DCIT, Coimbatore V. Estate of VLB Janakiammal, Coimbatore

ITA 1719/CHNY/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8125 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 31-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R. DURAI PANDIAN
• Keywords: Capital receipt
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 153A; 143(2); 22; 153C

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1 719 /MDS/201 5 / ASSESSMENT YEAR :20 06 - 07 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3, INCOME TAX BUILDING, RACE COURSE ROAD, COIMBATORE 641 018. VS. ESTATE OF VLB JANAKIAMMAL, NO. 720, AVINASHI ROAD, COIMBATORE 641 018. [PAN: ACTPJ8189L ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. DURAI PANDIAN , J CIT / RESPONDENT BY : SHRI S. SRIDHAR , ADVOCATE / DATE OF HEARING : 31 . 1 0 .201 6 / DATE OF P RONOUNCEMENT : 06 . 0 1 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 18 , CHENNAI DATED 2 5 . 03 .201 5 RELEVANT TO THE ASSESSMENT YEAR 20 06 - 07 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF .50 LAKHS BEING THE CASH COMPENSATION RECEIVED BY TH E ASSESSEE. 2. BRIEF FACTS OF THE CASE ARE THAT ACTION U NDER SECTION 132 OF THE INCOME TAX ACT , 1961 [ ACT IN SHORT] WAS CONDUCTED ON 02 .0 7 . 2010 IN THE CASES OF I.T.A. NO . 1 719 /M/ 15 2 M/S. VLB TRUST, M/S. SRI KRISHNA TRUST AND AT THE RESIDENCE OF SMT. S. MALARVIZHI, THE MANA GING TRUSTEE OF THE ABOVE TWO TRUSTS. SIMULTANEOUS SEARCH WAS ALSO CONDUCTED IN THE CASE OF SHRI N. SURYAKUMAR, THE ERSTWHILE MANAGING TRUSTEE OF THE ABOVE 2 TRUSTS. BASED ON THE MATERIALS SEIZED FROM THE TRUST OFFICE, NOTICE U NDER SECTION 153A OF THE ACT WAS ISSUED IN THE CA S E OF ESTATE OF V.L.B JANAKIAMMAL ON 19 . 09 . 2011 AND SERVED ON 22.09.2011. THE ASSESSEE EXPIRED ON 12 . 10 . 2006 AND HENCE DEPARTMENTAL PROCEEDINGS WERE COMPLETED IN THE NAME OF ESTATE OF V.L.B. JANAKIAMMAL. IN RESPONSE TO NOTICE U NDER SECT ION 153C OF THE ACT , THE A SSESSEE S LEGAL HEIR SMT. S. SURYAKUMAR, D/O LATE SMT. V.L.B. JANAKIAMMAL FILED RETURN OF INCOME ON 05 . 11 . 2012 ADMITTING NIL INCOME AND AGRICULTURAL INCOME OF .70, 000 / - . THEREAFTER, NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 07.11.2012. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE A SSESSMENT U NDER SECTION 143(3) R.W.S 153A OF THE ACT WAS COMPLETED ON 22 . 03 . 2013 BY DETERMINING THE TOTAL INCOM E OF THE ASSESSEE AT .50,70, 000 / - TREATING THE CASH COMPENSATION RECEIVED OF .50, 00 , 000 / - AS INCOME FROM OTHER SOURCES. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT( A) ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE I.T.A. NO . 1 719 /M/ 15 3 TO SHOW THAT THE ACTUAL AMOUNTS DUE AS ON THE DATE OF AWARD OF CO MPENSATION. HOWEVER, THE LD. CIT(A) HAS BLINDLY CONSIDERED THE AMOUNTS DUE AS ON 31.03.2004 TO CONCLUDE THAT THE CASH COMPENSATION RECEIVED AS LATE AS 10.03.2006 WAS AMOUNTS RETURNED IGNORING THE TIME GAP AND SUBSEQUENT BALANCE DUE IN THE ACCOUNT. MOREOV ER, THE ASSESSEE OR HER LEGAL HEIRS DID NOT EXPLAIN AS TO HOW AND WHEN THE ALLEGED ADVANCES AGGREGATING TO .59,35,387/ - WERE MADE AND WHETHER THEY WERE OUT OF THE ASSESSEE S TAX PAID SOURCE. FURTHER, THE LD. DR STRONGLY CONTENDED THAT BY RELYING UPON THE BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2004, THE LD. CIT(A) HAS GIVEN A WRONG FINDING THAT THE ASSESSEE HAD A SUM OF .59,35,387/ - UNDER THE HEAD ADVANCES AND DEPOSITS AGAINST VLB TRUST BUT FAILED TO CONSIDER THE FACT THAT THE BALANCE SHEET OF THE TRU ST AS ON 31.03.2005, BEING THE LATEST PRIOR TO ARBITRATION, SHOWED ONLY A CREDIT BALANCE OF .86,985/ - AGAINST THE ASSESSEE M/S. V.L.B. JANAKIAMMAL UNDER SUNDRY CREDITOR S. WITHOUT VERIFYING THE ABOVE CRUCIAL FACTS, THE LD. CIT(A) HAS WENT IN WRONG TO DEL ETE THE ADDITION OF .50 LAKHS BEING THE CASH RECEIVED BY THE ASSESSEE. THEREFORE, THE LD. DR HAS PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE COURSE OF I.T.A. NO . 1 719 /M/ 15 4 ASSESSMENT PROCEEDINGS, FROM THE LOOSE SHEETS OF THE SEIZED MATERIALS IN ANN/KK/LS/S - 1 DATED 04 .08.2010 SEIZED FROM THE OFFICE OF M/S. V.L.B. TRUST, THE ASSESSING OFFICER HAS NOTICED THAT SMT. V.L.B. JANAKIAMMAL HAS RECEIVED A CASH COMPENSATION OF .50 LAKHS BASED ON AN ARBITRATION AWARD DATED 11.01.2006 FROM M/S. V.L.B. TRUST ON 10.03.2006. SINCE THE ABOVE COMPENSATION OF .50 LAKHS WAS NOT REFLECTED IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 - 07 , THE ASSESSING OFFICE R CALLED FOR EXPLANATION. THE GIST OF AR S SUBMISSION S/OBJECTIONS THROUGH HIS LETTER DATED 28.02.2013 ARE AS UNDER: (A) THE SAID AMOUNT WAS RECEIVED ON ACCOUNT OF DUES RECEIVABLE BY SMT. V.L.B. JANAKIAMMAL FROM V.L.B. TRUST AS FINAL SETTLEMENT. (B) THAT THE AMOUNT CANNOT BE TAXED AS IT IS ONLY A RECEIVABLE, AN ADVANCE MADE BY HER TO THE TRUST. (C) THAT IT IS NOT A REVENUE RECEIPT NOR A CAPITAL RECEIPT BUT A PART REPAYMENT OF THE AMOUNT DUE AS AN ADVANCE. (D) THAT IF THE SAID AMOUNT IS BROUGHT TO TAX, THEN IN ALL FAIRNESS, THE BALANCE AMOUNT DUE FROM THE TRUST SHOULD BE ALLOWED TO BE WRITTEN OFF AS BAD ADVANCES. (E) THAT THE NOMENCLATURE CASH COMPENSATION IS A MISNOMER AND DOES NOT MEAN COMPENSATION TOWARDS ANY SERVICE OR INCOME. (F) THAT THE REAL MEANING OF THE WORD COMPENSATION HERE IS A ONE TIME SETTLEMENT OF THE DUES RECEIVABLES BY SMT. V.L. B. JANAKIAMMAL. THE ARBITRATION AWARD DATED 11.01.2006 PASSED BY THE SOLE ARBITRATOR DR. D. JAYARATHINAVELU, CHAIRMAN & MD OF M/S. LAKSHMI MACHINE WORK S LTD., I.T.A. NO . 1 719 /M/ 15 5 COIMBATORE WAS AN UNREGISTERED DOCUMENT. ON PERUSAL OF THE ARBITRATION AWARD, THE ASSESSING OFFICER HAS OBSERVED THAT THE SOLE ARBITRATOR WAS APPOINTED BY THE CLAIMANT AND THE RESPONDENT TO THE SETTLE THE DISPUTES RELATING TO PROPERTIES, DIVISION O F ALL PROPERTIES INCLUDING RIGHTS OF MANAGEMENT OF INSTITUTIONS, FIRMS AND COMPANIES AS ALL THE PARTIES BELONGED TO ONE FAMILY. THUS IT CAN BE CLEARLY INFERRED THAT THIS ARBITRATION WAS MADE TO ADEQUATELY COMPENSATE THE CLAIMANTS BY THE RESPONDENT IN RESPE CT OF PROPERTIES HELD BY THE FAMILY AND ALSO TO SUITABLY COMPENSATE THE CLAIMANTS FOR RELINQUISHMENT OF RIGHTS FROM THE TRUSTS AND OTHER BUSINESS ENTITIES. BY VIRTUE OF HIS ARBITRATION AWARD, SMT. V.L.B . JANAKIAMMAL HAD DECIDED TO RESIGN HER LIFE TRUSTEESH IP AND NOMINATED THE RESPONDENT'S WIFE AS LIFE TRUSTEE. BY RELINQUISHING HER RIGHTS AND PRIVILEGES IN V.L.B. TRUST, LATE SMT. V.L.B. JANAKIAMMAL WAS PAID A CASH COMPENSATION OF . 50 LAKHS. IF THIS SUM IS PAID TO HER AS A ONETIME SETTLEMENT FOR THE ADVANCES MADE BY HER TO THE TRUST AS CLAIMED BY THE ASSESSEE IN THE LETTER DATED 28.02.2013 DURING ASSESSMENT PROCEEDINGS, IT WOULD HAVE BEEN CLEARLY MENTIONED IN THE SAID ARBITRATION AWARD. HOWEVER, WHEN ALL OTHER ISSUES ARE DEALT WITH ELABORATELY IN THE AWARD THIS CASH COMPENSATION WAS ADJUDICATED IN A SUMMARY MANNER. THIS SUM WAS RECEIVED BY THE ASSESSEE FOR NOT CARRYING OUT OR INTERFERING WITH THE AFFAIRS OF THE SAID TRUST. THEREFOR E, THE ASSESSING OFFICER WAS OF THE OPINION THAT THE CASH COMPENSATION OF .50 LAKHS SO RECEIVED WA S CLEARLY A PAYMENT WHICH FALLS WITHIN THE PURVIEW OF SEC. 28(VA) OF THE ACT AND I.T.A. NO . 1 719 /M/ 15 6 ACCORDINGLY BROUGHT TO TAX UNDER INCOME FROM OTHER SOURCES UNDER SECTION 5 6(1) OF THE ACT. 6.1 BY REFERRING TO THE BALANCE SHEET AS ON 31.03.2004, WHEREIN, THE LD. CIT(A) NOTED THAT THE ASSESSEE HAD TO RECEIVE THE SAID AMOUNT WHICH SHE HAD GIVEN AS ADVANCE TO THE TRUST, HE ALSO NOTICED IN THE ENCLOSURE TO THE BALANCE SHEET UND ER THE HEAD ADVANCES & DEPOSITS AGAINST VLB TRUST, A SUM OF .59,35,387/ - WAS SHOWN. FURTHER, AS PER CLAUSE 21 OF THE ARBITRATION AWARD, WHEREIN, THE ARBITRATOR HAS FOUND THAT A SUM OF .50,00,000/ - HAS TO BE PAID BY THE TRUST TO THE ASSESSEE, SMT. V.L.B . JANAKIAMMAL, THE LD. CIT(A) HAS OBSERVED THAT THE ADDITION OF .50,00,000/ - MADE BY THE ASSESSING OFFICER WAS LEGALLY UNTENABLE AND ALLOWED THE GROUND RAISED BY THE ASSESSEE. IT MAY BE A FACT THAT IN THE BALANCE SHEET AS ON 31.03.2004 PERTAINING TO THE F INANCIAL YEAR 2003 - 04 RELEVANT TO THE ASSESSMENT YEAR 2004 - 05, THE LD. CIT(A) HAS OBSERVED THAT THAT ASSESSEE HAS BEEN DUE TO RECEIVE THE SAID AMOUNT FROM THE TRUST. HOWEVER, THE LD. CIT(A) HAS NOT GIVEN ANY FINDINGS OR VERIFIED AS TO WHETHER THE SAID AMOU NT WAS SHOWN AS OUTSTANDING FROM THE TRUST IN THE BALANCE SHEET AS ON 31.03.2005 OR THE SAID AMOUNT WAS SHOWN AS BAD DEBT IN THE CURRENT YEAR ACCOUNTS RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IF THE SAID AMOUNT WAS NOT SHOWN AS OUTSTANDING OR B ECOME BAD DEBT IN ACCOUNTS OF THE ASSESSEE IN THE FINANCIAL YEAR 2005 - 06, THEN, IT CANNOT BE HELD THAT THE AMOUNT SO STATED TO HAVE BEEN I.T.A. NO . 1 719 /M/ 15 7 OUTSTANDING IN THE ASSESSMENT YEAR 2005 - 06 WAS RECEIVED IN THE ASSESSMENT YEAR 2006 - 07. MOREOVER, THE LD. CIT(A) IS REQ UIRED TO VERIFY THE ACCOUNTS OF THE TRUST AS TO WHETHER THE SAID AMOUNT HAS BEEN REFLECTED IN THEIR ACCOUNTS AS PAYABLE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2005 - 06 AND 2006 - 07 AND THEREAFTER, DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY OF HEARING TO TH E ASSESSING OFFICER AS WELL AS THE ASSESSEE. THUS, THE GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 06 TH JANUARY, 2017 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 06 . 0 1 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.