S.S. Jyothi Prakash, Shimoga v. Addl.CIT, Shimoga

ITA 534/BANG/2010 | 2006-2007
Pronouncement Date: 10-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 53421114 RSA 2010
Bench Bangalore
Appeal Number ITA 534/BANG/2010
Duration Of Justice 3 month(s) 24 day(s)
Appellant S.S. Jyothi Prakash, Shimoga
Respondent Addl.CIT, Shimoga
Appeal Type Income Tax Appeal
Pronouncement Date 10-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 10-08-2010
Date Of Final Hearing 05-08-2010
Next Hearing Date 05-08-2010
Assessment Year 2006-2007
Appeal Filed On 16-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O.K NARAYANAN VICE PRESIDENT AND SMT. P MADHAVI DEVI JUDICIAL MEMBER ITA NO.534 /B ANG/2010 (AS ST. YEAR - 2006-07) S.S JYOTHI PRAKASH M/S SHIVALINGASWAMY TRANSPORT SAVARKARNAGAR SHIMOGA . APPELLANT VS. THE ADDL. COMMISSIONER OF INCOME-TAX SHIMOGA . RESPONDENT APPELLANT BY : SHRI KRISHNA SWAMY CHARTERED ACCOUNTAN T RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADDL. COMMISSIONER OF INCOME-TAX O R D E R PER DR. O.K NARAYANAN VICE PRESIDENT THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELE VANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE CIT(A) AT HUBLI DATED 4.2.2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX A CT 1961. ITA NO.534/B/10 2 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED MAINLY IN THE TRANSPORT BUSINESS AND RUNNING PROPRIETARY CONCERN UNDER THE NAME AND STYLE OF SHRI SHIVALINGA TRANSPORT AT SHIMOGA. HE IS ALSO A PARTNER IN VARIOUS FIRMS RECEIVING REMUNERATION AND INTEREST ON CAPITA L. THE ASSESSEE FILED HIS RETURN OF INCOME FOR RS.18 11 187/-. IN THE COURSE OF ASSESSMENT PROCEEDINGS A SERIES OF ADDITIONS WERE MADE BY THE ASSESSING AUTHORITY INCLUDING DISALLOWANCES OF EXPE NSES AND FINALLY DETERMINED THE TAXABLE INCOME AT RS.92 16 623/-. T HE ASSESSMENT WAS TAKEN IN FIRST APPEAL. IT WAS ONLY PARTLY SUCCESSF UL. THE ASSESSEE IS AGGRIEVED BY THE ADDITIONS/DISALLOWANCES SUSTAINED BY THE CIT(A) AND THEREFORE THIS SECOND APPEAL FILED BEFORE THE TRI BUNAL. 3. WE HEARD SHRI S KRISHNA SWAMY THE LEARNED CHART ERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SMT. JACI NTA ZIMIK VASHAI THE LEARNED ADDL. COMMISSIONER OF INCOME-TAX APPEAR ING FOR THE REVENUE. 4. THE FIRST GROUND IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE ON LORRY REPAIRS AND MAINTENANCE EXPEN SES TO THE EXTENT OF RS.56 730/-. THE CIT(A) UPHELD THE ABOVE ADDITI ON ON THE BASIS OF THREE SPECIFIC BILLS ON THE GROUND THAT THE BILL DA TE AND THE ACCOUNTING ITA NO.534/B/10 3 DATES ARE DIFFERENT. IN THESE THREE CASES EXCEPT F OR THE CHANGE IN THE DATE NO OTHER DEFECTS HAVE BEEN POINTED OUT. THE BILLS PRODUCED AS SUCH BY THE ASSESSEE HAVE NOT BEEN ALLEGED AS BOGUS OR FABRICATED. THE NECESSITY FOR INCURRING SUCH EXPENDITURE HAS AL SO NOT BEEN QUESTIONED. IT IS POSSIBLE SOME TIMES SMALLTIM E BUSINESS PEOPLE MAY ENTER THE BILLS IN THE BOOKS OF ACCOUNTS AFTER ONE OR TWO DAYS. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE WE DO NOT FIND THAT THE DIFFERENCE NOTED IN THE DATES ARE NOT SO SERIOUS S O AS TO DISALLOW THE EXPENSES CLAIMED BY THE ASSESSEE. THEREFORE WE DE LETE THE DISALLOWANCE CONFIRMED BY THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO GIVE DEDUCTION FOR AN AMOUNT OF RS.56 73 0/-. 5. THE SECOND GROUND IS REGARDING COMPUTATION OF CA PITAL GAINS ARISING OUT ON THE SALE OF THE RIGHT ENJOYED BY THE ASSESSEE IN M/S CORPORATE LEISURE DEVELOPMENT PVT. LTD. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL THE A SSESSEE HAD PAID AN ADDITIONAL INSTALLMENT OF RS.1 44 218/- TOWARDS OUT STANDING BALANCE AND THE SALE OF THE RIGHT WAS MADE AFTER THE ABOVE PAYMENT. BUT THE ASSESSING AUTHORITY COMPUTED CAPITAL GAINS TAKING T HE COST OF THE ASSET AS REFLECTED IN THE BALANCE SHEET. THE ASSESSING O FFICER HAS NOT GIVEN CREDIT FOR THE PAYMENT MADE BY THE ASSESSEE TO THE EXTENT OF ITA NO.534/B/10 4 RS.1 44 218/-. IT IS THE CASE OF THE LEARNED CHARTE RED ACCOUNTANT THAT THE COST REFLECTED IN THE BALANCE SHEET WAS THE OPE NING BALANCE AND THE PAYMENT MADE IN THE IMPUGNED PREVIOUS YEAR WOULD BE REFLECTED IF AT ALL ONLY AT THE END OF THE YEAR AND NOT IN THE COU RSE OF THE PREVIOUS YEAR. HE THEREFORE ARGUED THAT THE ASSESSING OFFI CER HAS ERRED IN ADOPTING THE OPENING BALANCE REFLECTED IN THE BALAN CE SHEET OF THE ASSESSEE AS THE COST. WE FIND MUCH FORCE IN THE AR GUMENT ADVANCED BY THE CHARTERED ACCOUNTANT. WE DIRECT THE ASSESSIN G AUTHORITY TO VERIFY THE PROOF OF PAYMENT OF RS.1 44 218/- THAT M AY BE PRODUCED BY THE ASSESSEE AND TO DEDUCT THE SAID AMOUNT FROM THE COMPUTATION OF CAPITAL GAINS. 6. THE SECOND LIMB OF THE ARGUMENT ON THIS ISSUE IS THAT THE CIT(A) HAS DISALLOWED THE PAYMENT OF COMMISSION OF RS.36 750/- CLAIMED BY THE ASSESSEE AS PAID TO BROKER. THE ASS ESSEE HAS RECORDED THE COMMISSION PAYMENT IN HIS BOOKS OF ACCOUNT. NO OTHER EVIDENCE IS AVAILABLE. BUT ONE THING IS TO BE BORNE IN MIN D THAT IT IS USUAL AND CUSTOMARY IN REAL ESTATE TRANSACTIONS THAT COMMISSI ON WOULD HAVE TO BE PAID TO BROKERS INVOLVED IN THE DEAL. THIS IS A COMMON PRACTICE FOUND NOT ONLY IN OUR COUNTRY BUT ELSEWHERE ALSO. THE AMOUNT OF COMMISSION CLAIMED BY THE ASSESSEE FOR RS.36 750/- IS EXTREMELY ITA NO.534/B/10 5 REASONABLE AND WE DO NOT FIND ANY REASON TO DISBELI EVE ASSESSEES CLAIM. ACCORDINGLY THE SAID DISALLOWANCE IS DELETE D AND THE ASSESSING AUTHORITY IS DIRECTED TO GIVE DEDUCTION FOR THE SAI D COMMISSION AMOUNT. 7. THE NEXT GROUND RAISED BY THE ASSESSEE RELATES T O THE ADDITION OF RS.8 75 000/- CONFIRMED BY THE CIT(A) U/S 68 OF THE INCOME-TAX ACT 1961. 8. THE CREDITS INVOLVED IN THE ADDITIONS SUSTAINED BY THE CIT(A) ARE AS FOLLOWS: S/SHRI G.B BASAVARAJ RS.1 50 000 BAKSHI RS.2 50 000 HALANA GOWDA RS.1 25 000 VIJAYENDRA RS.2 50 000 9. IT IS THE ARGUMENT OF THE LEARNED CHARTERED ACCO UNTANT THAT EXCEPT IN THE CASE OF SHRI VIJAYENDRA ALL OTHER CR EDITORS HAVE APPEARED BEFORE THE ASSESSING AUTHORITY AND CONFIRM ED ADVANCING OF MONIES TO THE ASSESSEE. IT IS THE CASE OF THE ASSE SSEE THAT THE MONIES ITA NO.534/B/10 6 WERE AVAILED BY THE ASSESSEE AS ADVANCES FOR PURCHA SE OF PLOTS AND PROPERTIES. IT IS ALSO THE CASE OF THE CHARTERED A CCOUNT THAT EVEN OPENING BALANCE HAS BEEN ADDED BY THE ASSESSING AUT HORITY. 10. WE CONSIDERED THE MATTER. THE ASSESSEE HAS PR ODUCED THE CREDITORS EXCEPT SHRI VIJAYENDRA. BUT IT IS TO BE SEEN THAT ALL THESE PERSONS WERE NOT IN A POSITION TO EXPLAIN BEFORE TH E ASSESSING AUTHORITY REGARDING THE BONAFIDES OF THEIR SOURCE O F INCOME. THESE CREDITORS EXPLAINED AGRICULTURAL INCOME AS THEIR SO URCE. THEY COULD NOT PRODUCE EVIDENCE TO SHOW THAT THEY ARE ENJOYING SUBSTANTIAL AMOUNT OF AGRICULTURAL INCOME. THEY WERE ALSO NOT IN A POSITION TO ESTABLISH NEXUS BETWEEN THE PROPOSED PROPERTY TRAN SACTIONS AND THE ADVANCES MADE TO THE ASSESSEE. IN THESE CIRCUMSTAN CES WE FIND THAT MERE APPEARANCE OF THE CREDITORS BEFORE THE AO WOUL D NOT ABSOLVE THE ASSESSEE FROM HIS DUTY OF PROVING THE GENUINENESS O F CASH CREDITS. THEREFORE WE ARE INCLINED TO CONFIRM THE ADDITIONS SUSTAINED BY THE CIT(A). BUT WE HAVE TO ADD ONE RIDER TO THIS. IF ANY OPENING BALANCE THAT STOOD IN THE NAME OF ANY CASH CREDITOR IS ADDE D FOR THE IMPUGNED ASSESSMENT YEAR THEN THE SAID OPENING BALANCES WIL L BE EXCLUDED FROM THE ADDITION. THE ASSESSING OFFICER IS DIRECTED TO LOOK INTO THE MATTER. SUBJECTED TO THIS THIS ISSUE IS DECIDED AGAINST TH E ASSESSEE. ITA NO.534/B/10 7 11. THE LAST GROUND RAISED BY THE ASSESSEE IS IN RE SPECT OF THE ADDITION SUSTAINED BY THE CIT(A) AGAINST THE UNEXPL AINED INVESTMENTS. THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.51 63 458/. A RELIEF OF RS.6 09 119/- WAS GRANTED BY THE CIT(A). THE CIT(A) UPHELD THE BALANCE ADDITION OF RS.56 73 037/-. 12. THE UNEXPLAINED INVESTMENT WAS PERTAINING TO TH E LAND AS WELL AS A BUILDING THEREON. THE DEPARTMENTAL VALUATION OFFICER HAS ADOPTED A VALUATION OF RS.97 98 771/- FOR LAND AND RS.20 26 793/- FOR THE BUILDING. THE ASSESSEESS REGISTERED VALUER HAS VA LUED THE BUILDING AT RS.18 53 113/- AND THAT OF THE LAND AT RS.51 40 964 /- TOTAL OF RS.69 94 000/-. THE VALUATION OF THE PROPERTY WAS ALSO CONSIDERED BY THE DISTRICT REGISTRAR/THE APPELLATE AUTHORITY. WHE N THE MATTER OF UNDER VALUATION OF THE PROPERTY WAS INITIATED AGAIN ST THE ASSESSEE THE DISTRICT REGISTRAR/THE APPELLATE AUTHORITY HAS DETE RMINED THE VALUE OF THE LAND AT RS.79 61 525/- AND THAT OF THE BUILDING AT RS.21 60 000/-. 13. ON GOING THROUGH THE THREE SETS OF VALUATION RE PORTS AVAILABLE WITH US WE FIND THAT MORE EFFECTIVE AND REALISTIC VALUATION WAS THAT OF THE DISTRICT REGISTRAR SHIMOGA. SO WE DIRECT THE ASSESSING AUTHORITY ITA NO.534/B/10 8 TO RE-COMPUTE THE CAPITAL GAINS ON THE BASIS OF THE VALUATION DECIDED BY THE DISTRICT REGISTRAR SHIMOGA THROUGH HIS PROC EEDINGS DATED 18.5.2006. 14. THE ASSESSING AUTHORITY IS DIRECTED TO MODIFY T HE ASSESSMENT ON THE ABOVE LINES. 15. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON TUESDAY THE 10TH DAY OF AUGUST 2010 AT BANGALORE. SD/- SD/- (P MADHAVI DEVI) (DR. O.K NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT VMS. COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR ITAT BANGALORE.