N. Balakrishnan, Tiruvannamalai V. ITO, Tiruvannamalai

ITA 2139/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6176 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment; Gift; Income from undisclosed sources

Judgement Text

, .. , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC C BENCH, CHENNAI . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2139/MDS/2016 ( / ASSESSMENT YEAR: 2009-10) SHRI N. BALAKRISHNAN, K.N.R. MODERN RICE MILL, NEW NO.203, OLD NO.56-A, ANNA SALAI, TINDIVANAM ROAD, THIRUVANNAMALAI 606 601 VS THE INCOME TAX OFFICER, WARD - 1, THIRUVANNAMALAI. PAN: AFIPB3887P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI G. BASKAR, ADVOCATE /RESPONDENT BY : SHRI B. SAGADEVAN, JCIT /DATE OF HEARING : 02.08.2017 ! /DATE OF PRONOUNCEMENT : 15.09.2017 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-13, CHENNAI DATED 30.05.2016 IN ITA NO.118/CIT(A)-13/20 09-10 FOR THE ASSESSMENT YEAR 2009-10 PASSED U/S.250(6) R.W.S .143(3) OF THE ACT. 2 ITA NO.2139/MDS/2016 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS APPEAL; HOWEVER THE CRUXES OF THE ISSUES ARE THAT:- (I) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDIT ION MADE BY THE LD.AO AMOUNTING TO RS.5 LAKHS BEING THE GIFT RECEIVED FROM THE ASSESSEES SON. (II) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ORDE R OF THE LD.AO WHO HAD MADE ADDITION OF RS.4,65,000/- TOWARD S UNEXPLAINED INVESTMENT IN CONSTRUCTION OF RICE MILL BUILDING. (III) THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADD ITION MADE BY THE LD.AO AMOUNTING TO RS.60,000/- TOWARDS POOR DRAWING. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL EARNING INCOME FROM RICE MILL, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 11.03.2010 AND T HE SAME WAS PROCESSED U/S.143(1) OF THE ACT, ON 06.07.2010. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSME NT WAS REFRAMED U/S.143(3) OF THE ACT ON 23.12.2011 WHEREI N THE LD.AO HAD MADE THE FOLLOWING ADDITIONS: 3 ITA NO.2139/MDS/2016 1. UNEXPLAINED GIFTS RS.5,00,000/- 2. UNEXPLAINED INVESTMENT IN CONSTRUCTION RS.4,65,0 00/- 3. POOR DRAWING RS. 60,000/- 4. GROUND NO. 2(I) : UNEXPLAINED GIFT OF RS.5 LAKHS:- DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD CLAIMED TO HAVE RECEIVED GIFT OF RS.20 LAKHS FROM HIS SON SHRI B. KRISHNASAMY. O N FURTHER PERUSAL OF THE ISSUE IT WAS FOUND THAT THE GIFT REC EIVED FROM HIS SON TO THE EXTENT OF RS.15 LAKHS IS GENUINE. WITH R ESPECT TO THE GIFT OF RS.5 LAKHS IT WAS OBSERVED THAT THE ASSESSE ES SON HAD GIVEN A CHEQUE OF RS.2 LAKHS AND RS.3 LAKHS TO SOME OTHER PERSON, WHICH WAS PURPORTED TO BE GIVEN TO THE ASSE SSEE. THEREAFTER THE ASSESSEE TOOK A STAND THAT RS.3 LAKH S WAS RECEIVED FROM HIS DAUGHTER AND SOURCE OF THE RS.3 L AKHS WAS THE AMOUNT SENT BY HIS SON TO HIS DAUGHTER. SINCE THE ASSESSEE HAD TAKEN DIFFERENT STAND ON DIFFERENT OCCASIONS, THE L D.AO OPINED THAT THE AMOUNT OF GIFT OF RS.5 LAKHS IS NOT GENUIN E AND THEREFORE TREATED THE SAME AS THE INCOME OF THE ASSESSEE. 4 ITA NO.2139/MDS/2016 4.1. ON APPEAL THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BECAUSE IN THE REMAND REPORT IT WAS REVEALED THAT T HE GIFTS CLAIMED TO HAVE BEEN RECEIVED AMOUNTING TO RS.5 LAK HS IS NOT A DIRECT GIFT FROM THE DONOR TO THE DONEE BUT IT WAS ROUTED IN CIRCUITOUS MANNER LEADING TO THE DOUBT THAT THE ASS ESSEE WAS ONLY MAKING AN ATTEMPT TO ACCOUNT FOR THE SOURCE OF THE GIFTS WHICH HE HAS NOT RECEIVED. 4.2 AT THE OUTSET, I FIND THAT ON THE IDENTICAL ISS UE IN THE ASSESSEES SPOUSE CASE, I HAD HELD AS FOLLOWS: 4.3 I HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIAL ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE SOURCE OF THE GIFT IS GENUI NE AND ACCOUNTED. ADDITIONS HAD BEEN MADE BY THE LD.REVEN UE AUTHORITIES ONLY BECAUSE THE ASSESSEE HAD TAKEN DIF FERENT STAND ON DIFFERENT OCCASIONS AND HAD ALSO UN CONVIN CINGLY EXPLAINED THAT THE SOURCE OF THE GIFT OF RS.5 LAKHS WAS THE AMOUNT RECEIVED BY THE ASSESSEES DAUGHTER FROM HER SON WHICH WAS FINALLY PASSED ON TO HER. CONSIDERING TH ESE FACTS, I DO NOT FIND ANY MERIT IN THE ORDER OF THE REVENUE AUTHORITIES. IT IS A NORMAL PRACTICE TO PASS ON CA SH BETWEEN FAMILY MEMBERS ON DIFFERENT OCCASIONS AND SOMETIME EVEN TO RECEIVE BACK THE AMOUNT ADVANCED. THIS KIND OF TRANSFER OF FUNDS BETWEEN THE FAMILY MEMBERS CANNOT BE TREAT ED AS DUBIOUS TRANSACTIONS. IN THE CASE OF THE ASSESSEE THE SOURCE OF THE FUND AND THE SOURCE OF THE SOURCE OF THE FUN D HAVE BEEN ESTABLISHED AND ARE NOT DISPUTED. THEREFORE, IT IS NOT RIGHT ON THE PART OF THE LD.AO AND THE LD.CIT(A) TO HOLD THAT THE GIFT RECEIVED BY THE ASSESSEE AMOUNTING TO RS.5 5 ITA NO.2139/MDS/2016 LAKHS AS NOT GENUINE. HENCE, I HEREBY DIRECT THE L D.AO TO DELETE THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.5 LAKHS TOWARDS UNEXPLAINED GIFT. FOLLOWING THE SAME RATIO, IM OF THE VIEW THAT THE ADDITION OF RS.5 LAKHS IN THE HANDS OF THE ASSESSEE IS NOT W ARRANTED BECAUSE THE SOURCE OF RS.3 LAKHS IS ESTABLISHED AND THE AMOUNT OF RS.2 LAKHS IS INSIGNIFICANT BECAUSE THE ASSESSEE S SON HAS SUFFICIENT SOURCE TO BESTOW SUCH AMOUNT TO HIS FATH ER CONSIDERING HIS FINANCIAL STATUS. THEREFORE, I HEREBY DIRECT T HE LD.AO TO DELETE THE ADDITION OF RS.5 LAKHS MADE IN THE HANDS OF THE ASSESSEE TOWARDS UNEXPLAINED GIFT. 5. GROUND NO. 2 (II) : UNEXPLAINED INVESTMENT IN CONSTRUCTION OF RICE MILL AMOUNTING TO RS.4,65,000/ -:- DURING THE COURSE OF SCRUTINY ASSESSMENT, IT WAS NOTICED BY THE LD.AO THAT THE ASSESSEE HAD CONSTRUCTED RICE MILL BUILDING DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMEN T YEARS 2009- 10 & 2010-11 FOR RS.20,23,000/-. THE LD.AO REFERRE D THE MATTER TO THE VALUATION CELL OF THE DEPARTMENT, WHO VALUED THE COST OF CONSTRUCTION AT RS.28,38,400/-. THEREFORE THE LD.A O OPINED THAT THE UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF R ICE MILL IS 6 ITA NO.2139/MDS/2016 RS.8,15,400/- (RS.28,38,400 RS.20,23,000). HOWEV ER GIVING AN ALLOWANCE OF 50%, THE LD.AO TREATED RS.4,65,000/ - AS THE UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF THE R ICE MILL BY REJECTING THE SUBMISSION OF THE ASSESSEE THAT THE C ONSTRUCTION EXPENSES HAD TO BE SPREAD OVER THE SUBSEQUENT ASSES SMENT YEAR. BEFORE THE LD.CIT(A), THE ASSESSEE ARGUED BY STATING THAT PWD RATES HAS TO BE ADOPTED FOR VALUING THE PROPERT Y AND FURTHER ALLOWANCE SHOULD BE GIVEN FOR SELF-SUPERVISION. HO WEVER, THE LD.CIT(A) CONFIRMED THE ORDER OF THE LD.AO BY HIS V IEW THAT SUFFICIENT CONCESSION WAS GRANTED BY THE LD.AO ON T HE VALUATION OF THE PROPERTY. 5.1 AFTER EXAMINING THE ISSUE, I FIND THAT THE LD.R EVENUE AUTHORITIES HAS NOT GIVEN PROPER WEIGHTAGE TO THE S UBMISSION OF THE ASSESSEE THAT THE CONSTRUCTION COST OF THE RICE MILL BUILDING HAS TO BE SPREAD OVER IN THE SUBSEQUENT PERIOD. NO RMALLY IN SUCH BUSINESS ACTIVITIES THE CONSTRUCTION OF BUILDI NGS ARE NOT COMPETED IN THE SAME YEAR BUT SPREAD OVER A PERIOD. HENCE, THE SOURCE OF INCOME FOR THOSE RELEVANT ASSESSMENT YEAR S SHOULD ALSO BE CONSIDERED. CONSIDERING THESE ASPECTS OF T HE CASE AND THE FINANCIAL STATUS OF THE ASSESSEE AND HIS CHILDR EN, IM OF THE 7 ITA NO.2139/MDS/2016 CONSIDERED VIEW THAT THE ADDITION OF RS.4,65,000/- IS NOT WARRANTED IN THE CASE OF THE ASSESSEE. HENCE, I D IRECT THE LD.AO TO DELETE THE ADDITION OF RS.4,65,000/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTION OF RICE MILL BUILDING. 6. GROUND NO. 2 (III) : ADDITION OF RS.60,000/- TOWARD S POOR DRAWING:- ON THE IDENTICAL ISSUE IN THE CASE OF THE ASSESSE ES SPOUSE, I HAVE DELETED THE ADDITION OF RS.96,000/- BY HOLDING AS UNDER:- IT WAS NOTICED BY THE LD.AO THAT THE ASSESSEE HAD DISCLOSED DRAWING AS RS.24,000/- FOR THE ENTIRE PREVIOUS YEAR . CONSIDERING THE STATUS OF THE ASSESSEE AND THE WAY OF LIVING THE LD.AO OPINED THAT THE ASSESSEE SHOULD HAVE INCURRED AT LEAST AN EXPENDITURE OF RS.10,000/- PER MONTH FOR HER FAM ILY MAINTENANCE. THEREFORE THE LD.AO ADDED RS.96,000/- TO THE INCOME OF THE ASSESSEE TOWARDS POOR DRAWING. ON AP PEAL, THE LD.CIT(A) AGREEING WITH THE VIEWS OF THE LD.AO CONF IRMED HIS ORDER. I DO NOT FIND ANY MERIT IN THIS ADDITION MA DE BY THE REVENUE AUTHORITIES ON THIS ISSUE. AS EXPLAINED BY THE ASSESSEE, THE ASSESSEES CHILDREN WERE NON-RESIDENT S AND HAD ENOUGH SOURCED TO PROVIDE FUNDS TO THEIR PARENTS. IN THIS SITUATION, IT IS NOT NECESSARY TO PRESUME THAT THE ASSESSEE AND HER FAMILY WERE SPENDING MONEY FOR THEIR PERSONAL MAINTENANCE FROM THEIR UNACCOUNTED INCOME. THEREFO RE, I HEREBY DIRECT THE LD.AO TO DELETE THE ADDITION MADE FOR RS.96,000/- IN THE HANDS OF THE ASSESSEE TOWARDS PO OR DRAWING. 8 ITA NO.2139/MDS/2016 FOR THE SAME REASON IN THE CASE OF THE A SSESSEE ALSO, IM OF THE VIEW THAT THE ADDITION OF RS.60,000/- IN THE HANDS OF THE ASSESSEE IS NOT WARRANTED. THEREFORE I HEREBY DIRE CT THE LD.AO TO DELETE THE ADDITION OF RS.60,000/- IN THE HANDS OF THE ASSESSEE TOWARDS POOR DRAWING. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THE 15 TH SEPTEMBER, 2017 AT CHENNAI. SD/- ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER '# /CHENNAI, $% /DATED 15 TH SEPTEMBER, 2017 RSR % '( )( /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. (-. / /DR 6. .0 /GF