Mr. Michael Anthony, Kolkata V. DCIT, Circle - 53, Kolkata, Kolkata

ITA 2174/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54615 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 13-07-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 30-12-2009
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Gift; Business income; Opportunity of being heard
• Section: 142(1); 80HHC; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , . ! . '# ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 2174/KOL/2009 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR: 2002-03 MR. MICHAEL ANTHONY VS DEPUTY COMMISSIONER OF IN COME-TAX, (PAN-ACXPA 6495 L) CIRCLE-53, KOLKATA. (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING : 24.10.2011 DATE OF PRONOUNCEMENT: 31.10.2011 FOR THE APPELLANT: SHRI MANOJ KATARUKA FOR THE RESPONDENT: SHRI M. BHATTACHARYA '. / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A)-XXXIII, KOLKATA IN APPEAL NO. 340/CIT(A)-XXXIII/CIR-53/07-08 DATED 28. 08.2009. ASSESSMENT WAS FRAMED BY ACIT-53, KOLKATA U/S.147/143(3) OF THE ACT, 1961 FO R ASSESSMENT YEAR 2002-03 VIDE HIS ORDER DATED 04.12.2007. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE, ARGUE D BY LD. COUNSEL, IS THAT THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF BUSINESS REC EIPT AS NOT ALLOWABLE DEDUCTION U/S. 80HHC OF THE ACT. FOR THIS, ASSESSEE HAS RAISED THREE EF FECTIVE GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) ERRED IN PARTLY UPHOLDING THE ACTION OF THE A.O TO DISALLOW AN AMOU NT OF RS.21,88,280/- AS BUSINESS RECEIPTS CHARGEABLE TO TAX WITHOUT ALLOWING DEDUCTI ON U/S. 80HHC OF THE I. T. ACT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND EVIDENCES ON RECORDS THE LD. CIT(A) ERRED IN ALLOWING THE ALTERNATIVE SUBMI SSION OF THE APPELLANT BY TAXABILITY OF RS.21,88,280/- AS BUSINESS RECEIPTS WITHOUT CONSIDE RING DEDUCTIONS ALLOWABLE UNDER THE PROVISIONS OF SECTION 80HHC OF THE I. T. ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND EVIDENCES ON RECORDS THE LD. CIT(A) ERRED IN NOT DIRECTING THE ASSESSING OFF ICER TO CALCULATE THE DEDUCTION AVAILABLE TO THE APPELLANT UNDER THE PROVISIONS OF SECTION 80HHC AND ALSO ERRED IN NOT DIRECTING THE ASSESSING OFFICER TO PROVIDE THE APPE LLANT AN OPPORTUNITY TO BE HEARD FOR CLAIM OF DEDUCTION U/S. 80HHC OF THE I. T. ACT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF EXOTIC CARVING TO M/S. 2 ITA 2174/K/20 0 9 MR. MICHAEL ANTHONY. A.Y. 02-03 AGRELL & THROPE OF USA. THE ASSESSEE FILED ITS RET URN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR DECLARING LOSS AT RS.16,17,149/- ON 29.07.2002 . THE ASSESSEES CLAIM IS THAT HE HAS SOLD ITEMS AS SAMPLE SALES AND INCURRED LOSS FROM THE SA ME. LATER ON, HE HAS INTRODUCED THE SAME AMOUNT OF ADVANCE RECEIVED FROM MR. YAN AGRELL OF M /S. AGRELL & THROPE AS GIFT. THE ASSESSEE HAS ACCUMULATED THE FOLLOWING AMOUNTS OF E ARLIER YEARS RECEIPTS FROM M/S. AGRELL & THROPE AS UNDER: ASSTT. YEAR ADVANCE FROM AGRELL & THROPE LTD. (USA) EQUIVALENT TO RUPEE ADJUSTMENT AGAINST SALE BALANCE BEING OF IN THE NEXT YEAR AS ADVANCE. 1999-2000 2000-2001 2001-2002 2002-2003 1711488.00 1553775.00 1866230.00 2465590.00 17670.00 65800.00 141000.00 277310.00 1693818.00 3181793.00 4907023.00 7095303.00 THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT FOR ASSESSMENT YEAR 2003-04 AND 2004-05, FIRST TIME DETECTED THAT THE ASSESSEE ADMITTED HAVI NG RECEIVED THE AMOUNT AS ADVANCE AND TREATED THE SAME AS GIFTS IN ITS BOOKS OF ACCOUNT. ACCORDI NGLY, ASSESSING OFFICER REOPENED THE ASSESSMENT FOR ASSESSMENT YEAR 2002-03 I.E. RELEVAN T ASSESSMENT YEAR AND ISSUED NOTICES U/S. 143(2) AND 142(1) OF THE ACT. ASSESSEE ADMITTED TO HAVE RECEIVED THESE AMOUNTS AS GIFT AND GIFT DEED WAS EXECUTED BY DONOR IN CALIFORNIA AS ON 15.08.2003. ACCORDING TO THE STATEMENT RECORDED OF THE ASSESSEE ON 16.11.2007, HE CLEARLY ADMITTED AS UNDER: Q. NO. 7 FROM WHERE YOU ARE GETTING THE MONEY? ANS - THEY SEND IT AS ADVANCE AGAINST WHICH THE I TEMS ARE SENT. Q. NO.8 - IS MR. AGRELL RELATED TO YOU IN ANY WAY OR IT IS YOUR BUSINESS RELATION ONLY? ANS - ONLY BUSINESS RELATION IS THERE. THERE IS NO OTHER RELATIONSHIP. Q. NO. 9 - AS PER THE DECLARATION OF GIFT, MR. IAN AGRELL GIFTED RS.70,95,303/- DURING THE YEAR 2001-02 RELATING TO ASSESSMENT YEA R 2002-03 WHICH WAS THE BALANCE OF THE BUSINESS DUES HE OWED YOU. IS IT CORRECT? ANS. - I SWEAR THAT IT IS A TRUTH AND NOTHING BUT THE TRUTH. I HAVE NOTHING TO HIDE FROM YOU. Q. NO. 10 - WAS THERE ANY PARTICULAR OCCASION OF G IFT? ANS. - NO THERE WAS NO OCCASION. Q. NO. 11 - WHY IT SHOULD NOT BE INFERRED THAT HE GIFTED YOU TO SQUARE UP THE ACCOUNTS AND YOU RECEIVED IT SO THAT NO TAXES WOULD BE PAYABLE? ANS. - I NEEDED MONEY AND SO I APPROACHED HIM AND HE ACCEPTED. IT WAS NEVER MY INTENTION NOT TO PAY THE TAXES OR DEFRAUD THE REVENUE. Q. NO. 12 - THE GIFT DEED WAS EXECUTED IN CALIFORN IA. HAD YOU BEEN THERE ON 15.08.2003? ANS. - NO I WAS NOT THERE. I WAS CELEBRATING MY I NDEPENDENCE DAY IN INDIA. Q. NO.13 - WHY THE GIFT DEED WAS NOTARISED ON 11.3 .2005? 3 ITA 2174/K/20 0 9 MR. MICHAEL ANTHONY. A.Y. 02-03 ANS - IN FACT, DID NOT NEED IT. I ALREADY HAD THE MONEY. BUT LATER ON HE SENT IT AFTER A NO. OF TELEPHONE DISCUSSION WHEN I WAS ADVISED THAT I NEED TO KEEP A DOCUMENTARY EVIDENCE OF THE GIFT. Q. NO.4 - THERE WAS NO RELATIONSHIP. THERE WAS NO OCCASION. THERE WAS ONLY COMMERCIAL RELATION WITH MR. IAN AGREEL. SO, IT IS A CLEAR CASE OF BUSINESS TRANSACTION IN WHICH THE AMOUNT HAS BEEN C REDITED TO YOUR ACCOUNT. IF YOU AGREE TO THIS, THEN EITHER YOU WIL L LIKE TO PAY TAXES ON THE AMOUNT? ANS - I AM SORRY. Q. NO. 15 - WILL YOU LIKE TO SAY ANYTHING ELSE? ANS - NOTHING ELSE. I HAVE NOTHING TO SAY AND NO THING TO HIDE. 4. THE ASSESSING OFFICER IN VIEW OF THE ABOVE STATE MENT TREATED THE AMOUNT OF ADVANCE DURING THE YEAR AT RS.70,95,303/- AS BUSINESS RECEI PTS NOT DISCLOSED TO THE REVENUE IN ITS BOOKS OF ACCOUNTS AND ADDED BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO AFTER TAKING RE MAND REPORT FROM ASSESSING OFFICER TREATED THIS AMOUNT AS BUSINESS RECEIPTS TAXABLE UNDER THE HEAD BUSINESS INCOME. CIT(A) HAS NOT ALLOWED THE CLAIM OF DEDUCTION U/S. 80HHC TO THE AS SESSEE, AS CLAIMED BY GIVING FOLLOWING FINDING: IT IS IN THIS BACKGROUND AND FACTUAL POSITION THAT THE CONCLUSION OF THE A.O., SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT ARE T O BE CONSIDERED. IN MY OPINION THE CONCLUSION OF THE A.O. IN CONSIDERING THE GIFT AMOUNTS AS INCOME OF THE ASSESSEE U/S. 68 IS NOT CORRECT. THE DEPARTMENT CANNOT TAKE TWO D IFFERENT STANDS ON THE SAME SET OF FACTS FOR THE SAME ASSESSEE IN DIFFERENT YEARS. THE GIFT WILL HAVE TO BE TREATED AS COMMERCIAL RECEIPT AND THEREFORE BUSINESS INCOME OF THE ASSESSEE WHICH WOULD BE CONSISTENT WITH THE STAND TAKEN BY THE DEPARTMENT I N OTHER YEARS WHICH HAVE REACHED FINALITY. IN ANY CASE, THE SOURCE OF THE CREDITS A RE THE RECEIPTS FROM M/S. AGRELL & THROPE AND HAVE BEEN RECEIVED THROUGH BANKING CHANN EL FROM ABROAD AND THEREFORE IT CANNOT BE CONSIDERED AS UNEXPLAINED AS TO THE SOURC E AND NATURE AND THEREFORE CANNOT BE ADDED U/S. 68. THE AMOUNT CONSIDERED AS GIFT DUR ING THE YEAR BY THE ASSESSEE AND CONSIDERED AS INCOME U/S. 68 BY THE A.O. HAS BEEN R ECEIVED ON ACCOUNT OF COMMERCIAL CONSIDERATION WHICH IS SPREAD OVER NUMBER OF YEARS. THE BREAK UP OF THE SAME IS AVAILABLE AND HAS BEEN MENTIONED EARLIER. THE A.O. HAS ALSO SUBMITTED IN HIS REMAND REPORT THAT THE CLAIM OF THE ASSESSEE REGARDING SPL ITTING UP OF THE AMOUNTS TO RESPECTIVE FINANCIAL YEAR IS ACCEPTABLE. SINCE THE RECEIPT ARE COMMERCIAL IN NATURE, THEY WILL HAVE TO BE CONSIDERED AS SUCH AND WILL HAVE TO BE TAKEN TO THE RESPECTIVE ACCOUNTING PERIOD AND THE INCOME WILL HAVE TO BE DETERMINED AS PER LA W FOR EACH YEAR SEPARATELY. THE A.O. WILL CONSIDER THE AMOUNT RECEIVED DURING REMA INING AS UNADJUSTED ADVANCE AT THE END OF EACH YEAR AS ADDITIONAL BUSINESS INCOME FOR THAT YEAR AND WILL TAX IT IN ACCORDANCE WITH APPLICABLE PROVISIONS OF LAW. HE WI LL ACCORDINGLY BRING TO TAX THE OUTSTANDING AMOUNTS IN THE DIFFERENT ACCOUNTING PER IODS FOR WHICH PURPOSES RECOURSE TO RE-OPENING OF EARLIER ASSESSMENTS MAY BE TAKEN IF R EQUIRED. THE A.O. WILL ACT ACCORDINGLY. FOR THE YEAR UNDER REFERENCE THE A.O. WILL CONSIDER THE ADDITIONAL BUSINESS RECEIPTS AT RS. 21,88,280/- AND TAX IT AS PER LAW AFTER CONSIDERING APPLICABLE PROVISIONS OF THE ACT. THE APPEAL OF THE ASSESSEE D ISPOSED OFF ACCORDINGLY. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 4 ITA 2174/K/20 0 9 MR. MICHAEL ANTHONY. A.Y. 02-03 5. AFTER HEARING RIVAL SUBMISSIONS AND GOING THROUG H FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE BEFORE US FILED COPY OF 2 64 ORDER I.E. REVISION ORDER OF CIT-XVIII, KOLKATA DATED 10.06.2009, WHEREBY VIDE NO. CIT-KOL/ XVIII/264/09-10/696-98 DATED 10.6.2009 DIRECTED THE ASSESSING OFFICER TO TREAT THESE RECEI PTS AS BUSINESS INCOME AND ALLOWED DEDUCTION U/S. 80HHC OF THE ACT AFTER VERIFICATION OF EVIDENC E. RELEVANT DIRECTIONS IN PARA 4 OF CIT ARE AS UNDER: I HAVE GONE THROUGH BOTH THE CONTENTIONS. IN MY O PINION, THE LAPSES COMMITTED BY THE ASSESSEE AT THE TIME OF FURNISHING THE RETURN OF INCOME MAY BE RECTIFIED BY THE A.O. DURING THE SCRUTINY PROCEEDINGS. IN THE RETURN OF INCOME FOR BOTH THE YEARS, THE ASSESSEE DID NOT ORIGINALLY DISCLOSE THE RECEIPTS AS BUSINESS INCOME, HENCE QUESTION OF DEDUCTION U/S. 80HHC DID NOT ARISE AT THAT MOMENT. IT WAS DURING THE ASSESSMENT PROCEEDINGS W HEN HE DISCLOSED AND ADMITTED THOSE RECEIPTS AS BUSINESS INCOME. SO, FOR HONEST AND FAIR JUSTIC E, THE ASSESSEE SHOULD ALSO BE GIVEN AN OPPORTUNITY TO SUBMIT THE NECESSARY EVIDENCES IN SU PPORT OF ANY PERMISSIBLE DEDUCTIONS ON THE ADMITTED INCOME AS PER LAW. IF THE RECEIPTS ARE BE ING CONSIDERED AS EXPORT INCOME, THEN DEDUCTION U/S. 80HHC ON SUCH INCOME WERE ALSO TO BE CONSIDERED FOR BOTH THE YEARS. HOWEVER, FOR FAIR END OF JUSTICE, THE ISSUE IS BEING RESTORE D TO THE FILE OF THE A.O. U/S. 264 FOR PROPER EXAMINATION OF THE FACTS AND PASS NECESSARY ORDER A FTER VERIFICATION OF THE EVIDENCES SUBMITTED BEFORE ME, IN SUPPORT OF THE CLAIM OF THE ASSESSEE U/S. 80HHC FOR BOTH THE YEARS. NOT TO MENTION THAT THE DELAY IN SUBMISSION OF THE CERTIFICATES U/ S. 80HHC FOR BOTH THE YEARS ARE ALSO HEREBY CONDONED. 6. IT IS A FACT THAT THIS INCOME IS TREATED AS BUSI NESS RECEIPT BY CIT WHILE ADJUDICATING THE ISSUE U/S. 264 OF THE ACT FOR THE AY 2004-05 AND DE DUCTION U/S. 80HHC OF THE ACT WAS ALLOWED ON THE BUSINESS RECEIPTS BY THE AO WHILE GIVING EFF ECT TO THE ORDER OF 264 OF THE ACT. SIMILARLY, WE ARE OF THE VIEW THAT THE AO WILL FIND OUT THE NE XUS OF THESE RECEIPTS WITH EXPORT OF GOODS AND IN CASE HE FINDS THAT THE EXPORT SALES HAVE REL ATION WITH THESE RECEIPTS, MAY BE BUSINESS RECEIPTS, THE AO WILL ALLOW DEDUCTION U/S. 80HHC OF THE ACT. THE AO WILL REQUIRE THE NECESSARY DETAILS FROM ASSESSEE AND ASSESSEE IN TUR N WILL FILE COMPLETE DETAILS OF EXPORT SALES SO AS TO THE AO CAN CORRELATE THE SAME WITH THE BUSINE SS RECEIPTS, ON WHICH DEDUCTION U/S. 80HHC OF THE ACT WAS CLAIMED BY ASSESSEE. IN VIEW OF THE ABOVE, WE SET ASIDE THIS ISSUE TO THE FILE OF AO WITH THE ABOVE DIRECTION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2011 . SD/- SD/- . ! ! ! ! . '# , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( !# !# !# !#) )) ) DATED :31ST OCTOBER, 2011 5 ITA 2174/K/20 0 9 MR. MICHAEL ANTHONY. A.Y. 02-03 /0 %12 3 JD.(SR.P.S.) '. 4 ,5 6'5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT MR. MICHAEL ANTHONY, BELDANGA ROAD, P. S. MAHESHTALLA, 24 PARGANAS, KOLKATA-700 141. 2 ,-*+ / RESPONDENT DCIT, CIRCLE-53, KOLKATA 3 . .% ( )/ THE CIT(A), KOLKATA 4. 5. .% / CIT KOLKATA 5=> ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, '.%?/ BY ORDER, 2 /ASSTT. REGISTRAR .