B.R.Sarin & Sons (HUF), CHENNAI V. DCIT, CHENNAI

ITA 220/CHNY/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8635 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI
• Assessee Lawyers: DR M SRINIVASA RAO
• Keywords: Business income; Block assessment
• Section: 273B; 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.217 TO 220/CHNY/2015 / ASSESSMENT YEARS: 2005-06 TO 2007-08 M/S. B.R. SARIN & SONS HUF NO.15/4, MASILAMANI ROAD, BALAJI NAGAR, ROYAPETTAH, CHENNAI 600 014. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(1), CHENNAI -34. PAN: AAAHB2214D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.M.SRINIVASA RAO, CIT / RESPONDENT BY : SHRI K.RAVI, ADVOCATE /DATE OF HEARING : 29.01.2019 /DATE OF PRONOUNCEMENT : 03.04.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI, DATED 28.11.2014 IN ITA NO.92/07-08, 63/08-09 & 181/09-10 FOR THE ASSESSMENT YEARS 2005-06,2006-07 & 2007-08 PASSED U/S.250(6) R.W.S. 143(3) / 144 OF THE ACT AND ORDER DATED 28.11.2014 IN ITA NO.25/10-11 FOR THE ASSESSMENT YEAR 2007-08 PASSED U/S.250(6) R.W.S. 271F OF THE ACT. 2 ITA NOS.217 TO 220/CHNY/2015 2.1 THE ASSESSEE HAS RAISED THE FOLLOWING IDENTICAL GROUND WITH RESPECT TO THE SAME FACTS IN ALL THE APPEALS FOR THE RELEVANT ASSESSMENT YEARS:- THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE LD.AO TOWARDS ACCRUED INTEREST ON THE INVESTMENT MADE BY THE ASSESSEE AS DETAILED HEREIN BELOW:- PARTICULARS AY 2005-06 ITA NO.217/CHNY/2015 AY 2006-07 ITA 218/CHNY/2015 AY 2007-08 ITA 219/CHNY/2015 DEPOSITS OF RS.3,03,125/- IN RD ACCOUNT @ 9% RS.27,281 RS.27,281 RS.27,281 ADVANCE MADE TOWARDS PROMISSORY NOTES AGGREGATING TO RS.11,45,000 @ 24% RS.2,74,800 RS.2,74,800 RS.2,74,800 AMOUNT ADVANCED TO M/S. BMB PRODUCTIONS RS.1,50,000/- @ 24% RS.36,000 RS.36,000 RS.36,000 2.2 FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO.219/CHNY/2015, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OTHER THAN THE GROUND RAISED HEREIN ABOVE IN PARA NO. 2.1:- THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD.AO WHO HAD ESTIMATED THE BUSINESS INCOME OF THE ASSESSEE AT RS.3,00,000/- AS AGAINST RS.2,74,320/- ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME FILED. 3 ITA NOS.217 TO 220/CHNY/2015 2.4 FOR THE ASSESSMENT YEAR 2007-08 IN ITA NO.220/CHNY/2015 WITH RESPECT TO THE PENALTY APPEAL, THE ASSESSEE HAS FILED THE FOLLOWING GROUND:- THE LD.CIT(A) HAS ERRED IN UPHOLDING THE ORDER OF THE LD.AO WHO HAD LEVIED PENALTY OF RS.5,000/- INVOKING THE PROVISION OF SECTION 271F OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN HUF CLAIMED TO HAVE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2005-06, 2006-07 & 2007-08 ADMITTING TOTAL INCOME OF RS.4,60,000/-, RS.4,49,910/- & RS.2,74,320/- ON 12.10.2006, 18.03.2008 & 02.06.2009 RESPECTIVELY. THE CASE WAS SELECTED FOR SCRUTINY BY ISSUE OF NOTICE U/S.143(2) & 142(1) OF THE ACT, FOR THE ASSESSMENT YEARS 2005-06, 2006-07 & 2007-08 AND ASSESSMENT ORDER WAS PASSED U/S.143(3) / 144 OF THE ACT ON 26.12.2007, 10.12.2008 & 30.12.2009 RESPECTIVELY WHEREIN THE LD.AO MADE THE ABOVE MENTIONED ADDITIONS WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD.CIT(A). FURTHER PENAL PROVISIONS OF SECTION 271F OF THE ACT WAS ALSO INVOKED IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2007-08 AND PENALTY WAS LEVIED FOR NON-FILING OF RETURN OF INCOME. 4 ITA NOS.217 TO 220/CHNY/2015 4. GROUND NO.2.1 : ADDITION TOWARDS ACCRUED INTEREST:- FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08, ASSESSMENT WAS COMPLETED U/S.143(3) / 144 OF THE ACT WHEREIN THE LD.AO MADE ADDITION BY ESTIMATING THE INTEREST INCOME ON THE UNACCOUNTED BANK DEPOSITS @ 9% AND ADVANCE MADE TO PRIVATE PARTIES @ 24% AS DETAILED HEREIN BELOW:- ' INTEREST ACCRUED FROM DEPOSITS IN RD (9% OF RS.3,03,125) RS. 27,281/- INTEREST ACCRUED FROM PROMISSORY NOTES (24% OF 11,45,000) RS.2,74,800/- INTEREST ACCRUED FROM MONEY ADVANCED TO BMB PROMOTERS (24% OF RS.1,50,000) RS. 36,000/- ========= TOTAL RS.3,38,081/- ========== 4.1 ON APPEAL, THE LD.CIT(A) HAD CONFIRMED THE ORDER OF THE LD.AO BY AGREEING WITH HIS VIEW. HOWEVER SINCE THIS BENCH OF THE TRIBUNAL IN THE ASSESSEES CASE IN IT(SS)A NO.11/CHNY/2014 FOR THE BLOCK ASSESSMENT PERIOD 01.04.1996 TO 27.03.2003 VIDE ORDER DATED 02.04.2019 HAD DELETED THE ADDITION OF RS.11,45,000/- TOWARDS PROMISSORY NOTES, THERE IS NO SCOPE FOR ESTIMATING THE INTEREST INCOME ON SUCH ADVANCE FOR ALL THE RELEVANT ASSESSMENT YEARS. FURTHER WITH RESPECT TO THE OTHER ADDITIONS OF RS.27,281/- TOWARDS INTEREST ACCRUED FROM DEPOSITS IN RD ACCOUNT, RS.36,000/- TOWARDS INTEREST ACCRUED FROM MONEY ADVANCED TO BMB PROMOTERS, IT IS APPARENT FROM RECORD THAT THE ASSESSEE HAS NOT RECEIVED/REALIZED THE INTEREST INCOME AND SINCE THE ASSESSEE BEING 5 ITA NOS.217 TO 220/CHNY/2015 HUF, IT HAS THE LEGITIMATE RIGHT TO MAINTAIN ITS BOOKS OF ACCOUNTS IN CASH SYSTEM OF ACCOUNTING AS PER SECTION 145(1) OF THE ACT, THEREFORE THE INTEREST INCOME CAN BE TAXED IN THE HANDS OF THE ASSESSEE ONLY IN THE YEAR IN WHICH IT RECEIVES THE INTEREST. THEREFORE WE HEREBY DIRECT THE LD.AO TO DELETE THE INTEREST INCOME ESTIMATED IN THE HANDS OF THE ASSESSEE AMOUNTING TO RS.27,281/- TOWARDS INTEREST ACCRUED FROM DEPOSITS IN RD ACCOUNT & RS.36,000/- TOWARDS INTEREST ACCRUED FROM MONEY ADVANCED TO BMB PROMOTERS SINCE THE ASSESSEE HAS NOT RECEIVED THE SAME DURING THE RELEVANT ASSESSMENT YEARS. 5. GROUND NO.2.2: ESTIMATION OF INCOME OF THE ASSESSEE AT RS.3,00,000/- FOR THE ASSESSMENT YEAR 2007-08:- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2007-08, THE LD.AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 02.06.2009, WHICH IS BEYOND THE TIME LIMIT IT IS INVALID AND NON-ERST. HENCE REJECTING THE RETURN FILED BY THE ASSESSEE, THE LD.AO ESTIMATED THE BUSINESS INCOME OF THE ASSESSEE AS RS.3,00,000/- AND ACCORDINGLY PASSED ORDERS U/S.144 OF THE ACT. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO. 6 ITA NOS.217 TO 220/CHNY/2015 5.1 AT THE OUTSET, WE FIND THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME THOUGH NOT WITHIN DUE DATE BUT BELATEDLY. THE LD.AO HAS SIMPLY REJECTED THE RETURN FILED BY THE ASSESSEE TREATING IT TO BE NON-ERST. HOWEVER WE ARE OF THE VIEW THAT THOUGH THE LD.AO HAD REJECTED THE RETURN OF INCOME FILED BY THE ASSESSEE, IT WOULD HAVE BEEN APPROPRIATE ON HIS PART TO EXAMINE THE DETAILS SUBMITTED IN THE RETURN FILED BY HIM AND THEREAFTER ARRIVE AT THE APT CONCLUSION BASED ON MERITS RATHER THAN ASSESSING THE INCOME BY MERE ESTIMATION. SINCE THE LD.AO HAS FAILED TO DO SO, WE ARE OF THE CONSIDERED VIEW THAT ESTIMATING THE BUSINESS INCOME OF THE ASSESSEE AT RS.3,00,000/- IS NOT CORRECT. THEREFORE WE HEREBY DIRECT THE LD.AO TO ASSESS THE INCOME AS STATED IN THE RETURN OF INCOME BELATEDLY FILED BY THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 6. GROUND NO.2.3: LEVY OF PENALTY U/S.271F OF THE ACT FOR THE ASSESSMENT YEAR 2007-08:- SINCE THE ASSESSEE DID NOT FILE HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 IN SPITE OF NOTICE ISSUED U/S.142(1) OF THE ACT ON 19.09.2008, THE LD.AO INVOKING HIS DISCRETIONARY POWERS UNDER THE PENAL PROVISIONS OF SECTION 271F OF THE ACT, LEVIED PENALTY FOR RS.5,000/-. ON PERUSING THE FACTS IT IS APPARENT THAT THE ASSESSEE THOUGH HAD NOT FILED ITS RETURN OF INCOME WITHIN THE 7 ITA NOS.217 TO 220/CHNY/2015 STIPULATED PERIOD, IT HAS FILED THE RETURN OF INCOME BELATEDLY. FURTHER THE PENAL PROVISIONS OF SECTION 271F OF THE ACT HAS BEEN WITHDRAWN WITH EFFECT FROM 1 ST APRIL 2018. IT IS ALSO APPARENT THAT THE AFFAIRS OF THE HUF ASSESSEE HAVING BEEN MANAGED BY THE KARTA WHO IS PRE- OCCUPIED WITH VARIOUS COMMITMENTS, THERE COULD HAVE BEEN SOME LAPSE ON THE PART OF THE ASSESSEE TO COMPLY WITH THE PROVISIONS OF THE ACT WITHIN THE STIPULATED PERIOD OF TIME. THEREFORE TAKING A LENIENT VIEW AND DRAWING STRENGTH FROM THE PROVISIONS OF SECTION 273B OF THE ACT, WE HEREBY DIRECT THE LD.AO TO DELETE THE PENALTY LEVIED FOR RS.5000/- BY INVOKING THE PROVISIONS OF SECTION 271F OF THE ACT. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE IN ITA NOS.217 TO 219/CHNY/2015 FOR THE ASSESSMENT YEARS 2005-06 TO 2007-08 AND THE PENALTY APPEAL IN ITA NO.220/CHNY/2015 FOR THE ASSESSMENT YEAR 2007-08 ARE ALLOWED. ORDER PRONOUNCED ON THE 03 RD APRIL, 2019 AT CHENNAI. SD/- SD/- ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 03 RD APRIL, 2019 8 ITA NOS.217 TO 220/CHNY/2015 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF