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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is directed against order of the Commissioner of Income-tax (Appeals)-2, Chennai in dt 11.11.2015 for the assessment year
ITA No.199/Mds/2016. :- 2 -:
2009-2010 passed u/s.143(3) r.w.s. 147 and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
The assessee has raised the grounds challenging the order of Commissioner of Income Tax (Appeals) in confirming the addition of �15,00,000/- credited to the assessee’s bank account received from M/s. Cauvery Stone Impex P. Ltd as repayment of loan advanced in the assessment year 2005-06 by assessee through partnership sister concern M/s. Cauvery Enterprises. The second ground being Commissioner of Income Tax (Appeals) erred in confirming the addition of �1,68,000/- credited to the assessee’s bank account as rent though offered by the assessee’s husband in his income tax return for the same assessment year.
The Brief facts of the case that the assessee is an individual and filed her income tax return on 03.08.2009 with total income of �6,67,340/- and the assessment was completed u/s.143(3) of the Act on 02.08.2011 accepting returned income. Subsequently, the ld. Assessing Officer found that assessee has not disclosed true and full particular of credits in the bank account in the return of income and issued notice u/s.148 of the Act. In compliance to notice, the ld. Authorised Representative appeared and submitted information. The ITA No.199/Mds/2016. :- 3 -:
ld. Assessing Officer found in assessee’s Canara Bank Account No.13784, aggregate amount of �16,68,000/- was credited on various dates in the financial year 2008-09 and issued show cause notice for explanation and the assessee furnished clarification and details referred at para 5 by the Assessing Officer. The Assessing Officer considered the assessee submissions duly supported by the evidence explaining that amount pertaining to advances made in the financial year 2004-2005. The Assessing Officer called for the assessment records of assessment year 2005-06 and examined the submission and found that the assessee has not disclosed loans advances to the company in her income tax return. The assessee explained the source for advance through letter dated 12.12.2013 that assessee is a partner of the firm M/s. Cauvery Enterprises and the firm has made certain advances to M/s. Cauvery Stone Impex Pvt. Ltd. Subsequently, firm has transferred the unsecured loan account to assessee and the advance in the books of account adjusted. The assessee substantiated her financial transactions with ledger copy of M/s.
Cauvery Stone Impex (P) Ltd in the books of M/s. Cauvery Enterprises.
But the ld. Assessing Officer observed that assessee has not advanced money directly to M/s. Cauvery Stone Impex (P) Ltd and the transaction was only a book entry and such transactions should be ITA No.199/Mds/2016. :- 4 -: reflected in the books of account of the assessment year 2005-06.
The assessee has offered only interest income of �6,37,000/- and assessee has not offered any share income of partnership firm. The ld. Assessing Officer on surmises disbelieved the transactions and made an addition of �15,00,000/-. Further, the ld. Assessing Officer found �1,68,000/- credited in the bank account of the assessee over a period during financial year 2008-2009 and assessee explained the amount pertaining to rental income of the husband credited in her bank account. The assessee submitted rental agreement to substantiate the bonafides of source and the ld. Assessing Officer verified the clauses, books of account and deposits but interpreted that the assessee could not establish the deposits in bank account with clarity as the amount was received from tenants of husband, further there is no agreement or obligation to deposit such rental income in assessee’s bank account. The Assessing Officer called for the income tax return of husband Shri. Asaithambi and found satisfied with rental income offered by husband. But the ld. Assessing Officer disbelieved the credits for reasons and treated �1,68,000/- as income of the assessee and passed assessment order u/s.143(3) r.w.s. 147 of the Act dated 25.03.2014. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).
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In the appellate proceedings, the ld. Authorised 4.
Representative of assessee reiterated the facts and argued the grounds and substantiated his arguments with the supporting evidence of bank credits. The ld. Assessing Officer has prime facie doubted the genuiness of transaction. The ld. Commissioner of Income Tax (Appeals) perused the grounds and aggregate amount of �15,00,000/- is credited in bank account pertains to the assessee as refund of advance made in earlier years and observed at para 7.1.2. as under:-
M/s. Cauvery Enterprises, the partnership firm in which the appellant Smt. Seetha Lakshmi along with three others Viz. Smt. Raji Veeramani, Smt. Latha Sekhar and Smt. Vedavalli Kumar, are partner had advanced sums of money, by crediting the same in the accounts of the partners in the books of M/s. cauvery Stone Impex (P) I.td. It may noted that these four partners are also Directors of the said company.
The following are the amounts debited to the firms account in the books of the company
March, 25, 2005 ₹1,00,00,000/- Smt. Raji Veeramani ₹1,00,00,000/- Smt. Latha Sekar ₹1,03,54,378/- Smt. Seethalakshmi Asai ₹1,00,00,000/- Smt. Vedavalli Kumar The corresponding credit entry in to the assessee's account (and the accounts of the other 3 Partners, also stated to be the Directors of the Co.)with the company is as follows:
March, 25, 2005 (details hereunder) Jrnl. 1,03,54,378.10
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₹4,03,54,378.10 Cauvery Enterprises ₹1,00,00,000/- Smt. Raji Veeramani (-) ₹1,00,00,000/- Smt. Latha Sekar (-) ₹1,00,00,000/- Smt. Vedavalli Kumar (-) 2. The appellant states that she was in receipt of share income from the partnership firm, during FY. 2004-05. The appellant makes a reference to the memo of taxable income filed alongwith Return of Income of the said year wherein the fact of receiving share income from the firm which is exempt u/s.10(2A) is shown. However, it is seen that the quantum of such income is not reflected.
3. The appellant also states that loan amounts are generally not reflected in the Return of Income. ‘’ The ld. Commissioner of Income Tax (Appeals) relied on the findings of the Assessing Officer and credits in the books of account of the company as on 25.03.2005 supported with the ledger copies and made his observation at para 7.1.3. and dismissed the assessee’s ground.
From the copies of various ledger accounts filed during the course of appellate proceedings it is seen that the following points are clear: i) There has been a credit of an amount of Rs.1,03,54,378.10/- on 25.03.2005 to the appellant's account in the books of the company. The same was transferred by way of book entries made on the same date, from the appellants account as a partner in the firm. ii) Credit entries of Rs.l,25,000j- per month (totalling Rs.15 Lakh for the year) have been debited to account No.2566 with lOB, Esplanade and credited to the assessee's 5B account with Canara Bank, through cheques throughout F.Y. 2008-09 i.e. the year in question. The debit as well as credits are duly reflected in the ledger account of the assessee in the books of the company as well as in the Canara Bank statements (SB bank of the appellant).
ITA No.199/Mds/2016. :- 7 -: iii) The appellant claims that these credits, totalling Rs.15 Lakh, represent drawinqs made by the appellant from out of the loan amount transferred to the company, during F.Y. 2004-05. iv) It is strange that the so- called 'drawings' have been credited as identical, fixed amounts of Rs.1,25,000/- per month. Against some of the entries (as seen from the appellants accounts in the books of the company), the letters 'jjk' are mentioned alongwith the letters 'RD'. v) Although there is no doubt about the source of these credits being the bank account of the company with lOB Esplande, the appellant has failed to establish the co- relation between the loan channelized/credited in the appellant's name on 25.03.2005 with these credit entries appearing now, during Fin. Year 2008-09. vi) The possibility that the appellant, a director in the company M/s. Cauvery Stone Impex Pvt. Ltd, could have been compensated by way of certain fixed amounts as remuneration by the company, cannot be ruled out. The fact remains that only share income from firm is exempted in the hands of the appellant as a partner of the firm. The appellant is liable to tax on income from all other channels/sources received by her.
CONCLUSION : As stated earlier, the appellant has failed to establish the co- relation, if any, between the loan credited in her name in the books of the company on 25.03.2005 and the amount of Rs.15 lakhs presently credited to her SB Account. In the absence of satisfactory explanation the Assessing Officer has rightly brought the sum of Rs.15 lakhs, to tax’’.
On the issue of credit of �1,68,000/- in financial year 2008-09, the ld. Authorised Representative submitted that it pertains to assessee’s husband rental income credited to account and amount was withdrawn for expenses. Further, the transaction and source has been explained with necessary evidence and the same amount cannot be ITA No.199/Mds/2016. :- 8 -: subjected to double taxation. The ld.Commissioner of Income Tax (Appeals) highlighted the observations of the Assessing Officer as credit worthiness and genuiness of the transaction is not proved and dismissed the ground. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal.
Before us, the ld. Authorised Representative of assessee 5. argued the facts and reiterated the submissions of the assessment and appellate proceedings with evidences filed with the lower authorities.
