TaxTMI 
TaxTMI 
2015 (4) TMI 260
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....t the learned Commissioner of Income-tax (Appeals) has entertained additional evidence in violation of rule 46A and failed to give an opportunity of representation to the Assessing Officer. It also pleaded that the learned Commissioner of Income-tax (Appeals) has erred in not examining the evidence available on record. Before adverting to the specific grievance of the Revenue in each assessment year, first we take these legal grounds of appeal raised by the Revenue. I. T. A. No. 1008/Bang/2011-assessment year 2003-04 3. Though the facts on all vital points are common in all the assessment years, but for the facilitation of reference, we are taking up the facts mainly from the assessment year 2003-04. The brief facts are that the assessee is an individual and a gynaecologist by profession. He is running a nursing home at Mandya in the name and style of M/s. Kaveri Nursing Home. On April 12, 2008, the assessee was intercepted by the police possessing a sum of Rs. 3,21,50,000 in his car. He was unable to specifically explain the source of cash. Thus it was seized by the police authorities in Mandya and an information was sent to the Income-tax Department. The cash so seized by the p....
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....ce. He accordingly deleted the addition of Rs. 18 lakhs. 6. The learned Departmental representative while impugning the order of the Commissioner of Income-tax (Appeals) contended that the learned first appellate authority has failed to follow the procedure provide in rule 46A while entertaining the additional evidence. She further contended that the Assessing Officer has specifically submitted before the Commissioner of Income-tax (Appeals) that a notice for personal hearing should be given to him. In spite of that the learned Commissioner of Income-tax (Appeals) failed to provide opportunity of hearing to the Assessing Officer. She called for the original folder of the Commissioner of Income-tax (Appeals)'s appeal and produced in the court room. She demonstrated as to how the learned first appellate authority failed to comply with the requirement of sub-rule (3) of rule 46A. 7. On the other hand, learned counsel for the assessee submitted that the first appellate authority has called for a remand report from the Assessing Officer on the additional evidence sought to be produced by the assessee. Therefore, there is no violation of rule 46A. The Assessing Officer was given du....
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....ent, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271." 9. On a bare perusal of this rule would suggest that sub-rule (1) puts an embargo upon the assessee to seek permission for producing additional evidence either oral or documentary. Such evidence can only be permitted to be produced, if conditions enumerated in sub-clauses (a) to (d) are available. The learned Commissioner has to record in writing as to why he had admitted the additional evidence. Sub-rule (3) contemplates that if additional evidence is taken on record, then it cannot be considered on the merits, unless an opportunity to the Assessing Officer is being given to comment the evidence or documents or to cross-examine the witness produced by the assessee. Apart from that the learned Assessing Officer would be given an opportunity to produce any evidence or documents or any evidence in rebuttal of the additional evidence produced by the ....
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....udication. The learned first appellate authority shall call for a remand report from the Assessing Officer on merit. 12. Now we take the Revenue's other grounds of appeal in the assessment year 2003-04. In ground No. 4, the Revenue has pleaded that the Commissioner of Income-tax (Appeals) has erred in accepting the explanation of the assessee with regard to the gift received from Dr. Prabhakar Shetty. Since this issue has been set aside to the file of the Commissioner of Income-tax (Appeals) for readjudication, therefore, no specific finding is required to be recorded. 13. In ground No. 5, the Revenue pleaded that the learned Commissioner of Income-tax (Appeals) has erred in accepting the explanation of the assessee with regard to the gifts received from Mr. Jayesh Kumar and Shri Shankar Lal. We find from the record that these two persons have made a gift of Rs. 3 lakhs each. The learned Commissioner of Income-tax (Appeals) has confirmed the addition. Therefore, the ground is misconceived, hence rejected. 14. The learned Departmental representative pointed out that basically the grievance of the Revenue is that these amount ought to have been assessed as income from other so....
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.... has explained the transaction. 17. We have duly considered the rival contentions and carefully gone through the record. The learned first appellate authority noticed the following important aspects with regard to this transaction. "(i) Mr. H. B. Krishnappa is an agriculturist and has confirmed having advanced a sum of Rs. 5 lakhs towards purchase of a site. (ii) He is an agriculturist by profession and is a grower of sugarcane having substantial holdings. (iii) He has advanced the amount of Rs. 5,00,000 by cash. (iv) He has confirmed having known Dr. Krishna for past 25 years. (v) He has submitted affidavit to the fact that he has advanced the money. (vi) Since the transaction is not complete he has stated that the money is still receivable and in view of their long mutual understanding, it is still outstanding in the absence of transactions ha....
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....purposes. I. T. A. No. 1009/Bang/2011-assessment year 2004-05 20. As far as ground Nos. 1, 2 and 3 are concerned, they verbatim same as taken in the assessment year 2003-04. In these grounds, the Revenue has pleaded that the learned Commissioner of Income-tax (Appeals) has entertained additional evidence in violation to rule 46A. In the light of the discussions made in the assessment year 2003-04, we have perused the records in this year. We find that no additional evidence was produced by the assessee in this year. Therefore, these grounds are not relevant. 21. In ground Nos. 4 and 5 same issue has been taken twice. In these grounds the Revenue has pleaded that the assessee has claimed professional receipts from JSS Dialysis Centres prior to its commencement and the learned first appellate authority has accepted the claim of the assessee without any corroborative evidence. From the assessment order it is not discernible on which are the receipts and which is the addition made by the Assessing Officer on this issue in this assessment year. No such issue is being emerged out, no arguments have been advances, hence these grounds are rejected. 22. In ground No. 6, it has been plea....
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....cation and other relevant records, even if it is considered as money's received from him, it cannot be regarded as gift since it has an element of pro fessional receipts as some services were rendered by the appellant some years back by treating the injured members of the family in an accident and hence it is held as professional charges received by the appellant. Accordingly this addition is confirmed as receipts are in the nature of professional charges and not necessarily as bogus gifts". 24. Since the learned Commissioner of Income-tax (Appeals) did not accept the contention of the assessee and found as a matter of fact that it was a professional charge from Shri Lalit Kumar Mehta, dismissed the appeal. We do not find any error in the order of the learned Commissioner of Income-tax (Appeals). 25. Ground No. 7 is general in nature, wherein the Revenue reserves its right for raising any other ground of appeal. No arguments were advanced on this issue. Hence this ground is also rejected. 26. In the result, the appeal of the Revenue is rejected. I. T. A. No. 1010/Bang/2011-assessment year 2005-06 27. Ground Nos. 1 to 3 are similar as were in the assessment year 2003-04. Th....
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....o the assessee's total income. On appeal the learned Commissioner of Income-tax (Appeals) deleted the addition by observing as under : "5.3 After considering the appellant's arguments on this issue, it is held as under : (I) M/s. Shivappa Nayaka Institute of Medical Sciences is an established trust and it has given a sum of Rs. 30 lakhs by cheque to the appellant. (II) It was also stated that the above amount was given for purchase of hospital equipment through Dr. Krishna as Dr. Krishna was well experienced in this field who is a gynaecologist having 20 years of experience and having his own hospital and is experienced in buying hospital equipment. (III) Sri M. S. Sridhar, managing trustee of M/s. Shivappa Nayaka Institute of Medical Sciences has given confirmation to this extent and his statement is recorded which is reproduced by the Assessing Officer in paragraphs 4, 5 and 6 of the assessment order. (IV) M/s. Shivappa Nayaka Institute of Medical Sciences wanted to start a medical college at Shimoga that was formed in March 2004, purchased land in September, 2004 and started construction ....
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....cal Sciences has confirmed having given the advance and the transaction is through cheque and part of the money amounting to Rs. 12 lakhs was also repaid on July 26, 2005 by cheque and in a detailed statement before the Assessing Officer, the managing trustee Sri M. S. Sridhar had confirmed having given the money, existence of the creditor and genuineness of the transaction is established. As regards, the dona tions, etc., from the trustees and other persons received by the trust which has no relationship with the appellant, it is for the trust to establish the identity and the creditworthiness of the donors and not for the appellant as the appellant has received this money only for arranging medical equipment supply. Accordingly, the addition of Rs. 30 lakhs is deleted. In the result, the appeal is 'allowed'." 29. The learned Departmental representative has filed written submissions, whereas learned counsel for the assessee relied upon the order of the Commissioner of Income-tax (Appeals). 30. On due consideration of the record, we are of the view that whenever any explanation at the end of the an assessee supported with documentary as well as oral evidence required con....
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....turn on April 23, 2009 declaring an income of Rs. 23,76,833. The Assessing Officer has passed assessment order on December 30, 2010 and determined the taxable income of the assessee at Rs. 53,26,430. He made two additions with the aid of section 68 namely : (a) Borrowing from Shri P. Ramesh Rs. 25.00 lakhs (b) Borrowing from Hospitech Ind. Rs. 5.00 lakhs 32. The assessee challenged the order of the Assessing Officer before the Commissioner of Income-tax (Appeals) and the learned Commissioner of Income-tax (Appeals) has deleted both additions. 33. With the assistance of the learned representative, we have gone through the record carefully. The first three grounds taken this year are verbatim same as have taken in 2003-04. However, it was brought to our notice that no additional evidence was produced by the assessee in this year. Therefore, these grounds are redundant and not emerging out from the record. 34. In ground No. 4 the assessee has challenged the deletion of addition of Rs. 25 lakhs taken as a loan from Shri P. Ramesh. The Revenue has not challenged the deletion of Rs. 5 lakhs added by the Assessing Officer on account of unexplained cash receipt appearing a....
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....ionship between the borrower and the lender had led to his non-appearance before the Assessing Officer again as he had already appeared before the Assistant Director of Income-tax. Since the appellant has produced details of the creditor and his assessment particulars who is assessed with the Deputy Commissioner of Income-tax, Circle 2(2), Bangalore and has produced the lender before the Assistant Director of Income-tax, the transaction is through banking channels by cheque and since the amount to the extent of Rs. 15 lakhs was already repaid and the balance Rs. 10 lakhs is now repaid, there was no reason for doubting the transaction and to treat the amount as unexplained credit. Accordingly, the addition of Rs. 25 lakhs is deleted. The learned Departmental representative relied upon the order of the Assessing Officer, whereas learned counsel for the assessee relied upon the order of the Commissioner of Income-tax (Appeals)." 37. A perusal of section 68 would reveal that where any sum is found credited in the books of account of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof, or the explanation offered by hi....
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....ning additional evidence in violation of rule 46A. It is further pleaded that the learned Commissioner of Income-tax (Appeals) has passed the order without scrutinising the evidence available on the record. It was demonstrated before us that no application leading additional evidence was filed in this year. Therefore, these grounds are not emerging out from the record. As far as the plea taken in ground No. 3 that the Commissioner of Income-tax (Appeals) has passed the order without scrutinising the evidence available on record is concerned, we will deal with this aspect along with the specific ground of appeal raised by the Revenue. 39. In ground No. 4, the Revenue has pleaded that the learned Commissioner of Income-tax (Appeals) has erred in accepting the computation of capital gain claim by the assessee on sale of J. C. Road property. The Revenue has segregated this issue in seven sub-grounds of appeal, i.e., a to h. The brief facts are that the assessee has filed his return of income for assessment year 2009-10 on April 29, 2009 declaring an income of Rs. 10,27,22,270. M/s. Blue Cross Builders and Investors Ltd. was owner and in possession of a vacant land bearing No. 5/1 situ....
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.... Liquidated damages to Gurushree Prop. Rs. 30,00,000 (c) Interest capitalised Rs. 15,59,000 The Assessing Officer did not allow the claim of the assessee with regard to interest expenses paid to Dr. Manjunath. With regard to the payment of Rs. 30 lakhs made to Gurushree Properties, the learned Assessing Officer has allowed only Rs. 20 lakhs and did not allow Rs. 10 lakhs. Similarly, he did not allow capitalisation of alleged interest expenses of Rs. 15,59,000 and alleged payment of Rs. 50 lakhs to M/s. Blue Cross Builders and Investors Ltd. The learned Assessing Officer has arrived at the cost of acquisition at Rs. 11,12,50,000. The sale consideration is Rs. 21,75,00,000. After debiting the cost of acquisition, the capital gain has been computed at Rs. 10,62,50,000 as against Rs. 992.05 lakhs disclosed by the assessee. 41. On appeal, the learned Commissioner of Income-tax (Appeals) has deleted the additions made by the Assessing Officer in the capital gain except a sum of Rs. 40 lakhs which was alleged to be received from one Shri Srinivasa Raju. 42. Let us take each item independently. The first major issue is whether a sum of Rs. 50 lakhs is to be added tow....
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....ings of the learned Commissioner of Income-tax (Appeals) is set aside and that of the Assessing Officer is restored on this issue. 43. The next item is of Rs. 7 lakhs. According to the assessee he has received a sum of Rs. 30 lakhs from Dr. Y. S. Manjunath. Rs. 5 lakhs was received on March 29, 2005 and Rs. 25 lakhs on June 3, 2005. These amounts have been repaid on July 25, 2007 with an interest of Rs. 7 lakhs. The contention of the assessee is that this amount was used for purchase of J.C. Road property and therefore, the interest expenses incurred by him has to be added towards the cost of acquisition while computing the capital gain. The learned Assessing Officer has rejected the claim of the assessee on the basis of circumstances available on the record. The contention of the Assessing Officer is that there is no direct nexus between these loans and investment in the property. No agreement was executed with Dr. Y. S. Manjunath for payment of interest. The assessee had advanced the money towards purchase of Banaskari site in the same year and therefore, any interest payment cannot be directly relatable to the acquisition of property at J.C. Road, Bangalore. The money has been ....
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....ed any fund flow statement demonstrating how he has received this amount and how that went to the investment. The learned first appellate authority erred in reversing the findings of the Assessing Officer. The findings of the learned Commissioner of Income-tax (Appeals) is set aside on this issue and that of the Assessing Officer is restored. This amount of Rs. 7 lakhs is not to be included in the cost of acquisition. 46. The next item is of Rs. 30 lakhs. The findings of the learned Commissioner of Income-tax (Appeals) on this issue read as under : "7.3 Liquidated damages paid to Gurushree Properties Rs. 10,00,000. 7.3.1 The appellant had claimed that an amount of Rs. 30 lakhs as liquidated damages were paid to Gurushree Properties as expenses towards earning the short-term capital gain on the sale of J. C. Road property. The appellant, had entered into an agreement for sale with M/s. Gurushree properties on May 12, 2006 for the sale of the above property and had received Rs. 430 lakhs in a phased manner. The money was repaid on June 30, 200....
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....SBM, Mandya wherein the appellant's account is debited to the extent of Rs. 10,01,750 the balance Rs. 1,750 is towards demand draft commission/bank charges. In view of the same, the appellant's liability was to the extent of Rs. 30 lakhs out of which Rs. 20 lakhs was already paid before March 31, 2009 and the balance amount of Rs. 10 lakhs was paid on June 25, 2009, the Assessing Officer is directed to allow the full amount of Rs. 30 lakhs including the accrued liability as on March 31, 2009, which was discharged subsequently. Hence, the addition of Rs. 10 lakhs is deleted.' 47. With the assistance of the learned representatives, we have gone through the record. The Assessing Officer had recorded the statement of Shri G. Suresh, Partner of Gurushree Properties. He confirmed giving advance to the assessee but he disclosed that he had a profit of Rs. 20 lakhs for this transaction. The question Nos. 6 and 7 of his statement read as under : "Question 6. What is the status of that agreement ? Ans. The agreement was cancelled in 2008 or 2007, I do not r....
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....d as under : (i) The Assessing Officer has not doubted the borrowings from banks and interest payment thereon. (ii) The Assessing Officer has not doubted the payment of interest of Rs. 15,59,000. (iii) The property at 5/1, 1st cross, J. C Road was transacted during the period from May 5, 2005 to June 30, 2007 as recorded by the Assessing Officer in page 4 and borrowings were made during this period. (iv) In page 12, the Assessing Officer herself has recorded as under: 'The money has been brought into his regular books through which it has gone to the regular business and profession also'. When the Assessing Officer herself is accepting that they had gone to his business/profession, even if it is claimed against their business/professional income, the interest is otherwise allowable. (v) The Assessing Officer is not empowered to dictate to the businessmen as to how they should conduct and carry on their business....