ITO, Faridabad v. Smt. Satya Wanti Bareja, Faridabad

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.D. RANJAN ACCOUNTANT MEMBER I.T.A NO. 3011/DEL/09 ASSTT. YEAR 2005-06 I.T.O. WARD II (2) FARIDABAD VS. SHRI SATYA WANTI BAREJA PROP. M/S. SUNRISE STEEL AGENCY 1C/5 B.P. FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY: MS. ANUSHA KHURANA SR. DR RESPONDENT BY: SHRI ASHWANI TANEJA ADVOCATE ORDER PER RAJPAL YADAV JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LD. CIT(A)DATED 22 ND APRIL 2009 PASSED FOR ASSTT. YEAR 2005-06. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT LD. CIT(A ) HAS ERRED IN DELETING THE ADDITION OF RS. 11 48 295 MADE BY THE AO ON ACCOUNT OF UNEXPLAINED BUSINESS TRANSACTION WITH M/S. KAUSH AL ISPAT. ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED HER RETURN OF INCOME ON 31 ST OCTOBER 2005 DECLARING AN INCOME OF RS. 1 66 820/-. THE CASE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND A NOTICE U/S 143(2) AND 142(1) WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE ABOVE NOTICES SHRI RA KESH AHUJA ADVOCATE APPEARED BEFORE THE AO AND SUBMITTED INFOR MATIONS AS CALLED FOR BY THE AO. ON SCRUTINY OF THE BOOKS OF ACCOUNTS IT REVEALED TO THE AO THAT ASSESSEE WAS HAVING CREDIT BALANCE OF RS. 11 48 295/- AS ON 1.4.2004 AGAINST M/S. KAUSHAL ISP AT NEHRU GROUND FARIDABAD. THIS CREDIT BALANCE HAS BEEN SHO WN AS SQUARED UP AT THE END OF THE ACCOUNTING YEAR BY MAK ING CASH PAYMENTS ON VARIOUS DATES. THE ASSESSEE HAS APPENDE D ACCOUNT OF M/S KAUSHAL ISPAT APPEARING IN HER BOOKS OF ACCO UNTS. THE LD. AO HAD WRITTEN A LETTER TO M/S. KAUSHAL ISPAT AND A SKED TO CONFIRM HAVING RECEIVED CASH PAYMENT OF RS. 11 48 295/- FRO M M/S SUNRISE STEEL AGENCY I.E PROPRIETORSHIP CONCERN OF THE ASSE SSEE SMT. SATYA WANTI BAREJA. IN RESPONSE TO THE LETTER OF AO IT WAS SUBMITTED BY M/S KAUSHAL ISPAT THAT THERE WAS NO BALANCE AS REC EIVABLE IS OUTSTANDING FROM M/S. SUNRISE STEEL AGENCY AS PER B OOKS OF ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 3 ACCOUNTS AS ON 1.4.2004. ONE SALE TRANSACTION DURIN G THE F.Y. 2004- 05 WAS CONDUCTED ON 17.11.2004 VIDE ITS BILL NO. 77 FOR RS. 18 611/-. THIS HAS DULY BEEN SHOWN IN ITS ACCOUNT. M/S. KAUSH AL ISPAT HAD DENIED RECEIPT OF ANY PAYMENT IN CASH DURING THIS Y EAR FROM THE ASSESSEE. THE AO HAS CONFRONTED THE ASSESSEE WITH T HE REPLY OF M/S. KAUSHAL ISPAT. THE ASSESSEE HAS CONTENDED THAT SHE HAD MADE CASH PAYMENT AS REFLECTED IN THE BOOKS AND EN TRIES ARE GENUINE. SHE IS UNABLE TO UNDERSTAND AS TO WHY M/S. KAUSHAL ISPAT HAS NOT SHOWN