ACIT, Kollam V. Sri.Babu G.oommen, Kottarakkara

ITA 28/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68927 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2013
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: A S NARAYANAMOORTHI
• Keywords: Unexplained investment; Proportionate interest
• Section: 132

Judgement Text

1 ITA NO. 28/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 28/COCH/2013 (ASSESSMENT YEAR 2008-09) THE A.C.I.T., CIR.1 VS SHRI BABU OOMMEN KOLLAM M/S ALPHONSA CASHEW INDUSTRIES, PUTHOOR PO KOTTARAKARA PAN : AADPO7373B (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. S VIJAYAPRABHA RESPONDENT BY : SHRI A.S. NARAYANAMOORTHI DATE OF HEARING : 24-07-2013 DATE OF PRONOUNCEMENT : 23-08-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-III, KOCHI DATED 06 TH NOVEMBER, 2012 FOR THE ASSESSMENT YEAR 2008-09. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS.3,76,38,240 TOWARDS UNEXPLAINED INVESTMENT. 2 ITA NO. 28/COCH/2013 3. SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT A SEARCH WAS CONDUCTED U/S 132 OF THE ACT AT THE RESIDENTIAL PRE MISES OF DR SACHIDANANDA KAMATH ON 22-01-2008. DURING THE COUR SE OF SEARCH OPERATIONS, IT WAS FOUND THAT THE PRESENT ASSESSEE HAD PURCHASED A LODGE KNOWN AS KEERTHI MAHAL TOGETHER WITH LAND ADMEASU RING ABOUT 33.016 CENTS IN SURVEY NO.420/1 IN ERNAKULAM VILLAGE. THE ASSESSEE ADMITTED DURING THE COURSE OF EXAMINATION THAT THE TOTAL AMO UNT PAID WAS RS. 6,27,30,400 FOR PURCHASE OF THE ABOVE SAID PROPERTY . HOWEVER, THE SALE CONSIDERATION WAS SHOWN IN THE SALE DEED ONLY AT RS .3,76,38,240. SINCE THE ASSESSEE HAS PAID UNACCOUNTED MONEY, THE SAME W AS TREATED AS UNEXPLAINED INVESTMENT TO THE EXTENT OF RS.3,76,38, 240. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE AMOUNT OF RS.3,76,38,240 WAS SHOWN AS JOURNAL ENTRIES BUT WERE NOT REFLECTED IN THE CASH BOOK. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE AMOUNT WAS BUSINESS FUND, WAS HELD TO BE NOT ACCEPTABLE. IN T HE ABSENCE OF ANY MATERIAL, ACCORDING TO THE LD.DR, THE AMOUNT OF RS. 3,76,38,240 WAS TREATED AS UNEXPLAINED INVESTMENT. HOWEVER, THE CIT(A) DEL ETED THE ADDITION WITHOUT ANY JUSTIFIABLE REASON. 4. ON THE CONTRARY, SHRI A.S. NARAYANAMOORTHY, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT DURING THE COURSE O F FIRST APPELLATE PROCEEDINGS, THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING 3 ITA NO. 28/COCH/2013 OFFICER ON THE BASIS OF THE SUBMISSIONS MADE BEFORE HIM. THE ASSESSING OFFICER BY REMAND REPORT DATED 18-11-2011 EXAMINED THE ISSUE SPECIFICALLY AND FOUND THAT ALL THE PAYMENTS MADE BY THE ASSESSE E FOR PURCHASE OF THE LODGE WERE MADE OUT OF THE BOOKS OF ACCOUNT. THE C IT(A), AFTER EXTRACTING THE REMAND REPORT FILED BY THE ASSESSING OFFICER IN THE IMPUGNED ORDER FOUND THAT SINCE THE PAYMENTS WERE ROUTED THROUGH T HE BOOKS OF ACCOUNT, THERE IS NO QUESTION OF ANY UNEXPLAINED INVESTMENT. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSING OFFICER MADE ADDITION ON THE GROUND THAT A SUM OF RS.3,76,38,240 WAS SHOWN IN THE JOURNAL ENTRIES, BUT WAS NOT REFLECTED IN THE CASH BOOK. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NO SOURCE FOR MAK ING PAYMENT OF RS.3,76,38,240. THE ONLY CONTENTION OF THE DEPARTM ENT IS THAT A SUM OF RS.3,76,38,240 WAS PAID OUTSIDE THE BOOKS OF ACCOU NT SINCE IT WAS NOT REFLECTED IN THE CASH BOOK. THIS FACT WAS EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF REMAND PROCEEDINGS AND THE ASSESSING OFFICER HIMSELF REPORTED TO THE CIT(A) THAT THE ENTIRE PAYM ENTS WERE ROUTED THROUGH THE BOOKS OF ACCOUNT. IN VIEW OF THIS FACT UAL FINDING BY THE ASSESSING OFFICER IN THE REMAND REPORT, THIS TRIBUN AL IS OF THE CONSIDERED 4 ITA NO. 28/COCH/2013 OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER. THE ORDER OF CIT(A) IS UPHELD. 6. THE NEXT GROUND OF APPEAL IS TOWARDS DISALLOWANC E OF PROPORTIONATE INTEREST ON THE FUNDS DIVERTED FOR NON BUSINESS PUR POSE. 7. SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT TH E ASSESSEE HAS DEBITED AN AMOUNT OF RS.69,88,560 TOWARDS PAYMENT O F INTEREST ON LOAN BORROWED FROM BANKS AND OTHER PARTIES. AS PER THE BALANCE-SHEET, AN AMOUNT OF RS. 1,83,18,285 WAS OUTSTANDING TOWARDS L OAN AS ON 31-03- 2008. HOWEVER, THE ASSESSEE DIVERTED THE BUSINESS FUNDS FOR NON BUSINESS PURPOSE TO THE EXTENT OF RS.9,21,12,464. THEREFORE, THE ASSESSING OFFICER BY FOLLOWING THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF V.I. BABY & CO (2002) 254 ITR 248 (KER) DIS ALLOWED THE PROPORTIONATE SHARE. REFERRING TO THE ORDER OF CIT (A), THE LD.DR SUBMITTED THAT EVEN IN THE REMAND PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE EXACT DIVERSION OF FUNDS FOR NON BUSINESS PURPOSE C OULD BE ASCERTAINED ONLY FROM THE CASH FLOW STATEMENT OF THE ASSESSEE. HOWEVER, THE ASSESSEE HAS NOT FILED ANY CASH FLOW STATEMENT EVEN AFTER OPPORTUNITY WAS GIVEN. THE CIT(A), WITHOUT EXAMINING THE AVAILABIL ITY OF THE FUNDS AND THE EXTENT TO WHICH THE BORROWED FUNDS WERE USED HAS DE LETED THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER. 5 ITA NO. 28/COCH/2013 8. ON THE CONTRARY, SHRI A.S. NARAYANAMURTHY, THE L D.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE BALANCE IN THE CAPI TAL ACCOUNT AS ON 31- 03-2008 IS RS.12,72,37,136. THE ASSESSEE HAS BORRO WED PACKING CREDIT FROM CATHOLIC SYRIAN BANK, THE OUTSTANDING OF WHICH WAS RS. 1,83,18,285 AS ON 31-03-2008. THE NET PROFIT FOR THE YEAR UNDE R CONSIDERATION IS RS.4,59,49,483. THE AMOUNT SAID TO HAVE BEEN DIVER TED IS RS. 9,21,12,464. THEREFORE, ACCORDING TO THE LD.REPRES ENTATIVE, THE ASSESSEE HAD SUFFICIENT FUNDS; HENCE, THERE IS NO QUESTION O F DISALLOWANCE. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGME NT OF THE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION VS CIT (2008) 298 ITR 298 (SC). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. DURING T HE REMAND PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT ALL THE CAPITALS W ERE LOCKED IN THE FIXED ASSETS / BUSINESS ASSETS / CURRENT ASSETS FOR THE P URPOSE OF BUSINESS. THE EXACT UTILIZATION OF THE LOAN FOR NON BUSINESS PURP OSE COULD BE ASCERTAINED ONLY AFTER EXAMINING THE CASH FLOW STATEMENT. THE ASSESSEE APPEARS TO HAVE NOT FILED THE CASH FLOW STATEMENT EVEN AFTER T HE ASSESSING OFFICER DISCUSSED THE ISSUE. THEREFORE, THE ASSESSING OFFI CER PRIMA FACIE FOUND THAT THE BORROWED FUNDS WERE USED FOR NON BUSINESS PURPOSE. HOWEVER, THE EXACT QUANTUM COULD BE DECIDED ONLY ON THE BASI S OF THE CASH FLOW 6 ITA NO. 28/COCH/2013 STATEMENT. AS FOUND BY THE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION (SUPRA), THE CAPITAL AVAILABLE WITH THE ASSESSEE AND THE NET PROFIT OF THE YEAR UNDER CONSIDERATION NEEDS TO BE EXAMINED TO FIND OUT THE EXACT QUANTUM WHICH WAS DIVERTED FOR NON BUSINESS P URPOSE. WE FEEL THAT THE ASSESSING OFFICER COULD NOT FIND OUT THE EXACT QUANTUM OF DIVERSION WHEREAS THE CIT(A), WITHOUT EXAMINING THE MATTER, H AS SIMPLY DELETED THE ADDITION. THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE QUANTUM OF DIVERTED FUNDS NEEDS TO BE EXAMINED ON THE BASIS OF THE FUNDS AVAILABLE WITH THE ASSESSEE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SINCE THE AVAILABLE FUNDS WERE PRIMA FACIE APP EAR TO HAVE BEEN LOCKED UP IN THE FIXED ASSETS / BUSINESS ASSETS / CURRENT ASSETS FOR THE PURPOSE OF BUSINESS AS FOUND BY THE ASSESSING OFFICER, THE MAT TER NEEDS TO BE RE- EXAMINED BY THE ASSESSING OFFICER ON THE BASIS OF T HE CASH FLOW STATEMENT OF THE ASSESSEE. ACCORDINGLY, THE ORDERS OF THE LO WER AUTHORITIES ARE SET ASIDE ON THIS ISSUE AND REMITTED BACK TO THE FILE O F THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ISSUE AFRES H IN THE LIGHT OF THE CASH FLOW STATEMENT THAT MAY BE FILED BY THE ASSESSEE. WE MAKE IT CLEAR THAT THE ASSESSEE SHALL FILE THE CASH FLOW STATEMENT FOR THE YEAR UNDER CONSIDERATION WITHIN TWO WEEKS FROM THE DATE OF REC EIPT OF COPY OF THIS ORDER. IF THE ASSESSEE FAILS TO FILE THE CASH FLOW STATEMENT WITHIN TWO WEEKS FROM THE DATE OF RECEIPT OF COPY OF THIS ORDER, THE ASSESSING OFFICER IS AT LIBERTY TO DECIDE THE MATTER AFRESH IN ACCORDANCE W ITH LAW ON THE BASIS OF 7 ITA NO. 28/COCH/2013 THE MATERIAL AVAILABLE ON RECORD AFTER GIVING REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD AUGUST, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 23 RD AUGUST, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH