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TMI Blog2010 (5) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in deleting the 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t.K. Radha, appellant's wife 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 submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fts (India) Ltd. 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 Drivesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Smt. K. Radha, wife of the assessee. As a matter of fact, Smt. K.Radha had furnished her returns of income for the AYs 2001-02 and 2002.03 wherein she had disclosed the advances taken from HUF amounting to ₹ 25 lakhs. These facts were available on record of the AO. The AO's other allegation that the creation of HUF was an after thought also doesn't hold water since the assessee's wife in her returns of income referred supra had disclosed for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.07 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; - The details of lands purchased in Choodsandra and Kudlu village - The lands admeasuring 7A 24G in Sy.No.9 were purchased after the death of assessee's father and before the oral partition of the family of assessee's late father and thus there was an HUF during the life time of assessee's father; - On partition and after the marriage of the assessee, agricultural lands of 14A 20G became the HUF property and the HUF had, subsequently, purchased about 17A 38 ½ G till the FY 2003-04 (ii) by ignoring the above details before the AO and on records, the AO had passed the order on 28.12.07 itself even though the assessee was given a hearing on 29.12.07. (3) Arm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 lakhs was shown as advances received from HUF. The copies of he said returns of income were submitted to the AO at the time of assessment proceedings. On perusal of assessment records, copies of the said returns are available on record to strengthen the appellant case. The claims of the appellant with material on records and evidences cannot be brushed aside without any cogent reason by the AO. The AO either during the asst. proceedings or subsequently has not disputed the existence of the land and the agricultural operations carried on by the HUF and failed to consider the submission made by the appellant. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med 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 materials and consumables etc., took a view that the expenses claimed were excessive and, therefore, disallowed 50% of the total expenditure of ₹ 2868533/- on vehicle maintenance. (10) The Ld. CIT (A), after giving due weight-age to the forceful contentions of the assessee backed with comparative figures etc., perusing the remand report of the AO and the rebuttal of the assessee on remand report, has observed thus - "(Page 20)…………….it is not fair to compare the percentage of expenditure on vehicle maintenance on the basis of turnover alone, various other factors such as cost of fuel, spare p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fag end of the proceedings, he had to resort to disallow 50% of the claim as excessive. The moot question before us is - how could the action of the AO be justifiable to disallow as it would meet the end of justice, if 50% of the expenditure claimed disallowable since the assessee took a considerable time to furnish the required data? This exercise of the AO, to put it gently, was a futile attempt which in no way stand the testimony of scrutiny. For the year under dispute, the assessee had included JCB expenditure under the head 'vehicle maintenance' whereas in the immediately previous year, the JCB expenditure was added to cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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