Shri. K.N. Prabhakar, Bangalore v. ACIT, Bangalore

ITSSA 26/BANG/2009 | misc
Pronouncement Date: 30-09-2010 | Result: Partly Allowed

Appeal Details

RSA Number 2621116 RSA 2009
Bench Bangalore
Appeal Number ITSSA 26/BANG/2009
Duration Of Justice 1 year(s) 5 month(s) 16 day(s)
Appellant Shri. K.N. Prabhakar, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 30-09-2010
Date Of Final Hearing 26-08-2010
Next Hearing Date 26-08-2010
Assessment Year misc
Appeal Filed On 13-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER IT(SS)A NO. 26 BANG/2009 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1996 TO 18.12.2 002 SHRI K.N. PRABHAKAR NO.193 3 RD MAIN 5 TH CROSS CHAMARAJPET BANGALORE 560 018. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(1) BANGALORE. : RESPONDENT ASSESSEE BY : SHRI S. PARTHASARATHI ADVOCATE REVENUE BY : SMT. SWATHI S. PATIL CIT-II(DR) O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (A)-II BANGALORE IN ITA NO: 162/AC 3(1)/C IT(A)-II/04-05 DATED: 19.1.2009 FOR THE BLOCK PERIOD 1.4.1996 TO 18.12.2 002. 2. THE ASSESSEE HAS RAISED ELEVEN GROUNDS IN WHICH GROUND NO: 9 AND 11 BEING GENERAL IN NATURE THEY DO NOT SURVIVE FOR ADJUDICATION. GROUND NO.10 IS NOT MAINTAINABLE AS CHARGING OF INT EREST U/S 158BFA OF THE IT(SS)A NO.26/BANG/09 PAGE 2 OF 12 ACT IS MANDATORY AND CONSEQUENTIAL IN NATURE. IN THE REMAINING GROUNDS THE CRUXES OF THE ISSUES RAISED ARE LISTED OUT AS U NDER: (I) THE CIT (A) OUGHT TO HAVE REFRAINED FROM UPHOLDING THE ADDITION OF RS.63 500/- IN CONNECTION WITH THE INVESTMENT IN THE PROPERTY; (II) THE CIT(A) OUGHT TO HAVE REFRAINED FROM HOLDING THA T THE LOAN OF RS.3 LAKHS WAS UNEXPLAINED; (III) THE CIT(A) OUGHT TO HAVE REFRAINED FROM UPHOLDING T HAT THE CHIT DIVIDEND AS INCOME; & - WITHOUT PREJUDICE THE CIT (A) OUGHT TO HAVE GIVEN A N OPPORTUNITY BEFORE SUCH A FINDING WAS GIVEN TO EXPLAIN THE ENTR IES IN THE BALANCE SHEET FILED BEFORE THE ASSESSING AUTHORITY. 3. BRIEFLY STATED THE ASSESSEE AN INDIVIDUAL IS THE SON OF K. NARAYANAGOWDA IN WHOSE RESIDENTIAL PREMISES WERE SU BJECTED TO OPERATION U/S 132(1) OF THE ACT ON 18.12.2002. ON SCRUTINY O F THE SEIZED DOCUMENTS IT APPEARS THAT THE AO WAS OF THE VIEW THAT THE ASS ESSEE HAD INCOME LIABLE TO TAX AND ACCORDINGLY A NOTICE U/S 158BC OF THE A CT WAS SLAPPED ON THE ASSESSEE. IN COMPLIANCE THE ASSESSEE FURNISHED A NIL INCOME FOR THE BLOCK PERIOD. HOWEVER THE AO CONCLUDED THE ASSESS MENT DETERMINING THE INCOME OF THE ASSESSEE AT RS.12.54 LAKHS FOR THE RE ASONS SET-OUT IN THE IMPUGNED ORDER WHICH IS UNDER DISPUTE. 4. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS D ILIGENTLY PERUSED THE RELEVANT RECORDS AND ALSO THE PAPER BOOK FURNIS HED BY THE LD. A.R DURING THE COURSE OF HEARING. WE SHALL NOW CONSIDER THE ISSUES CHRONOLOGICALLY. I. (I) AS IN THE CASE OF K.N. SRINIVAS [IT(SS)A N O: 23 & 25/09] SMT.GANGALAKSHMI THE MOTHER OF THE ASSESSEE HAD TR ANSFERRED FOUR SITES IT(SS)A NO.26/BANG/09 PAGE 3 OF 12 AT KATHRIGUPPE VILLAGE FOR A CONSIDERATION OF RS.80 000/-. HOWEVER THE MARKET VALUE OF PROPERTY APPEARS TO BE RS.8.38 LAKH S BASED ON AN UNDER- VALUATION NOTICE OF THE SUB-REGISTRAR WHICH WAS FOU ND DURING THE SEARCH THE AO ADOPTED THE SAME AS UNEXPLAINED INVESTMENT I N THE ASSESSEES HANDS SINCE ACCORDING TO THE AO THE SOURCE FOR T HE INVESTMENT WAS NOT EXPLAINED. (II) DURING THE COURSE OF APPELLATE PROCEEDINGS I T WAS CONCEDED BY THE ASSESSEE THAT THE SALE DEED WAS EXECUTED ON 16. 12.08 AND ACCORDING TO STAMP UNDER-VALUATION AUTHORITY THE MARKET VALU E OF THE SUBJECT PROPERTY WAS AT RS.4.20 LAKHS AND THAT THE DEFICIT STAMP FEE AGGREGATING TO RS.52 700/- WAS REMITTED THROUGH A PAY ORDER NO.598 037 DATED: 8.5.2001 AND THUS THE SALE DEED WAS EXEMPT FROM UNDER VALUA TION ETC. FURTHER OUT OF NATURAL AFFECTION AND LOVE THE ASSESSEES MOTHE R DID ACCEPT ONLY RS.80 000/- AS COST OF CONSIDERATION WHICH WAS DECL ARED IN THE SALE DEED. (III) DUE CONSIDERATION OF THE ASSESSEES SUBMISS ION PERUSAL OF THE IMPUGNED ASSESSMENT ORDER REMAND REPORT AND ALSO T HE EVIDENCES PRODUCED THE CIT (A) HAD OBSERVED THAT THE ADDITIO N OF RS.8.38 LAKHS WAS MADE SOLELY ON THE BASIS OF THE VALUE OF THE PROPER TY DETERMINED BY THE SVA FOR STAMP DUTY PURPOSE. THE AO DID BRING NOTHI NG ON RECORD TO SUGGEST THAT THE ASSESSEE HAD PAID MORE CONSIDERATI ON THAN WHAT WAS MENTIONED IN THE SALE DEED. HE THEREFORE RESTRIC TED THE ACTUAL INVESTMENT IN THE PROPERTY AT RS.1 43 500/- [RS.80 000/- + STA MP AND REGISTRATION FEE OF RS.63 500/-]. IT(SS)A NO.26/BANG/09 PAGE 4 OF 12 (IV) IT WAS CONTENDED IN BRIEF THAT THE ASSESSE E HAD INVESTED ONLY RS.80 000/- AND NO FURTHER INVESTMENT WAS MADE AND THUS ADDITION OF RS.63 500/- MADE BY THE CIT (A) WAS RATHER UNCALLED FOR. (V) HOWEVER THE ASSESSEE HAD FAILED TO TAKE COGNIZANCE OF THE CONFIRMATION OF THE DISTRICT REGISTRATION AUTHORITY [UNDER-VALUATION] IN CASE NO.DVN/K/2360/98-99 DATED: NIL [P 10 OF PB AR] TO T HE EFFECT THAT THE VALUE OF THE SUBJECT PROPERTY WAS FIXED AT RS.4.20 LAKHS AND ACCORDINGLY DEFICIT STAMP FEE AGGREGATING TO RS.52 700/- WAS C OLLECTED FROM THE ASSESSEE. THIS VERY FACT WAS NOT HOWEVER DISPUTE D BY THE ASSESSEE. THUS THE ASSESSEES REPEATED ASSERTION THAT NO FUR THER INVESTMENT (THAN RS.80000/-) WAS MADE DOESNT HOLD WATER. IN OUR CO NSIDERED VIEW THE CIT (A) WAS JUSTIFIED IN RESTRICTING THE ADDITION TO TH E EXTENT OF RS.1 43 500/- WHICH INCLUDES RS.63 500/- AND THUS OUR INTERFERE NCE IS NOT CALLED FOR. IT IS ORDERED ACCORDINGLY. II. (I) THE OTHER GRIEVANCE OF THE ASSESSEE WAS THA T THE CIT (A) OUGHT TO HAVE REFRAINED FROM HOLDING THAT THE LOAN OF RS. 3 LAKHS WAS UNEXPLAINED. (II) BRIEFLY STATED THE AO MADE AN ADDITION OF RS.2.80 LAKHS AS UNEXPLAINED CASH CREDITS ON THE GROUND THAT IN THE CASH FLOW STATEMENT THE ASSESSEE HAD RECORDED LOANS FROM HIS GRAND PARENTS OF RS.2 LAKHS AND RS.80 000/- FROM HIS MOTHER RESPECTIVELY FOR THE YE AR-ENDED 31.3.1999. AS THE ASSESSEES GRAND PARENTS APPEARED TO HAVE DIED DURING 99-00 AS ADMITTED BY THE ASSESSEES FATHER K.NARAYANAGOWDA WHICH WAS NOT PROVED AND THE ASSESSEES MOTHER WAS A HOUSE WIFE W HO HAD NO DEFINITE IT(SS)A NO.26/BANG/09 PAGE 5 OF 12 SOURCE OF INCOME THE AO BROUGHT THE ENTIRE ALLEGED LOAN AMOUNTS OF RS.2.8 LAKHS TO TAX. (III) WHEN THE ISSUE WENT BEFORE THE CIT (A) WHO AFTER HAVING CONSIDERED THE SUBMISSION OF THE ASSESSEE OBSERVED THAT 5.4.IT IS SEEN THAT THE APPELLANT RECEIVED AND AMOUNT OF RS.80 000/- AS LOA N FROM HIS MOTHER DURING THE FINANCIAL YEAR 1998-99 AND RS.2 00 000/- FROM SHRI CHINNAGANGAPPA AND SMT. LAXAMMA DURING THE FINANCIA L YEAR 2000-01. HOWEVER NO EVIDENCE LIKE COPY OF CONFIRMATION BOO KS OF ACCOUNT WAS FILED. THE APPELLANT MERELY STATED THAT RS.80 000/- WAS TA KEN FROM SMT GANGALAKSHMI THE MOTHER WHO HAD GIVEN AS LOAN WAS OUT OF SALE PROCEEDS OF THE PROPERTY AND DETAILS HAS BEEN FILED IN FORM OF CASH FLOW STATEMENT. WITH REGARD TO THE LOAN OF RS.2 00 000/- IT WAS ST ATED THAT THEY ARE NOT ALIVE AND THE APPELLANT COULD ONLY PRODUCE CORROBORATIVE EVIDENCE WAS OF CAPACITY FOR THEM TO GIVE LOANS. THE GRAND PARENTS HAD SUBSTANTIAL AGRICULTURAL HOLDINGS AND LOANS WERE GIVEN BY THEM DURING THEIR LIFETIME AND PART OF THE LOAN WAS REPAID TO THE LEGAL HEIRS BEIN G HIS UNCLE. THUS THE GENUINENESS OF THE LOAN HAS BEEN ESTABLISHED. FROM PERUSAL OF THE CASH FLOW STATEMENT IT IS FOUND THAT THE APPELLANT RECEIVED F ROM SHRI CHINNAGANGAPPA AND SMT. LAXMAMMA RS.2 00 000/- DURING THE FINANCIA L YEAR 2000-01 AND RS.1 00 000/- DURING THE FINANCIAL YEAR 2001-02. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAD EXAMINED AND IT WAS FOUND THAT SHRI CHINNAGANGAPPA AND SMT. LAKSHMAMMA THE GRAND FATHE R AND GRAND MOTHER OF THE APPELLANT DIED DURING THE YEAR 1999-2 --- AS ADMITTED BY THE APPELLANTS FATHER K.NARAYANA GOWDA (PARA 4 OF THE ASSESSMENT ORDER). HOWEVER AS PER CASH FLOW STATEMENT ALLEGED LOANS R ECEIVED DURING THE YEAR 2000-01 AND 2001-02 WHICH IS CONTRARY TO THE AOS F INDING. IN VIEW OF THE FACT THE LOAN OF RS.3 00 000/- CONSIDERED REMAINED UNEXPLAINED.. (IV) BEFORE US IT WAS SUBMITTED THAT THE CIT (A ) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAD RECEIVED RS.1 LAK H FROM SMT. GANGALAKSHMI HIS MOTHER AND RS.2 LAKHS FROM THE GR AND PARENTS WHO HAVE CONFIRMED THE LOAN AND THEIR CREDIT WORTHINESS ALSO BEEN PROVED. IT WAS FURTHER SUBMITTED THAT THE FIRST APPELLATE AU THORITY OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAD DISCHARGED THE ON US AND ACCORDINGLY IT(SS)A NO.26/BANG/09 PAGE 6 OF 12 THE IMPUGNED ADDITION U/S 68/69 OF THE ACT WAS OPPO SED TO LAW AND THUS LIABLE TO BE DELETED. (V) AT THIS JUNCTURE WE WOULD LIKE TO POINT OUT THAT THE AO IN HIS IMPUGNED ORDER HAD ADDED ONLY RS.2.80 LAKHS AS UNE XPLAINED CASH CREDITS OF (I) RS.80 000/- ALLEGED TO HAVE BEEN RECEIVED F ROM SMT. GANGALAKSHMI AND (II) RS.2 LAKHS FROM HIS GRAND PARENTS AND THU S THE AGGREGATING LOAN OF RS.2.80 LAKHS WAS ADDED AS THE ASSESSEES INCOME FOR THE REASONS SET- OUT IN THE IMPUGNED ASSESSMENT ORDER AS UNEXPLAIN ED CASH CREDITS. (VI) WHILE RAISING THE ISSUE BEFORE US IN THE SHAPE OF GROUND NO.4 THE ASSESSEE HAD MENTIONED THAT 4..THAT THE APPELLANT HAD RECEIVED RS.1 LAKH FROM SMT.GANGALAKSHMI HIS MOTHE R AND RS.2 LAKHS FROM THE GRAND PARENTS WHEREAS THE AO HAD ADDED ONLY RS.80 000/- BEING ALLEGED LOAN FROM THE ASSESSEES MOTHER. HOW DID THE ALLEGED LOAN AMOUNT OF RS.80 000/- RECEIVED FRO M SMT GANGALAKSHMI BECOME RS.1 LAKH IS ANYBODYS GUESS? (VII) TURNING OUR ATTENTION TO THE CRUX OF THE ISS UE WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO GONE THRO UGH THE PAPER BOOK FURNISHED BY THE LD. A.R. (VIII) IN RESPECT OF THE ALLEGED LOAN OF RS.80 000/- RECEIVED BY THE ASSESSEE FROM HIS MOTHER THE REASONING IN REJECTIN G THE ASSESSEES CONTENTIONS BY THE AO CANNOT BE ACCEPTED ON ITS FAC E VALUE. THOUGH SMT. GANGALAKSHMI WAS A HOUSE WIFE AND PERHAPS DID NOT HAVE ANY DEFINITE SOURCE OF INCOME THE AO AS WELL AS THE FIRST APPEL LATE AUTHORITY HAVE FAILED IT(SS)A NO.26/BANG/09 PAGE 7 OF 12 TO NOTICE THAT SHE WAS IN RECEIPT OF RS.80 000/- FR OM HER OTHER SON K.N.SRINIVAS TO WHOM ALSO SHE HAD TRANSFERRED FOU R SITES IN AVALAHALLI VILLAGE AT THAT RELEVANT PERIOD AND THE SALE DEED W AS REGISTERED ON 16.12.1998. WE ARE THEREFORE OF THE FIRM VIEW THA T THERE WAS EVERY POSSIBILITY THAT SMT. GANGALAKSHMI COULD HAVE PARTE D WITH THE SALE PROCEEDS RECEIVED FROM SRINIVAS TO ACCOMMODATE HER OTHER SON THE ASSESSEE. THUS THE GENUINENESS OF LENDING A SUM O F RS.80 000/- TO THE PRESENT ASSESSEE BY SMT. GANGALAKSHMI CANNOT BE PUT UNDER THE SCANNER. (IX) ON A GLIMPSE OF THE CASH FLOW STATEMENT FOR THE YEAR-ENDED 31.3.1999 [P 43 OF PB AR] WE NOTICED UNDER RECEIPT COLUMN THERE WAS AN ENTRY TO THE EFFECT THAT LOAN FROM GANGALAKSHMI RS.80 000-00. WE ARE THEREFORE OF THE FIRM VIEW THAT THE AUTHORITIES BE LOW WERE NOT JUSTIFIED IN SUSPECTING THE CREDIT WORTHINESS OF SMT. GANGALAKSH MI LENDING OF RS.80 000/- TO THE ASSESSEE AT THAT RELEVANT PERIOD . (X) WITH REGARD TO THE ALLEGED LOAN RECEIVED FRO M THE GRAND PARENTS OF THE ASSESSEE WE FIND FROM THE IMPUGNED ORDER OF THE AO (AS NARRATED SUPRA) THAT HE HAD MENTIONED AT PARA 4 THAT IN THE CASH FLOW STATEMENT THE ASSESSEE HAS RECORDED LOAN FROM SRI CHANNAGANGAPPA AND SMT. LAXMAMMA AMOUNTING TO RS.2 00 000.. AND FOR THE REASONS RECORDED HE BROUGHT TO TAX THE SAID AMOUNT OF RS.2 LAKHS IN THE HANDS OF THE ASSESSEE. THE ASSESSEES FATHER K.NARAYANA GOWDA ADMITTED DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO THAT CHANNAGAN GAPPA AND HIS WIFE DIED DURING THE YEAR 1999-2000 ITSELF THIS VERY F ACT HAS NOT BEEN DISPUTED BY THE ASSESSEE EITHER. SUCH BEING THE GROUND REAL ITY THE ASSESSEE IN HIS IT(SS)A NO.26/BANG/09 PAGE 8 OF 12 CASH FLOW STATEMENTS FOR THE YEARS-ENDED 31.3.2001 AND 31.3.2002 [P 40 & 41 OF PB AR] HAD MENTIONED AS LOAN FROM CHINNAGANGAPPA & LAKSHMAMMA RS.2 00 000/- AND RS.1 00 000/- RESPECTIVELY. THIS BELIES THE ASSESSEES ASSERTION THAT HE HAD AVAILED THE LO AN FROM HIS GRAND PARENTS EITHER RS.2 LAKHS OR RS.3 LAKHS WHICH HAS N O RELEVANCE TO THE ISSUE. SINCE THE ASSESSEES ALLEGED AVAILING OF L OAN ITSELF WAS NOT ABOVE THE BOARD WE HAVE NOT GONE THROUGH THE ASSESSEES AVERMENT WHETHER HIS GRAND PARENTS HAD SUBSTANTIAL AGRICULTURAL LAND HOL DINGS AND SO ON SO FORTH. IN A NUTSHELL THE AO WAS JUSTIFIED IN BRINGING TO TAX RS.2 LAKHS [RS.280000 80000 = 2 LAKHS] AS UNEXPLAINED CASH C REDITS. IT IS ORDERED ACCORDINGLY. III. (I) THE OTHER GRIEVANCE OF THE ASSESSEE BEING THE CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE CHIT DIVIDEND AS INCOME OF THE ASSESSEE. (II) THE AO BROUGHT TO TAX RS.52584/- BEING CHIT COMMISSION DIVIDEND UNDER THE HEAD OTHER SOURCES AS UNDISCLO SED INCOME OF THE ASSESSEE ON THE GROUND THAT THE RECEIPT OF WHICH W AS NOT REFLECTED IN CAPITAL ACCOUNT THOUGH REFLECTED IN BANK ACCOUNT. (III) WHEN THE ISSUE WAS TAKEN UP WIT H THE CIT (A) WHO AFTER DUE CONSIDERATION OF THE ASSESSEES SUBMISSION OBSERVE D THUS 6.4. AS REGARDS THE COMMISSION/DIVIDEND OF RS.52 5 84/- THE APPELLANT CONTENDED THAT CHIT COMMISSION IS EXEMPT AS PER THE RULING OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SODA SIL ICATE AND CHEMICALS WORKS V. CIT 179 ITR 588. IF THIS ARGUMENT IS NOT ACCEPTABLE IT IS SUBMITTED THAT THE CHIT/COMMISSION WAS NOT FOR ONE YEAR AND I T WAS FOR VARIOUS YEARS IN THE BLOCK PERIOD. EVEN WITH THE CHIT/COMMISSION T HE INCOME WAS BELOW TAXABLE LIMIT. ACCORDINGLY THE APPELLANT PLEADED THAT NO ADDITION BE MADE. THE CASE LAW RELIED UPON BY THE APPELLANT RELATED T O THE ASSESSMENT YEAR IT(SS)A NO.26/BANG/09 PAGE 9 OF 12 1980-81 WHEREIN IT HAS BEEN HELD THAT AMOUNTS PAID RECEIVED FROM CHIT FUNDS WERE CONSIDERED NOT BUSINESS ACTIVITY OF THE ASSESS EE AND LOSS ARISING ON CHIT TRANSACTIONS IS NOT ALLOWABLE AS BUSINESS LOSS. FU RTHER IT WAS ALSO HELD THAT INCOME EARNED FROM CHIT FUND IS NOT TAXABLE ON PRIN CIPLE OF MUTUALITY AMONGST THE CONTRIBUTORS THEREFORE DIVIDENDS TOO W ERE NEITHER INCOME NOR REVENUE LOSS. SINCE THE CONCEPT OF DIVIDEND FROM C HIT IS INCOME IT IS TAXABLE ACCORDINGLY.. (IV) AGGRIEVED THE ASSESSEE CAME UP WITH A PLEADIN G THAT THE CHIT COMMISSION WAS NOT FOR ONE YEAR. IT WAS FOR T HE VARIOUS YEARS IN THE BLOCK PERIOD AND EVEN WITH THE CHIT COMMISSION THE TAXABLE INCOME BELOW THE TAXABLE MINIMUM IN THE CASE OF THE ASSESSEE FO R THOSE YEARS AND THUS NO ADDITION WAS REQUIRED TO BE MADE. IT WAS FURTHER SUBMITTED THAT EVEN INCLUSIVE OF THE CHIT COMMISSION FOR THE NUMBE R OF YEARS THE INCOME WAS BELOW TAXABLE AND THUS THE SAME SHOULD NOT HA VE BEEN ADDED AS PART OF BLOCK ASSESSMENT. STRONG RELIANCE WAS ALSO PLACED ON THE RULING OF THE HONBLE PUNJAB & HARYANA HIGH COURT CITED SUPR A. (V) WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS METICULOUSLY PERUSED THE RELEVANT RECORDS AND ALSO THE DOCUMENTA RY EVIDENCE PRODUCED DURING THE COURSE OF HEARING IN THE SHAPE OF A PAPE R BOOK. (VI) WE ARE NOT IN AGREEMENT WITH THE ARGUMENT/C ONTENTION OF THE LD. AR THAT CHIT COMMISSION IS EXEMPT FROM TAXATION . WE ARE OF THE VIEW THAT THE AMOUNT RECEIVED BY A SUBSCRIBER FROM A CHI T FUND IN EXCESS OF CONTRIBUTION MADE BY HIM IS A REVENUE RECEIPT AND CORRESPONDINGLY THE EXCESS CONTRIBUTION TO THE FUND OVER RECEIPT WOULD BE REVENUE LOSS. WHETHER THE SAME SHOULD BE ASSESSED AS BUSINESS INC OME OR INCOME FROM OTHER SOURCES WILL DEPEND ON FACTS OF EACH CASE. T HE FACTS CONSIDERED BY HONBLE PUNJAB & HARYANA HIGH COURT ARE DISTINGUISH ABLE FROM THE PRESENT IT(SS)A NO.26/BANG/09 PAGE 10 OF 12 CASE. IN THAT CASE THE AO DISALLOWED CHIT LOSS BY HOLDING THAT AS IT WAS NOT BUSINESS OF THE ASSESSEE TO CONTRIBUTE TOWARDS CHIT FUNDS THE LOSS INCURRED WAS NEITHER INCIDENTAL TO THE BUSINESS NOR EVEN REMOTELY RELATED TO THE BUSINESS. THEREFORE IN ESSENCE THE HONBLE P UNJAB & HARYANA HIGH COURT WAS CONSIDERING WHETHER LOSS SHOULD BE ALLOWE D AS BUSINESS/REVENUE EXPENDITURE. MORE OVER THE JUDGM ENT OF THE HONBLE PUNJAB & HARYANA COURT WAS DISSENTED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF BILAHARI INVESTMENTS P. LTD. V. CIT 288 ITR 39. THE HONBLE MADRAS HIGH COURT HAD HELD THAT INCOME DERIVED BY W AY OF CHIT DIVIDEND IS TO BE RECKONED AND ASSESSED AS INCOME. THE RELEVAN T FINDING OF THE HONBLE MADRAS HIGH COURT READS AS FOLLOWS: THAT A CONJOINT READING OF SECTIONS 5 AND 145 OF T HE INCOME-TAX ACT 1961 MADE IT CLEAR THAT ALL INCOME RECEIVED O R DEEMED TO BE RECEIVED OR ACCRUING OR ARISING DURING THE PREVIOUS YEAR SHALL FORM PART OF THE TOTAL INCOME OF THE ASSESSEE AND S UCH INCOME SHALL BE COMPUTED IN ACCORDANCE WITH THE ACCOUNTING SYSTEM WHICH THE ASSESSEE REGULARLY FOLLOWED. THEREFORE WHEN THE ASSESSEE FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTI NG AS STATUTORILY REQUIRED UNDER THE COMPANIES ACT IN WH ICH ENTRIES WERE POSTED IN THE BOOKS OF ACCOUNT ON THE DATE OF THE TRANSACTION THAT IS ON THE DATE ON WHICH RIGHTS A CCRUED OR LIABILITIES WERE INCURRED IRRESPECTIVE OF THE DATE OF PAYMENT THE INCOME DERIVED DURING A PARTICULAR PREVIOUS YEAR BY WAY OF CHIT DIVIDEND HAD TO BE RECKONED AND ASSESSED AS INCOME OF THAT YEAR. THE DIVIDEND INCOME HAD TO BE TAXED ON THE BASIS OF ITS ACCRUAL IN THE YEAR OF THE BID. THE DECISION OF THE HONBLE MADRAS HIGH COURT WAS A FFIRMED BY THE HONBLE SUPREME COURT IN THE CASE REPORTED IN 299 ITR 1. (VII) HOWEVER WE ARE INCLINED TO ALL OW THE ALTERNATIVE PLEA OF THE ASSESSEE THAT THE CHIT COMMISSION/DIVIDEND IS NOT T O BE ASSESSED IN ONE YEAR BUT SAME IS TO BE SPREAD OVER FOR THE ENTIRE B LOCK PERIOD. IT(SS)A NO.26/BANG/09 PAGE 11 OF 12 (VIII) ON A PERUSAL OF THE COMPUTATIONS O F INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEARS FROM 1997-98 TO 2003-04 [ P.23 33 OF PB AR] WE FIND THAT HE WAS IN RECEIPT OF CHIT COMMISSION A ND DIVIDENDS AGGREGATING TO SAY RS.45 723/- SPREAD OVER THE ABOVE MENTION ED ASSESSMENT YEARS AND NOT PERTAINING TO ONE ASSESSMENT YEAR. EVEN IF THE COMMISSION/DIVIDENDS WERE TO BE ADDED TO THE INCOME ARRIVED AT BY THE ASSESSEE FOR A PARTICULAR ASSESSMENT YEAR THE ASSE SSEES TAXABLE INCOME WAS BELOW THE TAXABLE MINIMUM. (IX) IN AN OVERALL CONSIDERATION OF THE FACTS A ND CIRCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FOREGOING PARA GRAPHS WE ARE OF THE FIRM VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTI FIED IN BRINGING TO TAX THE CHIT COMMISSION AND DIVIDEND AS INCOME FROM OTHER SOURCES. IT IS ORDERED ACCORDINGLY. 5. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLO WED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 30 TH SEPTEMBER 2010. DS/- IT(SS)A NO.26/BANG/09 PAGE 12 OF 12 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.