TMI Blog2013 (10) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... before DDIT. On the contrary, Shri Francis Joseph, despite the alleged threat from the assessee, has firmly stood by his statement that the impugned bank account belongs to the assessee only. Tax authorities have corroborated the statement given by Shri Francis Joseph with sufficient material and surrounding circumstances. Accordingly held that the transactions found in the bank account, except the first two transactions, belong to the assessee only – Thus, confirmed assessment of deposits found in the bank account standing in the name of Shri Francis Joseph, in the hands of the assessee. Addition u/s 68 of the Income tax act - Unexplained credit in the capital account of the firm - Rs.5,60,000/- - Amount found credited in the capital account of the assessee in the books of partnership firm - Held that:- Assessee did not claim that he received a sum of Rs.10,15,000/- on slaughter tapping and sale of trees before the AO either during original assessment proceeding or during reassessment proceeding. He has made this submission for the first time before Ld CIT(A). In any case, the assessee could not substantiate his submissions with any credible evidence. On the contrary, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., regarding validity of re-opening of assessments. All these assessments had been re-opened by the AO by issuing notice u/s 148 of the Act. The assessee, inter alia, challenged the validity of reopening of impugned assessments before Ld CIT(A). The first appellate authority dismissed the grounds urged on validity of reopening of appeals and also disposed of the grounds urged on merits of additions. Before Tribunal also, the assessee, inter alia, challenged the validity of reopening of assessments. The Tribunal, vide its order dated 08-12-2006, decided the issue of validity of reopening of assessments in favour of the assessee for assessment years 1996-97 and 1997-98. Hence, the revenue filed appeals before Hon'ble High Court of Kerala challenging the orders passed by the Tribunal on the legal issue referred above. 3. For other three years, i.e., assessment years 1998-99 to 2000-01, the Tribunal remanded the legal issue cited above to the file of Ld CIT(A) for fresh consideration. In the set aside proceedings, the Ld CIT(A) held that the re-opening of assessments of all the three years was bad in law. The revenue challenged the said decision of the Ld CIT(A) by filing appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the investments made by him in construction of a house having an extent of 6000 Sq. Ft. and purchase of 165 acres of land in Tamilnadu. Based on this information, the DDIT (Inv) recorded a statement from the brother in law of the assessee named Shri Francis Joseph on 05-09-2002, wherein he stated that the SB account No. 3075 standing in his name with Federal Bank, Poovarani Branch was actually operated by the assessee herein. Shri Francis Joseph further submitted that he made initial deposits aggregating to Rs. 2 lakhs in his account. Thereafter, all other transactions were operated by the assessee herein by using blank cheque leaves signed and given to him. When this information was put to the assessee, he did not agree with the claim made by Shri Francis Joseph and asked for an opportunity to cross-examine him. Accordingly, the Assessing Officer issued a summon u/s. 131 of the Act upon Shri Francis Joseph. On the date fixed by the Assessing Officer, the assessee and his authorised representative appeared but Shri Francis Joseph failed to turn up. The summon issued by the Assessing Officer was returned by the postal authorities with the endorsement 'not claimed'. Hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him before the DDIT, the Assessing Officer concluded that the deposits in the above said bank account, except the first two deposits, belonged to the assessee herein. Accordingly, for the assessment year 1996-97, the Assessing Officer added a sum of Rs. 3.00 lakhs as unexplained deposit. In the appellate proceedings, the Ld. CIT(A) confirmed this addition. 8. Before us, the Ld. Counsel for the assessee submitted that the assessee was not given an opportunity to cross examine Shri Francis Joseph and hence, the impugned addition, made in violation of natural justice. is not valid in the eyes of law. He further submitted that Shri Francis Joseph has only stated that the deposits have been made through bar business of M/s. Mayura Bar, a partnership firm. Accordingly, he submitted that it is not proper to assess the said deposits in the hands of the assessee, who is only one of the partners in the above said partnership firm. The Ld. Counsel for the assessee further submitted that the department has re-opened the assessment of Shri Francis Joseph also and assessed the deposits of the very same amount in his hands also. Hence the very same addition made in the hands of the assessee res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee herein on the basis of signed blank cheque leaves given by him to the assessee. Though the Assessing Officer issued summons to Shri Francis Joseph, in order to allow an opportunity of cross-examination to the assessee, yet Shri Francis Joseph did not appear before the Assessing Officer on the reasoning that he was scared of the assessee herein and facing threat of arrest in a criminal case fabricated by the assessee herein. However, the said Francis Joseph again re-affirmed the statement given by him before the DDIT to the effect that the impugned bank account was operated by the assessee herein. The Assessing Officer has also collected information from the bank and noticed that the majority of cheques and pay-in-slips contained the signature of the assessee herein which clearly proved that the bank account was controlled and operated by the assessee herein. 10. We have heard the rival contentions on this issue. The admitted facts are that the bank account maintained with Federal Bank stands in the name of Shri Francis Joseph, the brother in law of the assessee herein. The assessee herein has introduced Shri Francis Joseph to the bank. According to Shri Francis Jos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee herein was operating the bank account opened in the name of Shri Francis Joseph. The said fact was also corroborated by the AO by obtaining copies of cheques leaves and pay in slips from bank, wherein the signature of the present assessee was found. However, according to the assessee, he has operated the bank account on the instructions of Shri Francis Joseph only. 10.5 The question that arises now is - which of the statements can be considered to be true. We have already noticed that the assessee herein is a man of means, whereas Shri Francis Joseph did not have enough means. The assessee has introduced Shri Francis Joseph to the bank for opening the impugned bank account. Thereafter, he has collected 60 leaves of blank cheques signed by Shri Francis Joseph. It is also an admitted fact that Shri Francis Joseph was staying in a far-away place and accordingly it was submitted by the assessee that he obtained the signed cheque leaves in order to facilitate the operation of accounts on behalf of Shri Francis Joseph. However, the said submission defies the logic for more than one reason, i.e., (a) the necessity of opening a bank account in a place where Shri Francis Jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch an opportunity to the assessee. It is also pertinent to note that the assessee, being brother in law of Shri Francis Joseph, could not produce him before the AO to retract the statements already given by him before DDIT. On the contrary, Shri Francis Joseph, despite the alleged threat from the assessee, has firmly stood by his statement that the impugned bank account belongs to the assessee only. Accordingly, we are of the view that decision of the AO might not have changed, had he disregarded the sworn statement given by Shri Francis Joseph. Hence, the cross examination could not have changed the position. Accordingly, in our view, all the case law relied upon by the assessee shall not be applicable to the facts of the instant case. Accordingly, we hold that the tax authorities have corroborated the statement given by Shri Francis Joseph with sufficient material and surrounding circumstances. Accordingly we hold that the transactions found in the bank account, except the first two transactions, belong to the assessee only. 10.7 The Ld Counsel also contended that Shri Francis Joseph has only implicated the partnership firm, i.e., the deposits were made by the assessee from out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not have explainable sources for the investment made in the partnership concern. Hence, the AO assessed the amount of Rs.5,60,000/- as unexplained investment in the hands of the assessee. 11.1 Before Ld CIT(A), the assessee submitted that he received a sum of Rs.10,15,000/- by way of slaughter tapping and sale of trees as evidenced by agreements dated 5.7.1994, 15.7.1994 and 13.2.1995. It was submitted that the AO considered only Rs.4,75,000/- only during the course of original assessment proceeding and the balance amount of Rs.5,40,000/- was available. However, the assessee could not furnish any document in support of the said claim. The Ld CIT(A) also noticed that the assessee was raising this contention for the first time before him, that too without furnishing any detail or evidence in support of the said claim. Hence, the Ld CIT(A) confirmed the said addition. 11.2 Before us, the Ld A.R simply reiterated the contentions made before Ld CIT(A). He fairly admitted that the assessee did not have any evidence to support his contention. He also submitted that the assessee might have furnished copies of all the three agreements to the AO and hence it might be available in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly added the same to the total income of the assessee. The Ld CIT(A) also agreed with the view taken by the AO on this issue and accordingly confirmed the said addition. 13. The Ld Counsel for the assessee submitted that the lender Shri George Joseph has confirmed the loan of Rs.4.00 lakhs given to the assessee by appearing before the AO. Further the lender has also explained the sources for giving the impugned loan. Accordingly he submitted that the assessee has discharged the obligation placed upon him u/s 68 of the Act. He also submitted that the assessee has shown the loan only in the cash flow statement and the said loan was not recorded in any of the books of account. Accordingly he contended that the AO was not right in invoking the provisions of sec.68 of the Act in the instant issue. The Ld A.R has placed reliance on the case laws reported in 234 ITR 571, 187 ITR 299, 237 ITR 570 in this regard. On the contrary, the Ld D.R submitted that the lender did not prove his credit worthiness to the satisfaction of the AO. Further she said that it was not comprehensible as to how a person could give interest free loan to the assessee by availing interest bearing loans from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low statement, but it was not included in the return of income. Hence, the AO assessed the same. Before Ld CIT(A), the assessee contended that the assessing officer did not include the above said income in the reasons recorded for re-opening of assessment and hence he could not have assessed the same. The Ld CIT(A) did not agree with the contentions of the assessee and accordingly confirmed the order of the AO on this issue. Before us also, the Ld A.R reiterated the same contentions. However, in view of the specific provisions contained in sec. 147, we are of the view that the AO is very much entitled to assess the escaped income during the reassessment proceedings, which comes to his notice during the course of assessment. However, the Courts have held that the AO is entitled to do so, provided he assesses those incomes for which the assessment was re-opened. In the instant case, the assessing officer has assessed the incomes for which the assessment was re-opened. Hence, we do not find any infirmity in assessing the interest income which has come to his notice during the course of assessment proceedings from out of the cash flow statement filed by the assessee. Accordingly, we up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee had included a sum of Rs. 1,80,000/- only as cash inflow under the head agricultural income, leaving a balance of Rs.20,000/-. The Ld. Counsel for the assessee submitted that the above said sum of Rs 20,000/- was used by the assessee for making investment in the firm. We also heard the Ld. DR on this issue and also perused the cash flow statement filed by the assessee. We also notice that the Assessing Officer has assessed agricultural income at Rs.2.00 lakhs for this year. However, in the cash flow statement, the assessee has included a sum of Rs. 1,80,000/- only as cash inflow, which leaves a balance of Rs.20,000/-. As submitted by the Ld. Counsel for the assessee, this amount could have been used by the assessee for making investment in the firm M/s. Hotel Mayura. The department could not produce any material to contradict the said submissions made by the Ld. AR. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer to delete the addition of Rs. 20,000/-. 19. The next issue relates to the addition of Rs.1,60,224/- towards personal expenses. Before the Assessing Officer, the assessee stated that he has drawn a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with Federal Bank in the name of Shri Francis Joseph. In the assessment year 1996-97 also, the deposits found in the above said bank account was assessed by the AO. This issue has been discussed in detail in that assessment year and we have confirmed the order of the Ld. CIT(A) in holding that the deposits found in the above said bank account is assessable in the hands of the assessee. By following the said decision, we confirm the order of the Ld. CIT(A) on this issue for this year also. 23. The next issue relates to the addition of unexplained investment in the capital account of the firm M/s Hotel Mayoora. The AO noticed that the assessee has invested a sum of Rs.1,90,000/- in his capital account in Hotel Mayoora, but it was not reflected in the cash flow statement. The assessee also did not offer any explanation before the AO. Hence, the AO added the above said amount as unexplained investment. Before Ld CIT(A), it was submitted that a sum of Rs.1,50,000/- was realised on sale of old building and a sum of Rs.40,000/- was realised out of agricultural income. However, no detail was furnished to substantiate the said explanation. Hence, the Ld CIT(A) confirmed the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount in Hotel Mayoora, but it was not reflected in the cash flow statement. The assessee also did not offer any explanation before the AO. Hence, the AO added the above said amount as unexplained investment. Before Ld CIT(A), it was submitted that the assessee returned agricultural income to the tune of Rs.3.00 lakhs. However, in the cash flow statement only a sum of Rs.1.00 lakh was taken as cash inflow. Accordingly, it was submitted that the balance amount of Rs.2.00 lakhs was used for making investment in the firm. The Ld CIT(A) did not accept the said explanation and accordingly confirmed the addition made by the AO. 27.1 Before us, the Ld A.R reiterated the very same contention. We have gone through the cash flow statement and notice that the assessee has included a sum of Rs.1.00 lakh only as cash inflow. From the assessment order, we notice that the AO has assessed a sum of Rs.3.00 lakhs as agricultural income. Hence, the claim of the assessee that he has invested in the firm out of the balance amount of Rs.2.00 lakhs appears to be reasonable. It was not shown to us by the department that the above said sum of Rs.2.00 lakhs could not have been available with the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1995-96 1996-97 1,50,645 1996-97 1997-98 6,27,090 1997-98 1998-99 2,99,262 1998-99 1999-00 13,36,250 1999-00 2000-01 4,92,040 29,05,287 2000-01 2001-02 3,35,930 32,41,227 We notice that the cost of construction declared by the assessee is only Rs.32,41,227/- as worked out above and not Rs.34,91,767/-, as taken by the assessing officer. It is unfortunate that the Ld A.R, being the officer of the court and who is required to assist the bench, did not point out this error. Instead, we notice that the Ld A.R has only tried to capitalise the mistake committed by the assessing officer. In any case, the cost declared by the assessee up to 31.3.2000 or up to 31.3.2001 was less than the value determined by the DVO. We also notice that the DVO has valued the building on 27.3.2002 and the DVO has stated that the building was not completed by that date. Hence, the DVO has valued an incomplete building. Hence, it is necessary to compare the cost declared by the assessee up to that stage of completion with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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