MUTHUKUMARASAMY DURAI,CHENNAI vs. ITO NON CORPORATE WARD 7(4), CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -7, Chennai, dated 29.06.2018 and pertains to assessment year 2011-12.

Shri K. Meenakshisundaram, the Ld. representative for the assessee, submitted that there was a cash deposit in the accounts of the assessee with Indian Bank and Axis Bank. According to the Ld. representative, the assessee explained before the Assessing Officer that the assessee received funds from Gokulam Chit Funds being a successful bidder in the chit group. The assessee has claimed that some of the advances received from traders for purchase of tiles was also deposited in the bank accounts. According to the Ld. representative, the Assessing Officer after examining the explanation of the assessee found that a sum of ₹14,75,973/- was unexplained. According to the Ld. representative, the assessee was a subscriber to five high value chits of ₹1,25,000/- for 20 months totalling to ₹25 lakhs. The chit group commenced from 08.03.2010. The first instalment for first group was made on 08.03.2010. According to the Ld. representative, the assessee also joined four more groups in quick succession. Totally the assessee has paid ₹24,51,250/- for five chits before participating in the auction. The Assessing Officer reduced the payment of ₹24,51,250/- from the total auction amount received and found that a sum of ₹68,77,000/- alone was available for making cash deposits into the bank accounts. In fact, the deposit was more than ₹82 lakhs. According to the Ld. representative, the Assessing Officer overlooked the fact that ₹6,82,500/- was paid even before the commencement of the first chit itself, hence, the same should not have been taken as amount spent out of the amount received in chit auction.

Shri K. Meenakshisundaram, the Ld. representative for the assessee further submitted that an income of ₹6,63,013/- was shown under the head ‘business’ under Section 44AD of the Income-tax Act, 1961 (in short 'the Act') in retail trading in tiles. Therefore, the above said sum of ₹6,82,500/- has not been invested out of chit auction amount, but, out of the own funds and advances received from traders. According to the Ld. representative, these fact were not considered by both the authorities below.

I heard Shri Sanath Kumar Raha, the Ld. Departmental Representative also. The assessee claims that the chit amount received was used as source for deposits in the bank accounts. It is not known whether Gokulam Chit Fund, the finance company paid the amount by cash to the assessee or through banking channel. More than ₹82 lakhs were said to be deposited in the bank accounts and the assessee claims that ₹68,77,000/- was received from Gokulam Chit Fund. It is not known how Gokulam Chit Fund paid ₹68,77,000/- by cash to the assessee. These facts were not brought on record either by the Assessing Officer or by the CIT(Appeals). Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside. The Assessing Officer shall re-examine the matter on the basis of the material that may be filed by the assessee. The Assessing Officer shall bring on record how the assessee paid the subscription to five chits. It is also to be brought on record how Gokulam Chit Fund paid the chit amount to the assessee either by cash or through banking channel and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes.