ITO, CHENNAI V. Shri P.K.S.Prasad, CHENNAI

ITA 1598/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5208 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Keywords: Unexplained cash credit; Source of fund; Non compliance; Procedural lapse
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T.A.NO.1598(MDS)2009 ASSESSMENT YEAR : 2006-07 THE INCOME-TAX OFFICER, BUSINESS WARD II(2), VS CHENNAI. (APPELLANT) SHRI P.K.S.PRASAD, 60, VENKATANARAYANA ROAD, T.NAGAR, CHENNAI 600 017. PAN: AHJPP9566C. (RESPONDENT) . APPELLANT BY: SHRI K.E.B.RENGARAJAN, JR. STANDING COUNSEL RESPONDENT BY: NONE O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS APPEAL FILED BY THE REVENUE RELATES TO THE ASSESSMENT YEAR 2006-07. THE APPEAL IS DIRECTED AG AINST THE ORDER ITA NO.1598(MDS)/2009 2 OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-VI, CHEN NAI DATED 3-7- 2009 AND ARISES OUT OF THE ASSESSMENT COMPLETED UND ER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IS AN INDIVIDUAL EA RNING INCOME FROM OTHER SOURCES AND HOUSE PROPERTY. HE FILED HIS RETURN OF INCOME FOR ` 75,390/- AND ON THE SCRUTINY ASSESSMENT THAT FOLLOW ED, THE ASSESSING AUTHORITY FOUND THAT THE ASSESSEE HAD PUR CHASED IMMOVABLE PROPERTIES AT ADYAR, CHENNAI, IN THE PREV IOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE HAD FURNISHED PARTICULARS OF LOAN AVAILED FROM THE BANK , ON THE SCRUTINY OF WHICH THE ASSESSING OFFICER FOUND THAT THERE WAS A HUGE TURNOVER OF CASH CREDITS IN THE SAID BANK ACCOUNT, FOR WHICH TH E KNOWN SOURCES OF INCOME OF THE ASSESSEE WOULD NOT BE SUFFICIENT. ON THE BASIS OF FURTHER ENQUIRES MADE BY THE ASSESSING AUTHORITY, H E FOUND THAT THE THE ASSESSEE HAS AVAILED LOANS FROM FOUR CREDITORS, NAMELY, M/S.VISHNU MARKETING, SHRI G.N.VENUGOPAL, SHRI J.N. RANJI AND SMT.SAILAKSHMI RAMJI, BOTH IN CASH AND BY WAY OF CH EQUES. THE ASSESSING OFFICER HELD THAT ALL THESE CASH CREDITS AND LOANS HAVE NOT BEEN EXPLAINED BY THE ASSESSEE TO HIS SATISFACTION. ITA NO.1598(MDS)/2009 3 3. IN THE LIGHT OF THE ABOVE FINDIN GS THE ASSESSING AUTHORITY COMPLETED THE ASSESSMENT AFTER MAKING TWO ADDITIONS . THE FIRST ADDITION IS A SUM OF ` 17,35,000/- AGAINST THE CASH DEPOSITS REFLECTED IN THE INDIAN OVERSEAS BANK, WHICH, ACCORDING TO TH E ASSESSING AUTHORITY, HAVE NOT BEEN EXPLAINED BY THE ASSESSEE. THE SECOND ADDITION IS A SUM OF ` 23,95,000/- BEING THE TOTAL OF THE LOANS AVAILED FROM THE ABOVE STATED FOUR CREDITORS. THE ASSESSME NT WAS THUS COMPLETED ON A TOTAL INCOME OF ` 41,89,390/- AS AGAINST THE RETURNED INCOME OF ` 75,390/-. 4. THE ABOVE TWO ADDITIONS WERE TAK EN BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS)-VI A T CHENNAI. 5. IN FIRST APPEAL THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT THE ASSESSEE HAS EXPLAINED THE SOURCE OF CASH LOAN OF ` 17.35 LAKHS DEPOSITED IN THE BANK ACCOUNT IN A REAS ONABLE MANNER. THE COMMISSIONER OF INCOME-TAX(APPEALS) HELD THAT C ASH AMOUNTS WERE DEPOSITED BY THE ASSESSEE IN HIS BANK ACCOUNT FROM TIME TO TIME AGAINST REALIZATION OF FIXED DEPOSITS AND LIQUIDATI ON OF SUCH FIXED DEPOSITS PROVED BY BANK STATEMENTS, INCOME DISCLOSE D, SOURCES ITA NO.1598(MDS)/2009 4 AVAILABLE AGAINST RETURNS FILED, REALIZATION OF DEB TORS, ETC. THE COMMISSIONER OF INCOME-TAX(APPEALS) FURTHER FOUND T HAT APART FROM THE ABOVE, THE ASSESSEE HAD NO OTHER SOURCE OF INCO ME. IN THE LIGHT OF THE ABOVE OBSERVATIONS, HE DELETED THE SUM OF ` 17.35 LAKHS ADDED BY THE ASSESSING OFFICER AS UNEXPLAINED CREDITS. 6. REGARDING THE ADDITION OF ` 23.95 LAKHS, THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED A NUMB ER OF PROCEDURAL LAPSES ON THE PART OF THE ASSESSING AUTH ORITY. HE HELD THAT SUMMONS WERE NOT ISSUED TO THE CREDITORS IN A PROPE R FORM AND WITH THE REQUISITE PARTICULARS AS REQUIRED UNDER THE INC OME-TAX RULES AS WELL AS UNDER THE RULES OF CIVIL PROCEDURE CODE AND , THEREFORE, NON COMPLIANCE FROM THE SIDE OF THE CREDITORS CANNOT BE ATTRIBUTED AGAINST THE ASSESSEE. HE ALSO NOTICED THAT AFFIDAVITS WER E FILED BY THE PARTIES AND THEY WERE NOT EXAMINED BY THE ASSESSING AUTHORITY. HE ALSO OBSERVED THAT IN RESPECT OF TWO CREDITORS COPI ES OF ASSESSMENT ORDERS WERE PLACED ON RECORD WHICH SHOWED AVAILABIL ITY OF RESOURCES IN THEIR HANDS. ON THE BASIS OF THE ABOVE FINDINGS HE DELETED THE ADDITION OF ` 23.95 LAKHS AS WELL, AND ALLOWED THE APPEAL FILED B Y THE ASSESSEE. ITA NO.1598(MDS)/2009 5 7. THE REVENUE IS AGGRIEVED AND, TH EREFORE, FILED THIS APPEAL BEFORE US. 8. THE GROUNDS RAISED BY THE REVENU E IN THIS APPEAL READ AS BELOW:- 1. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITIO N OF ` `` ` 17.35 LAKHS MADE AS UNEXPLAINED CASH DEPOSITS. 2. THE LEARNED CIT(A) OUGHT TO H AVE APPRECIATED THE FACT THAT THE ASSESSEE HAD NOT SATISFACTORILY EXP LAINED AS TO HOW THE WITHDRAWALS MADE IN EARLIER YEAR WA S ACCUMULATED TO BE THE SOURCE FOR THE SUBJECT CRED ITS MADE IN THE SUBSEQUENT YEAR. 3. THE LEARNED CIT(A) ERRED IN D ELETING THE ADDITION OF ` `` ` 23.95 LAKHS MADE TOWARDS BOGUS CREDITS. 4. THE LD. CIT(A) ERRED IN DELET ING THE ADDITION SOLELY BASED ON THE LAPSES IN THE ENQUIRY MADE BY THE ITA NO.1598(MDS)/2009 6 ASSESSING OFFICER RATHER THAN ON THE STRENGTH OF THE DETAILS FURNISHED BY THE ASSESSEE. 5. THE LD. CIT(A) COULD HAVE CAL LED FOR A REMAND REPORT OR GIVEN A SPECIFIC DIRECTION TO THE ASSES SING OFFICER TO MAKE FURTHER ENQUIRIES BEFORE DECIDIN G THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. WHEN THE MATTER WAS CALLED ON FO R HEARING NO-BODY WAS PRESENT FOR THE RESPONDENT-ASSESSEE. THE NOTICE OF POSTING ISSUED TO THE ASSESSEE BY REGISTERED POST WITH ACKNOWLEDGEMEN T DUE HAS BEEN RETURNED TO THE REGISTRY BY THE POSTAL AUTHORITIES WITH THE REMARK: LEFT WITHOUT INSTRUCTION. THIS APPEAL HAS BEEN POSTED FOR HEARING FOR A NUMBER OF TIMES IN THE PAST. THE NOTICE SENT TO TH E ASSESSEE POSTING THE CASE ON 26 TH OCTOBER, 2009 WAS ACCEPTED BY THE ASSESSEE AND THE ACKNOWLEDGEMENT CARD IS AVAILABLE ON RECORD. T HEREAFTER AGAIN REGISTERED NOTICE WAS ISSUED AND IT WAS ACKNOWLEDGE D BY THE ASSESSEE ON 23 RD DECEMBER, 2009. AGAIN NOTICE WAS ISSUED AND IT IS SEEN ACKNOWLEDGED ON 20-7-2010. ANOTHER NOTICE WAS ISSUED AND IT IS ACKNOWLEDGED ON 7-10-2010. IT SHOWS THAT THE A SSESSEE HAD ITA NO.1598(MDS)/2009 7 ACCEPTED THE POSTING NOTICES ATLEAST FOUR TIMES IN THE PAST, PROVED BY THE RESPECTIVE ACKNOWLEDGEMENTS AVAILABLE IN THE FI LE. THIS NOTICE HAS BEEN RETURNED BY THE ASSESSEE. THE ASSESSEE MI GHT NOT BE HAVING TIME EVEN TO ACCEPT THE NOTICE. 10. MOREOVER IN THE PAST, WHEN THE C ASE WAS CALLED ON FOR HEARING, EITHER NO-BODY APPEARED OR DIFFERENT COUNS ELS APPEARED FROM TIME TO TIME AND SOUGHT ADJOURNMENTS. 11. IN THE ABOVE CIRCUMSTANCES WE FI ND THAT THE CONDUCT OF THE ASSESSEE IS IRRESPONSIBLE. IN THE CIRCUMSTANCE S WE ARE NOT INCLINED TO FURTHER DELAY THE DISPOSAL OF THIS APPE AL. 12. WE, THEREFORE, HEARD SHRI K.E.B. RENGARAJAN, THE LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE AND PROCEED TO DISPOSE OF THE APPEAL EX-PARTE QUA THE ASSESSEE. 13. THE COMMISSIONER OF INCO ME-TAX(APPEALS) WHILE DELETING THE ADDITION OF ` 17.35 LAKHS HAS OBSERVED THAT THE NECESSARY AMOUNTS WERE SOURCED OUT OF REALIZATION OF FIXED DE POSITS AND COLLECTIONS RECEIVED FROM DEBTORS AND INCOME EARNED BY THE ITA NO.1598(MDS)/2009 8 ASSESSEE AND REFLECTED IN THE RETURNS OF INCOME FIL ED BY HIM. BUT WHILE ACCEPTING THE CONTENTION OF THE ASSESSEE THAT AMOUNTS WERE REALIZED BY WAY OF LIQUIDATION OF FIXED DEPOSITS, T HE COMMISSIONER OF INCOME-TAX(APPEALS) HAS NOT EXAMINED THE LOCUS STAN DI OF THOSE FIXED DEPOSITS WITH REFERENCE TO ITS SOURCE AS WELL AS WI TH REFERENCE TO ITS IMMEDIATE AVAILABILITY FOR THE PURPOSE OF EXPLAININ G THE CREDITS. APART FROM THE GENERAL OBSERVATION THAT THE ASSESSEE HAD LARGE RESOURCES AVAILABLE IN HIS HANDS, AN EFFECTIVE ANALYSIS OF TH E FUND FLOW POSITION HAS NOT BEEN DONE BY THE COMMISSIONER OF INCOME-TAX (APPEALS). THEREFORE, WE FIND THAT THE ORDER OF THE COMMISSION ER OF INCOME- TAX(APPEALS) DELETING THE ADDITION OF ` 17.35 LAKHS IS PREMATURE. 14. WHILE DELETING THE SECOND ADDITI ON OF ` 23.95 LAKHS, AS RIGHTLY ARGUED BY THE REVENUE, THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS NOT EXAMINED THE BONA FIDES OF THE EXPLANATION OFFERED BY THE ASSESSEE. INSTEAD, THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS DELETED THE ADDITION ON THE GROUND THAT THE PROCEDURES FOLLOWED BY THE ASSESSING AUTHORITY IN M ATTERS LIKE ISSUING SUMMONS WERE NOT IN ACCORDANCE WITH PRESCRIBED RULE S. IF THAT WAS THE ONLY REASON THEN THE COMMISSIONER OF INCOME-TAX (APPEALS) COULD ITA NO.1598(MDS)/2009 9 HAVE REMANDED THE MATTER BACK TO THE ASSESSING AUTH ORITY FOR MAKING A FRESH INVESTIGATION OBSERVING THE RULES IN A PROP ER MANNER. THE DEFECTS POINTED OUT BY THE COMMISSIONER OF INCOME-T AX(APPEALS) AGAINST THE PROCEDURES ADOPTED BY THE ASSESSING AUT HORITY ARE DEFINITELY CURABLE DEFECTS. THEY DO NOT MAKE THE A DDITION VOID OR UNSUSTAINABLE, PER SE. AT THE SAME TIME THE COMMIS SIONER OF INCOME-TAX(APPEALS) HAS FAILED TO APPRECIATE THAT T HE ASSESSEE HAS NOT DONE ANYTHING MEANINGFUL TO PROVE THE BONA FIDE S OF THE LOANS AVAILED FROM THE CREDITORS. THE COMMISSIONER OF IN COME- TAX(APPEALS) HAS MENTIONED ABOUT THE AFFIDAVITS FIL ED BY THOSE CREDITORS. IF THOSE CREDITORS COULD FILE AFFIDAVIT S BEFORE THE ASSESSING AUTHORITY, WHY THEY DID NOT APPEAR BEFORE THE ASSES SING AUTHORITY? DID THE ASSESSEE MAKE ANY EFFORT TO BRING THOSE CRE DITORS BEFORE THE ASSESSING AUTHORITY? THEREFORE, WE FEEL THAT THE C OMMISSIONER OF INCOME-TAX(APPEALS) HAS GROSSLY ERRED IN NOT APPREC IATING THE FACTUAL CIRCUMSTANCES OF THE CREDITS, BUT INSTEAD, CARRIED AWAY BY THE TECHNICAL DEFECTS POINTED OUT AGAINST THE PROCEDURE S ADOPTED BY THE ASSESSING AUTHORITY. ACTUALLY THE COMMISSIONER OF INCOME- TAX(APPEALS) HAS MISSED THE WOODS FOR TREES. HIS O RDER CANNOT BE SUSTAINED IN LAW. ITA NO.1598(MDS)/2009 10 15. IN THESE CIRCUMSTANCES THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS SET ASIDE. THE ISSUES OF ABOVE STATED TWO ADDITIONS ARE REMITTED BACK TO THE ASSESSING AUTHOR ITY. THE ASSESSEE IS GIVEN ONE MORE OPPORTUNITY TO APPEAR BEFORE THE ASSESSING AUTHORITY AND PRODUCE THE NECESSARY EVIDENCES IN SU PPORT OF THE GENUINENESS OF HIS CASE. THE ASSESSING AUTHORITY S HALL EXAMINE SUCH EVIDENCES AND PARTICULARS PLACED BEFORE HIM AN D SHALL HEAR THE ASSESSEE AND THEREAFTER COME TO A FINDING IN ACCORD ANCE WITH LAW AND SHALL PASS APPROPRIATE ORDERS. 16. IN RESULT THIS APPEAL FILED BY T HE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COU RT AT THE TIME OF HEARING ON MONDAY, THE 9 TH DAY OF MAY, 2011, AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 9 TH MAY, 2011. V.A.P. COPY TO: APPELLANT/RESPONDENT/CIT/CIT( A)/DR/G.F.