Shri Hiren D.Hathi, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITSSA 513/AHD/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 1852 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-04-2016
• Assessment Year: misc
• Appeal Filed On: 15-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained expenditure; Income from undisclosed sources; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) IT(SS)A. NO: 513/AHD/2012 (BLOCK PERIOD: 1-4-1990 TO 20-07-2000 ) HIREN D. HATHI B-803, CO. OP HOUSING SOC. LTD., SAMRAJYA FLAT, OPP. MANAV MANDIR ROAD, MEMNAGAR, AHMEDABAD V/S ACIT, CIRCLE-6, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABPH 6617B APPELLANT BY : SHRI S.N. SOPARKAR, AR RESPONDENT BY : SMT. VIBHA BHALLA, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 06 -04-201 6 DATE OF PRONOUNCEMENT : 07 -04-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF LD. CIT(A)-XI, AHMEDABAD DATED 08.08.2012 PERTAINING TO THE BLOCK PERIOD 01.04.1990 TO 20.07.2000. IT(SS)A NO . 513/AHD/2012 . B.P. 01/04/1 990 TO 20/07/2000 2 2. THE GRIEVANCE OF THE ASSESSEE READ AS UNDER:- 1. THE LEARNED ITO HAS ERRED IN LAW AND ON FACTS IN NO T FOLLOWING THE DIRECTIONS OF HON. ITAT CORRECTLY AND HON. CIT(A) HAS ERRED IN CONFIRM ING THE ORDER OF THE ASSESSING OFFICER AND THEREBY MAKING ADDITION OF RS. 3,45,780 /- BY NOT FOLLOWING CORRECTLY THE PRINCIPLES LAID DOWN IN JUDICIAL PRONOUNCEMENTS AS DIRECTED BY HON. ITAT. 3. IN THIS CASE, THE ORIGINAL BLOCK ASSESSMENT WAS MAD E U/S. 158BC ON 31.03.2002 BY WHICH UNDISCLOSED INCOME WAS DETERMIN ED AT RS. 16, 25,824/-. THE MATTER TRAVELLED UP TO THE TRIBUNAL A ND THE TRIBUNAL IN IT(SS)A NO. 103/AHD/2003 DATED 31.03.2009 DECIDED T HE ISSUES BY RESTORING THE MATTER TO THE FILES OF THE A.O WITH A SPECIFIC DIRECTION TO DECIDE THE ISSUES IN THE LIGHT OF THE RATIO LAID DO WN BY THE HONBLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGHA IAH & CO. 123 ITR 457. THE RELEVANT PART OF THE TRIBUNALS ORDER READS AS UNDER:- 15. GROUND NO. 4 RELATES TO DIRECTIONS OF THE LD. C IT(A) TO ALLOW SET OFF OF UNDISCLOSED INCOME AGAINST VARIOUS UNACCOUNTED EXPENSES AND INV ESTMENTS MADE BY THE ASSESSEE AND FURTHER DIRECTING THAT ONLY HIGHER OF THE AFORESAID TWO SUMS SHOULD BE TREATED AS UNDISCLOSED INCOME. THE ASSESSEE REQUESTED THE AO T HAT IN CASE ANY ADDITION QUA BUSINESS TRANSACTIONS IN THE NAME OF M/S. H. H. MAR KETING WAS MADE IN THE A.Y. 1994-95, THEN SUCH INCOME SHOULD BE CONSIDERED AS UTILIZED F OR MAKING UNDISCLOSED INVESTMENTS AND UNEXPLAINED EXPENDITURE FOR THE SUBSEQUENT YEAR S INCLUDING FOREIGN TOURS ETC. HOWEVER, THE AO REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT GIVEN COMPLETE PICTURE OF HIS INCOME AND EXPEND ITURE FOR THE BLOCK PERIOD. THE AO WAS OF THE VIEW THAT THE INCOME EARNED DURING THE F .Y. 1993-94 COULD NOT HAVE BEEN RETAINED TILL 1999-2000 AND THAT IT COULD NOT BE PR ESUMED THAT UNACCOUNTED EXPENSES WERE FROM THE UNACCOUNTED INCOME EARNED BY THE ASSE SSEE SIX YEARS AGO, ESPECIALLY IN VIEW OF HIGH PROFILE LIFE STYLE OF THE ASSESSEE. ON APPEAL, THE ASSESSEE PLEADED THAT BOTH INCOME AND APPLICATION COULD NOT BE TAXED. ACCORDIN GLY, THE LEARNED CIT(A) DIRECTED THE AO TO ALLOW NECESSARY SET OFF OF THE INCOME AGAINST VARIOUS EXPENSES/INVESTMENTS TO IT(SS)A NO . 513/AHD/2012 . B.P. 01/04/1 990 TO 20/07/2000 3 ARRIVE AT THE UNDISCLOSED INCOME AND ONLY THE HIGHE R TO TWO MAY BE TREATED AS UNDISCLOSED INCOME. 16. REVENUE IS NOW IN APPEAL AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). LD. D.R. SUBMITTED THAT DIRECTIONS OF THE LD. CIT(A) ARE VAG UE WHILE THE LD. A.R. PLEADED THAT MATTER HAS BEEN LEFT TO THE AO. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE TH ROUGH THE FACTS OF THE CASE. IN THE MATTER OF SET OFF IN SUCH CASES, IN THE CASE OF ANA NTHARAM VEERASINGHAIAH & CO. VS. CIT (1980) 123 ITR 457, HONBLE SUPREME COURT OBSERVED THAT (P. 462): THE SECRET PROFITS OR UNDISCLOSED INCOME OF AN ASSESSEE EARNED IN AN EARLIER ASSESSMENT YEAR MAY CONSTITUTE A FUND, EVEN THOUGH CONCEALED, FROM WHICH THE ASSESSEE MAY DRAW SUBSEQUENTLY FOR MEETING EXPENDITURE OR IN TRODUCING AMOUNTS IN HIS ACCOUNT BOOKS. BUT IT IS QUITE ANOTHER THING TO SAY THAT AN Y PART OF THAT FUND MUST NECESSARILY BE REGARDED AS THE SOURCE OF UNEXPLAINED EXPENDITURE I NCURRED OR OF CASH CREDITS RECORDED DURING A SUBSEQUENT ASSESSMENT YEAR. THE MERE AVAIL ABILITY OF SUCH A FUND CANNOT, IN ALL CASES, IMPLY THAT THE ASSESSEE HAS NOT EARNED FURTH ER SECRET PROFITS DURING THE RELEVANT ASSESSMENT YEAR. IT IS A MATTER FOR CONSIDERATION BY THE TAXING AUTHORITY IN EACH CASE WHETHER THE UNEXPLAINED CASH DEFICITS AND THE CASH CREDITS CAN BE REASONABLY EXPLAINED BY REFERENCE TO CONCEAL INCOME EARNED IN THAT VERY YEAR. IN EACH CASE, THE TRUE NATURE OF THE CASH DEFICIT AND THE CASH CREDIT MUST BE ASCERT AINED FROM AN OVERALL CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE. EVIDENCE MAY EXIST TO SHOW THAT RELIANCE CANNOT BE PLACED COMPLETELY ON THE AVAILAB ILITY OF PREVIOUSLY EARNED UNDISCLOSED INCOME. A NUMBER OF CIRCUMSTANCES OF VITAL SIGNIFIC ANCE MAY POINT TO THE CONCLUSION THAT THE CASH DEFICIT OR CASH CREDIT CANNOT REASONABLY B E RELATED TO THE AMOUNT COVERED BY THE INTANGIBLE ADDITION BUT MUST BE REGARDED AS POINTIN G TO THE RECEIPT OF UNDISCLOSED INCOME EARNED DURING THE ASSESSMENT YEAR UNDER CONSIDERATI ON. IT IS OPEN TO THE REVENUE TO RELY ON ALL THE CIRCUMSTANCES POINTING TO THAT CONCLUSIO N. WHAT THESE SEVERAL CIRCUMSTANCES CAN BE IS DIFFICULT TO ENUMERATE AND INDEED, FROM T HE NATURE OF THE ENQUIRY, IT IS ALMOST IMPOSSIBLE TO DO SO. 17.1 IN THE LIGHT OF AFORESAID DECISION OF HONBLE SUPREME COURT, WE ARE OF THE VIEW THAT THERE CAN BE NO PRESUMPTION THAT WHENEVER ADDITIONS ON ACCOUNT OF UNDISCLOSED INCOME ARE MADE, THEY MUST BE SET OFF AGAINST UNEXPLAINED EXPENDITURE INCURRED BY THE ASSESSEE. IT(SS)A NO . 513/AHD/2012 . B.P. 01/04/1 990 TO 20/07/2000 4 IT IS ALWAYS OPEN TO THE ASSESSEE TO PROVE THAT THE UNEXPLAINED EXPENDITURE WAS INCURRED FROM THE SUPPRESSED INCOME TOWARDS WHICH AN ADDITIO N HAS ALREADY BEEN MADE, AND, THEREFORE, THERE SHOULD BE TELESCOPING OF ONE WITH THE OTHER. UNLESS ANY CONNECTION BETWEEN THE ADDITIONS MADE EARLIER AND THE EXPENDIT URE INCURRED IS ESTABLISHED, THERE IS NO QUESTION OF ANY SET OFF. IT DEPENDS UPON FACTS O F EACH CASE. WITH THESE OBSERVATIONS, WE MODIFY THE DIRECTIONS OF THE LD. CIT(A) AND HOLD TH AT CLAIM FOR SET OFF MAY BE CONSIDERED BY THE AO INCLUDING THE PRINCIPLES LAID DOWN IN VAR IOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE AFORESAID DECISION OF HONBLE SUPREME COURT AND OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. THEREFORE, GROUND NO. 4 IS DISPOSED OF. 4. THE A.O STARTED THE PROCEEDINGS FOLLOWING THE DIREC TIONS OF THE ITAT (SUPRA). HOWEVER, IT IS SEEN THAT THE A.O HAS MADE THE ADDITION OF RS. 3,45,780/- BASED ON THE FINDINGS GIVEN IN THE ORIGI NAL ASSESSMENT ORDER. THE RELEVANT CONCLUSION OF THE A.O. READS AS UNDER:- THIS IS A SEARCH CASE AND THE BLOCK ASSESSMENT WAS COMPLETED ON THE BASIS OF SEIZED MATERIAL FOUND AFTER DUE VERIFICATI ON. IT IS FURTHER STATED THAT NO NEW EVIDENCES OR EXPLANATION WERE FURNISHED DURING THE COURSE OF SET ASIDE PROCEEDINGS. HENCE THE FOLLOWING EXPEN SES BECOME UNEXPLAINED EXPENSES AND DESERVED TO BE CONSIDERED FOR ADDITION. THEREFORE AN ADDITION OF RS. 3,45,780/- FINDS ITS P LACE TO THE ORIGINAL ASSESSMENT ORDER WHICH WAS CONSIDERED BY THE CIT(A) BUT MODIFIED BY THE HONBLE ITAT. THEREFORE ENTIRE AMOUNT OF RS. 3, 45,780/- EMERGED AS ADDITION TOWARDS UNEXPLAINED EXPENSES IN VIEW OF THE REASONS STATED ABOVE. 5. AGGRIEVED BY THIS ADDITION, THE ASSESSEE CARRIED TH E MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT THE A.O HAS COMPLET ELY MISUNDERSTOOD THE DIRECTIONS OF THE TRIBUNAL GIVEN IN THE FIRST ROUND OF IT(SS)A NO . 513/AHD/2012 . B.P. 01/04/1 990 TO 20/07/2000 5 APPEAL THEREBY MAKING THE ASSESSMENT ORDER ERRONEOU S. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 6. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY CONSIDERE D THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE FIRST ROUND OF APPEAL WHICH ARE EXTRACTED ELSEWHERE. 7. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL BECAUSE THE A.O HAS SIMPLY DISREGARDED THE CATEGORICAL DIRECTIONS OF TH E TRIBUNAL AND PROCEEDED BY MAKING THE ADDITION ON THE BASIS OF EV IDENCES ON RECORD. IN OUR CONSIDERED OPINION, THE TRIBUNAL NEVER DIREC TED THE A.O TO DECIDE THE ISSUE ON THE BASIS OF THE EVIDENCES ON R ECORD. ON THE CONTRARY, THE TRIBUNAL HAS SPECIFICALLY DIRECTED TH E A.O TO EXAMINE THE EVIDENCES IN THE LIGHT OF THE RATIO LAID DOWN BY TH E HONBLE SUPREME COURT IN THE CASE OF ANANTHARAM VEERASINGHAIAH (SUP RA). FOR THE SAKE OF COMPLETENESS AND REPETITION LET US CONSIDER THE SPECIFIC DIRECTIONS OF THE TRIBUNAL WE MODIFY THE DIRECTIONS OF THE CIT(A) AND HOLD T HAT CLAIM FOR SET OFF MAY BE CONSIDERED BY THE A.O IN T HE LIGHT OF THE PRINCIPLES LAID DOWN IN VARIOUS JUDICIAL PRONOUNCEM ENTS INCLUDING THE AFORESAID DECISION OF HONBLE SUPREME COURT. 8. THE ORDER OF THE REVENUE AUTHORITIES IS DEVOID OF A NY SUCH FINDING. IN OUR CONSIDERED OPINION AND UNDERSTANDING OF THE LAW , IF THE LOWER AUTHORITIES COMPLETELY FLAUNT THE SPECIFIC DIRECTIO NS OF THE APPELLATE AUTHORITIES THEN THE ORDERS OF THE AUTHORITIES BELO W DESERVES TO BE QUASHED. WE ACCORDINGLY SET ASIDE THE FINDINGS OF T HE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 3,45,7 80/-. IT(SS)A NO . 513/AHD/2012 . B.P. 01/04/1 990 TO 20/07/2000 6 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 07- 04 - 20 16. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD