SHRI T.CHINNADURAI vs. THE INCOME TAX OFFICER

TCA.No.34 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 08.03.2021 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MS.JUSTICE R.N.MANJULA Tax Case Appeal No.34 of 2019 Shri.T.Chinnadurai ...Appellant Vs The Income Tax Officer, Non Corporate Ward - 15(1), Chennai. ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 10.07.2018 in I.T.A.No.1426/Chny/2017 passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai for the assessment year 2012-13. For Appellant : Mr.A.S.Sriraman For Respondent : Mr.J.Narayanasamy, SSC JUDGMENT (Delivered by

T.S.SIVAGNANAM

,J ) This appeal, filed by the assessee under Section 260A of the Income Tax Act, 1961 (for short, the Act), is directed against the order dated 1/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 10.07.2018 in I.T.A.No.1426/Chny/2017 passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai ('the Tribunal' for brevity) for the assessment year 2012-13. 2. The appeal was admitted on 18.01.2019 to decide the following substantial questions of law: "1. Whether the provisions of Section 68 of the Act would empower the respondent/the Assessing Officer to go into the source of the capital credited in compiling the financial statements of the earlier Assessment Years and filed along wi th the respective returns of income within the prescribed time limit under the statute in finalizing the assessment of the subsequent year, namely, the Assessment Year under consideration for making the addition of the opening capital taken from the initial earlier Assessment Year i.e., 2002-03 as unexplained with a view to tax such sum in the computation of taxable total income? and 2. Whether the Appellate Tribunal is correct in sustaining the assessment of the opening capital as on 1.4.2003 in the assessment order for 2/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 the Assessment Year 2012-13 despite the production of complete details of the capital account maintained right from 1.4.2003, which proved the perversity in recording the findings of facts?" 3. We have elaborately heard Mr.A.S.Sriraman, learned counsel appearing for the appellant-assessee and Mr.J.Narayanasamy, learned Senior Standing Counsel appearing for the respondent-Revenue 4. The only issue which falls for consideration is whether the Tribunal was right in reversing the findings rendered by the Commissioner of Income Tax (Appeals) [CIT(A)], in respect of a sum of Rs.1,02,06,929/-, which was treated as unexplained cash credit. 5. The Assessing Officer had completed the assessment under Section 143(3) of the Act by order dated 30.03.2015 holding that the assessee has failed to substantiate that the capital amount of Rs.1,02,06,929/- has not been actually accrued in the year in which it was shown as capital for the first time in the balance sheet for the financial year 3/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 FY 2011-12. Therefore, the Assessing Officer proceeded to hold that there is nothing to automatically presume that the said sum was actually available in the earlier period as sought to be claimed by the assessee. Thus, on account of inability of the assessee to identify the source and quantify the amount of capital on the basis of substantiative fact, the said amount was treated as unexplained credit and assessed to tax under Section 68 of the Act. 6. The assessee preferred appeal before the CIT(A), who found the case of the assessee to be acceptable and accordingly deleted the addition. The CIT(A) held that the foremost thing that is to be noted is whether the said amount was ever introduced in the form of cash in the books of accounts of the assessee during the relevant year under consideration and whether it was deposited in the bank account of the appellant in that relevant year. Taking note of this fact, the CIT(A) observed that if the same is not there, then the taxability of something which is not existing does not arise. Further, the CIT(A) held that as the balance sheet was drawn for the purpose of bank loan, the capital formulation in the balance sheet was based on the assets and liabilities held by the assessee prior to the relevant assessment year under consideration. Thus, the CIT(A) 4/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 held that the balance sheet may not present exact and correct facts and figures. Therefore, any reliance on these facts and figures would result in incorrect assessment of taxable income. Therefore, the CIT(A) concluded that there was no unexplained cash credit available with the assessee during the year under consideration and the same could have been taxed under Section 68 of the Act. 7. The Revenue preferred appeal as against the said finding before the Tribunal as well with regard to other issues, which was held in favour of the assessee. The Tribunal accepted the stand taken by the Revenue and in fact agreed with the observation made by the Assessing Officer that the assessee was unable to substantiate before the Assessing Officer through any evidence that the sum of Rs.1,02,06,929/- represented cash in hand, value of food grain stock and value of agricultural produce. Aggrieved by such finding, the assessee is before us by way of this appeal. 8. The argument of the Revenue before us is that the order passed by the CIT(A) is absolutely devoid of any reasons and the CIT(A) has merely accepted the stand taken by the assessee without discussing the 5/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 correctness of the stand taken by the assessee and whether the assessee was able to establish that there was no unexplained cash credit. 9. On a perusal of the appeal papers filed before the CIT(A), we find that it may not be a case where the assessee has not produced any proof to substantiate their stand. In fact, in the appeal, they have stated that the sum of Rs.1,02,06,929/- was not introduced by the assessee either in the form of cash or bank during the previous year relevant to the assessment year 2012-13. In this regard, a working was given as to how a sum of Rs.1,18,42,598/- has been arrived at as opening capital of the assessee for the assessment year 2003-04. It was further stated that out of the sum of Rs.1,18,42,598/-, which represents the opening balance, the land holdings at cost and the bank balance as on 31.03.2003 were reduced to arrive at the sum of Rs.1,02,06,929/- for invoking the provisions of Section 68 of the Act. Further, it was stated that the alleged cash credit treated as unexplained under Section 68 does not belong to the year in question, but relates to the assessment year 2004-05 and the statutory presumption that the said sum is treated as income of the previous year is not factually applicable. 6/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 10. The assessee produced a photostat copy of the return of income filed by it for all the assessment years i.e., from 2003-04 to 2010-11 along with computation of income for all the years in the form of annexure to the written submissions. The appellant also submitted photostat copies of the bank statements starting from 01.04.2002 to 31.03.2010 as annexures along with the written submissions. These facts appear to have weighed in the mind of the CIT(A) for granting relief to the assessee. The Revenue alleged in paragraph 16 of the order of CIT(A) dated 15.02.2017, sufficient reasons have not been recorded. But, the Revenue would not be right in contending that the assessee never offered an explanation in spite of this alleged cash credit. Probably, if the CIT(A) had recorded its opinion upon perusal of the records placed in the form of annexures, in all probabilities, the Revenue would have been on appeal before us and not the assessee. 11. In any event, considering the fact that the assessee is an individual and also taking note of the fact that there is an explanation offered by the assessee, this Court is of the view that the matter can be remanded back to the CIT(A) for fresh consideration of the explanation offered by the assessee in respect of the alleged cash credit of 7/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 Rs.1,02,06,929/- and pass a speaking order on merits and in accordance with law. 12. For the above reasons, the Tax Case Appeal is allowed and the order passed by the Tribunal is set aside and the matter is remanded back to the CIT(A) for a fresh consideration on the above mentioned issue also. Consequently, the substantial questions of law are left open. No costs. (T.S.S.,J.) (R.N.M.,J.) 08.03.2021 Index: Yes/No Internet:Yes/No hvk 8/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 To 1. The Income Tax Appellate Tribunal, Madras 'C' Bench, Chennai. 2. The Commissioner of Income Tax (Appeals)-15, No.121, Mahatma Gandhi Road, Nungambakkam, Chennai - 600 034. 2. The Income Tax Officer, Non Corporate Ward - 15(1), Chennai. 9/10 https://www.mhc.tn.gov.in/judis/ TCA.No.34 of 2019 T.S.SIVAGNANAM,J AND R.N.MANJULA,J hvk TCA.No.34 of 2019 08.03.2021 10/10 https://www.mhc.tn.gov.in/judis/