Dr. M. Prakash Kamath, Bangalore V. ITO, Bangalore

ITA 647/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63738 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 07-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained investment; Depreciation; Principle of natural justice; Revised return; Capital expenditure
• Section: 143(3); 133A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.6 47/BANG/2011 (ASST. YEAR - 2002-03) DR. M PRAKASH KAMATH, PROP : VINAYAKA NURSING HOME, , # 3033, 8 TH MAIN, HAL II STAGE, BANGALORE. . APPELLANT PAN NO.AAVPK 0631 K. VS. THE INCOME-TAX OFFICER, WARD-5(4), BANGALORE. . RESPONDENT APPELLANT BY : SHRI V SRINIVASAN, C.A RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCIT DATE OF HEARING : 24-09-2012 DATE OF PRONOUNCEMENT : 28-09-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2002-03. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE ITA NO.647/ B/11 2 COMMISSIONER OF INCOME-TAX - (APPEALS) II AT BANGA LORE DATED 25.03.2011. THE APPEAL ARISES OUT OF THE ASSESSMEN T COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. I) THE LD. CIT(A) IS NOT JUSTIFIED IN ENHANCING T HE ADDITION OF RS.8,76,614/- BY A FURTHER SUM OF RS.5,00,000/- AGGREGATING TO A SUM OF RS.13,76,614/ - BEING THE ALLEGED UNEXPLAINED INVESTMENT IN THE PURCHASE OF PROPERTY UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS CASE. II) THE LEARNED CIT(A) IS FURTHER NOT JUSTIFIED IN ENHANCING THE ADDITION BY FURTHER SUM OF RS.5,00,00 0/- WITHOUT GIVING ANY NOTICE OF THE PROPOSED ENHANCEME NT AND, THEREFORE, THE ENHANCEMENT OF THE ADDITION MAD E BY THE LD. CIT(A) IS TOTALLY OPPOSED TO LAW AND DESER VES TO BE VACATED. III) THE LD. CIT(A) IS NOT JUSTIFIED IN OBSERVING THAT A SUM OF RS.1,73,386/- WAS THE SHORT TERM CAPITAL G AIN THAT WAS NOT OFFERED TO TAX AND THE SAME IS TAXABLE , WHICH OBSERVATION IS TOTALLY UNWARRANTED EX-FACIE U NDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE. ITA NO.647/ B/11 3 IV) WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER WITH THE HONBLE CCIT/DG, THE APPELLANT DENIES HIMS ELF LIABLE TO BE CHARGED TO INTEREST U/S 234-B OF THE A CT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF T HE APPELLANTS CASE DESERVES TO BE CANCELLED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WHO IS AN INDIVIDUAL AND DOCTOR BY PROFESSION, FILED HIS RETU RN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 ON 30.7.2002 DECLARING AN I NCOME OF RS.1,76,634/-. HE FILED HIS REVISED RETURN OF INCO ME ON 29.9.2003 DECLARING THE SAME INCOME OF RS.1,76,634/- BUT HAS MADE GOOD CERTAIN OMISSIONS IN THE FINANCIAL STATEMENTS. IN THE REVI SED RETURN AMOUNT PAYABLE TO MR. PRAKASH KAMATH (HUF) WAS SHOWN AT R S.38,08,818/-. A SURVEY U/S 133A WAS CARRIED OUT ON THE ASSESSEES PREMISES ON 9.3.2002, DURING WHICH, IT HAD COME TO LIGHT THAT T HE ASSESSEE HAD JOINTLY PURCHASED A RESIDENTIAL PROPERTY ALONG WITH HIS WIFE AT INDIRANAGAR AND SALE DEED WAS EXECUTED ON 10.12.20 01. THE COST OF PURCHASE OF THE SAID PROPERTY WAS RS.85 LAKHS AND T HE ASSESSEES SHARE WORKS OUT TO RS.42,50,000/-. THE ASSESSEE WAS ASKE D TO EXPLAIN THE SOURCES OF AFORESAID INVESTMENT AND IT WAS EXPLAINE D BY THE ASSESSEE THAT HE HAD TAKEN A LOAN OF RS.5 LAKHS FROM STATE BANK OF INDIA, INDIRANAGAR BRANCH AND THE BALANCE OF RS.37,50,000/ - IS PAID OUT OF ITA NO.647/ B/11 4 THE FUNDS OF THE ASSESSSEES ERSTWHILE JOINT FAMIL Y. AFTER CONSIDERING ASSESSEES CONTENTIONS, THE ASSESSMENT WAS COMPLETE D U/S 143(3), WHEREIN AN ADDITION OF RS.38,30,469/- WAS MADE TO T HE RETURNED INCOME ON ACCOUNT OF INVESTMENT, CAPITAL EXPENDITUR E AND VEHICLE DEPRECIATION. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE WAS IN FURTHER APPEAL BEFORE THE ITAT. THE ITAT GRANTED PARTIAL R ELIEF TO THE ASSESSEE BY DELETING THE ADDITION MADE ON ACCOUNT O F CAPITAL EXPENDITURE AND VEHICLE DEPRECIATION BUT AS REGARDS UNEXPLAINED INVESTMENT, THE ISSUE WAS SET ASIDE TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 5. THE ASSESSING OFFICER VIDE ASSESSMENT U/S 143(3) READ WITH SEC. 256 OF THE INCOME-TAX ACT CONFIRMED THE ADDITI ON OF UNEXAPLINED INVESTMENT OF RS.37,50,000/- ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THAT HE HAS RECEIVED ANY FUNDS FROM HUF AND THAT ASSESSEES SUBMISSIONS RUN CONTRARY TO HIS SUBMISSIONS MADE EA RLIER BEFORE THE ITAT. ITA NO.647/ B/11 5 6. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) WHO DISMISSED THE SAME. THE ASSESSEE FURTHER PREFER RED AN APPEAL BEFORE THE ITAT AND ITAT VIDE ORDER DATED 8.5.2009 HELD THAT THE CONSIDERATION PAID FOR THE PURCHASE OF PROPERTY IS OUT OF THE CREDITS IN THE BANK ACCOUNT FROM 23.12.2001 TO 27.12.2001 WHIC H ARE SALE PROCEEDS OF MUTUAL FUNDS AND TRANSFERRING ENTRIES F ROM ANOTHER SAVING BANK ACCOUNT. THE ITAT, THEREFORE, REMANDED THE I SSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE SAME. CONSEQUENT TO THE ORDER OF THE ITAT AND IN COMPLIANCE OF THE SAME, TH E ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE TO SUBMIT THE DETAILS IN SUPPORT OF HIS CLAIM. THE ASSESSEE SUBMITTED PART OF THE DETA ILS AND AFTER CONSIDERING OF THE SAME, THE AO HELD THAT THE ASSE SSEE HAS EXPLAINED THE SOURCE OF INVESTMENT TO THE TUNE OF RS.28,73,38 6/- BUT IS NOT ABLE TO FURNISH ANY EVIDENCE IN SUPPORT OF THE INVESTMEN T OF RS.8,76,614/-. THE AO ACCORDINGLY MADE THE ADDITION OF RS.8,76,614 TO THE RETURNED INCOME OF THE ASSESSEE. 7. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). 8. THE CIT(A) AFTER CONSIDERING THE ASSESSEES SUBM ISSIONS HELD THAT THE DIFFERENCE BETWEEN THE INVESTMENT OF RS.42 ,50,000/- AND THE ITA NO.647/ B/11 6 AMOUNT RECEIVED ON REDEMPTION OF THE MUTUAL FUNDS I .E RS.28,73,386/- COMES TO RS.13,76,614/-. HE HELD THAT THE AO HAS H ELD THE DIFFERENCE BETWEEN THE TWO TO BE RS.8,76,614/- AND, THEREFORE, THERE IS A MISTAKE APPARENT FROM RECORD AND HE DIRECTED THE AO TO RECT IFY THE SAME AFTER TAKING APPROPRIATE ACTION. HE, THEREFORE, HELD THA T THE ADDITIONS STAND CONFIRMED NOT ONLY TO THE EXTENT OF RS.8,76,614/- B UT ALSO ENHANCED BY SUM OF RS.5 LAKHS. 9. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US B Y RAISING GROUNDS OF APPEAL NOS. 2 AND 3. 10. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW A ND SUBMITTED THAT AS FAR AS THE ENHANCEMENT OF ADDITION BY RS.5 LAKSH IS CONCERNED, THE CIT(A) HAS NOT GIVEN ANY OPPORTUNITY OF HEARING TO THE ASSESSEE. HE EXPLAINED THAT DURING THE ASSESSMENT PROCEEDINGS U/ S 143(3), IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT THE ASSESSE E HAD OBTAINED A LOAN OF RS. 5 LAKHS FROM S.B.I INDIRANAGAR, BANGALO RE AND, THEREFORE, TAKING NOTE OF THE SAME, THE AO HAS ACCEPTED THE SA ME IN THE ASSESSMENT PROCEEDINGS AND HAS MADE THE ADDITION OF RS.8,76,614/- ONLY. HE SUBMITTED THAT THE CIT(A)S DIRECTION TO THE AO TO ENHANCE ITA NO.647/ B/11 7 THE ADDITION BY SUM OF RS.5 LAKHS IS IN VIOLATION O F PRINCIPLES OF NATURAL JUSTICE AND IS UNWARRANTED. THE LEARNED CO UNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IT IS CLEARLY BROUG HT OUT AND ESTABLISHED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE AND THE HUF HAD FUNDS OF RS.57 LAKHS TO INVEST IN THE MUTUAL FUNDS AND, T HEREFORE, THE POSSIBILITY OF HAVING FUNDS TO THE TUNE OF RS.8,76, 614/- CANNOT BE DOUBTED AND IT SHOULD BE ACCEPTED AS EXPLAINED INVE STMENT. 11. THE LEARNED DR, ON THE OTHER HAND SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 12. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE IN THE ASSES SMENT PROCEEDINGS U/S 143(3) HAD EXPLAINED BEFORE THE AO, THE SOURCES OF INVESTMENT TO THE TUNE OF RS.5 LAKHS AS A LOAN FROM SBI, INDIRANA GAR. HOWEVER, THIS FACT COULD NOT EXPLAINED TO THE CIT(A), AS THE CIT( A) HAS NOT CALLED FOR ANY EXPLANATION FROM THE ASSESSEE FOR THE SAME. THEREFORE, IN OUR VIEW IT IS IN VIOLATION OF PRINCIPLES OF NATURAL JU STICE. THEREFORE, WE DEEM IT FIT AND PROPER TO REMIT THE ISSUE TO THE FI LE OF THE CIT(A) TO CALL FOR THE ASSESSEES EXPLANATION AND DECIDE THE ISSUE IN ACCORDANCE ITA NO.647/ B/11 8 WITH LAW. THE ASSESSEE SHALL BE ALLOWED AN OPPORTU NITY OF HEARING AND TO SUBSTANTIATE ITS CLAIM BY PRODUCING THE NECESSAR Y EVIDENCE. 13. AS REGARDS THE ADDITION OF RS.8,76,614/- IS CON CERNED, WE FIND THAT THE TRIBUNAL IN THE EARLIER PROCEEDINGS HAS AL READY HELD THAT THE BURDEN IS ON THE ASSESSEE TO PROVE THE CLAIM. IT IS THE DUTY OF THE ASSESSEE TO EXPLAIN THE SOURCES ALONG WITH NECESSAR Y EVIDENCES. THE ASSESSEES CONTENTION WAS THAT THE ASSESSEE AND HIS HUF BEING IN A FINANCIAL POSITION TO INVEST RS.57 LAKHS IN MUTUAL FUNDS ITSELF PROVES HIS CAPABILITY OF HAVING A SOURCE IN SUCH INVESTMEN T CANNOT BE ACCEPTED. IRRESPECTIVE OF THE QUANTUM OF INVESTMEN T, IT IS THE BOUNDEN DUTY OF THE ASSESSEE TO FURNISH NECESSARY DETAILS I N SUPPORT OF ITS CLAIM. IN THE ABSENCE OF ANY EVIDENCE IN SUPPORT O F HIS CLAIM, WE FIND THAT THE ORDER OF THE AUTHORITIES BELOW IS TO BE CONFIRMED. 14. IN THE RESULT GROUND NO. 2 IS DISMISSED AND GRO UND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 15. AS REGARDS GROUND NO.4, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) WHILE REMANDING THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER HAS DIRECTED THE ASSESSING AUTHORITY TO BRING ITA NO.647/ B/11 9 TO TAX THE SHORT-TERM CAPITAL GAIN ARISING OUT OF THE REDEMPTION OF MUTUAL FUNDS. HE SUBMITTED THAT THIS ISSUE HAD NOT ARISEN DURING THE ASSESSMENT COMPLETED U/S 143(3) OR IN ANY OF THE P ROCEEDINGS BEFORE THE CIT(A) AND THE ITAT AND, THEREFORE, THE CIT(A) IN HIS PROCEEDINGS HAS DIGRESSED ITS JURISDICTION BY GIVIN G A DIRECTION ON THIS ISSUE, WHICH WAS NOT BEFORE THE ASSESSING AUTHORITY . ACCORDING TO HIM, THE CIT(A)S JURISDICTION TO REMAND PROCEEDINGS ARE LIMITED TO THE ISSUES REMANDED AND CANNOT BE PERMITTED TO MAKE ROV ING ENQUIRY INTO OTHER ASPECTS OF THE ASSESSEES INCOME. 16. THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS BEEN TAK ING DIFFERENT STANDS IN THE ORIGINAL AS WELL AS REMAND PROCEEDING S BEFORE THE AO AND IT IS ONLY DURING THE REMAND PROCEEDING THAT TH E SOURCE OF THE INVESTMENT IN THE PROPERTY WAS STATED TO BE OUT OF REDEMPTION OF MUTUAL FUNDS. SHE SUBMITTED THAT AS THE ISSUE OF I NVESTMENT IN AND REDEMPTION OF MUTUAL FUNDS HAD ARISEN FOR THE FIRST TIME DURING THE REMAND PROCEEDINGS ONLY, IT WAS VERY MUCH OPEN FOR THE CIT(A) TO CONSIDER THE ISSUE AND GIVE APPROPRIATE DIRECTION T O THE ASSESSING AUTHORITY AND THERE IS NO DIGRESSING OF JURISDICTI ON BY THE CIT(A). ITA NO.647/ B/11 10 17. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE CIT(A) HAS NOT CALLED FOR ASSESSEES EXPLANATION ON THIS ISSUE ALSO BEFORE DIRECTING TH E AO TO ASSESS THE INCOME FROM REDEMPTION OF MUTUAL FUNDS AS SHORT TER M CAPITAL GAIN. THE PRINCIPLES OF NATURAL JUSTICE REQUIRES THAT A P ERSON SHOULD HAVE HEARD BEFORE PASSING ANY ORDER PREJUDICIAL TO HIS I NTEREST. AS THE CIT(A) HAS NOT GIVEN ANY OPPORTUNITY TO THE ASSESSE E TO RAISE ANY OBJECTION TO THE PROPOSED ADDITION AS WELL AS THE J URISDICTION OF THE CIT(A) TO DECIDE THIS ISSUE IN THE REMAND PROCEEDIN GS, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO ISSUE NOTICE TO THE ASSESSEE ON THE IS SUE OF SHORT TERM CAPITAL GAIN ON REDEMPTION OF MUTUAL FUNDS AND DEC IDE THE ISSUE IN ACCORDANCE WITH LAW AFTER HEARING THE ASSESSEE ON H IS OBJECTIONS BOTH ON THE JURISDICTION AS WELL AS MERITS. 18. THIS GROUND IS ACCORDINGLY ALLOWED FOR STATISTI CAL PURPOSES. 19. AS REGARDS GROUND NO.5, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS CHARGED IN TEREST U/S 234B OF RS.1,95,117/- BUT HOWEVER, THE PERIOD FOR WHICH THE INTEREST IS CHARGED IS NOT MENTIONED. HE SUBMITTED THAT AS PER THE DEC ISION OF THE HONBLE ITA NO.647/ B/11 11 SUPREME COURT IN THE CASE OF MODI INVESTMENT REPORT ED IN 216 ITR 759, THE INTEREST U/S 234B CAN BE CHARGED ONLY UP T O THE DATE OF REGULAR ASSESSMENT, THEREFORE, RESPECTFULLY FOLLOWI NG THE DECISION OF THE APEX COURT, WE REMIT THIS ISSUE ALSO TO THE FIL E OF THE ASSESSING AUTHORITY TO COMPUTE THE INTEREST U/S 234B IN ACCOR DANCE WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MODI INVESTMENTS (CITED SUPRA). 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH SEPT, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 28/09/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETA RY, ITAT, BANGALORE.