Shri Ravindra M.Rathod, Ahmedabad V. The Income tax Officer,Ward-2(2), Baroda

ITA 1407/AHD/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5902 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: ANIL R SHAH
• Section: 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.1407/AHD/2010 ASSTT. YEARS: 2004-05 RAVINDRASINGH M. RATHOD PROP. PARAGON ENTERPRISES 27, GIDC ESTATE NANDESARI DIST. BARODA PAN : ABZPR 1620 H VS. ITO, WARD - 2(2) BARODA. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI ANIL R. SHAH, AR REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 08/05/2017 / DATE OF PRONOUNCEMENT: 15 /05/2017 &'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE A SSESSEE AGAINST ORDER OF THE LD.CIT(A)-II, BARODA DATED 26.3.2010 PASSED FOR THE ASSTT.YEAR 2004- 05. 2. IT IS PERTINENT TO MENTION THAT THIS APPEAL WAS DECIDED BY THE TRIBUNAL VIDE ORDER DATED 16.9.2013. THEREAFTER, THE ASSESS EE HAS FILED MA BEARING NO.117/AHD/2014 AND POINTED OUT THAT THE TRIBUNAL H AS COMMITTED AN APPARENT ERROR BY NOT DECIDING GROUND NO.3 RAISED B Y THE ASSESSEE, AND ACCORDINGLY, THE TRIBUNAL RECALLED ORDER OF THE ITA T DATED 16.9.2013 FOR LIMITED PURPOSE. IN THIS WAY, GROUND NO.3 HAS REST ORED FOR RE-ADJUDICATION. ITA NO.1407/AHD/2010 2 3. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE H AVE GONE THROUGH THE RECORD CAREFULLY. IN GROUND NO.3, THE ASSESSEE IS I MPUGNING ADDITION OF RS.4,81,650/- MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS INTRODUCED FRESH CAPITAL IN HIS CAPITAL ACCOUNT. THE FINDING RECORDED BY THE AO IN THIS CONNECTION READS AS UNDER: 4. THE DISCUSSION MADE BY THE AP IN PARA 5 TO 5.2 IS WORTH TO NOTE. IT READS AS UNDER: 5. ON VERIFICATION OF BALANCE SHEET OF PARAGON ENT ERPRISE INDUSTRIES, IT FOUND THAT THERE WAS AN ADDITION OF RS. 8,04,878/- IN THE CAPITAL ACCOUNT OF THE PROPRIETOR DURING THE YEAR. AS PER NOTICE U/S. 142(1) DATED 24-10-200 6 ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE SOUR CE OF FRESH CAPITAL BROUGHT IN THE CAPITAL ACCOUNT WITH S UPPORTING EVIDENCES. VIDE VARIOUS ORDER SHEETS NOTINGS THE AS SESSEE WAS ASKED TIME AND AGAIN TO GIVE PROPER EXPLANATION TO THE CREDIT ENTRIES IN THE CAPITAL ACCOUNTS WITH PROOF A ND THAT IN CASE ANY CREDIT ENTRY HAS COME FROM ANY THIRD PARTY , PROPER CONFIRMATION WITH PAN AND SOURCE OF THE AMOUNT BE EXPLAINED. BUT ASSESSEE HAS NOT SUBMITTED ANY EXPLA NATION WITH DOCUMENTARY EVIDENCES AS REQUIRED. FINALLY | S HOW CAUSE NOTICE DATED 22-12-2006 WAS ISSUED TO THE ASS ESSEE WHEREIN HE WAS ASKED TO SUBMIT THE ABOVE DETAILS, 5.1 THE ASSESSEE, IN RESPONSE TO THE SHOW CAUSE NOT ICE, VIDE HIS LETTER DATED 26-12-2006, REPLIED AT POINT NO. 9 THAT THE SOURCE OF CAPITAL AND EXPLANATION IS AS UNDER:- THE DETAILS OF FIXED ASSET ALONG WITH ADDITION ALRE ADY SUBMITTED TO YOU. THE SOURCE OF CAPITAL AND EXPLANA TIONS AS UNDER IN THE CAPITAL ACCOUNT, THE ASSETS PURCHASED BY FIRM BY MISTAKE CREDITED RS, 4,81,650/- BY VARIOUS BILLS OF FIXED ASSETS TO THE CREDIT OF PROPRIETOR CAPITAL ACCOUNT INSTEAD OF PARTY'S ACCOUNT AND SAME HAS BEEN SHOWN AS WITHDRAW N WHEN PAYMENT MADE TO SUCH PARTY IN PROPRIETOR'S CAP ITAL ACCOUNT. IN FACT ONLY PAYMENT MADE FROM PERSONAL AC COUNT OF S.B. PASSBOOK WHERE PROPRIETOR HAS TAKEN PERSONA L LOAN FROM PARTIES AND FROM WHICH PAYMENTS MADE TO FIXED ASSETS (BUILDING) ONLY BY WAY OF ADDITION TO CAPITAL, AND SOURCE OF SUCH CAPITAL ALONG WITH SUPPORTING DOCUMENTS IS ENC LOSED AS PER ANMXURE-4. ITA NO.1407/AHD/2010 3 THE NET ADDITION TO CAPITAL & ITS SOURCES IS EXPLAI NING ABOVE ANNEXURE-4. 5.2 THE ABOVE REPLY OF THE ASSESSEE WAS CAREFULLY CONSIDERED AND NOT FOUND TO BE FACULTY CORRECT. IN THIS REGARD IT IS MENTIONED THAT ASSESSEE HAS CLAIMED TO HAVE ENCLOSED SUPPORTING DOCUMENT FOR ADDITION TO CAPITA L BUT NO SUCH DOCUMENT WERE FOUND TO BE ENCLOSED. THIS FACT HAS BEEN STATED TO THE ASSESSEE ALSO. ON VERIFICATION O F THE ABOVE, IT IS FOUND THAT TO EXPLAIN THE SOURCE OF AD DITION IN THE CAPITAL ACCOUNT ASSESSEE HAS CLAIMED THAT HE HA S INVESTED RS. 4,81,650/- FOR ADDITION IN FACTORY BUI LDING DURING THE YEAR OUT OF HIS PERSONAL SOURCES. IN SUP PORT OF THIS CLAIM, ON 28.12.2006 ASSESSEE SUBMITTED COPY O F SOME BILLS. PERUSAL OF THESE BILLS REVEAL THAT COMPLETE DETAILS WERE NOT SUBMITTED AND WHATEVER BILLS ETC. WERE SUBMITTE D WERE EITHER FOUND TO BE WITHOUT ANY NAME, DATE OR THEY A RE NOT IN THE NAME OF ASSESSEE. SUBSEQUENTLY, VIDE HIS REPLY DATED 28.12.2006 ASSESSEE HAS GIVEN A STATEMENT OF CAPITA L ACCOUNT OF SHRI R.M. RATHOD I.E. ASSESSEE HIMSELF, MARKED AS 'ACTUAL CAPITAL ACCOUNT'. WHAT DOES THIS ACTUAL CAPITAL ACCOUNT' MEANS IS NOT CLEAR. MEANING THEREBY THAT W HATEVER CAPITAL ACCOUNT OR DETAILS WERE SUBMITTED BEFORE TH IS CAPITAL ACCOUNT WERE NOT ACTUAL OR CORRECT. VERIFICATION OF THIS ACCOUNT REVEALED THAT THE ASSE SSEE HAS GIVEN DESCRIPTION OF DEBIT ENTRIES BEING PAYMENT/WITHDRAWAL MADE FROM THIS ACCOUNT AND CREDI T ENTRIES BEING AMOUNT INTRODUCED IN THIS ACCOUNT BUT ASSESSEE HAS NOT GIVEN ANY SUPPORTING DOCUMENT WITH THIS ACCOUNT. MOST OF THE ENTRIES ARE IN CASH. FROM WHER E THE SAID CASH HAS COME AND WERE CASH HAS GONE FROM THIS ACCOUNT NOTHING HAS BEING SUBMITTED BY THE ASSESSEE IN THIS REGARD. FURTHER, ON EXAMINATION OF THE SO CALLED CA PITAL ACCOUNT IT IS FOUND THAT HOW THIS CAPITAL ACCOUNT W AS PREPARED IS NOT CLEAR. MANY OF THE ENTRIES ARE NOT TALLYING WITH WHATEVER SUPPORTING DOCUMENTS WERE SUBMITTED I N THIS REGARDS. IT SEEMS THAT ASSESSEE HIMSELF IS UNABLE T O UNDERSTAND AND EXPLAIN THE ENTRIES OF CAPITAL ACCOU NT. THIS VIEW IS STRENGTHEN BY THE FACT THAT ASSESSEE HIMSEL F HAS GIVEN EXPLANATION OF ADDITION IN CAPITAL ACCOUNT IN PIECEMEAL. THE CAPITAL ACCOUNT IS NOT MAINTAINED ST RICTLY AS PER THE ACCOUNTING STANDARD. ITA NO.1407/AHD/2010 4 SO IN ABSENCE OF PROPER AND COMPLETE SUPPORTING DOCUMENTARY EVIDENCES THE CLAIM OF THE ASSESSEE FOR ADDITION OF RS. 4,81,650/- IN HIS CAPITAL ACCOUNT I S NOT FOUND TO BE IN ORDER & GENUINE AND IS HEREBY REJECTED. 4. DURING THE COURSE OF HEARING, WE HAVE DIRECTED T HE LD.COUNSEL FOR THE ASSESSEE TO SHOW THE SOURCE OUT OF WHICH THIS CAPIT AL WAS CONTRIBUTED. ACCORDING TO THE LD.COUSNEL FOR THE ASSESSEE IT IS NOT CAPITAL CONTRIBUTION AS SUCH IN CASH, BUT IT REPRESENTS EXPENDITURE INCURRE D BY THE ASSESSEE FOR RENOVATION OF BUILDING. HE DREW OUR ATTENTION TOWA RDS LEDGER ACCOUNT FROM 1.4.2003 TO 31.3.2004 WHICH HAS BEEN PLACED IN THE PAPER BOOK. FOR EXAMPLE ONE OF THE MAJOR ITEMS WHICH REPRESENTS IS OF RS.67 ,923/-. IT WAS GIVEN TO NEW INDIA CORPORATION. IT REPRESENTS FACTORY BUILD ING RENOVATION OF SHED NO.35. ACCORDING TO THE ASSESSEE THIS AMOUNT WAS P AID THROUGH BANK OF BARODA VIDE CHEQUE NO.787003, 787050 AND 787097. I N THIS WAY, THE LD.COUNSEL FOR THE ASSESSEE HAS PLACED BEFORE US A CHART EXHIBITING PAYMENT MADE FOR FACTORY BUILDING FROM CAPITAL ACCOUNT. HE ALSO POINTED OUT THAT CERTAIN PAYMENTS WERE MADE IN CASH WHOSE DETAILS AR E ALSO AVAILABLE IN THE PAPER BOOK. 5. WE HAVE DULY CONSIDERED THIS ASPECT. THE QUESTI ON IS NOT NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAS INCURRED EXPENDITURE FROM THE CAPITAL ACCOUNT FOR RENOVATION OF BUILDING , IN OTHER WORDS, FROM ONE HAND IT ENTERED INTO OTHERS HAND. THESE ITEMS WER E MADE FROM CAPITAL ACCOUNT AND THE EXPENDITURES WERE INCURRED FOR RENO VATION OF BUILDING. THE QUESTION IS WHAT IS THE SOURCE OF EXPENDITURE INCUR RED FOR RENOVATION OF BUILDING ? IT WAS A NEW ADDITION TO THE CAPITAL AC COUNT IN THE NATURE OF RENOVATION OF BUILDING. THE ASSESSEE FAILED TO EXP LAIN THAT SOURCE BEFORE THE AO. FACED WITH THIS PROBLEM, WE DEEM IT APPROPRIAT E TO SET ASIDE THIS ASPECT TO THE AO FOR RE-EXAMINE AND RE-ADJUDICATION ON THI S ISSUE. THE ASSESSEE WILL ITA NO.1407/AHD/2010 5 BE AT LIBERTY TO SUBMIT DETAILS OF ALLEGED CAPITAL ADDITION WITH DETAILS OF ALLEGED EXPENDITURE AND SOURCE OF THAT EXPENDITURE. THE AO, THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 6. THE OBSERVATIONS MADE BY US WILL NOT IMPAIR OR I NJURE THE CASE OF THE AO AND WILL NOT CAUSE ANY PREJUDICE TO THE DEFENCE/EXPLANATION OF THE ASSESSEE. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 15 TH MAY, 2017 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER