Income Tax Appellate Tribunal - Chennai
K.N.Pannirselvam, Chennai vs Dcit Non Corporate Circle 2, Chennai on 8 February, 2019
आयकर अपीलीय अिधकरण, 'डी' ायपीठ, चे ई
IN THE INCOME TAX APPELLATE TRIBUNAL , 'D' BENCH, CHENNAI
ीएन.आर.एस. गणेशन, ाियक सद एवं ी ए.सजयरामन, लेखास द के सम#
BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER
AND SHRI S.JAYARAMAN, ACCOUNTANT MEMBER
आयकरअपीलसं/I.T.A. No.2524/Chny/2017
िनधा'रणवष'/Assessment Year : 2012-13
ShriK.N.Pannirselvam, Vs The Deputy Commissioner of
3B, Parkland Apartment, Income Tax,
2, Kamalabhai Street, Non-Corporate Circle-2,
T.Nagar, Chennai-600 017. Chennai.
PAN: AAOPP8632 M
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से/ Appellant by : Mr. Philip George, Advocate
यथ क ओर से/Respondent by : Mr. Srinivasa Rao, CIT
सुनवाई क तार ख/D at e of he ar ing : 05.02.2019
घोषणा क तार ख /Da te of P r on o u nce m en t : 08.02.2019
आदे श/O R D E R
Per S.JAYARAMAN, AM:
The assessee filed this appeal against the order of Commissioner of Income Tax (Appeals)-2, Chennai, in ITA No. 123/CIT(A)-2/2015-16 dated 10.07.2017 for assessment year 2012-13.
2. Shri K.N.Pannirselvam, the assessee, an individual, Landscaping Architect, is running two business concerns viz., Plants Scape and Flower and Petals. In M/s.Plants Scape, the assessee did business and admitted its income as taxable, while in M/s. Flower and Petals, he 2 ITANo.2524/Chny/2017 carried out agricultural operations and claimed its income as an exempt one. While making the assessment for assessment year 2012- 13, the AO noticed , inter-alia, that out of the total purchases made by M/s.Plants Scape, purchases of Rs.77,34,756/- were made from M/s.Flower and Petals. By comparing the purchases from other parties, the AO found that the assessee has paid excessively to his own concern viz., M/s. Flower and Petals vis-à-vis from other parties on specific occasions. After considering the assessees's reply etc., the A O was of the view that there was clear inflation of purchases and hence treated 10% of assessee's purchases from M/s. Flower and Petals as an inflated one and disallowed the same. Further, the A O noticed that a credit of Rs.34,00,000/- to his capital account as a gift from the assessee's father, who expired on 13.09.2011. After considering the assessee's reply and material on record, the A O held that the primary onus is on the assessee to prove that he has received the gift from his father and since he has not discharged the burden added Rs.34,00,000/- as an unexplained cash credit. Aggrieved, the assessee filed appeal before the CIT(A). The learned CIT(A) has dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.
3. Learned AR submitted that learned CIT(A) has grossly erred in observing that the transaction with the related unit, M/s. Flower and 3 ITANo.2524/Chny/2017 Petals stood at higher value merely on a suspicion and surmise, without any basis and hence he grossly erred in upholding estimated addition towards the alleged inflation of purchases. Inviting our attention to copy of some photographs depicting certain plants, learned AR submitted that the purchases were made at the price fixed by the parties whose value depends upon the size and year of growth of plants and the pricing of the plants varies accordingly. Learned AR submitted that the learned CIT(A) is not correct in sustaining the disallowance made by the A O and hence pleaded to allow this appeal.
4. Per contra, learned DR submitted that assessee purchased plants from its own concern M/s. Flower and Petals at a higher rate than the purchases made from others i.e., third parties. The A O has very clearly brought on record two specific instances of such purchases viz., on 27.09.2011, M/s.Plantscape has purchased Fox Tail Palms from M/s. Flower and Petals for Rs.3150/- per plant, whereas on 27.01.2012 it has purchased the same plant from Shri Kondarama Nursery @ Rs.2400/- per plant. On 12.01.2012, the assessee has purchased Royal Palms from its related concern for Rs.3150/- per plant, whereas on 01.02.2012, it has purchased the same plant from Mohanapriya Nursery @ Rs.2,400/- per plant. After considering the assessee's reply etc, the AO made a disallowance @10%. When the assessee went on appeal 4 ITANo.2524/Chny/2017 before the Commissioner of Income Tax(Appeals), he could not counter the findings recorded by the A O with proper explanation/ evidence. Since the transactions with the related unit i.e., M/s. Flower and Petals stood at higher value than the transactions with the unconnected parties, in order to prove that transactions between himself and his related unit are at arms length price, the assessee has to explain the nature and produce appropriate evidences. No document in support of his claim that the impugned palms purchased from its own related entity at market rate was furnished. In view of that the Learned CIT(A) confirmed the Assessing Officer's disallowance. Even now, the assessee is not able to explain the basis on which it paid such huge sums towards purchases from its related concern vis-à-vis third parties and hence learned DR pleaded that the orders of the lower authorities be confirmed.
5. We have heard rival submissions and gone through the relevant material on record. Out of the total purchases, the assessee accounted, about 35% of the purchases from the related entity viz., M/s. Flower and Petals. The Assessing Officer found on the specific instances (supra), that the assessee had purchased at higher rates than with unrelated parties. The assessee being in the same line of business, should have brought adequate material and should have explained that the prices at 5 ITANo.2524/Chny/2017 which the purchases made from his related unit are at arms length price. However, he has not done so either before the lower authorities or before us. In the facts and circumstances, we do not find any reason to interfere with the order of the learned CIT(A) and hence the corresponding grounds of the assessee on this issue are dismissed.
6. With regard to the gift received from the demised father of the assessee at Rs .34,00,000/-,the learned AR submitted that Shri M.V. Nalliappa Gounder, father of the assessee, had been working in agricultural operations from 1950, had lent ₹34,00,000/- as loan in cash to three persons on three occasions viz., 11.05.2009, 30.11.2009 & 06.03.2010 a sum of ₹13,05,000/- to Shri R.Duraiswamy. Similarly, on 20.02.2009 & 02.06.2010 a sum of ₹12,00,000/- was lent to Shri P.Sengottaiyan of Rasipuram. On 04.1.2011 ₹3,00,000/- was lent to Shri N.Sengottaiyan of Valayapatti. Shri M.V.Nalliappa Gounder expired on 13.09.2011. Therefore, the loan debtors had returned the debts in cash to the assessee which was credited in his capital account. The Assessing Officer did not accept the contention in the absence of necessary documentary proof. Inviting our attention to the paper book wherein confirmation letters issued by the above three persons were placed, the learned AR submitted that these copies were furnished before the learned Commissioner of Income Tax(Appeals). However, the 6 ITANo.2524/Chny/2017 learned CIT(A) dismissed the appeal holding that there is difference of ₹5,95,000/- between the amount credited to the capital account and redemption of loans received back from the assessee's father. The learned AR submitted that the learned Commissioner of Income-tax (Appeals) has erred in observing that credit in the capital account is guised as gift received from the demised father are concocted to suit the requirements of the assessee. The learned CIT(A) grossly erred in holding that creditworthiness of the assessee's father was not established. The learned CIT(A) ought to have appreciated that merely on the ground that interest income was not offered for tax by the assessee and thus entire debt cannot be doubted and hence pleaded to allow the appeal.
7. Per contra, learned DR submitted that the credit to the Capital Account was Rs.34,00,000/-. The AO recorded a finding that the pronotes are unilateral in nature, therefore, they do not possess evidentiary value. Since the primary onus is on the assessee to prove that he has received the gift from his father which he has not discharged the credits of Rs.34,00,000/- was added as an unexplained cash credit. The documents furnished before the Ld CIT(A) to prove that the credits related to redemption of loans received back on behalf of assessee's demised father exhibited a receipt of Rs.28,05,000/-only from the three 7 ITANo.2524/Chny/2017 parties. Therefore, in the absence of proper proof with regard to the difference of Rs.5,95,000/- , the Ld CIT(A), first upheld the short fall of Rs5,95,000/- . After considering the documents provided in respect of the balance sum of ₹28,05,000/- and other pleas, the Ld CIT(A) observed that according to the assessee, Shri. M.V. Nalliyappa Gounder, assessee's father, expired on 13.9.2011. In such a situation, it is not clear as to how the assessee received Rs.5,00,000/- from Shri. R. Duraiswamyon 2.5.2011 while the alleged lender was alive. Similarly, Shri. P. Sengottalyan has repaid Rs.5,50,000/- on 23.06.2011 before the demise of Shri. MN. Nalliyappa Gounder. The credit worthiness on part of the assessee's father to lend such a huge sum of Rs.28,05,000/- was not established and these amountswere claimed to have been lent in the financial years 2008-09, 2009-10 & 2010-11. The corresponding receipt of interest income is not admitted. When the promotes confirm that the amount has been lent towards interest, the debtors have not affirmed the payment of interest which proved that the claim wasdetached from reality. Therefore, the Ld CIT(A) held that the documents furnished in support of the sources towards credits in the capital account guised as gift received from the demised father were concocted to suit the requirements of the assessee and do not bear any semblance of truth in it. Accordingly, the Ld. CIT(A) has rightly upheld the addition of Rs.28,05,000/-, relating to balance component. Even now, the 8 ITANo.2524/Chny/2017 assessee is not able to explain/ produce any evidence in support of his contentions and hence learned DR pleaded that the orders of the lower authorities be confirmed.
8. We have heard rival submissions and gone through the relevant material on record. From the above, it is clear that the assessee claimed to have received Rs.35,00,000/- gift by redemption of loans received back on behalf of assessee's demised father. However, he could not explain satisfactorily about the nature and sources of such credits and genuineness of them. In view of that the impugned sum was added to the income of the assessee and on appeal the Ld CIT(A), after due appreciation of the material etc, sustained the addition holding , inter-alia, that the documents furnished in support of the sources towards the credits in the capital account guised as gift received from the demised father were concocted to suit the requirements of the assessee and do not bear any semblance of truth in it. Before us, the assessee could not lay any material to dislodge the findings recorded by the lower authorities. In view of the above facts and circumstances, we do not find any reason to interfere with the order of the learned CIT(A) and hence the corresponding grounds of the assessee are dismissed. 9 ITANo.2524/Chny/2017
9. In the result, the assessee's appeal is dismissed.
Order pronounced on 08th February, 2019
Sd/- Sd/-
(एन.आर.एस. गणेशन) (ए.सजयरामन)
(N.R.S.Ganesan) (S.Jayaraman)
( या यक सद!य /Judicial Member) (लेखा सद!य / Accountant Member)
चे नई/Chennai,
$दनांक/Dated 08th February, 2019
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आदे श क त(ल)प अ*े)षत/Copy to:
1. Appellant 2. Respondent 3. आयकर आयु+त (अपील)/CIT(A)
4. आयकर आयु+त/CIT 5. )वभागीय त न/ध/DR 6. गाड2 फाईल/GF