DCIT Circle 1, Tirunelveli V. Hotel Aryaas, Tirunelveli

ITA 1718/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5188 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 12-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Keywords: Source of fund
• Section: 133A; 131; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1717/CHNY/2017 & C.O. NO.128/CHNY/2017 (IN I.T.A. NO.1717/CHNY/2017) ( )( / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, NELLAI CITY CENTRE, RAHMATH NAGAR, TIRUNELVELI. V. M/S ARYAAS SUPER MARKET, 139A, TRIVANDRUM ROAD, PALAYAMKOTTAI, TIRUNELVELI 627 002. PAN : AAHFA 9672 P (+,/ APPELLANT) ( RESPONDENT & CROSS OBJECTOR) ./ ITA NO.1718/CHNY/2017 & C.O. NO.126/CHNY/2017 (IN I.T.A. NO.1718/CHNY/2017) ( )( / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, NELLAI CITY CENTRE, RAHMATH NAGAR, TIRUNELVELI. V. M/S HOTEL ARYAAS, 29, MADURAI ROAD, TIRUNELVELI 627 001. PAN : AADFH 0482 N (+,/ APPELLANT) ( RESPONDENT & CROSS OBJECTOR) 2 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 ./ ITA NO.1719/CHNY/2017 ( )( / ASSESSMENT YEAR : 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, NELLAI CITY CENTRE, RAHMATH NAGAR, TIRUNELVELI. V. M/S HOTEL AACHEES, 10A/5, TRIVANDRUM ROAD, PALAYAMKOTTAI, TIRUNELVELI 627 002. PAN : AADFH 0484 L (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI V. NANDAKUMAR, JCIT -.+, / 0 / RESPONDENTS BY : SHRI Y. SRIDHAR, CA 1 / 2% / DATE OF HEARING : 14.05.2018 3') / 2% / DATE OF PRONOUNCEMENT : 08.06.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE APPEALS OF THE REVENUE IN RESPECT OF THREE I NDEPENDENT ASSESSEES ARE DIRECTED AGAINST THE RESPECTIVE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, MADURAI, DA TED 17.04.2017 FOR THE ASSESSMENT YEAR 2012-13. THE FI RST TWO ASSESSEES FILED CROSS-OBJECTIONS IN SUPPORT OF THE ORDERS OF THE CIT(APPEALS). SINCE COMMON ISSUE ARISES FOR CONSID ERATION IN ALL THE APPEALS AND CROSS-OBJECTIONS, WE HEARD ALL THES E TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 3 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 2. SHRI V. NANDAKUMAR, THE LD. DEPARTMENTAL REPRESE NTATIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD TO A SUM OF 5 CRORES TOWARDS CONSTRUCTION OF HOTEL KNOWN AS HO TEL APPLE TREE IN THE HANDS OF THE ASSESSEES. ACCORDI NG TO THE LD. D.R., THERE WAS A SURVEY IN THE PREMISES OF THE ASS ESSEES ON 18.02.2013. SOME OF THE ACCOUNT BOOKS WERE FOUND A ND IMPOUNDED. A STATEMENT FROM ONE OF THE PARTNERS, N AMELY, SHRI JAYAPRAKASH NARAYANAN WAS ALSO RECORDED. ACCORDING TO THE LD. D.R., THE REVENUE AUTHORITIES FOUND THAT ALL THE AS SESSEES INVESTED 9 CRORES IN THE CONSTRUCTION OF A HOTEL KNOWN AS H OTEL APPLE TREEE. THE ASSESSEES HAVE BORROWED A LOAN OF 4 CRORES. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER ACCEPTED THE SOURCE OF 4 CRORES AND THE BALANCE OF 5 CRORES COULD NOT BE EXPLAINED BY ANY OF THE ASSESSEES. IN FACT, DURING THE COURSE OF SURVEY OPERATION, ACCORDING TO THE LD. D. R., SHRI JAYAPRAKASH NARAYANAN ADMITTED AN ADDITIONAL INCOME OF 5 CRORES IN THE HANDS OF EACH ASSESSEE. HOWEVER, WHILE FILI NG THE RETURN OF INCOME, THE SAME WAS NOT OFFERED BY THE ASSESSEES. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER MA DE AN ADDITION OF 5 CRORES IN THE HANDS OF ALL THE ASSESSEES. HENCE, THE 4 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE ADDIT ION MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD. D.R., THE ACCOUNTS WERE PREPARED TO ACCOMMODATE THE INVESTMENT MADE IN THE CONSTRUCTION. THEREFORE, THE SOURCE OF INCOME FROM THE PARTNERS F OR MAKING INVESTMENT IS NOT ACCEPTED AND THE ASSESSING OFFICE R MADE ADDITION IN THE RESPECTIVE HANDS OF THE ASSESSEES. 3. ON THE CONTRARY, SHRI Y. SRIDHAR, THE LD. REPRES ENTATIVE FOR THE ASSESSEES, SUBMITTED THAT ALL THE ASSESSEES ARE ENGAGED IN THE BUSINESS OF HOSPITALITY, GROCERY AND CONSUMER PRODU CTS. THERE WAS A SURVEY IN THE GROUP CONCERN ON 18.02.2013. ACCOR DING TO THE LD. REPRESENTATIVE, ON THE BASIS OF THE BALANCE SHEET, THE ASSESSING OFFICER FOUND THAT THERE WAS INVESTMENT OF 9 CRORES IN THE HOTEL M/S RAMYAAS INN (HOTEL APPLE TREE). ACCORDING TO T HE LD. REPRESENTATIVE, THE INVESTMENT IN THE HOTEL TO THE EXTENT OF 9 CRORES IS NOT IN DISPUTE. THE DISPUTE IS ONLY WITH REGA RD TO 5 CRORES ACCEPTED BY ONE OF THE PARTNERS SHRI JAYAPRAKASH NA RAYANAN WHILE RECORDING A STATEMENT DURING THE COURSE OF SURVEY O PERATION. THE LD. REPRESENTATIVE FURTHER SUBMITTED THAT THE HOTEL M/S RAMYAAS INN IS ALSO AN INDEPENDENT ASSESSEE. THE INVESTMENT OF 9 CRORES WAS DISCLOSED IN THE BALANCE SHEET OF M/S RAMYAAS INN A S ON 5 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 31.03.2013. ACCORDING TO THE LD. REPRESENTATIVE, T HIS WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDING. THE ASSESSEES EXPLAINED BEF ORE THE ASSESSING OFFICER THAT THE SUM OF 4 CRORES WAS FROM THE LOAN BORROWED AND THE BALANCE OF 5 CRORES WAS FROM THE WITHDRAWAL FROM THE ACCOUNTS OF THE PARTNERS FROM VARIOUS CONC ERNS. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER HA S NOT DOUBTED THE LOAN BORROWED BY THE ASSESSEES TO THE EXTENT OF 4 CRORES. NO MATERIAL EVIDENCE WAS FOUND CONTRARY TO THE EXPLANA TION OF THE ASSESSEES THAT THE BALANCE OF 5 CRORES WAS INVESTED FROM THE AMOUNT WITHDRAWN MADE BY THE PARTNERS FROM VARIOUS CONCERNS. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER MADE ADDITION ONLY ON THE BASIS OF THE STATEMENT SAID TO BE RECORDED UNDER SECTION 131 OF THE ACT DURING THE COURSE OF S URVEY OPERATION. ACCORDING TO THE LD. REPRESENTATIVE, DURING THE COU RSE OF SURVEY OPERATION UNDER SECTION 133A OF THE ACT, THE ASSESS ING OFFICER WAS NOT EMPOWERED TO ADMINISTER OATH BEFORE EXAMINATION OF ANY PERSON. THEREFORE, THE STATEMENT SAID TO BE RECORD ED DURING THE COURSE OF SURVEY OPERATION UNDER SECTION 133A OF TH E ACT HAS NO EVIDENTIARY VALUE. HENCE, ACCORDING TO THE LD. REP RESENTATIVE, THE 6 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 STATEMENT SAID TO BE RECORDED FROM SHRI JAYAPRAKASH NARAYANAN HAS NO EVIDENTIARY VALUE, THEREFORE, ASSESSMENT CAN NOT BE FRAMED ON THE BASIS OF THE STATEMENT SAID TO BE MADE BY SH RI JAYAPRAKASH NARAYANAN. THE LD. REPRESENTATIVE PLACED HIS RELIA NCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. S. KHADER K HAN SON (2008) 300 ITR 157. 4. REFERRING TO THE CIRCULARS ISSUED BY THE CBDT IN F.NO.286/2/03 IT (INV) DATED 10.03.2003 AND 18.12.2 014, THE LD. REPRESENTATIVE FOR THE ASSESSEES SUBMITTED THAT THE CBDT, BEING THE APEX ADMINISTRATIVE BODY TO ADMINISTER THE DIRE CT TAXES IN THE COUNTRY, INSTRUCTED ITS OFFICERS, INCLUDING THE ASS ESSING OFFICERS, TO SEARCH FOR MATERIAL EVIDENCES DURING THE COURSE OF SURVEY OPERATION AND NOT TO EXTRACT DISCLOSURE STATEMENT FROM THE TA XPAYERS WHILE RECORDING STATEMENT UNDER SECTION 133A / 132 OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, THE JUDGMENT OF MADRAS H IGH COURT IN S. KHADER KHAN SON (SUPRA) AND THE CBDT CIRCULARS WERE BROUGHT TO THE NOTICE OF THE CIT(APPEALS). THE CIT(APPEALS), AFTER PLACING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT AND C BDT CIRCULARS, FOUND THAT THERE IS NO MATERIAL AVAILABLE ON RECORD OTHER THAN THE STATEMENT RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF 7 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 SURVEY OPERATION TO DOUBT THE SOURCE OF INVESTMENT FROM 5 CRORES. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER MADE AN IMPROPER OBSERVATION THAT THE ACCOUNTS WERE PREPARE D TO ACCOMMODATE THE INVESTMENT IN CONSTRUCTION WITHOUT ANY MATERIAL AVAILABLE ON RECORD. THE ATTEMPT MADE BY THE ASSES SING OFFICER TO FIND OUT THE DEFECTS IN THE ACCOUNTS IN THE FORM OF CASH DEFICIENCY WAS FACTUALLY FOUND TO BE INCORRECT BY THE CIT(APPE ALS) ON THE BASIS OF THE RECONCILIATION STATEMENT FILED WHICH WAS NOT ED AS ANNEXURE-1 OF THE IMPUGNED ORDER OF THE CIT(APPEALS). THEREFO RE, ACCORDING TO THE LD. REPRESENTATIVE, THERE IS NO CASH DEFICIENCY AS PROJECTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. HEN CE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER IN ALL THE APPEALS. 5. THE ASSESSEES, M/S ARYAAS SUPER MARKET AND M/S H OTEL ARYAAS, HAVE FILED CROSS-OBJECTIONS IN SUPPORT OF T HE ORDER OF THE CIT(APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF SURVEY OPERATION, ON THE BASIS OF THE DIS CLOSURE MADE BY 8 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 THE ASSESSEES IN THE BALANCE SHEET, THE REVENUE AUT HORITIES FOUND AN INVESTMENT OF 9 CRORES BY EACH ASSESSEE IN HOTEL M/S RAMYAAS INN, WHICH IS ALSO KNOWN AS HOTEL APPLE TRE E. THE ASSESSEES EXPLAINED BEFORE THE ASSESSING OFFICER TH AT OUT OF 9 CRORES INVESTED IN THE CONSTRUCTION OF HOTEL, 4 CRORES WAS FROM THE LOAN BORROWED. THEREFORE, THE ASSESSING OFFICER AC CEPTED THE SOURCE FOR INVESTMENT OF 4 CRORES. THE ASSESSEES FURTHER EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE BAL ANCE AMOUNT OF 5 CRORES WAS FROM THE WITHDRAWALS FROM THE ACCOUNTS OF THE PARTNERS FROM VARIOUS CONCERNS. THE ASSESSING OFFI CER REJECTED THE EXPLANATION OF THE ASSESSEES ON THE GROUND THAT THE RE WAS NO EVIDENCE TO SHOW THAT THE PARTNERS WITHDREW THE MON EY FROM OTHER CONCERNS AS CLAIMED. THE ASSESSEES ALSO FILED A RE CONCILIATION STATEMENT BEFORE THE CIT(APPEALS) WHICH WAS MADE AS ANNEXURE-I TO THE ORDER OF THE CIT(APPEALS). THE ASSESSING OF FICER DISBELIEVED THE ENTRIES FOUND IN THE BOOKS OF ACCOUNT ON THE GR OUND THAT THE ACCOUNTS WERE PREPARED TO ACCOMMODATE THE INVESTMEN T IN THE CONSTRUCTION. HOWEVER, THERE IS NO MATERIAL AVAILA BLE ON RECORD TO SUGGEST THAT THE ACCOUNTS WERE PREPARED TO ACCOMMOD ATE THE INVESTMENT MADE IN THE CONSTRUCTION. WHEN THE BOOK S OF ACCOUNT 9 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 INDICATE WITHDRAWAL OF MONEY BY THE RESPECTIVE PART NERS FROM VARIOUS CONCERNS, AND THE SAME WAS INVESTED IN THE CONSTRUCTION OF HOTEL BUILDING, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE SAME CANNOT BE IGNORED BY THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT SAID TO BE RECORDED DURING THE COURSE OF SURVEY OPERATION. 7. THE MADRAS HIGH COURT IN THE CASE OF S. KHADER K HAN SON (SUPRA) FOUND THAT SECTION 133A OF THE ACT DOES NOT EMPOWER THE AUTHORITIES TO ADMINISTER OATH, THEREFORE, THE STAT EMENT RECORDED DURING THE COURSE OF SURVEY OPERATION HAS NO EVIDEN TIARY VALUE. IN VIEW OF THIS JUDGMENT OF MADRAS HIGH COURT, THE STA TEMENT SAID TO BE RECORDED FROM SHRI JAYAPRAKASH NARAYANAN ALONE C ANNOT BE A BASIS FOR ANY MAKING ANY ADDITION WITH REGARD TO CO ST OF CONSTRUCTION OF THE HOTEL BUILDING. MOREOVER, THE CBDT, BEING T HE APEX BODY TO ADMINISTER THE DIRECT TAXES, INSTRUCTED ITS OFFICER S TO SEARCH FOR MATERIAL EVIDENCE DURING THE COURSE OF SURVEY OPERA TION AND NOT TO EXTRACT STATEMENT FROM TAXPAYERS. IN THE CASE BEFO RE US, THERE IS NO EVIDENCE FOUND DURING THE COURSE OF SURVEY OPERATIO N TO DISPROVE THE CLAIM OF THE ASSESSEE THAT THE SOURCE OF FUNDS WERE FROM THE AMOUNT WITHDRAWN BY THE RESPECTIVE PARTNERS FROM VA RIOUS 10 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 CONCERNS. AS RIGHTLY FOUND BY THE CIT(APPEALS), TH E STATEMENT RECORDED FROM SHRI JAYAPRAKASH NARAYANAN DURING THE COURSE OF SURVEY OPERATION HAS NO EVIDENTIARY VALUE, THEREFOR E, THAT ALONE CANNOT BE A BASIS FOR MAKING ANY ADDITION. MOREOVE R, THE ASSESSEES ALSO FILED RECONCILIATION STATEMENT WHICH WAS MADE AS A PART OF ORDER OF THE CIT(APPEALS). WE FIND NO REAS ON TO IGNORE THE RECONCILIATION STATEMENT FILED BY THE ASSESSEES. H ENCE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ANY AD DITION ON THE BASIS OF THE STATEMENT SAID TO BE RECORDED BY SHRI JAYAPR AKASH NARAYANAN. IN VIEW OF THE ABOVE, WE DO NOT FIND AN Y REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 8. THE CROSS-OBJECTIONS FILED BY THE TWO ASSESSEES WERE ONLY TO SUPPORT THE ORDER OF THE CIT(APPEALS). IN VIEW OF OUR DECISION CONFIRMING THE ORDERS OF THE CIT(APPEALS), THE CROS S-OBJECTIONS BECOME INFRUCTUOUS. 9. IN THE RESULT, ALL THE APPEALS FILED BY THE REVE NUE AND THE CROSS-OBJECTIONS FILED BY THE ASSESSEES STAND DISMI SSED. 11 I.T.A. NOS.1717 TO 1719/CHNY/17 C.O. NOS.128 & 126/CH NY/17 ORDER PRONOUNCED ON 8 TH JUNE, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 8 TH JUNE, 2018. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-3, MADURAI 4. PRINCIPAL CIT-2, MADURAI 5. 7: -2 /DR 6. ;( < /GF.