Shri Rahul Dev Dhand, Dehradun V. ITO, Dehradun

ITA 3644/DEL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3047 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 06-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Salary income; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3644/DEL/2017 ASSESSMENT YEAR : 2013-14 RAHUL DEV DHAND, R/O. ASHOK MARG, TURNER ROAD, DEHRADUN. VS. ITO, WARD- 2(2), DEHRADUN. PAN : ADEPD8468Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ROHIT TIWARI, ADV. DEPARTMENT BY : SHRI ATIQ AHMAD, SR.DR DATE OF HEARING : 20-03-2018 DATE OF PRONOUNCEMENT : 23-03-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 25.04.2017 OF THE CIT(A), DEHRADUN RELATING TO ASSE SSMENT YEAR 2013-14. 2. THE GROUND OF APPEAL NO.1 TO 3 BY THE ASSESSEE R EAD AS UNDER :- 1. THAT IN FACTS AND CIRCUMSTANCES OF THE CASE, SU STAINING THE ADDITION OF RS.33,40,000/- ON WRONG FACT IS ERRONEOUS. 2. THAT IN FACTS AND CIRCUMSTANCES OF THE CASE, AUT HORITIES BELOW HAVE FAILED TO APPRECIATE THE FACTS THAT THE CLOSING BALANCE OF TH E EARLIER YEARS SOLD DURING THE YEAR IGNORING THE SAME IS ARBITRARY. 3. THAT IN FACTS AND CIRCUMSTANCES OF THE CASE, A.O . HAS ACCEPTED THE BOOKS OF ACCOUNTS AND NO MISTAKE WAS PIN POINTED OUT MAKING THE ADDITION IS UNJUSTIFIED AND ILLEGAL. 2 ITA NO.3644/DEL/2017 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME ON 22.01.2014 DECLARING TAXABL E INCOME OF RS.12,87,880/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN RECEIPT OF RS.49,25,655 /- FROM SALE OF OLD STOCK OF BRICKS. HE ASKED THE ASSESSEE TO ESTABLISH THE SAM E AND PRODUCE THE BOOKS OF ACCOUNTS ALONG WITH BILLS AND VOUCHER PERTAINING TO THE BUSINESS RELATED TO MANUFACTURING OF BRICKS AND SALE ETC. FOR VERIFICAT ION IN SUPPORT OF SALE OF THE SAME. DESPITE REPEATED REMINDERS, THERE WAS NO PRO PER RESPONSE FROM THE ASSESSEE. THE ASSESSEE PRODUCED ONLY THE CASH BOOK AND LEDGER AND A SINGLE BILL BOOK WHICH WERE NOT COMPLETED. THEREFORE, THE ASSE SSING OFFICER HELD THAT THE ASSESSEE FAILED TO PRODUCE BILLS AND VOUCHERS TO ES TABLISH THE OLD STOCK OF BRICKS AND SALE OF THE SAME. FURTHER, THE REPORT OF THE W ARD INSPECTOR WAS OBTAINED, ACCORDING TO WHICH, ON THE DATE OF HIS REPORT THERE WAS NO STOCK OF BRICKS. THE ASSESSING OFFICER EXAMINED THE RETURN OF THE ASSESS EE FOR LAST FOUR YEARS AND CAME TO THE CONCLUSION THAT THE ASSESSEE HAS CREATE D A HYPOTHETICAL STOCK OF BRICKS SINCE ASSESSMENT YEAR 2011-12 ONWARDS AND NO THING ELSE. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND OBSE RVING THAT THE ASSESSEE HAS NEITHER MANUFACTURED NOR SOLD ANY BRICKS, THE ASSES SING OFFICER MADE ADDITION OF RS.33,40,000/- TO THE TOTAL INCOME OF THE ASSESS EE AS UNDISCLOSED INCOME. 4. IN APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF T HE ASSESSING OFFICER IN TREATING SUCH DEPOSIT AS INCOME FROM UNDISCLOSED SO URCES. 3 ITA NO.3644/DEL/2017 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSA L OF THE ORDER OF THE LD. CIT(A) SHOWS THAT THE LD. CIT(A) HAS GIVEN A CATEGO RICAL FINDING THAT THE ASSESSEE WAS IN-FACT IN BUSINESS. PARA 22 OF THE O RDER OF THE LD. CIT(A) WHICH IS VERY RELEVANT FOR THIS PURPOSE IS REPRODUCED AS UND ER :- 22. THIS BRINGS US TO THE SECOND ISSUE UPON WHICH THE ADDITION HAS BEEN MADE I.E. UNEXPLAINED RECEIPTS IN THE BANK ACCOUNT OF M/S ASH OK BRICKS OF RS.33,40,000/-, WHICH ARE SOUGHT TO BE EXPLAINED AS ARISING FROM SA LE OF BRICKS. THE AO CAME TO SUCH A CONCLUSION ON THE BASIS OF HIS INSPECTORS REPORT, WHO AFTER VISITING THE PREMISES IN 2016, STATED THAT THE ASSESSEE HAD NO STOCK OF BRIC KS ON THE DATE OF INSPECTION AND THAT THE BRICK KILN HAD STOPPED FUNCTIONING AFTER THE DE ATH OF THE ASSESSEES FATHER AND AROUND TWO TO THREE YEARS AGO. HOWEVER, IT IS NOTI CED THAT SHRI ASHOK DHAND, THE ASSESSEES FATHER, ACTUALLY PASSED AWAY IN 1992. T HUS THE REPORT WHICH STATES THAT THE KILN STOPPED FUNCTIONING TWO TO THREE YEARS AGO CON TRADICTS ITS OWN OBSERVATION THAT IT STOPPED FUNCTIONING AFTER THE DEATH OF HIS FATHER. BE THAT AS IT MAY, IT IS OBSERVED THAT THE TIMELINE SUGGESTED BY THE INSPECTOR DOES NOT RE ALLY CONTRADICT WHAT THE ASSESSEE HAS STATED. IT IS OBSERVED FROM OTHER DOCUMENTS ON THE ASSESSMENT RECORDS, THAT IT WAS INFACT, THE ASSESSEES GRANDMOTHER WHO WAS THE PROP RIETOR OF M/S ASHOK BRICKS AND WHO DIES ON THEREAFTER, ONLY THE INVENTORIES WERE S OLD OVER THE NEXT TWO YEARS. SO THE TIMELINE CORRESPOND TO WHAT HAS BEEN STATED BY THE INSPECTOR IN HER REPORT. IN THE CIRCUMSTANCES, THIS ITSELF CANNOT BE A BASIS TO HOL D THAT THERE WAS NO SALE OF BRICKS IN THE ABSENCE OF STOCKS. 7. IN VIEW OF THE ABOVE FINDING OF THE LD. CIT(A) T HIS CANNOT BE THE BASIS FOR HOLDING THAT THERE WAS NO SALE OF BRICKS IN THE ABS ENCE OF STOCK. FURTHER, IN PARA 24 OF THE ORDER, THE LD. CIT(A) HAS ALSO GIVEN A FI NDING THAT THE ASSESSING OFFICERS THEORY THAT THE CONCERN WAS NOT NON-EXIST ENCE CANNOT BE ACCEPTED. THE RELEVANT OBSERVATION OF LD. CIT(A) READS AS UND ER :- 4 ITA NO.3644/DEL/2017 24. ONE OF THE REASONS CITED BY THE AO FOR CONCLUD ING THAT NO BRICK KILN BUSINESS EXISTED, WAS HIS OBSERVATION THAT WITHOUT RUNNING A NY BUSINESS PRIOR TO AY 2010-11, THE ASSESSEE HAD SUDDENLY SOLD BRICKS WORTH RS 43,2 4,935/- AND HAD A CLOSING STOCK OF RS 15,04,000/-. FROM THE SAME HE HAS CONCLUDED THAT THE STORY OF THE BRICK KILN WAS CONCOCTED, WITH A VIEW TO GENERATING RESOURCES TO P AY FOR THE PROPERTY BEING PURCHASED AT MUSSOORIE, WHICH WAS OSTENSIBLY PRICED AT RS 4,80,00,000/-, BUT ACTUALLY BOUGHT AT A HIGHER PRICE. SINCE, HIS OBSERVATION AB OUT THE SALE PRICE OF THE MUSSOORIE PROPERTY IS NOT BACKED UP WITH ANY EVIDENCE, IT CAN NOT BE CONSIDERED AS ANYTHING MORE THAN AN OFF THE CUFF REMARK. BUT IT IS OBSERVE D THAT, IN CONCLUDING THAT THERE WAS NO BRICK KILN IN EXISTENCE AT THE SITE, HE HAS OVER LOOKED THE REPORT OF HIS OWN INSPECTOR, WHO AFTER INSPECTION HAS REPORTED BACK T HAT THERE WAS A BRICK KILN WHICH WAS CLOSED TWO OR THREE YEARS PRIOR TO 2016. HE ALS O FAILED TO CONSIDER THE SUBMISSION OF THE ASSESSEE, THAT MS ASHOK BRICKS WAS RUN AS A PROPRIETORY CONCERN BY THE ASSESEE'S GRANDMOTHER, SMT BHAGWATI DEVI DHAND UPTI LL HER DEATH ON 21.10.2010 AND IGNORED THE RETURN OF THE SAID ASSESSEE FOR THE AY 2010-11 AND THE AUDITED ACCOUNTS FOR THE PERIOD UPTILL 21.10.2010, THAT WAS FILED BY THE ASSESEE'S COUNSEL ON 18.03.2016. PERUSAL OF THE AUDITED ACCOUNTS FOR FY 2009-10, WOU LD HAVE SHOWN THAT THE ACCOUNTS (OF AY 2010-11) WERE COUNTER SIGNED BY THE ASSESSEE 'S GRANDMOTHER (AS PROPRIETOR) ON 22.09.2010 I.E. A MONTH BEFORE HER DEATH AND REV EALED BOTH OPENING STOCK AND MANUFACTURING AND PAYMENT OF TRADE TAX, THUS CLEARL Y CONSTITUTING EVIDENCE OF A RUNNING CONCERN. FURTHER, THE BALANCE SHEET OF SMT BHAGWATI DEVI FOR THE YEAR ENDING 31.03.2009 WERE ALSO FILED BEFORE THE AO WHICH REVE ALED THE SAME FACTS. IT IS ALSO SEEN THAT SUBSEQUENT TO SMT. BHAGWATI DEVIS DEATH THE ASSESSEE INFORMED THE TRADE TAX AUTHORITIES ABOUT CLOSURE OF THE BRICK KILN ON 1/05/2012, POINTING OUT THAT HE HAD CLOSED THE BRICK KILN IN JUNE 2011 AND SUBMITTED TH E NECESSARY COMPOUNDING FEES WITH RELATION TO FY 2009-10 (AY 2010 - 11) BETWEEN 11.01.11 AND 15.05.2012. IT IS ALSO SEEN THAT THE TRADE TAX AUTHORITIES PASSED THE FINAL ORDER IN THIS REGARD ON 29.03.2014 AND IN THE SAME, THE ASSESSEE WAS ADDRES SED AS THE OWNER OF THE FIRM MS ASHOK BRICKS AND IT WAS POINTED OUT THAT THE BRICK KILN CONSISTED OF 19 'PAYA' AND IT ASSESSED THE COMPOUNDING CHARGES DUE FROM IT FOR TH AT YEAR, AT RS 1,63,000/-. PRIOR TO AY 2011-12, THE ASSESSEE SHOWED SALARY INCOME FROM M/S ASHOK BRICKS IN HIS RETURN. FOR AY 2011-12 HE FILED THE RETURN UPTILL 21.10.201 0 AS THE LEGAL HEIR OF SMT. BHAGWATI DEVI DHAND, AND ANOTHER INDIVIDUAL RETURN IN WHICH HE DISCLOSED BOTH SALARY INCOME FROM ASHOK BRICKS (UP TILL 21.10.2010 ) AND THEREAFTER INCOME FROM MS ASHOK BRICKS. THE CLOSING STOCK OF FINISHED GOODS W AS DISCLOSED IN THE RETURN FILED ON BEHALF OF SMT. BHAGWATI DEVI DHAND AT RS 49,20,000/ -, WHICH WAS SUPPORTED BY AUDITED ACCOUNTS. THUS, THE AO IS INCORRECT IN HIS ASSUMPTION THAT THE ASSESSEE BEGAN HIS BUSINESS WITHOUT ANY STOCK OF FINISHED GOODS BE CAUSE, AS THE INHERITOR OF THE BUSINESS FROM HIS GRANDMOTHER, HE WOULD HAVE INHERI TED THE CLOSING STOCK OF FINISHED GOODS AS ON 21.10.2010. AS THE ACCOUNTS OF HIS GRAN DMOTHER ARE SEEN TO BE AUDITED, THE DETAILS CONTAINED THEREIN HAVE TO BE ACCEPTED U NLESS PROVED OTHERWISE. FURTHER, ALL THESE DOCUMENTS AND RETURNS WERE FILED/CAME INT O EXISTENCE WELL BEFORE THE SELECTION OF THE CASE FOR SCRUTINY ON 4.09.2014. TH US THERE WAS SUFFICIENT EVIDENCE ON RECORD BEFORE THE AO TO CORROBORATE THE FACT THAT M S ASHOK BRICKS WAS A FUNCTIONING CONCERN UPTILL THE DEATH ,OF SMT BHAGWATI DEVI DHAN D AND WAS WOUND UP A FEW YEARS AFTER HER DEATH BY HER SUCCESSOR AND LEGAL HEIR, TH E ASSESSEE, SHRI RAHUL DEV DHAND. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER'S THEOR Y, THAT THE CONCERN WAS NONEXISTENT CANNOT BE ACCEPTED. 5 ITA NO.3644/DEL/2017 8. THE REVENUE IS NOT IN APPEAL AGAINST THE ABOVE F INDING OF THE LD. CIT(A). 9. A PERUSAL OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2012-13 WHICH WAS PASSED U/S 147/143(3) ON 01.12.2017 SHOWS THAT CLOS ING STOCK AT RS.35,36,700/- WAS DETERMINED AS ON 31.03.2012. FURTHER, THE SALE DECLARED BY THE ASSESSEE HAS NOT BEEN DISBELIEVED. THEREFORE, WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT TAXING THE DEPOSIT IN THE BANK ACCOUNT WILL AMOUNT TO DOUBLE TAXATION OF THE SAID AMOUNT I.E. ONCE ON ACCOUNT OF SALE AND AGAIN TREATING THE DEPOSIT IN BANK ACCOUNT AS UNDISCLOSED INCOME. 10. SINCE THE ASSESSING OFFICER IN THE INSTANT CASE HAS PASSED THE ASSESSMENT ORDER U/S 143(3)/147 FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR DETERMINING THE CLOSING STOCK OF RS.35,36,700/- AND SINCE THE REVENUE HAS NOT FILED ANY APPEAL AGAINST THE FINDING GIVEN BY THE L D. CIT(A) THAT THE BASIS OF THE ASSESSING OFFICER HOLDING THAT THERE WAS NO SALE OF BRICKS IN ABSENCE OF STOCK AND THE CONCERN WAS NON-EXISTENT IS INCORRECT, THER EFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT( A), IN OUR OPINION, IS NOT JUSTIFIED UNDER THE PECULIAR FACTS AND CIRCUMSTANCE S OF THE CASE. WE, THEREFORE, SET-ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT TH E ASSESSING OFFICER TO DELETE THE ADDITION. 11. THE GROUND OF APPEAL NO.4 BY THE ASSESSEE READS AS UNDER :- 6 ITA NO.3644/DEL/2017 4. THAT IN FACTS AND CIRCUMSTANCES OF THE CASE, TH E ADDITION OF RS.5,50,000/- FOR THE AMOUNT RECEIVED IN ADVANCE BY CHEQUES, CONFIRME D BY THE PARTIES GIVING THEIR PAN NUMBER AND FULL ADDRESS WITH THE PROOF THAT THE Y ARE ASSESSED TO TAX, ADDING BACK THE SAME BY THE AUTHORITY BELOW IS UNWARRANTED AND BAD AT LAW. 12. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SING OFFICER MADE ADDITION OF RS.5,50,000/- BEING THE AMOUNT RECEIVED BY THE A SSESSEE AS ADVANCE AGAINST SALE OF PROPERTY. ACCORDING TO THE ASSESSING OFFIC ER, THE ASSESSEE FAILED TO FURNISH THE IDENTITY, PAN, COMPLETE POSTAL ADDRESS AND PRODUCE THEM ALONG WITH THEIR BANK ACCOUNT, COPY OF SALE AGREEMENT ETC. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED A CONFIRMATION LETTER OF ASHA RAWAT AND BHARAT SINGH RAWAT, WHICH ACCORDING TO THE ASSESSIN G OFFICER DID NOT CONTAIN THE CORRECT ADDRESS AND THEY ARE NOT TRACEABLE. 13. WE FIND, IN APPEAL, THE LD. CIT(A) CONFIRMED TH E ADDITION SO MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER :- 32. WITH REGARDS TO RECEIPTS OF RS.5,50,000/- FROM SHRI BHARAT SINGH RAWAT AND SMT. ASHA RAWAT, IT IS OBSERVED THAT THE SO CALLED CONFIRMATION DOES NOT CONTAIN AND IDENTITY PROOF, THE COMPLETE ADDRESS OF THE PARTIES , ANY INFORMATION REGARDING THE CREDITWORTHINESS OF THE PARTIES AND THE ADVANCE HAS STILL NOT MATERIALIZED INTO A DEAL. IN THE CIRCUMSTANCES, THE RECEIPT CANNOT BE HELD TO BE EXPLAINED. THEREFORE, IT IS HELD TO BE UNEXPLAINED AND THE ADDITION MADE IN THIS REG ARD OF RS.5,50,000/- IS ACCORDINGLY CONFIRMED. 14. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT HE HAD RECEIVED THE AMOUNT BY CHEQUE. THE CONFIRMATIONS OF THE PER SONS WERE FILED GIVING THEIR PAN NUMBERS AND THE PAN NUMBERS ARE VERIFIABLE FROM THE WEBSITE OF THE DEPARTMENT. ALL SUCH DETAILS OBTAINED THROUGH RTI FROM THE ASSESSING OFFICER 7 ITA NO.3644/DEL/2017 HAVE BEEN FILED IN PAPER BOOK. WE FIND THE LOWER A UTHORITIES IN THE INSTANT CASE HAVE FAILED TO CONSIDER THE PAN NUMBER WHICH COULD HAVE BEEN EASILY VERIFIED FROM THEIR OWN WEBSITE OR THE CONCERNED ASSESSING O FFICER. SINCE THE ADVANCE HAS BEEN RECEIVED BY CHEQUE AND THE AMOUNT IS NOT V ERY SUBSTANTIAL BEING RS.1,50,000/- FROM SMT. ASHA RAWAT AND RS.4,00,000/ - FROM SHRI BHARAT SINGH RAWAT, THEREFORE CONSIDERING THE TOTALITY OF THE FA CTS OF THE CASE AND CIRCUMSTANCES OF THE CASE, WE SET-ASIDE THE ORDER O F THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDI TION. 15. THE REMAINING GROUNDS BEING GENERAL IN NATURE A RE DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MARCH, 2018. SD/- SD/- (KULDIP SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23-03-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI