N.A. Prasad, Hubli V. ITO, Bangalore

ITA 911/BANG/2010

• Counselvise Citation: 91121114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-08-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 19-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: P C CHADAGA
• Keywords: Opportunity of being heard; Source of fund
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. P.MADHAVI DEVI, JUDICIAL MEMBER ITA NOS.911 & 912(BANG)/2010 (ASSESSMENT YEARS: 1999-2000 AND 2000-01) SHRI N.A. PRASAD, C/O M/S. HARYANA HARDWARES. STATION ROAD, HUBLI. PAN: ADWPV9768P VS. APPELLANT INCOME-TAX OFFICER, WARD 1(1), BANGALORE. RESPONDENT APPELLANT BY: SHRI P.C.CHADAGA. RESPONDENT BY : SMT.SUSAN THOMAS JOSE. DATE OF HEARING: 28-09-2011 DATE OF PRONOUNCEMENT: 28-09-2011 O R D E R PER N.K.SAINI, AM : THESE TWO APPEALS BY THE ASSESSEE ARE FILED AGAINS T SEPARATE ORDERS DATED 22-3-2001 AND 19-3-2010 FOR T HE ASSESSMENT YEARS 1999-00 AND 2000-01 RESPECTIVELY O F THE LD.CIT(A), HUBLI. 2. SINCE ISSUES INVOLVED IN THESE APPEALS ARE COMM ON, THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPO SED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA 911 & 912(BANG)/2010 PAGE 2 OF 10 3. FIRST WE WILL DEAL WITH ITA NO.911/BANG/2011 FOR THE ASSESSMENT YEAR 1999-2000. 3.1.1 THE FIRST ISSUE IN THIS APPEAL RELATES TO CON FIRMATION OF ADDITION OF ` .30,000/- MADE BY THE AO ON ESTIMATE BASIS IN RESPECT OF THE ASSESSEES INDIVIDUAL BUSINESS. FAC TS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCO ME ON 22-12- 2005 DECLARING AN INCOME OF ` 1,79,333/- AND AGRICULTURAL INCOME OF ` .45,000/-. SINCE THE SAID RETURN WAS FILED BEYOND THE TIME PERMITTED UNDER THE INCOME-TAX ACT, 1961 [ HEREINAFTER REFERRED TO AS 'THE ACT'] THE SAME WAS LODGED AS NON EST. LATER ON THE AO ISSUED NOTICE U/S 148 OF THE ACT. IN RESP ONSE TO THAT, THE ASSESSEE STATED THAT THE RETURN ALREADY FILED O N 22-12-2005 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTIC E U/S 148. THE SOURCES OF INCOME OF THE ASSESSEE WERE INTEREST AND REMUNERATION FROM M/S.N.A.PRASAD & ASSOCIATES, AND M/S.HARYANA HARDWARE, HUBLI. IN ADDITION TO THIS, T HE ASSESSEE HAD DECLARED INCOME OF ` 1,20,000/- ON ESTIMATE BASIS FROM THE WORK OF PLASTER OF PARIS. THE AO OBSERVED THAT THE ASSESSEE HAD NOT GIVEN ANY SATISFACTORY EXPLANATION WITH REGARD TO THE INCOME DECLARED AT ` 1,20,000/- FROM THIS BUSINESS ON ESTIMATE BASIS. HE ESTIMATED THE SAME AT ` 1,50,000/- AND MADE THE ADDITION OF ` 30,000/-. 3.1.2 THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT (A) AND SUBMITTED THAT THE MAJOR ITEM OF WORK WAS UNDER TAKEN BY THE PARTNERSHIP FIRMS AND THE ASSESSEE HAD CARRIED OUT ONLY SMALL ITEMS OF WORK AND REPAIRS IN HIS INDIVIDUAL C APACITY AND ITA 911 & 912(BANG)/2010 PAGE 3 OF 10 THAT SINCE NO BOOKS OF ACCOUNT WERE MAINTAINED, THE INCOME WAS DECLARED ON THE BASIS OF ROUGH NOTES AND KEEPIN G IN VIEW THE ASSETS AND LIABILITIES POSITION AT THE END OF T HE YEAR. 3.1.3 THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE NEITHER EXP LAINED THE BASIS OF NET PROFIT DECLARED ON THE BASIS OF NET PO SITION OF ASSETS AND LIABILITIES NOR FURNISHED DETAILS OF ASSETS AND LIABILITIES EITHER BEFORE THE AO OR BEFORE HIM IN THE APPELLATE PROCEE DINGS. HE FURTHER OBSERVED THAT THE ASSESSEE HAS ALSO NOT PRO VIDED THE DETAILS OF WORK EXECUTED BY HIM AND HAD NOT BROUGHT OUT ANY MATERIAL SUPPORTING THE INCOME DECLARED AT ` .1,50,000/-. THE LD.CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. NO W THE ASSESSEE IS IN APPEAL. 3.1.4 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS NO T MAINTAINING THE BOOKS OF ACCOUNT AND DECLARED THE INCOME ONLY O N ESTIMATE BASIS. HOWEVER, THE EXPLANATION OF THE ASSESSEE TH AT HE WAS CARRYING ON SMALL ITEMS OF WORK IN HIS INDIVIDUAL C APACITY AND THE MAJOR ITEMS OF WORK WERE UNDERTAKEN BY THE FIRM S M/S.N.A.PRASAD & ASSOCIATES AND M/S.HARAYANA HARDWA RE, HAS NOT BEEN REBUTTED. IT IS ALSO NOTICED THAT THE AO, WHILE ESTIMATING INCOME AT ` 1,50,000/- HAS NOT GIVEN ANY BASIS. IN OUR OPINION, THE INCOME ESTIMATED BY THE AO AND CON FIRMED BY THE LD.CIT(A) IS ON A HIGHER SIDE. WE, THEREFORE, TO MEET THE ENDS OF JUSTICE, DEEM IT APPROPRIATE TO REDUCE THE ESTIMATED ITA 911 & 912(BANG)/2010 PAGE 4 OF 10 INCOME TO ` 1,30,000/- IN PLACE OF ` .1,50,000/-. THUS, THE ASSESSEE WILL GET A RELIEF OF `2 0,000/- ON THIS ACCOUNT. 3.2.1 THE NEXT ISSUE IN THIS APPEAL RELATES TO THE ADDITION OF ` 35,000/- ON ACCOUNT OF LOW WITHDRAWALS. FACTS RELA TING TO THIS ISSUE IN BRIEF ARE THAT THE AO OBSERVED THAT T HE ASSESSEE HAD NOT SHOWN ANY WITHDRAWAL TOWARDS HOUSEHOLD EXPE NSES IN THE FIRMS OF M/S.N.A.PRASAD & ASSOCIATES AND M/S.HA RYANA HARDWARE, HUBLI IN WHICH THE ASSESSEE WAS A PARTNER AND THAT THE MAIN SOURCE OF INCOME OF THE ASSESSEE WAS INTER EST AND REMUNERATION FROM THE ABOVE TWO FIRMS. BESIDES THA T THE ASSESSEE WAS HAVING INCOME FROM PLASTER OF PARIS WO RK AND INCOME FROM AGRICULTURE. THE AO POINTED OUT THAT T HE ASSESSEE HAD SHOWN WITHDRAWAL OF ` .14,800/- IN HIS CAPITAL ACCOUNT. HE, THEREFORE, CONSIDERING THE STANDARD OF LIVING AND C OST OF LIVING ESTIMATED HOUSEHOLD EXPENSES AT ` .70,000/- AND ALSO CONSIDERING THAT 50% OF THE SAME WAS MET BY THE ASS ESSEE OUT OF HIS EARNINGS, HE MADE THE ADDITION OF ` 35,000/- FOR THE LOW WITHDRAWALS. 3.2.2 THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT (A) AND SUBMITTED THAT THE AO HAS NOT TAKEN INTO CONSID ERATION ` .14,800/- DEBITED IN THE CAPITAL ACCOUNT AND ` .13,800/- DEBITED IN THE CASE OF THE ASSESSEES SON THE TOTAL OF WHIC H CAME TO ` 28,600/- WHICH WAS ADEQUATE TO MEET HOUSEHOLD EXPEN SES WITH SIX FAMILY MEMBERS. 3.2.3 THE LD.CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE AO HAD ALREADY ALLO WED REBATE ITA 911 & 912(BANG)/2010 PAGE 5 OF 10 OF ` 35,000 FROM THE ESTIMATED TOTAL HOUSEHOLD EXPENSES OF ` 70,000/- BY CONSIDERING THE EXPENSES HAVING BEEN ME T OUT FROM THE ASSESSEES OWN EARNING AND WITHDRAWALS FRO M THE CAPITAL ACCOUNT. THE LD.CIT(A) HELD THE ADDITION M ADE BY THE AO AT ` .35,000/- TO BE REASONABLE. NOW, THE ASSESSEE IS I N APPEAL. 3.2.4 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH TH E PARTIES AND MATERIAL ON RECORD. IN THE PRESENT CAS E, IT APPEARS THE ASSESSEE HAD NOT FURNISHED THE COMPLETE DETAILS OF HOUSEHOLD EXPENSES AND THE SOURCE FOR MEETING THE S AME BEFORE THE AO. IT IS ALSO NOTICED THAT THE AO HAD NOT DISPUTED THE FACT THAT THE ASSESSEE WAS EARNING IN HIS INDIV IDUAL CAPACITY BY WAY OF PLASTER OF PARIS WORK AND WAS ALSO HAVING AGRICULTURAL INCOME. THE AO, CONSIDERING 50% OF THE EXPENSES AM OUNTING TO ` .35,000/- FROM HIS EARNING, MADE THE ADDITION OF A SUM OF ` .35,000/- BY CONSIDERING THAT THE EXPENSES INCURRED BY THE ASSESSEE WERE ` .70,000/-. IN OUR OPINION, THE ESTIMATE OF 50% OUT OF PERSONAL EARNING APPEARS TO BE ON LOWER SIDE . THE AO, WHILE MAKING THE ADDITION HAD NOT CONSIDERED THAT T HE ASSESSEE HAD SHOWN WITHDRAWAL OF A SUM OF ` .14,800/- IN HIS CAPITAL ACCOUNT. WE, THEREFORE, CONSIDERING THE TOTALITY O F THE FACTS AND TO MEET THE ENDS OF JUSTICE, DEEM IT FAIR AND REASO NABLE TO REDUCE THE ADDITION TO ` .15,000/- AND THUS THE ASSESSEE WILL GET FURTHER RELIEF OF ` .20,000/-. ITA 911 & 912(BANG)/2010 PAGE 6 OF 10 3.3.1 THE NEXT ISSUE RELATES TO THE CONFIRMATION OF DISALLOWANCE OF LOSS ON SALE OF CAR AND INTEREST ON CAR LOAN. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE CLAIMED LOSS ON SALE OF CAR TO THE EXTENT OF ` 65,000/- AND INTEREST ON CAR LOAN AT ` 28,387/-. THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF WRITTEN DOWN VALUE OF THE CAR, DATE OF SALE OF C AR, SALE CONSIDERATION RECEIVED ETC. THE ASSESSEE WAS ALSO ASKED TO FURNISH DOCUMENTARY EVIDENCE IN SUPPORT OF INTEREST PAID ON THE CAR LOAN. ACCORDING TO THE AO, THE ASSESSEE HAD NO T FILED SUCH DETAILS. HE, THEREFORE, IN THE ABSENCE OF THOSE DE TAILS, DISALLOWED LOSS ON SALE OF CAR AS WELL AS INTEREST ON CAR LOAN. 3.3.2 THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT (A) AND SUBMITTED THAT MARUTI 800 CAR WAS PURCHASED ON 22-2 -1998 FOR `2,20,000/- INCLUDING TAX AND REGISTRATION CHARGES FOR WHICH A LOAN OF `1,60,000/- WAS TAKEN FROM KARNATAKA BANK, HUBLI. IT WAS FURTHER STATED THAT THE CAR MET WITH AN ACCIDEN T AND DUE TO SENTIMENTAL FEELINGS THE CAR WAS SOLD DURING THE FI NANCIAL YEAR 1998-99 FOR A SUM OF `.1,50,000/- IN A CAR MELA WHI CH RESULTED IN A LOSS OF `65,000/- ON SALE OF CAR. 3.3.3 THE ASSESSEE ALSO FURNISHED SOME PAPERS FROM M/S.KITTUR AUTOS AND ONE SANCTION ORDER FROM THE KA RNATAKA BANK LTD., ALONG WITH AN INVOICE FROM M/S.DHURU MOT ORS TO JUSTIFY THAT INTEREST OF `.28,387/- WAS PAID AGAIN ST THE BANK LOAN TAKEN FOR PURCHASE OF CAR. THE LD.CIT(A), AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT NOTHING C OULD BE READ FROM THE PAPERS FURNISHED BY THE ASSESSEE AND APART FROM ITA 911 & 912(BANG)/2010 PAGE 7 OF 10 FRESH EVIDENCES, THE PAPERS SUBMITTED BY THE ASSESS EE DID NOT SUPPORT FACTS AND FIGURES MENTIONED IN HIS WRITTEN SUBMISSION. HE ALSO POINTED OUT THAT THE ASSESSEE HAD NEITHER F URNISHED WORKING OF THE LOSS ON SALE OF CAR NOR GAVE THE DET AILS OF INTEREST PAYMENT AS CLAIMED AND IT WAS ALSO NOT KNOWN WHETHE R THE CAR WAS EVER USED FOR THE PURPOSE OF BUSINESS OF THE AS SESSEE. HE, ACCORDINGLY, CONFIRMED THE DISALLOWANCE MADE BY THE AO. NOW, THE ASSESSEE IS IN APPEAL. 3.3.4 LEARNED COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE LD.CIT(A), WITHOUT APPRECIATING THE FACTS IN RIGHT PERSPECTIVE, CONFIRMED THE ADDITION MADE BY T HE AO. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUPPORTED THE ORDER OF THE LD.CIT(A). 3.3.5 AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES AND MATERIAL ON RECORD, IT APPEARS THAT THE ASSESSEE COULD NOT FURNISH THE REQUISITE DETAILS SOUGHT BY T HE AO. HOWEVER, HE FURNISHED THE COPY OF INVOICE FROM M/S. DHURU MOTORS, SANCTION ORDER FROM KARNATAKA BANK AND SOME PAPERS FROM M/S.KITTUR AUTOS, HUBLI BEFORE THE LD.CIT(A) W HO CONSIDERED THE SAME AS FRESH EVIDENCE BUT DID NOT SEEK REMAND REPORT FROM THE AO ON THE SAID NEW EVIDENCE. IN THE PRESE NT CASE, THE LD.CIT(A) ALSO STATED THAT THE ASSESSEE HAD NEITHER FURNISHED WORKING OF THE LOSS ON SALE OF CAR NOR GAVE THE DET AILS OF INTEREST PAYMENT AS CLAIMED BUT IT IS NOT CLEAR FROM THE OR DERS OF THE AO AS WELL AS THE LD.CIT(A) THAT AS TO WHETHER ANY SUC H DETAILS WERE SOUGHT TO BE FURNISHED BY THE AUTHORITIES BELOW. W E, THEREFORE, ITA 911 & 912(BANG)/2010 PAGE 8 OF 10 CONSIDERING THE TOTALITY OF THE FACTS, ARE OF THE O PINION THAT THIS ISSUE REQUIRES RE-EXAMINATION AT THE LEVEL OF THE A O. IN THAT VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE L D.CIT(A) ON THIS ISSUE AND REMAND THE SAME BACK TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PRO VIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE AS SESSEE. 4.1 THE FIRST ISSUE IN ITA NO.912(BANG)/2010 ITA NO.912(BANG)/2010 ITA NO.912(BANG)/2010 ITA NO.912(BANG)/2010 RELATES TO THE CONFIRMATION OF THE ADDITION OF `40,000/- MADE BY THE AO ON ESTIMATE BASIS IN RESPECT OF THE ASSESSEES NEW BUS INESS. A SIMILAR ISSUE WAS INVOLVED IN THE PRECEDING YEAR WH EREIN ESTIMATED ADDITION OF `30,000/- WAS MADE BY THE AO AND SUSTAINED BY THE LD.CIT(A). SINCE FACTS FOR THE YE AR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED I N THE EARLIER YEAR AND EVEN THE SUBMISSIONS OF BOTH THE PARTIES W ERE SIMILAR, WE, BY TAKING A SIMILAR APPROACH AS WAS IN THE EARL IER YEAR, REDUCE THE ADDITION TO `20,000/-. THUS, THE ASSESS EE GETS A RELIEF OF `20,000/-. 