SMT, RAMU ANNAMALAI UMAIYAL RADHAI, CHENNAI V. PCIT, CHENNAI

ITA 922/CHNY/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1062 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 25-09-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 10-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Gift; Source of fund; TDS
• Section: 263; 69C; 143(3); 142(1); 143(1); 143(2)

Judgement Text

आयकर अपीलीय अिधकरण, ’सी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI ŵी वी दुगाŊ राव Ɋाियक सद˟ एवं ŵी जी. मंजुनाथा, लेखा सद˟ के समƗ Before Shri V. Durga Rao, Judicial Member & Shri G. Manjunatha, Accountant Member आयकर अपील सं./I.T.A. No. 922/Chny/2020 िनधाŊरण वषŊ/Assessment Year:2015-16 Smt. Ramu Annamalai Umaiyal Radhai, Flat No. III, 3 rd Floor, Poojapura Apartments, St. Mary’s Road, Alwarpet, Chennai 600 028. [PAN:AAKPU6790M] Vs. The Principal Commissioner of Income Tax- Chennai I, Chennai. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri V.P. Kuriachan, F.C.A. ŮȑथŎ की ओर से/Respondent by : Shri M. Rajan, CIT सुनवाई की तारीख/ Date of hearing : 26.09.2022 घोषणा की तारीख /Date of Pronouncement : 12.10.2022 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax, Chennai - I, Chennai, dated 20.05.2020 relevant to the assessment year 2015-16 passed under section 263 of the Income Tax Act, 1961 [“Act” in short]. 2. Brief facts of the case are that the assessee was rendering professional consultancy services of M/s. Hermes I Tickets Private Limited and received consultancy fee from them. Besides professional I.T.A. No.922/Chny/20 2 income, she was in receipt of interest income from term deposits with bank. She filed her return of income for the assessment year 2015-16 on 15.06.2016 admitting a taxable income of ₹.10,64,390/-. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny through CASS and notice under section 143(2) of the Act dated 05.07.2017 was issued and served on the assessee followed by notice under section 142(1) r.w.s. 129 of the Act dated 24.08.2017. In response to the above notices, the AR of the assessee appeared and furnished all the details and the Assessing Officer, after examining the details furnished by the assessee, the assessment under section 143(3) of the Act dated 15.12.2017 was completed by accepting the income returned by the assessee. 3. Subsequently, after examining the assessment records, the ld. PCIT issued show-cause notice under section 263 of the Act dated 19.08.2019 and 14.11.2019 on the ground that the Assessing Officer has not applied his mind to various aspects of taxation while completing the assessment under section 143(3) of the Act, thereby, the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In response to the notice, the AR of the assessee appeared and furnished written submissions along with enclosures I.T.A. No.922/Chny/20 3 containing complete details as was furnished before the Assessing Officer during the course of assessment proceedings. After examining the details furnished by the assessee, the ld. PCIT has held that the Assessing Officer has not applied his mind and failed to make a complete verification with respect to various aspects and completed the assessment order under section 143(3) of the Act without proper diligent application of mind and enquiry. Thus, the ld. PCIT has held that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue and directed the Assessing Officer to redo the assessment afresh after verification of details as discussed in the revision order passed under section 263 of the Act dated 20.05.2020. 4. On being aggrieved, the assessee is in appeal before the Tribunal. By filing paper book consisting of various details as was furnished before the Assessing Officer as well as the ld. PCIT, the ld. Counsel for the assessee has submitted that the assessee has explained in detail the source for purchasing the property as called for by the Assessing Officer along with supporting documents to establish the source and furnished written submission, which was duly verified by the Assessing Officer before completing the assessment. It was further submitted that the assessee has explained the source for repayment of housing loan which I.T.A. No.922/Chny/20 4 was verified by the Assessing Officer and therefore, prayed for quashing the revision order passed under section 263 of the Act. 5. On the other hand, the ld. DR strongly supported the revision order passed under section 263 of the Act. 6. We have heard both the sides, perused the materials available on record and gone through the revision order passed under section 263 of the Act and assessment order passed under section 143(3) of the Act along with paper book filed by the assessee. In the revision order, the ld. PCIT has observed that the assessee has purchased an immovable property (residential flat) vide document No. 1053/2014 dated 09.04.2014 registered with SRO, Mylapore for a consideration of ₹. 3,50,00,000/-. The assessee has stated vide letter of the AR dated 06.11.2017 that she has incurred further expenses towards stamp duty charges and other expenses to the tune of ₹.32,00,000/-. Thus, the total cost of the purchase was ₹.3,82,00,000/-. The sources has been explained by the assessee were loan from Bank and gifts received to the extent of ₹.3,58,00,000/-. For balance, the assessee has stated that the same was arranged out of her own source and past savings. After verification of the capital account of the assessee, the ld. PCIT has observed that the assessee has shown I.T.A. No.922/Chny/20 5 drawings to the extent of ₹.7,46,866/- only. If it is considered utilized for the investment in the house property, still the source for balance Rs.16,53,134/- has not been explained. Further, the ld. PCIT noted that the assessee was paying EMI to Karur Vysya Bank @ ₹.2,13,532/- per month from April, 2014 onwards, totalling to ₹.25,62,384/-. Since the assessee has no source for the EMI payment, the total amount of ₹.16,53,134/- plus ₹.25,62,384/- = ₹.42,15,518/- should be treated as unexplained expenditure under section 69C of the Act and added to the income returned. Further, in the P&L account, the assessee has debited interest on income tax and income tax to the tune of ₹.62,128/- & ₹.1,48,647/- totalling to ₹.2,10,775/-, which needs to be disallowed. Though the assessee has shown in the computation statement profit as at ₹.8,72,132.37 in the place of profit of ₹.7,23,485/- shown in the P&L account, still an amount of ₹.62,128/- has to be added to the income admitted in the computation statement towards disallowance of interest on income tax. In view of the above, the ld. PCIT has directed the Assessing Officer to redo the assessment. 6.1 On perusal of the revision order, we find that the ld. PCIT has elaborately stated the provisions of section 263 of the Act and various I.T.A. No.922/Chny/20 6 case law from para 5 to 6 running into 8 pages, whereas, surprisingly, in single line he has stated that “I have perused the contents of the written submissions of the AR”, without stating any flaw in the written submissions of the AR, which were supported by documentary evidences and concluded that the assessment order is erroneous and prejudicial to the interest of Revenue. We have perused the written submissions filed before the ld. PCIT along with documentary evidences, which were produced before the Assessing Officer during the course of scrutiny assessment and the same extracted as under: Sub: Your Notice NO.ITBNCOM/F/17/2019-20/1022768951(1) Dated 20/12/2019 under Section 263 of the Income Tax Act, 1961 Ref: MRS. RAMU ANNAMALAI UMAIYAL RADHAI /PAN: AAKPU6790M /AY 2015-16 With reference to your notice cited above, I submit the following for your kind consideration: 1. I am a software engineer and rendering my services in software consultancy since AY 2009-10 and duly filing my return of income ever since then. 2. During the FY 2014-15 relevant to the AY 2015-16, I had rendered services to M/s Hermes I Tickets Pvt Ltd, a company initially promoted by me along with my sister-in-law and was in receipt of professional income from them which was duly declared in the return of income filed by me for that year. 3. My income tax assessment order for the AY 2015-16 was completed under section 143(3) accepting the income returned by me. 4. During the AY 2015-16, I have acquired a residential flat in Chennai at a cost of Rs.3,50,00,000/-. The sale consideration of Rs.3,50,00,000/- was settled in the following manner: Date of payment Mode of payment Amount paid in Rs. 30/12/2013 Cheque No. 205458 on Syndicate Bank 10,00,000 12/01/2014 Cheque No. 205461 on Syndicate Bank 10,00,000 I.T.A. No.922/Chny/20 7 24/02/2014 Cheque No. 205462 on Syndicate Bank 10,00,000 29/03/2014 Demand Draft No. 409059 on Karur Vysya Bank Ltd. 1,00,00,000 08/04/2014 Demand Draft No. 409292 on Karur Vysya Bank Ltd. 58,25,000 08/04/2014 Demand Draft No. 409293 on Karur Vysya Bank Ltd. 1,58,25,000 19/05/2014 1% TDS amount 3,50,000 Total 3,50,00,000 5. I have incurred stamp duty, registration charge and other expenses of Rs.32,00,000/- for the flat. Accordingly, the total cost of the flat came to Rs. 3,82,00,000/- . 6. Out of the total purchase consideration of Rs. 3,82,00,000/-, an amount of Rs. 1,30,00,000/- was paid by me during the AY 2014-15 and remaining amount of Rs. 2,20,00,000/- was settled by me during the AY 2015-16. 7. I had availed a Housing Loan of Rs.2,10,00,000/- from Karur Vysya Bank Ltd for purchasing the flat. Copy of loan sanction letter is enclosed herewith. Balance cost of the property amounting to Rs. 1,72,00,000/- was paid by me from out of my own source from the personal gift of Rs. 1,98,00,000/- received from my father, Shri Veerappan Narayanan during the AY 2013-14, 2014-15 & 2015-16. 8. During the AY 2015-16, I had repaid loan instalments amounting to Rs. 22,48,315/- and not Rs. 25,62,3841- as stated in the show cause notice, towards the Home loan availed by me. Copy of loan account with The Karur Vysya Bank Ltd is enclosed herewith. 9. The personal gift of Rs.1,98,00,000/- was received from my father, Shri V. Narayanan, who is a NRI, for purchasing the flat. The gifts were paid from his personal NRI 1 NRO bank accounts and Gift confirmation letters were furnished to the Assessing Officer at the time of scrutiny assessment, copies of which are enclosed herewith. Copy of my father's bank statements were called for by the Assessing Officer for verification of his source at the time of scrutiny assessment and was satisfied about the genuineness of the gift. 10. I am furnishing below the income returned by me during the last 3 assessment years: AY Total income returned in Rs. Income tax paid in Rs. 2012-13 38,23,950 10,29,165 2013-14 22,68,560 (Gift from father: Rs.50,00,000/- duly disclosed in my return) 10,75,385 2014-15 44,33,240 12,51,161 11. I am giving below the source for acquiring the property and for loan repayment made by me during the AY 2014-15 & 2015-16; Sl.No. Particulars Amount in Rs. Investment/Application of funds I.T.A. No.922/Chny/20 8 1 Residential Flat 3,82,00,000 2 Repayment of Home loan instalments 22,48,315 Total 4,04,48,315 Source of fund 1 Home loan from Karur Vysya Bank Ltd. 2,10,00,000 2 Personal gift from father utilised for purchase of the flat 1,98,00,000 3 Drawings during the AY 2014-15 & 2015-16 utilised 52,90,103 Total 4,60,90,103 12. From the above cash flow statement, it is clear that I had more than sufficient source for purchasing the flat as well as towards repayment of the loan made during the year. 13. During the AY 2014-15, I was in receipt of gross consultancy income of Rs. 82,13,500/- and reported a net taxable income of Rs. 44,33,240/- which I had utilised for payment of advance for property. 14. My husband, Shri Ramu Annamalai Ramasamy is also an income tax assessee and filing his return of income regularly and financially supported me from time to time as and when required. 15. I am giving below the income returned by my husband, Shri Ramu Annamalai Ramasamy for the last 3 years. AY Total income returned in Rs. Income tax paid in Rs. 2012-13 10,65,340 1,88,460 2013-14 25,91,380 6,73,590 2014-15 25,48,470 6,40,110 16. The flat was under self occupation of my family for residence and no income was earned during the year. This fact was informed to the learned Assessing Officer at the time of assessment. 17. Interest on income tax debited in the profit & loss account amounting to Rs.62,128/-was inadvertently omitted to add back in the tax computation. 18. The learned Assessing Officer verified all the above documents, which I furnished at the time of assessment in support of the source for purchasing the property, before completing the assessment under section 143(3) of the Act. 19. It is most respectfully submitted that in the light of the submissions made above and documents and details furnished, it is clearly established that I had fully and truly disclosed and sufficiently explained all material facts before the learned Assessing Officer regarding the source for purchasing the property, who had verified the same and satisfied about the source before passing the assessment order. I.T.A. No.922/Chny/20 9 20. I, therefore, most respectfully submit that there is no infirmity in the assessment order passed by the Assessing Officer under Section 143(3) of the Act and the order is neither erroneous nor prejudicial to the interest of the revenue. I, therefore, submit that the proposal for revision of the order under section 263 of the Act may kindly be dropped.” 6.2 During the course of assessment proceedings, against the notice issued under section 142(1) of the Act, the assessee has furnished the following details before the Assessing Officer: Sub: Scrutiny assessment of Smt. UMAIYAL RADHAI I PAN: AAKPU6790M Ref: AY 2015-16 With reference to your notice U/s 142(1) of the Income Tax Act, 1961, we are pleased to furnish herewith the following details I documents called for by you for the scrutiny assessment. 1. Copy of Return filed acknowledgement along with computation of income statement. 2. Copy of Profit &Loss and Balance sheet. 3. The assessee was rendering professional consultancy services to M/s Hermes I Tickets Pvt Ltd and received consultancy fee from them. Besides professional income, she was in receipt of interest income from term deposit with bank. 4. Copy of 26AS is enclosed. 5. Copy of bank statement in respect of account maintained with Karur Vysya bank and Syndicate Bank. 6. During the FY 2014-15 relevant to the AY 2015-16 the assessee acquired a residential flat at 'Poojapura Apartments', Door NO.209, Old No.130, St. Mary's Road, Alwarpet, Chennai - 600 028 from Mrs. Lata Madhu and M. Madhu Utukuri, both residing at Flat No.4, Citadel Apartments, 1A, Cenotaph Road, 2nd Lane, Teynampet, Chennai- 600 018 for a consideration of Rs.3,50,00,0001- and incurred a stamp duty charges and other expenses of Rs 32,00,0001- in connection with purchase of the flat. The assessee had deducted a tax amount@1 % amounting to Rs.175,000/- each from the sale consideration and remitted to the Income Tax department. The assessee had taken a housing loan of Rs. 2,10,00,000/- from Karur Vysya Bank Limited. She had received a gift of Rs.1,48,00,0001-from her father, Shri Veerappan Narayanan who is a non-resident in Sharjah . Balance amount was arranged out of her own source and past savings. I.T.A. No.922/Chny/20 10 7. Copy of Sale deed of residential flat at Door NO.209, Old NO.130, St. Mary's Road, Alwarpet, Chennai - 600 028 acquired by the assessee during the year. 8. Copy of Form 26Q8 (2 nos) and copy of challan for TDS paid on property. 9. Copy of gift deed executed by her father in respect of gif of Rs.1,48,00,000/- is enclosed herewith. 6.3 On perusal of the above detailed written submissions filed before the ld. PCIT during the course of revision proceedings as well as the details furnished before the Assessing Officer during the assessment proceedings, the undisputed facts are that: (i) The assessee has purchased residential flat for a total purchase consideration of ₹.3,50,00,000/- plus registration charge and other expenses of ₹.32,00,000/- totalling to ₹.3,82,00,000/-. (ii) Out of the total purchase consideration of ₹.3,82,00,000/-, the assessee has paid an amount of ₹.1,30,00,000/- during the assessment year 2014-15 through banking channel and the remaining amount of ₹.2,20,00,000/- has been settled during the assessment year 2015-16 through banking channel. (iii) The personal gift of ₹.1,98,00,000/- received by the assessee from her father Shri V. Narayanan, who is NRI through his personal NRI/NRO bank account and duly supported by gift confirmation letters. (iv) While narrating purchase details in paras 2.1 of the revision order, the ld. PCIT has failed to note that the entire purchase consideration was not incurred in the assessment year 2015-16 I.T.A. No.922/Chny/20 11 alone and actually, an amount of ₹.2,20,00,000/- has been settled during the assessment year 2015-16 and ₹.1,30,00,000/- has been paid during the assessment year 2014-15, thereby, before exercising powers conferred under section 263 of the Act, the ld. PCIT has wrongly proceeded to pass a revision order under section 263 of the Act against the assessment order passed under section 143(3) of the Act. 6.4 Under the above facts and circumstances, we are of the considered opinion that the revision order passed under section 263 of the Act dated 20.05.2020 is liable to be quashed in view of the wrong inference drawn by the ld. PCIT. 6.5 Moreover, the scrutiny assessment of the assessee was taken for “Limited Scrutiny” to verify the source for acquisition of property during the financial year relevant to the assessment year 2015-16. It is a settled position of law that while completing the assessment under limited scrutiny, the Assessing Officer cannot look beyond the issue for which the case was selected for scrutiny. It is beyond the power of the Assessing Officer to look into any other issue which has come to his notice during the course of assessment proceedings. Thus, the ld. PCIT cannot exercise revision power under section 263 of the Act to look into any other issue which the Assessing Officer himself could not look as the I.T.A. No.922/Chny/20 12 Assessing Officer has selected the case for limited scrutiny and not complete scrutiny before concluding the assessment order under section 143(3) of the Act. Under the above facts and circumstances, the revision order passed under section 263 of the Act is quashed and allow the grounds raised by the assessee. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced on the 12 th October, 2022 in Chennai. Sd/- Sd/- (G. MANJUNATHA) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 12.10.2022 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ (अपील)/CIT(A), 4. आयकर आयुƅ/CIT, 5. िवभागीय Ůितिनिध/DR & 6. गाडŊ फाईल/GF.