ACIT, Bangalore V. Shri. K.N. Srinivasa, Bangalore

ITSSA 23/BANG/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8989 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-08-2010
• Assessment Year: misc
• Appeal Filed On: 09-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATHI S PATIL CITIIDR
• Assessee Lawyers: S PARTHASARATHI ITSSA NO; BANG P
• Keywords: Unexplained investment; Gift; Document seized; Source of fund; Block assessment; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER IT(SS)A NO. 23 BANG/2009 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1996 TO 18.12.2 002 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1), BANGALORE. : APPELLANT VS. SHRI K.N. SRINIVAS, NO.193, 3 RD MAIN, 5 TH CROSS, CHAMARAJPET, BANGALORE 560 018. : RESPONDENT IT(SS)A NO. 25 BANG/2009 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1996 TO 18.12.2 002 SHRI K.N. SRINIVAS, NO.193, 3 RD MAIN, 5 TH CROSS, CHAMARAJPET, BANGALORE 560 018. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1), BANGALORE. : RESPONDENT REVENUE BY : SMT. SWATHI S. PATIL, CIT-II(DR) ASSESSEE BY : SHRI S. PARTHASARATHI, ADVOCATE IT(SS)A NO.23 & 25 /BANG/09 PAGE 2 OF 10 O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE TWO APPEALS PREFERRED (I) BY THE REVENUE AN D (II) ANOTHER BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF TH E CIT (A)-II, BANGALORE, IN ITA NO: 163/AC 3(1)/CIT(A)-II/04-05 DATED: 19.1. 2009 FOR THE BLOCK PERIOD 1.4.1996 TO 18.12.2002. I. IT(SS)A NO.23/09 BY THE REVENUE : 2. THE REVENUE HAS RAISED FIVE GROUNDS, OUT OF WHIC H, GROUND NOS: 1, 2 AND 5 BEING GENERAL AND NO SPECIFIC ISSUES INVOLVED , THEY HAVE BECOME NON-CONSEQUENTIAL. IN THE REMAINING TWO GROUNDS, T HE CRUX OF THE ISSUE IS THAT (I) THE CIT (A) HAS ERRED IN HOLDING THAT THE ADDITION MADE IN THE HANDS OF THE ASSESSEE HAS ALREADY BEEN BROUGHT UND ER TAX NET IN THE CASE OF THE ASSESSEES FATHER K.NARAYANAGOWDA A S CONFIRMED BY THE CIT(A); - THE CIT(A) HAD NOT APPRECIATED THE FACT THAT THE FI NDING OF THE CIT(A) IN THE CASE OF K. NARAYANAGOWDA HAD NOT REACHED FINALITY. II. IT(SS)A NO.25/09 BY THE ASSESSEE : 3. THE ASSESSEE HAS RAISED SEVEN GROUNDS, IN WHICH, GROUND NO: 7 BEING GENERAL IN NATURE, IT DOESNT SURVIVE FOR ADJ UDICATION. GROUND NO.6 IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 158 BF A OF THE ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. IN THE REM AINING FIVE GROUNDS, THE CRUXES OF THE ISSUES ARE TWO-FOLDS, NAMELY IT(SS)A NO.23 & 25 /BANG/09 PAGE 3 OF 10 (I) THE CIT (A) OUGHT TO HAVE REFRAINED FROM UPHOLDING THE ADDITION OF RS.75000/- TOWARDS UNEXPLAINED DEPOSIT; (II) THE CIT (A) OUGHT TO HAVE REFRAINED FROM UPHOLDING THE ADDITION OF RS.63,500/- IN CONNECTION WITH THE INVESTMENT IN THE PROPERTY; - WITHOUT PREJUDICE, THE ADDITIONS ARE EXCESSIVE, ARB ITRARY AND UNREASONABLE WHICH REQUIRE TO BE REDUCED SUBSTANTIA LLY. 4. AS THE ISSUES RAISED IN THESE APPEALS ARE INTER- LINKED PERTAINING TO THE SAME ASSESSEE, BOTH THE APPEALS WERE HEARD, CON SIDERED AND DISPOSED OFF, FOR THE SAKE OF HANDINESS, IN THIS CO MMON ORDER. HISTORY OF THE ISSUE(S) : 5. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL, IS THE SON OF K. NARAYANAGOWDA IN WHOSE RESIDENTIAL PREMISES WERE SU BJECTED TO OPERATION U/S 132(1) OF THE ACT ON 18.12.2002. ON SCRUTINY O F THE SEIZED DOCUMENTS, IT APPEARS, THE AO WAS OF THE VIEW THAT THE ASSESSE E HAD INCOME LIABLE TO TAX AND, ACCORDINGLY A NOTICE U/S 158BC OF THE ACT WAS SLAPPED ON THE ASSESSEE. IN COMPLIANCE, THE ASSESSEE FURNISHED A NIL INCOME FOR THE BLOCK PERIOD. HOWEVER, THE AO CONCLUDED THE ASSESS MENT DETERMINING THE INCOME OF THE ASSESSEE AT RS.12.07 LAKHS FOR THE RE ASONS SET-OUT IN THE IMPUGNED ORDER WHICH IS UNDER DISPUTE. LET US NOW ADDRESS TO THE LONE GRIEVANCE OF THE REV ENUE. IT(SS)A NO.23/09 BY THE REVENUE : 6. AT THE OUT-SET, WE WOULD LIKE TO POINT OUT THAT THE REVENUE HAD FAILED TO QUANTIFY OR RATHER IDENTIFY WHICH ADDITION HAS S INCE BEEN WRONGLY DELETED BY THE CIT (A). HOWEVER, ON A CAREFUL PERUSAL OF TH E IMPUGNED ORDER OF THE IT(SS)A NO.23 & 25 /BANG/09 PAGE 4 OF 10 CIT (A), WE FIND THAT THE CIT (A) HAD RESORTED TO D ELETE THE ADDITIONS MADE BY THE AO ON THE FOLLOWING HEADS: (1)DELETION TOWARDS UNEXPLAINED DEPOSITS RS.1,00,000 (2) DELETION TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF PROPERTY RS.7,62,000 (3)DELETION OF UNEXPLAINED IN PURCHASE OF PROPERTY RS.1,27,065 6.1. THE BRIEF SUBMISSION OF THE REVENUE DURING THE COURSE OF HEARING BEFORE THIS BENCH WAS CENTERED THAT THE CIT (A) HAD FAILED TO APPRECIATE THE VERY FACT THAT IN HOLDING THE ENTIRE INCOME BELONGS TO K. NARAYANAGOWDA (THE ASSESSEES FATHER) HAD NOT REACH ED FINALITY AS THE SAID NARAYANAGOWDA MAY APPROACH THE HONBLE TRIBUNAL AGA INST HIS IMPUGNED ORDER FOR RELIEF ETC., 6.2. ON THE OTHER HAND, THE LD A R WAS VERY FIRM IN HIS URGE THAT WHILE DECIDING THE ISSUES, THE LD CIT(A) HAD ANALYZED THE VARIOUS ASPECTS BEFORE COMING TO SUCH A CONCLUSION WHICH, IT WAS PLEADED, REQUIRES NO INTERFERENCE AT THIS STAGE. 7. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, D ILIGENTLY PERUSED THE RELEVANT RECORDS AND ALSO THE PAPER BOOK FURNIS HED BY THE LD. A.R DURING THE COURSE OF HEARING. WE SHALL NOW CONSIDER THE ISSUES CHRONOLOGICALLY. (1) DELETION OF UNEXPLAINED DEPOSITS OF RS.1, 00,000 : THE AO HAD ADDED RS.1.75 LAKHS AS UNEXPLAINED DEPOS ITS IN THE NAME OF THE ASSESSEE AS, ACCORDING TO HIM, THERE WE RE FOUR DEPOSITS AGGREGATING TO RS.1.75 LAKHS AND THAT NO EXPLANATIO N WAS FORTH-COMING. IT(SS)A NO.23 & 25 /BANG/09 PAGE 5 OF 10 AFTER CONSIDERING THE ASSESSEES EXPLANATION THAT T HE ASSESSEE HAD TAKEN LOAN FROM HIS FATHER K.NARAYANA GOWDA WHICH W AS FINDING A PLACE IN THE CASH FLOW STATEMENT IN RESPECT OF NARAYANA GOWD A, THE CIT (A) WAS OF THE VIEW THAT THE SOURCE WAS FULLY ESTABLISHED AND AS SUCH, ADDITION WAS UNWARRANTED. SINCE THE LOAN AND GIFT WAS CONSIDERE D AS UNDISCLOSED INVESTMENT/EXPENSES IN THE HANDS OF NARAYANA GOWDA (IN HIS BLOCK ASSESSMENT PROCEEDINGS) AND AS SUCH, DEPOSIT TO THE EXTENT OF RS.1 LAKH CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE AND TH E BALANCE OF RS.75,000/- THOUGH REMAINED UNEXPLAINED AND UPHELD, THE SAME WAS TELESCOPED WITH INVESTMENT AND EXPENSES. NO DOCUMENTARY EVIDENCE WAS PRODUCED BEFORE US BY T HE REVENUE TO CONTRADICT THE FINDING OF THE CIT(A). MOREOVER, RS.1 LAKH WAS DULY CONSIDERED AS UNDISCLOSED INVESTMENT/EXPENSES IN TH E HANDS OF THE ASSESSEES FATHER K.NARAYANA GOWDA BY THE CIT(A) [P AGE 26 OF HIS IMPUGNED ORDER] WHICH WAS UPHELD BY THIS BENCH IN I T(SS)A NOS: 22 AND 24/B/09 DATED 17.09.2010. THOUGH, THE BALANCE OF RS.75,000/- REMAINED UNEXPLAINED AND UPHELD BY THE CIT (A), HOWEVER, THE SAME WAS TELESCOPED WITH INVESTMENT AND EXPENSES. THUS, THE STAND OF THE CIT (A) ON THIS SCORE IS UPHELD AND THE REVENUES GROUND IS DISMISS ED . (2) DELETION OF UNEXPLAINED INVESTMENT IN PURCHASE OF PROPERTY: IT WAS THE CASE OF THE AO THAT THE AS SESSEES MOTHER SMT. GANGALAKSHMI HAD TRANSFERRED FOUR SITES AT AVALAHAL LI FOR A CONSIDERATION OF RS.80,000/- WHICH WAS LOWER THAN MARKET VALUE OF SI TES AS PER THE SEIZED IT(SS)A NO.23 & 25 /BANG/09 PAGE 6 OF 10 DOCUMENTS OF RS.9,05,500/-, THE SAME WAS ADOPTED A S UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE. AFTER DUE CONSIDERATION OF VARIOUS CONT ENTIONS OF THE ASSESSEE, THE CIT (A)S OBSERVATION WAS THAT THE ASSESSEE HAD PUR CHASED THE SUBJECT PROPERTY AT RS.80,000/- VIDE REGISTERED DEED DT.16. 12.1998. HOWEVER, THE AO MADE THE ADDITION ON THE BASIS OF UNDER-VALUATIO N NOTICE OF THE SUB- REGISTRAR. ON A PERUSAL OF THE SAID NOTICE, THE CI T(A) FOUND THAT RS.52700/- WAS REMITTED AS STAMP FEE FOR UNDER-VALUATION. THE CONTENTION OF THE ASSESSEE BEFORE THE CIT (A) WAS THAT HE HAD PAID ON LY RS.80,000/- AS CONSIDERATION SINCE OUT OF NATURAL LOVE AND AFFECT ION TOWARDS HIM, HIS MOTHER ACCEPTED ONLY RS.80,000/-. THE ADDITION WAS MADE ONLY ON THE BASIS OF EVIDENCE THAT THE ASSESSEE HAD PAID MORE C ONSIDERATION THAN WHAT WAS DECLARED IN THE SALE DEED. HOWEVER, THE RECIPI ENT WAS NOT CONFRONTED WITH TO ASCERTAIN THE CORRECT POSITION AND, THUS, T HE CIT (A) CONSIDERED ONLY RS.1,43,500 [RS.80,000/- + RS.63,500 BEING STAMP PA PER AND REGISTRATION FEES). THE BALANCE OF RS.7,62,000 (SIC) RS.7,61,50 0 [905000 143500] WAS DELETED. BEFORE US, AS STATED EARLIER, NO DOCUM ENTARY EVIDENCE WORTH THE NAME WAS PRODUCED BY THE REVENUE TO CONTRADICT THE FINDING OF THE CIT(A). IN THE ABSENCE OF ANY CREDIBLE EVIDENCE, WE FALL IN LINE WITH THE FINDING OF THE CIT (A). (3) DELETION OF UNEXPLAINED INVESTMENT IN PURCHA SE OF PROPERTY RS.1,27,060/-: IT WAS THE CASE OF THE AO THAT THE ASSESSEE ALONG WITH HIS BROTHER K.N.CHANDRASHEKAR PURCHASED A PROPERTY AT AVALAHALL I ON 17.10.1997 FOR IT(SS)A NO.23 & 25 /BANG/09 PAGE 7 OF 10 RS.2,54,130/- AND THE ASSESSEES SHARE BEING RS.1,2 7,060/- WHICH WAS NOT PROPERLY EXPLAINED FOR THE SOURCE, THE SAME WAS TRE ATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE. THE CIT (A), AFTER CONSIDERATION OF THE ASSESSEES CONTENTION, HAD MADE THE FOLLOWING OBSERVATION 5.4..I FIND MERIT IN THE APPELLANTS SUBM ISSION THAT LOAN WAS RECEIVED FROM HIS FATHER SRI K.NARAYANAGOWDA. IT IS PERTINENT TO MENTION THAT IN THE BLOCK ASSESSMENT IN THE CASE OF SRI K.NARAYANA GOWDA, LOAN OF RS.1,27,065/- WAS CONSIDERED AS UNEXPLAINED INVESTMENT AND COMPUTED AS UNDISCLOSED INCOME, HENCE, SAME CANNOT BE TAXED IN THE HANDS OF THE APPELLANT. THE BRIEF SUBMISSION OF THE REVENUE DOESNT THROW A NY LIGHT TO REMOTELY SUGGEST THAT THE CIT (A) HAD ERRED IN DELETING THE ADDITION. WE HAVE SINCE UPHELD THE CIT (A)S STAND IN THE BLOCK ASSESSMENT IN THE CASE OF THE ASSESSEES FATHER K.NARAYANA GOWDA IN TREATING THE LOAN OF RS.1,27,065/- AS UNEXPLAINED INVESTMENT AND COMPUTE D AS UNDISCLOSED INCOME IN HIS [NARAYANA GOWDAS] HANDS, THE CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.1,27,065/- IN THE PRESE NT ASSESSEES HAND . IT IS ORDERED ACCORDINGLY. IT(SS)A NO.25/09 BY THE ASSESSEE : 8. THE GRIEVANCE OF THE ASSESSEE THAT THE CIT (A) H AD UPHELD THE ADDITION OF RS.75,000/- TOWARDS UNEXPLAINED DEPOSIT . AT THE OUTSET, WE WOULD LIKE TO POINT OUT THAT THE CIT (A) HAD OBSERVED IN PARA 3.4 OF HIS IMPUGNED ORDER THAT 3.4.BALANCE OF RS.75,000/- REMAINED UNEXPLAINED AND SAME IS UPH ELD. HOWEVER, THE SAME IS TELESCOPED WITH INVESTMENT AND EXPENSES. THOUGH RS.75,000/- WAS TERMED IT(SS)A NO.23 & 25 /BANG/09 PAGE 8 OF 10 BY THE CIT (A) AS UNEXPLAINED, THE SAME WAS TELESCO PED WITH INVESTMENT AND EXPENSES AND AS A MATTER OF FACT NO ADDITION OF RS.75,000/- WAS RESORTED TO. MOREOVER, THE AO IN HIS REMAND REPORT [SOURCE: P 6 OF THE PB AR) HE HAD UNWITTINGLY AFFIRMED THAT - 1. CASH DEPOSIT RS.1,75,000 : HENCE, THIS ADDITION CANNOT STAND JUDICIALLY (SIC)JUDICIAL SCRUTINY. 9. WITH REGARD TO THE CONFIRMATION OF THE ADDITION OF RS.63,500/-, THE CONTENTION OF THE ASSESSEE WAS THAT HE HAD INVESTED ONLY RS.80,000/- AND NO FURTHER INVESTMENT HAVING BEEN MADE BY HIM, THE IMPUGNED ADDITION OF RS.63,500/- IS UNCALLED FOR. 9.1. IN THIS CONNECTION, WE RECALL THE NOTE FURNISHED BY THE ASSESSEES AR DATED: 30.6.2006 [ P7 10 OF PB AR] WHEREIN IT HAS BEEN STATED THAT 2. UNEXPLAINED INVESTMENT IN PROPERTY RS.9,05,500 WITH REGARD TO VALUATION OF THE PROPERTY, IN THE CASE OF THE APPELLANTS BROTHER SRI K.N.PRABHAKAR, VIDE CON FIRMATION OBTAINED FROM THE DISTRICT REGISTRATION AUTHORITY, STAMP UNDERVAL UATION INSPECTION DEPARTMENT., JAYANAGAR, BANGALORE -5600011, IT IS C LEARLY MENTIONED THAT THE MARKET VALUE FOR THE ABOVE SAID PROPERTY IS DET ERMINED AT RS.4,20,000/- AND FOR A SUM OF RS.3,40,000/- THE DEFICIT STAMP FE E OF RS.45,900/- AND RS.68000/- HAVE BEEN REMITTED TO THE GOVERNMENT THR OUGH DEMAND DRAFT/PAY ORDER NO.598037 DATED: 8.5.L2001 EXCLUDING THE FACE VALUE MENTIONED IN THE ORIGINAL DOCUMENTS. ACCORDINGLY, HE HAS CONFIRMED THAT THIS DOCUMENT IS EXEMPT FROM THE UNDERVALUATION. A SIMILAR PAYMENT WAS ALSO MADE BY THE APPELLANT AND FROM THE FACTS IT MAY BE APPRECIATED THAT THE APPELLANT HAS PAYED (SIC) PAID ONLY RS.80,000/- AS CONSIDERATION TO HIS MOTHER.. 9.2. HOWEVER, THE CIT (A) MADE THE ADDITION OF RS.63,500 /- BEING STAMP AND REGISTRATION FEES OF RS.63500/- AS THE AO HAD M ADE THE ADDITION ON THE BASIS OF AN UNDER-VALUATION NOTICE ISSUED BY THE SU B-REGISTRAR, BANGALORE. IT(SS)A NO.23 & 25 /BANG/09 PAGE 9 OF 10 9.3. ON A CLOSE READING OF THE IMPUGNED ASSESSMENT ORDER WHICH REVEAL THAT 3. SMT.GANGALAKSHMI, THE MOTHER OF SRI K.N.SRINIVA S HAS TRANSFERRED THE SITE NO.1, 2, 9 AND 10 AT SURVEY NO . SY 45/7 MEASURING 90 X 65 WITH OLD TILED ROOF HOUSE AT AVALAHALLI VILLAGE, KATHRIGUPPE, BANGALORE, FOR A CONSIDERATION OF RS.80,000/- IN THE EXHIBIT N O.A/NG/1 VIDE SALE DEED DATED 16.12.1998 IN FAVOUR OF SRI K.N.SRINIVAS AND THE MARKET VALUE IS RS.9,05,500/-. IN VIEW OF THE ABOVE, THE INVESTMEN T IN THIS PROPERTY I.E., THE MARKET VALUE OF RS.9,05,500/- HAS BEEN BROUGHT TO T AX AS UNEXPLAINED INVESTMENT AS THE ASSESSEE COULD NOT ABLE TO EXPLAI N THE SOURCES OF INCOME FOR THIS TRANSACTION. 9.4. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE WAS ALSO SLAPPED WITH AN UNDER-VALUATION NOTICE BY THE SUB-R EGISTRAR AS IN THE CASE OF HIS BROTHER K.N. PRABHAKAR AND AS PER THE ASSESS EES ARS NOTE REFERRED SUPRA, ACCORDINGLY, HE HAS CONFIRMED THAT THIS DOCUMENT I S EXEMPT FROM THE UNDERVALUATION. A SIMILAR PAYMENT WAS ALSO MADE BY THE APPELLANT. THIS GOES WITHOUT SAYING THAT THE ASSESSEE TOO PAID RS.52700/- AS UNDER- VALUATION STAMP FEE PLUS STAMP AND REGISTRATION FEE S AGGREGATING TO RS.63,500/- AS WORKED OUT BY THE CIT(A). THUS, THE CIT (A) WAS WITHIN HIS REALM TO QUANTIFY THE ACTUAL INVESTMENT AT RS.1,43, 500 WHICH IS INCLUSIVE OF RS. 63,500/-. THEREFORE, THE ASSESSEE CANNOT NOW TAKE A STAND THA T HE HAD INVESTED ONLY RS.80,000/-, BY IGNORING THE VERY FACT THAT HE HAD INVESTED A FURTHER SUM OF RS.63,500/- IN GETTING TH E PROPERTY REGISTERED IN HIS NAME. WE ARE, THEREFORE, OF THE FIRM VIEW THAT THERE BEING NO INFIRMITY IN IT(SS)A NO.23 & 25 /BANG/09 PAGE 10 OF 10 THE FINDING OF THE LD. CIT (A) WHICH REQUIRES OUR I NTERFERENCE. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT : (I) THE REVENUES APPEAL IS DISMISSED; & (II) THE ASSESSEES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF SEPTEMBER, 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 22 ND SEPTEMBER, 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.