Addl.CI.T., Mysore V. M/s Karthik Associates, Mandya

ITA 884/BANG/2011

• Counselvise Citation: 88421114 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SUNDAR RAJAN
• Assessee Lawyers: S VENKATESAN
• Section: 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER I.T.A. NO. 884 /BANG/20 11 (ASSESSMENT YEAR : 2006-07) ADDL. COMMISSIONER OF INCOME TAX, RANGE-2, BANGALORE. VS. M/S. KARTHIK ASSOCIATES, OPP. HEAD POST OFFICE, V.V. ROAD, MANDYA, MANDYA DISTRICT. PAN APPELLANT RESPONDENT. APPELLANT BY : SHRI A. SUNDAR RAJAN. RESPONDENT BY : SHRI S. VENKATESAN. DATE OF HEARING : 5.12.2012. DATE OF PRONOUNCEMENT : 21.12.2012. O R D E R PER SHRI JASON P. BOAZ, A.M . : THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS), MYSORE DT.19.7.2011 FOR ASSESSMENT YEAR 2006-07. 2. THE FACTS OF THE CASE, IN BRIEF, ARE AS UNDER : 2.1 THE ASSESSEE, A PARTNERSHIP FIRM CARRYING ON TH E BUSINESS OF WHOLESALE LOTTERY DEALERS AT MANDYA, FILED ITS RETURN OF INCOME FOR ASSESSMENT Y EAR 2006-07 ON 31.10.2006 DECLARING TOTAL INCOME OF RS.2,14,125. A SURVEY ACTION UNDER SECTIO N 133A OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS 'THE ACT') WAS CONDUCTED AT TH E BUSINESS PREMISES OF THE ASSESSEE AT MANDYA ON 13.7.2007 IN WHICH THE BOOKS OF ACCOUNTS OF THE ASSESSEE MAINTAINED IN TALLY SOFTWARE WERE IMPOUNDED ALONG WITH THE CPU AS THE ENTRIES FOUND IN THE COMPUTERIZED ACCOUNTS WERE NOT TALLYING WITH THE RETURN OF INCOME FILED B Y THE ASSESSEE FOR ASSESSMENT YEAR 2006-07. PURSUANT TO THE SURVEY ACTION, IT CAME TO LIGHT THA T THE ASSESSEE WAS MAINTAINING CERTAIN UNACCOUNTED BANK ACCOUNTS WHICH WERE NOT REFLECTED IN THE RETURN OF INCOME. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY BY ISSUE OF NOTI CE UNDER SECTION 143(2) OF THE ACT ON 1.8.2007. AFTER EXAMINING THE DETAILS CALLED FOR A ND EXPLANATION FURNISHED, THE ASSESSING 2 ITA NO.884/BANG/2011 OFFICER COMPLETED THE ASSESSMENT BY AN ORDER UNDER SECTION 143(3) OF THE ACT ON 31.12.2008 DETERMINING THE INCOME OF THE ASSESSEE AT RS.81,67, 747. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR ASSES SMENT YEAR 2006-07 DT.31.12.2008, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS) RAI SING SEVERAL GROUNDS AGAINST THE VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER. HOWEVER, I T IS SEEN THAT BEFORE THE CIT (APPEALS), THE ASSESSEE AGITATED ONLY TWO GROUNDS VIZ. (I) GROUND NO.5 RELATING TO THE ADDITION OF RS.45,3 3,717 AS UNEXPLAINED DEPOSITS IN THE UNACCOUNTED BANK ACCOUNT NO.3744 WITH CANARA BANK, MYSORE. (II) GROUND NO.7 RELATING TO THE ADDITION OF RS. 1 0,64,200 AS BONUS PAID TO THE ASSESSEE. THE LEARNED CIT (APPEALS) DISPOSED OFF THE APPEAL B Y ORDER DT.29.7.2011 ALLOWING THE ASSESSEE PARTIAL RELIEF BY DELETING THE ADDITION OF RS. 45,3 3,717 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS IN THE CANARA BANK ACCOUNT AT MYSORE. 3. AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APPEAL S) DT.29.7.2011 GRANTING RELIEF TO THE ASSESSEE, REVENUE IS NOW IN APPEAL BEFORE US. IN T HIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT (APPEALS) AGAINS T THE REVENUE IS OPPOSED TO LAW EQUITY, FACT AND CIRCUMSTANCES OF THE CASE. 2. THE HON'BLE CIT (APPEALS) HAS ERRED IN ALLOWING THE APPEAL IN FAVOUR OF ASSESSEE EVEN THOUGH THE BANK ACCOUNTS ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT. 3. THE HON'BLE CIT (APPEALS) HAS NOT APPRECIATED THE FACT THAT, THE ADDITIONWAS MADE, AS ASSESSEE HAS NOT SUBSTANTIATED THE SOURCES FOR THECASH DEPOSITS INTO THE BANK ACCOUNT. 4. THE HON'BLE CIT (APPEALS) HAS ERRED IN ACCEPT ING THE ASSESSEE'S ARGUMENTS CATEGORICALLY WITHOUT VERIFYING THE FACTS AND REJEC TING THE SAME. 5. THE HON'BLE CIT (APPEALS) IS NOT JUSTIFIED IN DELETING THE UNEXPLAINED CASH DEPOSIT AGGREGATING TO RS. 45,33,717 ON THE GROUND THAT, THE WITHDRAWAL OF THE AMOUNT AND THE CASH DEPOSIT INTO THE BANK ACCOUNT A RE SAME. 6. FOR THE ABOVE AND OTHER GROUND THAT MAY BE URGE D AT THE TIME OF HEARING OF APPEAL AND THE APPELLANT PRAYS THAT, THE APPEAL MAY BE ALLOWED IN THE INTEREST OF REVENUE 4. THE GROUNDS RAISED AT S.NOS.1, AND 6 BEING GENERAL IN NATURE, NO ADJUDICATION IS CALLED FOR THEREON. 3 ITA NO.884/BANG/2011 5.1 THE GROUNDS RAISED AT S.NOS.2 TO 5 CONTEND THAT THE LEARNED CIT (APPEALS)S ACTION IN DELETING THE ADDITION OF RS.45,23,717 WAS NOT JUSTI FIABLE. THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE FINDINGS OF THE ASS ESSING OFFICER IN THE ORDER OF ASSESSMENT WHEREIN THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT THE BANK ACCOUNT NO.3744 MAINTAINED BY THE ASSESSEE AT CANARA BANK, MYSORE WAS NOT REFL ECTED IN THE BOOKS OF ACCOUNT IMPOUNDED AT THE TIME OF SURVEY ACTION. 133A ON 13.7.2007. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THERE WERE CASH DEPOSITS TO THE EXTE NT OF RS.45,33,717 MADE IN THE SAID BANK ACCOUNT, AND CONTENDED THAT SINCE THE BANK ACCOUNT WAS UNDISCLOSED, THE DEPOSITS MADE THEREIN WERE NOT EXPLAINED. IT WAS FURTHER SUBMITTED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PREPARED A NEW SET OF BOOKS OF ACCOUN T AND PRODUCED THE SAME BEFORE THE ASSESSING OFFICER WITHOUT EXPLAINING HOW THE SAME W ERE PREPARED WHEN THE HARD DISK WAS IMPOUNDED AND WAS IN THE POSSESSION OF THE ASSESSIN G OFFICER. THE EXPLANATION TENDERED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT HE O PENED THE BANK ACCOUNT AT CANARA BANK, MYSORE ONLY TO MAKE PAYMENTS TO M/S. KANNAIAH AGENC IES TOWARDS PURCHASE OF LOTTERY TICKETS, THE PAYMENTS FOR WHICH WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. KANNAIAH AGENCIES SHOWED THAT THE PAYMENTS WERE MADE BY CHEQUES AND DEMAND DRAFTS. I N THIS VIEW OF THE MATTER, THE ASSESSING OFFICER REJECTED THE EXPLANATION PUT FORTH BY THE A SSESSEE THAT THE CASH DEPOSITS MADE IN THE BANK ACCOUNT WITH CANARA BANK, MYSORE REPRESENTED T HE PAYMENTS TO M/S. KANNAIAH AGENCIES BECAUSE THE LEDGER ACCOUNTS OF THE ASSESSEE APPEAR ING IN THE BOOKS OF M/S. KANNAIAH AGENCIES SHOW THE RECEIPT OF CHEQUES AND DEMAND DRAFTS. IT IS SUBMITTED THAT THE LEARNED CIT (APPEALS) ACCEPTED THE FRESH EXPLANATION PUT FORTH BY THE ASS ESSEE AND ALLOWED RELIEF. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT, IN THES E CIRCUMSTANCES, THE LEARNED CIT (APPEALS)S WAS NOT JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE HOLDING THAT THE ASSESSEE WAS DEPOSITING CASH INTO THE CANARA BANK ACCOUNT AT MYS ORE WHICH WAS IN TURN PAID TO M/S. KANNAIAH AGENCIES. 5.2 PER CONTRA, THE LEARNED COUNSEL FOR THE ASSESS EE SUPPORTED THE ORDERS OF THE LEARNED CIT(APPEALS). HE SUBMITTED THAT THE IMPOUNDED BOOKS CONTAINED PAYMENTS MADE TO M/S. 4 ITA NO.884/BANG/2011 KANNAIAH AGENCIES. THE SAID PAYMENTS MADE WERE OUT OF SUMS OF MONEY ACTUALLY DEPOSITED IN THE ACCOUNT OF CANARA BANK, MYSORE OF THE ASSESSEE FROM WHICH PAYMENTS WERE MADE TO M/S. KANNAIAH AGENCIES BY WAY OF CHEQUES AND DEMAND DRAF TS. HE SUPPORTED THE ORDERS OF THE LEARNED CIT (APPEALS) AND SUBMITTED THAT THE CASE OF THE ASSESSEE WAS NOT A FRESH GROUND SET UP BEFORE THE LEARNED CIT (APPEALS) BUT WAS ALSO UR GED BEFORE THE ASSESSING OFFICER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT (APPEALS) HAD ALSO CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND THE CO PY OF THE REMAND REPORT SHOWS THAT THE ASSESSING OFFICER HAD SUBMITTED HIS VIEWS ON THE EX PLANATIONS OF THE ASSESSEE BEFORE THE LEARNED CIT (APPEALS) FINALLY CAME TO THE FINDING H E DID IN HIS APPELLATE ORDER. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THESE C IRCUMSTANCES OF THE CASE, THE GROUNDS RAISED BY REVENUE ARE LIABLE TO BE REJECTED AND PRAYED THA T THE ORDER OF THE LEARNED CIT (APPEALS) ON THIS ISSUE BE UPHELD. 5.3 WE HAVE HEARD BOTH PARTIES AND CAREFULL Y PERUSED AND CONSIDERED THE MATERIAL ON RECORD. THE LEARNED CIT (APPEALS) HAS GIVEN THE FO LLOWING FINDINGS OF FACT, ON THIS ISSUE, IN HIS ORDER AT PAGES 6 AND 7 THEREOF WHICH ARE EXTRACTED AND REPRODUCED HEREUNDER : I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLANT, THE ASSESSMENT ORDER AND THE CONTENTS OF THE REMAND REPORT. AS SEEN FROM THE LE DGER ACCOUNT OF THE APPELLANT IN THE BOOKS OF KANNAIAH AGENCIES WHICH IS ANNEXURE 3 TO THE ASSESSMENT ORDER, THERE ARE VARIOUS RECEIPTS WITH NARRATION SOMETIMES AS DD AND SOMETIMES AS CHEQUES. THE RELEVANT ENTRIES ARE LISTED BELOW : DATE NARRATION AMOUNT RS. 7.7.2005 BEING THE DD NO.004627 RECEIVED FORM THE ABOVE STOCKIEST TOWARDS WEEKLY PAYMENT FOR THE PERIOD OF 27.6.2005 TO 3.7.2005. 1,34,827 14.7.2005 BEING THE DD NO.004628 RECEIVED FORM THE ABOVE STOCKIEST TOWARDS WEEKLY PAYMENT FOR THE PERIOD OF 4.7.2005 TO 10.7.2005. 1,06,495 4.8.2005 BEING THE DD NO.004630 RECEIVED FORM THE ABOVE STOCKIEST TOWARDS WEEKLY PAYMENT FOR THE PERIOD OF 25.7.2005 TO 10.7.2005. 2,37,170 11.8.2005 BEING THE CH.NO.004631 1,56,679 20.8.2005 BEING THE CH.NO.004632 1,71,444 2.9.2005 BEING THE CH. NO.004633 1,76,838 5 ITA NO.884/BANG/2011 12.9.2005 BEING THE CH. NO.004634 1,05,943 16.9.2005 BEING THE CH. NO.004636 76,171 1.10.2005 CH.NO.004637 63,791 7.10.2005 CH.NO.004638 2,89,863 4.11.2005 CH.NO.004639 1,16,800 11.11.2005 CH.NO.004640 1,25,019 18.11.2005 CH.NO.004642 2,27,217 25.11.2005 CH.NO.004643 2,05,969 2.12.2005 CH.NO.004644 1,42,347 5.12.2005 CH.NO.004645 60,821 16.12.2005 CH.NO.004646 1,20,101 23.12.2005 CH.NO.004647 2,70,000 12.1.2006 CH.NO.004648 1,45,142 19.1.2006 CH.NO.004649 80,000 27.1.2006 CH.NO.004650 1,75,000 10.2.2006 CH.NO.007551 1,00,000 16.2.2006 CH.NO.007552 49,000 23.2.2006 CH.NO.007553 1,50,000 2.3.2006 CH.NO.007554 2,20,000 9.3.2006 CH.NO.007555 2,00,000 16.3.2006 CH.NO.007556 80,000 23.3.2006 CH.NO.007557 1,30,000 31.3.2006 CH.NO.007558 1,00,000 THE ASSESSING OFFICER HAS GIVEN THE DETAILS OF DATE OF DEPOSIT AND THE AMOUNT INTO THE CANARA BANK ACCOUNT OF THE APPELLANT WHICH IS A NNEXURE 4 TO THE ASSESSMENT ORDER. FROM THE ABOVE TWO ANNEXURES, THE FOLLOWING OBSERVA TIONS CAN BE MADE : 1. IN THE LEDGER ACCOUNT OF THE APPELLANT IN THE B OOKS OF KANNAYYA AGENCIES, THERE IS A RECEIPT OF EXACTLY THE SAME AMOUNT ON THE SAME DA TE WITH THE NARRATION AS AMOUNT RECEIVED EITHER THROUGH CHEQUE OR SOMETIMES DD. 2. THE CHEQUES ARE ALL SERIALLY NUMBERED STARTING FROM 4627 ON 7.7.2005 FOR AN AMOUNT OF RS.1,34,827 TO 4650 ON 27.1.2006 FOR AN A MOUNT OF RS.1,75,000. SUBSEQUENT SERIES STARTS FROM CHEQUE NO.7551 DT.10. 2.2006 FOR AN AMOUNT OF RS.1 LAKH TILL 7558 DT.31.3.2006 FOR AN AMOUNT OF RS.1 L AKH. THE APPELLANT HAS ALSO EXPLAINED DURING APPEAL PROCEEDINGS THAT THIS CHEQU E NUMBERS ARE REFLECTED IN THEIR BANK ACCOUNTS. THE APPELLANT HAS FILED A COPY OF T HE CANARA BANK ACCOUNT WHEREIN THESE PAYMENTS ALONG WITH CHEQUE NUMBERS ARE REFLEC TED. 6 ITA NO.884/BANG/2011 5.4 THE ABOVE FINDINGS OF THE LEARNED CIT (APPEALS) HAVE NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER OR BY THE LEARNED DEPARTMENTAL RE PRESENTATIVE BEFORE US. IN THE LIGHT OF THE FINDINGS OF THE LEARNED CIT (APPEALS), IT IS CLEAR THAT THE BANK ACCOUNT NO.3477 AT CANARA BANK, MYSORE WAS OPENED BY THE ASSESSEE ONLY TO MAKE PAYM ENTS TO M/S. KANNAIAH AGENCIES. THE ASSESSEE CARRIED ON BUSINESS AT MANDYA. M/S. KANNA IAH AGENCIES IS SITUATED AT MYSORE AND DID NOT WANT TO ACCEPT OUTSTATION CHEQUES OF THE ASSESS EE DRAWN AT MANDYA. THEREFORE, THE ASSESSEE OPENED A BANK ACCOUNT AT CANARA BANK, MYSO RE AND ISSUED CHEQUES FOR PURCHASE OF LOTTERY TICKETS FROM M/S. KANNAIAH AGENCIES. THE C HEQUES WERE HONOURED BY DEPOSITING CASH IN THE SAID BANK ACCOUNT AT CANARA BANK, MYSORE. IN T HE BOOKS OF ACCOUNT, THE ASSESSEE HAS SHOWN PAYMENTS TO M/S. KANNAIAH AGENCIES IN CASH. EXACTL Y THE SAME AMOUNT IS DEPOSITED IN THE BANK ACCOUNT AT CANARA BANK, MYSORE AND A CHEQUE IS ISS UED TO M/S. KANNAIAH AGENCIES. IN OTHER WORDS, THE DEPOSITS IN CANARA BANK, MYSORE ARE FROM OUT OF AMOUNTS DRAWN FROM THE CASH BOOK OF THE ASSESSEE AND THEREFORE, THE SOURCE OF THE DE POSITS IS FULLY EXPLAINED. IN FACT, THE PAYMENTS MADE TO M/S. KANNAIAH AGENCIES ARE ALSO RE CORDED IN THE IMPOUNDED BOOKS AT THE SURVEY ACTION AND THE ASSESSEE HAS CLAIMED THE SAME AS PURCHASES AND THEY HAVE BEEN EXAMINED AND ALLOWED AS SUCH. WE ALSO FIND THAT THE AFORESA ID EXPLANATION OF THE ASSESSEE WAS PUT TO THE ASSESSING OFFICER AND A REMAND REPORT WAS CALLED FO R BY THE LEARNED CIT (APPEALS). IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFE RE WITH THE FINDINGS OF THE LEARNED CIT (APPEALS) ON THIS ISSUE AND THEREFORE CONFIRM HIS O RDER. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 1 ST DAY OF DEC., 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER *REDDY GP 7 ITA NO.884/BANG/2011 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - C BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDE R SR. PRIVATE SECRETARY, ITAT, BANGALORE