Shri S N V L Narasimha Raju, Bangalore V. DCIT, Bangalore

ITA 334/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0621 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASAHI
• Assessee Lawyers: VENKATESAN
• Keywords: Revised return
• Section: 143(3); 142(1); 143(2); 139(4); 6; 144

Judgement Text

PAGE 1 OF 10 ITA NO.334 & 335/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A' BEFORE SHRI K P T THANGAL, VICE PRESIDENT AND SHRI N L KALRA, A.M. ITA NO.334 & 335/BANG/09 (ASST. YEARS 2003-04 & 2004-05) SHRI S N V L NARASIMHA RAJU, #40, I PHASE, J P NAGAR, BANGALORE. - APPELLANT VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), BANGALORE. - RESPONDENT APPELLANT BY : SHRI VENKATESAN RESPONDENT BY : SMT. JACINTA ZIMIK VASAHI O R D E R PER N L KALRA : THE ASSESSEE HAS FILED APPEALS AGAINST THE RESPECTIVE ORDER OF LEARNED CIT(A)-VI, BANGALORE. 2. GROUND OF APPEAL NO.1 IS GENERAL FOR BOTH THE APPEALS AND THIS GROUND STANDS DISPOSED OFF IN VIEW OF OUR FINDING TO BE RECORDED AGAINST OTHER GROUNDS OF APP EAL. 3. THE SECOND GROUND OF APPEAL, WHICH IS COMMON FO R BOTH THE ASST. YEARS, IS THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ASSESSMENT COMPLETED U/S 144 OF TH E ACT. PAGE 2 OF 10 ITA NO.334 & 335/BANG/2009 2 3.1 FOR THE ASST. YEAR 2003-04, THE ASSESSING OFFIC ER NOTICED THAT THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME. THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) ON 6 TH JULY, 2004. THE ASSESSEE FILED RETURN OF INCOME ON 11TH MAY, 2005 BEFORE THE ASSESSING OFFICER. THE ASSESSEE'S A.R. FILED COPY OF BANK ACCOUNTS AND COPY OF LEDGER ACCOUNTS OF THE ASSESSEE IN THE BOOKS OF THE FIRM M/S THE OXFORD GIRLS HOSTEL. THE AO REQUIRED THE ASSESSEE TO FILE COPY OF STATEMENT OF AFFAIRS AND ALSO REQUIRED THE ASSESSEE TO EXPLAIN THE CREDITS A PPEARING IN THE BANK ACCOUNTS IN VIJAYA BANK AND ICICI BANK. TH E ASSESSEE DID NOT RESPOND TO THE LETTERS AND VARIOUS NOTICES ISSUED. ACCORDINGLY, THE ASSESSING OFFICER ISSUED A LETTER T O THE ASSESSEE ON 3RD JANUARY, 2006, VIDE WHICH, IT WAS PR OPOSED TO COMPLETE THE ASSESSMENT PROCEEDINGS U/S 144 OF THE I T ACT. THE AO HAS REPRODUCED THE COPY OF THE LETTER IN THE ASSESSMENT ORDER. IN THE LETTER, IT WAS MENTIONED THAT THE RETURN HAS BEEN FILED BEYOND THE PERIOD ALLOWED TO T HE ASSESSEE IN THE NOTICE ISSUED U/S 142(1) AND ALSO BEYOND THE TIME LIMIT PRESCRIBED UNDER THE PROVISIONS OF SECTION 139(4) O F THE I T ACT. IT WAS THEREFORE PROPOSED THAT THE RETURN WIL L BE TREATED AS INVALID RETURN. THE INFORMATION FURNISHED ALONG WITH THE RETURN OF INCOME WAS CONSIDERED FOR MAKING THE ASSE SSMENT. THE AO TREATED THE DEPOSITS IN THE BANK ACCOUNTS IN VIJAYA BANK AND ICICI BANK AS UNEXPLAINED AND THEREFORE AD DED TO THE INCOME. PAGE 3 OF 10 ITA NO.334 & 335/BANG/2009 3 3.2 THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNE D CIT(A). THE LEARNED CIT(A) HAS MENTIONED THAT THE ASSESSING OFFICER HAS ISSUED A PROPOSITION LETTER AND THEREFO RE, THE AO WAS JUSTIFIED IN COMPLETING THE ASSESSMENT U/S 144 OF THE I T ACT. 3.3 BEFORE US, THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER HAS ISSUED NOTICE U/S 142(1) AFTE R THE END OF THE ASST. YEAR. IT IS TRUE THAT THE RETURN HAS BEEN FILED BELATEDLY BUT THE SAME HAS BEEN FILED IN RESPONSE TO NOTICE U/S 142(1). THE AO WAS NOT JUSTIFIED IN TREATING THE R ETURN AS INVALID. HENCE, THE ASSESSMENT MADE U/S 144 IS NOT VALID BECAUSE THE RETURN IS TO BE TREATED AS VALID AND TH E ASSESSMENT SHOULD HAVE BEEN MADE U/S 144 R.W.S. 143(3). 3.4 ON THE OTHER HAND, THE LEARNED DR DREW OUR ATTENTION TO PAGE 5 OF THE ASSESSMENT ORDER. THE A SSESSING OFFICER HAS REPRODUCED A CHART SHOWING THE DATE OF ISSUE OF VARIOUS NOTICES AND THE DATES OF HEARINGS FIXED VID E SUCH NOTICES. THE LEARNED DR POINTED OUT THAT THE ASSES SEE ALWAYS SOUGHT ADJOURNMENT FOR 15 DAYS AND NEVER COMPLIED WI TH ANY NOTICES. THE LAST NOTICE ISSUED ON 28TH DECEMBER, 2005 WAS NOT COMPLIED WITH. 144 PROPOSAL WAS ALSO SENT ON 3 RD JANUARY, 2006. IT WAS THEREFORE SUBMITTED THAT THE ASSESSIN G OFFICER WAS JUSTIFIED IN COMPLETING THE ASSESSMENT U/S 144 OF THE I T ACT. PAGE 4 OF 10 ITA NO.334 & 335/BANG/2009 4 3.5 WE HAVE HEARD BOTH THE PARTIES. FOR THE ASST. YEAR 2003-04, THE AO HAS ISSUED NOTICE U/S 143(2) ON 25TH JULY, 2005. NOTICE U/S 143(2) CAN BE ISSUED IN CASE THE ASSESSEE HAS FILED THE RETURN. HENCE, FOR THE ASST . YEAR 2003- 04, THE AO CANNOT TREAT THE RETURN AS INVALID. U/S 139(4), AN ASSESSEE CAN FILE A RETURN BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASST. YEAR OR BEFORE THE COM PLETION OF THE ASSESSMENT, WHICHEVER IS EARLIER. THIS IS WITH REFERENCE TO NOTICE ISSUED U/S 142(1) ALSO. IF THE RETURN WAS N OT TO BE TREATED AS INVALID, THEN THE ASSESSMENT SHOULD HAVE BEEN COMPLETED BEFORE 31ST MARCH, 2005. IN THE INSTANT CASE, THE ASSESSMENT HAS BEEN MADE ON 31ST JANUARY, 2006. AS PER SECTION 153(1)(B), ASSESSMENT CAN BE COMPLETED WITH IN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH A RETURN OR A REVISED RETURN IS FILED UNDER SUB-SECTION 4 AND 5 OF SECTIO N 139. AS PER SECTION 153(1), IT IS MENTIONED THAT NO ORDER OF AS SESSMENT SHALL BE MADE U/S 143 OR SECTION 144. THIS MEANS THAT AS SESSMENT CAN BE MADE U/S 143 AS WELL AS U/S 144. IN THE INSTANT CASE, THE ASSESSEE HAS FAILED TO COMPLY WITH THE TERMS OF NOTICE U/S 142(1) ISSUED ON 28TH DECEMBER, 2005. THEREFORE, T HE ASSESSING OFFICER WAS JUSTIFIED IN COMPLETING THE A SSESSMENT U/S 144 OF THE I T ACT. 3.6 FOR THE ASST. YEAR 2004-05, THE ASSESSEE HAS FI LED THE RETURN ON 11TH MAY, 2005. THE ASSESSING OFFICER ISSUED NOTICE U/S 143(2) ON 24TH MAY, 2005. THE ASSESSING OFFICER PAGE 5 OF 10 ITA NO.334 & 335/BANG/2009 5 ISSUED NOTICE U/S 142(1) ON VARIOUS DATES BUT THE D ETAILS WERE NOT FILED. SINCE THE ASSESSEE FAILED TO COMPLY WITH THE TERMS AND REQUIREMENTS OF THE NOTICE ISSUED U/S 142(1), T HEREFORE, THE ASSESSMENT ORDER WAS COMPLETED U/S 144 OF THE I T ACT. THE COMPLETION OF ASSESSMENT U/S 144 WAS UPHELD BY T HE LEARNED CIT(A). FOR THE ASST. YEAR 2004-05, THE A.O . HAS RIGHTLY COMPLETED THE ASSESSMENT U/S 144 IN VIEW OF THE PROVISIONS OF SECTION 144(1)(B). WE HAD ALREADY POI NTED OUT THAT ASSESSMENT CAN BE MADE U/S 143 AS WELL AS U/S 144. IT IS NOT NECESSARY THAT WHEN NOTICE U/S 143(2) IS ISSUED THEN ASSESSMENT SHOULD BE MADE U/S 144 R.W.S. 143(3). H ENCE, WE HOLD THAT FOR BOTH THE ASST. YEARS, THE LEARNED CIT( A) WAS JUSTIFIED IN UPHOLDING THAT THE ASSESSING OFFICER W AS JUSTIFIED IN COMPLETING THE ASSESSMENT U/S 144 OF THE ACT. 4. THE THIRD GROUND OF APPEAL, WHICH IS COMMON FOR BOTH THE ASST. YEARS, IS THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ASSESS THE PE AK CREDIT IN RESPECT OF THE DEPOSITS MADE IN VIJAYA BANK AND ICIC I BANK. 4.1 THE ASSESSING OFFICER TREATED THE ENTIRE DEPOS ITS IN THE BANK ACCOUNTS AS UNEXPLAINED INCOME. THE LE ARNED CIT(A) DIRECTED THE AO TO CONSIDER THE PEAK OF CRED ITS AS UNEXPLAINED INCOME. 4.2 WE HAVE HEARD BOTH THE PARTIES. IN THE STATEM ENT OF AFFAIRS FILED AS ON 31ST MARCH, 2004 AVAILABLE A T PAGE 20 OF PAGE 6 OF 10 ITA NO.334 & 335/BANG/2009 6 THE PAPER BOOK FILED BY THE LEARNED AR, THE SAVING B ANK ACCOUNT IN VIJAYA BANK IS NOT APPEARING IN THE BALANCE SHEET . IT WAS CLARIFIED BEFORE US THAT THE SAID REFERRED BANK ACC OUNT IS REFLECTED IN THE BOOKS OF M/S THE OXFORD GRILS HOST EL, PARTNERSHIP FIRM IN WHICH THE ASSESSEE IS A PARTNER . THE FACT THAT VIJAYA BANK ACCOUNT WAS APPEARING IN THE BOOKS OF THE FIRM HAS NOT BEEN BROUGHT TO THE KNOWLEDGE OF THE LOWER AUTHORITIES. IT IS TRUE THAT ICICI BANK ACCOUNT HAS BEEN SHOWN I N THE BALANCE SHEET. WE THEREFORE FEEL THAT THE ISSUE IN RESPECT OF EXPLAINING THE DEPOSITS IN THE BANK ACCOUNT IN VIJA YA BANK AND ICICI BANK ARE REQUIRED TO BE RE-LOOKED BY THE ASSES SING OFFICER. IN CASE THE ASSESSEE IS NOT ABLE TO EXPLA IN THE DEPOSITS THEN THE SAME CAN BE ADDED TO THE INCOME. HOWEVER, FOR CONSIDERING THE UNEXPLAINED DEPOSITS, THE AO WI LL HAVE TO CONSIDER THE EXPLANATION OF THE ASSESSEE IN RESPECT OF ANY WITHDRAWAL MADE PRIOR TO THE DEPOSITS IN THE BANK A CCOUNT. THE ASSESSEE WILL BE FREE TO PLACE MATERIALS ON RECORD TO EXPLAIN THE DEPOSITS IN THE BANK INCLUDING THE WITHDRAWAL FROM HIS ACCOUNT IN THE PARTNERSHIP FIRM. HENCE, THE ISSUE OF ASCER TAINING THE UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT MAINTAINED IN VIJAYA BANK AND ICICI BANK ARE RESTORED BACK ON THE FILE O F THE ASSESSING OFFICER. THIS ISSUE IS RESTORED BACK FO R BOTH THE ASST. YEARS. 5. THE FOURTH AND FIFTH GROUNDS OF APPEAL FOR THE ASST. YEAR 2003-04 IS THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN PAGE 7 OF 10 ITA NO.334 & 335/BANG/2009 7 ASSESSING A SUM OF RS.5 LAKHS ON ESTIMATE BASIS AS INCOME OF THE APPELLANT FROM M/S OXFORD FINANCIERS. 5.1 THE ASSESSING OFFICER VIDE LETTER DATED 3RD JANUARY, 2006 PROPOSED TO THE ASSESSEE THAT IS GOING TO ESTIMATE INCOME OF RS.5 LAKHS ON OXFORD FINANCIERS AS THERE IS AN INVESTMENT OF AROUND RS.41.65 LAKHS IN THE FIRM M/S THE OXFORD GIRLS HOSTEL. THE ASSESSEE SUBMITTED THAT H E HAS NOT DERIVED ANY INCOME FROM M/S OXFORD FINANCIERS AND TH EREFORE, NO INCOME SHOULD BE ADDED. 5.2 THE LEARNED CIT(A) HAS MENTIONED IN HIS ORDER THAT NO EXPLANATION OR ARGUMENT WAS GIVEN AGAINST T HE ADDITION OF RS.5 LAKHS; THEREFORE, THE ADDITION OF RS.5 LAKH S WAS UPHELD. 5.3 DURING THE COURSE OF PROCEEDINGS BEFORE US, TH E LEARNED AR SUBMITTED THAT IN CASE THE ASSESSMENT IS COMPLETED U/S 144 THEN ONE HAS TO CONSIDER THE PAST HISTORY OF THE CASE. IN THE INSTANT CASE, THE RETURNED INCOME IS BEING A CCEPTED IN THE EARLIER YEARS. HENCE, THERE WAS NO CASE OF ESTI MATION OF INCOME OF RS.5 LAKHS FROM OXFORD FINANCIERS. THE L EARNED AR DREW OUR ATTENTION TO THE BALANCE SHEET AS ON 31ST MARCH, 2004 AND ALSO TO THE COPY OF ACCOUNT AS APPEARING IN THE BOOKS OF THE OXFORD GIRLS HOSTEL. THE LEARNED AR ALSO DREW OUR ATTENTION TOWARDS THE CAPITAL ACCOUNT. IT WAS STATED THAT TH E INVESTMENTS STAND EXPLAINED AND THERE HAS BEEN NO I NCOME FROM OXFORD FINANCIERS. PAGE 8 OF 10 ITA NO.334 & 335/BANG/2009 8 5.4 ON THE OTHER HAND, THE LEARNED DR SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW. IT WAS STATED THA T WHEN THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE THEN THE ASSE SSING OFFICER WAS LEFT WITH NO ALTERNATIVE BUT TO MAKE TH E ESTIMATE. THE LEARNED DR RELIED ON THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF SILVER STAR ENGINEERS V ITO 266 ITR 376. 5.5 WE HAVE HEARD BOTH THE PARTIES AND HAVE PERUSE D THE PAPER BOOK FILED BY THE LEARNED AR. ASSESSMENT IN THE CASE OF THE ASSESSEE FOR THE ASST. YEAR 2001-02 WAS COMPL ETED U/S 143(3) AND THE RETURNED INCOME WAS ACCEPTED. SIMIL AR RETURNED INCOME FOR THE ASST. YEAR 2005-06 HAS ALSO BEEN ACCE PTED. FOR BOTH THE YEARS, THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM OXFORD FINANCIERS. FOR THE ASST. YEAR 2005-06 THE A SSESSEE HAS ALSO FILED STATEMENT OF AFFAIRS AS ON 31ST MARC H, 2004 THOUGH SUCH STATEMENT OF AFFAIRS HAS BEEN FILED AFT ER THE COMPLETION OF ASSESSMENT FOR THE ASST. YEAR 2003-04 . HENCE, WE FEEL THAT THE ESTIMATION OF INCOME FROM THE OXFO RD FINANCIERS IS ALSO REQUIRED TO BE RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER AS THERE IS NO JUSTIFICATION OF MAKING ADDITION. IT IS NOT THE CASE OF THE REVENUE THAT M /S OXFORD GIRLS HOSTEL, THE FIRM IN WHICH THE ASSESSEE IS A P ARTNER, DID NOT MAINTAIN THE BOOKS OF ACCOUNT. HENCE, THIS ISSUE I S RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER. PAGE 9 OF 10 ITA NO.334 & 335/BANG/2009 9 6. FOR THE ASST. YEAR 2004-05, THE ASSESSEE IS AGGRIEVED AGAINST THE FINDING OF THE LEARNED CIT(A) IN SUSTAINING THE ADDITION OF RS.3 LAKHS MADE ON ACCOU NT OF ESTIMATED HOUSEHOLD EXPENSES. 6.1 THE ASSESSING OFFICER ESTIMATED THE HOUSEHOLD EXPENSES AT RS.25,000/- AND ADDED IT TO THE INCOME. THE LEARNED CIT(A) DIRECTED TO TELESCOPE THE INADEQUATE WITHDRAWALS FOR HOUSEHOLD EXPENSES WITH THE UNEXPLA INED CREDIT/INCOME DEPOSITED IN THE BANK ACCOUNT. 6.2 WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. SINCE WE ARE RESTORING BACK THE MATTER OF DEPOSITS IN THE SAVINGS BANK ACCOUNT TO THE FILE OF THE ASSESSING O FFICER TO BE RE-LOOKED, THEREFORE, THE ISSUE OF ADDITION ON ACCO UNT OF LOW WITHDRAWAL FOR HOUSEHOLD EXPENSES IS ALSO RESTORED BACK ON THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFIC ER WILL GIVE OPPORTUNITY TO THE ASSESSEE FOR EXPLAINING THE WITHD RAWALS FOR HOUSEHOLD EXPENSES. THE ASSESSING OFFICER AFTER CON SIDERING THE EXPLANATION OF THE ASSESSEE MAY CONSIDER OF MAK ING ADDITION IN CASE IT IS FELT THAT THE WITHDRAWALS MA DE BY THE ASSESSEE FOR HOUSEHOLD EXPENSES WERE INADEQUATE OR WERE NOT FROM THE EXPLAINED SOURCES. 7. THE LAST GROUND OF APPEAL, WHICH IS COMMON FOR BOTH THE ASSESSMENT YEARS, IS AGAINST THE CHARGING O F INTEREST. PAGE 10 OF 10 ITA NO.334 & 335/BANG/2009 10 7.1 CHARGING OF INTEREST IS MANDATORY AND THE APPELLANT WILL GET CONSEQUENTIAL RELIEF. 8. IN THE RESULT, BOTH THE APPEALS ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 9TH OCTOBER, 2009. SD/- SD/- (K P T THANGAL) (N L KALRA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DTD.09/10/2009 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT( A) CONCERNED.4. THE CIT CONCERNED. 5. THE DR 6. GUAR D FILE. 7. GF, ITAT, NEW DELHI. MSP/5.10. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.