Income Tax Appellate Tribunal - Bangalore
Shri. N.J.C. Reddy, Bangalore vs Department Of Income Tax on 8 May, 2013
Page 1 of 9 ITA Nos.433/Bang/2010 &
26/Bang/2011
IN THE INCOME TAX APPELLATE TRIBUNAL,
BANGALORE BENCH 'A'
BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND
SHRI JASON P BOAZ, ACCOUNTANT MEMBER
ITA No.433/Bang/2010
(Asst. year 2003-04)
The Asst. Commissioner Shri N J C Reddy, Prop: J C
of Income Tax, Circle- R Mining Equipments,
8(1), Bangalore. #1324, 7th Main, 13th Cross,
Vs Mahalakshmi Layout,
Bangalore.
PA No. ADBPR 1084 P
(Appellant) (Respondent)
ITA No.26/Bang/2011
(Asst. Year 2003-04)
(By Assessee)
Date of Hearing : 08.05.2013
Date of Pronouncement : 17.05.2013
Revenue by : Shri Bijoy Kumar Panda, Addl. CIT
Assessee by : None
ORDER
PER GEORGE GEORGE K :
These two appeals - one by the Revenue and another by the assesse
- are directed against the order of the CIT (A)-II, Bangalore dated 21.12.2009. The relevant assessment year is 2003-04.Page 2 of 9 ITA Nos.433/Bang/2010 &
26/Bang/2011 I. ITA No. 433/B/10 - AY 2003-04 - By the Revenue:
2.1) The revenue has, in its grounds of appeal, raised 12 grounds, out of which, ground Nos.1, 11 & 12 do not survive for adjudication as they are general in nature. The remaining grounds related to the following issues, namely:
(1) (Ground Nos. 2 to 6) that the CIT (A) had erred in deleting the addition of unproved loan credit of Rs.5 lakhs; (2) (Ground Nos. 7 to 9) that the CIT (A) had erred in deleting the addition of Rs.1 lakh on account of unproved expenses; & (3) (Ground No.10) that the CIT (A) also erred in deleting the addition of Rs.2,04,620/- out of Rs.3.75 lakhs being agricultural income.
II. ITA No. 26/B/11 - AY 2003-04 - By the assessee:
2.2) The assessee has, in his grounds of appeal, raised seven grounds, in which, ground Nos.1, 6 and 7 being general in nature, they have become inconsequential. The remaining grounds relate to the following issue, namely:
(1) (Ground Nos. 2 to 5) that the CIT (A) had failed to appreciate that the assessee furnished the confirmation to satisfy the genuineness of loans etc., and he ought to have refrained from upholding the additions made u/s 68 of the Act.
2.3) As the issues raised by the rival parties pertaining to the same assessment year, both the appeals were heard, considered together and disposed of, for the sake of convenience, in this common order. 2.4) The facts of the issues, in brief, are as under:
2.5) The assessee is an individual. He is engaged in the business of manufacture of button bits, hammers, and rig spares. The return of income for the assessment year under consideration was filed on 28.11.2003, admitting a total income of Rs.18,18,570/-, besides agricultural income of Rs.3.75 lakhs.
The scrutiny assessment was concluded after considering various aspects as Page 3 of 9 ITA Nos.433/Bang/2010 & 26/Bang/2011 recorded in the order, the AO had determined the assessee's income at Rs.72,63,570/- making additions under the heads of Cash credit, unexplained expenses and unexplained investment out of agricultural income etc., 2.6) Aggrieved, the assessee took up the issues before the CIT (A) for relief. After having considered the assessee's contentions are recorded in his appellate order under dispute, the CIT (A) had allowed partial relief to the assessee.
3) Let us now address to the grievance of the Revenue. After careful consideration of the learned D R, the issues raised by the revenue are dealt with. As there was no representation on behalf of the assessee during the hearing of the revenue's appeal, the issues are decided chronologically on the basis of the materials on record, as under:
I. ITA No. 433/B/10 - AY 2003-04 - By the Revenue:
3.1) (a) Deletion of loan credit of Rs.5 lakhs from T Shobhan Babu:
The CIT (A) had deleted the addition of Rs.5 lakhs for the reasons that -
"4.4.5.(b) A copy of the confirmation dated 29.8.2005 is also furnished wherein it is stated that the amount was paid by cash and was received by cheque during March - April, 2005 but the date of transaction is not mentioned. The advance was given without interest. Copy of acknowledgement for the return filed and income and expenditure account and balance sheet have been furnished. In the assets side of the balance sheet an amount of Rs.5,43,500/- is shown as 'advance to JCR Mining Equipments.' This indicates that the loan of Page 4 of 9 ITA Nos.433/Bang/2010 & 26/Bang/2011 Rs.5,00,000/- has been given to the appellant. As the loan amount of Rs.5,00,000/- has been disclosed in the balance sheet as on 31.3.2004, the same stands explained..."
3.1.1) The above reasoning of the CIT (A) has been contested before us by the revenue that -
- The CIT (A) had erred in deleting the addition of unproved loan credit from Shobhan Babu;
- He had also erred in deleting the addition on the ground that the loan amount has been explained as the same was disclosed in the balance sheet as on 31.3.2004;
- The CIT (A) would have appreciated the fact that Shobhan Babu had submitted that the amount was advanced to the assesse out of agricultural income whereas he had shown no agricultural income in the return of income filed;
- He should have appreciated that Shobhan Babu had confessed that whatever stated in his statement was not true and correct and he had also not advanced any loan to the assessee; &
- The amount of loan being substantial and the contradictory statements made by the assessee during the cross examination to testify the fact that the credit of Rs.5 lakhs to the assessee remains unexplained.
3.1.2) On close scrutiny of the findings of the CIT(A), it is observed that the assessee had furnished a confirmation letter dated 29.8.2005 that the amount was paid in cash which was received during March - April, 2005 through cheque. On verification of the Income & Expenditure account and Balance Sheet attached to the return of income of the said creditor, an amount of Rs.5,43,500/- was shown as 'advance to JCR Mining Equipment' [the assessee's proprietary concern]. As the loan amount of Rs.5 lakhs was finding a place in the Balance sheet of the creditor as on 31.3.2004, the CIT(A) was of the view that the loan amount of Rs.5 lakhs was explained. Page 5 of 9 ITA Nos.433/Bang/2010 &
26/Bang/2011 3.1.3) Even at the time of hearing before us, the revenue had not brought any credible documentary evidence to rebut either the assessee's claim or the reasoning of the CIT (A) on the issue. We are, therefore, of the view that there is no infirmity in the finding of the CIT (A) warranting our intervention in the matter. It is ordered accordingly.
(b) Deletion of addition of Rs.1 lakh being unproved expenses:
3.2) Under this head also, the CIT (A) had deleted the addition for the following reasons:
"5.4. A perusal of the profit and loss account shows the following expenses:
Conveyance Rs.1,63,479
Telephone charges Rs.2,98,745
Travelling expenses Rs.3,20,500
Depreciation on vehicles Rs.2,29,447
Total Rs.7,12,724 (sic) 7,82,724
5.5. An analysis of these expenses shows that the total expenses as incurred on conveyance, telephone, etc., with reference to the total turnover of Rs.6.44 crores shows that it works out to 1.10 per cent. Thus, there is force in the appellant's submission that the expenditure is in connection with the business only. Moreover, the AO has not brought any definite finding that expenses are personal and it is merely on estimated basis which cannot be sustained....."
3.2.1) Before us, it was contended by the revenue that the CIT (A) had failed to appreciate that the assessee had not proved the genuineness of the expenses to full extent and also not produced the bills / vouchers supporting the same. It was, therefore, pleaded that the addition of Rs.1 lakh made by the AO was justifiable.
Page 6 of 9 ITA Nos.433/Bang/2010 &
26/Bang/2011 3.2.3) We are not, however, convinced with the contention put-forth by the revenue. Indeed, the CIT (A) had analysed the issue in depth and arrived at a conclusion that the expenditure was in fact in connection with the assessee's business only. On a perusal of the details furnished, it is observed that on a total turnover of Rs.6.44 crores, the assessee had claimed expenses towards conveyance, telephone, travelling etc., comes to hardly 1.21%. Moreover, the AO's ad-hoc disallowance of Rs.1 lakhs was merely based on assumption and guess work, but, not on a sound footing. As rightly observed by the CIT(A), the AO had not brought on record any clear finding that the expenses were attributable to personal.
3.2.4) In view of the above, we are in agreement with the finding of the CIT (A) on this issue. It is ordered accordingly.
(c) Deletion of unexplained credit of Rs.2,04,620/-:
3.3) The assessee had claimed the agricultural income at Rs.3.75 lakhs.
However, in the absence of any documentary evidence of proof on the sale of agricultural produce etc., based on the extent of land holding of 36.51 Acres situated in Andhra Pradesh, the AO had estimated the net agricultural income at Rs.1,70,380/- and the balance of Rs.2,04,620/- [3,75,000 - 1,70,380] was treated as unexplained investment. However, the CIT(A) allowed the appeal of the assessee and deleted the addition. The relevant portion of the reasoning of the CIT (A) is extracted as under:
"6.3. A similar issue came up in the assessment year 2002-03 in the appellant's own case wherein agricultural income was shown at Rs.12,83,482/-. The AO had examined this issue in detail with land records, RTC etc., and income to the extent of Rs.10,40,700/- has been considered as income from agriculture. During the Page 7 of 9 ITA Nos.433/Bang/2010 & 26/Bang/2011 previous year relevant to the assessment year under consideration, agricultural income declared is Rs.3,75,000/- i.e., three times less when compared to the previous year. The AO added a sum of Rs.2,04,620/- as unexplained investment. However, no supporting evidence has been brought on record for the finding given by him....."
3.3.1) It was the case of the learned D R that from the details produced, the agricultural income of the assessee was estimated at Rs.1,70,380/- and, hence, the AO was justified in adding back the excess claim of Rs.2.04 lakhs as unexplained investment u/s 69 of the Act. It was, therefore, pleaded that the CIT(A) was not justified in deleting the addition which requires to be reversed. 3.3.2) We have considered the submission of the learned DR and carefully perused the finding of the CIT(A). As rightly highlighted by the CIT(A),in the preceding assessment year, the then AO had determined the agricultural income of the assessee at Rs.10,40,700/- as against the assessee's claim of Rs.12,83,482/- which is almost three times more than what has been admitted for the assessment year under consideration. Moreover, the present AO had not spelt out the basis on which he had estimated the gross agricultural income at Rs.10000/acre which, in our view, is rather pessimistic. When the then AO had, after examining the issue in detail with reference to the land records, RTC, land holding etc., arrived at a conclusion that the income of the assessee from agricultural at Rs.10.4 lakhs that too in the immediately preceding assessment year, there was no plausible cause for the AO to disbelieve the claim of the assessee. Moreover, there was neither any increase nor decrease in the land- holding of the assessee during the period under consideration to take a different view.
Page 8 of 9 ITA Nos.433/Bang/2010 &
26/Bang/2011 3.3.3) Taking into account all the above facts and circumstances of the issue, we are of the view that the CIT (A) was justified in his finding which requires no intervention by this Bench. It is ordered accordingly.
II. ITA No.26/B/11 - A.Y - By the assessee:
4) As pointed out supra, when the assessee's appeal came up for hearing, neither the assessee appeared in person nor through his authorised representative to put-forth his contention(s), if any, for the consideration of this Bench. We, therefore, proceed to dispose of the assessee's appeal on merits in consonance with the rule 24 of Income-tax (Appellate Tribunal) Rules, 1963, after hearing the learned D R present.
4.1) The grievance of the assessee, on reading the grounds raised, is summarised as under:-
- that the CIT(A) ought to have appreciated that all the creditors were genuine and no portion of the credits were liable to be disallowed;
- that the CIT(A) ought to have appreciated that the appellant furnished the confirmation from the creditors to satisfy the genuineness of loans by proving the identity and credit worthiness of the creditors and thus the initial onus cast upon the assessee had been discharged;
- that the CIT(A) failed to appreciate that the assessing officer having failed to summon the creditors u/s 131(1) of the Act for examination in case he was not satisfied with the confirmation furnished by the appellant, the provisions of s. 68 of the Act were not applicable; &
- that on the facts, the CIT(A) ought to have accepted the explanation and evidence furnished by the assessee and ought to have refrained from upholding the additions made u/s 68 of the Act.Page 9 of 9 ITA Nos.433/Bang/2010 &
26/Bang/2011 4.2) We have carefully considered the contentions of the assessee as stated in his grounds of appeal. On a careful perusal of the reasons recorded by the CIT(A), we find that the CIT(A) had, in fact, analysed the issues of unexplained cash credits aggregating to Rs.49,70,000/- on each cash creditor.
After detailed reasons recorded in his appellate order, the CIT(A) confirmed the additions to the extent of Rs.44,70,000/- and deleted the addition of Rs.5 lakhs in the case of T. Shobhan Babu.
4.3) In view of the above, we are of the considered view that the CIT(A) was justified in confirming the additions to the tune of Rs.44.7 lakhs which requires no intervention of this Bench. Accordingly, we sustain the findings of the CIT(A) in the matter.
In the result:
(i) the Revenue's appeal is dismissed; & (ii) the assessee's appeal is dismissed.
Order pronounced in the open court on 17th day of May, 2013.
Sd/- Sd/-
(JASON P BOAZ) (GEORGE GEORGE K)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Copy to :
1. The Revenue 2. The Assessee 3. The CIT concerned. 4. The CIT(A) concerned. 5. DR 6. GF MSP/ By order Senior Private Secretary, ITAT, Bangalore.