S.Duraipandi & S.Thalavaipandian (AOP), CHENNAI V. ACIT, CHENNAI

CO 138/CHNY/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 5885 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 18-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TAPAS KUMAR DUTTA
• Assessee Lawyers: T BANUSEKAR; B RAMAKRISHNAN I T A NOS
• Keywords: Unexplained cash credit; Bad and doubtful debts
• Section: 143(3); 133A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T.A. NOS. 1745 TO 1751/MDS/2010 ASSESSMENT YEARS : 2002-03 TO 2008-09 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-III(4), CHENNAI. V. SHRI S. DURAIPANDI & SHRI S. THALAVAIPANDIAN (AOP), 29/5, AMC CENTRE, VISWANATHAPURAM MAIN ROAD, KODAMBAKKAM, CHENNAI-600 024. (PAN: AAAAD4723G) (APPELLANT) (RESPONDENT) A N D C.O. NOS. 138 TO 144/MDS/2010 (ARISING OUT OF ITA NOS. 1745 TO 1751/MDS/2010) ASSESSMENT YEAS : 2002-03 TO 2008-09 SHRI S. DURAIPANDI & V. THE ASSISTANT COMM ISSIONER SHRI S.THALAVAIPANDIAN (AOP), OF INCOME TAX, CHENNAI-600 024. CENTRAL CIRCLE-III(4), CHENNAI. (CROSS OBJECTOR) (R ESPONDENT) DEPARTMENT BY : SHRI TAPAS KUMAR DUTTA ASSESSEE BY : SHRI T. BANUSEKAR AND SHRI B. RAMAKRISHNAN I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 2 O R D E R PER BENCH: THIS IS A BUNCH OF SEVEN APPEALS, ALL FILED BY THE REVENUE, AND CORRESPONDING CROSS OBJECTIONS FILED BY THE ASS ESSEE. THE APPEALS AND THE CROSS OBJECTIONS RELATE TO THE SEVEN ASSESSMENT YEA RS 2002-03 TO 2008-09. 2. THESE APPEALS AND CROSS OBJECTIONS ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE CIT(APPEALS)-II AT CHENNAI ON 0 2-07-2010 AND ARISE OUT OF THE ASSESSMENTS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 153C OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE IN THIS CASE, AN ASSOCIATION OF PE RSONS (AOP), CONSISTS OF TWO PERSONS, SHRI S. DURAIPANDI AND SHRI S. THALAVA IPANDIAN. THE ASSESSEE IS ENGAGED IN MONEY-LENDING BUSINESS AND REAL ESTATE B ROKERAGE. THE BUSINESS IS CARRIED ON UNDER THE NAME AND STYLE OF TEX B SECUR ITIES (P) LTD. A SEARCH U/S 132 WAS CARRIED OUT IN THE RESIDENTIAL PREMISES OF BOTH THE PERSONS ON 16-05- 2007. A SURVEY U/S 133A WAS ALSO CARRIED OUT IN TH E BUSINESS PREMISES OF M/S. TEX B. SECURITIES (P) LTD. IN THE COURSE OF SEARC H, CASH OF ` 65 LAKHS WAS FOUND AND SEIZED FROM THE RESIDENCE OF SHRI DURAIPANDI. ANOTHER SUM OF ` 1 CRORE WAS FOUND AND SEIZED FROM THE BANK LOCKER OF PUNJAB NAT IONAL BANK AT ANNA NAGAR HELD IN THE NAME OF SHRI DURAIPANDI. 4. CONSEQUENT TO SEARCH OPERATIONS UNDER SECTION 13 2, INVESTIGATIONS AND ENQUIRIES WERE MADE BY THE AUTHORITIES. SHRI S. DU RAIPANDI AND SHRI S. I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 3 THALAVAIPANDIAN EXPLAINED THAT THE BUSINESS HAD BEE N CARRIED ON BY THEM JOINTLY IN THE CAPACITY OF AOP. THE AOP HAS THE PERMANENT ACCOUNT NUMBER. BUT IT WAS SEEN THAT THE AOP HAS NOT BEEN FILING ANY REGUL AR RETURNS OF INCOME. THE ASSESSING AUTHORITY PROCESSED THE SEIZED MATERIALS AND SOUGHT FOR DETAILS FROM THE ASSESSEE. THE ASSESSEE HAD NOT MAINTAINED REGU LAR BOOKS OF ACCOUNTS. BUT STATEMENTS OF ACCOUNTS WERE FINALLY PREPARED USING TALLY SOFTWARE ON THE BASIS OF DETAILS COLLECTED FROM BOOKS, PAPERS, SHEETS AND OT HER MATERIALS SEIZED IN THE COURSE OF SEARCH. 5. THEREAFTER THE ASSESSEE WAS ISSUED NOTICE UNDER SECTION 153C REQUIRING IT TO FILE RETURNS OF INCOME FOR THE RELEVANT ASSESSME NT YEARS. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURNS DISCLOSING PREDO MINANTLY INCOME FROM AGRICULTURAL OPERATIONS. 6. IN THE LIGHT OF THE ABOVE PARTICULARS FILED BY T HE ASSESSEE, DETAILS WERE SOLICITED BY THE ASSESSING AUTHORITY ON VARIOUS MAT TERS RELATING TO RECOGNITION OF AGRICULTURAL INCOME AS WELL AS COMPUTATION OF SUCH INCOME. DETAILS OF LAND HOLDINGS, NATURE OF CROPS, OWNERSHIP OF LAND, DETAI LS REGARDING INCOME AND EXPENSES ETC. WERE CALLED FOR. THE REQUIREMENTS WE RE COMPLIED WITH BY THE ASSESSEE BY FILING THE NECESSARY DETAILS. THE ASSE SSEE FILED THE DETAILS OF THE LAND HOLDINGS WITH COPY OF CHITTA AND ADANGAL C ERTIFIED BY THE VILLAGE ADMINISTRATIVE OFFICER (VAO). THE ASSESSEE FURNISH ED CERTIFICATES REGARDING QUANTUM OF AGRICULTURAL INCOME EARNED BY THE ASSESS EE AND ATTRIBUTABLE TO THE I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 4 ASSESSMENT YEARS 2002-03 TO 2007-08. THE MATTER WA S AGAIN EXAMINED AND SCRUTINIZED BY THE ASSESSING AUTHORITY IN THE LIGHT OF THE MATERIALS AND DETAILS FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER F OUND THAT THE CERTIFICATES ISSUED BY THE VAO DO NOT REFER TO ANY GOVERNMENT RE CORDS BASED ON WHICH SUCH CERTIFICATES COULD HAVE BEEN ISSUED. THE CERTIFICA TES HAVE BEEN ISSUED ONLY ON THE BASIS OF ORAL ENQUIRIES. ON THE BASIS OF SUCH OBSERVATIONS, THE ASSESSING OFFICER HELD THAT THE THEORY OF AGRICULTURAL INCOME PROPOUNDED BY THE ASSESSEE COULD NOT BE ACCEPTED AS GENUINE. 7. HE TREATED THE AGRICULTURAL INCOME OFFERED BY TH E ASSESSEE AS THE INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES TO BE TAXE D AT NORMAL RATES. IN FIRST APPEAL, THE CIT(A) EXAMINED THE ISSUE AND HELD THAT THE ASSESSEE HAS PROVED ITS HOLDING OF 63 ACRES OF CULTIVABLE LAND. HE ALSO AC CEPTED THE CONTENTION OF THE ASSESSEE THAT AGRICULTURAL ACTIVITIES WERE CARRIED ON IN THE LAND OWNED BY THE ASSESSEE. BUT THE CIT(A) DID NOT ACCEPT THE QUANTU M OF THE AGRICULTURAL INCOME EARNED BY THE ASSESSEE AS CERTIFIED BY THE VAO. AS PER THE CERTIFICATE ISSUED BY THE VAO, THE AGRICULTURAL INCOME WORKED OUT TO ` 67,990/- PER ACRE PER ANNUM. THE CIT(A) FELT IT AS TOO HIGH. THE CIT(A) ESTIMATE D THE AGRICULTURAL INCOME AT ` 22 LAKHS EACH FOR THE SIX ASSESSMENT YEARS 2002-03 TO 2007-08. 8. THE POSITION OF THE AGRICULTURAL INCOME AS PER T HE ORDER OF THE CIT(A) IS REPRODUCED BELOW : I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 5 ASST. YEAR AGRICULTURAL INCOME AGRICULT URAL INCOME DISALLOWANCE OF RETURNED BY THE ASSESSEE ACCEPTED BY THE AGRICULTURAL INCOME & DISALLOWED BY THE CIT(A ). CONFIRMED BY THE ASSESSING OFFICER. CIT(A). 2002-03 ` 54,95,000 ` 22,00,000 ` 32,95,000 2003-04 ` 87,15,000 ` 22,00,000 ` 65,15,000 2004-05 ` 36,05,000 ` 22,00,000 ` 14,05,000 2005-06 ` 40,95,000 ` 22,00,000 ` 18,95,000 2006-07 ` 43,05,000 ` 22,00,000 ` 21,05,000 2007-08 ` 47,25,000 ` 22,00,000 ` 25,25,000 ___________________________________________________ ______________ 9. THE FIRST POINT OF DISPUTE, THEREFORE, IN THIS C ASE IS THE ISSUE OF AGRICULTURAL INCOME TO BE DETERMINED OR NOT TO BE DETERMINED IN THE HANDS OF THE ASSESSEE- AOP. THE GROUNDS RAISED BY THE REVENUE IN THEIR AP PEALS ARE THAT THE CIT(A) HAS ERRED IN ACCEPTING, EVEN THOUGH PARTIALLY, THE CONTENTION OF THE ASSESSEE THAT IT HAD EARNED SUBSTANTIAL AGRICULTURAL INCOME DURIN G THE PERIOD RELEVANT TO THE ASSESSMENT YEARS 2002-03 TO 2007-08. IT IS THE CAS E OF THE REVENUE THAT THE CIT(A) HAS GROSSLY ERRED IN TREATING AN AMOUNT OF ` 22,00,000/- EACH FOR THOSE ASSESSMENT YEARS AS AGRICULTURAL INCOME IN THE HAND S OF THE ASSESSEE. 10. ON THE OTHER HAND, IN THE CROSS OBJECTIONS FILE D BY THE ASSESSEE, IT IS A CONTENTION THAT WHEN THE ASSESSEE HAD SUBMITTED ALL THE NECESSARY DETAILS AND EVIDENCES, THE CIT(A) WAS NOT JUSTIFIED IN NOT ACCE PTING THE AGRICULTURAL INCOME RETURNED BY THE ASSESSEE. IT IS THE CASE OF THE A SSESSEE THAT THE CIT(A) HAS GONE WRONG IN DISALLOWING A MAJOR PORTION OF THE GE NUINE AGRICULTURAL INCOME RETURNED BY THE ASSESSEE. I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 6 11. LET US FIRST CONSIDER THE ABOVE ISSUE ITSELF. ON GOING THROUGH THE MATERIALS AVAILABLE BEFORE US INCLUDING THE ORDER O F THE CIT(A), WE FIND THAT THE FACTUM OF HOLDING OF AGRICULTURAL LAND BY THE ASSES SEE HAS BEEN PROVED BEYOND ANY DOUBT. IT HAS ALSO BEEN PROVED THAT THE ASSESS EE HAS BEEN FRUITFULLY CULTIVATING THEIR LAND HOLDINGS. WHEN THIS IS THE SITUATION, THE DECISION OF THE CIT(A) IN ACCEPTING THE CONTENTION OF AGRICULTURAL INCOME, EVEN THOUGH PARTIALLY, AS A BASIC PROPOSITION CANNOT BE HELD TO BE UNJUST. WE AGREE WITH HIS FINDING. 12. AS FAR AS THE AGRICULTURAL INCOME IS CONCERNED, EVEN THOUGH THE ASSESSEE HAS MADE FERVENT PLEADINGS REGARDING THE ACCURACY O F THE QUANTUM REPORTED BY IT, WE ARE NOT INCLINED TO BE CARRIED AWAY BY THOSE ARGUMENTS. AS RIGHTLY POINTED OUT BY THE CIT(A), THE QUANTUM OF AGRICULTURAL INCO ME PER ACRE PER ANNUM REPORTED BY THE ASSESSEE WAS EXORBITANTLY HIGH WHIC H TRANSGRESSED ALL THE LEVELS OF PROBABILITY. SO ALSO, SUCH A HUGE CLAIM OF INCO ME HAS NOT BEEN SUPPORTED BY OPERATING ACCOUNTS, IF ANY, MAINTAINED BY THE ASSES SEE. THEREFORE, THE CIT(A) HAS RIGHTLY REFUSED TO ACCEPT THE CLAIM OF THE ASSE SSEE THAT THE ENTIRE CLAIM OF AGRICULTURAL INCOME SHOULD HAVE BEEN ACCEPTED. NOW COMING TO THE ESTIMATE PART OF THE AGRICULTURAL INCOME, WE AGREE WITH THE CIT(A) THAT AN ESTIMATION OF ` 22,00,000/- PER ASSESSMENT YEAR IS A REASONABLE EST IMATE. 13. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, AS FAR AS THE COMMON ISSUE OF AGRICULTURAL INCOME IS CONCERNED, W E UPHOLD THE ORDERS OF THE I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 7 CIT(A) AS CONCLUDED BY HIM IN PARA 7 OF HIS ORDER. THE GROUNDS RAISED BY THE REVENUE AS WELL AS BY THE ASSESSEE ON THIS ISSUE AR E REJECTED. 14. THE NEXT ISSUE RAISED BY THE REVENUE IN THEIR A PPEALS RELATED TO THE ADDITIONS OF ` . 4.90 CRORES AND ` 5.29 CRORES MADE BY THE ASSESSING AUTHORITY FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09, BUT DELET ED BY THE CIT(A). THESE ADDITIONS HAD BEEN MADE BY THE ASSESSING OFFICER IN THE LIGHT OF THE PAPERS FOUND AND SEIZED IN THE COURSE OF SEARCH, ATTRIBUTA BLE TO MS. JAYANTHI KRISHNAMURTHY. AS OBSERVED BY THE ASSESSING AUTHOR ITY, THE SAID SEIZED PAPERS REFLECTED A NUMBER OF TRANSACTIONS TOTALING TO ` 10.19 CRORES HAVING RECEIVED BY SHRI S. DURAIPANDI AND SHRI S. THALAVAIPANDIAN. TH ESE RECEIPTS WERE MADE IN THE MONTHS OF MARCH AND APRIL, 2007. WHEN THIS MATTER WAS PUT TO SHRI S. DURAIPANDI, IT WAS STATED THAT THE AMOUNTS WERE REC EIVED FROM ONE MS. JAYANTHI KRISHNAMURTHY. HE ALSO STATED THAT MS. JAYANTHI KR ISHNAMURTHY HAD ENTRUSTED THE AMOUNTS FOR SAFE CUSTODY. THE ASSESSING OFFIC ER FURTHER OBSERVED THAT, IF SO, NO PROOF IS AVAILABLE REGARDING THE RETURN OF T HOSE AMOUNTS TO MS. JAYANTHI KRISHNAMURTHY. BUT AT THE SAME TIME MS. JAYANTHI K RISHNAMURTHY STATED BEFORE THE ASSESSING AUTHORITY THAT NO SUCH AMOUNTS WERE P AID BY HER EITHER TO SHRI S. DURAIPANDI OR HIS FAMILY MEMBERS. ON THE OTHER HAN D, SHE STATED THAT SHE HAD BEEN RECEIVING PAYMENTS FROM SHRI S. DURAIPANDI AND OTHERS AGAINST THE SALE OF HER PROPERTIES INCLUDING THE ON-MONEY OF ` 2.5 CRORES. AS THE PAPERS WERE SEIZED FROM THE BUSINESS PREMISES OF THE ASSESSEE, THE AMOUNTS WERE ATTRIBUTED I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 8 TO THE ASSESSEE AND ADDITIONS WERE MADE BY THE ASSE SSING AUTHORITY FOR THE TWO ASSESSMENT YEARS 2007-08 AND 2008-09 AT ` . 4.90 CRORES AND ` 5.29 CRORES ON THE BASIS OF THE DATES REFLECTED IN THE DOCUMENTS S EIZED IN THE COURSE OF SEARCH. 15. AFTER OBSERVING THESE ISSUES IN A VERY DETAILED MANNER, THE CIT(A) HELD THAT THESE TWO AMOUNTS COULD NOT BE ADDED TO THE IN COME OF THE ASSESSEE-AOP FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 AND AC CORDINGLY HE DELETED THOSE TWO ADDITIONS. 16. WE HAVE CONSIDERED THE GROUNDS RAISED BY THE RE VENUE IN THIS REGARD VERY CAREFULLY. THE PREMISES LEADING TO THESE ADDI TIONS HAVE BEEN SUMMARIZED BY THE CIT(A) IN PARAGRAPH 13 OF HIS ORDER IN A DET AILED MANNER. THE DETAILS AS DISCUSSED BY HIM IN THE SAID PARAGRAPH SHOW THAT TH ESE MONEY TRANSACTIONS WERE ATTRIBUTABLE TO PROPERTY TRANSACTIONS INVOLVING MS. JAYANTHI KRISHNAMURTHY, SHRI S. DURAIPANDI AND ONE SHRI MURUGANANDAM. THE FACTS BEING SO, THE CIT(A) HAS HELD THAT THESE TWO AMOUNTS COULD NOT BE TREATED AS THE INCOME OF THE ASSESSEE- AOP. WE AGREE WITH HIS FINDING THAT THE SUM OF ` . 10.19 CRORES REFLECTED IN THE SEIZED MATERIAL, HAS TO BE CONSIDERED IN THE HANDS OF SHRI S. DURAIPANDI OR MS. JAYANTHI KRISHNAMURTHY. THIS IS BECAUSE SHRI S. DU RAIPANDI WAS THE PERSON WHO HAD ENTERED INTO AN AGREEMENT FOR THE PURCHASE OF L AND AT KELAMBAKKAM IN 2006. HE WAS THE PERSON WHO HAD SOLD THE PROPERTY IN 2007. THE SECOND PERSON INVOLVED IN THE TRANSACTION WAS SHRI MURUGAN ANDAM ON A 50% SHARE. WHEN THE CHAIN OF LAND TRANSACTION IS SO COMPLETE W ITH MS. JAYANTHI I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 9 KRISHNAMURTHY AS THE SELLER AND SHRI S. DURAIPANDI AND SHRI MURUGANANDAM AS THE BUYERS, IT IS NOT NECESSARY TO IMPLICATE THE AS SESSEE INTO THE WEB OF THESE TRANSACTIONS. REGARDING THE ON-MONEY PAYMENT THE C IT(A) HAS OBSERVED THAT NO EVIDENCE IS FOUND ON RECORDS BUT THE SAME IS HANGIN G OVER ONLY ON THE BASIS OF THE STATEMENT OF MS. JAYANTHI KRISHNAMURTHY. IN TH ESE CIRCUMSTANCES, WE FIND THAT THE CIT(A) IS JUSTIFIED IN HOLDING THAT THESE MONEY TRANSACTIONS TOTALING TO ` 10.19 CRORES BE CONSIDERED IN THE HANDS OF THE APPR OPRIATE ASSESSEES AND COULD NOT BE CONSIDERED IN THE HANDS OF THE ASSESSEE-AOP. 17. WE AGREE WITH THE ABOVE FINDING OF THE CIT(A) M AINLY ON THE GROUND THAT AS PER THE SEIZED RECORDS AND THE SUBSEQUENT STATEM ENTS FURNISHED BY THE CONCERNED PERSONS, THE ASSESSEE-AOP HAS NO ROLE IN THE EPISODE OF LAND TRANSACTION INVOLVING THE SALE OF LAND BY MS. JAYAN THI KRISHNAMURTHY. THE LAND TRANSACTION SEEMS TO BE ENTERED INTO BETWEEN INDIVI DUALS IN THEIR INDIVIDUAL CAPACITIES. WHEN THERE IS NO NEXUS BETWEEN THE ASS ESSEE-AOP AND THE LAND TRANSACTION, IT IS NOT POSSIBLE TO HOLD THE ASSESSE E RESPONSIBLE TO ACCOUNT FOR THE INCOME ARISING OUT OF SUCH PROPERTY TRANSACTION. T HERE IS NOTHING UNUSUAL IN LOCATING THE RELEVANT PAPERS IN THE BUSINESS PREMIS ES OF M/S. TEX B. SECURITIES AS SHRI DURAIPANDI IS ALSO THE SOUL AND SUBSTANCE OF T HE SAID BUSINESS OF THE AOP. 18. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE ORDER OF THE CIT(A) DELETING THE ADDITIONS OF ` 4.90 CRORES AND ` 5.29 CRORES FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 10 19. THE NEXT ISSUE RAISED BY THE REVENUE IN ITS APP EALS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 IS ON THE QUESTION OF ADD ITION OF ` 5.50 LAKHS AND ` 50 LAKHS ON THE GROUND THAT THE AMOUNTS HAD BEEN PA ID TO MS. JAYANTHI KRISHNAMURTHY. THE ASSESSEE WAS ASKED TO EXPLAIN H OW THE PAYMENT WAS MADE TO MS. JAYANTHI KRISHNAMURTHY. ACCORDING TO THE ASS ESSING OFFICER, THE ASSESSEE COULD NOT RECONCILE THE VARIOUS SOURCES CLAIMED BY THE ASSESSEE AS TO JUSTIFY THE ABOVE TWO PAYMENTS. HENCE ADDITIONS WERE MADE. TH E CIT(A) FOUND THAT THE FACTS AND CIRCUMSTANCES RELATING TO THE ADDITION OF ` 10.19 CRORES WHICH HAS ALREADY BEEN DELETED BY HIM, EQUALLY APPLY TO THESE TWO AMOUNTS AS WELL. THEREFORE, HE HELD THAT THESE TWO AMOUNTS CANNOT BE ACCOUNTED FOR IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY HE DELETED THE ABOV E TWO AMOUNTS. 20. WE AGREE WITH THE FINDING OF THE CIT(A). IN T HE MATTER OF ADDITION OF ` 10.19 CRORES IT HAS ALREADY BEEN SEEN THAT THE SAI D AMOUNT CANNOT BE ATTRIBUTED AS THE INCOME OF THE ASSESSEE AND ON THE SAME REASO NING THESE TWO AMOUNTS ALSO COULD NOT BE TREATED AS ITS INCOME. THEREFORE , THE CIT(A) IS JUSTIFIED IN DELETING THE ABOVE TWO ADDITIONS MADE BY THE ASSESS ING AUTHORITY. 21. THE NEXT GROUND RELATED TO THE ADDITIONS OF ` .17,83,500/-, ` 1,63,45,000/- AND ` 25,00,000/- MADE FOR THE ASSESSMENT YEAR 2008-09. THE ASSESSING OFFICER HAS MADE THE ADDITIONS OF ` 17,83,500/- AND ` 1,63,45,000/- ON THE GROUND THAT THESE AMOUNTS WERE ADVANCED AS LOANS BY THE ASSESSE E AND THE RELEVANT SOURCE HAS NOT BEEN EXPLAINED. BUT THE CASE OF THE ASSESS EE WAS THAT THE ASSESSEE HAS I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 11 ALREADY OFFERED AN AMOUNT OF ` 1.4 CRORES, BEING THE CASH CREDIT IN THE CAPITAL ACCOUNT BY WAY OF INCOME AND IN THE LIGHT OF THE SA ID AMOUNT OF ` 1.4 CRORES OFFERED AS INCOME, THERE WAS NO JUSTIFICATION FOR M AKING TWO INDEPENDENT ADDITIONS OF ` 17,83,500/- AND ` 1,63,45,000/. IT WAS THE CONTENTION OF THE ASSESSEE THAT THE SAME WOULD AMOUNT TO DOUBLING OF THE ADDITION. THE ASSESSING OFFICER HAS MADE AN ADDITION OF ` 25 LAKHS AS INTEREST INCOME IN THE HANDS OF THE ASSESSEE. IT IS THE CASE OF THE ASSES SEE THAT THE ASSESSEE HAS ALREADY OFFERED INTEREST INCOME TO THE EXTENT OF ` 24,73,800/- AND THE ASSESSING OFFICER HAS ERRONEOUSLY MADE AN ADDITION OF ` 25 LAKHS ON THE BASIS OF THE EARLIER ADMISSION OF ` 25 LAKHS MADE BY THE ASSESSEE AND AT THE SAME TIME WITHOUT LOOKING INTO THE FACT THAT THE ASSESSEE HAS ALREADY HONOURED THE COMMITMENT OF ` 25 LAKHS BY OFFERING A SUM OF ` 24,73,800/-. IT IS THE CASE OF THE ASSESSEE THAT THE ADDITION WAS MADE AS THE INTEREST INCOME RETURN ED BY THE ASSESSEE WAS NOT EXACTLY ` 25 LAKHS. 22. AFTER CONSIDERING ALL THE ASPECTS AND EVIDENCES OF THE CASE, THE CIT(A) FOUND THAT THE ASSESSEE HAS ALREADY OFFERED ` 1.4 CRORES AS UNEXPLAINED CASH CREDIT. HE FOUND THAT THE AMOUNT OFFERED BY THE AS SESSEE AT ` 1.4 CRORES HAS CREATED SUCH SOURCE IN THE HANDS OF THE ASSESSEE AN D TO THAT EXTENT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDIT IONS. HE FOUND THAT THE TOTAL OF THE ADDITIONS MADE BY THE ASSESSING OFFICER WAS ` 1,81,28,500/- AND THE INCOME OFFERED BY THE ASSESSEE WAS ` 1.4 CRORES. THE CIT(A) HELD THAT THE I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 12 DIFFERENTIAL AMOUNT OF ` 41,28,500/- ALONE COULD BE ADDED IN THE HANDS OF T HE ASSESSEE. 23. ACCORDINGLY, HE MODIFIED THE ADDITION OF ` 1,81,28,500/- (BEING THE SUM OF ` 1,63,45,000/- AND ` 17,83,500/-) TO ` 41,28,500/- . WE ARE INCLINED TO AGREE WITH THE FINDING OF THE CIT(A) AS THE RELEVANT ARIT HMETICS ARE VERY CLEAR AS APPARENT FROM THE RECORDS OF THE CASE. THE ASSESSE E HAS ALREADY OFFERED ` 1.4 CRORES AS INCOME AND IN SUCH CIRCUMSTANCES THE ASSE SSING AUTHORITY WAS NOT JUSTIFIED IN IGNORING SUCH AN OFFER MADE BY THE ASS ESSEE AND TO GO FOR FURTHER INDEPENDENT ADDITIONS. 24. IN SUCH CIRCUMSTANCES, THE CIT(A) HAS RIGHTLY G IVEN CREDIT FOR THE AMOUNT OF ` 1.4 CRORES AND REDUCED THE ADDITION TO THE EXTENT OF ` . 41,28,500/-. THIS AMOUNT OF ADDITION MODIFIED BY THE CIT(A) IS CONFIR MED. 25. ON THE SAME ANALOGY, WE UPHOLD THE DIFFERENTIAL AMOUNT OF ADDITION OF ` 26,200/- SUSTAINED BY THE CIT(A) IN THE LIGHT OF TH E ADDITION OF ` 25 LAKHS MADE BY THE ASSESSING OFFICER. THIS IS BECAUSE THE ASSE SSEE HAS ALREADY OFFERED AN AMOUNT OF ` 24,73,800/-. THE RELEVANT GROUNDS OF THE REVENUE ARE THEREFORE REJECTED. 26. NEXT WE WILL CONSIDER THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS AGAINST THE ADDITIONS MADE ON ACCOUNT OF THE DEPOSITS FOUND IN THE BANK ACCOUNT OPERATED BY SHRI S. DURAIPANDI AND SHR I S. THALAVAIPANDIAN. THE BANK ACCOUNTS WERE IN THE NAMES OF SHRI GANESAN AND SHRI T. RAJESH KHANNA. I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 13 THE ASSESSING OFFICER FOUND THAT THOSE ACCOUNTS WER E OPERATED BY SHRI S. DURAIPANDI AND SHRI S. THALAVAIPANDIAN. ACCORDINGL Y, ADDITIONS WERE MADE FOR THE ASSESSMENT YEARS 2004-05, 2005-06, 2006-07 AND 2007-08 AT ` 7,54,070/-, 15,32,000/-, ` 15,73,500/- AND ` 12,50,000/- RESPECTIVELY. THE CIT(A) FOUND THAT THE EMPLOYEES IN WHOSE NAMES THE ACCOUNTS ARE OPERATED DID NOT HAVE SOURCES TO DEAL IN THAT MUCH TRANSACTIONS REFLECTED IN THE BANK ACCOUNTS. HE ALSO FOUND THAT THE ASSESSEE HAS NOTHING TO SAY AGA INST THE FINDING OF THE ASSESSING AUTHORITY THAT THESE ACCOUNTS WERE IN FAC T OPERATED BY SHRI S. DURAIPANDI AND SHRI S. THALAVAIPANDIAN. HE THEREFO RE AGREED WITH THE ASSESSING OFFICER AND HELD THAT THESE ADDITIONS WERE RIGHTLY MADE. THE ADDITIONS WERE THUS CONFIRMED. 27. AFTER CONSIDERING THE ISSUE IN DETAIL, WE ARE O F THE VIEW THAT THE CASE MADE OUT BY THE ASSESSING AUTHORITY HAS BEEN SUPPOR TED BY EVIDENCES AVAILABLE ON RECORDS. IT IS TRUE THAT THE ACCOUNT HOLDERS BY THEMSELVES WERE NOT IN A POSITION TO INDULGE IN SUCH FINANCIAL TRANSACTIONS. SO ALSO IT IS TO BE SEEN THAT THOSE ACCOUNTS WERE OPERATED BY SHRI S. DURAIPANDI AND SHRI S. THALAVAIPANDIAN. SO ALSO THOSE TRANSACTIONS IN THE BANK ACCOUNTS EQU ATED THE SEQUENCE OF BUSINESS TRANSACTIONS OF THE ASSESSEE-AOP. IN THES E CIRCUMSTANCES, WE UPHOLD THE FINDING OF THE LOWER AUTHORITIES AND CONFIRM TH ESE ADDITIONS. THE CONTENTIONS OF THE ASSESSEE IN THIS REGARD ARE REJECTED. I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 14 28. THE NEXT ISSUE IS THE GROUND RAISED BY THE REVE NUE FOR THE ASSESSMENT YEAR 2007-08 AGAINST THE ORDER OF THE CIT(A) DELETI NG THE DISALLOWANCE OF THE CLAIM OF BAD DEBTS FOR ` 2,01,64,838/-. THIS ISSUE HAS BEEN DISCUSSED IN D ETAIL BY THE CIT(A) IN PAGES 27 TO 31 OF HIS ORDER. 29. IN THE INCOME AND EXPENDITURE STATEMENT FILED B Y THE ASSESSEE ALONG WITH THE RETURN OF INCOME IT HAS CLAIMED DEDUCTION BY WA Y OF BAD DEBTS TO THE EXTENT OF ` 2,01,64,838/-. THE BAD DEBTS WERE GENERATED OUT O F THE LOANS ADVANCED BY THE ASSESSEE IN ITS ORDINARY COURSE OF BUSINESS. W HEN ASKED FOR THE DETAILS, THE ASSESSEE HAD FURNISHED THE DETAILS OF THE PARTIES W HOSE DEBTS HAD BECOME BAD. BUT THE CLAIM WAS DISALLOWED BY THE ASSESSING OFFIC ER ON THE GROUND THAT THE DETAILS WERE NOT FURNISHED BY THE ASSESSEE AND NO S TEPS WERE TAKEN BY THE ASSESSEE TO RECOVER THE DEBTS. IN THE FIRST APPEAL THE CIT(A) HELD THAT THE FACTS OF THE CASE ARE COMPARABLE TO THE FACTS OF THE CASE CONSIDERED BY THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. V. CIT (323 I TR 397) AND THEREFORE THE CLAIM MADE BY THE ASSESSEE TOWARDS BAD DEBTS SHOULD BE ALLOWED AS A DEDUCTION. 30. ON A READING OF THE RELEVANT ORDERS OF THE LOWE R AUTHORITIES WE FIND THAT THE ASSESSEE HAS WRITTEN OFF THE DEBTS TREATED TO B E BAD IN ITS BOOKS OF ACCOUNTS AND THUS CLAIMED THE BAD DEBTS AS AN ITEM OF DEDUCT ION IN COMPUTING ITS INCOME. THE CASE OF THE ASSESSING AUTHORITY IS NOT ON THAT BASIC FACT. THE CASE OF THE ASSESSING AUTHORITY IS THAT THE ASSESSEE HAS NOT PR OVED THAT THOSE DEBTS HAD I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 15 BECOME BAD. THIS IS WHAT IS COMING OUT OF THE OBSE RVATIONS OF THE ASSESSING AUTHORITY THAT THE ASSESSEE HAD NOT TAKEN STEPS TO RECOVER THE DEBTS FROM THE DEFAULTERS. IT IS NOT THE CASE OF THE ASSESSING OF FICER THAT PARTICULARS WERE NOT FURNISHED BY THE ASSESSEE OR THAT THE DEBTS HAD NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS REQUIRED BY LAW. 31. AS RIGHTLY HELD BY THE CIT(A), IN THE LIGHT OF THE NEW LAW GOVERNING THE DEDUCTION OF BAD DEBTS, AFTER ASSESSMENT YEAR 1989- 90 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBTS HAVE BECOME BA D. THE STATUTE RECOGNIZES IT AS A REASONABLE EVIDENCE OF BAD DEBTS IF THE BAD DE BTS ARE WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AS SUCH. THEREFOR E, WRITING OFF OF BAD DEBTS IN THE BOOKS OF ACCOUNTS ITSELF IS A STATUTORY FORM OF EVIDENCE. THIS IS THE POSITION UPHELD BY THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. V. CIT (323 ITR 397) WHEREIN THE COURT HAS OBSERVED THAT PRIOR TO 1 .4.1989 EVERY ASSESSEE HAD TO ESTABLAISH, AS A MATTER OF FACT, THAT THE DEBT A DVANCED BY THE ASSESSEE HAD, IN FACT, BECOME IRRECOVERABLE AND THAT POSITION GOT AL TERED BY THE DELETION OF THE WORD ESTABLISHED WHICH EARLIER EXISTED IN SECTION 36(1)(VII) OF THE INCOME TAX ACT, 1961. 32. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE CIT(A) HAS RIGHTLY APPLIED THE ABOVE JUDGMENT OF THE HON'BLE S UPREME COURT AND DELETED THE DISALLOWANCE OF BAD DEBTS. THE RELEVANT GROUND S RAISED BY THE REVENUE ARE ACCORDINGLY REJECTED. I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 16 33. THE NEXT ISSUE IS THE ONE RAISED BY THE ASSESSE E IN ITS CROSS OBJECTION AGAINST THE ADDITIONS OF UNEXPLAINED CASH CREDITS C ONFIRMED BY THE CIT(A) FOR THE ASSESSMENT YEARS 2003-04, 2004-05 AND 2005-06. THE ASSESSING OFFICER HAS MADE ADDITIONS OF ` 4,71,730/-, ` 11,53,407/- AND ` 36,54,146/- ON THE BASIS OF THE UNEXPLAINED CASH CREDITS REFLECTED IN THE BALAN CE SHEET FILED BY THE ASSESSEE ALONG WITH THE RETURNS OF INCOME FOR THE ABOVE ASSE SSMENT YEARS. AS RIGHTLY POINTED OUT BY THE CIT(A), THE ASSESSEE ITSELF HAS TACITLY ADMITTED THAT IT DID NOT HAVE ANY EVIDENCE TO SUPPORT THE BONA FIDES OF THE ABOVE CREDITS REFLECTED IN ITS BALANCE SHEETS. THEREFORE IT IS CLEAR THAT THOSE C REDITS REMAINED UNEXPLAINED. FOR THIS SHORT GROUND ITSELF THE CIT(A) IS JUSTIFIE D IN CONFIRMING THOSE ADDITIONS. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) UPH OLDING THOSE THREE ADDITIONS AND REJECT THE CONTENTIONS OF THE ASSESSEE. 34. IN RESPECT OF OTHER INCIDENTAL ARGUMENTS OF THE ASSESSEE RELATING TO GIVING CREDIT FOR TAX PAID AND SEIZED CASH ETC., THE CIT(A ) HAS GIVEN APPROPRIATE DIRECTIONS TO THE ASSESSING OFFICER. THE LEVY OF I NTEREST UNDER SECTION 234B IS ALSO CONSEQUENTIAL. 35. AFTER CONSIDERING ALL THE GROUNDS RAISED BOTH B Y THE REVENUE AS WELL AS BY THE ASSESSEE, WE FIND THAT THE CASES HAVE BEEN EXAM INED BY THE CIT(A) IN A SPEAKING MANNER AND HE HAS MODIFIED THE ADDITIONS A ND DISALLOWANCES WHEREVER NECESSARY TO THE EXTENT REASONABLE. THEREFORE, WE HAVE IN FACT CONFIRMED THE I.T.A. NOS. 1745-1751/MDS/2010 & CO NOS. 138 TO 144/MDS/2010 17 ORDER OF THE CIT(A) IN ALL ASPECTS. ACCORDINGLY, T HE CONTENTIONS OF THE REVENUE AS WELL AS THE ASSESSEE ARE REJECTED. 36. IN RESULT, THE APPEALS BY THE REVENUE AS WELL A S THE CROSS OBJECTIONS BY THE ASSESSEE ARE DISMISSED. 37. ORDER PRONOUNCED ON FRIDAY, THE 29 TH DAY OF APRIL,2011. SD/- SD/- (HARI OM MARATHA) (DR. O.K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT CHENNAI, DATED THE 29 TH APRIL, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE