Sh. Paramjeet Singh, New Delhi V. ITO, New Delhi

ITA 232/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6784 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 18-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Income from undisclosed sources
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.232/DEL/2016 ASSESSMENT YEAR : 2009-10 PARAMJEET SINGH, 1623, B-1, VASANT KUNJ, NEW DELHI. VS. ITO, WARD- 33(5), NEW DELHI. PAN : AOPPS 8054 R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURJEET SINGH, CA RESPONDENT BY : SHRI S. K. JAIN, SR.DR DATE OF HEARING : 02-02-2017 DATE OF PRONOUNCEMENT : 09-02-2017 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.10.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-11, NEW DELHI, U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT), RELATING TO ASSESSMENT YEAR 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT DURING THE RELE VANT ASSESSMENT YEAR, THE ASSESSEE EARNED INCOME FROM HOUSE PROPERTY, FROM BU SINESS OR PROFESSION AND OTHER SOURCES. HE HAD FILED HIS RETURN OF INCO ME DECLARING INCOME OF RS.14,60,662/- AND AGRICULTURAL INCOME OF RS.17,49, 480/-. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE 2 ITA NO.232/DEL/2016 HAD NOT PRODUCED ANY EVIDENCE AS TO SALE PROCEEDS O F HUGE QUANTITY OF AGRICULTURAL PRODUCE CONSISTING OF AMLA, PAPAYA, ET C.. HE ESTIMATED THE AGRICULTURAL INCOME AT RS.12,00,000/- AND TREATED T HE BALANCE INCOME OF RS.3,99,480/- AS INCOME FROM UNDISCLOSED SOURCES. 2.1 HE FURTHER NOTICED THAT ASSESSEE HAD CLAIMED EX PENSES OF RS.4,59,720/- ON ACCOUNT OF EXPENSES INCURRED TO EA RN THE AGRICULTURAL INCOME. HE REQUIRED THE ASSESSEE TO FURNISH NECESS ARY PROOF OF THESE EXPENSES. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THESE EVIDENCES, THEREFORE, HE ESTIMATED 50% OF THE ENTIRE EXPENSES CLAIM AS EXPENSES ON ACCOUNT OF AGRICULTURAL INCOME AND DISALLOWED THE B ALANCE 50%. 2.2 THE ASSESSING OFFICER FURTHER OBSERVED THAT ASS ESSEE HAD CLAIMED AN AMOUNT OF RS.1,30,575/- PAID ON ACCOUNT OF INTEREST TO THE BANK. HE NOTED THAT NO BUSINESS ACTIVITY HAD BEEN DONE BY THE ASSE SSEE DURING THE RELEVANT ASSESSMENT YEAR AND NO SATISFACTORY REPLY WAS SUBMI TTED IN THIS REGARD. HOWEVER, TAKING NOTE OF THE FACT THAT THE ASSESSEE HAD EARNED AN INTEREST INCOME OF RS.75,167/-. HE MADE A DISALLOWANCE OF B ALANCE INTEREST OF RS.55,408/-. 3. THE ASSESSING OFFICER FURTHER NOTICED THAT ASSES SEE HAD CLAIMED BUSINESS EXPENSES OF RS.4,33,721/- BUT SINCE NO BUS INESS ACTIVITY HAD BEEN 3 ITA NO.232/DEL/2016 DONE BY THE ASSESSEE AND ASSESSEE FAILED TO PRODUCE ANY EVIDENCE IN RELATION TO PURCHASE AND SALE. THEREFORE, HE DISALLOWED THE BUSINESS EXPENSES CLAIMED BY ASSESSEE. 4. LD. CIT(A) PARTLY ALLOWED THE ASSESSEES APPEAL BY DELETING THE 50% OF THE EXPENSES TOWARDS EARNING OF AGRICULTURAL INC OME DISALLOWED BY THE ASSESSING OFFICER. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE TRIBUNAL, THE ASSESSEE IS IN APPEAL BEFORE THE TRIB UNAL AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- THE ORDER OF CIT(A)-11 CONFIRMING ADDITIONS TO INC OME IN ASSESSMENT U/S 143(3) IS BAD IN LAW & FACTS OF THE FOLLOWING GROUN DS :- 1. BECAUSE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION ON ACCOUNT OF TREATING AGRICULTURAL INCOME OF RS 3,99,480 AS INCO ME FROM UNDISCLOSED SOURCES IGNORING THE FACTS OF CASES & ON WRONG BASI S. 2. BECAUSE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS 55,408/= ON ACCOUNT OF INTEREST ON LOAN IGNORING THE FACTS THE CASE & SUBMISSIONS OF THE APPELLANT AND ON WRONG PREMISES. 3. BECAUSE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS 4,33,721 ON ACCOUNT OF BUSINESS EXPENSES ON WRONG OBSERVATION & CONCLUSIONS DRAWN. 4. THE APPELLANT CRAVES TO ADD, DELETE, AMEND, MODIFY RECORDS, ANY GROUND OR GROUNDS OF APPEAL. 5. APROPOS GROUND NO.1, LD. COUNSEL FOR THE ASSESSE E REFERRED TO PAGES 25 TO 27 OF PAPER BOOK, WHEREIN, THE AFFIDAVIT OF ASSE SSEE IS CONTAINED GIVING THE DETAILS OF EARNING OF NET AGRICULTURAL INCOME A T RS.15,99,480/- AS UNDER :- 2. THAT DURING FY 2008-09, I DERIVED NET AGRICULTU RAL INCOME OF RS.15,99,480/- FROM SALE OF AGRICULTURAL PRODUCE AS UNDER :- 4 ITA NO.232/DEL/2016 S.NO. AGRICULTURAL PRODUCE LAND AREA COVERED QTY. SOLD AV. RATE OF SALE (RS.) GROSS SALE (RS.) 1 PAPAIA 1.50 ACRE 1,05,000 KG 8 PER KG 840,000 2 SARSOON 20.00 ACRE 18,000 KG 20 PER KG 360,000 3 WHEAT 3.50 ACRE 6,300 KG 10 PER KG 63,000 4 GRAM 2.00 ACRE 2,100 KG 22 PER KG 46,200 5 GVAAR 1.00 ACRE 1,200 KG 50 PER KG 60,000 6 AMLA 1.00 ACRE 15,000 KG 18 PER KG 270.000 7 LEMON 1.00 ACRE 21,000 KG 20 PER KG 420,000 TOTAL 30.00 ACRE 2,059,200 LESS : AGRICULTURAL EXPENSES 1. SEEDS 60,500 2. MANURE, CHEMICALS, PESTICIDES 37,500 3. WATER & ELECTRICITY 42,000 4. LABOUR 260.000 5. OTHER MISC. 59,720 459,720 NET AGRICULTURAL INCOME 1,599,480 6. LD. COUNSEL FURTHER REFERRED TO PAGE 28, WHEREIN , THE STATEMENT OF ASSESSEE IS CONTAINED AND POINTED OUT THAT THE AVER MENTS MADE IN THE AFFIDAVIT HAVE NOT BEEN FOUND TO BE WRONG. LD. COU NSEL POINTED OUT THAT ASSESSEE INHERITED LAND FROM HIS FATHER, WHO PASSED AWAY ON 13.01.2004, THEREFORE, THE AGRICULTURAL INCOME SHOWN BY ASSESSE E IN ASSESSMENT YEAR 2009-10 WAS ON HIS OWN AS WELL AS LAND INHERITED BY HIS FATHER AS WELL AS OWNED BY SISTER OF ASSESSEE, WHO WAS OUT OF INDIA. LD. DR SUBMITTED THAT NO RECORDS WERE PRODUCED BY ASSESSEE TO SUBSTANTIAT E ITS CLAIM AND MERELY ON THE BASIS OF AVERMENTS MADE IN AFFIDAVIT, WITHOU T BEING SUBSTANTIATED, THE ASSESSEES CLAIM WAS RIGHTLY REJECTED PARTLY BY ASS ESSING OFFICER. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE RECORD OF THE CASE. ADMITTEDLY, BEFORE THE ASSESSI NG OFFICER, THE ASSESSEE, 5 ITA NO.232/DEL/2016 INTER-ALIA, ADMITTED THAT NO RECORDS WERE MAINTAINED IN REGARD TO SALE OF CROPS. THE ASSESSING OFFICER HAD GIVEN DUE WEIGHTA GE TO ASSESSEES PLEA REGARDING INCREASE IN LAND HOLDINGS. THE SUBMISSIO NS OF LD. COUNSEL THAT ASSESSEES PLEA ON THE BASIS OF AFFIDAVIT SHOULD HA VE BEEN ACCEPTED IN TOTO , IS DEVOID OF ANY MERIT BECAUSE UNLESS THE AVERMENTS MA DE IN THE AFFIDAVIT ARE DULY SUPPORTED BY EVIDENCE, THE SAME CANNOT BE TAKE N AS SACROSANCT. THE ASSESSEE HAD BEEN PROVIDED OPPORTUNITY TO SUBSTANTI ATE THE AVERMENTS BY ASSESSING OFFICER AS HE HAD TAKEN ASSESSEES STATEM ENT ALSO AND, THEREFORE, THE ESTIMATE MADE BY THE ASSESSING OFFICER DOES NOT CALL FOR ANY INFERENCE. ACCORDINGLY, THIS GROUND IS DISMISSED. 8. BRIEF FACTS PROPOS GROUND NO.2 ARE THAT THE DISA LLOWANCE HAD BEEN MADE PRIMARILY ON THE GROUND THAT THE NO BUSINESS A CTIVITY HAD BEEN DONE BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR. THE LD. CIT(A) CONFIRMED THE ADDITION. 9. LD. COUNSEL SUBMITTED THAT ASSESSEE HAD TAKEN A PERSONAL LOAN FROM HDFC BANK AND INVESTED AS A PARTNER IN ITS FIRM, NA MELY, BETTER LIVING AND ALSO EARNED INTEREST INCOME AMOUNTING TO RS.75, 167/- FROM THE FIRM. LD. COUNSEL POINTED OUT THAT THE INTEREST IS TO BE ALLOWED U/S 36(1)(III) BECAUSE THE BUSINESS ACTIVITY IN THE CONTEXT OF PRO PRIETORY BUSINESS 6 ITA NO.232/DEL/2016 DARROUMANA IN RESPECT OF FURNITURE HAD STARTED. LD. COUNSEL POINTED OUT THAT BUSINESS HAD BEEN SETUP DURING THE YEAR BECAUS E ASSESSEE HAD PURCHASED STOCK LIKE DECORATIVE ITEMS, FURNITURE ITEMS, AMOUN TING TO RS.1,25,000/- FROM VARIOUS PLACES INCLUDING UDAIPUR, JAIPUR AND F ROM VARIOUS SCRAP DEALERS AND, THEREFORE, MERELY BECAUSE THERE WAS NO SALE, IT COULD NOT BE HELD THAT NO BUSINESS HAD BEEN SETUP. HE, THEREFORE, SU BMITTED THAT THIS CLAIM IS TO BE ALLOWED U/S 36(1)(III) OF THE ACT. LD. DR RE LIED ON THE ORDER OF LD. CIT(A) AND SUBMITTED THAT SINCE THERE WAS NO BUSINE SS ACTIVITY, THIS CLAIM COULD NOT BE ALLOWED. 10. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE RECORD OF THE CASE. AS FAR AS THE CLAIM U/S 36(1)( III) IS CONCERNED, THE SAME CAN BE ALLOWED ONLY IF ASSESSEE COULD SUBSTANTIATE THE SETTING OFF OF HIS BUSINESS. THE ONUS WAS ON ASSESSEE TO ESTABLISH TH AT FIRST STEP HAD BEEN TAKEN TOWARDS SETTING UP OF HIS BUSINESS. LD. CIT( A) CONCLUDED THAT THERE WAS NO SETTING UP OF BUSINESS BECAUSE ASSESSEE FAIL ED TO SUBSTANTIATE THE PURCHASES OF RS.1,25,000/-. HOWEVER, THE ASSESSEE HAD ALSO CLAIMED RENT OF RS.69,000/- OUT OF WHICH RS.57,000/- HAD BEEN PAID THROUGH CHEQUE AND HAD ALSO CLAIMED RS.1,58,785/- TOWARDS REPAIRS AND MAIN TENANCE OUT OF WHICH RS.1,51,105/- WAS PAID THROUGH CHEQUE AS IS EVIDENT FROM PAGES 52 TO 53 OF 7 ITA NO.232/DEL/2016 PAPER BOOK. FURTHER, THE ASSESSEE HAD PAID SALARY OF RS.48,000/- IN CASH APART FROM TELEPHONE AND CONVEYANCE OF RS.9,700/-. EVEN IF THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE CASH PAYMENTS BU T THE PAYMENTS MADE THROUGH CHEQUE TOWARDS RENTS CLEARLY SHOW THAT THE ASSESSEE HAD TAKEN THE PREMISES ON RENT FOR HIS BUSINESS PURPOSE AND THAT WAS SUFFICIENT EVIDENCE TO COME TO THE CONCLUSION THAT ASSESSEE HAD SETUP ITS BUSINESS BECAUSE IT IS NOT DISPUTED THAT ASSESSEE EVENTUALLY CARRIED ON BUSINE SS FROM THE SAID PREMISES. THEREFORE, THE INTEREST EXPENDITURE CLAIMED BY ASSE SSEE WAS ALLOWABLE AS BUSINESS EXPENDITURE U/S 36(1)(III). ALTERNATIVELY , EVEN IF, THE DEPARTMENTS VIEW IS TO BE ACCEPTED REGARDING NO BUSINESS ACTIVI TY, STILL, I FIND THAT THIS CLAIM IS ALLOWABLE U/S 57(III) AS ENTIRE AMOUNT BOR ROWED HAD BEEN INVESTED IN FIRM AND, THEREFORE, IT WAS AN ALLOWABLE DEDUCTI ON BEING INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING INTEREST. IN THE RESUL T, THE GROUND NO.2 IS ALLOWED. 11. APROPOS GROUND NO.3 THE MAIN REASON FOR MAKING DISALLOWANCE WAS THAT NO BUSINESS ACTIVITY HAD BEEN DONE BY THE ASSE SSEE. HOWEVER, AS HELD EARLIER, IN REGARD TO GROUND NO.2, THAT THE BUSINES S OF THE ASSESSEE HAD BEEN SETUP, THEREFORE, I DIRECT THAT EXPENSES THROUGH CH EQUE BY ASSESSEE ONLY SHOULD BE ALLOWED BY ASSESSING OFFICER AND REST INC URRED IN CASH TO BE 8 ITA NO.232/DEL/2016 DISALLOWED AS ASSESSEE FAILED TO SUBSTANTIATE ITS C LAIM. IN THE RESULT, THE GROUND NO.3 IS PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF FEBRUARY, 2017. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED : 09-02-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A)- 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI