T.Saravanakumar, Kovilpatti V. ITO, Tuticorin

ITA 467/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77361 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2014
• Court: TRIBUNAL
• Department Lawyers: HARI RAO
• Assessee Lawyers: N DEVANATHAN
• Keywords: Capital asset; Source of fund; Benefit of exemption

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHE NNAI . . . , ! , ' # $ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 467/MDS/2014 / ASSESSMENT YEAR : 2009-10 SHRI T.SARAVANAKUMAR, 1179, VIP NAGAR, RAJIV NAGAR, KOVILPATTI-628 501 [PAN: BUOPS 4208 P] ( !% /APPELLANT) VS THE INCOME TAX OFFICER, WARD-I(3), TUTICORIN ( &'!% /RESPONDENT) / APPELLANT BY : MR. N.DEVANATHAN, ADVOCATE / RESPONDENT BY : MR. HARI RAO, JCIT / DATE OF HEARING : 12-05-2014 ! / DATE OF PRONOUNCEMENT : 30-06-2014 #( / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST T HE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)-I, MADURAI, DATED 10-02-2014 FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. THE ASSESSEE IS A BUILDING CONTRACTOR. FOR THE AY UNDER CONSIDERATION, THE ASSESSEE FILED HIS RETURN OF INC OME ON I.T.A. NO. 467/MDS/2014 2 07-04-2010 DECLARING HIS TOTAL INCOME AS ` 1,48,799/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U /S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE ON 05-09-2011. 3. DURING THE PERIOD RELEVANT TO AY.2009-10, THE AS SESSEE SOLD CAPITAL ASSET INHERITED BY HIM FOR A CONSIDERATION OF ` 50.00 LAKHS AND UTILIZED THE SALE PROCEEDS TOWARDS CONSTRUCTION OF A NEW HOUSE AT KOVILPATTI. AS PER THE DETAILS SUBMITTED BY THE ASSESSEE, THE TOTAL COST OF CONSTRUCTION OF THE NEW HOUSE WAS ` 38,45,820/-. THE ASSESSING OFFICER COMPUTED LONG TERM CAPITAL GA IN FROM THE SALE OF INHERITED PROPERTY AS ` 49,21,473/-. THE ASSESSEE DEPOSITED THE UN-UTILIZED AMOUNT IN HIS SAVINGS BAN K A/C AND CLAIMED EXEMPTION OF THE ENTIRE CAPITAL GAINS U/S.5 4 OF THE ACT. THE ASSESSING OFFICER HELD THAT, SINCE THE ENTIRE A MOUNT WAS NOT UTILIZED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 54, THEREFORE, THE ASSESSEE IS ENTITLED TO PROPORTIONATE EXEMPTION U/S.54 OF THE ACT. THUS, THE LONG TERM CAPITAL GAIN LIABLE FOR T AX WAS COMPUTED AS ` 30.56 LAKHS. THE ASSESSING OFFICER MADE ANOTHER ADDITION OF ` 6,10,000/- U/S.68 AS UN-EXPLAINED CASH CREDITS. THE ASSESSEE HAD CLAIMED UN-SECURED LOAN FROM HIS FRIENDS AND RELATIVES TO T HE EXTENT OF I.T.A. NO. 467/MDS/2014 3 ` 20,60,940/-. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, ASSESSING OFFICER WAS SATISFIED WITH THE EXPLANATIO N FURNISHED IN RESPECT OF LOANS TO THE EXTENT OF ` 14,50,000/-. AS REGARDS REMAINING AMOUNT OF ` 6,10,000/- SECURED FROM SHRI KARUPPASAMY ( ` 4.00 LAKHS) AND SHRI D. SELVIN JEBARAJ ( ` 2,10,000/-), THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLAN ATION FURNISHED BY THE CREDITORS AND THUS MADE ADDITION OF THE SAID AMOUNT U/S.68 OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER DT.29-11-2011, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APPEALS ). THE CIT(APPEALS) VIDE IMPUGNED ORDER UPHELD THE FINDING S OF THE ASSESSING OFFICER AND CONFIRMED THE ADDITION. AGGRIEVED BY THE ORDER OF FIRST APPELLATE AUTHORITY , THE ASSESSEE HAS COME IN SECOND APPEAL BEFORE THE TRIBU NAL. 4. SHRI N.DEVANATHAN, APPEARING ON BEHALF OF THE AS SESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW. THE LD.COUNSEL SUBMITTED THAT THE CIT(APPEALS) HAS ERRE D IN SUSTAINING THE FINDINGS OF ASSESSING OFFICER. THE ASSESSEE HA D UTILIZED THE AMOUNT OF LONG TERM CAPITAL GAINS IN THE CONSTRUCTI ON OF RESIDENTIAL HOUSE WITHIN THE TIME FRAME PROVIDED U/ S.54 OF THE ACT AND THE REMAINING AMOUNT WAS DEPOSITED BY THE ASSES SEE IN I.T.A. NO. 467/MDS/2014 4 SAVINGS BANK A/C. ON THE ISSUE OF ADDITIONS MADE U /S.68 OF THE ACT, THE LD.COUNSEL SUBMITTED THAT THE ASSESSEE WAS ABLE TO PRODUCE ALL THE CREDITORS FROM WHOM HE HAD CONFIRME D THE LOAN EXTENDED TO THE ASSESSEE. 5. ON THE OTHER HAND, SHRI HARI RAO, APPEARING ON B EHALF OF THE REVENUE STRONGLY SUPPORTED THE ORDER OF THE CIT(APP EALS). THE LD.DR CONTENDED THAT THE ASSESSEE HAD ONLY INVESTED PART OF CAPITAL GAINS IN THE CONSTRUCTION OF HOUSE AND HAS DEPOSITED THE REMAINING AMOUNT IN SAVINGS BANK A/C. FOR CLAIMING BENEFIT OF EXEMPTION, THE ASSESSEE OUGHT TO HAVE DEPOSITED THE AMOUNT IN NOTIFIED SCHEME AND NOT IN THE SAVINGS BANK A/C. A S FAR AS ADDITION U/S.68 IS CONCERNED, THE LD.DR CONTENDED T HAT THE ASSESSING OFFICER HAS GRANTED RELIEF TO THE ASSESSE E TO THE EXTENT HE WAS SATISFIED THAT THE LOANS HAVE BEEN EXTENDED BY THE RELATIVES AND FRIENDS OF THE ASSESSEE. AS REGARDS LOAN OF ` 4.00 LAKHS FROM SHRI KARUPPASAMY IS CONCERNED, THERE WER E CONTRADICTIONS IN THE STATEMENT MADE BY THE CREDITO R AND THE ASSESSEE. IN RESPECT OF SHRI D. SELVIN JEBARAJ, TH E ASSESSING OFFICER OBSERVED THAT HE DOES NOT HAVE SOURCE TO EX TEND LOAN. I.T.A. NO. 467/MDS/2014 5 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN APPEAL, THE LD.COUNSEL F OR THE ASSESSEE HAS RAISED ONLY TWO ISSUES: I. ASSESSEES ENTITLEMENT TO CLAIM EXEMPTION U/S.54 F ON THE ENTIRE AMOUNT OF CAPITAL GAINS; AND II. ADDITION MADE U/S.68 ON ACCOUNT OF UN-PROVED CA SH CREDITS. 7. AS FAR AS FIRST ISSUE OF EXEMPTION U/S.54 IS CON CERNED, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS EARNED LONG TER M CAPITAL GAIN FROM SALE OF IMMOVEABLE PROPERTY AND ONLY THE PART OF SALE PROCEEDS WAS UTILIZED TOWARDS CONSTRUCTION OF A RES IDENTIAL HOUSE. THE REMAINING AMOUNT WAS DEPOSITED BY THE ASSESSEE IN HIS SAVINGS BANK A/C. FOR CLAIMING BENEFIT OF EXEMPTIO N U/S.54, THE ASSESSEE WAS REQUIRED TO DEPOSIT UN-UTILIZED AMOUNT IN CAPITAL GAINS ACCOUNT SCHEME. SINCE, THE ENTIRE AMOUNT OF LONG TERM CAPITAL GAIN IS NOT UTILIZED BY THE ASSESSEE IN ACC ORDANCE WITH THE PROVISIONS OF SECTION 54, THE ASSESSEE IS ELIGIBLE FOR PROPORTIONATE BENEFIT ONLY. THE AUTHORITIES BELOW HAVE RIGHTLY GR ANTED PROPORTIONATE EXEMPTION TO THE EXTENT OF AMOUNT UTI LIZED IN THE CONSTRUCTION OF A NEW RESIDENTIAL ASSET. WE DO NOT FIND ANY I.T.A. NO. 467/MDS/2014 6 INFIRMITY IN THE FINDINGS OF THE CIT(APPEALS). ACC ORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. THE SECOND ISSUE RAISED IN APPEAL IS WITH REGARD TO ADDITION MADE U/S.68 OF THE ACT. THE ASSESSEE HAD TAKEN LOA N TO THE EXTENT OF ` 20,60,000/- FROM HIS RELATIVES AND FRIENDS. THE ASSESSING OFFICER EXAMINED ALL THE CREDITORS U/S.13 1 OF THE ACT TO VERIFY THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. ALL THE CREDITORS DEPOSED IN FAVOUR OF THE ASSESSEE . THE ASSESSING OFFICER WAS SATISFIED WITH THE CREDITWORT HINESS OF ALL THE CREDITORS EXCEPT TWO I.E., SHRI KARUPPASAMY AND SHR I D. SELVIN JEBARAJ. SHRI KARUPPASAMY IS RELATED TO THE ASSESS EE AND ADMITTED GIVING LOAN TO THE TUNE OF ` 4.00 LAKHS TO THE ASSESSEE ON VARIOUS DATES. IN HIS STATEMENT, HE ADMITTED THAT HE HAD NOT MAINTAINED ANY RECORD OF EXTENDING LOAN TO THE ASSE SSEE NOR HE HAS TAKEN ANY PROMISSORY NOTE FROM THE ASSESSEE. O N THE CONTRARY, THE ASSESSEE HAD FILED PHOTO COPIES OF PR OMISSORY NOTE DT.25-01-2008 EXECUTED IN FAVOUR OF SHRI KARUPPASA MY. THIS CLEARLY SHOWS THAT THE TRANSACTION WITH SHRI KARUPP ASAMY IS FAKE AND THUS, NO SANCTITY CAN BE ATTACHED TO THE STATEM ENT MADE BY SHRI KARUPPASAMY U/S.131. I.T.A. NO. 467/MDS/2014 7 SIMILARLY, SHRI D. SELVIN JEBARAJ, WHO IS A FRIEND OF THE ASSESSEE MADE STATEMENT U/S.131 ADMITTING EXTENDING LOAN OF ` 2,10,000/- TO THE ASSESSEE ON VARIOUS DATES. HOWEV ER, SHRI D. SELVIN JEBARAJ WAS UNABLE TO PROVE SOURCE OF FUNDS FOR EXTENDING LOAN TO THE ASSESSEE. THE ASSESSING OFFICER HAS GI VEN A CATEGORIC FINDING THAT HE HAS NO MEANS TO GIVE LOAN. THE LD .COUNSEL FOR THE ASSESSEE HAS NOT ABLE TO CONTROVERT THE FINDINGS OF THE AUTHORITIES BELOW. ACCORDINGLY, THIS GROUND OF APPEAL OF THE A SSESSEE IS DISMISSED BEING DEVOID OF MERIT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED ON MONDAY, THE 30 TH JUNE, 2014 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ) (DR. O.K. NARAYANAN) (VIKAS AWAS THY) '#$ / VICE PRESIDENT % &' / JUDICIAL MEMBER (% /CHENNAI, )& /DATED: 30 TH JUNE, 2014 TNMM &* +,-, /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ./0 /CIT(A) 4. . /CIT 5. ,12 3 /DR 6. 245 /GF