Income Tax Appellate Tribunal - Chennai
M. Uthirapathy, Trichy vs Department Of Income Tax on 9 May, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH : CHENNAI
[BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER
AND SHRI V. DURGA RAO, JUDICIAL MEMBER]
I.T.A.No.1432/Mds/2012
Assessment year : 2007-08
The Income Tax Officer vs Shri M. Uthirapathy
Ward IV,(1) Nirmala Cottage
Trichy No.30, 3rd Street
State Bank Colony
Edamalaipatty Pudur
Trichy 620 012
[PAN AATPU 3407 A]
(Appellant) (Respondent)
Appellant by : Shri N. Madhavan, Jt. CIT
Respondent by : Shri S.Keethirajan, CA
Date of Hearing : 09-05-2013
Date of Pronouncement : 10-05-2013
ORDER
PER N.S. SAINI, ACCOUNTANT MEMBER
This is an appeal filed by the Revenue against the order of the ld. CIT(A), Tiruchirapalli, dated 16.4.2012.
2. The sole issue involved in this appeal of the Revenue is that the ld. CIT(A) erred in holding that loans given by Shri M. Veeramani, Shri Arokiadoss alias Chinnappa, Shri Sanjeevi, Shri P. Suresh, Shri :- 2 -: I.T.A.No. 1432/12 Kannan and Shri R. Ramanathan amounting to ` 15,73,625/- were genuine.
3. The brief facts of the case are that the Assessing Officer found from the Balance Sheet of the assessee that the assessee had shown unsecured loan of ` 16,73,625/- during the financial year 2006- 07 from the following persons:
Name of the creditor Amount advanced `
Shri M. Veeramani 63,625/-
Shri Sanjeevi 70,000/-
Shri Arokiadoss alias 5,00,000/-
Chinnappa
Shri Suresh 1,00,000/-
Shri Kannan 90,000/-
Shri R.Ramanathan 7,50,000/-
Trichy Agro Industry 1,00,000/-
4. The Assessing Officer required the assessee to prove the
identity of creditors, capacity of the creditors and genuineness of the transactions. The Assessing Officer issued summons to all the creditors. On examining the loan creditors, the Assessing Officer found that Shri M. Veeramani, was a Practicing Lawyer and that he :- 3 -: I.T.A.No. 1432/12 informed that his monthly income was ` 10,000/- and family expense was around ` 5,000/-. He further informed the Assessing Officer that the assessee being his relative, he advanced a sum of ` 63,625/- on five occasions by depositing the amount into the bank account of the assessee. The Assessing Officer observing that no evidence was produced for earning of ` 10,000/- per month by Shri M. Veeramani, no bank account or income tax details were produced, held that the creditworthiness of the creditor was not proved and therefore, the loan was not genuine.
5. As regarding Shri Arokiadoss alias Chinnappa, the Assessing Officer observed that the said person stated he was having PAN and had filed returns of income, his source of income was from commission from sale of automobiles. Regarding the source of advancing loan to the assessee, it was submitted by the said creditor that it was from his savings from agricultural income and from his other income. The Assessing Officer observed that perusal of the books of account of the assessee shows that this creditor had given ` 4,75,000/- on 20.5.2006 and ` 25,000/- on 28.12.2006. Regarding the mode of payment, it was stated that a DD was taken of ` 4,75,000/- by the loan creditor in Keeranoor near his native village and the same was :- 4 -: I.T.A.No. 1432/12 handed over to the employee of the assessee. The balance amount of ` 25,000/- was paid in cash. Regarding the source of ` 4,75,000/- it was explained that ` 2 lakhs was available with him and balance amount was received from his father in their native village. The creditor stated before the Assessing Officer that the loan advanced to the assessee was not reflected in the income tax return filed by him. Therefore, the Assessing Officer did not accept the loan of ` 5 lakhs received from this creditor as genuine and added the same to the income of the assessee.
6. With regard to the loan of ` 1,10,000/- received from Shri Sanjeevi, the Assessing Officer observed that that the said creditor has explained that the source of this loan advanced to the assessee was out of his past savings, but he could not produce any evidence in respect of the same. Therefore, the Assessing Officer treated this amount as not genuine and added the same to the income of the assessee.
7. Regarding the loan of ` 1,00,000/- from Shri Suresh, the Assessing Officer observed that the loan creditor explained that the amount was given out of saving from agricultural income. Regarding the mode of payment it was stated that the amount was paid in the :- 5 -: I.T.A.No. 1432/12 bank account of the assessee. The Assessing Officer did not accept the loan as genuine as the assessee was having a bank account but still the cash was stated to be kept in his house and no evidence was produced for the claim of accumulation of income so as to lend `1, 00,000/- to the assessee. Therefore, this sum was added to the income of the assessee as unexplained cash credit.
8. Regarding `95,000/- received from Shri Kannan, the Assessing Officer observed that the loan creditor explained that ` 95,000/- was given out of savings from agricultural income, but he could not produce evidence about his past savings for advancing such sum to the assessee. Thus, he treated ` 95,000/- as unexplained cash credit in the hands of the assessee.
9. Regarding ` 7,50,000/- received from Shri R.Ramanathan, the Assessing Officer observed that this creditor was not produced for examination in absence of details and evidences to prove the genuineness of the loan transaction and the capacity of the creditor, the same was not accepted and added to the income of the assessee.
10. On appeal, the ld. CIT(A) observed that except Shri R. Ramanathan, all other creditors attended before the Assessing Officer and their sworn statements proved their identity, creditworthiness and :- 6 -: I.T.A.No. 1432/12 capacity to lend and source of income for having given the loans to the assessee. On verifying the details filed by the ld. A.R of the assessee, it is found that the following persons have reflected the loan to the assessee in their returns of income, copies of which were filed by the creditors:
Shri M. Veeramani ` 63,625 AJBPM 6524 F
Shri Arokiadoss alias Chinnappa ` 5,00,000 AHLPC 2818
Shri Sanjeevi ` 70,000 BYJPS 0420C
Shri P. Suresh ` 1,00,000` BODPS 4601H
11. As far as Shri Kannan from whom ` 90,000/- was received was concerned, the ld. CIT(A) observed that he was having agricultural income and also appeared before the Assessing Officer to prove his identity and creditworthiness.
12. Similarly, in the case of Shri R. Ramanathan, from whom ` 7,50,000/- was received, the ld. CIT(A) observed that he could not attend before the Assessing Officer due to non-availability on the date of issue of summon and could produce confirmation letter alongwith other documents for having source of income such as agricultural patta passbook and promissory note issued by the assessee. The ld. AR of the assessee has submitted promissory notes in the case of all the seven loan creditors to prove their genuineness. The ld. CIT(A) observed that on verifying the returns of income filed by some of the :- 7 -: I.T.A.No. 1432/12 loan creditors mentioned above as well as copies of promissory notes and other details, the loans given by the above parties were in order and deleted the addition.
13. The ld.D.R, before us, submitted that copies of income tax returns and promissory notes, agricultural patta passbook and confirmation of Shri R. Ramanathan were not produced before the Assessing Officer and were produced before the ld. CIT(A) for the first time. The ld. CIT(A) accepted these evidences without allowing opportunity of verification to the Assessing Officer. The ld.D.R also argued that all loans were given in cash by way of deposit in the bank ac or by way of demand draft purchased in cash. The loan creditors could not explain their creditworthiness or availability of the said sum before advancing of it to the assessee. Therefore, the Assessing Officer had rightly made the addition and the ld. CIT(A) was not justified in deleting the addition.
14. On the other hand, the ld. AR of the assessee vehemently argued and supported the order of the ld. CIT(A) and submitted that all evidences were filed before the Assessing Officer. Only Shri R. Ramanathan could not appear before the Assessing Officer as he was out of station. The ld. CIT(A), being satisfied with the ability of the :- 8 -: I.T.A.No. 1432/12 loan creditors to advance the sum of money to the assessee, deleted he addition in the case of six loan creditors out of the total seven loan creditors from whom the assessee had received the amount during the year under consideration.
15. After considering the rival submissions and perusing the orders of the lower authorities and materials available on record, we find that the Assessing Officer added ` 16,73,625/- u/s 68 of the Act, out of which ` 15,73,625/- was deleted by the ld. CIT(A) on appeal. Being aggrieved by this deletion of ` 15,73,625/- the Revenue is in appeal before us.
16. The main contention of the ld.D.R is that the ld. CIT(A) deleted the addition of ` 15,73,625/- by admitting fresh evidences in the form of promissory notes in respect of all seven creditors, agricultural patta passbook in the case of Shri R. Ramanathan and income tax returns of six creditors. He submitted that the ld. CIT(A) admitted fresh evidences in violation of Rule 46A of the Income-tax Rules without allowing any opportunity to the Assessing Officer and therefore, the issue should be restored to the file of the Assessing Officer for fresh adjudication after verification of these fresh evidences. The ld. AR of the assessee could not controvert the above submission :- 9 -: I.T.A.No. 1432/12 of the ld.D.R. We, therefore, find that the ld. CIT(A), in deleting the addition of ` 15,73,625/-, admitted fresh evidences in the form of promissory notes in respect of all creditors, patta passbook in the case of Shri R. Ramanathan and income tax returns of all the creditors in question in violation of Rule 46A of Income Tax Rules. We, therefore, set aside the order of the ld. CIT(A) and restore the issue back to the file of the Assessing Officer for adjudication afresh as per law after allowing proper opportunity of hearing to the assessee and after verifying the fresh evidences discussed above and other evidences which the assessee may rely upon. Thus, the grounds of appeal of the Revenue are allowed for statistical purposes.
17. In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced on Friday, the 10th of May, 2013, at Chennai.
Sd/- Sd/- (V. DURGA RAO) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10th May, 2013, RD
Copy to: Appellant/Respondent/CIT(A)/CIT/DR