ITO WARD 2, POLLACHI vs. SMT R SHANTHI, VILLIPURAM

आदेश / O R D E R Per Bench:

These bunch of eight appeals filed by three different assessees

are directed against separate but identical orders of Commissioner of

Income Tax (Appeals)-3, Coimbatore, dated 01.01.2018 &

Commissioner of Income Tax (Appeals)-1, Thiruchirapalli, dated

18.12.2018, and pertains to Assessment Years 2009-10 & 2010-11.

Since, facts are identical and issue is common, for the sake of

convenience, these appeals were heard together and are being

disposed off, by this consolidated order.

assessee for assessment year 2009-10 in ITA No: 713/Chny/2019 is

time barred by 15 days for which necessary petition for condonation

of delay along with affidavit explaining the reasons for the delay has

been filed. The assessee further submitted that he could not file appeal

within the time allowed under the Act, because he was in hospital for

heart throat and other ailments and was advised for bed rest. The delay

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 3 -: in filing appeal is neither intentional nor willful but for the unavoidable

reasons, therefore, delay may be condoned in the interest of

advancement of substantial justice.

condonation of delay petition filed by the assessee submitted that the

reasons given by the assessee do not come within the ambit of

reasonable and bonafide reasons, which can be considered for

condonation of delay and hence, appeal filed by the assessee may be

dismissed as not maintainable.

assessee for condonation of delay, we are of the considered view that

reasons given by the assessee for not filing the appeal within the time

allowed under the Act comes under reasonable cause as provided

under the Act for condonation of delay and hence, delay in filing of

appeal is condoned and appeal filed by the assessee for assessment

year 2009-10 in ITA No: 713/Chny/2019 is admitted for adjudication.

appeals in all three cases and the only issue emanates from grounds of

appeal filed by the assessee and the appeal filed by the Revenue is

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 4 -: estimation of net profit on total receipts assessed by the A.O as income.

Therefore, we deem it not necessary to reproduce grounds of appeal

filed by the Revenue in all the three cases. The assessee, Shri N.

Erulappan, was also raised more or less common grounds for both the

A.Ys and therefore, we deem it not necessary to reproduce the grounds

of appeal filed by the assessee. The assessee, Smt. R. Shanthi & Smt.

M. Sasikala, represented by her Legal Representative, Shri M.

Vivekandan has also filed more or less common grounds in their cross

objections and therefore, we deem it not necessary to reproduce

grounds of cross objections.

Proprietor of M/s. Thirumurthy Software and Solutions, Smt. Late M.

Sasikala, Rep. by L.R M. Vivekanandan, Proprietor of M/s. Om Muruga

Engineering & Developers and Shri N. Erulappan, have been concluded

based on credits found in their bank accounts. The summary of such

credits taxed in each of the assessee for A.Y 2009-10 and 2010-11 are

as under:

Name of the Assessee AY Bank Credits Credit Sub-total (Rs) assessed(Rs) (Rs) M. Shanthi (BZUPS 1508R) ICICI 28152000 28152000 Prop. Thirumurthy Software 2010-11 Axis 31300000 31300000 and solutions 5,94,52,000 M. Sasikala (BZLPS7258H) Prop. Om Muruga Engineers 2009-10 ICICI 14365202 1,81,80,202 14365202

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 5 -: & Developers, LR by M. Vivekanandan Axis 3815000 3815000 2010-11 ICICI 44297834 35249834* 6,02,49,834 Axis 25000000 25000000 N.Erulappan (AAJPE2224P) ICICI 152051584 152051584 Prop.Devaki Developers 2009-10 16,10,64,006 HDFC 9012422 9012422 2010-11 ICICI 158682589 158682589 15,86,82,589 Grand Total 46,66, 76,631 457628631 45, 76,28,631

credits in their bank account as to amounts received from M/s. EDAC

Engineering Ltd. as contract receipts and said transactions has been

facilitated by one Shri M. Nandakumar of M/s. EDAC Engineering Ltd.

through Shri N. Erulappan and Shri S.Kesavan. The A.O has captured

the amount released by M/s. EDAC Engineering Ltd. to three

assessees amounting to Rs. 22,40,74,347/- and the summary of such

money released are identifies as under:

SI.No. Name of the Party Amount (Rs) Om Muruga Engineers & Developers. Prop. M. 1 1,17,30,000 Sasikala 2 N.Erulappan, Prop. Of Devaki Developers 7,98,00,000 Devaki Developers/Sarvana Engineers. Prop. 3 13,25,44,347 N.Erulappan Total 22,40,74,347

released the above sums in the guise of awarding a civil contract to Shri

N. Erulappan and Shri S. Kesavan. In turn, Shri N. Erulappan has

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 6 -: transferred amount to Smt. R. Shanti and Smt. M. Sasikala. The

statement of Shri N. Erulappan and Shri S. Kesavan was recorded,

where they have stated that they did not execute any contract work, but

instead, as instructed by N. Nandakumar of M/s. EDAC Engineering

Ltd., withdraw the money from their bank account and handed over

back to Shri Nanda Kumar. The A.O did not accept the explanation of

the assessee and according to the A.O, all the assessees could not

substantiate their claim with necessary evidences. Therefore, taking

into account relevant facts and explanation of the assessee, the A.O

concluded the assessment in the case of Smt. R. Shanthi and M.

Sasikala and made additions towards total credits in bank account u/s.

69A of the Income-tax Act, 1961 (hereinafter referred to as “the

Act”). However, in the case of N. Erulappan, the A.O considered total

credits in bank account as contract receipts and estimated 8% net profit

on total receipts and added back to total income.

Before CIT(A), they have filed a detailed written statements and

explained the transactions between the assessee and M/s. EDAC

Engineering Ltd., and claimed that sum received from said company is

not for carrying out any civil contract work, but the same has been

released by Shri N. Nandakumar and the amount has been withdrawn

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 7 -: from the bank and handed over back to Shri N. Nandakumar. The

CIT(A) taking into account relevant facts and also considering the

nature of transactions, estimated 1% net profit on total credits

assessed by the A.O as income, by observing that the assessees are

only a facilitator of bogus transactions carried out by M/s. EDAC

Engineering Ltd. through Shri N. Nandakumar and further, carried out

said transactions for nominal commission. In the case of Shri N.

Erulappan, the Ld. CIT(A) has enhanced the assessment and directed

the A.O to assess total credits found in his bank account as income of

the assessee as against the estimation of income @ 8% on total

receipts by the A.O. Being aggrieved by the order of Ld. CIT(A), the

Revenue is in appeal before us in the case of Smt. R. Shanthi and

Smt. M. Sasikala and the assessee has filed cross objections. In the

case of N. Erulappan, the assessee is in appeal before us against the

order of Ld. CIT(A).

for hearing on number of occasions, which is evident from the records

that the case was posted for hearing right from 13.08.2018 to

29.08.2023. The assessees neither appeared, nor sought any

adjournment therefore, the appeals filed by the Revenue and as well

as the assessee and also cross objections filed by the assessees are

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 8 -: disposed off on the basis of material available on record after hearing

the Ld. D.R for the Revenue.

perused the relevant materials available on record. We find that the

sole basis for the A.O to make additions in all three cases is some

found credited in bank account of the assessees. The assessees

claimed before the A.O that source of the credit in their bank account

is amount received from M/s. EDAC Engineering Ltd. It was further

explained that, they have received amount from the company as

contract receipts, but they did not carry out any civil contract work for

the company. It was further stated that Shri N. Nandakumar of M/s.

EDAC Engineering Ltd., has approached them to facilitate the

transactions in the guise of civil contract works and withdraw money

from the bank account and handed over to Shri N. Nandakumar. We

find that the A.O has identified amount released by M/s. EDAC

Engineering Ltd. to three assessees and total sum released by said

company was at Rs. 22,40,74,347/-. As against this, the A.O

assessed sum of Rs. 45,76,28,631/- in three assessees hands for two

assessment years. From the above, it is very clear that the A.O has

not carried out necessary verification to ascertain the nature of credits

found in the bank account and the source of said credits. We further

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 9 -: noted that Smt. R. Shanti and Smt. M. Sasikala have stated in their

statements that they had received money from Shri N. Erulappan and

Shri R. Kesavan. Therefore, if at all the claim of the above two

assessees are correct then, the money needs to be identified by the

A.O by taking into account relevant bank statements of all three

assessees. Further, it was submissions of Ld. D.R that the very same

amount released by M/s. EDAC Engineering Ltd. has been disallowed

in their assessment on the ground that said payment is bogus in

nature. It was further argued that the ITAT has allowed partial relief in

the case of M/s. EDAC Engineering Ltd. These are oral submissions

and there is no evidence before us to verify the claim of the Ld. D.R.

Further, the first appellate authority in the case of Smt. R. Shanti and

Smt. M. Sasikala has estimated 1% profits/commission on total credits

found in the bank account of the both assessees. However, in the

case of N. Erulappan, although the A.O has estimated 8% profit on

total credits for both assessments, but the Ld. CIT(A) has enhanced

the assessment and directed the A.O to assess total credits found in

bank account. From the above, it appears that the Department has

taken a contrary view in different assessees case on very same credits

found in bank account and received from M/s. EDAC Engineering Ltd.

Since, the credits considered by the A.O in the assessments of three

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 10 -: assessees is more than the amount claimed to have been released by

M/s. EDAC Engineering Ltd., in our considered view the issue needs

fresh examination from the A.O to identify the nature and source of

credits found in bank account of all three assessees. Further, if the

claim of the Ld. D.R is correct that the ITAT has allowed partial relief in

the case of M/s. EDAC Engineering Ltd. then, the findings given by the

Tribunal in the case of M/s. EDAC Engineering Ltd. also needs to be

considered by the A.O to conclude the assessment. Therefore, for all

these reasons, the appeals filed by the Revenue in the case of Smt. R.

Shanti and Smt. M. Sasikala and consequent cross objections filed by

both the assessees and also the appeal filed by Shri N. Erulappan for

both assessment years needs to go back to the file of the A.O for

further verification of facts. Thus, we set aside the orders passed by

first appellate authority in all three cases and restore the issue in three

cases to the file of the jurisdictional A.O and direct the A.O to re-verify

the case with reference to claim of the assessee that source of credits

found in their bank account is out of amount received from M/s. EDAC

Engineering Ltd. The A.O is also directed to refer to the order passed

by the ITAT in the case of M/s. EDAC Engineering Ltd. to arrive at a

proper conclusion in the case of all these three assessees. We further

direct the Revenue, if possible all three cases should be consolidated

ITA Nos.825-826/Chny/2018, CO Nos.71-73/Chny/2018 & ITA Nos.713 & 714/Chny/2019 :- 11 -: to one A.O for better appraisal of facts and assess the income in

accordance with law.

827/Chny/2018 and appeals by the assessee in ITA Nos.713 &

714/Chny/2019 and Cross Objections by the assessee in C.O Nos.71,

72 & 73/Chny/2018 are allowed for statistical purposes.

Order pronounced on 31st August, 2023.

Sd/- Sd/- (मनोमोहन दास) (मंजुनाथ. जी) (Manomohan Das) (Manjunatha. G) �ाियक सद�/Judicial Member लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य

चे�ई/Chennai, �दनांक/Dated: 31st August, 2023. EDN/-

आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ+/Appellant 2. )*थ+/Respondent 3. आयकर आयु-/CIT 4. िवभागीय )ितिनिध/DR 5. गाड' फाईल/GF