LAKSHMI VALLABH SHARMA,SALEM vs. ITO WARD 1(2), SALEM

These are the appeals filed by the assessees viz., Shri Bhawarlal Sharma, Shri Vimal Kumar Sharma & Shri Laxmi Vallabh Sharma against the Orders of the Commissioner of Income Tax (Appeals), Salem, in Appeal Nos.119/2017-18, 120/2017-18 & 122/2017-18 dated 08.02.2019 for the AY 2015-16.

Mr. R.Clement Ramesh Kumar, Addl.CIT, represented on behalf of the Revenue and Mr.R.Raghunathan, FCA, represented on behalf of the assessee.

It was submitted by the Ld.AR that the assessees were originally not having taxable income. During the relevant AY, as the assessees had generated taxable income, the assessees had filed returns for the first time. It was a submission that the AO did not accept the opening capital balance as disclosed by the assessees and had consequently, treated the same as unexplained cash credits and added to the returned income of the assessees. It was a submission that on appeal, the Ld.CIT(A) had also dismissed the assessee’s appeals on the ground that the assessees could not provide any concrete proof to establish the source for the opening capital. It was a submission that as the assessees had adequate opening capital and the same was supported by balance sheet and P&L A/c as -1009/Chny/2019 :- 3 -:

In reply, the Ld.DR submitted that during the demonetization time, the assessees had deposited the amounts in the case of Shri Bhawarlal Sharma (HUF) to an extent of Rs.13,32,000/- Shri Vimal Kumar Sharma (HUF) to an extent of Rs.13,49,000/- and in the case of Shri Laxmi Vallabh Sharma (HUF) to an extent of Rs.13,77,000/-. When the same was questioned, all the assessees had come up with the explanation that they were doing money lending activities and that they do not have taxable income during the earlier years but had generated taxable income during the relevant AY and therefore, had filed their returns. It was a submission that the AO had disbelieved the assessee’s claims as the assessees were not registered under the Tamil Nadu Moneylenders Act, 1957. It was a further submission that the assessees had also argued that the incomes of the assessees during the earlier years were below the taxable limit and therefore, no returns had been filed. It was a submission that if the incomes of the assessees were below taxable limit, then the funds would have been used for their household expenses itself and there would be no funds available for accretion to the capital as has been claimed. It was a further submission that a perusal of the balance sheet and P&L A/c of the parties produced clearly showed that there were no drawings or minimal drawings which could not have sustained a family -1009/Chny/2019 :- 4 -:

We have considered the rival submissions.

A perusal of the Paper Book filed by the assessees clearly shows that the assessees have given confirmation letters obtained from various persons who claimed to have received money from them. It is noticed that the AO has not examined these persons at all. Further, the assessees shown to have paid salaries, the same has also not been examined by the AO. The AO has also not considered the applicability of the provisions of Sec.269SS & 269T and so on and so forth in respect of the cash transactions. A perusal of the Paper Book clearly shows that the assessees have received cash amounting to Rs.20,000/- and more during various dates. The AO seems to have disbelieved the statement of the assessees without doing any detailed examination. This is not permissible. This being so, the issues in these appeals are restored to the file of the AO for re-adjudication. The AO shall be at liberty to call for the production of the debtors for verification. The confirmation letters are also notice to be identical and it also does not talk of rate of interest or the -1009/Chny/2019 :- 5 -:

In the result, appeals filed by the assessees are partly allowed for statistical purposes.