TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 709
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....t common issue in ITA No.170 & 172/Chny/2022 for the assessment year 2010-11 & 2011-12 as regards to the order of CIT(A) confirming the action of AO in upholding the addition made by AO on account of unexplained cash credit u/s.68 of the Act for an amount of Rs.7,56,74,000/- for assessment year 2010-11 and Rs.1,98,00,000/- for the assessment year 2011-12. The relevant grounds raised by assessee in assessment year 10-11 read as under:- "2.1 The CIT(A) erred in upholding the addition of Rs.7,56,74,000/- as unexplained Cash Credits u/s.68 of the Income Tax Act. 2.2 The applicant having provided proper explanation and proof regarding the credits, the CIT(A) went wrong in confirming the addition made. 2.3 The appellant having submitted that the credits were loans received back, advanced earlier by him, the CIT(A) erred in rejecting the same based on assumptions and surmises. This makes the addition liable to be deleted in full." The relevant ground raised by assessee in assessment year 2011-12 read as under:- 2.1. The CIT(A) erred in upholding the addition of Rs.1,98,00,000/- as unexplained Cash Credits u/s, 68 of the Income Tax Act. 2.2. The appellant having provided proper ....
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....f Dhanalakshni Mini Bus business, the assessee's A/R could not submit any proof/supporting documents in support of cash credits of Rs. 7,56,74,000/- Hence, in the absence of proper documentary evidences/proof, the balance unexplained cash credits of Rs. 7,56,74,000/- are treated as income of the assessee u/s 68 of the Income-tax Act, 1961 for the financial year 2009-10 relating to the assessment year 2010-11, After discussion with the assessee's A/R, the assessment is completed as under: 3.1 Similarly in assessment year 2011-12, the AO noticed that there are cash deposits in current account maintained in the books of Dhanalakshmi Agencies amounting to Rs.1,14,00,000/- on various dates and another cash deposit in current account maintained with Dhanalakshmi Mini Bus to the extent of Rs.1,91,00,000/- crores during the financial year 2010-11. After considering the explanation of the assessee, accepted the explanation of the assessee to the extent of Rs.1,07,00,000/- and added the balance sum of Rs.1,98,00,000/- as unexplained cash credit u/s.68 of the Act. For this, the AO recorded his finding as under:- " For balance amount of Rs.1,98,00,000/-, the authorised representativ....
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....eal before the CIT(A). 4. The CIT(A) after considering the submissions of the assessee, remand report submitted by the assessee, paper book and other evidences filed by the assessee confirmed the action of the AO by observing in para 6.1 to 6.3 of his order for assessment year 2010- 11 as under:- 6.1 While going through the affidavit and confirmation letters submitted by the appellant, I am of the view that all the papers were meticulously prepared in a mechanical way just as a evidence rather than bringing the true affairs of the event. No prudent person will believe that such loans were advanced without any guarantee or mortgage of any property. It may be appreciated that the lands at Perambulur District are not so fertile as in the case of Tanjore delta. If the contention of the appellant is acceptable, all the land owners who are doing agricultural activity at Perambulur District must be millionaire by this point of time. It is beyond imagination the debtors have repaid the loan by single installment by doing dairy activity with small number of cows and holding of small portions of agricultural dry land. The value of the land at Perambulur District would have been in crores ....
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....he persons said to have been received the loan from the appellant are persons of meagre means. It is considered that the report of the AO is crystal clear about the transactions upon which the loan amount was received is only a bogus claim and it is the method adopted by the appellant to bring his own unaccounted cash into main stream. 5.10 In this background, the grounds raised by the appellant upon this issue are hereby dismissed and the addition made u/s.68 of Rs.1,98,00,000/- are sustained. Aggrieved, in both the years, the assessee came in appeal before the Tribunal. 5. We have heard rival contentions and gone through facts and circumstances of the case. We have also perused the paper-book filed by assessee consisting of 1 to 345 pages and another paperbook consisting of pages 1 to 68. The assessee is an individual and deriving income from various business as enumerated by us in para 3 of this order like running petrol bunk, agricultural income, rent from hiring of JCB, doing transport business, diary business, salary from chit fund company, rental income and interest income, etc. The assessee maintained separate books of accounts for all lines of business. The assessee be....
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.... the loan out of savings from the above income after meeting the family expenses, The size of the family, the average monthly expenses of the family, the expenses for untoward happenings in the family would definitely be bound to be there, which should have been met from this income only. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income is only Rs. 15000/- Out of this income hand to mouth existence would have been difficult, leave alone paying back the debt in lump sum amounting to Rs. 3,00,000/- Also, in the letter addressed to the Assessing Officer, this person has claimed to have obtained land in 2001 from Mr.Kathiravan whereas in the statement before the Thasildar, he has deposed that the loan has been obtained in 2002. There is contradiction in the statement of this person. 2. P. Senthilkumar/(12) 0.43 50,000/- 1,250,000 1,75,000 4,75,000 As stated in sl. no. 1, the average annual income is only Rs. 1,75,000/- which has to take care of his family, other expenses and untoward expenses. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from t....
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.... no land holding. The labour charges claimed to have been earned by him is of course without any evidence and so also for earning from cow breeding. This person claims to have repaid Rs. 4,00,000/- out of his savings, after meeting his household expenses, medical expenses and other incidental expenses. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 7. D. Venkatesan (59) 0.60 40,000 1,00,000 1,40,000 3,50,000 From the meagre land holding and cow breeding, this person claims to have earnedRs. 1,40,000/- per annum which means a monthly Income of Rs.11,600/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs. 3,50,000/-. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. Before the A.O., the year of obtaining loan has been stated as 2003 in the letter submitted by this person, whereas before the Thasildar, the year of obtaining loan has been given as 2002. 8. S. Jaisankar(60) 0.99 60,000 1,00....
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....his income only. 12. A.Selvakumar - - 1,70,000 1,70,000 4,00,000 There is no land holding. The earning from cow The quantum of Rs. 4,00,000/-claimed to have been repaid in 2009 out of this meagre earnings of Rs. 1,70,000/- has to be examined. 13. M. Kulandayi (80) - - 1,00,000 1,00,000 2,00,000 There is absolutely no income from agriculture. For cow breeding, there is no evidence. under the circumstances, out of Rs. 1,00,000/- average annual income, which means monthly income of less than Rs.9,000/- this person claims to have repaid Rs. 2,00,000/- out of her savings after meeting all her expenses for livelihood and other incidental expenses. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 14. C. Jayaraman (87) 2.10 60,000 1,00,000 1,60,000 4,00,000 Average annual income is only Rs. 1,60,000/-. In the statement before the Thasildar, he as submitted that he has repaid the loan out of savings from the above income after meeting the family expenses. The size of the family, the average monthly expenses of the family, the expenses for untoward happenings in the family would definitely....
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.... taken care of his family expenses and other expenses and over and above that has made savings and repaid a sum of Rs. 4,00,000/-. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 19. R. Vijayakumar (114) 1.21 90,000 1,00,000 1,90,000 4,00,000 From the meagre land holding and cow breeding, this person claims to have earned Rs. 1,90,000/- per annum which means a monthly income of Rs. 15,830/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has made savings and repaid a sum of Rs. 4,00,000/-. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. Before the A.O., the year of obtaining loan has been stated as 2003 in the letter submitted by this person, whereas before the Thasildar, the year of obtaining loan has been given as 2002. 20. M. Senthil (123) 2.95 1,00,000 4,50,000 5,50,000 30,00,000 This person claims agricultural income of Rs. 1,00,000/- and Rs. 4.5 lakhs from cow breeding. From this total earning of Rs. 5.5 lakhs, he has stated that ....
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....aimed to have made savings and repaid a sum of Rs.4,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 40 K. Karthik(137) ---- 1,20,000 1,20,000 2,00,000 There is no land holding. This person earns from a Private Company and has no connection with agriculture. From this petty earnings of Rs.1,20,000/-, he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.2,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 41 T.Karthikeyan(122) ---- 1,40,000 1,40,000 2,00,000 There is no land holding. This person earns from a Private Company and has no connection with agriculture. From this petty earnings of Rs.1,40,000/- , he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.2,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this....
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....w breeding, this person claims to have earned Rs.1,70,000/- per annum which means a monthly income of Rs.14,000/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.4,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 48 K.Angammal(39) 1.67 90,000 1,00,000 1,90,000 4,00,000 This also is like the case of other persons, with the repayment being double the earnings. Repayment out of savings after meeting all the expenses is without proof. Also, expenses for maintenance of the cows like fooder expenses, medical expenses also would have been met from this income only. 49 C.Palaniammal(109) 60,000 1,40,000 2,00,000 6,25,000 There is no land holding. Whatever income given is only labour charges received. There is no evidence to prove the same. Also there is no proof for earnings from cow breeding. Further, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only, other than meeting his routi....
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....ike fodder expenses, medical expenses also would have been met from this income only. 5.1 Even, both the remand reports of the AO supported by the Tahsildar i.e., Revenue District Collector, Perambalur dated 19.06.2017 and 30.06.2017 verifying the details of all the persons to whom the assessee has advanced money, which was returned by these persons including their sources of income and ownership of land holding is confirmed by the Tahsildar which are enclosed by assessee at pages 322 to 325, 326 to 329 and 330 to 331, those are being reproduced as it is:- From To Mr. S. Balakrishnan, M.A., Assistant Commissioner, Revenue District Collector, Income Tax Department, Perambalur. Williams Road, Cantonment, Tiruchirappalli - 620 001. N.K.A1/2032/2017 Dated: 19.06.2017 Sir, Subject- Income Tax- Perambalur District- Perambalur Circle- Perambalur (South) Village - Kathiravan (Mr) C request for Statement of Income - Regarding. Reference-1) Tiruchirappalli Deputy Commissioner of Income Tax Department call dated 11.05.2017. 2) Perambalur District Commissioner's letter No.K.A1/2032/2017 dated 15.05.2017. 3) Invitation letter of Assistant Commissioner of I....
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....ikkakavundar Mettur Pudhunaduvalur Village Perambalur Circle. 2.10.5 60,000 1,00,000 1,60,000 15. Mr. R. Selvaraj (92) S/o. Rasu Pudhunaduvalur Village Perambalur Circle. 1.41.0 50,000 1,00,000 1,50,000 16. Mr. S. Shakthivel (95) s/o. Subhramani, Pudhunaduvalur Village Perambalur Circle. 1.18.0 1,00,000 1,00,000 2,00,000 17. Mr. V. Jeyakumar (103) S/o. Veerappan Pudhunaduvalur Village Perambalur Circle. 0.60.5 1,00,000 1,00,000 2,00,000 18. Mr. R. Manogaran (111) S/o. Rengaraj Pudhunaduvalur Village Perambalur Circle - 70,000 (Agricultural Wages) 1,00,000 1,70,000 19. Mr. R. VijayaKumar (114) S/o. Rasu Pudhunaduvalur Village, Perambalur Circle. 1.21.0 90,000 1,00,000 1,90,000 20. Mr. M. Senthil (123) S/o. Manikkam Pudhunaduvalur Village Perambalur Circle. 2.95.0 (Land lease) 1,00,000 4,50,000 5,50,000 21. Mr.P.PaneerSelvam(124) S/o. Paramasivam Pudhunaduvalur Village Perambalur Circle. 0.42.0 1,00,000 5,00,000 6,00,000 22. Mr. K. Shivalingam (125) S/o. Karuppan Pudhunaduvalur Village Perambalur Circle. 0.44.0 1,00,000 4,00,000 5,00,000 23. Mr. S. Alagappan (126) S/o. SeerangaGoundar Pudhunaduvalur Village Perambalur Circle. 0.5....
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....ncome tax proceedings, the land holding and income details of 159 persons were called for by the Assistant Commissioner of Income Tax by way of communication under reference no.1. In the list of persons mentioned in the communication under reference no.1, 27 persons had already been investigated and the consequent report dated 19.06.2017 had been forwarded. The details of income of 24 other persons mentioned in said list have been gathered through investigation and the details are as under; S. No . Name and Address Land held (in hectare) Annual Income from land (in Rs.) Income from Dairy Cow (in Rs.) Gross Income (in Rs.) 1. Mr.R.Sankardas (77), S/o. Mr.Ramasamy, Pudunaduvalur 1.21.0 60,000 1,00,000 1,60,000 village,Perambalur District 2. Mr.M.Rajendran (61), S/o. Manickam, Pudunaduvalur village, Perambalur District 0.86.5 55,000 1,00,000 1,55,000 3. Mr.P.Selvaraj (105), S/o. Periyasamy, Pudunaduvalur village, Perambalur District 0.94.0 65,000 1,00,000 1,65,000 4. Mr.A.Arivazhagan (108), S/o. Mr.Arunachalam, Pudunaduvalur village, Perambalur District --- 60,000 80,000 1,40,000 5. Mrs.V.Ezhilarasi (128), ....
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.... wages) 1,40,000 2,00,000 23. Mr.N.Latchmanan (41), S/o.Mr.Nallathambi, Mettur Village, Pudunaduvalur village, Perambalur District 0.81.0 60,000 1,00,000 1,60,000 24. Mr.V.Rengaraj (8), S/o. Mr.Venkatachalam, Pudunaduvalur village, Perambalur District 0.61.5 60,000 1,00,000 1,60,000 It is kindly informed that, at this moment, 24 people have been investigated and copy of chitta and adangal of those who own land is being enclosed with this report. After investigating the remaining persons, the final report will be sent soon. Enclosures: Chitta and Adangal copies of 9 people Yours faithfully, Revenue District Collector, Perambalur. A copy is forwarded to the District Head, Perambalur for their information. A copy is forwarded to the Revenue Commissioner, Perambalur for their information. ___________________________ From Mr. S. Balakrishnan, M.A, Revenue District Collector, Perambalur. To Assistant Commissioner of Income Tax, Williams Road, Cantonement, Tiruchirapalli 620 001. N.K.A1/2032/2017 &nb....
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....the District Collector, Perambalur for their information. A copy is forwarded to the Revenue Commissioner, Perambalur for their information. 5.2 The assessee filed complete details in the shape of affidavit, confirmations from these persons that they have taken loans from the assessee and repaid these loans to the assessee back. The assessee took this plea before the AO and this fact is noted by the AO in his assessment order at page 4, "vii Regarding the balance amount for Rs.7,56,74,000/-, the assessee's A/R claims that the amount represents the loan amounts received back from the various persons (Sundry debtors) living in and around Perambalur District. Originally, the assessee used to advance loan(s) especially to village/rural/poor people for the purpose of agricultural operations/purchase of agri.land and cows for their livelihood/welfare of their families for the past 10 years. As the assessee was in need of money to invest in current a/c of Dhanalakshmi Mini Bus, he collected the money back from the various parties to whom the amount of Rs.7,56,74,000/- advanced in the earlier year." 5.3 According to AO, the assessee is unable to prove the identity of the debtors and ....
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....raws inference that amount represents income either from sources already disclosed or from some undisclosed sources, that can be added only after stating the reason as to how explanation is unconvincing. Similarly, the Hon'ble High Court of Madras in the case of S. Hastimal vs. CIT, [1963] 49 ITR 273 has held that inability of the Department to verify the explanation offered is not a sufficient cause for rejection of the explanation. We are in agreement with the Department that it is not correct to say that the AO is not entitled to reject the explanation without some other positive evidence falsifying the assessee's case. The true view is that, while the AO is not bound to accept as true any possible explanation which the assessee may put forth but he cannot also especially reject the assessee's explanation without any enquiry or reason. Since the assessee has discharged all initial onus and assessee was asked to prove the source of debit entries, the assessee actually proved in the present case. The Hon'ble Gujarat High Court in the case of DCIT vs. Rohini Builders, (2002) 256 ITR 360 held that the amount representing cash credits was not includable in the total income of the ass....
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....e same treated by the AO as business income as against claimed by assessee as capital asset not taxable to long term capital gain being agricultural land.We will take facts from assessment year 2010-11 in ITA No.171/Chny/2022 and will decide the issue. 7. Brief facts are that the AO during the course of assessment proceedings noticed that the assessee has sold lands to Srinivasan Charitable and Educational Trust for a total consideration of Rs.68.40 lakhs for the assessment year 2010-11 and to Srinivasan Health and Educational Trust and Srinivasan Charitable and Educational Trust i.e.,these two trusts for a sum of Rs.1.35 crores for the assessment year 2011-12. The assessee is one of the managing trustees in both the trusts. The assessee before the AO in both the years contended that these lands were agricultural lands and hence, not liable for capital gains in view of the provisions of section 2(14) of the Act. But the AO noted that the lands were purchased by assessee, who is also one of the trustees and these lands were purchased during the last 2-3 years and now, sold to these two trusts in assessment year 2010-11 & 2011-12 for consideration as noted above. The AO treated thes....
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....sale proceeds are of agricultural land and not business asset as is being contended by Revenue. Hence, the same cannot be assessed to capital gains and are exempt. Accordingly, this issue of assessee in both the years is allowed. 11. The next issue in ITA No.172/Chny/2022 for assessment year 2011-12 is as regards to the order of CIT(A) confirming the action of the AO in making addition of unexplained credit of Rs.3,00,00,000/- being amount received temporarily from the creditor as unexplained cash credit u/s.68 of the Act. For this, assessee has raised the following ground Nos.4.1 & 4.2:- 4.1. The CIT(A) grossly erred in confirming the addition of Rs.3,00,00,000/- as unexplained credit which is nothing but amount temporarily received from a creditor. 4.2. The appellant having proved the transactions to be genuine in nature as the same had taken place via banking channel, the CIT(A) erred in confirming the addition in toto. 12. We have heard rival contentions and gone through facts and circumstances of the case. We noted that only sundry credit claimed by assessee is in the name of Murugan Traders from whom the assessee has obtained loan of Rs.3 crores. The AO required the ass....