Rakesh Sarin & Sons (HUF), CHENNAI V. DCIT, CHENNAI

ITA 224/CHNY/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8639 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 28-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAVI
• Assessee Lawyers: DR M SRINIVASA RAO
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Block assessment
• Section: 273B; 143(3); 142(1); 6; 2

Judgement Text

, , IN THE INCOM E TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO S . 2 21 TO 2 2 5 /CHNY/2015 / ASSE SSMENT YEAR S : 200 6 - 07 TO 2009 - 10 M/S. RAKESH 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: AAAHR3518N ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : DR. M. SRINIVASA RAO, CIT / RESPONDENT BY : SHRI K.RAVI, ADVOCATE / DATE OF HEARING : 29.01 . 201 9 / DATE OF PRONOUNCEMENT : 04 . 0 4 .2019 / O R D E R PER A. MOHAN ALANKAMONY, AM : - TH ESE APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 19 , C HENNAI , DATED 28.11.2014 IN ITA NO. 127/11 - 12, 179/09 - 10, 23/10 - 11, 62/08 - 09, 270/10 - 11 FOR THE ASSESSMENT YEARS 2006 - 07 TO 2009 - 10 PASSED U/S. 250(6) R.W.S. 143(3) / 144 OF THE ACT AND ORDER DATED 28.11.2014 IN ITA NO.2 3 /10 - 11 FOR THE ASSESSMENT YEAR 2007 - 08 PASSED U/S. 250(6) R.W.S. 271F OF THE ACT. 2 ITA NOS.221 TO 22 5 /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 : - T HE 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 2006 - 07 ITA 221 /CHNY/2015 AY 200 7 - 08 ITA 223 /CHNY/2015 AY 2008 - 09 ITA 224 /CHNY/2015 AY 2009 - 10 ITA 225 /CHNY/2015 INTEREST FROM RBI RELIEF BONDS RS.5,00,000/ - @ 9% RS.45,000 RS.45,000 RS.45,000 RS.45,000 INVESTMENT IN UTI, IDBI AND HDFC RELIEF BONDS AGGREGATING TO RS.25,000/ - @ 8.5% RS.2,125 RS.2,125 RS.2,125 RS.2,125 INVESTMENT IN KISAN VIKAS PATRAS RS.20,000 @12% RS.2,400 RS.2,400 RS.2,400 RS.2,400 INTEREST FROM RBI RELIEF BONDS ASSIGNED RS.3,50,000/ - @ 10% RS.35,000 RS.35,000 RS.35,000 RS.35,000 INTEREST FROM RBI RELIEF BONDS ALREADY ASSIGNED RS.41,50,000/ - @ 10% RS.4,15,000 RS.4,15,000 RS.4,15,000 RS.4,15,000 ADVANCE MADE TOWARDS PROMISSORY NOTES AGGREGATING TO RS.25,50,000 @ 24% RS.6,12,000 RS.6,12,000 RS.6,12,000 RS.6,12,000 LOAN TO NADIAWALA GRANDSON AGGREGATING TO RS.4,50,000/ - @ 24% RS.1,08,000 RS.1,08,000 RS.1,08,000 RS.1,08,000 3 ITA NOS.221 TO 22 5 /CHNY/2015 2. 2 FOR THE ASSESSMENT YEAR 2006 - 07 IN ITA NO.221/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 SUSTAINING THE ORDER OF THE LD.AO WHO HAD MADE ADDITION OF RS.1,90,000/ - TOWARDS DEPOSITS MADE ON 08.04.2005 & 06.05.2005 IN THE ASSESSEES BANK ACCOUNT MAINTAINED WITH STANDARD CHARTERED BANK. 2.3 FOR THE A SSES SMENT YEAR 2007 - 08 IN ITA NO.2 23 /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. 6 , 10,000/ - AS AGAINST RS.6,04,020 / - ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME FILED. 2.4 FOR THE ASSES SMENT YEAR 2007 - 08 IN ITA NO.22 2 /CHNY/2 015 WITH RESPECT TO THE PENALTY APPEAL, THE ASSESSEE HAS FILED THE FOLLOWING GROUND: - 4 ITA NOS.221 TO 22 5 /CHNY/2015 T HE 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 AS SESSMENT YEARS 2006 - 07 , 2007 - 08, 2008 - 09 & 2009 - 10 ADMITTING TOTAL INCOME OF RS .4,14,840 / - , RS. 6,04,020 / - , RS.7,91,250/ - & RS.6,79,330 / - ON 17.03.2008 , 02.06,2009, 29.07.2009 & 17.05.2010 RESPECTIVELY. T HE CASE WAS SELECTED FOR SCRUTINY BY ISSUE OF NOTICE U/S.143(2) & 142(1) OF THE ACT, FOR THE AS SESSMENT YEARS 2006 - 07 TO 2009 - 10 AND ASSESSMENT ORDER WAS PASSED U/S.143(3) / 144 OF THE ACT ON 10.12.2008, 3 0.12.2009 , 29.12.2010 & 26.12.2012 RESPECTIVELY WHEREIN THE LD.AO MADE THE ABOVE 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. GROUND NO.2.1 : ADDITION TOWARDS ACCRUED INTEREST: - FOR THE ASSESSMENT YEARS 2006 - 07 TO 200 9 - 10 , ASSESSMENT WAS COMPLETED U/S.143(3) / 144 OF TH E ACT WHEREIN THE 5 ITA NOS.221 TO 22 5 /CHNY/2015 LD.AO MADE ADDITION BY ESTIMATING THE INTEREST INCOME ON THE UNACCOUNTED INVESTMENTS IN RBI RELIEF BONDS @ 9% / 10%, UTI, IDBI, HDFC RELIEF BONDS @ 8.5%, KISAN VIKAS PATRAS @12% AND ADVANCE MADE TO PRIVATE PARTIES @ 24% AS DETAILED HEREIN BELOW: - ' 'INTEREST ACCRUED FROM INVESTMENT IN RBI RELIEF BONDS (9% OF RS. 5,00,000 ) RS. 45,000 / - INTEREST ACCRUED FROM INVESTMENT IN UTI, IDBI, HDBC RELIEF BONDS ( 8.5 % OF RS .25,000 ) RS. 2,125/ - INTEREST ACCRUED FROM INVESTMENTS IN KVP (12% OF 20,000) RS. 2,400/ - INTEREST ACCRUED FROM RBI RELIEF BONDS ASSIGNED (10 % OF 3 ,50,000) RS. 3 5, 0 00/ - INTEREST ACCRUED FROM RBI RELIEF BONDS ALREADY ASSIGNED (10% OF 41,50,000) RS. 4,15,000/ - INTEREST ACCRUED FROM PROMISSORY NOTES (24% OF 25 ,50,000) RS. 6 , 12 ,000/ - INTEREST ACCRUED FROM LOAN TO NADIAWALA GRANDSON (24% OF RS. 4 50,000) RS. 1,00,000 / - ========= TOTAL RS. 12,19,525 / - ========== 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 A SSESSEES CASE IN IT(SS)A NO.1 9 /CHNY/2014 FOR THE BLOCK ASSESSMENT PERIOD 01.04.1996 TO 27.03.2003 VIDE ORDER DATED 03.04.2019 HAD DELETED THE ADDITION OF RS. 25,50 ,000/ - TOWARDS PROMISSORY NOTES , RS.4,50,000/ - TOWARDS AMOUNT ADVANCED TO M/S. NADIADWALA GRA NDSON ENTERPRISES 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. 45,000 / - TOWARDS INTEREST ACCRUED FROM RBI RELIEF 6 ITA NOS.221 TO 22 5 /CHNY/2015 BONDS , RS.2,125/ - TOWARDS INTEREST ACCRUED FROM KVP, RS.2,400/ - & RS.35,000/ - TOWARDS INTEREST ACCRUED FROM RBI RELIEF BONDS ASSIGNED , IT IS APPARENT FROM RECORD THAT THE ASSESSEE HAS NOT RECEIVED /REALIZED THE INTEREST INCOME AND SINCE THE ASSESSEE BEING HUF , IT HAS TH E LEGITIMATE RIGHT TO MAINTAIN ITS BOOKS OF ACCOUNTS IN CASH SYSTEM OF ACCOU NTING 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.45,000/ - TOWARDS INTEREST ACCRUED FROM RBI RELIEF BONDS, RS.2,125/ - TOWARDS INTEREST ACCRUED FROM KVP, RS.2,400/ - & RS.35,000/ - TOWARD S INTEREST ACCRUED FROM RBI RELIEF BONDS ASSIGNED, SINCE THE ASSESSEE HAS NOT RECEIVED THE SAME DURING THE RELEVANT ASSESSMENT YEARS. 5. GROUND NO.2.2: ADDITION OF RS.1,9 0,000/ - TOWARDS DEPOSITS IN BANK ACCOUNT MAINTAINED WITH STANDARD CHARTERED BANK : - DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2006 - 07, IT WAS OBSERVED BY THE LD.AO THAT THERE WERE CASH DEPOSITS TO THE TUNE OF RS.1,90,000/ - IN THE BANK ACCOUNT MAINTAINED BY THE ASSESSEE IN STANDARD CHARTERED BANK, 7 ITA NOS.221 TO 22 5 /CHNY/2015 MYLAPOR E BRANCH. SINCE ASSESSEE COULD NOT EXPLAIN THE SOURCE FOR THE CASH DEPOSIT, THE LD.AO ADDED THE SAME AS UNEXPLAINED CASH CREDITS IN THE HANDS OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BECAUSE EVEN BEFORE HIM, THE ASSESSEE C OULD NOT EXPLAIN THE SOURCE OF INVESTMENT. 5.1 EVEN BEFORE US AT THIS STAGE, THE LD.AR DID NOT FURNISH ANY EXPLANATION TOWARDS THE SOURCE OF CASH DEPOSIT MADE BY THE ASSESSEE IN ITS BANK ACCOUNT FOR RS.1,90,000/ - . THEREFORE WE HEREBY CONFIRM THE ADDITION OF RS.1,90,000/ - MADE AND SUSTAINED BY THE LD.REVENUE AUTHORITIES FOR THE ASSESSMENT YEAR 2006 - 07 6 . GROUND NO.2. 3 : ESTIMATION OF INCOME OF THE ASSESSEE AT RS. 6 , 1 0,000/ - 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 BEY OND THE TIME LIMIT IT IS INVALID AND NON - ERST. HENCE REJECTING THE RETURN FILED BY THE ASSESSEE, THE LD .AO ESTIMATED THE BUSINES S INCOME OF THE ASSESSEE AS RS. 6 , 1 0,000/ - AND ACCORDINGLY PASSED ORDERS U/S.144 OF THE ACT. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO. 8 ITA NOS.221 TO 22 5 /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 HA D REJECTED THE RETURN OF INCOME FILED BY THE ASSESSEE, IT WOULD BE APPRO PRIATE TO EXAMINE THE DETAILS SUBMITTED THEREIN AND THEREAFTER ARRIVE AT THE APT CONCLUSION BASED ON MERITS. SINCE THE LD.AO HAS FAILED TO DO SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD.AO IS NOT CORRECT IN ESTIMATING THE BUSINES S INCOME OF THE ASSESSEE AT RS. 6 , 1 0,000/ - . 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. 7 . GROUND NO.2. 4 : LEVY OF PENALTY U/S.271F OF THE ACT FOR THE ASSESSMENT YEAR 2007 - 08 : - SINCE THE ASSESSEE DID NOT FILE I T S 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 PROVISION S OF SECTION 271F OF THE ACT, LEVI ED PENALTY FOR RS.5,000/ - . ON PERUSING THE FACTS IT IS APPARENT THAT THE ASSESSEE THOUGH HAD NOT FILED I T S RETURN OF INCOME WITHIN THE STIPULATED PERIOD, IT HAS FILED THE RETURN OF INCOME BELATEDLY. FURTHER 9 ITA NOS.221 TO 22 5 /CHNY/2015 THE PENAL PROVISIONS OF SECTION 271F OF THE ACT H AS BEEN WITHDRAWN WITH EFFECT FROM 1 ST APRIL 2018. I T IS ALSO APPARENT THAT THE AFFAIRS OF THE 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 T HE 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 PROVIS IONS OF SECTION 271F OF THE ACT. 7 . I N THE RESULT, THE APPEAL S OF THE ASSESSEE IN ITA NOS. 223 TO 2 25 /CHNY/2015 FOR THE ASSESSMENT YEARS 2007 - 08 TO 200 9 - 10, PENALTY APPEAL IN ITA NO.222/CHNY/2015 FOR THE ASSESSMENT YEAR 2007 - 08 ARE ALLOWED AND THE APPEAL IN ITA NO.221/CHNY/2015 FOR THE ASSESSMENT YEAR 2006 - 07 IS PARTLY ALLOWED . O RDER PRONOUNCED ON THE 04 TH APRIL , 2019 AT CHENNAI. SD/ - SD/ - ( ) (DUVVURU R.L REDDY) / JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER / CHENNAI, / DATED 04 TH APRIL , 2019 10 ITA NOS.221 TO 22 5 /CHNY/2015 RSR / COPY TO: 1. / APPELLANT 2. /RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5 . / DR 6. / GF