Mr. Richard Lasrado, Mangalore V. ACIT, Mangalore

ITA 49/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1639 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-10-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 19-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: S VENKATESAN
• Keywords: Additional evidence
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.49(BANG)/2010 (ASSESSMENT YEAR: 2005-06) SHRI RICHARD LASRADO, PROP. M/S.RICHARD CONSTRUCTIONS, 1 ST FLOOR, NIRMALA SERVICE STATION, VIJODI, MANGALORE-560 002. APPELLANT VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 1(1), MANGALORE. RESPONDENT APPELLANT BY: SHRI S.VENKATESAN. RESPONDENT BY : SMT.JACINTA ZIMIK VASHAI. O R D E R PER SMT. P. MADHAVI DEVI, JM : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(APPEALS), MANGALORE, DATED 14-12-2009 FO R THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.49(BANG)/2010 PAGE 2 OF 9 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.12,05,471/- IN RESPECT OF SUNDRY CREDITORS SHOWN BY THE APPELLANT OBSERVING THAT THE APPELLANT HAD FAILED TO PROVE THE SAME UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS.10,19,915/- IN RESPECT OF LOAN CREDITORS HOLDING THE SAME TO BE UNPROVEN UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 4. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.14,16,954/- CONSIDERED AS EXCESS CLAIM IN PURCHASE OF MATERIALS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 5. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A) OUGHT NOT TO REFUSED THE BENEFIT OF TELESCOPY OF THE ADDITION TOWARDS EXCESS CLAIM OF PURCHASES WITH THE ADDITIONS MADE ON ACCOUNT OF UNPROVED CREDITORS AND HE OUGHT NOT TO HAVE UPHELD BOTH THE ADDITIONS UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR THE Y EAR CONSIDERATION ON 29-10-2005 DECLARING A TOTAL INCOM E OF RS.7,16,773/-. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED T O AS 'THE ACT'] THE AO OBSERVED THAT THE ASSESSEE, BEING A CI VIL CONTRACTOR, IS ENGAGED IN THE BUILDING CONSTRUCTION AND THEREFORE THE BOOKS OF ACCOUNT, LEDGER, BANK PASSBOOK, BILLS ETC., IN SUPPORT OF THE EXPENSES WERE ASKED TO BE PRODUCED A ND THE SAME WERE PRODUCED. ON GOING THROUGH THE ACCOUNTS, THE AO OBSERVED THAT THE ASSESSEE HAS OBTAINED UNSECURED L OANS TO THE TUNE OF RS.10,19,915/- FROM THE ASSESSEES RELATIVE S AND ALSO ITA NO.49(BANG)/2010 PAGE 3 OF 9 FROM THE SUNDRY CREDITORS TO THE TUNE OF RS.12,05,4 71/-. THE ASSESSEE WAS ASKED TO PRODUCE CONFIRMATORY LETTERS FROM THE SUNDRY CREDITORS AND ALSO UNSECURED LOAN CREDITORS. THE ASSESSEE COULD NOT FURNISH THE SAME IN SPITE OF SEV ERAL OPPORTUNITIES GIVEN TO HIM. IN VIEW OF THE SAME, T HE AO HELD THAT UNSECURED LOANS/SUNDRY CREDIT BALANCES ARE UNP ROVED AND THUS ADDED IT BACK TO THE TOTAL INCOME OF THE ASSES SEE. HE FURTHER OBSERVED THAT THE ASSESSEE HAS SUBMITTED DE TAILS OF PURCHASE OF MATERIAL AND CENTERING MATERIAL WITH SU PPORTING BILLS AND THE EXTRACT OF THE LEDGER ENTRY. FROM TH ESE DETAILS, HE OBSERVED THAT THERE ARE CERTAIN DISCREPANCIES IN TH E ACCOUNT OF PURCHASE OF MATERIAL. DISCREPANCIES WERE POINTED O UT TO THE ASSESSEE BUT THE ASSESSEE COULD NOT FILE ANY EVIDEN CE TO RECONCILE THE DISCREPANCY. THEREFORE, THE AO DISAL LOWED THE PURCHASE OF MATERIALS AMOUNTING TO RS.14,16,954/- A ND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THESE ADDITIONS, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) ALONG WITH ADDITIONAL EVID ENCE IN THE FORM OF CONFIRMATION LETTERS FROM UNSECURED CREDITO RS. IT WAS ALSO SUBMITTED THAT THE SUNDRY CREDITORS DID NOT RE PRESENT CASH CREDITS BUT ARE UNPAID EXPENSES INCURRED IN THE BUS INESS OF THE ASSESSEE AND THEREFORE THEY COULD NOT BE HELD AS UN PROVED CREDITORS MERELY BECAUSE CONFIRMATORY LETTERS WERE NOT FURNISHED WHEN THE RELATED EXPENSES HAVE BEEN ALLOW ED AND WHEN THE ASSESSEE HAD FURNISHED THE NAMES AND ADDRE SSES OF THE CREDITORS IN THE COURSE OF ASSESSMENT PROCEEDIN GS. IT WAS ITA NO.49(BANG)/2010 PAGE 4 OF 9 ALSO SUBMITTED THAT THE ASSESSEE DID NOT HAVE ACCES S TO THE UNSECURED LOAN CREDITORS AT THE TIME OF ASSESSMENT BUT NOW PRODUCED CONFIRMATION LETTERS FROM THEM AT THE APPE LLATE STAGE AS ADDITIONAL EVIDENCE. THE CIT(A) ADMITTED THE AD DITIONAL EVIDENCE FILED IN THE INTEREST OF JUSTICE AND FORWA RDED IT TO THE AO UNDER RULE 46A FOR NECESSARY VERIFICATION AND RE MAND REPORT. THE AO, IN HIS REMAND REPORT DATED 25-5-2009 SUBMIT TED THAT THE CONFIRMATORY LETTERS WERE NOTHING BUT EXTRACTS FROM THE LEDGER ACCOUNTS MAINTAINED BY THE ASSESSEE HIMSELF IN THE NAMES OF THE CREDITORS ON WHICH HE HAD NOW SIMPLY O BTAINED THE PARTYS SIGNATURE AND THESE LEDGER EXTRACTS DID NOT EVEN BEAR THE SEAL OF THE CREDITOR BUT ONLY NAMES WRITTE N IN INK BELOW THEIR SIGNATURE. HE ALSO OBSERVED THAT THE SIGNATU RES OF THE THREE LOAN CREDITORS VIZ., LANCY MORAS, WILSON LASA RADO AND LAVINA CORREA FOUND ON THE CONFIRMATION LETTERS DID NOT TALLY WITH SIGNATURES AFFIXED ON THEIR ACCOUNT COPIES AND IN SPITE OF LETTERS BEING ISSUED TO ALL THE CREDITORS TO APPEAR BEFORE HIM FOR VERIFICATION OF CREDIT BALANCES, NONE OF THEM HAD A PPEARED AND THAT THE ASSESSEE WAS NOT CO-OPERATING WITH THE DEP ARTMENT. 5. AFTER CONSIDERING THE REMAND REPORT AND THE ADDI TIONAL EVIDENCE, THE CIT(A) CALLED FOR THE ASSESSEES OBJE CTIONS ON THE REMAND REPORT BUT THE ASSESSEE WAS NOT ABLE TO RECO NCILE THE DIFFERENCES NOR PRODUCED ANY EVIDENCE TO SUBSTANTIA TE THE CREDIT BALANCES IN RESPECT OF THE PARTIES WHO HAD NOT RESP ONDED TO THE AOS LETTER. THEREAFTER, THE CIT(A) CAME TO THE CO NCLUSION THAT THE ASSESSEE FAILED TO PRODUCE PROPER EVIDENCE DESP ITE BEING ITA NO.49(BANG)/2010 PAGE 5 OF 9 GIVEN MORE THAN ADEQUATE OPPORTUNITY AND THAT THE A SSESSEE HAS NOT EXPLAINED WHY THE AOS LETTERS WERE RETURNE D BY THE POSTAL AUTHORITIES IN RESPECT OF TWO PARTIES AND AS TO WHY THE CREDITORS DID NOT TURN UP FOR VERIFICATION OF CREDI T BALANCES. HE, THEREFORE, HELD THAT THE ADDITIONAL EVIDENCE, FILED BY THE ASSESSEE THOUGH ADMITTED IN ORDER TO GIVE A FAIR CH ANCE TO THE ASSESSEE, CANNOT BE ACCEPTED AS PROOF OF THE CREDIT BALANCES CLAIMED. IN VIEW OF THE SAME, HE REJECTED THE ADDI TIONAL EVIDENCE FILED AND CONFIRMED THE ADDITION TOWARDS U NPROVED CREDITOR AS WELL AS UNPROVED UNSECURED LOAN CREDITO RS. EVEN AS REGARDS EXCESS DEBIT ON PURCHASES, THE ASSESSEE SUB MITTED THE DETAILS OF THE MATERIALS PURCHASED ALONG WITH SUPPO RTING BILLS AND LEDGER EVIDENCE BUT AS PER THE ASSESSEES OWN S UBMISSION IN HIS LETTER 24-7-2006, THE PURCHASES WERE FOR RS. 93,66,680/- AND THE DIFFERENCE OF RS.14,16,954/- COULD NOT BE E XPLAINED BY HIM. THEREFORE, THE CIT(A) HELD THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE DISCREPANCY. THE ASSESSEE HAD ALSO MAD E AN ALTERNATIVE CLAIM BEFORE THE CIT(A) THAT THE AO OUG HT TO HAVE TELESCOPED THE ADDITION MADE TOWARDS EXCESS CLAIM O F PURCHASES WITH THE ADDITIONS ON ACCOUNT OF UNPROVED CREDITORS AND OUGHT NOT TO HAVE MADE BOTH ADDITIONS SEPARATEL Y. THE CIT(A) REJECTED THIS CONTENTION OF THE ASSESSEE HOL DING THAT THE ASSESSEE HAS FAILED TO ESTABLISH SUCH DIRECT NEXUS BETWEEN THE AMOUNTS DEBITED IN THE PURCHASES ACCOUNT AND THOSE CLAIMED AS OUTSTANDING AGAINST THE CREDITORS. HE FURTHER HELD THAT NEITHER THE CREDITORS TO BE GENUINE NOR DEBITS IN THE PURCH ASE ACCOUNT ITA NO.49(BANG)/2010 PAGE 6 OF 9 TO BE CORRECT AND THEREFORE THERE IS NO CASE FOR AL LOWING THE BENEFIT OF TELESCOPING. ACCORDINGLY, THE ADDITION O F RS.14,16,954/- WAS CONFIRMED. AGGRIEVED BY THE ORD ER OF THE CIT(A) REJECTING THE ASSESSEES PRAYER FOR DELETING THE ADDITIONS, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 6. SHRI S.VENKATESAN, LEARNED COUNSEL FOR THE ASSES SEE, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE A UTHORITIES BELOW SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE CONFIRMATION LETTERS OF THE SUNDRY CREDITORS AS WEL L AS UNSECURED CREDITORS BEFORE THE CIT(A) AND HAS ALSO CO-OPERATE D WITH THE AO IN THE REMAND PROCEEDINGS. HE DREW OUR ATTENTIO N TO VARIOUS PAPERS IN THE PAPER BOOK WHICH CONTAIN THE CONFIRMATION LETTERS OF THE UNSECURED LOAN CREDITORS. HE SUBMIT TED THAT BOTH THE AO AS WELL AS THE CIT(A) HAVE NOT PROPERLY CONS IDERED THE MATERIAL FILED BEFORE THEM. SMT. JACINTA ZIMIK VASHAI, LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS NOT CO- OPERATED WITH THE DEPARTMENT NOR HAS HE ESTABLISHED HIS CLAIM WITH NECESSARY EVIDENCE AND THEREFORE THE ADDITIONS SHOULD BE CONFIRMED AS DONE BY THE AO. 7. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HA S FURNISHED CONFIRMATION LETTERS OF ALL LOAN CREDITORS BEFORE T HE CIT(A) AS ADDITIONAL EVIDENCE. AS FAR AS SUNDRY CREDITORS ARE CONCERNED, WE FIND THAT THESE REPRESENT EXPENSES INCURRED IN T HE BUSINESS ITA NO.49(BANG)/2010 PAGE 7 OF 9 OF THE ASSESSEE WHICH HAVE BEEN ALLOWED BY THE AO A ND DO NOT REPRESENT CASH CREDITS. UNDER SECTION 68 OF THE AC T, WHERE ANY SUM IS CREDITED TO IN THE BOOKS OF ACCOUNT OF THE A SSESSEE AND ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF/OR THE EXPLANATION OFFERED BY HIM IS NOT SA TISFACTORY TO THE AO, THEN IT MAY BE SO CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IN THE CASE BEFORE US IT IS THE ARGUMENT OF THE ASSESSEE THAT THESE CREDITS ARE NOTHING BUT EXPENSES WHICH HAVE BEEN ALLOWED BY THE AO AND THEREFORE CANNOT BE ADDED U/S 68 OF THE ACT. BUT NEITHER AO NOR THE CIT(A) HAVE CONSIDERED THIS ASPECT OF THE ISSUE. TH EREFORE, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7.1 AS REGARDS GROUND NO.3, WE FIND THAT THE ASSESS EE HAS FILED CONFIRMATION LETTERS FROM THE LOAN CREDIT ORS BUT THE SAME HAVE NOT BEEN PROPERLY CONSIDERED BY THE AO IN THE REMAND PROCEEDINGS OR BY THE CIT(A) IN THE APPELLAT E PROCEEDINGS. THEREFORE, IN OUR OPINION, THIS GROUN D OF APPEAL IS ALSO TO BE RECONSIDERED BY THE AO IN THE LIGHT OF C ONFIRMATION LETTERS FILED BY THE ASSESSEE. IN VIEW OF THE SAME , WE DEEM IT FIT AND PROPER TO REMIT THIS ISSUE ALSO BACK TO THE FILE OF THE AO FOR RE-CONSIDERATION IN ACCORDANCE WITH LAW. NEEDL ESS TO MENTION THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUN ITY OF HEARING ON BOTH THE ISSUES. ITA NO.49(BANG)/2010 PAGE 8 OF 9 7.2 AS REGARDS GROUND NO.4, WE FIND THAT THE ASSESS EE HAS NOT BEEN ABLE TO RECONCILE DISCREPANCY IN THE E XCESS CLAIM IN THE PURCHASE OF MATERIALS EITHER BEFORE THE AUTH ORITIES BELOW OR BEFORE US. THEREFORE, WE DO NOT SEE ANY MERIT IN THE ARGUMENT OF THE ASSESSEE TO DELETE THIS ADDITION. THEREFORE, THIS GROUND OF APPEAL IS REJECTED. 7.3 AS REGARDS GROUND NO.5, WE FIND THAT THE SUNDRY CREDITORS REPRESENT THE UNPAID EXPENSES AND NOT CAS H CREDIT AS HELD BY THE CIT(A). THEREFORE, THERE IS NO CASE FO R GIVING THE BENEFIT OF TELESCOPING OF THE ADDITION TOWARDS THE EXCESS CLAIM OF PURCHASES WITH THE ADDITIONS MADE ON ACCOUNT OF UNPROVED CREDITORS. THEREFORE, THIS GROUND OF APPEAL ALSO F AILS. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JANUARY,2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE PRESIDENT (SMT. P.MADHAVI DEVI) JUDICIAL MEMBER PLACE : BANGALORE DATED: 5 TH JANUARY, 2011. EKS ITA NO.49(BANG)/2010 PAGE 9 OF 9 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE