ITO, Wd 3(2), Nanded, Nanded V. Ajit Ramchandra Jadhav, Billoli

ITA 350/PUN/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49924 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-03-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTUAMA
• Keywords: Unexplained investment; Opportunity of being heard; Proportionate interest
• Section: 143(3); 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 350/PN/2007 (ASSTT. YEAR : 2004-05) ITO, WARD 3(2), ... APPELLANT PARMAR COMPLEX, BAFNA ROAD, NANDED 431 601 V. SHRI AJIT RAMCHANDRA JADHAV, RESPONDENT PLOT NO. 68, ANANDNAGAR NANDED PAN : NOT AVAILABLE APPELLANT BY : MS. ANN KAPTUAMA RESPONDENT BY : MS. DEEPA KHARE ORDER PER I.C. SUDHIR, JM THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: 1. ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-II, AURANGABAD HAS ERRED IN DELETING THE ADD ITION REGARDING THE INVESTMENT IN IMMOVABLE PROPERTIES U/S 69 ON TH E GROUND THAT THE ASSESSEE HAS PROPERLY EXPLAINED THE SOURCES OF INVESTMENT WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT EXPLAINED THE SOURCES OF INVESTMENT ALTHOUGH GIVEN ADEQUATE OPPOR TUNITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A)-II, AURANGABAD HAS ERRED IN DELETING THE DIS ALLOWANCE MADE BY THE AO ON PROPORTIONATE INTEREST ON CC LOAN FOR BUSINESS OUT OF WHICH PLOT IS PURCHASED AND REMAINS AS OPEN PLOT N OT USED FOR BUSINESS PURPOSE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A)-II, AURANGABAD HAS ERRED IN RESTRICTING THE ADDITIONS REGARDING TRANSPORTATION EXPENSES WHEN THE ASSESSEE HIMSELF HAS ADMITTED THAT THE RECORD OF TRANSPORTATION EXPENSES ARE ACTUALLY NOT VERIFIABLE, AS SUCH, COULD NOT SUBSTANTIATE THE EXP ENDITURE. ITA . NO350/PN/2007 AJIT RAMCHANDRA JADHAV A.Y 2004-05 PAGE OF 7 2 2. AT THE OUTSET OF HEARING, THE LD. A.R. RAISED A PRELIMINARY OBJECTION AGAINST THE MAINTAINABILITY OF THE ABOVE GROUNDS W ITH THIS CONTENTION THAT THE ADDITION OF RS. 23,32,592/- DELETED BY THE LD CIT(A) WAS TO THE EXTENT OF RS. 23 LAKH QUESTIONED BY THE REVENUE IN GROUND NO. 1, WHICH ACTUALLY FALLS IN THE A.Y. 2003-04, SINCE ADMITTED LY THE AMOUNT WAS PAID BY THE ASSESSEE ON 31 ST DECEMBER 2002, HENCE THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION OF THE AMOUNT ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY IN THE A.Y. 2004-05 UNDE R CONSIDERATION. THE LD. A.R. SUBMITTED FURTHER THAT SUBSEQUENT TO THE ORDERS OF THE AUTHORITIES BELOW, ASSESSMENT FOR EARLIER A.Y. I.E. A.Y. 2003-04 WERE RE- OPENED U/S. 147 IN PURSUANCE OF SURVEY ACTION U/S. 133A BY THE DEPARTMENT. DURING THE ASSESSMENT PROCEEDINGS FOR A.Y. 2003-04, THE ASSESSEE HAD DECLARED RS. 1,42,00,000/- TOWARDS UN EXPLAINED INVESTMENT IN THE IMPUGNED PROPERTY. SHE SUBMITTED THAT THE QUESTION OF UNEXPLAINED INVESTMENT IN THE IMPUGNED PROPERTY HAS BEEN CONSIDERED AND FINALLY ASSESSED IN A.Y. 2003-04 BY THE A.O. I N SUPPORT, SHE REFERRED ASSESSMENT ORDER FOR THE A.Y. 2003-04 DATE D 29.12.2009 MADE AVAILABLE ON THE RECORD. THE LD. A.R. SUBMITTED TH AT THE QUESTION REGARDING THE UNEXPLAINED INVESTMENT IS NOW STANDS CONCLUDED AND SETTLED IN A.Y. 2003-04. THUS, THERE IS NO CAUSE OF ACTION FOR THE DEPARTMENT TO INSIST FOR THE SAID ADDITION OF INVE STMENT IN PROPERTY IN A.Y. 2004-05. 3. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIF Y THE ASSESSMENT ORDER ON THE ISSUE. 4. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND THAT DURING THE A.Y. 2004-05 UNDER CONSIDERATION, THE A.O MADE ADDITION OF RS.23,32,592/- ON ACCOUNT OF UNRECORDED INVESTMENT U/S. 69 OF THE ACT. THE A.O NOTED ITA . NO350/PN/2007 AJIT RAMCHANDRA JADHAV A.Y 2004-05 PAGE OF 7 3 THAT THE ASSESSEE HAD VIDE AGREEMENT OF PURCHASE A GREED TO PURCHASE PROPERTY I.E. LAND/BUILDING OF NANDED SAHAKARI SOOT MILL, MARKED AS SURVEY NO. 19/J, 19/F AND 22/B FOR RS. 88,44,000/- (AS PER TENDER). AS PER AGREEMENT, ASSESSEE HAD PAID RS.22,11,000/- BEI NG 25% OF THE RS.88,44,000/- AND THE BALANCE AMOUNT OF RS. 66,33, 000/- WAS PAID ON 31.12.2002 AT THE TIME OF REGISTRATION OF THE ABOV E STATED PROPERTIES. THE A.O ACCORDINGLY WORKED OUT THE TOTAL INVESTMEN T AT RS. 90,61,300/- (RS.26,79,360/- FOR THE PLOT HAVING SURVEY NO. 19J/ 19F VIDE RECEIPT NO. 1796 AND RS. 63,81,940/- FOR THE PROPERTY MARKED AS SURVEY NO. 19J/19F VIDE RECEIPT NO. 1797). BUT, AS PER BALANCE SHEET AS ON 31 ST MARCH 2004 IN THE CURRENT ASSET, RS. 67,28,708/- ONLY WAS SHOW N IN RESPECT OF NANDED SAHAKARI SOOT GIRNI. THUS, THE DIFFERENCE O F RS.23,32,592/- WAS NOT SHOWN IN THE BALANCE SHEET AS ASSET AND WAS ADD ED BY THE A.O IN THE INCOME OF THE ASSESSEE. THE LD CIT(A) AFTER DISCUS SING THE SUBMISSION OF THE ASSESSEE HAS RESTRICTED THE ADDITION TORS. 1,32 ,592/- WITH THIS FINDING THAT THE ASSESSEE WAS ABLE TO EXPLAIN THAT RS.22 LA KH WAS RECEIVED FROM SHRI CHHATRAPATI SAMBHAI MAHARAJ PVT. LTD. WHICH I S ALSO ASSESSED TO TAX AND MANAGED BY ASSESSEE. AGAINST THIS ACTION OF TH E LD CIT(A), THE REVENUE IS IN APPEAL IN GROUND NO. 1. 5. IN GROUND NO.2, THE REVENUE HAS QUESTIONED THE A CTION OF THE LD CIT(A) WHEREBY THE LD CIT(A) HAS DELETED THE DISALL OWANCE OF INTEREST OF RS. 4,00,000/- MADE BY THE A.O OUT OF TOTAL INTERES T OF RS.6,85,551/-. THE CONTENTION OF THE ASSESSEE BEFORE LD CIT(A) RE MAINED THAT THE LAND IN QUESTION WAS PURCHASED FOR THE BUSINESS PURPOSE ONLY, HENCE INTEREST OF RS.6,85,551/- WAS TO BE ALLOWED U/S. 36(1)(IV) O F THE ACT. THE LD CIT(A) HAS ACCEPTED THIS CONTENTION WITH THIS OBSER VATION THAT ONCE IT IS DECIDED THAT THE LAND HAS BEEN PURCHASED