ITO, Tirur V. Shri M.P.Kunhimohammed, Tirur

ITSSA 7/COCH/2009

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8369 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 19-07-2012
• Assessment Year: misc
• Appeal Filed On: 08-05-2009
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Rectification of order; Block assessment
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.(SS)A NOS. 48/COCH/2008 & 7/COCH/2009 BLOCK ASSESSMENT YEAR : 1997-98 TO 2003-2004 & BLOCK PERIOD : 01-04-1996 TO11-07-2002 THE I.T.O., WARD-1, TIRUR VS. SHRI M.P. KUNHIMOHAMMED, M/S. MANGALAM TRADERS & DOORS, VYLATHUR ROAD, TIRUR, MALAPPURAM. [PAN: AHAPK 1076C] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, SR. DR ASSESSEE BY SHRI T.N. SEETHARAMAN, ADV. DATE OF HEARING 19/07/2012 DATE OF PRONOUNCEMENT 10/08/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE TWO ORDERS PASSED BY LD CIT(A)-I, KOCHI AND THEY RELATE TO THE BLOCK PERIOD ENDING 11.7.2002. ONE APPEAL IS AGAINST THE APPELLATE ORDER AND ANOTH ER APPEAL IS AGAINST THE RECTIFICATION ORDER PASSED BY LD CIT(A) U/S 154 OF THE ACT. 2. THE REVENUE IS IN APPEAL IN RESPECT OF THE F OLLOWING ISSUES:- (A) DELETION OF ADDITION OF RS.10.00 LAKHS RELATI NG TO THE CLAIM OF RECEIPT OF AMOUNT FROM BEGUM KATHIYUMMA. (B) DELETION OF UNEXPLAINED CASH. (C) DETERMINATION OF QUANTUM OF INVESTMENT IN BU ILDINGS. (D) ACCEPTANCE OF RENT ADVANCE TO THE TUNE OF RS .1.00 LAKH (E) ACCEPTANCE OF TRADE CREDITORS RS.29,66,962 /-. I.T.(SS)A. NOS.48/COCH/2008 & 7/COCH/2009 2 (F) ACCEPTANCE OF LOAN CREDITORS RS.79,31,500/ -. 3. THE FACTS RELATING TO THE CASE ARE SET OUT I N BRIEF. THE ASSESSEE IS IN THE BUSINESS OF TRADING IN TILES AND IMPORTED CHINESE GOODS. A SEARCH WAS CONDUCTED IN THE HANDS OF THE ASSESSEE ON 11.7.2002. THE ASSESSEE FILED H IS BLOCK RETURN DISCLOSING A SUM OF RS.12.00 LAKHS AS UNDISCLOSED INCOME. BEFORE THE AO , THE ASSESSEE FILED CASH FLOW STATEMENTS, ASSETS AND LIABILITIES STATEMENT AND AL SO A STATEMENT COMPARING THE AMOUNT OF INVESTMENTS COLLATED BY THE AO IN HIS ENQUIRY LE TTER WITH THE AMOUNT AS CLAIMED BY THE ASSESSEE ALONG WITH THE REASONS FOR THE DIFFERE NCE. THE AO COMPLETED THE BLOCK ASSESSMENT BY CONSIDERING THESE STATEMENTS AND SEIZ ED RECORDS AND DETERMINED THE UNDISCLOSED INCOME AT RS.2,02,78,637/-. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A), WHICH WAS PARTLY ALLOWED. AGAINST THE SAID ORDER OF LD CIT(A), BOTH THE PARTIES FILED APPEAL BEFORE THE TR IBUNAL AND THE TRIBUNAL REMANDED CERTAIN ISSUES TO THE FILE OF LD CIT(A). ACCORDING LY, THE LD CIT(A) PASSED THE ORDER. IN BETWEEN, THE LD CIT(A) ALSO PASSED A RECTIFICATION ORDER U/S 154 OF THE ACT. AGGRIEVED BY BOTH THE ORDERS, THE REVENUE IS IN APPEAL BEFORE US. 4. THE FIRST ISSUE RELATES TO THE ACCEPTANCE OF CLAIM OF RECEIPT OF CASH OF RS.19.00 LAKHS FROM SMT BEGUM KATHIYUMMA, WHICH HAS RESULTED IN DELETION OF RS.10.00 LAKHS ADDED BY THE AO. THE FACTS RELATING TO THE SAME AR E STATED IN BRIEF. THE ASSESSEE AND THREE OTHER PERSONS PROPOSED TO PURCHASE A PROPERTY FROM SMT. BEGUM KATHIYUMMA AND ACCORDINGLY GAVE AN ADVANCE OF RS.19.00 LAKHS T O HER. IN THE SWORN STATEMENT TAKEN U/S 132(4) OF THE ACT, THE ASSESSEE ADMITTED THAT HE HAS CONTRIBUTED RS.9.00 LAKHS. ACCORDING TO THE ASSESSEE, THE DEAL DID NOT MATERIALISE AND HENCE THE ADVANCE AMOUNT OF RS.19.00 LAKHS WAS RETURNED TO THE ASSESS EE BY SMT. BEGUM KATHIYUMMA. THE ASSESSEE DISCLOSED THE PAYMENT OF HIS SHARE OF ADVANCE OF RS.9.00 LAKHS AND ALSO RECEIPT OF THE REFUND OF RS.19.00 LAKHS IN THE CASH FLOW STATEMENT. SINCE THE ASSESSEE DID NOT PRODUCE THE BEGAM KATHIYUMMA BEFORE THE AO, HE AO TREATED THE DIFFERENCE OF RS.10.00 LAKHS (RS.19.00 LAKHS (-) RS.9.00 LAKHS) A S THE UNDISCLOSED INCOME OF THE ASSESSEE. IN THE REMAND PROCEEDINGS, THE ABOVE SAI D BEGAM KATHIYUMMA WAS I.T.(SS)A. NOS.48/COCH/2008 & 7/COCH/2009 3 EXAMINED AND SHE CONFIRMED THE REFUND OF RS.19.00 L AKHS. ON THE STRENGTH OF THE SAID STATEMENT, THE LD CIT(A) DELETED THE ADDITION OF RS .10.00 LAKHS. 5. IN OUR VIEW, THE LD CIT(A) AS WELL AS THE A O HAS MISSED AN IMPORTANT POINT ON THIS ISSUE. IT IS STATED THAT THE ASSESSEE HAS CON TRIBUTED ONLY RS.9.00 LAKHS AND THE BALANCE AMOUNT OF RS.10.00 LAKHS WAS CONTRIBUTED BY THREE OTHERS. THE NAME AND OTHER DETAILS OF SUCH OTHER PERSONS ARE NOT AVAILAB LE ON RECORD. EVEN IF THE REFUND MADE BY SMT BEGAM KATHIYUMMA IS ACCEPTED AS GENUINE , THE QUESTION THAT ARISES IS WHY THE AMOUNT OF RS.10.00 LAKHS BELONGING TO THREE OTHER PERSONS WAS NOT RETURNED TO THEM. HENCE, THE CONFIRMATION IS ACTUALLY REQUI RED TO BE OBTAINED FROM THE SAID THREE OTHER PERSONS. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE TAX AUT HORITIES AND HENCE REQUIRE RE- EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW. 6. THE NEXT ISSUE RELATES TO THE DELETION OF ADDIT ION RELATING TO THE CASH FOUND DURING THE COURSE OF SEARCH. THE LD CIT(A) DELETED THE S AID ADDITION, SINCE HE HAD CONFIRMED THE RECEIPT OF RS.19.00 LAKHS FROM SMT. BEGUM KATHI YUMMA. IN THE EARLIER PARAGRAPHS, WE HAD SET ASIDE THE ISSUE OF ADDITION OF RS.10.00 LAKHS (OUT OF THE RECEIPT OF RS.19.00 LAKHS) TO THE FILE OF THE AO FOR MAKING FRESH EXAMI NATION OF THE SAME. SINCE THE ISSUE OF UNEXPLAINED CASH IS INTERRELATED TO THE ABOVE SA ID ISSUE, IT WOULD BE PROPER TO SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE AO. ACCOR DINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FI LE OF AO WITH THE DIRECTION TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH THE LAW. 7. THE NEXT ISSUE RELATES TO THE DETERMINATION OF QUANTUM OF INVESTMENTS IN THE BUILDINGS. THE ASSESSEE ALONG WITH TWO OTHER PERSO NS MADE INVESTMENT IN THE FOLLOWING IMMOVABLE PROPERTIES, THE COST OF WHICH WAS DETERMI NED AS UNDER:- INVESTMENT IN VICTORIA BUILDING RS.53,33,440/- COST OF BUILDING CONSTRUCTION RS.20,01,559/- I.T.(SS)A. NOS.48/COCH/2008 & 7/COCH/2009 4 MMK HAJI BUILDING RS.31,98,674/- ---------------------- TOTAL RS.1,05,33,673/- ========== THE SHARE OF THE ASSESSEE IN THE ABOVE SAID PROPERT IES WAS 25% AND THE REMAINING SHARES WERE HELD BY SHRI M.SOOPY (50%) AND SHRI A.P .MOIDEENKUTTY (25%). IN THE BLOCK ASSESSMENTS OF THE ABOVE SAID TWO PERSONS, TH EIR RESPECTIVE SHARE OF INVESTMENT WAS ACCEPTED ON THE BASIS OF RS.1,05,33,673/- STATE D ABOVE. HOWEVER, IN THE HANDS OF THE ASSESSEE, THE AO DETERMINED THE SHARE OF THE AS SESSEE ON THE BASIS OF STATEMENTS SUBMITTED BY THE ASSESSEE WITHOUT CONSIDERING THE A MOUNT OF INVESTMENT FOUND IN THE SEIZED RECORDS. THE DETAILS OF AMOUNT FOUND IN THE SEIZED RECORDS AND THAT SUBMITTED IN THE STATEMENT IS GIVEN BELOW:- PROPERTY DETAILS SEIZED RECORD ASSESSEES REPLY (A) VICTORIA BUILDING (25%) 13,33,36 0 20,00,040 (B) CONSTRUCTION COST (25%) 5,00,380 7,50,570 (C) MMK HAJI BUILDING (25%) 7,99,668 11,99,502 THE LD CIT(A) DIRECTED THE AO TO ASSESS THE ABOVE S AID INVESTMENTS AS PER THE AMOUNT FOUND IN THE SEIZED RECORD. THE REVENUE IS AGGRIEV ED BY THE SAID DECISION. 8. AS PER SEC. 158BB(1) OF THE ACT, THE UNDISCL OSED INCOME IS REQUIRED TO BE DETERMINED ON THE BASIS OF SEIZED MATERIAL AND SUCH OTHER EVIDENCES RELATABLE TO THOSE SEIZED MATERIALS. IN ANY CASE, THE TOTAL AMOUNT OF INVESTMENT IN THE ABOVE SAID PROPERTIES HAVE BEEN DETERMINED AT RS.1,05,33,673/- IN THE ASSESSMENT OF TWO OTHER CO-OWNERS. THE ASSESSEES SHARE OF 25% WORKS OUT T O RS.2,33,418/-, WHICH IS EQUIVALENT TO THE AGGREGATE AMOUNT FOUND IN THE SEI ZED MATERIALS. HENCE, IN OUR VIEW, THE LD CIT(A) IS JUSTIFIED IN DIRECTING THE AO TO A DOPT THE FIGURES AS PER THE SEIZED MATERIALS IN RESPECT OF THE ABOVE SAID THREE ITEMS. ACCORDINGLY, WE UPHOLD HIS ORDER ON THIS ISSUE. 9. THE NEXT ISSUE RELATES TO THE ACCEPTANCE OF R ENT ADVANCE TO THE EXTENT OF RS.1.00 LAKHS. IN THE CASH FLOW STATEMENT, THE ASSESSEE CL AIMED RECEIPT OF RENT ADVANCE OF RS.3.00 LAKHS FROM M/S M.K. STORES, APART FROM OTHE R RENT ADVANCES TO THE TUNE OF I.T.(SS)A. NOS.48/COCH/2008 & 7/COCH/2009 5 RS.13.00 LAKHS. SINCE THE ASSESSEE DID NOT FILE A NY CONFIRMATION LETTER BEFORE THE AO IN RESPECT OF THE ABOVE SAID AMOUNT, THE AO DID NOT AC CEPT THE SAME AS SOURCE. IN THE APPELLATE PROCEEDINGS, THE AO SUBMITTED A REMAND RE PORT DATED 26.10.2007, WHEREIN HE STATED THAT THE OTHER RENT ADVANCES OF RS.13.0 0 LAKHS ALREADY INCLUDES A SUM OF RS.2.00 LAKHS RECEIVED FROM M/S M.K. STORES. HOWEV ER, THE AO EXPRESSED DOUBT ABOUT THE BALANCE AMOUNT OF RS.1.00 LAKHS. THE LD CIT(A) NOTICED THAT THE PROPRIETOR OF M/S M.K. STORES HAS CONFIRMED THE PAYMENT OF RENT ADVAN CE OF RS.3.00 LAKHS. HE FURTHER NOTICED THAT THE RENT ADVANCE OF RS.2.00 LAKHS ALRE ADY INCLUDED IN OTHER RENT ADVANCES OF RS.13.00 LAKHS WAS ACCEPTED BY THE AO. ACCORDIN GLY, THE LD CIT(A) DIRECTED THE AO TO ALLOW CREDIT OF RS.1.00 LAKH ALSO. 10. WE DO NOT FIND ANY INFIRMITY IN THE SAID DEC ISION OF LD CIT(A). SINCE THE AO HAS ACCEPTED THE RECEIPT OF RENT ADVANCE OF RS.2.00 LAK HS FROM M/S M.K. STORES, WE DO NOT FIND ANY REASON TO DOUBT THE RECEIPT OF BALANCE AMO UNT OF RS.1.00 LAKHS, SINCE THE SAID TENANT HAS CONFIRMED THE PAYMENT OF RS.3.00 LAKHS. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 11. THE NEXT ISSUE RELATES TO THE ACCEPTANCE OF TRADE CREDITORS TO THE TUNE OF RS.29,66,962/-. THE ASSESSEE ORIGINALLY CLAIMED TH E TRADE CREDITORS TO THE TUNE OF RS.49,80,545/-. HOWEVER, THE AO ALLOWED THE CLAIM ONLY TO THE EXTENT OF RS.9,74,351/-. IN THE REMAND REPORT, THE AO STOOD BY HIS EARLIER D ECISION, SINCE THERE WAS DIFFERENCE IN THE AMOUNTS MENTIONED IN THE REPLIES FILED BY SOME OF THE CREDITORS, DETAILS AVAILABLE IN THE SEIZED RECORDS AND THE DETAILS COLLECTED BY THE AO DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. ACCORDING TO THE ORDER O F LD CIT(A), THE ASSESSEE FILED CONFIRMATION LETTERS FROM 8 PARTIES AND ON THE BASI S OF SAID CONFIRMATION LETTERS, THE LD CIT(A) ALLOWED FURTHER CREDITS TO THE TUNE OF RS.29 ,66,962/-. 12. IN THE GROUNDS OF APPEAL, THE REVENUE HAS S TATED THAT THE ASSESSEE HIMSELF OFFERED 40% OF THE TOTAL CREDITORS AS DOUBTFUL AND OFFERED THE SAME FOR ASSESSMENT AT THE REMAND STAGE. HOWEVER, WE DO NOT FIND ANY SUCH ADMISSION EITHER IN THE ASSESSMENT ORDER OR REMAND ORDER. HENCE, WE ARE UN ABLE TO ADJUDICATE ON THIS I.T.(SS)A. NOS.48/COCH/2008 & 7/COCH/2009 6 CONTENTION. IT IS STATED THAT THE ASSESSEE HAS FIL ED CONFIRMATION LETTERS IN THE REMAND PROCEEDINGS AND THE AO DID NOT CONSIDER THE SAME. THE LD CIT(A) CONSIDERED THE CONFIRMATION LETTERS FILED BY 8 PARTIES AND NOTICED THAT THEY WERE TRADE CREDITORS SUPPLYING GOODS TO THE ASSESSEE. ACCORDINGLY, HE H AS DIRECTED THE AO TO ALLOW FURTHER CREDIT OF RS.29,66,962/-. 13. WE DO NOT FIND ANY INFIRMITY IN THE SAID DE CISION OF LD CIT(A). THE ASSESSEE HAS FILED CONFIRMATION LETTERS OBTAINED FROM THE SUPPLI ERS BEFORE THE AO DURING REMAND PROCEEDINGS. THE AO, IF HE DOUBTS THE GENUINENESS OF THE SAID LETTERS, COULD HAVE CAUSED ENQUIRIES IN ORDER TO VERIFY THE VERACITY OF THE SAID LETTERS. HOWEVER, THE AO HAS FAILED TO DO SO AND HENCE THE LD CIT(A) HAS TAKEN I NDEPENDENT VIEW AFTER EXAMINING THE SAID DOCUMENTS. ACCORDINGLY, WE UPHOLD HIS ORDER O N THIS ISSUE. 14. THE LAST ISSUE RELATES TO THE ACCEPTANCE OF LOAN CREDITORS TO THE TUNE OF RS.79,31,500/-. THE ASSESSEE HAS CLAIMED TO HAVE R ECEIVED FOLLOWING LOANS, OUT OF WHICH HE SURRENDERED A SUM OF RS.23,07,000/-:- LOANS BY CHEQUE 53,09,800 LOANS BY CASH 49,28,700 --- ------------- 1,02,38,500 LESS:- SURRENDERED 23,07,000 ----------------- BALANCE 79,31,500 ========= IN THE REMAND REPORT, THE AO HAS STATED THAT THE AS SESSEE HAS NOT PRODUCED ANY FURTHER EVIDENCE BEFORE HIM TO PROVE THE CREDIT WOR THINESS, GENUINENESS OR IDENTITY OF THE CREDITORS. BEFORE THE LD CIT(A), THE ASSESSEE HAS CLAIMED THAT HE HAS SUBMITTED THE CLARIFICATIONS BEFORE THE AO. ACCORDINGLY, THE LD CIT(A) DIRECTED THE AO TO ACCEPT THE LOAN CREDITORS BALANCE OF RS.79,31,500/-. 15. IT CAN BE NOTICED THAT THERE IS CONTRADICTI ON BETWEEN THE SUBMISSIONS MADE BY THE AO IN THE REMAND REPORT AND THE SUBMISSIONS MAD E BY THE ASSESSEE BEFORE LD CIT(A). WE FURTHER NOTICE THAT THE AMOUNT OF RS.23 ,07,000/- SURRENDERED BY THE I.T.(SS)A. NOS.48/COCH/2008 & 7/COCH/2009 7 ASSESSEE HAS NOT BEEN LINKED WITH ANY PARTICULAR CR EDITOR. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO UNDERSTAND AS TO HOW THE LD CIT(A) ACCEPTED THE BALANCE AMOUNT OF RS.79,31,500/-. ACCORDINGLY, IN OUR VIEW, THIS ISS UE REQUIRES RE-EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO WITH THE DIRECTION TO EX AMINE THIS AFRESH IN ACCORDANCE WITH THE LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BE ING HEARD. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 10-08-2012. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 10TH AUGUST, 2012 GJ COPY TO: 1. SHRI M.P. KUNHIMOHAMMED, M/S. MANGALAM TRADERS & DOORS, VYLATHUR ROAD, TIRUR, MALAPPPURAM. 2. THE INCOME TAX OFFICE,M WARD-1, TIRUR. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, CALICUT. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) ITAT, COCHIN BENCH