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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
There are 3 appeals filed by the assessee under consideration for the A.Yrs. 2006-07 to 2008-09. They are filed against the consolidated order of CIT(A), Kolhapur, dated 23-09-2014.
We shall take up the appeal of the assessee for the A.Y. 2006-07 first for reference to the facts. Grounds raised by the assessee are extracted here as under :
“1. The order of the leaned CIT (Appeals) is bad in law and opposed to the facts. 2. The learned CIT (Appeals) has erred in upholding the addition of Rs.18,34,649 made by the Assessing Officer as an unexplained expenditure. He ignored the letter of confirmation given by the family friend who had paid some portion of the school fees of assessee's son and had furnished the copies of his passport and residence certificate in
Switzerland. He ignored the fact that entire expenditure was incurred through official banking channels. Without prejudice to these facts, the learned CIT (Appeals) has erred in ignoring the fact that out of total expenses of Rs. 18,34,649 the appellant had incurred an expenditure of Rs,5,78,608 on 02/06/2005 from his personal bank account in India vide Savings Bank Account No.20120636722 with Bank of Maharashtra, Laxmipuri Branch, Kolhapur and remitted the amount through authorized channels, hence the said amount ought to have been excluded from the alleged addition. The total addition of Rs. 18,34,649 may kindly be deleted.
The appellant craves leave to add to, to modify, to amend, or to delete any or all the above grounds of appeal.”
2.1 Assessee has also raised an additional ground without prejudice
to the original grounds of appeal and the same is also extracted here as
under :
“1. The assessee submits that in case, any addition is warranted, in that event, the benefit of telescoping may kindly be granted against the additional income disclosed by Ghatge Patil Industries Ltd. in its return of income after the search action.”
Briefly stated relevant facts of the case include that the assessee
is an individual and belongs to Ghatge Patil group of cases. Assessee
studied in Shrewsbury School, London. As per the AO, assessee spent
Rs.49 lakhs (rounded off) on the said school. There was search action
u/s.132 of the Act on the assessee on 11-09-2008. The said search
action resulted in seizure of documents pertaining to the education of
the assessee in that school. In the assessment, AO determined the total
expenditure on the said education amounting to Rs.49,32,544/-. The
year-wise details are tabulated as under :
Financial Date of payment Amount paid in Rs. Year 2005-06 01-06-2005 5,78,607 27-09-2005 6,04,958 17-01-2006 6,51,084 18,34,649 2006-07 15-05-2006 7,39,234 20-08-2006 7,25,788 11-09-2006 7,25,884 18-01-2007 7,51,071 29,41,977
2007-08 17-05-2007 1,55,928
Accordingly, AO made addition of Rs.18,34,649/- for the assessment
year 2006-07, Rs.29,41,977/- for the A.Y. 2007-08 and Rs.1,55,928/-
for the A.Y. 2008-09.
In the First Appellate proceedings, the CIT(A) confirmed the said
additions for all the 3 assessment years. Aggrieved with the said order
of CIT(A), the assessee is in appeal before us.
During the proceedings before us, at the outset, Ld. Counsel for
the assessee submitted that the total amount worked out by the AO in
the table above requires certain corrections on facts.
Referring to the amount of Rs.7,25,788 paid on 30-08-2006 vide
the table in Para No.3 overleaf, Ld. Counsel for the assessee submitted
that the said amount requires to be deleted due to duplicity. This
amount is relevant for the A.Y. 2007-08. Further, referring to the
amount of Rs.5,78,607/- (pages 3 to 11 of the paper book), Ld. Counsel
submitted that assessee owns bank account in India and an aggregate
sum of Rs.13 lakhs was withdrawn from the said bank account and the
same was the source for making couple of Demand Drafts sent to
Shrewsbury School, UK. In this regard, Ld. Counsel brought our
attention to page 1 of the paper book, which contains the summary of
statement of account raised by Schrewsbury School, UK evidencing the
receipt of money from the assessee. Referring to Pages 3, 5 and 6 of the
paper book, Ld. Counsel submitted that £7180 was made out of fund of
Rs.5,84,730/- drawn from The United Western Bank Ltd., Kolhapur
savings account on 01-06-2005 where the assessee has an account.
Referring to page 6 of the paper book, Ld. Counsel submitted that the
said page constitutes the evidence for withdrawal of Rs.5,84,730/- on
01-06-2005. Therefore, according to Ld. Counsel for the assessee, the
same is from own funds which should constitute accounted source of
income for evidence the payment. Referring to page 4, 8 and 11 of the
paper book, Ld. Counsel submitted that £8156/70 was made out of
fund of Rs.7,25,688/- drawn from the Bank of Maharashtra, Laxmipur
Branch, Kolhapur for making the demand draft for a sum of £8156/70
paid to Schrewsbury School, UK on 11-09-2006. These two demand
drafts worth around Rs.13,04,296/- should also be reduced from the total addition of Rs. 49,32,544/-.
On hearing both the parties and on perusal of the paper book and
the documents placed before us, we are of the opinion that the two
adjustments, i.e. (1) duplication and (2) accounted sources from the
Indian Bank account, as demonstrated by the Ld. Counsel are
sustainable in principle. We accordingly order. After due verification of
the entries, the AO is directed to reduce the amounts as per the law
after due verification of the documents placed before us. To that extent,
we find merit in the arguments of Ld. Counsel for the assessee. This
aspect is relevant for the A.Y. 2006-07 and 2007-08. Accordingly, the
relevant grounds raised by the assessee are allowed for statistical
purposes.
Additional Ground – Telescopy : Regarding the additional
ground raised by the assessee, Ld. Counsel for the assessee submitted
that the assessee relates to M/s.Ghatge Patil Industries Ltd. (in short
‘GPIL) and the search action resulted in discovery of certain documents
evidencing the payment of cash by the company to the assessee.
Bringing our attention to pages 85 to 123 of the paper book, Ld.
Counsel demonstrated that pages 23 to 123 constitutes additional
evidences and they constitutes the cash vouchers evidencing the cash
payment to the assessee during the year under consideration. In
particular, the pages 85 to 123 constitute the vouchers seized during
the search action and the GPIL offered the said cash to tax in its hands.
Bringing our attention to some of these pages, Ld. Counsel submitted
that those gross amounts of the cash payment made to Mr. Kiran Patil,
the assessee, the amount of total addition of Rs. 49,32,544/- added by
the AO on account of foreign education in UK. Before us, in the context
of additional ground, Ld. Counsel for the assessee submitted that the
said amount, since received by Mr. Kiran Patil from the company, is
now available to the assessee for explaining the source of
Rs.49,32,544/- paid to Schrewsbury School, UK. Therefore, requesting
for grant of telescopy benefit, Ld. Counsel prayed for remitting the issue
to the file of AO for verification and fresh consideration of the issue.
On this issue, Ld. DR for the Revenue vehemently opposed to the
request for admission of the additional ground and evidences. On
merits of telescopy benefit, Ld. DR argued that the said cash payments
are appropriated/utilised in India and the same is not the investment
on his school education abroad. Ld. DR rely dutifully on the orders of
the AO/CIT(A).
On hearing both the parties, we are of the opinion that it is an
undisputed fact that Ghatge Patil Industries Limited offered additional
income on account of such cash payment made to Mr. Kiran Patil and
there is no dispute on this issue. Consequently, Mr. Kiran Patil is the
owner of the equivalent amount and the same should have been
reflected in his financial statement as his income for the assessment
years under consideration. Therefore, the additional ground as well as
the additional evidences cannot be dismissed outright. Accordingly, we
admit the same for adjudication. Further, considering the set principles
of natural justice, there is need for the AO to look into the additional
ground and related aspects, both on facts and on law before any final
decision is taken. Considering the gravity of the documents placed
before us, we are of the opinion that these additional evidences should
be remanded to the file of AO for fresh examination as they confirm the
fact of providing cash to the assessee. AO shall grant reasonable
opportunity of being heard to the assessee and examine the issues
afresh as per the due process of law.
Before concluding, we may mention that this is a search case and
the onus is heavily on the assessee to demonstrate that the cash
payments received from the company crossed the international borders
through the rightful methods to reach the said school in UK. There is
need for establishing the connection between the cash given to assessee
and the appropriation of the same by assessee for school education in
UK. Assessee is directed to discharge the same before the AO.
Accordingly, the grounds and the additional ground raised by the
assessee in the appeals are allowed for statistical purposes.
In the result, all the 3 appeals of the assessee are partly allowed for statistical purposes.
Order pronounced in the open court on this 06th day of June, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य पुणे Pune; �दनांक Dated : 06th June, 2018 सतीश
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A), Kolhapur 4. The CIT Central, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A Bench” Pune; 5. गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune