Shri P.Madhurajan (HUF), Salem V. ACIT, Salem

ITA 256/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4800 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BASKAR
• Keywords: Unexplained investment; Income from undisclosed sources; Document seized; Documents seized
• Section: 153A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NO. 256/MDS/2009 ASSESSMENT YEAR : 2002-03 SHRI P. MADHURAJAN (HUF), PROP. BAALAJI PROCESS, G.T. GARDEN, KALIAMMAN KOIL THOTTAM, MAGUDANCHAVADI VIA, GUDALUR PO, SALEM DISTRICT. PAN : AAFHM7760L (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, SALEM. (RESPONDENT) APPELLANT BY : SHRI G. BASKAR RESPONDENT BY : SHRI SHAJI P. JACOB O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE AGAINST THE O RDER DATED 2.12.2008 OF THE COMMISSIONER OF INCOME TAX (APPEAL S), SALEM, IT HAS RAISED TEN GROUNDS IN TOTAL. HOWEVER, ALL THE TEN GROUNDS RELATE TO AN ADDITION OF ` 68 LAKHS MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF INCOME-TAX ACT, 1961 (IN SHORT THE A CT), BEING THE I.T.A. NO. 256/MDS/09 2 VALUE OF PROPERTY ACQUIRED BY THE ASSESSEE DURING T HE RELEVANT ASSESSMENT YEAR. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN MONEY LENDING AND TEXTILE PROCESSING BUSINESS, HAD FILED A RETURN IN PURSUANCE OF A NOTICE UNDER SECTION 153C READ WITH SECTION 153A OF THE ACT. SUCH NOTICE RESULTED OUT OF A SEARCH PROC EEDING CONDUCTED IN THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASS ESSEE, IN HIS INDIVIDUAL CAPACITY. IN THE RETURN FILED, ASSESSEE HAD ADMITTED A LOSS OF ` 20,317/- AND AGRICULTURE INCOME OF ` 2,55,000/-. ASSESSEE, IN HIS INDIVIDUAL CAPACITY, WAS ENGAGED IN THE BUSINESS OF CHEQUE DISCOUNTING THROUGH TWO PARTNERSHIP CONCERNS, NAMED SREE VENKATACHALAPATHY FINANCE AND SREE VENKATACHALAPATH Y CORPORATION. HE WAS ALSO CLOSELY CONNECTED TO ONE KALAIVANI FINANCE CORPORATION. AS PER THE A.O., THE ASSESSEE WAS IN OVERALL CONTROL OF THE ABOVE FIRMS. DURING THE COURSE OF S EARCH, AS PER THE REVENUE, IT HAD UNEARTHED COPIES OF CONVEYANCE DEED IN RESPECT OF CERTAIN PROPERTIES PURCHASED BY THE ASSESSEE FROM O NE SHRI P. BALASUBRAMANIAM AND HIS TWO BROTHERS, NAMELY, SHRI P. VENKATESAN I.T.A. NO. 256/MDS/09 3 AND SHRI P. GOPALAKRISHNAN AND ALSO A PROPERTY PURC HASED FROM THE ABOVE PERSONS HELD IN JOINT NAMES. AS PER THE DOCU MENTS, THE CONSIDERATION WAS ` 33,98,000/-. HOWEVER, THE GUIDELINE FIXED BY THE REGISTRATION DEPARTMENT WAS ` 67,86,000/-. SHRI P. BALASUBRAMANIAM WAS EXAMINED BY THE ASSESSING OFFIC ER ON 12.10.2004. AS PER THE A.O., SHRI P. BALASUBRAMANI AM HAD STATED THAT HE HAD TAKEN LOANS FROM M/S SREE VENKATACHALAP ATHY FINANCE, M/S SREE VENKATACHALAPATHY CORPORATION AND M/S KALA IVANI FINANCE CORPORATION DURING THE YEARS 2000-01 AND BY MARCH, 2002, THE TOTAL AMOUNT OF LOAN HAD SWELLED UPTO ` 68 LAKHS. THESE LOANS WERE TAKEN ON MORTGAGE OF THE DOCUMENTS RELATING TO THE PROPER TIES HELD BY SHRI P. BALASUBRAMANIAM, SHRI P. VENKATESAN AND SHRI P. GOPALAKRISHNAN INDIVIDUALLY AND ALSO ON THE MORTGAG E OF ONE ANOTHER PROPERTY HELD BY THEM IN JOINT NAMES. IT SEEMS SHR I P. BALASUBRAMANIAM STATED THAT HE COULD NOT MAKE REPAY MENT OF THE LOANS TAKEN FROM ASSESSEE AND ITS RELATED CONCERNS AND WAS, THEREFORE, PRESSED BY THE ASSESSEE TO REGISTER THE DOCUMENTS RELATING TO MORTGAGED PROPERTIES IN THE NAME OF ASSESSEE AND HIS SON SHRI M. GOVINDARAJAN. AS PER SHRI P. BALASUBRAMANIAM, THE PROPERTY IN THE I.T.A. NO. 256/MDS/09 4 NAME OF HIS BROTHER SHRI P. VENKATESAN WAS REGISTER ED IN FAVOUR OF SHRI GOVINDARAJAN, WHEREAS THAT IN THE NAME OF GOPA LAKRISHNAN WAS REGISTERED IN FAVOUR OF ASSESSEE. THE PROPERTY WH ICH WAS HELD JOINTLY BY THE BROTHERS WAS REGISTERED IN FAVOUR OF BOTH, I .E. THE ASSESSEE AND HIS SON SHRI GOVINDARAJAN JOINTLY. IT WAS MENT IONED BY SHRI P. BALASUBRAMANIAM THAT THE FOURTH PROPERTY MORTGAGED, WHICH WAS IN HIS NAME, STILL CONTINUED TO BE SO. CERTAIN OTHER DOCUMENTS WERE ALSO SEIZED WHICH CONTAINED FINANCIAL DEALINGS BETWEEN T HE ASSESSEE AND ONE M/S DEVABALA GROUP WHICH WAS OWNED BY SHRI P. BALASUBRAMANIAM AND HIS RELATIVES. AS PER THE A.O. , THE BOOKS OF SHRI P. BALASUBRAMANIAM AND DEVABALA GROUP OF CONCE RNS REFLECTED ONLY ` 22,60,000/- AS LOANS TAKEN FROM ASSESSEE AND HIS R ELATED CONCERNS. ON A QUESTION TO SHRI P. BALASUBRAMANIAM AS TO HOW HE GAVE THE FIGURE OF ` 68 LAKHS AS THE SUM OWED BY HIM TO THE ASSESSEE, IT SEEMS SHRI P. BALASUBRAMANIAM REPLIED THAT THE INTEREST CHARGED BY THE ASSESSEE AND HIS CONCERNS WAS 36%, O UT OF WHICH ONLY 18% WAS PAID AND INCREASE IN THE PRINCIPAL AMO UNT WAS DUE TO COMPOUNDING OF THE BALANCE INTEREST. ASSESSEE WAS ALLOWED TO CROSS-EXAMINE SHRI P. BALASUBRAMANIAM, WHEREUPON SH RI P. I.T.A. NO. 256/MDS/09 5 BALASUBRAMANIAM STATED THAT HE HAD NOT RECEIVED EVE N ONE PIE AGAINST ` 34 LAKHS SALE CONSIDERATION MENTIONED IN THE DOCUM ENTS AND ONLY AMOUNTS DUE BY HIM TO THE ASSESSEE WAS ` 22.60 LAKHS AND INTEREST THEREON. ON FURTHER QUESTIONING, SHRI P. BALASUBRAMANIAM STATED THAT AS PER HIS BOOKS, AND AMOUNT DUE TO THE ASSESSEE WAS ` 66 LAKHS BUT HE HAD EVIDENCE ONLY FOR ` 22.60 LAKHS. THE BALANCE, ACCORDING TO SHRI P. BALASUBRAMANIAM, WAS INTEREST. 3. ASSESSING OFFICER NOTED THAT THE REGISTERED VALU ER HAD VALUED THE PROPERTY AT ` 66,86,600/- AND IN ADDITION TO THAT STAMP DUTY OF ` 4,46,903/- WAS DEMANDED FROM THE ASSESSEE WHICH WAS PAID BY HIM WITHOUT DEMUR. FURTHER, AS PER THE A.O., THE RETUR N OF INCOME FILED BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY, DID NOT RE FLECT THE PURCHASE OF THE ABOVE PROPERTY. BASED ON THE ABOVE, THE A.O. C AME TO A CONCLUSION THAT ASSESSEE WAS ENGAGED IN MONEY LENDI NG BUSINESS AND WAS SUPPRESSING INTEREST. AS PER THE A.O., UNA CCOUNTED INCOME GENERATED BY THIS METHOD WAS DEPLOYED