ACIT, Coimbatore V. Shri N.B. Aathishankar, Coimbatore

ITA 2288/CHNY/2013

• Counselvise Citation: 228821714 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 20-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-12-2013
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH JCITD R
• Keywords: Depreciation; Income from undisclosed sources
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NOS.2288 & 2289 /MDS./2013 ( ! '! / ASSESSMENT YEAR :2009-10) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(1), COIMBATORE 641 018. VS. SHRI N B AATHISHANKAR, NO.3A,RAJIV GANDHI NAGAR, CIVIL AERODROME POST, COIMBATORE-14. PAN AFBPA 3814 N ( / APPELLANT ) ( / RESPONDENT ) #$ % & / APPELLANT BY : MR.A.V.SREEKANTH,JCIT,D.R '(#$ % & / RESPONDENT BY : NONE ) * % +, / DATE OF HEARING : 20.08.2015 -' % +, /DATE OF PRONOUNCEMENT : 15.10.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THESE TWO APPEALS ARE FILED BY THE REVENUE, AGGRI EVED BY THE SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCO ME ITA NO.2288 & 2289 /MDS/2013 2 TAX(APPEALS)-I, COIMBATORE DATED 29.10.2013 IN APPE AL NO.26/12-13, PASSED UNDER SECTION 143(3) R.W.S. 250 OF THE ACT A ND ORDER DATED 29.10.2013 IN APPEAL NO.57/12-13 PASSED UNDER SECT ION 271(1)(C) R.W.S. 250 OF THE INCOME TAX ACT,1961 FOR THE ASSES SMENT YEAR 2009- 10. SINCE THE QUANTUM APPEAL AND THE PENALTY APPEA L ARE INTERLINKED, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE S AKE OF CONVENIENCE. 2. THE REVENUE HAS RAISED EIGHT ELABORATE GROUNDS IN ITS QUANTUM APPEAL AND FOUR GROUNDS IT ITS PENALTY APPE AL, HOWEVER THE CRUXES OF THE ISSUES ARE CONCISED HEREIN BELOW FOR ADJUDICATION:- QUANTUM APPEAL:- I) THE LD. CIT(A) HAS ERRED IN DIRECTING THE LD. A SSESSING OFFICER TO TREAT THE INCOME OF ` 20 LAKHS RESULTING FROM CASH DEPOSITS AS ASSESSEES BUSINESS TURNOVER AND BALANCE ` 25,57,709/- AS INCOME FROM OTHER SOURCES. II) THE LD. CIT(A) HAS ERRED BY GRANTING 80% DEPOS IT ON WDV METHOD INSTEAD OF 7.69% ON STRAIGHT LINE METHOD IN ACCORDANCE WITH SECTION-32(1) EXPLANATION-2 READ WITH RULES 5 (1A) . ITA NO.2288 & 2289 /MDS/2013 3 PENALTY APPEAL:- I) THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED AGAINST THE CASH DEPOSIT AMOUNT OF ` 35,57,709/- WHICH IS AGAINST THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ACIT VS. BHYOATHI IN 113 ITR 188. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL, HAVING INCOME UNDER THE HEAD SALARY, HO USE PROPERTY AND PROFESSION, FILED HIS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2009- 10 ON 25.05.09 DECLARING INCOME OF ` 2,58,180/-, AND AGRICULTURAL INCOME OF ` 1,80,000/-. THE RETURN WAS TAKEN FOR SCRUTINY AND ASSESSMENT U/S.143(3) OF THE ACT WAS COMPLETED ON 1 6.12.2011. 4.1 GROUND NO.(I) OF QUANTUM APPEAL - TREATING THE INCOME OF ` 20 LAKHS RESULTING FROM CASH DEPOSITS AS ASSESSEES BU SINESS TURNOVER AND BALANCE ` 25,57,709/- AS INCOME FROM OTHER SOURCES:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS OBSERVED THAT THE ASSESSEE HAD MADE SEVERAL CASH DEPOSITS IN HIS SAVINGS BANK A/C DURING THE RELEVANT PREVIOUS YEAR 2008-09. THE ASSESSEE ITA NO.2288 & 2289 /MDS/2013 4 HAD EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE AMOUNT DEPOSITED IN THE BANK ACCOUNT WAS FROM HIS WASTE CO TTON SALES BUSINESS. HOWEVER THE LD. ASSESSING OFFICER OBSERVE D IN HIS ORDER THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO ESTABLISH THE MONEY DEPOSITED IN HIS BANK A/C FROM HIS COTTON BUS INESS. ON PERUSING THE STATEMENT OF ACCOUNT FOR THE ASSESSMEN T YEAR 2008-09, IT WAS REVEALED THAT THE PROFIT FROM WASTE COTTON B USINESS WAS ` 1,69,000/- AND THE ASSESSEES CASE WAS COVERED U/S. 44AF OF THE ACT SINCE THE ANNUAL TURNOVER OF THE ASSESSEE WAS L ESS THAN ` 40/- LAKHS. IT WAS FURTHER NOTICED THAT FOR THE ASSESSM ENT YEARS 2007-08 & 2009-10, THE INCOME FROM THE SAME BUSINESS WAS ` 50,000/- & ` 1,25,380/- RESPECTIVELY. SINCE THERE WAS A HUGE DE POSIT DURING THE PERIOD 01.04.2008 TO 31.03.2009 AMOUNTING TO ` 45,57,709/-, THE LD. ASSESSING OFFICER OPINED THAT THE ENTIRE CASH DEPOS ITS COULD NOT HAVE RESULTED FROM THE WASTE COTTON BUSINESS BECAUSE THE ASSESSEE HAD DECLARED FAR LESSER TURNOVER DURING THE OTHER ASSES SMENT YEARS AND THEREFORE, TREATED AN AMOUNT OF ` 10 LAKHS AS THE ASSESSEES TURNOVER FROM WASTE COTTON BUSINESS AND ACCEPTED THE INCOME ADMITTED BY THE ASSESSEE OF ` 7,69,907/- AS INCOME FROM WASTE COTTON BUSINESS AND ITA NO.2288 & 2289 /MDS/2013 5 FURTHER TREATED THE BALANCE AMOUNT OF ` 35,57,709/- AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. 4.2 ON APPEAL, THE LD. CIT (A) OPINED THAT SINCE THE AS SESSING OFFICER HAS ACCEPTED THE ADMITTED INCOME OF ` 7,69,907/- FROM THE WASTE COTTON BUSINESS, THE AMOUNT OF ` 20/- LAKHS CAN BE REASONABLY TREATED AS CASH DEPOSITS ARISING FROM THE TURNOVER OF SUCH BUSINESS AND TREATED THE BALANCE AMOUNT OF ` 25,57,709/- AS HIS INCOME FROM OTHER SOURCES. 4.3 THE LD. D.R RELIED ON THE ORDER OF THE LD. A SSESSING OFFICER AND ARGUED IN SUPPORT OF THE SAME WHILE NONE WAS PR ESENT FOR THE ASSESSEE. 4.4 HAVING HEARD THE LD. D.R., AND PERUSING THE MA TERIALS ON RECORD AND ORDERS OF BOTH THE REVENUE AUTHORITIES, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) WAS JUSTIFIED IN TREATING ` 20 LAKHS OF CASH DEPOSITS AS ASSESSEES BUSINESS TURNOVER SI NCE THE ASSESSEE ADMITTED INCOME OF ` 7,69,907/- IS ACCEPTED BY THE LD. ASSESSING ITA NO.2288 & 2289 /MDS/2013 6 OFFICER. ON A TURNOVER OF ` 20 LAKHS, IF ` 7,69,907/- IS TREATED AS NET PROFIT, IT AMOUNTS TO NET PROFIT RATIO OF 38.5% (7 ,69,907 X 100 20,00,000) WHICH IS FAIRLY ACCEPTABLE. THE LD. ASSE SSING OFFICER TREATMENT OF ` 10 LAKHS TURNOVER FROM THE ASSESSEES WASTE COTTON BUSINESS WOULD MEAN THAT THE ASSESSEES NET PROFIT RATIO IS 77% (7,69,907 X 100 10,00,000) WHICH IS TOTALLY ILLOGICAL BECAUSE SUCH PROFIT CANNOT BE DERIVED FROM COTTON WASTE BUSINESS . THEREFORE, WE HEREBY CONFIRM THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. 5.1. GROUND NO.(II) - GRANTING 80% DEPRICITION ON WDV METHOD INSTEAD OF 7.69% ON STRAIGHT LINE METHOD IN ACCORDA NCE WITH SECTION- 32(1) EXPLANATION-2 READ WITH RULES 5 (1A). THE ASSESSEE HAD INVESTED IN WINDMILL DURING THE RELEVANT PREVIOUS YEAR AMOUNT TO ` 1.08 CRORES. SINCE THE ASSESSEE HAD NOT EXERCISED ITS OPTION BEFORE THE LD. ASSESSING OFFIC ER FOR GRANTING DEPRECATION @80% THE LD. ASSESSING OFFICER ALLOWED THE DEPRECIATION AT 7.69% ON STRAIGHT LINE METHOD AS ST IPULATED IN EXPLANATION-2 OF SECTION-32(1) OF THE ACT. ON APPE AL, THE LD. CIT (A) DIRECTED THE LD. ASSESSING OFFICER TO GRANT DEPRECI ATION TO THE ITA NO.2288 & 2289 /MDS/2013 7 ASSESSEE AS CLAIMED IN HIS RETURN OF INCOME FILED O N 25.05.2009 FOR THE RELEVANT ASSESSMENT YEAR BY FOLLOWING THE DECIS ION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S.K. K.S.K. LEATHER PROCESSES P LTD. VS. ITO (2010) REPORTED IN 126 ITD 215 (CHENNAI) WHEREIN IT WAS HELD THAT OPTION UNDER RULE 5(1A) MA Y BE EXERCISED IN THE INCOME TAX RETURN FILED WITHIN THE DUE DATE AND IT IS NOT NECESSARY TO FILE OPTIONS SEPARATELY. THE REVENUE IS IN APP EAL ON THE AFORESAID DECISION OF THE LD. CIT (A). CONSIDERING THE FACTS OF THE CASE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER O F THE LD. CIT (A) BECAUSE THE LD. CIT (A) HAS ONLY FOLLOWED THE DECIS ION OF THE CHENNAI BENCH OF THE TRIBUNAL. THEREFORE, WE HEREBY CONFIRM THE ORDER OF THE LD. CIT (A) ON THIS ISSUE. PENALTY APPEAL:- 6.1. GROUND NO.(I) - DELETING THE PENALTY LEVIED A GAINST THE CASH DEPOSIT AMOUNT OF ` 35,57,709/- WHICH IS AGAINST THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ACIT VS. BHYOATHI IN 113 ITR 188:- ITA NO.2288 & 2289 /MDS/2013 8 IN THE PENALTY PROCEEDINGS THE LD. ASSESSING OFFICE R LEVIED PENALTY OF ` 15,34,125/- BEING 100% OF TAX SOUGHT TO BE EVADED TOWARDS ` 10/- LAKHS DISCLOSED BY THE ASSESSEE AS THE LOAN FR OM HIS FATHER AND ` 35,57,709/- BEING CASH DEPOSITS MADE IN SAVINGS BAN K A/C DISCLOSED BY THE ASSESSEE AS THE SALE PROCEEDS FROM WASTE COTTON BUSINESS BOTH OF WHICH IS TREATED AS NOT GEN UINE. THE LD. ASSESSING OFFICER DID NOT FIND MERIT IN THE CREDIT WORTHINESS OF THE ASSESSEES FATHER FOR HAVING ADVANCED ` 10/- LAKHS LOAN TO THE ASSESSEE BECAUSE HE WAS A RETIRED EMPLOYEE OF A CEM ENT FACTORY DURING THE YEAR 2000 AND DID NOT HAVE ANY SOURCE OF INCOME. FURTHER THE CASH DEPOSIT OF ` 35,57,709/- COULD NOT BE CONVINCINGLY EXPLAINED BY THE ASSESSEE AS SALE PROCEEDS FROM THE WASTE COT TON BUSINESS OF THE ASSESSEE. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ORDER LEVYING PENALTY FOR THE ADDITION OF ` 10 LAKHS, HOWEVER DELETED THE PENALTY WITH RESPECT TO CASH DEPOSITS FROM WASTE COTTON BUS INESS BY OBSERVING AS UNDER:- ITA NO.2288 & 2289 /MDS/2013 9 THE NEXT ISSUE IS REGARDING CASH DEPOSITS MADE IN THE BANK ACCOUNT OF THE APPELLANT. THE APPELLANT SUBMITTED THAT THESE CASH DEPOSITS WERE MADE OUT OF THE WASTE COTTON BUSINESS. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER COULD NOT BRING ANY EVIDENCE ON RECORD TO S AY THAT TO CASH DEPOSITS WERE FROM UNEXPLAINED SOURCES. IT CANNOT BE CONCLU SIVELY PROVE THAT THE CASH DEPOSITS WERE FROM UNDISCLOSED SOURCES. IT CA NNOT BE CONCLUDED AS CONCEALED INCOME. IN VIEW OF THIS THE ASSESSING OFF ICER IS DIRECTED TO DELETE THE PENALTY LEVIED ON CASH DEPOSITS. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE REVE NUE IS IN APPEAL BEFORE US. 6.2 AFTER PERUSING THE MATERIALS ON RECORD AND THE ORDERS OF THE REVENUE, WE ARE ALSO OF THE CONSIDERED VIEW THAT TH E LD. ASSESSING OFFICER COULD NOT SUBSTANTIATE CONCLUSIVELY THAT TH E CASH DEPOSITS WERE NOT FROM THE ASSESSEES BUSINESS OF WASTE COTT ON WHEN HE HAS ACCEPTED PARTIALLY THE CASH DEPOSITS ARE FROM THE W ASTE COTTON BUSINESS OF THE ASSESSEE. THEREFORE WE HEREBY CONF IRM THE ORDER OF THE LD. CIT (A). ITA NO.2288 & 2289 /MDS/2013 10 7. IN THE RESULT, BOTH THE QUANTUM APPEAL AND THE P ENALTY APPEAL OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 15 TH OCTOBER, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 15 TH OCTOBER, 2015 . K S SUNDARAM. % '+./ 0 /'+ /COPY TO: 1. #$ /APPELLANT 2. '(#$ /RESPONDENT 3. ) 1+ () /CIT(A) 4. ) 1+ /CIT 5. /4 '+5 /DR 6. 6! 7* /GF