The ACIT,(OSD) Circle-9, Ahmedabad V. M/s. Suramya Corporation, Ahmedabad

ITA 2821/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60505 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 21-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: PRAMOD B KEDIA
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 69C; 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2821/AHD/2011 A. Y. 2007-08 A.C.I.T. (OSD), CIRCLE-9 AHMEDABAD APPELLANT VS. M/S SURAMYA CORPORATION SURAMYA BUNGLOWS, OPP.-MURLIDHAR PARTY PLOT, SOLA, AHMEDABAD-380 063 RESPONDENT DEPARTMENT BY : SHRI B.L. YADAV, SR. D.R. ASSESSEE BY : SHRI PRAMOD B. KEDIA, A.R. DATE OF HEARING : 21.05.2012 DATE OF PRONOUNCEMENT 15.06.2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-XV, AHMEDABAD D ATED 21 ST SEPTEMBER, 2011. 2. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROU ND OF APPEAL:- THE LD. COMMISSIONER OF INCOME TAX(APPEALS-XV, AHM EDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSE SSING OFFICER TO ALLOW REMUNERATION TO THE PARTNERS AS CLAIMING IN R ETURN OF INCOME. I.T.A. NO.2821/AHD/2011 A. Y. 2007-08 2 3. THE FACTS, IN BRIEF, ARE THAT IN THIS CASE A S URVEY ACTION U/S 133 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) WAS CARRIED BY THE REVENUE ON THE PREMISES OF THE ASSESSEE. DURING TH E COURSE OF SURVEY PROCEEDINGS, ON VERIFICATION OF THE BOOKS OF ACCOUN TS, DIARIES FOUND AT THE SITE PREMISES AND A NOTE BOOK WAS FOUND AND MARKED AS AN NEXURE A2, THEREIN THE ASSESSEE HAD RECORDED TRANSACTIONS REGARDING CASH R ECEIPTS FROM MEMBERS OF SURAMAYA BUNGALOWS SRI JAGDISHBHAI AND PATEL PARTNE RS OF THE ASSESSEE FIRM WHOSE STATEMENT WAS RECORDED U/S 131 OF THE ACT. T HEY STATED THAT THE AMOUNT SHOWN IN THE BOOKS WAS ON-MONEY RECEIPTS AND THAT W ERE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. THEREFORE, AN AMOUN T OF RS.56,00,500/- WAS ADMITTED AS UNDISCLOSED RECEIPTS FOR THE FINANCIAL YEAR 2006-07. SUBSEQUENTLY, RETURN OF INCOME WAS FILED AT RS.51,43,390/- ON 29. 10.2007 AND THE SAME WAS ASSESSED RS.73,76,310/- U/S 143(3) OF THE ACT OUT O F RS.56,00,500/- CREATED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNTS AS BUS INESS INCOME WAS TREATED AS INCOME FROM OTHER SOURCES BY THE ASSESSING OFFICER AND BY DOING SO DISALLOWED THE REMUNERATION PAID TO THE PARTNERS IN THE PROFIT AND LOSS ACCOUNTS OF RS.35,04,283/-. AGAINST THE ASSESSMENT ORDER THE AS SESSEE FILED AN APPEAL BEFORE LD. CIT(A) WHO RELYING ON THE DECISION HONB LE CO-ORDINATE BENCH IN THE CASE OF M/S FASHION WORLD VS. ACIT IN ITA NO.1634/A HD/2006, DIRECTED THE ASSESSING OFFICER TO ALLOW REMUNERATION TO THE PART NERS AS CLAIMED BY THE ASSESSEE. NOW THE REVENUE IS BEFORE US CHALLENGING THE DIRECTION OF THE COMMISSIONER OF INCOME TAX TO ALLOW THE REMUNERATIO N TO PARTNERS, AS CLAIMED IN THE RETURN OF INCOME. I.T.A. NO.2821/AHD/2011 A. Y. 2007-08 3 4. LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED ON THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY TREATED THE AMOUNT DISCLOSED BY THE PARTNERS OF THE ASSESSEE FIRM AS I NCOME FROM OTHER SOURCES. ON THE CONTRARY, LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL) AND THE ORD ER OF HONBLE CO-ORDINATE BENCH IN THE CASE OF M/S FASHION WORLD VS. ACIT IN ITA NO.1634/AHD/2006. THE CONTENTION OF THE ASSESSEE IS THAT THE AMOUNT OF RS .56,00,500/- HAS BEEN RIGHTLY HELD BY LD. CIT(A) AS INCOME FROM BUSINESS/PROFESSI ON AND SAME HAS BEEN RIGHTLY INCLUDED IN THE BOOK PROFIT FOR ARRIVING PERMISSIBL E REMUNERATION OF PARTNERS DEDUCTIBLE U/S 14(B)(V). IT IS THE SUBMISSION OF T HE LD. A.R. THAT THE REVENUE HAD CATEGORICALLY FOUND THAT THE TRANSACTIONS REGAR DING CASH RECEIPTS FROM MEMBERS OF SURAMYA BUNGALOWS WERE NOTED IN THE NOTE BOOK IMPOUNDED FROM THE SITE PREMISES AND IT IS ADMITTED BY THE PARTNER S OF THE ASSESSEE FIRM THAT THE AMOUNT REPRESENTED ON-MONEY RECEIPTS WHICH WERE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. IT IS FURTHER SUBMITTED THAT REVENUE HAD NOT FOUND ANY UNEXPLAINED ASSET/INVESTMENT/EXPENDITURE DURING SURVEY AND THE ASSESSEE FIRM DULY REFLECTED THE TRANSACTION IN THE BOOKS OF ACCOUNTS, AS ADMITTED DURING SURVEY PROCEEDINGS. THE ASSESSEE FIRM CAME INTO EX ISTENCE ONLY FOR SCHEME CALLED SURAMYA BUNGALOWS AND IT DID NOT HAVE OTHER ACTIVITIES OTHER THAT THE BUSINESS CALLED SURAMYA BUNGALOWS. IT IS ALSO RECO RDED BY LD. CIT(A) THAT THE PARTNERS HAVE DISCLOSED THE REMUNERATION CLAIMED AS DEDUCTION BY THE FIRM IN THE RESPECTIVE BOOKS OF ACCOUNTS. IT IS SUBMITTED BY A UTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THE AMOUNT OF RS.56,00,500/- IS TO BE INCLUDED IN THE BOOK PROFIT IN COMPUTATION OF REMUNERATION ALLOWABLE U/S 14(B)(V). I.T.A. NO.2821/AHD/2011 A. Y. 2007-08 4 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY CONTROVERSY IN THIS APPEAL IS RELATED TO TREATMENT OF THE AMOUNT ADMITT ED TO BE UNDISCLOSED RECEIPTS RECEIVED FROM THE MEMBERS OF SURAMYA BUNGALOWS WHET HER SAME COULD BE TREATED AS A BUSINESS INCOME OR INCOME FROM OTHER S OURCES. WE FIND THAT THE ASSESSING OFFICER HIMSELF HAD RECORDED THAT A SURVE Y WAS CONDUCTED U/S 133 OF THE ACT ON 14.11.2006. ON VERIFICATION OF THE BOOK S OF ACCOUNTS, DIARIES ETC. LYING AT THE SITE PREMISES, NOTE BOOK MARKED AS A2 WAS FOUND AND IMPOUNDED WHEREIN THE ASSESSEE HAD NOTED THE TRANSACTION REGA RDING CASH RECEIPTS FROM THE MEMBERS OF SURAMYA BUNGALOWS. HE FURTHER RECORDED DATEWISE RECEIPTS OF UNDISCLOSED ON-MONEY AS PER THE IMPOUNDED NOTE BOOK . FURTHER, THE ASSESSING OFFICER RECORDED THAT DURING THE COURSE OF SCRUTINY OF ASSESSMENT PROCEEDINGS WHEN THE AUTHORIZED REPRESENTATIVE WAS ASKED TO PRO VIDE CONFIRMATION FROM THE MEMBERS THAT THEY HAD GIVEN ON-MONEY IN CASH TO THE ASSESSEE, THE AUTHORIZED REPRESENTATIVE REPLIED THAT THE ASSESSEE HAD ALREAD Y GIVEN POSSESSION TO THE MEMBERS AND THERE WAS NO ARRANGEMENT ACCORDING TO W HICH THE MEMBERS COULD GIVE CONFIRMATION FOR SUCH TYPE OF INFORMATION. IT IS RECORDED BY THE ASSESSING OFFICER EVEN THE ADDRESS AND PAN OF THE MEMBERS FRO M WHOM THE CASH WAS RECEIVED WAS NOT FURNISHED. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE FAILED TO ESTABLISH THE SOURCE OF CASH REC EIPTS. THE ASSESSING OFFICER, RELYING UPON THE JUDGMENT OF HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MADURI RAJAIAHGAR I KISTAIAH (120 ITR 294) AND TREATED THE SUM OF RS.56,00,500/- DISCLOSED DUR ING THE SURVEY, AS THE INCOME FROM OTHER SOURCES. I.T.A. NO.2821/AHD/2011 A. Y. 2007-08 5 6. WE FIND THAT THE HONBLE CO-ORDINATE BENCH IN T HE CASE OF M/S FASHION WORLD VS. ACIT IN ITA NO.1634/AHD/2006 HAS HELD THAT:- THE FIRST ATTEMPT OF THE ASSESSING AUTHORITY SHOUL D BE TO FIND OUT LINK OF UNDECLARED INVESTMENT/EXPENDITURE WITH THE KNOWN HEAD, GIVE OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS AND IF IT IS SATISFACTORILY ESTABLISHED THEN FIRST SUCH INVESTME NT SHOULD BE CONSIDERED UNDECLARED RECEIPT UNDER THAT PARTICULAR HEAD. IT IS ONLY WHERE NO NEXUS IS ESTABLISHED WITH ANY HEAD THEN IT SHOULD BE CONSIDERED AS DEEMED INCOME UNDER SECTIONS 69, 69A, 69B AND 69C AS THE CASE MAY BE. IN THE PRESENT CASE, THE ASSESSING OFFICER HAD REJE CTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT FURNISH C ONFIRMATION FORM THE MEMBERS THAT THEY HAD GIVEN ON-MONEY IN CASH TO THE ASSESSEE. EVEN THE ADDRESS AND PAN OF MEMBERS FROM WHOM THE CASH WAS R ECEIVED WAS NOT FURNISHED. THEREFORE, THE ASSESSING OFFICER CONCLU DED THAT THE ASSESSEE FAILED TO ESTABLISH THE SOURCE OF CASH RECEIPTS TO THE EXTENT THAT HE FAILED TO PROVE THAT INCOME OF RS.56,00,500/- HAD ARISEN OUT OF BUSINESS ACTIVITY. IT IS NOT DISPUTED THAT IN BOOK IMPOUNDED AT THE PREMISES OF THE ASSES SEE IT HAD NOTED THE TRANSACTIONS REGARDING CASH RECEIPTS FROM THE MEMBE RS OF SURAMYA BUNGALOWS. THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE ASSESSEE SOLELY ON THE GROUND THAT NO CONFIRMATION AND PAN OF THE MEMBERS OF SURA MYA BUNGALOWS WAS FURNISHED. IT IS NOTEWORTHY THAT THE REVENUE HAS NO T PLACED ANYTHING ON RECORD THAT THE ASSESSEE HAD CARRIED OUT ANY OTHER ACTIVIT Y OTHER THAN THE CONSTRUCTION OF SURAMYA BUNGALOWS. THE NOTE BOOK WAS ALSO IMPOU NDED FROM THE SITE PREMISED AND THE TRANSACTIONS RECORDED IN THE NOTE BOOK IS ADMITTEDLY RELATING TO THE MEMBERS OF SURAMYA BUNGALOWS. THE ASSESSING OF FICER, ON ONE HAND HAS ADMITTED THAT THE TRANSACTIONS RECORDED INTO THE NO TE BOOK PERTAINED TO THE I.T.A. NO.2821/AHD/2011 A. Y. 2007-08 6 SURAMYA BUNGALOWS AND DATEWISE DETAILS OF RECEIPT O F MONEY FROM THE MEMBERS IS ALSO RECORDED IN THE NOTE BOOK ON THE OTHER TREA TING THE SAME AS INCOME FROM OTHER SOURCES. THEREFORE, THE SOURCE OF RECEIPT WA S RECORDED IN THE NOTE BOOK THAT WAS NECESSARILY FROM THE BUSINESS ACTIVITY CAR RIED OUT BY THE ASSESSEE FIRM. 7. IN THIS VIEW OF THE MATTER, LD. CIT(A) HAS RIGH TLY APPLIED THE RATIO OF THE DECISION OF HONBLE ITAT, AHMEDABAD BENCH IN TH E CASE OF M/S FASHION WORLD VS. ASSTT. CIT IN ITA NO.1634/AHD/2006. IN THIS VI EW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A ). THIS GROUND OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON 15 .06.2012 SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *