Sh. Vijay kanhayalal Oswal C/o, Ratnagiri V. Asst. CIT, Ratnagiri Circle, Ratnagiri

ITA 977/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56598 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Gift
• Section: 69C; 40A(3); 143(3); 133A; 234B; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 977/PN/09 (ASSTT. YEAR: 2005-06) SHRI VIJAY KANHAYALAL OSWAL, .. APPELLANT C/O M/S SHANTI SUPER MARKET, RAM LANE, RATNAGIRI PAN AABP00351Q VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RESPONDENT RATNAGIRI CIR. RATNAGIRI APPELLANT BY: SHRI M K KULKARNI RESPONDENT BY: SMT NEERA MALHOTRA DATE OF HEARING : 29.10.2011 DATE OF PRONOUNCEMENT : 29.11.2011 ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KOLHAPUR DATED 16 .6.2009, WHICH IN TURN, HAS ARISEN FROM THE ORDER OF THE ASSESSING OFFICER DATED 2 8.12.2007 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SH ORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL REL ATES TO THE CONFIRMATION BY THE COMMISSIONER OF INCOME-TAX (APPEALS) OF THE ADDITION OF RS 6,34,999/- MADE UNDER SECTION 69C OF THE ACT. THE FACTS , IN BRIEF, ARE THAT THE 2 ASSESSEE IS AN INDIVIDUAL CARRYING ON LODGING AND CONSTRUCT ION BUSINESS, AND DURING THE YEAR ON 20.10.2005, SURVEY OPERATIONS WER E CARRIED OUT IN THE ASSESSEES PREMISES UNDER SECTION 133A OF THE ACT. THE ASSESSIN G OFFICER PREPARED A CHART OF BILLS/VOUCHERS IMPOUNDED DURING THE COURSE OF SURVEY ACTION AS DETAILED IN PARA 5 OF THE ASSESSMENT ORDER, TOTALLIN G TO RS 8,31,541/-, WHICH WERE NOT FOUND RECORDED IN THE REGULAR ACCOUNT BOOKS. TH E ASSESSEE WAS SHOW CAUSED AS TO WHY THE SAID AMOUNT OF UNACCOUNTED EXPENDIT URE SHOULD NOT BE ADDED TO HIS TOTAL INCOME. IT WAS SUBMITTED THAT THE AM OUNTS WERE PAID MAINLY TO M/S MALUSHTE CONTRACTORS AND WERE DULY RECORDED IN THE B OOKS. THE VOUCHERS IMPOUNDED CONTAINED A LUMP-SUM FIGURE WHEREAS THE ACCOU NT BOOKS CONTAINED A NUMBER OF ENTRIES OF SMALLER AMOUNTS ON VARIOUS DATES. IT WAS NOTICED THAT THE DATE OF PAYMENT AS PER ACCOUNT BOOKS DID NOT TALLY AND S OMETIMES EVEN THE TOTAL AMOUNT ALSO DID NOT TALLY WITH THE FIGURE RECORDED IN IMPOUNDED VOUCHERS. AS PER THE ASSESSING OFFICER, THE COPY OF EXTRACT OF ACCOUNT IN R ESPECT OF MALUSHTE CONTRACTORS SUBMITTED BY THE ASSESSEE VIDE LETTER DATED 6.11.2007 DID NOT CONTAIN THE ENTRIES RELIED UPON BY THE ASSESSEE. IN CERTAI N CASES, IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNTS WRITTEN IN T HE VOUCHERS WERE ADVANCES AND ACTUAL PAYMENTS WERE YET TO BE MADE. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE FOR THE MAIN R EASON THAT THE VOUCHERS WERE SIGNED BY THE PAYEE AND, THEREFORE, IT COULD NO T BE SAID THAT THE PAYMENT IN LUMP-SUM AMOUNT WAS MADE IN LIEU OF MULTIPLE PAYMENTS RECORDED IN THE ACCOUNT BOOKS. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE AMOUNT S RECORDED IN THE IMPOUNDED VOUCHERS AS UNEXPLAINED EXPENDITURE AND MADE AN ADDITION OF RS 8,31,541/- UNDER SECTION 69C OF THE ACT. 3. IN APPEAL, COMMISSIONER OF INCOME-TAX (APPEALS) VER IFIED THE ACCOUNT OF M/S MALUSHTE CONTRACTORS. HE NOTICED THAT THE ASSESSEE HAD A CTUALLY PAID IN CASH LARGE AMOUNTS TO MALUSHTE CONTRACTORS, BUT TO AVOID PR OVISIONS OF SECTION 40A(3) OF THE ACT, THE PAYMENTS WERE BROKEN-UP IN SMALLER AMO UNTS OF LESS THAN RS 20,000/- EACH FOR THE PURPOSES OF RECORDING IN THE ACCO UNT BOOKS. THE BOOKS OF 3 ACCOUNT OF M/S MALUSHTE CONTRACTORS, HOWEVER, SHOWED ONLY A FEW LARGE PAYMENTS AROUND THE SAME DATE. THE COMMISSIONER OF INCOM E-TAX (APPEALS) ANALYSED THE PAYMENTS WITH REFERENCE TO A CHART EXTRA CTED IN PARA 9 OF HIS ORDER AND FOUND OUT THAT IN CASE OF PAYMENT OF RS 50,000/- ON 29.5.2004, RS 71,542/- ON 2.9.2004 AND RS 75,000/- ON 11.11.2004 RECORDED I N THE IMPOUNDED VOUCHERS, THE BOOKS OF ACCOUNT SHOWED PAYMENTS OF SMALLER AMOUNTS TO M/S MALUSHTE CONTRACTORS NEAR ABOUT THE DATE OF ACTUAL PAYM ENTS SHOWN IN THE IMPOUNDED VOUCHERS AND THE ACCOUNT BOOKS OF M/S MALUSHTE CONTRACTORS. AS REGARDS THESE PAYMENTS, THE COMMISSIONER OF INCOME-TAX ( APPEALS) ACCEPTED THE EXPLANATION OF THE ASSESSEE AND ALLOWED PART RELIEF . THE COMMISSIONER OF INCOME-TAX (APPEALS) ALSO ACCEPTED THE PLEA OF THE ASSESSEE THAT IT HAS ADOPTED THE METHODOLOGY OF SPLITTING DIFFERENT CASH PAYMENTS O F LARGER AMOUNTS INTO AN AMOUNT BELOW RS 20,000/- IN ORDER TO ESCAPE THE PROVI SIONS OF SECTION 40A(3) OF THE ACT. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DISALLOW 20% OF SUCH PAYMENTS. AS A RESULT, THE COMMISSIONER OF INCOME-TAX (APPEALS) GRANTED A RELIEF OF RS 1,96,542/- OUT OF TOTAL ADDITION OF RS 8,31,541/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69C OF THE ACT. STILL NOT SATISFIED WITH THE RELIEF GRANTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS), A SSESSEE IS IN FURTHER APPEAL BEFORE US. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JUSTIFIED I N SUSTAINING AN ADDITION OF RS 6,34,999/- OUT OF THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER BECAUSE THE UNEXPLAINED NATURE OF THE EXPENDITURE WAS NOT PR OVED BY THE ASSESSING OFFICER. IT HAS ALSO BEEN POINTED OUT THAT WITH RESPE CT TO THE DISALLOWANCE OF RS 1,00,00/- AND RS 1,95,000/- IN RELATION TO MAHESH NAW ATHE, ARCHITECT, THE SAME WAS CLEARLY NOT TENABLE, AS THE ASSESSEE HAD EXPLAINED TH AT NO CASH PAYMENT WAS MADE BUT THE AMOUNT WAS ADJUSTED BY WAY OF A JOURN AL ENTRY AGAINST THE PROPERTY PROPOSED TO BE PURCHASED BY HIM. IN THIS CONNECT ION, REFERENCE WAS ALSO MADE TO PAGE 8 OF THE PAPER BOOK, WHEREIN IS PLACE D A CONFIRMATION IN THIS 4 REGARD FROM THE SAID CONCERN. APART THEREFROM, IT HAS ALSO BEEN POINTED OUT THAT THE ASSESSING OFFICER HAS MADE AN ADDITION IN RELATION TO M/S MALUSHTE CONTRACTORS AS UNEXPLAINED EXPENDITURE AND, AT THE SA ME TIME, PART OF THE EXPENDITURE HAS ALSO BEEN DISALLOWED INVOKING SECTION 40A (3) OF THE ACT ON THE GROUND THAT THE PAYMENTS WERE MADE IN CASH IN VIOLATIO N OF THE PRESCRIBED LIMITS. THIS AMOUNTED TO DOUBLE DISALLOWANCE, WHICH WAS UNTENABL E. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS DEFENDED THE CASE OF THE REVENUE BY PLACING RELIANCE ON THE ORD ERS OF THE AUTHORITIES BELOW. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. I N PARA 5 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS LISTED OUT AN EX PENDITURE OF RS 8,31,541/- WHICH, AS PER HIM, IS UNACCOUNTED EXPENDITUR E BECAUSE IT HAS NOT BEEN RECORDED IN THE ACCOUNT BOOKS AND WHICH CAME INTO LI GHT AS A RESULT OF A SURVEY ACTION UNDER SECTION 133A OF THE ACT. THE COMMISSI ONER OF INCOME-TAX (APPEALS) HAS ALLOWED PARTIAL RELIEF WITH RESPECT TO T HE PAYMENTS HAVING BEEN MADE TO ONE, M/S MALUSHTE CONTRACTORS. NOW, WITH REGARD TO THE PAYMENTS OF RS 1,00,000/- AND RS 1,95,000/- MADE TO MAHESH NAWATHE, ARCHITECT, IN OUR VIEW, THE EXPLANATION OF THE ASSESSEE THAT THE SAID AMOUNTS HAV E BEEN ENTERED IN THE ACCOUNT BOOKS BY WAY OF AN ADJUSTMENT ENTRY AGAINST PURCHA SE OF PROPERTY BY THE SAID CONCERN AND THAT SUCH EXPENDITURE IS NOT AS A RESULT OF ANY CASH PAYMENT HAS NOT BEEN APPROPRIATELY APPRECIATED BY THE AUTHORI TIES BELOW. THE EXPLANATION PUT-FORTH BY THE APPELLANT IS PRIMA FACIE SUPPORTED BY THE CONFIRMATION ISSUED BY MAHESH NAWATHE, COPY OF WHICH HAS BEEN PLACED IN THE PAP ER BOOK AT PAGE 8. SO, HOWEVER, THE SAID CONFIRMATION HAS NOT BEEN REFERR ED TO IN THE ORDERS OF EITHER OF THE AUTHORITIES BELOW AND, THEREFORE, WE DEEM IT FIT AND PROPER TO REMAND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER, WHO SHAL L EXAMINE THE STAND OF THE ASSESSEE WITH RESPECT TO THE IMPUGNED SUM ON THE BASIS OF MATERIAL ON RECORD AND, THEREAFTER ADJUDICATE AFRESH. FURTHER, ON THE ASPECT OF ADDITION IN 5 RELATION TO PAYMENTS TO M/S MALUSHTE CONTRACTORS IS CON CERNED, WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-T AX (APPEALS), IN PRINCIPLE. HOWEVER, THE APPELLANT HAS CANVASSED THAT THERE HAS BEEN A DOUBLE DISALLOWANCE, NAMELY, ONCE AS AN UNEXPLAINED EXPENDITU RE UNDER SECTION 69C OF THE ACT AND THEREAFTER AS THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. THE ASSESSING OFFICER SHALL EXAMINE THIS PLEA OF THE ASSESSEE AND IF IT IS FOUND TO BE IN ORDER, THEN THE ASSESSING OFFICER SHALL OBVIATE THE D OUBLE DISALLOWANCE AND ALLOW APPROPRIATE RELIEF TO THE ASSESSEE. THUS, ON THIS ASPECT, THE ASSESSEE PARTLY SUCCEEDS. 7. THE NEXT ISSUE RELATES TO THE CONFIRMATION OF AN A DDITION OF RS 1,00,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69C OF THE A CT. IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY OPERATIONS, THE A SSESSEE DISCLOSED AN ADDITIONAL INCOME OF RS 1,00,000/-. THE ASSESSEE, HOWEV ER, DID NOT OFFER THE SAID INCOME IN THE RETURN OF INCOME FILED ON 19.9.2006. TH E ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SAID AMOUNT OF R S 1,00,000/- SHOULD NOT BE ADDED TO HIS TOTAL INCOME. TO THIS, THE ASSESSEE EX PLAINED THAT HE HAD NOT GIVEN ANY SUCH AMOUNT TO SHRI PRABHAKAR G DHAWALE AN D THE DISCLOSURE AT THE TIME OF SURVEY WAS MADE DUE TO PRESSURE OF SURVEY ACTION AND CONFUSION, TENSION AND JUMBLED MIND. IT WAS EXPLAINED THAT THE ADDITION WAS MADE ON ACCOUNT OF LOOSE PAPER WHICH SHOWED THAT THE ABOVE AMOUNT HAD BE EN GIVEN TO SHRI PRABHAKAR DHAWALE ON 27.12.2004. THE PAYMENT WAS NOT RECORDED IN THE BOOKS AND, THEREFORE, THE DECLARATION WAS MADE. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND MADE ADDITION OF T HE AMOUNT OF RS 1,00,000/- UNDER SECTION 69C OF THE ACT. 8. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (AP PEALS), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE DECLARATION WAS MADE AS THE ASSESSEE WAS UNDER GREAT TENSION DURING THE SURVEY OPERAT ION AND COULD NOT REMEMBER THE TRANSACTION RECORDED IN THE LOOSE PAPER IN ITS TRUE PERSPECTIVE. THE 6 COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT SATISFIED WI TH THE SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE IMPUGNED ADDITION OF RS 1 ,00,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69C OF THE ACT BY HOLDING A S FOLLOWS: 16. THE APPELLANT HAS NOT GIVEN THE CONVINCING EXP LANATION AS TO THE STAMPED RECEIPT FROM SHRI DHAWALE FOR AN AMOUNT OF RS 1 LAC WHICH I S FOUND DURING SURVEY. FURTHER, THE APPELLANT HAS GIVEN A STATEMENT IN WHICH HE HAD ACC EPTED THAT THE PAYMENT WAS UNRECORDED. IN ORDER TO RETRACT FROM THE STATEMENT GIVEN ON OATH, THE APPELLANT HAS TO PROVE THAT THE DECLARATION WAS A RESULT OF MISTAKEN APPRECIATION OF THE FACT OR LAW. SINCE THIS IS NOT THE CASE, THE CONTENTION OF THE APPELLA NT IS REJECTED AND THE ADDITION IS CONFIRMED. BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFOR E US. 9. ON THIS ASPECT, THE LEARNED COUNSEL MERELY REITERAT ED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES TO THE EFFECT THAT THE ADMISSION WAS MADE BY THE ASSESSEE AT THE TIME OF SURVEY ON ACCOUNT OF CONFUSION AND THAT IN EFFECT, THERE WAS NO SUCH PAYMENT MADE. 10. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE HAS DEFENDED THE ORDERS OF THE AUTHORITIES BELOW BY PLACIN G RELIANCE ON THE SAME. 11. HAVING CONSIDERED THE RIVAL SUBMISSIONS, IN OUR VIEW, THE ASSESSING OFFICER HAS RIGHTLY MADE THE SAID ADDITION, INASMUCH A S THE IMPOUNDED LOOSE PAPER, VIDE BUNDLE NO. 1, PAGE NO. 1, CLEARLY SHOWED THAT THE ASSESSEE HAD GIVEN AN AMOUNT OF RS 1,00,000/- TO SHRI PRABHAKAR GA NESH DHAVALE ON 27.12.2004, WHICH WAS NOT RECORDED IN THE ACCOUNT BOOKS A ND THE ASSESSEE ALSO COULD NOT EXPLAIN THE SOURCE OF SUCH INVESTMENT. IN FACT, IN THE COURSE OF THE SURVEY, ASSESSEE ADMITTED UNEXPLAINED NATURE OF SUCH PAYM ENT. IN THESE CIRCUMSTANCES, WE FIND NO JUSTIFICATION FOR THE ASSESSEE TO RE SIST SUCH AN ADDITION IN THE FACE OF HIS ADMISSION AT THE TIME OF SURVEY ITSEL F. AS A RESULT, ON THIS ASPECT THE ASSESSEE HAS TO FAIL. 12. THE NEXT ISSUE RELATES TO THE CONFIRMATION OF THE ADDITION OF RS 1,21,275/- MADE ON ACCOUNT OF HOUSEHOLD EXPENSES. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT AN AMOUNT OF RS 2,21,275/- WAS CREDITED TO CAPITAL ACCOUNT UNDER THE HEAD CAPITAL IN TRODUCED FROM GUEST HOUSE. 7 AS THERE WAS NO SUCH WITHDRAWAL FOUND FROM THE CAPITAL ACCOUNT OF GUEST HOUSE BUSINESS, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE AFORESAID AMOUNT SHOULD NOT BE ADDED TO HIS TOTAL INCOME. IT WAS EXPLAIN ED ON BEHALF OF THE ASSESSEE THAT THE ASSESSEE USED TO KEEP A RESERVE AMOUNT TO THE EXTENT OF RS 3 TO 4 LAKHS IN CASH AT HIS HOUSE FOR EMERGENCIES AND THAT THE SAID AMOUNT IS THE CUMULATIVE BALANCE BY WAY OF GIFTS, SAVING FROM HOUSEHO LD WITHDRAWALS, ETC., OVER A PERIOD OF TIME. THE EXPLANATION WAS REJECTED B Y THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD EARLIER DENIED VIDE L ETTER DATED 6.11.2007 THAT HE HAD MAINTAINED ANY TIJORI ACCOUNT. THE ASSESSING OFFICE R ACCORDINGLY MADE AN ADDITION OF RS 2.21.275/- UNDER SECTION 68 OF THE ACT, WHICH WAS CONTESTED IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS). 13. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS REITERATED THAT THE AMOUNT WAS A CUMULATIVE BALANCE OUT OF GIFTS AND SAV INGS FROM HOUSE HOLD WITHDRAWALS OVER A PERIOD OF TIME. A STATEMENT SHOWI NG TOTAL WITHDRAWALS MADE BY THE FAMILY MEMBERS FOR THE HOUSEHOLD EXPENSES AND SA VINGS THEREFROM WAS ALSO FILED. FURTHER IT WAS SUBMITTED THAT THOUGH THERE WAS NO TIJORI ACCOUNT, HOWEVER, THE ASSESSEE WAS HAVING SOME FUNDS ACCUMULATED OUT OF HOUSEHOLD SAVINGS. A CHART WAS FILED TO SHOW THAT THE FUND HAD ACCUM ULATED TO A SUBSTANTIAL AMOUNT AND IT WAS USED WHENEVER A NEED AROSE. AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE, THE COMMISSIONER OF INCOME-TAX (A PPEALS) ESTIMATED THE SAVINGS TO BE AROUND 50% OF THE AMOUNT AND GAVE A RELIEF OF RS 1,00,000/-, THUS UPHOLDING AN ADDITION OF RS 1,21,275 /-. STILL NOT SATISFIED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 14. HAVING CAREFULLY CONSIDERED THE SUBMISSIONS OF RIVAL PARTIES, WE FIND THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS TAKEN A REASO NABLE VIEW OF THE MATTER AND WE FIND NO INFIRMITY IN HIS ORDER SO AS TO WARRANT ANY INTERFERENCE BY US. WE ACCORDINGLY AFFIRM HIS ORDER AND, THE ASSESSEE FAIL S ON THIS ASPECT. 8 15. THE LAST ISSUE RELATING TO LEVY OF INTEREST UNDER SE CTION 234A, 234B & 234C BEING CONSEQUENTIAL IN NATURE NEEDS NO ADJUDICATION. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. DECISION PRONOUNCED IN THE OPEN COURT ON THE 29 TH DAY OF NOVEMBER, 2011. SD/- SD/- (I C SUDHIR) (G .S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 29 TH NOVEMBER, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT (A) KOLHAPUR 4) CIT, KOLHAPUR 5) DR, B BENCH, ITAT, PUNE. 6) GUARD FILE TRUE COPY BY ORDER ASST. REGISTRAR, I.T.A.T., PUNE