Durai Pugazhenthi, Salem V. DCIT, Salem

ITA 934/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8862 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2016
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment; Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI ., !' #$ . # % & !' ' BEFORE SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.934/MDS./2016 / ASSESSMENT YEAR : 2007-08 MR.DURAI PUGAZHENTHI , 1/103,BRINDAVAN ROAD, 3 RD CROSS, FAIRLANDS, SALEM 636 016. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, 3,GANDHI ROAD, SALEM 636 007. [PAN AENPP 5237 R ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.G.BASKAR,ADVOCATE /RESPONDENT BY : MR.S.BHARATH, CIT D.R / DATE OF HEARING : 16 - 0 8 - 201 6 / DATE OF PRONOUNCEMENT : 19 - 0 8 - 2016 !, / O R D E R PER ABRAHAM P GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, THE ASSESSE E ASSAILS AN ORDER DATED 21.03.2016 PASSED U/S.263 OF THE INCOME TAX ACT, 1961 (IN SHORT `ACT) BY THE PRINCIPAL COMMISSIONER OF I NCOME TAX, CENTRAL- 2, CHENNAI. ITA NO. 934/MDS./2016 :- 2 -: 2. FACTS, APROPOS ARE THAT THERE WAS A SEARCH IN THE PREMISES OF ONE SHRI MADANLAL D.CHAWLA ON 10.01.2012. DURING TH E COURSE OF THE SEARCH, A COPY OF AN AGREEMENT OF SALE DEED DATED 0 9.01.2007 ENTERED BETWEEN THE ASSESSEE AND ONE SHRI P.PONGOPAL WAS FO UND AND SEIZED. AS PER THIS AGREEMENT, ASSESSEE HAD CONTRACTED TO P URCHASE ELEVEN FLATS CONSTRUCTED BY M/S.PONRAM PROMOTERS FOR A TOT AL CONSIDERATION OF ` 1,10,00,000/- AGAINST WHICH AN ADVANCE OF ` 40,00,000/- WAS PAID BY THE ASSESSEE ON 09.01.2007 ITSELF. THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE SOURCE OF THE CASH ADVANCE OF ` 40 LAKHS, DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS PER THE AO, IN REPLY TO QUESTION NO.8, THE ASSESSEE HAD STATED ON 27.04.2012 THAT A SUM OF ` 40 LAKHS WAS NOT ACCOUNTED IN HIS BOOKS AND WAS OUT OF HIS UNACC OUNTED BUSINESS OF INCOME. AS AGAINST THIS CONTENTION, THE ASSESSEE WA S THAT OUT OF ` 40 LAKHS, ` 22.5 LAKHS WAS PAID BY ONE SHRI P.MURUGESAN. AS PER THE ASSESSEE, SHRI P.MURUGESAN WAS KNOWN TO HIM FROM HI S SCHOOL DAYS AND PURCHASE OF FLATS WAS DONE BY HIM AS A JOINT VE NTURE WITH MR.P.MURUGESAN. CONTENTION OF ASSESSEE WAS THAT ON LY ` 17.5 LAKHS OUT OF THE TOTAL AMOUNT OF ` 40 LAKHS BELONGED TO HIM AND THIS WAS OFFERED AS HIS INCOME. MR.P.MURUGESAN IN HIS STATEM ENT RECORDED U/S.131 OF THE ACT CONFIRMED THE PAYMENT TO THE ASS ESSEE. THE AO WAS OF THE OPINION THAT THOUGH MR.P.MURUGESAN HAD A PPEARED AND CONFIRMED THE PAYMENT OF ` 22.5 LAKHS TO THE ASSESSEE, HE HAD FAILED TO ITA NO. 934/MDS./2016 :- 3 -: FILE HIS TAX RETURNS. LD. A.O HELD THAT THE SUM OF 22.5 LAKHS WAS TO BE CONSIDERED AS UNEXPLAINED INVESTMENT OF THE ASSESSE E FOR SUCCEEDING ASSESSMENT YEAR 2008-09. IN OTHER WORDS, THE ASSESS MENT WAS COMPLETED CONSIDERING THE SUM OF ` 17.5 LAKHS DISCLOSED BY THE ASSESSEE. 2.1 IT SEEMS FOR ASSESSMENT YEAR 2008-09, THE AO H AD MADE AN ADDITION OF ` 22.5 LAKHS AS MENTIONED BY HIM IN THE ASSESSMENT OR DER FOR ASSESSMENT YEAR 2007-08. SAID ADDITION WAS CARR IED IN APPEAL BY THE ASSESSEE BEFORE THE LD.CIT(A). THE MATTER REAC HED THIS TRIBUNAL IN ITA NO.116/MDS/2016 DATED 24.03.2016. THIS TRIBU NAL HELD AS UNDER:- 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE THAT AN AGREEMENT O F SALE WAS ENTERED WITH SHRI P.PONGOPAL ON 09.01.2007. CONSEQ UENT TO THIS, ASSESSEE PAID `40 LAKHS ADVANCE. OUT OF THIS, ASSE SSEE DISCLOSED ` 17.5 LAKHS AS PAYMENT TO PURCHASE OF FLATS. FURTHE R, THERE IS A FAILURE FOR DISCLOSING THE BALANCE OF ` 22.5 LAKHS. THE AO BROUGHT THIS ` 22.5 LAKHS IN THE ASSESSMENT YEAR 2008-09, THOUGH T HE SAID AMOUNT WAS SAID TO BE PAID ON 09.01.2007, RELATING TO FINANCIAL YEAR 2006-07 PERTAINING TO ASSESSMENT YEAR 2007-08. AS PER THE PROVISIONS OF THE SECTION 69B, ONLY UNDISCLOSED INV ESTMENT IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E., 2008-09 C OULD BE BROUGHT IN TAX TO THOSE ASSESSMENT YEARS. THE TRAN SACTION ITA NO. 934/MDS./2016 :- 4 -: RELATING TO ANOTHER ASSESSMENT YEAR THAN 2008-09 CO ULD NOT BE BROUGHT TO TAX IN THE ASSESSMENT YEAR UNDER CONSIDE RATION BEFORE US. THE CONTENTION OF THE DEPARTMENTAL REPRESENTAT IVE IS THAT SINCE THE ASSESSEE OFFERED ` 17.5 LAKHS, THE PART OF ADVANCE OUT OF ` 40 LAKHS BALANCE ` 22.5 LAKHS HAS TO BE CONSIDERED IN THE ASSESSMENT YEAR ONLY. IN OUR OPINION, THIS ARGUM ENT OF THE DEPARTMENTAL REPRESENTATIVE IS DEVOID OF MERITS. T HE CONFESSION GIVEN BY THE ASSESSEE CANNOT BE A REASON TO SUSTAIN THE ADDITION AS HELD BY JURISDICTIONAL HIGH COURT IN THE CASE O F MARIAM AYSHA VS. CIT REPORTED IN 104 ITR 381(MAD.). IN VIEW OF THIS, WE ARE DELETING THE ADDITION OF ` 22.5 LAKHS MADE BY THE AO, SUSTAINED BY THE LD.CIT(A). 2.2. BEFORE THE CONCLUSION OF THE APPEAL PROCEEDI NGS FOR ASSESSMENT YEAR 2008-09 CULMINATING IN THE ABOVE ORDER, THE CI T FOR THE IMPUGNED ASSESSMENT YEAR ISSUED NOTICE TO THE ASSES SEE REQUIRING HIM TO EXPLAIN WHY THE ASSESSMENT DONE FOR THE IMPUGNED ASSESSMENT YEAR SHOULD NOT BE REVISED U/S.263 OF THE ACT. AS P ER THE PCIT, THERE WAS AN OMISSION ON THE PART OF THE AO TO MAKE AN AD DITION OF ` 22,50,000/- IN THE SAID ASSESSMENT ORDER. IN REPLY TO THE ABOVE NOTICE, ASSESSEE STATED THAT ALL THE FACTS RELATING TO THE ISSUE WERE AVAILABLE BEFORE THE AO. ASSESSEE ALSO POINTED OUT THAT THE VERY SAME AMOUNT WAS SUBJECTED TO THE ASSESSMENT FOR ASSESSME NT YEAR 2008- 09. AS PER THE ASSESSEE, THE VIEW OF THE LD. PCIT T O ASSESS THE VERY ITA NO. 934/MDS./2016 :- 5 -: SAME AMOUNT AGAIN FOR THE IMPUGNED ASSESSMENT YEAR WOULD RESULT IN TAXING THE SAME AMOUNT TWICE. CONTENTION OF ASSESSE E WAS THAT THE AO HAD TAKEN A CONSCIOUS DECISION TO OMIT THE SUM O F ` 22.5 LAKHS FROM THE INCOME OF ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR AND TAX IT FOR THE SUCCEEDING ASSESSMENT YEAR. THUS, ACCORDIN G TO ASSESSEE, THE PCIT WAS TRYING TO SUBSTITUTE HIS VIEW WITH A LAWFU L VIEW TAKEN BY THE AO. 2.3 HOWEVER, THE PCIT WAS NOT IMPRESSED. ACCORDING TO HIM, JUST BECAUSE AN AMOUNT WAS CONSIDERED FOR ASSESSMENT IN A SUBSEQUENT ASSESSMENT YEAR, WOULD NOT PRECLUDE THE REVENUE TO MAKE THE ADDITION OF SUCH SUM IN THE CORRECT ASSESSMENT YEAR . HE HELD THAT THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007-08 WAS ER RONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. HE SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE AO TO REDO THE ASSESSMENT, BY BRINGING TO TAX THE SUM OF ` 22.50 LAKHS AS UNEXPLAINED INVESTMENT U/S.69B OF THE ACT FOR THE I MPUGNED ASSESSMENT YEAR, AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE. 3. NOW, BEFORE US LD.A.R STRONGLY ASSAILING THE O RDER OF CIT, SUBMITTED THAT THE TRIBUNAL HAD IN THE SUCCEEDING A SSESSMENT YEAR 2008-09HELD THAT THE ADDITION COULD NOT BE SUSTAINE D SINCE IT WAS BASED ON A CONFESSION GIVEN BY THE ASSESSEE. AS PE R THE LD.A.R, THE ISSUE WAS EXAMINED IN DETAIL BY THE AO IN THE PROCE EDING FOR THE ITA NO. 934/MDS./2016 :- 6 -: IMPUGNED ASSESSMENT YEAR AND THE AO HAD TAKEN A CON SCIOUS DECISION TO TAX THE AMOUNT IN ASSESSMENT YEAR 2008-09 AND NO T FOR ASSESSMENT YEAR 2007-08. FURTHER, ACCORDING TO LD.A.R, THE OR DER U/S.263 OF THE ACT WAS PASSED ON 21.03.2006, WHEN THE LD.CIT(A) HA D IN AN APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 C ONFIRMED THE ADDITION. THUS, ACCORDING TO HIM THE REASONS CITED BY THE LD.CIT FOR ASSUMING THE JURISDICTION U/S.263 OF THE ACT WERE N ON-EXISTENT. 4. PER CONTRA LD.D.R SUBMITTED THAT ASSESSEE HAD D URING THE COURSE OF STATEMENT RECORDED AT THE TIME OF SEARCH ACCEPTE D THAT THE SUM OF ` 40 LAKHS WAS HIS UNACCOUNTED BUSINESS INCOME. AS P ER LD.D.R, THE ADVANCE OF ` 40 LAKHS WAS PAID ON 09.01.2007 WHICH FELL IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08. THUS, ACCORDING TO HIM, THE AO HAD MADE A SERIOUS MISTAKE OF NOT CONSI DERING THE AMOUNT IN FULL FOR THE IMPUGNED ASSESSMENT YEAR. AS PER THE LD.D.R, THIS RENDERED THE ASSESSMENT ORDER ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOT DISPUTED BY THE ASSESSEE THA T AGREEMENT FOR SALE DATED 09.01.2007 DID MENTION AN ADVANCE OF ` 40 LAKHS AS PAID BY THE ASSESSEE ON THAT DATE. IT IS ALSO NOT DISPUTED THA T ASSESSEE HAD IN A STATEMENT RECORDED FROM HIM ON 27.04.2012 ADMITTED SUCH SUM TO BE A PART OF HIS UNEXPLAINED BUSINESS INCOME. THE AO A FTER GOING THROUGH ITA NO. 934/MDS./2016 :- 7 -: THE SUBMISSIONS OF ASSESSEE HAD HELD THAT ASSESSEE HAD DISCLOSED ONLY ` 17.5 LAKHS IN HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AGAINST THE UNEXPLAINED INVESTMENTS OF ` 40 LAKHS. THE AO HAD CONSIDERED IN DETAIL CLAIM OF ASSESSEE THAT A SUM O F ` 22.5 LAKHS WAS RECEIVED FROM MR.P.MURUGESAN AS A PART OF JOINT VEN TURE. HOWEVER, HE REFUSED TO ACCEPT THIS CLAIM. NEVERTHELESS, WHILE COMPLETING THE ASSESSMENT HE DID NOT MAKE ANY ADDITION MENTIONING THAT THE UNEXPLAINED INVESTMENT OF ` 22.5 LAKHS WOULD BE CONSIDERED FOR ADDITION IN ASSESSMENT YEAR 2008-09. NO DOUBT, IT I S TRUE THAT THE SAID AMOUNT WAS CONSIDERED IN THE ASSESSMENT DONE FOR A SSESSMENT YEAR 2008-09. THE TRIBUNAL HAD AN ASSESSEES APPEAL CAN CELLED THE SAID ADDITION FOR A REASON THAT THE INCOME DID NOT BELON G TO ASSESSMENT YEAR 2008-09, AND THE ADDITION WAS BASED ON CONFESS ION GIVEN BY THE ASSESSEE. HOWEVER, A READING OF THE ASSESSMENT DON E FOR THE IMPUGNED ASSESSMENT YEAR SHOW THAT THE AO AFTER REA CHING A CLEAR FINDING THAT THE SUM OF 22.5 LAKHS REPRESENTED UNEX PLAINED INVESTMENTS HAD FOR NO PLAUSIBLE REASON SHIFTED THE ASSESSMENT OF THE SAID AMOUNT TO THE NEXT YEAR. SUCH SHIFTING OF INCO ME WITHOUT SPELLING OUT THE REASONS RENDERED IT ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. JUST BECAUSE ON THE D ATE WHEN PCIT PASSED HIS ORDER U/S.263 OF THE ACT, THE ADDITION M ADE BY THE AO IN THE VERY NEXT ASSESSMENT YEAR, STOOD CONFIRMED BY T HE CIT(A), WE ITA NO. 934/MDS./2016 :- 8 -: CANNOT SAY THAT THE AMOUNT WHICH REALLY PERTAINED TO ASSESSMENT YEAR 2007-08 COULD NOT BE CONSIDERED IN THE SAID ASSESSM ENT YEAR. HOWEVER, AT THE SAME TIME WHAT WE FIND IS THAT THE PCIT HAD TIED HANDS OF AO BY DIRECTING HIM TO TREAT THE SUM OF ` 22.5 LAKHS AS AN UNEXPLAINED INVESTMENT FOR IMPUGNED ASSESSMENT YEAR WITHOUT GIVING AN OPEN HAND. THUS, WHILE CONFIRMING THE ORDER OF PCIT, WE MODIFY IT TO THE EXTENT THAT THE AO SHALL PROCEED UNTRAMMELED BY THE DIRECTION OF PCIT AND SHALL COMPLETE THE ASSESSMENT IN ACCOR DANCE WITH LAW. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS PARTLY ALLOWED. ORDER PRONOUNCED ON 19 TH AUGUST, 2016, AT CHENNAI. SD/ - SD/ - ( ! . ' ) ( G.PAVAN KUMAR ) & !' / JUDICIAL MEMBER ( #$%&' ' !(! ) ( ABRAHAM P GEORGE ) !' / ACCOUNTANT MEMBER )* / CHENNAI +, / DATED: AUGUST, 2016 K S SUNDARAM ,-$$ ./$0/ / COPY TO: $ 1 . / APPELLANT 3. $ 1$23 / CIT(A) 5. /45$ 6 / DR 2. / RESPONDENT 4. $ 1 / CIT 6. 57$8 / GF