The ITO, Ward-2(4), AMRELI V. Shri B.P. Sudani, Collector, Ahmedabad

ITA 270/RJT/2011

• Counselvise Citation: 27024914 RSA 2011
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-07-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 16-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: DM RINDANI
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT BEFORE SHRI T K SHARMA, JM AND SHRI D K SRIVASTAVA, AM ITA NO. 270 /RJ T/201 1 ASSESSMENT YEAR : 200 4 - 0 5 ITO, WARD - 2(4 ), AMRELI V. SHRI B P SUDANI COLLECTOR, C/O. DHOLKA PRANT OFFI CE DHOLKA, AHMEDABAD PAN : AHPPS 9620 L DATE OF HEARING : 23 .0 7 .2013 DATE OF PRONOUNCEMENT : 13 . 0 9 .2013 REVENUE BY : SHRI AVINASH KUMAR, DR ASSESSEE BY : SHRI D M RINDANI, CA ORDER D. K. SRIVASTAVA : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - XXI, AHMEDABAD ON 10.03.2011 ON THE FOLLOWING GROUNDS: - 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.86,000/ - ON ACCOUNT OF LOW HOUSE HOLD EXPENSES. 2. THE LD. CIT (A ) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.741227/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT IN HOUSE PROPERTY AND IN BANK ACCOUNT ON THE BASIS OF UNSUBSTANTIATED CLAIMS OF THE ASSESSEE AND DESPITE MATERIAL RECORD IN SUPPORT OF THE ADDITION MADE BY THE AO. 3. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.200000/ - ON ACCOUNT OF UNEXPLAINED INVESTMENT IN G.P.F. ACCOUNT ON THE BASIS OF UNSUBSTANTIATED CLAIMS OF THE ASSESSEE AND DESPITE MATERIAL RECORD IN SUPPORT OF THE ADDITION MADE BY THE AO. 4. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.122700/ - ON ACCOUNT OF REPAYMENT OF HBA INTEREST. 5. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.120000/ - ON ACCOUNT OF EXCESS AGRICULTURE INCOME ON THE BASIS OF UNSUBSTANTIATED CLAIMS OF THE ASSESSEE AND DESPITE MATERIAL RECORD IN SUPPORT OF THE ADDITION MADE BY THE AO. 2 270 - RJT - 2011 - SHRI B P SUDANI 6. O N THE FACTS OF THE CASE AND IN LAW T HE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A O. 7. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFORE OR DURING HEARING PROCEEDINGS BEFORE THE HONBLE ITAT. 8. IT IS, THEREFORE PRAYED THAT THE ORDER OF THE CIT (A) - XXI, AHMEDABAD MAY KINDLY BE SET - ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 2. THE ASSESSEE IS AN INDIVIDUAL. AT THE RELEVANT POINT OF TIME, HE WAS POSTED AS DEPUTY COLLECTOR, DHOLKA PRANT OFFICE, DHOLKA, DIST. AHMEDABAD. HE FILED HIS RETURN OF INCOME ON 21.06.2004 RETURNING TOTAL INCOME AT RS.1,47,945/ - IN ADDITION TO AGRICULTUR AL INCOME OF RS.2,10,000/ - . ASSESSMENT U/S 143(3) OF THE INCOME - TAX ACT WAS COMPLETED ON 28.12.2006 ASSESSING TOTAL INCOME OF THE ASSESSEE AT RS.14,07,790/ - IN ADDITION TO AGRICULTURAL INCOME OF RS.90,000/ - . THE ADDITIONS MADE BY THE ASSESSING OFFICER TO T HE INCOME RETURNED BY THE ASSESSEE ARE MAINLY ON ACCOUNT OF LOW HOUSEHOLD EXPENSES, UNEXPLAINED INVESTMENTS AND TREATMENT OF A SUM OF RS.1,20,000/ - AS INCOME FROM UNDISCLOSED SOURCES OUT OF AGRICULTURAL INCOME OF RS.2,10,000/ - SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME. 3. AGGRIEVED BY THE ADDITIONS MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A) WHO DELETED ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER AND CONSEQUENTLY ALLOWED THE APPEAL FILED BY THE AS SESSEE. AGGRIEVED BY THE ORDER PASSED BY THE LD . CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 4. AS ALREADY STATED EARLIER, ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF (1) LOW HOUSEHOLD EXPENSES, (2) UNEXPLAINED INVESTME NTS , AND (3) TREATMENT OF RS.1,20,000/ - AS INCOME FROM UNDISCLOSED SOURCES OUT OF AGRICULTURAL INCOME OF RS.2,10,000/ - DECLARED BY THE ASSESSEE. THE ASSESSEE HAD FILED CASH FLOW STATEMENT FOR THREE F INANCIAL Y EARS, NAMELY , FY 2001 - 02, FY 2002 - 03 AND FY 200 3 - 04 RELEVANT TO A SSESSMENT Y EARS 2002 - 03, 2003 - 04 AND 2004 - 05. IN THE AFORESAID CASH FLOW STATEMENT, THE ASSESSEE HA D SHOWN CASH INFLOWS AND CASH OUTFLOWS (INCLUDING THE INVESTMENTS WHICH HAVE BEEN TREATED BY THE AO AS 3 270 - RJT - 2011 - SHRI B P SUDANI UNEXPLAINED) . IT IS ON THE BASIS OF CASH FLOW STATEMENT THAT THE LD . CIT(A) HAS TREATED ALL THE ADDITIONS MADE BY THE AO AS FULLY EXPLAINED. IT IS THEREFORE RELEVANT TO EXAMINE THE CASH FLOW STATEMENT FILED BY THE ASSESSEE FOR THE AFORESAID YEARS. 5. PERUSAL OF THE CASH FLOW STATEMENT SHOW S THAT THE ASSESSEE SOUGHT TO EXPLAIN THE NATURE AND SOURCE OF ADDITIONS MADE BY THE AO WITH REFERENCE TO CASH AVAILABILITY AS SHOWN IN THE CASH FLOW STATEMENT. THERE ARE TWO MAIN SOURCES OF CASH INFLOW IN THE AFORESAID CASH FLOW STATEMENT. FIRST SOURCE OF CASH INFLOW IS OPENING CASH BALANCE OF RS.6,50,000/ - SHOWN IN FY 2001 - 02 AND ON THAT BASIS OPENING BALANCE OF RS.7,26,950/ - AND RS.6,18,950/ - SHOWN IN THE FY 2002 - 03 AND FY 2003 - 04 RESPECTIVELY. IT IS THEREFORE THE CORRECTNESS OF THE OPENING BALANCE OF RS .6,50,000/ - SHOWN IN THE FY 2001 - 02 WHICH HAS TO BE EXAMINED. THE ASSESSEE IS A DEPUTY COLLECTOR. HE MAINTAINS SEVERAL BANK ACCOUNTS, PPF ACCOUNTS, GPF ACCOUNT ETC. IT IS UNBELIEVABLE THAT A PERSON OF HIS STANDING WOULD KEEP SUCH A HUGE AMOUNT OF RS.6,50,0 00/ - IN CASH. BESIDES, THERE IS NO EVIDENCE TO ESTABLISH THAT THE ASSESSEE REALLY HAD THE OPENING BALANCE OF RS.6,50,000/ - . THERE IS NO MATERIAL ON RECORD TO SHOW THAT CASH FLOW STATEMENTS FOR RESPECTIVE YEARS WERE FILED ALONG WITH THE RETURN OF INCOME IN THOSE RESPECTIVE YEARS. THERE IS NO EVIDENCE ON RECORD THAT THE SAID CASH FLOW STATEMENT WAS CONTEMPORANEOUSLY PREPARED IN THOSE YEARS. T HE ASSESSEE HAS OBVIOUSLY PREPARED THE SAME AT THE LATER STAGE TO EXPLAIN THE NATURE AND SOURCE OF INVESTMENTS, WHICH H E WAS FOUND TO HAVE MADE IN THE YEAR UNDER APPEAL, FOR WHICH PURPOSE HE INFLATED OPENING BALANCE . BESIDES, THE AFORESAID STATEMENT DOES NOT RECORD DAY TO DAY DETAILS OF CASH INFLOWS AND OUTFLOWS. IN THE ABSENCE OF ANY EVIDENCE ON RECORD TO ESTABLISH THE GE NUINENESS OF THE OPENING BALANCE, IT IS NOT POSSIBLE TO ACCEPT THE OPENING BALANCE AS SHOWN IN THE CASH FLOW STATEMENT. THE OPENING BALANCE CAN NOT THEREFORE BE TREATED AS AVAILABLE TO EXPLAIN THE NATURE AND SOURCE OF THE IMPUGNED INVESTMENTS AND EXPENSES. 6. ANOTHER SOURCE OF CASH INFLOW IN THE YEAR UNDER APPEAL IS AGRICULTURAL INCOME SHOWN BY THE ASSESSEE AT RS.2,10,000/ - AS AGAINST RS.80,000/ - SHOWN BY THE ASSESSEE HIMSELF IN EACH OF THE A SSESSMENT Y EARS 2002 - 03 AND 2003 - 04. THE 4 270 - RJT - 2011 - SHRI B P SUDANI ASSESSEE HAS GIVEN NO EX PLANATION FOR SUCH ABNORMAL INCREASE IN THE AGRICULTURAL INCOME. LAND HOLDING AND PA TTERN OF CULTIVATION REMAINS THE SAME. AGRICULTURAL INCOME IS EXEMPT FROM TAX. IT IS QUITE OBVIOUS THAT THE ASSESSEE HA S INFLATED AGRICULTURAL INCOME FROM RS.80,000/ - SHOWN IN THE PRECEDING AYS 2002 - 03 AND 2003 - 04 TO RS.2,10,000/ - IN THE YEAR UNDER APPEAL SO AS TO EXPLAIN THE NATURE AND SOURCE OF THE INVESTMENTS AND EXPENSES. THE ASSESSING OFFICER IS RIGHT IN RESTRICTING AGRICULTURAL INCOME OF THE ASSESSEE TO RS.90,000/ - WHI CH IS MORE THAN 10% HIGHER THAN THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING TWO A SSESSMENT Y EARS. IN OTHER WORDS, ASSESSEE WOULD NOT BE ENTITLED TO HAVE THE BENEFIT OF CASH INFLOW OF RS.2,10,000/ - ON ACCOUNT OF AGRICULTURAL I NCOME. IT HAS TO BE RESTRICTED TO RS.90,000/ - . 7. PERUSAL OF THE CASH FLOW STATEMENT SHOWS THAT THE ASSESSEE HAS ACCEPTED THE CASH OUTFLOW AGGREGATING TO RS.8,45, 200/ - IN THE YEAR UNDER APPEAL ON ACCOUNT OF CASH DEPOSIT IN BANK (RS.11,500/ - ), DEPOSIT IN GPF ACCOUNT (RS.2,00,000/ - ), DEPOSIT IN PPF ACCOUNT (RS.70,000/ - ), PURCHASE OF LAND (RS.1,00,000/ - ), PAYMENT TO TIRTH CONSTRUCTION (RS.3,00,000/ - ), PURCHASE OF ACTIVA (RS.41,000/ - ) AND REPAYMENT OF HBA INTEREST (RS.1,22,700/ - ). AS STATED EARLIER, THE ASSES SING OFFICER HAS ALSO ADDED A SUM OF RS.86,000/ - ON ACCOUNT OF LOW HOUSEHOLD EXPENSES. 8 . IN SUPPORT OF APPEAL, THE LD . DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ASSESSMENT ORDER. HE SUBMITTED THAT CASH FLOW STATEMENT AS SUBMITTED BY THE ASSESSEE BEFOR E THE LD . CIT(A) WAS NOT CORROBORATED BY ANY INDEPENDENT EVIDENCE AND THEREFORE THE CASH INFLOW AS SHOWN IN THE SAID CASH FLOW STATEMENT SHOULD NOT BE ACCEPTED. 9 . IN REPLY, THE LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUPPORTED THE ORDER PASSED BY THE LD CIT(A) . HE RELIED UPON THE CASH FLOW STATEMENT FILED BY THE ASSESSEE BEFORE THE LD CIT(A) ON THE BASIS OF WHICH THE LD CIT(A) HAS DELETED THE IMPUGNED ADDITIONS. HE HAS ALSO FILED WRITTEN SUBMISSIONS SUPPORTING THE ORDER PASSED BY THE CIT(A). 5 270 - RJT - 2011 - SHRI B P SUDANI 10 . WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THEIR SUBMISSIONS. FIRST GROUND OF APPEAL RELATES TO ADDITION OF RS.86,000/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW HOUSEHOLD EXPENSES. THE ASSESSEE HAS A FAMILY CONSISTING OF THREE MEMBERS. HE IS A DEPUTY COLLECTOR. HE WAS FOUND TO HAVE WITHDRAWN A MEAGER SUM OF RS. 34,000/ - IN THE WHOLE YEAR FOR HOUSEHOLD EXPENSES WHICH WAS CONSIDERED BY THE ASSESSING OFFICER TO BE LOW. THE ASSESSING OFFICER THEREFORE FIXED THE HOUSEHOLD EXPENSES AT RS.10,00 0/ - AND RESULTANTLY ADDED A SUM OF RS.86,000/ - TOWARDS HOUSEHOLD EXPENSES. KEEPING IN VIEW THE SIZE OF THE FAMILY OF THE ASSESSEE, HIS STATUS AND STANDING IN THE SOCIETY, HIS STANDARD OF LIVING AS EVIDENT FROM THE INVESTMENTS MADE BY HIM AND HIS SALARY, W E CONSIDER IT APPROPRIATE TO RESTRICT THE ADDITION TO RS.50,000/ - AS AGAINST RS.86,000/ - MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF LOW HOUSEHOLD EXPENSES. THIS WORKS OUT TO RS.7000/ - PER MONTH (RS.84,000/ - PER ANNUM) AS AGAINST RS.5000/ - SHOWN BY THE ASS ESSEE IN THE YEAR UNDER APPEAL. IN THIS VIEW OF THE MATTER, ADDITION ON ACCOUNT OF LOW HOUSEHOLD EXPENSES IS CONFIRMED TO THE EXTENT OF RS.50,000/ - . GROUND NO.1 TAKEN BY THE REVENUE IS PARTLY ALLOWED. 1 1 . GROUND NOS. 2, 3 AND 4 RELATE TO ADDITIONS MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF INVESTMENTS , WHICH, ACCORDING TO THE ASSESSING OFFICER, HA VE NOT BEEN SATISFACTORILY EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAS NO SATISFACTORY EXPLANATION IN THIS BEHALF EXCEPT TO RELY ON THE CASH FLOW STATEMENT. THE CASH INFLOWS SHOWN IN THE STATEMENT ARE NOT SUPPORTED BY ANY EVIDENCE. THE OPENING BALANCE OF THE CASH FLOW STATEMENT HAS BEEN INFLATED WITH A VIEW TO EXPLAIN THE NATURE AND SOURCE OF INVESTMENTS. THERE IS NO MATERIAL AVAILABLE ON RECORD TO HOLD THAT THE ASSESSEE HAD OPENING CASH BALANCE AS SHOWN IN THE CASH FLOW STATEMENT. SIMILARLY, THE ASSESSEE HAS INFLATED AGRICULTURAL INCOME. IN THIS VIEW OF THE MATTER, THE BENEFIT ON ACCOUNT OF OPENING BALANCE AND AGRICULTURAL INCOME IS RESTRICTED TO RS.1,25,000/ - . R ESULTANTLY, THE ADDITION TO THE EXTENT OF RS.7,20,200/ - MADE BY THE ASSESSING OFFICER IS CONFIRMED. GROUND NOS. 2, 3 AND 4 ARE PARTLY ALLOWED. 1 2 . SINCE THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE AT RS. 2,10,000/ - HAS NOT BEEN ACCEPTED BY US FOR EXPLA INING THE NATURE AND SOURCE OF INVESTMENTS , THE 6 270 - RJT - 2011 - SHRI B P SUDANI ADDITION SEPARATELY MADE BY THE A SSESSING OFFICER BY TREATING A SUM OF RS.1,20,000/ - AS INCOME FROM UNDISCLOSED SOURCES OUT OF AGRICULTURAL INCOME OF RS.2,10,000/ - SHOWN BY THE ASSESSEE CANNOT BE SUSTAINED. T HEREFORE THE AFORESAID ADDITION IS DELETED. 1 3 . IN VIEW OF THE FOREGOING, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 13 . 0 9 . 201 3 SD/ - SD/ - (T. K. SHARMA) ( D. K. SRIVASTAVA) JUDICIAL MEMBER ACCOUNTA NT MEMBER RAJKOT: 13 . 0 9 .2013 B T COPY OF ORDER FORWARDED TO: - 1 . APPELLANT ITO, WARD - 2(4), AMRELI 2 . RESPONDENT - SHRI B P SUDANI, C/O. DHOLKA PRANT OFFICE, DHOLKA, AHMEDABAD 3 . CONCERNED CIT - III, RAJKOT 4 . CIT (A) - XXI , AHMEDABAD 5 . DR, ITAT, R AJKOT 6 . GUARD FILE. BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT