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Income Tax Appellate Tribunal, “C ” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & 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)-4, Chennai in 15/2011-2012/CIT(A)-4, dt 27.10.2015 for the assessment year 2011-
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2012 passed u/s.143(3) and 250 of the Income Tax Act, 1961 (herein after referred to as ‘the Act’).
The assessee has raised the following grounds:-
‘’2. The CIT (Appeals) erred in sustaining the addition of ₹5,77,69,932/- u/s 69 of the Act made by the AO in the computation of taxable total income without assigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that the provisions of 69 of the Act had no application to the facts of the case and ought to have appreciated that the presumption of lending money based on the withdrawals from the bank accounts in overlooking the credits was wrong, erroneous, unjustified, incorrect and not sustainable in law.
4. The CIT (Appeals) failed to appreciate that the replies filed at the time assessment and the in the appellate proceedings were not considered and hence went wrong in recording the findings in this regard in paras 6 to 13 of the impugned order without assigning proper reasons and justification,
The CIT (Appeals) failed to appreciate that the alternative contention for considering peak credit from the bank accounts from the analysis of statement of account was not considered properly and ought to have appreciated that the misreading of decisions for rejecting the stand of the Appellant would vitiate his decision.
The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any other passed in violation of the principles of natural justice would be nullity in law’’.
The Brief facts of the case the assessee is an individual and engaged in the business of money lending and also in receipt of income
ITA No.2284/Mds/2015. :- 3 -: from house property and income from other sources and filed return of income on 07.09.2011 declaring total income of �3,40,130/-.
Subsequently, the case was selected for scrutiny and notice u/s.143(2) was issued. In compliance to notice, the ld. Authorised Representative of assessee appeared from time to time and filed details. On perusal of the financial statement, the ld. Assessing Officer has found that assessee is maintaining two separate bank accounts at AXIS bank and Indian Overseas Bank and there is inflow of funds in AXIS Bank �486/- lakhs and IOB �100/- lakhs. Out of this, cheques transaction were about �381/- lakhs, the assessee has maintaining books of account and in addition to books of account, the assessee was asked to prepare separate individual accounts in order to determine money lying with borrowers. In compliance to the ledger accounts, the ld. Authorised Representative of assessee filed detailed explanation on 24.01.2014 as under:-
‘’The crux of the reply dt 24.1.2014 filed by the authorized representative is reproduced below:
" (4) The assessee advances money both by cash as well as by cheque. Similarly, the collection of such advances are also by cash as well as by cheque. The amounts withdrawn from the bank are utilized for making the advances and the recoveries of the said advances made by cash are also redeposited into the bank account of the assessee only. (5) Thus, the withdrawals made by the assesee from his Bank account are recycled and deposited into the bank account by cash as well cheque. Consequently, the credits in the bank account are explained by the withdrawals from the bank account on earlier days by cash as well as by cheque" .
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The Assessing Officer is on the impression that assessee has failed to provide books of account and entire transaction in bank accounts are unexplained and excluded in balance sheet was filed. The Assessing Officer made calculation based on debits in account as under:-
(+)/ (-) Particulars Amount (�) Amount (�)
Debits into Axis Bank 4,87,39,833/- account Debits into IOB Bank 1,00,42,662/- account
Total Debits 5,87,82,495/
Less:- Loan outflow to 3,79,250/- Chithambaram during the year Less:- Loan outflow to Shankar 43,500/- during the year Less: Loan outflow to Sathya 1,02,439/- Plastics during the year
Less:- Fund outflow on account of 5,00,000/- drawings, minor expenses etc during the year Balance money lent by the 5,77,57,306/- assessee in excess of the amounts exhibited in the balance sheet Further, on considering the debits in the bank accounts, the Assessing Officer in the absence of the individual running ledger of the assessee’s customers has calculated balance as unexplained investments and further gave elaborate explanations in respect of the outstanding balance and duly supporting with annexure B & C to the assessment order and passed assessment order u/s.143(3) of the Act dated
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31.03.2014. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals).
In the appellate proceedings, the ld. Authorised Representative explained the submissions made in the assessment proceedings and also the modus of working in the finance business were all the transactions of money lending by the assessee are completed within a maximum period of 7 to 10 days. Further, the assessee does not permit any back log in collection of Interest / old outstanding balance. Therefore, it is not necessary for the assessee to maintain the individual balance of each and every person on any given date as the transactions are completed in reasonable time. Further submitted that the Cash Deposits in the Bank are only the collection of advances made by assessee earlier and shall be the source for the cash deposits of different bank accounts. The assessee has not claimed any credit of third parties for explaining the source except the collection of advances given earlier and periodically re-deposited in accounts. The assessee has been carrying on the same financing activity from long time and file Return of Income for the earlier assessment years. The ld. Authorised Representative submitted analysis on the transactions of assessee and clearly establish the money lending business carried as going concern by the assessee. The Cash Deposits in the Bank Account of the assessee are fully explained with the collection of the ITA No.2284/Mds/2015. :- 6 -:
advances by the assessee in the normal course of Business. The assessee filed his letter dated 27.11.2013 explaining the peak balance of bank account �20,00,613/- and to treat the income of the assessee as the deposits in the bank account is not on a single day and the deposits preceded with drawal of earlier days. The deposits cannot be read in isolation, disregarding the withdrawal, otherwise it will lead to absurd results, and of opinion that the assessee must have either the bank balance or cash balance or debtor balance of �5,77,69,932/- as on 31.03.2011 and the assessing officer has not established that the assessee is in possession of asset and omitted to take into account the withdrawal of funds from the banks and only considered deposits. The assessee submitted the closing balance of bank account is �1,684/- only. However, the Assessing Officer assessed the entire sum of �5,77,69,932/- as the income of the assessee for the current year. The ld. Authorised Representative explained that in assessment proceedings of assessee husband the Revenue has accepted for the same assessment year on the similar issue relied on the peak credit of bank account and not on entire deposits in bank. The ld. Commissioner of Income Tax (Appeals) considered the submissions, grounds and findings of the Assessing Officer and gave a elaborate submissions and concurred with the findings of the Assessing Officer and ITA No.2284/Mds/2015. :- 7 -: confirmed the order. Aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal.
5. Before us, the ld. Authorised Representative of the assessee reiterated the submissions of assessment and appellate proceedings with documentary evidence of bank statements as assessee is in the business of money lending and modus of operating transactions mostly by cheques. The Assessing Officer has considered only the deposits in the bank accounts and not the withdrawals made by the assessee and such practice as in earlier years was accepted by the Department. The assessee have adequate source of funds and there are no unexplained investments as alleged by the Assessing Officer. The Department has completed the assessment of assessee husband having similar business based on the peak credit of the banks accounts. The Commissioner of Income Tax (Appeals) though considered the statements and submissions but not provided adequate opportunity to the assessee before confirming the findings of the Assessing Officer and therefore prayed for allowing the grounds of the assessee.
6. Contra, the ld. Departmental Representative relied on the orders of the lower authorities and vehemently argued on the findings of the Commissioner of Income Tax (Appeals) and Assessing Officer and prayed for dismissal of appeal.
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We heard the rival submissions and perused the material on record and judicial decisions. The ld. Authorised Representative of assessee basic contention being the deposits in the bank accounts. The Assessing Officer has considered only deposits in the bank account ignoring sources of withdrawal from money lending business. The assessee provides short term loans and re-deposits, when the proceeds are received and balance in the bank accounts represents money advanced for short period ranging from seven to ten days and there is no backlogs in collection of amount. The assessee is following a moderate approach by not providing second loan unless first loan is cleared. Prime facie the assessee’s main source of income is interest income which was offered in the bookss of account and Assessing Officer has not disputed.
The Commissioner of Income Tax (Appeals) has considered the modus of working as systematic approach in operations on verifying bank statements forming part of assessment order and misdirected that assessee is creating colourable devices to suppress true income and evade tax are without any weighted reports. Further in assessee’s husband case for the same assessment year on the same issue were the assessment was completed by accepting the peak credit in the books of account and not entire bank deposits. The action of the Department to focus on the peak credit seems to be reasonable and the Assessing Officer has not relied on the earlier years orders. In the interest of justice, we
ITA No.2284/Mds/2015. :- 9 -: are of the opinion that the matter has to be reexamined and reworked on the basis of peak credit which is reliable and acceptable for determination of income. as it was considered in the assessee’s husband case. Therefore, we set aside the order of Commissioner of Income Tax (Appeals) and remit the entire file to the Assessing Officer and assessee should be provided with adequate opportunity of hearing and co-operate in filing the information before passing the order.
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced on Friday, the 29th day of April, 2016 at Chennai.