R.M. Janaki, Chennai vs Assessee

अपीलाथ क ओर से / Appellant by : Shri. S.P. Chidambaram, Advocate यथ क ओर से / Respondent by : Shri. N. Madhavan, IRS, JCIT.

सन ु वाई क तार ख/Date of hearing : 11.06.2015 घोषणा क तार ख /Date of Pronouncement : 19.06.2015 :- 2 -: I.T.A.Nos.2314 & 2315/Mds/2013.

आदे श / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

These two appeals by different assessees are directed

against different orders of Commissioner of Income Tax (Appeals),

Tiruchirapali, for the above assessment years. Since issue in these

appeals are common in nature, these appeals are clubbed together,

heard together, and disposed of by this common order for the sake of

convenience.

2. The facts of the case with regard to Shri. Subbiah Ramanathan

are that he filed his return of income for the assessment year 2009-10

on 04.03.2010, admitting a total income of E1,11,320/- and

agricultural income of E1,05,000/-. The return was processed u/s.

143(1) of the Income-tax Act, 1961 on 25.02.2011. This case was

selected for scrutiny through CASS. Accordingly, notice u/s. 143(2) was

duly served on the assessee on 30.08.2010. On verification, the

Assessing Officer found that the assessee along with his wife Smt. R.

M. Janaki and his son Shri. R. M. Subbiah has purchased a plot No. 34

measuring one ground 400 sq. feet equal to 260.13 sq. mtrs. At

Ayyappa Nagar in S. F.No 119/1A1A1A1H of Koyambedu Village,

Nungambkkam Taluk, Chennai from Shri K. Ramakrishnan and his son

R. Suresh for E50,00,000/-. On perusal of Balance Sheet, the :- 3 -: I.T.A.Nos.2314 & 2315/Mds/2013.

Assessing Officer found that on the liability side, the Assessee had

admitted a fresh loan of E43,90,000/- from R. Balasubramanian

equally in the hands of the assessee and his wife for E27,25,000/-

(including stamp duty). In this regard the assessee was asked to

produce the creditor on 05.12.2011 for examination. Since the

Assessee and his representative failed to produce the creditor, a

summon u/s. 131 was issued to him through Income tax Inspectors.

The Inspectors reported that Shri. R.Balasubramanian had relocated to

Srirangam where he was issued summons. Shri. Balasubramainan

appeared on 07.12.2011 and a sworn statement was recorded that he

was working as a manager in Mahalakshmi Engineering College,

Thodaiyur, Trichy for a monthly salary of E15,000/-, did not have any

movable and immovable property in his name or his family members

name, does not have any bank account and is not assessed to income

tax. Regarding the loan given by him to the assessee he stated that he

has given a loan of E47,00,000/- through Demand Draft out of the

loan taken from one Shri. Anandharaman, Chennai. He further stated

that no interest was received from the assessee for that loan and

Shri. R. Balasubramaninan has not produced any evidence for the loan

taken by him from Shri. Anandharaman. The Assessing Officer held

that the lender Shri. R. Balasubramanian was not a creditworthy :- 4 -: I.T.A.Nos.2314 & 2315/Mds/2013.

person to lend a huge amount of E43,90,000/- since the said creditor

is a employee of a private college for a monthly salary of E15,000/-

and does not have even a bank account, movable or immovable

property. Further the Assessing Officer held that only a transaction

through account payee cheque for such huge sum cannot be

considered as genuine. In the above circumstances, the amount of

E43,90,000/- said to be obtained from Shri. R. Balasubramanian was

treated by the Assessing Officer as unexplained cash credit of the

assessee u/s. 68 of the Act and was added to the income returned.

2.1 The facts of the case in respect of R.M.Janaki is that she was

deriving salary income from firm and income from tailoring filed her

return of income on 21.12.2009, for the year under consideration,

admitting income at E1,85,000/- alongwith agricultural income of

E1,52,000/-. The case was selected for scrutiny through CASS to

examine the source for investment in property as per the AIR

information, the assessee has purchased immovable property jointly at

a cost of E50,00,000/- on 02.07.2008, registered with Sub-Registrar,

Anna Nagar, Chennai. Appropriate notices were issued and the

assessment was completed on 21.12.2011. In the return of income

filed, the assessee declared salary income from partnership firm,

income from tailoring and agricultural income of E72,000/-, E29,500/-

:- 5 -: I.T.A.Nos.2314 & 2315/Mds/2013.

and E1,52,000 respectively. The purchase of the above property was

not reflected in the return filed. The Assessing Officer conveyed the

AIR information and sought for details, which included copy of

purchase deed, statement of income, balance sheet and capital

account for the assessment year 2009-10 alongwith corresponding

details for A.Y. 2008-09. From the details filed, the Assessing Officer

found that the assessee had purchased housing plot measuring 1

ground and 400sq ft. at Chennai, jointly with her husband and son.

The assessee's share of the plot as well as the cost of construction

carried out in the plot was met out of the borrowings of E44,00,000/-

from one Shri. R. Balasubramanian. The Assessing Officer, asked the

assessee to file confirmation letter from the said creditor. The

confirmation letter, so produced before the Assessing Officer, lacked

details of sources from which the loan was advanced and the

assessment details of the creditor. The assessee did not produce the

creditor form examination. After hectic efforts in tracing out the

creditor, the Assessing Officer, in response to the summons u/s.131

issued. Shri. Balasubramanian, appeared and deposed that he is

drawing a monthly salary of E15,000/- as manager in Mahalakshmi

Engineering College, Thudaiyur, and, that he has not given any loan to

the assessee Smt. R.M. Janaki. Shri. Balasubramanian also stated that :- 6 -: I.T.A.Nos.2314 & 2315/Mds/2013.

he has no bank account and not assessed to income tax. Since the

creditor Shri. R. Balasubramanian, in his deposition, has denied any

loan given to the assessee, the Assessing Officer treated the sum of

E44,00,000/- as unaccounted cash credit u/s.68 of the Act.

2.2 Aggrieved by the order of the Assessing Officer in making

additions of E43,90,000/- in the case of Subbiah Ramanathan and

E44,00,000/- in the case of R.M. Janaki as unexplained cash credit,

both went on appeal before the Commissioner of Income Tax

(Appeals) who, in turn, confirmed the action of the Assessing Officer.

Against this, both are in appeal before us.

3. The ld. Authorised Representative for assessee submitted that

Subbiah Ramanathan has received a sum of E43,90,000/- as loan from

R. Balasubramanian, Similarly R.M. Janaki received a sum E44,00,000/-

as loan from R. Balasubramanian by way of bank demand draft and to

this effect these assessees filed a confirmation letter from him.

Further, he submitted that Shri. R. Balasubramanian had availed loan

from Mahalakshmi Estates, Chennai who has confirmed the loan by

way of letter which was filed before the lower authorities and also

placed on record in paper book and he drew our attention to the said

letter. According to the ld. Authorised Representative for assessees, :- 7 -: I.T.A.Nos.2314 & 2315/Mds/2013.

the assessees have received the above loans by way of banking

channel. Further, he submitted that the said amount has been repaid

by crossed demand draft for which he had filed xerox copy of demand

draft which was placed on record. Thus, he submitted that the

assessee has proved the source of credit and also proved source of

source of credit i.e. Shri. Balasubramanian had advanced the amount

out of loan proceeds received from Mahalakshmi Estates, Real Estate

Consultants and Flat Promoters, No.1, Srinivasapillai Street, West

Mamalam, Chennai who was assessed to tax and its PAN No. AAIFM

2345L. According to the ld. Authorised Representative for assessees,

identity of party is proved and the transaction is genuine as it is

through banking channel and the creditworthiness is also proved as

the Mahalakshmi Esates was assessed to tax. According to him,

ingredients of u/s.68 are totally complied with and there is no

question of treating the amount as unexplained cash credit in the

hand of these two assessees.

4. In the case of Subbiah Ramanathan, the ld. Departmental

Representative submitted that assessee filed his return of income

for the assessment year 2009-10 by admitting a total income of

E1,11,320/-. During the course of assessment proceedings the

Assessing Officer has made an addition of E43,90,000/- on account of :- 8 -: I.T.A.Nos.2314 & 2315/Mds/2013.

loan received from R. Balasubramanian for non furnishing of details

such as identity of the creditors, creditworthiness and assessment

particulars of the creditors. The Assessing Officer during the course of

assessment proceedings recorded a statement from R.

Balsubramanian who deposed before him that he is working as a

manager in Mahalakshmi Engineering College, Thodaiyur, Trichy for a

monthly salary of E15,000/- and residing at Srirengam on a rented

house for E5,000/- per month. Further Shri. Balasubramanian stated

that he does not have any movable or immovable properties in his

name or in his family members name and also does not have any bank

account and not assessed to income tax. However, regarding the loan

given by him to the assessee he has stated that the loans amount of

E47 lakhs was given through demand draft out of the loan taken from

one Shri. Anantharaman, Chennai. He has not charged any interest

from the assessee. Thus, the Assessing Officer has doubted the

creditworthiness of Balsubramanian and genuineness of the

transaction as the loan creditor himself has not shown any evidence

that loan taken by him from Shri.Anantharaman. Thus, the Assessing

Officer has treated the loan said to have been received from R.

Balsubramanian as unaccounted cash credit. The Assessing Officer in

his assessment order treated the loan creditor as not genuine lender :- 9 -: I.T.A.Nos.2314 & 2315/Mds/2013.

as he was not a creditworthy person. Shri R. Balasubramanian is only

an employee of a private college earning only a monthly salary of

E15,000/- and even does not have any bank account or any movable

or immovable property. The assessee's contention that the above loan

was received from R.Balasubramanian through banking channel was

also not correct as the said lender does not have any bank account in

his name. Even the story of demand draft taken by some other third

party was reasoned as given by shri R.Balasubramanian. Over and

above, in the return of income filed for the assessment year 2009-10

on 04.03.2010 the assessee has not disclosed these transactions of

purchase of property and the borrowal of loan of E43,90,000/-. Since

the source of money for lending has not been proved along with the

identity of the creditor and creditworthiness as well as genuineness of

the transaction has not been proved by the assessee to the

satisfaction of the Assessing Officer, the addition made by the

Assessing Officer was thus justified. The alleged lender was only a

salary employee not assessed to income tax. The Commissioner of

Income Tax (Appeals) in agreement with the reasoning taken by the

Assessing Officer that a demand draft can be taken from any bank by

any person in anybody's name. Thus there was no truth in the

contention of the Authorised Representative for assessee that Shri :- 10 -: I.T.A.Nos.2314 & 2315/Mds/2013.

R.Balasubramanian has taken a demand draft and lend the money to

the assessee was only a coloured transaction to show it as genuine

transaction when the lender was a man of no means and also without

charging any interest on the amount said to have been lent to the

assessee proves that it was a sham transaction. Hence, the addition

may be sustained.

5. Further, in the case of R.M. Janaki, the ld. Departmental

Representative submitted that during the course of assessment

proceedings the Assessing Officer examined this issue and asked the

assessee to prove the genuineness of the transaction, capacity of the

lender and creditworthiness of the above transaction. Even though the

amount of loan was received by the assessee by way of cheque

payments the lender in his deposition before the Assessing Officer, has

denied that having given any loan to the assessee at E44,00,000/- and

also stated that he is a salaried employee on a monthly salary of

E15,000/- and has no bank account and not assessed to income tax..

Even though the assessee's representative in his submissions defended

the above transaction but the same person i.e., R.Balasubramanian,

the creditor, who himself has denied having lent the above loan

amount of E44,00,000/- to the assessee. When the said loan creditor,

himself deposed before the Assessing Officer, denying any loan :- 11 -: I.T.A.Nos.2314 & 2315/Mds/2013.

amount given to the assessee, and also stated that he is not having

any bank account, the defence put forward by ld. Authorised

Representative for assessee lack any credible evidence in his hands to

support his claim. Hence, the assessee was not able to prove the

genuiness of the transaction as well the capacity of the lender i.e.

creditworthiness to prove the correctness of the transaction. Hence,

the additions made by the lower authorities may be sustained.

6. We have heard both the parties and perused the material on

record. According to section 68 of the Income Tax Act, the assessees

ought to have proved nature and source of credits appearing in his/her

books of accounts. In other words, the assessee has to prove not

only identity of the creditors but also to prove that creditors had the

requisite capacity to advance the loan and also prove the genuineness

of the transaction. In the present case, according to the lower

authorities the assessee has not discharged the burden cast upon

them, even after filing confirmation letter from the creditor and also

source of credit from where lender has borrowed money. But now the

question whether such onus has been duly discharged by the assessee

or as has been shifted to the Revenue can be determined after

evaluation of the surrounding circumstances. There cannot be one

general or universal proposition of law which could be the guiding :- 12 -: I.T.A.Nos.2314 & 2315/Mds/2013.

hardstick in the matter. In the present case, the assessees filed

confirmation letter from Shri. R. Balasubramanian who had advanced

the impugned money to these assessees. It was also stated by him in

his sworn statement recorded by the Assessing Officer that he has

advanced money to these assessees which was borrowed from M/s.

Mahalakshmi Estates, Real Estate Consultants and Flat Promoters,

No.1, Srinivasapillai Street, West Mamalam, Chennai through Demand

Draft and the same was passed on to these assessees as loan. Further,

M/s. Mahalakshmi Estates also confirmed that they have advanced

money to Shri. R. Balasubramanian whose PAN No. has also been

given. Inspite of this, lower authorities were not ready to accept the

transaction as genuine. There was a doubt in the mind of the

Assessing Officer regarding genuineness of the transaction. In the

present case there is positive evidence like

(1) Existence of Creditors.

(2) Their PAN Nos.

(3) The confirmation letter from them.

The creditors given loans to the assessees through Demand Draft and

the assessees furnished the details of the same alongwith confirmation

letter and also explained mode of transaction, which is through

banking channel and also repaid the said loan through banking :- 13 -: I.T.A.Nos.2314 & 2315/Mds/2013.

channel. Considering these facts, in our opinion the assessee herein

had discharged their onus placed on them. The fact that credit entry

shown in the name of a person other than the actual lender of the

money would not by itself, be relevant where cogent evidence is

independently available. In the case of CIT vs. Orissa Corporation P.

Ltd 159 ITR 78 (SC) wherein it was held that the assessee produced

before the Assessing Officer letter of confirmation by creditors,

discharged onus and particulars of the different creditors whose

Income Tax files Nos were with the Department. The summons issued

to the creditors by the Assessing Officer u/s.131 at the addresses

given by the assessee were returned unserved with the endorsement

''left''. The Revenue did not examine the source of income of the said

alleged creditors to find out whether they were creditworthy. Thus, the

Supreme Court affirmed the view of the High Court as well as the

Tribunal that the assessee had discharged the burden lay on it. In

our opinion, once the existence of the creditors is proved and such

person owed the credits which are found in the books of accounts of

the assessees, the onus stand discharged and the assessee is not

further required to prove the source of income from which the

creditors would have acquired the money and, therefore, addition

u/s.68 cannot be sustained in the absence of anything to establish that :- 14 -: I.T.A.Nos.2314 & 2315/Mds/2013.

source of creditors deposit, flew from the assessee itself. In our

opinion, creditor having appeared before the Assessing Officer in

response to the summons issued u/s.131 of the Act before the

Assessing Officer and confirmed by filing of confirmation letter, the

transaction cannot be doubted. The assessee discharged onus placed

upon them by establishing the identity of the creditor, his credit

worthiness, genuineness of the transaction. Being so, in our opinion

the addition made in this case u/s.68 is unwarranted. The same is

deleted.

7. In the result, both the assessees appeal in ITA Nos.2314/13

and 2315/13 are allowed.

Order pronounced on Friday , the 19th day of June, 2015, at Chennai.

Sd/- Sd/-

(वी. दग ु ा" राव) (चं पज ू ार ) V. DURGA RAO (CHANDRA POOJARI) या#यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER चे"नई/Chennai. #दनांक/Dated:19.06.2015. KV

आदे श क त&ल'प अ(े'षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आयु*त (अपील)/CIT(A) 4. आयकर आयु*त/CIT 5. 'वभागीय त न-ध/DR

6. गाड फाईल/GF.

:- 15 -: I.T.A.Nos.2314 & 2315/Mds/2013.