MRS. RAJNI MADAN,BHOPAL vs. THE ITO 3(2), BHOPAL

आदेश /O R D E R

PER O.P. MEENA, ACCOUTANT MEMEBR. This appeal filed by the assessee is directed against the order of Learned Commissioner of Income-tax (Appeals)-II, Bhopal [in short “the CIT (A)”] dated 20-12-2013 pertaining to Assessment Year 2009- 10, which in turn has arisen from the order dated 19-12-2010 passed by the ITO 3(2) Bhopal (in short “the AO”) under section 143 (3) of Income Tax Act, 1961 (in short ‘the Act’). The assessee has taken following grounds of appeal:- 1. The Ld. CIT (A) has erred in maintaining the addition of Rs. 40,00,000/- paid on account of purchase of house.

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 2 of 8

1.1. It was proved before the lower authorities about the

source of the said money, which is paid through the bank

cheques and mentioned in the registered transfer document. 1.2. The addition of Rs. 40,00,000/- may please be deleted. 2. The Ld. CIT (A) has erred in maintaining the addition of Rs.

39,82,000/- being paid to son Shri Ashok Madan.

2.1 It was proved before the lower authorities that the source of

money raised through bank loans and as such, the source was

totally explained. 2.2 The addition of Rs.39,82,000/- may please be deleted.

lakhs being amount paid for purchase of house and Rs. 39.82

Lakh as unexplained unsecured loans taken by the assessee.

These are being considered together.

authorities are that the assessee is individual derives income from

salary from Ujala Electrical Ltd. and interest income. The assessee

filed return of income on 30-07-2009 declaring total income of Rs.

3,52,048/-. The AIR information reflected that the assessee had

purchased a immovable property during the year. Therefore, the

assessee was asked to submit copy of registry and relevant

document. On verification, these documents , the AO noticed that

the assessee has purchased Plot No. 258, Sector-II, Shakti Nagar,

Bhopal, is situated next to the property of the assessee`s son which

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 3 of 8

are the residential unit of whole of the Madan family, and the

assessee has purchased the same from M/s. Oxford Cables and

Metals Pvt.(in short OCMPL) The Shri Neeraj Thakur, the so-called

director of OCMPL, signs the registered deed on 16.03.2009. The AO

issued summons to Shri Neeraj Thakur to attend his office on

26.12.2011 with complete details of sale and purchase of immovable

property, but failed to attend nor furnished any reasons for non-

attendance. Therefore, Inspector was deputed to search Shri Neeraj

Thakur. On 28-12-2011, the Inspector has submitted a report that

Shri Neeraj Thakur is merely an employee to the firm M/s. Ujala

Electricals of Shri V. K. Madan and he is residing at Shanti Niketan,

Govindpura, Bhopal. On enquiry, Shri Neeraj Thakur does not recall

his connection with M/s. OCMPL and possession of said property

Plot No. 258, Sector –II, Shakti Nagar, Bhopal. As per Central

Excise Department survey carried out in year 2008, also submitted a

report that there was no business being carried out at the premises

of M/s. OCMPL and the said company has not taken even electricity

connection. This company was located in the same complex where

M/s. VKM Electrical Ltd. of Shri V.K. Madan is reported to have been

running. The AO observed that as per Central Excise Department

report M/s. Oxford Cables and Metals Pvt. Ltd. is a totally bogus

company established by V. K. Madan in order to pass entries. In

view of these facts, the AO held that the Plot No. 258 , is a benami

property of Shri V. K, Madan and Smt. Rajani Madan Registered in

the name of M/s. OCMPL in whom Shri Neeraj Thakur has been

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 4 of 8

made as a director of the said company. The AO also found that the

assessee has took loan of Rs. 40 Lakh to purchase this property from

HDFC Bank. This amount has been credited to ICICI Bank account

of M/s. OCMPL from where, this amount transferred to M/s. VKM

Electricals and M/s. Ujala Electricals Ltd.. From where the said

amount was, credited back to the account of Smt. Rajani Madan and

same has been given to Shri Ashish Madan as unsecured loan. In

turn, Shri Ashish Madan has credited back the same amount in the

account of M/s. OCMPL. Thus, this transaction clearly established

nexus of fake companies. The AO has allowed various opportunity to

prove genuineness of transfer of the property but failed to

substantiate by documentary evidence. Hence, the AO treated the

investment of Rs. 40 Lakh as unexplained investment under section

69C of the Act. The AO further made an addition of Rs. 39, 82,000/-

on account of unsecured loan given to Shri Ashish Madan. The

source of assessee`s income is only salary of Rs. 3,52,052/- from

Ujala Electricals. Therefore, the AO concluded that deposit made in

her account were from unexplained sources as the creditworthiness

and genuineness was not established.

(A). During the course of appellate proceedings, the same

submissions were reiterated which have been reproduced by the ld.

CIT (A) in his order. The Ld. CIT (A) observed that M/s. OCMPL has

three shareholder namely Shri Anil Sheth, Ramesh Yeli and Shri

Neeraj Thakur. Shri Ashish Madan, son of the assessee, is also

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 5 of 8

Managing Director whereas Shri Neeraj Thakur is director of the said

OCMPL. In the search carried out on 05.12.2008 by Central Excise,

it was found that the assessee without electricity connection carrying

out some manufacturing activity of aluminum wires, however, said

company was failed to record the accounting receipts of input and

furnished goods. Further, Shri V. K. Madan was operating the bank

account. Thus, it shows that dubious circuitous fund flow mostly in

cash. The Ld. CIT (A) also noticed that the said OCMPL had disclosed

unsecured loans of Rs. 1.35 crores and share application money in

the name of 200 individuals. The Ld. CIT (A) had held that the so-

called director of M/s. OCMPL are dummy director and are

employees of the assessee group companies/ firms. This was

apparent from the statement recorded by Central Excise authorities

of these persons. Considering, these facts, the addition of Rs. 40

Lakh and Rs. 39.82 lakhs were came to be confirmed.

Tribunal. Before us, the Ld. A.R. submitted that various cheques as

mentioned in registered document by Shri Ashish Madan, which was

returned back to him by cheque of HDFC on 31.03.2009, made the

payment of Rs. 40 Lakh. The assessee has raised a loan from ICICI

bank. Thus, all transactions are routed through banking channels.

The assessee also received substantial amount from her son Shri

Manish Madan who is settled in Australia which was also through

cheques. The AO made addition of Rs. 40 lakhs under section 69C

and Rs. 39.82 lakhs as unsecured loan from unexplained sources.

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 6 of 8

However, the AO made remarks that Shri Neeraj Thakur is merely an

employee of the firm of Shri V. K Madan and no business activity

found during excise survey. All these remarks were irrelevant for

framing assessment of the assessee. With regard to addition of

Rs.39.82 Lakh, the AO did not bother to look in to the details filed by

the assessee and submissions made before him. He gave undue

importance for the extraneous event about survey of the Central

Excise, which has nothing to do with the case of the assessee.

Therefore, it was contended that there is direct evidence of payments

made by cheques through banking channel and loan taken as

repayment made by the assessee. Hence, no addition is called for.

has been signed by Shri Neeraj Thakur , so called director who has

avoided his presence before the AO whereas the Inspector of

Department has find out that he is merely an employee of Shri VK

Madan and does not have any connection with M/s. OCMPL.

Further, the AO had found that the amount of loan taken and repaid

has been circuitously routed through bank account of various family

members, whereas the assessee is merely a salaried employee

drawing salary of Rs. 3.5 Lakh per annum only. Further, the

assessee has failed to produce necessary evidence and avail the

opportunity of being heard allowed to her. Nor she had filed any

evidence in her support to disprove the findings recorded by Central

Excise Authorities during survey. Therefore, it was contended that

transaction is not genuine; hence, the lower authorities were justified

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 7 of 8

in making the addition of Rs. 40 Lakh and Rs. 39.82 lakhs in the

case of the assessee.

have perused the material available on record. We find that the sole

signatory of registered document Shri Neeraj Thakur has failed to

appear before the AO to verify the genuineness of transfer of Plot No.

258 of Shakti Nagar. Whereas, as per report submitted by the

Inspector of Department, he is merely an employee of Shri V. K

Madan. Shri Neeraj Thakur has also denied having any connection

with M/s. OCMPL. Further, we find that the transaction of loans

have travelled through banking channel by taking various circuitous

routes, which has not been properly examined to establish the

genuineness of transaction. Further, survey proceedings undertaken

by the Central Excise have revealed that no business activity were

carried out by the M/s. OCMPL. It is also noticed from the

statement dtd. 30.04.2009 of Shri Anil Sethi that he does not have

any connection with M/s. OCMPL, M/s. VKM and is not holding any

directorial position. Further Shri Ramesh Yeli and Shri Neeraj

Thakur were found to be working as accountant only. We also

noticed that the Ld. A.R. of the assessee submitted that the AO has

failed to look in to the evidence produced before him and

submissions made by the assessee. In view of these facts and

circumstances, we are of the considered opinion that the entire issue

of addition of Rs. 40 Lakh as well as Rs. 39.82 Lakhs is required to

be revisited by the AO. Therefore, in exercise of power conferred

Smt. Rajani Madan vs. ITO 3(2) Bhopal / I.T.A. No.199/Ind/2014/A.Y.:09-10 Page 8 of 8

under Rule 28 of Tribunal Rules, we restore this appeal to the file of

Ld. AO for allowing proper opportunity of being heard in accordance

with law. Nevertheless, to mention that the assessee will produce

Shri Neeraj Thakur, Shri Anil Sethi and Shri Ramesh Yeli before the

AO for examination. The assessee would also produce the copies of

all bank accounts, which are relevant to explain the circuitous

transaction routed through various banks and concerns and as

required by the AO. The AO will examine the genuineness and legal

existence of M/s. OCMPL and the loan transaction undertaken by

the assessee. Nevertheless, to mention that the assessee will

cooperate in the assessment proceedings and file necessary

evidences on which he wants to rely upon. Accordingly, we restore

both the issues for fresh adjudication to be made de-novo

assessment the file of the Assessing Officer with the direction that

the assessee be afforded proper opportunity to present her case as

well as the assessee is to extend all possible cooperation in the

disposal of the case.

Sd/- Sd/-

(सी.एम.गग�)/(C.M. GARG) ( ओ.पी.मीना) /(O.P.MEENA) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

Dated: 20th March, 2017/op