Shri T.A. Mohan Kumar, Mysore V. DCIT, Mysore

ITA 432/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2064 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V SRINIVASAN
• Section: 69C; 142(1); 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 432/BANG/2009 ASSESSMENT YEAR : 2006-07 SHRI T.A. MOHAN KUMAR, PR. THOLASI JEWELLERY MART, # 578, ASHOKA ROAD, MYSORE. : APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, MYSORE. : RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN RESPONDENT BY : SMT. V.S. SREELEKHA O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE AN INDIVIDUAL IS DI RECTED AGAINST THE ORDER OF THE CIT(A)-VI, BANGALORE, FOR THE ASSESSME NT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS, OUT OF WH ICH, GROUND NO.1 BEING GENERAL AND, THUS, BECOMES NON-CONSEQUENTIAL. THE REMAINING GROUNDS, FOR THE SAKE OF CLARITY, THEY ARE REFORMUL ATED CONCISELY AS UNDER: ITA NO.432/BANG/09 PAGE 2 OF 9 (I) THE AUTHORITIES BELOW NOT JUSTIFIED IN HOLDING THAT THE EXPENSES INCURRED ON THE MARRIAGE OF ASSESSEES DAUGHTER ARE ASSESSABLE U/S 69C OF THE ACT; (II) THE ASSESSEE DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST U/S 234A AND 234B OF THE ACT; AND (III) TO AWARD COSTS IN INITIATING THE APPEAL AND ALSO RE FUND OF INSTITUTION FEE. 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEES WERE SUBJECTED TO ACTION U/S 132 OF THE ACT ON 31.1.2006 . IN COMPLIANCE TO NOTICE U/S 142(1) OF THE ACT, THE ASSESSEE HAD FURN ISHED HIS ROI ON 20.3.07, ADMITTING A TOTAL INCOME OF RS.2.15 LAKHS WHICH WAS CONCLUDED BY THE AO BY MAKING AN ADDITION OF RS.7.36 LAKHS AS UN EXPLAINED EXPENDITURE U/S 69C OF THE ACT BEING THE PAYMENTS TOWARDS HOTEL BILL(S) FOR CONDUCTING THE DAUGHTERS MARRIAGE DURING AUGUST, 2005. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE WITH THE CIT(A) FOR RELIEF. IT WAS CONTENDED THAT THE THREE BROTHERS OF THE ASS ESSEE HAD PROCURED THE DRAFTS FOR RS.1.25 LAKHS EACH, BESIDES THE ASSESSEE HIMSELF, IN FAVOUR OF LEELA PALACE HOTEL FROM THEIR RESPECTIVE BANK ACCOU NTS TO FOOT THE BILL FOR THE EXPENSES ALLEGED TO HAVE BEEN INCURRED AT THE T IME OF HIS DAUGHTERS MARRIAGE RECEPTION. AFTER CONSIDERING THE CONTENTI ONS OF THE ASSESSEE, THE CIT(A), FOR THE REASONS SET-OUT IN HIS IMPUGNED ORD ER WHICH IS UNDER DISPUTE, HAD CONCLUDED THAT 8..WHICH STANDS REFUTED BY THE INCOHERENT STATEMENT OF HIMSELF AND CONTRADICTORY S TATEMENTS OF HIS BROTHERS. THEREFORE, I GO FOR THE ENTIRE ADDITION MADE BY THE AO OF RS.736070/- AND DO NOT GO FOR PART RELIEF OF RS.5 L AKHS AND SUSTAIN THE ADDITION OF RS.736070. ITA NO.432/BANG/09 PAGE 3 OF 9 5. DISAPPOINTED WITH THE STAND OF THE CIT(A), THE A SSESSEE HAS COME UP WITH THE PRESENT APPEAL BEFORE US. THE REITERAT ION OF THE LD.A R MORE OR LESS WHAT WAS URGED BEFORE THE LOWER AUTHORITIES. AT THE COST OF REPETITION, THE SUBMISSION OF THE ASSESSEE IS REPRODUCED, OF CO URSE, IN A CONDENSED MANNER, AS UNDER: (I) THE ASSESSEE HIMSELF HAD PURCHASED DEMAND DRAFTS FO R RS.1.25 LAKHS PLUS RS.25000/-, BESIDES THREE OF HIS BROTHER S, VIZ., T.A.MANOHAR BABU, T.A.ASHOK KUMAR AND T.A. SHANTI K IRAN (RS.1.25 LAKHS EACH) AGGREGATING TO RS.5.25 LAKHS I N FAVOUR OF LEELA PALACE HOTEL; - THE PAYMENT OF RS.5.25 LAKHS TO THE HOTEL WAS MADE THROUGH NINE DEMAND DRAFTS; - A BUSINESS MEET WAS ORGANIZED BY HIS BROTHERS T.A.N ATARAJ AND T.A.RAGHAVENDRA OF THOLASI PRINTS INDIA PVT. LTD AT THE SAME HOTEL AND THUS, THE HOTEL HAD ISSUED A CONSOLIDATED INVOI CE [WHICH BORE THE NAMES OF THE ASSESSEE AND THOLASI PRINTS INDIA PVT. LTD.] ON 28.8.05 FOR RS.7.15 LAKHS IN RESPECT OF THE WEDDING RECEPTI ON OF HIS DAUGHTER AND THE BUSINESS MEET; - SIX DEMAND DRAFTS OF RS.34845/- EACH WERE TENDERED TO THE HOTEL BY T.A.NATARAJ AND T.A.RAGHAVENDRA AS CONFIRMED BY THE M; - THE THREE DEMAND DRAFTS FOR RS.65000/- +RS.60000 + 25000 WERE DRAWN FROM HIS S.B ACCOUNT MAINTAINED IN S.B.M. MYS ORE; (II) T.A.MANOHAR BABU IN HIS LETTER DT:29.11.06 ADDRESSE D TO THE AO CONFIRMED THAT HE HAD ADVANCED RS.1.25 LAKHS TO THE ASSESSEE; - T.A.SHANTI KIRAN IN HIS LETTER DT.21.12.06 ADDRESSE D TO THE AO, WHILE FURNISHING HIS ROI FOR THE AY 06-07 CONFIRMED THAT HE HAD ALSO ADVANCED RS.1.25 LAKHS TO THE ASSESSEE; - T.A.ASHOK KUMAR (LEDGER ACCOUNT) IN HIS BOOKS OF AC COUNT RECORDED RS.1.25 LAKHS [RS.75725 OWES TO THE ASSESSEE + 4927 5 BEING LOAN ] LENT TO THE ASSESSEE BY WAY OF TWO DEMAND DRAFTS DR AWN IN FAVOUR OF LEELA PALACE HOTEL; ITA NO.432/BANG/09 PAGE 4 OF 9 - THOLASI PRINTS INDIA PVT. LTD., THOLASI HOTELS PVT. LTD AND THOLASI PROCESS, BANGALORE IN WHICH THE ASSESSEES BROTHERS HAVE INTEREST [T.A.NATARAJ AND T.A.RAGHAVENDRA] HELD BUSINESS MEE T AT THE LEELA PALACE; - THE THREE CONCERNS HAVE PAID RS.69690/- EACH BY WAY OF TWO DRAFTS FOR RS.34845/- EACH TOWARDS THE BUSINESS MEET; - THE EXPENSES HAVE BEEN REFLECTED IN THEIR BOOKS OF ACCOUNT WHICH WERE PRODUCED BEFORE THE AO FOR VERIFICATION; - THE EXPENSES WERE DEBITED IN THEIR BOOKS OF ACCOUN TS AND CLAIMED FOR THE AY 06-07 WHICH WERE DISALLOWED BY THE AO AS THESE PAYMENTS NOT RELATED TO THEIR BUSINESSES; (III) THE STAND OF THE AO WAS THAT THE TWO BILLS OF THE H OTEL FOR RS.7.15 LAKHS AND RS.25000/- IN RESPECT OF THE WEDDING REC EPTION, THE ASSESSEE HAD ACCOUNTED FOR ONLY RS.5 LAKHS IN HIS R ETURN OF INCOME; - COMPARING WITH THE STATEMENTS RECORDED DURING THE S EARCH OPERATION, THE AO TOOK A STAND THAT ANSWERS WERE INCOHERENT AN D DID NOT EXPLAIN THE SOURCES AND THUS TREATED THE SAID SUM OF RS.7.1 5 LAKHS + 21070 AGGREGATING TO RS.7.36 LAKHS AS INCOME BEING UNEXPL AINED EXPENSES U/S 69C OF THE ACT. - THE EXPENSES INCURRED HAVE SINCE BEEN REFLECTED IN THE BOOKS OF ACCOUNT AND THE SOURCE THEREOF HAS BEEN EXPLAINED, IT WAS PLEADED THAT THE ADDITION BE DELETED. 6. TO BUTTRESS HIS FURTHER ARGUMENTS, THE LD. A R H AS COME UP WITH A PAPER BOOK CONTAINING 1 45 PAGES WHICH CONSIST OF , INTER ALIA, COPIES OF (I) SWORN STATEMENTS OF THE ASSESSEE AND HIS BROTHERS, (II) CORRESPONDENCE WITH THE AO (III) ASSESSMENT ORDERS IN THE CASES OF THOLASI JEWELLERY MART, THOLASI PRINTS INDIA PVT. LTD., THOLASI HOTELS PVT. LTD. ETC. + PHOTOSTAT COPIES OF DEMAND DRAFTS. 7. ON HER PART, THE LD. D R WAS VERY VEHEMENT IN HER RESOLVES THAT THE LOWER AUTHORITIES HAVE ANALYZED THE ISSUE EXHAU STIVELY AND CAME TO THE CONCLUSION THAT THERE WAS NO COHESION IN THE ASSERT IONS OF THE ASSESSEE ITA NO.432/BANG/09 PAGE 5 OF 9 AND, THEREFORE, PLEADED THAT THE STAND OF THE AUTHO RITIES BELOW BE SUSTAINED. 8. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS A ND ALSO CAREFULLY PERUSED THE PAPER BOOK OF THE LD. A.R. THERE IS N O DISPUTE TO THE FACT THAT THE ASSESSEE DID HOST A WEDDING RECEPTION OF HIS DA UGHTER AT LEELA PALACE HOTEL FOR WHICH THE SAID HOTEL HAD, PERHAPS, RAISED A BILL FOR RS.7.15 LAKHS + RS.21070/- BEING THE SUITE CHARGES FOR HAVING STAYE D BY THE BRIDEGROOM. THE BONE OF CONTENTION OF THE REVENUE IS THAT THE B ROTHERS OF THE ASSESSEE HAVE DENIED TO HAVE FOOT THE BILL ON BEHALF OF THE ASSESSEE AND THAT THERE WAS NO COHESION IN THE ASSERTION OF THE ASSESSEE AN D, THEREFORE, THE AO HAD RESORTED TO TREAT THE EXPENDITURE AS THE INCOME OF THE ASSESSEE U/S 69C OF THE ACT. WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDER OF THE LD. CIT (A). PRIMA FACIE, THE CIT(A) HAD CONCEDED THAT THE SOURCE TO THE EXTENT OF RS.5 LAKHS WAS EXPLAINED. LET US REPRODU CE WHAT THE CIT(A) MEANT IT, 8..THE EVIDENCES ONLY SHOW THAT DRAFTS WERE PREP ARED BY THE BROTHERS OF THE APPELLANT AND PAID TO M/S.LEELA PALACE BUT IT DID NOT SPEAK TRANSPARENTLY THE PURPOSE OF SUCH PAYMENTS I. E., WHETHER FOR MARRIAGE CEREMONY AND STAY OF GROOM AND HIS FAMILY MEMBERS OR FOR THE GALA BUSINESS MEET STARRING (SIC) STARTING FROM 22/8/08 TO 28/8/08 (SIC) 22.8.05 TO 28.8.05 OF THE HOUSE OF THOOLASI CONSIST ING OF JEWELERS, PRINTERS AND HOTELS. IN FACT, THE HOUSE THROUGH THE APPELLA NT HAD MIXED PLEASURE WITH BUSINESS TO OBTAIN THE BENEFIT OF BUSINESS DED UCTION WHICH IS APPARENTLY WRONG. BUT IT IS DIFFICULT TO ASCERTAIN THE AMOUNT WHICH RELATES TO PLEASURE AND PERSONAL NON-BUSINESS PURPOSE SO THAT SUCH PART CAN BE DISALLOWED. HOWEVER, AO HAS POINTED OUT THAT THE APPELLANT HAS ITA NO.432/BANG/09 PAGE 6 OF 9 ACCOUNTED FOR RS.5 LAKHS IN HIS RETURN AND THEREFOR E THE AUTHORIZED REPRESENTATIVE PLEADED THAT SOURCE OF RS.5 LAKHS IS EXPLAINED AND RELIEF OF RS.5 LAKHS BE ALLOWED TO THE APPELLANT WHEN THE CIT(A) WAS CONVINCED THAT RS.5 LAKHS WAS A CCOUNTED FOR, WHAT PREVENTED HIM IN NOT ALLOWING THE BENEFIT TO THE AS SESSEE IS RATHER INTRIGUING. DISALLOWANCE CAN BE MADE ONLY ON THE S OUND FOOTING AND NOT FOR THE SAKE OF MAKING THE DISALLOWANCE. 9. REVERTING BACK TO THE MAIN ISSUE, THE SOURCE F OR RS.5.25 LAKHS, AS CULLED OUT FROM THE VARIOUS DOCUMENTS, ARE LISTED O UT AS UNDER: (I) T.A.MANOHAR BABU RS.1, 25,000 IN HIS LETTER DT:29.11.06 TO THE DCIT, CC, MYSORE WHILE FURNISHING HIS ROI FOR THE AY 2006-07 (PAGE 22 OF PB) DD NO:213191 DT:27.5.2005 FOR RS.65000 DD NO.213277 DT:28.5.2005 FOR RS.60000-SBM,M YSORE (II) T.A.SHANTI KIRAN RS.1, 25,000 IN HIS LETTER DT:21.12.06 TO THE DCIT, CC, MYSORE WHILE FURNISHING HIS ROI FOR THE AY 2006-07 (PAGE 23 OF PB) DD NO:213187 DT:27.5.2005 FOR RS.65000 DD NO.213276 DT:28.5.2005 FOR RS.60000-SBM,M YSORE (III) T.A.ASHOK KUMAR RS.1, 25,000 DD NO:252669 DT:27.5.2005 FOR RS.65000 DD NO.252680 DT:28.5.2005 FOR RS.60000-UBI,B LORE (IV)T.A.MOHAN KUMAR (THE ASSESSEE) RS.1, 25,000 DD NO:213190 DT:27.5.2005 FOR RS.65000 DD NO.213275 DT:28.5.2005 FOR RS.60000-SBM,M YSORE THE ASSESSEE IN HIS LETTER TO THE ADDL.CIT, CC 2, BLORE DT: 6.12.2007 (P 28 OF PB) RS. 25,000 ------- -------------- TOTAL RS.5,2 5,000 ------- ------------- ITA NO.432/BANG/09 PAGE 7 OF 9 THE ABOVE PARTIES INCLUDING THAT OF THE ASSESSEE HA VE SUBMITTED THEIR LETTERS TO THE AO/ADDL.CIT VOUCHING THAT THEY HAVE LENT MONIES TO THE ASSESSEE WHICH HAVE BEEN DULY REFLECTED IN THEIR BO OKS OF ACCOUNT/RSOI. THEY HAVE ALSO PRODUCED THE COPIES OF DEMAND DRAFTS TO SUBSTANTIATE THAT THESE DRAFTS WERE PURCHASED BY WITHDRAWING MONIES F ROM THEIR SAVING BANK ACCOUNTS. THUS, THE SOURCE TO THE EXTENT OF RS.5.2 5 LAKHS STAND EXPLAINED. 10. WITH REGARD TO THE BALANCE AMOUNT OF RS.2,11,07 0 [RS.736070 525000], THE ASSESSING OFFICER, HAD DISALLOWED THE EXPENSES IN THEIR RESPECTIVE ASSESSMENT ORDERS, FOR THE SAKE OF CLARI TY, THE DETAILS OF WHICH ARE AS UNDER: (I) THOLASI PRINTS INDIA P.LTD. FOR THE AY 2006-07 - RS.69690 2. THE ASSESSEE COMPANY HAS INCURRED RS.69690/-TOW ARDS THE BANQUET ARRANGED ON 28.8.05 AT THE LEELA PALACE HO TEL. DURING THE COURSE OF ACTION U/S 132 AT THE PREMISES OF TH E DIRECTORS IT IS FOUND THAT THE BANQUET HAD BEEN ARRANGED IN CONNEC TION WITH THE WEDDING RECEPTION OF TM VINDHYA DAUGHTER OF TA MOHA NKUMAR AND ACCORDINGLY THE SAME CANNOT BE TREATED AS RELAT ING TO ASSESSEES BUSINESS. THE SAME IS DISALLOWED AS NOT RELATING TO THE ASSESSEES BUSINESS.[P 39 OF PB] (II) THOLASI HOTELS P.LTD. FOR THE AY 2006-07 - RS.69690 2. THE ASSESSEE COMPANY HAS INCURRED RS.69690/-TOW ARDS THE BANQUET ARRANGED ON 28.8.05 AT THE LEELA PALACE HO TEL. DURING THE COURSE OF ACTION U/S 132 AT THE PREMISES OF TH E DIRECTORS IT IS FOUND THAT THE BANQUET HAD BEEN ARRANGED IN CONNEC TION WITH THE WEDDING RECEPTION OF TM VINDHYA DAUGHTER OF TA MOHA NKUMAR AND ACCORDINGLY THE SAME CANNOT BE TREATED AS RELAT ING TO ASSESSEES BUSINESS. THE SAME IS DISALLOWED AS NOT RELATING TO THE ASSESSEES BUSINESS.[P 43 OF PB] (III) THOLASI PROCESS FOR THE AY 2006-07 RS.69690 2. THE ASSESSEE COMPANY HAS INCURRED RS.69690/-TOW ARDS THE BANQUET ARRANGED ON 28.8.05 AT THE LEELA PALACE HOT EL. DURING THE COURSE OF ACTION U/S 132 AT THE PREMISES OF TH E DIRECTORS IT IS FOUND THAT THE BANQUET HAD BEEN ARRANGED IN CONNEC TION WITH THE WEDDING RECEPTION OF TM VINDHYA DAUGHTER OF TA MOHA NKUMAR ITA NO.432/BANG/09 PAGE 8 OF 9 AND ACCORDINGLY THE SAME CANNOT BE TREATED AS RELA TING TO ASSESSEES BUSINESS. THE SAME IS DISALLOWED AS NOT RELATING TO THE ASSESSEES BUSINESS. [P.45 OF PB] THUS, RS.2,09,070 + RS.2000 (DD NO.JY 090122 DT:30. 7.05 ) HAVE BEEN PAID BY THE THREE COMPANIES, THE EXPENSES OF WHICH HAVE BEEN DISALLOWED BY THE AO IN THEIR RESPECTIVE HANDS AS NOT RELATED TO THE ASSESSEES BUSINESS. THE PAYMENTS MADE TO THE HOTEL - EITHER FOR THE WEDDING RECEPTION OF THE ASSESSEES DAUGHTER OR THE SO CALL ED BUSINESS MEET, AS THE CASE MAY BE - HAVE SINCE BEEN EXPLAINED. 11. IT WAS THE CLAIM OF THE ASSESSEE THAT HIS DAUGH TERS WEDDING RECEPTION EXPENSE CAME ONLY TO THE EXTENT OF RS.5.2 5 LAKHS FOR WHICH HE HAD ACCOUNTED FOR. HIS OTHER CLAIM WAS THAT HIS BR OTHERS WHO WERE STATIONED AT BANGALORE HOSTED A BUSINESS MEET INCID ENTALLY DURING THE MONTH OF AUGUST, 2005 IN THE SAME HOTEL FOR WHICH T HE HOTEL MANAGEMENT HAD RAISED A CONSOLIDATED INVOICE OR A BILL, AS THE SAME MAY BE, WHICH HAD CREATED A CONFUSION THAT WEDDING RECEPTION EXPENSES OF HIS DAUGHTER CAME TO RS.7.36 LAKHS AND THE AO, WITHOUT LOOKING INTO T HE CIRCUMSTANCES UNDER WHICH A CONSOLIDATED BILL WAS RAISED BY THE HOTEL M ANAGEMENT, WENT AHEAD TO ADD THE SAME IN HIS HANDS U/S 69C OF THE ACT. 12. CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCE S OF THE ISSUE, WE ARE OF THE UNANIMOUS VIEW THAT THE AO WAS NOT JUSTIFIED IN DISBELIEVING THE VERSION OF THE ASSESSEE AND TREATING THE ENTIRE SUM OF RS.7.36 LAKHS AT THE HANDS OF THE ASSESSEE. TO SUM UP, THE ADDITION OF RS.736070/- U/S 69C OF THE ACT IS DELETED. ITA NO.432/BANG/09 PAGE 9 OF 9 13. WE HAVE SINCE DELETED THE ADDITION MADE BY THE AO U/S 69C OF THE ACT, THE OTHER GROUNDS RAISED BY THE ASSESSEE HAVE AUTOMATICALLY BECOME OBSOLETE AND THEY HAVE NOT BEEN ADDRESSED TO. 14. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DECEMBER, 2009. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 18 TH DECEMBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.