Sri. M. Veeranna, Kolar V. ITO, Kolar

ITA 36/BANG/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63836 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-12-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained investment
• Section: 142(1); 234B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.36/BANG/2012 (ASSESSMENT YEAR : 2005-06) SHRI M. VEERANNA, SUGATUR VILLAGE, JANGAMAKOTE HOBLI, SIDLAGHATTA TALUK, KOLAR DISTRICT 562 105 . APPELLA NT. PAN AGPPV7382R VS. INCOME TAX OFFICER, WARD 1, KOLAR. .. RESPONDENT. APPELLANT BY : SHRI V. SRINIVASAN. RESPONDENT BY : SMT. SUSAN THOMAS JOSE. DATE OF HEARING : 12.12.2012. DATE OF PRONOUNCEMENT : 21.12.2012. O R D E R PER SHRI JASON P. BOAZ : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-V, BANGALORE DT .28.11.2011 FOR ASSESSMENT YEAR 2005-06. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE IS AN AGRICULTURIST WHO HAD NOT FI LED ANY RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06. A NOTICE UNDER SECTION 14 2(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') WAS ISSUED TO THE ASSESSEE ON 16.11.2007 CALLING FOR THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005-0 6, TO WHICH THERE WAS NO RESPONSE. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER COMPL ETED THE ASSESSMENT EX-PARTE UNDER 2 ITA NO.36/BANG/2012 SECTION 144 OF THE ACT BY ORDER DT.17.12.2007 WHERE IN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.32,62,500, WHICH WAS CONSIDERED TO BE THE UNEXPLAINED INVESTMENT IN PURCHASE OF IMMOVABLE PROPERTY. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSESS MENT YEAR 2005-06 DT.17.12.2007, THE ASSESSEE WENT IN APPEAL BEFORE T HE CIT(APPEALS). BEFORE THE LEARNED CIT(APPEALS), THE ASSESSEE CONTENDED THAT NO EXPLAN ATION WAS FURNISHED BEFORE THE ASSESSING OFFICER BECAUSE OF IGNORANCE OF TAX PROCE EDINGS. THE ASSESSEE SUBMITTED THAT HE HAD ENTERED INTO TWO TRANSACTIONS OF PURCHASE OF AGRICULTURAL LANDS UNDER AN ARRANGEMENT WITH ONE SRI P. RANGA RAJU AN ACQUAINTA NCE OF THE ASSESSEE. IT WAS SUBMITTED THAT IN TERMS OF THE UNDERSTANDING THAT THE ASSESSE E WOULD CULTIVATE THE LANDS AND DERIVE INCOME AND PROTECT THE LAND ON BEHALF OF SRI RANGA RAJU. THE ASSESSEE AGREED TO BE THE REPRESENTATIVE OF SRI RANGA RAJU AND THE TWO AGRICU LTURAL LANDS WERE PURCHASED IN HIS NAME. IT WAS ALSO SUBMITTED THAT THE CONSIDERATION FOR PURCHASE OF AGRICULTURAL LANDS AMOUNTING TO RS.45,17,500 WAS PAID FROM THE BANK AC COUNTS OF SRI RANGA RAJU. IN SUPPORT OF THIS ARGUMENT, THE ASSESSEE FILED COPIES OF TWO SALE DEEDS DT.7.3.2005 WHEREIN PAYMENTS OF RS.28,27,500 AND RS.16,90,000 TO THE VE NDORS WERE MADE FROM BANK ACCOUNTS AT MALLESHWARAM CO-OP BANK, UTI BANK AND VIJAYA BAN K WHICH WERE IN THE NAME OF SRI P.RANGA RAJU, AN AFFIDAVIT DT.5.6.2008 EXPLAINING T HE CIRCUMSTANCES UNDER WHICH THE SALE DEEDS WERE OBTAINED IN THE NAME OF THE ASSESSEE; CO NFIRMATION LETTER OF SRI P. RANGA RAJU, COPY OF RETURN OF INCOME FILED BY SRI RANGA RAJU FO R ASSESSMENT YEAR 2005-06 AND THE BALANCE SHEET OF SRI P.RANGA RAJU AS ON 31.3.2005 W HEREIN THE ABOVE INVESTMENTS OF AMOUNTING TO RS.45,17,500 MADE IN AGRICULTURAL LAND S IS REFLECTED. ON THESE DETAILS BEING PLACED BY THE ASSESSEE, BEFORE THE LEARNED CIT(APPE ALS), THE LEARNED CIT(APPEALS) ISSUED A NOTICE OF ENHANCEMENT OF INCOME TO THE ASSESSEE. ACCORDING TO THIS NOTICE ISSUED BY THE LEARNED CIT(APPEALS), THE ASSESSEE WAS TO BE ASSESS ED AT AN INCOME OF RS.45,17,500 AS HE HAD MADE INVESTMENT TO THAT EXTENT IN THE PURCHASE OF LAND UNDER TWO SALE DEEDS BUT THE ASSESSING OFFICER HAD ASSESSED HIM AT AN INCOME OF RS.32,62,500 ONLY. THE ASSESSEE REPLIED TO THE ENHANCEMENT NOTICE STATING THAT THE ENTIRE INVESTMENT OF RS.45,17,500 ADMITTEDLY WAS MADE BY SRI P. RANGA RAJU AND THEREF ORE THERE WAS NO QUESTION OF MAKING 3 ITA NO.36/BANG/2012 ANY ADDITION WHATSOEVER IN THE HANDS OF THE ASSESSE E. THE DETAILS FILED BY THE ASSESSEE WERE SENT BY THE LEARNED CIT(APPEALS) TO THE ASSESS ING OFFICER FOR A REMAND REPORT THEREON. IN THE REMAND REPORT DT.16.6.2008, THE AS SESSING OFFICER MERELY REITERATED THAT THE ORDER OF ASSESSMENT WAS FRAMED UNDER SECTI ON 144 OF THE ACT AS THE ASSESSEE HAD NOT FURNISHED ANY DETAILS AND PARTICULARS. IN THE BACKDROP OF THE SAID FACTUAL MATRIX, THE LEARNED CIT(APPEALS) DECIDED THE APPEAL AGAINST THE ASSESSEE BY HOLDING AS UNDER AT PARA 11 ON PAGE 4 AND 5 OF HIS ORDER, WHICH ARE EXT RACTED HEREUNDER : I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMS TANCES OF THE CASE. IN HIS LETTER DATED 4.6.2008 SRI P. RANGA RAJU STATED AS U NDER : OWING TO THE FACT THAT I COULD NOT PURCHASE THE SA ID LANDS IN MY NAME. I HAD REQUESTED YOU (THE APPELLANT ) TO A CT AS MY REPRESENTATIVE AND OBTAIN THE ABOVE SALE DEEDS IN Y OUR NAME ITSELF. FROM THIS IT IS VERY CLEAR THAT SRI P. RANGA RAJU IS PROHIBITED BY THE LAW OF THE KARNATAKA GOVERNMENT TO PURCHASE AGRICULTURAL LANDS . IT IS THE LAW OF THE LAND THAT ONE LAW CAN NEVER BE USED TO CIRCUMVENT ANOTHE R LAW. THEREFORE I HAVE NO OPTION BUT TO CONFIRM THE ACTION OF THE ASSESSING O FFICER AND ALSO TO ENHANCE THE INCOME ASSESSED BY THE ASSESSING OFFICER FROM R S. 32,62,500 TO RS. 45,17,500 IN THE HANDS OF THE APPELLANT AS INCOME F ROM THE OTHER SOURCES AND ACCORDINGLY THE ASSESSING OFFICER IS DIRECTED TO AD OPT THE INCOME OF THE APPELLANT AT RS.45,17,500 AND THE APPEAL IS DISMISS ED. 3.0 AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEA LS) FOR ASSESSMENT YEAR 2005-06 DT.28.11.2011 CONFIRMING THE EX-PARTE ORDER OF ASSE SSMENT UNDER SECTION 144 OF THE ACT AND DIRECTING THE ENHANCEMENT OF INCOME, THE ASSESS EE IS IN APPEAL BEFORE US. IN THE GROUNDS RAISED THE ASSESSEE HAS CONTENDED AS UNDER : 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVI DENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN COMP LETING THE ASSESSMENT EX- PARTE UNDER SECTION 144 OF THE ACT, UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. 3. THE LEARNED CIT (APPEALS) IS NOT JUSTIFIED IN DIRECTING THE LEARNED ASSESSING OFFICER TO ENHANCE THE INCOME FROM RS. 32 ,62,500 TO RS. 45,17,500 IN THE HANDS OF THE APPELLANT AS INCOME FROM OTHER SOURCES UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4 ITA NO.36/BANG/2012 3.1 THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECI ATED THAT THERE WAS NO WARRANT FOR MAKING ANY ADDITION IN THE HANDS OF THE APPELLANT AS THE ENTIRE INVESTMENT MADE WAS PROPERLY EXPLAINED AND THAT THE ENTIRE ADDITION MADE IS PURELY ON SUSPICION AND SURMISE, ASSUMPTIONS AND PR ESUMPTIONS AND THEREFORE THE ADDITION MADE IS LIABLE TO BE DELETED. 4. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WI TH THE HON'BLE CCIT / DG, THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARG ED TO INTEREST UNDER SECTIONS 234A, 234B AND 234C OF THE ACT, WHICH UNDER THE FAC TS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND THE LEVY DESERVES TO BE CA NCELLED. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUN D OF THE INSTITUTION FEES AS PART OF THE COSTS. 4.0 THE GROUND RAISED AT S.NO.1 IS GENERAL IN NATURE AND NO ADJUDICATION IS THEREF ORE CALLED FOR THEREON. 5.0 IN THE GROUND RAISED AT S.NO.5 , THE ASSESSEE AMONG OTHER GENERAL AVERMENTS HAS SOUGHT THE AWARDING OF COSTS IN PROSECUTING THE APP EAL AND ALSO FOR REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. APART FROM PUTTING FORWARD THESE GROUNDS, THE SAME WAS NOT URGED OR ARGUED AT ALL IN THE COURSE OF APP ELLATE PROCEEDINGS BEFORE US. NO CASE BEING MADE OUT IN RESPECT OF THE AVERMENTS MADE, TH IS GROUND IS RENDERED INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. 6.1 IN RESPECT OF THE GROUNDS RAISED AT S.NOS.2 TO 3.1 , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT (APPEALS) W AS NOT JUSTIFIED ON ANY COUNT IN ENHANCING THE INCOME OF THE ASSESSEE IN THE ORDER O F ASSESSMENT TO RS.45,17,500. THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY CONTENDED THE ASSESSEE HAD PLACED ON RECORD BEFORE THE LEARNED CIT(APPEALS) OVERWHELMING EVIDEN CE TO ESTABLISH THAT INVESTMENT IN THE TWO AGRICULTURAL LANDS WAS MADE BY SRI P.RANGA RAJU AND THEREFORE, IT CANNOT BE SAID THAT THERE WAS NO SOURCE EXPLAINED BY THE ASSESSEE FOR MAKING THE SAID INVESTMENTS. IT WAS STATED, BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ENTIRE CONSIDERATION FOR PURCHASING THE SAID AGRICULTURAL LANDS WERE MADE FR OM THE BANK ACCOUNTS OF SRI P.RANGA RAJU. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITS THAT THE SAID INVESTMENT IN AGRICULTURAL LANDS HAS BEEN SHOWN / REFLECTED IN TH E BALANCE SHEET OF SRI P.RANGA RAJU, 5 ITA NO.36/BANG/2012 PLACED AT PAGE 46 OF THE ASSESSEE'S PAPER BOOK. TH E LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO THE AFFIDAVIT FILED BY THE ASSESSE E, PLACED AT PAGE 31 AND 32 OF THE PAPER BOOK AND ALSO THE CONFIRMATION LETTER OF SRI P.RANG A RAJU WHICH IS PLACED AT PAGES 33 AND 34 OF THE PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE PLEADED THAT IN THESE CIRCUMSTANCES THE LEARNED CIT(APPEALS) WAS NOT JUST IFIED IN CONFIRMING THE ADDITION OF RS.32,62,500 MADE BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT AND IN MAKING THE ENHANCEMENT OF INCOME TO RS.45,17,000 BY TOTALL Y BRUSHING ASIDE AND IGNORING THE EVIDENCE TENDERED BEFORE HIM. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE VIEW TAKEN BY THE LEARNED CIT (APPEALS) THAT THERE WAS A VIOLATION OF THE STATE LAWS IN THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WAS NOT J USTIFIED AS THE LEARNED CIT(APPEALS) IS NOT THE CONCERNED AUTHORITY TO CONSIDER THE SAME. IN THESE CIRCUMSTANCES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE INCOME AS SESSED IN THE HANDS OF THE ASSESSEE REQUIRES TO BE DELETED. 6.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTA TIVE STRONGLY SUPPORTED THE ORDER PASSED BY LEARNED CIT(APPEALS). THE LEARNED DEPART MENTAL REPRESENTATIVE STATES THAT THE ASSESSEE HAD ENTERED INTO AN ARRANGEMENT TO HEL P SRI P.RANGA RAJU ACQUIRE AGRICULTURAL LANDS IN KARNATAKA WHICH WAS PROHIBITED UNDER STATE LAWS AND THERE BEING A VIOLATION OF PUBLIC POLICY, THE ASSESSEE IS NOT ENTITLED TO RELI EF. IN THESE CIRCUMSTANCES, THE LEARNED DEPARTMENTAL REPRESENTATIVE PRAYED THAT THE ORDER O F THE LEARNED CIT(APPEALS) BE UPHELD AND THE ASSESSEE'S APPEAL BE DISMISSED. 6.3.1 WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERU SED AND CONSIDERED THE MATERIAL ON RECORD. THE RECORD INDICATES THAT THE INCOME TAX D EPARTMENT IN CONSEQUENCE OF INFORMATION IN ITS POSSESSION ISSUED A NOTICE UNDER SECTION 142(1) OF THE ACT ON 16.11.2007 TO THE ASSESSEE TO WHICH THERE WAS NO RESPONSE FROM THE ASSESSEE THOUGH THE NOTICE WAS SERVED ON HIM. SUBSEQUENTLY, BY LETTER DT.4.12.200 7, THE ASSESSING OFFICER COMMUNICATED THE PROPOSED LINES OF ASSESSMENT TO TH E ASSESSEE. SINCE THE ASSESSEE DID NOT RESPOND TO THIS TOO, THE ASSESSMENT WAS CONCLUD ED EX-PARTE UNDER SECTION 144 OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.3 2,62,500. WE FIND THAT BEFORE THE FIRST APPELLATE AUTHORITY, VIZ. THE CIT(APPEALS)-V, BANGALORE, THE ASSESSEE HAS GIVEN THE 6 ITA NO.36/BANG/2012 ENTIRE DETAILS IN RESPECT OF THE INVESTMENTS MADE I N THE TWO AGRICULTURAL LANDS PURCHASED VIDE SALE DEEDS DT.7.3.2005 AND EXPLANATIONS FOR TH E SAME. THE ASSESSEE HAD ALSO FURNISHED EVIDENCE IN SUPPORT OF EXPLANATION FOR T HE SOURCE OF INVESTMENT IN THE AGRICULTURAL LANDS IN THE FORM OF AN AFFIDAVIT, CON FIRMATION LETTER FROM SRI P.RANGA RAJU FOR THE SOURCES OF INVESTMENT IN THE AGRICULTURAL L ANDS, THE INCOME TAX RETURNS AND BALANCE SHEET OF SRI P.RANGA RAJU DT.31.3.2005, WHEREIN THE INVESTMENTS MADE IN THE SAID AGRICULTURAL LANDS TO THE EXTENT OF RS.45,17,500 IS REFLECTED. FROM THE SAID DETAILS FURNISHED BY THE ASSESSEE, IT IS CLEAR THAT THE SOU RCE OF INVESTMENT IN THE SAID AGRICULTURAL LANDS IS FROM OUT OF THE FUNDS OF SRI P.RANGA RAJU AND HAVE FLOWN OUT OF HIS BANK ACCOUNTS; FACTS WHICH WE FIND HAVE NOT BEEN DOUBTED / QUESTIO NED BY THE AUTHORITIES BELOW. THE RECORD SHOWS THAT WHAT HAS BEEN HELD BY THE LEARNED CIT(APPEALS) IS THAT THE ACTION OF THE ASSESSEE IN HELPING SRI P.RANGA RAJU IN ACQUIRI NG AGRICULTURAL LANDS IN KARNATAKA IS IN VIOLATION OF STATE LAWS AND THEREFORE THE ASSESSEE IS NOT ENTITLED TO ANY RELIEF UNDER THE INCOME TAX LAWS. 6.3.2 WE FIND THAT THE AFORESAID VIEW TAKEN BY THE LEARNED CIT(APPEALS) IS TOTALLY UNWARRANTED AND THE SAME IS NOT SUPPORTED BY ANY LE GAL PROPOSITION. IT IS TRITE LAW THAT THE OBJECT AND SCOPE OF THE INCOME TAX ACT IS TO AS SESS THE ASSESSEE'S CORRECT INCOME. APPLYING THE SAID TEST, WHAT WE NEED TO LOOK AT IS IF THE ASSESSEE IS ABLE TO PROPERLY EXPLAIN THE SOURCE OF THE INVESTMENTS OF RS.45,17,5 00 MADE IN THE AGRICULTURAL LANDS. ON THAT COUNT WE FIND THAT THE SOURCE FOR MAKING THE S AID INVESTMENTS STANDS EXPLAINED AND THE SAME CANNOT BE CONSIDERED AS INCOME IN THE HAND S OF THE ASSESSEE. NOW THE QUESTION THAT REMAINS IS WITH REGARD TO THE VIOLATION OF STA TE LAWS. ON THIS ASPECT, WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(APPEALS) IS NO T THE CONCERNED AUTHORITY TO DETERMINE WHETHER OR NOT THE ASSESSEE HAS VIOLATED THE STATE LAWS. IT IS FOR THE CONCERNED AUTHORITIES OF THE STATE GOVERNMENT TO DE TERMINE THE SAID QUESTION AND THEREFORE THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN COMING TO THE CONCLUSION THAT THE ASSESSEE HAS VIOLATED THE STATE LAWS IN ASSISTING S RI P.RANGA RAJU IN PURCHASING THE SAID AGRICULTURAL LANDS. CONSEQUENTLY, WE HOLD THAT THE IMPUGNED ORDERS OF THE LEARNED 7 ITA NO.36/BANG/2012 CIT(APPEALS) CANNOT BE SUSTAINED AND THEREFORE THE INCOME ASSESSED BY THE AUTHORITIES BELOW IS DELETED. IT IS ORDERED ACCORDINGLY. 7. IN THE GROUNDS RAISED AT S.NO.4 , THE ASSESSEE HAS DENIED HIMSELF LIABLE TO BE CHARGED INTEREST UNDER SECTION 234A AND 234B OF THE ACT. THE CHARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY AND THE ASSESSING OFFIC ER HAS NO DISCRETION IN THE MATTER. IN VIEW OF THIS, WE HOLD THAT HIS ACTION IN CHARGIN G THE ASSESSEE INTEREST UNDER SECTION 234A AND 234B OF THE ACT IS IN ORDER. THE ASSESSIN G OFFICER IS, HOWEVER, DIRECTED TO RECOMPUTE THE INTEREST CHARGEABLE UNDER SECTION 234 A AND 234B OF THE ACT, IF ANY, WHILE GIVING EFFECT TO THIS ORDER. 8. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DEC., 2012. SD/- SD/- (GEORGE GEORGE K) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMB ER *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE .