Ramesh Maruti Patil, V. ACIT,Cir.2,

ITA 326/PUN/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7487 (ITAT-PUNE)
• Duration Of Justice: 4 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 1997-1998
• Appeal Filed On: 27-02-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Keywords: Depreciation; Set aside
• Section: 133A; 147; 68; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER S.NO . ITA NO. ASSTT.YEAR 1. 326/PN/07 1997-98 2. 327/PN/07 1998-99 3. 328/PN/07 1999-2000 4. 329/PN/07 2000-01 SHRI RAMESH MARUTI PATIL, 391, E-WARD, ALLAP APARTMENT, .. APPELLANT SAHUPURI, KOLHAPUR PAN AHFPP1853N VS. ASSTT. COMMISSIONER OF INCOME-TAX, CIR. 2, KOLHAPUR .. RESPONDENT NASHIK PAN AAACP 3590P APPELLANT BY : SHRI M.K. KULKARNI RESPONDENT BY : SHRI ABHAY DAMLE ORDER PER G.S.PANNU, A.M: THE CAPTIONED FOUR APPEALS BY THE ASSESSEE ARE DIR ECTED AGAINST A COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (APP EALS), KOLHAPUR DATED 16.10.2006 PERTAINING TO THE ASSESSMENT YEARS 1997- 98 TO 2000-01, WHICH IN TURN HAVE ARISEN FROM THE RESPECTIVE ORDERS PASSED BY TH E ASSESSING OFFICER UNDER SECTION 147 READ WITH SECTION 144 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR THE AFORESAID ASSESSMENT YEARS. 2. THE FACTS AND ARGUMENTS OF BOTH THE PARTIES BEIN G IDENTICAL IN ALL THE APPEALS, WE SHALL TAKE UP ITA NO 326/PN/07 FILED BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 1997-98, IN ORDER TO APPRECIATE THE CONTROVERSY. 3. THE FIRST COMMON ISSUE IN ALL THESE APPEALS RELA TES TO THE CLAIM OF THE ASSESSEE THAT THE ASSESSMENT PROCEEDINGS ARE VITIAT ED, SINCE THE ASSESSING OFFICER WRONGLY ASSUMED JURISDICTION TO MAKE THE IM PUGNED ASSESSMENT. IN ORDER ITA NOS 326 TO 329/PN/07 SHRI RAMESH M PATIL, KOLHA PUR 2 TO APPRECIATE THE SAID CONTROVERSY, WE MAY REFER TO THE FACTS AS EMERGING FOR THE ASSESSMENT YEAR 1997-98, VIDE APPEAL IN ITA NO 326/ PN/07. IN THIS CASE, THE ASSESSEE IS IN THE BUSINESS OF RUNNING A VIDEO-CUM- PARLOUR AND A SURVEY ACTION UNDER SECTION 133A OF THE ACT TOOK PLACE AT THE BUS INESS PREMISES OF THE ASSESSEE. FOR THE ASSESSMENT YEAR 1997-98, A NOTICE UNDER SECTION 148 OF THE ACT DATED 25.3.2004 WAS ISSUED TO THE ASSESSEE REQU IRING HIM TO FILE HIS RETURN OF INCOME WITHIN 30 DAYS FROM THE DATE OF SERVICE OF T HE SAID NOTICE. THE ASSESSEE FILED HIS RETURN ON 30.4.2004 WHEREIN TOTAL INCOME DECLARED AT RS 47,670/- WAS THE SAME AS DECLARED IN THE RETURN FILED ORIGINALLY . HOWEVER, THE RETURN FILED ON 30.4.2004 WAS BEYOND THE TIME STIPULATED IN THE NOT ICE ISSUE UNDER SECTION 148 OF THE ACT AND, THEREFORE, THE ASSESSING OFFICER TR EATED THE SAID RETURN AS AN INVALID RETURN. HE, THEREFORE, PROCEEDED TO FINALIS E THE ASSESSMENT UNDER SECTION 144 READ WITH SECTION 147 OF THE ACT. 4. IN THIS BACKGROUND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RAISED A SPECIFIC GROUND OF APPEAL, WHICH READS AS UNDER: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER IS REQUIRED TO BE SET ASIDE SINCE THE ASSESSING OFFICE R ADMITTED AND LD CIT (A) CONFIRMED THAT THE ASSESSMENT WAS MADE ON A NON-EST RETURN AN D THEREFORE THE AO SHOULD NOT HAVE PROCEEDED TO COMPLETE THE ASSESSMENT FOLLOWING THE HONBLE PUNE I.T.A.T.,(T.M) JUDGMENT IN THE CASE OF G.C. BAFNA V DCIT (2004) 90 ITD 115 (PUNE)(TM)? IN THIS REGARD, IT HAS BEEN CONTENDED THAT THE ASSE SSMENT WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF A NON-EST RETURN, WHICH WAS IMPERMISSIBLE HAVING REGARD TO THE DECISION OF THE TRIBUNAL IN TH E CASE OF G.C.BAFNA (SUPRA). HE, THEREFORE, SUBMITTED THAT THE ASSESSMENT ORDER BE SET ASIDE FOR MAKING IT AFRESH IN ACCORDANCE WITH LAW. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS OPPOSED THE PRAYER OF THE ASSESSEE POINTING OUT THAT THE DE CISION OF THE TRIBUNAL IN THE CASE OF G.C. BAFNA (SUPRA) IS NOT ATTRACTED IN THE FACTS OF THE PRESENT CASE, INASMUCH AS THE ASSESSING OFFICER HAS NOT PASSED TH E ASSESSMENT ON THE BASIS OF THE INVALID RETURN, BUT HAS MERELY TREATED IT AS A SOURCE OF INFORMATION FOR MAKING ASSESSMENT, UNDER SECTION 144 OF THE ACT WHI CH IS PERMISSIBLE IN LAW. ITA NOS 326 TO 329/PN/07 SHRI RAMESH M PATIL, KOLHA PUR 3 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. IN THIS CASE, THE ASSESSEE DID NOT FURNISH A RETURN WITHIN THE PERIOD PRESCRIBED IN THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT. FOR THIS REASON, THE RETURN FILED BY THE ASSESSEE ON 30.4.2004 IN RESPONSE TO NOTICE UNDER SECTION 148 W AS TREATED AS INVALID. THE ASSESSING OFFICER HAS NOTED IN PARAGRAPH (1) THAT T HE SAID RETURN HAS BEEN MERELY TREATED AS A SOURCE OF INFORMATION FOR COMPL ETING A BEST JUDGMENT ASSESSMENT IN TERMS OF SECTION 144 READ WITH SECTIO N 147 OF THE ACT. AS PER THE ASSESSEE, THE ASSESSING OFFICER WRONGLY RELIED UPON AN INVALID RETURN IN ORDER TO COMPLETE THE ASSESSMENT AND, THEREFORE, SUCH ASSESS MENT IS TO BE SET ASIDE, ON THE BASIS OF THE DECISION OF THE TRIBUNAL IN THE CA SE OF G.C. BAFNA (SUPRA). IN OUR OPINION, THE ABOVE SUBMISSION IS DEVOID OF MERIT. F IRSTLY, THE DECISION IN THE CASE OF G.C BAFNA (SUPRA) IS ON AN ALTOGETHER DIFFERENT FACTUAL MATRIX. IN THE CASE OF G.C. BAFNA (SUPRA), THE ASSESSEE HAD FILED A RETURN AFTER EXPIRY OF THE TIME ALLOWED IN THE NOTICE ISSUED UNDER SECTION 158BC OF THE ACT AND THE SAME WAS TREATED BY THE ASSESSING OFFICER AS NON-EST AND THE ASSESSMENT WAS COMPLETED WITHOUT CONSIDERING THE RETURN SO FILED. THE TRIBUN AL, BY A MAJORITY OPINION, HELD THAT THE BELATED RETURN WAS A VALID RETURN AND, THE REFORE, THE ENTIRE ASSESSMENT WAS TO BE RESTRUCTURED ON THE PREMISE THAT THE ASSE SSEE DID FILE A VALID RETURN. IN SUCH EVENTUALITY, THE ASSESSMENT WAS SET ASIDE AND RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH. IN THE I NSTANT CASE, THE FACT-SITUATION STANDS ON AN ENTIRELY DIFFERENT FOOTING, INASMUCH A S THE ASSESSEE DOES NOT DISPUTE THAT THE RETURN FILED ON 30.4.2004 AND WHIC H HAS BEEN TREATED AS NON-EST BY THE ASSESSING OFFICER HAS BEEN SO WRONGLY TREATE D. IN OTHER WORDS, THE ASSESSEE DOES NOT DISPUTE THAT THE RETURN FILED ON 30.4.2004 IS A NON-EST RETURN. THE FACT-SITUATION IN THE CASE OF G.C .BAFNA (SUPRA ) WAS TO THE CONTRARY. THEREFORE, THE RATIO OF THE DECISION OF THE TRIBUNA L IN THE CASE OF G.C., BAFNA CANNOT HELP THE ASSESSEE IN NEGATING THE IMPUGNED A SSESSMENT. THEREFORE, THE PLEA OF THE ASSESSEE IS HEREBY DISMISSED. 7. THE SECOND SUBSTANTIVE GRIEVANCE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1997-98 IS AGAINST THE ACTION OF THE COMMISSIO NER OF INCOME-TAX(APPEALS) ITA NOS 326 TO 329/PN/07 SHRI RAMESH M PATIL, KOLHA PUR 4 IN UPHOLDING THE ADDITION OF RS 16,85,047/- REPRESE NTING OPENING CASH BALANCE IN THE FUND FLOW STATEMENT. IN THIS REGARD, BRIEF FACT S ARE THAT THE ASSESSEE DID NOT FILE RETURNS OF INCOME OF THE YEARS PRIOR TO THE SU RVEY. AFTER THE SURVEY WHEN THE RETURNS WERE FILED, THE ASSESSEE DREW UP ACCOUNTS F ROM THE YEAR 1993-94 ONWARDS, WHICH ACCORDING TO THE ASSESSEE WAS THE YE AR IN WHICH THE BUSINESS HAD BEEN CARRIED ON. IN THE YEAR 1993-94, THE OPENI NG CASH BALANCE WAS TAKEN AT THE FIGURE OF RS 16,85,047/-. TAKING THIS AS THE CA SH BALANCE, THE RECEIPT AND EXPENSES WAS ADJUSTED AND CLOSING CASH BALANCE CARR IED FORWARD TO THE NEXT YEAR AND SO ON WITH THE RESULT THAT FOR ASSESSMENT YEAR 1997-98, THE OPENING CASH BALANCE WAS SHOWN AT RS 14,22,129/- AND THE CL OSING BALANCE AT RS 16,52,909/-. THE ASSESSING OFFICER DID NOT ACCEPT T HE CLAIM OF THE ASSESSEE REGARDING THE CASH BALANCE IN THE ABSENCE OF ANY EV IDENCE TO PROVE THE CASH BALANCE. WHILE THE ASSESSING OFFICER ADDED THE OPEN ING CASH BALANCE OF 1993- 94, IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 1997- 98, IN THE SUBSEQUENT CAPTIONED ASSESSMENT YEARS, ONLY INCREMENTAL AMOUNT S HAVE BEEN ADDED. 8. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), ASSESSEE CONTENDED THAT THOUGH HE DID NOT MAINTAIN ANY BOOKS OF ACCOUN T ON THE BASIS OF WHICH HE COULD PROVE THAT THERE WAS CASH BALANCE AVAILABLE, HOWEVER, THE FACTUM OF THE ASSESSEE CONDUCTING A REGULAR BUSINESS IN WHICH THE RECEIPTS ARE ALWAYS IN CASH, CANNOT BE DENIED. THE COMMISSIONER OF INCOME-TAX (A PPEALS), HOWEVER, UPHELD THE ADDITION OF RS 16,85,047/- BY OBSERVING THAT TH E ASSESSEE HAS NEITHER FILED HIS RETURNS OF INCOME OR MAINTAINED BOOKS OF ACCOUN T TO SUPPORT HIS CLAIM. AGAINST SUCH A DECISION, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT IT IS A CASE OF A RUNNING BUSINESS IN WHICH BOOKS OF A CCOUNT WERE NOT MAINTAINED AND THE RETURNS OF INCOME WERE ALSO NOT FILED FOR R ELEVANT YEAR. HOWEVER, ACCORDING TO HIM, IN A RUNNING BUSINESS IT IS NOT P OSSIBLE TO HAVE A NIL CASH BALANCE AND, THEREFORE, TREATING THE OPENING CASH B ALANCE AS ON 1.4.1996 AS NIL WAS NOT CORRECT. ITA NOS 326 TO 329/PN/07 SHRI RAMESH M PATIL, KOLHA PUR 5 10. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF T HE CASE OF THE REVENUE. 11. IN OUR CONSIDERED OPINION, IT IS UNDENIABLE THA T THE CLAIM OF THE ASSESSEE REGARDING AVAILABILITY OF OPENING CASH BALANCE FOR ASSESSMENT YEAR 1997-98 IS UNSUPPORTED IN THE ABSENCE OF BOOKS OF ACCOUNT OR T HE RETURNS OF INCOME HAVING BEEN FILED FOR THE EARLIER ASSESSMENT YEAR. SO, HOW EVER, THERE IS SOME WEIGHT IN THE PLEA SET UP BY THE ASSESSEE THAT BUSINESS WAS R UNNING EVEN IN THE EARLIER YEARS AND IT CANNOT BE A CASE OF NIL CASH BALANCE. IN OUR CONSIDERED OPINION, HAVING REGARD TO THE PECULIAR FACTS AND CIRCUMSTANC ES OF THE CASE, IT WOULD BE IN THE FITNESS OF THINGS THAT CERTAIN AMOUNT OF CREDIT IS ALLOWED TO THE ASSESSEE TOWARDS OPENING CASH BALANCE AS ON 1.4.1996 BROUGHT FORWARD FROM THE EARLIER YEARS. CONSIDERING THE OVERALL FACTS AND CIRCUMSTA NCES, IN OUR VIEW, HAVING REGARD TO THE FACTUM THAT THE ASSESSEE HAS BEEN CON DUCTING BUSINESS IN THE PAST YEARS, WHICH IS NOT DISPUTED, THAT A SUM OF RS 2,00 ,000/- BE CONSIDERED AS AN OPENING CASH BALANCE AS ON 1.4.1996 AVAILABLE FROM THE PRECEDING YEARS. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO REWORK T HE ADDITION AFTER CONSIDERING THE AFORESAID. ACSCORDINGLY, ON THIS ASPECT THE ASSESSE E PARTLY SUCCEEDS. 12. THE NEXT GROUND IS WITH REGARD TO A SUM OF RS 4 8,000/- REPRESENTING LOAN FROM SHRI D.M. PATIL, WHICH HAS BEEN CONSIDERED AS UNEXPLAINED. IN THIS REGARD, THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DIRECT ED THE ASSESSING OFFICER TO VERIFY THE CASE OF THE ABOVE LENDER TO DETERMINE WH ETHER THE AMOUNT OF MONEY GIVEN TO THE ASSESSEE HAS BEEN TAXED IN THE HANDS O F THE LENDER OR NOT. WHEREVER THE AMOUNT HAS BEEN TAXED IN THE LENDERS HANDS, ADDITION UNDER SECTION 68 IN THE HANDS OF THE ASSESSEE HAS BEEN DI RECTED TO BE DELETED. 13. AFTER CONSIDERING THE PLEA OF THE ASSESSEE, WE FIND NO REASONS TO INTERFERE WITH THE DIRECTIONS OF THE COMMISSIONER OF INCOME-T AX (APPEALS) WHICH, IN OUR VIEW, IS FAIR AND PROPER. THUS, ON THIS ASPECT, ASS ESSEE FAILS. 14. THE NEXT GROUND RELATES TO DISALLOWANCE OF DEPR ECIATION ON MARUTI CAR OWNED BY THE ASSESSEE. AFTER GOING THROUGH THE ORDE RS OF THE AUTHORITIES BELOW, WE FIND THAT THE COMMISSIONER OF LNCOME-TAX (APPEAL S) HAS DIRECTED THE ITA NOS 326 TO 329/PN/07 SHRI RAMESH M PATIL, KOLHA PUR 6 ASSESSING OFFICER TO RESTRICT DEPRECIATION OF THE V EHICLE TO 50% OF THE AMOUNT CLAIMED BY THE ASSESSEE, AS IN HIS OPINION, THERE W AS NO EVIDENCE TO SHOW THE EXTENT OF PERSONAL USE OF THE CAR. IN OUR CONSIDERE D OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE COMMISSIONER OF INCO ME0TAX (APPEALS) ON THIS ASPECT. ASSESSEE FAILS ON THIS GROUND. 15. THE NEXT GROUND RELATING TO CLAIM UNDER SECTION 80D OF THE ACT WAS NOT PRESSED AT THE TIME OF HEARING AND, THEREFORE, THE SAME STANDS DISMISSED. 16. THE NEXT GROUND RELATING TO LEVY OF INTEREST UN DER SECTIONS 2134A, 234B, AND 234C BEING CONSEQUENTIAL IN NATURE AND NEED NO ADJUDICATION. 17. IN THE RESULT, APPEAL FOR THE ASSESSMENT YEAR 1 997-98 IS PARTLY ALLOWED. 18. ON THE PARITY OF REASONING, APPEALS FOR ASSESSM ENT YEARS 1998-99, 1999- 2000 AND 2000-01 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF FEBRUARY, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. PA NNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 28 TH FEBRUARY, 2011 COPY TO:- 1) SHRI RAMESH M PATIL, KOLHAPUR 2) ACIT, CIR 2 KOLHAPUR 3) THE CIT(A) KOLHAPUR 4) THE CIT I KOLHAPUR. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, ITAT,PUNE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE B