Rameshchandra Vadilal Shah, Ahmedabad V. The Income tax Officer,Ward-2(2), Ahmedabad

ITA 373/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2155 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 05-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: BHAVESH R SHAH
• Keywords: Gift; Opportunity of being heard; Agreed addition
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.373/AHD/2009 A. Y.: 2005-06 SHRI RAMESHCHANDRA VADILAL SHAH, PROP. M/S. RAMESH & CO., MARCHI POLE, RATAN POLE, AHMEDABAD VS THE INCOME TAX OFFICER, WARD-2(2), AHMEDABAD PA NO. ARCPS 4758 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI BHAVESH R. SHAH, AR RESPONDENT BY SHRI K. MADHUSUDAN, SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-VI I, AHMEDABAD DATED 20 TH NOVEMBER, 2008 FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. ON GROUND NO.1, THE ASSESSEE CHALLENGED THE ADDI TION OF RS.15,00,000/- ON ACCOUNT OF UNEXPLAINED GIFTS. THE AO NOTED THAT THE ASSESSEE HAS RECEIVED GIFTS OF RS.15,00,000/- FROM 8 PERSONS NOTED IN PARA 4 OF THE ASSESSMENT ORDER. IN ORDER T O VERIFY GENUINENESS OF THE GIFTS RECEIVED FROM THE DONORS, LETTERS U/S 133(6) OF THE IT ACT WERE ISSUED CALLING FOR THE INFORMATI ON REGARDING THEIR RETURN OF INCOME FILED, COPY OF THE CAPITAL ACCOUNT AND COPY OF THE ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 2 BANK ACCOUNT. THESE LETTERS WERE ISSUED BY POST. SU BSEQUENTLY, LETTERS WERE RETURNED BACK BY THE POSTAL AUTHORITIE S WITH THE REMARKS LEFT/NOT KNOWN, IN THE CASES OF THE DONORS MENTIO NED AT SR. NO.2 TO 8 OF THE LIST. HOWEVER, REPLY IN THE CASE OF KAMLESH P. PATEL (SR. NO.1) WAS RECEIVED WHEREIN IT WAS SUBMITTED THAT HE HAS N OT MADE ANY GIFT TO THE ASSESSEE. THESE FACTS WERE BROUGHT TO THE NO TICE OF THE ASSESSEE AND THE ASSESSEE WAS REQUESTED TO PRODUCE ALL THE DONORS BEFORE THE AO FOR VERIFICATION/EXAMINATION. THE ASS ESSEE DID NOT PRODUCE ANY OF THE DONORS BEFORE THE AO AND NO PRES ENT WHEREABOUTS WERE SUBMITTED. AGAIN, SIMILAR REQUEST WAS MADE TO PRODUCE THE DONORS FOR EXAMINATION/VERIFICATION; BU T NOBODY ATTENDED THE PROCEEDINGS BEFORE THE AO. SUMMONS U/S 131 OF T HE IT ACT WERE ALSO ISSUED IN THIS REGARD AND INSPECTOR WAS ALSO D EPUTED TO SERVE THE SUMMONS AT THE ADDRESSES GIVEN IN THE DECLARATI ON OF THE GIFTS. IT WAS REPORTED BY THE INSPECTOR THAT THE DONORS ARE N OT AVAILABLE AT THE GIVEN ADDRESS. AS NOTED ABOVE, ONE OF THE DONORS KA MLESH P. PATEL SUBMITTED THAT HE HAS NOT GIVEN ANY GIFT TO THE ASS ESSEE. ONE OF THE DONORS RAMHIHORA SURESH CHAUDHARY WAS PRODUCED AND HIS STATEMENT WAS RECORDED IN WHICH HE HAS STATED THAT HE HAS NO FAMILY RELATION WITH THE ASSESSEE. HE WAS DIRECTED TO FURN ISH COPY OF THE BANK ACCOUNT AND SOURCE OF INCOME; BUT HE WAS NOT A BLE TO FURNISH THE DETAILS. THE AO, THEREFORE, NOTED THAT NO LOVE AND AFFECTION AND SOURCES OF THE GIFTS ARE PROVED. IN RESPECT OF OTHE R 4 DONORS, THE DETAILS WERE CALLED FOR FROM THE BANK AND THE BANK HAS REPORTED THAT PAY ORDERS HAVE BEEN ISSUED AND 4 DONORS ARE NOT MA INTAINING ANY BANK ACCOUNT WITH THE ASSESSEE AND PAY ORDERS HAVE BEEN ISSUED FROM ANOTHER BANK ACCOUNTS HOLDER WHICH ON FURTHER ENQUIRIES WERE ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 3 FOUND TO BE OF STAFF MEMBERS OF THE ASSESSEE. THESE FACTS WERE ALSO BROUGHT TO THE NOTICE OF THE ASSESSEE TO EXPLAIN TH E GENUINENESS OF THE GIFTS. THE ASSESSEE DID NOT ATTEND THE PROCEEDI NGS BEFORE THE AO AND ULTIMATELY THE ASSESSEE SUBMITTED A LETTER DATE D 04 TH DECEMBER, 2007 WHICH IS REPRODUCED IN THE IMPUGNED ORDER IN W HICH THE ASSESSEE SURRENDERED THE AMOUNT OF RS.15,00,000/- O F THE GIFTS AND PAID THE TAX THEREON. THE AO, THEREFORE, NOTED THAT THERE IS NO SUFFICIENT MATERIAL ON RECORD TO PROVE GENUINE GIFT S IN THE MATTER AND FURTHER THE GIFTS REMAINED UNEXPLAINED AND FURTHER THE ASSESSEE HAS MADE SURRENDER OF THE GIFTS. THEREFORE, ADDITION U/ S 68 OF THE IT ACT WAS MADE TREATING THE GIFTS AS UNEXPLAINED. PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING FALSE AND INACCURATE PARTICULARS OF INCOME. THE LEARNED CIT(A) NOTED SIMILAR FACTS IN T HE IMPUGNED ORDER AND FURTHER NOTED THAT THE ASSESSEE WAS NOT JUSTIFI ED IN FILING AN APPEAL AGAINST THE ACCEPTED ADDITION DURING THE ASS ESSMENT PROCEEDINGS. THE LEARNED CIT(A) ACCORDINGLY CONFIRM ED THE ADDITION AND DISMISSED THE APPEAL OF THE ASSESSEE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE ADMITTED DU RING THE COURSE OF HEARING THAT THE ASSESSEE MADE SURRENDER OF THE AMOUNT OF RS.15,00,000/- BEFORE THE AO VIDE LETTER DATED 04 TH DECEMBER, 2007. HE COULD NOT EXPLAIN WHY THE PRESENT APPEAL WAS PRE FERRED BEFORE THE TRIBUNAL ON AGREED ADDITION OF THE GIFTS IN QUESTIO N. 4. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT SINCE THE ASSESSEE AGREED TO THE ADDITION ON UNEXPLAINED GIFT S BEFORE THE AO ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 4 IN THE LETTER DATED 04 TH DECEMBER, 2007, THE LEARNED CIT(A) WAS JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE ON THIS REASON. 5. ON CONSIDERATION OF THE RIVAL SUBMISSIONS WE ARE OF THE VIEW THE APPEAL OF THE ASSESSEE IS NOT MAINTAINABLE ON THE A BOVE GROUND NO.1 OF THE APPEAL. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF JIVATLAL PURTAPSHI VS CIT, 65 ITR 261 HELD AS UNDER: HELD, THAT THE DEPARTMENT, HAVING AGREED TO DELETE THE AMOUNT FROM THE ASSESSMENT AND HAVING CONCEDED THE DELETION BEFORE THE APPELLATE ASSISTAN T COMMISSIONER CANNOT BE HELD TO BE AGGRIEVED BY THIS PART OF THE ORDER TO ENABLE IT TO FILE AN APPEAL TO THE TRIBUNAL; THE APPEAL OF THE DEPARTMENT REGARDING TH E DELETION OF THE AMOUNT WAS NEITHER COMPETENT NOR CAPABLE OF BEING ENTERTAINED BY THE TRIBUNAL. 5.1 THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BANTA SINGH KARTAR SINGH VS CIT, 125 ITR 239 OBSERVED: AN ORDER BASED ON AN AGREEMENT CANNOT GIVE RISE TO GRIEVANCES AND THE SAME CANNOT BE AGITATED IN APPEAL. IT WAS HELD: HELD, THAT IT WAS ON THE AGREEMENT OF THE ASSESSEE , WHICH AGREEMENT MENTIONED THE RATE AS WELL AS THE FIGURE, THAT PENALTY HAD BEEN LEVIED. THE ASSESSEE HAD NO RIGHT TO AGITATE THIS QUESTION IN APPEAL. TH E TRIBUNAL WAS RIGHT IN LAW IN NOT GOING INTO THE QUESTION WHETHER THE PENALTY WAS IN LAW THE MINIMUM PENALTY LEVIABLE UNDER S. 271(1) ( C ) OF THE I. T. ACT,1961. ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 5 5.2 THE HONBLE KERALA HIGH COURT IN THE RECENT DEC ISION IN THE CASE OF CIT VS VAMADEVAN BHANU, 330 ITR 559 HELD AS UNDER: ASSESSMENT ASSESSMENT ON AGREED BASIS ASSESSEE CANNOT APPEAL AGAINST SUCH ORDER INCOME TAX ACT, 1961. 6. CONSIDERING THE FACTS IN THE LIGHT OF THE ABOVE DECISIONS, IT IS CLEAR THAT THE ASSESSEE AGREED FOR THE ADDITION BEF ORE THE AO ON ACCOUNT OF UNEXPLAINED GIFTS OF RS.15,00,000/-. THE ASSESSMENT WAS THUS BASED ON AN AGREEMENT WHICH CANNOT GIVE RISE T O ANY GRIEVANCE AND THE SAME CANNOT BE AGITATED IN APPEAL BEFORE TH E LEARNED CIT(A). AN APPEAL TO THE TRIBUNAL COULD ONLY BE TAKEN AGAIN ST A PART OF THE ORDER AGAINST WHICH THE ASSESSEE CAN BE SAID TO BE FEELING AGGRIEVED. WHAT IS VOLUNTARILY ACCEPTED CANNOT GIVE RISE TO A GRIEVANCE WHICH CAN BE TAKEN FURTHER IN APPEAL. CON SIDERING THE FACTS OF THE CASE AS NOTED ABOVE, IT IS CLEAR THAT THE AS SESSEE FAILED TO PROVE IDENTITY OF THE DONORS, THEIR CREDITWORTHINES S AND GENUINENESS OF THE GIFTS BEFORE THE AO. EVEN, ONE OF THE DONORS REFUSED TO ACKNOWLEDGE THE GIFTS AND IN 4 CASES THE GIFT AMOUN TS WERE STATED TO BE GIVEN THROUGH PAY ORDERS AND THE PAY ORDERS WERE FOUND TO BE ISSUED FROM THE BANK ACCOUNT OF STAFF MEMBERS OF TH E ASSESSEE. THE ASSESSEE FAILED TO PROVIDE COMPLETE DETAILS OF THE DONORS AS WELL AS FAILED TO PRODUCE THE DONORS BEFORE THE AO FOR EXAM INATION. THE ENQUIRY CONDUCTED BY THE AO WAS BROUGHT TO THE NOTI CE OF THE ASSESSEE AND THE ASSESSEE AGREED TO THE ADDITION OF RS.15,00,000/- ON ACCOUNT OF UNEXPLAINED GIFTS. THESE FACTS WOULD SHOW THAT THE ASSESSEE FAILED TO PROVE THE CONDITIONS OF SECTION 68 OF THE IT ACT AS ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 6 WELL AS AGREED TO THE ADDITION BEFORE THE AO. THESE FACTS ARE SUFFICIENT TO HOLD THAT THE ASSESSEE HAS NO GRIEVAN CE IN THE MATTER FOR FILING ANY APPEAL. THE LEARNED CIT(A) WAS, THEREFOR E, JUSTIFIED IN HOLDING THAT THE ASSESSEE IS NOT JUSTIFIED IN COMIN G IN APPEAL BEFORE HIM. THUS, THE APPEAL OF THE ASSESSEE IS NOT MAINTA INABLE ON THIS GROUND. THE SAME IS ACCORDINGLY DISMISSED. 7. ON GROUND NO.2, THE ASSESSEE CHALLENGED THE DISA LLOWANCE OF INTEREST OF RS.4,50,550/-. THE AO NOTED THAT THE AS SESSEE HAS DEBITED THE ABOVE AMOUNT IN THE PROFIT & LOSS ACCOU NT ON ACCOUNT OF INTEREST EXPENSES. THE DETAILS OF THE ACCOUNT WAS F ILED WHICH IS NOTED AT PAGE 8 AND 9 OF THE ASSESSMENT ORDER. VIDE ORDER SHEET DATED 20 TH DECEMBER, 2007 THE ASSESSEE WAS DIRECTED TO EXPLAIN /PROVE THE NEXUS AND SHOW CAUSED WHY INTEREST DEBITED SHOULD N OT BE DISALLOWED BECAUSE IT WAS FOUND THAT THE INTEREST H AD BEEN PAID @12% TO 25% TO SARAFI DEPOSITORS WHEREAS INTEREST H AS BEEN CHARGED @2% TO 12% ON THE LOANS AND ADVANCES. THE R EPLY OF THE ASSESSEE WAS CALLED FOR ON OR BEFORE 27 TH DECEMBER, 2007 AT 11 AM. THE AO NOTED THAT NEITHER THE ASSESSEES REPRESENTA TIVE ATTENDED THE PROCEEDINGS NOR SUBMITTED ANY DETAILS IN THIS REGAR D. THE AO, THEREFORE, NOTED THAT THE ASSESSEE HAS PAID EXCESSI VE INTEREST TO THE DEPOSITORS INCLUDING RELATED PERSONS COVERED U/S 40 A (2) (B) OF THE IT ACT AND ACCORDINGLY DISALLOWED THE INTEREST. THE L EARNED CIT(A) ON THE SAME REASONS CONFIRMED THE ADDITION. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO THE STATEMENT OF FACTS FILED BEFORE THE LEARNED CIT(A) IN WHICH I T WAS EXPLAINED THAT ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 7 THE AO HAS FAILED TO CONSIDER THE ASSESSEES SUBMIS SION DATED 27 TH DECEMBER, 2007 ON THIS ISSUE. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED DETAILED REPLY ON 27 TH DECEMBER, 2007 BUT IT WAS NOT CONSIDERED BY THE AO AS WELL AS BY THE LEARNED CIT(A). ON THE OTHER HAND, THE LEARNED DR RELIED UP ON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MARITAL AVAILABLE ON RECORD. THE AO HAS SPECIFICALL Y NOTED ON VERIFICATION OF THE INTEREST ACCOUNT THAT EXCESSIVE INTEREST IS PAID WHEREAS LOWER INTEREST HAS BEEN CHARGED. IT WAS ALS O FOUND THAT EXCESSIVE INTEREST HAVE BEEN PAID TO THE DEPOSITORS INCLUDING RELATED PERSONS COVERED U/S 40A (2) (B) OF THE IT ACT. THUS , EXPLANATION OF THE ASSESSEE WAS CALLED FOR AND THE ASSESSEE WAS DI RECTED TO SUBMIT REPLY ON OR BEFORE 27 TH DECEMBER, 2007. BUT THE ASSESSEE DID NOT FILE THE REPLY ON THAT DATE. THE LEARNED COUNSEL FOR THE ASSESSEE HOWEVER, SUBMITTED A COPY OF THE REPLY DATED 27 TH DECEMBER, 2007 WHICH WAS FILED IN THE OFFICE OF THE AO ON 28 TH DECEMBER, 2007 IN WHICH THE MATTER IS EXPLAINED. THOUGH, THIS REPLY D ATED 27 TH DECEMBER, 2007 WAS FILED ON THE NEXT DATE, THE LEAR NED CIT(A) SHOULD HAVE CONSIDERED THIS REPLY. EVEN, THE AO COU LD HAVE CONSIDERED THIS REPLY BECAUSE THE ASSESSMENT ORDER WAS PASSED ON 28 TH DECEMBER, 2007. SINCE THE REPLY OF THE ASSESSEE IS NOT CONSIDERED, THEREFORE, THE MATTER REQUIRES RECONSID ERATION AT THE LEVEL OF THE AO. WE ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO RE- DECIDE THE ISSUE IN THE LIGHT OF THE REPLY OF THE A SSESSEE DATED 27 TH ITA NO.373AHD/2009 SHRI RAMESHCHANDRA VADILAL SHAH VS ITO, W 2(2), AHM EDABAD 8 DECEMBER, 2007 (FILED ON 28 TH DECEMBER, 2007) BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. IN THE RESULT, GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4-02-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 4-02-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD