Mr. S.Arputharaj, Member of Arputharaj and Radhakrishnan (AOP), CHENNAI V. ACIT, Coimbatore

ITA 34/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68885 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 07-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: V JAGADISAN
• Keywords: Search and seizure; Maximum Marginal Rate; Validity of assessment; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NOS.34, 35, 36 & 37/MDS/2013 ASSESSMENT YEARS : 2006-07 TO 2009-10 MR. S. ARPUTHARAJ, MEMBER OF ARPUTHARAJ AND RADHAKRISHNAN (AOP), FLAT NO.5, KRISHNA NAGAR, SOWRIPALAYAM, COIMBATORE 641 028. PAN AACAA2376G VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-III, COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V. JAGA DISAN, CA RESPONDENT BY : SHRI SHAJI P. JA COB, IRS, ADDL. CIT DATE OF HEARING : 5 TH DECEMBER, 2013 DATE OF PRONOUNCEMENT : 5 TH DECEMBER, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THESE FOUR APPEALS ARE FILED BY THE ASSESSEE. T HE RELEVANT ASSESSMENT YEARS ARE 2006-07, 2007-08, 200 8-09 AND 2009-10. THESE APPEALS ARE DIRECTED AGAINST THE OR DERS OF THE - - 2 COMMISSIONER OF INCOME-TAX(APPEALS)-I AT COIMBATORE , PASSED ON 14.11.2012 AND ARISE OUT OF THE ASSESSMENTS COMP LETED UNDER SECTION 143(3), READ WITH SEC.147 OF THE INCO ME-TAX ACT, 1961. 2. COMMON GROUNDS HAVE BEEN RAISED IN ALL THESE FO UR APPEALS. THE FIRST COMMON GROUND IS THAT THE ASSES SING AUTHORITY HAS ERRED IN REOPENING THE ASSESSMENTS AN D TO COMPLETE THE ASSESSMENTS IN THE STATUS OF AN ASSOCI ATION OF PERSONS(AOP). IT IS THE CASE OF THE ASSESSEE THAT THE LOWER AUTHORITIES HAVE FAILED TO BRING OUT CLEARLY IN THE IR ORDERS AS TO THE JUSTIFICATION FOR MAKING AN ASSESSMENT ON AOP ESPEC IALLY WHEN SEC.67A PROHIBITED AN ASSESSMENT ON AOP IN RESPECT OF THE AGGREGATE INCOME OF MEMBERS OF AOP, WHERE THE SHARE S OF MEMBERS OF AOP ARE SPECIFIED AND SUSTAINABLE. 3. THIS COMMON GROUND WAS CONSIDERED IN DETAIL BY US. THE EARLIER CONFUSION WAS WHETHER THE SHARES W ERE DETERMINATE OR INDETERMINATE AND WHETHER LEVY OF TA X HAS BEEN MADE ON AOP AT MAXIMUM MARGINAL RATE OR SLAB RATE. BUT THE - - 3 CONFUSION WAS CLEAR WHEN THE LEARNED COMMISSIONER A PPEARING FOR THE REVENUE SHOWED US THAT TAX HAS BEEN LEVIED AS PER SLAB RATE. ONCE THIS FACT IS ESTABLISHED WITHOUT ANY DI SPUTE, THERE IS NO FORCE IN THE ARGUMENT ADVANCED BY THE ASSESSEE R EGARDING THE VALIDITY OF ASSESSMENTS COMPLETED IN THE STATUS OF AOP. 4. THEREFORE, THE COMMON GROUND RAISED BY THE ASSESSEE IN ALL THESE FOUR APPEALS ON THE ISSUE OF ASSESSMENT COMPLETED ON THE STATUS OF AOP IS REJECTED. 5. THE NEXT COMMON GROUND RAISED IN ALL THESE APPEALS IS REGARDING THE DISALLOWANCE OF EXPENDITUR E WHILE COMPLETING THE ASSESSMENTS FOR THE IMPUGNED ASSESSM ENT YEARS. 6. FOR THE ASSESSMENT YEAR 2006-07, THE CASE OF TH E ASSESSEE IS THAT THE ASSESSING OFFICER HAS ADDED ` 10 LAKHS BY WAY OF DISALLOWING THE EXPENDITURE BOOKED BY THE AS SESSEE IN HIS PROFIT AND LOSS ACCOUNT BUT WHERE AS IN FACT TH E ASSESSEE HAS SHOWN NIL INCOME AND HAS NOT CLAIMED THE SAID AMO UNT AS - - 4 DEDUCTION. THE AMOUNT OF ` 10 LAKHS HAS BEEN ADDED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE H AD NOT PRODUCED ANY EVIDENCE IN SUPPORT OF INCURRING OF TH AT EXPENDITURE. THIS CONCLUSION WAS ARRIVED AT BY THE ASSESSING OFFICER IN THE LIGHT OF SURVEY CARRIED OUT IN THE B USINESS PREMISES OF THE ASSESSEE. IN THE COURSE OF SURVEY, BOOKS OF ACCOUNT WERE VERIFIED AND NO ENTRY RELATING TO INSTANCE OF EXPEN DITURE TO THE EXTENT OF ` 10 LAKHS WAS FOUND OUT FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER FOUND THAT THIS EX PENDITURE WAS BOOKED BY THE ASSESSEE LONG AFTER THE CLOSURE OF TH E ACCOUNTS AND THAT TOO, NO EVIDENCES WERE AVAILABLE TO SUPPOR T SUCH EXPENSES. 7. WE CONSIDERED THE MATTER IN DETAIL. THE ASSESS ING OFFICER HAS DISALLOWED THE EXPENDITURE PROPERLY. T HIS IS BECAUSE NO EVIDENCE WAS AVAILABLE ON RECORDS. NOW REGARDIN G THE ARGUMENT THAT THIS DISALLOWANCE COULD NOT BE CONVER TED INTO AN ADDITION TO THE INCOME FOR THE REASON THAT THE ASSE SSEE HAS FILED NIL INCOME. WE ARE AFRAID THAT IT IS NOT SUSTAI NABLE IN LAW. IF THE ASSESSEE HAS RETURNED A LOSS, THE LOSS WILL BE REDU CED TO THE - - 5 EXTENT OF DISALLOWANCE VIS-A-VIS ADDITION MADE BY T HE ASSESSING OFFICER. IF THE ASSESSEE HAS FILED POSITIVE INCOME , THE SAME SHALL BE INCREASED TO THE EXTENT OF DISALLOWANCE VIS-A-VI S ADDITION MADE BY THE ASSESSING OFFICER. IF AN ASSESSEE HAS FILED A NIL RETURN, THE INCOME OF THE ASSESSEE SHALL BE DETERM INED TO THE EXTENT OF DISALLOWANCE VIS--VIS ADDITION MADE BY T HE ASSESSING OFFICER . THIS IS ONLY AN ARITHMETICAL CONSEQUENCE . THE ASSESSEE CANNOT ARGUE THAT THIS EXPENDITURE WAS AD DED BY HIM TO THE CAPITAL ACCOUNT. THE AMOUNT WAS REFLECTED I N THE PROFIT AND LOSS ACCOUNT. THEREFORE, THE ADDITION OF ` 10 LAKHS FOR THE ASSESSMENT YEAR 2006-07 IS CONFIRMED. 8. THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07 FAILS. 9. REGARDING THE REMAINING THREE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10, AGAIN THE ISSUE IS RE GARDING DISALLOWANCE OF EXPENDITURE CLAIMED BY WAY OF DEDUC TION. THE LEARNED CHARTERED ACCOUNTANT SUBMITTED THAT THE ASS ESSING OFFICER HAS DISALLOWED ALMOST ENTIRE EXPENSES CLAIM ED BY THE - - 6 ASSESSEE, WHICH IS AN INDISCRIMINATE ACT NOT JUSTIF IED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED CHARTER ED ACCOUNTANT OBSERVED THAT WHILE SURVEY WAS CARRIED O N BUSINESS PREMISES OF THE ASSESSEE, THE BOOKS OF ACCOUNT REFL ECTED THE DETAILS AND QUANTUM EXPENDITURE INCURRED BY THE ASS ESSEE FOR THE RESPECTIVE ASSESSMENT YEARS TO CARRY ON HIS BUS INESS AND TO THAT EXTENT, THE EXPENDITURE REFLECTED IN THE BOOKS AT THE TIME OF SURVEY MUST BE ALLOWED AS A DEDUCTION. 10. AS FAR AS THIS ARGUMENT OF THE LEARNED CHARTER ED ACCOUNTANT IS CONCERNED, WE AGREE THAT IT IS SUPPOR TED BY THE PROVISIONS OF THE STATUTE. THE ASSESSING OFFICER I S JUSTIFIED IN DISALLOWING THE VARIOUS EXPENDITURE CLAIMED BY THE ASSESSEE AS NOT REFLECTED IN THE BOOKS OF ACCOUNT AND DOCUMENTS SEIZED AT THE TIME OF SURVEY. IT IS POSSIBLE TO ACCEPT THE A RGUMENT OF THE REVENUE THAT SUCH EXPENDITURE MIGHT HAVE BEEN INFLA TED BY THE ASSESSEE AFTER THE SURVEY AND BEFORE CLOSING OF THE ACCOUNTS OF THE PREVIOUS YEARS. THIS IS BECAUSE NO EVIDENCE WA S PRODUCED BY THE ASSESSEE. - - 7 11. BUT THE ENTIRE EXPENDITURE CANNOT BE DISALLOWE D. THE EXPENDITURE TO THE EXTENT REFLECTED IN THE BOOK S OF ACCOUNT AND DOCUMENTS SEIZED AT THE TIME OF SURVEY HAVE TO BE HELD AS INCURRED AND THEREFORE, TO THAT EXTENT THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE UNDER DIFFERENT HEADS FOR ALL THESE THREE ASSESSMENT YEARS HAVE TO BE ALLOWED. WE DIRECT THE ASSESSING OFFICER TO DO SO. 12. THE ASSESSEE IS PARTLY SUCCESSFUL IN HIS APPEA LS FILED FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10. 13. IN RESULT, THE APPEAL FILED BY THE ASSESSEE FO R THE ASSESSMENT YEAR 2006-07 IS DISMISSED. THE REMAININ G THREE APPEALS FOR THE ASSESSMENT YEARS 2007-08, 2008-09 A ND 2009- 10 ARE PARTLY ALLOWED. ORDERS PRONOUNCED ON THURSDAY, THE 5 TH OF DECEMBER, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 5 TH DECEMBER, 2013. MPO* - - 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.