ITO, CHENNAI V. G.Murugan, CHENNAI

ITA 1536/CHNY/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90616 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: P RAJASEKARAN
• Keywords: Unexplained investment; Gift; Peak credit; Reasonable cause; Notional interest
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NOS.1484, 1535 TO 1537/MDS/2013 ( / ASSESSMENT YEARS: 2007-08 TO 2010-11) INCOME TAX OFFICER, BUSINESS WARD-IV(2) CHENNAI-600 034. VS MR. G.MURUGAN, 6, BALAJI AVENUE, VADAPALANI, CHENNAI-600 026. PAN:BDNPM7104C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. P.RADHAKRISHNAN, JCIT /RESPONDENT BY : MR. P.RAJASEKARAN, C.A /DATE OF HEARING : 14 TH MAY, 2015 /DATE OF PRONOUNCEMENT : 8 TH JULY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: ALL THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS- VIII), CHENNAI DATED 18.02.2013 FOR THE ASSESSMENT YEARS 2007-08 TO 2010-11. THE ONLY ISSUE IN ALL THESE AP PEALS IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AS UNEXP LAINED INVESTMENTS. 2. THE APPEALS OF THE REVENUE FOR THE ASSESSMENT Y EARS 2008-09 TO 2010-11 ARE TIME BARRED BY 9 DAYS. THE 2 ITA NOS. 1484, 1535 TO 1537/MDS/2013 DEPARTMENT FILED SEPARATE PETITIONS EXPLAINING REA SONS FOR DELAY IN FILING OF APPEALS AND PRAYS FOR CONDONATIO N OF DELAY. WE HAVE PERUSED THE REASONS AND ARE SATISFIED THAT THERE IS A REASONABLE CAUSE FOR THE DELAY IN FILING OF THE APP EALS. IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY OF NINE D AYS IN FILING OF THESE THREE APPEALS. THE PETITIONS FOR CONDONATI ON OF DELAY ARE THUS ALLOWED AND THE APPEALS FOR THE ASSESSMENT YEARS 2008-09 TO 2010-11 ARE ADMITTED. 3. BRIEF FACTS ARE THAT SURVEY WAS CONDUCTED IN THE CASE OF MR. E.VELU AT NO.103,GANGAI AMMAL KOIL STREET, VADA PALANI, CHENNAI. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE MR. G.MURUGAN WAS ONE OF THE MONEYLENDERS TO MR. E. VELU AND THE MONEY RECEIVED FROM THE ASSESSE E BY MR. VELU IS BEING ROTATED THEREBY EARNING COMMISSIO N. A STATEMENT WAS RECORDED FROM THE ASSESSEE ON 12.04. 2010 AND 07.05.2010 DURING THE COURSE FROM WHICH IT CAME TO LIGHT THAT ASSESSEE WAS ENGAGED IN MONEY LENDING BUSINESS . THE ASSESSEE HAS GIVEN MONEY TO MR. E.VELU, THE MEDIATO R FOR ROTATION IN MONEY LENDING BUSINESS AND WAS EARNING INTEREST THEREFROM. MONEY LENDING FETCHES INTEREST @ 2% ON A N 3 ITA NOS. 1484, 1535 TO 1537/MDS/2013 AVERAGE AND ASSESSEE HAS ESTIMATED INTEREST INCOME @ 1.5% PER MONTH AND PAID 0.5% PER MONTH AS COMMISSIO N TO MR. E.VELU. THE ASSESSEE IS ALSO DOING MONEY LENDIN G BUSINESS ON HIS OWN FOR WHICH HE IS EARNING INTERES T ON AN AVERAGE @ 2% PER MONTH. THE ASSESSEE HAD NEVER FILE D HIS RETURN OF INCOME AND DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT. DURING THE COURSE OF ENQUIRY, ASSESSEE PRE PARED AND SUBMITTED COMPUTATION OF INCOME, PROFIT & LOSS ACCOUNT AND BALANCE SHEET FOR THE PERIODS ENDING 31.3.2007 TO 31.03.2010 AND ALSO PAID TAXES AS PER HIS COMPUTATI ON OF INCOME FOR THE SAID YEARS. ASSESSMENTS WERE COMPLET ED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE A CT BY THE ASSESSING OFFICER ON 31.10.2011 MAKING ADDITIONS TO WARDS UNEXPLAINED INVESTMENT IN MONEY LENDING BUSINESS. T HE UNEXPLAINED INVESTMENTS WHICH THE ASSESSING OFFICER ADDED IN ALL THESE ASSESSMENT YEARS WAS ESTIMATED CAPITAL SAID TO HAVE BEEN INTRODUCED BY THE ASSESSEE BASED ON THE STATEMENT OF AFFAIRS OF THE ASSESSEE FOR THE ASSESS MENT YEAR 2007-08 AND NOTIONAL INTEREST ON SUCH ESTIMATED CAP ITAL FOR THE ASSESSMENT YEARS 2008-09 TO 2010-11. THE ASSESS EE PREFERRED APPEAL BEFORE COMMISSIONER OF INCOME TAX 4 ITA NOS. 1484, 1535 TO 1537/MDS/2013 (APPEALS) AND HE DELETED THE ADDITIONS STATING THA T ASSESSING OFFICER HAS SIMPLY CALCULATED THE NOTIONA L GROSS TURNOVER AMOUNT AS PER THE RATE OF INTEREST AND BY MAKING A REVERSE CALCULATION AND ARRIVED AT DIFFERENCE FROM UNACCOUNTED SOURCES WHICH IS NOT CORRECT, AGAINST W HICH THE REVENUE IS IN APPEAL BEFORE US. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE ASSESSING OFFICER IN BRINGING TO TAX T HE INVESTMENTS SAID TO HAVE BEEN MADE BY THE ASSESSEE IN MONEY LENDING BUSINESS. 5. COUNSEL FOR THE ASSESSEE SUPPORTS THE ORDER OF T HE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E ADDITION MADE BY THE ASSESSING OFFICER AS UNEXPLAIN ED INVESTMENTS. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER MADE ADDITION TOWARDS UNEXPLA INED INVESTMENTS BY CALCULATING THE CAPITAL WHICH MIGHT HAVE BEEN INTRODUCED BY THE ASSESSEE IN THE BUSINESS AND BRO UGHT TO 5 ITA NOS. 1484, 1535 TO 1537/MDS/2013 TAX. THE COMMISSIONER OF INCOME TAX (APPEALS) DELET ED SUCH ADDITIONS OBSERVING AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE AR THE APPELLANT AS WELL AS ASSESSMENT ORDER WHEREIN T HE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.27,33,140/- ON ACCOUNT OF INVESTMENT OUT OF UNDISCLOSED SOURCES. THE ASSESSING OFFICER HAS ARRIVED AT THE ADDITION B Y CALCULATING GROSS RECEIPTS BASED ON INTEREST INCOME REPORTED BY THE APPELLANT HIMSELF. THE AMOUNT INVES TED BY THE ASSESSEE IN THE MONEY LENDING BUSINESS IS WO RKED OUT AT ` 30,18,140/-. OUT OF WHICH OPENING CAPITAL OF RS.1,45,000/- AND GIFT FROM MOTHER AT RS.1,00,000/ - ONLY ACCEPTED AND ARRIVED AT THE BALANCE AMOUNT OF RS.27,33,140/- AS GROSS RECEIPTS AND ADDED AS INVESTMENT OUT OF UNDISCLOSED SOURCES. THE AR OF TH E APPELLANT IN HIS SUBMISSION HAS OBJECTED THAT THE ASSESSING OFFICER HAS ARRIVED GROSS RECEIPTS AT RS.30,18,140/- ON ACCOUNT OF RATE OF INTEREST APPLI ED TO ARRIVE THE ABOVE AMOUNT. THE APPELLANT HAS HIMSELF ADMITTED GROSS INTEREST AT RS.5,43,265/- BEING 18% WHICH CAPITALIZED TO RS.30,18,140/-. THE AR OF THE APPELL ANT HAS ALSO EXPLAINED THE NATURE' OF THE BUSINESS OF T HE APPELLANT WHICH IS CASH ROTATION ON DAY TODAY BASIS RANGING FROM 2 DAYS TO 2 WEEKS AND SOME TIME THE MAXIMUM LOAN TO THE BORROWERS FOR 5 MONTHS AS SUCH THE OPENING CAPITAL ACCEPTED BY THE ASSESSING OFFICER A T RS.2,45,000/- HAS BEEN ROTATED ALONG WITH THE INTER EST EARNED AS WELL AS PERIODICAL REPAYMENT OF THE LOAN. AS SUCH THE GROSS RECEIPTS WORKED OUT BY THE AO ON RAT E OF INTEREST BASIS SHOULD BE CONSTRUED AS TURNOVER BUT NOT THE CAPITAL. THE DECISION OF TREATING THE NOTIONAL TURNOVER/GROSS RECEIPTS IN ADDITION TO THE INTEREST INCOME EARNED AND RETURNED BY THE APPELLANT AT RS.4,02,220 /- IS TOTALLY DEVOID OF ANY LOGIC AS THE TURNOVER/ GROSS RECEIPTS IS TREATED' AS INCOME. THE AR OF THE APPELLANT ALSO HAS MENTIONED THAT THERE WAS NO CASH DEPOSIT IN .THE BA NK ACCOUNT FOR ALL THE YEARS W.E.F. 1.04.2006 TO 31.03 .2010. THE RETURN OF INCOME HAS BEEN FILED BY THE APPELLAN T ON 01.08.2011 DECLARED AN AMOUNT OF ` 4,02,220/- IS OUT OF INTEREST INCOME EARNED DURING THE YEAR UNDER CONSIDERATION AND THE AO IS NOT JUSTIFIED IN TREATI NG THE ROTATION OF AMOUNT PERIODICALLY WHICH IS IN FACT TU RNOVER OF THE APPELLANT AND HENCE CANNOT BE TREATED AS INCOME OF THE APPELLANT THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT BASED ON ANY EVIDENCE AND 6 ITA NOS. 1484, 1535 TO 1537/MDS/2013 REQUESTED FOR DELETION OF THE SAME. 5.2 I HAVE GONE THROUGH THE SUBMISSIONS MADE BY T HE AR OF THE APPELLANT AND IT IS A FACT THAT THE FINAN CE BUSINESS CARRIED ON BY THE APPELLANT ON DAILY ROTAT ION ,BASIS WHICH IS RECEIVED BY THE APPELLANT ALONG WIT H THE INTEREST IS AGAIN RE-ROTATED FOR EARNING INTEREST A S THE APPELLANT HIMSELF HAS ADMITTED INCOME ON ACCOUNT OF MONEY LENDING BUSINESS. THE AO HAS SIMPLY CALCULATED THE NOTIONAL GROSS TURNOVER AMOUNT AS PE R THE RATE OF INTEREST BY MAKING A REVERSE CALCULATION AN D ARRIVED AT THE DIFFERENCE AS INCOME FROM UNACCOUNTE D SOURCES WHICH IS FACTUALLY NOT CORRECT, AT THE MOST IT CAN BE TREATED AS GROSS RECEIPT AS ANNUAL TURNOVER WHIC H CAN BE NEVER BEEN TREATED AS THE INCOME OF THE APPELLAN T. THERE IS NO OTHER MATERIAL ON RECORD TO SUGGEST TH AT THE APPELLANT HAS EARNED INVESTABLE AMOUNT AT ` 27,73,140/- WHICH IS NEITHER A PEAK CREDIT NOR RECEIVED FROM ANY MONEY LENDERS 'TO BE USED IN HIS MONEY LENDING BUSINESS. KEEPING IN VIEW OF THE SUBMISSIONS MADE B Y THE AR OF THE APPELLANT AS WELL AS MATERIAL ON RECO RD, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTA INABLE ADDITION AND DESERVES TO BE DELETED. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 7. ON GOING THROUGH THE ABOVE ORDER OF THE COMMISSI ONER OF INCOME TAX (APPEALS), WE DO NOT FIND ANY INFIRMI TY IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER . NONE OF THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APP EALS) HAVE BEEN REBUTTED BY THE REVENUE WITH EVIDENCE. 8. COMING TO THE DELETION OF ADDITIONS FOR THE ASSE SSMENT YEARS 2008-09 TO 2010-11, THESE ADDITIONS ARE MADE TOWARDS NOTIONAL INTEREST ARE ALL BASED ON THE ADDITION MAD E TOWARDS NOTIONAL CAPITAL ARRIVED IN THE ASSESSMENT YEAR 20 07-08. FOR 7 ITA NOS. 1484, 1535 TO 1537/MDS/2013 THE ELABORATE REASONS GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETIN G NOTIONAL INTEREST FOR THE ASSESSMENT YEARS 2008-09 TO 2010- 11 SINCE WE HAVE UPHELD THE ORDER OF THE COMMISSION ER OF INCOME TAX (APPEALS) IN DELETING THE NOTIONAL CAPIT AL ARRIVED AT BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2007-08. 9. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JULY, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 8 TH JULY, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .