Smt. Selviammal Sivalingam, CHENNAI V. ITO, CHENNAI

ITA 1663/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0980 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 06-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E B RANGAR AJAN JR
• Assessee Lawyers: K MEENAKSHISUDA RM
• Keywords: Unexplained investment; Search and seizure; Peak credit
• Section: 6

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL:C- BENCH: CHENNAI (BEFORE SHRI HARI OM MARATHA, JM & SHRI AB RAHAM P GEORGE, AM) ITA NO.1663/MDS/10 ASST. YEAR 2007-08 SMT. SELVIAMMAL SIVALINGAM, VS. THE I TO, NO.3 KAILAS MUDALI ST., TONDIARPET BUSIN ESS WARD VII(1), CHENNAI. CHENNAI 600081 (PAN AAIPS 2137G) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.MEENAKSHISUDA RM. RESPONDENT BY: SHRI K.E.B.RANGARAJAN,JR. STANDING COUNSEL ORDER PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, SHE H AS RAISED THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT HAD AN OPENING FIXED CAPITAL OF ` 16,00,000/- AS ON 142006 IN HER MICRO FINANCE ACTIVITY TO PEOPLE IN LOWER STRATA OF SOCIE TY. 2. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT IN A MICRO FINANCE MONEY LENDING BUSINESS A FIXED CAPITAL IS C IRCULATED OVER A SHORT PERIOD SPREAD OVER A LARGE NUMBER OF PEOPLE AND TH E CIRCULATING CAPITAL WILL BE MANY TIMES MORE THAN THE FIXED CAPITAL. 3. THE LD. ITO DID NOT TAKE A WHOLE SOME VIEWE OF THE BUSINESS OF THE ASSESSEE AND HAD CONSIDERED THE DEPOSITS IN THE BAN K ACCOUNT WHICH WERE PART OF THE CIRCULATING CAPITAL AS UNEXPLAINED INVE STMENTS IN AN IN BETWEEN YEAR AND THE CIT(A) ALSO ERRED IN CONFIRMING THE AC TION OF THE AO. 4. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE PEAK CREDIT DURING THE YEAR WAS ONLY ` 9,00,000 ON 22/2/2007 AND THIS ALONE HAD SNOWBALLED INTO ` 25,50,000 IN THE BANK ACCOUNT IN THE INTERVENING YE AR 2007-08. ITA NO.1663/MDS/10 2 5. THE LD.CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE MAXIMUM PEAK CAPITAL OF ` 9,00,000 ON 22/2/2007 HAD BEEN BELOW THE OPENING PEAK CAPITAL OF ` 16,00,000 AND AS SUCH OUGHT TO HAVE DELETED THE ENT IRE ADDITION OF ` 25,50,000. 6. THE ASSESSEE CRAVES LEAVE TO THE ADDITIONAL GROUNDS IF FOUND NECESSARY TO COURSE OF THE APPEAL IN ACCORDANCE WIT H LAW RULES AND PROCEDURE. 7. THE APPELLANT UNDER THE CIRCUMSTANCES SUBMI TS THAT THE HONORABLE TRIBUNAL MAY BE PLEASED TO DELETE THE ENTIRE ADDITI ON OF ` 25,50,000 AND RENDER JUSTICE. 2. FACTS APROPOS ARE THAT THE ASSESSSE HAD FILED T HE RETURN FOR THE IMPUGNED ASSESSMENT YEAR ADMITTING TOTAL INCOME OF ` 2,13,000/-. INCOME ADMITTED BY THE ASSESSEE WAS FROM HOUSE PROPERTY AND INTEREST. IT S EEMS THERE WAS AN AIR REPORT WITH THE AO WHICH REPORTED CASH DEPOSIT OF ` 25,50,000/- IN A BANK ACCOUNT IN THE NAME OF THE ASSESSEE WAS REPORTED. ASSESSEE WAS REQ UIRED DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO PRODUCE CASH BOOK, LEDGER , BANK STATEMENT ETC. BUT IT SEEMS ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUN T. THOUGH ASSESSEE SUBMITTED THAT SHE WAS DOING MONEY LENDING BUSINESS IN THE FI ELD OF MICRO FINANCE, NO BOOKS OF ACCOUNT IN SUPPORT THEREOF WAS PRODUCED. THE AO, RE LYING ON SEC. 69A OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT) WAS OF T HE OPINION THAT EXPLANATION FOR THE CASH DEPOSIT OF ` 25,50,000/- WAS NOT SATISFACTORY AND MADE AN ADDITI ON OF THE AMOUNT AND COMPLETED THE ASSESSMENT. 3. IN HER APPEAL BEFORE THE CIT(A), ARGUMENT OF TH E ASSESSEE WAS THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF MONEY LENDI NG TO PEOPLE IN THE LOWER STRATA OF SOCIETY AND INTEREST CHARGED WAS 12% NORM ALLY. ACCORDING TO THE ASSESSEE, ITA NO.1663/MDS/10 3 SHE WAS HAVING CIRCULATING CAPITAL OF ` 16 LAKHS AND WAS ENGAGED IN THIS BUSINESS FOR FIFTEEN YEARS. SUCH COLLECTIONS FROM THE AMOUNTS AD VANCED FOR SHORT PERIODS WERE DEPOSITED IN BANK IN THE SAVINGS BANK ACCOUNT WITH DENA BANK AND THEREFORE THE SUM OF ` 20,50,000/- DEPOSITED THEREIN WAS PROPERLY EXPLAINE D. FURTHER AS PER THE ASSESSEE, THERE WAS ALWAYS TIME GAP BETWEEN COLLECT ION OF OUTSTANDING AMOUNT AND GIVING OF ADVANCE NECESSITATING THE DEPOSIT IN THE BANK DURING THE INTERREGNUM. THEREFORE ACCORDING TO THE ASSESSEE, CIRCULATING CA PITAL OF ` 16 LAKHS OUGHT HAVE BEEN EXCLUDED. LD. CIT(A) WAS NOT APPRECIATIVE OF THE ABOVE CONTENTIONS AND HE DISMISSED THE APPEAL OF THE ASSESSEE WITH THE FOLLO WING NOTING: FROM THE ABOVE FIGURE, IT IS UNDERSTOOD THAT IN JU NE 2006 HE HAS DEPOSITED ` 5,00,000/-, IN OCTOBER 2006 ` 8,50,000/-. IN DECEMBER 2006 ` 3,00,000, IN FEBRUARY 2007 ` 9,00,000/- AND IN MARCH 2007 ` .8,50,000/-. ACCORDINGLY, HE HAS WITHDRAWN IN JULY 2006 ` 5,00,000, IN NOVEMBER 2006 ` 9,00,000/-. IN DECEMBER 2006 ` 5,00,000 AND IN MARCH 2007 ` 9,00,000/- BUT THE APPELLANT HERSELF SUBMITTED THAT SHE IS ADVANCING LOAN TO PEOPLE IN T HE LOWER STRATA OF OF SOCIETY OF THE RANGE WELL BELOW ` 20,000/-. IT IS VERY STRANGE TO UNDERSTAND THAT THE TRANSACTIONS ARE DEPOSITED IN LAKHS AND THAT TOO WI THIN A MONTH, ` 5 LAKH, ` 9 LAKH ETC. WERE DEPOSITED AND WITHDRAWN. SO, IN VIEW OF T HE ABOVE FAFTS, I AM ALSO AGREEING WITH THE AOS VIEW THAT THE SOURCES HAVE N OT BEEN PROPERLY EXPLAINED AND THE ADDITION MADE BY THE AO OF ` 25,50,000/- FOUND TO BE IN ORDER AND ACCORDINGLY, THE ADDITION MADE BY THE AO AT ` 25,50,000/- IS CONFIRMED. 4. NOW BEFORE US. LD COUNSEL FOR THE ASSESSEE SUBMI TTED THAT ASSESSEE WAS HAVING CAPITAL OF ` 16,00,000/- AS ON 31-3-2006 AND ` 18,62,294/- AS ON 31-3-2007 IN ITS MONEY LENDING BUSINESS. THEREFORE, ACCORDING TO HIM, REVO LVING CAPITAL USED IN THE BUSINESS WHICH WERE KEPT IN DEPOSITS FOR SHORT PERIODS, IN B ETWEEN COLLECTION OF MONEY AND GIVING OF ADVANCES, OUGHT NOT HAVE BEEN CONSIDERED AS UNEXPLAINED INVESTMENT. FURTHER ITA NO.1663/MDS/10 4 ACCORDING TO HIM, THE DEPOSITS IN THE BANK ACCOUNT COULD NOT BE CONSIDERED AS UNEXPLAINED INVESTMENT. IT WAS ARGUED THAT THE BALA NCE AS ON 31-3-2007 IN THE RELEVANT BANK ACCOUNT WAS ONLY ` 8,56,701/-, AND THIS COULD NOT BE CONSIDERED AS AN INVESTMENT MADE BY ASSESSEE AND THEREFORE, THE ADDITION MADE U NDER SEC.69A WAS NOT JUSTIFIED. 5. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF THE A UTHORITIES BELOW. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. IN THE RETURN OF INCOME ASSESSEE HAS SHOWN INCOME FROM ONLY HOUSE PR OPERTY AND INTEREST ONLY. NOTHING WHATSOEVER WAS MENTIONED REGARDING ANY BUSI NESS IN THE NATURE OF MICRO FINANCE. AO WHEN HE GOT THE AIR INFORMATION THAT A SSESSEE WAS HAVING A BANK ACCOUNT WITH M/S. DENA BANK WHEREIN THERE WAS DEPOSIT OF ` 25,50,000/-, PUT THIS TO THE ASSESSEE, WHEN SHE CAME OUT WITH AN EXPLANATION THA T SHE WAS DOING SOME MICRO FINANCE. NEVERTHELESS NO BOOKS OF ACCOUNT REGARDING SUCH MICRO FINANCE BUSINESS WAS PRODUCED BY ASSESSEE BEFORE THE AO. IN THE BALANCE SHEET PRODUCED BY THE LD. AR THE CASH AND BANK BALANCE AS ON 31-3-2006 IS ` 2,690/- WHEREAS DENA BANK ACCOUNT SHOWS BALANCE OF ` 5,910/- AS ON 31-3-2006. THEREFORE, OBVIOUSLY THE S TATEMENT GIVEN BY THE ASSESSEE BEFORE THE AO AS WELL AS BEFORE US DID NOT INCLUDE THE BALANCE WITH THE DENA BANK. NOW IF WE LOOK AT THE TRANSACTION, THAT HAD T AKEN PLACE DURING THE RELEVANT PREVIOUS YEAR IN THE SAID ACCOUNT, IT WOULD APPEAR AS UNDER: ITA NO.1663/MDS/10 5 DATE PARTICULARS CHEQUES WITHDRAWAN DEPOSITS BALANC E 01-04-06 19-06-06 OB BY CASH 500000 5910 505910 05-07-06 TO CASH S.SURESH 696204 200000 305910 06-07-06 TO CLEARING MICR.CLG. 696203 300000 5910 11-09-06 INTEREST CREDIT 103 6013 28-10-06 BY CASH 850000 856013 28-11-06 TO CASH SURESH 696205 650000 206013 05-12-06 BY CASH 300000 506013 18-12-062 CASH MUGUNTHAN 696207 500000 6013 22-02-07 BY CASH 900000 906013 02-03-07 TO CASH TAMILVANNA 696208 900000 6013 10-03-07 BY INTEREST CREDIT 688 6701 24-03-07 CLEARING SIVA 751305 850000 856701 31-03-07 CLEARING 856701 7. EXCEPT FOR A BLAND STATEMENT THAT THERE WAS REVO LVING CAPITAL USED FOR THE PURPOSE OF DEPOSITS, THERE IS NOTHING ON RECORD TO SUPPORT THIS VERSION OF THE ASSESSEE. IN SO FAR AS THE CONTENTION OF THE LD. AR THAT INVE STMENTS COULD NOT BE TAXED UNDER SEC. 69A, WE ARE AFRAID UNEXPLAINED INVESTMENTS ARE COVE RED UNDER SEC.69 OF THE ACT AND ITA NO.1663/MDS/10 6 SEC. 69A SPEAKS ONLY ABOUT UNEXPLAINED MONEY. ASSES SEE HAD NOT MAINTAINED ANY BOOKS OF ACCOUNT AND THE BANK BALANCE WITH M/S DENA BANK WAS NEVER SHOWN BY HER IN THE RETURN FILED BY HER. ASSESSEE OFFERED NO EXPLAN ATION WHICH WAS SATISFACTORY FOR THE DEPOSITS IN THE BANK ACCOUNT THEREFORE, WE CANNOT F IND ANY FAULT IN THE ORDER OF THE LD.AO AND LD. CIT(A) IN CONSIDERING SUCH DEPOSITS I N THE BANK ACCOUNT AS UNEXPLAINED AND FOR MAKING ADDITION UNDER SEC. 69A OF THE ACT, SUCH ADDITION HAVING NOT BEEN MADE AS UNEXPLAINED INVESTMENT BUT ONLY AS UNEXPLAINED M ONEY. NEVERTHELESS, WE ARE OF THE OPINION THAT ASSESSEE COULD HAVE USED THE WITHDRAWA LS MADE FOR MAKING THE DEPOSITS DURING THE CURRENCY OF THE PREVIOUS YEAR AND THEREF ORE, ONLY PEAK CREDIT COULD HAVE BEEN CONSIDERED FOR MAKING SUCH ADDITION. PEAK CRE DIT APPEARS ON 31-3-2007 AND THE AMOUNT IS ` 8,56,701/-. WE ARE THEREFORE, OF THE OPINION THAT T HE ADDITION SHOULD BE RESTRICTED TO ` 8,56,701/-. WE, THEREFORE, DIRECT THE AO TO RESTRIC T THE ADDITION UNDER SEC. 69A OF THE ACT TO ` 8,56,701/-. ASSSESSEE GETS A RELIEF OF ` 16,93,299/-. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18 - 03-20 11. . .SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 18TH MARCH, 2011. CC: THE ASSESSEE 2)THE ASSESSING OFFICER 3)THE C IT(A) 4) THE CIT, 5)THE D.R 6)GUARD FILE. ITA NO.1663/MDS/10 7 NBR