Income Tax Appellate Tribunal - Cochin
Sri.M.J. Joy, Trichur vs Department Of Income Tax on 9 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE S/SHRI N.R.S.GANESAN, JM and CHANDRA POOJARI, AM
I.T.A. Nos.365 & 366/Coch/2014
Assessment Years : 2006-07 & 2007-08
The Deputy Commissioner of Vs. Shri M.J.Joy,
Income-tax, Central Circle, Mandakan House,
Thrissur. Kottamuri, P.O.,
Vadama, Mala,
Thrissur-680 736.
[PAN:ADVPJ 2530J]
(Revenue-Appellant) (Assessee-Respondent)
I.T.A. Nos. 391&392/Coch/2014
Assessment Years : 2006-07 & 2008-09
Shri M.J.Joy, Vs. The Deputy Commissioner of
Mandakan House, Income-tax, Central Circle,
Kottamuri, P.O., Thrissur.
Vadama, Mala,
Thrissur-680 736.
[PAN:ADVPJ 2530J]
(Assessee-Appellant) (Revenue-Respondent)
Revenue by Smt. Latha V. Kumar, Jr. Dr
Assessee by None
Date of hearing 10/12/2014
Date of pronouncement 09/01/2015
ORDER
Per CHANDRA POOJARI, Accountant Member:
These cross appeals filed by the assessee and the Revenue are directed against the separate orders dated 06-01-2014 passed by the CIT(A)-V, Kochi for the assessment years 2006-07, 2007-08 and 2008-09. 2 I.T.A. Nos./365 & 366
& 391&392/Coch/2014
2. None appeared on behalf of the assessee nor was there any adjournment application filed before the Tribunal. Hence, we proceed to adjudicate these appeals ex parte.
3. There was a delay of 115 days in filing the assessee appeals in I.T.A. Nos. 391&392/Coch/2014 before the Tribunal. The assessee has filed a petition seeking condonation of delay and also has filed an affidavit explaining the reasons for delay in filing the appeal before the Tribunal within the due date. The assessee submitted that though the time limit of filing appeal as per 249(2) is 30 days, the certified copy of the order was received on 24/03/2014, 30 days calculated therefrom ends on 23/04/2014. The assessee submitted that the above delay was not due to any willful default, neglect or laches but the same was caused due to inadvertent mistake. The assessee was under treatment and in bed rest by disease from 22/03/2014 to 04/09/2014 (Medical certificate enclosed) and when he got back from this, he proceeded to file the appeals. It was submitted that the delay occurred solely due to the reasons stated above and hence prayed that the delay in filing the above appeals may be condoned.
4. The Ld. DR has not raised any serious objection for condonation of delay in filing the appeal by the assessee.
3 I.T.A. Nos./365 & 366
& 391&392/Coch/2014
5. We have heard both the parties and perused the record. We find that there exists reasonable cause for not filing the appeal in time and the reasons advanced by the assessee for the delay are bona fide. Being so, we condone the delay in filing the appeal by the assessee and admit the appeal for adjudication.
6. The first ground in the Revenue appeal I.T.A. No. 365/Coch/2014 is with regard to the deletion of addition of Rs.7,00,000/- as borrowals from the assessee's Uncle.
7. The brief facts of the case as narrated in Revenue appeal in I.T.A. No. 365/Coch/2014 are that the assessee Shri M.J. Joy is Managing Partner of the firm M/s. Saj Cera Colours. There was a survey carried out u/s. 133A in the business premises of the firm and during the course of survey, certain incriminating papers were found. This survey was carried out in consequence to the search operation u/s. 132 conducted on Shri E.T. Devassy & Sons Group on 26-03-2008. The document No. TCS-30 seized during the course of search, at the residence of Shri E.T. Devassy on 26-03-2008 and document No. H-13 impounded during survey suggests that the assessee has purchased certain immovable property and similarly document H-19, impounded from the premises of the firm was also suggestive of a sum of Rs.13,88,401/- was spent towards purchase of various properties.
4 I.T.A. Nos./365 & 366
& 391&392/Coch/2014 7.1 The Assessing officer has segregated the assessee's share of investment in plant and machinery and land of Rs. 44,96,850/- and it was compared with the cash flow statement filed by the assessee on 26/10/2010 and 27/10/2010 and found that there was shortage of availability of cash of Rs.36,41,850/-. While considering the cash flow statement, the Assessing officer considered all the sources explained by the assessee such as:
i) Borrowals from uncle Rs.7,50,000/-.
ii)Gold belonging to family members pledged Rs.12,00,000/-.
iii)Withdrawals of loans from KFC Rs.41,85,000/-.
7.2 The Assessing officer treated the sources for the cash as bogus because of inadequacy of evidences produced during the course of assessment proceedings.
7.3 As regards borrowals from uncle, the assessee filed cash flow statement on 26-10-2010 wherein it was stated that an amount of Rs. 15,000 was borrowed from uncle during F.Y. 2005-06. Subsequently, the assessee filed cash flow statement on 27/10/2010 for the financial year 2005-06 wherein it was stated that an amount of Rs.2,50,000/- was borrowed from Uncle during the F.Y. 2005-06 and that an amount of Rs.3,00,000/- was borrowed from the uncle during F.Y. 2007-08. As per revised cash flow statement filed by the assessee on 29/10/2010, it was stated that an amount of Rs.7,00,000/- was borrowed from uncle during 5 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 F.Y. 2005-06 and that an amount of Rs. 3,00,000/- was borrowed from uncle during the F.Y. 2007-08. Thus, it was seen that these are very much contradictory cash flow statements and the assessee could not furnish any evidence to prove the fact of exact dates of having given moneys to the assessee, especially he had conducted the marriage of his daughter during the year 2006 out of the retirement benefits received by him. 7.4 Thus the Assessing officer held that the assessee failed to produce his Uncle who stands as a creditor and, since the onus to prove the identity, creditworthiness and genuineness of the creditor squarely lies on the assessee, an amount of Rs.7,00,000/- claimed as receipt in cash flow statement was treated as bogus.
8. On appeal, the CIT(A) remanded the issue to the file of the Assessing officer directing the Assessing officer to call for the following details from the assessee.
(i) Complete details with proof regarding the transaction with Shri P.G. George, his uncle.
(ii) Complete details regarding the money raised from pledging gold with evidence.
(iii) Correct and complete details of loan received from KFC with supporting evidences.6 I.T.A. Nos./365 & 366
& 391&392/Coch/2014 8.1 In response to this, the assessee filed a copy of the evidence/confirmation filed before the CIT(A) and also filed copies of TDS certificates in Form No.16 showing the emoluments received during the assessment year 2004-05 and 2005-06 alongwith copies of E.P.F. ledger for the period 2004-05. The assessee produced Shri P.G. George on 17/10/2013 and the same day he was examined on oath, wherein he stated that he had extended monetary assistance of Rs.7,00,000/- to his nephew, Shri M.J. Joy. He has also stated that he had received around Rs.10,00,000/- at the time of his retirement in the year 2005. Further a certificate from the IOB, Udyogamandal Branch where Shri P.G. George maintained a savings Bank account, "during 2005 one clearing credit entry dated 15/7/2005 for Rs.7,65,924.88 and one withdrawal entry dated 4.8.2005 for Rs.7,00,000/- is observed" was filed. 8.2 In this regard, it was submitted that even though there was a withdrawal of Rs.7,00,000/- on 4.8.2005 certified by the bank, as Shri George in his reply to question No. 4 in the sworn statement stated that he has given the amount of Rs.7,00,000/- on various occasions to the assessee, it was crystal clear that this single withdrawal of Rs.7,00,000/- could not be the source of the money to lent to the assessee on various dates, for no prudent person will withdraw such huge amounts from the bank account, to lent money to anyone in future instalments. Also, it was 7 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 submitted that at that time, the marriage of the daughter of the lender was due and the marriage subsequently was held in the year 2006. In view of the same, the Ld. AR submitted that the addition made by the Assessing officer by disallowing this amount in cash flow statement filed by the assessee may be sustained.
8.3. The CIT(A) observed that it was evident from the Remand Report that Shri P.G. George was produced on 17.10.2013 and was examined on oath, wherein he stated that he had extended monetary assistance of Rs.7,00,000/- to his nephew, Shri M.J. Joy. As regards his source of the fund it was stated that the same was received as retirement benefits. However, the Assessing officer submitted that in his sworn statement, the creditor Shri P.G. George has stated that the amount of Rs.7,00,000/- was given on various occasions to the assessee, on which the Assessing officer has inferred that out of single withdrawal of Rs.7,00,000/-, how could have the creditor lent to the assessee on various dates, as no prudent person will withdraw such huge amount from the bank a/c to have lent money to anyone in future installments 8.4 According to the CIT(A), It appears that the Assessing officer instead of examining the three ingredients of a credit, i.e., identity of the person, the creditworthiness and genuineness of transaction, has resorted 8 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 to another logical interpretation of the events of withdrawal of money and lending thereafter. In the instant case, according to the CIT(A), since all the three ingredients of a genuine credit gets established as the creditor has been produce by the assessee and the creditor has admitted to have given the loan in his sworn statement and the creditor has explained his creditworthiness by explaining the source of his income, i.e., he has received Rs.10,00,000/- as retirement benefits for which Form No. 16 showing the emoluments as per the TDS certificate and the copies of the EPF Ledger have also been produced. In view of this, the CIT(A) held that the cash shown as available in the cash flow statement as loan from Uncle, was explainable and hence, cannot be treated as bogus. Against this, the Revenue is in appeal before us.
9. We have heard the Ld. DR. In this case, the assessee's uncle Shri P.G. George was produced on 17-10-2013 and in the sworn statement it was admitted that he had given Rs. 7,00,000/- to the assessee. The creditor explained the source of the above amount, i.e., he has received Rs. 10,00,000/- as retirement benefits for which Form No. 16 showing emoluments and TDS certificate and the copies of EPF Ledger were produced. Thus, the identity of the person, the creditworthiness and the genuineness of the transaction has been established. Hence, the loan of Rs.7,00,000/- from the assessee's uncle is explainable and cannot be 9 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 treated as bogus. Hence, we are inclined to confirm the order of the CIT(A) on this issue. Accordingly, this ground of the Revenue is dismissed.
10. The next ground in the Revenue appeal is with regard to deletion of addition of gold belonging to family members pledged at Rs,.12,00,000/- .
11. However, in the assessment order, it was held by the AO that no evidence for pledge of gold and receipt of money was filed. However, in the remand report, the Assessing officer has submitted that the assessee filed copies of four receipts of gold loan from the Canara Bank, Irinjalakuda gold loan tickets issued in the name of Shri M.J. Jojo and Shri M.J. Jose as shown below:
M.J. Jose 5.1.2010 renewal 3.00 lakhs
M.J. Joy 6.1.2010 3,26,728
M.J.Jojo 5.2.2010 renewal 3.00 lakhs
M.J. Jojo - 2,61,603
Total 11,88,331/-
Further, the assessee also filed two letters from the Canara Bank confirming that Rs. 3,00,000/- credited on 3.12.2008 in the account of Shri M.J. Jojo which pertains to proceeds of gold loan availed by him and Rs.2,40,000/- to Shri M.J. Jose in his a/c on the same date. The Assessing officer has observed that "though some evidence about gold pledging was brought out 10 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 but nothing concrete to prove that this was the source for the amounts shown in the cash flow statement with independent verifiable entry such as cheque/DD transfer, in want of which it leaves the claim of the assessee hollow and unsubstantiated.
12. The CIT(A) observed that the plea taken by the assessee for the source of cash available in the cash flow statement appears to be correct, to the extent that evidences regarding such gold pledge have been produced. According to the CIT(A), the Assessing officer has gone beyond such evidences, in search of further concrete evidences which at this juncture was no more required. In view of the fact that the assessee has also submitted the slips for other such gold loans, the CIT(A) held that there has been consistency in the approach and explanation of the assessee, and the same was supported with the actual instances of pledging of gold for taking loans. Accordingly, it was held that the source for the available cash of Rs.12,00,000/- was explainable. Against this, the Revenue is in appeal before us.
13. We have heard the Ld. DR. In this case, the assessee has raised amount from pledging of gold belonging to family members at Rs.12,00,000/- with Canara Bank, Irinjalakuda in the name of Shri M.J. Jojo and M.J. Jose. Further, the assessee has furnished two letters from Canara 11 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 Bank, Irinjalakuda confirming that Rs.3.00 lakhs credited on 3.12.2008 into the account of Shri M.J. Jojo pertains to proceeds of gold loan availed by him and Rs.2,40,000/- credited on 3.12.2008 in the account of Shri M.J. Jose pertains to proceeds of gold loan availed by him. However, this fact was confirmed by the Assessing officer in his remand report, though he was not able to explain the source of Rs. 12,00,000/- as gold loan. The CIT(A), after considering the entire facts of the case and the evidence brought on record, deleted the addition of Rs.12,00,000/- as it was received from pledging gold. Being so, we do not find any infirmity in the order of the CIT(A) on this issue and confirm the deletion of addition of Rs.12,00,000/-. Accordingly, this ground of the Revenue is dismissed.
15. The next ground in Revenue appeal is with regard to deletion of addition of Rs.41,85,000/- as loan from KFC.
16. Regarding withdrawal of loan from KFC, it was submitted by the Assessing officer in his Remand Report that a copy of sanctioned letter for a loan of Rs.41.85 lakhs under SME Scheme to start a unit of manufacture of glazed Terracotta Tiles was filed. However, the Assessing officer did not find it convincing because the assessee did not submit as to how and when this amount was practically used in the investment.
12 I.T.A. Nos./365 & 366
& 391&392/Coch/2014
17. On appeal, the CIT(A) observed that the Assessing officer has not accepted the assessee's claim because of the fact that the loan was sanctioned to the firm and not in the name of Managing Partner. However, it has not been denied that the investment made in land, building and machinery etc. has been in the name of the firm. The overall cash flow statement has thus, to include the available cash in the hands of the partner as well as in the hands of the firm as the immovable property and other properties like crusher etc. have been purchased for the business of the assessee on which there is no segregation as such, made by the Assessing officer during the course of assessment proceedings. In view of this, the cash flow statement showing available cash of Rs.41.85 lakhs is held as explainable.
18. We have heard the Ld. DR. The assessee has filed copy of sanctioned letter before the lower authorities under SME Scheme for a loan of Rs.41.85 lakhs which was confirmed by the Assessing officer in his remand report. However, he was not ready to accept the same on the reason that the loan was sanctioned to the firm and not in the name of Managing Partner. However, it was not to be denied that the investment made in land, building and machinery etc. has been in the name of the firm. The cash flow statement included the available cash in the hands of the partner as well as in the hands of the firm as the immovable properties and 13 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 other properties like crusher etc. have been purchased for the purpose of the business of the assessee on which there was no segregation as such, made by the Assessing officer during the course of assessment proceedings. The CIT(A) being satisfied with the evidence furnished by the assessee, deleted the addition as the source was loan from KFC. Being so, we do not find any infirmity in the findings of the CIT(A) on this issue and hence, we confirm the order of the CIT(A) on this issue. Accordingly, this ground of the Revenue is dismissed.
19. Next we will take up the Revenue appeal in I.T.A. No. 366/Coch/2014.
20. Since the first ground in this appeal is identical to that of I.T.A. No. 365/Coch/2014, we are inclined to confirm the findings of the CIT(A) on this issue. Accordingly, this ground of the Revenue is rejected.
21. The second ground is with regard to addition of Rs.13,38,401/- on account of undisclosed investment in immovable property.
22. As discussed in earlier paras in I.T.A. No. 365/Coch/2014, the investment has been made from the amount received from relatives by pledging of family gold. The CIT(A), after being satisfied about the source 14 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 of loan, deleted the addition. Being so, we are inclined to confirm the findings of the CIT(A) on this issue. Accordingly, This ground of the Revenue is dismissed.
23. The third ground is with regard to addition is with regard to addition of undisclosed investment of Rs. 17,84,049/- in the firm Saj Cera Colours. 24 . The AO made the above additions on account of discrepancies found in the assessee's account with the firm M/s. Saj Cera Colours in which the assessee is a partner. The assessee's counsel had no satisfactory explanation to offer. Hence, the differences were treated as undisclosed investment of the assessee in the firm and the amount was added to the total income returned by the assessee for the respective assessment years.
25. The CIT(A) observed that source of cash from loans from relatives, pledge of family gold and from the KFC are explainable. Accordingly, the CIT(A) deleted the addition of Rs.13,38,401. Against this, the Revenue is in appeal before us.
26. Regarding the quantum of disallowance, the CIT(A) observed that a sum of Rs.16,25,219/- has already been disallowed in the A.Y. 2007-08 and as the current account is cumulative and progressive in nature the addition 15 I.T.A. Nos./365 & 366 & 391&392/Coch/2014 for the A.Y. 2008-09 could be limited to the extent of accretion in current account during the period relevant to the assessment year, i.e., Rs. 17,84,049 - Rs.16,25,219 = Rs. 1,58,830/-. Accordingly, the CIT(A) limited the disallowance made by the Assessing officer to Rs.1,58,830/-. Against this the Revenue is in appeal before us.
27. We have heard the Ld. DR. The CIT(A), after considering the cash flow statement, observed that the assessee has properly explained the source in the cash flow statement for the assessment years 2006-07 and 2007-08. There was enough fund available with the assessee to make this investment and sustained only Rs. 1,58,830/- out of Rs.32,72,450/-. Accordingly, we do not find any infirmity in the order of the CIT(A) on this issue and confirm the finding of the CIT(A) on this issue. Accordingly, both the grounds of the Revenue are dismissed.
28. Next we will take up the common grounds in assessee's appeals in I.T.A. Nos. 391&392/Coch/2014.
29. We have heard the Ld. DR. We find that the grounds are very general in nature and have not specified the exact grievance of the assessee. More so, the grounds are supportive of the CIT(A) order. Accordingly, the grounds of the assessee in both the appeals are dismissed.
16 I.T.A. Nos./365 & 366
& 391&392/Coch/2014
30. In the result, the appeals filed by the Revenue as well as the appeals filed by the assessee are dismissed.
Pronounced in the open court on 09/01/2015
sd/- sd/-
(N.R.S.GANESAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi
Dated: 9th Jan 2015
GJ
Copy to:
1. Shri M.J.Joy, Mandakan House,Kottamuri, P.O., Vadama, Mala, Thrissur-680 736.
2. The Deputy Commissioner of Income-tax, Central Circle, Thrissur.
3. The Commissioner of Income-tax(Appeals)-V, Kochi.
4. The Commissioner of Income-tax, Central, Kochi.
5. D.R., I.T.A.T., Cochin Bench, Cochin.
6. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin