DCIT, CHENNAI v. M/s. Mark Hospitals P. Ltd., CHENNAI

ITA 1291/CHNY/2010 | 2006-2007
Pronouncement Date: 28-02-2011 | Result: Dismissed

Appeal Details

RSA Number 129121714 RSA 2010
Assessee PAN AABCM2346N
Bench Chennai
Appeal Number ITA 1291/CHNY/2010
Duration Of Justice 6 month(s) 22 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. Mark Hospitals P. Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 28-02-2011
Date Of Final Hearing 19-01-2011
Next Hearing Date 19-01-2011
Assessment Year 2006-2007
Appeal Filed On 06-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER] I.T.A NO. 1291/MDS/2010 ASSESSMENT YEAR : 2006-07 THE DY. CIT COMPANY CIRCLE IV(1) CHENNAI VS M/S MARK HOSPITALS P. LTD. FLAT NO.7 SHANTHI APARTMENTS NO.25 VYASAR STREET T. NAGAR CHENNAI 600 017 [PAN AABCM2346N] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SHRI K. RAVI O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR ASSESSMENT YEA R 2006-07 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) CHENN AI DATED 4.5.2010. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE- COMPANY WHICH WAS INCORPORATED ON 18.10.2004 FILE D ITS RETURN OF INCOME ON 30.11.2006 ADMITTING NIL INCOME. IN TH E ASSESSMENT ITA 1291/10 :- 2 -: COMPLETED U/S 143(3) ON 26.12.2008 POSITIVE INCOME WAS COMPUTED AT ` 37 LAKHS. AGGRIEVED THE ASSESSEE PREFERRED APPEA L BEFORE THE LD. CIT(A) AND WAS SUCCESSFUL IN GETTING THE ADDITION O F ` 37 LAKHS MADE U/S 68 OF THE ACT DELETED. NOW THE REVENUE IS A GGRIEVED AND HAS RAISED THE FOLLOWING GROUNDS: 1 THE ORDER OF THE LEARNED CIT (A) IS CONTRARY T O LAW AND FACTS OF THE CASE. 2.1 THE LD CIT(A) ERRED IN HOLDING SHRI N. CHINNA N ADAR AS CAPABLE OF LENDING MONEY TO THE ASSESSEE AND DIRECT ING THE AO TO DELETE THE ADDITION OF ` 9 LAKHS MADE UNDER SECTION 68 OF THE IT ACT. 2.2 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN ASSESSMENT ORDER HAD POINTED OUT TO THE CONTRADICTI ON WITH REGARD TO THE MODE OF PAYMENT OF LOAN WHICH HAS NO T BEEN EXPLAINED. 2.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE A O IN HIS REPORT UNDER RULE 46A OF THE IT RULES HAD POINTED OUT THAT NO DOCUMENTARY EVIDENCE HAS BEEN FILED BY THE CREDITOR FOR THE CLAIM OF SAVINGS FROM RETIREMENT BENEFITS SALE OF AGRICULTURAL PRODUCE AND HAD ALSO POINTED OUT THAT THE CREDITOR HAD SPENT SUBSTANTIALLY ON HIS CHILDREN'S MARRIAGE. 2.4 THE CIT(A) ERRED IN ALLOWING THE RELIEF BASED ON A MERE AFFIDAVIT OF SHRI N. CHINNA NADAR AND BASED ON A VA O'S INCOME CERTIFICATE WITHOUT GIVING A FINDING ON THE ISSUES RAISED BY THE AO IN THE ASSESSMENT ORDER AND THE RE MAND REPORT. 3.1 THE LD CIT(A) ERRED IN HOLDING SMT LINGAM AS C APABLE OF LENDING MONEY TO THE ASSESSEE AND DIRECTING THE AO TO DELETE THE ADDITION OF ` 16 LAKHS MADE UNDER SECTION 68 OF THE IT ACT. ITA 1291/10 :- 3 -: 3.2 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN ASSESSMENT ORDER HAD POINTED OUT TO THE CONTRADICTI ON WITH REGARD TO THE MODE OF PAYMENT OF LOAN WHICH HAS NO T BEEN EXPLAINED. 3.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE A O IN HIS REPORT UNDER RULE 46A HAD POINTED OUT THAT NO DOCUMENTARY EVIDENCE FOR THE CREDITOR'S SAVINGS AND FOR THE FLO W OF FUND FROM THE CREDITOR TO THE ASSESSEE HAS BEEN FURNISHE D IT WAS IMPROBABLE FOR THE CREDITOR TO SAVE ` 16 LAKHS WHEN THE VAO CERTIFIED HER INCOME AS ` 1.90 LAKHS PER ANNUM POINTED OUT TO THE FINDINGS OF THE ADIT(INVESTIGATI ON) WITH REGARD TO THE BARREN NATURE OF THE CREDITOR'S LANDS WHICH HAS NOT BEEN REBUTTED BY THE CREDITOR. 3.4 THE CIT(A) ERRED IN ALLOWING THE RELIEF BASED ON A MERE AFFIDAVIT OF MRS LINGAM AND BASED ON A VAO'S INCOME CERTIFICATE WITHOUT GIVING A FINDING ON THE ISSUES RAISED BY THE AO IN THE ASSESSMENT ORDER AND THE REMAND REPOR T. 4.1 THE LD. CIT(A) ERRED IN HOLDING SHRI S. MURUGES AN AS CAPABLE OF LENDING MONEY TO THE ASSESSEE AND DIRECT ING THE A.O TO DELETE THE ADDITION OF ` 3 LAKHS MADE UNDER SECTION 68 OF THE IT ACT. 4.2 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN ASSESSMENT ORDER HAD POINTED OUT TO THE CONTRADICTI ON WITH REGARD TO THE CREDITOR'S ADDRESS HAS NOT PRODUCED BANK PASSBOOKS EVIDENCING THE SOURCES THOUGH IT WAS CLAI MED TO BE OUT OF PF OF THE CREDITOR. 4.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN HIS REPORT UNDER RULE 46A OF THE IT RULES HAD POINTED OUT THAT THE DETAILS OF SALE OF AGRICULTURE PRODUCE BANK STATEM ENT EVIDENCING RECEIPT OF PF AND GRATUITY HAVE NOT BEEN PRODUCED AND THAT THE EVIDENCE FOR MOVEMENT OF FUND S HAS NOT BEEN FURNISHED. 4.4 THE CIT(A) ERRED IN ALLOWING THE RELIEF BASE D ON A MERE AFFIDAVIT OF SHRI S. MURUGESAN AND BASED ON A VAO'S INCOME CERTIFICATE WITHOUT GIVING A FINDING ON THE ISSUES RAISED BY THE AO IN THE ASSESSMENT ORDER AND THE RE MAND REPORT. ITA 1291/10 :- 4 -: 5.1 THE LD CIT(A) ERRED IN HOLDING SHRI B. RAMAMU RTHY AS CAPABLE OF LENDING MONEY TO THE ASSESSEE AND DIRECT ING THE AO TO DELETE THE ADDITION OF ` 3 LAKHS MADE UNDER SECTION 68 OF THE IT ACT. 5.2 THE LD CIT(A) FAILED TO APPRECIATE THAT THE A O IN ASSESSMENT ORDER HAD POINTED OUT THAT NO EVIDENCE T O PROVE THE CREDITWORTHINESS WAS FURNISHED AND THAT C ASH WAS DEPOSITED IN THE CREDITOR'S ACCOUNT ON THE DATE OF PURCHASE OF DD. 5.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN HIS REPORT UNDER RULE 46A OF THE IT RULES HAD POINTED OUT THAT THE PATTA ITSELF STANDS IN THE NAME OF SHRI SUBBIAH KON AR AND SHRI RAMASAMY KONAR. 5.4 THE CIT(A) ERRED IN ALLOWING THE RELI EF BASED ON A MERE AFFIDAVIT OF SHRI B. RAMAMURTHY AND BASED ON A VAO' S INCOME CERTIFICATE AND THE ASSESSEE'S CLARIFICATION THAT THE LAND IS ANCESTRAL WITHOUT VERIFYING WHETHER THE CRE DITOR WAS IN POSSESSION OF THE LAND AND WITHOUT GIVING A FIND ING ON THE ISSUES RAISED BY THE AO IN THE ASSESSMENT ORDER AND THE REMAND REPORT. 6.1 THE LD CIT(A) ERRED IN HOLDING SHRI ESAKKIAPP AN AS CAPABLE OF LENDING MONEY TO THE ASSESSEE AND DIRECT ING THE AO TO DELETE THE ADDITION OF ` 3 LAKHS MADE UNDER SECTION 68 OF THE IT ACT. 6.2 THE LD CIT(A) FAILED TO APPRECIATE THAT THE A O IN ASSESSMENT ORDER HAD POINTED OUT TO THE CONTRADICTI ON WITH REGARD TO THE IDENTITY OF THE CREDITOR WHICH WAS NO T SATISFACTORILY EXPLAINED CONTRADICTION WITH REGARD TO THE TERMS OF LOAN AS PER THE CREDITORS WRITTEN CONFIRMA TION AND ORAL STATEMENT AND THE CASH WAS DEPOSITED IN THE CREDITOR'S ACCOUNT ON THE DAY OF TRANSFER TO THE AS SESSEE. 6.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN HIS REPORT UNDER RULE 46A OF THE IT RULES HAD POINTED OUT THAT THE CREDITOR DID NOT FURNISH THE DETAILS OF THE AGRICUL TURAL PRODUCE AND HOW IT WAS SOLD. ITA 1291/10 :- 5 -: 6.4 THE CIT(A) ERRED IN ALLOWING THE RELIEF BASED ON A MERE AFFIDAVIT OF SHRI ESAKKIPPAN AND WITHOUT GIVING A F INDING ON THE ISSUES RAISED BY THE AO IN THE ASSESSMENT ORDER AND THE REMAND REPORT. 7.1 THE LD CIT(A) ERRED IN HOLDING SHRI M. MURUG ESAN AS CAPABLE OF LENDING MONEY TO THE ASSESSEE AND DIRECTING THE AO TO DELETE THE ADDITION OF ` 3 LAKHS MADE UNDER SECTION 68 OF THE IT ACT. 7.2 THE LD CIT(A) FAILED TO APPRECIATE THAT T HE AO IN ASSESSMENT ORDER HAD POINTED OUT TO THE CONTRADICTION WITH REG ARD TO THE IDENTITY OF THE CREDITOR WHICH WAS NOT SATISFACTORI LY EXPLAINED CONTRADICTION WITH REGARD TO THE TERMS OF LOAN AS P ER THE CREDITORS WRITTEN CONFIRMATION AND ORAL STATEMENT AND THE CASH WAS DEPOSITED IN THE CREDITOR'S ACCOUNT ON THE DAY OF TRANSFER TO THE ASSESSEE AND THAT THE CREDITOR DID NOT OWN ANY LAND. 7.3 THE LD CIT(A) FAILED TO APPRECIATE THAT THE AO IN HIS REPORT UNDER RULE 46A OF THE IT RULES HAD POINTED OUT THA T THE CREDITOR DID SAY ANYTHING ABOUT LEASED LAND F IN HIS STATEMENT AND THAT THE LAND IS IN THE NAME OF ONE SHRI JAYARA J AND THE VAO'S INCOME CERTIFICATE IS ALSO IN THE NAME OF SHR I JAYARAJ. 7.4 THE CIT(A) ERRED IN ALLOWING THE RELIEF BASED ON A MERE AFFIDAVIT OF SHRI M. MURUGESAN AND BASED ON A VAO' S INCOME CERTIFICATE AND THE LEASE AGREEMENT BETWEEN SHRI JA YARAJ AND SHRI MANI WHO IS STATED TO BE THE FATHER OF THE CRE DITOR AND WITHOUT GIVING A FINDING ON THE ISSUES RAISED BY TH E AO IN THE ASSESSMENT ORDER AND THE REMAND REPORT. 8 FOR THESE AND OTHER GROUNDS THAT MAY BE ADD UCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. 3. IN EFFECT ONLY ONE ISSUE REGARDING GENUINENESS OF LOANS TAKEN BY THE ASSESSEE DURING THE RELEVANT PERIOD HAS BEEN RAISED IN THIS APPEAL. THE RELEVANT FACTS OF THE ISSUE ARE THAT D URING THE FINANCIAL YEAR 2005-06 THE ASSESSEE-COMPANY HAD OBTAINED UNS ECURED LOANS ITA 1291/10 :- 6 -: TOTALING TO ` 52 63 000/-. WHEN CALLED TO EXPLAIN THE SAME THE LD.AR OF THE ASSESSEE SUBMITTED NAMES AND ADDRESSES OF TH E CREDITORS BUT DID NOT PROVIDE THEIR PERMANENT ACCOUNT NUMBERS. F OLLOWING ARE THE SIX PERSONS FROM WHOM THE LOAN AMOUNTS MENTIONED AG AINST THEIR NAMES WERE OBTAINED BY THE ASSESSEE-COMPANY: (1) SHRI N. CHINNANADAR 9 00 000 (2) SMT S LINGAM 16 00 000 (3) SHRI S MURUGESAN 3 00 000 (4) SHRI B. RAMAMOORTHY 3 00 000 (5) SHRI S ESAKKIPPAN 3 00 000 (6) SHRI M. MURUGESAN 3 00 000 4. AS USUAL THE ASSESSING OFFICER WANTED THE ASSESSE E TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND SO ALSO THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSING OFF ICER ISSUED COMMISSION U/S 131(1)(D) OF THE ACT TO THE ASSISTAN T DIRECTOR OF INCOME-TAX(INVESTIGATION) TIRUNELVELI TO VERIFY T HE VERACITY OF THE CLAIM OF THE ASSESSEE. THE COMMISSION FOUND THAT C REDITOR NO.4 IN THE ABOVE LIST HAD DENIED HAVING ADVANCED ANY LOAN TO A NYBODY; CREDITOR NO.6 WAS NOT FOUND TO BE CREDITWORTHY CREDITOR NO. 5 ALSO DENIED HAVING GIVEN ANY LOAN TO THE ASSESSEE AND REMAINING PERSONS WERE NOT FOUND TO BE CREDITWORTHY. WHEN FURTHER NOTICE WAS ISSUED THE ASSESSEE AGAIN SUBMITTED DETAILED REPLY IN RELATION TO EACH AND EVERY CREDITOR. BUT STILL THE ASSESSING OFFICER WAS NOT SATISFIED HENCE HE ITA 1291/10 :- 7 -: MADE AN ADDITION OF ` 37 LAKHS U/S 68 OF THE ACT. IN FIRST APPEAL VEHEMENTLY DISPUTING HE FINDING OF THE ASSESSING OF FICER THE LD.AR OF THE ASSESSEE PRODUCED FOLLOWING EVIDENCES IN RESPEC T OF THE SIX CREDITORS: (A) IN THE CASE OF MR.N. CHINNA NADAR : (I) NOTARISED AFFIDAVIT OF N. CHINNA NADAR (ORIGIN AL) (II) AGRICULTURAL CULTIVATION INCOME CERTIFICATE FO R `2 LAKHS PER ANNUM ISSUED BY VILLAGE ADMINISTRATIVE OFFICER KULASEKAR APURAM (III) COPY OF CHITTA & PATTA ISSUED BY VAO OF KULAS EKARAPURAM (B) IN THE CASE OF SMT. S. LINGAM (I) NOTARISED AFFIDAVIT OF MRS LINGAM (II) AGRICULTURAL CULTIVATION INCOME CERTIFICATE FO R RS 1 90 000 PER ANNUM ISSUED BY VAO RADHAPURAM (III) COPY OF CHITTA & PATTA ISSUED BY VAO RADHAPU RAM (13 NOS.) (C) IN THE CASE OF MR.S.MURUGESAN : (I) NOTARISED AFFIDAVIT OF MR. S. MURUGESAN (II) COPY OF PATTA ISSUED BY TALUK OFFICER RADHAPU RAM (III)COPY OF CHITTA & PATTA ISSUED BY VAP RADHAPUR AM (IV) COPY OF POST OFFICE RECURRING DEPOSIT. (V) COPY OF SPECIAL BENCH ACCOUNT STATEMENT. (D) IN THE CASE OF MR B.RAMAMOORTHY : (I) NOTARISED AFFIDAVIT OF MR B RAMAMOORTHY (II) AGRICULTURAL CULTIVATION INCOME CERTIFICATE FO R ` 1 02 000 PER ANNUM ISSUED BY VAO PAZHAVOOR (III) COPIES OF CHITTA & PATTA ISSUED BY OFFICER OF RADHAPURAM TALUK ( ITA 1291/10 :- 8 -: E) IN THE CASE OF MR S ESAKKIAPPAN : (I) NOTARISED AFFIDAVIT OF MR. B.RAMAMOORTHY (II) COPY OF LEASE AGREEMENT BETWEEN ESAKKIAPPAN AN D RAJESWARAN S/O DURAISWAMY NADAR AND PATTA OF DURAISWAMY NADAR (III) COPY OF PATTA OF ESAKKIAPPAN (F) IN THE CASE OF MR M. MURUGESAN : (I) NOTARISED AFFIDAVIT OF MR M.MURUGESAN (II) COPY OF LEASE AGREEMENT BETWEEN MANI (FATHER O F M.MURUGESAN) AND JAYARAJ (III) AGRICULTURAL CULTIVATION INCOME CERTIFICATE F OR ` 2 LAKHS PER ANNUM ISSUED BY VAO PAZHAVOOR (IV)COPY OF CHITTA AND PATTA IN THE NAME OF JAYARAJ ISSUED BY VAO PAZHAVOOR 5. THE LD. CIT(A) ADMITTED THESE EVIDENCES UNDER RULE 46A OF THE INCOME-TAX RULES AND FORWARDED THE SAME VIDE OFFICE LETTER DATED 16.11.2009 FOR ASSESSING OFFICERS VERIFICATION AND HIS COMMENTS. THE ASSESSING OFFICER SENT HIS REMAND REPORT DATED 1.4 .2010 ALONGWITH ENDORSEMENT LETTER DATED 7.4.2010 OF ADDL. CIT COM PANY RANGE IV CHENNAI. THE REMAND REPORT OBTAINED FROM THE ASSES SING OFFICER WAS CONFRONTED TO THE REPRESENTATIVE OF THE ASSESSEE VI DE LETTER DATED 9.4.2010 FOR REBUTTAL. THE REMAND REPORT WAS REBUT TED BY GIVING FOLLOWING EXPLANATION: 'AT THE OUTSET WE STATE THAT THE IDENTITY OF ALL T HE PARTIES HAS BEEN PROVED BEYOND DOUBT. ALL THE CREDI TORS HAVE GIVEN NOTARISED AFFIDAVITS CONFIRMING THE ADVA NCES OUT OF THEIR ACCUMULATED SAVINGS FROM THEIR INCOME. ALL ITA 1291/10 :- 9 -: THE CREDITORS ALSO CONFIRMED THE TRANSACTIONS IN PE RSON BEFORE INCOME TAX AUTHORITIES . THEY ALL HAVE ADEQUATE RESOURCES BY WAY OF ACCUMULATED SAVINGS FROM AGRICULTURAL INCOME RETIREMENT BENEFITS AND SALARY SAVINGS. SINCE THE CREDITORS ARE AGRICULTURISTS TH EY DO NOT HAVE REGULAR BANK TRANSACTIONS. THEIR DAY TO DA Y TRANSACTIONS ARE MOSTLY IN CASH. THEY USE TO KEEP T HEIR SAVINGS IN CASH ONLY. BEFORE ADVANCING THE LOAN TH EY DEPOSITED CASH TO THAT EXTENT TO COMPLY WITH THE PROVISIONS OF SEC. 269SS. HENCE THERE IS NO GROUND TO SUSPECT THE GENUINENESS OF DEPOSITS BY THE CREDITOR S IN THEIR BANK ACCOUNTS. THE CREDITORS ARE VILLAGE PEOPLE . THEY DON'T KNOW THE PROCEDURE ADOPTED BY THE INCOME TAX DEPARTMENT. AT THEIR FIRST APPEARANCE AT SHORT NOTICE THEY DID NO T PRODUCE ANY DOCUMENTS SUPPORTING THEIR INCOME AS I T WAS THEIR FIRST EXPERIENCE DEALING WITH THE INCOME TAX DEPARTMENT AND THEY WERE NOT AWARE OF THE FACT THAT THEY HAD TO PRODUCE PAPERS TO SHOW THEIR INCOME . THE CREDITORS HAD TO OBTAIN DOCUMENTS FROM VAO IN SUPPO RT OF THEIR ANNUAL AGRICULTURAL INCOME AND THE DETAILS OF OWNERSHIP OF LAND LIKE PATTA ADANGAL ETC. IT TOOK LOT OF TIME FOR THEM. THE ASSESSEE WAS THEREFORE PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WH ICH IS RELEVANT TO THE GROUNDS OF APPEAL. THE ASSESSEE' S CASE IS COVERED BY THE EXCEPTIONS MENTIONED IN RUL E 46A(1)(CC) OF THE I.T.RULES. IN THIS CONNECTION P LEASE REFER TO THE FOLLOWING CASE LAWS: (A) JAY TEXTILE MILLS (128 ITR 480) P&H (B) SARDARI LAL & CO(251 ITR 864) DELHI FB (C) PRABHAVATHI S SHAH.(231 ITR 1) BOMBAY (D) RAO RAJA HAMEET SINGH (252 ITR 528) RAJ AFTER RECEIVING ADDITIONAL DOCUMENTS SUBMITTED WITH THE HON'BLE CIT(A) THE AO HAS FAILED TO GIVE ONE MORE OPPORTUNITY TO THE CREDITORS AND ASSESSEE TO PROVE THEIR ITA 1291/10 :- 10 - : BONAFIDES. THE COMMENTS OF THE APPELLANT-COMPANY ON THE POINTS RAISED BY THE AO IN THE CASE OF EACH INDIVIDUAL CREDITOR ARE AS UNDER: (A) SHRI M MURUGESAN : HIS FATHER MANI HAS TAKEN ON LEASE 4.6 ACRES PUNJA LANDS FROM ONE JAYARAJ AS PER AGREEMENT DT 05 04 1999 FOR 15 YEARS. THE CREDITOR S AND HIS FATHER JOINTLY CULTIVATED FLOWERS AND COCON UTS. SINCE THE VAO IS NOT AWARE OF THE LEASE AND THE LAN D OWNERSHIP STILL BELONGS TO MR JAYARAJ HE HAS TO IS SUE CERTIFICATE IN THE NAME OF ONLY LAND OWNER EVEN THO UGH MR M MURUGESAN'S FATHER HAS TAKEN THE LAND ON LEASE . THE ANNUAL NET INCOME FROM THE LAND TAKEN ON LEASE AS PER THEIR INCOME CERTIFICATE OF VAG IS ` 2 LAKHS. HE HAS ADEQUATE ACCUMULATED SAVINGS TO ADVANCE ` 3 LAKHS OUT OF THE SAID INCOME (B) SHRI B RAMAMURTHY : ACCORDING TO THE CREDITOR HE OWNS 2 ACRES OF LAND. COPIES OF PATTA PRODUCED ARE IN THE NAME OF BHAGAVATHY KONAR S/O SUBBAIAH KONAR. BHAGAVATHY KONAR IS THE FATHER OF THE CREDITOR. THE VAG CERTIFIED THAT THE ANNUAL INCOME OF SRI RAMAMOORTHY IS ` 1 02 000. IN ADDITION HE IS ALSO DOING CIVIL CONTR ACT WORK. IN THE AGRICULTURAL LANDS HE GREW FLOWERS AN D BANANA. HENCE HE HAS ADEQUATE RESOURCES TO ADVANCE ` 3LAKHS. (C) N CHINNA NADAR : HE IS A RETIRED HIGHER SECONDARY SCHOOL HEADMASTER. BESIDES HE OWNS AGRICULTURAL LA NDS MEASURING 2.492 ACRES. THE VAO HAS GIVEN A CERTIFIC ATE OF ANNUAL NET INCOME FROM COCONUTS IN HIS AGRICULTU RAL LANDS TO THE EXTENT OF ` 2 LAKHS. BESIDES HE HAS INCOME BY WAY OF PENSION OF ` 10 000 PER MONTH AND RETIREMENT BENEFITS. THERE COULD BE ADEQUATE SAVINGS FROM THE ABOVE INCOME FOR MAKING THE ADVANCE OF ` 9 LAKHS. (D) MS.S LINGAM : SHE IS AGED 63 YEARS AND HAS NO DEPENDENTS. SHE IS MAINTAINED BY HER SON A PWD ITA 1291/10 :- 11 - : ENGINEER WHO HAS GOOD INCOME. SHE OWNS 70 ACRES OF AGRICULTURAL LANDS IN WHICH SHE MAINLY GREW COCONUTS BESIDES SOME COMMERCIAL CROPS. THE VAO CERTIFIED TH AT HER ANNUAL NET AGRICULTURAL INCOME WILL BE ` 1 90 000. SINCE SHE COULD SAVE HER ENTIRE INCOME WITH SAME INCOME FROM SAVINGS PLUS HER SON'S INCOME SHE HAS ADEQUATE RESOURCES FOR LENDING THE SUM OF ` 16 LAKHS. (E) S.MURUGESAN : HE OWNS ANCESTRAL AGRICULTURAL LANDS OF 8.5 ACRES. HIS NET ANNUAL INCOME FROM AGRICULTU RAL OPERATIONS WILL BE ` 1 50 000. HE RETIRED FROM M/S PARTHA TEXTILES ERNAKULAM AND RECEIVED GRATUITY OF ` 42 062 AND PF OF ` 85 504 WHICH WERE CREDITED TO HIS BANK ACCOUNT NO. 15299 WITH CANARA BANK COCHIN. HIS WIFE MRS E MUTHULAKSHMI IS WORKING AS TEACHER IN A GOVERNMENT AIDED SCHOOL. SHE HAD A RECURRING DEPOSIT ACCOUNT IN A PO ST OFFICE SAVINGS BANK IN AVARIKULAM POST OFFICE AND THE AMOU NT MATURED FROM THIS ACCOUNT IS ` 1 21 672 IN HER RECURRING DEPOSIT ACCOUNT. M ESAKKIAPPAN IS WRONGLY MENTIO NED AS HER HUSBAND . OBVIOUSLY HE IS THE FATHER OF MRS E MUTHULAKSHMI. HE HAS THEREFORE ADEQUATE SAVINGS CONSISTING OF HIS GRATUITY AND PF OF ` 1 27 500 HIS WIFE'S RD ACCOUNT MATURITY OF ` 1 21 672 AND HIS NET AGRICULTURAL INCOME SAVINGS OUT OF THE ANNUAL INCOME OF ` 1 50 000 TO ADVANCE ` 3 LAKHS. (E) S ESAIKKAPPAN : HE OWNS 0.75 ACRES OF AGRICULTURAL LANDS IN WHICH HE GREW FLOWERS AS PER EXTRACTS FROM ADANGAL. HE HAS ALSO TAKEN ON LEASE OF ABOUT 6 ACRE S OF LAND FROM ONE RAJESWARAN AS PER LEASE AGREEMENT DT 28 08 2001 FOR 15 YEARS. AS PER EXTRACTS FROM ADANGAL REGISTER FLOWERS COCONUTS TOMATO ETC WERE GROWN. HIS NET ANNUAL INCOME FROM THESE ACTIVITIES IS ` 1 50 000 AS PER VAO CERTIFICATE. HE COULD SAVE ADEQUATE FUNDS OUT O F THIS INCOME TO ADVANCE ` 3 LAKHS. FROM THE ABOVE FACTS IT MAY BE SEEN THAT (A) THE IDENTITY OF THE CREDITORS HAS BEEN PROVED (B) THE CREDITORS CONFIRMED THE ADVANCE BY FILING N OTORIZED AFFIDAVITS AND BY GIVING STATEMENTS IN PERSON BEFOR E ITA 1291/10 :- 12 - : INCOME TAX AUTHORITIES (C) THE LOANS WERE GIVEN BY CHEQUES (D) THE CREDITORS HAD ADEQUATE RESOURCES TO GIVE LO ANS AS MAY BE EVIDENCED BY PATTA EXTRACTS FROM ADANGAL REGISTER LEASE AGREEMENT INCOME CERTIFICATES BY V AO AND BANK ACCOUNTS SHOWING SAVINGS - WHERE (A) THE IDENTITY OF THE CREDITORS IS PROVED (B) THE Y FILED CONFIRMATION LETTERS (C) THEY APPEARED AND ADMITTED THE ADVANCE (D) LOANS WERE RECEIVED BY CHEQUES/DRAFTS (E) TRANSACTIONS WERE REFLECTED IN THE ACCOUNTS OF THE ASSESSEE AND (F) EVEN IF THE CONFIRMATION LETTERS ARE IDENTICAL AND GOT PREPARED BY THE ASSESSEE - THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT THE CREDITORS HAD CREDIT WORTHINESS AND THAT THE CREDIT S ARE NOT ASSESSABLE U/S 68 AS PER THE FOLLOWING DECISIONS OF HIGH COURTS AND APPELLATE TRIBUNALS: (A) JEETAKHAN (292 ITR 597) P&H (B) A ONE HOUSING COMPLEX LTD (299 ITR 327) AT DELH I BENCH (C) ARIMA INVESTMENTS LTD (247 ITR 22) AT - IN THIS CASE IT IS HELD THAT SEC.68 WILL NOT APPLY ONCE T HE IDENTITY OF THE PERSON HAD BEEN ESTABLISHED AND CREDITS APPEARED IN THE BANK ACCOUNT (D) NEMICHAND KOTHARI (264 ITR 254) GUJ - IN THIS C ASE IT IS HELD THAT WHEN THE IDENTITY OF THE CREDITORS AND THE AMOUNT RECEIVED BY CHEQUE HAD BEEN ESTABLISHED THE ASSESSEE MUST BE TAKEN TO HAVE PROVED THAT CREDITORS HAVE CREDITWORTHINESS AND THE CREDITS ARE NOT ASSESSABLE AS INCOME U/S 68 (E) DHENUK INDUSTRIES LTD (282 ITR64) ST.(SLP) DISM ISSED BY SUPREME COURT) (F) UMA POLYMERS LTD (274 ITR 1) AT JODHPUR (G) RAM NARAIN GOEL (224 ITR 180) P&H - IN THIS CASE IT ITA 1291/10 :- 13 - : IS HELD THAT WHEN THE CREDITORS WERE IDENTIFIED AN D THEY APPEARED AND ADMITTED THE ADVANCE WITH CONFIRMATION LETTERS AND BANK STATEMENTS THE ASSESSEE WAS NOT FOUND TO PROVE THE SOURCE OF LOANS AND THE LOANS HAD TO BE ACCEPTED AS GENUINE. IN THE GROUNDS OF APPEAL IT IS STATED THAT THE AO FAILED TO SEE THAT THE ADDRESS AND IDENTITIES OF ALL THE SIX PERSONS HAVE BEEN PROVED BY PRODUCING XEROX COPIES OF THEIR FAMILY CARDS OR THEIR ELECTORAL IDENTITY CARDS. IT IS THER EFORE PRAYED THAT ALL THE CREDITS MENTIONED ABOVE MAY BE ACCEPTE D AS GENUINE AND THAT THE ADDITION OF ` 37LAKHS MADE U/S 68 BE DELETED.' 6. AFTER GOING THROUGH THE ENTIRE RECORDS THE LD. CIT (A) CAME TO THE CONCLUSION THAT ALL THE THREE REQUIREMENTS OF S ECTION 68 STAND FULFILLED AND THERE IS NO REASON TO DISBELIEVE THE EVIDENCE(S) FILED TO PROVE THE CREDITS IN QUESTION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE ENTIRE RECORDS. AFTER CIRCUMSPECTING TH E ENTIRE RECORDS WE FIND THAT THE LOANS IN QUESTION WERE GIVEN TO THE A SSESSEE THROUGH CHEQUES AND ALL THE CREDITORS HAVE CONFIRMED BY APP EARING BEFORE THE ADDL. CIT (INVESTIGATION) THAT THEY HAD ADVANCED LO ANS MENTIONED AGAINST THEIR NAMES TO THE ASSESSEE-COMPANY. THERE FORE THE IDENTIFY OF THE CREDITORS CANNOT BE DISPUTED. IT IS NOT NEC ESSARY THAT EVERY CREDITOR SHOULD HAVE PERMANENT ACCOUNT NUMBER AS I T HAS BEEN FOUND ITA 1291/10 :- 14 - : CONSPICUOUSLY THAT ALL THE CREDITORS ARE AGRICULTUR ISTS AND THEREFORE THEY DO NOT REQUIRE ANY FILING OF RETURNS OF INCOME AND THAT IS THE REASON THAT THEY DID NOT HAVE PAN. IN SO FAR AS TH EIR CREDITWORTHINESS IS CONCERNED THEY HAVE GIVEN MINUTE DETAILS OF THE IR RESPECTIVE SOURCE(S) TO GIVE LOAN(S) TO THE ASSESSEE AND IN SU CH CIRCUMSTANCES WHEN THE ASSESSEE-COMPANY HAS GIVEN PLAUSIBLE EXPLA NATION FOR THE ENTIRE LOAN AMOUNT OF ` 37 LAKHS IT WOULD BE UNJUSTIFIED IF THESE CREDITS ARE NOT CONSIDERED AS GENUINE. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE PARTICULARLY WHEN ALL THE CREDITORS AR E AGRICULTURISTS AND THEIR IDENTITY THEIR CREDITWORTHINESS AND GENUITY OF TRANSACTION STAND PROVED ON RECORD WHAT ELSE IS REQUIRED TO BE PRODUC ED TO PROVE THE FACTUM OF IMPUGNED LOANS. TO ASCERTAIN CREDITWORTH INESS CUMULATIVE FACTS AND EVIDENCE HAVE TO BE TAKEN INTO CONSIDERAT ION. THE LD. CIT(A) HAS DISCUSSED EACH AND EVERY CREDITOR TO ARRIVE AT THEIR CREDITWORTHINESS IN HIS ORDER IN DETAIL. WE ARE IN AGREEMENT WITH THE LD. CIT(A) AND CONCLUDE THAT NO SEPARATE ADDITION C AN BE SUSTAINED IN THE HANDS OF THE ASSESSEE. 8. IN SO FAR AS THE APPLICATION OF RULE 46A IS CONCERN ED THE LD. CIT HAS APTLY CONSIDERED THE PROVISIONS IN THEIR LETTER AND SPIRIT. ITA 1291/10 :- 15 - : 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE STAN DS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28. 2.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 28.2.2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR