Sri Buddan Gowda , Raichur V. Income TAx Officer Ward-3 , Raichur

ITA 2564/BANG/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8912 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-07-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 01-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: RAVISHANKAR S V
• Keywords: Set aside
• Section: 44AD; 143(3); 142(1); 143(1); 250; 143(2); 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES C BENCH: BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA. NO. 2564 /BANG/201 7 (ASSESSMENT YEAR: 2008 - 09 ) SHRI BUDDAN GOUDA, JAGTKAL VILLAGE, DEODARG TALUK, RAICHUR. PAN AKLPB 7335A VS. INCOME TAX OFFICER, WARD 3, RAICHUR. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI RAVI SHANKAR S.V., ADVOCATE. REVENUE BY: DR. P. V. PRADEEP KUMAR, ADDL. CIT (D.R) DATE OF HEARING : 10.07 .2019 DATE OF PRONOUNCEMENT : 20 .0 9 .2019 O R D E R PER SHRI PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), GULBARGA PASSED UNDER SECTION 143(3) AND 250 OF THE INCOME TAX ACT, 1961. 2. AT THE TIME OF HEARING, THE AR SUBMITTED THAT THE ASSESSEE HAS R AISED 18 GROUNDS OF APPEAL . OUT OF ABOVE GROUNDS, THE LD. AR HAS PRESSED ONLY GROUND OF APPEAL NOS.14 & 15 AND HENCE OTHER 2 ITA NO.2564/BANG/2017 GROUNDS OF APPEAL ARE TREATED AS NOT PRESSED AND WITHDRAW N A N D DISMISSED , TH E EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER : 14. TH E LEARNED CIT (APPEALS) WAS NOT JUSTIFIED IN APPRECIATING THAT WHERE ESTIMATION WAS RESORTED TO, THERE COULD BE NO FURTHER ADDITIONS IN THE CASE OF THE APPELLANT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 15. WITHOUT PREJUDICE, IF THE ESTIMATION RESORT ED IS CORRECT, IT WOULD DRAW AN INFERENCE OF REJECTION OF THE BOOKS AND NO ADDITIONS WERE CALLED FOR OVER AND ABOVE THE ESTIMATED INCOME, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS PWD CONTRA CTOR AND HA S INCOME FROM EXECUTION OF CONTRACT WORKS WITH STATE GOVERNMENT DEPARTMENT AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 ON 16.09.2008 WITH TOTAL INCOME OF RS.2,42,640 AND THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED AND SUMMONS . THE LEARNED AUTHORISED REPRESENTATIVE APPEARED BEFORE THE ASSESSING OFFICER AND THE CASE WAS DISCUSSED. THE ASSESSING OFFICER ON PERUSAL OF THE FINANCIAL STATEME NTS FOUND THAT THE ASSESSEE HAS TURNOVER OF RS.48,52,739 AND 3 ITA NO.2564/BANG/2017 HAS OFFERED THE INCOME AT 8% OF GROSS RECEIPTS AS PER SECTION 44AD OF THE ACT , NO BOOKS OF ACCOUNTS MAINTAINED . IN THE PRESENT FINANCIAL YEAR, THE ASSESSEE HAS SOLD THE TWO TIPPERS OF HOT M IX PLANT AND AGRICULTURE LAND S F OR REPAYMENT OF BANK LOAN AND NO CLARIFICATION /DOCUMENT WERE SUBMITTED. THE ASSESSING OFFICER RECEIVED LETTER FROM THE BANK IN RESPECT OF GRANTING OF LOAN FOR PURCHASE OF CAR AND HOT MIX PLANT. ASSESSING OFFICER ON PE RUSAL OF THE BANK STATEMENT FIND REPAYMENT OF LOAN OF RS.14,50,000 ON 2.9.2007 WHICH INCLUDE PRINCIPLE OF RS.11,29,008 AND INTEREST OF RS.3,20,992 AND THE ASSESSEE ;COULD NOT EXPLAIN THE CASH TRANSACTIONS OF REPAYMENT TO BANK A N D T H E ASSESSEE I S IN THE CONTRACT BUSINESS FROM THE EARLIER YEAR. HENCE THE ASSESSING OFFICER CALLED FOR THE CONFIRMATION OF OUTSTANDING BALANCES IN SUNDRY CREDITORS AMOU N T OF RS.45,00,995 AS ON 31.03.2008 AND IT WAS EXPLAINED THAT THE BALANCES IN SUNDRY CREDITORS A M O U N T TO THE EXTENT OF RS.29,95,711 WAS BROUGHT FORWARD FROM F.Y. 2005 - 06. THE ASSESSEE HAS ESTIMATED I N C O M E IN EARLIER ASSESSMENT YEAR 2007 - 08 FROM DIRECT BUSINESS. HENCE THE BALANCE SHEET WAS NOT PREPARED , WHERE IN THE PRESENT ASSESSMENT THE ASSESSEE HAS FILED BALANCE SHEET AND PRODUCED BOOKS OF ACCOUNTS. SINCE NO DETAILS WERE SUBMITTED IN RESPECT OF SUNDRY 4 ITA NO.2564/BANG/2017 CREDITORS BY THE ASSESSEE, THE ASSESSING OFFICER MADE ADDITION OF RS.45,00,995 AND WITH THE OTHER ADDITIONS AND ASSESSED THE TOTAL INCOME OF RS.63,39,214 UNDER SECTION 143(3) DT.27.12.2010. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL WITH THE CIT (AP PEALS). IN THE APPELLATE PROCEEDINGS THE ASSESSEE COULD NOT RECONCILE THE CASH BALANCES FOR REPAYMENT OF BANK LOAN AND HAS NOT PRESSED THIS DISPUTED ISSUE DEALT BY CIT (APPEALS) AT PAGE 4 PARA 4.3 AND WAS DISMISSED. WHEREAS IN RESPECT OF ADDITION MADE O N UNEXPLAINED SUNDRY CREDITORS OF RS.45,00,995 - THE ASSESSEE SUBMITTED THAT LOANS ARE OBTAINED FROM FRIENDS AND RELATIVES AND CIT (APPEALS) DEALT AT PAGE 5 PARA 5.2 OF THE ORDER WHERE THE ASSESSEE HAS NOT SUBMITTED THE INFORMATION EVEN BEFORE APPELLATE A UTHORITY AND CONFIRMED THE ADDITION AND PARTLY ALLOWED THE APPEAL. AGGRIEVED BY THE CIT (APPEALS) ORDER, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 4. IN THE HEARING, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSE E HAS ESTIMATED THE INCOME UNDER PROVISIONS OF SECTION 44AD OF THE ACT AND HENCE NO ADTION OF BALANCE OF SUNDRY CREDITORS CAN BE MADE A N D RELIED ON THE JUDICIAL DECISIONS. FURTHER SUNDRY CREDITORS BALANCES INCLUDES THE OPENING 5 ITA NO.2564/BANG/2017 BALANCES BROUGHT FORWARD FROM T HE ASST. YEAR 2006 - 07 AND THE PROVISIONS OF SEC. 68 OF THE ACT DOES NOT APPLY AND SUNDRY CREDITORS REPRESENT LOAN FROM FRIENDS, RELATIVES AND PAR T I E S W H O SUPPLIED , OPENING BALANCE BROUGHT FORWARD FROM EARLIER YEARS AND FURTHER SUBMITTED THAT INCOM E IS ESTIMATED, NO ADDITION SHALL BE MADE AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE CIT(APPEALS) AND DECISIONS AND ALSO OBJECTED TO THE SUBMISSIONS OF THE LD. AR. 5. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE DISPUTED ISSUE ENVISAGED BY THE LD. AR IN RESPECT OF ADDITION OF OUTSTANDING BALANCE OF SUNDRY CREDITORS WHER E THE ASSESSEE HAS OFFERED THE INCOME ON ESTIMATE D BASIS APPLYING THE PROVISIONS OF SECTION 44AD OF THE ACT. THE CONTENTION OF THE LD. AR THAT THE CIT(APPEALS) HAS OVER LOOKED THE FACT THAT THE ASSESSEE HAS OBTAINED THE LOAN FROM FRIENDS , RELATIVES AND T OOK TIME TO PRODUCE PARTIES WITH DOCUMENTARY EVIDENCE. IN THE ASSESSMENT PR OCEEDINGS, IT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER THAT SUNDRY CREDITOR ALSO INCLUDE CARRY FORWARD BALANCE OF EARLIER YEAR AND ASST. YEAR 2006 - 07. W HEREAS THE ASSESSING OFFICER HAS MADE ADDITION OF THE OPENING BALANCES AND CANNOT BE TRE ATED AS CASH CREDIT IN THE 6 ITA NO.2564/BANG/2017 PREVIOUS YEAR. WE FIND STRENGTH IN THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE AND WE CONSIDER IT PROPER REFER TO THE PROVISIONS OF SECTION 68 WHICH READ AS UNDER : 68. WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CH ARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR : PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHA RE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE - COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS ( A ) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SU CH COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST P ROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE ( 23FB )OF SECTION 10 . 6. WE FIND THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AT PAGE 4 PARA 4 HAS DEALT ON THE ISSUE OF UNEXPLAINED SUNDRY CREDITOR S AND IT WAS BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER THAT THE SUNDRY CREDITORS TO THE EXTENT OF RS.29,95,711 RELATE TO ASSESSMENT YEAR 2006 - 07 AND S A ME BALANCE IS INCLUDED IN THE BALANCE SHEET OF PRESENT ASSESSMENT YEAR . WE FIND THE ASSESSE E HAS NOT PRODUCED B O O K S O F A C C O U N T S AND OTHER DETAILS AS PER THE OBSERVATION S OF 7 ITA NO.2564/BANG/2017 ASSESSING OFFICER AT PAGE 2 PARA 5 OF THE ASSESSMENT YEAR AND CIT (APPEALS) HAS ALSO CONFIRMED OF NON - PRODUCTION O F DETAILS OF SUNDRY CREDITORS AT PARA 5.28 OF THE CIT (APPEALS) ORDER. WE ARE OF THE OPINION THAT AS PER THE PROVISIONS OF SECTION 68 OF THE ACT TH A T OPENING BALANCE CARRIED FORWARD FROM EARLIER YEARS, RECORDED IN THE BOOKS OF ACCOUNTS CANNOT BE CHARGED TO INCOME TAX IN THE CASE OF THE ASSESSEE. BUT THE ASSESSING O FFICER IN THE PRESENT CAS E, HAS NOT REJECTED THE B OOKS OF ACCOUNTS AS THE ASSESSEE FAILED TO PRODUCE IN THE ASSESSMENT PROCEEDINGS AS DISCUSSED AT PAGE 2 PARA 5 OF THE ASSESSMENT ORDER. CONSIDERING THE FACTS AND PROVISION OF LAW, WE SHALL PROVIDE ONE MORE OPPORTUNITY AS PRAYED BY LD. AR TO EXPLAIN THE BALANCES WITH EVIDENCE BEFORE THE ASSESSING OFFICER. ACCORDINGLY, TO MEET THE ENDS OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND RESTORE THE DISPUTED ISSUE OF UNEXPLAINED SUNDRY CREDITOR S, TO THE FILE OF ASSESSING OFFICER FOR LIMITED PURPOS E TO EXAMINE THE CON FIRMATIONS AND EVIDENCES AND EXCLUDE THE OPENING BALANCES OF CREDITORS INCLUDED AS ON 31.3.200 8 AS DISCUSSED ABOVE AND PASS T H E ORDER FURTHER. THE ASSESSEE SHALL BE PROVIDED WITH ADEQUATE OPPORTUNITY OF HEARING AND CO - OPERATIVE I N SUBMITTING THE 8 ITA NO.2564/BANG/2017 INFORMATION AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE ASSESSEE'S APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 0 T H SEP T ., 2019. S D / - S D / - (A.K. GARODIA) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 0 .0 9 . 2019. *REDDY GP COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT (A) 4. PR. CIT 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE