KIRAN JAYKUMAR PATIL,KOLHAPUR vs. DEPUTY COMMISSIONER OF INCOME-TAX,

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.

“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.

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.”

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.

additions for all the 3 assessment years. Aggrieved with the said order

of CIT(A), the assessee is in appeal before us.

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/-.

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.

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.

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).

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.

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