B.H. Jagadeesh, Sira v. ITO, Tumkur

ITA 663/BANG/2011 | 2008-2009
Pronouncement Date: 15-11-2011 | Result: Allowed

Appeal Details

RSA Number 66321114 RSA 2011
Assessee PAN EYEAR2007A
Bench Bangalore
Appeal Number ITA 663/BANG/2011
Duration Of Justice 4 month(s) 29 day(s)
Appellant B.H. Jagadeesh, Sira
Respondent ITO, Tumkur
Appeal Type Income Tax Appeal
Pronouncement Date 15-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 15-11-2011
Date Of Final Hearing 08-09-2011
Next Hearing Date 08-09-2011
Assessment Year 2008-2009
Appeal Filed On 16-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SMT. P MADHAVI DEVI JUDICIAL MEMBER ITA NO.663 & 664/BANG/2011 (ASST. YE AR 2008-09) 1. SHRI B.H JAGADEESH RATHNIKEETAN RAGAVENDRA SWAMY TEMPLE STREET SIRA. 2. SHRI B MANJUNATH M/S MANJUSHREE TEXTILES R.T ROAD SIRA. . APPELLANTS VS. THE INCOME-TAX OFFICER WARD-2 TUMKUR. . RESPONDENT APPELLANT BY : SHRI S RAMASUBRAMANIYAN RESPONDENT BY : SHRI SUSAN THOMAS JOSE DATE OF HEARING : 15-11-2011 DATE OF PRONOUNCEMENT : 15-11-2011 ITA NO.663 & 664/B/09 2 O R D E R PER SMT. P MADHAVI DEVI JUDICIAL MEMBER THESE APPEALS ARE FILED BY THE RESPECTIVE ASSESSEES . THE RELEVANT ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - II B ANGALORE DATED 15.03.2011. THE APPEAL ARISES OUT OF THE ASSESSMEN T COMPLETED U/S 143(3) OF THE INCOME-TAX ACT 1961. 2. IN BOTH THE APPEALS THE ASSESSEES ARE AGGRIEVED BY THE ADDITIONS CONFIRMED BY THE CIT(A) TO THE TUNE OF RS.2 LAKHS U /S 68 OF THE ACT AS UNEXPLAINED CASH CREDITS THOUGH IT REPRESENTED SECU RITY DEPOSITS RECEIVED FROM THE PROPOSED TENANTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE ES ARE INDIVIDUALS WHO WERE INTO THE BUSINESS OF MONEY LENDING. THE A SSESSEES FILED THEIR RETURNS OF INCOME FOR THE RELEVANT ASSESSMENT YEARS. MEANWHILE A SURVEY WAS CONDUCTED U/S 133A OF THE ACT ON 7.8.2 009 IN THE BUSINESS PREMISES OF THE ASSESSEES AND IT WAS SEEN THAT THE ASSESSEES WERE CONSTRUCTING A COMMERCIAL COMPLEX ON A CO-OWNE RSHIP BASIS. THE ASSESSEES WERE ASKED TO EXPLAIN THE EXPENDITURE INCURRED ON ITA NO.663 & 664/B/09 3 CONSTRUCTION TILL THE DATE OF SURVEY AND ALSO SOURC ES OF INVESTMENTS SO MADE. THE ASSESSEES SUBMITTED THEIR EXPLANATIONS STATING THAT THEY HAVE NOT MADE ANY INVESTMENT OUT OF THEIR PERSONAL FUNDS AND THAT THE SOURCES FOR INVESTMENTS ARE LOANS TAKEN FROM TOWN CO-OPERATIVE BANK (TCB) SIRA AND RENTAL ADVANCES TAKEN FROM T HE PROSPECTIVE TENANTS. THE AO INVESTIGATED THE SAID STATEMENTS A ND FOUND THAT THE ASSESSEES HAVE TAKEN LOAN FROM TCB SIRA IN A JOINT NAME TO THE TUNE OF RS.60 LAKHS WHICH WAS SANCTIONED AND THE TOTAL OF RS.2 LAKHS WAS DISBURSED BEFORE 31.8.2008. HE ALSO FOUND THAT THE ASSESSEES HAVE RECEIVED ADVANCES/SECURITY DEPOSITS FROM VARIOUS PA RTIES. THE PARTIES WERE SUMMONED AND THEIR STATEMENTS WERE RECORDED. IT WAS FOUND THAT EXCEPT FOR ONE PERSON ALL THE OTHERS ARE RELATIVES OF THE ASSESSEES AND THESE PARTIES HAVE NOT TAKEN POSSESSION OF THE SHOP NOR HAVE TAKEN THE REPAYMENT OF THE ADVANCES MADE. HENCE A NOTICE WA S ISSUED TO THE ASSESSEES ASKING THEM TO SHOW CAUSE WHY THE DEPOSIT S RECEIVED SHOULD NOT BE BROUGHT TO TAX IN THE HANDS OF THE CO -OWNERS U/S 68 AS UNEXPLAINED CASH CREDITS. THE ASSESSEES SUBMITTED THEIR REPLY STATING THAT THE ADVANCES RECEIVED WERE INTEREST FREE SECUR ITY DEPOSITS AGAINST THE TENANCY OF THE SHOP TO BE CONSTRUCTED AND THAT THE ASSESSEE HAS PROVED THE GENUINENESS OF THE TRANSACTIONS BY PRODU CING THE ADDRESSES OF THE PARTIES AND ALSO THE LEASE AGREEMENTS AND TH E PARTIES HAVE ITA NO.663 & 664/B/09 4 ADMITTED AND CONFIRMED THE TRANSACTIONS. THE ASSES SEES WERE ALSO PLACED RELIANCE UPON THE DECISION OF THE HONBLE HI GH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS. NEVENDRAM AHU JA REPORTED IN 290 ITR 453 M.P. THE AO HOWEVER WAS NOT CONVINCED BY THE SAID EXPLANATION AND A SPOT INSPECTION WAS MADE BY THE AO PERSONALLY ON 24.12.2010 AND 25.12.2010 OF THE COMMERCIAL COMPLEX CONSTRUCTED BY THE ASSESSEES AND IT WAS FOUND THAT THE SAID SHOPS WERE NOT READY FOR USE AS THE FLOORING HAS NOT BEEN MADE AS OF DATE AN D THE PLACE IS STREWN WITH UNWANTED JUNK. THEREFORE AO WAS NOT CO NVINCED BY THE CONTENTION OF THE ASSESSEES THAT THE SHOPS WILL BE OCCUPIED BY THE TENANTS DURING JAN 2011. HE ALSO EXAMINED CREDIT WORTHINESS OF THE PARTIES AND CAME TO THE CONCLUSION THAT THEY DO NOT HAVE THE SOURCE TO MOBILIZE THE MONEY TO PAY THE RENTAL ADVANCES AND THAT EVEN AFTER MAKING AN ADVANCE OF RS. 2 LAKHS THEY HAVE NEITHER OCCUPIED THE SHOP NOR HAS SOUGHT REFUND OF THE DEPOSIT MADE BY T HEM WHICH IS QUITE UNUSUAL. THE AO THUS HELD IT TO BE UNEXPLAI NED CASH CREDIT U/S 68 OF THE ACT AND MADE THE ADDITION ACCORDINGLY. 4. AGGRIEVED BY THIS THE ASSESSEES PREFERRED AN AP PEAL BEFORE THE CIT(A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE A ND THE ASSESSEES ARE IN SECOND APPEAL BEFORE US AGAINST THE RELIEF DENIE D TO THEM. ITA NO.663 & 664/B/09 5 5. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEES COULD NOT COMPLETE THE CONSTRUCTION OF THE SHOPS DUE TO PERSONAL PROBLEMS AND THE TENANTS HAVE ULTIMATELY OCCUPIED THE PREMISES IN JAN 2011 ONCE THE SHOPS H AVE BEEN COMPLETELY CONSTRUCTED. HE SUBMITTED THAT HE HAS E VIDENCES TO THIS EFFECT IN THE FORM OF CONFIRMATIONS GIVEN BY THE S AID PARTIES AND ALSO THE RENTAL DEEDS EXECUTED BY THEM. HE SOUGHT TO FI LE THE SAME IN THE FORM OF ADDITIONAL EVIDENCES AND PRAYED THAT THE S AME MAY BE ADMITTED AS THEY GO TO THE ROOT OF THE MATTER. 5. THE LEARNED DR HOWEVER STRONGLY OPPOSED THE ADM ISSION OF THE ADDITIONAL EVIDENCES STATING THAT THE AO HAD PE RSONALLY VISITED THE SITE AND HAS COME TO THE CONCLUSION THAT THE SHOPS WERE NOT COMPLETED AND WERE NOT FIT FOR OCCUPATION EVEN IN JAN 2011 A ND THE ADDITIONAL EVIDENCES IF ADMITTED TO BE CONSIDERED WOULD GIVE THE ASSESSEE A FRESH LEASE OF LIFE CONTRARY TO THE EXISTING FACTS RECORDED BY THE AO. 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS WE FIND THAT THE QUESTION HEREIN IS WH ETHER THE DEPOSITS RECEIVED BY THE ASSESSEES WERE RENTAL ADVANCES/SECU RITY DEPOSITS FOR ITA NO.663 & 664/B/09 6 LEASING OUT THE SHOPS TO BE BUILT BY THE ASSESSEES IN THE FINANCIAL YEAR 2007-08. IT IS NOT DISPUTED THAT THE ASSESSEE HAD COMMENCED THE CONSTRUCTION OF THE COMMERCIAL COMPLEX AND ALSO THA T THE ADVANCES WAS RECEIVED THROUGH BANK CHANNELS IN THE FORM OF D DS. IT IS ONLY TO BE ESTABLISHED THAT THERE IS A NEXUS BETWEEN THE AD VANCES RECEIVED AND THE LEASING OUT OF THE PREMISES TO THE TENANTS. TH E ADDITIONAL EVIDENCES IN THE FORM OF LEASE DEEDS SHOW THAT THES E DOCUMENTS WERE EXECUTED IN THE YEAR 2007 AND 2008 DURING WHICH PE RIOD THE ASSESSEE HAS RECEIVED THE RENTAL ADVANCES. IT IS ALSO NOT D OUBTED THAT THE PARTIES HAVE APPEARED AND CONFIRMED THE TAKING OF SHOPS ON RENT. THE LEARNED DR HAD STATED THAT THE SHOP NOS. MENTIONED BY THE PARTIES DURING THE SWORN STATEMENT ARE DIFFERENT FROM THE S HOP NOS. MENTIONED IN THE AGREEMENTS PRODUCED BEFORE US TODAY. HOWEVE R THE BASIC QUESTION BEFORE US IS WHETHER THE SHOPS HAVE ACTUAL LY BEEN LET OUT TO THE PERSONS FROM WHOM THE DEPOSITS HAVE BEEN RECEIV ED. THE DOCUMENTS PRODUCED BY THE ASSESSEES NOW BEFORE US A RE TO PROVE THAT THESE SHOPS HAVE ACTUALLY BEEN TAKEN POSSESSION OF BY THE TENANTS. AS THEY GO TO THE VERY ROOT OF THE MATTER I AM INCLIN ED TO ADMIT THE ADDITIONAL EVIDENCES AND REMIT THE SAME BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RECONSIDER TH E SAME AND ALSO TO VERIFY WHETHER PARTIES HAVE ACTUALLY TAKEN POSSESSI ON OF THE SHOPS IN ITA NO.663 & 664/B/09 7 JAN 2011 AS CONFIRMED BY THEM IN THEIR STATEMENT A ND IF IT IS FOUND THAT THEY HAVE ACTUALLY TAKEN THE POSSESSION OF THE SHOPS THEN TO TREAT THE DEPOSITS AS THE SECURITY DEPOSITS OR RENTAL ADV ANCES WHICH ARE NOT TAXABLE. 7. IN THE RESULT THE APPEALS OF THE ASSESSEES ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15TH NOV 2011. SD/- (P MADHAVI DEVI) JUDICIAL MEMBER VMS. BANGALORE DATED : 15/11/2011 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 I TAT BANGALORE.