ITO, CHENNAI V. Shri O.J.Lukose, CHENNAI

ITA 384/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51829 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T N BETIGIRI
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Unexplained cash credit; Source of fund; Notional interest; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A.NO. 384/MDS/2011 (ASSESSMENT YEAR : 2006-07) THE INCOME-TAX OFFICER, COMPANY WARD-IV(1), CHENNAI 600 034. VS. SHRI O.J. LUKOSE, SOUTHERN SHIPS & INVESTMENTS, NO.193, VALLUVAR KOTTAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI 34. PAN AABPL 2539 A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.BETIGIRI, JCIT RESPONDENT BY : SHRI N. QUADIR HO SEYN, ADVOCATE DATE OF HEARING : 24 TH AUGUST, 2011 DATE OF PRONOUNCEMENT : 26 TH AUGUST, 2011 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)V , AT ITA 384/11 :- 2 -: CHENNAI DATED 16.11.2010 AND ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1 961. 2. THE ASSESSEE, AN INDIVIDUAL HAD FILED HIS RETURN OF INCOME OF ` 4,92,610/-. HIS TOTAL INCOME INCLUDED SALARY AS D IRECTOR OF M/S. SOUTHERN CREDITS AND CHITS PVT. LTD., COMMISSION, I NCOME FROM HOUSE PROPERTY AND FARM INCOME. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THE CONTENTS OF THE ANNUAL INFORMA TION REPORT CONTAINING CERTAIN DETAILS RELATING TO THE INCOME O F THE ASSESSEE. THE ASSESSEE HAD MADE TOTAL CASH DEPOSITS OF ` 26,49,000/- IN HIS ACCOUNT WITH CATHOLIC SYRIAN BANK. THE ASSESSE E ALSO HAD SOLD A PROPERTY FOR ` 36,17,700/- ON 7.2.2006. THESE MATTERS WERE ENQUIRED INTO BY THE ASSESSING OFFICER AND ACC EPTED THE EXPLANATIONS OF THE ASSESSEE IN THE LIGHT OF THE BO OKS OF ACCOUNT. BUT THEREAFTER, AGAIN THE ASSESSING OFFICER CALLED FOR BANK STATEMENTS OF THE ASSESSEE IN RESPECT OF CATHOLIC S YRIAN BANK AND STATE BANK OF TRAVANCORE AND ASKED THE DETAILS OF CERTAIN CREDITS REFLECTED IN ASSESSEES ACCOUNTS. AS THE E XPLANATIONS WERE NOT FOUND SATISFACTORY, THE ASSESSING OFFICER TREATED THOSE CREDITS AS UNEXPLAINED CASH CREDITS AND ADDED THE S AME TO THE ITA 384/11 :- 3 -: INCOME OF THE ASSESSEE. THE ADDITION THUS, MADE BY THE ASSESSING AUTHORITY WAS ` 46,06,748/-. 4. IN FIRST APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) FOUND THAT ALL THE CREDIT ENTRIES POINTED OUT BY TH E ASSESSING AUTHORITY WERE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE DEPOSITS OF CHEQUES IN ASSESSEES BANK ACCOUNT HAVE BEEN REFLECTED IN THE CASH BOOK AND THE LEDGER MAINTAINE D BY THE ASSESSEE. THEREFORE, HE HELD THAT ALL THE ENTRIES ARE REFLECTED IN THE BOOKS OF ACCOUNT AND THE ADDITION WAS NOT JUSTI FIED. THE COMMISSIONER OF INCOME-TAX (APPEALS) ALSO HELD THAT ADDITIONS UNDER SEC.68 CANNOT BE MADE WITH REFERENCE TO BANK STATEMENTS, AS BANK STATEMENTS DO NOT AMOUNT TO THE CORRECT ACC OUNTS OF THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) ULTIMATELY DELETED THE ADDITION OF ` 46,06,748/- MADE BY THE ASSESSING AUTHORITY. THE REVENUE IS AGGRIEVED AND THEREFORE, THE SECOND APPEAL BEFORE US. 5. WE HEARD SHRI T.N.BETGIRI, THE LEARNED JOINT COM MISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE AND SHRI QU ADIR HOSEYN, THE LEARNED COUNSEL APPEARING FOR THE ASSES SEE. ITA 384/11 :- 4 -: 6. THE GROUNDS RAISED BY THE REVENUE IN THE PRESENT APPEAL READ AS FOLLOWS : 2.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE ENTIRE ADDITION OF ` 46,06,748 BEING AMOUNT CREDITED IN ASSESSEES BANK ACCOUNTS NOT EXPLAINED. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT IRRESPECTIVE OF THE FACT THAT THE AMOUNTS CREDITED WERE BY CHEQUES AND WERE REFLECTED IN THE BOOKS OF THE ASSESSEE THE FACT REMAINS THAT THE SOURCES FOR THESE CREDITS HAVE NOT BEEN EXPLAINED. 2.3 WITHOUT PREJUDICE TO THE ABOVE THE CIT(A) ERRE D IN DECIDING THE ISSUE ON TECHNICAL GROUNDS THAT THE BANK STATEMENT OF THE ASSESSEE IS NOT HIS BOOKS OF ACCOUNTS. 2.4 THE LEARNED CIT9A)S POWERS BEING CO-TERMINUS WITH THAT OF THE ASSESSING OFFICER OUGHT TO EXAMINE WHETHER THE SOURCES FOR THE CREDITS WERE PROPERLY EXPLAINED. 2.5 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE DID NOT EVEN DISCHARGE HIS PRIMARY ONUS OF ITA 384/11 :- 5 -: FURNISHING THE DETAILS OF THE NAME AND ADDRESS OF T HE CREDITORS AND NATURE OF THE TRANSACTION. 2.6 HAVING REGARD TO THE DECISION OF THE HONBLE H IGH COURT OF KERALA IN THE CASE OF M A UNNERI KUTTY VS. CIT (198 ITR 147) WHICH HELD THAT IT IS FOR THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITOR AS A LSO THE CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS THE CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 2.7 HAVING REGARD TO THE DECISION OF THE HONBLE H IGH COURT OF CALCUTTA IN THE CASE OF CIT VS. PRECISION FINANCE P LTD. (208 ITR 465) WHICH HELD THAT MERE PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE A NON-GENUINE TRANSACTION GENUINE THE CIT(A) ITAT OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 3.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF NOTIONAL INTEREST OF ` 1,31,556. 3.2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE FAILED TO FURNISHED INFORMATION TO THE ITA 384/11 :- 6 -: ASSESSING OFFICER WITH REGARD TO THE PAYMENTS MADE BY THE ASSESSEE TO VARIOUS PARTIES. 3.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE BEING IN FINANCE BUSINESS IT IS ONLY LOGIC AL TO CONCLUDE THAT ANY PAYMENTS MADE WERE ADVANCES PERTAINING TO HIS BUSINESS. 4.1 THE LEARNED CIT(A) HAS ERRED IN ALLOWING ASSESSEES APPEAL AGAINST INITIATING PENAL AND REASSESSMENT PROCEEDINGS THOUGH STATING THAT SUCH INITIATION IS OUTSIDE THE PURVIEW OF THE ASSESSMENT . 7. IN THE PRESENT CASE, THE ENTRIES REFLECTED IN TH E BANK STATEMENTS HAVE BEEN CORRESPONDINGLY REFLECTED IN T HE CASH BOOK AND THE LEDGER OF THE ASSESSEE AS WELL. THEREFORE, THE ENTRIES ARE REFLECTED BOTH IN THE BOOKS OF ACCOUNT AS WELL AS I N THE BANK STATEMENTS. THE POINT TO BE NOTED IS THAT THESE EN TRIES ARE REFLECTED IN THE BOOKS OF ACCOUNT EVEN THOUGH IN TH E FORM OF CHEQUE DEPOSITS. THEREFORE, IT IS WITHIN THE JURIS DICTION OF THE ASSESSING OFFICER TO ENQUIRE INTO THE GENUINENESS O F THOSE CREDITS. ONLY FOR THE REASON THAT THOSE AMOUNTS AR E ALSO REFLECTED IN THE BANK STATEMENTS, IT DOES NOT MEAN THAT THEY DISAPPEAR FROM ITA 384/11 :- 7 -: THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSIN G OFFICER HAS THE JURISDICTION TO EXAMINE THE SOURCE OF FUNDS CAM E INTO THE HANDS OF THE ASSESSEE IN THE RELEVANT PREVIOUS YEAR . 8. THEREFORE, WE FIND THAT THE COMMISSIONER OF INCO ME-TAX (APPEALS) HAS MORE CONCENTRATED ON TECHNICAL ASPECT S OF THE ISSUE RATHER THAN EXAMINING THE BONA FIDES OF THE C REDITS REFLECTED IN THE ACCOUNTS OF THE ASSESSEE. IT IS TRUE THAT T HE AMOUNTS WERE RECEIVED BY THE ASSESSEE BY CHEQUES FROM DIFFERENT PARTIES. THAT IS NOT THE END OF THE MATTER. HOW THE CHEQUES WERE RECEIVED BY THE ASSESSEE, IN WHAT CONTEXT AND FOR WHAT CONSIDER ATION AND HOW THE ASSESSEE WAS ENTITLED TO RECEIVE SUCH AMOUNTS A ND WHAT WAS THE NATURE OF THOSE RECEIPTS ETC. HAVE TO BE EXAMIN ED. IF NO PROPER EXPLANATION IS COMING FORTH WITHIN THE JURIS DICTION OF THE ASSESSING OFFICER, HE HAS TO TREAT THEM AS UNEXPLAI NED INCOME IN THE HANDS OF THE ASSESSEE. THE COMMISSIONER OF INC OME-TAX (APPEALS) HAS NOT APPLIED HIS MIND ON THIS CRUCIAL ASPECT. THEREFORE, WE ARE NOT IN A POSITION TO ENDORSE THE FINDINGS ARRIVED AT BY HIM. IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE CONSIDERED VIEW THAT THE GRIEVANCE OF THE REVEN UE HAS TO BE REDRESSED. WE REMIT BACK THE ISSUE TO THE ASSESSIN G OFFICER FOR ITA 384/11 :- 8 -: RE-EXAMINING THE CASE IN RESPECT OF THE CREDITS REF LECTED IN THE ACCOUNTS OF THE ASSESSEE INCLUDING BANK STATEMENTS. WHILE DOING SO, THE ASSESSING OFFICER SHALL GIVE CAREFUL CONSID ERATION TO THE OBSERVATIONS AND PROPOSITIONS MADE BY THE COMMISSIO NER OF INCOME-TAX (APPEALS) IN HIS ORDER. HE SHALL ALSO G IVE AN EFFECTIVE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 9. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 26 TH OF AUGUST, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 26 TH AUGUST, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR