ITO, Vellore V. Punitha Balakrishnan, Tiruvannamalai

ITA 991/CHNY/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7584 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: G BASKAR
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.991/MDS/2014 ( )( / ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD I(4), VELLORE. V. SMT. PUNITHA BALAKRISHNAN, NO.203, ANNA SALAI, TIRUVANNAMALAI. PAN: AOYPB 2411 C (+,/ APPELLANT) (-.+,/ RESPONDENT) ./ ITA NOS.992 & 993/MDS/2014 ( )( / ASSESSMENT YEARS : 2007-08 & 2008-09 THE INCOME TAX OFFICER, WARD I(4), VELLORE. V. SHRI N. BALAKRISHNAN, NO.203, ANNA SALAI, TIRUVANNAMALAI. PAN: AFIPB 3887 P (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : DR. B. NISCHAL, JCIT -.+, / 0 / RESPONDENTS BY : SHRI G. BASKAR, ADVOCATE 1 / 2% / DATE OF HEARING : 02.02.2016 3') / 2% / DATE OF PRONOUNCEMENT : 24.03.2016 2 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE REVENUE HAS FILED THESE APPEALS AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) VII, DATED 30.12.2013, IN RESPECT OF TWO INDEPENDENT ASSESSEES , FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN THESE APPEALS, WE HEARD ALL THESE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. IN I.T.A. NOS.991 & 992/MDS/2014, THE ADMITTED T AX IS LESS THAN ` 10 LAKHS. IN VIEW OF THE CIRCULAR OF CBDT IN CIRCU LAR NO. 21/2015 DATED 10.12.2015, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THESE TWO APPEALS FILED BY THE REVENUE ARE NOT MAINTAINABLE BEFORE THIS TRIBUNAL. ACCORDINGLY, I.T.A. NOS.991 & 992/MDS/2014 ARE DISMISSED. 3. NOW COMING TO I.T.A. NO.993/MDS/2014, THE FIRST ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION OF ` 8,07,747/- TOWARDS INFLATION OF PURCHASE OF RICE. 3 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 4. DR. B. NISCHAL, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE ASSESSEE DEPOSITED A SUM OF ` 43,03,588/- IN INDIAN BANK, THIRUVANNAMALAI BRANCH. NO BOOKS OF A CCOUNT WERE MAINTAINED. THE ASSESSEE CLARIFIED THAT THE DEPOSI T OF ` 33,78,600/- WAS PURPORTED TO BE IN CONNECTION WITH TRADING, PRO FIT & LOSS ACCOUNT OF THE ASSESSEE. THE ASSESSEE CLAIMED BEFO RE THE ASSESSING OFFICER THAT HE HAS PURCHASED PADDY FROM FARMERS FOR A SUM OF ` 8,07,747/-. THE ASSESSEE HAS MAINTAINED BOUGHT NOT ES WHEREIN THE NAMES OF THE FARMERS AND THE DATES OF P URCHASE WERE SAID TO BE MENTIONED. ACCORDING TO THE LD. D.R., T HE BOUGHT NOTES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. IT WAS PRODUCED ONLY BEFORE THE CIT(APPEALS). THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE HAS EXPORTED RICE FOR ` 33,78,600/-. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT PRODUCE ANY I NVOICE / BILL FOR PURCHASE OF PADDY FROM SO-CALLED AGRICULTURISTS. I N THE ABSENCE OF ANY MATERIAL FOR THE PURCHASES MADE, THE ASSESSING OFFICER DISALLOWED A SUM OF ` 8,07,747/-. 5. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT IT IS NOT CORRECT TO SAY T HAT BOUGHT NOTE WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER. REF ERRING TO THE 4 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 ASSESSMENT ORDER, MORE PARTICULARLY PAGE 5, PARA 1. 3, THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OFFICER IN CATEGORICAL TERMS SAYS THAT THE BOUGHT NOTE PURCHASE BILLS EXAMINED . HOWEVER, THE ASSESSING OFFICER HAS ADDED THAT IT DOES NOT CONTAI N COMPLETE NAMES AND ADDRESS OF THE FARMERS. REFERRING TO THE DATES MENTIONED IN THE BOUGHT NOTE, THE ASSESSING OFFICER OBSERVED THAT THE PERIOD OF YIELDING IS DIFFERENT AND THE FARMERS COULD NOT SELL THEIR PRODUCTS AT ANY TIME WHEN THE BILLS WERE RAISED. A CCORDING TO THE ASSESSING OFFICER, THE AGRICULTURISTS COULD NOT PRE SERVE THEIR PADDY AND SELL THE SAME IN A LATER STAGE. ACCORDING TO T HE LD. COUNSEL, THE PADDY CAN BE VERY MUCH STORED AND IT CAN BE SOLD AT ANY POINT OF TIME. SINCE THE PURCHASES ARE MADE FROM FARMERS, T HE ASSESSEE CANNOT BE EXPECTED TO GET ANY PURCHASE BILL FOR PUR CHASE OF PADDY FROM AGRICULTURISTS. IF THE DISALLOWANCE IS MADE A S PROPOSED BY THE ASSESSING OFFICER, THEN THE GROSS PROFIT OF THE RAT IO WOULD GO TO 52% WHICH IS ABNORMAL. REFERRING TO THE EXPORT MADE BY THE ASSESSEE TO THE EXTENT OF ` 33,78,600/-, THE LD.COUNSEL SUBMITTED THAT UNLESS PURCHASE WAS MADE, THE ASSESSEE COULD NOT HAVE EXPO RTED THE RICE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING 5 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 OFFICER DOUBTED THE PURCHASE OF PADDY TO THE EXTENT OF ` 8,07,747/-. IT IS NOT IN DISPUTE THAT THE PADDY WAS PURCHASED F ROM AGRICULTURISTS. THE AGRICULTURAL PRODUCE IN THIS COUNTRY ARE SOLD I N UNREGULATED MARKET. EXPECTING BILLS FROM THE FARMERS FOR PURCH ASE OF PADDY IS SOMETHING IMPOSSIBLE IN THIS COUNTRY. MAJORITY OF THE AGRICULTURISTS IN THIS COUNTRY ARE ILLITERATE AND THEY WOULD SELL THE AGRICULTURAL PRODUCE, INCLUDING THE PADDY, TO THE PERSONS WHO AR E OFFERING THE HIGHEST PRICE. THE AGRICULTURISTS BEING NOT IN REG ULAR TRADE LIKE MERCHANTS, THEY ARE NOT IN THE HABIT OF ISSUING ANY BILLS FOR SALE OF THEIR AGRICULTURAL PRODUCE. THIS FACT WHICH PREVAI LS IN THIS COUNTRY CANNOT BE IGNORED BY THE INCOME-TAX DEPARTMENT, WHE N THE AGRICULTURAL PRODUCES ARE PURCHASED FROM THE AGRICU LTURISTS. WHAT IS TO BE SEEN IS WHETHER THE ASSESSEE HAS PURCHASED TH E PADDY OR NOT. IN THIS CASE DISALLOWANCE WAS MADE ONLY ON TH E GROUND THAT THE ASSESSEE HAS NOT PRODUCED THE BILLS AND VOUCHER S. THE FACT REMAINS THAT THE ASSESSEE HAS PRODUCED BOUGHT NOTE WHICH CONTAINS THE NAMES OF THE FARMERS AND THEIR VILLAGE NAMES. BY REFERRING TO THE VILLAGE NAME AND NAME OF THE FARME RS, ONE CAN EASILY IDENTIFY THE INDIVIDUAL FROM WHOM THE PADDY WAS PURCHASED. IT IS NOT NECESSARY TO MENTION THEIR COMPLETE ADDRE SS OF THE FARMERS 6 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 WHO ARE LIVING IN THE VILLAGE. EACH AND EVERY AGRI CULTURIST CAN BE VERY MUCH IDENTIFIED BY REFERRING TO THEIR INDIVIDU AL NAME AND THE VILLAGE. THEREFORE, THE ASSESSING OFFICER MAY NOT BE JUSTIFIED IN SAYING THAT THE BOUGHT NOTE DOES NOT CONTAIN COMPLE TE NAME AND ADDRESS OF THE FARMERS. 7. THE NEXT CONTENTION OF THE ASSESSING OFFICER APP EARS TO BE THAT THE FARMERS COULD NOT PRESERVE THEIR PADDY AND SELL IN A LATER STAGE. THE ARGUMENT OF THE ASSESSING OFFICER IS FA RFETCHED. PADDY IS NOT A PERISHABLE COMMODITY. THE PADDY HARVESTED BY THE AGRICULTURISTS CAN BE STORED FOR A REASONABLE PERIO D OF TIME. AT THE BEST, THE MOISTURE CONTENT MAY BE REDUCED BY PASSAG E OF TIME. THE PADDY IS NOT A PERISHABLE COMMODITY. THEREFORE, ME RELY BECAUSE THE BILLS WERE RAISED DURING THE PERIOD WHEN THERE WAS NO HARVEST, THAT CANNOT BE A REASON TO DOUBT THE PURCHASE ITSEL F. RULE 6DD RELAXES THE RIGOUR OF PROVISIONS OF SECTION 40A(3) OF THE ACT WITH REGARD TO PAYMENT MADE TO AGRICULTURAL AND FOREST P RODUCES PURCHASED FROM CULTIVATOR, GROWER OR PRODUCER OF SU CH ARTICLES. WHEN RULE 6DD ENABLES THE PURCHASER TO PAY CASH AFT ER TAKING INTO CONSIDERATION OF THE ECONOMIC CONDITION IN WHICH TH E AGRICULTURISTS OF THIS COUNTRY ARE LIVING, EXPECTING A BILL/VOUCHER F ROM THE 7 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 AGRICULTURISTS IS SOMETHING WHICH CANNOT BE OBTAINE D BY THE ASSESSEE. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTL Y DELETED THE ADDITION OF ` 8,07,747/-. 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF ` 4,55,000/-. 9. DR. B. NISCHAL, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE ASSESSEE HAS DISCLOSED OPENING C ASH BALANCE OF ` 5,23,773/- BY WAY OF CASH DEPOSIT IN THE ASSESSEES BANK ACCOUNT. THE ASSESSEE HAS NOT FURNISHED ANY CASH FLOW STATEM ENT BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(APPEALS). IN TH E ABSENCE OF ANY CASH FLOW STATEMENT, THE CIT(APPEALS) SHOULD HAVE C ALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER. THE CIT( APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE CASH DEPOSIT WAS WITHIN EXCLUSIVE KNOWLEDG E OF THE ASSESSEE. WHEN THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF DEPOSIT, ACCORDING TO THE LD. D.R., THE CIT(APPEALS ) OUGHT NOT HAVE DELETED THE ADDITION. 8 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 10. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THERE WAS AN ADDITION OF ` 4,55,000/- TOWARDS UNEXPLAINED CASH DEPOSIT IN BANK ACCOUNT. THE LD.COUNSEL FURTHER SUBMITTED THAT THE CIT(APPEALS) DELETED THE ADDITION ACCEPTING THE AVAILABLE FUNDS TO THE EXTENT OF ` 5,23,773/- AS ON 31.03.2007. BUT, THIS FACT NEEDS TO BE VERIFIED. FURTHER, THE LD.COUNSEL SUBMITTED THAT THE MATTER MAY BE REMITTE D BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CIT(APPEALS), BY FOLLOWING HIS OWN ORDER IN THE ASS ESSEE'S OWN CASE FOR ASSESSMENT YEAR 2007-08, FOUND THAT THE NE T AVAILABLE CASH AS ON 31.03.2007 WAS ` 5,23,773/-. THEREFORE, THE CIT(APPEALS) PRESUMED THAT THE ASSESSEE COULD EXPLA IN THE SOURCE FOR MAKING INVESTMENT IN THE BANK ACCOUNT. AS RIGH TLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THIS FACT NEEDS TO BE VERIFIED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ISSUE OF ADDITION OF ` 5,23,773/- IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE ISSUE IN THE LIGHT OF AVAILABILITY OF FUNDS AS ON 3 1.03.2007 AND 9 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 THEREAFTER DECIDE THE MATTER IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 12. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 21,00,000/- TOWARDS UNEXPLAINED LOANS AND ADVANCES. 13. DR. B. NISCHAL, THE LD. DEPARTMENTAL REPRESENTA TIVE, SUBMITTED THAT WHILE EXPLAINING THE CASH DEPOSIT FO R THE ASSESSMENT YEAR 2008-09 IN THE CASE OF SMT. PUNITHA BALAKRISHN AN, IT WAS CLAIMED THAT THERE WAS TRANSFER OF FUNDS FROM THE A SSESSEE TO THE EXTENT OF ` 21,00,000/-. HOWEVER, THE LOAN SAID TO BE ADVANCED BY THE ASSESSEE TO HIS WIFE SMT. PUNITHA BALAKRISHNAN WAS NOT REFLECTED IN THE BALANCE SHEET AT ALL. THEREFORE, THE ASSESSING OFFICER DOUBTED THE LIABILITY OF SMT. PUNITHA BALAK RISHNAN TO REPAY THE LOAN. ACCORDINGLY, MADE AN ADDITION OF ` 21,00,000/-. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOUND THAT THE LO AN WAS GIVEN BY THE ASSESSEE TO HIS WIFE BY WAY OF CHEQUES. THE CI T(APPEALS) FOUND THAT SINCE THE LOAN WAS ADVANCED THROUGH BANK ING CHANNEL, MERELY BECAUSE THE LOAN WAS NOT REFLECTED IN THE BA LANCE SHEET THAT CANNOT BE A REASON TO DISALLOW THE CLAIM OF THE ASS ESSEE. ACCORDING TO THE LD. D.R., THE FACT THAT THE LOAN S AID TO BE GIVEN TO 10 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 THE ASSESSEES WIFE SMT. PUNITHA BALAKRISHNAN IS NO T REFLECTED IN THE BALANCE SHEET IS NOT DISPUTED. THEREFORE, THE AMOUNT SAID TO BE RECEIVABLE IS QUESTIONABLE. THEREFORE, THE ASSESSI NG OFFICER HAS RIGHTLY ASSESSED THE SAME AS UNEXPLAINED LOAN AND A DVANCE. 14. ON THE CONTRARY, SHRI G. BASKAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT DURING THE YEAR UNDER CONS IDERATION, A SUM OF ` 21,00,000/- WAS TRANSFERRED TO SMT. PUNITHA BALAKRI SHNAN BY WAY OF FOUR CHEQUES. THE DETAILS OF THE DATES O N WHICH THE CHEQUES WERE ISSUED AND TRANSFERRED BY THE BANK ARE AVAILABLE AT PAGE 8 OF THE CIT(APPEALS)S ORDER. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ONLY ON THE GR OUND THAT THE LOAN GIVEN BY THE ASSESSEE TO HIS WIFE DOES NOT FIN D PLACE IN THE BALANCE SHEET. WHEN THE LOAN WAS GIVEN THROUGH BAN KING CHANNEL, WHICH IS RECORDED, MERELY BECAUSE THE SAME WAS NOT REFLECTED IN THE BALANCE SHEET CANNOT BE A REASON TO DISALLOW TH E CLAIM OF THE ASSESSEE. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ONLY O N THE GROUND THAT 11 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 THE BALANCE SHEET DOES NOT REFLECT THE LOAN/ADVANCE SAID TO BE GIVEN BY THE ASSESSEE TO HIS WIFE SMT. PUNITHA BALAKRISHN AN. THE FACT REMAINS THAT THE LOAN WAS GIVEN THROUGH FOUR CHEQUE S ON FOUR DIFFERENT DATES. THIS FACT IS NOT DISPUTED BY THE REVENUE. WHEN THE AMOUNT WAS TRANSFERRED FROM THE BANK BY MEANS OF CH EQUES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT REJECTIO N OF CLAIM OF THE ASSESSEE ONLY ON THE GROUND THAT THE BALANCE SHEET DOES NOT DISCLOSE THE ADVANCE SAID TO BE MADE BY THE ASSESSE E IS NOT JUSTIFIED. 16. IN VIEW OF THE ABOVE, THIS TRIBUNAL HAS NO REAS ON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY , THE SAME IS CONFIRMED. 17. IN THE RESULT, REVENUES APPEALS IN I.T.A. NOS. 991 & 992/MDS/2014 ARE DISMISSED AND I.T.A. NO.993/MDS/20 14 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 24 TH MARCH, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER 12 I.T.A. NO.991/MDS/14 I.T.A. NO.992 & 993/ MDS/14 /CHENNAI, 5 /DATED, THE 24 TH MARCH, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENTS 3. 1 92 () /CIT(A)-VII, CHENNAI-34 4. 1 92 /CIT-VIII, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.