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Income Tax Appellate Tribunal, ‘D’ BENCH : CHENNAI
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 filled by assessee and Revenue respectively are directed against an order dated 02.06.2014 of the ld. Commissioner of Income Tax (Appeals)-V, Chennai for the impugned assessment year.
Facts apropos are that assessee earning income from salary 2. and income from other sources, had declared a total income of �5,21,490/- in his return. During the course of assessment proceedings, it was noted by the ld. Assessing Officer that assessee had cash deposits in bank account in Axis and Oriental Bank of Commerce. Claim of the assessee was that, he was carrying on a money lending business and the transactions appearing in his bank accounts were relating to such money lending activities. Assessing Officer was of the opinion that assessee could not explain the source for the loans granted by him in his money lending activities and also the cash balance as on 31.03.2010 which aggregated to �1,19,07,402/-. Assessing Officer took a view that entire cash balance and loans were outside the books of account. An addition of �1,19,07,402/- was made. & 2477/Mds/2014 :- 3 -:
Though assessee had stated that he was earning interest @9% per annum on the loans advanced, ld. Assessing Officer was of the opinion that a separate addition was not required as he was following investment method rather than income method. Ld. Assessing Officer also made a disallowance of �7,59,438/- claimed by the assessee as expenditure incurred for earning the interest income, for a reason that proof for each expenditure was not produced.
Aggrieved, assessee moved in appeal before ld. 4.
Commissioner of Income Tax (Appeals). The ld. Commissioner of Income Tax (Appeals) after going through the bank accounts and statements found that there were large numbers of debits appearing throughout the year in the bank statements and such debits reflected withdrawal of funds. According to him, Assessing Officer did not bring any material on record to establish that debtors and cash balance appearing in the books produced by the assessee really existed.
According to him, what was to be assessed was the peak credit appearing in the bank accounts and not investments shown by the assessee as loan to outside parties. In so far as, expenditure of �7,59,438/- was concerned, ld. Commissioner of Income Tax (Appeals) was of the opinion that Assessing Officer was justified in making the disallowance for want of evidence. Thus, he whittled down the addition & 2477/Mds/2014 :- 4 -: made by the Assessing Officer to the peak credit appearing in the bank statements, while confirming the disallowance of the expenditure.
Now before us, assessee is assailing the disallowance of expenditure, whereas revenue is assailing the application of peak credit method by ld. Commissioner of Income Tax (Appeals) against investment method adopted by the Assessing Officer. Ld. Departmental Representative submitted that assessee itself had admitted to the money lending business and produced books of account. According to him, the ld. Commissioner of Income Tax (Appeals), in such circumstances went wrong in directing adoption of the peaks credits method.
Per Contra, ld. Authorised Representative strongly supported 6.
the order of the ld. Commissioner of Income Tax (Appeals) in so far as it concerned adoption of peak credit as income. However, as per ld. Authorised Representative the disallowance of expenditure was confirmed by the ld. Commissioner of Income Tax (Appeals) without giving an opportunity to produce evidence.
We have considered the rival contentions and perused the 7. orders of the authorities below. It is not disputed that assessee had produced before Assessing Officer details of loans and advances given & 2477/Mds/2014 :- 5 -: by the assessee. Claim of the assessee before Assessing Officer was that, it was doing money lending business and the deposits in Axis bank and Oriental Bank of Commerce were transactions relating to money lending business. As against this, ld. CIT(A) had taken a view that Assessing Officer had not brought any evidence on record to establish the existence of debts and cash balance appearing in the records of the cash book. We are of the opinion that considering the lack of clarity with regard to the nature of books produced by the assessee and loans given by it, a fresh look by the ld. Assessing Officer is required. When assessee had produced books of account, it was the duty of the Assessing Officer to verify such books of account with the bank statements and give a detailed list of loans given by the assessee for which no source was there. As against this, ld. Commissioner of Income Tax (Appeals) went head to adopt the peak credit without making sufficient enquiry into the claim of the assessee that it was doing a money lending business. Assessing Officer had taken a view that assessee was doing ill organized money lending business and the claim of the expenditure was bogus. Whether organized or ill organized, it is the duty of the Assessing Officer to separate the wheat from the chaff and find the correct income which has to be assessed in the hands of the assessee, if at all there were if any. We therefore of the opinion that matter requires a fresh visit by & 2477/Mds/2014 :- 6 -: the Assessing Officer. We set aside the orders of lower authorities and remit the issue back to the file of the Assessing Officer for consideration afresh in accordance with law.
In the result, the appeal of the assessee and Revenue are allowed for statistical purposes.
Order pronounced on Wednesday, the 23rd day of November, 2016, at Chennai.