Assistant Commissioner of Income-Tax, Bangalore V. Shri.Pichila Jayachandra Reddy, Bangalore

ITA 1683/BANG/2016

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0719 (ITAT-BANGALORE)
• Duration Of Justice: 4 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-02-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 21-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S V RAVISHANKAR ADVOTES
• Keywords: Additional evidence
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K , JUDICIAL MEMBER ITA NO. 1683 /BANG/201 6 (ASSESSMENT YEAR: 20 12 - 13 ) ASST. COMMISSIONER OF INCOME TAX, C IRCLE 1(2)(2), BANGALORE. .APPELLANT . VS. SHRI PICHILA JAYACHANDRA REDDY, NO.554, 9 TH A MAIN,1 ST STAGE, INDIRANAGAR, BANGALORE - 560038 , RESPONDENT. ASSESSEE BY: SHRI S.V.RAVISHANKAR, ADVOTES. REVENUE BY: SHRI KANNAN NARAYANAN, JCIT (D.R) DATE OF HEARING : 11.02.2 0 2 1 . DATE OF PRONOUNCEMENT : 16 .02 .20 2 1 . O R D E R PER SHRI CHANDRA POOJARI, A M : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 1 , BANGALORE DT.6.6.2016 FOR THE ASSESSMENT YEAR 2012 - 13 . 2. THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO. 1683/BANG/2016 2. THE LD. CIT(A) ERRED IN MERELY ACCEPTING THE ASSESSEE'S SUBMISSION REGARDING THE CAPITAL INTRODUCED AND DELETING THE ADDITION MADE BY THE AO AMOUN TING TO RS.1,97,61,038/ - WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD FAILED TO PROVE THE CAPACITY OF THE CREDITORS TO ADVANCE MONEY AND THE GENUINENESS OF THE TRANSACTIONS DURING ASSESSMENT PROCEEDINGS. 3. THE LD. CIT(A) ERRED IN DELETING THE ADDITIO N OF RS.1,97,61,038/ - AND ALLOWING THE ASSESSEE'S APPEAL ON THE BASIS OF CERTAIN ADDITIONAL EVIDENCE, WITHOUT GIVING AN OPPORTUNITY TO THE AO TO VERIFY THE ADDITIONAL EVIDENCE AS REQUIRED UNDER RULE 46A. 4. THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANC ES ON ACCOUNT OF TRAVELLING & CONVEYANCE TO RS.1 LAKH AND SALARIES & WAGES CLAIMED TO RS.90,000/ - WITHOUT SPECIFYING THE REASONS FOR THE SAME. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 3. THE FACTS OF THE CASE ARE THAT ACCORDIN G TO THE ASSESSING OFFICER THE ASSESSEE INTRODUCED A CAPITAL OF RS.1,97,61,038; THE ASSESSEE STATED AS BELOW : (I) LOAN FROM P. RAMACHANDRA REDDY, P. SURENDRA REDDY AND P. VISHWANTH REDDY RS.54 LAKHS. (II) LOAN FROM SPARK KLEAN, HIGHGENE AND RAMACHAND RA REDDY RS.86,49,049. (III) THE LOAN FROM P. SATISH REDDY RS.5 LAKHS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE THE DETAILS IN THE FORM OF CONFIRMATION LETTER FROM LOAN FROM THE LENDER FOR INVESTMENT OF CAPITAL. THE ASSESSEE FAILED TO SATISFY THE ASSESSING OFFICER WITH REGARD TO GENUINENESS OF THE TRANSACTION AS WELL AS CAPACITY OF THE LENDER. THE ASSESSING OFFICER MADE ADDITION OF RS.1,97,61,038 U/S.56(2)(VII) OF THE INCOME TAX ACT, 1961 ('THE ACT'). AGAINST 3 ITA NO. 1683/BANG/2016 THIS THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS). BEFORE THE CIT(APPEALS) THE ASSESSEE EXPLAINED THE ABOVE ADDITION OF RS.1,97,61,038 AS FOLLOWS : 4 ITA NO. 1683/BANG/2016 THE CIT(APPEALS) AFTER GOING