THE ITO 25(2)(4), MUMBAI v. SHRI RANJEETSINGH M. GOHIL, MUMBAI

ITA 5227/MUM/2007 | 2004-2005
Pronouncement Date: 14-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 522719914 RSA 2007
Assessee PAN AALPG1412B
Bench Mumbai
Appeal Number ITA 5227/MUM/2007
Duration Of Justice 2 year(s) 9 month(s) 12 day(s)
Appellant THE ITO 25(2)(4), MUMBAI
Respondent SHRI RANJEETSINGH M. GOHIL, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 14-05-2010
Date Of Final Hearing 02-03-2010
Next Hearing Date 02-03-2010
Assessment Year 2004-2005
Appeal Filed On 02-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D BEFORE SHRI N.V. VASUDEVAN (JM) & B. RAMAKOTAIAH (A M) I.T.A.NO. 5227/MUM/07 (ASSESSMENT YEAR : 2004-05) ITO 25(2)(4) C-11 ROOM NO. 101 P.K. BHAVAN BANDRA KURLA COMPLEX BANDRA EAST MUMBAI-400 051. VS. SHRI RANJEETSINGH M. GOHIL SHREENATH KRIPA SHOP NO. 4 CARTER ROAD NO. 5 BORIVALI EAST MUMBAI-400 066. APPELLANT RESPONDENT PAN/GIR NO. : AALPG1412B ASSESSEE BY : SHRI VIPUL B. JOSHI & SHRI SAMEER G. DALAL DEPARTMENT BY : SHRI T.T. JACOB ORDER PER N.V. VASUDEVAN JM :- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 18.5.2007 OF LEARNED CIT(A)-XXV MUMBAI RELATING TO A.Y. 2004-05. 2. GROUND NO. 1 RAISED BY THE REVENUE READS AS FOLL OWS :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) ERRED IN CHANGING THE HEAD OF INCOME OF RS. 7 09 123/- TO LONG TERM CAPITAL GAIN AS AGAINST INCOME FROM OTHER SOURCES AS TREATED BY THE ASSESSING OFFICER. 3. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF PASSENGER BUS TRANSPORT. HE IS ALSO A PARTNER IN A REGISTERED FIRM. THE ASSESSEE FILED RETURN OF INCOME ON 1.11.2004 DECLAR ING TOTAL INCOME AT RS. 4 60 268/-. TOTAL INCOME COMPRISED OF BUSINESS INCOME AND INCOME FROM OTHER SOURCES. THE ASSESSEE DURING THE PREVIOU S YEAR DERIVED LONG TERM CAPITAL GAIN OF RS. 7 09 123/- ON SALE OF SHAR ES AND CLAIMED DEDUCTION U/S. 54 OF THE ACT IN RESPECT OF SAID LON G TERM CAPITAL GAIN. SUBSEQUENTLY THE ASSESSEE VIDE LETTER DATED 20.4.2 006 WITHDREW THE SHRI RANJEETSINGH M. GOHIL 2 CLAIM IN RESPECT OF LONG TERM CAPITAL GAIN ON SALE OF SHARES AND OFFERED IT TO TAX UNDER THE HEAD OTHER INCOME. THE ASSESSING OFFICER DID NOT ACCEPT THE LETTER BY WHICH THE ASSESSEE SOUGHT TO REVISE HIS ORIGINAL COMPUTATION OF INCOME ON THE GROUND THAT THE SAME O UGHT TO HAVE BEEN FILED WITHIN ONE YEAR FROM THE RELEVANT ASSESSMENT YEAR. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS IN RESPECT OF AFORESAID INCORRECT CLAIM MADE BY THE ASSESSEE IN THE RETURN OF INCOME AFTER BRINGING TO TAX A SUM OF RS. 7 09 123/- UNDER THE HEAD INCOME FROM OTHER SOURCES. 4. THE ASSESSEE AGITATED THE ISSUE BEFORE LEARNED CIT(A) WHO HELD AS FOLLOWS :- I HAVE GONE THROUGH THE FACTS RELATED TO THE ISSUE AND FIND THAT THOUGH APPELLANT REVISED RETURN AFTER ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR BUT TRUTH REMAINS THAT THE APPELLANT VOLUNTARILY AND SUO-MOTO FILED LETTER ON 26.4.2006 TO THE ASSESSING OFFICER. HE FILED A LETTER WITH THE PLEA THAT WHEN HE VERIFIED RECORDS HE FOUND THAT HE DID NOT POSSESS PROOF OF SHARES. H E WITHDREW CLAIM OF EXEMPTION U/S. 54 AMOUNTING TO RS. 7 09 12 3/- MADE IN THE ORIGINAL RETURN OF INCOME. THIS LETTER WAS WRIT TEN BY THE APPELLANT TO THE ASSESSING OFFICER MUCH EARLIER TO THE NOTICE U/S. 142(1) AND QUESTIONNAIRE ISSUED BY THE ASSESSING OF FICER. THE ASSESSING OFFICER ISSUED QUESTIONNAIRE ALONGWITH NO TICE U/S. 142(1) ON 28.7.2006 WHILE APPELLANT WROTE LETTER TO THE ASSESSING OFFICER FOR WITHDRAWING THE CLAIM OF RS. 7 09 123/- ON 26.4.2006. MOREOVER THERE WAS NO INVESTIGATION IN THE CASE OF THE APPELLANT BY THE INVESTIGATION WING OR ANY OTHER AUTHORITY BE FORE WRITING THE LETTER TO THE ASSESSING OFFICER FOR WITHDRAWING THE CLAIM. IN VIEW OF THE ABOVE THE AO CANNOT TREAT IT AS UNDISCLOSED IN COME OF THE APPELLANT EVEN THOUGH REVISED RETURN FILED BY THE A PPELLANT WAS INVALID. THE APPELLANT CANNOT BE PENALIZED AS DEPAR TMENT HAS NOT PUT ANY MATERIAL BEFORE HIM TO MAKE HIM WITHDRAW TH E CLAIM U/S. 54 OF THE I.T. ACT. HE DID SUO-MOTO. IN VIEW OF THE ABOVE WITHDRAWAL OF EXEMPTION U/S. 54 MADE BY THE APPELLA NT BEFORE THE DEPARTMENT COULD GATHER ANYTHING AGAINST HIM IS TRE ATED AS VOLUNTARY WITHDRAWAL. THIS WILL MAKE NO CHANGE IN I NCOME. 5. THE GROUND OF APPEAL (GROUND NO.1) RAISED BY THE REVENUE IN ITS APPEAL IN OUR VIEW DOES NOT ARISE OUT OF THE ORDER OF THE LEARNED CIT(A). AS CAN BE SEEN FROM THE ORDER OF LEARNED CIT(A) HE HAS NOT CHANGED HEAD OF INCOME AND HEAD OF INCOME CONTINUES TO REMA IN AS ONE UNDER SHRI RANJEETSINGH M. GOHIL 3 INCOME FROM OTHER SOURCES. WE ARE THEREFORE OF T HE VIEW THAT GROUND RAISED BY THE REVENUE IS MIS-CONCEIVED AND THEREFOR E THE SAME IS DISMISSED. 6. GROUND NO. 2 RAISED BY THE REVENUE READS AS FOL LOWS :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS. 44 72 000/- MADE ON ACCOUNT OF UNPROVED CAPITAL INTRODUCED BY SIMPLY ST ATING THAT THESE HAVE BEEN ROUTED THROUGH BOOKS OF ACCOUNTS AN D BANK ACCOUNTS BECAUSE SIMPLE PRODUCTION OF COPIES OF BOO KS OF ACCOUNT AND BANK ACCOUNTS IS NOT ENOUGH FOR VERIFICATION SO AS TO ACCEPT THE CORRECTNESS OF THE CAPITAL INTRODUCED. 7. BEFORE WE DEALT WITH THIS GROUND IT IS NECESSAR Y TO STATE THAT THE ASSESSEE DID NOT MAKE PROPER COMPLIANCE BEFORE THE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEEDINGS AS CAN BE SEEN FR OM PARAGRAPH 2 OF THE ASSESSMENT ORDER WHICH IS AS FOLLOWS :- 2. NOTICE U/S. 143(2) WAS ISSUED ON 27.11.2004. T HEREAFTER A QUESTIONNAIRE DATED 28.7.2006 CALLING FOR DETAILS U /S. 142(1) OF THE ACT WAS ALSO ISSUED. IN RESPONSE SHRI ASHOK TRIVED I ITP FROM M/S. B.D. VASANI & CO. THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE ATTENDED. THE FIRST NOTICE FIXING THE HEA RING FOR SUBMISSION OF DETAILS AS REQUIRED U/S. 142(1) OF TH E ACT WAS ISSUED ON 28.7.2006. THEREAFTER FOURTEEN HEARINGS WERE HE LD. ON SIX OCCASIONS A DEFAULT OF NON-COMPLIANCE WAS COMMITTED . FOUR NOTICES U/S. 271(1)(B) OF THE ACT FOR THE DEFAULTS OF NON-COMPLIANCE WERE ISSUED. DESPITE ALL THESE OPPORTUNITIES AND L IBERTY ASSUMED BY THE ASSESSEE AND THE AR FULL DETAILS WERE NOT FI LED. AT THE END OF THE PROCEEDINGS EVEN THE AR STARTED FILLING EMBARRA SSED BY LEVERAGE HE AND HIS CLIENT WAS ASSUMING AND INITIAL LY IN THE HEARING HELD ON 29.11.2006 HE SURRENDERED TO STATE THAT THE ASSESSEE COULD GIVE AS MUCH DETAILS AS ALREADY BROU GHT ON RECORD TILL DATE AND NO FURTHER DETAILS COULD BE GIVEN BY THE ASSESSEE. HE FURTHER REQUESTED TO COMPLETE THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. AS PER THE WISHED OF LEARNED AR THE PROCEEDINGS ARE BEING COMPLETED ACCORDINGLY. PENALT Y PROCEEDINGS ARE SEPARATELY INITIATED U/S. 271(1)(B) OF THE ACT FOR THE DEFAULTS OF NON-COMPLIANCES. 8. FACTS RELEVANT FOR ADJUDICATION OF THE ABOVE GRO UNDS ARE AS FOLLOWS:- SHRI RANJEETSINGH M. GOHIL 4 THE ASSESSEE IS A PARTNER IN FOUR PARTNERSHIP FIRMS . IN THE TWO OF SUCH FIRMS NAMELY M/S. SADGURU ASHISH DEVELOPER AN D M/S. SAI DEVELOPER THE ASSESSEE INTRODUCED FRESH CAPITAL OF RS. 15 85 000/- AND RS. 28 87 000/- RESPECTIVELY. IN THE HEARING HELD O N 9.11.2006 THE AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE WAS ASKED TO ESTABLISH THE SOURCE OF CAPITAL INTRODUCTION. BUT THERE WAS N O COMPLIANCE FROM THE ASSESSEES SIDE. THE ASSESSEE MERELY FILED THE COPI ES RETURNS CONTAINING CAPITAL ACCOUNT OF THE PARTNERS OF THESE FIRMS. NO LEDGER ACCOUNT EXTRACTS AND BANK ACCOUNT STATEMENT WITH NARRATION WERE FILE D DESPITE SPECIFICALLY SO REQUESTED IN THE NOTICE U/S. 142(1) OF THE ACT. ACCORDING TO THE AO BY NOT SUBMITTING THESE DETAILS THE ASSESSEE THWARTED ANY ATTEMPT OF VERIFICATION FROM THE DEPARTMENTS SIDE. ACCORDING TO THE AO THE ASSESSEE NEITHER PROVIDED THE SOURCE OF CAPITAL INT RODUCTION NOR THE BASIC DETAILS WHICH COULD HAVE ENABLED THE REVENUE TO MAK E SUCH VERIFICATION ON ITS OWN. IN THE CIRCUMSTANCES THE AO LEFT WITH NO OPTION ADDED SUCH CAPITAL INTRODUCTION AS UNEXPLAINED INVESTMENT U/S. 69C OF THE ACT. THE TOTAL INCOME WAS THUS ENHANCED BY RS. 44 72 000/-. 9. BEFORE LEARNED CIT(A) THE ASSESSEE SUBMITTED TH AT HE WAS A PARTNER IN TWO REGISTERED PARTNERSHIP FIRM VIZ. M/S . SADGURU ASHISH AND M/S. SAI DEVELOPERS. HE INTRODUCED CAPITAL TO THE E XTENT OF RS. 15 85 000/- AND RS. 28 87 000/- RESPECTIVELY. IT WA S SUBMITTED THAT AT THE TIME OF HEARING BEFORE THE ASSESSING OFFICER T HE ASSESSEE HAD SHOWN TO HIM THAT THE AMOUNT OF CAPITAL CONTRIBUTION HAS GONE THROUGH BANK ACCOUNT. SAME WAS MARKED FROM THE BANK ACCOUNT AND GOT TALLIED WITH THE COPY OF ACCOUNT IN THE FIRM. IN SPITE OF THE SA ME THE WHOLE AMOUNT OF THE CAPITAL INTRODUCTION WAS DISALLOWED WITHOUT GIV ING SINGLE OPPORTUNITY OF HEARING BEFORE SUCH A HUGE ADDITION. WITHOUT PRE JUDICE TO THE ABOVE IT WAS SUBMITTED THAT THE SAID CONTRIBUTION WAS MADE O UT OF LOAN TAKEN FROM VARIOUS PERSONS FOR WHICH SEPARATE ADDITION WA S ALSO MADE. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAS FILED APPEAL A GAINST SUCH ADDITION U/S. 68 TOO. ACCORDING TO THE ASSESSEE THE ASSESSI NG OFFICER MADE SHRI RANJEETSINGH M. GOHIL 5 ADDITION TWICE IN THE ASSESSMENT ORDER TO THE EXTEN T OF RS. 18 57 405/-. CONSIDERING THE ABOVE IT WAS REQUESTED TO DELETE T HE ADDITION. 10. THE LEARNED CIT(A) ON THE ABOVE SUBMISSIONS MAD E BY THE ASSESSEE BEFORE HIM HELD AS FOLLOWS :- I HAVE GONE THROUGH THE SUBMISSIONS AND COPY OF TH E BANK ACCOUNT FILED IN THE PAPER BOOK AND FIND THAT FIRST OF ALL ADDITION MADE BY THE ASSESSING OFFICER IS NOT COVERED BY SEC TION 69C OF THE I.T. ACT AS APPLIED BY THE ASSESSING OFFICER. SECTI ON 69C IS MEANT FOR UNEXPLAINED EXPENDITURE WHILE CAPITAL CONTRIBUT ION BY THE APPELLANT IS PARTNERSHIP FIRM IS AN INVESTMENT AND NOT AN EXPENDITURE. SECONDLY COPY OF BANK ACCOUNT WAS ALR EADY GIVEN TO THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PRO CEEDINGS AND HE COULD HAVE VERIFIED THE SOURCE OF INVESTMENT IN PARTNERSHIP FIRM. I HAVE CHECKED THE BANK ACCOUNT AND THE DATES OF CAPITAL CONTRIBUTION IN THE FIRMS AND FIND THAT LOAN OF RS. 18 25 000/- OBTAINED FROM DIFFERENT PERSONS IN THE YEAR UNDER C ONSIDERATION IS DIRECTLY UTILIZED IN MAKING ADVANCES TO THE PARTNER SHIP FIRM AS CAPITAL CONTRIBUTION. BALANCE OF THE CAPITAL CONTRI BUTION IS OUT OF ACCUMULATED FUNDS IN THE BANK ACCOUNT. INSTEAD OF M AKING VERIFICATION FROM BANK ACCOUNT AND THEN DECIDING TH E ISSUE THE ASSESSING OFFICER HAS HURRIEDLY MADE ADDITION SIMPL Y FOR THE SAKE OF MAKING ADDITION. NONE OF THE CONTRIBUTION IN BOT H THE FIRMS IS IN CASH. WHOLE CAPITAL CONTRIBUTION IS ROUTED THROUGH THE BOOKS OF ACCOUNTS; HENCE IT CAN NOT BE TREATED AS UNEXPLAIN ED EXPENDITURE OR INVESTMENT. MOREOVER ASSESSING OFFICER HAS MADE DOUBLE ADDITION OF RS. 18 25 000/- ONE U/S. 68 OF THE I.T. ACT AND ANOTHER 69C OF THE I.T. ACT. THIS ACTION OF THE ASSESSING O FFICER IS AGAINST EQUITY AND NATURAL JUSTICE. CONSIDERING THE FACT TH AT WHOLE CAPITAL CONTRIBUTION IN THE PARTNERSHIP FIRM IS VERIFIABLE FROM THE BANK ACCOUNT AND BOOKS OF ACCOUNTS ADDITION OF RS. 44 72 000/- IS DELETED. 11. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVEN UE HAS RAISED GROUND NO.2 BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. AS CAN BE SEEN FROM THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE HAD NOT GIVEN REQUIRED PARTICULARS BEFORE THE ASSESSING OFF ICER. THE ASSESSEE HAS ALSO NOT COMPLIED WITH THE REQUIREMENTS CALLED FOR BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS WITH REGARD TO THE INTRODUCTION OF CAPITAL IN THE FIRM BY THE ASSESSEE. THE LEARNED CI T(A) HAS HOWEVER HELD THAT COPY OF THE BANK ACCOUNT GIVEN BY THE ASSESSEE SHOWS THE NATURE AND SOURCES OF MONEY CONTRIBUTED BY THE ASSESSEE AS CAPITAL TO THE FIRM. SHRI RANJEETSINGH M. GOHIL 6 THE FINDINGS OF THE LEARNED CIT(A) IS CONTRARY TO T HE FINDINGS OF THE ASSESSING OFFICER. IT IS CLEAR FROM THE ORDER OF LE ARNED CIT(A) THAT HE DID NOT CONFRONT THE ASSESSING OFFICER WITH REGARD TO T HE ENTRIES IN THE BANK ACCOUNT AND AS TO HOW THOSE ENTRIES WOULD EXPLAIN S OURCE OF CAPITAL COMPUTATION BY THE ASSESSEE IN THE PARTNERSHIP FIRM . WE ARE OF THE VIEW THAT THE ORDER OF LEARNED CIT(A) DESERVES TO BE SET ASIDE AND THE MATTER REMANDED TO THE ASSESSING OFFICER FOR FRESH CONSIDE RATION. THE ASSESSEE WILL EXPLAIN SOURCE OF FUNDS WHICH WERE INTRODUCED AS CAPITAL IN THE FIRM. THE ASSESSING OFFICER WILL TAKE INTO CONSIDERATION SUCH EXPLANATION INCLUDING BANK STATEMENT AND DECIDE THE ISSUE IN AC CORDANCE WITH LAW AFTER AFFORDING THE ASSESSEE OPPORTUNITY OF BEING H EARD. 12. IN THE RESULT APPEAL BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BEEN PRONOUNCED ON 14 TH DAY OF MAY 2010. SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 14 TH MAY 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS