Ponmani Suresh, CHENNAI V. DCIT, CHENNAI

ITA 1011/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6135 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2017
• Result in Favour of: Set Aside
• Court: TRIBUNAL
• Department Lawyers: R ILAVARASI
• Assessee Lawyers: K RAVI
• Keywords: Unexplained cash credit; Principle of natural justice; Opportunity of cross examination; Revised return
• Section: 139(5); 292BB; 131; 40A(3); 143(2); 142(1); 143(3); 133(6); 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' ! # . $ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER . / ITA NO. 1011/MDS/2017 / ASSESSMENT YEAR : 2012-13 MRS. PONMANI SURESH , OLD NO.12A, NEW NO.24, SWARNA MANGALAM, EAST ROAD, WEST CIT NAGAR, NANDANAM, CHENNAI 600 035. PAN AALPP7516R ( /APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME-TAX, NON CORPORATE WARD-2, CHENNAI. RESPONDENT) / APPELLANT BY : SHRI K. RAVI, ADVOCATE / RESPONDENT BY : MS. R. ILAVARASI, JCIT ! / DATE OF HEARING : 03.07.2017 '# ! / DATE OF PRONOUNCEMENT: 21.09.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) D ATED 31.03.2017. - - ITA 1011/MDS/17 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS FO R OUR ADJUDICATION. 1.THE FIRST GROUND IS WITH REGARD TO ASSESSMENT BA SED ON NON-EST RETURN OF INCOME. 2. THE NEXT GROUND IS WITH REGARD TO INVALIDITY OF STATEMENT RECORDED U/S.131 FROM MR. STEPHEN JOHN BY DDIT(INV) KOCHI ON 26.3.2015. 3. THE NEXT GROUND IS WITH REGARD TO ADDITION OF 2,15,00,000/- AS PROFIT FROM TRANSACTING IN VELACHARY PROPERTY. 4. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE O F 2,90,00,000/- U/S.40A(3) IN RESPECT OF PAYMENTS MADE IN RESPECT O F TRANSACTION IN VELACHERY PROPERTY. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN HOLDING THAT ANY PAYMENT IN CASH IN EXCESS OF 20,000/- WOULD ATTRACT DISALLOWANCE U/S.40A(3), WHEREAS THE SECTION PRESCR IBES DISALLOWANCE, ONLY IF THE PAYMENTS ARE MADE TOWARDS AN EXPENDITURE. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED I N HOLDING THAT PAYMENTS MADE BY THE APPELLANT IN HIS CAPACITY AS A N INTERMEDIARY IN THE SALE OF VELACHERY PROPERTY, CONSTITUTES EXPE NDITURE IN THE HANDS OF THE APPELLANT. 5. THE NEXT GROUND IS WITH REGARD TO DISALLOWANCE O F COST OF RENOVATION IN COMPUTING CAPITAL GAINS. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF COST OF RENOVATION WITHOUT APPR ECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. THE COMMISSIONER OF INCOME- TAX(APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE W ITHOUT APPRECIATING THE DIFFERENCE BETWEEN COST OF RENOVAT ION AND COST OF REPAIRS. - - ITA 1011/MDS/17 3 6. THE NEXT GROUND IS WITH REGARD TO ADDITION OF 95,00,000/- REPRESENTING CASH DEPOSITS IN BANK. THE COMMISSIONER OF INCOME-TAX(APPEALS) ERRED I N NOT CONSIDERING THE EXPLANATION OFFERED BY THE APPELLAN T. WITHOUT PREJUDICE TO THE ABOVE, THE FOLLOWING ARE THE ALTER NATE GROUNDS: 7. THE APPELLANT IS ENGAGED IN REAL ESTATE. THERE ARE OUTGOINGS THROUGH BANKING CHANNELS AS A CONTRA TO CASH RECEIP TS. THE ENTIRE DEPOSITS CANNOT BE TREATED AS INCOME OF THE APPELLA NT. 8. THE DEPOSITS IN THE BANK ACCOUNT OF THE APPELLAN T CANNOT BE TREATED AS UNEXPLAINED CREDIT AS EXPLAINED IN THE B OMBAY HIGH COURT DECISION OF CIT V. BHAICHAND GANDHI [2013] 14 1 ITR 67 (BOM.), WHICH PRINCIPLE HAS BEEN ACCEPTED BY THE IN COME TAX APPELLATE TRIBUNAL MUMBAI BENCH IN SMT. MANASI MAHE NDRA PITKAR VS. ITO REPORTED IN [2016] 73 TAXMANN.COM 68 (MUMBA I TRIB.) 9. THE APPELLANT HAD PRODUCED CASH BOOK TO EXPLAIN THE SOURCE OF CASH DEPOSITS IN BANK ACCOUNT. THE APPELLANT HAD G IVEN EXPLANATIONS TO 77,00,000/- CREDITED TO THE CASH BOOK. IF THE EXPLANATIONS ARE NOT SATISFACTORY, THE ADDITION HAS TO BE RESTRICTED TO 77,00,000/-. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DECL ARED A TOTAL INCOME OF 3,08,330/- IN THE ORIGINAL RETURN OF INCOME FILED ON 30.5.2012 FOR THE AY 2012-13. ON THE 16 TH DAY OF MARCH 2012, A DEED OF SALE WAS EXECUTED BY SHRI STE PHEN JOHN AND FOUR OTHERS IN FAVOUR OF ITC LTD. FOR A CO NSIDERATION - - ITA 1011/MDS/17 4 OF 17.80 CRORES. OUT OF THE SALE CONSIDERATION OF 17.80 CRORES, SHRI STEPHEN JOHN WAS PAID AN AMOUNT OF 8 CRORES ON 14.3.2012 BY PAY ORDER NO.517909. THE OTHER FOU R CO- OWNERS WERE TOGETHER PAID 3 CRORES ON THE SAME DATE BY PAY ORDER NO.517911. THE ASSESSEE WAS NOT THE CO-O WNER OF THE PROPERTY AND IS NOT PART OF THE LIST OF SELL ERS IN THE SALE DEED. DESPITE THE SAME, SHE WAS PAID AN AMOUNT OF 6.80 CRORES VIDE PAY ORDER NO.517910 DATED 14.3.2012. T HE SAID PAYMENT WAS DIRECTLY RECEIVED BY THE ASSESSEE FROM ITC LTD. AND THE PARTICULARS OF THE TRANSACTION INVOLVING TH E ASSESSEE IS EXHIBITED IN THE CONTENTS OF THE SALE DEED ITSELF. 3.1 THE PROFITS THAT AROSE IN THE TRANSACTION DETAI LED ABOVE TO THE ASSESSEE WERE NOT DECLARED TO THE INCOME TAX DE PARTMENT AND AS A RESULT OF THE ENQUIRY CONDUCTED BY THE I&C I WING OF THE INCOME TAX DEPARTMENT, CHENNAI, THE ASSESSEE CAME F ORWARD TO FILE A REVISED RETURN ON 31.03.2014 ENHANCING THE T AXABLE INCOME TO 19,14,060/-. THE RETURN OF INCOME WAS TAKEN UP FO R SCRUTINY AND NOTICE U/S.143(2) WAS SERVED ON THE ASSESSEE ON 04.09.2014. SUBSEQUENTLY, A NOTICE U/S.142(1) DATED 12.12.2014 WAS SERVED ON THE ASSESSEE SEEKING DETAILS OF DOCUMENTS. TH EREAFTER, THE - - ITA 1011/MDS/17 5 LD. ASSESSING OFFICER , AFTER EXAMINING THE GENUINE NESS OF CLAIM OF EXPENSES AGAINST THE RECEIPT OF 6.80 CRORES, COMPLETED THE ASSESSMENT U/S.143(3) ON 30.03.2015 AND ASSESSED TH E RETURN AT A TAXABLE INCOME OF 7,29,75,900/-. 3.2 THE ASSESSEE HAD CLAIMED A HOST OF EXPENSES AMO UNTING TO 6,64,95,000/-. THE LIST OF PAYEES INCLUDED 24 PERS ONS. THE PARTICULARS OF THE PAYMENTS CLAIMED TO HAVE BEEN MA DE BY THE ASSESSEE AGAINST THE INCOME OF 6.80 CRORES IS ENUMERATED IN THE ASSESSMENT ORDER. 3.3 THE ASSESSEE HAD RECEIVED A SUM OF 4.50 CRORES FROM SIX PARTIES, WHILE THE BALANCE OF 18 PARTIES STATED TO HAVE RECEIVED 2,14,95,000/- TOTALING TO 6,64,95,000/- AND THE DIFFERENCE OF 15,05,000/- WAS ADDITIONALLY OFFERED TO TAX IN THE REVISED RETURN FILED ON 31.3.2014. 3.4 THE AO, ON EXAMINATION OF THE ACCOUNTS AND THE VERACITY OF THE CLAIMS DID NOT ACCEPT THE NEXUS BETWEEN THE PAYMENTS AND THE RECEIPTS AND THEREFORE, THE ENTIRE EXPENDITURE RELATING TO SIX PARTIES OF 4,50,00,000/- AND IN RESPECT OF THE BALANCE, AN AMOUNT OF 1,61,21,250/- WAS FOUND TO BE INELIGIBLE AS DEDUCT ION - - ITA 1011/MDS/17 6 AND THE SAME WAS ADDED TO THE TAXABLE INCOME. ON A TOTAL CLAIM OF 2,14,95,000/- TO 18 PARTIES, THE AO FELT IT APPROP RIATE TO ALLOW AN EXPENDITURE OF 53,53,750/-, WHICH CONSTITUTES 25% OF THE TOTAL QUANTUM AND THE BALANCE 75% BEING 1,61,21,250/- WAS DISALLOWED. AMONGST THE SIX RECIPIENTS, M/S. ASTOR IA LEATHERS AND SHRI P.R.RAMAKRISHNA RAJA, ARE STATED TO HAVE BEEN PAID 1.25 CRORES AND 25 LAKHS AS COMPENSATION BY THE ASSESSEE. HOWEVER, IN RESPONSE TO NOTICE U/S.133(6) ISSUED BY THE AO, M/S. ASTORIA LEATHERS AND SHRI P.R. RAMAKRISHNA RAJA VID E THEIR LETTERS DATED 25.3.2015 AND 27.3.2015 HAD EXPRESSED THAT THE TRANSACTIONS INVOLVING THEM HAD NOTHING TO DO WITH THE PROPERTY TRANSACTION WITH ITC. 3.5 THE ASSESSEE IS NOT THE OWNER OF THE ASSET TRAN SFERRED TO ITC LTD. BUT HAD RECEIVED A CONSIDERATION OF 6.80 CRORES. THE OBVIOUS REASON IS THAT THE ASSESSEE WAS COMPENSATED IN LIEU OF FACILITATING AN UNENCUMBERED CONVEYANCE OF PROPERTY TO THE BUYER. HOWEVER, IT WAS STATED BY HER THAT THE PAYM ENTS WERE MADE ON BEHALF OF SHRI STEPHEN JOHN, THE ACTUAL OWN ER OF THE PROPERTY AND THEREFORE, THERE IS NO SIGNIFICANT PRO FIT BUT FOR THIS SUM OF 15.05 LAKHS OFFERED TO TAX. IN ORDER TO EXAMINE T HE - - ITA 1011/MDS/17 7 VERACITY OF THE CLAIM, SHRI STEPHEN JOHN WAS EXAMIN ED ON OATH U/S.131 BY THE DDIT(INV.), KOCHI ON 26.3.2015 AND I N HIS SWORN DEPOSITION, SHRI STEPHEN JOHN AFFIRMED THAT THE CON SIDERATION RECEIVED BY HIM OF 8 CRORES WAS FULL AND FINAL AND NO PAYMENTS WERE MADE INDIRECTLY THROUGH THE ASSESSEE AT THIS B EHEST. UNDER THE CIRCUMSTANCES, SINCE THE GENUINENESS OF THE CLA IM DID NOT STAND THE LITMUS TEST, THE AO HAD TO RESORT TO THE ADDITION. 3.6 THE ITS DATA EXHIBITED THAT THE ASSESSEE HAD DEPOSITED 40 LAKHS, 35 LAKHS AND 20 LAKHS IN AXIS BANK IN MODE OF CASH ON 28.12.2011, 31.12.2011 AND 02.01.2012, SUMM ING UP TO 95 LAKHS. THE EXPLANATION PROVIDED BY THE ASSESSE E WITH REGARD TO THE SOURCES WAS FOUND TO BE UNSATISFACTOR Y AND THUS AN AMOUNT OF 95 LAKHS WAS ADDED SEPARATELY U/S.68 OF THE ACT. AS A RESULT, THE TAXABLE INCOME GOT ENHANCED TO 7,29,75,896/- AND A RESULTANT TAX DEMAND 2,99,57,050/-. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(APPEALS), WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. - - ITA 1011/MDS/17 8 4. THE FIRST ISSUE RAISED IN HER APPEAL IS WITH RE GARD TO LD.CIT(A) ERRED IN UPHOLDING THE ASSESSMENT BASED ON A RETURN OF INCOME FILED ON 31.03.2014, WHICH IS A NON-EST R ETURN IN THE EYES OF LAW. 5. NOW, THE CONTENTION OF THE LD.A.R IS THAT THE R ETURN FILED BY THE ASSESSEE ON 31.03.2014 CANNOT BE TREATED AS RE TURN OF INCOME FILED AS PER SECTION 139(5) OF THE ACT, SINC E THE RETURN IS NOT FILED ON ACCOUNT OF DISCOVERY OF OMISSION BY TH E ASSESSEE BUT AS A RESULT OF ENQUIRY. ACCORDING TO LD.A.R, THE R ETURN FILED ON 31.03.2014 CANNOT BE TREATED AS A RETURN OF INCOME FILED AS PER SECTION 139(5) OF THE ACT. HE SUBMITTED THAT FOR A RETURN TO BE TREATED AS FILED U/S.139(5) OF THE ACT, IT MUST BE ON ACCOUNT OF DISCOVERING ANY OMISSION OR ANY WRONG STATEMENT IN THE ORIGINAL RETURN FILED BY ASSESSEE. IF THE RETURN IS REVISED AS A RESULT OF ENQUIRY, THEN IT IS NOT A RETURN FILED AS PER SEC.1 39(5) OF THE ACT. IN SUPPORT OF HIS ARGUMENT, LD.A.R PLACED RELIANCE IN THE FOLLOWING CASE LAWS. I) F.C.AGARWAL VS. CIT IN (1976) 102 ITR 408 (GAU. ) II) CIT VS. J.K.A. SUBRAMANIA CHETTIAR (1977) 110 I TR 602(MAD.) III) SUNANDA RAM DEKA VS. CIT (1994) 210 ITR 988(G AU.) - - ITA 1011/MDS/17 9 IV) CIT VS. SHREE KRISHNA GYANODAY SUGAR LTD., IN [1990] 186 ITR 541 (CAL) V) CIT VS. J. K. A. SUBRAMANIA CHETTIAR IN [1977] 110 ITR 602 (MAD) FURTHER, HE SUBMITTED THAT PROVISIONS OF THE SECTIO N 292 BB CANNOT BE HELPED TO THE DEPARTMENT. HE PRAYED TO QU ASH THE ASSESSMENT . 6. ON THE OTHER HAND, LD.D.R SUBMITTED THAT THERE IS NO PROTEST BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS AND THE ASSESSEE ACTIVELY PARTICIPATED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, NOW THE ASSESSEE RAISED SUC H GROUND BEFORE THIS TRIBUNAL, WHICH IS TO BE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED OPINION, THERE SHOULD NOT BE ANY GRIEVANCE TO THE ASSESSEE.THERE BEING DUE OPPORTUNI TY OF HEARING HAS BEEN GIVEN TO THE ASSESSEE. EVEN IF TH ERE IS ANY LAPSE ON THE PART OF THE AO, IT IS ONLY PROCEDURAL IR-REGULARITY, THE PROVISION OF SEC.292BB OF THE ACT TAKES CARE OF IT. MORE SO, JURISDICTIONAL HIGH COURT IN THE CASE OF AREVA T&D INDIA LTD. VS. ACIT REPORTED IN (2007) 294 ITR 0233 WHEREIN HELD THAT NON- - - ITA 1011/MDS/17 10 CONSIDERING THE OBJECTIONS FOR REOPENING AS WELL AS NON- ISSUANCE OF NOTICE UNDER S. 143(2) ARE MERE PROCEDU RAL IRREGULARITIES AND WILL NOT MAKE THE REASSESSMENT A NULLITY IN LAW. ACCORDINGLY, THIS GROUND OF THE APPEAL OF THE ASSES SEE IS DISMISSED. 8. THE LD. AR, CONTENDED BEFORE US, THAT AN OPPORTU NITY OF CROSS EXAMINATION OF SHRI STEPHEN JOHN WAS NOT PROV IDED TO THE ASSESSEE BY THE CIT(APPEALS). THE LD. AR, FURTHER CONTENDED THAT THE CIT(APPEALS) HAS GIVEN A CATEGORICAL OBSER VATION, IN SPITE OF PARA WISE COMMENTS GIVEN BY THE ASSESSEE TO THE REMAND REPORT OF THE AO THAT THE ASSESSEE WAS NOT PROVIDED AN OPPORTUNITY OF CROSS EXAMINATION OF SHRI STEPEN JOH N. THEREFORE, THE LD. AR SUBMITTED THAT WHILE EXAMINING SHRI STE PEHN JOHN, THE STATEMENT WAS RECORDED BY THE AO IN THE PRESENCE OF THE ASSESSEES SPOUSE, SHRI KALYANASUNDARAM SURESH, BUT NO OPPORTUNITY OF CROSS EXAMINATION OF SHRI STEPHEN JO HN WAS PROVIDED TO THE ASSESSEE. HENCE, THE LD. AR CONTEN DED THAT THERE IS A VIOLATION OF PRINCIPLE OF NATURAL JUSTICE AND PRAYED THAT AN OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE TO CROSS E XAMINE SHRI STEPHEN JOHN, BEFORE FRAMING THE ASSESSMENT. - - ITA 1011/MDS/17 11 9. THE LD. DR WAS NOT ABLE TO CONTROVERT THE ARGUM ENT OF THE LD. AR AND HE RELIED ON THE ORDER OF THE CIT(APPEAL S). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, WHENEVER THE AUTHORITIE S RELY ON EVIDENCES COLLECTED FROM THE THIRD PARTIES, IT SHOU LD BE CONFRONTED WITH THE ASSESSEES FOR HIS/HER COMMENTS. IN SIMILA R WAY, WHEN THE ASSESSEE ASKS FOR CROSS EXAMINATION OF THE PART IES FROM WHOM EVIDENCES ARE COLLECTED, IT IS APPROPRIATE TO PROVIDE AN OPPORTUNITY OF CROSS EXAMINATION. IN THE PRESENT CASE, THOUGH THE STATEMENT FROM SHRI STEPHEN JOHN WAS RECORDED I N THE PRESENCE OF THE ASSESSEES SPOUSE, AN OPPORTUNITY O F CROSS EXAMINATION WAS NOT AT ALL GIVEN TO THE ASSESSEE. IF THE CIT(APPEALS)/AO COLLECTS THE EVIDENCES FROM THE PAR TIES DURING THE REMAND PROCEEDINGS, THE CIT(APPEALS)/AO SHOULD HAVE GIVEN AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE . HENCE, IN THE INTEREST OF JUSTICE, WE ARE OF THE OPINION THAT THE ENTIRE ISSUE TO BE REMITTED TO THE CIT(APPEALS) WITH A DIRECTION TO GIVE AN OPPORTUNITY OF CROSS EXAMINATION BEFORE DECIDING TH E ISSUE. - - ITA 1011/MDS/17 12 10.1 WHILE REMITTING THE LEGAL ISSUE TO THE FILE O F LD.CIT(A), AT THIS STAGE, WE REFRAIN FROM GOING INTO OTHER GROUND S OF APPEAL RAISED BY THE ASSESSEE. ACCORDINGLY, WE REMIT THE ENTIRE ISSUE TO THE FILE OF THE CIT(APPEALS) WITH A DIRECTION TO GI VE AN OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE BEFORE DECIDIN G THE ISSUE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 21 ST SEPTEMBER, 2017 AT CHENNAI. SD/- SD/- ( $ % . & '( ) ( ) * + , ) DUVVURU RL REDDY - ./012304556037- 8 9: /JUDICIAL MEMBER ! 9:;<<5=1>01>?@AB@3 )8 /CHENNAI, C9 /DATED, THE 21 ST SEPTEMBER, 2017. K S SUNDARAM 9D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H- /CIT(A) 4. H /CIT 5. FIJ K /DR 6. J(L /GF.