Income Tax Appellate Tribunal - Delhi
Sompal Singh, Muzaffarnagar vs Assessee on 18 July, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G" NEW DELHI
BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER
AND
SHRI C.M. GARG : JUDICIAL MEMBER
ITA No. 4163/Del/2011 & 5997/Del/2012
Asstt. Yr: 2005-06
Sompal Singh, Vs. Income-tax Officer,
Vill. & Post Kurmali, Ward-1(1), Muzaffarnagar.
The. Kairana,
Distt. Muzaffarnagar
PAN: ATQPS 0353 K
( Appellant ) ( Respondent )
Appellant by : Shri Ankit Gupta Adv.
Respondent by : Smt. Shalini Verma Sr. DR
Date of hearing : 09-07-2014
Date of order : 18-07-2014.
ORDER
ITA no. 4163/Del/2011 is directed against CIT(A)'s order dated 20-7- 2011 in quantum; and ITA no. 5997/Del/2012 is directed against CIT(A)'s order dated 22-8-2012, sustaining the penalty of Rs. 9,700/- levied u/s 271(1)(c) of the Act relating to A.Y. 2005-06. Both the appeals are heard together and disposed of by this consolidated order for the sake of convenience.
2. First we take up quantum appeal being ITA no. 4163/Del/2011.
3. Brief facts of the case are that assessee had filed his return of income on 4-1-2006 declaring income of Rs. 2,30,840/- and agricultural income of 2 Rs. 1,70,000/-. The return was processed u/s 143(1) on the returned income. Subsequently, assessment proceedings were initiated and in course of assessment proceedings, the assessee filed the revised return on 5-9-2007 declaring income of Rs. 1,58,900/-. The revised return was filed because in the original return deduction for interest paid to the bank at Rs. 71,940/- could not be claimed. Vide letter dated 26-9-2007, assessee submitted that he had made investment of Rs. 40,000/- in NSCs during the year. The AO accepted the revised return and determined thee total income at Rs. 1,58,900/-.
3.1. Ld. CIT, Muzaffarnagar vide order dated 4-12-2009cancelled the assessment order, inter alia, observing that since assessee had filed the original return on 4-1-2006 as against due date of 1-8-2005, the second return could not be treated as revised return in view of provisions of section 139(5). The AO determined the total income at Rs. 3,25,430/- as under:
Gross total income including agricultural income As per capital a/c cum balance sheet furnished by the assessee. 732585 Less: Outgoing during the year
(i) Claim u/s 80C in the original return Rs. 16031/-
(ii) Bank interest & charges Rs. 71940/-
(iii) NSC purchased Rs. 40000/-
(iv) House hold expenses admitted Rs. 60000/-
(v) Loss in share trading Rs. 12590/-
Total Rs. 200561/- Rs. 200561
Actual capital accretion during the year. Rs. 532024/-
Capital accretion shown by the assessee (1097753-1694367) Rs. 596614/-
Difference Rs. 64590/-
Income declared in original return Rs. 2,30,840/-
Income under the head other sources as held in the original assessment order Rs. 30,000/-3
Unexplained accretion in the capital as held above Rs. 64,590/-
Rs. 3,25,430/-
3.2. Ld. CIT(A) confirmed the AO's action for the following reasons:
(i) Return filed u/s 139(5) of the Act was non est in the eyes of law as the original return filed was belated.
(ii) The interest paid to bank at Rs. 71,940/- was claimed in the revised return and, therefore, he was justified in disallowing the assessee's claim.
(iii) The addition of Rs. 64,590/- being unexplained accretion in capital called for no interference because assessee had not been able to point out any mistake in the working of the same.
(iv) The assessee had claimed investment in NSCs at Rs. 40,000/- and consequent deduction u/s 88 in the revised return of income filed u/s 139(5), which was an invalid return.
3.3. As regards the addition of Rs. 12,000/- being estimation of house-hold expenses, the ld. CIT(A) did not accept the assessee's contention that it was on account of clerical mistake in the figure of withdrawal.
3.4. Being aggrieved with the order of ld. CIT(A), the assessee has taken following effective grounds of appeal:
"1. That the order passed by assessing officer u/s 143(3)/ 263 are illegal, bad in law and without jurisdiction.
2. The CIT(A) has, in view of the facts & circumstances of the case, erred in law and on facts in not accepting the revised return dated 05-09-2007, which has been accepted in original assessment proceedings u/s 143(3).4
3. The CIT(A) has erred on facts and in law in not allowing the deduction of interest paid to the bank at Rs. 71,940/-.
4. The CIT(A) has erred in law and on facts and circumstances of the case in sustaining the addition of Rs. 64,590/- on account of unexplained capital accretion. The addition and calculation of accretion of capital is totally on summaries and conjectures.
5. The CIT(A) has erred in facts and circumstances of the case in sustaining the disallowance of deduction u/s 88C of Rs. 40,000/- for the investment in purchase of NSC merely the revised return filed u/s 139(5) of the Act.
The CIT(A) has erred in facts and circumstances of the case in sustaining the addition of Rs. 12,000/- on account of household expenses."
4. We have considered the submissions of both the parties and have perused the record of the case. As far as ground no. 2, regarding validity of revised return, is concerned, we do not find any reason to interfere with the order of ld. CIT(A) because admittedly the original return was belated return which could not be revised in view of the provisions of sec. 139(5) as interpreted by Hon'ble Supreme Court in the case of Kumar Jagdish Sinha Vs. CIT 220 ITR 67. Ld. CIT(A) has given detailed reasoning on this count and we are in full agreement with the same. Accordingly, ground no. 2 is dismissed.
5. As far as ground no. 3, regarding deduction of interest paid to the bank at Rs. 71,940/- is concerned, it was contended by assessee that he had obtained term loan and over-draft limit in his individual credit limit a/c no. CD 100415 at Rs. 4,20,000/- from Bank of India and term loan a/c no. TLN 309 at Rs. 8,20,000/- with Bank of India against the property in the name of 5 Smt. Prem Bala situated at 842 Civil Lines, South, Muzaffarnagar time to time and when required amount had been deposited with the firm as his capital through a/c payee cheques. Purpose of term loan and over draft was stated to be investment of funds in the business. Thus, the claim is that this being business expenditure, was to be allowed.
5.1. Ld. Counsel relied on the decision of Hon'ble Delhi High court in the case of CIT Vs. Sam Global Securities Ltd. (ITA no. 214/2013 dated 2-9- 2013) and pointed out that in this case the assessee had not filed any revised return but claim was made during the course of assessment proceedings by filing a revised computation of income, which was rejected by assessing officer as well as CIT(A). However, Hon'ble Delhi High Court relying on the decision of Hon'ble Supreme Court in the case of CIT Vs. Mr. P. Firm 56 ITR 67 and distinguishing the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323, being rendered with reference to the powers of assessing officer and did not impinge on the power of the Tribunal, upheld the Tribunal's decision in restoring the matter to the file of assessing officer by entertaining the new ground raised by the assessee.
5.2. Ld. Counsel further pointed out that SLP filed against the decision of Hon'ble Delhi High court has been dismissed by Hon'ble Supreme Court on 4-4-2014.
5.3. We find that Hon'ble Delhi High Court has, inter alia, taken note of the decision in the case of CIT Vs. Natraj Stationery Products (P) Ltd. 312 ITR 22. Therefore, though technically the assessee may not be entitled to 6 deduction on the basis of revised return but the assessee's right to advance fresh legal claim before ITAT cannot be curtailed by adopting a pedantic approach. The Hon'ble Delhi High Court has taken note of the fact that assessment proceedings are not adversarial in nature. The plea had been taken before the assessing officer but both the lower revenue authorities disallowed the assessee claim solitary on the technical ground without examining the same. The assessee's claim was akin to revised computation of income and not altogether a new claim. Under such circumstances, in order to advance the cause of justice, we restore the matter to the file of assessing officer to reexamine the assessee's claim regarding obtaining of loan from bank for business purposes. If the funds obtained from the bank were duly utilized by assessee for business purposes, then interest cannot be disallowed. However, this will be subject to verification and investigation.
6. Ground nos. 4,5 & 6 have three limbs -
(i) Addition of Rs. 12,590/- on account of loss in share trading;
(ii) Addition of Rs. 40,000/- on account of NSC purchased; and
(iii) Addition of Rs. 12,000/- on account of house-hold expenses. 6.1. As far as ground no. 5 is concerned, that has one more issue regarding disallowance of deduction u/s 88C on account of revised return being treated as non-est in which the claim was advanced for the first time. As far as this aspect is concerned, following the reasoning given in regard to the interest paid to bank, we restore this matter to the file of assessing officer for verification and investigation.
7. Now we take up the addition of Rs. 64,590/- on account of unexplained capital accretion.
77.1. As far as addition of Rs. 12,590/- loss in share trading is concerned, we find substance in the plea advanced by ld. Counsel for the assessee because even if this loss was accounted for in the capital account/ balance- sheet at best it would have effect on the cash in hand which was Rs. 1,16,411.13, sufficient to cover this amount. Therefore, this cannot be treated as unexplained accretion to the capital account. Accordingly, addition on this count is deleted.
7.2. As far as addition of Rs. 40,000/- on account of NSC purchased is concerned, ld. counsel referred to page 3 of assessment order and pointed out that assessing officer had, inter alia, made the addition of Rs. 40,000/- on account of NSC purchased as unexplained capital. In this regard ld. Counsel referred to page 55 of the PB where capital a/c/ balance-sheet of assessee for A.Y. 2005-06 is contained, to demonstrate that assessee had shown NSC as on 29-3-2005 at Rs. 40,000/- on the asset side of the balance-sheet and, therefore, it was duly recorded in assessee's books of a/c hence no addition was called for.
7.3. As far as the addition of Rs. 12,000/-, on account of house-hold expenses, is concerned, we find substance in the plea of ld. Counsel for the assessee that this was a mistake in incorporating the figure of Rs. 60,000/- as against Rs. 48,000/- in the capital account. However, even if the sum of Rs. 60,000/- is incorporated in the capital account/ balance sheet, still there would be no effect on the capital accretion because of the sufficiency of cash balance in hand. Therefore, this cannot be termed as unexplained capital accretion. Accordingly, the addition is deleted.
8. In the result, assessee's appeal is partly allowed for statistical purposes.
8ITA no. 5997/Del/2012 (penalty appeal):
9. The assessing officer had levied a penalty of Rs. 9600/- in respect of unexplained capital accretion of Rs. 64,590/-. In quantum appeal, we have deleted the addition made on account of capital accretion, Therefore, since the very base for levy of penalty has gone, we delete the penalty in question levied u/s 271(1)(c).
10. In the result, ITA no. 4163/Del/2011 is partly allowed for statistical purposes and ITA no. 5997/Del/2012 is allowed.
Order pronounced in open court on 18-07-2014.
Sd/- Sd/- ( C.M. GARG ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 18-07-2014. MP Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR