SUBHASH AGARWAL, MUMBAI V. ITO 20(3)(3), MUMBAI

ITA 7011/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55752 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 31-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 08-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RATAN SAMUAK
• Keywords: Unexplained cash credit; Capital asset; Proportionate interest
• Section: 133A; 68; 27; 6

Judgement Text

1 SHRI SUBHASH AGARWAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI B RAMAKOTAIAH, AM & SHRI VIJAY PAL RAO , JM ITA NO. 7011/MUM/2010 (ASST YEAR 2005-06 ) SHRI SUBHASH AGARWAL 4/6 SHER-E-PUNJAB SOCIETY MAHAKALI CAVES ROAD ANDHERI (E) MUMBAI 400 093 VS THE INCOME TAX OFFICER WARD 20(3)(2), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AGCPA9183E ASSESSEE BY SHRI RATAN SAMUAK REVENUE BY SH G P TGRIVEDI DT.OF HEARING 1 ST NOV 2011 DT OF PRONOUNCEMENT 4 TH , NOV 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.8.2010 OF THE CIT(A) FOR THE AY 2005-06. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: I. THE RESPONDENT ERRED IN DISALLOWING THE CLAIM OF ANNUAL MAINTENANCE CHARGE MADE TO HIS MOTHER AMOUNTING TO RS. 1 LAC WH ICH IS SQUARELY FALLING WITHIN THE AMBIT OF THE DEDUCTION U/S 24. II) THE RESPONDENT ERRED IN DISALLOWING THE EXPENSES CLAIMED MADE IN THE P&L ACCOUNT THOUGH PERSONAL EXPENDITURES ARE SEPARATELY D EBITED TO THE CAPITAL ACCOUNT. III) THE RESPONDENT ERRED DIN TREATING CASH LOAN OF RS. 10 LACS AND INTEREST ON CASH LOAN TO THE EXTENT OF RS. 90,000/- MECHANICALL Y WITHOUT HAVING SUFFICIENT EVIDENCES ON RECORD,. IV) THE RESPONDENT ERRED IN ALLOWING COST OF IMPROVE MENT ONLY TO THE EXTENT OF RS. 40,385/- AGAINST RS. 3,38,000/- FOR WHICH THE A PPELLANT HAD SUBMITTED NECESSARY DOCUMENTARY EVIDENCE TO THE EXTENT OF RS. 1 ,60,000/- 2 SHRI SUBHASH AGARWAL 3 AT THE TIME OF HEARING, THE LD AR OF THE ASSESSEE HAS STATED THAT THE ASSESSEE DOES NOT PRESS GROUND NOS 1 & 2 AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD DR HAS NO OBJECTION, IF THE GROUND NOS 1 & 2 ARE DISMISSED AS NOT PRESSED. ACCORDINGLY, GROUND NOS 1 & 2 ARE DISMISSED BEING N OT PRESSED. 4 GROUND NO.3 IS REGARDING CASH LOAN ADVANCED OF RS . 10 LACS AND INTEREST THERE ON OF RS. 90,000/- AS UNEXPLAINED CASH CREDIT U/S 6 8 OF THE I T ACT. 5 THE ASSESSING OFFICER HAS RECEIVED AN INFORMATION THAT DURING THE COURSE OF SURVEY ACTION U/S 133A IN THE CASE OF ONE MR NARAYA NA GOWDA, DIRECTOR OF M/S SAI SHAKTI DEVELOPERS PVT LTD., A TRANSACTION OF ADVANC E OF CASH LOAN OF RS. 10 LACS CAME INTO LIGHT. THE ASSESSING OFFICER ASKED THE A SSESSEE AS TO WHY THE LOAN OF RS. 10 LACS GIVEN TO MR NARAYANA GOWDA SHOULD NOT B E TREATED AS CASH CREDIT U/S 68 OF THE ACT. THE ASSESSEE, IN REPLY, HAS SUBMITTED T HAT NO CASH LOAN HAS BEEN ADVANCED BY THE ASSESSEE; EVEN IT WAS NOT ADMITTED BY THE SAID MR NARAYANA GOWDA IN HIS SURVEY PROCEEDINGS. IT WAS CONTENDED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT AFTER THE SURVEY PROCEEDINGS , THE ASSESSMENT WAS CONCLUDED IN THE CASE OF MR NARAYANA GOWDA AND PENALTY U/S 27 1D WAS LEVIED. THE PROCEEDINGS ARISING FROM PENALTY U/S 271D WERE PEND ING BEFORE THE APPELLATE AUTHORITIES. 5.1 THE MAIN CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT MR NARAYANA GOWDA DENIED ANY SUCH CASH LOAN OF RS. 10 LACS FROM THE ASSESSEE. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE CASH LOAN OF RS. 10 LACS ADVANCED TO MR NARAYANA GO WDA IS AN UNEXPLAINED CASH CREDIT U/S 68 AND ACCORDINGLY, ADDED TO THE TOTAL I NCOME OF THE ASSESSEE. THE ASSESSING OFFICER ALSO ADDED PROPORTIONATE INTEREST @ 18% ON THE SAID AMOUNT FOR A PERIOD OF SIX MONTHS SINCE THE LOAN WAS ALLEGEDLY G IVEN ON 25.9.2004. 3 SHRI SUBHASH AGARWAL 5.2 ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION MA DE BY THE ASSESSING OFFICER . 6 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ADDITION MADE WAS ON THE BASIS OF SURVEY ACTION IN THE CASE OF MR NARAYANA GOWDA WHEREAS NO ENTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WAS F OUND IN RESPECT OF THE SAID ADVANCE OF LOAN. HE HAS FURTHER SUBMITTED THAT THE PENALTY LEVIED IN THE CASE OF MR NARAYANA GOWDA HAS ALREADY BEEN CANCELLED BY THE T RIBUNAL; THEREFORE, THE ADDITION MADE SOLELY ON THE BASIS OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY IS NOT SUSTAINABLE. HE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION WITHOUT ANY MATERIAL TO WARRANT S UCH ADDITION. 6.1 ON THE OTHER HAND, THE LD DR HAS RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT EVIDENCE SURFACED DU RING THE SURVEY ACTION IN THE CASE OF MR NARAYANA GOWDA, WHICH WAS DULY ADMITTED BY MR NARAYANA GOWDA; THEREFORE, THE ADDITION HAS BEEN MADE ON THE BASIS OF THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 7 WE HAVE CONSIDERED THE RIVAL CONTENTION AND PERUS ED THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE CANCELLATION OF THE PENAL TY U/S 271D BY THE TRIBUNAL IS CONCERNED, THE SAME CANNOT HAVE A BEARING ON THE IS SUE OF ADDITION MADE IN RESPECT OF ALLEGED CASH LOAN ADVANCED BY THE ASSESS EE TO MR NARAYANA GOWDA. THE ASSESSING OFFICER PROPOSED TO MAKE THE ADDITION FOR THE ALLEGED CASH LOAN OF RS. 10 LACS ON THE BASIS OF SOME INTIMATION RECEIVE D FROM THE ASSESSING OFFICER OF MR NARAYANA GOWDA AND AS A RESULT OF SURVEY ACTION, IN THE CASE OF MR NARAYANA GOWDA, A DIRECTOR OF M/S SAI SHAKTI DEVELOPERS PVT LTD. NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS DISCUSSED ANY MATERIAL OR EVEN T HE STATEMENT OF MR NARAYANA GOWDA RECORDED U/S 133A; BUT THE ADDITION WAS MADE SOLELY ON THE BASIS OF INTIMATION RECEIVED BY THE ASSESSING OFFICER. EVEN , NO RECORD HAS BEEN FILED BEFORE 4 SHRI SUBHASH AGARWAL US RELEVANT TO THE ISSUE OF ADVANCE OF CASH LOAN OF RS. 10 LACS. THUS, THE ISSUE IS BASED PURELY ON FACTS AND THEREFORE, IN THE ABSENCE OF RELEVANT MATERIAL AND PARTICULARLY, THE ALLEGED CHEQUE FOUND DURING THE S URVEY AND STATEMENT OF NARAYANA GOWDA, DURING THE COURSE OF SURVEY ACTION, IT IS NOT POSSIBLE TO GIVE A FINDING ON THIS ISSUE. SINCE M/S SAI SHAKTI DEVELO PERS PVT LTD A SISTER CONCERN OF THE ASSESSEE AND OWNED BY THE FAMILY MEMBERS OF THE AS SESSEE AND THE ASSESSEE HAS ACCEPTED THE ADVANCEMENT OF LOAN OF RS. 5,20,000 A ND RS. 1,50,000 TO HIS SON AMIT AGARWAL AND WIFE MRS AGARWAL RESPECTIVELY. THEREFOR E, M/S SAI SHAKTI DEVELOPERS PVT LTD., IS NOT A STRANGER BUT A RELATED CONCERN OF TH E ASSESSEE. IN VIEW OF THE FACTS AND CIRCUMSTANCES AND PARTICULARLY IN THE ABSENCE O F RELEVANT MATERIAL ON RECORD, THE ISSUE IS SET ASIDE THE TO RECORD OF THE ASSESSI NG OFFICER FOR DECIDING THE SAME AFRESH AFTER GIVING ALL THE DETAILS OF THE RELEVANT MATERIAL IN SUPPORT OF THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE SA ID CASH LOAN OF RS. 10 LACS. 8 GROUND NO.4 IS REGARDING THE COST OF IMPROVEMENT. 9 THE ASSESSEE CLAIMED RS. 3,38,000/- AS IMPROVEMEN T CHARGES IN RESPECT OF THE PREMISES. THE SAID EXPENDITURE OF IMPROVEMENT WAS C LAIMED TO HAVE BEEN INCURRED IN THE YEAR 1989 AND INDEXATION COST BENEFIT FOR TH E PURPOSE OF COMPUTING CAPITAL GAIN ON SUCH AMOUNT OF RS. 3,38,000/- WAS ALSO CLA IMED BY THE ASSESSEE. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE WAS ABL E TO FURNISH THE EVIDENCE TO THE EXTENT OF RS. 1,60,000/- AND THE ASSESSEE DID NOT F URNISH THE ENTIRE EVIDENCES OF RS. 3,38,000/-. ACCORDINGLY, THE ASSESSING OFFICER DISA LLOWED THE ENTIRE COST OF IMPROVEMENT CHARGES AND CONSIDERED ONLY RS. 40,385/ - AS COST OF AMOUNT INCURRED ON SALE OF CAPITAL ASSET, WHICH WAS DISCLOSED BY TH E ASSESSEE IN THE BOOKS OF ACCOUNT. 9.1 ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF T HE ASSESSING OFFICER . 5 SHRI SUBHASH AGARWAL 10 BEFORE US, THE LD AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS PRODUCED THE EVIDENCE TO THE EXTENT OF RS. 1,60,000/- FOR THE CO ST OF IMPROVEMENT OF THE CAPITAL ASSET, THEN THE ASSESSING OFFICER SHOULD HAVE ALLO WED THE SAME AND THE BENEFIT OF INDEXATION COST. 10.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T WHEN THE ASSESSEE HAS NOT SHOWN COST OF IMPROVEMENT IN THE BOOKS OF ACCOUNT, THEN THE ASSESSING OFFICER HAS RIGHTLY ALLOW THE CLAIM OF THE ASSESSEE TO THE EX TENT OF COST OF IMPROVEMENT WHICH WAS DISCLOSED IN THE BOOKS OF ACCOUNT. 10.2 IN REBUTTAL, THE LD AR OF THE ASSESSEE HAS SUB MITTED THAT SINCE THE CAPITAL ASSET IN QUESTION WAS A PERSONAL PROPERTY AND NOT A BUSINESS ASSET AND THE COST OF IMPROVEMENT INCURRED DURING THE YEAR 1989 WAS THERE FORE, NOT SHOWN IN THE BOOKS OF ACCOUNT, WHEN THE ASSESSEE IS HAVING PROOF OF COST OF IMPROVEMENT, THE BENEFIT OF THE SAME SHOULD BE ALLOWED TO THE ASSESSEE WHILE CO MPUTING THE CAPITAL GAIN. 11 AFTER CONSIDERING THE RIVAL CONTENTION AND THE R ELEVANT MATERIAL ON RECORD, WE NOTE THAT SINCE THE PROPERTY IN QUESTION WAS NOT A BUSINESS ASSET; THEREFORE, THE ASSESSEE HAS NOT RECORDED THE COST OF IMPROVEMENT I N THE BOOKS OF ACCOUNT. HOWEVER, THE ASSESSEE HAS NOT PLACED ANY RECORD BEF ORE US TO ESTABLISH THAT AT LEAST RS. 1,60,000/- WAS INCURRED FOR THE COST OF IMPROVE MENT WHICH WAS PRODUCED BEFORE THE ASSESSING OFFICER. 11.1 ON PRINCIPLE, WE ARE OF THE VIEW THAT IF THE A SSESSEE ESTABLISHES THE ACTUAL INCURRENCE OF THE EXPENSES ON IMPROVEMENT OF THE CA PITAL ASSET, THEN THE BENEFIT OF THE SAME SHOULD BE GIVEN TO THE ASSESSEE TO THAT EX TENT. SINCE THE RELEVANT EVIDENCE IS NOT BEFORE US; THEREFORE, WE SET ASIDE TO THE RECORD OF THE ASSESSING 6 SHRI SUBHASH AGARWAL OFFICER TO CONSIDER THE ISSUE OF COST OF IMPROVEMEN T TO THE EXTENT OF THE AMOUNT PROVED BY THE ASSESSEE BY PRODUCING THE RELEVANT EV IDENCE. 12 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 4 TH , DAY OF NOV 2011. SD/ SD/- ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 4 TH ,NOV 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI