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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI (CAMP : MADURAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
These are cross appeals filed by the assessee and Revenue respectively directed against an order dated 14.03.2014 of ld. Commissioner of Income-tax (Appeals), Tiruchirapalli.
ITA Nos.1731 & 1871/2014 :- 2 -:
Facts apropos are that assessee had filed return of income 2. for the impugned assessment year disclosing income of �3,10,500/- as ‘’income from commission on money lending’’. Ld. Assessing Officer was having AIR information that assessee had deposits aggregating �3,67,75,800/- in his saving bank accounts M/s. Axis Bank Ltd, Pudukkottai Branch and T. Nagar Branch. Assessee was required to show source for the deposited amounts. Reply of the assessee as summarized by the ld. Assessing Officer read as under:-
‘’3. The assessee derives income from money lending commission.
4. The assessee makes/collects advances by cash as well as by cheque.
5. The cash /cheque collected are deposited into the Bank account of the assessee and the same is utilized for making advances by cash as well as by cheque.
6. The assessee has admitted a sum of �3500/- as income in respect of the transactions appearing in all the bank accounts of the assessee.
7. The assessee does not maintain details for the other income of �3,50,000/- and the same is admitted on estimated cash flow basis only.
The assessee has not availed any fresh loans during the year’’.
Ld. Assessing Officer was of the opinion that assessee had large number of transactions though his bank accounts, as listed by him at page 2 & 3 of the assessment order. Ld. Assessing Officer
ITA Nos.1731 & 1871/2014 :- 3 -: required the assessee to give details regarding percentage of commission charged on his money lending business, details of the commission received, details of the persons who had transactions with the assessee and details of the business dealing with persons with whom assessee was having substantial transactions. Ld. Assessing Officer also listed the names of persons who were repeatedly appearing in the bank of the assessee as under:-
Sl. Name Axis Bank Ltd, Axis Bank Total No Pudukkottai Ltd, Chennai amount 1 R. Karuppiah 1,29,24,000 3,50,000 1,32,74,000 2 RM.CT. Ramanathan 1,30,22,000 20,05,000 1,50,27,000 Chettiar 3 A. Sureshkumar 70,47,300 12,70,000 83,17,300 4 TR. Subramanian 29,15,500 25,55,000 54,70,500 5 S. Kulandaian 36,50,000 15,55,000 52,05,000
Reply of the assessee to the above query reads as under:-
‘’(1) Assessee does not maintain any details of the persons from whom the commission was received. (2) The assessee cannot charge uniform rate for all the transactions entered into by him as the same depends on the quantum of the loan. (4) The assessee has not borrowed any money from any person as evidenced by the cash flow statement. Hence, the requirement of filing the name, address and PAN of such persons are not applicable to the assessee.
ITA Nos.1731 & 1871/2014 :- 4 -:
(5) The following factors in the business of the assessee are to be considered (a) The money is advanced both by cash as well as by cheque. The advances are also recovered both by cash as well (b) as by cheque. (c) The cash / cheques as in para (b) above are deposited in the bank account. (d) The funds available in the bank account are utilised for making the advances both by drawing cash as well as by issue of cheques directly to the borrower
(6) (a)All the amounts represent collections from persons to whom money was advanced by the assessee. (b)The assessee has not claimed any credit in respect of the amounts received from the said persons on account of the fact that they represent collection of advances only.
(d)Under the circumstances, we submit that the onus on the part of the assessee to establish the credits are not applicable in the instant case’’.
Thereupon ld. Assessing Officer summoned the assessee by issuing notice u/s.131(1) of the Income Tax Act, 1961 (in short ‘’the Act’’).
Relevant questions posed to the assessee and his replies were as under:-
‘’Q. No.2 Explain the details of your business activities. Ans. I have been engaged in the business of brokerage on money lending for the past five years. I get an average commission of half percent on the transaction of money from one person to another. Q. No.3 Are you maintaining regular books of account for the money lending commission carried out by you? I have not maintained any books of account with regard to Ans. my business.
ITA Nos.1731 & 1871/2014 :- 5 -:
Q. No.4 As you say, when you transfer certain amount from one person to another are you maintaining any proper accounts for receipt of commission. Ans. I am not maintaining any such books; instead, I make a note in loose sheets (kai chittai) and get my commission.
Q. No.7 Give details of persons from whom you have received and to whom you have given money during the period 0110412009 to 3110312010. Likewise, from whom you have received commission. Ans. As I do not remember the details of any transaction at the moment, I would submit the same if available in the residence. Q. No.11 Can you furnish the details such as name, address and PAN number of the persons in both Pudukkottai and Chennai who were advanced money. Ans. I am not able to furnish the particulars in this regard. Q. No.13 While verifying your bank statement, the following particulars were noticed. Accordingly, please explain the following clearly: (a) details of transactions with VT. M. Ganesan". Ans. I do not know the particulars in this regard. (b) details of transactions with Oasis Supermarket. Ans. I do not know remember. During the next hearing I shall furnish the details with regard to from whom, how much was received and how much was returned and how much I received as commission in respect of the transactions of VTM. Ganesan and Oasis Supermarket. Q. No.14 Were you liable to pay any outstanding amount to anyone as on 31/03/2010. If so, did you pay any interest? I did not get any loan from anybody nor paid any interest. Ans.
Q. No.15 Likewise, were you liable to get any outstanding amount from anyone as on 31.03.2010. If so, did you receive any interest. Ans. I am not liable to receive any amount nor any commission.
IIQ. No.16 Have you made any investment in any institution? Ans. No. ITA Nos.1731 & 1871/2014 :- 6 -: Are you a share holder in any institution? Q. No.17 Ans. No.
Q. No. 19 You have stated that you have received commission on money lending. But on scrutinising the bank account, it is seen that the entire transactions, i.e. both debit and credit, have been made in your account only. Weren't they the commission receivable by you? Give details. Ans. Out of the total amount of debit and credit, 1% is my commission and the remaining amount relate to both the lender and the borrower. Q. No. 20 As stated by you in your aforesaid reply, give the details of commission receivable by you, details of borrower and the details of disbursement. Ans. I shall furnish during the next hearing. Q. No. 26 Give the details such as the business connection and the outstanding amount through the same receivable by you from Kavita Shankar, KRV Mani, A. Marimuthu, M. Balu, Kumar Traders, Sagubarnisa, Sivanandam, Kumar, Sri Gokulam Chit & Co., Pee Tee Kay, S. Raja, Selvam Sea Food, Selvam, Spencer, UNI, Eltech, Shince Ph arms, Dipiha, M. Veerappan, R. Murugan, Sakthi Agencies, SP. Deivanai Achi, S. Raja, A. Rameshkumar, XSPESS, Sivasakthi Traders, Devaki Agencies, Sri Oli Vilakku Traders, Sundaram, SM Enterprises, Skatmindia, Sri Srinivasa Automobiles, HSB Clothing Ltd., Leela Clothing Pvt. Ltd., Chidambaram, Hermes Ticket, Dinakaran Medical Agencies, Express Buildings Ltd., Cheran Hotels, Slatco Magniludes, Precision Press Product. Ans. I shall furnish during the next hearing’’.
After going through the above details, ld. Assessing Officer reached a conclusion that assessee could not produce details of the transactions with the following persons:-
(a) A. Suresh Kumar (b) S. Kulandaian (c) TR. Subramanian (d) R. Karuppiah (e) RM.CT. Ramanathan Chettiar
ITA Nos.1731 & 1871/2014 :- 7 -:
Though assessee filed confirmation letters from the above persons. Ld. Assessing Officer noted that Shri. R.Karuppiah was only an office assistant of the assessee and he had not advanced any amount to the assessee. As per ld. Assessing Officer the confirmation letter of Shri.
S. Kulandaian, did not give correct particulars. Similar discrepancies were found by the Assessing Officer in confirmation relating to others also. Thus, according to ld. Assessing Officer explanations furnished by the assessee could not be believed. He held that assessee was unable to produce satisfactory evidence for the debit and credit entries in the bank account. Relying on the judgment of Hon’ble Apex Court in the case of Kale Khan Mohammad Hanif vs. CIT 50 ITR 1 and Roshan Di Hatti vs. CIT 107 ITR 938, ld. Assessing Officer held that onus was on the assessee to prove source for the money claimed to have been received by him. Further, as per ld. Assessing Officer claim of the assessee that withdrawals from the bank were recycled was never substantiated with evidence. He treated the entire cash deposits of �3,67,75,800/- as unexplained income of the assessee, invested in money lending business and made an addition u/s.69A of the Act.
Aggrieved, assessee moved in appeal before ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that the addition was purely based on imaginative figures. Relying on the judgments of Hon’ble Apex Court in the case of Poona Electric
ITA Nos.1731 & 1871/2014 :- 8 -:
Company vs. CIT 57 ITR 521, State Bank of Travancore vs. CIT 158 ITR 102 and Udayan Chinubhai vs. CIT 111 ITR 584, assessee contended that real income alone could be taxed and every receipt could not be considered as income. Ld. Commissioner of Income Tax (Appeals) after considering the submissions of the assessee held that ld. Assessing Officer could not bring out any material to prove any money lending business being carried on by the assessee. As per ld. Commissioner of Income Tax (Appeals) credits in the bank account were spread throughout the year and preceded by debits representing withdrawal of funds. According to him, ld. Assessing Officer erred in considering only the credits disregarding the debits. Relying on the decision of Bangalore Bench of the Tribunal in the case of Dr. M.
Somashekar vs. CIT (2010) 5 ITR 129, ld. Commissioner of Income Tax (Appeals) held that additions at the best had to be limited to the peak credit appearing in the bank account which came to �18,12,888/-. Further as per ld. Commissioner of Income Tax (Appeals) assessee c only be deemed as a commission agent and commission of 1% of total deposits could be considered as reasonable income earned by him. The total deposits being �3,67,75,800/-, a further addition of �3,67,758/- was also made by the ld. Commissioner of Income Tax (Appeals). Thus, he sustained aggregate addition of �21,80,646/- and deleted the balance of the addition.
ITA Nos.1731 & 1871/2014 :- 9 -:
Now before us, ld. Departmental Representative strongly assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that existence of money lending business was proved by the ld. Assessing Officer and accepted by the assessee. According to him, aggregate deposits �3,67,75,800/- with the bank account represented investment of the assessee in his money lending business and no explanation was offered for the source thereof. According to him, ld. Commissioner of Income Tax (Appeals) had applied the peak credit principle when assessee could not show that the deposits were made out of earlier withdrawals.
8. Contra, and in support of its own appeal, ld. Authorised Representative submitted that ld. Commissioner of Income Tax (Appeals) though he correctly applied peak credit principle erred in sustaining additions to the extent of � �21,80,646/-. As per ld. Authorised Representative presumption that assessee had earned agency commission of �3,67,758/- was incorrect.
We have considered the rival contentions and perused the orders of the authorities below. It is not disputed by the Revenue that assessee had both cash deposits as well as cash withdrawals in his bank account with Axis Bank accounts with Pudukkottai and T. Nagar Branch. Though ld. Assessing Officer had listed out the major transactions at paragraph 4 of the assessment order, a date wise
ITA Nos.1731 & 1871/2014 :- 10 -: analysis of the bank accounts were not done. Assessee can always say that cash deposits in the bank account had come out of an earlier cash withdrawal as long as the time interval between the withdrawals and deposits are not so significantly substantial to disbelieve the source.
Whether the assessee was carrying on any money lending business, has no relevance when an assessment is made considering the amounts deposited in the bank accounts. However, in our opinion cash deposits alone cannot be the subject of an addition ignoring the cash withdrawals. Hence, finding of ld. Commissioner of Income Tax (Appeals) that peak credit of �18,12,888/- alone could have been considered for the addition cannot be faulted. In so far as transactions other than cash are concerned, it may be true that assessee was earning commission from money lending. However, the finding of the ld. Commissioner of Income Tax (Appeals) that assessee was earning 1% commission of the deposits in the bank account was only a surmise. Even if there were some commission earnings it gets subsumed in the peak credit of �18,12,888/- considered for addition.
The further addition of �3,67,758/- was not justified in the fact and circumstances of the case, such addition stands deleted.
In the result, appeal of the Revenue is dismissed whereas
ITA Nos.1731 & 1871/2014 :- 11 -: that of the assessee is partly allowed.
Order pronounced on Wednesday, the 5th day of April, 2017, at Chennai.