Shri G. Subbarayashetty, Kolar V. ITO, Kolar

ITA 83/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2045 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: S VENKATESAN
• Keywords: Unexplained investment; Business income; Peak credit
• Section: 143(3); 142(1); 234B; 143(2); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.83/BANG/2009 (ASSESSMENT YEAR : 2005-06) SHRI G. SUBBARAYA SETTY, NO.1, VASAVI LAYOUT, BAGEPALLI. APPELLANT . VS. INCOME TAX OFFICER, WARD-1, KOLAR. .. RESPONDENT. APPELLANT BY : SHRI S. VENKATESAN. RESPONDENT BY : SMT. V.S. SREELEKHA. O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE AN INDIVIDUAL IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A)-V, BANGALORE, FOR THE ASSESSMENT Y EAR 2005-06. 2. THE ASSESSEE HAS RAISED SIX GROUNDS, OUT OF WHI CH, GROUND NO.1 BEING GENERAL IN NATURE AND NO SPECIFIC ISSUE INVOLVED. IN THE REMAINING GROUNDS, THE ASSESSEES GRIEVANCES ARE REFRAMED AS UNDER: (I) THE AO HAD NOT ASSUMED JURISDICTION U/S 147 OF THE ACT VALIDLY BY ISSUING A NOTICE U/S 148, THE ASSESSMENT MADE BY ISSUANCE OF NOTICE U/S 142(1) OF THE ACT WAS ILLEGAL AND, THUS, THE ASSESSMENT MADE WAS VOID-AB-INITIO WHICH REQUIRES TO BE ANNULLED; (II) ADDITION OF RS.54.05 LAKHS BASED ON DEPOSITS MADE I N THE BANK ACCOUNTS WAS ARBITRARY; (III) THE ASSESSEE DENIES HIMSELF LIABLE TO BE CHARGED IN TEREST U/S 234A AND 234B OF THE ACT; & (IV) TO AWARD COSTS IN PROSECUTING THE APPEAL AND ORDER FOR REFUND OF INSTITUTION FEE. 3. THE FACTS OF THE ISSUE, IN BRIEF, ARE THAT THE ASSESSEE HAD NOT FURNISHED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER DISPUTE. THERE WAS ALSO NO ITA 83(BNG)/09 2 COMPLIANCE TO THE NOTICE U/S 142(1) OF THE ACT SERV ED ON HIM. THE ASSESSEES ATTENTION WAS DRAWN BY THE AO TO THE FACT THAT THERE WERE SEV ERAL CASH DEPOSITS IN HIS BANK ACCOUNT AGGREGATING TO RS.54.05 LAKHS WHICH HE HAD PROPOSED TO BRING THE SAME UNDER TAX NET IN THE ABSENCE OF ANY CLARIFICATION. IN AN IMMEDIATE RESPONSE, THE ASSESSEE HAD FURNISHED A ROI ON 18.12.07, ADMITTING RS.15058/- U NDER THE HEAD BUSINESS OR PROFESSION AND CLAIMED A DEDUCTION OF RS.58/- U/S 80L, BUT, NOT ACCOMPANIED BY ANY STATEMENT OF AFFAIRS OR P & L ACCOUNT. 4. DURING THE COURSE OF HEARING BEFORE THE AO, IT WAS CLAIMED THAT HE WAS THE SECRETARY TO A LOCAL TEMPLE AND ALL THE TRANSAC TIONS WERE DONE WITH REGARD TO THE CONSTRUCTION OF THE SAID TEMPLE. AS THE ASSESSEE H AD FAILED TO SUBSTANTIATE HIS CLAIMS WITH ANY DOCUMENTARY EVIDENCE AND THERE WAS NO CLAI M THAT THE WITHDRAWALS RESULTED IN THE DEPOSITS, THE AO WAS OF THE VIEW THAT THERE WAS NO QUESTION OF WORKING OUT THE PEAK CREDIT. THUS, THE ENTIRE CASH CREDITS OF RS.5 4.05 LAKKS WAS BROUGHT ON THE TAX NET, UNDER THE HEAD INCOME FROM OTHER SOURCES. 5. AGGRIEVED, THE ASSESSEE HAD APPROACHED THE CIT( A) FOR REDRESSAL. AFTER CONSIDERING THE LENGTHY CONTENTIONS OF THE ASSESSEE , THE LD.CIT(A) HAS OBSERVED THUS 11NO EVIDENCES AND MATERIALS ARE PRODUCED TO JUSTIFY THE CLAIM THAT THE APPELLANT IS THE SECRETARY OF THE TEMPLE COMMITTEE. NO DETAILS OF CONSTRUCTION OF THE TEMPLE AND EXPENSE VOUCHERS/BILLS PRODUCED TO PROVE THE GENUINENESS OF THE EXPENDITURE. NO DETAILS AND ADDRESSES OF DONORS AN D RECEIPTS ARE AVAILABLE FOR VERIFICATION. NO BOOKS OF ACCOUNTS MAINTAINED. T HE APPELLANT IN HIS SUBMISSIONS STATED THAT OUT OF THE DONATIONS COLLECTED FROM PUBLIC, A CHIT IS BEING RUN BY DEVOTEES OF THE TEMPLE. THIS CHIT MONEY IS DEPOSITED IN THE BANK A CCOUNT OF THE APPELLANT EVERY MONTH. THE MONEY WAS WITHDRAWN FROM THE BANK FOR MAKING PA YMENTS TO PERSONS WHO HAD BID THE CHIT. IN THE PROCESS, A SMALL COMMISSION IS EA RNED FOR THE UPKEEP OF THE TEMPLE. THE STATEMENTS AND THE SUBMISSIONS ARE CONTRADICTOR Y. IN THE FIRST PLACE, THE APPELLANT USED THE MONEY FOR THE CONSTRUCTION OF THE TEMPLE. LATER ON, THE APPELLANT STATED THAT THE MONEY WAS WITHDRAWN TO MAKE PAYMENT TO THE BIDD ER OF THE CHIT FUND AND THE COMMISSION EARNED IS UTILIZED FOR THE UPKEEP OF THE TEMPLE. BEFORE ME AND BEFORE THE AO, NO DOCUMENTARY EVIDENCES ARE FILED OR PRODUCED TO CONSIDER THE CLAIM OF THE APPELLANT THAT THE DEPOSITS IN THE BANK ARE OUT OF THE CHIT FUND. IN MY CONSIDERED OPINION, THE DEPOSITS ARE THE UNDISCLOSED INCOME OF THE APPELLANT AND IT IS NOT RELATED TO THE CHIT FUND OR THE TEMPLE COMMITTEE FUND. THE DI SPUTED FACT IS THAT ALL THE DEPOSITS IN THE BANK BELONGED TO APPELLANT AS THE SAME ARE CRED ITED IN HIS BANK ACCOUNT. THERE IS NO EVIDENCE TO SHOW THAT THE MONEY BELONGED TO CHIT FUND OR TEMPLE FUND. IT IS SURPRISING TO NOTE THAT THE APPELLANT IS NOT ABLE T O EXPLAIN THE DEPOSITS AMOUNTING TO ITA 83(BNG)/09 3 RS.54,05,180/- IN HIS BANK ACCOUNT. CONSIDERING TH E FACTS OF THE CASE AND IN THE ABSENCE OF ANY MATERIAL OR DOCUMENTARY EVIDENCE ON THE PART OF THE APPELLANT TO EXPLAIN THE CASH DEPOSITS IN THE BANK ACCOUNT, THE ADDITION MADE BY THE AO IS JUSTIFIED. 6. DISENCHANTED WITH THE FINDING OF THE LD.CIT(A), THE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL . THE REITERATION OF THE LD.A R WAS MORE OR LESS WHAT HAS BEEN URGED BEFORE THE FIRST APPELLATE AUTHORITY. T HE SUBMISSION OF THE LD.A R, FOR THE SAKE OF CONVENIENCE, IS SUMMARIZED AS UNDER: (I) THE ORDER OF THE AO WAS BAD IN LAW AS MUCH AS, THE AO, PRIOR TO ISSUANCE OF NOTICE U/S 142(1) OF THE ACT, HAD NOT ASSUMED JURIS DICTION U/S 147 OF THE ACT VALIDLY BY ISSUING A NOTICE U/S 148 OF THE ACT AND , THUS, THE ASSESSMENT MADE BY ISSUANCE OF NOTICE U/S 142(1) OF THE ACT WH EN THE PREVIOUS YEAR EXPIRED WAS ILLEGAL AND VOID-AB-INIIO WHICH REQUIRE S TO BE ANNULLED; (II) IN THE ASSESSMENT, THE AO ADDED THE ENTIRE DEPOSITS IN THE SAID BANK ACCOUNT OF RS.54.05 LAKHS AS UNEXPLAINED INVESTMENTS LIABLE TO TAX WHICH WAS IN ADDITION TO THE INCOME OF RS.15058/- OFFERED BY THE ASSESSEE IN THE RETURN. EVEN THIS INCOME HAD NOT BEEN TELESCOPED WHILE COMP LETING THE ASSESSMENT; (III) IN THE BANK ACCOUNT, THE OPENING AND THE CLOSING BA LANCES AS ON 1.4.04 AND 31.3.2005 WERE RS.517270/- AND RS.9420/- RESPECTIV ELY. THERE WERE DEPOSITS AND WITHDRAWALS AND THE PEAK BALANCE WAS R S.616987/- ON 16.9.04; - IF THE ASSESSEES CONTENTIONS WERE TO BE TURNED DOW N, THE DIFFERENCE WAS 616987 517270 =99717 58 (DEDUCTION U/S 89L = RS.99659/ - OUT OF RS.15058 REQUIRES TO BE DEDUCTED (AS THE ASSESSEE HAD OFFERE D THIS AMOUNT IN HIS ROI) AND, THUS, THE INCOME OF THE ASSESSEE COULD HAVE BE EN ONLY RS.84601/-; (IV) A CHIT WAS BEING RUN BY CERTAIN PERSONS WHO WERE TH E DEVOTEES OF THE TEMPLE. THIS WAS UNOFFICIAL CHIT. EVERY MONTH THE COMMISSION, WHICH WAS EARNED FOR CONDUCTING THE CHIT WAS UTILIZED FOR TH E UPKEEP OF THE TEMPLE. THE MONIES COLLECTED FROM VARIOUS PERSONS FOR SAFET Y THIS MONEY WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE AND E VERY MONTH AFTER THE CHIT, THIS WAS WITHDRAWN AND PAID TO THE SUCCESSFUL PARTICIPANT BIDDER OF THE CHIT; - THE CASE OF THE ASSESSEE WAS THAT THESE DEPOSITS WE RE THE AMOUNTS COLLECTED FROM VARIOUS PERSONS EVERY MONTH WHO PARTICIPATED I N THE CHIT AND THIS WAS WITHDRAWN FOR MAKING PAYMENT TO THE PERSON WHO HAD BID THE CHIT. THE COMMISSION EARNED IN THE PROCESS WAS UTILIZED FOR T HE TEMPLE UPKEEP; - THE AO HAD ADDED THE AGGREGATE OF DEPOSITS IN THE B ANK ACCOUNT AND TAXED IT IN THE HANDS OF THE ASSESSEE; - THE ASSESSEE HAD SOLD HIS PROPERTY ON 9.8.2001 AND WAS IN POSSESSION OF FUNDS TO THE EXTENT OF RS.1.2 LAKHS AND, THUS, EVEN THIS PEAK SUM OF RS.99717/- WAS NOT TAXABLE. - RELIES ON: (A) THE RULING OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SMT.VENKATAMMA (DECD) V. CIT, K-I REPORTED IN 119 I TR 298; & ITA 83(BNG)/09 4 (B) HONBLE TRIBUNALS FINDING IN ITA NO.1220(BANG)/200 8 DATED: 19.6.2009 IN THE CASE OF JAGANNATHA S SHETTY V. ITO. 7. ON THE OTHER HAND, THE LD. D R WAS VERY FIRM IN HER RESOLVES THAT THE ASSESSEE HAD FAILED TO PROVE EITHER BEFORE THE AO O R BEFORE THE FIRST APPELLATE AUTHORITY WITH ANY DOCUMENTARY EVIDENCE THE ORIGIN OF THE HUG E DEPOSITS MADE IN THE BANK. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE AUTHO RITIES BELOW BE SUSTAINED. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND ALSO PERUSED THE RELEVANT RECORDS. 8.1. WITH REGARD TO THE CONTENTION OF THE LD.A R T HAT THE ASSESSMENT ORDER WAS BAD IN LAW AS THE AO PRIOR TO ISSUANCE OF NOTIC E U/S 142(1) OF THE ACT, HAD NOT ASSUMED JURISDICTION U/S 147 OF THE ACT, WE WOULD L IKE TO POINT OUT THAT THE AO WAS WITHIN HIS DOMAIN TO ISSUE A NOTICE U/S 142(1) OF T HE ACT WHERE THE ASSESSEE HAD FAILED TO FURNISH HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER DISPUTE AND IN COMPLIANCE TO THE SAID NOTICE, PERHAPS, THE ASSESSEE HAD FURNI SHED HIS ROI ADMITTING A TOTAL INCOME OF RS.15058/-. ON THE BASIS OF THE RETURN FURNISHE D, A NOTICE U/S 143(2) WAS ISSUED AND, ACCORDINGLY, THE ASSESSMENT U/S 143(3) WAS CONCLUDE D. THEREFORE, THERE WAS NO INFIRMITY IN ASSUMPTION OF JURISDICTION BY THE AO. THEREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED. THE LD. A.R WAS ALSO MAGNANIMOUS IN CONCEDING THIS GROUND. ADDITION OF RS.54.05 LAKHS : 8.2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS CLAIMED THAT THE ASSESSEE WAS WORKING AS SECRETARY OF A LOCAL TEMPLE AND ALL THE BANK TRANSACTIONS WERE FOR THE CONSTRUCTION OF THE SAID TEMPLE AND THUS HE HAD NO OTHER BUSINESS INCOME. ON SCRUTINIZING THE BANK ACCOUNT EXTRACT, IT WAS FOUND THAT THE ASSESSEE HAD MADE SUBSTANTIAL DEPOSITS PERIODICALLY AND ALSO PAYMENT TOWARDS INSURANCE COVER. ON BEING QUERIED, IT WAS CLAIMED THAT THE DONATIONS/CONTRIBU TIONS WERE COLLECTED WITHOUT ANY RECEIPT AND HE WAS IN NO POSSESSION OF ANY DOCUMENT S OR CONNECTED ACCOUNTS WITH REGARD TO TEMPLE CONSTRUCTION. AS THERE WAS NO CLAI M THAT THE WITHDRAWALS HAD RESULTED IN THE DEPOSITS, THE AO WAS THE VIEW THAT THERE WAS NO QUESTION OF WORKING OUT ANY ITA 83(BNG)/09 5 PEAK CREDIT AND ACCORDINGLY, THE ENTIRE CASH CREDIT S WAS BROUGHT ON THE TAX NET UNDER THE HEAD INCOME FROM OTHER SOURCES AND ADDED TO T HE INCOME RETURNED. 8.2.1. CONSIDERING THE SUBMISSION OF THE ASSESSEE, THE LD.CIT(A) WAS OF THE VIEW THAT [AT THE COST OF REPETITION] (I) NO PROOF TO JUSTIFY THE CLAIM OF THE ASSESSEE THAT HE WAS THE SECRETARY OF THE TEMPLE COMMITTEE; (II) NO DETAILS OF TEMPLE CONSTRUCTION, VOUCHERS/BILLS F OR SUCH EXPENSES TO PROVE THE GENUINENESS OF THE EXPENSES; (III) NO NAMES AND ADDRESSES OF THE ALLEGED DONORS WERE M ADE AVAILABLE; (IV) THE CLAIM WAS THAT OUT OF THE DONATIONS COLLECTED F ROM THE PUBLIC, A CHIT WAS BEING RUN BY THE DEVOTEES AND THE CHIT MONEY WAS DE POSITED IN THE ASSESSEES BANK ACCOUNT EVERY MONTH AND THE MONEY W AS BEING WITHDRAWN FOR MAKING PAYMENTS TO THE BIDDERS AND THAT THE SMA LL COMMISSION SO EARNED IN THE PROCESS WAS FOR THE UPKEEP OF THE TEMPLE. T HE STATEMENT AND THE SUBMISSION ARE QUITE CONTRAST; - IN THE FIRST PLACE, THE CLAIM WAS THAT THE MONEY WA S UTILIZED FOR TEMPLE CONSTRUCTION; AND SUBSEQUENTLY SHIFTED THE STAND TH AT THE MONEY WAS USED FOR MAKING PAYMENT TO THE HIGHEST BIDDER OF THE CHIT A ND THE COMMISSION EARNED FOR THE UPKEEP OF THE TEMPLE AND SO ON SO FORTH; - NO PROOF WAS ADDUCED THAT THE AMOUNTS DEPOSITED WER E OUT OF CHIT FUNDS; (V) THE UNDISPUTED FACT WAS THAT THE DEPOSIT IN THE BAN K BELONGED TO THE ASSESSEE AND IT WAS NEITHER BELONGED TO THE CHIT FU ND NOR THE TEMPLE FUND; 8.2.2. AFTER DUE CONSIDERATION OF ALL RELEVANT FA CTS AND THE CIRCUMSTANCES OF THE ISSUE, THE FORCEFUL SUBMISSIONS OF THE LD. A.R AND ALSO WITH RESPECTS TO THE FINDING OF THE HONBLE JURISDICTIONAL HIGH COURT REFERRED SUPR A WHICH HAS BEEN EXTENSIVELY QUOTED BY THE HONBLE TRIBUNAL IN ITS DECISION CITED, WE ARE OF THE UNANIMOUS VIEW THAT THE ONLY RECOURSE AVAILABLE TO MEET THE END OF JUSTICE WITHO UT FURTHER COMPLICATING THE ISSUE AND ENDING UP WITH CUMBERSOME PROCESS IS TO WORK OUT TH E TAXABLE INCOME ON PEAK CREDITS. THE LD. AR HAS ALSO RELIED ON THE FINDING OF THE HO NBLE JURISDICTIONAL HIGH COURT REFERRED SUPRA AND ALSO THE DECISION OF THIS HONBLE TRIBUNA L IN ITA NO.1220/B/2008 JAGANNATHA SHETTY V. ITO. IN THE INTEREST OF NATUR AL JUSTICE AND TO AVOID FURTHER LITIGATION PROCESS AND FOLLOWING THE RATIO OF THE C ASE LAWS CITED SUPRA, WE REMIT BACK THE ISSUE ON THE FILE OF THE AO WITH A SPECIFIC DIRECTI ON TO WORK OUT THE TAXABLE INCOME IN PURSUANCE OF PEAK CREDIT METHOD AND TO CONCLUDE THE ASSESSMENT, AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD. IT IS ORDERED ACCORDINGLY. ITA 83(BNG)/09 6 9.1. AS REGARDS THE GROUND RAISED BY THE ASSESSEE ON CHARGING OF INTEREST U/S 234A AND 234B OF THE ACT, WE HOLD IT TO BE CONSEQUE NTIAL AND, THEREFORE, WE DISMISS THIS GROUND. 9.2. ON EXAMINING THE GROUND RAISED BY THE ASSESSE E FOR AWARD OF COST IN PROSECUTING THE APPEAL AND TO REFUND OF INSTITUTION FEES, WE ARE OF THE VIEW THAT THE ASSESSEE HAS OVER-STEPPED, LOOKING AT THE CONDUCT O F THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS NOT COME UP CLEAN WITH ALL THE FACTS EITHER BEFORE THE ASSESSING AUTHORITY OR EVEN AT THIS STAG E. THEREFORE, WE DISMISS THIS GROUND WITH THESE OBSERVATIONS. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF DECEMBER, 2009. SD/- SD/- (K.P.T. THANGAL) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 30 TH DECEMBER, 2009. 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