Ita/491/2014 Of M/S Lakshmi Enterprises v. The Income Tax Officer

1| IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 02[nd]DAY OF JULY, 2015 PRESENT THE HON'BLE MR. JUSTICE VINEET SARAN ANIL THE HON’BLE MR. JUSTICE ARAVIND KUMAR ITA NO.491 /201 BETWEEN: M/S LAKSHMI ENTERPRISESNEAR SCM LADIES HOSTEL, SIDDARTHA NAGAR.CHAMARAJANAGARAREPRESENTED BY ITS.PROPRIETORSRI SRIKANTAMURTHY NJAGED ABOUT 46 YEARS9/O SRI NANJAPPA. .. APPELLANT (BY SMT. VANI H, ADVOCATE) AND: THE INCOME TAX OFFICERWARD-I,CHAMARAJANAGAR. ..RESPONDENT (BY SRI.K.V. ARAVIND, ADVOCATE) THIS APPEAL IS FILED UNDER SECTION J6O0A OFINCOME TAX ACT, 1961 PRAYING TO FORMULATE THESUBSTANTIAL QUESTIONS OF LAW STATED ABOVEAND ALLOW THR APPEAL AND SEI ASIDE THE. 2 IMPUGNED ORDER OF THE INCOME TAX APPELLATETRIBUNAL DATED 11.07.2014 (ANNEXURE-A) PASSEDIN ITA NO.349/BANG/2012 RELATING TO ASSESSMENTYEAR 2OO8-O9. THISAPPHKALHAVING|BREN,HBARD]ANTIRBSBRVEDROR,ORDERS,COMINGON|ROR|PRONOUNCEMENT THIS DAY,ARAVIND KUMAR J,DELIVERED THE FOLLOWING: JUDGMENT We have heard the learned Advocates appearingfor the parties namely, Smt.Vani H. appearing for|appellant — assessee and Sri K.V.Aravind, appearing|for respondent — revenue. We have perused the orders passed by the assessing Officer, CIT (A) and Income|Tax Appellate Tribunal, Bengaluru ‘C’ Bench. — 2 |HOTtheassessmentYCar2008-Q9,assessee filed the return of income declaring total|income oft44,26,1600/- besides the agriculturalincome. After issuing notice under Section 143(2) ofthe Income Tax Act, 1961 assessment order came to.be framed on 31.12.2010 whereunder claim of the'assessee of having incurred expenses ofV28,40,160/- towards “granite raising expenses” came to _ bdisallowed and was held that the liability created by|the assessee iS an unproved liability and accordingly,the said sum was brought to tax. Being aggrieved by |this order, an appeal came to be filed before the CIT|(A), who by order dated 29.11.2011 upheld the|addition and dismissed the appeal. Assessee|pursued his grievance before the Income _ TaAppellate Tribunal, Bengaluru ‘C’ Bench and the|Tribunal on re-appreciation of entire facts and.perusal of the records was of the view that the order|passed by the first appellate authority did not suffer|from any legal infirmity calling for interference and assuch by order dated 11.07.2014 allowed the appeal inpart (on other issues). _ 3.|Being aggrieved by the disallowance of theexpenditure of428,40,160/-, the assessee has filedthis appeal contending interalia that the payments|made to three persons was by way of cross cheques| 4 and taxes have also been deducted at source when|payments were made to them and as such, the|assessing Officer could not have disallowed the|expenditure. It is also contended by Smt.Vani H, |learned Advocate appearing for the assessee that|assessingOfficererroneously|relieduUporthestatement of Sri Nagendra without providing any|opportunity to the assessee to cross examine him andas such, the order of assessment as aifirmed by the|appellate authorities is erroneous and is liable to be.set aside. She would elaborate her submission by|contending that when the authorities have not'disputed the particulars of granite purchased,|produced and sold by the assessee during the|relevant year, it should be logically concluded that|there would be no sale without equal quantity oferanite production or purchases. Hence, on these|esrounds she seeks for formulating the substantialquestionot lawas|indicated1nNtheappeal 5 memorandum and prays for answering the same in|favour of the assessee. | 5 memorandum and prays for answering the same in|favour of the assessee. | 4Percontra,Sri.K.V.Aravind,learnedAdvocate appearing for the revenue would support allthe three orders passed by the authorities and_contends that the finding recorded by the assessing|Officer as well as first appellate authority are all|questions of fact and as such, the Tribunal also did|not find any substance in the contention raised by|the assessee and submits that there is no substantialquestion of law involved in this appeal for being|adjudicated and answered. Hence, he prays for|dismissal of the appeal. 5HavingheardthelearnedAdvocatesappearing for the parties and on perusal of the|records, it would clearly indicate that the assessee|had debited |V28,40,160/- as ‘granite raisingexpenses’ which was said to have been incurred 6 towards extraction of granite and claimed that said|amount was paid to three persons namely, Sriyuths|Sundarraj, Basavaraj and Nagendra in a sum ofzy9,15,100/-, |49,75,800/- andzy9,49,260/-respectively. Hence, assessing Officer has called|upon the assessee to produce proof in support of the.claim of expenditure and also to furnish the postal|address of these three persons in order to verily the|genuineness of the statement. During the course ofassessment proceedings, statement of the assessee|was recorded under Section 131 of the Act. Though|Summons under Section 131 ot the Act were issued|to these three creditors and duly served on them,|only Sri G Nagendra appeared and furnished his|statement and has admitted to the following eftect: $:&“he carried on the business otextracting granties jointly with Sri.Sundarajan and Sri. Basavara]extracting granties jointly with Sri.Sundarajan and Sri. Basavara] $::&he does not know the assessee and|does not have any transaction withthe assessee;does not have any transaction withthe assessee; $:::&he does not know the nature oftliability created by the assessee inhis books;liability created by the assessee inhis books; $:2&he|Neve Tworkedas|araisingcontractor for the assessee norissued any bills/statements;contractor for the assessee norissued any bills/statements; $2&the receipt of amount of49.5 lakhsis withdrawal of his capital from thejoint business carried on by himwithSr1._SundarajanandSri.Basavara]; is withdrawal of his capital from thejoint business carried on by himwithSr1._SundarajanandSri.Basavara]; $2:&he does not know who has issued|cheque forV9.5 lakhs to him.However, cheque has been handedover by Sri.Basavaraju; and|cheque forV9.5 lakhs to him.However, cheque has been handedover by Sri.Basavaraju; and| $2::&ori. Nagendra is not aware that hehas filed return of income for the AY|2008-09.”has filed return of income for the AY|2008-09.” 6. In fact, assessee contended that amount| was paid to Sri G Nagendra by crossed cheque. |However, said Sri G Nagendra pleaded his ignorance|with regard to filing of return of income by him and|also stated that the assessee’s' brother Sri GBasavara]j (to whom the assessee had also paid a sumoT =9,75,800/-) had obtained signatures in the guise 8 of obtaining PAN card for him. This would only|indicate that there has been inconsistency between|the stand of the assessee and the statement=furnished by Sri G Nagendra. TSNo other material evidence was produced|by the assessee for verification by the assessing|Officer and as such, the assessing Officer came to a|conclusion that the liability created by the assessee isnot genuine and has not been created in the normal|course of business. 3.|The CIT(A), on re-appreciation of material|evidence, has also found that one of the recipients ofthe money from the assessee was Sri Basavaraj who|is none other than the brother of the assessee. Therewas no impediment for the assessee to secure his.presence and Sri Sundarraj to whom the assessee|also claims to have made payment towards granite|extraction charges is none other than the partner of 9 TSNo other material evidence was produced|by the assessee for verification by the assessing|Officer and as such, the assessing Officer came to a|conclusion that the liability created by the assessee isnot genuine and has not been created in the normal|course of business. 3.|The CIT(A), on re-appreciation of material|evidence, has also found that one of the recipients ofthe money from the assessee was Sri Basavaraj who|is none other than the brother of the assessee. Therewas no impediment for the assessee to secure his.presence and Sri Sundarraj to whom the assessee|also claims to have made payment towards granite|extraction charges is none other than the partner of 9 ori Basavaraj. During the pendency of appeal|proceedings, the first appellate authority directed theassessing Officer to give further opportunity to the|assessee to prove his claims. Even at that stage,|ASSECSSEEdidNOTtenderany|evidence EXCEPTreiterating his earlier stand. Thus, taking note of thestatement made by Sri Nagendra that he had receivedamount ot|49,49,260/- as withdrawal from his capitalfrom the partnership firm, it was held that said|transaction is a finance transaction and not businesstransaction. This finding recorded by first appellate|authority is also based on proper appreciation otfmaterial evidence. OQ The Tribunal has rightly held that when| an assessee claims expenditure for business purpose, the onus is on the assessee to prove and it has also.found that on facts, assessee had failed to establish|this fact. At this juncture itself, it would be|appropriate to deal with the contention raised by the| learned counsel namely, the assessing Officer not|atiording opportunity to the assessee to cross|examine Sri Nagendra. Records would clearly|indicate that copy of the statement recorded by|assessing Officer was supplied to the assessee but|the assessee did not chose to cross examine Sri|Nagendra. Hence, assessee cannot be heard to|contend that the order of the assessing Officer|smacks of violation of principles of natural justice|when the onus of proof is upon the assessee with.regard to expenditure incurred and on failure to|prove the same, the expenditure could not be allowed|as has been done rightly so by the assessing Officer|in the instant case. | LQ.|The payments which the assessee claims|to have paid to these three persons relates to granite|extraction charges. This Court cannot lose sight ofthe fact that for extraction of granite apart from|manual labour, equipments and machineries would| be used by the labour contractors and the payments|are made on weekly basis to the manual labourers. |In the instant case, it has been rightly noticed by theassessing Officer that the payments have been made|alter a year which would be an additional factor to doubt the transaction. Hence, the burden cast on|the assessee to prove the expenditure incurred was|genuine, has not been discharged. © 11.)For the reasons aforestated, we find the|findings recorded by the assessing Officer, as|alflirmed by the CIT(A) and confirmed by the IncomeTax Appellate Tribunal, Bengaluru ‘C’ Bench are all|question of facts and there being no perversity in thefindings recorded by these three authorities, we are ofthe considered view that it does not give rise for|formulating the substantial question of law as|contended by the appellant — assessee and same is liable to be rejected. Hence, we proceed to pass the following: ORDER $:&Appeal is hereby dismissed.| $::&Order passed by the Income Tax Appellate Tribunal, Bengaluru ‘C’ Bench, dated|11.07.2014 is hereby affirmed. |11.07.2014 is hereby affirmed. | $:::&No order as to costs. Sd/-. JUDGE Sd/-. JUDGE