IN IMMOVABLE PROPERTIES. FURTHER, AS PER THE A.O., THE ASSESSEE HIMSELF HAD ADMITTED SALE OF SUCH PROPERTIES AT ` 77.25 LAKHS WITHIN FOUR YEARS OF CREATION OF I.T.A. NO. 256/MDS/09 6 MORTGAGE. HENCE, BY ALL PROBABILITY, THE VALUE OF THE LAND COULD BE CONSIDERED AS ` 68 LAKHS. AS PER THE A.O., COGENT EVIDENCE WAS AVAILABLE IN THE FORM OF SEIZED DOCUMENTS AND STATE MENT OF SHRI P. BALASUBRAMANIAM WHICH WHEN CONSIDERED ALONG WITH TH E CONDUCT OF THE ASSESSEE WOULD GO TO PROVE THAT ` 68 LAKHS WAS THE AMOUNT OWED BY SHRI P. BALASUBRAMANIAM AND HIS RELATED CONCERNS TO THE ASSESSEE AND SUCH LOANS WERE SQUARED THROUGH THE SA LE OF MORTGAGED PROPERTIES TO THE ASSESSEE BY SAID SHRI P . BALASUBRAMANIAM AND HIS BROTHERS. HE, THEREFORE, C ONSIDERED ` 68 LAKHS AS VALUE OF INVESTMENT IN THE PROPERTY AND BR OUGHT IT TO TAX AS UNACCOUNTED INCOME OF THE ASSESSEE UNDER SECTION 69 OF THE ACT. 4. IN HIS APPEAL BEFORE THE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE ADMITTED SALE CONSIDERATION W AS ONLY ` 33.98 LAKHS AND THIS WAS THE AMOUNT OUTSTANDING TO THE CO NCERNS RELATED TO THE ASSESSEE. AS PER THE ASSESSEE, SUCH AMOUNT HAD BECOME DUE FROM SHRI P. BALASUBRAMANIAM AND HIS BROTHERS ON AC COUNT OF CHEQUE DISCOUNTING DONE BY THE ASSESSEE ON THEIR BE HALF. AS PER THE ASSESSEE, THIS POSITION WAS CONFIRMED BY A LETTER W RITTEN BY M/S RUBI I.T.A. NO. 256/MDS/09 7 MILLS (P.) LTD. OWNED BY SHRI P. BALASUBRAMANIAM WH ICH WAS SEIZED AS DOCUMENT NO.54. FURTHER, AS PER THE ASSESSEE, S HRI M. GOVINDARAJAN, SON OF THE ASSESSEE WAS SEPARATELY AS SESSED AND SIMILARLY THE FINANCE FIRMS WHICH HAD GIVEN MONEY T O SHRI P. BALASUBRAMANIAM WERE ALL SEPARATE ASSESSEES WITH DI STINCT P.A. NUMBERS. LD. CIT(APPEALS) AFTER CONSIDERING THE AR GUMENTS OF THE ASSESSEE, CONFIRMED THE ADDITION MADE BY THE A.O. W ITH THE FOLLOWING OBSERVATION:- 15. THE MOOT POINT IS HOW THE CONSIDERATION HAS TO BE ARRIVED AT IN THE ABSENCE OF AVAILABILITY OF TOTAL FINANCIAL TR ANSACTION INVOLVING THE PURCHASE OF THE PROPERTY. THE MAJOR FACTORS TO BE CONSIDERED ARE:- (I) THERE IS NO DOUBT THAT THE PROPERTY HAS BEEN PURCHASED IN LIEU OF THE LOAN TRANSACTION WITH M/S DEVABALA GROUP. THEREFORE, THE TOTAL AMOUNT OUTSTANDING TO FINANCE FIRMS OF SRI.P. MADHURAJAN REPRESENTS THE TOTAL CONSIDERATION OF THE PROPERTY. THIS WOULD MEAN THAT THE CONSIDERATION REPRESENTS THE LOAN AMOUNT AS WELL AS THE INTEREST AMOUNT OUTSTANDING AS ON THE DATE OF TRANS ACTION. ON THIS ASPECT, THERE WERE RIVAL CLAIMS. THE CLAIM MADE BY SRI.P. MADHURAJAN IS THAT THE LOAN OUTSTANDING IS O NLY RS.34,81,689/- WHEREAS THE PERSON WHO HAS TAKEN THE LOAN IE. SRI.P. BALASUBRAMANIAM HAS STATED THAT THE OUTS TANDING AMOUNT IS RS.68,00,000/-. IN SUCH A SITUATION, THE POINT TO BE CONSIDERED IS THAT IT WOULD BE MOST LIKELY THAT T HE SELLER WOULD NOT TRY TO INFLATE THE SALE PRICE OF THE PROPE RTY KEEPING IN VIEW THE TAX IMPLICATIONS. THE FACT REM AINS THAT I.T.A. NO. 256/MDS/09 8 THE SELLER HAS INDEED CONFIRMED BY WAY OF SWORN STATE MENT THAT THE TOTAL AMOUNT OWED BY HIM TO SRI.K.MADHURAJA N WAS RS.68 LACS AND HE SOLD THE PROPERTY IN FULL AND FINA L SETTLEMENT OF ALL THE LOANS. THIS STATEMENT ABUNDA NTLY PROVES THAT THE PURCHASE CONSIDERATION IN THE HANDS OF SRI.P.MADHURAJAN IS RS.68 LACS IRRESPECTIVE OF ANY O THER DOCUMENT EVIDENCING LESSER VALUE. (II) IN ORDER TO ESTABLISH THAT WHETHER RS.68 LACS WOULD REPRESENT REASONABLE VALUE FOR THE PROPERTY PURCHASE D BY THE APPELLANT, THE ONLY ACCEPTABLE AND VERIFIABLE PR OOF THAT WE CAN LOOK FOR IS THE VALUE FIXED BY THE DEPARTMENT OF REGISTRATION. THIS VALUE WOULD IN ALL PROBABILITY REPRESENT THE GUIDELINE VALUE WHICH HAS BEEN FIXED BY THE DEPA RTMENT OF REGISTRATION AFTER CARRYING OUT DETAILED SCIENTIF IC EXERCISE AND ALSO KEEPING IN VIEW THE PREVALENT MAR KET RATE. IT WOULD BE DIFFICULT TO DISREGARD THE RATE FIXED B Y THE REGISTRATION DEPARTMENT. (III) THE APPELLANT COULD NOT PRODUCE ANY OTHER EVID ENCE TO SUGGEST THAT THE PROPERTY INDEED HAS BEEN TRANSACTED AT A PRICE LOWER THAN WHAT HAS BEEN STATED BY THE SELLER. 16. CONSIDERING THE ABOVE, I AM OF THE VIEW THAT TH E AO IS RIGHT IN ADOPTING THE PURCHASE CONSIDERATION AT RS.68 LAC S AND THE SAME IS ARISING OUT OF THE UNACCOUNTED INCOME OF THE APP ELLANT AND TO BE ASSESSED UNDER SECTION 69 OF THE I.T.ACT. THE APPE AL ON THIS GROUND IS DISMISSED. 5. NOW BEFORE US, THE LEARNED A.R., ASSAILING THE O RDERS OF THE AUTHORITIES BELOW, SUBMITTED THAT IN THE FIRST PLAC E, THERE WAS NO CASH TRANSFER, WHEN THE THREE DOCUMENTS WERE REGISTERED IN FAVOUR OF ASSESSEE AND HIS SON. AS PER THE LEARNED A.R., THE AMOUNT OF ` 34 I.T.A. NO. 256/MDS/09 9 LAKHS SHOWN IN THE DOCUMENT MORE OR LESS TALLIED WI TH THE AMOUNTS DUE FROM SHRI P. BALASUBRAMANIAM AND HIS RELATED CO NCERNS TO THE CONCERNS RELATED TO THE ASSESSEE ON ACCOUNT OF BILL DISCOUNTING DONE. IN ANY CASE, ACCORDING TO HIM, THE LOANS WERE TAKEN BY SHRI P. BALASUBRAMANIAM FROM M/S SREE VENKATACHALAPATHY FIN ANCE, M/S SREE VENKATACHALAPATHY CORPORATION AND M/S KALAIVAN I FINANCE CORPORATION, WHICH WERE DISTINCTLY DIFFERENT ASSESS EES. HENCE, ACCORDING TO LEARNED A.R., IF THERE WAS ANY ALLEGAT ION THAT INTEREST WAS NOT CORRECTLY ACCOUNTED, THEN THE ADDITION SHOU LD HAVE BEEN MADE IN THE HANDS OF THE SAID CONCERNS ONLY. ACCOR DING TO HIM, EVEN ASSUMING THAT THE VALUE OF LAND WAS ` 68 LAKHS, ASSESSEE HAD NOT PAID ANY AMOUNT SINCE ADMITTEDLY THE SETTLEMENT WAS THROUGH SQUARING UP OF LOANS TAKEN BY SHRI P. BALASUBRAMANI AM AND HIS RELATED CONCENS FROM M/S SREE VENKATACHALAPATHY FIN ANCE, M/S SREE VENKATACHALAPATHY CORPORATION AND M/S KALAIVANI FIN ANCE CORPORATION. RELYING ON STATEMENT GIVEN BY SHRI P. BALASUBRAMANIAM PLACED AT PAPER-BOOK PAGES 1 TO 5, LEARNED A.R. SUBMITTED THAT SHRI P. BALASUBRAMANIAM HAD ADMITTED LOANS HAVING BEEN RAISED BY HIM FROM THE CONCERNS MENTIONED ABOV E AND NOT FROM I.T.A. NO. 256/MDS/09 10 THE ASSESSEE-HUF. EVEN OTHERWISE, LEARNED A.R. POI NTED OUT THAT THE FOURTH PROPERTY HELD BY SHRI P. BALASUBRAMANIAM WAS NOT CONVEYED TO THE ASSESSEE OR HIS SON. AGAIN, LEARNE D A.R. POINTED OUT THAT THE PROPERTY BELONGING TO SHRI P. VENKATES AN WAS REGISTERED IN THE NAME OF SHRI M. GOVINDARAJAN AND NOT IN THE NAME OF THE ASSESSEE AT ALL. THE PROPERTY IN THE NAME OF SHRI P. GOPALAKRISHNAN ALONE WAS REGISTERED IN THE NAME OF THE ASSESSEE, W HEREAS, THE THIRD PROPERTY WAS REGISTERED IN THE JOINT NAME OF ASSESS EE AND HIS SON SHRI M. GOVINDARAJAN. IN ANY CASE, ACCORDING TO HI M, NEITHER THE LOANS WERE GIVEN BY THE ASSESSEE NOR ANY INTEREST E VER ACCRUED TO HIM. HENCE, AS PER LEARNED A.R., APPLICATION OF SE CTION 69 OF THE ACT WAS NOT CALLED FOR. IN SO FAR AS SUM OF ` 34 LAKHS MENTIONED IN THE SALE DEED WAS CONCERNED, LEARNED A.R. POINTED OUT T HAT THIS WAS THE AMOUNT ACTUALLY DUE FROM SHRI P. BALASUBRAMANIAM AN D HIS BROTHERS TO THE CONCERNS RELATED TO THE ASSESSEE. HE, THERE FORE, SUBMITTED THAT JUST BECAUSE THE PROPERTY WAS VALUED BY DISTRI CT REGISTRAR AT ` 66,86,600/- IT COULD NOT BE CONCLUDED THAT THERE WA S ANY UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE. I.T.A. NO. 256/MDS/09 11 6. PER CONTRA, LEARNED D.R. SUBMITTED THAT ASSESSEE HAD SUPPRESSED INTEREST ON AN AMOUNT OF ` 22.60 LAKHS ADVANCED BY HIM TO SHRI P. BALASUBRAMANIAM AND HIS RELATED CONCERNS . ACCORDING TO LEARNED D.R., ASSESSEE WAS ACCOUNTING ONLY 18% INTE REST AND BALANCE 18% WAS ACCUMULATED TO THE PRINCIPAL. THER EFORE, WHEN INTEREST NOT ACCOUNTED WAS ALSO CONSIDERED, SUM OF ` 68 LAKHS MENTIONED BY SHRI P. BALASUBRAMANIAM IN HIS DISPOSI TION WAS ABSOLUTELY CORRECT. HENCE, AS PER THE LEARNED D.R. , ASSESSING OFFICER WAS DUTY BOUND TO BRING TO TAX SUCH UNACCOUNTED MON EY IN THE HANDS OF THE ASSESSEE, ASSESSEE HAVING INVESTED SUCH UNAC COUNTED INCOME BY GETTING THE PROPERTY MORTGAGED BY THE DEB TORS CONVEYED IN HIS NAME. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. TWO DOCUMENTS HAVE BEEN RELIED ON BY THE ASSESSING OFFICER FOR MAKING THE ADDITION. FIRST IS THE VALUATION MADE B Y THE DISTRICT REGISTRAR FOR THE SUBJECT PROPERTY WHICH ADMITTEDLY WAS ` 66,86,600/-. SECOND DOCUMENT RELIED ON IS THE STATEMENT RECORDED FROM SHRI P. BALASUBRAMANIAM ON 12.10.2004. THERE IS NO DISPUTE THAT THE I.T.A. NO. 256/MDS/09 12 AMOUNT MENTIONED IN THE DOCUMENT AS SUCH WAS ONLY ` 34 LAKHS. IF WE LOOK AT SECTION 69 OF THE ACT, IT RUNS AS UNDER: - 69. WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WH ICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTA INED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENTS OR T HE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF SUCH FIN ANCIAL YEAR. THE ISSUE BEFORE US IS TO CHECK WHETHER APPLICATION OF SECTION 69 OF THE ACT WAS CALLED FOR IN INSTANT TRANSACTIONS CONV EYING THE PROPERTY TO THE ASSESSEE. TO RESOLVE THIS, IT IS NECESSARY TO HAVE A LOOK AT THE DISPOSITION OF SHRI P. BALASUBRAMANIAM, WHICH IS TH E BACKBONE OF THE ADDITION. RELEVANT QUESTIONS AND ANSWERS STARTING FROM QUESTION NO.4 TO QUESTION NO.9 ARE REPRODUCED HEREUNDER:- Q. 4: DO YOU OR YOUR FIRMS KNOW SHRI P. MADHURAJAN OF ELAMPILLAI. ANS. 4: FOR THE PERIOD FROM 2000, I KNOW SHRI P. MADHURAJAN OF ELAMPILLAI AS FINANCIER. WE USED TO TAKE LOANS FROM SHRI P. MADHURAJAN OR HIS FINANCE CONCERNS LIK E SREE VENKATACHALAPATHY FINANCE, SREE VENKATACHALAPATHY COR PORATION. THROUGH SHRI P. MADHURAJAN WE HAVE TAKEN LOAN IN TH E NAME OF KALAIVANI FINANCE CORPORATION ALSO. I.T.A. NO. 256/MDS/09 13 Q. 5: WHAT IS THE TOTAL AMOUNT OF LOAN TAKEN FROM SHRI P. MADHURAJAN OR HIS FINANCE CONCERN OVER THE PERIOD O F LAST 4 YEARS I.E. FROM 2000 ONWARDS. ANS. 5: DURING THE YEAR 2000; 2001;; AND UPTO MARCH 2002 THE LOAN AMOUNT TAKEN IS NEARLY ` 68 LAKHS. THIS LOAN AMOUNT IS TAKEN IN MY NAME ON BEHALF OF THE FIRMS IN WHICH I W AS PARTNER. THIS AMOUNT WAS TAKEN BOTH BY CHEQUE AND CASH. Q. 6: WHAT IS THE AMOUNT REPAID SO FAR? WHAT IS T HE RATE OF INTEREST FOR THE LOAN TAKEN. ANS. 6: THE LOAN REPAYMENT DETAILS WE RECORDED IN OU R FIRMS REGULAR BOOKS. I WILL SUBMIT THE LEDGER COPIES WIT HIN A DAY OR TWO. THE RATE OF INTEREST WAS INITIALLY @ 36% BUT HE WAS GIVING RECEIPT FOR 18% ONLY. THE DIFFERENCE AMOUNT HE WAS COLLECTI NG IN CASH IN SMALL SLIPS WHICH ARE DESTROYED BY HIM AFTER COLLECTI NG THE INTEREST. THE INTEREST RATE WAS 8 PAISE PER DAY PER 100 RUPEES FOR THE PERIOD DURING 2002. Q. 7: WHAT IS THE LOAN AMOUNT PAYABLE TO SHRI P. MADHURAJAN OR HIS FINANCE CONCERNS AS ON DATE. ANS. 7: AS ON DATE THE BALANCE LOAN DUE IS UNDER DI SPUTE. DURING THE PERIOD, WE HAVE TAKEN LOAN SIMULTANEOUSL Y WE HAVE GIVEN THE PROPERTY AS MORTGAGED SECURITY TO SHRI P. M ADHURAJAN. SINCE WE MADE HUGE LOSS IN OUR BUSINESS WE COULD NO T REPAY THE AMOUNT OF LOAN TAKEN FROM SHRI P. MADHURAJAN. SHRI P. MADHURAJAN HAS COMPELLED US TO GIVE REGISTRATION IN THE NAME OF HIMSELF AND HIS SON SHRI M. GOVINDARAJAN. FOR THE LOAN OF ` 68 LAKHS WE HAVE GIVEN 4 PROPERTIES BELONGING TO MYSELF AND MY TWO BROTHERS, NAMELY, SHRI P. VENKATESAN, SHRI P. GOPALA KRISHNAN AND THE PROPERTIES IN THE JOINT NAMES OF OURSELF WERE M ORTGAGED. OUT OF THE ABOVE 4 PROPERTIES, THE PROPERTY IN THE N AME OF MY BROTHER SHRI P. VENKATESAN WAS REGISTERED IN THE NA ME OF SHRI M. GOVINDARAJAN. THE PROPERTY IN THE NAME OF ANOTHER B ROTHER SHRI I.T.A. NO. 256/MDS/09 14 P. GOPALAKRISHNAN WAS GIVEN REGISTRATION IN THE NAM E OF SHRI P. MADHURAJAN. THE THIRD PROPERTY IN OUR JOINT NAME WA S GIVEN REGISTRATION IN THE JOINT NAMES OF SHRI M. GOVINDAR AJAN AND SHRI P. MADHURAJAN. THE FOURTH PROPERTY WHICH IS IN MY NA ME IS STILL UNDER MORTGAGE WITH SHRI P. MADHURAJAN. THE DISPUT E IS THAT SHRI P. MADHURAJAN FURTHER DEMANDS INTEREST PART FO R RELEASE OF THE ABOVE DOCUMENTS. Q. 8: WHAT IS THE SALE CONSIDERATION FOR THE THREE PROPERTIES REGISTERED IN THE NAMES OF SHRI P. MADHU RAJAN AND SHRI M. GOVINDARAJAN. ANS. 8: AS A SALE CONSIDERATION WE HAVE NOT RECEIVE D ANY AMOUNT FROM SHRI P. MADHURAJAN OR SHRI M. GOVINDARA JAN. THE PROPERTIES ARE (1) ONE VACANT SITE MEASURING 4915 SQ. FT. (2) ONE SITE MEASURING 5400 SQ. FT. WITH INCOMPLETE STRUCTU RE MEASURING 2400 SQ. FT. UPTO LINTEL STRUCTURE. (3) AREA MEAS URING 6400 SQ. FT. OUT OF WHICH 2400 SQ. FT. INCOMPLETE LINTEL CON STRUCTION WORK WAS DONE. THE THREE PROPERTIES WERE SURROUNDED BY 1 3 FEET HEIGHT COMPOUND WALL. CONSIDERING THE MARKET VALUE OF ` 400 PER SQ. FT. ALL THE THREE PROPERTIES VALUE WILL DEFINIT ELY MEET THE LOAN LIABILITY OF ` 68 LAKHS. SO I WAS REQUESTING FOR THE RELEASE OF MY FOURTH MORTGAGED PROPERTY FROM SHRI P. MADHURAJAN. Q. 9: HAVE THESE LOANS AND REPAYMENT INTEREST PAYMEN T ARE ACCOUNTED FOR IN THE HANDS OF YOU OR YOUR FIRMS. ANS. 9: OUT OF THE LOAN AMOUNT OF ` 68 LAKHS, SOME OF THE LOANS ARE NOT ACCOUNTED FOR WHICH ARE USED FOR OUR BUSINESS PURPOSES. THE EXACT AMOUNT OF ACCOUNTED PART, I WI LL SUBMIT THE LEDGER EXTRACT OF THE RESPECTIVE CONCERNS. FROM THE ABOVE DISPOSITION, IT CLEARLY COMES OUT TH AT THE AMOUNTS WERE TAKEN NOT FROM THE ASSESSEE BUT FROM THE FIRMS SREE I.T.A. NO. 256/MDS/09 15 VENKATACHALAPATHY FINANCE, SREE VENKATACHALAPATHY C ORPORATION AND KALAIVANI FINANCE CORPORATION. IT ALSO COMES O UT THAT ASSESSEE HAD ACQUIRED ONLY TWO PROPERTIES, ONE WHICH WAS CON VEYED TO HIM BY SHRI P. GOPALAKRISHNAN AND THE OTHER WHICH WAS CONV EYED JOINTLY TO HIM AND HIS SON BY SHRI P. BALASUBRAMANIAM, SHRI P. VENKATESAN AND SHRI P. GOPALAKRISHNAN AGAIN JOINTLY. THUS IF AT ALL THERE ANY INVESTMENT CAN BE CONSIDERED IN THE HANDS OF THE AS SESSEE, IT IS LIMITED TO THESE PROPERTIES AND NOT TO THE PROPERTY HELD BY HIS SON SHRI M. GOVINDARAJAN, WHO ADMITTEDLY WAS A SEPARATE ASSE SSEE. 8. NOW COMING TO THE ISSUE WHETHER THERE WAS ANY UN EXPLAINED INVESTMENT, THE CONSIDERATION FOR THE CONVEYANCE WA S SQUARING UP OF THE LOANS TAKEN BY SHRI P. BALASUBRAMANIAM AND HIS CONCERNS FROM M/S SREE VENKATACHALAPATHY FINANCE, M/S SREE VENKAT ACHALAPATHY CORPORATION AND M/S KALAIVANI FINANCE CORPORATION. AS PER THE A.O., SUBSTANTIAL PART OF SUCH LOANS WERE NOT ACCOUNTED B Y THE ASSESSEE. BUT, WE WONDER HOW THE ASSESSEE COULD HAVE ACCOUNTE D THE INTEREST AT ALL, SINCE LOANS WERE GIVEN BY DIFFERENT ENTITIE S, WHICH WERE SEPARATELY ASSESSED. NO DOUBT, ASSESSEE MIGHT BE A PARTNER AND CLOSELY CONNECTED THERETO. BUT, THIS WOULD NOT, BY ITSELF, BE A REASON I.T.A. NO. 256/MDS/09 16 TO CONSIDER ANY INCOME SUPPRESSED OR INCOME ARISING TO SUCH CONCERNS TO BE THAT OF HIS. SHRI P. BALASUBRAMANIA M CLEARLY STATED THAT NOTHING WAS RECEIVED BY HIM ON CONVEYING THE P ROPERTY TO THE ASSESSEE EXCEPT FOR SQUARING UP OF THE LOANS. IF T HAT BE SO, CAN WE SAY THAT ASSESSEE HAD MADE ANY INVESTMENTS WHICH WE RE NOT RECORDED IN THE BOOKS, IF ANY MAINTAINED BY HIM, AN D FOR WHICH ASSESSEE HAD OFFERED NO EXPLANATION? ADMITTEDLY, T HE BOOKS OF THE ASSESSEE WERE NOT CONSIDERED AT ALL BY THE ASSESSIN G OFFICER SINCE PARA 1 OF THE ASSESSMENT ORDER CLEARLY MENTIONS THA T NO PROPER BOOKS WERE MAINTAINED. THE QUESTION, THEREFORE, WHITTLES DOWN TO WHETHER ASSESSEE HAD OFFERED EXPLANATION FOR SOURCE OF INVE STMENT OF THE PROPERTIES CONVEYED TO HIM BY SHRI P. BALASUBRAMANI AM AND HIS BROTHERS. THE DISPOSITION OF SHRI P. BALASUBRAMANI AM ITSELF CLEARLY GIVES THE SOURCE AND THIS, ACCORDING TO HIM, WAS NO THING BUT THE LOANS TAKEN BY HIM FROM THE CONCERNS RELATED TO THE ASSES SEE. MAY BE THE INTEREST WAS HIGH OR MAY BE SOME PART OF THE INTERE ST WAS NOT ACCOUNTED BUT, NEVERTHELESS, LOANS WERE GIVEN BY M/ S SREE VENKATACHALAPATHY FINANCE, M/S SREE VENKATACHALAPAT HY CORPORATION AND M/S KALAIVANI FINANCE CORPORATION A ND SUCH INTEREST I.T.A. NO. 256/MDS/09 17 SUPPRESSED OR NOT SUPPRESSED HAD TO BE CONSIDERED I N THE HANDS OF THESE ENTITIES. ASSESSEE WAS NOT DUTY BOUND TO ACC OUNT ANY INTEREST. A.O. HAD MADE THE ADDITION FOR A REASON THAT INTERE ST WAS NOT PROPERLY SHOWN BY THE ASSESSEE SINCE THE LOAN AMOUN T WAS ONLY ` 22.80 LAKHS. EVEN ASSUMING THIS TO BE CORRECT, THE ADDITION COULD NOT HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE SINCE T HE LOANS WERE NOT GIVEN BY THE ASSESSEE. IN SO FAR AS ASSESSEE W AS CONCERNED, HE COULD NOT HAVE BEEN CALLED TO EXPLAIN THE SOURCE OF INVESTMENT OF ALL THE PROPERTIES CONVEYED SINCE HE WAS NOT BENEFICIAR Y OF ALL SUCH CONVEYANCES. THE SOURCE OF INVESTMENT WAS CLEARLY MENTIONED BY THE SELLER HIMSELF AND THIS HAS NEVER BEEN DISPUTED BY THE ASSESSING OFFICER. IN SO FAR AS THE VALUATION DONE BY THE RE GISTRATION DEPARTMENT, WHICH ADMITTEDLY WAS ` 66,86,600/-, EVEN IF CONSIDER IT AS THE CORRECT VALUE OF THE PROPERTIES, WE CANNOT S AY THERE WAS ANY UNEXPLAINED INVESTMENT SINCE THE SUM SQUARED UP ON ACCOUNT OF THE CONVEYANCING WAS ADMITTED BY SHRI P. BALASUBRAMANIA M TO BE ` 68 LAKHS. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE O PINION THAT THERE WAS NO CASE FOR ANY UNEXPLAINED INVESTMENT BEING CO NSIDERED IN THE HANDS OF THE ASSESSEE ON THESE TRANSACTIONS. THE V ALUE OF THE I.T.A. NO. 256/MDS/09 18 PROPERTY SHOULD NOT HAVE BEEN BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE UNDER SECTION 69 OF THE ACT. THE ADDITION MADE, THEREFORE, IS DELETED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 24 TH JUNE, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 24 TH JUNE, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), SALEM (4) CIT, SALEM (5) D.R. (6) GUARD FILE