DCIT, CHENNAI V. Elred Kumar Santhanam, CHENNAI

ITA 86/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8197 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 09-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH JCITD R
• Assessee Lawyers: K BALASUBR AMANIAN
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , !' . ' # $ % $& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NOS.85 & 86 /MDS./2015 ( % ' '(' / ASSESSMENT YEARS :2010-11 & 2011-12) DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE 22, NO.7,RAMAKRISHNA STREET, WEST TAMBARAM,CHENNAI 600 045. VS. SHRI ELRED KUMAR SANTHANAM , 20,ALAGESAN STREET, WEST TAMBARAM, CHENNAI-45. PAN AADPE 2378 L ( / APPELLANT ) ( / RESPONDENT ) )* + , / APPELLANT BY : MR.A.V.SREEKANTH,JCIT,D.R -.)* + , / RESPONDENT BY : MR.K.BALASUBRAMANIAN,ADVOCATE # ' + / / DATE OF HEARING : 09.12.2015 01( + / /DATE OF PRONOUNCEMENT : 20.01.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-II, ITA NOS.85 & 86/MDS/2015 2 SALEM, DATED 25.09.2014 PERTAINING TO ASSESSMENT YE ARS 2010-11 & 2011-12. SINCE CERTAIN ISSUES IN THESE APPEALS ARE COMMON NATURE, THESE APPEALS ARE CLUBBED TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE COMMON GROUND RAISED BY THE REVENUE IN THES E TWO APPEALS IS WITH REGARD TO DELETION OF DISALLOWANCE OF ` 1,83,49,903/- (A.Y 2010-11) & ` 80,89,309/- (A.Y 2011-12) ON THE INTEREST EXPENSES U/S.40(A)(IA) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL, FILED ITS E-RETURN OF INCOME ON 20.03.2011 AND 31.0 3.2012 DECLARING AN INCOMES OF ` 1,53,62,559/- ` 1,77,85,891/- FOR ASSESSMENT YEARS 2010-11 & 2011-12 RESPECTIVELY. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER FOUND THAT T HE ASSESSEE HAD DEBITED THE INTEREST EXPENSES OF ` 1,83,49,903/- AND ` 80,89,309/- IN THE PROFIT AND LOSS ACCOUNTS OF FINANCIAL YEARS 200 9-10 AND 2010-11. FURTHER ON VERIFICATION, IT WAS FOUND THAT THE ASSE SSEE HAD NOT DEDUCTED/REMITTED ANY TDS ON THESE EXPENSES. THERE FORE, THE LD. ITA NOS.85 & 86/MDS/2015 3 ASSESSING OFFICER INVOKED THE PROVISIONS OF THE SEC TION 40(A)(IA) OF THE ACT AND DISALLOWED THE INTEREST EXPENSES OF ` 1,83,49,903/-AND ` 80,89,309/- FOR THE RELEVANT ASSESSMENT YEARS. AGGR IEVED, THE ASSESSEE PREFERRED APPEALS BEFORE THE COMMISSIONER OF INCOME TAX(APPEALS). 4. ON APPEAL, THE LD. COMMISSIONER OF INCOME TAX(A PPEALS) PLACED RELIANCE ON THE DECISION OF THE SPECIAL BENC H OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ACIT (2012) 136 ITD 23 (VISAKHAPATNAM) AND OBSERVED THAT THE WORDS PAID AND PAYABLE, FOR THE PURPOSE OF SECTION 40(A)(IA) HAVE BEEN DELIBER ATED BY VARIOUS TRIBUNALS AND HIGH COURTS. THE SPECIAL BENCH OF IT AT (VIZAG BENCH), IN THE CASE OF MERILYN SHIPPING AND TRANSPO RTERS VS. ADDL.CIT (136 ITD 23)(VIZAG SB), HAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO THE EXPENS ES THAT ARE PAYABLE AND OUTSTANDING AS ON 31ST MARCH OF THE R ELEVANT FINANCIAL YEAR IN WHICH THE EXPENSES ARE CLAIMED. THIS VIEW H AS ALSO BEEN ENDORSED BY THE HIGH COURT OF ALLAHABAD IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD. (357 ITR 642)(ALL.), WHER E IT HAS CLEARLY ITA NOS.85 & 86/MDS/2015 4 BEEN HELD THAT FOR DISALLOWING EXPENSES FROM BUSINE SS AND PROFESSION ON THE GROUND THAT TDS HAS NOT BEEN DEDUCTED, THE A MOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY THE END O F THE YEAR. THE HEAD NOTE OF THE DECISION IS AS UNDER: SECTION 40(A)(IA), READ WITH SECTION 192, OF THE I NCOME-TAX ACT, 1961 - BUSINESS DISALLOWANCE - INTEREST, ETC., PAID TO R ESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE - ASSESSMENT YEAR 2009-1 0 - WHETHER FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION O N GROUND THAT TDS HAS NOT BEEN DEDUCTED, AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAS BEEN PAID BY END OF YEAR - HELD, YES - AS SESSEE, A SHIPPING COMPANY, CLAIMED DEDUCTION OF SALARY PAID TO EMPLOYEES OF COMPANY M WHICH PERFORMED SHIP, MANAGEMENT WORK O N ITS BEHALF - ASSESSING OFFICER DISALLOWED EXPENSES UNDER SECTION 40(A) (IA) ON GROUND THAT TDS WAS NOT DEDUCTED ON SUCH EXPENSES - COMMISSIONER (APPEALS) AND TRIBUNAL DELETED DISALLO WANCE BY RECORDING FINDING THAT M HAD DEDUCTED TDS ON SALA RIES PAID BY IT ON BEHALF OF ASSESSEE AND NO AMOUNT REMAINED PAYABLE A T YEAR END - WHETHER TRIBUNAL WAS JUSTIFIED IN DELETING DISALLO WANCE - HELD, YES [PARA 10] ITA NOS.85 & 86/MDS/2015 5 THE COMMISSIONER OF INCOME TAX(APPEALS) FURTHER OBS ERVED THAT ON THE CONTRARY, THE HIGH COURTS OF KOLKATA AND GUJARA T, IN THE CASES OF CIT VS.CRESCENT EXPORTS SYNDICATE (216 TAXMAN 258)( KOL.) AND CIT VS. SIKANDAR KHAN N. TANVAR (357 ITR 312)(GUJ.) RES PECTIVELY, HAVE HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) CAN B E INVOKED EVEN IF THE EXPENSES ARE ALREADY PAID AND NOT OUTSTANDING AS ON 31ST MARCH OF THE RELEVANT FINANCIAL YEAR. THE COMMISSIONER OF IN COME TAX(APPEALS) AFTER ANALYZING THE ABOVE DECISIONS, J URISDICTIONAL CHENNAI BENCH OF ITAT, RECENTLY, IN THE CASE OF ITO VS. M/S. THEEKATHIR PRESS MADURAI (ITA NO.2076(MDS)/2012 DATED 18.9.2013), HAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLIC ABLE ONLY WHEN THE EXPENSES ARE PAYABLE AND OUTSTANDING AS ON 31ST M ARCH OF THE RELEVANT FINANCIAL YEAR AND ALSO HELD THAT:- 5. WE FIND THAT THE JUDGMENT OF THE HONBIE ALLAHAB AD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAME TIME, WE FIND T HAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GUJARAT HIGH COURT ARE AGAINST THE ASSESSEE. IN SUCH CIRCUMSTANCES THE RULE OF JUDICIAL PRECEDEN CE DEMANDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED, AS HELD BY THE HONBLE ITA NOS.85 & 86/MDS/2015 6 SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PROD UCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HONBLE SUPREME COURT, WE HAVE TO FOLLOW THE JUDGMENT OF TH E HONBLE ALLAHABAD HIGH COURT, WHICH IS IN FAVOUR OF THE ASS ESSEE. ACCORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(I A) APPLIES ONLY TO THOSE AMOUNTS PAYABLE AND NOT TO THOSE AMOUNTS P AID FURTHER THE COMMISSIONER OF INCOME TAX(APPEALS) OBS ERVED THAT THE HONBLE SUPREME COURT OF INDIA, VIDE CC NO.8068/20 14 DATED 02.07.20 14, HAS UPHELD THE DECISION OF THE ALLAHAB AD HIGH COURT (IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD) BY DIS MISSING THE SLP FILED BY THE REVENUE. ACCORDINGLY, THE COMMISSIONER OF INCOME TAX(APPEALS) CONSIDERING THE DECISIONS OF THE ALLAHABAD HIGH COU RT IN THE CASE OF VECTOR SHIPPING SERVICES P. LTD. (35 7 ITR 642) (ALL.), WHICH HAS ALSO BEEN UPHELD BY THE APEX COURT, AND A LSO THE JURISDICTIONAL ITAT IN THE CASE OF ITO VS. M/S. THE EKATHIR PRESS MADURAI (ITA NO.2076(MDS)/2012 DATED 18.09.2013), H OLD THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY IF THE AMOUNTS ARE PAYABLE AND OUTSTANDING AS ON 31ST MARCH OF THE R ELEVANT FINANCIAL ITA NOS.85 & 86/MDS/2015 7 YEARS. THE COMMISSIONER OF INCOME TAX (APPEALS) OBS ERVED THAT SINCE THE ASSESSEE HAS ALREADY PAID THE INTEREST EX PENSES OF ` 1,83,49,903/- AND ` 80,89,309/- AS ON 31.03.2010 AND 31.03.2011 RESPECTIVELY, THE SAME CANNOT BE DISALLOWED U/S.40( A)(IA) OF THE ACT. HENCE THE COMMISSIONER OF INCOME TAX(APPEALS) DIREC TED THE ASSESSING OFFICER TO ALLOW THESE INTEREST EXPENSES OF ` 1,83,49,903/- AND ` 80,89,309/- AS DEDUCTIONS IN THE A.YS.2010-11 AND 2011-12. AGGRIEVED OF THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THESE CASES, THE CIT(A) PLACED RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF ITAT (VIZAG BENCH), IN THE CAS E OF MERILYN SHIPPING AND TRANSPORTERS CITED ABOVE AND ALSO ON T HE JUDGEMENT OF THE GUJARAT HIGH COURT IN THE CASE OF VECTOR SHIPP ING SERVICES P. LTD., CITED SUPRA WHEREIN IT WAS HELD THAT PROVISIO NS OF THE SECTION 40(A)(IA) IS NOT APPLICABLE WHEN THERE IS NO OUTSTA NDING BALANCE AT THE END OF THE CLOSE OF THE YEAR RELEVANT TO THE ASSESS MENT YEAR IN RESPECT OF THESE PAYMENTS. THIS APPEAL IS FILED BY THE REVENUE AND THE REVENUE IS NOT ABLE TO PRODUCE ANY EVIDENCE TO SHOW THAT ANY ITA NOS.85 & 86/MDS/2015 8 AMOUNT OUTSTANDING TOWARDS OUTSTANDING EXPENSES EIT HER IN THE NAME OF SUNDRY CREDITORS OR AS OUTSTANDING EXPENSES AS I T IS OUTSTANDING AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. HENCE, IN THE ABSENCE OF ANY MATERIAL TO SUG GEST THAT THE AMOUNT IS OUTSTANDING AT THE END OF THE CLOSE OF TH E PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, THEN IMPUGNED AMOU NT CANNOT BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCH OF CHENNAI TRIBUNAL IN THE CA SE OF SHRI N.PALANIVELU VS. ITO, SALEM REPORTED IN [2015] 40 I TR(TRIB.) 325(CHENNAI). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DISALLOW THE ONLY AMOUNT WHICH IS OUTSTANDING AT TH E END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R. HENCE, FOR LIMITED PURPOSE TO VERIFY THE OUTSTANDING AMOUNT OU T OF THIS IMPUGNED AMOUNT AT THE END OF THE CLOSE OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, WE REMIT THE ISSUE BACK O THE FILE OF THE LD. ASSESSING OFFICER. FURTHER, WE ALSO MAKE IT CLEAR T HAT IF THE ASSESSEE PAID THE TDS BEFORE THE RETURNS FILED U/S.139(1) OF THE ACT, THAT EXPENSES CANNOT BE DISALLOWED. THE LD. ASSESSING OF FICER HAS TO DECIDE THE ISSUE AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE FOR ITA NOS.85 & 86/MDS/2015 9 PRODUCING NECESSARY EVIDENCE. THIS GROUND IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ITA NO.85/MDS./15 6. THE NEXT GROUND RAISED BY THE REVENUE IN THIS AP PEAL IS WITH REGARD TO DELETION OF DISALLOWANCE OF ` 36,00,000/- FOR NON-DEDUCTION OF TDS ON HIRE CHARGES TO R.S.ENTERPRISES. THIS GR OUND IS DISPOSED OFF AS DISCUSSED IN PARA-5 OF THIS ORDER AS ABOVE. 7. THE THIRD GROUND RAISED BY THE REVENUE IN THIS APPEAL IS WITH REGARD TO DELETION OF ADDITION OF RS.7,94,624/- BEI NG UNACCOUNTED RENT. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE AO MAD E AN ADDITION OF ` 7,94,624/- ON ACCOUNT OF UNACCOUNTED RENT RECEIVED IN THE ASSESSMENT YEAR 2010-11. THE 26AS DATA OF THE ASSES SEE SHOWED THAT THE ASSESSEE WAS IN RECEIPT OF RENT OF ` 10,08,562/- FROM NAPC DURING THE FINANCIAL YEAR 2009-10. WHEN THIS WAS Q UESTIONED BY THE A.O, THE ASSESSEE ADMITTED TO OFFER THE DIFFERENCE ` 7,94,624/-. ITA NOS.85 & 86/MDS/2015 10 HENCE, THE AO HAD ADMITTED ONLY ` 2,13,938/- AND BROUGHT THE DIFFERENCE OF ` 7,94,624/- TO TAX AS UNACCOUNTED RENT RECEIVED. 9. ON APPEAL, THE CIT(A) OBSERVED THAT THE THIRUN EERMALAI LAND OF 8.15 ACRES, WHICH WAS LET OUT TO NAPC LTD, IS OW NED BY THE ASSESSEE AND SHRI R. JAYARAMAN AND THE LEASE WAS FO R A PERIOD OF 11 MONTHS STARTING FROM 20.01.2010, FOR MONTHLY REN T OF ` 22,500/- PER ACRE. FURTHER IT WAS OBSERVED THAT THE NAPC LTD PA ID THE ENTIRE RENT OF 11 MONTHS OF ` 10,08,562/-, UPFRONT AND ALSO DEDUCTED THE TDS ON THE FULL AMOUNT. HENCE THE 26AS DATA SHOWED THE ENT IRE RENT RECEIPTS AND TDS IN THE FINANCIAL YEAR 2009-10 ONLY. THE CIT (A) WAS OF THE OPINION THAT AS PER THE PROVISIONS OF THE INCOME TA X ACT, ONLY THE RENTAL INCOMES WHICH ARE DUE (WHETHER RECEIVED OR A CCRUED) ARE TO BE ASSESSED TO TAX IN A PARTICULAR YEAR. SINCE THE ASS ESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTANCY, AMOUNTS RECEIVE BY WAY OF ADVANCE ETC CANNOT BE ASSESSED TO TAX BASED ON T HE TIME OF RECEIPT. SINCE, OUT OF THE TOTAL LEASE PERIOD OF 11 MONTHS, ONLY 2 MONTHS AND 10 DAYS FALL IN THE CURRENT FINANCIAL YE AR 2009-10, ONLY A PROPORTIONATE RENT PERTAINING THE PERIOD 20.01.2010 TO 31.03.2010 IS ITA NOS.85 & 86/MDS/2015 11 TO BE CONSIDERED FOR THE PURPOSE OF ASSESSMENT OF A .Y.2010-11. UNDER THIS BACKGROUND, THE ASSESSEE ACCOUNTED THE R ENT PERTAINING TO THE PERIOD 20.01.2010 TO 31.03.2010, AMOUNTING TO ` 2,13,936/-, IN THE RETURN OF A.Y.2010-11 AND THE BALANCE IN THE FOLLOW ING A.Y.2011-12. THE ASSESSEES PORTION OF MONTHLY RENT FROM THE LAN D COMES TO ` 91,687/- (I.E. ` 22,500 X 8.15 ACRES 12). AS THE LEASE PERIOD THAT F ALLS IN THE PRESENT FINANCIAL YEAR 2009-10 WAS ONLY 2 MO NTHS 10 DAYS (I.E. FROM 20.01.2010 TO 31.03.2010), THE RENT RECEIPTS F OR THE LAND DURING THE FINANCIAL YEAR 2009-10 WILL BE- JANUARY2010 (10 DAYS) ` 30,562 FEBRUARY 2010 (FULL MONTH) ` 91,687 MARCH 2010 (FULL MONTH) ` 91,687 TOTAL FOR F.Y.2009-10 ` 2,13,936 THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE RIGHT LY ACCOUNTED ` 2,13,936/- AS THE RENTAL INCOME FOR THE ABOVE LAND DURING THE FINANCIAL YEAR 2009-10, RELEVANT TO THE A.Y.2010-11 . THE BALANCE OF ` 7,94,624/- WAS TAKEN TO THE BALANCE SHEET OF F.Y.20 09-10 AND REFLECTED IN THE ADVANCES RECEIVED. THIS AMOUNT WAS IN TURN OFFERED, TO TAX IN THE FOLLOWING FINANCIAL YEAR 2010-11 AS I T PERTAINS TO THAT ITA NOS.85 & 86/MDS/2015 12 YEAR. HENCE, THE CIT(A CAME TO A CONCLUSION THAT TH ERE IS NO MISTAKE OR SUPPRESSION OF RENTAL RECEIPTS SHOWN BY THE ASSE SSEE IN HIS RETURN OF INCOME FILED FOR A.Y.2010-11. THEREFORE, THE ADD ITION OF ` 7,94,625/- MADE BY THE ASSESSING OFFICER IN HIS ORDER IS NOT J USTIFIED AND DELETED. AT THE SAME TIME, IT IS IMPORTANT TO MENT ION HERE THAT OUT OF THE UPFRONT RENTAL RECEIPTS ` 10,08,562/-, ONLY A PORTION ( ` 2,13,936/-) IS ASSESSABLE TO TAX IN THE FINANCIAL YEAR 2009-10 (AY 2010-11) AND THE BALANCE IS ASSESSABLE TO TAX IN THE FOLLOWING A.Y.2 010-11. HOWEVER THE ASSESSEE APPARENTLY CLAIMED CREDIT FOR THE ENTI RE TDS OF ` 1,00,856/- (I.E. ON THE TOTAL RENT OF ` 10,08,562) IN THE PRESENT A.Y.2010-11. THIS IS NOT CORRECT. AS PER THE PROVIS IONS OF SECTION THE ACT, THE CREDIT FOR TDS IS TO BE ALLOWED ONLY IN TH E YEAR IN WHICH CORRESPONDING INCOME IS OFFERED TO TAX. SINCE THE A SSESSEE HAS ONLY OFFERED ` 2,13,936/- (OUT OF THE TOTAL RECEIPTS OF ` 10,08,562) TO TAX IN THE A.Y.2010-11, ONLY A PROPORTIONATE TDS IS TO BE ALLOWED IN THE A.Y.2010-11. THE BALANCE OF TDS SHOULD BE ALLOWED I N THE A.Y.2011- 12. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE TH IS ISSUE AND ALLOW THE CREDIT FOR TDS AS PER THE LAW ON THE PROPORTION ATE/PRORATE BASIS. ITA NOS.85 & 86/MDS/2015 13 AGGRIEVED BY THE ABOVE ACTION OF THE CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD. D.R IS THAT THE ASSESSEE HAD NOT ADMITTED THIS INCOME IN THE NEXT ASSESSMENT YEA R 2011-12. IN OUR OPINION, THIS COULD BE VERIFIED AT THE END OF T HE A.O. ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE A.O WHETHER THIS INCOME WAS OFFERED FOR TAXATION IN THE NEXT ASSESSMENT YEAR 20 11-12 AND DECIDE ACCORDINGLY. 11. THE FOURTH GROUND RAISED BY THE REVENUE IN THIS APPEAL IS WITH REGARD TO DELETION OF ADDITION OF ` 37,09,471/- BEING UNEXPLAINED CASH CREDIT MADE U/S.68 OF THE ACT. 12. THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEES CAPITAL ACCOUNT IN THE BALANCE SHEET WAS FOUND CREDITED WIT H A SUM OF ` 37,09,471/- DURING THE FINANCIAL YEAR 2009-10, BY W AY OF TRANSFER ITA NOS.85 & 86/MDS/2015 14 AND THE ASSESSEE HAS CREDITED ` 37,90,471/- AS TRANSFER. WHEN THIS IS QUESTIONED, THE ASSESSEE FILED A REPLY DATED 15. 03.2013 SAYING THE AMOUNT UNDER TRANSFER SHOWN IN THE CAPITAL A CCOUNT OF MR. S. ELRED KUMAR REFERS TO ENTRIES EFFECTED THROUGH JOIN T ACCOUNT WITH R. JAYARAMAN. THE ASSESSEE HAS NOT FILED ANY DOCUMENT ARY EVIDENCE IN SUPPORT OF THE ABOVE CLAIM. AS THE ASSESSEE FAIL ED TO FURNISH SATISFACTORY EXPLANATION, THE ASSESSING OFFICER TRE ATED THE SAME AS UNEXPLAINED CASH CREDITS U/S.68 OF THE ACT AND BROU GHT TO TAX. 13. ON APPEAL, THE CIT(A) OBSERVED THAT FROM THE SUBMISSIONS OF THE APPELLANT, IT WAS FOUND THAT THERE WAS A JOINT ACCOUNT (ACCOUNT NO.428010200004091) IN THE AXIS BANK, JOINTLY HELD BY THE ASSESSEE AND SHRI R.JAYARAMAN. THIS IS A REGULAR AND ACCOUNT ED BANK ACCOUNT. THE BALANCE IN THIS BANK ACCOUNT AS ON 31. 03.2010 WAS ` 76,58,152.97 (CREDIT). FURTHER CIT(A) OBSERVED THAT SINCE THIS WAS A JOINT BANK ACCOUNT, THE ASSESSEE TRANSFERRED AN AMO UNT OF ` 37,90,471.28 ON 31.03.2010 FROM THIS JOINT BANK ACC OUNT TO HIS CAPITAL ACCOUNT BY JOURNAL ENTRY. SIMILARLY, SHRI R . JAYARAMAN, BEING THE OTHER JOINT HOLDER OF THE ACCOUNT, ALSO TRANSFE RRED A SIMILAR AMOUNT ITA NOS.85 & 86/MDS/2015 15 OF ` 37,90,47 1.28 ON 31.03.2010 FROM THIS JOINT BANK AC COUNT TO HIS CAPITAL ACCOUNT OF HIS BUSINESS, BY JOURNAL ENTRY. THIS LEFT A CLOSING BALANCE OF ` 77,210.97 IN THE BANK ACCOUNT (AS PER THE BOOKS) AS ON 31.03.2010. IT WAS REVEALED THAT OTHERWISE, THE BAN K WOULD HAVE BEEN SHOWN AS A CREDITOR FOR THE FULL AMOUNT OF ` 77,210.41 + ` 37,90,471.28 IN THE BALANCE SHEET. THUS THE ASSESSE E EXPLAINED THAT THE CREDIT IN THE CAPITAL ACCOUNT WAS ON ACCOU NT OF THE TRANSFER OF CREDIT BALANCE FROM THE ABOVE JOINT BANK ACCOUNT TO THE PERSONAL CAPITAL ACCOUNT. OTHERWISE, THE ENTIRE AMOUNT WOULD HAVE BEEN REFLECTED (ON THE LIABILITIES SIDE OF THE BALANCE S HEET) IN THE NAME OF THE BANK ACCOUNT. THEREFORE, THE ASSESSEE CLAIMED T HAT SINCE IT WAS A TRANSFER OF LIABILITY FROM BANK ACCOUNT TO HIS PE RSONAL CAPITAL ACCOUNT, THE TRANSACTION IS EXPLAINED AND THE ASSES SING OFFICERS ADDITION U/S.68 OF THE ACT MAY BE DELETED. IN SUPPO RT OF HIS CLAIM THE ASSESSEE ALSO FURNISHED THE LEDGER EXTRACTS OF THE BANK ACCOUNT AND THE CAPITAL ACCOUNT. THE RELEVANT PORTION OF THE AS SESSEES SUBMISSIONS BEFORE THE CIT(A) DATED 19.09.2014 ARE REPRODUCED FOR REFERENCE:- THE LAST ADDITION IS RS.37,90,471 IS MADE U/S 68 FOR THE REASON THAT NO DOCUMENTARY EVIDENCE WAS FILED BY APPELLANT IN SUPP ORT OF HIS ITA NOS.85 & 86/MDS/2015 16 CONTENTION THAT THIS ONLY A TRANSFER ENTRY. THE FAC TS ARE: THE ASSESSEES BOOKS OF ACCOUNTS INCLUDE A JOINT BANK A/C WITH AXI S BANK A/C NO.4091. ALL THE TRANSACTIONS IN THIS ACCOUNT IS FULLY ACCOU NTED FOR IN THE BOOKS OF ACCOUNTS. AT THE END OF THE YEAR 31.3.2010 TO RECON CILE THE BALANCES IN THIS LEDGER A/C WITH ABOVE BANK A/C, BEING A JOINT A/C, HALF THE BALANCE WAS TRANSFERRED TO APPELLANTS CAPITAL ACCOUNT AND THE OTHER HALF TO MR. JAYARAMANS CAPITAL A/C. THUS, THIS IS ONLY A MEREL Y JOURNAL ENTRY AND HENCE THE CREDIT IN THE CAPITAL ACCOUNT. THIS BANK LEDGER ACCOUNT BEING PART OF THE BOOKS OF ACCOUNTS THERE IS NO UNACCOUNT ED CREDIT WHICH CAN BE ADDED U/S 68. THE RELEVANT EDGER ACCOUNT AND COP Y OF AXIS BANK A/C FOR THE LAST MONTH OF THE YEAR ARE SUBMITTED FOR CI T(A)S PERUSAL. THE CIT(A) CAME TO A CONCLUSION THAT THE ASSESSEE A ND SHRI R. JAYARAMAN, JOINTLY HELD A JOINT ACCOUNT (ACCOUNT NO .42801020000409 1) IN THE AXIS BANK AND THE CLOSING BALANCE IN THE BANK ACCOUNT AS ON 31.03.2010 WAS ` 76,58,152.97 (CREDIT). THE LEDGER ACCOUNT OF THE AXIS BANK ACCOUNT, IN THE BOOKS OF THE ASSESSEE, SH OWED A CREDIT BALANCE OF ` 76,58,152.97/- AS ON 31.03.2010 (JUST BEFORE THE AB OVE MENTIONED TRANSFERS TO THE ASSESSEE AND R. JAYARAMA N). THIS ACCOUNT IS A CA BUSINESS ADVANTAGE ACCOUNT AND JOINTLY HELD BY THE ASSESSEE AND SHRI R. JAYARAMAN. FROM THIS JOINT BANK ACCOUNT, THE ASSESSEE AND SHRI R.JAYARAMAN, BEING THE TWO JO INT HOLDERS, HAVE TRANSFERRED ` 37,90,471.28 EACH ON 31.03.2010 TO THEIR PERSONAL CAPITAL ACCOUNTS BY JOURNAL ENTRIES. THIS LEFT A CL OSING BALANCE OF ` 77,210.97 IN THE BANK ACCOUNT (AS PER THE BOOKS) AS ON 31.03.2010. ITA NOS.85 & 86/MDS/2015 17 THE LEDGER EXTRACT OF THE BANK ACCOUNT CLEARLY SHOW ED THAT AN AMOUNT OF ` 37,90,471.28 WAS TRANSFERRED TO THE ASSESSEES ACCO UNT ON 31.03.2010, BY JOURNAL ENTRY. THE CIT(A) FURTHE R OBSERVED THAT THE ABOVE TRANSFER IS NOTHING BUT SHIFTING LIABILITY FR OM BANK ACCOUNT TO CAPITAL ACCOUNT. OTHERWISE, THE BANK WOULD HAVE BEE N SHOWN AS A CREDITOR FOR THE FULL AMOUNT OF ` 77,210.41 + ` 37,90,471.28 IN THE BALANCE SHEET. THUS CIT(A) CAME TO A CONCLUSION THT THE CREDIT IN THE CAPITAL ACCOUNT WAS ON ACCOUNT OF THE TRANSFER OF CREDIT BALANCE FROM THE ABOVE JOINT BANK ACCOUNT TO THE PERSONAL C APITAL ACCOUNT, AND BY WAY OF INTRODUCTION OF ANY CASH. THEREFORE, AS IT WAS ONLY A TRANSFER OF LIABILITY FROM BANK ACCOUNT TO HIS PERS ONAL CAPITAL ACCOUNT, THE TRANSACTION STANDS EXPLAINED AND THE ASSESSING OFFICERS ADDITION U/S.68 OF THE ACT IS NOT JUSTIFIED. THEREFORE, CIT( A) DELETED THE ADDITION MADE BY THE A.O. AGAINST THIS, THE REVENU E IS IN APPEAL BEFORE US. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIAL ON RECORD. THE CIT(A) CLEARLY BROUGHT ON RECORD THAT THE CREDIT IN THE CAPITAL ACCOUNT WAS ON ACCOUNT OF TRANSFER OF CRE DIT BALANCE FROM THE JOINT BANK ACCOUNT TO THE PERSONAL CAPITAL ACCO UNT, AND BY WAY OF ITA NOS.85 & 86/MDS/2015 18 INTRODUCTION OF ANY CASH. BEING SO, THE IDENTITY OF THE PARTIES, THE GENUINENESS OF THE TRANSACTIONS AND CREDIT WORTHINE SS OF THE PARTIES HAS BEEN DULY EXPLAINED AND THERE IS NO CHANCE TO S USTAIN THE ADDITION U/S.68 OF THE ACT. ACCORDINGLY, THE DELETI ON OF ADDITION MADE BY THE CIT(A) IS JUSTIFIED. THE SAME IS CONFIRMED. THIS GROUND IS REJECTED. 15. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON WEDNESDAY THE 20 TH OF JANUARY,2016 AT CHENNAI. SD/- SD/- ( . ' # $ ) (G.PAVAN KUMAR) ( ( ) ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 20 TH JANUARY,2016. K S SUNDARAM. 4 + -%/56 76(/ /COPY TO: 1. )* /APPELLANT 2. -.)* /RESPONDENT 3. # 8/ () /CIT(A) 4. # 8/ /CIT 5. 6'9: -%/% /DR 6. :;' < /GF