M/s Sri Bhakta Markandeshwara Minerals , Hospet V. The Deputy Commissioner of Income TAx Central Circle-2(1), Bangalore

ITA 1891/BANG/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8926 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Unexplained investment; Set aside
• Section: 153A; 132; 144; 139

Judgement Text

ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NOS.1786&1787/BANG/2017 ASSESSMENT YEAR: 2010-11 & 2011-12 ACIT CENTRAL CIRCLE-2(1) BANGALORE VS. M/S. BHAKTA MARKANDESHWARA MINERALS DOOR NO.93, 3 RD CROSS WEAVERS CO-OPERATIVE COLONY HOSPET KARNATAKA-583201. PAN NO : ABVFS1475R APPELLANT RESPONDENT ITA NOS.1891/BANG/2017 ASSESSMENT YEAR: 2010-11 M/S. BHAKTA MARKANDESHWARA MINERALS KARNATAKA-583201. VS. DCIT CENTRAL CIRCLE-2(1) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI PRADEEP KUMAR, D.R. RESPONDENT BY : SHRI V. SRINIVASAN, A.R. DATE OF HEARING : 23.07.2020 DATE OF PRONOUNCEMENT : 31.07.2020 O R D E R PER BENCH: THE APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEA RS 2010-11 & 2011-12 AND THE APPEAL FILED BY THE ASSES SEE FOR 2010-11 ARE DIRECTED AGAINST THE ORDERS PASSED BY L D. CIT(A)- ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 2 OF 12 11, BENGALURU. ALL THESE APPEALS WERE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAK E OF CONVENIENCE. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE HEREIN IS A PARTNERSHIP FIRM BELONGING TO SHRI K. MAHESH KUMAR FAMILY. THE REVENUE CARRIED OUT SEARC H & SEIZURE OPERATION U/S 132 OF THE ACT ON 25.10.2010. ON ACCOUNT OF SEARCH OPERATIONS, ALL THE CASES OF ASSE SSEES BELONGING TO THE FAMILY WERE CENTRALISED. THE ASSE SSEE, INITIALLY, FILED ITS RETURN OF INCOME U/S 139 OF TH E ACT ON 9.12.2010 DECLARING A TOTAL INCOME OF RS.22,48,790/ -. IN THE SEARCH PROCEEDINGS, SHRI MAHESH KUMAR FURNISHED A L ETTER DATED 28.3.2011 BEFORE THE INVESTIGATION OFFICIALS, WHEREIN HE AGREED TO OFFER ADDITIONAL INCOME OF RS.25 CRORES I N THE HANDS OF VARIOUS ASSESSEES BELONGING TO HIS FAMILY. IT W AS SUBMITTED THAT THE ABOVE SAID SURRENDER OF INCOME REPRESENTS BUSINESS PROFITS, UNEXPLAINED INVESTMENTS/ADVANCES IN RESPEC T OF GROUP CONCERNS AND ALSO TO OVERCOME SHORTCOMINGS TILL THE ASSESSMENT YEAR 2011-12. 3. IN THE ABOVE SAID OFFER LETTER, A SUM OF RS .4 CRORES WAS OFFERED IN THE HANDS OF THE ASSESSEE FOR ASSESSMENT YEAR 2010- 11. IN COMPLIANCE TO THE SAME, THE ASSESSEE FILED A RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 4.12.2012 DEC LARING TOTAL TAXABLE INCOME OF RS.4,22,48,790/- UNDER THE HEAD ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 3 OF 12 PROFITS & GAINS OF BUSINESS, APPARENTLY U/S 153A OF THE ACT. IN THE STATEMENT OF TOTAL INCOME, THE ASSESSEE