Sri Ashok P. Magajikondi V. The Income-Tax Officer, Ward-1(3), Navanagar, Hubli

ITA/5065/2010

AI Insights

The case revolves around an income tax appeal by Sri Ashok P. Magajikondi against the order of the Income Tax Appellate Tribunal, which confirmed the assessments made by the Appellate Authority and the Assessing Officer. The primary contention was whether the income from a bank account, which had a substantial deposit, should be assessed under the appellant's individual capacity or as part of his HUF status. The Tribunal and the lower authorities found that the account was operated in the appellant's individual name and not as an HUF, leading to the inclusion of Rs.4,25,000 as unexplained investment under Section 69 of the Income Tax Act.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 816953 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-11-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: PARTHASARATHI; H R KAMBIYAVAR
• Keywords: Assessment Year 2005-06; Income tax appeal; Money lending business; Unexplained investment; HUF status
• Section: 148; 69; 80C; 260-A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 12TH DAY OF NOVEMBER, 2013 PRESENT THE HON’BLE MR.JUSTICE DILIP B. BHOSALE AND THE HON’BLE MR.JUSTICE B.MANOHAR INCOME TAX APPEAL No.5065/2010 (T-IT) BETWEEN: SRI ASHOK P.MAGAJIKONDI, SON OF SRI PARASHURAMASA, AGED ABOUT 54 YEARS, NO.17/1, 1ST CROSS, OPP. GOVT.KANNADA SCHOOL, KAMARIPETH, HUBLI-580028. ... APPELLANT (BY SRI PARTHASARATHI AND SRI H.R.KAMBIYAVAR, ADVOCATE) AND : THE INCOME-TAX OFFICER, WARD-1(3), NAVANAGAR, HUBLI-580 025. ... RESPONDENT (BY SRI Y.V.RAVIRAJ, ADVOCATE) THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961, AGAINST ORDER DATED 30.08.2010 PASSED IN ITA NO.538/BANG/2009 ON THE FILE OF THE INCOME TAX APPELLANT TRIBUNAL, “A” BENCH 2 BANGALORE, PARTLY ALLOWING THE APPEAL FILED BY THE ASSESSEE AND ETC., THIS APPEAL COMING ON FOR FINAL HEARING, THIS DAY, DILIP B. BHOSALE J., DELIVERED THE FOLLOWING: PC : This appeal is directed against the order passed by Income Tax Appellate Tribunal (for short, ‘the Tribunal’) in I.T.A. NO.538/BANG/2009, for the assessment year 2005-06, whereby orders passed by the Appellate Authority and the Assessing Officer have been confirmed by the Tribunal. The Tribunal had framed the following questions for consideration: i) Whether the CIT (Appeals) is justified in directing the AO to assess the income in the individual capacity as against HUF status? ii) Whether the CIT (Appeals) is justified in upholding the impugned addition of Rs.4,25,000/- by applying the provisions of section 69 of the Act? iii) The CIT (Appeals) ought to have given benefit of deduction u/s. 80C of the Act for the investments made in ICICI and LIC to the tune of Rs.1 lakh. 3 All the three questions were answered by the Tribunal against the assessee and dismissed the appeal. 2. This Court while admitting the appeal framed the following two substantial questions of law: 1. Whether the Tribunal was justified in holding that there was no existence of HUF as claimed by the appellant individual? 2. Whether the Tribunal was justified in holding that the bank account did not belong to the HUF only on the ground that it was not mentioned as ‘HUF’ when all the transactions recorded belonged to the HUF and corroborated with the books of account maintained by the said HUF and consequently whether the deposits found in the said account was liable to be included in the hands of the appellant individual? 3. Briefly stated the facts leading to this appeal are as under: The appellant assessee is an individual. He had filed Return of Income for the assessment year 2005-06 on 18.12.2006 declaring total income of Rs.81,447/- from the 4 business of repairs of mobile phones. He had shown Rs.69,362/- as gross receipts from the business of mobile phones and Rs.27,557/- from share trading. After deducting the expenses of Rs.43,072/-, he had declared net income of Rs.53,487/-. Apart from the business income, he had also declared income from other sources amounting to Rs.27,600/-. After filing of the Return of Income, it was revealed that the assessee had maintained Savings Account in Canara Bank, Traffic Island, Hubli, wherein a cash deposit of Rs.10,20,800/- was found during the relevant financial year. In view thereof, the assessment was taken up for scrutiny and the assessee was asked to explain the deposits made in the account in Canara Bank (S.B. A/c. No.21842). 4. The assessee explained that his family was having money lending business and after the death of his father, he continued the said business of money lending under HUF status. It was further explained that the transactions in the savings bank account were in respect of the money lending business of HUF. The Assessing Officer, after scrutiny of the 5 assessment, held that the books of accounts maintained by the assessee were fabricated and accordingly rejected the same. It was further held that in the impugned savings bank account in Canara Bank, a sum of Rs.7,20,761/- being the peak credit was unexplained investment under Section 69 of the Act. Out of the said amount, the Assessing Officer was satisfied with the source to the tune of Rs.2,96,184/- being opening balance, withdrawals and recoverables from the debtors. Thus, the balance rounded off to the tune of Rs.4,25,000/- was held to be unexplained in the individual hands on protective basis. The assessment of HUF was also reopened under Section 148 since no return of income was filed and a sum of Rs.4,25,000/- was substantively added in the hands of HUF by the Assessing Officer. 5. It is in this backdrop, we have heard learned counsel for the parties on the questions of law framed at the time of hearing of the appeal. Learned counsel for the assessee submitted that the authorities below erred in confirming the addition of Rs.4,25,000/- under Section 69 of the Act in the 6 assessee’s account in his individual status after accepting that Canara Bank account belonged to HUF of assessee. In support of the said contention, he invited our attention to paragraph 3.2 and paragraph 4.2 in the assessment order dated 31.12.2007. On the basis the findings recorded in the aforesaid paragraphs, it was vehemently submitted that the assessee had furnished sufficient evidence to show that his ancestors were having money lending license and they were carrying on the business of money lending and that the assessee had filed return in Form 2-C pertaining to his HUF status. It was further submitted that the assessee continued the ancestral money lending business in his HUF status and since there was no taxable income from the said business, no return was filed. It was also claimed that the assessee filed returns in HUF status in Form 2-C for the assessment years 2001-2002 and 2000-2001. 6. On the other hand, learned counsel appearing for the Revenue invited our attention to paragraph 5 of the said order to contend that on 27.12.2007, the assessee filed an 7 application before the Additional Commissioner seeking direction under Section 144-A of the Act. The Additional Commissioner after hearing the assessee’s representative, had issued directions under Section 144-A dated 31.12.2007 to assess Rs.4,25,000/- as unexplained investment in the hands of assessee on protective basis, as the information about the Canara Bank Account was received in the name of the assessee in his individual status. In this backdrop, Rs.4,25,000/- was taken as income of the assessee under Section 69 of the Act for the assessment years 2004-2005 on protective basis. It was also submitted on behalf of the Revenue that the assessee did not produce a single document to show that the Canara Bank Account was HUF account and not his individual account. 7. We have perused all the three orders passed by the authorities below and at the outset asked learned counsel appearing for the assessee to demonstrate on the basis of the materials on record that the Canara Bank Account belonged to HUF. Apart from the oral submissions, he could not and did not invite our attention to any part of the materials in support 8 of this contention. The record reveals that when the Carana Bank Account was opened, it was not opened as HUF. No details of HUF were furnished to the Bank for opening the said account as HUF account nor could the assessee demonstrate on the basis of any other material to show that it was HUF account. Having considered the facts of the case and the materials placed on record, the Appellate Authority in paragraph 5.1 and 5.2 observed thus: “5.1 It is proved by AO that all books of accounts are fabricated. There is no valid HUF in existence. There is no money lending business proved either by books of accounts or by any primary documents as verified by AO in order dated 31.12.2007. Money lending business was said to be in name of father of appellant either in HUF or in individual capacity assessee is not having any money lending business and no returns are filed with Registrar. Further, appellant could not prove with help of primary documents transactions of money lending business as in case of Sri Bedsur discussed above. Affidavit without having any support of evidences is not acceptable thus in individual capacity though money lending business 9 is done but it is without knowledge of concerned authority. Therefore, it is illegal, in view of same both in individual and in HUF capacity appellant could not explain peak transactions in Canara Bank, Hubli of Rs.4,25,000/- after detailed discussion in assessment orders of appellant both in individual and HUF capacity. 5.2 Question is of assessability of unexplained peak cash credits in Canara Bank in capacity as individual. Because there is no valid HUF in existence as discussed above, business has proved as carried on in HUF capacity, therefore, additional of Rs.4,25,000/- as unexplained cash credit is confirmed in hands of appellant in individual capacity on substantive base. AO is directed to cancel assessment in HUF capacity along with initiation of concealment penalty as initiated in assessment order in individual capacity.” (emphasis supplied) 8. Similarly, the Tribunal in paragraph 13 to 16 observed thus: “13. We have heard the rival submissions and perused the material on record. The issue for consideration is, in whose hands a sum of 10 Rs.4,25,000/- is to be assessed, whether it is to be assessed in the individual hands or whether it is to be assessed HUF status? The claim of the assessee is that the HUF was carrying on money lending business and the impugned bank account belongs to HUF. We have examined the impugned bank statements. It is clearly mentioned that the same belongs to assessee, without reference to HUF. Had the HUF opened bank account, the necessary details of HUF would have been furnished to the bank and the bank account would be in the name of ‘HUF’ represented by a member of HUF. Here the bank account is operated by the assessee-individual and there is nothing on record to suggest the impugned bank account belongs to HUF. 14. As regards the denial of status of HUF by the CIT (Appeals), we notice that the ‘HUF’ had filed an appeal before the CIT (Appeals) and in the said appeal, the CIT (Appeals) had categorically held in para 5.1 as follows: “5.1 In the absence of the valid HUF in existence and in absence of specific finding by AO, assessing income in hands of HUF is not held as legal, 11 information received in respect of cash transaction also does not mention specifically in case of HUF, therefore, any addition in hands appellant in HUF capacity will be legally not valid………..” 15. Had the HUF been aggrieved by the above said finding of the CIT (Appeals), the HUF ought to have filed appeal before the Tribunal. Having failed to file appeal before the Tribunal, the assessee cannot now contend there is a valid HUF in existence. 16. As regards the quantum of addition on merits is concerned, we find total cash deposits are to the tune of Rs.10,20,800/- out of which the addition sustained by the AO and confirmed by the CIT (Appeals) is only Rs.4,25,000/-. The AO has considered only the peak deposits and has given necessary deduction for deposits made out of prior withdrawal and possible receipt from debtors. We are of the view the finding of the authorities below is correct and no material has been produced before us to dispel their conclusion, hence we confirm the addition of Rs.4,25,000/-. (emphasis supplied) 12 9. Having regard to the findings recorded by the authorities below and that the assessee could not and did not demonstrate before this Court on the basis of the materials on record that the Canara Bank account was HUF account, we find no reason to interfere with the findings of fact recorded by the authorities below and we agree that the submissions advanced by learned counsel for the Revenue that no substantial questions of law as formulated by this Court at the stage of admission, are involved in the present appeal. Even from bare perusal of the substantial questions of law, it is clear that they are questions of fact and in view of concurrent findings of fact recorded by the authorities below, we cannot reach a conclusion other than the one recorded by the authorities below. In the circumstances, the appeal is dismissed. SD/- JUDGE SD/- JUDGE hnm/jm/- "