ITO, Ward 3(2), Pune, Pune V. Shri Jitendra Navlakha, Pune

ITA 473/PUN/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2038 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-02-2013
• Assessment Year: 2000-2001
• Appeal Filed On: 18-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Keywords: Unexplained expenditure; Document seized; Opportunity of being heard; Documents seized
• Section: 69C; 132

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS. 473/PN/2011, 474/PN/2011 AND 475/PN/2011 (ASSESSMENT YEARS 2000-01, 2002-03 AND 2003-04) INCOME TAX OFFICER, WARD-3(2), PUNE. .. APPELLANT VS. JITENDRA NAVLAKHA PARTNER KAMDHENU PESTICIDES, 1118/B, LAKAKI ROAD, MODEL COLONY, PUNE 411 016 .. RESPONDENT PAN NO.AFFPN 0877C ASSESSEE BY : NONE DEPARTMENT BY : SRI D.S. KOTHARI DATE OF HEARING : 25-02-2013 DATE OF PRONOUNCEMENT : 25-02-2013 ORDER PER R.K. PANDA, AM : THE ABOVE 3 APPEALS FILED BY THE REVENUE ARE DIREC TED AGAINST THE COMMON ORDER DATED 27-01-2011 OF THE CIT(A)-II, PUNE RELATING TO ASSES SMENT YEARS 2000-01, 2002-03 AND 2003- 04 RESPECTIVELY. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. DESPITE SERVICE OF NOTICE THROUGH THE DEPARTMENT NOBODY APPEARED ON BEHALF OF THE ASSESSEE. IT WAS SEEN FROM THE RECORDS THAT THE AS SESSEE HAD NEVER APPEARED BEFORE THE ASSESSING OFFICER FOR WHICH AN EXPARTE ORDER U/S.14 4 R.W.S. 153C WAS PASSED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERING T HE FACT THAT NO ONE WAS APPEARING ON BEHALF OF THE ASSESSEE ON A NUMBER OF OCCASIONS THESE APPEALS WERE TAKEN UP FOR HEARING ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. ITA NO.473/PN/2011 (2000-01) : 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND WAS THE PROPRIETOR OF M/S. KAMDHENU PESTICIDES. IN THIS CASE NOTICE U /S.153C OF THE INCOME TAX ACT DATED 29- 03-2007 WAS ISSUED AND WAS DULY SERVED ON THE ASSES SEE. IN RESPONSE TO THE SAME THE ASSESSEE VIDE LETTER DATED 03-04-2007 EXPLAINED THAT THE PRO PRIETARY CONCERN M/S. KAMDHENU PESTICIDES WAS DECLARED A SICK UNIT AND WAS DOING LITTLE JOB W ORK TO SURVIVE AND SINCE THE INCOME WAS NOT 2 TAXABLE, RETURNS WERE NOT FILED. SUBSEQUENTLY, TH E ASSESSING OFFICER ISSUED NOTICE U/S.142(1) ON VARIOUS DATES FOR WHICH THERE WAS NO COMPLIANCE. IN ABSENCE OF ANY RESPONSE IN THE FORM OF PERSONAL ATTENDANCE OR WRITTEN COMMUNICATION THE ASSESSING OFFICER PROCEEDED TO FINALISE THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE O N RECORD. 4. THE AO NOTED THAT DURING THE COURSE OF THE SEARC H OPERATION U/S 132 IN THE CASE OF SHRI SHRIRAM H. SONI ON 29.07.2003, A LARGE NUMBER OF SE IZED DOCUMENTS, BOOKS OF ACCOUNTS ETC. HAVE BEEN SEIZED, RELATING TO THE MONEY LENDING BUS INESS OF THE ASSESSEE. APART FROM THE REGULAR TRANSACTIONS RELATING TO THE FINANCE BROKER AGE, INCRIMINATING DOCUMENTS RELATING TO THE ADVANCE OF CASH LOANS RUNNING INTO SEVERAL CRORES O F RUPEES WERE FOUND AND SEIZED. THESE DOCUMENTS ARE MOSTLY IN THE FORM OF BLANK PROMISSOR Y NOTES (SIGNED BY THE BORROWERS) AND BLANK UNDATED CHEQUES DULY SIGNED BY THE BORROWERS (WITH AMOUNTS OF LOAN MENTIONED). BESIDES, THE ENTRIES IN THE CASH BOOK (OF PART PERI OD) (VIDE B.NO.100/PANCHANAMA DATED 2.8.2003), CHECKLIST OF THE BORROWERS INDICATING TH E DUE DATES OF PAYMENT OF INTEREST AND BROKERAGE TO SHRI SONI, HAVE BEEN FOUND (FOR THE PE RIOD 1.1.2000 TO31.12.2002, WITH BROKEN PERIODS) (B.NO.98 AND 99 OF THE PANCHANAMA DATED 2. 8.2003). 4.1 THE METHOD FOLLOWED BY SHRI SONI, IS THAT THE C ASH LOAN IS NORMALLY ADVANCED FOR 90 DAYS, AFTER DEDUCTING THE INTEREST AMOUNT (VARYING FROM 1.5% TO 2% P.M.) AND THE BROKERAGE AMOUNT (BETWEEN 0.25% TO 0.50% P.M.). THUS FOR A L OAN OF RS. 1 LAKH, THE BORROWER RECEIVES ONLY RS.94,750/- (AFTER DEDUCTING INTEREST OF RS.4, 500/- @ 1.5% P.M. FOR THREE MONTHS), AND BROKERAGE OF RS.750/- @ 0.25% P.M. FOR THREE MONTHS ). AT THE TIME OF BORROWING OF THE CASH LOANS, THE BORROWER HANDS OVER THE BLANK CHEQUE (OF THE FULL AMOUNT BORROWED) AND PROMISSORY NOTE. ANOTHER PROMISSORY NOTE (FOR 1% OF THE AMOUNT BORROWED), IS ALSO OBTAINED FROM THE BORROWER, WHICH IS TO KEEP TRACK OF THE IN TEREST PAYMENT ON DUE DATES BY THE BORROWER WHICH IS RECORDED. INTEREST / BROKERAGE IS PAYABLE ON DUE DATES IF THE LOAN AMOUNT IS NOT REPAID. 4.2 THE AO NOTED THAT A BLANK CHEQUE FOUND DURING T HE COURSE OF SEARCH OPERATION IN THE CASE OF SHRI SONI AS DETAILED BELOW BEAR SIGNATURE OF THE ASSESSEE : 1.) CENTRAL BANK OF INDIA, PUNE CAMP, CH EQUE NO. 524267 FOR RS.3,00,000/- 3 4.3 HE NOTED THAT THE CASH BOOK SEIZED DURING THE C OURSE OF SEARCH OPERATION ALSO CLEARLY REVEALS NAME OF THE ASSESSEE ENLISTED AMONG THE NAME OF BORROWERS. THE FACT THAT BLANK CHEQUES WERE HANDED OVER BY THE ASSESSEE JUST IFIES & PROVES THAT TRANSACTION HAS TAKEN PLACE. ACCORDING TO THE AO NO MAN OF ORDINARY PRUDE NCE WOULD HAND OVER BLANK CHEQUE WITHOUT ANY PURPOSE. THE EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATION IN THE CASE OF SHRI SONI PROVES THAT THE ASSESSEE HAS BORROWED LOA N IN CASH FROM SHRI SONI AND HAS HANDED OVER THE BLANK CHEQUE AS SECURITY FOR REPAYMENT OF THE SAID LOAN. THEREFORE, HE WAS OF THE OPINION THAT THE PROVISIONS OF SEC. 69D OF THE ACT IS SQUARELY APPLICABLE. ACCORDINGLY HE ADDED THE AMOUNT OF RS. 2 LACS TO THE TOTAL INCOME OF THE ASSESSEE U/S 69D OF THE ACT AND ALSO INITIATED PENALTY PROCEEDINGS U/S 271D FOR CONTRAVE NTION OF PROVISIONS OF SEC. 269SS OF THE ACT. HE ALSO ADDED THE INTEREST @2% P.M. AMOUNTING TO RS.12,000/- AND BROKERAGE @ 0.25% FOR 3 MONTHS AMOUNTING TO RS.1,500/- TO THE TOTAL I NCOME OF THE ASSESSEE U/S.69C OF THE ACT AS UNEXPLAINED EXPENDITURE. 5. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT TH E ASSESSEE VOLUNTARILY APPEARED BEFORE THE AO IMMEDIATELY AFTER RECEIPT OF THE NOTICE AND EXPLAINED TO HIM THAT M/S. KAMDHENU PESTICIDES WAS A PARTNERSHIP FIRM AND HE WAS ONE OF THE PARTNERS OF THE SAID FIRM. THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS STATING THERE IN THE ABOVE REFERRED FACT AND ALSO FURTHER FACTUAL INFORMATION. IT WAS FURTHER SUBMITTED THAT THE SEIZED PAPERS WHICH WERE SUPPLIED TO HIM DID NOT INDICATE THAT THE ASSESSEE HAS EVEN BOR ROWED AN AMOUNT OF ` 2 LAKHS AS ALLEGED FROM SHRI SHRIRAM H.SONI. HE HAD FLATLY DENIED TO HAVE BORROWED THE AMOUNT OF ` 2 LAKHS. 5.1 SO FAR AS THE ALLEGATION OF THE AO THAT SIGNED BLANK CHEQUE BY THE ASSESSEE WAS FOUND IN POSSESSION OF SHRI S.H. SONI DURING THE SEARCH A ND SEIZURE ACTION, IT WAS SUBMITTED THAT THE SAID CHEQUE WAS SIGNED BY THE ASSESSEE IN HIS CAPAC ITY AS POWER OF ATTORNEY HOLDER OF M/S. MAHAVIR BUILDERS. THE ASSESSEE IS NOT A PARTNER OF THE SAID FIRM. THE PROMISSORY NOTE SIGNED BY THE ASSESSEE AS POWER OF ATTORNEY HOLDER OF M/S. MAHAVIR BUILDERS IS NOT A HUNDI AND THE SAME IS SIGNED FOR AND ON BEHALF OF THE SAID FIRM. WITHOUT PREJUDICE TO THE ABOVE, IT WAS ARGUED THAT AN OPPORTUNITY TO CROSS EXAMINE SHRI S. H SONI SHOULD BE GRANTED TO THE ASSESSEE. 6. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND THE WRITTEN SUBMISSIONS FILED BEFORE HIM THE LEARNED CIT(A) CALLED FOR A REMAND R EPORT FROM THE ASSESSING OFFICER. AFTER CONSIDERING THE REMAND REPORT AND FOLLOWING THE DEC ISION OF THE TRIBUNAL IN THE CASE OF 4 HIMALAYA DISTRIBUTORS VS. ITO REPORTED IN 125 TTJ 7 05 THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER U/S.69D OF T HE INCOME TAX ACT. HE ALSO ALLOWED THE TECHNICAL GROUND RAISED BY THE ASSESSEE THAT THE AS SESSING OFFICER WAS NOT JUSTIFIED IN ASSUMING JURISDICTION U/S.153C OF THE INCOME TAX AC T SINCE HE WAS ONLY A PARTNER AND NOT THE PROPRIETOR OF M/S. KAMDHENU PESTICIDES AND THEREFOR E THE VERY BASIS FOR MAKING ADDITION IN THE HANDS OF THE ASSESSEE DID NOT SURVIVE. 6.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN ACCEPTING THE ASSESSEE'S CONTENTION REGARDING ASSUMPTION OF J URISDICTION U/S. 153C ON THE FLIMSY GROUND THAT AS THE ASSESSEE WAS ONLY A PARTNER IN A ND NOT THE PROPRIETOR OF M/S. KAMDHENU PESTICIDES, THE VERY BASIS FOR MAKING ADDI TION IN THE ASSESSEE'S CASE DID NOT SURVIVE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN GIVING UNDUE WEIGHTAGE TO THE FACTUM OF THE ASSESSEE HAVIN G SIGNED THE PROMISSORY NOTE AS AN AUTHORIZED SIGNATORY OF M/S. MAHAVIR BUILDERS IN DI SREGARD OF THE FACT THAT AS THE ASSESSEE HAD UNDENIABLY SIGNED THE SEIZED DOCUMENTS , THE ONUS LAY SQUARELY ON HIM TO PROVE THE CONTENTS OF THE SAID DOCUMENTS. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN ATTRIBUTING INFIRMITY TO THE INITIATION OF PROCEEDINGS U/S. 153 C MERELY BECAUSE THE NOTICE MENTIONED THE ASSESSEE'S NAME AS PROPRIETOR OF M/S. KAMDHENU PESTICIDES WITHOUT APPRECIATING THAT ALL THE EVIDENCES FOUND AT THE TI ME OF THE SEARCH AND RELATING TO THE ASSESSEE CLEARLY ESTABLISH THAT THE TRANSACTIONS RE FLECTED THEREIN PERTAINED TO THE ASSESSEE ONLY; AND IN THE CIRCUMSTANCES, THE MENTIO N OF THE ASSESSEE'S NAME IN THE NOTICE AS A PROPRIETOR OF M/S. KAMDHENU PESTICIDES CANNOT MAKE ANY DIFFERENCE. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN ANY CASE GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE ERROR, IF ANY, IN TH E NOTICE U/S.153C IS CURABLE WITHIN THE MEANING OF SEC. 292B OF THE INCOME-TAX ACT, 1961; A ND, IN THE CIRCUMSTANCES, SUBSTANCE AND EFFECT OUGHT NOT TO HAVE BEEN ALLOWED TO BE IGNORED ON MERE REFERENCE TO A MISTAKE OR DEFECT IN THE NOTICE. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN HOLDING AGAINST ASSUMPTION OF JURISDICTION U/S. 153C WITHOU T TAKING INTO CONSIDERATION THE FACT THAT IN THE LETTER DATED 03/04/2007 FILED BEFORE TH E ASSESSING OFFICER, THE ASSESSEE HAD MERELY RAISED CERTAIN CONTENTIONS WITHOUT CONTESTIN G ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER; AND, IN THE CIRCUMSTANCES, THE J URISDICTION CANNOT BE SUBSEQUENTLY QUESTIONED IN VIEW OF SUB.SEC. (3) OF SEC. 124 OF T HE INCOME-TAX, ACT 1961. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S. 69D OF THE INCOME-TAX ACT, , 1961 BY ROUTINELY FOLLOWING THE DECISION OF THE HON'BLE ITA T, PUNE BENCH, IN THE CASE OF HIMALAYA DISTRIBUTORS 125 TTJ 705(2009), INSTEAD OF CONFIRMI NG SUCH ADDITION. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THE CIRCUMSTANCES OF THE CASE IN TOTALIT Y AND ALSO IN FAILING TO APPRECIATE 5 THAT THE EVIDENCES SEIZED AT THE TIME OF THE SEARCH AND RELATING TO THE ASSESSEE HAD ALL THE ATTRIBUTES OF A 'HUNDI' VIZ. 3 PARTIES TO THE T RANSACTION, NAMELY, THE ASSESSEE BORROWER, THE INVESTOR AND SHRI SHRIRAM SONI, THE B ROKER; AND, THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING ADDITION ON ACCOUNT OF BORROWAL BY APPLYING THE PROVISION OF SEC. 69D OF THE INCOME-TA X ACT, 1961. 9. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN DELETING THE ADDITION BY MAKING A VERY NARROW INTERPRETATION OF 'HUNDI' WITHIN THE MEANING OF SEC. 69D OF THE ACT AND WITHOUT APPRECIATING THAT I N VIEW OF THE RELEVANT PROVISION OF THE NEGOTIABLE INSTRUMENT ACT, 1881 THE WORD 'HUNDI ' USED IN SEC. 69D REQUIRES TO BE VIEWED / INTERPRETED BROADLY; AND, SO DONE, THE SEI ZED DOCUMENTS RELATING TO THE PRESENT ASSESSEE READ WITH THE MODUS-OPERANDI ADOPT ED BY THE SHRIRAM SONI GROUP WOULD CLEARLY QUALIFY TO BE CONSIDERED AS'HUNDI'. ' 10. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) GROSSLY ERRED IN DELETING THE ADDITION MADE U/S 69C WITHOUT APPRECIATING THAT THE SEIZED DOCUMENTS RELATED TO THE ASSESSEE CONSTITUTED / CONTAINED CLEAR EVIDENCE S IN RESPECT OF UNEXPLAINED EXPENDITURE. HENCE, THE ADDITION MADE ON THIS SCORE SHOULD HAVE BEEN CONFIRMED. 11. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. 12. THE APPELLANT CRAVES LEAVE TO ADD, ALTER O R AMEND ANY OR ALL THE GROUNDS OF APPEAL. 7. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) ON A POINTED QUERY BY THE BENCH TO THE LEARNED DEPARTMENTAL REPRESENTATIVE AS TO WHAT IS THE FATE OF OTHER PERSONS WHOSE SIGNED BLANK CHEQUES WERE ALSO FOUND FROM THE PREMISES OF SHRI SHRIRAM H. SONI DURING THE COURSE OF SEARCH THE LEARNED DEPARTMENT AL REPRESENTATIVE COULD NOT THROW ANY LIGHT ON THE SAME. FURTHER, THE LEARNED DEPARTMENT AL REPRESENTATIVE EXPRESSED HIS INABILITY TO STATE AS TO WHETHER THE DECISION OF THE TRIBUNAL IN THE CASE OF HIMALAYA DISTRIBUTORS (SUPRA) HAS BEEN CHALLENGED BY THE REVENUE BEFORE THE HONB LE HIGH COURT AND ITS OUTCOME, IF ANY. IT IS SEEN THAT THE ASSESSEE HAS NOT APPEARED BEFORE T HE ASSESSING OFFICER NOR PARTICIPATED IN THE PROCEEDINGS BEFORE THE TRIBUNAL FOR WHICH CERTAIN B ASIC FACTS RELATING TO ADDITION MADE BY THE ASSESSING OFFICER AND DELETION MADE BY THE CIT(A) C OULD NOT BE ASCERTAINED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE DEEM IT PROPE R TO RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ADJUDICATE TH E ISSUE AFRESH AND IN ACCORDANCE WITH LAW IN THE LIGHT OF THE FINALITY OF THE ASSESSMENT/APPEAL IN SIMILARLY PLACED SITUATION OF OTHER PERSONS. NEEDLESS TO SAY THE ASSESSING OFFICER SHALL GIVE DU E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. WE HO LD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSES. 6 ITA NO.474/PN/2011 (2002-03) : ITA NO.475/PN/2011 (2003-04) : 8. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS RAISED IN THE ABOVE APPEALS ARE IDENTICAL TO THE GROUNDS IN ITA NO.473/PN/2011. WE HAVE ALREADY DECIDED THE ISSUES AND THE GROUNDS RAISED BY THE REVENUE HAVE BEEN ALLOWED FOR STATISTICAL PURPOSES. FOLLOWING THE SAME RATIO, THE GROUNDS RAISED BY THE REVENUE IN THE ABO VE APPEALS ARE ALSO ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, ALL THE 3 APPEALS FILED BY THE RE VENUE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARIN G ITSELF, I.E. ON 25-02-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R. K. PANDA) JUDICIAL MEMBER A CCOUNTANT MEMBER PUNE DATED: THE 25 TH FEBRUARY 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, PUNE 4. CIT-II, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE