Sri. M.B. Shankre Gowda, Bangalore V. ITO, Bangalore

ITA 518/BANG/2011

• Counselvise Citation: 51821114 RSA 2011
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDARARAJAN
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE C BENCH, BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER I.T.A.NO.518(B)/2011 (ASSESSMENT YEAR : 2006-07) SRI M.B.SHANKRE GOWDA, NO.62/2, 27 TH CROSS, CUBBONPET MAIN ROAD, BANGALORE-560 001 PAN NO.AWPS 5660G APPELLANT VS THE INCOME-TAX OFFICER, WARD-5(1), BANGALORE. RESPONDENT ASSESSEE BY : SHRI BALRAM R RAO, ADVOCATE REVENUE BY : SHRI A. SUNDARA RAJAN, JCIT DATE OF HEARING : 24 -09-2012 DATE OF PRONOUNCEMENT : 28- 09-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 09-12-2010 OF CIT(A)-II, BANGALORE, RELATING TO ASS ESSMENT YEAR 2006-07. ITA NO.518(B)/2011 2 2. THE REVISED GROUNDS OF APPEAL RAISED BY THE ASSE SSEE READS AS FOLLOWS; 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN PASSING THE ORDER IN THE MANNER IN WHICH HE DID. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)OUGHT TO HAVE APPRECIATED THE FACT THAT THE A PPELLANT WAS HAVING SUFFICIENT AGRICULTURAL LANDS TO DERIVE INCOME THEREFROM AND THE SOURCE OF CASH DEPOSITS AMOUNTING TO RS.6,16,8917/- IN HIS SAVINGS BANK ACCOUNT WAS HIS AGRICULTURAL INCOME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE APPEL LANT HAS TAKEN LOAN FROM HIS FATHER AMOUNTING TO RS.2,96,000 /- IN VARIOUS OCCASIONS AND THUS THE ADDITION CONFIRMED I S AGAINST THE PRINCIPLE OF NATURAL JUSTICE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO WI THOUT APPRECIATING THE FACT THAT SUFFICIENT TIME WAS NOT GIVEN TO HE APPELLANT TO FURNISH THE DETAILS ABOUT APPELLANT S LAND HOLDING AND CONCLUDED THE ASSESSMENT IN HASTE. 5. WITHOUT PREJUDICE, THE ADDITIONS AS CONFIRMED B Y THE CIT(A) ARE ARBITRARY, BASELESS AND ON SURMISE AND A RE REQUIRED TO BE DELETED SUBSTANTIALLY. 6. THE CIT(A) GROSSLY ERRED IN CONFIRMING INTEREST U/S 234A,234B AND 234C OF THE ACT. 3. GROUND NO.2 & 3 ARE THE MAIN GROUNDS TO BE DEAL T WITH IN THIS APPEAL. AS FAR AS GROUND NO.2 IS CONCERNED, THE F ACTS ARE AS FOLLOWS; THE ASSESSEE IS AN INDIVIDUAL AND IS AN ADVOCATE B Y PROFESSION. IN THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAD BANK ACCOUNT WITH M/S KARNATAKA BANK LTD., CC EXTENSION, KG ROAD, BANGALORE IN WHIC H HE ASSESSEE HAD MADE CASH DEPOSITS TO THE TUNE OF RS.1 1,85,500/-. ITA NO.518(B)/2011 3 WHEN THE ASSESSEE WAS QUESTIONED ABOUT THE SOURCE O F CASH DEPOSITS IN THE BANK, THE ASSESSEE EXPLAINED THAT T HE ASSESSEE HE HAD ANCESTRAL AGRICULTURAL LANDS MEASURING ABOUT 15 ACRES AT AMBLIKAL VILLAGE, MULABAGAL TALUK, KOLAR WHERE THEY HAVE GROWN CROPS LIKE RAGI, MULBARI, TOMTO, POTATO, ETC. INCO ME DERIVED BY SELLING THE AGRICULTURAL PRODUCTS WAS EXPLAINED AS THE SOURCE OF FUNDS WHICH WAS USED FOR MAKING THE CASH DEPOSITS I N THE ASSESSEES BANK ACCOUNT BESIDES PROFESSIONAL RECEIP TS RECEIVED IN CASH. THE ASSESSEE FURNISHED COPIES OF THE BILLS, FOR HAVING SOLD AGRICULTURAL PRODUCTS WHICH ARE AS FOLLOWS; BILL DATE AMOUNT 10-04-2005 7825 03-05-2005 38250 31-07-2005 10000 02-08-2005 44250 05-08-2005 140000 25-08-2005 53010 27-08-2005 62230 29-08-2005 61100 01-09-2005 55413 02-11-2005 50000 08-11-2005 122000 25-11-2005 14200 14-12-2005 122050 10-01-2006 33925 20-01-2006 52938 05-02-2006 78500 31-03-2006 60500 TOTAL 1055441 ITA NO.518(B)/2011 4 4. THE ASSESSEE ALSO FURNISHED A JOINT AFFIDAVIT B Y ASSESSEES BROTHERS STATING THAT THE ANCESTRAL PROPERTY WAS NO T PARTITIONED AND THAT THE SAME WAS BEING CULTIVATED JOINTLY. TH E AFFIDAVIT FURTHER MENTIONS THAT THE INCOME RECEIVED FROM AGRI CULTURAL OPERATIONS WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. 5. THE AO DID NOT ACCEPT THE PLEA OF THE ASSESSEE. HE WAS OF THE VIEW THAT THERE WAS NO EVIDENCE FILED TO SHOW THAT THE FAMILY WAS HOLDING AGRICULTURAL LAND. HE WAS ALSO OF THE VIEW THAT FROM A MEAGER HOLDING OF 15 ACRES OF LAND, IT WAS NOT POSS IBLE TO EARN RS.10,54,441/-BY SALE OF AGRICULTURAL PRODUCE. T HE AO ALSO FOUND THAT THE SALE OF AGRICULTURAL PRODUCE BY THE ASSESSEEE WERE ON 17 OCCASIONS AND ON MANY SUCH OCCASIONS, THE ASS ESSEE HAS RECEIVED ABOVE RS.25,000/-. THE AO FOUND THAT THE CASH DEPOSITS IN THE BANK ACCOUNT WERE SMALL DEPOSIT BELOW RS.5,0 00/- MADE AT REGULAR INTERVALS. THE AO ALSO WAS OF THE VIEW THA T THE ASSESSEE HAS NOT EXPLAINED AS TO HOW EXPENDITURE FOR CARRYIN G OUT THE AGRICULTURAL OPERATIONS WERE MET. FOR ALL THE ABOV E REASONS, THE AO WAS OF THE VIEW THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT SATISFACTORY. THE AO HOWEVER, GAVE SOME CR EDIT FOR AGRICULTURAL INCOME AND MADE AN ADDITION OF RS.6,16 ,917/- AS UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT, BY OBSERV ING AS UNDER; HOWEVER, IN VIEW OF THE FACT THAT THE ASSESSEE HA S PRODUCED THE SALE BILL (THIS AGAIN SUBJECT TO VERIFICATION) A BENEFIT OF DOUBT TO A CERTAIN EXTENT MAY BE ALLOWED IN ASSESSEES FA VOUR. THE SAME IS WORKED OUT AS UNDER; ITA NO.518(B)/2011 5 TOTAL CASH DEPOSIT IN THE BANK ACCOUNT RS.11,85,550 A. PROFESSIONAL RECEIPTS RECEIVED IN CASH AS PER THE BOOKS RS. 1,90,913 BALANCE RS. 9,94,637 B. SET OFF AGRICULTURAL INCOME RS. 3,77,720 UNDISCLOSED INCOME RS. 6,16,917 CALCULATION FOR SET OFF AGRICULTURAL INCOME GROSS AGRICULTURAL INCOME RECEIVED AS PER BILLS RS.10,55,441 50% OF THE RECEIPT IS CONSIDERED AS EXPENDITURE FOR AGRICULTURAL OPERATION RS. 5,27,721 BALANCE RS. 5,27,720 LESS: CONSIDERED AS DRAWINGS TOWARDS THE JOINT FAMILY OF THE ASSESSEE RS.1,50,000 BALANCE AVAILABLE FOR SET OFF FOR BANK ACCOUNT RS.3,77,720 6. BEFORE THE CIT(A), THE ASSESSEE FURNISHED EVIDE NCE REGARDING HOLDING OF AGRICULTURAL LANDS BY THE ASSESSEES FAM ILY. THE OTHER SUBMISSIONS MADE BEFORE THE AO WERE REITERATED. THE CIT(A) HOWEVER, CONFIRMED THE ORDER OF THE AO FOR THE FOLL OWING REASONS; 3.1. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE APPELLANTS SUBMISSIONS AND ALSO PERUSED THE ASSESS MENT ORDER DATED 30-12-2009. THE APPELLANT SUBMITTED T HAT CASH DEPOSITED IN THE APPELLANTS BANK ACCOUNT BEARING NO.1172500100114701 TO THE EXTENT OF RS.11,85,500/- WAS CLAIMED TO BE FROM AGRICULTURAL INCOME. AT THE TIME OF APPEAL HEARING, THE APPELLANT HAS FURNISHED DETAILS OF FAM ILY TREE AND COPIES OF PHANIS (RECORD OF RIGHTS). A CLOSE VERIF ICATION OF THE PHANIS SHOW DETAILS OF AGRICULTURAL LAND HOLDING AS GIVEN BELOW; ITA NO.518(B)/2011 6 SY.NO. ACRE GUNTAS 51 1 00 52 6 19 97 1 00 131 1 04 132 O 16 134 3 34 169 5 06 TOTAL 18 39 3.2 THE AFORESAID LAND APPEARS IN THE JOINT NAMES V IZ.(III) SHRI M.CHOWDAPPA, (II) SHRI M.BYRAPPA (III) SHRI M.NARAY ANAPP, (IV) SHRI M.KRISHNAPPA AND (V)SHRI M.GOVINDAPPA. ALL OF THEM ARE SONS OF SHRI MUNIYAPPA. THE APPELLANT AND THREE BRO THERS VIZ. SHRI M.B.VENKATESH, SHRI M.B.RAMESH AND SHRI M.B.NA GARAJA ARE SONS OF LATE SHRI BYRAPPA. AFTER CONSIDERING TH EIR FAMILY TREE, THE AGRICULTURAL LAND HOLDING WOULD BE BELOW AN ACRE EACH. THUS, THE APPELLANTS SHARE OF AGRICULTURAL LAND WOULD BE LESS THAN AN ACRE. THEN BY NO STRETCH OF IMAG INATION IT CAN BE CONSTRUED THAT THE APPELLANT HAD EARNED AGRICULT URAL INCOME TO THE TUNE OF RS.9,94,637/- AFTER ALLOWING PROFESS IONAL RECEIPTS. 3.3 THE APPELLANT ALSO FURNISHED COPIES OF CASH MEM OS PURPORTED TO BE SALE OF AGRICULTURAL PRODUCE. A PE RUSAL OF THE CASH MEMO SHOWS THAT SALES ARE ALLEGED TO HAVE BEEN MADE TO TOMA TO MANDY AND S.M.T.B.S AND THE TOTAL SALES ARE CLAIMED TO BE RS.11,57,981/-. SIMILAR CASH MEMOS WERE ALSO FURNISHED BEFORE THE AO AT THE TIME OF ASSESSMENT P ROCEEDINGS TO THE EXTENT OF RS.10,55,441/-. VERIFICATION OF T HOSE CASH MEMOS SHOWS THAT THEY DO NOT MATCH WITH THE CASH ME MOS FURNISHED BEFORE THE UNDERSIGNED. FOR INSTANCE; ITA NO.518(B)/2011 7 NO DATE PRODUCED BEFORE THE UNDERSIGNED PRODUCED BEFORE THE AO I) 31/7/2005 44,950 10,000 II) 1/8/2005 2,40,000 - III) 5/8/2005 53.010 1,40,000 IV) 20/8/2005 55,413 NIL V) 25/8/2005 62,330 53,010 VI) 29/8/2005 NIL 61,100 VII) 1/9/2005 NIL 55,413 VIII) 2/11/2005 45,000 1,22,000 IX) 8/11/2005 1,41,000 1,22,000 X) 25/11/2005 61,600 14,200 XI) 14/12/2005 33,925 1,22,050 XII) 10/1/2006 52,938 33,925 XIII) 20/1/2006 78,505 52,938 XIV) 5/2/2006 60,500 78,500 XV) 31/3/2006 NIL 60,500 3.4 IN VIEW OF THE FACTS STATED ABOVE, THE GENUINEN ESS OF THE RECEIPT OF SUCH BILL IS ITSELF DOUBTFUL. IN THE LI GHT OF THE FACTS NARRATED ABOVE, THE APPELLANT COULD NOT ESTABLISH H AVING EARNED AGRICULTURAL INCOME. CONSIDERING THE TOTALIT Y OF THE CASE, I DO NOT FIND ANY INFIRMITY IN THE AOS FINDI NGS. THE ADDITION OF RS.6,16,917/- IS THEREFORE, CONFIRMED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE RAISED GROUND NO.2 BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION, AS WERE MADE BEFORE THE LOWER AUTHORITIES. HE ALSO SU BMITTED THAT THE ITA NO.518(B)/2011 8 CIT(A) DID NOT AFFORD AN OPPORTUNITY OF BEING HEARD ON THE FINDINGS RECORDED BY HIM WITH REGARD TO THE DISCREPANCY IN T HE FIGURES OF SALE BILLS PRODUCED BEFORE THE AO AND THE CIT(A). THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE A RE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THIS ISSUE HAS TO B E SET ASIDE AND THE MATTER REMANDED TO THE AO FOR FRESH CONSIDERATI ON. THE EVIDENCE REGARDING HOLDING OF THE LAND WAS FURNISHE D BEFORE THE CIT(A). IT APPEARS THAT THE CIT(A) DID NOT CONFRON T THE ASSESSEE WITH REGARD TO FACT THAT THE LANDS MEASURING 18.39 GUNTAS WAS IN THE JOINT NAMES OF 5 PERSONS OF WHICH THE ASSESSEE S FATHER WAS ONE OF THE CO-OWNERS. APART FROM THE ABOVE, THE CIT(A ) ALSO PROCEEDED ON THE BASIS THAT SHRI M.BYRAPPA, FATHER OF THE ASS ESSEE HAD 4 CHILDREN INCLUDING ASSESSEE AND THEREFORE, THE SHAR E HOLDING OF THE ASSESSEES FATHER WOULD BE ONLY 1/5 TH OF 18.39 GUNTAS AND THAT 1/5 TH HAD TO BE THE SHARE BETWEEN 4 CHILDREN OF LATE M. BYRAPPA (ASSESSEES FATHER). IT WAS SUBMITTED BEFORE US TH AT THIS IS NOT THE CORRECT POSITION. IT WAS ALSO SUBMITTED BEFORE US T HAT THE DISCREPANCY IN THE SALE BILLS WOULD HAVE BEEN EXPLA INED HAD THE CIT(A) CONFRONTED THE ASSESSEE ABOUT THE SAME. SIN CE THE BASIS ON WHICH THE CONCLUSIONS WERE DRAWN BY THE CIT(A) WAS ON THE BASIS OF THE EXTENT OF LAND HOLDING AND THE DISCREPANCY I N THE SALE BILLS AND SINCE THE ASSESSEE HAS NOT BEEN CONFRONTED WITH THE ABOVE DISCREPANCIES, WE SET ASIDE THE ORDER OF CIT(A) AND REMAND THE ISSUE TO THE AO FOR FRESH CONSIDERATION IN ACCORDAN CE WITH LAW, AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. ITA NO.518(B)/2011 9 9. AS FAR AS GROUND NO.3 IS CONCERNED, THE ASSESSE E HAD SHOWN A LOAN OF RS.2,96,000/- RECEIVED FROM HIS FATHER WHIC H WERE USED TO PURCHASE OFFICE FURNITURE, LAW BOOKS, MOTOR CYCLE A ND OFFICE RENTAL DEPOSIT. THE SOURCE OF INCOME OF THE FATHER WAS EXP LAINED AS INCOME FROM AGRICULTURE. THIS WAS DISBELIEVED BY TH E REVENUE AUTHORITIES. AS WE HAVE ALREADY REMANDED THE QUESTI ON OF AGRICULTURE INCOME FOR FRESH DETERMINATION BY THE A O, WE ARE OF THE VIEW THAT THIS ISSUE SHOULD ALSO BE REMANDED TO THE AO FOR FRESH CONSIDERATION. THE AO WILL ASCERTAIN THE QUANTUM OF AGRICULTURAL INCOME AND AFTER CONSIDERING AVAILABILITY OF SURPLU S AGRICULTURAL INCOME IN THE HANDS OF THE FATHER DECIDE THE ISSUE WITH REGARD TO THE EXPLANATION OF LOANS RECEIVED FROM FATHER. THE OTHER GROUNDS OF APPEAL ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 10. FOR STATISTICAL PURPOSES, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF SEPT., 2012. SD/-SD/- (N. BARATHVAJA SANKAR) (N .V.VASUDEVAN) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR ITA NO.518(B)/2011 10 6. GF(BLORE) 7. GF(DELHI) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE