Assistant Commissioner of Income Tax Circle-1, Tumkur V. Sri K.R.Narasimha Raju , Gubbi

ITA 579/BANG/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7617 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH JT BENGALURU
• Assessee Lawyers: KRISHNASWAMY
• Keywords: Transactions in derivatives; Source of fund
• Section: 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 579/BANG/2017 ASSESSMENT YEAR : 2012 - 13 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, TUMKUR. VS. SHRI K.R. NARASIMHA RAJU, PROP: VASAVI JEWELLERS & PAWN BROKERS, B H ROAD, GUBBI 572 216. PAN: AAOPN 6858R APPELLANT RESPONDENT APPELLANT BY : SHRI B.R. RAMESH, JT.CIT(DR)(ITAT), BENGALURU. RE SPONDENT BY : SHRI KRISHNASWAMY, ADV OCATE DATE OF HEARING : 12 .06 .201 8 DATE OF PRONOUNCEMENT : 20.07. 2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER D ATED 20.12.2016 OF THE CIT(APPEALS)-7, BENGALURU RELATING TO ASSESSMEN T YEAR 2012-13. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READS AS FO LLOWS:- 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE EFFO RTS OF THE AO INVOLVED IN THOROUGH EXAMINATION OF THE GENUINEN ESS OF CREDITS APPEARING IN THE BOOKS OF ACCOUNTS, RETURNS OF INCOME AND THE CREDIT WORTHINESS OF THE LENDERS. ITA NO. 579/BANG/2017 PAGE 2 OF 8 3. THE LD. CIT(A) ERRED IN NOT CONSIDERING THAT TH E INCOME OF THE FAMILY MEMBERS ARISING OUT OF TRADING IN BLA CK MARKET DOESN'T HAVE ANY CORROBORATIVE EVIDENCE AND THUS IT IS THE COLOURABLE DEVICE USED BY THE ASSESSEE TO SHIFT HIS UNACCOUNTED/UNDECLARED INCOME IN THE HANDS OF FAMIL Y MEMBERS AND AGAIN TAKEN AS LOAN, IN ORDER TO AVAIL THE BENE FIT OF MARGIN TAX SLAB RATE. 4. THE LD. CIT(A) ERRED IN CONSIDERING THAT IF TDS IS DEDUCTED ON THE INTEREST PAYMENTS, SUCH UNSECURED L OANS FROM FAMILY MEMBERS ARE CONSIDERED TO BE GENUINE AND NOT DEBATABLE. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT( A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND TH AT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. 2. THE ASSESSEE IS AN INDIVIDUAL. HE CARRIES ON B USINESS OF JEWELLERY AND PAWN BROKING. FOR AY 2012-13, THE ASSESSEE FIL ED RETURN OF INCOME DISCLOSING TOTAL INCOME OF RS.52,29,530. IN THE CO URSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS R ECEIVED UNSECURED LOANS TOTALING RS.62,15,000 ON WHICH ASSESSEE PAID INTEREST OF RS.4,33,090. THE ASSESSEE HAD ALSO DEDUCTED TAX AT SOURCE ON THE INTEREST PAID. THE AO NOTICED THAT THE UNSECURED L OANS HAVE BEEN RECEIVED FROM THE FAMILY MEMBERS. THE AO CALLED UP ON THE ASSESSEE TO FURNISH CONFIRMATIONS FROM THE FAMILY MEMBERS ALONG WITH STATEMENT OF AFFAIRS OF THE FAMILY MEMBERS TO PROVE THEIR CREDIT WORTHINESS. ON VERIFICATION OF DETAILS FURNISHED BY THE ASSESSEE, THE AO NOTICED THAT INCOME DECLARED BY THE FAMILY MEMBERS WERE MERELY E XPENDITURE OVER RECEIPTS AND THERE WAS NO DESCRIPTION OF SOURCE OF THEIR INCOME, ETC. THE AO WAS THEREFORE DOUBTFUL OF SOURCE OF INCOME OF FA MILY MEMBERS WHO HAD GIVEN LOAN TO THE ASSESSEE. THE AO WAS OF THE VIEW THAT THE LOANS ITA NO. 579/BANG/2017 PAGE 3 OF 8 RECEIVED FROM THE FAMILY MEMBERS WERE NOTHING BUT A SSESSEES INCOME WHICH WAS DECLARED IN THE HANDS OF RELATED PARTIES/ FAMILY MEMBERS AND TAKEN AS A LOAN FROM THEM. THE AO EXAMINED THE ASS ESSEE AS WELL AS ASSESSEES WIFE, ASSESSEES SON AND ASSESSEES DAUG HTER-IN-LAW U/S. 131 OF THE INCOME-TAX ACT, 1961 [THE ACT]. THE GIST OF THE CONCLUSION OF THE AO ON SUCH EXAMINATION OF THE FAMILY MEMBERS IS THA T THEY HAVE NOT BEEN ABLE TO EXPLAIN THE MANNER IN WHICH THE INCOME DECL ARED BY THEM IN THEIR RETURN OF INCOME WAS EARNED. THE DETAILS OF THE FA MILY MEMBERS WHO HAD GIVEN LOANS TO THE ASSESSEE AND INCOME DECLARED BY THEM IN THEIR RETURN OF INCOME WAS AS FOLLOWS:- SL. NO. NAME STATUS CONCERN NAME INCOME DECLARED AS EXPENDITURE OVER RECEIPTS/ SUNDRY RECEIPTS RS. 1 K R NARASIMHA RAJU INDIVIDUAL M/S. VASAVI JEWELLERS 29,35,000 2 K R NARASIMHA RAJU HUF, PARTNER M/S KANNIKA JEWELLERS 10,07,000 3 K N NAGARATHNAMMA INDIVIDUAL, PARTNER M/S KANNIKA JEWELLERS 19,76,000 4 K N DARSHAN INDIVIDUAL, PARTNER M/S KANNIKA JEWELLERS 21,93,700 5 K R ABHILASHA INDIVIDUAL, PARTNER M/S KANNIKA JEWELLERS 19,02,500 1,00,14,200 3. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD DEC LARED EXCESS INCOME OVER EXPENDITURE OF RS.29,35,000. THE AO WA S OF THE VIEW THAT THE INCOME DECLARED BY THE FAMILY MEMBERS WAS NOTHING B UT ASSESSEES INCOME AND THE DIFFERENCE BETWEEN THE INCOME DECLAR ED BY THE FAMILY MEMBERS AND THE INCOME DECLARED BY THE ASSESSEE AS EXCESS INCOME OVER THE EXPENDITURE SHOULD BE ADDED AS ASSESSEES UNACC OUNTED MONEY U/S. 69A OF THE ACT. THE AO ACCORDINGLY ADDED A SUM OF RS.70,79,200 TO THE TOTAL INCOME OF THE ASSESSEE MAKING THE FOLLOWING O BSERVATIONS:- ITA NO. 579/BANG/2017 PAGE 4 OF 8 THE INCOME DECLARED AS EXPENDITURE OVER RECEIPTS/S UNDRY RECEIPTS BY THE FAMILY MEMBERS PUT TOGETHER (EXCLUD ING THE ASSESSEE SRI.K.R. NARASIMHARAJU-INDIVIDUAL) IS RS.7 0,79,200/-. (I.E., RS.1,00,14,200/- (-) RS.29,35,000/-). DURING THE COURSE OF RECORDING OF STATEMENT, THE MEMBERS OF THE FAMILY W ERE ASKED TO SUBSTANTIATE THE SOURCES FOR THE INCOME DECLARED AS EXPENDITURE OVER RECEIPTS/ SUNDRY RECEIPTS. ALL THE MEMBERS HAV E STATED TO HAVE THEIR OWN INCOME UNDER, WHICH WAS DECLARED AND OFFERED TO TAX. INCOME DECLARED AS EXPENDITURE OVER RECEIPTS W AS QUESTIONED. THE RELATED PARTIES STATES THAT INCOME IS ARRIVED OUT OF MCX TRADING IN BLACK MARKET. BUT COULD NOT PROVE WI TH EVIDENCE. AS PER STATEMENT RECORDED IN THE CASE OF MRS.ABHILA SHA AND MRS.NAGARATHNAMMA STATES THEIR INCOME IS ALSO FROM MCX TRADING IN BLACK MARKET AND BY SELLING OLD JEWELLER Y. FROM THESE STATEMENT IT IS NOTICED THAT ASSESSEE WAS INTO SOME OTHER UNACCOUNTED/UNDECLARED BUSINESS FROM WHICH HE MIGHT HAVE RECEIVED UNACCOUNTED RECITES. AS ASSESSEE WAS PLANN ING FOR EXPANSION OF HIS BUSINESS DURING THE YEAR, SAME UNA CCOUNTED RECEIPTS WAS INTRODUCED AS EXCESS EXPENDITURE OVER RECEIPTS IN THE HANDS OF ALL THE RELATED PARTIES TO CLAIM TAX SLAB BENEFIT AND TO AVOID ANY TAX IMPLICATIONS. DURING THE HEARING, ON THE STATEMENT WAS TAKEN ASSE SSE WAS ASKED WHY THESE EXCESS EXPENDITURE OVER RECEIPTS SH OULD NOT BE CONSIDERED AS YOUR UNACCOUNTED MONEY AND ADDED TO T OTAL INCOME. ASSESSE OBJECTED THIS ADDITION BY STATING T HIS INCOME IS NOT MY INCOME, IT IS THEIR OWN INCOME, HENCE, TAXED IN THEIR HANDS. ASSESSEE ONLY STATES THAT IT IS NOT HIS INCO ME BUT COULD NOT PROVE WITH EVIDENCE. AS NEITHER ASSESSEE NOR ANY OF THE RELATED PARTY HAS FURNISHED ANY EVIDENCE TO PROVE THEMSELVE S, ABOUT SOURCE OF INCOME IT IS CONSIDERED THAT RS.70,79,200 /-IS UNACCOUNTED MONEY U/S 69A AND ADDED BACK TO TOTAL I NCOME. 4. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(APPEALS). BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THE LENDERS HAD SEPARATE SOURCE OF INCOME AND WERE ASSE SSED TO INCOME-TAX IN THEIR OWN RIGHTS AND THEREFORE THE AO WAS NOT RI GHT IN CONCLUDING THAT INCOME OF FAMILY MEMBERS WAS INCOME OF THE ASSESSEE . THE ASSESSEE SUBMITTED THAT THE CONTENTION OF AO WAS THAT THE AS SESSEE WITH A VIEW TO ITA NO. 579/BANG/2017 PAGE 5 OF 8 SPLIT THE INCOME AND TO AVOID INCIDENCE OF TAX HAS ROUTED HIS OWN INCOME IN THE FORM OF LOANS THROUGH FAMILY MEMBERS. THE ASSES SEE SUBMITTED THAT THERE WAS NO EVIDENCE TO COME TO SUCH CONCLUSION, E SPECIALLY WHEN THE INCOME DECLARED BY THE FAMILY MEMBERS HAD SUFFERED TAX IN THEIR HANDS. IT WAS SUBMITTED THAT THE AO FAILED TO EXAMINE THE SOU RCE OF INCOME OF FAMILY MEMBERS AND THEIR CREDITWORTHINESS. THE ASSESSEE A LSO SUBMITTED THAT PROVISIONS OF SECTION 69A OF THE ACT WERE NOT ATTRA CTED IN THE PRESENT CASE BECAUSE THE ASSESSEE IS NOT FOUND TO BE OWNER OF AN Y MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLES. THE CIT(APPEA LS) ON A CONSIDERATION OF THE ABOVE SUBMISSIONS WAS OF THE VIEW THAT THE ADDI TION MADE BY THE AO CANNOT BE SUSTAINED. HE HELD AS FOLLOWS:- 5.1 THE PROVISIONS OF SECTION 69 OF INCOME TAX ACT, IS AS FOLLOWS: UNEXPLAINED MONEY, ETC. 69A. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FO UND TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VAL UABLE ARTICLE AND SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTI CLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINE D BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EX PLANATION ABOUT THE NATURE AND SOURCE OF ACQUISITION OF THE M ONEY, BULLION, JEWELLERY; OR OTHER VALUABLE ARTICLE, OR THE EXPLAN ATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER , SATISFACTORY, THE MONEY AND THE VALUE OF THE BULLION, JEWELLERY O R OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. 5.2 AS PER SECTION 69A OF THE ACT, IN ANY FINANCIA L YEAR IF THE APPELLANT IS FOUND TO BE OWNER OF ANY MONEY, BULLIO N, JEWELLERY OR OTHER VALUABLE ARTICLE WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS AND THE EXPLANATION OFFERED BY THE APPELLA NT ABOUT THE NATURE AND SOURCE OF ACQUISITION OF SUCH MONEY BULL ION, JEWELLERY OR OTHER VALUABLE ARTICLE IS NOT SATISFACTORY IN TH E OPINION OF AO THEN THE SAID MONEY MAY BE DEEMED TO BE THE INCOME OF THE APPELLANT FOR SUCH FINANCIAL YEAR. IN THE INSTANT C ASE THE ITA NO. 579/BANG/2017 PAGE 6 OF 8 OWNERSHIP OF THE MONEY IN TERMS OF A LOAN HAS BEEN SUSPECTED BY THE AO AND THE NATURE AND SOURCE AS EXPLAINED BY TH E APPELLANT HAS NOT BEEN ACCEPTED BY THE AO. THE ASSESSING OFFI CER HAS NOT BROUGHT ANY MATERIAL FACT THROUGH WHICH THE OWNERSH IP OF THE LOAN AMOUNT SHOULD BE SHIFTED TO THE APPELLANT FROM THE LENDER OF THE LOAN. THE GENESIS OF INCOME IS IN THE HANDS OF THE SAID. RELATIVES/FAMILY MEMBERS AND THE SAME HAS BEEN SHOW N IN THEIR RESPECTIVE RETURNS OF INCOME. THE APPELLANT IN HIS STATEMENT MENTIONED THAT THE BUSINESS OF THE APPELLANT IS BEI NG MANAGED BY HIS SON WHO IN TURN HAS SAID THAT HE IS DEALING IN TRADING OF SILVER ARTICLES AND ALSO DOING COMMODITY TRANSACTION. 5. THE CIT(APPEALS) FINALLY CONCLUDED AS FOLLOWS:- 5.4 THE ASSESSING OFFICER HAS INVOKED THE PROVISIO NS OF SECTION 69A OF THE ACT BUT HAS NOT BROUGHT ANY MATERIAL FAC T THROUGH WHICH THE OWNERSHIP OF THE LOAN AMOUNT CAN BE TREAT ED TO BE SHIFTED TO THE APPELLANT FROM THE LENDER OF THE LOA N. FURTHER MAKING AN ADDITION OF INCOME ON THE BASIS OF A STAT EMENT OF THIRD- PARTY WITHOUT ANY CORROBORATIVE EVIDENCE AND WITHOU T MAKING ANY ATTEMPT TO CONFIRM THAT SUCH MONEY IS OWNED BY THE APPELLANT, THE ADDITION CANNOT BE SUSTAINED. FOLLOW ING THE JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE, THE ADDITION OF RS. 70,79,200/- MADE UNDER SECTION 69A OF THE ACT IS DIRECTED TO BE DELETED. CONSEQUENTLY THE ADDITIONS OF RS. 4,33,090/- AS INT EREST PAID ON THE ABOVE MENTIONED UNSECURED LOAN IS ALSO DIRECTED TO BE DELETED. 6. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE REVE NUE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 7. THE LD. DR REITERATED THE STAND OF THE REVENUE A S REFLECTED IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL. THE L D. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF CIT(APPEALS). 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ADDITION IN QUESTION HAS BEEN MADE U/S. 69A OF THE ACT. THE AD DITION IS IN RESPECT OF LOANS SAID TO HAVE BEEN GIVEN BY THE FAMILY MEMBERS OF THE ASSESSEE TO ITA NO. 579/BANG/2017 PAGE 7 OF 8 THE ASSESSEE. THE FAMILY MEMBERS HAVE DECLARED THE SOURCE OF FUNDS OUT OF WHICH THE LOAN AMOUNTS IN QUESTION WERE GIVEN TO THE ASSESSEE. THEIR SOURCE HAS BEEN ACCEPTED IN THEIR RESPECTIVE ASSESS MENT PROCEEDINGS. IN SUCH CIRCUMSTANCES, THERE IS NO BASIS FOR THE AO TO HAVE COME TO THE CONCLUSION THAT THE SUM OF MONEY IN THE FORM OF LOA NS GIVEN BY THE FAMILY MEMBERS WAS IN FACT ASSESSEES OWN MONEY. THE PRIM ARY CONDITION FOR APPLICABILITY OF PROVISIONS OF SECTION 69A OF THE A CT IS THAT THE ASSESSEE SHOULD BE FOUND TO BE THE OWNER OF MONEY, BULLION, ARTICLE OR THINGS WHICH IS NOT ESTABLISHED IN THE PRESENT CASE. THE CONTENTIO N OF THE REVENUE THAT THE SOURCE OF INCOME OF THE FAMILY MEMBERS WERE DOUBTFU L AND THAT THE ASSESSEE HAS ADOPTED A COLOURABLE DEVICE ARE ARGUME NTS WHICH CANNOT BE ACCEPTED. THE ADMITTED FACTUAL POSITION IS THAT TH E ASSESSMENTS IN THE CASE OF FAMILY MEMBERS WHO HAVE THE LOANS TO THE AS SESSEE HAVE BEEN COMPLETED AND NO ADVERSE INFERENCE HAS BEEN DRAWN. IN SUCH CIRCUMSTANCES, THE CLAIM OF REVENUE IN THE GROUNDS OF APPEAL DOES NOT HAVE ANY MERIT. EVEN THE ADDITION CANNOT STAND THE TEST OF PROVISIONS OF SECTION 68 OF THE ACT AS THE ASSESSEE HAS PROVED AL L THE THREE INGREDIENTS NECESSARY FOR SATISFACTORILY EXPLAINING THE CREDITS IN THE BOOKS OF ACCOUNT. IN THE GIVEN FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THIS APPEAL BY THE REVENUE. CONSEQUENTLY, THE SAME IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF JULY, 2018. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 20 TH JULY, 2018. / D ESAI S MURTHY / ITA NO. 579/BANG/2017 PAGE 8 OF 8 COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3 . THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.