TMI Blog2010 (5) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made as undisclosed income without appreciating the facts; - the theory of HUF by the assessee was only an after thought. II. ITA No:798 - AY. 05-06: For this assessment year, the Revenue has raised six grounds, out of which, ground No.1 being general, it doesn t survive for adjudication. In the remaining grounds, the issues raised are reformulated, in a concise manner, as under: The CIT (A) has erred in: (i) deleting the addition of ₹ 62,29,977/- being unexplained investments; (ii) deleting the addition of ₹ 14,34,266/- towards vehicle maintenance. 2. As the issues raised in these appeals were similar and rather interlinked, for the sake of clarity and convenience, they were clubbed, heard together and disposed off in this common order. I. ITA Nos:797, 807 808/09 - AYs. 03-04, 04-05 06-07: (1) Briefly stated, the assessee, an individual, was doing business in bricks. During the course of assessment proceedings for the AY 2005-06, the AO had noticed and reasoned to believe that certain income of the assessee escaped assessments for the AYs 2003-04, 04-05 and 06-07 and, accordingly, to examine the veracity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed her return of income for the asst. years 2001-02 and 2002-03 on 31.7.2001 and 31.3.2003 respectively and an amount of ₹ 25 lakhs was shown as advance received from HUF in the balance sheet. The copies of the said return of income with balance sheet were already available on record to show the existence of HUF is not an afterthought. On perusal of the records the copies of the said returns were available on record to strengthen the appellant case. The assessment order passed without observing the principle of natural justice as enunciated by the Supreme Court s decision in GKN Driveshafts and also the income being agricultural income earned by the HUF cannot be taxed in the hands of the appellant. Both the grounds of appeals succeed and relief granted to the appellant. (4) Disappointed with the findings of the first appellate authority, the Revenue has come up with the present appeals. The cryptic submission of the Revenue was that the orders of the CIT(A) s was illegal, improper and much against the facts of the case, that the CIT(A) erred in deleting the addition made as undisclosed income, that he failed to appreciate the facts submitted in the form of written s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. referred supra wherein, the Hon ble Apex Court has observed thus When a Notice under section 148 of the Income-tax Act 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek reasons for issuing the notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the present case, the directions of the Hon ble Court have been given a go-by . It may be appropriate to analyze the ruling of the Hon ble High Court of Bombay in the case of Allana Cold Storage Ltd. v. ITO 287 ITR 1, which is of more illustrative on a similar issue. After deliberating the issue at length, the Hon ble Court has observed that - The law as laid down by the apex court is binding on this court as well as on the authorities functioning under the statute. This being the position, one fails to understand as to why the first respondent did not decide the objections separately which he is duty bound to decide. The whole idea in laying down the law in GKN Driveshaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is share of 14 A 20 G and subsequently he had purchased 21 A 35 G up-to the F.Y 2004-05. These land holdings of the assessee have subsequently become the HUF of the assessee. It is apparent from the above, the assessee (HUF) has been holding vast agricultural lands - which facts were on the records of the AO from which the assessee (HUF) was in receipt of incomes for the AYS, the details of which are as under: Asst. Year Agrl. Income Extent of land holding 2003-04 Rs.11 lakhs 30 A 11 G 2004-05 Rs.13 lakhs 32 A 24 G 2005-06 Rs.15 lakhs 36 A 20 G 2006-07 Rs.17 lakhs 40 A 14 G The assessee has been earning income from various crops, trees grown in the said lands such as, coconut trees, mango trees, chickoo trees, nilgiri trees, banana plantation, seasoned crop like ragi, vegetables etc., Out of these sale proceeds, the assessee had advanced amounts totaling to ₹ 25 lakhs as on 31.3.2003 to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased in 89-90 whereas the assessee got married in 1991; (iv) no proof for agricultural income of huge proportions was furnished; (v) no disclosure of purchase of assets in the balance sheet of HUF in his earlier returns; (vi) the creation of HUF was an after thought to explain the sources for purchase of agricultural lands; (vii) the bank account No.3273 was admittedly in the individual name and not in the name of HUF. (2) Agitated, the assessee contended before the Ld. CIT (A), the substance of which is summarized as under: (i) the impugned assessment order was dated: 28.12.07, whereas the AR appeared before the AO on 27.12.07 and furnished certain details and the case was adjourned to 28.12.07. Again the AR appeared on 28.12.07, furnished certain details and on 29.2.07 discussed the case with the AO; - In the letter dt. 29.12.07, details, such as, cash deposited in the Bank, purchase of Pay orders for ₹ 16 lakhs for purchase of lands and cash balance of ₹ 8.25 lakhs were furnished; - Details of HUF, on separation from family on an oral partition, the assessee got agricultural lands admeasuring 7A 10 G of HUF property; - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was necessary to file return declare only agricultural income for income-tax purposes. The land holdings of HUF and bank account not reflected in the balance sheet of appellant proved that these lands belonged to the HUF. The AO next observed that the lands do not stand in the name of HUF, hence, the lands are to be considered as that of appellant. In this regard, the appellant contention is that the Karnataka Land Reforms Act 1961 prohibits for purchasing agricultural lands other than a person who cultivates the lands. Further, the appellant s AR submitted that section79B of the said Act states that no person other than a person cultivating land personally shall be entitled to hold lands. In these circumstances, the appellant HUF could not have acquired agricultural land in the name of HUF. In effect, the lands shall stand in the name of individual and not in the name of HUF. The AO further observed that the creation of HUF is an after thought. The appellant claimed that the return of income in respect of appellant s wife Smt. K.Radha for the AYs 2001-02 and 02-03 was filed on 31.3.01 and 31.3.03 respectively along with the balance sheet. Wherein an amount of ₹ 25 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y facts, strangely enough, have been over-looked by the AO. (8) In view of the above and also the issue has since been dealt with elaborately by the Ld. CIT (A) in his impugned order, we are of the unanimous view that the AO was not justified in treating the entire sum of ₹ 62,29,977/- as assessee s income without any basis and also by overlooking the facts available on record. Accordingly, the addition of ₹ 62,29,977/- is deleted. (9) The other issue raised by the Revenue is with regard to deletion of the addition of ₹ 14,34,266/-. The assessee, being a manufacturer and supplier of bricks, had claimed an expenditure of ₹ 28,68,533/- under the head vehicle maintenance . However, the AO was of the view that the claim was on a higher side as in the immediately preceding year, the expense on vehicle maintenance was only ₹ 10,37,892/- on a turnover of ₹ 70.5 lakhs as against ₹ 28.68 lakhs on a turnover of ₹ 89.26 lakhs for the current year. Brushing aside the assessee s contention that the vehicles were old and even JCB expenditure also included under this head etc., the AO in comparing the total expenditure on raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers work spots these vital facts have been contributing more consumption of fuel, maintenance of vehicles etc., which have been sidetracked while considering the allowability of the claim by the AO; (ii) there was a deep hike in the price of petroleum products due to short supply as well as steep rise in the price of crude oil imported from oil supplied countries; (iii) the maintenance of heavy vehicles, wear and tear of its ancillaries and also the cost on replacement of spares cannot be equated with the expenses claimed for the same in the previous year (12) We have duly considered the submissions of the either party and also taken into cognizance of the finding of the Ld. CIT (A). As a whole, we find reasonableness in the argument of the assessee. How could one compare the maintenance of vehicles with the consumables and raw materials to arrive at the expenses incurred on the maintenance of vehicles? In our considered view, the comparison attempt made by the AO was not on the sound footing and was rather illogical. He had, perhaps, confused with the issue itself. Another lame excuse of the AO was that since the assessee had furnished the required data at the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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