Sri.T.J.Avarachan, Ernakulam V. DCIT, Ernakulam

ITA 437/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69135 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 28-11-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 10-06-2013
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: T JOHN GEORGE
• Keywords: Unexplained expenditure; Principle of natural justice; Additional evidence; Cost of acquisition; Onus to prove; Revenue expenditure; Capital expenditure
• Section: 69C; 68; 69; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 432-437/COCH/2013 ASSESSMENT YEARS : 2005-06-2010-2011 SHRI T.J. AVARACHAN, THIRUTHANATHIL HOUSE, MANJAPRA, ERNAKULAM, KOCHI-683 581. PAN: AFBPA 2819M] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) I.T.A. NOS. 473-475/COCH/2013 ASSESSMENT YEARS : 2005-06, 2009-10 & 2010-2011 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. VS. SHRI T.J. AVARACHAN, THIRUTHANATHIL HOUSE, MANJAPRA, ERNAKULAM, KOCHI-683 581. PAN: AFBPA 2819M] (REVENUE -APPELLANT) (ASSESSEE-RESPONDEN T) C.O. NOS. 30-32/COCH/2013 (ARSG. OUT OF I.T.A. NOS. 473-475/COCH/2013) ASSESSMENT YEARS : 2005-06, 2009-10 & 2010-2011 SHRI T.J. AVARACHAN, THIRUTHANATHIL HOUSE, MANJAPRA, ERNAKULAM, KOCHI-683 581. PAN: AFBPA 2819M] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI T. JOHN GEORGE, ADV. REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 28/11/2013 DATE OF PRONOUNCEMENT 31/12/2013 I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 2 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE APPEALS FILED THE ASSESSEE AS WELL AS TH E REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAIN ST THE COMMON ORDER DATED 27.03.2013 PASSED BY LD CIT(A)-I, KOCHI AND THEY RE LATE TO THE ASSESSMENT YEARS 2005-06 TO 2010-11. THE ASSESSEE HAS FILED A PPEALS FOR ALL THE YEARS AND THE REVENUE HAS FILED APPEALS FOR ASSESSMENT YEARS 2005-06, 2009-10 AND 2010- 11. THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS F OR THE ABOVE SAID THREE ASSESSMENT YEARS. ALL THESE APPEALS WERE HEARD TOG ETHER SINCE SOME OF THE ISSUES ARE IDENTICAL IN NATURE. HENCE, THESE APPEA LS ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS RUNNING A PETROL PUMP AS THE DEALER OF IOC. BESIDES THAT HE IS ALSO ENGAGED IN REAL ESTATE BUSINESS. THE REVENUE CARRIED OUT SEARCH AND SEIZU RE OPERATIONS IN THE HANDS OF THE ASSESSEE ON 19.02.2010 AND CONSEQUENT THERETO A SURVEY OPERATION WAS ALSO CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE. CONSEQUENT TO THE SEARCH ACTION, THE ASSESSEE FILED RETURNS OF INCOME U/S 15 3A OF THE ACT FOR ASSESSMENT YEARS 2004-05 TO 2010-11. THE ASSESSEE ALSO FILED A CASH FLOW STATEMENT FOR ALL THE YEARS DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE ASSESSING OFFICER MADE SPECIFIC DISALLOWANCES/ADDITIONS AGAINST THE I NCOME DECLARED BY THE ASSESSEE. IN ADDITION THERETO, THE ASSESSING OFFIC ER ALSO TINKERED WITH THE CASH OUTFLOW/ CASH INFLOW SHOWN IN THE CASH FLOW STATEME NT, WHICH RESULTED IN CASH SHORTAGE AT THE END OF THE YEAR. THE ASSESSING OFF ICER ASSESSED THE SAID CASH SHORTAGE ALSO AS INCOME OF THE ASSESSEE IN THE RELE VANT YEARS. THE ASSESSEE CHALLENGED ALL THE ADDITIONS / DISALLOWANCES / ADJU STMENTS MADE IN THE CASH FLOW STATEMENTS BY FILING APPEAL BEFORE THE LD CIT(A) AN D GOT PARTIAL RELIEF. STILL AGGRIEVED, THE ASSESSEE HAS FILED APPEALS BEFORE US . THE REVENUE HAS FILED I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 3 APPEALS FOR THE THREE YEARS MENTIONED ABOVE ON CERT AIN ISSUES AGAINST WHICH, THE ASSESSEE HAS ALSO FILED CROSS OBJECTIONS. 3. ON A PERUSAL OF THE RECORD, WE NOTICE THAT F OLLOWING ARE THE COMMON ISSUES. (A) CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME . (B) GROSS PROFIT ADDITION IN PETROL PUMP ( AY 2007 -08 TO 2010-11) 4. THE ASSESSEE HAS URGED A LEGAL ISSUE IN ALL THE YEARS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER RECAS T THE CASH FLOW STATEMENT BY ENHANCING DOMESTIC EXPENSES, ENHANCING VALUE OF INV ESTMENTS, DISREGARDING CERTAIN CREDITS ETC. IN THE RECAST CASH FLOW STATEM ENT, THERE WAS CASH SHORTAGE, I.E., THE DIFFERENCE BETWEEN THE CASH OUTFLOW AND T HE CASH INFLOW WAS A NEGATIVE FIGURE. THE ASSESSING OFFICER ASSESSED THE CASH SH ORTAGE NOTICED AT THE END OF EVERY YEAR AS INCOME OF THE ASSESSEE BY STATING THA T IT IS ASSESSED U/S 69C OF THE ACT. THE CONTENTION OF THE ASSESSEE IS THAT THE PR OVISIONS OF SEC.69C SHALL APPLY ONLY TO UNEXPLAINED EXPENDITURE AND HENCE THE ADD ITIONS MADE BY INVOKING WRONG PROVISION OF LAW ARE NOT SUSTAINABLE IN LAW. 4.1 WE HEARD THE RIVAL CONTENTIONS ON THIS LEGA L ISSUE. ACCORDING TO THE LD A.R, THE ADDITIONS MADE BY INVOKING WRONG PROVISION S OF LAW ARE NOT SUSTAINABLE IN LAW. HOWEVER, WE ARE UNABLE TO AGREE WITH THE S AID CONTENTIONS. THERE IS NO DISPUTE THAT THE AO HAS ASSUMED JURISDICTION TO MAK E THE ASSESSMENTS FOR THE YEARS UNDER CONSIDERATION IN ACCORDANCE WITH THE LA W. THE NATURE OF ITEMS DESCRIBED UNDER SECTION 68 TO 69D ARE CONSIDERED AS INCOME OF THE ASSESSEE BY LEGAL FICTION AND THE PRIMARY BURDEN TO PROVE THAT THEY DO NOT CONSTITUTE INCOME IS ALWAYS PLACED UPON THE ASSESSEE. IF THE ASSESSE E FAILS TO DISCHARGE THE PRIMARY BURDEN OF PROOF SO PLACED UPON HIM, THE AMO UNTS MENTIONED IN SEC. 68 TO 69D ARE ASSESSABLE AS INCOME IN HIS HANDS. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 4 4.2 IN THIS REGARD, ONE MAY MAKE GAINFUL REFERE NCE TO DECISION RENDERED BY THE DELHI SPECIAL BENCH, A LARGER BENCH CONSISTING OF FIVE MEMBERS, IN THE CASE OF MANOJ AGGARWAL VS. DCIT (2008)(113 ITD 377). I N THE CASE BEFORE THE LARGER BENCH OF SPECIAL BENCH, THE DEPOSITS FOUND IN BANK ACCOUNTS WERE ASSESSED U/S 68 OF THE ACT. ACCORDING TO THE ASSESSEE THEREIN, THE PROVISIONS OF SEC. 68 CAN BE INVOKED ONLY IF THE CASH CREDITS ARE FOUND IN TH E BOOKS OF ACCOUNT. THE ASSESSEE THEREIN DID NOT MAINTAIN BOOKS OF ACCOUNT AND ACCORDINGLY, IT WAS CONTENDED THAT THE AO WAS NOT RIGHT IN LAW IN INVOK ING THE PROVISIONS OF SEC. 68 OF THE ACT FOR MAKING ADDITION RELATING TO UNEXPLAI NED BANK DEPOSITS. THE SAID CONTENTIONS DID NOT FIND FAVOUR WITH THE SPECIAL BE NCH OF THE TRIBUNAL. FOR THE SAKE OF CONVENIENCE, THE RELEVANT OBSERVATIONS/DECI SION GIVEN BY THE SPECIAL BENCH AT PARA 26 OF ITS ORDER ARE EXTRACTED BELOW:- THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE BE FORE US WAS THAT THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT A ND THE DEPOSITS WERE FOUND ONLY IN THE ASSESSEES BANK STATEMENT WHICH C ANNOT BE CONSIDERED AS THE BOOKS OF ACCOUNT OF THE ASSESSEE AND, THEREF ORE, S. 68 WAS NOT APPLICABLE. OUR ATTENTION WAS DRAWN TO THE CONFIRMA TION LETTERS PLACED AT PP. 159 AND 160 OF THE PAPER BOOK. WE ARE HOWEVER U NABLE TO ACCEPT THE ARGUMENT. THOUGH S. 68 OF THE ACT MAY NOT BE STRICT LY APPLICABLE SINCE THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT A ND THE BANK STATEMENT CANNOT BE CONSIDERED AS THE ASSESSEES BO OKS OF ACCOUNT, ON THE BASIS OF THE JUDGMENT OF THE SUPREME COURT IN T HE CASE OF A. GOVINDARAJULU MUDALIAR VS. CIT (1958) 34 ITR 807 (S C) , IT IS THE ONUS OF THE ASSESSEE TO EXPLAIN THE CASH RECEIVED BY HIM AN D IF THERE IS NO EXPLANATION OR ACCEPTABLE EVIDENCE TO PROVE THE NATURE AND SOURCE OF THE RECEIPT, THE AMOUNT MAY BE ADDED AS T HE ASSESSEES INCOME ON GENERAL PRINCIPLES AND IT IS NOT NECESSAR Y TO INVOKE S. 68, NOR IS IT NECESSARY FOR THE IT AUTHORITIES TO P OINT OUT THE SOURCE OF THE MONIES RECEIVED. EVEN IF S. 68 IS NOT APPLICABLE, THE CASH DEPOSIT IN THE BANK CAN BE ASKED TO BE EXPLAIN ED BY THE ASSESSEE UNDER S. 69 OR S. 69B OF THE ACT. NO DOUBT THE ASSESSEE HAD TRIED TO FILE ADDITIONAL EVIDENCE BEFORE THE CIT(A) IN THE FORM OF CONFIRMATION LETTERS AND IT RETURNS BUT THESE WERE NOT ADMITTED BY THE CIT(A) AND NO REASONS HAVE BEEN SHOWN BEFORE US AS TO WHY THEY SHOULD HAVE BEEN ADMITTED. IN THE ABSENCE OF ANY CLINCHING EVIDENCE TO SHOW THE NATURE AND SOURCE OF THE MONIES DEPOSITED INTO THE BANK ACCOUNT WHICH I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 5 BELONGS TO THE ASSESSEE, THE AO WAS JUSTIFIED IN AD DING THE AMOUNT OF RS. 15 LACS AS THE ASSESSEES UNEXPLAINED INCOME. WE CO NFIRM THE ADDITION AND DISMISS THE GROUND. IT CAN BE SEEN THAT THE UNEXPLAINED RECEIPTS/INVEST MENTS/EXPENDITURE ETC., AS PER THE VIEW EXPRESSED BY THE LARGER BENCH OF THE S PECIAL BENCH OF THE TRIBUNAL, CAN BE ASSESSED AS THE INCOME OF THE ASSESSEE ON GE NERAL PRINCIPLES, IF THE ASSESSEE HAS FAILED TO OFFER SATISFACTORY EXPLANATI ON. IT WAS FURTHER HELD THAT THE SAID INCOME, IF NOT ASSESSABLE UNDER ONE SECTION CA N BE ASSESSED BY INVOKING APPLICABLE SECTION. ACCORDINGLY, IN OUR VIEW, MERE MENTIONING OR INVOKING OF WRONG SECTION FOR ASSESSING A PARTICULAR ITEM OF IN COME MAY NOT VITIATE THE ASSESSMENT PROCEEDINGS, IF THE AO HAD OTHERWISE ASS UMED JURISDICTION FOR ASSESSING THE INCOME OF THE ASSESSEE IN A LEGALLY P ERMISSIBLE MANNER. 4.3 IN THE INSTANT CASE, WE HAVE ALREADY NOTICED THAT THE CASH SHORTAGE DETERMINED BY THE ASSESSING OFFICER IS THE CUMULATI VE EFFECT OF VARIOUS ADJUSTMENTS MADE BY THE ASSESSING OFFICER IN THE CA SH FLOW STATEMENTS FURNISHED BY THE ASSESSEE. FOR EXAMPLE, THE ASSESSING OFFICE R HAS (A) INCREASED THE AMOUNT OF HOUSE HOLD EXPENSES (B) REDUCED THE OPENING CASH BALANCE. (C) DISREGARDED CASH CREDITS. (D) ENHANCED THE VALUE OF INVESTMENTS (E) INCLUDED VEHICLE LOAN REPAYMENTS AS CASH OUTF LOW. EACH OF THE ADJUSTMENTS SO MADE MAY BE ASSESSABLE UN DER DIFFERENT SECTIONS INCLUDING SECTION 69C OF THE ACT. SINCE THE CASH SHORTAGE REPRESENTS UNEXPLAINED MONEY OUTFLOW, THE AO APPEARS TO HAVE INVOKED SEC. 69C OF THE ACT, FOR THE SAKE OF CONVENIENCE. IN VIEW OF THE D ISCUSSIONS MADE IN THE PRECEDING PARAGRAPHS, WE ARE UNABLE TO ACCEPT WITH THE CONTENTIONS OF THE LD A.R THAT MENTIONING OF WRONG SECTION WOULD VITIATE THE ADDITIONS MADE. ACCORDINGLY, WE REJECT THE LEGAL GROUND CITED ABOVE . I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 6 5. THE NEXT COMMON ISSUE URGED BY THE ASSESSEE RELATES TO THE REJECTION OF CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME. WHEN THE ASSESSING OFFICER ENQUIRED ABOUT THE ADEQUACY OF HOUSE HOLD EXPENSES SHOWN IN THE CASH FLOW STATEMENT, THE ASSESSEE CONTENDED THAT HE IS DERIVING AGRICULT URAL INCOME FROM FAMILY PROPERTY AND PART OF DOMESTIC EXPENSES WERE MET OUT OF IT. IT WAS FURTHER SUBMITTED THAT HE OWNS NEARLY 2 ACRES OF NUTMEG PLA NTATION. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DID NOT DECLARE ANY AGRICULT URAL INCOME IN THE RETURNS FILED FOR ASSESSMENT YEARS 2005-06 TO 2009-10. IN THE RE TURN FILED FOR ASSESSMENT YEAR 2010-11, HE DECLARED AGRICULTURAL INCOME TO TH E TUNE OF RS.3.00 LAKHS. THE AO REJECTED THE ABOVE SAID CLAIM, SINCE THE ASSESSE E FAILED TO FURNISH ANY PROOF IN SUPPORT OF AVAILABILITY OF AGRICULTURAL INCOME, VIZ., TITLE DEED OF PROPERTY, SALE BILLS OF AGRICULTURAL PRODUCE ETC. 5.1 WE NOTICE THAT THE LD CIT(A) DID NOT ADDRES S THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME IN ASSESSMENT YEARS 2005-06 TO 2009-10, SINCE HE HAD GIVEN RELIEF IN RESPECT OF THE QUANTUM OF DOMESTIC EXPENS ES. HOWEVER, IN ASSESSMENT YEAR 2010-11, THE LD CIT(A) ALLOWED THE CLAIM OF AV AILABILITY OF THE AGRICULTURAL INCOME OF RS.3.00 LAKHS ON THE REASONING THAT THE A SSESSEE OWNS AGRICULTURAL LANDS TO THE EXTENT OF ABOUT 3 ACRES. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN PARTIALLY SUSTAINING THE ADDITION R ELATING TO DOMESTIC EXPENSES BY NOT CONSIDERING THE CLAIM OF AVAILABILITY OF AGRICU LTURAL INCOME. IN ASSESSMENT YEAR 2010-10, ACCORDING TO THE ASSESSEE THE LD CIT( A) SHOULD HAVE DIRECTED THE AO TO CONSIDER THE AGRICULTURAL INCOME OF RS.3.00 L AKHS AS SOURCE AVAILABLE FOR MEETING OTHER CASH OUTFLOWS. 5.2 WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISS UE. ADMITTEDLY, THE ASSESSEE DID NOT PRODUCE ANY DOCUMENT TO SUBSTANTIATE THE CL AIM OF AVAILABILITY OF AGRICULTURAL INCOME IN ASSESSMENT YEARS 2005-06 TO 2009-10. HENCE, WE DO NOT I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 7 FIND ANY REASON TO INTERFERE WITH THIS ISSUE AND AC CORDINGLY CONFIRM THE DECISION OF THE ASSESSING OFFICER ON THIS ISSUE. 5.3 IN ASSESSMENT YEAR 2010-11, SINCE THE LD CI T(A) HAS UPHELD THE AVAILABILITY OF AGRICULTURAL INCOME OF RS.3.00 LAKH S, THE SAME SHOULD BE TREATED AS A SOURCE AVAILABLE FOR MEETING OTHER CASH OUTFLOW. ACCORDINGLY WE DIRECT THE AO TO CONSIDER THE SAME AS CASH INFLOW IN THE CASH FLO W STATEMENT. 6. THE NEXT COMMON ISSUE AGITATED BY THE ASSESS EE RELATES TO THE GROSS PROFIT ADDITION MADE IN PETROL PUMP BUSINESS. THE ASSESSI NG OFFICER ASCERTAINED THE RATE OF COMMISSION GIVEN BY THE OIL COMPANIES TO TH E PETROL PUMPS. ACCORDINGLY HE WORKED OUT THE AMOUNT OF GROSS PROFIT THAT WOULD HAVE BEEN EARNED BY THE ASSESSEE IN ASSESSMENT YEARS 2007-08 TO 2010-11 ON THE BASIS OF QUANTITY OF PETROL AND DIESEL SOLD BY THE ASSESSEE. THE AO FOU ND THAT THE GROSS PROFIT ACCOUNTED FOR BY THE ASSESSEE WAS LESSER THAN THE A MOUNT COMPUTED BY HIM AND ACCORDINGLY ADDED THE DIFFERENCE TO THE TOTAL INCOM E OF RESPECTIVE YEARS. 6.1 BEFORE LD CIT(A), THE ASSESSEE DID NOT CONT EST THIS ADDITION IN ALL THE YEARS. THE ASSESSEE HAS URGED THIS ISSUE FOR THE F IRST TIME BEFORE US. WE NOTICE THAT THE ASSESSEE DID NOT FURNISH ANY REASONS FOR N OT URGING THE SAME BEFORE THE LD CIT(A). AT THE SAME TIME, IT WAS NOW SHOWN TO U S THAT THE ASSESSEE HAS ACCEPTED THIS ADDITION IN ALL THE YEARS. THE LD A. R ADVANCED ARGUMENTS EXTENSIVELY BEFORE US. HOWEVER, SINCE THIS ISSUE H AS NOT BEEN ADJUDICATED BY LD CIT(A), WE ARE OF THE VIEW THAT THE SAME NEEDS TO B E DECIDED BY THE FIRST APPELLATE AUTHORITY FIRST. ACCORDINGLY, IN THE INT EREST OF NATURAL JUSTICE, WE SET ASIDE THE ISSUE RELATING TO THE GROSS PROFIT ADDITI ON MADE IN ASSESSMENT YEARS 2007-08 TO 2010-11 TO THE FILE OF THE LD CIT(A) FOR HIS CONSIDERATION AND APPROPRIATE DECISION. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 8 7. NOW WE SHALL TAKE UP THE APPEAL FILED BY BOT H THE PARTIES ASSESSMENT YEAR WISE. IN ASSESSMENT YEAR 2005-06, THE AO HAS ASSES SED A SUM OF RS.6,43,426/-, BEING THE DIFFERENCE IN THE OPENING CAPITAL BALANCE AS ON 1.4.2004, AS THE INCOME OF THE ASSESSEE. THE AO, HOWEVER, DID NOT I NCLUDE THE SAME AS CASH INFLOW, WHILE PREPARING REVISED CASH FLOW STATEMEN T. WE HAVE ALREADY STATED THAT THE ASSESSING OFFICER HIMSELF PREPARED CASH FL OW STATEMENTS FOR EVERY YEAR AND THE CASH SHORTAGE ARRIVED AT BY HIM WAS ASSESSE D AS THE INCOME OF THE ASSESSEE. THE LD CIT(A) HELD THAT THE ABOVE SAID A MOUNT IS REQUIRED TO BE INCLUDED AS A SOURCE IN THE CASH FLOW STATEMENT. H OWEVER, HE DID NOT GIVE ANY DIRECTION FOR DELETING THE ADDITION MADE BY THE AO. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DIRECTING THE ASSESSIN G OFFICER TO INCLUDE THE SAME AS CASH INFLOW BY CONSIDERING FRESH MATERIALS IN VIO LATION OF RULE 46A OF THE INCOME TAX RULES. THE ASSESSEE IS AGGRIEVED, SINCE THE LD CIT(A) DID NOT DELETE THE ADDITION OF RS.6,43,426/- MADE BY THE AO. 7.1 THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD SHO WN THE CAPITAL BALANCE AS ON 31.3.2004 AT RS.12,64,381/- IN THE BALANCE SHEET AS AT 31.3.2004, WHILE THE OPENING BALANCE OF CAPITAL ACCOUNT AS ON 1.4.2004 W AS SHOWN AT RS.6,20,955/- IN THE SUCCEEDING YEARS BALANCE SHEET, I.E., BALAN CE SHEET AS AT 31.3.2005. IN THE CASH FLOW STATEMENT SUBMITTED BY THE ASSESSEE, THE DIFFERENCE BETWEEN THE ABOVE SAID TWO FIGURES AMOUNTING TO RS.6,43,426/- W AS SHOWN AS CASH INFLOW. SINCE THE ASSESSEE DID NOT OFFER SATISFACTORY EXPLA NATION FOR THIS DIFFERENCE, THE AO ASSESSED THE ABOVE SAID AMOUNT AS INCOME OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT INCLUDE THE SAME AS CASH INFLOW IN THE REVISED CASH FLOW STATEMENT PREPARED BY HIM, EVEN THOUGH HE HAD CONSI DERED THE SAME AS THE INCOME OF THE ASSESSEE. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 9 7.2 BEFORE LD CIT(A), THE ASSESSEE PRODUCED TWO DIFFERENT BALANCE SHEETS FOR THE YEAR ENDING 31.3.2004. WHILE ONE BALANCE SHEET DISCLOSED THE CAPITAL BALANCE AT RS.12,64,381/-, ANOTHER BALANCE SHEET DI SCLOSED THE CAPITAL BALANCE AT RS.6,20,955/-. THE ASSESSEE RECONCILED THE DIFFERE NCE AS UNDER:- (A) IN THE CAPITAL BALANCE OF RS.12,64,381/-, LOAN AMOU NT OF RS.84,000/- OBTAINED FROM MR. PAUL WAS WRONGLY INCLUDED. (B) THE SAID BALANCE SHEET DISCLOSED SUNDRY DEBTORS BA LANCE OF RS.5,59,426/- IN THE ASSET SIDE OF THE BALANCE SHEE T WITH CORRESPONDING CREDIT TO THE CAPITAL BALANCE IN THE LIABILITY SIDE. (C) IN ANOTHER BALANCE SHEET PREPARED FOR THE YEAR ENDI NG 31.3.2004, THE LOAN OBTAINED FROM MR. PAUL WAS SHOWN SEPARATELY UN DER THE HEAD LOANS AND ADVANCES, WHICH RESULTED IN REDUCTION O F CAPITAL BALANCE BY RS.84,000/-. SIMILARLY, THE SUNDRY DEBTORS BALA NCE OF RS.5,59,426/- DO NOT FIND PLACE IN THAT BALANCE SHEET AND THE COR RESPONDING REDUCTION WAS MADE IN THE CAPITAL BALANCE. THUS TH E REDUCTION OF RS.6,43,426/- IN THE CAPITAL ACCOUNT BALANCE WAS EX PLAINED TO BE FOR THE FOLLOWING REASONS / ADJUSTMENTS:- LOAN TAKEN FROM MR. PAUL SHOWN SEPARATELY - 84,000 SUNDRY DEBTORS BALANCE REALIZED AND DRAWN BY THE ASSESSEE - 5,59,426 -------------- 6,43,426 ======== ACCORDINGLY, THE ASSESSEE CLAIMED THAT THE REDUCTIO N IN THE AMOUNT OF CAPITAL BALANCE TO THE TUNE OF RS.6,43,426/- REPRESENTS HIS DRAWINGS AND HENCE THE SAME SHOULD BE CONSIDERED AS CASH IN FLOW. THE LD CIT(A) WAS CONVINCED WITH THE SAID EXPLANATION AND ACCORDINGLY DIRECTED THE A O TO INCLUDE THE ABOVE SAID AMOUNT AS CASH INFLOW IN THE CASH FLOW STATEMENT. H OWEVER, HE DID NOT ADJUDICATE THE ISSUE RELATING THE ADDITION OF EQUAL AMOUNT MADE BY THE AO. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 10 7.3 WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. THERE SHOULD NOT BE ANY DISPUTE THAT THE FINANCIAL STATEMENTS VIZ., THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET ARE PREPARED ON THE BASIS OF ENTRIES AVAILABLE IN THE BOOKS OF ACCOUNTS. HENCE, THE FIN ANCIAL STATEMENTS WILL BE MODIFIED / AMENDED ONLY IF SOME CORRECTION IS MADE IN THE BOOKS OF ORIGINAL ENTRY OR IF DIFFERENT TREATMENT WAS PROPOSED TO BE GIVEN TO PARTICULAR ITEM OF INCOME OR EXPENDITURE. FOR EXAMPLE, AN ITEM OF EXPE NDITURE MIGHT BE TREATED AS CAPITAL EXPENDITURE INITIALLY AND MAY BE CONSIDERED AS REVENUE EXPENDITURE SUBSEQUENTLY, WHICH WOULD WARRANT REVISION OF FINAN CIAL STATEMENTS. HOWEVER, WE NOTICE THAT BOTH THE BALANCE SHEETS AS AT 31.3.2 004 HAVE BEEN CERTIFIED BY THE AUDITORS OF THE ASSESSEE ON THE SAME DATE, I.E. , ON 26.10.2004. IT IS NOT COMPREHENSIBLE AS TO HOW THE AUDITORS ARE CERTIFYIN G TWO DIFFERENT BALANCE SHEET AS AT 31.3.2004 ON THE VERY SAME DATE WITHOUT GIVIN G ANY REASON. WE FURTHER NOTICE THAT THE ASSESSEE SEEMS TO HAVE NOT EXPLAINE D THE DIFFERENCE BY PLACING RELIANCE ON THE BOOKS OF ORIGINAL ENTRY. THE REASO NS GIVEN BY THE ASSESSEE FOR THE DIFFERENCE VIZ., THE LOAN FROM MR. PAUL AND THE OMISSION OF SUNDRY DEBTORS ACCOUNT IS ONLY AN ATTEMPT TO RECONCILE THE DIFFERE NCE AND IT DOES NOT PROVE THAT THE ASSESSEE HAS ACTUALLY REALIZED MONEY FROM THE S UNDRY DEBTORS AND THE ASSESSEE DRAWN THE MONEY. EVEN, IF IT IS CONSIDERED THAT THE EXPLANATION OF THE ASSESSEE IS CORRECT, THE ABOVE SAID ADJUSTMENTS WOU LD GIVE RISE TO A CASH FLOW OF RS.5,59,426/- ONLY, BEING THE ALLEGED REALIZATION O F SUNDRY DEBTORS BALANCE AND NOT RS.6,43,426/- AS CONTENDED BY THE ASSESSEE. TH E LOAN TAKEN FROM MR. PAUL IS GETTING SHIFTED FROM CAPITAL ACCOUNT TO LOANS A ND ADVANCES ACCOUNT AND THE SAME WOULD NOT GIVE RISE TO CASH INFLOW. 7.4 IN OUR VIEW, THE CLAIM OF AVAILABILITY OF CASH DRAWINGS, AT LEAST TO THE EXTENT OF RS.5,59,426/- COULD BE ACCEPTED, IF THE A SSESSEE HAD PROVED THAT THE REALIZATION OF SUNDRY DEBTORS BALANCE BY GIVING FUL L DETAILS THEREOF, VIZ., THE NAME OF THE DEBTORS, THE AMOUNT DUE FROM EACH OF THEM, T HE DETAILS OF RECEIPT OF I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 11 MONEY FROM THEM, THE DETAILS OF WITHDRAWALS MADE BY THE ASSESSEE ETC. THE ASSESSEE SHOULD HAVE ALSO PRODUCED THE BOOKS OF ACC OUNTS. APPARENTLY, THE ASSESSEE HAS FAILED TO FURNISH THE RELEVANT DETAILS . BESIDES THE ABOVE, THE ASSESSEE HAS NOT OFFERED ANY SATISFACTORY EXPLANATI ON WHICH COMPELLED THE ASSESSEE TO PREPARE TWO DIFFERENT BALANCE SHEETS FO R THE YEAR ENDING 31.3.2004. ACCORDINGLY, IN OUR VIEW, THE ASSESSEE HAS NOT SUBS TANTIATED THE CLAIM OF DRAWINGS OUT OF SUNDRY DEBTORS BALANCE REALIZATIONS . 7.5 A CAREFUL PERUSAL OF THE TWO DIFFERENT BALAN CE SHEET AS AT 31.3.2004 SUBMITTED BY THE ASSESSEE WOULD SHOW THAT THE DIFFE RENCE OF RS.5,59,426/- EXISTED EVEN IN THE IMMEDIATELY PRECEDING YEAR, I.E ., YEAR ENDING 31.3.2003. OPENING BALANCE AS ON 1.4.2004 WAS SHOWN AT RS.10,6 9,788.17 AND RS.5,10,362.17 IN THE ABOVE SAID BALANCE SHEETS, ME ANING THEREBY THE ASSESSEE HAD MADE SOME ADJUSTMENTS IN THE FINANCIAL YEAR 200 2-03 OR EARLIER PERIODS. HENCE, THE NORMAL INTERPRETATION THAT EMERGES IS TH AT THE ADJUSTMENTS HAVING TAKEN PLACE IN THE FINANCIAL YEAR 2002-03 OR EARLIE R PERIODS, THE CORRESPONDING CASH REALIZATION WOULD ALSO HAVE TAKEN PLACE IN THO SE YEARS OR PERIODS ONLY. IF THAT IS THE CASE, THE CLAIM OF REALIZATION OF MONEY BY THE ASSESSEE IN THE FINANCIAL YEAR 2004-05, I.E., AFTER A PERIOD OF ABOUT TWO YEA RS IS HARD TO BELIEVE AND IS ALSO NOT SUPPORTED BY THE FINANCIAL STATEMENTS FURNISHED BY THE ASSESSEE. HENCE, IN OUR VIEW, THE AMOUNT OF RS.6,43,426/- SHOWN AS CAS H INFLOW IN THE CASH FLOW STATEMENT FILED BY THE ASSESSEE HAS NOT BEEN PROPER LY EXPLAINED BY THE ASSESSEE, IN WHICH CASE, THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE SAME AS THE INCOME OF THE ASSESSEE. 7.6 SINCE, WE HAVE UPHELD THE ACTION OF THE AS SESSING OFFICER IN ASSESSING THE AMOUNT OF RS.6,43,426/- AS THE INCOME OF THE ASSESS EE, THE SAME IS REQUIRED TO BE TREATED AS CASH INFLOW IN THE REVISED CASH FLO W STATEMENT PREPARED BY THE AO. WE HAVE ALREADY NOTICED THAT THE ASSESSING OFF ICER HAS FAILED TO INCLUDE THE I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 12 SAME AS CASH INFLOW AND THE LD CIT(A) HAS DIRECTE D THE AO TO INCLUDE THE SAME IN THE CASH FLOW STATEMENT AS CASH INFLOW. IN VIEW OF THE OUR FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN GIVING THE ABOVE SAID DIRECTION. 7.7 ACCORDINGLY, WE UPHOLD THE ADDITION OF RS.6, 43,426/- MADE BY THE ASSESSING OFFICER AND ALSO UPHOLD THE DIRECTION OF THE LD CIT(A) TO TREAT THE SAME AS CASH INFLOW. ACCORDINGLY, THE APPEALS FILED B OTH THE PARTIES FOR ASSESSMENT YEAR 2005-06 STANDS DISPOSED OF. 8. WE SHALL TAKE UP THE APPEAL FILED BY THE A SSESSEE FOR ASSESSMENT YEAR 2006-07. THE FIRST GROUND AND FIFTH GROUND ARE GE NERAL IN NATURE AND HENCE THEY DO NOT REQUIRE ANY ADJUDICATION. 8.2 THE SECOND GROUND RELATES TO THE ADJUSTMENT OF OPENING CASH BALANCE. IN THE APPEAL FILED BY THE ASSESSEE FOR AY 2005-06, WE HAVE DIRECTED THE AO TO INCLUDE THE AMOUNT OF RS.6,43,426/- AS CASH INFLOW. HENCE THE CONSEQUENT ADJUSTMENT IS REQUIRED TO BE MADE IN THE CASH FLOW STATEMENT PREPARED BY THE AO FOR THIS ASSESSMENT YEAR. ACCORDINGLY, WE DIREC T THE AO TO PREPARE THE CASH FLOW STATEMENT BY CONSIDERING OUR DECISION CITED AB OVE. 8.3 THE THIRD GROUND RELATES TO THE CLAIM OF AV AILABILITY OF AGRICULTURAL INCOME. WE HAVE ALREADY DISPOSED OF THE SAME IN THE PRECEDI NG PARAGRAPHS. 8.4 THE LD A.R DID NOT PRESS THE GROUND NO.4 RE LATING TO THE ADDITION OF RS.1,50,000/- PERTAINING TO THE LOAN RECEIVED FROM THE SISTER OF ASSESSEE NAMED SMT. LOVELY JOY. ACCORDINGLY, WE DISMISS THE SAME AS WITHDRAWN. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 13 9. NOW WE SHALL TAKE UP THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2007-08. THE FIRST AND NINTH GROUNDS ARE GENERA L IN NATURE AND HENCE THEY DO NOT REQUIRE ADJUDICATION. 9.1 THE GROUND NO.2 RELATING TO THE VALIDITY OF INVOKING SEC. 69C FOR MAKING ADDITION, THE GROUND NUMBERED AS 5 TO 7 RELATING TO GROSS PROFIT ADDITION AND THE GROUND NO.8 RELATING TO THE CLAIM OF AVAILABILITY O F AGRICULTURAL INCOME HAVE ALREADY BEEN DISPOSED OF BY US IN THE PRECEDING PAR AGRAPHS. 9.2 THE LD COUNSEL FOR THE ASSESSEE DID NOT PRE SS THE GROUND NO. 3 AND 4 AND HENCE THEY ARE DISMISSED AS WITHDRAWN. 10. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 2008-09. THE FIRST AND TENTH GROUNDS ARE GENE RAL IN NATURE AND HENCE THEY DO NOT REQUIRE ADJUDICATION. 10.1 THE GROUND NO.2 RELATING TO THE VALIDITY O F INVOKING SEC. 69C FOR MAKING ADDITION, THE GROUND NUMBERED AS 6 TO 8 RELATING TO GROSS PROFIT ADDITION AND THE GROUND NO.9 RELATING TO THE CLAIM OF AVAILABILITY O F AGRICULTURAL INCOME HAVE ALREADY BEEN DISPOSED OF BY US IN THE PRECEDING PAR AGRAPHS. 10.2 THE LD A.R DID NOT PRESS THE GROUND NO.3 AN D GROUND NO.4 AT THE TIME OF HEARING AND HENCE THEY ARE DISMISSED AS WITHDRAWN. 10.3 THE GROUND NO.5 RELATES TO THE ADDITION OF R S.15,75,000/-. FROM THE BALANCE SHEET FILED FOR THE ASSESSEES PROPRIETARY BUSINESS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED FRESH UNSECU RED LOANS FROM FRIENDS AND RELATIVES TO THE TUNE OF RS.15.75 LAKHS. SINCE THE ASSESSEE DID NOT FURNISH CONFIRMATION LETTERS FROM THE CREDITORS, THE ASSESS ING OFFICER ASSESSED THE ABOVE I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 14 SAID AMOUNT AS INCOME OF THE ASSESSEE. THE ASSESSE E DID NOT AGITATE THIS ADDITION BEFORE LD CIT(A). 10.4 BEFORE US, IT IS SUBMITTED THAT THE ASSESSI NG OFFICER HAS ASSESSED THE CASH SHORTAGE OF RS.15,23,692/- WORKED OUT BY HIM BY RECASTING THE CASH FLOW STATEMENT. IT WAS FURTHER SUBMITTED THAT THE ASSES SING OFFICER HAS ALSO ASSESSED THE CASH CREDIT AMOUNT OF RS.15.75 LAKHS AS THE INC OME OF THE ASSESSEE AND THE SAME HAS ALSO BEEN ACCEPTED BY THE ASSESSEE. ACCOR DINGLY, IT WAS SUBMITTED THAT THE CASH CREDIT ADDITION SHOULD BE SET OFF AGA INST THE ADDITION RELATING TO CASH SHORTAGE. 10.5 HOWEVER, WE DO NOT FIND MERIT IN THE SAID SUBMISSIONS. WE HAVE ALREADY NOTICED THAT THE ASSESSEE HAS DISCLOSED LOAN AMOUNT OF RS.15.75 LAKHS IN HIS PROPRIETARY BUSINESS, MEANING THEREBY THE SAID LOAN GOT FULLY UTILIZED IN HIS BUSINESS CONCERN. THE CASH FLOW STATEMENT IS PREPA RED BY CONSIDERING THE DRAWINGS MADE FORM BUSINESS CONCERN AND OTHER SOURC ES AVAILABLE OUTSIDE THE BUSINESS. HENCE, THE CASH SHORTAGE WORKED OUT BY T HE ASSESSING OFFICER IS ALTOGETHER DIFFERENT ITEM AND IT DOES NOT HAVE ANY RELATIONSHIP WITH THE CASH CREDIT ADDITION. HENCE, THE SET OFF CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED. ACCORDINGLY, WE DISMISS THIS GROUND OF THE ASSESSEE . 11. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR ASSESSMENT YEAR 2009-10. THE FIRST AND NINTH GROUNDS ARE GE NERAL IN NATURE AND THEY DO NOT REQUIRE ADJUDICATION. 11.1 THE GROUND NO.2 RELATING TO THE VALIDITY O F INVOKING SEC. 69C FOR MAKING ADDITION, THE GROUND NUMBERED AS 5 TO 7 RELATING TO GROSS PROFIT ADDITION AND THE GROUND NO.8 RELATING TO THE CLAIM OF AVAILABILITY O F AGRICULTURAL INCOME HAVE ALREADY BEEN DISPOSED OF BY US IN THE PRECEDING PAR AGRAPHS. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 15 11.2 IN GROUND NO.3, THE ASSESSEE IS CHALLENGING THE ADDITION RELATING TO EXTRA CONSIDERATION PAID BY THE ASSESSEE ON THE PURCHASE OF NELLAI PROPERTY. THE FACTS RELATING TO THE SAME ARE DISCUSSED IN BRIEF. THE ASSESSEE ALONG WITH THREE OTHER PERSONS NAMED SHRI E.N. GOPAKUMAR, SHRI C.O. J OHNY AND SHRI JOBY, PURCHASED 1 ACRE AND 95 CENTS OF LAND AT A PLACE CA LLED NELLAI, THRISSUR. THE PURCHASE CONSIDERATION WAS SHOWN IN THE CONVEYANCE DEED AT RS.25.00 LAKHS. AS PER THE AO, A SWORN STATEMENT WAS TAKEN FROM SHRI E. N. GOPAKUMAR, ONE OF THE CO-PURCHASERS AND HE CONFESSED THAT THE ABOVE SAID PROPERTY WAS PURCHASED FOR RS.50.00 LAKHS AND FURTHER EXPENSES OF RS.3.00 LAKH S WAS ALSO INCURRED. BY PLACING RELIANCE ON THE SAID STATEMENT, THE AO WORK ED OUT THE SHARE OF THE ASSESSEE IN THE PURCHASE COST AT RS.13.25 LAKHS. H OWEVER, IN THE CASH FLOW STATEMENT, THE ASSESSEE HAD SHOWN HIS SHARE OF PURC HASE COST AT RS.7.00 LAKHS ONLY. THE AO OFFERED AN OPPORTUNITY TO THE ASSESSE E TO CROSS EXAMINE SHRI GOPAKUMAR. HOWEVER, THE ASSESSEE APPEARS TO HAVE N OT AVAILED THE SAID OPPORTUNITY AND HENCE THE AO INCLUDED THE DIFFERENC E AMOUNT OF RS.6.25 LAKHS (13.25 LESS 7.00) AS CASH OUTFLOW IN THE CASH FLO W STATEMENT. SINCE THE ASSESSEE DID NOT AVAIL THE OPPORTUNITY TO CROSS EXA MINE SHRI GOPAKUMAR, THE LD CIT(A) CONFIRMED THE ACTION OF THE AO. 11.3 THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN THE ADVERSE DECISION WITHOUT EXAMINING THE OT HER CO-OWNERS AND SELLER OF THE PROPERTY. ACCORDING TO LD A.R, THE ASSESSING O FFICER SHOULD HAVE ALSO EXAMINED THE SUB-REGISTRAR AND WITNESSES ALSO TO CO RROBORATE THE STATEMENT GIVEN BY SHRI GOPAKUMAR. 11.4 WE ALSO HEARD LD D.R ON THIS ISSUE. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS PURCHASED THE NELLAI PROPERTY ALONG WITH SHRI GOPAKUMAR AND TWO OTHER PERSONS. THUS SHRI GOPAKUM AR IS ONE OF THE CO- I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 16 OWNERS OF THE NELLAI PROPERTY. THE DEPARTMENT HAS TAKEN A SWORN STATEMENT FROM SHRI GOPAKUMAR, WHEREIN HE HAS ADMITTED THAT T HE CONSIDERATION PAID FOR THE PURCHASE OF NELLAI PROPERTY WAS RS.50.00 LAKHS AND FURTHER A SUM OF RS.3.00 LAKHS WAS INCURRED TOWARDS EXPENSES. ADMITTEDLY, T HESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE DURING THE COURSE OF ASS ESSMENT PROCEEDINGS AND THE AO ALSO OFFERED AN OPPORTUNITY TO THE ASSESSEE TO C ROSS EXAMINE SHRI GOPAKUMAR. ADMITTEDLY, THE ASSESSEE DID NOT AVAIL THE SAID OPPORTUNITY, MEANING THEREBY THE ASSESSEE DID NOT HAVE ANY OTHER EXPLANATION AT THAT POINT OF TIME. NOW BEFORE LD CIT(A) AS WELL AS BEFORE US , THE ASSESSEE IS CHALLENGING THE STATEMENT GIVEN BY SHRI GOPAKUMAR. HOWEVER, W E NOTICE THAT THE ASSESSEE HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO DISP ROVE THE SWORN STATEMENT GIVEN BY ONE OF THE CO-PURCHASERS OF THE NELLAI PRO PERTY. IT IS A FACT THAT THE DETAILS OF ON-MONEY TRANSACTIONS ARE WITHIN THE PER SONAL KNOWLEDGE OF THE PARTIES ENTERING INTO THE PROPERTY TRANSACTIONS. H ENCE, IN OUR VIEW, THE STATEMENT GIVEN BY SHRI GOPAKUMAR, BEING ONE OF THE CO-PURCHASERS, CANNOT BE BRUSHED ASIDE. IN THE ABSENCE OF ANY OTHER MATERIAL TO CONTRADICT THE STATEMENT GIVEN BY SHRI GOPAKUMAR, IN OUR VIEW, THE TAX AUTHO RITIES ARE JUSTIFIED IN PLACING RELIANCE ON IT. ACCORDINGLY, IN OUR VIEW, THE LD C IT(A) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE AO IN INCLUDING THE EXTRA CONSIDE RATION AS AN ITEM OF CASH OUTFLOW IN THE CASH FLOW STATEMENT. 11.5 IN GROUND NO. 4, THE ASSESSEE IS SEEKING A DIRECTION TO THE AO TO MAKE NECESSARY ADJUSTMENTS IN THE CASH FLOW STATEMENT PR EPARED BY HIM IN TERMS OF THE DECISION TAKEN ON VARIOUS ISSUES. AS SUBMITTED BY LD A.R, THE DECISION TAKEN BY US ON VARIOUS ISSUES WOULD HAVE CONSEQUENTIAL EF FECT ON THE CASH FLOW STATEMENT PREPARED BY THE AO AND CONSEQUENTLY, THE QUANTUM OF ADDITION RELATING TO CASH SHORTAGE WOULD ALSO UNDERGO A CH ANGE. ACCORDINGLY, WE DIRECT THE AO TO PREPARE A FRESH CASH FLOW STATEMENT BY CO NSIDERING THE DECISION RENDERED ON VARIOUS ISSUES BY US. IF THE DECISION RENDERED BY LD CIT(A) ON ANY I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 17 OF THE ISSUES HAS NOT BEEN CONTESTED BEFORE US, THE N THE ADJUSTMENT IS REQUIRED TO BE MADE IN ACCORDANCE WITH THE DECISION RENDERED BY LD CIT(A) ON THOSE ISSUES. 12. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH E REVENUE FOR THE ASSESSMENT YEAR 2009-10. THE REVENUE IS CHALLENGING THE DECIS ION OF LD CIT(A) IN ACCEPTING THE CLAIM OF REFUND OF ADVANCE AMOUNT OF RS.10.00 L AKHS BY MR. ROBIN. THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF. IN THE CASH FLOW STATEMENT, THE ASSESSEE HAS SHOWN RS.10.00 AS CASH INFLOW, WHICH W AS CLAIMED TO REFUND OF ADVANCE AMOUNT GIVEN TO MR. ROBIN EARLIER. IT APPE ARS THAT THE ADIT HAD RECORDED A STATEMENT FROM HIM AND IN THAT STATEMENT ; MR. ROBIN APPEARS TO HAVE DENIED THE TRANSACTION RELATING TO THE REFUND OF RS .10.00 LACS CITED ABOVE. ACCORDINGLY, THE AO DID NOT INCLUDE THE SAME AS AN ITEM OF CASH INFLOW IN THE RE-CAST CASH FLOW STATEMENT PREPARED BY HIM. 12.1 THE LD CIT(A) NOTICED THAT THE ADVANCE OF RS.10.00 LAKHS GIVEN TO MR. ROBIN WAS SHOWN AS CASH OUTFLOW IN THE CASH FLOW ST ATEMENT PREPARED BY THE ASSESSING OFFICER HIMSELF FOR THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2008-09. THE ABOVE SAID ADVANCE WAS CLAIMED TO HAVE BEEN PAI D FOR PURCHASE OF 18.5 CENTS OF LAND BELONGING TO MR. ROBIN. THE LD CIT(A ) NOTICED THAT ABOVE SAID LAND WAS SOLD BY MR. ROBIN TO BINOY THOMAS VIDE DOC . NO.5011/1/2008 AND NOT TO THE ASSESSEE. ACCORDINGLY, IT WAS CLAIMED THAT MR. ROBIN RETURNED THE ADVANCE AMOUNT OF RS.10.00 LAKHS TO THE ASSESSEE. THE LD CIT(A) ALSO NOTICED THAT THE ASSESSEE HAD FILED A CONFIRMATION LETTER O BTAINED FROM MR. ROBIN IN THIS REGARD BEFORE THE AO. BEFORE LD CIT(A), THE ASSESS EE ALSO FURNISHED A COPY OF ASSESSMENT ORDER PASSED IN THE HANDS OF BINOY THOMA S. BY CONSIDERING ALL THE ABOVE SAID DOCUMENTS, THE LD CIT(A) WAS CONVINCED W ITH THE CLAIM OF THE ASSESSEE AND ACCORDINGLY ALLOWED THE APPEAL ON THIS POINT. THE REVENUE IS AGGRIEVED BY THE SAID DECISION. I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 18 12.2 ACCORDING TO LD D.R, THE LD CIT(A) HAS VIO LATED RULE 46A OF THE INCOME TAX RULES BY CONSIDERING THE FRESH DOCUMENTS IN THE NATURE OF ASSESSMENT ORDER OF MR. BINOY THOMAS. FURTHER THE LD D.R SUBMITTED THAT THE LD CIT(A) HAS IGNORED THE STATEMENT GIVEN BY MR. ROBIN BEFORE ADI T. ON THE OTHER HAND THE LD A.R SUBMITTED THAT THE ADIT HAS TAKEN STATEMENT FROM MR. ROBIN AFTER EXPIRY OF ABOUT SIX MONTHS FROM THE DATE OF SEARCH, WHEREI N HE HAD RETRACTED FROM HIS EARLIER STATEMENT. THE LD A.R SUBMITTED THAT THE S TATEMENT GIVEN BY MR. ROBIN SUBSEQUENT TO THE DATE OF SEARCH SHALL NOT HAVE BIN DING EFFECT AND HENCE THE AO SHOULD NOT HAVE PLACED RELIANCE ON THE SAME. 12.3 WE HAVE HEARD RIVAL CONTENTIONS ON THIS IS SUE. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS DECLARED PAYMENT OF ADVANCE OF RS. 10.00 LAKHS TO MR. ROBIN IN THE CASH FLOW STATEMENT FILED FOR THE FINANCIAL YEA R RELEVANT TO THE ASSESSMENT YEAR 2008-09. WE NOTICE THAT THE ASSESSING OFFICER HAS ALSO ACCEPTED THE SAID PAYMENT AND HAS ACCORDINGLY SHOWN THE SAME AS AN IT EM OF CASH OUTFLOW IN THE RECAST CASH FLOW STATEMENT PREPARED BY HIM. NOW TH E CLAIM OF THE ASSESSEE IS THAT HE HAS RECEIVED BACK THE SAID ADVANCE, BUT THE SAME HAS NOT BEEN ACCEPTED BY THE AO, ONLY FOR THE REASON THAT MR. ROBIN DENIE D THE REFUND OF ADVANCE AMOUNT IN THE STATEMENT TAKEN FROM HIM BY ADIT. HOWEVER, THE FACT REMAINS THAT THE ASSESSEE HAD GIVEN THE IMPUGNED ADVANCE AM OUNT IN CONNECTION WITH THE PURCHASE OF LAND FROM MR. ROBIN AND FURTHER THE SAID LAND WAS NOT PURCHASED BY THE ASSESSEE, BUT BY ANOTHER PERSON NAMED MR. BI NOY THOMAS. ACCORDING TO LD A.R, THE ASSESSMENT OF MR. BINOY THOMAS WAS COMP LETED BY THE VERY SAME ASSESSING OFFICER AND HENCE THE ABOVE SAID FACTS AR E WITHIN HIS PERSONAL KNOWLEDGE. FURTHER, ACCORDING TO THE ASSESSEE, HE HAS FURNISHED A CONFIRMATION LETTER OBTAINED FROM MR. ROBIN TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS QUIET POSSIBLE THAT THE SELLER OF A PROPERTY WOULD REFUND THE ADVANCE AMOUNT, IF THE TRANSACTION DID NOT GO THROU GH, UNLESS THE AGREEMENT I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 19 ENTERED BETWEEN THE PARTIES PROVIDE FOR FORFEITURE OF ADVANCE. IN THE INSTANT CASE, IT WAS NOT SHOWN TO US THAT THE AGREEMENT ENT ERED BETWEEN THE ASSESSEE AND MR. ROBIN DID CONTAIN A CLAUSE FOR SUCH FORFEIT URE. HENCE, IN OUR VIEW, THE SURROUNDING CIRCUMSTANCES AND THE FACTS DISCUSSED A BOVE WOULD GO TO SUPPORT THE CASE OF THE ASSESSEE. SINCE THE LAND WAS NOT P URCHASED BY THE ASSESSEE, IT IS PROBABLE THAT MR. ROBIN WOULD HAVE RETURNED BACK THE ADVANCE AMOUNT. THOUGH THE REVENUE IS CONTENDING ABOUT THE VIOLATIO N OF RULE 46A IN CONSIDERING THE ASSESSMENT ORDER OF MR. BINOY THOMAS, IN OUR VI EW, THE DECISION WOULD NOT CHANGE EVEN IF IT WAS NOT CONSIDERED. SIMILARLY, T HE STATEMENT GIVEN BY MR. ROBIN RETRACTING HIS EARLIER CONFIRMATION LETTER, I N OUR VIEW, WOULD NOT HAVE ANY CREDENCE, IF THE FACTS AND SURROUNDING CIRCUMSTANCE S ARE CONSIDERED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DE CISION OF LD CIT(A) ON THIS ISSUE. 13. WE SHALL NOW TAKE UP THE APPEAL FILED BY TH E ASSESSEE FOR THE ASSESSMENT YEAR 2010-11. THE GROUND NO.1 AND 8 ARE GENERAL IN NATURE AND HENCE THEY DO NOT REQUIRE ADJUDICATION. 13.1 THE GROUND NO.2 RELATING TO THE VALIDITY OF INVOKING SEC. 69C FOR MAKING ADDITION, THE GROUND NUMBERED AS 4 TO 6 RELATING TO GROSS PROFIT ADDITION AND THE GROUND NO.7 RELATING TO THE CLAIM OF AVAILABILITY O F AGRICULTURAL INCOME HAVE ALREADY BEEN DISPOSED OF BY US IN THE PRECEDING PAR AGRAPHS. 13.2 IN GROUND NO. 3, THE ASSESSEE IS SEEKING A DIRECTION WITH REGARD TO THE ADJUSTMENT OF CASH FLOW STATEMENT PREPARED BY THE A O IN TERMS OF THE DECISION TAKEN ON VARIOUS ISSUES. AS SUBMITTED BY LD A.R, T HE DECISION TAKEN BY US ON VARIOUS ISSUES WOULD HAVE CONSEQUENTIAL EFFECT ON T HE CASH FLOW STATEMENT PREPARED BY THE AO AND CONSEQUENTLY, THE QUANTUM OF ADDITION TOWARDS CASH SHORTAGE WOULD ALSO UNDERGO A CHANGE. ACCORDINGLY , WE DIRECT THE AO TO I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 20 PREPARE A FRESH CASH FLOW STATEMENT BY CONSIDERING THE DECISION RENDERED ON VARIOUS ISSUES BY US. IF THE DECISION RENDERED BY LD CIT(A) ON ANY OF THE ISSUES HAS NOT BEEN CONTESTED BEFORE US, THEN THE ADJUSTME NT IS REQUIRED TO BE MADE IN ACCORDANCE WITH THE DECISION RENDERED BY LD CIT(A). 14 NOW WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2010-11. THE REVENUE IS CHALLENGING THE DECIS ION OF LD CIT(A) IN ACCEPTING THE LOAN AMOUNT OF RS.16.00 LAKHS RECEIVED FROM SMT . NOBY AUGUSTINE. THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF. IN THE CASH FLOW STATEMENT, THE ASSESSEE HAD SHOWN LOAN AMOUNT OF RS.16.00 RECEIVED FROM SMT. NOBY AUGUSTINE AS AN ITEM OF CASH INFLOW. THOUGH THE ASSESSEE FURNISHED A CONFIRMATION OBTAINED FROM THE ABOVE SAID CREDITOR, YET THE AO FELT THAT THE ASSESSEE HAS FAILED TO PROVE THE LOAN RECEIPT BY ES TABLISHING THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR AND GENUINENESS O F TRANSACTIONS. ACCORDINGLY, THE AO DID NOT INCLUDE THE SAME AS A SOURCE IN THE RE-CAST CASH FLOW STATEMENT PREPARED BY HIM. THE LD CIT(A), HOWEVER, ACCEPTED THE LOAN RECEIPT WITH THE FOLLOWING OBSERVATION:- 13.4 IN RESPECT OF LOAN FROM NOBY AUGUSTINE, THE LD AR CONTENDS THAT NOBY AUGUSTINE HAS CONFIRMED THE LOAN. AMOUNT IS P AID THROUGH BANK. BANK ACCOUNT STATEMENT IS PRODUCED. THE AO DID NOT SUMMON HER OR TOOK HER STATEMENT. SHE IS THE SISTER OF THE APPELLANT. THE AMOUNT IS GIVEN FOR THE ASSESSEES BUSINESS PURPOSES. CONSIDERING THES E FACTS, THE LOAN FROM NOBY AUGUSTINE MAY BE TREATED AS GENUINE. AGGRIEVED, THE REVENUE IS CONTESTING THE DECISION O F LD CIT(A) ON THIS ISSUE. 14.1 THE LD D.R, BY PLACING RELIANCE ON THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. P.P. GANAPATHY (254 CTR 336) , SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF TRA NSACTIONS. 14.2 HOWEVER, THE LD A.R CONTENDED THAT THE ASS ESSEE HAS PROVED THE CASH CREDIT. HE FURTHER SUBMITTED THAT THE DECISION OF HONBLE SUPREME COURT I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 21 RENDERED IN THE CASE OF P.P.GANAPATHY (SUPRA) SHALL NOT BE APPLICABLE, BUT THE DECISION RENDERED BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS P LTD (319 ITR (ST.) 5) SHALL BE APPLICABLE, WHEREIN THE APEX COURT HAS HELD THAT THE DEPARTMENT COULD ENQUIRE ABOUT THE GE NUINENESS OF TRANSACTIONS, IF THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITORS ARE PROVED. 14.3 WE HAVE HEARD RIVAL CONTENTIONS ON THIS IS SUE. WE EXTRACT BELOW THE OBSERVATIONS MADE BY THE AO ON THIS ISSUE:- 4.3 THE ASSESSEE HAS CLAIMED A LOAN OF RS.16,00, 000 FROM NOBY AUGUSTINE. THE ASSESSEE HAS FURNISHED A CONFIRMATI ON WHERE IT IS STATED I NOBY AUGUSTINE, THIRUTHANATHIL HOUSE, MANJAPRA N OW RESIDING AT MALABAR TECHNICAL COMPANY, SHARJA, UAE, P.BOX NO.308 70 HAVE ADVANCED RS.16 LAKHS ON VARIOUS DATES AS PER BANK ACCOUNT CS B A/C NO. 016700689378191001. THIS IS NRE A/C. THE AMOUNT A DVANCED IS FOR BUSINESS PURPOSES. A BANK STATEMENT OF THE CREDIT OR WITH CATHOLIC SYRIAN BANK, ANGAMALY HAS ALSO BEEN FURNISHED. 4.4 THE ASSESSEE HAS NOT ESTABLISHED THE IDENTI TY AND CREDITWORTHINESS OF THE CREDITOR. THE GENUINENESS OF THE TRANSACTIO N HAS ALSO NOT BEEN ESTABLISHED. IT IS SEEN FROM THE BANK ACCOUNT THAT THE WITHDRAWALS FROM THE BANK ACCOUNT ARE IN CASH. IT IS NOT CLEAR THE PURPOSE OF THESE WITHDRAWALS. UNDER THE CIRCUMSTANCES THE CREDIT IS NOT REGARDED AS GENUINE. IT IS WELL SETTLED PROPOSITION OF LAW THAT THE PRI MARY BURDEN OF PROOF IS PLACED UPON THE ASSESSEE U/S 68 OF THE ACT, I.E., THE ASSE SSEE HAS TO PROVE THREE MAIN INGREDIENTS VIZ., THE IDENTITY OF THE CREDITOR, CRE DIT WORTHINESS OF THE CREDITOR AND THE GENUINENESS OF TRANSACTIONS. IF THE ASSESSEE F AILS TO PROVE ANY OF THE THREE INGREDIENTS STATED ABOVE, HE CANNOT BE SAID TO HAVE DISCHARGED THE PRIMARY BURDEN AND HENCE THE ADDITION U/S 68 CANNOT BE AVOI DED. IN THE INSTANT CASE, THOUGH THE ASSESSEE HAS FILED CONFIRMATION LETTER A ND BANK ACCOUNT COPIES OBTAINED FROM THE CREDITOR, YET THE OBSERVATIONS MA DE BY THE AO WOULD SHOW THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENE SS OF THE TRANSACTION. THE AO HAS SPECIFICALLY OBSERVED THAT THE BANK ACCOUNT OF THE CREDITOR MAINTAINED WITH CATHOLIC SYRIAN BANK ONLY SHOW CASH WITHDRAWAL S AND THE ASSESSEE HAS I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 22 FAILED TO ESTABLISH THE NEXUS BETWEEN THE SAID CASH WITHDRAWALS AND THE LOAN RECEIVED BY HIM. BEFORE US, BOTH THE PARTIES HAVE FAILED TO FURNISH COPIES OF THE CONFIRMATION LETTER AND BANK STATEMENTS. WE NOTIC E THAT THE LD CIT(A) HAS ALSO NOT CONSIDERED THE SETTLED PRINCIPLES DISCUSSED ABO VE. THOUGH THE AO HAS OBSERVED ABOUT THE CASH WITHDRAWALS MADE FROM THE B ANK ACCOUNT OF CREDITOR, YET HE HAS NOT DISPROVED THE NEXUS, IF ANY, BETWEEN THE WITHDRAWALS AND THE LOAN AMOUNT. THE ASSESSEE HAS ALSO FAILED TO PROV E THE NEXUS. HENCE, IN OUR VIEW, THE TAX AUTHORITIES HAVE NOT PROPERLY ANALYSE D THE FACTS SURROUNDING THIS ISSUE AND ACCORDINGLY, IN OUR VIEW, IT REQUIRES FRE SH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT( A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION T O EXAMINE THIS ISSUE AFRESH BY DULY CONSIDERING THE INFORMATION AND EXPLANATION TH AT MAY BE FURNISHED BY THE ASSESSEE BEFORE HIM. THE ASSESSEE IS ALSO DIRECTED TO PROVE THE NEXUS BETWEEN THE CASH WITHDRAWALS AND LOAN RECEIPTS BY ADDUCING NECESSARY EVIDENCES. 15. THE ASSESSEE HAS FILED CROSS OBJECTIONS FOR THREE YEARS CITED ABOVE ONLY TO SUPPORT THE ORDER OF LD CIT(A). HENCE, WE DISMISS ALL OF THEM. 16. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. THE APPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2 005-06 AND 2009-10 ARE DISMISSED. THE APPEAL OF THE REVENUE FOR ASSESSMEN T YEAR 2010-11 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE CROSS OBJECT IONS FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED ON 31ST DECEMBER, 2 013 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER AC COUNTANT MEMBER PLACE: KOCHI DATED: 31ST DECEMBER, 2013 I.T.A. NOS. 432-437 & 473-475/COCH/2013 & C.O. NOS. 30-32/COCH/2013 23 GJ COPY TO: 1. SHRI T.J. AVARACHAN, THIRUTHANATHIL HOUSE, MANJA PRA, ERNAKULAM, KOCHI-683 581. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRA L CIRCLE-1, ERNAKULAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, KOCHI . 4. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN