Smt T. Lekha, Trivandrum V. DCIT, Trivandrum

ITA 555/COCH/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4336 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 15-06-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 17-04-2008
• Court: TRIBUNAL
• Assessee Lawyers: P VENUGOPAL
• Keywords: Unexplained investment; Income from undisclosed sources; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NOS.555 & 556/COCH/2008 ASST. YEARS:2002-03 & 2003-04 SMT. T. LEKHA APARANA, TRIVANDRUM. PA NO.AABKPL 0568M VS. THE DY. COMMISSIONER OF INCOME-TAX ,CENTRAL CIRCLE, TRIVANDRUM. (APPELLANT) ( RESPONDENT ) I.T.A.NOS.799 & 800/COCH/2008 ASST. YEARS:2004-05 & 2006-07 THE DY. COMMISSIONER OF INCOME-TAX , CENTRAL CIRCLE, TRIVANDRUM. VS. SMT. T. LEKHA APARANA, TRIVANDRUM. PA NO.AABKPL 0568M (APPELLANT) (RESPONDENT) & C.O.NOS. 79 & 80/COCH/2008 ( ARISING OUT OF I.T.A.NOS.799 & 800/COCH/2008 ) ASST. YEARS:2004-05 & 2006-07 SMT. T. LEKHA APARANA, TRIVANDRUM. PA NO.AABKPL 0568M VS. THE DY. COMMISSIONER OF INCOME-TAX ,CENTRAL CIRCLE, TRIVANDRUM. ( CROSS OBJECTOR ) (RESPONDENT) ASSESSEE BY SHRI P. VENUGOPAL, FCA RE VENUE BY SHRI PAVAN VED, CIT,DR O R D E R PER BENCH: THIS IS A BUNCH OF FOUR APPEALS AND TWO CROSS OBJECTIONS. ITA NOS.555 & 556/COCH/2008 AND C.O. NOS. ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 2 79 & 80/COCH/2008 ARE FILED BY THE ASSESSEE WHEREAS ITA NOS. 799 & 800/COCH/2008 ARE FILED BY THE REVENUE. THE ASSESSMENT YEARS INVOLVED ARE 2002-03, 2003-04, 200 4-05 AND 2006-07. 2. SINCE ALL THESE APPEALS AND CROSS OBJECTIONS PER TAIN TO ONE AND THE SAME ASSESSEE, WE HAVE HEARD THESE MATT ERS TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON A ND CONSOLIDATED ORDER, FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IS THE PROPREITRIX OF ARTECH GROUP AND PARTNER IN M/S. ARTECH GROUP (CONTRACTING) AND SOME OTHER FIRMS. A SEARCH WAS CONDUCTED ON THE ASSESSEES R ESIDENTIAL AS WELL AS ON THE BUSINESS PREMISES AND SEVERAL BOO KS OF ACCOUNTS AND INCRIMINATING DOCUMENTS WAS FOUND AND SEIZED. THE SEARCH WAS REVEALED UNDISCLOSED INCOME/INVESTME NTS. 4. ON SCRUTINY OF THE RECORDS, THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE WAS SUBSCRIBING TO KUTIKATU NARAY ANA PILLAI MEMORIAL FINANCE & INVESTMENT CO. LTD., KARUNAGAPAL LY AND ROYAL KURIES. THE EXPLANATION OF THE ASSESSEE WAS THAT THE CHITTY PAYMENTS WERE MADE FROM PERSONAL SOURCES AS IT WAS A PERSONAL CHITTY AND HENCE THE CHITTY WAS NOT ACCO UNTED IN ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 3 THE BOOKS OF ACCOUNTS OF THE BUSINESS. ACCORDING TO THE ASSESSING OFFICER, SINCE CHITTY IS NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS, IT IS AN UNEXPLAINED INVESTMENT. ACC ORDINGLY, THE ASSESSING OFFICER MADE ADDITION OF RS.43,750/- AND RS.2,07,750/- RESPECTIVELY FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04. 5. IN APPEAL, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED BEFORE THE CIT(APPEALS) THAT IT WAS OMITTED TO BE D ISCLOSED IN THE CASH FLOW STATEMENT AS IT WAS A CONCLUDED TR ANSACTION AND THE ASSESSEE HAD SUFFICIENT DRAWINGS TO COVER T HESE AMOUNTS. HOWEVER, THE LD. COMMISSIONER OF INCOME-TA X (APPEALS) REJECTED THE ARGUMENTS OF THE ASSESSEE AN D HENCE THE ASSESSEE IS ON SECOND APPEAL BEFORE US, IN ITA NOS.555 & 556/COCH/2008 FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04. 6. WE HAVE HEARD RIVAL SUBMISSIONS. THE LD. COUNS EL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS, WHICH WAS ADVANCED BEFORE THE LOWER AUTHORITIES. THE LD. COMM ISSIONER OF INCOME-TAX, DR, SUPPORTED THE FINDINGS OF THE LO WER AUTHORITIES. THE FACT THAT THE ASSESSEE HAS MADE SUBSCRIPTIONS TO THE CHITTY IS NOT DISPUTED. THE ARGUMENT OF ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 4 THE LD. COUNSEL IS THAT THE PAYMENT MADE FOR THE AS SESSMENT YEAR 2002-03 IS OUT OF PERSONAL DRAWINGS OF RS.87,9 30/- AND FOR THE ASSESSMENT YEAR 2003-04, IT IS OUT OF BID A MOUNT OF CHITTY AMOUNTING TO RS.6,90,000/- AS PRIZE AMOUNT. THE LD. CIT(APPEALS) OPINED THAT IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED THAT THE PAYMENT WAS OUT OF PERSONAL DR AWINGS IN THE ASSESSMENT YEAR 2002-03, IT WOULD POSE A QUE STION ON REASONABLENESS OF THE DRAWINGS. IN RESPECT OF THE ASSESSMENT YEAR 2003-04, THE LD. CIT(APPEALS) FOUND THAT THE DATE OF RECEIPT OF BID AMOUNT WAS ON 04-05-2003 , WHICH FALLS AFTER THE LAST DAY OF THE RELEVANT PREVIOUS Y EAR. THEREFORE WE FIND NO ERROR ON THE ABOVE FINDINGS OF THE LD. CIT(APPEALS), AS THE FINDINGS OF THE LD. CIT(APPEAL S) IS BASED ON THE FACTS OF THE CASE, WHICH HAS NOT BEEN DISPUTED BY THE ASSESSEE IN THESE APPEALS. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(APPEALS) AND DISMISS THE APPEA LS FILED BY THE ASSESSEE. 7. NOW TURNING TO THE APPEALS FILED BY THE DEPARTME NT, IN ITA NO.799/COCH/2008 FOR THE ASSESSMENT YEAR 2004-05, THE ONLY ISSUE FOR OUR CONSIDERATION IS IN RESPECT OF DELETION OF ADDITION OF RS.10 LAKHS ON ACCOUNT OF DEEMED DIV IDEND U/S.2(22)(E). ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 5 7.1 ON SCRUTINY OF BANK ACCOUNT OF M/S. TOUCH HOME BUILDERS AND REALTORS PVT. LTD., A COMPANY IN WHICH THE ASSESSEE IS ONE OF THE DIRECTORS, THE ASSESSEE ALON G WITH SHRI MOHAMMED RAFI WITHDREW BY CHEQUE NOS. 8530 AND 8533 RS.10 LAKHS EACH ON 26-8-2003. IT WAS CREDIT ED TO THE ASSESSEES BANK ACCOUNT AND AS PER THE STATEMENT OF THE COMPANY; THE ASSESSEE HAD USED IT FOR BUSINESS PURP OSES. ACCORDING TO THE ASSESSING OFFICER, THERE WAS NO EV IDENCE IN THIS REGARD. FURTHER, ON VERIFICATION OF THE RECO RDS OF THE ASSESSEE AND M/S. TOUCH HOME BUILDERS AND REALTORS P. LTD. THE ASSESSING OFFICER FOUND THAT NO DIVIDEND WAS DE CLARED BY THE COMPANY FOR THE PERIOD 2003-04. NO PROOF WAS FORTHCOMING THAT THIS AMOUNT OF RS.10 LAKHS DRAWN B Y THE ASSESSEE WAS USED FOR BUSINESS PURPOSES. THEREFORE, THE ASSESSING OFFICER CLASSIFIED THIS AS DEEMED DIVIDEN D U/S.2(22)(E) AND TREATED AS UNACCOUNTED INCOME OF T HE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 AND ADDED TO THE INCOME RETURNED. 7.2 BEFORE THE LD. CIT(APPEALS) IT WAS CONTENDED TH AT SECTION 2(22)(E) DEALS WITH ADVANCE OR LOANS TO A SHARE HOLDER AND NOT A REPAYMENT OF A LIABILITY. WHAT WAS REPAID ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 6 TO THE ASSESSEE WAS THE SUM OF RS.10 LAKHS COLLECTE D FROM THE ASSESSEE BY WAY OF SHARE APPLICATION MONEY. M/S. TOUCH HOME BUILDERS AND REALTORS P. LTD. IN ITS ONL Y PROJECT INCURRED HUGE LOSSES AND ON COMPLETION OF THE PROJE CT, THE SURPLUS OF RS.20 LAKHS OUT OF THE SUM OF RS.20 LAKH S CONTRIBUTED BY THEM FOR COMPLETION OF CONSTRUCTION AS SHARE APPLICATION MONEY WAS WITHDRAWN. THUS, IT IS THE C ONTENTION OF THE ASSESSEE THAT THIS WITHDRAWAL HAS GONE ONLY TO REDUCE THE LIABILITY OF RS.20 LAKHS APPEARING UNDER THE HE AD SHARE APPLICATION MONEY DURING THE FINANCIAL YEAR ENDED 31-3- 2004 AND THAT THERE WAS NO ADVANCE OR LOAN APPEAR ING IN THE BALANCE-SHEET OF THE SAID COMPANY, THERE IS NO SURPLUS IN PROFIT AND LOSS ACCOUNT AND SECTION 2(22)(E) CLE ARLY SPEAKS AS TO THE EXTENT TO WHICH THE COMPANY IN EI THER CASE POSSESSES ACCUMULATED PROFITS. WITHOUT CONSIDERIN G THESE FACTS WHICH ARE ALREADY ON RECORD, THE ASSESSING OF FICER MADE THE IMPUGNED ADDITION. THE LD. CIT(APPEALS) DEALING WITH THE ISSUE AT LENGTH IN PAGES 4,5 & 6 OF HIS AP PELLATE ORDER, HELD THAT THIS ADDITION WAS NOT WARRANTED. HENCE, REVENUE IS ON APPEAL BEFORE THE TRIBUNAL. 7.3 WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FAC T IS THAT ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 7 THERE IS NO ACCUMULATED PROFIT SO AS TO BRING THIS AMOUNT OF RS.10 LAKHS UNDER THE HEAD DEEMED DIVIDEND FOR TH E PURPOSE OF ADDITION. IF THERE IS NO ACCUMULATED P ROFIT, THEN THE QUESTION OF DEEMED DIVIDEND WILL NOT ARISE. T HEREFORE, WE AGREE WITH THE FINDINGS OF THE LD. CIT(APPEALS) WHO HELD THAT THE COMPANY HAS ONLY ACCUMULATED LOSS FOR THE RELEVANT ASSESSMENT YEAR ENDED WITH 31-3-2004 AND SURPLUS RE SERVES ARE NIL. FURTHER, IT IS ESTABLISHED THAT THIS PAY MENT OF RS.10 LAKHS EACH TO THE ASSESSEE AND MR. MOHAMMED R AFI GATHERED AT THE TIME OF COMPLETION OF THE INVESTIGA TION OF THE ASSESSMENT OF M/S. TOUCH HOME BUILDERS AND REAL TORS PVT. LTD. AND IN THE ASSESSMENT OF M/S. TOUCH HOME BUILDERS AND REALTORS PVT. LTD., THE SAID COMPANY H AS FILED THEIR AUDITED BALANCE-SHEET ON 06-12-2007 AND THE O RDER HAS BEEN PASSED ON 17-12-2007. THE COPY OF THE SAID AUDITED BALANCE-SHEET OF THE SAID COMPANY FOR THE YEARS END ED 31-3- 2003 AND 31-3-2004 WERE ALSO CONSIDERED BY THE LD. CIT(APPEALS) AND WE FIND THAT SUM OF RS.20 LAKHS UN DER THE HEAD SHARE APPLICATION MONEY AS ON 31-3-2003 AND NIL AMOUNT AS ON 31-3-2004 AND AFTER THE COMPLETION OF THE ONLY PROJECT BY THE SAID COMPANY IN THE MONTH OF AU GUST 2003, THE ASSESSEE AND MR. MOHAMMED RAFI WITHDRAWN THE SHARE APPLICATION MONEY. COUPLED WITH THESE FACTS AND THE ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 8 UNDISPUTED FACT THAT THE COMPANY IS ONLY ACCUMULATE D LOSS AND THERE IS NO PROFIT, THE MISCHIEF OF SECTION 2(2 2)(E) UNDER THE DEEMED DIVIDEND IS NOT AT ALL ATTRACTED . HENCE, WE HAVE NO HESITATION IN REJECTING THE GROUNDS OF T HE DEPARTMENT AND CONFIRMING THE ORDER OF THE LD. CIT( APPEALS). 7.4 IN THE RESULT, THE APPEAL OF THE REVENUE FAILS AND THE SAME IS HEREBY DISMISSED. 8. C.O.NO.79/COCH/2008 FILED BY THE ASSESSEE IS ONLY SUPPORTS THE STAND OF THEE LD. CIT(APPEALS) WITH RE GARD TO THE APPLICATION OF SECTION 2(22)(E) OF THE ACT. S INCE WE HAVE CONFIRMED THE FINDINGS OF THE LD. CIT(APPEALS) ON THIS ISSUE, THE CROSS OBJECTION FILED BY THE ASSESSEE BE COMES INFRUCTUOUS AND DESERVES TO BE DISMISSED AND ACCORD INGLY DISMISSED. 9. IN ITA NO.800/COCH/2008 , THE REVENUE SUBMITS THAT THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.16,13,333/- AS UNACCOUNTED INVESTMENT IN LAND PU RCHASE AND FURTHER ERRED IN HOLDING THAT THE ASSESSEE HAD SUFFICIENT FUNDS FOR THE INVESTMENT BEING RECEIPT OF RS.53 LAK HS FROM M/S. INTEGRATED HOUSING DEVELOPMENT LTD. ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 9 9.1 THE ASSESSING OFFICER ON THE BASIS OF THE SEIZE D MATERIAL AR-6(3), A PRE-SALE WORKING OF PROPERTY SA LE FROM SMT. MEENAKSHI SUKUMARAN, FROM WHOM LAND WAS PURCHA SED BY THE ASSESSEE, SMT. LATHA AND SHRI M. VIJAYAKUMAR ON 08- 12-2005, THE ASSESSING OFFICER TOOK THE VALUE OF CONSIDERATION PAYABLE TO SMT. MEENAKSHI SUKUMARAN A T RS.78,40,000/- AND AFTER DEDUCTING THE DOCUMENT VAL UE OF RS. 30 LAKHS, COMPUTED THE UNACCOUNTED INVESTMENT O F RS.48,40,000/-. OUT OF THIS, THE ASSESSING OFFICER CONSIDERED A SUM OF RS.16,13,333/-(1/3 RD OF RS.48,40,000/-) AS THE UNACCOUNTED INVESTMENT OF THE ASSESSEE AND T HE BALANCE IN THE HANDS OF SMT. LATHA AND SHRI M. VIJA YAKUMAR. IT WAS THE CONTENTION OF THE ASSESSEE THAT AR 6(3) WAS ONLY A DRAFT DOCUMENT BETWEEN MEENAKSHI SUKUMARAN AND MR . ASOK, WITHOUT ANY DATE. ACTUAL TRANSACTION WAS BET WEEN SMT. MEENAKSHI SUKUMARAN ON THE ONE SIDE AND THE ASSESSEE, SMT. LATHA AND SHRI M. VIJAYAKUMAR ON THE OTHER SIDE. THE REGISTERING AUTHORITY HAS NOT MADE OUT ANY CASE OF UNDER VALUATION OF PROPERTY. THE ASSESSING OFF ICER HAS NOT COME WITH A CASE OF FINANCIAL DEALINGS BETWEEN THE PURCHASERS AND THE SELLER DURING SEARCH OF ANY TIME THEREAFTER. THE BUYER AS PER THE PURPORTED AGREEM ENT AND THE ACTUAL BUYER DIFFER. SINCE THE ALLEGED AGREEM ENT DOES ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 10 NOT BEAR ANY DATE OR SIGN AND IT IS ONLY A LOOSE SH EET OF PAPER, IT CANNOT BE CONSIDERED AS A VITAL DOCUMENT. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CBI VS. VC SHUKLA 3 SCC 410 WHEREIN IT HA S BEEN HELD THAT LOOSE SHEETS OF PAPER ARE NOT EVIDENCE WI THIN THE MEANING OF THE INDIAN EVIDENCE ACT,1872. THE ASSE SSING OFFICER HAS NOT CORROBORATED WITH FINANCIAL TRANSAC TIONS OR OTHER EVIDENCES AND ESTABLISHED A CASE FOR UNDER VA LUATION. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS : A) AMAR KUMARI SURANA VS. CIT -226 ITR 344 (RAJ); B) CIT VS. NARESH KHATTER (HUF) 261 ITR 664 (DEL); C) KP VARGHESE VS. ITO -131 ITR 597(SC). IT WAS ALSO SUBMITTED THAT AR6(3) WAS ONLY A DRAFT PRINT OUT OF AN AGREEMENT BETWEEN THE SAID SELLER AND ARTECH GROUP WHICH WAS DROPPED. 9.2 THE LD. CIT(APPEALS) ON A PERUSAL OF THE AGREEM ENT FOUND THAT IT IS AN UNSIGNED DOCUMENT WITHOUT ANY D ATE. THE NAME OF THE BUYER GIVEN IN THE AR 6(3) IS DIFFERENT FROM THE ACTUAL BUYERS AS PER THE SALE DEED. THE LD. CIT(A PPEALS) RELYING ON THE DECISION OF THE HONBLE APEX COURT I N THE CASE OF CBI VS. VC SHUKLA -3 SCC 410 WHEREIN IT HAS BEE N HELD ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 11 THAT THE LOOSE SHEETS OF PAPERS ARE NOT EVIDENCES W ITHIN THE MEANING OF THE INDIAN EVIDENCE ACT, 1872, DELETED T HE ADDITION MADE BY THE ASSESSING OFFICER. 9.3 WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDE NTS RELIED UPON. THE FACTS OF THE CASE ARE NOT IN DISPUTE. T HE LD. FIRST APPELLATE AUTHORITY HAS DEALT WITH THIS ISSUE AT LE NGTH AND PASSED A SPEAKING ORDER. WE FIND NO REASON TO INT ERFERE WITH HIS FINDINGS, SINCE THE REASONINGS GIVEN BY TH E LD. CIT(APPEALS) ARE NOT CONTROVERTED BY THE REVENUE. SO ALSO THE DECISION RELIED UPON BY THE LD. CIT(APPEALS) IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE. HENCE, WE UP HOLD THE FINDINGS OF THE LD. CIT(APPEALS) DELETING THE ADDIT ION OF RS.16,13,333/-. 10. IN RESPECT OF GROUND NO.2.2, I.E. THE CIT(APPE ALS) ERRED IN HOLDING THAT THE ASSESSEE HAD SUFFICIENT F UNDS FOR THE INVESTMENT BEING RECEIPT OF RS.53 LAKHS FROM M/ S. INTEGRATED HOUSING DEVELOPMENT LTD. WITHOUT ASCERTA INING THE DIRECT NEXUS OF THE SOURCE WITH THE INVESTMENT , NO- WHERE WE FIND SUCH A VIEW OBSERVED BY THE LD. CIT(A PPEALS) IN THE IMPUGNED ORDER. HENCE, NO ADJUDICATION IS CALLED FOR. ITA NO.555/COCH/2008, ETC. T. LEKHA APARANA 12 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 12. C.O.NO.80/COCH/2008 IS FILED BY THE ASSESSEE. IT IS MERELY SUPPORTS THE VIEW TAKEN BY THE LD. CIT(APPEA LS) IN RESPECT OF DELETION OF RS.16,13,333/- AND WITH REGA RD TO THE ISSUE RAISED IN 2.2. OF THE GROUNDS OF APPEAL, IT I S THE SUBMISSION OF THE ASSESSEE THAT IT DOES NOT RELATE TO THE RESPONDENT. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE CONFIRMING THE FINDINGS OF THE LD. CIT(APPE ALS), THE PRESENT CROSS OBJECTION BECOMES INFRUCUOUS. HENCE , IT IS DISMISSED. 13. IN THE RESULT, ALL THESE APPEALS AND CROSS OB JECTIONS ARE DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 30 TH JUNE,2010. PM. COPY FORWARDED TO: 1. SMT. T. LEKHA APARANA, MARAPPALAM, PATTOM PALACE P OST, TRIVANDRUM. 2. THE DY. CIT, CENTRAL CIRCLE, TRIVANDRUM. 3. CIT(A)-I, KOCHI. 4. CIT, CENTRAL, KOCHI. 5. D.R.