Sri.V.Ganesan, Cochin V. DCIT, Calicut

ITA 98/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77486 (ITAT-COCHIN)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-03-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: C B M WARRIER
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NOS.98-100/COCH/2014 ASSESSMENT YEARS : 2007-08 , 2008-09 & 2009-10 SHRI V. GANESHAN, POOJA, CHERUVANNUR, FEROKE, KOZHIKODE. [PAN: ANDPG 1570D] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), KOZHIKODE. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI C.B.M. WARRIER, FCA REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 16/07/2014 DATE OF PRONOUNCEMENT 18/07/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST THE COMMON ORDER DATED 19-12-2013 PASSED BY THE CIT(A), KOZHIKODE FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10. 2. THE COMMON GROUNDS IN THESE APPEALS ARE AS FOLLO WS: 1. THE APPELLANT IS V. GANESH, POOJA, CHERUVANNUR , KOZHIKODE AND IN REGARD TO THE ASSESSMENT YEARS UNDER CONSIDERATI ON, THE ASSESSING OFFICER HAS GONE WRONG IN MAKING AN ADDITION OF RS. 25,29,600/- TOWARDS MONEY LENDING BUSINESS AND THE COMMISSIONER OF INCOME- TAX (APPEALS) HAS GONE WRONG IN CONFIRMING THE SAME WHICH IS NOT IN ACCORDANCE TO THE LAW AND FACTS OF THE CASE. I.T.A. NOS.98-100/COCH/2014 2 2. THE ADDITION OF RS. 25,29,600/- IS WITHOUT ANY E VIDENCE AND ESTIMATED WITHOUT BASIS. 3. THE ASSESSMENT ON THE BASIS OF STATEMENT RECORD ED IN THE COURSE OF SURVEY U/S. 133A IS WITHOUT ANY DIRECT EVIDENCE OR CORROBORATIVE EVIDENCE IS NOT JUSTIFIED. 4. THE COMMISSIONER OF INCOME TAX(APPEALS) HAS GON E WRONG IN NOT CONSIDERING THE LIABILITY TO FINANCIAL INSTITUT IONS AND BANKS TO THE EXTENT OF RS. 50,00,000/- AVAILABLE TOWARDS THE BUS INESS INVESTMENT OF THE APPELLANT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A MONEY LENDER. A SURVEY U/S. 133A WAS CONDUCTED IN THIS CASE ON 23-0 3-2009, DURING THE COURSE OF WHICH IT CAME TO LIGHT THAT HE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT. THE DETAILS OF MONEY TRANSACTIONS AND THE INCOME THEREF ROM WERE FOUND RECORDED IN BITS AND PIECES OF PAPERS, WHICH WERE IMPOUNDED IN SURVEY. THE MATERIALS IMPOUNDED CONTAINED THE DETAILS OF INCOME EARNED BY THE ASSESSEE FROM THE MONEY LENDING BUSINESS DURING THE PREVIOUS YEARS RE LEVANT TO AYS 2007-08, 2008-09 AND 2009-10. THE ASSESSMENTS OF ALL THE TH REE YEARS WERE COMPLETED ON THE BASIS OF INFORMATION AVAILABLE IN THE MATERI ALS IMPOUNDED AND ALSO ON THE BASIS OF STATEMENT RECORDED FROM THE ASSESSEE D URING THE COURSE OF SURVEY. 4. THE ADDITION OF RS.25,29,600/- EACH IN AYS 20 07-08, 2008-09 AND 2009-10 IS WITH REGARD TO INCOME FROM MONEY LENDING BUSINES S. THE CIT(A) NOTICED THAT ON THE BASIS OF IMPOUNDED MATERIAL SSA-1; SL NO. 16 AND ALSO ON THE BASIS OF STATEMENT RECORDED, THE ASSESSING OFFICER WORKED OU T THE TOTAL MONEY ROLLED IN THE MONEY LENDING BUSINESS DURING THE AYS 2007-08, 2008-09 AND 2009-10 AT I.T.A. NOS.98-100/COCH/2014 3 RS. 158.1 LAKHS. ACCORDING TO THE LD. CIT(A) SINCE THE INTEREST CHARGED BY THE ASSESSEE VARIES FROM 36% TO 60%, THE ASSESSING OFFI CER ADOPTED THE AVERAGE OF THESE TWO FIGURES, I.E., 48%, AND WORKED OUT THE IN COME EARNED BY THE ASSESSEE DURING THESE YEARS, WHICH WORKED OUT TO RS.75,88,80 0/-. THE CIT(A) FOUND THAT THE ASSESSING OFFICER APPORTIONED THIS AMOUNT TO TH REE AYS @ RS.25,29,600/- AND ADDED AS INCOME FROM MONEY LENDING BUSINESS IN EACH YEAR. DURING THE COURSE OF HEARING, IT WAS ARGUED BY THE LD. COUNSEL THAT T HE ASSESSEE HAS RETRACTED THE STATEMENT, HE IS NOT INTO THE BUSINESS OF MONEY LEN DING ETC. AFTER CONSIDERING THE ARGUMENTS OF THE LD. COUNSEL, THE CIT(A) UPHELD THE DECISION OF THE ASSESSING OFFICER WITH REGARD TO INTEREST RATE ADOPTED AT 48% AS THE ASSESSING OFFICER HAS ADOPTED THE AVERAGE OF INTEREST CHARGED BY THE ASSE SSEE WHICH VARIES FROM 36% TO 60%. FURTHER, ACCORDING TO THE CIT(A), THE ASSE SSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AND THE LD. COUNSEL HAS ALSO NOT P OINTED OUT ANY SPECIFIC INFIRMITY IN THE ADOPTION OF INTEREST @ 48%. THE C IT(A) OPINED THAT THE ASSESSEE IS NOT BOUND BY THE STATEMENT GIVEN DURING THE SURVEY UNLIKE IN THE CASE OF SEARCH, IT STILL AMOUNTS TO AN IMPORTANT PI ECE OF CORROBORATING EVIDENCE. ACCORDING TO THE CIT(A), ON THE BASIS OF PAPER FOUN D, THE ASSESSEE TRIED TO RECONCILE THE FIGURES BASED ON THE PREMISE THAT HE IS INTO MONEY LENDING BUSINESS. HOWEVER, THE ASSESSEE HAS NOT BEEN ABLE TO RECONCILE A MAJOR PART OF THE AMOUNT AND THE ASSESSING OFFICER ESTIMATED THE INCOME FROM MONEY LENDING BUSINESS ON A FAIR AND EQUITABLE BASIS. IN THE LIGH T OF THE ABOVE, THE CIT(A) DID NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF THE ASSESSING OFFICER, AND I.T.A. NOS.98-100/COCH/2014 4 ACCORDINGLY, HE SUSTAINED THE ADDITION OF RS. 25,29 ,600/- EACH IN AYS 2007-08, 2008-09 AND 2009-10 AS INCOME FROM MONEY LENDING BU SINESS. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE INCOME OF THE ASSESSEE CANNOT BE ESTIMATED AT 48% OF THE MONEY ADVANCED. IT IS NORMAL IN THIS BUSINESS TO CLAIM INTEREST AT 24% TO 36% PER ANNUM. FURTHER, HE SUBMITTED THAT THERE IS A UTILIZATION OF AN AMOUNT OF RS. 50.00 LA KHS OUT OF BORROWINGS MADE FROM VARIOUS BANKS FOR MONEY LENDING BUSINESS AND A S SUCH, THE ASSESSEE HAS TO PAY INTEREST ON BANK BORROWINGS AND CORRESPONDING D EDUCTION IS TO BE GIVEN ON PAYMENT OF INTEREST TO BANKS. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ASSESSEE COLLECTED INTEREST AT THE RATE OF 36% TO 60% PER ANNUM. ACCO RDING TO THE LD. DR, THE ASSESSEE HAS CATEGORICALLY STATED IN HIS SWORN STAT EMENT THAT THE AMOUNT BORROWED FROM BANKS WAS NOT AT ALL USED IN THE MONE Y LENDING BUSINESS. ON THE OTHER HAND, THE ASSESSEE SUBMITTED AS PER THE SWORN STATEMENT THAT HE HAD GIVEN THE FOLLOWING AMOUNTS TO THE UNDER MENTIONED PERSONS FROM THE LOAN AMOUNT TAKEN:- (A) INVESTED IN M/S. PRIME FLEX, CHUNGAM, FEROKE (MANUFACTURER OF PLASTIC CARRY BAG. AMOUNT IS GIVEN BY CHEQUE. A PARTNERSHIP FIRM I.T.A. NOS.98-100/COCH/2014 5 HAVING FIVE PARTNERS INCLUDING SELF : RS. 22,00,000 (B) INVESTED IN HIS PLYWOOD BUSINESS : RS. 20,00,000 (C) GIVEN AS ADVANCE FOR PURCHASE OF : RS. 2,00,000 PROPERTY AT KADAVU RS. 44,00,000 BEING SO, NO CREDIT IS TO BE GIVEN TO THE USAGE OF BORROWED FUNDS IN MONEY LENDING BUSINESS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. IN THIS CASE, IT IS EVIDENT FROM THE INFORMATION GATHERED DURING THE SU RVEY THAT THE ASSESSEE HAS BEEN COLLECTING INTEREST FROM THE BORROWERS RANGING FROM 36% TO 60% PER ANNUM. SINCE THE ASSESSEE IS NOT PROPERLY MAINTAIN ING ANY BOOKS OF ACCOUNTS, THE ASSESSING OFFICER CONSIDERING ALL SITUATIONS, E STIMATED THE INCOME OF THE ASSESSEE AT 48% OF THE AMOUNT ROLLED IN MONEY LENDI NG BUSINESS. BEING SO, IN THE ABSENCE OF ANY MATERIAL CONTRARY TO THE FINDING S OF THE LOWER AUTHORITIES, WE ARE NOT IN A POSITION TO REDUCE THE RATE OF INTERES T OF 48% PER ANNUM. ACCORDINGLY, WE ARE INCLINED TO CONFIRM THE ORDER O F THE LOWER AUTHORITIES ON THIS ISSUE. 9. REGARDING THE CLAIM OF USAGE OF BORROWED FUNDS I N MONEY LENDING BUSINESS, THE ASSESSING OFFICER HAS CATEGORICALLY B ROUGHT ON RECORD THAT THE BORROWED MONEY WAS NOT USED IN THE MONEY LENDING BU SINESS. BEING SO, THERE IS NO QUESTION OF GIVING ANY CREDIT TOWARDS PAYMENT OF INTEREST ON BORROWED FUNDS I.T.A. NOS.98-100/COCH/2014 6 FROM BANK. ACCORDINGLY, WE ARE INCLINED TO CONFIRM THE ORDER OF THE CIT(A) ON BOTH THESE ISSUES. 10. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE ASSESSEE ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 18-07-2014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 18 TH JULY, 2014 GJ COPY TO: 1. SHRI V. GANESHAN, POOJA, CHERUVANNUR, FEROKE, KOZHIKODE. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-2 (1), KOZHIKODE. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOZHIKO DE. 4. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR)