Kanchana Bharath Alias V.S.Lakshmi, Madurai V. ACIT, Madurai

ITA 337/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2546 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 16-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RU GEORGE SHRI S DASGUPTA
• Assessee Lawyers: T BANUSEKAR
• Keywords: Unexplained investment; Deemed to accrue or arise in india; Revised return
• Section: 80C; 143(3); 133A; 131; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 576/MDS/2012 & C.O. NO. 71/MDS/2012 (IN I.T.A. NO. 576/MDS/2012) ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE III, MADURAI. (APPELLANT) V. SHRI R. BHARAGTHWAJ, PROP. M/S M.R. SONS, NO.39, HARVEY NAGAR II STREET, MADURAI 16. PAN : ACIPB 6349 K (RESPONDENT & CROSS-OBJECTOR) I.T.A. NOS. 337 & 338/MDS/2012 (ASSESSMENT YEARS : 2007-08 & 2008-09) SMT. KANCHANA BHARAT ALIAS V.S. LAKSHMI, W/O SHRI R. BHARAGTHWAJ, NO.39, HARVEY NAGAR II STREET, MADURAI 625 016. PAN : AFWPK 2354 J (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, MADURAI. (RESPONDENT) ASSESSEES BY : SHRI T. BANUSEKAR, CA REVENUE BY : SMT. RUBY GEORGE, CIT-DR SHRI S. DASGUPTA, JCIT DATE OF HEARING : 18.04.2013 DATE OF PRONOUNCEMENT : 09.05.2013 2 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : FIRST SET IS AN APPEAL AND CROSS-OBJECTION FILED BY THE REVENUE AND ASSESSEE RESPECTIVELY, AGAINST AN ORDER DATED 2 3.12.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-II, MADURAI, W HEREAS, SECOND SET IS THE APPEALS OF THE WIFE OF THE ASSESSEE, AGA INST A COMMON ORDER DATED 26.12.2011 OF COMMISSIONER OF INCOME TAX (APP EALS)-I, MADURAI. 2. APPEAL AND CROSS-OBJECTION IN THE CASE OF SHRI R . BHARAGTHWAJ ARE FIRST TAKEN UP FOR DISPOSAL. 3. FACTS APROPOS ARE THAT ASSESSEE, A REDISTRIBUTIO N STOCKIEST FOR FMCG PRODUCTS AND DEALER IN LPG STOVES, ALSO DOING FINANCE BUSINESS, HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YE AR, ON 24.11.2008 DECLARING AN INCOME OF ` 19,32,740/-. THE RETURNED INCOME OF ` 19,32,740/- WAS ARRIVED AT AS UNDER:- (I) INCOME FROM HOUSE PROPERTY ` 4,78,653 (II) PROFITS AND GAINS FROM BUSINESS NIL (III) INCOME FROM OTHER SOURCES ` 2,28,06,675 TOTAL ` 2,32,85,128 LESS : BUSINESS LOSS SET OFF U/S 71 ` 2,12,52,385 BALANCE ` 20,32,743 LESS : DEDUCTION U/S 80C (CHAPTER VIA) ` 1,00,000 TAXABLE INCOME ` 19,32,743 3 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 THE WORK-OUT OF BUSINESS LOSS ON WHICH CLAIM FOR SE T OFF WAS MADE WAS AS UNDER:- INCOME FROM LPG STOVE BUSINESS ` 50,45,075 INCOME FROM MUTUAL FUND TRADING ` 41,801 TOTAL ` 50,76,880 (A) LOSS FROM DERIVATIVE TRADING ( - ) ` 2,25,36,879 LOSS FROM COMMODITY TRADING ( - ) ` 26,655 LOSS FROM EQUITY SHARES DAY TRADING ( - ) ` 37,75,731 TOTAL ` 2,63,39,265 (B) NET LOSS [(A) (B)] ( - ) ` 2,12,52,385 (C) BREAK-UP OF THE INCOME FROM OTHER SOURCES FORMING P ART OF THE RETURNED INCOME WAS AS UNDER:- INCOME FROM OTHER SOURCES ` 2,18,50,000 INTEREST FROM OTHERS ` 9,56,475 TOTAL ` 2,28,06,475 4. RETURN FILED WAS PROCESSED UNDER SECTION 143(1) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') INITIALLY AND LATER SELECTED FOR SCRUTINY. MEANWHILE, A SURVEY UNDER SECTION 133A OF THE ACT W AS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE, ON 20.10.200 9. AS PER A.O., DURING SUCH SURVEY, IT WAS FOUND THAT ASSESSEE WAS INVOLVED IN FINANCE BUSINESS. ASSESSEE WAS THE PROPRIETOR OF A CONCERN CALLED M/S M.R. & SONS. OTHER ASSESSEE IN THE SECOND SET OF APPEALS, WHO IS THE WIFE OF THE ASSESSEE, WAS THE PROPRIETRESS OF ONE M/S M.R. ASSOCIATES. 4 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 5. THE ADDITIONS, WHICH WERE DELETED BY THE CIT(APP EALS) ON WHICH REVENUE IS ON APPEAL BEFORE US, IS RELATED TO A DEB TOR NAMED SHRI SEETHARAMAN. SHRI SEETHARAMAN WAS MANAGING DIRECTO R OF ONE M/S VISVAS PROMOTERS (P) LTD. BOOKS OF ACCOUNTS OF M/S M.R. & SONS FOR THE FINANCIAL YEAR 2009-10 REFLECTED A RECEIVABLE OF ` 50 LAKHS FROM SHRI SEETHARAMAN. AS PER THE A.O., ENQUIRIES MADE WITH SHRI SEETHARAMAN REVEALED THAT HE HAD PAID A SUM OF ` 3 CRORES IN THE FORM OF PRINCIPAL AND INTEREST TO THE ASSESSEE. FURTHER, AS PER THE A.O., THE SAID SHRI SEETHARAMAN HAD TAKEN A LOAN FROM THE ASSESSEE PRIO R TO FINANCIAL YEAR 2002-03 AND THEREAFTER WAS PAYING INTEREST ON SUCH LOAN AT THE RATE OF 30%. THE INTEREST, AS PER THE A.O., WAS COMPOUNDED ON A MONTHLY BASIS. SHRI SEETHARAMAN HAD SHOWN THE RE-PAYMENTS OF LOAN TAKEN FROM THE ASSESSEE THROUGH THE BOOKS OF M/S VISVAS PROMOT ERS (P) LTD. 6. AS PER THE A.O., THOUGH THE LOAN TAKEN BY SHRI S EETHARAMAN WAS NEVER SHOWN IN THE BOOKS, RE-PAYMENTS WERE REFLECTE D IN THE BOOKS OF M/S VISVAS PROMOTERS (P) LTD. RE-PAYMENTS OF LOAN WERE NOT DIRECTLY TO THE ASSESSEE, BUT, THROUGH ONE SHRI T. RAMANUJAN, W HO WAS CHARTERED ACCOUNTANT OF THE ASSESSEE. PAYMENTS WERE EFFECTED BY M/S VISVAS PROMOTERS (P) LTD., BY CHEQUES TO SHRI T. RAMANUJAM AND HIS FAMILY MEMBERS. SUMMONS WERE ISSUED TO SHRI T. RAMANUJAM ON 20.10.2009, 5 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 AND IT SEEMS HE STATED THAT THE ENTIRE MONEY WAS GI VEN BACK TO THE ASSESSEE BY WITHDRAWALS IN CASH AND ALSO BY WAY OF CHEQUES FROM HIS AND HIS WIFES BANK ACCOUNTS. 7. THEREAFTER, A SWORN STATEMENT UNDER SECTION 131 OF THE ACT WAS RECORDED FROM THE ASSESSEE. IN THE SAID SWORN STAT EMENT, IN ANSWER TO QUESTION NO.2, ASSESSEE STATED AS UNDER:- QUESTION NO.2 DURING THE COURSE OF SURVEY, IT APPEARS THAT THERE IS SUPPRESSION OF INCOME, PARTICULARLY IN THE MONEY LENDING BUSINESS. ALSO IN THE COURSE OF SURVEY IT WAS FOUN D THAT THE CREDIT BALANCES APPEARING IN THE NAMES OF SUPPLIERS AND DI STRIBUTORS WERE NOT TRUE FIGURE. KINDLY BRIEF IN DETAIL. ANS . PURSUANT TO THE SURVEY CARRIED OUT IN MY PREMISES ON 20-10- 2009 AND THE SUBSEQUENT REPRESENTATION AND SUBMISSION M ADE ON PERSONAL APPEARANCES, I WOULD LIKE TO SUBMIT THE FO LLOWING FOR YOUR KIND AND SYMPATHETIC CONSIDERATION. I STARTED MY BUSINESS IN THE YEAR 1989 AS A STOCKIEST FOR SURYA FLAME LPG GAS STOVES AND APPLIANCES FOR THE WHOLE OF TAMIL NADU AND PONDICHERRY AND CONTINUE THE BUSINESS TILL DATE. IN THE YEAR 1997 M.R. & COMPANY, A PARTNERSHIP FIRM WAS FORME D CONSISTING OF MY FATHER SRI M. RAMAMOORTHY AND MY S ELF AS PARTNERS TO DO THE BUSINESS OF DEALINGS IN FMCG PRO DUCTS OF REPUTED COMPANIES. MY FAMILY IS A LIMITED ONE WITH MY WIFE AND MY DAUGHTER. BOTH THE BUSINESSES WERE DOING WELL AND I WAS UTILIZING THE SURPLUS FUNDS IN GIVING ADVANCES TO BUSINESS PE OPLE. I AM ASSESSED TO TAX SINCE I STARTED MY BUSINESS AND ALL THE RETURNS OF INCOME OF MY FAMILY MEMBERS AND CONCERNS HAVE BEEN FILED UP TO DATE WITHOUT DELAY. WITH REGARD TO MY FINANCE BUSINESS, I DECIDED TO DISCONTINUE THE SAME IN THE YEAR 2003 DUE TO THAT BUSINESS BECOMING HIGHLY 6 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 RISKY CONSEQUENT TO THE CHANGE IN THE MARKET CONDIT IONS AND APPLICABLE LAWS AND REGULATIONS. I STARTED RECOVER ING THE AMOUNTS SLOWLY AND BROUGHT THOSE COLLECTIONS TO THE BOOKS O F ACCOUNTS BY CREDITING IN THE CAPITAL ACCOUNT OF MYSELF AND MY F AMILY MEMBERS, AND TAKEN TO TOTAL INCOME OF THE RESPECTIVE PERSONS IN THE COMPUTATION STATEMENTS UP TO THE ASSESSMENT YEAR 2008- 09. WITH THE VIEW TO BRING MY AFFAIRS TO A CLEAN SLATE AND TO BRING TO RECORD ANY SHORTFALL IN THE REPORTING OF I NCOME, I WOULD LIKE TO OFFER IN THE FOLLOWING INCOME MORE FULLY DE SCRIBED AS FOLLOWS. ASSESSMENT YEAR PERSONS UNDISCLOSED INCOME AMOUNT (IN ` `` ` ) 2007 - 08 (FIN. YR.2006-07) M.R. & SONS 76,00,000 M.R. ASSOCIATES 92,00,000 1,68,00,000 2008 - 09 (FIN. YR. 2007-08) M.R. & SONS 2,10,40,000 M.R. ASSOCIATES 10,00,000 2,20,40,000 2010 - 11 (FIN. YR. 2009-10) M.R. & SONS 1,73,50,109 M.R. ASSOCIATES 42,51,453 2,16,01,562 TOTAL 6,04,41,562 THE ITEMS OF INCOME OFFERED FOR THE ASST. YR. 2007-08 AN D 08-09 REPRESENTS THE AMOUNT RECEIVED FROM MR. S. SEETH ARAMAN, VISWAS PROMOTERS PVT. LTD. MADURAI BY WAY OF CHEQUE S AS WELL AS CASH. THE CHEQUES WERE GIVEN IN THE NAME OF SRI. T . RAMANUJAM AND FAMLY MEMBERS AND CREDITED IN MY BOOKS IN THE NAMES OF ABOVE NAMED PERSONS AND SUCH CREDITS STILL APPEAR IN MY B OOKS NOW OFFERED AS INCOME. MR. T. RAMANUJAM IS MY CHARTERE D ACCOUNTANT. HE WAS USED ONLY AS CONDUIT FOR THE ABOVE TRANSACTI ON. NOTHING REMAINED IN THE HANDS OF MR. T. RAMANUJAM AND HENCE HE HAS NOT DERIVED ANY INCOME OUT OF IT. IN THE ASST. YR. 2008-09 THE CHEQUES GIVEN BY MR. SEETHARAMAN WERE WITHDRAWN BY SELF CHE QUES BY T. RAMANUJAM AND WAS BROUGHT INTO MY BOOKS AS CREDITS IN CAPITAL ACCOUNT. HOWEVER, AS A MATTER OF CO-OPERATION FOR EARLY SETTLEMENT, THE CASH WITHDRAWALS IS ALSO OFFERED AS INCOME IN THE YEAR 2008-09 . 7 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 8. AS PER THE A.O., THOUGH THE ASSESSEE HAD PROMISE D TO FILE REVISED RETURN FOR THE IMPUGNED ASSESSMENT YEAR, INCLUDING THEREIN THE AMOUNTS ADMITTED BY HIM DURING THE COURSE OF SURVEY, HE HAD NOT DONE SO. LD. A.O. CAME TO A CONCLUSION THAT ASSESSEE WAS ACTIVEL Y INVOLVED IN FINANCE BUSINESS AND WAS GETTING INTEREST AT THE RA TE OF 36% PER ANNUM ON THE AMOUNTS ADVANCED BY HIM. BASED ON THIS CONC LUSION, A SUM OF ` 2,10,40,000/- WAS ADDED TOWARDS SUPPRESSION OF INCO ME IN MONEY LENDING BUSINESS. 9. THERE WAS AN ADDITION OF ` 15,07,27,590/- ALSO AS UNEXPLAINED INVESTMENT IN SHARES, BUT THE CIT(APPEALS) ON THE A PPEAL OF THE ASSESSEE, HAD DELETED SUCH ADDITION BASED ON A REMA ND REPORT OF THE A.O. AND THE REVENUE IS NOT ON APPEAL ON THIS ISSUE . 10. IN HIS APPEAL BEFORE THE CIT(APPEALS), ASSESSEE TOOK THREE LINES OF ARGUMENTS WITH REGARD TO THE ADDITION MADE FOR ALLE GED SUPPRESSION OF INCOME IN THE MONEY LENDING BUSINESS. FIRST WAS TH AT THE AMOUNTS RECEIVED FROM SHRI SEETHARAMAN THROUGH SHRI T. RAMA NUJAM, WERE ADMITTEDLY RE-PAYMENTS OF LOANS GIVEN PRIOR TO FINA NCIAL YEAR 2002-03. THEREFORE, ACCORDING TO THE ASSESSEE, THESE COULD N OT BE CONSIDERED AS INCOME OF THE IMPUGNED ASSESSMENT YEAR. SECONDLY, AS PER ASSESSEE, 8 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 SOURCE OF THE AMOUNTS STOOD CLEARLY EXPLAINED. THI RD LINE OF ARGUMENT WAS THAT ASSESSEE HAD IN THE RETURN FILED PRIOR TO THE DATE OF SURVEY, ALREADY ADMITTED A SUM OF ` 2,18,50,000/- UNDER THE HEAD INCOME FROM OTHER SOURCES AND THE OFFER MADE AT THE TIME OF SU RVEY, HAD TO BE TELESCOPED WITH SUCH AMOUNT. 11. CIT(APPEALS) WAS NOT APPRECIATIVE OF THE FIRST AND SECOND LINE OF CONTENTIONS. ACCORDING TO HIM, ASSESSEE COULD NOT FURNISH EVIDENCE REGARDING HIS TRANSACTIONS WITH SHRI SEETHARAMAN, W HICH WERE ALL OUTSIDE THE BOOKS OF ACCOUNTS. AMOUNTS RECEIVED BACK FROM SHRI SEETHARAMAN WOULD HAVE INCLUDED INTEREST ALSO AND BIFURCATION O F PRINCIPAL AND INTEREST WAS NEVER GIVEN BY THE ASSESSEE, NOR WERE ANY DETAI LS IN THIS REGARD AVAILABLE. HENCE, ACCORDING TO CIT(APPEALS), ASSES SEES CLAIM THAT RECEIPT OF MONEY FROM SHRI SEETHARAMAN WAS NOT CHAR GEABLE TO TAX IN THE IMPUGNED ASSESSMENT YEAR, COULD NOT BE ACCEPTED . 12. NEVERTHELESS, SINCE ASSESSEE CLAIMED TELESCOPIN G WITH RETURNED INCOME AND HAD FILED COPIES OF CHEQUES WHICH WERE U SED TO WITHDRAW MONEY FROM THE BANK ACCOUNT OF SHRI T. RAMANUJAM AN D HIS RELATIVES, TO WHOSE ACCOUNTS PAYMENTS WERE EFFECTED TO M/S VISVAS PROMOTERS (P) LTD., CIT(APPEALS) SOUGHT A REMAND REPORT FROM ASSE SSING OFFICER. IN THE REMAND REPORT, IT WAS MENTIONED BY THE ASSESSIN G OFFICER THAT 9 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 THOUGH OTHER INCOME OF ` 2,18,50,000/- WAS SHOWN BY THE ASSESSEE IN THE RETURN OF INCOME FILED, THERE WAS NOTHING TO SH OW THAT THIS INCLUDED THE SUM OF ` 2,20,40,000/- MENTIONED IN THE STATEMENT RECORDED UNDER SECTION 131, ON 5.11.2009. ACCORDING TO A.O., THIS WAS AN AFTER-THOUGHT OF THE ASSESSEE AND COULD NOT BE ACCEPTED. 13. THE REMAND REPORT WAS PUT TO ASSESSEE, WHEREUPO N, ASSESSEE SUBMITTED THAT WITHDRAWALS MADE FROM THE BANK ACCOU NTS OF SHRI T. RAMANUJAM AND HIS FAMILY MEMBERS WERE BROUGHT INTO THE BOOKS OF THE ASSESSEE BY WAY OF CREDIT IN HIS CAPITAL ACCOUNT. AS PER THE ASSESSEE, IT WAS SUCH CREDITS IN THE CAPITAL ACCOUNT THAT WAS AD MITTED AS INCOME FROM OTHER SOURCE IN THE RETURN FILED. AS PER THE ASSESSEE, INTRODUCTION OF CASH THROUGH THE CAPITAL ACCOUNT WERE DONE SUBSE QUENT TO THE WITHDRAWALS FROM THE BANK ACCOUNT OF SHRI T. RAMANU JAM. 14. LD. CIT(APPEALS), AFTER CONSIDERING THE SUBMISS IONS AND REMAND REPORT OF THE ASSESSING OFFICER, GAVE A FINDING THA T A SUM OF ` 1,59,60,000/- WAS WITHDRAWN ON DIFFERENT DATES FROM THE ACCOUNTS HELD BY SHRI T. RAMANUJAM AND HIS FAMILY MEMBERS IN KARU R VYSYA BANK LTD., GNANAOLIVUPURAM BRANCH, MADURAI AND THE CHEQU ES THROUGH WHICH SUCH AMOUNTS WERE WITHDRAWN, WERE SIGNED BY THE ASS ESSEE OR PERSONS RELATED TO HIM ON THE BACKSIDE. ACCORDING TO LD. C IT(APPEALS), A FURTHER 10 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 SUM OF ` 40,50,000/- WAS ALSO WITHDRAWN BY SHRI T. RAMANUJA M FROM HIS ACCOUNT IN UNION BANK OF INDIA, KOCHADAI BRANCH AND ANOTHER SUM OF ` 30,000/- WAS WITHDRAWN BY SMT. R. SUJARITHA, WIFE O F SHRI T. RAMANUJAM, FROM HER ACCOUNT WITH KARUR VYSYA BANK, GNANAOLIVUPURAM BRANCH, ON 20.9.2007. LD. CIT(APPE ALS) CAME TO A CONCLUSION THAT THESE WITHDRAWALS TOTALING TO ` 2,00,40,000/- WERE DULY SUPPORTED BY BANK STATEMENTS OF THE INTERMEDIARY PA RTIES AND CREDITS IN THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS WERE AFTER SUCH WITHDRAWALS. THOUGH THE AMOUNTS INTRODUCED IN THE CAPITAL ACCOUNT COULD NOT BE EXACTLY TALLIED FROM THE WITHD RAWALS MADE FROM THE BANK ACCOUNTS OF SHRI T. RAMANUJAM AND HIS WIFE, LD . CIT(APPEALS) AFTER EXAMINATION OF THE RECORDS, REACHED A CONCLUSION TH AT THE INTRODUCTION WERE SUBSEQUENT TO WITHDRAWALS. THUS, ACCORDING TO HIM, ASSESSEES CLAIM THAT THE SUM OF ` 2,18,50,000/- ADMITTED UNDER THE HEAD INCOME FROM OTHER SOURCES COULD BE TELESCOPED WITH THE SU M OF ` 2,10,40,000/- ADDED BY THE A.O. WAS JUSTIFIED. IN HIS VIEW, THE ASSESSING OFFICER HAD NOT CONSIDERED THE SWORN STATEMENT RECORDED FROM TH E ASSESSEE IN ITS ENTIRETY. WHAT WAS OFFERED AS INCOME IN THE SWORN STATEMENT, IN FACT, ALREADY STOOD RETURNED IN THE RETURN OF INCOME FILE D PRIOR TO THE DATE OF SURVEY. THUS, HE HELD THAT THE ADDITION OF ` 2,10,40,000/- TOWARDS 11 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 SUPPRESSION OF INCOME, IF ALLOWED, WOULD RESULT IN TAXING THE SAME AMOUNT TWICE AND IN THIS VIEW OF THE MATTER, HE DEL ETED SUCH ADDITION. 15. NOW BEFORE US, THE DEPARTMENT ASSAILS THE ORDER OF CIT(APPEALS) INSOFAR AS IT RELATES TO HIS FINDING THAT WHAT WAS AGREED BY THE ASSESSEE AS INCOME AT THE TIME OF SURVEY COULD BE ALLOWED TO BE TELESCOPED WITH THE INCOME ALREADY RETURNED BY THE ASSESSEE PRIOR T O THE DATE OF SURVEY. AS AGAINST THIS, ASSESSEE IN HIS CROSS-OBJECTION, I S AGGRIEVED ON THE FINDING OF THE CIT(APPEALS) THAT THE SUM OF ` 2,10,40,000/- RECEIVED BY HIM FROM SHRI SEETHARAMAN WAS NOT PROPERLY EXPLAINE D AND ON THE REJECTION OF HIS CLAIM THAT THESE COULD NOT BE TAXE D BEING LOAN AMOUNTS RETURNED. 16. LEARNED D.R., ASSAILING THE ORDER OF THE CIT(AP PEALS) INSOFAR AS IT RELATED TO THE ISSUE OF TELESCOPING, WHILE SUPPORTI NG IT ON THE OTHER ASPECTS, SUBMITTED THAT ASSESSEE HAD IN HIS STATEME NT GIVEN ON 5.11.2009, CLEARLY AGREED TO RETURN FURTHER INCOME IN ADDITION TO WHAT WAS ALREADY RETURNED EARLIER, AS PER THE TABLE MENT IONED AT PARA SEVEN ABOVE. NOWHERE IN THE SWORN STATEMENT IT WAS CLAIM ED BY THE ASSESSEE THAT THE AMOUNT RECEIVED WAS FROM SHRI SEETHARAMAN THROUGH SHRI T. RAMANUJAM AND HIS FAMILY MEMBERS. LEARNED D.R. POI NTED OUT THAT ASSESSEE HAD MOVED THE SETTLEMENT COMMISSION, BUT T HE SETTLEMENT 12 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 COMMISSION, VIDE ITS ORDER DATED 9.12.2010, HAD REJ ECTED SUCH APPLICATION FOR A REASON THAT ASSESSEE HAD NOT MADE FULL AND TRUE DISCLOSURE AND HAD FAILED TO FURNISH EVIDENCE ON HI S CLAIM REGARDING LOANS ADVANCED TO SHRI SEETHARAMAN PRIOR TO 2003. F URTHER, ACCORDING TO THE LEARNED D.R., ASSESSEE HAD IN HIS STATEMENT SPE CIFICALLY MENTIONED THAT INCOME OFFERED FOR ASSESSMENT YEAR 2007-08 AND 2008-09 REPRESENTED THE AMOUNTS RECEIVED FROM SHRI SEETHARA MAN. MODUS OPERANDI ADOPTED WAS ALSO MENTIONED BY THE ASSESSEE . AS PER THE LEARNED D.R., THERE WAS AN UNHOLY NEXUS BETWEEN ASS ESSEE, SHRI SEETHARAMAN, M/S VISVAS PROMOTERS (P) LTD. AND SHRI T. RAMANUJAM. THESE CASH TRANSACTIONS, CAME TO LIGHT ONLY AT THE TIME OF SURVEY ON 20.10.2009 AND THEREFORE, THERE WAS NO POSSIBILITY OF SUCH AMOUNTS BEING ACCOUNTED PRIOR TO THAT DATE BY THE ASSESSEE. RELIANCE WAS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH CO URT IN THE CASE OF HUKUM CHAND JAIN V. ITO (334 ITR 197). 17. PER CONTRA, LEARNED A.R. SUBMITTED THAT THE CIT (APPEALS) WAS IN EVERY WAY JUSTIFIED IN ALLOWING THE SET OFF OF THE INCOME RETURNED UNDER THE HEAD INCOME FROM OTHER SOURCES BY THE ASSESSE E, PRIOR TO THE DATE OF SURVEY, AGAINST THE ADMISSION OF ` 2,10,40,000/- MADE BY THE ASSESSEE IN THE STATEMENT TAKEN FROM HIM ON 5.11.20 09. HOWEVER, 13 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 ACCORDING TO HIM, CIT(APPEALS) FELL IN ERROR IN HOL DING THAT THIS AMOUNT WAS ASSESSEES INCOME. READING PARA 5 OF THE ASSES SMENT ORDER, LEARNED A.R. POINTED OUT TO THE OBSERVATION OF THE ASSESSING OFFICER THAT LOANS WERE TAKEN BY SHRI SEETHARAMAN FROM THE ASSES SEE PRIOR TO FINANCIAL YEAR 2002-03. REVENUE HAVING ADMITTED TH AT WHAT WAS RECEIVED BY THE ASSESSEE DURING THE RELEVANT PREVIO US YEAR WERE REPAYMENTS OF LOANS GIVEN PRIOR TO FINANCIAL YEAR 2 002-03, NO ADDITION OF INCOME COULD HAVE BEEN DONE FOR THE IMPUGNED ASSESS MENT YEAR. REVENUE ITSELF HAS ALLEGED THAT THERE WAS A NEXUS B ETWEEN THE ASSESSEE, SHRI SEETHARAMAN, SHRI T. RAMANUJAM AND M /S VISVAS PROMOTERS (P) LTD. IT WAS NEVER DISPUTED THAT THE MONEY RECEIVED WERE REPAYMENTS MADE BY SHRI SEETHARAMAN THROUGH SHRI T. RAMANUJAM AND FAMILY. CASH WAS WITHDRAWN BY THE ASSESSEE FROM TH E BANK ACCOUNTS OF SHRI T. RAMANUJAM AND HIS WIFE AND WERE THEREAFTER BROUGHT INTO BUSINESS THROUGH CREDITS IN CAPITAL ACCOUNT. ASSES SEE HAD OFFERED THE CREDITS IN CAPITAL ACCOUNT AS INCOME FROM OTHER SOU RCES IN THE RETURN OF INCOME. ASSESSEE MIGHT HAVE IN THE STATEMENT RECOR DED ON 5.11.2009 STATED THAT THERE WAS SUPPRESSION OF INCOME IN THE MONEY LENDING BUSINESS. HOWEVER, IT WAS ALSO MENTIONED BY HIM TH AT INCOME BEING OFFERED BY HIM FOR ASSESSMENT YEAR 2007-08 AND 2008 -09, REPRESENTED MONEY RECEIVED FROM SHRI SEETHARAMAN BY WAY OF CHEQ UE AND CASH, 14 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 THROUGH HIS CHARTERED ACCOUNTANT SHRI T. RAMANUJAM. ASSESSEE MIGHT HAVE MISSED OUT TO MENTION THE INCOME ALREADY OFFER ED BY HIM UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE RETURN ALRE ADY FILED FOR THE IMPUGNED ASSESSMENT YEAR. HOWEVER, ACCORDING TO TH E LEARNED AR, THIS WILL NOT MAKE A SUM OF MONEY RECEIVED BY THE ASSESS EE, WHICH WAS NOT IN THE NATURE OF INCOME AT ALL, AN INCOME ASSESSABL E UNDER THE ACT. REPAYMENTS OF LOANS RECEIVED BY THE ASSESSEE COULD NEVER BE CONSIDERED AS INCOME. LOANS HAVING BEEN ADVANCED B Y THE ASSESSEE PRIOR TO THE YEAR 2002-03, AN ASSESSMENT COULD HAVE BEEN DONE ONLY IN THAT YEAR AND NOT IN THE YEAR IN WHICH THE LOAN REP AYMENTS WERE RECEIVED BY THE ASSESSEE. ACCORDING TO HIM, CIT(APPEALS) FE LL IN ERROR IN HOLDING THAT THE AMOUNTS COULD BE ASSESSED AT ALL. 18. FURTHER, CONTINUING HIS ARGUMENTS, LEARNED A.R. SUBMITTED THAT PRESUMING THE LOAN RETURNED BY SHRI SEETHARAMAN TO BE INCOME, CIT(APPEALS) WAS JUSTIFIED IN GIVING TELESCOPING WI TH THE AMOUNTS ADMITTED AS INCOME FROM OTHER SOURCES. AS PER LEAR NED A.R., CIT(APPEALS) HAD ACCEPTED THE CLAIM OF TELESCOPING AFTER GIVING A SPECIFIC FINDING THAT CHEQUES USED FOR WITHDRAWING MONEY FROM THE ACCOUNT OF SHRI T. RAMANUJAM AND HIS WIFE, HAD ON T HEIR BACK SIDE SIGNATURE OF THE ASSESSEE, IN MAJORITY OF THE CASES . CIT(APPEALS) HAD 15 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 ALSO GIVEN A CLEAR FINDING THAT CREDITS IN THE CAPI TAL ACCOUNT WERE SUBSEQUENT TO SUCH WITHDRAWALS. SUCH CREDITS WERE OFFERED BY THE ASSESSEE AS INCOME IN THE RETURN OF INCOME FILED. THEREFORE, AS PER LEARNED A.R., THOUGH THE CIT(APPEALS) FELL IN ERROR IN RULING THAT THE MONEY RECEIVED BY THE ASSESSEE FROM SHRI SEETHARAMA N WAS IN THE NATURE OF INCOME, HE WAS NEVERTHELESS WELL JUSTIFIE D IN ALLOWING SET OFF OF SUCH AMOUNT WITH THE INCOME ALREADY OFFERED BY THE ASSESSEE UNDER THE HEAD OTHER SOURCES. RELYING ON THE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. S. KHADER KHAN SON (300 ITR 157), LEARNED A.R. SUBMITTED THAT A STATEMENT RECORDED DU RING A SURVEY CANNOT BE USED AS AN EVIDENCE AND WOULD NOT AUTOMAT ICALLY BIND THE ASSESSEE. LEARNED A.R. ALSO POINTED OUT THAT HON'B LE APEX COURT HAD DISMISSED THE APPEAL FILED BY THE REVENUE, AGAINST THE JUDGMENT OF HON'BLE JUDICIAL HIGH COURT ON 20 TH SEPTEMBER, 2012, AFTER ADMISSION. 19. IN REPLY, LEARNED D.R. THAT SHE WAS STILL PLACI NG RELIANCE ON THE STATEMENT RECORDED FROM THE ASSESSEE ON 5.11.2009. 20. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IT IS AN ADMITTED POSITION THAT ASSESSEE HAD FILED A RETU RN OF INCOME PRIOR TO THE SURVEY. THE BREAK-UP OF INCOME SHOWN BY THE AS SESSEE IN SUCH RETURN, HAS BEEN REPRODUCED AT PARA 3 ABOVE. APART FROM ADDITION OF ` 16 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 2,10,40,000/-, WHICH IS THE BONE OF CONTENTION IN T HESE APPEALS, THERE WAS ANOTHER ADDITION OF ` 15,07,27,590/- MADE BY THE A.O., FOR UNEXPLAINED INVESTMENTS. IT IS TO BE MENTIONED THA T SUCH ADDITION WAS DELETED BY THE CIT(APPEALS) BASED ON A CLEAR FINDIN G OF THE ASSESSING OFFICER IN HIS REMAND REPORT, ACCEPTING THE AUTHENT ICITY AND GENUINENESS OF THE TRANSACTIONS RELATING TO SUCH ADDITION. LD. CIT(APPEALS) HAD EVEN VETTED SUCH REMAND REPORT BEFORE DELETING SUCH ADDI TION, BY VERIFYING THE RECORDS INCLUDING BOOKS OF ACCOUNTS OF THE ASSESSEE . THUS IT IS NOT THE CASE OF AN ASSESSEE, WHO WAS HABITUALLY INDULGING I N SUPPRESSION OF INCOME. MAJOR ITEM OF THE ADDITIONS STOOD DELETED BY THE CIT(APPEALS) AND REVENUE IS NOT ON APPEAL. 21. THE ONLY ADDITION WHICH WAS SUSTAINED BY THE CI T(APPEALS) WAS ` 2,10,40,000/-, AS INCOME FROM MONEY LENDING BUSINES S, AGAINST WHICH BOTH PARTIES ARE AGGRIEVED. THIS ADDITION HAD AS I TS BASE A STATEMENT RECORDED FROM ASSESSEE ON 5.11.2009 UNDER SECTION 1 31 OF THE ACT. NO DOUBT, THE ASSESSING OFFICER HAS AT PARA 4 OF HER A SSESSMENT ORDER MENTIONED THE INSTANCE OF ANOTHER DEBTOR CALLED SHR I MILTON JEGANATHAN. AS PER THE A.O., IN THE STATEMENT RECORDED FROM SHR I MILTON JEGANATHAN, HE HAD ADMITTED THAT HE OWED A SUM OF ` 43 LAKHS TO M/S M.R. & SONS IN FINANCIAL YEAR 2009-10. HOWEVER, FOR THE IMPUGNED ASSESSMENT YEAR, 17 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 THERE WAS NO ADDITION WHATSOEVER ON THIS. THE ONLY ADDITION WAS WITH REGARD TO THE AMOUNTS RECEIVED FROM SHRI SEETHARAMA N. PARAS 5 TO 7 OF THE ASSESSMENT ORDER ARE VERY RELEVANT AND ARE REPR ODUCED AS UNDER:- 5. THE ENQUIRIES WITH ANOTHER DEBTOR NAMED SHRI SEE THARAMAN, MANAGING DIRECTOR OF VISVAS PROMOTERS (P) LTD. WAS MADE AND THE RECEIVABLES REFLECTED IN THE BOOKS OF M R & SONS FO R THE FINANCIAL YEAR 2009-10 AMOUNTED TO ` 50,00,000/-. THE ENQUIRIES WITH SHRI SEETHARAMAN BROUGHT INTO LIGHT A STARTLING FEATURE. IT WAS FOUND BY THE TEAM THAT SHRI SEETHARAMAN HAS PAID MORE THAN ` 3 CRORES SUM IN THE FORM OF PRINCIPAL AND INTEREST TO SHRI R. BHARAG THWAJ. THE REAL STORY WAS THAT SHRI R. SEETHARAMAN HAD TAKEN LOAN FROM SHRI R. BHARAGTHWAJ PRIOR TO THE FINANCIAL YEAR 2002-03 AND HAD B EEN CONSISTENTLY PAYING INTEREST AT THE RATE OF 30%. THE UNPAID INTEREST, IF ANY, WILL GET ADDED TO THE PRINCIPAL IN THE NEXT MONTH AND THE INTEREST WILL BE CHARGED ON THE REVISED PRINCIPAL. THIS WAY THE NET INTEREST CHARGED BY SHRI R. BHARAGTHWAJ FOR THE LOAN S ADVANCED TO SHRI SEETHARAMAN WILL GO WAY BEYOND 40% PER ANNUM. 6. THE ENQUIRIES WITH SHRI SEETHARAMAN, THE DEBTOR A LSO REVEALED THAT THE REPAYMENT OF THE LOAN WAS DEBITED AS WOOD PURCHASE TO SHRI T. RAMANUJAM AND FAMILY IN THE BOOKS OF M/S VISVAS PROMOTERS PVT. LTD. THE IMPACT WAS THAT THE LOAN WAS TAKEN OUTSID E THE BOOKS BUT THE REPAYMENT WAS BEING MADE THROUGH BOOKS AS WOOD PURCHASE. THE FUND WHICH WAS TAKEN OUTSIDE THE BOOKS FROM SHRI R. BHARAGTHWAJ WAS USED FOR VARIOUS PROJECTS BEING DEVELOPED BY M/S VI SVAS PROMOTERS. THE VERACITY OF EXPENDITURE WHEN CHECKED AND THEN ON LY IT WAS FOUND THAT THE WOOD PURCHASE DEBITED BY M/S VISVAS PROMOT ERS PVT. LTD. IN VARIOUS YEARS WAS THE REPAYMENT OF LOAN WHICH WAS R OUTED THROUGH SHRI T. RAMANUJAM AND FAMILY TO SHRI R. BHARAGTHWAJ. THE ENTIRE SUMS WENT UNTAXED IN THE HANDS OF SHRI T. RAMANUJAM AND FAMILY BECAUSE THE MONIES WHICH WERE RECEIVED FOR WOOD PUR CHASE FROM M/S VISVAS PROMOTERS PVT. LTD. HAD NO EXPENDITURE AGAIN ST IT AS THE ENTIRE SUMS RECEIVED BACK WAS ACTUALLY THE LOAN GIVEN BY S HRI R. BHARAGTHWAJ TO SHRI SEETHARAMAN WHICH WAS CHANNELIZED BACK INTO THE BOOKS OF SHRI R. BHARAGTHWAJ BY USING THE NAMES OF SHRI T. R AMANUJAM AND FAMILY. 18 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 7. WHEN THIS FACT WAS PUT BEFORE SHRI T. RAMANUJAM B Y ISSUING SUMMONS DURING THE COURSE OF SURVEY PROCEEDINGS UND ER SECTION 131 ON 20.10.09, INITIALLY THE AUDITOR EXPLAINED THAT THE MON IES WERE RECEIVED FROM SHRI SEETHARAMAN FOR RENDERING THE SE RVICES IN THE EARLIER YEARS. SHRI T. RAMANUJAM REVEALED THAT THE ENTIRE MONEY WAS GIVEN BACK TO SHRI R. BHARAGTHWAJ BY WITHDRAWING CAS H AND ALSO IN CHEQUES ON SEVERAL DATES. SHRI T. RAMANUJAM DEPOSE D THAT THE INCOME FROM THESE TRANSACTIONS WILL BE OFFERED AS IT HAS G ONE UNTAXED IN THE HANDS OF SHRI R. BHARAGTHWAJ AS HE IS THE SOLE BENEF ICIARY OUT OF THESE TRANSACTIONS. IF SHRI BHARAGTHWAJ FAILS TO DI SCLOSE THE TRANSACTION AS THE INCOME THEN THE SAME WILL BE OFF ERED AS THE INCOME IN THE HANDS OF SHRI T. RAMANUJAM AND FAMILY. 22. THUS WHAT WE CAN DISCERN FROM THE ABOVE IS THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM SHRI SEETHARAMAN DURI NG THE RELEVANT PREVIOUS YEAR, WERE REPAYMENTS OF LOANS ALREADY GIV EN BY THE ASSESSEE TO SHRI SEETHARAMAN IN A FINANCIAL YEAR PRIOR TO 20 02-03. REVENUE ALSO ACCEPTS THAT THE AMOUNTS WERE RECEIVED BACK BY THE ASSESSEE THROUGH SHRI T. RAMANUJAM AND HIS FAMILY. GRIEVANCE OF THE REVENUE IS THAT THE ENTIRE AMOUNT WENT UNTAXED. NEVERTHELESS, ROUTE OF THE MONEY IS VERY CLEAR. M/S VISVAS PROMOTERS (P) LTD. HAD ISSUED CH EQUES TO SHRI T. RAMANUJAM AND HIS WIFE, UNDER THE GUISE OF WOOD PUR CHASE. THESE WERE CREDITED IN THE BANK ACCOUNTS OF SHRI T. RAMAN UJAM AND HIS WIFE. THEREAFTER, WITHDRAWALS WERE MADE FROM THE BANK ACC OUNTS OF SHRI T. RAMANUJAM AND HIS WIFE, BY THE ASSESSEE THROUGH BEA RER CHEQUES. CHEQUES HAD ON THEIR BACKSIDE SIGNATURE OF SHRI T. RAMANUJAM OR SOMEBODY ON HIS BEHALF. IT IS ALSO PERTINENT TO NO TE THAT THE ADDITION OF ` 19 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 2,10,40,000/- WAS MADE BY THE ASSESSING OFFICER UND ER THE HEAD INCOME FROM OTHER SOURCES. THUS, DESPITE THE STA TEMENT GIVEN BY THE ASSESSEE ON 5.11.2009, WHERE HE AGREED FOR AN ADDIT IONAL INCOME OF ` 2,10,40,000/-, THE FACT OF THE MATTER WAS THAT THIS AMOUNT WAS ONLY SUMS RETURNED BY SHRI SEETHARAMAN TO THE ASSESSEE THROUG H SHRI T. RAMANUJAM AND HIS FAMILY. IF THAT BE SO, CAN WE SA Y THAT SOURCE OF THE MONEY WAS UNEXPLAINED? IN OUR OPINION, THE SOURCE OF MONEY HAS BEEN CLEARLY CHARTERED OUT BY THE REVENUE ITSELF. THE O NLY QUESTION THAT HAS TO BE ANSWERED IS WHETHER THE MONEY RECEIVED WAS AS SESSEES INCOME. ASSESSING OFFICER HERSELF STATES THAT THESE WERE RE PAYMENTS OF LOAN TO THE ASSESSEE. REPAYMENTS OF LOAN CANNOT BE CONSIDE RED AS INCOME. WHEN THE SOURCE OF THE MONEY IS EXPLAINED, AND WHEN A RECEIPT IS NOT HAVING THE ESSENTIAL FEATURES REQUIRED TO BE CLASSI FIED AS INCOME, AN ADDITION COULD NOT HAVE BEEN MADE, SIMPLY BASED ON THE STATEMENT GIVEN BY THE ASSESSEE. EVIDENTIARY VALUE OF A STAT EMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS WAS AN ISSU E BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF S. KHADER KHAN SON (SUPRA). SUCH A STATEMENT AT THE BEST CAN BE RELEV ANT IN AN ASSESSMENT PROCEEDING, BUT BY ITSELF CANNOT BE A BASE FOR ADDI TION. NO DOUBT, THE REPAYMENTS OF LOAN MIGHT HAVE INCLUDED IN IT INTERE ST AS WELL. BUT, ASSESSEE HAD ALREADY SHOWN IN HIS RETURN OF INCOME, AS A PART OF HIS 20 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 INCOME FROM OTHER SOURCES, A SUM OF ` 9,56,475/- AS INTEREST. THERE IS NOTHING ON RECORD TO SHOW THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM SHRI SEETHARAMAN COMPRISED IN IT, ANY INTEREST MORE THAN WHAT WAS RETURNED BY THE ASSESSEE. IN ANY CASE, ASSESSEE HA D ALREADY OFFERED A SUM OF ` 2,18,50,000/- AS INCOME FROM OTHER SOURCES IN A RE TURN FILED PRIOR TO THE DATE OF SURVEY. LD. CIT(APPEALS) HAD, AFTER VERIFYING THE CHEQUES THROUGH WHICH WITHDRAWALS WERE MADE FROM TH E BANK ACCOUNTS OF SHRI T. RAMANUJAM AND HIS WIFE, GIVEN A CLEAR FI NDING THAT ON THE BACK OF CHEQUES, NAME OF THE ASSESSEE WAS MENTIONED. TH E CASH INTRODUCTION IN THE CAPITAL ACCOUNT OF THE ASSESSEE WAS SUBSEQUENT TO SUCH WITHDRAWALS. 23. AT THIS JUNCTURE, IT WILL BE INAPPROPRIATE IF W E DO NOT SEE WHAT HAPPENED IN ASSESSMENT YEAR 2007-08, SINCE OATH STA TEMENT OF THE ASSESSEE MENTIONED THAT YEAR ALSO. ASSESSEE HAD IN DEED FILED A REVISED RETURN PURSUANT TO THE SURVEY, FOR ASSESSME NT YEAR 2007-08, WHEREIN THE INCOME MENTIONED IN THE SWORN STATEMENT DATED 5.11.2009 WAS OFFERED ADDITIONALLY. BUT IN THE SAID YEAR, IT SEEMS, NO AMOUNT WAS OFFERED AS OTHER INCOME IN THE RETURN FILED PRIOR TO THE SURVEY. THEREAFTER, PENALTY PROCEEDINGS WERE INITIATED UNDE R SECTION 271(1)(C) FOR THAT YEAR AND THIS RESULTED IN A LEVY OF PENALT Y CONSIDERING SUCH 21 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 ADDITIONAL INCOME OFFERED IN THE REVISED RETURN AS CONCEALED. ASSESSEES APPEAL AGAINST LEVY OF PENALTY WAS ALLOW ED BY CIT(APPEALS), WHEREUPON REVENUE HAD MOVED IN FURTHER APPEAL BEFOR E THIS TRIBUNAL. THIS TRIBUNAL, WHILE DISMISSING SUCH APPEAL, HAD MA DE CERTAIN OBSERVATIONS ON THE NATURE OF THE AMOUNT OFFERED IN THE REVISED RETURN. THE SAID OBSERVATIONS APPEARING AT PARA 6 OF TRIBUN AL ORDER DATED 7.4.2011 IN I.T.A. NO. 166/MDS/2011 IS REPRODUCED H EREUNDER:- 6. IT IS A FACT THAT THE ASSESSING OFFICER HAS CONSC IOUSLY CONSIDERED THE OBJECTIONS OF THE ASSESSEE IN RESPEC T OF PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) OF THE ACT. AFTE R CONSIDERING THE EXPLANATION OF THE ASSESSEE AGAINST THE LEVY OF PENA LTY, THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS AND HAS DROPPED THE PROCEEDINGS. IN THE SHOW CAUSE NOTICE THE GROUN D TAKEN TO REVISE THE ORDER DATED 28.6.2010 VIDE WHICH THE PENALTY PROCEEDI NGS U/S 271(1)(C) OF THE ACT WERE DROPPED BY THE ASSESSING OF FICER, IS THAT THIS ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICI AL TO THE INTERESTS OF THE REVENUE. TO OUR MIND, THIS REASON IS NOT SUFFI CIENT ENOUGH TO TAKE RECOURSE TO SECTION 263 OF THE ACT. THE ORDER DROPPIN G PENALTY PROCEEDINGS WAS PASSED AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE. THE ASSESSING OFFICER HAS COME TO THE CO NCLUSION THAT THE PENALTY PROCEEDINGS SHOULD NOT FURTHER CONTINUE AND HENCE, HE HAS CHOSEN TO TAKE A CONSCIOUS DECISION OF DROPPING THE PROCEEDINGS. THIS ACT OF THE ASSESSING OFFICER DOES NOT TANTAMOUNT TO AN ERROR AT ALL. IT IS ALSO A FACT THAT WHATEVER HAS BEEN ADDED IN T HE ASSESSMENT IN THE ONLY SURRENDERED AMOUNT WHICH WAS OFFERED BY WA Y OF REVISED RETURN OF INCOME AFTER SURVEY CONDUCTED IN ASSESSEE S BUSINESS PREMISES. THE REVENUE HAS ACCEPTED THE REVISED RET URN AND HAS ONLY ACTED THEREON. THE PENALTY PROCEEDINGS ARE DEFINIT ELY INDEPENDENT OF THE PROCEEDINGS OF ASSESSMENT. THE SUBMISSION OF T HE ASSESSEE IS THAT THE AMOUNT QUA WHICH PENALTY WAS INITIATED IS THE RECEIPT OF REPAYMENT OF LOAN GIVEN TO ONE SHRI S.SEETHARAMAN OF M/S VISVAS PROMOTERS PVT. LTD PRIOR TO FINANCIAL YEAR 2002-03. IN HIS SWORN 22 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 STATEMENT RECORDED BY THE ASSESSING OFFICER, SHRI S .SEETHARAMAN HAS CATEGORICALLY ACCEPTED THAT HE HAD TAKEN LOANS FROM THE ASSESSEE PRIOR TO FINANCIAL YEAR 2002-03. THIS FACT IS FOUND REC ORDED IN THE ASSESSMENT ORDER PASSED U/S 143(3) AT PAGE 2 IN PARA 4 OF THE ORDER. IN THE ASSESSMENT ORDER IN PARA 5 AT PAGE 2, IT HAS BEEN CLEARLY MENTIONED THAT THE VERACITY OF EXPENDITURE HAS BEEN CHECKED AND FOUND THAT THE WOOD PURCHASE DEBITED BY M/S VISVAS PROMOTERS PVT. LTD IN VARIOUS YEARS WAS ACTUALLY THE REPAYMENT OF LOAN WHICH WAS ROUTED THROUGH SHRI T.RAMANUJAM AND FAMILY TO SHRI R.BHARAGTHWAJ, THE ASSESSEE. THE ASSESSING OFFICER HAS CONCLUSIVE LY FOUND THAT THE ENTIRE SUMS RECEIVED BACK WAS ACTUALLY THE LOAN GIV EN BY SHRI R.BHARAGTHWAJ, THE ASSESSEE TO SHRI S.SEETHARAMAN WH ICH WAS CHANNELIZED INTO THE BOOKS OF THE ASSESSEE BY USI NG THE NAME OF SHRI T. RAMANUJAM AND FAMILY. THE ASSESSEE HAS OFFERED THE PRINCIPAL REPAYMENT OF THE LOANS AS CASH CREDIT IN THE TOTAL INCOME DEPICTED IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2007-08 A ND HAS ALSO OFFERED THE INTEREST RECEIVED ON LOANS UNDER THE HE AD INCOME FROM OTHER SOURCES. THE ASSESSEE HAS OFFERED ADDITIONA L INCOME OF ` 76 LAKHS DURING THE COURSE OF ASSESSMENT PROCEEDINGS W HICH REPRESENTS PRINCIPAL REPAYMENT OF THE LOAN GIVEN BY THE ASSESS EE TO SHRI S. SEETHARAMAN PRIOR TO FINANCIAL YEAR 2002-03. AS PER LAW , THIS AMOUNT COULD BE CONSIDERED PRIOR TO FINANCIAL YEAR 2002-03 BUT SINCE THE ASSESSEE HAS VOLUNTARILY OFFERED THE PRINCIPAL REPA YMENT WITH THE RIDER THAT IT WAS BEING OFFERED TO PURCHASE PEACE. IN OUR CONSIDERED OPINION, THE ASSESSEE HAS GOT A GOOD CASE TO EXPLAIN AGAINST THE LEVY OF PENALTY AND HENCE, HE IS SPARED FROM THE GUILLOTINE S OF THE RIGOURS OF SECTION 271(1)(C) OF THE ACT. FINDING OF THE CO-ORDINATE BENCH THUS CLEARLY IMPLY THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM SHRI SEETHARAMAN WERE ONLY RETURN OF THE LOANS GIVEN IN AN EARLIER YEAR. 24. FOR THE REASONS MENTIONED AT PARAS 20 TO 23 ABO VE, WE ARE OF THE OPINION THAT THE AMOUNTS RECEIVED BY THE ASSESSEE F ROM SHRI SEETHARAMAN, THROUGH SHRI T. RAMANUJAM AND HIS WIFE COULD NOT HAVE 23 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 BEEN CONSIDERED AS INCOME OF THE ASSESSEE, AND EVEN IF IT WAS SO CONSIDERED, STOOD COVERED BY THE AMOUNTS DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME AS INCOME FROM OTHER SOURCE. 25. WE, THEREFORE, FIND NO MERIT IN THE APPEAL FILE D BY THE REVENUE, WHICH STANDS DISMISSED. 26. CROSS-OBJECTIONS OF THE ASSESSEE INSOFAR AS IT ASSAIL THE FINDING OF THE LOWER AUTHORITIES THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM SHRI SEETHARAMAN HAD TO BE CONSIDERED AS TAXABLE IN COME, IS ALLOWED. HOWEVER, THE GROUNDS IN THE CROSS-OBJECTION, WHICH SAY THAT THE ASSESSMENT WAS BAD IN LAW, HAVING BEEN NOT PRESSED BY THE LEARNED A.R., ARE DISMISSED AS NOT PRESSED. 27. TO SUMMARIZE THE RESULT, APPEAL OF THE REVENUE IS DISMISSED, WHEREAS, CROSS-OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. 28. NOW WE TAKE UP APPEALS OF SMT. KANCHANA BHARATH ALIAS SMT. V.S. LAKSHMI, WIFE OF SHRI R. BHARAGTHWAJ. ADDITIO N OF ` 92 LAKHS FOR ASSESSMENT YEAR 2007-08 AND ` 10 LAKHS FOR ASSESSMENT YEAR 2008-09, WHICH WERE SUSTAINED BY THE CIT(APPEALS), ARE ASSAI LED. 24 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 29. FACTS APROPOS ARE THAT ASSESSEE WAS THE PROPRIE TRESS OF M.R. ASSOCIATES. HER HUSBAND SHRI R. BHARAGTHWAJ HAD IN HIS SWORN STATEMENT RECORDED ON 5.11.2009, AGREED TO DISCLOSE A FURTHER INCOME TOTALLING TO ` 6,04,41,562/-, IN ADDITION TO WHAT WAS ALREADY RET URNED AS MENTIONED AT PARA 3 ABOVE. WHAT WAS AGREED BY SHRI R. BHARAGTHWAJ IN HIS STATEMENT HAS BEEN REPRODUCED BY US AT PARA 3 A BOVE. FROM THIS TABLE, IT IS CLEAR THAT A SUM OF ` 92 LAKHS WAS TO BE OFFERED AS INCOME IN THE HANDS OF M.R. ASSOCIATES FOR ASSESSMENT YEAR 20 07-08 AND ` 10 LAKHS FOR ASSESSMENT YEAR 2008-09. HOWEVER, IN THE RETURNS FILED FOR THE IMPUGNED ASSESSMENT YEARS, ASSESSEE DID NOT MAKE AN Y SUCH ADDITIONAL DISCLOSURE. ASSESSEE HAD FILED A LETTER WITHDRAWING THE OFFER MADE BY HER HUSBAND. THOUGH IN THE ASSESSMENT, ASS ESSING OFFICER MADE AN ADDITION OF ` 1,17,75,000/- FOR ASSESSMENT YEAR 2007-08, CIT(APPEALS) ON ASSESSEES APPEAL, REDUCED SUCH ADD ITION TO ` 92 LAKHS CONSIDERING THE STATEMENT GIVEN BY ASSESSEES HUSBA ND. IN OTHER WORDS, CIT(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE WITH REGARD TO THE BALANCE OF ` 25,75,000/-, WHICH ACCORDING TO HIM, STOOD PROPERLY EXPLAINED. ADDITION MADE BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2008-09, WAS ONLY ` 10 LAKHS AND THIS WAS SUSTAINED BY THE CIT(APPEALS), AGAIN RELYING ON THE STATEMENT GIVEN BY THE ASSESSEES HUSBAND. 25 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 30. MAIN POINT OF DIFFERENCE BETWEEN ASSESSEES CAS E AND THAT OF HER HUSBAND, WHICH WE HAVE DEALT WITH AT PARAS 3 TO 24 ABOVE, IS THAT SHE HAD NOT DISCLOSED ANY AMOUNT AS INCOME FROM OTHER SOURCES IN HER RETURN FILED, WHICH COULD OFFSET THE AMOUNTS OFFERE D BY HER HUSBAND IN STATEMENT GIVEN BY HIM ON 5.11.2009. CIT(APPEALS) HAD DISMISSED HER APPEALS BECAUSE OF THIS, SINCE OTHERWISE HE HAD HEL D IN HER HUSBANDS CASE THAT THE AMOUNTS RECEIVED WERE TAXABLE, BUT FO R THE TELESCOPING ALLOWED WITH THE RETURNED INCOME. IN THE FIRST PLA CE, WE ARE OF THE OPINION THAT ASSESSEE COULD NOT HAVE BEEN FASTENED WITH A LIABILITY BASED ON A STATEMENT RECORDED FROM HER HUSBAND, THE EVIDENTIARY VALUE OF WHICH ITSELF WAS SUSPECT. IN THE SECOND PLACE, THERE WAS NO EVIDENCE THAT ANY SUCH INCOME WAS EARNED BY THE ASSESSEE. W HAT WERE RECEIVED, AS CLEARLY STATED BY THE A.O. HERSELF, IN HER ORDER IN THE CASE OF ASSESSEES HUSBAND, WERE LOAN AMOUNTS RETURNED BY S HRI SEETHARAMAN THROUGH HIS CHARTERED ACCOUNTANT SHRI T. RAMANUJAM AND HIS WIFE. SUCH AMOUNTS DO NOT HAVE CHARACTERISTIC OF INCOME D EFINED UNDER SECTION 2(24) OF THE ACT OR DEEMED INCOME COMING WI THIN THE PURVIEW OF SECTIONS 68, 69, 69A OR 69B OF THE ACT. SOURCE OF THE FUNDS WAS CLEARLY KNOWN AND ROUTE IN WHICH IT HAD COME WAS CLEARLY ID ENTIFIED. THUS WE 26 I.T.A. NO. 576/MDS/12 C.O. NO. 71/MDS/12 I.T.A. NOS. 337 & 338/MDS/12 ARE OF THE OPINION THAT ADDITIONS MADE WERE NOT JUS TIFIED IN LAW. SUCH ADDITIONS ARE DELETED. 31. IN THE RESULT, APPEALS OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE ALLOWED. 32. TO SUMMARIZE THE RESULT, APPEAL OF THE REVENUE IN THE CASE OF SHRI R. BHARAGTHWAJ IS DISMISSED, CROSS-OBJECTION OF SHR I R. BHARAGTHWAJ IS PARTLY ALLOWED, AND APPEALS OF THE ASSESSEE SMT. KA NCHANA BHARATH ARE ALLOWED. ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE 9 TH OF MAY, 2013, AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 9 TH MAY, 2013. KRI. COPY TO: (1) ASSESSEES (2) ASSESSING OFFICERS (3) CIT(A)-I / II, MADURAI (4) CIT-I / II, MADURAI (5) D.R. (6) GUARD FILE