Shri. Ashok Kumar Rai, Mangalore V. Joint Commissioner of Income-Tax, Mangalore

ITA 1705/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7606 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 27-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH JT BENGALURU
• Assessee Lawyers: U S YOGESH KUMAR
• Keywords: Non-deduction of tax
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA NO.1705/BANG/2016 ASSESSMENT YEAR : 2011-12 SHRI ASHOK KUMAR RAI, 2-13-1151/2, BEJAI NEW ROAD, PROP. VEE YES ENTERPRISES, MANGALURU. PAN: ADGPR 7834J VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 1, MANGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI U.S. YOGESH KUMAR, CA RESPONDENT BY : SHRI B.R. RAMESH, JT. CIT(DR)(ITAT), BENGALURU DATE OF HEARING : 04.09.2017 DATE OF PRONOUNCEMENT : 08.09.2017 O R D E R PER MANJUNATHA G., ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS), MANGALURU DATED 28.07.2016 AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION, DEAL ER IN REAL ESTATE, PETROLEUM PRODUCTS AND ALLIED BUSINESS, FILED HIS R ETURN OF INCOME FOR AY 2011-12 ON 30.09.2011 DECLARING TOTAL INCOME OF RS. 25,91,650. THE CASE ITA NO.1705/BANG/2016 PAGE 2 OF 8 HAS BEEN SELECTED FOR SCRUTINY AND THE ASSESSMENT H AS BEEN COMPLETED US. 143(3) ON 27.12.2013 DETERMINING TOTAL INCOME AT RS .68,96,887 AFTER MAKING ADDITIONS TOWARDS SUPPRESSION OF CLOSING STO CK, DISALLOWANCE OF INTEREST RELATING TO OTHER PROJECTS, DISALLOWANCE O F AGRICULTURAL INCOME, ADDITION TOWARDS DIFFERENCE IN SALE PROCEEDS OF FLA TS, DISALLOWANCE OF EXPENSES AND DISALLOWANCE OF EXPENSES U/S. 40(A)(IA ) OF THE INCOME-TAX ACT, 1961 [THE ACT]. AGGRIEVED BY THE ASSESSMEN T ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). 3. BEFORE THE CIT(APPEALS), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS AND CHALLENGED ALL THE ADDITIONS MADE B Y THE AO. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS W ITHDRAWN GROUND CHALLENGING ADDITIONS MADE BY THE AO TOWARDS DISALL OWANCE OF INTEREST RELATING TO OTHER PROJECTS AND HENCE, THE CIT(APPEA LS) CONFIRMED THE ADDITIONS MADE BY THE AO TOWARDS DIFFERENCE OF INTE REST. INSOFAR AS ADDITIONS MADE TOWARDS DIFFERENCE IN SALE CONSIDERA TION OF FLATS, THE ASSESSEE HAS AGREED FOR CONFIRMING THE ADDITIONS MA DE BY THE AO TOWARDS DIFFERENCE IN SALE CONSIDERATION OF FLAT SOLD TO SH RI JAYARAM P SHETTY, ACCORDINGLY THE SAME IS UPHELD. SIMILARLY, GROUND RAISED CHALLENGING THE ADDITIONS MADE BY THE AO TOWARDS EXPENSES OF OTHER PROJECTS HAS BEEN WITHDRAWN. ACCORDINGLY, THE SAME HAS BEEN DISMISSE D. 4. AS REGARDS THE ADDITIONS MADE BY THE AO TOWARDS DIFFERENCE IN SALE CONSIDERATION OF FLAT TO SHRI NISHITH SHETTY, THE A SSESSEE HAS FILED THE ITA NO.1705/BANG/2016 PAGE 3 OF 8 DETAILS OF LEDGER ACCOUNT EVIDENCING REFUND OF EXCE SS AMOUNT COLLECTED FROM THE PARTY. ACCORDINGLY ADDITION MADE BY THE A O TOWARDS DIFFERENCE IN SALE CONSIDERATION OF RS.10 LAKHS HAS BEEN DELETED. INSOFAR AS ADDITIONS MADE TOWARDS AGRICULTURAL INCOME OF RS.3 LAKHS IS C ONCERNED, THE CIT(APPEALS) CONFIRMED THE DISALLOWANCE OF AGRICULT URAL INCOME BY HOLDING THAT ASSESSEE HAS SHOWN AGRICULTURAL INCOME WHICH I S MORE THAN THE AGRICULTURAL INCOME DECLARED FOR THE PRECEDING FINA NCIAL YEAR FOR WHICH THE ASSESSEE HAS NOT FILED ANY EVIDENCE. THOUGH ASSESS EE HAS FILED CERTAIN LAND RECORDS TO CLAIM THAT HE HAD CLAIMED AGRICULTU RAL INCOME ON THE BASIS OF ADDITIONAL LAND WHICH GENERATES AGRICULTURAL INC OME, THOSE LANDS ARE NOT REGISTERED IN THE NAME OF ASSESSEE. THEREFORE, THE AO GIVING THE BENEFIT OF DOUBT TO THE ASSESSEE HAS MADE A REASONABLE DISALLO WANCE OF RS.3 LAKHS OUT OF AGRICULTURAL INCOME OF RS.20,06,042 AND HENC E DISALLOWANCE MADE BY THE AO IS CONFIRMED. 5. AS REGARDS DISALLOWANCE OF EXPENDITURE U/S. 40(A )(IA) OF THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE, THE CIT(APPEALS) O BSERVED THAT THOUGH ASSESSEE CLAIMS THAT AMOUNT SHOWN IN THE NAME OF MC I LEASING LTD. IS NOT INTEREST PAYMENT, BUT LOSS ON CHIT AMOUNT, ASSESSEE FAILED TO FURNISH ANY EVIDENCE IN SUPPORT OF HIS CLAIM. THEREFORE, HE CO NFIRMED THE ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA) OF THE ACT. AGGRIEVED BY THE CIT(APPEALS) ORDER, THE ASS ESSEE IS IN APPEAL BEFORE US. ITA NO.1705/BANG/2016 PAGE 4 OF 8 6. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DISALLOWANCE OF AGRICULTURAL INCOME. THE LD. AR FOR THE ASSESSEE S UBMITTED THAT THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE O F AGRICULTURAL INCOME BY HOLDING THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENC E, DESPITE THE FACT THAT ASSESSEE HAS FURNISHED LAND HOLDING AND ALSO SALE B ILLS FOR HAVING SOLD AGRICULTURAL PRODUCTS. THE LD. AR REFERRING TO THE PAPERBOOK FILED SUBMITTED THAT ASSESSEE HAS FILED COPIES OF RTC AND ALSO FILE D SALE BILLS, WHICH PROVE THE FACT THAT ASSESSEE IS HAVING SUFFICIENT LAND TO EXPLAIN THE AGRICULTURAL INCOME DECLARED IN THE RELEVANT FINANCIAL YEAR. TH E LD. AR FURTHER SUBMITTED THAT THERE WERE ADDITIONAL PROPERTIES WHICH WERE AC QUIRED, BUT NOT REGISTERED IN ASSESSEES NAME, WHICH GIVES MORE INC OME IN THE RELEVANT FINANCIAL YEAR. THE LOWER AUTHORITIES WITHOUT TAKI NG INTO ACCOUNT THE ADDITIONAL LAND HOLDINGS BY THE ASSESSEE, MERELY ON THE GROUND THAT AGRICULTURAL INCOME DECLARED FOR THE YEAR IS MORE T HAN THE INCOME DECLARED IN THE PREVIOUS FINANCIAL YEAR HAS DISALLOWED ON TH E BASIS OF SUSPICION AND SURMISES WHICH IS INCORRECT. 7. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTE D THE ORDER OF THE CIT(APPEALS). THE LD. DR FURTHER SUBMITTED THAT TH OUGH ASSESSEE CLAIMS TO HAVE SUFFICIENT LAND HOLDINGS TO JUSTIFY AGRICULTUR AL INCOME, ON PERUSAL OF COPIES OF RTC FILED BY THE ASSESSEE, IT WAS NOTICED THAT IN MANY RTCS, THERE WAS NO INFORMATION OF CROPS GROWN FOR THE REL EVANT FINANCIAL YEAR. THEREFORE, DECLARATION OF SUCH HUGE AGRICULTURAL IN COME IS NOT SUPPORTED BY SUFFICIENT LAND HOLDINGS AND ALSO SALE BILLS FOR HA VING GENERATED SUCH A ITA NO.1705/BANG/2016 PAGE 5 OF 8 HUGE AGRICULTURAL INCOME. THE AO HAS BROUGHT OUT C LEAR FACT TO THE EFFECT THAT ASSESSEE IS NOT JUSTIFIED IN DECLARATION OF AG RICULTURAL INCOME AND HENCE DISALLOWED A REASONABLE AMOUNT OF RS.3 LAKHS WHICH SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED RE LEVANT MATERIAL AVAILABLE ON RECORD. THE AO HAS NOT DISPUTED THE LA ND HOLDINGS WHICH GENERATES AGRICULTURAL INCOME AND ALSO SALE BILL CO PIES PRODUCED FILED BY THE ASSESSEE IN SUPPORT OF DECLARATION OF AGRICULTU RAL INCOME. THE AO WAS OF THE OPINION THAT AGRICULTURAL INCOME DECLARED BY THE ASSESSEE IS EXCESSIVE WHEN COMPARED TO LAND HOLDINGS BY THE ASS ESSEE. WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE AO FOR THE RE ASON THAT THE AO HAS NOT BROUGHT ANY COGENT REASONS FOR DISALLOWING PART OF AGRICULTURAL INCOME, WHEN HE HAS ACCEPTED SUBSTANTIAL PART OF AGRICULTUR AL INCOME DECLARED BY THE ASSESSEE. WE FURTHER OBSERVE THAT ASSESSEE HAS FURNISHED COPIES OF RTC WHICH SHOWS HE IS HOLDING MORE THAN 14 ACRES OF AGRICULTURAL LAND. THE ASSESSEE ALSO FILED COPIES OF SALE BILLS EVIDEN CING SALE OF AGRICULTURAL CROPS. ALL THESE EVIDENCE LEADS TO THE CONCLUSION THAT ASSESSEE IS HAVING SUFFICIENT LAND HOLDINGS TO JUSTIFY DECLARATION OF AGRICULTURAL INCOME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A O ERRED IN DISALLOWING PART OF AGRICULTURAL INCOME WHEN HE HAS ACCEPTED TH E REMAINING PART OF AGRICULTURAL INCOME BY CONSIDERING THE EVIDENCE FIL ED BY THE ASSESSEE. HENCE, WE DIRECT THE AO TO DELETE THE ADDITION MADE TOWARDS DISALLOWANCE OF AGRICULTURAL INCOME. ITA NO.1705/BANG/2016 PAGE 6 OF 8 9. THE NEXT ISSUE THAT CAME UP FOR CONSIDERATION IS ADDITION TOWARDS DIFFERENCE IN SALE CONSIDERATION OF FLAT SOLD TO SH RI JAYARAM P. SHETTY. THE AO MADE ADDITION OF RS.3,50,000 TOWARDS DIFFERENCE IN SALE CONSIDERATION OF FLATS SOLD TO SHRI JAYARAM P. SHETTY. ACCORDING TO THE AO, THE ASSESSEE HAS SOLD A FLAT NO.001 IN GLORY APARTMENT FOR A SAL E CONSIDERATION OF RS.22 LAKHS AND THE SAID SALE DEED WAS REGISTERED ON 8.4. 2010 VIDE DOCUMENT NO.MGC-1-134/2010-11. AS AGAINST THE SALE CONSIDERA TION OF RS.22 LAKHS, THE ASSESSEE HAS TRANSFERRED AN AMOUNT OF RS.18,50, 000 TO THE PROFIT & LOSS ACCOUNT LEAVING THE REMAINING CONSIDERATION OF RS.3,50,000 UNDER UNSECURED LOAN. THEREFORE, THE AO HAS TREATED THE BALANCE AMOUNT OF RS.3,50,000 AS PART OF SALE CONSIDERATION OF FLAT N O.001 AND ADDED TO THE TOTAL INCOME OF ASSESSEE. BEFORE THE CIT(APPEALS), THOUGH THE ASSESSEE