Income Tax Appellate Tribunal - Bangalore
Abdul Kareem Ladsab Telgi, Bangalore vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH : BANGALORE
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
M.P. No.56/Bang/2010
(in ITA No.1474/Bang/2008)
Assessment year : 1996-97
Mr. Abdul Karim Ladsab Telgi,
Currently lodged at :
Hospital Room No.8,
Central Jail,
Parappana Agrahara,
Bangalore - 560 100. : APPLICANT
Vs.
The Assistant Commissioner of
Income-tax,
Central Circle 1(1),
Bangalore. : RESPONDENT
Applicant by : Shri K.Y. Ningoji Rao, C.A.
Respondent by : Smt. Preethi Garg, CIT-III(DR)
ORDER
Per A. Mohan Alankamony, Accountant Member
This Misc. Petition of the assessee is in consequence of his original appeal in ITA No:1474 (Bang)/2008 for the AY 1996-97 which was disposed off on 29.1.2010.
M.P.No.56/Bang/2010Page 2 of 10
2. Briefly, the grievance of the assessee was that certain mistakes have crept in while passing the above mentioned order which are listed out as below:
(i) Disregarded the claimed of the petitioner with regard to the addition of Rs.2,29,00,000;
(ii) Addition of Rs.11,17,500/- as unexplained expenditure u/s 69C of the Act;
(iii) Addition of Rs.1,35,00,000 as unaccounted investment in Alankar Lodge presumably u/s 69 of the Act;&
(iv) Adoption of peak credit formula.
3. After due consideration of the contents of the Misc. Petition, the registry was directed to take on record the Misc. Petition of the assessee and to be posted for hearing in normal course.
4. During the course hearing, the Ld. AR submitted that -
(1) Addition of Rs.2,29,00,000:
While dismissing this ground and upholding the CIT(A)'s finding, the Hon'ble Tribunal had disregarded the claim of the assessee that -
(a) the income from fake stamp paper business has to be computed in accordance with the provisions contained in Ch. IV D of the Act;
(b) the Explanation to s.37(1)applies only to the expenditure allowance u/s 37(1) and do not apply to any other deductions allowable under any other provisions contained under Ch. IV D of the Act;
(c) that the income of Rs.33.20 lakhs declared by the assessee having been held as the income from the fake stamp paper business will have to be deleted owing to assessment of Rs.2.29 crores as the income from the fake paper business;
and M.P.No.56/Bang/2010 Page 3 of 10
(d) the decisions in the case of CIT v. S.C.Kothari (1971) 82 ITR 794 (SC), the ratios in the case of CIT v. Piara Singh 124 ITR 40 (SC) and Dr.T.A.Qureshi v. CIT 287 ITR 547 (SC) relied upon by the assessee are applicable to the issue (2) Addition of Rs.11,17,500:u/s 69 of the Act:
(a) it was argued before the Hon'ble Bench that when the assessee had declared a total income of Rs.3835625/- and the AO had further made an addition of Rs.2.29 crores and the funds of the assessee to the extent of Rs.16.99 lakhs brought forward from the earlier years where is the issue of inadequacy of available sources for the alleged unexplained expenditure of Rs.11.17 lakhs;
- it was, therefore, claimed that the said addition u/s 69 was unlawful and applying the ratio in the case of CIT v. Nelliappan 66 ITR 722 (SC), the addition was liable to be set aside; (3) Addition of Rs.1,35,00,000/- u/s 69 of the Act:
(a) it was argued before the Hon'ble Bench that the assessee had taken Alankar Lodge lease on pagadi of Rs.20 lakhs in 1998-
99;
- documentary evidences were produced to prove that the assessee had taken the said
- premises on rent as tenant from its owners and the Small Causes Court, Bombay its orders decreed that the assessee shall hand over the possession of the decreed property - Alankar Lodge premises - to the landlords;
(b) the declared income of Rs.38.35 lakhs and the funds of Rs.16.99 lakhs which were held by the assessee in his bank accounts as at 1..4.95 and the addition of Rs.2.29 crores made u/s 68 were adequate to explain the source of investment in the said business and, thus, the question of unaccounted investment in the said Lodge did not arise at all;
(c) as could be seen from the reasons of the AO, it was evident the AO made the addition of Rs.1.35 crores as unaccounted investment in the said property based on the report of the DDIT(Inv)without having any evidence to prove such an investment by the assessee
- relies on the case laws:
M.P.No.56/Bang/2010Page 4 of 10
(i) K.P.Verghese v. ITO 131 ITR 597 (SC);
(ii) CIT v. Godavari Corporation Ltd 200 ITR 567
(SC)
(iii) CIT v. Nelliappan 66 ITR 722 (SC)
(4) Adoption of peak credit formula:
(a) it was argued that in case any addition in respect of the matters
covered under the above mentioned grounds are to be sustained then in such an event the principles of peak credit should be adopted, applying the principles laid down in the case of CIT v. Nelliappan 66 ITR 722 (SC);
- that the addition of Rs.2.29 crores made in respect of income from fake stamp paper business, the declared income of Rs.38.35 lakhs and the funds of Rs.16.99 lakhs brought forward from the earlier years by itself constitute the sources for the alleged unexplained expenditure of Rs.11.17 lakhs and the unexplained/unaccounted investment of Rs.1.35 crores in Alankar Lodge;
- it, was, therefore, argued that the additions of Rs.11.17 lakhs and Rs.1.35 crores were liable to be deleted applying the decision of the S.C. in the case of CIT v. Nelliappan cited supra. In conclusion, it was vehemently argued by the Ld. A R that the submissions made referred supra have not been considered by the earlier Hon'ble Bench while passing its order in ITA No:1474(Bang)/2008 dated:
29.1.2010. These omissions constitute mistakes apparent from records as contemplated u/s 254(2) of the Act. It was, therefore, prayed that the earlier order of the Hon'ble Bench be recalled and to rectify the aforesaid mistakes apparent from the records.
5. On the other hand, the Ld D R was very emphatic in her resolve that the issues raised in the Misc. Petition had, in fact, been deliberated upon in the earlier order of the Hon'ble Bench and that there were no mistakes crept in which necessitate to take recourse under section 254(2) of the Act M.P.No.56/Bang/2010 Page 5 of 10 The earlier order of the Hon'ble Bench doesn't suffer from any infirmity as alleged by the assessee, and, therefore, pleaded that the Misc. petition of the assessee cannot be entertained which requires to be rejected summarily.
6. We have carefully analyzed the rival submissions, attentively gone through the relevant records and also the other documentary evidences produced during the course of earlier proceedings. 6.1. At the outset, we would like to emphasis in clear terms that the grounds raised by the assessee and the arguments coupled with various judicial pronouncements put-forth by his Ld. AR during course of hearing of the original appeal [which have now been agitated in the misc. petition that they have not been considered], were, in fact, duly considered and took cognizance of the same by the earlier Bench. At the cost of repetition, we shall reproduce the relevant portion of the findings of the earlier Bench, as under:
"2. The first issue is with regard to addition of a sum of Rs.2,29,00,000/- being the amount deposited to the bank accounts of the assessee. The AO has assessed the same being the amount deposited in the bank account of the assessee by treating the same as income of assessee u/s 68 of the IT Act. The same was confirmed by the CIT(A). The AO found that the assessee was maintaining bank account in SBI, Mumbai vide A/c No.01050, Bank of Baroda, Mumbai (A/c No.20129) and Citibank, A/c No.00703120128 respectively, wherein deposit of Rs.1,49,75,000/-, Rs.71,000/- and Rs.60,000/- totaling Rs.4,54,06,000/- were found. The assessee was questioned about the deposits and withdrawals. It was explained to the AO that the credits represented the receipts from stamp sale. AO found that stamp vending turnover was Rs.2.25 crores only and therefore, he added the rest i.e., 2.29 crores as unaccounted income from stamp vending. This also commensurate with conclusion of other investigating agencies that the assessee had earned huge unaccounted sum from the racket of M.P.No.56/Bang/2010 Page 6 of 10 counterfeit stamp papers. This was also found commensurate with the further conclusion that the assessee has paid huge amounts in cash to his aides representing cash withdrawals from the bank but not allowed under IT Act as 'expenses for illegal purpose." The stand of the assessee is that the assessee was also engaged in the business of dealing in white kerosene. In AY: 1996-97, Rs.33,20,000/- (sic) 3320000 litres of white kerosene was sold and the sale price was Rs.8/- per litre totaling Rs.2,65,60,000/- which is more than Rs.2.49 crores added by the AO as unexplained credit. It was also pleaded that the receipt on sale of white kerosene explains the credit entries in bank accounts partly and the other part represents turnover from stamp vending. This contention was not accepted by the CIT(A) on the ground that this issue was not pleaded like that before the AO and it was found out that the business of white kerosene was fake and non-existence. Even before the CIT(A), no documents in the shape of license or correspondence from Civil Supply Department, transportation of white kerosene to real (sic) retail vendors or from Government deposits or any other corroborating evidence was produced to prove the genuineness of business of white kerosene. In view of the above, the CIT(A) rightly concluded that such business was non- existence and it was only futile attempt to explain entries in the bank and the real source of which was only to sale of counterfeit stamp papers and for this year the amount of such explained income was quantified at Rs.2.29 crores. The assessee cannot be allowed illegal expenses as explanation to sec. 37(1) of the Act. It is settled legal preposition that person should come for justice with clean hand. CIT(A)is justified in upholding the addition in question. The same is upheld.
With regard to the disallowance of expenditure of Rs.11.17 lakhs, it was observed by the Hon'ble Bench that -
"6. After going through the material and rival submissions, we find that at the time of recording of statement, the assessee stated to be in improper and mental and physical state. It is not so which is evident from categorical answer that he was paying salary of Rs.5000/- per person per month to 20 persons resulting in payment of salary of Rs.12 lakhs and Rs.40000/- per person per annum as conveyance charges to 20 persons resulting in payments of conveyance charges of Rs.4.8 lakhs totaling to Rs.16.8 lakhs. It shows that there was no consistency between the returned expenses and the expenses recorded in statement. Apart from this, the AR did not produce any books of account to corroborate the returned expenses. In view of the above, the lower authorities relying on the statement recorded on oath made M.P.No.56/Bang/2010 Page 7 of 10 the stand in question, the AO has given clear cut finding that the business of kerosene oil was fake and not carried out by the assessee as discussed above. So the AO has rightly added the same under the head 'other sources'. we uphold the same.
In respect of the addition of Rs.1,35,00,000/-, the observation of the Hon'ble Bench was that -
"7....................The stand of the AR of the assessee in this regard was that the above said documents relied on by the assessee were not confronted to assessee. Moreover, statement u/s w131, he has mentioned having paid Rs.20.00 lakhs as pagudi. Before us learned AR has fined an application under Rule of Appellate Rules,1967, wherein various documents have been filed with regard to above said property and the stand of the assessee is that the assessee was a tenant of above said Alankar Lodge property which was owned by Dawood Bhoy Fazalbhoy Muslim Educational Trust. In this regard, attention was drawn towards the order of the Pune Court in RAE Suit No:46/70 of 2007 directing delivery of possession of Alankar Lodge property to its owner i.e., Dawood Bhoy Fazalbhoy Muslim Educational Trust. These documents were filed before us and the issue goes to the root of the issue, so we admit the same. This does not help assessee because case before us is with regard to quantum of pagri amount prevailing in market at relevant point of time. It is not the case of revenue that the assessee was legal owner of the property in question. The question before us is with regard to investment by way of pagri paid at relevant point of time cannot be disputed. In view of above, we are not inclined interfere with the finding of CIT(A) who has upheld the reasoned addition in question. We uphold the same."
