A. Natarajan, Salem V. ITO, Salem

ITA 2591/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7576 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 06-09-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment
• Section: 142(1); 133A; 131; 2

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 2 5 9 1 AND 2 5 9 2/MDS/2016 ASSESSMENT YEAR : 20 0 3 - 0 4 S HRI A. NATARAJAN, 125/3, SANKAGIRI MAIN ROAD, NETHIMEDU, SALEM 638 002. [PAN: A ESPN1974Q ] VS. THE INCOME TAX OFFICER , WARD I ( 2 ) , 3, GANDHI ROAD, SALEM 636 007 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE / RESPONDENT BY : S HRI S HIVA SRINIVAS , J CIT / DATE OF HEARING : 20 . 02 .201 7 / DATE OF P RONO UNCEMENT : 03 . 0 3 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE SAME ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) , SALEM BOTH DATED 29 . 0 7 .201 6 RELEVANT T O THE ASSESSMENT YEAR 200 3 - 0 4 PASSED UNDER 144 R.W.S. 263 OF INCOME TAX ACT, 1961 [ ACT IN SHORT] AS WELL AS PENALTY ORDER UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. IN THE QUANTUM APPEAL, THE ASSESSEE HAS CHALLENGED AGAINST PART CONFIRMATION OF I.T.A. NO . 2 5 9 1 & 2 5 9 2 / M/ 1 6 2 DISAL LOWANCE OF UNEXPLAINED INVESTMENTS AS WELL AS CONFIRMATION OF INTEREST INCOME FROM OWN BUSINESS OF THE ASSESSEE. I.T.A. NO. 2 5 9 1/MDS/2016 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN MONEY LENDING AND TRADING IN SHARE . HE WAS ALSO A PARTNER IN THE FINANCE FIRMS NAMELY M/S. TAMILNADU FINANCE, M/S. SRI BALAJI ENTERPRISES AND M/S. SALEM TIRUMALAI FINANCE. A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED ON 03.03.2004 IN THESE FIRMS. DURING THE COURSE OF SURVEY, A SWOR N STATEMENT WAS RECORDED FROM THE ASSESSEE, BEING THE MANAGING PARTNER. ON RECEIPT OF THE REFERENCE FROM ADIT (INV.), NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISSUED ON 29.07.2004 T O THE ASSESSEE CALLING FOR RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. BUT THE ASSESSEE HAS NOT RESPONDED TO THE ABOVE NOTICE, ANOTHER NOTICE UNDER SECTION 142(1) OF THE ACT DATED 05.12.2005 WAS ISSUED. FURTHER NOTICE UNDER SECTION 142(1) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 03.02.2006. SINCE THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME OR THE DETAILS AS CALLED FOR IN THE NOTICE SUMMONS UNDER SECTION 131 OF THE ACT WAS ISSUED. IN RESPONSE TO THE SUMMONS, THE ASSESSEE APPEARED AND STATEMENT WAS RECORDED FROM HIM ON 14.03.2006. HE HAS ALSO FILED COPIES OF LOANS STATEMENT TAKEN FROM HIS FIRMS AND THE LIST OF SHARES, HE HAD DEALT WITH. FURTHER, HE HAS FILED THE SALE DEED DATED 25.08.2004 FOR .13,50,000/ - WITH I.T.A. NO . 2 5 9 1 & 2 5 9 2 / M/ 1 6 3 RESPECT TO THE SALE OF LAND AND BUILDING TO HIS PARENTS. IN THE SALE DEED, IT WAS CLEARLY MENTIO NED THAT THE ASSESSEE AND HIS WIFE HAD OBTAINED LOAN TO THE EXTENT OF .8,00,000/ - FROM HIS PARENTS. MEANWHILE THE ASSESSING OFFICER HAS GATHERED DETAILS FROM THE BANKS AND STOCK BROKERS. SINCE THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME FOR THIS ASSES SMENT YEAR, A PROPOSAL UNDER SECTION 144 OF THE ACT WAS ISSUED TO HIM ON 20.03.2006, CALLING FOR OBJECTIONS, IF ANY. HE HAS FILED HIS OBJECTION ON 23.03.2006. ACCORDINGLY, BASED ON THE MATERIALS AVAILABLE AS ON THE DATE ON RECORD, THE ASSESSING OFFICER PAS SED BEST JUDGEMENT ORDER UNDER SECTION 144 OF THE ACT. AGAINST THE ASSESSMENT ORDER UNDER SECTION 144 OF THE ACT, VIDE HIS ORDER UNDER SECTION 263 OF THE ACT DATED 05.12.2006, THE LD. CIT HAS SET ASIDE THE ORDER WITH FOLLOWING SPECIFIC DIRECTIONS. (I) TO ASSESS INCOME FROM HIS OWN FINANCING BUSINESS KEEPING IN VIEW FACTORS LIKE CAPITAL OF .4.5 LAKHS (II) WHILE COMPARING CREDITS IN BANK WITH LOAN FROM PARENTS AND FINANCE FIRM, CREDIT SHOULD BE ALLOWED ONLY FOR LOANS RECEIVED IN THE RELEVANT YEAR (AND NOT EARLIER YEAR), WHICH HAVE BEEN ROUTED THROUGH BANK ACCOUNT. ACCORDINGLY, THE ASSESSING OFFICER HAS POSTED THE CASE FOR HEARING, BUT THE ASSESSEE FAILED TO APPEAR DESPITE SUFFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE. BASED ON THE MATERIALS AVAILABLE ON AND IN VIEW OF THE DIRECTIONS I.T.A. NO . 2 5 9 1 & 2 5 9 2 / M/ 1 6 4 OF THE LD. CIT UNDER SECTION 263 OF THE ACT, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 144 R.W.S. 263 OF THE ACT ON 30.03.2007 ASSESSING TAXABLE INCOME AT .10,74,232/ - AFTER MAKING ADDITIONS TOWARDS UNEXPLAINED INVESTMENTS IN THE SB ACCOUNTS AND INTEREST INCOME FROM ASSESSEE S OWN BUSINESS. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, WITH REGARD TO THE ISSUE OF UNEXPLAINED INVESTMENTS, BY DIRECTING THE ASSESSING OFFICER TO GIVE CREDIT TO THE LOAN AMOUNT OF .1,50,000/ - , THE LD. CIT(A) PARTLY ALLOWED THE GROUND RAISED BY THE ASSESSEE. WITH REGARD TO THE GROUND OF ADDITION TOWARDS IN TEREST INCOME FROM FINANCE BUSINESS, THE LD. CIT(A) CONFIRMED THE ADDITIONS. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEAR ING TO THE ASSESSEE, THE ASSESSMENT UNDER SECTION 144 R.W.S. 263 OF THE ACT WAS PASSED . MOREOVER, THE DETAILS DIRECTLY OBTAINED BY THE ASSESSING OFFICER FROM THE BANK AND SHARE BROKERS WERE NOT GIVEN TO THE ASSESSEE FOR FILING COUNTER REPLY. THEREFORE, HE PLEADED THAT ONE MORE OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE TO FILE THE DETAILS BEFORE THE ASSESSING OFFICER. I.T.A. NO . 2 5 9 1 & 2 5 9 2 / M/ 1 6 5 5. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITIES TO FURNISH THE DETAILS BEFORE THE ASSESS ING OFFICER AND SINCE THE ASSESSEE HAS NOT FILED THE DETAILS, THE ASSESSING OFFICER HAS CONCLUDED THE ASSESSMENT UNDER SECTION 144 R.W.S. 263 OF THE ACT. THEREFORE, THE LD. DR HAS PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE CONFIRMED. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE ASSESSMENT WAS PASSED UNDER SECTION 144 R.W.S. 263 OF THE ACT. DURING THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A OF THE A CT ON 03.03.2004, A SWORN STATEMENT WAS RECORDED FROM THE ASSESSEE. AGAINST THE SUMMONS UNDER SECTION 131 OF THE ACT, THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND STATEMENT WAS ALSO RECORDED FROM HIM ON 14.03.2006. HOWEVER, DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT APPEARED BEFORE THE ASSESSING OFFICER AND THEREBY, THE ASSESSING OFFICER CONCLUDED THE BEST JUDGEMENT ASSESSMENT UNDER SECTION 144 R.W.S. 263 OF THE ACT. ON MERITS, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSING OFFICER HAS NOT ALLOWED CREDIT FOR ANY AMOUNT. AGAINST THE BORROWALS OF .1,50,000/ - FROM THE FATHER OF THE ASSESSEE, THE AR OF THE ASSESSEE FILED EVIDENCES AND ACCORDINGLY, THE LD. CIT(A) REDUCED .1,50,000/ - FROM THE ADDITION S MADE BY THE ASSESSING OFFICER AND DIRECTED TO GIVE CREDIT TO THE LOAN AMOUNT. THUS, IT I.T.A. NO . 2 5 9 1 & 2 5 9 2 / M/ 1 6 6 IS EVIDENT T HAT THE ASSESSING OFFICER HAS NOT PROPERLY EXAMINED THE MATERIALS AVAILABLE ON RECORD WHILE PASSING THE ORDER UNDER SECTION 144 R.W.S. 263 OF THE ACT. THUS, WE REMIT THE MATTER BACK TO THE ASSESSING OFFICER TO RE - EXAMINE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPORTUNITIES OF HEARING TO THE ASSESSEE. 7. WITH REGARD TO INTEREST INCOME FROM FINANCE BUSINESS, THE ASSESSING OFFICER HAS LEVIED INTEREST @ 18%, WHICH WAS CONFIRMED BY THE LD. CIT(A). WE ARE OF THE CONSIDERED OPINIO N THAT THE INTEREST RATE OF 18% IS ON HIGHER SIDE. THUS, WE RESTRICT THE INTEREST COMPONENT TO THE EXTENT OF @ 12% AND DIRECT THE ASSESSING OFFICER TO RECOMPUTE THE SAME. ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. I.T.A. NO.2592/MDS/2016 8. CONSEQUENT T O THE ORDER UNDER SECTION 144 R.W.S. 263 OF THE ACT, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS AND LEVIED PENALTY UNDER SECTION 271(1)(C) OF THE ACT VIDE HIS ORDER DATED 27.09.2007. AGAINST THE QUANTUM ADDITIONS, THE TRIBUNAL HAS REMITTED THE ISS UES BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH HEREIN ABOVE, THE TRIBUNAL CANNOT DECIDE THE LEVY OF PENALTY ON MERITS. OUR VIEW IS FORTIFIED BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RAMAKRISHN A SONS (P) LTD. 192 ITR 282. ACCORDINGLY, THE PENALTY ORDER PASSED UNDER SECTION 271 (1)(C) OF THE ACT STAND QUASHED. HOWEVER, THE I.T.A. NO . 2 5 9 1 & 2 5 9 2 / M/ 1 6 7 ASSESSING OFFICER IS FREE TO INITIATE PENALTY PROCEEDINGS AFRESH AFTER COMPLETING THE ASSESSMENT. 9 . IN THE RESULT, THE APPE AL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED UNDER SECTION 144 R.W.S. 263 OF THE ACT IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED AGAINST PENALTY ORDER UNDER SECTION 271(1)(C) OF THE ACT IS ALLOWED . ORDER PRONOUNCED ON THE 03 RD MARCH , 20 1 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 03.03 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4 . / CIT , 5. / DR & 6. / GF.