HAS CHALLENGED THE ADDITIONS MADE BY THE AO, BUT A GREED WITH THE DIFFERENCE OF RS.3,50,000 ON ACCOUNT OF SALE CONSID ERATION RECEIVED FOR SALE OF FLAT NO.001 AND HENCE WITHDRAWN THE GROUND RAISE D CHALLENGING THE ADDITION MADE BY THE AO. THE FACTS REMAIN UNCHANGE D. THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO DISPROVE THE FINDINGS OF FACT RECORDED BY THE CIT(APPEALS). THEREFORE, WE ARE IN CLINED TO UPHOLD THE ORDER OF CIT(APPEALS) AND DISMISS THE GROUND RAISED BY THE ASSESSEE. 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA) FOR FAILURE TO DEDUCT TA X AT SOURCE U/S. 194A OF THE ACT. THE AO DISALLOWED A SUM OF RS.2,27,964 U/S. 4 0(A)(IA) FOR FAILURE TO DEDUCT TAX AT SOURCE U/S. 194A ON INTEREST PAYMENTS TO MCI LEASING LTD. ITA NO.1705/BANG/2016 PAGE 7 OF 8 IT IS THE CONTENTION OF THE ASSESSEE THAT AMOUNT DE BITED IN THE NAME OF MCI LEASING LTD. IS NOT INTEREST PAYMENTS, BUT LOSS ON SUBSCRIPTION TO CHIT, THEREFORE, THE PROVISIONS OF SECTION 194A HAS NO AP PLICATION, CONSEQUENTLY THE AMOUNT CANNOT BE DISALLOWED U/S. 40(A)(IA) OF T HE ACT. 11. HAVING HEARD BOTH SIDES, WE FIND FORCE IN THE A RGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE AO HAS MADE ADDITI ON MERELY ON THE BASIS OF LEDGER EXTRACT FILED BY THE ASSESSEE ON THE ASSU MPTION THAT THE SAID PAYMENTS ARE INTEREST PAYMENTS WHICH ATTRACTS TDS U NDER THE PROVISIONS OF SECTION 194A OF THE ACT, WITHOUT CONDUCTING FURTHER ENQUIRIES IN THE BACKGROUND OF THE ASSESSEES CLAIM THAT THE SAID PA YMENTS ARE LOSS FROM SUBSCRIPTION TO CHITS. THE AO SHOULD HAVE CONDUCTE D NECESSARY ENQUIRIES BEFORE MAKING THE DISALLOWANCE U/S. 40(A)(IA). THE AO HAS NOT EXERCISED HIS OPTION TO CONDUCT THE NECESSARY ENQUIRIES AND M ADE THE ADDITION PURELY ON SUSPICION AND SURMISES, BASED ON THE LEDGER EXTR ACT IGNORING THE EVIDENCE FILED BY THE ASSESSEE TO CLAIM THAT THE SA ID AMOUNT IS LOSS ON ACCOUNT OF CHIT WHICH WAS WRONGLY BOOKED UNDER THE HEAD INTEREST PAYMENT TO MCI LEASING LTD. AT THE SAME TIME, THE ASSESSEE , THOUGH CLAIMS SAID PAYMENT IS NOT INTEREST, BUT CHIT LOSS, FAILED TO F URNISH REQUIRED EVIDENCE. IF PAYMENT TO MCI LEASING LTD. IS ON ACCOUNT OF CHIT L OSS, THEN, THE QUESTION OF TDS DOES NOT ARISE. CONSEQUENTLY, NO DISALLOWANC E OF EXPENDITURE U/S. 40(A)(IA). THEREFORE, WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER AND DIRECT HIM TO EXAMINE THE ISSUE IN THE LIGHT OF CLAIM OF ASSESSEE THAT THE SAID AMOUNT IS LOSS ON CHIT ACCOUNT WHICH DOES NOT COME UNDER THE ITA NO.1705/BANG/2016 PAGE 8 OF 8 PURVIEW OF PROVISIONS OF SECTION 194A OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 08 TH DAY OF SEPTEMBER, 2017. SD/- SD/- ( LALIET KUMAR ) ( MANJUNATHA G. ) JUDICIAL MEMBER A CCOUNTANT MEMBER BANGALORE, DATED, THE 08 TH SEPTEMBER, 2017. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.