CIT VI, Hyderabad V. Sri T.V.Chakravarthy, Hyderabad

ITA 883/HYD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3011 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 13-05-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VENKAT REDDY
• Assessee Lawyers: K G SAI PRASAD
• Keywords: Capital asset; Depreciation; Revised return; Unabsorbed depreciation
• Section: 133A; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA-883/HYD/2008 ASSESSMENT YEAR 2005 -06 THE CIT, VI, HYDERABAD (RESPONDENT) VS SHRI T.V. CHAKRAVARTHY, HYDERABAD (PAN ACIPT 8793 R) (APPELLANT) APPELLANT BY : SHRI VENKAT REDDY, CIT, DR RESPONDENT BY : SHRI K.G. SAI PRASAD O R D E R PER SHRI N.R.S. GANESAN, JUDICIAL MEMBER THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGA INST THE ORDER PASSED BY THE ADMINISTRATIVE COMMISSIONER-VI, HYDERABAD ( CIT-VI) PASSED U/S 263 OF THE INCOME TAX ACT DATED 11/3/2008 FOR THE ASSESSMENT YEAR 2005-06. 2. SHRI K.G. SAI PRASAD, LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED THAT THERE WAS A SURVEY OPERATION IN THE PREMISES OF T HE ASSESSEE ON 20.1.2006. NO INCRIMINATING MATERIAL WAS FOUND DURIN G THE COURSE OF SURVEY OPERATION. HOWEVER, A SWORN STATEMENT WAS RECOR DED FROM THE ASSESSEE, A COPY OF WHICH IS AVAILABLE AT PAGES 1 8 OF TH E PAPER BOOK. ON THE BASIS OF THE SWORN STATEMENT, THE ASSESSEE FILED REV ISED RETURN DISCLOSING THE INVESTMENTS MADE IN TWO PLOTS TO THE EXT ENT OF RS.10.5 LAKHS FOR THE ASSESSMENT YEAR 2005-06. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE AGREED TO PAY AN ADDITION AL TAX OF RS.10 LAKHS IN ORDER TO AVOID FURTHER LITIGATION. TH E ASSESSING OFFICER ACCORDINGLY ASSESSED THE INCOME AT RS.27,36,980/- AFTER DISA LLOWING THE ITA NO.883/HYD/2009 SHRI TV CHAKRAVARTHY, HYDERABAD 2 EXPENDITURE TO THE EXTENT OF RS.89,750/-. HOWEVER, T HE ADMINISTRATIVE COMMISSIONER IN EXERCISE OF HIS POWER U/S 263 OF THE IT A CT FOUND THAT THERE WAS A CAPITAL ACCRETION TO THE EXTENT OF RS.3.14 LAKHS WHEN COMPARED TO THE ORIGINAL BALANCE SHEET WITH THE REVISE D BALANCE SHEET. THEREFORE, HE FOUND THAT AN ADDITION OF RS.3.14 LAKH S HAS TO BE MADE. THE ADMINISTRATIVE COMMISSIONER FURTHER FOUND THAT TH E CASH DEPOSIT MADE IN THE BANK ACCOUNT WAS NOT PROPERLY EXPLAINED AN D THE ASSESSING OFFICER HAS NOT EXAMINED THE SOURCES OF SUCH INVESTMENT. 3. REFERRING TO THE DIFFERENCE WITH REGARD TO THE CA PITAL ACCRETION, THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED TH AT IN THE ORIGINAL BALANCE SHEET THE ASSESSEE HAS DISCLOSED THE BUSINESS ASSET. HOWEV ER, IN THE REVISED BALANCE SHEET, THE ASSESSEE HAS DISCLOSED BOTH BUSINESS AS WELL AS PERSONAL ASSETS INCLUDING THE PUBLIC PROVIDENT FUND. THEREFORE, THE DIFFERENCE OF RS.3.14 LAKHS COMES IN. WH EN THIS WAS EXPLAINED TO THE ADMINISTRATIVE COMMISSIONER, HE COULD NOT APPRECIATE THE SAME. THEREFORE, ACCORDING TO THE LEARNED REPRESEN TATIVE, THERE IS NO DIFFERENCE AT ALL. REFERRING TO THE CASH DEPOSIT, T HE LEARNED REPRESENTATIVE SUBMITTED THAT THE ENTIRE TRANSACTION W AS REFLECTED IN THE BOOKS OF ACCOUNTS. THE ADMINISTRATIVE COMMISSIONER WITHO UT EXAMINING THE SAME HAS REJECTED THE CONTENTION OF THE ASSESSEE. EVE N FOR THE ARGUMENT SAKE THE ADDITIONAL INCOME OFFERED WAS TAKEN AS TOWARDS INFLATED EXPENDITURE, STILL THE ASSESSEE WAS LEFT WITH SUF FICIENT CASH TO THE EXTENT OF EXPENDITURE DISALLOWED. ACCORDING TO T HE LEARNED REPRESENTATIVE, THE ADDITIONAL INCOME OFFERED FOR TH E ASSESSMENT YEAR 2005-06 IS RS.22.60 LAKHS AND MOST OF THE CASH DEPOSITS IN THE BANK ACCOUNT ARE PRECEDED BY CASH WITHDRAWALS. THE SOURCE OF CASH DEPOSIT WAS EXPLAINED BEFORE THE ADMINISTRATIVE COMMISSIONER B Y A LETTER DATED 31.1.2008, A COPY OF WHICH IS AVAILABLE AT PAGES 21 2 2 OF THE PAPER BOOK. THE LEARNED REPRESENTATIVE FURTHER SUBMITTED THAT THOUGH DURING ITA NO.883/HYD/2009 SHRI TV CHAKRAVARTHY, HYDERABAD 3 THE COURSE OF SURVEY OPERATION, THE ONLY ISSUE ARISES FOR CONSIDERATION IS INVESTMENT OF RS.10.5 LAKHS IN TWO PLOTS, DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE AGREED TO PAY RS.10 LAKH S TOWARDS TAX. THE ASSESSING OFFICER ACCEPTED THE TAX PAID BY THE ASSESSEE AND COMPLETED THE ASSESSMENT. THE LEARNED COUNSEL FU RTHER SUBMITTED THAT THE ASSESSEE HAS PAID RS.10 LAKHS TOWARDS TA X AS PER THE AGREEMENT AND UNDERSTANDING WITH THE DEPARTMENT. TH EREFORE, THE CIT CANNOT REVISE THE ORDER ON THE GROUND THAT THE SOURCE O F DEPOSIT WAS NOT EXAMINED. ACCORDING TO THE LEARNED REPRESENTATIVE, T HE ASSESSING OFFICER AFTER EXAMINING ALL THE MATERIAL FACT INCLUD ING THE SOURCE OF DEPOSIT ASSESSED THE INCOME AND THE ASSESSEE ALSO AGREED TO PA Y A SUM OF RS.10 LAKHS TOWARDS TAX. 4. THE LEARNED REPRESENTATIVE FURTHER REFERRED TO THE ORDER OF THIS TRIBUNAL IN THE CASE OF SATYAM CONSTRUCTIONS (P) LTD. VS. DCIT IN ITA NO.895/HYD/1995, A COPY OF WHICH IS AVAILABLE AT PAGE 23 OF THE PAPER BOOK. ACCORDING TO THE LEARNED REPRESENTATIVE, ON IDE NTICAL CIRCUMSTANCES, A CO-ORDINATE BENCH OF THIS TRIBUNAL FOUND THAT ONCE THE ASSESSEE PAID TAX AS PER THE AGREEMENT AND UNDERSTANDING WITH THE DEPARTMENT, THAT CANNOT BE IGNORED BY THE REVISIONAL AUTHORITY. THEREFORE, ACCORDING TO THE LEARNED REPRESENTATIVE, TH E ADMINISTRATIVE COMMISSIONER COMMITTED AN ERROR IN REVISING THE ORDER O F THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THE ORDER OF THE A SSESSING OFFICER WAS NEITHER ERRONEOUS NOR PREJUDICE TO THE INTEREST OF THE REVENUE. 5. ON THE CONTRARY, SHRI VENKAT REDDY, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT AFTER THE SURVEY OPERA TION, THE ASSESSEE HAS FILED REVISED RETURN OF INCOME AND THE DIFFERENCE B ETWEEN THE BALANCE SHEET FILED ALONG WITH ORIGINAL RETURN AND TH E BALANCE SHEET FILED ALONG WITH THE REVISED RETURN WAS TO THE EXTENT OF RS. 3.14 LAKHS. THIS ITA NO.883/HYD/2009 SHRI TV CHAKRAVARTHY, HYDERABAD 4 WAS TAKEN BY THE ADMINISTRATIVE COMMISSIONER AS CAPITAL ACCRETION. WHEN THE ASSESSEE FILED REVISED BALANCE SHEET, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE INCREASED CAPITAL HAS T O BE EXPLAINED PROPERLY OTHERWISE, THE ASSESSEE HAS TO PAY TAX. THERE W AS A DIFFERENCE OF RS.3.14 LAKHS WITH REGARD TO THE CAPITAL ASSET. ACCOR DING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ADMINISTRATI VE COMMISSIONER HAS RIGHTLY EXERCISED HIS POWERS U/S 263 OF THE IT ACT. 6. REFERRING TO THE CASH DEPOSIT, THE LEARNED DEPART MENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS MAINTAIN ED TWO BANK DEPOSITS AND DEPOSITS WERE MADE TO THE EXTENT OF RS.70 LAKHS AS AGAINST ADMITTED BROKERAGE OF RS.60,53,902/-. ON PERUSAL OF THE ACCOUNT, IT WAS FOUND THAT THE ADDITIONAL INCOME OFFERED BY THE A SSESSEE TO THE EXTENT OF RS.22.52 LAKHS WAS OUT OF THE DISCLOSED CASH B ROKERAGE OF RS.60,53,902/- AND IT DOES NOT PERTAINS TO ANY RECEIPT OVER AND ABOVE OF RS.60,53,902/-. THEREFORE, THE ADMINISTRATIVE COMMISSI ONER FOUND THAT THE CASH DEPOSIT HAS TO BE EXAMINED BY THE ASSESSING OFFIC ER. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER SIDE A ND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY , THERE WAS A SURVEY OPERATION IN THE PREMISES OF THE ASSESSEE ON 20.1.2 006. THE ASSESSEE WAS A DIRECT SELLING AGENT OF HDFC BANK. ORIGINAL LY, THE ASSESSEE FILED RETURN OF INCOME SHOWING THE CAPITAL ASSET A T RS.5,90,287/-. HOWEVER, AFTER THE SURVEY OPERATION U/ S 133A OF THE IT ACT, THE ASSESSEE REVISED THE BALANCE SHEET AND SHOWN THE CAPITAL ASSET AT RS.33,75,602/-. THE ASSESSING OFFICER FOUND THAT THE ACCRETION TO THE CAPITAL ASSET TO THE EXTENT OF RS.28.28 LAKHS. THE ADDIT IONAL INCOME OFFERED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2004-05 AN D 2005-06 WAS ONLY TO THE EXTENT OF RS.25.14 LAKHS. THERE WAS A DIFFERENCE OF RS.3.14 LAKHS. ITA NO.883/HYD/2009 SHRI TV CHAKRAVARTHY, HYDERABAD 5 8. WE HAVE CAREFULLY GONE THROUGH THE BALANCE SHEET F ILED BY THE ASSESSEE ALONG WITH ORIGINAL AND REVISED RETURNS. AS RIGH TLY SUBMITTED BY THE ASSESSEES COUNSEL, THE BALANCE SHEET IN THE ORIGINAL RETURN HAS NOT DISCLOSED THE PERSONAL INVESTMENT. IN THE REVISED B ALANCE SHEET, THE ASSESSEE HAS SHOWN PUBLIC PROVIDENT FUND OF RS.3.50 L AKHS. THIS WAS NOT SHOWN IN THE ORIGINAL BALANCE SHEET. THEREFOR E, AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL, THE ORIGINAL BALANCE SHEET CONFINED ONLY TO THE BUSINESS ASSET. IT DOES NOT TAKEN INTO CONSID ERATION THE PERSONAL ASSETS. IN THE REVISED BALANCE SHEET, THE ASSESSEE H AS CLUBBED BOTH PERSONAL AS WELL AS BUSINESS ASSETS. THEREFORE, THERE WAS A DIFFERENCE TO THE EXTENT OF RS.3.14 LAKHS AS FOUND BY T HE ADMINISTRATIVE COMMISSIONER. THIS DIFFERENCE WAS DUE TO THE PERSONAL ASSE TS WHICH WERE INCLUDED IN THE BALANCE SHEET. THEREFORE, IN OUR OPINION, THE ORDER OF THE ASSESSING OFFICER IS NOT ERRONEOUS OR PREJUDICE TO T HE INTERESTS OF THE REVENUE. ACCORDINGLY, WE ARE UNABLE TO UPHOLD TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER ON THIS ISSUE. 9. THE NEXT ISSUE IS WITH REGARD TO CASH DEPOSIT IN TH E BANK ACCOUNT. IT IS NOT DISPUTED THAT THE CASH TRANSACTIONS ARE REFLECTE D IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. AS RIGHTLY SUBMITTED BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE, EVEN IF THE ADD ITIONAL INCOME WAS OFFERED WAS TOWARDS INFLATED EXPENDITURE, STILL THE ASSESSEE WAS LEFT WITH SUFFICIENT CASH TO CLAIM THE EXPENDITURE. THE ASSE SSEE HAS ADMITTEDLY OFFERED RS.22.60 LAKHS FOR THE ASSESSMENT YEAR 2005-06 FOR TAXATION. THE ASSESSEE HAS EXPLAINED THE SOURCES OF DEPOSIT BEFORE THE ADMINISTRATIVE COMMISSIONER BY WAY OF LETTER DATED 31 .1.2008 WHICH IS AVAILABLE ON PAGES 21-22 OF THE PAPER BOOK. ON PERU SAL OF THIS CASH BALANCE AVAILABLE IN THE BANK ACCOUNT AS DISCLOSED IN THE LETTER DATED 31.1.2008, IT IS SUFFICIENT TO MEET THE EXPENDITURE. THE ONLY OBSERVATION ITA NO.883/HYD/2009 SHRI TV CHAKRAVARTHY, HYDERABAD 6 OF THE ADMINISTRATIVE COMMISSIONER IS THAT THE DISCLOSED CASH BROKERAGE AT RS.60,53,902/- HAS TO BE SUBJECTED TO EXAMINATION. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE ADMINISTRATIVE COMMISSIONER . WHEN THE ASSESSEE HAS OFFERED ADDITIONAL INCOME OF RS.22.52 LAKHS, I T IS FOR THE ENTIRE GROSS RECEIPT. THE ADMINISTRATIVE COMMISSIONER I S NOT JUSTIFIED IN RESTRICTING THE ADDITIONAL INCOME SHOWN BY THE ASSESSEE OVE R AND ABOVE THE DISCLOSED INCOME ONLY TO THE EXTENT OF CASH BROKERAG E RECEIPT OF RS.60,53,902/. THE ENTIRE INCOME INCLUDING THE INCOME ORIGINALLY OFFERED AND THE ADDITIONAL INCOME HAS TO BE CONSIDERED AS INCOME FOR THE ENTIRE GROSS PROFIT. THEREFORE, WE DO NOT FIND A NY ERROR IN THE ORDER OF THE ASSESSING OFFICER. MOREOVER, THERE IS NO PREJUDICE TO THE INTERESTS OF THE REVENUE. 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISION O F THIS TRIBUNAL IN THE CASE OF SATYAM CONSTRUCTIONS (P) LTD. (SUPRA). IN THE CASE BEFORE THIS TRIBUNAL, IN SATYAM CONSTRUCTIONS (P) LTD. (SUPRA ), AS PER THE AGREEMENT AND UNDERSTANDING WITH THE DEPARTMENT, THE ASSESSMENT WAS COMPLETED AND THE ASSESSEE HAS PAID TAXES. HOWEVER, THE ADMINISTRATIVE COMMISSIONER IN EXERCISE OF HIS POWER U/S 263 OF THE IT ACT FOUND THAT THERE WAS NO UNABSORBED DEPRECIATION FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AS CLAIMED BY THE ASSESSEE. ACCORDI NGLY, IT WAS FOUND THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THOSE FACTUAL BACKGROUNDS, A CO-ORDINATE BENCH OF THIS TRIBUNAL FOUN D THAT WHEN THERE WAS AGREED ASSESSMENT, IT CANNOT BE IGNORED LIGHTLY BY EXERCISING POWER U/S 263 OF THE ACT. IT WAS FURTHER OBSERVED THAT UNLESS THE AGREEMENT AND UNDERSTANDING BETWEEN THE ASSESSEE AND THE REVENUE WAS FOUND TO BE FRAUDULENT WITH A MALA FIDE INTENTIO N OR MISREPRESENTATION ON THE PART OF THE ASSESSEE, SUCH AGREEM ENT CANNOT BE IGNORED IN THE REVISION PROCEEDINGS. IN THIS CASE AL SO, SUBSEQUENT TO ITA NO.883/HYD/2009 SHRI TV CHAKRAVARTHY, HYDERABAD 7 THE SURVEY OPERATION, THE ASSESSEE HAS FILED REVISED RETUR N. HOWEVER, DUE TO THE AGREEMENT AND UNDERSTANDING BETWEEN THE A SSESSEE AND THE DEPARTMENT, THE ASSESSEE HAS PAID A SUM OF RS.10 LAKHS TO WARDS TAX. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS MISREPR ESENTED THE FACT OR THERE IS ANY FRAUD ON THE PART OF THE ASSESSEE. THEREFORE, AS FOUND BY THE COORDINATE BENCH OF THIS TRIBUNAL, THE A DMINISTRATIVE COMMISSIONER IS NOT JUSTIFIED IN EXERCISING HIS POWER U/S 2 63 OF THE ACT IN SUCH CIRCUMSTANCES. THIS DECISION OF THE COORDINATE BENCH IS A BINDING ON THE TRIBUNAL. 11. IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO UPHOLD THE ORDER OF THE ADMINISTRATIVE COMMISSIONER. ACCORDINGLY, THE SAM E IS SET ASIDE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT 16.7.2010 SD/- SD/- AKBER BASHA N.R.S. GANESAN ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH JULY, 2010 COPY FORWARDED TO: 1. SHRI T.V. CHAKRAVARTHY, HYDERABAD C/O M/S CH. PARTHASARATHY & CO., 1-1-298/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST.NO.1., ASHOK NAGAR, HYDERABAD 2. ITO WARD 9(2), HYDERABAD 3. CIT- VI, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP