Shri Prakash Bafna, Dhar v. The Income Tax Officer, Dhar

ITA 589/IND/2010 | 2002-2003
Pronouncement Date: 16-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 58922714 RSA 2010
Assessee PAN AAXPB2677D
Bench Indore
Appeal Number ITA 589/IND/2010
Duration Of Justice 1 year(s) 1 month(s) 26 day(s)
Appellant Shri Prakash Bafna, Dhar
Respondent The Income Tax Officer, Dhar
Appeal Type Income Tax Appeal
Pronouncement Date 16-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 16-11-2011
Assessment Year 2002-2003
Appeal Filed On 20-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH J.M. AND SHRI R.C.SHARM A A.M. PAN NO. : AAXPB2677D I.T.A.NO. 589 TO 591/IND/2010 A.YS. : 2002-03 TO 2004-05 SHRI PRAKASH BAFNA INCOME-TAX OFFICER 282 M. G. ROAD VS DHAR. DHAR APPELLANT RESPONDENT APPELLANT BY : SHRI RAVI SARDA ADV. RESPONDENT BY : SHRI ARUN DEWAN SR. DR DATE OF HEARING : 08.11.2011 DATE OF PRONOUNCEMENT : 16.11.2011 O R D E R PER R. C. SHARMA A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2002-03 20 03-04 AND 2004-05. ASSESSMENT YEAR : 2002-03 : -: 2: - 2 2. FIRST GROUND TAKEN BY THE ASSESSEE RELATES TO VALID ITY OF REOPENING OF ASSESSMENT U/S 147. 3. FROM THE RECORD WE FOUND THAT THE RETURN FOR ASSESSMENT YEAR 2002-03 WAS FILED AT AN INCOME OF R S. 2 61 401/- WHICH WAS PROCESSED U/S 143(1) ON 15.8. 2003. THEREAFTER THE AO ISSUED NOTICE U/S 148 ON 13.2.20 06 ALLEGING THAT THE ASSESSEE HAS WRONGLY CLAIMED INAD MISSIBLE EXPENDITURE AGAINST THE SALARY INCOME. CONTENTION O F LD. AUTHORIZED REPRESENTATIVE WAS THAT THE AO HAS REOPE NED THE ASSESSMENT MERELY ON CHANGE OF OPINION BY FRESH APP LICATION OF MIND ON SAME FACTS. THERE WAS NO NEW MATERIAL ON RECORD NOR ANY INFORMATION HAS BEEN RECEIVED WHICH WOULD CONSTITUTE A REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE LD. AU THORIZED REPRESENTATIVE IN SO FAR AS ORIGINAL RETURN WAS PRO CESSED U/S 143(1) THEREFORE THERE IS NO OCCASION TO APPLY MI ND BY THE ASSESSING OFFICER THEREFORE IT CANNOT BE PLEADED THAT THERE WAS CHANGE OF OPINION. SINCE THE ASSESSEE HAS CLAIM ED -: 3: - 3 INADMISSIBLE EXPENDITURE AGAINST THE SALARY INCOME THE AO WAS PERFECTLY JUSTIFIED IN HOLDING THAT THE ASSESSE E HAS ESCAPED ITS INCOME AND THEREBY REOPENING OF ASSESSM ENT U/S 147 WAS JUSTIFIED. 5. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDIT ION OF RS. 5 49 542/- IN ASSESSEES INCOME. 6. FROM THE RECORD WE FOUND THAT DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE AO FOUND THAT THERE W AS A CREDIT BALANCE OF RS. 5 49 542/- IN THE NAME OF SMT . SAJJAN BAI. THE AO DISBELIEVED THE CREDIT BALANCE. IT WAS SUBMITTED BEFORE HIM THAT THE ASSESSEE IS ADOPTED SON OF SMT. SAJJAN BAI AND AFTER HER DEATH ON 31.12.1990 AMOUNT BELONGING TO HER WAS TRANSFERRED IN THE NAME OF THE ASSESSEE. COPIES OF THE ACKNOWLEDGMENT OF RETURN OF SMT. SAJJAN BAI FOR THE ASSESSMENT YEARS 1990-91 1991-92 AND 1992-93 AND 1 993- 94 WERE PLACED BEFORE THE AO TO SUBSTANTIATE THAT S HE WAS HAVING BUSINESS INCOME AND THAT NO BUSINESS CAN BE RUN WITHOUT CAPITAL. THE AO OBSERVED THAT THE ASSESSEE HAS ONLY FILED ACKNOWLEDGEMENT OF RETURNS NO STATEMENT OF A FFAIRS NOR ANY BALANCE SHEET COMPUTATION OF INCOME WAS FILED IN RESPECT -: 4: - 4 OF SMT. SAJJAN BAI. HE FURTHER OBSERVED THAT EVEN T HE ASSESSEE HAS NOT FILED ANY OF THE BALANCE SHEET IN ITS EARLI ER YEAR SO AS TO SUBSTANTIATE HIS CLAIM THAT THE AMOUNT WAS RECEI VED BY HIM ON 31 ST DECEMBER 1990 AND THE SAME CONTINUED TO BE ENJOYED BY HIM TILL THE ASSESSMENT YEAR 2002-03 UND ER CONSIDERATION. AO THEREFORE ADDED THE ENTIRE AMOU NT IN ASSESSEES INCOME AND THE ACTION OF THE AO WAS CONF IRMED BY THE LD. CIT(A). THE ASSESSEE IS NOW IN FURTHER APPE AL BEFORE US. 7. IT WAS CONTENDED BY THE LD. AUTHORIZED REPRESENTATI VE THAT THE ASSESSEE HAS FILED COPY OF RETURN OF SMT. SAJJAN BAI FOR EARLIER FOUR YEARS BEFORE THE AO TO SHOW THAT S HE WAS HAVING BUSINESS INCOME AND WITHOUT ANY REASON THE AO HAS DISBELIEVED THE BUSINESS INCOME EARNED BY SMT. SAJJ AN BAI. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED COPY OF PROFIT AND LOSS ACCOUNT AND CAPITAL ACCOUNT STATEMENT OF AFFA IRS FOR ASSESSMENT YEARS 1998-99 1999-2000 2000-01 2001- 02 2002-03 AND 2003-04 OF THE ASSESSEE IN WHICH ALL TH E YEARS CREDIT BALANCE OF SMT. SAJJAN BAI OF RS. 5 49 542/- WAS SHOWN AS OPENING BALANCE. AS PER LD. AUTHORIZED REPRESENT ATIVE AN AMOUNT RECEIVED IN THE YEAR 1990 CANNOT BE UNEXPLAI NED -: 5: - 5 INCOME IN THE YEAR 2002-03. AS PER LD. AUTHORIZED REPRESENTATIVE CARRIED FORWARD AMOUNT OF PREVIOUS YEARS DOES NOT BECOME AN UNEXPLAINED CASH CREDIT OF THE CURREN T YEAR. 8. ON THE OTHER HAND THE LD. SENIOR D.R. SUPPORTED TH E FINDING RECORDED BY THE LOWER AUTHORITIES TO THE EF FECT THAT IN EARLIER YEARS NEITHER THE ASSESSEE HAS FILED ANY OF HIS BALANCE SHEET TO SHOW THAT THE AMOUNT WAS RECEIVED ON SMT. SAJJAN BAIS DEATH NOR THE SOURCE OF INCOME OF SMT. SAJJAN BAI WAS EXPLAINED. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS CAREF ULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. F ROM THE RECORD WE FOUND THAT THE ASSESSEE IS AN ADOPTED SO N OF SMT. SAJJAN BAI AND AFTER HER DEATH ON 31 ST DECEMBER 1990 AMOUNT BELONGED TO HER WAS TRANSFERRED IN THE ACCOU NT OF ASSESSEES BOOKS. BEFORE THE AO IT WAS SPECIFICALL Y MENTIONED THAT THE AMOUNT WAS RECEIVED ON 31.12.1990 ON THE D EATH OF SMT. SAJJAN BAI. IN SUPPORT OF THE CONTENTION THAT SMT. SAJJAN BAI WAS ALSO INCOME TAX ASSESSEE HER INCOME TAX RE TURN FOR THE ASSESSMENT YEAR 1990-91 TO 1993-94 WAS ALSO FIL ED BEFORE THE AO WHICH INDICATED HER INCOME FROM BUSINESS IN ALL THE -: 6: - 6 FOUR YEARS. THE ASSESSEE HAS ALSO FILED INTIMATION ISSUED BY THE ASSESSING OFFICER U/S 143(1)(A) FOR THE ASSESSM ENT YEAR 1992-93 AND 1993-94. HOWEVER ALL THESE DOCUMENTS D ID NOT INDICATE THE QUANTUM OF CAPITAL EARNED BY SMT. SAJJ AN BAI AND GIVEN TO ASSESSEE ON HER DEATH. HOWEVER AT THE VER Y SAME TIME THE AO HAS NOT FOUND NOR POINTED OUT ANYTHING WRONG IN THE DOCUMENTS FILED BY THE ASSESSEE WITH RESPECT TO THE AMOUNT SHOWN AS RECEIVED FROM SMT. SAJJAN BAI IN HIS EARLI ER BALANCE SHEET EVEN THOUGH THE SAME WERE NOT FILED ALONGWIT H RETURN BUT WERE FILED AT THE TIME OF REASSESSMENT PROCEEDI NGS WHEN THE SPECIFIC QUERY WAS RAISED BY THE ASSESSING OFFI CER. UNDER THESE CIRCUMSTANCES THE TRANSFER OF CAPITAL BALANC E IN ASSESSEES ACCOUNT CANNOT BE DISBELIEVED TOTALLY. L OOKING TO THE BUSINESS INCOME SHOWN BY SMT.SAJJAN BAI IN HER INCOME TAX RETURNS THE CRUX OF THE ISSUE WHICH NOW REVOLV ES IS THE QUANTUM OF CAPITAL WHICH CAN REASONABLY BE ACCEPTED TO HAVE BEEN SAVED BY SMT. SAJJAN BAI DURING HER LIFE TIME. IN THIS REGARD THE AO HAS OBSERVED THAT SMT. SAJJAN BAI H AD NOT FILED ANY WEALTH TAX RETURN PRIOR TO HER DEATH IN S O FAR AS CAPITAL ABOVE RS. 2.5 LAKHS WAS LIABLE TO WEALTH TA X ACT DURING -: 7: - 7 THE YEAR THE AMOUNT WAS TRANSFERRED TO ASSESSEES A CCOUNT I.E. 1990. THEREFORE KEEPING IN TO VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE IT WILL BE REASONABLE TO ACCEPT THAT THE ASSESSEE HAS GOT CAPITAL OF RS. 2.50 LAKHS FROM HER MOTHER SMT. SAJJAN BAI. ACCORDINGLY WE MODIFY THE ORDER O F LOWER AUTHORITIES AND DIRECT THE AO TO ACCEPT THE LOAN OF RS. 2.50 LAKHS AS HAVING BEEN GIVEN BY SMT. SAJJAN BAI OUT O F HER SAVINGS DURING HER LIFE TIME. WE DIRECT ACCORDINGLY . 10. GROUND NO.3 RELATES TO ADDITION OF RS. 66 747/- OUT OF INTEREST INCOME. 11. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAD SHOW N INTEREST INCOME OF RS. 66 747/- AGAINST WHICH HE HA S CLAIMED EXPENDITURE OF RS. 48 052/-. THE AO FOUND THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ARE NOT ADMISSI BLE AGAINST THE INTEREST INCOME THEREFORE HE HELD THA T ENTIRE INTEREST INCOME OF RS. 66 747/- RECEIVED ON ACCOUNT OF DEPOSIT WITH M/S. TIRUPATI STARCH & CHEMICALS LIMITED WILL BE CHARGED TO TAX. HOWEVER IN THE COMPUTATION OF INCOME AT PA GE NO.6 THE AO HAS ADDED THE ENTIRE INTEREST INCOME OF RS. 66 747/- IN PLACE OF EXPENDITURE OF RS. 48 052/- CLAIMED BY THE ASSESSEE. -: 8: - 8 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THERE IS NO DISPUTE TO THE FACT THAT THE EXPENDITUR E SO CLAIMED WAS INADMISSIBLE AGAINST THE INTEREST AND SALARY IN COME. HOWEVER IF ANY DISALLOWANCE IS TO BE MADE THE SAM E SHOULD BE RESTRICTED TO THE TOTAL AMOUNT OF EXPENDITURE SO CLAIMED. ACCORDINGLY WE DIRECT THE AO TO RESTRICT THE ADDIT ION OF EXPENDITURE CLAIMED AGAINST SALARY AND INTEREST INC OME. WE DIRECT ACCORDINGLY. 13. GROUND NO. 4 RELATES TO ADDITION OF INTEREST INCOM E EARNED BY WIFE OF THE ASSESSEE SMT. SUSHILA DEVI BA FNA HIS SON PRADEEP BAFNA AND HER FATHER SHRI GENDALAL BAFN A. THE AO HAS INVOKED THE PROVISIONS OF SECTION 64(IV) AND 64(VII). HOWEVER NO MATERIAL WAS BROUGHT ON RECORD BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS DIVERTED HIS FUNDS TO THESE PERSONS SO AS TO CLUB THE INTEREST INCOME EARNED O N SUCH DIVERTED FUNDS TO THE ASSESSEES INCOME. AT THE VER Y SAME TIME AS PER OUR CONSIDERED VIEW CLUBBING PROVISION S CANNOT BE ATTRACTED IN CASE OF INCOME EARNED BY FATHER AND MA JOR SON OF THE ASSESSEE EVEN IF THE ASSESSEE HAS DIVERTED ANY OF HIS INTEREST FREE FUNDS TO THEM. WE THEREFORE DO NOT FIND ANY -: 9: - 9 JUSTIFICATION FOR ADDITION IN RESPECT OF INTEREST I NCOME EARNED BY FATHER AND MAJOR SON OF THE ASSESSEE. IN RESPECT OF INTEREST INCOME OF SMT. SUSHILA DEVI BAFNA WE RESTORE THE M ATTER BACK TO THE FILE OF AO TO DECIDE AFRESH AFTER VERIFYING THE AMOUNT OF FUND TRANSFERRED BY THE ASSESSEE IN THE ACCOUNT OF WIFE FREE OF INTEREST SO AS TO ASCERTAIN THE QUANTUM OF INTERES T EARNED THEREON. THE AO IS TO DECIDE THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 14. IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 SIMILA R GROUNDS HAVE BEEN TAKEN WITH REGARD TO REOPENING OF ACCOUNT U/S 147 AS HAS BEEN DISCUSSED HEREIN ABOVE IN ASSES SMENT YEAR 2002-03. WE FOLLOW THE SAME REASONING AND DISM ISS THE GROUNDS TAKEN BY THE ASSESSEE WITH REGARD TO INITIA TION OF REASSESSMENT PROCEEDINGS. 15. WITH RESPECT TO DISALLOWANCE OF EXPENSES WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF EX PENDITURE CLAIMED. 16. WITH REGARD TO ADDITION U/S 64(IV) AND 64(VII) AS DISCUSSED HEREINABOVE NO ADDITION IS WARRANTED IN RESPECT OF INTEREST EARNED BY FATHER AND SON. WITH RESPECT TO THE INTEREST -: 10: - 10 EARNED BY SUSHILA DEVI BAFNA WHICH WAS INCLUDED IN ASSESSEES INCOME FOLLOWING THE SAME REASONING AS DISCUSSED ABOVE THE MATTER IS RESTORED BACK TO THE FILE OF A O WITH THE SIMILAR DIRECTION. 17. IN THE RESULT THE APPEALS OF THE ASSESSEE IN ALL T HE YEARS ARE ALLOWED IN PART IN TERMS INDICATED HEREIN ABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 16 TH NOVEMBER 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH NOVEMBER 2011. CPU* 817