B.R.Sarins and Sons HUF, CHENNAI V. DCIT, CHENNAI

ITSSA 11/CHNY/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9265 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 02-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 24-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K RAVI
• Assessee Lawyers: DR M SRINIVASA RAO
• Keywords: Unexplained investment; Peak credit; Block assessment
• Section: 143(3)

Judgement Text

, , IN THE INCOM E TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T. (SS) A.NO . 1 1 /CHNY/20 14 BLOCK PERIOD 01.04.1996 TO 27.03.2003 M/S. B.R. SARIN & SONS HUF NO.15/4, MASILAMANI ROAD, BALAJI NAGAR, ROYAPETTAH, CHENNAI 600 014. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE II(1), CHENNAI - 34. PAN: A AAHB2214D ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : DR. M. SRINIVASA RAO, CIT / RESPONDENT BY : SHRI K.RAVI, ADVOCATE / DATE OF HEARING : 29.01 . 201 9 / DATE OF PRONOUNCEMENT : 0 2 . 0 4 .2019 / O R D E R PER A. MOHAN ALANKAMONY, AM : - THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A) (C) - II, C HENNAI , DATED 31.03. 2014 IN ITA NO. 45 1 / 06 - 07 FOR THE BLOCK PERIOD 01.04.1996 TO 27.03.2003 PASSED U/S.250(6) R.W.S. 143(3) R.W.S. 158BC & 158B D OF THE ACT. 2 IT(SS)A NO.11 /CHNY/2014 2. THE ASSESSEE HAS RAISED FEW GROUNDS IN IT S APPEAL HOWEVER THE CRUXES OF THE ISSUES ARE THAT : - I . THE LD.CIT(A) HAS ERRED IN UPHOLDING THE FINDING OF THE LD.AO TH A T THE ASSESSEE HAD NOT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS FALLING WITHIN THE BLOCK P ERIOD BEFORE THE DATE OF SEARCH AND THEREBY ADDED THE AMOUNT OF RS.5,10,770/ - BEING THE AGGREGATE INCOME DISCLOSED IN THE RETURN OF INCOME STATED TO HAVE BEEN FILED BY THE ASSESSEE. II . THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS. 3,03,125 / - TOWARDS RECURRING DEPOSIT A CCOUNT NO.5188 WITH STATE BANK OF INDORE , ROYAPETTAH AS THE UNACCOUNTED INVESTMENT OF THE ASSESSEE. III . THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS. 11,45 ,000/ - AS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE BEING THE UN ACCOUNTED PRO - NOTES FOUND DURING THE COURSE OF SEARCH. IV . THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS. 1 ,50,000/ - BEING THE MONEY 3 IT(SS)A NO.11 /CHNY/2014 ADVANCED TO M/S. BMB PRODUCTIONS AS UNEXPLAINED ADVANCES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A HUF WHOSE KARTHA SHRI RAKESH SARIN S PREMISES WAS SEARCHED ON 27.03.2003 AND CONCLUDED ON 28.08.2003. THEREAFTER A NOTICE U/S.158BC R.W.S. 158BD WAS SERVED TO THE ASSESSEE ON 23.02 .2005 REQUESTING THE ASSESSEE TO FILE ITS RETURN OF INCOME. SUBSEQUENTLY THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE BLOCK ASSESSMENT PERIOD IN FORM 2B ON 16.03.2005 DISCLOSING UNDISCLOSED INCOME AS NIL. THEREAFTER ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S. 158BC & 158BD OF THE ACT VIDE ORDER DATED 28.02.2007 WHEREIN THE LD.AO MADE SEVERAL ADDITIONS WHICH WAS FURTHER SUSTAINED BY THE LD.CIT(A). 4. GROUND NO.2(I) : NON FILING OF INCOME TAX RETURNS : - DURING THE COURSE OF INVESTIGATION, IT WAS OBSERVED THAT THE ASSESSEE HAD MADE SUBSTANTIAL INVESTMENTS IN RECURRING DEPOSIT, AND ALSO HAD ADVANCED LOANS TO VARIOUS PARTIES. IT WAS EXPLAINED BY THE ASSESSEE THAT THEY HAD DISCLOSED THE SAME IN THE RETURN OF 4 IT(SS)A NO.11 /CHNY/2014 INCOME FOR ALL THE ASSESSMENT YEARS AND ALSO PRODUCED THE ACKNOWLEDGEMENTS FOR HAVING FILED THE RETURN OF INCOME. HOWEVER ON VERIFYING THE ACKNOWLEDGEMENTS SUBMITTED BY THE ASSESSEE, IT WAS OBSERVED THAT THE ACKNOWLEDGEMENT NUMBER DID NOT PERTAIN TO THE AS SESSEE BUT TO DIFFERENT PERSONS. THEREFORE THE LD.AO OPINED THAT THE RETURNS FILED BY THE ASSESSEE ARE BOGUS TOWARDS WHICH THE ASSESSEE STRONGLY OBJECTED. ON APPEAL THE LD.CIT(A) HELD THE ISSUE IN FAVOUR OF THE REVENUE BY RELYING ON VARIOUS DECISIONS OF TH E HIGHER JUDICIARIES. 4.1 BEFORE US THE LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE LD.REVENUE AUTHORITIES THAT THE LAPSE ON THE PART OF THE REVENUE TO MAINTAIN PROPER RECORDS CANNOT DETERMINE THE RETURNS FILED BY THE ASSESSEE TO BE BOGUS. THE LD.DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE LD.REVENUE AUTHORITIES. 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. THE LD.REVENUE AUTHORITIES HAD REJECTED THE ACKNOWLEDGEMENTS OF THE RETURNS FILED BY THE ASSESSEE BECAUSE IT DID NOT MATCH WITH THE RECORDS MAINTAINED BY THE 5 IT(SS)A NO.11 /CHNY/2014 LD.REVENUE AUTHORITIES. HOWEVER THE LD.REVENUE AUTHORITIES HAVE NOT CONDUCTED ANY INVESTIGATION ON THAT REGARD. THE LD.REVENUE AUTHORITIES ALSO OUGHT TO HAVE EXAMINED THE COPY OF THE RETURNS FILED BY THE ASSESSEE THAT WAS PRODUCED BEFORE THEM AND THEREAFTER ARRIVED AT A PROPER CONCLUSION. FURTHER THE LD.REVENUE AUTHORITIES HAD NOT TAKEN ANY COERCIVE ACTION FOR THE ALLEGED FRAUD COMMITTED BY THE ASSESSEE. IN THIS SITUATION WE CAN NEITHER HOLD THE MA TTER IN FAVOUR OF THE REVENUE NOR THE ASSESSEE. IT IS PERTINENT TO MENTION THAT ON THE IDENTICAL FACTS IN THE CASE OF RELATED PARTIES SMT. RENU SARIN IN IT(SS)A NO.17/CHNY/2014 VIDE ORDER DATED 20.03.2019 AND IN THE CASE OF THE SHRI RAKESH SARIN IN IT(SS)A NO.66/CHNY/2007 VIDE ORDER DATED 11.03.2019 ALSO WE HAD EXPRESSED SIMILAR VIEW. CONSIDERING THESE FACTS WE ARE OF THE VIEW THAT THE ADDITION MADE BY THE LD.AO FOR RS.5,10,770/ - IN THE BLOCK ASSESSMENT IS DEVOID OF MERITS BECAUSE THERE IS NO CONCLUSIVE FINDING BY THE REVENUE THAT THE ASSESSEE HAD NOT FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 1997 - 98 TO 2003 - 04. HENCE WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE BY THE LD.AO FOR RS.5,10,770/ - IN THE BLOCK ASSESSMENT. 6 IT(SS)A NO.11 /CHNY/2014 5. GROUND NO. 2(II ): ADDITION OF RS.3 , 03,125 / - TOWARDS RECURRING DEPOSIT: - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD DEPOSITED RS. 3,03,125 / - IN RECURRING DEPOSIT ACCOUNT NO.5188 WITH STATE BANK OF INDORE, ROYAPETTAH DURING THE BLOCK PERIOD. THE LD.AO ADDED THE SAME TO THE UNDISCLOSED INCOME OF THE ASSESSEE BECAUSE THE TRANSACTIONS WERE NOT ACCOUNTED IN THE ASSESSEES BOOKS OF ACCOUNTS. THE LD.AO FURTHER OBSERVED THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME BEFORE THE DATE OF SEARCH. ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY AGREEING WITH HIS VIEW. IN SIMILAR SI TUATION HEREIN ABOVE, WE HAVE DELETED THE ADDITION MADE BY THE LD.AO BECAUSE THE LD.AO HAD FAILED TO EXAMINE THE RETURN FILED BY THE ASSESSEE AND THE EXPLANATION SUBMITTED. WE HAVE EXPRESSED THE SIMILAR VIEW IN THE ASSESSEES RELATED CASE SMT. RENU SARIN IN IT(SS)A NO.17/CHNY/2014 VIDE ORDER DATED 22.03.2019 AND IN THE CASE OF SHRI RAKESH SARIN IN IT(SS)A NO.66/CHNY/2007 VIDE ORDER DATED 11.03.2019 . 7 IT(SS)A NO.11 /CHNY/2014 ACCORDINGLY WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE FOR RS. 3,03,125 / - TOWARDS RECURRING DEPOS IT. 7. GROUND NO.2(IV ): ADDITION OF RS. 11,45 ,000/ - TOWARDS PRO - NOTES: - DURING THE COURSE OF SEARCH CERTAIN PRO - NOTES WERE FOUND IN THE ASSESSEES PREMISES AND SINCE NO EXPLANATION COULD BE OBTAINED FROM THE KARTA OF THE HUF SHRI RAKESH SARIN WHO WAS UNAVAILABLE AT THAT TIME AND THE MANAGER WHO WAS PRESENT, THE LD.AO ADDED THE AGGREGATE OF THE SAME AS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE AS THEY WERE NOT ACCOUNTED IN THE BOOKS OF ACCOUNT S . ON THE IDENTICAL ISSUE AND FACT S, THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEES RELATED PARTIES SMT. RENU SARIN IN IT(SS)A NO.17/CHNY/2014 VIDE ORDER DATED 22.03.2019 AND IN THE CASE OF SHRI RAKESH SARIN IN IT(SS)A NO.66/CHNY/2007 VIDE ORDER DATED 11.03.2019 HELD THE ISSUE I N FAVOUR OF THE ASSESSEE. IN THE CASE OF THE SHRI RAKESH SARIN THIS BENCH OF THE TRIBUNAL HAD OBSERVED AS UNDER: - 7.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE PRO - NOTES WERE INCOMPLETE IN ALL ASPECTS AND THEREFORE PRESUMPTION CANNOT BE MADE THAT THE ASSESSEE HAD LEND MONEY 8 IT(SS)A NO.11 /CHNY/2014 THOUGH THERE IS SOME AIR OF DOUBT. MOREOVER PEAK CREDIT CONCEPT MAY ALSO BE APPLICABLE IN THE CASE OF THE ASSESSEE DUE TO ROTATION OF ADVANCES AND REPAYMENTS. IT APPEARS THAT THE LD.AO HAS NOT EXAMINED THOSE ASPECTS. THERE IS EVERY PROBABILITY THAT IF SUCH EXER CISE WOULD HAVE BEEN CARRIED OUT THE SOURCE OF THE AMOUNT UTILIZED IN THE FINANCE BUSINESS WOULD HAVE BEEN EXPLAINABLE AS THE AMOUNT UTILIZED IN THE BUSINESS WOULD HAVE BEEN MUCH LESS THAN THE ADDITION MADE BY THE LD.AO. THEREFORE ADHOC ADDITION OF THE AMO UNT MENTIONED IN THE ENTIRE PRO - NOTES IS NOT JUSTIFIABLE. FURTHER THE LD.AO HAS ALSO NOT MADE ANY INVESTIGATION IN THE MARKET TO FIND OUT WHETHER ANY AMOUNT BORROWED FROM THE ASSESSEE WAS PENDING TO BE RETURNED TO THE ASSESSEE. FURTHER THE LD.AO HAD ALSO NOT MADE PROPER INVESTIGATION FROM THE BORROWERS. WHEN THE LD.AO HAS NOT MADE ANY INVESTIGATION ON THIS REGARD ADDITION MADE ONLY ON THE BASIS OF PRESUMPTION IS NOT JUSTIFIABLE. MOREOVER THERE IS NO CORROBORATIVE EVIDENCE TO SUPPORT THE CASE OF THE LD.AO. EVEN BEFORE US THE LD.DR WAS NOT ABLE TO SUCCESSFULLY CONTROVERT TO THE FINDINGS OF THE LD.CIT(A). THE DECISION CITED BY THE LD.DR IS ALSO NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCE OF THE CASE OF THE ASSESSEE. THE ASSESSEE HAS ALSO EXPLAINED VARIOUS SIT UATIONS WHEREIN SUCH DOCUMENTS ARE ACCUMULATED IN THE PREMISES OF THE ASSESSEE. THE LD.DR COULD ALSO NOT FURNISH ANY MATERIALS TO REJECT THE EXPLANATION OFFERED BY THE ASSESSEE. HENCE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) ON THIS REGARD. THUS THIS GROUND IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. SINCE THE FACTS AND THE ISSUE BEING SAME, THE SAME DECISION HOLDS GOOD IN THE CASE OF THE ASSESSEE ALSO AND ACCORDINGLY WE HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION OF RS. 11 ,45,000 / - MADE TOWARDS UNACCOUNTED PRO - NOTES. 9 IT(SS)A NO.11 /CHNY/2014 8. GROUND NO.2( IV ) : ADDITION OF RS. 1 , 50,000 / - BEING THE AMOUNT ADVANCED TO M/S. BMB PRODUCTIONS AS UNEXPLAINED ADVANCES: - DURING THE COURSE OF SEARCH PROCEEDINGS IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD ADVANCED MONEY TO M/S. BMB PRODUCTION S AND THE SA ME WAS RETURNED. SINCE EX CESS MONEY OF RS.1,50,000/ - WAS RETURNED , THELD.AO ADDED THE SAME TO THE INCOME OF THE ASSESSEE WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD.CIT(A). BEFORE US NEITHER THE ASSESSEE NOR THE LD.AR HAS PRODUCED ANY MATERIALS OR ADVANCED ANY ARGUMENTS TO NEGATE THE FINDING OF THE LD.REVENUE AUTHORITIES , THEREFORE WE HAVE NO OTHER OPTIONS BUT TO CONFIRM THE ORDER OF THE LD.REVENUE AUTHORITIES. ACCORDINGLY WE HEREBY CONFIRM THE ADDITION OF RS.1,50,000/ - MADE BY THE LD.AO 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED O N THE 0 2 ND APRIL , 2019 AT CHENNAI. SD/ - SD/ - ( ) (DUVVURU R.L REDDY) / JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER 10 IT(SS)A NO.11 /CHNY/2014 / CHENNAI, / DATED 0 2 ND APRIL , 2019 RSR / COPY TO: 1. / APPELLANT 2. /RESPONDENT 3. ( ) / CIT(A) 4. / CIT 5. / DR 6. / GF