DCIT,CC-1, Coimbatore V. Vasantharaju, Coimbatore

ITA 1778/CHNY/2017

AI Insights

The case involves an appeal by the Deputy Commissioner of Income-tax against the order of the CIT(A) which deleted the addition of Rs.2,20,44,000 made by the AO under section 69B of the Income Tax Act, 1961, concerning unexplained investment in immovable property for the assessment year 2013-14. The appellant, Shri M. Vasantharaju, managing director of Ishan Foundation Pvt Ltd, was implicated during a search operation under section 132 of the IT Act at the residence of his father, Shri N. Muthusamy. The search revealed that both had purchased properties involving substantial on-money payments. The assessee admitted to these payments as undisclosed income and declared them in his tax returns. The CIT(A) found that the sources of the property purchases were adequately explained through the assessee's declared income and other receipts, leading to the deletion of the addition made by the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134718 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 17-07-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Set aside
• Section: 148; 132; 143(3); 69B

Judgement Text

आयकर अपीलीय अिधकरण, ‘ए ’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ᮰ी वी दुगाᭅ राव, ᭠याियक सद᭭य एवं ᮰ी जी. मंजुनाथ, लेखा सद᭭य के समᭃ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1778/Chny/2017 िनधाᭅरण वषᭅ / Assessment Year: 2013-14 The Deputy Commissioner of Income-tax, Central Circle-1, Aayakar Bhavan, 63, Race Course Road, Coimbatore – 641 018. v. Shri. M. Vasantharaju, No. 16, Syrian Church Road, No.1, Coimbatore – 641 001. [PAN: ADGPV-6450-L] (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri. R. Mohan Reddy, CIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. S. Sridhar, Advocate & Shri. N. Arjunraj, CA सुनवाई कᳱ तारीख/Date of Hearing : 12.12.2022 घोषणा कᳱ तारीख/Date of Pronouncement : 04.01.2023 आदेश /O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-18, Chennai, dated 03.04.2017 and pertains to assessment year 2013-14. :-2-: ITA. No:1778/Chny/2017 2. The Revenue has raised the following grounds of appeal: “1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts of the case and in law. 2. The ld. CIT(A) erred in deleting the addition of Rs.2,20,44,000/- made by the AO u/s 69B of the IT Act, 1961 towards unexplained investment in immovable property in the assessment order passed u/s 143(3) of the IT Act, 1961 for AY 2013-14 in the assessee's case. 2.1 The ld. CIT(A) is not justified in allowing relief to the assessee on the ground that the AO has not discussed elaboratory with material evidence as to how he quantified the addition on unexplained investment in immovable property, when the said-investment of the assessee was found, during the" course of search action u/s 132 of the IT Act and no evidence, whatsoever was produced by the assessee to explain the sources for such investment, inspite of ample of opportunity given to him by the AO. 2.2 Having held that the assessee's father Sri.N.Muthusamy had an excess cash availability of Rs.77,44,000/- which would have been given to the assessee, the Id .CIT(A) ought to have appreciated that the said excess cash availability in the case of Sri.N.Muthusamy, the assessee's father, was worked out, as seen from page 9 of the order of ld.CIT(A)-18 in ITA No.83/15-16 dated 03.04.2017 for A.Y 2013-14 in the case of Sri.N.Muthusamy, by taking Rs.4,63,00,000/-, being the 50% share in the investment in-immovable property purchased from CS! Church and Sri.Albert D'Silva, Coimbatore, jointly with the assessee, as cash outflow and comparing the same with the cash inflow of Rs.5,40,44,000/-in that case. 2.3 Having held that as against a cash outflow of Rs.2,20,44,000/-, the assessee had a cash inflow of Rs.2,22,44,000/-, the Id. CIT(A) erred in not appreciating that while 50% share in the investment in immovable property amounting to Rs,4,63,00,000/- was considered in assessee's father Sri.N.Muthusamy, the balance 50% share of Rs.4,63,00,000/- is to be considered as the outflow in the assessee's case and as such there is still a difference of Rs.2,40,56,000/-[4,63,00,000-2,22,44,000] to be explained by the assessee. :-3-: ITA. No:1778/Chny/2017 2.4 Having regard to the fact that the additions have been made based on information gathered during the search action u/s 132 of the IT Act in this group and during post search operations and in the absence of explanation or material evidence furnished by the assessee and having regard to the difference of Rs.2,40,56,000/-worked out in ground no.2.3 above, the Id.CIT(A) ought to have upheld the addition made by the AO in the assessment order passed u/s 143(3) of the IT Act, 1961 for AY 2013-14 in the assessee's case. 3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.” 3. The brief facts of the case are that, the appellant is a managing director of M/s. Ishan Foundation Pvt Ltd, a company engaged in the business of property developer and design consultant. A search action u/s. 132 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was carried out in the case of Shri. N. Muthusamy, and during the course of search, the case of the appellant was also covered. During the course of search, it was noticed that the appellant along with his father has purchased two properties at Coimbatore for a consideration of Rs. 9,26,00,000/-, which includes on money payment of Rs. 4.7 crores. During the course of search, a statement was recorded from the appellant and called upon to explain source for investment in properties. In response, the :-4-: ITA. No:1778/Chny/2017 appellant offered on money paid for purchase of property as undisclosed income for the assessment year 2013-14 and also filed return of income in response to notice, and declared on money paid for purchase of property as income and paid tax. The amount invested for purchase of property as per document has been brought to tax for the assessment year 2013-14. The case has been subsequently subjected to 263 proceedings for the assessment year 2012-13 and 2013-14 and consequent to 263 proceedings, the AO has passed assessment order u/s. 143(3) r.w.s. 263 of the Act, and taxed unaccounted payments pertains to purchase of property and consequent on money payments in the year of respective payments and accordingly, a sum of Rs. 2.25 crores has been added for the assessment year 2012-13 and a sum of Rs. 2.2 crores has been added for the assessment year 2013-14. The appellant has settled dispute with the department towards assessment made for assessment year 2012-13 under ‘Vivad se Vishwas Scheme, 2020’ and the department has issued Form no. 5 for payment of disputed tax. As regards assessment year 2013-14, the AO has made addition of Rs. 2.2 crores towards purchase of property on the ground that the assessee could not :-5-: ITA. No:1778/Chny/2017 explain source for purchase of property. On appeal, the CIT(A) deleted addition made by the AO, on the ground that the source for purchase of property is out of income declared for assessment year 2012-13, and amount received from Ishan Foundation Pvt Ltd on sale of property. 4. The Ld. DR, referring to cash flow statement filed by the assessee for the assessment year 2012-13 & 2013-14 submitted that, although the assessee has explained source for purchase of property out of income declared for the impugned assessment year and receipt from sale of property, still there is a deficit of Rs. 90 lakhs for which no proper explanation was furnished. The ld. DR, further referring to cash flow statement submitted that the assessee himself has prepared cash flow during the assessment proceedings and explained the source. The assessee claims to have source out of cash received from Ishan Foundation Pvt Ltd and also sale value of asset. But, fact remains that, if you consider amount received from sale of property and advance from Ishan Foundation Pvt Ltd, still there is a deficit which needs to be explained, but the CIT(A) without considering facts has simple deleted addition made by the AO. :-6-: ITA. No:1778/Chny/2017 5. The Ld. Counsel for the assessee, submitted that the assessee has offered income towards on money payment for purchase of property for assessment year 2013-14 and paid relevant taxes. The AO has subsequently re-assessed on money payment on the basis of date of payment and assessed for assessment year 2012-13 & 2013-14. The appellant has settled addition made for assessment year 2012-13 under ‘Vivad se Vishwas Scheme, 2020’ and paid relevant tax which is evident from Form No. 5 issued by the Department. As regards addition of Rs. 2.20 crores towards amount paid for purchase of property as per registered document, the assessee has filed a cash flow statement as per which the source available with the assessee is Rs. 2,88,44,000/-, whereas, the addition made by the AO is Rs. 2.20 crores. The ld. CIT(A) after considering relevant facts has rightly deleted addition made by the AO and their order should be upheld. 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that, the purchase of property at Coimbatore during the impugned :-7-: ITA. No:1778/Chny/2017 assessment year was not disclosed by the appellant in the regular return of income filed for relevant assessment years. It is also not in dispute that the appellant has offered additional income towards on money payment for purchase of property and the same has been accepted by the Department. It is also not in dispute that the assessee has settled dispute towards addition made on purchase of property for assessment year 2012-13 under VSVS scheme and paid relevant taxes, which is evident from Form No. 5 issued by the Department. The only dispute is with regard to addition made for the impugned assessment year amounting to Rs. 2.20 crores towards consideration paid for purchase of property. The AO has made addition towards amount paid for purchase of property as unexplained investment u/s. 69B of the Act, on the ground that the assessee could not explain source for purchase of property. It was the explanation of the assessee that he had sufficient source out of income declared for the impugned assessment year, amount received from Ishan Foundation Pvt Ltd and amount received from sale of asset. We find that the assessee has filed a cash flow statement explaining availability of source and as per the cash flow :-8-: ITA. No:1778/Chny/2017 statement filed by the assessee, the source available with the assessee for the assessment year 2013-14 is Rs. 2,88,44,000/-, whereas addition made by the AO for purchase of property is Rs. 2.20 crores. If you go by the cash flow statement there is no doubt, the source available with the assessee is in excess of investment made in purchase of property and thus, question of making addition towards investment in purchase of property as unexplained investment u/s. 69B of the Act does not arise. As regards source, the assessee has declared current year income of Rs. 2,42,44,000/- and out of which Rs. 1 crore has been shifted to assessment year 2012-13 as per order u/s. 148 of the Act. The balance amount available with the assessee is Rs. 1,42,44,000/- and the AO is not disputing these facts. The assessee explained that he had received Rs. 1.16 crores from Ishan Foundation Pvt Ltd through proper banking channel and once again the AO is not disputing these facts. The assessee had explained source out of sale of asset amounting to Rs. 36 lakhs, but the AO considered only Rs. 6 lakhs being short term capital loan but ignored consideration received for transfer of property and once again the AO is not disputing this facts. If :-9-: ITA. No:1778/Chny/2017 you consider above three items at source, total amount available with the assessee is Rs. 2,88,44,000/-, whereas the assessee has paid a sum of Rs. 2.38 crores for purchase of property which is less than the amount of source available with the assessee. Therefore, we are of the considered view that the assessee could able to explain source for purchase of property with necessary documentary evidence. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO and thus, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss appeal filed by the revenue. 7. In the result, appeal filed by the revenue is dismissed. Order pronounced in the court on 04 th January, 2023 at Chennai. Sd/- (वी दुगाᭅ राव) (V. DURGA RAO) ᭠याियकसद᭭य/Judicial Member Sd/- (जी. मंजुनाथ) (G. MANJUNATHA) लेखासद᭭य/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated: 04 th January, 2023 JPV आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ/CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF