Appeal Details
Counselvise Citation
[2010] 136 COUNSELVISE.COM (IT) 9693 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-01-2010
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
I
Next Hearing Date
04-11-2009
Assessment Year
2005-2006
Appeal Filed On
06-05-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I : NEW DELHI) SHRI R.P. TOLANI, JM AND SHRI SHAMIM YAHYA, AM ITA NO.1892/DEL./2009 (ASSESSMENT YEAR : 2005-06) ITO, WARD 31 (1), VS. SHRI VARUN SETH, NEW DELHI. 6 A, JANTAR MANTAR, PARLIAMENT STREET, NEW DELHI. (PAN : ABLPS4124P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.N. CHAWLA, ADVOCATE REVENUE BY : MS. ANUSHA KHURANA, DR ORDER PER R.P. TOLANI, JUDICIAL MEMBER : THE REVENUE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT (APPEALS) FOR THE ASSESSMENT YEAR 2005-06 ON THE FOLLOWING GR OUNDS OF APPEAL :- 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE THE LD. CIT (A) HAS ERRED IN DELETING ADDITION OF RS.35,03, 500/- MADE BY A.O. U/S 68 OF THE ACT IN ASSESSMENT U/S 143(3) DT. 26.12.2007, BY RELYING ON THE INCOME-TAX RETURN OF M/S. JAGAT TALKIES DISTRIBUTORS FOR THE A.Y. 2005-06 FILED ON 31.3.2008 (EVEN BEYOND THE LIMIT FOR FILING OF BELATED RETURN ) AND ACCEPTING ASSESSEES PLEA THAT ASSESSEES BANK ACCO UNT WAS BEING USED FOR TRANSACTIONS RELATING TO ITS PARTNER SHIP FIRM M/S. JAGAT TALKIES DISTRIBUTORS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.5, 25,000/- ADDED BY THE A.O. AS BUSINESS INCOME. ITA NO.1892/DEL./2009 2 2. BRIEF FACTS ARE THAT THE ASSESSEE IS IN BUSINESS OF T.SHIRTS AND DERIVES INCOME FROM PARTNERSHIP FIRM M/S. JAGAT TALKIES DIS TRIBUTOR (JTD). THE ASSESSEE AND SAID FIRM JTD ARE ASSESSED TO INCOME-T AX SINCE PAST SO MANY YEARS. VIJAYA BANK ACCOUNT OF THE FIRM JTD WAS ATT ACHED BY INCOME-TAX AUTHORITIES AND AS THE ASSESSEE BEING A PARTNER ALL OWED THE FIRM TO USE ITS BANK ACCOUNT FOR THE PURPOSES OF SAID FIRM. DURING THE COURSE OF ASSESSMENT, ASSESSING OFFICER ASKED QUESTIONS ABOUT DEPOSITS IN THIS VIJAYA BANK AND CANARA BANK ACCOUNTS. ASSESSEE REPLIED AS UNDER : THE SAID FIRM (M/S. JAGAT TALKIES DISTRIBUTORS) HA S INCOME FROM PROPERTIES AND EXHIBITIONS OF FILMS. DUE TO A RBITRARY DEMANDS AGAINST WHICH THE ASSESSEE FIRM HAD FILED A PPEAL BEFORE THE INCOME TAX AUTHORITIES, THE BANK ACCOUNT OF THIS FIRM WAS ATTACHED BY THE INCOME TAX DEPARTMENT AND IT BECAME DIFFICULT TO OPERATE THE FIRMS BANK ACCOUNT. THE PARTNERS STARTED DOING DAY TO DAY BUSINESS OF THE FIRM USING THEIR OWN BANK ACCOUNTS AND ACCORDINGLY MR. VARUN SETH PLACED HIS ABOVE NOTED TWO BANK ACCOUNTS AT THE DISPOSAL OF TH E FIRM AND THE FIRM STARTED OPERATING THESE ACCOUNTS BY ISSUIN G CHEQUES SIGNED BY MR. VARUN SETH, FOR DAY TO DAY OPERATIONS , FROM HIS BANK ACCOUNT NO. SB-17299 AT VIJAYA BANK, CHANDNI C HOWK, DELHI, WHICH MENTION NAMES OF THE PERSONS TO WHOM C HEQUES WERE ISSUED FOR MAINTENANCE OR THE HALL SUCH US -AB HI, MINI, MAYA, R.K., MUNI, TULSI, SAIL, SEA, CITI, VISHAL KA NOJ KHO, BALAM, SADIQ AND TELEPHONE EXPENSES AS WELL AS OTHE R EXPENSES OF THE FIRM. THUS THIS ACCOUNT WAS PLACED AT THE DI SPOSAL OF THE FIRM AND THE CAPITAL ACCOUNT OF SHERI VARUN SETH BE CAME AN INTEGRAL PART OF THE FIRM. WHENEVER THE FIRM HAD SU RPLUS FUNDS, THESE WERE SHOWN AS WITHDRAWALS IN THE NAME OF SHER I VARUN SETH AND IN TURN WERE DEPOSITED IN THE ABOVE NOTED BANK. SIMILARLY, THE OTHER BANK ACCOUNT OPERATED BY MR. V ARUN SETH IN CANARA BANK WAS ALSO PUT AT THE DISPOSAL OF THE FIRM AND WHENEVER THE FIRM WANTED TO ISSUE CHEQUES FOR ITS B USINESS THESE WERE ISSUED FROM THIS ACCOUNT AND WHENEVER HE NEEDED THE MONEY, THE FIRM HAVING CASH IN HAND USED TO DEB IT IN HIS NAME AND THEN IN TURN BE DEPOSITED THE SAME IN HIS BANK ACCOUNT. ITA NO.1892/DEL./2009 3 IT MAY NOT BE OUT OF PLACE TO MENTION HERE THAT ANO THER PARTNER OF JAGAT TALKIES DISTRIBUTORS SHERI VIJAY NARAIN SE TH ALSO PUT HIS BANK ACCOUNT NO.23033 WITH CANARA BANK AT THE D ISPOSAL OF THE FIRM. FROM THIS BANK ACCOUNT, YOUR HONOUR WILL FIND THAT, FROM 1 ST APRIL TO 12 TH OCTOBER 2004, SHERI VIJAY NARAIN SETH HAD WITHDRAWN LARGE SUMS OF MONEY IN CASH AND HIS A CCOUNT WAS IN DEBIT AMOUNTING TO RS.3,46,240/- WHICH WAS S QUARED UP BY THE BANK ON ACCOUNT OF RENT RECEIVED BY HIM ON B EHALF OF THE FIRM. SIMILARLY, HE RECEIVED RS.28 LACS ON 26.2.200 5 AND RS.52,23,000/- ON 31.3.2005 AS DPN - 'DEMAND PROMIS SORY NOTE' (TO BE ADJUSTED AGAINST RENT THE FIRM). YOUR HONOUR WILL SEE THAT SHERI VIJAY NARAIN SETH ALSO WITHDREW LARG E SUMS OF MONEY FROM ITS ACCOUNT FROM OCTOBER 2004 TO FEBRUAR Y 2005 AND FROM 26 TH FEBRUARY 2005 TO 31 ST MARCH 2005 WHEN HIS DEBIT BALANCE IN THE BANK ACCOUNT WAS RS.51,58,136/-, MEA NING THEREBY THAT THESE ARE LARGE SUMS OF MONEY WHICH WE RE IN TURN WITHDRAWN IN CASH BY SHERI VIJAY NARAIN SETH AND DE POSITED IN HIS BANK ACCOUNT FOR MEETING OUT THE DAY TO DAY EXP ENSES OF THE FIRM. THAT THE COPY OF ACCOUNT OF SHERI YARUN SETH IN THE BOOKS OF JAGAT TALKIES DISTRIBUTORS IS ENCLOSED HEREWITH IND ICATING THE DATE OF DEPOSIT BY HIM IN THE FIRM AS WELL AS DATE OR WITHDRAWAL BY HIM FROM THE FIRM AND DEPOSITED IN HIS BANK ACCO UNT. ASSESSEE FURTHER FILED COPIES OF ACCOUNT WITH THE F IRM JTD AND HIS FATHER WHICH WAS NOT ACCEPTED BY ASSESSING OFFICER AND THE CREDITS IN THESE ACCOUNTS WERE HELD TO BE ASSESSEES UNEXPLAINED CAS H CREDITS AND ADDED THE SAME U/S 68. 3. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN FIRST APPEAL. DURING THE COURSE OF APPEAL, ASSESSEE FILED CERTAIN DOCUMENTS INCLUDING COPY OF INCOME- TAX RETURN OF THE FIRM JTD FOR ASSESSMENT YEAR 2005 -06 WHICH WAS FILED BELATEDLY ON 31.3.2008, ACCORDING TO ASSESSING OFFI CER, IT WAS NOT WITHIN TIME AND SO THE ENTRIES THEREIN WERE NOT ACCEPTABLE TO ASSESSING OFFICER. CIT (APPEALS) FORWARDED THESE DOCUMENTS TO ASSESSIN G OFFICER FOR HIS ITA NO.1892/DEL./2009 4 REMAND REPORT. CIT (APPEALS) DELETED THE ADDITION BY FOLLOWING OBSERVATIONS :- DURING THE COURSE OF APPELLATE PROCEEDINGS THE AP PELLANT HAS SUBMITTED THAT THE BANK ACCOUNT OF M/S. JAGAT T ALKIES DISTRIBUTORS WAS ATTACHED BY THE INCOME-TAX DEPARTM ENT AND IT BECAME DIFFICULT FOR THE FIRM TO RUN ITS DAY TO DAY BUSINESS. THEREFORE, THE PARTNERS SHRI VARUN SETH AND SHRI VI JAY NARAIN SETH STARTED USING THEIR OWN BANK ACCOUNTS FOR CARR YING OUT THE BUSINESS OF THE FIRM. THE RENTAL INCOME OF SHRI VI JAY NARAIN SETH WAS DEPOSITED IN HIS CANARA BANK ACCOUNT NO.23 033. EXPENSES OF THE FIRM WERE MET FROM THIS ACCOUNT BY WAY OF ISSUE OF CHEQUES. THESE FACTS ARE STATED TO BE VER IFIABLE FROM THE BANK RECORDS WHICH HAVE BEEN SUBMITTED BY THE A PPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF APPELLATE PROCEEDINGS. IT IS SEEN THA T TWO ACCOUNTS WERE USED FOR THE PURPOSE OF CARRYING OUT THE DAY T O DAY BUSINESS ACTIVITIES OF THE FIRM, THE DETAILS OF WHI CH ARE AS BELOW :- 1. SAVING BANK A/C NO.17299 IN VIJAY BANK, CHANDNI CHOWK, DELHI BELONG TO SHRI VARUN SETH. 2. SAVINGS BANK A/C NO.23033 WITH CANARA BANK, NEW MOTI CINEMA CHANDNI CHOWK, DELHI BELONGING TO SHRI VIJAY NARAIN SETH. THE AO HAS ALSO RAISED THE ISSUE WHETHER THE OPERAT ION OF INDIVIDUAL ACCOUNTS FOR THE PURPOSE OF CARRYING OUT THE BUSINESS OF THE FIRM WAS IN CONFORMITY WITH THE ACCOUNTING S TANDARD SET BY THE INSTITUTE OF CHARTERED ACCOUNTANTS. HOWEVER, DURING THE APPELLATE PROCEEDINGS IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THIS PROCEDURE WAS RESORTED TO BY THE PARTNERS BY WAY OF NECESSITY RATHER THAN CHOICE. SINCE THE REGULAR ACC OUNTS OF THE FIRM WERE FROZEN BY THE AUTHORITIES THERE WAS NO WA Y TO CARRY OUT THE BUSINESS OF THE FIRM ON A DAY TO DAY BASIS WITHOUT A BANK ACCOUNT. KEEPING IN VIEW THE EXIGENCIES DESCRI BED BY THE APPELLANT, IT IS OBSERVED THAT THE ACT OF USING THE PARTNERS ACCOUNT FOR PURPOSES OF CARRYING OUT THE FIRM'S BUS INESS IS NOT AN UNPARDONABLE OFFENCE SO LONG AS IT DOES NOT COME IN THE WAY OF DETERMINING THE CORRECT INCOME OF THE APPELLANT AND OF THE FIRM IN WHICH HE IS A PARTNER. ITA NO.1892/DEL./2009 5 DURING THE COURSE OF APPELLATE PROCEEDINGS IT HAS B EEN SUBMITTED THAT THE RETURN OF INCOME OF M/S. JAGAT T ALKIES DISTRIBUTORS FOR A. Y. 2005-06 HAS BEEN FILED ON 31 .3.2008 WITH ACIT, CIRCLE 29(1), NEW DELHI. IN THE REMAND REPORT IT HAS BEEN STATED BY THE AO THAT THIS RETURN CONSTITUTES FRESH EVIDENCE. IT HAS ALSO BEEN STATED THAT THE RETURN F ILED BY THE FIRM IS BEYOND STIPULATED TIME ALLOWED UNDER THE ACT. TH EREFORE, IT WAS UPTO THE AO TO CONSIDER IT A VALID RETURN OF NO T. THE APPELLANT IN THEIR REJOINDER HAVE REITERATED THAT T HE AMOUNT OF RS.35 LACS WAS GIVEN AS ADVANCE BY THE FIRM THIS FA CT IS REFLECTED IN THE BALANCE SHEET OF M/S. JAGAT TALKIE S DISTRIBUTORS WHEREIN THE TOTAL ADVANCE RECEIVABLE TO THE TUNE OF RS.1,23,11,989/- ALSO INCLUDE THE TWO ENTRIES I.E. SHRI ARVIND RS.20 LACS AND M/S.VISHWANATHAN SECURITIES PVT. LTD RS.7,50,000/-. SIMILARLY IN SUNDRY DEBTORS ACCOUNT OF M/S. JAGAT TALKIES DISTRIBUTORS A TOTAL SUM OF RS.53,48,416/- HAS BEEN SHOWN IN WHICH RS.7,50,000/- RELATES TO RECEIVABLE SHOWN FROM SHRI VISHWANATHAN. THUS IT HAS BEEN CONTENDED THAT THE ENTIRE AMOUNT OF RS.35 LACS HAS BEEN DULY ACCOUNTED FOR IN M/S. JAGAT TALKIES DISTRIBUTORS. IN SUPPORT OF THIS CONTENTION THE APPELLANT HAS FILED A COPY OF THE AUDIT REPORT OF M/S. JAGAT TALKIES DISTRIBUTORS WHICH IS DATED FEBRUARY 12, 2008. SINC E THE ACCOUNTS HAVE BEEN AUDITED AND THE CONTENTIONS OF T HE APPELLANT ARE VERIFIABLE FROM THE DETAILS OF LOANS AND ADVANC ES AS ON 31.3.2005, RELATING TO THE FIRM, IT IS CLEAR THAT T HE AMOUNT OF RS.35 LACS RELATES TO THE FIRM M/S. JAGAT TALKIES D ISTRIBUTORS AND NOT TO THE ASSESSEE. THIS FACT HAS BEEN VERIFIE D FROM THE RELEVANT ANNEXURE OF THE AUDIT REPORT. THEREFORE, I T IS HELD THAT THE AO WAS NOT RIGHT IN TREATING THESE AMOUNTS AGGR EGATING TO RS.35,03,500/- AS INCOME OF THE ASSESSEE FROM OTHER SOURCES. HENCE THE ADDITION IS, LIABLE TO BE DELETED. HELD A CCORDINGLY. 4. IN RESPECT OF SECOND GROUND OF REVENUE, THE SAME COMPRISES OF FOLLOWING ITEMS : (I) CAPITAL EMPLOYED CREDIT IN VIJAYA BANK A/C NO.17299 (MAXIMUM BALANCE) RS.3,50,000/- (II) ESTIMATED NET PROFIT FROM T.SHIRT BUSINESS R S.2,50,000/- RS.6,00,000/- ITA NO.1892/DEL./2009 6 ASSESSING OFFICER MADE ABOVE ADDITIONS BY HOLDING T HAT THE ABOVE MAXIMUM BALANCE WAS CAPITAL EMPLOYED BY THE ASSESSEE IN BUS INESS AND THE REMAINING AMOUNT WAS ADDED AS ESTIMATED NET PROFIT. 5. CIT (A) DELETED THE ADDITION ON ACCOUNT OF CAPIT AL EMPLOYED AND GAVE SUBSTANTIAL RELIEF IN RESPECT OF ESTIMATE OF NET PR OFIT BY RETAINING ADDITION TO THE EXDTENT OF RS.75,000/- (OVER AND ABOVE NET PROF IT OF RS.1,06,203/- DECLARED BY THE ASSESSEE). 6. REVENUE HAS TAKEN THE GROUND AT RS.5,25,000/-. HOWEVER, IF THE CIT(A)S DIRECTION ARE SEEN THEN THE BUSINESS INCOM E RETAINED IS AT RS.1,81,203/-, THUS RESULTING IN RELIEF OF RS.4,18, 797/- ONLY. CIT (APPEALS) GAVE THE PART RELIEF BY GIVING FOLLOWING OBSERVATIO NS : THE NEXT GROUND RELATES TO THE ADDITION OF RS.6 LA CS ON ACCOUNT OF BUSINESS. INCOME OF THE APPELLANT. THIS ADDITION HAS BEEN MADE ON ACCOUNT OF :- I) MAXIMUM BALANCE OF RS.3,50,000/- IN THE SAVINGS BANK ACCOUNT NO.17299 WITH VIJAY BANK, BELONGING TO THE APPELLANT II) ESTIMATED ADDITION OF RS.2,50,000/- ON ACCOUNT OF ESTIMATED NET PROFIT ON THE BUSINESS OF SALE AND PU RCHASE OF T- SHIRTS FOR WHICH NO DETAILS WERE SUBMITTED DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. THE FIRST PART OF THE ADDITION AMOUNTING TO RS.3,50 .000/- WAS MADE BY THE AO AFTER APPELLANT THAT THE VIJAY BANK ACCOUNT OF THE APPELLANT OUT THE BUSINESS TRANSACTIONS ON A DA Y TO DAY BASIS PERTAINING TO JAGAT TALKIES DISTRIBUTORS. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT WAS ASKED TO E XPLAIN THE MAXIMUM BALANCE OF RS.3,50,000/- ON 16.2.2005. IT W AS EXPLAINED BY THE APPELLANT DURING THE ASSESSMENT PR OCEEDINGS THAT THE BUSINESS OF T-SHIRTS CARRIED OUT BY THE AP PELLANT WAS IN HIS INDIVIDUAL CAPACITY AND NONE OF THE SALE PROCEE DS FROM THE T- ITA NO.1892/DEL./2009 7 SHIRTS BUSINESS WAS DEPOSITED IN VIJAY BANK ACCOUNT . IT WAS FURTHER SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THAT ALL THE ENTRIES IN VIJAY BANK ACCOUNT INCLUDING THE BALANCE OF RS.3,50,000/- ON 16.2.2005 PERTAINED TO THE FIRM AN D NOT TO THE APPELLANT THIS ISSUE HAS BEEN DISCUSSED IN THE FORE GOING PARAS WHILE DISPOSING OFF GROUND NO.3 ABOVE THAT THE ACCO UNT OF THE APPELLANT WAS IN FACT BEING USED TO CARRY OUT THE D AY TO DAY BUSINESS TRANSACTIONS OF THE FIRM. SINCE THAT FACT HAS BEEN ESTABLISHED AND ACCEPTED, THIS MATTER IS ALSO DISPO SED OFF BY HOLDING THAT SINCE THE ACCOUNT WAS BEING USED FOR T HE TRANSACTIONS OF THE FIRM THE BALANCE OF RS.3,50,000/- AS ON 16.2 .2005 ALSO PERTAINS TO THE FIRM AND NOT TO THE APPELLANT. HENC E THE ADDITION OF RS.3,50,000/- OUT OF THE TOTAL ADDITION OF RS.6, 00,000/- IS HEREBY DELETED. THE SECOND PART OF THE GROUND NO.2 RELATES TO THE A DDITION OF RS.2,50,000/- ON ESTIMATE BASIS IN THE ABSENCE O F REQUISITE DETAILS. THE APPELLANT HAS SUBMITTED THAT ON A TURN OVER OF RS.3,49,246/- THE ASSESSEE HAS SHOWN NET PROFIT OF RS.L,06,203/- WHICH COMES TO APPROXIMATELY 30% AS AGAINST 5% REQU IRED U/S.44AF. HOWEVER, SINCE NO DETAILS WERE SUBMITTED, THE AO ESTIMATED THE NET PROFIT AT RS.2,50,000/- INSTEAD O F RS.1,06,203/-. AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT AND AFTER GOING THROUGH THE ASSESSMENT ORDER THE ADDITION OF RS.2,50,000/- IS REDUCED TO RS.75,000/-. THIS RS.75000/- WILL BE ADDED OVER AND ABOVE THE NET PROFIT OF RS.1,06,203/- SHOWN BY THE APPELLANT. THEREFORE, THE TOTAL INCOME IS ESTIMATED AT RS.1,81 ,203/-. 7. AGGRIEVED, REVENUE IS BEFORE US. 8. LEARNED DR CONTENDS THAT THE FIRM JTD FILED A RE TURN BEYOND THE TIME LIMIT PRESCRIBED BY THE INCOME-TAX ACT FOR FILING B ELATED RETURN, THEREFORE, THE RETURN OF THE FIRM FILED BY THE ASSESSEE AS EVI DENCE BFORE THE CIT (A) IS NON EST AND CANNOT BE RELIED ON. CIT (A) ERRED IN DRAWING INFERENCE FROM THIS RETURN. FURTHER, THE EXPLANATION OF THE ASSES SEE THAT THE ENTRIES IN THE BANK ACCOUNTS PERTAINED TO THE SAID FIRM WAS AN AFT ERTHOUGHT AS THE ASSESSEE WAS NOT IN A POSITION TO OFFER OTHER CREDIBLE EXPLA NATION. IN RESPECT OF ITA NO.1892/DEL./2009 8 BUSINESS INCOME ALSO, LEARNED DR CONTENDS THAT THE ENTRY OF RS.3,50,000/- AS CAPITAL EMPLOYED IS ON THE SAME FOOTING AND SHOULD BE ADDED ON FOR THE SAME REASON. IN RESPECT OF NET PROFIT ESTIMATE, LEARNED DR RELIED ON THE ORDER OF AO. 9. IN REPLY, LEARNED COUNSEL FOR THE ASSESSEE VEHEM ENTLY ARGUES THAT THE EXPLANATION ABOUT THE FIRM JTD WAS NOT AN AFTERTHOU GHT AND IT WAS EXPLAINED TO ASSESSING OFFICER IN THE ASSESSMENT ITSELF. FUR THER, THE PARTNERSHIP FIRM IS AN OLD ASSESSEE AND HAS HUGE RENTAL INCOME FROM PRO PERTIES AND MAINTAINED REGULAR BOOKS OF ACCOUNT WHICH WERE DULY AUDITED. THE FACT THAT THE BANK ACCOUNT OF THE FIRM JTD WAS ATTACHED BY INCOME-TAX AUTHORITIES WAS PART OF THE DEPARTMENTAL RECORD AS THE FIRM AND ASSESSEE BO TH ARE ASSESSED. ALL THE COPIES OF ACCOUNTS AND CONFIRMATIONS WERE DULY FILE D, WHICH IS APPARENT FROM FOLLOWING WRITTEN EXPLANATION FILED BEFORE THE ASSESSING OFFICER :- IN THIS CONNECTION, IT IS SUBMITTED THAT AS STATE D EARLIER IN MY LETTER DATED 26.11.2007 THAT THE FIRM M/S. JAGAT TALKIES DISTRIBUTORS HAD RENTAL INCOME FROM PROPERTIES AND DUE TO ARBITRARY DEMANDS OF INCOME TAX THE FILM'S BANK ACC OUNT WAS ATTACHED BY THE INCOME TAX AUTHORITIES AND IT WAS N OT POSSIBLE TO DEPOSIT THE AMOUNTS OF THE FILM IN THAT ACCOUNT. IT IS CLEAR THAT THE BANK ACCOUNT HAS TO BE OPERATED IN THE NAME OF THE FIRM, BUT DUE TO' UNAVOIDABLE CIRCUMSTANCE THE FIRM HAD TO AD OPT THE PROCEDURE OF OPERATING THE PARTNERS ACCOUNTS FOR DA Y TO DAY RUNNING OF THE BUSINESS. IN THE VIJAYA BANK SMALL A MOUNTS WERE DEPOSITED AND WITHDRAWN FROM TIME TO TIME. ALL THES E TRANSACTIONS HAVE BEEN DULY RECORDED IN THE BOOKS O F ACCOUNTS OF THE FIRM. COPIES OF THE SAME HAVE ALREADY BEEN F ILED. 2. I MAY FURTHER CLARIFY THAT THE BUSINESS CONDUCTE D BY MR. VARUN SETH WAS IN HIS INDIVIDUAL CAPACITY AND NONE OF THE SALE PROCEEDS FROM TEE SHIRTS WAS DEPOSITED IN THE VIJAY BANK ACCOUNT. ALL THESE ENTRIES IN VIJAY BANK ACCOUNT IN CLUDING THE ENTRY OF RS.3,50,000/- ON 16.12.2005 PERTAIN TO THE FIRM AND NOT TO MR. VARUN SETH INDIVIDUALLY. THE ASSESSEE HAS DE CLARED A NET PROFIT OF RS.1,06,203/- AND ESTIMATING THE SAME AT RS.2,50,000/- ITA NO.1892/DEL./2009 9 IS HIGHLY ARBITRARY, EXCESSIVE AND UNJUST. THE ASSE SSEE HAS ALREADY SHOWN THE NET PROFIT OF 30% INSTEAD OF 5% A S REQUIRED UNDER SECTION 44AF AND IN SPITE OF THIS YOUR HONOUR WANTS TO ESTIMATE THE PROFIT AT RS.2,50,000/- WHICH IS HIGHL Y ARBITRARY. 3. THE ASSESSEE HAD MADE DEPOSITS IN HIS BANK ACCOU NT WITH CANARA BANK OUT OF WHICH A SUM OF RS.20 LACS WAS GI VEN TO MR. ARVIND VISHWANATHAN AND RS.15 LACS WAS GIVEN TO M/S . VISHWANATHAN SECURITIES PVT. LTD. BOTH THESE ENTRIE S. I.E. RS. 20 LACS AND RS.15 LACS HAVE BEEN SHOWN AS ADVANCES REC EIVABLE IN CASH AND KIND IN THE BOOKS OF M/S. JAGAT TALKIES DI STRIBUTORS. COPY OF THE LIST OR LOANS AND ADVANCES IS ENCLOSED HEREWITH FOR YOUR KIND PERUSAL. A CERTIFICATE FROM VISHWANATHAN SECURITIES PVT. LTD. AS WELL AS FROM SHRI ARVIND VISHWANATHAN IS ENCLOSED TO SHOW THAT THESE AMOUNTS WERE GIVEN AS ADVANCES A GAINST PURCHASE OF SHARES AMOUNTING TO RS.15 LACS AND RS.2 0 LACS AS LOAN. THUS, BOTH THESE ENTRIES OF RS.35 LACS PERTA IN TO THE FIRM AND NOT TO THE ASSESSEE. 4. IN VIEW OF THE SUBMISSIONS MADE ABOVE, YOU ARE REQUESTED KINDLY NOT TO MAKE ADDITIONS AS PROPOSED BY YOUR GOODSELF UNDER SECTION 68 OF THE INCOME TAX ACT. IT IS ABUNDANTLY CLEAR THAT ASSESSEE EXPLAINED EVER YTHING BEFORE AO WHO DID NOT CONSIDER THE EVIDENCE. CIT (A) CONSIDERED THE SAME AND CALLED FOR REMAND REPORT AND THEN GRANTED RELIEF. 9. THE COPY OF THE RETURN FILED BY THE ASSESSEE IS PART OF THE DEPARTMENTAL RECORD AND EVEN IF THE SAME IS A BELATED RETURN, TH E ACCOMPANYING STATEMENTS THEREIN, I.E., THEIR ACCOUNT STATEMENTS SUPPORTING MATERIAL IS A RELEVANT MATERIAL AND CIT (APPEALS) HAS RIGHTLY ADMITTED THE SAME AS ADDITIONAL EVIDENCE BY CALLING A REMAND REPORT THEREON. DEPAR TMENT HAS NOT CHALLENGED THE ADMISSION OF ADDITIONAL EVIDENCE BY CIT (A), TH E ONLY OBJECTION IS THE SAME BEING BELATED SHOULD NOT BE ACCEPTED. THE PLE A IS THAT THE RETURN MAY BE BELATED IN RESPECT OF THE FIRM BUT AS FAR AS THE ASSESSEE CONCERNS THE ACCOUNTS OF THE FIRM BEING SUPPORTING EVIDENCE HAS BEEN DULY SUBMITTED ITA NO.1892/DEL./2009 10 BEFORE CIT (APPEALS) TO SUBSTANTIATE THE STAND AND WRITTEN ARGUMENTS ALREADY TAKEN BEFORE ASSESSING OFFICER. CIT (A) HAVING A DMITTED THE SAME AFTER DUE VERIFICATION, SUPPLYING A COPY TO ASSESSING OFF ICER AND CALLING FOR REMAND REPORT THEREON THE GRIEVANCE OF REVENUE IS U NFOUNDED. REVENUE HAS NOT CHALLENGED THE EXISTENCE OF SAID FIRM, AS THE F IRM IS OLD AND ASSESSED TO TAX AND THE ACCOUNT STATEMENTS ARE ON THE RECORD OF THE DEPARTMENT WHICH SUPPORTS ASSESSEES CLAIM. IT WAS CONTENDED THAT C IT (A) HAS DELETED THE ADDITION BY VERIFYING THE ENTRIES. 10. APROPOS SECOND GROUND, IT WAS CONTENDED THAT TH E AMOUNT OF RS.3,50,000/- AS CAPITAL EMPLOYED STANDS EXPLAINED IN VIJAYA BANK ACCOUNT BEING FOR THE PURPOSES OF FIRM JTD THE ADDITION HAS BEEN RIGHTLY DELETED. APROPOS THE ESTIMATION OF NET PROFIT, IT WAS CONTEN DED THAT CIT (A) HAS SUSTAINED THE INCOME OF RS.1,81,203/- AS ESTIMATED BUSINESS INCOME WHICH IS EVEN HIGHER THAN THE PERCENTAGE PRESCRIBED BY SECTI ON 44AF. A.O. MADE A PURE ESTIMATION. CIT (APPEALS) HAS RATIONALIZED IT BY MAKING IT A REASONABLE ADDITION TOTALING TO RS.1,81,203/-. LEARNED DR HAS NOT POINTED OUT THAT THE ADDITION MADE BY THE CIT (A) WAS ARBITRARY OR UNJUS TIFIED. IT AMOUNTS TO SUBSTITUTION OF AO'S ESTIMATE BY CIT(A)S ESTIMATE WHO HAS CO-TERMINUS POWERS OF AO ALONG WITH BEING APPELLATE AUTHORITY. THE ORDER OF CIT (A) WAS RELIED ON. 11. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. APROPOS THE ADDITION MADE U/S 68, THE FACT THAT THE ASSESSEE IS A PARTNER IN FIRM JTD AND BOTH ARE ASSESSED TO TAX SINCE EARLIER YEARS HAVE NOT BEEN DISPUTED BY LEARNED DR. ASSESSEE EXPLAINED THE ENT RIES IN VIJAYA BANK ACCOUNT AND CANARA BANK ACCOUNT ALONG WITH EVIDENCE BEFORE AO WHO DID NOT EXAMINE THE SAME AND MADE THE ADDITION ONLY ON A TECHNICAL GROUND THAT THE FIRM HAD FILED A TIME BARRED RETURN. ASSESSEE REITERATED ITS STAND BEFORE ITA NO.1892/DEL./2009 11 CIT (A) AND FILED SOME MORE EVIDENCE WHICH WERE DUL Y FORWARDED TO AO FOR HIS COMMENTS AND REMAND REPORT. THEREAFTER, CI T (A) CONSIDERED THE EVIDENCE AND EXPLANATION OF THE ASSESSEE AND DELETE D THE ADDITION. 12. LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED T O VARIOUS PAGES OF PAPER BOOK INCLUDING FIRMS RETURN, BANK STATEMENT, CONFIRMATIONS, IN CONSIDERATION OF THE ARGUMENTS AND EVIDENCE RELIED UPON BY THE ASSESSEE BEFORE LOWER AUTHORITIES AND US. WE SEE NO INFIRMI TY IN THE ORDER OF CIT (A) HOLDING THAT THE ASSESSEES BANK ACCOUNT WAS USED B Y THE FIRM FOR ITS BUSINESS PURPOSES, THE AMOUNTS DEPOSITED RELATE TO THE FIRM WHICH HAVE BEEN DULY REFLECTED IN THE FIRMS ACCOUNT. IN VIEW THER EOF, WE UPHOLD DELETION OF ADDITION MADE BY AO U/S 68. 13. APROPOS SECOND GROUND THE ADDITION OF CAPITAL E MPLOYED STANDS EXPLAINED BY THE ASSESSEE IN RESPECT OF VIJAYA BANK ACCOUNT MENTIONED ABOVE. ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT IN RESPECT OF T. SHIRTS BUSINESS AND REPORTED A NET PROFIT OF RS.1,06,203/- THEREON. AO HAS FURTHER RETAINED ADDITION OF RS.75,000/- ON ESTIMATE BASIS. LEARNED DR HAS NOT ARGUED ANYTHING IN PARTICULAR TO HOLD THAT AO'S EST IMATE IS BASED ON ANY FACTUAL DETAILS, CONSEQUENTLY IT BECOMES A CASE OF CHOOSING ONE ESTIMATE OUT OF TWO. IN THIS REGARD ALSO, WE SEE NO INFIRMITY I N THE ORDER OF CIT (A) WHICH IS UPHELD. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2010. SD/- SD/- (SHAMIM YAHYA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 1 ST JANUARY, 2010/TS ITA NO.1892/DEL./2009 12 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
