Income Tax Appellate Tribunal - Chennai
R.Udayakumar, Bhavani vs Assessee on 19 June, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER
I.T.(SS) A. No. 159/Mds/2005
Block Assessment Period : 1989-90 to 1999-2000
(till 19.8.1999)
1. M/s Stonex Enterprises (India)
The Assistant Commissioner Ltd.,
of Income Tax, 2. Shri R. Meenakshisundararajan
Central Circle II, v. 3. Shri R. Udayakumar,
Coimbatore. 5/40, Car Street, Bajanai Koil Street,
Bhavani - 638 301.
(Appellant) (Respondent)
I.T.(SS) A. No. 1/Mds/2009
Block Assessment Period : 1989-90 to 1999-2000
The Assistant Commissioner Shri R. Udayakumar,
of Income Tax, 5/40, Car Street, (Bajanai Koil
Central Circle II, v. Street)
Coimbatore. Bhavani - 638 301.
PAN : AAFDU7503D
(Appellant) (Respondent)
I.T.(SS) A. No. 2/Mds/2009
Block Assessment Period : 1989-90 to 1999-2000
The Assistant Commissioner M/s Stonex Enterprises (India) Ltd.,
of Income Tax, 5/40, Car Street, (Bajanai Koil
Central Circle II, v. Street)
Coimbatore. Bhavani - 638 301.
(Appellant) (Respondent)
2 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09
I.T.(SS) A. No.194/Mds/06
I.T.(SS) A. No. 3/Mds/2009
Block Assessment Period : 1989-90 to 1999-2000
The Assistant Commissioner Shri R. Meenakshi Sundararajan,
of Income Tax, 5/40, Car Street, (Bajanai Koil
Central Circle II, v. Street)
Coimbatore. Bhavani - 638 301.
(Appellant) (Respondent)
I.T.(SS) A. No. 194/Mds/2006
Block Assessment Period : 1.4.89 to 22.6.99
Shri R. Udayakumar, The Assistant Commissioner of
5/40, Car Street, (Bajanai Income Tax,
Koil Street) v. Central Circle II,
Bhavani - 638 301. Coimbatore.
(Appellant) (Respondent)
Revenue by : Shri Anirudh Rai, CIT-DR
Respondent by : Shri S. Sridhar, Advocate
Date of Hearing : 19.06.2012
Date of Pronouncement : 28.06.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
Of the above, four appeals are of the Revenue, whereas, the last one is an appeal filed by one of the assessees. Appeal of the assessee is against the levy of penalty.
2. Facts relating to these appeals are as under:-
3 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06
3. There was a search conducted in the premises of one Shri V.S. Kathirvel on 21.6.99. The said search was concluded only on 19.8.99. From the premises of Shri V.S. Kathirvel, who was a real estate agent, certain documents were seized. It was noted from such seized material that he had agreed to sell certain pieces of land to one Shri R. Udayakumar, one Shri R. Meenakshi Sundararajan and one Shri R. Yuvaraj, who were all sons of one Shri M.A. Rajappan. The agreements for such sale were also found in the premises of Shri V.S. Kathirvel. Consequently, a search was conducted in the premises of Shri M.A. Rajappan on 1.7.99, wherefrom a notebook alleged to be belonging to one company called M/s Stonex Enterprises (India) Ltd. was seized. One other material seized from the premises of Shri M.A. Rajappan contained certain entries which showed payments made by Shri R. Udayakumar, Shri R. Meenakshi Sundararajan and Shri R. Yuvaraj to Shri V.S. Kathirvel, for purchase of the land. As per agreements for sale seized by the Revenue, Shri R. Udayakumar, Shri R. Meenakshi Sundararajan and Shri R. Yuvaraj were to acquire 8.3 acres of land at Veerachipalayam Village from the power-agent of Shri V.S. Kathirvel. Statements were recorded both from Shri V.S. Kathirvel and Shri M.A. Rajappan. Shri M.A. Rajappan in such statement mentioned that the land was being acquired by his sons. Accordingly, Shri R. Udayakumar, one of his sons, was also examined by the Revenue. Shri R. 4 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 Udayakumar stated that he was Managing Director of M/s Stonex Enterprises (India) Ltd. and land was being acquired only for the said company. Both Shri R. Udayakumar and Shri R. Meenakshi Sundararajan were the Directors of the said company. The conveyance deeds for the property were executed on 27.7.95 and 20.1.96 in the name of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan respectively, as stated by Shri M.A. Rajappan in his answer to query No. 24, in his oath. Though the agreements for sale in the names of three sons of Shri M.A. Rajappan, which apart from Shri R. Udayakumar and Shri R. Meenakshi Sundararajan, included Shri R. Yuvaraj also, eventually, the conveyance deed relevant to the agreement entered with Shri R. Yuvaraj was executed in favour of one Shri Ilango, who was a relative of these persons. Since the claim of Shri R. Udayakumar was that the properties were acquired for M/s Stonex Enterprises (India) Ltd., he was required to produce books of the said company. On 5.7.99, the books of the said company were handed over by Shri R. Udayakumar to the Department.
4. A.O. issued a notice under Section 158BD of Income-tax Act, 1961 (in short 'the Act') for the block period 1.4.89 to 19.8.99 to Shri R. Udayakumar, Shri R. Meenakshi Sundararajan and M/s Stonex Enterprises (India) Ltd. It seems no such notice was issued to Shri R. 5 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 Yuvaraj since eventually the sale deed was not executed in his name but in the name of one Shri Ilango. Nothing is available on record as to what happened in the assessment of Shri Ilango. Pursuant to such notice issued under Section 158BD of the Act, all the three assessees concerned, namely, Shri R. Udayakumar, Shri R. Meenakshi Sundararajan and M/s Stonex Enterprises (India) Ltd. filed their block return. In such returns, 'nil' income was declared by Shri R. Udayakumar and Shri R. Meenakshi Sundararajan, whereas, a loss of ` 4,83,749/- was returned by M/s Stonex Enterprises (India) Ltd. During the course of block assessment proceedings, assessees were put on notice by the A.O. with regard to discrepancies in the payments effected by them to Shri V.S. Kathirvel, as reflected in the seized records of M/s Stonex Enterprises (India) Ltd. from which assessees had shown such payments. It is to be noted at this juncture that as per the agreement dated 12.7.95, Shri V.S. Kathirvel had agreed to purchase 2.60 acres of land at the rate of ` 2.60 lakhs per acre, whereas, Shri R. Meenakshi Sundararajan had agreed to acquire three acres of land at the rate of ` 2.85 lakhs per acre. However, in the conveyance deeds dated 27.7.95 and 20.1.96, the total consideration shown were only ` 1,71,000/- and ` 2,21,000/- respectively. Thus, as per the A.O., against the consideration mentioned in the respective agreements, actual consideration shown in the conveyance deeds were understated. It seems assessees did not 6 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 dispute actual consideration at any point during assessment proceedings. The A.O. also noted that the payments stated to have been received by Shri V.S. Kathirvel on various dates from the assessees Shri R. Udayakumar and Shri R. Meenakshi Sundararajan exactly tallied with the dates of payments mentioned in the records seized from the premises of Shri M.A. Rajappan. As against this, according to him, the payments shown in the books of M/s Stonex Enterprises (India) Ltd., were not matching date-wise. As per the A.O., not only all these payments were actually not effected by M/s Stonex Enterprises (India) Ltd., but, on the other hand, M/s Stonex Enterprises (India) Ltd. was simply passing journal entries crediting the share application money account of the said assessees, namely, Shri R. Udayakumar and Shri R. Meenakshi Sundararajan and debiting the land account.
5. Assessees explained that the purchase of land was being effected only for the company M/s Stonex Enterprises (India) Ltd. and the payments directly made by them to Shri V.S. Kathirvel, was treated as share application money by the said company. According to Shri R. Udayakumar and Shri R. Meenakshi Sundararajan, the purchase being effected for the said company, these entries were appropriately passed. The dates on which Shri V.S. Kathirvel had stated that he had received 7 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 the amounts and the dates on which such amounts were shown as paid by Shri R. Udayakumar, Shri R. Meenakshi Sundararajan and Shri R. Yuvaraj in the records seized from their father Shri M.A. Rajappan, can be summarized as under:-
Dates on Amounts shown Dates and Amounts paid, as per records seized from which Shri as received by Shri M.A. Rajappan V.S. Shri V.S. Kathirvel Kathirvel recorded payments Date By By By Sh. R. Sh. R. Sh. R. Yuvaraj Meenakshi Udayakumar Sundararajan ` 5000 ` 5000
- - - (Token - (Token advance) advance) 12.7.1995 ` 2,10,000 12.7.1995 ` 2,00,000 21.7.1995 ` 4,00,000 21.7.1995 ` 4,00,000 22.7.1995 ` 4,00,000 22.7.1995 ` 4,00,000 27.7.1995 ` 1,98,200 27.7.1995 ` 1,98,200 31.7.1995 ` 2,00,000 31.7.1995 ` 2,00,000 5.1.1996 ` 4,00,000 5.1.1996 ` 4,00,000 24.1.1996 ` 4,40,900 24.1.1996 ` 1,80,200 ` 2,60,700 ` 22,49,100 ` 7,85,200 ` 8,60,700 ` 6,03,200
6. As per the A.O., whereas the above dates and amounts inter se tallied perfectly, it was not matching with the dates mentioned in the books of M/s Stonex Enterprises (India) Ltd. The dates and amounts in the books of M/s Stonex Enterprises (India) Ltd. shown as paid for land purchases, were as under:-
8 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 20.7.1995 ` 2,0,000 27.7.1995 ` 2,05,800 4.10.1995 ` 2,50,000 5.1.1996 ` 4,00,000 25.1.1996 ` 2,60,700 31.1.1996 ` 1,50,000 ` 14,66,500 As per the A.O., there was mismatch of dates except for the payment of ` 4 lakhs on 5.1.96. Hence according to him, explanation of the assessee could not be accepted, not only due to mismatch of the dates but also due to the reasons that conveyance deeds were executed not in the name of M/s Stonex Enterprises (India) Ltd. but in the name of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan respectively.
Thus, he came to a conclusion that assessees Shri R. Udayakumar and Shri R. Meenakshi Sundararajan had not recorded the purchase consideration in their books. Hence, the entire purchase consideration was considered as undisclosed income. For Shri R. Udayakumar, the sum so considered was ` 6,25,460/- including registration fee of ` 22,260/-. In the case of Shri R. Meenakshi Sundararajan, the amount considered was ` 8,89,460/- including registration charges of ` 28,760/-. In the case of the company M/s Stonex Enterprises (India) Ltd., the whole of the amount including the consideration paid for the purchase made by Shri Ilango totalling to ` 22,49,100/- was considered as undisclosed income on a protective basis.
9 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06
7. All the three assessees filed appeals before the CIT(Appeals). As per the assessees, the entire assessment was based on admission made by Shri V.S. Kathirvel, who was a real estate agent. Argument of the assessee was that two pieces of land purchased in the names of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan for which a total consideration of ` 14,66,500/- was paid, was duly reflected in the books of M/s Stonex Enterprises (India) Ltd. As per the assessees, all these amounts were drawn from the bank accounts of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan and journal entries were passed by the company by crediting their respective share application money accounts and debiting the land account. Insofar as the issue of purchase made by Shri Ilango, assessees submitted that they were not responsible to explain such purchase. However, assessees submitted that Shri Ilango had furnished all particulars called for by the Assessing Officer as also the source for his purchase. CIT(Appeals) after going through the submissions and records of the case, summarized the discrepancies between the payments as recorded by Shri V.S. Kathirvel and payments as recorded in the books of M/s Stonex Enterprises (India) Ltd., as under:-
10 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 Payment details recorded by Shri V.S. Payment details in the books of M/s Kathirvel Stonex Enterprises (India) Ltd.
Token advance ` 5000
12.7.1995 ` 2,10,000 20.7.1995 ` 2,00,000
22.7.1995 ` 4,00,000 ...... ......
27.7.1995 ` 1,98,200 27.7.1995 ` 2,05,800
....... ........ 4.10.1995 ` 2,50,000
5.1.1996 ` 4,00,000 5.1.1996 ` 4,00,000
24.1.1996 ` 2,60,700 25.1.1996 ` 2,60,700
31.1.1996 ` 1,50,000
Total ` 14,68,900 ` 14,71,500
* token advance
from R. Yuvaraj ` 5000
Based on the above, CIT(Appeals) was of the opinion that except for a sum of ` 4,00,000/-, recorded by Shri V.S. Kathirvel to have been received on 22.7.95, for which no corresponding entry was there in the books of M/s Stonex Enterprises (India) Ltd., all other amounts stood explained. Though there were a sum of ` 2,50,000/- and a sum of ` 1,50,000/- shown as paid to Shri V.S. Kathirvel on 4.10.95 and 31.1.96 in the books of M/s Stonex Enterprises (India) Ltd., the CIT(Appeals) was of the opinion that these could not be considered due to the date disparity. According to him, the token advance of ` 5000/- each paid by Shri R. Udayakumar and Shri R. Yuvaraj stood included in the sum of ` 2,10,000/- recorded as received by Shri V.S. Kathirvel on 12.7.95. CIT(Appeals) accepted the claim of the assessees that agreements for sale, though executed on 12.7.95, were signed by the assessees only on 20.7.95 when a sum of ` 2,00,000/- was paid and hence, the date 11 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 discrepancy to this extent stood explained. Thus, according to him, the only amount that stood unexplained was ` 4,00,000/- shown as received by Shri V.S. Kathirvel on 22.7.95 and this alone could be considered for assessment, that too in the hands of Shri R. Udayakumar. Insofar as registration charge of ` 22,260/- considered in the hands of Shri R. Udayakumar and ` 28,760/- considered in the hands of Shri R. Meenakshi Sundararajan, the CIT(Appeals) noted that a sum of ` 7,600/- was paid in excess on 27.7.95 when compared to the payments recorded by Shri V.S. Kathirvel on that date. Therefore, according to CIT(Appeals), out of ` 22,260/- considered as registration expenses, a sum of ` 7,600/- stood explained. He thus sustained the addition for registration expenses only to the extent of ` 14,660/- in the case of Shri R. Udayakumar. In the case of Shri R. Meenakshi Sundararajan, the addition of registration expenses ` 28,760/- was sustained. In the circumstances, CIT(Appeals) held that there was no question of any addition being made in the hands of M/s Stonex Enterprises (India) Ltd. In this view of the matter, he deleted the additions made protectively in the hands of M/s Stonex Enterprises (India) Ltd. and sustained the addition to the extent of ` 4,14,660/- in the hands of Shri R. Udayakumar. The addition in the hands of Shri R. Meenakshi Sundararajan was scaled down to ` 28,760/-. 12 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06
8. Revenue, initially against the above consolidated order of CIT(Appeals), filed a consolidated appeal before this Tribunal numbered as I.T.(SS) A. No. 159/Mds/2005. The defect in filing a common appeal in respect of all assessees together was pointed out to the Department. Thereafter, separate appeals were filed in respect of the three assessees and these have been numbered as I.T.(SS) A. Nos. 1 to 3/Mds/2009. Such appeals were filed with a delay of 1171 days. Affidavits have been filed for condonation of such delay. As per the Revenue, the delay was caused due to a reason that initially a consolidated appeal was filed in respect of all the three assessees. Only when it was pointed out that separate appeals were to be filed, Department became aware of such requirement. By the time such appeals were filed, delay had occurred.
9. Learned A.R. did not raise any objection for condonation of delay.
10. Reasons for delay are found to be justified. Delay in filing the appeals in I.T.(SS) A. Nos. 1 to 3/Mds/2009 are condoned and appeals are admitted.
11. Learned D.R., strongly assailing the order of CIT(Appeals), submitted that the explanation that the money was paid by M/s Stonex Enterprises (India) Ltd. could not be believed at all. According to him, 13 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 the company M/s Stonex Enterprises (India) Ltd. was incorporated only on 6th September, 1995, whereas, a sum of ` 808,200/- stood paid to Shri V.S. Kathirvel by 27th July, 1995. To accept that money had gone out of M/s Stonex Enterprises (India) Ltd. will be difficult on the face of the record showing that the company was registered only on 6.9.95. According to him, nothing was available in the agreement for sale or in the conveyance deeds executed, to show that the purchases of land were made by Shri R. Udayakumar and Shri R. Meenakshi Sundararajan for M/s Stonex Enterprises (India) Ltd. All these purchases were personally made by the two individuals only. Land could not be purchased for a company which was not there. Books of accounts of the said company was never seized from Shri M.A. Rajappan at the time of search, but, was produced at the later date. Dates on which payments were shown in such books did not tally with the dates recorded by Shri V.S. Kathirvel and shown by Shri V.S. Kathirvel in his block return. According to learned D.R., the dates, on the other hand, particularly tallied with the dates mentioned in the records seized from Shri M.A. Rajappan, who was the father of two assessees, namely, Shri R. Udayakumar and Shri R. Meenakshi Sundararajan. Assessing Officer had clearly analysed the books of M/s Stonex Enterprises (India) Ltd. with the payments received by Shri V.S. Kathirvel and established that these were all mere entries passed 14 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 through journals. None of the amounts went from accounts of the company M/s Stonex Enterprises (India) Ltd. but these payments were directly made by Shri R. Udayakumar and Shri R. Meenakshi Sundararajan, who were the Directors of the said company. Therefore, according to him, the A.O. was justified in disbelieving the explanation given by assessees and considering the amounts as undisclosed income in the hands of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan respectively. Nevertheless, according to him, if additions were confirmed in the hands of the two individuals, the protective assessment in respect of M/s Stonex Enterprises (India) Ltd. had to be deleted.
12. Per contra, learned A.R., strongly supporting the order of CIT(Appeals), submitted that the two assessees Shri R. Udayakumar and Shri R. Meenakshi Sundararajan had been paying their income-tax and filing their returns since last thirty three years and were not new assessees. They had shown their source of income and this was disbelieved for a reason that certain journal entries were passed by M/s Stonex Enterprises (India) Ltd. in which they were Directors. Wherever there were mismatches, CIT(Appeals) confirmed the addition. Therefore, according to him, the order of CIT(Appeals) was justifiable and well reasoned.
15 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06
13. We have perused the orders and heard the rival submissions. Undisputed facts are that there was a search in both the premises of Shri V.S. Kathirvel and Shri M.A. Rajappan. The two assessees, namely, Shri R. Udayakumar and Shri R. Meenakshi Sundararajan were the sons of Shri M.A. Rajappan. From the premises of Shri V.S. Kathirvel, records were seized showing that payments were made by three sons of Shri M.A. Rajappan, including Shri R. Udayakumar and Shri R. Meenakshi Sundararajan, for purchase of land from Shri V.S. Kathirvel. Shri V.S. Kathirvel had also recorded the dates on which he had received the sums and these have been reproduced at para 5 above. There is also no dispute that records were seized from the premises of Shri M.A. Rajappan, which showed the above payments effected to Shri V.S. Kathirvel, and both these records tally. As per the assessees, these payments were made from one M/s Stonex Enterprises (India) Ltd. in which both the individual assessees were Directors. Assessees did produce the books of M/s Stonex Enterprises (India) Ltd. before the Assessing Officer. Assessing Officer disbelieved such books for, according to him, it was not found during the search. But, what we notice is that premises of M/s Stonex Enterprises (India) Ltd. was not at all searched. So, we cannot expect the books of the said company would available at the premises of Shri M.A. Rajappan. The 16 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 books of M/s Stonex Enterprises (India) Ltd. were indeed produced within five days from the date of search. Assessing Officer made a study of entries recorded in the books of M/s Stonex Enterprises (India) Ltd. and according to him, there were discrepancies in the dates and therefore, the version given by the assessees could not be accepted. But, what we specifically notice is that, undisputedly the amounts had gone out of the personal bank accounts of the two Directors of M/s Stonex Enterprises (India) Ltd. and these Directors were none other than the assessees Shri R. Udayakumar and Shri R. Meenakshi Sundararajan. There is no case for the Revenue that in the bank accounts of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan there were any credits which were not explained. As long as the amounts had gone out of bank accounts of the said individual assessees and as long as the bank accounts had no credits which were considered as any undisclosed income, in our opinion, the payments effected stood explained. Just because M/s Stonex Enterprises (India) Ltd. recorded certain journal entries whereby share application money account was credited and asset account was debited for the payments made by the two Directors to Shri V.S. Kathirvel, would not make the source itself suspicious or not believable. As mentioned by learned A.R., it has not been disputed that both Shri R. Udayakumar and Shri R. Meenakshi Sundararajan have been filing their returns for the last thirty three years. 17 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 Shri M.A. Rajappan, being the father of these assessees, in the statement given by him to the Department, did not at any point dispute that the payments effected for the purchase of the property was more than what was mentioned in the conveyance deed. He had specifically stated in answer to query No.25 that though registration was done for a sum of ` 4,00,000/-, the actual cost of acquisition was ` 14,00,000/-. Thus, we cannot point a finger at the assessees that they had tried to conceal any particulars of their income or made a deliberate attempt to show a sum lesser than what they had paid. Whatever they had paid, they had shown and it had gone from their respective bank accounts. No doubt, the company M/s Stonex Enterprises (India) Ltd. was incorporated only on 6th September, 1995 and payments were effected earlier. But, in our opinion, this has got no relevance since the payments admittedly were made by Shri R. Udayakumar and Shri R. Meenakshi Sundararajan from their own bank accounts. In our opinion, the only amount which was found not explained by the CIT(Appeals) was a sum of ` 4,00,000/- recorded as received by Shri V.S. Kathirvel on 5.1.96. To this extent, he had confirmed the addition in the hands of Shri R. Udayakumar. Even this amount was not shown to have been made out of any unaccounted or undisclosed income of Shri R. Udayakumar. But, nevertheless, there were mismatch of dates between what was recorded in the books of M/s Stonex Enterprises (India) Ltd. 18 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 and the seized records. CIT(Appeals) had also confirmed the addition insofar as registration charges were concerned to the extent it stood unexplained. We are of the opinion, in such circumstances, when the payments had gone out of the individual assessees' personal bank accounts and there being no finding that there were any deposits in such bank accounts which were unexplained, the payments to Shri V.S. Kathirvel stood explained. The additions were all made on presumptions.
14. Insofar as the addition made in the hands of M/s Stonex Enterprises (India) Ltd., it went against very basic presumption taken by Assessing Officer that the purchases were made in the personal names of Shri R. Udayakumar and Shri R. Meenakshi Sundararajan and not in the name of the said company. Both the agreement for sale as well as the conveyance deed were executed in the name of these persons and not in the name of company and therefore, there is no question of there being any undisclosed income in the hands of the said company.
15. In this view of the matter, we are of the opinion that the CIT(Appeals) was justified in deleting the additions made in the hands of the respective assessees. We do not find any reason to interfere with the order of CIT(Appeals).
19 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06
16. Appeals of the Revenue including its defective appeal in I.T.(SS) A. No. 159/Mds/2005, stand dismissed.
17. Now we are left with only one appeal which is that of assessee in I.T.(SS) A. No. 194/Mds/2006.
18. Grievance raised by the assessee is that CIT(Appeals) confirmed the levy of penalty under Section 158BFA(2) of the Act.
19. Facts relating to the levy of penalty as coming out from para above, are that an addition of ` 4,14,660/- was sustained by the CIT(Appeals) in the hands of the assessee Shri R. Udayakumar. The A.O. was of the opinion that assessee could not give reasons why such amount was not admitted in the block return filed. Assessee had shown "nil" income in the block return. Notice for levy of penalty under Section 158BFA(2) was issued to the assessee. Reply of the assessee was that the investment in the land was made by M/s Stonex Enterprises (India) Ltd. and the undisclosed income fixed in his hands was purely on presumptive basis. As per the assessee, it was only due to mismatch of dates, the addition was made in his hands. Nevertheless, amounts were available in the said company for effecting payments to Shri V.S. Kathirvel. However, the A.O. did not accept this explanation. According to him, this was a fit case for levy of penalty under Section 158BFA(2) of 20 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 the Act. He, therefore, levied a penalty of ` 2,76,676/- being the tax payable on ` 4,14,660/-, assessed as undisclosed income.
20. In its appeal before CIT(Appeals), assessee reiterated the same contention as submitted before the A.O. According to assessee, the levy of penalty was only due to mismatch of dates and this could not be considered as a reason for such levy.
21. CIT(Appeals) was not appreciative of these contentions. According to him, levy of penalty, though not mandatory under Section 158BFA(2) of the Act, it was the onus of the assessee to show that there was a reasonable cause for not disclosing such income in the return filed pursuant to search. Here, assessee clearly could not discharge such onus. As per CIT(Appeals), assessee was unable to show why and how the amount of ` 4,00,000/- was paid to Shri V.S. Kathirvel. He thus confirmed the levy of penalty under Section 158BFA(2) of the Act.
22. Now before us, learned A.R. strongly assailing the orders of authorities below, submitted that there is never any finding that ` 4,00,000/- was unexplained or undisclosed income of the assessee. It was only due to date of mismatch, the explanation of the assessee was not believed. Mismatch of dates might have been good enough for an addition, but it would not be sufficient enough reason for levy of penalty. 21 I.T.(SS) A. No.159/Mds/05
I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06
23. Per contra, learned D.R. strongly supported the orders of authorities below.
24. We have perused the orders and heard the rival submissions. The whole issue of mismatch of dates is summarized by the CIT(Appeals) at para 2.3.4 of his order and this has been reproduced by us at para 7 above. There was a payment effected to Shri V.S. Kathirvel on 22.7.95 and against this, payment in the books of M/s Stonex Enterprises (India) Ltd. was recorded as ` 2,50,000/- on 4.10.95 and ` 1,50,000/- on 31.1.96. Nevertheless, ld. CIT(Appeals) in assessee's appeal in block assessment has given a clear finding that the payments effected to Shri V.S. Kathirvel were drawn by Shri R. Udayakumar and Shri R. Meenakshi Sundararajan from their bank accounts. In our opinion, in such a situation, mismatch of dates recorded in between the books of M/s Stonex Enterprises (India) Ltd. and as recorded by Shri V.S. Kathirvel will be of little relevance. Entry in the books of M/s Stonex Enterprises (India) Ltd. was passed by crediting share application money and debiting the asset account. These were made through journals. Actual payments having been effected by concerned persons directly, a mismatch of dates between what was recorded in the books of M/s Stonex Enterprises (India) Ltd. and what was recorded by Shri V.S. Kathirvel, cannot be a reason for levy of penalty. We are of the opinion 22 I.T.(SS) A. No.159/Mds/05 I.T.(SS) A. No.1 to 3/Mds/09 I.T.(SS) A. No.194/Mds/06 that assessee was able to give a proper explanation with regard to the sum of ` 4,00,000/- paid by him for the purchase of property. Levy of penalty was not warranted and as such it stands deleted.
25. Appeal of the assessee is allowed.
26. To summarise the result, appeal of the Revenue in I.T.(SS) A. No. 159Mds/2005 is dismissed as being defective, whereas, its other appeals are dismissed on merits. Appeal of the assessee against penalty is allowed.
The order was pronounced in the Court on Thursday, the 28th of June, 2012, at Chennai.
sd/- sd/-
(Vikas Awasthy) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 28th June, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)- II, Coimbatore
(4) CIT, Central-III, Chennai
(5) D.R.
(6) Guard file