ACIT, NCC-11,, CHENNAI vs. SMT. DEVAKUMARI,, CHENNAI

आयकर अपीलीय अिधकरण, ’बी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी वी दुगा� राव �ाियक सद� एवं �ी जी. मंजुनाथा, लेखा सद� के सम� Before Shri V. Durga Rao, Judicial Member & Shri Manjunatha, G. Accountant Member आयकर अपील सं./I.T.A. No.3066/Chny/2019 िनधा�रण वष�/Assessment Year: 2014-15 Smt. Devakumari, Vs. The Assistant Commissioner of No. 48, Venkata Maistry Street, Income Tax, Mannady, Chennai 600 001. Non Corporate Circle 11, Chennai. [PAN:AAGPD0150L] (अपीलाथ�/Appellant) (��थ�/Respondent) आयकर अपील सं./I.T.A. No.3181/Chny/2019 िनधा�रण वष�/Assessment Year: 2014-15 The Assistant Commissioner of Vs. Smt. Devakumari, Income Tax, No. 48, Venkata Maistry Street, Non Corporate Circle 11(1), Mannady, Chennai 600 001. Chennai.

(अपीलाथ�/Appellant) (��थ�/Respondent) Assessee by : Shri N. Arjun Raj, CA Department by : Shri D. Hema Bhupal, JCIT सुनवाई की तारीख/ Date of hearing : 30.08.2023 घोषणा की तारीख /Date of Pronouncement : 13.09.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: Both the cross appeals filed by the assessee as well as Revenue are directed against the order of the ld. Commissioner of Income Tax

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(Appeals) 13, Chennai, dated 16.09.2019 relevant to the assessment year 2014-15.

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However, when asked for the source for the amount invested in shares and that was pledged for the loan in Citicorp Finance, the summoned persons have requested time till 09.12.2016. On perusal of the paper books submitted by them, the Assessing Officer noted that the above persons namely, B. Ramesh Babu, B. Rani (late) represented by her husband, B. Suresh Babu, B. Devi and B. Sathish Kumar have advanced a loan of ₹.2,40,00,000/- to Smt. Devakumari by way of RTGS transfer. The Assessing Officer has further noted that on the face of it, the transactions were made to look absolutely genuine as the loans were taken by RTGS/account payee cheque, the deposits had filed their returns of income, had prepared their accounts, had their own bank accounts and six of the above had even appeared before the Assessing Officer. The Assessing Officer has observed that unfortunately, on a deep scrutiny into the pile of documents furnished by the AR and the assessee, in assessment proceedings, clearly revealed the manipulations and the manner in which cash was deposited in the bank accounts of the above mentioned depositors immediately prior to issuing the cheques to the assessee. Merely because the transactions were through the bank account, accordingly, it cannot be presumed that the transactions were genuine. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. Before the Assessing

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Officer, the assessee also agitated against the enquiry into the source of source of the loans by relying on some court decision during the course of assessment proceedings. Since the assessee has not established the creditworthiness of the depositors/lenders and genuineness of the transactions and that the loans of ₹.3,07,71,007/- represent bogus accommodation entries where the assessee had schemed to use his family members and their bank accounts to generate capital for the business, the Assessing Officer issued show-cause notice proposing to disallow the same and added back under section 68 of the Act. After considering the submissions of the assessee, the Assessing Officer has disallowed the entire unsecured loans of ₹.3,07,71,007/- and brought to tax under section 68 of the Act. On appeal, after considering the submissions of the assessee as well as facts of the case, the ld. Held that out of ₹.3,07,71,007/-, addition to the extent of ₹.2,85,00,000/- needs deletion and the addition the extent of ₹.22,71,007/- and interest thereon of ₹.1,01,050/- totalling to 22,71,007 + 1,01,050 = 23,72,057 is only confirmed and partly allowed the ground raised by the assessee.

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of section 68 of the Act had no application to the facts of the case and the ld. CIT(A) ought to have appreciated that the initial onus cast upon the assessee had been fully discharged in placing all details on record and thus, prayed for deleting the above addition confirmed by the ld. CIT(A).

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before the Assessing Officer in response to the summons issued and statement recorded. The Assessing Officer disbelieved the credits was that the creditor’s income shown was meagre and presumed that they would not have been in a position to advance such huge sums. The creditors have explained that the loans were undisputedly advanced from borrowals from Citicorp Finance (India) Ltd. by pledging the shares. The Assessing Officer further called upon the creditors to explain the sources for the amount invested in shares which they explained as the immediate source for the loan and they were all by RTGS transfers. All the creditors were having PAN and admitted the transactions and therefore the initial onus on the assessee to prove the identity of the creditors and their creditworthiness and genuineness of transactions was discharged. In view of the above facts and circumstances and after verifying the details of the assessee, the ld. CIT(A) was of the opinion that there was no case for the Assessing Officer to treat the credits as unexplained under section 68 of the Act without disproving the assessee’s contention, which the Assessing Officer failed to do. Accordingly, the ld. CIT(A) deleted the addition of ₹.2,40,00,000/-.

6.1 Regarding the loan of ₹.35,00,000/- from S. Sethuraman [₹.13,50,000] and S. Chandra [₹.13,50,000/-], K.T. Shanmugham minor

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HUF [₹.8,00,000], the only objection of the Assessing Officer was that they are all having same address and PAN. The only objection of the Assessing Officer was that they are all having same address and PAN. Before the ld. CIT(A) the assessee has submitted that they are all income tax assessees, confirmed the transactions and given the loan through banking channels. In respect of the loan of ₹.10,00,000/- from Mrs. R. Vijayalakshmi, the Assessing Officer has not adduced any reason for disbelieving/disproving the credits. Since the assessee had discharged her initial onus again of proving the credit whereas, the Assessing Officer appears to have failed to discharged his onus to disprove the same and accordingly, the ld. CIT(A) deleted the addition of ₹.45 lakhs made as unexplained loan under section 68 of the Act.

6.2 Before the Tribunal, the Revenue has filed an appeal against deletion of addition towards unsecured loans taken to the extent of ₹.2.40 crores as well as allowing the interest of ₹.7,62,738/- on the above unsecured loans. Against the total deletion of addition towards unsecured loans of ₹.2,85,00,000/-, by accepting the deletion of addition of unsecured loans to the extent of ₹.45 lakhs, the Revenue has not raised any ground in its appeal before the Tribunal. Against the loan amount of ₹.45 lakhs, the loan creditors are income tax assessees, confirmed the

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transactions and moreover, the transactions were made through banking channel by RTGS and the assessee has discharged her initial onus of proving the credit and therefore, the ld. CIT(A) has deleted the loan of ₹.45 lakhs, which was duly accepted by the Department. On similar facts and circumstances, Against the loan amount of ₹.2,40,00,000/- received from B. Suresh Babu, B. Ramesh Babu, B. Sathish Kumar, B. Rani, and B. Devi also the above five creditors are income tax assessees, having PAN, the loan amount was advanced through banking channel by RTGS and have also confirmed the transactions when appeared before the Assessing Officer in response to the summons issued and statement recorded. Since the assessee has discharged her initial onus to prove the identity of the creditors and their creditworthiness and genuineness of the transactions, the ld. CIT(A) deleted the addition.

6.3 On perusal of the assessment order, we find that the Assessing Officer has confirmed that the above five loan creditors are income tax assessees, have filed their returns of income for the assessment year 2014-15 and also the transactions were made through banking channel by RTGS. On further enquiry made by the Assessing Officer through summons under section 131 of the Act towards source of source, they have given the following statements:

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Borrowed revolving loan facility against pledging of shares with Citicorp Finance (India) Limited and had advanced the same to Smt. Devakumari”. We have also perused the detailed paper book filed by the assessee containing reply to the objections of the Assessing Officer filing copies of the ITR, copies of bank pass book, copies of the “Revolving loan facility- cum-pledge etc., running from page No. 81 to 545. With regard to creditworthiness of the creditors, the assessee filed copies of agreement with Citicorp Finance (India) Ltd. at paper book page Nos. 113 to 123 in respect of B. Suresh Babu, B. Rani at page 148 to 150, B. Ramesh Babu at page 207 to 210, B. Satishkumar at page 327 to 338 and Citi bank statement of account of B. Devi from page 361 to 364.

6.4 Once the assessee has discharged the onus cast upon her with regard to identity of the creditors, their creditworthiness and genuineness of transactions, we are of the considered opinion that there would not be any case for the Department to treat the credits as unexplained under section 68 of the Act. Moreover, since the Department has accepted the deletion of addition of ₹.45 lakhs loan on similar facts and circumstances, we are of the considered opinion that the Department has no case to find fault in the appellate order towards deleting the addition on account of unsecured loan received by the assessee to the extent of ₹.2.40 crores

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along with interest on the above unsecured loans. Accordingly, the grounds raised by the Revenue are dismissed.

7.1 Before us, the ld. Counsel for the assessee has submitted that both the minors have received gifts in the previous assessment year and the amounts were lying in the bank accounts of the minors unused. Thus, the

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minors offered loans to the assessee out of their savings. In support of the above, the ld. Counsel for the assessee has relied upon the statement of account, bank details, income tax return, etc. filed in the form of paper book and prayed for deleting the addition made by the Assessing Officer and confirmed by the ld. CIT(A).

7.2 On the other hand, the ld. DR strongly supported the order of the ld. CIT(A) on this issue.

7.3 We have considered the rival contentions. The assessee has received loan from the minors S. Goutham Raj and B. Satvika of ₹.13,37,982/- and ₹.9,33,025/- respectively. It is an admitted fact that the minors have been receiving gifts in earlier years. In fact, there was no debit entry in their SB account. To offer a loan, credit balances in their accounts are required. Out of their bank balance, the minors have offered loans to the assessee. When they have sufficient credit in their accounts, creditworthiness cannot be questioned. More so, both the minors have furnished their income tax returns, which were duly agreed by the Department. Thus, we are of the opinion that the ld. CIT(A) was not correct to held that the minors have no independent source of funds to advance the loans. Accordingly, we reverse the orders of authorities below and delete the addition of ₹.22,71,007/- as well as interest relating

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thereon of ₹.1,01,050/-. Thus, the ground raised by the assessee is allowed.

8.1 Before us, by referring to the paper book pages 512 to 518, the ld. Counsel for the assessee has submitted that besides furnishing detailed confirmation of payment of ₹.8,83,600/- on accounts of factory maintenance expenses, the assessee has also brought on record the copy of ITR, PAN and Aadhar, etc. towards her claim and prayed for deleting the addition.

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8.2 On the other hand, the ld. DR supported the order passed by the ld. CIT(A).

8.3 We have heard the rival contentions and also perused the paper book pages referred by the ld. Counsel. The assessee has claimed expenses for ₹.16,77,965/- on account of factory maintenance and debited the same in the profit and loss account, out of which the payments made to S. Srinivasalu (Engineering Works) to the extent of ₹.8,83,600/- were disallowed by the Assessing Officer by disbelieving the identity of the individual for which Aadhar, PAN & ITR copies were furnished besides written confirmation furnished by Shri S. Srinivasalu. It has been stated in the assessment order that the Assessing Officer has deputed the Inspector to make enquiry and it came to light that S. Srinivasalu was not traceable in the said address as was in the bills produced by the assessee, but, it was accepted that there exists in the above address, Sri Vinayaka Agencies. First of all, in the assessment order, report of the Inspector was not brought on record and secondly, when in the address there exists Sri Vinayaka Agencies, the Inspector should have made enquiry. Before the Assessing Officer the assessee has submitted that the said person Mr. S. Srinivasalu was doing business individually in the relevant previous year and subsequently doing the

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business in the name of Sri Vinayaka Agencies. However, we are unable to understand as to why the Assessing Officer has not issued any summon under section 131 of the Act to Shri S. Srinivasalu to appear before him and to record the statements. It appears that the ld. CIT(A) has also not bothered to make enquiry before confirming the addition. Once the assessee has furnished detailed confirmation of payment of ₹.8,83,600/- on accounts of factory maintenance expenses, to prove the identity of Shri S. Srinivasalu, copy of Aadhar, PAN, ITR, etc. were brought on record, we are of the considered opinion that the assessee has discharged the primary onus cast upon her and thus, the above addition made by the Assessing Officer is liable to be deleted. Accordingly, The addition made on account of disallowance of factory maintenance expenses at ₹ 8,83,600/- stands deleted and the ground raised by the assessee is allowed.

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showing consolidated payment. Since the assessee could not furnish even three months bill to check the genuineness of the same and to rule out the possibility of personal expense, the Assessing Officer disallowed ₹.10,00,000/- against the claim of electricity expenses of ₹.21,73,053/-. On appeal, the ld. CIT(A) granted relief to the extent of ₹.5,00,000/- and confirmed the balance addition of ₹.5,00,000/-. Though the assessee claims to have made payment to the TNEB and the element of personal usage cannot be ruled out in the absence of production of electricity bills, we sustain the addition to the extent of ₹.2,00,000/- out of addition confirmed by the ld. CIT(A) to the extent of ₹.5.00 lakhs and the balance addition of ₹.3,00,000/- stands sustained.

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disallowed a sum of ₹.72,916/- being 10% of such expenses as incurred for personal purpose. Similarly, ₹.2,27,817/- out of the total depreciation on vehicle amounting to ₹.22,78,173/- was disallowed and brought to tax.

10.1 The assessee carried the matter in appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee did not object to the disallowance of car maintenance expenses of ₹.72,916/-, but only disputed the disallowance of depreciation. The ld. CIT(A) has observed that under section 38(2) of the Act, where an asset was not exclusively used for the purpose of business, the deduction under section 32 of the Act should also be restricted to a fair proportionate part thereof. In this case, 10% of the expenditure on maintenance of car was disallowed towards personal use, thereby, the ld. CIT(A) has observed that the Assessing Officer was justified in disallowing 10% of the depreciation on car. Since the assessee has not given the correct depreciation on car claimed, the Assessing Officer has taken 10% of the total depreciation claimed under the 15% block and disallowed the depreciation. Accordingly, the ld. CIT(A) confirmed the disallowance of ₹.2,27,817/- under depreciation and total disallowance at ₹.3,00,7230/- under car maintenance expenses. We find no infirmity in the above findings of the ld. CIT(A) and thus, the ground raise by the assessee is dismissed.

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more was added back to drawing of the assessee and added to the returned income.

11.1 The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) has observed as under: 19.2 I agree with the AO on this ground. Given the salary she earns and the social status she maintains total drawings debited for her and her family members of ₹.4,63,360/- including all cess, taxes, besides savings, travelling, medical bills etc. of just Rs.2 lakhs appears clearly on her lower side and therefore addition of another 2 lakhs thereto appears reasonable and fair in the totality of the facts and circumstances of the case. This ground is partly allowed. Considering the turnover of the assessee at about ₹.37 crores and also drawing of ₹.12,00,000/- as salary from Metro Power Transmission (P) Ltd. during the previous year 2013-14, the drawings towards personal expenses shown by the assessee appears to be very low and accordingly, the Assessing Officer enhanced an additional amount of ₹.2.00 lakhs. The ld. CIT(A) has also observed that the addition of another 2 lakhs thereto the personal expenses appears to be reasonable and fair in totality of the facts and circumstances of the case. Thus, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed.

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considering the submissions of the assessee and since the assessee has failed to establish the genuineness of her claim by not furnishing the EB bills/EB cards for the six vacant flats, the Assessing Officer has disallowed the sum of ₹.5,40,000/- [7500x12x6] and added back to the total income returned.

12.1 The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) has observed that as per section 23(1)(c) of the Act, when the property was let and was vacant during the year then the amount of rent received or receivable can be assessed as annual value. Since the assessee claimed that the property was vacant for the whole year and not let out for any period during the year, the ld. CIT(A) opined that the assessee may not be entitled to any relief and has to pay tax on the notional rent. Accordingly, the ld. CIT(A) confirmed the findings of the Assessing Officer that the notional rent has to be assessed as property income. However, since the Assessing Officer has assessed the entire gross rental of ₹.5.40,000/- as income without giving statutory deduction at 30% of the annual value, the ld. CIT(A) has confirmed the addition to the extent of ₹.3,78,000/- after granting statutory deduction of ₹. 1,62,000/- being 30% of ₹. 5,40,000/-. Before us, the ld. Counsel for the assessee could not

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controvert the above findings of the ld. CIT(A) and accordingly, the addition confirmed by the ld. CIT(A) stands sustained.

Order pronounced on 13th September, 2023 at Chennai.

Sd/- Sd/- (MANJUNATHA, G.) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 13.09.2023 Vm/- आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant, 2.��थ�/ Respondent, 3.आयकर आयु�/CIT, 4. िवभागीय �ितिनिध/DR & 5. गाड� फाईल/GF.