The Commissioner Of Income Tax,Salary Circle V,Chennai-34 v. R.mallika

Dated : 17.06.2013 CoramThe Honourable Mrs.Justice CHITRA VENKATARAMANandThe Honourable Ms.Justice K.B.K.VASUKITax Case (Appeal) No.20 of 2010--- The Commissioner of Income Tax,Salary Circle V,Chennai-34. .. Appellant -vs- R.Mallika .. Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of theIncome Tax Appellate Tribunal, Chennai 'B' Bench dated 19.6.2009 in IT.(SS)A.No.79/Mds/2008. For appellant : Mr.T.R.Senthil Kumar,Standing counsel for IncomeTax Department For respondent : Mr.J.Ashokpathyfor M/s.Pass Associates JUDGMENT (The Judgment of the Court was made by CHITRA VENKATARAMAN, J.) The following substantial questions of law are raised by the Revenue in the present Tax Case Appealfiled as against the order of the Income Tax Appellate Tribunal, Chennai 'B' Bench dated 19.6.2009in IT.(SS)A.No.79/Mds/2008. "Whether on the facts and circumstances of the case, the Tribunal was right in finding that theassessee proved the source of deposit contrary to the law laid down in (2007) 292 ITR 682 2. This is a case of block assessment covering the period 01.04.1996 to 21.02.2003. It is seen fromthe facts narrated in the orders of the authority below that a search was conducted under Section132 of the Income Tax Act, 1961 in the case of one Shri.Singanamala Ramesh Babu and his fatherShri.S.Sathya Ramamurthy on 21.02.2003. One of the documents seized during the search indicatethat there was a sale of immovable property by one Kanakarathnamma, W/o.Shri S.SathyaRamamurthy. The said S.Kanakarathnamma sold 1/3rd share of her immovable property for a sum ofRs.22 lakhs (Rupees Twenty Two Lakhs only) to the assessee herein viz., Mallika. 3. On receipt of the information, the Assistant Commissioner of Income Tax sought for informationas regards the filing of the returns for the relevant assessment years. It was found that the assesseedid not disclose sufficient income to make an investment to the extent of Rs.22 lakhs. Thus, noticeunder Section 158BC was issued for the period 01.04.1996 to 21.02.2003 on 09.11.2005. 4. In response to this notice, the assessee filed return of income for the block period. As regards theinvestment in immovable property at 41, Giri Road, T.Nagar, Chennai, it was submitted that theassessee had purchased the property in the undivided share of 1/3rd for a sum of Rs.22 lakhs. Theother 2/3rd of the property was purchased by her daughter Smt.Hemalatha and her son-in-lawShri.J.Senthil Kumar, each of them investing Rs.22 lakhs each. The assessee contended that she hadsold her jewellery for a sum of Rs.5,70,095/- and also taken loan from her son-in-law and the balancewas out of her salary income and cash on hand as on the date of investment. 5. As regards the sale of jewellery, she had stated that the sale was through auction by GiriAuctioneers on 23.04.2002. The receipt given by M/s.Giri Auctioneers was submitted in support ofthe claim. On summons to the said auctioneers, it was deposed that he could not give anyinformation since he could not recollect whether he had dealt with Mrs.Mallika, the assessee or not.Thus, the claim of the assessee as regards Rs.5,70,095/- stood unproved and that the assessee hadnot taken any steps to produce Sri Lalith Kumar, who was incharge of Giri Auctioneers nor anyevidence let in regarding the genuineness of the auction said to have been conducted. 5. As regards the sale of jewellery, she had stated that the sale was through auction by GiriAuctioneers on 23.04.2002. The receipt given by M/s.Giri Auctioneers was submitted in support ofthe claim. On summons to the said auctioneers, it was deposed that he could not give anyinformation since he could not recollect whether he had dealt with Mrs.Mallika, the assessee or not.Thus, the claim of the assessee as regards Rs.5,70,095/- stood unproved and that the assessee hadnot taken any steps to produce Sri Lalith Kumar, who was incharge of Giri Auctioneers nor anyevidence let in regarding the genuineness of the auction said to have been conducted. 6. The Assessing Officer further pointed out that contrary to her assertion that she had given a sumof Rupees six lakhs by way of sale of jewellery, her son in law Senthil Kumar stated that the assesseehad given her jewellery to her daughter worth Rs.7 lakhs just before the registration, which weresold by him. The assessee, however, submitted that as on 31.03.1996, she was in possession ofjewellery worth about Rs.2,86,395/- and there were no silver articles. She also submitted a photocopy of daily viz.,. "Makkal Kural" dated 22.04.2002, where, there was an advertisement relating toauction of her jewellery and silver articles. The assessee was directed to produce other details so asto accept the genuineness of the auction. Even then, it was not forthcoming. Thus, a sum ofRs.5,70,095/- was added back to the total income of the assessee as on the date of investment madeby her in the purchase of immovable property i.e., on 24.04.2002. 7. The assessee submitted that her son-in-law contributed Rs.15 lakhs towards her investment inpurchase of her share of property. In this regard, a statement was recorded from her son-in-law,which may be usefully extracted herein for better understanding:- " ......Rs.15 lakhs was contributed by me at the time of registration. It may be noted that the DD hadbeen taken directly in the name of the seller from my IDBI SB Account No.005104000035033 on24.04.2002. It may be noted that the sum of Rs.15 lakhs given to her is not a loan given by me toher. " 8. Based on the above statement, the Assessing Officer also caused verification on various accounts. On the verification of the credit entries in the IDBI and other banks, it was found that payorders/DDs had been taken for making deposit into the bank accounts of J.Senthil Kumar during theperiod 02.03.2002 to 18.03.2002. The Assessing Officer pointed out that the credit entry have comefrom the parents, brothers, friends and employees of J.Senthil Kumar. A reading of the details givenshows that the assessee had also made cash payment to J.Senthil Kumar's account by Pay OrderNos. 421800, 421799, 846154 all dated 13.03.2002 for a sum of Rs.45,000/- each, the first two fromKarur Vysya Bank and other one from State Bank. 9. In response to the notice, the said Senthil Kumar appeared before the Officer and he was asked toexplain the various credit entries. On a question specifically put to Senthil Kumar, whether he hadrepaid the loan, he had answered that he had not repaid the loan. In order to verify the financialtransaction nature, notice was also issued to daughter of the assessee, who, however did notrespond to the notice, except to say through a letter dated 14.11.2007 that she was unable to explainher stand for various reasons. 10. The Assessing Officer found that the assessee had gifted the share of the property to herdaughter and that the son-in-law claimed that he had returned all the amounts too. In thebackground of these facts, the Income Tax Officer proposed to treat the investment in the propertyas unexplained. Thus, after hearing the assessee, the Officer passed the order of assessment apartfrom proposing penalty proceedings. 10. The Assessing Officer found that the assessee had gifted the share of the property to herdaughter and that the son-in-law claimed that he had returned all the amounts too. In thebackground of these facts, the Income Tax Officer proposed to treat the investment in the propertyas unexplained. Thus, after hearing the assessee, the Officer passed the order of assessment apartfrom proposing penalty proceedings. 11. Aggrieved by this, the assessee went on appeal before the Commissioner of Income Tax(Appeals), who pointed out that the assessee had produced materials explaining her source ofinvestment and that there could not be any addition at the hands of the assessee, viz., mother-in-law.Thus, on the evidence available before it, the Commissioner of Income Tax (Appeals) held that thereis no justification in making addition at the hands of the assessee and if at all any addition could bemade, it could be done only at the hands of the son-in-law. In so holding, the Commissioner ofIncome Tax (Appeals) set aside the assessment. 12. Aggrieved by the same, the Revenue went on further appeal before the Income Tax AppellateTribunal, who had confirmed the view of the Commissioner of Income Tax (Appeals) pointed out thatthe said Senthil Kumar had invested Rs.22 lakhs directly and had provided loan to his mother-in-lawfor purchase of share in the property. There are credit entries in his accounts. Since Senthil Kumarwas an assessee and also submitted before the Assessing Officer that the credits in his bank accounthad been offered before his Assessing Officer, nothing further was required to make addition at thehands of the assessee. Thus, the appeal filed by the assesseee was allowed on this aspect. 13. As regards the possession of jewellery and the sale of it, the Tribunal confirmed the view of theCommissioner of Income Tax (Appeals) deleting the addition holding that the assessee had produceda copy of the advertisement of the auction and receipts of the auction, thus, the assessment at thehands of the assessee for Rs.22 lakhs was set aside. Aggrieved by this, the Revenue is before thisCourt. 14. Although the issue herein would appear to be a question of fact found by the Income TaxAppellate Tribunal, yet, going through the assessment order, we find that the issue does not appearto be a simple one. As already seen in the preceeding paragraph, the assessee was stated to beworking as a Teacher in International Maritime Academy from the financial year 2001-02 to2005-06. Although the assessee was called upon to produce bill regarding salary and other details,except photocopies of Form 16, no materials were furnished. Apart from this fact, the claim of theassessee that part of the consideration came from the sale of jewellery also appear to be not true.The assessee took the stand that she had sold her jewellery in auction through M/s.Giri Auctioneers. There are no details that on 23.04.2002, auction was conducted. Notice was issued to the auctioneerin 2007, however, the auctioneer disclaimed sale or auction through their concern. The claim of theassessee in this regard merits to be tested on the specific question made on this. 15. The assessee's son-in-law submitted that the assessee had given jewellery to her daughter worthRs.7 lakhs before Registration. This is apart from the explanation given by the assessee that she wasin possession of jewellery worth Rs.2,86,395/-. The claim of the assessee on the sale of gold jewellerydoes not fit in with any of this explanation. The view of the Income Tax Appellate Tribunal based onthe advertisement of the auction and the receipt given by the auctioneer, by itself, would not provesubstantially the claim of the assessee as regards the sale of her jewellery. 15. The assessee's son-in-law submitted that the assessee had given jewellery to her daughter worthRs.7 lakhs before Registration. This is apart from the explanation given by the assessee that she wasin possession of jewellery worth Rs.2,86,395/-. The claim of the assessee on the sale of gold jewellerydoes not fit in with any of this explanation. The view of the Income Tax Appellate Tribunal based onthe advertisement of the auction and the receipt given by the auctioneer, by itself, would not provesubstantially the claim of the assessee as regards the sale of her jewellery. 16. As regards a sum of Rs.15 lakhs said to have been given by her son-in-law directly to the vendorof the assessee is concerned, there could be no inhibition on a person holding finance giving moneyto the vendor on behalf of the purchaser, yet, the details given in the assessment order, particularly,as regards the transactions of the son-in-law raised serious doubt on payment of the said amounts bythe said Senthil Kumar on behalf of the Mallika for purchase of the property. The reason being thaton 13.03.2002, the assessee herein viz., R.Mallika is stated to have deposited Rs.45,000/- each byway of three Demand Drafts separately into the account of Senthil Kumar. There is no explanation asregards this deposit by the assessee in the sworn statement for making such deposit. Quite apart,the deposition recorded from the assessee's son in law also raised doubts regarding the payment. 17. It may be seen that one of the questions posed to the son-in-law was that whether a sum of Rs.15lakhs was given as a loan, while originally he said no, immediately, he changed it and stated that itmight be considered loan without interest. On a specific question whether the loan was returned bythe assessee to Senthil Kumar, while stating that it was not returned, he continued that the assesseehad returned the share of property and gifted it to her daughter. Thus, the reading of the statementshows the unreliability of the claim made by the assessee as regards the receipt of money from herson-in-law. Even assuming that the mother had gifted the property to her daughter, the fact remainsthat the nature of the transaction between the assessee and her son-in-law, thus, not being madeclear, we find it difficult to accept the case of the assessee that she had borrowed a sum of Rs.15lakhs from son-in-law for the purpose of investing it in a property, which was later on returned to theson-in-law. There is absolutely no material to throw light on the assessee's son-in-law parting withthe said sum for and on behalf of the assessee. 18. In the circumstances, we have no hesitation in holding that the assessee had not discharged theburden as regards the source from which the investment had been made. In the circumstances, onfacts, we hold that the Income Tax Appellate Tribunal misdirected itself in accepting the case of theassessee, thereby confirming the order of the Commissioner of Income Tax (Appeals) that there areentries in the accounts of Senthil Kumar and that the credits in the accounts of Senthil Kumar wereconsidered by the respective Assessing Officer to make any further addition at the hands of theassessee on the sum of Rs.15 lakhs. We do not think that such a line of reasoning will satisfy therequirements of law in the matter of substantiating the claim on the addition under the head of"Unexplained Investment". In the circumstances, we have no hesitation in disturbing the finding offact by the Income Tax Appellate Tribunal as one not based on material and confirm the order of theAssessing Officer. Accordingly, the Tax Case Appeal stands allowed. No costs. nvsri To1. The Commissioner of Income Tax,Central III,Salary Circle, V,Chennai-32. The Commissioner of Income Tax (Appeals)121, Mahatma Gandhi Road,Chennai-343. The Income Tax Appellate Tribunal,Chennai Bench BChennai