Subhankar Associates, Bhubaneswar V. ITO, Bhubaneswar

ITA 349/CTK/2011

• Counselvise Citation: 34922114 RSA 2011
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 09-11-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-07-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATACHARJEE
• Assessee Lawyers: P R MOHANTY

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, ACCOUNTANT MEMBER ITA NO. 349/CTK/2011 (ASSESSMENT YEAR 2006 - 07) M/S.SUBHANKAR ASSCOCIATES, PLOT NO.5075/5076, GOUTAM NAGAR,BHUBANESWAR PAN: ABBFS 4332 D VERSUS INCOM E - TAX OFFICER, WARD 1(2), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.R.MOHANTY, AR FOR THE RESPONDENT SHRI A.BHATACHARJEE, DR DATE OF HEARING : 09.11.2011 DATE OF PRONOUNCEMENT : 16.11.2011 ORDER SHRI K.K.GUPT A, AM : THIS APPEAL BY THE ASSESSEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE SOLITARY ADDITION BEING A SUM OF 1,00,525 INTER ALIA WHILE OTHER ADDITIONS AND DISALLOWANCES WERE MADE BY THE ASSESSING OFFICER IN HIS ORDER U/S.143(3) OF THE INCOME - TAX ACT,1961. 2. THE LEARNED CIT(A) CONFIRMED THE ADDITION OF 1,00,525 HOLDING A VIEW THAT THE ASSESSEE OUGHT TO HAVE CLARIFIED THE STAND TAKEN AT THE TIME OF HEARING OF THE APPEAL THAT THE LOAN WAS OBTAINED IN CASH AMOUNTING TO 1,04,000 UNDER THE PROVISIONS OF SECTION 269SS WHEN THE ASSESSING OFFICER PROCEEDED TO BRING TO TAX THE SUM AFTER VERIFYING THE LOAN CREDITORS BY CROSS VERIFYING THE SAME FROM STATE BANK OF INDIA AND HDFC BANK. 3. THE BRIEF FACTS ON THE ISS UE ARE THAT THE ASSESSEE IS DERIVING INCOME PROVIDING FINANCIAL SERVICES AND ASSISTING BANKS IN VERIFICATION OF ADDRESSES ETC., FI LED INCOME OF 1,94,730. THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) DISALLOWED CERTAIN EXPENSES AND D EPRECIATION AND ALSO ADDED A SUM OF 1,00,525 BY HOLDING A VIEW THAT THE INCOME OF THE ASSESSEE FIRM HAS BEEN UNDERSTATED ON RECONCILIATION OF THE LOAN OF SHRI ANIL KUMAR AGARWAL WHO HAD OBTAINED LOAN FROM HDFC BANK AND HAD GIVEN A SUM 2 OF 2,96 , 000 LOAN TO THE ASSESSEE FIRM. THE ASSESSING OFFICER CONSIDERED THE REPLY OF THE HDFC BANK WHEN THE VENDORS PAYMENT TO THE ASSESSEE FIRM WERE ROUTED THROUGH THE ACCOUNT OF SHRI ANIL KUMAR AGARWAL WHEN HE HELD THAT THE LOAN AMOUNT WAS OVERSTATED WHEN THE INCOME HA D BEEN UNDERSTATED BY THE ASSESSEE. HE MADE THE ADDITION OF 1,00,525 WHICH WAS APPEALED BEFORE THE FIRST APPELLATE AUTHORITY. 4. THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY CONTENDED THAT THE LOAN OF 1,04,000 IN CASH WAS OBTAINED FROM SHRI ANIL KUMAR AGARWAL WHICH WAS CONSIDERED UNDER THE AMBIT OF RULE 46 A BY THE LEARNED CIT(A) WHO HELD A VIEW THAT THE ASSESSEE HAVING FILED THE AUDIT REPORT IN FORM NO.3CD OUGHT TO HAVE DISCLOSED AND REPORT ED IN SL.24(A) THAT LOANS OBTAINED EXCEEDING A CERTAIN AMOUNT IN CASH U/S.269SS WERE TO BE INDICATED. HOLDING THIS AS A CHANGE OF EXPLANATION, THE ADDITION BY THE ASSESSING OFFICER WAS UPHELD BY THE LEARNED CIT(A). 