SRI.PHINU THOMAS,TRIVANDRUM vs. THE ITO, WD-3,, TRIVANDRUM

Per CHANDRA POOJARI, AM:

This appeal filed by the assessee is directed against the order of the CIT(A),

Kottayam dated 26/04/2018 and pertains to the assessment year 2010-11.

1.1 There was a delay of 70 days in filing this appeal before the Tribunal. The Ld.

AR has filed condonation petition accompanied by an affidavit stating that the

impugned order was passed on 26/04/2018 and copy of he same was served to him

on 05/05/2018. The assessee had filed the appeal on 02/07/2018 through his

counsel through registered post, but the assessee omitted to remit the appeal fee

and submit the copy of the challan along with the appeal memorandum. The same

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was noticed only when defects notice was served to him from the registry and on

12/09/2018 itself, the assessee remitted the appeal fee and stay application fee and

submitted to the Registry. It was submitted that since the Registry noted that the

appeal fee was remitted only on 12/09/2018, there was a delay of 70 days in filing

the appeal before the Tribunal. The Ld. AR submitted that the omission to remit the

appeal fee along with filling of the appeal was not deliberate or intentional but only

due to an inadvertent mistake, hence, the delay of 70 days in filing the appeal may

be condoned.

1.2 The Ld. DR did not strongly opposed to the condonation petition filed by the

assessee.

1.3 We have gone through the condonation petition filed by the assessee. We find

that the reason explained by the assessee for delay of 70 days in filing the appeal

before the Tribunal is bona fide and there is merit in the arguments. There is good

and sufficient cause for belatedly filing the appeal before the Tribunal. Hence, we

condone the delay of 70 days and admit the appeal for adjudication.

unexplained income which was claimed to be received from the sale of gold.

Theravathu Builders, Trivandrum. The return of income was filed on 23/01/2012 2

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declaring total income of Rs.2,10,000/-. Subsequently, the case was selected for

scrutiny and notice u/s. 143(2) of the I.T. Act was issued on 21/09/2012. The

assessee was requested to explain the source of cash transactions in the SB A/cs

with Federal Bank, Uzhavoor Branch during the F.Y. 2009-10. He stated that even

though these accounts were maintained in his name, these accounts were that of

the partnership firm, M/s. Thervathu Builders and they were maintained in his name

for the sole purpose of operational convenience and easy withdrawal of money. All

these transactions were reflected in the books of account of the firm. The firm had

contract works at different localities and he used to pay the daily expenses by

taking money from the banks using the ATM card as the banks do not allow ATM

facility to partnership firms but only to individuals. The assessee was also asked to

explain the source of following deposits made in the SB account with Federal Bank.:

a) Rs.2,00,000/- on 30/10/2009 b) Rs.4,00,000/- on 05/12/2009 c) Rs.10,00,000/- on 10/03/2010 d) Rs.2,00,000/- on 25/03/2010 e) Rs.3,00,000/- on 27/03/2010 f) Rs.3,00,000/- on 29/03/2010

3.1 It was also noticed that there was a capital introduction of Rs.12,05,00/- by

the as in the firm M/s. Theravathu Builders. The assessee explained the source of

deposits made on 30/10/2009 – Rs.2,00,000/-, on 05/12/2009 – Rs.4,00,000/-, on

27/03/2010 – Rs.3,00,000/- were amounts remitted by the M/s. Theravathu Builders

and filed the supporting evidences. The deposits on 10/03/2010-Rs.10,00,00/- and

on 25/03/2010 -Rs.2,00,000/- were the additional capital brought in by the assessee 3

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to augment funds on reconstitution of the firm Theravathu Builders. When asked

about the source of Rs.12,00,000/- he stated that Rs.10,05,00/- was sale proceeds

of gold belonging to him and his wife from his nearest relatives and the source of

remaining amount of Rs.2,00,000/- was his past savings.

3.2 In response to Summons u/s. 131 of the I.T. Act, the following persons to

whom the gold was sold appeared and sworn statements were recorded from them:

a) Shri Roy Mathew, Ramachanattu House, Kottayam : In the sworn statement it

was stated that he had purchased gold ornaments of 31 sovereigns at the rate of

Rs.10,500/- for an amount of Rs.3,25,000/- in February 2010 from Shri Phinu

Thomas. Specific questions were asked about his income, source of this amount

etc. The relevant portion of the sworn statement reads as follows:

“Q.2 Your source of lncome?

Ans: I am taking rubber plantation for lease.

Q.3 Give the details of your immovable property ?

Ans: One house and 13 cents of land at Pala."

It was also stated that the source of purchase of gold was from the sale of rubber.

No documentary evidence was available with him in connection with the purchase of

gold and there was no proof for the source of income to purchase this gold. On

going through the sworn statement recorded from Shri Roy Mathew , it was noticed

that no documentary evidence was available with him to prove the claim. It was 4

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noticed that he had no sufficient fund to purchase this gold. The yearly income as

admitted by Shri Roy Mathew was Rs.2.40,000/- (Rs.2,000 x 12). He was living with

wife 2 children of 7 and 3 & years old and after meeting the household expenses,

there were no sufficient funds to purchase the ornaments. Considering all these

things, the Assessing Officer held that Shri Roy Mathew cannot be considered as a

genuine purchaser and hence, the amount of Rs.3,25,000/- said to have been

received from the sale of gold ornaments from Shri Roy Mathew was treated as the

undisclosed income of the assessee

b) P.J. Mathew, Perumbel House, Arreekkara, Kottayam In the sworn statement,

recorded from Shri P.J. Mathew it was stated that he had purchased gold ornaments

of 27 sovereigns at the rate of Rs.10,300/- for an amount of Rs.2,75,000/- in

January, 2010 from Shri Phinu Thomas. Specific questions were asked about his

income, source of this amount etc. The relevant portion of the sworn statement

reads as follows:

“Q.2 Your source of lncome?

Ans: Agricultural income from rubber, tapioca etc. Monthly income is

Rs.3,000/-.

Q.3 Give the details of your immovable property ?

Ans: 2 acres of land. Land is in the name of my mother.

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It was also stated that the source of purchase of gold was from the agricultural

income. No documentary evidence was available with him in connection with the

purchase of gold and there was no proof for the source of income to purchase this

gold. On going through the sworn statement recorded from Shri P.J. Mathew , it

was noticed that no documentary evidence was available with him to prove the

claim. It was noticed that he had no sufficient fund to purchase this gold. The

yearly income as admitted by Shri Roy Mathew was Rs.36,000/- (Rs.3,000 x 12). He

was living with wife and 2 sons and after meeting the household expenses, there

were no sufficient funds to purchase the ornaments. Considering all these things,

the Assessing Officer held that Shri P.J. Mathew cannot be considered as a genuine

purchaser and hence, the amount of Rs.2,75,000/- said to have been received from

the sale of gold ornaments from Shri P.J. Mathew was treated as the undisclosed

income of the assessee

c) James T.A. Thadathil House, Ayarkunnam, Kottayam In the sworn statement,

recorded from Shri James T.A., it was stated that he had purchased gold ornaments

of 21 sovereigns at the rate of Rs.10,500/- for an amount of Rs.2,15,000/- from Shri

Phinu Thomas. Specific questions were asked about his income, source of this

amount etc. The relevant portion of the sworn statement reads as follows:

“Q.2 Your source of lncome?

Ans: Agricultural income from rubber, plantain etc. from 1 1/2 acres of land.

Monthly income is Rs.10,000/-. 6

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It was also stated that the source of purchase of gold was from the agricultural

income. No documentary evidence was available with him in connection with the

purchase of gold and there was no proof for the source of income to purchase this

gold. On going through the sworn statement recorded from Shri James T.A. , it was

noticed that no documentary evidence was available with him to prove the claim. It

was noticed that he had no sufficient fund to purchase this gold. The yearly income

as admitted by Shri James T.A. was Rs.1,20,000/- (Rs.10,000 x 12). He was living

with wife and after meeting the household expenses, there were no sufficient funds

to purchase the ornaments. Considering all these things, the Assessing Officer held

that Shri James T.A. cannot be considered as a genuine purchaser and hence, the

amount of Rs.2,15,000/- said to have been received from the sale of gold

ornaments from Shri James T.A. was treated as the undisclosed income of the

assessee

d) T.U. Stephen, Theruvath House, Uzhavoor, Kottayam In the sworn statement,

recorded from Shri T.U. Stephen, it was stated that he had purchased gold

ornaments of 18 sovereigns for an amount of Rs.1,90,000/- from Shri Phinu

Thomas. Specific questions were asked about his income, source of this amount

etc. The relevant portion of the sworn statement reads as follows:

“Q.2 Your source of lncome?

Ans: Agricultural income from rubber. Monthly income is less than

Rs.10,000/-. Property is in the name of my father-in-law, 80 cents of land.

Q.3: Give the details of your immovable property ? 7

I.T.A. No. 316/Coch/2018

Ans: I have no immovable property.

It was also stated that the source of purchase of gold was from the agricultural

income. No documentary evidence was available with him in connection with the

purchase of gold and there was no proof for the source of income to purchase this

gold. On going through the sworn statement recorded from Shri T.U. Stephen, it

was noticed that no documentary evidence was available with him to prove the

claim. It was noticed that he had no sufficient fund to purchase this gold. The

yearly income as admitted by Shri T.U. Stephen was less than Rs.1,20,000/- (less

than Rs.10,000 x 12). He was living with wife and 3 daughters of 24, 23 and 20

years old and after meeting the household expenses, there were no sufficient funds

to purchase the ornaments. Considering all these things, the Assessing Officer held

that Shri T.U. Stephen cannot be considered as a genuine purchaser and hence, the

amount of Rs.1,90,000/- said to have been received from the sale of gold

ornaments from Shri T.U. Stephen was treated as the undisclosed income of the

assessee. Therefore, the total disallowance came to Rs.10,05,000/- (Rs.3,25,000/-

+ Rs.2,75,000/- +Rs.2,15,000/- + Rs.1,90,000/-).

3.3 In response to the office letter dated 03/10/2012, the assessee stated that

the jewellery owned by the assessee and his wife as on 31/03/2009 and 31/03/2010

was for Rs.5,00,000/- lakhs only. From the above reply, it was seen that there was

no sale of gold ornaments during the previous year relevant to the assessment year

2010-11. The Assessing Officer noticed that the sale of gold was not genuine. 8

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However, the Assessing Officer treated the source for Rs.2,00,000/- introduced as

capital from his past savings as genuine. Thus, the Assessing Officer treated

Rs.10,05,000/- as unexplained income of the assessee and added to the total

income returned under the head ‘income from other sources’.

him was discharged by proving the identity of the persons who purchased the gold.

However, proving the identity will not amount to proving creditworthiness of the

persons who purchased gold. Further, the CIT(A) observed that the assessee had

not explained the discrepancy pointed by the Assessing Officer except stating in the grounds of appeal that the value of gold reflected as on 31st March, 2010 does not

reflect the particulars of the gold ornaments. The CIT(A) observed that even

though the value of the gold keeps fluctuating over the period of time but the onus

was on the assessee to produce the evidence to prove that the value remained at

Rs. 5,00,000/- as on 31.03.2010 even after selling gold ornaments worth Rs.

10,05,000/- when the value of the gold ornaments as on 31.03.2009 was Rs.

5,00,000/- In view of the above facts, the CIT(A) not only confirmed the addition

of Rs.10,05,000/-, but also enhanced it by Rs.2,00,000/- .

submitted that the assessing authority as well as the appellate authority ought to

have accepted the return filed by the assessee and the income reported for the year

2010-11. Regarding the amount of Rs 10,05,000/- which has arrived from the sale 9

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of gold, it was submitted that the assessee had discharged his burden by producing

the witnesses, who were the purchasers of the gold. Nowhere, it was mandated

that the assessee should explain the income source of the purchasers also to

discharge his burden, It was submitted that the during the year, there was

reconstitution of firm, in which the assessee was a partner and as per the

reconstitution, he became the major shareholder and was under the obligation to

settle the dues to the retiring partner. According to the Ld. AR, this was the

circumstances, to introduce the additional capital in the business amounting to Rs

10,05,000/- Thus, the source of fund of Rs 10,05,000/- was explained as the sale

consideration of gold ornaments and the said facts were explained before the

authorities below. It was submitted that the authorities below disbelieved the

contentions of the assessee regarding the sale consideration, which he received

from the sale of gold, on the reason that they were not convinced on the

statements made by the purchasers and it was also stated therein that the

purchasers were not tax payers and they have no means to raise such money. It

was submitted that it cannot be mandated that the assessee should explain the

activities of the purchasers, when they have made sworn statement before the

assessing authorities that they have purchased gold from the assessee.

5.1 It was submitted that the CIT(A) ought to have found that the assessee had

fully discharged his burden by establishing the identity of persons who have

purchased the gold ornaments from the assessee. It was submitted that the

authorities ought to have made an independent enquiry on the basis of the 10

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statement of witnesses, but the findings were arrived on the mere assumptions and

presumptions and also on the basis of pure guess works. At no point of time the

witnesses were deposed that they did not have money to purchase the gold from

the assessee. According to the Ld. AR, the assessing authority as well as the

appellate authority had arrived in a contrary finding on the basis of the assets held

by the purchasers for the relevant time. It was submitted that the gold value at Rs

5, 00,000/- was misinterpreted as the sale value of the gold and the value of the

gold as assets in stock can only be reported as the value as it had at the time of

purchase and not the market value of the gold on the relevant point of time. The

value of the gold may vary at the time of incidence of sale and it depends on the

market force like demand and supply and also the necessity of the parties to the

sale contract. Thus, the Ld. AR submitted that the value reported by the assessee

as per his statement dated 03/10/2012 as the market value of gold or the saleable

value of the same. Hence, it was submitted that the addition made by the Assessing

Officer and confirmed by the CIT(A) may be deleted.

case, the assessee claimed that it generated Rs.10,05,000/- on sale of gold

jewellery which was not in his possession. The Assessing Officer summoned the

parties who purchased the gold from the assessee. From the sworn statements of 11

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the parties, it was seen that these persons had very meager income, it cannot be

said that these persons whose statements were recorded u/s. 131 of the Act having

such income could purchase gold from the assessee. The burden is on the as to

prove the credits with reliable evidence in support of the generation of funds by way

of sale of gold jewellery. Therefore, in the absence of the sources of the parties to

make the said purchase of gold from the assessee, it cannot be said that the

assessee has discharged the onus cast upon him. As held by the Jurisdictional High

Court in the case of CIT vs. Kerala Road Lines Corporation (162 ITR 669), the

burden is on the assessee to support the entries made in the books of accounts,

and the revenue has no onus to disprove, until the assessee has submitted

satisfactory explanation for credit entries. It was held that when, apart from the

entries in the books of the assessee, the only other evidence was the statement by

the assessee himself regarding the alleged credits and alleged creditors in the

statements which showed that they did not have the source to give the amount in

question and there was no supporting evidence towards the same. Similarly, in the

case of Jash Bhai F. Patel vs. CIT, (181 ITR 197), the Calcutta High Court held that

the alleged creditor confessed that he acted as only a name-lender and did not lend

the money to any person actually. Further, in the case of T.P. Abdulla vs. ACIT (68

DTR (Ker) 181, it was held that if the materials produced by the assessee do not

lead to a proper reasonable or acceptable explanation as regards the receipts in the

books, the Assessing Officer is perfectly entitled to record his non-satisfaction,

provided he has applied his mind.

I.T.A. No. 316/Coch/2018

7.1 Being so, in the absence of supportive evidence and in the light of the sworn

statements from the parties and above judgments, the addition made by the

Assessing Officer is justified. In view of the above facts, we do not find any

infirmity in the order of the CIT(A) and the same is confirmed. Thus, this ground of

appeal of the assessee is dismissed.

by Rs.2 lakhs by the CIT(A).

assessee regarding the sources for the Rs.2,00,000/- which was accepted by the

Assessing Officer on the ground that this amount represented the past savings of

the assessee. However, the CIT(A) noticed that there was no evidence on record to

prove that the amount represents the past savings of the assessee. The assessee

explained the source of this amount vide letter dated 21/04/2018 as follows:

"In this connection, it is submitted that it is not additional capital brought in, but only plough back of my drawings from the firm Rs. 2,00,000 on 01.04.2009. This is done in accordance with the mutual agreement between the partners since the proposal to reconstitute the Firm w.e.f 01.04.2010 was alive during the year under consideration. This was done in addition to the amount brought in by me as capital Rs. 10,00,000 on 10.03.2010."

9.1 In view of the submission of the assessee that the amount of Rs.2,00,000/-

which was claimed as past savings during the course of assessment proceedings,

was shown as drawings from the firm, the CIT(A) directed the Assessing Officer to

verify the drawings of the assessee from the firm during the FY 2009-10 and if the 13

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explanation of the assessee was found to be true, no further addition was to be

made and if the explanation of the assessee was found to be not correct, then the

addition of Rs. 10,05,000 made by the Assessing Officer stood enhanced to Rs.

12,05,000/-.

the action of the appellate authority to verify the source of Rs 2,00,000/- which was

accepted during the assessment proceedings is highly vitiated and prejudicial and

the appellate authority ought to have found that this aspect was properly explained

before the assessing authority and he was convinced on the explanation of the

assessee. The direction to the assessing authority to verify this again is highly

inappropriate.

assessee has not placed necessary evidence to show that the assessee was having

sufficient funds to introduce additional capital of Rs. 2 lakhs in the assessment year

under consideration. The assessee explained the source of Rs. 2 lakhs as

withdrawals in earlier years, but there was no explanation for the time gap between

the earlier years withdrawals and the introduction of credits to the assessee’s books

of accounts. It is to be presumed that the assessee must have spent away the

withdrawals. As held by the Jurisdictional High Court in the case of Daniel vs. CIT 14

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(43 ITR 117). Since the assessee failed to substantiate the introduction of capital of

Rs. 2 lakhs with supporting evidence, we are of the opinion that the CIT(A) is

justified in enhancing the assessment by Rs.2 lakhs which was claimed as past

savings. Thus, this ground of appeal of the assessee is dismissed.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 26th November ,2019 GJ Copy to: 1. Shri Phinu Thomas, Puthiyidathu, Uzhavoor, Kottayam. 2. The Income Tax Officer, Ward-3, Kottayam. 3. The Commissioner of Income-tax(Appeals), Kottayam. 3. The Pr. Commissioner of Income-tax, Kottayam. 4. D.R., I.T.A.T., Cochin Bench, Cochin. 5. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin

I.T.A. No. 316/Coch/2018