Muneer Abdul Fazal, Bangalore V. ITO, Bangalore

ITA 623/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60729 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: H N KHINCHA
• Keywords: Unexplained investment; Gift; Depreciation; Assessment record; Condonation of delay
• Section: 80C; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO.623/BANG/2011 (ASSESSMENT YEAR : 2006-07) MR. MUNEER ABDUL FAZAL, PROP. M/S. FAZAL AND SONSS NO.153, COMMERCIAL STREET, BANGALORE-560 001 . APPELLANT. PAN AABPF 7984M VS. INCOME TAX OFFICER, WARD 1(2), BANGALORE. .. RESPONDENT. APPELLANT BY : SHRI H.N. KHINCHA. RESPONDENT BY : SMT. SUSAN THOMAS JOSE. DATE OF HEARING : 29.05.2012. DATE OF PRONOUNCEMENT : 29.5.2012. PER SHRI JASON P. BOAZ ORDER ON CONDONATION OF DELAY 1. FORM NO.36 IN THIS CASE WAS FILED ON 27.5.2 011. ADMITTEDLY, THE ORDER OF CIT(A), BANGALORE FO R ASSESSMENT YEAR 2006-07 DT.24.11.2008 WAS SERVED ON THE ASSESSEE ON 27.3.2011. THEREFORE, THE APPEAL IN THIS CASE OUGHT TO HAVE BEEN FILED ON OR BEFORE 26.5.2011. THE RECORD SHOWS THAT FORM NO.36 WAS FILED ON 27.5.2011 THEREBY LEADING TO A D ELAY OF ONE DAY IN FILING THE APPEAL. THE ASSESSEE HAS FILED A PETITION DT.8.7.2011 ALONG WIT H AN AFFIDAVIT OF SIMILAR DATE SEEKING THE CONDONATION OF ONE DAY DELAY IN FILING THE APPEAL F OR ASSESSMENT YEAR 2006-07. THE PETITION AND AFFIDAVIT SEEKING CONDONATION OF DELAY FOR THE DELA Y HAVE BEEN CAREFULLY CONSIDERED. IN VIEW OF THE REASONS CITED THEREIN, WE ARE OF THE VIEW THAT, IN THE INTEREST OF EQUITY AND JUSTICE, THE DELAY OF ON E DAY IN FILING THE APPEAL IS TO BE CONDONED AND THE APPEAL BE ADMITTED FOR HEARING AND DISPOSAL. IT I S ORDERED ACCORDINGLY. 2 ITA NO.623/BANG/11 O R D E R 2. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE DT.9.3.2011 FOR THE A.Y. 2006-07. 3. THE FACTS OF THE CASE, IN BRIEF, AS EMANATE FROM THE RECORD ARE AS UNDER : 3.1 THE ASSESSEE, PROP. OF M/S. FAZAL & SONS, FILED HIS RETURN OF INCOME FOR A.Y. 2006-07 ON 26.7.2006 DECLARING INCOME OF RS.2,88,730. THE RET URN WAS PROCESSED U/S. 143(1) OF THE ACT AND THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTI CE U/S. 143(2) ON 27.6.2007. THE A.O. AFTER EXAMINING THE CASE COMPLETED THE ASSESSMENT BY AN O RDER U/S.143(3) OF THE ACT ON 24.11.2008 DETERMINING THE ASSESSEES INCOME AT RS.8,86,014. IN DOING SO THE A.O. MADE THE FOLLOWING DISALLOWANCES : 1) INTEREST ON HOUSING LOAN DISALLOWED RS.23,628 2) DEDUCTION U/S. 80C DISALLOWED RS.59,872 3) NON-EXISTENT LIABILITY RS.36,644 4) UNDISCLOSED ASSET RS.4,77,120 3.2 THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) A GAINST THE ORDER OF THE ASSESSING OFFICER DT.24.11.2008. THE LEARNED CIT(A) DISMISSED THE AS SESSEES APPEAL BY ORDER DT.9.3.2011. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE ORDER OF THE CIT(A) DT.9.3.2011. 4.1 IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS : 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN MA KING ADDITIONS INTER ALIA OF RS. 36,664 AS INFLATED LIABILITY AND RS. 4,77,120 BEING NON-DISCL OSURE OF ASSETS AND THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE SAME. 2. THE FACTS AND CIRCUMSTANCES OF THE CASE HAVE N OT BEEN APPRECIATED PROPERLY BY LOWER AUTHORITIES. ON PROPER APPRECIATION OF FACTS, EVID ENCE AVAILABLE AND EXPLANATION OFFERED IT WILL BE CLEAR THAT THERE IS NEITHER ANY INFLATED LI ABILITY NOR IS THERE ANY UNEXPLAINED / UNACCOUNTED ASSETS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION OF RS. 36,664 AND RS. 4,77,120 AS MADE BY THE ASSESSING OFFICER HAVE NO LEGS TO ST AND IN LAW AND HAVE TO BE DELETED. 3 ITA NO.623/BANG/11 4. THE APPELLANT ALSO DENIES LIABILITY TO PAY INT EREST UNDER SECTION 234B OF IT ACT, 1961. THE INTEREST HAVING BEEN LEVIED ERRONEOUSLY IS TO B E DELETED. 5. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING IT IS REQUESTED THAT THE ADDITIONS OF RS. 36,664 AND RS. 4,77,120 BE DELETED AND INTEREST LEVIED BE ALSO DELETED. 5. IN THE COURSE OF HEARING, THE LEARNED A.R. STATE D THAT THE GROUNDS OF APPEAL REGARDING THE ADDITION OF RS.36,664 ON ACCOUNT OF NON-EXISTENT LI ABILITY / INFLATED LIABILITY IS NOT BEING PRESSED A ND IS THEREFORE ACCORDINGLY DISMISSED. 6.1 THE ONLY OTHER GROUND ON MERITS FOR OUR CONSIDE RATION IS THE ADDITION OF RS.4,77,120 WHICH HAS BEEN MADE ON ACCOUNT OF UNDISCLOSED ASSETS. WH ILE MAKING THE ADDITION, THE A.O. HAS HELD AS UNDER IN THE ORDER OF ASSESSMENT : FURTHER AS PER LOAN STATEMENT THE LOAN IS DISBURS ED IN 29.7.2005. HENCE, THE VEHICLE IS PURCHASED BY THE ASSESSEE IN FINANCIAL YEAR 2005-06 . DURING COURSE OF ASSESSMENT, THE ASSESSEE SUBMITTED DEPRECIATION STATEMENT. AS PER DEPRECIATION STATEMENT, THE ASSESSEE HAS NOT SHOWN AN ADDITION OF FIXED ASSET DURING FIN ANCIAL YEAR 2005-06. HENCE, THE NEW VEHICLE PURCHASED IS NOT DECLARED BY THE ASSESSEE I N THE BALANCE SHEET FILED. HENCE, THE VALUE OF CAR AT RS. 4,77,120 IS ADDED TO ASSESSEES DECLARED INCOME AS UNDISCLOSED ASSET. 6.2 IN APPEAL, THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION BY HOLDING AS UNDER IN PARA 9 ON PAGES 6 TO 8 OF HIS ORDER. 9. I HAVE GIVEN A SERIOUS THOUGHT OVER THE ISSUE. I AM NOT CONVINCED BY THE ARGUMENT OF THE AR THAT THE QUALIS HAD BEEN GIFTED BY THE APPEL LANT TO HIS WIFE ON 15.12.2005 THROUGH A STAMP PAPER DEED EVEN IF IT IS CLAIMED AND SHOWN THAT SHE HAD SHOWN THE SAME IN THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME OF ASSESSMENT YEAR 2006-07 FILED UNDER THE RECEIPT NO.1745 DATED 26.7.2006 WITH THE ITO WARD 1(2), BANGALORE I.E. THE A.O. ITSELF. THE REASONS ARE MANY. FIRSTLY, IN A VALID GIFT THE OWNERSHIP OVER THE GIFTED PROPERTY IS TRANSFERRED VOLUNTARILY BY THE DONOR WI THOUT ANY CONSIDERATION AND ACCEPTED BY THE DONE. IF THE GIFTED PROPERTY IS IMMOVABLE I T HAS TO BE MANDATORY TRANSFERRED THROUGH A REGISTERED DEED. IN CASE OF MOVABLE PROP ERTY SUCH MUST BE DELIVERED PHYSICALLY AFTER COMPLETION OF THE NECESSARY FORMALITIES OF TR ANSFER OF OWNER SHIP TO THE DONE. THE QUALIS AS ON 1.4.2005 IS AN IMMOVABLE PROPERTY AND IT REQUIRES THE FORMALITY OF CERTIFICATE OF TRANSFER BY THE RTO CONCERNED SO THAT THE OWNERS HIP OVER THE VEHICLE GETS TRANSFERRED TO THE DONE. THUS THE LEGAL FORMALITY OF TRANSFER OF OWNERSHIP REMAINING INCOMPLETE EVEN TODAY, THE GIFT SUFFERS FROM ILLEGALITY AND THUS A NULL AND VOID GIFT. BESIDES, SECONDLY THE ORIGINAL GIFT DEED WAS NOT PRODUCED WHICH ALSO GOES AGAINST THE APPELLANT BECAUSE IN THE 4 ITA NO.623/BANG/11 ABSENCE OF THE ORIGINAL IT IS DIFFICULT TO ASSESS T HE GENUINENESS OF THE CONTENTS MENTIONED THEREIN. THIRDLY, ON QUERY IT WAS LEARNT, THE REG ISTRATION CERTIFICATE AS ON DATE STILL STANDS IN THE NAME OF THE APPELLANT AND HAS NOT BEEN TRANS FERRED TO THE DONE SMT. RAFIA MUNEER, IN OTHER WORDS, THE APPELLANT REMAINED THE LEGAL OW NER OF THE QUALIS AS ON 31.3.2006 WITHOUT DISCLOSING THE SAME IN THE RETURN, IF THE V IEW OF THE APPELLANT IS ACCEPTED. I AM MAKING THE ABOVE OBSERVATION UNDERLINED BECAUSE THE ASSESSING OFFICER HAS A DIFFERENT OPINION. HE HAS HELD THAT THE WDV OF QUALIS HAS BE EN DISCLOSED WHILE THE NEW PURCHASED GETZ HAS NOT BEEN DISCLOSED. INCIDENTALLY, THE VAL UES ARE SAME I.E. RS. 4.77 LAKHS AND PROBABLY ROOT CAUSE OF SUCH CONFUSION. NEVERTHELESS , THE OBVIOUS FACT IS THAT THE VALUE OF ONE VEHICLE HAS NOT BEEN SHOWN IN THE RETURN OF THE APPELLANT. FOURTH REASON IS THAT THE EXECUTION OF THE GIFT DEED, THE FILING OF THE DETAI LS RELATING TO SUCH GIFT IN THE INCOME TAX RETURN ARE ONLY ACT OF THE CONCERNED AND INTERESTED PARTIES WHICH CAN BE EFFECTED AT THEIR CHOICE BUT THE CHANGE OF NAME BEARING THE STAMP AND SEAL OF THE RTO IN THE R.C. BOOK IS AN ACT OF GOVERNMENT AND IS THE BEST PROOF TO SHOW THE GENUINENESS OF THE ALLEGED GIFT. THUS THE GIFT IS HELD NOT GENUINE. THE CONSEQUENCE IS OBVIOUS. A.OS ADDITION HAS TO BE HELD JUSTIFIED. THERE IS STILL ANOTHER REASON TO U PHOLD THE ADDITION OF COURSE NOT RELATED TO THE GIFT DEED. THE DEPRECIATION CHART FILED DURING THE COURSE OF SCRUTINY Y DOES NOT REFLECT THE TRANSACTIONS PROPERLY. AT THE BEGINNING OF THE YEAR THE OPENING BALANCE SHOULD HAVE SHOWN THE WDV OF THE QUALIS. SUBSEQUENTLY WHEN THE GETZ WAS PURCHASED ON 29.7.2005, IT SHOULD HAVE BEEN SHOWN AS ADDITION. SINCE THE QUAL IS WAS ALLEGEDLY GIFTED IN DECEMBER 2005, ;THE SAME SHOULD HAVE BEEN REFLECTED AS AN EX PLANATION AND AFTER THE DEPRECIATION THE WDV COULD HAVE BEEN SHOWN PROPERLY AS ON31.3.20 06. THE IMPROPER ACCOUNTING ITSELF SHOWS THE STRAW IN THE BEARD OF THE THIEF. WHATEVE R MAYBE THE EXPLANATION, THEREFORE THE SAME CANNOT BE HELD AS SATISFACTORY TO GIVE THE REL IEF IN THE ABSENCE OF THE SPECIFIC MENTION OF THE NEWLY PURCHASED CAR GETZ IN THE ADDITION COL UMN OF THE DEPRECIATION CHART AND ALSO IN THE ABSENCE OF THE CHANGE OF NAME IN THE R.C. BO OK. HENCE ADDITION JUSTIFIED. 6.3 THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE OW NED A QUALIS CAR, PURCHASED FEW YEARS BACK AND WHOSE W.D.V. AS ON 1.4.2005 WAS RS.4,77,000. I T IS STATED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PURCHASED A NEW GETZ CA R FOR RS.5,25,000 AND THE OLD QUALIS CAR WAS GIFTED TO HIS WIFE. THE LEARNED A.R. ALSO PLACED B EFORE US A COPY OF THE DEPRECIATION STATEMENT FILED BEFORE THE A.O. WHICH IS AS UNDER : STATEMENT OF DEPRECIATIONFOR THE YEAR ENDED 31.3.20 06. DESCRIPTION RATE OPENING BALANCE ADDITION TOTAL DEP FOR THE YEAR CLOSING WDV MOTOR CAR 20% 4,77,000 48,000 5,25,000 78,750 4,46, 250 TOTAL 4,77,000 48,000 5,25,000 78,750 4,46,250 5 ITA NO.623/BANG/11 THE LEARNED A.R. ACKNOWLEDGED THAT THE DEPRECIATION STATEMENT WAS NOT PROPERLY PRESENTED IN AS MUCH AS INSTEAD OF REFLECTING ADDITIONS TO FIXED AS SETS AT RS.5,25,000 ON PURCHASE OF THE NEW GETZ CAR AND DELETION OF RS.4,77,000 ON ACCOUNT OF GIFTI NG OF QUALIS CAR TO WIFE, THE ASSESSEE HAS REFLECTE D ADDITION AT THE NET FIGURE OF RS.48,000 (VIZ. RS.5, 25,000 LESS RS.4,77,000). THE LEARNED A.R. HOWEVER CONTENDED THAT THROUGH THE PRESENTATION WAS FAULTY, EFFECTIVELY THE ADDITION OF THE NEW CAR (GETZ) AND REMOVAL/DELETION OF THE VALUE OF THE OLD CAR (Q UALIS) WAS REFLECTED IN THE FIGURE OF NET ADDITIONS AND ULTIMATELY AFTER DEPRECIATION, THE VALUE OF THE NEW CAR ONLY WAS REFLECTED IN THE BALANCE SHEET. THUS THE LEARNED A.R. SUBMITTED THAT THERE WAS NO UNACCOUNTED ASSET OR UNEXPLAINED INVESTMENT IN AN ASSET. ALTERNATIVELY THE LEARNED A.R. ALSO CONT ENDED THAT AFTER THE A.O. HAS HIMSELF ACKNOWLEDGED THAT THE ASSESSEE HAD TAKEN A BANK LOAN OF RS.4,25, 000 FOR PURCHASE OF THE NEW GETZ CAR, AT LEAST TO THAT EXTENT IT CANNOT BE HELD THAT THE SOURCE FOR I NVESTMENT IN THE NEW CAR WAS UNEXPLAINED. 6.4 THE LEARNED D.R. PLACED RELIANCE ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). THE LEARNED D.R. HOWEVER SUBMITTED THAT SHE DID NOT HAV E OBJECTION IF THE MATTER WAS REMITTED TO THE FILE OF THE A.O. FOR DE NOVO CONSIDERATION OF THIS ISSUE. 6.5 WE HAVE HEARD BOTH PARTIES AND HAVE PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER IN T HE ORDER OF ASSESSMENT HOLDS THAT SINCE AS PER THE DEPRECIATION STATEMENT OF THE ASSESSEE, THE ADDITIO N OF THE FIXED ASSET IS NOT REFLECTED, THE VALUE OF THE NEW CAR IS ADDED TO THE ASSESSEES INCOME AS UN DISCLOSED ASSET. THE LEARNED CIT(A) ALSO IN THE CONCLUDING PORTION ON PAGE 7 OF HIS ORDER HOLDS THA T THE DEPRECIATION CHART DOES NOT REFLECT THE GIFT TRANSACTION PROPERLY AND IN THE ABSENCE OF SPECIFIC MENTION OF THE NEWLY PURCHASED CAR IN THE ADDITION COLUMN OF THE DEPRECIATION CHART, THE ADD ITION IS JUSTIFIED. IN THIS REGARD, WE FIND FROM T HE PERUSAL OF THE LEARNED CIT(A)S ORDER THAT THERE AR E CONFLICTING FINDINGS BY THE A.O. AND THE LEARNED CIT(A) AS TO WHICH OF THE CARS VIZ. QUALIS OR GETZ WAS REFLECTED IN THE ASSESSEES BOOKS IN THE 6 ITA NO.623/BANG/11 RELEVANT PERIOD. THE LEARNED CIT(A) RECORDS AT PAR A 9 OF HIS ORDER THAT WHILE THE A.O. HELD THAT W.D.V. OF THE QUALIS HAS BEEN DISCLOSED, THE NEWLY PURCHASED GETZ HAS NOT BEEN DISCLOSED, HE WAS OF THE VIEW THAT THE QUALIS IS STILL WITH THE ASSESSEE WHILE THE PURCHASE OF THE NEW GETZ CAR IS NOT PROVED. ADMITTEDLY, THE DEPRECIATION STATEMENT FI LED BY THE ASSESSEE HAS NOT BEEN PRESENTED IN THE PROPER FORMAT IN AS MUCH AS THE ADDITION THERETO AN D DELETION THEREFROM IS NOT REFLECTED SEPARATELY. HOWEVER, WE FIND THAT THE AUTHORITIES BELOW ALSO HA VE NOT EXAMINED THE ISSUE THOROUGHLY SO AS TO ASCERTAIN THE CORRECT POSITION AS TO THE PURCHASE O F THE NEW GETZ CAR FOR WHICH THE LOAN OF RS.4,25,000 TAKEN FOR THIS PURPOSE HAS NOT BEEN DOU BTED OR QUESTIONED BY THE ASSESSING OFFICER OR THE LEARNED CIT(A). SIMILARLY, WE FIND THAT THERE HAS BEEN NO DETAILED EXAMINATION BY THE LEARNED CIT(A) OF THE CLAIM OF THE ASSESSEE THAT HE HAS PUR CHASED A NEW GETZ CAR OR THAT HIS OLD QUALIS CAR IS NOT REFLECTED IN HIS ASSET STATEMENT AS IT HAS BEE N GIFTED TO HIS WIFE AND IS REFLECTED IN HER ASSESSMENT RECORDS WHICH ARE WITH THE VERY SAME A.O . AS THAT OF THE ASSESSEE IN THE INSTANT CASE. WE FIND THAT THE ASSESSEES CLAIMS ARE JUST BRUSHED ASIDE AND NO CROSS VERIFICATION HAS BEEN CARRIED OUT. IN THIS VIEW OF THE MATTER, WE FIND THAT THERE APPEARS TO BE NO CLARITY EITHER IN THE SUBMISSIONS MADE BY THE ASSESSEE OR IN THE FINDINGS OF THE AUTH ORITIES BELOW AND THEREFORE IN THE INTEREST OF JUSTICE WE REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO HAVE THE MATTER EXAMINED DE NOVO AND TO PASS FRESH ORDERS THEREON AFTER AFFORD ING THE ASSESSEE ADEQUATE OPPORTUNITY TO PRESENT HIS CASE AND FILE DETAILS. THE ASSESSEE IS ALSO DI RECTED TO CO-OPERATE WITH THE A.O. IN FILING DETAIL S CALLED FOR IN ORDER THAT THE MATTER BE DISPOSED OFF EXPEDITIOUSLY. 7. IN THE GROUND OF APPEAL RAISED AT S.NO.4 , THE ASSESSEE HAS CHALLENGED THE CHARGING OF INTER EST U/S.234B OF THE ACT FOR THE RELEVANT PERIOD. THE C HARGING OF INTEREST IS CONSEQUENTIAL AND MANDATORY. HAVING NO DISCRETION IN THE MATTER, THE ASSESSING OFFICER ACTION IS, THEREFORE, HELD TO BE 7 ITA NO.623/BANG/11 IN ORDER. THE ASSESSING OFFICER IS HOWEVER DIRECTE D TO RECOMPUTE THE INTEREST CHARGEABLE, IF ANY, WHILE GIVING EFFECT TO THIS ORDER. 8. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.5.2012. SD/- SD/- (GEORGE GEORGE K) ( JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 29.05.2012. *REDDY GP COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - B BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE