Shri R.Pandian, CHENNAI V. ITO, Madurai

ITA 388/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4997 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Unexplained investment
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NO. 387/MDS/2011 ASSESSMENT YEAR : 2006-07 SMT. P. NALLAMMAL, 106, SIVAGANGA ROAD, MADURAI 625 020. PAN : ACWPN3036F (APPELLANT) V. THE INCOME TAX OFFICER, WARD II(1), MADURAI. (RESPONDENT) I.T.A. NO. 388/MDS/2011 ASSESSMENT YEAR : 2006-07 SHRI R. PANDIAN, 106, SIVAGANGA ROAD, MADURAI 625 020. PAN : AAPPP3495H (APPELLANT) V. THE INCOME TAX OFFICER, WARD II(2), MADURAI. (RESPONDENT) APPELLANTS BY : SHRI T.N. SEETHARAMAN RESPONDENTS BY : SHRI B. S RINIVAS O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY DIFFERENT ASSESSEES AGA INST THEIR RESPECTIVE ORDERS DATED 16.12.2010 OF COMMISSIONER OF INCOME TAX I.T.A. NOS. 387 & 388/MDS/11 2 (APPEALS)-I, MADURAI, FOR THE IMPUGNED ASSESSMENT Y EAR. BOTH THE ASSESSEES HAVE RAISED SIMILAR GROUNDS WHICH ARE REP RODUCED HEREUNDER:- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING AN ADDITION OF ~ .20,OO,OOO/- AS 'UNEXPLAINED INVESTMENT' AND AS INCOME OF THE AP PELLANT UNDER SECTION 69 OF THE ACT AND DISMISSING THE APPEAL. 2. THE COMMISSIONER (APPEALS) ERRED IN NOT APPRECIATI NG THE FACTS OF THE CASE AND THE EXPLANATION RENDERED / EVIDENCE ADDUCED AND HOLDING THAT THE INVESTMENT ' THAT STOOD IN THE NAME OF ASSESSEE' REPRESENTED INCOME O F THE APPELLANT NOT DECLARED FOR I. T. PURPOSES. 3. THE COMMISSIONER (APPEALS) AND THE ASSESSING OFFIC ER ERRED IN APPLYING THE CRITERIA IN SECTION 68 /SECTION 69 AND JUDICIAL DECISIONS, W HICH HAVE NO RELEVANCE AT ALL IN THE FACT SITUATION OF THE APPELLANT'S CASE. 4. THE AUTHORITIES BELOW ERRED IN NOT SEEING THAT THE APPELLANT WAS ONLY A ' CARE TAKER' OF THE MONEYS OF HER SON IN LAW AND THE INVESTMENT IN UTI MUTUAL FUND WAS HER SON IN LAW'S, THOUGH MADE IN THE NAME OF THE APPELLANT. 5. THE AUTHORITIES BELOW FAILED TO SEE THAT THE APPEL LANT'S SON IN LAW SRI M.BABU IS AN ASSESSEE IN COMPANY CIRCLE II, MADURAI UNDER P.A.NO . AFXPB 1271 LAND HAD FURNISHED LETTERS/DECLARATION OWNING THE FUNDS GIVE N BY HIM TO THE APPELLANT FOR PURPOSES OF INVESTMENT ALSO EXPLAINING THE SOURCE O F THE FUNDS IN HIS CASE. 6. THE AUTHORITIES BELOW FURTHER FAILED TO SEE THAT S RI M.BABU IS A MAN OF MEANS, AS EVIDENCED BY HIS LETTERS / DECLARATION FILED BEFORE THE ASSESSING OFFICER, AND HAD ALSO EXPLAINED THE CIRCUMSTANCES IN WHICH HE HAD DISPOSE D OF HIS ASSETS TO RAISE THE MONEYS ENTRUSTED TO THE APPELLANT FOR PURCHASE OF P ROPERTY IN FUTURE. 7. THE AUTHORITIES BELOW ERRED IN NOT APPRECIATING TH AT THE AMOUNT INVESTED IN UTI MUTUAL FUND DID NOT BELONG TO THE APPELLANT NOR WAS IT RECEIVED AS A LOAN BUT WAS AT ALL TIMES MONEYS OF SRI M.BABU. ON THE AFORESAID FA CTS, THERE WAS NO JUSTIFICATION TO DRAW A ADVERSE INFERENCE AND TO INVOKE THE DEEMING PROVISIONS OF SECTION 69 OF THE ACT. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT T HE TIME OF HEARING, THE APPELLANT I.T.A. NOS. 387 & 388/MDS/11 3 PRAYS THAT THE HON'BLE TRIBUNAL BE PLEASED TO ALLOW THE APPEAL AND RENDER JUSTICE. 2. SHORT FACTS APROPOS ARE THAT THE ASSESSEES HAD F ILED THEIR RETURNS WHICH WERE PROCESSED UNDER SECTION 143(1) O F INCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). CASES OF BOTH THE ASSESSEES WERE SELECTED FOR SCRUTINY. THE A.O. WAS HAVING AI R INFORMATION REGARDING INVESTMENT OF ` 20 LAKHS ON 20 TH FEBRUARY 2006 BY EACH ASSESSEE IN UTI MUTUAL FUNDS. AS PER THE A.O., THE SE INVESTMENTS WERE NOT REFLECTED IN THE RETURNS FILED BY THE ASSE SSEES. INFORMATION WAS SOUGHT FROM THE ASSESSEES REGARDING SOURCE OF I NVESTMENTS. BOTH THE ASSESSEES FILED A LETTER FROM THEIR SON-IN -LAW, NAMELY, SHRI M. BABU, WHO WAS RESIDING IN MALAYSIA. THE LETTER FILED BY SHRI M. BABU READS AS UNDER:- I AM PRESENTLY WORKING AS A SOURCING MANAGER IN SABI C INNOVATIVE PLASTICS, MALAYSIA. EARLIER, I WAS WORKI NG IN ABC INDIA LTD., CHENNAI BETWEEN 1995 AND 2000 AND LATER JOINE D IN GE PLASTICS INDIA (P) LTD., VADODARA, GUJARAT WHERE I SERVED UNTIL 2005 BEFORE LEAVING FOR MALAYSIA. MY GROSS PAY WHEN I LEFT INDIA WAS ` 8 LAKHS. I JOINED IN THE MALAYSIAN COMPANY WITH A S TARTING PAY OF ` 16 LAKHS. WHEN I LEFT INDIA, I DISPOSED OFF MY MOVABLE PROPERT IES INCLUDING CAR AND A PORTION OF MY JEWELS AND TOGETHE R WITH MY SAVINGS I GAVE A SUM OF ` 40 LAKHS TO MY FATHER-IN-LAW WITH A REQUEST TO IDENTIFY A SUITABLE RESIDENTIAL BUNGALOW FOR OUT-RIGHT I.T.A. NOS. 387 & 388/MDS/11 4 PURCHASE OR FOR PURCHASE OF A SITE AND CONSTRUCTION OF A BUNGALOW AT MADURAI. SINCE, I WAS NOT HAVING ANY URGENCY TO C OME BACK TO INDIA, I LEFT HIM WITH THE CHOICE OF SUITABLE INVES TMENTS. THIS MONEY WAS INVESTED BY HIM IN UNIT TRUST OF INDIA , MUMBAI IN THE NAMES OF SELF AND HIS WIFE. THIS FAC T WAS INFORMED TO ME ALREADY. NOW, I HAVE COME BACK TO INDIA FOR DEEPAVALI AND WI TH A VIEW TO CONFIRM AND OFFER EXPLANATION. I AM EXECUT ING THIS CONFIRMATION LETTER. THIS IS TO CONFIRM THAT THE I NVESTMENT HAS FLOWN FROM MY MONEY ONLY AND MY IN-LAWS ARE ONLY CARETA KERS OF THIS FUND. A FURTHER LETTER DATED 24.11.2008 WAS ALSO FILED BY THE ASSESSEES WHEREIN IT WAS STATED BY THE ASSESSEES THAT THE MON EY RECEIVED BY THEM WERE IN A CAPACITY AS CARETAKER FOR THE PURPOS E OF INVESTMENT IN HOUSE PROPERTY AND THIS WAS THE REASON WHY IT DID N OT GET ITSELF REFLECTED IN THEIR RESPECTIVE RETURNS. THE A.O. RE QUIRED THE ASSESSEES TO PRODUCE DOCUMENTARY EVIDENCE FOR THE SALE OF VAR IOUS ITEMS MENTIONED BY SHRI M. BABU IN HIS LETTER AND ALSO HO W THE AMOUNTS RECEIVED IN EACH OF SUCH SALE CAME TO THE ASSESSEES . FOR THIS, EACH ASSESSEE FILED A LETTER DATED 18.12.2008 WHEREIN IT WAS STATED AS UNDER:- AN AMOUNT OF ` 40 LAKHS WAS GIVEN TO ME BY MY SON-IN-LAW, SHRI M. BABU IN THE END OF JANUARY, 2004, OUT OF WHI CH ` 20 LAKHS WAS INVESTED IN MY NAME. I.T.A. NOS. 387 & 388/MDS/11 5 MY SON-IN-LAW AS HE HAS STATED IN HIS DECLARATION, D ID NOT RETAIN ANY EVIDENCES FOR HIS DISPOSAL OF MOVABLE ASS ETS SINCE HE DID NOT THINK THAT IT WAS NECESSARY AS THE ASSETS W ERE PURCHASED FROM HIS ASSESSED INCOME/SAVINGS. FURTHER, HE LEFT GUJARAT FOR GOOD AND AT PRESENT IS IN MALAYSIA. HE HAS CONFIRME D THE PAYMENT. AT PRESENT I DO NOT HAVE ANY OTHER EVIDENC ES FOR HIS DISPOSAL ASSETS OF ASSTS. I AM ENCLOSING COPIES OF THE INCOME-TAX RETURN AND STATEMENT OF MY SON-IN-LAW FOR THE ASST. YEAR 2006-0 7. THE A.O. WAS OF THE OPINION THAT SHRI M. BABU WAS H AVING A TAKE HOME SALARY OF ` 4.7 LAKHS ONLY PER ANNUM AND ASSESSEES WERE NOT ABLE TO SUBSTANTIATE BY ANY DOCUMENTARY EVIDENCE TH E DISPOSAL OF VARIOUS PROPERTIES MENTIONED BY SHRI M. BABU. AS P ER THE A.O., THE ONLY PROOF RELIED ON BY THE ASSESSEES WAS THE CONFI RMATION LETTER FROM THEIR SON-IN-LAW. THE A.O., THEREFORE, TREATED THE INVESTMENTS MADE BY THE ASSESSEES IN THE UTI MUTUAL FUND AS UNEXPLAI NED AND BROUGHT IT TO TAX UNDER SECTION 69 OF THE ACT. 3. IN THEIR APPEALS PREFERRED BEFORE THE CIT(APPEAL S), ARGUMENT OF THE ASSESSEES WAS THAT THEY HAD GIVEN PROPER EXPLAN ATION FOR THE NATURE AND SOURCE OF INVESTMENTS AND THE EXPLANATIO NS WERE CORROBORATED BY THE CONFIRMATION LETTER GIVEN BY SH RI M. BABU. HOWEVER, THE CIT(APPEALS) WAS NOT IMPRESSED. ACCOR DING TO HIM, I.T.A. NOS. 387 & 388/MDS/11 6 ASSESSEES COULD NOT SHOW THAT THE AMOUNTS RECEIVED FROM SHRI M. BABU WERE THROUGH BANKING CHANNEL, NOR COULD THEY P RODUCE A DAY BOOK OR SHOW CASH BOOK ENTRIES, IF THE RECEIPTS WER E IN CASH. LD. CIT(APPEALS) ALSO FOUND THAT CASH FLOW STATEMENT FO R THE RELEVANT PREVIOUS YEAR FILED BY THE ASSESSEES DID NOT SHOW T HE ABOVE AMOUNTS. RELYING ON THE DECISION OF HON'BLE PATNA HIGH COURT IN THE CASE OF SMT. ASHOKA SARAN V. CIT (209 ITR 679), LD. CIT(APPEALS) CONFIRMED THE ACTION OF THE A.O. IN CONSIDERING SUC H INVESTMENTS TO BE UNEXPLAINED. 4. NOW BEFORE US, LEARNED A.R. SUBMITTED THAT ASSES SEES HAD FILED A LETTER DATED 25.10.2008 FROM SHRI M. BABU, THEIR SON-IN-LAW, WHO HAD CONFIRMED THAT ` 20 LAKHS EACH WAS GIVEN BY HIM TO THE ASSESSEES, IN A CAPACITY AS CARETAKERS. ACCORDING TO LEARNED A.R., SINCE THE MONEY WAS GIVEN BY THEIR SON-IN-LAW, FOR PURCHASING RESIDENTIAL BUNGALOW AND, SINCE THE PURCHASE COULD NOT COME THROUGH, ASSESSEES HAD, AS A TEMPORARY MEASURE, DEP OSITED THE AMOUNT IN UTI MUTUAL FUNDS. LEARNED A.R. REFERRING TO ANOTHER LETTER DATED 25.10.2008 PLACED AT PAGE NO.5 OF PAPER-BOOK, SUBMITTED THAT SHRI M. BABU HAD ADDRESSED THE SAME TO A.O. DIRECTL Y AND ALSO I.T.A. NOS. 387 & 388/MDS/11 7 MENTIONED THAT HE WAS IN INDIA AT THAT POINT OF TIM E. ACCORDING TO LEARNED A.R., DESPITE THE PRESENCE OF SHRI BABU IN INDIA, THE A.O. DID NOT TAKE ANY STEP TO EXAMINE HIM NOR DID HE REQUIRE THE ASSESSEES TO PRODUCE HIM. AS PER THE LEARNED A.R., ASSESSEES WE RE UNDER THE IMPRESSION THAT THEIR EXPLANATION WAS BEING ACCEPTE D BY THE A.O. OTHERWISE THEY WOULD HAVE PRODUCED SHRI BABU, THEIR SON-IN-LAW BEFORE THE ASSESSING OFFICER FOR DIRECT CONFIRMATIO N. LEARNED A.R. ALSO BROUGHT TO OUR ATTENTION AN AFFIDAVIT FILED BY SHRI M. BABU AND LETTER DATED 1 ST DECEMBER, 2008 PLACED AT PAGES 6 TO 8 OF PAPER-BOO K, WHEREIN HE CONFIRMED THE POSITION THAT THE MONEY WA S GIVEN ONLY FOR PURCHASE OF PROPERTY ON HIS BEHALF AND POINTED OUT THAT HE HAD ALSO GIVEN HIS PAN NUMBER. IN SHORT, ACCORDING TO LEARN ED A.R., HAD PROPER OPPORTUNITY BEEN GIVEN, ASSESSEES WOULD HAVE PRODUCED SHRI BABU AND PROVED THEIR CONTENTION THAT THE MONEY WAS RECEIVED FROM HIM. 5. PER CONTRA, LEARNED D.R. SUBMITTED THAT ASSESSEE S WERE GIVEN SUFFICIENT OPPORTUNITY TO PROVE THEIR CONTENTION AN D EXCEPT A CONFIRMATION LETTER FROM SHRI M. BABU NOTHING WAS F ILED. I.T.A. NOS. 387 & 388/MDS/11 8 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. A SUM OF ` 40 LAKHS IN TOTAL HAD COME FROM THEIR SON-IN-LAW, AS PER THE ASSESSEE AND THIS HAD COME OUT OF SALE OF VARIOUS M OVABLE PROPERTIES. SHRI M. BABU UNDISPUTEDLY WAS AN INCOM E-TAX ASSESSEE AND WAS REGULARLY FILING HIS RETURN WITH DEPUTY COM MISSIONER OF INCOME TAX, COMPANY CIRCLE, MADURAI. NO DOUBT, ASS ESSEES WERE REQUIRED BY THE ASSESSING OFFICER TO PRODUCE EVIDEN CE FOR THE SALE OF JEWELLERY, SALE OF CAR, ETC. CLAIMED BY SHRI BABU A ND ALSO HIS STATEMENT OF BANK ACCOUNTS. BUT, IT IS CLEAR FROM THE LETTER DATED 25 TH OCTOBER, 2008 OF SHRI BABU PLACED AT PAGES 3 AND 4 OF PAPER-BOOK THAT HE WAS IN MALAYSIA AT THAT POINT OF TIME. THE REFORE, IT MIGHT NOT HAVE BEEN POSSIBLE FOR THE ASSESSEES TO BRING AND S UBMIT BEFORE THE A.O. THE EVIDENCE SOUGHT. NEVERTHELESS, SHRI BABU IN HIS LETTER DATED 25 TH OCTOBER, 2008 ALSO CONFIRMED THAT HE WAS IN INDIA AT THAT POINT OF TIME. HOWEVER, NO STEP WAS TAKEN BY THE A.O. TO EX AMINE HIM. IN THE CASE OF SMT. NALLAMMAL (ASSESSEE IN I.T.A. NO. 387/MDS/2011), HER ONLY INCOME WAS FROM HOUSE PROPERTY AND OTHER S OURCES AND IN THE CASE OF SHRI R. PANDIAN (ASSESSEE IN I.T.A. NO. 388/MDS/2011), HIS INCOME WAS FROM HOUSE PROPERTY AND PROFESSION. THEREFORE, THERE IS EVERY PROBABILITY THAT EXPLANATION GIVEN B Y THE ASSESSEES I.T.A. NOS. 387 & 388/MDS/11 9 REGARDING THE SOURCE OF ` 40 LAKHS, FOR THE TOTAL INVESTMENTS MADE IN THEIR NAMES IN UTI MUTUAL FUNDS ON 20.2.2006 HAD CO ME FROM THEIR SON-IN-LAW SHRI M. BABU WAS CORRECT. ASSESSEES HAD NEVERTHELESS FAILED TO FILE SUFFICIENT CORROBORATIVE EVIDENCE BE FORE THE ASSESSING OFFICER. IN THE FITNESS OF CASE AND IN THE INTERES T OF JUSTICE, WE ARE OF THE OPINION THAT THE MATTER NEEDS A RE-VISIT BY THE A.O. ONCE AGAIN. ASSESSEES HAVE TO BE GIVEN A CHANCE TO PRODUCE SHRI M. BABU BEFORE THE ASSESSING OFFICER TO CORROBORATE THEIR V ERSION THAT THE MONEY HAD COME FROM SHRI M. BABU. WE, THEREFORE, S ET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT IT BACK T O ASSESSING OFFICER FOR FRESH CONSIDERATION. ASSESSEES SHALL BE GIVEN A CHANCE TO CORROBORATE THEIR SUBMISSION THAT MONEY DID COME FR OM SHRI M. BABU AND SHALL ALSO CO-OPERATE WITH ASSESSING OFFICER IN THIS REGARD. ASSESSING OFFICER CAN CALL SHRI M. BABU FOR VERIFIC ATION AND ASSESSEES ARE DUTY BOUND TO PRODUCE SHRI M. BABU BE FORE THE ASSESSING OFFICER. ASSESSING OFFICER SHALL ACT IN ACCORDANCE WITH LAW. 7. IN THE RESULT, BOTH THE APPEALS FILED BY ASSESSE ES ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 387 & 388/MDS/11 10 THE ORDER WAS PRONOUNCED IN THE COURT ON 31 ST MAY, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 31 ST MAY, 2011. KRI. COPY TO: APPELLANTS/RESPONDENTS/CIT(A)-I, MADURAI/ CIT-I, MADURAI/D.R./GUARD FILE