M/S.mabel Engineers Pvt. Ltd., Plot v. The Deputy Commissioner Of Income-Tax, Company Circle – Iv (1), Chennai – 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 15.03.2017 THE HONOURABLE MR.JUSTICE RAJIV SHAKDHERAndTHE HONOURABLE MR.JUSTICE R.SURESH KUMAR T.C.A.No.189 of 2017 Shri.S.Raman M/s.Mabel Engineers Pvt. Ltd.,Plot No.66-69, EPIP Sipcot Industrial Complex,Gummidipoondi – 601 201... AppellantVs. The Deputy Commissioner of Income-tax,Company Circle – IV (1),Chennai – 600 034.... Respondent Prayer: Appeal filed under Section 260-A of the Income Tax Act,1961, against the order dated 30.11.2016 passed inI.T.A.No.2573/MDS/ 2014 by the Income Tax Appellate Tribunal,'B' Bench, Chennai.Appeal arising against the order of the Commissioner ofIncome Tax (Appeals) IV, Chennai in ITA.NO.459/13-14,dt.10.4.14, against the Assessment order of the DeputyCommissioner of Income Tax, Company Circle (IV) Chennai,dt.19.3.2013 in PAN/GIR.NO.AAFPR 1944 M.For Appellant: Mr.M.P.Senthil KumarFor Respondent : Mrs.R.Hemalatha 1. Before we deal with the appeal, we may indicate that thepractice followed, vis-a-vis, tax appeals is that, advancecopies are not served on the contesting party. It is only,after notice is issued, in the matter that the respondents areserved. 2.The instant appeal has been filed by the Assessee. Thoughadditional sets of paper book were filed with the Registry, noadvance copy is served on any of the counsels who are empanelledto appear for the Revenue. 3.According to us, this practice delays, at times, theadjudication of the matter. In several cases, the matters, to https://hcservices.ecourts.gov.in/hcservices/ our minds, can be disposed of, at the notice stage itself, asthey may raise issues, which are either covered or raisequestions of fact as against substantial questions of law.Assistance of the contesting counsel would go a long way inenabling the Bench, to reach a conclusion in the matter. 4.Therefore, we direct the Registry, to follow, hereon, thefollowing practice, in respect of tax matters : (i) Where the Assessee is in appeal, the counsel prosecutingthe appeal would serve an advance set of the appeal paper book,along with the typed set of documents, on any one of thecounsels, who are empanelled to appear for the Revenue. (i)(a) We are informed by Ms.Hemalatha, who has beenrequested to appear for the Revenue, today, that inter se, theempanelled counsels, they can then hand over the papers, to theconcerned counsels depending on the jurisdiction, ear marked forthe empanelled counsel for the Revenue. (ii) The counsel for the Assessee will ensure that theappeal paper book along with the typed set of documents, unlessthere is grave urgency, would be served at least three (3) days,in advance. (iii) In cases, where Revenue is in appeal and, since, it isnot known by the Revenue, as to who would be the counsel whowould enter appearance on behalf of the Assessee, i.e.,contesting party, the Revenue, will despatch, an advanceintimation along with only the grounds of appeal via, RegisteredPost with Acknowledgement Due (RPAD), at least seven (7) daysprior to the listing of the case. The communication willindicate the mode and manner by which complete set of papers canbe collected. (iv) In addition, intimation by way of a letter will also besent to the counsels/authorized representative, on record,before the authorities below, in case, the relevant informationwith regard to the name and address is available on record. (v) It is made clear, in case, the Assessee is notrepresented on the day, when, the matter is listed, it will notbe held against the Assessee. The Bench concerned, in suchcircumstances, if thought fit, would issue formal notice to theAssessee. (vi) In the event of an urgency arising in the matter, theconcerned counsel would have liberty to mention the matter,before the Bench, for grant of waiver of the aforementioneddirections. 4.1. We make it clear, that these directions are applicable,only to tax matters. (iv) In addition, intimation by way of a letter will also besent to the counsels/authorized representative, on record,before the authorities below, in case, the relevant informationwith regard to the name and address is available on record. (v) It is made clear, in case, the Assessee is notrepresented on the day, when, the matter is listed, it will notbe held against the Assessee. The Bench concerned, in suchcircumstances, if thought fit, would issue formal notice to theAssessee. (vi) In the event of an urgency arising in the matter, theconcerned counsel would have liberty to mention the matter,before the Bench, for grant of waiver of the aforementioneddirections. 4.1. We make it clear, that these directions are applicable,only to tax matters. 5.In so far as the present case is concerned, it is noticed,that the appeal, which pertains to the assessment year 2010-11,is directed against the judgment of the Income Tax AppellateTribunal (in short the Tribunal), dated 30.11.2016. that the appeal, which pertains to the assessment year 2010-11,is directed against the judgment of the Income Tax AppellateTribunal (in short the Tribunal), dated 30.11.2016. 6.The only issue, which arose for consideration, before theTribunal was, as to whether additions made to the income of theAssessee, under Section 68 of the Income Tax Act, 1961 (inshort, the Act), ought to be sustained. 6.1.To be noted, the Assessee has lost throughout. 7.The learned counsel for the Assessee, however, says thatthe evidence produced, before the Authorities below, has notbeen properly appreciated. 7.1.It is, his contention that the initial onus, regardingsource of unexplained funds, was discharged by the Assessee. 7.2.It is, in this connection, that the learned counsel forthe Assessee says that the Authorities below, failed toappreciate, which is, that not only, the identity of thepersons, who furnished funds to the Assessee was disclosed, butalso their creditworthiness and source was established. 7.3.Learned counsel says that therefore, the transactionsentered into between the persons, who furnished the funds to theAssessee, which stood deposited in his bank account, wereexplained and therefore, all transactions, with which, fault isfound by the Authorities below, would necessarily be genuine. 8.In order to adjudicate upon the present appeal, thefollowing broad facts need to be noticed: 8.1.The Assessee had filed his return of income for theAssessment Year in issue, i.e., 2010-11 on 31.12.2010. 8.2.The Assessee's case was picked up for scrutiny. 8.3.Upon scrutiny, it was found that they were moniesamounting to Rs.30,83,000/- credited to his account. 8.4.Since, the Assessing Officer was not satisfied, with theexplanations given by the Authorized Representative of theAssessee, individual notices were issued under Section 133 A ofthe Act, to those persons, from whom, the Assessee indicatedthat funds had been received. 9.To be noted, out of the total credit reflected in theAssessee's account for the relevant period, i.e., a sum ofRs.30,83,000/-, the Assessee had attempted to furnishexplanation for a sum of Rs.29,68,000/-, by attributing thesource to relatives and his own means. 9.1.For the balance amount, i.e., Rs.1,15,000/-, explanationwas furnished, which was not duly supported by requisitematerial. 9.2.In the Assessee's words, clear and cogent explanationwas furnished in respect of sums amounting to Rs.23,48,000/-.The explanation, which was given, in respect of this amount, is,as follows: 9.3.It was the Assessee's case before the Assessing Officerthat monies to the tune of Rs.23,48,000/-, were, largely,received, from his close relatives. This sum included an amount https://hcservices.ecourts.gov.in/hcservices/ equivalent to Rs.2,28,370/-, which, the Assessee claimed werehis own funds. 9.2.In the Assessee's words, clear and cogent explanationwas furnished in respect of sums amounting to Rs.23,48,000/-.The explanation, which was given, in respect of this amount, is,as follows: 9.3.It was the Assessee's case before the Assessing Officerthat monies to the tune of Rs.23,48,000/-, were, largely,received, from his close relatives. This sum included an amount https://hcservices.ecourts.gov.in/hcservices/ equivalent to Rs.2,28,370/-, which, the Assessee claimed werehis own funds. 9.4.In so far as the sum of Rs.1,15,000/- was concerned, itwas the Assessee's stand that it was received from his employeri.e., Mabel Engineers Private Limited. 9.5.The detailed break up, as furnished by the Assessee, isas follows: 9.6. As would be evident upon perusing the details set outin the table that each one of them from Serial No.1 to 7 areclose relatives of the Assessee. 9.7.The explanation given, with regard to, each one of themwas examined by the Assessing Officer. Since, we do not wish,to reiterate the findings of fact, returned by the AssessingOfficer, which, as indicated above, have been affirmed both bythe CIT(A) and the Tribunal, we would only, observe, that thesame finds a discussion in paragraphs 3.1 to 11, of the order ofthe Assessing Officer. 9.8.However, only to highlight the fact as to why, theAssessing Officer came to the conclusion which, he did, we may,indicate that in so far as the mother–in– law and father–in–lawof the Assessee were concerned, it was sought to be explainedthat between them, a sum of Rs.10,00,000/- was given to theAssessee, in the form of a gift. 9.9.The father–in–law, as noted by the Assessing Officer,was at the relevant point of time aged 83 years, while themother–in–law was aged 73 years. 10.The father–in–law's explanation was that, he was anagriculturist and a retired Purohit/Priest. It was sought to beexplained by the father– in–law that thereby a parcel of https://hcservices.ecourts.gov.in/hcservices/ agricultural land was sold and a sum of Rs.1,98,000/- wasgenerated thereby. 10.1.The Assessing Officer seems to have examined the papersin that behalf and noted that while, the sale transaction wascarried out on 10.06.2008, the money was gifted only on19.03.2010. 10.2.The mother–in–law, on the other hand, also submittedbefore the Assessing Officer that the sum of Rs.5,00,000/-, thatshe had gifted to the Assessee, was sourced from her savingsfrom agricultural income. No details of any bank account, weregiven. 10.3.The mother–in–law, did not indicate, to the AssessingOfficer that she owned any agricultural land or any other asset.She did, however, try to explain that she carried outagricultural activity on leasehold land(s). 10.4.Concededly, the details of income generated fromleasehold lands was not furnished to the Assessing Officer. 10.5.Furthermore, as noted by the Tribunal also, the giftdeeds which were produced and are dated 19.03.2010, did notindicate the date when the gift was made. 10.6.Therefore, for these, amongst other reasons, theexplanation given by the mother–in–law and father-in–law, werenot accepted. 10.7.In so far as the brothers are concerned, it is noticedthat one of the brothers, i.e., Mr.S.Srinivasan, whose name isfound at serial no.5 of the Table, set out above, was engaged asa Purohit/Priest. He had sought to explain that the sum ofRs.2,00,000/-, which, he gave, to the Assessee was generatedfrom private savings. 10.8.There was no proof, placed before the AssessingOfficer, as to the income which Mr.Srinivasan had earned duringthe relevant period. 10.9.In so far as the other two brothers were concerned,i.e., Mr.S.Krishnamoorthy and Mr.S.Muthukrishnan, they hadindicated that the monies given to the Assessee, were, in factloans, which were being repaid. 10.7.In so far as the brothers are concerned, it is noticedthat one of the brothers, i.e., Mr.S.Srinivasan, whose name isfound at serial no.5 of the Table, set out above, was engaged asa Purohit/Priest. He had sought to explain that the sum ofRs.2,00,000/-, which, he gave, to the Assessee was generatedfrom private savings. 10.8.There was no proof, placed before the AssessingOfficer, as to the income which Mr.Srinivasan had earned duringthe relevant period. 10.9.In so far as the other two brothers were concerned,i.e., Mr.S.Krishnamoorthy and Mr.S.Muthukrishnan, they hadindicated that the monies given to the Assessee, were, in factloans, which were being repaid. 11.The Assessing Officer, while considering the explanationof Mr.S.Muthukrishnan, noticed that he earned a salary ofapproximately, Rs.17,000/- per month. Since, it was sought tobe explained by Mr.S.Muthukrishnan that in order to repay theloan, he had also dipped into the savings of his son, theearnings of his son, were also looked at. After examining theaccounts of the son of Mr.Muthukrishnan, it was found that heearned a salary of approximately, Rs.20,000/- to Rs.25,000/- permonth and on most occasions, he had withdrawn only Rs.200/- toRs.2,000/- from his bank account. The withdrawal, in certaininstances, ranged between Rs.10,000/- and Rs.20,000/-. 11.1.The Assessing Officer came to the conclusion after aholistic appreciation of the evidence, produced before him, thattakingintoaccount,thedomesticexpensesofMr.S.Muthukrishnan, who earned an annual salary ofapproximately, Rs.2,00,000/- to Rs.2,04,000/-, he could not https://hcservices.ecourts.gov.in/hcservices/ have, garnered enough funds, to pay monies, which werecategorised as repayment of loan. 11.2.Likewise, in the case of Mr.Krishnamoorthy, theevidence produced was examined by the Assessing Officer and itwas found that the annual salary, which he earned, was a sum ofRs.2,60,000/-. 11.3.Since, in this case, as well, it was stated byMr.Krishnamoorthy that his son had helped him out, withrepayment of loan, to the Assessee, the said explanation wasalso examined. 11.4.The Assessing Officer notes that Mr.Krishnamoorthy, inthe relevant year, had only three credits in his accounts, whichtotalled to Rs.80,000/-. 11.5.Thus,havingfactoredthemonies,which,Mr.Krishnamoorthy would have expended for domestic purposes, theAssessing Officer came to the conclusion that the Assessee hadnot given satisfactory evidence, with regard to the source ofcredit, qua the sum of Rs.2,49,630/- paid to the Assessee. 11.6.In so far as the two daughters are concerned, theAssessing Officer returned a categorical finding of fact thatduring the relevant period, the daughters were students andtherefore, they could not generated the sums which were sourcedto them. The daughters did attempt to furnish an explanation tothe effect that they had to receive monies from certain personsqua their own account, which were collected on their behalf bythe Assessee, i.e., the father and directly, deposited in hisaccount. 11.7.Concededly, the details of those debtors, who owedmoneys to the daughters were not furnished. 11.8.In so far as the sum of Rs.1,15,000/- is concerned,which, the Assessee said he had received from his employer;concededly, the Assessee had not furnished the balance sheet ofthe employer. 11.7.Concededly, the details of those debtors, who owedmoneys to the daughters were not furnished. 11.8.In so far as the sum of Rs.1,15,000/- is concerned,which, the Assessee said he had received from his employer;concededly, the Assessee had not furnished the balance sheet ofthe employer. 11.9.In so far as the explanation given for his own fundswas concerned, the Assessing Officer noted as follows:“With regard to the argument of his drawingsbeing the source for deposit of case ofRs.2,28,370, The cash balance, he refers tohas got no relevance. The withdrawals areonly Rs.4.19 lakhs, which would not allowhim to save 2.28 lakhs, as he needs to meethis domestic expenses. The assessee did notco-ordinate with the dates or amounts ofwithdrawals with cash deposits. In view ofthis, the assessee's argument is not tenablein the facts and circumstances of the case.He fails to satisfactorily explain thesource of funds in respect of the cashdeposits into his bank account to an extent of Rs.2,28,370. Hence, in accordance withthe provisions of section 68 of the IncomeTax Act, 1961, the same is assessed asincome of the assessee.” 12.These explanations, were, once again, scrutinized both bythe CIT(A) and by the Tribunal. We have also looked at theexplanations given by the Assessee. 13.Mr.M.P.Senthil Kumar, learned counsel for the Assessee,in support of his submission has relied upon the judgment of theDelhi High Court rendered in: Commissioner of Income Tax Vs.Kinetic Capital Finance Limited, (2013) 354 ITR 296 (Delhi). 13.1.According to us, the judgment is completelydistinguishable on facts. 13.2.In that case, CIT has reversed the view of theAssessing Officer, after, inter alia, noting the fact, that 86investors who were third parties, 16 had confirmed the depositand in one case, the deposit had been repaid with interest. 13.3.It is also noticed that the Assessee in that case was alimited company, having branches in different parts of thecountry. The assessee was in the business of non-bankingfinance and was registered with the RBI. Out of the totaldeposit amounting to Rs.1,08,54,463/-, a sum of Rs.62,13,485/-was received in earlier years. Furthermore, the deposits wererenewed in the assessment year in issue. 13.4.Having regard to the aforesaid broad facts, as culledout from the said judgment, we are of the view, that on facts,it cannot be applied to the case, at hand.14.Mrs.R.Hemalatha, who appears for the Revenue says thatapart from the fact that no substantial questions of law arisefor consideration by this Court, this Court, may also like totake into consideration the fact that three Authorities havereturned concurrent findings of fact against the Assessee. Insum, it was Ms.R.Hemalatha's submission that no interference iscalled for with the impugned judgement and order. 15. According to us, while the Assessee has not been able todischarge what he claims is the initial onus, satisfactorily,the observations made by the authorities below are findings offact based upon appreciation of evidence. The onus, in thiscase, according to us, did not shift to the Revenue. The reasonbeing that while, the Assessee was able to identify the sourcefor whatever it was worth, he definitely failed to establish thecreditworthiness of his source. We have ourselves examined theexplanation given by the Assessee and are satisfied that thereis no fundamental error committed by the authorities below inthe appreciation of evidence. 15.1. Each of the relatives identified as source, clearly,lacked the capability of lending funds to the extent attributedto them by the Assessee. While, the Assessee is not expected to https://hcservices.ecourts.gov.in/hcservices/ 15.1. Each of the relatives identified as source, clearly,lacked the capability of lending funds to the extent attributedto them by the Assessee. While, the Assessee is not expected to https://hcservices.ecourts.gov.in/hcservices/ establish the means, by which, funds are generated by thesource. In other words, look to the "source of the source" - thecapability of the source to generate funds is an exercise, whichneeds to be carried. In the instant case, an exercise in thatbehalf was, in fact, carried out, which led to the conclusionthat each source identified by the Assessee did not have thenecessary wherewithal to provide funds to the Assessee. We arepersuaded to hold that in this case, additions have not beenmade based on mere suspicion, surmises and/or conjectures, asalleged by the Assessee. 16.Therefore, in our opinion, no question of law, arises forour consideration, much less a substantial question of law. 16.1.Thus, we find no reason to interfere with the judgementand order of the Tribunal. 17.The appeal is, accordingly, dismissed. However, thereshall be no order as to costs. Sd/- Asst.Registrar (J) /true copy/ Sub Asst. RegistrarTo 1.The Deputy Commissioner of Income-tax, Company Circle – IV (1), Chennai – 600 034. 2.The Income Tax Appellate Tribunal, 'B' Bench, Chennai. 3.The Registrar (Judicial) High Court of Madras, Chennai – 600 104. copy to:1.The Section Officer,Judicial Section,High Court, Madras. 2.The Section Officer,"F" Section,High Court, Madras.