Shri Charudatt C.Patel, Surat V. The Income tax Officer,Ward-9(1), Surat

ITA 2111/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0073 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-08-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 02-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: M K PATEL
• Keywords: Gift; Earning of tax free income; Source of fund; Corroborative evidences
• Section: 142(1); 147; 145; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.2111 AND 2112/AHD/2008 A. Y.: 2001-02 AND 2004-05 SHRI CHARUDUTT C. PATEL, 18, NEELKAMAL PARK SOCIETY, B/H. HAKIM PHARMACY, VARACHHA ROAD, SRUAT VS THE INCOME TAX OFFICER, WARD 9(1), AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M. K. PATEL, AR RESPONDENT BY SHRI R. K. DHANESTA, DR O R D E R PER BHAVNESH SAINI: BOTH THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST ORDER OF THE LEARNED CIT(A)-V, SUR AT DATED 17-03-2008 FOR ASSESSMENT YEARS 2001-02 AND 2004-05. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES. THE LEARNED COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ASSESSMENT ORDERS WERE PASSED EX -PARTE IN THE ABSENCE OF CO-OPERATION OF THE ASSESSEE AND EVEN TH E CASE WAS NOT PROPERLY REPRESENTED BEFORE THE LEARNED CIT(A). THE REFORE, THE MATTER MAY BE REMANDED TO THE FILE OF THE AO FOR RECONSIDERATI ON AFRESH. 3. BRIEFLY, THE BACKGROUND OF PASSING OF THE ASSESS MENT ORDERS IN THE ASSESSMENT YEARS UNDER APPEAL ARE THAT SURVEY U/S 1 33A OF THE IT ACT WAS CARRIED OUT IN THE CASE OF SHRI PANKAJ DANAWALA , CHARTERED ACCOUNTANT ON 11-03-2005. DURING THE COURSE OF SURV EY, HE WAS FOUND TO HAVE A LARGE NUMBER OF CAPITAL BUILT UP CASES. THE MODUS OPERANDI WAS FRAUDULENT. IN SOME CASES THERE WAS INFLATION OF TH E OPENING OF THE CAPITAL SUBSTANTIALLY AS COMPARED TO THE EARLIER YE ARS AND IN SOME OTHER CASES, HE PREPARED PROFIT & LOSS ACCOUNT, CAPITAL A CCOUNT AND BALANCE ITA NO.2111 AND 2112/AHD/2008 SHRI CHARUDUTTT C. PATEL VS VS ITO, W-9(1), SURAT 2 SHEET WITH EXEMPT INCOME LIKE AGRICULTURAL INCOME, GIFTS, INCOME FROM BROKERAGE, COMMISSION ETC. FOR MANY YEARS AND THUS CREATING SUBSTANTIAL CAPITAL AND FINALLY HE WAS FILING RETURN OF INCOME FOR VARIOUS ASSESSEE PAYING MINIMUM AMOUNT OF TAX. THE AO CITED SEVERAL INSTANCES IN WHICH THE CHARTERED ACCOUNTANT CREATED CAPITAL BUILT UP. IN HIS STATEMENT RECORDED, HE HAS ADMITTED TO HAVE CREATED BOGUS CAP ITAL WITHOUT SUPPORTING EVIDENCES AND EVEN SOME OF THE ENTRIES W ERE PASSED ON TO THE BENEFICIARIES. HE HAS FURTHER ADMITTED ENHANCEMENT OF THE CAPITAL WITHOUT ANY BASIS AND ASSISTING HAWALA ENTRIES THER EBY INCREASING THE CAPITAL OF THE DIFFERENT PERSONS EVEN WITHOUT KNOWI NG HIS CLIENTS BECAUSE THE CASES WERE REFERRED BY ONE SHRI KIRITBHAI MOHAN PATEL. SOME OF THE PARTIES HAVE EVEN OPTED FOR SETTLEMENT. CERTAIN DOC UMENTS WERE ALSO FOUND DURING THE COURSE OF SURVEY WHICH SUPPORT HIS MODUS OPERANDI FOR CREATING CAPITAL WITHOUT EVIDENCE WHICH WERE IMPOUN DED BY THE DEPARTMENT AND ACTIONS HAVE BEEN TAKEN IN THE MATTE R. NOW, ON THE BACKGROUND OF THESE FACTS, WE DEAL BOTH THE APPEALS AS UNDER: ITA NO. 2111/AHD/2008 (A. Y. 2001-02 ) 4. THIS APPEAL IS FILED ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING BOOKS OF ACCOUNT U/S . 145(3) OF THE INCOME-TAX ACT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING EXPENSES OF RS.41, 095/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.2,75,694 /- AS ALLEGED UNEXPLAINED GIFT. ITA NO.2111 AND 2112/AHD/2008 SHRI CHARUDUTTT C. PATEL VS VS ITO, W-9(1), SURAT 3 5. IN THIS CASE, THE ASSESSEE FIELD HIS RETURN OF I NCOME ON 15-03-2002 SHOWING TOTAL INCOME OF RS.60,330/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE IT ACT. IN THE BACKGROUND OF THE ABOV E FACTS, THE AO RECORDED THE REASONS AND THE CASE WAS REOPENED U/S 147 BY ISSUING NOTICE U/S 148 OF THE IT ACT DATED 27-09-2005 WHICH WAS SERVED UPON THE ASSESSEE AND THE ASSESSEE WAS DIRECTED TO FILE RETURN OF INCOME. BUT, NO RETURN WAS FILED IN RESPONSE TO THE NOTICE U/S 1 48 OF THE IT ACT. FURTHER NOTICE U/S 142(1) OF THE IT ACT WAS ISSUED FOR FURNISHING SEVERAL DETAILS, BUT THE ASSESSEE DID NOT RESPOND. FURTHER STATUTORY NOTICES WERE ALSO NOT COMPLIED WITH AND EVEN NO REPLY WAS FILED. THE AO, THEREFORE, PROCEEDED TO FRAME THE ASSESSMENT EX-PARTE U/S 144 READ WITH SECTION 147 OF THE IT ACT. IN THE IMPOUNDED DOCUMENTS DURIN G SURVEY AT THE PREMISES OF THE CHARTERED ACCOUNTANT THE BALANCE SH EET AND CAPITAL ACCOUNT FOR ASSESSMENT YEAR 1998-99 WAS FOUND WHICH WAS FILED ON 05-11-1998 BEFORE THE DEPARTMENT FOR THE FIRST TIME SHOWING INCOME FOR THE YEAR OF RS.44,000/-. SOURCE WAS SHOWN AS BROKER AGE/COMMISSION. OPENING CAPITAL WAS CLAIMED AT RS.60,100/- AS ON 01 -04-1997. IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS SHOW N BROKERAGE RECEIPTS OF RS.1,01,420/-, OUT OF THE SAID GROSS RE CEIPT, AMOUNT OF RS.41,095/- WAS CLAIMED AS EXPENDITURE IN VARIOUS H EADS SUCH AS VEHICLE EXPENSES, TELEPHONE EXPENSES, STATIONARY EX PENSES, ADMINISTRATIVE EXPENSES, SALARY, OFFICE EXPENSES AN D BROKERAGE ETC. AND FINALLY NET INCOME WAS SHOWN AT RS.60,327/- IN THE RETURN OF INCOME WHICH FILED U/S 139 OF THE IT ACT ON 15-03-2002. T HE ASSESSEE WAS DIRECTED THROUGH STATUTORY NOTICES TO PRODUCE ALL T HE BOOKS OF ACCOUNT, VOUCHERS OF THE EXPENDITURE ETC. AND TO EXPLAIN THE SOURCES OF INCOME. THE ASSESSEE HOWEVER, DID NOT FILE ANY REPLY. THE S TATUTORY NOTICES WERE NOT COMPLIED WITH AND NO RETURN WAS FILED U/S 148 O F THE IT ACT. THE AO, THEREFORE, REJECTED THE BOOK RESULTS U/S 145 (3) OF THE IT ACT. SINCE NO EVIDENCE OF EXPENSES WERE FILED, THEREFORE, EXPENSE S CLAIMED AT RS.41,095/- WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.2111 AND 2112/AHD/2008 SHRI CHARUDUTTT C. PATEL VS VS ITO, W-9(1), SURAT 4 SIMILARLY, IT WAS NOTICED FROM THE CAPITAL ACCOUNT FILED ALONG WITH RETURN OF INCOME AND ALSO APPEARING IN THE IMPOUNDED DOCUM ENTS THAT AN AMOUNT OF RS.2,75,694/- HAS BEEN CREDITED BEING GIF T RECEIVED FROM SHRI DINESH HAZARI AND SHRI RANJAN PATEL. THE ASSESSEE W AS DIRECTED TO FILE CONFIRMATION FROM THE DONORS BUT THE ASSESSEE FAILE D TO FILE THE SAME. THE AO, THEREFORE, TREATED THE GIFTS TO BE BOGUS AND MA DE THE ADDITIONS OF RS.2,75,693/-. BOTH THE ADDITIONS WERE CHALLENGED B EFORE THE LEARNED CIT(A) AND THE LEARNED CIT(A) CONFIRMED THE ADDITIO NS AND DISMISSED THE APPEAL OF THE ASSESSEE. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS OF THE PARTIES, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE FILED RETURN OF INCOME U/S 139 OF THE IT ACT ON 15-03-2002 AND HAS SHOWN INCOME OF RS.60,330/- OUT OF THE TOTA L RECEIPTS AND CLAIMED THE EXPENDITURE OF RS.41,095/-. THE ASSESSE E FAILED TO FILE RETURN OF INCOME IN RESPONSE TO NOTICE U/S 148 OF THE IT A CT. ALL STATUTORY NOTICES NOT COMPLIED. NO DETAIL OR EVIDENCE WAS FIL ED TO PROVE DEDUCTION OF THE EXPENDITURE LAID OUT WHOLLY OR EXCLUSIVELY F OR THE PURPOSE OF BUSINESS. NO BOOKS OF ACCOUNT WERE PRODUCED FOR VER IFICATION BEFORE THE AO. THE AO WAS, THEREFORE, JUSTIFIED IN REJECTING T HE BOOK RESULTS U/S 145 (3) OF THE IT ACT. SINCE GENUINENESS OF THE EXPENDI TURE WAS NOT PROVED THROUGH ANY EVIDENCE ON RECORD, THEREFORE, DISALLOW ANCE OF THE EXPENDITURE IS ALSO JUSTIFIED. THE ASSESSEE CLAIMED GIFT OF RS.2,75,694/- RECEIVED FROM TWO PERSONS WHICH WAS FILED IN THE CA PITAL ACCOUNT FILED WITH THE RETURN OF INCOME. THE ASSESSEE FAILED TO F ILE EVEN CONFIRMATION OF THE DONORS BEFORE THE AUTHORITIES BELOW. THEREFORE, THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE GIFT IN THE MATTER. TH E ONUS UPON THE ASSESSEE HAS NOT BEEN DISCHARGED THROUGH ANY EVIDENCE OR MAT ERIAL ON RECORD. NO MATERIAL IS PRODUCED BEFORE US TO EXPLAIN ANY OF TH E ISSUES. NO JUSTIFICATION IS SHOWN FOR REMANDING THE MATTER TO THE FILE OF THE AO FOR RECONSIDERATION. WE, THEREFORE, DO NOT FIND ANY JUS TIFICATION TO INTERFERE ITA NO.2111 AND 2112/AHD/2008 SHRI CHARUDUTTT C. PATEL VS VS ITO, W-9(1), SURAT 5 WITH THE ORDERS OF THE AUTHORITIES BELOW. WE, ACCOR DINGLY, CONFIRM THEIR FINDINGS ON ALL THE 3 GROUNDS AND DISMISS THE APPEA L OF THE ASSESSEE. ITA NO.2112/AHD/2008(A.Y. 2004-05) 7. THIS APPEAL IS FILED ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONE R OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN REJECTING BOOKS OF ACCOUNT U/S . 145(3) OF THE INCOME-TAX ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONE R OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN DISALLOWING 25% OF THE EXPENSE S OF RS.2,05,830/- CLAIMED OUT OF GROSS RECEIPTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONE R OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.31,610/- AS ALLEGED INCOME FROM BUSINESS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONE R OF THE INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE AC TION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.22,610/- AS ALLEGED UNEXPLAINED GIFT. 8. FACTS ARE ALMOST SAME AS NOTED IN ITA NO.2111/AH D/2008 EXCEPT THAT THE ASSESSEE HAS NOT FILED RETURN OF INCOME FO R THE ASSESSMENT YEAR UNDER APPEAL I.E. ASSESSMENT YEAR 2004-05 EVEN U/S 139 OF THE IT ACT. THE ASSESSEE AGAIN DID NOT FILED ANY RETURN OF INCO ME IN RESPONSE TO NOTICE U/S 148 OF THE IT ACT. NO STATUTORY NOTICE W AS COMPLIED WITH. THE AO NOTED FROM THE IMPOUNDED DOCUMENTS THAT THE ASSE SSEE WAS PROPRIETOR OF M/S. HAISHAL SYNTHETICS DURING THE YE AR UNDER CONSIDERATION AND CARRIED OUT JOB WORK OF M/S. SHAR ADHA INDUSTRIES OF ITA NO.2111 AND 2112/AHD/2008 SHRI CHARUDUTTT C. PATEL VS VS ITO, W-9(1), SURAT 6 RS.8,59,385/- AS SHOWN IN THE TDS CERTIFICATE ISSUE D BY THE DIRECTOR ANNEXED AT PAGE 49 OF THE IMPOUNDED DOCUMENTS, WHER EAS THIS AMOUNT WAS SHOWN AT RS.8,47,983/- IN THE PROFIT & LOSS ACC OUNT ENCLOSED AT PAGE 51. THE ASSESSEE HAS CLAIMED EXPENSES OF RS.8,23,32 0/- OUT OF THE GROSS RECEIPTS OF RS.8,47,983/- AND FINALLY SHOWN NET PRO FIT OF RS.31,610/-. THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE IMPOUNDED DOCUMENTS AND TO PRODUCE ALL THE DOCUMENTS, VOUCHERS ETC. IN SUPPORT OF THE CLAIM OF THE EXPENDITURE. THE ASSESSEE DID NOT FILE ANY R EPLY AND NO SHOW CAUSE WAS RESPONDED. NO BOOKS OF ACCOUNT WERE PRODUCED. T HE AO ACCORDINGLY REJECTED TO BOOK RESULT U/S 145 (3) OF THE IT ACT A ND EXPENSES AT 25% OF THE GROSS RECEIPTS WAS DISALLOWED IN A SUM OF RS.2, 05,830/-. ADDITION WAS ACCORDINGLY MADE. IN THE CAPITAL ACCOUNT ALSO D URING THE COURSE OF SURVEY IT WAS FOUND THAT THE ASSESSEE HAS CREDITED AMOUNT OF RS.22,987/- AS AMOUNT RECEIVED FROM THE RELATIVES A ND FRIENDS FOR WHICH NO EXPLANATION OR CONFIRMATION WAS FILED. IT WAS, T HEREFORE, TREATED AS UNEXPLAINED GIFT. THE LEARNED CIT(A) CONSIDERING TH E ABOVE, CONFIRMED THE ADDITIONS AND DISMISSED THE APPEAL OF THE ASSESSEE. THE LEARNED CIT(A) FOUND THAT TDS CERTIFICATE SHOWS AMOUNT RECEIVED BY THE ASSESSEE BUT THE EXPENDITURE HAS NOT BEEN SUBSTANTIATED THROUGH ANY MATERIAL OR EVIDENCE ON RECORD. SINCE NO EVIDENCE OF GENUINENES S OF THE GIFTS WAS FILED, THEREFORE, THE GIFT WAS ALSO TREATED AS BOGU S. THE BASE OF INCOME TAKEN BY THE AO AT RS.31,610/- WAS ALSO CONFIRMED B ECAUSE IT WAS THE DIFFERENCE IN THE GROSS RECEIPT AND THE EXPENDITURE . 9. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES, WE ARE INCLINED TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THE FACTS ARE AS CONSIDERED IN ASSESSMENT YEAR 2001-02. THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME EITHER U/S 139 OR U/S 148 OF THE I T ACT. NO BOOKS OF ACCOUNT WERE PRODUCED. NO DETAILS OF EXPENDITURE FI LED. NO CONFIRMATION OF GIFT WAS ALSO FILED. THE TDS CERTIFICATE WAS FOU ND ALONG WITH BALANCE SHEET OF THE ASSESSEE DURING THE COURSE OF SURVEY W HICH SHOWS THAT THE ITA NO.2111 AND 2112/AHD/2008 SHRI CHARUDUTTT C. PATEL VS VS ITO, W-9(1), SURAT 7 ASSESSEE RECEIVED THE AMOUNT ON ACCOUNT OF JOB WORK FOR WHICH NO DETAILS OF EXPENDITURE HAS BEEN FILED. THE AO RIGHTLY COMPU TED THE INCOME AND DISALLOWED PART OF THE EXPENDITURE. SINCE GIFT WAS SHOWN IN THE CAPITAL ACCOUNT WHICH REMAINED UNEXPLAINED THROUGHOUT, THER EFORE, NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE ABOVE FACTS WOULD NOT EVEN JUSTIFY REMANDING THE MATTER TO THE FILE OF THE AO FOR RECONSIDERATION. CONSIDERING THE ABOVE DISCUSSIONS, WE DO NOT FIND I T TO BE A FIT CASE FOR INTERFERENCE. WE ACCORDINGLY, DISMISS THE APPEAL OF THE ASSESSEE ALSO ON ALL THE GROUNDS OF APPEAL. 10. AS A RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20-08-2010 SD/- SD/-[ (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 20-08-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD