TMI Blog2023 (1) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred the matter to the Revenue Officer, i.e, Tahsildar on communication from the Income-tax Department, all confirmed the transaction. It is pertinent to note that all the persons admitted have returned the money. Since the assessee has discharged all initial onus and assessee was asked to prove the source of debit entries, the assessee actually proved in the present case. In the case of DCIT vs. Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT ] held that the amount representing cash credits was not includable in the total income of the assessee as the assessee had discharged the initial onus and the assessee can be asked to prove the source of the source of credit in its books of accounts, which the AO failed to do so. In view of this finding and moreover these being only debtors who have returned their loan amount to the assessee and assessee has declared all these loan amounts in their books of accounts, which were never rejected by the Department and accepted in earlier years, now they cannot go back until that the source are not proved. Thus we are of the view that the debtors cannot be added u/s.68. The assessee has discharged the onus laid u/s.68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2010-11 u/s.143(3) r.w.s. 263 of the Act dated 12.03.2015 passed by the DCIT, Circle-1, Trichy. 2. The first common issue in ITA No.170 172/Chny/2022 for the assessment year 2010-11 2011-12 as regards to the order of CIT(A) confirming the action of AO in upholding the addition made by AO on account of unexplained cash credit u/s.68 of the Act for an amount of Rs.7,56,74,000/- for assessment year 2010-11 and Rs.1,98,00,000/- for the assessment year 2011-12. The relevant grounds raised by assessee in assessment year 10-11 read as under:- 2.1 The CIT(A) erred in upholding the addition of Rs.7,56,74,000/- as unexplained Cash Credits u/s.68 of the Income Tax Act. 2.2 The applicant having provided proper explanation and proof regarding the credits, the CIT(A) went wrong in confirming the addition made. 2.3 The appellant having submitted that the credits were loans received back, advanced earlier by him, the CIT(A) erred in rejecting the same based on assumptions and surmises. This makes the addition liable to be deleted in full. The relevant ground raised by assessee in assessment year 2011-12 read as under:- 2.1. The CIT(A) erred in upholding the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt opportunity to prove the sources for claim of cash credits introduced in the current account of the assessee in the books of accounts of Dhanalakshni Mini Bus business, the assessee's A/R could not submit any proof/supporting documents in support of cash credits of Rs. 7,56,74,000/- Hence, in the absence of proper documentary evidences/proof, the balance unexplained cash credits of Rs. 7,56,74,000/- are treated as income of the assessee u/s 68 of the Income-tax Act, 1961 for the financial year 2009-10 relating to the assessment year 2010-11, After discussion with the assessee's A/R, the assessment is completed as under: 3.1 Similarly in assessment year 2011-12, the AO noticed that there are cash deposits in current account maintained in the books of Dhanalakshmi Agencies amounting to Rs.1,14,00,000/- on various dates and another cash deposit in current account maintained with Dhanalakshmi Mini Bus to the extent of Rs.1,91,00,000/- crores during the financial year 2010-11. After considering the explanation of the assessee, accepted the explanation of the assessee to the extent of Rs.1,07,00,000/- and added the balance sum of Rs.1,98,00,000/- as unexplained cash credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income returned u/s 68. Therefore total addition u/s 68 comes to Rs.1,98,00,000/-. Aggrieved, in both the years, the assessee came in appeal before the CIT(A). 4. The CIT(A) after considering the submissions of the assessee, remand report submitted by the assessee, paper book and other evidences filed by the assessee confirmed the action of the AO by observing in para 6.1 to 6.3 of his order for assessment year 2010- 11 as under:- 6.1 While going through the affidavit and confirmation letters submitted by the appellant, I am of the view that all the papers were meticulously prepared in a mechanical way just as a evidence rather than bringing the true affairs of the event. No prudent person will believe that such loans were advanced without any guarantee or mortgage of any property. It may be appreciated that the lands at Perambulur District are not so fertile as in the case of Tanjore delta. If the contention of the appellant is acceptable, all the land owners who are doing agricultural activity at Perambulur District must be millionaire by this point of time. It is beyond imagination the debtors have repaid the loan by single installment by doing dairy activity with sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the appellant that the amount represents being the recovery of earlier debts is not acceptable. 5.9 The AO has brought out clearly that the persons said to have been received the loan from the appellant are persons of meagre means. It is considered that the report of the AO is crystal clear about the transactions upon which the loan amount was received is only a bogus claim and it is the method adopted by the appellant to bring his own unaccounted cash into main stream. 5.10 In this background, the grounds raised by the appellant upon this issue are hereby dismissed and the addition made u/s.68 of Rs.1,98,00,000/- are sustained. Aggrieved, in both the years, the assessee came in appeal before the Tribunal. 5. We have heard rival contentions and gone through facts and circumstances of the case. We have also perused the paper-book filed by assessee consisting of 1 to 345 pages and another paperbook consisting of pages 1 to 68. The assessee is an individual and deriving income from various business as enumerated by us in para 3 of this order like running petrol bunk, agricultural income, rent from hiring of JCB, doing transport business, diary business, salary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to have been borrowed and repaid to Karthiravan Remarks of the A.O 1. C. Karunanidhi(9) 1.21 80,000 1,00,000 1,80,000 3,00,000/- Average annual income is onyRs. 1,80,000/-. In the statement before the Thasildar, he has submitted that he has repaid the loan out of savings from the above income after meeting the family expenses, The size of the family, the average monthly expenses of the family, the expenses for untoward happenings in the family would definitely be bound to be there, which should have been met from this income only. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income is only Rs. 15000/- Out of this income hand to mouth existence would have been difficult, leave alone paying back the debt in lump sum amounting to Rs. 3,00,000/- Also, in the letter addressed to the Assessing Officer, this person has claimed to have obtained land in 2001 from Mr.Kathiravan whereas in the statement before the Thasildar, he has deposed that the loan has been obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year of obtaining loan has been given as 2002. 5. N. Mani (23) 0.10 55,000 1,00,000 1,55,000 4,00,000 This person has only 0.10 cents of land holding. Again from the quantum of annual income of Rs.1,55,000/- (monthly income works out to less than Rs. 13,000) this persons claims to have repaid Rs. 4,00,000/- out of his savings, after meeting his household expenses, medical expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. Before the A.O., the year of obtaining loan has been stated as 2004 in the letter submitted by this person, whereas before the Thasildar, the year of obtaining loan has been given as 2002. 6. N. Ambekar (27) - 50,000 1,00,000 1,50,000 4,00,000 There is no land holding. The labour charges claimed to have been earned by him is of course without any evidence and so also for earning from cow breeding. This person claims to have repaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome only. Also expense for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. the quantum of Rs. 4,25,000/- claimed to have been repaid in 2009 out of this meagre earnings is not practically feasible. . 10. R. Selvaraj (67) 1.71 50,000 1,00,000 1,50,000 4,00,000 From the meagre land holding and cow breeding, this person claims to have earned Rs. 1,50,000/- per annum which means a monthly income of Rs. 12,500/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has made savings and repaid a sum of Rs. 4,00,000/-. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 11. A. Kanagaraj (72) - 50,000 1,00,000 1,50,000 4,00,000 There is no land holding. The earning from cow breeding is without any evidence. For the labour charges of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated as 2003 in the letter submitted by this person, whereas before the Thasildar, the year of obtaining loan has been given as 2002. 15. R. Sevaraj (92) 1.41 50,000 1,00,000 1,50,000 3,50,000 From the meagre land holding and cow breeding, this person claims to have earned Rs. 1,50,000/- per annum which means a monthly income of Rs. 12,500/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has made savings and repaid a sum of Rs. 4,00,000/-. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 16. S. Sakthivel (5) 1.18 1,00,000 2,00,000 6,00,000 From the meagre land holding and cow breeding, this person claims to have earned Rs. 2,00,000/- per annum which means a monthly income of Rs. 16,600/-. From this petty amount, he claims to have taken care of his family expenses and other expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thil (123) 2.95 1,00,000 4,50,000 5,50,000 30,00,000 This person claims agricultural income of Rs. 1,00,000/- and Rs. 4.5 lakhs from cow breeding. From this total earning of Rs. 5.5 lakhs, he has stated that after meeting all the expenses includings the incidental expenses, has repaid Rs. 30 lakhs in 2009 to the Assessee. The amount is almost six times his average earnings. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 21 P. Paneerselvam (124) 0.42 1,00,000 5,00,0000 6,00,000 25,00,000 In this case also, earnings per annum is only Rs.6,00,000/-. Whereas he claims to have repaid Rs.25,00,000/- in 2009 to the assessee. The assessee in his statement before the Thasildar has submitted that he has repaid the said amount out of his savings. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 1,20,000 2,00,000 There is no land holding. This person earns from a Private Company and has no connection with agriculture. From this petty earnings of Rs.1,20,000/-, he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.2,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 41 T.Karthikeyan(122) ---- 1,40,000 1,40,000 2,00,000 There is no land holding. This person earns from a Private Company and has no connection with agriculture. From this petty earnings of Rs.1,40,000/- , he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.2,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 42 M.Rajamani(17) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have earned Rs.1,60,000/- per annum which means a monthly income of Rs.14,000/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.4,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 47 K.Kathavarayan(51) 0.23 60,000 1,10,000 1,70,000 4,00,000 From the meagre land holding and cow breeding, this person claims to have earned Rs.1,70,000/- per annum which means a monthly income of Rs.14,000/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has claimed to have made savings and repaid a sum of Rs.4,00,000/-. Also, expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 48 K.Angammal(39) 1.67 90,000 1,00,000 1,90,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cow breeding, this person claims to have earned Rs. 1,60,000/- per annum which means a monthly income of Rs. 4,00,000/-. From this petty amount, he claims to have taken care of his family expenses and other expenses and over and above that has made savings and repaid a sum of Rs. 4,00,000/-. Also expenses for maintenance of the cows like fodder expenses, medical expenses also would have been met from this income only. 53. T. Muthukannu (4) - - - - - The person has not source of earning. The person has deposed before the Thasildar that he has neither received any money nor returned any money from and to Mr.Kathiravan The Person has n source of earning. The person has deposed before the Thasildar that he has neither received any money nor returned any money from and to Mr.Kathiravan. 54. V. Devi(113) - 60,000 90,000 1,50,000 4,00,000 There is no land holding. Whatever income given is only labour charges received. There is no evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Capturing of land (Hectare) Annual Income from Land (Rs) Income from dairy Cow (Rs) Gross Income (Rs) 1. Mr. C. Karunanidhi (9) S/o. Chinnayan, Pudhunaduvalur Village, Perambalur Circle. 1.21.0 80,000 1,00,000 1,80,000 2. Mr. P. Senthilkumar, (12) S/o. Paramasivam Pudhunaduvalur Village, Perambalur Circle. 0.43.0 50,000 1,25,000 1,75,000 3. Mr. P. Sathyaseelan (13) S/o. Periyasamy Pudhunaduvalur Village, Perambalur Circle. - 60,000 (Agricultural Wages) 1,00,000 1,60,000 4. Mr. P. Ganesan (14) S/o. Ponnusamy Pudhunaduvalur Village, Perambalur Circle. 0.47.0 60,000 1,00,000 1,60,000 5. Mr. N. Mani (23) S/o. Nallusamy Pudhunaduvalur Village Perambalur Circle. 0.10.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 2,00,000 17. Mr. V. Jeyakumar (103) S/o. Veerappan Pudhunaduvalur Village Perambalur Circle. 0.60.5 1,00,000 1,00,000 2,00,000 18. Mr. R. Manogaran (111) S/o. Rengaraj Pudhunaduvalur Village Perambalur Circle - 70,000 (Agricultural Wages) 1,00,000 1,70,000 19. Mr. R. VijayaKumar (114) S/o. Rasu Pudhunaduvalur Village, Perambalur Circle. 1.21.0 90,000 1,00,000 1,90,000 20. Mr. M. Senthil (123) S/o. Manikkam Pudhunaduvalur Village Perambalur Circle. 2.95.0 (Land lease) 1,00,000 4,50,000 5,50,000 21. Mr.P.PaneerSelvam(124) S/o. Paramasivam Pudhunaduvalur Village Perambalur Circle. 0.42.0 1,00,000 5,00,000 6,00,000 22. Mr. K. Shivalingam (125) S/o. Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kathiravan regarding. Reference: 1. Summons dated 11.05.2017 issued by the Assistant Commissioner of Income Tax, Tiruchirapalli. 2. Letter No. N.K.A1/2032/2017 dated 15.05.2017 issued by the District Collector, Perambalur. 3. Summons dated 11.05.2017 issued by the Assistant Commissioner of Income Tax, Tiruchirapalli. 4. Letter No. N.K.A1/2032/2017 dated 19.05.2017, 04.06.2017 and 19.06.2017 issued by the District Collector, Perambalur. Based on the submissions made by Mr. KathiravanSrinivasan, residing in Perambalur District, Perambalur (South) Village, during the income tax proceedings, the land holding and income details of 159 persons were called for by the Assistant Commissioner of Income Tax by way of communication under reference no.1. In the list of persons mentioned in the communication under reference no.1, 27 persons had already been investigated and the consequent report dated 19.06.2017 had been forwarded. The details of income of 24 other persons mentioned in said list have been gathered through investigation and the details are as under; S. No . Name and Address Land held (in hec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, Perambalur District --- --- 1,50,000 (Private Company) 1,50,000 11. Mr.R.Nagaraj, S/o. Mr.Ramanathan, Pudunaduvalur village, Perambalur District --- 60,000 1,00,000 1,60,000 12. Mrs.M.Chitra (91), W/o. Manoharan,Pudunaduvalur village, Perambalur District --- 60,000 1,10,000 1,70,000 13. Mr.K.Karthik (137), S/o. Mr.Kannusamy, Perambalur (North) village, Perambalur District --- --- 1,20,000 (Private Company) 1,20,000 14. Mr.D.Karthikeyan (122), S/o.Mr.Devarajan, Ammapalayam Village, Perambalur District --- --- 1,40,000 (Private Company) 1,40,000 15. Mrs.K.Rajamani (17), W/o. Mr.Mookan, Pudunaduvalur village, Perambalur District --- 1,50,000 --- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Yours faithfully, Revenue District Collector, Perambalur. A copy is forwarded to the District Head, Perambalur for their information. A copy is forwarded to the Revenue Commissioner, Perambalur for their information. ___________________________ From Mr. S. Balakrishnan, M.A, Revenue District Collector, Perambalur. To Assistant Commissioner of Income Tax, Williams Road, Cantonement, Tiruchirapalli 620 001. N.K.A1/2032/2017 Date: 08.08.2017 Sir, Subject: Income Tax Perambalur District, Perambalur Circle, Perambalur (South) Village, report on income of Mr. S.Kathiravan regarding. Reference: 5. Summons dated 11.05.2017 issued by the Assistant Commissioner of Income Tax, Tiruchirapalli. 6. Letter No. N.K.A1/2032/2017 dated 15.05.2017 issued by the District Collector, Perambalur. 7. Summons dated 11.05.2017 issued by the Assistant Commissioner of Income Tax, Tiruchirapalli. 8. Letter No. N.K.A1/2032/2017 dated 19.05.2017, 04.06.2017 and 19.06.2017 issued by the District Collector, Perambalur. Based on the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsons that they have taken loans from the assessee and repaid these loans to the assessee back. The assessee took this plea before the AO and this fact is noted by the AO in his assessment order at page 4, vii Regarding the balance amount for Rs.7,56,74,000/-, the assessee s A/R claims that the amount represents the loan amounts received back from the various persons (Sundry debtors) living in and around Perambalur District. Originally, the assessee used to advance loan(s) especially to village/rural/poor people for the purpose of agricultural operations/purchase of agri.land and cows for their livelihood/welfare of their families for the past 10 years. As the assessee was in need of money to invest in current a/c of Dhanalakshmi Mini Bus, he collected the money back from the various parties to whom the amount of Rs.7,56,74,000/- advanced in the earlier year. 5.3 According to AO, the assessee is unable to prove the identity of the debtors and their creditworthiness and hence, it was added. As noted by us that the CIT(A) also confirmed the addition by stating that all sundry debtors said to have received loans from the assessee are persons of meager means and he considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt of Madras in the case of S. Hastimal vs. CIT, [1963] 49 ITR 273 has held that inability of the Department to verify the explanation offered is not a sufficient cause for rejection of the explanation. We are in agreement with the Department that it is not correct to say that the AO is not entitled to reject the explanation without some other positive evidence falsifying the assessee s case. The true view is that, while the AO is not bound to accept as true any possible explanation which the assessee may put forth but he cannot also especially reject the assessee s explanation without any enquiry or reason. Since the assessee has discharged all initial onus and assessee was asked to prove the source of debit entries, the assessee actually proved in the present case. The Hon ble Gujarat High Court in the case of DCIT vs. Rohini Builders, (2002) 256 ITR 360 held that the amount representing cash credits was not includable in the total income of the assessee as the assessee had discharged the initial onus and the assessee can be asked to prove the source of the source of credit in its books of accounts, which the AO failed to do so. In view of this finding and moreover these being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 and will decide the issue. 7. Brief facts are that the AO during the course of assessment proceedings noticed that the assessee has sold lands to Srinivasan Charitable and Educational Trust for a total consideration of Rs.68.40 lakhs for the assessment year 2010-11 and to Srinivasan Health and Educational Trust and Srinivasan Charitable and Educational Trust i.e.,these two trusts for a sum of Rs.1.35 crores for the assessment year 2011-12. The assessee is one of the managing trustees in both the trusts. The assessee before the AO in both the years contended that these lands were agricultural lands and hence, not liable for capital gains in view of the provisions of section 2(14) of the Act. But the AO noted that the lands were purchased by assessee, who is also one of the trustees and these lands were purchased during the last 2-3 years and now, sold to these two trusts in assessment year 2010-11 2011-12 for consideration as noted above. The AO treated these lands as business asset and held that the assessee is doing business as adventure in the nature of business or trade and hence, he assessed the same to short term capital gains. The CIT(A) exactly on identical facts d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears is allowed. 11. The next issue in ITA No.172/Chny/2022 for assessment year 2011-12 is as regards to the order of CIT(A) confirming the action of the AO in making addition of unexplained credit of Rs.3,00,00,000/- being amount received temporarily from the creditor as unexplained cash credit u/s.68 of the Act. For this, assessee has raised the following ground Nos.4.1 4.2:- 4.1. The CIT(A) grossly erred in confirming the addition of Rs.3,00,00,000/- as unexplained credit which is nothing but amount temporarily received from a creditor. 4.2. The appellant having proved the transactions to be genuine in nature as the same had taken place via banking channel, the CIT(A) erred in confirming the addition in toto. 12. We have heard rival contentions and gone through facts and circumstances of the case. We noted that only sundry credit claimed by assessee is in the name of Murugan Traders from whom the assessee has obtained loan of Rs.3 crores. The AO required the assessee to file confirmation and assessee filed confirmation of Murugan Traders having Permanent Account NoAATFM1756G. The AO deputed an Inspector but since at the given address, the person was not available, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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