M.KANNABIRAN,CHENNAI vs. ITO, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 14, Chennai, dated 05.08.2015 and pertains to assessment year 2009-10.

Shri R. Sivaraman, the Ld.counsel for the assessee, submitted that the assessee, a retired employee of Supreme Court of India, filed his return of income on 07.02.2011 for the assessment year 2009-10. The Assessing Officer reopened the assessment by issuing notice under Section 148 of the Income-tax Act, 1961 (in short 'the Act') on the presumption that the assessee has not filed any return of income. Referring to page 1 of the paper-book, the Ld.counsel submitted that this is an acknowledgement for the return uploaded by the assessee electronically on 07.02.2011. Therefore, it is not correct to say that the assessee has not filed any return of income for the assessment year 2009-10. Referring to the reasons recorded by the Assessing Officer for reopening assessment, the Ld.counsel submitted that the reason for reopening the assessment was furnished only on 22.04.2015 after completion of assessment.

Referring to page 3 of the paper-book, the Ld.counsel submitted that this is a copy of the reasons recorded by the Assessing Officer for reopening of the assessment. According to the Ld. counsel, the Assessing Officer found that the assessee has paid `2,24,800/- for purchasing a plot of 1603 sq.ft. and `30,22,400/- for purchasing plot of 1841 sq.ft., to Tamil Nadu Housing Board. The above said payments were made during the financial year 2007-08 and 2009-10. The Assessing Officer admitted that the assessee filed the return of income for the assessment year 2009-10 on 07.02.2011 admitting a total income of `1,46,000/-. According to the Ld. counsel, when the amounts were paid during the financial year 2007-08 and 2009-10, it is for the Assessing Officer to reopen the assessments for the financial year 2007-08 and 2009-10 relevant to assessment year 2008-09 and 2010-11. On the basis of the payments said to be made for the financial years 2007-08 and 2009-10, the assessment relating to financial year 2008-09 relevant to assessment year 2009-10 cannot be reopened. Therefore, the entire reassessment proceeding is invalid.

Referring to merit of the appeal, the Ld.counsel submitted that the Assessing Officer made an addition of `22,86,645/- as unexplained investment in the land. According to the Ld. counsel, Tamil Nadu Housing Board allotted a plot to the assessee at Nolambur, Chennai on 18.06.2008 for `30,86,645/-. The assessee explained the source for making investment during the financial year 2008-09 relevant to assessment year 2009-10, as follows:-

Referring to the loan received from Shri Kandasamy to the extent of `7,50,000/-, the Ld.counsel for the assessee submitted that Shri Kandasamy is none other than father-in-law of the assessee. The said Shri Kandasamy confirmed the grant of loan before the Assessing Officer to the extent of `7,50,000/-. A copy of the confirmation letter given by Shri Kandasamy is available at Annexure 2 of the paper-book. According to the Ld. counsel, Shri Kandasamy is a retired teacher from Government school. Besides his pension, he is also having agricultural income. Shri Kandasamy is also earning income from painting. Shri Kandasamy’s son, daughter and daughter-in-law are Government employees. However, the Assessing Officer rejected the claim of the assessee on the ground that Shri Kandasamy has withdrawn `5,89,000/- out of his total retirement benefits of `6,11,689/-. Therefore, nothing is left out. The Assessing Officer also found that Shri Kandasamy had no capacity to give `7,50,000/- to the assessee. Accordingly, the Assessing Officer made an addition of `7,50,000/-. The Ld.counsel submitted that Shri Kandasamy retired from service in the year 2004. The last drawn salary before his retirement was `8,000/-.

Referring to the loan said to be received from Shri K.

Now coming to the loan said to be given by Shri Surya and Shri Narayanan, the Ld.counsel for the assessee submitted that the assessee received a sum of `4,00,000/- from Shri Surya and also received a loan of `3,00,000/- from Shri Narayanan. The Assessing Officer made addition in respect of the loan received from Shri Surya and Shri Narayanan on the ground that the letters sent to them were returned unserved by the postal authorities with endorsement “No such person”. Referring to copy of the Inspector’s report, which is available at page 48 of the paper-book, the Ld.counsel submitted that on 02.01.2015, the Inspector found that the door was locked. However, when he visited the premises again on 13.01.2015, he did not visit Flat No.B-6. The Inspector did not investigate whether Shri Tamilselvan is the actual owner of the property or not. According to the Ld. counsel, due to harassment by the Department, Shri Surya and Shri Narayanan refused to give confirmation letters. According to the Ld. counsel, the fact is that the assessee has received the money from Shri Surya and Shri Narayanan and the Assessing Officer has not taken any further steps after the letter return by the postal authorities. Therefore, there is no justification for making any addition.

Now coming to the sale of jewellery to the extent of `5,02,070/-, the Ld.counsel for the assessee submitted that the assessee sold jewellery to M/s Sujatha Jewellery, 33, Big Street, Kumbakonam. The purchase bills were filed before the lower authorities and copies of the same are available at pages 35 to 47 of the paper-book. The Assessing Officer claimed that one Shri Inder Chand Chethia, proprietor of M/s Sujatha Jewellery, was examined and told that no jewellery was purchased from the assessee. When M/s Sujatha Jewellery filed receipt of purchase of Jewellery and Shri Inder Chand Chethia clarified that he could not recollect from whom the jewellery was purchased, there is no justification for making any addition. The fact that M/s Sujatha Jewellery issued purchase bills for purchasing jewellery is not in dispute. It is not the case of the Revenue that the copies of the purchase bills filed before the lower authorities are not the one issued by M/s Sujatha Jewellery. The fact remains that the purchase of jewellery from the assessee is evidenced by way of purchase bills filed. Therefore, the Assessing Officer cannot ignore purchase bills issued by M/s Sujatha Jewellery.

The Ld.counsel further submitted that the Assessing Officer also made an addition of `84,575/- as unexplained investment.

On the contrary, Dr. B. Nischal, the Ld. Departmental Representative, submitted that admittedly, the assessee is a retired employee of Supreme Court of India. Referring to the letter of the Assessing Officer dated 22.04.2015, whereby the reasons for reopening of assessment were given to the assessee, the Ld. D.R. submitted that the assessee himself asked for reasons vide his letter dated 17.04.2015. It was admittedly furnished on 22.04.2015.

Referring to the assessment order, the Ld. D.R. pointed out that the Assessing Officer received information from Addl. Director of Income Tax (Investigation), Kochi. Accordingly, certain enquiries were conducted by the Deputy Director of Income Tax (Investigation) regarding allotment of land by Tamil Nadu Housing Board at Alapakkam and Nolambur to the assessee. According to the Ld. D.R., the assessee applied for allotment of plots at Nolambur and Alapakkam from Tamil Nadu Housing Board. During the financial year 2007-08, the assessee was allotted a plot at Alapakam for a sum of `2.25 lakhs. On 18.06.2008, the assessee was allotted another plot at Nolambur by Tamil Nadu Housing Board for a sum of `30,86,645/-. The assessee accepted the allotment and paid a sum of `30,86,645/-. The assessee claimed that the source for making investment was the fund borrowed from five persons and sale of jewellery. In fact, the loan from Shri Sunil Kumar was accepted by the Assessing Officer. However, in respect of loans from Shri Kandasamy, Shri Seenivasan, Shri Surya and Shri Narayanan were not accepted by the Assessing Officer.

Referring to the loan said to be taken from Shri Surya and Shri Narayanan, the Ld. D.R. pointed out that the assessee claimed before the Assessing Officer that he has taken loan of `4,00,000/- from Shri Surya and a sum of `3,00,000/- from Shri Narayanan.

We have considered the rival submissions on either side and perused the relevant material on record. Admittedly, the assessee is a retired employee of Supreme Court. The Assessing Officer made an addition of `22,86,645/- being unexplained investment in the landed property. The assessee explained before the Assessing Officer that the source for purchasing the landed property from Tamil Nadu Housing Board is the loan borrowed from various persons including the sale of gold jewellery belonging to the assessee and saving from salary to the extent of ` 84,575/-. In fact, the assessee explained before the Assessing Officer that the Tamil Nadu Housing Board allotted a plot of land to the assessee at Nolambur for a total sum of `30,86,645/-. The source for making the payment to Tamil Nadu Housing Board is as follows:-

Let’s now examine the loans taken from each individual as explained by the assessee. The assessee submitted before the Assessing Officer that he received a sum of `7,50,000/- from his father-in-law Shri Kandasamy. In fact, Shri Kandasamy appeared before the Assessing Officer and confirmed the loan. The Assessing Officer however rejected the claim of the assessee on the ground that he has no source of income to advance `7,50,000/- to the assessee. Referring to the written submission and the annexures, which are available at paper-book, the Ld.counsel for the assessee pointed out that Shri Kandasamy is a retired teacher drawing pension and he is also having agricultural land and agricultural income. The Assessing Officer, after referring to the explanation of the assessee, observed that Shri Kandasamy neither had means nor credible source to advance a sum of `7,50,000/- to the assessee. The fact remains that Shri Kandasamy is a retired teacher and is drawing pension regularly. He is also cultivating the land and receiving agricultural income. From the orders of the lower authorities it is seen that the assessee was holding 3.05 acres of Nanjai lands and 32 cents of Punjai lands. The Assessing Officer disbelieved the claim of agricultural income on the ground that the assessee has gifted all the Nanjai lands to his daughter Smt.

The economic scenario which prevails in India cannot be totally ignored by the Assessing Officer while considering the cash credit claimed by the assessee. During the financial year 2008-09 relevant to the assessment year under consideration, the agriculture coolie was `250/- per day for working for five hours. If a husband and wife go for agriculture work in any of the family, they can earn minimum of `500/- per day. An average income of a family, which goes for daily work is `15,000/- per month. The Assessing Officer also needs to take into consideration that Government of Tamil Nadu is providing free rice to the extent 25 KGs to a family. After taking into consideration that a reasonable family could save more than `400/- per day, that means the reasonable family having no regular employment could save `12,000/- per month. The people in the State, more particularly, in the agriculture sector are illiterate and they do not have bank account. Therefore, the people use to save the money by keeping the cash in their respective house. When this is the economic situation prevailed in the country, an educated person like Shri Kandasamy who is receiving pension apart from retirement benefits as a Head Master and is also cultivating land to the extent of 3.02 acres. Even if he estimates agricultural income to the extent of `1 lakh per acre, the average income would be `3 lakhs per annum. Apart from this, Shri Kandasamy is also receiving pension. This Tribunal is of the considered opinion that when Shri Kandasamy is having so much of resources or source for earning income, the Assessing Officer is not justified in rejecting the claim of Shri Kandasamy for advancing a sum of `7,50,000/- to the assessee who is none other than the son- in-law of Shri Kandasamy. In view of this factual situation, this Tribunal is unable to uphold the orders of the lower authorities.

Now coming to the loan said to be received from Shri Seenivasan to the extent of `2,50,000/-, Shri Seenivasan is the father-in-law of the assessee’s brother Shri M. Manohar. The said Shri Seenivasan confirmed the loan of `2,50,000/- in writing. The source for making the loan was the sale proceeds of gold jewellery belonging to Shri Seenivasan.

Now coming to the loans said to be received from Shri Surya and Shri Narayanan, the assessee claimed before the lower authorities that he received `4,00,000/- from Shri Surya and `3,00,000/- from Shri Narayanan. The Assessing Officer placed reliance on the Inspector’s report to show that the above said two persons were not residing in the address given by the assessee. A copy of the report said to have been filed by the Income-tax Inspector before the Assessing Officer is available at page 48 of the paper-book. The Assessing Officer also claimed that the notice sent by her was returned with endorsement “no such person”. The fact that the letter was returned with an endorsement “No such address/ person” and the Inspector’s report that no such person lived in the address given by the assessee was not brought to the notice of the assessee at any point of time during the assessment proceedings. When the postal authorities returned the letter issued by the Assessing Officer, this Tribunal is of the considered opinion that the matter should have been brought to the notice of the assessee and the assessee should have been given an opportunity to collect the new address of Shri Surya and Shri Narayanan so that the Assessing Officer can contact the creditors at new address.

Now coming to the sale proceeds of gold jewellery to the extent of `5,02,070/-, the assessee claimed before the Assessing Officer that the gold jewellery was sold to M/s Sujatha Jewellery at Kumbakonam. The assessee has also shown copies of the bills of M/s Sujatha Jewellery. It appears one Shri Inder Chand Chethia claimed before the Assessing Officer that he is the proprietor of M/s Sujatha Jewellery and he has not purchased any jewellery as claimed. The assessee has produced a copy of the receipt issued by M/s Sujatha Jewellery. The assessee has also filed a copy of the statement recorded from Shri Inder Chand Chathia. Shri Inder Chand Chethia clarified before the Assessing Officer that the purchase bill for gold jewellery was prepared by his accountant Shri Ramakrishnan. On the basis this statement, the said Shri Ramakrishnan was also examined and copy of the statement recorded from him is available at paper-book. Shri Ramakrishnan in response to Question No.7, explained before the Assessing Officer that Bill No.301 to Bill No.313 are with regard to purchase of gold jewellery from Shri M. Kannabiran. The assessee has also filed copies of the bills issued by M/s Sujatha Jewellery. When M/s Sujatha Jewellery purchased the gold jewellery from the assessee and issued purchase bills, it cannot be said that Shri Inder Chand Chethia denied the purchase of jewellery from the assessee. The purchase bills produced by the assessee clearly show that the assessee sold the gold jewellery to M/s Sujatha Jewellery.

In view of the above facts, this Tribunal is of the considered opinion that there is no justification in making addition of `22,86,645/-. Accordingly, the orders of the lower authorities are set aside and the entire addition of `22,86,645/- is deleted. Since the addition made by the Assessing Officer is deleted on merit, it may not be necessary for this Tribunal to go into the alternative grounds raised by the assessee with regard to year of payment as mentioned by the Assessing Officer in the notice issued under Section 147 of the Act and also legality of reopening of assessment under Section 147 of the Act.

In the result, the appeal of the assessee is allowed.