Arati Raman, Bangalore V. DCIT, Bangalore

ITA 245/BANG/2012

• Counselvise Citation: 24521114 RSA 2012
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN JT
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Unexplained investment; Source of fund
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.245/BANG/2012 ASSESSMENT YEAR : 2008-09 MRS. ARATI RAMAN, NO.7/10, PALACE CROSS ROAD, BANGALORE 560 020. PAN : AABPR 5853Q VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI PADAMCHAND KHINCHA, C.A. RESPONDENT BY : SHRI A. SUNDAR RAJAN, JT. CIT(DR) DATE OF HEARING : 24.09.2012 DATE OF PRONOUNCEMENT : 05.10.2012 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 30.11.2011 OF THE CIT(APPEALS)-I, BANGALORE RELATING TO ASSESS MENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS:- 1.1 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, BANGALORE, TO THE EXTENT PREJUDICI AL TO THE APPELLANT, IS BAD IN LAW AND LIABLE TO BE QUASHED. ITA NO.245/BANG/12 PAGE 2 OF 9 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) I, BANGALORE HAS ERRED IN SOLELY RELYING ON THE INFORM ATION CONTAINED IN ANNUAL INFORMATION RETURN (AIR) IN THE PROCESS OF SUSTAINING THE ADDITIONS TO INCOME RETURNED TO THE EXTENT OF RS. 21,00,000/-. ON FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND LAW APPLICABLE, THE INFORMATION CONTAINED IN THE AI R BEING INCORRECT AND NOT APPLICABLE TO THE APPELLANT, THE ADDITION MADE TO INCOME RETURNED AMOUNTING TO RS. 2 1,00,000/- IS BA D IN LAW AND LIABLE TO BE DELETED. 3.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) I, BANGALORE HAS ERRED IN CONFIRMING THE LEVY OF SURCH ARGE IN COMPUTING THE TAX ON TOTAL INCOME. ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND LAW APPLICABLE, SURCHARGE IS NOT LE VIABLE. THE APPELLANT DENIES ITS LIABILITY TO PAY SURCHARGE. 4.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) I, BANGALORE HAS ERRED IN CONFIRMING THE LEVY OF INTER EST UNDER SECTION 234B AND 234D OF THE INCOME TAX ACT, 1961. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND LAW APPLIC ABLE, INTEREST UNDER SECTION 234B AND 234D IS NOT LEVIABLE. THE AP PELLANT DENIES ITS LIABILITY TO PAY INTEREST UNDER SECTION 234B AND 234D. 5.1 IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE A DDUCED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE O RDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) I, BANGALORE, TO THE EXTENT PREJUDICIAL TO THE APPELLANT, BE QUAS HED OR IN THE ALTERNATIVE (I) ADDITION OF RS. 21,00,000/- TO INCOME RETURNED BE DELETED; (II) SURCHARGE LEVIED BE DELETED; (III) INTEREST LEVIED UNDER SECTIONS 234B AND 234D BE DELETED. 3. THE ASSESSEE IS AN INDIVIDUAL. SHE DERIVES INCO ME UNDER THE HEAD SALARIES. FOR THE ASSESSMENT YEAR 2008-09, SHE FIL ED A RETURN OF INCOME DECLARING TOTAL INCOME OF Q 4,66,360. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CONFRONTED THE ASSESSEE WITH TH E COPIES OF ANNUAL INFORMATION REPORT (AIR) IN RESPECT OF SPECIFIED FI NANCIAL TRANSACTIONS WHICH WERE REQUIRED TO BE SUBMITTED BY SPECIFIED PERSONS MENTIONED IN SECTION 285BA OF THE INCOME-TAX ACT, 1961 R.W. RULE 114E OF THE I.T. RULES, 1962. ITA NO.245/BANG/12 PAGE 3 OF 9 AS PER THE AIR OBTAINED BY THE ASSESSING OFFICER, T HE ASSESSEE MADE INVESTMENTS TO THE EXTENT OF Q 25 LAKHS. THE DETAILS OF INVESTMENT MADE BY THE ASSESSEE AS REVEALED BY THE AIR WERE AS FOLLOWS :- BIRLA SUNLIFE MUTUAL FUND - 5,50,000 FRANKLIN TEMPLETON MUTUAL FUND - 7,00,000 FRANKLIN TEMPLETON MUTUAL FUND - 5,50,000 BIRLA SUNLIFE MUTUAL FUND - 7,00,000 ---------------- Q 25,00,000 ------------- 4. AS FAR AS THE AFORESAID INVESTMENTS ARE CONCERNE D, IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS ABLE TO EXPLAIN THE S OURCES OF MAKING INVESTMENTS IN THE AFORESAID FUNDS. THE AO WAS ALS O SATISFIED WITH THE ASSESSEES EXPLANATION. 5. APART FROM THE ABOVE, THE AIR INFORMATION ALSO R EVEALED THE FOLLOWING INVESTMENTS BY THE ASSESSEE:- REGISTRAR TO ISSUE OF SHARES & DEBENTURES 1. 12-MAR-08 700000 REGISTRAR TO ISSUE OF SHARES AND DEBENTURES ABOVE RS 1 CRORE FULL LIST OF A MUTUAL FUND 1. 12-JUN-08 500000 MUTUAL FUNDS MUTUAL FUNDS 2. 10-MAR-08 CASH 700000 MUTUAL FUNDS MUTUAL FUNDS 3. 12-MAR-08 CHEQUE 700000 MUTUAL FUNDS MUTUAL FUNDS ITA NO.245/BANG/12 PAGE 4 OF 9 6. THE ASSESSEE DENIED HAVING MADE THE AFORESAID IN VESTMENTS. THE AO, HOWEVER, PROCEEDED TO RELY ON THE AIR AND MADE THE ADDITION OF Q 26 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE HOLDING T HAT THE ASSESSEE COULD NOT EXPLAIN THE SOURCES OF MAKING THE AFORESAID INV ESTMENTS. THE ADDITION WAS MADE BY THE AO U/S. 69 OF THE ACT. 7. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THE PART OF THE AIR ON WHICH THE AO MADE THE IMPUGNED ADDITION OF Q 26 LAKHS WAS NOT CORRECT AND THAT THE ASSESSEE DID NOT MAKE ANY SUCH INVESTMENTS AS REVEALED IN THE AIR. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE CIT(A) THE DECISION OF THE ITAT BANGALORE A BENCH DATED 22.10.2010 IN THE CASE OF DCIT V. G. SELVAKUMAR ITA NO.868/BANG/2010 A.Y. 2 006- 07, WHEREIN THE TRIBUNAL HAD TAKEN THE VIEW THAT WHEN THE AIR SHOWS SOME INVESTMENT AND THE ASSESSEE DENIES IT, NO ADDI TION CAN BE MADE ON ACCOUNT OF UNEXPLAINED INVESTMENTS WITHOUT FURTHER EVIDENCE TO SHOW THAT THE ASSESSEE MADE INVESTMENTS. THE ASSESSEE ALSO S UBMITTED THAT THE INFORMATION CONTAINED IN THE AIR IS A GUIDELINE FOR THE OFFICER BASED ON WHICH THE OFFICER CAN INITIATE ENQUIRIES AND THAT U NDER NO CIRCUMSTANCES CAN AIR BE CONSIDERED AS ABSOLUTE DOCUMENT TO CONCL UDE THE ASSESSMENT. 8. ON THE ABOVE SUBMISSIONS BY THE ASSESSEE, THE LD . CIT(A) HELD AS FOLLOWS:- 8. I COMPLETELY AGREE WITH THE ABOVE INFERENCE OF THE AR QUOTED IN PARA 7. IN FACT BY DENYING SO THE ASSESSE E SHIFTED THE BURDEN TO THE A.O. I OBSERVE THE A.O. HAD BEEN GIVE N SUFFICIENT TIME I.E., FROM 23RD MARCH 2010 TO 25-11-2010 TO PR OVE THE ASSERTION HE MADE TO JUSTIFY THE ADDITION. HOWEVER NO SUCH EFFORTS HAVE BEEN MADE AT ALL. BUT HE MADE THE ADDITION ON THE BASIS OF AIR INFORMATION. THUS THE ONUS SHIFTED TO AO COULD NOT BE ITA NO.245/BANG/12 PAGE 5 OF 9 DISCHARGED AT ALL. BESIDES THE A.O. HAS ALSO FAILED TO RESPOND TO OBJECTION OF THE ASSESSEE THAT THE AIR IS PATENTLY WRONG IN SHOWING 7 LAKHS INVESTMENTS MADE IN CASH IN MUTUAL FUND AS PER SEBI GUIDELINES. BUT THIS DOES NOT MEAN THAT I AM IN FAVOUR OF THE ASSESSEE AND AS PER THE PRAYER GOING TO DIRECT THE AO TO DELETE THE ADDITION. I OBSERVE THAT THE A.O. PROBABLY GOT HANDICAPPED BY THE AIR PASSED ON TO HIM BECAUSE NO DETAILS OF SCRI PS/SHARES PURCHASED OR NAMES OF MUTUAL FUND WAS MENTIONED IN THE AIR. PROBABLY THE ASSESSEE HAD TAKEN ADVANTAGE OF SUCH L ACK OF INFORMATION IN THE AIR. THIS ITSELF DIFFERENTIATES THE FACT FROM THE CITED CASE LAW WHEREIN AT LEAST THE AO HAD GOT THE KNOWLEDGE OF SUB-REGISTRARS OFFICE FROM WHOM HE COULD HAVE ELICI TED THE INFORMATION TO STRENGTHEN THE ADDITION MADE IN THAT CASE. HERE THERE IS NO SUCH SCOPE AT ALL, BUT THIS WOULD NOT R ENDER THE AIR WRONG ON THE BASIS OF ALLEGATION OF AR THAT IF CONT AINS ARBITRARY INFORMATION. HENCE THE ADDITION IS HELD JUSTIFIED. HOWEVER THE DETAILS OF ADDITIONS AS PER THE ASSESSMENT ORDER IS DATE DETAILS OF INVESTMENT AMOUNT IN RS. I. 10-03-2008 MUTUAL FUNDS 7 LAKHS II. 12-03-2008 MUTUAL FUNDS 7 LAKHS III. 12-03-2008 SHARES 7 LAKHS IV. 12-06-2008 MUTUAL FUNDS 5 LAKHS TOTAL 26 LAKHS THE ABOVE SHOWS THAT SL.NO. (IV) DOES NOT PERTAIN T O THIS A.Y. 2007-08. HENCE THE ADDITION IS RESTRICTED TO RS.21 LAKHS. APPELLANT GETS RELIEF OF RS.5 LAKHS. 9. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS) IN SU STAINING THE ADDITION TO THE EXTENT OF Q 21 LAKHS, THE ASSESSEE HAS PREFERRED THE PRESENT A PPEAL BEFORE THE TRIBUNAL. 10. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSE WHO REITERATED STAND OF THE ASSESSEE AS PUT FORTH B EFORE CIT(A) BESIDES RELYING ON SOME JUDICIAL PRECEDENTS. THE LD. DR RE LIED ON THE ORDER OF THE CIT(APPEALS). ITA NO.245/BANG/12 PAGE 6 OF 9 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE AIR OBTAINED BY THE AO FROM THE SPECIFIED PERSON IS AT PAGES 50-51 OF T HE PAPERBOOK. THE DISPUTED ADDITIONS IN THIS APPEAL ARE WITH REFERENC E TO 3 ITEMS AS SET OUT IN THE AIR (PAGE 51 OF THE PAPERBOOK). 12. THE FIRST INVESTMENT AS WE HAVE ALREADY SEEN IS AN INVESTMENT STATED TO HAVE BEEN MADE ON 12.03.2008. THE DESCRI PTION IN THE AIR IS AS FOLLOWS:- REGISTRAR TO ISSUE OF SHARES & DEBENTURES 1. 12-MAR-08 700000 REGISTRAR TO ISSUE OF SHARES AND DEBENTURES ABOVE RS 1 CRORE FULL LIST OF A THE ABOVE DESCRIPTION DOES NOT GIVE THE SHARES OF T HE COMPANY IN WHICH THE INVESTMENTS WERE MADE NOR DOES IT GIVE DESCRIPT ION OF THE SHARES LIKE DISTINCTIVE NUMBERS ETC. AS RIGHTLY SUBMITTED BY T HE LD. COUNSEL FOR THE ASSESSEE, ON THE BASIS OF SUCH INCOMPLETE DETAILS O BTAINED BY THE AO IN THE FORM OF AIR, IT CANNOT BE PRESUMED THAT THE ASS ESSEE MADE INVESTMENT OF Q 7 LAKHS. THE LAW IS WELL SETTLED THAT U/S. 69 OF THE ACT, THERE SHOULD BE AN INVESTMENT MADE BY THE ASSESSEE AND ONLY THEN TH E QUESTION OF EXPLAINING THE SOURCE OF FUNDS OF MAKING SUCH INVES TMENT COULD BE EXAMINED. 13. IN THE PRESENT CASE, THE ASSESSEE DENIES HAVING MADE ANY SUCH INVESTMENT. THE ONUS IS ON THE REVENUE TO SHOW THA T THE ASSESSEE MADE INVESTMENTS. THE AIR WHICH IS THE ONLY BASIS ON WH ICH THE AO HAS PROCEEDED TO MAKE THE IMPUGNED ADDITION IS NOT CONC LUSIVE AS TO THE ITA NO.245/BANG/12 PAGE 7 OF 9 FACTUM OF THE ASSESSEE HAVING MADE INVESTMENTS. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO FILED BEFORE US T HE FREQUENTLY ASKED QUESTIONS & ANSWERS ON AIR BROUGHT OUT BY THE INCOM E TAX DEPARTMENT. IN ANSWER TO QUESTION 38 AS TO UNDER WHAT CIRCUMSTA NCES THE AIR WILL NOT BE ACCEPTED, ONE OF THE ANSWERS GIVEN BY THE DEPART MENT IS THAT MISMATCH OF NAME OF FILER MENTIONED IN FORM 68A WITH AIR FIL E BUT NO DOCUMENT SUBMITTED IN SUPPORT OF NAME APPEARING ON FORM 61A (PART A). FURTHER, THE PRESS RELEASE DATED 26.10.2006 BRINGS OUT THE CBDT GUIDELINES FOR DEALING WITH THE GRIEVANCES ARISING OUT OF CASES SELECTED F OR SCRUTINY ON THE BASIS OF INFORMATION CONTAINED IN AIR. THE GUIDELINES MENTI ONS THAT WHEN A GRIEVANCE IS PROJECTED BY A TAX PAYER WITH REGARD T O AIR, STEPS SHOULD BE TAKEN TO REDRESS SUCH WRITTEN GRIEVANCES EXPEDITIOU SLY. 14. AS ALREADY STATED, THE BANGALORE BENCH OF ITAT IN THE CASE OF G. SELVAKUMAR (SUPRA) HAS ALREADY TAKEN THE VIEW THAT ASSESSMENT ORDER BASED ONLY ON THE AIR WILL NOT STAND IN THE EYE OF LAW. FURTHER, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RBNJ NAIDU V. CIT 29 ITR 194 (NAG) HAS HELD THAT WHEN AN ASSESSEE DENIES THAT HE IS IN RECEIPT OF INCOME FROM A PARTICULAR SOURCE, IT IS FOR THE ITO TO PROVE THAT THE ASSESSEE RECEIVED INCOME AND THAT THE ASSESSEE CANNOT PROVE THE NEGATIVE. IN THIS REGARD, AS EARLY AS ON 23.01.2012 THE ASSESSEE HAS WRITTEN A LETTER TO THE CIT (COMPUTER OPERATIONS), BANGLAORE-I DENYING THE CORRECTNESS OF THE AIR IN SO FAR AS ADDITION OF Q 21 LAKHS SUSTAINED BY THE CIT(APPEALS) IS CONCERNED. THE DEPARTMENT HAS NOT ACTED ON THIS LE TTER. IN THE LIGHT OF THE ABOVE DISCUSSION AND ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, ITA NO.245/BANG/12 PAGE 8 OF 9 WE ARE OF THE VIEW THAT THE ADDITION OF Q 7 LAKHS SUSTAINED BY THE LD. CIT(APPEALS) DESERVES TO BE DELETED. 15. ANOTHER INVESTMENT OF Q 7 LAKHS IN MUTUAL FUNDS STATED TO HAVE BEEN MADE ON 12.03.2008 BY CHEQUE IS AGAIN LACKING OF AL L MATERIAL PARTICULARS LIKE MUTUAL FUND IN WHICH THE INVESTMENT WAS MADE, THE SCHEME OF THE MUTUAL FUND, ETC. THE DISCUSSION REFERRED TO ABOVE WILL BE EQUALLY APPLICABLE TO THIS ADDITION ALSO. 16. ONE MORE INVESTMENT WHICH REQUIRES TO BE CONSID ERED IS INVESTMENT OF Q 7 LAKHS STATED TO HAVE BEEN MADE ON 10.03.2008 BY THE ASSESSEE IN MUTUAL FUNDS BY CASH. AS ALREADY STATED, THE AIR L ACKS ANY INFORMATION WITH REGARD TO THE MUTUAL FUNDS AS WELL AS THE SCHE ME IN WHICH THE INVESTMENTS ARE MADE. IT WAS BROUGHT TO OUR NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE THAT AS PER SEBI GUIDELINES ISSUED ON 30.09.2002 TO MUTUAL FUNDS (COPY PLACED AT PAGE 31 OF THE COMPILATION FI LED BY THE ASSESSEE), MUTUAL FUNDS ARE DEBARRED FROM ACCEPTING CASH APPLI CATIONS FOR INVESTMENT IN FUNDS. ON 13.09.2012, THE SEBI HAS ISSUED A CIR CULAR IN WHICH IT HAS CARVED OUT AN EXCEPTION TO THE ABOVE RULE BY PERMIT TING CASH TRANSACTIONS IN MUTUAL FUNDS PER INVESTOR PER MUTUAL FUND PER FI NANCIAL YEAR AT RS.20,000/-. THE ABOVE BEING THE APPLICABLE REGULA TION, THERE IS EVERY REASON TO DOUBT THE VERACITY OF THE AIR, BASED ON W HICH THE REVENUE AUTHORITIES HAVE MADE THE IMPUGNED ADDITION. IN LI GHT OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE IMPUGNED AD DITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) DESERVES TO BE DELETED. THERE IS NO MATERIAL TO SHOW THAT THE ASSESSEE MADE INVESTMENTS, IN SUCH CIRCUMSTANCES THE QUESTION OF OFFERING A SATISFACTORY EXPLANATION BY THE ASSESSEE DOES NOT ITA NO.245/BANG/12 PAGE 9 OF 9 ARISE FOR CONSIDERATION. THE REVENUE AUTHORITIES H AVE PROCEEDED ON A WRONG PREMISE IN MAKING THE IMPUGNED ADDITION. WE THEREFORE DIRECT THE ADDITION SUSTAINED BY THE LD. CIT(A) BE DELETED. T HE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWED. 17. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF OCTOBER, 2012. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDICIAL MEMB ER BANGALORE, DATED, THE 5 TH OCTOBER , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.