SUBBAN SIVAKUMAR,COIMBATORE vs. ACIT, NCC-2,, COIMBATORE

Aforesaid appeal by assessee for Assessment Year (AY) 2022-23 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 07-08-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 16-03-2024. The grievance of the assessee is two-fold i.e., (i) Confirmation of addition of Rs.58.83 Crores u/s 69A; (ii) Addition of interest income for Rs.1.98 Crores.

The Ld. AR advanced arguments with the support of documents on record and made various submissions. The Ld. CIT-DR also advanced arguments supporting the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident individual is stated to be engaged in money-lending business. The assessee admitted interest income of Rs.40.73 Lacs as Business income. The assessee opted for presumptive taxation scheme u/s 44AD. Upon perusal of return of income, it was noted by Ld. AO that the assessee reflected debtors of Rs.82.88 Crores which were stated to be sourced out of repayment of pre-existing loan installments. It was submitted that the assessee collected loan installments of Rs.77.66 Crores which was extended as fresh loans during the year. In support, the assessee furnished bank statements and complete details of sundry debtors and movement in each of the debtor during the year. 3.2 However, Ld. AO rejected the explanation as furnished by the assessee. It was noted by Ld. AO that in AY 2021-22, the assessee reflected debtors at ‘Nil’ whereas in this year, opening debtors were shown aS Rs.22.62 Crores. The assessee could not produce documentary evidences like loan agreement, promissory notes or affidavit of these debtors. 3.3 The assessee also produced list of about 13000 sundry creditors from whom the assessee received money to the tune of Rs.4.49 Crores. The opening balance of creditors was reflected as Rs.22.55 Crores. All thee creditors had given loans for amount below Rs.20,000/- allegedly to avoid penal consequences of Sec.269SS. 3.4 In the above background, Ld. AO alleged that the assessee was rotating his own unaccounted money through various bank accounts to carry out money-lending business and merely taking shelter of the provisions of Sec.44AD. The Ld. AO worked out interest rate of 18% for previous year and based on the interest income reflected in earlier year, concluded that the assessee would have funds or capital to the tune of Rs.6.01 Crores. Further, loans in money lending business were short term for 3-4 months which would mean that the capital would be rotated for 3-4 times during the year. Assuming rotation of 4 times, the assessee would have funds to the extent of Rs.24.05 Crores as against debtors of Rs.82.88 Crores as reflected by the assessee. The differential of the two i.e., Rs.58.83 Crores was added as unexplained money u/s 69A of the Act. 3.5 The Ld. AO also proceeded to estimate the income of the assessee considering debtors of Rs.82.88 Crores assuming interest rate of 18%. The same would translate into interest income of Rs.14.92 Crores. The assessee reflected gross receipts of Rs.1.69 Crores which would mean that the receipts to the tune of Rs.13.22 Crores were suppressed by the assessee. By applying estimated interest rate of 24%, the assessee would have earned income of Rs.317.34 Lacs. After reducing the profit of Rs.40.73 Lacs as already offered by the assessee, the undisclosed profit was estimated at Rs.276.61 Lacs which was also added as undisclosed profits. Aggrieved, the assessee preferred first appeal against the same.