ACIT, CHENNAI V. Shri V.R.Venkatachalam, CHENNAI

ITA 986/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64253 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M BALAGANESH
• Keywords: Unexplained cash credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 986/MDS/2012 (ASSESSMENT YEAR : 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(3), CHENNAI - 600 034. (APPELLANT) V. SHRI V.R. VENKATACHALAM, 24, SIR C.V. RAMAN ROAD, ALWARPET, CHENNAI - 600 0018. PAN : AADPV3203H (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI M. BALAGANESH, CA DATE OF HEARING : 12.09.2012 DATE OF PRONOUNCEMENT : 12.09.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANC E IS THAT CIT(APPEALS) DELETED AN ADDITION OF ` 5,46,898/- MADE FOR UNEXPLAINED CREDITS BY ALLOWING IT TO BE TELESCOPED WITH ANOTHER ADDITION OF ` 16,21,278/- MADE BY THE A.O. FOR A DIFFERENCE IN C APITAL ACCOUNT. REVENUE IS ALSO AGGRIEVED REGARDING THE R ELIEF GRANTED BY I.T.A. NO. 986/MDS/12 2 THE CIT(APPEALS) BY DELETING AN ADDITION OF DIFFERE NCE IN CAPITAL ACCOUNT. 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN MONE Y LENDING BUSINESS AND ALSO RECEIVING SALARY, DIVIDEND, ETC., FILED HIS RETURN OF INCOME DECLARING ` 2,96,86,448/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE WAS REQUIRED TO PRODUCE THE B ALANCE SHEET, BANK STATEMENT, ETC. FROM THE STATEMENT OF AFFAIRS AS ON 31.3.2007 FILED BY THE ASSESSEE, ASSESSING OFFICER CAME TO A CONCLUSION THAT THERE WAS A DIFFERENCE IN CAPITAL ACCOUNT. THE SAI D DIFFERENCE WAS WORKED OUT BY HIM AS UNDER:- OPENING BALANCE OF CAPITAL I.E. AS ON 31.03.2006 : ` 13,16,06,077 NET PROFIT FOR THE FINANCIAL YEAR 2006 - 07 WAS : ` 1,87,00,173 ` 15,03,06,250 CLOSING BALANCE OF CAPITAL AS ON 31.03.2007 : ` 15,25,96,482 DIFFERENCE IN THE CAPITAL ACCOUNT : ` 22,90,232 3. EXPLANATION OF THE ASSESSEE WITH REGARD TO THIS DIFFERENCE WAS THAT IF THE CLOSING BALANCE IN INDIAN BANK, BANK OF BARODA AND EGMORE BENEFIT SOCIETY LTD. WERE TAKEN OUT, THE CAP ITAL ACCOUNT BALANCE COULD BE ONLY ` 15,09,75,204/-. AS PER THE ASSESSEE, THE RESULTING DIFFERENCE AMOUNT OF ` 6,68,954/- WAS OFFERED TO TAX. HOWEVER, THE A.O. WAS NOT IMPRESSED. ACCORDING TO HIM, IT COULD NOT BE ASCERTAINED WHETHER ASSESSEE WAS SHOWING THESE A CCOUNTS IN THE I.T.A. NO. 986/MDS/12 3 BOOKS AND ALSO COULD NOT DISTINGUISH BETWEEN VARIOU S DEPOSITS AND LOANS OF THE ASSESSEE, SINCE ASSESSEE WAS ENGAGED I N MONEY LENDING BUSINESS. HE, THEREFORE, MADE AN ADDITION OF ` 22,90,232/-. A.O. ALSO NOTED THAT ASSESSEE HAD, DURING THE COURS E OF SCRUTINY ASSESSMENT, OFFERED A SUM OF ` 5,46,898/- BEING CREDITS IN BANK ACCOUNT, AS NOT EXPLAINABLE. THIS AMOUNT WAS ALSO ACCORDINGLY ADDED. 4. IN HIS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT ALL MONEY LENDING TRANSACTIONS WERE OPERAT ED THROUGH HIS BANK ACCOUNT IN INDIAN BANK, EAST ABHIRAMAPURAM BRA NCH. OTHER THREE BANK ACCOUNTS DID NOT HAVE IN THEM, ANY MONEY LENDING TRANSACTIONS AT ALL. AS PER THE ASSESSEE, STATEMEN T OF AFFAIRS AS ON 31.3.2007 FILED BY HIM WAS IN RESPECT OF MONEY LEND ING BUSINESS ALONE. IF THE BALANCE IN OTHER THREE BANKS WERE CO NSIDERED, THEN THE REVISED CAPITAL ACCOUNT WOULD SHOW ONLY A DEFICIT F IGURE OF ` 6,68,954/-, WHICH WAS VOLUNTARILY OFFERED. FURTHER , AS PER THE ASSESSEE, THE DEFICIT OF ` 6,68,954/- HAD TO BE TELESCOPED WITH CREDITS OF ` 5,21,898/- CREDITED ON 11.4.2006 AND ` 25,000/- CREDITED ON 19.9.2006, TOTALLING TO ` 5,46,898/- WHICH WAS SEPARATELY ADDED BY THE ASSESSING OFFICER. I.T.A. NO. 986/MDS/12 4 5. CIT(APPEALS), AFTER CONSIDERING SUBMISSIONS OF T HE ASSESSEE, WAS OF THE OPINION THAT IF THE BANK ACCOUNTS, WHICH HAD NO NEXUS TO MONEY LENDING BUSINESS OF THE ASSESSEE, WERE IGNORE D, THE DIFFERENCE IN CAPITAL ACCOUNT WAS ONLY 6,68,954/-. HE THEREFORE, HELD THAT ADDITION OF ` 6,68,954/- ALONE WAS WARRANTED AND DELETED THE BALANCE ADDITION. INSOFAR AS PLEA OF THE ASSESSEE FOR TELESCOPING THE UNEXPLAINED CREDITS OF ` 5,46,898/-, WITH THE DIFFERENCE IN CAPITAL ACCOUNT WAS CONCERNED, HE HELD THAT THIS WAS POSSIB LE, SINCE THERE WAS ONLY A DEFICIT OF ` 6,68,954/- IN THE CAPITAL ACCOUNT WHEN THE THREE BANK ACCOUNTS WERE ELIMINATED. IN THIS VIEW OF THE MATTER, HE DELETED THE ADDITION OF ` 5,46,898/- ALSO. 6. NOW BEFORE US LEARNED D.R., STRONGLY ASSAILING T HE ORDER OF CIT(APPEALS), SUBMITTED THAT INSOFAR AS ADDITION OF ` 5,46,898/- WAS CONCERNED, IT WAS SUO MOTU AGREED BY THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE HAVING AGREED TO S UCH ADDITION, HE COULD NOT HAVE BEEN AGGRIEVED AND CIT(APPEALS) O UGHT NOT HAVE DELETED SUCH ADDITION. AS FOR THE FINDING OF THE C IT(APPEALS) THAT IF THE THREE BANK ACCOUNTS, IN WHICH MONEY LENDING TRA NSACTIONS WERE NOT REFLECTED, WERE EXCLUDED, THERE WOULD BE ONLY A DEFICIT DIFFERENCE, LEARNED D.R. SUBMITTED THAT THIS WAS WITHOUT APPREC IATING THE I.T.A. NO. 986/MDS/12 5 ACCOUNTS STATEMENT FILED BY THE ASSESSEE ALONG WITH HIS RETURN. PLACING RELIANCE ON PAGE 1 OF THE PAPER-BOOK FILED BY HIM, LEARNED D.R. SUBMITTED THAT RECEIPTS AND PAYMENTS ACCOUNT I NCLUDED ALL THE THREE BANK ACCOUNTS AND ACCOUNT WITH EGMORE BENEFIT SOCIETY LTD. EVEN STATEMENT OF AFFAIRS FILED BY THE ASSESSEE PLA CED AT PAPER-BOOK, ALSO SHOWED BANK BALANCE INCLUDING THREE BANK ACCOU NTS, WHICH CIT(APPEALS) HAD EXCLUDED. FURTHER HE POINTED OUT THAT EVEN THE SUM OF ` 1,55,36,188/- SHOWN BY THE ASSESSEE IN THE ASSETS SIDE OF THE STATEMENT OF AFFAIRS AS BALANCES IN BANK ACCOUN TS, DID NOT TALLY WITH THE BALANCE SHOWN IN THE RECEIPTS AND PAYMENTS ACCOUNT. CIT(APPEALS), THEREFORE, DELETED THE ADDITION WITHO UT PROPERLY APPRECIATING THESE FACTS. 7. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDER OF CIT(APPEALS). ACCORDING TO HIM, DIFFERENCE IN CAPITAL ACCOUNT POI NTED OUT BY THE LEARNED D.R. WAS ONLY DUE TO BANK RECONCILIATION EN TRIES. FURTHER, HE SUBMITTED THAT ASSESSEE HAD NO MONEY LENDING TRANSA CTION IN ANY BANK ACCOUNT EXCEPT IN INDIAN BANK, EAST ABHIRAMAPU RAM BRANCH. HENCE OTHER BANK ACCOUNTS HAD TO BE EXCLUDED. LEAR NED A.R. FURTHER POINTED OUT THAT STATEMENT OF AFFAIRS PRODUCED BY T HE LEARNED D.R. WAS IN RESPECT OF THE MONEY LENDING BUSINESS, WHERE AS, RECEIPTS I.T.A. NO. 986/MDS/12 6 AND PAYMENTS ACCOUNT WAS FOR THE WHOLE OF THE TRANS ACTIONS OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. COMPUTATION OF INCOME GIVEN BY THE ASSESSING OFFICE R AT PAGE 3 OF ASSESSMENT ORDER, SHOWS THAT THE ASSESSEE HAD RECEI VED MONEY FROM REDEMPTION OF SHARES AND HE ALSO HAD INTEREST INCOME. FURTHER, THE NATURE OF BUSINESS AND SOURCE OF INCOME MENTION ED IN FACING SHEET OF THE ASSESSMENT ORDER SHOWS THAT ASSESSEE W AS HAVING SALARY AND DIVIDEND INCOME AS WELL. ASSESSEES CON TENTION THAT RECEIPTS AND PAYMENTS ACCOUNT PLACED AT PAGE 1 OF D EPARTMENT PAPER-BOOK WAS FOR THE WHOLE OF THE CASH TRANSACTIO NS OF THE ASSESSEE, CAN BE BELIEVED FOR THE REASON THAT THE S AID RECEIPTS AND PAYMENTS ACCOUNT DID INCLUDE DIVIDEND, RENT, ETC. IN THE STATEMENT OF AFFAIRS PLACED AT PAPER-BOOK PAGE 2 IT IS CLEARLY M ENTIONED THAT IT WAS ONLY WITH REGARD TO MONEY LENDING BUSINESS OF THE A SSESSEE. HOWEVER, ARGUMENT OF THE ASSESSEE THAT THE CAPITAL ACCOUNT OF THE ASSESSEE MENTIONED THEREIN WAS AFTER CONSIDERING TH E WHOLE OF THE BANK ACCOUNTS ALSO CANNOT BE ACCEPTED STRAIGHT AWAY , SINCE IF THAT WAS SO, THE AMOUNT OUGHT HAVE BEEN ` 1,58,21,488/- AND NOT ` 1,55,36,188/-. ADMITTEDLY, ASSESSEE WAS NOT HAVI NG ANY BALANCE I.T.A. NO. 986/MDS/12 7 SHEET AS ON 31.3.2006 FROM WHICH AFTER CONSIDERING THE EFFECT OF THE TRANSACTIONS FOR RELEVANT PREVIOUS YEAR, A BALANCE SHEET AS ON 31.3.2007 COULD BE ARRIVED AT. CAPITAL ACCOUNT SHO WN IN THE STATEMENT OF AFFAIRS WAS ONLY A BALANCING FIGURE. EVEN IF THE ASSESSEES VERSION THAT THREE BANK ACCOUNTS HAD TO BE EXCLUDED FOR RECONCILING HIS CAPITAL ACCOUNT, IS ACCEPTED, THERE IS STILL A DIFFERENCE OF ` 6,68,954/-. AS POINTED OUT BY THE LEARNED D.R., T HERE IS ALSO AN ANOMALY WITH REGARD TO TOTAL OF THE BALANCE IN THE BANK ACCOUNT. WE ARE, THEREFORE, OF THE OPINION THAT THE MATTER REQU IRES A RE-VISIT BY THE A.O. A.O. HAS TO CONSIDER THE STATEMENTS OF AFFAI RS AS ON 31.3.2006 AND 31.3.2007 FOR ARRIVING AT ANY DEFICIT OR INTROD UCTION IN THE CAPITAL ACCOUNT DURING THE RELEVANT PREVIOUS YEAR, TAKING I NTO ACCOUNT THE PROFIT FOR THE YEAR. ASSESSEE SHALL CO-OPERATE WIT H THE A.O. AND FILE DETAILS OF THE WORK-OUT FOR ARRIVING AT THE CORRECT DIFFERENCE, IF ANY, IN CAPITAL ACCOUNT. 9. INSOFAR AS ISSUE OF TELESCOPING OF ` 5,46,898/- IS CONCERNED, A PERUSAL OF THE ASSESSMENT ORDER WOULD CLEARLY SHOW THAT ASSESSEE HAD OFFERED AS INCOME DURING THE COURSE OF ASSESSME NT PROCEEDINGS. THIS WAS CLEARLY MENTIONED BY THE ASSESSEE IN HIS L ETTER DATED I.T.A. NO. 986/MDS/12 8 15.12.2009 PLACED AT PAGE 3 OF THE DEPARTMENT PAPER -BOOK. THEREFORE, THE QUESTION OF TELESCOPING OF SUCH AMOU NT WILL NOT ARISE. 10. WE THEREFORE SET ASIDE THE ORDERS OF AUTHORITIE S BELOW AND REMIT THE ISSUES BACK TO THE FILE OF A.O. FOR CONSIDERATI ON AFRESH IN ACCORDANCE WITH LAW. 11. IN THE RESULT, APPEAL FILED BY THE REVENUE IS A LLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON WEDNESDAY, THE 12 TH OF SEPTEMBER, 2012, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 12 TH SEPTEMBER, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, CHENNAI (4) CIT, CENTRAL-I, CHENNAI (5) D.R. (6) GUARD FILE