DCIT, CHENNAI V. M/s. Sonex Realty Private Limited, CHENNAI

ITA 1447/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52034 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 16-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained cash credit; Reason to believe
• Section: 143(3); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER] I.T.A.NO.1447/MDS/2011 ASSESSMENT YEAR : 2002-03 THE DY. CIT COMPANY CIRCLE II(1) CHENNAI VS M/S SONEX REALTY PVT. LTD NEWRY SHREYA NO.34, F BLOCK ANNA NAGAR EAST CHENNAI 600 012 [PAN - AAACE1410F] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, SR.DR RESPONDENT BY : SHRI G.BASKAR, ADVOCATE DATE OF HEARING : 3-11-2011 DATE OF PRONOUNCEMENT : 18-11-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE, FOR ASSESSMEN T YEAR 2002-03, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-III, CHENNAI, DATED 30.5.2011. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF REAL ESTATE. FOR ASSESSMENT ITA 1447/11 :- 2 -: YEAR 2002-03, IT FILED ITS RETURN OF INCOME ON 8.1. 2002 DECLARING A LOSS OF ` 18,01,608/-. THE RETURN WAS PROCESSED U/S 143(1) AND REFUND OF ` 6,52,634/- WAS ISSUED TO THE ASSESSEE ON 31.3.2003 . THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND RE-ASSESSMENT U/S 143(3) R.W.S 147 WAS COMPLETED ON 28.12.2007 DETERMINING THE LOS S AT ` 18,01,608/-. THEREAFTER THE ASSESSING OFFICER NOTI CED FROM THE RECORDS OF M/S EGBERTS INDIA PVT. LTD.(EIPL) THAT AS ON 31. 3.2002 THERE WAS AN EXCESS CREDIT OF ` 1,27,26,537/- IN THE LEDGER ACCOUNT OF EIPL IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS COMPARED TO TH E CORRESPONDING DEBIT BALANCE IN THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF EIPL. THERE BEING DIFFERENCE BETWEEN THE TWO, AS D ISCUSSED ABOVE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT, E XCESS CREDIT REPRESENTED UNEXPLAINED CASH CREDIT ASSESSABLE AS I NCOME U/S 68 OF THE ACT HAS ESCAPED ASSESSMENT. CONSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S 148 ON 31.3.2009 AFTER RECORDING REQUISITE REASONS FOR REOPENING. THE ASSESSEE REQUESTED THAT THE RET URN ALREADY FILED MAY BE TREATED AS RETURN FILED IN COMPLIANCE TO THI S NOTICE. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE GAVE COMPLETE RECONCILIATION OF THE TWO ACCOUNTS AND STATED THAT THE DIFFERENCE OF ` 1,27,26,534/- WAS THERE EVEN IN OPENING BALANCE AND THAT THE DIFFEREN CE WAS MAINLY ON ITA 1447/11 :- 3 -: ACCOUNT OF THE WRONG POSTING OF A SUM OF ` 1,45,00,000/- RECEIVED FROM THE GROUP CHAIRMAN OF COMPANY NAMELY, SHRI M.T .MAKHIJA FROM HONG KONG ON VARIOUS DATES DURING THE FINANCIAL YEA R 2000-01. THIS WAS SUBSTANTIATED WITH THE HELP OF NOTARIZED AFFIDA VITS OBTAINED FROM THE SONS OF SHRI MAKHJIJA, AS SHRI MAKHIJA HAD DIED ON 20.5.2005. BUT THE ASSESSING OFFICER WAS NOT AGREEABLE AND DID NOT ACCEPT THAT THIS EXCESS CREDIT DID NOT PERTAIN TO THE ASSESSMENT YEA R IN QUESTION AND DID NOT BELIEVE THAT THE WRONG POSTING OF A SUM OF ` 1,45,00,000/- WAS MADE. PREDOMINANTLY ON THE REASONING THAT THE ASS ESSEE COULD NOT PRODUCE, IN PERSON, THE SONS OF DECEASED MAKHIJA B EFORE HIM, HE HAS TREATED THIS SUM OF ` 1,27,26,534/- AS UNEXPLAINED CASH CREDIT U/S 68 AND HAS ADDED THE SAME TO ASSESSEES TOTAL INCOME. ON THE CONTRARY, THE LD. CIT(A) HAS DELETED THIS ADDITION ON BEING S ATISFIED BY THE EXPLANATION PUT FORTH ON BEHALF OF THE ASSESSEE. R ESULTANTLY, THE REVENUE IS IN APPEAL. THE FOLLOWING GROUNDS HAVE B EEN RAISED: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (AP PEALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF ` 1,27,26,534/MADE BY THE AO U/S 68 OF THE INCOME-TAX ACT ON ACCOUNT OF UNEXPLAINED CASH CREDITS. ITA 1447/11 :- 4 -: 2.1 THE LD.CIT(A) OUGHT TO HAVE SEEN THAT IN THE CO MPANY ACCOUNT OF M/S EGBERTS INDIA PVT LTD A SUM OF ` 5,76,34,254/- WAS SHOWN AS LOAN TO THE ASSESSEE COMPANY. HOWEVER IT IS SEEN FROM THE DETAILS OF CRE DITORS THAT IT IS SHOWN AS ` 7,03,60,788/- DUE TO M/S EGBERTS INDIA P LTD. THUS THE DIFFERENCE OF ` 1,27,26,534 IS NON EXISTING CREDIT. 2.2 THE ID.CIT(A) FAILED TO CONSIDER THE FACT AS TO WHETHER A CREDITS WERE REPAID AND HOW ON MERGER, THE CREDITS WERE REFLECTED IN THE BOOKS OF THE ASSESSEE AND ALLEGED CREDITORS I.E. BOTH M/S EGBERTS INDIA PVT LTD AND MR.MAKHIJA, THE CHAIRMAN OF THE GROUP OF THE COMPAN Y. 2.3 THE LEARNED CIT(A) HAS DELETED THE ADDITION TAK ING IN TO ACCOUNT THAT THE DIRECTOR OF THE COMPANY TRANSFERRE D THE FUNDS FROM HONKONG TO THE ASSESSEE COMPANY'S ACCOUN T AND THE CORRESPONDING ENTRIES WERE MADE IN THE ACCO UNT OF M/S EGBERTS INDIA PVT LTD INSTEAD OF THE DIRECTOR'S ACCOUNT IN THE ASSESSEE'S BOOKS. IT IS SUBMITTED THAT THE A SSESSEE FAILED TO ESTABLISH THAT THE INITIAL MISTAKE COMMIT TED IN THE BOOKS OF ACCOUNTS WERE SUBSEQUENTLY CORRECTED TO SH OW THE REAL ACCOUNTS. THE LEARNED CIT(A) FAILED TO CAL LED FOR AND LOOKED INTO THE SAME BEFORE GIVING THE RELIEF T O THE ASSESSEE. 2.4 THE LD CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE TRANSACTION BETWEEN THE GROUP COMPANIES, THE ON US LIES ON THE ASSESSEE TO PROVE THE TRANSACTION BEYON D DOUBT. 2.5 THE PERUSAL OF ALL THE GROUNDS BEFORE THE LEARN ED CIT(A) MAKES IT CLEAR THAT IT IS NOT A GRIEVANCE OF THE ASSESSEE THAT THE AMOUNT CONCERNED, WHICH IS CLAIME D AS REFLECTED IN THE OPENING BALANCE, SHOULD NOT BE TAX ED EVEN IN THE ASST. YEAR 2001-02. THE CIT(A) HAS TRAVELLED BEYOND THE GROUNDS RAISED BEFORE HIM AND GAVE RELIEF WHICH IS ALL TOGETHER NEW ISSUE AND DOES NOT FALL WITHIN THE JUR ISDICTION OF THE CIT(A). THE CIT(A) IS DUTY BOUND TO GIVE AN OPPORTUNITY TO THE AO BEFORE TOUCHING THE NEW ISSUE . ITA 1447/11 :- 5 -: 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. IT WAS ARGUED BY THE LD.DR IN CONNECTION WITH THE SOLE ISSUE RAISED IN THIS APPEA L THAT IN THE ACCOUNTS OF M/S EIPL, A SUM OF ` 5,76,34,254/- HAS BEEN SHOWN AS LOAN TO THE ASSESSEE-COMPANY AS AGAINST WHICH THIS AMOUNT HAS BEEN SHOWN AT ` 7,03,60,788/- BY THE ASSESSEE. THUS, THE DIFFEREN TIAL AMOUNT OF ` 1,27,26,534/- IS NOTHING BUT A NON-EXISTING CREDIT . HE HAS FURTHER ARGUED THAT WHETHER THE CREDITS WERE REPAID OR NOT AND AFTER MERGER IN WHAT MANNER THESE CREDITS WERE REFLECTED IN THE BOOKS OF THE ASSESSEE AND ALLEGED CREDITORS M/S EIPL AND SHR I MAKHIJA, THE CHAIRMAN OF THE GROUP OF THE COMPANIES. HE HAS DIS PUTED THE REASONING OF THE LD. CIT(A) THAT THE DIRECTOR OF TH E COMPANY HAD TRANSFERRED THE FUNDS FROM HONG KONG TO THE ASSESSE E-COMPANYS ACCOUNT AND THE CORRESPONDING ENTRIES WERE MADE IN THE ACCOUNT OF AIPL INSTEAD OF DIRECTORS ACCOUNT IN ASSESSEES BO OKS. HIS OBJECTION IS THAT THE LD. CIT(A) SHOULD HAVE EXAMINED THAT THE I NITIAL MISTAKES COMMITTED IN THE BOOKS OF ACCOUNT WERE SUBSEQUENTLY CORRECTED TO ITA 1447/11 :- 6 -: SHOW THE REAL ACCOUNTS. FINALLY, HE HAS ARGUED TH AT ONUS LIES ON THE ASSESSEE TO PROVE THE TRANSACTIONS BEYOND DOUBT, WH ICH, IT HAS FAILED TO DO. HE HAS ALSO OBJECTED TO THE OBSERVATION MAD E BY THE LD. CIT(A) IN HIS ORDER REGARDING THIS AMOUNT WHICH IS CLAIMED AS REFLECTED IN THE OPENING BALANCE, THAT IT CAN NOT BE TAXED EVEN IN A SSESSMENT YEAR 2001-02. ACCORDING TO THE LD.DR, THE FIRST APPELLA TE AUTHORITY HAS TRAVELED BEYOND THIS SCOPE OF THE GROUNDS RAISED BE FORE HIM. PER CONTRA, THE LD. COUNSEL, SHRI G.BASKAR, HAS PLACED HEAVY RELIANCE ON THE REASONING CONTAINED IN THE APPELLATE ORDER AND HAS ALSO REFUTED EACH AND EVERY CONTENTION MADE BY THE LD.DR AS HER EINABOVE AND HAS EVEN REFUTED THE VERSION OF THE GROUNDS OF APPEAL, BIT BY BIT. 4. WE HAVE GONE THROUGH THE ENTIRE RECORD INCLUDING TH E PROFIT & LOSS ACCOUNT, BALANCE SHEET FILED BY THE ASSESSEE F OR THE YEARS ENDING 31.3.2001 AND 31.3.2002. WE HAVE PERUSED THE STATE MENT OF INCOME OF M/S EIPL FOR THE YEARS ENDING 31.3.2001 AND 31.3 .2002. WE HAVE ALSO SEEN THE ORIGINAL ASSESSMENT ORDER DATED 28.12 .2007. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAVE TREADED THROUGH THE RECONCILIATION STATEMENT WHICH WAS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, AND WE REPRODUCE THE SAME HE REIN BELOW: 31.3.2001 ITA 1447/11 :- 7 -: BALANCE IN THE ACCOUNT OF EGBERTS INDIA(P) LTD AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE ` 7,03,64,588.30 LESS: RECEIPTS FROM SHRI M.T.MAKJIJA, CHAIRMAN OF THE GROUP WRONGLY CREDITED IN EIPL ACCOUNT 24-7-2000 ` 10,00,00 12-02-2001 ` 94,13,129 13-02-2001 ` 35,86,871 23-03-2001 ` 5,00,000 ` 1,45,00,000.00 ` 5,58,64,588.30 ADD : SECURITY DEPOSIT TO MMDA PAID BY EGBERTS INDIA(P) LTD ON BEHALF OF THE ASSESSEE ` 6,98,987 LESS : SECURITY CHARGES FOR MTH ROAD PROPERTY PAID BY THE ASSESSEE FOR EGBERTS INDIA(P) LTD ` 72,167.00 ` 6,26,820.00 BALANCE AS PER BOOKS OF ACCOUNT OF EGBERTS INDIA(P) LTD ` 5,64,91,408.00 31.3.2002 LESS : 16-07-2001 APPEAL FILING FEE PAID BY THE ASSESSEE ON BEHALF OF EGBERTS INDIA(P) LTD ` 1,000.00 21-08-2001 WEALTH TAX APPEAL FILING FEE PAID BY THE ASSESSEE ON BEHALF OF EGBERTS INDIA(P) LTD ` 1,000.00 01-10-2001 ROC FILING FEE PAID BY THE ASSESSEE ON BEHALF OF EGBERTS INDIA (P) LTD ` 1,800.00 ` 3,800.00 BALANCE IN ASSESSEES ACCOUNT AS ON 31.3.2002 AS PER THE BOOKS OF ACCOUNTS OF EGBERTS INDIA (P) LTD. ` 5,64,87,608.30 ITA 1447/11 :- 8 -: 5. FROM THE ABOVE, IT BECOMES CLEAR THAT THE OPENING B ALANCE IN THE ACCOUNT OF M/S EIPL AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE AS ON 1.4.2001 ITSELF WAS ` 7,03,64,588/-. THE CORRESPONDING DEBIT BALANCE IN THE LEDGER ACCOUNT OF THE ASSESSEE IN TH E BOOKS OF ACCOUNT OF M/S EIPL AS ON 1.4.2001 WAS ` 5,64,87,608/-. IT SHOWS THAT THERE WAS A DIFFERENCE IN THE OPENING BALANCE OF ` 1,38,76,980/- WHICH WAS MORE THAN THE DIFFERENCE OF CLOSING BALANCE TREATED AS UNEXPLAINED CREDIT U/S 68. THIS DIFFERENCE EXISTED IN THE OPEN ING BALANCE AS ON 1.4.2001 AND THIS FACT HAS NOT BEEN DISPUTED BY THE REVENUE. THEREFORE, IT BECOMES AMPLY CLEAR THAT THE AMOUNT O F ` 3800/- WAS CREDITED IN THE ACCOUNT OF M/S EIPL DURING THE PREV IOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. THUS, THER E IS NO QUESTION OF OFFERING ANY EXPLANATION BY THE ASSESSEE TO PROVE T HE UNEXPLAINED CREDITS WHEN NO SUCH SUM WAS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE. ACCORDINGLY, THE AMOUNT OF ` 1,27,26,534/- CANNOT BE TREATED AS INCOME OF THE ASSESSEE OF THIS YEAR AND THUS, CANNOT BE ADDED U/S 68 OF THE ACT. 6. THE BANK STATEMENT FILED BEFORE THE ASSESSING OFFI CER SHOWED THAT OUT OF TOTAL SUM OF ` 1,45,00,000/- RECEIVED FROM SHRI MAKHIJA, ITA 1447/11 :- 9 -: THE FOLLOWING TWO SUMS CLEARLY MENTIONED THE NAME O F SHRI M.T.MAKHIJA: INDUSIND BANK 13.2.2001 M.T.MAHIJA ` 94,13,129/- INDUSIND BANK 13.2.2001 M.T.MAKHIJA ` 35,86,871/- ` 1,30,00,000/- 7. SHRI MAKHIJAS SONS ARE NON-RESIDENTS AND DESPITE T HERE BEING NO NEW EVIDENCE, THE ASSESSING OFFICER HAS PERUSED THE MATTER FURTHER BY DEMANDING THEIR PHYSICAL PRESENCE. THE ASSESSING O FFICER HAS NOT DISPUTED THE AVERMENTS AND HAS ALSO NOT CHALLENGED THE GENUINITY OF THE NOTARIZED AFFIDAVITS FILED BY THE SONS OF DEC EASED SHRI MAKHIJA. THEREFORE, IN OUR CONSIDERED OPINION, THE INITIAL B URDEN WHICH LIES ON THE ASSESSEE-COMPANY STANDS DISCHARGED AS THE ASSES SEE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS, GENUINI TY OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITOR. THE CREDITOR WAS THE CHAIRMAN OF THE GROUP OF COMPANIES TILL HIS DEATH BEING A LEAD ING BUSINESSMAN IN HONG KONG. THIS AMOUNT WAS LYING IN THE BANK ACCOU NT OF THE CREDITOR BEFORE IT WAS TRANSFERRED TO THE ASSESSEE. SO CRED IT OF THIS AMOUNT STANDS PROVED. 8. OUT OF THE FOUR REMITTANCES, TWO OF THE MAJOR RECEI PTS AMOUNTING TO ` 1,30,00,000/- WERE FROM SHRI MAKHIJA AND THE SAME IS ITA 1447/11 :- 10 - : EVIDENT FROM THE BANK STATEMENT ITSELF. THE ASSES SING OFFICER IS REQUIRED TO FORM HIS OPINION OBJECTIVELY WITH REFER ENCE TO THE MATERIAL AVAILABLE ON RECORD. THUS, WE FIND THE CONTENTION PUT FORTH FROM ASSESSEES SIDE THAT THE DIFFERENCE IN THE ACCOUNT S OF TWO COMPANIES CANNOT BE TREATED AS INCOME OF THE ASSESSEE-COMPANY AND CANNOT BE ADDED U/S 68 OF THE ACT EVEN IN THE ASSESSMENT YE AR 2001-02. THIS OBSERVATION OF THE LD. CIT(A) IS ONLY AN OBITER TO SETTLE THE ISSUE FOR GOOD, BUT ACCORDING TO US, THE ASSESSING OFFICER HA S A LIBERTY TO TAX ANY INCOME AS PER LAW. THEREFORE, WE DO NOT FIND A NY FALLACY IN THE APPELLATE FINDING AND CONFIRM THE SAME, SO FAR AS T HE IMPUGNED ADDITION IS CONCERNED, BUT WE MODIFY THE OBSERVATIO N WHICH HAS BEEN MADE BY HIM ABOUT TAXING OPENING BALANCE, WHICH WAS NOT THE SUBJECT IN APPEAL BEFORE HIM. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PAR TLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 1 8.11.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 18 TH NOVEMBER, 2011 RD COPY TO: APPELLANT /RESPONDENT/CIT(A)/CIT/DR