Sri. T. Thimmegowda, V. ITO, Bangalore

ITA 272/BANG/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0199 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 04-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: D DEVARAJ
• Keywords: Peak credit; Cost of acquisition
• Section: 147; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS.272 & 273/BANG/2013 ASSESSMENT YEARS : 2006-07 & 2007-08 SHRI T. THIMMEGOWDA, NO.690/O, 14 TH CROSS, OPP. VET COLLEGE, 2 ND PHASE, J.P. NAGAR, BANGALORE 560 078. PAN: AFVPG 8261P VS. THE INCOME TAX OFFICER, WARD 4(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI D. DEVARAJ, CA RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 30.06.2016 DATE OF PRONOUNCEMENT : 20.07.2016 O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE AGGRIEVED BY THE DIFFERENT ORDERS OF THE CIT(APPEALS)-II, BANGALORE, BOTH DATE D 07.12.2012 FOR THE ASSESSMENT YEARS 2006-07 & 2007-08. SINCE COMMON I SSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE OF THE SAME BY THIS CONSOLIDATED ORDER. ITA NO.272 & 273/BANG/2013 PAGE 2 OF 9 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1 . THE ORDER OF THE LAA IS BAD IN LAW . 2. THE LAA ERRED IN CONFIRMING THE ACTION OF LAO IN COMPLETING THE ASSESSMENT UNDER SECTION 144 READ WI TH SECTION 147 WITHOUT FURNISHING THE REASONS FOR RE- OPENING THE ASSESSMENT. 3. THE LAA ERRED IN CONFIRMING THE ACTION OF LAO, I N REJECTING THE VARIOUS CONTENTIONS OF THE APPELLANT IN RESPECT OF THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS. HE FURTHER ERRED IN CONFIRMING THE ADDITIONS OF RS .404.21 LAKHS AS THE INCOME OF THE APPELLANT WHEN SUCH WAS NOT THE FACT. HE ALSO ERRED IN REJECTING THE CONTENTION OF THE APPELLANT THAT EVERY SINGLE TRANSACTION IN THE BANK ACCOUNTS WAS PROPERLY AND CORRECTLY ACCOUNTED BY SRI M THIMM E GOWDA, WHO OPERATED THE ACCOUNTS THROUGH THE APPELL ANT. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LAA E RRED IN ONLY CONSIDERING THE DEPOSITS AND NOT CONSIDERING T HE WITHDRAWALS BY WAY OF CHEQUES. THE LAA OUGHT TO HAVE APPLIED THE PRINCIPLE OF PEAK CREDIT FOR QUANTIFYING THE AMOUNTS OF ADDITION HAVING DECIDED TO MAKE AN ADDITION. 4. THE LAA ERRED IN CONFIRMING THE ACTION OF LAO, E RRED IN REJECTING THE VARIOUS CONTENTIONS OF THE APPELLANT IN RESPECT OF TREATING THE TRANSACTIONS CARRIED OUT UNDER SALE DE ED PERTAINING TO PROPERTY BEARING SY.NO.22, SITUATED I N HAMPAPURA VILLAGE, KENGERI HOBLI, BANGALORE SOUTH A S THAT OF THE APPELLANT AND BRINING TO TAX AN AMOUNT OF RS .31.71 LAKHS AS SHORT TERM CAPITAL GAINS. FURTHER, THE LAA ERRED IN NOT CONSIDERING THE VAR IOUS CONTENTIONS OF THE APPELLANT PERTAINING TO THE TRAN SACTION, ESPECIALLY THE FACT OF THE TRANSACTIONS HAVING BEEN RECORDED BY THE REAL BENEFICIAL OWNER OF THE LAND M/S. SPR DEVELOPERS PVT LTD., WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LAA E RRED IN FAILING TO APPRECIATE THE FACT THAT THE LAND WAS AN AGRICULTURAL ITA NO.272 & 273/BANG/2013 PAGE 3 OF 9 LAND AND ANY GAIN ARISING OUT OF SUCH SALE WAS NOT TAXABLE. ON THE ABOVE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING YOUR APPELLANT PRAYS YOUR HONOUR TO CONS IDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND RENDER JUSTICE. 3. BRIEFLY, THE FACTS ARE THAT THE APPELLANT IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF COMMISSION AGENCY. HE HAS FILED RE TURN OF INCOME FOR THE AY 2006-07 ON 31.10.2006 DISCLOSING A TOTAL INCOME OF RS.1,14,220 AND FOR THE AY 2007-08 DISCLOSING A TOTAL INCOME OF RS.6,35 ,540 ON 27.6.2007. AFTER PROCESSING THE SAID RETURNS UNDER THE PROVISI ONS OF SECTION 143(1), THE CASES WERE SELECTED FOR SCRUTINY ASSESSMENT AND ASS ESSMENTS CAME TO BE COMPLETED EX PARTE UNDER THE PROVISIONS OF SECTION 144 OF THE ACT VIDE ORDER DATED 30.12.08 FOR THE AY 2006-07 AT A TOTAL INCOME OF RS.57,75,559 AND AT A TOTAL INCOME OF RS.4,42,27,586 FOR THE AY 2007-08. THE DISPARITY BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME IS ON ACCOUNT OF ADDITIONS MADE IN BOTH THE YEARS TOWARDS THE UNEXPL AINED CASH DEPOSITS IN HIS BANK ACCOUNTS WITH CANARA BANK, HAROHALLI BRANC H, KANAKAPURA ROAD, BANGALORE IN THE CURRENT A/C NO.223 AND IN THE SB A /C NO.13255. 4. BEFORE THE AO, THE APPELLANT HAD NOT COOPERATED WITH THE COMPLETION OF ASSESSMENT NOR FILED ANY DETAILS IN SUPPORT OF T HE SOURCE OF CASH DEPOSITS IN THE SAID BANK ACCOUNTS. THEREFORE, THE AO WAS COMPELLED TO COMPLETE THE ASSESSMENTS EX PARTE BY BRINING TO TAX THE UNEXPLAINED CASH DEPOSITS IN THE SAID BANK ACCOUNTS. FOR THE AY 200 7-08, THE AO ALSO ITA NO.272 & 273/BANG/2013 PAGE 4 OF 9 NOTICED THAT THE APPELLANT HAS SOLD A PROPERTY FOR A CONSIDERATION OF RS.1,28,37,000 AFTER ALLOWING COST OF ACQUISITION, COST OF CONVERSION AND REGISTRATION CHARGES, BROUGHT TO TAX A SUM OF RS.31 ,71,440 AS SHORT TERM CAPITAL GAIN. 5. BEING AGGRIEVED, APPEALS WERE FILED BEFORE THE C IT(APPEALS). IT WAS CONTENDED BEFORE THE CIT(A) THAT THE CASH DEPOSITS MADE IN THE SAID BANK ACCOUNTS BELONG TO HIS UNCLE SHRI M. THIMMEGOWDA. IT WAS FURTHER EXPLAINED THAT HE WAS ONLY DISCOUNTING THE CHEQUES OF ONE SHRI M. THIMMEGOWDA OF M/S. SPR GROUP OF COMPANIES. THE LD . CIT(APPEALS) AFTER CALLING FOR A REMAND REPORT FROM THE AO, HAD CONFIRMED THE ADDITIONS BY HOLDING THAT THE APPELLANT HAD FAILED TO FILE AN Y DOCUMENTARY EVIDENCE IN SUPPORT OF THE EXPLANATION OFFERED. 6. AS REGARD TO THE ADDITION UNDER THE HEAD CAPITA L GAINS, THE LD. CIT(APPEALS) HAS REJECTED THE CONTENTION OF THE APP ELLANT THAT THE PROPERTY SOLD BELONGS TO HIS UNCLE, SHRI M. THIMMEGOWDA AND THUS CONFIRMED THE ADDITION. 7. BEING AGGRIEVED, THE APPELLANT IS BEFORE US IN T HE PRESENT APPEALS. 8. THE LD. AR VEHEMENTLY CONTENDED THAT THOUGH THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF CASH DEPOSITS BEFORE THE AO, THE SAME WAS EXPLAINED DURING THE COURSE OF PROCEEDINGS BEFORE T HE CIT(APPEALS). THE CIT(APPEALS) WAS NOT JUSTIFIED IN SUMMARILY REJECTI NG THE EXPLANATION OF THE ITA NO.272 & 273/BANG/2013 PAGE 5 OF 9 APPELLANT. THE CASH DEPOSITS MADE IN THE BANK ACCO UNTS OF THE APPELLANT WERE DULY REFLECTED IN THE BOOKS OF ACCOUNTS MAINTA INED BY SHRI M. THIMMEGOWDA AND THE SAID EXPLANATION WAS REJECTED B Y THE CIT(A) WITHOUT ASSIGNING ANY COGENT REASON. THUS, THE LD. AR SUB MITTED THAT HAVING REGARD TO THE EXPLANATION FURNISHED BEFORE THE CIT( A), NO ADDITION SHOULD BE SUSTAINED. 9. ON THE OTHER HAND, THE LD. DR VEHEMENTLY CONTEND ED THAT NO EVIDENCE WAS FURNISHED IN SUPPORT OF THE EXPLANATIO N BEFORE THE CIT(APPEALS) AND THEREFORE THE CIT(APPEALS) WAS JUS TIFIED IN REJECTING THE EXPLANATION OF THE APPELLANT. THUS, HE PRAYED FOR SUSTAINING THE ORDERS OF THE CIT(APPEALS). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THESE APPEALS IS, WHETHER THE CASH DEPOSITS MADE IN THE BANK ACCOUNTS OF CANARA BANK OF THE APPELLANT S TOOD EXPLAINED OR NOT? THOUGH THE APPELLANT HAD NOT COOPERATED WITH THE DE PARTMENT BY FILING ANY EVIDENCE OR EXPLANATION IN SUPPORT OF SOURCES OF CA SH DEPOSITS DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE APPE LLANT HAD ATTEMPTED TO EXPLAIN THE SOURCE OF CASH DEPOSITS BEFORE THE CIT( APPEALS). THE CIT(A) AFTER CALLING FOR A REMAND REPORT FROM THE AO, REJE CTED THE EXPLANATION OFFERED THAT THE CASH DEPOSITS BELONG TO PATERNAL U NCLE, SHRI M. THIMMEGOWDA. AFTER GOING THROUGH THE BANK STATEME NTS OF THE APPELLANT, WE FIND THAT THERE ARE DEPOSITS AS WELL AS THE CASH WITHDRAWALS FROM THE ITA NO.272 & 273/BANG/2013 PAGE 6 OF 9 SAID BANK ACCOUNTS. EVEN AFTER REJECTING THE EXPLA NATION OFFERED BY THE APPELLANT THAT THE CASH DEPOSITS BELONG TO HIS PATE RNAL UNCLE, SHRI M. THIMMEGOWDA, HAVING REGARD TO THE FACT THAT THERE A RE DEPOSITS AS WELL AS WITHDRAWALS IN THE SAME BANK ACCOUNTS, THE AMOUNTS WITHDRAWN SHOULD BE DEEMED TO HAVE BEEN AVAILABLE FOR REDEPOSITING THE SAME IN THE BANK ACCOUNT, AS IT IS NOT THE CASE OF THE REVENUE THAT THE WITHDRAWALS HAVE BEEN UTILIZED BY THE ASSESSEE FOR SOME OTHER PURPOS E. FURTHERMORE, THE ASSESSEE ALSO RECEIVED THE SALE CONSIDERATION OF RS .1,28,37,000 ON THE SALE OF PROPERTY SITUATED AT 22, HAMPAPURA VILLAGE, KENGERI HOBLI, BANGALORE SOUTH AND THUS THE SURPLUS ARISING OUT OF THE SALE OF PROPERTY HAS BEEN BROUGHT TO TAX BY THE AO UNDER THE HEAD CA PITAL GAINS. THE SALE CONSIDERATION SHOULD BE ALSO DEEMED TO BE AVAILABLE FOR DEPOSITING THE SAME IN THE BANK ACCOUNTS. NEITHER THE AO NOR THE CIT(APPEALS) HAD GIVEN THE BENEFIT OF TELESCOPING. IT IS TRITE LAW THAT THE BENEFIT OF TELESCOPING OR PEAK CREDIT CANNOT BE CLAIMED AS A MATTER OF RIG HT, BUT IN THE GIVEN FACTS AND CIRCUMSTANCES THAT THERE ARE DEPOSITS AS WELL A S WITHDRAWALS FROM THE SAME BANK ACCOUNTS AND THERE WAS SALE CONSIDERATION IN RESPECT OF SALE OF PROPERTY WHICH HAS BEEN BROUGHT TO TAX BY THE AO, T HE BENEFIT OF TELESCOPING SHOULD BE GIVEN, HAVING REGARD TO THE L AW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGAIAH & CO. V. CIT (123 ITR 457 (SC) WHEREIN THE HONBLE SUPREME COUR T HAS HELD AS UNDER:- ITA NO.272 & 273/BANG/2013 PAGE 7 OF 9 THERE CAN BE NO ESCAPE FROM THE PROPOSITION THAT T HE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR M EETING EXPENDITURE OR INTRODUCING AMOUNTS IN HIS ACCOUNT B OOKS. BUT IT IS QUITE ANOTHER THING TO SAY THAT ANY PART OF THAT FU ND MUST NECESSARILY BE REGARDED AS THE SOURCE OF UNEXPLAINE D EXPENDITURE INCURRED OR OF CASH CREDITS RECORDED DURING A SUBSE QUENT ASSESSMENT YEAR. THE MERE AVAILABILITY OF SUCH A FU ND CANNOT, IN ALL CASES, IMPLY THAT THE ASSESSEE HAS NOT EARNED F URTHER SECRET PROFITS DURING THE RELEVANT ASSESSMENT YEAR. NEITHE R LAW NOR HUMAN EXPERIENCE GUARANTEES THAT AN ASSESSEE WHO HA S BEEN DISHONEST IN ONE ASSESSMENT YEAR IS BOUND TO BE HON EST IN A SUBSEQUENT ASSESSMENT YEAR. IT IS A MATTER FOR CONS IDERATION BY THE TAXING AUTHORITY IN EACH CASE WHETHER THE UNEXPLAIN ED CASH DEFICITS AND THE CASH CREDITS CAN BE REASONABLY ATT RIBUTED TO A PRE- EXISTING FUND OF CONCEALED PROFITS OR THEY ARE REAS ONABLY EXPLAINED BY REFERENCE TO CONCEALED INCOME EARNED I N THAT VERY YEAR. IN EACH CASE, THE TRUE NATURE OF THE CASH DEF ICIT AND THE CASH CREDIT MUST BE ASCERTAINED FROM AN OVERALL CONSIDER ATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. EVI DENCE MAY EXIST TO SHOW THAT RELIANCE CANNOT BE PLACED COMPLE TELY ON THE AVAILABILITY OF A PREVIOUSLY EARNED UNDISCLOSED INC OME. A NUMBER OF CIRCUMSTANCES OF VITAL SIGNIFICANCE MAY POINT TO THE CONCLUSION THAT THE CASH DEFICIT OR CASH CREDIT CANNOT REASONA BLY BE RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADDITION BUT M UST BE REGARDED AS POINTING TO THE RECEIPT OF UNDISCLOSED COME EARNED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS OPEN IN TO THE REVENUE TO RELY ON ALL THE CIRCUMSTANCES POINTI NG TO THAT CONCLUSION. WHAT THESE SEVERAL CIRCUMSTANCES CAN BE IS DIFFICULT TO ENUMERATE AND INDEED, FROM THE NATURE OF THE ENQ UIRY, IT IS ALMOST IMPOSSIBLE TO DO SO. IN THE END, THEY MUST B E SUCH AS CAN LEAD TO THE FIRM CONCLUSION THAT THE ASSESSEE HAS C ONCEALED THE PARTICULARS OF HIS INCOME OR HAS DELIBERATELY FURNI SHED INACCURATE PARTICULARS. IT IS NEEDLESS TO REITERATE THAT IN A PENALTY PROCEEDING THE BURDEN REMAINS ON THE REVENUE OF PROVING THE EX ISTENCE OF MATERIAL LEADING TO THAT CONCLUSION. ITA NO.272 & 273/BANG/2013 PAGE 8 OF 9 11. THE ABOVE PRINCIPLE LAID DOWN BY THE HONBLE SU PREME COURT HAS BEEN REITERATED IN SEVERAL SUBSEQUENT DECISIONS WHI CH ARE AS FOLLOWS:- (1) ADDL. CIT V. DHARAMDAS AGARWAL, 15 TAXMAN 485 ( MP) (2) ADDL. CIT V. GOKAL CHAND JAGAN NATH, 23 TAXMAN 431 (DEL) (3) ADDL. CIT V. GHASIRAM PHOOLCHAND, 35 TAXMAN 12 (BOM) (4) ACIT V. DSL SOFTWARE LTD., 20 TAXMANN.COM 408 (DEL) (5) CIT V. ANANTHARAM VEERASINGAIAH & CO., 99 ITR 5 44 (AP) (6) CIT V. INDUS VALLEY PROMOTERS LTD., 155 TAXMAN 223 (DEL) (7) CIT V. DIVINE LEASING & FINANCE LTD., 158 TAXMA N 440 (DEL) (8) CIT V .DOWN TOWN HOSPITAL LTD., 124 TAXMAN 561 (GAU) 12. THUS, HAVING REGARD TO THE ABOVE LEGAL POSITION AND AS HELD BY US ( SUPRA) THAT IT IS A CASE WHERE THE PRINCIPLE OF PEAK CREDI T IS CLOSELY APPLICABLE AND THEREFORE, IN THE INTEREST OF JUSTIC E, WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO WORK OUT THE PEAK CREDIT AND BRING TO TAX ONLY THE PEAK CREDIT. OF COURSE, THE AO IS ENTITLED TO MAKE A SEPARATE ADDITION IN RESPECT OF SALE OF IMMOVABLE PROPERTY UNDER THE HEAD CAPITAL GAINS. THUS, THE APPEALS ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2016. SD/- SD/- (ASHA VIJAYARAGHAVAN ) ( INTURI RAMA RAO ) JUDICIAL MEMBER ACCOUNTANT M EMBER BANGALORE, DATED, THE 20 TH JULY, 2016. /D S/ ITA NO.272 & 273/BANG/2013 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.