THE AMOUNTS OF RECEIPTS IN BOOKS OF A CCOUNTS. ACCORDING TO THE ASSESSEE THE SIMPLE REASON FOR NOT SHOWING THE CASH PAYMENT BY ASSESSEE IN THE BOOKS OF M/S KAUSHA L ISPAT IS THAT AS ON 1.4.2004 THIS CONCERN HAS SHOWN THE AMOU NT RECEIVABLE FROM THE ASSESSEE AS NIL WHEREAS ASSESSEE HAS SHOWN RS. 11 84 295/- AS PAYABLE. THE ASSESSEE FURTHER CONTE NDED THAT A SUM OF RS. 14 86 886/- WAS SHOWN AS PAYABLE BY THE ASSESSEE AS ON 1 ST APRIL 2003. A PART PAYMENT WAS MADE BEFORE 31 ST MARCH 2004. DURING THE PERIOD 1 ST APRIL 2004 UPTO 31 ST MARCH 2005 ASSESSEE HAD MADE THE BALANCE PAYMENT OF RS. 11 48 295/- M/S KA USHAL ISPAT HAS NOT RECORDED IN ITS BOOKS OF ACCOUNTS THESE PAY MENTS . THE ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 4 ASSESSEE FURTHER CONTENDED THAT LOOKING INTO THIS DISCREPANCY SHE DOES NOT WANT TO LITIGATE WITH THE DEPARTMENT AND I N ORDER TO REMAIN IN PIECE SHE IS WILLING TO SURRENDER ABOVE A MOUNT SUBJECT TO THE CONDITION THAT NO PENALTY PROCEEDINGS WOULD BE INITIATED. 3. THE AO AFTER REPRODUCING THE LETTER OF ASSESSEE DID NOT MAKE A MENTION ABOUT ANY OTHER DETAILS OR THE PROVISO. HE SIMPLY MADE THE ADDITION OF RS. 11 48 295/-. HE ALSO INITIATED THE PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT. 4. DISSATISFIED WITH THE ACTION OF AO ASSESSEE CAR RIED THE MATTER IN APPEAL BEFORE LD. CIT(A). SHE POINTED OUT THAT HER OFFER FOR TAXING THE AMOUNT OF RS. 11 48 295/- WAS CONDIT IONAL ONE. ACCORDING TO THE CONDITION AO WAS NOT SUPPOSED TO I NITIATE THE PENALTY PROCEEDING. IT HAS SPECIFICALLY BEEN MENTIO NED BY THE ASSESSEE IN HER LETTER DATED 27.9.2007. THE AO APPE ARS TO HAVE NOT ACCEPTED THE LETTER OF THE ASSESSEE IN FULL SPI RIT RATHER HE PROCEEDED TO MAKE THE ADDITION ON MERIT WITHOUT GET TING INFLUENCED FROM HER CONCESSION. THAT IS WHY HE INIT IATED THE PENALTY PROCEEDINGS. THUS ASSESSEE HAS EVERY RIGHT TO CHALLENGE THIS ADDITION IN APPEAL BEFORE LD. CIT(A). WITH REG ARD TO THE MERITS ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 5 IT WAS CONTENDED BY THE ASSESSEE THAT HER BOOKS OF ACCOUNTS ARE GENUINE. SHE HAS SHOWN THE PAYMENT IF THE OTHER CO NCERN HAS NOT SHOWN THE RECEIPT THEN SHE CANNOT BE FASTENED W ITH THE LIABILITY. WITHOUT PREJUDICE TO THE CLAIM MADE BY T HE ASSESSEE IN THE RETURN IT WAS CONTENDED THAT EVEN OTHERWISE THI S ADDITION COULD NOT BE MADE UNDER ANY PROVISION OF LAW ON THE GROUND THAT ASSESSEE HAS MADE THE PAYMENT WHEREAS M/S KAUSHAL I SPAT HAS NOT SHOWN THE SAID PAYMENT AS RECEIPT. SUCH PAYMENT S MADE BY THE ASSESSEE OUT OF HER BOOKS OF ACCOUNTS CANNOT GI VE ANY AUTHORITY TO THE LD. AO TO MAKE ANY ADDITION MUCH LESS U/S 68 69 69A 69B 69C AND 69D. THE AO HAS NOT MADE ANY MENTION OF ANY SECTION IN THE ASSTT. ORDER. IT WAS ALSO CONTEN DED THAT IT IS NOT THE CASE OF LD. AO THAT ANY EXPENDITURE IN RESPECT OF THIS AMOUNT WAS CLAIMED IN THE YEAR UNDER APPEAL WHICH COULD BE HELD BOGUS AND COULD BE DISALLOWED. THUS ADDITION CANNOT BE MA DE. THE ASSESSEE ALTERNATIVELY CONTENDED THAT AT THE MOST A O COULD EXPLORE THE POSSIBILITY OF APPLICABILITY OF SECTIO N 41 (1) OF THE ACT I.E CESSATION OF LIABILITY . WITH REGARD TO THIS PO SSIBILITY IT WAS CONTENDED BY THE ASSESSEE HAT THERE IS NO EVIDENCE ON RECORD ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 6 WHICH CAN INDICATE THAT IMPUGNED CREDITS WERE IN RE SPECT OF TRADING LIABILITY FOR WHICH ANY DEDUCTION WAS EVER CLAIMED AND ALLOWED AND IF ALLOWED IN WHICH YEAR IT WAS ALLOWED . IT WAS ALSO CONTENDED THAT M/S. KAUSHAL ISPAT HAS SPECIFICALLY INFORMED TO THE AO THAT AS ON 1.4.2004 THERE WAS NO AMOUNT RECEIVAB LE FROM THE ASSESSEE IT MAKES IT CLEAR THAT NO ADDITION CAN BE MADE IN ASSESSMENT YEAR 2005-06 UNDER 41(!) OF THE ACT BECA USE EVEN IF FOR THE SAKE OF ARGUMENT IT IS CONSTRUED THAT LIABILITY HAS CEASED THEN IT WAS CEASED IN EARLIER YEAR AND NOT IN THIS YEA R. 5. LD. CIT (A) HAS CONSIDERED BOTH THESE ASPECTS EL ABORATELY AND DELETED THE ADDITION. FINDING OF THE LD. CIT(A) READ AS UNDER :- 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE LD. AR. AND PERUSED THE ORDER OF ASSESSMENT AND THE ASSESSMENT RECORDS .IT IS FOUND THAT THE ADMITTED POSITION IS THAT THE ASSESSEE WAS HAVING CREDIT BALANCE OF RS. 11 48 295 /- AS OPENING BALANCE AS ON 01.04 .2004 TO THE CREDIT OF M/S KAUSHAL ISPAT WHICH WAS SQUARED UP BY THE ASSESSEE DURING THE IMPUGNED YEAR BY MAKING CASH PAYMENTS TO M/S KAUSHAL ISPAT WHICH INFORMED THAT IN ITS BOOKS OF ACCOUNT THERE WAS NO BALANCE RECEIVABLE AS OUTSTANDING FROM THE ASSESSEE AS ON 01.04.2004. AND THEREFORE THERE WAS NO QUESTION OF RECEIVING ANY PAYMENT FROM THE APPELLA NT AND THAT THEY HAD NOT RECEIVED ANY PAYMENT DURING THE Y EAR UNDER APPEAL .THUS THE A.O. MADE THE ADDITION OF TH E CASH PAYMENTS MADE BY ASSESSEE IN HER BOOKS OF ACCOUNT B UT HAS NOT MENTIONED ANY SECTION OF THE INCOME TAX ACT 1961 ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 7 UNDER WHICH THE IMPUGNED ADDITION OF RS. 11 48 295/ - WAS MADE. AS PER THE LITTLE INVESTIGATION MADE BY THE A .O AND AS PER PARA 2.2 OF HIS ORDER THE ASSESSEE FINALLY WA S WILLING TO SURRENDER ABOVE AMOUNT SUBJECT TO NO INITIATION O F PENALTY PROCEEDINGS TO BUY PEACE AND TO AVOID LITIGATION. H OWEVER IT IS SEEN THAT THE AO INITIATED PENALTY PROCEEDING S U/S 271(1)(C) SEPARATELY WHICH REFLECTS THAT HE DID NO T ACCEPT THE SURRENDER OF RS. 11 48 295/-. IT IS ALSO FOUND THAT IN DOING SO THE A.O DID NOT AFFORD ANY OPPORTUNITY TO THE AS SESSEE. HAD HE GIVEN THE OPPORTUNITY TO THE APPELLANT IN RE JECTING THE SURRENDERED AMOUNT OF RS. 11 48 295/- THE ASSE SSEE MIGHT HAVE BEEN ABLE TO EXPLAIN AND EXAMINE THE ISS UE BY PLEADING IT THROUGH HER OWN CONTENTIONS. HOWEVER THE PRINCIPLES OF NATURAL JUSTICE BEING VITIATED AND TH E SPIRIT OF THE SURRENDER SUBJECT TO NO PENALTY TO AVOID LITIGATION AND BY PEACE HAVING BEEN DEFEATED IT CAN NO WAY BE CONCL UDED THAT THE SAID SURRENDER OF RS. 11 48 295/- WAS NOT ACTUALLY ACCEPTED BY THE A.O. HOWEVER SINCE THE SANCTITY O F THE ABOVE AGREEMENT HAS BEEN BREACHED THE ASSESSEE HAS BEEN COMPELLED TO GO IN APPEAL AGAINST THIS ADDITIO N WHICH HE TRIED TO AVOID. AS THE EFFORT TO AVOID LITIGATIO N HAS BEEN THWARTED BY THE A.O THEREFORE THE APPELLANT HAS EVERY RIGHT TO CONTEST THIS ADDITION IN APPEAL AS GENUINE GRIEVANCE AGAINST THIS ADDITION. 7. COMING TO THE MERITS OF THE ADDITION IN THE F ACE OF NO SECTION OF THE INCOME TAX ACT HAVING BEEN MENTION ED BY THE A.O. IT IS OBSERVED THAT THE DISCREPANCY OF RS . 11 48 295/- EVIDENT FROM THE BOOKS OF ASSESSEE AND THE BOOKS OF M/S KAUSHAL ISPAT CAN BE ON ACCOUNT OF MANY FACTORS WH ICH HAVE NOT BE MADE AVAILABLE BOTH BY THE ASSESSEE AN D THE PARTY M/S KAUSHAL ISPAT EXCEPT THE REPLIES BY BOTH AS MENTIONED IN THE ASSESSMENT ORDER. HAVING SAID THA T THE CASH PAYMENTS OF RS. 11 48 295/- ON VARIOUS DATES W ERE FIRST OF ALL EXPENDITURE OF THE ASSESSEE AND NOT AN INCO ME AND THIS EXPENDITURE HAS NOT BE CLAIMED AS DEDUCTION IN THE BOOKS OF ACCOUNT . THEY WERE ADMITTEDLY SQUARED UP TO ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 8 LIQUIDATE THE CREDIT BALANCE OF RS. 11 48 295/- AND THIS FACT IS RECORDED IN THE BOOKS OF ACCOUNT. THE QUESTION THEN REMAINS WHAT KIND OF ADDITION OUT OF THIS CREDIT BALANCE BE ING MET BY CASH PAYMENTS ON VARIOUS DATES CAN BE MADE AND UND ER WHAT PREVISIONS OF INCOME TAX ACT 1961.? THE LD. A.R. HAS IN HER WRITTEN SUBMISSIONS ABOVE CONTENDED THAT THE AD DITION CANNOT BE EFFECTED UNDER THE PROVISIONS OF SECTION 69 69A 69B 69C & 69D FOR UNEXPLAINED EXPENDITURE AS THES E CASH PAYMENTS WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE I TEND TO CONCUR WITH THE PLEAS OF THE LD. A.R. THAT THE SAID ADDITION OF RS.11 48 295/- CANNOT BE COV ERED UNDER THE PROVISIONS OF SECTION 69 69A 69B 69 C & 69D AS THE ASSESSEE HAS EXPLAINED THE SOURCE OF SUCH EXPEN DITURE WHICH IS FOUND FROM THE BOOKS OF ACCOUNTS MAINTAINE D BY THE ASSESSEE . 6. LD. DR WHILE IMPUGNING THE ORDER OF LD. CIT(A) T OOK US THROUGH INTERIM ORDER DATED 11.10.2007 AND 12.10.20 07 PASSED BY THE AO WHEREIN SURRENDER OF THESE AMOUNTS HAS BEEN NOTICED. SHE ALSO TOOK US THROUGH THE LETTER OF ASSESSEE DAT ED 27.9.2007 REPRODUCED ON PAGE 2 AND 3 OF THE ASSTT. ORDER. SHE CONTENDED THAT ONCE AN ITEM IS SURRENDERED BEFORE THE AO THEN ASSESSEE IS PRECLUDED TO CHALLENGE THAT ADDITION IN APPEAL. HER APPEAL IS NOT MAINTAINABLE ON THIS ISSUE. HOWEVER WITH REGARD TO THE MERIT SHE WAS UNABLE TO CONTROVERT THE FINDING OF LD. CIT(A). SHE PLACED HER ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 9 RELIANCE UPON THE ORDER OF AO. IN SUPPORT OF HER CO NTENTION SHE RELIED UPON 168 ITR 375 108 ITR 73 AND 238 ITR 130 . 7. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF LD. CIT(A). HE EMPHASISED THAT IT IS NOT THE CASE THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. IT IS NO T THE CASE THAT ASSESSEE WAS UNABLE TO EXPLAIN HER POSITION WITH RE GARD TO THE PAYMENT OF RS. 11 48 295/-. THE ASSESSEE WAS WELL A WARE ABOUT HER RIGHTS. THIS ADDITION WILL NOT BE THERE BUT IN ORDER TO AVOID LONG DRAWN LITIGATION WITH THE DEPARTMENT SHE OFFER THIS AMOUNT FOR TAXATION IF THE AO WILL NOT INITIATE PENALTY PROCEE DINGS. HER OFFER WAS CONDITIONAL. THE AO HAS BREACHED THAT CONDITION . HE INITIATED THE PENALTY PROCEEDINGS AND DRAGGED THE ASSESSEE IN THE LITIGATION. THE AO HAS NOT MADE THE ADDITION ON THE BASIS OF CONCESSION GIVEN BY THE ASSESSEE RATHER BELIED THE CONCESSION. HE PROCEED TO MAKE THE ADDITION ON THE BASIS OF HIS INVESTIGATION. IN SUCH SITUATION IT CAN NOT BE SAID THAT ASSESSEE HAS BEEN PRECLUDED TO AGITATE THIS ADDITION IN FURTHER APPEA L. HE FURTHER CONTENDED THAT SIMILAR SITUATION HAS ARISEN BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF SONIA MAGU VS. CIT RENDERED IN ITA ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 10 NO. 721/2008 AND OTHERS. IN THIS CASE A SEARCH WAS CONDUCTED ON 17.1.2002. FROM THE RESIDENCE AND LOCKER CERTAIN J EWELLERY HAVING VALUE RS. 22 96 000/- WAS RECOVERED WHOSE SOURCE WA S TO BE EXPLAINED BY THE ASSESSEE. THE ASSESSEE HAD THE EXP LANATION OF THE SOURCE OF TOTAL JEWELLERY BUT IN ORDER TO AVOID LITIGATION AND BUY PIECE OF MIND SHE OFFERED 20% OF SUCH JEWELLE RY FOR TAXATION. IN OTHER WORDS A SUM OF RS. 4 59 200/- WAS OFFERED FOR PAYMENT OF TAX WHICH IS 20% OF TOTAL JEWELLERY OF RS. 22 96 00 0/-. THIS OFFER WAS NOT ACCEPTED BY THE AO. HE MADE THE ADDITION. APART FROM THE DISPUTE RELATING TO THE MERITS OF THE ADDITION A DI SPUTE TRAVELLED UP TO THE HONBLE HIGH COURT WHETHER AN ADDITION OF RS . 4 59 200/- CAN BE RETAINED SOLELY ON THE GROUND THAT ASSESSEE HAS OFFERED THIS AMOUNT HERSELF BEFORE THE AO DESPITE THE FACT THAT SOURCE OF ENTIRE JEWELLERY HAS BEEN SATISFACTORILY EXPLAINED. THE HONBLE COURT AFTER TAKING INTO COGNIGENCE THE EXACT WORDIN G VIDE WHICH ASSESSEE HAD OFFERED 20% IN RESPECT TO SUCH EXCESS JEWELLERY HAS HELD THAT ADDITION OF RS. 4 59 200/- CANNOT BE MAD E. ACCORDING TO THE HONBLE HIGH COURT ASSESSEE HAD CONTENDED BE FORE THE AO THAT SHE HAD PROPER EXPLANATION FOR THE PURCHASE OF AFORESAID ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 11 JEWELLERY. SHE IS OFFERING THE JEWELLERY ONLY TO BU Y PIECE OF MIND. SUCH OFFER WAS CONDITIONAL. THE AO IGNORED THIS OFF ER AND PROCEED TO DEAL WITH THE MATTER ON MERITS AND FASTENED THE LIABILITY OF MUCH HIGHER AMOUNT UPON THE ASSESSEE. IN THESE CIRC UMSTANCES THE ASSESSEE WAS CONSTRAINED TO TAKE UP THE MATTER IN DETAIL AND THEREFORE SHE WAS JUSTIFIED IN CHALLENGING THE ENTI RE ADDITION BEFORE THE APPELLATE AUTHORITY. THE RELEVANT OBSERV ATION OF HONBLE COURT IN THIS REGARD ARE WORTH TO NOTE. HER STAND WAS VINDICATED IN AS MUCH AS CIT (A) ACC EPTED HER EXPLANATION IN RESPECT OF THE ENTIRE JEWELLERY VALUED AT RS. 22 96 000/-. ONCE THE ASSESSEE WAS ABLE TO DULY EXPLAIN THE SOURCE OF PURCHASE OF THE ENTIRE DISPUTED JEWEL LERY WE ARE OF THE OPINION THAT THE CIT(A) COMMITTED AN ERR OR IN FALLING BACK ON THE CONDITIONAL OFFER GIVEN BY THE ASSESSEE BEFORE THE AO ALONG WITH THE RETURN IN FORM 2B. FRO M THE LANGUAGE OF THE OFFER GIVEN IT IS CLEAR THAT IT WA S A WITHOUT PREJUDICE OFFER AND WAS NOT IN THE NATURE OF ADMIS SION ON THE BASIS OF WHICH SHE COULD BE FASTENED WITH THE L IABILITY WHICH OTHERWISE DID NOT EXCEED. PROVISION OF SECTI ON 23 OF THE INDIAN EVIDENCE ACT WOULD CLEARLY BE APPLICABLE IN SUCH A CASE. THIS SECTION READS AS UNDER :- 23. ADMISSION IN CIVIL CASES WHEN RELEVANT IN C IVIL CASES NO ADMISSION IS RELEVANT IF IT IS MADE EITHE R UPON AN EXPRESS CONDITION THAT EVIDENCE OF IT IS NOT TO BE GIVEN OR UNDER CIRCUMSTANCES FROM WHICH THE COURT CAN INFER THAT THE PARTIES AGREED TOGETHER THAT EVIDENCE OF IT SHOULD NOT BE GIVEN. 13. THAT APART IT IS TRITE LAW THAT THE PRINCIPLE OF ESTOPPELS HAS NO APPLICATION IN THE INCOME TAX ACT. EXACTLY THIS VERY ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 12 ISSUE CAME UP FOR CONSIDERATION BEFORE THE COURT IN COMMISSIONER OF INCOME TAX VS. BHARAT GENERAL REINS URANCE CO. LTD. 80 ITR 303 AND THE POSITION WAS EXPLAINED IN THE FOLLOWING MANNER. IT IS TRUE THAT THE ASSESSEE ITSELF HAD INCLUDED T HAT DIVIDEND INCOME IN ITS RETURN FOR THE YEAR IN QUEST ION BUT THERE IS NO ESTOPPEL IN THE INCOME-TAX ACT AND THE ASSESSEE HAVING ITSELF CHALLENGED THE VALIDITY OF T AXING THE DIVIDEND DURING THE YEAR OF ASSESSMENT IN QUEST ION IT MUST BE TAKEN THAT IT HAD RESILED FROM THE POSIT ION WHICH IT HAD WRONGLY TAKEN WHILE FILING THE RETURN. QUIT APART FROM IT IT IS INCUMBENT ON THE INCOME-TAX DEPARTMENT TO FIND OUT WHETHER A PARTICULAR INCOME WAS ASSESSABLE IN THE PARTICULAR YEAR OR NOT. MEREL Y BECAUSE THE ASSESSEE WRONGLY INCLUDED THE INCOME IN ITS RETURN FOR A PARTICULAR YEAR IT CANNOT CONFER JURISDICTION ON THE DEPARTMENT TO TAX THAT INCOME I N THAT YEAR EVEN THOUGH LEGALLY SUCH INCOME DID NOT PERTAIN TO THAT YEAR. WE ARE THEREFORE OF THE VIEW THAT THE INCOME FROM DIVIDEND WAS NOT ASSESSABLE DURING THE ASSESSMENT YEAR 1958-59 BUT IT WAS ASSESSABLE IN THE ASSESSMENT YEAR 1953-54. IT CANNOT THEREFORE BE TAXED IN THE ASSESSMENT YEAR 1958-59. TO THE SAME EFFECT ARE THE FOLLOWING JUDGMENTS. 91 (1973) ITR 18-PULLANGODE RUBBER PRODUCE VS. ST. OF KERALA. 66 (1976) ITR 647 & 251 (2001) ITR 873 14. MATTER CAN BE LOOKED INTO FROM ANOTHER ANGLE AS WELL. ONCE THE ASSESSEE HAS GIVEN SATISFACTORY EXPLANATIO N REGARDING THE PURCHASE/ACQUISITION OF THE DISPUTED JEWELLERY THE NECESSARY CONSEQUENCE IS THAT THERE WAS NO UNEXPLAINED ASSET IN THE HANDS OF THE ASSESSEE. IN SUCH A SITUATION IT IS NEITHER PROPER NOR LEGALLY PERMISS IBLE FOR THE REVENUE TO STILL FASTEN THE ASSESSEE WITH THE LIABI LITY OF TAX. IT WOULD BE CLEAR GROUND OF ILLEGAL EXTRACTION OF TAX FROM THE ASSESSEE. WE ARE THEREFORE ANSWER THE AFORESAID Q UESTION IN ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 13 FAVOUR OF THE ASSESSEE AND ALLOW THESE APPEALS. CONSEQUENTLY THE ORDER OF THE INCOME TAX TRIBUNAL AND THE CIT (A) TO THE EXTENT IT MAINTAINS THE ADDITION OF RS. 4 59 200/- IS SET ASIDE AND THAT AMOUNT IS ALSO DELETED FROM T HE RETURN FILED BY THE ASSESSEE. 8. ON THE STRENGTH OF THIS ORDER LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT APPEAL OF THE ASSESSEE WAS DULY MAI NTAINABLE BEFORE THE APPELLATE AUTHORITY AND LD. CIT(A) HAS R IGHTLY DELETED THE ADDITION. 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. AS FAR AS THE FIRST O BJECTION RAISED BY THE LD. DR THAT APPEAL OF THE ASSESSEE WAS NOT MAI NTAINABLE BEFORE THE LD. CIT(A) BECAUSE SHE HERSELF HAS OFFER ED THE AMOUNT FOR TAXATION. WE HAVE GONE THROUGH THE LETTER OF AS SESSEE DATED 27.9.2007 REPRODUCED BY THE AO ON PAGES 2 AND 3 OF THE ASSTT. ORDER. WE FIND THAT ASSESSEE HAS SPECIFICALLY OFFER ED THIS AMOUNT FOR TAXATION ONLY ON THE CONDITION THAT NO PENALTY PROCEEDING WOULD BE INITIATED AGAINST HER. THE AO DID NOT RELY UPON THIS OFFER AND PROCEED TO MAKE THE ADDITION AS WELL AS INITIAT E THE PENALTY PROCEEDINGS. THE LD. COUNSEL FOR THE ASSESSEE AT TH E TIME OF HEARING DREW OUR ATTENTION TOWARDS THE JUDGMENT OF HONBLE ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 14 JURISDICTIONAL HIGH COURT RENDERED IN ITA NO. 721/2 008 AND OTHER APPEALS WHICH WE HAVE TAKEN NOTE WHILE TAKING COGNI GANCE OF HIS ARGUMENTS . IN VIEW OF THE JUDGMENT OF HONBLE DELHI HIGH COURT WHEREAS AO FAILED TO HONOUR THE CONCESSION GI VEN BY THE ASSESSEE AND PROCEED TO MAKE THE ADDITION ON MERIT AND ALSO INITIATE THE PENALTY PROCEEDING THEN ASSESSEE HAS E VERY RIGHT TO CHALLENGE THE ORDER OF THE AO. THEREFORE WE DO NOT SEE ANY MERIT IN THE FIRST FOLD OF CONTENTION RAISED BY LD. DR. A S FAR AS THE ADDITIONS ON MERIT ARE CONCERNED THE ONLY EVIDENCE POSSESSED BY THE AO IS THE INFORMATION GIVEN BY M/S. KAUSHAL ISP AT. ACCORDING TO M/S. KAUSHAL ISPAT THERE WAS NO AMOUNT RECEIVABL E FROM THE ASSESSEE IN THE ACCOUNTING YEAR RELEVANT TO THIS AS STT. YEAR. M/S. KAUSHAL ISPAT HAS SHOWN THE AMOUNT RECEIVABLE FROM ASSESSEE AS ON 1 ST APRIL 2004 AS NIL. THE ASSESSEE HAS NOT CLAIMED T HE DEDUCTION OF THIS AMOUNT IN THIS YEAR. SHE HAS ONLY SQUARED UP THE ACCOUNT. THEREFORE IT IS NEITHER THE CESSATION OF LIABILITY IN THIS YEAR NOR THESE WERE CLAIMED AS EXPENSES WHICH CAN BE DIS ALLOWED AS BOGUS CLAIM OF EXPENSES. THE ASSESSEE HAS SQUARED U P THE ACCOUNT. THEREFORE IT CANNOT BE AN UNEXPLAINED CRED IT BALANCE IN ITA NO. 3011/DEL/2009 ASSTT. YEAR 2005-06 15 THE ACCOUNTS OF ASSESSEE. LD. FIRST APPELLATE AUTHO RITY HAS CONSIDERED THIS CONTROVERSY FROM ALL POSSIBLE ANGLE S IN THE FINDING EXTRACTED SUPRA. THE LD. CIT(A) FURTHER CONSIDERED APPLICABILITY OF SECTION 41(1) IN PARAGRAPH 9 AND HELD THAT IT IS N OT PROVED BY THE AO THAT IT WAS A TRADING LIABILITY. ITS DEDUCTION W AS ALLOWED IN ANY YEAR OR IT HAS BEEN CEASED IN THIS ACCOUNTING YEAR. TAKING INTO CONSIDERATION ALL THESE ASPECTS WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.5.2010 [K.D. RANJAN] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER VEENA DATED: 21.5.2010 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT