Shri B.Ramalingam, CHENNAI V. ITO, Pondicherry

CO 166/CHNY/2012

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8225 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Bonafide belief
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1440/MDS/2012 (ASSESSMENT YEAR : 2007-08) THE INCOME TAX OFFICER, WARD I(2), D.P. THOTTAM, MUTHIALPET, PUDUCHERRY 605 003. (APPELLANT) V. SHRI B. RAMALINGAM, PROP: JBR ROADLINES, NO.4/280-A, JAYARAMAN COMPLEX, PONDY-TINDIVANAM ROAD, GORIMEDU, PONDICHERRY 605 006. PAN : AEGPR 8712 L (RESPONDENT) C.O. NO. 166/MDS/2012 (IN I.T.A. NO. 1440/MDS/12) (ASSESSMENT YEAR : 2007-08) SHRI B. RAMALINGAM, PROP: JBR ROADLINES, NO.4/280-A, JAYARAMAN COMPLEX, PONDY-TINDIVANAM ROAD, GORIMEDU, PONDICHERRY 605 006. (CROSS-OBJECTOR) V. THE INCOME TAX OFFICER, WARD I(2), D.P. THOTTAM, MUTHIALPET, PUDUCHERRY 605 003. (RESPONDENT) REVENUE BY : SHRI GURU BASHYAM, JCIT ASSESSEE BY : SHRI SAROJ KUMAR PAR IDA,ADVOCATE DATE OF HEARING : 09.01.2013 DATE OF PRONOUNCEMENT : 17.01.2013 I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 2 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEAL FILED BY THE REVENUE AND CROSS-O BJECTION FILED BY THE ASSESSEE RESPECTIVELY, DIRECTED AGAINS T AN ORDER DATED 20.3.2012 OF COMMISSIONER OF INCOME TAX (APPEALS)-X II, CHENNAI. 2. ASSESSEE, A TRANSPORT COMMISSION AGENT, HAD FILE D HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 29.10.20 07 DECLARING AN INCOME OF ` 4,32,580/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD EFFECTED A PAYMENT OF ` 19,17,700/- AND DEDUCTED TAX AT A LOWER RATE THAN WHAT WAS PRESCRIBED UNDER THE INCOME-TAX ACT. AS PER THE A.O., ASSESSEE HAD DEDUCTED ` 31,964/- ONLY, WHEREAS, ACTUAL AMOUNT THAT SHOULD HAVE BEEN COLLECTED WAS ` 43,031/-. 3. ASSESSEE HAD ALSO SHOWN A CREDIT OF ` 6,50,000/- IN HIS CAPITAL ACCOUNT, WHICH WAS CLAIMED AS A GIFT RECEIVED FROM ONE SHRI G. RAGHAVAN. ASSESSEE FILED A LETTER OF CONFIRMATION FROM SHRI G. RAGHAVAN, WHEREIN IT WAS STATED THAT THE AMOUNT CAM E OUT OF LAND I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 3 ACQUISITION CONSIDERATION RECEIVED BY HIM. HOWEVER , THE A.O. WAS OF THE OPINION THAT ASSESSEE COULD NOT ESTABLISH THE I DENTITY OF THE DONOR, NOR THE CAPACITY OF THE DONOR. AS PER THE A .O., ASSESSEE HAD SIMPLY STATED THAT THE DONOR WAS HIS UNCLE, BUT SUC H RELATIONSHIP WAS NOT ESTABLISHED. HE, THEREFORE, DISALLOWED THE CLA IM OF GIFT OF ` 6,50,000/- AND IT ADDED TO THE INCOME OF THE ASSESS EE. 4. IN ADDITION TO THE ABOVE, A SUM OF ` 3 LAKHS WAS ALSO SHOWN AS A CREDIT IN THE ASSESSEES CAPITAL ACCOUNT. AS PER THE A.O., ASSESSEE COULD NOT FURNISH ANY EVIDENCE WITH REGARD TO THE G ENUINENESS OF THE CREDIT OR THE CREDITWORTHINESS OF THE CREDITOR. TH IS AMOUNT WAS ALSO CONSIDERED AS INCOME OF THE ASSESSEE UNDER SECTION 68 OF INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT'). 5. ASSESSEE HAD PAID LIC PREMIUM OF ` 60,965/-. AS PER THE A.O., ASSESSEE COULD NOT OFFER ANY EXPLANATION ABOUT THE SOURCE OF INVESTMENT. SUCH AMOUNT OF ` 60,965/- WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER SECTION 69 OF THE ACT. 6. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) AGA INST EACH OF THE ABOVE ADDITIONS. ACCORDING TO HIM, HE WAS TAKI NG TRANSPORT CONTRACT FROM VARIOUS PERSONS AND HAD IN TURN AWARD ED SUB-CONTRACTS I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 4 TO OTHER PERSONS. AS PER THE ASSESSEE, HIS LIABILI TY TO DEDUCT TAX WAS 1% AND NOT 2% SINCE PAYMENTS WERE EFFECTED TO SUB-C ONTRACTORS. ASSESSING OFFICER HAD CALCULATED THE TAX AT 2%, WHE REAS, ASSESSEE WAS LIABLE FOR DEDUCTION ONLY AT 1%. AS PER THE AS SESSEE, IN SUCH CIRCUMSTANCES, NO DISALLOWANCE WAS WARRANTED. 7. WITH REGARD TO GIFT OF ` 6,50,000/-, ASSESSEE EXPLAINED THAT SHRI G. RAGHAVAN WAS HUSBAND OF HIS SISTER SMT. B. JAYAM ANI. AS PER ASSESSEE, HE HAD FURNISHED A COPY OF RATION CARD FO R PROVING THAT SHRI G. RAGHAVAN WAS HIS UNCLE AND THIS WAS DISBELI EVED BY THE ASSESSING OFFICER. 8. WITH REGARD TO THE ADDITION FOR UNEXPLAINED CASH CREDIT OF ` 3 LAKHS, EXPLANATION OF THE ASSESSEE WAS THAT THIS WA S RECEIVED FROM HIS FATHER, WHO HAD RETIRED AND HAD RETIREMENT BENE FITS. FURTHER, AS PER THE ASSESSEE, HIS FATHER HAD ALSO SOLD AGRICULT URAL LANDS FOR ` 1,50,000/-. THUS, ACCORDING TO HIM, ` 3 LAKHS, WHICH WAS RECEIVED FROM HIS FATHER WAS ALSO EXPLAINED. 9. FINALLY, WITH REGARD TO PREMIUM AMOUNT OF ` 60,965/- PAID TO LIC, ARGUMENT OF THE ASSESSEE WAS THAT THERE WERE D RAWINGS OF ` 3,90,000/- IN THE FINANCIAL YEAR 2005-06 AND ANOTHE R SUM OF ` I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 5 43,000/- IN THE FINANCIAL YEAR 2006-07, OUT OF WHIC H, REMITTANCES WERE MADE TO LIC. 10. CIT(APPEALS), AFTER HEARING THE ASSESSEE, DELET ED THE ADDITIONS OF ` 4,93,218/-, ` 6,50,000/- AND ` 60,965/-. HOWEVER, HE SUSTAINED THE ADDITION OF ` 3 LAKHS. 11. NOW BEFORE US, LEARNED D.R. ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT ASSESSEE HAD NOT DEDUC TED TAX AS REQUIRED UNDER THE ACT AND THEREFORE, APPLICATION O F SECTION 40(A)(IA) WAS CORRECTLY MADE BY THE A.O. WITH REGARD TO THE GIFT OF ` 6,50,000/- , LEARNED D.R. SUBMITTED THAT ASSESSEE COULD NOT GI VE SOURCE OF HIS UNCLE. WITH REGARD TO REMITTANCES MADE TO LIC, LEA RNED D.R. SUBMITTED THAT ASSESSEE COULD NOT PROVE WITH RECORD S, DRAWINGS MADE BY HIM IN THE EARLIER YEARS. IN SUPPORT OF AD DITION OF ` 3 LAKHS SUSTAINED BY THE CIT(APPEALS), LEARNED D.R. SUBMITT ED THAT ASSESSEES FATHER HAD RECEIVED RETIREMENT BENEFITS OF ` 1,26,773/- IN 1997-98 AND RECEIVED THE SALE PROCEEDS OF ` 1,50,000/- IN 2002-03. IT WAS NOT KNOWN WHERE THESE MONEYS WERE LYING FOR SUCH A LONG PERIOD OF TIME FOR GIVING IT TO THE ASSESSEE. I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 6 12. PER CONTRA, AND IN SUPPORT OF HIS CROSS-OBJECTI ON, LEARNED A.R. SUBMITTED THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DE LETING THE ADDITIONS OF ` 4,93,218/-, ` 6,50,000/- AND ` 60,965/-. SO FAR AS UNEXPLAINED CASH CREDIT OF ` 3 LAKHS SUSTAINED BY THE CIT(APPEALS), LEARNED A.R . SUBMITTED THAT ASSESSEES FATHER HAD CONFIRMED THE PAYMENT TO THE ASSESSEE AND THIS WAS UNFAIRLY DISBELIEVED. 13. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. SO FAR AS DISALLOWANCE UNDER SECTION 40(A)(IA) IS C ONCERNED, IT IS NOT DISPUTED THAT ASSESSEE HAD DEDUCTED TAX AT 1% ON TH E PAYMENTS EFFECTED TO HIS TRANSPORTERS. CONTENTION OF THE AS SESSEE THAT HE HAD MADE THE PAYMENTS TO SUB-CONTRACTORS AND THEREFORE, HE WAS LIABLE FOR DEDUCTION ONLY AT 1%, HAS NOT BEEN EFFECTIVELY REBUTTED BY THE LEARNED D.R. IN OUR OPINION, EVEN IF THE RATE APPL IED BY THE ASSESSEE WAS LOWER THAN WHAT WAS PRESCRIBED BY THE ACT, A DI SALLOWANCE UNDER SECTION 40(A)(IA) CANNOT BE MADE, WHEN ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE RATE APPLIED BY HIM WAS TH E CORRECT ONE. WE ARE OF THE OPINION THAT CIT(APPEALS) HAD RIGHTLY AP PRECIATED THIS POSITION OF LAW AND DELETED THE ADDITION. 14. WITH REGARD TO GIFT OF ` 6,50,000/-, WITHOUT DISPUTE, THE MONEY WAS RECEIVED FROM ASSESSEES UNCLE, WHO WAS HUSBAND OF HIS OWN I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 7 SISTER. ASSESSEE HAD FILED A CONFIRMATION BEFORE T HE ASSESSING OFFICER WHEREIN IT WAS MENTIONED THAT THE AMOUNT WA S GIVEN BY SHRI G. RAGHAVAN OUT OF LAND ACQUISITION PROCEEDS RECEIV ED BY HIM. THIS WAS NEVER DISPUTED BY THE ASSESSING OFFICER. HE WA S OF THE OPINION THAT ASSESSEE COULD NOT ESTABLISH THE RELATIONSHIP OF THE DONOR WITH THE ASSESSEE. IN OUR OPINION, ONCE ASSESSEE HAD PR ODUCED A COPY OF RATION CARD, WHICH SHOWED THE NAME OF SHRI G. RAGHA VAN AND SMT. B. JAYAMANI, WHO WAS ASSESSEES SISTER THEREIN, THE RE WAS NO REASON WHY THE GIFT OUGHT HAVE BEEN DISBELIEVED. ASSESSEE HAD DISCHARGED ONUS RESTING ON HIM FOR PROVING THE GIFT. THE DISA LLOWANCE WAS RIGHTLY DELETED BY THE CIT(APPEALS). 15. COMING TO THE REMITTANCES OF ` 60,965/- TO LIC, THE AMOUNT IN THE FIRST PLACE WAS PAYMENT OF LIC PREMIUM. ARGUME NT OF THE ASSESSEE THAT HE HAD DRAWINGS IN THE PRECEDING YEAR FROM THE CAPITAL ACCOUNT WAS FOUND TO BE CORRECT BY THE CIT(APPEALS) . IN OUR OPINION, THE SOURCE FOR SUCH AMOUNT WAS ALSO SUFFICIENTLY DE MONSTRATED. 16. THIS LEAVES US WITH THE ADDITION FOR UNEXPLAINE D CASH CREDIT ` 3 LAKHS SUSTAINED BY THE CIT(APPEALS). CIT(APPEALS) AS WELL AS ASSESSING OFFICER DISBELIEVED THE EXPLANATION OF TH E ASSESSEE THAT IT HAD COME OUT OF RETIREMENT BENEFITS RECEIVED BY HIS FATHER AND ALSO I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 8 SALE PROCEEDS OF AGRICULTURAL LANDS. ACCORDING TO THEM, ASSESSEE COULD NOT SHOW HOW THIS MONEY WAS LYING ALL THE YEA RS, I.E. DURING THE PERIOD 1997-98 TO 2006-07. IN OUR OPINION, JUST BE CAUSE A LOAN WAS RECEIVED IN CASH, IT COULD NOT BE DISBELIEVED ESPEC IALLY WHEN IT WAS RECEIVED FROM A CLOSE RELATIVE. IT IS NOT DISPUTED THAT ASSESSEES FATHER HAD RETIRED AND HAD RECEIVED RETIREMENT BENE FITS. HE MIGHT HAVE CHOSEN TO GIVE A LOAN TO HIS SON ONLY WHEN HIS SON NEEDED SUCH AMOUNT. THIS EXIGENCY MIGHT HAVE HAPPENED ONLY IN THE RELEVANT PREVIOUS YEAR. ASSESSEE CANNOT BE EXPECTED TO EXPL AIN WHERE HIS FATHER HAD KEPT HIS MONEY ALL ALONG. IN OUR OPINIO N, THE LOAN OF ` 3 LAKHS TAKEN FROM FATHER WAS SUFFICIENTLY EXPLAINED AS COMING OUT OF THE RETIREMENT BENEFITS OF ` 1,26,773/- RECEIVED BY THE LATTER IN 1997- 98 ALONG WITH ITS INTEREST AND ALSO CONSIDERATION R ECEIVED ON SALE OF AGRICULTURAL LAND IN 2002-03. IN OUR OPINION, THIS ADDITION WAS NOT CALLED FOR. SUCH ADDITION IS DELETED. 17. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED, WHEREAS, THE CROSS-OBJECTION FILED BY THE ASSESSEE IS ALLOWED. I.T.A. NO. 1440/MDS/12 C.O. NO. 166/MDS/12 9 THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 17 TH OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 17 TH JANUARY, 2013. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT(A)-XII, CHENNAI-34 (4) CIT, PONDICHERRY (5) D.R. (6) GUARD FILE