Sri M.K.Selva, CHENNAI V. ITO, Coimbatore

ITA 162/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61204 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained cash credit
• Section: 44AD; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 162/MDS/2012 (ASSESSMENT YEAR : 2006-07) SHRI M.K. SELVA, NO.301/1, VOC STREET, SIRUMUGAI, METTUPALAYAM, COIMBATORE 641 302. PAN : ATMPS6025L (APPELLANT) V. THE INCOME TAX OFFICER, WARD V(1), COIMBATORE. (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI K.E.B. RENGA RAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 19.06.2012 DATE OF PRONOUNCEMENT : 19.06.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT THE CIT(APPEALS) SUSTAINED THE ADDITION OF ` 5,23,447/- CONSIDERED AS UNEXPLAINED CREDITS BY THE ASSESSING OFFICER, AND A LSO SUSTAINED AN ADDITION OF ` 19,10,852/-, WHICH WAS A PART OF ITS OPENING CAPIT AL AS ON 1.4.2005, WITHOUT PROPERLY APPRECIATING THE FACTS O F THE CASE. 2 I.T.A. NO. 162/MDS/12 2. ASSESSEE, A CIVIL CONTRACTOR, FILED HIS RETURN F OR THE IMPUGNED ASSESSMENT YEAR ADMITTING AN INCOME OF ` 3,84,294/-. FROM THE BALANCE SHEET FILED ALONG WITH RETURN, IT WAS NOTED BY THE ASSESSING OFFICER OPENING CAPITAL SHOWN BY THE ASSESSEE AS ` 29,60,850/-. THOUGH ASSESSEE WAS FILING RETURNS FOR THE LAST TEN YEARS, INCLUDING IMMEDIATELY PRECEDING ASSESSMENT YEAR, HE WAS ESTIMATING HIS IN COME UNDER SECTION 44AD OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AT 8% OF HIS GROSS RECEIPTS. A.O. REQUIRED THE ASSESSEE TO EXPL AIN AND PROOF FOR THE OPENING CAPITAL OF ` 29,60,850/-. REPLY OF THE ASSESSEE WAS THAT THIS CAME OUT OF SAVINGS EFFECTED FROM INCOME FOR THE LA ST TEN YEARS. NEVERTHELESS, A.O. WAS OF THE OPINION THAT THE SAVI NGS OF ` 1,50,000/- TO ` 2,50,000/- PER YEAR, IN THE NATURE OF THE BUSINESS OF THE ASSESSEE, WOULD NOT HAVE BEEN POSSIBLE. A.O. ESTIMATED SAVIN GS ` 75,000/- PER YEAR AND ACCEPTED THE CLAIM OF THE ASSESSEE TO THE EXTENT ` 7,50,000/-. A.O. ALSO ACCEPTED THE CLAIM OF THE ASSESSEE THAT A SUM OF ` 3 LAKHS WAS GIVEN BY HIS FATHER. THUS AGAINST ` 29,60,850/- SHOWN AS OPENING CAPITAL, A SUM OF ` 10,50,000/- WAS ACCEPTED BY THE A.O. AND BALANCE WAS CONSIDERED AS UNEXPLAINED CASH CREDIT UNDER SEC TION 68 OF THE ACT. 3. FROM THE BALANCE SHEET FILED BY THE ASSESSEE, TH E A.O. ALSO NOTED THAT SUNDRY CREDITORS OF ` 5,23,447/- WERE THERE. THOUGH ASSESSEE WAS 3 I.T.A. NO. 162/MDS/12 REQUIRED TO PRODUCE DETAILS OF THE CREDITORS, IT SE EMS THIS WAS NOT GIVEN TO THE SATISFACTION OF THE ASSESSING OFFICER. HE, THEREFORE, MADE AN ADDITION OF ` 5,23,447/- CONSIDERING THESE AS BOGUS CREDITS. 4. ASSESSEE MOVED IN APPEAL AGAINST THE ABOVE AS WE LL AS OTHER ADDITIONS AND DISALLOWANCES. ARGUMENT OF THE ASSES SEE WITH REGARD TO THE ADDITIONS MENTIONED ABOVE WAS THAT HIS FATHER W AS DOING CONTRACT WORK IN AND AROUND COIMBATORE SINCE LAST VERY MANY YEARS AND HE WAS LIVING ALONG WITH HIS FATHER. ACCORDING TO ASSESSE E, HIS PERSONAL EXPENSES WERE MINIMAL. ASSESSEE ADMITTED THAT HE H AD STUDIED ONLY UPTO IV STD AND WAS DOING AGRICULTURAL WORK PRIOR T O CONTRACT WORK. ACCORDING TO ASSESSEE, IN THE EARLIER YEARS, HE HAD DECLARED HIS TOTAL INCOME AS PER SECTION 44AD AT 8% OF HIS GROSS RECEI PTS. INCOME FROM AGRICULTURAL ACTIVITIES FOR THE EARLIER YEARS WERE NOT CONSIDERED BY THE ASSESSING OFFICER. ASSESSEE ALSO PRODUCED COPIES O F LEASE DEEDS FOR AGRICULTURAL OPERATIONS CONDUCTED BY HIM AND ALSO F OR BORROWALS FROM HIS FATHER. 5. INSOFAR AS SUNDRY CREDITS OF ` 5,23,447/- WAS CONCERNED, ASSESSEE PRODUCED BEFORE CIT(APPEALS) CONFIRMATION LETTERS. AS PER THE ASSESSEE, ALL SUCH SUNDRY CREDITORS STOOD PAID. 4 I.T.A. NO. 162/MDS/12 6. HOWEVER, CIT(APPEALS) WAS NOT APPRECIATIVE OF AN Y OF THE ABOVE CONTENTIONS. ACCORDING TO HIM, NOTHING PREVENTED T HE ASSESSEE FROM JUSTIFYING BEFORE THE ASSESSING OFFICER THE SOURCE OF CAPITAL ACCOUNT OPENING BALANCE BY GIVING DETAILS OF THE AGRICULTUR AL INCOME AND ALSO LEASE DEEDS OF AGRICULTURAL LAND. NOTHING ALSO PRE VENTED THE ASSESSEE FROM PRODUCING BEFORE THE ASSESSING OFFICER CONFIRM ATION FOR THE LOAN TAKEN FROM HIS FATHER. INSOFAR AS LACK OF ADDRESS OF THE CREDITORS WERE CONCERNED, CIT(APPEALS) WAS OF THE OPINION THAT EVI DENCE PRODUCED BEFORE HIM COULD NOT BE CONSIDERED SINCE ASSESSING OFFICER HAD GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE. IN THIS VI EW OF THE MATTER, CIT(APPEALS) CONFIRMED THE ADDITION MADE BY THE A.O . 7. NOW BEFORE US, LEARNED A.R. STRONGLY ASSAILING T HE ORDERS OF THE AUTHORITIES BELOW SUBMITTED THAT THE ADDITIONS WERE ALL MADE ON MERE PRESUMPTIONS. 8. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE IS A SMALL CIVIL CONTRACTOR, WHO WAS EARLIER ENGAGED IN AGRICULTURAL ACTIVITIES. PRIOR TO THE IMPUGNED ASSESSMENT YEAR, ASSESSEE WAS RETURNING INCOME AT 8 % OF HIS GROSS 5 I.T.A. NO. 162/MDS/12 RECEIPTS AS PER SECTION 44AD OF THE ACT. NO DOUBT, ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE FOR HIS SAVINGS FROM AG RICULTURAL OPERATIONS OR HIS SAVINGS FROM EARLIER YEARS EARNINGS. BUT ST ILL HIS CLAIMS OUGHT NOT HAVE BEEN BRUSHED ASIDE SO LIGHTLY. ASSESSEE ALSO COULD NOT PRODUCE EVIDENCE BEFORE THE A.O. FOR THE LOAN RECEIVED BY H IM FROM HIS FATHER. INSOFAR AS SUNDRY CREDITOR WERE CONCERNED, ASSESSEE COULD NOT PRODUCE CONFIRMATION LETTERS BEFORE THE ASSESSING OFFICER, BUT, NEVERTHELESS, HAD PRODUCED DETAILS BEFORE THE CIT(APPEALS). LD. CIT( APPEALS) HAD NOT CONSIDERED THE CLAIM FOR A REASON THAT ASSESSEE HAD NOT TAKEN ANY INITIATIVE TO PROVE THAT THE CREDITS WERE GENUINE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE MATTER REQUIRES A FR ESH LOOK BY THE ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE OR DERS OF AUTHORITIES BELOW AND REMIT BOTH THE ISSUES BACK TO THE ASSESSI NG OFFICER FOR CONSIDERATION AFRESH. IF THE ASSESSEE IS ABLE TO P ROVE TO THE SATISFACTION OF THE ASSESSING OFFICER THAT SUFFICIENT FUNDS WERE AVAILABLE WITH HIM FOR OPENING CAPITAL ACCOUNT CREDIT AND ALSO PRODUCE SUF FICIENT RECORDS TO PROVE THE SUNDRY CREDITORS AS ON 31.3.2006, THEN TH E CLAIMS WILL HAVE TO BE ALLOWED. ASSESSING OFFICER SHALL PROCEED IN ACC ORDANCE WITH LAW. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6 I.T.A. NO. 162/MDS/12 THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 19 TH OF JUNE, 2012, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH JUNE, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-II, COIMBATOR E/ CIT-III, COIMBATORE/D.R./GUARD FILE