The first issue being the aggregate credits of �15,00,000/- in the assessee’s bank account, out of the loans advanced by the assessee in assessment year 2005-06 were the advances was routed through partnership firm M/s. Cauvery Enterprises and the same was repaid by the M/s. Cauvery Stone Impex (P) Ltd during the financial year 2008-
The ld. Commissioner of Income Tax (Appeals) observed the amount as remuneration based on finding of the Assessing Officer.
Prime facie it is clear transaction of money transfer and not book entries. The assessee has produced evidence pertaining to assessment year 2005-06 and 2009-10 were the transactions are materialized. The ld. Authorised Representative filed paper book to substantiate the entries with copies of income tax return of partnership firm and ledger account copy of M/s. Cauvery Enterprises
ITA No.199/Mds/2016. :- 9 -: in the books of M/s. Cauvery Stone Impex (P) Ltd, and the ledger of assessee account in the books of the M/s. Cauvery Stone Impex (P)
Ltd for the assessment year 2005-06 and from 01.04.2006 to 31.03.2009 and flow chart explaining the routing of the transactions through partnership firm. The aggregate credit of �1,68,000/- is rental income offered by the assessee’s husband in the computation of income statement and supported with confirmation and prayed for allowing the appeal.
On the other hand, the ld. Departmental Representative 6. relied on the order and findings of Commissioner of Income Tax (Appeals) and opposed the grounds.
We heard rival submissions, perused the material on record 7. and evidence. On the issue of aggregate credit of �15,00,000/- in assessee account over a period of time, the assessee has explained the modus of transaction of loan to the company and subsequenlty, refunded to the assessee during the finanical year 2008-09. The ld. Authorised Representative drew our attention to the letters and replies filed before the Assessing authorities on the dipsuted issue. The ld. Commissioner of Income Tax (Appeals) has dealt on the source for ITA No.199/Mds/2016. :- 10 -: advances made in assesment year 2005-06 were the assessee was a partner of M/s. Cauvery Enterprises, which has advanced the amount to M/s. Carvery Stones Impex Pvt. Ltd in the financial year 2004-05 and the advance was reflected in the companies books of account. The assessee’s a partner and the share income of firm is exempted u/s.10 (2A) of the Act under the provisions of partnership firm share income is exempted u/s.10(2A) of the Act and any salary to working partner shall be taxable as business income The ld. Authorised Representative drew attention to page no.28 of paper book explaining circular of CBDT No.08/2014, dated 31st March, 2014. Further to strengthen genuineness and creditworthiness of the transaction. The assessee has filed ledger copy of M/s. Cauvery Stones Impex P. Ltd and M/s.
Cauvery Enterprises. The ld. Authorised Representative argued on transparency in repayment of amount wholly and exclusively by the company. We considering the financial transactions and income tax assessment details of M/s. Cauvery Enterprises and M/s. Cauvery Stones Impex P. Ltd and the bank account statements filed by the assessee in hearing proceedings , we are of the opinion that transaction of debits and credit entries and closing balance are to be verified by the Assessing Officer on genuiness of the advance and repayment. So, we set aside the order of Commissioner of Income Tax
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(Appeals) and remit the entire file to the Assessing Officer for re- examination to verify transaction as per financial statements. This ground of the assessee is allowed for statistical purpose.
On the second ground, the ld. Authorised Representative contention that property income was credited into assessee’s bank account on understanding with husband and same was offered to income tax assessment. The ld. Authorised Representative drew attention to the memo of income tax filed by the assessee’s husband were income from flat at Brown Stone Apartments, Mahalingapuram, Chennai �1,68,000/- was disclosed. The ld. Assessing Officer findings that credits in bank pertains to the assessee, irrespective of husband has offered in his income tax return, the rental income credits are reflected in the bank account at page 44 of the paper book and there is nothing on record to state that the Assessing Officer has made independent enquiry with tenants or confirmation from assessee’s husband but relied only on bank statement of the assessee.
Therefore, we are of the opinion that for limited purpose, the matter has to be remitted to the Assessing Officer to verify the Husband’s assessment as per the computation of income filed disclosing the rental income and if it is clarified, the Assessing Officer is directed to delete the addition and we set aside the order of Commissioner of ITA No.199/Mds/2016. :- 12 -:
Income Tax (Appeals) and remit the file to Assessing Officer. This ground of the assessee is allowed for statistical purpose.
In the result, the appeal of the assessee in ITA 9. No.199/Mds/2016 allowed for statistical purpose.
Order pronounced on Friday, the 20th day of May, 2016, at Chennai.