FOR THE B USINESS PURPOSE, THEN, IT IS IMMATERIAL AS TO HOW MUCH IS USED FOR THE BUSINESS. HE HAS ITA . NO350/PN/2007 AJIT RAMCHANDRA JADHAV A.Y 2004-05 PAGE OF 7 4 OBSERVED FURTHER THAT IF THE BORROWED FUNDS ARE UTI LIZED FOR THE PURPOSE OF BUSINESS WHETHER FOR CAPITAL OR REVENUE PURPOSE, TH E INTEREST IS ALLOWABLE U/S. 36(1)(III) AS LONG AS THE FUNDS HAVE BEEN UTIL IZED FOR THE PURPOSE OF BUSINESS. WE THUS FIND THAT ISSUE RAISED IN GROUND NO. 2 IS CONSEQUENTIAL TO THE ISSUE RAISED IN GROUND NO. 1. 6. NOW THE PRELIMINARY OBJECTION RAISED BY THE LD. A.R. WHICH GOES TO THE VERY ROOT OF THE MATTER IS THE TAXABILITY OF UN -RECORDED INVESTMENT IN PROPER ASSESSMENT YEAR. ON PERUSAL OF ORDERS OF THE AUTHORITIES BELOW FOR THE A.Y. 2004-05 UNDER CONSIDERATION, WE FIND THAT THERE IS NO DENIAL THAT AMOUNT OF RS.26,79,360/- PAID VIDE RECEIPT NO. 1796 TOWARDS PURCHASE PRICE, STAMP PAPER EXPENSES AND REGISTRATION EXPENS ES AGAINST THE PROPERTY MARKED AS SURVEY NO. 19J/19F AND PAYMENT OF RS. 63,81,940/- TOWARDS PURCHASE PRICE, STAMP PAPER EXPENSES AND RE GISTRATION EXPENSES VIDE RECEIPT NO. 1797 FOR THE PROPERTY MARKED AS SU RVEY NO. 19J/19F/ 22B ARE DATED 31.12.2002 WHICH FALLS IN THE A.Y. 20 03-04. IT HAS ALSO BEEN SUPPORTED BY THE ASSESSMENT ORDER FOR THE A.Y. 2003-04 FRAMED U/S. 143(3) ON 29.12.2009, WHEREIN DECLARATION OF A DDITIONAL INCOME OF RS.1,42,00,000/- MADE BY THE ASSESSEE IN THE RETURN OF INCOME AFTER SURVEY U/S. 133A HAS BEEN CONSIDERED. DURING THE P ROCEEDING OF THE SURVEY, THE ASSESSEE DECLARED RS. 1.75 CRORES AS UN ACCOUNTED INVESTMENT IN PURCHASE OF NANDED SAHAKARI SOOT GIRNI, NANDED (OLD NAME IS MARATHWADA CO-OPERATIVE SPINNING MILLS LTD., NANDED ). IT WAS STATED THAT DURING THE YEAR, ASSESSEE HAD MADE THE PAYMENT OF RS.2,61,14,000/- FOR PURCHASE OF SOOT GIRNI LAND. OUT OF THE SAID PAYMENT, RS. 49,73,500/- WAS PAID BY TAKING LOAN FR OM SHRI SAMBAJI MAHARAJ SPINNING MILLS PVT. LTD., RS.66,33,000/- FR OM REGULAR BANK ACCOUNT MAINTAINED BY THE ASSESSEE, RS.69,14,000/- WAS SALE PROCEEDS OF PLOT AND THE BALANCE THE ASSESSEE HAS DISCLOSED IN THE RETURN OF INCOME ITA . NO350/PN/2007 AJIT RAMCHANDRA JADHAV A.Y 2004-05 PAGE OF 7 5 FILED. THE DETAILS OF PURCHASE OF LAND OF SOOOT GI RNI HAS BEEN GIVEN IN THE ASSESSMENT ORDER FOR THE A.Y. 2003-04 AS UNDER : 1.LOCATION WAJEGAON WAGE- GAON WAGE- GAON WAGE- GAON DHANE- GAON DHANE- GAON II.DATE OF PURCHASE 31-12-02 18-12- 02 29-06- 02 29-06- 02 31-12-02 18-12- 02 III.AMOUNT 26,07,000 32,40,000 55,80,000 49,80,000 62,37,000 59,70,000 IV.S.NO. 19J 19E 19A 19B/19C 22B 39 V.EXTENT OF LAND 1H 51R 1H 01R 1H 85R 1H 66R 5H 67R 1H 99R IN ADDITION TO THE ABOVE, THE ASSESSEE ALSO CLAIMED TO HAVE INCURRED EXPENSES ON ACCOUNT OF REGISTRATION CHARGES AND STA MP DUTY CHARGES AGGREGATING TO RS. 7,84,197/-. IN NUTSHELL, THE D ECLARATION OF ADDITIONAL INCOME OF RS.1,42,00,000/- AGAINST THE AMOUNTS INVE STED IN PURCHASE OF LANDS AS DETAILED ABOVE HAS ALREADY BEEN CONSIDERED BY THE A.O IN THE ASSESSMENT ORDER FRAMED FOR THE A.Y. 2003-04. WE, THUS, PRIMA FACIE FIND SUBSTANCE IN THE PRELIMINARY OBJECTION RAISED BY THE ASSESSEE THAT AN ADDITION OF RS.23,32,592/- MADE BY THE A.O ON ACCOU NT OF UNEXPLAINED INVESTMENT IN THE PROPERTY IN THE A.Y. 2004-05 UND ER CONSIDERATION HAS ALREADY BEEN SETTLED IN THE A.Y. 2003-04. WE, THUS , IN THE INTEREST OF JUSTICE, REMAND THE MATTER TO THE FILE OF THE A.O T O VERIFY THE ABOVE PRELIMINARY OBJECTION RAISED BY THE LD. A.R. REGAR DING THE MAINTAINABILITY OF THE ADDITION OF RS. 23,32,592/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE PROPERTY DURING THE YEAR IN VIEW OF THE ASSESSMENT ORDER ON THE ISSUE FOR THE A.Y. 2003-04 AND DECIDE THE ISSUE AFRESH AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSE E ON THE ISSUES RAISED IN GROUND NOS. 1 AND 2 OF THE APPEAL. THE GROUND N O. 1 & 2 ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. GROUND NO.3 ITA . NO350/PN/2007 AJIT RAMCHANDRA JADHAV A.Y 2004-05 PAGE OF 7 6 7. OUT OF THE CLAIMED TRANSPORT EXPENSES AT RS. 42, 76,000/-, THE A.O DISALLOWED RS. 2,13,800/- IN ABSENCE OF VERIFIABLE EVIDENCE. IN OTHER WORDS, THE A.O DISALLOWED 5% OF THE TOTAL TRANSPORT EXPENSES IN ABSENCE OF PROPER EVIDENCE IN SUPPORT. THE SAME IS RESTRIC TED TO 2% OF THE TOTAL EXPENDITURE BY THE LD CIT(A) ACCEPTING THE SUBMISSI ON OF THE ASSESSEE THAT THE ASSESSEE HAD NOT MAINTAINED FULLY THE SUPP ORTING EVIDENCES OF TRANSPORTATION CHARGES PAID DUE TO PECULIAR NATURE OF THE BUSINESS AND THE PAYMENTS ARE MADE TO THE TRUCK DRIVERS FROM WHO M PROPER RECEIPTS/VOUCHERS WERE NOT AVAILABLE TO THE ASSESSE E. WE FIND THAT THE EXPENDITURE HAS BEEN CLAIMED TO HAVE BEEN INCURRED FOR THE TRANSPORTATION OF KEROSENE OIL IN TANKER FROM MAN MAD DEPOT TO THE CUSTOMERS SITE. THE ASSESSEE IS IN THE BUSINESS OF KEROSENE ON WHOLESALE BASIS. CONSIDERING THESE SUBMISSIONS, ESPECIALLY T HE VERY NATURE OF THE BUSINESS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE KEEPING IN VIEW THE NATURE OF TH E BUSINESS. WE, THUS, DO NOT FIND REASON TO INTERFERE WITH THE FIRST APPE LLATE ORDER ON THE ISSUE. THE SAME IS UPHELD. THE GROUND IS, ACCORDINGLY, RE JECTED. 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 20TH JULY, 2011. SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE, DATED THE 20TH JULY, 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT ITA . NO350/PN/2007 AJIT RAMCHANDRA JADHAV A.Y 2004-05 PAGE OF 7 7 3. THE CIT, AURANGABAD 4. THE CIT(A)- II, AURANGABAD 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE