ITO, Alappuzha V. Sri.Sudarsanan P.S., Alappuzha

ITA 517/COCH/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7207 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 05-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMR
• Assessee Lawyers: R KRISHNAN
• Keywords: Unexplained investment

Judgement Text

1 ITA NO. 517/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 517/COCH/2013 (ASSESSMENT YEAR 2005-06) ITO, WD.4 VS SHRI SUDARSANAN PS ALAPPUZHA COIR LAND EXPORTS, ASHRAMAM ROAD, AVALOOKUNNU PO ALAPPUZHA PAN : AGUPS8665H (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. LATHA V KUMR, JR DR RESPONDENT BY : SHRI R KRISHNAN DATE OF HEARING : 17-07-2014 DATE OF PRONOUNCEMENT : 19-09-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, KOCHI DATED 04-06-2013 AND PERTAINS TO AS SESSMENT YEAR 2005- 06. 2. THOUGH THE REVENUE HAS RAISED SEVERAL GROUNDS OF APPEAL, THE ISSUE RELATES TO ONLY IN RESPECT OF TWO ADDITIONS MADE BY THE ASSESSING OFFICER WHICH WERE DELETED BY THE CIT(A). THE FIRST ISSUE ARISES FOR CONSIDERATION 2 ITA NO. 517/COCH/2013 IS ADDITION OF RS.52,49,278 TOWARDS THE COST OF CLO SING STOCK ON THE BASIS OF THE AUDIT REPORT FILED WITH THE FINANCIAL INSTIT UTION. 3. SMT. LATHA V KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE ENGAGED HIMSELF IN THE BUSINESS OF MANUFACTURER AND SALE OF COIR MAT AND MATTINGS. THE ASSESSEE FILED PROFIT & LOSS ACCOUNT AND BALANCE-SHEET ALONG WITH THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05. IT WAS FOUND BY THE DEPARTMENT THAT THE ASSESSEE HAS ALSO FILED PROFIT & LOSS ACCOUNT, BALANCE-SHEET, STOCK STATEMENT AND AUDIT R EPORT IN FORM 3CB FOR THE ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 W ITH STATE BANK OF INDIA, ALAPPUZHA BRANCH. ACCORDING TO THE LD.DR, A S PER THE FINANCIAL STATEMENTS FILED WITH SBI, ALAPPUZHA BRANCH FOR THE YEAR ENDED 31-03- 2005, THE OPENING CREDIT BALANCE IN THE CAPITAL ACC OUNT IS RS.54,17,489. HOWEVER, IN THE ACCOUNTS FILED ALONG WITH THE RETUR N OF INCOME FOR THE ASSESSMENT YEAR 2004-05, THE CLOSING CREDIT BALANCE WAS SHOWN AS ON 31- 03-2004 AT RS.1,68,211. THEREFORE, THE EXCESS CAPI TAL BALANCE TO THE EXTENT OF RS.52,49,278 WAS ASSESSED AS INCOME FROM OTHER SOURCES. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSING OFFICE R COMPARED THE OPENING CAPITAL FIGURE DISCLOSED TO THE BANKERS AND CLOSING FIGURE DISCLOSED TO THE DEPARTMENT. THE CIT(A) FURTHER FOUND THAT A COMPARISON OF THE BALANCE-SHEET SUBMITTED TO THE BANK SHOWS THAT THE ASSESSEE HAD BEEN CONSISTENTLY DECLARING HIGH STOCK TO THE BANK AND O N THE CAPITAL ACCOUNT FOR 3 ITA NO. 517/COCH/2013 BOTH THE YEAR HAD AN ENHANCED FIGURE AS COMPARED TO THE BALANCE-SHEET FILED WITH THE DEPARTMENT AS ON 31-03-2004. ACCORD INGLY, A COMPARISON WAS MADE BY THE ASSESSING OFFICER ON THE OPENING BA LANCE DISCLOSED TO THE DEPARTMENT AND THE CLOSING BALANCE DISCLOSED TO THE BANKER. THE CIT(A) FOUND THAT THE FIGURE DISCLOSED EITHER TO THE BANKE R OR TO THE DEPARTMENT SHOULD BE TAKEN FOR THE PURPOSE OF COMPARISON. ACC ORDING TO THE LD.DR, ADMITTEDLY, THE ASSESSEE HAS DISCLOSED CAPITAL BALA NCE TO THE BANKER. THEREFORE, THE CAPITAL BALANCE DISCLOSED TO THE BAN KERS AS PER THE AUDITED STATEMENT SHOULD BE TAKEN FOR THE PURPOSE OF COMPUT ATION OF INCOME. 4. ON THE CONTRARY, SHRI R KRISHNAN, THE LD.REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE CAPITAL ACCOUNT AND CLOSING STOCK AND AUDITED BALANCE-SHEET TO THE BANKERS FOR THE PURPOSE OF AVAILING HIGHER AMOUNT OF LOAN. ACCORDI NG TO THE LD.REPRESENTATIVE, WHAT WAS DISCLOSED TO THE DEPART MENT IS THE ACTUAL FIGURE. THEREFORE, A COMPARISON SHOULD BE MADE EIT HER TO THE FIGURE DISCLOSED TO THE DEPARTMENT OR TO THE FIGURE DISCLO SED TO THE BANKERS. THE FIGURE DISCLOSED TO THE DEPARTMENT FOR THE ASSESSME NT YEAR 2004-05 AS CLOSING CAPITAL HAS TO BE COMPARED WITH OPENING FIG URE DISCLOSED TO THE DEPARTMENT FOR THE ASSESSMENT YEAR 2005-06. THE OP ENING BALANCE DISCLOSED TO THE DEPARTMENT CANNOT BE COMPARED WITH CLOSING BALANCE DISCLOSED TO THE BANKERS FOR THE ASSESSMENT YEAR 20 05-06. ACCORDING TO 4 ITA NO. 517/COCH/2013 THE LD.REPRESENTATIVE, IT IS A USUAL PRACTICE IN TH E BUSINESS TO BOOST THE CAPITAL AND PROFIT FOR THE PURPOSE OF AVAILING HIGH ER LOAN FROM BANKS / FINANCIAL INSTITUTIONS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FOUND BY THE CIT(A), THE ASSESSEE IS MAINTAINING TWO SETS OF ACCOUNTS UPTO A SSESSMENT YEAR 2004- 05, ONE FOR THE BANKERS AND THE OTHER FOR THE DEPAR TMENT. FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSEE FILED BALANCE- SHEET AND AUDITED STATEMENT ALONGWITH THE RETURN OF INCOME. THE ASSE SSING OFFICER COMPARING THE FIGURES DISCLOSED TO THE BANKERS FOR THE ASSESSMENT YEAR 2005-06 TO THE FIGURES DISCLOSED TO THE DEPARTMENT FOR THE ASSESSMENT YEAR 2004-05 AND MADE THE ADDITION. THIS TRIBUNAL FINDS THAT AS HELD BY THE MADRAS HIGH COURT IN CIT VS N. SWAMY (2000) 241 ITR 36 (MAD) THE TRANSACTION OF THE ASSESSEE WITH THIRD PARTIES, VIZ . BANKERS CANNOT BE THE BASIS FOR MAKING ADDITION. MOREOVER, AS FOUND BY T HE CIT(A), THE COMPARISON IF AT ALL TO BE MADE IS TO BE MADE ONLY WITH RESPECT TO THE CLOSING BALANCE DISCLOSED TO THE DEPARTMENT FOR THE ASSESSMENT YEAR 2005-06. UNFORTUNATELY, THE ASSESSING OFFICER TOOK THE CLOSING BALANCE DISCLOSED TO THE DEPARTMENT FOR ASSESSMENT YEAR 200 4-05 AND OPENING BALANCE DISCLOSED TO THE BANKER FOR ASSESSMENT YEAR 2005-06. THIS COMPARISON IS UNJUSTIFIED, THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED 5 ITA NO. 517/COCH/2013 OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADD ITION AND NO INTERFERENCE IS CALLED FOR. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDI TION OF RS.3 LAKHS TOWARDS UNEXPLAINED INVESTMENT IN THE BUILDING CONS TRUCTION. 7. SMT. LATHA V KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE ADMITTED THE COST OF CONSTRUCTION AT RS.25 LAKHS. THE ASSESSEE ADMITTEDLY AVAILED LOAN OF RS.15 LAKHS FROM STATE BANK OF INDI A. THE BALANCE OF RS.10 LAKHS NEEDS TO BE CLARIFIED. THE ASSESSEE BY A LETTER DATED 23-10- 2009 THOUGH REPLIED TO THE OTHER QUERIES HAS NOT RE PLIED THE QUERIES IN RESPECT OF SOURCE FOR THIS RS.10 LAKHS. ACCORDING TO THE LD.DR, THE ASSESSEE CONSTRUCTED A PALATIAL RESIDENTIAL BUILDIN G CONSISTING OF TWO STOREYS IN THONDANKULANGARA, ALAPPUZHA. THE ASSESS ING OFFICER, AFTER TAKING INTO CONSIDERATION THE LOAN AVAILED FROM STA TE BANK OF INDIA TO THE EXTENT OF RS.15 LAKHS AND OTHER INCOME SHOWN IN THE BALANCE-SHEET AS ON 31-03-2004, THE ADMITTED INVESTMENT, ETC. THE UNEXP LAINED INVESTMENT WAS QUANTIFIED AT RS.8,50,000. HOWEVER, ON APPEAL BY T HE ASSESSEE THE CIT(A) FOUND THAT CREDIT SHOULD BE GIVEN TO THE EXT ENT OF RS.3 LAKHS WHICH WAS ADDED ON ESTIMATE BASIS FOR THE ASSESSMENT YEAR 2003-04. AFTER DEDUCTING RS.3 LAKHS, THE CIT(A) RESTRICTED THE ADD ITION TO RS.5.5 LAKHS. 6 ITA NO. 517/COCH/2013 8. ON THE CONTRARY, SHRI R KRISHNAN, THE LD.REPRESE NTATIVE FOR THE ASSESSEE SUBMITTED THAT ADMITTEDLY, THE COST OF CON STRUCTION OF THE BUILDING IS RS.25 LAKHS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE AVAILED LOAN OF R.15 LAKHS FROM STATE BANK OF INDIA. AFTER CONSIDE RING THE PROFIT AVAILABLE, THE ASSESSING OFFICER QUANTIFIED THE UNEXPLAINED IN VESTMENT IN THE CONSTRUCTION OF BUILDING AT RS.8,50,000. IT IS ALS O NOT IN DISPUTE THAT AN ADDITION OF RS.3 LAKHS WAS MADE ON ESTIMATE BASIS F OR THE ASSESSMENT YEAR 2003-04. THEREFORE, THE ASSESSEE CONTENDED BE FORE THE CIT(A) THAT RS.3 LAKHS WHICH WAS ADDED FOR THE ASSESSMENT YEAR 2003-04 ON ESTIMATE IS ALSO AVAILABLE WITH THE ASSESSEE FOR MAKING INVE STMENT IN THE CONSTRUCTION. THIS CONTENTION WAS RIGHTLY ACCEPTED BY THE LD.CIT(A), THEREFORE, HE RESTRICTED THE ADDITION TO RS.5.5 LAK HS INSTEAD OF RS.8.5 LAKHS. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COST OF CONSTRUCTION OF THE BUILDING IS RS.25 LAKHS WHICH IS NOT IN DISPUTE. T HE LOAN AVAILED BY THE ASSESSEE FROM SBI TO THE EXTENT OF RS.15 LAKHS IS A LSO NOT IN DISPUTE. THE UNEXPLAINED INVESTMENT QUANTIFIED BY THE ASSESSING OFFICER ALSO IS NOT DISPUTED. THE CONTENTION OF THE ASSESSEE IS THAT T HE INCOME ESTIMATED FOR THE ASSESSMENT YEAR 2003-04 TO THE EXTENT OF RS.3 L AKHS IS AVAILABLE FOR MAKING INVESTMENT. IT IS NOT IN DISPUTE THAT AN AD DITION OF RS.3 LAKHS WAS ESTIMATED FOR THE ASSESSMENT YEAR 2003-04. THE CON TENTION OF THE 7 ITA NO. 517/COCH/2013 REVENUE APPEARS TO BE THAT THE ADDITION MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS DOES NOT RESULT IN CASH AVAILABILITY FOR INVESTMENT IN THE BUILDING. WHEN THE INCOME OF THE ASSESSEE WAS ESTI MATED TO THE EXTENT OF RS.3 LAKHS, IT IS NOT KNOWN WHY THAT AMOUNT SHOULD NOT BE AVAILABLE FOR MAKING INVESTMENT BY THE ASSESSEE FOR THE YEAR UNDE R CONSIDERATION. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE INCO ME ESTIMATED TO THE EXTENT OF RS.3 LAKHS FOR THE ASSESSMENT YEAR 2003-0 4 IS AVAILABLE WITH THE ASSESSEE FOR MAKING INVESTMENT IN CONSTRUCTION. TH EREFORE, THE CIT(A) HAS RIGHTLY RESTRICTED ADDITION TO RS.5.5 LAKHS. T HIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE SAME IS CONFIRMED. 10. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH SEPTEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 19 TH SEPTEMBER, 2014 PK/- COPY TO: 1. ITO, WD.4, ALAPPUZHA 2. SHRI SUDARSHAN PS, COIR LAND EXPORTS, ASHRAMAM R OIAD, AVALOOKUNNU PO, ALAPPUZHA 3. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 4. THE COMMISSIONER OF INCOME-TAX(A)-I, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH