2018 (12) TMI 458 - AT - Income Tax

Addition on account of Rental income - addition on the statement of Shri. Anil Kashinath Khode given at the time of survey - addition based on diaries found in survey - Held that - The impounded diaries are not prepared by the assessee but by third party and there is no signature of the assessee to even remotely suggest that the assessee has been paid rent by Shri. Kashinath Khemsa Khode for carrying out liquor business under the Excise Licence of the assessee. While it is true that admission is an important piece of evidence; unless corroborated, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect; which in my considered opinion has been successfully done in the case on hand. Before me, Revenue has failed to controvert the averments made in the Affidavits dated 19.11.2015 filed by the Khodes and the clarifications by the assessee and Shri. Kashinath Khemsa Khode and Shri. Anil Kashinath Khode in statements dated 17.03.2016 and 18.03.2016 respectively. In this factual matrix of the case, as discussed above, the additions made by the AO and upheld by the CIT(A) on account of Rent for Assessment Years 2011-12 to 2013-14 are hereby deleted. Disallowance of Excise Licence Fees paid - as per assessee assessee s accounts have been audited u/s 44AB of the Act and the amounts in question have admittedly been claimed in the assessee s accounts and therefore no disallowance can be made for want of challan - Held that - as the assessee s books of accounts have been audited u/s 44AB of the Act; copies of challans for payment of Excise Licence Fees to government are filed to corroborate the assessee s claims for such expenditure and the fact that the assessee admittedly carried on the business of sale of liquor during the impugned Assessment Years 2012-13 and 2013-14, I am of the view that the same is allowable expenditure. In the light of the aforesaid evidence and in this view of the matter, the disallowance of the expenditure on Excise Licence Fee made by the AO and sustained by the CIT(A) is factually unsustainable - Decided in favour of assessee. Liable to be charged interest u/s 234B and 234D - Held that - The charging of interest is consequential and mandatory and the AO has no discretion in the matter. This proposition is upheld by the in the case of Anjum H. Ghaswala 2001 (10) TMI 4 - SUPREME COURT and therefore, the action of the AO in charging the said interest is upheld. The AO is, however, diverted to re-compute the interest chargeable u/s 234B and 234D of the Act, if any, while giving effect to these orders.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act.
2. Addition of rental income based on statements and impounded materials.
3. Disallowance of Excise Licence Fees.
4. Charging of interest under Sections 234B and 234D.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148:
The assessee challenged the reassessment proceedings, arguing that the mandatory requirements to assume jurisdiction under Section 148 were not met. However, since the main grievances regarding the additions and disallowances were addressed favorably, this ground was rendered academic and required no further adjudication.

2. Addition of Rental Income:
The AO added rental income based on statements recorded during a survey and impounded materials, alleging that the assessee received rent for allowing another individual to use his Excise Licence for running a liquor business. The CIT(A) upheld these additions, stating the notings in the impounded materials were unambiguous and corroborated by statements.

The Tribunal found that the additions were primarily based on the statement of Shri. Anil Kashinath Khode recorded during the survey, which was later denied in sworn affidavits and subsequent statements by both Shri. Kashinath Khode and his son. The Tribunal emphasized that affidavits have evidentiary value and cannot be ignored unless controverted. The Tribunal concluded that the statements recorded during the survey lacked corroborative evidence and were successfully refuted by the affidavits and subsequent statements. Therefore, the additions of rental income for the assessment years 2011-12 to 2013-14 were deleted.

3. Disallowance of Excise Licence Fees:
The AO disallowed the Excise Licence Fees claimed by the assessee for the assessment years 2012-13 and 2013-14 due to the absence of challans. The CIT(A) upheld these disallowances. The Tribunal, however, noted that the assessee's accounts were audited under Section 44AB, and the challans for the payment of the Excise Licence Fees were submitted as evidence. Given this, the Tribunal found the disallowances factually unsustainable and deleted them.

4. Charging of Interest under Sections 234B and 234D:
The assessee contested the charging of interest under Sections 234B and 234D. The Tribunal held that the charging of interest is consequential and mandatory as per the Supreme Court ruling in Anjum H. Ghaswala (252 ITR 1). The AO was directed to recompute the interest chargeable while giving effect to the Tribunal's orders.

Conclusion:
The Tribunal partly allowed the assessee's appeals for the assessment years 2011-12 to 2013-14, deleting the additions of rental income and disallowances of Excise Licence Fees, while upholding the charging of interest under Sections 234B and 234D. The reassessment proceedings' validity was rendered academic due to the favorable outcome on the main issues.