The ACIT, Indore V. Shri Shrichand Shadija, Indore

ITA 564/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2784 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 14-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Assessee Lawyers: S S DESH
• Keywords: Unexplained investment; Loose papers
• Section: 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.564/IND/2009 ASSESSMENT YEAR: 2007-08 ASSTT. COMMISSIONER OF INCOME TAX, 4(1), INDORE . APPELLANT VS SHRI SHRICHAND SHADIJA, 156, PALSIKAR COLONY, INDORE PAN AZNPS 5696 L . RESPONDENT APPELLANT BY : SHRI K.K. SINGH, CIT, DR RESPONDENT BY : SHRI S.S. DESHPANDE, CA O R D E R PER BENCH THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 8.9.09, ON THE EFFECTIVE G ROUND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D ELETING THE ADDITION OF RS.21,17,500/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF UNEXPLAINED INVESTMENT IN HUNDI. 2 2. WHEN THE MATTER CAME UP FOR HEARING, LD. CIT, DR MADE GENERAL OBSERVATIONS AS REGARD TO THE OTHER APPEALS OF THE ASSESSEE WHICH COULD BE PENDING, HOWEVER, THIS OBSERVATION WAS NOT SUPPO RTED BY ANY SPECIFIC DETAILS THEREOF. AT THIS STAGE, THE BENCH INQUIRED FROM THE LD. COUNSEL FOR THE ASSESSEE AS REGARD TO PENDENCY OF OTHER APPEALS OR ISSUE RAISED IN THE APPEAL HAVING ANY BEARING ON OTHER PENDING APPE ALS, IF ANY. THE LD. COUNSEL FOR THE ASSESSEE MADE A STATEMENT AT BAR TH AT NO OTHER APPEALS OF THE ASSESSEE WERE PENDING AND THE ISSUE RAISED I N THIS APPEAL WAS OF INDEPENDENT NATURE. THE BENCH, THEN, PUT FORTH A QU ESTION TO THE LD. CIT, DR AS TO HOW THE ORDER OF THE LD. CIT(A) WAS WRONG INASMUCH AS THE ISSUE INVOLVED MERELY THE DETERMINATION OF PERIOD O F ROTATION OF MONEY SO AS TO ARRIVE AT THE AMOUNT OF UNEXPLAINED INVESTMEN T IN THE HUNDIES. THE LD. CIT, DR STATED THAT HE HAD GONE THROUGH ONLY A PART OF THE ASSESSMENT ORDER, HENCE, IT WAS NOT POSSIBLE TO MAK E SPECIFIC ARGUMENTS. THE BENCH, THEN, THOUGHT IT FIT TO PROCE ED WITH THE MATTER FOR THE REASON THAT THE ISSUE APPEARED TO BE VERY SIMPL E AND THE GROUND OF ADJOURNMENT PLEADED BY THE LD. CIT, DR WAS NOT CONV INCING. THE LD. COUNSEL FOR THE ASSESSEE INSTEAD OF MAKING DETAILED ARGUMENTS PREFERRED TO RELY ON SUBMISSIONS MADE BEFORE LD. CI T(A) AND FINDINGS OF LD. CIT(A) WHICH REMAINED UNCONTROVERTED BY THE REV ENUE AS THE LD. CIT, DR MERELY PREFERRED TO RELY ON THE ASSESSMENT ORDER . 3 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ONLY REGULAR SOURCE OF INCOME OF THE ASSES SEE WAS FROM PARTNERSHIP FIRM M/S. SAI KRIPA PACKAGING. A SEARCH OPERATION U/S 132 OF THE ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES O F THE ASSESSEE ON 6.1.2007. THE ASSESSEE FOR ASSESSMENT YEAR 2007-08 FILED THE RETURN ON 31.3.2008. IN THE ORIGINAL RETURN, THE ASSESSEE SHO WED THE TOTAL INCOME OF RS.1,67,49,230/- WHICH INCLUDES RS.2,10,000/- AS PARTNER REMUNERATION, RS.82,805/- AS SHORT TERM CAPITAL GAI N ON THE SALE OF LAND AND RS.1,65,00,000/- AS INCOME SURRENDERED U/S 132. AFTER CLAIMING DEDUCTION OF RS.43,074/- U/S 80D & 80C, THE TOTAL I NCOME WAS SHOWN AT RS.1,67,49,230/-. THE ASSESSEE EXPLAINED THE DETAIL OF SURRENDERED INCOME OFFERED IN THE RETURN IS AS FOLLOWS: - SL.NO. AY ON ACCOUNT OF INCOME SURRENDERED (IN RS.) 1 2007-08 LPS-1 & LPS-2 1,25,00,000 2 2007-08 INVESTMENT IN RESIDENTIAL HOUSE 10,00,000 3 2007-08 OTHER INVESTMENTS/LOOSE PAPERS 10,00,000 4 2007-08 LPS-3 (INV IN PROP) 20,00,000 BEFORE THE LD. ASSESSING OFFICER, THE AMOUNT OF RS. 20 LACS WHICH WAS SURRENDERED ON ACCOUNT OF INVESTMENT IN PURCHASE OF PROPERTY (LPS-3) WAS CLAIMED TO BE PERTAINED TO ASSESSMENT YEAR 2006 -07, THEREFORE, 4 PLEA WAS RAISED THAT THIS AMOUNT REQUIRES TO BE EXC LUDED FROM RS.1,65,00,000/-. IT WAS FURTHER CLARIFIED THAT THE RETURN WAS REVISED ONLY TO GIVE EFFECT TO ADJUST THE FACTUAL ERRORS AND OTH ERWISE THERE IS NO CHANGE IN THE INCOME RETURNED FOR THE ASSESSMENT YE AR 2007-08 OR THE AMOUNT SURRENDERED/OFFERED IN THE HANDS OF THE INDI VIDUAL ASSESSEE. THE LD. ASSESSING OFFICER WAS OF THE VIEW THAT SINCE TH ERE IS A GAP IN THE PERIOD OF INVESTMENTS IN HUNDIES, THEREFORE, THE AM OUNT OF RS.20 LACS WAS UNEXPLAINED. THE ASSESSING OFFICER TABULATED SI XTY ENTRIES AS MENTIONED IN TABLE-A TO ANNEXURE-A IN THE ASSESSMEN T ORDER MENTIONING IN FIRST COLUMN ENTRY NUMBER, THE AMOUNT IN THE SEC OND COLUMN AND CODE USED FOR THE AMOUNT DENOTES TO THIRD COLUMN, T HE PERIOD OF HUNDI IN THE NEXT COLUMN AND THE SPECIFIC DATE OF SUCH HUNDI IN THE LAST COLUMN. OUT OF THE VARIOUS ENTRIES IN THE DIARY TO THE EXTE NT OF RS.429.60 LACS, THE AMOUNT OF RS.5,42,500/- WERE VERIFIED BY THE AO THA T IT RELATES TO EMI PAYMENTS AND FURTHER THE AMOUNT OF RS.167.50 LACS P ERTAINING TO LOANS TAKEN. HOWEVER, THE AMOUNT OF RS.2,56,67,500/- WAS SUSPECTED TO BE UNEXPLAINED INVESTMENT. THE LD. ASSESSING OFFICER A CCEPTED THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT OF RS.20 LACS WAS PERTAINING TO PROPERTY TRANSACTION OF EARLIER YEAR. THE ASSESS EE PREFERRED WRITTEN SUBMISSION BEFORE THE LD. CIT(A) AS MENTIONED IN PA RA 3 ONWARDS, THEREFORE, THE SAME ARE NOT BEING REPRODUCED BEING MATTER OF RECORD. THE ASSESSEE WAS FURTHER ASKED CLARIFICATIONS WHICH WERE SUBMITTED VIDE 5 WRITTEN SUBMISSION MENTIONING THE COMPLETE DETAILS OF DISCLOSURE MADE IN THE ENTIRE GROUP OF CASES WHICH HAS BEEN REPRODU CED IN PARA 3.1 ONWARDS OF THE IMPUGNED ORDER. THE BRIEF OBSERVATI ONS MADE IN THE IMPUGNED ORDER ARE REPRODUCED HEREUNDER: 4 FACTS ON RECORD, FINDING GIVEN BY THE AO AND THE CONTENTIONS PUT FORWARD BY THE APPELLANT ARE CAREFULLY TAKEN INTO CONSIDERATION. 4.1 FIRST OF ALL, IT IS TO BE NOTED THAT THERE IS N O DISPUTE IN THE QUANTUM OF INVESTMENT IN UNACCOUNTED HUNDIES WITHOUT CONSIDERING THE BENEFIT OF RENEWAL/ROTATION OF THE INVESTMENT IN SUCH HUNDI. T HE MAIN THRUST OF THE APPELLANT ARGUMENT IS THAT THOUG H AS PER NOTINGS FOUND IN SEIZED DIARY, AS EVIDENCED FROM THE CHART OF SUCH TRANSACTIONS, ENCLOSED BY TH E AO AS ANNEXURE A TO THE ASSESSMENT ORDER, THERE WAS SPECIFIC ENTRY OF 6 MONTHS PERIOD ONLY AGAINST HUNDI TRANSACTION OF RS.10 LAKH AND AGAINST ALL THE 23 HUNDI TRANSACTIONS OF THE AMOUNT OF RS.5 LAKHS, INVARIABLY WHEREVER THE PERIOD WAS MENTIONED, IT WA S MENTIONED AS 4 MONTHS. HOWEVER, THE AO WHILE SUMMARIZING HIS FINDING IN THE PERIOD OF ROTATION H AS CATEGORIZED HUNDIES FALLING IN RS.5 LAKH AND ABOVE IN THE ROTATION PERIOD OF 6 MONTHS, WHEREAS IN THE EARLIER ENTRY UPTO RS.5 LAKHS, HE HAS HIMSELF MENTIONED AS ROTATION PERIOD OF 4 MONTHS. IT WAS EMPHASIZED THAT IF FOR HUNDIES, INVOLVING AN AMOUNT OF RS.5 LAKHS AND BELOW WAS TAKEN AS 4 MONTHS, THERE WAS NO CASE FOR ARRIVING AT ANY AMOUNT OF UNEXPLAINED INVESTMENT AS DONE BY AO. 4.2 IT WAS ALSO EMPHASIZED THAT THE ASSESSEE HAS ADDITIONALLY SURRENDERED AN AMOUNT OF RS.10 LAKHS BY WAY OF ABUNDANT PRECAUTION AND THOUGH THE ENTIRE INTEREST ON SUCH HUNDI WAS BY AND LARGE RE-INVESTED AND HAS BEEN SO ACCEPTED BY THE AO ALSO, THE SAME WOULD TAKE CARE OF THE INTEREST INCOME OF SUCH UNACCOUNTED HUNDI TRANSACTION ALSO. 4.3 IT WAS FURTHER EMPHASIZED THAT THE AO'S ORDER WAS LACKING IN NECESSARY CLARITY IN THE WORKING OF ROTATION PERIOD AS FAR AS HUNDIES OF RS.5 LAKHS WER E CONCERNED BECAUSE HE HAS INCLUDED THIS AMOUNT IN BOTH ENTRIES AS ONCE IN UPTO RS.5 LAKHS WHERE THE ROTATION PERIOD IS MENTIONED AS 4 MONTHS AND THEN 6 AGAIN IN THE NEXT MONTH RS.5 LAKHS AND ABOVE AS 6 MONTHS, WHEREAS, THE AMOUNT OF RS.5 LAKHS WOULD FALL IN EITHER OF THE TWO CATEGORIES AND CANNOT FAL L IN BOTH THE CATEGORIES. IT WAS AGAIN REITERATED THAT I F THE HUNDIES OF RS.5 LAKHS EACH ARE TAKEN INTO CONSIDERATION FOR A ROTATION PERIOD OF 4 MONTHS AND ALSO ACCEPTED BUY THE AO, THEN THE WORKING DONE BY THE AO IN ANNEXURE A TO THAT EXTENT WOULD HAVE TO BE REVISED. LASTLY IT WAS PRESSED THAT STEPS 6 AND 7 ARE DEVOID OF LOGIC AS SIMPLY BECAUSE A PARTICULAR AMOUNT APPEARS ONCE, WITHOUT CORRELATING THE DATES OF SUCH HUNDI AND ROTATION PERIOD, IT CANNOT BE CONCLUDED THAT FOR EXPLAINING INVESTMENT IN THESE HUNDIES OF RS.20 LAKHS, THE AMOUNT NEEDED TO EXPLAIN THE SAME WOULD BE RS.20 LAKHS. IF IT WAS SO ADOPTED THEN AO WOULD BE CONTRADICTING HIS OWN APPROACH IN GIVING THE BENEFIT OF ROTATION. THUS IF THE WORKING WAS PROPERLY DONE, THEN THERE WOULD BE NO FURTHER AMOUNT OF UNEXPLAINED INCOME AS ADDED BY THE AO. 4.4 THERE IS APPARENT MERIT IN THE CONTENTION OF TH E APPELLANT THAT THE AO HAS WRONGLY CONSIDERED THE ROTATION PERIOD OF 6 MONTHS FOR HUNDIES AMOUNT INVOLVING RS.5 LAKHS AS PER STEP 5 WHICH BECOMES CLEAR FROM ENTRY NP.11,56,57 & 58 ON TABLE A INVOLVING RS.5 LAKHS WHERE THE PERIOD IS SPECIFICAL LY MENTIONED AS 4 MONTHS. FURTHER AGAIN SOME OF OTHER ENTRIES INVOLVING RS.5 LAKHS, NO ROTATION PERIOD IS MENTIONED AND ROTATION PERIOD OF 6 MONTHS IS MENTIONED ONLY AGAINST 1 ENTRY OF RS.10 LAKHS. THE AO AS PER HIS OWN APPROACH HAS ADOPTED THE ROTATION PERIOD OF 3 MONTHS AND 4 MONTHS FOR AMOUNT UPTO RS.4 LAKHS BASED ON THE PERIOD NOTICED IN RESPECT OF SOME OF SUCH HUNDIES SO THERE WAS NO APPARENT BASIS TO COME TO THE CONCLUSION IN ABSENCE OF ANY DEFINITE INDICATION THAT THE ROTATION PERIOD OF HUNDIES INVOLVING AMOUNT OF RS.5 LAKHS WOULD BE 6 MONTHS AND NOT 4 MONTHS. THIS CONFUSION ALSO GETS REFLECTED AS PER ROTATION PERIOD MENTIONED IN PARA 5.6 OF THE ASSESSMENT ORDER. THUS, IF ROTATION PERIOD O F 4 MONTHS IS CONSIDERED, THEN IN STEP 5, INVOLVING TOT AL INVESTMENT OF RS.45 LAKHS, THE SURRENDERED AMOUNT REQUIRED TO EXPLAIN SUCH INVESTMENT WOULD BE 1/3 RD OF SUCH AMOUNT I.E. RS.15 LAKHS, WHEREAS, IT IS NOT CL EAR ON WHAT BASIS AO HAS ADOPTED THE AMOUNT OF RS.30 LAKHS FOR CONSIDERING THE INVESTMENT OF RS.45 LAKHS , 7 WHICH IS AGAINST HIS OWN APPROACH AND METHODOLOGY ALSO OF CONSIDERING ROTATION PERIOD OF 6 MONTHS. BECAUSE IF ROTATION PERIOD OF 6 MONTHS IS APPLIED, THE AMOUNT REQUIRED TO EXPLAIN SUCH INVESTMENT WOULD COME TO RS.22.5 LAKHS ONLY AND NOT RS.30 LAKHS AS CONSIDERED BY HIM. THUS, ON THIS COUNT ITSELF, THER E IS OVER-DETERMINATION OF UNEXPLAINED INVESTMENT OF RS.15 LAKHS OUT OF RS.21,17,500/-, WHICH LEAVES A BALANCE OF RS.6,17,500/-. THERE IS FURTHER MERIT IN APPELLANTS CONTENTION ABOUT WRONG INFERENCE DRAWN IN STEP 6 INVOLVING TRANSACTIONS OF RS.20 LAKHS. 4.5 NOW, THE ASSESSEE HAS SURRENDERED FURTHER AMOUNT OF RS.10 LAKHS OVER AND ABOVE THE AMOUNT OF RS.1,17,50,000/- FOR INVESTMENT IN UNEXPLAINED HUNDIES AND THE CREDIT FOR THE SAME HAS NOT BEEN CLAIMED BY THE APPELLANT NOR ALLOWED BY THE AO AGAINST ANY FURTHER INVESTMENT OR TRANSACTION. THUS , THE BALANCE AMOUNT IF ANY WOULD BE AMPLY COVERED BY FURTHER SURRENDERED AMOUNT OF RS.10 LAKHS WHICH WILL INCIDENTALLY ALSO COVER UNACCOUNTED INTEREST O N SUCH HUNDI TRANSACTIONS WHICH WAS OTHERWISE UTILISE D AND WAS NOT RE-INVESTED, AS HAS BEEN BY AND LARGE ACCEPTED BY THE AO. THUS, IN ANY WAY, THE ISSUE IS EXAMINED, THERE IS NO CASE FOR MAKING ANY FURTHER ADDITION OF RS.21,17,500/- FOR UNEXPLAINED INVESTMENT IN HUNDI AS MADE BY AO AND THE SAME IS ACCORDINGLY DIRECTED TO BE DELETED. IF THE AFORESAID OBSERVATIONS MADE BY THE LD. CIT(A ), ARGUMENTS ADVANCED BY THE LD. RESPECTIVE COUNSEL AND THE OBSE RVATIONS OF THE ASSESSING OFFICER ARE KEPT IN JUXTA-POSITION AND AN ALYSED, WE FIND THAT THE LD. ASSESSING OFFICER WRONGLY CONSIDERED THE RO TATION PERIOD OF 6 MONTHS FOR HUNDI AMOUNTS INVOLVING RS.5 LAKHS AS PE R STEPS 5 WHICH BECOMES CLEAR FROM ENTRY NUMBER 11, 56, 57 & 58 IN TABLE-A AS THE PERIOD OF 4 MONTHS HAS SPECIFICALLY BEEN MENTIONED. FOR SOME OF ENTRIES INVOLVING RS.5 LAKHS, EITHER NO ROTATION PERIOD IS MENTIONED OR IT IS OF 6 8 MONTHS FOR ENTRY NUMBER 1 OF RS.10 LACS. THE ASSESS ING OFFICER FOR THE AMOUNT OF RS.4 LACS HAS ADOPTED THE ROTATION PERIOD OF 3 & 4 MONTHS BASED ON THE PERIOD NOTICED IN RESPECT OF SOME OF S UCH HUNDIES, THEREFORE, THERE IS NO BASIS TO COME TO A CONCLUSIO N THAT TOO IN THE ABSENCE OF DEFINITE INDICATION, WHICH LEAD TO THE C ONFUSION AS IS EVIDENT IN PARA 5.6 OF THE ASSESSMENT ORDER. IT IS NOT CLEA R ON WHAT BASIS, THE LD. ASSESSING OFFICER ADOPTED THE AMOUNT OF RS.30 LACS FOR CONSIDERING THE INVESTMENT OF RS.45 LACS BECAUSE IF THE ROTATION PE RIOD OF 6 MONTHS IS APPLIED, THE AMOUNT REQUIRED FOR SUCH INVESTMENT CO MES TO RS.22.5 LACS ONLY AND NOT RS.30 LACS. IT IS A CLEAR CASE OF OVER DETERMINATION OF UNEXPLAINED INVESTMENT OF RS.15 LACS OUT OF RS.21,1 7,500/- LEAVING THE BALANCE OF RS.6,17,500/- WHEREAS THE ASSESSEE HAS F URTHER SURRENDERED RS.10 LACS OVER AND ABOVE THE AMOUNT OF RS.1,17,50, 000/- FOR INVESTMENT IN UNEXPLAINED HUNDIES AND THE ASSESSEE HAS NOT CLAIMED ANY CREDIT FOR THE SAME, THEREFORE, IT WOULD BE COV ERED BY THE FURTHER SURRENDER OF RS.10 LACS INCLUDING UNACCOUNTED INTER EST ON SUCH HUNDIES WHICH WERE OTHERWISE NOT RE-INVESTED. WE FURTHER FI ND THAT IN THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE ALSO REFERRE D TO THE STATEMENT GIVEN BY THE ASSESSEE U/S 132(4) DULY ACCEPTED BY T HE ADI WING AND ALSO BY THE ASSESSING OFFICER TO SHOW THAT THERE WA S AN INADVERTENT MISTAKE IN THE QUANTUM OF PEAK WORKED OUT ORIGINALL Y AND THIS FACT HAS ALSO BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A ) AS IS EVIDENT IN THE 9 FINDINGS REPRODUCED HEREIN BEFORE. THEREFORE, IN VI EW OF THE ABOVE UNCONTROVERTED FINDINGS OF THE LD. CIT(A), WITH WHI CH, WE ARE IN AGREEMENT, WE DO NOT CONSIDER ANY NECESSITY TO ELAB ORATE THE MATTER FURTHER FOR THE SAKE OF BREVITY, CONSEQUENTLY, THE STAND OF THE LD. CIT(A) IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 4 TH JUNE, 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 4 .6.2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE ! VYAS !