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

ITA 913/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51375 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: P C CHADAGA ITP
• Keywords: Unexplained investment; Business income; Opportunity of being heard; Additional evidence
• Section: 69

Judgement Text

PAGE 1 OF 9 ITA NO.913/BANG/2010 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.913/BANG/2010 (ASST. YEAR 2004-05) SHRI N A PRASAD, P/IN M/S HARYANA HARDWARE, STATION ROAD, HUBLI. - APPELLANT PA NO.ADWPV9768P VS THE INCOME TAX OFFICER, WARD-1(1), BANGALORE. - RESPONDENT DATE OF HEARING : 22/11/2011 DATE OF PRONOUNCEMENT : 25/11/2011 APPELLANT BY : SHRI P C CHADAGA, ITP RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCIT O R D E R PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), HUBLI DATED 19/03/2010.. THE RELEVANT ASST. YEAR IS 2004-05. 2. THE EFFECTIVE GROUNDS READS AS FOLLOWS:- 2) THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.25,000/- MADE BY THE AO ON ESTIMATE BASIS IN RESP ECT OF THE APPELLANTS INDIVIDUAL BUSINESS EVEN THOUGH THE PAGE 2 OF 9 ITA NO.913/BANG/2010 2 ADDITION WAS MADE BY THE AO MERELY ON THE BASIS OF ALLEGED GOOD REPUTATION OF THE APPELLANT. 3) THE CIT(A) ALSO ERRED IN CONFIRMING THE DISALLOWANC E INTEREST ON BORROWALS ALTHOUGH THE APPELLANT HAD FURNISHED THE DETAILS REGARDING THE LOANS TAKEN. 4) THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.5,50,000/- MADE U/S 69B DISBELIEVING THE GENUINE NESS OF THE EVIDENCES PRODUCED. ADDITION UNDER BUSINESS INCOME RS.25,000/- 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS ALSO A PA RTNER IN THE FIRM M/S N A PRASAD & ASSOSICATES AND M/S HARYANA HARDWAR E, HUBLI. THE ASSESSEE CARRIES ON THE WORK OF PLASTER OF PARIS. THE ASSESSEE HAD DECLARED INCOME FROM PLASTER OF PARIS WORK, A SUM OF RS.25,0 00/- ON ESTIMATE BASIS, SINCE HE HAD NOT MAINTAINED BOOKS OF ACCOUNTS. IN COMPLETING THE ASSESSMENT VIDE ORDER DATED 18.12.2006, THE AO ESTI MATED THE INCOME FROM PLASTER OF PARIS AT RS.50,000/- AS AGAINST RS.25,00 0/- DECLARED BY THE ASSESSEE. 3.1 AGGRIEVED BY THE ADHOC ESTIMATION OF BUSINESS I NCOME FROM PLASTER OF PARIS WORK AT RS.50,000/-, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3.2 IT WAS SUBMITTED BEFORE THE FIRST APPELLATE AU THORITY THAT MAJOR ITEMS OF WORK WERE UNDERTAKEN BY FIRM M/S N A PRASAD & ASSOCIATES AND THE ASSESSEE HAD CARRIED OUT ONLY SMALL ITEMS AN D REPAIRS IN HIS INDIVIDUAL CAPACITY. IT WAS FURTHER SUBMITTED THAT SINCE NO BO OKS OF ACCOUNTS WERE MAINTAINED, THE INCOME DECLARED WERE ON THE BASIS O F ROUGH NOTES AND KEEPING IN VIEW THE ASSETS AND LIABILITY POSITION AT THE END OF THE YEAR. PAGE 3 OF 9 ITA NO.913/BANG/2010 3 3.3 THE CIT(A) AFFIRMED THE VIEW TAKEN BY THE AO AN D CONFIRMED THE ADDITION OF RS.25,000/- UNDER BUSINESS INCOME. 3.4 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFO RE US. 3.5 THE LEARNED AR REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES WHEREAS THE LEARNED DR SUPPO RTED THE FINDING OF THE FIRST APPELLATE AUTHORITY. 3.6 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS NOT MAINTAINING THE BOOKS OF ACCOUNTS AND HAD DECLARED THE INCOME ONLY O N ESTIMATE BASIS. THE EXPLANATION OF THE ASSESSEE WAS THAT THE ASSESSEE W AS CARRYING ON SMALL ITEMS AND REPAIRS IN HIS INDIVIDUAL CAPACITY AND MAJ OR ITEMS OF WORK OF PLASTER OF PARIS WERE UNDERTAKEN BY THE FIRM M/S N A PRASAD & ASSOCIATES. THE AO MADE AN ADDITION ON ADHOC BASIS WITH A NARRA TION AS UNDER:- CONSIDERING HIS REPUTATION IN THE LOCALITY AND ALSO THE FACT THAT THE FIRM IN WHICH THE ASSESSEE IS A PARTN ER IS ALSO CARRYING OUT THE SAME WORK, THE PROFIT IN THIS BUSINESS IS ESTIMATED AT RS.50,000/- AND THE DIFFER ENCE OF RS.25,000/- IS ADDED TO THE TOTAL INCOME. IT IS NOTICED THAT THE AO, WHILE ESTIMATING THE INC OME AT RS.50,000/-, HAS NOT GIVEN ANY RATIONAL BASIS. IN OUR OPINION, THE I NCOME ESTIMATED BY THE AO AND CONFIRMED BY THE CIT(A) IS ON HIGHER SIDE. THER EFORE, TO MEET THE ENDS OF JUSTICE, WE DEEM IT PROPER TO REDUCE THE AMOUNT FROM RS.50,000/- TO RS.40,000/-. THUS, THE ASSESSEE GET A RELIEF OF RS .10,000/-. HENCE, GROUND NO.2 MENTIONED ABOVE IS PARTLY ALLOWED. PAGE 4 OF 9 ITA NO.913/BANG/2010 4 DISALLOWANCE OF INTEREST ON LOAN RS.94,020/- 4. THE ASSESSEE HAD CLAIMED INTEREST PAYMENT AMOUNT ING TO RS.94,020/-. OUT OF THE AMOUNT OF RS.94,020/-, INT EREST OF RS.73,020/- IS CLAIMED TO HAVE BEEN PAID TO THE HUBLI URBAN COOPER ATIVE BANK AND RS.21,000/- TO SHRI S R KHEENCHAN. THE AO IN THE C OURSE OF ASSESSMENT PROCEEDINGS DIRECTED THE ASSESSEE TO FURNISH THE PR OOF WITH REGARD TO PAYMENT OF INTEREST. SINCE THE ASSESSEE COULD NOT F URNISH ANY EVIDENCE AS REGARDS THE INTEREST PAYMENT AND ALSO FOR THE FACT T HAT THE ASSESSEE HAD NOT CLAIMED ANY INTEREST EXPENDITURE IN THE EARLIER YEARS, THE AO DISALLOWED THE ENTIRE INTEREST OF RS.94,020/-. THE VIEW TAKEN BY THE AO WAS AFFIRMED BY THE FIRST APPELLATE AUTHORITY. THE RELEVANT FINDI NG OF THE FIRST APPELLATE AUTHORITY READS AS FOLLOWS:- 5.2 ON CAREFUL EXAMINATION OF THE FACTS, IT IS SEE N THAT THE APPELLANT HAS NOT FURNISHED ANY SUPPORTING PAPER S AND DOCUMENTS INCLUDING THE BANK PASS BOOK AND THE CONFIRMATIONS IN SUPPORT OF INTEREST PAID. THE APP ELLANT, HOWEVER, IN THE WRITTEN SUBMISSION STATES THAT THE BANK PASS BOOK AND THE CONFIRMATION FROM SRI KHEENCHAND HAVE BEEN SUBMITTED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THERE IS NOTHING ON RECORD WHICH COULD SHOW THAT THE APPELLANT HAVE FILED THE DETAILS BEFORE AO. EVEN DURING THE APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT ATTENDED AND RELIED UPON HIS EA RLIER SUBMISSIONS DATED 17.9.2010 WHICH ARE ALSO NOT FOUN D ENCLOSED WITH ANY COPY OF PASS BOOK OR CONFIRMATION A S CLAIMED BY THE APPELLANT. THUS, THE SUBMISSION FILE D BY THE APPELLANT IS NOT SUPPORTED BY ANY SORT OF EVIDENC E FOR HIS CLAIM OF HAVING PAID INTEREST TO THE BANK AND S RI KHEENCHAND. IN THE ABSENCE OF ANY DETAILS AS REGARD S THE PAYMENT OF INTEREST, THE AO IS JUSTIFIED IN PAGE 5 OF 9 ITA NO.913/BANG/2010 5 DISALLOWING THE INTEREST, HENCE, THE DISALLOWANCE M ADE BY AO OF RS.94,020/- IS CONFIRMED. 4.1 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFO RE US. 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. IT IS THE CLAIM OF THE ASSESSEE THAT IN TEREST PAYMENTS ARE REFLECTED IN THE PASSBOOK AND PAYMENT TO SHRI S R KH EENCHAN WAS MADE BY CHEQUE. THE ABOVE SAID CLAIM OF THE ASSESSEE, EVEN BEFORE US, HAS NOT BEEN SUBSTANTIATED BY PRODUCING ANY EVIDENCE. IN ABSENCE OF ANY DETAILS AS REGARDS THE PAYMENT OF INTEREST, WE ARE OF THE VIEW THAT THE AUTHORITIES ARE JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE C LAIMED AMOUNTING TO RS.94,020/-. IT IS ORDERED ACCORDINGLY. HENCE, GRO UND NO.3 MENTIONED ABOVE IS DISMISSED. ADDITION OF RS.5,50,000/- U/S 69 5. IT WAS NOTICED IN THE COURSE OF ASSESSMENT PROC EEDINGS THAT THE ASSESSEE HAD MADE AN INVESTMENT OF RS.5,50,000/ - IN M/S UTTARANCHAL TRACTORS. WHEN THE ASSESSEE WAS CONFRONTED WITH TH E SOURCE OF THE ABOVE INVESTMENT, IT WAS SUBMITTED THAT ONE OF HIS FRIEND S SHRI ABDUL CHOWDHARY, RESIDING IN DUBAI, HAD MADE THE PAYMENT OF RS.5,50,0 00/- TO M/S UTTARANCHAL TRACTORS ON ASSESSEES BEHALF ALONG WIT H HIS OWN INVESTMENT IN THE SAID FIRM. ACCORDING TO THE ASSESSEE, FAX MESS AGE CONFIRMING THE REMITTANCE WAS FURNISHED AT THE TIME OF HEARING, BE FORE THE AO. THE AO HOWEVER WAS OF THE VIEW THAT THE FAX RECEIVED IS NO T FROM DUBAI AND IT IS ONLY A DOCUMENT CREATED BY THE ASSESSEE MERELY BY PUTTI NG A DATE AS 11.10.2006 WHEREAS ON THE TOP OF THE SAID FAX SHEET THE DATE MENTIONED IS PAGE 6 OF 9 ITA NO.913/BANG/2010 6 13.3.2005. THUS, THE AO SUSPECTED THE GENUINENESS OF THE CONFIRMATION LETTER. FURTHER IT WAS NOTICED BY THE AO THAT THE F AX MESSAGE DID NOT CONTAIN THE DETAILS OF DATE OF DEPOSITING THE AMOUN T OF RS.20 LAKHS WITH NEW HOLLAND TRACTORS CO. NO DETAILS AS TO HOW THE SAID AMOUNT WAS TRANSFERRED TO THE SAID COMPANY. IT WAS FURTHER STATED BY THE A O THAT THOUGH THE ASSESSEE HAD PROMISED TO PRODUCE THE COPY OF THE DD, WHICH WAS SENT BY SHRI ABDUL CHOWDHARY TO NEW HOLLAND TRACTORS, THE SA ME WAS NOT PRODUCED. THUS, IT WAS CONCLUDED THAT THE ASSESSEE HAD FAILED TO FURNISH THE DETAILS AND ESTABLISH THE GENUINENESS OF THE CONFIRMATION. IN THE RESULT, THE AO MADE AN ADDITION OF RS.5.5 LAKHS IN THE HANDS OF TH E ASSESSEE AS UNEXPLAINED INVESTMENT. 5.1 ON FURTHER APPEAL, THE VIEW OF THE AO WAS CONF IRMED BY THE CIT(A). 5.2 THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFO RE US. 5.3 THE ASSESSEE HAS FILED AN APPLICATION UNDER RU LE 29 OF ITAT RULES, 1963. THE GIST OF THE CONTENT OF THE APPLIC ATION IS AS FOLLOWS:- THE ASSESSEE BECAME A PARTNER IN A FIRM VIZ. M/S UTRAULA TRACTORS, UTRAULA (UP). THE FIRM WAS REQUI RED TO DEPOSIT A SUM OF RS.23,50,000/- FOR GETTING THE DEALERSHIP OF M/S NEW HOLLAND TRACTORS. THIS ENTIR E AMOUNT WAS REMITTED BY ANOTHER PARTNER IN THE FIRM, SHRI ABDUL CHAUDHARY, WHO WAS RESIDING AT DEIRA, DUBAI, UAE. THE ENTIRE AMOUNT WAS REMITTED FROM DUBAI TO HIS ACCOUNT AT DELHI AND FROM THERE THE DEPOSIT AMOUNT WAS SENT BY WAY OF DD TO THE COMPANY. OUT OF THE AMOUNT S O SENT, RS.5,50,000/- WAS TREATED AS A LOAN TO THE AP PELLANT PAGE 7 OF 9 ITA NO.913/BANG/2010 7 AND THE SAME WAS TREATED AS APPELLANTS CAPITAL IN THE FIRM. A FAX MESSAGE CONFIRMING THE REMITTANCE WAS PRODUCED AT THE TIME OF HEARING. ALTHOUGH THE FAX MESSAGE WAS DATED 11/10/2006, IN THE UPPER PORTION THE DATE WAS SHOWN AS 13.3.2005. THIS WAS A MISTAKE BE CAUSE THE FAX MACHINE HAD NOT BEEN RESET PROPERLY. ANOTHE R FAX MESSAGE WAS SENT ON 5.12.2006, CONFIRMING THE TRANSACTION, WHICH WAS PRODUCED BEFORE THE AO. AS SHRI ABDUL CHAUDHARY WAS AWAY IN DUBAI, THE COPIES OF THE DEMAND DRAFTS ISSUED IN DUBAI COULD NOT BE PRODUCED BEFORE THE AO OR THE CIT(A). THEY ARE NOW BEING SUBMITTED BEFORE THE HONBLE ITAT. THE DATE OF ISS UE OF DDS AND THE AMOUNTS ARE AS UNDER:- NO. DATE OF ISSUE OF DD AT DUBAI AMOUNT (RS.) 1. 8/4/2003 2,00,000 2. 8/4/2003 5,00,000 3. 31.5.2003 11,00,000 4. 1.9.2003 5,00,000 THE AO ADDED A SUM OF RS.5,50,000/- AS UNEXPLAINED INVESTMENT IN ASSESSEES PERSONAL ASSESSMENT U/S 69 B OF THE I T ACT, WHICH WAS CONFIRMED BY THE CIT(A). THE ADDITIONAL EVIDENCE NOW BEING PRODUCED MAY KINDLY BE ADMITTED IN THE INTEREST OF ADVANCEMENT OF SUBSTANT IAL CAUSE AND JUSTICE. 5.4 THE LEARNED DR OPPOSED THE ADMISSION OF THE AD DITIONAL EVIDENCE. 5.5 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE CONFIRMATION LETTER OF SHRI ABDUL C HAUDHARY, WHO HAS CLAIMED TO HAVE BEEN GIVEN THE LOAN OF RS.5.5 LAKHS READS AS FOLLOWS:- PAGE 8 OF 9 ITA NO.913/BANG/2010 8 I, ABDUL CHAUDHARY, PARTNER OF UTRAULA TRACTORS STATE THAT WE ARE THE AUTHORIZED DEALERS FOR NEW HOLLAND TRACTORS AT BALRAMPUR. TO GET THE AGENCY OUR FIRM HAS TO DEPOSIT RS.TWENTY LACK (RS.20,00,000 .00) IN THE NAME OF NEW HOLLAND COMPANY. THE SAME IS DEPOSITED BY ME. OUT OF THAT MR. N A PRASAD HAS TO GIVE ME RS.5.5 LA CK (RS. FIVE LACK FIFTY THOUSAND). THE SAME IS TREATED AS LOAN TO MR. N A PRASAD. 5.6 THE COPIES OF THE DDS DRAWN BY ABDUL CHAUDHARY T O NEW HOLLAND TRACTORS ARE ALSO PRODUCED AS ADDITIONAL EV IDENCE. SINCE SHRI ABDUL CHAUDHARY WAS AWAY IN DUBAI, IT IS THE CLAIM OF THE A SSESSEE THAT THE COPIES OF THE DDS ISSUED IN DUBAI COULD NOT BE PRODUCED BE FORE THE INCOME TAX AUTHORITIES. BOTH THE AO AND THE CIT(A) HAD ADDED THE SUM OF RS.5.5 LAKHS U/S 69B OF THE ACT PRIMARILY FOR THE REASON THAT THE ASSESSEE COULD NOT PRODUCE THE COPIES OF THE DDS DRAWN BY ABDUL CHAUDHA RY TO NEW HOLLAND TRACTORS. WE FEEL THAT THE CONFIRMATION LETTER AND COPIES OF THE DDS, NOW PRODUCED, GO TO THE ROOT OF THE ISSUE AND IN THE IN TEREST OF SUBSTANTIAL JUSTICE; THE SAME REQUIRES TO BE ADMITTED AS ADDITI ONAL EVIDENCE. SINCE ADDITIONAL EVIDENCE HAS BEEN ADMITTED, THE MATTER N ECESSARILY HAS TO BE REMITTED TO THE FILE OF THE AO FOR PROPER VERIFICAT ION OF THE SAME AND TAKE A DECISION IN ACCORDANCE WITH LAW. ACCORDINGLY, THI S ISSUE IS RESTORED TO THE FILE OF THE AO, WHO SHALL TAKE A DECISION AS EXPEDI TIOUSLY AS POSSIBLE, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 5.7 IN THE RESULT, GROUND NO.4 MENTIONED ABOVE IS ALLOWED FOR STATISTICAL PURPOSE. PAGE 9 OF 9 ITA NO.913/BANG/2010 9 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF NOVEMBER, 2011 SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO:- 1.THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCE RNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.