ITO, CHENNAI vs. M.S.MOORTHY, CHENNAI

This appeal of the Department is directed against the order passed by the ld. Commissioner of Income Tax (Appeals) V, Chennai dated 20.05.2014 relevant to the assessment year 2011-12, whereby the Department has challenged deletion of addition made under section 68 of the Income Tax Act, 1961 [“Act” in short].

Brief facts of the case are that the assessee is engaged in real estate business and contract business and filed his return admitting an income of ₹.2,67,273/-. The return filed by the assessee was taken for scrutiny and notice under section 143(2) of the Act was served on the assessee. In response thereto, the assessee filed certain details. From the details of the assessee, the Assessing Officer has observed that he has made huge cash deposits amounting to ₹.90,13,000/-. When asked, he produced certain details and stated that those are land advance given by the customers for purchase of land. After verification of details filed by the assessee, the Assessing Officer has observed that out of total deposit of ₹.90,13,000/-, except land advance given by Shri Sekar of ₹.25,00,000/-, the others were found not genuine claim. Since the assessee has not furnished proper evidences/explanations for the source of cash deposit of ₹.65,13,000/- and hence, the same was brought to tax. Similarly, against the sundry credits, the Assessing Officer issued summons to the sundry creditors, whereas, most of them were returned back and the others have not properly explained the source of the amount advanced (loan) to the assessee. In respect of one of the sundry creditors Shri Sekar has given advance of ₹.25.00 lakhs for purchase of land consequent to the sale agreement entered. As per sale agreement, the assessee is power agent of the seller. Since the sale was not materialized, the assessee has to return the money to Shri Sekar, which was outstanding till 31.03.2011. On perusal of the sale agreement, the Assessing Officer noticed that the said amount of ₹.25.00 lakhs was given by Shri Sekar on 30.06.2010. When Shri Sekar was asked to explain the source, it was stated before the Assessing Officer that the amount was given in cash and no evidence was produced in this regard and whatever statement given during the course of sworn statement recorded from him differs from the assessee, the Assessing Officer did not accept the sundry credit. Similarly, the assessee has not produced proper confirmation from other sundry creditors and thus the entire sundry credits were brought to tax. Further, the assessee has shown unsecured loans from M/s. West India Impex Pvt. Ltd. of ₹.50.00 lakhs and Transworld Wood Pvt. Ltd. of ₹.50.00 lakhs. Summons were issued to both the companies to produce bank statement, profit and loss account and balance sheet, showing whether the same is reflected in their books and any interest has been received by both the companies. Instead of filing the above details, the representative of the company filed a letter stating that the amount was paid on 06.04.2010 and no interest was charged. Since no details were furnished before the Assessing Officer for verification of the above loans, same were added to the total income of the assessee. Accordingly, assessment was completed under section 143(3) of the Act by assessing total income of the assessee at ₹.2,18,97,201/- by making the above additions.

The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee and details filed by the assessee, the ld. CIT(A) has allowed the appeal filed by the assessee.

On being aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR has submitted that even though it was mentioned in the appellate order that the Assessing Officer has not made proper verification of the details of cash deposits, sundry creditors, etc. without giving an opportunity to the Assessing Officer by obtaining report from him, the ld. CIT(A) has violated the provisions of Rule 46A to directly accept the details furnished by the assessee and pleaded that the entire issues may be remitted back to the file of the Assessing Officer for verification of the details and decide the issues afresh.

To this move of the ld. DR, ld. Counsel for the assessee did not object but supported the order passed by the ld. CIT(A).

We have heard both the sides, considered the material on record and gone through the orders of authorities below. We find that in the assessment the Assessing Officer has stated the proper evidences/explanations were not furnished by the assessee for verification with regard to all the additions made. In the appellate order, the ld. CIT(A) has given an observation that the Assessing Officer has not made extensive enquiry / wider scrutiny. The ld. CIT(A) has further observed that against the details furnished by the assessee, neither the Assessing Officer has controverted nor disapproved the materials filed by the assessee. But before accepting the details furnished by the assessee, the ld. CIT(A) has not obtained any report from the Assessing Officer. Under the above facts and circumstances, we find it just and appropriate to restore the matter back on the file of the Assessing Officer with the direction to decide the issues afresh after giving due opportunity to the assessee and pass speaking order with regard to the cash credits, sundry credits and unsecured loans. The assessee is also directed to file complete details of cash deposits/sundry credit including full particulars of unsecured loan with suitable explanation for not charging interest of loan to the extent of ₹.1.00 crores from the assessee. Hence, the appeal filed by the Revenue is allowed for statistical purposes.

In the result, the appeal of the Department is allowed for statistical purposes. Order pronounced on the 12th July, 2017 at Chennai.