M/s. Rishabchand Misrimalji Bhansali (HUF), Bangalore V. ITO, CHENNAI

ITA 3161/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8000 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-11-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 16-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH JT
• Assessee Lawyers: K RAVI
• Keywords: Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , !' . ' $ %, & %' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO.3161/MDS/2016 & S.P NO.246/MDS/2016 & ) '*) / ASSESSMENT YEAR : 2005-06 RISHABCHAND MISRIMALJI BHANSALI (HUF) NO.10/1, NAMBOOR MARKET, T.N. SETTY LANE, AVENUE ROAD CROSS, BANGALORE 560 053. [PAN: AAIHR5888K ] (,-/ APPELLANT ) VS. INCOME TAX OFFICER, NON-CORPORATE WARD-6(1), CHENNAI. (PREVIOUSLY, BUSINESS WARD- XII(1), CHENNAI) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI K.RAVI, ADVOCATE ./,- 0 1 /RESPONDENT BY : SHRI A.V. SREEKANTH, JT. CIT $ ' 0 2 /DATE OF HEARING : 24.11.2016 3* 0 2 /DATE OF PRONOUNCEMENT : 03.02.2017 / O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI (CI T(A) FOR SHORT) DATED 23.09.2016, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HE REINAFTER) DATED 18.12.2009 FOR ASSESSMENT YEAR (AY) 2005-06. 2 ITA NO.3161 /MDS/2016 (AY 2005-06) RISHABCHAND MISRIMALJI BHANSALI V. ITO 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE, A HINDU UNDIVIDED FAMILY (HUF) CONSISTING OF THE KARTA, SHRI R.C. BHANSALI, AND HI S THREE SONS, HAD ADMITTEDLY LENT A SUM OF .73 LACS TO ONE, MR. T.BALAKRISHNA OF M/S. VISHWA B HARATHI VIDYA MANDIR OF BANGALORE DURING THE FINANCIAL YEAR (F.Y. ) 1998-99. THE ASSESSEE HAD NOT ACCOUNTED FOR THE SAID LOAN NOR, CONSEQUENTLY, DISCLOSED ANY INTEREST INCOME THEREON. ACCORDINGLY, REASSESSMENT PROCEEDINGS (VID E NOTICE U/S. 148 DATED 12.5.2008) WERE INITIATED TO BRING THE INTEREST INC OME TO TAX. THE ASSESSEE EXPLAINED THAT THE BORROWER HAD REPAID PRINCIPAL AT . 36.90 LACS UP TO 31.3.2002. NO PRINCIPAL OR INTEREST WAS RECEIVED TH EREAFTER TILL 31.3.2005, WHEREAT THE PRINCIPAL OUTSTANDING WAS THUS AT . 36.10 LACS. THE PARTIES AGREED TO A SETTLEMENT, WITNESSED BY LETTER DATED 13.5.200 5, WHERE-UNDER THE BORROWER WAS TO PAY . 8.25 LACS TOWARDS PRINCIPAL AND . 8,56,023/- AS INTEREST. ACCORDINGLY, THE ENTIRE INTEREST OF . 8.56 LACS WAS RETURNED AS INCOME FOR F.Y. 2005-06, RELEVANT TO AY 2006-07. ON THAT BASIS, IT WAS SUBMITTED THAT NO INTEREST IS LIABLE TO BE ASSESSED AS INCOME FOR THE CURRENT YEAR. FROM THE STATEMENT OF THE ASSESSEES ACCOUNT IN THE BORROWER S BOOKS OF ACCOUNT, IT WAS FOUND THAT ITS CREDIT BALANCE OUTSTANDING AS ON 01. 4.2004 (AND WHICH CONTINUED UP TO 31.3.2005) WAS . 9,80,102/-. FURTHER, THE ENTIRE SETTLEMENT AMOUNT OF . 16,81,023/- WAS RECEIVED DURING THE PERIOD 13.5.200 5 TO 28.11.2007. THE OUTSTANDING OF . 9.80 LACS, THUS, INCLUDED INTEREST OF . 1,55,102/- (I.E., . 9,80,102 - .8,25,000), AND WAS ACCORDINGLY BROUGHT TO TAX. THE SAME BEING CONFIRMED IN FIRST APPEAL, THE ASSESSEE IS IN SECON D APPEAL, CHALLENGING BOTH - THE ADDITION AFORESAID ON MERITS, AS WELL AS REOPENING OF THE ASSESSMENT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATE RIAL ON RECORD. ASSAILING OF THE REASSESSMENT PROCEEDINGS, WHICH IS ON THE BASIS OF ABSENCE OF REASON/S TO BELIEVE ESCAPEMENT OF INCO ME, IS WITHOUT BASIS. THE LOAN UNDER REFERENCE WAS ADMITTEDLY OUT OF BOOKS; THE AS SESSEE APPARENTLY NOT MAINTAINING ANY BOOKS OF ACCOUNTS, AND WAS IN FACT ASSESSED AS THE UNDISCLOSED 3 ITA NO.3161 /MDS/2016 (AY 2005-06) RISHABCHAND MISRIMALJI BHANSALI V. ITO INCOME (U/S. 158BC OF THE ACT) IN THE KARTAS INDIV IDUAL CAPACITY, AND IT WAS ONLY THEREAFTER, ON HIS CLAIMING THAT THE LOAN WAS GRANT ED BY THE HUF, THAT THE TRIBUNAL, DELETING THE ADDITION IN THE HANDS OF THE INDIVIDUA L, DIRECTED THE ASSESSMENT OF THE INTEREST INCOME IN THE HANDS OF THE HUF. NO INTERES T INCOME HAS ADMITTEDLY BEEN OFFERED TO TAX FOR THE YEAR EVEN AS PRINCIPAL OUTST ANDS DURING THE CURRENT YEAR. UNDER THE CIRCUMSTANCES, THERE IS A CLEAR AND LIVE NEXUS BETWEEN THE MATERIAL AVAILABLE WITH THE REVENUE AND THE INFERENCE OF ESC APEMENT OF INTEREST INCOME FOR THE CURRENT YEAR. THE ASSESSEES OBJECTION THUS FAI LS. ON THE MERITS OF THE ADDITION SUSTAINED, WE FIRSTLY OBSERVE A CONTRADICTION IN THE ASSESSEES CLAIM. ON ONE HAND IT CLAIMS TO HAVE RECEIVED ONLY PRINCIPAL (AT . 36.90 LACS) UP TO 31.3.2002, AND NOTHING THEREAFTER UP TO 31.3.2005, SO THAT PRINCIPAL OUTSTANDS AS ON, AND NEITHER HAS ANY INTE REST BEEN RECEIVED UP TO, 31.3.2005, YET AGREES TO A SETTLEMENT OF . 16.81 LACS, INCLUDING INTEREST OF . 8,56,023/-. HOW COULD THAT BE ? THAT IS, HOW COULD ANY AMOUNT ACCRUE, OR AGREED AS TOWARD, OR BE APPROPRIATED, AS INTEREST, WHEN TH E AMOUNT RECEIVED IN SETTLEMENT DOES NOT EVEN COVER THE PRINCIPAL AMOUNT OUTSTANDING ( . 36.90 LACS), SO THAT THERE IS RATHER A LOSS OF CAPITAL? INCOME ( INTEREST) CAN ONLY BE THAT ARISING OR RECEIVED IN ADDITION TO, I.E., AFTER PRESERVING, THE CAPITAL. FURTHER, THE VERY FACT THAT THE PARTIES AGREED TO THE SETTLEMENT AFORESAID ONLY IMPLIES THAT THE BORROWERS ACCOUNTS ARE RELIABLE, AND THAT ONLY A S UM OF . 8.25 LACS WAS OUTSTANDING AS PRINCIPAL IN THE TOTAL OUTSTANDING O F . 9,80,102/- AS ON 31.3.2005; IN FACT, 31.3.2004 INASMUCH AS THE SAME OUTSTANDS AS ON 01.4.2004 AS WELL (REFER PARA 8/PG. 2 OF THE ASSESSMENT ORDER). THE REVENUES INFERENCE OF THE AMOUNT RECEIVED IN EXCESS (OF . 8.25 LACS) AS INTEREST IS THUS VALID. THE ASSESSEES CLAIM THAT THE ENTIRE INTEREST AMOUN T OF . 8.56 LACS STANDS RETURNED AS INCOME FOR AY 2007-08, APART FROM BEING UN-EVIDENCED, SO THAT IT WOULD REQUIRE BEING VERIFIED, IS OF NO MOMENT AS IN COME IS ASSESSABLE ONLY FOR THE RIGHT YEAR, AND IT BEING RETURNED (AND ASSESSED ) FOR ANOTHER YEAR WOULD NOT FURNISH A GROUND FOR IT BEING NOT ASSESSED IN THE R IGHT YEAR. THE MOOT QUESTION, 4 ITA NO.3161 /MDS/2016 (AY 2005-06) RISHABCHAND MISRIMALJI BHANSALI V. ITO HOWEVER, IS: WHICH IS THE RIGHT YEAR ? THE INTEREST BEING NOT FORTHCOMING FOR THREE YEARS, I.E., SINCE 31.3.2002, SO THAT ITS RE CEIPT WAS UNCERTAIN, IT CANNOT BE SAID THAT INTEREST HAD ACCRUED MERELY ON THE BASIS THAT AN INTEREST RATE HAD BEEN AGREED TO AT THE TIME OF LENDING, I.E., ON ACCOUNT OF THE LOAN BEING INTEREST BEARING. THE UNCERTAINTY CAN REASONABLY BE REGARDED AS RESOLVED, OR SUBSTANTIALLY SO, ON 13.5.2005, I.E., DURING THE IM MEDIATELY SUCCEEDING YEAR, WHILE THE ACCRUAL OF INCOME HAS TO BE SEEN ON THE B ASIS OF THE POSITION OBTAINING AS ON 31.3.2005. IF THERE IS UNCERTAINTY AS TO THE REALIZABILITY OF INCOME AS ON 31.3.2005, IT CANNOT BE SAID TO HAVE ACCRUED FOR TH E RELEVANT YEAR. THE ASSESSEE IS ACCORDINGLY, IN OUR VIEW, CORRECT IN, WHERE SO, OFFERING THE INTEREST INCOME FOR AY 2006-07. THE SAME, AS IT APPEARS, PERTAINS TO TH E PERIOD 01.4.2002 TO 31.3.2005. HOWEVER, AS AFORE-STATED, ACCRUAL, IN TE RMS OF A REALIZABLE RIGHT (TO RECEIVE), VESTS IN THE ASSESSEE ONLY ON THE ARRIVIN G AT A SETTLEMENT BETWEEN THE BORROWER AND THE LENDER ON 13.5.2005, I.E., DURING THE PREVIOUS YEAR RELEVANT TO AY 2006-07. IN FACT, AS THE SUM OF . 9.80 LACS OUTSTANDS AS ON 31.3.2004, THE INTEREST ELEMENT OF . 1.55 LACS INCLUDED THEREIN WOULD RELATE TO PERIOD /S UP TO 31.3.2004. WE, ACCORDINGLY, FIND NO REASON FOR CONS IDERING THE IMPUGNED INTEREST INCOME OF . 1,55,102/- AS ASSESSABLE FOR THE CURRENT YEAR. WE THEREFORE DIRECT ITS DELETION. THERE CAN BE, NEEDLESS TO ADD, ONLY ONE ASSESSMENT F OR ANY AND, THEREFORE, THE CURRENT, YEAR. WE FEEL THE NEED TO SAY SO AS TH E ASSESSEE HAS ITSELF FURNISHED AN ASSESSMENT ORDER (BY AO, NON-CORPORATE WARD-6(1), C HENNAI) IN ITS CASE FOR AY 2006-07 (UNDER PAN: AAEPR 5875Q). FURTHER, THE IMPUG NED ASSESSMENT ORDER ITSELF RECORDS OF THERE BEING ANOTHER HUF BY THE SA ME NAME (AT BANGALORE) UNDER PAN: AAFHR 7586H. PAN IS AN ASSESSEE-SPECIFIC UNIQ UE IDENTITY NUMBER ISSUED BY THE REVENUE, AND APPLYING FOR OR OBTAINING MORE THAN ONE PAN IS ITSELF AN OFFENCE, WHILE WE FIND SEVERAL BEING QUOTED WITH IM PUNITY. THE AO SHALL CAUSE WITHDRAWAL OF ALL BUT ONE PAN, AND THE ASSESSEE SHA LL EXTEND FULL COOPERATION IN THE MATTER. OUR ORDER IS ASSESSEE, AND NOT, PAN SPECIFI C. THE CONCERNED AO SHALL 5 ITA NO.3161 /MDS/2016 (AY 2005-06) RISHABCHAND MISRIMALJI BHANSALI V. ITO ASSESS THE ASSESSEES ENTIRE INCOME ASSESSABLE FOR THE CURRENT YEAR (I.E., UNDER WHICHEVER PAN) WHILE GIVING APPEAL EFFECT TO OUR OR DER. WE SAY SO AS THIS ONLY WOULD ENSURE A PROPER ASSESSMENT OF THE ASSESSEES INCOME AND DETERMINATION OF ITS TAX LIABILITY FOR THE CURRENT YEAR, WHICH IS IN FAC T THE SCOPE OF ANY TAX APPEAL BEFORE THE TRIBUNAL, FOR WHICH THERE IS AMPLE AUTHORITY AN D TOWARD WHICH WE MAY QUOTE, INTER ALIA , THE FOLLOWING DECISIONS: KAPURCHAND SHRIMAL V. CIT [1981] 131 ITR 451 (SC); HUKUMCHAND MILLS LTD V. CIT [1967] 63 ITR 232 (SC); CIT V. C.C.C. HOLDINGS [2003] 260 ITR 433 (MAD); CIT V. INDIAN EXPRESS (MADURAI) PVT. LTD. [1983] 140 ITR 705 (MAD); THANTHI TRUST V. ASST. CIT [1999] 238 ITR 117 (MAD); AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351(BOM-FB); CONTROLLER OF ESTATE DUTY V. R.BRAHADEESWARAN [1987] 163 ITR 680 (MAD); CIT V. CELLULOSE PRODUCTS OF INDIA LTD . [1985] 151 ITR 499 (GUJ-FB). WE DECIDE ACCORDINGLY . 4. THE ASSESSEE HAS ALSO FILED A STAY PETITION. THE SAME BECOMES UNFRUCTUOUS IN VIEW OF HAVING DECIDED THE APPEAL. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED, AND ITS STAY PETITION IS DISMISSED AS UNFRUCTUOUS. ORDER PRONOUNCED ON FEBRUARY 3, 2017 AT CHENNAI . SD/- SD/- ( . ' $ %) ( ) ( G. PAVAN KUMAR ) ( SANJAY ARORA ) & / JUDICIAL MEMBER / ACCOUNTANT MEMBER / CHENNAI, 5 / DATED, FEBRUARY 3, 2017 . EDN 6 0 .&278 98*2 / COPY TO: 1. ,- / APPELLANT, 2. ./,- / RESPONDENT, 3. $ :2 ) / CIT(A), 4. $ :2 / CIT, 5. 8';< .&2& / DR & 6. <=) > / GF.