Gopalkrishna D Hebbar, Uttarakannada V. ITO, Hubli

ITA 830/BANG/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5579 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: P C CHADAGA ITP
• Keywords: Bonafide belief
• Section: 40A(3); 133A; 28; 154

Judgement Text

PAGE 1 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 1 IN THE INOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI, J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NOS.829, 830, 1188 & 1189/BANG/2010 (ASST. YEARS 2003-04 & 2004-05) SHRI GOPALAKRISHNA D HEBBAR, JOGADAMANE, POST IDAGUNDI, TALUQ YELLAPUR, DIST. UTTARAKANNADA. -APPELLANT VS THE INCOME TAX OFFICER, WARD-3(1), HUBLI-25. - RESPONDENT APPELLANT BY : SHRI P C CHADAGA, ITP RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI, ADDL. C IT O R D E R PER BENCH : THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST T WO SEPARATE ORDERS OF THE CIT(A), HUBLI DATED 10.6.200 8 AND 23.3.2010 FOR THE ASST. YEARS 2003-04 AND 2004-05. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL WHO IS HAVING INCOME FROM A RICE MILL AN D ALSO AGRICULTURE. THERE WAS A SURVEY ACTION U/S 133A OF THE ACT ON TH E BUSINESS PREMISES OF THE ASSESSEE ON 20.9.2005. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE IS NOT MAINTA INING DAY-TO-DAY CASH BOOK AND THE AVAILABILITY OF CASH TO INCUR DAY- TO-DAY EXPENSES PAGE 2 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 2 IS NOT VERIFIABLE. IN ORDER TO COVER UP THE DEFICI ENCY, THE ASSESSEE AGREED TO DECLARE RS.1 LAKH EACH FOR THE ASST. YEARS 2003-04 AND 2004-05 RESPECTIVELY. ACCORDINGLY, THE ASSESSEE FIL ED HIS RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.1 LACK FOR BO TH THE ASST. YEARS. ON VERIFICATION OF THE RETURN OF INCOME, THE AO OBSERVED THAT THE ASSESSEE HAS INCOME FROM RICE MILL AND HAS DECLARED A NET PROFIT OF RS.6473/-. AS THE BOOKS OF ACCOUNT WERE NOT VERIFIABLE AND THE ASSESSEE HAS NOT SHOWN ANY RECEIPTS FROM THE SALE OF HUSK, WHICH IS A BYPRODUCT OF RICE MILL, HE MADE AN ADDITI ON OF RS.25,000/-. SUBSEQUENTLY, HE ALSO OBSERVED THAT TH E ASSESSEE OWNS A LORRY, WHICH IS BEING PLIED ON HIRE AND THE A SSESSEE HAS ADMITTED AN INCOME OF RS.42,000/- U/S 44AE OF THE A CT. HE ACCEPTED THE INCOME DECLARED UNDER THIS HEAD. THER EAFTER, HE OBSERVED THAT THE ASSESSEE HAS A LEDGER ACCOUNT IN THE BOOKS OF M/S V V SHANBHAG FOR THE FINANCIAL YEAR 2002-03 FROM WHICH IT IS SEEN THAT THE ASSESSEE HAS MADE CASH PAYMENTS EXCEED ING RS.20,000/- IN VIOLATION OF SECTION 40A(3) OF THE I T ACT. THE ASSESSEE HAD ALSO ADMITTED THAT HE IS PURCHASING DI ESEL FROM THE SAID FIRM FOR WHICH THESE PAYMENTS ARE MADE. FOR VI OLATION OF PROVISIONS OF SECTION 269SS OF THE I T ACT, THE AO HELD THAT THE EXPENDITURE IS TO BE DISALLOWED U/S 40A(3) OF THE I T ACT. ACCORDINGLY, HE BROUGHT 20% OF THE EXPENDITURE TO TA X I.E. MADE AN ADDITION OF RS.2,13,410/-. HE ALSO OBSERVED THAT T HE ASSESSEE HAS MADE A DEPOSIT WITH M/S V V SHANBHAG, BPC DEALERS, YELLAPUR AND INTEREST IS PAYABLE ON THIS DEPOSIT. THEREFORE, HE ESTIMATED THE PAGE 3 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 3 INTEREST AT 17% ON THE DEPOSIT OF RS.2,25,000/- AND WORKED OUT TO RS.38,250/- AND MADE AN ADDITION ACCORDINGLY. 3. AGGRIEVED BY THE SAME, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO DELETED THE ADDITION OF THE INTEREST FROM DEPOSIT WITH M/S V V SHANBHAG. HOWEVER, HE CO NFIRMED THE OTHER ADDITIONS. AGAINST THIS, THE ASSESSEE PREFER RED AN APPLICATION U/S 154 OF THE I T ACT STATING THAT THE ASSESSEE HAD DECLARED AN AMOUNT OF RS.1 LAKH FOR EACH OF THE ASS T. YEAR ONLY TO COVER UP THE DEFICIENCY IN MAKING THE BOOKS OF ACCOU NT AND THEREFORE, THE INCOME ASSESSED BY THE AO IS INCLUDED IN THE AMOUNT OF RS.1 LAKH DECLARED BY THE ASSESSEE FOR THE RELEVA NT ASST. YEARS AND ORDERS SHOULD BE RECTIFIED ACCORDINGLY. 3.1 AS THE SAID APPLICATION WAS PENDING BEFORE THE CIT(A) AND THE ASSESSEE DID NOT PREFER ANY APPEAL BEFORE TH E ITAT AGAINST THE ORDER OF THE CIT(A) PASSED U/S 250 OF T HE I T ACT. THE APPLICATION OF THE ASSESSEE U/S 154 WAS REJECTE D BY THE CIT(A) AND THEREAFTER, THE ASSESSEE PREFERRED AN APPEAL AG AINST THE SAID ORDERS U/S 154 BEFORE THE ITAT IN ITA NOS.829 AND 8 30 OF 2010. IN THE MEANTIME, THE ASSESSEE APPROACHED THE PRESEN T COUNSEL AND HE WAS ADVISED TO FILE APPEALS AGAINST THE ORDERS O F THE CIT(A) U/S 250 ALSO. THUS, THERE IS A DELAY OF 857 DAYS IN FILI NG THE APPEALS BEFORE THE TRIBUNAL. PAGE 4 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 4 4. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI P C C HADAGA SUBMITTED THAT SINCE THE ASSESSEE WAS UNDER THE ERR ONEOUS IMPRESSION AND WAS ILL-ADVISED THAT APPEAL NEED NOT BE FILED AGAINST THE ORDER OF THE CIT(A) U/S 250, THERE IS A DELAY AN D WHICH IS NOT INTENTIONAL. HE THEREFORE PRAYED THAT THE SAID DELA Y MAY BE CONDONED. 5. THE LEARNED DR, HOWEVER, OPPOSED THE CONDONATIO N OF DELAY ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THE SUFFICIENCY OF REASONS FOR THE CONDONATION OF SAID D ELAY. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HA S NOT BEEN INSOLENT OR SLEEPING OVER THE MATTER. HE HAS IN FAC T APPROACHED THE AUTHORITY U/S 154 AND WAS UNDER THE BONAFIDE BELIEF THAT APPEAL CANNOT BE FILED BEFORE THE ITAT WHEN AN APPLICATION U/S 154 WAS PENDING BEFORE THE AUTHORITIES BELOW. AS THE ASSES SEE WAS PURSUING A LEGAL REMEDY DURING THE RELEVANT PERIOD, IT CANNOT BE SAID THAT HE HAS BEEN SLEEPING OVER HIS RIGHTS. IN VIEW OF THE SAME, WE ARE INCLINED TO ACCEPT THE EXPLANATION OF THE ASSES SEE IN CONDONING THE DELAY OF 857 DAYS IN FILING THE APPEAL BEFORE US. 7. COMING TO ITA NOS.1188 & 1189/BANG/2010 WHEREIN THE ASSESSEE IS CHALLENGING THE ADDITIONS MADE TO T HE INCOME OF THE ASSESSEE FROM RICE MILL BUSINESS AND ALSO DISALLOWA NCE U/S 40A(3) OF THE ACT, THE LEARNED COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT THE ASSESSEE OWNS ONLY ONE LORRY AND HE HAS BEEN PLYIN G THE SAME PAGE 5 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 5 FOR HIRE. SINCE THE ASSESSEE HAS NOT BEEN MAINTAIN ING ANY BOOKS OF ACCOUNTS AND HAS LESS THAN 10 LORRIES, THE ASSESSEE OFFERED THE INCOME U/S 44AE OF THE ACT, WHICH HAS BEEN ACCEPTED BY THE AO. HE SUBMITTED THAT ONCE THE INCOME HAS BEEN ACCEPTED U/S 44AE OF THE I T ACT, THE EXPENDITURE INCURRED FOR EARNING T HE INCOME FROM LORRY CANNOT BE DISALLOWED U/S 40A(3) OF THE I T ACT . HE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 44AE WHEREIN THE SAID PROVISION STARTS WITH THE NON-ABSTANTE CLAUSE STATI NG THAT NOTWITHSTANDING ANYTHING CONTAINED IN SECTIONS 28 TO 43C OF THE I T ACT. THUS, ACCORDING TO HIM, THE OTHER PROVIS IONS OF THE I T ACT WILL NOT APPLY AND IRRESPECTIVE OF THE INCOME EA RNED AND THE EXPENDITURE INCURRED BY THE ASSESSEE FOR RUNNING OF THE SAID VEHICLE, THE ASSESSEE IS SUPPOSED TO PAY THE TAX PER VEHICLE PER ANNUM U/S 44AE OF THE ACT. THEREFORE, ACCORDING TO HIM, THIS ADDITION IS TO BE DELETED. HE FURTHER SUBMITTED TH AT IF THIS ADDITION IS DELETED, THE INCOME OFFERED BY HIM IS MO RE THAN THE INCOME ASSESSED BY THE AO AND THEREFORE, THE INCOME OFFERED BY HIM IS TO BE ACCEPTED AS IT IS. 8. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE PROVISIONS OF SECTION 40A(3) ARE INDEPENDENT OF SECTION 44AE AND THEREFOR E, THE DISALLOWANCE MADE BY THE AO IS JUSTIFIED. 9. HAVING HEARD BOTH THE PARTIES AND HAVING CONSID ERED THE RIVAL CONTENTIONS, WE FIND THAT THE PROVISIONS OF SECTION 44AE PAGE 6 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 6 ARE FOR TAXING THE INCOME FROM THE BUSINESS OF PLYIN G OF LORRIES ON HIRE WHERE THE NUMBER OF VEHICLES PLIED BY THE ASSES SEE IS LESS THAN 10. UNDISPUTEDLY, THE ASSESSEE OWNS ONLY ONE LORRY A ND HAS BEEN RUNNING IT ON HIRE. THEREFORE, THE ASSESSEE HAS OF FERED INCOME U/S 44AE OF THE ACT AND THE AO ACCORDINGLY ACCEPTED IT. ONCE THE INCOME HAS BEEN OFFERED AND ACCEPTED U/S 44AE, IT I S NOT OPEN TO THE AO TO GO INTO THE ALLOWABILITY OR OTHERWISE OF T HE EXPENDITURE RELATING TO THE PLYING OF THE LORRIES. THE PROVISIO NS OF SECTION 40A(3) ARE RELATING TO THE DISALLOWANCE OF THE EXPE NDITURE CLAIMED BY THE ASSESSEE IF THE PAYMENTS ARE MADE OTHERWISE TH AN BY CHEQUE WHERE THE AMOUNTS ARE EXCEEDING RS.20,000/-. IN THE CASE BEFORE US, THE ASSESSEE HAS NEVER CLAIMED THE EXPEN DITURE AND THEREFORE, THE DISALLOWANCE OF THE SAME ALSO WOULD NOT ARISE. IN VIEW OF THE SAME, THIS GROUND OF APPEAL IS ALLOWED AND THE ADDITION ON ACCOUNT OF DISALLOWANCE U/S 40A(3) IS DELETED FO R BOTH THE ASST. YEARS. 9.1 AS THE MAJOR ADDITION WHICH IS MADE ON ACCOUNT OF DISALLOWANCE U/S 40A(3) HAS BEEN DELETED BY US, WE F IND THAT THE ONLY OTHER ADDITION MADE BY THE AO IS RELEVANT TO INC OME FROM RICE MILL BUSINESS AND EVEN IF THAT IS TAKEN INTO ACCOUN T, THE INCOME ASSESSED BY THE AO IS BELOW RS.1 LAKH, WHICH IS THE INCOME DECLARED BY THE ASSESSEE. THEREFORE, THE AO SHALL CONSIDER T HE INCOME DECLARED BY THE ASSESSEE I.E. RS.1 LAKH ONLY AS INCO ME OF THE ASSESSEE FOR BOTH THE ASST. YEARS. PAGE 7 OF 7 ITA NOS.829, 830, 1188 & 1189 /BANG/2010 7 10. IN THE RESULT, THESE TWO APPEALS FILED BY THE A SSESSEE ARE ALLOWED. 11. AS REGARDS ITA NOS. 829 AND 830/BANG/2010 ARE CONCERNED, WE FIND THAT THEY ARE AGAINST THE ORDERS U/S 154 AND AS WE HAVE ALREADY DELETED THE ADDITIONS MADE BY THE AO AND HAVE DIRECTED HIM TO CONSIDER THE RETURNED INCOME AS RS.1 LAKH FO R EACH OF THE ASST. YEAR, THESE TWO APPEALS NEED NO ADJUDICATION AND ARE ACCORDINGLY DISMISSED. 12. IN THE RESULT, THE APPEALS (ITA NOS. 829 & 830 /10) FILED BY THE ASSESSEE ARE DISMISSED. THE ORDER PRONOUNCED ON TUESDAY, THE 31 ST DAY OF MAY, 2011 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (P MADH AVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMB ER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) THE CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. MSP/26.5 BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.