Mr Satish Kulkarni, Pune V. ITO, Wd-3,[4] Pune, Pune

ITA 831/PUN/2012

• Counselvise Citation: 83124514 RSA 2012
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Principle of natural justice; Source of fund
• Section: 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.831/PN/2012 (ASSESSMENT YEAR : 2008-09) SATISH KULKARNI, PROP. SHREE INFOTECH SYSTEMS, B-1, KESHAR, 46/2-B PAUD ROAD, BEHIND JOG HOSPITAL, PUNE 411 038. PAN : ABEPK3225G . APPELLANT VS. INCOME TAX OFFICER, WARD 3(4), PUNE. . RESPONDENT ASSESSEE BY : MR. KISHOR PHADKE DEPARTMENT BY : MR. B. C. MALAKAR DATE OF HEARING : 24-02-2015 DATE OF PRONOUNCEMENT : 31-03-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE D ATED 12.01.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 27.12.2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWIN G MODIFIED GROUND OF APPEAL NOS.1 TO 5 AND AN ADDITIONAL GROUND OF APPEA L BY WAY OF GROUND OF APPEAL NO.6, WHICH READ AS UNDER :- 1. THE LEARNED CIT(A)-II ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.85 LACS U/S 69 OF THE ITA, 1961 MADE BY LEARNED AO TO THE TAXABLE INCOME OF THE APPELLANT. 2. THE LEARNED CIT(A)-II, PUNE ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE LEARNED AO IN ADDING THE AMOUNT OF RS .85 LACS TO THE APPELLANT'S TAXABLE INCOME, SIMPLY ON THE BASIS OF A FRAUDULENT LETTER DATED 24/03/2008, THE CONTENTS OF WHICH WERE DENIED VIDE STATEMENTS U/S ITA NO.831/PN/2012 131 BY THE APPELLANT. IN FACT, THE LEARNED AO'S OWN FINDINGS AS PER PARA 5 OF THE 143(3) ORDER REVEALS THAT THE DEMAND DRAFTS ALLEGED AS BELONGING TO THE APPELLANT WERE, IN FACT, THOSE BELONGING TO SMT. SHEELA SHARMA AND MR. BANKEBIHARI AGARWAL OF JAIPUR. 3. THE LEARNED CIT(A)-II AND THE LEARNED AO ERRED I N LAW AND ON FACTS IN NOT APPRECIATING THAT AS PER THE LETTERS OF M/S INS PIRA ENTERPRISE PRIVATE LIMITED (IEPL) DATED 16 TH DECEMBER 2010 AND 20 TH DECEMBER 2010, IT IS CLEAR THAT THE APPELLANT HAD NO ROLE OF WHATSOEVER NATURE IN TRANSACTIONS OF PAYMENT OF RS.85 LACS. 4. THE LEARNED CIT(A)-II, PUNE; ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE LEARNED AO; BEFORE USING ALLE GED INCRIMINATING MATERIAL (IN THE FORM OF LETTERS, ETC.) AVAILED FROM IEPL AG AINST THE APPELLANT; OUGHT TO HAVE VOLUNTARILY EXTENDED COPY OF THE SAME TO THE A PPELLANT CONSIDERING THE PRINCIPLE OF NATURAL JUSTICE. 5. THE LEARNED CIT(A)-II ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE APPELLANT'S REPEATED REQUESTS FOR EXTENDING COP IES OF THE ALLEGED INCRIMINATING MATERIAL WERE OVERLOOKED BY THE LEARN ED AO, THUS LEADING TO SERIOUS BREACH OF PRINCIPLE OF NATURAL JUSTICE. 6. APPROPRIATE SUITABLE COST OF LITIGATION INCURRED BY THE APPELLANT MAY PLEASE BE AWARDED TO THE APPELLANT CONSIDERING THE HIGH HANDED MANNER OF MAKING ADDITIONS TO THE INCOME OF THE APPELLANT LEA DING TO A LOT OF MENTAL STRESS AND AGONY. 3. IN SO FAR AS THE GROUND OF APPEAL NO.6 (BEING AD DITIONAL GROUND) IS CONCERNED, THE SAME HAS NOT BEEN PRESSED AT THE TIM E OF HEARING AND THE SAME IS ACCORDINGLY DISMISSED. 4. ALTHOUGH, THE ASSESSEE HAS RAISED MULTIPLE GROUN DS OF APPEAL, NAMELY, GROUND OF APPEAL NOS.1 TO 5, ESSENTIALLY THE SOLITA RY DISPUTE ARISES FROM THE ACTION OF THE CIT(A) IN CONFIRMING AN ADDITION OF R S.85,00,000/- MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 69 OF THE ACT . 5. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT APPELLA NT IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 DE CLARING A TOTAL INCOME OF RS.4,42,390/-. THE APPELLANT IS ENGAGED IN THE RUN NING OF PROPRIETORY CONCERN, SHREE INFOTECH SYSTEMS, WHICH IS UNDERTAKING TRADIN G OF COMPUTER SOFTWARE AND HARDWARE. WITH RESPECT TO THE IMPUGNED ADDITIO N, THE PERTINENT FACTS ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSES SEE WAS SHOW-CAUSED TO ITA NO.831/PN/2012 EXPLAIN THE SOURCES OF TRANSMITTING RS.85,00,000/- TO ONE M/S INSPIRA ENTERPRISES PVT. LTD., MUMBAI AS PER FOLLOWING DETA ILS :- DD NO. AMOUNT DATE NAME OF THE BANK 367803 35,00,000/- 01.04.2008 ORIENTAL BANK 111379 7,00,000/- 24.03.2008 BANK OF BARODA 111380 6,00,000/- 24.03.2008 BANK OF BARODA 111381 7,00,000/- 24.03.2008 BANK OF BARODA 111382 5,00,000/- 24.03.2008 BANK OF BARODA 101752 8,00,000/- 24.03.2008 BANK OF BARODA 101753 4,00,000/- 24.03.2008 BANK OF BARODA 006903 7,00,000/- 24.03.2008 BANK OF BARODA 006904 6,00,000/- 24.03.2008 BANK OF BARODA 6. THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT WAS NOT PAID BY HIM TO M/S INSPIRA ENTERPRISES PVT. LTD. AND THAT SUCH AMO UNT WAS ALSO NOT REFLECTED IN THE ACCOUNT BOOKS MAINTAINED. THE ASSESSEE COMM UNICATED TO THE ASSESSING OFFICER VIDE A COMMUNICATION DATED 15.11. 2010 THAT HE WAS NOT MAINTAINING ANY BANK ACCOUNT REFERRED IN THE AFORES AID TABULATION AND IT WAS CATEGORICALLY ASSERTED THAT NO SUCH PAYMENTS WERE M ADE. THE ASSESSMENT ORDER REVEALS THAT A STATEMENT, U/S 131 OF THE ACT, OF THE ASSESSEE WAS ALSO RECORDED ON 08.12.2010. DURING SUCH EXAMINATION, A SSESSEE WAS SPECIFICALLY ASKED AS TO WHETHER HE HAD PURCHASED THE DEMAND DRA FTS (DDS) SHOWN IN THE AFORESAID TABULATION, WHICH THE ASSESSEE DENIED. H OWEVER, THE ASSESSING OFFICER CONFRONTED THE ASSESSEE WITH A LETTER DATED 24.03.2008 PURPORTEDLY WRITTEN ON THE LETTER HEAD OF THE ASSESSEES PROPRI ETORY CONCERN WHICH WAS ADDRESSED TO M/S INSPIRA ENTERPRISES PVT. LTD. WHER EBY THE ABOVE DDS/CHEQUES WERE STATED TO HAVE BEEN FORWARDED TO M /S M/S INSPIRA ENTERPRISES PVT. LTD.. THE ASSESSEE AGAIN DENIED H AVING WRITTEN SUCH A LETTER TO M/S INSPIRA ENTERPRISES PVT. LTD. AND ALSO POINT ED OUT THAT THE LETTER IN QUESTION APPEARED TO BE A FICTITIOUS DOCUMENT. IT TRANSPIRES FROM THE ASSESSMENT ORDER THAT ASSESSING OFFICER MADE FURTHE R ENQUIRIES WHICH REVEALED THAT THE DDS UNDER CONSIDERATION WERE PURC HASED BY FIVE PERSONS, NAMELY, (I) BANKE BIHARI AGARWAL; (II) SURENDRA TAM BI; (III) BANKE BIHARI ITA NO.831/PN/2012 AGARWAL (HUF); (IV) MRS. SHEELA SHARMA; AND, (IV) D R. MADHUSUDHAN SHARMA. THE ASSESSING OFFICER ALSO NOTED THAT M/S INSPIRA E NTERPRISES PVT. LTD. CONFIRMED THE RECEIPT OF DDS OF RS.85,00,000/- THRO UGH ONE, MR. RAHUL PATIL AN EMPLOYEE OF M/S INSPIRA ENTERPRISES PVT. LTD., WHO WAS STATED TO HAVE HANDED-OVER THE LETTER UNDER CONSIDERATION OF SHREE INFOTECH SYSTEMS. 7. ON THE BASIS OF THE AFORESAID, THE ASSESSING OFF ICER HELD THAT ASSESSEE HAD FAILED TO EXPLAIN THE SOURCE OF MONEY UTILIZED FOR THE PURCHASE OF THE IMPUGNED DDS AND THEREFORE HE INVOKED SECTION 69 OF THE ACT AND ADDED A SUM OF RS.85,00,000/- TO THE RETURNED INCOME. THE CIT(A) HAS ALSO AFFIRMED THE ADDITION, AGAINST WHICH ASSESSEE IS IN APPEAL B EFORE US. 8. BEFORE US, THE LD. REPRESENTATIVE FOR THE ASSESS EE HAS PRIMARILY SUBMITTED THAT THERE WAS NO MATERIAL ON RECORD TO S UGGEST THAT THE ASSESSEE HAD OBTAINED THE DDS FROM THE BANK AND GIVEN THE SA ME TO M/S INSPIRA ENTERPRISES PVT. LTD.. IN THIS CONTEXT, IT WAS POI NTED OUT THAT THE SUBSEQUENT COMMUNICATIONS OF M/S INSPIRA ENTERPRISES PVT. LTD. DATED 16.12.2010 AND 20.12.2010 ADDRESSED TO THE ASSESSING OFFICER, CLAR IFIED THAT ASSESSEE HAD NOTHING TO DO WITH SUCH DDS. A REFERENCE HAS BEEN MADE TO THE AFORESAID COMMUNICATION, COPIES WHICH HAVE BEEN PLACED IN THE PAPER BOOK AT PAGES 12 TO 13 AND 20 TO 21 RESPECTIVELY. 9. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE APPEARING FOR THE REVENUE HAS EMPHASIZED THAT THE RECIPIENT M/S I NSPIRA ENTERPRISES PVT. LTD. HAS INITIALLY CONFIRMED THAT THE DDS IN QUESTI ON WERE RECEIVED UNDER THE COVERING LETTER OF THE ASSESSEE THROUGH ONE OF THEI R EMPLOYEE, MR. RAHUL PATIL, WHO WAS ASSOCIATED WITH ASSESSEES PROPRIETORY BUSI NESS OF SHREE INFOTECH SYSTEMS. ITA NO.831/PN/2012 10. WE HAVE CAREFULLY CONCERNED THE RIVAL SUBMISSIO NS. OSTENSIBLY, IN THE PRESENT CASE, SECTION 69 OF THE ACT HAS BEEN INVOKE D BY THE INCOME-TAX AUTHORITIES IN ORDER TO JUSTIFY THE IMPUGNED ADDITI ON OF RS.85,00,000/-. AS PER THE REVENUE, PAYMENT OF RS.85,00,000/- HAS BEEN MAD E TO M/S INSPIRA ENTERPRISES PVT. LTD. BY MEANS OF DDS/CHEQUES AS TA BULATED EARLIER, FOR WHICH ASSESSEE HAS FAILED TO EXPLAIN ANY SOURCE OF INCOME. SECTION 69 OF THE ACT PROVIDES THAT WHERE IN THE FINANCIAL YEAR, ASSE SSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE ACCOUNT BOOKS OF ACCO UNT, IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFE RS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENT OR THE EXPL ANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATIS FACTORY, THE VALUE OF SUCH INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE A SSESSEE OF SUCH FINANCIAL YEAR. NOTABLY, THE DEEMING PROVISION OF SECTION 69 OF THE ACT WOULD BE TRIGGERED IF IT IS ESTABLISHED THAT THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT . IN OTHER WORDS, BEFORE FASTENING TAX LIABILITY IN THE HANDS OF THE ASSESSEE BY APPLICATI ON OF SECTION 69 OF THE ACT, IT IS IMPERATIVE TO ESTABLISH THAT ASSESSEE HAS INDEED MADE SUCH INVESTMENTS, WHICH FALL WITHIN THE MISCHIEF OF SECTION 69 OF THE ACT. OSTENSIBLY, THE BURDEN IS ON THE ASSESSING OFFICER TO ESTABLISH THAT ASSES SEE HAS INDEED MADE INVESTMENTS WHICH ARE NOT RECORDED IN THE ACCOUNT B OOKS. OF COURSE, ONCE THE ASSESSING OFFICER IS ABLE TO ESTABLISH MAKING OF IN VESTMENT BY THE ASSESSEE, THE ONUS THEREAFTER SHIFTS ON TO THE ASSESSEE TO EX PLAIN THE SOURCES OF INCOME FOR MAKING SUCH INVESTMENT. THE AFORESAID DISCUSSI ON IS RELEVANT IN THE PRESENT CASE BECAUSE THE CASE SET-UP BY THE ASSESSE E BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US IS TO THE EFFECT T HAT HE HAS NOT MADE ANY SUCH INVESTMENT. AS PER THE ASSESSEE HE HAS NOT OBTAINE D THE IMPUGNED DDS/CHEQUES OF RS.85,00,000/- FOR PAYMENT TO M/S IN SPIRA ENTERPRISES PVT. LTD.. AT THE VERY OUTSET, WHEN ASSESSEE WAS CONFRO NTED ON THIS ASPECT HE DENIED OF HAVING MADE ANY SUCH PAYMENT. NOT ONLY T HAT, ASSESSEE ALSO ITA NO.831/PN/2012 DENIED OF HAVING ANY CONNECTION WITH THE BANK ACCOU NTS FROM WHERE SUCH DDS/CHEQUES WERE FOUND TO HAVE BEEN ISSUED. 11. IN THIS CONTEXT, WE FIND THAT THE VERIFICATION EXERCISE CONDUCTED BY THE ASSESSING OFFICER REVEALED THE NAME OF PERSONS WHO HAD OBTAINED SUCH DDS/CHEQUES FROM THE RESPECTIVE BANKS. OSTENSIBLY, THERE IS NO MATERIAL TO LINK SUCH PERSONS WITH THE ASSESSEE. IT IS ALSO NO T BROUGHT OUT BY THE ASSESSING OFFICER AS TO WHETHER ASSESSEE HAD ANY BE NEFICIAL INTEREST IN THE BANK ACCOUNT FROM WHERE SUCH DDS/CHEQUES WERE ISSUE D. IN-FACT, THERE IS COMPLETE SILENCE ON THIS ASPECT IN THE ASSESSMENT O RDER. 12. THE ONLY POINT MADE OUT BY THE ASSESSING OFFICE R IS THAT M/S INSPIRA ENTERPRISES PVT. LTD. INITIALLY STATED THAT THE SAI D DDS/CHEQUES WERE RECEIVED BY IT WITH A COVERING LETTER OF ASSESSEES PROPRIET ORY CONCERN, AND THAT SUCH MATERIAL WAS RECEIVED THROUGH ONE, MR. RAHUL PATIL, WHO WAS THEIR EMPLOYEE. IN THIS CONTEXT, WE FIND THAT IN THE COURSE OF ASSE SSMENT PROCEEDINGS ITSELF, M/S INSPIRA ENTERPRISES PVT. LTD. VIDE COMMUNICATION DA TED 16.12.2010 CLARIFIED THAT SUBSEQUENTLY IT CAME TO THEIR NOTICE THAT THE AFORESAID AMOUNT OF RS.85,00,000/- WHICH WAS RECEIVED THROUGH MR. RAHUL PATIL WAS NOT PERTAINING TO THE ASSESSEES PROPRIETORY CONCERN AND THAT IT W AS COLLECTED FROM DIFFERENT PARTIES BY MR. RAHUL PATIL AND HANDED-OVER TO THEM. THE SAID COMMUNICATION ALSO CLARIFIED THAT NECESSARY RECTIFICATION ENTRIES WERE ALSO PASSED BY M/S INSPIRA ENTERPRISES PVT. LTD. IN ITS ACCOUNT BOOKS. THE SAID COMMUNICATION OF M/S INSPIRA ENTERPRISES PVT. LTD. ALSO CONTAINED A STATEMENT SHOWING DETAILS OF THE REFUND TO RESPECTIVE PARTIES OF THE AFORESAID A MOUNT. THE AFORESAID MATERIAL IS PLACED IN THE PAPER BOOK AT PAGES 12-13 . IN-FACT, THE PARTIES TO WHOM THE AMOUNT OF RS.85,00,000/- HAS BEEN REFUNDED ARE THE SAME WHICH WERE FOUND BY THE ASSESSING OFFICER ON VERIFICATION I.E. (I) BANKE BIHARI AGARWAL; (II) SURENDRA TAMBI; (III) BANKE BIHARI AG ARWAL (HUF); (IV) MRS. ITA NO.831/PN/2012 SHEELA SHARMA; AND, (IV) DR. MADHUSUDHAN SHARMA. I N THE SAID DETAILS FURNISHED BY M/S INSPIRA ENTERPRISES PVT. LTD. THE NAMES OF PERSONS THROUGH WHOM THE PAYMENTS ARE RECEIVED HAVE BEEN MENTIONED AS ALSO THE DETAILS OF THE CHEQUES THROUGH WHICH THE RE-PAYMENT HAS BEEN E FFECTED HAVE ALSO BEEN MENTIONED. SUBSEQUENTLY, ON 20.12.2010, THE SAID C ONCERN I.E. M/S INSPIRA ENTERPRISES PVT. LTD. ALSO FURNISHED THE ADDRESS OF MR. RAHUL PATIL TO THE ASSESSING OFFICER. ALL THE AFORESAID MATERIAL, WHI CH WAS VERY MUCH BEFORE THE ASSESSING OFFICER, CLEARLY SHOWS THAT THE INVESTMEN T IN OBTAINING THE DDS/CHEQUES IN QUESTION AMOUNTING TO RS.85,00,000/- CANNOT BE ATTRIBUTED TO THE ASSESSEE. THEREFORE, IN OUR CONSIDERED OPINION , HAVING REGARD TO THE MATERIAL AND EVIDENCE ON RECORD THE ASSESSING OFFIC ER HAS FAILED TO ESTABLISH THE BASIC PRE-REQUISITE OF SECTION 69 OF THE ACT, N AMELY, THAT ASSESSEE HAS MADE THE IMPUGNED INVESTMENT. IN THE ABSENCE OF TH E FULFILLMENT OF SUCH PRIMARY PRE-REQUISITE OF SECTION 69 OF THE ACT, IN OUR VIEW, THE IMPUGNED ADDITION IS UNTENABLE IN THE HANDS OF THE ASSESSEE. WE THEREFORE DEEM IT FIT AND PROPER TO SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.85,00,000/-. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 31 ST MARCH, 2015. SD/- SD /- (SUSHMA CHOWLA) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 31 ST MARCH, 2015. SUJEET ITA NO.831/PN/2012 COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, PUNE; 4) THE CIT-II, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE