Shri Ghanshyambhai L.Vaghani, Surat V. The Income tax Officer,Ward-8(2), Surat

ITA 585/AHD/2010

• Counselvise Citation: 58520514 RSA 2010
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Salary income; Bonafide mistake
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI D. K. TYAGI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA. NO.585/AHD/2010 (ASSESSMENT YEAR 2006-07) SHRI GHANSHYAMBHAI L VAGHANI C/O S R MEDICAL STORES 2, RUPAL SOCIETY, VED ROAD, SURAT VS. ITO, WARD 8(2), SURAT PAN/GIR NO. : AALPV1244N (APPELLANT) .. (RESPONDENT) APPELLANT BY: MS. ARTI N SHAH, AR RESPONDENT BY: SHRI B L YADAV, SR. DR DATE OF HEARING: 10.07.2012 DATE OF PRONOUNCEMENT: 07.09.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) V, SURAT DATED 30.12.2009 FOR THE ASSESSMENT YEAR 2006-07. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- V, SURAT HAS EARNED IN LAW AS WELL AS ON FACTS OF THE CASE BY CONFIRMING ADDITION BY WAY OF INVESTMENT AND INCOME FROM PARTNERSHIP FIRM M/S. SHRUNGAL DEVELOPERS OF RS.4,6 3,501/- MADE BY ASSESSING OFFICER THOUGH THE SAME BELONGS TO HUF OF THE APPELLANT. WITHOUT PREJUDICE TO ABOVE, THE LEARNED COMMISSIONE R OF INCOME (APPEALS)-V, SURAT HAS ERRED IN LAW AS WELL AS ON F ACTS OF THE CASE, BY CONFIRMING ADDITION OF RS.4,50,000/- AS INVESTME NT BY YOUR APPELLANT IN ASST. YEAR 2006-06 THOUGH THE INVESTME NT WAS MADE IN THE ASST. YEAR 2005-06 AND ADDITION TO THAT EFFE CT HAS ALREADY BEEN MADE IN THE ASSESSMENT OF YOUR APPELLANT FOR A SST.YEAR 2005-06. I.T.A.NO. 585 /AHD/2010 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-V, SURAT HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY CON FIRMING THE ADDITION BY ASSESSING OFFICER IN RESPECT OF UNEXPLA INED SOURCE OF HOUSEHOLD EXPENSES OF RS 25000/-. YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER, AM END AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 2. BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 2 TO 3.4 OF HIS ORDER WHICH ARE REPRODUCED BELOW: 2. THE APPELLANT RUNS A RETAIN MEDICAL STORE. HIS INCOME FROM RUNNING THE RETAIN MEDICAL STORE AND DIAMOND DALALI INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. CAME TO KNOW THAT THE ASSESSEE HAS A PARTNER HAVING 10% SHA RE IN AFFIRM, M/S. SHRUNGAL DEVELOPERS, SINGAPORE, CHAR RASTA, VE D ROAD, SURAT. IN THE TAX AUDIT REPORT OF M/S. SHRUNGAL D EVELOPERS, THE AO NOTICED POSITION OF ASSESSEE'S CAPITAL ACCOUNT A S A PARTNER IN THE FIRM AS UNDER :- PARTICULARS AMOUNT (RS.) OPENING BALANCE BROUGHT FORWARD 4,50,000/- ADD: SHARE OF NET PROFIT 3,201/- SALARY 10,400/- TOTAL 4,63,601/- LESS: WITHDRAWALS 4,60,400/- BALANCE AS ON 31.03.2006 3,201/- THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS NOT S HOWN THIS TRANSACTION IN HIS INDIVIDUAL RETURN OF INCOME FILE D. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN ABOUT HIS NON DISCLOSURE OF INFORMATION AS A PARTNER OF THE FIRM AND AS TO WHY THE TRANSACTIONS WITH THE SAID FIRM ARE NOT SHOWN IN HIS RETURN OF I NCOME. 3.1 IN THE WRITTEN REPLY DATED 5.9.2008 THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE INVESTMENT IN THE SAID FIRM, M/S.SHRUNGAL DEVELOPERS WAS MADE BY HIS FAMILY IN HIS NAME, I.E. IN THE NAME OF THE ASSESSEE DURING THE FINANCIAL YEAR 2004-05. THE DATE-WISE IN VESTMENT IN THE ABOVE SAID FIRM WAS GIVEN AS UNDER :- DATE PARTICULARS AMOUNT (RS.) 01.1.2005 CASH INVESTED 5,0007- I.T.A.NO. 585 /AHD/2010 3 01.2.2005 CASH INVESTED 10,0007- 05.2.2005 CASH INVESTED 50,000/- 15.2.2005 CASH INVESTED 1,85,0007- 05.3.2005 CASH INVESTED 1,10,0007- TOTAL 4,50,000/- 3.2 BEFORE THE AO, THE ASSESSEE EXPLAINED THAT THE INVESTMENT IN THE SAID FIRM WAS NOT DONE BY HIM IN HIS INDIVIDUAL CAPACITY BUT BY HIS FAMILY. ACCORDING TO HIM, HIS FAMILY HOLDS 22 V IGHA OF LAND IN BHAVNAGAR DISTRICT AND THE INVESTMENT WAS MADE FROM INCOME OF HIS FAMILY. 3.3 ON THE ISSUE OF NOT SHOWING THE TRANSACTIONS WI TH THE FIRM, THE ASSESSEE SUBMITTED THAT AT THE TIME OF PREPARING TH E RETURN OF INCOME, THERE WAS 'SOME DISPUTE WITH THE FIRM, M/S, SHRUNGAL DEVELOPERS, WHO DID NOT PROVIDE ANY DETAILS TO HIM. THE ASSESSEE FURTHER MENTIONED THAT HE WAS UNDER THE BONAFIDE BE LIEF THAT THE INCOME WAS OUT OF THE INCOME OF HIS FAMILY AND ANY SURPLUS IN THE ABOVE FIRM WOULD NOT BE INCLUDED IN HIS INDIVIDUAL INCOME. HE, HOWEVER, ADMITTED THE BONAFIDE MISTAKE AND OFFERED TO PAY TAX ON THE SURPLUS INCOME OF RS.10,400/-. 3.4 THE AO R EJECTED THE REPLY OF THE ASSESSEE STATING AS UNDER - 'ASSESSEE'S SUBMISSIONS ON THE SAID ISSUE HAS BEEN CONSIDERED CAREFULLY. THE ASSESSEE IS A PARTNER IN THE SAID FI RM M/S. SHRUNGAL DEVELOPERS, IN HIS INDIVIDUAL CAPACITY HAVING 10% O F SHARE BUT HAS NOT SHOWN THE SAME IN HIS INDIVIDUAL RETURN OF INCO ME. THERE ARE ALSO OTHER 9 PARTNERS IN THE SAID FIRM. THIS FIRM H AS SHOWN INCOME FROM SALE OF LAND OF RS.45,39,170/- DURING THE YEAR UNDER CONSIDERATION, THE FIRM HAS DISTRIBUTED THE PROFIT EARNED ON THE SALE OF LAND AMONGST ITS 10 PARTNERS. THE ASSESSEE'S CLA IM THAT INVESTMENT IN THE SAID FIRM WAS MADE BY HIS FAMILY IN HIS NAME IS NOT ACCEPTABLE, AS THE ASSESSEE WAS WELL AWARE OF T HE FACTS THAT HE IS ONE OF THE PARTNERS IN THE SAID FIRM IN HIS INDI VIDUAL CAPACITY. THE INVESTMENT IN THE SAID FIRM BY THE ASSESSEE AS A PARTNER IS REQUIRED TO BE CONSIDERED AS INVESTMENT IN HIS INDI VIDUAL CAPACITY ONLY. THE ASSESSEE HAS NOT REFLECTED THE ABOVE TRAN SACTIONS WITH THE FIRM IN HIS INDIVIDUAL RETURN OF INCOME. THE ASSESS EE HAS ALSO NOT SHOWN ANY LIABILITY IN THE NAME OF HIS FAMILY. AFTE R DETECTION OF I.T.A.NO. 585 /AHD/2010 4 THE UNRECORDED TRANSACTIONS MADE BY THE ASSESSEE WI TH THE SAID FIRM DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE STARTED TAKING STAND THAT INVESTMENT OF RS.4,50,000 /- IN THE FIRM WAS MADE BY HIS FAMILY AND WITHDRAWALS OF RS.4,60,4 00/- FROM THE FIRM WAS RECEIVED BY HIS FAMILY. THE SAID FIRM HAS NOT SHOWN ANY LOAN FROM THE FAMILY OF THE ASSESSEE. THE FIRM IS A SSESSED TO TAX UNDER PAN ABCFS4892B. THE FIRM IS ASSESSEE'S DEBTOR AND NOT DEBTOR OF HIS FAMILY. THE FIRM HAS RECORDED THE LIA BILITY IN RESPECT OF THE ASSESSEE IN ITS RETURN BUT THE ASSESSEE HAS NOT SHOWN THE SAME AS DEBTOR IN HIS RETURN, THE ASSESSEE HAS RECE IVED THE AMOUNT OF RS.4,60,400/- FROM THE FIRM DURING THE YEAR UNDE R CONSIDERATION. HENCE, THE AMOUNT OF RS.4,60,400/- IS CONSIDERED AS UNRECORDED DEBTOR REALIZED BY THE ASSESSES, IN HIS HANDS AND I N HIS INDIVIDUAL CAPACITY DURING THE YEAR UNDER CONSIDERATION. THERE FORE, THE AMOUNT OF RECEIPT OF RS,4,60,400/- FROM THE FIRM BY THE ASSESSEE IS TREATED AS INCOME OF THE ASSESSEE AND THEREFORE BRO UGHT TO TAX DURING THE YEAR UNDER CONSIDERATION. HENCE AN ADDIT ION OF RS,4,60,400/- IS MADE TO THE INCOME RETURNED BY THE ASSESSEE. THE FIRM HAS ALLOCATED RS.3,201/-AS SHARE OF NET PROFIT IN RESPECT OF THE ASSESSEE AND THE ASSESSEE HAS NOT SHOWN THE SAME IN HIS RETURN OF INCOME, THEREFORE, THE AMOUNT OF RS.3,201/- IS ALSO MADE TO THE INCOME RETURNED BY THE ASSESSEE. HENCE TOTAL ADDITI ON OF RS.4,63,601/- (460400 + 3201) IS MADE TO THE INCOME RETURNED BY THE ASSESSEE. PENALTY PROCEEDINGS, U/S 271(L)(C) OF THE ACT IS ALSO INITIATED ON THE ISSUE.' 3. IT WAS SUBMITTED BY THE LD. A.R. THAT THE A.O. H AS MADE ADDITION OF RS.4,63,601/- ON THE BASIS THAT THE ASSESSEE REA LIZED UNRECORDED DEBTORS. IN THIS REGARD, OUR ATTENTION WAS DRAWN T O PAGE NO.2 OF THE ORDER OF LD. CIT(A) WHERE HE ALSO REPRODUCED THE ASSESSEE S CAPITAL ACCOUNT AS A PARTNER IN THE FIRM M/S. SHRUNGAL DEVELOPERS AS P ER THE TAX AUDIT REPORT OF THIS FIRM AND FROM THE SAME, IT IS SEEN THAT THE RE IS OPENING BALANCE OF RS.4.50 LACS IN WHICH RS.3201/- IS ADDED ON ACCOUNT OF SHARE OF NET PROFIT AND RS.10,400/- HAS BEEN ADDED ON ACCOUNT OF SALARY AND IN THIS MANNER, THERE IS BALANCE OF RS.4,63,601/- OUT OF WHICH RS.4 ,60,400/- WAS WITHDRAWN AND THERE IS CLOSING BALANCE OF RS.3201/- . HE SUBMITTED THAT NO ADDITION CAN BE MADE ON ACCOUNT OF OPENING BALAN CE IN THE PRESENT I.T.A.NO. 585 /AHD/2010 5 YEAR AND SHARE OF THE NET PROFIT IS ALSO EXEMPT FRO M TAX AND THE ONLY ADDITION WHICH CAN BE MADE IS OF RS.10,400/- WHICH IS ON ACCOUNT OF SALARY RECEIVED BY THE ASSESSEE AS A PARTNER OF THE FIRM SHRUNGAL DEVELOPERS. 4. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BEL OW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT IS NOTED BY LD. CIT(A) ON PAGE 2 OF HIS ORD ER THAT AS PER THE TAX AUDIT REPORT OF THE FIRM M/S. SHRUNGAL DEVELOPERS, THE A.O. HAS NOTED THE POSITION OF THE ASSESSEES CAPITAL ACCOUNT AS A PAR TNER IN THE FIRM WHICH SHOWS OPENING BALANCE BROUGHT FORWARD OF RS.4.50 LA CS IN WHICH AN AMOUNT OF RS.3201 WAS ADDED ON ACCOUNT OF SHARE OF THE NET PROFIT AND A FURTHER AMOUNT OF RS.10,400/- WAS ADDED ON ACCOUNT OF SALARY AND THE TOTAL OF THESE THREE AMOUNTS COMES TO RS.4,63,601/- FOR WHICH ADDITION WAS MADE BY THE A.O. IT IS ADMITTED POSITION THAT THE INVESTMENT IN PARTNERSHIP FIRM WAS NOT DISCLOSED BY THE ASSESSEE IN HIS RETURN OF INCOME AND HE HAS ALSO NOT DISCLOSED ANY INCOME ON ACCOUNT OF SALARY FORM THIS FIRM. HENCE, THE SALARY INCOME OF RS.10,400/- HAS TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE IN THE PRESENT YEAR. THE AMOUNT OF RS.3201/- IS THE SHARE OF NET PROFIT OF THE ASSESSEE BEING A PAR TNER OF THE FIRM AND HENCE, THE SAME IS NOT TAXABLE. REGARDING THE OPEN ING BALANCE OFRS.4.50 LACS, WE ARE OF THE CONSIDERED OPINION THAT THE SAM E CANNOT BE TAXED IN THE PRESENT YEAR BECAUSE IT IS ADMITTED POSITION TH AT IT IS THE OPENING BALANCE AND, THEREFORE, NO ADDITION CAN BE MADE ON THIS ACCOUNT IN THE PRESENT YEAR. AS PER THE NOTING BY CIT(A) ON PAGE 4 OF HIS ORDER, THIS AMOUNT WAS INVESTED BY THE ASSESSEE IN THE FINANCIA L YEAR 2004-05 RELEVANT TO ASSESSMENT YEAR 2005-06. IT IS FURTHER NOTED BY LD. CIT(A) THAT THE CASE FOR ASSESSMENT YEAR 2005-06 HAS NO RE FERENCE OF REOPENING AND IT WAS SUBMITTED BY THE ASSESSEE BEFORE LD. CIT (A) THAT EVEN IF THIS I.T.A.NO. 585 /AHD/2010 6 AMOUNT IS CONSIDERED AS ESCAPED INCOME, IT WOULD BE TAXABLE IN THE ASSESSMENT YEAR 2005-06 BUT NOT IN THE PRESENT YEAR . HE ALSO SUBMITTED A COPY OF ASSESSMENT ORDER U/S. 143(3) R.W.S. 147 FOR A.Y. 2005-06 IN WHICH THIS AMOUNT OF RS.4.50 LAKHS WAS ADDED U/S. 6 9. WE ARE OF THE CONSIDERED OPINION THAT THIS AMOUNT OF RS.4.50 LACS WHICH WAS INVESTED BY THE ASSESSEE IN THE SAID FIRM IN FINANCIAL YEAR 2004-05, FOR WHICH ADDITION IS ALSO MADE IN REOPENED ASSESSMENT OF ASS ESSMENT YEAR 2005- 06, NO ADDITION CAN BE MADE IN THE PRESENT YEAR. W E, THEREFORE, CONFIRM THE ADDITION OF RS.10,400/- AND DELETE THE BALANCE ADDITION. GROUNDS NO.1 & 2 ARE PARTLY ALLOWED. 6. REGARDING GROUND NO.3, IT WAS SUBMITTED BY LD. A .R. THAT THE ASSESSEE HAS SHOWN WITHDRAWAL OF RS.30,000/- AND HI S WIFE HAS MADE WITHDRAWAL OF RS.65,000/- AND, THEREFORE, TOTAL WIT HDRAWAL OF RS.95,000/- IS SUFFICIENT FOR HOUSE HOLD EXPENSES AND NO FURTHE R ADDITION IS JUSTIFIED. LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT IS NOTED BY LD. CIT(A) IN PARA 6 OF HIS ORD ER THAT THE ASSESSEES FAMILY CONSISTED OF 4 PERSONS I.E. SELF, WIFE AND T WO SCHOOL GOING CHILDREN. HE HAS ALSO NOTED THAT THE COST OF LIVIN G IN SURAT CITY IS HIGH. CONSIDERING THE FACTS OF THE PRESENT CASE, WE ARE O F THE CONSIDERED OPINION THAT THIS ADDITION MADE BY THE A.O. IS JUST IFIED AND NO INTERFERENCE IS CALLED FOR. GROUND NO.3 IS REJECTE D. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD/- SD/- (D. K. TYAGI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP/*DKP I.T.A.NO. 585 /AHD/2010 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE /TRUE COPY/ AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 28/08/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 03/09/2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.03.09. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 04.09 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 06.09 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : 0 7/09 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER: 07/09/12