T.c.a v. Income Tax Officer, Ward – 1(3), Salem

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 28.03.2022CORAM : THE HONOURABLE MR.JUSTICE R.MAHADEVANANDTHE HONOURABLE MR.JUSTICE J.SATHYA NARAYANA PRASAD T.C.A. No. 89 of 2022 Smt.S.Sakunthala SivamNo.42, Hari PalaceSundaram Colony,Pallapatti,Salem – 636 005. ...Appellant/AppellantVersus Income Tax Officer,Ward – 1(3),Salem. ...Respondent/Respondent Tax Case Appeal filed under Section 260 (A) of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal 'A' Bench, Chennai dated 16.09.2021 passed inI.T.A.No.2724/Chny/2016 and against the order of theCommissioner of Income Tax (Appeals), Salem dated 23.06.2016made in ITA.No.72/2014-15 and against the order of the IncomeTax Officer, Ward I (3), Salem dated 21.03.2014 made inPAN.No.BDLPS8621L for the Assessment year 2011-12. For Appellant :Mr.R.JanakiramanFor Respondent :Mrs.V.Pushpa,Junior Standing Counsel JUDGMENT(Judgment of the Court was delivered by R.MAHADEVAN, J.) This is an assessee's appeal, filed against the order dated16.09.2021 passed by the Income Tax Appellate Tribunal, Chennai'A' Bench, in ITA No.2724/CHNY/2016 relating to the assessmentyear 2011-12. 2.The case in brief is as follows:The appellant, an individual in status, was deriving income https://hcservices.ecourts.gov.in/hcservices/ on commission basis from real estate business. For theassessment year in question, she filed her return of income on06.02.2012 admitting a total income of Rs.4,44,750/-, which wasinitially processed under section 143(1) of the Income tax Act,1961 (in short, 'the Act'). Subsequently, notice under section143(2) of the Act, dated 31.07.2012 was issued, which was servedon the appellant on 17.08.2012. In response, the relevantdetails were furnished by the appellant to the respondent.Thereafter, an assessment order under section 143(3) of the Act,dated 21.03.2014 came to be passed, making addition ofRs.25,00,000/- as unexplained investment under section 69 of theAct, on the premise that the cash deposits in the Savings bankaccount do not represent the business receipts claimed to beadmitted under section 44AD, for which, the appellant wasrequired to prove the sources for the peak cash balance ofRs.25,00,000/-, but she failed to do so. Challenging the orderof assessment, the appellant preferred an appeal before the CIT(Appeals) Salem, who by order dated 23.06.2016, dismissed theappeal, after having held that the appellant has not producedevidence for the cash deposits made in the bank account. Shecarried the matter further to the Income Tax Appellate Tribunal,which also dismissed the appeal filed by her, by the order dated16.09.2021. Therefore, the appellant / assessee is before thiscourt with this tax case appeal. 3.The appellant has suggested the following substantialquestions of law for consideration of this court:“(i)Whether the Appellate Tribunal was correct inlaw in dismissing the appeal without due regard to thestatutory mandate of section 44AD of the Income-taxAct? (ii)Whether the Appellate Tribunal was correct inlaw in holding that the source of a cash deposit is tobe explained, although the amount forms part of thetotal credits considered for applying the presumptiverate of tax under section 44AD of the Act.” 3.The appellant has suggested the following substantialquestions of law for consideration of this court:“(i)Whether the Appellate Tribunal was correct inlaw in dismissing the appeal without due regard to thestatutory mandate of section 44AD of the Income-taxAct? (ii)Whether the Appellate Tribunal was correct inlaw in holding that the source of a cash deposit is tobe explained, although the amount forms part of thetotal credits considered for applying the presumptiverate of tax under section 44AD of the Act.” 4.It is the main contention of the learned counsel for theappellant that all the authorities below failed to notice thatonce the income has been returned under section 44AD of the Act,there was no mandate under the statute for the department toquestion the source for each and every entry that formed thebasis to arrive at the gross income for the purpose of applying8% rate. It is further contended that the appellant had beenearning income from real estate business from the assessmentyear 2007-08 onwards and the records produced by her were verymuch available with the respondent. However, the respondenterred in concluding that the cash deposits in the SB account donot represent the business receipts as admitted under section44AD and that, the source for the peak cash balance of Rs.25,00,000/- was not proved by the appellant and accordingly,made addition of the said amount as unexplained investment undersection 69 of the Act. Without properly appreciating thesubmission of the appellant, the conclusion so arrived at by therespondent was also affirmed by the appellate authorities andhence, the same is liable to be set aside. The learned counselin support of his contention, placed reliance on a decisionrendered by Punjab and Haryana High Court in the case of CIT v.Surinder Pal Anand [(2011) 242 CTR 61, wherein it was held asfollows: “8.Once under the special provision, exemption frommaintaining of books of account has been provided andpresumptive tax @ 8% of the gross receipt itself is thebasis for determining the taxable income, the assessee wasnot under obligation to explain individual entry of cashdeposit in the bank unless such entry of cash deposit inthe bank unless such entry had no nexus with the grossreceipts. The stand of the assessee before Commissioner ofIncome-tax (Appeals) and the ITAT that the said amount ofRs.14,95,300/- was on account of business receipts had beenaccepted. Learned counsel for the appellant with referenceto any material on record, could not show that the cashdeposits amounting to Rs.14,95,300/- were unexplained orundisclosed income of the assessee. 9. In view of the above position, we are unable to holdthat any substantial question of law arises in this appeal”With these submissions, the learned counsel sought to allow thisappeal by setting aside the order of the Tribunal. 5.On the other hand, the learned counsel appearing for therespondent submitted that after analysing the entire facts andcircumstances of the case in the light of the materials placed,the authorities below rightly held that the sources of thedeposits in question, were not properly explained by theappellant. Hence, the order impugned herein warrants nointerference at the hands of this court. 6.Heard both sides and perused the documents enclosed in thetyped set of papers. 7. The short question that arises for consideration hereinis relating to the unaccounted credit of Rs.25,00,000/- in thesavings bank account of the appellant. According to theappellant, the said sum is to be taxed at 8% as per section 44ADof the Act, as the same is her business receipts. However, theassessing officer rejected the claim of the appellant andassessed the same under section 69 of the Act, by treating it asunexplained investment, with the following findings: “5.1.The assessee has initially claimed certainsources for the peak deposit of Rs.25,00,000/- and 6.Heard both sides and perused the documents enclosed in thetyped set of papers. 7. The short question that arises for consideration hereinis relating to the unaccounted credit of Rs.25,00,000/- in thesavings bank account of the appellant. According to theappellant, the said sum is to be taxed at 8% as per section 44ADof the Act, as the same is her business receipts. However, theassessing officer rejected the claim of the appellant andassessed the same under section 69 of the Act, by treating it asunexplained investment, with the following findings: “5.1.The assessee has initially claimed certainsources for the peak deposit of Rs.25,00,000/- and when she was confronted with the possibility of hersources being discredited in view of the facts andpropositions expounded in this office letter dated12.03.2014, she has resorted to this new theory asan afterthought to cover up the obvious lack ofsources. 5.2. The assessee vide her letter dated Nilreceived on 06.03.2013 initially stated that hernature of Business is “Spoken English Coaching ClassProfession” and later in her letter dated 17.03.2014she has stated that she has done “Real EstateBusiness”. If the assessee was carrying on “SpokenEnglish Coaching Class”, she would not be eligibleto admit income u/s 44AD as this would be in thenature of profession. If on the other hand, as theassessee claimed later, she is engaged in “RealEstate Business”, there should be records for thepurchase and sale of immovable property which wouldinevitably have to be maintained. In view of thediverging stands taken by the assessee, there is noway of ascertaining the actual nature of businessand its eligibility under the provisions of section44AD.” The order of assessment passed by the assessing officer wasconfirmed by the first appellate authority as well as by theTribunal. Therefore, this tax case appeal by the appellant /assessee. 8.There is no dispute with regard to the legal position thatSection 44AD of the Act was inserted by Finance Act, 1994 witheffect from 01.04.1994. Sub-section (1) of Section 44AD clearlyprovides that where an assessee is engaged in the business ofcivil construction or supply of labour for civil construction,income shall be estimated at 8% of the gross receipts paid orpayable to the assessee in the previous year on account of suchbusiness or a sum higher than the aforesaid sum as may bedeclared by the assessee in his return of income notwithstandinganything to the contrary contained in Sections 28 to 43C of theAct. This income is to be deemed to be the profits and gains ofthe said business chargeable of tax under the head “profits andgains” of business. The said provisions are applicable where thegross receipts paid or payable does not exceed Rs.40 lakhs. 9.However, it is evident from the records that the appellantdid not prove her nature of business and the source of credit ofRs.25,00,000/-; and she put forth different stand before theauthorities below. Though the learned counsel for the appellantraised a plea that the appellant was represented by an IncomeTax Practitioner, who did not properly represent the case beforethe respondent and failed to give the details with regard to the credit in her savings bank account and explain the sources ofcredit of Rs.25,00,000/- in a proper manner, this court is notinclined to accept the same, in view of the categorical findingrendered by the appellate authorities, while dismissing theappeals filed by the appellant, to the effect that the appellantfailed to co-relate the source of cash deposits. For betterappreciation, the relevant passage of the orders passed by theappellate authorities is extracted below: First Appellate Authority credit in her savings bank account and explain the sources ofcredit of Rs.25,00,000/- in a proper manner, this court is notinclined to accept the same, in view of the categorical findingrendered by the appellate authorities, while dismissing theappeals filed by the appellant, to the effect that the appellantfailed to co-relate the source of cash deposits. For betterappreciation, the relevant passage of the orders passed by theappellate authorities is extracted below: First Appellate Authority “6. The assessee has been giving differentexplanation at different times regarding the sourcesof Rs.25,00,000/-. However, the assessee has notproduced any evidence in support of the claims. TheAuthorised Representative has requested that theentire amount may be treated as the business turnoverof the assessee as claimed in the Return of Incomefiled by the assessee. The question of cash depositwas a subject matter of AIR information based on whichthe Assessing Officer had called for details. Inresponse to the query by the assessing officer, theassessee has made a claim that the amount ofRs.12,45,000/- was her own accounted money andRs.12,55,000/- was cash gift received from here NRIson and her husband. However, no evidence wasproduced & hence, the assessing officer made theadditions. The assessee and her authorizedrepresentative are unable to produce any evidence insupport in their claims even during the proceedingsbefore me. Therefore, I do not find any reason tointerfere with the Assessment Order. Hence, thisground of appeal is dismissed.”Income Tax Appellate Tribunal “7. We heard the rival submissions and gonethrough the relevant material. Though, the assesseeadmitted the income u/s. 44AD, with regard to thesources of cash deposits made in the bank account,initially, she submitted that her nature of businessof Spoken English Coaching Class Profession and gavecertain sources for the cash deposits made on18.10.2010 and explained the sources for the cashdeposits made on 21.10.2010 as extracted, supra. Whenthe AO accepted part of her explanation and requiredthe assessee to prove the sources of the remainingdeposits, the assessee took a differed stand andcanvassed that her income is from real estate businessand it is covered u/s.44AD etc. However, she has notlet any material/evidences before the lowerauthorities to prove that she was in the real estatebusiness. It is clear that the assessee has beeninconsistent about the nature of sources of the impugned cash credits. She has not let in anymaterial/evidence either before the lower authoritiesor before us to establish that the nature of heractivities are falling within the realm of businessetc and the impugned transactions are part and parcelof her turnover etc but for a fact that she was atrustee in a school which was brought on recordthrough an enquiry. Therefore, the sources of theimpugned deposits were not explained by the assessee.Further, the assessee has not dislodged the findingsrecorded by the AO on the inconsistencies in herstand, supra.” 10.In view of the above, this court is of the opinion thatthere is no question of law much less substantial question oflaw arisen for consideration herein. Hence, this tax case appealdeserves to be dismissed and is accordingly, dismissed. Nocosts. mrr To 1. The Income Tax Appellate Tribunal 'A' Bench, Chennai. Chennai. 2. The Commissioner of Income Tax (Appeals) No.3, Gandhi Road, Salem -7. No.3, Gandhi Road, Salem -7. 3. The Income Tax Officer, Ward – 1(3),Salem. Ward – 1(3),Salem. BR(CO)RGA(06/05/2022)