DR. R.KUMUDHA RATHNA (LAW),CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

Assessment year 2010-11

For the assessment year 2010-2011 the assessee had raised several grounds in her appeal, however the cruxes of the issues are as follows:-

1) The Ld. CIT (A) had erroneously confirmed the order of the Ld. AO who had treated the advance amount of Rs 40 lacks received by the assessee towards sale of her immovable property as income from undisclosed source and thereby made addition of Rs. 40,36,000/- & 16,75,750/- which is nothing but deposits and re-deposits after withdrawing from the same amount of Rs. 40 lacks received as advance.

2) The Ld. CIT(A) had erred in confirming the order of the Ld.

AO who had made addition of Rs. 3,85,870/- towards unexplained cash deposits being the cheque received from M/s Sriram Chits against chit contribution.

Assessment year 2011-12 3. For the assessment year 2011-12 also, the assessee has raised several grounds in her appeal, however the cruxes of the issues are as follows:-

1) The Ld. CIT (A) had erroneously confirmed the order of the Ld. AO who had treated the balance amount of Rs 30 lacks received by the assessee towards sale of her immovable property as income from undisclosed source and thereby made addition of Rs. 30,91,200/- & Rs.

12,75,113/- which is nothing but deposits and re-deposits after withdrawing from the sale consideration deposited in the bank account.

2) The Ld. CIT(A) had erred in confirming the order of the Ld. AO who had denied the claim of deduction u/s.54 of the Act to the assessee. 3) The Ld. CIT(A) had erred in confirming the order of the Ld.

AO who had made addition of Rs.3,72,500/- being the bank interest received by the assessee by holding that the same is not disclosed in her return of income.

During the course of the assessment proceedings it was noticed by the Ld. AO that the assessee had made deposits in her bank account for both the assessment years as follows:-

Amount A/Y Year Details of deposit Date of deposit (Rs.) Cash deposit 16,75,750 Fixed deposit 40,36,000 (45,65,000-5,29,000 2010-11 withdrawals) Cheque received from 3,85,870 M/s. Sriram Chits 60,97,617 TOTAL 12/04/2010 19,200 15/06/2010 23,000 13/07/2010 33,000 13/08/2010 46,000 2011-12 Cash deposits 09/10/2010 50,000 01/11/2010 10,00,000 08/11/2010 20,000 19/01/2011 10,00,000 19/02/2011 9,00,000 30,91,200 TOTAL 2011-12 Cheque deposit 12,75,113 TOTAL 12,75,113 5.1. With respect to the addition of Rs.40,36,00/- and Rs.16,75,750/- for the assessment year 2010-11, it was explained by the assessee that they were out of the deposits and drawings from the advance received from Shri R. Shanmugam, S/o. Ramraj amounting to Rs.40 lakhs during the relevant assessment year towards the sale of her immovable property. In order to verify the claim of the assessee the Ld. AO had summoned Shri. R.Shanmugam u/s. 133(6) of the Act. Shri R.

Shanmugam responded to the summon by submitting a letter which stated as follows: 1. “Myself and my persons are doing real estate business as brokers & dealers. 2. The said property was purchased not for our own use. We have paid Rupees Seventy Lakhs (Rs.70,00,000/-) in installments towards receipt acknowledgement. 3. We, several persons joined together are doing this business and the income earned was less than tax assessable income. 4. Even for small profits we sell the property to a buyer and making him as our nominee. We pay the sale amount to the seller and get receipts for the same. 5. We do not have bank account and income tax assessment. We receive amount from nominee and pay the same to seller….”

However the Ld. AO rejected the submission of Shri R. Shanmugam by observing as under: 1) Shri Shanmugam had not furnished any evidence for making such huge payment of Rs.40 lakhs as advance for the sale transaction.

2) Shri Shanmugam had not mentioned the name of the person who purchased the property.

3) Shri Shanmugam has also not mentioned from whom he received the amount of Rs.40 lakhs.

4) Shri Shanmugam has also not mentioned the name of other persons / intermediaries involved in the transaction.

5) No documentary evidence was furnished by Shri

Shanmugam such as agreement copy, copies of receipts for advance given and source of such advance.

After rejecting the submission of the Ld. AR, the Ld. AO further observed that the onus was on the part of the assessee to prove the capacity and creditworthiness of the person who had advanced the money to the assessee towards the sale transaction. Since the assessee could not furnish any other evidence in support of her claim that the amount of Rs.40 lakhs was received by her as advance for sale of her immovable property, the Ld. AO added the following cash deposits in the hands of the assessee as unexplained income u/s. 68 of the Act for the assessment year 2010-11 :- i) Cash deposit 16,75,750 ii) Fixed deposit (45,65,000-5,29,000 40,36,000 withdrawals) iii) Cheque received from M/s. Sriram 3,85,870 Chits

Similarly for the assessment year 2011-12, also the Ld. AO made addition of Rs.30,91,200/- and Rs.12,95,113/- u/s. 68 of the Act, rejecting the contention of the assessee that she has received Rs.30 lakhs during the relevant assessment year being the balance portion of the sale consideration of her immovable asset and the amount of Rs.30,91,200/- and Rs.12,95,113/- were out the sale proceeds which was deposited and re-deposited after withdrawal.

5.2 On appeal the Ld. CIT confirmed the order of the Ld. AO accepting the findings of the Ld. AO.

5.3 Before us, the Ld. AR reiterated the submissions made before the Revenue authorities on the earlier occasions and they are summarized herein below :-

1) The assessee had received Rs.40 lakhs as advance during the assessment year 2010-11 and balance amount of Rs.30 lakhs during the assessment year 2011-12 towards the sale of her immovable property for Rs.70 lakhs.

2) The entire amount was received from Shri R. Shanmugam on various dates for which the assessee had endorsed in her letter head from the period 27.04.2009 onwards to 16.12.2010.

3) Shri R. Shanmugam had initially confirmed the transaction before the Revenue Authorities and had acknowledged for having paid Rs.70 lakhs to the assessee vide his letter dated 14.12.2012 to the Ld. AO in response to the letter received by him u/s. 133(6) of the Act.

4) The assessee did not have any other source of income other than salary income by virtue of her employment as lecturer in Tamil Nadu Dr. Ambedkar Law University,

Chennai.

5) Shri R. Shanmugam and his associates were dealing in real estate and they had induced the assessee to sell her immovable property to them.

6) Since the assessee was desperate to sell her immovable property she was lured by the real estate agents and had agreed to accept the sale consideration by part payments.

7) The entire cash transaction was made by Shri R. Shanmugam to the assessee. 8) The assessee had acknowledged in writing to Shri R.

Shanmugam for having received the entire sale consideration witnessed by his associates.

9) Thereafter Shri R. Shanmugam requested the assessee to execute the sale deed in favor of the persons with whom he had subsequently sold the property.

10) The assessee had no control on the sale value declared in the sale deed because the same was prepared by the purchasers of the immovable property conniving with Shri

R. Shanmugam and his associates. 11) The entire amount of sale considered received from Shri R. Shanmugam was deposited in the bank account of the assessee.

12) The assessee had received the amount of Rs.70 lakhs from Shri R. Shanmugam as detailed below:

Date Amount (Rs.) 27.04.2009 1,00,000 06.06.2009 4,00,000 16.07.2009 5,00,000 03.09.2009 10,00,000 30.10.2009 5,00,000 25.11.2009 5,00,000 07.02.2010 10,00,000 23.07.2010 10,00,000 21.10.2010 10,00,000 16.12.2010 10,00,000 ----------------- TOTAL 70,00,000 ==========

The Ld. AR further submitted before us that the entire amount of Rs.70 lakhs received by the assessee was from Shri R.

Shanmugam towards sale of her immovable property and she had no other source of income. It was therefore pleaded that the entire amount of Rs.70 lakhs may be treated as sale proceeds of her immovable property and not as income from undisclosed source.

5.4 The Ld. DR on the other hand argued in support of the orders of the Revenue authorities and pleaded that their orders may be confirmed by treating the amount of Rs. 40,36,000/- & 16,75,750/- as income from undisclosed source for the assessment year 2010-11 and Rs.30,91,200/- & Rs.12,75,113/- as undisclosed income for the assessment year 2011-12.

5.5 We have heard the rival submissions and carefully perused the material on record. From the facts of the case, it is apparent that the assessee is employed as lecturer and earning only salary income. There is no scope for the assessee to earn income from any other source. The Revenue has also not brought out any materials on record to suggest that the assessee has a potential to earn income from any other source. During the assessment year 2010-11 and 2011-12, she had indulged in sale of her immovable asset which is not in dispute. It is also apparent that Shri R. Shanmugam was acting as intermediary along with his associates. During the relevant assessment years 2010-11 and 2011-12 the assessee has deposited Rs.70 lakhs in her bank account which she claims it to have received from Shri R.

Shanmugam with respect to the sale of her immovable property.

When the Ld. AO summoned Shri R. Shanmugam u/s. 133(6) of the Act vide letter dated 14.12.2012 to ascertain the facts, he had replied admitting the amount of Rs.70 lakhs being paid by him to the assessee towards sale of her immovable asset. However, all through he has eluded from appearing before the Revenue authorities. Even when the Tribunal had directed the Ld.AO vide order dated 6th October 2016 to find out about the existence of Shri R. Shanmugam and summon him in person for enquiry, the Revenue had failed to do so. The relevant portion of the order of the Tribunal is reproduced herein below for reference:- “2. Apparently, the certified copy issued by City Civil Court in OS No.2422 of 2013 shows that Shri R. Shanmugam is first Defendant. Therefore, this Tribunal is of the considered opinion that the Assessing Officer shall examine the certified copies issued by City Civil Court, Chennai in OS No.2422 of 2013 and also summon the said Shri R. Shanmugam for personal examination and thereafter file a report before this Tribunal about the existence of Shri R. Shanmugam and the payment of ₹70,00,000/- made to the assessee. Accordingly, the Assessing Officer is directed to examine the certified copies issued by City Civil Court, Chennai in OS No.2422 of 2013 in which the said Shri R. Shanmugam is the first defendant and also summon the said Shri R. Shanmugam in person for personal examination and thereafter file a report before this Tribunal about the existence/availability of Shri R. Shanmugam and payment of ₹70,00,000/- to the assessee on or before 05.12.2016 after serving a copy of the report to the assessee. After receipt of copy of the report of the Assessing Officer, it is open to the assessee to file objection, if any, before this Tribunal on or before 21.12.2016. The Registry is directed to post the appeal for further hearing on 29.12.2016.”

The Revenue in response to the order of the Tribunal has only submitted an affidavit from Shri R. Shanmugam dated 14/11/2016 which stated as under:- “I R.Shanmugham s/o.Ramaraj aged about 41 years presently residing at 6, Chenna Krishna street, Shevapet, Salem -2 solemnly affirm and state as follows; I am engaged as a real estate broker. I have been in this trade for over 10years. Due to the constraints in the trade. I am no more engaged in this line of business. Dr.Kurnudha Rathna along with her father Dr.S.T.Rathna Sababathv residing at 104, Nagarjuna apartments, 12/36 , Raman street, T.Nagar, Chennai - 600017 approached me to sell the piece of land at Causeway road, Gugai, Salem -6 in all measuring 4822 Sq.ft. I along with the two other friends arranged the sale of this property to S.D.Kalaiamudhan and five others residing at Syed Ali street, Salem 9. After the initial contact the owners of the land Dr.Kumudha Rathina has not contacted me and I learnt that the property was sold to S. Kalaiamudhan for 24.11Lacs. I also learnt that the original suit filed by the said Dr.Kumudha Rathina in the City Civil court has been dismissed with cost. I submit that a detailed enquiry was made and a statement was recorded from me by the Income tax Authorities at Salem in connection with the sale of this property. I am a Diabetic crippled with arthritics and I am unable to travel outside Salem whatever I have deposed in this Affidavit is true and correct to best of my knowledge and belief.”

5.6 From the above it is apparent that Shri R. Shanmugam has retracted from his earlier admission and further he is shying away from appearing before the Revenue. It also appears that the Revenue is not seriously interested in examining Shri R.

Shanmugam. After evaluating all these facts we do not understand as to why the Revenue is shielding Shri R.

Shanmugam by even doubting his existence instead of physically summoning him for enquiry. No doubt, the onus is on the assessee to prove the creditworthiness and identity of the person from who she had received advance amount of Rs.70 lakhs. But in this case, the assessee had identified and established the existence of the intermediary Shri R. Shanmugam who had transacted the sale of her immovable property. Further from the facts of the case, it appears that Shri R. Shanmugam is a seasoned real estate agent who has financial ability to purchase immovable property by investing from his own source or from the amounts collected from his syndicate with an intention to resell the same at a higher price. Further in real estate transactions predominantly the actual sale consideration is not mentioned in the sale deed to avoid registration/stamp fees and further there is every possibility of on-money transactions. Instead of thoroughly investigating the middlemen who deal in real estate transactions amassing huge amount of profit and often generating unaccounted cash, the Revenue has taken a short cut by taxing the gullible assessee, who has been under the clutches of experienced real estate dealers. In fact they even went to the extent of certifying that there was no person in the name of Shri R.

Shanmugam. These findings of the Revenue are perverse leading to total miscarriage of justice. The Ld. AO had also not bothered to examine the actual purchaser of the property. Considering these facts and circumstance of the case, we are of the considered view that the entire amount of Rs.70 lakhs received by the assessee is from the sale proceeds of her immovable property and not from any other source. Therefore, we hereby direct the Ld. AO to treat the entire amount of Rs.70 lakhs as receipt from sale of her immovable property. Since the assessee has submitted before us that for the assessment year 2010-11 the amount of Rs.40,36,000/- & Rs.16,75,750/- and for the assessment year 2011-12 the amount of Rs.30,91,200 & Rs.12,75,113/- are deposits resulting from the sale proceeds received by the assessee amounting to Rs.70 lakhs and also from own savings, we hereby remit back the matter to the file of the Ld. AO in order to examine the same by verifying the cash flow statement and the bank accounts which are to be submitted by the assessee before the Ld. AO promptly and there after decide the issue in accordance with law and merit.

We also caution the assessee to submit the cash flow statement and the bank statement before the Ld. AO promptly failing which the Ld.AO shall be at liberty to pass appropriate order based on the materials available on record and our above findings with respect to the sale of immovable asset of Rs.70,00,000/-.

Accordingly Ground No.1 of the assessment year 2010-11 and 2011-12 are disposed off.

During the course of assessment proceedings, it was observed by the Ld. AO that there was a credit of Rs.3,85,867/- in the bank account of the assessee. It was explained by the assessee that the amount was received from M/s. Sriram Chits Tamil Nadu Pvt. Ltd., being her contribution in the chit fund which had matured. However, the Ld. AO treated the same as income from undisclosed source. On appeal, the Ld. CIT(A) also confirmed the order of the Ld. AO. Before us, the Ld. AR submitted that the assessee had received her chit contribution made during the earlier few years which had matured during the relevant assessment year. It was therefore argued that the assessee had sufficient source for the amount contributed to the chit fund which was subsequently received back from M/s. Sriram Chit Tamil Nadu Pvt. Ltd., on maturity. The Ld. AR did not have any objection for the matter to be remitted back to the file of Ld. AO for examining these facts. Though Ld. DR vehemently opposed to the submission of the Ld. AR, we are of the considered view that the facts submitted by the Ld.AR before us requires to be verified. Therefore in the interest of justice we remit back the matter to the file of Ld. AO for de-nova consideration.

The assessee had claimed to have sold immovable property along with her mother for sale consideration of Rs.70 lakhs.

However she did not produce the sale deed before the Ld.AO Therefore the Ld. AO obtained the sale deed from the sub- registrar office document number 1312 of 2011 dated 14.02.2011.

On examining the sale deed, it was noticed that the sale consideration mentioned in the sale deed was Rs.24,11,000/- against which Rs.14,11,000/- was received by the assessee and her mother by cheque and the balance amount of Rs.10 lakhs by cash. Therefore, the Ld. AO opined that the sale consideration of Rs.70 lakhs stated by the assessee cannot be taken into consideration. Further the assessee had claimed to have invested the sale proceeds of her immovable asset in a residential property amounting to Rs.53,35,370/- vide sale deed registration No.2599 of 2011 dated 28.11.2011 in SRO, Adyar and further incurred expenditure amounting to Rs.17,82,130/-, thus aggregating to Rs.71,17,500/-. Against the same the assessee claimed exemption u/s.54F of the Act. However the Ld. AO rejected the claim of deduction u/s. 54F of the Act since the assessee had neither invested the entire sale proceeds before the due date of filing the return U/s. 139(1) of the Act nor remitted the sale proceeds in any nationalized bank under the capital gains savings scheme account. On appeal, the Ld. CIT(A) dismissed the appeal of the assessee as the assessee had not made any submission before him at the time of hearing the appeal. Before us the Ld. AR submitted that the assessee had invested her entire sale proceeds before the due date of filing the return u/s. 139(4) of the Act. He further relied on the various decisions wherein it was held that the due date for the purpose of depositing the sale proceeds in the nationalized bank under the capital gains scheme account should be taken as prescribed u/s.139(4) of the Act. Gists of the decisions cited by the Ld. AR are as follows:

1) ITO v. Smt. Swarnambal Dayashankar in ITA No.1472/Mds/2012, Chennai “C” Bench of the Tribunal dated 24-01-2013. 2) CIT v. Ms. Jagriti Aggarwal (2011) (339 ITR 610) (P&H) 3) Mrs. Esther Christopher Mascarenhas v. ITO (2011) (9 taxmann.com 99) (Mum.ITAT (‘I’ Bench)

7.1 We find merit in the contention of the Ld.AR. On perusing the above mentioned orders cited by the Ld. AR, we find that the Chennai bench of the Tribunal, Mumbai bench of the Tribunal & various Hon’ble High Courts had consistently held that the specified period for the purpose of depositing the sale proceeds in the capital gain scheme account in any nationalized bank, should be taken as the due date of filing the return as provided u/s.139(4) of the Act. Since in the given case before us, the assessee had purchased the new asset by investing the entire sale proceeds of Rs.70 lakhs on 28.11.2011 which is well before the due date of filing the return of income u/s. 139(4) of the Act, as held by the Tribunal & Hon’ble High Courts on several earlier occasions, the assessee deserves the benefit u/s.54 of the Act. Therefore, we hereby direct the Ld. AO to grant deduction u/s.54 of the Act to the assessee for the entire sale proceeds of Rs.70 lakhs, provided other statutory requirements are complied.

It was observed by the Ld. AO, that the assessee had received bank interest amounting to Rs.3,74,062/-. However the assessee had admitted only a sum of Rs.1,562/- as the bank interest received by her in her return of income. Therefore the Ld.AO made addition of Rs.3,72,500/- under the head income from other sources. Before the Ld. CIT(A), the assessee did not furnish any evidence to disprove the finding of the Ld. AO.

Therefore, he confirmed the addition made by the Ld. AO.

However before us, the Ld. AR submitted that the amount of Rs.3,72,500/- was disclosed in the revised return filed by the assessee and the tax due for the same was paid. He therefore argued that the addition made in the hands of the assessee would amount to double taxation. Though the Ld. DR opposed to the submissions of the Ld. AR, we are of the considered view that in the interest of justice the matter requires to be reexamined by the Ld. AO. Therefore we remit the matter back to the file of Ld. AO in order to verify the claim of the Ld. AR, needless to mention that if the assessee had already included the amount of Rs.3,72,500/- in her revised return of income and paid the due tax, addition once again in the hands of the assessee is not warranted. It is ordered accordingly.

Order pronounced in the court on the 03rd March, 2017