5. INITIATING HIS ARGUMENT, THE LEARNED COUNSEL SUBMITTED THAT IT WAS NOT THE CASE OF THE ASSESSEE TO UNDERSTATE ITS INCOME INSOFAR AS THE HDFC BANK RIGHTLY REP LIED TO THE REQUISITION OF THE ASSESSING OFFICER U/S.133(6) OF TRANSFERRING THE SUM OF 2,96,000 AND THE VENDORS PAYMENT TOTALLING 1,00,525 WHICH WERE DISCLOSED BY THE ASSESSEE AS PER THE COPY OF THE BANK STATEMENT FURNISHED TO THE ASSESSING OFFICER. TH E LOAN AMOUNT HAS BEEN CERTIFIED BY THE BANK OF SHRI ANIL KUMAR AGARWAL AT 4 LAKHS WHEN THE BANK PASS BOOK OF SHRI ANIL KUMAR AGARWAL WITHDRAWING 99,000 CASH ON 29.10.2005 WAS INDICATED TO THE LEARNED CIT(A).THE LOAN FROM HDFC BANK IS UNDISPUTEDLY AT 4 LAKHS TO SHRI ANIL KUMAR AGARWAL WAS NOT THE CASE FOR CONSIDERATION BY THE ASSESSING OFFICER. THE AMOUNT OF LOAN THEREFORE INDICATING A SUM OF 3,63,347 WAS ON ACCOUNT OF REPAYMENT BY THE ASSESSEE BEING THE AMOUNT OF INCOME ALREADY RENDERED TO TAX B Y THE ASSESSEE COULD 3 NOT BE CONSIDERED OTHERWISE BY THE ASSESSING OFFICER AS UNEXPLAINED LOAN WHICH THE LEARNED CIT(A) MISINTERPRETED AS LOAN OBTAINED IN CASH NOT DISCLOSED UNDER THE PROVISIONS OF SECTION 269SS BY THE AUDITORS. THE ISSUE WAS DENIED BY THE LEARNED CIT(A) FOR WA NT OF EXPLANATION IN VIOLATION TO RULE 46A WHICH WAS NEVER THE CASE OF THE ASSESSEE APPELLANT BEFORE HIM. THE ASSESSING OFFICER HAD CATEGORICALLY INDICATED THAT THIS AMOUNT WAS THE INCOME UNDECLARED BY THE ASSESSEE WHEN HE VERIFIED THE LOAN OF SHRI ANIL KUMAR AGARWAL TO THE ASSESSEE FIRM AT 3,63,347. THIS CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE TO THE EFFECT THAT IT WAS ONLY TO EXPLAIN THE SUM OF 1,00,525 WHICH AMOUNT WAS CONSIDERED BY THE ASSESSING OFFICER OF HIS OWN WHEN THE FACT REMAINED THAT THE ASSESSEE HAD DEPOSITED THE EMI TO BE PAID LOAN CREDITOR SHRI ANIL KUMAR AGARWAL WHICH ENTRIES REDUCED THE AMOUNT OF LOAN OF 4,00,000 TO 3,36,350 WHEN THE INTEREST ON LOAN AMOUNTING TO 18,041 WAS PAID FOR BY SHRI ANIL KUMAR AGAR WAL THROUGH THE ASSESSEES BOOKS OF ACCOUNT. HE PRAYED THAT NO USEFUL PURPOSE WOULD BE SERVED IF THE MATTER WAS TO BE VERIFIED BY THE ASSESSING OFFICER AGAIN INSOFAR AS THE LEARNED CIT(A) HAS CONSIDERED THE CLAIM OF INTEREST OF 18,041 WHICH THE ASSESSING OFFICER HAD CONSIDERED DISALLOWABLE AS WITHOUT DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 40(A)(IA). THE LEARNED CIT(A) DELETED THE ADDITION ON THE SAME FACTS WHICH HAVE BEEN VERIFIED BY THE ASSESSING OFFICER. 6. THE LEARNED DR OPPOSED TH E CONTENTION OF THE LEARNED COUNSEL. HE STATED THAT IT IS A FIRM OF CHARTERED ACCOUNTANTS PROVIDING FINANCIAL SERVICES TO THE BANK AND SHRI ANIL KUMAR AGARWAL CANNOT BE SAID TO BE UNAWARE OF THE FACT THAT A LOAN OBTAINED IN CASH IS VIOLATIVE TO THE PROVISI ONS OF SECTION 269SS. THE LEARNED CIT(A) THEREFORE RIGHTLY NOTED THAT THE EXPLANATION AT THE TIME OF HEARING OF THE APPEAL WAS VIOLATIVE TO THE RULE 46 A OF THE I.T.RULES WHEN THE ASSESSING OFFICER HAD CATEGORICALLY NOTED THAT THE INCOME OF THE 4 ASSESSEE FIR M HAD BEEN UNDERS TATED WHEN THE FUNDS REMAINED PARKED IN THE FO RM OF LOAN CREDITOR. THE CONTENTION OF THE LEARNED COUNSEL AS OF NOW SHOULD NOT BE ACCEPTED IN VIEW OF THE FACT THAT THE INCOME UNDECLARED HAD BEEN IDENTIFIED BY THE ASSESSING OFFICER. HE PRAYE D THAT THE ORDER OF THE ASSESSING OFFICER BE CONFIRMED ON THIS ISSUE. 7. I HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND AFTER CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM INCLINED TO HOLD THAT THE PURPORTE D INCOME SOUGHT TO HAVE BEEN FOUND BY THE ASSESSING OFFICER AS LOAN BY SHRI ANIL KUMAR AGARWAL NOT DISCLOSED IN THE HANDS OF THE FIRM HAS BEEN MISINTERPRETED BY THE ASSESSING OFFICER ON HAVING OBTAINED INFORMATION FROM THE BANK WHEN THE LOAN OBTAINED FROM HDFC BANK IN HIS INDIVIDUAL CAPACITY BY SHRI ANIL KUMAR AGARWAL WAS DISBURSED BY SHRI ANIL KUMAR AGARWAL TO THE ASSESSEE FIRM. THE BANK ALSO ISSUED CHEQUES AS VENDORS PAYMENT TO THE FIRM WHICH HAS BEEN ACKNOWLEDGED BY THE FIRM. IT SO HAPPENED THAT THE CASH LOAN OF 1,04,000 WAS ALSO OBTAINED FROM SHRI ANIL KUMAR AGARWAL WHICH WAS ACKNOWLEDGED BY THE FIRM AGAINST REPAYMENTS OF EMI ON BEHALF OF SHRI ANIL KUMAR AGARWAL. THE ASSESSING OFFICER HAVING VERIFIED THE INTEREST PAYMENT ON BEHALF OF SHRI ANIL KUMAR AG ARWAL DISALLOWED A SUM OF 18,041 AS WITHOUT DEDUCTION OF TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 40(A)(IA) WAS CONSIDERED BY THE LEARNED CIT(A) AS OUTSIDE THE AMBIT OF SECTION 40(A)(IA) CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THE LOAN AMO UNT OF 3,63,357 OWED TO SHRI ANIL KUMAR AGARWAL DID NOT REQUIRE ANY FURTHER SCRUTINY. THE LEARNED ASSESSING OFFICER GOT EMBROILED O N HIS VERIFICATION OF THE SAME AFTER HAVING OBTAINED EXPLANATION FROM THEBANKS U/S.133(6). THE ASSESSEE HAD ALREADY INCORPO RATED THE SUM OF 1,00,525 IN ITS BOOKS OF ACCOUNT AS INCOME THEREFORE COULD NOT HAVE BEEN TAXED ON THE SAME AMOUNT WHEN THE LOAN AMOUNT OF 3,63,357 OWED TO SHRI ANIL KUMAR 5 AGARWAL REMAINED UNTOUCHED. IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO HOLD THE LOAN AS UNEXPLAINED OR FOR THAT MATTER ANY VIOLATION TO THE PROVISIONS OF SECTION 269SS WHEN THE LEARNED CIT(A) SOUGHT TO CONSIDER THE SAME AS INADMISSIBLE KEEPING IN VIEW THE PROVISIONS OF RULE 46A. I AM UNABLE TO SATISFY MYSELF TO THIS PROPOSITION O F EITHER OF THE AUTHORITIES IN VIEW OF A SIMPLE RECORD ING OF A TRANSACTION WHICH IN NO WAY INDICATE UNDERSTATEMENT OF INCOME EITHER BY SHRI ANIL KUMAR AGARWAL OR THE ASSESSEE FIRM. I FIND THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE JUSTIFIED THAT NO USEFUL PURPOSE WOULD BE SERVED IN RESTORING THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WHEN THE FACTS AND CIRCUMSTANCES CLEARLY INDICATE THAT THE ADDITION OF THE SUM OF 1,00,525 HAS NO LEGS TO STAND ON. IN THIS VIEW OF THE MATTER, THE ORDER OF TH E LEARNED CIT(A) IN THIS REGARD IS SET ASIDE AND THE IMPUGNED ADDITION OF 1,00,525 IS DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 16 TH NOVEMBER, 2011 H.K. PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S.SUBHANKAR ASSCOCIATES,OPLOT NO.5075/5076, GOUTAM NAGAR,BHUBANESWAR 2. THE RESPONDENT: INCOME - TAX OFFICER, WARD 1(2), BHUBANESWAR. 3. THE CIT, 4 . THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.