Nataraj S , Udupi V. Income TAx Oficer Ward-1 , Udupi

ITA 1608/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5624 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 27-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIMAL ANAND
• Assessee Lawyers: C SANDEEP
• Keywords: Opportunity of being heard; Peak credit
• Section: 80C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1608 / BANG/2017 ASSESSMENT YEAR : 20 07 - 08 SHRI S. NATARAJA, PWD CONTRACTOR, BANNANJE, UDUPI 576 101. PAN: ADPPN 9464K VS. THE INCOME TAX OFFICER, WARD 1, UDUPI. APPELLANT RESPONDENT APPELLANT BY : SHRI C. SANDEEP, CA RESPONDENT BY : SHRI VIMAL ANAND, ADDL. CIT (DR) DATE OF HEARING : 1 8 .01.2018 DATE OF PRONOUNCEMENT : 24 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT(A), MANGALORE DATED 23.05.2017 FOR ASSESSMENT Y EAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) IN SO FAR IT IS PREJUDICIAL TO THE INTERE STS OF THE APPELLANT, IS BAD AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS.75,000 /- TOWARDS LOW DRAWINGS. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS.4,86,0 00/- U/S. 68 OF THE ACT. 4. WITHOUT PREJUDICE TO THE ABOVE GROUND NO. 3, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ADDED ONLY PEAK CREDIT. ITA NO.1608/BANG/2017 PAGE 2 OF 7 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN LAW AND FACTS IN MAKING AN ADHOC DISALLOWANCE OF 5% OF THE LABOUR CHARGES AND MATERIAL PURCHASES FROM UNREGISTERED DE ALERS. ADDITIONAL GROUND 6. THAT THE LEARNED LOWER AUTHORITIES OUGHT TO HAVE ALLOWED THE CLAIM OF THE APPELLANT TOWARDS DEDUCTION OF RS. 74,363/- U/S. 80C OF THE ACT SINCE THE EVIDENCES FOR THE CLAIM ARE AVAILABLE. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HON'BLE INCOME TAX AP PELLATE TRIBUNAL, BANGALORE TO ADD, DELETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR AT THE TIME OF H EARING OF THIS APPEAL. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT GROU ND NO. 1 IS GENERAL. REGARDING GROUND NO. 2, HE SUBMITTED THAT AS PER PARA 6 OF TH E ASSESSMENT ORDER, IT IS STATED BY THE AO THAT IN THE PRESENT YEAR, THE ASSE SSEE HAS SHOWN DRAWING OF RS. 1,37,062/- AND, AFTER CONSIDERING LIC AND NSC P AYMENTS, ONLY AN AMOUNT OF RS. 45,000/- IS LEFT FOR THE HOUSE HOLD EXPENSES OF THE PRESENT YEAR WHICH IS VERY LOW AND IT IS UNBELIEVABLE AND UNACCEPTABLE TH AT THIS AMOUNT OF DRAWING FOR PERSONAL EXPENSES OF THE ASSESSEE IS SUFFICIENT CON SIDERING THE SIZE OF THE FAMILY AND THE STANDARD OF LIVING OF THE ASSESSEE. THE AO HAS ESTIMATED THAT RS. 10,000/- PER MONTH IS REASONABLE AMOUNT OF DRAW ING. THEREAFTER, HE SUBMITTED THAT BEFORE THE CIT(A), IT WAS SUBMITTED BY ASSESSEE THAT THE ASSESSEE LIVED IN A HINDU UNDIVIDED FAMILY WITH 14 MEMBERS INCLUDING BROTHERS, MOTHER AND CHILDREN. HE ALSO SUBMITTED T HAT THE ASSESSEE HAS A SON AND DAUGHTER AND DURING THE PRESENT YEAR, THE SON A ND DAUGHTER OF THE ASSESSEE WERE STUDENTS. IT IS ALSO NOTED BY CIT(A) IN PARA NO. 5.4.2 OF HIS ORDER THAT IN THE RELEVANT YEAR I.E. ASSESSMENT YEA R 2007-08, THE HUF HAD AGRICULTURAL INCOME OF RS. 6,00,000/- P.A. AND DAIR Y INCOME OF RS. 1,00,000/- P.A. AND IT WAS THE CLAIM OF THE ASSESSEE THAT HUF INCOME WAS USED FOR HOUSEHOLD EXPENSES. HE SUBMITTED THAT THIS ASPECT IS OVERLOOKED BY CIT(A) WHILE DECIDING THIS ISSUE IN 5.4.3 OF HIS ORDER AND THEREFORE, THE ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS NOT JUSTIF IED. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. ITA NO.1608/BANG/2017 PAGE 3 OF 7 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, I REPRODUCE PARA NOS. 5.4.2 AND 5.4.3 FROM THE ORDER OF CIT(A) FOR READY REFERENCE. 5.4.2 THE APPELLANT SUBMITTED VIDE LETTER DATED 17. 5.2017 THAT HE LIVED IN A HINDU UNDIVIDED FAMILY WITH ABOUT 14 MEM BERS INCLUDING BROTHERS, MOTHER AND CHILDREN. THE APPELLANT HAS A SON AND A DAUGHTER. DURING THE ASSESSMENT YEAR 2007-08 THEY W ERE STUDENTS. PRESENTLY, THE DAUGHTER GOT MARRIED AND SON HAS COM PLETED HIS MBA. DURING THE ASSESSMENT YEAR 2007-08, HUF HAD AGRICUL TURAL INCOME OF RS. 6,00,000/- P.A. AND DAIRY INCOME OF RS.1,00, 000/- P.A. THE HUF INCOME WAS BEING USED FOR HOUSE HOLD MAINTENANCE EX PENSES. 5.4.3 THE APPELLANT IN ITS SUBMISSIONS IN SUPPORT O F LOAN FROM SHANTARAJ (HUF) SUBMITTED THAT. THE FAMILY INCOME I S RS. 4 TO 5 LAKHS BASED ON A VILLAGE ACCOUNTANT CERTIFICATE. WHERE AS IN SUPPORT OF HIS DRAWINGS, HE CLAIMED THAT FAMILY INCOME IS 6 LAKHS. THE FAMILY INCOME FIGURES SUBMITTED WERE FLUCTUATING WITH EVERY SUBMI SSION. THE APPELLANT HAS NOT FURNISHED THE DETAILS OF THE ENTI RE FAMILY EXPENDITURE WITH REGARD TO EACH MEMBER'S ACTIVITY, FOOD, CLOTHI NG, ELECTRICITY, TELEPHONE, MEDICAL, TRAVEL, PETROL, CONVEYANCE AND EDUCATION EXPENSES ETC. THE APPELLANT IS A PWD CONTRACTOR. THE MONTHLY WITHDRAWAL OF RS 3750/- FOR A FAMILY OF FOUR IS VERY VERY LOW. EVEN THE DAILY WAGE LABOURER AND BPL FAMILY WOULD BE SPENDING MORE THAN RS.3750/- PER MONTH. I AM OF THE VIEW THAT THE APPELLANT FAILED T O JUSTIFY THE LOW WITHDRAWAL. IN THE ABSENCE OF COMPLETE DETAILS OF F AMILY EXPENDITURE, TAKING INTO CONSIDERATION, THE STATUS OF THE APPELL ANT, THE ADDITION MADE BY THE AO IS FOUND TO BE REASONABLE AND THE ACTION OF THE AO IS HEREBY UPHELD. GROUND NO.7 IS REJECTED. 5. FROM THE ABOVE PARAS OF THE ORDER OF CIT(A), IT IS SEEN THAT IT IS NOTED BY CIT(A) IN PARA NO. 5.4.3 OF HIS ORDER THAT IN SUPPORT OF L OAN FROM SHANTARAJ (HUF), THE ASSESSEE HAS SUBMITTED THAT THE FAMILY INCOME IS RS . 4 TO 5 LAKHS BASED ON A VILLAGE ACCOUNTANT CERTIFICATE. BUT IN SUPPORT OF H IS DRAWINGS, HE CLAIMED THAT THE FAMILY INCOME IS RS. 6 LAKHS. BECAUSE OF THIS DIFF ERENCE IN THESE TWO FIGURES OF FAMILY INCOME, THE CIT(A) HAS TOTALLY DISREGARDED T HIS ASPECT OF THE MATTER AND CONFIRMED THE ADDITION MADE BY THE AO. IN MY CONSI DERED OPINION, HE SHOULD HAVE GIVEN A FINDING AS TO HOW MUCH OF FAMILY INCOM E IS ACCEPTABLE IN THE FACTS OF THE PRESENT CASE AND HOW MUCH AMOUNT OF TOTAL DR AWINGS INCLUDING THE PERSONAL DRAWINGS OF ALL FAMILY MEMBERS IS MET OUT OF THE FAMILY INCOME AND WHETHER THE FAMILY INCOME AND PERSONAL DRAWINGS SHO WN BY THE PRESENT ASSESSEE AND OTHER FAMILY MEMBERS IS REASONABLE TO TAKE CARE OF THE PERSONAL EXPENSES OF ALL THE FAMILY MEMBERS AND AFTER THAT, THE ISSUE SHOULD HAVE BEEN ITA NO.1608/BANG/2017 PAGE 4 OF 7 DECIDED AS TO WHETHER ANY ADDITION IS CALLED FOR IN RESPECT OF ALLEGED LOW WITHDRAWING OR WHETHER ANY AMOUNT IS AVAILABLE OUT OF FAMILY INCOME AS EXPLANATION OF LOAN FROM FAMILY. SINCE THIS WAS NO T DONE, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF CIT(A) FOR F RESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO BOTH SIDES. GROUND NO. 2 IS ALLOWED FOR STATISTICAL PUR POSES. 6. REGARDING GROUND NOS. 3 AND 4 IN RESPECT OF CONF IRMING THE ADDITION OF RS. 4,86,000/- U/S. 68 OF IT ACT, HE SUBMITTED THAT ON THIS ACCOUNT ALSO, IT WAS THE EXPLANATION OF THE ASSESSEE THAT LOAN RECEIVED FROM THE FATHER OF THE ASSESSEE WAS FINANCED BY THE INCOME OF THE HUF AND HENCE, TH IS ADDITION MADE BY THE AO AND CONFIRMED BY THE CIT(A) IS ALSO NOT JUSTIFIE D FOR THE SAME REASON. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITI ES BELOW. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT IT IS NOTED BY CIT(A) IN PARA NO. 5.5.5 OF HIS ORDER THAT IT WAS THE EXPLANATION OF THE ASSESSEE THAT THE HUF HAD AGRICULTURAL INCOME OF RS. 6,00,000/- P.A. AND DAIRY INCOME OF RS. 1,00,000/- P.A. THEREAFTER IN PARA NO. 5.5.6 OF IT S ORDER, IT IS NOTED BY CIT(A) THAT THE HUF CONSISTED OF 14 MEMBERS WHO LIVED TOGE THER. THEREAFTER THE CIT(A) PROCEEDED ON THIS BASIS THAT THE HUF MIGHT H AVE GIVEN LOANS TO OTHER MEMBERS ALSO. THE ASSESSEE IN ALL ITS SUBMISSIONS MERELY RELIED ON THE AGRICULTURAL HOLDING RATHER THAN SUBMITTING HUF INC OME DETAILS BASED ON BOOKS AND EVIDENCE. THE BOOKS OF ACCOUNTS OF HUF WERE NE VER PRODUCED. THE ASSESSEE HIMSELF SUBMITTED THAT THE HUF INCOME WAS BEING USED FOR HOUSEHOLD MAINTENANCE EXPENSES. ON THIS BASIS, THE CIT(A) HAS REJECTED THE ASSESSEES CLAIM IN RESPECT OF CREDIT WORTHINESS OF THE HUF BY HOLDING THAT THE ASSESSEE FAILED TO PROVE THE CREDIT WORTHINESS OF T HE HUF THAT IT IS STILL LEFT WITH FUNDS TO LEND PERIODICALLY TO THE ASSESSEE AFTER ME ETING THE DAILY REQUIREMENTS OF SUCH A BIG FAMILY. BUT THERE IS NO CATEGORICAL FINDING GIVEN AS TO HOW MUCH IS THE INCOME OF THE HUF, HOW MUCH IS EXPENSES OF VARI OUS MEMBERS OF HUF, HOW MUCH OF LOAN WAS GIVEN BY THE HUF TO THE PRESEN T ASSESSEE AND OTHER FAMILY MEMBERS OF HUF AND IT IS SEEN THAT EVEN THE EXPENSES HAS NOT BEEN ACCEPTED AS EXPLAINED OUT OF THE INCOME OF HUF. HE NCE I FEEL IT PROPER TO ITA NO.1608/BANG/2017 PAGE 5 OF 7 RESTORE THIS MATTER ALSO BACK THE FILE OF CIT(A) FO R FRESH DECISION SIMULTANEOUSLY WITH THE DECISION IN RESPECT OF ADDITION ON ACCOUNT OF LOW WITHDRAWAL WITH A CATEGORICAL FINDING AS TO HOW MUCH IS THE INCOME OF THE HUF AND OTHER FAMILY MEMBERS OF THE HUF, HOW MUCH IS THE PERSONAL EXPENS ES, HOW MUCH LOAN WAS GIVEN TO OTHER FAMILY MEMBERS IF ANY AND THEN HE SH OULD DECIDE AS TO WHETHER THE LOAN CLAIMED TO HAVE BEEN RECEIVED FROM HUF IS ACCEPTABLE OR NOT IN THE FACTS OF THE PRESENT CASE. HE SHOULD PASS A REASON ED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. GROUND NOS. 3 AND 4 ARE ALSO ALLOWED FOR STATISTICAL PURPOSES. 8. REGARDING GROUND NO. 5, HE SUBMITTED THAT THIS A DHOC DISALLOWANCE MADE BY THE AO AND CONFIRMED BY CIT(A) IS NOT JUSTIFIED. T HE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT IN PARA NO. 5 OF THE ASSESSMENT ORDER, IT IS STATED BY THE AO THAT THE A SSESSEE HAS ADMITTED INCOME AT ONLY 4.55% OF THE GROSS RECEIPTS WHICH IS UNACCEPTABLE AND IT IS SEEN THAT THE ENTIRE CLAIM OF THE CONTRACT EXPENSES TO T HE TUNE OF RS. 55,74,371/- AND MATERIAL PURCHASE OF RS. 26,86,782/- IS NOT SUPPORT ED BY DOCUMENTARY EVIDENCES AND ENTIRE PAYMENTS ARE MADE IN CASH. ON THE BASIS OF THIS REASONING, THE AO MADE DISALLOWANCE TO THE EXTENT O F 5% OF EXPENSES BY HOLDING THAT THESE EXPENSES ARE NOT CROSS VERIFIABL E AND HENCE, TREATED AS INFLATED EXPENSES. IN THIS MANNER, DISALLOWANCE IS MADE OF RS. 4,13,057/-. I FIND THAT A CLEAR FINDING IS GIVEN BY CIT(A) IN PAR A NO. 5.6.6 OF HIS ORDER THAT OUT OF TOTAL PURCHASE OF MATERIALS IN THE PRESENT YEAR OF RS. 26,86,782/-, AN AMOUNT OF RS. 22,96,181/- IS SUPPORTED BY PROPER BILLS AND ONLY RS. 3,90,601/- FOR PURCHASE OF JELLY AND SAND WERE FROM UNREGISTERED D EALERS AND SUPPORTED BY ONLY DEBIT VOUCHERS. IN PARA NO. 5.6.7 OF HIS ORDE R, IT IS NOTED BY CIT(A) THAT FOR LABOUR PAYMENTS OF RS. 55,74,371/-, THERE ARE NO B ILLS MAINTAINED THESE ARE SUPPORTED BY THE DEBIT SLIPS ONLY. THE CIT(A) CONF IRMED THE DISALLOWANCE OF 5% IN RESPECT OF RS. 3,90,601/- BEING PURCHASE OF JELL Y AND SAND FROM UNREGISTERED DEALERS AND RS. 55,74,371/- BEING PAYMENT ON LABOUR CHARGES AND IN THIS MANNER, HE CONFIRMED THE DISALLOWANCE OF RS. 2,98,2 48/- OUT OF TOTAL ITA NO.1608/BANG/2017 PAGE 6 OF 7 DISALLOWANCE OF RS. 4,13,057/-. IN MY CONSIDERED O PINION, FOR THIS REASON ALONE THAT PURCHASE IS FROM UNREGISTERED DEALERS AND PAYM ENT TO LABOUR IS BY WAY OF SELF MADE VOUCHERS, DISALLOWANCE IS NOT JUSTIFIED. IT HAS TO BE SEEN AS TO WHETHER SUCH CLAIM OF THE ASSESSEE IS REASONABLE OR NOT AND FOR THAT, CIT(A) SHOULD HAVE COMPARED THE EXPENSES IN THE PRESENT YE AR WITH THAT OF THE EARLIER YEARS AND IF POSSIBLE, SUCH EXPENSES BY SIMILAR ASS ESSEE MAY ALSO BE CONSIDERED TO EXAMINE THE REASONABLENESS OF THE ASS ESSEES CLAIM AND THEREAFTER, THE MATTER SHOULD BE DECIDED IF IT IS F OUND THAT CLAIM OF THE ASSESSEE IS EXCESSIVE, UNREASONABLE AND UNJUSTIFIED AND THEN ONLY, REASONABLE DISALLOWANCE CAN BE MADE AND NOT OTHERWISE. HENCE ON THIS ISSUE ALSO, I SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER BA CK TO HIS FILE FOR FRESH DECISION IN THE LIGHT OF ABOVE DISCUSSION AFTER PRO VIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. GROUND NO. 5 IS ALSO AL LOWED FOR STATISTICAL PURPOSES. 10. REGARDING GROUND NO. 6 BEING ADDITIONAL GROUND IN RESPECT OF DISALLOWANCE OF DEDUCTION CLAIMED OF RS. 74,363/- U/S. 80C OF THE A CT, NO ARGUMENT WAS RAISED BEFORE ME AND NO SUCH GROUND WAS RAISED BEFORE CIT( A) AND THEREFORE, THIS ISSUE DOES NOT ARISE OUT OF THE ORDER OF CIT(A). H ENCE THIS GROUND IS REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 24 TH JANUARY, 2018. /MS/ ITA NO.1608/BANG/2017 PAGE 7 OF 7 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.