SUBBAN SIVAKUMAR,COIMBATORE V. ACIT, NCC-2, COIMBATORE

ITA 2483/CHNY/2024

AI Insights

The case involves Shri Subban Sivakumar, a resident individual engaged in the money-lending business, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The primary grievances were the confirmation of an addition of Rs.58.83 Crores under section 69A of the Income Tax Act and the addition of interest income amounting to Rs.1.98 Crores. The Assessing Officer had rejected the assessee's explanations regarding the sources of his debtors and creditors, leading to the additions. The Tribunal found that the lower authorities had not adequately considered the detailed submissions and workings provided by the assessee, leading to the decision to set aside the order and remand the matter for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29294 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2022-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C. VATCHALA LD.
• Assessee Lawyers: N.V.BALAJI LD
• Keywords: Set aside; Business income; Presumptive income
• Section: 143(3); 69A

Judgement Text

" आयकर अपीलीय अिधकरण ‘बी’ \u0010ा यपीठ चे\u0015ई म\u0018। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI मा ननीय +ी मनोज क ुमा र अ/वा ल ,लेखा सद4 एवं मा ननीय +ी मनु क ुमा र िग8र, \u0010ा ियक सद4 क े सम9। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM AND HON’BLE SHRI MANU KUMAR GIRI, JM आयकरअपील सं ./ ITA No.2483/Chny/2024 (िनधा :रणवष: / Assessment Year: 2022-23) Shri Subban Sivakumar #51/5-6, 4th Street, Muthukumar Rathinapuri, Coimbatore-641 027. बना म/ Vs. ACIT Non Corporate Circle-2 Coimbatore. \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No. EICPS-4239-H (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri N.V. Balaji (Advocate) - Ld.AR थ कीओरसे/Respondent by : Ms. C. Vatchala (CIT) - Ld. Sr. DR सुनवाई की तारीख/Date of Hearing : 11-12-2024 घोषणा की तारीख /Date of Pronouncement : 09-01-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2022-23 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 07-08-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 16-03-2024. The grievance of the assessee is two-fold i.e., (i) Confirmation of addition of Rs.58.83 Crores u/s 69A; (ii) Addition of interest income for Rs.1.98 Crores. 2 2. The Ld. AR advanced arguments with the support of documents on record and made various submissions. The Ld. CIT-DR also advanced arguments supporting the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident individual is stated to be engaged in money-lending business. The assessee admitted interest income of Rs.40.73 Lacs as Business income. The assessee opted for presumptive taxation scheme u/s 44AD. Upon perusal of return of income, it was noted by Ld. AO that the assessee reflected debtors of Rs.82.88 Crores which were stated to be sourced out of repayment of pre-existing loan installments. It was submitted that the assessee collected loan installments of Rs.77.66 Crores which was extended as fresh loans during the year. In support, the assessee furnished bank statements and complete details of sundry debtors and movement in each of the debtor during the year. 3.2 However, Ld. AO rejected the explanation as furnished by the assessee. It was noted by Ld. AO that in AY 2021-22, the assessee reflected debtors at ‘Nil’ whereas in this year, opening debtors were shown aS Rs.22.62 Crores. The assessee could not produce documentary evidences like loan agreement, promissory notes or affidavit of these debtors. 3.3 The assessee also produced list of about 13000 sundry creditors from whom the assessee received money to the tune of Rs.4.49 Crores. The opening balance of creditors was reflected as Rs.22.55 Crores. All 3 thee creditors had given loans for amount below Rs.20,000/- allegedly to avoid penal consequences of Sec.269SS. 3.4 In the above background, Ld. AO alleged that the assessee was rotating his own unaccounted money through various bank accounts to carry out money-lending business and merely taking shelter of the provisions of Sec.44AD. The Ld. AO worked out interest rate of 18% for previous year and based on the interest income reflected in earlier year, concluded that the assessee would have funds or capital to the tune of Rs.6.01 Crores. Further, loans in money lending business were short term for 3-4 months which would mean that the capital would be rotated for 3-4 times during the year. Assuming rotation of 4 times, the assessee would have funds to the extent of Rs.24.05 Crores as against debtors of Rs.82.88 Crores as reflected by the assessee. The differential of the two i.e., Rs.58.83 Crores was added as unexplained money u/s 69A of the Act. 3.5 The Ld. AO also proceeded to estimate the income of the assessee considering debtors of Rs.82.88 Crores assuming interest rate of 18%. The same would translate into interest income of Rs.14.92 Crores. The assessee reflected gross receipts of Rs.1.69 Crores which would mean that the receipts to the tune of Rs.13.22 Crores were suppressed by the assessee. By applying estimated interest rate of 24%, the assessee would have earned income of Rs.317.34 Lacs. After reducing the profit of Rs.40.73 Lacs as already offered by the assessee, the undisclosed profit was estimated at Rs.276.61 Lacs which was also added as undisclosed profits. Aggrieved, the assessee preferred first appeal against the same. 4 Appellate Proceedings 4.1 During appellate proceedings, the assessee, inter-alia, submitted that it has given short term loans to various people and charged interest from them. Normal repayment period would be three to six months and it may be increased up-to twelve months in certain cases. The assessee would normally charge interest of 18% which may be less in certain cases. The assessee also submitted that it duly furnished the outstanding balances of debtors as on 31-03-2022 along with Names, Address and PAN. Similarly, the Name, address and closing balance of creditors were also furnished. It was stated that the creditors would be paid interest of 12%. It was also submitted that the assessee did not enter into any loan agreement either with debtors or creditors. Rather the loans were advanced on the strength of promissory notes, post dated cheques, PAN card copy and GST registration certificate etc. The assessee submitted that all the loans given during FY 2021-22 were recovered and the promissory notes were returned and other papers were destroyed and therefore, the same was not available for submissions. However, as required by Ld. CIT(A), the assessee could not furnish full particulars of income, monthly opening and closing amount of loans provided to debtors as well as other details as called for by Ld. CIT(A). The assessee also assailed the invocation of Sec. 69A . 4.2 After due consideration, Ld. CIT(A) held that the required details including basis of gross receipts of Rs.169.71 Lacs was not furnished. Further, in the earlier return of income, opening debtors were reflected as ‘nil’. Under these circumstances, the findings of Ld. AO were endorsed and both the additions were confirmed against which the assessee is in further appeal before us. 5 Our findings and Adjudication 5. The Ld. AR has stated that the assessee act as private financier and it offers income on presumptive basis u/s 44AD. All the lending is stated to be through banks whereas the borrowings are in cash. The Ld. AR has further stated that the assessee had furnished complete details of the debtors along with their address and PAN. The Ld. AO has not doubted the genuineness of creditors. No examination of debtors was done by lower authorities. The Ld. AR also assailed invocation of the provisions of Sec.69A on the ground that the books were not required to be maintained. On the issue of interest estimation, it was stated that the details of parties from whom the interest was received was duly furnished. All the details are stated to be not considered by lower authorities and accordingly, a prayer has been made for reconsideration of the same by lower authorities. The Ld. CIT-DR, on the other hand, has stated that the required details were not furnished by the assessee which is already noted in the orders of lower authorities. 6. We find that the addition of debtors stem from the fact that the assessee did not reflect debtors in earlier years and accordingly, the same has been estimated by Ld. AO. In our considered opinion, mere inadvertent error in the return of income should not have led to estimation of debtors when the assessee had furnished elaborate details and workings before lower authorities. Similarly, the assessee has also furnished party-wise interest income details before lower authorities which have been rejected and the interest income is estimated. Considering all the aforesaid factors in mind, we are of the opinion that the impugned order is to be set aside and the assessment be restored back to the file of Ld. AO for de novo assessment. The assessee is 6 directed to file requisite documents / explanations etc. to substantiate its return of income. All the issues are kept open. 7. The appeal stand allowed for statistical purposes. Order pronounced on 9th January, 2025 Sd/- (MANU KUMAR GIRI) \u0010ा ियक सद4 / JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद4 / ACCOUNTANT MEMBER चे4ई Chennai; िदनांक Dated :09-01-2025 DS आदेशकीTितिलिपअ/ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु=/CIT Coimbatore. 4. िवभागीय ितिनिध/DR 5. गाडBफाईल/GF "