The Jt. CIT, Kolhapur V. Shri Balasaheb Ganpati Dongale, Kolhapur

ITA 382/PUN/2006

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3078 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 12-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Opportunity of being heard; Principle of natural justice; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 382 PN/06 [BLOCK ASSTT. YEARS 1996-97 TO 2002-03 (PART PERIO D)] THE JT. C.I.T (CENTRAL) CIRCLE, KOLHAPUR .... APPELLANT VS. SHRI BALASAHEB GANPATI DONGALE, C/O HOTEL AMBASSADOR, 498/E WARD., SHAHUPURI, DIST. KOLHAPUR PAN NO. ADDPD1132G . RESPONDENT ITA NO. 322/PN/06 [BLOCK ASSTT. YEARS 1996-97 TO 2002-03 (PART PERIO D)] SHRI BALASAHEB GANPATI DONGALE, C/O HOTEL AMBASSADOR, 498/E WARD., SHAHUPURI, DIST. KOLHAPUR PAN NO. ADDPD1132G .... APPELLANT VS. ACIT, CENTRAL CIRCLE, KOLHAPUR . RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK DEPARTMENT BY : SHRI HARESHWAR SHARMA, CIT DR ORDER PER D. KARUNAKARA RAO AM THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AN D THE REVENUE AGAINST THE ORDER OF CIT(A), KOLHAPUR DATED 29/12/2 005 FOR BLOCK ASSESSMENT YEARS 1996-97 TO 2002-03 (PART PERIOD). APPEAL WISE AD JUDICATION IS TAKEN UP IN THE PRECEDING PARAGRAPHS. TA NO. 382 & 322/PN/06 BLOCK ASSTT. YEARS 196-97 TO 2002-03 (PART PERIOD) PAGE 2 OF 6 ITA NO. 322/PN/06 2. AT THE VERY OUTSET, LD. COUNSEL FOR THE ASSESSEE B ROUGHT OUT ATTENTION THE GROUNDS OF APPEAL OF THE ASSESSEE RAISED IN ITA NO. 3 22/PN/06 AND STATED THAT GROUNDS 1 AND 5 ARE NOT PRESSED. AFTER CONSIDERING THE SAID SUBMISSIO NS, THE SAME ARE DISMISSED AS NOT PRESSED . FURTHER, REFERRING TO THE GROUND NO. 2, LD. COUNSEL MENTIONED THAT THE SAME HAS TO BE ACTUALLY DECIDED IN FAVOUR OF THE REVENUE. ON HEARING THE COUNSEL AND WITHOUT GOING IN TO THE MERITS OF THE GROUND, THE SAID GROUND 2 IS DECIDED IN FAVOUR OF THE REVENUE. ACCORDINGLY, GROUND NO. 2 IS DISMISSED. 3. REFERRING TO GROUND NO. 3 AND 4 , LD. COUNSEL MENTIONED THAT THIS ISSUE HAS TO BE SET ASIDE TO THE FILES OF THE A.O IN LINE WITH THE DIRECTION GIVEN IN THE TRIBUNAL IN THE RELATED CASE OF VIJAYSINH GANPATRAO DO NGALE VIDE ITA NO. 318/PN/06 ORDER DATED 30-04-2009. FURTHER, THE COUNSEL MENTIONED THAT PARA 11 AND 12 OF THE SAID ORDER OF THE TRIBUNAL IS RELEVANT . WE HAVE PERUSED THE SAID PARAS WHICH ARE REPRODUCE AS UNDER FOR READY REFERENCE. 11. GROUND NO. 8 READS AS FOLLOWS: ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) WAS WRONG IN HOLDING THAT SALARY AND INTEREST FROM FIRM M/S. HOTEL AMBASSADOR IS UNDISCLOSED INCOME WHEN FIRM HAD FILED THE R EGULAR RETURNS OF INCOME FOR A.Y 1996-97 TO 2001-02 BEFORE THE DATE OF SEARCH AND IN PARTNERS CAPITAL ACCOUNT THE SALARY AND INTERES T WAS SHOWN. THE APPELLANT HAS UNDER MISCONCEPTION OF LAW INCLUDED THE SAID INCOME IN COMPUTATION OF UNDISCLOSED INCOME IN THE BLOCK RETURN. 12. THE ONLY ISSUE IS THAT SINCE THE ASSESSEE IS A PARTNER IN THE FIRM M/S. HOTEL AMBASSADOR AND RECEIVING SALARY AND INTEREST FROM THE SAID FIRM, THEREFORE, MERELY BY NOT FILING THE RETURN THE SAI D IMPUGNED INCOME WOULD BECOME UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT THE INCOME WAS DULY DISCLOSED IN THE CASE OF HOTEL AMBASSADOR BY FILING THE RETURN PRIOR TO THE D ATE OF SEARCH. RELIANCE WAS PLACED ON THE DECISION BOMBAY HIGH COU RT IN THE CASE OF SHAMLAL GURBANI (249 ITR 501). CONSIDERING THE TOTALI TY OF THE CIRCUMSTANCES UNDER WHICH THE IMPUGNED INCOME WAS UNE ARTHED BY THE REVENUE DEPARTMENT, THE ONLY OPTION LEFT FOR US IS TO REMIT BACK THE ISSUE TO THE FIE OF THE A.O TO EXAMINE THE WAY AND THE MANNER IN WHICH THE SALARY AND THE INTEREST WAS DISCLOSED IN THE BOOKS OF M/S. HOTEL AMBASSADOR . THE A.O IS EXPECTED TO RESTRICT HIS INVESTIGATION TO ASCERTAIN WHETHER THE SALARY AND INTE REST WAS NOT OF THE INCOME TAX RECORDS OF THE FIRM M/S. HOTEL AMBASSADOR AN D IF FOUND CORRECT THEN THE SAID INCOME EARNED AS SALARY AND INTEREST FROM THE FIRM CANNOT BE HELD AS UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. WE HAVE TAKEN THIS VIEW FOLLOWING THE HONBLE HIGH COURT DEC ISION IN THE CASE OF SHAMLAL GURBANI (SUPRA). THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. TA NO. 382 & 322/PN/06 BLOCK ASSTT. YEARS 196-97 TO 2002-03 (PART PERIOD) PAGE 3 OF 6 WE HAVE CONSIDERED THE CLOSE ANALOGY OF THE FACTS OF THE INSTANT CASE AND FIND NO REASON TO DEVIATE FROM THE DIRECTION TAKEN BY THE T RIBUNAL IN THE CASE OF VIJAYSINH GANPATRAO DONGALE (SUPRA). ACCORDINGLY, THE GROUND 3 AND 4 ARE SET ASIDE . 5. REGARDING GROUND NO. 6 , LD. COUNSEL FAIRLY MENTIONED THAT THE SAID ISSUE IS ALSO ADJUDICATED BY THE SAID ORDER OF THE TRIBUNAL VIDE PARA 15 AND 16 OF THE ORDER DATED 30-04-2009 PARA 16 READS AS UNDER:- ON HEARING THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE DO NOT FIND ANY INFIRMITY IN THE ORDE RS OF THE AUTHORITIES BELOW. HENCE WE DISMISS THIS GROUND. WE HAVE CONSIDERED THE CLOSE ANALOGY OF THE FACTS OF THE INSTANT CASE AND FIND NO REASON TO DEVIATE FROM THE DIRECTION TAKEN BY THE T RIBUNAL IN THE CASE OF VIJAYSINH GANPATRAO DONGALE (SUPRA). ACCORDINGLY, THE GROUND 6 IS DISMISSED. 6. REGARDING GROUND NO. 7 , LD. COUNSEL MENTIONED THAT REVENUE AUTHORITIES DID NOT APPRECIATE THE FACTS OF THIS ISSUE AND THEREF ORE, THIS ISSUE IS REQUIRED TO BE SET ASIDE TO THE FILES OF THE A.O FOR ADJUDICATIN G THE ISSUE AFRESH. FURTHER, LD. COUNSEL ELABORATED BY STATING THAT THE ASSESSEE RECE IVED MEETING FEES OR ALLOWANCES IN THE TWO YEARS AS MENTIONED IN THE GROUND AND THERE FORE ADDING THIS INCOME FOR OTHER TWO YEARS SHOULD NOT ARISE AND THEREFORE DISALLOWANCE OF 50% OF MEETING FEE AND ALLOWANCE SHOULD NOT ARISE TO THESE YEARS. BOTH THE PARTIES ARE CONCURRED TO THE PROPOSAL TO SET ASIDE THIS GROUND TO THE FILES OF THE A.O FOR AFRESH ADJUDICATION AND DECISION BY THE A.O, WHO SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEARD AS PER THE ESTABLISHED PRIN CIPLES OF NATURAL JUSTICE. ACCORDINGLY, GROUND NO. 7 IS SET ASIDE. 7. REGARDING GROUND NO. 8 LD. COUNSEL FAIRLY MENTIONED THAT THIS ISSUE IS DECIDED IN FAVOR OF THE REVENUE BY THE JURISDICTIONAL COURT IN THE CASE OF SURESH N. GUPTA IN [2008] 297 ITR 322 (SC). CONSIDERING DE CIDED NATURE OF THIS ISSUE AT THE LEVEL OF THE APEX COURT OF THIS COUNTRY, WE FI ND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A) IN THIS REGARD. ACCORDINGLY, GRO UND NO. 8 OF THE APPEAL IS DISMISSED. 8. FURTHER LD. COUNSEL BROUGHT OUR ATTENTION TO THE ADDITIONAL GROUND RAISED BY THE ASSESSEE BY STATING THAT THE INCOME UP TO BASIC EXEMPTION LIMIT SHOULD NOT BE CONSIDERED AS UNDISCLOSED INCOME FOR EA CH ASSESSMENT YEAR FOR TA NO. 382 & 322/PN/06 BLOCK ASSTT. YEARS 196-97 TO 2002-03 (PART PERIOD) PAGE 4 OF 6 COMPUTING THE TOTAL INCOME OF BLOCK PERIOD. IN THIS REGARD LD. COUNSEL MENTIONED THAT THIS ISSUE WAS DECIDED BY THE PUNE BENCH TRIBUN AL IN THE CASE OF VIJAYSINH GANPATI DONGALE (SUPRA) AND BROUGHT OUR ATTENTION TO PARA 19. WE HAVE REFERRED TO SAID PARA 19 AND SAME IS REPRODUCED AS FOLLOWS:- 19. IN THIS APPEAL, AN ADDITIONAL GROUND HAS ALSO BEEN RAISED FOR THE PROPOSITION THAT THE INCOME UPTO THE BASIC EXEMPTIO N LIMIT SHOULD NOT BE CONSIDERED AS UNDISCLOSED INCOME FOR THE PURPOSE OF BLOCK ASSESSMENT. IN SUPPORT, A DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHAIN SUKH RATHI VS. CIT (2004) 278 ITR 368 AND ALSO A DE CISION OF RESPECTED CO-ORDINATE BENCH REPORTED IN 96 TTJ 362 HAVE BEEN CITED. SINCE THE HONBLE HIGH COURT HAS TAKEN A VIEW, THEREFORE, THE ISSUE IS NOT SET AT REST AND TO BE FOLLOWED BY THE LOWER AUTHORITIES. WE, TH EREFORE, DIRECT THE A.O TO RE-COMPUTE THE UNDISCLOSED INCOME IN LINE WITH T HE VERDICT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CHAIN SUKH RATH I (SUPRA). THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. CONSIDERING THE SETTLED NATURE OF THE ISSUE, WE ARE OF THE OPINION THAT THE ISSUE RAISED IN THE ADDITIONAL GROUND MUST BE ADMITTED AND ADJUDICATED IN THE LINES MENTIONED IN PARA 19 OF THE SAID ORDER OF THE TRIBUNAL . THIS GROUND IS TREATED AS ALLOWED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 382/PN/06 10. THE ISSUES RAISED IN THIS APPEAL ARE:- 1) THE NET PROFIT DECLARED FOR THE A.Y 1998-99, 199 9-00 AND 2000-01 IN THE P & L ACCOUNT SHOULD BE UNALTERED. 2) ESTIMATION OF TURNOVER OF RS. 2 LAKHS EACH FOR A .Y 1996-97, 1997- 98, 1998-99 AND 2002-03 AND FURTHER DIRECTION TO ES TIMATE THE NET PROFIT AT THE RATE OF 9% OF THE TURNOVER. AS AGAINS T 20% ADOPTED BY THE A.O. 11. DURING THE PROCEEDINGS IT IS MENTIONED THAT THE TURNOVER AND NET PROFITS EARNED OUT OF BOREWELL BUSINESS IS A BONE OF CONTENTI ON BEFORE THE TRIBUNAL. THE DETAILS OF THE SAME ARE NARRATED IN PARA 17 TO 19 OF T HE IMPUGNED ORDER, FOR THE SAKE OF COMPLETENESS THE SAID PARAS ARE REPRODUCED AS UNDER:- 17. IT IS MENTIONED IN THE ORDER THAT THE APPELLANT ESTIMATED IN THE STATEMENT THAT HE HAD NOT MAINTAINED ANY BOOKS OF A CCOUNT FOR THE BOREWELL BUSINESS. INCOME HAD BEEN DECLARED ON THE BA SIS OF TDS CERTIFICATES ISSUED BY GOVERNMENT DEPARTMENTS. THIS DI D NOT INCLUDE PRIVATE BOREWELL WORK DONE. THE CASH RECEIVED FROM PRIVAT E WORK WAS ESTIMATED AT RS. 1.5 LAKH TO RS. 2 LAKHS. THE ACCOU NT OF THE APPELLANT AT RATNAKAR BANK INDICATED CASH DEPOSITS AS UNDER: TA NO. 382 & 322/PN/06 BLOCK ASSTT. YEARS 196-97 TO 2002-03 (PART PERIOD) PAGE 5 OF 6 A.Y. AMOUNT 1996-97 RS. 1,50,000/- 1997-98 RS. 2,39,000/- THE ASSESSING OFFICER ESTIMATED THE INCOME FROM THE BOREWELL BUSINESS AS UNDER: A.Y AMOUNT 1998-99 RS. 2,50,000/- 1999-00 RS. 2,50,000/- 2000-01 RS. 2,50,000/- 2001-02 RS. 2,50,000/- 2002-03 RS. 2,00,000/- (09 MONTHS) 18. THE APPELLANT SUBMITTED THAT THE PROFIT AND LOSS ACCOUNT, FOR ASSESSMENT YEARS 1997-98, 1998-99 AND 1999-00, PREPA RED FOR SUBMISSION TO THE BANK, OF THE BOREWELL BUSINESS, WA S FOUND DURING THE SURVEY AT M/S. HOTEL AMBASSADOR. IN THE RETURN FOR ASSES SMENT YEARS 1996-97 TO 1998-99 THE INCOME FROM BOREWELL BUSINESS HAD BEEN DECLARED AS UNDER: ASSTT. YEAR GROSS RECEIPTS INCOME 1996-97 RS. 1,22,500/- RS. 9,800/- 1997-98 RS. 2,46,991/- RS. 19,610/- 1998-99 RS. 2,80,784/- RS. 21,60/- THE INCOME FROM BOREWELL BUSINESS WAS SHOWN IN THE RET URN FILED BEFORE THE DATE OF SEARCH. THE APPELLANTS STATEMENT WAS REC ORDED ON 09/08/02. HE STATED THAT THE RECEIPTS FROM PRIVATE WORK WAS IN T HE RANGE OF RS. 1.5 LAKH TO RS. 2 LAKHS PER YEAR. HE ALSO STATED THAT THE PROFIT AND LOSS ACCOUNTS AND BALANCE SHEETS INCLUDED RECEIPTS, BOTH FROM THE GOVERNMENT AND PRIVATE WORK. THE ASSESSING OFFICE HAS WRONGLY CON SIDERED THE GROSS RECEIPTS FROM PRIVATE WORK AS NET INCOME FROM PRIVATE WO RK. THE INCOME SHOWN IN THE PROFIT AND LOSS ACCOUNT ARE AS FOLLOWS:- ASSTT. YEAR GROSS RECEIPTS NET PROFIT 1998-99 RS. 7,65,500/- RS. 66,025/- 1999-00 RS. 8,72,625/- RS. 76,425/- 2000-01 RS. 10,22,250/- RS. 80,651/- THE ASSESSING OFFICER HAS ESTIMATED THE INCOME AT 20 % ALTHOUGH IN THE DOCUMENTS, INCOME IS SHOWN AT AROUND 9% THE INCOME F ROM BOREWELL BUSINESS SHOULD BE COMPUTED AS PER THE PROFIT AND LOS S ACCOUNT FOUND DURING THE SEARCH. THE INCOME FOR ASSESSMENT YEARS 1996 -97 AND 1997-98 SHOULD BE TREATED AS ALREADY DECLARED. 19. I HAVE CONSIDERED THE SUBMISSIONS. THE APPELLANT HAS STATED CLEARLY IN THE STATEMENT THAT THE INCOME-TAX RETURN IS FILED ON THE BASIS OF TDS CERTIFICATES ONLY. BESIDES, PRIVATE WORK IS ALSO DONE. THE AVERAGE RECEIPTS FROM PRIVATE WORK WOULD BE RS. 1.5 LAKHS TO RS. 2 LAKH S PER YEAR. HE HAS FURTHER STATED THAT THE AMOUNT DEPOSITED IN THE RATNA KAR BANK ACCOUNT WAS CASH RECEIVED FROM PRIVATE WORK OF DIGGING OF BOREWE LL. AT ANOTHER POINT, IN ANSWER TO QUESTION NUMBER 7, HE HAS FURTHER S TATED THAT THE GOVERNMENT WORK RECEIPTS ARE ABOUT RS. 5 LAKHS AND INCLU DING PRIVATE WORK THE TOTAL RECEIPTS WOULD BE ROUGHLY RS 7 LAKHS. IT IS QUITE CLEAR THAT IN THE STATEMENT THE APPELLANT HAS REFERRED TO RS. 1.5 LAKHS TO RS. 2 LAKHS AS THE GROSS RECEIPTS FOR PRIVATE WORK AND NOT THE NET INCOME A S ADOPTED BY THE TA NO. 382 & 322/PN/06 BLOCK ASSTT. YEARS 196-97 TO 2002-03 (PART PERIOD) PAGE 6 OF 6 ASSESSING OFFICER. THE ASSESSING OFFICER HAS SHOWN TH E ABOVE AS ESTIMATED CASH RECEIPTS OF VARSHA BOREWELLS AT RS. 16,80,000/- F OR THE BLOCK PERIOD, TAKING AN AVERAGE OF RS. 2.5 LAKHS PER YEAR. THE PROFIT AND LOSS ACCOUNTS ALSO FALL IN LINE WITH THE STATEMENT GIVEN BY THE A PPELLANT. THE MONEY RECEIPTS SHOWN IN THE PROFIT AND LOSS ACCOUNT ARE BETW EEN RS. 7.65 LAKHS TO RS. 10.22 LAKHS DURING THE PERIOD 1998-99 T0 2000- 01. THUS, IT APPEARS THAT THE PROFIT AND LOSS ACCOUNTS FOUND DURING SURVEY INDICATE THE ACTUAL RECEIPTS FOR THE BOREWELL BUSINESS, BOTH PRIVATE AND GO VERNMENT. THE PROFIT DECLARED IN THE PROFIT AND LOSS ACCOUNTS SHOULD ALSO BE TREATED AS THE NET PROFIT FROM THE BUSINESS. IN THE EARLIER THREE YEARS I.E. 1996-97, 1997-98, THE TURNOVER OF THE BOREWELL BUSINESS SHOULD BE TAKEN AT RS. 2 LAKHS EACH FOR EACH YEAR AND THE PROFIT SHOULD BE FOLL OWED FOR ESTIMATING THE INCOME FROM BOREWELL BUSINESS FOR THE PAST YEAR 200 2-03. 12. FROM THE ABOVE, IT IS EVIDENT FOR THE YEARS WHERE A SSESSEE FILED THE RETURN OF INCOME DISCLOSING BOREWELL BUSINESS, CIT(A) DID N OT DISTURB THE TURNOVER REFERRED IN THE BOOKS. WHEREAS FOR THE OTHER YEARS TO WHIC H THE ASSESSEE HAS NOT FILED THE RETURNS THE ASSESSMENT WAS MADE AT THE RATE OF 2 LAKHS PER EACH YEAR AND THE PROFITS WERE DETERMINED APPLYING THE RATE OF 9% . WE FIND THE A.O HAS ESTIMATED THE SAID PROFIT APPLYING 20% OF THE TURNOVE R. IN OUR OPINION, THE A.OS DECISION IS IMPROPER AND THE ORDER OF THE CIT(A) IS FAI R AND REASONABLE AND THEREFORE, WE FIND NO REASON TO INTERFERE IN THE CIT(A). ACCORDINGLY, GROUNDS RAISED IN THE APPEAL ARE DISMISSED . 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 08 TH DECEMBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 08 TH DECEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. JT. CIT (OSD) (CENTRAL) CIRCLE, KOLHAPUR & ACIT, CENTRAL CIRCLE, KOLHAPUR 2. ASSESSEE 3. CIT(A), KOLHAPUR 4. CIT-I, KOLHAPUR 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE