Chithira Enterprises, Alappuzha V. ACIT, Kottayam

ITA 86/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64865 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 02-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure
• Section: 153A; 132

Judgement Text

1 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 715/COCH/2010 - A.Y. 2000-01 I.T.A NO. 716/COCH/2010 - A.Y. 2002-03 I.T.A NO. 717/COCH/2010 - A.Y. 2006-07 THE DY.CIT, CENT.CIR. VS M/S CHITHIRA ENTERPRISE S KOTTAYAM VAZHICHERY BRIDGE ALAPUZHA PAN : AAFFC2496D (APPELLANT) (RESPONDENT) I.T.A NO. 82/COCH/2011 - A.Y. 2000-01 I.T.A NO. 83/COCH/2011 - A.Y. 2001-02 I.T.A NO. 84/COCH/2011 - A.Y. 2002-03 I.T.A NO. 85/COCH/2011 - A.Y. 2003-04 I.T.A NO. 86/COCH/2011 - A.Y. 2004-05 I.T.A NO. 87/COCH/2011 - A.Y. 2005-06 I.T.A NO. 88/COCH/2011 - A.Y. 2006-07 M/S CHITHIRA ENTERPRISES VS THE A.C.I.T, CENT.C IR. VAZHICHERY BRIDGE, ALAPUZHA KOTTAYAM (APPELLANT) (RESPONDENT) REVENUE BY : MS. A.S. BINDHU TAXPAYER BY : SHRI R KRISHNA IYER DATE OF HEARING : 23-08-2012 DATE OF PRONOUNCEMENT : 12-10-2012 2 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 O R D E R PER N.R.S. GANESAN (JM) THE TAXPAYER FILED THE APPEALS FOR ASSESSMENT YEAR S 2000-01 TO 2006-07. THE REVENUE FILED THE APPEALS FOR THE ASSESSMENT YE ARS 2000-01, 2002-03 AND 2006-07. SINCE COMMON ISSUES ARISE FOR CONSIDERATIO N, WE HEARD ALL THE APPEALS TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORD ER. 2. WE MAY TAKE UP THE TAXPAYERS APPEALS FIRST. 3. THE FIRST GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS.1,06,246 FOR A.Y. 2000-01; RS.1,40,465 FOR A.Y. 2002-03; AND RS. 1,28,1 00 FOR A.Y. 2003-04 FROM SALE OF BUILDING MATERIALS. 4. SHRI R. KRISHNA IYER, THE LD.REPRESENTATIVE FOR T HE TAXPAYER SUBMITTED THAT THE SO-CALLED TRADING, PROFIT & LOSS ACCOUNT SAID TO BE SEIZED HAS NO CONNECTION WITH THE BUSINESS OF THE TAXPAYER. ACCORDING TO TH E LD.REPRESENTATIVE, THE SO- CALLED PROFIT & LOSS ACCOUNT RELATES TO SHRI D THIR UMENI, WHO IS A PARTNER OF THE TAXPAYER FIRM. IN THE BALANCE-SHEET ONLY HIS PERSON AL ACCOUNT IS SHOWN. ACCORDING TO THE LD.REPRESENTATIVE, THIS PROFIT & L OSS ACCOUNT WAS PREPARED FOR GETTING A BANK LOAN; IT IS NOT CONNECTED WITH FIRMS BUSINESS / INCOME. 5. ON THE CONTRARY, MIS. A.S. BINDHU, THE LD.DR SUB MITTED THAT AS PER THE SEIZED DOCUMENT, SK-17 & MJ-1 WHICH CONTAINS TRAD ING, PROFIT & LOSS ACCOUNT OF THE TAXPAYER FOR THE PERIOD ENDING 31-03-2000, 31-03-20 02 AND 31-03-2003 WERE SEIZED. AS PER THIS PROFIT & LOSS ACCOUNT, THE NET PROFIT WAS SHOWN AT RS.1,06,246 FOR A.Y. 2000-01; RS.1,40,465 FOR A.Y. 2002-03; AND R S. 1,28,100 FOR A.Y. 2003-04. 3 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 THE TAXPAYER, BY HIS LETTER DATED 27-12-2007 HAS STAT ED BEFORE THE ASSESSING OFFICER THAT THE FIRM HAD NO OBJECTION TO TREAT THE ABOVE AMOUNTS AS BUSINESS INCOME OF THE FIRM. ACCORDINGLY, THE ASSESSING OFF ICER MADE THE ADDITION TOWARDS THE TOTAL INCOME. THEREFORE, ACCORDING TO THE LD.D R, NOW THE TAXPAYER CANNOT CLAIM THAT THE PROFIT & LOSS ACCOUNT WAS PREPARED O NLY FOR THE PURPOSE OF GETTING A BANK LOAN AND IT DOES NOT REFER TO THE TAXPAYER AT ALL. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND ALSO PE RUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT TRA DING, PROFIT & LOSS ACCOUNT WAS FOUND BY THE REVENUE AUTHORITIES DURING THE COURSE OF SEARCH OPERATION. THE ONLY CONTENTION OF THE LD.REPRESENTATIVE IS THAT THE PRO FIT & LOSS ACCOUNT FOUND DURING THE COURSE OF SEARCH OPERATION DOES NOT RELATE TO T HE FIRM BUT IT RELATES TO ITS PARTNERS, SHRI D THIRUMENI. HOWEVER, THE TAXPAYER ADMITTED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ADDITION OF THE INCOME SHOWN IN THE SEIZED PROFIT & LOSS ACCOUNT. ONCE TH E TAXPAYER ADMITTED FOR ADDITION, THIS TRIBUNAL IS OF THE OPINION THAT THER E CANNOT BE ANY FURTHER APPEAL. IN VIEW OF THE ADMISSION MADE BY THE TAXPAYER IN TH E COURSE OF ASSESSMENT PROCEEDINGS THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE ADDITION WAS RIGHTLY MADE ON THE BASIS OF THE PROFIT & LOSS ACCO UNT FOUND DURING THE COURSE OF SEARCH OPERATION. THEREFORE, WE DO NOT FIND ANY IN FIRMITY IN THE ORDERS OF LOWER AUTHORITY. ACCORDINGLY THE ORDER OF LOWER AUTHORIT Y IS CONFIRMED. 6. THE NEXT COMMON GROUND OF APPEAL IS WITH REGARD TO ESTIMATION OF INCOME FROM LENDING BUSINESS. 4 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 7. SHRI R KRISHNA IYER, THE LD.REPRESENTATIVE FOR TH E TAXPAYER SUBMITTED THAT THE SEIZED TRIAL BALANCE SHOWED THE NET RECEIPT OF INTEREST AT RS. 12,43,632 FOR A.Y. 2000-01; RS. 15,71,608 FOR A.Y. 2001-02; RS. 10, 74,221 FOR A.Y. 2002-03; RS.15,66,295 FOR A.Y. 2003-04; AND RS. 13,81,671 FOR THE ASSESSMENT YEAR 2006- 07. FOR THE ASSESSMENT YEARS 2003-04; 2004-05 AND 20 05-06 NO SUCH TRIAL BALANCE WAS FOUND. THE ASSESSING OFFICER MADE DISA LLOWED OF RS. 2,30,299 FOR THE ASSESSMENT YEAR 2000-01; RS. 3,02,293 FOR A.Y. 2001-0 2; RS.2,91,495 FOR A.Y. 2002-03; RS.2,59,900 FOR A.Y. 2003-04; RS.2,62,518 FO R A.Y. 2004-05 & 2005-06; AND RS. 1,87,506 FOR A.Y. 2006-07 BEING THE DISALLOW ANCE OF INTEREST TOWARDS DEPOSITS WHICH WERE FOUND TO BE NON-GENUINE. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT NO DEDUCTION WAS ALLOWED IN RESPECT OF INTEREST PAID BY THE TAXPAYER ON THE BORROWED FUNDS. ONCE THE TAXPAYER COLLECTED INTEREST @24% APPROXIMATELY AND PAID INTEREST @12% TO THE CREDITO RS, THE NET INCOME BASED ON THE TURNOVER RECORDED IN THE SAME SHEET WOULD COME TO APPROXIMATELY RS.5 LAKHS. THE NET PROFIT RECORDED IN THE SEIZED DOCUME NT CANNOT BE IGNORED. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT THE LOOSE SHEET FOUND DURING THE COURSE OF SEARCH OPERATION DOES NOT RELATE TO THE BUSINESS OF THE TAXPAYER. 8. ON THE CONTRARY, SMT. A.S. BINDHU, THE LD.DR SUB MITTED THAT FROM THE PROFIT & LOSS ACCOUNT THE TAXPAYER HAS SHOWN INCOME FROM M ONEY LENDING BUSINESS AT RS.10,06,156 FOR A.Y. 2000-01; RS. 13,25,320 FOR A.Y . 2001-02; RS. 12,77,979 FOR A.Y. 2002-03; RS.13,28,712 FOR A.Y. 2003-04; AND NO I NCOME FROM MONEY LENDING BUSINESS WAS SHOWN FOR ASSESSMENT YEARS 2004-05, 200 5-06 AND 2006-07. THE ASSESSING OFFICER DISALLOWED INTEREST ON NON GENUIN E DEPOSITS TO THE EXTENT OF RS. 2,30,299 FOR THE ASSESSMENT YEAR 2000-01; RS. 3,02,2 93 FOR A.Y. 2001-02; RS.2,91,495 FOR A.Y. 2002-03; RS.2,59,900 FOR A.Y. 2 003-04; RS.2,62,518 FOR A.Y. 5 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 2004-05 & 2005-06; AND RS. 1,87,506 FOR A.Y. 2006-07. ACCORDINGLY, THE BUSINESS INCOME OF THE TAXPAYER FROM MONEY LENDING WAS DETER MINED AT RS. 12,36,455 FOR THE ASSESSMENT YEAR 2000-01; RS. 16,27,623 FOR A.Y. 2001-02; RS.15,69,474 FOR A.Y. 2002-03; RS.15,87,612 FOR A.Y. 2003-04; RS.17,52 ,964 FOR A.Y. 2004-05 & 2005-06; AND RS. 19,06,453 FOR A.Y. 2006-07. ON APPE AL BY THE TAXPAYER, THE COMMISSIONER OF INCOME-TAX(A) REDUCED THIS INCOME TO RS. 6,49,202 FOR A.Y. 200- 01; RS. 7,40,650 FOR A.Y. 2001-02; RS. 6,45,393 FOR A.Y. 2002-03; RS.6,41,046 FOR A.Y. 2003-04; RS. 7 LAKHS FOR A.Y. 2004-05 & 2005-06; AND RS.12,18,648 FOR A.Y. 2006-07. THE LD.DR SUBMITTED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, THE COMMISSIONER OF INCOME-TAX(A) CALLED FOR REMAND REPORT. THE ASSESSING OFFICER, AFTER VERIFICATION OF THE SEIZED MATERIAL FOUND THAT THE TAXPAYER HAS NOT MADE ANY CLAIM IN THE PROFIT & LOSS ACCOUNT WITH RE GARD TO INTEREST PAID ON THE DEPOSIT WHICH WAS TREATED AS NON GENUINE. ACCORDIN GLY THE COMMISSIONER OF INCOME-TAX(A) DELETED THE ADDITION OF RS. RS. 2,30,2 99 FOR A.Y. 200-01; RS. 3,02,293 FOR A.Y. 2001-02; RS. 2,91,495 FOR A.Y. 200 2-03; RS.2,59,900 FOR A.Y. 2003-04; RS. 2,62,518 FOR A.Y. 2004-05 & 2005-06; AND RS.1,87,805 FOR A.Y. 2006- 07. HOWEVER, WITH REGARD TO THE NET PROFIT SHOWN I N THE PROFIT AND LOSS ACCOUNT THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE INT EREST PAID ON THE DEPOSITS HAS TO BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. ACCORDINGLY, THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT 22% OF THE EXPENSES WHICH INCLUDE 12% OF INTEREST AND 10% OTHER EXPENSES HAS TO BE AL LOWED. THE REVENUE HAS CHALLENGED THE FINDING OF THE COMMISSIONER OF INCOM E-TAX(A) WITH REGARD TO ALLOWING 22% OF NET PROFIT TOWARDS INTEREST AND EXP ENSES. ACCORDING TO THE LD.DR, IN THE ABSENCE OF ANY MATERIAL, PAYMENT OF I NTEREST AND EXPENSES CANNOT BE ALLOWED. 6 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT, ANY EXPENDITURE INC URRED BY THE TAXPAYER HAS TO BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. IN TH E CASE BEFORE US, THE PROFIT & LOSS ACCOUNT FOUND BY THE REVENUE AUTHORITIES SHOWE D THE NET PROFIT AS INDICATED ELSEWHERE IN THIS ORDER. WHEN THE PROFIT & LOSS AC COUNT SHOWED THE NET PROFIT, IT WOULD MEAN THAT ALL EXPENSES WERE ALLOWED. IT IS N OBODYS CASE THAT THE FIGURES FOUND IN THE PROFIT AND LOSS ACCOUNT IS ONLY A GROS S PROFIT. IF THE TAXPAYER FELT THAT ANY PAYMENT MADE TOWARDS INTEREST OR EXPENDITURE WA S NOT CONSIDERED WHILE PREPARING THE PROFIT AND LOSS ACCOUNT IT IS THE DUT Y OF THE TAXPAYER TO FILE NECESSARY MATERIAL BEFORE THE LOWER AUTHORITIES AND EXPLAIN HOW THE EXPENSES AND INTEREST PAID WAS OMITTED TO BE CONSIDERED WHIL E PREPARING THE PROFIT & LOSS ACCOUNT WHICH WAS SEIZED DURING THE COURSE OF SEARC H OPERATION. THE COMMISSIONER OF INCOME-TAX(A) WITHOUT ANY MATERIAL F OUND THAT NOBODY WOULD PARK THE FUND WITH THE TAXPAYER WITHOUT PAYMENT OF I NTEREST. IT IS TRUE THAT NOBODY WOULD PARK THEIR FUND WITHOUT INTEREST, BUT THE PROFIT & LOSS ACCOUNT FOUND DURING THE COURSE OF SEARCH OPERATION SHOWED NET PROFIT WHICH WOULD MEAN THAT ALL PAYMENTS TOWARDS INTEREST AND EXPENSE S ARE DEEMED TO HAVE BEEN ALLOWED. IF ANYTHING IS OMITTED TO BE CONSIDERED, IT IS FOR THE TAXPAYER TO FILE NECESSARY MATERIAL FOR CONSIDERATION. IN THE ABSEN CE OF ANY MATERIAL, THE COMMISSIONER OF INCOME-TAX(A) HAS ALLOWED THE CLAIM OF THE TAXPAYER TOWARDS INTEREST AND EXPENDITURE @22%. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE SEIZED MATERIAL SHOWED THE NET PROFIT THER E IS NO NEED FOR ALLOWING ANY FURTHER EXPENDITURE. BY SAYING SO, THIS TRIBUNAL D OES NOT MEAN THAT THE EXPENDITURE TOWARDS INTEREST NEEDS TO BE DISALLOWED . WHAT WE ARE TRYING TO SAY IS THAT WHEN THE PROFIT & LOSS ACCOUNT DISCLOSED NE T PROFIT, PAYMENTS TOWARDS EXPENDITURE AND INTEREST IS DEEMED TO HAVE BEEN ALL OWED. THEREFORE, THERE IS NO 7 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 NEED FOR ALLOWING ANY FURTHER EXPENDITURE. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY JUSTIFICATION FOR ALLOWING ANY DEDUCTION 2 2%. ACCORDINGLY, THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(A) ARE SET ASIDE AND THAT OF THE ASSESSING OFFICER ON THIS ISSUE ARE RESTORED. 10. IN RESPECT OF ASSESSMENT YEAR 2004-05 AND 2005-06 THE ASSESSING OFFICER ESTIMATED THE PROFIT FROM MONEY LENDING BUSINESS AT RS.7 LAKHS. 11. SHRI R KRISHNA IYER, THE LD.REPRESENTATIVE FOR T HE TAXPAYER SUBMITTED THAT THE ESTIMATION OF PROFIT AT RS.7 LAKHS IS HIGHLY EXC ESSIVE AND UNREALISTIC. ACCORDING TO THE LD.REPRESENTATIVE, THE TOTAL ADVAN CE IS ONLY RS.30 LAKHS. THE FUNDS AVAILABLE WERE MAINLY DEPOSITS / LOANS. THE TAXPAYER HAS TO MEET THE EXPENSES ON INTEREST. THEREFORE, THE ESTIMATION OF PROFIT AT RS.7 LAKHS IS HIGHLY EXCESSIVE. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT LOOSE SHEET SAID TO HAVE BEEN FOUND DURING THE COURSE OF SEARCH OPERATION DO ES NOT HAVE ANY NEXUS WITH THE TAXPAYER. 12. ON THE CONTRARY MS.A.S. BINDHU, THE LD.DR SUBMI TTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 14,90,446 FOR BOTH THE ASSESSMENT YEARS. HOWEVER, THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE INC OME WAS ESTIMATED WITHOUT ANY CORROBORATIVE MATERIAL AND AFTER CONSID ERING THE PROFIT & LOSS ACCOUNT FOR THE ASSESSMENT YEARS 2000-01 TO 2003-04 H E NOTICED THAT THE TAXPAYER WAS EARNING THE INCOME BETWEEN RS.6 LAKHS T O RS.7 LAKHS FOR EARLIER ASSESSMENT YEARS. ACCORDINGLY, HE ESTIMATED THE PR OFIT AT RS.7 LAKHS FOR BOTH THE YEARS. ACCORDING TO THE LD.DR, THE ESTIMATION OF P ROFIT AT RS.7 LAKHS IS VERY LOW. 8 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 HOWEVER, SHE CLARIFIED THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL AGAINST THE ORDERS OF COMMISSIONER OF INCOME-TAX(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER ESTIMAT ED THE INCOME AT RS. 14,90,446 AFTER TAKING INTO CONSIDERATION THE INCREASE IN VOLU ME OF BUSINESS YEAR AFTER YEAR. THE COMMISSIONER OF INCOME-TAX(A) AFTER CONSIDERING THE LOOSE PAPER FOUND THAT DURING THE COURSE OF SEARCH OPERATION THE NET PROFI T WAS SHOWN BETWEEN RS.6 LAKHS TO RS.7 LAKHS. AFTER TAKING INTO CONSIDERATION THE NET PROFIT FOUND IN THE SEIZED MATERIAL FOR THE ASSESSMENT YEARS 2000-01 TO 2003-04 THE COMMISSIONER OF INCOME-TAX(A) FIXED THE PROFIT AT RS.7 LAKHS. WHE N THE COMMISSIONER OF INCOME-TAX(A) FIXED THE PROFIT AT RS.7 LAKHS AFTER CO NSIDERING THE SEIZED MATERIAL, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDERS OF THE COMMISSIONER OF INCOME-TAX(A). THE ORDERS OF THE CO MMISSIONER OF INCOME- TAX(A) ON THIS ISSUE IS CONFIRMED FOR THE ASSESSMEN T YEARS 2004-05 AND 2005-06. 14. NOW WE MOVE ON TO DISPOSE OF THE APPEALS FILED BY THE REVENUE. 15. THE FIRST GROUND OF APPEAL FOR ASSESSMENT YEAR 2000-01 IS WITH REGARD TO THE GENUINENESS OF LOAN / DEPOSIT. 16. MS. A.S. BINDHU, THE LD.DR SUBMITTED THAT THE A SSESSING OFFICER MADE ADDITION OF RS. 17,25,000 FOR A.Y. 2000-01 ON ACCOUN T OF UNEXPLAINED DEPOSITS. AS PER THE LEDGER FOUND DURING THE COURSE OF SEARCH OPERATION THE OPENING DEPOSIT AS ON 01-02-2000 WAS RS.26,05,000. THE DEPAR TMENT MADE ENQUIRY AND THE TAXPAYER FILED CONFIRMATION TO THE EXTENT OF RS .4,50,000. HOWEVER, WITH 9 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 REGARD TO THE REMAINING DEPOSIT, THE PARTNER OF THE TAXPAYER FIRM STATED THAT THE NAMES OF THE DEPOSITORS APPEARING IN THE TRIAL BALA NCE ARE NOT GENUINE. THE TAXPAYER SUBMITTED LIST OF 11 PERSONS STATED TO BE THE REAL DEPOSITORS. THE OTHER PARTNERS, SHRI RAJAGOPALAN HAS ALSO CONFIRMED THE S TATEMENT OF SHRI D THIRUMANAI. THE TAXPAYER FILED CONFIRMATION LETTER S FROM 12 PERSONS FOR AN AGGREGATE AMOUNT OF RS. 17,25,000. THE ASSESSING O FFICER DID NOT BELIEVE THE CONFIRMATION LETTERS SINCE THEY WERE VAGUE. ACCORD ING TO THE LD.DR, MANY OF THE CREDITORS ARE SMALLTIME TRADERS AND THEY HAVE NO SO URCE OF FUND FOR MAKING SUCH DEPOSITS. SINCE THE CREDIBILITY OF THE CREDITORS W ERE LACKING THE ASSESSING OFFICER MADE ADDITION OF RS.17,25,000. THE LD.DR FURTHER P OINTED OUT THAT THE COMMISSIONER OF INCOME-TAX(A) HAS ALSO CALLED FOR RE MAND REPORT DURING THE COURSE OF APPELLATE PROCEEDINGS AND DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER WITHOUT ANY JUSTIFIABLE CAUSE. ACCORDING T O THE LD.DR IT IS THE RESPONSIBILITY OF THE TAXPAYER TO ESTABLISH THE IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTION. IN THE ABSENCE OF ANY EVIDENCE, ACCOR DING TO THE LD.DR, THE COMMISSIONER OF INCOME-TAX(A) OUGHT NOT HAVE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 17. ON THE CONTRARY, SHRI R KRISHNA IYER, THE LD.REP RESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THOUGH THE TAXPAYER HAS FURNISHED A LIST OF 12 DEPOSITORS, BEFORE THE COMMISSIONER OF INCOME-TAX(A) THE TAXPAYER HAS F URNISHED THE LIST OF 5 DEPOSITORS FOR THE DEPOSIT OF RS.17,25,000. THEREF ORE, THE COMMISSIONER OF INCOME-TAX(A) CALLED FOR A REMAND REPORT. ON THE BA SIS OF THE REMAND REPORT THE FIVE DEPOSITORS APPEARED BEFORE THE ASSESSING OFFIC ER AND FILED THE CONFIRMATION LETTERS. WITH REGARD TO SHRI PRABHUKUMAR THE ASSESS ING OFFICER HAS NOT EXPRESSED ANY DOUBT ABOUT THE CREDITWORTHINESS. THE IDENTITY OF SHRI PRABHUKUMAR WAS ALSO 10 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 FOUND SATISFACTORY. THE ASSESSING OFFICER DOUBTED ONLY THE GENUINENESS OF THE TRANSACTION. ACCORDING TO THE LD.REPRESENTATIVE, T HE DOUBT EXPRESSED BY THE ASSESSING OFFICER WITH REGARD TO THE MEETING OF EXP ENDITURE FOR THE BUSINESS CANNOT HAVE ANY RELEVANCE AT ALL. ACCORDING TO THE LD.REPRESENTATIVE, WHEN THE EVIDENCE AVAILABLE ON RECORD CLEARLY SUGGESTS THAT THE TAXPAYER HAS RECEIVED DEPOSIT FROM 5 PERSONS, THE ASSESSING OFFICER CANNO T REJECT THE CLAIM OF THE TAXPAYER MERELY BECAUSE THE TAXPAYER COULD NOT FURN ISH THE CORRECT NAMES AT THE ORIGINAL STAGE. THE LD.REPRESENTATIVE FURTHER SUBM ITTED THAT ALL THE DEPOSITS WERE RECEIVED IN THE YEAR 1999-2000 AND THE STATEMENTS WE RE RECORDED IN THE YEAR 2009. THEREFORE, AFTER A GAP OF LONG 9 YEARS, NO O NE CAN EXPECT THE TAXPAYER TO FURNISH THE CORRECT DETAILS. ACCORDING TO THE LD.R EPRESENTATIVE, THE STATEMENTS RECORDED FROM THE 5 PERSONS CLEARLY SHOWS THAT THEY HAVE DEPOSITED THE MONEY. THEREFORE, THERE IS NO QUESTION OF DOUBTING THE TRA NSACTION AT ALL. 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. NO DOUBT, THE TA XPAYER HAD FURNISHED 12 NAMES AS DEPOSITORS AT THE ASSESSMENT STAGE. HOWEVER, AT THE APPELLATE STAGE, THE TAXPAYER HAS FURNISHED 5 NAMES AS DEPOSITORS. A RE MAND REPORT WAS CALLED FOR BY THE COMMISSIONER OF INCOME-TAX(A). THE ASSESSING OF FICER SUMMONED ALL THE FIVE DEPOSITORS AND ALL OF THEM HAVE CONFIRMED THE DEPOS ITS. HOWEVER, THE ASSESSING OFFICER DOUBTED THE GENUINENESS OF THE TRANSACTION. THE FACT REMAINS IS THAT ALL THE DEPOSITORS APPEARED BEFORE THE ASSESSING OFFICE R AND THEY HAVE CONFIRMED THE FACT OF ADVANCING FUNDS TO THE TAXPAYER. A FEW CREDITORS ARE GOVERNMENT EMPLOYEES AND THEY HAVE FURNISHED THE BANK DETAILS F ROM WHERE THE FUNDS WERE WITHDRAWN. 11 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 18.1 IN THE CASE OF SHRI PRABHUKUMAR, IN THE ORIGINA L LIST FURNISHED BY THE TAXPAYER AS WELL AS IN THE LIST FURNISHED BEFORE TH E COMMISSIONER OF INCOME- TAX(A), AN AMOUNT OF RS.11 LAKHS WAS FOUND TO BE DEP OSITED BY HIM. IT IS ALSO CONFIRMED BY HIM IN THE EXAMINATION DURING THE COUR SE OF REMAND PROCEEDINGS. THE ONLY DOUBT RAISED BY THE ASSESSING OFFICER IS T HAT HE COULD HAVE MET THE DAY TO DAY BUSINESS EXPENSES OF HIMSELF. AS RIGHTLY OB SERVED BY THE COMMISSIONER OF INCOME-TAX(A), THE TRANSACTION TOOK PLACE IN THE YEA R 1999-2000 AND THE DEPOSITORS WERE EXAMINED IN THE YEAR 2009. THEREFO RE, THE TENDENCY OF THE HUMAN MEMORY TO FORGET THE TRANSACTION BY EFFLUX OF TIME CANNOT BE IGNORED AT ALL. WHEN A PERSON WAS EXAMINED AFTER A GAP OF 9 Y EARS, HE MAY NOT BE ABLE TO EXPLAIN EXACTLY AS TO WHAT HAPPENED BEFORE 9 YEARS. THEREFORE, WHAT WE HAVE TO SEE IS THE SUM AND SUBSTANCE OF THE MATTER WHICH WA S EXPLAINED BY THE RESPECTIVE DEPOSITOR. THEREFORE, IN OUR OPINION, T HE COMMISSIONER OF INCOME- TAX(A) HAS RIGHTLY DELETED THE ADDITION. 18.2 IN THE CASE OF P.S. DEVAKI WHO CLAIMED TO HAVE ADVANCED A SUM OF RS. 1,75,000 ON 01-04-1999 AND RS.2,25,000 ON 17-05-2000. IT APPEARS THAT SMT. PS DEVAKI STATED BEFORE THE ASSESSING OFFICER THAT THE AMOUNT WAS PAID TO SHRI RAJAGOPALAN. TAKING THIS AS A GROUND THAT THE MONEY WAS NOT ADVANCED TO THE FIRM BUT TO PARTNER, SHRI RAJAGOPALAN, THE ASSESSIN G OFFICER REJECTED THE CLAIM OF THE TAXPAYER. THE FACT REMAINS IS THAT SHRI RAJAGO PALAN IS A PARTNER OF THE FIRM AND THE TAXPAYER BEING A FIRM CANNOT ACT INDEPENDEN TLY. IT HAS TO ACT ONLY THROUGH HUMAN AGENT, VIZ. PARTNERS. THEREFORE, WHE N THE MONEY WAS PAID THROUGH SHRI RAJAGOPALAN WHO IS NONE OTHER THAN THE PARTNERS, WE CANNOT SAY THAT SMT. P.S. DEVAKI HAD NOT ADVANCED MONEY NOT TO THE FIRM. THEREFORE, WE HAVE TO NECESSARILY UPHOLD THE ORDER OF THE COMMISS IONER OF INCOME-TAX(A). 12 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 18.3 SIMILARLY, SHRI RAJENDRA BABU WHO DEPOSITED RS .1,70,000 STATED THAT THE MONEY WAS GIVEN TO SHRI D THIRUMENI. SHRI D THIRUM ENI IS ONE OF THE PARTNERS AND IT WAS DEPOSITED THROUGH THE PARTNER. THE SAID SHRI RAJENDRA BABU CONFIRMED THAT THE MONEY WAS WITHDRAWN FROM SOUTH INDIAN BANK. HE HAS ALSO PROVIDED THE BANK ACCOUNT NUMBER. SHRI RAJENDRA BABU CLAIMED BEFORE THE ASSESSING OFFICER THAT HE IS A RETIRED EMPLOYEE FROM M/S PRIM O PIPES AND RECEIVED RS.1,97,000 AS TERMINAL BENEFITS AT THE TIME OF HIS RETIREMENT. THE ASSESSING OFFICER SIMPLY CONFUSED HIMSELF THAT THE MONEY WAS PAID TO SHRI D THIRUMENI AND NOT TO THE FIRM. THE FACT REMAINS IS THAT THE MONE Y WAS PAID TO THE FIRM THROUGH SHRI D THIRUMENI. THEREFORE, THE COMMISSIONER OF I NCOME-TAX(A) HAS RIGHTLY DELETED THE ADDITION. 18.4 NOW COMING TO THE ADVANCE OF RS.2,40,000 FROM SHRI LALJI, THIS PERSON CLAIMED THAT HE WAS WORKING AS A MACHINE OPERATOR AT AL-KUHAWI AT DAMAM. THE MONEY WAS WITHDRAWN FROM NRE ACCOUNT WITH STATE BAN K OF INDIA, KALOOR AND THE PAYMENTS WERE MADE. THE DEPOSITOR HAS FURNISHED TH E DATE OF WITHDRAWAL AND OTHER DETAILS. IN THE ABSENCE OF ANY OTHER MATERIA L TO SHOW THAT THE TAXPAYER ROUTED HIS FUNDS IN THE FORM OF DEPOSIT, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY D ELETED THE ADDITION. THEREFORE, WE HAVE NO HESITATION TO CONFIRM THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(A). 19. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ALL OWING 22% OF THE NET PROFIT TOWARDS INTEREST AND EXPENSES. WHILE CONSIDERING T HE TAXPAYERS APPEALS WE HAVE DISCUSSED THIS ISSUE ELABORATELY AND FOUND THA T WHEN THE PROFIT & LOSS 13 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 ACCOUNT SHOWED NET INCOME, THERE IS NO REASON FOR A LLOWING ANY FURTHER EXPENDITURE EITHER IN THE FORM OF INTEREST OR EXPEN SES. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME-TA X(A) ON THIS ISSUE. ACCORDINGLY, THE ORDER OF COMMISSIONER OF INCOME-TAX (A) ON THIS ISSUE IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 20. NOW COMING TO THE APPEAL FOR ASSESSMENT YEAR 20 02-03, THE FIRST ISSUE IS WITH REGARD TO DELETION OF RS. 2,03,758 OUT OF RS.1 2,77,979 MADE BY THE ASSESSING OFFICER. 21. MS. A.S. BINDHU, THE LD.DR SUBMITTED THAT THE P ROFIT OF RS.10,74,221 WAS REFLECTED IN THE PROFIT & LOSS ACCOUNT FOUND DURING THE COURSE OF SEARCH OPERATION. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THERE IS NO CORROBORATIVE EVIDENCE FOR ESTIMATING THE INCOME OF RS.12,77,979. BY FOLLOWING THE JUDGMENT OF THE DELHI HIGH COURT IN COMMISSIONE R OF INCOME-TAX VS RAVIKANT JAIN 250 ITR 141 (DEL) AND JUDGMENT OF MADRAS HIGH COURT IN COMMISSIONER OF INCOME-TAX VS R.M. PATEL, HUF 298 ITR 274 (MAD) FOUN D THAT THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATION ALONE HAS TO BE CONSIDERED WHILE COMPUTING THE UNDISCLOSED INCOME. 22. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF RAVIKANT JAIN (SUPRA) AND THE MADRAS HIG H COURT JUDGMENT IN THE CASE OF R.M. PATEL, HUF (SUPRA). INA THE CASE BEFORE TH E DELHI HIGH COURT, A SEARCH WAS CONDUCTED U/S 132 OF THE I.T. ACT ON 30-11-1996. THE ASSESSMENT WAS FRAMED U/S 158BC. THEREFORE, THE DELHI HIGH COURT AFTER CONSI DERING THE PROVISIONS OF SECTION 158BA AND 158BB(1) FOUND THAT THE UNDISCLOS ED INCOME HAS TO BE 14 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 COMPUTED ONLY ON THE BASIS OF THE MATERIAL FOUND DU RING THE COURSE OF SEARCH OPERATION. A SIMILAR VIEW WAS ALSO TAKEN BY THE MAD RAS HIGH COURT IN THE CASE OF R.M. PATEL, HUF (SUPRA). IN THE CASE BEFORE US, TH E ASSESSMENT WAS FRAMED U/S 153A OF THE ACT. THE PROVISIONS OF SECTION 158BB(1 ) IS NOT APPLICABLE WHEN THE ASSESSMENT WAS MADE U/S 153A OF THE ACT. IN VIEW O F THE LANGUAGE EMPLOYED BY THE LEGISLATURE IN SECTION 158BB(1), THE UNDISCLOSE D INCOME HAS TO BE COMPUTED ONLY ON THE BASIS OF THE EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATION AND INFORMATION WHICH IS RELATABLE TO THE EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATION. THE LANGUAGE EMPLOYED BY THE LEG ISLATURE IN SECTION 153A DOES NOT RESTRICT THE APPLICATION OF EVIDENCE FOUND DURI NG THE COURSE OF SEARCH. WHEN THERE WAS A SEARCH, ALL PENDING ASSESSMENT PROCEEDI NGS SHALL BE ABATED AND THE ASSESSING AUTHORITY HAS TO FRAME THE ASSESSMENT FOR SIX EARLIER ASSESSMENTS FALLING WITHIN THE BLOCK PERIOD. IN CASE, ANY OF THE ASSESS MENT IN RESPECT OF ANY ASSESSMENT YEAR THAT FALLS WITHIN THE BLOCK PERIOD W AS COMPLETED THEN THE COMPLETED ASSESSMENT SHALL NOT BE ABATED. ONCE THE ASSESSMENT PROCEEDINGS WERE INITIATED, THE ASSESSING AUTHORITY HAS TO CONS IDER ALL THE MATERIALS INCLUDING THE SEARCH MATERIALS AVAILABLE ON RECORD. THEREFOR E, IN VIEW OF THE LANGUAGE EMPLOYED BY THE LEGISLATURE IN SECTION 153A OF THE ACT, IT IS NOT NECESSARY TO CONFINE ONLY TO THE MATERIAL FOUND DURING THE COURS E OF SEARCH OPERATION. SINCE THE DELHI HIGH COURT AND THE MADRAS HIGH COURT IN T HE CASE OF RAVIKANT JAIN (SUPRA) AND R.M. PATEL, HUF (SUPRA) HAD NO OCCASION TO CONSIDER THE PROVISIONS OF SECTION 153A AND HAVE ONLY CONSIDERED PROVISIONS OF SECTION 158BB(1), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDG MENTS OF THE DELHI HIGH COURT IN RAVIKANT JAIN (SUPRA) AND THE MADRAS HIGH COURT I N THE CASE OF R.M. PATEL, HUF (SUPRA) ARE NOT APPLICABLE TO THE FACTS OF THE CASE . THEREFORE, THE COMMISSIONER OF INCOME-TAX(A) IS NOT JUSTIFIED IN FOLLOWING THE P RINCIPLES LAID DOWN BY THE DELHI 15 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 HIGH COURT AND MADRAS HIGH COURT ON THE BASIS OF TH E PROVISIONS OF SECTION 158BB (1) OF THE ACT. SINCE THE PROVISIONS OF SECTION 15 8BB(1) ARE NOT APPLICABLE TO THE CASE, AS OBSERVED EARLIER, THE ABOVE JUDGMENTS ARE NOT APPLICABLE TO THE ASSESSMENT COMPLETED U/S 153A OF THE ACT. ACCORDIN GLY, THE COMMISSIONER OF INCOME-TAX(A) IS NOT JUSTIFIED IN DELETING THE ADDIT ION OF RS.2,03,758. IN VIEW OF THE ABOVE, THE ORDER OF COMMISSIONER OF INCOME-TAX(A ) IS SET AIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 23. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF RS.2,91,495. WE HEARD THE LD.DR AND THE LD.REPRESENTATIVE FOR THE T AXPAYER. THE ASSESSING OFFICER DISALLOWED RS.2,91,495 ON ACCOUNT OF DISALLOWANCE O F INTEREST FOR NON GENUINE DEPOSITS. THE COMMISSIONER OF INCOME-TAX(A), AFTER CALLING FOR REMAND REPORT FOUND THAT THE DEPOSIT OF RS.17,25,000 IS GENUINE. ACCORDINGLY, THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE PAYMENT OF INTEREST HAS TO BE ALLOWED. IN THE EARLIER PART OF THIS ORDER FOR THE ASSESSMENT YEAR 2000-01, THIS TRIBUNAL CONFIRMED THE FINDINGS OF THE COMMISSIONER OF INCOME-TAX(A) WI TH REGARD TO THE GENUINENESS OF DEPOSITS. ONCE THE GENUINENESS OF T HE DEPOSITS IS CONFIRMED, THE INTEREST ON SUCH DEPOSIT HAS TO BE ALLOWED. THEREF ORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOM E-TAX(A). ACCORDINGLY, THE SAME IS CONFIRMED. 24. NOW COMING TO THE APPEAL FOR ASSESSMENT YEAR 20 06-07, THE FIRST GROUND OF APPEAL IS WITH REGARD TO DELETION OF ADDITION TO THE EXTENT OF RS.5 LAKHS ON ACCOUNT OF ESTIMATED PROFIT FROM 19-11-2005 TO 31-03-20 06. 16 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 25. WE HAVE HEARD SMT. A.S. BINDHU, THE LD.DR AND S HRI R KRISHNA IYER, THE LD.REPRESENTATIVE FOR THE TAXPAYER. THE COMMISSION ER OF INCOME-TAX(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE G ROUND THAT THERE WAS NO CORROBORATIVE MATERIAL FOUND DURING THE COURSE OF S EARCH OPERATION. THEREFORE, BASED UPON HIS REASONING FOR THE ASSESSMENT YEARS 2 000-01 TO 2005-06, THE COMMISSIONER OF INCOME-TAX(A) DELETED THE ADDITION. THE FACT REMAINS IS THAT THIS IS AN ASSESSMENT MADE U/S 153A OF THE ACT. TH E LANGUAGE OF SECTION 153A DOES NOT RESTRICT THE POWER OF THE ASSESSING OFFICE R TO CONFINE HIMSELF ONLY TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIO N. THE ASSESSING OFFICER CAN VERY WELL CONSIDER ALL THE MATERIAL AVAILABLE ON RE CORD INCLUDING THE SEARCH MATERIAL FOR COMPLETING THE ASSESSMENT. IN CASE OF EARLIER SCHEME OF SEARCH ASSESSMENTS, THE PROVISIONS OF SECTION 158BB(1) CLE ARLY LAID OUT THAT THE UNDISCLOSED INCOME SHALL BE COMPUTED ON THE BASIS O F THE EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATION OR SUCH INFORMATION WHICH IS RELATABLE TO THE EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATIO N. THE LEGISLATURE INTENTIONALLY REFRAMED THE LANGUAGE IN SECTION 153A OF THE ACT. THEREFORE, IT IS NOT NECESSARY THAT THE ASSESSING AUTHORITY HAS TO C ONFINE HIMSELF ONLY TO THE SEARCH MATERIAL. IN VIEW OF THE ABOVE, THE COMMISS IONER OF INCOME-TAX(A) IS NOT CORRECT IN DELETING THE ADDITION OF RS.5 LAKHS. ACC ORDINGLY, THE ORDERS OF COMMISSIONER OF INCOME-TAX(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 26. NOW COMING TO DELETION OF RS.1,87,805 TOWARDS I NTEREST ON LOAN FOR ASSESSMENT YEAR 2000-01, THIS ISSUE HAS ALREADY CON SIDERED BY THIS TRIBUNAL AND CONFIRMED THE GENUINENESS OF THE LOAN TRANSACTION. ONCE THE LOAN TRANSACTION IS CONFIRMED AS GENUINE, THE INTEREST ON SUCH LOAN HAS TO BE ALLOWED AS DEDUCTION. 17 ITA NO.715-717/COCH/2010 ITA NO. 82-88/COCH/2011 THEREFORE, WE DO NOT FIND ANY IN INFIRMITY IN THE O RDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 27. IN THE RESULT, THE APPEALS OF THE TAXPAYER FOR ASSESSMENT YEARS 2000-01; 2001-02; 2002-03; 2003-04 AND 2006-07 ARE DISMISSED AND THAT FOR ASSESSMENT YEARS 2004-05 AND 2005-06 ARE PARTLY ALLOWED. THE AP PEALS FOR ASSESSMENT YEARS 2000-01, 2002-03 AND 2006-07 FILED BY THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH OCTOBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 12 TH OCTOBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH