SMT R SHANTHI, VILLIPURAM V. ITO WARD 2, POLLACHI

CO 71/CHNY/2018

AI Insights

This consolidated order addresses multiple appeals related to the assessment years 2009-10 and 2010-11, involving different assessees but similar issues concerning the source of bank credits. The Income Tax Officer (ITO) had assessed these credits as income under section 69A of the Income-tax Act, 1961, after finding substantial credits in the assessees' bank accounts. The assessees contended that these credits were contract receipts from M/s. EDAC Engineering Ltd., facilitated by intermediary transactions. The Commissioner of Income Tax (Appeals) (CIT(A)) had partially accepted the assessees' claims by estimating a lower profit margin on these credits. However, the ITAT found inconsistencies in the assessments and the treatment of similar transactions across different assessees, leading to the decision to remand the cases for a detailed re-examination by the A.O.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135400 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 1 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-08-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 02-07-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

आयकर अपीलीय अिधकरण, ’सी’ ायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI ी मंजुनाथ. जी, लेखा सद! एवं ी मनोमोहन दास, ाियक सद! के सम& BEFORE SHRI MANJUNATHA. G, ACCOUNTANT MEMBER AND SHRI MANOMOHAN DAS, JUDICIAL MEMBER आयकर अपील सं./ITA No.825/Chny/2018 िनधा'रण वष' /Assessment Year: 2010-11 & C.O No.71/Chny/2018 The Income Tax Officer, Ward-2, Pollachi. Vs. Smt. R. Shanti, 23-B, New No.22-B, Rahim Layout, Villupuram – 605 602. [PAN: BZUPS-1508-R] ( अपीलाथ /Appellant) ( यथ /Respondent/ Cross Objector) आयकर अपील सं./ITA Nos.826 & 827/Chny/2018 िनधा'रण वष' /Assessment Years: 2009-10 & 2010-11 & C.O Nos.72 & 73/Chny/2018 The Income Tax Officer, Ward-1, Villupuram. Vs. Shri M. Vivekanandan, (Legal Representative of Late M. Sasikala) No.34, Rahim Layout, KK Road, Villupuram – 605 602 [PAN: BZLPS-7258-H] ( अपीलाथ /Appellant) ( यथ /Respondent/ Cross Objector) आयकर अपील सं./ITA Nos.713 & 714/Chny/2019 िनधा'रण वष' /Assessment Years: 2009-10 & 2010-11 Shri N. Erulappan, No.1, 1 st Floor, Thiruvengadam Street, Adyar, Chennai – 600 020. [PAN: AAJPE-2224-P] Vs. The Income Tax Officer, Ward-1, Kumbakonam. ( अपीलाथ /Appellant) ( यथ /Respondent) ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 2 -: अपीलाथ क ओर से/ Assessee/ Cross Objector by : None )*थ+ की ओर से /Revenue by : Shri P. Sajit Kumar, JCIT सुनवाई क तारीख/Date of Hearing : 29.08.2023 घोषणा क तारीख /Date of Pronouncement : 31.08.2023 आदेश / O R D E R Per Bench: These bunch of eight appeals filed by three different assessees are directed against separate but identical orders of Commissioner of Income Tax (Appeals)-3, Coimbatore, dated 01.01.2018 & Commissioner of Income Tax (Appeals)-1, Thiruchirapalli, dated 18.12.2018, and pertains to Assessment Years 2009-10 & 2010-11. Since, facts are identical and issue is common, for the sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order. 2. At the outset, the assessee submitted that the appeal filed by the assessee for assessment year 2009-10 in ITA No: 713/Chny/2019 is time barred by 15 days for which necessary petition for condonation of delay along with affidavit explaining the reasons for the delay has been filed. The assessee further submitted that he could not file appeal within the time allowed under the Act, because he was in hospital for heart throat and other ailments and was advised for bed rest. The delay ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 3 -: in filing appeal is neither intentional nor willful but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. 3. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee do not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay and hence, appeal filed by the assessee may be dismissed as not maintainable. 4. Having heard ld. DR and considered the petition filed by the assessee for condonation of delay, we are of the considered view that reasons given by the assessee for not filing the appeal within the time allowed under the Act comes under reasonable cause as provided under the Act for condonation of delay and hence, delay in filing of appeal is condoned and appeal filed by the assessee for assessment year 2009-10 in ITA No: 713/Chny/2019 is admitted for adjudication. 5. The Revenue has filed more or less common grounds in their appeals in all three cases and the only issue emanates from grounds of appeal filed by the assessee and the appeal filed by the Revenue is ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 4 -: estimation of net profit on total receipts assessed by the A.O as income. Therefore, we deem it not necessary to reproduce grounds of appeal filed by the Revenue in all the three cases. The assessee, Shri N. Erulappan, was also raised more or less common grounds for both the A.Ys and therefore, we deem it not necessary to reproduce the grounds of appeal filed by the assessee. The assessee, Smt. R. Shanthi & Smt. M. Sasikala, represented by her Legal Representative, Shri M. Vivekandan has also filed more or less common grounds in their cross objections and therefore, we deem it not necessary to reproduce grounds of cross objections. 6. The brief facts are that, the assessment of Smt. R. Shanti, Proprietor of M/s. Thirumurthy Software and Solutions, Smt. Late M. Sasikala, Rep. by L.R M. Vivekanandan, Proprietor of M/s. Om Muruga Engineering & Developers and Shri N. Erulappan, have been concluded based on credits found in their bank accounts. The summary of such credits taxed in each of the assessee for A.Y 2009-10 and 2010-11 are as under: Name of the Assessee AY Bank Credits Credit Sub-total (Rs) assessed(Rs) (Rs) M. Shanthi (BZUPS 1508R) ICICI 28152000 28152000 Prop. Thirumurthy Software 2010-11 Axis 31300000 31300000 and solutions 5,94,52,000 M. Sasikala (BZLPS7258H) Prop. Om Muruga Engineers 2009-10 ICICI 14365202 14365202 1,81,80,202 ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 5 -: & Developers, LR by M. Vivekanandan Axis 3815000 3815000 2010-11 ICICI 44297834 35249834* 6,02,49,834 Axis 25000000 25000000 N.Erulappan (AAJPE2224P) Prop.Devaki Developers 2009-10 ICICI 152051584 152051584 16,10,64,006 HDFC 9012422 9012422 2010-11 ICICI 158682589 158682589 15,86,82,589 Grand Total 46,66, 76,631 457628631 45, 76,28,631 7. The assessees claimed before the A.O that, the source for the credits in their bank account as to amounts received from M/s. EDAC Engineering Ltd. as contract receipts and said transactions has been facilitated by one Shri M. Nandakumar of M/s. EDAC Engineering Ltd. through Shri N. Erulappan and Shri S.Kesavan. The A.O has captured the amount released by M/s. EDAC Engineering Ltd. to three assessees amounting to Rs. 22,40,74,347/- and the summary of such money released are identifies as under: SI.No. Name of the Party Amount (Rs) 1 Om Muruga Engineers & Developers. Prop. M. Sasikala 1,17,30,000 2 N.Erulappan, Prop. Of Devaki Developers 7,98,00,000 3 Devaki Developers/Sarvana Engineers. Prop. N.Erulappan 13,25,44,347 Total 22,40,74,347 8. All the assessees claimed that, M/s. EDAC Engineering Ltd. has released the above sums in the guise of awarding a civil contract to Shri N. Erulappan and Shri S. Kesavan. In turn, Shri N. Erulappan has ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 6 -: transferred amount to Smt. R. Shanti and Smt. M. Sasikala. The statement of Shri N. Erulappan and Shri S. Kesavan was recorded, where they have stated that they did not execute any contract work, but instead, as instructed by N. Nandakumar of M/s. EDAC Engineering Ltd., withdraw the money from their bank account and handed over back to Shri Nanda Kumar. The A.O did not accept the explanation of the assessee and according to the A.O, all the assessees could not substantiate their claim with necessary evidences. Therefore, taking into account relevant facts and explanation of the assessee, the A.O concluded the assessment in the case of Smt. R. Shanthi and M. Sasikala and made additions towards total credits in bank account u/s. 69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) . However, in the case of N. Erulappan, the A.O considered total credits in bank account as contract receipts and estimated 8% net profit on total receipts and added back to total income. 9. All the assessees have preferred an appeal before CIT(A). Before CIT(A), they have filed a detailed written statements and explained the transactions between the assessee and M/s. EDAC Engineering Ltd., and claimed that sum received from said company is not for carrying out any civil contract work, but the same has been released by Shri N. Nandakumar and the amount has been withdrawn ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 7 -: from the bank and handed over back to Shri N. Nandakumar. The CIT(A) taking into account relevant facts and also considering the nature of transactions, estimated 1% net profit on total credits assessed by the A.O as income, by observing that the assessees are only a facilitator of bogus transactions carried out by M/s. EDAC Engineering Ltd. through Shri N. Nandakumar and further, carried out said transactions for nominal commission. In the case of Shri N. Erulappan, the Ld. CIT(A) has enhanced the assessment and directed the A.O to assess total credits found in his bank account as income of the assessee as against the estimation of income @ 8% on total receipts by the A.O. Being aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us in the case of Smt. R. Shanthi and Smt. M. Sasikala and the assessee has filed cross objections. In the case of N. Erulappan, the assessee is in appeal before us against the order of Ld. CIT(A). 10. None appeared for the assessees, despite the case was posted for hearing on number of occasions, which is evident from the records that the case was posted for hearing right from 13.08.2018 to 29.08.2023. The assessees neither appeared, nor sought any adjournment therefore, the appeals filed by the Revenue and as well as the assessee and also cross objections filed by the assessees are ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 8 -: disposed off on the basis of material available on record after hearing the Ld. D.R for the Revenue. 11. We have heard the Ld. D.R, Shri P. Sajit Kumar, JCIT and perused the relevant materials available on record. We find that the sole basis for the A.O to make additions in all three cases is some found credited in bank account of the assessees. The assessees claimed before the A.O that source of the credit in their bank account is amount received from M/s. EDAC Engineering Ltd. It was further explained that, they have received amount from the company as contract receipts, but they did not carry out any civil contract work for the company. It was further stated that Shri N. Nandakumar of M/s. EDAC Engineering Ltd., has approached them to facilitate the transactions in the guise of civil contract works and withdraw money from the bank account and handed over to Shri N. Nandakumar. We find that the A.O has identified amount released by M/s. EDAC Engineering Ltd. to three assessees and total sum released by said company was at Rs. 22,40,74,347/-. As against this, the A.O assessed sum of Rs. 45,76,28,631/- in three assessees hands for two assessment years. From the above, it is very clear that the A.O has not carried out necessary verification to ascertain the nature of credits found in the bank account and the source of said credits. We further ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 9 -: noted that Smt. R. Shanti and Smt. M. Sasikala have stated in their statements that they had received money from Shri N. Erulappan and Shri R. Kesavan. Therefore, if at all the claim of the above two assessees are correct then, the money needs to be identified by the A.O by taking into account relevant bank statements of all three assessees. Further, it was submissions of Ld. D.R that the very same amount released by M/s. EDAC Engineering Ltd. has been disallowed in their assessment on the ground that said payment is bogus in nature. It was further argued that the ITAT has allowed partial relief in the case of M/s. EDAC Engineering Ltd. These are oral submissions and there is no evidence before us to verify the claim of the Ld. D.R. Further, the first appellate authority in the case of Smt. R. Shanti and Smt. M. Sasikala has estimated 1% profits/commission on total credits found in the bank account of the both assessees. However, in the case of N. Erulappan, although the A.O has estimated 8% profit on total credits for both assessments, but the Ld. CIT(A) has enhanced the assessment and directed the A.O to assess total credits found in bank account. From the above, it appears that the Department has taken a contrary view in different assessees case on very same credits found in bank account and received from M/s. EDAC Engineering Ltd. Since, the credits considered by the A.O in the assessments of three ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 10 -: assessees is more than the amount claimed to have been released by M/s. EDAC Engineering Ltd., in our considered view the issue needs fresh examination from the A.O to identify the nature and source of credits found in bank account of all three assessees. Further, if the claim of the Ld. D.R is correct that the ITAT has allowed partial relief in the case of M/s. EDAC Engineering Ltd. then, the findings given by the Tribunal in the case of M/s. EDAC Engineering Ltd. also needs to be considered by the A.O to conclude the assessment. Therefore, for all these reasons, the appeals filed by the Revenue in the case of Smt. R. Shanti and Smt. M. Sasikala and consequent cross objections filed by both the assessees and also the appeal filed by Shri N. Erulappan for both assessment years needs to go back to the file of the A.O for further verification of facts. Thus, we set aside the orders passed by first appellate authority in all three cases and restore the issue in three cases to the file of the jurisdictional A.O and direct the A.O to re-verify the case with reference to claim of the assessee that source of credits found in their bank account is out of amount received from M/s. EDAC Engineering Ltd. The A.O is also directed to refer to the order passed by the ITAT in the case of M/s. EDAC Engineering Ltd. to arrive at a proper conclusion in the case of all these three assessees. We further direct the Revenue, if possible all three cases should be consolidated ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 11 -: to one A.O for better appraisal of facts and assess the income in accordance with law. 12. In the result, appeals by the Revenue in ITA Nos.825, 826 & 827/Chny/2018 and appeals by the assessee in ITA Nos.713 & 714/Chny/2019 and Cross Objections by the assessee in C.O Nos.71, 72 & 73/Chny/2018 are allowed for statistical purposes. Order pronounced on 31 st August, 2023. Sd/- Sd/- ( मनोमोहन दास) (Manomohan Das) ाियक सद /Judicial Member (मंजुनाथ. जी) (Manjunatha. G) लेखा लेखालेखा लेखा सद य सद यसद य सद य /Accountant Member चे ई/Chennai, दनांक/Dated: 31 st August, 2023. EDN/- आदेश क ितिलिप अ ेिषत/Copy to: 1. अपीलाथ+/Appellant 2. )*थ+/Respondent 3. आयकर आयु-/CIT 4. िवभागीय )ितिनिध/DR 5. गाड' फाईल/GF