N. BALAKRISHNAN,TIRUVANNAMALAI vs. ITO, TIRUVANNAMALAI

आदेश / O R D E R

2. The assessee has raised several grounds in his appeal; however the cruxes of the issues are that:-

(i) The Ld.CIT(A) has erred in confirming the addition made by the Ld.AO amounting to Rs.5 lakhs being the gift received from the assessee’s son.

(ii) The Ld.CIT(A) has erred in confirming the order of the Ld.AO who had made addition of Rs.4,65,000/- towards unexplained investment in construction of rice mill building.

(iii) The Ld.CIT(A) has erred in confirming the addition made by the Ld.AO amounting to Rs.60,000/- towards poor drawing.

3. Poor drawing Rs. 60,000/-

During the course of scrutiny assessment, it was observed by the Ld.AO that the assessee had claimed to have received gift of Rs.20 lakhs from his son Shri B. Krishnasamy. On further perusal of the issue it was found that the gift received from his son to the extent of Rs.15 lakhs is genuine. With respect to the gift of Rs.5 lakhs it was observed that the assessee’s son had given a cheque of Rs.2 lakhs and Rs.3 lakhs to some other person, which was purported to be given to the assessee.

Thereafter the assessee took a stand that Rs.3 lakhs was received from his daughter and source of the Rs.3 lakhs was the amount sent by his son to his daughter. Since the assessee had taken different stand on different occasions, the Ld.AO opined that the amount of gift of Rs.5 lakhs is not genuine and therefore treated the same as the income of the assessee.

4.1. On appeal the Ld.CIT(A) confirmed the order of the Ld.AO because in the remand report it was revealed that the gifts claimed to have been received amounting to Rs.5 lakhs is not a direct gift from the donor to the donee but it was routed in circuitous manner leading to the doubt that the assessee was only making an attempt to account for the source of the gifts which he has not received.

4.2 At the outset, I find that on the identical issue in the assessee’s spouse case, I had held as follows: “4.3 I have heard the rival submissions and carefully perused the material on record. From the facts of the case, it is apparent that the source of the gift is genuine and accounted. Additions had been made by the Ld.Revenue authorities only because the assessee had taken different stand on different occasions and had also un convincingly explained that the source of the gift of Rs.5 lakhs was the amount received by the assessee’s daughter from her son which was finally passed on to her. Considering these facts, I do not find any merit in the order of the Revenue authorities. It is a normal practice to pass on cash between family members on different occasions and sometime even to receive back the amount advanced. This kind of transfer of funds between the family members cannot be treated as dubious transactions. In the case of the assessee the source of the fund and the source of the source of the fund have been established and are not disputed. Therefore, it is not right on the part of the Ld.AO and the Ld.CIT(A) to hold that the gift received by the assessee amounting to Rs.5 lakhs as not genuine. Hence, I hereby direct the Ld.AO to delete the addition made by the Ld.AO amounting to Rs.5 lakhs towards unexplained gift.”

Following the same ratio, I’m of the view that the addition of Rs.5 lakhs in the hands of the assessee is not warranted because the source of Rs.3 lakhs is established and the amount of Rs.2 lakhs is insignificant because the assessee’s son has sufficient source to bestow such amount to his father considering his financial status. Therefore, I hereby direct the Ld.AO to delete the addition of Rs.5 lakhs made in the hands of the assessee towards unexplained gift.

During the course of scrutiny assessment, it was noticed by the Ld.AO that the assessee had constructed rice mill building during the previous year relevant to the assessment years 2009- 10 & 2010-11 for Rs.20,23,000/-. The LD.AO referred the matter to the valuation cell of the Department, who valued the cost of construction at Rs.28,38,400/-. Therefore the Ld.AO opined that the unexplained investment in the construction of rice mill is Rs.8,15,400/- (Rs.28,38,400 – Rs.20,23,000). However giving an allowance of 50%, the Ld.AO treated Rs.4,65,000/- as the unexplained investment in the construction of the rice mill by rejecting the submission of the assessee that the construction expenses had to be spread over the subsequent assessment year. Before the Ld.CIT(A), the assessee argued by stating that PWD rates has to be adopted for valuing the property and further allowance should be given for self-supervision. However, the Ld.CIT(A) confirmed the order of the Ld.AO by his view that sufficient concession was granted by the Ld.AO on the valuation of the property.

5.1 After examining the issue, I find that the Ld.Revenue authorities has not given proper weightage to the submission of the assessee that the construction cost of the rice mill building has to be spread over in the subsequent period. Normally in such business activities the construction of buildings are not competed in the same year but spread over a period. Hence, the source of income for those relevant assessment years should also be considered. Considering these aspects of the case and the financial status of the assessee and his children, I’m of the considered view that the addition of Rs.4,65,000/- is not warranted in the case of the assessee. Hence, I direct the Ld.AO to delete the addition of Rs.4,65,000/- made on account of unexplained investment in the construction of rice mill building.

On the identical issue in the case of the assessee’s spouse, I have deleted the addition of Rs.96,000/- by holding as under:-

“It was noticed by the Ld.AO that the assessee had disclosed drawing as Rs.24,000/- for the entire previous year. Considering the status of the assessee and the way of living the Ld.AO opined that the assessee should have incurred at least an expenditure of Rs.10,000/- per month for her family maintenance. Therefore the Ld.AO added Rs.96,000/- to the income of the assessee towards poor drawing. On appeal, the Ld.CIT(A) agreeing with the views of the Ld.AO confirmed his order. I do not find any merit in this addition made by the Revenue authorities on this issue. As explained by the assessee, the assessee’s children were Non-residents and had enough sourced to provide funds to their parents. In this situation, it is not necessary to presume that the assessee and her family were spending money for their personal maintenance from their unaccounted income. Therefore, I hereby direct the Ld.AO to delete the addition made for Rs.96,000/- in the hands of the assessee towards poor drawing.”

For the same reason in the case of the assessee also, I’m of the view that the addition of Rs.60,000/- in the hands of the assessee is not warranted. Therefore I hereby direct the Ld.AO to delete the addition of Rs.60,000/- in the hands of the assessee towards poor drawing.

Order pronounced on the 15th September, 2017 at Chennai.