Dr. Ashley D Cruz, Bangalore V. ITO, Bangalore

ITA 812/BANG/2010

• Counselvise Citation: 81221114 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ABHAY KUMAR SINGH A
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Cost of acquisition
• Section: 234B

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 NOS.812 & 813/BANG/2010 ASSESSMENT YEARS : 2005-06 DR. ASHLEY D CRUZ, NO.871, 12 TH MAIN, 3 RD BLOCK, KORAMANGALA, BANGALORE 560 034. PAN : AAMPD 4637L VS. THE INCOME TAX OFFICER, WARD 5(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. CHANDRASHEKAR, ADVOCATE RESPONDENT BY : SHRI ABHAY KUMAR SINGH, ACIT(DR) DATE OF HEARING : 8.11.2011 DATE OF PRONOUNCEMENT : 8.11.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE SEPARATE ORDERS EACH DATED 19.2.2010 OF THE CIT(APP EALS)-II, BANGALORE. THESE APPEALS ARE CO-RELATED AND WERE HEARD TOGETHE R, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.812 & 813/BANG/10 PAGE 2 OF 8 2. FIRST WE WILL DEAL WITH ITA NO.812/BANG/2010. I N THIS APPEAL, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE ORDER OF THE AUTHORITIES BELOW IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED TO LAW, WEIGHT OF EVIDENC E, NATURAL JUSTICE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN CONFIRMIN G THE ADDITIONS TO THE EXTENT OF RS.50,000/- BEING DISALL OWED BY THE LEARNED ASSESSING OFFICER UNDER THE HEAD PERSONAL U SE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW IN N OT CONSIDERING THE FACT THAT THE APPELLANT HAS SOLD TH E SHARES OF INFOSYS TO THE EXTENT OF RS.5,56,494/- AFTER 01.10. 2004 AND SUFFERED STT AND HENCE NOT ELIGIBLE FOR TAXATION UN DER THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED CIT(A) IS NOT JUSTIFIED IN LAW IN HO LDING THAT SHARES HAVE NOT BEEN TRANSFERRED AFTER 30.09.2004 A ND CONTRARY HE HELD THAT THE SHARES WERE SOLD ON 01.08.2004 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW IN D IRECTING THE LEARNED ASSESSING OFFICER TO GIVE THE BENEFIT O F INDEXATION AND FAILED TO CONSIDER THE FACT THAT IF BENEFIT OF INDE XATION IS NOT CONSIDERED THEN THE CAPITAL GAINS HAS TO BE TAXED A T THE RATE OF 10% AS PER SECTION 112 OF THE INCOME-TAX ACT, 1961 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE APPELLANT DENIES HIMSELF LIABLE TO BE CHARGE D TO INTEREST U/S. 234B AND 234D OF THE INCOME-TAX ACT, 1961, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELET E OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 8. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND APPROPRIATE RELI EF MAY BE GRANTED IN THE INTEREST OF JUSTICE AND EQUITY. ITA NOS.812 & 813/BANG/10 PAGE 3 OF 8 3. GROUNDS NO.1, 7 & 8 ARE GENERAL IN NATURE, SO DO NOT REQUIRE ANY COMMENTS ON OUR PART. 4. VIDE GROUND NO.2, THE GRIEVANCE OF THE ASSESSEE RELATES TO CONFIRMATION OF ADDITION OF RS.50,000 BEING DISALLO WED BY THE AO ON ACCOUNT OF PERSONAL USE. THE FACTS RELATED TO THI S ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 30.7.2005 DE CLARING INCOME OF RS.2,54,480, WHICH WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT] ON 15.5.2006. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE GOING THROUGH THE INCOME & EXPEN DITURE STATEMENT, THE ASSESSING OFFICER OBSERVED THAT THE EXPENDITURE DEB ITED UNDER SOME OF THE HEADS SUCH AS VEHICLE MAINTENANCE, DEPRECIATION HAD AN ELEMENT OF PERSONAL USE, HE DISALLOWED A LUMPSUM AMOUNT OF RS. 1,25,000. 5. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS) AND SUBMITTED THAT THE DISALLOWANCE OF RS.1,25,000 HAD BEEN MADE TOWARDS PROBABLE PERSONAL USE OF VEHICLES AND TELEPHONE OF THE ASSESSEE WHICH WAS UNJUST AND UNFAIR. IT WAS FURTHER STATED THAT THE ASSESSEE IS A PAEDIATRIC SURGEON AND IS ON ALL FOR 24 HOURS OF TH E DAY FOR ALL SORTS OF EMERGENCIES, THE USE OF TELEPHONE AND VEHICLES WAS ABSOLUTELY ESSENTIAL FOR HIS PROFESSION AND ANY ELEMENT OF PERSONAL USE IF ANY WILL BE INFINITESIMALLY MINIMAL AND NOT WARRANTING A DISALL OWANCE AS CONTEMPLATED BY THE AO. 6. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO WHILE MAKING THE DISALLOWANCE HAD NOT GIVEN ANY OTHER REASON LIKE RATIO OF TOTAL EXPENDITURE TO THE TOTAL RECEIPTS UNDER ITA NOS.812 & 813/BANG/10 PAGE 4 OF 8 PROFESSIONAL CHARGES, HOWEVER, HE RESTRICTED THE DI SALLOWANCE TO RS.50,000. NOW THE ASSESSEE IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE SUSTAINED BY THE LD. CIT(APPEALS) IS NOT JUSTIFIED PARTICULARLY WHEN NO BASIS HAS BEEN GIVEN EITHER BY THE AO OR THE LD. CIT(A). ALTERNATIVELY, IT WAS SUBMITTED THAT DISALLOWANCE SUSTAINED BY THE LD. CI T(A) IS ON THE HIGHER SIDE. 8. IN HIS RIVAL SUBMISSIONS, THE LD. DR SUPPORTED T HE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 9. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PA RTIES AND MATERIAL ON RECORD, IN THE PRESENT CASE IT IS NOTICED THAT THE AO WHILE MAKING THE DISALLOWANCE OF RS.1,25,000/- HAS NOT POINTED OUT H OW MUCH EXPENSES WERE INCURRED BY THE ASSESSEE UNDER THE HEAD VEHICL E MAINTENANCE, DEPRECIATION, ETC. IT APPEARS THAT THE ADDITION M ADE BY THE AO WAS ON THE BASIS OF PRESUMPTION ONLY. SIMILARLY, THE LD. CIT( A) WHILE RESTRICTING THE DISALLOWANCE TO THE EXTENT OF RS.50,000, AGAINST TH E DISALLOWANCE OF RS.1,25,000 MADE BY THE AO, HAD NOT GIVEN ANY COGEN T REASON/BASIS. AT THE SAME TIME, IN SUCH TYPE OF CASES THE PERSONAL U SE OF VEHICLE AND TELEPHONE ETC. CANNOT BE RULED OUT, THEREFORE SOME DISALLOWANCE IS CALLED FOR ON ACCOUNT OF PERSONAL USER. IN OUR OPINION, T HE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS ON THE HIGHER SIDE, WE THEREFO RE, TO MEET THE ENDS OF JUSTICE, DEEM IT FAIR AND REASONABLE TO RESTRICT TH E DISALLOWANCE TO RS.30,000. THUS, THE ASSESSEE WILL GET FURTHER REL IEF OF RS.20,000. ITA NOS.812 & 813/BANG/10 PAGE 5 OF 8 10. THE NEXT ISSUE VIDE GROUNDS 3 TO 5 RELATE TO TH E ADDITION ON ACCOUNT OF CAPITAL GAIN. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVE D THAT THE ASSESSEE HAD OMITTED TO OFFER THE INCOME FROM LONG TERM CAPI TAL GAIN AND SHORT TERM CAPITAL GAIN AT RS.19,31,746 AND RS.1,77,986 RESPEC TIVELY, FROM THE TRANSACTIONS MADE BY HIM IN SHARES AND MUTUAL FUNDS . THE AO PROPOSED TO BRING TO TAX THE AFORESAID AMOUNT AND ASKED THE WIFE OF THE ASSESSEE, WHO WAS REPRESENTING THE CASE, TO FILE OBJECTION/EX PLANATION, IF ANY, TO THE PROPOSED ADDITION UNDER THE HEAD CAPITAL GAINS. ACCORDING TO THE AO, THE WIFE OF THE ASSESSEE AGREED FOR THE ABOVE ADDITION, HE ACCORDINGLY MADE THE ADDITION. THE ASSESSEE CARRIED THE MATTER TO T HE LD. CIT(APPEALS) WHO OBSERVED THAT THE ASSESSEE IN THE GROUNDS OF APPEAL HAD CLEARLY STATED THAT HE WAS NOT CONTESTING THE COMPUTATION OF CAPITAL GA INS, BUT IN THE COPY OF REVISED COMPUTATION OF INCOME WHILE GIVING DETAILS OF TAXABLE INCOME, THE EXEMPT PORTION OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN WAS GIVEN AS UNDER:- SHORT-TERM CAPITAL GAINS BEFORE 30/9/2004 RS. 21 ,669 SHORT-TERM CAPITAL GAINS AFTER 30/9/2004 RS. 1,23 ,805 LONG-TERM CAPITAL GAINS BEFORE 30/9/2004 RS.13,75,2 52 LONG-TERM CAPITAL GAINS AFTER 30/9/2004 [EXEMPT U/S 10(38)] RS. 5,56,494 11. FROM THE ABOVE COMPUTATION, THE LD. CIT(APPEALS ) NOTICED THAT THE LONG TERM CAPITAL GAIN WAS WORKED OUT AT RS.14,77,3 88 AGAINST RS.21,09,732 DETERMINED BY THE AO. THE LD. CIT(A) ALSO OBSERVED THAT THE ITA NOS.812 & 813/BANG/10 PAGE 6 OF 8 ASSESSEE HAD FURNISHED COPY OF STATEMENT WITH REGAR D TO PURCHASE AND SALE OF MUTUAL FUNDS & SHARES AND HAD CLAIMED THE E XEMPTION IN RESPECT OF RS.5,56,494 U/S. 10(38) OF THE ACT ON THE GROUND TH AT THE SHARES WERE SOLD AFTER 30/9/2004. THE LD. CIT(A) POINTED OUT THAT T HE DETAILS FURNISHED BY THE ASSESSEE REVEALED THAT 1500 SHARES OF INFOSYS WERE PURCHASED ON 1/1/1987 FOR RS.1,35,000 AND THE ENTIRE LOT WAS SOL D ON 1/8/2004 FOR A TOTAL CONSIDERATION OF RS.20,66,745. THUS, THE NET PROFIT WOULD BE RS.19,31,745. ACCORDING TO THE LD. CIT(APPEALS), NO DETAILS OF SH ARES HAD BEEN FURNISHED BY THE ASSESSEE TO SHOW THAT THE SALE HAD BEEN EFFE CTED AFTER 30/9/2004. HE THEREFORE REJECTED THE CLAIM OF THE ASSESSEE, AT THE SAME TIME DIRECTED THE AO TO RECOMPUTED THE LONG TERM CAPITAL GAIN ARI SING ON SALE OF SHARES SUBJECT TO INDEXATION OF THE COST OF ACQUISITION. NOW THE ASSESSEE IS IN APPEAL. 12. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE DETAILS WERE FURNISHED BEFORE THE AO, WHO HAD NOT TAKEN ANY COGN IZANCE OF THE SAME AND MADE THE ADDITIONS ARBITRARILY. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) ALSO DID NOT APPRECIATE THE FACTS IN THE RIG HT PERSPECTIVE AND SUSTAINED THE ADDITION. IT WAS CONTENDED THAT THE ASSESSEE FURNISHED ALL THE DETAILS BEFORE THE AO A WELL AS THE LD. CIT(A) AND THE CLAIM OF THE ASSESSEE WAS BASED ON SUCH DETAILS, THEREFORE THE A DDITION SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 13. IN HIS RIVAL SUBMISSIONS, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE WI FE OF THE ASSESSEE HERSELF AGREED FOR THE ADDITION BEFORE THE AO, THER EFORE THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION. ITA NOS.812 & 813/BANG/10 PAGE 7 OF 8 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE P RESENT CASE, IT APPEARS THAT THE AO MADE THE ADDITION FOR THE REASON THAT T HE ASSESSEE DID NOT FURNISH THE REQUISITE DETAILS AND EVIDENCE IN SUPPO RT OF HIS CLAIM. ON THE CONTRARY, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT ALL THE DETAILS WERE FURNISHED BY THE ASSESSEE AND WERE AVA ILABLE TO THE AO AS WELL AS THE LD. CIT(A). IN THE INSTANT CASE, IT IS ALSO NOTICED THAT THE LD. CIT(A) IN PARA 4.1 OF THE IMPUGNED ORDER CATEGORICA LLY STATED THAT THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME, THE REFORE THE OBSERVATIONS OF THE AO AND THE LD. CIT(A) APPEARS TO BE CONTRARY TO EACH OTHER, BECAUSE THE AO IS STATING THAT NO EXPLANATION WAS FURNISHED BY THE ASSESSEE, WHILE THE LD. CIT(A) IS STATING THAT THE COPY OF REVISED COMPUTATION OF INCOME WAS FURNISHED, WHILE THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE BEFORE US WAS THAT ALL THE DETAILS WERE FURNISHED TO THE AO A S WELL AS TO THE LD. CIT(A). THEREFORE THERE ARE CONTRARY CLAIMS BY THE PARTIES AND THE FACTS ARE NOT CLEAR. IN VIEW OF THAT, WE DEEM IT APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND RE MAND THE MATTER BACK TO THE FILE OF ASSESSING OFFICER, TO BE ADJUDICATED AF RESH IN ACCORDANCE WITH THE LAW, BY CONSIDERING THE DOCUMENTS AVAILABLE ON THE RECORD AND OF COURSE, BY PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 15. AS REGARDS TO GROUND NO.6, WHICH RELATES TO CHA RGING OF INTEREST U/S. 234B AND 234D OF THE ACT, IT WAS THE CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE. WE ORDER ACCORDINGLY. ITA NOS.812 & 813/BANG/10 PAGE 8 OF 8 16. IN ITA NO. 813/BANG/2010, THE GRIEVANCE OF THE ASSESSEE RELATES TO THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. SINC E WHILE DECIDING THE APPEAL OF THE ASSESSEE ON QUANTUM IN ITA NO.812/BANG/2010 (SUPRA) , WE HAVE REMANDED THE MAJOR ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION AND THE PENALTY U/S. 271(1)(C) OF THE ACT IS CO-RELATED WITH THE QUANTUM ADDITION, THEREFORE THIS ISSUE IS ALSO REMANDED BACK TO THE F ILE OF AO, TO BE ADJUDICATED AFRESH IN ACCORDANCE WITH THE LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 17. IN THE RESULT, THE APPEAL IN ITA NO.812/BANG/20 10 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE, WHILE THE APPEAL IN ITA NO .813/BANG/2010 IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF NOVEMBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 8 TH NOVEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.