Sree Saravana Financiers, Erode V. ITO, Erode

ITA 2691/CHNY/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8007 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 26-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 27-10-2014
• Court: TRIBUNAL
• Department Lawyers: DURAI
• Assessee Lawyers: G BASKAR
• Keywords: Business income; Proportionate interest; Retraction
• Section: 143(3); 142(1); 133A; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , # $ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 46/MDS/2015 / ASSESSMENT YEAR : 2010-11 INCOME TAX OFFICER, WARD 1 (2), ERODE. VS. SHRI G. RAMARAJ, NO. 25/1, KONGUNAGAR II STREET, KARUNGALPALAYAM, ERODE - 638 003. [PAN: AGQPR 4238R] ( / APPELLANT) ( / RESPONDENT) ./ I.T.A. NO. 2710/MDS/2014 / ASSESSMENT YEAR : 2010-11 INCOME TAX OFFICER, WARD 1 (2), ERODE. VS. SHRI N. MUTHUKRISHNAN, NO.1, NARAYANASAMY STREET, UZHAVAN NAGAR, ERODE - 638 009. [PAN: AHEPM 4475A] ( / APPELLANT) ( / RESPONDENT) ./ I.T.A. NO. 2691/MDS/2014 / ASSESSMENT YEAR : 2010-11 M/S. SREE SARAVANA FINANCIERS, NEW NO. 429/4, OLD NO. 725, A/4, VS. THE INCOME TAX OFFICER, WARD I (2), :-2-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 BROUGH ROAD, ERODE - 638 001. [PAN: AAIFS 7368H] 15, GANDHIJI ROAD, ERODE - 638 001. ( / APPELLANT) ( / RESPONDENT) ASSESSEE BY : SHRI G. BASKAR, ADVOCATE REVENUE BY : SHRI DURAI PANDIAN, JCIT , /DATE OF HEARING : 26.10.2016 , /DATE OF PRONOUNCEMENT : 24.01.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THESE ARE THE COMMON APPEALS FILED BY THE ASSESSE E AND THE REVENUE AGAINST THE DIFFERENT ORDERS OF CIT(A), WHE REAS THE ASSESSEE HAS FILED APPEAL ITA NO. 2691/MDS/2014 FOR THE ASSESSMENT YEA R 2010-11 AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I, IT A NO. 37/13-14 DATED 22.08.2014 PASSED U/S. 143(3) AND 250 OF THE INCOME TAX ACT. AND THE REVENUE FILED APPEAL ITA NO. 46/MDS/2015 AND ITA NO . 2710/MDS/2014 FOR THE ASSESSMENT YEAR 2010-11 AGAINST THE ORDER OF COMMIS SIONER OF INCOME TAX (APPEALS)-I, PASSED U/S. 143(3) AND 250 OF THE INCO ME TAX ACT. SINCE THE ISSUES ARE COMMON IN BOTH THE APPEALS AND ARE CLUBBED TOGE THER AND HEARD. AND FOR THE SAKE OF CONVENIENCE, WE TAKE UP THE FACTS NARRA TED IN ASSESSEE APPEAL ITA NO. 2691/MDS/2014. :-3-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN SUSTAINING PROTECTIVE ADDITION OF RS. 14,44,500/- BELONGING TO 88 DEPOSITORS, IN THE VIEW THAT THEY WERE REPAID DURING THE YEAR ENDED 31 .03.2010 OUT OF ASSESSEE FIRM'S UNEXPLAINED SOURCES 2.2 AS THE DEPOSITS HAD NOT BEEN HELD NON-GENUINE I N THE YEAR IN WHICH THEY WERE MADE, AND AS IT WAS NOT ACTUALLY FOUND THEY WE RE REPAID DURING THE RELEVANT YEAR, THE ADDITION OF RS. 14,44,500/- MADE TO INCOME ON ASSESSMENT, SHOULD NOT HAVE BEEN CONFIRMED. 2.3 THE STATEMENT MADE DURING A SURVEY BY PARTNER N . MUTHUKRISHNAN AND AGREED TO BY PARTNER G. RAMARAJ, THAT THEY REPAID C ERTAIN AMOUNTS TO DEPOSITORS SHOULD NOT HAVE LED TO INCREASING THE AS SESSEE FIRM'S INCOME. 2.4 MOREOVER THE SUPREME COURT HAS HELD IN 352 ITR 480 THAT A STATEMENT MADE DURING A SURVEY 'WOULD NOT HAVE ANY EVIDENTIAR Y VALUE AND THAT IT COULD NOT BE SAID, SOLELY ON THE BASIS OF THE STATE MENT GIVEN BY ONE OF THE PARTNERS OF THE ASSESSEE-FIRM, THAT THE DISCLOSED I NCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. 2.5 THERE HAS BEEN NO EVIDENCE OR SURROUNDING MATER IAL FOUND TO HOLD THAT AMOUNTS WERE REPAID TO DEPOSITORS, EXCEPT THE RETRA CTED STATEMENT OF PARTNERS AND THE LISTS FILED LATE CONSEQUENT THERET O :-4-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 2.6 NO ADDITION IS TO BE MADE ON BASIS OF SUCH CONF ESSION EXTRACTED DURING A SURVEY, ACCORDING TO COMMUNICATION DATED 10.03.2003 OF THE CENTRAL BOARD OF DIRECT TAXES REFERRED TO IN 214 CTR 589 MD S. 2.7 PARA 6 OF THE ORDER OF CIT(A) DATED 22.08.2014 PASSED IN ITA 36/13-14 IN THE APPEAL OF PARTNER N. MUTHUKRISHNAN HAS HELD AS FOLLOWS: ' THE ADDITION WAS MADE ONLY ON THE BASIS OF THE ST ATEMENT RECORDED, WHICH WAS RETRACTED BY THE ASSESSEE WHILE FILING THE RETURN OF INCOME. THE ASSESSING OFFICER HAS NOT MADE ANY ENQ UIRIES WITH THE DEPOSITORS EXCEPT SENDING LETTERS... WITHOUT ANY EV IDENCE... MAKING AN ADDITION... CANNOT BE UPHELD.' 2.8 THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL S) HAS NOT DEALT WITH CONTENTION RAISED BY FOLLOWING GROUND NO. 10 AS FOL LOWS: 'WHILE LETTERS ARE STATED TO HAVE BEEN ISSUED 273 D EPOSITORS LISTED BY PARTNER N. MUTHUKRISHNAN, IT IS NOT KNOWN WHETHE R ANY LETTER WAS ISSUED TO THE 245 CREDITORS, LISTED AS REPAID BY G. RAMRAJ.' 2.9 NOT HAVING HELD ANYTHING AGAINST THE CONTENTION MADE BY GROUND NO. 10 RS. 30,34,500/- OF 273 DEPOSITS SAID TO HAVE BEEN R EPAID BY PARTNER G. RAMRAJ, SHOULD HAVE BEEN DELETED, ESPECIALLY, WHEN NO LETTER APPEARS TO HAVE BEEN ISSUED TO ANY OF THESE DEPOSITORS. 2.10 THE COMMISSIONER OF INCOME TAX (APPEALS) SHOUL D HAVE DELETED ADDITION OF RS. 13,56,673/- MADE TOWARDS INTEREST; ATLEAST A LTERNATELY, A PROPORTIONATE RELIEF SHOULD HAVE BEEN GRANTED ON PR INCIPAL AMOUNTS OF RS. 11,08,500/- AND RS. 18.59.500/- DELETED BY THE APPE LLATE ORDER. :-5-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 2.11 ADDITION OF RS. 90,000/- MADE SHOULD NOT HAVE BEEN CONFIRMED ON THE GROUND THAT THE CONCERNED DEPOSITORS REPLIED AT ASS ESSEE'S BACK THAT THEY HAD NOT MADE THE DEPOSITS; THE DEPOSITS WERE NOT MA DE DURING THE RELEVANT YEAR ENDED 31.03.2010. 3. THE BRIEF FACTS OF THE CASE, THE ASSESSEE IS A P ARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF LENDING MONEY ON PRO-NOTE AND HI RE PURCHASE AND FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 30.08 .2011 WITH TOTAL INCOME RS. NIL. THE RETURN OF INCOME WAS PROCESSED U/S. 143(1 ) ON 29.11.2011. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S. 143(2) WAS ISSUED. IN COMPLIANCE TO THE NOTICE, THE LD. AR AN D MANAGING PARTNER OF THE FIRM APPEARED ON VARIOUS DATES AND THE CASE WAS DISCUSSE D. THERE WAS A SURVEY U/S. 133A AT THE BUSINESS PREMISES OF THE ASSESSEE FIRM ON 25.02.2010 IN THE FINANCIAL YEAR 2009-10 AND THE STATEMENT WAS RECORDED FROM TH E PARTNERS OF THE ASSESSEE'S FIRM N. MUTHUKRISHNAN AND IN REFERENCE TO THE STATEMENT OF QUESTION NO. 5, THE PARTNER OF THE FIRM EXPLAINED THAT THEY HAVE COLLECTED DEPOSITS FROM PUBLIC AND SUCH DEPOSITS COLLECTED BY THE PARTNERS WITH THEIR PERSONAL EFFORTS AND INTEREST IS PAID ON DEPOSITS FROM PUBLIC AND FURTHE R THEY CHARGE RS. 1.40 PER RS. 100 ON LOANS PROVIDED AND IN THE HEARING PROCEEDING S, LD. AR PRODUCED DAY BOOK, LEDGER, HIRE PURCHASE REGISTER, RECEIPT REGIS TER AND DEPOSITOR REGISTER. ON QUERY OF QUESTION NO. 7 IN RESPECT OF RECEIPT OF DE POSITS ISSUED, THE PARTNERS OF THE FIRM SUBMITTED THAT THE TOTAL DEPOSITS OF THE F IRM ARE BY THE EFFORTS OF THE PARTNERS AND INFORMATION IS AVAILABLE WITH THE PART NERS AND THE LD. AO ALSO :-6-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 REFERRED TO THE QUESTION NO. 9 OF THE STATEMENT AND THE ASSESSEE WAS CALLED TO SUBMIT THE NAME AND ADDRESS OF THE LOAN CREDITORS A GGREGATING TO RS. 1,17,96,313/- AS ON 31.03.2009 AND SIMILARLY THE SA ME AMOUNT WAS REFLECTED AS ON 31.03.2010. THE PARTNER OF THE FIRM SUBMITTED THAT AFTER 01.04.2009 RS. 75,00,000/- WAS REFUNDED TO THE DEPOSITORS BY THE P ARTNERS N. MUTHUKRISHNAN AND G. RAMARAJ AND BOTH THE PARTNERS IN THEIR INDIV IDUAL CAPACITY HAS ADMITTED THAT THEY SHALL OFFER INCOME OF RS. 45,00,000/- AND RS. 30,00,000/- RESPECTIVELY AND PAYING THE TAXES. IN THE CASE OF ASSESSEE PART NERSHIP FIRM WHICH HAS 273 LOAN DEPOSITORS AND RS. 45,02,500/- WAS REFUNDED BY N. MUTHUKRISHNAN AND PARTNER G. RAMARAJ HAS REFUNDED RS. 30,34,500/- AND ACCEPTED TO OFFER AS INCOME. WHEREAS, THE LD. AO FOUND THAT BOTH THE PA RTNERS HAVE FILED INCOME TAX RETURNS AND HAS NOT MADE DISCLOSURE OF THIS ADDITIO NAL INCOME CLAIMED TO BE ACCEPTED IN SURVEY PROCEEDINGS. WHEREAS, THE PARTN ER N. MUTHUKRISHNAN FILED RETURN OF INCOME ON 07.01.2011 ADMITTING RS. 1,48,3 70/- AND CLAIMED REFUND AND G. RAMARAJ FILED RETURN OF INCOME ON 16.03.2011 RS. 2,75,990/- AND CLAIMED REFUND. IN BOTH THE CASES, THE PARTNERS HAVE NOT A DMITTED ADDITIONAL INCOME OFFERED BY THEM OVER THE NORMAL BUSINESS INCOME AT THE TIME OF SURVEY. WHEREAS, THE ASSESSEE PARTNERSHIP FIRM FILED RETURN OF INCOME FOR THE SAID ASSESSMENT YEAR WITH NIL INCOME AND THE ASSESSING O FFICER FOUND THAT THE PARTNERS HAVE NOT ADMITTED ADDITIONAL INCOME AND TH E FIRM HAS ALSO NOT OFFERED INCOME IN THE ASSESSMENT YEAR 2010-11. :-7-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 4. ON FURTHER VERIFICATION, THE LD. AO FIND THERE A RE SIX PARTNERS ENGAGED IN FINANCING BUSINESS AND COPY OF REGISTERED PARTNERSH IP DEED WAS PRODUCED AND ON VERIFICATION OF FINANCIAL STATEMENTS AND BOOKS OF P ARTNERSHIP FIRM, THE ASSESSING OFFICER OBSERVED THAT THE DEPOSITS AS ON 31.03.2009 ARE RS. 1,17,96,303/- AND SAME BALANCE APPEARS ON 31.03.2010. THEREFORE, LD. AO ISSUED NOTICE U/S. 142(1) OF THE ACT CALLING FOR DETAILS. IN THE HEAR ING PROCEEDINGS, THE MANAGING PARTNER OF THE FIRM EXPLAINED THAT HE IS NOT MAINTA INING ANY PERSONAL BOOKS OF ACCOUNTS AND FURNISHED DETAILS AND ADDRESS OF LOAN DEPOSITORS AND EMPHASIZED THAT ALL THE DEPOSITS ARE GENUINE AND STILL OUTSTAN DING. THE ASSESSING OFFICER FOUND OUT OF 273 LETTERS ISSUED TO THE DEPOSITORS, 68 HAVE RESPONDED THAT THEY HAVE MADE DEPOSIT IN SARAVANA FINANCIERS AND IN 88 CASES IN RESPECT OF LETTERS ADDRESSED TO THE LOAN DEPOSITORS WERE RETURNED BY P OSTAL AUTHORITIES FOR INSUFFICIENT ADDRESS OR NO SUCH ADDRESSEE AND IN CA SE OF 5 DEPOSITS SUBMITTED THAT THEY HAVE NOT MADE ANY DEPOSITS AND REMAINING IN THE CASE OF 112 LETTERS THERE WAS NO RESPONSE FROM DEPOSITORS. THE LOAN DE POSITORS CONFIRMED THE DEPOSITS IN SARAVANA FINANCIERS RS. 11,08,500/- AND THE LOANS IN THE CASE OF LETTERS RETURNED BY POSTAL AUTHORITIES AMOUNTS TO R S. 14,44,500/- AND SIMILARLY IN THE CASE OF DENIAL OF LETTERS DEPOSITS ARE RS. 90,0 00/- AND IN 112 CASES THERE WAS NO RESPONSE FROM DEPOSITORS WHERE DEPOSITS ARE RS. 18,59,500/-. 5. THE ASSESSING OFFICER VERIFIED THE BOOKS OF ACCO UNTS PRODUCED AND THE DEPOSIT RECEIPT BOOKS, DAY BOOKS, LEDGER ACCOUNTS A ND ASSESSMENT OF THE PARTNERS. ON PERUSAL OF THE FACTS, THE ASSESSING O FFICER IS OF THE OPINION THAT RS. :-8-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 75,37,000/- WAS TO BE BROUGHT TO TAX IN THE HANDS O F THE ASSESSEE FIRM AND THERE ARE NO PROPER EXPLANATIONS ENVISAGED BY THE PARTNER S AS THE PARTNERS HAVE ACCEPTED THAT THEY SHALL OFFER THIS INCOME PERTAINI NG TO REPAYMENT TO THE DEPOSITORS AND THE ACCOUNTING CONCEPTS ADOPTED IN T HE BOOKS OF ACCOUNTS FROM EARLIER YEARS AND AS ON 31.03.2010 STILL THE BALANC E IS REFLECTED. THE ASSESSING OFFICER CONSIDERED THE FACTS, AND STATEMENT OF SURV EY OPERATIONS AND UNDISCLOSED INCOME IN THE HANDS OF THE PARTNERS AND HAS MADE A PROTECTIVE ASSESSMENT IN THE CASE OF ASSESSEE PARTNERSHIP FIRM. FURTHER, ON VERIFYING THE PROFIT AND LOSS ACCOUNT, THE LD. AO FOUND THAT AN AMOUNT OF RS. 21, 23,214/- WAS CLAIMED AS INTEREST ON LOAN DEPOSITORS AND THERE WAS NO ENTRIE S IN THE BOOKS OF ACCOUNTS AND THE ASSESSING OFFICER HAS WORKED OUT THE PROPORTION ATE INTEREST WHICH WAS WRONGLY CLAIMED. WHEREAS, THE AR EXPLAINED THAT SI NCE THERE IS A OBJECTION TO THE PROPOSED ADDITION OF DEPOSITS AND THE INTEREST CANNOT BE DISALLOWED. THE LD. AO FIND THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE FOR PAYMENT ON INTEREST TO LOAN CREDITORS AND THE EXPLANATIONS OF THE ASSESSEE THAT THE PARTNERS ARE LOOKING AFTER INTEREST COMPONENT IS WITHOUT ANY EVIDENCE. T HE LD. AO IDENTIFIES THAT SINCE THE INTEREST WAS DISALLOWED IN THE HANDS OF PARTNER S ON SUBSTANTIVE BASIS AND ON PROTECTIVE BASIS THE SAID AMOUNT WAS ADDED TO THE R ETURN OF INCOME AND PASSED ORDER WITH ADDITION OF DEPOSITS RS. 75,37,000/- AND PROPORTIONATE INTEREST RS. 13,56,673/- AND ASSESSED TOTAL INCOME U/S. 143(3) D ATED 15.02.2013. :-9-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 6. AGGRIEVED BY THE ORDER, ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) CONSIDERED THE SUBMISSIONS ON ASSESSMENT OF PARTNERS. THE LD AR REITERATED THE FACTS OF PARTNERS. THE CIT(A) HAS A NALYSED THE BACKGROUND AND CALCULATED THAT OUT OF 88 DEPOSITORS RETURNED BY TH E POSTAL AUTHORITIES AGGREGATING TO RS. 14,44,500/-IS TREATED AS ADDITIO N IN THE CASE OF THE FIRM AND SIMILARLY IN THE CASE OF 5 DEPOSITORS WHO HAVE STAT ED THAT THEY HAVE NOT DEPOSITED ANY AMOUNT WITH THE PARTNERS AGGREGATING TO RS. 90,000/- WAS CONFIRMED AND WHEREAS, THE LD. CIT(A) FOUND THAT IN THE CASE OF 68 LETTERS AGGREGATING TO RS. 11,08,500/- AS DEPOSITED IN SARA VANA FINANCIERS, ASSESSEE FIRM IS DIRECTED TO BE DELETED AND IN RESPECT OF 1 12 LOAN DEPOSITORS WHOM THE LETTER HAVE BEEN SENT AND THERE WAS NO RESPONSE, TH E LD. CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO DELETE RS. 18,59,500/- AND THE LD. CIT(A) DEALT ON THE PROPORTIONATE DISALLOWANCE OF INTEREST PAYMENTS AND DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE AND PARTLY ALL OWED THE APPEAL AND PASSED THE ORDER ON 22.08.2014. 7. AGGRIEVED BY THE ORDER, ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. AR ARGUED THAT THE CIT(A) HAS ER RED IN CONFIRMING THE ADDITION OF 88 DEPOSITORS MADE BY THE ASSESSING OFFICER ON P ROTECTIVE ADDITION IS WITHOUT BASIS AND THEY ARE TREATED AS NOT GENUINE. THE PAR TNERS HAVE REPAID TO DEPOSITORS AND THE LD. AR REFERRED TO THE PAPER BOO K REFLECTING THE BALANCE AS ON 31.03.2009 RS. 1,17,96,313/- IS CARRY FORWARD FOR T HE YEAR ENDING 31.03.2010 AND 31.03.2011 AND VEHEMENTLY ARGUED THAT THE PENDI NG BALANCE CANNOT BE :-10-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 CONSIDERED FOR ADDITION IN THE ASSESSMENT YEAR 2010 -11 AND SUPPORTED HIS ARGUMENTS BY RELYING ON THE JUDICIAL DECISIONS AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND MENTIONED THAT THE FIRM HAS NOT DEDUCTED TDS ON THE INTEREST AND SHOULD BE DISALLOWED AND ALSO THE PARTNERS HAVE NOT OFFERED S AID AMOUNT AS UNDISCLOSED INCOME IN THEIR INDIVIDUAL ASSESSMENTS. 8. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. AR CONTENTION THAT THE CIT(A) ERRED IN NOT GRANTING THE RELIEF IRRESPECTIVE OF THE FACT THAT THE LETTER S PERTAINING TO 88 DEPOSITORS AGGREGATING TO RS 14,44,500/- HAVE BEEN RETURNED BY THE POSTAL AUTHORITIES, WHERE THE INFORMATION PROVIDED WAS INSUFFICIENT ADD RESS OR NO SUCH ADDRESSEE. WE PERUSED THE ASSESSMENT ORDER FOUND THAT THE PART NERS HAVE MADE STATEMENTS BEFORE THE INCOME TAX AUTHORITIES IN THE SURVEY OPE RATION U/S. 133A OF THE ACT THAT THEY SHALL OFFER DEPOSIT AMOUNT AS ADDITIONAL INCOME OVER AND ABOVE THE NORMAL BUSINESS INCOME. THE ASSESSING OFFICER BASE D ON THE INFORMATION SUBMITTED BY THE ASSESSEE FIRM OF THE LOAN DEPOSITO RS SUBMITTED IN THE SURVEY OPERATION FOUND 273 LETTERS WERE ISSUED FOR THE CON FIRMATION. THE LD. AO DISCUSSED IN THE ASSESSMENT ORDER 88 DEPOSITORS HAV E NOT CONFIRMED AS IT WAS RETURNED BY POSTAL AUTHORITIES FOR INSUFFICIENT ADD RESS OR NO SUCH ADDRESSEE. THE LD. CIT(A) HAS CONSIDERED THE FACTS AND GRANTED PAR TIAL RELIEF. BUT THE FACT REMAINS THAT THE ASSESSING OFFICER HAS DEALT ONLY O N THE INFORMATION SUBMITTED BY THE ASSESSEE AND THERE IS INDEPENDENT ENQUIRY MADE BEFORE MAKING THE :-11-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 PROTECTIVE ASSESSMENT AND ALSO INTEREST WAS DISALLO WED PROPORTIONATELY. THE LD. AR DREW OUR ATTENTION TO THE PAPER BOOK FILED AND D EMONSTRATED THAT THE RETURN OF INCOME FILED BY THE ASSESSEE FIRM FOR THE ASSESS MENT YEAR 2009-10, 2010-11 AND 2011-12 AND THE BALANCE SHEET REFLECTS RS. 1,17 ,96,313/- AS DEPOSITS FROM FINANCIAL YEAR 2008-09. THE LD. AR REFERRED TO THE STATEMENT OF THE PARTNERS ALONG WITH THE LIST OF LOAN DEPOSITORS OF N. MUTHUK RISHNAN AT PAGE 27 TO 43 AND LIST OF DEPOSITORS OF G. RAMARAJA AT PAGE 44 TO 61 AND EXPLAINED THAT THE ASSESSING OFFICER HAD MADE A METICULOUS EXERCISE IN SENDING THE LETTERS BASED ON THE INFORMATION SUBMITTED BY THE PARTNERS AND THERE IS NO CLARITY OF VARIOUS ISSUES. THE ASSESSING OFFICER HAS RELIED ONLY ON T HE INFORMATION SUBMITTED BY THE ASSESSEE WITHOUT INDEPENDENT ENQUIRY AND NO COGENT MATERIAL WAS FOUND IN SURVEY OPERATION AND ALSO THE ASSESSEE FIRM COULD N OT SUBSTANTIATE THAT THE SAID AMOUNT WAS REPAID FROM THE BOOKS OF ACCOUNTS AND EN TRIES WERE NOT PASSED. WHEREAS, THE PARTNERS CLAIMED THAT THEY HAVE REPAID TO LOAN DEPOSITORS OUT OF UNDISCLOSED INCOME AND SUCH UNDISCLOSED AMOUNT WAS NOT OFFERED IN THEIR INDIVIDUAL ASSESSMENT. 9. CONSIDERING THE APPARENT FACTS, MATERIAL ON RECO RD AND THE PAPER BOOK FILED AND THE FINDINGS OF THE ASSESSING OFFICER, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER MADE A PROTECTIVE ASSESSMENT IN T HE INTEREST OF REVENUE AS ASSESSMENT WAS TIME BARRED BY LIMITATION. THERE IS NO CLARITY ON WHETHER THE DISPUTED AMOUNT HAS TO BE TAXED IN THE HANDS OF THE ASSESSEE FIRM OR IN THE HANDS OF THE PARTNERS. WE ARE OF THE OPINION THAT THE MATTER HAS TO BE :-12-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 EXHAUSTIVELY WORKED OUT AND RE-EXAMINED BY THE ASSE SSING OFFICER ON COMPARISON OF THE PARTNERS SOURCES AND ASSESSEES F IRM. FURTHER, THE CONFIRMATIONS WHICH ARE RETURNED BY POSTAL AUTHORIT IES FOR VARIOUS REASONS CANNOT BE CONSIDERED AS NO SOURCE. THE ASSESSING OFFICER SHALL VERIFY THE GENUINENESS OF TRANSACTIONS AND TAKE EFFECTIVE STEPS TO GET THE SUBSTANTIAL INFORMATION FROM THE LOAN CREDITORS, WHO HAVE NOT FILED THE CONFIRMA TION. AND THE ASSESSEE SHOULD BE PROVIDED WITH ADEQUATE OPPORTUNITY TO MAKE SUBMI SSIONS AND SHALL CO-OPERATE IN GETTING THE DETAILS FROM LOAN CREDITORS BEFORE T HE PASSING THE ORDER BY THE ASSESSING OFFICER. ACCORDINGLY, WE REMIT THE DISPU TED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATIONS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE. 11. WE TAKE UP THE REVENUE APPEAL IN ITA NO. 2710/M DS/2014, OF N. MUTHUKRISHNAN. THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: 11.1 THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I IS NOT JUSTIFIED IN DELETING THE ADDITION OF G 45,02,500/- ON ACCOUNT OF UNEXPLA INED SOURCES OF REPAYMENT OF DEPOSITS BY THE ASSESSEE ON BEHALF OF THE FIRM. 11.2 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I S NOT JUSTIFIED IN DELETING THE ADDITION OF G 8,10,404/- ON ACCOUNT OF INTEREST PAID TOWARDS THE DEPOSITS OF THE FIRM WHICH WERE MOBILIZED BY HIM ON BEHALF OF THE FIRM. 11.3 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) O UGHT TO HAVE OBSERVED THAT THE ASSESSEE HAD MADE A CATEGORICAL STATEMENT THAT HE HAD REPAID THE DEPOSITS OF THE FIRM WHICH WERE MOBILIZED BY HI M ON BEHALF OF THE FIRM. :-13-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 11.4 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) O UGHT TO HAVE OBSERVED THAT THE ASSESSEE HAD CONFIRMED IN HIS OWN HANDWRIT ING IN THE STATEMENT RECORDED AT THE TIME OF SURVEY THAT HE HAD READ THE STATEMENT, IT WAS RECORDED AS STATED BY HIM, THE STATEMENT WAS TRUE T O THE BEST OF HIS INFORMATION AND KNOWLEDGE, THE STATEMENT WAS GIVEN BY HIM VOLUNTARILY WITHOUT ANY FORCE, INFLUENCE OR COERCION. 11.5 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) O UGHT TO HAVE OBSERVED THAT THERE IS NO FORMAL RETRACTION OF THE STATEMENT GIVEN BY THE ASSESSEE AT THE TIME OF SURVEY, IMMEDIATELY AFTER SURVEY AND THAT RETRACTION WAS ONLY MUCH LATER IN THE FORM OF FILING RETURN OF INC OME WITHOUT DISCLOSING THE INCOME ADMITTING AT THE TIME OF SURVEY. 11.6 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) O UGHT TO HAVE OBSERVED THAT THE REASON FOR RETRACTION AS SUBMITTED BY THE ASSESSEE THAT HE WAS UNDER CONFUSED SITUATION AND GAVE AN ADMISSION AT T HE TIME OF SURVEY AND THAT THE ASSESSEE HAD FURNISHED THE LIST OF DEPOSIT ORS TO WHOM HE HAD MADE THE REPAYMENTS, WELL AHEAD OF THE DATE OF SURV EY. 11.7 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) O UGHT TO HAVE OBSERVED THAT THE RETRACTION BY THE ASSESSEE IS CLEARLY AN A FTER THOUGHT SINCE HIS CONFUSED SITUATION WOULD NOT HAVE CONTINUED TILL TH E DATE OF FILING THE LIST OF DEPOSITORS TO WHOM HE HAD MADE THE REPAYMENTS, BEFO RE THE AO. 12. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE I S A PARTNER OF M/S. SARAVANA FINANCIERS AND FILED THE RETURN OF INCOME FOR THE A SSESSMENT YEAR 2010-11 ON :-14-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 07.01.2011 WITH TOTAL INCOME OF RS. 1,48,370/- AND PASSED U/S. 143(1) ON 12.04.2011. SUBSEQUENTLY, THE CASE WAS SELECTED FO R SCRUTINY AND NOTICE U/S. 143(2) WAS ISSUED. THERE WAS SURVEY OPERATIONS IN THE BUSINESS PREMISES OF M/S. SARAVANA FINANCIERS ON 25.02.2010. WHEREAS, T HE ASSESSEE IS THE MANAGING PARTNER AS DISCUSSED IN THE ASSESSMENT OF ASSESSEE S FIRM. THE ASSESSING OFFICER HAS MADE THE ELABORATE FINDINGS, WHEREAS, THE PARTN ERS HAVE FILED RETURN OF INCOME WITHOUT ADMITTING THE ADDITIONAL INCOME OFFE RED BY THEM IN THE SURVEY OPERATION. THE CONTENTION OF THE LD. AR, THE ASSES SEE N. MUTHUKRISHNAN HAS REPAID LOAN DEPOSITS RS. 45,02,500/- AND G. RAMARAJ RS. 30,34,500/-. THE LD. AO DISCUSSED THIS ISSUE IN THE ASSESSMENT OF FIRM A T PAGE 3 AND 4 OF THE ORDER. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS A DMITTED THE AMOUNT DURING THE COURSE OF SURVEY OPERATION AND ALSO SUBMITTED L IST OF DEPOSITORS, WHEREAS, CONFIRMATION WAS RECEIVED TO THE EXTENT OF RS. 11,0 8,500/- ONLY, AND IT WAS NOT CLEAR WHETHER THE REFUND OF DEPOSITS IS MADE COMPLE TELY OR NOT. THEREFORE, THE ASSESSING OFFICER IS OF THE OPINION THAT THE AMOUNT OF RS. 45,02,500/- CLAIMED BY THE ASSESSEE TOWARDS REPAYMENT OF LOAN DEPOSITS OUT OF UNDISCLOSED SOURCE AND HENCE MADE ADDITION. SIMILARLY, THE ASSESSING OFFI CER DEALT ON PROPORTIONATE DISALLOWANCE OF INTEREST ON DEPOSITS WHERE SUCH DEP OSITS ARE COLLECTED BY THE INDIVIDUAL PARTNER WITH THEIR EFFORTS AND ALSO THER E IS NO INFORMATION OF PAYMENT OF INTEREST. WITH THESE OBSERVATIONS THE ASSESSING OFFICER MADE ADDITION OF LOAN AMOUNT RS. 45,02,500/- AND PROPORTIONATE INTEREST O N DEPOSITS RS. 8,10,404/- AND PASSED ORDER U/S. 143(3) DATED 15.02.2013 WITH ASSESSED INCOME OF RS. 54,61,270/-. :-15-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 13. AGGRIEVED BY THE ORDER, ASSESSEE FILED AN APPEA L BEFORE THE CIT(A). THE LD. CIT(A) HAS CONSIDERED THE GROUNDS AND THE FACTS AND THE ASSESSMENT OF THE FIRM AND CAME TO A FINAL CONCLUSION RELYING ON THE LETTERS SENT BY THE ASSESSEE AND ALSO THE DEPOSITORS HAVE CONFIRMED OF MAKING DE POSITS WITH M/S. SARAVANA FINANCIERS AND ALLOWED THE APPEAL REFERRED AT PAGE 5 PARA 6 WHICH IS READ AS UNDER: 6. COMING TO THIS, ANY ABERRATIONS, OR IF IT IS P ROVED THAT THE DEPOSITORS WERE BOGUS, THE ADDITION HAS TO BE MADE IN THE CASE OF THE FIRM M/S. SRI SARAVANA FINANCIERS. THE ASSESSING OFFICE R WITHOUT ANY CORROBORATIVE EVIDENCE HAS MADE THE ADDITION OF RS. 45,02,500/- I N THE HANDS OF THE APPELLANT. THE ADDITION WAS MADE ONLY ON THE BASIS OF THE STATEMENT RECORDED, WHICH WAS RETRACTED BY THE ASSESSEE WHILE FILING HIS RETURN OF INCOME. THE ASSESSING OFFICER HAS NOT MADE ANY ENQ UIRIES WITH THE DEPOSITORS EXCEPT FOR SENDING LETTERS. NOTHING WAS ESTABLISHED BY THE ASSESSING OFFICER, IT WAS PROVED THAT THE DEPOSITS WERE REPAID BY SHRI N. MUTHUKRISHNAN OUT OF HIS UNEXPLAINED INCOME. COMIN G TO THE LETTERS ADDRESSED BY THE ASSESSING OFFICER, IT WAS PROVED T HAT THE AMOUNT TO THE EXTENT OF RS. 11,08,500/- WAS DEPOSITED BY 88 DEPOS ITORS AND IN THE CASE OF 112 DEPOSITORS THERE WAS NO RESPONSE. THIS AMOUNT WAS RS. 18,59,500/-. AS SEEN FROM THE SURVEY FOLDER, THE DEPOSITS WERE VARY ING FROM RS. 10,000/- TO RS. 20,000/- AS SUBMITTED BY THE AUTHORIZED REPRESE NTATIVE. IN MY OPINION, THE GENUINENESS OF THE DEPOSITS MADE HAVE TO BE EXA MINED AND IF ESTABLISHED THAT SOME OF THE DEPOSITS ARE NOT GENUINE, THEN ADD ITION MAY HAVE TO BE MADE IN THE HANDS OF THE FIRM OR IN THE HANDS OF TH E PARTNERS, IF IT IS ESTABLISHED THAT THE UNACCOUNTED DEPOSITS WERE INVE STED BY THEM. WITHOUT ANY EVIDENCE COLLECTED BY THE ASSESSING OFFICER, MA KING AN ADDITION OF RS. 45,02,500/- IN THE HANDS OF THE APPELLANT BASED ONL Y ON THE STATEMENT RECORDED DURING THE COURSE OF SURVEY WITHOUT ANY SU PPORTING EVIDENCE CANNOT :-16-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 BE UPHELD. THE ASSESSING OFFICER IS DIRECTED TO DE LETE THE ADDITION. THE GROUNDS OF APPEAL ARE ALLOWED. 7. THE OTHER ISSUE ON THE GROUNDS OF APPEAL IS REGA RDING THE ADDITION OF INTEREST INCOME IN THE HANDS OF THE APP ELLANT. AS SUBMITTED BY THE APPELLANT NO INTEREST TO THE FIRMS DEPOSITORS HAVE BEEN CLAIMED BY THE APPELLANT, AS SUCH NO PART OF THE INTEREST CAN BE A DDED AS APPELLANTS INCOME. THIS GROUND OF APPEAL IS ALLOWED. 14. AGGRIEVED BY THE ORDER, REVENUE HAS FILED AN A PPEAL WITH TRIBUNAL. THE LD. DR ARGUED THAT THE CIT(A) HAD ERRED IN DELE TING THE ADDITION IN THE CASE OF ASSESSEE AS THE SOURCE IS UNEXPLAINED AND INTERE ST PAID TOWARDS DEPOSITS. WHEREAS, THE ASSESSEE SUBMITTED THAT THEY REPAID TH E DEPOSITS, WHICH WAS MOBILIZED ON BEHALF OF THE FIRM. IN THE SURVEY OPE RATIONS U/S. 133A OF THE ACT, ASSESSEE HAS VOLUNTARILY ACCEPTED AND SHALL OFFER S UCH INCOME IN THE INCOME TAX RETURNS. THE LD. CIT(A) HAS ALLOWED THE APPEAL IRR ESPECTIVE OF THE FACT THAT THE STATEMENT WAS GIVEN BY THE ASSESSEE AT THE TIME OF SURVEY OPERATION, WHEREAS, RETRACTION WAS MADE ONLY AT THE TIME OF FILING THE RETURN OF INCOME. THE ASSESSING OFFICER HAVE MADE AN EXHAUSTIVE ANALYTICA L TASK AND SENT 273 LETTERS TO LOAN DEPOSITORS AND PRAYED FOR SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE REVENUE APPEAL. CONTRA, THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 15. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS. THE LD. DR CONTENTION THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 45,02,500/- ON ACCOUNT OF UNEXP LAINED SOURCE FOR REPAYMENT ON DEPOSITS AND SIMILARLY RS. 8,10,404/- TOWARDS I NTEREST PAYMENT ON DEPOSITS. :-17-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 THE FACT REMAINS THAT THE ASSESSING OFFICER MADE SU BSTANTIVE ASSESSMENT IN THE HANDS OF THE PARTNERS BASED ON THE STATEMENT MADE I N SURVEY OPERATIONS U/S. 133A THAT THEY SHALL OFFER THIS INCOME AS UNDISCLOS ED INCOME IN THE INCOME TAX ASSESSMENT. FURTHER, THE PARTNERS BEFORE THE ASSES SING OFFICER CONFIRMED THESE ASPECTS. AT THE TIME OF FILING THE RETURN, THE PAR TNERS HAVE NOT INCLUDED THIS INCOME IN THEIR INDIVIDUAL CAPACITY AND MADE VARIOU S ALLEGATIONS AND SHIFTED THE BURDEN TO THE FIRM AND THERE IS NO CONFIRMATION FRO M THE LOAN DEPOSITORS. THE ASSESSING OFFICER HAS SENT 273 LETTERS TO LOAN DEPO SITORS AND MADE DISALLOWANCE IN THE HANDS OF THE FIRM ON PROTECTIVE BASIS. WHER EAS, THE ADDITION IN THE HANDS OF THE PARTNERS/ASSESSEE IS ON SUBSTANTIVE BASIS AN D THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. CONSIDERING THE FACTS THAT THE AMOUNT HAS BEEN TAXED IN THE HANDS OF FIRM BUT ON PERUSAL OF THE AS SESSMENT ORDER OF THE PARTNERS, THE LD. AO HAS MADE SIMILAR ADDITION. TH E LD. CIT(A) SHOULD HAVE CALLED FOR THE REMAND REPORT OR COMMENTS FROM THE A SSESSING OFFICER WHEN THERE IS SUBSTANTIVE ASSESSMENT AND PROTECTIVE ASSE SSMENT. THEREFORE, IN THE INTEREST OF THE JUSTICE, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) CANNOT BE SUSTAINED AND CONSIDERING THE FINANCIAL TRANSACT IONS BETWEEN THE PARTNERS AND THE FIRM. ACCORDINGLY, WE REMIT THE MATTER TO THE ASSESSING OFFICER TO EXAMINE/VERIFY THE TRANSACTIONS WITH THE FIRM ASSES SMENT AND DECIDE THE ISSUE ON MERITS AND ASSESSEE SHALL BE PROVIDED WITH ADEQUATE OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER AND GROUNDS OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. :-18-: I.T.A. NOS. 46/MDS/2015, 2691 & 2710/MDS/2014 16. IN THE RESULT, THE REVENUE APPEAL IS ALLOWED FO R STATISTICAL PURPOSE. 17. SIMILARLY, IN THE CASE OF PARTNER G. RAMARAJ IN ITA NO. 46/MDS/2015 FOR THE ASSESSMENT YEAR 2010-11 IS ALSO SET ASIDE TO TH E ASSESSING OFFICER AND REVENUE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 18. IN THE RESULT, THE ASSESSEE APPEAL FILED IN THE CASE OF PARTNERSHIP FIRM AND REVENUE APPEAL FILED IN THE CASE OF PARTNERS AR E ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 24TH DAY OF JANUAR Y, 2017 AT CHENNAI. SD/- ( ' ) (CHANDRA POOJARI) $ / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) * $ /JUDICIAL MEMBER /CHENNAI, 3 /DATED: 24TH JANUARY, 2017 JPV , 5#67 87 /COPY TO: 1. ASSESSEE 2. REVENUE 3. 9 ( )/CIT(A) 4. 9 /CIT 5. 7 5## /DR 6. < /GF