ACIT, Sawai Madhopur V. TARA CHAND JAIN,

ITA 545/JPR/2003

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5605 (ITAT-JAIPUR)
• Duration Of Justice: 10 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 1999-2000
• Appeal Filed On: 12-08-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: MRIDUL GOYAL
• Keywords: Block assessment
• Section: 145

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH : JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 545/JP/2003 (A.Y. 1999-2000) ACIT, CIRCLE, VS. TARA CHAND JAIN, SAWAIMADHOPUR. S/O LATE LADU LAL JAIN, NEWAI. PAN/GIR T-701/CIR/SWM (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MRIDUL GOYAL, DEPARTMENT BY : SHRI D.C. SHARMA - D.R. DATE OF HEARING : 22/01/2014. DATE OF PRONOUNCEMENT : 23/01/2014. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 28/02/2003 OF LD. CIT(A), KOTA. THE FOLLOWING GROU NDS HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS GROSSLY ERRED IN ACCEPTING THE CONTENTION OF TH E ASSESSEE THAT ON BALANCE OF THE ADVANCES EITHER NO INTEREST WAS R ECEIVED OR LESSOR RATE OF INTEREST WAS RECEIVED AND THEREBY DE LETING THE ADDITION OF RS. 10,13,670/- MADE ON ACCOUNT OF INTE REST FORM MONEY LENDING BUSINESS WITHOUT APPRECIATING THE FAC TS DISCUSSED BY THE A.O. IN THE ASSESSMENT ORDER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN DELETING THE ADDITION OF RS. 6 7,495/- MADE ON 2 ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS WITHOUT APPREC IATING THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. 2 THE FIRST ISSUE IN THIS APPEAL VIDE GROUND NO.1 RE LATES TO THE DELETION OF ADDITION OF RS. 10,13,670/- MADE BY THE AO ON ACCOUNT OF INTEREST FROM MONEY LENDING BUSINESS. 3. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAD DISCLOSED INTEREST INCOME FROM ADVANCES OF RS. 15 L AC AND HAD SHOWN REALIZATION OF DEBTS AT RS. 6,60,000/-. HE ALSO OBS ERVED THAT DURING THE PERIOD 06/08/1998 TO 31/03/1999, THE INTEREST R ECEIVED WAS DECLARED AT RS. 40,495/- WHICH INCLUDED INTEREST OF RS. 21,600/- PERTAINING TO THE PERIOD AFTER 08/08/1998 TO 31/03/ 1999. HE ALSO NOTICED THAT THE ASSESSEE DECLARED INTEREST ON ACCR UAL BASIS AT RS. 66,400/- ON ADVANCES OF RS. 8 LAC AT THE RATE OF INTEREST RANGING FROM 12% TO 18% P.A. ACCORDING TO AO, THE ASSESSEE HAD SHOWN INTEREST ONLY ON THE ADVANCES OF RS. 15 LAC AND NOT FOR THE BALANCE ADVANCES. THE AO ESTIMATED THE INTEREST ON WHOLE OF THE ADVAN CES OF RS. 97,75,464/- @ 18% AND MADE ADDITION OF RS. 10,12 , 670/- 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED AS UNDER:- THE TOTAL OUTSTANDING DEBTORS WERE OF RS. 15,00,00 0/- (PRINCIPAL RS. 14,60,000/- + ACCRUED INTEREST RS. 40,000/-) AS ON THE DATE OF SEARCH. THE ASSESSEE REALIZED DEBTORS OF RS. 6,60,000/- DUR ING THE PERIOD OF 06/08/1998 TO 31/03/1999. THE ASSESSEE RECEIVED IN TEREST OF RS. 3 18,895/- PERTAINING TO PERIOD 01/04/1998 TO 06/08/1 998 AND RS. 21,600/- FROM 06/08/1998 TO THE DATE OF REALIZATION OF DEBTORS. THE DEBTORS OF RS. 8,00,000/- WERE OUTSTANDING AS ON TH E CLOSE OF THE ACCOUNTING YEAR AND INTEREST OF RS. 67,600/- WERE O UTSTANDING FOR THE PERIOD 06/08/1998 TO 31/03/1999. THEREFORE, THE IN TEREST FOR THE PERIOD 06/08/1998 TO 31/03/1999 WAS RS. 88,000/-, W HICH HAS BEEN RIGHTLY DISCLOSED IN RETURN OF INCOME FOR ASSESSMEN T YEAR 1999-2000. THE ASSESSEE WAS IN URGENT NEED OF FUNDS AS HE WAS TO PAY TAX ON BLOCK RETURN. ON THE OTHER HANDS, THE DEBTORS WERE NOT PAYING THE PRINCIPLE AND INTEREST BECAUSE THEY HAD APPREHENSIO N IN THEIR MIND AS REGARD INCOME TAX ENQUIRY. THE ASSESSEE HAD NO LEG AL DOCUMENT TO ENFORCE THE REPAYMENT OF LOANS. THEREFORE, THE COM PROMISES WERE MADE FOR REPAYMENT AT LESSER INTEREST RATE. THEREF ORE, THE INTEREST INCOME OF RS. 88,000/- WAS RIGHTLY DISCLOSED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT DUE TO URGENCY IN SO ME CASES, ONLY PRINCIPLE AMOUNT HAD BEEN COLLECTED AND IN SOME CAS ES, LESSER INTEREST HAD BEEN COLLECTED. THEREFORE, THE ADDITION MADE B Y THE AO WAS PURELY BASED ON CONJECTURES AND SURMISES WITHOUT BR INGING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE EARNED THE INTEREST TO THE EXTENT OF ESTIMATION. 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE OBSERVED THAT THE AO MADE PURE ESTIMATION WITHOUT A NY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE EARNED INTEREST IN COME MORE THAN WHAT WAS SHOWN IN THE RETURN. HE FURTHER OBSERVED T HAT IF THE AO WANTED TO MAKE ADDITION ON THE BASIS OF MATERIAL AV AILABLE WITH HIM, HE SHOULD HAVE CONFRONTED TO THE ASSESSEE TO PLACE HIS VIEWS ON THE INFORMATION AVAILABLE WITH THE AO. HOWEVER, IN THE INSTANT CASE, THE AO HAD NOT COLLECTED ANY MATERIAL AGAINST THE ASSES SEE TO SHOW THAT 4 THE ASSESSEE HAD SUPPRESSED INTEREST INCOME WHICH W OULD WARRANT FURTHER MODIFICATION, PARTICULARLY WHEN THE BOOKS O F ACCOUNTS WERE REJECTED UNDER SECTION 145 OF THE ACT. ACCORDINGLY , THE ADDITION MADE BY THE AO WAS DELETED. NOW THE DEPARTMENT IS IN A PPEAL. 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS, HAS NOT BEEN REJECTED BY THE AO NOR THE METHOD OF ACCOUNTIN G CONSISTENTLY FOLLOWED HAS BEEN DOUBTED. THEREFORE, THE ADDITION MADE PURELY ON ESTIMATE BASIS WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD WAS NOT JUSTIFIED, PARTICULARLY WHEN NOTHING WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE HAD EARNED INTEREST INCOME MORE THAN WHAT WAS SHOWN IN HIS RETURN. WE, THEREFORE, DO NO T SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 7 . THE NEXT ISSUE VIDE GROUND NO.2 RELATES TO THE DE LETION OF ADDITION OF RS. 67,495/- MADE BY THE AO ON ACCOUNT OF LOW WITHDRAWALS OF HOUSEHOLD EXPENSES FOR THE PERIOD 06 /08/1998 TO 31/03/1999. 8 . THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THA T THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAD 5 DECLARED TOTAL HOUSEHOLD EXPENSES FOR HIS FAMILY AT RS. 48,985/- FOR THE PERIOD 06/08/1998 TO 31/03/1999. HE FURTHER OBSERV ED THAT WHILE FRAMING THE BLOCK ASSESSMENT, THE UNDISCLOSED HOUSE HOLD EXPENSES OF RS. 5,69,758/- WERE ADDED TO THE TOTAL INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD. HE ALSO OBSERVED THAT AT THE TIME OF ESTIMATING THE HOUSEHOLD EXPENSES A SUM OF RS. 62,238/- WAS ESTIMA TED FOR THE PERIOD 01/04/1998 TO 06/08/1998 WHICH CAME ABOUT RS. 15,56 0/- P.M. WHICH WAS REDUCED TO RS. 14,560/-. THE AO, THEREFORE, EST IMATED THE HOUSEHOLD EXPENSES AT RS. 1,16,480/- AS AGAINST THE DECLARED EXPENSES OF RS. 48,985/-. ACCORDINGLY, THE ADDITION OF RS. 67,495/- WAS MADE. 9 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT HIS FAMILY CONSISTS OF 08 MEMBERS HAVING 05 ADULT AND 03 MINOR AND THE STANDARD OF LIVING WAS V ERY NORMAL. IT WAS FURTHER SUBMITTED THAT THE AO ESTIMATED THE HOUSEHO LD EXPENSES ON THE BASIS OF ESTIMATE IN BLOCK ASSESSMENT, HOWEVER, DURING THE INTENSIVE SEARCH CARRIED OUT BY THE DEPARTMENT, NO DOCUMENT WAS FOUND TO VISUALIZE THAT THE HOUSEHOLD EXPENSES WERE MORE THAN WHAT HAD BEEN DECLARED IN THE REGULAR RETURNS, THEREFORE , THE ADDITION ON ACCOUNT OF HOUSEHOLD EXPENSES WERE BASED ON DE HORSE OF THE SEIZED MATERIAL COULD NOT BE SUSTAINED. IT WAS FURTHER SU BMITTED THAT THE SETTLEMENT COMMISSION FOUND THE COMPLEXITIES INVOLV ED IN THE BLOCK ASSESSMENT AND ADMITTED THE APPLICATION OF THE ASSE SSEE. THEREFORE, 6 THE ORDER OF THE THEN LD. CIT(A) FOR BLOCK PERIOD H AD LOST SANCTITY ON PASSING OF THE ORDER BY THE HONBLE SETTLEMENT COMM ISSION AS SUCH THE ASSESSMENT BASED ON THE ORDER OF LD. CIT(A) COULD N OT HAVE BEEN MADE. 10 . LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF T HE ASSESSEE OBSERVED THAT THE AO HAD ADOPTED THE BASIS OF ADDIT ION MADE IN THE BLOCK ASSESSMENT WHICH WERE UNDER CONSIDERATION OF SETTLEMENT COMMISSION, THEREFORE, THE AO COULD NOT ADOPT THE B ASIS ADOPTED IN BLOCK ASSESSMENT IN REGULAR ASSESSMENT. HE FURTHER OBSERVED THAT THE AO SHOULD HAVE BROUGHT SOME MATERIAL TO SHOW THAT T HE ASSESSEE INCURRED EXPENSES OF HOUSEHOLD OVER AND ABOVE THE E XPENSES WHATEVER WERE DECLARED. LD. CIT(A) POINTED OUT THAT THE AO HAD NOT BROUGHT ANY MATERIAL AGAINST THE ASSESSEE TO SHOW THAT THE ASSESSEE EARNED SOME OTHER INCOME WHICH HAD BEEN UTILIZED FOR HOUSE HOLD EXPENSES. HE, THEREFORE, IN ABSENCE OF SUPPORTING MATERIAL IN RESPECT OF ESTIMATION, DELETED THE IMPUGNED ADDITION. NOW TH E DEPARTMENT IS IN APPEAL. 11 . LD. D.R. SUPPORTED THE ORDER OF THE AO AND FURTHE R SUBMITTED THAT THE HOUSEHOLD EXPENSES SHOWN BY THE ASSESSEE W AS ON LOWER SIDE AND THE AO ESTIMATED THE HOUSEHOLD EXPENSES ON THE BASIS OF THE 7 ADDITION MADE IN THE BLOCK ASSESSMENT. THEREFORE, LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. 12 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 13 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IN THE PRESENT CASE, IT APPEARS THAT THE AO ESTIMATED THE HOUSEHOLD EXPENSES ON THE BASIS OF ORDER PASSED BY THE LD. CIT(A) IN B LOCK ASSESSMENT. AGAINST THE SAID ORDER, THE ASSESSEE WENT BEFORE TH E SETTLEMENT COMMISSION AND THE PETITION OF THE ASSESSEE FOR SET TLEMENT HAD BEEN ADMITTED BY THE SETTLEMENT COMMISSION. THEREFORE, THE BASIS ADOPTED BY THE AO WAS WRONG, PARTICULARLY WHEN NO MATERIAL WAS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE INCURRED M ORE EXPENSES THAN WHATEVER SHOWN IN THE BOOKS OF ACCOUNTS. WE, THERE FORE, DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL . 14. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISS ED. (ORDER PRONOUNCED IN THE COURT ON 23 RD JANUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD JANUARY, 2014. 8 VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R BY ORDER ASSISTANT REGISTRAR, ITAT, JAIPUR.