4.2 ANOTHER ISSUE AGITATED BY THE ASSESSEE IN THIS APPEAL RELATES TO THE ADDITION OF ` 12,000 TOWARDS INCOMES FROM LORRY. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE AO NOTICED THAT THE ASSESSEE HAD PLIED THREE LORRIES I.E. KA 25/A-2 431, KA 25/A- 567 AND KA 25/A-3485 WHEREAS HE HAS DECLARED INCOME IN RESPECT OF TWO LORRIES ONLY U/S 44AE OF THE ACT. T HE EXPLANATION OF THE ASSESSEE BEFORE THE AO WAS THAT THE NEW LORR Y NO.KA 25/A 3485 WAS NOT PUT TO USE DURING THE YEAR AND HE NCE NO INCOME HAD BEEN DECLARED. THE AO ASKED THE ASSESSE E TO FURNISH DETAILS OF TAKING DELIVERY OF THE SAID LORR Y AND DATE OF ITA 911 & 912(BANG)/2010 PAGE 9 OF 10 COMPLETION OF THE BODY BUILDING AND WHEN IT WAS ACT UALLY PUT TO USE. ACCORDING TO THE AO, THE ASSESSEE DID NOT PRO DUCE INVOICE OF THE SAID LORRY AND WAS NOT ABLE TO GIVE THE DATE OF COMPLETION OF THE BODY BUILDING AND THE EXACT DATE ON WHICH TH E SAID LORRY WAS PUT TO USE. AT THE SAME TIME, THE AO POINTED O UT THAT M/S.SUNDARAM FINANCE LTD., WHICH HAD FINANCED THE A SSESSEE FOR PURCHASE OF THE SAID LORRY HAD SANCTIONED THE LOAN IN THE MONTH OF AUGUST 1999 AND PROBABLY SOME TIME REQUIRED FOR BODY BUILDING. ACCORDING TO HIM, THE LORRY MUST HAVE BE EN PUT TO USE IN THE MONTH OF OCTOBER 1999, HE ESTIMATED THE INCO ME FROM THIS LORRY AT `.12,000/- I.E. `.2000/- PER MONTH FO R SIX MONTHS AND BROUGHT THE SAME TO TAX. 4.2.1 THE ASSESSEE CARRIED THE MATTER TO THE LD.CIT (A) AND SUBMITTED THAT ALL THE DOCUMENTS REQUESTED BY THE A O WERE IMPOUNDED/SEIZED AND THOSE DOCUMENTS WERE IN THE CU STODY OF THE AO. THEREFORE, COULD NOT BE PRODUCED. IT WAS CONTENDED THAT THE AO, WITHOUT VERIFYING THE DOCUMENTS IN HIS POSSESSION, HAD ESTIMATED THE INCOME. THE LD.CIT(A), DID NOT F IND MERIT IN THE ABOVE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ACTION OF THE AO. NOW THE ASSESSEE IS IN APPEAL. 4.2.2 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH TH E PARTIES ON THIS ISSUE. IN OUR OPINION, THE AO SHOU LD HAVE VERIFIED THE DOCUMENTS WHICH WERE IN HIS POSSESSION WHILE ES TIMATING INCOME. IN THAT VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTIO N OF THE AO. WE, THEREFORE, SET ASIDE THIS ISSUE BACK TO THE FIL E OF THE AO TO ITA 911 & 912(BANG)/2010 PAGE 10 OF 10 BE ADJUDICATED AFRESH AFTER PROVIDING DUE AND REASO NABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2011 SD/- SD/- (SMT. P. MADHAVI DEVI) JUDICIAL MEMBER (N.K. SAINI) ACCOUNTANT MEMBER EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE