ITO, New Delhi V. Shri Suresh Seth, New Delhi

ITA 1907/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86599 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 28-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Peak credit; Additional evidence
• Section: 142(1); 144

Judgement Text

DELHI BENCH G : NEW DELHI BEFORE SHRI N.K.SAINI , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 1907 /DEL/ 2010 (ASSESSMENT YEAR: 2006 - 07 ) ITO, WARD - 20(1) NEW DELHI VS. SURESH SETH 14/A, 1 ST FLOOR, WEA KAROL BAGH, NEW DELHI PAN:APJPS9968K (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY, JUDICIAL MEMBER THIS IS A DEPARTMENTAL APPEAL AGAINST THE ORDER OF THE LD CIT(A) - XXII, NEW DELHI DATED 26 TH FEBRUARY 2010 FOR ASSESSMENT YEAR 2006 - 07. 2. THE FACTS IN BRIEF ARE THAT RETURN OF INCOME WAS FILED ON 31 ST MARCH 2007 DE CLARING INCOME OF RS.2,94,895/ - . SUBSEQUENT THERETO, IT IS APPARENT FROM THE ORDER OF ASSESSMENT THA T VARIOUS NOTICES ISSUED REMAINED UNCOMPLIED. THE RELEVANT PORTIONS WHICH HIGHLIGHTS THE NON - COMPLIANCE BY THE ASSESSEE READS AS UNDER: - RETURN OF INCOME WAS FILED ON 31103/2007 DECLARING INCOME OF RS.2,94,895 / - . THE SAME HAS BEEN PROCESSED U/S 143(1) OF THE I.T. ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS. NOTICE U/S 143(2), WAS ISSUED ON 10 - 08 - 2007 DULY SERVED UPON THE ASSESSEE ACCORDINGLY. DURING THE RELEVANT FINANCIAL YEAR, THE ASSESS EE HAS BEEN DERIVING INCOME FROM HOUSE PROPERTY, CAPITAL GAINS & OTHER SOURCES. IN RESPONSE TO THE SAID NOTICE NEITHER ANYBODY ATTENDED NOR ANY APPLICATION FOR ADJOURNMENT WAS RECEIVED. THEREAFTER, NOTICE U/S. 143(2) DATED 24.8.20087 FIXING THE CASE FOR 07 .09.2007 WAS ISSUED, WHICH WAS RETURNED BACK UN - SERVED BY THE NOTICE SERVER WITH THE REMARKS 'LEFT THE HOUSE'. ANOTHER NOTICE U/S. 143(2) DATED 05.03.2008 FIXING THE CASE FOR 14.03.2008 WAS ISSUED WHICH REMAINED UNCOMPLIED WITH. THEREAFTER NOTICES U/S. 142 (1) AND 143(2) DATED 14.08.2008 FIXING THE CASE FOR 26.08.2008 WAS ISSUED WHICH WAS AGAIN RETURNED BACK UN - SERVED BY THE NOTICE SERVER WITH THE REMARKS 'LEFT THE HOUSE'. AGAIN NOTICE U/S. 143(2) APPELLANT BY : B.R.R. KUMAR, SR. DR RESPONDENT BY : R.B. ARORA, CA PAGE 2 OF 8 DATED 04.09.2008 FIXING THE CASE FOR 15.09.2008 WAS ISSUED, W HICH WAS RETURNED BACK UN - SERVED BY THE' NOTICE SERVER WITH THE REMARKS 'LEFT THE HOUSE'. FINALLY NOTICES U/S 143(2)AND 142(1) ALONG WITH A SHOW CAUSE WERE ISSUED ON 22.09.2008, WHICH WERE DULY SERVED ON THE ASSESSEE ON 24.09.2008, FIXING THE CASE FOR 15.1 0.2008. IN RESPONSE TO THIS NOTICE, SH. NARESH SETH, BROTHER AND AR OF THE ASSESSEE ATTENDED ON 15.10.2008 AND WAS ASKED TO FILE DETAILS AS PER ORDER SHEET ENTRY OF DATE AND THE CASE WAS ADJOURNED TO 22.10.2008. ON 22.10.2008 NEITHER ANYBODY ATTENDED NOR A NY APPLICATION FOR ADJOURNMENT WAS RECEIVED, NOTICE U/S. 143(2) AND 142(1) ALONG WITH SHOW CAUSE NOTICE WAS ISSUED ON 29.10.2008 AND THE CASE WAS FIXED FOR 11.11.2008. THIS NOTICE ALSO REMAINED UNCOMPLIED WITH. AGAIN ANOTHER SHOW CAUSE NOTICE ALONG WITH NO TICES U/S. 142(1) AND 143(2) DATED 19.12.2008 FIXING THE CASE FOR 23.12.2008 WERE ISSUED WHICH ALSO REMAINED UNCOMPLIED WITH. 3. AS A RESULT THEREOF, THE AO COMPLETED THE ASSESSMENT ON 24 TH DECEMBER, 2008, U/S 144 OF THE ACT AT AN INCOME OF RS.32,85,655/ - . 4. ON APPEAL THE LD CIT(A), OBSERVED THAT THERE ARE THREE ISSUES IN THE INSTANT CASE NAMELY : - (A) DEPOSIT OF RS.20,00,000/ - IN ACCOUNT WITH ICICI BANK. (B) ADDITION OF RS.7,36,607/ - , ON ACCOUNT OF SO - CALLED MAXIMUM CREDIT BALANCE ON 28 - 06 - 2005. (C) ADDITION OF RS.2,54,158/ - ON ACCOUNT OF SO - CALLED INCOME FROM BUSINESS @ 10% OF TOTAL CREDITS IN BANK ACCOUNT AMOUNTING TO RS.32,78,1911 - (AFTER REDUCING RS.7,36,607/ - , THE MAXIMUM CREDIT AMOU N T ON 28 - 06 - 2005). 5. HE THEREAFTER DELETED ALL THE AFORESAID A DDITIONS. AS REGARDS ADDITION OF RS.20 LAKHS HE HAS CONCLUDED AS UNDER: - DOCUMENTS HAVE BEEN FILED IN PAPER - BOOK BEFORE ME, TO SHOW THAT HUF HAS AGREED TO SELL ITS PROPERTY NO. 24 - F, KAMLA NAGAR, KOHLAPUR ROAD FOR RS.1,05,00,000/ - IN JULY, 2005. HOWEVER, THE PAYMENTS WERE TO BE COMPLETED BY 31 - 03 - 2006 BY BUYERS NAMELY SHRI ARUN KHANNA, SON OF SH. SHYAM KISHORE KHANNA, AND SMT. ASHA KHANNA WIFE OF SH. ARUN KHANNA RESIDENTS OF 4831/26, ANSARI ROAD, DARYA GANJ, NEW DELHI - 110002. THE BUYERS OF THE PROPERTY HAVE MADE PAYMENT OF RS.21,00,000/ - IN CASH BY MAKING WITHDRAWAL IN CASH FROM SAVING BANK ACCOUNT NO.3916 (SMT. ASHA KHANNA) AND 1275 (SH. ARUN KHANNA) BOTH THE ABOVE ACCOUNTS MAINTAINED WITH THE KHATRI CO - OPERATIVE (U) BANK LTD. , DARYA GANJ, NEW DELHI. AS PER COPIES OF BANK STATEMENT, FOR BOTH THE ABOVE ACCOUNTS THE AMOUNT WAS WITHDRAWN PRIOR TO THE DATE OF DEPOSIT IN BANK ACCOUNT OF SURESH SETH HUF WITH ICICI BANK LTD. PAGE 3 OF 8 THUS THE APPELLANT HAS TRIED TO ESTABLISH CO - RELATION BETWE EN THE ACCOUNT WITH ICICI BANK, IN WHICH CASH WAS DEPOSITED AND PARTICULARS OF