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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI V. DURGA RAO
आदेश / O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER
This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-VIII, Chennai, dated 11.11.2011 for the assessment year 2007-2008.
I.T.A.No. 212/Mds/2012. :- 2 -:
The first ground raised by the Revenue is that the CIT(A) erred in deleting the addition of �15,50,000/- made by the Assessing Officer on the consultancy charges paid to sister concern.
The facts of the issue are that the assessee has claimed a payment of �15,50,000/- as consulting charges to its sister concern
M/s East Coast consultants. On verification, the amount was shown to have been paid on the last day of the financial year and paid through a book entry only. During the course of assessment proceedings, the assessee was asked to clarify the cash deposits in the bank accounts, cash flow statement for such purpose and to explain the reason for payment of consultancy charges to East Coast Consultants. But the assessee could not furnish the required clarification in spite of repeated opportunities given. The assessee in his letter dated
06.10.2010 stated that the consultancy charges to sister concern
�15,50,000/- is not paid but the consultancy charges was collected on behalf of East Coast Consultant (P) Limited was shown as the amount was paid to Govindammal as land advance." Hence, the assessee has taken the correct net receipts by way of consultancy charges at �67,41,080/- without including the consultancy charges received on behalf of its sister concern at �15,50,000/-. The book entry was I.T.A.No. 212/Mds/2012. :- 3 -: wrongly added as consultancy Charges since the amount was collected on behalf of East Coast Consultants (P) Limited was credited in his account was reversed by passing book entry. On verifying the details filed the ld. Authorised Representative for assessee who has filed cash flow statement of the assessee for the period ended on 31.03.2007 which reveals that the assessee has shown total consultancy charges at Rs.82,91,080/- which includes an amount of �15,50,000/- collected on behalf of the assessee's sister concern i.e. East Coast Consultancy.
The assessee has paid the consultancy charges collected on behalf of East Coast Consultancy Private Ltd., by way of cheque to the above concern which was duly reflected in the return of income filed by the assessee's sister concern. Hence, the ld.AR of assessee objected to add this amount to the consultancy charges in the case of the assessee as this amount of �.15,50,000/- is related to the assessee's sister concern. The AR of the assessee has also stated that the amount is collected on behalf of his sister concern from M/s.
Commercial Buildwell Pvt. Limited at �22,20,960/-. The ld.
Authorised Representative for assessee has produced a form No.26AS duly reflecting the above transaction on which TDS also deducted at �1,24,596/- Out of the amount received at �22,20,960/- the assessee had paid to Govindammal by way of cheque on 05.03.2007 for I.T.A.No. 212/Mds/2012. :- 4 -:
�5,56,000/- and �9,94,000/- which was reflected in assessee's books of account as well as the books of accounts of the sister concern i.e.
East Coast Consultant whereas the assessee has passed journal entry for �15,50,000/-. The AR of the assessee has also filed the copies of the return of income of the assessee sister concern which duly reflected the above transaction. The real transaction was that the Govindammal was a supplier of lands to East Cost consultant for the purchase of land on behalf of the assessee sister concern whereas the Assessing Officer has presumed wrongly that the amount has been paid to the assessee sister concern without getting any service rendered to the assessee. In this regard, to substantiate the claim of the assessee the AR has furnished return of income filed by the sister concern for the AY 07-08 duly reflecting the consultancy charges received at �15,50,000/- apart from other income particulars. The Commissioner of Income Tax (Appeals) after verifying the documents filed by the assessee, deleted the addition at �15,50,000/-. Against this, the Revenue is in appeal before us.
We have heard both the sides and perused the material on record. It was argued by the ld. Departmental Representative that no details are available as to why the present assessee has received I.T.A.No. 212/Mds/2012. :- 5 -: the amount on behalf of the sister concern i.e. East Cost consultant from M/s. Commercial Buildwell Pvt. Limited. The facts brought on record do not suggest the reason for the same and services rendered by East Cost consultant to M/s. Commercial Buildwell Pvt. Limited.
Being so, in our opinion, it requires re-examination of the issue. We are not in a position to express any opinion regarding the nature of service rendered by East Cost consultant and in the absence of the reason for receipt of the above amount by the assessee on behalf of the East Cost consultant, from M/s. Commercial Buildwell Pvt. Limited.
Accordingly, we are not in a position to uphold the of the Commissioner of Income Tax (Appeals) and accordingly this issue is remitted back to the Assessing Officer for fresh consideration.
The next ground raised by the Revenue is that the Commissioner of Income Tax (Appeals) erred in deleting the addition
of �15,00,000/- made by the Assessing Officer being the sale of ancestral property reminded as unexplained.
The facts of the issue are that a sum of �15,00,000/- was found in the account of the assessee during the year on sale
consideration which represents the sale proceeds of ancestral I.T.A.No. 212/Mds/2012. :- 6 -: agricultural land of his brother Shri. P.Srinivasan. The ld. Authorised
Representative for assessee has stated that crediting of �15,00,000/- in the account of the assessee was actually taken as a loan from Shri.P. Srinivasan who in turn confirmed the loan. The Assessing
Officer has not considered the explanantion of the assessee, confirmation given by Shri. Srinivasan, brother of the assessee and added the amount as unexplained credit in the hands of the assessee. The ld. Authorised Representative for assessee has shown the loan taken from his brother at a simple interest on 12% p.a. repayable for a period of three years and shown the amount as loan from mother instead of mentioning the name of the assessee's brother i.e. Shri P.Srinivasan The transaction of obtaining loan at �15,00,000/- from the brother of assessee and verifiable from the bank statement from the Axis bank, the AR of assessee is of the opinion, that the AO should have verified the transaction either by summoning Shri P.Srinivasan who has given a confirmation letter on 31.03.2007 who has lend the amount of �15,00,000/- vide cheque to the assessee repayable for a period of 3 years at a simple interest of 12% p.a. As the amount has been obtained through cheque and was duly reflected in his cash book and also the cash flow statement filed by the assessee the I.T.A.No. 212/Mds/2012. :- 7 -: genuineness cannot be doubted by the Assessing Officer without verifying the credit worthiness of the creditor. The Assessing Officer has failed to examine the issue as well as the details filed by the AR of the assessee which are already on record. The ld. Authorised
Representative for assessee has also stated that the summary account has already been filed by the assessee on 17.11.2009 showing the bifurcation of bank transactions in respect of SBI & Axis
Bank accounts. From the statement, it was seen that the amount of �15,00,000/- was deposited with the Axis Bank and received by way of cheque . The AO should have verified the genuineness of the transaction and should have summoned the assessee’s brother Shri.
P. Srinivasan for verifying his capacity and credit worthiness to lend the above said amount and sources thereof. The Commissioner of Income Tax (Appeals) deleted the addition of �15,00,000/- made by the Assessing Officer is not sustainable on mere suspicion as the nature of the addition made is on no basis. Against this, the Revenue is in appeal before us.
We have heard both the sides and perused the material on record. It was brought on record by the Commissioner of Income Tax (Appeals) that the assessee has received this amount from his I.T.A.No. 212/Mds/2012. :- 8 -: brother Shri. P. Srinivasan as loan for which the assessee had paid interest thereon. Further, the name of the assessee’s mother is typed instead of assessee’s brother, is only a typographical error which is to be condoned. Since the assessee’s brother Shri. P. Srinivasan has confirmed the loan given to the assessee and the transaction was routed through banking channel, the identity of the lender is proved as well as the genuineness of the transaction. Accordingly, the deletion of addition made by the Commissioner of Income Tax (Appeals) is justified. This ground of the appeal of the Revenue is dismissed.
The last ground raised by the Revenue is with regard to deletion of the addition made by the Assessing Officer on the cash deposit with Axis Bank of �35,55,580/- and State Bank �5,64,325/- being unexplained cash deposits.
The facts of the issue are that the assessee is an advocate by profession and during the year his gross earning as per his accounts
filed with the return was �67,41,080/- received as consultancy charges. During the course of assessment proceedings, the Assessing
Officer has observed that the assessee has received �36,55,200/- from M/s. Dawn Realtors Pvt. Limited and �22,20,960/- from M/s.
Commercial Buildwel (P) Ltd and the remaining amount �.8,84,600/- I.T.A.No. 212/Mds/2012. :- 9 -: from other parties. At the time of explaining the difference in gross receipts it was stated by ld. Authorised Representative for assessee that the assessee paid �15,50,000/- as consultancy charges to M/s.
East Coast consultants in which assessee himself is the main partner, and the net amount of �67,41,080/- is shown as gross receipt in the P&L Account. Another amount of �15,OO,O0O/-- was shown to have been paid to M/s East
Coast consultants through a journal entry made on 31.03.2007 and such amount is shown as sundry creditor at the end of the year. The AR of the assessee has stated that the receipts from the above companies are in cheque after duly deducting TDS. The AO has observed that on examination of statement of both the bank accounts of the assessee, a lot of cash deposits were found, source of which remained unexplained. The AO has totalled the cash deposits from the Axis bank account of the assessee at �.35,55,580/- whereas the total amount is working out to �19,35,580/- only, as per the table given in the assessment order for the cash deposits in Axis bank starting from 07.04.2006 to 21.02.2007. But the AO has wrongly taken the figure at �35,55,580/-. The AO has also worked out the cash deposits in SBI account of the assessee at Rs.5,64,325/- starting from 02.05.2006 to 29.01.2007. During the course of assessment proceedings, the AO has I.T.A.No. 212/Mds/2012. :- 10 -: called for details of cash deposits in the bank accounts and also to furnish the cash flow statement.
In response to the assessment order the assessee in his grounds of appeal has stated that the learned AO was not justified while making the addition of Rs. 35, 55, 580/- on account of unexplained cash deposits.
On verifying the details filed by the assessee as well the materials , available on record, the AO admitted that the Cash book showed the amounts deposited in bank account with SBI and Axis Bank from cash available in hand as on dates. As the AO was of the opinion that certain expenses and drawing of Rs. 25 lakhs were not reflected in cash book and if these are taken then there might be no cash balance available with the assessee at some point of time. The AO has also stated that if. the assessee's explanation is considered for cash deposits then one will find that the assessee is taking out cash from one bank and deposited the same or other bank account and vice versa. Hence, the AO has stated that the cash book and explanation filed by the assessee regarding cash deposit in bank accounts cannot relied upon. The AR of the assessee has stated that the major receipts from consultancy charges and the credit of �25,00,000/-(for which the addition has been separately made by the AO) have been duly reflected in the transaction account which is the Axis Bank Alc No.505 I.T.A.No. 212/Mds/2012. :- 11 -: and there are substantial cash withdrawals from this account to meet expenses for both business and personal. The AR of the assessee has stated that the Assessing Officer has not given any break up for �.35,55,580/- while the details given in the Assessment order for cash withdrawal totaling up to only �19,35,580/-. In this amount also there are cheque receipts are as follows:
1. On 10.02.2007 Rs. 13,680 2. On 15.02.2007 Rs. 62,400 3. On 1602.2007. Rs. 10,00,000 Total Rs.10,76,080 Similarly, the AR of the assessee contended that the AO has also wrongly taken deposit in SBI account against �8,500/- on 29.01.2007 as �.20,000/-. The AR of the assessee has given the details of Axis Bank deposits on various dates and sources thereof out of the opening balance available on the previous day including some cheque receipts as mentioned above. Similarly, the date wise analysis of SBI deposits have been explained along with the sources thereof and on verifying the details filed by the AR of the assessee all the above transactions have been duly reflected in cash book and cash flow statement filed by the appellant. The AO has also worked out the cash deposit in SBI account of the assessee at �5,64,325/- starting from 02.05.2006 to I.T.A.No. 212/Mds/2012. :- 12 -:
29.01.2007. During the course of assessment proceedings, the AO has called for details of cash deposits in the bank accounts and also to furnish the cash flow statement. The AR of the assessee argued that the addition made on account of cash deposits/cheque deposits from the available previous balances will resulting double addition of the receipts of the assessee as the entire consultancy charges receipts have been accounted in both the bank accounts and duly reflected in his books of accounts and cash flow statement. As far as Axis Bank deposits concerned, the above amounts have been received from various parties as legal consultancy fee which can be easily verifiable from the said concerns and similarly the balance amount (�19,35,580- �10,76,080 ) of �8,59,500/- also can be seen from the previous balances and made deposits in his accounts to meet the day today expenses whereas assessing officer has taken as cash credits and cash deposits in the assessee’s accounts which are unexplained and added as cash deposits available with Axis bank account as well as cash deposits available with SBI accounts. As the amounts in both the above accounts have been reflected in his books of accounts and properly accounted as his consultancy fee/charges received, the cash deposit taken out of the existing previous balances cannot be added to the income of the assessee as it will tantamount to adding the same I.T.A.No. 212/Mds/2012. :- 13 -: amount twice as unexplained cash credits. The AR of the assessee argued for deletion of the same. On verifying the details filed from the both bank statements from Axis and SBI, the AO should have called for statement of account from the parties who have availed the legal services from the assessee and the details of payments made by them to the assessee on various dates to the genuineness and also the cash flow statement filed by the assessee and books of accounts maintained by the appellant. As there are some totalling mistakes in the addition made on account of cash deposits with Axis bank disallowed by the Assessing Officer at �35,55,580/- is totally lack of any reasoning and there is no account how the Assessing Officer has arrived at this addition and also cash deposits from SBI account arrived by AO out of reason and cash deposits in SBI arrived by AO at �5,65,325/- without any basis and without proper verification of tax and also without reconciliation of statements available on record the addition proposed by the AO for the above two amounts do not stand on any merit and hence the Commissioner of Income Tax (Appeals) deleted the addition made by the Assessing Officer. Against this, the Revenue is in appeal before us.
I.T.A.No. 212/Mds/2012. :- 14 -:
We have heard both the sides and perused the material on record. As narrated by the Commissioner of Income Tax (Appeals) the funds transactions are duly reflected in the books of accounts of the assessee and the assessee also explained the parties from whom the funds were received. Hence, these deposits cannot be claimed as unexplained deposits. In our opinion, the findings of the Commissioner of Income Tax (Appeals) is justified and the same is confirmed. This ground of the appeal of the Revenue is dismissed.
In the result, the appeal of the Revenue in is partly allowed for statistical purpose.
11th Order pronounced on Wednesday, the day of November, 2015, at Chennai.