PONNAMBALAM THIRUMURUGAN,CHENNAI vs. DCIT, CORPORATE CIRCLE, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) -3, Chennai, dated 27.10.2017 and pertains to assessment year 2014-15.

The only issue arises for consideration is addition of ₹81,22,906/- under Section 68 of the Income-tax Act, 1961 (in short 'the Act').

Shri C.H. Vinobha Gandhi, the Ld.counsel for the assessee, submitted that the assessee is a director in two educational institutions, namely, RLT Academy and Shanthinikethan School. According to the Ld. counsel, the assessee opened separate bank accounts in the name of educational institutions. The assessee has filed documents to comply with KYC norms and the PAN details. According to the Ld. counsel, the students’ fees collected from RLT Academy and Shanthinikethan School were credited in the respective bank account of the school. According to the Ld. counsel, the bank wrongly connected the individual bank account of the assessee instead of the school PAN number. The mistake crept in the bank was admitted by the City Union Bank and the same was intimated to the Assessing Officer. Therefore, according to the Ld. counsel, if at all there was any addition, it has to be made only in the hands of RLT Academy and Shanthinikethan School and definitely not in the hands of the assessee. Therefore, according to the Ld. counsel, the Assessing Officer as well as the CIT(Appeals) are not justified in making addition of ₹81,22,906/- in the hands of the assessee.

On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that the claim of the assessee that the PAN number of the assessee was wrongly connected with school account was examined by the Assessing Officer. In order to verify the claim, according to the Ld. D.R., the Assessing Officer verified the return of income of the school. The school / trust filed the return of income after the prescribed period under Section 139(4) of the Act. In other words, according to the Ld. D.R., the trust / school belatedly filed the returns. The trust / school has not filed any return in the last three years. Therefore, according to the Ld. D.R., the assessee could not establish whether the deposit of ₹81,22,906/- was accounted by the school in their return. In the absence of any material evidence, according to the Ld. D.R., the Assessing Officer made the addition which was rightly confirmed by the CIT(Appeals).

We have considered the rival submissions on either side and perused the relevant material available on record. The case of the assessee right from the Assessing Officer was that the deposits were made in the school account. From the material available on record, it appears that the bank is collecting fees from students directly. The assessee claims that the PAN number of the assessee was wrongly connected with the school account and the fees were credited only in the bank account maintained by the school and not in the name of the assessee. This factual aspect needs to be verified whether the cash credit was made in the account of the assessee or in the account of the school. It also needs to be examined if the amount was credited in the account maintained by the trust or school which is an independent assessable unit and whether the addition can be made under Section 68 of the Act in the hands of the present assessee. Merely because the particular assessee, namely, school or trust has not filed the return of income or filed belatedly the returns, that cannot be a reason to assess the deposit in the hands of the assessee.

In view of the above, the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the entire issue raised by the assessee is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter in the light of the material that may be filed by the assessee and find out whether the credit was found in the bank account of the school or in the bank account of the assessee 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.