S.VENKATESAN,CHENNAI vs. ACIT, CHENNAI

This appeal of the assessee is directed against the order of CIT(A)-III, Chennai dated 28.02.2014 and pertains to Assessment Year 2000-01.

Shri S.Sridhar, the learned counsel for the assessee submitted that the first issue for consideration is sustaining the addition of Rs.6,25,000/- being the amount withdrawn from M/s.WSA Lines (I) P Ltd. Shri S.Sridhar, the ld. Counsel for the assessee submitted that in the return of income, the assessee claimed that a sum of Rs.6,25,000/- was withdrawn from M/s.WSA Lines (I) P Ltd. The Assessing Officer made addition under Section 68 of the Income Tax Act on the ground that the assessee could not produce any confirmation letter from the company for withdrawal of the money. The CIT(A) also confirmed the addition made by the assessing officer. According to the ld. Counsel for the assessee, an opportunity may be given to the assessee to produce the relevant material before the assessing officer for examination.

We have considered the rival submissions on either side and also perused the material available on record. The assessee claims that a sum of Rs.6,25,000/- was withdrawn from M/s.WSA Lines (I) P Ltd. However, the assessee could not file any material either before the Assessing Officer or before CIT (A) to support the claim of withdrawal. Now, the learned counsel for the assessee submits that an opportunity may be given to the assessee to produce the relevant material. This Tribunal is of the considered opinion that giving one more opportunity for producing the material before the Assessing Officer may not prejudice the interest of the revenue in any way. This Tribunal is of the considered opinion that given such an opportunity to the assessee would definitely promote the cause of justice. Therefore, by keeping the interest of justice in mind, the orders of the lower authorities are set aside and the addition of Rs.6,25,000/- is remitted back to the file of the AO. The AO shall re-examine the matter afresh in the light of the material that may be filed by the assessee and decide the same in accordance with law after giving reasonable opportunity to the assessee.

The next issue is with regard to the addition of Rs.2,22,220/- being the interest received from Kissan Vikas Patra while computing the taxable income. Shri S.Sridhar, the learned counsel for the assessee submitted that the assessee invested the funds in Kissan Vikas Patra. The Assessing Officer found that the interest accrued on the Kissan Vikas Patra was not offered for taxation. Accordingly, he computed the interest accrued on the Kissan Vikas Patra to the extent of Rs.2,22,220/- and added the same to the taxable income. According to the ld. Counsel for the assessee, the assessee had the option of offering the accrued interest on Kissan Vikas Patra either on yearly basis or at the time of maturity of the Kissan Vikas Patra. Therefore, the Assessing Officer is not justified in computing the accrued interest on yearly basis.

On the contrary, Shri P. Radhakrishnan, JCIT, the ld. Representative for the Department submitted that, admittedly, the assessee invested in Kissan Vikas Patra, though, the assessee claims that the interest accrued on the Kissan Vikas Patra would be offered for taxation on maturity of the Kissan Vikas Patra. There is no material available on record either before the Assessing Officer or before the CIT(A) that the assessee has offered the interest accrued on the investment in Kissan Vikas Patra on its maturity. In the absence of any material on record, according to the Department Representative, the CIT(A) has rightly confirmed the addition made by the AO.

We have considered the rival submissions on either side and also perused the material available on record. It is not in dispute that the assessee invested in Kissan Vikas Patra and interest accrued on such investment was not offered for taxable during the year under consideration. No doubt, this assessee is following mercantile system of accounting. The interest accrued on Kissan Vikas Patra was reinvested in the very same patra and it was not paid to the assessee. This Tribunal is of the considered opinion that when the assessee opted to offer the interest on Kissan Vikas Patra on its maturity, the same cannot be found fault by the authorities below. However, in the case before us, no material is available on record to suggest that the interest accrued on Kissan Vikas Patra was offered for taxation on its maturity.

The next issue arises for consideration is addition of Rs.5,00,000/- being the withdrawal said to be made from HUF Account. In the return of income, the assessee claimed that a sum of Rs.5,00,000/- was withdrawn from Shri Venkatesan (HUF). However, no material was appeared to have been filed before the Assessing Officer. Therefore, the Assessing Officer made an addition of Rs.5,00,000/-. On appeal by the assessee before the CIT(A), it appears that a remand report was called for from the Assessing Officer even in the remand proceedings, the assessee could not file any material to support the claim of withdrawal of money from Venkatesan (HUF) account. In view of the fact that the assessee could not produce any material, the CIT found that the assessee could not prove the source.

We have considered the rival submissions on either side and also perused the material available on record. Admittedly, an addition of Rs.5,00,000/- was made as unexplained money for want of material from the assessee. The assessee even though claims that a sum of Rs.5,00,000/- was withdrawn from HUF account, the same was not proved by necessary material. Giving one more opportunity for producing the material before the Assessing Officer would not prejudice the interest of the revenue in any way.

The next ground for consideration is with regard to addition of Rs.6,00,000/- said to be received from V.K.Pattammal. Shri S.Sridhar, the learned counsel for the assessee submitted that a sum of Rs.6,00,000/- was received from V.K.Pattammal. For want of material evidences, the Assessing Officer made addition of Rs.6,00,000/- to the taxable income. The CIT(A) also found that no material was produced to support the claim of receipt of Rs.6,00,000/- from Smt.V.K.Pattammal. According to the learned counsel, Mrs. V.K.Pattammal had fixed deposits in the bank account. The fixed deposit account was closed and the proceeds of the fixed deposit was paid to the assessee. The learned counsel further submitted that an opportunity may be given to the assessee to produce the details of the fixed deposit before the Assessing Officer.

We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the assessee claimed before the lower authorities that he received a sum of Rs.6,00,000/- from Smt.V.K.Pattammal. The source for V.K.Pattammal appears to be closure of the fixed deposit account. However, the details of the fixed deposit account was not available either before the assessing officer or before the CIT(A). When the assessee claimed that Mrs.V.K.Pattammal gave Rs.6,00,000/- from the proceeds of the fixed deposits, giving one more opportunity to the assessee to establish the source of receipt of money may not produce the interest of the revenue. This Tribunal is of the considered opinion that when the assessee claims that he is willing and ready to furnish the necessary material before the Assessing Officer, giving one more opportunity for producing the material before the Assessing Officer would not prejudice the interest of the revenue in any way. Hence, the orders of the lower authorities are set aside and addition of Rs.6,00,000/- is remitted back to the file of the AO. The AO shall re-examine the matter afresh in the light of the material that may be produced by the assessee and thereafter decide the same in accordance with law after giving a reasonable opportunity of being heard to the assessee.

The next issue arises for consideration is that addition of Rs.1,00,000/- said to be received from Shri V.S.Vasudevan. Shri S.Sridhar, the learned counsel for the assessee submitted that the assessee claimed before the assessing officer that he received a sum of Rs.1,00,000/- from Shri V.S.Vasudevan. In the absence of any confirmation letter from the said V.S.Vasudevan, the AO made addition and the CIT(A) has also confirmed the order of the AO. According to the learned counsel, the assessee has filed the confirmation letter before the CIT(A) and CIT (A) confirmed the order of the assessing officer on the basis of the remand report. The CIT(A) further observed that the confirmation letter was on similar format. According to the learned representative, the AO has not raised any doubt about the confirmation letter of Mr.V.S.Vasudevan. According to the learned counsel, it is open to the AO to summon the said Shri V.S.Vasudevan and examine the genuineness of transaction.

On the contrary, Shri P.Radhakrishnan, the learned representative for the department submitted that even though the assessee claimed before the AO that he received a sum of Rs.1,00,000/- from Shri V.S.Vasudevan, no material evidence was filed before the AO. Before CIT (A), the assessee has filed confirmation letter. The CIT (A) called for remand report from AO. The AO during remand proceeding found that the so called confirmation letters are in similar format. The same was written on the same date. Therefore, the CIT(A) found that the so called confirmation letter is only prepared for the purpose of producing before the authorities. The learned department representative submitted the body of the confirmation letter in all cases are similar. Therefore, there was a doubt, who has actually signed the confirmation letter. Therefore, according to the learned department representative, the CIT(A) has rightly confirmed the order of the assessing officer.

We have considered the rival submissions on either side and also perused the material available on record. Even though confirmation letter was filed before the CIT(A), he found that the confirmation letter filed by the assessee are in similar format and the same was prepared just for the sake of producing before the authorities. Before rejecting the claim of the assessee, the AO has not made any attempt to examine the so called creditor.

This Tribunal is of the considered opinion that the AO or CIT(A) should have summoned the creditor and found out whether he, in fact advanced money to the assessee. Such an exercise was not done either by AO or by CIT(A). Therefore, this matter needs to be re-examined by the AO.