Shri Sompal Singh, Muzaffarnagar V. ACIT, Muzaffarnagar

ITA 4163/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77788 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 16-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHALINI VERMA
• Keywords: Business expenditure; Revised return
• Section: 80C; 139(5); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI C.M. GARG : JUDICIAL MEMBER ITA NO. 4163/DEL/2011 & 5997/DEL/2012 ASSTT. YR: 2005-06 SOMPAL SINGH, VS. INCOME-TAX OFFICER, VILL. & POST KURMALI, WARD-1(1), MUZAFFARNAGAR. THE. KAIRANA, DISTT. MUZAFFARNAGAR PAN: ATQPS 0353 K ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI ANKIT GUPTA ADV. RESPONDENT BY : SMT. SHALINI VERMA SR. DR DATE OF HEARING : 09-07-2014 DATE OF ORDER : 18-07-2014. O R D E R ITA NO. 4163/DEL/2011 IS DIRECTED AGAINST CIT(A)S ORDER DATED 20-7- 2011 IN QUANTUM; AND ITA NO. 5997/DEL/2012 IS DIREC TED AGAINST CIT(A)S ORDER DATED 22-8-2012, SUSTAINING THE PENALTY OF RS . 9,700/- LEVIED U/S 271(1)(C) OF THE ACT RELATING TO A.Y. 2005-06. BOTH THE APPEALS ARE HEARD TOGETHER AND DISPOSED OF BY THIS CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP QUANTUM APPEAL BEING ITA NO. 41 63/DEL/2011. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD FI LED HIS RETURN OF INCOME ON 4-1-2006 DECLARING INCOME OF RS. 2,30,840/- AND AGRICULTURAL INCOME OF 2 RS. 1,70,000/-. THE RETURN WAS PROCESSED U/S 143(1) ON THE RETURNED INCOME. SUBSEQUENTLY, ASSESSMENT PROCEEDINGS WERE INITIATED AND IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED THE REV ISED RETURN ON 5-9-2007 DECLARING INCOME OF RS. 1,58,900/-. THE REVISED RET URN WAS FILED BECAUSE IN THE ORIGINAL RETURN DEDUCTION FOR INTEREST PAID TO THE BANK AT RS. 71,940/- COULD NOT BE CLAIMED. VIDE LETTER DATED 26-9-2007, ASSESSEE SUBMITTED THAT HE HAD MADE INVESTMENT OF RS. 40,000/- IN NSCS DURI NG THE YEAR. THE AO ACCEPTED THE REVISED RETURN AND DETERMINED THEE TOT AL INCOME AT RS. 1,58,900/-. 3.1. LD. CIT, MUZAFFARNAGAR VIDE ORDER DATED 4-12-2 009CANCELLED THE ASSESSMENT ORDER, INTER ALIA, OBSERVING THAT SINCE ASSESSEE HAD FILED THE ORIGINAL RETURN ON 4-1-2006 AS AGAINST DUE DATE OF 1-8-2005, THE SECOND RETURN COULD NOT BE TREATED AS REVISED RETURN IN VI EW OF PROVISIONS OF SECTION 139(5). THE AO DETERMINED THE TOTAL INCOME AT RS. 3,25,430/- AS UNDER: GROSS TOTAL INCOME INCLUDING AGRICULTURAL INCOME AS PER CAPITAL A/C CUM BALANCE SHEET FURNISHED BY THE ASSESSEE. 732585 LESS: OUTGOING DURING THE YEAR (I) CLAIM U/S 80C IN THE ORIGINAL RETURN RS. 16031/ - (II) BANK INTEREST & CHARGES RS. 71940/- (III) NSC PURCHASED RS. 40000/- (IV) HOUSE HOLD EXPENSES ADMITTED RS. 60000/- (V) LOSS IN SHARE TRADING RS. 12590/- TOTAL RS. 200561/- RS. 200561 ACTUAL CAPITAL ACCRETION DURING THE YEAR. RS. 53 2024/- CAPITAL ACCRETION SHOWN BY THE ASSESSEE (1097753-16 94367) RS. 596614/- DIFFERENCE RS. 64590/- INCOME DECLARED IN ORIGINAL RETURN RS. 2,30,84 0/- INCOME UNDER THE HEAD OTHER SOURCES AS HELD IN THE ORIGINAL ASSESSMENT ORDER RS. 30,000/- 3 UNEXPLAINED ACCRETION IN THE CAPITAL AS HELD ABOVE RS. 64,590/- RS. 3,25,430/- 3.2. LD. CIT(A) CONFIRMED THE AO'S ACTION FOR THE F OLLOWING REASONS: (I) RETURN FILED U/S 139(5) OF THE ACT WAS NON EST IN T HE EYES OF LAW AS THE ORIGINAL RETURN FILED WAS BELATED. (II) THE INTEREST PAID TO BANK AT RS. 71,940/- WAS CLAIM ED IN THE REVISED RETURN AND, THEREFORE, HE WAS JUSTIFIED IN DISALLO WING THE ASSESSEES CLAIM. (III) THE ADDITION OF RS. 64,590/- BEING UNEXPLAINED ACCR ETION IN CAPITAL CALLED FOR NO INTERFERENCE BECAUSE ASSESSEE HAD NOT BEEN ABLE TO POINT OUT ANY MISTAKE IN THE WORKING OF THE SAME. (IV) THE ASSESSEE HAD CLAIMED INVESTMENT IN NSCS AT RS. 40,000/- AND CONSEQUENT DEDUCTION U/S 88 IN THE REVISED RETURN O F INCOME FILED U/S 139(5), WHICH WAS AN INVALID RETURN. 3.3. AS REGARDS THE ADDITION OF RS. 12,000/- BEING ESTIMATION OF HOUSE-HOLD EXPENSES, THE LD. CIT(A) DID NOT ACCEPT THE ASSESSE ES CONTENTION THAT IT WAS ON ACCOUNT OF CLERICAL MISTAKE IN THE FIGURE OF WIT HDRAWAL. 3.4. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSESSEE HAS TAKEN FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY ASSESSING OFFICER U/S 143(3)/ 263 ARE ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTIO N. 2. THE CIT(A) HAS, IN VIEW OF THE FACTS & CIRCUMSTA NCES OF THE CASE, ERRED IN LAW AND ON FACTS IN NOT ACCEPTIN G THE REVISED RETURN DATED 05-09-2007, WHICH HAS BEEN ACCEPTED IN ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3). 4 3. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE DEDUCTION OF INTEREST PAID TO THE BANK AT RS. 7 1,940/-. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE IN SUSTAINING THE ADDITIO N OF RS. 64,590/- ON ACCOUNT OF UNEXPLAINED CAPITAL ACCRETIO N. THE ADDITION AND CALCULATION OF ACCRETION OF CAPITAL IS TOTALLY ON SUMMARIES AND CONJECTURES. 5. THE CIT(A) HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE IN SUSTAINING THE DISALLOWANCE OF DEDUCTION U/ S 88C OF RS. 40,000/- FOR THE INVESTMENT IN PURCHASE OF NSC MERE LY THE REVISED RETURN FILED U/S 139(5) OF THE ACT. THE CIT(A) HAS ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE IN SUSTAINING THE ADDITION OF RS. 12,000/- ON ACCOUNT OF HOUSEHOLD EXPENSES. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. AS FAR AS GROUND NO . 2, REGARDING VALIDITY OF REVISED RETURN, IS CONCERNED, WE DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) BECAUSE ADMITTEDLY THE ORIGINAL RETURN WAS BELATED RETURN WHICH COULD NOT BE REVISED IN VIEW OF THE PROVISIO NS OF SEC. 139(5) AS INTERPRETED BY HONBLE SUPREME COURT IN THE CASE OF KUMAR JAGDISH SINHA VS. CIT 220 ITR 67. LD. CIT(A) HAS GIVEN DETAILED R EASONING ON THIS COUNT AND WE ARE IN FULL AGREEMENT WITH THE SAME. ACCORDI NGLY, GROUND NO. 2 IS DISMISSED. 5. AS FAR AS GROUND NO. 3, REGARDING DEDUCTION OF I NTEREST PAID TO THE BANK AT RS. 71,940/- IS CONCERNED, IT WAS CONTENDED BY ASSESSEE THAT HE HAD OBTAINED TERM LOAN AND OVER-DRAFT LIMIT IN HIS INDI VIDUAL CREDIT LIMIT A/C NO. CD 100415 AT RS. 4,20,000/- FROM BANK OF INDIA AND TERM LOAN A/C NO. TLN 309 AT RS. 8,20,000/- WITH BANK OF INDIA AGAINST T HE PROPERTY IN THE NAME OF 5 SMT. PREM BALA SITUATED AT 842 CIVIL LINES, SOUTH, MUZAFFARNAGAR TIME TO TIME AND WHEN REQUIRED AMOUNT HAD BEEN DEPOSITED WI TH THE FIRM AS HIS CAPITAL THROUGH A/C PAYEE CHEQUES. PURPOSE OF TERM LOAN AND OVER DRAFT WAS STATED TO BE INVESTMENT OF FUNDS IN THE BUSINESS. T HUS, THE CLAIM IS THAT THIS BEING BUSINESS EXPENDITURE, WAS TO BE ALLOWED. 5.1. LD. COUNSEL RELIED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAM GLOBAL SECURITIES LTD. (ITA NO. 214/2013 DATED 2-9- 2013) AND POINTED OUT THAT IN THIS CASE THE ASSESSE E HAD NOT FILED ANY REVISED RETURN BUT CLAIM WAS MADE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS BY FILING A REVISED COMPUTATION OF INCOME, WHICH WAS R EJECTED BY ASSESSING OFFICER AS WELL AS CIT(A). HOWEVER, HONBLE DELHI H IGH COURT RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. MR. P. FIRM 56 ITR 67 AND DISTINGUISHING THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323, BE ING RENDERED WITH REFERENCE TO THE POWERS OF ASSESSING OFFICER AND D ID NOT IMPINGE ON THE POWER OF THE TRIBUNAL, UPHELD THE TRIBUNALS DECISI ON IN RESTORING THE MATTER TO THE FILE OF ASSESSING OFFICER BY ENTERTAINING TH E NEW GROUND RAISED BY THE ASSESSEE. 5.2. LD. COUNSEL FURTHER POINTED OUT THAT SLP FILED AGAINST THE DECISION OF HONBLE DELHI HIGH COURT HAS BEEN DISMISSED BY HON BLE SUPREME COURT ON 4-4-2014. 5.3. WE FIND THAT HONBLE DELHI HIGH COURT HAS, INT ER ALIA, TAKEN NOTE OF THE DECISION IN THE CASE OF CIT VS. NATRAJ STATIONE RY PRODUCTS (P) LTD. 312 ITR 22. THEREFORE, THOUGH TECHNICALLY THE ASSESSEE MAY NOT BE ENTITLED TO 6 DEDUCTION ON THE BASIS OF REVISED RETURN BUT THE AS SESSEES RIGHT TO ADVANCE FRESH LEGAL CLAIM BEFORE ITAT CANNOT BE CURTAILED B Y ADOPTING A PEDANTIC APPROACH. THE HONBLE DELHI HIGH COURT HAS TAKEN NO TE OF THE FACT THAT ASSESSMENT PROCEEDINGS ARE NOT ADVERSARIAL IN NATU RE. THE PLEA HAD BEEN TAKEN BEFORE THE ASSESSING OFFICER BUT BOTH THE LOW ER REVENUE AUTHORITIES DISALLOWED THE ASSESSEE CLAIM SOLITARY ON THE TECHN ICAL GROUND WITHOUT EXAMINING THE SAME. THE ASSESSEES CLAIM WAS AKIN T O REVISED COMPUTATION OF INCOME AND NOT ALTOGETHER A NEW CLAIM. UNDER SUC H CIRCUMSTANCES, IN ORDER TO ADVANCE THE CAUSE OF JUSTICE, WE RESTORE T HE MATTER TO THE FILE OF ASSESSING OFFICER TO REEXAMINE THE ASSESSEES CLAIM REGARDING OBTAINING OF LOAN FROM BANK FOR BUSINESS PURPOSES. IF THE FUNDS OBTAINED FROM THE BANK WERE DULY UTILIZED BY ASSESSEE FOR BUSINESS PURPOSE S, THEN INTEREST CANNOT BE DISALLOWED. HOWEVER, THIS WILL BE SUBJECT TO VERIFI CATION AND INVESTIGATION. 6. GROUND NOS. 4,5 & 6 HAVE THREE LIMBS (I) ADDITION OF RS. 12,590/- ON ACCOUNT OF LOSS IN SHAR E TRADING; (II) ADDITION OF RS. 40,000/- ON ACCOUNT OF NSC PURCHASE D; AND (III) ADDITION OF RS. 12,000/- ON ACCOUNT OF HOUSE-HOLD E XPENSES. 6.1. AS FAR AS GROUND NO. 5 IS CONCERNED, THAT HAS ONE MORE ISSUE REGARDING DISALLOWANCE OF DEDUCTION U/S 88C ON ACCOUNT OF REV ISED RETURN BEING TREATED AS NON-EST IN WHICH THE CLAIM WAS ADVANCED FOR THE FIRST TIME. AS FAR AS THIS ASPECT IS CONCERNED, FOLLOWING THE REASONING GIVEN IN REGARD TO THE INTEREST PAID TO BANK, WE RESTORE THIS MATTER TO THE FILE OF ASSESSING OFFICER FOR VERIFICATION AND INVESTIGATION. 7. NOW WE TAKE UP THE ADDITION OF RS. 64,590/- ON A CCOUNT OF UNEXPLAINED CAPITAL ACCRETION. 7 7.1. AS FAR AS ADDITION OF RS. 12,590/- LOSS IN SHA RE TRADING IS CONCERNED, WE FIND SUBSTANCE IN THE PLEA ADVANCED BY LD. COUNS EL FOR THE ASSESSEE BECAUSE EVEN IF THIS LOSS WAS ACCOUNTED FOR IN THE CAPITAL ACCOUNT/ BALANCE- SHEET AT BEST IT WOULD HAVE EFFECT ON THE CASH IN H AND WHICH WAS RS. 1,16,411.13, SUFFICIENT TO COVER THIS AMOUNT. THERE FORE, THIS CANNOT BE TREATED AS UNEXPLAINED ACCRETION TO THE CAPITAL ACC OUNT. ACCORDINGLY, ADDITION ON THIS COUNT IS DELETED. 7.2. AS FAR AS ADDITION OF RS. 40,000/- ON ACCOUNT OF NSC PURCHASED IS CONCERNED, LD. COUNSEL REFERRED TO PAGE 3 OF ASSESS MENT ORDER AND POINTED OUT THAT ASSESSING OFFICER HAD, INTER ALIA, MADE TH E ADDITION OF RS. 40,000/- ON ACCOUNT OF NSC PURCHASED AS UNEXPLAINED CAPITAL. IN THIS REGARD LD. COUNSEL REFERRED TO PAGE 55 OF THE PB WHERE CAPITAL A/C/ BA LANCE-SHEET OF ASSESSEE FOR A.Y. 2005-06 IS CONTAINED, TO DEMONSTRATE THAT ASSE SSEE HAD SHOWN NSC AS ON 29-3-2005 AT RS. 40,000/- ON THE ASSET SIDE OF T HE BALANCE-SHEET AND, THEREFORE, IT WAS DULY RECORDED IN ASSESSEES BOOKS OF A/C HENCE NO ADDITION WAS CALLED FOR. 7.3. AS FAR AS THE ADDITION OF RS. 12,000/-, ON ACC OUNT OF HOUSE-HOLD EXPENSES, IS CONCERNED, WE FIND SUBSTANCE IN THE PL EA OF LD. COUNSEL FOR THE ASSESSEE THAT THIS WAS A MISTAKE IN INCORPORATING T HE FIGURE OF RS. 60,000/- AS AGAINST RS. 48,000/- IN THE CAPITAL ACCOUNT. HOWEVE R, EVEN IF THE SUM OF RS. 60,000/- IS INCORPORATED IN THE CAPITAL ACCOUNT/ B ALANCE SHEET, STILL THERE WOULD BE NO EFFECT ON THE CAPITAL ACCRETION BECAUSE OF THE SUFFICIENCY OF CASH BALANCE IN HAND. THEREFORE, THIS CANNOT BE TERMED A S UNEXPLAINED CAPITAL ACCRETION. ACCORDINGLY, THE ADDITION IS DELETED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. 8 ITA NO. 5997/DEL/2012 (PENALTY APPEAL) : 9. THE ASSESSING OFFICER HAD LEVIED A PENALTY OF RS . 9600/- IN RESPECT OF UNEXPLAINED CAPITAL ACCRETION OF RS. 64,590/-. IN Q UANTUM APPEAL, WE HAVE DELETED THE ADDITION MADE ON ACCOUNT OF CAPITAL ACC RETION, THEREFORE, SINCE THE VERY BASE FOR LEVY OF PENALTY HAS GONE, WE DELE TE THE PENALTY IN QUESTION LEVIED U/S 271(1)(C). 10. IN THE RESULT, ITA NO. 4163/DEL/2011 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND ITA NO. 5997/DEL/2012 IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18-07-2014. SD/- SD/- ( C.M. GARG ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18-07-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR