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Income Tax Appellate Tribunal, BENCH ‘C’ KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ORDER PER N.V.VASUDEVAN, JM:
This is an appeal by the Revenue against the order dated 07.04.2016 of C.I.T.(A)-12, Kolkata relating to A.Y.2008-09.
2.. There is a delay of 19 days in filing the appeal by the revenue. It has been explained in the affidavit filed on behalf of the revenue that the delay in filing the appeal was due to administrative and procedural delays. The reasons given in the affidavit are accepted and we hold that there was a reasonable and sufficient cause for the delay in filing the appeal. The delay in filing this appeal is accordingly condoned.
The Assessee is an individual. For A.Y.2008-09 the assessee filed return of income declaring total income of Rs.2,12,670/-. In the course of assessment proceedings u/s 143(3) of the Income Tax Act, 1961 the AO confronted the assessee with AIR information received by him which was to the effect that the assessee has made the following investments in various mutual fund schemes :
Kanailal Das Mazumdar A.Y. 2008-09
The AO called upon the assessee to explain the source of funds out of which the aforesaid investments were made by the assessee. According to the AO there was a failure on the part of the assessee to explain the source of funds for making the aforesaid investments. The AO accordingly added a sum of Rs.3..29 crores of the total income of the assessee as unexplained investment u/s 69 of the Act.
5. Before CIT(A) the assessee explained that the source of investments was out of the redemption proceeds of investments of units of mutual funds that were made in the earlier assessment year. The details of each of the 14 investments set out by the AO in the order of assessment was furnished by the assessee which was as follows :-
“Source of each of the investment added by the AO U/S 69 during the assessment year 2008-09 1. 22.06.2007 25,00,000/- AIG GIG Mutual Fund This investment made from AXIX Bank (Al/c 53) Cheque cleared on 5.6.2007 and this matured on 27.7.2007 (Rs. 2578622/-) vide certificate attached (page-l ) and put in AXIX bank (A/c 53) . The Investment was made out of maturity of DSP Mutual Fund of Rs. 42,63,934,03 and 26,90,079,52 (Total 69,54,013/-.) atured on 22.5.2007 vide certificate attached(page 2 & 3) and put in the same bank. The investment in DSP was made on 14.11.2006 (Last year) as appears from the above certificate, Hence the source is explained during this assessment year. The balance Rs. 45 lakhs was invested as under:- Rs 25 lakhs in another AIG DGJG Mutual Fund on 5.6.2007 and Rs. 20 Lakhs in Term deposit in the same bank. Since the investment came out of the redemption of earlier Kanailal Das Mazumdar A.Y. 2008-09 years investments, no addition can be made during the assessment year in question.
2 6.08.2007 27,00,000/- JM Mutual Fund
This investment was made from AXIX Bank (Ale 53) out of the maturity of investment in AIG Mutual Fund (Paper book page 1) put in IX Bank (A/c 53) and small remaining bank balance on maturity of other investments before that date. This investment was redeemed on 6. 12. 2007 Rs. 31,14, 965/-vide age 15- J 7 and put in AXIX Bank A/c 53) Thus this investment came from redemption of earlier investment, no addition can be made.
3. 8.08.2007 2,50,000/- Reliance Mutual Fund
The investment was made from Standard Chartered Bank (A/c 476) vide age 4 was made out of the maturity of SBI Mutual Fund of Rs. 2,35. 350/- which was earlier made on 17.1.2007 vide Paper book page 4A. This investment was matured on 28.9.2007 (Rs. 2,60,383/-). Since the investment came out of the redemption of earlier years investments, no addition can be made during the assessment year in question.
4. 8.08.2007 5,00,000/- Reliance Mutual Fund
Source explained vide SL 5. the investment was matured on 28.9.2007 vide paper book page 5 and put in Axis Bank bank (A/c 53). 5,20,768/-
8.08.2007 39,25,000/- Reliance Mutual Fund Investment made from AXIX Bank (A/c 53) Cheque cleared on 14.7.2007. This was matured on 28.9.2007 vide paper book page-6 (Rs.40,88,029/-) The Investment was made out of maturity of SBI Mutual Funds of Rs.19,42,891/- on 11.7.2007 which was invested earlier on 17.1.2007 (vide Paper book page 7-8) Rs.50,07,450/- matured on 11.7.2007 which was earlier invested on 17.1.2007 and Rs. 20,07,834/- being the maturity of the Term deposit made vide Sl 1 matured on 12.7.2007. Hence the source of investment in SL 5, Sl 4, sl 7, is explained during this assessment year. The balance Rs. Rs. 25 lakhs was also invested in Reliance Mutual Fund which is not in the AIR report available with AO Since the investment came out of the redemption of earlier years investments, no addition can be made during the assessment year in question.
6 8.08.2007 3,25,000/- Reliance Mutual Fund Investment made from Standard Chartered Bank (A/c 7-0) cheque cleared on 14.7.2007. This was made out of the maturity of the investment of Rs. Kanailal Das Mazumdar A.Y. 2008-09 3,25,484/- in SBI Mutual Fund on 11.7.2007. Copy of bank account and certificate of SBI attached. The investment with SBI Mutual Fund was made on 17.1.2007 vide Paper book page 9. The investment was redeemed on 28.9.2007 (Rs. 3,38,499/- A/c 7-0) vide Paper book page 10 and put in Std Ch Bank. Since the investment came our of the redemption of earlier years investments, no addition can be made during the assessment year in question.
7 8.08.2007 25,00,000/- Reliance Mutual Fund Source explained vide SL 5, the investment was matured on 21.9.2007 vide Paper book page 11 and put in Axix Bank bank (A/c 53) Rs. 25, 30, 991/-) Hence no addition can be made.
14.10.2007 30,00,000/- Kotak Mahindra Mutual Fund The investment was made from AXIX Bank A/c 53) out of the maturity 0/ the investment in Sl. 5. Rs. 40,88,029/- which was put in Axix Bank(A/c 53) and from the said fund this investment was made. The investment was matured on 22.11.2007 (Rs. 30,22, 284/-)vide page 12 and maturity cleared in AXIX bank.(a/c 53). Hence no addition can be made.
14.10.2007 20,00,000/- Kotak Mahindra Mutual Fun
This was invested from AXIX bank A/c No. 137 on transfer of receipt of Rs. 24,00,000/-from A/c No. 53 on 28.9.2007 and in that account the deposit was from maturity of Reliance M F vide sl 7. This investment was matured on 22.11.2007 (Rs. 20,14.856) vide page 13 and maturity cleared in Axix bank Ale 137)
23.11.2007 30,00,000/- Reliance Mutual Fund This investment was made out of the maturity of the investment in SL. 8 from Axix Bank (A/c 53). Hence no addition can be made.
. 23.11.2007 20,00,000/- Reliance Mutual Fund The investment was made from Axix Bank A/c No. 137 out of maturity of TD of Rs. 28,00,000/- made from a/c 53 on 8.10.2007 and maturity proceeds was Rs. 28,15,82/- credited in a/c no. 137 and further maturity of the Kotak mutual fund of Rs. 20,14,856/- of SI 9 out of which this investment and investment.
1l.01.2008 39,50,000/- Reliance Mutual Fund Kanailal Das Mazumdar A.Y. 2008-09 The investment was made from Axix Bank A/c No. 137 The assessee received back Rs. 39.30.229/- on account of the amount given to them on 18.12.2007 and 19.12.12007 (Total amount given to them was Rs. (52,83,292/- + 48,39,261/- Total 1,01,22,553/- and received back Was 39,20,119/- + 39.60,000/- + 29, 0,000/- i.e. 1,08.50.120/- This amount was thus invested out of the amount received from S K P Securities Ltd. as stated above and redeemed on 16.1.2008 vide page 14 and put in Axix bank.
13 11.01.2008 33,00,000/- Reliance Mutual Fund Investment made from Axix Bank (53) out of receipt as stated in sl 12. The redemption of this mutual fund was received on 16.1.2008 vide page 14 and put in axix bank Ale 53
14. 11.012008 29,50,000/- Reliance Mutual Fund Investment explained vide Sl 11 made out of Rs 29.70.000/- received form SKP Securities Ltd against the money given to them on 18.12.2007 (Rs. 5283292/- from A/c no. 53. This amount was received back on redemption on 16.1.2008 vide page 14 and put in Axix bank a/c no.53.”
Since the details filed by the assessee before CIT(A) were in the nature of additional evidence the CIT(A) forwarded the details filed by the assessee to the AO and called for a remand report from the AO on the additional evidence filed by the assessee.
The AO vide his remand report dated 11.12.2015 submitted that the investments made by the assessee in the earlier assessment year were not disclosed. Therefore the addition made by the AO was justified and the investments made in the previous year had to be regarded as made out of undisclosed sources of income and are liable to be added u/s 69 of the Act.
8. On a consideration of the evidence before him the CIT(A) was of the view that in the remand report the AO has accepted the fact that the maturity proceeds of investments made by the assessee in the earlier assessment years was the source out of which various investments were made by the assessee during the previous year. He found that the objection of the AO in the remand report was that since the investments Kanailal Das Mazumdar A.Y. 2008-09 made in the earlier year were not disclosed by the assessee to the department the source of funds out of which investments made during the previous year should also be held as unexplained . The CIT(A) was of the view that the stand of the AO was untenable. He held that the assessee had explained the source of funds for investments made in the previous year and therefore no addition could be made u/s 69 of the Act. The CIT(A) accordingly deleted the addition made by the AO.
9. The CIT(A) further noticed that the assessee had earned short term capital gain of Rs.14,97,103/- on redemption of units of mutual funds during the previous year which were explained as source for making various investments in mutual funds during the relevant previous year. The details in this regard were as follows :-
10. The CIT(A) found that the assessee had not disclosed the aforesaid short term capital gain in his return of income. The CIT(A) accordingly directed the AO to bring to tax the short term capital gain of Rs.14,97,103/-.
11. Aggrieved by the relief granted by the CIT(A) the revenue is in appeal before the tribunal.
Kanailal Das Mazumdar A.Y. 2008-09
12. The ld. DR relied on the remand report of the AO dated 11.12.2015 filed before the CIT(A) and submitted that when an investment matures for payments during the previous year the sum received on such maturity should also be regarded as a fresh source and even the source for making the original investment that matured during the previous year should be explained by the assessee. According to him the assessee has not explained the source of funds for making investments which matured during the previous year and therefore the addition made u/s 69 of the Act by the AO to be sustained.
The ld. Counsel for the assessee submitted that the assessee duly submitted evidence along with written submissions that all the investments made during the year came out of the maturity proceeds of the investments made in earlier years. This is not denied by the AO. Therefore, the source of investment during the year was directly explained with investment made in earlier year which matured during the year. The ld. Counsel for the assessee also pointed out that the assessment for earlier years have also been reopened by the Assessing Officer u/s. 148. 1n any case if the investments are directly linked with the earlier years repayment of investment, no addition can be made during the year..
We have carefully considered the rival submissions. It will be desirable to examine the provisions of section 69 which are as under:
Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books 0/ account, if any, maintained by him for any source 0/ income, AND the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year .
A reading of the provisions contained in sec. 69, shows that if any investment is found to have been made by the assessee during the financial year which is not recorded in the books of accounts , it can be treated as income of the assessee for such Kanailal Das Mazumdar A.Y. 2008-09 financial year. However, if the assessee is in a position to offer explanation about the nature and source of the investments or if the explanation offered by the assessee is not in the opinion of the A.O satisfactory only then such investment can be added as income of the assessee. In the instant case the assessee has offered explanation with regard to the source of the investment linking each and every investments made in earlier years and the same has also not been found by the AO to be not satisfactory. The remand report of the AO clearly admits this position. The case of the AO in the remand report was that on redemption of the investments made in the earlier year during the previous year, the investments made during the previous year becomes fresh investment. This stand of the AO is contrary to the provisions of sec.69 of the Act. There is no dispute about that fresh investments have been made during the year but all such investments have come out of the maturity of the investments made in earlier years. Therefore the source of investments made during the year have been explained. In view of the above the addition of Rs.3,29,00,000/- cannot be sustained as unexplained investment of the assessee during the assessment year in question and was rightly deleted by the CIT(A). Further the earlier year’s assessment have been reopened by the AO u/s 148. The source of funds for making investments of the units of Mutual funds which matured for payment can be examined only in the assessment year relevant to the previous year in which the investment was made.
In our view the above conclusions drawn by the CIT(A) is in accordance with law and does not require any consideration. For the reasons given above we find no merits in the appeal by the revenue and the same is dismissed.
In the result the appeal by the revenue is dismissed. Order pronounced in the open Court on 09.02.2018. Sd/- Sd/- [M.Balaganesh] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 09.02.2018. [RG Sr.PS] Kanailal Das Mazumdar A.Y. 2008-09 Copy of the order forwarded to: 1.Kanailal Das Mazumdar, P-226, CIT Scheme, Block-C, Flat No.1, Kolkata-700054. 2. A.C.I.T., Circle-42, Murshidabad. 3. CIT(A)-12, Kolkata 4. C.I.T.-14, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches Kanailal Das Mazumdar A.Y. 2008-09