ITO Ward 1, Kumbakonam V. N.Balakrishnan, Kumbakonam

ITA 3212/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5169 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: N QUADIR HOSEYN DR L NATARAJAN
• Keywords: Unexplained investment; Peak credit
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.3212/CHNY/2017 ( )( / ASSESSMENT YEAR : 2011-12 THE INCOME TAX OFFICER, WARD 1, GANDHI NAGAR, KUMBAKONAM. V. SHRI N. BALAKRISHNAN, NO.37/13, SINGARAM CHETTY STREET, KUMBAKONAM. PAN : AMWPB 0637 J (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI V. NANDAKUMAR, JCIT -.+, / 0 / RESPONDENT BY : SHRI N. QUADIR HOSEYN, ADVOCAT E DR. L. NATARAJAN, CA 1 / 2% / DATE OF HEARING : 16.05.2018 3') / 2% / DATE OF PRONOUNCEMENT : 31.05.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, TIRUCH IRAPALLI, DATED 24.10.2017 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. SHRI V. NANDAKUMAR, THE LD. DEPARTMENTAL REPRESE NTATIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS ADDITION 2 I.T.A. NO.3212/CHNY/17 MADE BY THE ASSESSING OFFICER UNDER SECTION 68 OF T HE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') ON ACCOUNT OF UNEXPL AINED CASH DEPOSIT IN THE BANK ACCOUNT. THE LD. D.R. SUBMITTED THAT T HE ASSESSEE HAD TRANSACTION WITH AXIS BANK, KUMBAKONAM BRANCH. ACC ORDING TO THE LD. D.R., THE ASSESSEE DEPOSITED 1,32,19,464/-, OUT OF WHICH 63,04,950/- WAS IN CASH. ON A QUERY FROM THE BENCH , THE LD. D.R. CLARIFIED THAT THE ASSESSEE IS ENGAGED HIMSELF IN T HE BUSINESS OF FINANCING. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO RECEIVED 37,31,260/- FROM M/S SREE GOKULAM CHITS AND FINANCE ON 27.09.2010. AS PER THE INFORMATION RECE IVED FROM M/S SREE GOKULAM CHITS AND FINANCE, THE ASSESSEE HAS SU BSCRIBED TO TWO CHITS OF 25 LAKHS EACH. THE NET CONTRIBUTION MADE BY THE ASSESSEE WAS 18,74,000/-. SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE FOR DEPOSIT IN AXIS BANK, ACCORDING TO T HE LD. D.R., THE ASSESSING OFFICER FOUND THAT THERE WAS UNEXPLAINED INVESTMENT IN THE BANK ACCOUNT TO THE EXTENT OF 1,32,19,464/-. THE ASSESSING OFFICER HAS ALSO ADDED THE CONTRIBUTION MADE TO THE CHITS TO THE EXTENT OF 18,74,000/- AND AFTER REDUCING THE CHIT AMOUNT RECE IVED FROM M/S SREE GOKULAM CHITS AND FINANCE, AN ADDITIO N OF 94,88,204/- WAS MADE. THEREFORE, ACCORDING TO THE LD. D.R., THE 3 I.T.A. NO.3212/CHNY/17 CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE ADDIT ION MADE BY THE ASSESSING OFFICER. 3. ON THE CONTRARY, SHRI N. QUADIR HOSEYN, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS ENGAGE D IN THE BUSINESS OF MONEY LENDING. THE MONEY DEPOSITED IN AXIS BANK IS NOTHING BUT THE MONEY ROTATED IN THE MONEY LENDING BUSINESS. REFERRING TO PAGE 4 OF THE ASSESSMENT ORDER, MORE P ARTICULARLY THE FIRST PARAGRAPH, THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HIMSELF OBSERVED IN THE ASSESSMENT ORDER THAT AFTER ARRIVING AT THE INTEREST INCOME OF 9,37,135/-, THE INCOME OF THE ASSESSEE WAS AGAIN WORKED OUT AT 22.73% WHICH COMES TO 2,13,011/-. AFTER ADJUSTMENT OF CHIT CONTRIBUTION AND CHIT DISCOUNTS, THE NET ADDITIONAL INCOME ON THE UNACCOUNTED TRANSACTIONS IN AXIS BANK IS ONLY 1,44,271/-. WHEN THE ASSESSING OFFICER MADE A CATE GORICAL FINDING THAT THE UNACCOUNTED MONEY IN AXIS BANK WAS ARRIVED AT 1,44,271/-, ACCORDING TO THE LD. COUNSEL, HE CANNOT MAKE AN ADDITION OF 1,32,19,464/-. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER ASSESSED EXCESS INCOME. DURING T HE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE FILED A REVISED COMPUTATION RECONCILING THE ENTIRE DEPOSITS AND RECEIPTS, WHICH WAS ACCEPTED BY 4 I.T.A. NO.3212/CHNY/17 THE ASSESSING OFFICER. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) IS RIGHT IN UPHOLDING THE ADDITION TO THE EXTENT OF 19,87,135/-. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MONEY LENDIN G. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT THE AS SESSEE USE TO LEND LOAN VARYING FROM 50,000/- TO 5,00,000/- PER INDIVIDUAL. THE INTEREST CHARGED BY THE ASSESSEE COMES TO 12% TO 15 % FLAT. THE OVERALL RATE AS PER THE ORDERS OF THE LOWER AUTHORI TIES COMES TO 22% TO 24%. THE ASSESSING OFFICER ADDED THE DEPOSIT MA DE IN THE AXIS BANK. SINCE THE ASSESSEE IS ENGAGED IN THE BUSINES S OF MONEY LENDING, THE CASH IN ANY FORM IS A STOCK-IN-TRADE I N THE HANDS OF THE ASSESSEE AND NOT INVESTMENT AS RIGHTLY OBSERVED BY THE CIT(APPEALS). THEREFORE, ONLY THE PROFIT HAS TO BE ASSESSED AS INCOME AND NOT THE VALUE OF STOCK. HENCE, THE CIT( APPEALS) FOUND THAT THE ENTIRE DEPOSITS IN THE AXIS BANK IS ONLY A CAPITAL. THEREFORE, THE PEAK CREDIT THEORY HAS TO BE APPLIED OR THE ADD ITIONAL INTEREST AT THE SAME RATE AT WHICH EXPENSES WERE CLAIMED WHILE FILING RETURN OF INCOME HAS TO BE ESTIMATED. THE CIT(APPEALS) FOUND THAT THE PEAK 5 I.T.A. NO.3212/CHNY/17 CREDIT COMES NEARLY TO 2,69,250/-. THE CIT(APPEALS) HAS ALSO FOUND THAT THE UNACCOUNTED DEPOSIT AT THE RATE OF 2 4% COMES TO 9,37,135/-. SINCE THE INTEREST INCOME AT THE RATE OF 25% IS HIGHER THAN THE PEAK CREDIT, HE ADOPTED THE SAME AND SUSTA INED. 5. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE A SSESSEE, THE ASSESSING OFFICER HIMSELF OBSERVED AT PAGE 4 OF THE ASSESSMENT ORDER AS FOLLOWS:- HOWEVER, AFTER ARRIVING AT THE INTEREST INCOME AT 9,37,135/- THE INCOME OF THE ASSESSEE HAS BEEN AGAIN WORKED OUT AT 22.73% AMOUNTING TO 2,13,011/- AND AFTER ADJUSTMENT OF THE CHITS CONTRIBUTION AND THE CHITS DISCOUNTS, THE NET ADDITIONAL INCOME ON THE UNACCOU NTED TRANSACTIONS IN THE AXIS BANK LTD., KUMBAKONAM BRANC H WAS ARRIVED AT 1,44,271/-. 6. THEREFORE, THE ASSESSING OFFICER CANNOT GO BACK BEYOND HIS OBSERVATION REPRODUCED ABOVE AND MAKE ADDITION OF 1,32,19,464/-. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. 6 I.T.A. NO.3212/CHNY/17 ORDER PRONOUNCED ON 31 ST MAY, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 31 ST MAY, 2018. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-1, TRICHY 4. PRINCIPAL CIT, TRICHY-2, TRICHY 5. 7: -2 /DR 6. ;( < /GF.