Shyam Lal Athwal, Kaithal v. ITO, Kaithal

ITA 342/CHANDI/2011 | 2007-2008
Pronouncement Date: 27-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 34221514 RSA 2011
Assessee PAN AHEPA5474F
Bench Chandigarh
Appeal Number ITA 342/CHANDI/2011
Duration Of Justice 3 month(s) 23 day(s)
Appellant Shyam Lal Athwal, Kaithal
Respondent ITO, Kaithal
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 27-07-2011
Date Of Final Hearing 15-06-2011
Next Hearing Date 15-06-2011
Assessment Year 2007-2008
Appeal Filed On 04-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 342/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI SHYAM LAL ATHWAL VS. THE ITO KAITHAL WARD-4 KAITHAL PAN NO. AHEPA 5474 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PERMIL GOEL RESPONDENT BY: SMT. SARITA KUMARI ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) KARNAL DATED 16.2.2011 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 144/147 OF THE I.T. ACT 1961. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- NOTICE U/S 148 IS NOT A LEGAL AND VALID NOTICE AS NOTICE U/S 148 IS ISSUED WHEN TIME AVAILABLE FOR IS SUING NOTICE U/S 143(2) HAS NOT EXPIRED. ALTERNATIVELY 1) ASSESSING OFFICER ERRED IN LAW AND FACTS IN MAKING ADDITION REDUCED BY CIT(A) OF RS. 2 40.220/- ON ACCOUNT OF PURCHASE OF CAR IGNORING CAR LOAN & CIT(A) FURTHER ERRED IN CALCULATING CAR LOAN INSTALLMENTS ACTUALLY PAID DURING YEAR OUT OF CURR ENT INCOME @ 6342 X 12. 2 2) ASSESSING OFFICER ERRED IN LAW & FACTS IN MAKIN G ADDITION OF RS. 2 LAKH ON ACCOUNT OF DEPOSIT OF FEE S AS INCOME FROM UNDISCLOSED SOURCES. 3) ASSESSING OFFICER ERRED IN LAW AND FACTS IN MAKING ADDITION OF RS. 2 LAKH ON ACCOUNT OF PRESUME D INVESTMENT IN STOCK / FURNITURE / FIXTURE / ADVANCE RENT OF SHOP WAS EVER MADE BY THE APPELLANT. 4) ASSESSING OFFICER ERRED IN LAW AND FACTS IN MAKING ADDITION OF RS. 175000/- ON ACCOUNT OF ESTIMATING PROFIT @ 5% U/S 44AF ON PRESUMED SALES O F RS. 35 LAKHS PARTICULARLY WHEN NO PAYMENT WAS EVER MADE FOR LIQUOR PURCHASE BY APPELLANT & SOMEONE ELS E PURCHASED / SOLD LIQUOR. 3. THE FIRST ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE RE- ASSESSMENT PROCEEDINGS INITIATED U/S 147 / 148 OF T HE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FILED BY THE ASSESSEE DECLARING INCOME OF RS. 92 000/- WAS PROCE SSED U/S 143(1) OF THE ACT ON 24.3.2008. THE ASSESSING OFFICER RECEIVED T HE INFORMATION FROM CIB WING OF THE DEPARTMENT THAT THE ASSESSEE HAD PU RCHASED A CAR FOR RS. 2 88 696/- ON 28.4.2006 AND WAS ALSO ALLOTTED A VEN D BY DETC (EXCISE) KAITHAL AT PAI. THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF INVESTMENT THROUGH LETTER DATED 11.6.2008 BUT NO RE PLY WAS FILED TO THE SAME AND EVEN TO A REMINDER LETTER. THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT TO BRING TO TAX THE INCOME FROM WINE BUSINESS AND THE INVESTMENT IN CAR . NOTICE U/S 148 OF THE ACT WAS ISSUED ON 10.10.2008 AND WAS SERVED UPO N THE ASSESSEE. THE ASSESSEE FAILED TO FILE ANY RETURN OF INCOME IN RES PONSE TO THE SAID NOTICE ISSUED U/S 148 OF THE ACT. THE ASSESSING OFFICER I SSUED A NOTICE U/S 142(1) OF THE ACT ALONG WITH LETTER ON 30.3.2009 AS KING THE ASSESSEE TO FILE RETURN OF INCOME AND ALSO TO PRODUCE THE BOOKS OF ACCOUNT AS WELL AS BANK PASS BOOKS. THE ASSESSING OFFICER FURTHER ISS UED SEVERAL NOTICES U/S 3 142(1) OF THE ACT ON VARIOUS DATES. ALL THE ABOVE SAID NOTICES REMAINED UN-COMPLIED WITH; NEITHER THE RETURN OF INCOME WAS FILED NOR ANY DOCUMENT WAS PRODUCED. THE ASSESSING OFFICER LEVIE D PENALTY FOR NON COMPLIANCE OF NOTICES U/S 142(1) OF THE ACT. ANOTH ER NOTICE WAS ISSUED ON 10.7.2009 FOR COMPLIANCE ON 22.7.2009 ON WHICH DATE THE ASSESSEE APPEARED BUT NEITHER FILED THE RETURN OF INCOME NOR PRODUCED ANY DOCUMENTS. AT HIS REQUEST THE CASE WAS ADJOURNED TO 7.8.2009 ON WHICH DATE NONE ATTENDED THE OFFICE OF THE ASSESSING OFFI CER NOR ANY APPLICATION WAS MOVED FOR ADJUDICATION. THE ASSESSING OFFICER ACCORDINGLY COMPLETED THE ASSESSMENT U/S 144 OF THE INCOME TAX ACT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD AND GATHERED DURIN G THE ASSESSMENT PROCEEDINGS. 5. THE ASSESSING OFFICER NOTED THE ASSESSEE TO HAVE CLAIMED DEDUCTION UNDER CHAPTER VI-A AT RS. 28 000/- FOR WHICH THE NE CESSARY EVIDENCE WAS NOT FILED AND HENCE THE SAME WAS DISALLOWED. THE A SSESSEE HAD FAILED TO FURNISH THE EVIDENCE OF SOURCE OF INVESTMENT FOR PU RCHASE OF CAR FOR RS. 2 88 696/- AND EXPENDITURE ON INSURANCE AND REGISTR ATION OF CAR. THE ASSESSING OFFICER ESTIMATED THE SAID EXPENDITURE AT RS. 15 000/- AND AN ADDITION OF RS. 3 03 696/- WAS MADE AS DEEMED INCOM E OF THE ASSESSEE. THE ASSESSEE HAD NOT DECLARED ANY INCOME FROM WINE BUSINESS BUT AS PER THE INFORMATION RECEIVED FROM EXCISE DEPARTMENT TH E VEND AT VILLAGE PAI WAS ALLOTTED TO THE ASSESSEE DURING THE FINANCIAL Y EAR 2006-07. THE ASSESSEE HAD DEPOSITED LICENSE FEE OF RS. 10 LACS V IDE MONTHLY INSTALLMENTS AS DETAILED AT PART OF PAGES 2 & 3 OF THE ASSESSMENT ORDER. THE ASSESSEE IN HIS VERBAL REPLY DATED 22.7.2009 H AD STATED THAT THE SAID VEND WAS SOLD TO SOME OTHER PERSONS WHO HAD RUN THE SAID BUSINESS AND 4 LICENSE FEE WAS ALSO DEPOSITED BY THE SAID PERSONS. THE CONTENTION OF THE ASSESSEE WAS REJECTED AS HE COULD NOT FILE ANY EVID ENCE OF THE SALE OF THE VEND. THE ASSESSING OFFICER HELD THAT OUT OF THE F IRST TWO INSTALLMENTS OF RS. 3 LACS OF LICENSE FEE RS. 2 LACS WAS DEPOSITED OUT OF UNDISCLOSED SOURCES AND AS THE ASSESSEE HAD RUN THE BUSINESS T HE ASSESSING OFFICER HELD THAT THE BALANCE WAS FUNDED OUT OF THE SALE PR OCEEDS OF WINE. THE ASSESSING OFFICER ESTIMATED THE INITIAL INVESTMENT IN THE STOCK FURNITURE AND FIXTURE AND ADVANCE RENT FOR SHOP AT RS. 2 LACS WHICH WAS ALSO INCLUDED AS INCOME OF THE ASSESSEE. FURTHER ADDI TION WAS MADE ON ACCOUNT OF INCOME FROM WINE BUSINESS BY ESTIMATING THE SALE FOR THE FINANCIAL YEAR AT RS. 35 LACS AND IN THE ABSENCE OF THE BOOKS OF ACCOUNT BEING PRODUCED PROVISIONS OF SECTION 44AF OF THE A CT WERE APPLIED FOR ESTIMATING THE NET PROFIT @ 5%. THE ADDITION OF RS . 1 75 000/- WAS MADE ON ACCOUNT OF INCOME FROM WINE BUSINESS. 6. IN APPEAL THE CONTENTION OF THE LD. AR FOR THE ASSESSEE WAS THAT ISSUE OF NOTICE US/ 148 OF THE ACT WAS INVALID SINC E THE TIME WAS AVAILABLE TO ISSUE NOTICE U/S 143(2) OF THE ACT. RELIANCE WA S PLACED ON THE RATIO LAID DOWN BY THE HON'BLE MADRAS HIGH COURT IN THE C ASE OF ZORA SINGH V ITO [308 ITR 249(MAD.)]. THE ASSESSING OFFICER IN REPLY PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH C OURT IN MITTAL PORT PREMISES COOPERATIVE SOCIETY LTD V ITO [(2004) 140 TAXMAN 145 (MUMBAI)] WHEREIN IT IS HELD THAT MERELY BECAUSE TI ME WAS AVAILABLE TO TAKE THE CASE IN SCRUTINY BY ISSUING NOTICE U/S 143 (2) OF THE ACT IT IS NOT CORRECT THAT NOTICES CAN NOT BE ISSUED U/S 147 / 14 8 OF THE ACT. IN REJOINDER THE ASSESSEE CLAIMED THAT ISSUE STANDS C OVERED BY THE THIRD MEMBER DECISION OF TRIBUNAL IN SUPER SPINNING MILLS V ACIT [(2010) 38 5 SOT 14 ( TM)]. THE CIT(A) PLACING RELIANCE ON THE R ATIO LAID DOWN BY THE HON'BLE ANDHRA PRADESH HIGH COURT IN A.PUSA LAL V C IT [169 ITR 215 (AP) AND DEEPAK KUMAR PODAR AND OTHERS V UOI AND OT HERS [224 ITR 95 (PATNA)] UPHELD THE ISSUE OF NOTICE U/S 148 OF THE ACT. IN THE ABSENCE OF ANY EVIDENCE FILED BY THE ASSESSEE DISALLOWANCE OF DEDUCTION CLAIMED AT RS. 28 000/- WAS UPHELD BY THE CIT(A). THE ASSESS EE FILED AN APPLICATION UNDER RULE 46A OF I.T. RULES DURING THE APPELLATE P ROCEEDINGS BEFORE THE CIT(A) WHICH IS REPRODUCED AT PARA 2 OF PAGE 6 OF T HE APPELLATE ORDER. UNDER THE SAID APPLICATION THE ASSESSEE SOUGHT ADM ISSION OF THE COPY OF THE LOAN ACCOUNT RAISED DURING THE YEAR FROM BANK T OTALING RS. 2 30 000/- THE ASSESSING OFFICER IN THE REMAND REPORT SUBMITTE D THAT THE COPY OF THE LOAN ACCOUNT FILED BY THE ASSESSEE WAS NOT AUTHENTI CATED BY THE COMPANY AND ALSO OBJECTION WERE RAISED TO THE ADMISSION OF ADDITIONAL EVIDENCE ON THE GROUND THAT SUFFICIENT OPPORTUNITY WERE AFFORDE D TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS WHICH WERE NOT A VAILED OFF HENCE THE EX. PARTE ASSESSMENT. IN REJOINDER THE ASSESSEE FU RNISHED THE STAMPED CAR LOAN LETTER. THE CIT(A) NOTED THAT THE ASSESSEE HA D FAILED TO FILE THE PURCHASE BILL OF CAR NOR SPECIFIED THE AMOUNT OF IN SURANCE AND REGISTRATION. AS THE TOTAL INCOME SHOWN BY THE ASS ESSEE WAS ONLY RS. 92 000/- AFTER ALLOWING THE CREDIT OF AMOUNT OF FI NANCE I.E. RS. 2 30 000/- BALANCE INVESTMENT OF RS. 73 697/- WAS ALSO HELD TO BE UNEXPLAINED. FURTHER THE ASSESSING OFFICER HELD THAT THE AMOUN T OF INSTALLMENT PAID DURING THE YEAR TOTALING RS. 1 40 524/- REMAINED UN EXPLAINED AND ACCORDINGLY AN ADDITION OF RS. 2 40 220/- WAS CONFI RMED BY THE CIT(A). THE SECOND ADDITION ON ACCOUNT OF INCOME FROM BUSIN ESS WAS UPHELD BY CIT(A) ON TWO COUNTS I.E. ON ACCOUNT OF INITIAL PAY MENT OF INSTALLMENTS OF THE VEND ALLOTTED INITIAL INVESTMENT IN THE INFRAS TRUCTURE AND THE 6 ESTIMATION OF SALE AND INCOME U/S 44AF OF THE ACT. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID GROUNDS. 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT AS PERIOD FOR ISSUE OF NOTICE U/S 143(2) OF THE INCOME TAX ACT HAD NOT EXP IRED; THE NOTICE ISSUED U/S 147 OF THE ACT BEFORE THE EXPIRY OF THE AFORESA ID PERIOD WAS INVALID IN VIEW OF THE RATIO LAID DOWN BY THE THIRD MEMBER OF THE TRIBUNAL IN SUPER SPINNING MILLS VS. ACIT ((SUPRA)). FURTHER IT WAS POINTED OUT BY THE LD. AR THAT EVEN BEFORE THE HON'BLE SUPREME COURT IN CI T V RAJESH JHAVERI STOCK BROKERS (P) LTD [291 ITR 500 (SC)] NO SUCH ISSUE AROSE. THE LD. DR FOR THE REVENUE PLACING RELIANCE ON THE RATIO LA ID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V SMT. SHUKANTAL A DEVI [227 CTR 618 (P&H)] HELD THAT THE NOTICE ISSUED U/S 147 OF T HE ACT WAS VALID. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE FACTS OF THE PRESENT CASE BEFORE US THE ASSESSEE H AD FURNISHED THE RETURN OF INCOME ON 30.11.2007. THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER ON THE RECEIPT OF C ERTAIN INFORMATION FROM CIB WING OF THE DEPARTMENT THE ASSESSING OFFICER R ECORDED THE REASONS FOR REOPENING THE ASSESSMENT AND NOTICE U/S 148 OF THE ACT WAS ISSUED ON 10.10.2008. THE SAID NOTICE WAS ISSUED WITHIN ONE YEAR FROM THE DATE OF FILING OF THE RETURN OF INCOME. THE CASE OF THE ASS ESSEE IS THAT IN THE RELEVANT YEAR THE NOTICE U/S 143(2) FOR INITIATING THE ASSESSMENT PROCEEDINGS CAN BE ISSUED WITHIN ONE YEAR FROM TH E DATE OF FILING OF THE RETURN OF INCOME. THE SAID PERIOD HAVING NOT BEEN E XPIRED THE ISSUE OF NOTICE U/S 147/148 OF THE ACT WAS INVALID. 7 9. WE FIND THAT THE ISSUE IN THE PRESENT CASE STAND S COVERED BY THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V SMT. SHAKUNTALA DEVI (SUPRA) WHEREIN THE PROCEEDINGS U/ S 147 OF THE ACT WERE INITIATED AND NOTICE U/S 148 OF THE ACT WAS ISSUED WITHIN ONE YEAR FORM THE DATE OF FILING OF THE RETURN OF INCOME. THE HON 'BLE COURT HELD THAT IN VIEW OF THE AMENDMENTS BY WAY OF EXPLANATION 2(B) T O SECTION 147 OF THE ACT EVEN IF IT IS ASSUMED THAT THE PROCEEDINGS COU LD NOT BE INITIATED U/S 147 IN RESPECT OF THE PENDING ASSESSMENT THERE IS NO BAR IN THE PRESENT CASE TO PROCEED U/S 143(2) OF THE ACT AND HENCE THE PROCEEDINGS WERE HELD TO BE VALID. THE ASSESSMENT WAS THUS HELD TO BE CO RRECT. THE LD. AR FOR THE ASSESSEE HAS PLACED RELIANCE ON THE THIRD MEMBE R DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN SUPER SPINNING MILLS LTD V ACIT (SUPRA) WHEREIN CONTRARY VIEW WAS TAKEN THAN THE ONE TAKEN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V SMT. SHAKUNTALA DEVI (SUPRA). FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISD ICTIONAL HIGH COURT IN CIT V SMT. SHAKULTALA DEVI (SUPRA) WE HOLD THAT TH E RE-ASSESSMENT PROCEEDINGS INITIATED U/S 147 AND THE NOTICE ISSUED U/S 148 OF THE ACT HAVE BEEN VALIDLY INSTITUTED. ACCORDINGLY THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS DISMISSED. 10. NOW COMING TO THE MERITS OF THE ADDITION BEFORE US THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE INITIAL INVESTMEN T IN THE PURCHASE OF A CAR TOTALING RS. 73 697/- WAS OUT OF THE SAVINGS OF THE ASSESSEE AND HENCE NO ADDITION IS WARRANTED IN THIS REGARD. FURTHER W ITH REGARD TO THE ADDITION ON ACCOUNT OF CAR INSTALLMENTS PAID TOTALING RS. 1 40 524/- THE LD. AR STRESSED THAT THE SAID FIGURES WAS WRONG. THE ASSES SEE HAD PAID INSTALLMENTS OF RS. 6 342/- FOR A PERIOD OF 12 MONT HS TOTALING RS. 73 104/- 8 IN RESPECT OF THE ESTIMATION OF PROFITS THE LD. AR POINTED OUT THAT AFTER SUCH ESTIMATION OF INCOME FROM BUSINESS NO OTHER ADDITION WAS WARRANTED ON ACCOUNT OF THE INVESTMENT IN THE BUSIN ESS AND DEPOSITS OF LICENSE FEE. THE LD. AR FOR THE ASSESSEE FAIRLY CO NCEDED THAT NO REQUEST WAS MADE FOR SUPPLY OF REASONS RECORDED FOR REOPENI NG THE ASSESSMENT BEFORE THE ASSESSING OFFICER. THE SAID REASONS WERE HANDED OVER TO THE ASSESSEE DURING THE APPELLATE PROCEEDINGS ON WHICH THE ASSESSEE HAS RAISED THE OBJECTIONS WHICH IN TURN WERE FURNISHED TO THE ASSESSING OFFICER. THUS NO ISSUE ARISES AS TO NON SUPPLY OF REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT. THE LD.DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT H AD MADE ADDITION ON ACCOUNT OF TWO SCORES I.E. I) ON ACCOUNT OF INVEST MENT FOR PURCHASE OF CAR AND; II) ON ACCOUNT OF INVESTMENT AND INCOME FROM WINE BUSINESS. THE ASSESSING OFFICER HAD RECEIVED INFORMATION FROM THE CIB WING ON THE ABOVE SAID ACCOUNTS AND DESPITE SEVERAL OPPORTUNITI ES BEING AFFORDED TO THE ASSESSEE NO INFORMATION REGARDING THE SOURCE O F INVESTMENT WAS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER. THE ASSESSING OFFICER ACCORDINGLY TREATED THE INVESTMENT IN PURCH ASE OF CAR AT RS. 2 88 696/- PLUS EXPENDITURE ON INSURANCE AND REGIST RATION OF CAR ESTIMATED AT RS. 15 000/- AS INCOME OF THE ASSESSEE. FURTHER AS PER THE INFORMATION COLLECTED FROM THE EXCISE AUTHORITIES THE ASSESSEE HAD PAID LICENSE FEE OF RS. 10 LACS IN MONTHLY INSTALLMENTS FOR THE VEND AL LOTTED DURING THE FINANCIAL YEAR 2006-07. THE ASSESSEE HAD PAID RS. 1 LAC ON 5.4.2006 AND 9 RS. 2 LACS ON 15.5.2006. THE ASSESSING OFFICER EST IMATED THE SOURCE OF INVESTMENT I.E. PAYMENT OF LICENSE FEE OF RS. 2 LAC S OUT OF UNDISCLOSED SOURCES. FURTHER ADDITION WAS MADE ON ACCOUNT OF INVESTMENT IN STOCK FURNITURE ADVANCE RENT FOR SHOP ETC AT RS. 2 LACS. THE ASSESSING OFFICER ALSO ESTIMATED THE SALES AT 3 TO 3.5% OF THE LICENS E FEE PAID. AN ESTIMATION OF SALES AT RS. 35 LACS RELATABLE TO THE FINANCIAL YEAR WAS MADE BY THE ASSESSING OFFICER ON WHICH APPLYING A GP RAT E OF 5% INCOME FROM BUSINESS WAS WORKED OUT AT RS. 1 75 000/- UNDER THE PROVISIONS OF SECTION 44AF OF THE ACT. BEFORE THE CIT(A) THE ASSESSEE M OVED AN APPLICABLE UNDER RULE 46A FOR THE ADMISSION OF THE ADDITIONAL EVIDENCE WHICH IS COPY OF CAR LOAN OF RS. 2 30 000/- TAKEN FROM THE BANK DURING THE YEAR. THE CIT(A) CONSIDERED SUCH ADDITIONAL EVIDENCE AND OBSERVED THAT ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE WITH RE GARD TO THE SOURCE OF INITIAL INVESTMENT OF RS. 73 697/- I.E. EXCLUDING T HE CAR LOAN AMOUNT RAISED BY THE ASSESSEE. FURTHER ADDITION WAS MADE O F INSTALLMENTS PAID DURING THE YEAR TOTALING RS. 1 40 528/- AS THE ASSE SSEE HAD FAILED TO EXPLAIN THE SOURCES OF THE SAME AN ADDITION OF RS. 1 40 524/- WAS MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT. THUS ADDITI ON OF RS. 2 40 220/- WAS CONFIRMED BY CIT(A). IN RESPECT OF THE ESTIMAT ION OF SOURCE OF INVESTMENT AND INCOME FROM THE WINE BUSINESS THE C ONTENTION OF THE ASSESSEE WAS THAT HE HAD SOLD THE SAID VEND TO OTHE R PERSON AND THE LICENSE FEE WAS ALSO DEPOSITED BY THAT PERSON. HOWEVER N O DETAILS OF THE SAID PERSON OR ANY EVIDENCE OF SALE OF VEND WAS FURNISHE D BEFORE THE ASSESSING OFFICER. IN ITS WRITTEN SUBMISSIONS BEFORE THE CIT (A) THE CLAIM OF THE ASSESSEE WAS THAT WHERE INCOME IS ESTIMATED U/S 44A D / AF OF THE ACT NO ADDITION IS WARRANTED ON ACCOUNT OF DEPOSIT OF FEE AS INCOME FROM UNDISCLOSED SOURCES OR INVESTMENT IN THE STOCK FUR NITURE ETC. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE P UNJAB & HARYANA HIGH 10 COURT IN CIT VS. SURINDER PAL ANAND IN ITA NO. 156 OF 2010 AND ALSO CIT VS. AGGARWAL ENGINEERING COMPANY [206 CTR 648(P&H)] . THE CIT(A) UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER O N ACCOUNT OF INITIAL PAYMENT OF INSTALLMENT OF VEND ALLOTTED INITIAL IN VESTMENT IN THE INFRASTRUCTURE IN PURCHASE OF FURNITURE AND ALSO EX PENDITURE INCURRED IN STARTING THE BUSINESS AND THEREAFTER ESTIMATING THE BUSINESS AN INCOME U/S 44AF OF THE INCOME TAX ACT. 12. IN THE FACTS OF THE CASE BEFORE US THE ASSESS EE HAD DECALED TOTAL INCOME FOR THE YEAR AT RS. 1 20 000/- . THE RETURN OF INCOME WAS FILED DECLARING AN INCOME OF RS. 92 000/- AS AGAINST THE SAID TOTAL INCOME EARNED BY THE ASSESSEE. THE INFORMATION RECEIVED W AS IN RESPECT OF THE INVESTMENT IN CAR OF RS. 2 88 676/- AND ALSO THE IN VESTMENT IN THE WINE BUSINESS. IN VIEW OF THE INCOME DECLARED BY THE AS SESSEE AND KEEPING IN MIND THE HOUSE HOLD EXPENDITURE TO BE INCURRED BY T HE ASSESSEE WE ARE OF THE VIEW THAT ASSESSEE HAS FAILED TO EXPLAIN THE SO URCE OF INVESTMENT IN CAR AND THE WINE BUSINESS. EVEN IF CREDIT FOR THE CAR LOAN TAKEN FROM THE BANK AT RS. 2 30 000/- IS ALLOWED TO THE ASSESSEE THERE IS FAILURE ON THE PART OF THE ASSESSEE TO BRING ON RECORD THE SOURCE OF INITI AL INVESTMENT OF RS. 73 697/-. FURTHER THE ASSESSEE HAS ALSO PAID ON M ONTHLY BASIS THE INSTALLMENTS DUE AGAINST THE CAR LOAN ACCOUNT. THE ASSESSEE IS PAYING MONTHLY INSTALLMENTS OF RS. 6 342/- STARTING FROM A PRIL 2006 WITH AN INITIAL ACCOUNT PAYMENT OF RS. 1000/- THAT AS SUCH THE ASSESSEE HAS PAID A SUM OF RS. 77 104/-. THE ASSESSEE HAS FAILED TO BRING ON RECORD ANY EVIDENCE OF SOURCE OF SUCH PAYMENTS. ACCORDINGLY THE ADDITION ON THIS ACCOUNT IS RESTRICTED TO RS. 73 697 + RS. 77 104/- = 1 50 801/-. THE 11 GROUND NO.1 RAISED BY THE ASSESSEE AGAINST THE MERI TS OF THE ADDITION IS THUS PARTLY ALLOWED. 13. THE GROUND NOS. 2 3 & 4 RAISED BY THE ASSESSEE ARE AGAINST ADDITIONS MADE ON ACCOUNT OF BUSINESS STARTED BY TH E ASSESSEE. THE ONUS WAS UPON THE ASSESSEE TO ESTABLISH THAT THE INVESTM ENT / EXPENDITURE INCURRED IN ITS NAME WAS OUT OF PROVEN SOURCES OF I NCOME / FUNDS AVAILABLE. IN THE ABSENCE OF THE ONUS BEING DISCHA RGED WE UPHOLD THE ESTIMATION OF SALES AT RS. 35 LACS AND INCOME OF RS . 1 75 000/-. FURTHER THE SAID INVESTMENT / EXPENDITURE IS TREATED AS DEE MED INCOME OF THE ASSESSEE. WE ARE IN CONFORMITY WITH THE ORDERS OF THE AUTHORITIES BELOW THAT THE SOURCE OF INVESTMENT IN MAKING THE INITIAL INVESTMENT IN STARTING THE WINE BUSINESS HAS NOT BEEN PROVED BY THE ASSESS EE AND ADDITION ON THIS ACCOUNT IS WARRANTED IN THE HANDS OF THE ASSESSEE. THE FIRST ADDITION IS ON ACCOUNT OF LICENSE FEE PAID TO THE EXCISE AUTHROTIE S AGAINST THE ALLOTMENT OF VEND. THE ASSESSEE HAS PAID A SUM OF RS. 3 LACS IN THE MONTHS OF APRIL AND MAY 2006 OUT OF WHICH CREDIT FOR RS. 1 LAC WAS ALLOWED BY THE AUTHORITIES BELOW OUT OF THE SALE PROCEEDS GENERATE D FORM THE BUSINESS AND IN THE ABSENCE OF ANY SOURCE FOR THE INITIAL INVEST MENT OF RS. 2 LACS THE ADDITION WAS MADE TO THAT EXTENT. WE UPHOLD THE OR DER OF THE CIT(A) IN THIS REGARD. HOWEVER IN RESPECT OF ADDITION OF RS . 2 LACS MADE ON ACCOUNT OF ESTIMATED SOURCE OF INVESTMENT IN FURNIT URE STOCK ETC WE ARE OF THE VIEW THAT THE SAID ADDITION IS ON THE HIGHER SIDE AND THE SAME IS REDUCED TO RS. 1 LAC. THE ASSESSING OFFICER HAD ES TIMATED THE INCOME FROM BUSINESS AT RS. 1 75 000/- BY ESTIMATING THE S ALE PROCEEDS AT RS. 35 LACS. KEEPING IN VIEW THE LICENSE FEE OF RS. 10 L ACS PAID BY THE ASSESSEE WE FIND NO MERIT IN THE STAND OF THE ASSESSEE THAT WHEN PRESUMPTIVE 12 TAXATION PROVISIONS ARE APPLIED U/S 44AF OF THE ACT NO FURTHER ADDITION IS WARRANTED. THE ADDITION IS MADE ON ACCOUNT OF INIT IAL INVESTMENT IN BUSINESS SOURCES OF WHICH HAVE NOT BEEN ESTABLISHE D BY THE ASSESSEE. IN THE FACTS OF THE CASE BEFORE HON'BLE PUNJAB & HARY ANA HIGH COURT IN CIT V SURINDER PAL ANAND (SUPRA) THE ADDITIONS WERE MA DE ON ACCOUNT OF DEPOSITS IN THE BANK ACCOUNT AFTER ESTIMATING THE I NCOME BY APPLYING THE GP RATE ON THE GROSS RECEIPTS. HOWEVER IN THE CAS E OF ASSESSEE BEFORE US THE ADDITIONS ARE MADE ON ACCOUNT OF THE INITIAL IN VESTMENT MADE AT THE START OF THE BUSINESS I.E. BEFORE THE BUSINESS HAS STARTED AND THE ASSESSEE HAS STARTED EARNING INCOME. IN THE ABSENCE OF ANY EXPLANATION / EVIDENCE BEING FURNISHED BY THE ASSESSEE TO PROVE ITS CASE THERE IS NO MERIT IN THE STAND OF THE ASSESSEE AND THE SAME IS DISMISSED. W E UPHOLD THE ORDER OF CIT(A) IN ESTIMATING THE SAID INCOME U/S 44AF OF TH E ACT BY APPLYING THE NET PROFIT RATE OF 5% ON THE TOTAL SALES OF RS. 35 LACS AND ALSO ADDITION OF RS. 2 LACS ON ACCOUNT OF LICENSE FEE AND RS. 1 LAC ON ACCOUNT OF INVESTMENT IN STOCK FURNITURE ETC. ACCORDINGLY T HE GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE ARE DISMISSED AND GROUND NO. 4 IS PARTLY ALLOWED. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : JULY 2011 RKK 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH