Shri R.Udayachandran, Coimbatore V. ACIT, Coimbatore

ITA 166/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5032 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 12-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Unexplained investment; Gift; Document seized; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A. NOS. 161, 162, 163, 164, 165 & 166/MDS/2009 ASSESSMENT YEARS : 2000-01 TO 2005-06 SHRI R. UDAYACHANDRAN, 53, STV NAGAR, PEELAMEDU, COIMBATORE-641 004. PAN AFLPR 7677 G VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I, COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.SEETHARAMAN RESPONDENT BY : SHRI ANIRUDH RAI O R D E R PER DR. O.K.NARAYANAN, VICE PRESIDENT THERE ARE SIX APPEALS IN THIS BUNCH. THESE APPEAL S ARE FILED BY THE ASSESSEE. THEY RELATE TO THE ASSESSME NT YEARS 2000- 01, 2001-02, 2002-03, 2003-04, 2004-05 AND 2005-06. THE APPEALS ARE DIRECTED AGAINST THE ORDERS OF THE COMM ISSIONER OF INCOME-TAX (APPEALS)-II, AT COIMBATORE, ALL DATED 1 0.11.2008 AND ITA 161 TO 166/09 :- 2 -: ARISE OUT OF THE ASSESSMENTS COMPLETED UNDER SEC.14 3[3] READ WITH SEC. 153C OF THE INCOME-TAX ACT, 1961. 2. THE COMMON GROUND RAISED IN ALL THESE APPEALS IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN H OLDING THAT THE PROCEEDINGS INITIATED AGAINST THE ASSESSEE UNDE R SEC.153A/153C ARE NOT VALID. IT IS THE CASE OF THE ASSESSEE THAT THE WARRANT WAS ISSUED IN THE NAME OF SHRI R. BALAJ I, BROTHER OF THE ASSESSEE IN ALL THESE APPEALS, AND AT THAT RELE VANT POINT OF TIME, SHRI R. BALAJI HAD LEFT INDIA FOR HIGHER STUD IES IN DECEMBER, 2004. SHRI BALAJI WAS EMPLOYED FOR A FEW MONTHS IN INDIA BEFORE HE LEFT INDIA IN DECEMBER, 2004 AND HIS TOTAL SALAR Y INCOME WAS ` 77,654/-. IT IS THE CASE OF THE ASSESSEE THAT NEIT HER SHRI BALAJI NOR ANY OF HIS RELATIVES OR FAMILY MEMBERS WAS STAY ING IN THE PREMISES WHERE SEARCH WAS MADE AND THE SAID PREMISE S WERE RENTED OUT TO SHRI R. RAJAGOPAL, FATHER OF SHRI R. BALAJI. IT IS ALSO THE CASE OF THE ASSESSEE THAT THE ONLY DOCUMENT FOU ND FROM THE PREMISES IS FD RECEIPTS OF ` 78,285/- IN THE NAME OF SHRI R. BALAJI. IN THESE CIRCUMSTANCES, THE IMPUGNED ASSESSMENTS MA DE IN THE LIGHT OF INVALID MATERIALS ARE NOT SUSTAINABLE IN L AW. ITA 161 TO 166/09 :- 3 -: 3. THE COMMISSIONER OF INCOME-TAX (APPEALS) IN HIS DISCUSSION OBSERVED THAT THE GROUNDS RELATING TO TH E SEARCH WARRANT ISSUED IN THE PREMISES OF SHRI BALAJI CANNO T BE A GROUND FOR THE ASSESSEE TO PLEAD EXONERATION FROM THE IMPU GNED ASSESSMENTS. THE COMMISSIONER OF INCOME-TAX (APPEA LS) OBSERVED THAT WARRANTS WERE ISSUED IN ACCORDANCE WI TH LAW AND THEY WERE EXECUTED PROPERLY AND IN THE COURSE OF CO NSEQUENTIAL SEARCH, DETAILS OF UNEXPLAINED INVESTMENTS HELD IN THE NAME OF THE ASSESSEE WERE FISHED OUT. IN SUCH CIRCUMSTANCE S, THE ASSESSING OFFICER HAS INVOKED SEC.153C, RIGHTLY IN LAW. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS DISMISSED THE ABOVE CONTENTION OF THE ASSESSEE. 4. WE CONSIDERED THIS MATTER. THE ARGUMENTS OF THE ASSESSEE REGARDING THE OWNERSHIP OF THE PREMISES AND THE FAC T OF LETTING OUT OF THE PROPERTY TO THE ASSESSEES FATHER ARE ALL MA TTERS OF SELF SERVICE ALL THOSE EVIDENCES WERE CREATED BY THE A SSESSEE AND FAMILY MEMBERS THEMSELVES. THE CRUCIAL QUESTION AS OBSERVED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) IS THAT IN THE COURSE OF SEARCH WHETHER MATERIALS CONCERNING THE ASSESSEE WE RE UNEARTHED OR NOT. THE ANSWER IS YES. WHEN THE MAT ERIALS ITA 161 TO 166/09 :- 4 -: CONCERNING THE ASSESSEE HAVE BEEN COLLECTED IN THE COURSE OF SEARCH, IT IS WITHIN THE JURISDICTION OF THE ASSESS ING OFFICER TO ISSUE NOTICE UNDER SEC.153C. THEREFORE, WE FIND THAT THE RE IS NO NEED OF MUCH ELABORATION ON THIS POINT AND HOLD THAT THE ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED BY THE ASSESSING AU THORITY UNDER SEC.153C, LAWFULLY. WE UPHOLD THE ORDER OF THE C OMMISSIONER OF INCOME-TAX (APPEALS) ON THIS POINT AND REJECT THIS LEGAL CONTENTION RAISED BY THE ASSESSEE. 5. NEXT WE WILL CONSIDER THE GROUNDS REGARDING THE ADDITIONS SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (APPEAL S). 6. THE FIRST POINT IS ABOUT THE ACCEPTABILITY OF TH E EXPLANATION OF THE ASSESSEE REGARDING THE GIFTS STATED TO BE RECEI VED FROM HIS GRAND-MOTHER. THE COMMISSIONER OF INCOME-TAX (APPE ALS) HAS CONFIRMED ADDITIONS OF ` 2,50,000/- EACH FOR THE ASSESSMENT YEAR 2000-01, 2001-02 AND 2002-03. THE ASSESSEE HAS CO NTENDED THAT THESE AMOUNTS WERE IN FACT, GIFTED BY HIS GRAN D-MOTHER. 7. THE CONTENTIONS OF THE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER AS WELL AS BY THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR WANT OF EVIDENCES. THE COMMISSIONER OF INCOME- ITA 161 TO 166/09 :- 5 -: TAX (APPEALS) HAS ALSO OBSERVED THAT SUFFICIENT SOU RCES WERE NOT EXPLAINED IN THE HANDS OF THE ASSESSEES GRAND-MOTH ER. HE HAS ALSO STATED THAT IT IS NOT POSSIBLE TO BELIEVE THAT THE GRAND-MOTHER WOULD HAVE GIVEN THE ENTIRE CASH BALANCE OF ` 7,50,000/- TO THE ASSESSEE AGAINST OTHER RELATIVES. IT IS IN THESE C IRCUMSTANCES, THAT THE ADDITIONS HAVE BEEN CONFIRMED. 8. ON CONSIDERING THESE ISSUES, WE FIND THAT THE A VAILABILITY OF SOURCES IN THE HANDS OF THE ASSESSEES GRAND-MOTHER WAS REJECTED BY THE LOWER AUTHORITIES ON THE GROUND THA T SHE WAS NOT ASSESSED TO INCOME-TAX. IT IS NOT PERMISSIBLE IN L AW TO MAKE A PROPOSITION THAT AVAILABILITY OF SOURCES IN THE HAN DS OF A PERSON COULD BE CONCEIVED ONLY IF THE SAID PERSON HAS REGU LARLY FILED RETURNS OF INCOME. IN CERTAIN CASES, A PERSON MIGH T HAVE BEEN LIABLE FOR FILING OF RETURNS OF INCOME BUT NO RETUR NS WOULD HAVE BEEN FILED. BUT THE FAILURE TO FILE THE RETURNS OF INCOME IS NOT A GROUND TO HOLD THAT, SOURCES WERE NOT AVAILABLE IN THE HANDS OF THAT PERSON. APART FROM THE ABOVE EXTREME CASE, IT IS ALSO POSSIBLE THAT THE ASSESSEES GRAND-MOTHER MIGHT BE HAVING INCOME NOT LIABLE FOR TAXATION. THE ASSESSEES GRA ND-MOTHER WAS NOT EXAMINED BY THE ASSESSING AUTHORITY. REGARDIN G THE ITA 161 TO 166/09 :- 6 -: EVIDENCES, IN FAMILY TRANSACTIONS, IT IS VERY DIFFI CULT TO PRODUCE EVIDENCES FOR CASH TRANSACTIONS. CONSIDERING THE F INANCIAL AND SOCIAL STATUS OF THE ASSESSEES FAMILY, WE FIND THA T IT IS NOT IMPOSSIBLE OR IMPROBABLE TO HOLD THAT SUCH GIFTS CO ULD NOT HAVE BEEN MADE BY THE GRAND-MOTHER OF THE ASSESSEE. 9. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THESE THREE ADDITIONS CONFIRMED FOR THE A SSESSMENT YEARS 2000-01, 2001-02 AND 2002-03 ARE NOT JUSTIFIED. TH E ADDITIONS ARE ACCORDINGLY, DELETED. 10. THE APPEALS FILED BY THE FOR THE ASSESSMENT YEA RS 2000-01, 2001-02 AND 2002-03 ARE SUCCESSFUL, ON MERIT. 11. NEXT WE WILL CONSIDER THE ASSESSMENT YEAR 2003- 04 IN WHICH THE ONLY GROUND RAISED IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF ` 13,50,000/- IN THE ASSESSMENT AS INVESTMENT IN UNACCOUNTED MONEY LENDING. 12. WE CONSIDERED THIS ISSUE. THE DOCUMENTS SEIZED FROM THE PREMISES OF SHRI R. BALAJI, ASSESSEES BROTHER, CLE ARLY SHOWED THAT THE ASSESSEE HAD GIVEN AN AMOUNT OF ` 13,50,000/- TO ONE SHRI N. DEVARAJ. THIS TRANSACTION WAS RECORDED IN THE DOCUMENTS ITA 161 TO 166/09 :- 7 -: IN ASSESSEES OWN HANDWRITING. THE ONLY DEFENCE EX PLAINED BY THE ASSESSEE IS THAT THE AMOUNT WAS PAID BY HIS LAT E GRAND-FATHER. BUT IT IS TO BE SEEN THAT THE TRANSACTION HAS BEEN RECORDED IN A STAMP PAPER. WHEN THE PRIVITY OF TRANSACTION BETWE EN THE ASSESSEE AND SHRI N. DEVARAJ IS APPARENT IN A STAMP PAPER, THERE IS NO MUCH FORCE IN THE ARGUMENT THAT THE AMOUNT WA S ADVANCED BY HIS LATE GRAND-FATHER. THEREFORE, THE LOWER AUT HORITIES HAVE RIGHTLY REJECTED THE CONTENTION OF THE ASSESSEE TO HOLD THAT THE ASSESSEE IS ACCOUNTABLE FOR A SUM OF ` 13,50,000/-. 13. BUT WE FIND THAT IT IS NOT NECESSARY TO MAKE AN ADDITION OF THE SAID SUM OF ` 13,50,000/- AS A WHOLE. THIS IS BECAUSE IN THE EARLIER ASSESSMENT YEARS 2000-01, 2001-02 AND 2002- 03, THE ASSESSEE HAS CLAIMED RECEIPT OF GIFTS FROM HIS GRAN D-MOTHER WHICH HAS BEEN ACCEPTED BY US WHILE DISCUSSING THE MATTER ABOVE. THEREFORE, AS A FAIR MEASURE, WE HAVE TO SE E THAT THE AMOUNT TO THE EXTENT GIFTED BY HIS GRAND-MOTHER WAS AVAILABLE IN ASSESSEES HANDS TO SUPPLEMENT THE PAYMENT OF ` 13,50,000/- TO SHRI DEVARAJ. THEREFORE, WE FIND THAT IN THE INTER EST OF JUSTICE, A SUM OF ` 7,50,000/- HAS TO BE SET OFF AGAINST THE AMOUNT OF ` 13,50,000/- AND THE DIFFERENTIAL AMOUNT OF ` 6,50,000/- ALONE NEED ITA 161 TO 166/09 :- 8 -: TO BE ADDED AS INCOME OF THE ASSESSEE FOR THE ASSES SMENT YEAR 2003-04. WE ORDER ACCORDINGLY. 14. THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESS MENT YEAR 2003-04 IS PARTLY SUCCESSFUL, ON MERIT. 15. AS FAR AS THE NEXT ASSESSMENT YEAR 2004-05 IS C ONCERNED, CASE OF TWO ADDITIONS ARE AGITATED. THE FIRST CASE IS THAT OF ` 1,72,188/- ADDED BY THE ASSESSING AUTHORITY AND CON FIRMED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AS UNEXPLA INED INVESTMENT IN PURCHASE OF PROPERTY. IT WAS THE CON TENTION OF THE ASSESSEE THAT EVEN THOUGH THE TOTAL REGISTRATION EX PENSES WAS ` 7,87,878/- AS NOTED IN THE SEIZED DOCUMENT, ON NEGO TIATION, THE ASSESSEE HAD SETTLED THE TRANSACTION FOR ` 7,00,000/- INCLUDING ALL EXPENSES. THE AMOUNT OF ` 7,00,000/- HAS BEEN SHOWN IN THE BALANCE-SHEET OF THE ASSESSEE AS ON 31.3.2004 AND L ATER AFFIRMED IN THE SWORN STATEMENT GIVEN BY THE ASSESSEE ON 27. 9.2005. WHEN WE GO THROUGH THE MATTER, WE FIND THAT THE AMO UNT ADOPTED BY THE LOWER AUTHORITIES HAS BEEN REFLECTED IN THE SEIZED DOCUMENTS, WHICH GOES AGAINST THE ASSESSEE. WE ARE NOT INCLINED TO INTERFERE AND THEREFORE, THIS ADDITION IS CONFIRMED. ITA 161 TO 166/09 :- 9 -: 16. THE SECOND POINT IS REGARDING THE ADDITION OF ` 1,23,780/- MADE TOWARDS UNEXPLAINED CASH CONTRIBUTED TO CAPIT AL ACCOUNT. WE DO NOT FIND ANY RELIABLE BASIS TO CONFIRM SUCH A N ADDITION. ACCORDINGLY, THE ADDITION OF ` 1,23,780/- IS DELETED. 17. THE ASSESSEE IS PARTLY SUCCESSFUL IN HIS APPEAL FOR ASSESSMENT YEAR 2004-05. 18. IN RESPECT OF ASSESSMENT YEAR 2005-06, THE ONLY GROUND IS AGAINST THE ADDITION OF ` 1,91,000/- MADE AGAINST UNEXPLAINED MONEY BROUGHT IN CASH FLOW STATEMENT. WE FIND THA T THE SOURCE OF THIS ADDITION IS NOT THE SEIZED MATERIAL BUT THE CASH FLOW STATEMENT FILED BY THE ASSESSEE HIMSELF. WHEN WE C ONSIDER THE FINANCIAL STATUS OF THE ASSESSEE, IT IS NOT POSSIBL E TO BRUSH ASIDE HIS ARGUMENT THAT CASH TO THE EXTENT OF ` 1,91,000/- WAS AVAILABLE IN HIS HANDS FOR THE IMPUGNED ASSESSMENT YEAR. THE REFORE, THE SAID ADDITION OF ` 1,91,000/- IS NOT JUSTIFIED. IT IS DELETED. 19. THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 IS SUCCESSFUL, ON MERIT. 20. IN RESULT, THE APPEALS FILED BY THE ASSESSEE AR E PARTLY ALLOWED. ITA 161 TO 166/09 :- 10 - : ORDERS PRONOUNCED ON TUESDAY, THE 24 TH DAY OF MAY, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) JUDICIAL MEMBER (DR. O.K.NARAYANAN) VICE-PRESIDENT CHENNAI, DATED : 24 TH MAY, 2011 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR