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Income Tax Appellate Tribunal, ‘SMC’ ‘D’ BENCH, CHENNAI
Before: Shri A. Mohan Alankamony
आदेश / O R D E R
This appeal by the Revenue is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals), Tiruchirapalli dated 22.10.2010 in for the assessment year 2006-07 passed U/s.250(6) r.w.s.153C & 143(3) of the Act.
The Revenue has raised eight grounds in its appeal however they are briefly stated herein below for adjudication:-
(i) The Ld.CIT(A) has erred in deleting the addition made by the Ld.AO amounting to Rs.2 lakhs towards trade advance by relying on the documents produced by the assessee without any verification. (ii) The Ld. CIT(A) has erred in deleting the addition made by the Ld.AO being the amount recovered against advance paid for acquiring agricultural land amounting to Rs.9 lakhs by relying on the documents produced by the assessee without any verification. (iii) The Ld.CIT(A) has erred in deleting the addition made by the Ld.AO being the gift received from assessee’s husband amounting to Rs.1.5 lakhs by relying on the cash flow statement without any other evidence. (iv) The Ld.CIT(A) has erred in deleting the addition made by the Ld.AO being the advance received by the assessee for sale of land amounting to Rs.3 lakhs . (v) The Ld.CIT(A) has erred in deleting the addition made by the Ld.AO being the gifts received by the assessee at the time of grahapravesam amounting to Rs.1,49,201/-, which is not genuine. (vi) The Ld.CIT(A) has erred in granting relief to the assessee towards construction expenses amounting to Rs.8,35,000/- (vii) The Ld.CIT(A) has erred in granting relief to the assessee amounting to Rs.1,45,000/- being investment in lorry.
The brief facts of the case are that the assessee is an individual engaged in the business of trading in tamarind.
Consequent to search operation U/s.132 of the Act, in the case of Shri R. Viswanathan, Ex-Minister, Govt. of Tamilnadu, search was also conducted in the house of the assessee U/s.132 of the Act. Thereafter repeated notice were sent to the assessee for filing her return of income followed by penalty notices U/s.271(1)(b) of the Act. Finally the assessee filed her return of income for the period 2001-02 to 2007-08 including for the relevant assessment year 2006-07, wherein various additions were made.
Ground No. 2(i) : Deleting the addition of Rs.2 lakhs towards trade advance:- The assessee had claimed that she had received Rs.2 lakhs during the relevant assessment year against the advances given to the suppliers during the period 2004-05. She had also produced the sale agreements to justify her claim. However, the Ld.AO opined that assessee could not establish the bonafide of her claim, hence he made the addition of Rs.2 lakhs in the hands of the assessee. On appeal, the Ld.CIT(A) granted relief to the assessee because the assessee had submitted the sale agreements before the Revenue Authorities and the Ld.AO had not discharged his burden of disproving the same. At the outset I find merit in the order of the Ld.CIT(A) because when the assessee had produced certain documents before the Revenue in order to establish her claim, it is the primary duty of the Revenue to investigate the bonafide of those documents and thereafter come to a logical conclusion. In the case of the assessee, the Ld.AO had not discharged his burden as pointed out by the Ld.CIT(A). Therefore I uphold the order of the Ld.CIT(A) on this issue.
Ground No. 2(ii) : Deleting the addition of Rs.9 lakhs towards recovered advances:- The assessee had claimed that she has given agricultural advance during the period 1994-95 as detailed herein below:- 1. Mr. Adaikan, S/o. Poosari, Rs.4,00,000/- Uluppakudi Post, Velayuthampatti, Pannapatti Village, Natham 2. Shri V. Manikandan, Rs.6,00,000/- S/o. Veeran Poosari, Uluppakudi Post, Velayuthampatti, Pannapatti Village, Natham TOTAL Rs.10,00,000/-
The assessee also produced the above mentioned persons before the Ld.A.O. Both Mr. Adaikan & Mr. Manikandan affirmed the submission made by the assessee and in their sworn statement they disclosed their source of income for repaying the advance as follows:- 1. Mr. Adaikan Source of repayment, being sale of Rs.4,00,000/- 50 cows and sale of 40 goats 2. Mr. Manikandan
Source of repayment, being sale of Rs.2,00,000/- 70 cows and 90 goats
Sale of land Rs.2,00,000/-
Repayment of hand loan from his Rs.2,00,000/- nephew In order to verify the veracity of the claim of the assessee, the Ld.AO deputed inspectors to examine the financial status of Mr. Adaikan and Mr. Manikandan. From the inspection report, it was revealed that both Mr. Adaikan and Mr. Mainkandan were living in a small thatched hut and were not financially sound to own such resources. Therefore, the Ld.AO made addition of Rs.9 lakhs in the hands of the assessee by rejecting the claim of the assessee to be bogus. On appeal, the Ld.CIT(A) held the issue in favour of the assessee because the Ld.AO had not furnished the outcome of the enquiry made by the Inspector of Income Tax Department to the appellant and thus the appellant was denied the opportunity to rebut the information relied by the Ld.AO which is against the principle of natural justice. The Ld.CIT(A) further observed that both Mr. Adaikan and Mr. Manikandan had confirmed the transaction and therefore there was merit in the contention of the assessee.
5.2 At the outset, I do not agree with the view expressed by the Ld.CIT(A) on this issue. It is not common for any person to possess such huge cattle stock, more so when the individuals are not financially sound. The report of the inspector that Mr. Adaikan and Mr. Manikandan were living in thatched hut with no sound financial resources cannot be simply brushed aside. From the facts of the case, I’m of the view that the assessee has not established the source of Rs.9 lakhs with any convincing evidence. Therefore, I hereby set aside the order of the Ld.CIT(A) on this issue and further uphold the order of the Ld.AO. Accordingly the addition of Rs.9 lakhs is hereby sustained.
Ground No. 2(iii) : Deleting advance of Rs.1,50,000/- being gift received from assessee’s husband:- The assessee had contended before the Ld.AO that she had received Rs.1,50,000/- from her husband. However the Ld.AO had rejected the submission of the assessee because there was no evidence to establish the same. However the Ld.CIT(A) allowed the claim of the assessee because the assessee had justified the source of Rs. 1,50,000/- from the cash flow statement of her husband Shri R. Jeyaraj. On this issue, I find merit in the finding of the Ld.CIT(A) because it is quite normal for any person to gift an amount of Rs.1,50,000/- to his / her spouse, when the person is resourceful which in the case of the assessee is established from the cash flow statement. Therefore, I hereby uphold the order of the Ld.CIT(A) on this issue.
Ground No. 2(iv) : Deleting the addition of Rs.3 lakhs being advances received for sale of land:-
The assessee had explained that she has received an amount of Rs.2 lakhs from advocate Shri S.P. Dharmaraj, the Counsel for the Central Government and Rs.1 lakh from Shri V. Subbiah towards advances for sale of land which was utilized for construction of her house. The assessee had also filed confirmation letter from both Shri S.P. Dharmaraj and Shri V. Subbiah. However the Ld.AO rejected the claim of the assessee because the confirmation letter did not mention the mode of payment and it appeared that the assessee has received the advance in cash and further there was no evidence to suggest that the assessee was selling her land. On appeal, the Ld.CIT(A) held the issue in favour of the assessee by observing as under:- “I have considered contentions of the appellant it is found that the Assessing Officer has treated the advances of Rs. 3 Lakhs for two reasons (i) the appellant could not explain the land proposed to be sold and the confirmation letter do not indicate the mode of receipt. As for the first reason I feel that it do not have any bearing for deciding the issue. (ii) The issue for decision is whether or not the appellant received the amounts from the persons concerned, it is not disputed that the persons who gave the amounts have owned up the payment through their confirmations. Their capacity is not in dispute. As rightly contended by the appellant vide her letter dt. 11.12.2008 filed before the Assessing Officer indicates the mode of receipt. Further the decisions relied on by the appellant support her case. So, I find that there is no ground for considering the advances of Rs.3 Lakhs as unexplained investment in house construction. Therefore, the addition of Rs.3 LAkhs is liable deleted and accordingly it is deleted.”
7.2 I do not find any infirmity in the order of the Ld.CIT(A) on this issue because both Mr. S.P. Dharmaraj and Shri V. Subbiah had confirmed the transaction for extending the advance. Further considering the profession and social status of the individuals it can be safely presumed that they have sufficient resource to justify the source for the advance. Hence, I hereby sustain the order of the Ld.CIT(A) on this issue.
Ground No. 2(v) : Deleting the addition of Rs.1,49,201/- being gift received at the time of grahapravesam:- The assessee had claimed to have received Rs.1,49,201/- during her house warming ceremony. The Ld.AO rejected her claim because the assessee had not accounted the details of the expenditure incurred on the house warming ceremony. On appeal, the Ld.CIT(A) held the issue in favour of the assessee because there was no material before the Ld.AO to disbelieve the explanation offered by the assessee. On this issue also I restrain from interfering with the order of the Ld.CIT(A) because during the occasion of house warming ceremony, receipt of such nominal gifts is common practice considering the financial status of the assessee. Hence, I hereby sustain the order of the Ld.CIT(A) on this issue.
Ground No. 2(vi) : Granting relief to the assessee for Rs.8,35,000/- towards construction cost:- During the course of scrutiny assessment, it was observed that the assessee had disclosed to have spent Rs.30,15,500/- towards construction of her residential house during the relevant assessment year and an amount of Rs.8,35,000/- in the subsequent assessment year 2007-08. However it was opined by the Ld.AO that the assessee would have spent the entire amount of Rs.30,15,500/- and Rs.8,35,000/- during the relevant assessment year because the assessee had occupied the house during the month of January 2006. Since the valuation report of the department dated 19.12.2006 also revealed the cost of construction is Rs.39,71,700/-, the Ld.AO concluded that the assessee have spent the amount of Rs.8,35,000/- from her unaccounted income during the relevant assessment year. On appeal, the Ld.CIT(A) opined that the Ld.AO had not set out any evidence in support of his conclusion that the construction was completed during the assessment year 2006-07. Further the Ld.CIT(A)’s finding was that the house was occupied by the assessee after the house warming ceremony, which was performed on 16.02.2006. Further there was no evidence to suggest that there was no construction after 31.03.2006 and the house was constructed before 31.03.2006. For the above stated reasons the Ld.CIT(A) came to a conclusion that the Ld.AO’s decision was based on presumption. Therefore the Ld.CIT(A) deleted the addition of Rs.8,35,000/- made towards construction of house.
9.1 The Ld.DR argued in support of the order of the Ld.AO. While as on the other hand the Ld.AR reiterated the submission made before the Ld.Revenue Authorities and argued by stating that the assessee had spent only Rs.30,15,500/- during the relevant assessment year and the balance amount of Rs.8,35,000/- was spent during the subsequent assessment year. Hence it was pleaded that the decision of the Ld.CIT(A) may be upheld.
9.2 We have heard the rival submission and carefully perused the material on record. On examining the facts and circumstance on the case, we find merit in the order of the Ld.CIT(A). It is apparent that the Ld.AO had arrived at his decision based on presumptions and assumption and not by any constructive evidence. Therefore we do not find it necessary to interfere with the order of the Ld.CIT(A) on this issue.
10. Ground No. 2(vii) : Deleting addition of Rs.1,45,000/- towards investment in lorry:- During the course of search in the residence of Mr. R. Jeyaraj, husband of the assessee, it was revealed from the seized documents which is elaborated in the order of the Ld.AO that the purchase cost of lorry was understated by Rs.3,70,000/-. Since the assessee in her return of income for the relevant assessment year 2006-07 had disclosed the purchase of lorry and admitted income from lorry, the Ld.AO added the amount of Rs.3,70,000/- as unexplained income in the hands of the assessee. On appeal, the Ld.CIT(A) examined the materials on record and the books of accounts maintained by both the assessee and her husband and from the other relevant particulars presented before him came to a conclusion that the assessee had not understated the purchase cost of lorry. Since the Ld.CIT(A) had made a clear cut finding on this issue based on the records available before him, I do not find it necessary to interfere in his order on this issue.
To conclude, the addition with respect to recovery of advance amounting to Rs.9 lakhs [Ground No.(ii)] is sustained and all other additions are deleted.
In the result, the appeal of the assessee is partly allowed.
Order pronounced on 26th October, 2017 at Chennai.