ACIT, CHENNAI V. RAM MAHARAJ, CHENNAI

ITA 2709/CHNY/2024

AI Insights

The case involves an appeal by the Revenue against the decision of the Ld.CIT(A) which had deleted the addition of Rs.2,00,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The assessee, Ram Maharaj Sundareswaran, had received Rs.2 Crores through an online transfer from Shri Ramajayam Rangasamy, which was initially treated as an unexplained cash credit by the Assessing Officer (AO). The AO added the amount under section 68, suspecting the nature of the transaction. However, the Ld.CIT(A) found that the amount was an advance for a property transaction, supported by a Memorandum of Understanding (MoU). The Tribunal upheld the Ld.CIT(A)'s decision, noting that the AO had not effectively rebutted the evidence provided by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107498 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2019-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITHA
• Assessee Lawyers: D.ANAND
• Keywords: Set aside; Unexplained cash credit; Onus to prove
• Section: 68

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \u0001यायपीठ, चे\tई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , \u000bाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद\f क े सम\u0015 BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2709/Chny/2024 िनधा\u000eरणवष\u000e/Assessment Year: 2019-20 The ACIT, Central Circle-1(2), Chennai. v. Ram Maharaj Sundareswaran, Flat No.3A, Newry Sresha Apartment, Second Avenue, Indira Nagar, Adyar, Chennai-600 020. [PAN: AVKPM 2944 G] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Ms. Anitha, Addl.CIT \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mr. D. Anand, Advocate सुनवाईक\u001aतारीख/Date of Hearing : 09.01.2025 घोषणाक\u001aतारीख /Date of Pronouncement : 05.03.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-18, (hereinafter referred to as “the Ld.CIT(A)”), Chennai, dated 22.08.2024 for the Assessment Year (hereinafter referred to as \"AY”) 2019-20. ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 2 :: 2. At the outset, it is noted that the Revenue’s appeal is delayed by ‘1’ day, for which, the ACIT has filed an affidavit for condoning the delay, to which, the Ld.Counsel of the assessee didn’t raise any objection. Consequently, the delay of ‘1’ day in filing of the appeal stands condoned and the appeal filed by the Revenue is taken up for hearing on merits. 3. Grounds of appeal raised by the Revenue are as under: 1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The Ld.CIT(A} erred in deleting the addition of Rs.2,00,00,000/- towards unexplained cash credit u/s. 68 of the Act, without considering the facts of the case that the assessing officer has brought on record the ambiguity pertaining to the nature of the credit for AY: 2019-20. 3. The Ld.CiT(A) erred in deleting the addition made u/s 68 of the Act towards unexplained cash credit just because the amount is found to have been received through banking channel \\when the assessee has failed to discharge his onus with respect to the credit worthiness and genuineness of the transaction. 4. The Ld.CiT(A) disregarded the findings of the AO, that the assessee could not produce any satisfactory documentary evidence to show that the nature of credit pertains to property transaction. 5. For these grounds and any other ground including amendment of grounds that any be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be’ set aside and that of the Assessing Officer be restored. 4. The sole issue raised by the Revenue is against the action of the Ld.CIT(A) deleting the addition of Rs.2 Crs. added by the AO as unexplained cash credit u/s.68 of the Income Tax Act, 1961 (hereinafter referred to as ‘ the Act‘). 5. The brief facts are that the assessee is an individual who received income from partnership firm; and in this AY 2019-20, had filed his original return of income (RoI) on 31.08.2018 u/s.139(1) of the Act disclosing total income at Rs.7,55,940/-. Later a search action was carried out u/s.132 of the Act on 21.09.2019 at the residential premise of ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 3 :: the assessee. During the course of search proceedings, they came across, the statement of bank-account of assessee, which showed that assessee got Rs.2 Cr. through online transfer from the bank account of Shri Ramajayam Rangasamy of M/s G Square Group [through online on 21.12.2018], and when asked by the search team to explain about this credit in his account, assessee stated it to be interest free loan from Shri Ramajayam Rangasamy; and, when Shri Ramajayam Rangasamy was confronted on 19.09.2019 with this explanation/transaction, he is noted to have stated it to be an advance for purchase of the property handled by the assessee, but in this regard, the AO noted that Shri Ramajayam Rangasamy didn’t divulge the details of the property for which the purported advance of Rs.2 Crs. was given to the assessee. Thus, according to the AO, there was per se contradiction in the statement given by the assessee as well as Shri Ramajayam Rangasamy in respect of the nature of the online transaction of Rs.2 Crs; but the AO acknowledges in this context that the assessee filed an MoU dated 21.12.2018, which evidenced an agreement to sale of land at Eruvakkam Village, Kanchipuram District [which property was owned by the assessee]; and that the recitals in the MoU showed it to be advance of Rs.2 Crs. out of the total sale consideration of Rs.5,08,50,000/- for sale of land at Eruvakkam Village. After going through the contents of the MoU, the AO noted that the time stipulated for completion of the deal was three ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 4 :: years i.e. for execution of the contract; However, according to the AO, the assessee failed to show that the property referred to in MoU was sold to Shri Ramajayam Rangasamy. Hence, the AO was of the opinion that the explanation given by Shri Ramajayam Rangasamy in respect of Rs.2 Crs. transferred to his (assessee’s) account as advance of sale consideration was an afterthought and was of the opinion that the MoU was prepared back dated to cover up the same and it was nothing but an ‘accommodating deed’; and therefore, the AO disbelieved the statement given by both the assessee as well as Shri Ramajayam Rangasamy regarding the nature of transaction and added Rs.2 Crs. u/s.68 of the Act. 6. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to delete the same. 7. Aggrieved by the aforesaid action of the Ld.CIT(A), the Revenue is before us. 8. We have heard both the parties and perused the material available on record. The assessee is a realtor and runs two LLPs in the name and style of M/s. Stones & Acres Property Developers LLP as well as M/s. Stones & Acres Realty Consultants LLP. It is noted that the income derived from the LLPs are offered as commission income after facilitation of the real estate transactions. The assessee had filed his RoI for AY 2019-20 on 31.08.2018 u/s.139(1) of the Act disclosing total income at ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 5 :: Rs.7,55,940/-. Thereafter, search u/s.132 was carried out on 29.01.2019 against M/s. Lotus G-Square Group which included the residential business premises of the assessee. During the course of search, the search team noted from the contents of the bank statement of the assessee [in Tamil Nadu Mercantile Bank account] that assessee had received Rs.2 Crs. through RTGS/online from the account of Shri Ramajayam Rangaswamy of G-Square Group. Upon a query from the search team on 31.01.2019, as to the nature and source of Rs.2 Crs., the assessee explained it to be interest free loan from Shri Ramajayam Rangasamy. Later, Shri Ramajayam Rangasamy was confronted on 19.09.2019 about the transfer of Rs.2 Cr. to assessee and he explained it to be advance for purchase of property, and in support of the same, presented an MoU dated 21.12.2018 wherein at Para No.2, there was averment evidencing payment of Rs.2 Crs. on the same day [i.e. 21.12.2018] through RTGS to the assessee as advance for purchase of property that was owned by the assessee at Eruvakkam Village [details of which is given in the schedule therein]. However, the AO disbelieved the explanation given by Shri Ramajayam Rangasamy as well as the veracity of the MoU dated 21.12.2018, since there was contradiction in the statement given by the assessee during the course of search on 31.01.2019 and further, he noted that in the MoU, there was averments stipulating the time period of three years for completion of the execution ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 6 :: of the sale, but there was no evidence showing the execution of the sale of the said property referred to in MoU. Therefore, he added Rs.2 Crs. u/s.68 of the Act. On appeal, the Ld.CIT(A) has deleted the addition having found that the assessee has received on 21.12.2018 Rs.2 Crs through online/bank transaction from Shri Ramajayam Rangasamy; and that it was an event before the search happening on 21.09.2019. And that the payer/Shri Ramajayam Rangasamy has asserted on the strength of the MoU dated 21.12.2018 that payment of Rs.2 Crs was advance given to assessee for purchasing of land [scheduled land of assessee at Eruvakkam village]. And that only due to the ambiguity in the statement of the payee regarding the nature of transaction that it was loan, the AO has taken adverse view in respect of the receipt of Rs.2 Crs in assessee’s bank account; and in this regard noted that even if the nature of transaction is accepted to be loan or advance (for purchase of property), either way, it doesn’t have an element of income and deleted the addition by holding as under;- Further, to treat a particular credit / receipt as income appearing in the books,-the corollary debit / payment has to be considered. In other words, in accounting parlance, any receipt in the hands of a person carries an equal liability to be discharged on his part, i,e., it may be either in the form of supplying goods / services or repaying equal amount. To treat a particular receipt as income, the recipient should have cleared the liability fastened to such credit and then the difference amount between the two can be brought to tax. As long as such liability was not discharged by the recipient, the same partake the character of loan / advance. In the case on hand, the appellant had received the money of Rs.2 crores and the corresponding liability towards this receipt was not discharged by the appellant - either by selling the land or returning the same. Therefore, by any means, the receipt of Rs.2 crore received by the appellant can be treated as income without considering the corresponding fastening liability attached to this receipt. As per both versions of the appellant, the appellant has a fastening liability in respect of the receipt of Rs.2 crores - either to pay it back (if treated as loan) or to sell the land (if treated as advance). Therefore, this ambiguity of treating the receipt either as loan or advance, at any stretch, cannot be the reason to doubt the nature of the transaction and call for invocation of provisions of section 68. ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 7 :: 5.2.9 To take the discussion further, this is not a case where the payer had ceased his right over the payment of Rs.2 crores to the appellant for any default on his part. As long as there is no cessation, irrespective of the nature of receipt being loan or advance, the same cannot be treated as income of the appellant. Therefore, in the light of the above discussion, the AO is directed to delete the addition of Rs.2 crores made u/s 68. 9. We do countenance the impugned action of the Ld CIT(A) and find that that assessee had received on 21.12.2018, Rs.2 Crs through RTGS/online from the account of Shri Ramajayam Rangaswamy, and when asked during search on 29.01.2019, assessee had explained it to be interest-free loan from Shri Ramajayam Rangaswamy, but when asked, Shri Ramajayam Rangaswamy though confirmed the transaction had stated it to be advance given to assessee for purchase of a property [owned by assessee] and in order to corroborate it filed MoU dated 21.12.2018, which evidenced the existence of an agreement for purchase of land and advance payment of Rs 2 crs on the same day to assessee. The AO disbelieved the MoU as an afterthought and an accommodation- deed. In this regard, it is noted that MoU dated 21.12.2018 was executed on stamp paper, a perusal of which revealed that the stamp-paper has been purchased on 05.12.2018 from the stamp-vendor whose details are discernable on the face of the stamp-paper itself. The MoU is noted to have been signed by the assessee as well as the buyer [Shri Ramajayam Rangasamy], and that event has been witnessed by two parties whose name & address, signatures are affixed on the MoU. [Ms. C. Sabnatha & Mr. S. Palani Vel]. The MoU shows that sale consideration of the property was Rs.5,08,50,000/-; and the advance to be paid was Rs.2 Crs. which ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 8 :: fact has been stated at Para No.1 of MoU; and Para No.2 of MoU captures the fact that about the details of buyer [Shri Ramajayam Rangasamy] and that pursuant to agreement, he was making payment of Rs.2 Crs. as advance through RTGS into the account of the assessee on 21.12.2018. The MoU couldn’t have been brushed aside by the AO merely because assessee had stated during search that it was loan given by Shri Ramajayam Rangasamy. By presenting the aforesaid relevant evidences, and especially the MoU, the burden to prove the nature of Rs.2 Crs in assessee’s bank- account shifted to AO, who we note has not rebutted the same. Based only on suspicion, conjectures and surmises the AO couldn’t have spurned it away. Even though, original MoU was placed before the AO, he failed to call for the stamp vendor [Mr.N.Jyothi Selvam] who sold the stamp paper on 05.12.2018 as well as any of the witnesses whose names have been cited as witnesses to the aforesaid MoU. The AO couldn’t point out any material infirmity in the MoU i.e. as to the assertions made by the assessee that he was the owner of the scheduled property and that the buyer has part performed his part of the obligation by advancing Rs.2 Crs. through banking channel on 21.12.2018 [which was an event which happened before the search took place on 29.01.2019]. Therefore, even though it is an un-registered MoU/agreement dated 21.12.2018, it is trite law that the buyer has every right to proceed against the assessee for specific performance of the sale ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 9 :: of the property referred to in the MoU. Therefore, the AO erred in law, by observing that unregistered document [MoU] is not enforceable contract. And as noted, the AO has not been able to rebut the onus which shifted on him after the MoU was presented before him and the payer/purchaser has confirmed the transfer of Rs 2 Crs online to assessee’s account. Having said so, we also agree with the Ld.CIT(A) that the addition u/s.68 of the Act was not warranted in the facts and circumstance of the case, because the identity of the credit is not disputed [i.e. Shri Ramajayam Rangasamy]; and the nature of the transaction has been shown as advance for the purchase of scheduled property owned by the assessee. In any event, as rightly noted by Ld CIT(A) that section 68 addition could have been made only if assessee failed to prove the identity, creditworthiness and genuineness of the transaction. In this case, even if the statement of assessee recorded during the search is accepted, then it is loan from Shri Ramajayam Rangasamy; and if the statement of transferee of the credit is taken, then it is ‘advance’ of the sale consideration given to assessee; in both scenario, there is no element of income embedded in either transaction. Therefore, we agree with the action of the Ld.CIT(A) and confirm the impugned order of the Ld.CIT(A) and dismiss the appeal of the Revenue. ITA No.2709/Chny/2024 (AY 2019-20) Ram Maharaj Sundareswaran :: 10 :: 10. In the result, appeal filed by the Revenue is dismissed. Order pronounced on the 05th day of March, 2025, in Chennai. Sd/- Sd/- (जगदीश) (JAGADISH) लेखा सद\f/ACCOUNTANT MEMBER (एबी टी. वक ) (ABY T. VARKEY) \u0001याियक सद\bय/JUDICIAL MEMBER चे\tई/Chennai, !दनांक/Dated: 05th March, 2025. TLN, Sr.PS आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ\u0010/Appellant 2. \u0011\u0012थ\u0010/Respondent 3. आयकरआयु\u0018/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u0011ितिनिध/DR 5. गाड फाईल/GF "