Shri Kuruvilla Augustine, Cochin V. ACIT, Kottayam

ITA 63/COCH/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7600 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2010
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 14-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 09-02-2009
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: THOMAS JOSEPH
• Keywords: Unexplained investment; Peak credit; Source of fund; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.63/COCH/2009 ASSESSMENT YEAR:2005-06 KURUVILLA AUGUSTINE, KOCHI. PA NO.AFEPK 0622B VS. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-I, KOTTAYAM. (APPELLANT) ( RESPONDENT ) & I.T.A.NO.105/COCH/2009 ASSESSMENT YEAR:2005-06 THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-I, KOTTAYAM. VS. KURUVILLA AUGUSTINE, KOCHI. PA NO.AFEPK 0622B (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI THOMAS JOSEPH ,CA REVENUE BY SHRI T.J. VINCENT, JR.DR O R D E R PER N.VIJAYAKUMARAN,J.M: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE. BOTH THE APPEALS ARE DIRECTED AGAINST T HE ORDER OF THE LD. CIT(APPEALS)-IV,KOCHI, DATED 18-11-2008. THE ASSESSMENT YEAR INVOLVED IS 2005-06. AS BOTH ARE C ROSS APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DIS POSED OFF BY THIS COMMON ORDER. ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 2 2. IN THE ASSESSEES APPEAL, THE FIRST ISSUE FOR OU R CONSIDERATION IS IN RESPECT OF ADDITION OF RS.1,72, 000/- UNDER THE HEAD SOURCE OF DEPOSIT OF THE AMOUNT IN THE BA NK ACCOUNT NOT EXPLAINED AS WELL AS ANOTHER GROUND SUM OF RS.50,000/- UNDER FOREIGN TRIP FOR WHICH THE SOURCE WERE NOT EXPLAINED, ACCORDING TO THE REVENUE. 3. THE ASSESSEE IS A PARTNER IN SEVERAL HOTELS. H E IS ASSESSED IN THE STATUS OF INDIVIDUAL. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.4,60,040/-. HOWEVER, THERE WAS A SUR VEY U/S.133A CONDUCTED ON 31-08-2006 AT HOTEL MERIYA RESIDENCY, A BAR HOTEL, AS WELL AS MERIYA GROUP OF HOTELS, IN WHICH THE ASSESSEE WAS A PARTNER, WHICH WAS SEARCHE D U/S.132 ALSO. WHILE FRAMING THE ASSESSMENT, ASS ESSING OFFICER WAS OF THE VIEW THAT IN RESPECT OF THE CASH DEPOSITS OF RS.1,72,000/- MADE ON 19-03-2005, WAS NOT PROPER LY EXPLAINED. THEREFORE, THE LD. A.O. ADDED THE SUM OF RS.1,72,000/- TO THE TOTAL INCOME OF THE ASSESSEE F OR THE IMPUGNED ASSESSMENT YEAR, WHICH WAS CONFIRMED IN AP PEAL BY THE LD. CIT(APPEALS). 4. IN RESPECT OF THE OTHER ADDITION OF RS.50,000/- ON ACCOUNT OF FOREIGN TRAVEL, THE LD. CIT(APPEALS) ALS O ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 3 CONFIRMED THE VIEW OF THE ASSESSING OFFICER THAT TH IS WAS ALSO NOT PROPERLY EXPLAINED. 5. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE WOU LD SUBMIT THAT THIS AMOUNT OF RS.1,72,000/- UNDER THE HEAD ALLEGED UNEXPLAINED SOURCE OF DEPOSITS IN THE BANK ACCOUNT AS WELL AS RS.50,000/- AS UNEXPLAINED FOREIGN TRIP, WOULD TAKE CARE IN THE EXPLAINED AMOUNT OF THE MISCELLANE OUS INCOME OF RS.4 LAKHS AND AGRICULTURAL INCOME OF RS. 90,000/- DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FO R THE ASSESSMENT YEAR 2005-06. IN OTHER WORDS, THE LD . COUNSEL FOR THE ASSESSEE SUBMITTED THAT AFTER AVAILING THE TELESCOPING TO TAKE IT AS THE SOURCE FOR THE BANK DEPOSIT AS WELL AS THE FOREIGN TRIP. ON THE OTHER HAND, THE LD. D.R. VEHEMENTLY OPPOSED THE APPEAL AND CONTENDED THAT IT IS THE BURDEN OF THE ASSESSEE TO EXPLAIN THE SOURCE WHICH WAS NOT PROPERLY EXPLAINED. THEREFORE, THE ADDITIONS MADE BY THE AUTHORITIES ARE TO BE SUSTAINED. THE LD. D.R. REL IED ON THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. TELESCOPING IS ALS O RECOGNIZED WHEN THERE ARE MANY CREDITS AND WITHDRAW ALS AND ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 4 ALL ARE TREATED THE SOURCE OF THE ASSESSEES INCOME . SAME WAY, INCOME-TAX DEPARTMENT IS BOUND TO ACCEPT EVEN SUCH CLAIM FOR ADDITION OF ONLY PEAK CREDITS AND NOT ALL THE CREDITS BY TAKING THEM AS INDEPENDENT CREDITS. THE DECIS ION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KS M GURUSWAMY NADAR & SONS REPORTED IN 149 ITR 127 HELD THAT THIS WOULD HAPPEN WHERE INTANGIBLE ADDITIONS HAVE B EEN MADE IN THE PAST, WHILE INVESTMENTS ARE SURFACED IN THE LATER YEARS. IN SUCH A CASE IT IS POSSIBLE FOR THE ASSE SSEE TO EXPLAIN THAT THE INVESTMENTS HAVE COME OUT OF THE I NCOMES ADDED BY THE ASSESSING OFFICER. COURTS HAVE HELD THAT THE ASSESSEE IS ENTITLED TO TAKE SUCH A STAND AND THAT ATTEMPT WILL HAVE TO BE ACCEPTED UNLESS IT COULD BE SHOWN T HAT SUCH AMOUNTS ADDED WOULD NOT HAVE BEEN AVAILABLE FOR INVESTMENTS. HERE TAKING THE SAME ANALOGY, ASSES SEE OFFERED RS.4 LAKHS AS INCOME FROM OTHER SOURCES BES IDES RS.90,000/- AS AGRICULTURAL INCOME. IT COMES TO RS.4,90,000/-AS INCOME DECLARED BY THE ASSESSEE IN THE RETURN FOR THIS RELEVANT ASSESSMENT YEAR. THAT BE ING THE CASE, WE CAN EASILY HOLD THAT THIS WILL TAKE CARE O F AS SOURCE EXPLAINED FOR THE DEPOSITS OF THE BANK ACCOUNT AS W ELL AS THE FOREIGN TRIP. THUS BOTH WILL TAKE CARE OF THIS EX PLANATION AS THE ASSESSEE IS HAVING MISCELLANEOUS INCOME OF ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 5 RS.4,00,000/- BESIDES AGRICULTURAL INCOME OF RS.90, 000/-. AS DECLARED IN THE RETURN. HENCE, WE HAVE NO HESITAT ION IN DECIDING THIS ISSUE BY REVERSING THE ORDERS OF THE AUTHORITIES BELOW. THIS WILL TAKE CARE OF THE GROUND NOS. 2, 3 & 4 OF THE GROUNDS OF APPEAL FILED BY THE ASSESSEE. 7. COMING TO GROUND NO.5, WHICH IS ANOTHER ADDITION OF RS.9,50,000/- TOWARDS SHARE OF INVESTMENT IN THE PR OPERTY PURCHASED BY M/S. PARK RESIDENCY. THIS ISSUE WILL TAKE CARE OF GROUND NOS.5, 6 AND 7 OF THE GROUNDS OF APPEAL U RGED BEFORE US. 8. THE FACTS RELEVANT FOR DECIDING THIS ISSUE ARE T HAT M/S. PARK RESIDENCY, ERNAKULAM, IN WHICH ASSESSEE IS A P ARTNER, PURCHASED SOME LAND AT KUNDANNOOR. THE TOTAL LAND COST WAS RS.77,70,145/-. FOR THIS SALE CONSIDERATION, A SSESSEE HAS GIVEN RS.10 LAKHS ONLY AS HIS SHARE IN THE INVE STMENT BY WAY OF DD ON 23-08-2004. THIS AMOUNT IS THE WITHD RAWAL FROM THE FIRM, HOTEL VENUS, AS THE SOURCE EXPLAINED . ADMITTEDLY, DEPARTMENT ALSO ACCEPTED THIS AS SOURCE D EXPLAINED. THE ASSESSEE WAS ASKED TO PRODUCE THE BOOKS OF THE FIRM. HOWEVER, ASSESSEE COULD NOT MAKE IT AVA ILABLE. BUT A LETTER DATED 18-12-2007 WAS FILED STATING THA T HE HAS ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 6 ALREADY PRODUCED THE COPY OF HIS BANK ACCOUNT. TH E ASSESSEE EXPRESSED HIS INABILITY TO PRODUCE THE BOO KS OF ACCOUNTS OF THE FIRM AS THEY HAVE SOLD THE HOTEL. THE ASSESSING OFFICER MADE THIS AS PART OF UNEXPLAINED BANK DEPOSIT AND THE SOURCE OF RS.9,50,000/- WAS NOT EXP LAINED . THE ASSESSEE IS HAVING 25% SHARE, WHICH COMES TO RS.19,50,000/-. ACCEPTING THE SOURCE OF RS.10,00,00 0/-, THE ASSESSING OFFICER TREATED THE REMAINING SUM OF RS.9,50,000/-AS UNEXPLAINED INVESTMENTS. ON APPEAL , THE LD. CIT(APPEALS) CONFIRMED THE ADDITION. 9. BEFORE US, THE LD. COUNSEL WOULD SUBMIT THAT FIR ST OF ALL IT IS THE PROPERTY PURCHASED FOR RS.77,70,145/- BY THE FIRM M/S. PARK RESIDENCY. ADMITTEDLY THE ASSESSEE IS A P ARTNER IN THE FIRM OF M/S. PARK RESIDENCY. THE LD. COUNSEL V EHEMENTLY CONTENDED THAT IF THERE IS DEFICIENCY IN THE SOURCE OF INVESTMENT, WHICH WAS ADMITTEDLY PURCHASED BY THE F IRM, M/S. PARK RESIDENCY, AS PER LAW, IT CAN BE ASSESSED IN THE HANDS OF THE FIRM, M/S. PARK RESIDENCY ONLY AND NOT IN THE HANDS OF THE PARTNERS BY APPORTIONING THE INVESTMEN T IN THE PROFIT SHARING RATIO. THE LD. COUNSEL FURTHER SUBMI TTED THAT THE ORDERS OF THE AUTHORITIES BELOW HAS TO BE SET A SIDE AS THE LD. CIT(APPEALS) FAILED TO CONSIDER THIS ASPECT THA T THE ASSESSEE IS HAVING 25% SHARE IN THE FIRM OF M/S. PA RK ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 7 RESIDENCY ONLY ON THE PROFITS AND NOT ON THE ENTIRE INVESTMENTS MADE BY THE FIRM. THE LD. COUNSEL FU RTHER SUBMITTED THAT THE INVESTMENTS MADE BY THE FIRM NEE D NOT BE OUT OF FRESH CONTRIBUTION BY THE PARTNERS, THE S OURCE OF INVESTMENT BY THE FIRM CAN BE FROM ANY OTHER SOURCE , WHICH NEED NOT BE FROM THE PARTNERS ALONE WHO ARE ADMITTE D TO SHARE THE PROFITS OF THE FIRM. THE CONTRIBUTION O F RS. 10 LAKHS ALONE IS THE ASSESSEES CONTRIBUTION FOR THE PURCHASE OF THE PROPERTY BY THE FIRM AND THE BALANCE WAS MET OU T FROM OTHER SOURCES OF THE FIRM, AS THE PAYMENT OF RS. 10 LAKHS IS EVIDENCED BY DD. THE LD. COUNSEL THEREFORE SUBMIT TED THAT THE ADDITION IN THE HANDS OF THE INDIVIDUAL ASSESSE E IS NOT AT ALL WARRANTED. HENCE, IT IS TO BE DELETED. ON T HE OTHER HAND, THE LAND D.R. RELIED ON THE ORDERS OF THE AUT HORITIES AND SUBMITTED THAT THE ASSESSEE HAS NOT CO-OPERATED WITH THE DEPARTMENT, AS IT HAS TO BE PROVED THAT THE INV ESTMENTS BY THE FIRM ONLY AND NOT BY THE PARTNERS INCLUDING THE ASSESSEE, BY PRODUCING THE PROFIT AND LOSS ACCOUNT OF THE FIRM IN RESPECT OF ITS INVESTMENTS IN THE KUNDANNOO R PROPERTY. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT IS NOT DISPUTED THAT THE INVESTMENTS IN THE KUNDANNOOR PROPERTY ADMITTEDLY M ADE BY ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 8 THE FIRM AND NOT BY THE ASSESSEE. ANY SOURCE OF I NVESTMENT REMAINED TO BE EXPLAINED, IT CAN BE ASSESSED ONLY I N THE HANDS OF THE FIRM AND NOT IN THE HANDS OF THE PARTN ERS, AS IN THE EYE OF INCOME-TAX LAW, THE FIRM IS A SEPARATE L EGAL ENTITY ASSESSED TO TAX. IN THE REMAND REPORT ALSO, THE A SSESSING OFFICER ACCEPTED THAT THE UNEXPLAINED INVESTMENT MA DE SHOULD BE ASSESSED IN THE HANDS OF THE FIRM RATHER THAN THE PARTNERS. UNDER THE ABOVE CIRCUMSTANCES, WE ARE O F THE VIEW THAT THE ORDERS OF THE AUTHORITIES BELOW IS TO BE REVERSED WITH RELEVANCE TO THE ISSUE URGED BEFORE U S AND ACCORDINGLY WE SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND DIRECT THE ASSESSING OFFICER TO DELETE THIS ADD ITION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 12. TURNING TO THE DEPARTMENTAL APPEAL, THE ONLY IS SUE IS IN RESPECT OF THE DELETION OF RS. 2 LAKHS CREDITED IN THE ASSESSEES BANK ACCOUNT WHICH ALLEGEDLY HAS NOT BEE N PROVED THE SOURCE OF FUNDS. WE HAVE HEARD RIVAL SUBMISSI ONS AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD . THIS IS A CREDIT OF RS.2 LAKHS STANDING IN THE NAME OF ONE SHRI BABY MATHEW. IT IS EXPLAINED BY THEE ASSESSEE THAT IT IS NOT A CASH CREDIT BUT ONLY A CHEQUE DISCOUNTING TRANSACTI ON. TO SUPPORT HIS ARGUMENT, THE LD. COUNSEL INVITED OUR A TTENTION ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 9 TO PAGE NOS. 4 AND 5 OF THE PAPER BOOK WHEREIN IT I S STATED THAT THIS ITEM OF RS. 2 LAKHS IS FOUND AT PAGE 4 UN DER THE HEAD BY TRANSFER CBP/OBC299 ON 7-05-2004 AND TO TRANSFER LBP REVERSED ON 11-05-2004 AND ON THE NEX T PAGE, I.E. PAGE 5 TO TRANSFER 4 DAYS INT RS.373/- HAS B EEN CHARGED BY THE BANK. THE LD. COUNSEL FURTHER SUBM ITTED THAT THIS IS ONLY A DISCOUNTING ARRANGEMENT WITH TH E BANK, FOR WHICH AN AMOUNT OF RS.373/- HAS BEEN CHARGED BY WAY OF INTEREST. THIS HAS BEEN RIGHTLY APPRECIATED BY TH E LD. CIT(APPEALS) AND BILL DISCOUNTING HAS BEEN REFLECTE D IN THE BANK STATEMENT ENTRY AS ON 07-05-2004. HENCE, THI S HAS BEEN PROPERLY EXPLAINED. CONSIDERING THE FACTS OF THE CASE AND EVIDENCE AS BROUGHT OUT BY THE ASSESSEE, WHICH HAS BEEN RIGHTLY APPRECIATED BY THE LD. CIT(APPEALS), W E AGREE WITH HIS FINDINGS. HENCE, THE DEPARTMENTAL APPEAL DESERVES TO BE DISMISSED AND ACCORDINGLY DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 16 TH SEPTEMBER,2010. PM. ITA NOS. 63 & 105/COCH/2009 KURUVILLA AUGUSTINE 10 COPY FORWARDED TO: 1. KURUVILLA AUGUSTINE, KANCHIRAMATTOM HOUSE, CHEMBUMU KKU, THRIKKAKARA, KOCHI. 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-I, KOT TAYAM. 3. CIT(A)-IV, KOCHI. 4. CIT, KOTTAYAM./5. D.R.