Chidambaram Lathadevi, CHENNAI V. ITO, CHENNAI

ITA 2284/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9413 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 18-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Unexplained investment; Principle of natural justice; Peak credit; Source of fund
• Section: 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBE R AND SHRI. G. PAVAN KUMAR, JUDICIAL MEMBER ./I.T.A. NO.2284/MDS/2015 / ASSESSMENT YEAR : 2011-2012 SMT. CHIDAMBARAM LATHADEVI, OLD NO.2, NEW NO.3, 5 TH STREET, ALWARPET, CHENNAI 600 018. VS. THE INCOME TAX OFFICER, BUSINESS RANGE XV(3) CHENNAI. [PAN ABJPL 1056H] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE $% ! ' # /RESPONDENT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. & ' ' ( /DATE OF HEARING : 18-04-2016 ) ' ' ( /DATE OF PRONOUNCEMENT : 29-04-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-4, CHENNAI IN ITA NO.56/2014- 15/2011-2012/CIT(A)-4, DT 27.10.2015 FOR THE ASSESS MENT YEAR 2011- ITA NO.2284/MDS/2015. :- 2 -: 2012 PASSED U/S.143(3) AND 250 OF THE INCOME TAX A CT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE ADDI TION OF 5,77,69,932/- U/S 69 OF THE ACT MADE BY THE AO IN T HE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNI NG PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE PROVISIONS OF 69 OF THE ACT HAD NO APPLICATION TO THE FACTS OF TH E CASE AND OUGHT TO HAVE APPRECIATED THAT THE PRESUMPTION OF L ENDING MONEY BASED ON THE WITHDRAWALS FROM THE BANK ACCOUN TS IN OVERLOOKING THE CREDITS WAS WRONG, ERRONEOUS, UNJUS TIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE REPLIES FILED AT THE TIME ASSESSMENT AND THE IN THE APPELLATE PROCEE DINGS WERE NOT CONSIDERED AND HENCE WENT WRONG IN RECORDING TH E FINDINGS IN THIS REGARD IN PARAS 6 TO 13 OF THE IMPUGNED ORD ER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION, 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE ALTERNATIVE CONTENTION FOR CONSIDERING PEAK CREDIT FROM THE BAN K ACCOUNTS FROM THE ANALYSIS OF STATEMENT OF ACCOUNT WAS NOT C ONSIDERED PROPERLY AND OUGHT TO HAVE APPRECIATED THAT THE MIS READING OF DECISIONS FOR REJECTING THE STAND OF THE APPELLANT WOULD VITIATE HIS DECISION. 6. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE RE WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPU GNED ORDER AND ANY OTHER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE WOULD BE NULLITY IN LAW. 3. THE BRIEF FACTS OF THE CASE THE ASSESSEE IS AN INDI VIDUAL AND ENGAGED IN THE BUSINESS OF MONEY LENDING AND ALSO I N RECEIPT OF INCOME ITA NO.2284/MDS/2015. :- 3 -: FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES A ND FILED RETURN OF INCOME ON 07.09.2011 DECLARING TOTAL INCOME OF =3,4 0,130/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S.143(2) WAS ISSUED. IN COMPLIANCE TO NOTICE, THE LD. AUTHO RISED REPRESENTATIVE OF ASSESSEE APPEARED FROM TIME TO TIME AND FILED DETAI LS. ON PERUSAL OF THE FINANCIAL STATEMENT, THE LD. ASSESSING OFFICER HAS FOUND THAT ASSESSEE IS MAINTAINING TWO SEPARATE BANK ACCOUNTS AT AXIS BANK AND INDIAN OVERSEAS BANK AND THERE IS INFLOW OF FUNDS IN AXIS BANK =486/- LAKHS AND IOB =100/- LAKHS. OUT OF THIS, CHEQUES TRANSACTION WERE ABOUT =381/- LAKHS, THE ASSESSEE HAS MAINTAINING BOOKS OF ACCOUN T AND IN ADDITION TO BOOKS OF ACCOUNT, THE ASSESSEE WAS ASKED TO PREPARE SEPARATE INDIVIDUAL ACCOUNTS IN ORDER TO DETERMINE MONEY LYING WITH BOR ROWERS. IN COMPLIANCE TO THE LEDGER ACCOUNTS, THE LD. AUTHORI SED REPRESENTATIVE OF ASSESSEE FILED DETAILED EXPLANATION ON 24.01.2014 A S UNDER:- THE CRUX OF THE REPLY DT 24.1.2014 FILED BY THE A UTHORIZED REPRESENTATIVE IS REPRODUCED BELOW: ' (4) THE ASSESSEE ADVANCES MONEY BOTH BY CASH AS WELL AS BY CHEQUE. SIMILARLY, THE COLLECTION OF SUCH ADVANCES ARE ALSO BY CASH AS WELL AS BY CHEQUE. THE AMOUNTS WITHDRAWN FROM THE BANK ARE UTILIZED FOR MAKING THE ADVANCES AND THE RECOVERIES OF THE SAID ADVANCES MADE BY CASH ARE ALSO REDEPOSITED INTO THE BANK ACCOUNT OF THE ASSESSEE ONLY. (5) THUS, THE WITHDRAWALS MADE BY THE ASSESEE FROM HIS BANK ACCOUNT ARE RECYCLED AND DEPOSITED INTO THE BANK ACCOUNT BY CASH AS WELL CHEQUE. CONSEQUENTLY, THE CREDITS IN THE BANK ACCOUNT ARE EXPLAINED BY THE WITHDRAWALS FROM THE BANK ACCOUNT ON EARLIER DAYS BY CASH AS WELL AS BY CHEQUE' . ITA NO.2284/MDS/2015. :- 4 -: THE ASSESSING OFFICER IS ON THE IMPRESSION THAT ASS ESSEE HAS FAILED TO PROVIDE BOOKS OF ACCOUNT AND ENTIRE TRANSACTION IN BANK ACCOUNTS ARE UNEXPLAINED AND EXCLUDED IN BALANCE SHEET WAS FILE D. THE ASSESSING OFFICER MADE CALCULATION BASED ON DEBITS IN ACCOU NT AS UNDER:- (+)/ ( - ) PARTICULARS AMOUNT ( =) AMOUNT ( =) DEBITS INTO AXIS BANK ACCOUNT 4,87,39,833/ - DEBITS INTO IOB BANK ACCOUNT 1,00,42,662/ - TOTAL DEBITS 5,87,82,495/ LESS: - LOAN OUTFLOW TO CHITHAMBARAM DURING THE YEAR 3,79,250/ - LESS: - LOAN OUTFLOW TO SHANKAR DURING THE YEAR 43,500/ - LESS: LOAN OUTFLOW TO SATHYA PLASTICS DURING THE YEAR 1,02,439/ - LESS: - FUND OUTFLOW ON ACCOUNT OF DRAWINGS, MINOR EXPENSES ETC DURING THE YEAR 5,00,000/ - BALANCE MONEY LENT BY THE ASSESSEE IN EXCESS OF THE AMOUNTS EXHIBITED IN THE BALANCE SHEET 5,77,57,306/ - FURTHER, ON CONSIDERING THE DEBITS IN THE BANK ACCO UNTS, THE ASSESSING OFFICER IN THE ABSENCE OF THE INDIVIDUAL RUNNING LE DGER OF THE ASSESSEES CUSTOMERS HAS CALCULATED BALANCE AS UNEXPLAINED INV ESTMENTS AND FURTHER GAVE ELABORATE EXPLANATIONS IN RESPECT OF THE OUTST ANDING BALANCE AND DULY SUPPORTING WITH ANNEXURE B & C TO THE ASSESS MENT ORDER AND PASSED ASSESSMENT ORDER U/S.143(3) OF THE ACT DATED ITA NO.2284/MDS/2015. :- 5 -: 31.03.2014. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN APPEAL BEFORE COMMISSIONER OF INCOME TAX (APPEALS). 4. IN THE APPELLATE PROCEEDINGS, THE LD. AUTHORISED RE PRESENTATIVE EXPLAINED THE SUBMISSIONS MADE IN THE ASSESSMENT PR OCEEDINGS AND ALSO THE MODUS OF WORKING IN THE FINANCE BUSINESS WERE ALL THE TRANSACTIONS OF MONEY LENDING BY THE ASSESSEE ARE COMPLETED WIT HIN A MAXIMUM PERIOD OF 7 TO 10 DAYS. FURTHER, THE ASSESSEE DOES NOT PERMIT ANY BACK LOG IN COLLECTION OF INTEREST / OLD OUTSTANDING BA LANCE. THEREFORE, IT IS NOT NECESSARY FOR THE ASSESSEE TO MAINTAIN THE INDIVIDUAL BALANCE OF EACH AND EVERY PERSON ON ANY GIVEN DATE AS THE TRANS ACTIONS ARE COMPLETED IN REASONABLE TIME. F URTHER SUBMITTED THAT THE CASH DEPOSITS IN THE BANK ARE ONLY THE COLLECTION OF A DVANCES MADE BY ASSESSEE EARLIER AND SHALL BE THE SOURCE FOR THE CA SH DEPOSITS OF DIFFERENT BANK ACCOUNTS. THE ASSESSEE HAS NOT CLAI MED ANY CREDIT OF THIRD PARTIES FOR EXPLAINING THE SOURCE EXCEPT THE COLLECTION OF ADVANCES GIVEN EARLIER AND PERIODICALLY RE-DEPOSITE D IN ACCOUNTS. THE ASSESSEE HAS BEEN CARRYING ON THE SAME FINANCING ACTIVITY FROM LONG TIME AND FILE RETURN OF INCOME FOR THE EARLIER ASSE SSMENT YEARS. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED ANALYSIS ON THE TRANSACTIONS OF ASSESSEE AND CLEARLY ESTABLISH THE MONEY LENDING BUSINESS CARRIED AS GOING CONCERN BY THE ASSESSEE. THE CASH DEPOSIT S IN THE BANK ACCOUNT OF THE ASSESSEE ARE FULLY EXPLAINED WITH TH E COLLECTION OF THE ITA NO.2284/MDS/2015. :- 6 -: ADVANCES BY THE ASSESSEE IN THE NORMAL COURSE OF B USINESS. THE ASSESSEE FILED HIS LETTER DATED 27.11.2013 EXPLAINI NG THE PEAK BALANCE OF BANK ACCOUNT =20,00,613/- AND TO TREAT THE INCO ME OF THE ASSESSEE AS THE DEPOSITS IN THE BANK ACCOUNT IS NOT ON A SIN GLE DAY AND THE DEPOSITS PRECEDED WITH DRAWAL OF EARLIER DAYS. THE DEPOSITS CANNOT BE READ IN ISOLATION, DISREGARDING THE WITHDRAWAL, OTH ERWISE IT WILL LEAD TO ABSURD RESULTS, AND OF OPINION THAT THE ASSESSEE MU ST HAVE EITHER THE BANK BALANCE OR CASH BALANCE OR DEBTOR BALANCE OF = 5,77,69,932/- AS ON 31.03.2011 AND TH E ASSESSING OFFICER HAS NOT ESTABLISHED THAT THE ASSESSEE IS IN POSSESSION OF ASSET AND OMITTED TO T AKE INTO ACCOUNT THE WITHDRAWAL OF FUNDS FROM THE BANKS AND ONLY CO NSIDERED DEPOSITS. THE ASSESSEE SUBMITTED THE CLOSING BALAN CE OF BANK ACCOUNT IS =1,684/- ONLY. HOWEVER, THE ASSESSING OFFICER ASSESSED THE ENTIRE SUM OF =5,77,69,932/- AS THE INCOME OF THE ASSESSEE FOR THE CURRENT YEAR. THE LD. AUTHORISED REPRESENTATIV E EXPLAINED THAT IN ASSESSMENT PROCEEDINGS OF ASSESSEE HUSBAND THE REV ENUE HAS ACCEPTED FOR THE SAME ASSESSMENT YEAR ON THE SIMILAR ISSU E RELIED ON THE PEAK CREDIT OF BANK ACCOUNT AND NOT ON ENTIRE DEPOSITS IN BANK. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SUBMISSIONS, GROUNDS AND FINDINGS OF THE ASSESSING OFFICER AND GAVE A ELABORATE SUBMISSIONS AND CONCURRED WITH THE FINDINGS OF THE ASSESSING OFFICER AND ITA NO.2284/MDS/2015. :- 7 -: CONFIRMED THE ORDER. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEALS) ORDER, THE ASSESSEE ASSAILED AN APPEAL BE FORE TRIBUNAL. 5. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS OF ASSESSMENT AND APPEL LATE PROCEEDINGS WITH DOCUMENTARY EVIDENCE OF BANK STATEMENTS AS ASSESSE E IS IN THE BUSINESS OF MONEY LENDING AND MODUS OF OPERATING TRANSACTIO NS MOSTLY BY CHEQUES. THE ASSESSING OFFICER HAS CONSIDERED ONLY THE DEPOSITS IN THE BANK ACCOUNTS AND NOT THE WITHDRAWALS MADE BY THE ASSESSEE AND SUCH PRACTICE AS IN EARLIER YEARS WAS ACCEPTED BY THE DEPARTMENT. THE ASSESSEE HAVE ADEQUATE SOURCE OF FUNDS AND THERE AR E NO UNEXPLAINED INVESTMENTS AS ALLEGED BY THE ASSESSING OFFICER. T HE DEPARTMENT HAS COMPLETED THE ASSESSMENT OF ASSESSEE HUSBAND HAVING SIMILAR BUSINESS BASED ON THE PEAK CREDIT OF THE BANKS ACCOUNTS. TH E COMMISSIONER OF INCOME TAX (APPEALS) THOUGH CONSIDERED THE STATEMEN TS AND SUBMISSIONS BUT NOT PROVIDED ADEQUATE OPPORTUNITY TO THE ASSESS EE BEFORE CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER AND THEREFORE PRAYED FOR ALLOWING THE GROUNDS OF THE ASSESSEE. 6. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND VEHEMENTLY ARGU ED ON THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND ASSES SING OFFICER AND PRAYED FOR DISMISSAL OF APPEAL. ITA NO.2284/MDS/2015. :- 8 -: 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. AUTHORISED REPRESENTATIVE OF ASSESSEE BASIC CONTENTION BEING THE DEPOSITS IN THE BANK ACCOUNTS. THE ASSESSING OFFICER HAS CONSIDERED ONLY DEPOSITS IN T HE BANK ACCOUNT IGNORING SOURCES OF WITHDRAWAL FROM MONEY LENDING B USINESS. THE ASSESSEE PROVIDES SHORT TERM LOANS AND RE-DEPOSITS , WHEN THE PROCEEDS ARE RECEIVED AND BALANCE IN THE BANK ACCOUNTS REPR ESENTS MONEY ADVANCED FOR SHORT PERIOD RANGING FROM SEVEN TO TEN DAYS AND THERE IS NO BACKLOGS IN COLLECTION OF AMOUNT. THE ASSESSEE IS FOLLOWING A MODERATE APPROACH BY NOT PROVIDING SECOND LOAN UNLESS FIRST LOAN IS CLEARED. PRIME FACIE THE ASSESSEES MAIN SOURCE OF INCOME IS INTE REST INCOME WHICH WAS OFFERED IN THE BOOKSS OF ACCOUNT AND ASSESSING OFFI CER HAS NOT DISPUTED. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS CONSID ERED THE MODUS OF WORKING AS SYSTEMATIC APPROACH IN OPERATIONS ON VE RIFYING BANK STATEMENTS FORMING PART OF ASSESSMENT ORDER AND MI SDIRECTED THAT ASSESSEE IS CREATING COLOURABLE DEVICES TO SUPPRES S TRUE INCOME AND EVADE TAX ARE WITHOUT ANY WEIGHTED REPORTS. FURTHE R IN ASSESSEES HUSBAND CASE FOR THE SAME ASSESSMENT YEAR ON THE SA ME ISSUE WERE THE ASSESSMENT WAS COMPLETED BY ACCEPTING THE PEAK CRED IT IN THE BOOKS OF ACCOUNT AND NOT ENTIRE BANK DEPOSITS. THE ACTION OF THE DEPARTMENT TO FOCUS ON THE PEAK CREDIT SEEMS TO BE REASONABLE AND THE ASSESSING OFFICER HAS NOT RELIED ON THE EARLIER YEARS ORDERS. IN TH E INTEREST OF JUSTICE, WE ITA NO.2284/MDS/2015. :- 9 -: ARE OF THE OPINION THAT THE MATTER HAS TO BE REEXAM INED AND REWORKED ON THE BASIS OF PEAK CREDIT WHICH IS RELIABLE AND ACCE PTABLE FOR DETERMINATION OF INCOME. AS IT WAS CONSIDERED IN THE ASSESSEES HUSBAND CASE. THEREFORE, WE SET ASIDE THE ORDER OF COMMISSIONER O F INCOME TAX (APPEALS) AND REMIT THE ENTIRE FILE TO THE ASSESSIN G OFFICER AND ASSESSEE SHOULD BE PROVIDED WITH ADEQUATE OPPORTUNITY OF HEA RING AND CO-OPERATE IN FILING THE INFORMATION BEFORE PASSING THE ORDER. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 29TH DAY OF APRIL, 2016 AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) # $% / ACCOUNTANT MEMBER ( & . ' ( ) (G. PAVAN KUMAR) ) $% / JUDICIAL MEMBER *& / CHENNAI + / DATED:29TH APRIL, 2016. KV , ' $'./ 0/' / COPY TO: 1 . ! / APPELLANT 2. $% ! / RESPONDENT 3. 1' () / CIT(A) 4. 1' / CIT 5. /4 5 $'6 / DR 6. 5 7 8 & / GF