Income Tax Appellate Tribunal - Cochin
Dr. Ramani Krishnan, Kollam vs The Dcit, Kollam on 10 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER
I.T.A. Nos. 259 & 260/Coch/2016
Assessment Years : 2008-09 & 2009-10
Dr. Remani Krishnan, Vs. The Deputy Commissioner of
Asvini Hospital, Income-tax, Circle-1(1), Kollam.
Curzon Road,'
Kollam-13
[PAN: ABDPK 3724B]
(Assessee-Appellant) (Revenue-Respondent)
Assessee by Ms. Lalia Elizabeth Philip, Adv.
Revenue by Shri A. Dhanaraj, Sr. DR
Date of hearing 06/07/2017
Date of pronouncement 10/07/2017
ORDER
Per GEORGE GEORGE K.,JUDICIAL MEMBER:
These appeals at the instance of the assessee are directed against the consolidated order of the CIT(A) dated 01/03/2016. The relevant assessment years are 2008-09 and 2009-10.
2. Since common issue is raised in these appeals, they were heard together and are disposed of by this consolidated order.
2 I.T.A. Nos.259&260/Coch/20163. The solitary issue that arises for my consideration is whether the amounts received by the assessee from two firms, namely, Total 4 U and Nest Investment Solutions are return of investment or sum promised as assured growth/profit.
4. I shall first take up for adjudication I.T.A. No. 259/Coch/2016 concerning the assessment year 2008-09.
I.T.A. No. 259/Coch/2016 : A.Y. 2008-09 4.1 Briefly stated, the facts relating to the assessment year 2008-09 are as follows:
The assessee, an individual, is a doctor by profession and derives income from running a hospital. She also undertakes share trading business through various share broking firms. It was noticed by the Assessing Officer that the assessee had made huge investments in two firms by the name of Total 4 U and Nest Investment Solutions. Both the firms were managed by one Shri Sabarinath who was caught in a scam and later imprisoned. It was noticed by the Assessing Officer that the assessee received a sum of Rs.52,26,000/- from Nest Investment Solutions on various dates during the assessment year 2008-09. The assessee submitted that the amounts received by from Nest Investment Solutions were investments made by her with the firm and not the sum promised as assured growth/profit. It was submitted by the assessee that she had made investment of Rs.2,50,000/- in August, 2007 and in September, 2007 she received back Rs.3,50,000/- which included profit/growth of Rs.1 lakh. It was submitted that 3 I.T.A. Nos.259&260/Coch/2016 only Rs.1 lakh which was received back as growth/profit in September, 2007 alone can be treated as income. The Assessing Officer however disbelieved that the amount received back as profit is only Rs.1 lakh during the relevant assessment year.
4.2 It was further held by the Assessing Officer in paragraph 6 of the impugned assessment order that there were certain investments made by assessee in assets, the source of which was not properly explained. However, the Assessing Officer did not make a separate addition for unexplained investment in assets, since, addition was to be telescoped with growth/profit of investment made with Nest Investment Solutions. The Assessing Officer calculated the average investment made with Total 4 U and Nest Investment Solutions during the period August, 2007 to March, 2008 and calculated the assured growth/profit at Rs.15,64,900/- for the assessment year 2008-09. The relevant finding of the Assessing Officer in making the addition of Rs.15,64,900/- reads as follows:
"4. As mentioned in para 1 above, Dr. Remani Krishnan had made substantial investments in companies Total 4 U and Nest Investment Solutions owned by Shri Sabarinath, as the said institutions had offered 40% assured growth. The investments were made out of her own resources and out of loans taken from relatives and friends. The details of persons from whom loans were taken have been furnished along with confirmation letters or two such persons and were contacted personally and they confirmed that they had advanced money to Dr.Remani.. They also confirmed that they had not received any interest for the amount advanced. In the circumstances the source of investment stands 4 I.T.A. Nos.259&260/Coch/2016 explained. A statement has been recorded by ITO, Ward-4, Kollam from Dr. Remani on oath on 15.9.2008 in which she had explained the investments made as answers to Question Nos. 14 to 18. The manner in which the amounts were deposited and received back from total 4 U/Nest Investment Solutions is stated by Dr. Remani as under (English translation) as answer to Question 15.
Question 15. If so how did you make the investment?
"I invested Rs.2.50 lakhs in the company Nest Investment Solutions in August 2007. I was made to understand that this was an institution dealing in commodity trading and was a franchise of share wealth. The amount of Rs. 2.5 lakhs was given in cash. Assured growth of 40% was promised. An amount of Rs.3.50 lakhs was given in September, 2007 including assured growth. On the same day I invested Rs.2.50 lakhs. I invested a further sum of Rs.7.5 lakhs in the same month. In October, 6.75 lakhs and in November 32.20 lakhs was invested. An amount of Rs.1 lakh was returned in November. Rs. 3 lakhs was invested in December. 1 lakh was returned in January and 23 lakhs was invested. Rs.21.76 lakhs was returned in February and 15.50 lakhs was invested. In March 25 lakhs was received and 14 lakhs was invested. Most of the above transactions were by way of cheques. Some were cash transactions. The details will be filed later."
5. The assessee in the Return of Income filed has disclosed only the amount of Rs. 1 lakh received by her in September, 2007 as her income from the above investments. A letter dated 21/12/2010 confirming the above and contending the difficulties faced by her was also filed. It is contended that what was received is return of deposits in Assured Growth Income. The contentions have been considered. In as much as investment was made out of loans taken by her and her own investments and that no amount by way of income on investments was given to the borrowers, it has to be taken that the income on investments was received by Dr. Remani only. The nature of the transactions mentioned in the answer of Dr. Remani referred to above clearly points to the fact that what was received back periodically is not return of investments made but amounts including sums promised as assured growth. Dr. Remani in her answer referred to above has mentioned that assured growth of 40% had been promised by the investment companies. This is also corroborated by the fact that she received an amount of Rs.1,00,000/- in September, 2007 for the investment of Rs.2.5 lakhs made in August 2007. Therefore on the amounts invested and reinvested with Nest Investment Solutions Assured Growth income should be worked out for the period the deposits were 5 I.T.A. Nos.259&260/Coch/2016 held in the financial year i.e. from 1.8.2007 to 31.3.2008 (August 2007 to march, 2008) @ 40% assured growth. Since moneys were invested and withdrawn every month, income is calculated @ 40% on the aggregate average advance. When so worked out (as per detailed working given in the Annexure) the income by way of Assured Growth for the investments made will work out to Rs.15,64,900/-. The assessee has offered an amount of Rs.1 lakh to tax. But the same is included in the Share Trading account from which loss of Rs.37,670/- has been returned. Hence the amount of Rs.15,64,900/- is brought to tax as additional income from share business not offered for assessment.
6. The assessee has made the following investments in movable and immovable properties during the relevant previous year as under:
i) Purchase of property 5 cents and Building at Thycaud, Trivandrum 10.50 lakhs.
ii) Purchase of Innova car in March, 2008 - 10 lakhs estimated.
The above investments can also be telescoped to the income earned from share growth with Nest Investment Solutions."
4.3 Aggrieved by the order of the assessment, among other additions, the assessee also challenged the addition of Rs.15,64,900/- before the first appellate authority. The CIT(A) confirmed the order of the Assessing Officer. The relevant finding of the CIT(A) reads as follows:
"5.3 I carefully examined this issue and also gone through the records in this regard available with. The crux of the issue to be decided is what the appellant has received from Total 4 U and Nest Investment Solutions between September, 2007 and March, 2008 is return of investment or sum promised as assured growth/profit. The appellant claims that whatever she received is out of the investment she made and not out of the assured growth/profit. The Assessing Officer further claims that the source for the investment made on land & building and on vehicle was made out of the income earned from the above mentioned companies. Both the appellant and the Assessing Officer are not in dispute about the 6 I.T.A. Nos.259&260/Coch/2016 first investment of Rs.2,50,000/- made in August, 2007 and the amount of Rs.3,50,000/- which includes Rs.1,00,000/- towards assured growth/profit returned back to the appellant in September, 2007. The dispute is centered around over the amount received back, as brought out in the assessment order, between November, 2007 and March, 2008. It is seen from the assessment order, the appellant had received Rs.1,00,000/- in November,2007 when the net credit balance was at Rs.46,45,000/- and another amount of Rs.1,00,000/- in January,2008 when the net credit balance increased to Rs.49,45,000/-. If the intention of the appellant is to get back her hard earned money, she would not have received again a paltry sum of Rs.1,00,000/- when the net credit balance getting increased gradually to Rs.71,45,000/- in January, 2008. No person with minimum wisdom and caution would ever think of investing another amount of Rs.23,00,000/- in the same month in which a paltry sum of Rs.1,00,000/- was returned back without getting a definite assurance to return back substantial amount out of the assured growth/profit. This is what literally happened in the instant case of the appellant that she received Rs.21,76,000/- in the month of February, 2008 just after a month she made the investment of Rs.23,00,000/-. Finding that the companies are returning back reasonable amount out of assured growth/profit, the appellant immediately invested in February, 2008 itself another amount of Rs.15,50,000/-. In a period of three months between January, 2008 and March, 2008 the appellant had invested Rs.52,50,000/- while receiving back Rs.46,76,000/-. The investments made during the said 3 months period cannot be just to receive back the same investments that too without any gain. The appellant appears to have got convinced that reasonable return out of assured growth/profit is regularly passed on to her and further investment could rightly be made anticipating further profit sparing in the near future. What was received back in the month of February 2008 and March, 2008 against the credit balance cannot be out of the deposited money but only out of the assured growth/profit. Had no profit been shared with the appellant during the current year, then the appellant would not have continued making further investments in the subsequent year i.e., AY 2009-10. Seeing from the appellant's ledger account with Nest Investment Solutions a copy of which was furnished for further consideration, it could be made out that the appellant had continued the investments even during the AY 2009-10 and upto August, 2008 the additional investment swelled to Rs.1,52,00,000/-. If it is a case of no sharing from profit, the appellant definitely would not have infused additional investment during the AY 2009-10. It could be made from the above, the appellant kept on receiving reasonable return as assured in the name of 40% assured growth while keep on investing continuously even during the subsequent assessment year until the activities of Sabarinath of Total 4 U and Nest Investment Solutions became a scandal. In the 7 I.T.A. Nos.259&260/Coch/2016 background of foregoing, I am of the considered opinion that what the appellant had received from Total 4 U and Nest Investment Solutions is nothing but out of the assured growth/profit and not out of the investment made.
5.4 Further, I am not inclined to agree with the appellant that she had not received the so called assured growth/profit but only the amount she deposited, for the following reasons;
a) No investor would continue the investment unless reasonable return out of the profit made is returned back. The appellant continued the investment even during the subsequent assessment year not because the deposits she made were returned back but because she received continuously sum which was assured out of profit.
b) The appellant is not an ordinary person to be carried away with hollow promises. She could have stopped making investment had she really thought that the assured return was not forthcoming. She never stopped investment until the whole episode turned into a scandal.
c) Any person like the appellant who got additional amount of Rs.1,00,000/- within a month of first investment and not getting further benefits in the next three months definitely won't make further investment unless return is assured and received.
d) No company in the investment business would ever think of returning back the money invested with them unless extraordinary circumstances warrants to do so rather it would always think of sharing only the profit it made. The same was actually happened with the appellant and the profit was infact shared with her.
e) Inspite of all these developments reached to the stage of scandal, the appellant still is unable to produce correspondence she had with the said companies requesting to return back the money she deposited. Hence, what was returned back to appellant is only the share from the profit earned and not the money she deposited.
f) It could be seen from the complained filed before the Hon'ble Additional chief Judicial Magistrate Court, Trivandrum, the appellant claimed to have invested in Total 4 U and Nest Investment Solutions a sum of Rs.2,20,95,000/- which includes Rs.1,17,50,000/-, the amount withdrawn and reinvested from the growth. Therefore, what was returned back to appellant is 8 I.T.A. Nos.259&260/Coch/2016 only the share from the profit earned and not the money she deposited.
g) Source for the investment made on movable and immovable assets as mentioned in para 6 of the assessment order, has not been explained yet with cogent evidence but simply stated as made out of withdrawals from Nest Investment Solutions. Atleast, for the bank loan availed, a confirmation letter obtained from the Punjab National Bank for the loan availed, could have been furnished for verification.
5.5 In the background of foregoing, what the appellant had received from Total 4 U and Nest Investment Solutions during the year under consideration is nothing but the assured growth/profit and not out of the investment made. In view of the above the appellant's argument of a promise to pay income on a future date is not an incidence for attracting Income Tax liability, has no relevance to the facts of the case as it is proved to be a case wherein income in the name of assured growth has rightly been earned against the investment made during the current year itself but wrongly been treated as return of investment. Hence, appeal on this ground stands dismissed.
5.6 The decision in dismissing the appeal on this ground is subject to further ruling by the Hon'ble Additional Chief Judicial Magistrate Court, Trivandrum which is reportedly still pending for adjudication.
6. In the result, the appeal is partly allowed."
4.4 Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. The Ld. Counsel for the assessee, reiterated the submissions made before the Income Tax authorities. The Ld. DR on the other hand supported the orders of the Assessing Officer and the CIT(A).
4.5 I have heard the rival submissions and perused the material on record. The only issue that arises for my consideration is whether the amounts received by 9 I.T.A. Nos.259&260/Coch/2016 the assessee from the two firms, namely, Total 4 U and Nest Investment Solutions during the relevant assessment year is return of investment or assured growth/profit. It is an admitted position that during the relevant assessment year the assessee had received a sum of Rs.52,26,000/- from Nest Investment Solutions. Out of the total amount of Rs.52,26,000/- received back, the Assessing Officer has estimated income for the relevant assessment year only to the tune of Rs.15,64,900/-. The assessee in the course of assessment proceedings had given a statement to the Assessing Officer on 15/09/2008. In answer to Question No. 15, she has stated as follows:
"I invested Rs.2.50 lakhs in the company Nest Investment Solutions in August 2007. I was made to understand that this was an institution dealing in commodity trading and was a franchise of share wealth. The amount of Rs. 2.5 lakhs was given in cash. Assured growth of 40% was promised. An amount of Rs.3.50 lakhs was given in September, 2007 including assured growth. On the same day I invested Rs.2.50 lakhs. I invested a further sum of Rs.7.5 lakhs in the same month. In October, 6.75 lakhs and in November 32.20 lakhs was invested. An amount of Rs.1 lakh was returned in November. Rs. 3 lakhs was invested in December. 1 lakh was returned in January and 23 lakhs was invested. Rs.21.76 lakhs was returned in February and 15.50 lakhs was invested. In March 25 lakhs was received and 14 lakhs was invested. Most of the above transactions were by way of cheques. Some were cash transactions. The details will be filed later."
4.6 From the above statement of the assessee, it is clear that on an investment of Rs.2.5 lakhs made in August 2007, she received back principal amount of Rs.2.5 lakhs plus growth of Rs.1 lakh in September, 2007. Further in the month of November, 2007 and January, 2008, Rs.1 lakh each was received by assessee 10 I.T.A. Nos.259&260/Coch/2016 from Nest Investment Solutions. In February, 2008, the assessee received Rs.21,76,000/- and in March, 2008, a further sum of Rs.25 lakhs was received by her. When the assessee had received growth of Rs. 1 lakh in September, 2007 on investment of Rs.2.5 lakhs made in August, 2007, it is clear that the assessee was getting assured growth/profit of 40% and it is unlikely that whatever amount that has been received from Nest Investment Solutions in the course of the relevant assessment year is return of investment. The onus is on the assessee to prove what has been received by her in the course of relevant assessment year from Nest Investment Solutions is return of investment. The assessee in this case has not produced any evidence to show that the amount that was received by her from Nest Investment Solutions is return of investment.
I am of the view, the Assessing Officer was very reasonable in bringing to tax only Rs.15,64,900/- out of the total amount of Rs.52,26,000/- that was received by the assessee from Nest Investment Solutions. Moreover, I notice that the source of investment made in movable and immovable assets, as mentioned in para 6 of the assessment order has not been properly explained with cogent evidence. As regards the source of investments made in movable and immovable assets, no separate addition was made, since the addition of Rs.15,64,900/- was made on income received from Nest Investment Solutions.
In other words, the Assessing Officer had telescoped the source of investments in movable and immovable assets with the addition made on account of amounts received from Nest Investment Solutions. For the aforesaid reasoning, I confirm 11 I.T.A. Nos.259&260/Coch/2016 the order of the CIT(A) for the assessment year 2008-09 as correct and in accordance with law and no interference is called for. It is ordered accordingly.
Thus, the appeal of the assessee for the assessment year 2008-09 is dismissed.
I.T.A. No. 260/Coch/2016 : A.Y. 2009-10
5. The Assessing Officer had made an addition of Rs.13,32,600/- being the amount received from Nest Investment Solutions. The relevant finding of the Assessing Officer reads as follows:
"During the course of recording the statement of Dr. Remani Krishnan on oath on 15/09/2008 by the Income Tax Officer, Ward-4, Kollam, the assessee has deposed that for the investment in Nest Investment Solutions, there was an assured growth rate of 40%. Even though the assessee disputes this extent of return from investment, no evidence has been brought to establish that there was lesser growth. In fact the assessee has not returned any income from this investment. She has however claimed interest of Rs.2,11,627/- against loan taken for investment in Nest . In the absence of any evidence to prove the claim that there was no income, the net increase from Nest Investment Solutions is estimated @ 40% upto 18.08.2008 on the net balance of Rs.55,19,000/- and at the same rate on Rs.20,19,000/- for the remaining part of the year as shown below:
55,19,000 x 4.5 x 40% = 8,27,050 12 20,19,000 x 7.5 x 40% = 5,04,750 12 Total =13,32,600"
5.1 On further appeal to the first appellate authority, the CIT(A) confirmed the order of the Assessing Officer. The CIT(A) followed the reasoning given by him 12 I.T.A. Nos.259&260/Coch/2016 for the assessment year 2008-09 in rejecting the appeal of the assessee. The relevant finding of the CIT(A) reads as follows:
"For the detailed reasons discussed in paras 5.1 to 5.6 of the order passed for the AY 2008-09, appeal filed for the year under consideration against the addition made on account of income earned from the companies Total 4 You and Nest Investment Solutions is also dismissed since I am of the considered opinion that what the appellant had received from the above mentioned companies during the year under consideration is nothing but the assured growth/profit and not out of the investment the appellant had made."
5.2 Aggrieved by the order of the CIT(A), the assessee has preferred the present appeal before the Tribunal.
5.3 I have heard the rival submissions and perused the material on record. As mentioned earlier for assessment year 2008-09, I am of the view that the assessee has been unable to prove that the amount received from Nest Investment Solutions is return of investment. When the onus is on the assessee to prove whether the amount received is return of investment, which she has failed to discharge, I find no infirmity in the orders of the Assessing Officer and the CIT(A). Therefore, I confirm the addition made. It is ordered accordingly.
Thus the appeal of the assessee for the assessment year 2009-10 is dismissed.
13 I.T.A. Nos.259&260/Coch/20166. In the result, the appeals of the assessee for AY's 2008-09 and 2009-10 are dismissed.
Pronounced in the open court on 10th-07-2017.
sd/-
(GEORGE GEORGE K.) JUDICIAL MEMBER Place: Kochi Dated: 10th July, 2017 GJ Copy to:
1. Dr. Remani Krishnan, Asvini Hospital, Curzon Road, Kollam-13.
2. The Deputy Commissioner of Income-tax, Circle-1(1), Kollam.
3. The Commissioner of Income-tax(Appeals),Trivandrum.
4. The Pr. Commissioner of Income-tax, Trivandrum.
5. D.R., I.T.A.T., Cochin Bench, Cochin.
6. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin