Late Shri Narendra Kothari , L/R. Mr.Nishant Kothari, CHENNAI V. ITO, CHENNAI

ITA 2528/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8200 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 30-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Opportunity of cross examination; Third party statement
• 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; 92; 153

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NOS.2528 & 2529 /MDS./2016 ( / ASSESSMENT YEARS :2008-09 & 2009-10) LATE SHRI NARENDRA KOTHARI, REP BY HIS SON & L/R MR.NISHANT KOTHARI,OLD NO.113, NEW NO.250, KOTHARI TOWERS, NSC BOSE ROAD, CHENNAI-79. VS. THE ITO, COMPANY WARD V(1) CHENNAI-34. PAN AACPN 7254 R ( / APPELLANT ) ( / RESPONDENT ) ! ' # / APPELLANT BY : MR.D.ANAND,ADVOCATE $% ! ' # / RESPONDENT BY : MR.SHIV SRINIVAS,JCIT, D.R & ' ' ( ) / DATE OF HEARING : 29.11.2016 *+ ' ( ) /DATE OF PRONOUNCEMENT : 09.01.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS ARE FILED BY THE ASSESSEE, AGG RIEVED BY THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-3, ITA NOS.2528 & 2529 /MDS/2016 2 CHENNAI DATED 30.06.2016 PERTAINING TO ASSESSMEN T YEARS 2008- 09 & 2009-10. 2. THE FIRST COMMON GROUND IN THESE APPEALS IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIREC TING THE ASSESSING OFFICER TO ASSESS THE ENTIRE 10 FLATS OWN ED BY THE ASSESSEE AT THIRUVANMIYUR UNDER THE HEAD INCOME FROM HOUSE P ROPERTY. THE LEARNED COMMISSIONER OUGHT TO HAVE SEEN THAT OUT OF THE 10 FLATS OWNED BY THE ASSESSEE , ONLY 8 FLATS HAVE BEEN LET OUT AND THERE IS NO INCOME DERIVED FROM 2 FLATS WHICH HAVE BEEN KEPT VACANT. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS OWNING 17 FLATS AT THIRUVANMIYUR ROAD, BUT THE ASSESSEE OFFERED REN T FROM ONLY 8 FLATS AND STATED THAT TWO FLATS ARE VACANT DUE TO LEAKAGE AND WATER PROBLEMS, ANOTHER ONE FLAT WAS USED BY THE ASSESSEE S STAFF, WHO WERE ENGAGED TO COLLECT RENT AND OTHER 6 FLATS WERE SEMI FINISHED AND USED BY M/S.OMKAR CONSTRUCTIONS P. LTD. HOWEVER, TH E AO NOT AGREED WITH THE ASSESSEES CONTENTION CONSIDERED TH E RENT FOR 17 FLATS UNDER THE HEAD INCOME FROM HOUSE PROPERTY. AGGRI EVED WITH THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIE D THE APPEALS ITA NOS.2528 & 2529 /MDS/2016 3 BEFORE THE LD.CIT(A).ON APPEAL, THE LD.CIT(A) DIREC TED THE AO TO CONSIDER THE INCOME FROM 10 FLATS ONLY AND AGREED WITH THE ASSESSEE THAT 7 FLATS ARE NOT LET OUT AND SINCE THE AO HAS N OT BROUGHT OUT ANY MATERIAL CONTRARY TO THE SUBMISSIONS OF THE ASSESSE E. AGAINST THIS, THE ASSESSEE IS IN APPEALS BEFORE US. 4. BEFORE US, THE MAIN CONTENTION OF THE LD.A.R IS THAT THE ASSESSEE LET OUT ONLY 8 FLATS AND TWO FLATS ARE NOT IN LIVING POSITION, SINCE THERE WAS A LEAKAGE AND WATER PROBLEM. 5. ON THE OTHER HAND, LD.D.R RELIED ON THE ORDERS OF LOWER AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD.A.R, THOUGH MADE AN ORAL PLEA THAT T HE TWO FLATS ARE NOT IN A POSITION TO LET OUT DUE TO LEAKAGE AND SEW AGE AS THEY LOCATED IN THE LAST FLOOR OF THE BUILDING, HE HAS NOT BROU GHT ANY RECORD TO SUGGEST THAT THESE TWO FATS ARE NOT HABITABLE CONDI TION, WE REMIT THE ISSUE TO THE FILE OF AO TO VERIFY WHETHER THESE FLA TS ARE REALLY LET OUT OR NOT, BY GOING THROUGH ELECTRICITY, WATER USAGE FR OM THE RESPECTIVE DEPARTMENT AND ALSO ENQUIRE WITH REVENUE AUTHORITIE S REGARDING ITA NOS.2528 & 2529 /MDS/2016 4 USAGE OF FLATS AND IF IT IS REALLY IN THE HABITABLE POSITION AND IF THE AO COME TO KNOW THAT THESE FLATS ARE LET OUT, THEN ALV TO BE BROUGHT TO TAX. WITH THIS OBSERVATION, WE REMIT THIS ISSUE TO THE FILE OF AO FOR FRESH CONSIDERATION AFTER GIVING OPPORTUNITY OF HEA RING TO THE ASSESSEE. 7. THE NEXT COMMON GROUND IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DIRECTING THE ASSESSI NG OFFICER TO ASSESS THE 16 SHOPS OWNED BY THE APPELLANT AT NSC B OSE ROAD UNDER THE HEAD INCOME FROM HOUSE PROPERTY. THE LEAR NED COMMISSIONER OUGHT TO HAVE SEEN THAT OUT OF THE 16 SHOPS OWNED BY THE APPELLANT, ONLY 10 SHOPS HAVE BEEN LET OUT AND THERE IS NO INCOME DERIVED FROM 6 SHOPS WHICH IS UNDER SELF-OCCUPATION AND USED BY THE APPELLANT FOR STORAGE OF ITS GOODS. 8. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS HAVING 18 FLATS AT NSC BOSE ROAD AND OUT OF IT, ASSESSEE OFFERED RENTA L INCOME OF 10 FLATS ONLY. HOWEVER, THE AO CONSIDERED THE RENTAL INCOME OF 16 FLATS. AGGRIEVED WITH THE ORDER OF LD. ASSESSING OFFICER, THE ASSESSEE CARRIED THE APPEALS BEFORE THE LD.CIT(A).ON APPEAL, THE LD.CIT(A) ITA NOS.2528 & 2529 /MDS/2016 5 CONFIRMED THE ORDER OF LD. ASSESSING OFFICER. AGAIN ST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 9. BEFORE US, IT WAS SUBMITTED BY THE LD.A.R THAT SIX FLATS WERE USED BY STORING THE MATERIALS RELATED TO THE PROJEC TS EXECUTED BY M/S.OMKAR CONSTRUCTIONS P. LTD., WHEREIN THE ASSESS EE IS A DIRECTOR. 10. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THE L D.CIT(A) OBSERVED THAT THE DIRECTOR IS DIFFERENT FROM LIMITE D COMPANY AND IT AMOUNTS LETTING OUT THE PROPERTY TO M/S.OMKAR CONST RUCTIONS P. LTD. ACCORDINGLY, LD.CIT(A) CONFIRMED THE CHARGING OF RE NTAL INCOME FROM THESE FLATS. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THESE SIX FLATS S ITUATED AT NSC BOSE ROAD WERE USED BY OTHER THAN ASSESSEE, NAMELY M/S.O MKAR CONSTRUCTIONS P. LTD. BEING SO, WE ARE OF THE OPI NION THAT THE ASSESSEE IS LET OUT THE PROPERTY TO M/S.OMKAR CONST RUCTIONS P. LTD. AND THE ALV OF THOSE FLATS PROPERTY TO BE TAXED IN THE HANDS OF ASSESSEE AS INCOME FROM HOUSE PROPERTY. THIS GROUND OF ASSESSEE RAISED IN THESE TWO APPEALS STANDS DISMISSED. ITA NOS.2528 & 2529 /MDS/2016 6 12. THE OTHER GROUND RAISED BY THE ASSESSEE IN THE APPEAL IN ITA NO.2529/MDS./16 IS WITH REGARD TO CONFIRMING THE AD DITION OF ` 10.35 LAKHS MADE UNDER THE HEAD UNDISCLOSED INVESTMENT IN LAND ON THE BASIS OF A LETTER DATED 26.03.2014 & 28.03.2014, AL LEGED TO HAVE BEEN OBTAINED BY THE AO FROM M/S.GURUDEV FOUNDATION AT THE BACK OF THE ASSESSEE. 13. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE P URCHASED A PROPERTY LOCATED AT NO. 153 PERUMBAKKAM VILLAGE TAMBARAM TALUK, KANCHIPURAM DISTRICT ADMEASURING 69 CENTS AND 4700 SQ. FT. FROM M/S.GURUDEV FOUNDATION VIDE TWO SALE DEEDS DATED 3. 2.2010 AND 5.4.2010 FOR A REGISTERED DOCUMENTATION VALUE AT ` 1,34,00,000/-. HOWEVER, IT WAS RECORDED IN THE BOOKS OF ACCOUNTS O F ASSESSEE AT ` 1,67,50,000/-. THERE WAS A SURVEY U/S.133A OF THE A CT AT THE BUSINESS PREMISES OF M/S.OMKAR CONSTRUCTIONS P. LTD . , IN WHICH THE ASSESSEE IS A DIRECTOR. CONSEQUENT TO THE SURVEY, T HE ASSESSEE HAD ADMITTED UNEXPLAINED INVESTMENT TO THE TUNE OF ` 41.5 LAKHS FOR ASSESSMENT YEARS 2010-11 & 2011-12. HOWEVER, IT WA S SUBMITTED BY THE ASSESSEE THAT TOTAL INVESTMENT IN THE ABOVE SAI D PROPERTY WAS AT ` ITA NOS.2528 & 2529 /MDS/2016 7 209 LAKHS AND NOT ` 167.5 LAKHS. CONSEQUENTLY, THE ASSESSEE OFFERED ` 41.5 LAKHS AS ADDITIONAL INCOME TOWARDS UNEXPLAINE D INVESTMENT IN RESPECT OF THE ABOVE PROPERTY. HOWEVER, THE AO FURT HER ENQUIRED WITH THE M/S.GURUDEV FOUNDATION ON THE BASIS OF THE LETT ER DATED 26.03.2014 & 28.03.2014. THE AO CAME TO KNOW THAT THERE WAS FURTHER ADDITIONAL PAYMENT OF ` 10.35 LAKHS, IN ADDITION TO THE OFFER MADE BY THE ASSESSEE AT ` 41.5 LAKHS, THE AO BROUGHT INTO TAX ANOTHER AMOUNT OF ` 10.35 LAKHS ON THE BASIS OF LETTER FROM M/S.GURUDEV FOUNDATION. AGAINST THIS, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 14. ON APPEAL, LD.CIT(A) AFTER GETTING THE SUBMISS IONS OF ASSESSEE, SENT THE SAME TO THE AO VIDE LETTER DATED 29.02.2016. THE AO IN TURN SENT A REMAND REPORT ON 31.03.2016, ISSU ED BY LD.CIT(A) ON 01.04.2016. THE AO IN HIS REMAND REPORT CONFIRM ED THE ADDITIONAL PAYMENT OF ` 10.35 LAKHS TO M/S.GURUDEV FOUNDATION BY THE ASSESS EE AND HE SUPPORTED THE ASSESSMENT ORDER IN REMAND PRO CEEDINGS. ON THE BASIS OF REMAND REPORT, THE LD.CIT(A) CONFIRMED THE ADDITION MADE ON UNEXPLAINED INVESTMENT AMOUNTING TO ` 10.35 LAKHS. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS.2528 & 2529 /MDS/2016 8 15. THE MAIN CONTENTION OF THE LD.A.R IS THAT OTHE R THAN THE LETTER FROM M/S.GURUDEV FOUNDATION FOR THE RECEIPT OF ` 10.35 LAKHS PAYMENT FROM THE ASSESSEE, THERE IS NO EVIDENCE IN THE HAND S OF AO. ACCORDING TO LD.A.R, THIRD PARTY STATEMENT CANNOT B E RELIED UPON WITHOUT PROVIDING CROSS EXAMINATION, OPPORTUNITY TO THE ASSESSEE. FOR THIS RE RELIED ON THE JUDGEMENT OF SUPREME COUR T IN THE CASE OF CIT VS. P. V. KALYANASUNDARAM IN [2007] 294 ITR 49 (SC). 16. ON THE OTHER HAND, LD.D.R STRONGLY SUPPORTED T HE ORDER OF LOWER AUTHORITIES AND SUBMITTED THAT STATEMENT COLLECTED FROM M/S.GURUDEV FOUNDATION U/S.131 OF THE ACT WAS CONFRONTED TO THE AUTHORISED REPRESENTATIVE OF ASSESSEE, NAMELY SHRI NARENDRA KO THARI AND THE ASSESSEE CANNOT CLAIM THAT EVIDENCES COLLECTED BY T HE DEPARTMENT AT THE BACK OF THE ASSESSEE AND USED AGAINST THE ASSES SEE FOR FRAMING THE ASSESSMENT ORDER. HE PRAYED THAT ADDITION TO B E SUSTAINED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. IN THIS CASE, THE ASSESSMENT WAS BASED ON OFFER MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY. ORIGINA LLY THE ASSESSEE ITA NOS.2528 & 2529 /MDS/2016 9 EXECUTED SALE DEED FOR PURCHASE OF A PROPERTY AT P ERUMBAKKAM FOR ` 1.34 CRORES. HOWEVER, IT WAS RECORDED IN BOOKS OF ACCOUNTS AT ` 167.5 LAKHS. DURING THE COURSE OF SURVEY, SEC.133A ASSESSEE ADMITTED THE SALES CONSIDERATION WAS 209 LAKHS. A CCORDINGLY, THE ASSESSEE OFFERED ADDITIONAL INCOME OF ` 41.5 LAKHS. THE AO AFTER ACCEPTING THE OFFER OF ASSESSEE DURING THE COURSE O F SURVEY, HE ENQUIRED WITH THE PURCHASER, NAMELY M/S.GURUDEV FOU NDATION AND ON THE BASIS OF THEIR LETTER, AO MADE FURTHER ADDITIO N OF ` 10.35 LAKHS AND THERE IS NO OTHER POSITIVE MATERIAL TO SUGGEST THE PAYMENT OF THIS, ON MONEY OF ` 10.35 LAKHS. THE EVIDENCE WITH THE AO ONLY WITH TH E RECORD OF LETTERS FROM M/S.GURUDEV FOUNDATION COLLE CTED DURING THE COURSE OF SURVEY PROCEEDINGS U/S.133A OF THE ACT AN D EVEN THOUGH THE AO COLLECTED INFORMATION FROM M/S.GURUDEV FOUND ATION, THERE WAS NO OPPORTUNITY OF CROSS EXAMINATION WAS GIVEN T O THE ASSESSEE AND IT WAS CLEARLY STATED BY THE AO THAT THE FACT W AS APPRISED TO THE ASSESSEES COUNSEL. IN OUR OPINION, APPRISING THE FACTS TO THE ASSESSEES COUNSEL CANNOT BE SUBSTITUTION FOR PROVI DING OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. IN SIMILAR CIRC UMSTANCES, ITA NOS.2528 & 2529 /MDS/2016 10 THE SUPREME COURT IN THE CASE OF CIT VS. P. V. KALY ANASUNDARAM CITED SUPRA HELD AS FOLLOWS:- 5. - - - LEARNED COUNSEL REPRESENTING THE ASSE SSEE-RESPONDENT HAS HOWEVER POINTED OUT THAT THE COMMISSIONER OF IN COME-TAX IN PARTICULAR, HAD AFTER A VERY ELABORATE DISCUSSION O F THE MATTER, CONCLUDED ON A FINDING OF FACT WITH REGARD TO THE N ATURE OF THE TRANSACTION AND THIS VIEW HAD BEEN ACCEPTED BY THE TRIBUNAL AS WELL. HE HAS ACCORDINGLY SUBMITTED THAT NO SUBSTANT IAL QUESTIONS OF LAW HAVE BEEN RAISED IN THIS MATTER AND THE ISSUES RAISED WERE PURELY QUESTIONS OF FACT. 6. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES AN D HAVE GONE THROUGH THE RECORD. IT IS TRUE THAT THE DIVISION BE NCH OF THE HIGH COURT HAS BORROWED EXTENSIVELY FROM THE ORDERS OF T HE TRIBUNAL AND THE COMMISSIONER AND PASSED THEM OFF AS IF THEY WER E THEMSELVES THE AUTHOR(S). WE FEEL THAT QUOTING FROM AN ORDER O F SOME AUTHORITY PARTICULARLY A SPECIALIZED ONE CANNOT PER SE BE FAU LTED AS THIS PROCEDURE CAN OFTEN HELP IN MAKING FOR BREVITY AND PRECISION, BUT WE AGREE WITH MR. VAHANVATI TO THE EXTENT THAT ANY ' BORROWED WORDS' USED IN A JUDGMENT MUST BE ACKNOWLEDGED AS S UCH IN ANY APPROPRIATE MANNER AS A COURTESY TO THE TRUE AUTHOR (S). BE THAT AS IT MAY, WE ARE OF THE OPINION THAT THE THREE QUESTIONS REPRODUCED ABOVE CAN, IN NO WAY, BE CALLED SUBSTANTIAL QUESTIO NS OF LAW. THE FACT AS TO THE ACTUAL SALE PRICE OF THE PROPERTY, T HE IMPLICATION OF THE CONTRADICTORY STATEMENTS MADE BY RAJARATHINAM OR WH ETHER RELIANCE COULD BE PLACED ON THE LOOSE SHEETS RECOVE RED IN THE COURSE OF THE RAID ARE ALL QUESTIONS OF FACT. WE TH EREFORE FIND NO INFIRMITY IN THE ORDER OF THE HIGH COURT. ACCORDING LY, WE DISMISS THE APPEAL. IN VIEW OF THE ABOVE DECISION, WE ARE OF THE OPINIO N THAT LOWER AUTHORITIES ARE NOT JUSTIFIED IN MAKING ADDITION OF ` 10.35 LAKHS ON THE BASIS OF LETTERS FURNISHED BY M/S.GURUDEV FOUNDATIO N, WHO IS THE VENDOR AS SUCH, ADDITION CANNOT BE SUSTAINED. MOR E SO, WHEN THE ITA NOS.2528 & 2529 /MDS/2016 11 AO ACCEPTED THE OFFER MADE BY THE ASSESSEE IN HIS S TATEMENT DURING THE COURSE OF SURVEY, ONCE AGAIN HE CANNOT STEP IN OR ENQUIRE THE THINGS WITH THE VENDOR. HE SHALL ACCEPT THE OFFER M ADE BY THE ASSESSEE IN TOTO OR REJECT IN TOTO, HE CANNOT DO CH ERRY PICKING SO AS TO SUIT HIS NEEDS. ACCORDINGLY, WE ARE NOT IN A POSIT ION TO APPRECIATE THE ARGUMENT OF THE LD.D.R. ACCORDINGLY, WE ARE DELE TING THE ADDITION MADE BY THE LD. ASSESSING OFFICER AT ` 10.35 LAKHS TOWARDS IMPUGNED LAND TRANSACTION. THIS GROUND RAISED BY THE ASSESSE E STANDS ALLOWED. 18. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE A RE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH JANUARY, 2017 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 09 TH JANUARY, 2017 . K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF