K.N.Pannirselvam, CHENNAI V. DCIT Non Corporate Circle 2, CHENNAI

ITA 2524/CHNY/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4319 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-04-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 19-10-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Transfer pricing

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , ., # BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER / I.T.A. NO.2524/CHNY/2017 '' /ASSESSMENT YEAR : 2012-13 SHRIK.N.PANNIRSELVAM, 3B, PARKLAND APARTMENT, 2, KAMALABHAI STREET, T.NAGAR, CHENNAI-600 017. VS THE DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-2, CHENNAI. PAN: AAOPP8632M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. PHILIP GEORGE, ADVOCATE /RESPONDENT BY : MR. SRINIVASA RAO, CIT /DATE OF HEARING : 05.02.2019 /DATE OF PRONOUNCEMENT : 08.02.2019 / O R D E R PER S.JAYARAMAN, AM: THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI, IN ITA NO. 123/ CIT(A)-2/2015-16 DATED 10.07.2017 FOR ASSESSMENT YEAR 2012-13. 2. SHRI K.N.PANNIRSELVAM, THE ASSESSEE, AN INDIVID UAL, LANDSCAPING ARCHITECT, IS RUNNING TWO BUSINESS CONCERNS VIZ., P LANTS SCAPE AND FLOWER AND PETALS. IN M/S.PLANTS SCAPE, THE ASSESSE E DID BUSINESS AND ADMITTED ITS INCOME AS TAXABLE, WHILE IN M/S. FLOWER AND PETALS, HE 2 ITANO.2524/CHNY/2017 CARRIED OUT AGRICULTURAL OPERATIONS AND CLAIMED ITS INCOME AS AN EXEMPT ONE. WHILE MAKING THE ASSESSMENT FOR ASSESS MENT YEAR 2012- 13, THE AO NOTICED , INTER-ALIA, THAT OUT OF THE T OTAL PURCHASES MADE BY M/S.PLANTS SCAPE, PURCHASES OF RS.77,34,756/- WERE MADE FROM M/S.FLOWER AND PETALS. BY COMPARING THE PURCHASES FROM OTHER PARTIES, THE AO FOUND THAT THE ASSESSEE HAS PAID EXCESSIVE LY TO HIS OWN CONCERN VIZ., M/S. FLOWER AND PETALS VIS--VIS FROM OTHER PARTIES ON SPECIFIC OCCASIONS. AFTER CONSIDERING THE ASSESSEES S REPLY ETC., THE A O WAS OF THE VIEW THAT THERE WAS CLEAR INFLATION OF PURCHASES AND HENCE TREATED 10% OF ASSESSEES PURCHASES FROM M/S. FLOWE R AND PETALS AS AN INFLATED ONE AND DISALLOWED THE SAME. FURTHER, THE A O NOTICED THAT A CREDIT OF RS.34,00,000/- TO HIS CAPITAL ACCOUNT AS A GIFT FROM THE ASSESSEES FATHER, WHO EXPIRED ON 13.09.2011. AFTER CONSIDERING THE ASSESSEES REPLY AND MATERIAL ON RECORD, THE A O H ELD THAT THE PRIMARY ONUS IS ON THE ASSESSEE TO PROVE THAT HE HAS RECEIV ED THE GIFT FROM HIS FATHER AND SINCE HE HAS NOT DISCHARGED THE BURDEN A DDED RS.34,00,000/- AS AN UNEXPLAINED CASH CREDIT. AGGRIEVED, THE ASSES SEE FILED APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) HAS DISMISS ED THE APPEAL. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED TH IS APPEAL. 3. LEARNED AR SUBMITTED THAT LEARNED CIT(A) HAS GRO SSLY ERRED IN OBSERVING THAT THE TRANSACTION WITH THE RELATED UNI T, M/S. FLOWER AND 3 ITANO.2524/CHNY/2017 PETALS STOOD AT HIGHER VALUE MERELY ON A SUSPICIO N AND SURMISE, WITHOUT ANY BASIS AND HENCE HE GROSSLY ERRED IN UPH OLDING ESTIMATED ADDITION TOWARDS THE ALLEGED INFLATION OF PURCHASES . INVITING OUR ATTENTION TO COPY OF SOME PHOTOGRAPHS DEPICTING CERTAIN PL ANTS, LEARNED AR SUBMITTED THAT THE PURCHASES WERE MADE AT THE PRICE FIXED BY THE PARTIES WHOSE VALUE DEPENDS UPON THE SIZE AND YEAR OF GROWTH OF PLANTS AND THE PRICING OF THE PLANTS VARIES ACCORDINGLY. LEARNED AR SUBMITTED THAT THE LEARNED CIT(A) IS NOT CORRECT IN SUSTAININ G THE DISALLOWANCE MADE BY THE A O AND HENCE PLEADED TO ALLOW THIS APP EAL. 4. PER CONTRA, LEARNED DR SUBMITTED THAT ASSESSEE PURCHASED PLANTS FROM ITS OWN CONCERN M/S. FLOWER AND PETALS AT A HI GHER RATE THAN THE PURCHASES MADE FROM OTHERS I.E., THIRD PARTIES. THE A O HAS VERY CLEARLY BROUGHT ON RECORD TWO SPECIFIC INSTANCES OF SUCH P URCHASES VIZ., ON 27.09.2011, M/S.PLANTSCAPE HAS PURCHASED FOX TAIL PALMS FROM M/S. FLOWER AND PETALS FOR RS.3150/- PER PLANT, WHEREAS ON 27.01.2012 IT HAS PURCHASED THE SAME PLANT FROM SHRI KONDARAMA NURSER Y @ RS.2400/- PER PLANT. ON 12.01.2012, THE ASSESSEE HAS PURCHAS ED ROYAL PALMS FROM ITS RELATED CONCERN FOR RS.3150/- PER PLANT, WHEREAS ON 01.02.2012, IT HAS PURCHASED THE SAME PLANT FROM M OHANAPRIYA NURSERY @ RS.2,400/- PER PLANT. AFTER CONSIDERING THE ASSES SEES REPLY ETC, THE AO MADE A DISALLOWANCE @10%. WHEN THE ASSESSEE WE NT ON APPEAL 4 ITANO.2524/CHNY/2017 BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS), HE COULD NOT COUNTER THE FINDINGS RECORDED BY THE A O WITH PROPER EXPLAN ATION/ EVIDENCE. SINCE THE TRANSACTIONS WITH THE RELATED UNIT I.E. , M/S. FLOWER AND PETALS STOOD AT HIGHER VALUE THAN THE TRANSACTIONS WITH T HE UNCONNECTED PARTIES, IN ORDER TO PROVE THAT TRANSACTIONS BETWE EN HIMSELF AND HIS RELATED UNIT ARE AT ARMS LENGTH PRICE, THE ASSES SEE HAS TO EXPLAIN THE NATURE AND PRODUCE APPROPRIATE EVIDENCES. NO DOCUME NT IN SUPPORT OF HIS CLAIM THAT THE IMPUGNED PALMS PURCHASED FROM IT S OWN RELATED ENTITY AT MARKET RATE WAS FURNISHED. IN VIEW OF THAT THE L EARNED CIT(A) CONFIRMED THE ASSESSING OFFICERS DISALLOWANCE. E VEN NOW, THE ASSESSEE IS NOT ABLE TO EXPLAIN THE BASIS ON WHICH IT PAID SUCH HUGE SUMS TOWARDS PURCHASES FROM ITS RELATED CONCERN VIS --VIS THIRD PARTIES AND HENCE LEARNED DR PLEADED THAT THE ORDERS OF THE LOWER AUTHORITIES BE CONFIRMED. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. OUT OF THE TOTAL PURCHASES, THE ASSESSEE ACCOUNTED, ABOUT 35% OF THE PURCHASES FROM THE RELATED ENTITY VIZ., M/S. FLOWER AND PETALS. THE ASSESSING OFFICER FOUND ON THE SPECIFI C INSTANCES (SUPRA), THAT THE ASSESSEE HAD PURCHASED AT HIGHER RATES T HAN WITH UNRELATED PARTIES. THE ASSESSEE BEING IN THE SAME LINE OF BU SINESS, SHOULD HAVE BROUGHT ADEQUATE MATERIAL AND SHOULD HAVE EXPLAINE D THAT THE PRICES AT 5 ITANO.2524/CHNY/2017 WHICH THE PURCHASES MADE FROM HIS RELATED UNIT ARE AT ARMS LENGTH PRICE. HOWEVER, HE HAS NOT DONE SO EITHER BEFORE THE LOWE R AUTHORITIES OR BEFORE US. IN THE FACTS AND CIRCUMSTANCES, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) AND HENCE THE CORRESPONDING GROUNDS OF THE ASSESSEE ON THIS ISSUE ARE DISMISSED. 6. WITH REGARD TO THE GIFT RECEIVED FROM THE DEMISE D FATHER OF THE ASSESSEE AT RS .34,00,000/-,THE LEARNED AR SUBMITTE D THAT SHRI M.V. NALLIAPPA GOUNDER, FATHER OF THE ASSESSEE, HAD BE EN WORKING IN AGRICULTURAL OPERATIONS FROM 1950, HAD LENT 34,00,000/- AS LOAN IN CASH TO THREE PERSONS ON THREE OCCASIONS VIZ., 11.05.200 9, 30.11.2009 & 06.03.2010 A SUM OF 13,05,000/- TO SHRI R.DURAISWAMY. SIMILARLY, ON 20.02.2009 & 02.06.2010 A SUM OF 12,00,000/- WAS LENT TO SHRI P.SENGOTTAIYAN OF RASIPURAM. ON 04.1.2011 3,00,000/- WAS LENT TO SHRI N.SENGOTTAIYAN OF VALAYAPATTI. SHRI M.V.NALL IAPPA GOUNDER EXPIRED ON 13.09.2011. THEREFORE, THE LOAN DEBTORS HAD RETURNED THE DEBTS IN CASH TO THE ASSESSEE WHICH WAS CREDITED I N HIS CAPITAL ACCOUNT. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION IN THE ABSENCE OF NECESSARY DOCUMENTARY PROOF. INVITING OUR ATTENTIO N TO THE PAPER BOOK WHEREIN CONFIRMATION LETTERS ISSUED BY THE ABOVE TH REE PERSONS WERE PLACED, THE LEARNED AR SUBMITTED THAT THESE COPIES WERE FURNISHED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEA LS). HOWEVER, THE 6 ITANO.2524/CHNY/2017 LEARNED CIT(A) DISMISSED THE APPEAL HOLDING THAT TH ERE IS DIFFERENCE OF 5,95,000/- BETWEEN THE AMOUNT CREDITED TO THE CAPIT AL ACCOUNT AND REDEMPTION OF LOANS RECEIVED BACK FROM THE ASSESSEE S FATHER. THE LEARNED AR SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN OBSERVING THAT CREDIT IN THE CAPITAL ACCOUNT IS GUISED AS GIFT RECEIVED FROM THE DEMISED FATHER A RE CONCOCTED TO SUIT THE REQUIREMENTS OF THE ASSESSEE. THE LEARNED CIT(A ) GROSSLY ERRED IN HOLDING THAT CREDITWORTHINESS OF THE ASSESSEES FAT HER WAS NOT ESTABLISHED. THE LEARNED CIT(A) OUGHT TO HAVE APPRE CIATED THAT MERELY ON THE GROUND THAT INTEREST INCOME WAS NOT OFFERED FOR TAX BY THE ASSESSEE AND THUS ENTIRE DEBT CANNOT BE DOUBTED AND HENCE PLEADED TO ALLOW THE APPEAL. 7. PER CONTRA, LEARNED DR SUBMITTED THAT THE CREDIT TO THE CAPITAL ACCOUNT WAS RS.34,00,000/-. THE AO RECORDED A FIND ING THAT THE PRONOTES ARE UNILATERAL IN NATURE, THEREFORE, THEY DO NOT POSSESS EVIDENTIARY VALUE. SINCE THE PRIMARY ONUS IS ON THE ASSESSEE TO PROVE THAT HE HAS RECEIVED THE GIFT FROM HIS FATHER WHICH HE HAS NOT DISCHARGED THE CREDITS OF RS.34,00,000/- WAS ADDED AS AN UNE XPLAINED CASH CREDIT. THE DOCUMENTS FURNISHED BEFORE THE LD CIT(A) TO PR OVE THAT THE CREDITS RELATED TO REDEMPTION OF LOANS RECEIVED BACK ON BEH ALF OF ASSESSEES DEMISED FATHER EXHIBITED A RECEIPT OF RS.28,05,000/ -ONLY FROM THE THREE 7 ITANO.2524/CHNY/2017 PARTIES. THEREFORE, IN THE ABSENCE OF PROPER PROOF WITH REGARD TO THE DIFFERENCE OF RS.5,95,000/- , THE LD CIT(A), FIRST UPHELD THE SHORT FALL OF RS5,95,000/- . AFTER CONSIDERING THE DOCUMENTS PROV IDED IN RESPECT OF THE BALANCE SUM OF 28,05,000/- AND OTHER PLEAS, THE LD CIT(A) OBSERVED THAT ACCORDING TO THE ASSESSEE, SHRI. M.V. NALLIYAPPA GOUNDER, ASSESSEES FATHER, EXPIRED ON 13.9.2011. I N SUCH A SITUATION, IT IS NOT CLEAR AS TO HOW THE ASSESSEE RECEIVED RS.5,0 0,000/- FROM SHRI. R. DURAISWAMYON 2.5.2011 WHILE THE ALLEGED LENDER WAS ALIVE. SIMILARLY, SHRI. P. SENGOTTALYAN HAS REPAID RS.5,50,000/- ON 2 3.06.2011 BEFORE THE DEMISE OF SHRI. MN. NALLIYAPPA GOUNDER. THE CREDIT WORTHINESS ON PART OF THE ASSESSEES FATHER TO LEND SUCH A HUGE SUM OF RS.28,05,000/- WAS NOT ESTABLISHED AND THESE AMOUNTSWERE CLAIMED TO HA VE BEEN LENT IN THE FINANCIAL YEARS 2008-09, 2009-10 & 2010-11. THE COR RESPONDING RECEIPT OF INTEREST INCOME IS NOT ADMITTED. WHEN THE PROMOT ES CONFIRM THAT THE AMOUNT HAS BEEN LENT TOWARDS INTEREST, THE DEBTORS HAVE NOT AFFIRMED THE PAYMENT OF INTEREST WHICH PROVED THAT THE CLAIM WAS DETACHED FROM REALITY. THEREFORE, THE LD CIT(A) HELD THAT THE DO CUMENTS FURNISHED IN SUPPORT OF THE SOURCES TOWARDS CREDITS IN THE CAPIT AL ACCOUNT GUISED AS GIFT RECEIVED FROM THE DEMISED FATHER WERE CONCOCTE D TO SUIT THE REQUIREMENTS OF THE ASSESSEE AND DO NOT BEAR ANY SE MBLANCE OF TRUTH IN IT. ACCORDINGLY, THE LD. CIT(A) HAS RIGHTLY UPHELD THE ADDITION OF RS.28,05,000/-, RELATING TO BALANCE COMPONENT. EVE N NOW, THE 8 ITANO.2524/CHNY/2017 ASSESSEE IS NOT ABLE TO EXPLAIN/ PRODUCE ANY EVID ENCE IN SUPPORT OF HIS CONTENTIONS AND HENCE LEARNED DR PLEADED THAT THE ORDERS OF THE LOWER AUTHORITIES BE CONFIRMED. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. FROM THE ABOVE, IT IS CLEAR THA T THE ASSESSEE CLAIMED TO HAVE RECEIVED RS.35,00,000/- GIFT BY RE DEMPTION OF LOANS RECEIVED BACK ON BEHALF OF ASSESSEES DEMISED FATHE R. HOWEVER, HE COULD NOT EXPLAIN SATISFACTORILY ABOUT THE NATURE A ND SOURCES OF SUCH CREDITS AND GENUINENESS OF THEM. IN VIEW OF THAT THE IMPUGNED SUM WAS ADDED TO THE INCOME OF THE ASSESSEE AND ON APPEAL THE LD CIT(A), AFTER DUE APPRECIATION OF THE MATERIAL ETC, SUSTAINED THE ADDITION HOLDING , INTER-ALIA, THAT THE DOCUMENTS FURNISHE D IN SUPPORT OF THE SOURCES TOWARDS THE CREDITS IN THE CAPITAL ACCOUNT GUISED AS GIFT RECEIVED FROM THE DEMISED FATHER WERE CONCOCTED TO SUIT THE REQUIREMENTS OF THE ASSESSEE AND DO NOT BEAR ANY SEMBLANCE OF TRUTH IN IT. BEFORE US, THE ASSESSEE COULD NOT LAY ANY MATERIAL TO DISLODGE THE FINDINGS RECORDED BY THE LOWER AUTHORITIES. IN VIEW OF THE ABOVE FACTS A ND CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) AND HENCE THE CORRESPONDING GROUNDS OF THE ASSESSE E ARE DISMISSED. 9 ITANO.2524/CHNY/2017 9. IN THE RESULT, THE ASSESSEES APPEAL IS DISMIS SED. ORDER PRONOUNCED ON 08 TH FEBRUARY, 2019 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) (S.JAYARAMAN) ( ! / JUDICIAL MEMBER) ( ! / ACCOUNTANT MEMBER) /CHENNAI, $ /DATED 08 TH FEBRUARY, 2019 SOMU () *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) / /DR 6. 2 /GF