ACIT, Trichy v. Shri R.Selvaraj, Pudukkottai

ITA 1119/CHNY/2011 | 2004-2005
Pronouncement Date: 09-02-2012 | Result: Dismissed

Appeal Details

RSA Number 111921714 RSA 2011
Assessee PAN AAMPS7646G
Bench Chennai
Appeal Number ITA 1119/CHNY/2011
Duration Of Justice 7 month(s) 23 day(s)
Appellant ACIT, Trichy
Respondent Shri R.Selvaraj, Pudukkottai
Appeal Type Income Tax Appeal
Pronouncement Date 09-02-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 09-02-2012
Date Of Final Hearing 01-02-2012
Next Hearing Date 01-02-2012
Assessment Year 2004-2005
Appeal Filed On 16-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NOS. 1117 1118 & 1119/MDS/2011 (ASSESSMENT YEARS : 2002-03 2003-04 & 2004-05) THE ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE II TIRUCHIRAPALLI. (APPELLANT) V. SHRI R. SELVARAJ PROP: MODERN RICE MILL 2/160-A/3 VADAKADU ROAD ALANGUDI PUDUKKOTTAI 622 301. PAN : AAMPS7646G (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI CIT-DR RESPONDENT BY : SHRI V. SUBBARA YAN RETD.DCIT DATE OF HEARING : 01.02.2012 DATE OF PRONOUNCEMENT : 09.02.2012 O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : THESE ARE APPEALS BY THE REVENUE AGAINST CONSOLID ATED ORDER DATED 28.3.2011 OF COMMISSIONER OF INCOME-TAX (APPE ALS) TIRUCHIRAPALLI FOR THE IMPUGNED ASSESSMENT YEARS. GROUNDS TAKEN BY THE REVENUE IN ALL THESE APPEALS RELATE TO AN ADDIT ION MADE BY THE ASSESSING OFFICER TOWARDS INCOME FROM UNACCOUNTED M ONEY LENDING I.T.A. NOS.1117 1118 & 1119/MDS/11 2 BUSINESS WHICH WAS DELETED BY LD. CIT(APPEALS). AS PER THE REVENUE THE ADDITIONS WERE MADE ON THE BASIS OF A SWORN STATEMENT RECORDED FROM ASSESSEE UNDER SECTION 131 OF INCOME- TAX ACT 1961 (IN SHORT 'THE ACT') ON 16.7.2003 WHICH WERE CORRO BORATED BY RECORDS SEIZED FROM THE RESIDENCE OF ONE SHRI A. NATARAJAN AS ALSO THE STATEMENT GIVEN BY SHRI A. NATARAJAN. REVENUE IS A LSO AGGRIEVED THAT LD. CIT(APPEALS) RELIED ON HIS OWN DECISION IN THE CASE OF SHRI A. NATARAJAN FOR GIVING A FINDING IN FAVOUR OF ASSESSE E. 2. THE APPEALS WERE TIME BARRED BY TWO DAYS. CONSI DERING THE SMALLNESS OF THE PERIOD WE ADMIT THE APPEALS FILED BY THE REVENUE. 3. SHORT FACTS APROPOS ARE THAT THERE WAS A SEARCH IN THE PREMISES OF ONE SHRI A. NATARAJAN ON 16.7.2003 WHO WAS THE HUSBAND OF THE SISTER OF ASSESSEES WIFE. AS PER THE A.O. IN SUC H SEARCH PRO-NOTES NUMBERING 45 WERE SEIZED WHICH WERE EXECUTED BY THE ASSESSEE IN FAVOUR OF SHRI A. NATARAJAN AND AS PER THE SAID PRO -NOTES ASSESSEE HAD TAKEN A LOAN OF ` 2.5 CRORES FROM SHRI A. NATARAJAN. THE A.O. SUMMONED THE ASSESSEE AND RECORDED A STATEMENT FROM HIM UNDER SECTION 131 OF THE ACT ON 16.7.2003 ITSELF. BOOKS OF THE ASSESSEE WERE ALSO IMPOUNDED. THEREAFTER NOTICE UNDER SEC TION 153C WAS ISSUED TO THE ASSESSEE FOR VARIOUS ASSESSMENT YEARS STARTING FROM I.T.A. NOS.1117 1118 & 1119/MDS/11 3 1999-2000 TO 2004-05. ASSESSEE FILED RETURNS IN PU RSUANCE OF SUCH NOTICE FOR ALL THE YEARS AND INCOME RETURNED THEREI N WERE THE SAME AS WHICH WERE ORIGINALLY RETURNED IN THE REGULAR RETUR NS FOR THE IMPUGNED ASSESSMENT YEARS. DURING THE COURSE OF PROCEEDINGS ASSESSING OFFICER ISSUED A QUESTIONNAIRE TO THE ASSESSEE REQU IRING HIM TO EXPLAIN HOW THE MONEY OF ` 2.5 CRORES LOANED WAS UTILIZED BY HIM. AS PER THE A.O. ASSESSEE HAD REPLIED THAT HIS CO-B ROTHER SHRI NATARAJAN AND LATTERS FATHER SHRI K.A. ARUNACHALAM CHETTIAR WERE USING HIS NAME FOR THE PURPOSE OF THEIR MONEY LENDI NG BUSINESS. ACCORDING TO THE ASSESSEE THE PRO-NOTES WERE SIGNE D ONLY AS ADDITIONAL SECURITY FOR THE LOANS ADVANCED TO VARIO US PARTIES. ASSESSEE ALSO SUBMITTED THAT A PART OF THE MONEY RE CEIVED AS LOANS WERE UTILIZED BY HIM FOR HIS OWN PADDY BUSINESS AND FOR MONEY LENDING DONE BY HIS CO-BROTHER SHRI NATARAJAN. THE A.O. FROM THE NOTEBOOK SEIZED FROM THE PREMISES OF SHRI A. NATARA JAN CAME TO AN OPINION THAT OUT OF ` 2.5 CRORES ` 2 15 00 000/- WAS STILL DUE BY THE ASSESSEE TO SHRI A. NATARAJAN. AS PER THE A.O. IF THE ASSESSEE WAS ONLY A NAME LENDER IN THE BUSINESS OF SHRI A. NATAR AJAN HE WOULD NOT HAVE EXECUTED THE PRONOTE FOR THE MONEY INVOLVED. IN ANY CASE AS PER THE A.O. ASSESSEE HIMSELF HAD ADMITTED TO HAVE ADVANCED ` 35 LAKHS TO VARIOUS PERSONS AND INVESTED ` 70 LAKHS IN HIS PADDY I.T.A. NOS.1117 1118 & 1119/MDS/11 4 BUSINESS AND FINANCING DEBTORS OF ` 30 LAKHS AGAIN IN HIS PADDY BUSINESS. THEREFORE ACCORDING TO HIM ASSESSEE CO ULD NOT AT THE SAME TIME SAY THAT THE MONEY WAS WHOLLY UTILIZED BY HIS CO-BROTHER IN MONEY LENDING BUSINESS. HE ALSO FOUND THAT OUT OF ` 2.15 CRORES ` 42.5 LAKHS WAS RECEIVED BY THE ASSESSEE BY CHEQUE WHEREAS THE BALANCE OF ` 175 LAKHS OUT OF TOTAL OUTSTANDING OF ` 215 LAKHS WAS RECEIVED IN CASH. THE REASONS WHY THE A.O. REJECTE D ALL THE CONTENTIONS OF THE ASSESSEE CAN BE SUMMARIZED AS UN DER:- (I) ASSESSEE HAD ADMITTED HIMSELF TO HAVE RECEIVED ` 6 LAKHS FROM SHRI ARUMUGAM OF PUDUKOTTAI. ` 20 LAKHS FROM A CONTRACTOR AT CHENNAI AND ` 9 LAKHS FROM SHRI TAMILARASAN OF KALANGADU. (II) ASSESSEE HAD ADMITTED STOCK-IN-TRADE IN PADDY OF ` 70 LAKHS AND DEBTOR OF ` 30 LAKHS IN HIS BUSINESS APART FROM ` 30 LAKHS DUE FROM PARTIES IN KERALA. (III) THE STATEMENT GIVEN BY THE ASSESSEE UNDER SEC TION 131 OF THE ACT WAS NEVER RETRACTED. (IV) SHRI A. NATARAJAN HAD CLAIMED BAD DEBTS ON THE LOANS IN THE NAME OF THE ASSESSEE AND THIS PROVED THAT ASSES SEE HAD TAKEN LOANS FROM SHRI NATARAJAN. (V) ASSESSEE HAD FILED DETAILS OF INCOME COLLECTED BY HIM IN THE BUSINESS OF SHRI A. NATARAJAN AND HANDED OVER T O SHRI A. NATARAJAN WHEREAS SHRI NATARAJAN HAD NOT ADMIT TED TO ANY COMMISSION GIVEN TO THE ASSESSEE ON SUCH BUSINE SS. (VI) THE AMOUNT OUTSTANDING AS ON 16.7.2003 ON ADVA NCES GIVEN THROUGH THE ASSESSEE INCLUDED A SUM OF ` 46 LAKHS OF NINE PARTIES BUT AS PER SHRI A. NATARAJAN THE AMOUNT I.T.A. NOS.1117 1118 & 1119/MDS/11 5 OUTSTANDING WAS ONLY ` 31 LAKHS ADVANCED TO SEVEN PARTIES. THUS A.O. REJECTED ALL THE CONTENTIONS OF THE ASSE SSEE. HE CAME TO A CONCLUSION THAT ASSESSEE HAD NOT ONLY UTILIZED TH E AMOUNTS RECEIVED FROM SHRI A. NATARAJAN TO GIVE ADVANCES T O VARIOUS PARTIES BUT ALSO USED A PART THEREOF IN HIS OWN PADDY BUSIN ESS . THE A.O. WAS OF THE OPINION THAT THE NET INCOME COULD BE EST IMATED AT 6% PER ANNUM AND FOR THIS PURPOSE HE PRESUMED NORMAL RATE OF INTEREST EARNED ON ADVANCES 27% AND DEDUCTED THEREFROM RATE OF INTEREST PAYABLE ON ADVANCES WHICH HE CONSIDERED AT 21%. FO R WORKING OUT THE INCOME FROM SUCH INVESTMENTS BY WAY OF LOANS TO PARTIES THE A.O. MADE A DATE-WISE ANALYSIS OF LOANS TAKEN BY TH E ASSESSEE FROM SHRI A. NATARAJAN AND WORKED OUT THE INTEREST BASED ON THE NUMBER OF MONTHS INVOLVED. THIS RESULTED IN ADDITIONS FOR AS SESSMENT YEARS 2002-03 2003-04 AND 2004-05 AND THE AMOUNTS WERE ` 20 250/- ` 5 58 371/- AND ` 14 98 728/- RESPECTIVELY. 4. ASSESSEE FILED APPEALS BEFORE LD. CIT(APPEALS) FOR ALL THE THREE ASSESSMENT YEARS IN WHICH ADDITIONS WERE MADE. ARG UMENT OF THE ASSESSEE WAS THAT HIS ROLE WAS LIMITED TO INTRODUCI NG CLIENTS TO SHRI A. NATARAJAN AND HE HAD NOT EARNED ANY INCOME EXCEPT F OR SMALL COMMISSION. ASSESSEE ALSO ARGUED THAT ` 42.5 LAKHS OUT OF SUMS I.T.A. NOS.1117 1118 & 1119/MDS/11 6 BORROWED FROM SHRI A. NATARAJAN WERE USED FOR HIS O WN BUSINESS PURPOSES. IN ANY CASE ACCORDING TO HIM THE PRO-N OTES NEVER GAVE DETAILS OF RATE OF INTEREST PAID BY THE ASSESSEE AN D THE STATEMENT GIVEN UNDER SECTION 131 OF THE ACT ON 16.7.2003 WAS IN A DAZED FORM OF MIND. AGAIN AS PER THE ASSESSEE ASSESSING OFF ICER HAD SIMPLY MADE PRESUMPTION REGARDING UTILIZATION OF MONEY WIT HOUT ANY EVIDENCE. HE ESTIMATED THE INTEREST AT THE RATE OF 6% PER ANNUM EVEN FOR THOSE PORTIONS USED FOR OWN BUSINESS. ASS ESSEE ALSO RELIED ON THE DECISION CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI A. NATARAJAN IN I.T.A. NOS. 591 TO 597/MDS/2008 DAT ED 22 ND JANUARY 2009 FOR ARGUING THAT IT WAS AN ACCEPTED POSITION T HAT ASSESSEE HAD MERELY ACTED AS AN INTRODUCER/AGENT IN THE MONEY LE NDING BUSINESS OF SHRI A. NATARAJAN. 5. LD. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONT ENTIONS. ACCORDING TO HIM THE ADDITIONS WERE MERELY BASED O N A STATEMENT RECORDED UNDER SECTION 131 OF THE ACT. IN THE CASE OF SHRI A. NATARAJAN IT WAS CLEARLY ACCEPTED AND ACKNOWLEDGED THAT ASSESSEE WAS ACTING ONLY AS AN AGENT OF SHRI A. NATARAJAN IN THE MONEY LENDING BUSINESS OF THE LATTER AND THE NATURE OF TRANSACTIO NS OF THE ASSESSEE WITH SHRI A. NATARAJAN WAS NEVER QUESTIONED BEFORE THIS TRIBUNAL IN I.T.A. NOS.1117 1118 & 1119/MDS/11 7 THE CASE OF SHRI A. NATARAJAN. FURTHER ACCORDING TO HIM THE A.O.S FINDING WAS NOT BASED ON ANY EVIDENCE AND HE HAD MA DE THE ADDITIONS DESPITE THERE BEING NO SEIZURE OF ASSETS OR BOOKS BELONGING TO THE ASSESSEE DURING THE SEARCH OF SHRI A. NATARA JAN. HE THEREFORE DELETED THE ADDITIONS MADE BY THE A.O. F OR ALL THE THREE ASSESSMENT YEARS. 6. NOW BEFORE US LEARNED D.R. STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS) FOR ALL THE THREE YEARS SUBMITTED THA T ADMITTEDLY ASSESSEE HAD TAKEN ` 2.5 CRORES AS LOAN FROM SHRI A. NATARAJAN AND HE HAD EXECUTED 45 NUMBERS OF PRO-NOTES IN THIS REG ARD. IN THE STATEMENT RECORDED ALSO ASSESSEE HAD ACCEPTED THE B ORROWINGS. ASSESSEE HAD ALSO GIVEN DETAILS OF ADVANCES. INSOF AR AS PLEA OF THE ASSESSEE THAT HE WAS ONLY A BENAMI LEARNED D.R. SUBMITTED THAT THIS CANNOT BE ACCEPTED SINCE PROMISSORY NOTES WERE SIGNED BY THE ASSESSEE. HE WOULD NOT HAVE SIGNED THIS PROMISSORY NOTE HIMSELF IF THE ADVANCES WERE GIVEN TO SOMEBODY ELSE. EVEN OTH ERWISE ASSESSEE HAS ADMITTED THAT PART OF THE MONEY HAD BE EN UTILIZED FOR HIS PADDY BUSINESS AND PARTLY ADVANCED TO PERSONS A ND ASSESSING OFFICER WAS JUSTIFIED IN ESTIMATING INCOME AT THE R ATE OF 6% PER ANNUM I.T.A. NOS.1117 1118 & 1119/MDS/11 8 ON THE AMOUNTS BORROWED BY THE ASSESSEE AND IN MAKI NG ADDITION TO THE INCOME FOR THE IMPUGNED ASSESSMENT YEARS. 7. PER CONTRA LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF LD. CIT(APPEALS). 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. FIRST WE HAVE TO DECIDE WHETHER THE ASSESSEE WHO H AD ADMITTED THAT HE HAD NOT TAKEN ANY LOAN FROM SHRI A. NATARAJAN W AS ONLY A NAME LENDER IN THE MONEY LENDING BUSINESS OF SHRI A. NA TARAJAN IS TRUE OR NOT. IN THE STATEMENT RECORDED UNDER SECTION 131 O F THE ACT HIS PLEADING WAS THAT HE HAD ONLY SIGNED THE PRO-NOTES ON BEHALF OF THE DEBTORS WHOM HE HAD INTRODUCED. WE ARE UNABLE TO APPRECIATE THIS SUBMISSION FOR A REASON THAT THE AMOUNT INVOLVED WA S ` 2.5 CRORES AND NO PRUDENT BUSINESSMAN WOULD HAVE EXECUTED PROM ISSORY NOTES FOR THE MONEY WHICH HE HAD NOT BORROWED BUT SOMEBOD Y ELSE HAD BORROWED. FURTHER ASSESSEE HAD ALSO STATED THAT H E HAS USED A PART OF THE MONEY IN HIS PADDY BUSINESS AND ALSO ADVANCE D LOAN TO OTHER PARTIES. MAY BE IN THE CASE OF SHRI A. NATARAJAN IT WAS CONSIDERED THAT THE ASSESSEE WAS A BENAMI AND A NAME LENDER. BUT THIS BY ITSELF WILL NOT ABSOLVE THE ASSESSEE FROM THE BURDE N OF REBUTTING THE EVIDENCE IN THE FORM OF HIS OWN STATEMENT AND THE P RO-NOTES SIGNED I.T.A. NOS.1117 1118 & 1119/MDS/11 9 BY HIM. NOW THE QUESTION THAT REMAINS IS WHETHER A SSESSEE HAD EARNED ANY INCOME BY UTILIZATION OF SUCH FUNDS. AS SESSING OFFICER HAS TAKEN A NUMBER OF PRESUMPTIONS IN THIS REGARD. FIRST WAS THAT A NORMAL RATE OF INTEREST THAT ASSESSEE WOULD HAVE EA RNED FROM SUCH ADVANCES WAS 27%. WE ARE NOT AWARE FROM WHAT RECOR DS THE ASSESSING OFFICER CAME TO SUCH A CONCLUSION. ASSES SEE OF COURSE ADMITTED THAT HE HAD GIVEN ` 6 LAKHS TO SHRI ARUMUGAM OF PUDUKOTTAI ` 20 LAKHS TO A CONTRACTOR IN CHENNAI AND ` 9 LAKHS TO SHRI TAMILARASAN OF KALANGADU. AS PER THE A.O. ASSESSE E HAD ALSO GIVEN DETAILS OF INCOME COLLECTED BY HIM FROM VARIOUS PAR TIES ON BEHALF OF SHRI NATARAJAN. BUT THESE DETAILS WERE NEVER ATTE MPTED TO BE CORRELATED BY THE A.O. THE A.O. SIMPLY WENT BY EST IMATES. THE ASSESSING OFFICER MADE NO ATTEMPT TO VERIFY OR EXAM INE ANY OF THE PERSONS TO WHOM ASSESSEE HAD ADVANCED THE MONEY FO R ASCERTAINING THE INTEREST IF ANY THEY HAD PAID TO THE ASSESSEE. SO THE RATE OF INTEREST 27% PRESUMED BY THE A.O. WAS F ROM A HYPOTHETICAL SITUATION. THE HYPOTHETICAL SITUATION WAS THAT ASSESSEE HAD UTILIZED THE AMOUNTS FOR ADVANCING MONEY TO OTH ER PARTIES AND SUCH PARTIES HAD PAID THE ASSESSEE INTEREST AT THE RATE OF 27% AND ASSESSEE WAS IN TURN PAYING 21% INTEREST TO SHRI A . NATARAJAN. AS AGAINST THIS ASSESSEE HIMSELF HAD ADMITTED THAT ` 70 LAKHS WAS I.T.A. NOS.1117 1118 & 1119/MDS/11 10 UTILIZED FOR FINANCING HIS STOCK-IN-HAND AND ANOTHE R ` 60 LAKHS FOR FINANCING THE DEBTORS IN HIS PADDY BUSINESS. IN OU R OPINION WHAT CAN BE TAXED IS REAL INCOME AND FOR ARRIVING AT REAL IN COME A METHOD OF ESTIMATION CAN BE RESTORED ONLY IF SOME EVIDENCE W HICH IS CREDIBLE ENOUGH IS AVAILABLE TO SHOW THE PROBABILITY OF EARN ING SUCH INCOME. HERE THERE IS NOT EVEN AN IOTA OF EVIDENCE TO SHOW THAT THE INTEREST AT THE RATE OF 27% WAS RECEIVED BY THE ASSESSEE FROM A NY OF THE PARTIES. NO RECORDS WERE SEIZED FROM THE ASSESSEE SHOWING THAT HE HAD ADVANCED SUCH AMOUNTS. NO PRO-NOTES WERE IMPOU NDED FROM THE ASSESSEE WHICH HE WOULD HAVE DEFINITELY OBTAINE D HAD HE GIVEN SUCH ADVANCES. WHEN THE A.O. BELIEVED THAT A PRUDE NT BUSINESSMAN WOULD NOT HAVE SIGNED A PRONOTE WITHOUT TAKING AN A DVANCE THE SAME PRESUMPTION WILL APPLY IN THE BUSINESS OF MONE Y LENDING IF ANY DONE BY THE ASSESSEE ALSO. WE ARE OF THE OPINION T HAT THERE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAD RECEIVE D INTEREST IF ANY IN EXCESS OF WHAT HE HAD PAID ON THE AMOUNTS LOANED FROM SHRI A. NATARAJAN. EVEN PRESUMING SUCH AMOUNTS WERE USED B Y HIM IN HIS OWN PADDY BUSINESS THERE IS NO RECORD TO SHOW THAT ASSESSEE HAD EARNED ANY INCOME FROM THE STOCK-IN-TRADE IN EXCESS OF WHAT WAS SHOWN BY HIM IN HIS REGULAR RETURNS. IN ANY CASE SHRI A. NATARAJAN HAD IN HIS ACCOUNTS CLAIMED BAD-DEBTS AGAINST LOANS TAKEN BY I.T.A. NOS.1117 1118 & 1119/MDS/11 11 ASSESSEE WHICH BY NECESSARY IMPLICATION MEANS THAT ASSESSEE COULD NOT HAVE MADE ANY PROFITS ON SUCH ADVANCES O THERWISE HE WOULD NOT HAVE DEFAULTED WHEN HIS PRO-NOTES WERE WI TH SHRI A. NATARAJAN. A.O. SIMPLY WENT BY PRESUMPTIONS AND AS SUMPTIONS FOR COMING TO A CONCLUSION THAT ASSESSEE WOULD HAVE EAR NED NET INCOME OF 6% BY DOING A FINANCE BUSINESS FROM THE FUNDS TA KEN FROM SHRI A. NATARAJAN. SO EVEN WITHOUT RELYING ON THE DECISIO N OF THIS TRIBUNAL IN THE CASE OF SHRI A. NATARAJAN WE ARE OF THE OPINIO N THAT THERE IS NOTHING ON RECORD TO PRESUME THAT ASSESSEE HAD EARN ED ANY INCOME FROM THE IMPUGNED TRANSACTION. THE ADDITIONS WERE RIGHTLY DELETED BY LD. CIT(APPEALS) . WE DO NOT FIND ANY REASON TO IN TERFERE WITH THE ORDER OF LD. CIT(APPEALS) . 9. IN THE RESULT APPEALS FILED BY THE REVENUE ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 9 TH FEBRUARY 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 9 TH FEBRUARY 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A) TIRUCHIRAPALL I/ CIT CENTRAL-II CHENNAI/D.R./GUARD FILE