THROUGH IT OBSERVED THAT ADDITION MADE U/S.56(2)(VII) OF THE ACT DELETED THE ADDITION STAT ING THAT THE ASSESSEE HAS PROPERLY EXPLAINED THE GENUINENESS OF THE TRANSACTION AS WELL AS CAPACITY OF THE LENDER. AGAINST THE DELETION OF ABOVE AMOUNT, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS NOT EXPLAINED THE GENUINENESS AND CAPACITY OF THE LENDER OF ADVANCING THE MONEY BEFORE THE ASSESSING OFFICER, AS SUCH HE REQUESTED TO EXAMINE BY THE ASSESSING OFFICER AND THE ISSUE MAY BE REMITTED TO THE ASSESSING OFFICER. 4.1 ON TH E OTHER HAND, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE REVENUE HAS CHALLENGED THE ONLY GENUINENESS AND CAPACITY OF THE LENDER IN RESPECT OF S/ SHRI P. R AMACHNDRA R EDDY, P. SURENDRA REDDY , V ISHWANATH R EDDY AND S ATISH R EDDY . WITH REGARD TO S PARK KLEAN AND HIGHGENE, THE LD. AR SUBMITTED THAT THESE PARTIES ARE RETURNING THE ADVANCES AND IT WAS DULY REFLECTED IN THE STATEMENT OF ACCOUNTS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND PRAYED THAT THIS ISSUE MAY BE REMANDED TO THE ASS ESSING OFFICER FOR FRESH CONSIDERATION. 5. THE LD.AR FURTHER SUBMITTED THAT WITH REGARD TO INTEREST INCOME FROM SPARK KLEAN AND HIGHGENE, THESE ARE NOT THE SUBJECT MATTER WHICH SHALL NOT BE REMANDED BACK TO THE LOWER AUTHORITIES. SIMILARLY HE SUBMIT TED THAT THE ENTRY IN A, B & C IN THE ABOVE CHART ARE THE INCOME DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 5 ITA NO. 1683/BANG/2016 UNDER CONSIDERATION. THERE IS NO APPEAL FILED BY THE DEPARTMENT ON THIS ISSUE. THE LD. AR CONTENDED THAT THIS ISSUE CANNOT BE REMANDED TO T HE ASSESSING OFFICER FOR FRESH CONSIDERATION. FURTHER, HE SUBMITTED THAT THERE WAS NO ADDITIONAL EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE CIT (APPEALS) AND AS SUCH NO VIOLATION OF RULE 46A AS ALLEGED BY REVENUE. HE RELIED ON THE FOLLOWING CASE LAWS : ( I) CIT VS. SAGAR CONSTRUCTION (P) LTD. (2015) 56 TAXMANN.COM 434 (PATNA) (II) DCIT VS. NE TECHNOLOGIES INDIA (P) LTD (2014) 151 ITD 783 (HYD. - TRIB) (III) ITO VS. INDUSTRIAL ROADWAYS 305 ITR (AT) 219 (MUMBAI) 6. WE HAVE HEARD THE RIVAL CONTENTIONS, P ERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. ADMITTEDLY, THE INCOME DECLARED BY THE ASSESSEE IN THESE ASSESSMENT YEARS WAS CONSIDERED AS SOURCE OF INTRODUCTION OF CAPITAL. HOWEVER, THE ASSESSEE HAS TO EXPLAIN WHETHER INCOME DECLARED BY THE AS SESSEE WAS AVAILABLE TO THE ASSESSEE AS A SOURCE TOWARDS INTRODUCTION OF CAPITAL AT THE TIME OF INTRODUCTION OF CAPITAL WHICH SHALL BE EXAMINED BY THE ASSESSING OFFICER . FOR THIS PURPOSE, WE REMIT THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR FRESH CON SIDERATION. 6.1 REGARDING LIC MATURITY VALUE AS A SOURCE OF INTRODUCTION IN CAPITAL, THE ASSESSEE HAS TO EXPLAIN WHETHER IT IS AVAILABLE AT THE TIME OF INTRODUCTION OF THE CAPITAL AT RS.1,97,61,038 AND T HE ASSESSING OFFICER HAS TO EXAMINE THIS ISSUE AND DECIDE AS PER LAW. 6.2 WITH REGARD TO LOAN FROM 6 ITA NO. 1683/BANG/2016 I) P. SURENDRA REDDY, BROTHER RS.20 LAKHS II) VISH WANATH REDDY, BROTHER RS.22 LAKHS III) P RAMACHANDRA REDDY , RELATIVE RS.12 LAKHS IV) RADHIKA REDDY, SPOUSE RS.15 LAKHS. THE ASSES SEE HAS TO EXPLAIN THE IDENTITY OF THE PARTIES, GENUINENESS AND CAPACITY BY FILING THE PROOF WITH REGARD TO IDENTITY, RETURN OF INCOME TO PROVE THE CREDIT WORTHINESS AND CONFIRMATION LETTER ALONG WITH BANK STATEMENT OF SAID PARTIES. THE ASSESSING OFFICE R AFTER GOING THROUGH THE ABOVE DOCUMENTS, THE ISSUE HAS TO BE DECIDED AFRESH. ORDERED ACCORDINGLY. 7. REGARDING THE RENT DEPOSIT, THE ASSESSEE HAS TO FILE NECESSARY DOCUMENTS IN SUPPORT OF THE AVAILABILITY OF RENT D EPOSIT OF RS.2,41,500 FOR INTRO DUCTION IN THE CAPITAL. WITH THESE OBSERVATIONS, THE ISSUE RELATING TO ADDITION U/S.55(2)(VII), WE DEEM IT FIT TO REMIT TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. 8. THE NEXT GROUND FOR CONSIDERATION IS SUSTAINING THE DISALLOWANC E ON ACCOUNT OF TRAVELLING AND CONVEYANCE TO RS.1 LAKH AND SALARY AND WAGES AT RS.90,000 WITHOUT SPECIFYING THE REASON FOR THE SAME. 8.1 THE ASSESSING OFFICER DISALLOWED THE TRAVELLING EXPENSES AT RS.2,80,152 OUT OF RS.11,20,608 CLAIMED BY THE ASSESSE E. THIS IS AN ADHOC DISALLOWANCE MADE BY THE ASSESSING OFFICER WITHOUT POINTING OUT ANY SPECIFIC REASON STATING THAT THE 7 ITA NO. 1683/BANG/2016 TRAVELLING EXPENSES INCURRED WAS IN PERSONAL NATURE. THE CIT(APPEALS) RESTRICTED THE DISALLOWANCE TO RS.1 LAKH . ACCORDING TO CIT(APP EALS), THE DISALLOWANCE OF RS.1 LAKH WOULD BE REASONABLE. BEFORE US, THE LD.DR HAS NOT ABLE TO ESTABLISH THAT THE ASSESSEE HAS INCURRED TRAVELLING EXPENSES FOR PERSONAL PURPOSES. THE CIT(APPEALS) MENTIONED THAT THE ASSESSING OFFICER PROPOSED THE DISALLOW ANCE ON THIS COUNT, PERSONAL USAGE AT RS.1,12,060. HOWEVER, HE FINALLY MADE DISALLOWANCE TOWARDS PERSONAL NATURE OF TRAVELLING EXPENSES AT RS.2,80,152. ON THIS COUNT, THE CIT(APPEALS) RESTRICTED TO RS.1 LAKH. WE FOUND THAT IT IS REASONABLE AND SAME IS C ONFIRMED. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 9. WITH REGARD TO DISALLOWANCE OF SALARIES AND WAGES, THE ASSESSING OFFICER DISALLOWED RS.4,51,680 OUT OF RS.9,03,360 CLAIMED BY THE ASSESSEE. THE CIT(APPEALS), HOWEVER, SUSTAINED THE DISALLO WANCE OF RS.90,000 OUT OF DISALLOWANCE OF RS.4,51,680 ON THE REASON THAT THE ASSESSEE HAS TO MAINTAIN STAFF FOR ITS OFFICE. IN THIS CASE ALSO, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ON ADHOC BASIS WITHOUT SPECIFYING THE REASON FOR SUCH DISALLOW ANCE, WHICH DETAILS ARE NOT FURNISHED BY THE ASSESSEE. AS OBSERVED BY THE CIT(APPEALS), THE ASSESSEE HAS TO MAINTAIN OFFICE FOR SMOOTH RUNNING OF HIS BUSINESS. IN THE ABSENCE OF FURNISHING REQUISITE DETAILS BY THE ASSESSEE, THE CIT(APPEALS) HAS RESTRICT ED THE DISALLOWANCE AT 10% OF SALARIES AND WAGES CLAIMED BY THE ASSESSEE. IT IS VERY 8 ITA NO. 1683/BANG/2016 REASONABLE AND THE SAME IS CONFIRMED. THIS GROUND OF APPEAL OF REVENUE IS DISMISSED. 10. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/ - SD/ - ( GEORGE GEORGE K ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 .02. 20 2 1 . *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE