M/S DHAVALA SONS(HUF), BHILAI(CG) V. THE INCOME TAX OFFICER, WARD-2, BHILAI(CG)

ITA 78/BIL/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4888 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RITUPARAN NAMDEO
• Assessee Lawyers: VIJAY DHAVALA KARTA OF
• Keywords: Salary income; Principle of natural justice
• Section: 69

Judgement Text

1 ITA NO. 78/BIL/2016 IN THE INCOME TAX APPE LLATE TRIBUNAL RAIPUR BENCH: RAIPUR BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 78/RPR/201 6 (A.Y 2009-10) DHAVALA SONS (HUF) 1-MAITRI MARG, MAITRI KUNJ, RISALI, BHILAI BHILAI (CG) AACHD8291G (APPELLANT) VS INCOME TAX OFFICER, WARD-2 AAYAKAR BHAWAN, NEW CIVIC CENTRE, BHILAI BHILAI (CG) (RESPONDENT) APPELLANT BY VIJAY DHAVALA KARTA OF ASSESSEE RESPONDENT BY SH. RITUPARAN NAMDEO, DR ORDER PER SUCHITRA KAMBLE, JM THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 18/1/2016 PASSED BY CIT(A)-II, RAIPUR FOR ASSESSMEN T YEAR 2009-10. 2. THE GROUNDS OF APPEAL ARE AS UNDER: 1. THE ASSESSEE /APPELLANT HAS SUBMITTED ALL REQUI RED INFORMATION & DOCUMENTS TO SUBSTANTIATE THE SOURCES OF AMOUNT DEP OSITED IN THE BANK BY THE ASSESSING OFFICER WAS MERELY NOT SATISFIED AND MADE ADDITIONS U/S 69 OF THE INCOME TAX ACT, 1961. SUBSEQUENTLY, THE FIRST APPELLATE AUTHORITY HAS NOT GONE THROUGH THE SUPPORTING INFORMATION/DOCUMEN TS THOROUGHLY SO AS TO UNDERSTAND OUR STRONG JUSTIFICATION AND SIMPLY RELI ED ON THE ASSESSMENT ORDER DATE OF HEARING 17.08.2018 DATE OF PRONOUNCEMENT 25.10.2018 2 ITA NO. 78/BIL/2016 ONLY. THE ASSESSMENT WAS MADE ON ONE SIDED APPROA CH AND NOT MADE ON BEST JUDGED ASSESSMENT PRINCIPLE. 3. THE RETURN OF INCOME WAS E-FILED ON 26.03.2010 S HOWING INCOME OF RS.1,26,000/-. CASE WAS SELECTED FOR SCRUTINY AND A CCORDINGLY NOTICE U/S 143(2) WAS ISSUED ON 18.08.2010 WHICH WAS SERVED ON 26.08.2010. FURTHER NOTICE U/S 143(2) WITH QUESTIONNAIRE WAS ISSUED FIX ING THE CASE OF HEARING. THE CONSULTANT AND CA ATTENDED THE CASE AND SUBMITTED T HE WRITTEN REPLY. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE COULD NOT E XPLAINED THE SOURCES OF CASH DEPOSIT AMOUNTING TO RS. 17,00,000/- MADE ON 1 9.01.2009 IN THE SAVINGS BANK ACCOUNT IN THE STATE BANK OF INDIA BELONGING T O ASSESSEE AND HENCE IN THE ABSENCE OF SATISFACTORY EXPLANATION THE AMOUNT OF R S. 17,00,000/- WAS DEEMED TO BE THE INCOME OF THE ASSESSEE U/S 69 OF THE INCO ME TAX ACT, 1961 BY THE ASSESSING OFFICER. THE ASSESSMENT WAS COMPLETED ON 22.12.2011 DETERMINING TOTAL INCOME OF RS. 18,26,000/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE ASSESSEE SUBMITTED WRITTEN SUBMISSION AT THE TIME OF HEARING. THE SAME ARE REPRODUCED HEREINBELOW: 1. SUMMARY OF MAJOR POINTS OF SUBMISSIONS MADE DUR ING REGULAR ASSESSMENT AND APPEAL PROCEEDINGS REGARDING THE AFFAIRS OF THE ASSESSEE: 1) THE HUF WAS CREATED IN THE YEAR 1988 AND THE SOURCE S OF INCOME OF THIS HUF INCLUDED INTEREST ON BANK DEPOSITS, RENT FROM H OUSE PROPERTY, SHARE OF AGRICULTURE INCOME FROM ANCESTRAL AGRICULTURE LANDS . 2) IN THE FY 2000-01, A SUM OF RS.6,00,000/- (RUPEES: SIX LAKH ONLY) WAS CONTRIBUTED BY THE FOUNDER OF THIS HUF, SHRI V C DH AVALA, OUT OF THE FUNDS RECEIVED BY HIM ON RETIREMENT FROM HIS SERVICE IN S TATE BANK OF INDIA. FURTHER IN THE SAME FINANCIAL YEAR, A SUM OF RS.3,8 4,900/- (RUPEES: THREE LAKH EIGHTY FOUR THOUSAND NINE HUNDRED ONLY) RECEIV ED AS FAMILY SHARE ON 3 ITA NO. 78/BIL/2016 SALE OF ANCESTRAL AGRICULTURAL LAND. 3) IN THE FY 2001-02, THERE WAS AN UNDERSTANDING MADE AMONG THE MEMBERS OF THE HUF THAT THE LIQUID FUNDS SHALL INSTEAD OF B EING USED IN A COMMON POOL, SHALL PROPORTIONATELY BE UTILIZED BY ALL THE MEMBERS FOR THEIR PERSONAL PURPOSES. ACCORDINGLY, THE SUMS WERE TRANSFERRED TO THE RESPECTIVE MEMBERS. 4) IN THE FY 2004-05, THE HUF ACQUIRED A RESIDENTIAL P LOT AND SUBSEQUENTLY CONSTRUCTED A BUILDING, BY AVAILING HOUSING LOAN FR OM STATE BANK OF INDIA. THE RENTAL INCOME FROM THIS PROPERTY WAS SHOWN IN T HE INCOME TAX RETURNS OF ALL RESPECTIVE YEARS. 5) IN THE FY 2007-08, ONE OF THE MEMBERS OF THIS HUF M ERGED HIS PERSONAL RESIDENTIAL PROPERTY INTO THE HUF AS THE FAMILY PRO PERTY. THE TOTAL COST/VALUE OF THE PROPERTY IS CONSIDERED AT RS.5,00 ,000/- (RUPEES: FIVE LAKH ONLY) AND TAKEN INTO THE BOOKS OF HUF AS CAPIT AL CONTRIBUTION FROM THE MEMBER. 6) IN THE FY 2008-09, A TOTAL SUM OF RS. 17,00,000/- ( RUPEES: SEVENTEEN LAKH ONLY), CONTRIBUTED BY ALL THE MEMBERS OF THIS HUF O UT OF THEIR SHARE WHICH WAS BEING USED BY THEM FOR PERSONAL PURPOSES, WAS D EPOSITED IN HUFS BANK ACCOUNT IN INSTALLMENTS. OUT OF THIS DEPOSIT, A SUM OF RS. 15,88,000/- (RUPEES: FIFTEEN LAKH EIGHTY EIGHT THOUSAND) TRANSF ERRED TO DHAVALA CONSULTANTS (P) LIMITED, BY ACCOUNT PAYEE CHEQUE, A S UNSECURED LOAN. THIS IS A FAMILY OWNED COMPANY AND ALL THE MEMBERS OF TH IS HUF ARE ALSO THE SHAREHOLDERS OF THIS COMPANY. THIS LOAN IS BEING RE FLECTED IN THE AUDITED BALANCE SHEET OF THE COMPANY. 7) THIS TOTAL SUM OF RS. 17,00,000/- (RUPEES: SEVENTEE N LAKH ONLY), DEPOSITED IN THE BANK ACCOUNT OF HUF BY CASH, WAS CONSIDERED BY THE AO AS THE UNDISCLOSED INCOME INVOKING THE PROVISION OF SECTI ON 69 OF THE INCOME TAX ACT, 1961 AND ADDED TO THE TOTAL INCOME OF THE RELE VANT ASSESSMENT YEAR. 2. SUBMISSIONS IN SUPPORT OF OUR CLAIM / APPEAL AGA INST THE ORDER OF THE ASSESSING OFFICER: 4 ITA NO. 78/BIL/2016 1) DEEMED CAPITAL ACCOUNT WORKING BY THE AO (PARA 9 & 10 OF THE ORDER): WE HAVE SUBMITTED A DETAILED CAPITAL ACCOUNT WORKIN G OF THE HUF FOR ALL THE FINANCIAL YEARS, FROM FY 1988-99 TO FY 2008-09, WITH YEAR WISE WORKING CLEARLY EXPLAINING HOW THE INITIAL FOUNDING CAPITAL OF RS. 5,100/- GREW TO RS. 22,54,800/- IN THESE YEARS. IN SPITE OF OUR CLEAR ANNUAL CAPITAL WORKING, THE AO MADE A SEPARATE CALCULATION WITH D EEMED INCOME & DEEMED WITHDRAWAL FIGURES AND ARRIVED AT THE ESTIM ATED CLOSING CAPITAL BALANCE OF RS. 7,05,800/- FOR FY 2007-08. INSTEAD OF SEEKING ANY CLARIFICATION / JUSTIFICATIO N FOR THE CAPITAL ACCOUNT WORKING, THE AO PREFERRED TO MAKE OWN DEEMED CALCU LATION AND ARRIVED AT AN IMAGINARY FIGURE OF CAPITAL BALANCE. BASED ON THIS NOTIONAL WORKING, IT IS PRESUMED THAT THE CASH DEPOSIT MADE IN THE BA NK IS OBVIOUSLY AN UNDISCLOSED INCOME. 2) INAPPROPRIATE CONCLUSIONS IN RESPECT OF MEMBERS C APITAL ACCOUNT ETC. (PARA 14 OF THE ORDER): DURING THE COURSE OF ASSESSMENT, WE HAVE FURNISHED ALL THE DETAILS REQUIRED BY THE AO, EXCEPT FOR THE COPI ES OF CAPITAL ACCOUNT, BALANCE SHEETS ETC. OF FEW MEMBERS. THIS WAS MAINLY BECAUSE OF THE FACT THAT THEY WERE BASICALLY SALARIED EMPLOYEES OF GOVT . / PUBLIC SECTOR UNDERTAKINGS WITH ONLY SALARY INCOME. THEY ARE NOT SUPPOSED TO MAINTAIN ANY RECORDS WHICH REFLECT THEIR PERSONAL BALANCE SH EET OR CAPITAL ACCOUNT. THIS FACT WAS DULY COMMUNICATED TO THE AO AND ALSO MENTIONED THAT MEMBERS CONFIRMATION CAN BE FURNISHED IF REQUIRED. INSTEAD OF CONSIDERING THE UNDERLYING FACTS ABOUT N ON APPLICABILITY OF THE ABOVE REQUIRED DOCUMENTS, THE AO PRESUMED THAT THES E DOCUMENTS COULD NOT BE FURNISHED AS THESE HAVE NO EXISTENCE AT ALL AND CONCLUDED AS UNSATISFACTORY EXPLANATION. 3) INCORRECT ANALYSIS OF BALANCE SHEET (PARA 5, 7 & 1 4 OF THE ORDER): AS PER THESE PARAS, ANY AMOUNT OF INVESTMENT AND LOANS & A DVANCES GIVEN TO ANY OTHER PERSONS OUT OF THE FUNDS OF HUF IS NOT SHOWN IN ANY YEAR. WHEREAS, THE INVESTMENTS ARE CLEARLY MENTIONED IN THE BALANC E SHEETS OF THE HUF, IN ALL THE YEARS AFTER FY 1992-93. FURTHER, IN ALL THE BALANCE SHEETS AFTER FY 2001-02, THE INVESTMENTS CLEARLY MENTIONED THE AMOU NT GIVEN TO THE MEMBERS AND THE SAME HAS ALSO BEEN UNDERLINED IN OU R SUBMISSIONS AT THE OUTSET ITSELF. INSTEAD OF RELYING ON THE FACTS OF THE BALANCE SHEE TS, THE AO AGAIN 5 ITA NO. 78/BIL/2016 PRESUMED THAT THESE FACTS & FIGURES ARE NOT MENTION ED IN THE BALANCE SHEET HENCE THIS IS AN UNDISCLOSED INCOME. 4) INCORRECT CASH FLOW WORKING (PARA 12 & 13 OF THE OR DER): AS MENTIONED IN SUBMISSION NO. 2(1) ABOVE, THE AOS WORKING IS BASE D ON DEEMED CALCULATION OF CAPITAL ACCOUNT AND ACCORDINGLY THE FUND SURPLUS ARRIVED AT IN THIS PARA IS INCORRECT. WE HAVE FURNISHED A DETA ILED CASH FLOW STATEMENT WITH RECONCILIATION OF SURPLUS FOR THE RESPECTIVE F INANCIAL YEAR. WITH INCORRECT ASSUMPTION, THE IMAGINARY FUND FLOW STATEMENT WOULD OBVIOUSLY SHOW INCORRECT SURPLUS OF FUNDS; AND HENC E THE AO PRESUMED THAT THE SURPLUS SUM, WHICH IS BEING DEPOSITED IN THE BANK IS NOT THE GENUINE SURPLUS OF FUNDS RATHER IT IS UNDISCLOSED I NCOME. PRAYER IN VIEW OF THE ABOVE FACTS AND DETAILS, WE HUMBLY P RAY FOR THE FOLLOWING: 1. KINDLY CONSIDER & APPROVE THE CAPITAL ACCOUNT BALAN CE OF THE HUF AS PER THE DETAILED WORKINGS AND SUBMISSIONS MADE. 2. KINDLY ALLOW THE ADVANCES MADE BY THE HUF, IN THE F ORM OF UNSECURED LOANS TO DHAVALA CONSULTANTS (P) LIMITED, AS A ROUT INE BUSINESS TRANSACTION; SO AS TO REVERSE THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE THIS CONNECTION. 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF THE WRITTE N SUBMISSIONS AND THE PAPER BOOKS FILED BY THE ASSESSEE, IT CAN BE SEEN THAT TH E ASSESSEE SUBMITTED A DETAILED CAPITAL ACCOUNT WORKING OF THE HUF FOR ALL THE FINANCIAL YEARS FROM FY 1988-89 TO FY 2008-09, WITH YEAR WISE WORKING CLEAR LY EXPLAINING HOW THE INITIAL CAPITAL OF RS. 5,100/- INCREASED TO RS. 22, 54,800/- IN THESE YEARS. BUT ASSESSING OFFICER MADE HIS OWN CALCULATION WITH DE EMED INCOME & DEEMED WITHDRAWAL FIGURES AND ARRIVED AT THE ESTIMATED CL OSING CAPITAL BALANCE OF RS. 7,05,800/- FOR A.Y. 2007-08. THE ASSESSING OFFICER TOTALLY IGNORED THE SUBMISSIONS AND DETAILS GIVEN IN RESPECT OF THE BAL ANCE SHEETS OF ALL THE 6 ITA NO. 78/BIL/2016 RELEVANT YEARS WHICH HAS A BEARING ON THE PRESENT Y EARS BALANCE SHEET. THE ASSESSMENT ORDER IS BASED MAINLY ON PRESUMPTION OF THE ASSESSING OFFICER. THE CIT(A) ALSO IGNORED THIS FACTS. CERTAIN DOCUMEN TS RELATING TO MEMBERS CAPITAL ACCOUNT AND BALANCE SHEET AS WELL AS CASH F LOW WORKING MADE BY THE ASSESSEE WITH SPECIFICATIONS WERE TOTALLY IGNORED B Y THE ASSESSING OFFICER AS WELL AS BY THE CIT(A). THEREFORE, IT WILL BE APPROP RIATE TO REMAND BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR TAK ING COGNIZANCE OF THE DOCUMENTS PRODUCED BY THE ASSESSEE. THE ASSESSEE BE GIVEN THE OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. 8. IN RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH OCTOBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 25/10/2018 *R.N COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT PRIVATE SECRETARY.. RAIPUR BENCH, RAIPUR. 7 ITA NO. 78/BIL/2016 DATE OF DICTATION 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.10.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS .10.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT .10.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .10.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER