CHANDRAMOHAN C. TIPNIS, MUMBAI V. ITO WD 23(1)(2), MUMBAI

ITA 5187/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6257 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 28-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 10-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHRIC V DHARKAR
• Keywords: Depreciation
• Section: 133(6); 68

Judgement Text

1 ITA NO. 5187/MUM/2009 (ASST YEAR 2005-06) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI C BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI T R SOOD, AM & SHRI VIJAY PAL RAO, JM ITA NO. 5187/MUM/2009 (ASST YEAR 2005-06) CHANDRAMOHAN C TIPNIS 114 P N KOTHARI INDL STATE LBS MARG BHANDUP (W) MUMBAI 78 VS THE INCOME OFFICER WARD 23(1)(2), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAFPTH 8192H ASSESSEE BY SHRIC V DHARKAR REVENUE BY SHRI C G K NAIR DT.OF HEARING 28 TH SEPT 2011 DT OF PRONOUNCEMENT 30 TH SEPT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29 TH JUNE 2009 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2005-06. 2 THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS IN THIS APPEAL: I) THE ASSESSING OFFICER AND CIT(A) ERRED ON FACTS AND IN ADDING RS. 879964/- (BEING ADVANCES FROM THE DEBTORS) / 41(1) OF THE I T ACT. II) THE CIT(A) ERRED IN HOLDING THAT SUM OF RS. 879 964/- IS CASH CREDIT U/S 68 OF THE I T ACT, WITHOUT GIVING ANY SHOW CAUSE NOTICE T O THE APPELLANT. III) THE CIT(A) HAS NOT RAISED ANY QUERY AND/OR NOT ASKED THE APPELLANT TO SUBMIT ANY EXPLANATION AND WITHOUT INTIMATING THE A PPELLANT INITIATED SEC 68 OF THE I T ACT. THE ASSESSING OFFICER HAS NEVER SCR UTINIZED THE BOOKS AND RECORDS AND CONCLUDED THAT THESE ARE ADVANCES FROM DEBTORS. IV) THE OPENING BALANCES OF EARLIER YEARS (BROUGHT FORWARD FROM EARLIER YEARS) CANNOT BE ADDED U/S 68 IN THE AY 2005-06 BY THE CIT (A) V) THE CIT(A HAS NOT SERVED ANY SHOW CAUSE NOTICE B EFORE THE IMPUGNED ADDITIONS. 2 ITA NO. 5187/MUM/2009 (ASST YEAR 2005-06) VI)THE CIT(A) ERRED IN SUSTAINING ADHOC DISALLOWANC E OF RS. 7643/- OUT OF TELEPHONE EXPENSES AND RS. 14139/- BEING 10% OF CAR MAINTENANCE AND DEPRECIATION. 3 GROUND NOS 1 TO 5 ARE REGARDING ADDITION ON ACCOU NT OF ADVANCES FROM DEBTORS. 3.1 THE ASSESSING OFFICER HAS OBSERVED THAT THE ASS ESSEE HAS SHOWN ADVANCES FROM DEBTORS TO THE TUNE OF RS. 24,45,984/-. TO VE RIFY THE GENUINENESS, THE ASSESSING OFFICER ISSUED NOTICES U/S 133(6) TO THE CONCERNED PARTIES CALLING FOR THE INFORMATION ON THE TRANSACTIONS. THE ASSESSING OFFICER HAS RECO RDED THE RESPONSES OF THE PARTIES AS UNDER: SL. NO NAME OF THE PARTY ADVANCE AS SHOWN IN ASSESSEES BOOKS AMT CONFIRMED BY THE PARTY REMARKS 1 BELCO PHARMA 3,70,000 NOT COMPLIED NO REPLY 2 LBAL LAB P LTD 3,08,464 NOT COMPLIED NO REPLY 3 SOFT SULE LTD 1,35,000 1,75,000 THE DIFFERENCE OF RS. 40,000/- NOT SHOWN IN ASSESSEES BOOKS AND NO REPLY 4 GL P L 2,24,000 22,500 DIFFERNCE OF RS. 2,01,500/- EXCESS SHOWN IN ASSESEES BOOKS AND NO REPLY TOTAL 12,45,932 3.2 SINCE THERE WAS A DISCREPANCY IN THE CASE OF TW O PARTIES AND THERE WAS NO REPLY IN RESPECT OF OTHER TWO PARTIES, THE ASSESSIN G OFFICER TREATED THE DIFFERENCE IN CASE OF TWO PARTIES AS WELL AS THE AMOUNT STANDING IN THE NAME OF THE OTHER TWO PARTIED TOTALLING TO RS. 9,19,964/- AS CESSATION OF LIABILITY AND BROUGHT TO TAX AS ASSESSEES INCOME U/S 41(1) OF THE ACT. 3.3 ON APPEAL, THE CIT(A) DELETED THE ADDITION MADE IN CASE OF SOFT SULE LTD OF RS. 1,35,000/- AND ALSO ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE ADVANCES 3 ITA NO. 5187/MUM/2009 (ASST YEAR 2005-06) CANNOT BE ASSESSED U/S 41(1) OF THE I T ACT. HOWEV ER, THE CIT(A) HAS HELD THAT THE ASSESSEE HAS NOT EXPLAINED THE SOURCE OF THESE CRED ITS WITH EVIDENCE AS PER SEC. 68 OF THE I T ACT AND ACCORDINGLY, CONFIRMED THE ADDIT ION TO THE EXTENT OF RS. 8,79,964/-. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THESE AMOUNTS REPRESENT THE OPENING BALANCE OF EARLIER YEAR, WHIC H WERE BROUGHT FORWARD FROM EARLIER YEARS AND CANNOT BE ADDED U/S 68 OF THE AC T FOR THE YEAR UNDER CONSIDERATION. HE HAS FURTHER CONTENDED THAT EVEN OTHERWISE, WHEN SUMMONS WERE RECEIVED BY THE PARTIES BUT THEY DID NOT RESPONDENT TO THE NOTICES OF THE ASSESSING OFFICER THEN THE ADDITION CANNOT BE MADE WHEN THE A SSESSEE HAS DISCHARGED ITS ONUS BY FURNISHING THE DETAILS AND CORRECT ADDRESSE S OF THE PARTIES. IN SUPPORT OF ITS CONTENTION, THE LD AR RELIED UPON VARIOUS DECISIONS AS WELL AS SUMMARY OF THE SUNDRY DEBTORS SHOWING THE ADVANCES AS OPENING BALANCE OF THE EARLIER YEARS. 4.1 THE LD DR ON THE OTHER HAND HAS SUBMITTED THAT WHEN THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THESE ADVANCES FROM THE DEBTORS AS NO CONFIRMATION HAS BEEN FILED; THEREFORE, THE SAME HAS TO BE ASSES SED AS INCOME OF THE ASSESSEE U/S 68. HE HAS RELIED UPON THE ORDERS OF THE LOWER AUTH ORITIES. 5 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE THE ADDIT ION BY APPLYING THE PROVISIONS OF SEC. 41(1), WHICH WAS REVERSED BY THE CIT(A)AND TH E ADDITION TO THE EXTENT OF RS. 8,79,964/- HAS BEEN CONFIRMED U/S 68 OF THE ACT . SINCE THE REVENUE HAS NOT CHALLENGED THE ORDER OF THE CIT(A); THEREFORE, THE ADDITION MADE U/S 41(1) MADE BY THE ASSESSING OFFICER IS NOT BEFORE US. THE CIT (A) HAS ACCEPTED THE FACT THAT THE ADVANCES RECEIVED IN THE EARLIER YEAR; BUT THE AD DITION WAS CONFIRMED BY THE CIT(A) ON THE GROUND THAT THE ASSESSEE HAS TO EXPL AIN THE SOURCE OF THE CREDITORS WITH EVIDENCE; THEREFORE, THE CONTENTION OF THE ASS ESSEE WAS NOT ACCEPTED. 4 ITA NO. 5187/MUM/2009 (ASST YEAR 2005-06) 5.1 THE PROVISIONS OF SECTION 68 MANIFEST THE SUM FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, AND THE ASSES SEE FAILS TO OFFER THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED IS NOT FO UND SATISFACTORY THEN, THE SUM SO CREDITED MAY BE ASSESSED AS THE INCOME OF THE ASS ESSEE OF THAT PREVIOUS YEAR. SECTION 68 READS AS UNDER: SEC.68:- WHERE ANY SUM IS FOUND CREDITED IN THE BOOK S OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATIO N ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINIO N OF THE [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE IN COME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 6 THE PLAIN READING OF SECTION 68 MAKES IT CLEAR TH AT THE CREDIT FOUND IN THE BOOKS OF ACCOUNT CAN BE ASSESSED AS THE INCOME OF T HE ASSESSEE ONLY FOR THAT ASSESSMENT YEAR IN WHICH THE CREDIT WAS INTRODUCED. 7 IN THE CASE IN HAND, WHEN THERE IS NO DISPUTE ABO UT THE FACT THAT THE CREDITS WERE INTRODUCED NOT IN THIS YEAR BUT IN THE EARLIE R YEAR THEN, THE SAME CANNOT BE ASSESSED AS THE INCOME OF THE ASSESSEE U/S 68 OF TH E ACT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY, WE DO NOT APPROVE THE VIEW OF THE CIT(A) IN MAKING THE ADDITION U/S 68 DESPITE THE FACT THAT TH ESE CREDITS WERE INTRODUCED IN THE BOOKS IN THE EARLIER YEARS. ACCORDINGLY, THE ADDIT ION ON THIS ISSUE IS DELETED. 8 GROUND NO 6 IS REGARDING DISALLOWANCE OF TELEPHON E AND MOTOR CAR EXPENSES TO THE EXTENT OF 10%. 9 WE HAVE HEARD THE LD AR OF THE ASSESSEE AND THE L D DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICE R DISALLOWED 20% OF THE TOTAL EXPENSES TOWARDS MOTOR CAR DEPRECIATION AND MAINTEN ANCE AS WELL AS TELEPHONE EXPENSES ON THE GROUND THAT PERSONAL USE OF TELEPHO NE AS WELL AS MOTOR CAR CANNOT BE RULED OUT. ON APPEAL, THE CIT(A) HAS REDUCED T HE DISALLOWANCE OF 20% TO 10%. 5 ITA NO. 5187/MUM/2009 (ASST YEAR 2005-06) 10 HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND PARTICULARLY WHEN THE ASSESSEE IS AN INDIVIDUAL, THE PERSONAL US E OF TELEPHONE AND MOTOR CAR CANNOT BE RULED OUT. MOREOVER, THE LD AR HAS NOT A DVANCED ANY ARGUMENT TO DEMONSTRATE AS TO HOW THE DISALLOWANCE OF 10% BY CI T(A) IS NOT JUSTIFIED. THEREFORE, IN THE ABSENCE OF EXACT DETAILS OF USE OF THE MOTOR CAR AND TELEPHONE, THE DISALLOWANCE MADE BY THE CIT(A) AT 10% , IN OUR OPI NION IS JUST AND PROPER. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD CIT(A), QUA, THIS ISSUE AND THE SAME IS UPHELD. 11 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 30 TH DAY OF SEPT 2011. SD/ SD/ ( T R SOOD ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 30 TH , SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI