S.Isaikalaivan, Pondicherry V. ITO, Pondicherry

ITA 1500/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8063 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A.S.SRIRAMAN
• Keywords: Rejection of books of accounts
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 22

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A(SMC) BENCH : CHENNAI . , ! ' [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 1500/MDS/2016 / ASSESSMENT YEAR : 2010-2011. SHRI. S. ISAIKALAIVAN, PROP: M/S. VEL SOKKANATHAN, THIRUMANA NILAYAM, 32, VALLALAR SALAI, PUDUCHERRY 605 011. [PAN AAAPI 3930P] VS. THE INCOME TAX OFFICER, WARD I (2) PUDUCHERRY. ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : SHRI. A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI. ASHISH TRIPATHI, IRS, JCIT. /DATE OF HEARING : 11-01-2017 !' /DATE OF PRONOUNCEMENT : 25-01-2017 ' / O R D E R IN THIS APPEAL FILED BY THE ASSESSEE DIRECTED AGAI NST AN ORDER DATED 07.04.2016 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- PUDUCHERY, IT HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) H AS BEEN PASSED WITHOUT REFERRING TO THE RECORDS AND PAST AS SESSMENT ORDERS WHICH HAVE BEEN SUBJECT TO ORDER OF THE APPE LLATE TRIBUNAL AND HAS BEEN PASSED SOLELY RELYING ON THE ITA NO.1500/MDS/16. :- 2 -: AGREEMENT EXTRACTED FROM THE APPELLANT'S REPRESENTA TIVE BEFORE THE ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER WITHO UT NOTICING THAT THE ADDITION MADE IN THE ORDER HAS NO T BEEN BASED ON ANY SPECIFIC OMISSION OR DEFECT NOTICED BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT, RECORDS OR RECEIPTS AND THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS AS NOT REFLECTING THE TRUE STATE OF AFFAIRS UNDER SECTION 145 OF THE INCOME-TAX ACT. 3. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT AN ASSESSMENT CANNOT BE MADE ON TH E BASIS OF ANY AGREEMENT EXTRACTED FROM THE ASSESSEE OR HIS REPRESENTATIVE AND THERE IS NO PROVISION IN THE INC OME-TAX ACT TO DO SO. ASSESSMENTS CAN BE DONE ONLY ON THE B ASIS OF BOOKS OF ACCOUNT AND RECORDS. THE REPRESENTATIVE HAS OBVIOUSLY GIVEN THE AGREEMENT JUST TO PLEASE THE ASSESSING OFFICER AND TO GET INTO THE GOOD BOOKS OF THE OFFICER IN RESPECT OF ASSESSMENTS IN OTHER CASES. 4. THE LEARNED COMMISSIONER (APPEALS) HAS DELIBERATELY OMITTED TO MENTION IN HIS ORDER THE AFFIDAVIT FILED BY THE APPELLANT'S REPRESENTATIVE DENYING THAT HE HAD AGRE ED FOR ANY PROPOSAL FOR FIXING THE RATE OF THIRUMANAM (MARRIAGE)AND THAT HE HAD NOT AGREED FOR ANY ADDITI ON TO THE RETURNED INCOME. 5. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO ERRED I N NOT NOTICING THAT THE NUMBER OF MARRIAGE FUNCTIONS ARRIVED AT IN THE ASSESSMENT ORDER ON PAGE 2, I.E. SERIAL N UMBERS 22 TO 71 COMES TO ONLY 50 AS SHOWN IN THE ASSESEE'S STATEMENT REPRODUCED ON THE SAME PAGE AND NOT 59, ADOPTED BY THE ASSESSING OFFICER WHICH IS PURELY AN ARITHMETICAL MISTAKE WHICH HAS TO BE RECTIFIED. 6. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO ERRED I N NOT NOTICING THAT THERE WAS NO BASIS FOR ASSUMING T HE NUMBER OF RECEPTIONS AT 44 AGAINST 23 SHOWN BY THE ASSESSEE AND THE ASSESSING OFFICER HAS NOT FOUND NO R MENTIONED ANY OMISSIONS IN THE BOOKS OF ACCOUNT INDICATING ANY SUCH UNDERSTATEMENT, ESPECIALLY WHEN THE ENTIRE RECEIPTS HAVE BEEN CHECKED AND ACCEPTED BY T HE SERVICE TAX DEPARTMENT. 7. THE LEARNED COMMISSIONER (APPEALS) HAS FURTHER ERRE D IN ITA NO.1500/MDS/16. :- 3 -: CONFIRMING THE INCREASE OF 10% OVER LAST YEAR'S FIG URES OF THE RENTALS FOR THE VARIOUS FUNCTIONS WITHOUT ANY R HYME OR REASON. 8. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE ALLOWED THE TELESCOPING OF THE SUM OF 6,37,900/- BEING ADDITIONAL INCOME OFFERED AGAINST THE ADDITION MADE , ASSESSMENT ORDER HE APPELLANT HAD NO OTHER INCOME F ROM BUSINESS EXCEPT SHARE OF INCOME AND HENCE THE INCOM E OFFERED, SHOULD BE TREATED AS EMANATING FROM THE BU SINESS OF KALYANA MANDAPAM ONLY. 9. THE LEARNED COMMISSIONER (APPEALS) HAS OMITTED TO CONSIDER THE GROUND THAT THERE HAD BEEN A TOTALLING MISTAKE IN THE ASSESSMENT ORDER OF 2,00,000/- TO DIRECT THE OFFICER TO RECTIFY THE SAME. 2. FACTS APROPOS ARE THAT ASSESSEE PROPRIETOR OF M/S. VEL SOKKANATHAN THIRUMANA NILAYAM AND M/S. DHANAM SALE S CENTRE HAD FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF ?10,53,100/-. THERE WAS A SURVEY OPERATIO N U/S.133A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN THE BUSINESS PREMISES OF M/S. VEL SOKKANATHAN THIRUMANA NILAYAM ON 16.09. 2009. DURING THE SURVEY, REVENUE AUTHORITIES FOUND MARRIAGE IN VITATIONS NUMBERING FIFTY NINE. ACCORDING TO THE LD. ASSESSI NG OFFICER, THERE WERE EVIDENCE TO SHOW THAT ASSESSEE HAD HELD TWENTY THREE NUMBER MORE OF RECEPTIONS THAN WHAT WAS SHOWN BY IT IN TH E RETURN OF INCOME FILED. LD. ASSESSING OFFICER WORKED OUT RECEIPTS OF THE ASSESSEE AS UNDER:- ITA NO.1500/MDS/16. :- 4 -: MARRIAGES (59 X ?44,600) = ?26,31,400 RECEPTION (44 X ?19,800) = ? 8,71,200 MEETING (1 X ?21,620) = ? 21,620 EXHIBITION (6 X ?71,552) = ? 4,29,312/- ----------------- TOTAL = ?39,53,532/- ------------------ SINCE ASSESSEE HAS RETURNED ?25,80,201/- AS RENTAL COLLECTIONS, DIFFERENCE OF ?13,73,331/- WAS ADDED AS INCOME. 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). CONTENTION O F THE ASSESSEE WAS THAT BOOKS OF ACCOUNTS WERE PRODUCED BUT WERE R EJECTED WITHOUT ANY REASONS. AS PER ASSESSEE RENTAL FROM MARRIAGE H ALL WAS ARBITRARILY ESTIMATED BY THE LD. ASSESSING OFFICER. FURTHER AS PER ASSESSEE, HE HAD IN HIS RETURN OF INCOME OFFERED AN ADDITIONAL I NCOME OF ?6,37,900/, AND THIS SHOULD HAVE BEEN ALLOWED FOR SETOFF. FURTH ER CONTENTION OF THE ASSESSEE WAS THAT RENTAL RATES FOR MARRIAGE HALL WA S ARBITRARILY INCREASED BY 10% FROM THAT OF THE PRECEDING YEAR. LD. COMMISSIONER OF INCOME TAX (APPEALS) AFTER GOING THROUGH THE CON TENTIONS OF THE ASSESSEE WAS OF THE OPINION THAT LD. AUTHORISED REP RESENTATIVE OF THE ASSESSEE HAD DURING THE COURSE OF ASSESSMENT PROCEE DINGS ACCEPTED THE FINDINGS OF THE LD. ASSESSING OFFICER REGARDING INCOME FROM THE MARRIAGE HALL. FURTHER ACCORDING TO HIM NUMBER OF EXCESS FUNCTIONS WORKED OUT BY THE LD. ASSESSING OFFICER WAS NOT BAS ED ON ANY PRESUMPTION BUT BASED ON IMPOUNDED DOCUMENTS. IN S O FAR AS CLAIM ITA NO.1500/MDS/16. :- 5 -: OF SET OFF INCOME OF ?6,37,900/- OFFERED BY THE ASS ESSEE, OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS THAT ASSESSEE NEVER CLAIMED RENTAL INCOME AS REPRESENTING THE CR EDITS APPEARING IN ITS CAPITAL ACCOUNT. LD. COMMISSIONER OF INCOME TA X (APPEALS) ALSO HELD THAT ENHANCEMENT OF RENTAL RATES BY 10% DONE BY LD. ASSESSING OFFICER WAS REASONABLE. WITH THESE OBSERVATIONS, H E DISMISSED THE APPEAL FILED BY THE ASSESSEE. 4. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT LD. ASSESSING OFFICER HAD RELIED ON A FILE CONTAINING M ARRIAGE INVITATIONS WITH SERIAL NUMBERS 22 TO 71 FOR COMPUTING RENTAL D URING THE RELEVANT PREVIOUS YEAR. AS PER LD. AUTHORISED REPRESENTATIVE AGAINST ACTUAL FORTY NINE NUMBERS. LD. ASSESSING OFFICER HAD CONS IDERED FIFTY NINE NUMBERS. ACCORDING TO HIM, THE IMPOUNDED RECORDS W HICH WERE RELIED ON BY THE LD. ASSESSING OFFICER WAS NEVER MADE AVA ILABLE TO THE ASSESSEE. FURTHER, AS PER LD. AUTHORISED REPRESENT ATIVE ENHANCEMENT OF 10% OF RENTAL INCOME WAS ALSO NOT BASED ON ANY V ALID REASONING. IN ANY CASE, ACCORDING TO HIM ASSESSEE ITSELF HAD ADMITTED AN ADDITIONAL INCOME OF ?6,37,900/- IN ITS RETURN AND THEREFORE ANY ADDITION FOR DIFFERENCE IN RENTAL INCOME OUGHT TO H AVE BEEN REDUCED ATLEAST BY THIS AMOUNT. ITA NO.1500/MDS/16. :- 6 -: 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. FURT HER HE SUBMITTED THAT ADDITIONS WERE ACCEPTED BY THE ASSESSEES REPR ESENTATIVE, AND GROUNDS TAKEN BY THE ASSESSEE SHOULD BE DISMISSED. 6. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORD ERS OF THE LOWER AUTHORITIES. LD. COMMISSIONER OF INCOME T AX (APPEALS) HAS CONFIRMED THE ADDITION AFTER NOTING THAT ADDITIONS WERE AGREED BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE BEFOR E THE LD. ASSESSING OFFICER. HE HAS REPRODUCED RELEVANT ORDER SHEET ENT RY IN FULL. IT IS MENTIONED THEREIN THAT LD. AUTHORISED REPRESENTATIV E HAD ACCEPTED THE SUPPRESSION OF NINE FUNCTIONS FOR MARRIAGE AND TWEN TY THREE RECEPTIONS. WHEN LD. AUTHORISED REPRESENTATIVE HAD ENTERED IN APPEARANCE BEFORE LD. ASSESSING OFFICER AND ACCEPTE D SUPPRESSION OF INCOME, IT WOULD BE NAVE TO PRESUME THAT HE HAD DO NE SO WITHOUT BEING AWARE OF ABOUT THE CONTENTS OF THE IMPOUNDED DOCUMENTS. THE INCREASE OF RATE FOR THIRUMANAN MANDAPAM WAS BASED ON A COMPARISON OF RATES WITH EARLIER YEARS. IN THE CIRC UMSTANCES, I AM OF THE OPINION THAT RENTAL INCOME FROM THIRUMANAM MAND APAM WAS CORRECTLY WORKED OUT AT ?39,53,532/-. THE ONLY QUES TION REMAINING IS WHETHER ASSESSEE COULD BE ALLOWED TELESCOPING OF ? 6,37,900/- ADDITIONALLY RETURNED BY IT AGAINST DIFFERENCE OF ? 13,73,331/- WHICH WAS ADDED TO ITS INCOME. LD. COMMISSIONER OF ITA NO.1500/MDS/16. :- 7 -: INCOME TAX (APPEALS) HAD DENIED THIS CLAIM OF SET O FF ONLY FOR A REASON THAT CREDITS IN THE CAPITAL ACCOUNT HAD NO LINK WI TH THE ADDITIONAL RENTAL INCOME. I AM OF THE OPINION THAT CREDITS IN THE CAPITAL ACCOUNT COULD ONLY HAVE BEEN DUE TO ADDITIONAL RENTAL INCOM E EARNED BY THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES, I AM OF THE OPINION THAT ASSESSEES CLAIM OF SET OFF OF ?6,37,900/- AGAINST ADDITION OF ?13,73,331/- HAS TO BE ALLOWED. I DIRECT THE LD. A SSESSING OFFICER TO GIVE RELIEF TO THE ASSESSEE TO THIS EXTENT. BALANC E OF THE ADDITION STANDS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 25TH JANUARY, 20 17, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 25TH JANUARY, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF