SUBBIAH RAMANATHAN,CHENNAI vs. ITO, TRICHY

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER These two appeals by different assessees are directed against different orders of Commissioner of Income Tax (Appeals), Tiruchirapali, for the above assessment years. Since issue in these appeals are common in nature, these appeals are clubbed together, heard together, and disposed of by this common order for the sake of convenience.

Assessing Officer found that on the liability side, the Assessee had admitted a fresh loan of �43,90,000/- from R. Balasubramanian equally in the hands of the assessee and his wife for �27,25,000/- (including stamp duty). In this regard the assessee was asked to produce the creditor on 05.12.2011 for examination. Since the Assessee and his representative failed to produce the creditor, a summon u/s. 131 was issued to him through Income tax Inspectors.

The Inspectors reported that Shri. R.Balasubramanian had relocated to Srirangam where he was issued summons. Shri. Balasubramainan appeared on 07.12.2011 and a sworn statement was recorded that he was working as a manager in Mahalakshmi Engineering College, Thodaiyur, Trichy for a monthly salary of �15,000/-, did not have any movable and immovable property in his name or his family members name, does not have any bank account and is not assessed to income tax. Regarding the loan given by him to the assessee he stated that he has given a loan of �47,00,000/- through Demand Draft out of the loan taken from one Shri. Anandharaman, Chennai. He further stated that no interest was received from the assessee for that loan and Shri. R. Balasubramaninan has not produced any evidence for the loan taken by him from Shri. Anandharaman. The Assessing Officer held that the lender Shri. R. Balasubramanian was not a creditworthy I.T.A.Nos.2314 & 2315/Mds/2013. :- 4 -: person to lend a huge amount of �43,90,000/- since the said creditor is a employee of a private college for a monthly salary of �15,000/- and does not have even a bank account, movable or immovable property. Further the Assessing Officer held that only a transaction through account payee cheque for such huge sum cannot be considered as genuine. In the above circumstances, the amount of �43,90,000/- said to be obtained from Shri. R. Balasubramanian was treated by the Assessing Officer as unexplained cash credit of the assessee u/s. 68 of the Act and was added to the income returned.

2.1 The facts of the case in respect of R.M.Janaki is that she was deriving salary income from firm and income from tailoring filed her return of income on 21.12.2009, for the year under consideration, admitting income at �1,85,000/- alongwith agricultural income of �1,52,000/-. The case was selected for scrutiny through CASS to examine the source for investment in property as per the AIR information, the assessee has purchased immovable property jointly at a cost of �50,00,000/- on 02.07.2008, registered with Sub-Registrar, Anna Nagar, Chennai. Appropriate notices were issued and the assessment was completed on 21.12.2011. In the return of income filed, the assessee declared salary income from partnership firm, income from tailoring and agricultural income of �72,000/-, �29,500/- I.T.A.Nos.2314 & 2315/Mds/2013. :- 5 -: and �1,52,000 respectively. The purchase of the above property was not reflected in the return filed. The Assessing Officer conveyed the AIR information and sought for details, which included copy of purchase deed, statement of income, balance sheet and capital account for the assessment year 2009-10 alongwith corresponding details for A.Y. 2008-09. From the details filed, the Assessing Officer found that the assessee had purchased housing plot measuring 1 ground and 400sq ft. at Chennai, jointly with her husband and son.

The assessee’s share of the plot as well as the cost of construction carried out in the plot was met out of the borrowings of �44,00,000/- from one Shri. R. Balasubramanian. The Assessing Officer, asked the assessee to file confirmation letter from the said creditor. The confirmation letter, so produced before the Assessing Officer, lacked details of sources from which the loan was advanced and the assessment details of the creditor. The assessee did not produce the creditor form examination. After hectic efforts in tracing out the creditor, the Assessing Officer, in response to the summons u/s.131 issued. Shri. Balasubramanian, appeared and deposed that he is drawing a monthly salary of �15,000/- as manager in Mahalakshmi Engineering College, Thudaiyur, and, that he has not given any loan to the assessee Smt. R.M. Janaki. Shri. Balasubramanian also stated that I.T.A.Nos.2314 & 2315/Mds/2013. :- 6 -: he has no bank account and not assessed to income tax. Since the creditor Shri. R. Balasubramanian, in his deposition, has denied any loan given to the assessee, the Assessing Officer treated the sum of �44,00,000/- as unaccounted cash credit u/s.68 of the Act.

2.2 Aggrieved by the order of the Assessing Officer in making additions of �43,90,000/- in the case of Subbiah Ramanathan and �44,00,000/- in the case of R.M. Janaki as unexplained cash credit, both went on appeal before the Commissioner of Income Tax (Appeals) who, in turn, confirmed the action of the Assessing Officer.

Against this, both are in appeal before us.

Further, he submitted that Shri. R. Balasubramanian had availed loan from Mahalakshmi Estates, Chennai who has confirmed the loan by way of letter which was filed before the lower authorities and also placed on record in paper book and he drew our attention to the said letter. According to the ld. Authorised Representative for assessees, I.T.A.Nos.2314 & 2315/Mds/2013. :- 7 -: the assessees have received the above loans by way of banking channel. Further, he submitted that the said amount has been repaid by crossed demand draft for which he had filed xerox copy of demand draft which was placed on record. Thus, he submitted that the assessee has proved the source of credit and also proved source of source of credit i.e. Shri. Balasubramanian had advanced the amount out of loan proceeds received from Mahalakshmi Estates, Real Estate Consultants and Flat Promoters, No.1, Srinivasapillai Street, West Mamalam, Chennai who was assessed to tax and its PAN No. AAIFM 2345L. According to the ld. Authorised Representative for assessees, identity of party is proved and the transaction is genuine as it is through banking channel and the creditworthiness is also proved as the Mahalakshmi Esates was assessed to tax. According to him, ingredients of u/s.68 are totally complied with and there is no question of treating the amount as unexplained cash credit in the hand of these two assessees.

Representative submitted that assessee filed his return of income for the assessment year 2009-10 by admitting a total income of �1,11,320/-. During the course of assessment proceedings the Assessing Officer has made an addition of �43,90,000/- on account of I.T.A.Nos.2314 & 2315/Mds/2013. :- 8 -: loan received from R. Balasubramanian for non furnishing of details such as identity of the creditors, creditworthiness and assessment particulars of the creditors. The Assessing Officer during the course of assessment proceedings recorded a statement from R.

Balsubramanian who deposed before him that he is working as a manager in Mahalakshmi Engineering College, Thodaiyur, Trichy for a monthly salary of �15,000/- and residing at Srirengam on a rented house for �5,000/- per month. Further Shri. Balasubramanian stated that he does not have any movable or immovable properties in his name or in his family members name and also does not have any bank account and not assessed to income tax. However, regarding the loan given by him to the assessee he has stated that the loans amount of �47 lakhs was given through demand draft out of the loan taken from one Shri. Anantharaman, Chennai. He has not charged any interest from the assessee. Thus, the Assessing Officer has doubted the creditworthiness of Balsubramanian and genuineness of the transaction as the loan creditor himself has not shown any evidence that loan taken by him from Shri.Anantharaman. Thus, the Assessing

Officer has treated the loan said to have been received from R.

Balsubramanian as unaccounted cash credit. The Assessing Officer in his assessment order treated the loan creditor as not genuine lender I.T.A.Nos.2314 & 2315/Mds/2013. :- 9 -: as he was not a creditworthy person. Shri R. Balasubramanian is only an employee of a private college earning only a monthly salary of �15,000/- and even does not have any bank account or any movable or immovable property. The assessee's contention that the above loan was received from R.Balasubramanian through banking channel was also not correct as the said lender does not have any bank account in his name. Even the story of demand draft taken by some other third party was reasoned as given by shri R.Balasubramanian. Over and above, in the return of income filed for the assessment year 2009-10 on 04.03.2010 the assessee has not disclosed these transactions of purchase of property and the borrowal of loan of �43,90,000/-. Since the source of money for lending has not been proved along with the identity of the creditor and creditworthiness as well as genuineness of the transaction has not been proved by the assessee to the satisfaction of the Assessing Officer, the addition made by the Assessing Officer was thus justified. The alleged lender was only a salary employee not assessed to income tax. The Commissioner of Income Tax (Appeals) in agreement with the reasoning taken by the Assessing Officer that a demand draft can be taken from any bank by any person in anybody's name. Thus there was no truth in the contention of the Authorised Representative for assessee that Shri I.T.A.Nos.2314 & 2315/Mds/2013. :- 10 -:

R.Balasubramanian has taken a demand draft and lend the money to the assessee was only a coloured transaction to show it as genuine transaction when the lender was a man of no means and also without charging any interest on the amount said to have been lent to the assessee proves that it was a sham transaction. Hence, the addition may be sustained.

Even though the assessee's representative in his submissions defended the above transaction but the same person i.e., R.Balasubramanian, the creditor, who himself has denied having lent the above loan amount of �44,00,000/- to the assessee. When the said loan creditor, himself deposed before the Assessing Officer, denying any loan I.T.A.Nos.2314 & 2315/Mds/2013. :- 11 -: amount given to the assessee, and also stated that he is not having any bank account, the defence put forward by ld. Authorised Representative for assessee lack any credible evidence in his hands to support his claim. Hence, the assessee was not able to prove the genuiness of the transaction as well the capacity of the lender i.e. creditworthiness to prove the correctness of the transaction. Hence, the additions made by the lower authorities may be sustained.

Mahalakshmi Estates, Real Estate Consultants and Flat Promoters, No.1, Srinivasapillai Street, West Mamalam, Chennai through Demand Draft and the same was passed on to these assessees as loan. Further, M/s. Mahalakshmi Estates also confirmed that they have advanced money to Shri. R. Balasubramanian whose PAN No. has also been given. Inspite of this, lower authorities were not ready to accept the transaction as genuine. There was a doubt in the mind of the Assessing Officer regarding genuineness of the transaction. In the present case there is positive evidence like

(1) Existence of Creditors. (2) Their PAN Nos. (3) The confirmation letter from them.

The creditors given loans to the assessees through Demand Draft and the assessees furnished the details of the same alongwith confirmation letter and also explained mode of transaction, which is through banking channel and also repaid the said loan through banking I.T.A.Nos.2314 & 2315/Mds/2013. :- 13 -: channel. Considering these facts, in our opinion the assessee herein had discharged their onus placed on them. The fact that credit entry shown in the name of a person other than the actual lender of the money would not by itself, be relevant where cogent evidence is independently available. In the case of CIT vs. Orissa Corporation P.

Ltd 159 ITR 78 (SC) wherein it was held that the assessee produced before the Assessing Officer letter of confirmation by creditors, discharged onus and particulars of the different creditors whose Income Tax files Nos were with the Department. The summons issued to the creditors by the Assessing Officer u/s.131 at the addresses given by the assessee were returned unserved with the endorsement ‘’left’’. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. Thus, the Supreme Court affirmed the view of the High Court as well as the Tribunal that the assessee had discharged the burden lay on it. In our opinion, once the existence of the creditors is proved and such person owed the credits which are found in the books of accounts of the assessees, the onus stand discharged and the assessee is not further required to prove the source of income from which the creditors would have acquired the money and, therefore, addition u/s.68 cannot be sustained in the absence of anything to establish that I.T.A.Nos.2314 & 2315/Mds/2013. :- 14 -: source of creditors deposit, flew from the assessee itself. In our opinion, creditor having appeared before the Assessing Officer in response to the summons issued u/s.131 of the Act before the Assessing Officer and confirmed by filing of confirmation letter, the transaction cannot be doubted. The assessee discharged onus placed upon them by establishing the identity of the creditor, his credit worthiness, genuineness of the transaction. Being so, in our opinion the addition made in this case u/s.68 is unwarranted. The same is deleted.

Order pronounced on Friday , the 19th day of June, 2015, at Chennai.