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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI ABRAHAM P GEORGESmt. Chethna Gupta,
In this appeal by the assessee against an order dated 8/6/2012 of CIT(A)-II, Bangalore, in addition to original grounds, concise grounds of appeal has also been filed. A reading of the original and the concise grounds of appeal shows that assessee is aggrieved on two issues. First is with regard to addition of Rs.10,50,000/- and the second issue is with regard to reopening proceedings for impugned assessment order.
Smt.Chethna Gupta Page 2 of 9 2. Facts apropos are that there was a survey in the premises of one Smt.Manju Gupta who was owning a proprietary concern ‘Mathru Granites’ located at Attibele Industrial Estate, Attibele, on 19/3/2008. During the course of survey Possession Certificate issued by the Karnataka State Financial Corporation in the name of Smt.Chethana Gupta was found. The said possession certificate read as under: “The scheduled assets as detailed hereunder of M/s Neelam Industries, Plot No.16/c, Somanahalli Industrial Area, Maddur Taluka which was taken over by the Corporation in exercise of its statutory powers vested under section 29 of the SFCs Act. The under mentioned scheduled assets have been sold by the Corporation in pursuance of the Sale Negotiation meeting held on 17/03/2004 in the Chamber of Assistant General Manger, KSFC, Branch Office, Mandya, to Kum.Chathana D/o Dharamraj, No.90, ‘C’ Layout, Bannimantap, Mysore, for a sale consideration of Rs.10,50,000/- (Rupees ten laksh fifty thousand only). The under mentioned scheduled assets have been handed over to Kum.Chethana, Mysore on this day i.e. 10/11/2004 on ‘AS IS WHERE IS CONDITION” AO was of opinion that assessee had purchased industrial property for Rs.10,50,000/- during the previous year ending on 31/3/2005. As per AO, assessee had not filed any return of income for impugned assessment year which could throw light on source of investment of Rs.10,50,000/- in the industrial property mentioned above. AO resorted to sec.147 of the IT Act and issued notice u/s 148 on 11/3/2010 to the assessee. In compliance, assessee filed a letter requesting for one month time to comply with said notice. Return of income was filed by Smt.Chethna Gupta Page 3 of 9 assessee on 24/05/2010 wherein total income of Rs.42,000/- was declared which inter alia included income from business. Assessee was required to explain source of investment of Rs.10,50,000/-. It seems there was no response from assessee to the notices issued by the AO. AO proposed an assessment u/s 144 of the Act and final notice was issued to assessee in this regard. As per said notice, addition of Rs.10,50,000/- was proposed for unexplained investment in purchase of industrial property. Said letter was served on assessee in the factory premises of M/s.Mathru Granites owned by assessee’s mother in law Smt. Manju Gupta. There was no response to said proposal. Eventually the assessment was completed by making an addition of Rs.10,50,000/- u/s 69 of the Act.
Aggrieved, assessee moved in appeal before CIT(A). Argument of assessee was that during relevant previous year, payment made for purchase of property was only Rs.9,50,000/- only. Assessee also furnished a statement of affairs before CIT(A) in which capital of Rs.8.8 lakhs was reflected. As per the assessee, credits in her SB account with Punjab & Sindh Bank were sourced from gifts, loans, tuition income etc. Assessee also stated that she had received hand-loan of Rs.5,20,000/- from 7 persons. As per assessee, M/s.Mathru Granites and one Shri O.P.Gupta had returned a sum of Rs.2 lakhs and Rs.1 lakh respectively, earlier loaned by her, to them.
Smt.Chethna Gupta Page 4 of 9 4. CIT(A), after verifying details filed by assessee, was of opinion that assessee had not filed any returns in earlier year. As per CIT(A), capital of Rs.8.8 lakhs shown by assessee in statement of affairs as on 31/3/2005 could not be believed. At the best, only a sum of Rs.2 lakhs could be accepted as fund available from tuitions, gifts, loans etc. However, as per CIT(A), assessee was obliged to give source to the extent of Rs.9,50,000/- only since what was paid by her during the relevant previous year for acquiring the industrial land was only that much. He, therefore, gave a relief of Rs.2 lakhs and confirmed the addition to the extent of Rs.7.5 lakhs.
Now, before me, learned AR strongly assailing order of CIT(A), submitted that reasons for re-opening were not supplied to assessee. As per learned AR, reason for reopening was mentioned by AO in the assessment order as the possession certificate obtained from premises of assessee’s mother-in-law during survey in their premises. Relying on decision of the co- ordinate bench in case of Smt. C.P.Prameelamma vs. ITO in dated 09/10/2015, learned AR submitted that only if total income of assessee exceeded maximum amount not chargeable to tax could there be deemed or fictional presumption of income escaping tax in a case where no return of income was furnished.
Smt.Chethna Gupta Page 5 of 9 6. On merits of the issue, learned AR submitted that assessee had produced confirmation letters from various persons for loans/gifts received. According to him, statement of affairs as on 31/3/2005 filed before CIT(A), reflected sundry creditors of Rs.2,10,000/- for which confirmations were filed. In addition, as per learned AR, assessee had received gifts from her brother, mother, father and brother-in-law which were also specified in the statement of affairs. Lower authorities had made addition without considering these confirmations filed. As per learned AR, CIT(A) had sought remand report from AO but AO had not given any chance to assessee to prove source of loans and gifts. AO, in the remand report dated 25/11/2011 had not given any comments, on various evidence filed by assessee for proving the source. According to him, confirmations filed by assessee were rejected without any valid reasons.
7. Per contra, learned DR strongly supported the order of CIT(A) and submitted that assessee was given considerable relief by CIT(A). According to him, assessee was given number of opportunities by AO during the course of original assessment proceedings. Assessee chose to ignore all these and did not pursue case before the AO. Learned CIT(A), as per learned DR, was justified in rejecting claims made by assessee during the appellate proceedings since assessee had shown no reason why it could not appear before AO and furnish evidence. Relying on judgment of the Hon’ble Rajasthan High Court in CIT vs. Jaipur
Smt.Chethna Gupta Page 6 of 9 Udyog Ltd. (227 ITR 345) and that of Hon’ble Punjab & Haryana High Court in CIT vs. SAS Educational Society (319 ITR 65), learned DR submitted that assessee once given sufficient opportunity by AO, could not be allowed to furnish new and fresh evidence before higher authorities.
I have perused the orders and heard rival submissions. Assessee had assailed the re-opening done by AO. According to assessee, there was no reason why AO resorted to a reopening. What we find is that assessee here had never asked AO the reasons for reopening at any time of the proceedings. Learned AR is relying on the portion from assessment order reproduced by us in para. 2 above for submitting that reasons were not relevant. No doubt Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. vs. ITO (259 ITR 19) had held that assessee can seek the reason for reopening and the AO had to dispose of the objections raised by the assessee to the reopening before proceeding with the assessment. In my opinion, where an assessee has never sought reasons for reopening, judgment of the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd (supra) would have no application. Here the assessee is simply presuming that the reason for reopening was the Possession Certificate obtained during the course of survey in her mother-in- law premises. This is only a presumption taken by the assessee. Assessee having never asked for reason, there was no question of AO expressing any opinion on her objections to reopening. As for Smt.Chethna Gupta Page 7 of 9 decision of the co-ordinate bench in case of Smt. C.P.Prameelamma(supra), the assessee concerned had asked for reason and this was not provided by AO. It was due to this reason that the co-ordinate bench held the reopening to be not valid. Even otherwise, Possession Certificate found during survey done by the revenue in the premises of Smt.Manju Gupta was good enough a reason to reopen the assessment of the assessee, especially so, since assessee had not filed any return of income for impugned assessment year or earlier year. In reality it was the first assessment and not a re-assessment. I, therefore, dismiss the grounds taken by assessee in her appeal regarding jurisdiction of AO to proceed u/s 147 of the Act.
Coming to merits of the addition, it is not disputed that assessee had produced before CIT(A) statement of affairs on 31/3/2005 and also confirmations filed from various parties to support her claim of gifts and loans. Though, CIT(A) has not mentioned anything regarding the remand report obtained by him, during the course of appellate proceedings, learned AR has pointed out that there was a remand report dated 25/11/2011 from the AO. The content of the remand report which was read out by learned AR in the open court was not disputed by the revenue. The report clearly substantiates the claim of the assessee that proper verification with regard to its claim of gifts/loans etc., was not done by lower authorities. No doubt, learned DR has strongly supported the order of the CIT(A) by Smt.Chethna Gupta Page 8 of 9 relying on the judgment of Hon’ble Rajasthan High Court in the case of Jaipur Udyog Ltd (supra) and Hon’ble Punjab & Haryana High Court in the case of SAS Education Society (supra). What I find is that CIT(A) had indeed considered the evidence filed by the assessee and given it a relief of Rs.2 lakhs against the claim of tuition/gifts/loans. Once the CIT(A) had decided to consider the evidence filed by the assessee, in my opinion, he had to go the wholehog and could not stop at an intermediate stage. He should have either verified the veracity of the claim of the assessee by himself or directed the AO to do so. The claim should have been disposed of in an objective manner considering each of the confirmations filed by the assessee. I am, therefore, of the opinion that the matter regarding addition of Rs.10,50,000/- requires fresh look by the AO. I, therefore, set aside the orders of the authorities below and remand the issue regarding source of investment of Rs.10,50,000/- back to the file of the AO for consideration afresh in accordance with law. The assessee can rely on the documents filed by it before CIT(A) and any other supporting proof. The AO shall proceed in accordance with law.
Appeal of the assessee is partly allowed for statistical purposes.