Sh. Krishan Kumar Najjon, V. ITO, Uttrakhand

ITA 273/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8113 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 23-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JA KHAN
• Keywords: Unexplained investment; Business income; Depreciation; Opportunity of being heard
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D NEW DELHI BEFORE SHRI C.L.SETHI, JM AND SHRI SHAMIM YAHYA, AM ITA NO. 273/DEL/2009 A.Y. 2001-02 SHRI KRISHAN KUMAR NAJJON VS. ITO-1, PROP. M/S KK FRUIT HOUSE A LMORA, UTTARAKHAND SABJI MANDI, ALMORA (APPELLANT) (RESPONDE NT) APPELLANT BY : SH.RAMESH GOYAL, C.A. RESPONDENT BY : SH. JA KHAN, SR.D.R. O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESEE IS DIRECTED AGAINST THE ORDER OF LDCIT(A) DATED 14.10.2008 AND PERTAINS TO A.Y. 2001-202. 2. THE ISSUE RAISED IS THAT THE LDCIT(A) IS NOT JUS TIFIED IN SUSTAINING ADDITIONS MADE BY THE A.O. 3. THE ASSESSEE IN THIS CASE HAD SHOWN INCOME FROM TRADING IN FRUITS AND VEGETABLES, COMMISSION ON SALE OF FRUITS AND VE GETABLES AND TRUCK PLYING. FOR THE A.Y. 2002-03 ON TOTAL SALES OF R S. 14,90,880/- ON ESTIMATE BASIS NET PROFIT SHOWN WAS AT RS. 89,633/- @ 6%. NET RECEIPTS 2 OF COMMISSION ON SALE OF FRUITS AND VEGETABLES WAS SHOWN AT RS. 69,287/- @ 5% ON SALE OF RS. 13,85,730/-. TRUCK PL YING INCOME FROM TWO MINI TRUCKS WAS SHOWN AS PER PROVISIONS OF S.44 AE OF THE INCOME TAX ACT, 1961. 3. DURING THE COURSE OF ASSESSMENT THE AO FOUND TH AT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SOURCE OF VARIOUS INVESTMENTS AND EXPENDITURE MADE DURING THE YEAR. HE ALSO OBSERVED THAT THE ASSESEE HAD NOT PRODUCED ANY BOOKS OF ACCOUNTS IN SUPPORT O F INCOME SHOWN OR SOURCE OF INVESTMENT/EXPENDITURE MADE DURING THE YE AR. THE A.O. PROCEEDED TO WORK OUT THE SHORT FALL IN INVESTMENT /EXPENDITURE FROM THE AVAILABLE FUNDS OF THE ASSESSEE. HE CONCLUDED THAT THERE WAS A SHORT FALL OF RS. 12,22,039/- IN RESPECT OF INVESTMENTS/EXPEND ITURE MADE BY THE ASSESSEE VIS--VIS FUNDS AVAILABLE WITH HIM DURING THE YEAR. HE ADDED THE SUM AS UNDISCLOSED INVESTMENT/EXPENDITURE OF TH E ASSESSEE U/S 69 OF THE INCOME TAX ACT. THE AO FURTHER ADDED INCREA SE OF RS. 3,75,605/- IN THE BANK BALANCE DURING THE YEAR AS UNEXPLAINED INVESTMENT U/S 69. 4. UPON ASSESSEES APPEAL THE LDCIT(A) ELABORATELY CONSIDERED THE ISSUE AND CONCLUDED AS UNDER. I HAVE LOOKED INTO THE ABOVE SUBMISSIONS OF THE CO UNSEL OF THE APPELLANT. AS REGARDS THE INVESTMENTS MADE IN TRUC KS STANDING IN THE NAME OF SMT. NISHA NAJJON, THE WIFE OF THE APPE LLANT TO THE TUNE 3 OF RS. 5,48,680/-, THE SAME HAS BEEN ADMITTED TO B E OUT OF THE BANK ACCOUNT OF THE APPELLANT AND THE COUNSEL FOR T HE APPELLANT HAS ALSO NOT CONTROVERTED ON THIS FACT. SIMILARLY IN THE CASE OF SMT.CHANNA RANI NAJJON, THE MOTHER OF THE APPELLANT , THE INVESTMENT IN TRUCK TO THE TUNE OF RS. 2,19,789/- H AS ALSO BEEN MADE OUT OF THE BANK ACCOUNT OF THE APPELLANT WHICH HAS AGAIN NOT BEEN CONTROVERTED BY THE LD.COUNSEL OF THE APPELLAN T. HOWEVER, LEGAL FICTION HAS BEEN CREATED BY FILING THE INCOME TAX RETURNS IN THE NAMES OF SMT.NISHA NAJJON AND SMT.CHANNA RANI NAJJO N IN ORDER TO EXPLAIN THE INVESTMENTS TOWARDS THE TRUCKS IN TH E CORRESPONDING NAMES. THE COUNSEL FO THE APPELLANT HAS STRETCHED A BIT FURTHER IN SAYING THAT THESE TRUCKS HAVE BEEN UTILIZED IN THE BUSINESS OF THE APPELLANT AND THE FREIGHTS RECEIVED THEREON HAVE BE EN ADJUSTED AGAINST THE REPAYMENTS OF LOANS ORIGINALLY ADVANCED BY THE APPELLANT ON BEHALF OF THE WIFE AND MOTHER OF THE A PPELLANT. HOWEVER, IN ABSENCE OF REQUISITE EVIDENCE, THESE CO NTENTIONS OF THE COUNSEL OF THE APPELLANT REMAIN A WORD OF MOUTH AND A FAADE WITHOUT ESTABLISHING SUCH CONTENTION. THEREFORE, I AM NOT IN A POSITION TO ACCEPT THE CONTENTION OF THE COUNSEL OF THE APPELLANT THAT THE INVESTMENTS TOWARDS THE PURCHASE OF TRUCKS TO T HE TUNE OF RS. 7,67,469/- ARE OUT OF THE OWN SOURCE OF THE WIFE AN D MOTHER OF THE APPELLANT AND THE AO IS RIGHT IN TREATING SUCH INVE STMENT TO BE OUT OF THE UNDISCLOSED SOURCE OF THE APPELLANT. AS REG ARDS THE 4 CONTENTION OF THE APPELLANT THAT THE DEPRECIATION O F RS. 7,05,238/- SHOULD HAVE BEEN CONSIDERED WHILE ARRIVING AT THE C ASH FLOW. I AM OF THE CONSIDERED OPINION THAT THE INCOME FROM THE TRUCKS HAS BEEN DECLARED UNDER THE PROVISIONS OF S.44AE OF THE ACT, WHEREIN THE DEPRECIATION HAS BEEN DEEMED TO BE ALLOWED AND THE NET INCOME AFTER ALLOWANCE OF SUCH DEPRECIATION HAS BEEN REFL ECTED AND SO THE QUESTION OF GIVING BENEFIT OF SUCH DEPRECIATION TOW ARDS THE CASH FLOW IN THE HAND OF THE APPELLANT DOES NOT ARISE. SO, THIS CONTENTION OF THE APPELLANT IS ALSO HEREBY REJECTED . AS REGARDS THE OPENING CAPITAL OF RS. 4,25,000/-, THE AO HAS REJEC TED THE SAME ON THE GROUND THAT THE NECESSARY EVIDENCE BY WAY OF RE GULAR BOOKS OF ACCOUNT COULD NOT BE FURNISHED. HOWEVER, THE AO HA S ACCEPTED ALL OTHER ENTRIES IN THE CAPITAL ACCOUNT. IT IS A FACT ON RECORD THAT THE APPELLANT HAPPENS TO BE AN OLD ASSESSEE SINCE 1991- 92 AND THE OPENING CAPITAL AS DECLARED AT RS. 4,25,000/- DOES NOT APPEAR TO BE IMPRACTICABLE EVEN THOUGH THE FULL PROOF ACCOUNT S FOR ALL THE EARLIER YEARS COULD NOT BE FURNISHED. THE AO IS HE REBY DIRECTED TO CONSIDER THE INCIDENCE OF SUCH OPENING CAPITAL OF R S. 4,25,00/- WHILE ARRIVING AT THE CASH FLOW OF THE APPELLANT AN D ALLOW CONSEQUENTIAL RELIEF TO THE APPELLANT. COMING TO T HE LAST POINT I.E. THE ACCRETION IN THE BANK ACCOUNT OF RS. 3,75,605/- IT AHS BEEN SUBMITTED THAT THIS HAS HAPPENED BECAUSE OF THE UN CLEARED CHEQUES OF RS. 3,75,605/- WHICH HAVE BEEN CLEARED I N THE ACCOUNT 5 IN THE SUCCEEDING YEAR. THE AO IS HEREBY DIRECTED TO VERIFY SUCH CONTENTION RAISED BY THE LD.COUNSEL OF THE APPELLAN T AND IF THE SAME APPEARS TO BE TRUE ON ACTUAL VERIFICATION OF THE BA NK ACCOUNT AND THE RELEVANT DOCUMENTS, THE AO IS HEREBY DIRECTED T O ALLOW CONSEQUENTIAL RELIEF OF RS. 3,75,605/- STRICTLY IN ACCORDANCE WITH LAW. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED RECO RDS. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THAT AUTHORIT IES BELOW HAVE NOT PROPERLY APPRECIATED THE CASH FLOW OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD NOT BEEN GIVEN ANY BENEFIT OF DEPRECIATION AND CLAIMED THAT IT WAS ONLY ON THIS ACCOUNT THAT THER E WAS MISS MATCH BETWEEN THE ASSESEES INVESTMENT AND FUNDS. HE CLA IMED THAT THOUGH THE INCOME FROM TUCK HAD BEEN MENTIONED AND SHOWN U /S 44AE OF THE ACT, HE CLAIMED THAT THIS DOES NOT PRECLUDE THE BEN EFIT OF DEPRECIATION INTO CASH AVAILABLE WITH THE ASSESEE. THE LDDR ON THE OTHER HAND RELIED UPON THE ORDERS OF LDCIT(A). WE HAVE CAREFULLY CON SIDERED THE SUBMISSIONS. WE ARE IN AGREEMENT WITH THE CONTENTIO NS OF THE LD.COUNSEL FOR THE ASSESSEE THAT EVEN WHERE PROFIT IS OFFERED AND ARE COMPUTED U/S 44AE OF THE ACT THE BENEFIT OF DEPRECIATION IN THE FUNDS AVAILABLE WITH THE ASSESEE HAS TO BE GIVEN. FOR THIS PURPOSE WE REFER TO THE SUB CLAUSE 4 OF S.44AE OF THE ACT, WHICH READS AS UNDER. 6 THE WRITTEN DOWN VALUE OF ANY ASSET USED FOR THE P URPOSE OF BUSINESS REFERRED TO IN SUB-SECTION 1 SHALL BE DEEM ED TO HAVE BEEN CALCULATED AS IF THE ASSESEE HAS CLAIMED AND HAS BE EN ACTUALLY ALLOWED THE REDUCTION IN RESPECT OF THE DEPRECIATIO N FOR EACH OF THE RELEVANT A.YS . FROM THE ABOVE IT IS VERY CLEAR THAT THERE IS PRESU MPTION THAT THE ASSESSEE HAS CLAIMED AND HAS BEEN ALLOWED DEPRECIAT ION. HENCE IN OUR CONSIDERED OPINION THE MATTER NEEDS TO BE REVERTED TO THE FILE OF AO TO PROPERLY APPRECIATE THE CASH FLOW OF THE ASSESSEE. THE AO SHALL EXAMINE THE ISSUE OF FUNDS AVAILABLE AFRESH. IN DOING SO H E SHALL ALLOW THE DEPRECIATION AS FUNDS AVAILABLE. FURTHER MORE THE CASH AVAILABLE HAS TO BE WORKED OUT AT THE TIME OF INVESTMENT/EXPENDITURE AND NOT OVERALL AS AT THE END OF THE YEAR. ACCORDINGLY THE ISSUE IS R EMITTED TO THE FILES OF AO WITH THE ABOVE DIRECTION. NEEDLESS TO ADD THE ASSE SSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 7. IN THE RESULT THE ASSESSEES APPEAL STANDS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 8TH FEB. 2010 , UPON CONCLUSION OF HEARING. (C.L.SETHI) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 8TH FEB. 2010 *MANGA 7 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5 .DR; 6.GUARD FILE BY ORDER DY. REGISTRAR