Sri.Mohammed Ashraf U.K., Kasargode V. The ITO, Kasargode

ITA 677/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73850 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 03-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 05-11-2013
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Section: 133A; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 677/COCH/2013 ASSESSMENT YEAR : 2004-05 SHRI MOHAMMED ASHRAF U.K., PROPRIETOR, U.K.TRADINGS, N.H. ROAD, UPPALA, KASARAGOD-671 322. [PAN:AFOPA 8590A] VS. THE INCOME TAX OFFICER, WARD-1, KASARAGOD. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT ) ASSESSEE BY SHRI DIVYA RAVINDRAN, ADV. REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 03/02/2014 DATE OF PRONOUNCEMENT 07/02/2014 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 08- 08-2013 PASSED BY LD CIT(A), KOZHIKODE AND IT RELAT ES TO THE ASSESSMENT YEAR 2004-2005. 2. THE ASSESSEE IS ASSAILING THE DECISION OF THE LD . CIT(A) IN CONFIRMING THE ADDITION OF RS. 3,24,500/- PERTAINING TO OPENING CA SH BALANCE DECLARED BY THE ASSESSEE IN THE CASH FLOW STATEMENT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE STARTED THE BUSINESS OF TRADING IN TILES AND GRANITES IN SE PTEMBER 2004. SINCE HE DID NOT FILE HIS RETURN OF INCOME, THE REVENUE CARRIED OUT A SURVEY OPERATION U/S. 133A OF THE ACT. DURING THE COURSE OF SURVEY PROCEEDINGS A ND ALSO DURING THE COURSE OF I.T.A. NO. 677/COCH/2013 2 ASSESSMENT PROCEEDINGS RELATING TO ASSESSMENT YEAR 2006-07, IT WAS NOTICED THAT THE ASSESSEE HAD MADE INVESTMENTS DURING THE FINANC IAL YEAR 2003-04 RELATING TO THE ASSESSMENT YEAR 2004-05. HENCE, THE ASSESSING O FFICER REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT. 4. BEFORE THE ASSESSING OFFICER, THE ASSESSEE FILED A CASH FLOW STATEMENT FOR THE YEAR ENDING 31-03-2004, WHEREIN HE DECLARED THE OPENING CASH BALANCE AT RS. 3,24,500/-. IN SUPPORT OF THE OPENING CASH BAL ANCE, THE ASSESSEE FILED CASH FLOW STATEMENTS FROM 01-04-1996 ONWARDS. IT WAS SE EN THAT THE ASSESSEE HAD DECLARED AGRICULTURAL INCOME, COMMISSION BROKERAGE INCOME AND LOAN FROM HIS FATHER SHRI U.K. ABDUL RAHIMAN IN THE PRIOR YEARS. BEFORE THE ASSESSING OFFICER, THE ASSESSEE ADMITTED THAT HE DID NOT POSSESS ANY A GRICULTURAL LAND AND HENCE, THE ASSESSING OFFICER REJECTED THE CLAIM OF AVAILAB ILITY OF AGRICULTURAL INCOME. THE AO ALSO REJECTED THE CLAIM OF AVAILABILITY OF C OMMISSION INCOME ON THE REASONING THAT THE ASSESSEE DID NOT FILE RETURNS OF INCOME IN THE EARLIER YEARS NOR HE COULD PROVE THE SOURCES FROM WHICH THE COMMISSIO N INCOME WAS RECEIVED. THE ASSESSING OFFICER ALSO OPINED THAT THE INCOME E ARNED BY THE ASSESSEE MIGHT HAVE BEEN UTILIZED FOR MEETING PERSONAL EXPENSES. THE LOAN CLAIMED TO HAVE BEEN RECEIVED FROM THE FATHER OF THE ASSESSEE FROM 1997 TO 1999 AGGREGATING TO RS.4,49,500/- WAS SEEN UTILIZED FOR GIVING ADVANCE FOR PURCHASE OF A BUILDING. ACCORDINGLY, THE ASSESSING OFFICER TOOK THE VIEW TH AT THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM OF AVAILABILITY OF OPENING C ASH BALANCE OF RS. 3,24,500/- AND ACCORDINGLY, THE ASSESSED THE SAME AS THE INCOM E OF THE ASSESSEE. THE LD. CIT(A) ALSO CONFIRMED THE ABOVE SAID ADDITION AND H ENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. THE CONTENTION OF THE LD. AR WAS THAT THOUGH THE ASSESSEE HAD STARTED THE BUSINESS ONLY IN THE YEAR 2004, YET HE HAD TAKE N STEPS FOR SETTING UP THE BUSINESS MUCH EARLIER. ACCORDINGLY, IT WAS CONTEND ED THAT THERE WAS NO REASON TO SUSPECT ABOUT THE COMMISSION AGENCY BUSINESS OF THE ASSESSEE AND ALSO TO I.T.A. NO. 677/COCH/2013 3 REJECT THE CLAIM OF AVAILABILITY OF COMMISSION INCO ME. ACCORDINGLY, THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE AC CEPTED THE AVAILABILITY OF OPENING CASH BALANCE BY CONSIDERING THE ACTIVITIES CARRIED ON BY THE ASSESSEE. 6. ON THE OTHER HAND, THE LD. DR PLACED STRONG RELI ANCE ON THE OBSERVATIONS MADE BY THE ASSESSING OFFICER AND SUBMITTED THAT TH E ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM OF AVAILABILITY OF OPENING C ASH BALANCE WITH SATISFACTORY EXPLANATIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF AVAILABILITY OF AGRICULTURAL INCOME FOR WANT OF EVIDENCES SHOWING P OSSESSION OF AGRICULTURAL LAND. SIMILARLY, HE HAS ALSO REJECTED THE CLAIM OF AVAILABILITY OF COMMISSION INCOME ON THE REASONING THAT THE ASSESSEE DID NOT F ILE RETURN OF INCOME FOR THE EARLIER YEARS NOR HE COULD FURNISH THE DETAILS OF S OURCES FROM WHICH THE COMMISSION INCOME WAS RECEIVED. THE ASSESSING OFFIC ER HAS ALSO TAKEN THE VIEW THAT THE INCOME INITIALLY EARNED BY THE ASSESSEE MI GHT HAVE BEEN UTILIZED FOR MEETING THE PERSONAL EXPENSES. ACCORDINGLY, THE AS SESSING OFFICER HAS REJECTED THE CLAIM OF AVAILABILITY OF OPENING CASH BALANCE O F RS. 3,24,500/-. 8. HOWEVER, IT IS AN ADMITTED FACT THAT THE ASS ESSEE IS DOING THE BUSINESS OF TILES AND MARBLES AND FURTHER, HE HAS MADE INVESTME NT IN A GRANITE FACTORY ALSO. THESE FACTS CLEARLY DEMONSTRATE THAT THE ASSESSEE H AS BEEN INDULGING IN SOME KIND OF BUSINESS ACTIVITY, MEANING THEREBY THAT THE RE IS A POSSIBILITY THAT THE ASSESSEE MIGHT HAVE DONE SOME KIND OF BUSINESS ACTI VITIES IN THE EARLIER YEARS ALSO. WE NOTICE THAT THE ASSESSING OFFICER HAS REJ ECTED THE CLAIM OF AVAILABILITY OF COMMISSION INCOME ONLY FOR THE REASON THAT THE ASSE SSEE DID NOT FILE RETURN OF INCOME ALONG WITH THE PROOF OF EARNING COMMISSION I NCOME. IN OUR VIEW, THE NON-FILING OF RETURN OF INCOME CANNOT BE A REASON T O NEGATE THE CLAIM OF AVAILABILITY OF INCOME IN THE EARLIER YEARS. THOUG H THERE IS MERIT IN THE I.T.A. NO. 677/COCH/2013 4 CONTENTIONS OF THE LD. DR THAT THE INCOME EARNED BY THE ASSESSEE IN THE EARLIER YEARS MIGHT HAVE BEEN SPENT FOR MEETING PERSONAL EX PENSES, YET, IN OUR VIEW, IT MAY NOT BE RIGHT TO REJECT THE CLAIM OF AVAILABILIT Y OF OPENING CASH BALANCE ALTOGETHER, FOR THE SIMPLE REASON THAT THE ASSESSEE WOULD NOT HAVE GOT A MOTIVATION TO START A NEW BUSINESS, UNLESS HE HAS S OME CASH BALANCE IN HIS POSSESSION. WE ALSO NOTICE THAT THE ASSESSING OFFI CER HAS ASSESSED THE COMMISSION INCOME OF RS.36,000/- DECLARED BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION. AT THE SAME TIME, IT IS AN AD MITTED FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM OF AVAILABILITY OF OPENING CASH BALANCE WITH ANY SUPPORTING MATERIAL, EXCEPT THE CASH FLOW STATEMENT S PREPARED FOR EARLIER YEARS. UNDER THESE FACTS AND CIRCUMSTANCES, IN OUR VIEW, I T WOULD BE REASONABLE, IF THE OPENING CASH BALANCE IS ESTIMATED, VIA MEDIA, AT AN AMOUNT OF RS. 2,50,000/- AND IN OUR VIEW IT WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT TH E ASSESSING OFFICER TO ADOPT THE OPENING CASH BALANCE AT RS. 2,50,000/- AND MODIFY T HE ASSESSMENT ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 07-02-2014. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 7TH FEBRUARY, 2014 GJ I.T.A. NO. 677/COCH/2013 5 COPY TO: 1. SHRI MOHAMMED ASHRAF U.K., PROPRIETOR, U.K.TRADI NGS, N.H. ROAD, UPPALA, KASARAGOD-671 322. 2. THE INCOME TAX OFFICER, WARD-1, KASARAGOD. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-, KOZHIK ODE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN