USHA SHARMA, MUMBAI V. ITO 24(2)(4), MUMBAI

ITA 1659/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75229 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2001-2002
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJUKTA CHOW DHURY
• Keywords: Capital asset; Depreciation; Income from undisclosed sources
• Section: 147; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F , BENCH MUMBAI BEFORE SHRI I.P.BANSAL & SHRI D.KARUNAKARA RAO, AM ITA NO. 1659 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 1 - 02 ) SMT. USHA SHARMA, D - 203, VEENA NAGAR, S.V.ROAD, MALAD (WEST), MUMBAI - 400 064 VS. ITO - 24(2)(4), MUMBAI PAN/GIR NO. : A LRPS 7681 M ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. PRAMOD KUMAR PARIDA & MS. SANJUKTA CHOWDHURY /REVENUE BY : MR . RAVI PRAKASH DATE OF HEARING : 1 ST JANUARY , 201 4 DATE OF PRONOUN CEMENT : 1 ST JANUARY , 201 4 O R D E R PER I.P.BANSAL ( J .M.) : THIS APPEAL IS FILED BY THE ASSESSEE AND IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED CIT(A) - 34, MUMBAI, DATED 28 - 1 - 2011 , FOR THE ASSESSMENT YEAR 200 1 - 02 . 2 . THE GROU NDS OF APPEAL IN APPEAL OF THE ASSESSEE ARE AS UNDER: - 1. ADDITION ON ACCOUNT OF ALLEGED INVESTMENT A FLAT - RS. 20,25,000/ A) THE ID. CIT(A) ERRED IN CONVERTING THE ASSESSING OFFICER'S PROTECTIVE ASSESSMENT AS SUBSTANTIVE ASSESSMEN T IN THE HANDS OF T HE APPELLANT WITHOUT APPRECIATING TO THE FACT THAT THE LADY APPELLANT WAS NEITHER THE OWNER OF THE FLAT NOR ANY PAYMENT HAD GONE FROM HER ACCOUNT PERTAINING TO ITS PURCHASE. ITA NO. 1659 /20 1 1 2 B) WITHOUT PREJUDICE TO ABOVE, THE APPELLANT AND THE FLAT PURCHASER (MIS. GLOBE TRANSPORT CORPORATION) ARE SEPARATELY ASSESSED TO TAX WITH THEIR RESPECTIVE PANS AND THE APPELLANT HAVING NO DIRECT CONNECTION WITH THE AFFAIRS OF THE SAID FIRM, THEREFORE, NOT ONLY SUBSTANTIVE ASSESSMENT BUT EVEN PROTECTIVE ASSESSMENT IN THE HANDS OF THE APPELLANT IS A WRONG ACTION ON THE PART OF THE ASSESSING OFFICER WHICH IS ENTIRELY PREJUDICIAL TO THE INTEREST OF YOUR APPELLANT. C) WITHOUT PREJUDICE TO ABOVE, THE REVENUE HAS ACCEPTED THE CLAIM OF DEPRECIATION MADE BY THE FIRM WHICH PROVES THE POINT THAT THE APPELLANT IS NOT THE OWNER THEREOF; HENCE, NO ADDITION IS CALLED FOR. D) WITHOUT FURTHER PREJUDICE TO ABOVE, THE ID. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE IMPUGNED FLAT STANDS AS CAPITAL ASSET IN THE BALANCE SHEET OF THE FIRM. THEREFORE, ME RE LENDING OF NAME SHOULD NOT CONVERT THE REAL ACTIVE OWNER AS A PASSIVE OWNER AND VICE VERSA. 2. LEVY OF PENAL INTEREST THE APPELLANT, ON MERITS, DENIES HER LIABILITY TO PENAL INTEREST. 3 . THE IMPUGNED ASSESSMENT IS ORDER DATED 28 - 12 - 2007 , PASSED U NDER SECTION 14 4 READ WITH SECTION 147 OF THE ACT. IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 20,25,000/ - , WHICH WAS WITH REGARD TO CANCELLATION OF A FLAT IN BASANT AT KANDIVALI, WHICH WAS NOT SHOWN IN THE RETURN OF INCOME. THE A SSESSEE WAS REQUIRED TO SUBMIT THE EXPLANATION. THE EXPLANATION OF THE ASSESSEE IS REPRODUCED IN THE ASSESSMENT ORDER. ACCORDING TO THE SUBMISSION OF THE ASSESSEE, THE SAID FLAT WAS BOOKED BY A FIRM M/S GLOBE TRANSPORT CORPORATION AND INVESTMENT WAS ALSO M ADE BY THE SAID FIRM. THE CANCELLATION AMOUNT RECEIVED BY THE ASSESSEE WAS RETURNED TO M/S GLOBE TRANSPORT CORPORATION, FOR WHICH RELEVANT PARTICULARS WERE GIVEN AND WAS SENT BY THE AO TO THE AO OF M/S GLOBE TRANSPORT CORPORATION. AFTER RECEIVING THE REPLY , THE AO OF THE ASSESSEE HAS TREATED THE SAID AMOUNT AS INCOME OF THE ASSESSEE ON PROT E CTIVE BASIS TO PROTECT THE INTEREST OF THE ITA NO. 1659 /20 1 1 3 REVENUE. THE AO OF THE ASSESSEE ALSO SENT THE INTIMATION TO THE AO OF M/S GLOBE TRANSPORT CORPORATION TO TAKE NECESSARY ACTION IN THE HANDS OF THE FIRM. IT IS IN THIS MANNER, AN ADDITION OF RS. 20,25,000/ - WAS MADE IN THE HANDS OF THE ASSESSEE. 4 . THE ADDITION WAS CHALLENGED IN AN APPEAL FILED BEFORE THE CIT(A). BEFORE THE CIT(A) , THE ASSESSMENT ORDER DATED 29 - 12 - 2008 FRAMED IN THE HANDS OF FIRM WAS PRODUCED AND IT WAS CONTENDED THAT SINCE THE SUBSTANTIAL ASSESSMENT HAS BEEN MADE IN THE HANDS OF THE FIRM, THEREFORE, NO ADDITION WAS REQUIRED TO BE SUSTAINED IN THE HANDS OF THE ASSESSEE. THE CIT(A) FORWARDED THE REPLY OF THE ASSESS EE TO THE AO OF THE FIRM FROM WHOM HE HAS RECEIVED LETTER DATED 24 - 6 - 2009. THE CONTENTS OF WHICH ARE AS UNDER : - WITH REFERENCE TO THE ABOVE SUBJECT, I WRITE TO STATE THAT THE ASSESSMENT IN THE CASE OF MIS. GLOBE TRANSPORT C ORPORATION HAS BEEN COMPLETED U / S 144 R.W.SEC. 147 OF THE I.T. ACT AS THE ASSESSEE HAS NOT FURNISHED ANY DETAILS TO VERIFY THE INVESTMENT MADE BY IT WHILE CONCLUDING THE ASSESSMENTS U/ S 144, EXPENDITURE CLAIMED IN THE P & L A/ C FOR THE YEAR RELEVANT TO THE A.Y. 2000 - 01 HAS BEEN ASCERTAI NED TO HAVE BEEN INFLATED BY THE ASSESSEE FIRM TO THE EXTENT OF RS. 1,98,68,047/ - AND THE SAME HAS BEEN DISALLOWED. SINCE THE SAID INFLATION OF EXPENDITURE IS CONSIDERED TO HAVE RESULTED IN UNACCOUNTED INCOME TO FIND ITS APPLICATION IN SUCH UNACCOUNTED ASSE TS, NO SEPARATE ADDITION HAS BEEN MADE ON ACCOUNT OF INVESTMENT IN FLAT AS STATED BY MRS. USHA SHARMA. ON RECEIPT OF SUCH LETTER FROM AO, LEARNED CIT(A) HAS CONVERTED THE ASSESSMENT OF THE ASSESSEE FROM PROTECTIVE TO SUBSTANTIAL WITH THE FOLLOWING OBSER VATIONS : - 2.2 I HAVE GONE THROUGH THE CONTENTS OF THE IMPUGNED ASSESSMENT ORDER AS WELL AS ARGUMENTS & SUBMISSIONS OF THE LD. AR OF THE APPELLANT ALONG WITH ALL MATERIAL AVAILABLE ON RECORD. THE CONTENTION OF THE APPELLANT THAT THE INVESTMENT IS MADE BY THE FIRM IN THE FLAT ITA NO. 1659 /20 1 1 4 PURCHASED IN THE NAME OF THE APPELLANT IS NOT BORNE OUT FROM THE SAID ASSESSMENT ORDER OF THE FIRM. SINCE NO SUBSTANTIVE ADDITION IS MADE FOR THE SPECIFIC INVESTMENT IN THE FLAT IN THE HANDS OF THE FIRM EVEN IN THE REASSESSMENT ORDER D ATED 28/12/2007 AND THERE IS NO REASON GIVEN BY THE CONCERNED ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 28/12/2007 OF THE FIRM AS TO WHETHER THE INVESTMENT IS PERTAINING TO THE FIRM BUT FOUND EXPLAINED OR ADDITION THEREFOR E NOT REQUIRED IN VIEW OF TH E OTHER ADDITIONS, THE SEPARATE OPINION OF THE CONCERNED ASSESSING OFFICER OF THE FIRM EXPRESSED THROUGH HIS LETTER DATED 24/06/ 2009 CANNOT COME TO THE RESCUE OF THE APPELLANT BEFORE ME AND I HAVE NO CHOICE BUT TO CONFIRM THE IMPUGNED ASSESSMENT ORDER BY D ECLARING THE IMPUGNED ADDITION TO BE SUBSTANTIVE IN THE HANDS OF THE APPELLANT IN THE FACTS & CIRCUMSTANCES OF THE INSTANT CASE. ACCORDINGLY, THE APPEAL IS DISMISSED ON ALL THE GROUNDS AND THE IMPUGNED ADDITION IN THE IMPUGNED ASSESSMENT ORDER IS UPHELD ON SUBSTANTIVE BASIS. 5 . BEING AGGRIEVED WITH THE IMPUGNED ORDER , THE ASSESSEE HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 6 . REFERRING TO THE FACTS, IT WAS SUBMITTED BY THE LEARNED AR THAT THE FLAT AT NO POINT OF TIME BELONGED TO THE ASSESSEE. IT WAS SH OWN AS CAPITAL INVESTMENT IN THE HANDS OF THE FIRM. THE AMOUNT RECEIVED BY THE ASSESSEE WAS ALSO RETURNED TO THE FIRM AND ALL THESE FACTS WERE SUBMITTED BEFORE THE AO, WHO AFTER VERIFICATION OF THE SAME, HAD ASSESSED THE ASSESSEE ON PROTECTIVE BASIS. IT WA S FURTHER SUBMITTED THAT LEARNED CIT(A) WITHOUT APPRECIATING THE FACTS HAS CONVERTED THE PROTECTIVE ASSESSMENT TO SUBSTANTIAL ASSESSMENT IN THE HANDS OF THE ASSESSEE. HE ALSO SUBMITTED THAT SINCE THE ADDITION HAS BEEN MADE IN THE HANDS OF THE FIRM ON SUBST ANTIVE BASIS, THE ADDITION IN THE HANDS OF THE ASSESSEE SHOULD BE CANCELLED. 7 . ON THE OTHER HAND, RELYING UPON THE ORDER PASSED BY THE CIT(A), IT WAS SUBMITTED BY THE LEARNED DR THAT LEARNED CIT(A) HAS RIGHTLY HELD THAT THE SAID AMOUNT IS ASSESSABLE IN T HE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS. ITA NO. 1659 /20 1 1 5 8 . WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. IN THE PRESENT CASE, WELL BEFORE FRAMING THE ASSESSMENT IN THE HANDS OF THE FIRM, THE AO HAS PASSED ASSESSMENT ORDER IN THE HANDS OF THE ASSESSEE AND ALL THE FACTS WERE PLACED BY THE ASSESSEE BEFORE THE AO . THE FACTS PLACED BEFORE THE AO CLEARLY SUGGESTED THAT THE INVESTMENT ON THE FLAT WAS MADE BY THE FIRM. IT IS FOR THAT REASON THE AO HAD ASSESSED THE ASSESSEE ON PROTECTI VE BASIS. MUCH AFTER MAKING SUCH ASSESSMENT OF THE ASSESSEE, THE AO ASSESSED THE FIRM WHERE THE SUBSTANTIAL ASSESSMENT HAS BEEN MADE. COPY OF THE ASSESSMENT ORDER OF THE FIRM IS ALSO ENCLOSED IN THE PAPER BOOK FROM PAGES 4 3 TO 60. THIS ADDITION HAS BEEN DI SCUSSED IN THE SAID ASSESSMENT ORDER AS UNDER : - 28. DURING THE FINANCIAL YEAR RELEVANT TO THE A.Y.2001 - 02, ASSESSEE FIRM IS ALLEGED TO HAVE RECEIVED A SUM OF RS. 20,25,000/ - AS PER THE DETAILS GIVEN BELOW : CHEQUE NO. DATE AMOUNT NAME OF BANK 486041 21/ 06/00 250000 STATE BANK OF MYSORE 486042 21/06/00 275000 STATE BANK OF MYSORE 486043 29/06/00 250000 STATE BANK OF MYSORE 486044 03/07/00 250000 STATE BANK OF MYSORE 486045 04/07/00 250000 STATE BANK OF MYSORE 486046 06/07/00 250000 STATE BANK OF MYSO RE 486047 10/07/00 250000 STATE BANK OF MYSORE 486048 11/07/00 250000 STATE BANK OF MYSORE TOTAL 2025000 29. HOWEVER, ASSESSEE FIRM COULD NOT SUBSTANTIATE THE SAME. IN THE ABSENCE OF ANY OTHER DETAILS, AND IN THE ABSENCE OF ANY RESPONSE FROM THE ASS ESSEE ON THIS ISSUE, THE SAME HAS BEEN CONSIDERED TO BE THE INCOME OF THE ASSESSEE FROM UNEXPLAINED SOURCES AND ACCORDINGLY THE ENTIRE AMOUNT OF RS.20,25,000/ - HAS BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 9 . FROM THE ABOVE EXTRACT OF THE ASSESSMEN T ORDER OF THE FIRM, IT IS CLEAR THAT THE SUBSTANTIAL ADDITION HAS BEEN MADE IN THE HANDS OF THE ITA NO. 1659 /20 1 1 6 FIRM. THE SAME AMOUNT CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE ON SUBSTANTIAL BASIS. THERE IS NO MATERIAL ON RECORD BY WHICH IT CAN BE SAID THAT THERE W AS SOME CHANGE IN THE FACTS AND CIRCUMSTANCE OF THE CASE ACCORDING TO WHICH THE ASSESSEE COULD BE HELD TO BE ASSESSABLE ON SUBSTANTIAL BASIS. IN ABSENCE OF ANY SUCH MATERIAL, THE PROTECTIVE ASSESSMENT MADE IN THE HANDS OF THE ASSESSEE COULD NOT CONVERTED INTO SUBSTANTIVE . IN ANY CASE, WHEN THERE ARE TWO ASSESSMENTS ONE ON PROTECTIVE BASIS AND OTHER ON SUBSTANTIAL BASIS - IT IS ALWAYS ADVISABLE TO ADJUDICATE BOTH THE ISSUES SIMULTANEOUSLY. THEREFORE, IN OUR OPINION, LEARNED CIT(A) HAS COMMITTED AN ERROR IN CONFIRMING THE ADDITION IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS WITHOUT EXAMINING THE FINALITY OF THE SAME INCOME IN THE HANDS OF THE FIRM WHERE DEPARTMENT HAS ASSESSED THE SAME AMOUNT ON SUBSTANTIVE BASIS. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT WHETHER THE SAID SUBSTANTIAL ASSESSMENT MADE IN THE HANDS OF THE FIRM HAS ATTAINED FINALITY. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE THE ISSUES RAISED IN THIS APPEAL TO THE FILE OF THE AO WITH A DIRECTION TO RE - EXAMINE THE ISSUES IN THE HANDS OF THE ASSESSEE IN THE LIGHT OF THE ASSESSMENT FRAMED IN THE HANDS OF THE FIRM WHERE THE INCOME HAS BEEN ASSESSE D ON SUBSTANTIVE BASIS. THE ORDER PASSED BY THE LEARNED CIT(A) IS SET ASIDE AND THE AO IS DIRECTED TO RE - ADJUDICATE THE ISSU E RAISED IN THE PRESENT APPEAL. WE DIRECT ACCORDINGLY . 1 0 . GROUNDS NO.2 RELATES TO LEVY OF PENAL INTEREST ETC. . NO ARGUMENTS WERE ADVANCED FOR THIS GROUND. IN ANY CASE, LEVY OF INTEREST IS ITA NO. 1659 /20 1 1 7 CONSEQUENTIAL. HENCE, THE AO IS DIRECTED TO LEVY INTEREST AS PER LAW AFTE R COMPLETING THE ASSESSMENT AS PER DIRECTION GIVEN ABOVE. 1 1 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST JANUARY . 201 4 . 1 ST JAN,2014 SD/ - SD/ - ( ) ( D .KARUNAKARA RAO ) ( ) ( I.P.BANSAL ) / ACCOUNTANT MEMBER / JUDICIALMEMBER MUMBAI ; DATED 01 / 01/2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. G UARD FILE. //TRUE COPY//