Madhuri Hingorani Pradeep , Bangalore V. Income Tax Officer Ward-1(2)(4), Bangalore

ITA 773/BANG/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4568 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 15-10-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 12-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Keywords: Business income; Depreciation; Opportunity of being heard; Unabsorbed depreciation; Set aside
• Section: 133A; 139(1); 44AB; 22

Judgement Text

ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.773/BANG/2019 ASSESSMENT YEAR: 2011-12 MADHURI HINGORANI PRADEEP G-1, PROMENADE, 763 NANDIDURGA ROAD, BENSON TOWN BANGALORE PAN NO : AFUPP6959G VS. ITO WARD-1(2)(4) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRIDHAR, A.R. RESPONDENT BY : SMT. R. PREMI, D.R. DATE OF HEARING : 15.10.2020 DATE OF PRONOUNCEMENT : 22.10.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 20-02-2019 PASSED BY LD CIT(A)-1, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2011-12. 2. THE GROUNDS URGED BY THE ASSESSEE RELATE TO T HE FOLLOWING ISSUES:- (A) ADDITION OF RS.60.00 LAKHS PERTAINING TO SURREN DER MADE DURING THE COURSE OF SURVEY. (B) NON-GRANTING OF SET OFF OF BROUGHT FORWARD LOSS AND DEPRECIATION. ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 2 OF 8 3. THE ASSESSEE WAS EARLIER RUNNING A GARMENT MA NUFACTURING UNIT UNDER THE NAME AND STYLE M/S MSR CLOTHING COMPANY. IT WAS DISCONTINUED IN 2006. AFTER THAT, THE ASSESSEE WAS IN EMPLOYMENT FOR SOME TIME. SUBSEQUENTLY, THE ASSESSEE STARTED A SPA AND BEAUTY PARLOUR BY NAME M/S ENERGIE INC IN OCTOBER, 2009. 4. THE REVENUE CARRIED OUT SURVEY OPERATIONS U/ S 133A OF THE ACT IN M/S ENERGIE INC ON 27-09-2010. A STATEMENT UNDE R OATH WAS TAKEN DURING THE COURSE OF SURVEY. IN THE STATEMEN T, THE ASSESSEE ADMITTED THAT SHE DID NOT MAINTAIN BOOKS OF ACCOUNT S. SHE ALSO SUBMITTED THAT SHE HAS MAINTAINED RECEIPT BOOKS, BU T NOT RECORDED ALL THE TRANSACTIONS. FINALLY, SHE SURRENDERED A S UM OF RS.60.00 LAKHS AS ADDITIONAL INCOME. SUBSEQUENTLY, THE ASSE SSEE HAS CLAIMED TO HAVE FILED A LETTER DATE 11 TH OCTOBER 2010 GIVING VARIOUS DETAILS RELATING TO HER INCOME AND INVESTMENTS. IN THE SAI D LETTER, THE INCOME OF THE YEAR WAS ESTIMATED AT RS.35.68 LAKHS. IT WA S ALSO STATED THAT THE BROUGHT WARD LOSSES TO THE TUNE OF RS.33.94 LAK HS ARE AVAILABLE FOR SET OFF AND HENCE NO SIGNIFICANT TAXABLE INCOME SHALL BE AVAILABLE FOR AY 2011-12. 5. SUBSEQUENTLY, THE ASSESSEE FILED HER RETURN O F INCOME ON 29-09- 2011. IN THE RETURN OF INCOME SHE DECLARED HER BUS INESS INCOME AT RS.26,69,449/- AND SET OFF THE SAME AGAINST BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. ACCORDINGLY THE TOTAL INCOME WAS DECLARED AT NIL. THE ASSESSEE DID NOT OFFER ADDITI ONAL INCOME OF RS.60.00 LAKHS IN THE RETURN OF INCOME. 6. THE ASSESSING OFFICER REJECTED THE CLAIM FOR SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION ON THE R EASONING THAT THE SAID CLAIM WAS REJECTED IN AY 2008-09 ON THE GR OUND THAT THE ASSESSEE HAS FAILED TO PRODUCE PROOFS IN SUPPORT OF THE SAID CLAIM. ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 3 OF 8 THE LD A.R SUBMITTED THAT THE ASSESSEE HAD CHALLENG ED THE SAID REJECTION BY FILING APPEAL BEFORE LD CIT(A) AND IT IS PENDING BEFORE HIM. SINCE THE ASSESSEE DID NOT OFFER THE ADDITION AL INCOME OF RS.60.00 LAKHS SURRENDERED DURING THE COURSE OF SUR VEY, THE AO ADDED THE SAME TO THE BUSINESS INCOME REPORTED BY T HE ASSESSEE. 7. IN THE APPELLATE PROCEEDINGS BEFORE LD CIT(A) , THE ASSESSEE MADE VARIOUS SUBMISSIONS AND HENCE THE LD CIT(A) CALLED FOR A REMAND REPORT. THE ASSESSEE ALSO REPLIED TO THE REMAND RE PORT. WITH REGARD TO CLAIM OF SET OFF OF BROUGHT FORWARD LOSSES AND U NABSORBED DEPRECIATION, THE LD CIT(A) UPHELD THE VIEW TAKEN B Y AO. WITH REGARD TO THE LETTER DATED 11.10.2010 CLAIMED TO HAVE BEEN FILED BEFORE THE AO, THE LD CIT(A) NOTICED THAT THE SAME IS UNSIGNED AND FURTHER THERE IS NO PROOF OF FURNISHING THE SAME TO THE ITO. ACC ORDINGLY HE REFUSED TO TAKE COGNIZANCE OF THE SAME. WITH REGARD TO THE BUSINESS INCOME, THE LD CIT(A) SUBSTITUTED THE BUSINESS INCOME OF RS .26,69,449/- DECLARED BY THE ASSESSEE WITH THE AMOUNT OF RS.5.00 LAKHS AND CONFIRMED THE ADDITION OF RS.60.00 LAKHS RELATING T O ADDITIONAL INCOME SURRENDERED DURING THE COURSE OF SURVEY OPER ATIONS. 8. THE MAIN CONTENTION OF THE LD A.R WAS THAT T HE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AT THE TIME OF SURVEY AND HENCE SHE SURRENDERED THE ADDITIONAL INCOME OF RS.60.00 LAKHS . HE SUBMITTED THAT THE ASSESSEE MADE THE SAID DISCLOSURE UNDER TH E BELIEF THAT HER INCOME FOR THE FINANCIAL YEAR 2010-11 WOULD BE AROU ND RS.60.00 LAKHS. HOWEVER, SUBSEQUENT TO THE SURVEY OPERATION S ONLY, SHE COULD ASCERTAIN FACTUAL ASPECTS. ACCORDINGLY, SHE FILED A LETTER DATED 11 TH OCTOBER 2010 BEFORE THE ASSESSING OFFICER. THE SAI D LETTER WAS HANDED OVER TO MR. RAMACHANDRA ITO PERSONALLY. IN THAT LE TTER, THE ASSESSEE HAS GIVEN ESTIMATES OF HER INCOME AND ALSO DETAILS OF BROUGHT FORWARD LOSSES. IN THE MEAN TIME, THE BUSINESS PREMISES O F THE ASSESSEE WAS ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 4 OF 8 SEALED BY THE MUNICIPAL CORPORATION PEOPLE AND ACCO RDINGLY BUSINESS WAS DISRUPTED. THE LD A.R SUBMITTED THAT THE ASSESS EE HAS SUBSEQUENTLY MAINTAINED THE BOOKS OF ACCOUNTS AND T HE SAME HAS ALSO BEEN AUDITED. ACCORDINGLY, SHE HAS FILED HER RETURN OF INCOME. ACCORDINGLY, HE SUBMITTED THAT THERE WAS NO NECESSI TY TO SEPARATELY ADD THE AMOUNT OF RS.60.00 LAKHS SURRENDERED DURING THE COURSE OF SURVEY OPERATION, SINCE IT WAS ONLY AN ESTIMATE. W ITH REGARD TO THE CLAIM OF SET OFF OF BROUGHT FORWARD LOSSES AND UNAB SORBED DEPRECIATION, THE LD A.R SUBMITTED THAT THE ASSESSE E HAS FURNISHED COPIES OF IT ACKNOWLEDGEMENTS AND RETURNS OF INCOME OF EARLIER YEARS. FILING OF RETURNS OF INCOME WITHIN DUE DATES IS SUF FICIENT TO CLAIM SET OFF. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE TA X AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE CLAIM. 9. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS NOT PROVED THAT THE LETTER DATED 11.10.2010 WAS FIL ED BEFORE THE AO. HENCE THE LD CIT(A) HAS REJECTED THE SAME BY MAKING FOLLOWING OBSERVATIONS:- HOWEVER, THE APPELLANT HAS RELIED ON THE LETTER S UPPOSEDLY FILED BEFORE THE AO ON 11.10.2010. HOWEVER, THERE IS NO MENTION OF THE SAID LETTER IN ASSESSMENT ORDER AND OTHER CONNECTED PROCEEDINGS AND THERE IS NO OTHER AUTHENT IC EVIDENCE TO SHOW CASE AS TO THAT THE SAID LETTER WA S INDEED FILED BEFORE THE AO DURING THE COURSE OF SURVEY PROCEEDIN GS. THE COPY OF THE LETTER PRODUCED NOW IS ALSO AN UNSIGNED COPY, WITHOUT ANY ACKNOWLEDGEMENT OF FILING THE SAME BEFO RE THE AO. HENCE, THE AUTHENTICITY OF THE SAID LETTER AS HAVIN G BEEN FILED BEFORE THE AO WITHIN 15 DAYS OF SURVEY IS DOUBTED. FURTHER, AS MENTIONED IN THIS LETTER, THE APPELLANT HAS WORKED OUT (REVERSAL OF INCOME) REVISED LOSS FROM THE PROPRIETARY CONCER N, BASED ON THE CREDITS APPEARING IN THE BANKS. HOWEVER, IN TH E LIGHT OF THE ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 5 OF 8 BUSINESS IN WHICH THE APPELLANT IS INTO, RUNNING A SPA- GROOMING SERVICE CENTRE ETC., WHERE IN MAJORITY OF THE SALES/PAYMENTS ARE RECEIVED BY WAY OF CASH. HENCE, THE REVISED WORKINGS BASED ON THE BANK ENTRIES, CANNOT BE CONSIDERED AS REFLECTING THE TRUE STATEMENT OF AFFA IRS OF THE APPELLANT. THE LD D.R FURTHER SUBMITTED THAT THE ASSESSEE HAS SURRENDERED THE AMOUNT OF RS.60.00 LAKHS AS ADDITIONAL INCOME AND HENCE IT IS OVER AND ABOVE THE AMOUNT DECLARED IN THE BOOKS OF ACCOU NT. WITH REGARD TO THE CLAIM OF BROUGHT FORWARD LOSSES AND UNABSORB ED DEPRECIATION, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS NOT PROV ED THE SAID CLAIM. 10. WE HEARD THE PARTIES AND PERUSED THE RECORD . WE NOTICE THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNTS AT THE TIME, WHEN THE SURVEY TOOK PLACE. HOWEVER, THE RETURN OF INCO ME WAS FILED ON THE BASIS OF BOOKS OF ACCOUNTS MAINTAINED BY THE AS SESSEE. FROM THE PAPER BOOK, WE NOTICE THAT THE ASSESSEE HAS ALSO GO T HER ACCOUNTS AUDITED U/S 44AB OF THE ACT AND TAX AUDIT REPORT WA S ALSO FURNISHED ALONG WITH THE RETURN OF INCOME. 11. FROM THE LETTER DATED 11.10.2010 CLAIMED TO H AVE BEEN FILED BEFORE THE AO, IT APPEARS THAT THE ASSESSEE WAS UND ER THE IMPRESSION THAT THE AMOUNT OF RS.60.00 LAKHS REPRESENTED HER I NCOME FOR THE FY 2010-11 RELEVANT TO AY 2011-12. HOWEVER, THE TAX A UTHORITIES HAVE TAKEN THE VIEW THAT THE SAME REPRESENTED ADDITIONAL INCOME. WE HAVE EARLIER NOTICED THAT THE LD CIT(A) HAS DOUBTED THE CLAIM OF FILING OF LETTER ITSELF AND ACCORDINGLY REJECTED THE SAID LETTER FOR THE REASONS DISCUSSED IN HIS ORDER. WE NOTICE THAT THE ASSESS EE HAS NOT SPECIFICALLY RETRACTED FROM THE SURRENDER OF RS.60. 00 LAKHS MADE BY HER DURING THE COURSE OF SURVEY OPERATION. INSTEAD , SHE HAS ONLY ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 6 OF 8 ESTIMATED HER INCOME FOR THE FINANCIAL YEAR 1.4.201 0 TO 31.03.2011 (WHICH ESTIMATE HAS BEEN MADE ON 11.10.2010). HENC E, IN OUR VIEW, THE SAID LETTER MAY NOT BE OF ANY HELP TO THE ASSES SEE. 12. SUBSEQUENT TO THE SURVEY OPERATIONS, IT IS C LAIMED THAT THE ASSESSEES BUSINESS WAS DISRUPTED BY CLOSURE OF SHO P BY MUNICIPAL CORPORATION FOR ABOUT A MONTH. IT IS FURTHER SUBMI TTED THAT THE DISRUPTIONS CONTINUED IN ONE FORM OR OTHER. THE LD CIT(A) HAS ALSO RECOGNISED THIS FACT AND ACCORDINGLY, HE HAS ESTIMA TED THE INCOME AT RS.5.00 LAKHS AS AGAINST RS.26.69 LAKHS DECLARED BY THE ASSESSEE HERSELF. 13. BE THAT AS IT MAY, WE NOTICE THAT THE ASSESSE E HAS SUBSEQUENTLY MAINTAINED BOOKS OF ACCOUNTS AND GOT IT AUDITED ALS O. WE NOTICE THAT THE AO HAS NOT EXAMINED BOOKS OF ACCOUNTS AT ALL. I T IS A FACT THAT THE ASSESSEE HAS SURRENDERED THE INCOME DURING THE COUR SE OF SURVEY AND THE ASSESSEE HAS TRIED TO REBUT THE SAME BY FUR NISHING REGULAR BOOKS OF ACCOUNTS. HENCE, IN OUR VIEW, THE AO SHOU LD HAVE EXAMINED THE BOOKS OF ACCOUNTS AND SHOULD HAVE GIVEN PROPER REASONING AS TO WHY THE SURRENDERED AMOUNT OF RS.60.00 LAKHS IS STI LL LIABLE TO BE TAXED. 14. WE NOTICE THAT THE AO HAS ACCEPTED THE BOO KS OF ACCOUNT AND HENCE ASSESSED THE BUSINESS INCOME OF RS.26,69,449/ - DECLARED BY THE ASSESSEE VOLUNTARILY. HOWEVER, THE LD CIT(A) H AS REDUCED THE SAME TO RS.5.00 LAKHS, WHICH MAY NOT BE A CORRECT A CTION. THE RELIEF, IF ANY, COULD BE GRANTED IN RESPECT OF ADDITIONAL I NCOME ONLY AND IT SHOULD BE PRESUMED THAT THE RELIEF OF ABOUT RS.21.6 9 LAKHS GRANTED BY THE LD CIT(A) IS TOWARDS ALLEGED ADDITIONAL INCO ME OF RS.60.00 LAKHS. FURTHER, THE LD CIT(A) HAS ALSO MADE VARIOU S OBSERVATIONS WITHOUT EXAMINING BOOKS OF ACCOUNTS. ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 7 OF 8 15. IN OUR CONSIDERED VIEW, THE EXAMINATION OF B OOKS OF ACCOUNTS OF THE ASSESSEE WOULD HELP TO DECIDE THE QUESTION A S TO WHETHER THE ADDITION OF RS.60.00 LAKHS (TO THE EXTENT SUSTAINED BY LD CIT(A)) IS STILL WARRANTED OR NOT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO FOR EXAMINING THE ISSUE AFRESH DULY EXAMINING THE BOOKS OF ACCOUNTS. 16. WITH REGARD TO THE CLAIM OF SET OFF OF BROUG HT FORWARD LOSSES AND UNABSORBED DEPRECIATION, IT IS THE SUBMISSION OF TH E ASSESSEE THAT SHE HAS FURNISHED COPIES OF RETURNS OF INCOME FILED BY HER FOR EARLIER YEARS. IF THE SAID RETURNS OF INCOME HAVE BEEN ACC EPTED AS IT IS AND IF THEY HAVE BEEN FILED WITHIN THE DUE DATES PRESCR IBED U/S 139(1) OF THE ACT, IN OUR VIEW, THERE SHOULD NOT BE ANY IMPED IMENT IN ALLOWING THE CLAIM. SINCE IT IS A MATTER OF VERIFICATION OF FACTS, WE RESTORE THIS ISSUE ALSO TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE VIS--VIS THE DOCUMENTS FURNISHED A ND DECIDE THE SAME IN ACCORDANCE WITH LAW. 17. NEEDLESS TO MENTION, THE ASSESSEE SHOULD BE PROVIDED WITH ADEQUATE OPPORTUNITY OF BEING HEARD. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND OCT, 2020 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 22 ND OCT, 2020. VG/SPS ITA NO.773/BANG/2019 MADHURI HINGORANI PRADEEP, BANGALORE PAGE 8 OF 8 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.