Marimuthu Vijayarani, CHENNAI V. ACIT, Trichy

ITA 1351/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4816 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 31-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2016
• Court: TRIBUNAL
• Department Lawyers: N RANGARAJ
• Assessee Lawyers: S SRIDHAR
• Keywords: Assessment record
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C, CHENNAI , . , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ITA NO.1350/MDS/2016 ! # $# / ASSESSMENT YEAR : 2011-12 AVATHAN MARIMUTHU, 2994, EAST THIRD STREET, PUKUKOTTAI 622 001. [PAN: AAKPM 4866C] VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE III, TRICHY. ( /APPELLANT ) ( / RESPONDENT ) ./ITA NO.1351/MDS/2016 ! # $# / ASSESSMENT YEAR : 2011-12 MARIMUTHU VIJAYARANI, 2429, WEST MAIN STREET, PUKUKOTTAI - 622 001. [PAN: AADPV 6328B] VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE III, TRICHY. ( /APPELLANT ) ( / RESPONDENT ) %& ( ) / APPELLANT BY : SHRI S.SRIDHAR, ADVOCATE *+%& ( ) / RESPONDENT BY : SHRI N.RANGARAJ, CIT ( , / DATE OF HEARING : 31.01.2017 -$ ( , / DATE OF PRONOUNCEMENT : 21.04.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS A SET OF TWO APPEALS BY TWO ASSESSEES DIREC TED AGAINST THE ORDERS BY THE PR. COMMISSIONER OF INCOME TAX, CHENNAI (PR .CIT(A) FOR SHORT) DATED 2 ITA NO.1350 & 1351/MDS/2016 (AY 2011-12) AVATHAN MARIMUTHU & MAR IMUTHU VIJAYARANI V. PR. CIT 24.03.2016, PASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) IN THEIR RESPECTIVE CASES FOR ASSESSMENT YEAR (AY) 2011-12. THE FACTS AND CIRCUMSTANCES OF THE TWO CASES BEING THE SAME, RAIS ING COMMON GROUNDS OF APPEAL, WERE POSTED FOR HEARING AND, ACCORDINGLY, H EARD TOGETHER, AND ARE BEING DISPOSED OF PER A COMMON ORDER, BEING ALSO REPRESEN TED BY THE SAME COUNSEL. 2. THE ONLY ISSUE ARISING IN THESE APPEALS IS THE M AINTAINABILITY OR OTHERWISE IN LAW OF THE IMPUGNED ORDER/S U/S. 263 OF THE ACT. THE SOLE PREMISE THEREOF IS A COMPLETE ABSENCE OF ENQUIRY BY THE ASSESSING OFFICE R (AO) IN PASSING THE ASSESSMENT ORDERS AND, IN ANY CASE, AS WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE/S. 3.1 IT MAY BE RELEVANT TO RECOUNT THE BACKGROUND F ACTS OF THE CASE/S. THE ASSESSMENT PROCEEDINGS IN EITHER CASE WERE INITIATE D BY THE ISSUE OF NOTICES U/S. 143(2) OF THE ACT ON 10.09.2012, UNDER THE COMPUTER ASSISTED SCRUTINY SELECTION (CASS) MECHANISM ADOPTED BY THE REVENUE; THE SAME D ISCOVERING CASH DEPOSITS IN THE ASSESSEES SAVING BANK ACCOUNT/S (W ITH AXIS AND ICICI BANK) DURING THE RELEVANT YEAR IN A SUBSTANTIAL SUM. THE ASSESSMENT ORDER IN BOTH THE CASES IS PASSED ON 30.03.2014 , ACCEPTING THE ADMITTED (RETURNED) INCOME. THE OPERATIVE PART OF THE ASSESSMENT ORDER IN EITHER CA SE IS REPRODUCED AS UNDER: ITA NO.1350/MDS/2016 THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS TO E XAMINE THE SOURCE OF CASH DEPOSIT MADE IN SB ACCOUNT. THE ASSESSEE HAS GOT CASH DEPOSIT IN SB ACCOUNT WITH AXIS BANK AMOUNTING TO RS.4 CR . THE SOURCE OF CASH DEPOSITS IS EXPLAINED AS FROM CLOSURE OF PREVIOUS L OANS GIVEN. THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND IS OPER ATING OUT OF HIS MEMORY ONLY. THE LOANS ARE STATED TO BE ADVANCED F OR 7 TO 10 DAYS ONLY AT A TIME. THE ASSESSMENT IS COMPLETED AS UNDER: TOTAL INCOME RETURN : RS. 14,35,270 ADDITION : NIL TOTAL INCOME ASSESSED : RS. 14,35,270 3 ITA NO.1350 & 1351/MDS/2016 (AY 2011-12) AVATHAN MARIMUTHU & MAR IMUTHU VIJAYARANI V. PR. CIT ITA NO.1351/MDS/2016 THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS TO E XAMINE THE SOURCE OF CASH DEPOSIT MADE IN SB ACCOUNT. THE ASSESSEE IS HA VING CASH DEPOSIT OF RS. 6 CR . IN SB ACCOUNTS WITH ICICI BANK AND AXIS BANK. INC OME FROM MONEY LENDING IS SHOWN AS RS. 1,00,000/-. SHE IS HAVING A RENTAL INCOME OF AROUND RS. 20 LAKH AND LTCG OF RS. 8.9 LAKH. SHE IS NOT MA INTAINING ANY BOOKS OF ACCOUNT FOR MONEY LENDING. THE SOURCE FOR CASH DEPO SITS IS STATED AS CLOSURE OF PREVIOUS LOAN. THE ASSESSMENT IS COMPLETED AS UN DER: TOTAL INCOME AS PER RETURN INCOME : RS. 28,88,950/ - ADDITION : NIL TOTAL INCOME ASSESSED : RS. 28,88,950/- (EMPHASIS, BY UNDERLINING, OURS) 3.2 FURTHER, EXAMINING THE ASSESSMENT RECORDS I N BOTH THE CASES, THE LD. PR. CIT NOTES THE VARIOUS REPLIES FURNISHED BY THE ASSE SSEE/S IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. IN BOTH THE CASES, QUA MONEY LENDING BUSINESS, WHICH IS STATED TO BE THE BASIS OF THE CASH DEPOSITS IN T HEIR RESPECTIVE BANK ACCOUNTS, IT IS STATED THAT THE SOURCE OF THE DEPOSITS IS THE CL OSURE OF THE PREVIOUS LOANS, AND THAT THE ASSESSEE HAD NOT CLAIMED ANY CREDIT FROM A NY PERSON, I.E., IN EXPLANATION OF THE SOURCE THEREOF. THE SAME IS FOUND SERIOUSLY WANTING BY THE LD. PR. CIT. THE ASSESSEES RETURNS ARE NOT BASED ON ANY BOOKS O F ACCOUNT, AND THE INCOME RETURNED, WHICH HAS BEEN ACCEPTED, IS ADMITTEDLY ON LY ON THE BASIS OF MEMORY. THERE HAS BEEN NO EXAMINATION OF THE ASSESSEES REP LIES, WHICH ARE WHOLLY UNSUBSTANTIATED. WHO ARE THE PERSONS TO WHOM THE MO NIES STAND ADVANCED, AND FROM WHOM THE SAME IS CLAIMED TO HAVE BEEN RECEIVED BACK DURING THE RELEVANT YEAR, AGAIN TO BE LENT FURTHER. HOW IS THE INTEREST , OR THE COMMISSION, AS ASSESSEE CHOOSES TO CALL IT, EARNED, VIZ. RATE, MANNER, ETC. ACCEPTANCE OF THE ASSESSEES RETURN/S WITHOUT ANY ENQUIRY/VERIFICATION, WHICH IT WAS INCUMBENT ON THE AO TO DO, MAKES HIS ORDER PER SE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, LIABLE FOR REVISION U/S. 263. REFERENCE IN THIS CONTEXT IS ALSO MADE BY HIM TO THE EXPLANATION 2(A) TO S. 263 INSERTED BY FINANCE ACT, 2015 W.E.F . 01.06.2015, WHICH READS AS UNDER: 4 ITA NO.1350 & 1351/MDS/2016 (AY 2011-12) AVATHAN MARIMUTHU & MAR IMUTHU VIJAYARANI V. PR. CIT EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, - (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VER IFICATION WHICH SHOULD HAVE BEEN MADE; HE ACCORDINGLY SET ASIDE THE ASSESSMENT/S U/S. 263 OF THE ACT AND DIRECTED THE AO TO RE DO THE SAME BY EXAMINING THE ASPECTS D ISCUSSED BY HIM IN THE BODY OF HIS ORDER, INCLUDING ASCERTAINING THE SOURCE OF THE DEPOSITS MADE IN THE BANK ACCOUNT/S UNDER REFERENCE DURING THE RELEVANT YEAR, AFTER MAKING NECESSARY ENQUIRIES AND VERIFICATION, IN ACCORDANCE WITH LAW AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE/S TO PRESENT HIS CASE B EFORE HIM. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 4.1 EVEN AS ADMITTED BY THE LD. AR DURING HEARING, THE MENTION OF THE BOOKS OF ACCOUNT AT PARA 2 (PG.1) OF THE ASSESSMENT ORDE R/S IS INCORRECT IN-AS-MUCH AS THE ASSESSEE/S IS ADMITTEDLY NOT MAINTAINING ANY BO OKS OF ACCOUNT, AND THAT ONLY THE BANK ACCOUNT/S WAS PRODUCED. THIS, QUA A CRITICAL ASPECT OF THE CASE, PARTICULARLY CONSIDERING THE VOLUME OF THE CASH DEP OSITS IN THE BANK ACCOUNT/S, TO EXAMINE THE LOSS, IF ANY, OF REVENUE, FOR WHICH THE ASSESSMENTS WERE SELECTED FOR BEING SUBJECT TO THE VERIFICATION PROCEDURE UND ER THE ACT, REFLECTS THE LACKADAISICAL AND CASUAL APPROACH OF THE AO, WHO IS EVEN OTHERWISE IN LAW OBLIGED TO, WHERE THE CIRCUMSTANCES WARRANT, MAKE P ROPER ENQUIRY, INDICATING A LACK OF APPLICATION OF MIND IN THE MATTER. IF THE B OOKS OF ACCOUNT, AS STATED, WERE PRODUCED, THE SAME WOULD ITSELF EXPLAIN THE SOURCE OF THE CASH DEPOSITED IN BANK ACCOUNT/S, AS WELL AS THE BASIS OF THE DISCLOSED OP ERATIONAL INCOME, AND IF FOUND TO BE A TRUTHFUL ACCOUNT OF THE ASSESSEES ACTIVITI ES, NO INTERFERENCE TO THE RETURNED INCOME CALLED FOR. AS EXPLAINED IN GEE VEE ENTERPRISES V. ADDL. CIT [1975] 99 ITR 375 (DEL), AN INCOME TAX OFFICER, IN CONTRADISTINCTION TO A CIVIL COURT, WHICH IS 5 ITA NO.1350 & 1351/MDS/2016 (AY 2011-12) AVATHAN MARIMUTHU & MAR IMUTHU VIJAYARANI V. PR. CIT NEUTRAL, IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INV ESTIGATOR. HE CANNOT, THEREFORE, REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APP ARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TR UTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS PROVOKE AN ENQUIRY. IT IS BECAUSE IT IS INCUMBENT ON HIM TO FURTHER INVESTIGA TE THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES WOULD MAKE SUCH AN EN QUIRY PRUDENT THAT THE WORD ERRONEOUS IN S. 263 INCLUDES A FAILURE ON HI S PART TO MAKE SUCH AN ENQUIRY. THE ORDER IS ERRONEOUS BECAUSE SUCH AN ENQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE OR DER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT . WHY, IN THE PRESENT CASE, THE ASSESSMENT IS NOT CONSISTENT EVEN WITH WHAT IS STATED IN THE RETU RN ITSELF. NO BILLS AND VOUCHERS STATED TO BE ACCOMPANYING NON-EXISTING BOOKS OF ACC OUNT, WERE ADMITTEDLY PRODUCED. IT IS ALSO INCOMPREHENSIBLE THAT THE ASSE SSEE IS, AS STATED, NOT MAINTAINING ANY BOOKS OF ACCOUNT (IN RESPECT OF THE MONEY LENDING BUSINESS) AND, IN ANY CASE, THAT THERE IS A COMPLETE ABSENCE OF ANY RECORD IN RESPECT OF THE ADVANCES MADE AND RECOVERED, AS WELL AS QUA THE INTEREST/ COMMISSION EARNED IN THE PROCESS, AND RETURNED ONLY ON THE BASIS OF MEM ORY. 4.2 THE CASH DEPOSITS IN THE BANK ACCOUNT/S NEED TO BE SATISFACTORILY EXPLAINED, ELSE ARE LIABLE TO BE ADDED AS UNEXPLAIN ED INCOME U/S. 69/69A OF THE ACT. THERE IS NO EXPLANATION AS TO THE SOURCE OF TH E DEPOSIT/S. MERELY STATING THAT THE SAME ARE A RETURN OF THE LOANS GIVEN EARLIER, W ITHOUT IN ANY MANNER SUBSTANTIATING THE SAME, I.E., THE LOANS GIVEN EARL IER AND/OR THEIR RETURN, WOULD BE OF LITTLE CONSEQUENCE, BOTH IN LAW AND IN FACT IN-A S-MUCH AS THE LAW MANDATES THE SAME TO BE SATISFACTORILY EXPLAINED, SO THAT THE SA ME WOULD REQUIRE BEING REASONABLY ESTABLISHED AS A FACT. THERE IS NOTHING TO INDICATE A RUNNING, MONEY LENDING BUSINESS. FURTHER, IT NEEDS TO BE BORNE IN MIND THAT THE LAW DEEMS THE SAME AS UNEXPLAINED INCOME FOR THE YEAR IN WHICH TH E ASSET (DEPOSIT) IS FOUND (MADE), I.E., THE CURRENT YEAR . IT IS ONLY FOR THE CURRENT YEAR THAT, BY VIRTUE O F THE 6 ITA NO.1350 & 1351/MDS/2016 (AY 2011-12) AVATHAN MARIMUTHU & MAR IMUTHU VIJAYARANI V. PR. CIT INFORMATION IN THE POSSESSION OF THE REVENUE OF THE CASH DEPOSITS IN THE ASSESSEE/S BANK ACCOUNT/S, LEADS TO THE INFERENCE O F THE ASSESSEE BEING THE OWNER OF THE SAID SUM/S, AS THE LAW DEEMS (S. 110 OF THE INDIAN EVIDENCE ACT) AND, ACCORDINGLY, IS DEEMED AS THE ASSESSEES INCOME FOR THE RELEVANT YEAR, I.E., WHERE NOT SATISFACTORILY EXPLAINED AS TO ITS NATURE AND SOURCE. SECTIONS 68, 69, ETC. ARE ONLY RULES OF EVIDENCE INCORPORATING THE P RINCIPLES OF COMMON LAW JURISPRUDENCE. THERE IS FURTHER NOTHING ADDUCED AT ANY STAGE TO SHOW THAT THE DEPOSITS, VALUE OF WHICH REMAINS UNSPECIFIED, FORME D PART OF THE DISCLOSED ASSETS OR INCOME FOR AN EARLIER YEAR, SO THAT THE D ISCLOSED CAPITAL BECOMES THE EXPLANATION FOR THE SOURCE OF THE DEPOSITS DURING T HE CURRENT YEAR. IN BOTH CASES, AS SHALL BE READILY SEEN, THERE IS NO FINDING BY TH E AO WHO MERELY RECORDS WHAT THE ASSESSEE/S STATES PER ITS COMMUNICATIONS, AS TO WHETHER IT IS INDEED SO, I.E., THE CASH DEPOSITS REPRESENT A RECEIPT, ALONG WITH INTEREST, OF THE LOANS GIVEN EARLIER. FURTHER, EVEN GOING BY THE ASSESSEES EXPL ANATION, WHICH COULD NO DOUBT BE TRUE, OR HAVE A ELEMENT OF TRUTH, SO THAT THE AS SESSEES CAPITAL AS INVESTED IN THE SAID BUSINESS, IS ROTATED, THE CAPITAL INVESTED IN THE SAID BUSINESS IS LIABLE TO BE ESTIMATED AND BROUGHT TO TAX, I.E., APART FROM T HE INCOME BY WAY OF INTEREST/COMMISSION FROM THE FINANCING BUSINESS. WH AT IS THIS CAPITAL? WHAT IS THE AMOUNT OF DEBTORS (RECEIVABLE) AS AT THE YEAR-E ND, OR THE BALANCE/S IN THE BANK ACCOUNT/S AT THE BEGINNING AS WELL AS END OF T HE YEAR. ALL THIS IS CONSPICUOUS BY ITS ABSENCE. AGAIN, AS STATED BY THE LD. PR. CIT, THERE IS NOTHING TO SHOW THAT THE DISCLOSURE OF INTEREST/COMMISSION INCOME IS TRUE AND CORRECT. AN AVERAGE LENDING PERIOD OF 7 TO 10 DAYS, AS STATE D, WOULD IMPLY AN ANNUAL TURNOVER RATIO IN THE RANGE OF 36 TO 52, AND PROVID E A BASIS FOR THE ESTIMATION OF BOTH THE CAPITAL INVESTED AS WELL AS THE INTEREST I NCOME. 4.3 WE HAVE ALREADY EXPLAINED THAT A FAILURE TO MAK E PROPER ENQUIRY WOULD MAKE AN ORDER PER SE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE R EVENUE, LIABLE FOR REVISION. THIS IN FACT REPRESENTS TRITE LAW, AND FOR WHICH WE MAY, APART 7 ITA NO.1350 & 1351/MDS/2016 (AY 2011-12) AVATHAN MARIMUTHU & MAR IMUTHU VIJAYARANI V. PR. CIT FROM THE DECISION IN GEE VEE ENTERPRISES (SUPRA) (WHICH ITSELF DRAWS ON SEVERAL DECISIONS, INCLUDING BY THE APEX COURT, TO TWO OF W HICH WE MAY REFER, I.E., REPORTED AT [1968] 67 ITR 84 AND [1973] 88 ITR 323) , ADVERT TO A SERIES OF DECISIONS, INCLUDING BY THE HON'BLE APEX AND JURISD ICTIONAL HIGH COURT, AS FOLLOWS, VIZ. MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83 (SC); CIT V. MCMILLAN & CO . (1958) 33 ITR 182 (SC); JAI BHARAT TANNERS V. CIT [2003] 264 ITR 673 (MAD.); ASHOK LEYLAND LTD. V. CIT [2003] 260 ITR 599 (MAD.); AND THALIBAI F. JAIN V. ITO [1975] 101 ITR 1 (KAR.), TO CITE SOME. T HE SAME STANDS IN FACT MADE A PART OF THE LAW BY INSERTION OF EXPLANATION 2(A) TO S. 263, REFERRED TO EARLIER. THE INITIATION OF REVISION PROCEEDINGS IN BOTH THESE CA SES, BY ISSUE OF SHOW CAUSE NOTICE/S U/S. 263 (IN FEBRUARY AND MARCH, 2016), IS ONLY AFTER THE AMENDED LAW COMES INTO FORCE. 5. IN VIEW OF THE FOREGOING, WE HAVE NO HESITATION IN UPHOLDING THE IMPUGNED ORDERS. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSSESSEES APPEALS ARE DISMI SSED. ORDER PRONOUNCED ON APRIL 21, 2017 AT CHENNAI . SD/- SD/- ( . ) ( ) (G. PAVAN KUMAR) (SANJAY ARORA) ! /JUDICIAL MEMBER /ACCOUNTANT MEMBER /CHENNAI, . /DATED, APRIL 21 ST , 2017. EDN / ( *!,01 21$, /COPY TO: 1. %& /APPELLANT 2. *+%& /RESPONDENT 3. 3, ( )/CIT(A) 4. 3, /CIT 5. 145 *!,! /DR 6. 56# 7 /GF