Smt. Badam Bai, Mysore V. ITO, Mysore

ITA 1414/BANG/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9520 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 21-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREELEKHA
• Assessee Lawyers: KRISHNAMOORTHY
• Keywords: Business income; Set aside
• Section: 143(3); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI K.K. GUPTA, A.M. AND SHRI SHAILENDRA KUMAR YADAV, J.M. ITA NOS.1414 & 1415(BNG)/08 (ASSESSMENT YEARS : 2004-05 & 2005-06) SMT. PARAS KUMARI, MYSORE. .... APPELLANT. VS. THE INCOME TAX OFFICER, WARD 2(2), MYSORE. ..... RESPONDENT. ITA NOS.1416(BNG)/08 (ASSESSMENT YEAR : 2005-06) SMT. BADAM BAI, MYSORE. . APPELLANT. VS. THE INCOME TAX OFFICER, WARD 2(2), MYSORE. ..... RESPONDENT. APPELLANTS BY : SRI KRISHNA MOORTHY. RESPONDENT BY : SMT. V. SREELEKHA. O R D E R PER BENCH : THESE APPEALS BY MOTHER IN LAW, DAUGHTER IN LAW FO R THE ASSESSMENT YEAR 2005-06 IN THE CASE OF SMT. BADAM BAI AND FOR THE ASSESSMENT YEAR 2004-05 AND 2005-06 IN THE CASE OF SMT. PARAS KUMARI ARE BE ING TAKEN UP TOGETHER FOR DISPOSAL AS COMMON ISSUES HAVE BEEN RAISED ARISING OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSME NTS WERE FRAMED IN THE CASE OF SMT. PARAS KUMARI UNDER SECTION 144 FOR BOTH THE YE ARS AND UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2005-06 IN THE CASE OF SMT. BAD AM BAI. 2. THE LEARNED COUNSEL INITIATING THE ARGUMENTS FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF SMT. BADAM BAI, THE I SSUES WITH RESPECT TO AMOUNT BROUGHT TO BE TAXED ON THE BASIS OF ASSESSING OFFIC ER COMPUTING INCOME OF THE ASSESSEE ON HAVING SHOWN CASH IN HAND CORRESPONDING TO THE GIRVI BUSINESS WHEN ITA NOS.1414 TO 1416(BNG)/08 2 SHE WAS PROPRIETRESS WAS SUBSEQUENTLY CONSIDERED IN A PARTNERSHIP FIRM IN THE NAME OF M/S. GAUTAM BANKERS. SRI GAUTAM CHAND WAS SUBJ ECTED TO SIMILAR ASSESSMENTS FOR THE ASSESSMENT YEARS 1999-2000 TO 2004-05. THE ISSUES WERE CONSIDERED BY THE TRIBUNAL FOR THE IMPUGNED ASSESSMENT YEARS WHEN THE ASSESSMENTS WERE RESTORED TO THE FILE OF ASSESSING OFFICER FOR RECOMPUTING THE E STIMATION VIS--VIS THE CAPITAL INTRODUCED FROM INCOME ON ACCOUNT OF ADVANCE TAXES PAID AND THE INCOME BROUGHT INTO THE BOOKS OF ACCOUNTS UNDER VDIS, 1997 . COPIES OF THE ORDERS OF THE TRIBUNAL WITH RESPECT TO THE SMT. BADAM BAI AND SRI GAUTAM CHAND DT.27.1.2009 ARE BEING SUBMITTED IN THE PAPER BOOK WHICH WOULD INDIC ATE THAT THE FINANCIAL AFFAIRS OF SMT. PARAS KUMARI, WHO IS THE DAUGHTER IN LAW OF SM T. BADAM BAI WAS ALSO SUBJECTED TO ESTIMATION OF INCOME FROM THE FIRM WHEN THE SALA RIES PAID TO THE PARTNERS WERE DENIED BY THE ASSESSING OFFICER UNDER THE PROVISION S OF SECTION 144 R.W.S. 147 FOR THE A.YS 2004-05 AND 2005-06. HE POINTED OUT THAT THE SOURCE OF INCOME SO GENERATED FROM THE PARTNERSHIP FIRM WAS ESTIMATED, LED TO THE FINDING BY THE ASSESSING OFFICER FOR THE INTEREST AND REMUNERATION PAID TO THE PARTN ER COULD NOT BE ALLOWED AND THEREFORE INCREASED THE INCOME IRRESPECTIVE OF CONS IDERING THE FINANCIAL STATEMENTS SUBMITTED AT THE TIME OF HEARING AND ARE ENCLOSED I N THE PAPER BOOK TO JUSTIFY THAT THE INCOME FROM GIRVI BUSINESS WAS NOT ESTIMATED AN D THE INTEREST THERE FROM HAS TO BE ALLOWED IN ACCORDANCE WITH THE PROVISIONS OF INC OME TAX ACT, 1961. THE LEARNED CIT(A) ON THESE ASPECTS WITHOUT APPRECIATING THAT T HE BUSINESS STOOD ESTABLISHED, CONFINED HIMSELF TO THE FINDING OF THE ASSESSING OF FICER FOR THESE ASSESSMENT YEARS AND CONFIRMED THE DISALLOWANCE BY PARTLY RECTIFYING THE MISTAKE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST AND REMUNERATION OVE RLAPPING THE AVAILABLE INCOME UNDER THE PROVISIONS OF SECTION 40(B). WITH RESPE CT TO SMT. BADAM BAI, IN VIEW OF THE TRIBUNAL HAVING RESTORED THE ISSUE FOR THE EARLIE R ASSESSMENT YEARS TO THE FILE OF ITA NOS.1414 TO 1416(BNG)/08 3 ASSESSING OFFICER, IN THE INTEREST OF JUSTICE, THER EFORE THE CAPITAL INTRODUCED BY SMT. BADAM BAI HAS TO BE CONSIDERED IN ACCORDANCE WITH T HE FACTS BROUGHT ON RECORD AND NOT ON THE BASIS OF ESTIMATION AS THAT WOULD NO T LEAVE A ROOM FOR CONSIDERATION TO TAX AMOUNTS AS CASH CREDITS AS CAN BE PURSUED IN THE ORDERS. NOW THAT THE FINANCIAL STATEMENTS, WHICH REFLECT THE TRUE STATE OF AFFAIRS IN RESPECT OF BOTH THE ASSESSEES, NO ESTIMATION WOULD BE RESORTED TO BY TH E ASSESSING AUTHORITIES TO AS NO BOOKS OF ACCOUNTS ARE MAINTAINED BUT AT THE SAME TI ME THE SOURCE OF INCOME AND THE INCOME GENERATED EARLIER WAS PLOUGHED BACK INTO THE BUSINESS FOR GIRVI BUSINESS. THESE AMOUNTS THEREFORE CANNOT BE TAXED EITHER UNDER SECTION 68 OR UNDER SECTION 69. THE ASSESSEE HAS BEEN CARRYING O N THE GIRVI BUSINESS THAT HAS BEEN ASSESSED IN THE PAST AND THEIR INCOME WAS ESTI MATED EARLIER ON THE BASIS OF GIRVI STOCK THAT WAS VERIFIABLE. THEREFORE, HE C ONCLUDE,D THAT IN VIEW OF THE TRIBUNAL HAVING CONSIDERED THE ASSESSEES RESORTING TO ESTIMATION OF INCOME IN THEIR ORDERS FOR THE EARLIER ASSESSMENT YEARS, THE APPEAL S FOR THESE IMPUGNED ASSESSMENT YEARS MAY ALSO BE CONSIDERED IN ACCORDANCE WITH THE DIRECTION OF THE TRIBUNAL. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE PAPER BOOKS SUBMITTED BY THE LEARNED COUNSEL AS OF NOW IN DICATE THE STATE OF AFFAIRS OF THE ASSESSEE ALONG WITH THE CAPITAL INTRODUCED IN THE P ARTNERSHIP FIRM AS THE INCOME DETERMINED THERE FROM ONLY RELATES TO THE REMUNERAT ION AND SALARY PAID TO THE PARTNERS WITHOUT INDICATING ANY EXPENSES FOR EARNIN G THE SAME. THE ASSESSING AUTHORITY THEREFORE HAD RIGHTLY PROCEEDED TO CONSID ER BY ESTIMATING THE INCOME FROM GIRVI BUSINESS WHICH THE ASSESSEE HAS TRIED TO SUBSTANTIATE BY HOLDING ASSETS AND NOT INDICATING ANY LIABILITIES. THEREFORE IN T HE GIRVI BUSINESS, WITHOUT BOOKS OF ACCOUNTS, THESE FINANCIAL STATEMENTS CARRY NO MEANI NG TO THE EXTENT THAT THE GIRVI ACCOUNT DOES NOT INDICATE THE PHYSICAL VERIFICATION OF THE ITEMS PLEDGED AND HELD ITA NOS.1414 TO 1416(BNG)/08 4 BY THE ASSESSEE TO SUBSTANTIATE SUCH INCOME THERE FROM. RATE OF INTEREST HAS NOT BEEN INDICATED AND THEREFORE WOULD BE AN EXERCISE I N FUTILITY TO RESTORE THE MATTER TO THE LEARNED CIT(A) OR ASSESSING OFFICER FOR CONSIDE RATION AFRESH. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE CASE OF SMT. PARAS KUM ARI, ASSESSMENTS HAD BEEN FRAMED UNDER SECTION 144 R.W.S. 147 WHEN THE ASSESS ING OFFICER CONSIDERED WHEN SHE BECAME PARTNER IN M/S. GAUTAM BANKERS IN 2003 W ITH EQUAL SHARE ALONG WITH SMT. BADAM BAI AND SRI GAUTAM CHAND. HE CONSIDERED THE CAPITAL THEREIN AND ALLOWED INTEREST AND REMUNERATION EQUALLY AMONG THR EE PARTNERS WHICH WAS NOT THE CASE OF THE ASSESSEE. IN CASE OF SMT. BADAM BAI, T HE ASSESSING OFFICER FRAMING ASSESSMENTS UNDER SECTION 143(3) IN ABSENCE OF EXAC T DETAILS OF GIRVI INCOME COMPUTED INCOME ON THE GIRVI ACCOUNT BALANCE @ 14% FOR THE FINANCIAL YEAR. THIS CLEARLY INDICATES THAT THE ESTIMATION OF INCOME AVA ILABLE TO THE ASSESSEE IN THE FORM OF CAPITAL HAD NOT BEEN PUT TO TAX IN ACCORDANCE WI TH THE PROVISIONS OF THE INCOME TAX ACT, 1961. HAVING ESTIMATED THE BUSINESS INCOME , THE ASSESSEE HAD ONLY CLAIMED REMUNERATION AND INTEREST THERE FROM BY REN DERING TO TAX THE AMOUNTS LESS CAPITAL. WE FIND FORCE IN THE SUBMISSION OF THE LE ARNED COUNSEL THAT THE TRIBUNAL HAD ALREADY RESTORED THE COMPUTATION OF INCOME TO THE F ILE OF ASSESSING OFFICER FOR THE ASSESSMENT YEARS 1999-2000 TO 2004-05 IN THE CASE O F SMT. BADAM BAI AND SRI GAUTAM CHAND FOR RECOMPUTING THE INCOME IN ACCORDAN CE WITH THE PROVISIONS OF THE INCOME TAX ACT, 1961 LEAVING NO ROOM FOR ESTIMA TION AS WAS CONSIDERED BY THE TRIBUNAL. THE ASSESSEE HAS TO ESTABLISH THE AMOUNT OF GIRVI BUSINESS WHICH OUGHT TO BE DECLARED AS AMOUNT OWED BY BORROWERS ON ACCOUNT OF STOCK PLEDGED WITH THE ASSESSEE SO AS TO LEAVE THE RESIDUAL AMOUNT RESULT IN INCOME TO THE ASSESSEE @ 14% WHICH NOW NOT TO BE ESTIMATED ONCE THE TRIBUNAL HAD RESTORED THE MATTER TO THE FILE ITA NOS.1414 TO 1416(BNG)/08 5 OF ASSESSING OFFICER FOR CONSIDERATION AFRESH. SAL ARY AND REMUNERATION HAS TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX AC T, 1961 WHICH WE ARE INCLINED TO CONSIDER. THE LEARNED CIT(A) HAD PARTLY CONSIDE RED THE RECTIFICATION TO BE CARRIED OUT WHEN THE REMUNERATION PAID TO WORKING PARTNER W AS LOWER VIS--VIS THE INTEREST AMOUNT PAID ON THE CAPITAL INTRODUCED BY THAT PARTN ER. WE ARE OF THE CONSIDERED VIEW THAT THIS REQUIRES CONSIDERATION AFRESH IN THE LIGHT OF ASSESSEE AGREEING TO SUBMIT THE REQUISITE DETAILS IN ACCORDANCE WITH THE ORDERS OF THE TRIBUNAL EARLIER AND AS OF NOW SUBMITTED BEFORE US. THE ORDERS OF THE LEARNED CIT(A) ARE SET ASIDE AND THE ISSUES ARE RESTORED TO THE FILE OF ASSESSING OFFICE R FOR CONSIDERATION AFRESH IN THE LIGHT OF OUR OBSERVATIONS ABOVE. 5. IN THE RESULT THE APPEALS FILED BY THE RESPECTIV E ASSESSEES ARE CONSIDERED AS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2009. SD/- SD/- (SHAILENDRA KUMAR YA DAV) (K.K.GUPTA) JUDICIAL ME MBER ACCOUNTANT MEMB ER BANGALORE, DT.28-09-2009. COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, BANGALORE. 6. GUARD FILE, ITAT, BANGALORE. 7. GUARD FILE, ITAT, NEW DELHI. GPR* BY ORDER ASSISTANT REGISTRAR, ITAT