Sri.Aboobacker A.M., Cochin V. The ITO, Ernakulam

ITA 282/COCH/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7215 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 09-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2014
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: K C JOSEPH VARGHESE
• Keywords: Unexplained investment; Retrospective amendment; Cost of acquisition; Corroborative evidences
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO. 282/COCH/2014 ASSESSMENT YEAR : 2007-08 SHRI ABOOBACKER A.M., ANJIKKATH HOUSE, THRIKKAKKARA P.O., KOCHI-682 021. [PAN: ACKPA 9686L] VS. THE INCOME TAX OFFICER, WARD- 2(2), ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI K.C. JOSEPH VARGHESE, CA REVENUE BY SMT. LATHA V. KUMAR, JR. DR DATE OF HEARING 09/09/2014 DATE OF PRONOUNCEMENT 19/09/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 16-01-2014 PASSED BY THE CIT(A)-II, KOCHI FOR THE A SSESSMENT YEAR 2007- 08. 2. THE ASSESSEES GRIEVANCE IS WITH REGARD TO ADDIT ION OF RS.69,00,000/- AS UNEXPLAINED INVESTMENT U/S. 69 OF THE I.T. ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT AS PER THE REPORT OBTAINED FROM THE SUB-REGISTRAR OFFICE, EDAPALLY, THE ASSESSEE HAS PURCHASED 35.137 I.T.A. NO.282/COCH/2014 2 CENTS OF LAND AND BUILDING AT THRIKKAKKARA NORTH VI LLAGE FOR A CONSIDERATION OF RS. 60 LAKHS. THE SAID PROPERTY WAS PURCHASED J OINTLY WITH BROTHER SHRI A.M. KAREEM. THE ASSESSEE WAS ASKED TO EXPLAIN AND FURNISH THE SOURCE OF THE SAID INVESTMENTS SINCE THE CASH FLOW STATEMENT DID NOT SHOW THIS INVESTMENT 4. DURING THE ASSESSMENT PROCEEDING THE ASSESSEE FI LED A REVISED CASH FLOW STATEMENT BEFORE THE ASSESSING OFFICER EXPLAIN ING THE INVESTMENT OF RS.69 LAKHS TOWARDS COST OF ACQUISITION, REGISTRATI ON CHARGES AND STAMP DUTY PAID. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND TREATED THE SUM OF RS. 69 LAKHS AS UNEXPLAINED INVESTMENTS U/S. 69 OF THE I.T. ACT. 5. ON APPEAL, THE CIT(A) CALLED FOR THE REMAND REPO RT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED THAT IN THE ORIGINAL CASH FLOW STATEMENT, THE INVESTMENT TOWARDS CONSTRUCTION OF BUILDING WAS SHOWN AT RS.1,36, 33,682/- WHICH INCLUDED THE COST OF LAN D. ACCORDING TO THE ASSESSING OFFICER, THERE WAS A DIFFERENCE BETWEEN T HE ORIGINAL CASH FLOW STATEMENT AND THE REVISED CASH FLOW STATEMENT. THE ASSESSING OFFICER REJECTED THE REVISED CASH FLOW STATEMENT ON THE REA SON THAT THE ASSESSEE WAS NOT ABLE TO PROVIDE ANY EVIDENCE FOR THE REDUCT ION OF THE COST OF BUILDING CONSTRUCTION BY RS.64,02,082/-. FURTHER, THE ADDITIONAL AMOUNT OF I.T.A. NO.282/COCH/2014 3 RS.16,56,341/- SHOWN IN THE REVISED CASH FLOW STAT EMENT WAS ALSO NOT REFLECTED IN THE ORIGINAL CASH FLOW STATEMENT. SI MILARLY, ANOTHER LAND PURCHASE OF RS.7,92,082/- SHOWN IN THE REVISED CASH FLOW STATEMENT WAS NOT SHOWN IN THE ORIGINAL CASH FLOW STATEMENT. T HE ASSESSEE FAILED TO EXPLAIN THE REASON FOR NOT SHOWING THE ABOVE AMOUNT S IN THE ORIGINAL CASH FLOW STATEMENT. UNDER THE ABOVE CIRCUMSTANCES, THE CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ADDITI ON OF RS. 69,00,000/- TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF LAND AND BUILDING. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. AR SUBMITTED THAT IN THE CASE OF CIT VS . SMT. P.K. NOORJAHAN (1999) 237 ITR 570, THE KERALA HIGH COURT OBSERVED THAT THE TRIBUNAL TOOK INTO ACCOUNT THE COMPLETE ABSENCE OF RESOURCES OF THE ASSESSEE AND THE CIRCUMSTANCES IN WHICH SHE WAS PLA CED, SHE COULD NOT BE CREDITED WITH HAVING MADE INCOME OF HER OWN. THE T RIBUNAL DIFFERED FROM THE ITO AND AAC IN THE MATTER OF EXERCISING JUDICIA L DISCRETION. IT REJECTED THE ASSESSEES EXPLANATION AND DID NOT TREAT THE VA LUE OF THE INVESTMENTS IN PROPERTY AS ASSESSEES INCOME. UNSATISFACTORINESS OF THE EXPLANATION DOES NOT AND NEED NOT AUTOMATICALLY RESULT IN DEEMING TH E VALUE OF THE INVESTMENTS TO BE THE INCOME OF THE ASSESSEE AND TH E ADDITION WAS SET ASIDE BY THE TRIBUNAL AND THEREFORE, THE TRIBUNAL W AS RIGHT IT ACTED WITHIN ITS DISCRETION. I.T.A. NO.282/COCH/2014 4 8. THE LD. AR SUBMITTED THAT IN THE ABOVE CASE, EVE N THOUGH THE TRIBUNAL FOUND THE EXPLANATION ABOUT THE NATURE AND THE SOURCE OF PURCHASE MONEY UNSATISFACTORY AND WAS OF THE OPINION THAT AL THOUGH THE EXPLANATION OF THE ASSESSEE WAS LIABLE TO BE REJECTED, SECTION 69 OF THE INCOME TAX ACT CONFERRED ONLY A DISCRETION ON THE ITO TO DEAL WITH THE INVESTMENT AS INCOME OF THE ASSESSEE AND THAT IT DID NOT MAKE IT MANDATORY ON HIS PART TO DEAL WITH THE INVESTMENT AS INCOME OF THE ASSESSEE AS SOON AS THE LATTERS EXPLANATION HAPPENED TO BE REJECTED. THEREFORE, ON THIS LINE OF REASONING, THE TRIBUNAL ALLOWED THE TWO APPEALS AND CANCELLED THE ASSESSMENT OF THE ITO. 9. HOWEVER, THE LD. AR SUBMITTED THAT IN THE INSTAN T CASE, THE ASSESSEE WAS NOT DOING ANY BUSINESS AND WAS NOT MAINTAINING ANY BOOKS OF ACCOUNTS WHICH HE WAS NOT STATUTORILY OBLIGED TO AND HE WAS NOT WELL-VERSED IN THE ACCOUNTING PRINCIPLES ALSO. ACCORDING TO THE LD. A R THE CASH FLOW STATEMENTS WERE PREPARED FROM THE FEW DETAILS COLLE CTED BY THE ASSESSEES ACCOUNTANT AND THE ACCOUNTANT ON HIS PART RELIED ON THE BANK PASSBOOKS AND OTHER RELATED DOCUMENTS FOR THE PREPARATION OF THESE STATEMENTS. THE LD. AR SUBMITTED THAT AS NO SUPPORTING DOCUMENTS WE RE AVAILABLE WITH THE ASSESSEE IN SUPPORT OF THE INVESTMENTS MADE BY HIM I.E., BUYING OF LAND AND CONSTRUCTION, THE ACCOUNTANT PREPARED A STATEME NT ON THE BASIS OF I.T.A. NO.282/COCH/2014 5 ENTRIES APPEARING IN THE BANK PASSBOOKS/STATEMENTS WHICH LED TO SOME ERRORS IN THE ORIGINAL CASH FLOW STATEMENT WHICH WA S REVISED ON THE BASIS OF NEWLY FOUND FACTS. 10. THE LD. AR SUBMITTED THAT THE ITO REJECTED THE REVISED CASH FLOW STATEMENT AND CONSIDERED ONLY THE ORIGINAL CASH FLO W STATEMENT FOR MAKING THE ASSESSMENT. THE LD. AR FURTHER SUBMITTED THAT IN THE REMAND REPORT OF THE ITO FURNISHED TO THE CIT(A), IT WAS ADMITTED TH AT IN THE REVISED CASH FLOW STATEMENT ADDITIONAL SOURCE OF RS.16,56,341/- HAD NOT BEEN CONSIDERED EVEN THOUGH DOCUMENTARY EVIDENCES OF SOME OF THEM W ERE AVAILABLE. 11. ACCORDING TO THE LD. AR, IN A CASE WHERE NO BOO KS OF ACCOUNTS ARE MAINTAINED THE ONLY RECOURSE AVAILABLE TO THE ITO W AS TO REFER THE MATTER TO THE VALUATION OFFICER U/S. 142A INSERTED BY FINA NCE (NO.2) ACT, 2004 WITH RETROSPECTIVE EFFECT FROM 15/11/1972. ANY SECTION GIVING A POWER TO THE ITO SHOULD ALSO BE USED TO SUPPORT AN ASSESSEES CO NTENTION AS HIS NATURE OF AUTHORITY IS QUASI-JUDICIAL. 12. THE LD. AR SUBMITTED THAT THE ASSESSEE HAD INSI STED ON PREPARING A REVISED CASH FLOW STATEMENT REFLECTING THE TRUE STA TE OF FACTS AND CIRCUMSTANCES AND THEREFORE NOT ONLY THE ADDITIONAL SOURCE OF RS.16,56,341/- BUT ALSO ANOTHER LAND PURCHASE OF RS .7,92,082/- WAS SHOWN I.T.A. NO.282/COCH/2014 6 IN THE RECEIVED CASH FLOW STATEMENT WHICH WAS CONCE DED BY THE ITO IN THE REMAND REPORT. ACCORDING TO THE LD. AR, THIS GOES TO SHOW THAT THE REVISED CASH FLOW STATEMENT WAS THE CORRECT STATEMENT AND S HOULD HAVE BEEN ACCEPTED BY THE ITO AS WELL AS THE CIT(A). 13. THE LD. AR FURTHER SUBMITTED THAT ALL TRANSACTI ONS IN IMMOVABLE PROPERTIES INVOLVING RS.30 LAKHS OR MORE WOULD BE R EPORTED BY THE REGISTERING AUTHORITY THROUGH ANNUAL INFORMATION RE TURN TO THE INCOME TAX AUTHORITIES AND NOBODY WOULD OMIT A PURCHASE OF LAN D OF RS.69 LAKHS AND THEREFORE, SUBMITTED THAT THE SECOND CASH FLOW STAT EMENT WAS THE RIGHT ONE. 14. ON THE OTHER HAND, THE LD. DR SUBMITTED THE ALT HOUGH THE ASSESSEE HAS CONTENDED THAT THE REMAND REPORT WAS INCONCLUSI VE, BUT IN SUPPORT OF ITS REVISED CASH FLOW, IT HAS NOT FURNISHED ANY SAT ISFACTORY EXPLANATIONS BEFORE THE ASSESSING OFFICER EVEN DURING THE REMAND PROCEEDINGS. IN VIEW OF THE SPECIFIC FINDINGS OF THE REMAND REPORT THAT THE REVISED CASH FLOW STATEMENT WAS MAINLY REJECTED AS THE ASSESSEE HAD F ILED A REVISED CASH FLOW STATEMENT BASICALLY TO EXPLAIN LOAN TO SHRI A.M. KA REEM, WHICH HAS INCREASED FROM RS.1000/- IN THE ORIGINAL ASSESSMENT TO RS.46,00,820/- WITHOUT EXPLAINING THE DIFFERENCE BY WAY OF AN BANK TRANSACTION SHOWING PAYMENT OF SUCH LOAN AND THEREFORE, THE REVISED ST ATEMENT OF CASH FLOW I.T.A. NO.282/COCH/2014 7 WAS NOT CORRECT. ACCORDING TO THE LD. DR, THE ASSE SSEE HAD SUBMITTED THAT AN AMOUNT OF RS.34,50,000/- HAD BEEN PAID DIRECTLY TO THE VENDOR. HOWEVER, IN THE REVISED CASH FLOW STATEMENT, THE AS SESSEE HAS ALSO TRIED TO SHOW THAT SOME CONSTRUCTION WAS UNDERTAKEN IN THE N EXT YEAR, THUS FUND FLOW CAME FROM NEXT YEARS INCOME. THE LD. DR SUBMI TTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THIS C ONTENTION OF THE ASSESSEE AS THE ASSESSEE STARTED GETTING RENT FROM SUCH PROPERT IES AND HENCE THE CONSTRUCTION WAS ALREADY COMPLETE. ACCORDING TO TH E LD. DR, THE ASSESSEE HAD ALSO ADMITTED THAT THERE WAS COST OF RS.24,00,0 00/- TOWARDS EXISTING BUILDING, BUT THAT DOES NOT PROVE THAT IT WAS INCLU DED IN THE TOTAL COST OF CONSTRUCTION AS IT WAS THE ADDITIONAL COST OF CONST RUCTION WHICH WAS LOOKED INTO. THUS THE LD. DR SUBMITTED THAT THE EXPLANATI ONS FURNISHED BY THE ASSESSEE WERE NOT SUPPORTED BY ANY EVIDENCE OR SATI SFACTORY REASON FOR THE REDUCTION OF COST OF BUILDING CONSTRUCTED BY RS.64, 02,082/- AND HENCE THE ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE WAS JUSTIFIED. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. IN THIS CASE, THE ASSESSEE PURCHASED LAND AND BUILDING SITU ATED AT THRIKKAKKARA NORTH VILLAGE FOR A CONSIDERATION OF RS.60 LAKHS JO INTLY WITH HIS BROTHER, SHRI A.M. KAREEM. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSEE FILED CASH FLOW STATEMENT EXPLAINING THE SOURCE OF THE SAME. SINCE THE I.T.A. NO.282/COCH/2014 8 SOURCE OF THE ABOVE INVESTMENT WAS NOT SATISFACTORI LY EXPLAINED, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS.69 LAKHS AS UNEXPLAINED INVESTMENT. BEFORE THE CIT(A), THE ASSESSEE RELIED ON REVISED CASH FLOW STATEMENT. FIRSTLY, TO EXPLAIN THE SOURCE ONCE AG AIN, THE ASSESSEE HAS SHOWN THE LOAN FROM HIS BROTHER, SHRI A.M. KAREEM A T RS.46,00,820/- IN THE REVISED CASH FLOW STATEMENT WHICH WAS ONLY R S.1000/- IN THE ORIGINAL. CASH FLOW STATEMENT. FOR THIS SOURCE ALSO, THERE I S NO SUPPORTING EVIDENCE. SECONDLY, THE ASSESSEE HAS TAKEN OUT INVESTMENT OF RS. 34,50,000/- TOWARDS CONSTRUCTION OF BUILDING TO THE NEXT ASSESS MENT YEAR SO AS TO REDUCE THE INVESTMENT IN THIS ASSESSMENT YEAR. HOW EVER, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ACTUAL CONSTRUCTION OF THE BUILDING WAS COMPLETED IN THE PREVIOUS YEAR RELATING TO THE ASSE SSMENT YEAR 2007-08 AND THE ASSESSEE HAS BEEN DERIVING RENTAL INCOME FROM T HE SAID PROPERTY. HENCE, WHEN THE ASSESSEE WAS GETTING INCOME FROM TH E SAID BUILDING IN THIS ASSESSMENT YEAR, THE CONSTRUCTION WAS ALREADY COMPL ETED AND THIS IS ONLY THE DEVISE ADOPTED BY THE ASSESSEE TO EXPLAIN THE I NVESTMENT BY REDUCING THE SAME WHICH CANNOT BE ACCEPTED. FURTHER, THOUGH THE ASSESSEE MADE A PLEA THAT THERE WAS AN EXISTING BUILDING VALUED AT RS.24,00,000/- WHICH WAS INCLUDED IN THE TOTAL COST OF CONSTRUCTION OF THE B UILDING, THERE WAS NO EVIDENCE TO SUGGEST THE SAME IN THIS ASSESSMENT YEA R. CONSIDERING ALL THESE FACTS, WE ARE OF THE OPINION THAT THE ASSESSE E HAS FAILED TO EXPLAIN THE I.T.A. NO.282/COCH/2014 9 SOURCE OF INVESTMENT TO THE EXTENT OF RS.69,00,000/ -. HENCE, WE ARE INCLINED TO CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. 16. FURTHER, THE CASE LAWS RELIED UPON BY THE ASSES SEE HAVE NO RELEVANCE TO THE FACTS OF THE ASSESSEES CASE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY O N 19-09-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 19TH SEPTEMBER 2014 GJ COPY TO: 1. SHRI ABOOBACKER A.M., ANJIKKATH HOUSE, THRIKKA KKARA, KOCHI-682 021 2. THE INCOME TAX OFFICER, WARD-2(2), ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN