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Income Tax Appellate Tribunal, ‘D’ BENCH : CHENNAI
Before: SHRI ABRAHAM P. GEORGE & SHRI DUVVURU RL REDDY]
आदेश / O R D E R
PER BENCH:-
Revenue has filed these appeals with a delay of three days. Condonation petition has been filed. Reason shown for the delay seems to be justified. Ld. Authorised Representative did not raise any serious objection. Delay is condoned. Appeals are admitted.
These appeals arise from assessment orders passed on a 2. group of concerns run by Shri. A.V. Nagarajan who is a functionary of AIADMK, his brother Shri. A.V. Subramanian and their relatives. They are doing varied business like civil contractors, running of crushing units and hiring out earth moving equipments. A search was conducted in the premises of Shri. A.V. Nagarajan, on 05.12.2006.
Simultaneously search/survey operations were also conducted in the premises of close relatives of Shri. A.V. Nagarajan who happened to be partners of concerns named M/s. A.V. Valli Ammal Metals, M/s.
A.V. Valli Ammal construction, M/s. A.V. Valli Ammal lorry services and to 3239 & 3450 to :- 3 -: 3455/Mds/2016.
M/s. A.V. Valli Ammal Malayadi works. Out of these very many concerns, M/s. A.V. Valli Ammal Metals and M/s. A.V. Valli Ammal Malayadi works were proprietorship concerns of Shri. A.V.
Subramanian, brother of Shri. A.V. Nagarajan. M/s. A.V. Valli Ammal Lorry services who is one among the respondents before us is a partnership firm of Shri. A.V. Subramanian and Shri. V. Sivakumar.
Shri. V. Sivakumar is another brother of Shri. A.V.Nagarajan. It seems there were certain other concerns named M/s. A.V. Valli Vinodhini Finance, M/s. AVNK Finance also in the group.
During the course of the search and survey, large number of 3. documents were seized, including unaudited trial Balance of various concerns mentioned in the preceding para. Notices were issued to the respondent assessees u/s.153A /153C of the Income Tax Act, 1961 (in short ‘’the Act’’) for filing of returns. Pursuant to such notices, returns were filed by all the three assessees. Ld. Assessing Officer on verifying the seized records and trial balance found that the records contained debits for political expenses, general expenses, temple expenses, payment under a head called Shri. A.V. Nararaja kanaku varavu suspense account, payment to relatives, expenses incurred for one Shri.K.K. Umadevan a close associate of Shri. A.V. Nagarajan, domestic expenses, purchase of immovable properties, debits in the name of M/s. A.V. Valli Ammal Malayadi works and AVV Metals, to 3239 & 3450 to :- 4 -: 3455/Mds/2016. investment in poclain, marriage expenses of relatives and receipts from certain creditors. Explanation of the assessees were sought for the source of the expenditure, advances and credits in the trial Balances. Submission of the assessees was that political expenditure was met out of donations collected from party cadres and public. As for general expenses, submission of the assessees before the ld. Assessing Officer was that these were made out of earning and contributions from firms. In so far as temple expenses were concerned, explanation of the assessees was that these were met out of sale of firewood trees. Viz-a-viz expenses incurred for Shri.K.K.
Umadevan, submission of the assessees was that these were met as a social obligation. On payments to relatives, submission of the assessees was that these were for business purposes. With regard to suspense account in the name of Shri. A.V. Nagarajan, explanation of the assessees was that it represented money given for safe keeping by village people. Explanations were also given for investment in immovable property and marriage expense of relatives.
Ld. Assessing Officer did not accept all the explanations 4. given by the assessees. He completed the assessments after making the following additions:- to 3239 & 3450 to :- 5 -: 3455/Mds/2016.
Shri. A.V. Nagarajan:- Assessment Heads of Income Amount (in �) Year 2001-02 Investment in M/s. AV Valli Vinodhini Finance 83,675 2002-03 Political Expenses 12,13,487 Investment in A.V. Valli Vinodhini Finance 2,14,965 2003-04 Political Expenses 7,65,322 General Expenses 1,48,020 Temple Expenses 1,94,371 Expenses incurred for K.K.Umadevan 1,26,500 Expenses of A.V. Valli Malayadi Works (protective) 15,53,925 Expenses of A.V. Valli Metal (protective) 7,81,379 Investment in AV Valli Vinodhini Finance 1,99,485 Investment in AVNK Finance 1,75,000
2004-05 Expenses of A.V. Valli Malayadi Works (protective) 2,27,317 General Expenses 4,19,639 Temple Expenses 15,77,702 Expenses incurred for K.K.Umadevan 2,41,902 Deposits in bank account of relatives 36,302 Investment in Valli Vinodhini Finance 50,000 Investment in AVNK Finance 3,91,000
2005-06 Political Expenses 10,30,160 General Expenses 4,08,798 Expenses of AVV Malayadi Works and A.V. V Metals (protective) 12,91,501 Temple Expenses 58,141 Temple expenses of AVV Metals 31,360 Deposit in bank account of relatives 91,000 Investment in AVNK Finance 30,000
2006-07 Political Expenses 29,64,192 General Expenses 3,28,417 Expenses of AVV Malayadi Works 3,73,831 Temple Expenses 1,86,070 Temples expenses of AVV Metals 92,539 Deposits in bank accounts of relatives 1,08,700
2007-08 General Expenses 2,98,314 Expenses of AVV Malayadi Works 4,84,309 Temple Expenses 2,03,444 Expenses incurred for K.K.Umadevan 4,68,131 Deposits in bank accounts of relatives 1,70,200 to 3239 & 3450 to :- 6 -: 3455/Mds/2016.
M/s. A.V. Valli Ammal lorry services:-
Assessment Heads of Income Amount (in �) Year 2002-03 Political Expenses 12,13,487 Payment to relatives 50,000
2003-04 Political Expenses 7,65,322 General Expenses 1,48,020 Temple Expenses 1,94,371 Expenses incurred for K.K.Umadevan 1,26,500 A.V. Nagarajan, Suspense A/c. 11,44,024 Payment to relatives 85,000
2004-05 General Expenses 4,19,639 Temple Expenses 15,77,702 Expenses incurred for K.K.Umadevan 2,41,902 A.V. Nagarajan, Suspense A/c. 20,30,714 Sundry Creditors 8,59,300
2005-06 Political Expenses 10,30,160 General Expenses 4,08,798 Temple Expenses 58,141 Payment to relatives 1,72,700 A.V. Nagarajan, Suspense A/c. 14,25,175 Sundry Creditors 1,00,000
2006-07 Political Expenses 29,64,192 General Expenses 3,28,417 Temple Expenses 1,86,070 A.V. Nagarajan, Suspense A/c. 18,32,280 Sundry Creditors 13,50,920
2007-08 General Expenses 2,98,314 Temple Expenses 2,03,444 Expenses incurred for K.K.Umadevan 4,68,131 A.V. Nagarajan, Suspense A/c. 20,60,680 Sundry Creditors 2,00,000 to 3239 & 3450 to :- 7 -: 3455/Mds/2016.
A.V. Subramanian:-
Assessment Heads of Income Amount (in �) Year 2002-03 Investment in immovable properties 3,50,000
2003-04 General Expenses 23,35,304 Domestic Expenses 20,94,696
2004-05 General Expenses 2,27,317 Analysis of bank A/c. of the assessee 93,200 Domestic Expenses 15,50,116 Sundry Creditors 1,60,950
2005-06 General Expenses 12,91,501 Temple Expenses 31,360 Analysis of bank A/c. of the assessee 1,47,950 Domestic Expenses 14,91,090 Sundry Creditors 1,96,055 Investment in poclain 1,25,000
2006-07 Political Expenses 2,11,298 General Expenses 3,73,831 Temple Expenses 92,539 Analysis of bank A/c. of the assessee 4,18,197 Domestic Expenses 22,20,666 Sundry Creditors 16,50,474 Investment in poclain 5,79,000
2007-08 General Expenses 4,84,309 Analysis of bank A/c. of the assessee 2,09,195 Domestic Expenses 26,50,890 Disllowance under marriage expenses of Latha. 1,00,000 Family credits. 9,92,421
Nature of the additions made by the ld. Assessing Officer in the hands of the Shri. A.V.Nagarajan show that, apart from various to 3239 & 3450 to :- 8 -: 3455/Mds/2016.
disallowances, there were additions for unexplained investments in M/s. AV Valli Vinodhini Finance and AVNK Finance. In the case of Shri.
A.V. Subramanian there were additions for domestic expenses, and for credits in the bank account of family members.
It is also noted that political expenditure and administrative 6. expenses were substantively considered in the assessment of M/s.
A.V. Valli Ammal Lorry Services and protectively considered in the hands of Shri. A.V.Nagarajan. Similarly general expenditure and temple expenditure were substantively assessed in the hands of the M/s. A.V. Valli Ammal Lorry Services and protectively in the hands of Shri. A.V.Nagarajan.
Aggrieved, all the three assessees moved in appeal before the ld. Commissioner of Income Tax (Appeals). Before the ld. Commissioner of Income Tax (Appeals) claim of the assessee was that political expenses were met out of money collected from the cadre of AIADMK. Contention of the assessees was that general expenses were in fact lorry expenditure of M/s. A.V. Valli Ammal Lorry Services.
According to the assessees, bank accounts considered for addition were in the name of various relatives namely B. Alamelu, Smt.
Anuradha and A.V. Kasthuri. Temple expenditure as per the assessee were incurred for Kumbabhishekam and met out of collections from to 3239 & 3450 to :- 9 -: 3455/Mds/2016. devotees of Arulmigu Manjanikoothaiyanaar, Arulmigu Muthiah Swamy, Arulmigu Sonaya Swamy Temples at Thirupathur, of which Shri. A.V.
Nararajan was a trustee. Further, as per the assessees they were having sufficient agricultural income for giving advance to Shri.K.K.
Umadevan, meeting domestic expenditure and for marriage of their relatives. Submission of the assessees with regard to M/s. AV Valli Vinodhini Finance and AVNK Finance was that former was a concern run by a women folks of the family and the latter proprietorship of Mrs A V Kasthuri. Viz-a-viz trade creditors explanation of the assessees was that they were all persons having sufficient source. In support of their contentions assessees also submitted a number of documents before the ld. Commissioner of Income Tax (Appeals).
Ld. Commissioner of Income Tax (Appeals) sought a remand 8. report from the ld. Assessing Officer on the various submissions and records produced by the assessee. What was stated by the ld. Assessing Officer in his first remand report dated 10.03.2014 is reproduced hereunder:-
Government of India Income Tax Department Office of the Assistant Commissioner of Income Tax Central Circle II, Madurai Income Tax Staff Quarters Complex, Kulamangalam Raod, to 3239 & 3450 to :- 10 -: 3455/Mds/2016.
Meenambalpuram, Madurai 625 002. Ref: Appeals/ Cent. Cir.II/ MDU/2013-14 Date: 10.03.2014. To The Commissioner of Income Tax (Appeals)-I, Madurai. Sub.: Appeals in the cases of S/Shri A.V. Nagarajan and Shri A.V. Subramanian & others (A.V. Valliammal Group), No.1/51, Sowmiya Narayanapuram, Kattambur Post, Thirupathur Taluk, Sivagangai District -- Asst. years 2001-02 to 2007-08 - Cross-verification with the persons from whom certain amounts were collected by Shri Nagarajan towards political expenses - Submission of report along with copies of statements recorded - regarding Ref.: 1) Letter in 388 to 390, 390A, 391, 392/2008-09 dated 06-1-2013 from the Commissioner of Income -tax(Appeals)- I, Madurai. 2) This Office Report of even no. dated 25-02-2014 Kind reference is solicited to the above.
As directed by the Commissioner (Appeals), Madurai, cross verification with those persons from whom Shri A.V. Nagarajan had stated to have received amounts towards political expenses and by whom affidavits had been filed earlier to the effect that they had so given him those amounts. According to Shri Nagarajan, the money was collected by him from the cadres of All India Anna Dravida Munnetra Kazhagam party who had given it for the development of the party and for helping the poor people belonging to the said Party.
3. For the purpose of making the aforesaid cross verification summons u/s.131 were issued to a few persons appearing in the list of 69 persons on 03-3- 2014 on sample basis directing them to appear before the undersigned on 05-03-2014. In response thereto, thirteen of 69 persons of the said list appeared before the undersigned and showed their identify' proof and also membership card issued by the All India Anna Dravida Munnetra Kazhagam party. Their proof of identity and membership card to 3239 & 3450 to :- 11 -: 3455/Mds/2016.
were verified. Statements were individually recorded from them on 05-03-2014. In their statement, these following 13 persons have stated that as members of the All India Anna Dravida Munnetra Kazhagam party they had given to Shri A.V. Nagarajan an amount [which is mentioned against their name in the list furnished below] during the years ; 2000-01 to 2007- 08, which was collected by them from the party cadres/public On being shown the affidavit furnished in the year 2008, these 13 persons have individually confirmed in their sStatement that it is only they who had given the affidavits in the year : 2008. Copies of proof shown to the undersigned are submitted herewith. List of persons from whom statements were recorded on 05.03.2014.
Sl. Sl. No. of Name of person Total amount given by No the persons form whom the person to Shri. A.V. as ppearing statement was Nagarajan during the in the list recorded on year 2000-01 to 07-08 ( ₹) 05.03.2014 1 23 S. Rajendran 1,16,600 2 34 P. Andiappan 2,64,910 3 35 A. Ganesan 2,60,135 4 36 S. Veluchamy 1,26,000 A. Adaikkalam 5 47 1,26,695 6 57 A. 3,72,170 Palaniapananesan 7 58 P. Ganesan 3,96,175 8 59 A. Subramanian 3,80,000 9 60 P. Durairaj 1,48,130 10 63 P.Murugan 4,21,000 11 65 A. Selvam 3,16,180 12 66 Rama Nagarajan 1,29,935 13 69 N. Mathi Venkatachalam 3,50,000
Yours faithfully, Sd/- (S.M. SURENDRANATH) Assistant Commissioner of Income Tax, Central Circle II, Madurai. Encl: Copies of proof of identity & Membership card. to 3239 & 3450 to :- 12 -: 3455/Mds/2016.
In a second remand report dated 22.05.2014, ld. Assessing Officer stated as under:-
Government of India Income Tax Department Office of the Assistant Commissioner of Income Tax Central Circle II, Madurai Income Tax Staff Quarters Complex, Kulamangalam Raod, Meenambalpuram, Madurai 625 002.
Ref: Appeals/ Cent. Cir.II/ MDU/2013-14 Date: 22.05.2014.
To The Commissioner of Income Tax (Appeals)-I, Madurai. Sir,
Sub: Comments on the written submissions of Shri A.V. Nagarajan and group, No.1/51, Sowmiya Narayanapuram Kattambur Post, Thirupathur Taluk, Sivagangai District – Asst. years 2001-02 to 2007-08 - Submission of –Regarding. Ref: 1) Letter dated 10-4-2014 from the Commissioner of Income-tax(Appeals)-I, Madurai. 2) Reminder-letter dated 02-05-2014 in & 388 to 392A/08-09 from the % the CIT(A)-I,Madurai. 3) This office letter of even no. dated 08-5-2014.
Kind reference is solicited to the above. I submit below my report on the written submissions of the assessees of Shri A.V. Nagarajan & group, which has been called for by the Commissioner(Appeals) vide letters cited under Reference above:- I. In the case of Shri A.V. Subramanian (1) General Expenses:- to 3239 & 3450 to :- 13 -: 3455/Mds/2016.
Asst. Year Amount – ₹
2003-04 23,35,304 2004-05 2,27,317 2005-06 12,91,501 2006-07 3,73,831 2007-2008 4,84,309 Under the head "General Expenses" the above amounts have been disallowed during the course of assessment proceedings on the ground that the expenses were not relatable to business and do not fulfill the requirement of having been incurred wholly and exclusively for the purpose of business. On verification of records, it is found that the expenses incurred and claimed by the assessee are relatable to the nature of business carried on by the assessee and the same has been incurred for the purpose of the business only. (2) Domestic expenses : The Assessing Officer has disallowed the 'domestic expenses as unexplained expenditure u/s.69C as the assessee failed to furnish proper details explaining the nature of expenses incurred and the source for the same. (3) Temple expenses: The AO. has disallowed certain amounts on account of Temple Expenses as unexplained expenditure u/s.69C. However," it is seen that the assessee has furnished evidences in the form of affidavits before the A.O. for collection of donation from the public and the devotees which were spent for the conduct of the 'Kumbabhishekam' of the temple. (4) Sundry creditors: The Assessing Officer has cross-verified the details of creditors and has found that the creditors were not genuine· and the assessee could not furnish proper details supporting the claim of deduction on account of creditors. (5) Analysis of bank account and addition: Since Shri S. Muthukumar, son of Shri A.V; Subramanian, is found to be assessed to tax in PAN: ANVPM1805C by ITO, W-I(2), to 3239 & 3450 to :- 14 -: 3455/Mds/2016.
Karaikudi. Credits appearing in' his account should have been treated as income / receipts in the hands of Shri Muthukumar only, (6) Investment in Pokeline : The A.O. has disallowed an amount of Rs.5,79,OOO/- on the ground that the assessee had no source for the same and that M/s.A V Valliammal Constructions in which the assessee is a partner, did not show any drawings in the, name of the assessee. The assessee has other sources of income like agricultural income and also drawings from other firms in which he is a partner. May kindly be verified. (7) Marriage expenses: Rs.1 lakh - AY: 2007-08 The A.O. has disallowed an amount of Rs.1 lakh for want of proper explanation from the assessee. It is seen that the amount of Rs.1 lakh has been given by Smt. A.V. Valllarnrnal, mother of the assessee at the time of marriage of the assessee's daughter. This is evidenced by the seized material WVS/B&D / S.15 dated 05-12- 2006.
(8) Family credits: The A.O. has disallowed a sum of Rs.9,92,421/- for want of explanation from the individual creditors. But, it is seen that the credits are appearing in the business from the Asst. Year: 1998-99 onwards and are running credits only.
Asst. year: 2006-07 – Undisclosed Income - Rs.8,76,265/- The Assessing Officer has completed the assessment estimating the total Income at Rs.8,76,265/- on the basis of the P&L A/c seized during the course of survey u/s.133A, in which the income of the concern was arrived at Rs.8,76,265/-. However, it is seen that the firm M/s. Valll Ammal Metals has been taken over, by, Shri A.V. Subramariian and the net income of the firm has been returned in the hands of A.V. Subramanian for the AY : 2006-07 in the Return of Income filed by him and has been assessed. III In the case of Shri A.Vs Nagarajan : (1) Political expenses: A detailed report dated 10-3-2014 already submitted by the undersigned on this issue may kindly be perused. (2)General expenses: to 3239 & 3450 to :- 15 -: 3455/Mds/2016.
Under the head "General Expenses" certain amounts have been disallowed during the course of assessment proceedings on the ground that the expenses were not relatable to business and do not fulfill the requirement of having been incurred wholly and exclusively for the purpose of business. On verification of records, it is found that the expenses incurred and claimed by the assessee are relatable to the nature of business carried on by the assessee and the same has been incurred for the purpose of the business only. (3)Temple expenses : The A.O. has disallowed certain amounts on account of Temple Expenses as unexplained expenditure u/s.69C. However,' it is seen that the assessee has furnished evidences in the form of affidavits before the A.O. for collection of donation from the public and the devotees which were spent for the conduct of the 'Kumbabhlshekarn' of the temple.
(4) Money lending business:- The A.O. has made the above addition as unexplained investment and the amount of the interest earned by Smt. Kasthuri, wife of Shri Nagarajan, on the ground that she had no independent source for introduction of capital in the business. It is seen from the records that Smt. Kasthuri has been 'running the business of money-lending out of the capital she got by way of pledging her jewels and has earned interest' income. Since the assessee Shri Nagarajan has nothing to do with the money-lending business and the entire money-lending has been done by his wife as a separate Individual only.
(5)/ Addition in respect of advance made to K.K. Umadevan The A.O. has made additions under this head on account of advances made to Shri K K Umadevan for buying a house and a vehicle, as a social obligation. The A.O. has disallowed the amount of expenditure and made an addition as unexplained expenditure u/s.69C. It is seen from the records that the assessee has offered explanation for the expenses made as amount advanced from the family income. The portion of such income relating to the assessee may be ascertained and the addition to that extent may be sustained. to 3239 & 3450 to :- 16 -: 3455/Mds/2016.
(6) Analysis of bank accounts:- The amounts represent the credit balances available in the name of Shri S. Muthukumar, Smt. B. Alamelu, V. Siva Kumar, Smt. Anuradha and the assessee. The portion of the credit balances relating to the assessee Shri Nagarajan may be taken as income of the assessee and the addition to that extent may be sustained (iv) In the case of Shri. A.V. Sivakumar:- The A.O. has made the addition on the basis of the details of purchase of property as income of the assessee. The assessee is a partner in the family group of business and is also deriving agricultural income which he has admitted in the Returns filed. The source for the purchase of the above property may be verified taking into account other income the assessee Is deriving from his family business and also the agricultural income derived by him
(v) In the case of Shri V. Bharathy : The. assessee is a partner in the group concerns and is also deriving agricultural income. The A.O. has made the addition on the basis of the credits available in the bank accounts. As the assessees are partners deriving share income and are having independent source of agricultural income, the total income on account of bank deposits may be considered taking into account the other incomes admitted in the Returns filed.
VI In the case of A.V. Valliammal Construction: Additions have been made in the case of. A V Valliammal Construction substantively and in the hands of the partners protectively. My comments offered earlier in this report in the case of the partners may kindly be treated as my submissions made in this case also.
VII In the case of A.V. Vallliammal Lorry Service: Additions have been made in the case of A V ValliammaI Lorry Service substantively and in the hands of the partners protectively. My comments offered earlier in this report in the case of the partners may kindly be treated as my submissions made in this case also.
The assessment records obtained from the Office of the CIT(Appeals) are resubmitted herewith. to 3239 & 3450 to :- 17 -: 3455/Mds/2016.
Yours faithfully,
Sd/- [S.M. SURENDRANATH] Assistant Commissioner of Income-tax, Central Circle-H, Madurai. Encl.: as above.
Copy submitted to : The Joint Commissioner of Income Tax, Central Range, Madurai.
Ld. Assessing Officer gave a third remand report on 10.07.2014 and what was stated therein is reproduced hereunder:-
GOVERNMENT OF INDIA INCOME-TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL C1RCLE-II, MADURAI INCOME-TAX STAFF QUARTERS COMPLEX, KULAMANGALAM ROAD MEENAMBALPURAM, MADURAI - 625 002 Ref:Appeas/Cent.Cir.II/MDU/2013-14 Date: 10-07-2014 To The Commissioner of Income-tax (APPEALS- II ), MADURAI.
Sir,
Sub: Appeals filed by the assessees belonging to the group of M/s. .A.V. Valliammal Lorry Service, Kattambur Post, Thirupathur Taluk, Sivagangai District - - Asst. years: 2002-03 to 2007-08 - Submitted – Regarding. Ref.: The CIT(A)' letter in to 412/08-09, dated- 30/06/2014. to 3239 & 3450 to :- 18 -: 3455/Mds/2016.
Kind reference is solicited to the above. The details called for vide letter under reference are submitted as under. As per enclosure. Yours faithfully,
[S.M. SURENDRANATH] Assistant Commissioner of Income-tax, Central Circle-H, Madurai. Encl.: as above.
A.V.Valliammal Lorry Service. ASST YEAR -2002-03. 1.Political Expense: As per my report dated 25/02/2014.Copy enclosed for ready reference 2.Payment to Relative :- An addition of Rs.50,OOO/ has been made on the ground of being the payment made to a relative .
From the copy of trial balance produced, it is seen that the amount has been given as an advance, and not as a personal outgo, and therefore it does not represent any amount to be treated as income of the assessee.
ASST YEAR- 2003-04.
1 .Political Expenses;- As per my report dated 25/02/2014.Copy enclosed for ready reference
2.General Expenses:- An amount of �1,48,020/-has been disallowed under this head.
On verification ,it is seen that, the expenses debited under his head general expenses included expenses in connection with running to 3239 & 3450 to :- 19 -: 3455/Mds/2016. of lorry, workshop expenses, tyre purchases etc., and not for any personal purpose. The expense has been incurred or business purpose only.
3.Temple Expense:- The Temple expense has been incurred in connection with conducting of Kumbabhishekam for the Temple and connected functions. As in the case of Political Expenses, the Temple Expenses have also been incurred from the money collected from the devotees and the general public. The details have been verified. 4.Expenses incurred forK.K.Umadevan:-The amount disallowed on the above head is found as an advance made to Shri.K.K.Umadevan, Ex- MLA, and the funds for advancing such amount has been met out of funds collected from political party cadres. Therefore it was only an advance, and not an expense for which no disallowance was called for.
5.Payment to relative:-The amount of Rs. 85,000/ made to relative, which was disallowed, is found to be an advance only, given to a relative from out of money standing to the credit of the assessee. The nature of the outgo is only an advance, and doesnot call for any disallowance.
A.V.Nagarajan suspense account:- It is noticed that Shri.A.V.Nagarajan is an active politician and is engaged in political activities as an office Bearer, and is engaged in collecting party funds from party cadres. From the Trial balance prepared for the earlier years, it has been observed that some of the money so collected has been accounted /credited to his books of account. The disallowance made of �11,44,024/,which represented money standing to the credit of his suspense account is also found to be the amount collected from party cadres and credited in his business books. The source of the money has also been satisfactorily explained.
ASST YEAR -2004-05. 1.Political Exp: As per my report dated 25/02/2014.Copy enclosed for ready reference
2.General Expenses:-An amount ofRs.4, 19,639/ has been to 3239 & 3450 to :- 20 -: 3455/Mds/2016. disallowed towards general expenses.
Verification, it is seen that, the expenses debited under his head general expenses included expenses in connection with running of lorry, workshop expenses, tyre purchases etc., and not for any personal purpose. The expense has been incurred or business purpose only.
3.Temple Expenses:- An amount of RS.15,77,702/ has been disallowed towards Temple expenses. The Temple expense has been incurred in connection with conducting of Kumbabhishekam for the Temple and connected functions. As in the case of Political Expenses, the Temple Expenses have also been incurred from the money collected from the devotees and the general public. The details have been verified.
4.Expenses incurred for K.K.Umadevan.:- The amount disallowed on the above head is found as an advance made to Shri.K.K.Umadevan, Ex-MLA, and the funds for advancing such amount has been met out of funds collected from political party. cadres. Therefore it was only an advance, and not an expense for which no disallowance was called for.
A.Y.2005-06.
General Expenses: An amount of RsA,08,798/has been disallowed under this head.
On verification .it is seen that, the expenses debited under his head general expenses included expenses in connection with running of lorry, workshop expenses, tyre purchases etc., and not for any personal purpose .The expense has been incurred for business purpose only.
2.Temple Expenses:- An amount of Rs.58, 141/ has been disallowed towards Temple expenses. to 3239 & 3450 to :- 21 -: 3455/Mds/2016.
The Temple expense has been incurred in connection with conducting of Kumbabhishekam for the Temple and connected functions. As in the case of Political Expenses, the Temple Expenses have also been incurred from the money collected from the devotees and the general public. The details have been verified.
A.V:Nagarajansuspense account:- It is noticed that Shri.AV.Nagarajan is an active politician and is engaged in political activities as an office Bearer, and is engaged in collecting party funds from party cadres. From the Trial balance prepared for the earlier years, it has been observed that some of the money so collected has been accounted /credited to his books of account.
The disallowance made of Rs.14,25, 175/,which represented money standing to the credit of his suspense account is also found to be the amount collected from party cadres and credited in his business books. The source of the money has also been satisfactorily explained.
4.Payment to relative:-The amount of Rs. 1,72,400/ made to relative, which was disallowed, is found to be an advance only, given to a relative from out of money standing to the credit of the assessee. The nature of the outgo is only an advance, and doesnot call for any disallowance.
A.Y.2006-07:
1.Political Expenses;- As per my report dated 25/02/2014.Copy enclosed for ready reference
2.General Expenses:- An amount of Rs.3,28,4 17 /has been disallowed under this head.
On verification ,it is seen that, the expenses debited under his head general expenses included expenses in connection with running of lorry, workshop expenses, tyre purchases etc., and not for any personal purpose. The expense has been incurred or business purpose only. to 3239 & 3450 to :- 22 -: 3455/Mds/2016.
2.Temple Expenses:- An amount of Rs.1,80,070/ has been disallowed towards Temple expenses.
The Temple expense has been incurred in connection with conducting of Kumbabhishekam for the Temple and connected functions. As in the case of Politicol Expenses, the Temple Exp[enses have also been incurred from the money collected from the devotees and the general public. The details have been verified. A.Y.2007-08. l. General Expenses:- An amount of Rs.2,98,314/has been disallowed under this head.
On verification .it is seen that, the expenses debited under his head general expenses included expenses in connection with running of lorry, workshop expenses, tyre purchases etc., and not for any personal purpose. The expense has been incurred or business purpose only.
2.Temple Expenses:- An amount of Rs.2,03,444/ has been disallowed towards Temple expenses.
The Temple expense has been incurred in connection with conducting of Kumbabhishekam for the Temple and connected Junctions. As in the case of Political Expenses, the Temple Expenses have also been incurred from the money collected from the devotees and the general public. The details have been verified.
3.A.V.Nagarajan suspense account:- It is noticed that Shri.A.V.Nagarajan is an active politician and is engaged in political activities as an office Bearer, and is engaged in collecting party funds from party cadres. From the Trial balance prepared for the earlier years, it has been observed that some of the money so collected has been accounted /credited to his books of account.
The disallowance made of Rs.20,60,680/,which represented money standing to the credit of his suspense account is also' found to be the amount collected from party cadres and credited in his business books. The source of the money has also been satisfactorily explained. to 3239 & 3450 to :- 23 -: 3455/Mds/2016.
3.Expenses incurred for K.K.Umadevan.:- The amount of Rs.4,68,131/- disallowed on the above head is found as an advance made to Shri.K.K.Umadevan, Ex-MLA, and the funds for advancing such amount has been met out of funds collected from political party cadres. Therefore it was only an advance, and not an expense for which no disallowance was called for.
Ld. Commissioner of Income Tax (Appeals) after considering 9. the above remand reports of the ld. Assessing Officer deleted the additions made for (i) Political expenses (ii) General expenses (iii)
Temple expenses (iv) Expenditure incurred for K.K. Umadevan (v)
Amounts appearing in Shri. A.V. Nararaja kanaku varavu suspense account (vi) Investment in M/s. AV Valli Vinodhini Finance (vii)
Unexplained payment to relatives. (viii) Investment in AVNK Finance (ix) Debits appearing in the name of M/s. AVV Malayadi Works (x)
Debits appearing in the name of AVV Metals (xi) Credits in bank accounts in the names of relatives of the assessee (xii) Investment in immovable property of Shri. Muthukumar of domestic expenses (xiii) investments in Poclain (xiv) Marriage expenditure of Ms. Latha of Shri.
A.V. Subramanian (xv) Family credits appearing in the members of the family and (xvi) sundry creditors. He also allowed relief of 50% on domestic expenses disallowed by the ld. Assessing Officer.
Now before us, Revenue assailing the orders of the ld. 10.
Commissioner of Income Tax (Appeals) has filed grounds against each to 3239 & 3450 to :- 24 -: 3455/Mds/2016. of the relief given by the ld. Commissioner of Income Tax (Appeals).
Ld. Counsel for the Revenue submitted that remand report given by the ld. Assessing Officer was blindly relied on by the ld. Commissioner of Income Tax (Appeals). According to him, it was only a small part of the process of Appellate Proceedings. As per the ld. Departmental Representative, it might be true that the remand report given by the ld. Assessing Officer went in favour of the assessees on a majority of the issues. However, according to him, ld. Commissioner of Income Tax (Appeals) was having power coterminus with the ld. Assessing Officer and should have verified the records and applied his mind, before deciding whether the claims of the assessees could be allowed. Making particular reference to the deletion of disallowance of expenditure incurred on behalf of Shri. K.K.Umadevan, ld. Departmental Representative submitted that the ld. Commissioner of Income Tax (Appeals) had directed the ld. Assessing Officer to consider peak credits. According to him, what the ld. Assessing Officer stated in the remand report was to consider family income of the assessees as a source for the amounts given to Shri. K. K.
Umadevan. According to him, there was no rule that remand report of the ld. Assessing Officer had to be accepted, where such remand report ran fully contrary to the original observations of the ld. Assessing Officer. to 3239 & 3450 to :- 25 -: 3455/Mds/2016.
Per contra, ld. Authorised Representative strongly supporting the order of the ld. Commissioner of Income Tax (Appeals) submitted that the ld. Assessing Officer had no right to file these appeals. As
per the ld. Authorised Representative, the very same ld. Assessing Officer, had in the remand reports, accepted the claims of the assessee after verifying records and evidence produced by the assessees. Contention of the ld. Authorised Representative was that ld. Assessing Officer could not be considered an aggrieved person once he had a given remand report which fully went in favour of the assessee. Reliance was placed on the judgment of Hon’ble Mumbai High Court in the case of Jivatlal Purtapshi vs. CIT, 65 ITR 261, that of Hon’ble Mysore High Court in the case of M.M. Annaiah vs. CIT, 76 ITR 582 and that of Hon’ble Jurisdictional High Court in the case of Ramanlal Kamdar vs. CIT, 108 ITR 73. In any case as per the ld. Authorised Representative, ld. Assessing Officer had verified the evidence produced by the assessee and had reached an opinion that such evidence was acceptable on each of the issues on which relief was given by ld. Commissioner of Income Tax (Appeals). As for addition made for Shri. K.K.Umadevan, contention of the ld. Authorised Representative was that direction of the ld. Commissioner of Income Tax (Appeals) was to consider peak credit and this would not lead to any revenue leakage. to 3239 & 3450 to :- 26 -: 3455/Mds/2016.
Ad libitum reply of the ld. Departmental Representative was for political expenditure, ld. Assessing Officer in his remand report dated 10.03.2014 had not expressed any opinion, but had only listed the proof produced by the assessee. According to him, this was a fit case for remitting the appeals back to the ld. Commissioner of Income Tax (Appeals), since ld. Commissioner of Income Tax (Appeals) had not given any findings, based on the remand reports and had failed to apply his mind.
We have considered the rival contentions and perused the orders of the authorities below. Remand reports of the ld. Assessing Officer furnished to the ld. Commissioner of Income Tax (Appeals) during the course of assessment proceedings have been reproduced by us at para 8 above. Ld. Assessing Officer had accepted almost all the claims of the assessee during such remand report. Even for expenditure incurred for Shri. K. K. Umadevan, on which disallowance was made in the assessment, ld. Assessing Officer in his remand report, relating to Shri. A.V. Nagarajan requested the ld. Commissioner of Income Tax (Appeals) to consider the family income of the assessees, before sustaining any part of the additions. Ld. Assessing Officer had in the remand report relating to M/s. A.V. Valliammal Lorry Service accepted that the advances to Shri. K.K. Umadevan was not an expense and no disallowance was required. Ld. Assessing Officer to 3239 & 3450 to :- 27 -: 3455/Mds/2016.
also stated in the remand report that amounts given to Shri.
K.K.Umadevan was out of funds collected from party cadres. Ld. Assessing Officer never stated anywhere that assessee’s explanations could not be accepted. A careful reading of the orders of the ld. Commissioner of Income Tax (Appeals) clearly show that he had deleted those additions on which ld. Assessing Officer had responded positively in favour of the assessee in the remand report. The only possible exception that we can find is on the claim of political expenditure which appear in the remand report dated 10.03.2014.
Even in this remand report, ld. Assessing Officer clearly mentions that he had selected thirteen persons out of sixty nine persons in the list given by the assessee, and all of them appeared and confirmed the payments made by them to AIADMK party.
Now coming to the argument of the ld. Departmental Representative that ld. Commissioner of Income Tax (Appeals) had not applied his mind independently, we are afraid we cannot accept it.
This is due to the reason that ld. Commissioner of Income Tax (Appeals) had carefully considered each and every points made out by the ld. Assessing Officer in the remand report. On the face of the remand reports which were strongly in favour of the assessee, ld. Commissioner of Income Tax (Appeals), in our opinion, was left with no option. On the other hand, we feel that the ld. Assessing Officer to 3239 & 3450 to :- 28 -: 3455/Mds/2016. could not have been aggrieved party, after giving these remand reports. Just because ld. Commissioner of Income Tax (Appeals) did not make specific comments on each and every addition, on which ld. Assessing Officer had taken a positive stance, we cannot say that ld. Commissioner of Income Tax (Appeals) had not applied his mind.
Even in the case of advance given to Shri. K.K. Umadevan the directions of the ld. Commissioner of Income Tax (Appeals) was to consider the peak credit and he did not delete the additions as a whole. We cannot thus find any lacuna in the directions given by the ld. Commissioner of Income Tax (Appeals). Considering these facts and circumstances, we are not inclined to interfere with the orders of the ld. Commissioner of Income Tax (Appeals) for any of these years.
In the result, the appeals of the Revenue for all the years are 15. dismissed.
Order pronounced on Monday, the 5th day of March, 2018, at Chennai.