Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI DUVVURU RL REDDY
आदेश /O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal filed by the assessee is directed against the order of the Commissioner of Income-tax (Appeals) dated 31.03.2017.
- - 2 ITA 1011/Mds/17
2. The assessee has raised the following grounds for our
adjudication.
“1.The first ground is with regard to assessment based on non-est return of income.
The next ground is with regard to invalidity of statement recorded u/s.131 from Mr. Stephen John by DDIT(Inv) Kochi on 26.3.2015.
3. The next ground is with regard to addition of ₹2,15,00,000/- as profit from transacting in Velachary property.
4. The next ground is with regard to disallowance of ₹2,90,00,000/- u/s.40A(3) in respect of payments made in respect of Transaction in Velachery property. The Commissioner of Income-tax(Appeals) erred in holding that any payment in cash in excess of ₹ 20,000/- would attract disallowance u/s.40A(3), whereas the section prescribes disallowance, only if the payments are made towards an expenditure. The Commissioner of Income-tax(Appeals) erred in holding that payments made by the appellant in his capacity as an intermediary in the sale of Velachery property, constitutes expenditure in the hands of the appellant.
5. The next ground is with regard to disallowance of cost of renovation in computing capital gains. The Commissioner of Income-tax(Appeals) erred in sustaining the disallowance of cost of renovation without appreciating the facts and circumstances of the case. The Commissioner of Income- tax(Appeals) erred in sustaining the disallowance without appreciating the difference between cost of renovation and cost of repairs.
- - 3 ITA 1011/Mds/17
6. The next ground is with regard to addition of ₹95,00,000/- representing cash deposits in bank. The Commissioner of Income-tax(Appeals) erred in not considering the explanation offered by the appellant. Without prejudice to the above, the following are the alternate grounds:
7. The appellant is engaged in real estate. There are outgoings through banking channels as a contra to cash receipts. The entire deposits cannot be treated as income of the appellant.
The deposits in the bank account of the appellant cannot be treated as unexplained credit as explained in the Bombay High Court Decision of CIT v. Bhaichand Gandhi [2013] 141 ITR 67 (Bom.), which principle has been accepted by the Income Tax Appellate Tribunal Mumbai Bench in Smt. Manasi Mahendra Pitkar vs. ITO reported in [2016] 73 taxmann.com 68 (Mumbai – Trib.)
9. The appellant had produced cash book to explain the source of cash deposits in bank account. The Appellant had given explanations to ₹ 77,00,000/- credited to the cash book. If the explanations are not satisfactory, the addition has to be restricted to ₹ 77,00,000/-.”
The facts of the case are that the assessee declared a total income of ₹3,08,330/- in the original return of income filed on 30.5.2012 for the AY 2012-13. On the 16th day of March 2012, a deed of sale was executed by Shri Stephen John and four others in favour of ITC Ltd. for a consideration
- - 4 ITA 1011/Mds/17 of ₹ 17.80 crores. Out of the sale consideration of ₹ 17.80 crores, Shri Stephen John was paid an amount of ₹ 8 crores on 14.3.2012 by Pay Order No.517909. The other four co- owners were together paid ₹ 3 crores on the same date by Pay Order No.517911. The assessee was not the co-owner of the property and is not part of the list of sellers in the sale deed. Despite the same, she was paid an amount of ₹ 6.80 crores vide Pay Order No.517910 dated 14.3.2012. The said payment was directly received by the assessee from ITC Ltd. and the particulars of the transaction involving the assessee is exhibited in the contents of the sale deed itself.
3.1 The profits that arose in the transaction detailed above to the assessee were not declared to the Income Tax Department and as a result of the enquiry conducted by the I&CI Wing of the Income Tax Department, Chennai, the assessee came forward to file a revised return on 31.03.2014 enhancing the taxable income to ₹ 19,14,060/-. The return of income was taken up for scrutiny and notice u/s.143(2) was served on the assessee on 04.09.2014. Subsequently, a notice u/s.142(1) dated 12.12.2014 was served on the assessee seeking details of documents. Thereafter, the - - 5 ITA 1011/Mds/17 ld. Assessing Officer , after examining the genuineness of claim of expenses against the receipt of ₹ 6.80 crores, completed the assessment u/s.143(3) on 30.03.2015 and assessed the return at a taxable income of ₹ 7,29,75,900/-. 3.2 The assessee had claimed a host of expenses amounting to ₹6,64,95,000/-. The list of payees included 24 persons. The particulars of the payments claimed to have been made by the assessee against the income of ₹6.80 crores is enumerated in the assessment order.
The assessee had received a sum of ₹ 4.50 crores from 3.3 six parties, while the balance of 18 parties stated to have received ₹ 2,14,95,000/- totaling to ₹ 6,64,95,000/- and the difference of ₹15,05,000/- was additionally offered to tax in the revised return filed on 31.3.2014.
3.4 The AO, on examination of the accounts and the veracity of the claims did not accept the nexus between the payments and the receipts and therefore, the entire expenditure relating to six parties of ₹ 4,50,00,000/- and in respect of the balance, an amount of ₹ 1,61,21,250/- was found to be ineligible as deduction
- - 6 ITA 1011/Mds/17 and the same was added to the taxable income. On a total claim of ₹ 2,14,95,000/- to 18 parties, the AO felt it appropriate to allow an expenditure of ₹ 53,53,750/-, which constitutes 25% of the total quantum and the balance 75% being ₹ 1,61,21,250/- was disallowed. Amongst the six recipients, M/s. Astoria Leathers and Shri P.R.Ramakrishna Raja, are stated to have been paid ₹1.25 crores and ₹25 lakhs as compensation by the assessee. However, in response to notice u/s.133(6) issued by the AO, M/s. Astoria Leathers and Shri P.R. Ramakrishna Raja vide their letters dated 25.3.2015 and 27.3.2015 had expressed that the transactions involving them had nothing to do with the property transaction with ITC.
3.5 The assessee is not the owner of the asset transferred to ITC Ltd. but had received a consideration of ₹ 6.80 crores. The obvious reason is that the assessee was compensated in lieu of facilitating an unencumbered conveyance of property to the buyer. However, it was stated by her that the payments were made on behalf of Shri Stephen John, the actual owner of the property and therefore, there is no significant profit but for this sum of ₹ 15.05 lakhs offered to tax. In order to examine the - - 7 ITA 1011/Mds/17 veracity of the claim, Shri Stephen John was examined on oath u/s.131 by the DDIT(Inv.), Kochi on 26.3.2015 and in his sworn deposition, Shri Stephen John affirmed that the consideration received by him of ₹ 8 crores was full and final and no payments were made indirectly through the assessee at this behest. Under the circumstances, since the genuineness of the claim did not stand the litmus test, the AO had to resort to the addition.
3.6 The ITS data exhibited that the assessee had deposited ₹ 40 lakhs, ₹ 35 lakhs and ₹ 20 lakhs in Axis Bank in mode of cash on 28.12.2011, 31.12.2011 and 02.01.2012, summing up to ₹ 95 lakhs. The explanation provided by the assessee with regard to the sources was found to be unsatisfactory and thus an amount of ₹ 95 lakhs was added separately u/s.68 of the Act. As a result, the taxable income got enhanced to ₹ 7,29,75,896/- and a resultant tax demand ₹ 2,99,57,050/-. Aggrieved, the assessee went in appeal before the CIT(Appeals), who partly allowed the appeal of the assessee. Against this, the assessee is in appeal before us.
- - 8 ITA 1011/Mds/17
The first issue raised in her appeal is with regard to Ld.CIT(A) erred in upholding the assessment based on a return of income filed on 31.03.2014, which is a non-est return in the eyes of law.
Now, the contention of the ld.A.R is that the return filed by the assessee on 31.03.2014 cannot be treated as return of income filed as per section 139(5) of the Act, since the return is not filed on account of discovery of omission by the assessee but as a result of enquiry. According to ld.A.R, the return filed on 31.03.2014 cannot be treated as a return of income filed as per section 139(5) of the Act. He submitted that for a return to be treated as filed u/s.139(5) of the Act, it must be on account of discovering any omission or any wrong statement in the original return filed by assessee. If the return is revised as a result of enquiry, then it is not a return filed as per sec.139(5) of the Act. In support of his argument, ld.A.R placed reliance in the following case laws. i) F.C.Agarwal Vs. CIT in (1976) 102 ITR 408 (Gau.) ii) CIT Vs. J.K.A. subramania Chettiar (1977) 110 ITR 602(Mad.) iii) Sunanda Ram Deka Vs. CIT (1994) 210 ITR 988(Gau.)
- - 9 ITA 1011/Mds/17 iv) CIT Vs. Shree Krishna Gyanoday Sugar Ltd., in [1990] 186 ITR 541 (Cal) v) CIT Vs. J. K. A. Subramania Chettiar in [1977] 110 ITR 602 (Mad) Further, he submitted that provisions of the section 292 BB cannot be helped to the Department. He prayed to quash the assessment .
On the other hand, ld.D.R submitted that there is no protest by the assessee at the time of assessment proceedings and the assessee actively participated during the course of assessment proceedings, now the assessee raised such ground before this Tribunal, which is to be dismissed.
We have heard both the parties and perused the material
on record. In our considered opinion, there should not be any grievance to the assessee.There being due opportunity of hearing has been given to the assessee. Even if there is any lapse on the part of the AO, it is only procedural ir-regularity, the provision of Sec.292BB of the Act takes care of it. More so, jurisdictional High Court in the case of Areva T&D India Ltd. vs.
ACIT reported in (2007) 294 ITR 0233 wherein held that non-
10 - - ITA 1011/Mds/17 considering the objections for reopening as well as non- issuance of notice under s. 143(2) are mere procedural irregularities and will not make the reassessment a nullity in law.
Accordingly, this ground of the appeal of the assessee is dismissed.
8. The ld. AR, contended before us, that an opportunity of cross examination of Shri Stephen John was not provided to the assessee by the CIT(Appeals). The ld. AR, further contended that the CIT(Appeals) has given a categorical observation, in spite of para wise comments given by the assessee to the remand report of the AO that the assessee was not provided an opportunity of cross examination of Shri Stepen John. Therefore, the ld. AR submitted that while examining Shri Stepehn John, the statement was recorded by the AO in the presence of the assessee’s spouse, Shri Kalyanasundaram Suresh, but no opportunity of cross examination of Shri Stephen John was provided to the assessee. Hence, the ld. AR contended that there is a violation of principle of natural justice and prayed that an opportunity may be given to the assessee to cross examine Shri Stephen John, before framing the assessment.
11 - - ITA 1011/Mds/17
The ld. DR was not able to controvert the argument of the ld. AR and he relied on the order of the CIT(Appeals).
We have heard both the parties and perused the material on record. In our opinion, whenever the authorities rely on evidences collected from the third parties, it should be confronted with the assessees for his/her comments. In similar way, when the assessee asks for cross examination of the parties from whom evidences are collected, it is appropriate to provide an opportunity of cross examination. In the present case, though the statement from Shri Stephen John was recorded in the presence of the assessee’s spouse, an opportunity of cross examination was not at all given to the assessee. If the CIT(Appeals)/AO collects the evidences from the parties during the remand proceedings, the CIT(Appeals)/AO should have given an opportunity of cross examination to the assessee. Hence, in the interest of justice, we are of the opinion that the entire issue to be remitted to the CIT(Appeals) with a direction to give an opportunity of cross examination before deciding the issue.
12 - - ITA 1011/Mds/17 10.1 While remitting the legal issue to the file of Ld.CIT(A), at this stage, we refrain from going into other grounds of appeal raised by the assessee. Accordingly, we remit the entire issue to the file of the CIT(Appeals) with a direction to give an opportunity of cross examination to the assessee before deciding the issue.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 21st September, 2017 at Chennai.