Sri. Goutham S Varad, Bangalore V. ITO, Bangalore

ITA 666/BANG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7732 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-04-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 14-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SARAVANAN B JT
• Keywords: Unexplained cash credit; Opportunity of being heard
• Section: 147; 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.666/BANG/2010 ASSESSMENT YEAR : 2003-04 SHRI GOUTHAM S. VARAD, # 12, 10 TH MAIN ROAD, RMV EXTENSION, SADASHIVANAGAR, BANGALORE 560 080. PAN : ABLPG 5377N VS. THE INCOME TAX OFFICER, WARD 8(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI RAGHAVENDRA CHAKRAVARTHY, C.A. RESPONDENT BY : SHRI SARAVANAN B., JT. CIT(DR) DATE OF HEARING : 25.04.2012 DATE OF PRONOUNCEMENT : 25.04.2012 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 18.01.2010 OF THE CIT(APPEALS)-II, BANGALORE. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: ITA NO.666/BANG/10 PAGE 2 OF 9 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR A S THEY ARE AGAINST THE APPELLANT ARE OPPOSED TO LAW, EQUITY, W EIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDIN G THE ADDITION OF RS.2,40,500/- BEING AGRICULTURAL INCOME BY CONSIDERING THE SAME AS INCOME LIABLE FOR ASSESSMEN T UNDER THE HEAD OTHER SOURCES UNDER THE FACTS AND IN THE CIR CUMSTANCES OF THE APPELLANTS CASE. 2.1. THE LEARNED CIT[A] FAILED TO APPRECIATE THAT THE AGRICULTURAL INCOME RETURNED BY THE APPELLANT ON ES TIMATE BASIS WAS INCOME GENERATED FROM LANDS STANDING IN THE NAM E OF THE APPELLANTS GRANDFATHER SRI V VARADA RAJU AND THERE WAS NO JUSTIFICATION TO DISBELIEVE THE AGRICULTURAL INCOME MERELY ON THE GROUND THAT THE LAND DID NOT BELONG TO THE APPELLAN T. 2.3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED C IT[A] OUGHT NOT TO HAVE CONSIDERED AGRICULTURAL INCOME AS INCOM E FROM OTHER SOURCES ESPECIALLY WHEN THE INCOME WAS NOT CONSIDERED AS A SOURCE FOR EXPLAINING ANY INVESTMENT AND CONSE QUENTLY, THE ADDITION MADE DESERVES TO BE DELETED. 3. THE LEARNED CIT[A] IS NOT JUSTIFIED IN UPHOLDIN G THE ADDITION OF RS. 61,602/- AS INCOME FROM HOUSE PROPE RTY UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANTS C ASE. 4. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER W ITH THE HONBLE C.C.I.T./D.G. THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGED TO INTEREST U/S.234-A AND 234-B OF THE ACT, WHICH UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT S CASE AND THE LEVY DESERVES TO BE CANCELLED. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS. 3. GROUND NOS. 1 & 5 ARE GENERAL IN NATURE, SO DO N OT REQUIRE ANY COMMENTS ON OUR PART. ITA NO.666/BANG/10 PAGE 3 OF 9 4. GROUNDS NO.2 TO 2.3 RELATE TO THE CONFIRMATION O F ADDITION OF Q 2,40,500 MADE BY THE AO BY CONSIDERING THE AGRICULT URAL INCOME SHOWN BY THE ASSESSEE AS INCOME FROM OTHER SOURCES. 5. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED HIS RETURN OF INCOME ON 16.2.2004 DECLARING AN INCOME O F Q 5,91,353 WHICH WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 19 61 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT]. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN AGRICULTURAL INCOME OF Q 2,40,500 IN HIS RETURN OF INCOME, BUT HE WAS NOT HOLDING AGRICULTURAL LAND IN HIS NAME AND THE LAND ORIGINALLY BELONGED TO HIS GRANDFATHER, LATE V. VAR ADARAJ, AND THE LAND RECORDS WERE NOT CHANGED. THE AO OBSERVED THAT THE ASSESSEE FILED LEASE AGREEMENT DATED 21.11.03 AND AS THE ASSESSEE WAS NO T OWNING ANY AGRICULTURAL LAND, THE AGRICULTURAL INCOME SHOWN TO THE EXTENT OF Q 2,40,500 WAS TREATED AS UNEXPLAINED CASH CREDIT U/S. 69 OF T HE ACT AND WAS BROUGHT TO TAX. 6. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A ) AND SUBMITTED THAT THE AGRICULTURAL INCOME DECLARED WAS ON ESTIMATE BA SIS AND THAT THE SAID INCOME GENERATED FROM THE LAND STANDING IN THE NAME OF ASSESSEES GRANDFATHER. IT WAS FURTHER SUBMITTED THAT THERE W AS NO JUSTIFICATION TO DISBELIEVE THE AGRICULTURAL INCOME MERELY ON THE GR OUND THAT THE LAND DID NOT BELONG TO THE ASSESSEE. 7. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT HOLDING OF LAND WAS NOT SUFFICIENT PR OOF FOR EARNING INCOME UNLESS DOCUMENTARY PROOF WAS FURNISHED LIKE EXISTEN CE OF AGRICULTURAL ITA NO.666/BANG/10 PAGE 4 OF 9 ACTIVITIES, CROPS GROWN AND SALE OF AGRICULTURAL PR ODUCTS. ACCORDING TO HIM, THE ASSESSEE HAD NOT ADDUCED ANY SUCH EVIDENCE, HE THEREFORE CONFIRMED THE ADDITION MADE BY THE AO. NOW THE ASSESSEE IS I N APPEAL. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT UNDER IDENTICAL FACTS, AGRICULTURAL INCOME HAD BEEN ACCEPTED BY THE AO IN THE PRECEDING YEARS I.E. FOR A.YS. 2001-02 & 2002-03. IN SUPPORT OF TH E ABOVE CONTENTION, OUR ATTENTION WAS DRAWN TOWARDS PAGE NOS. 17 TO 22 OF T HE ASSESSEES COMPILATION, WHICH ARE COPIES OF DEMAND NOTICE AS W ELL AS ASSESSMENT ORDERS PASSED U/S. 147 R.W. SEC. 144 OF THE ACT FOR THE A.YS. 2001-02 & 2002-03. 9. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY SU PPORTED THE ORDERS OF AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AS SESSEE HIMSELF AGREED FOR THE ADDITION. HE REFERRED TO PAGE 9 OF THE ASS ESSEES COMPILATION WHICH IS A COPY OF THE LETTER DATED 25.1.2006 BY THE ASSE SSEE TO THE AO. IN HIS REJOINDER, THE LD. COUNSEL FOR THE ASSESSEE ALSO RE FERRED TO THE ABOVE LETTER AND STATED THAT IN THE SAID LETTER, THE ASSESSEE CL EARLY STATED THAT IN REALITY HE DID NOT ADMIT SUCH AGRICULTURAL INCOME AS NON-AG RICULTURAL INCOME. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE DECLARED THE AGRICULTURAL INCOME FROM THE LAND WHICH WAS IN THE NAME OF HIS DECEASED GRANDFATHER, LATE V. VARADARAJ. THE AO AT PAGE 2, PARA 2 OF THE ASSESSMENT ORDER DATED 30.1.06 ALSO ADMITTED THIS FACT THAT THE LAND ORIGINALLY BELONGED TO GRAN DFATHER OF THE ASSESSEE AND TILL DATE THE LAND RECORDS WERE NOT CHANGED. H E ALSO CALLED FOR DETAILS ITA NO.666/BANG/10 PAGE 5 OF 9 OF AGRICULTURAL LAND, CROPS GROWN, ETC., BUT NO WHE RE IT IS STATED THAT THE ASSESSEE DID NOT FURNISH THOSE DETAILS. IT THEREFO RE APPEARS THAT THE ASSESSEE HAD GROWN CROPS ON THE LAND WHICH WAS HIS ANCESTRAL LAND AND THE DEPARTMENT HAD NOT BROUGHT ANY MATERIAL ON RECO RD TO SUBSTANTIATE THAT ANCESTRAL LAND OF THE ASSESSEE WAS USED BY ANY OTHE R PERSON FOR AGRICULTURAL PURPOSES. IN THE PRESENT CASE, AGRICU LTURAL INCOME WAS NOT ACCEPTED BY THE AO ONLY FOR THIS REASON THAT ITS HO LDING WAS IN THE NAME OF DECEASED GRANDFATHER OF THE ASSESSEE. IT IS ALSO N OTICED THAT THE AO HIMSELF WHILE PASSING THE ASSESSMENT ORDERS U/S. 14 7 R.W. SEC. 144 OF THE ACT FOR THE A.YS. 2001-02 & 2002-03 HAD ACCEPTED TH E AGRICULTURAL INCOME SHOWN BY THE ASSESSEE AT Q 1,46,500 AND Q 2,50,450 RESPECTIVELY. WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS AS NARRATED HEREINABOVE, ARE OF THE VIEW THAT THE LD. CIT(A) WAS NOT JUSTIFIED I N CONFIRMING THE ADDITION MADE BY THE AO, PARTICULARLY WHEN IN SIMILAR CIRCUM STANCES, THE AO HIMSELF HAD ACCEPTED THE AGRICULTURAL INCOME FOR THE IMMEDI ATELY PRECEDING YEARS AND HAD ALSO NOT BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ANCESTRAL LAND OF THE ASSESSEE WAS NOT UTILIZED FOR AGRICULTURAL P URPOSES BY THE ASSESSEE OR IT WAS UTILIZED BY ANOTHER PERSON FOR AGRICULTUR AL PURPOSES. IN OTHER WORDS, THE CONTENTION OF THE ASSESSEE HAD NOT BEEN REBUTTED THAT AGRICULTURAL CROPS WERE GROWN ON THE LAND WHICH WAS REGISTERED IN THE NAME OF ASSESSEES DECEASED GRANDFATHER. IN THAT VIEW O F THE MATTER, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DELETE THE ADDITION CONFIRMED BY HIM WHICH WAS MADE BY THE AO. 11. THE NEXT ISSUE VIDE GROUND NO.3 RELATES TO THE ADDITION OF RS.61,602 ON ACCOUNT OF INCOME FROM HOUSE PROPERTY. ITA NO.666/BANG/10 PAGE 6 OF 9 12. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE AO FROM THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT NOTICED THAT M/S. SRINIVASA ENTERPRISES IN WHICH THE ASSESSEE WAS A C O-OWNER HAD RECEIVED RENTAL INCOME OF Q 3,19,354 FROM THE PROPERTY AT NO.79/1, SRINIVASA COMPLEX, NO.79, I MAIN ROAD, SESHADRIPURAM, BANGALO RE 20, WHICH WAS LET OUT TO COMMERCIAL TAX DEPARTMENT AND THE SAID I NCOME WAS NOT OFFERED TO TAX IN THE RETURN OF INCOME FILED BY THE ASSESSE E. WHEN THIS WAS PUT TO THE ASSESSEE, THE ASSESSEE VIDE LETTER DATED 25.1.2 006 STATED AS UNDER:- I AM GETTING SHARE OF RENTAL INCOME OF RS.3,19,354 /- AS RENT FOR JAN. TO MARCH 2003 AND THAT THE SAME WAS NOT DECLAR ED BY ME IN THE RETURN OF INCOME. THE ABOVE FIGURE OF RS.3,19,3 54 IS THE TOTAL RENT AND MY SHARE HAS TO BE RESTRICTED TO 5% OF THE SAID AMOUNT. 13. THE AO AFTER CONSIDERING THE ABOVE REPLY OF THE ASSESSEE WORKED OUT THE RENTAL INCOME ON THE BASIS OF GROSS ANNUAL VALUE OF THE PROPERTY AS UNDER:- GROSS ANNUAL VALUE OF THE PROPERTY RS.18,50,226 (RS.3,19,354/63 DAYS X 365 DAYS) LESS: MUNICIPAL TAXES PAID RS. 90,182 ----------------- TOTAL RS.17,60,044 LESS: 30% FOR REPAIRS & MAINTENANCE ALLOWED RS. 5,28,013 ------------------ NET ANNUAL VALUE RS.12,32,031 5% SHARE OF THE ASSESSEE 5% X 12,32,031 = RS. 61,602 THIS INCOME OF Q 61,602 WAS BROUGHT TO TAX IN THE HANDS OF THE ASSE SSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ITA NO.666/BANG/10 PAGE 7 OF 9 14. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT( A), WHO CONFIRMED THE ACTION OF THE AO BY OBSERVING IN PARA 4.4 OF THE IM PUGNED ORDER, WHICH IS REPRODUCED VERBATIM AS UNDER:- 4.4 I HAVE VERIFIED THE FACTS AVAILABLE ON RECORD . THE APPELLANT HAS NOT FURNISHED FURTHER EVIDENCE TO SHOW THAT THE ADDITION ON ACCOUNT OF HOUSE PROPERTY INCOME IS NOT CORRECT, IT IS OBSERVED THAT THE APPELLANT AND OTHER CO-OWNERS ARE RECEIVIN G RENTAL INCOME AGGREGATING TO RS.1,73,79,600/- (GROSS) FROM SRINIVASA COMPLEX BEARING NO.79/2 TO 79/6. ENQUIRIES REVEAL T HAT THE SALES TAX DEPARTMENT IS PAYING RENT FOR THE PREMISES NO.7 9/1 AND THE APPELLANT HAS ALSO ADMITTED THIS FACT VIDE HIS LETT ER DATED 25/1/2006. THUS, I DO NOT FIND INFIRMITIES IN THE A OS FINDINGS. THEREFORE, THE ADDITION OF RS.61 ,602/- IS CONFIRME D. 15. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SHOWN THE INCOME IN QUESTION WHILE FURNISHING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, REFERENCE WAS MADE TO PAGES 2 & 3 OF THE ASSESSEES COMPILATION, WHICH ARE COPIES OF THE STATEMENT OF T OTAL INCOME OF THE ASSESSEE AND COMPUTATION OF INCOME FROM HOUSE PROPE RTY RESPECTIVELY. IT WAS FURTHER STATED THAT THE ASSESSEE HAD SHOWN THE INCOME IN THE SUBSEQUENT YEAR WHEN THE AMOUNT WAS RECEIVED, SO TH ERE WAS NO JUSTIFICATION IN MAKING THE ADDITION FOR THE YEAR U NDER CONSIDERATION. 16. IN HIS RIVAL SUBMISSIONS, THE LD. DR STRONGLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E ASSESSEE HIMSELF HAD ADMITTED THAT THE RENTAL INCOME HAS ACCRUED, THEREF ORE THE ADDITION WAS RIGHTLY MADE. IT WAS FURTHER SUBMITTED THAT THE IN COME ACCRUED OR RECEIVED FROM THE HOUSE PROPERTY WAS TO BE SHOWN AS INCOME, BUT THE ASSESSEE DID ITA NO.666/BANG/10 PAGE 8 OF 9 NOT DISCLOSE THE INCOME ALTHOUGH IT ACCRUED TO HIM, THEREFORE THE ADDITION WAS RIGHTLY CONFIRMED BY THE LD. CIT(A). 17. IN THE REJOINDER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INCOME WAS SHOWN WHEN IT WAS RECEIVED ON SETTLEMENT WITH THE TENANT IN THE MONTH OF FEBRUARY, 2004. THEREFORE THE LD. CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO. 18. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE P RESENT CASE, IT IS NOTICED THAT THE ASSESSEE VIDE LETTER DATED 30.12.2005 PLAC ED AT PAGE 8 OF THE ASSESSEES COMPILATION INFORMED THE AO THAT THE REN T WAS SETTLED BY THE TENANT DURING FEBRUARY, 2004, SO IT WAS NOT DECLARE D IN THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE CLAIM OF THE ASSESSEE IS THAT THE INCOME WHICH WAS RECEIVED DURING THE YEAR WAS OFFER ED FOR TAXATION, THEREFORE WE DEEM IT APPROPRIATE TO SET ASIDE THE I SSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THIS CONT ENTION OF THE ASSESSEE THAT INCOME IN QUESTION WAS RECEIVED SUBSEQUENTLY I.E., BEYOND THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND WAS ACCORDINGLY OFFERED FOR TAXATION IN THE SUCCEEDING YEAR. THE A SSESSING OFFICER IS DIRECTED TO DECIDE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 19. GROUND NO.4 RELATES TO CHARGING OF INTEREST U/S . 234A AND 234-B OF THE ACT, IT WAS THE COMMON CONTENTION OF BOTH THE P ARTIES THAT THIS ISSUE IS CONSEQUENTIAL IN NATURE. IT IS ORDERED ACCORDINGL Y. ITA NO.666/BANG/10 PAGE 9 OF 9 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF APRIL, 2012. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 25 TH APRIL , 2012. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.