Mattapalli Ram Kumar, Rajahmundry V. THE CIT(APPEAL), Visakhapatnam

ITA 352/VIZ/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1071 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 17-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M K SETHIDR
• Keywords: Additional evidence
• Section: 142(1); 14A; 68; 144

Judgement Text

ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.340/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) ACIT, CIRCLE - 1, RAJAHMUNDRY VS. SRI MATTAPALLI RAM KUMAR, RAJAHMUNDRY [PAN: AF RPM4855P ] ( / APPELLANT) ( / RESPONDENT) ./I.T.A.NO.352/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) SRI MATTAPALLI RAM KUMAR, RAJAHMUNDRY VS. ACIT, CIRCLE - 1, RAJAHMUNDRY ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI,DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 17.06.2016 / DATE OF PRONOUNCEMENT : 29.06.2016 ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE REVENUE, AS WELL AS ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER PASS ED BY THE CIT(A)- 11, MUMBAI, CAMP OFFICE AT VISAKHAPATNAM DATED 26.2 .2013 AND IT PERTAINS TO THE ASSESSMENT YEAR 2009-10. SINCE, TH E FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGE THER AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVED INCOME FROM HOUSE PROPERTY, INCOME FROM BUS INESS AND INCOME FROM OTHER SOURCES HAS FILED HIS RETURN OF INCOME F OR THE ASSESSMENT YEAR 2009-10 ON 31.3.2010 DECLARING INCOME OF ` 24,17,827/-, BESIDES AGRICULTURAL INCOME OF ` 1,85,000/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS 'THE ACT'). SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTI NY AS PER THE GUIDELINES OF CBDT AND ACCORDINGLY, NOTICE U/S 143( 2) OF THE ACT DATED 29.9.2000 WAS ISSUED FIXING THE CASE FOR HEARING ON 13.10.2010. ON THE DATE OF HEARING, THE ASSESSEE NEITHER APPEARED NOR FURNISHED ANY DETAILS, BUT, FILED ADJOURNMENT LETTER ON 13.10.201 0 AND REQUESTED TO ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 3 ADJOURN THE CASE TILL LAST WEEK OF OCTOBER, 2010. THE A.O. ISSUED ONE MORE NOTICE ON 3.11.2011 FIXING THE CASE FOR HEARIN G ON 16.11.2011. NO RESPONSE FROM THE ASSESSEE. THEREAFTER, NOTICE U/S 142(1) OF THE ACT ALONG WITH DETAILED SHOW CAUSE NOTICE DATED 9.12.20 11 WAS ISSUED AND POSTED THE CASE FOR HEARING ON 15.12.2011. THE ASS ESSEE NEITHER APPEARED NOR FURNISHED ANY DETAILS. THEREFORE, THE A.O. HAS COMPLETED THE ASSESSMENT EX-PARTE U/S 144 OF THE ACT, BASED O N THE INFORMATION AVAILABLE ON RECORD AND MADE FOLLOWING ADDITIONS: A) DISALLOWANCE OF INTEREST - ` 25,62,135/- B) ADDITION ON ACCOUNT OF SUNDRY CREDITORS - ` 70,93,573/- C) DISALLOWANCE OF 50% UNSECURED LOANS - ` 50,97,457/- D) CASH DEPOSITS INTO THE BANK ACCOUNT - ` 44,12,000/- E) AGRICULTURAL INCOME BROUGHT TO TAX UNDER THE HEAD INCOME FROM SOURCES - ` 1,85,000/- 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE AS SESSEE HAS FILED WRITTEN SUBMISSIONS ALONG WITH NECESSARY EVIDENCES. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) FORWARDED EVID ENCES FILED BY THE ASSESSEE TO THE ASSESSING OFFICER FOR HIS VERIFICAT ION AND COMMENTS. THE A.O. AFTER EXAMINING THE DETAILS FURNISHED BY THE A SSESSEE ISSUED REMAND REPORT, WHEREIN HE HAD DISCUSSED EACH AND EV ERY ITEM OF ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 4 DISALLOWANCE MADE BY THE A.O. AND GIVEN HIS REASONS . THE CIT(A) AFTER CONSIDERING THE REMAND REPORT OF THE A.O. AND ALSO TAKEN INTO ACCOUNT THE EVIDENCES FILED BY THE ASSESSEE DELETED THE ADD ITIONS MADE BY THE A.O. IN RESPECT OF DISALLOWANCE OF UNSECURED LOANS OF ` 50,97,457/-, CASH DEPOSITS INTO THE BANK ACCOUNT OF ` 44,12,000/- AND AGRICULTURAL INCOME ASSESSED UNDER THE HEAD INCOME FROM OTHER SO URCES OF ` 1,85,000/-. AS REGARDS INTEREST PAID ON LOANS ALLOW ED RELIEF TO THE EXTENT OF ` 10,85,389/- AND CONFIRMED BALANCE AMOUNT OF ` 14,76,746/-. SIMILARLY, AS REGARDS DISALLOWANCE OF SUNDRY CREDIT ORS, BASED ON THE REMAND REPORT OF THE A.O. DELETED THE ADDITIONS OF ` 44,93,498/- AND BALANCE AMOUNT OF ` 26,00,075/-, REPRESENTS OPENING BALANCES OF CREDIT S BROUGHT FORWARD FROM THE PREVIOUS YEAR, THEREFORE, DIRECTED THE A.O. TO TAKE NECESSARY ACTION IN THE YEAR TO WHICH THE CRED IT PERTAINS. HOWEVER, CONFIRMED INTEREST PAID TO CREDITORS AMOUNTING TO ` 3,96,566/-. WITH THESE OBSERVATIONS, PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFORE US. 4. THE LD. D.R. SUBMITTED THAT THE CIT(A) OUGHT TO HAVE RECORDED REASONS FOR ADMISSION OF ADDITIONAL EVIDENCE FURNIS HED BY THE ASSESSEE DURING THE APPELLATE PROCEEDINGS UNDER RULE 46A OF THE ACT INDEPENDENTLY, THEN TO REMAND THE SAME TO THE FILE OF THE A.O. FOR HIS ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 5 COMMENTS. THE D.R. SUBMITTED THAT THE CIT(A) OUGHT TO HAVE SUSTAINED THE INTEREST DISALLOWANCE OF ` 25,62,135/- INSTEAD OF ` 14,76,746/-. THE ASSESSEE HAS PAID INTEREST TO CREDITORS @ 24% AND I N SOME CASES @ 18% WHICH IS UNREASONABLE AND HIGH WHEN COMPARED TO 12% INTEREST RECEIVED BY THE ASSESSEE FROM THE FUNDS DEPLOYED IN THE PARTNERSHIP FIRM. WHEN THE ASSESSEE IS RECEIVING INTEREST OF 12 %, PAYMENT OF 18% AND 24% RESPECTIVELY TO CREDITORS IS UNREASONABLE. THE CIT(A) WITHOUT CONSIDERING THE FACTS RESTRICTED INTEREST PAYMENT T O 12% WHICH IS NOT CORRECT. SIMILARLY, AS REGARDS THE ADDITION OF SUN DRY CREDITORS U/S 68 OF THE ACT, THE D.R. SUBMITTED THAT THE CIT(A) OUGHT T O HAVE SUSTAINED THE ADDITIONS, AS THE SAME REMAINED UNVERIFIED EVEN AFT ER THE REMAND REPORT. THE D.R. FURTHER SUBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITIONS OF UNSECURED LOAN, AS THE ASSESSEE CO ULD NOT SUBMIT EITHER CONFIRMATION LETTER OR THEIR ACCOUNT COPY AND ADDRE SS EVEN AT THE TIME OF REMAND REPORT OR APPELLATE PROCEEDINGS. AS REGARDS THE ADDITION OF CASH DEPOSIT TO KARUR VYSYA BANK, THE CASH DEPOSITS TO B ANK ACCOUNTS REMAINED UNVERIFIED EVEN AFTER REMAND REPORT. THE A SSESSEE HAS NOT EXPLAINED THE SOURCES AND NATURE OF CREDIT IN THE B ANK ACCOUNT, THEREFORE, THE ADDITIONS MADE BY THE A.O. SHOULD BE SUSTAINED. THE D.R. FURTHER ARGUED THAT THE CIT(A) OUGHT TO HAVE C ONSIDERED CHARGING INTEREST U/S 14A OF THE ACT ON SUNDRY CREDITORS AS SUGGESTED BY THE A.O. ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 6 IN HIS REMAND REPORT. THE CIT(A) FAILED TO APPRECI ATE THE FACT THAT THE ASSESSEE NEITHER OFFERED NOR ACCOUNTED ANY INTEREST IN RESPECT SUNDRY CREDITORS, THEREFORE, THE A.O. HAS RIGHTLY RECOMMEN DED INTEREST U/S 14A OF THE ACT. AS REGARDS THE DELETION OF AGRICULTURA L INCOME, THE D.R. SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE ESSENTIAL INGREDIENTS OF AGRICULTURAL INCOME LIKE CROPS GROWN, SALE OF PR ODUCE, ETC. BY FURNISHING NECESSARY EVIDENCES. MERE PRODUCTION OF LAND HOLDING RECORDS IS NOT SUFFICIENT COMPLIANCE SO AS TO CLAIM THE BEN EFIT OF EXEMPTION FOR AGRICULTURAL INCOME. 5. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF CIT(A). THE A.R. FURTHER SU BMITTED THAT THE CIT(A) HAS GIVEN RELIEF BASED ON THE EVIDENCES FILE D BY THE ASSESSEE AND ALSO TAKEN NOTE OF THE REMAND REPORT ISSUED BY THE A.O. THE A.O. HAS ISSUED REMAND REPORT AFTER EXAMINING THE EVIDENCES FILED BY THE ASSESSEE AND HAS ACCEPTED THAT ALL THE ADDITIONS MA DE BY THE A.O. HAS BEEN VERIFIED AND FOUND TO BE CORRECT. THE A.R. FU RTHER SUBMITTED THAT IN RESPECT OF ADDITION TOWARDS INTEREST PAID ON SUN DRY CREDITORS, THE CIT(A) WAS ERRED IN SUSTAINING THE ADDITION OF ` 14,76,746/-, AS THE A.O. HAS DISALLOWED THE INTEREST BASED ON THE INTEREST P AID BY A PARTNERSHIP FIRM TO PARTNERS CAPITAL ACCOUNT. THE A.R. FURTHE R SUBMITTED THAT THE A.O. WAS COMPLETELY ERRED IN COMPARISON WITH THE IN TEREST PAYMENT OF A ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 7 PARTNERSHIP FIRM TO THE INTEREST PAID TO NORMAL BUS INESS ADVANCES, AS IN THE CASE OF PARTNERSHIP FIRM, INTEREST PAYMENT IS A N UNDERSTANDING BETWEEN THE FIRM AND THE PARTNERS. IT IS FURTHER S UBMITTED THAT IN THE CASE OF PARTNERSHIP FIRM, IN ADDITION TO INTEREST O N CAPITAL, THE PARTNERS ARE ELIGIBLE TO DRAW REMUNERATION AND ALSO GETTING SHARE OF PROFIT, KEEPING IN VIEW OF THESE FACTS, THE PAYMENT OF INTE REST TO PARTNERS CAPITAL IS RESTRICTED TO 12%, WHEREAS IN THE CASE O F NORMAL BUSINESS LOANS AND ADVANCES THERE IS NO SUCH CAP ON INTEREST . THE ONLY ISSUE IS WHETHER THE INTEREST IS UNREASONABLE OR EXCESSIVE. THE ASSESSEE HAS PAID INTEREST @ 18% AND 24% RESPECTIVELY WHICH IS Q UITE NORMAL. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IS D ISALLOWANCE OF INTEREST PAID TO CREDITORS. THE A.O. DISALLOWED INTEREST PAI D TO CREDITORS FOR THE REASON THAT THE ASSESSEE HAS NOT FURNISHED ANY PROO F WITH REGARD TO THE PAYMENT OF INTEREST AND COMPLIANCE OF THE TDS PROVI SIONS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS PAID INTERES T ON SUNDRY CREDITORS @ 18% AND IN FEW CASES @ 24%, THEREFORE, THE INTERE ST PAYMENT IS IN LINE WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. T HE A.O. DISALLOWED THE INTEREST FOR THE REASON THAT THE INTEREST PAYMENT T O SUNDRY CREDITORS IS ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 8 EXCESSIVE AND UNREASONABLE. THE A.O. FURTHER WAS O F THE OPINION THAT THE ASSESSEE HAS RECEIVED INTEREST OF 12% ON THE CA PITAL DEPLOYED IN THE PARTNERSHIP FIRM, WHEREAS HE HAD PAID INTEREST OF 1 8% AND 24% RESPECTIVELY, WHICH IS QUITE HIGH. WE FIND FORCE IN THE FINDINGS OF THE A.O. FOR THE REASON THAT THE ASSESSEE HAS NOT GIVEN ANY VALID REASONS FOR PAYING HIGHER INTEREST OF 18% AND 24% ON SUNDRY CRE DITORS WHEN HE IS RECEIVING 12% INTEREST ON CAPITAL DEPLOYED IN PARTN ERSHIP FIRMS. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS FILED BY THE ASSESSEE AND ALSO TAKEN NOTE OF THE REMAND REPORT, RESTRICTED TH E DISALLOWANCE OF INTEREST TO THE EXTENT OF 12%. WE DO NOT FIND ANY REASONS TO INTERFERE WITH THE ORDER PASSED BY THE CIT(A). HENCE, WE INC LINED TO UPHOLD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE RE VENUE AS WELL AS ASSESSEE. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ADDITION OF SUNDRY CREDITORS U/S 68 OF THE ACT. THE A.O. MADE ADDITIONS TOWARDS SUNDRY CREDITORS U/S 68 OF THE ACT, FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. THE CIT(A) AFTER TAKING INTO ACCOU NT THE REMAND REPORT ISSUED BY THE A.O. AND ALSO CONSIDERING THE EVIDENC ES FILED BY THE ASSESSEE, DELETED THE ADDITIONS TO THE EXTENT OF ` 44,93,498/- AND BALANCE AMOUNT OF ` 26,00,075/-, REPRESENTS THE CREDITORS BROUGHT ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 9 FORWARD FROM THE PREVIOUS FINANCIAL YEAR FOR WHICH THE CIT(A) DIRECTED THE A.O. TO TAKE APPROPRIATE ACTION IN THE YEAR IN WHICH THE CREDIT PERTAINS. AS REGARDS THE INTEREST PAYMENT OF ` 3,96,568/- IN RESPECT OF CREDITS BROUGHT FORWARD FROM PREVIOUS FINANCIAL YEA R, THE CIT(A) HAS CONFIRMED THE ADDITIONS MADE BY THE A.O. THE FACTS REMAIN SAME EVEN BEFORE US. THE REVENUE HAS FAILED TO BRING ON RECO RD ANY EVIDENCES TO PROVE THAT THE FINDINGS OF THE FACT RECORDED BY THE CIT(A) IS INCORRECT. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) HA S RIGHTLY DELETED THE ADDITION MADE BY THE A.O. WE DO NOT SEE ANY REASON S TO INTERFERE WITH THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE RE VENUE. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS DELETION OF ADDITIONS MADE BY THE A.O. TOWARDS DISALLOWANCE OF 50% UNSECURED LOANS, CASH DEPOSITS INTO THE SAVINGS BANK ACCOUNT MAINTAINED AT KARUR VYSYA BANK AND AGRICULTURAL INCOME TREATED AS INCOM E FROM OTHER SOURCES. DURING THE COURSE OF APPELLATE PROCEEDING S, THE CIT(A) CALLED FOR REMAND REPORT FROM THE A.O. THE A.O. VIDE REMAN D REPORT SUBMITTED THAT THE ADDITIONS MADE BY THE A.O. IN RESPECT OF T HESE ADDITIONS ARE NOT WARRANTED. THE CIT(A) AFTER CONSIDERING THE REMAND REPORT AND ALSO EVIDENCES FILED BY THE ASSESSEE DELETED THE ADDITIO NS MADE BY THE A.O. ITA NOS.340 & 352/VIZAG/2013 MATTAPALLI RAM KUMAR, RAJAHMUNDRY 10 IN RESPECT OF UNSECURED LOANS, CASH DEPOSITS TO BAN K ACCOUNTS AND AGRICULTURAL INCOME. WE DO NOT SEE ANY REASONS TO IN TERFERE WITH THE ORDER OF THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE APPEAL FILED BY THE ASSESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH JUN16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 29.06.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1, RAJAHMUNDRY 2. / THE RESPONDENT SRI MATTAPALLI RAM KUMAR, D.NO. 8-20-11/A, MADIREDDYVARI STREET, RAJAHMUNDRY 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A)-11, MUMBAI, CAMP OFFICE AT VISAKHAP ATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM