Sri. E. Krishnappa, Bangalore V. DCIT, Bangalore

ITA 552/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8586 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUDHAKAR RAO
• Assessee Lawyers: PRATIBHA
• Keywords: Unexplained cash credit; Unexplained expenditure; Peak credit; Additional evidence; Question of law; Wrong claim; Capital expenditure; TDS; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 69C; 11; 15; 40A(3); 271(1)(b); 139; 92; 40(a)(ia); 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SHRI A .K. GARODIA , ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO , JUDICIAL MEMBER I.T.A. NO. 552 /BANG/201 6 (ASSESSMENT YEAR : 20 10 - 11 ) SHRI E. KRISHNAPPA, ADAKARAMANAHALLI, MAKALI POST, 21 S T KM NELAMANGALA TALUK, BANGALORE. PAN AFFPK 2791A VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 7(2), BANGALORE. APPELLANT RESPONDENT. APPELLANT BY : SMT. PRATIBHA, ADVOCATE. RESPONDENT BY : SHRI SUDHAKAR RAO,CIT (D.R) DATE OF H EARING : 2.1.2017. DATE OF P RONOUNCEMENT : 17 .2. 201 7 . O R D E R PER SHRI VIJAY P AL RAO, J. M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT.29.01.2016 OF COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. ASSESSING OFFIC ER ERRED IN PASSING THE ORDER IN THE MANNER IN WHICH HE DID. 2 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA 3 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA 3. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 4. GROUND NOS.2 & 3 ARE REGARDING THE ADDITION ON ACCOUNT OF UNEXPLAINED C ASH CREDIT UNDER SECTIO N 68 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). THE ASSESSING OFFICER NOTICED FROM THE CASH BOOK FURNISHED IN RESPECT OF E K LAND DEVELOPERS THAT THERE ARE DEFICIENT CASH BALANCES ON VARIOUS DATES AND PEAK OF THE SAME ARE CULLED OUT BY THE ASSESSIN G OFFICER ON DIFFERENT DATES I.E. 24.4.2009, 20.08.2009 & 11.10.2009 AMOUNTING TO RS.1,86,311; RS.42,87,130 AND RS.26,48,191 RESPECTIVELY TOTAL AMOUNTING TO RS.71,21,632. THE ASSESSEE 4 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA WAS ASKED TO SHOW CAUSE AS TO WHY THE ABOVE CASH BOOK CREDIT OF DEFICIE NT CASH BALANCE OF RS.71,21,632 SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 AND BROUGHT TO TAX AS INCOME FROM OTHER SOURCES. IN RESPONSE THE ASSESSEE FILED REPLY VIDE LETTER ON 18.03.2013 AND SUBMITTED THAT THE CASH BOOK PRODUCED BY THE ASSESSEE DOES NOT REFLECT IN DEFICIT CASH BALANCE. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE'S REPLY IS NOT CORRECT , THE CASH BOOK WHICH WAS PRODUCED ON 22.02.2013 SHOWS THE CASH DEFICIT AS POINTED OUT BY THE ASSESSING OFFICER. HOWEVER, THE CASH BOOK PRODUCED BY THE ASSESSEE ON 18.3.2013 IS NOT THE CASH BOOK WHICH WAS PRODUCED ON 22.2.2013. THEREFORE THE ASSESSING OFFICER REJECTED THE REPL Y OF THE ASSESSEE AND THE DEFICIT CASH BALANCE OF RS.71,21,632 WAS TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. ON APPEAL, THE CIT (APPEALS) ISSUED REMAND ORDER. THE ASSESSING OFFICER IN THE REMAND REPORT STATED THAT THE CASH BOOK PRODUCED AFTER THE ISSUE OF SHOW CAUSE NOTICE CANNOT BE ACCEPTED AS GENUINE AND HAS BEEN A WINDOW DRESSED BY AD JUSTING SOME ENTRIES TO ARRIVE A POSITIVE CASH BALANCE. THE CIT (APPEALS) AFTER CONSIDERING THE REMAND REPORT AND REPLY OF THE ASSESSEE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 5. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE HAS SUBMITTED THAT IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER, THE 5 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA ASSESSEE FILED ALL THE DETAILS WHICH WERE CALLED FOR . S INCE THE ACCOUNTANT HAS MISSED CONTRA ENTRIES WHILE UPDATING IN TALLY AND SUBSEQUENTLY THE SAME WERE CORRECTED AND FURNISHED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND MADE THE ADDITION. THE LEARNED AUTHORISED REPRESENTATIVE HAS FURTHER CONTENDED THAT AFTER PROPER RECONCILIATION OF BOOKS OF ACCOUNTS BY POSTING AND VOUCHER THERE WAS NO NEGATIVE BALANCE ON ANY DATE. THE PEAK CREDIT BALANCE IN THE COMPUTERIZED CASH BOOK AROSE DUE TO INCOMPLETE SET OF BOOKS PREPARED BY THE EMPLOYEE WHO WAS NOT WELL VERSED WITH MAINTENANCE AND HANDLING OF THE ACCOUNTING WORK. THE MISTAKE COMMITTED BY ACCOUNTANT AT THE RELEVANT POINT OF TIME HAS TO BE ACCEPTED BY THE ASSESSING OFFICER. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE ADDITION IS NOT JUSTIFIED AND IS LIABLE TO BE DELETED. 6. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT DESPITE SUFFICIENT OPPORTUNITY GIVEN BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AS WELL AS DURING REMAND PROCEEDINGS, THE ASSESSEE FAILED TO FURNISH THE NECESSARY DETAI LS OF CREDIT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 6 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE HAS FURNISHED TWO SETS OF CASH BOOK AND AS PER THE CAS H BOOK FURNISHED BY THE ASSESSEE ON 22.2.2013 THERE WAS A PEAK CASH DEFICIT ON THREE OCCASIONS TOTAL AMOUNTING TO RS.71,21,632. IN REPLY TO SHOW CAUSE NOTICE, THE ASSESSEE PRODUCED FRESH CASH BOOK CLAIMING TO BE THE CORRECT CA S H BOOK CONTAINING ALL CONTR A ENTRIES WHICH WERE MISSED OUT BY THE ACCOUNTANT AT THE TIME OF PREPARING THE FIRST CASH BOOK. THE ASSESSING OFFICER OUT - RIGHTLY REJECTED SECOND CASH BOOK FILED BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT WHEN THE ASSESSEE HAS EXPLAINED THE REASONS OF DIFFERENCE AND SPECIFICALLY POINT OUT CERTAIN CONTRA ENTRIES WHICH WERE LEFT OUT IN THE FIRST CASH BOOK THEN THE ASSESSING OFFICER WAS REQUIRED TO PROPERLY EXAMINE THE EXPLANATION OF THE ASSESSEE AND THEN COULD HAVE REJECTED THE ENTRIES WHCH WERE FOUND TO BE BOGUS. INSTEAD OF DOING THE SAID EXERCISE OF VERIFICATION AND EXAMINATION OF THE ENTRIES THE ASSESSING OFFICER HAS JUST MADE THE GENERAL COMMENTS WITHOUT POINTING OUT WHICH ENTRY IN THE SUBSEQUENT CASH BOOK IS BOGUS. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR PROPER VERIFICATION AND EXAMINATION OF THE CASH BOOK PRODUCED BY THE ASSESSEE CLAIMING TO BE CORRECT CASH BOOK. 7 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA 8. GROUND NOS.4 & 5 ARE REGARDING DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT. 9. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS OBSERVED THAT ON GOING THROUGH THE CASH BOOK AND LEDGER EXTRACT OF M/S. E K ENTERTAINER AND M/S. E K AUDIO FOUND THAT THE ASSESSEE HAS MADE CASH PAYMENTS TOWAR DS EXPENSES EXCEEDING RS.20,000. ACCORDINGLY, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOW ED THE SUM OF RS.33,10,343 IN RESPECT OF M/S. E K ENTERTAINER AND RS.45,29,195 IN RESPECT OF M/S. E K AUDIO TOTAL AMOUNTING TO RS.78,39,538. ON APPEAL, THE CIT (APPEALS) ISSUED REMAND ORDER DIRECTING THE ASSESSING OFFICER TO FILE THE REMAND REPORT. THE ASSESSING OFFICER REITERATED THE VIEW AS TAKEN IN THE ASSESSMENT ORDER IN THE REMAND REPORT. AFTER CONSIDERING THE REMAND R EPORT, THE CIT (APPEALS) HAS CONFIRMED THE ADDITION/DISALLOWANCE MADE BY THE ASSESSING OFFICER. 10. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS GIVEN UNSECURED LOAN TO M/S. E K ENTERTAINER S AND M/S. E K AUDIO OF RS.97,30,000 AND RS.1,31,17,860 RESPECTIVELY. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION A SUM OF RS.31 LAKHS HAS BEEN GIVEN FOR BUSINESS PURPOSE AND ALSO RETURNED BY M/S. E K ENTERTAINER S . IT WAS FURTHER SUBMITTED THAT THE SAID A MOUNTS ARE REFLECTED IN THE BALANCE SHEET OF M/S. E K 8 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA ENTERTAINER S AND M/S. E K AUDIO. SHE HAS REFERRED TO THE LEDGER EXTRACTS AND PROFIT AND LOSS ACCOUNT AS WELL AS BALANCE SHEET. THE LEARNED AUTHORISED REPRESENTATIVE HAS THUS SUBMITTED THAT THE ASSESSI NG OFFICER HAS NOT VERIFIED THE BOOKS OF ACCOUNTS OF THE ASSESSEE PROPERLY WHICH WAS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SHE HAS FURTHER CONTENDED THAT SINCE THESE WERE ADVANCE AND UNSECURED LOANS GIVEN TO THESE CONCERNS AND THEREFORE NOT CLAIMED AS EXPENDITURE AND CONSEQUENTLY THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 11. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSING OFFICER AFTER EXAMINATION OF THE BOOKS OF A CCOUNTS OF THE ASSESSEE HAS NOTED THAT THE ASSESSEE HAS MADE CASH PAYMENTS TOWARDS EXPENSES AND NOT AS AN ADVANCE . THEREFORE WHEN THE ASSESSING OFFICER HAS GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE DETAILS AND RECORD OF THE CREDITORS BUT THE ASSESSEE FAILED TO PRODUCE THE SAME THEN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS JUSTIFIED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE DISALLOWANCE UNDER SECTIO N 40A(3) OF THE ACT BY TREATING THESE PAYMENTS TO M/S. E K ENTERTAINER S AND M/S. E K AUDIO IN CASH TOWARDS EXPENSES. THE ASSESSEE CONTENDED BEFORE THE CIT 9 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA (APPEALS) THAT THESE PAYMENTS ARE FOR BUSINESS PURPOSES IN THE FORM OF UNSECURED LOAN AND NOT TOWA RDS EXPENSES. THE ASSESSEE ALSO REFERRED TO THE BALANCE SHEET AS WELL AS LEDGER ACCOUNTS IN SUPPORT OF ITS CLAIM. HOWEVER THE ASSESSING OFFICER IN THE REMAND REPORT HAS REITERATED ITS STAND WITHOUT RE - EXAMINATION OF THE RECORD AND BOOKS OF ACCOUNTS OF T HE ASSESSEE. THE REMAND REPORT REPRODUCED BY THE CIT (APPEALS) AT PAGE 7 OF THE IMPUGNED ORDER CLEARLY REVEAL THAT THE ASSESSING OFFICER HAS STATED THAT THE DETAILS OF PAYMENT ARE VERIFIED IN THE RESPECTIVE CASH BOOK AND ALSO RESPECTIVE CONCERNS DURING T HE COURSE OF SCRUTINY. THUS IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE RECORD DURING THE REMAND PROCEEDINGS AND SIMPLY MADE A STATEMENT THAT THESE WERE EXAMINED DURING THE COURSE OF SCRUTINY ASSESSMENT. FURTHER WE NOTE THAT THE ASSESSEE HAS CLEARLY BROUGHT TO THE NOTICE OF THE CIT (APPEALS) THAT THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS FROM THE CREDITOR BUT WHEN THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER ON 4.11.2015 ALONG WITH THE NOTE AND RELEVANT EVIDENCE, THE ASSESSING OF FICER HAD ALREADY SENT THE REMAND REPORT WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSING OFFICER HAS NOT PROPERLY EXAMINED THE RELEVANT RECORD AS WELL AS BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE CORRESPONDING BOOKS OF THESE TWO CONCERNS TO ASCERTAIN THE 10 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA CORRECT FACTUAL POSITION. ACCORDINGLY, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO PROPERLY EXAMINE THE RELEVANT RECORD AND BOOKS OF ACCOUNTS AND THE N DECIDE THE SAME AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 13. GROUND NO.6 IS REGARDING THE ADDITION MADE ON ACCOUNT OF UNSECURED LOAN CREDIT. 14. ON GOING THROUGH THE BALANCE SHEET, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS TAKEN CASH LOAN DURING THE YEAR IN RESPECT OF THE FOLLOWING CONCERNS, DETAILS OF WHICH ARE REPRODUCED BY THE ASSESSING OFFICER IN PARA 5 AS UNDER : I. D C GOWDRU RS.6,99,200 II. HARISH RS.6,71,800 III. M. HARISH, ADAKAMARANAHALLI. RS.6,81,200 IV. MA NJUNATH RS.6,63,900 V. SHADAKSHARI RS.6,34,600 TOTAL : RS.33,50,700 THE ASSESSING OFFICER FOUND THAT THE LOAN HAS BEEN RECEIVED BELOW RS.20,000 PER DAY ON VARIOUS DATES DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO FURNISH THE FULL N AME AND ADDRESS OF THE PERSONS. IN RESPONSE THE ASSESSEE FURNISHED THE ADDRESSES OF THE ABOVE PERSONS AND THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133( 6 ) OF THE ACT TO THESE PERSONS AT THE 11 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA GIVEN ADDRESS HOWEVER THERE WAS NO RESPONSE FROM THE ABO VE PERSONS. SUBSEQUENTLY THE ASSESSEE WAS ASKED TO FURNISH THE CONFIRMATION FROM THESE PERSONS. SINCE THE ASSESSEE FAILED TO FURNISH THE CONFIRMATIONS FROM THESE PERSONS THE ASSESSING OFFICER MADE THE ADDITION OF RS.33,50,700. ON APPEAL, THE CIT (APPEA LS) ISSUED A REMAND ORDER AND AFTER CONSIDERING THE REMAND REPORT CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 15. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS PRODUCED ADDITIONAL EVIDEN CE BEFORE THE CIT (APPEALS) CONTAINING THE CONFIRMATION LETTERS FROM THE CREDITORS. SHE HAS REFERRED TO THE VARIOUS CONFIRMATION LETTERS. IT IS FURTHER CONTENDED THAT EVEN DURING THE REMAND PROCEEDINGS, THE ASSESSING OFFICER HAS NOT GIVEN PROPER OPPORT UNITY TO THE ASSESSEE AS THE ASSESSING OFFICER HAS NOT GIVEN A PARTICULAR DATE OF HEARING BUT ASKED THE ASSESSEE TO FURNISH THE DETAILS OF CREDITORS. THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER ON 4.11.2015 WITH THE NOTE AND ALL EVIDENCES BUT BY TH AT TIME THE ASSESSING OFFICER HA D ALREADY SUBMITTED THE REMAND REPORT. THUS THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSEE IS NOT TAKEN INTO ACCOUNT BY THE AUTHORITIES BELOW. 12 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA 16. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY DURING THE ASSESSMENT PROCEEDINGS AS WELL AS REMAND PROCEEDINGS BUT DESPITE THAT THE ASSESSEE FAILED TO PRODUCE THE CONFIRMATIONS AS WELL AS OT HER REQUISITE DETAILS IN SUPPORT OF THE CLAIM. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE CIT (APPEALS) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY RECORDING THE REASONS THAT DESPITE OPPORTUNITY GIVEN TO THE ASSESSEE TO EXPLAIN THE NECESSARY DETAILS THE ASSESSEE FAILED TO PRODUCE THE SAME. WE FURTHER NOTE THAT THE ASSESSEE HAS CATEGORICALLY STATED BEFORE THE CIT (APPEALS) THAT WHEN THE ASSESSEE APPEARED BEFORE THE ASSESSI NG OFFICER ON 28.9.2015, THE CASE WAS ADJOURNED AND THE ASSESSEE WAS ASKED TO FILE THE RETURN COPY OF THE SUNDRY CREDITORS TO PROVE THE CREDITWORTHINESS OF THE CREDITORS. HOWEVER NO SPECIFIC DATE OF HEARING WAS GIVEN. THE ASSESSEE HAS ALSO POINTED OUT T HAT WHEN THE ASSESSEE APPROACHED TO THE OFFICE OF THE ASSESSING OFFICER TO ENQUIRE ABOUT THE DATES OF HEARING IT WAS TOLD THAT DUE TO SHIFTING OF OFFICE, HEARING WILL BE FIXED LATER. FINALLY, THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER ON 4.11.201 5 ALONG WITH THE RELEVANT EVIDENCES, BUT THE ASSESSING OFFICER ALREADY SENT THE REMAND REPORT. IN VIEW OF THE ABOVE 13 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ISSUE HAS NOT BEEN EXAMINED PROPERLY BY CONSIDERING THE DETAILS TO BE FILED BY THE A SSESSEE. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE MATTER TO THE RECORD OF THE ASSESSING OFFICER FOR PROPER EXAMINATION AND VERIFICATION OF THE RELEVANT RECORD TO BE FILED BY THE ASSESSEE. 18. GROUND NOS.7 & 8 ARE REGARDIN G ADDITION ON ACCOUNT OF SUNDRY CREDITORS TOWARDS DEVELOPMENT CHARGES. 19. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN THE DEVELOPMENT CHARGES PAYABLE OF RS.7,74,05,400 UNDER THE HEAD SUNDRY CREDITORS IN RESPECT OF M/S. E K LAND DEVEL OPERS. THE ASSESSEE WAS ASKED TO FURNISH THE NAME AND ADDRESS OF THE PERSONS ALONG WITH THEIR PAN TO WHOM THESE AMOUNTS WERE PAYABLE AND WHAT IS THE NATURE OF WORK DONE BY THEM VIDE OFFICE LETTER DT.1.3.2013. IN RESPONSE TO THE SAID LETTER, THE ASSESSEE FILED THE REPLY ON 18.3.2013 HOWEVER , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS BUT SHOWN ONLY THESE AMOUNTS AND OTHER COLUMNS ARE LEFT BLANK. THE ASSESSEE AGAIN FILED A LETTER DT.23.3.2013 AND STATED THAT M/S. E K LAND D EVELOPERS WAS IN THE ACTIVITY OF DEVELOPMENT OF SITES AND FORMATION OF LAYOUTS. HE HAS MADE AN AGREEMENT WITH M/S. PRAKASH , VIJAY KUMAR, MUNIRAJ AC AND B. PREMANATH REDDY WHO WERE ALSO THE OWNERS OF THE LAND ALONG WITH 14 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA THE ASSESSEE. THE DEVELOPMENT WOR K WAS STARTED IN THE YEAR 2009 AND WAS COMPLETED TILL MARCH, 2010 AND EXPENDITURE WAS ESTIMATED TO THE EXTENT OF RS.7,74,05,400. THE ASSESSEE CONTENDED THAT IT IS A CAPITAL EXPENDITURE AND NOT CHARGED TO THE PROFIT AND LOSS ACCOUNT TILL THE SALE OF SITES . THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEE'S REPLY AND OBSERVED THAT THE ASSESSEE HAS MERELY CRE ATED GENERAL ENTRY TOWARDS DEVELOPMENT CHARGES ON THE LIABILITY SIDE AND ANOTHER ACCOUNT TOWARDS DEVELOPMENT CHARGES ON THE ASSET SIDE OF THE BALANCE SHEET. THE ASSESSING OFFICER FURTHER HELD THAT THIS IS NOT ASCERTAINABLE LIABILITY AND WHAT IS THE EXACT NATURE OF EXPENDITURE INCURRED. THERE IS NO CONTRACT BETWEEN THE PARTIES WHO HAVE EXECUTED THE WORK. ACCORDINGLY, THE ASSESSING OFFICER TREATED TH E SAID CLAIM OF RS.7,74,05,400 AS UNGENUINE/ ARTIFICIAL LIABILITY CREATED TO REDUCE THE PROFIT AGAINST THE FUTURE SALE. ON APPEAL, THE CIT (APPEALS) ISSUED A REMAND ORDER AND AFTER RECEIVING THE REMAND REPORT HAS CONFIRMED THE ACTION OF THE ASSESSING OFFI CER. 20. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS REFERRED TO THE BALANCE SHEET OF THE ASSESSEE OF EACH YEAR DURING WHICH THE DEVELOPMENT CHARGES WERE SHOWN AS LIABILITY PAYABLE AND ALSO CAPITALIZED ON THE ASSETS SIDE. THE LEARNED AUTHORISED REPRESENTATIVE HAS ALSO REFERRED TO THE CERTIFICATE OF ENGINEER WHO HAS CERTIFIED THE WORK IN PROGRESS. SHE HAS FURTHER 15 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA CONTENDED THAT DEVELOPMENT CHARGES WHICH HAS BEEN DIRECTLY TAKEN INTO BALANCE SHEET ARE PROPORTIONATELY ALLOWABLE D EDUCTION AGAINST THE SALE OF SITES. IN SUPPORT OF HER CONTENTION, SHE HAS RELIED UPON THE DECISION OF CO - ORDINATE BENCH OF THIS TRIBUNAL DT.25.10.2013 IN THE CASE OF M/S. JAIN FARMS & RESORTS LTD. VS. ACIT IN ITA NOS.1324 & 1325/BANG/2010. 21. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS CREATED ARTIFICIAL LIABILITY O N ACCOUNT OF DEVELOPMENT CHARGES TO BE CLAIMED AS A DEDUCTION AGAINST THE FUTURE SALE OF SITES. IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS NOT CLAIMED THIS AMOUNT OF RS.7,74,05,400 AS DEDUCTI ON DURING THE YEAR UNDER CONSIDERATION BUT IT WAS SHOWN IN THE BALANCE SHEET AS PAYABLE TOWARDS DEVELOPMENT EXPENSES. THUS THE ASSESSEE CLAIMED THAT THE SAID AMOUNT IS PROPORTIONATELY ALLOWABLE AS DEDUCTION AGAINST THE FUTURE SALES OF SITES. W HEN THE AS SESSEE HAS NOT CLAIMED THIS AMOUNT AS A DEDUCTION IN THE PROFIT AND LOSS ACCOUNT THEN THE ADDITION OF THIS AMOUNT CANNOT BE MADE DURING THE YEAR UNDER CONSIDERATION ON ACCOUNT OF UNGENUINE AND BOGUS CLAIM OF EXPENDITURE. HOWEVER THIS ISSUE OF ALLOWABILI TY OF THIS CLAIM IN THE YEAR WHEN 16 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA THE ASSESSEE DEBIT THE EXPENDITURE AGAINST THE SALE OF SITES CAN BE EXAMINED ALONG WITH THE GENUINENESS OF THE EXPENDITURE IN THE YEAR IN WHICH SUCH CLAIM IS MADE BY THE ASSESSEE. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HOWEVER , WE LEAVE THIS ISSUE OPEN FOR THE CONSIDERATION IN THE YEAR IN WHICH THE ASSESSEE CLAIMS THIS EXPENDITURE AGAINST SALE OF SITES. 23. GROUND NO.9 IS REGARDING DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 24. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED THE EXPENSES ON ACCOUNT OF EARTH FILLING OF RS.23,58,169 AND ON ACCOUNT OF JBC HIRE CHARGES OF RS.22,02,480 TOT AL AMOUNTING TO RS.45,60,648. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAS NOT DEDUCTED TDS IN RESPECT OF THESE EXPENSES. ACCORDINGLY, HE HAS DISALLOWED THE SAID AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ON APPEAL, THE CIT (APPEALS) HAS ISSUED REMAND ORDER AND AFTER CONSIDERING THE REMAND REPORT UPHELD THE ACTION OF THE ASSESSING OFFICER. 25. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS SUBMITTED THAT SINCE THE EXPENSES WERE ALREADY PAID AND NOTHING WAS PAYABLE 17 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA AS ON 31.3.2010 THEREFORE NO DISALLOWANCE CAN BE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 26. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF R YATAR SAHAKARI SAKKARE KARKHANE NIYAMIT, RANNA NAGAR, TIMMAPUR V S . ACIT 383 ITR 561. 27. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, AT THE OUTSET WE NOTE THAT THIS ISSUE IS COVERED AGAINST THE ASSESSE E BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF R YATAR SAHAKARI SAKKARE KARKHANE NIYAMIT, RANNA NAGAR, TIMMAPUR V S . ACIT (SUPRA) WHEREIN THE HON'BLE HIGH COURT HAS HELD IN PARAS 33 & 34 AS UNDER : 33. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED ORDER PASSED BY THE TRIBUNAL IS UNSUSTAINABLE IN LAW. THE JUDGMENT RENDERED BY THE HON BLE HIGH COURT OF ALLAHABAD IN THE CASE OF VECTOR SHIPPING PVT. LTD., IS NOT APPLICABLE TO THE FACTS OF THESE CASES. CONSEQUENTLY, THE FIRST SUBSTANTIAL QUESTION OF LAW, RAISED BY THE REVENUE MERITS CONSIDERATION. 34. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALLOWED BY ANSWERING THE FOLLOWING SUBSTANTIAL QUESTION OF LAW IN ITS FAVOUR AND IT IS HELD THA T IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE TRIBUNAL WAS NOT CORRECT IN INTERPRETING THE LANGUAGE OF SECTION 40(A)(IA) TO MEAN THAT THE CONSEQUENCE OF DISALLOWANCE IS ATTRACTED ONLY IN RESPECT OF AMOUNTS WHICH REMAIN PAYABLE ON THE LAST DAY OF THE F INANCIAL YEAR. FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT (SUPRA), WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT (APPEALS) QUA THIS ISSUE. 28. GROUND NO.10 IS REGARDING ADDITION UNDER SECTION 69C OF THE ACT. 18 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA 2 9. THE ASSESSING OFFICER FOUND THAT AS PER AIR INFORMATION, THE ASSESSEE HAS MADE PAYMENT OF RS.27,45,200 THROUGH AMERICAN EXPRESS BANK. T HE ASSESSEE WAS ASKED TO EXPLAIN WHETHER THESE EXPENSES ARE ACCOUNT FOR. IN RESPONSE THE ASSESSEE STATED THAT THE EXPENSES ARE ACCOUNTED UNDER THE BUSINESS PROMOTION AND OTHER EXPENSES. THE ASSESSING OFFICER EXAMINED THE LEDGER ACCOUNT UNDER THE HEAD BUSINESS PROMOTION EXPENSES AND FOUND THAT THE EXPENSES UNDER THESE HEADS ARE THROUGH CANARA BANK ONLY AND NO T A SINGLE ITEM WHICH REFLECTED UNDER AMERICAN EXPRESS BANK. ACCORDINGLY, THE ASSESSING OFFICER HAS MADE ADDITION OF RS.27,45,200 BY TREATING THE SAME AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT. THE CIT (APPEALS) AFTER CONSIDERING THE REMAND REPORT HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 30. BEFORE US, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS REFERRED TO THE DETAILS OF THE EXPENDITURE INCURRED THROUGH CREDIT CARD OF AMERICAN EXPRESS BANK AT PAGE NO.10 3 OF THE PAPER BOOK AND SUBMITTED THAT WHEN THE ASSESSING OFFICER ITSELF HAS TAKEN UP THE ISSUE ON THE BASIS OF THE AIR INFORMATION THAT THE EXPENDITURE WAS INCURRED BY USING THE CREDIT CARD THEN PROVISIONS OF SECTI O N 69C CANNOT BE INVOKED FOR MAKING TH E DISALLOWANCE OF THE SAID EXPENDITURE. FURTHER, THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT THE PAYMENT OF THE CREDIT CARD MADE BY USING THE CANARA BANK 19 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA ACCOUNT AND THEREFORE IN THE LEDGER ACCOUNT THE EXPENSES ARE SHOWN THROUGH CANARA BAN K. 31. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS TAKEN UP T HIS ISSUE ON THE BASIS OF AIR INFORMATION REGARDING THE PAYMENT MADE BY THE ASSESSEE THROUGH AMERICAN EXPRESS BANK CREDIT CARD. THE ASSESSING OFFICER FOUND THAT IN THE LEDGER ACCOUNT THE ASSESSEE HAS SHOWN THE EXPENSES THROUGH CANARA BANK AND NOT THE AME RICAN EXPRESS BANK. IT IS PERTINENT TO NOTE THAT USING THE CREDIT CARD IS NOT THE FINAL SETTLEMENT OF THE EXPENSES BUT EXPENSES ARE FINALLY PAID WHEN THE ASSESSEE MAKES CREDIT CARD PAYMENT. THEREFORE IT CANNOT BE R U LED OUT THAT THE ASSESSEE HAS MADE THE PAYMENT OF THE CREDIT CARD THROUGH CANARA BANK ACCOUNT. ACCORDINGLY, WE FIND THAT THE ASSESSING OFFICER HAS PROCEEDED WRONGLY BY MAKING THIS ADDITION WITHOUT CONSIDERING THE RELEVANT FACTS AS WELL AS THE DETAILS ON THIS ISSUE. HENCE IN THE FACTS AND C IRCUMSTANCES OF THE CASE, WE SET 20 ITA NO. 552 /BANG/ 201 6 SHRI E KRISHNAPPA ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO RECONSIDER THE SAME BY CONSIDERING AND EXAMINATION OF ALL THE FACTS OF THIS ISSUE. 33. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEB., 201 7 . SD/ - (A .K. GARODIA ) ACCOUNTANT MEMBER SD/ - (VIJAY PAL RAO) JUDICIAL MEMBER BANGA LORE, DT. 17 .02. 2017. *REDDY GP COPY TO : 1 . APPELLANT 2 . RESPONDENT 3 . C.I.T. 4 . CIT(A) 5 . DR, ITAT, BANGALORE. 6 . GUARD FILE. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE