M/s.Anchorage Shipping, Ernakulam V. The ACIT, Cochin

ITA 340/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96790 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 19-11-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 15-07-2014
• Court: TRIBUNAL
• Department Lawyers: K P GOPAKUMAR
• Assessee Lawyers: C B M WARRIER
• Keywords: Unexplained investment; Principle of natural justice; Difference of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO.340/COCH/ 2014 ASSESSMENT YEAR : 2004-05 M/S. ANCHORAGE SHIPPING, 37/1491A, NETAJI NAGAR, OFF KUMARANASAN ROAD, KADVANTHRA, KOCHI-682 036. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, MATTANCHERRY (ASSESSEE APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI C.B.M. WARRIER, CA REVENUE BY SHRI K.P. GOPAKUMAR, SR. DR DATE OF HEARING 19/11/2015 DATE OF PRONOUNCEMENT 23/11/2015 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE ARISES FROM THE O RDER OF THE LD. CIT(A) II KOCHI DATED 21/03/2014 FOR THE ASSESSMENT YEAR 2004 -05. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. YOUR APPELLANT IS A PARTNERSHIP CONCERN ESTABLI SHED IN THE YEAR 1986 AND IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING BUSINESS. 2. THE PARTNERSHIP BUSINESS WAS STATED WITH 2 PARTN ERS MR. AJAI JOSEPH AND MR. T.S. KALADHARAN. DUE TO SOME DIFFERENCE OF OPINION BETWEEN THE PARTNERS MR. T.S. KALADHARAN HAS RESIGNED FROM THE PARTNERSHIP. ACCORDINGLY THE PARTNERSHIP WAS RECONSTITUTED ON 31.05.2004 BY INDU CTING MRS. SHINEY JOSEPH I.T.A. NO340/COCH/2014 2 IN THE PLACE OF MR. T.S. KALADHARAN . MR. T.S. KAL ADHARAN HAS STARTED SIMILAR BUSINESS AND IS A COMPETITOR OF THE APPELLANT. 3. YOUR APPELLANT MAINTAINED PROPER BOOKS OF ACCOUN T WHICH IS DULY AUDITED BY CHARTERED ACCOUNTANT AN AUDIT REPORT THEREOF WAS SU BMITTED TO THE OFFICER. 4. LEARNED ASSISTANT COMMISSIONER OF INCOME-TAX (O FFICER) HAS ISSUED NOTICE U/S. 143(1) OF THE ACT AND YOUR APPELLANT APPEARED BEFORE THE OFFICE AND SUBMITTED VARIOUS DETAILS AND ALSO PRODUCED BOOKS O F ACCOUNT AND OTHER EVIDENCES CALLED FOR AT THE TIME OF HEARING. 5. OFFICER ISSUED ASSESSMENT ORDER U/S. 143(3) OF THE ACT BY ADDING RS.1454557/- ON THE FOLLOWING GROUNDS: 1) UNEXPLAINED CAPITAL INVESTMENT A) BY SHRI AJAI JOSEPH : RS.1,11 ,000/- B) BY MR. T.S. KALADHARAN : RS.13,43, 557/- RS.14,54,557/- 6. YOUR APPELLANT HAS SUBMITTED THE ACCOUNT COPY O F SHRI AJAI JOSEPH AND SHRI T.S. KALADHARAN TO THE OFFICER AT THE TIME OF HEARI NG. APPELLANT HAS PRODUCED STATEMENT OF ACCOUNT ISSUED BY CANARA BANK, HARIPAD AND CITI BANK, BANGALORE, SINCE MR. T.S. KALADHRAN HAS NOT PROVIDED HIS BANK ACCOUNT APPELLANT REQUESTED THE OFFICER TO COLLED THE STATEMENT FROM CANARA BANK, HARIPAD IS ENCLOSED AS EXHIBIT 3. YOUR APPELLANT HAS VERIFIED THE AMOUNT INFUSED INTO THE FIRM BY THE PARTNERS WITH THE BANK STATEMENTS AND T HE SAME WAS CLARIFIED TO THE OFFICER. BUT THE OFFICER HAS NOT CONSIDERED TH E SUBMISSION AND IN HASTE HAS ADDED RS.14,54,557/- AS UNEXPLAINED INVESTMENT. 7. AGGRIEVED BY THE ORDER, YOUR APPELLANT SUBMITTE D 1 ST APPEAL LEARNED COMMISSIONER OF INCOME TAX(APPEAL) LEARNED CIT DELE TED ADDITION OF RS.50000/- (FIVE LAKH) AND CONFORMED THE BALANCE AD DITION OF RS.954557/-. YOUR APPELLANT HAS SUBMITTED COMPLETE DETAILS BEFOR E THE LEARNED CIT BUT IT WAS NOT CONSIDERED. 8. YOUR APPELLANT IS SUBMITTING THE SECOND APPEAL AGAINST THE ORDER OF LEARNED OFFICER AND CIT. YOUR APPELLANT PRAYS THAT:- A) THE ORDER OF THE LEARNED AO WAS AGAINST LAW, FAC TS AND NATURAL JUSTICE. B) LEARNED AO AND LEARNED CIT WERE ERRED IN MAKING AN ADDITION OF RS.954557/- TO THE RETURNED INCOME IN HASTE AND WIT HOUT ANY BASIS. I.T.A. NO340/COCH/2014 3 C) ON THESE GROUNDS AND SUCH OTHER GROUNDS THAT MAY BE RAISED AT THE TIME OF HEARING, YOUR APPELLANT PRAYS THAT THE ORDER OF THE LEARNED AO TAX MAY KINDLY BE SET ASIDE. 3. THE ASSESSEE HAS RAISED ADDITIONAL GROUNDS OF APPEAL WHICH READS AS UNDER : 1) THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST O F RS.2,15,830/- AND IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEAL S)-II, COCHIN THE APPELLANT SUBMITTED THE GROUNDS TO CANCEL THIS DISA LLOWANCE OF INTEREST BUT COMMISSIONER OF INCOME-TAX(APPEALS) HAS GONE WRONG IN NOT CONSIDERING THIS GROUND IN THE APPELLATE ORDER. 2) THE APPELLANT SUBMIT THAT THE DISALLOWANCE OF INTEREST IS NOT ON PROPER GROUNDS AND NOT JUSTIFIED AND THE APPELLANT PRAY TH AT THE HONBLE BENCH MAY CONSIDER THIS DISALLOWANCE AND ORDER APPROPRIATELY. 4. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED SINCE THE SAME ARISES OUT OF THE ORDER OF THE ASSESSING OFFICER. T HE ASSESSEE HAS TAKEN UP THE ISSUE BEFORE THE LD. CIT(A) WHO HAS NOT DECIDED THE SAID GROUND. 5. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE ASSESSING OFFICER ARE REPRODUCED HEREINBELOW: DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMEN T YEAR 2004-05, SRI AJAI JOSEPH, PARTNER INTRODUCED AN AMOUNT OF RS.3,11,100 AS UNDER: 8/5/2003 BY CAH 50,000 8/5/2003 BY CASH 50,000 15/5/2003 BY CASH 2,0 0,000 4/6/2003 BY CASH 5,000 29/8/2009 BY CASH 6,100 IN ORDER TO SUPPORT THE INTRODUCTION OF CAPITAL , AT THE TIME OF HEARING, PRODUCED THE DETAILS AND BANK ACCOUNTS BUT FAILED T O EXPLAIN THE SOURCE FOR CASH DEPOSITS. THEREFORE, RS.1,11,100/- IS TREATED AS UNEXPLAINED INVESTMENT I.T.A. NO340/COCH/2014 4 WHICH IS DERIVED BY THE ASSESSEE THROUGH THE FIRM A ND ADDED TO THE TOTAL INCOME OF THE FIRM SHRI T.S. KALADHARAN, PARTNER INTRODUCED RS.13,4 3,557/- DURING THE YEAR RELEVANT TO THE ASST. YEAR 2007-08 THE ASSESSEE VI DE LETTER DATED 22.10.2009 STATED THAT MR. T.S. KALADHARAN HAD RETIRED FROM TH E FIRM AND STARTED HIS OWN SHIPPING COMPANY AND THEY COULD NOT GET THE ACCOUNT COPY OF THE BANK ACCOUNT FROM WHICH THE PARTNER HAS INVESTED. THEREF ORE, I HAVE OBTAINED THE COPOES OF THE NRE AND NRO ACCOUNT MAINTAINED BY MR. T.S. KALADHARAN AT CANARA BANK, HARIPAD AND COMPARED WITH CAPITAL ACCO UNT. IN THE CAPITAL ACCOUNT IT IS SEEN THAT RS.5 LAKHS WAS INTRODUCED O N 21/04/2003 AND IT IS THE TRANSFER FROM NRO ACCOUNT NO. 412659 VIDE CHEQUE NO .408799 FOR RS.2 LAKHS AND CHEQUE NO408798 FOR RS. 3 LAKHS AND NO EVIDENCE IS SEEN FOR RS.2,84,000 MENTIONED AS BANK RECEIPT ON 30.6.2003. ALL OTHER INTRODUCTIONS ARE BY CASH AND SOME EXPENDITURE DIRECTLY MET BY TH E PARTNER ARE ALSO CREDITED TO THE CAPITAL ACCOUNT. IT IS LEARNED THAT A NRO ACCOUNT HOLDER CAN DEPO SIT INDIAN INCOME IN HIS NRO ACCOUNT. IT IS CONFIRMED BY THE ENTRY IN THE B ANK ACCOUNT TOWARDS DEPOSITS IT IS SHOWNAS BY CLG(BY CLEARING) AND IN THE NRE ACCOUNT IT IS SHOWN AS FDD(FOREIGN DEMAND DRAFT). THEREFORE, IT IS NOT SURE THAT THE AMOUNT INTROD UCED BY T.S. KALADHARAN, PARTNER OF THE ASSESSEE HAD SUFFERED TAX OR INCOME EARNED THROUGH THE FIRM WAS DIVERTED TO HIS ACCOUNT. THE ASSESSEE HAS ALSO FAILED TO EXPLAIN THE SOURCE OF INVESTMENT BY THE PARTNER SRI T.S.KALADHA RAN. THEREFORE TO PROTECT THE INTEREST OF REVENUE THE AMOUNT OF RS.13,43,557 INTRODUCED BY THE PARTNER SRI T.S. KALADHARAN IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENT AND ALSO A PROTECTIVE ASSESS MENT. ON PERUSAL OF THE CAPITAL ACCOUNT OF THE PARTNERS , IT IS SEEN THAT IN THE ACCOUNT OF SRI T.S.KALADHARAN DURING THE YEAR HE HA S MADE AN ADDITION OF RS.13,43,557 AND DRAWINGS OF RS.24,75,766 AND THE N ET BALANCE IS ADEBIT OF RS.15,30,221. IN THE CASE OF SRI AJAI JOSEPH DURING THE YEAR H E HAS INTRODUCED AN AMOUNT OF RS.3,11,100 AND WITHDRAWN AN AMOUNT OF RS.7,44,7 45 FROM THE CAPITAL LEAVING A CREDIT BALANCE OF RS.2,06,208. THE ASSES SEE HAS NO SATISFACTORILY EXPLANATION FOR WITHDRAWAL OF CAPITAL MORE THAN THA T OF INTRODUCED/INVESTED. THE ASSESSEE HAS PAID AN AMOUNT OF RS.2,15,830 TO WARDS INTEREST FOR THE SECURED LOAN. BUT THE ASSESSEE HAS FAILED TO ESTAB LISH THAT THE FUND DIVERTED FROM THE FIRM FOR THE PERSONAL OBLIGATION OF THE PA RTNERS ARE OUT OF THE NON- I.T.A. NO340/COCH/2014 5 INTEREST BEARING FUNDS OF THE FIRM. THEREFORE, THE INTEREST CLAIMED BY THE ASSESSEE OF RS.2,15,830 IS DISALLOWED AND ADDED BAC K TO THE TOTAL INCOME. ACCORDINGLY, AFTER DISCUSSION WITH THE A.R. THE ASS ESSMENT IS COMPLETED AS UNDER: TOTAL INCOME AS PER THE ORIGINAL ASSESSMENT ORDER RS.43,670/- ADDITION UNEXPLAINED CAPITAL INVESTMENT 1. BY SRI AJAI JOSEPH RS.1,11,000 2. BY T.S. KALADHARAN RS.13,43,557 3. INTEREST DISALLOWED RS.2,15,830/- RS.16,70,387 RS.17,14,057 TOTAL INCOME ROUNDED TO RS.17,14,060 6. THE LD. CIT(A) VIDE PARA 4.3 ALLOWED RELIEF O F RS.5 LAKHS AND THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE REPRODUCED HEREINBEL OW: 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD. IT IS SEEN FROM THE L EDGER ACCOUNT THAT VARIOUS WITHDRAWALS MADE OUT OF THE BANK ACCOUNT OF THESE P ARTNERS WERE INTRODUCED AS INVESTMENT IN THE FIRM. IT IS NOTICE D THAT THESE PARTNERS HAVE MADE MANY OF THESE INVESTMENTS IN CASH AND CLAIMED TO EXPLAIN IT THROUGH CORRESPONDING WITHDRAWAL FROM THE BANK ACCOUNT OF T HESE PARTNERS. IN THIS CONNECTION ASSESSEE HAS ALSO FURNISHED CONFIRMATION FROM SHRI AJAI JOSEPH AND T.S. KALADHARAN, THE TWO PARTNERS OF THE FIRM S TATING THAT THESE PAYMENTS ON VARIOUS DATES WERE MADE AS INVESTMENT I N THE FIRM. AO IN HIS ORDER HAS ALSO OBSERVED THAT THE TRANSFER ENTRIES A RE BY CHEQUE IN THE CASE OF MR. KALADHARAN. IT IS SEEN THAT THE AMOUNT OF R S.3,11,100/- IS BY CASH. ALSO OUT OF TOTAL INVESTMENT OF RS.13,43,557/- ONLY RS.5,00,000/- ARE GIVEN BY CHEQUE DIRECTLY TO ANCHORAGE SHIPPING, REST OF T HE AMOUNTS ARE WITHDRAWAL IN CASH OR CASH IS DEPOSITED JUST BEFORE MAKING THE TRANSACTION/MAKING OF DD. IN VIEW OF THESE FOREGOI NG FACTS, ONLY PAYMENTS OF RS.5,00,000/- CAN BE TREATED AS EXPLAINED OUT OF TOTAL INVESTMENT OF RS.16,70,387/-. ACCORDINGLY THE ADDITION OF RS.5,0 0,000/- OUT OF TOTAL INVESTMENT OF RS.16,70,387/- MADE BY THE AO IS HERE BY DELETED. BALANCE ADDITION OF RS.11,70,387/- IS HEREBY CONFIRMED. I.T.A. NO340/COCH/2014 6 7. WITH REGARD TO THE ADDITION OF THE CAPITAL, THE LD. COUNSEL FOR THE ASSESSEE SHRI C.B.M. WARRIER HAD ARGUED THAT IF ANY ADDITION IS TO BE MADE, IT IS TO BE MADE IN THE HANDS OF THE PARTNERS AND NOT IN THE HA NDS OF THE ASSESSEE. 8. THE LD. DR ON THE OTHER HAND RELIED ON THE ORD ER OF BOTH THE AUTHORITIES BELOW. 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS RAISED THE PAYMENT FROM THE PARTNERS THOUGH CHEQUE AMOUNTING TO RS. 5 LAKHS, I. E., RS. 2 LAKHS ON ONE OCCASION AND RS.3 LAKHS ON THE OTHER OCCASION WHICH FACT IS ADMITTED IN THE ORDER OF THE ASSESSING OFFICER REPRODUCED HEREINABOVE. W HETHER THE PARTNERS ARE ASSESSED TO TAX OR NOT, HAS NOT BEEN BROUGHT ON REC ORD BY EITHER OF THE AUTHORITIES BELOW OR EVEN BEFORE US. THE ARGUMENT WAS MADE BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE CASH HAS BEEN WIT HDRAWN BY THE PARTNERS AND THE SAME HAS BEEN INVESTED IN THE FIRM BUT THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE HIS CLAIM EITHER BEFO RE ANY OF THE AUTHORITIES BELOW OR EVEN BEFORE US WITH ANY DOCUMENTARY EVIDENCE THA T THE CASH WITHDRAWN BY THE PARTNERS HAVE ACTUALLY BEEN INVESTED IN THE ASS ESSEE- FIRM. IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, IT CANNOT BE S AID THAT ANY CASH WITHDRAWAL BY THE PARTNERS HAVE ACTUALLY BEEN INVESTED IN THE FIRM. CONFIRMATION FROM THE PARTNERS IS IRRELEVANT SINCE THE PARTNERS ARE NOT A SSESSED TO TAX, AS PER PERUSAL OF I.T.A. NO340/COCH/2014 7 THE RECORD BEFORE US. SIMPLE STATEMENT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE PARTNERS ARE ASSESSED TO TAX IN THE ABSENCE OF PROOF OF FILING OF RETURN OF INCOME FOR THE IMPUGNED YEAR AND/OR THE PRECEDING Y EARS OF THE IMPUGNED YEAR, WILL NOT SUBSTANTIATE THE CLAIM OF THE ASSESSEE AN D CANNOT HELP THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A)IN DELETING THE ADDITION OF RS.5 L AKHS WITH REGARD TO THE CAPITAL INVESTMENTS MADE BY THE PARTNERS SHRI AJAI JOSEPH A ND SHRI T.S. KALADHARAN. ACCORDINGLY, THE GROUND WITH RESPECT TO THE INVESTM ENTS MADE BY THE PARTNERS AS CLAIMED BY THE ASSESSEE ARE DISMISSED. 10. AS REGARDS ADDITIONAL GROUNDS, THERE IS NO D ISPUTE TO THE FACT THAT THE ASSESSEE HAD EARNED AN AMOUNT OF RS.215830/- TOWARD S INTEREST FOR THE SECURED LOANS BUT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE FUNDS HAVE BEEN DIVERTED FROM THE FIRM FOR THE PERSONAL OBLIGATION OF THE PA RTNERS OR ARE OUT OF NON- INTEREST BEARING FUNDS OF THE FIRM. THE ISSUE WAS RAISED BEFORE THE LD. CIT(A) BUT THE LD. CIT(A) HAS NOT DECIDED THE ISSUE. ACCO RDINGLY, IN THE INTEREST OF JUSTICE, WE REMIT THE SAID ISSUE TO THE FILE OF THE LD. CIT(A) FOR DECIDING THE SAME AFRESH BUT BY AFFORDING ADEQUATE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. I.T.A. NO340/COCH/2014 8 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 23-11-2015 SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 23RD NOVEMBER, 2015 GJ COPY TO: 1. M/S. ANCHORAGE SHIPPING, 37/1491A, NETAJI NAGAR , OFF KUMARANASAN ROAD, KADVANTHRA, KOCHI-682 036. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, IRCLE- 1, MATANCHERRY. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN