CHINNASAMINAIDU CHANDRASEKAR,HOSUR V. INCOME TAX DEPARTMENT, HOSUR

ITA 3119/CHNY/2024

AI Insights

The case revolves around an appeal by Chinnasaminaidu Chandrasekar against the order of the Income Tax Officer, Ward-1, Hosur, which added Rs.87,88,333 as unexplained investment under section 69 of the Income Tax Act, 1961, for the assessment year 2015-16. The assessee had purchased an immovable property and made substantial payments through cheques and cash, part of which was claimed to be from loans and gifts from family members. The Assessing Officer (AO) and the CIT(A) upheld the addition, questioning the genuineness of the transactions as they were not routed through the assessee's own bank account. The Tribunal, however, found that the assessee had provided adequate evidence to substantiate the source of funds and that the transactions were genuine.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711634 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Other Referred Cases: S.K.Jain Vs ITO, Sarogi Credit Corpn. vs. CIT, Rohini Builders vs. Dy. CIT, Shreelekha Benerjee v. CIT, CIT Vs Orissa Corporation (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM; J. C.I.T
• Assessee Lawyers: L. MAHESH KUMAR
• Keywords: Set aside; Unexplained investment; Onus to prove; Gift; TDS; Source of fund; Assessment record
• Section: 147; 131

Judgement Text

" आयकर अपीलीय अिधकरण, ‘बी’ Ɋायपीठ, चेɄई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.:3119/Chny/2024 िनधाŊरण वषŊ / Assessment Year: 2015-16 Chinnasaminaidu Chandrasekar, 3-591, Athimugam, Hosur, Krishnagiri – 635 105. vs. Income Tax Officer, Ward -1, Hosur. [PAN:BWRPC-0650-C] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से/Appellant by : Shri. L. Mahesh Kumar, Advocate ŮȑथŎ की ओर से/Respondent by : Ms. Gouthami Manivasagam, J.C.I.T. सुनवाई की तारीख/Date of Hearing : 26.06.2025 घोषणा की तारीख/Date of Pronouncement : 23.07.2025 आदेश /O R D E R PER S.R. RAGHUNATHA, AM: This is an appeal by the assessee against the order dated 09.10.2024 under section 250 of Income Tax Act, 1961 (in short “the Act”) passed by the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi, (Ld.CIT(A)) in relation to assessment year 2015-16. 2. The brief facts of the case are that the assessee is an Individual had filed his return of income on 11.03.2022 for year under consideration, declaring Income of Rs.2,30,000/- in response to notice issued u/s.148 of the Income Tax Act, 1961 (in short ‘the Act’) issued on 31.03.2021. The statutory notice is issued u/s.142(1) and 143(2) and the assessee has complied with the notices. The AO made an addition of Rs.87,88,333/- as unexplained investment and determined Income of Rs.90,18,333/- and raised demand of Rs.74,31,070/- u/s.156 of the Act dated 23/03/2023. Printed from counselvise.com - 2 - ITA No.3119/CHNY/2024 3. The assessee along with two others entered into agreement dated 20.09.2024 to purchase an immovable property for a total consideration of Rs.2,41,25,000/- vide registered document and duly deducted TDS. Out of agreed sale consideration purchasers paid Rs.36,25,000/- in cash. Wherein the assessee’s share of investment is Rs.80,41,666/- i.e., paid in cheque is Rs. 68,33,333/- and paid in cash is Rs.12,06,333/-. 4. The assessee has also provided details of nature and source of investment made and the same is extracted in assessment order. Further, the assessee has filed his written submission (22 pages) along with Paper book for documentary evidence (total 122 pages) these evidence are on record of Assessment and no new material is introduced. The assessee has provided detailed explanation in correlation of amount appearing in agreement. The nature and source are explained as received from his family members mainly from Shri Srinivas.M (i.e., daughter’s husband). The table showing details is extracted as under, which is also part of assessment records: DD/ Cheque No Agree ment Drawn On Date of Payment Amount Paid Bank Statements of Shri. Srinivas Relative (Daughters Husband) 3224 2(h) IDBI Bank 10.09.2014 11,00,000 Loan received from my Son in law Mr Sreenivas (PAN: BJDPS1875C), and investment made in the form of DD in favour of V Sowmya. [i.e., Demand Draft Rs. 11,00,000/- is directly purchased by Mr.Srinivas from his bank account using Cheque No. 65695] Source – Relevant bank statement of Mr.Srinivas reflecting the transaction and copy of his IT Return is enclosed herewith. Confirmation Statement from Mr.Srinivas is enclosed. 382667 2(j) Corporation Bank 11.09.2014 25,00,000 Loan received from my Son in law Mr.Sreenivas (PAN: BJDPS1875C), and investment made in the form of DD in favour of V Sowmya. [i.e., Demand Draft Rs. 25,00,000/- is directly purchased by Mr. Sreenivas from his bank account] Printed from counselvise.com - 3 - ITA No.3119/CHNY/2024 DD/ Cheque No Agree ment Drawn On Date of Payment Amount Paid Bank Statements of Shri. Srinivas Relative (Daughters Husband) Source of source – Relevant bank statement of Mr Srinivas for Account no SB/01/001716 with Corporation Bank, reflecting the transaction (he had received Rs. 15 lakhs from Shubha Nagesh and Rs. 10 lakhs from Nagesh) copy of his IT Return is enclosed herewith. Confirmation Statement from Mr Srinivas is enclosed. 463426 2(d) Kaveri Grameen Bank 18.07.2014 5,00,000 Loan of Rs 25,00,000 received from my Son in Law Mr Sreenivasa (PAN: BJDPS1875C), and investment made in the form of DD in favour of V Sowmya. [i.e., as per my request, Demand Draft Rs. 5,00,000/- x 5 is directly purchased by Mr. Sreenivas from his bank account] Source - Bank statement reflecting Rs 50,00,000 used from Bank Account No SB/ 01/008160 on 17.07.2024 is enclosed. [Rs 10 Lakhs by Mutappa - Father of Srinivas M and Rs. 15 Lakhs by Puttama is mother of Mr. Srinivas and Rs. 10 lakhs by Mr. Srinivas and Rs. 15 Lakhs by R. Mohan Babu, co- owner in this agreement] Confirmation statement of Mr Srinivas is enclosed. 463427 2(c) Kaveri Grameen Bank 18.07.2014 5,00,000 463428 2(e) Kaveri Grameen Bank 18.07.2014 5,00,000 463429 2(f) Kaveri Grameen Bank 18.07.2014 5,00,000 463430 2(b) Kaveri Grameen Bank 18.07.2014 5,00,000 568235 2(l) Corporation Bank 17/07/201 4 15,00,000 This payment Rs. 15,00,000/- is paid by my son in law Mr. Sreenivasa M, i.e., directly through R. Mohan Babu. (inadvertently mentioned as cash in Agreement). Balance Rs. 4,41,000/- is also paid by my son in law, by way self-cash withdrawals appearing in bank statement of Rs. 10,00,000/- (including registration expenses). Bank statement reflecting Cash Cash 20.09.2014 9,41,666 Printed from counselvise.com - 4 - ITA No.3119/CHNY/2024 DD/ Cheque No Agree ment Drawn On Date of Payment Amount Paid Bank Statements of Shri. Srinivas Relative (Daughters Husband) withdrawal of Rs 50,00,000 from Bank Account No SB/ 01/008160 on 17.07.2024 is enclosed. Total 85,41,666 Total Agreement amount is met by family members (Daughter & her husband = son in law) 5. The assessee has produced the copy of “registered agreement” dated 20.09.2014 (at page 69 to 81) and copy of bank statements of assessee and also bank statement of providers of funds i.e. Shri Srinivas.M. The relationship of all family members as explained vide government documents and same is not in dispute. The Identity of person and genuineness of transaction and nature and sources are all not in dispute, admittedly by revenue. 6. On other hand the AO had provided his reason for making addition (at page 5 of 10 of Assessment order at Para 4.5) that “the assessee was required to furnish supporting documentary evidence to prove the genuineness and credit worthiness of the said parities who has given loans and gift to him. The assessee was also requested to explain why all the said transactions were not done through his account”. Thereby the AO arrived at conclusion (at para 4.6 of Assessment order) and held that “…It is clear that the assessee intention was not fair. He has neither submitted the original return nor he done the property transaction through his bank account”. Accordingly made addition of Rs.87,88,333/- as unexplained investment u/s.69 of the Act by passing an order u/s.147 of the Act dated 23.03.2023. 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC, Delhi. Based on the available records and the documents enclosed with the appeal papers, the ld.CIT(A) confirmed the order of the AO by passing an order dated 09.10.2024. Aggrieved by the order of the ld.CIT(A) the assessee in appeal before us. 8. The Ld.AR for assessee has drawn our attention towards the confirmation letters filed before AO dated 26.02.2023 by Shri Srinivas.M along with his return of Income (enclosed in paper book at page 82 to 83) and detailed explanation by assessee vide Printed from counselvise.com - 5 - ITA No.3119/CHNY/2024 letter dated 28.02.2023 (enclosed in paper book at Page 92 to 94) and letter dated 13.03.2023 (enclosed in paper book at page 95 to 97). These communications made before AO are all not in dispute and the same is reflected in assessment order itself (at para 4.5 of assessment order). 9. The relevant Grounds of appeal raised by appellant assessee are as under: 1.1. Ground No.3: On the facts and the circumstances of the appellants case, the learned Assessing officer has erred in questioning the genuineness of the payment merely on basis that the payment is not made from own bank account but from the bank account of son-in-law bank account who is part of his family, overlooking the bond and trust enjoyed by the family members in the Indian family system and by ignoring the evidence produced in support of the transaction. 1.2. Ground No.4: On the facts and circumstances of appellants case as well as in law, the ld. Assessing officer has erred in making the additions of Rs 87,83,330 as unexplained investment although it represents money received in the form of loan from friends and Son in law of the appellant and out of agricultural income earned by the appellant. The ld. assessing officer completely ignored the documents and submissions made by the Appellant on identify and prove the genuineness of the transaction as well as creditworthiness of the parties in passing the order u/s 147 r.w.s 144B. 1.3. Other grounds are all general in nature except Ground No.1 on legal issue, which needs no comment, in light of facts on merits. 10. Per contra, ld. DR for the revenue relied on the orders of the AO as well as the ld. CIT(A) and prayed for confirming the order of ld.CIT(A) as the assessee has not paid the consideration from his bank accounts. 11. The issue for consideration before us are: - Whether the “intention” of assessee is not fair as held by Ld. Assessing officer in not using his own bank account for payment of consideration? - Whether the assessee is required to discharge the burden of proof regarding genuineness and credit worthiness of parties who has given loan and gift to him? - Is addition of Rs.87,88,333/- made under section 69 of the Act as “unexplained investment” is sustainable? Printed from counselvise.com - 6 - ITA No.3119/CHNY/2024 12. Before we proceed for our reasoning, section 69 of the Act is extracted as under. Unexplained investments. 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. 13. The Ld. AR of Assessee has taken us through the assessment order in detail and all relevant documentary evidence produced before AO. This reveals that the assessee has provided complete details of source of funds and identity of person from whom it is received and genuineness of transaction. There is no burden on assessee to prove the source of source for A.Y.2015-16 merely because notice u/s.148 is issued on 31.03.2021, to make addition u/s.69 as unexplained investment under the Act. Recent Amendment: first proviso is inserted vide Finance Act, 2022, w.e.f. 1-4-2023. Hence, the same is not applicable to transaction entered into by appellant prior to 31/03/2022. For ease of reference below are extract of new amendment: Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: The above amendment is prospective in nature hence it can be safely concluded that the assessee has discharged his burden and not obligated to prove source of source. The ld.AR relied on following decision to buttress his argument that “Responsibility Of The Assessee Is Over”: The Hon’ble Agra Tribunal in the case of S.K.Jain Vs ITO (2004) 2 SOT 579 (Agra) observed as under: “The creditors have confirmed that they have advanced loan to the assessee. In most of the cases, transactions have been routed through bank account. Therefore, asking source of such deposits will amount to asking source of the Printed from counselvise.com - 7 - ITA No.3119/CHNY/2024 source which is not permitted under the law as held by the Hon’ble High Court of Patna in the case of Sarogi Credit Corpn. vs. CIT 1975 CTR (Pat) 1 : (1976) 103 ITR 344 (Pat) and the decision of the Ahmedabad Bench of the Tribunal in the case of Rohini Builders vs. Dy. CIT (2002) 76 TTJ (Ahd) 521 : (2001) 117 Taxman 25 (Ahd)(Mag). Once it is established that the amount has been invested by a particular person, be he is a family member or close relative then the responsibility of the assessee is over. The assessee cannot ask that person, who advanced the loan, whether money advanced is properly taxed or not.” Thus, it had become fairly settled law that assessee is not required to satisfy the Assessing Authority of the source of source. 14. The AO has relied only on “intention”, which appears to be not backed by sound material evidence on record and only a surmise and conjecture, arbitrary, in light of documentary evidence on record. The AR relied on decision in Shreelekha Benerjee v. CIT 49 ITR 112 (SC): “Before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. It is within the range of these principles that such cases have to be decided.” 15. The revenue did not pursue the matter further: The AO has not issued summons or notice u/s.131 of the Act on receipt of complete details from assessee regarding identity of a person who has given gift or loans. Hence, the burden of proof to prove source of source is not applicable in present case for impugned Assessment year. We are inclined to accept the argument of Ld.AR, that revenue was not remediless, it appears that revenue has waived its right. The Hon’ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd. 159 ITR 78 (SC) held as follows: “13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income- tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further.” 16. In so far as intention is concerned, it is only a mental state of mind. However, Ld.AR contended that there is no prohibition under any law, much less to income tax act, Printed from counselvise.com - 8 - ITA No.3119/CHNY/2024 to pay consideration from family member bank accounts. The intention has to be weighed from the document being registered and made public and TDS is deducted and paid to government. The transaction is done vide bank and small portion of cash prior to 31.03.2015. Hence, there is no violation of any law. Further ld.AR clarified that Section 2(d) of contract Act : Consideration can be paid by any person to any person. Also, section 25 of Contract Act r/w section 123 of Transfer of property Act. Family members can make gift of movable which needs no registration. Hence, loan alone is not relevant criteria. 17. Section 6(h) of Transfer of Property Act r/w section 79A and section 79B of Karnataka land Reforms Act prohibited non-agriculturist to purchase the property in state of Karnataka. Hence, to support the family the assessee has purchased the property in his name he is being agriculturist with the aid and support of other family members. The assessee could not make purchase in name of his son-in-law who is non-agriculturist and also wanted to avoid legal issues. The extracts of transfer of property Act section 6(h)(3) disqualifies r/w section 79A/B of KA Land reforms Act. 6. What may be transferred.—Property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force: ……….. (h) No transfer can be made (1) in so far as it opposed to the nature of the interest affected thereby, or (2) 9[an unlawful object or consideration within the meaning of section 23 of the Indian Contract Act, 1872 (9 of 1872), or (3) to a person legally disqualified to be transferee]. We find strength in arguments of Ld.AR, i.e., even on the intention aspect the assessee is abiding the law of land. 18. In view of above reasoning and complete evidence which is on record, the Ld.CIT(A) is not justified in not adjudicating the matter on grounds raised by assessee. Accordingly, we set aside the order of ld.CIT(A). 19. Therefore, in the present facts and circumstances of the case, we are of the considered view that all evidence being available on record of AO and the assessee has discharged his burden of proving genuineness of transaction and nature and source of funds and identity of persons, the AO is not justified in making addition in the hands of Printed from counselvise.com - 9 - ITA No.3119/CHNY/2024 assessee. Therefore, we direct the to delete the additions and to accept the return of income filed by the assessee. 20. In the result the appeal filed by the assessee is allowed. Order pronounced in the open court on 23rd July, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟/Judicial Member (एस. आर. रघुनाथा) (S.R.RAGHUNATHA) लेखासद˟/Accountant Member चेɄई/Chennai, िदनांक/Dated, the 23rd July, 2025 SP आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT– Chennai/Coimbatore/Madurai/Salem 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF Printed from counselvise.com "