STATED THAT THE ABOVE SAID INCOME OF RS.4.22 CRORES HAS BEEN ESTIMA TED ON THE TOTAL TURNOVER OF RS.21.05 CRORES, IN THE ABSENCE O F MAINTENANCE OF BOOKS OF ACCOUNTS, AS PER DECLARATIO N GIVEN U/S 132(4) OF THE ACT IN ORDER TO BUY PEACE FROM TH E DEPARTMENT. IT WAS ALSO STATED THAT THOUGH THE ASS ESSEE WAS NOT A PARTY TO THE SAID DECLARATION, YET IT IS SURR ENDERING THE SAID INCOME TO BUY PEACE WITH THE DEPARTMENT AND TO AVOID PROTRACTED LITIGATION. HOWEVER, THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME FOR AY 2011-12. ASSESSMENT YEAR 2010-11:- 4. WE SHALL TAKE UP THE APPEALS FILED BY BOTH TH E PARTIES FOR AY 2010-11. THE ASSESSING OFFICER TOOK UP THE RETU RN OF INCOME FOR SCRUTINY AND CALLED FOR VARIOUS DETAILS. HOWEVER, THE ASSESSEE FAILED TO COMPLY WITH THE SAME AND FUR NISHED ONLY BANK STATEMENTS. HENCE, THE ASSESSING OFFICER PROC EEDED TO COMPLETE THE ASSESSMENT TO THE BEST OF HIS JUDGEMEN T U/S 144 OF THE ACT. 5. THE A.O. NOTICED THAT THE ASSESSEE HAS DECLARE D GROSS INCOME OF RS.21.05 CRORES AND DECLARED PROFIT OF RS .4.22 ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 4 OF 12 CRORES. ACCORDINGLY, THE AO OBSERVED THAT THE ASSE SSEE HAS CLAIMED EXPENSES TO THE TUNE OF RS.16.83 CRORES. D URING THE ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE TO SUBMIT DETAILS LIKE NATURE OF EXPENSES, SUPPORTING BILLS O R VOUCHERS, DETAILS OF PURCHASES, PERMITS FOR PURCHASE OF IRON ORE, TRANSPORTATION DETAILS, ETC. SINCE THE ASSESSEE DI D NOT FURNISH THE DETAILS, THE A.O. DISALLOWED 20% OF EXPENSES I. E. 20% OF RS.16.82 CRORES, WHICH WORKED OUT TO RS.3.36 CRORES . 6. THE A.O. ALSO EXAMINED BANK ACCOUNTS OF THE A SSESSEE AND NOTICED THAT AN AGGREGATE AMOUNT OF CREDIT OF R S.61.50 CRORES HAVE BEEN FOUND DEPOSITED BY WAY OF CASH/CHE QUES. SINCE THE ASSESSEE DID NOT FURNISH ANY EXPLANATION, THE A.O. PROPOSED TO ASSESS THE BANK DEPOSITS AS UNEXPLAINED CREDITS. HOWEVER, HE ALLOWED DEDUCTION TO THE TUNE OF GROSS TURNOVER OF RS.21.05 CRORES AND ACCORDINGLY ASSESSED THE BALANC E AMOUNT OF RS.40.45 CRORES AS UNEXPLAINED CREDIT. THE A.O. NOTICED THAT SHRI K. MAHESH KUMAR IS THE KEY PERSON OF THE GROUP AND HE HAD ADMITTED IN HIS LETTER DATED 28.3.2011 THAT A TOTAL TURNOVER OF RS.204 CRORES WAS NOT DISCLOSED TO TAX. ACCORDINGLY, THE A.O. ADDED THE ABOVE SAID RS.40.45 CRORES IN ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 5 OF 12 THE HANDS OF SHRI K. MAHESH KUMAR ON SUBSTANTIVE BA SIS AND IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS. 7. THE ASSESSEE CHALLENGED BOTH THE ADDITIONS BY FILING APPEAL BEFORE LD CIT(A). THE LD. CIT(A) CONFIRMED T HE DISALLOWANCE OF EXPENSES AND HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 8. IN RESPECT OF ADDITION OF UNEXPLAINED BANK D EPOSITS, THE LD. CIT(A) DELETED THE SAME WITH THE OBSERVATION TH AT HE HAD CONFIRMED THE ADDITION IN THE HANDS OF SHRI K. MAHE SH KUMAR ON SUBSTANTIVE BASIS AND HENCE THERE IS NO REQUIREM ENT TO SUSTAIN ADDITION MADE ON PROTECTIVE BASIS. AGGRIEV ED, THE REVENUE IS IN APPEAL BEFORE US. 9. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASSE SSEE, WHEREIN THE ISSUE RELATING TO DISALLOWANCE OF EXPENSES IS B EING CONTESTED. THE LD. A.R. SUBMITTED THAT THE ASSESSE E HAS OFFERED THE INCOME OF RS.4.22 CRORES ON ESTIMATED B ASIS ON THE TOTAL TURNOVER OF RS.21.05 CRORES. WHEN THE INCOME IS ESTIMATED, THERE IS NO SCOPE FOR MAKING ANY DISALLO WANCE OF EXPENSES. WHEN A SPECIFIC QUERY WAS RAISED AS TO H OW THE RETURN OF INCOME WAS FURNISHED U/S 139 OF THE ACT, THE LD A.R SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSE E HAVE ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 6 OF 12 BEEN MISPLACED. HE SUBMITTED THAT THIS FACT WAS BR OUGHT TO THE NOTICE OF THE DEPARTMENT BY SHRI K MAHESH KUMAR IN HIS LETTER DATED 28-03-2011. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE WAS CONSTRAINED TO ESTIMATE THE INCOME AND FURTHER, IT COULD NOT FURNISH VARIOUS DETAILS CALLED FOR BY THE AO. IN ANY CASE, WHILE FILING RETURN OF INCOME IN RESPONSE TO NOTICE U/S 153A OF THE ACT, THE ASSESSEE HAS CLEARLY STATED IN THE RETURN OF INCOME THAT THE INCOME OF RS.4.22 CRORES IS ESTI MATED ON THE TOTAL TURNOVER OF RS.21.05 CRORES. ACCORDINGLY , HE REITERATED THAT, WHEN THE INCOME IS ESTIMATED THERE IS NO SCOPE FOR MAKING ANY DISALLOWANCE OUT OF ALLEGED EXPENSES . IN THE ALTERNATIVE, THE LD. A.R. SUBMITTED THAT THE ADDITI ONAL INCOME OF RS.4 CRORES WAS OFFERED, INTER ALIA, TO TAKE CAR E OF THE SHORTCOMINGS, IF ANY TILL THE ASSESSMENT YEAR 2011- 12. IN THAT VIEW OF THE MATTER ALSO, THE DISALLOWANCE OF 20% EX PENSES IS NOT JUSTIFIED AS THE SAID SURRENDER OF RS.4 CRORES WOULD TAKE CARE OF DEFICIENCIES, IF ANY. 10. ON THE CONTRARY, THE LD. D.R. PLACED HIS REL IANCE ON THE ORDER PASSED BY THE A.O. 11. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSIONS OF THE ASSES SEE. WITH ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 7 OF 12 REGARD TO SURRENDER OF RS.4 CRORES MADE IN THE HAND S OF THE ASSESSEE, THE LETTER DATED 28.3.2011 WRITTEN BY SHR I K. MAHESH KUMAR MAKES IT CLEAR THAT THE ABOVE SAID SURRENDER WAS MADE, INTER ALIA, TO COVER UP SHORTCOMINGS, IF ANY TILL T HE ASSESSMENT YEAR 2011-12. WE ALSO NOTICE THAT THE SURRENDER OF RS.4 CRORES IS LESS THAN THE DISALLOWANCE OF RS.3.36 CRORES MAD E BY THE A.O. AND HENCE THE SAID DISALLOWANCE MAY BE TELESCO PED AGAINST THE AMOUNT SURRENDERED BY THE ASSESSEE. TH IS IS WITHOUT PREJUDICE TO THE QUANTUM OF DISALLOWANCE MA DE BY THE AO. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THERE IS NO NECESSITY TO MAKE SEPARATE DISALLOWANCE OF RS.3. 36 CRORES OUT OF THE EXPENSES. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO DELETE THE DISALLOWANCE. 12. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE RELATING TO DELETION OF PROTECTIVE ADDITION RELATIN G TO UNEXPLAINED BANK DEPOSITS. THE LD. A.R. SUBMITTED T HAT THE LD. CIT(A) HAS DELETED THE PROTECTIVE ADDITION, FOR THE REASON THAT THE UNEXPLAINED BANK DEPOSITS HAS BEEN CONFIRM ED BY HIM ON SUBSTANTIVE BASIS IN THE HANDS OF SHRI K. MA HESH KUMAR. THE LD. A.R. SUBMITTED THAT SHRI K MAHESH K UMAR ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 8 OF 12 FILED APPEALS BEFORE TRIBUNAL CHALLENGING THE ABOVE SAID DECISION OF LD CIT(A). THE SAID APPEALS FILED BY S HRI K. MAHESH KUMAR BEFORE THE TRIBUNAL IN ITA NO.1819 TO 1822/BANG/2017 HAVE SINCE BEEN DISPOSED OF BY THE T RIBUNAL, VIDE ITS ORDER DATED 17.1.2020 AND THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF LD. CIT(A) FOR EXAMINING T HE ADDITIONS AFRESH BY CONSIDERING THE EVIDENCES FURNISHED BY TH E ASSESSEE. ACCORDINGLY, THE LD. A.R. SUBMITTED THAT THE PROTEC TIVE ADDITION DELETED BY THE LD CIT(A) REQUIRES TO BE RE -EXAMINED AT THE END OF CIT(A), SINCE THE ORIGINAL ORDER OF F IRST APPELLATE AUTHORITY HAS BEEN SET ASIDE BY THE TRIBUNAL. 13. WE FIND MERIT IN THE SAID SUBMISSIONS OF LD. A.R. SINCE THE LD. CIT(A) HAS DELETED THE PROTECTIVE ADDITION ON THE GROUND THAT HE HAS CONFIRMED THE SUBSTANTIVE ADDITI ON MADE IN THE HANDS OF K. MAHESH KUMAR AND SINCE THE SAID ISSUE HAS BEEN RESTORED BACK TO HIS FILE BY THE TRIBUNAL IN T HE CASE OF K. MAHESH KUMAR, THE PRESENT ISSUE ALSO NEEDS TO BE SE T ASIDE TO HIS FILE FOR EXAMINING IT AFRESH ALONG WITH THE APP EALS OF SHRI K MAHESH KUMAR. ACCORDINGLY, WE RESTORE THIS ISSUE TO FILE OF LD. CIT(A). ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 9 OF 12 ASSESSMENT YEAR 2011-12:- 14. NOW WE SHALL TAKE UP THE APPEAL FILED BY REVEN UE FOR ASSESSMENT YEAR 2011-12. IN THIS YEAR ALSO, THE A. O. NOTICED THAT THE AGGREGATE AMOUNT OF BANK DEPOSITS MADE WAS RS.76.34 CRORES. SINCE THE ASSESSEE DID NOT FILE A NY RETURN OF INCOME AND ALSO DID NOT FURNISH ANY DETAILS, THE A. O. ASSESSED THE ENTIRE DEPOSITS OF RS.76.34 CRORES ON PROTECTI VE BASIS IN THE HANDS OF THE ASSESSEE, WHILE SUBSTANTIVE ADDITI ON WAS MADE IN THE HANDS OF SH. K. MAHESH KUMAR IN AY 2011 -12, FOR THE VERY SAME REASONS DISCUSSED ABOVE, WHILE DE ALING WITH AN IDENTICAL ISSUE IN ASSESSMENT YEAR 2010-11. 15. THE LD. CIT(A) DELETED THE PROTECTIVE ADDIT ION ON THE REASONING THAT HE HAS CONFIRMED THE ADDITION ON SUB STANTIVE BASIS IN THE HANDS OF SHRI K. MAHESH KUMAR. THE RE VENUE IS AGGRIEVED. 16. FOR THE REASONS DISCUSSED ON AN IDENTICAL ISSUE IN ASSESSMENT YEAR 2010-11, THIS ISSUE NEEDS TO BE SET ASIDE TO THE FILE OF LD CIT(A), I.E. WE HAVE NOTICED THAT TH E TRIBUNAL HAS RESTORED THE SUBSTANTIVE ADDITION MADE IN THE HANDS OF SHRI K. MAHESH KUMAR TO THE FILE OF LD. CIT(A) IN AY 2011-1 2 ALSO AND HENCE, THIS ISSUE NEEDS TO BE SET ASIDE TO HIS FILE FOR EXAMINING ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 10 OF 12 IT AFRESH ALONG WITH THE APPEAL OF SHRI K MAHESH KU MAR. ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF L D. CIT(A). 17. THE LD. A.R. SUBMITTED THAT THE ASSESSING O FFICER HAS FRAMED THE ASSESSMENT FOR A.Y. 2011-12 IN THE HANDS OF THE ASSESSEE BY ASSESSING THE UNEXPLAINED BANK DEPOSITS . THE LD. A.R. SUBMITTED THAT THE ASSESSEE FIRM HAS BEEN DISS OLVED W.E.F. 1.4.2010 AND HENCE THE PRESENT PARTNERSHIP FIRM DID NOT EXIST IN THE YEAR RELEVANT TO A.Y. 2011-12. ACCORDINGLY, HE SUBMITTED THAT THE A.O. WAS NOT RIGHT IN LAW IN FRA MING THE IMPUGNED ASSESSMENT IN THE HANDS OF A NON-EXISTING ASSESSEE. THE LD. A.R. SUBMITTED THAT THIS FACT WAS BROUGHT T O THE NOTICE OF LD. CIT(A) AND SPECIFIC GROUNDS, VIZ., GROUND NO .3 & 4 WERE RAISED BEFORE LD. CIT(A) QUESTIONING THE VALIDITY O F ASSESSMENT MADE ON A NON-EXISTING ASSESSEE. HOWEVER, THE LD. CIT(A) HAS DECLINED TO ADJUDICATE THE ABOVE SAID GROUNDS BY OB SERVING THAT THEY ARE ACADEMIC IN NATURE, SINCE THE ADDITIO N MADE IN THE HANDS OF THE ASSESSEE ON PROTECTIVE BASIS HAS S INCE BEEN DELETED BY HIM. 18. THE LD. A.R. SUBMITTED THAT IN THE EVENT TH AT THE ISSUE OF PROTECTIVE ADDITION IS RESTORED TO THE FILE OF L D. CIT(A), THE LD ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 11 OF 12 CIT(A) MAY BE DIRECTED TO ADJUDICATE GROUND NOS.3 & 4, AS THEY GO TO THE ROOT OF THE MATTER. 19. WE AGREE WITH THE CONTENTIONS OF THE ASSESS EE. SINCE THE ASSESSEE IS CLAIMING THAT IT DID NOT EXIST DURI NG THE PERIOD RELEVANT TO THE ASSESSMENT YEAR 2011-12, THE SAID C LAIM GOES TO THE ROOT OF THE MATTER AND THE SAME IS REQUIRED TO ADJUDICATED FIRST BY LD. CIT(A). ACCORDINGLY, DIRE CT THE LD. CIT(A) TO ADJUDICATE GROUND NOS. 3 & 4 URGED BEFORE HIM. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE F ILED FOR AY 2010-11 IS TREATED AS ALLOWED AND THE APPEALS OF TH E REVENUE FILED FOR AY 2010-11 AND 2011-12 ARE TREATED AS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2020. SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 31 ST JULY, 2020. VG/SPS ITA NOS.1786, 1787 & 1891/BANG/2017 M/S. SRI BHAKTA MARKANDESHWARA MINERALS, HOSPET PAGE 12 OF 12 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.