THUPPIL SUNDERAJAN NATARAJAN, MUMBAI V. ITO 20(2)(3), MUMBAI

ITA 5513/MUM/2013

• Counselvise Citation: 551319914 RSA 2013
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Next Hearing Date: 16-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-08-2013
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: AJAY R SINGH
• Keywords: Unexplained cash credit; Additional evidence; Corroborative evidences
• Section: 68; 54

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 5513 / MUM/20 1 3 ( / ASSESSMENT YEAR : 200 9 - 10 ) MR. THUPPIL SUNDERAJAN NATARAJAN, B - 34, GREEN FIELDS APARTMENTS, JOGESHWARI VIKROLI LINK ROAD, NEAR MAJAS BUS DEPOT, ANDHERI (E), MUMBAI - 400060 VS. ITO 20(2)(3), MUMBAI ./ ./ PAN/GIR NO. : A BFPN 1831 Q ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI AJAY R.SINGH /REVENUE BY : SHRI NEIL PHILIP / DATE OF HEARING : 02 /0 7 / 2015 / DATE OF PRONOUNCEMENT 09/09 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR S 200 9 - 10 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT , WHE REIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - I. ADDITION OF RS.1,25,78,912/ - OUT OF RS. 1,27,78,912/ - ADDITION MADE BY A.O. 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 1 ,25,78,912/ - [OUT OF RS. 1,27,78,912/ - MADE BY A.O.] MA DE BY A.O. U/S. 68 0 THE ACT AS UNEXPLAINED CREDIT WITHOUT APPRECIATING THAT THE SAME WAS THE BALANCE IN ACCOUNT TITLED 'INTER BRANCH AND OTHER ADJUSTMENT ALC.' WHICH ARE PRIMARILY IN ITA NO. 5513 /1 3 2 THE NATURE OF RECONCILIATION ENTRIES BETWEEN PROPRIETOR ACCOUNT AND PERS ONAL INDIVIDUAL ACCOUNT ALSO MOST ENTRIES ORIGINATED IN THE EARLIER ASSESSMENT YEARS. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE RECEIPT IN BANK ACCOUNT ITSELF IS LESS THAN THE ALLEGED UNEXPLAINED CREDITS, FURTHER IN THE REMAND PROCEEDING THE A SSESSEE HAD PRODUCE DETAILED EXPLANATION AND SUPPORTING EVIDENCE BEFORE THE A.O., THUS THE ASSESSEE HAD DISCHARGE THE ONUS OF EXPLAINING AND RECONCILING THE ENTRIES. 3. THE LEARNED CIT(A) FINDING IN PARA 7.5.1. I.E. 'ALL THE ENTRIES WHICH THE APPELLANT RELIES UPON IN ORDER TO ASSERT THAT THE AMOUNT OF RS. 1.27 CRORES IS GENUINE, ARE MADE AT THE END OF THE F.Y.' THE AFORESAID F IND ING IS FACTUALLY INCORRECT AS THE ORIGIN OF MOST OF THE ENTR I ES RELATES TO EARLIER YEARS AND FULLY ACCOUNTED FOR IN THE RELEVAN T YEARS, ONLY THE ADJUSTMENT ENTRIES WERE MADE' DURING THE YEAR TO REFLECT THE CORRECT STATE OF AFFAIRS, THUS THE SAME CANNOT BE CHARACTERIZED AS UNACCOUNTED RECEIPTS. II . AD - HOC DISALLOWANCE OF EXPENSES @ 15% OF RS. 12,89,606/ - I.E. RS.3,22,401 / - 4. THE LEARNED CIT(A) ERRED IN SUSTAINING THE AD - HOC DISALLOWANCE OF , EXPENSES TO THE EXTENT OF 15% OF THE TOTAL EXPENSES OUT OF RS . 12,89,606 / - WHICH IS HIGHLY EXCESSIVE IN THE FACTS OF THE CASE. 2. WE HAVE HEARD RIVAL CONTENTIONS AND FOUND THAT ADDITION WAS MADE BY THE A O ON THE BASIS OF CREDIT ENTRY PASSED IN THE CAPITAL ACCOUNT UNDER THE HEAD NTER BRANCH AND OTHER ADJUSTMENT A/C AS UNEXPLAINED CREDIT U/S.68 OF THE IT ACT. BY THE IMPUGNED ORDER CIT(A) ALLOWED PART RELIEF AGAINST WHICH ASSESSEE IS IN FU RTHER APPEAL BEFORE US. 3. WITH REGARD TO ADDITION OF RS.1,25,78,912/ - IN THE INTER BRANCH ACCOUNT, T HE CONTENTION OF LD. AR WAS THAT THE CREDI T ENTRIES IN THE ACCOUNT OF INTER BRANCH AND OTHER ADJUSTMENT ACCOUNT WERE PRIMARILY IN THE NATURE OF RECONCILIAT ION ENTRIES BETWEEN PROPRIETOR ACCOUNT AND PERSONAL INDIVIDUAL ACCOUNT AND THAT MOST OF ENTRIES ORIGINATED IN THE EARLIER ASSESSMENT YEARS. ITA NO. 5513 /1 3 3 4. OUR ATTENTION WAS ALSO INVITED TO THE COMPUTATION OF INCOME TO INDICATE THAT ALL THE CREDIT ENTRY WAS MADE IN RES PECT OF SALE PROCEEDS OF HOUSE. IT WAS CONTENDED BY LD AR THAT THE LONG TERM CAPITAL GAIN WAS COMPUTED AT NIL WHICH WAS DULY OFFERED IN THE COMPUTATION OF INCOME, THEREFORE, CREDIT IN THE CAPITAL ACCOUNT WAS ARISING OUT OF THE SALE PROCEEDS OF THE HOUSE, INCOME OF WHICH HAS ALREADY BEEN OFFERED IN THE RETURN OF INCOME. IT WAS FURTHER CONTENDED THAT INTER BRANCH TRANSFER WAS NEITHER INCOME NOR AN EXPENDITURE AND IT WAS JUST TO TRANSFER OF FUNDS FROM ONE BRANCH TO ANOTHER BRANCH OF THE ASSESSEE. 5 . WE HAVE C ONSIDERED RIVAL CONTENTIONS AND FOUND THAT D URING THE SCRUTINY PROCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE HAD SHOWN A GROSS LOSS ON TRADING BUT HAD DEBITED EXPENSES TO THE TUNE OF RS.17,99,513/ - UNDER VARIOUS HEADS TO THE P&L ACCOUNT FOR THE YEAR UND ER CONSIDERATION. EXPENSES UNDER VARIOUS HEADS AMOUNTING IN ALL TO RS.12,89,606/ - WERE DISALLOWED BY THE A.O., WHO NOTED THAT THE MANUFACTURING ACTIVITY HAD CLOSED DOWN AND NEITHER JUSTIFICATION NOR SUPPORTING EVIDENCE HAD BEEN SUBMITTED TO ESTABLISH THE G ENUINENESS OF THE EXPENSES. 6 . THE CONTENTION OF LD. AR BEFORE THE LOWER AUTHORITIES WAS THAT AN AMOUNT OF RS. 51,50,000/ - IS ON ACCOUNT OF A BOOK ENTRY RELATING TO THE SALE OF THE FLAT IN GREEN FIELD COMPLEX. IN APPEAL, A COPY OF THE SALE AGREEMENT DATED 31.03.2008 AND THE RELEVANT LEDGER ACCOUNTS HAVE BEEN FURNISHED. FROM THESE DOCUMENTS IT IS SEEN THAT VIDE THE SAID SALE DEED EXE CUTED ON 07.02.2008, THE ASSESSEE TRANSFERRED FLAT NO. 34, B WING, ITA NO. 5513 /1 3 4 PHASE IL, GREEN FIELD COMPLEX, JOGESHWARI TO MR. VENKATSUND ERAJAN AND MRS. LAKSHMI VENKATRAMAN FOR A CONSIDERATION OF RS. 51,50,000/ - . THE ASSESSEE HAS SOUGHT TO MATCH THIS WITH THE LEDGER ACCOUNT OF ONE S.VENKATARAMAN WHICH BEARS THE CREDIT ENTRY OF THE CORRESPONDING AMOUNT AND HAS STATED THAT THE BOOK ENTRY RELA TING TO SALE WAS PUT INTO THE 'INTER - BRANCH ADJUSTMENT ACCOUNT.' IT IS FURTHER STATED THAT THE A.O. HAD ACCEPTED THE LONG - TERM CAPITAL GAIN RESULTING FROM THIS TRANSACTION BUT THAT THE RELATED ENTRIES WERE NOT CHECKED BY THE A.O, DURING THE ASSESSMENT PROC EED INGS. 7 . THE ASSESSEE HAS ALSO CONTENDED THAT AN AMOUNT OF RS. 18,26,316/ - IS RELATED TO THE LOAN TAKEN FROM S. VENKATARAMAN AND HAS PROVIDED A COPY OF THE LEDGER ACCOUNT OF THE PARTY CONCERNED AS WELL AS THE CONFIRMATION GIVEN DURING ASSESSMENT PROCEE DINGS. A PERUSAL OF THE LEDGER ACCOUNT SHOWS THAT THE SAID ACCOUNT REFLECTS A JOURNAL ENTRY DATED 31.03.2009 OF RS.18,26,316/ - AS LOAN TRANSFERRED TO THE CAPITAL ACCOUNT OF THE ASSESSEE . A CONFIRMATION IS FILED STATING THAT S. VENKAT SUNDERAJAN , YOUNGER BR OTHER OF T.S. NATARAJAN, HAS AN OUTSTANDING BALANCE OF RS. 18,26,316/ - WITH THE ASSESSEE AS ON 31.3.2009 . HOWEVER, THE AO OBSERVED THAT CONFIRMATION DOES NOT SUBSTANTIATE THE DATE, MODE AND SOURCE OF THE SAID TRANSACTION. IN VIEW OF THESE FACTS, THE AMOUNT WAS RS.18,26,316/ - WAS HELD TO BE UN - EXPLAINED CASH CREDIT OF THE ASSESSEE AND THE ADDITION TO THIS EXTENT WAS UPHELD. 8 . OUR AT TENTION WAS ALSO BROUGHT TO THE FACT THAT THE AMOUNT OF RS.8,83,391/ - BEING PAYMENT FOR PURPOSE OF OBEROI FLAT WAS WRONGLY ITA NO. 5513 /1 3 5 DEB ITED TO DRAWINGS ACCOUNT. AS SUPPORTING EVIDENCE FOR THIS THE ASSESSEE HAS PROVIDED A COPY OF THE 'INTER BRANCH ADJUSTMENT ACCOUNT.' IT HAS BEEN STATED THAT THIS AMOUNT WAS WRONGLY DEBITED TO THE DRAWINGS IN THE CAPITAL ACCOUNT OF TARGET MARKETING AND WAS SUBSEQUENTLY RECTIFIED. IT IS FURTHER SUBMITTED THAT EXEMPTION U/S 54 WAS SUBSEQUENTLY CLAIMED FOR THE SAID FLAT. 9 . OUR ATTENTION WAS ALSO INVITED TO THE AMOUNT OF RS.35,56,602/, AS BEING ON ACCOUNT OF DIFFERENCE IN THE OPENING BALANCE OF THE CAPITAL ACC OUNT. IN SUPPORT OF HIS CLAIM THE ASSESSEE HAS PRODUCED A COPY OF THE AUDITED BALANCE SHEET AS ON 31.03.2008 WHICH REFLECTS A NEGATIVE CAPITAL BALANCE OF RS. 29,64,629/ - . AS PER LD. AR THE NEGATIVE CAPITAL BALANCE AS ON 31.03.2009 WAS RS. 65,21,231/ - AND T HAT THIS WAS ON ACCOUNT OF CALCULATION ERR OR. 1 0 . OUR ATTENTION WAS ALSO INVITED TO EXPLAIN AN AMOUNT OF RS.6,93,500/ - AS BEING LOAN ADVANCED BY HIS WIFE SEEMA NATARAJAN WHICH WAS CREDITED TO THE 'INTER BRANCH AND OTHER ADJUSTMENT ACCOUNT' WHILE PREPARING THE BALANCE SHEET. IT HAS FURTHER BEEN ASSERTED THAT OUT OF THIS AMOUNT RS. 2,00,000/ - WAS SHOWN AS BALANCE IN HER PERSONAL BALANCE SHEET AND RS. 4,93,500/ - WAS CAPITALISED AS AMOUNT PAID BY HER FOR THE OBEROI FLAT. CONFIRMATION OF OUTSTANDING LOAN TO THE EXTENT OF RS.2, 00 , 000 / - HAS BEEN FURNISHED DURING ASSESSMENT PROCEEDINGS AND WAS ALSO PART OF THE MATERIAL FORWARDED TO THE A.O. DURING REMAND PROCEED INGS. ITA NO. 5513 /1 3 6 11. T HE A.O. ALSO NOTED THAT THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE PROPRIETARY FIRM REFLECTED AN 'INTER - BRAN CH TRANSFER CREDIT' OF RS.127. 79LAKHS. THE EXPLANATION GIVEN BY THE ASSESSEE , THAT THE CREDIT WAS ON ACCOUNT OF INTER - BRANCH TRANSACTIONS AND THAT THE INTER - BRANCH BALANCES REMAINED UN-RECONCILED SINCE 1984 WAS FOUND INSUFFICIENT BY THE A. O. AGAINST THE ABOVE ADDITION T HE ASSESSEE APPROACHED TO CIT(A) AND FILED ADDITIONAL EVIDENCE UNDER RULE 46A ON THE PLEA THAT SUFFICIENT OPPORTUNITY WAS NOT GIVEN BY THE AO INSOFAR AS DOCUMENTS WERE REQUIRED BY THE AO AT THE FAG END OF THE PROCEEDINGS. WE FOUND THAT ASSESSEE WAS PREVENTED BY SUFFICIENT CASE FOR PRODUCING EVIDENCE. WE ALSO FOUND THAT SOME OF THE DOCUMENTS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, PROPER EXPLANATION COULD NOT BE FILED DUE TO PAUCITY OF TIME AS ASSESSMENT WAS GETTING TIME BARRED. AFTER GOING THROUGH THE VARIOUS DOCUMENTS PLACED ON RECORD, WE ARE OF THE CONSIDERED VIEW THAT THE INTER BRANCH ACCOUNT WHICH REMAINED UN - RECONCILED SINCE 1984 REQUIRE HUGE WORKING TO ASCERTAIN THE DIFFERENCE. WITHOUT GOING MUCH INTO MERIT OF THE ADDITION, WE RESTORE THE ENTIRE MATTER TO THE FILE OF AO FOR DECIDING AFRESH AFTER CALLING NECESSARY DOCUMENTS FROM THE ASSESSEE. THE ASSESSEE IS ALSO AT LIBERTY TO FURNISH DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM. THE AO IS TO DECIDE TH E ENTIRE ISSUE AFRESH. WE DIRECT ACCORDINGLY. 12 . WITH REGARD TO DISALLOWANCE OF EXPENDITURE, WE FOUND THAT INITIALLY THE AO HAS DISALLOWED ENTIRE EXPENSES, THEREAFTER CONSIDERING THE EVIDENCE FILED DURING THE REMAND PROCEEDINGS, HE RESTRICTED DISALLOWANCE ITA NO. 5513 /1 3 7 TO 25%. BY THE IMPUGNED ORDER THE CIT(A) FURTHER RESTRICTED DISALLOWANCE TO 15%. IN VIEW OF THE FINDINGS RECORDED BY CIT(A) FOR SUSTAINING DISALLOWANCE OF 15% WHICH HAS NOT BEEN CONTROVERTED BY LD. AR BY BRINGING ANY POSITIVE MATERIAL ON RECORD, WE CONFIR M THE ACTION OF THE CIT(A) FOR DISALLOWING A SUM OF RS.3,22,401/ - . 1 3 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09/09 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 09/09 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//