ITO, Tirur v. M/s.Educare Charitable Trust, Malappuram

ITA 203/COCH/2014 | 2008-2009
Pronouncement Date: 31-07-2014 | Result: Dismissed

Appeal Details

RSA Number 20321914 RSA 2014
Assessee PAN AAATE2426N
Bench Cochin
Appeal Number ITA 203/COCH/2014
Duration Of Justice 2 month(s) 23 day(s)
Appellant ITO, Tirur
Respondent M/s.Educare Charitable Trust, Malappuram
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 31-07-2014
Assessment Year 2008-2009
Appeal Filed On 08-05-2014
Judgment Text
1 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 203/COCH/2014 (ASSESSMENT YEAR 2008-09) THE ITO WD.1 VS M/S EDUCARE CHARITABLE TRUST TIRUR KILIYAMANNIL COMPLEX CHATTIPARAMBA MALAPPURAM PAN : AAATE2426N (APPELLANT) (RESPONDENT) (C.O. NO.28/COCH/2014 (ARISING OUT OF I.T.A NO. 203/COCH/2014) (ASSESSMENT YEAR 2008-09) M/S EDUCARE CHARITABLE TRUST VS ITO WD.1 CHATTIPARAMBA MALAPPURAM TIRUR (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M ANIL KUMAR CIT DR ASSESSEE BY : SHRI K ANAND DATE OF HEARING : 22-07-2014 DATE OF PRONOUNCEMENT : 31-07-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) KOZHIKODE DATED 05-02-2014 AND PERTAINS TO ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS FILED CROSS OBJECTION TO SUPPORT THE ORDER OF 2 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 CIT(A). THEREFORE WE HEARD THE APPEAL AND THE CRO SS OBJECTION TOGETHER AND DISPOSE OF THE SAME BY THIS COMMON ORDER. 2. SHRI M ANIL KUMAR LD.DR SUBMITTED THAT THE ASSE SSING OFFICER MADE ADDITION OF RS.4 07 27 730 ON THE BASIS OF THE DETA ILS FURNISHED BY THE ASSESSEE TO KERALA FINANCIAL CORPORATION AND CRISIL . ACCORDING TO THE LD.DR THE ASSESSEE HAS FURNISHED AUDITED BALANCE-S HEET AND COPIES OF OTHER ACCOUNTS TO CRISIL FOR AVAILING LOAN. HOWEVE R THE ASSESSEE HAS NOT DISCLOSED TO THE DEPARTMENT THE CORRECT FIGURE. THEREFORE THE DIFFERENCE AS SHOWN IN THE ACCOUNTS DISCLOSED TO TH E DEPARTMENT AND THE ACCOUNTS DISCLOSED TO CRISIL WAS TAKEN AS INCOME OF THE ASSESSEE. HOWEVER THE CIT(A) ACCORDING TO THE LD.DR DELETE D THE ADDITION ON THE GROUND THAT FOR THE PURPOSE OF GETTING A HIGHER FIN ANCIAL ASSISTANCE THE ASSESSEE EXAGGERATED THE FIGURE GIVEN TO THE FINANC ING BANK AND CRISIL. REFERRING TO THE JUDGMENT OF THE MADRAS HIGH COURT IN V RAJAN VS CIT 96 ITR 64 THE LD.DR SUBMITTED THAT IN THE CASE BEFORE THE MADRAS HIGH COURT THE ASSESSEE HUF WAS CARRYING ON BUSINESS OF GINNI NG AND SELLING OF COTTON. THE ASSESSEE DISCLOSED THE STOCK OF COTTON TO THE DEPARTMENT AND ALSO DISCLOSED TO THE BANK FOR AVAILING LOAN. THE ASSESSEE IN FACT DISCLOSED HIGHER CLOSING STOCK TO THE BANK AND EXPL AINED TO THE AUTHORITIES THAT FOR THE PURPOSE OF AVAILING HIGHER LOAN THE C LOSING STOCK WAS 3 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 EXAGGERATED / INFLATED. THIS EXPLANATION OF THE AS SESSEE WAS NOT ACCEPTED BY THE TRIBUNAL. THE TRIBUNAL ESTIMATED THE PROBAB LE INFLATION IN THE CLOSING STOCK. THE ORDER OF THE TRIBUNAL WAS CONFI RMED BY THE HIGH COURT. THE LD.DR HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN COIMBATORE SPINNING & WEAVING CO LTD VS CI T (1975) 95 ITR 375. 3. ON THE CONTRARY SHRI K ANAND THE LD.REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT IN FACT THE CLOSING STOCK W AS INFLATED FOR THE PURPOSE OF GETTING HIGHER FINANCIAL ASSISTANCE FROM THE BANK AND FINANCIAL INSTITUTION. THE ASSESSEE HAS VALUED THE ASSET AT HIGHER FIGURE THAN WHAT IS SHOWN IN THE STATEMENT GIVEN TO THE DEPARTMENT. ACCORDING TO THE LD.REPRESENTATIVE THERE IS NO CHANGE IN THE QUANTI TY OR QUALITY OF THE ASSET SHOWN TO THE BANK AND THE DEPARTMENT. ONLY THE EST IMATION OF VALUE DIFFERS. SO LONG AS THE QUANTITY AND QUALITY OF TH E ASSET REMAINS THE SAME AND THE ASSESSEE ESTIMATED THE VALUATION LITTLE HIG HER THAN WHAT WAS DISCLOSED TO THE DEPARTMENT ACCORDING TO THE LD.RE PRESENTATIVE THERE CANNOT BE ANY ADDITION ON THE BASIS OF THE INFLATED ESTIMATION SHOWN TO THE FINANCIAL INSTITUTION. THE INFORMATION COLLECTED F ROM CRISIL CANNOT BE RELIED UPON BY THE DEPARTMENT SINCE THE SAME WAS UP LOADED ON THE OPINION FURNISHED BY THE FINANCIAL INSTITUTION. TH EREFORE ACCORDING TO THE 4 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 LD.REPRESENTATIVE THE CIT(A) HAS RIGHTLY DELETED T HE ADDITION. THE LD.REPRESENTATIVE PLACED RELIANCE ON THE JUDGMENT O F THE MADRAS HIGH COURT IN CIT VS N SWAMY (2000) 243 ITR 363 (MAD); C IT VS PADMAVATHY COTTON MILLS 236 ITR 340 (MAD); CIT VS APCOM COMPUT ERS P LTD (2007) 292 ITR 630; CIT VS LAXMI ENGINEERING INDUSTRIES 30 8 ITR 279. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE HAS SHOWN INFLATED CLOSING STOCK TO THE EXTENT OF RS. 4 11 22 227 TO THE BANK FOR THE PURPOSE OF AVAILING LOAN. IN FACT THE ASSESSEE HA S DISCLOSED THE VALUE OF THE CLOSING STOCK AT RS. 5 18 65 000 TO THE DEPARTM ENT. HOWEVER THE ASSESSEE DISCLOSED THE INFLATED CLOSING STOCK TO TH E EXTENT OF RS.9 29 87 227 TO THE FINANCIAL INSTITUTION. IT IS NOT THE CASE OF THE REVENUE THAT THE QUANTITY AND QUALITY OF THE STOCK DIFFERS. IN OTHER WORDS THE QUANTITY AND QUALITY OF THE STOCK DECLARED TO THE D EPARTMENT AND THE FINANCIAL INSTITUTIONS REMAINS THE SAME. WHAT DIFF ERS IS THE VALUATION OF CLOSING STOCK. THE ASSESSEE HAS DISCLOSED THE VALU E OF THE VERY SAME CLOSING STOCK TO THE FINANCIAL INSTITUTION AT RS. 9 29 87 227. HOWEVER THE VALUE OF THE VERY SAME STOCK WAS SHOWN TO THE DEPAR TMENT AT RS.5 18 65 000. THE DEPARTMENT BY RELYING UPON THE JUDGMENT OF THE MADRAS HIGH COURT IN V RAJAN (SUPRA) AND COIMBATORE SPINNING AND 5 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 WEAVING CO LTD (SUPRA) JUSTIFIED THE ACTION OF THE ASSESSING OFFICER IN ADDING THE DIFFERENCE BETWEEN THE TWO VALUATIONS. 5. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE MADRAS HIGH COURT IN N SWAMY (SUPRA). THE MADRAS HIGH COU RT AFTER REFERRING TO ITS EARLIER JUDGMENT IN COIMBATORE SPINNING & WEAVI NG CO LD (SUPRA) AND THE JUDGMENT OF THE SUPREME COURT IN PARIMISETTI SE ETHARAMAMMA VS CIT (1965) 57 ITR 532 (SC) FOUND THAT THE BURDEN IS ON THE REVENUE TO SHOW THAT THE ASSESSEE HAD UNDISCLOSED INCOME. THE BURD EN CANNOT BE SAID TO BE DISCHARGED BY MERELY REFERRING TO THE STATEMENT GIVEN BY THE ASSESSEE TO A THIRD PARTY IN CONNECTION WITH THE TRANSACTION WHICH WAS NOT DIRECTLY RELATED TO THE ASSESSMENT. IN VIEW OF THE LATER JU DGMENT OF THE MADRAS HIGH COURT THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE EARLIER JUDGMENTS OF THE MADRAS HIGH COURT IN V RAJAN (SUPR A) AND COIMBATORE SPINNING & WEAVING CO LTD (SUPRA) MAY NOT BE APPLIC ABLE TO THE FACTS OF THIS CASE. SINCE THE QUANTITY AND THE QUALITY OF T HE STOCK REMAINS THE SAME WHICH WAS DISCLOSED TO THE DEPARTMENT AS ALSO TO TH E FINANCIAL INSTITUTION THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MER ELY BECAUSE THERE WAS A DIFFERENCE BETWEEN THE VALUATION SHOWN TO THE DEPAR TMENT AND THE FINANCIAL INSTITUTION THERE CANNOT BE ANY ADDITION . AS OBSERVED BY THE MADRAS HIGH COURT IN THE CASE OF N. SWAMY (SUPRA) THE BURDEN OF PROOF IS 6 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 ON THE REVENUE AND MERELY BY RELYING UPON THE STATE MENT GIVEN TO THE FINANCIAL INSTITUTION THE DEPARTMENT CANNOT CLAIM THAT THEY DISCHARGED THEIR BURDEN OF PROOF. FURTHERMORE CRISIL IS A CREDIT I NSTITUTION WHICH MAINTAINS THE CREDIT DETAILS OF EVERY INDIVIDUAL / ESTABLISHMENT ON THE BASIS OF THE INFORMATION THAT MAY BE FURNISHED BY THE FIN ANCIAL INSTITUTION. THE CREDIT RATING GIVEN BY CRISIL IN RESPECT OF INDIVID UALS / ESTABLISHMENTS MAY BE USED BY THE FINANCIAL INSTITUTION AT THE TIME OF ADVANCING FUNDS TO THE INDIVIDUAL / INSTITUTION. THE INFORMATION WHICH IS MAINTAINED BY CRISIL IS FOR THE PURPOSE OF ENABLING THE FINANCIAL INSTITUTI ON TO TAKE A DECISION WITH REGARD TO FINANCIAL ASSISTANCE. THEREFORE THE INF ORMATION AVAILABLE WITH CRISIL CANNOT BE THE BASIS FOR MAKING ADDITION IN T HE ASSESSMENT PROCEEDINGS. ASSESSMENT PROCEEDINGS BEFORE THE INC OME-TAX OFFICER ARE A JUDICIAL PROCEEDINGS U/S 136 OF THE I.T. ACT. TH EREFORE THE ASSESSING OFFICER CANNOT BASE HIS RELIANCE ON THE INFORMATION MAINTAINED BY THIRD PARTY FOR ASSISTING THE FINANCIAL INSTITUTION TO AD VANCE FINANCIAL ASSISTANCE. THE ASSESSING OFFICER IS EXPECTED TO PLACE RELIANCE ON THE CONCRETE MATERIAL WITH REGARD TO INCOME THAT MAY BE SUBJECT MATTER OF ASSESSMENT. SINCE THERE WAS NO DIFFERENCE IN THE QUANTITY AND Q UALITY OF THE ASSET DECLARED BY THE ASSESSEE THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. 7 ITA NO.203/COCH/2014 CO NO.28/COCH/2014 6. NOW COMING TO THE CROSS OBJECTION THE SAME IS F ILED ONLY TO SUPPORT THE ORDER OF THE CIT(A). THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT TO SUPPORT THE ORDER OF THE CIT(A) THE ASSESSEE CANNO T FILE ANY CROSS OBJECTION. THE ASSESSEE CAN SUPPORT THE ORDER OF C IT(A) BY PLACING ORAL STATEMENTS AT THE TIME OF HEARING OF THE APPEAL. T HEREFORE THE CROSS OBJECTION FILED BY THE ASSESSEE IS NOT MAINTAINABLE . 7. IN VIEW OF THE ABOVE BOTH THE APPEAL OF THE REV ENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST JULY 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN DT : 31 ST JULY 2014 PK/- COPY TO: 1. THE ITO WD.1 TIRUR 2. M/S EDUCARE CHARITABLE TRUST KILIYAMANNIL COMPL EX CHATTIPARAMPA MALAPURAM 3. THE COMMISSIONER OF INCOME-TAX KOZHIKODE 4. THE COMMISSIONER OF INCOME-TAX(A) AAYAKAR BHAVA N MANANCHIRA KOZHIKODE 673 001 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR INCOME-TAX APPELLATE TRIBUNAL COCHIN BENCH