SURESH SETH HUF. THE COPY OF BALANCE - SHEET OF SURESH SETH HUF, COPY OF COMPUTATION OF WEALTH AND ALSO COPY OF RETURN OF WEALTH FILED BY SURESH SETH HUF HAVE BEEN PLACED BEFORE M E. BASED ON THESE DOCUMENTS I AM INCLINED TO ADMIT THAT THE APPELLANT HAS BEEN ABLE TO ESTABLISH, BEYOND REASONABLE DOUBT, THAT CASH WHICH WAS DEPOSITED IN ACCOUNT WITH ICICI BANK BELONGS TO SURESH SETH HUF AND NOT TO THE APPELLANT. IF AT ALL ANY ACTION IS CALLED FOR ON THIS ISSUE THE AO SHOULD HAVE CONSIDERED THE SAME IN THE HANDS OF HUF. AFTER CONSIDERING THE ABOVE FACTS, IT IS INFERRED THAT ADDITION OF RS.20 LAC MADE, FOR ALLEGED FOR CASH DEPOSIT, IS NOT JUSTIFIED AND CANNOT BE SUSTAINED IN THE HANDS OF APPELLANT HENCE DELETED. (RELIEF RS.20 LACS). 6. SO FAR AS THE ADDITION OF RS.9,90,765/ - HE HAS HELD AS UNDER: - THE ADDITIONS OF RS. 7,36,260/ - AND RS.2,54,158/ - AS PEAK CREDIT AND PROFIT EARNED BY THE APPELLANT RESPECTIVELY, WERE MADE BY THE ID AO, WH ILE FRAMING HIS ORDER ON EX - PARTE BASIS. HOWEVER WHEN DETAILS OF ALL THE ACCOUNTS AND CREDIT ENTRIES IN BANK ACCOUNT WERE AVAILABLE WITH HIM, HE DID NOT THINK IT FIT TO MAKE USE OF THE AVAILABLE INFORMATION, NOR DID HE REFER TO ANY OF THE DOCUMENTS WITH PA RTICULAR COMMENTS. IT IS NOT CLEAR WHEN COPY OF BANK STATEMENT WAS TAKEN BY THE LEARNED ASSESSING OFFICER BY ISSUE OF NOTICE UNDER SECTION 133(6), WHAT PREVENTED HIM TO CARRY - OUT FURTHER INVESTIGATIONS INTO ENTRIES IN THE ACCOUNT. NOR DID HE SEEK ANY FURTH ER INFORMATION FROM THE BANK. THE INFORMATION AS TO ACCOUNTS FROM WHERE THE MONEY HAS BEEN TRANSFERRED TO ACCOUNT OF THE APPELLANT COULD HAVE BEEN EASILY OBTAINED FROM THE BANK. NOW THE AR HAD FILED DETAILS OF ACCOUNTS OF FAMILY MEMBERS/RELATIVES FROM WHE RE MONEY WAS TRANSFERRED TO THE ACCOUNT OF APPELLANT, IT WAS ALSO BROUGHT TO MY NOTICE THAT THE ENTRIES ARE NOT BUSINESS TRANSACTIONS BUT ARE TRANSFERS ENTRIES FROM THE ACCOUNT OF FAMILY MEMBERS AS INDICATED IN PARA 7B OF THIS ORDER. THESE DO NOT CONSTITUT E ENTRIES OF BUSINESS RECEIPTS HENCE CALCULATING PROFIT ON THEM IS NOT JUSTIFIED. FOR ALL THE TRANSFER ENTRIES FROM THE FAMILY MEMBERS CONFIRMATIONS WERE FILED. I AM INCLINED TO ACCEPT THE EXPLANATION OF THE APPELLANT. SINCE ALL THE ENTRIES IN THE CRE DIT OF ACCOUNT OF THE APPELLANT WITH KHATRI CO - OPERATIVE BANK LTD, HAD ADEQUATELY BEEN EXPLAINED WITH SUPPORTING DOCUMENTARY EVIDENCE. I AM OF THE CONSIDERED OPINION THAT ADDITION OF RS.9,90,765/ - ON ACCOUNT OF ALLEGED PEAK CREDIT AND BUSINESS INCOME DO NO T SURVIVE AND LIABLE TO BE DELETED. THE ASSESSEE GETS RELIEF OF RS.9,90,765/ - . 7. IN THE LIGHT OF THE ABOVE FACTUAL POSITION, THE REVENUE HAS PREFERRED THE INSTANT APPEAL. PAGE 4 OF 8 8. GROUND NO.4 OF THE GROUNDS OF APPEAL CHALLENGES THE ACTION OF THE LD CIT(A), T O ENTERTAIN ADDITIONAL EVIDENCE WITHOUT FOLLOWING THE PROVISIONS OF RULE46A OF THE INCOME TAX RULES, 1962 (HEREIN AFTER THE RULES). 9. HAVING CONSIDERED THE RIVAL SUBMISSIONS, AND AFTER CAREFULLY PERUSING THE ORDER OF THE AUTHORITIE S BELOW AND MATERIAL ON RECORDS, WE FIND THAT THE ASSESSEE DID FURNISH FRESH EVIDENCES BEFORE THE LD CIT(A), WHICH HAS LED HIM TO DELETE THE ADDITIONS. HOWEVER, BEFORE DOING SO, WE ALSO FIND THAT THERE IS NO FINDING THAT SUCH ADDITIONAL EVIDENCE WARRANTS A DMISSIONS UNDER RULE46A. WHICH IS NOT IN CONFORMITY WITH RULE46A AS HELD BY THE JURISDICTIONAL HIGH COURT IN M ANISH BUILDWELL (204 TAXMAN 106) WHEREIN IT HAS BEEN OBSERVED AS UNDER: - RULE 46A IS A PROVISION WHICH IS INVOKED, ON THE OTHER HAND, BY THE ASSESSEE WHO IS IN AN APPEAL BEFORE THE COMMISSIONER (APPEALS). ONCE THE ASSESSEE INVOKES RULE 46A AND PRAYS FOR ADMISSION OF ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS), THEN THE PROCEDURE PRESCRIBED IN THE SAID RULE HAS TO BE SCRUPULOUSLY FOLLOWED. THE FACT THAT SUB - SECTION (4) OF SEC. 250 CONFERS POWERS ON THE COMMISSIONER (APPEALS) TO CONDUCT AN ENQUIRY AS HE THINKS FIT, WHILE DISPOSING OF THE APPEAL, CANNOT BE RELIED UPON TO CONTEND THAT THE PROCEDURAL REQUIREMENTS OF RULE 46A NEED NOT BE COMPLIED WITH. IF SUCH A PLEA OF THE ASSESSEE IS ACCEPTED, IT WOULD REDUCE RULE 46A TO A DEAD LETTER BECAUSE IT WOULD THEN BE OPEN TO EVERY ASSESSEE TO FURNISH ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS) AND, THEREFORE, CONTEND THAT THE EVIDENCE SHOULD BE ACCEPTED AND TAKEN ON RECORD BY THE COMMISSIONER (APPEALS) BY VIRTUE OF HIS PAGE 5 OF 8 POWERS OF ENQUIRY UNDER SUB - SECTION (4) OF SECTION 250. THIS WOULD MEAN IN TURN THAT THE REQUIREMENT OF RECORDING REASONS FOR ADMITTING THE ADDITIONAL EVIDENCE, THE REQUIREMENT OF EXAMINING WHETHER THE CONDITIONS FOR ADMITTING THE ADDITIONAL EVIDENCE ARE SATISFIED, THE REQUIREMENT THAT THE AO SHOULD BE ALLOWED A REASONABLE OPPORTUNITY OF EXAMINING THE EV IDENCE, ETC., CAN BE THROWN TO THE WINDS, A POSITION WHICH IS WHOLLY UNACCEPTABLE AND MAY RESULT IN UNACCEPTABLE AND UNJUST CONSEQUENCES. THE FUNDAMENTAL RULE WHICH IS VALID IN ALL BRANCHES OF LAW, INCLUDING INCOME TAX LAW, IS THAT THE ASSESSEE SHOULD ADD UCE THE ENTIRE EVIDENCE IN HIS POSSESSION AT THE EARLIEST POINT OF TIME. THIS ENSURES FULL, FAIR AND DETAILED ENQUIRY AND VERIFICATION. IT IS FOR THE AFORESAID REASON THAT RULE 46A STARTS IN A NEGATIVE MANNER BY SAYING THAT AN APPELLANT BEFORE THE COMMISSI ONER (APPEALS) SHALL NOT BE ENTITLED TO PRODUCE BEFORE HIM ANY EVIDENCE, WHETHER ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE ADDUCED BY HIM BEFORE THE AO. AFTER MAKING SUCH A GENERAL STATEMENT, EXCEPTIONS HAVE BEEN CARVED OUT THAT IN CERTAIN CIRCUMSTANCE S IT WOULD BE OPEN TO THE COMMISSIONER (APPEALS) TO ADMIT ADDITIONAL EVIDENCE. THEREFORE, ADDITIONAL EVIDENCE CAN BE PRODUCED AT THE FIRST APPELLATE STAGE ONLY WHEN CONDITIONS STIPULATED IN RULE 46A ARE SATISFIED AND A FINDING IS RECORDED. THE CONDITIONS PRESCRIBED IN RULE 46A MUST BE SHOWN TO EXIST BEFORE ADDITIONAL EVIDENCE IS ADMITTED AND EVERY PROCEDURAL REQUIREMENT MENTIONED IN RULE HAS TO BE STRICTLY COMPLIED WITH SO THAT RULE IS MEANINGFULLY EXERCISED AND NOT EXERCISED IN A ROUTINE OR CURSORY MANNE R. A DISTINCTION SHOULD BE PAGE 6 OF 8 RECOGNIZED AND MAINTAINED BETWEEN A CASE WHERE THE ASSESSEE INVOKES RULE 46A TO ADDUCE ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS) AND A CASE WHERE THE COMMISSIONER (APPEALS), WITHOUT BEING PROMPTED BY THE ASSESSEE, WH ILE DEALING WITH THE APPEAL, CONSIDERS IT FIT TO CAUSE OR MAKE A FURTHER ENQUIRY BY VIRTUE OF THE POWERS VESTED IN HIM UNDER SUB - SECTION (4) OF SECTION 250. IT IS ONLY WHEN THE EXERCISES HIS STATUTORY SUO MOTU POWER UNDER THE ABOVE SUB - SECTION, THAT THE R EQUIREMENTS OF RULE 46A NEED NOT BE FOLLOWED. ON THE OTHER HAND, WHENEVER THE ASSESSEE, WHO IS IN APPEAL BEFORE HIM, INVOKES RULE 46A, IT IS INCUMBENT UPON THE COMMISSIONER (APPEALS) TO COMPLY WITH THE REQUIREMENTS OF RULE STRICTLY. IN THE INSTANT CASE, T HE COMMISSIONER (APPEALS) HAS OBSERVED THAT THE ADDITIONAL EVIDENCE SHOULD BE ADMITTED BECAUSE THE ASSESSEE WAS PREVENTED BY ADDUCING THEM BEFORE THE AO. THIS OBSERVATION TAKES CARE OF CLAUSE (C) OF SUB - RULE (1) OF RULE 46A. THE OBSERVATION OF THE COMMISSIONER (APPEALS) ALSO TAKES CARE OF SUB - RULE (2) UNDER WHICH HE IS REQUIRED TO RECORD HIS REASONS FOR ADMITTING THE ADDITIONAL EVIDENCE. THUS, THE REQUIREMENTS OF SUB - RULES (1) AND (2) OF RULE 46A HAVE BEEN COMPLIED WITH. HOWEVER, SUB - RULE (3) WHICH INTERDICTS THE COMMISSIONER (APPEALS) FROM TAKING INTO ACCOUNT ANY EVIDENCE PRODUCED FOR THE FIRST TIME BEFORE HIM UNLESS THE AO HAS HAD A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE AND REBUT THE SAME, HAS A REASONABLE OPPORTUNITY OF EXAMINING THE EVIDENCE AND REBUT THE SAME, HAS NOT BEEN COMPLIED WITH. THERE IS NOTHING IN THE ORDER OF THE COMMISSIONER (APPEALS) TO SHOW THAT THE AO WAS PAGE 7 OF 8 CONFRONTED WITH THE CONFIRMATION LETTERS RECEIVED BY THE ASSE SSEE FROM THE CUSTOMERS WHO PAID THE AMOUNTS BY CHEQUES AND ASKED FOR COMMENTS. THUS, THE END RESULT HAS BEEN THAT ADDITIONAL EVIDENCE WAS ADMITTED AND ACCEPTED AS GENUINE WITHOUT THE AO FURNISHING HIS COMMENTS AND WITHOUT VERIFICATION. SINCE THIS IS AN INDISPENSABLE REQUIREMENT, THE TRIBUNAL OUGHT TO HAVE RESTORED THE MATTER TO THE COMMISSIONER (APPEALS) WITH THE DIRECTION TO HIM TO COMPLY WITH SUB - RULE (3) OF RULE 46A. 10 . IN THE LIGHT OF THE ABOVE SAID CASE LAW WE NEED TO EXAMINE THE INSTANT CASE. WE HAVE NOTED THAT OBTAINING A REMAND REPORT PER - SE IS NOT A SUBSTITUTE FOR RECORDING OF THE FINDING OF THE LD CIT(A) SETTING OUT THE REASON AND FULFILMENT OF CONDITIONS OF THE RULE 46A. IT WOULD BE ALSO APPROPRIATE TO STATE HERE THAT ASSESSEE DID NOT MOVE A N APPLICATION UNDER RULE 46A, SPECIFICALLY STATING THE FULFILMENT OF CONDITIONS SPECIFIED UNDER RULE 46A, THOUGH IT IS SEEN THAT LD CIT(A) HAS NOTED THAT NON - COMPLIANCE BEFORE AO WAS ON ACCOUNT OF THE FACT, THAT THE ASSESSEE WAS HAVING MARITAL DISCORD WITH HIS WIFE MRS. SONU SETH WHICH KEPT THE ASSESSEE ENGAGED IN LITIGATION. IN THIS REGARD THE ASSESSEE HAD PLACED ON RECORD ORDER OF THE HONBLE HIGH COURT OF DELHI (PB PAGE 7 TO 29) IN SUPPORT OF THE AFORESAID AVERMENT MADE BEFORE THE LD CIT(A). 11 . IN VIEW OF THE AFORESAID CONSPECTUS OF THE CASE, WE FEEL IT WOULD BE JUST AND FAIR TO REMIT THE MATTER BACK TO THE FILE OF AO FOR FRESH ADJUDICATION. AS A RESULT THE ORDER OF AUTHORITIES BELOW ARE SET - ASIDE, WITH A DIRECTION TO THE AO TO FRAME A FRESH ASSESSMENT AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE IN ACCORDANCE WITH LAW. PAGE 8 OF 8 12 . THUS THE GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. THE REMAINING GROUNDS OF APPEAL RELATING TO MERIT OF ADDITION ARE THUS ARE NOT BEING ADJUDICATED. 13 . IN THE RESULT TH E APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.02. 2015 . - SD/ - - SD/ - ( N.K.SAINI ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 06 / 02 / 2015 * A K KEOT *KAVITA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELH I