SRI.THEJAL VASUDEVAN,TRICHUR vs. THE ITO, COCHIN

Per George George K., JM

This appeal at the instance of the assessee is directed against order of the Commissioner of Income-tax (Appeals) dated 18.11.2015. The relevant assessment year is 2010- 2011.

2.1 The assessee an individual, is working as a Director in HMGT (India) Tours and Travels Private Limited. For the assessment year 2010-2011, the return of income was filed by the assessee on 28.07.2010 declaring a total income of Rs.5,60,871. The assessment was completed u/s 143(3) of the Income-tax Act, 1961, vide order dated 26.03.2013. In the

ITA No.121/Coch/2016. 2 Sri.Thejal Vasudevan. assessment completed, the Assessing Officer had made the following additions:-

(i) Unexplained amount on Google charges Rs.10,13,430 (ii) Unexplained investment in SBT Rs.15,10,000 (iii) Unexplained investment in the statement Rs.19,73,310

(i) Unexplained amount on Google charges Rs. 8,36,430 (ii) Unexplained investment in SBT Rs.15,10,000 (iii) Unexplained investment in the statement Rs.13,79,710

ITA No.121/Coch/2016. 3 Sri.Thejal Vasudevan. 5. The learned Departmental Representative, on the other hand, supported the order of the Assessing Officer and the CIT(A).

Unexplained amount on account of Google charges

6.1 The Assessing Officer had made an addition of Rs.10,13,430. The observation of the Assessing Officer in making the addition, reads as follow:-

“In the cash flow statement furnished, assessee was in receipt of Rs.16,19,664/- being google charges accounted by M/s.HMGT India Tours & Travels P.Ltd. against which he spent money from his own pocket to promote tourism business, assessee has produced copy of ledger wherein an amount of Rs.6,10,802/- was given by M/s. HMGT India Tours & Travels P.Ltd. Authorized Representative has not been substantiated any proof with satisfactory explanation for funds accumulated by the assessee though his known source to repay loans received is only income from salary. Hence Rs.10,13,430/- is added as unexplained investment of the assessee and added to returned income.”

6.2 The CIT(A) confirmed the addition made by the assessee to the extent of Rs.8,36,430. The relevant finding of the CIT(A) in confirming the addition to Rs.8,36,430 reads as follow:-

“4.4 The appellant on the other hand has denied that there was receipt of Rs.16,19,664/- in this account and has produced copy of the account showing the total amount under Google charges at Rs.6,67,336/-. As a matter of fact the assessing

ITA No.121/Coch/2016. 4 Sri.Thejal Vasudevan. officer has elaborated upon the credit card in ICICI Bank Ltd. vide account no.4477474100232001 where the credit appears at Rs.16,24,232/-. The appellant has filed the statement of credit card where cash payment is shown to be received at Branch periodically, which is seen as under:-

30.05.2009 Rs.1,68,250 30.06.2009 Rs.1,16,600 01.08.2009 Rs.1,30,000 20.08.2009 Rs.1,43,700 29.09.2009 Rs. 61,000 08.10.2009 Rs.1,07,645 14.10.2009 Rs. 5,000 03.11.2009 Rs.1,43,150 30.11.2009 Rs.1,86,507 12.01.2010 Rs.1,36,510 15.02.2010 Rs.1,57,250 12.03.2010 Rs. 91,626 -------------------- Rs.14,47,232 --------------------

Thus the cash deposits amounts to Rs.14,47,232/- which is paid against the credit taken by way of using the credit cards. This shows that the assessing officer has arrived at the correct conclusion that if the source of income in the hands of the assessee is only salary, where from the cash deposits have been made, over and above the amounts reimbursed by the company to the extent of Rs.6,10,802/-. This anomaly, between the sources of income and the monies put into deposit has not been explained even during the course of appeal proceedings. But the total cash deposit reflected in the credit card statement is Rs.14,47,232/- and, after considering that an amount of Rs.6,10,802/- has been reimbursed by the company, the balance sum of Rs.8,36,430/- is treated as unexplained investments. Accordingly, addition to the extent of Rs.8,36,430/- is upheld.”

ITA No.121/Coch/2016. 5 Sri.Thejal Vasudevan.

6.3 We have heard the rival submissions and perused the material on record. The assessee is a Director of M/s.HMGT (India) Tours and Travels Private Limited. The assessee had used his credit card for making payments on behalf of the private limited company. The expenses incurred by the assessee by using his credit card on behalf of the company, was reimbursed by the private limited company. The Assessing Officer reduced the reimbursement made by the private limited company from the total credit expenditure incurred by the assessee and the difference was considered as unexplained investment. The CIT(A) examined the cash deposits and after considering the reimbursement received by the assessee from the company, the balance was treated as unexplained investments. We find the issue has not been properly dealt by the Assessing Officer. The Assessing Officer ought to have considered the source of deposit which had facilitated the credit card payments of the assessee (whether the expenditure is incurred on his behalf or on behalf of the company). Since there is faulty examination of the issue, in the interest of justice, we are of the view that the matter needs to be examined by the Assessing Officer afresh. The A.O. shall examine whether there was source for the deposits which had facilitated the credit card payments. The A.O. shall expeditiously dispose of the matter after affording a reasonable opportunity of hearing to the assessee. Hence, ground No.2 is allowed for statistical purposes.

ITA No.121/Coch/2016. 6 Sri.Thejal Vasudevan. Unexplained deposit with SBT

7.1 The Assessing Officer had made an addition of Rs.15,10,000 being deposit with SBT. The A.O. in making the above addition, observed as under:-

“Out of total credit of Rs.17,20,000/- in the Kadavanthra branch of SBT, an amount of Rs.2,10,000/- being the salary received by the assessee and it is also stated in the sworn statement that an amount of Rs.13,00,000/- refunded by seller and seen credited by Kadavanthra branch of SBT on 24/10/2013 were not proved to be genuine in the absence of production of material evidences. Therefore, it is understood that amount shown in the account, explanation made by the authorized representative is not satisfactory being excess amount of Rs.15,10,000/- seen credited in the bank account maintained by the assessee. Hence Rs.15,10,000 is added to the returned income being unexplained investment of the assessee.”

7.2 On further appeal, the CIT(A) confirmed the addition made by the Assessing Officer. The relevant finding of the CIT(A) reads as under:-

“This explanation is apparently flawed argument because in any housing loan, where bank makes the payment directly to the seller, the same is based on the consideration as per agreement and the deed. In such case, any refund out of the sanctioned loan amount to the buyer, is a non existent probability. The assessing officer has also mentioned that the contentions raised by the assessee were not supported with any material evidence. Thus, not finding the explanation satisfactory; the assessing officer has given consideration to a sum of

ITA No.121/Coch/2016. 7 Sri.Thejal Vasudevan. Rs.2,10,000/- as the amount of salary received by the assessee, out of total credit of Rs.17,20,000/- appearing in the Kadavanthra branch of SBT, and added a sum of Rs.15,10,000/- as unexplained investment of the assessee. Accordingly, the addition made by the assessing officer is upheld and appeal on this ground is dismissed.”

7.3 We have heard the rival submissions and perused the material on record. It was submitted before the Tribunal, that out of total addition of Rs.15,10,000, credit of Rs.13,00,000 should be granted. It was stated that the assessee had purchased a property from Sri Joe Joseph Anthraper and Smt.Bindu Joe Anthraper. It was stated that the assessee had made cheque payment to them for a sum of Rs.13,00,000 from his bank account with ICICI Bank on 23.02.2010. Since an equal amount was paid by IDBI Bank from where the assessee had availed a loan, the excess amount of Rs.13 lakh was paid back to the assessee and same was credited in SBT on the very next day, i.e., on 24.02.2010. The assessee has furnished the bank statement of ICICI Bank from where the amounts were paid to the seller of the property, viz. Sri Joe Joseph Anthraper. The assessee’s bank account with SBT was also produced where the credit of Rs.13 lakh is seen. The credit of Rs.13 lakh is cheque payment and same is drawn from Kotak Bank. The assessee has also furnished the confirmation letter from Sri Joe Joseph Anthraper and Smt.Bindu Joe Anthraper dated 12.11.2015. In the confirmation letter, Sri Joe Joseph Anthraper and Smt.Bindu Joe Anthraper has confirmed that they have sold a property to

ITA No.121/Coch/2016. 8 Sri.Thejal Vasudevan. the assessee and had received a sum of Rs.13 lakh from the assessee through ICICI Bank cheque No.711474. It was further stated in the confirmation letter that since funds were received from IDBI Bank on behalf of the assessee, Sri Joe Joseph Anthraper had refunded the above sum of Rs.13 lakh on 24.02.2010. For ready reference, the confirmation of the transaction by Sri Joe Joseph Anthraper and Smt.Bindu Joe Anthraper, which is enclosed at page 46 of the paper book is reproduced below:-

“SUB : Confirmation of transaction with Mr.Tejal Vasudevan.

We Sri Joe Joseph Anthraper and Smt.Bindu Joe Anthraper hereby confirm that during the financial year 2009-10, we had sold our property to Mr and Mrs. Tejal Vasudevan as per document number 727/2010 dated 25/02/2010 of ERnakulam SRO. As a part of sale value Mr.Thejal Vasudevan has transferred Rs.13,00,000/- to my account on 23-02- 2010 through ICICI cheque number 711474. Since I had received funds from IDBI bank from the loan of Mr.Thejal Vasudevan, I had refunded the above sum of Rs.13,00,000/- through my Kotak Mahindra Bank cheque no.000003 on 24/02/2010 as the same is in excess of the value as per the document.

Yours faithfully, Sd/- Joe Joseph Anthraper and Bindu Joe Anthraper. Place : Mumbai. Date : 12 Nov 2015.”

7.4 The above confirmation letter of the seller was not considered by the Assessing Officer nor by the CIT(A). In the

ITA No.121/Coch/2016. 9 Sri.Thejal Vasudevan. interest of justice and equity, we are of the view that the matter needs to be considered afresh by the Assessing Officer. The Assessing Officer shall take into account the total sale consideration. The amounts the assessee had paid from his bank account and also from the loan account availed by the assessee. In short, the A.O. shall examine the claim of the assessee that the credit of Rs.13,00,000 in SBT account on 24.02.2010 is actually a refund made by the seller of the property. Therefore, out of Rs.15,10,000 added by the Assessing Officer and confirmed by the CIT(A), to the extent of Rs.2,10,000 is confirmed by us. With regard to Rs.13,00,000, as mentioned earlier, the issue is restored to the Assessing Officer to consider whether the claim of the assessee is genuine or not. It is ordered accordingly. Hence ground No.3 is partly allowed for statistical purposes.

Unexplained investment of Rs.19,73,310

8.1 The Assessing Officer had made an addition of Rs.19,73,310 by observing as under:-

“In the sworn statement the assessee explained that to the major credits seen in ICICI Bank Ltd. loan for Rs.15 lakhs received from his father, sale of motor cars to the tune of Rs.7,63,600/- and funds to the tune of Rs.21,10,000/- said to have been being advance from HMGT India Tours & Travels Pvt. Ltd. have not been explained with supporting proof for credit into the ICICI Bank of the said amounts except Rs.15,00,000/- given as loan by his father. The assessee is also failed to produce evidences for receipt of 763,600/- by sale of cars. However, out of

ITA No.121/Coch/2016. 10 Sri.Thejal Vasudevan. rS.490,39,073/- being total credits in the account, after allowing reduction of all expenses mentioned in working total at ‘C’, Rs.29,65,763/- (salary for Rs.5,55,000 + Boinus for Rs.70,000 + loan from father Rs.15,00,000 + and documentation & other expenses Rs.8,40,763/- but excludes Rs.36,50,000/- being part of loan availed from IDBI Bank Ltd.) is treated as unexplained investment by the assessee and added to the income returned.”

8.2 On further appeal, the CIT(A) confirmed an addition of Rs.13,79,710. The relevant finding of the CIT(A) reads as follow:- “6.3(i) As regards the sale of two motor cars, for one of the cars sold for Rs.5,93,600/-, the amount is shown to be received as DD and, the same could be found explained. The remaining sum of Rs.1,70,000/- is treated as unexplained investment.

(ii) As regards the loan taken from the Company to the extent of Rs.21,10,000/-, it has been explained by the appellant that only a sum of Rs.12 lakhs as advance from the company, has been taken by way of bank account.

In view of this, the inference drawn by the assessing officer in para 11 of the order, which compares the cash inflow with the expenses incurred by the assessee, and works out the unexplained investment in the matrix of the cash inflow and outflow is upheld. As such, the difference of Rs.19,73,310/- has been treated as unexplained. Since the issue has been examined as per the cash flow statement, nature of credits have been examined and seen in the context of its genuineness. Accordingly, it is held that the extent of gap between the genuine availability of the fund and that of the expenses incurred, as worked out by the Assessing Officer at Rs.19,73,310/- is upheld as unexplained

ITA No.121/Coch/2016. 11 Sri.Thejal Vasudevan. investment. Accordingly, appeal on this ground is dismissed.”

8.2 We have heard the rival submissions and perused the material on record. The only limited contention that was raised before us was out of total addition of Rs.19,73,310 the CIT(A) had given relief of Rs.5,93,600 and hence the addition should be limited to Rs.13,79,710. Instead it was submitted that the CIT(A) had erroneously confirmed the addition of Rs.19,73,310 in para 10 of the impugned order. The addition of Rs.19,73,310 by the CIT(A) is an error in view of his findings in para 6.3(i) [page 9 of CIT(A)’s order]. The CIT(A) erroneously had not reduced the relief of Rs.5,93,000 granted by him in para 6.3(i) of his order. Accordingly, the addition made by the A.O. is reduced to Rs.13,79,710. No other arguments were raised by the assessee in regard to the addition made by the A.O. amounting to Rs.19,73,310. Hence ground No.4 is partly allowed by restricting the addition to Rs.13,79,710 instead of Rs.19,73,310. It is ordered accordingly.

Order pronounced on this 13th day of March, 2018.

Sd/- Sd/- (Chandra Poojari) (George George K.) ACCOUNTANT MEMBER JUDICIAL MEMBER Cochin ; Dated : 13th March, 2018. Devdas*

ITA No.121/Coch/2016. 12 Sri.Thejal Vasudevan.

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT Kochi. 4. The CIT(A)-II, Kochi. 5. DR, ITAT, Cochin 6. Guard file.

BY ORDER,

(Asstt. Registrar) ITAT, Cochin