Considering the facts and circumstances of the issues which confronted the earlier Bench, it, perhaps, took a firm view that there were no possibilities of adopting of peak credit formula as pleaded by the Ld. A.R. 6.2. The above narration, in our considered view, goes without saying that the earlier Bench took cognizance of all the material arguments M.P.No.56/Bang/2010 Page 8 of 10 valiantly put forth by the Ld. A R, the facts culled out from the assessment order and also the very issues which were deliberated upon by the Ld. CIT (A) and, thus, came to a conclusion that the Ld. CIT (A) was justified in his findings. Though the earlier Bench took cognizance of the case laws on which the assessee had placed strong reliance and since the issues before the Bench were on the different footing and the case laws relied upon clearly distinguishable, they have not been quoted expressly. Such being the ground realities, the assessee cannot come up now with a Misc. Petition in the guise of "the Bench, while passing the order upholding the orders passed by the authorities below, the aforesaid grounds raised and the contentions advanced have not been considered at all." 6.3. In conclusion, the assessee's misconception that the earlier Bench had not taken cognizance of the material facts advanced by his Ld. A R was, to put it gently, without any basis which deserves to be rejected out- rightly. It is ordered accordingly.
6.4. In view of the above, this Bench is of the firm view that there were NO mistakes apparent from records which require recourse to action u/s 254 (2) of the Act as alleged by the assessee.
6.5. We shall also draw strength from the legal precedents for our endeavour, as quoted below:
(1) The Hon'ble Delhi High Court in the case of Ras Bihari Bansal v. CIT & Anr. reported in 293 ITR 368, while elaborating on the scope of s.254 (2) of the Act had unfolded the issue thus -M.P.No.56/Bang/2010
Page 9 of 10
"This section enables the concerned authorities to rectify any "mistake apparent from the record". It is well settled that an oversight of a fact cannot constitute an apparent mistake rectifiable under this section. Similarly, failure of the Tribunal to consider an argument advanced by either party for arriving at a conclusion, is not an error apparent on the record, although it may be an error of judgment The mere fact that the Tribunal has not allowed a deduction, even if the conclusion is wrong, that will be no ground for moving an application under section 254(2) of the Act. Further, in the garb of an application for rectification, the assessee cannot be allowed to be permitted to reopen and re- argue the whole matter, which is beyond the scope of this section."
(2) The Hon'ble jurisdictional High Court, in the case of CIT & Anr. v. McDowell & Co. Ltd. reported in (2009) 310 ITR 215, has in its wisdom ruled thus -
" Application of the principles laid down by the superior Courts to the facts of the case before the Tribunal on erroneous understanding of such principles, recording of an erroneous finding by it based on the facts on record, arriving at a conclusion on erroneous application of provisions of law to the facts of the case, etc., cannot be held to be 'a mistake apparent from the record' warranting any rectification by the Tribunal in exercise of its power under s. 254(2) of the IT Act, by reconsidering the application of principles of superior Courts to the facts of the case or by reconsidering its findings recorded, or by reconsidering the application of the relevant provisions of law to the facts of the case as is done by the Tribunal in the instant case. Such an exercise of power under s. 254(2) of the Act amounts to review of its earlier order on merits but not 'rectification of mistake apparent from the record' and such review would certainly be beyond the scope of s. 254(2) of the IT Act."
6.6. To illustrate further, in the case of the present assessee, it cannot be said that there were mistakes on the face of the records warranting interference of this Bench u/s 254(2) of the Act. The worst, it can be said that there being errors for which the remedy available to the assessee is not u/s 254(2) of the Act, but, u/s 260A of the Act for redressal. Our M.P.No.56/Bang/2010 Page 10 of 10 conclusion is supported by the finding of the Hon'ble jurisdictional High Court referred supra. In view of the above, the Misc. petition of the assessee is dismissed.
7. In the result, the Misc. Petition of the assessee is dismissed.
Pronounced in the open court on this 10th day of August, 2010.
Sd/- Sd/-
( SMT. P. MADHAVI DEVI ) (A. MOHAN ALANKAMONY )
Judicial Member Accountant Member
Bangalore,
Dated, the 10th August, 2010.
Ds/-
Copy to:
1. Applicant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file
By order
Assistant Registrar
ITAT, Bangalore.