K.Thanikachalam, CHENNAI V. ACIT, CHENNAI

ITA 2629/CHNY/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7662 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVASJCIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Unexplained cash credit; Capital asset; Business income; Principle of natural justice; Rule of consistency; Cost of acquisition
• Section: 143(3); 147; 68; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.2628 & 2629/MDS/2014 / ASSESSMENT YEARS : 2008-09&2010-11 SHRI K. THANIKACHALAM, C/O. S. SRIDHAR, ADVOCATE, NEW NO.14, OLD NO.82, FLAT NO.5, 1 ST AVENUE, INDIRA NAGAR, ADYAR, CHENNAI 600 020. [PAN: AAEPT 1404 B] V. THE ASSTT. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE - II, CHENNAI. ( !'# /APPELLANT) ( $%'# /RESPONDENT) !'#&' /APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE $%'#&' /RESPONDENT BY : SHRI SHIVA SRINIVAS, JC IT &( /DATE OF HEARING : 12.01.2017 )* &( /DATE OF PRONOUNCEMENT : 22.02.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER : THESE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINS T THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-I, C HENNAI, DATED 28.07.2014AND PERTAINS TO THE ASSESSMENT YEARS 2008 -09 AND 2010-11. :-2-: I.T.A. NOS.2628 & 2629/MDS/2014 2 THE ASSESSEE RAISED FOLLOWING GROUNDS OF APPEAL F OR THE A.Y.2008-09 IN APPEAL NO.2628/MDS/2014: 1) THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) I, CHENNAI 600 034 DATED 28.07.2014 IN I.T.A. NO.315/2013-14/A -I FOR THE ABOVE MENTIONED ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2) THE CIT (APPEALS) ERRED IN CONFIRMING THE VALIDITY OF THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT AND ERRED FURTHE R IN CONFIRMING THE RE-ASSESSMENT FRAMED CONSEQUENTLY U/S 143(3) R/W SE CTION 147 OF THE ACT WITHOUT ASSIGNING PROPER REASONS AND JUSTIF ICATION. 3) THE CIT(APPEALS) FAILED TO APPRECIATE THE LACK OF F RESH MATERIALS READ WITH INADEQUATE SATISFACTION RECORDED ON THE E SCAPEMENT OF INCOME AS WELL AS THE ATTEMPT TO SHIFT THE HEAD OF INCOME FROM INCOME FROM BUSINESS TO THE INCOME FROM HOUSE PR OPERTY TO TAX THE INCOME GENERATED FROM COMMERCIAL PROPERTIES IN THE CONSEQUENTIAL RE-ASSESSMENT FRAMED WOULD VITIATE TH E RE- ASSESSMENT FRAMED BOTH ON JURISDICTION AND ON MERIT S OF THE CASE. 4) THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE DECI SIONS RELIED UPON TO SUSTAIN THE ASSUMPTION OF JURISDICTION/S 147 OF THE ACT HAD NO APPLICATION TO THE FACTS OF THE CASE AND CITED OUT OF CONTEXT, THEREBY VITIATING HIS DECISION RENDERED IN RELATION THERETO . 5) THE CIT (APPEALS) ERRED IN CONFIRMING THE ASSESSMEN T OF RENTAL INCOME EARNED FROM COMMERCIAL PROPERTIES UNDER THE HEAD INCOME FROM HOUSE PROPERTY AS AGAINST THE CLAIM FOR ASSES SMENT OF SUCH INCOME UNDER THE HEAD INCOME FROM BUSINESS WITHOU T ASSIGNING PROPER REASONS AND JUSTIFICATION. 6) THE CIT(APPEALS) WENT WRONG IN RECORDING THE FINDIN GS IN THIS REGARD IN PARA 5.2 OF THE IMPUGNED ORDER WITHOUT AS SIGNING PROPER REASONS AND JUSTIFIED. 7) THE CIT(APPEALS) FAILED TO APPRECIATE THAT THERE WA S NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPUGNED OR DER AND ANY ORDER PASSED IN VIOLATION OF THE PRINCIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 8) THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUN DS/ARGUMENTS AT THE TIME OF HEARING. :-3-: I.T.A. NOS.2628 & 2629/MDS/2014 3. GROUND NO. 1 TO 4 ARE RELATING TO THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT,1961 (IN SH ORT THE ACT). THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INC OME OF RS.25,56,300/- AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143( 1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED BY ISSUE OF NOT ICE UNDER SECTION 148 OF THE ACT DATED 22.02.2012. THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT AND THE LD.CIT( A) CONFIRMED THE VALIDITY OF REOPENING OF ASSESSMENT PLACING RELIANC E ON JURISDICTIONAL HIGH COURT DECISION IN ALA FIRM VS. CIT(102ITR 622) AND HONBLE APEX COURT DECISION IN THE CASE OF ESSKAY ENGINEERING CO MPANY LTD VS CIT( 247 ITR818) AND OTHER DECISIONS CITED IN CIT(A) OR DER. IN ASSESSEES CASE NO ASSESSMENT WAS MADE UNDER SECTION 143(3) EA RLIER AND THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE AC T. THE ASSESSEE HAS ADMITTED THE RENTAL INCOME AS INCOME FROM BUSI NESS INSTEAD OF INCOME FROM PROPERTY AND CLAIMED VARIOUS EXPENSES AS APPLICABLE TO BUSINESS INCOME. THEREFORE, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT UNDER SECTION 148 OF THE ACT, HAVING REA SON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT . THE ASSESSMENT WAS REOPENED WITHIN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P LTD (291 ITR 500) IS CLEARLY :-4-: I.T.A. NOS.2628 & 2629/MDS/2014 APPLICABLE AND WE, THEREFORE, UPHOLD THE ISSUE OF N OTICE UNDER SECTION 147 OF THE ACT AND HOLD THAT THE ASSESSMENT IS VAL IDLY REOPENED. THE ASSESSEES APPEAL ON THIS ISSUE IS DISMISSED. 4. GROUND NOS. 5 TO 8 ARE RELATED TO THE ASSESSMENT OF BUSINESS INCOME AS INCOME FROM PROPERTY. THE ASSESSEE HAS LET OUT THE PROPERTY AND RECEIVING THE RENTS AND SUCH RENTS RECEIVED WERE ADMITTED AS BUSINESS INCOME. ACCORDING TO THE ASSE SSEE, THE RENTS WERE FROM MARKET COMPLEX AND PROPERTY IS COMMERCIAL LY EXPLOITED AND THE RENTS RECEIVED FROM SUCH PROPERTY ARE TAXABLE A S BUSINESS INCOME, BUT NOT AS PROPERTY INCOME. THE ASSESSING OFFICER RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT V. CHENNAI PROPERTIES & INVESTMENT LTD. [2004] 135 TAXMAN 509 (MAD.) AND TAXED THE INCOME AS INCOME FROM HOUSE PROPERTY. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT ON APPEAL BEFORE THE CIT (APPEALS). THE LD. CIT(APPEALS) CON FIRMED THE ORDER OF THE ASSESSING OFFICER PLACING RELIANCE ON THE DECIS ION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANMAR HOL DING LTD. (272 ITR 341). AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. :-5-: I.T.A. NOS.2628 & 2629/MDS/2014 5. APPEARING FOR THE ASSESSEE, SHRI S. SRIDHAR, THE LD. COUNSEL ARGUED THAT THE ASSESSEE HAS CONSTRUCTED THE COMMER CIAL COMPLEX FOR COMMERCIAL EXPLOITATION. THE INCOME DERIVED FROM S UCH COMMERCIAL COMPLEX REQUIRED TO BE ASSESSED AS BUSINESS INCOME. THE ASSESSEE HAS REGISTERED THE COMPLEX AS COMMERCIAL ASSET FOR THE PURPOSE OF COMMERCIAL TAX AS WELL AS THE SERVICE TAX. THE ASS ESSEE FURTHER ARGUED THAT ALL ALONG THE ASSESSEE IS ADMITTING THE INCOME UNDER THE HEAD BUSINESS INCOME WHICH WAS ACCEPTED BY THE DEPARTMEN T IN THE EARLIER YEARS ON THE SAME SET OF FACTS. THE DEPARTMENT CAN NOT CHANGE THE STAND AND TAKE DIFFERENT VIEW IN THE CASE OF THE SA ME ASSESSEE ON THE SAME SET OF FACTS AND FURTHER SUBMITTED THAT FOLLOW ING THE RULE OF CONSISTENCY AS HELD BY JURISDICTIONAL HIGH COURT AN D OTHER HIGH COURTS THE INCOME REQUIRED TO BE ASSESSED AS BUSINESS INCO ME AND NOT AS INCOME FROM PROPERTY. ON THE OTHER HAND, SHRI SHIV A SRINIVAS, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL PLACED ON RECORD. THE ASSESSEE HAS CONSTRUCTED THE COMMER CIAL COMPLEX, REGISTERED THE SAME FOR SERVICE TAX AND COMMERCIAL TAX PURPOSES AS COMMERCIAL ESTABLISHMENT AND ADMITTED THE INCOME DE RIVED FROM THE COMMERCIAL COMPLEX AS BUSINESS INCOME. WHEREAS THE AO ASSESSED :-6-: I.T.A. NOS.2628 & 2629/MDS/2014 THE SAME AS INCOME FROM PROPERTY. THE AO RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CH ENNAI PROPERTIES CITED (SUPRA) AND HELD IT AS PROPERTY INCOME. HONBLE SUP REME COURT HAS REVERSED THE DECISION OF THE HONBLE HIGH COURT AND HELD THAT WHERE IN TERMS OF MEMORANDUM OF ASSOCIATION, MAIN OBJECT OF ASSESSEE-COMPANY WAS TO ACQUIRE PROPERTIES AND EARN INCOME BY LETTIN G OUT THE SAME, SAID INCOME WAS TO BE BROUGHT TO TAX AS BUSINESS INCOME AND NOT AS INCOME FROM HOUSE PROPERTY IN [2015] 56 TAXMANN.COM 456 (S C). THE LD.CIT(A) RELIED ON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT V. SANMAR HOLDINGS LTD (272 ITR 341). HOWEVER THE CASE OF SANMAR HOLDINGS LTD WAS REMITTED BACK TO THE FILE OF THE A SSESSING OFFICER TO VERIFY THE FACTS REGARDING THE OWNERSHIP OF BUILDIN G AND THE COMMERCIAL EXPLOITATION OF THE PROPERTY. IN THE APPELLANTS CAS E THERE IS NO DISPUTE THAT THE ASSESSEE IS THE OWNER OF THE BUILDING AND RECEIVING THE RENTS BY MAKING EXTRA AMENITIES AND THE BUSINESS OF THE ASSE SSEE IS LETTING OUT THE PROPERTY ON COMMERCIAL LINES. IT WAS ALSO NOT I N DISPUTE THAT THE ASSESSEE HAS ALL ALONG ADMITTED THE RENTAL INCOME A S BUSINESS INCOME AND THE DEPARTMENT HAS ACCEPTED THE SAME. THERE WAS NO CHANGE IN THE CHARACTER OF THE BUILDING AND THE ACTIVITY OF THE A SSESSEE TO TAKE U TURN FROM THE EARLIER STAND. THE LD.D.R COULD NOT EXPLAI N THE REASONS OR MATERIAL FACTS TO CHANGE THE STAND OF THE DEPARTMEN T. THOUGH THE RULE OF :-7-: I.T.A. NOS.2628 & 2629/MDS/2014 RESJIDICATA DOES NOT APPLY TO THE INCOME TAX PROCEE DINGS, THE RULE OF CONSISTENCY DOES APPLY TO THE INCOME TAX PROCEEDING S. THIS VIEW IS UP HELD BY HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. L. G. RAMAMURTHY (1977) 110 ITR 453 (MAD.), THE COURT LAID DOWN THE PRINCIPLE THAT BUT WHAT IS RELEVANT IS NOT THE PERSONALITY OF OFF ICERS PRESIDING OVER THE TRIBUNAL BUT THE TRIBUNAL AS AN INSTITUTION. IF IT IS CONCEDED THAT SIMPLY BECAUSE OF THE CHANGE IN THE P ERSONNEL WHO MANNED THE TRIBUNAL, IT IS OPEN TO THEM TO A CONCLU SION TOTALLY CONTRADICTORY TO THE CONCLUSION WHICH HAD BEEN REAC HED BY EARLIER OFFICERS MANNING THE TRIBUNAL ON SAME SET OF FACTS IT WILL NOT ONLY SHAKE THE CONFIDENCE OF THE PUBLIC IN JUDICIAL PROCEDURE AS SUCH, BUT IT WILL TOTALLY DESTROY SUCH CONFIDENCE.THAT WILL BE DEST RUCTIVE OF THE INSTITUTIONAL INTEGRITY ITSELF .. SIMILARLY HONBLE SUPREME COURT I N RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC) EXPRESSED VIEW THAT RULE OF CONSISTENCY REQUIRED TO BE FOLLOW ED IN ASSESSMENT PROCEEDINGS. IN THE INSTANT CASE, THERE WAS NO DISP UTE THAT THE ASSESSEE HAS ADMITTED THE INCOME AS BUSINESS INCOME IN THE E ARLIER YEARS AND THE SAME WAS ACCEPTED BY THE DEPARTMENT AND THERE IS NO CHANGE IN THE FACTS IN THE YEAR UNDER CONSIDERATION. THEREFORE, F OLLOWING THE RULE OF CONSISTENCY AND ON FACTS WE HOLD THAT INCOME OF TH E ASSESSEE RECEIVED FROM THE LETTING OUT OF THE PROPERTIES SHOULD BE AS SESSED AS INCOME FROM :-8-: I.T.A. NOS.2628 & 2629/MDS/2014 BUSINESS BUT NOT FROM THE PROPERTY. APPEAL OF THE A SSESSEE ON THIS ISSUE IS ALLOWED. 7. NOW COMING TO ITA NO.2629/MDS/2014 FOR THE ASSES SMENT YEAR 2010-11, THE ISSUES INVOLVED ARE THE ASSESSMENT OF INCOME FROM PROPERTIES AS BUSINESS INCOME, CAPITAL GAINS AND DE DUCTION RELATING TO THE AMOUNTS PAID TO SHRI SRINIVAS, LOAN OF RS.50 LA KHS FROM SHR ISRINIVAS AND MISCELLANEOUS LOANS OF RS.13.25 LAKHS. 7.1 GROUND NO.1, 11 & 12 ARE GENERAL IN NATURE AND THE LD.AR HAS NOT MADE ANY ARGUMENT. THEREFORE, THESE GROUNDS DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 8. GROUND NOS. 2& 3 OF THE APPEAL FOR THE ASSESSMEN T YEAR 2010-11 ARE RELATED TO THE INCOME FROM PROPERTY ADMITTED AS BUSINESS INCOME. THE FACTS OF THE CASE ARE THE SAME AS THAT OF THE A SSESSMENT YEAR 2008- 09 IN APPEAL NO.2628. AS PER THE DETAILED REASONIN G GIVEN IN EARLIER ORDER OF 2628, WE ALLOWED THE APPEAL OF THE ASSESSE E AND HELD THAT THE INCOME RECEIVED FROM RENTS REQUIRED TO BE ASSED AS BUSINESS INCOME. THEREFORE, GROUND NOS. 2 & 3 ARE ALLOWED. :-9-: I.T.A. NOS.2628 & 2629/MDS/2014 9. GROUND NO.4 IS RELATED TO THE COMPUTATION OF SHO RT TERM CAPITAL GAINS FROM TRANSFER OF THREE PROPERTIES. THE ASSES SEE SOLD THREE PROPERTIES DURING THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR 2010-11 LOCATED AT NEW DOOR NOS. 198 & 199, THIRU VEETHI AMMAN KOIL STREET, MYLAPORE, CHENNAI TOTALLY MEASURING 2 GROUN DS AND 1410 SQ.FT (6210SQ.FT) BY WAY OF THREE REGISTERED DOCUMENTS AS FOLLOWS: DOC. NO.1109 OF 2009 DT 28.5.09 650 SQ.FT FOR RS. 42,90,000 DOC.NO.1473 OF 2009 DT 10.7.091192 SQ.FT. FOR RS.7 1,52,000 DOC.NO.1817 OF 2009 DT 28.8.09-4368 SQ.FT. FOR RS.2 ,88,28,800 THE TOTAL VALUE OF THE PROPERTY SOLD WAS RS.4, 02,70,800/- BY THREE SALE DEEDS MENTIONED ABOVE. 9.1 THE ASSESSING OFFICER TREATED THE SALE DOC.NO. DOC.NO.1817 OF 2009 DT 28.8.09 ADMEASURING 4368 SQ.FT. FOR RS.2,88 ,28,800/- AS SEPARATE TRANSACTION AND COMPUTED THE SHORT TERM CA PITAL GAINS AT RS.1,15,03,102/- AGAINST THE CAPITAL GAINS ADMITTED BY THE ASSESSEE AT RS.20,98,130/- AND MADE ADDITION OF RS.94,04.972/-. 9.2. THE ASSESSEE SOLD THE OTHER TWO PROPERTIES VIDE DOC. NO.1109 OF 2009 DT 28.5.09 650 SQ.FT FOR RS.42,90,000/- , AN D DOC.NO.1473 OF 2009 DT 10.7.091192 SQ.FT. FOR RS.71,52,000/- BUT NEITHER ADMITTED THE CAPITAL GAINS NOR SUBMITTED ANY DETAILS BEFORE THE ASSESSING OFFICER. :-10-: I.T.A. NOS.2628 & 2629/MDS/2014 THEREFORE THE ASSESSING OFFICER ASSESSED THE ENTIRE SALE CONSIDERATION OF RS.1,14,42,000/- AS SHORT TERM CAPITAL GAINS. 10. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT ON APPEAL BEFORE THE CIT (APPEALS) AND SUBMITTED TH AT THE ASSESSEE AS A PROPRIETOR OF M/S.SHARAD HOMES & PROPERTIES BECAM E A DULY APPOINTED POWER ATTORNEY HOLDER WITH REGARD TO THE PROPERTY BY A REGISTERED DOCUMENT NO.651/2007 DATED 16/03/2007.TH E PROPERTY WAS ACQUIRED BY THE ASSESSEE WITH FINANCIAL ASSISTANCE FROM ONE MR.C.R. SRINIVAS FROM BANGALORE AND CERTAIN PAYMENTS WERE M ADE TO HIM DIRECTLY AT THE TIME OF SALE AND THESE AMOUNTS ARE TO BE EXC LUDED FROM THE TAXABLE GAINS IN THE HANDS OF THE ASSESSEE. ONE SUC H PAYMENT WAS RS.35,00,000/-MADE BY PAY ORDER IS REFLECTED IN DOC .NO.1473 OF 2009 AT PAGE NO.10. FURTHER AN AMOUNT OF RS.1,10,00,000/- W AS MADE TO MR.SRINIVAS OUT OF THE SALE PROCEEDS IN DOC.NO.1817 /09.THIS PAYMENT WAS MADE BY WAY OF AXIS BANK NEFT TRANSFER. THE A SSESSING OFFICER IN HIS ORDER HAD REDUCED THE COST OF ACQUISITION OF RS .1,73,25,698/- FROM THE VALUE OF THE THREE DOCUMENT AND ARRIVED AT THE SHORT TERM CAPITAL GAINS. HE HAS FAILED TO CONSIDER THE PAYMENTS MADE TO MR.SRINIVAS FROM OUT OF THE SALE VALUE OF THE PROPERTY TOWARDS SETTL ING THE DUES, WHICH HAD BEEN BORNE BY HIM. THIS IS EVIDENCED BY THE MEMORA NDUM OF :-11-: I.T.A. NOS.2628 & 2629/MDS/2014 UNDERSTANDING ENTERED INTO BETWEEN THE ASSESSEE AS POA OF THE VENDORS AND MR.C.R.SRINIVAS ON 25.03.2009. MR. SRI NIVAS WAS AUTHORIZED TO NEGOTIATE WITH THE ENCROACHERS OF THE PROPERTY AND SETTLED FOR AN AMOUNT OF RS.1.10 CR. WHICH WAS LATER REIMBU RSED BY THE ASSESSEE FROM THE SALE VALUE OF THE PROPERTY. HENC E, THIS AMOUNT IS TO BE REDUCED FROM THE SALE VALUE OF PROPERTY FOR WORK ING OUT THE SHORT TERM CAPITAL GAINS. ACCORDING TO THE ASSESSEE, THE SHORT TERM C APITAL GAIN ON SALE OF PROPERTY WORKS OUT AS UNDER: TOTAL SALE VALUE OF PROPERTY IN THE 3 DOCUMENTS RS. 4,02,70,800 LESS: EVICTION EXPENSES & COMMISSION PAID RS. 33,00,000 LESS: COST OF ACQUISITION RS. 1,73,25,698 LESS: AMOUNTS PAID TO C.R. SRINIVAS (RS.25,00,000 + RS.1,10,00,000) RS. 1,45,00,000 BALANCE TAXABLE AS SHORT TERM CAPITAL GAINS RS. 51,45,102 LESS: AMOUNT ALREADY OFFERED AS CAPITAL GAINS. RS. 46,45,102 BALANCE RS. 5,00,000 (ALREADY SHOWN UNDER ISDL DEPOSIT (I.E. RS.14 LACS-RS.9 LACS) AND ADDED TO INCOME BY ASSESSING OFFICER UNDER LOANS AND ADVANCES) 11. THE LD. CIT (APPEALS) ALLOWED THE EVICTION CHAR GES OF RS.33.00 LAKHS SUBJECT TO VERIFICATION AND CONFIRMED THE AD DITION RELATING TO THE PAYMENTS MADE TO SHRI SRINIVAS AMOUNTING TO RS.145 LAKHS (110.00 :-12-: I.T.A. NOS.2628 & 2629/MDS/2014 LAKHS AND 35.00 LAKHS) AND ARRIVED AT THE STGL OF R S.1,96,45102/-. AGGRIEVED BY THE ORDER OF THE LD.CIT (APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 12. WE HEARD BOTH THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. THE ASSESSEE SOLD THE PROPERTIES IN 3 DOCU MENTS MENTIONED ABOVE FOR CONSIDERATION OF RS.4,02,70,800/-. A SUM OF RS.35,00,000,- WAS DIRECTLY PAID TO SHRI M. SRINIVAS FROM THE SA LE PROCEEDS OF DOCUMENT NO.1473 DATED 10.07.2009 AND THE SAME WAS NOT ACCOUNTED IN THE RECEIPTS AND DECLARED IN THE RETURN OF INCOM E, CLAIMING IT AS DEDUCTION BY OVER RIDING TITLE. THE ASSESSING OFFI CER DISALLOWED THE CLAIM MADE BY THE ASSESSEE AND BROUGHT TO TAX THE A MOUNT OF RS.35,00,000/-. THE LD. CIT (APPEALS) ALSO CONFIR MED THE ADDITION MADE BY THE ASSESSING OFFICER. FURTHER, AN AMOUNT O F RS.1,10,00,000/- WAS MADE TO MR.SRINIVAS OUT OF THE SALE PROCEEDS IN DOC.NO.1817/09. THE AGGREGATE AMOUNT OF RS.145 LAKHS MADE TO SHRI S RINIVAS WAS EXPLAINED TO BE PAID TO HIM SINCE HE MADE SOME FINA NCIAL SUPPORT AND NEGOTIATED WITH THE ENCROACHERS. THE CIT (APPEALS) OBSERVED THAT THE ASSESSEE COULD NOT EXPLAIN AS TO WHY THE SALE PROCE EDS WERE DIRECTLY PAID TO SHRI SRINIVAS. BEFORE THE LD. CIT(APPEALS) , THE ASSESSEE SUBMITTED THAT THERE WAS CERTAIN ENCROACHMENT IN TH E LAND AND THE :-13-: I.T.A. NOS.2628 & 2629/MDS/2014 ASSESSEE COULD NOT VACATE THE ENCROACHMENTS, HENCE HE APPROACHED SHRI SRINIVAS AND AUTHORIZED HIM TO VACATE THE ENC ROACHERS AND SETTLE FOR AN AMOUNT OF RS.1.10 CRORES WHICH WAS REIMBURSE D BY THE ASSESSEE FROM THE SALE VALUE OF THE PROPERTY. HENCE, THE LD . AR OF THE ASSESSEE CONTENTED THAT THE AMOUNT MADE TO SHRI SRINIVAS IS DEDUCTABLE FROM THE SHORT TERM CAPITAL GAINS. THE LD. CIT (APPEALS) DI D NOT ACCEPT THE CONTENTION AND CONFIRMED THE ADDITION. WITH REGARD TO THE DEDUCTION CLAIMED IN RESPECT OF EVICTION CHARGES OF RS.33 LAK HS, THE ASSESSEE SUBMITTED THE CONFIRMATION LETTERS BEFORE THE LD.CI T(APPEALS) AND THE CIT(APPEALS) ALLOWED THE DEDUCTION SUBJECT TO VERIF ICATION. 12.0 AS PER THE PROVISIONS OF SECTION 48 OF THE ACT , THE COST OF ACQUISITION AND THE EXPENDITURE INCURRED IN CONNECT ION WITH THE TRANSFER OF THE CAPITAL ASSET IS ALLOWABLE AS DEDUCTION. IN THIS CASE, THE ASSESSEE HAS MADE THE PAYMENT AGGREGATING TO RS.1.45 CRORES (110 LAKHS + 35.00 LAKHS) TO SHRI SRINIVAS AND CLAIMED THE SAME AS DED UCTION. 12.1 THE PAYMENT RS.35.00 LAKHS CLAIMED TO BE FIN ANCIAL SUPPORT FOR PURCHASE OF PROPERTY WHICH WAS IN THE FORM OF DEBT AND APPLICATION OF MONEY. AS DISCUSSED EARLIER THE COST OF ACQUISITION AND THE EXPENSES INCURRED IN RELATION TO TRANSFER OF THE PROPERTY AR E ALLOWABLE AS DEDUCTION. :-14-: I.T.A. NOS.2628 & 2629/MDS/2014 THE AMOUNT OF RS.35.00NLACS WAS NOT RELATED TO TRAN SFER OF THE PROPERTY AND THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO S HOW THAT THE PAYMENT WAS INCURRED FOR TRANSFER/SALE OF PROPERTY. AS STATED BY THE A.R, THE PROPERTY WAS PURCHASED WITH THE FINANCIAL ASSIS TANCE OF MR.SHRINIVAS AND HENCE IT APPEARED TO BE LOAN FOR PURCHASE OF TH E PROPERTY. THE ENTIRE COST OF ACQUISITION WAS ALLOWED AS DEDUCTION AND NO FURTHER AMOUNT REQUIRED TO ALLOWED. THE ASSESSEE HAS NOT PR ODUCED ANY EVIDENCE TO SHOW THAT THE VENDOR HAS BEEN PAID OVER AND ABOVE THE SALE CONSIDERATION. THEREFORE, THERE IS NO ERROR IN THE ORDER OF THE LD.CIT(A) AND THE SAME IS CONFIRMED. 12.2 THE REMAINING AMOUNT RS.110.00 LAKHS SUPPOSE D TO BE INCURRED FOR NEGOTIATING THE ENCROACHERS. THE ASSESSEE I N THIS CASE PURCHASED THE PROPERTY IN FINANCIAL YEAR 2007-08AND SOLD IN F EBRUARY, 2009. BUT THE PURCHASE DEED WAS NOT PRODUCED BEFORE THE ASSES SING OFFICER OR BEFORE US. IT COULD NOT BE ASCERTAINED WHETHER THE ASSESSEE HAS PURCHASED THE PROPERTY IN VACANT POSSESSION OR WITH THE ENCUMBRANCES OF ENCROACHMENTS. THE NAMES OF THE PERSONS WHO H AVE ENCROACHED, WHEN THEY HAVE OCCUPIED THE LAND AND WHAT WAS THE M ODE OF PAYMENT MADE TO THE ENCROACHERS, THE AMOUNT PAID TO EACH EN CROACHER, WHETHER THE AMOUNT IS PAID IN CHEQUE OR CASH BY SHRI SRINIV AS ETC., HAS NOT :-15-: I.T.A. NOS.2628 & 2629/MDS/2014 PLACED ON RECORD. THE ASSESSEE HAS NOT PLACED ANY EVIDENCE TO SHOW THAT THE LAND IN QUESTION WAS IN ENCROACHMENT AND S HRI SRINIVAS MADE EFFORTS TO VACATE THE LAND FROM THE ENCROACHERS. BE FORE THE ASSESSING OFFICER THE ASSESSEE HAS NOT ADMITTED THE SALE CONS IDERATION FOR TAXATION AND NO DETAILS WERE FURNISHED. THE SALE PROCEEDS O F DOCUMENT NO.1109 AND 1473 WERE NOT ACCOUNTED IN THE BOOKS OF ACCOUNT S AT ALL. THE LD.CIT(A) HAS NOT ACCEPTED THE DIVERSION BY OVER RI DING TITLE. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SHOW THAT THERE WAS AN ENCUMBRANCE FOR MAKING PAYMENT BY OVER RIDING TITLE . THE ASSESSEE ALSO FAILED TO PRODUCE ANY EVIDENCE TO SHOW THAT THE PAY MENT WAS MADE FOR TRANSFER OF THE PROPERTY. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE GROUND NO. 4 TO 8 OF THE ASSESSEE ARE DISMISSED. 13. GROUND NO.9 IS RELATED TO THE CASH CREDIT APPEA RING IN THE NAME OF SHRI M. SRINIVAS. THE ASSESSING OFFICER MADE ADDIT ION SINCE THE ASSESSEE HAS NOT GIVEN ANY DETAILS OR CONFIRMATIONS . NO EVIDENCE WAS PRODUCED BEFORE THE LD. CIT (APPEALS). HOWEVER, FR OM THE SUBMISSIONS MADE BEFORE THE CIT (APPEALS), IT IS SEEN THAT THE SAID CREDIT OF RS.50 LAKHS WAS SAID TO BE OPENING BALANCE AS ON 01.04.20 09. IN THE ABSENCE OF ANY EVIDENCE TO PROVE THE GENUINENESS OF THE TRA NSACTION AND THE :-16-: I.T.A. NOS.2628 & 2629/MDS/2014 CREDITWORTHINESS OF THE CREDITOR, THE SOURCE OF CAS H CREDIT WAS NOT ESTABLISHED. THE AR OF THE ASSESSEE CONTENTED THAT THE CREDIT WAS RELATED TO THE EARLIER YEAR AND NOT RELATING TO THE YEAR UNDER CONSIDERATION, THE SAME CANNOT BE ADDED IN THE ASSE SSMENT YEAR UNDER CONSIDERATION. AS PER THE PROVISIONS OF SECTION 68 OF THE ACT, THE UNEXPLAINED CASH CREDIT SHOULD BE MADE ADDITION IN THE YEAR IN WHICH THE SAME WAS RECEIVED. FOR READY REFERENCE, WE REPRODU CE HERE UNDER SECTION 68 OF THE ACT: SECTION 68: WHERE ANY SUM IS FOUND CREDITED IN TH E BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 13.1 THE ISSUE RELATING TO THE CASH CREDIT WAS NOT EXAMINED BY THE LD.CIT (APPEALS) AND THE AO. THEREFORE WE REMIT BA CK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO V ERIFY THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE, WHETHER IT WAS RELA TING TO THE EARLIER YEAR OR THE YEAR UNDER CONSIDERATION AND DECIDE AFR ESH AS PER LAW. ACCORDINGLY, GROUND NO.9 IS ALLOWED FOR STATISTICAL PURPOSE. :-17-: I.T.A. NOS.2628 & 2629/MDS/2014 14. GROUND NO.10 IS RELATING TO ADDITION OF RS.13,2 5,360/-. THE ASSESSEE HAS SHOWN THE SAID AMOUNT OF RS.13,25,360/ - AS MISCELLANEOUS LOANS. NO DETAILS WERE FURNISHED BEF ORE THE ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER TREATED THE SOURCE AS UNEXPLAINED AND ADDED BACK TO THE INCOME. BEFORE T HE LD. CIT (APPEALS) ALSO, THE ASSESSEE FAILED TO FURNISH THE BASIC DETAILS LIKE ADDRESS OF THE PERSON, PAN NUMBER, SOURCE, MODE OF RECEIPT, CONFIRMATION ETC., THEREFORE, THE LD. CIT (APPEAL S) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 15. BEFORE US, THE LD. AR REITERATED THE SUBMISSIO NS MADE BEFORE THE LD.CIT (APPEALS) BUT NOT PRODUCED ANY EVIDENCE TO P ROVE THAT THE LOAN WAS GENUINE. THE ASSESSEE FAILED TO FURNISH COPIES OF CONFIRMATIONS, NAMES AND ADVANCE, MODE OF RECEIPTS, PAN NO. ETC., THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT ( APPEALS) AND THE SAME IS UPHELD. THIS GROUND IS DISMISSED. :-18-: I.T.A. NOS.2628 & 2629/MDS/2014 16. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN I TA NO. 2628/MDS/2016 IS ALLOWED AND IN INCOME TAX ACT NO.2 629/MDS/2016 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( . . ) (D.S. SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 22 ND FEBRUARY, 2017. JR. +,&$(!- ( /COPY TO: 1. !'# /APPELLANT 2. $%'# /RESPONDENT 3. ++. ( )/CIT(A)-I, CHENNAI 4. ++. /CIT 5. /0$( /DR 6. 012 /GF.