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2016 (1) TMI 717 - ITAT CHENNAI

2016 (1) TMI 717 - ITAT CHENNAI - TMI - Unexplained deposits in the assesse’s bank account u/s.68 - AO arrived at the decision to make addition in the hands of the assessee because all the 4 prospective buyers had not filed the return of income and substantiated their sources of income for the amount advanced to the assessee - CIT(A) deleted the addition - Held that:- From the facts of the case it is evident that the assessee had received cash from proposed buyers of the flat and he has also sub .....

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flats.

iv) The joint developer Sri M.Raja Marrison also confirmed to the transactions.

We failed to understand as to why the Ld. Assessing Officer wants to make addition in the hands of the assessee when all the four prospective buyers have confirmed that they advanced the cash to the assessee. Failure on the part of the buyers of the flat to establish their source of income cannot be made as the reason to make addition in the hands of the assessee without out examining th .....

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ai dated 31.07.2014 in ITA No.1696/2013-14 passed under Sec.143(3) read with section Sec. 250 of the Act. 2. The Revenue has raised three elaborate grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT (A), who deleted the addition of ₹ 50,15,000/- on account of unexplained deposits in the assesse s bank account u/s.68 of the Act. 3. The brief facts of the case are that the assessee is an individual, a retired State Government emp .....

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respect of savings bank account held jointly by him with Sri M.Raja Marrison in Axis Bank Ltd. On perusal of the bank statement it was found there were cash deposits to the tune of ₹ 51,55,000/- during the financial year 2009-10. It was explained by the assessee that he owned a housing site in Tondiarpet, Chennai of 1250 sq. ft in the joint name with his wife Mrs.S.Inbavalli which he stated to have purchased on 02.03.2005 for ₹ 4/- lakhs. The assessee and his wife Ms.S.Inbavalli dec .....

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d buyers of the flats viz. i) Mr.V. Senthil Kumar, ii) J. Muthu Madesh iii) Mr.G.Kamal Kannan, iv) L.Karthik were also produced by the assessee before the Ld. Assessing Officer. But the Ld. Assessing Officer rejected the submissions of the assessee and made addition of ₹ 50,15,000/-being the cash deposited in the bank account due to the following reasons:- 1. The confirmation letter from the four persons addressed to the assessee clearly state that they had advanced the sum of ₹ 80 l .....

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wife Mrs.S.Inbavalli who held the account jointly with M.Rajamarrison in Axis Bank Ltd., with the Account No. 082010100484411. Examination of the bank statement of the assessee s wife reveals that there was cash deposit of ₹ 30,50,000/- only which leaves a shortfall of ₹ 9.5 lakhs. 3. It is clearly evident that the submissions by the assessee and the actual facts contradict each other. The assessee as well as the confirmation letters state that the entire sum of ₹ 80 lakhs was .....

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. iMuthu Madesh, Sri. G.Kamalakannan & SrI. L.Karthik appeared and furnished letters from the above persons alongwith POA. The replies from the four persons seem to be very similar. All of them had stated that they had advanced it from their own sources and parental sources and they had not flIed Returns of Income as their income had not exceeded the taxable limits in any of the year. No documentary evidence was filed such as the agreement copy, copy of receipt for the advance given, source .....

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also been returned in cash and not in cheque/DD/e-transfer. No urgency had been established by the assesseee in receiving or repaying the sum in cash. 7. the submissions by the assessee and the actual facts contradict each other. The assessee as well as the confirmation letters state that the entire sum of ₹ 80 lakhs was withdrawn and returned during the year itself whereas the bank statement of the assessee reveals that as against the deposit of ₹ 51.55 lakhs, a sum of ₹ 38.6 .....

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nced the sum had given detailed working of date wise receipt and date wise payment and furnished the copies of receipts inspite of the several opportunities given. 8. The proposed construction and sale of flats of 1000 Sq.ft. each at an estimated sale price of ₹ 4000/- per sq.ft. works out to ₹ 40 Iakhs. The question whether anyone would make an advance of 50% of the total cost of the flat to a novice builder even before the plan approval is obtained or prior to the commencement of c .....

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g the FSI permissible, the narrow frontage on the road etc., the proposal of construction of 4000 sq.ft. area in four floors on an 1250 sq.ft plot appears to be a piece of imagination rather than practically viable. As per the Development Control Rules, 2002 for Chennai Metropolitan Area, no development shall be made unless a site is approved for that development by the Authority(Rule. 3(c). Rule 5(1) states that there must be minimum front set back of 1.5 meteres and 1.5 meters as rear set back .....

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the four persons in response to the summons u/s 131 seem to be very similar. All of them had stated that they had advanced it from their own sources and parental sources and neither they nor their parents had filed the Returns of Income as their income had not exceeded the taxable limits in any of the year. No substantial evidence had been furnished for receiving the advance or return of the said advance. The credibility of the statements filed by these individuals are in doubt for the following .....

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ance sum of ₹ 40 lakhs was received by his wife whereas the Memorandum of Understanding furnished by the assessee was only between the assessee and Sri N.Rajamarrison. But there exists 2 separate joint accounts between the assessee and Sri N.Raja Marrison and Ms. Inbavalli and Sri N.Raja Marrison. 11. The assessee vide his reply submitted on 19/03/13 had stated that Sri.N.Raja Marrison the joint account holder had agreed to declare 8% of the above receipts in his personal assessment for AY .....

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oes not belong to him. 5. On appeal, the Ld. CIT (A) deleted the addition by observing as under:- 4.1.4 It is also important to mention here that the assesseeis an individual and has no business activities as such. There were no investments/purchases made by the assessee during the financial year 2009-10, at-least to the knowledge of the Revenue. In such a case, there was no need for the assessee to borrow money from others or bring any amount into the bank accounts. Further as could be seen fro .....

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aterialize the assessee and/or Shri N Raja Marrison withdrew the amounts and used repayments of the advances received. Thus the assessee s joint bank account with Shri N Raja Marrison showed a balance of ₹ 43,405/- only as on 3 1.03.2010. In the case of the joint account between Shn N Rana Moarrison and assessee s wife, the amount were also withdrawn and repaid to the prospective buyers but a little latter in April/ May 2010. Hence the joint account showed some balances in that account. 4. .....

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nd lower income group people reside. Hence people prefer small houses (flats). In this type areas only known persons buy the houses and amounts paid by way advances sometimes will be very high, amounting to almost the total value, depending upon the situation. As all the persons are kwon to each other, everything goes by trust rather than written agreements. Hence the advances received in such cases cannot equate with the commercial practices. 4.1.6 Further, in the above types of situations the .....

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f the flats are not assessed to Income Tax, cannot taken as an yardstick to dismiss the assessee s claims. The next observation of the Assessing Officer is that Shri N Raja Marrison, the proposed joint developer, is neither qualified nor experienced in the construction activity. For small constructions, like the present case, no experience/qualification is required. Hence no adverse inference can be drawn in this regard. 4.1.8 It is also important to mention here that Shri N Raja Marrison, the p .....

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ri N Raja Marrison also accepted the above advances of ₹ 80 lakhs as advance receipts of his business (construction) activity and estimated income thereon @ 8% and offered to tax. This fact also proves that the assessee s claim of receipt advances of ₹ 20 lakhs each from four prospective buyers and their deposits in to the bank account is genuine. 4.1.9 In view of the above reasons, the sources of income for the above cash deposits into the assessee s joint bank account is the advanc .....

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