M/S. CHANDRAKANT. K. INGAWALE, THANE V. THE ITO WD 1(3), MUMBAI

ITA 890/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7451 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-02-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 07-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: KISHORE K PODDAR
• Keywords: Unexplained cash credit; Unexplained expenditure; Depreciation; Set aside
• Section: 69C; 22; 144; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE SHRI R V EASWAR, SENIOR VICE PRESIDENT AND SHRI T R SOOD, ACCOUNTANT MEMBER I T A NO: 890/MUM/2008 AND 200/MUM/2009 (ASSESSMENT YEAR: 2004-05 AND 2005-06) MR CHANDRAKANT K INGAWALE, THANE APPELLANT (PAN: AABPI0404N) VS INCOME TAX OFFICER, WARD 1(3), THANE RESPONDENT APPELLANT BY: SHRI KISHORE K PODDAR RESPONDENT BY: SHRI D SONGATE O R D E R R V EASWAR, SENIOR VICE PRESIDENT: THESE ARE TWO APPEALS FILED BY THE ASSESSEE FOR TH E ASSESSMENT YEARS 2004-05 AND 2005-06. BOTH ARISE UNDER IDENTI CAL FACTS AND CIRCUMSTANCES AND HENCE WERE HEARD TOGETHER AND ARE ALSO DISPOSED OFF BY A SINGLE ORDER. 2. THE ASSESSEE IS AN INDIVIDUAL AND CARRYING ON BU SINESS AS BUILDER. HE WAS CARRYING ON THE BUSINESS IN THE NA ME AND STYLE OF M/S SWASTIK BUILDERS. HE WAS ALSO A PARTNER IN A PARTN ERSHIP FIRM BY NAME M/S ANAND KAVACH & ASSOCIATES, WHICH WAS ALSO ENGAG ED IN THE SAME BUSINESS. AFTER RETIREMENT OF THE OTHER PARTNERS, THE ASSESSEE BECAME THE SOLE PROPRIETOR OF THE FIRMS BUSINESS ALSO WIT H EFFECT FROM 15 TH DECEMBER 2004. 3. IN RESPECT OF THE ASSESSMENT YEARS 2004-05 AND 2 005-06, THE ASSESSEE FILED RETURNS OF INCOME SHOWING INCOME OF RS.1,70,190/- AND 2 RS.2,06,191/- RESPECTIVELY, IN ADDITION TO AGRICULT URAL INCOME OF RS.34,000/- FOR EACH OF THE YEARS. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004-05 WAS COMPLETED UNDER SECTION 144 OF THE ACT ON A TOTAL INCOME OF RS.1,74,45,642/- AND THE ASSESSMENT FOR T HE ASSESSMENT YEAR 2005-06 WAS COMPLETED ON A TOTAL INCOME OF RS. 1,84,47,163/-. IN THESE ASSESSMENTS, APART FROM ESTIMATING THE PROFIT S FROM THE BUSINESS UNDER SECTION 44AD, THE ASSESSING OFFICER ALSO MADE THE FOLLOWING ADDITIONS: - ASSESSMENT YEAR 2004-05 (RS) ASSESSMENT YEAR 2005-06 (RS.) UNEXPLAINED CASH CREDIT UNDER SECTION 68 1,10,53,917/- 1,10,00,745/- UNEXPLAINED CASH CREDIT UNDER SECTION 68 (ADVANCES AGAINST FLATS) 57,89,400/- 67,89,000/- UNEXPLAINED EXPENDITURE UNDER SECTION 69C 1,44,394/- NIL DEPRECIATION DISALLOWED NIL 40,377/- 4. THE APPEALS TO THE CIT(A) AGAINST THE AFORESAID ASSESSMENTS WERE DISMISSED. IN THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05, HE HAS REJECTED THE ASSESSEES CLAIM THAT HE WAS COMPLETELY UNAWARE AND IGNORANT OF THE STATEMENTS OF ACCOUNTS FILED WITH THE RETURN OF INCOME, THAT HE HAS NOT SIGNED THEM AND T HAT HE CANNOT STAND BY THE CONTENTS THEREOF. THE CIT(A) FOUND THAT THE ASSESSMENT WAS COMPLETED IN ACCORDANCE WITH THE FINANCIAL STATEMEN TS CERTIFIED BY THE CHARTERED ACCOUNTANT AND, THEREFORE, THE ASSESSEE C ANNOT GO BACK ON THE SAME. HE THUS CONFIRMED THE ASSESSMENT. IN TH E ORDER FOR THE ASSESSMENT YEAR 2005-06, THE CIT(A) HAS DISMISSED T HE APPEAL OF THE 3 ASSESSEE ON THE GROUND THAT DESPITE SUFFICIENT OPPO RTUNITY THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE HIS RETU RN EITHER DURING THE ASSESSMENT PROCEEDINGS OR THE APPELLATE PROCEEDINGS . THUS BOTH THE APPEALS WERE DISMISSED BY THE CIT(A). 5. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRI BUNAL. IT WAS EXPLAINED BEFORE US ON BEHALF OF THE ASSESSEE THAT THE ACCOUNTS ON THE BASIS OF WHICH THE ASSESSMENTS WERE COMPLETED WERE NOT PROPERLY DRAWN UP AND THAT THE CHARTERED ACCOUNTANT WHO PREP ARED THEM DID NOT DO SO ON THE BASIS OF THE PROPER RECORDS MAINTA INED BY THE ASSESSEE BUT DREW THEM UP ON THE BASIS OF INCORRECT RECORDS AND DETAILS AND, THEREFORE, THEY CANNOT FORM THE BASIS OF THE ASSESSMENTS. IN SUPPORT OF THIS SUBMISSION AN AFFIDAVIT FROM ONE PRANAAY N INGLE, CHARTERED ACCOUNTANT DATED 25 TH JANUARY 2010 HAS BEEN FILED. IN THIS AFFIDAVIT IT HAS BEEN STATED BY HIM THAT THE ASSESS EE HAD APPROACHED HIM FOR PROFESSIONAL GUIDANCE SOMETIME IN AUGUST 20 05 AND HAD ALSO REQUESTED HIM TO ARRANGE FOR A BANK LOAN FOR HIS CO NSTRUCTION ACTIVITIES. IT HAS FURTHER BEEN STATED IN THE AFFIDAVIT THAT TH E CHARTERED ACCOUNTANT REALIZED THAT THE ASSESSEE WAS NOT MAINTAINING PROP ER BOOKS OF ACCOUNTS AND THAT HE WAS ALSO INFORMED THAT MOST OF HIS RECORDS WERE DESTROYED IN THE HEAVY RAINS IN MUMBAI ON 26 TH JULY 2005. THEREFORE, THE CHARTERED ACCOUNTANT HAD TO PREPARE THE ACCOUNT S FOR THE FINANCIAL YEARS 2003-04 AND 2004-05 CORRESPONDING TO THE YEAR S UNDER APPEAL ONLY ON THE BASIS OF INFORMATION PROVIDED TO HIM AN D ON THE BASIS OF THE BEST ESTIMATES. IT HAS ALSO BEEN AVERRED THAT THES E ACCOUNTS WERE 4 PREPARED FOR SUBMISSION TO THE BANK FOR LOAN PURPOS ES AND THAT WHEN THE BANKERS INSISTED THAT THE ASSESSEES TAX RETURN S FOR THE LAST THREE YEARS WAS A PRE-CONDITION FOR PROCESSING THE LOAN A PPLICATIONS, THE RETURNS FOR THE YEARS UNDER APPEAL WERE PREPARED ON THE BASIS OF THE ACCOUNTS PREPARED ON ESTIMATES AND THEY WERE ATTACH ED ALONG WITH THE RETURNS. FINALLY IT HAS BEEN STATED IN THE AFFIDAV IT BY THE CHARTERED ACCOUNTANT THAT THE SET OF ACCOUNTS SO ATTACHED WI TH THE INCOME TAX RETURNS OF MR CHANDRAKANT K INGAWALE FOR AY 2004-05 AND AY 2005-06 ARE NOT THE TRUE EXTRACT FROM THE BOOKS OF ACCOUNTS BUT THEY ARE PREPARED ON THE BEST ESTIMATED BASIS. ON THE BASI S OF THIS AFFIDAVIT IT IS PLEADED BY THE LEARNED REPRESENTATIVE FOR THE AS SESSEE THAT THE ASSESSMENTS SHOULD BE SET ASIDE AND THE ASSESSING O FFICER SHOULD BE DIRECTED TO COMPLETE THEM AFRESH, IN ACCORDANCE WIT H LAW. IT IS REPEATEDLY URGED THAT THE ENTRIES IN THE FINANCIAL STATEMENTS FILED WITH THE RETURNS OF INCOME ARE TOTALLY UNRELIABLE IN THE LIGHT OF THE AFFIDAVIT FILED BY THE CHARTERED ACCOUNTANT AND CANNOT FORM T HE BASIS OF THE ASSESSMENTS. 6. IN ORDER TO VERIFY THE CONTENTS OF THE AFFIDAVIT , WE REQUESTED THE LEARNED REPRESENTATIVE FOR THE ASSESSEE TO PRODUCE THE CHARTERED ACCOUNTANT WHO FILED THE AFFIDAVIT. WE ADJOURNED T HE MATTER FOR A DAY TO ENABLE THE DEPONENT OF THE AFFIDAVIT TO APPEAR B EFORE US. HE APPEARED BEFORE US ON 9 TH FEBRUARY 2010 AND CONFIRMED THE CONTENTS OF THE AFFIDAVIT. WE HAVE ALSO ELICITED CLARIFICAT IONS FROM HIM AS TO HOW HE PREPARED THE ACCOUNTS WHICH WERE FILED ALONG WIT H THE RETURNS OF 5 INCOME. IN BRIEF, HE STATED THAT THE FINANCIAL ACC OUNTS WERE PREPARED ON THE BASIS OF THE INFORMATION PROVIDED BY THE ASS ESSEE, FROM WHICH SEVERAL INFERENCES AND ESTIMATES WERE DRAWN AND THE STATEMENTS WERE PREPARED. HE CONFIRMED THAT THE FINANCIAL STATEMEN TS WERE NOT PREPARED FROM ANY PRIMARY RECORDS MAINTAINED BY THE ASSESSEE. 7. WE HAVE ALSO HEARD THE SUBMISSIONS OF THE LEARNE D DEPARTMENTAL REPRESENTATIVE. ON A CAREFUL CONSIDER ATION OF THE SUBMISSIONS MADE BEFORE US, THE CONTENTS OF THE AFF IDAVIT AND THE CLARIFICATIONS MADE BY THE DEPONENT OF THE AFFIDAVI T BEFORE US, IT SEEMS CLEAR TO US THAT THE ASSESSMENTS AS THEY HAVE BEEN FRAMED CANNOT BE UPHELD. THE FINANCIAL STATEMENTS FILED ALONG WITH THE RETURNS OF INCOME HAVE BEEN DRAWN UP BY THE CHARTERED ACCOUNTANT FOR THE PURPOSE OF OBTAINING A LOAN FROM THE BANK FOR THE ASSESSEES B USINESS. OBVIOUSLY, A ROSY PICTURE OF THE ASSESSEES BUSINES S HAD TO BE SHOWN AND, THEREFORE, MERELY ON THE BASIS OF THE ORAL STA TEMENTS WHICH WERE NOT BACKED BY ANY RECORDS AND ON THE BASIS OF SOME ENTRIES IN THE BANK STATEMENTS ETC. THE CHARTERED ACCOUNTANT HAD P REPARED THE FINANCIAL STATEMENTS. HE HAS ADMITTED BOTH IN THE AFFIDAVIT AS WELL AS BEFORE US THAT HE DID NOT PREPARE THE STATEMENTS FR OM ANY BOOKS OF ACCOUNT OR OTHER RELIABLE RECORD MAINTAINED BY THE ASSESSEE AND THAT WHATEVER WAS SUBMITTED TO THE BANK WAS ATTACHED TO THE RETURNS OF INCOME WHICH HAS GIVEN RISE TO THE PRESENT ASSESSME NTS. IN THESE CIRCUMSTANCES, THE ASSESSMENTS AS THEY STAND CANNOT BE UPHELD. WE, THEREFORE, SET ASIDE THE ASSESSMENTS AND RESTORE TH EM TO THE FILE OF THE 6 ASSESSING OFFICER, WHO SHALL REFRAME THE ASSESSMENT S IN ACCORDANCE WITH LAW, AFTER GIVING DUE OPPORTUNITY TO THE ASSES SEE TO SUBSTANTIATE THE RETURNS. WE DIRECT ACCORDINGLY AND ALLOW THE A SSESSEES APPEALS BUT ONLY FOR STATISTICAL PURPOSES. NO COSTS. ORDER PRONOUNCED ON 22 ND MARCH 2010. SD SD (T R SOOD) (R V EASWAR) ACCOUNTANT MEMBER SENIOR VICE PRESI DENT MUMBAI, DATED 22 ND MARCH 2010 SALDANHA COPY TO: 1. MR CHANDRAKANT K INGAWALE BLOCK NO.704, BLDG. NO.5, SHREE SWAMI KRIPA DHOKALI, KOLSHET ROAD, THANE (WEST) 400 607 2. ITO, WARD 1(3), THANE 3. CIT-I, THANE 4. CIT(A)-II, THANE 5. DR C BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI