Madras High Court
Shri.T.Chinnadurai vs The Income Tax Officer on 8 March, 2021
TCA.No.34 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 08.03.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
Tax Case Appeal No.34 of 2019
Shri.T.Chinnadurai ...Appellant
Vs
The Income Tax Officer,
Non Corporate Ward - 15(1),
Chennai. ...Respondent
APPEAL under Section 260A of the Income Tax Act, 1961 against
the order dated 10.07.2018 in I.T.A.No.1426/Chny/2017 passed by the
Income Tax Appellate Tribunal, 'C' Bench, Chennai for the assessment year
2012-13.
For Appellant : Mr.A.S.Sriraman
For Respondent : Mr.J.Narayanasamy, SSC
JUDGMENT
(Delivered by T.S.SIVAGNANAM,J)
This appeal, filed by the assessee under Section 260A of the
Income Tax Act, 1961 (for short, the Act), is directed against the order dated
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TCA.No.34 of 2019
10.07.2018 in I.T.A.No.1426/Chny/2017 passed by the Income Tax
Appellate Tribunal, 'C' Bench, Chennai ('the Tribunal' for brevity) for the
assessment year 2012-13.
2. The appeal was admitted on 18.01.2019 to decide the following
substantial questions of law:
"1. Whether the provisions of Section 68 of
the Act would empower the respondent/the
Assessing Officer to go into the source of the
capital credited in compiling the financial
statements of the earlier Assessment Years and
filed along wi th the respective returns of income
within the prescribed time limit under the statute
in finalizing the assessment of the subsequent
year, namely, the Assessment Year under
consideration for making the addition of the
opening capital taken from the initial earlier
Assessment Year i.e., 2002-03 as unexplained with
a view to tax such sum in the computation of
taxable total income? and
2. Whether the Appellate Tribunal is correct
in sustaining the assessment of the opening
capital as on 1.4.2003 in the assessment order for
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TCA.No.34 of 2019
the Assessment Year 2012-13 despite the
production of complete details of the capital
account maintained right from 1.4.2003, which
proved the perversity in recording the findings of
facts?"
3. We have elaborately heard Mr.A.S.Sriraman, learned counsel
appearing for the appellant-assessee and Mr.J.Narayanasamy, learned Senior
Standing Counsel appearing for the respondent-Revenue
4. The only issue which falls for consideration is whether the
Tribunal was right in reversing the findings rendered by the Commissioner
of Income Tax (Appeals) [CIT(A)], in respect of a sum of Rs.1,02,06,929/-,
which was treated as unexplained cash credit.
5. The Assessing Officer had completed the assessment under
Section 143(3) of the Act by order dated 30.03.2015 holding that the
assessee has failed to substantiate that the capital amount of
Rs.1,02,06,929/- has not been actually accrued in the year in which it was
shown as capital for the first time in the balance sheet for the financial year
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TCA.No.34 of 2019
FY 2011-12. Therefore, the Assessing Officer proceeded to hold that there is
nothing to automatically presume that the said sum was actually available in
the earlier period as sought to be claimed by the assessee. Thus, on account
of inability of the assessee to identify the source and quantify the amount of
capital on the basis of substantiative fact, the said amount was treated as
unexplained credit and assessed to tax under Section 68 of the Act.
6. The assessee preferred appeal before the CIT(A), who found
the case of the assessee to be acceptable and accordingly deleted the
addition. The CIT(A) held that the foremost thing that is to be noted is
whether the said amount was ever introduced in the form of cash in the
books of accounts of the assessee during the relevant year under
consideration and whether it was deposited in the bank account of the
appellant in that relevant year. Taking note of this fact, the CIT(A) observed
that if the same is not there, then the taxability of something which is not
existing does not arise. Further, the CIT(A) held that as the balance sheet
was drawn for the purpose of bank loan, the capital formulation in the
balance sheet was based on the assets and liabilities held by the assessee
prior to the relevant assessment year under consideration. Thus, the CIT(A)
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TCA.No.34 of 2019
held that the balance sheet may not present exact and correct facts and
figures. Therefore, any reliance on these facts and figures would result in
incorrect assessment of taxable income. Therefore, the CIT(A) concluded
that there was no unexplained cash credit available with the assessee during
the year under consideration and the same could have been taxed under
Section 68 of the Act.
7. The Revenue preferred appeal as against the said finding before
the Tribunal as well with regard to other issues, which was held in favour of
the assessee. The Tribunal accepted the stand taken by the Revenue and in
fact agreed with the observation made by the Assessing Officer that the
assessee was unable to substantiate before the Assessing Officer through
any evidence that the sum of Rs.1,02,06,929/- represented cash in hand,
value of food grain stock and value of agricultural produce. Aggrieved by
such finding, the assessee is before us by way of this appeal.
8. The argument of the Revenue before us is that the order passed
by the CIT(A) is absolutely devoid of any reasons and the CIT(A) has
merely accepted the stand taken by the assessee without discussing the
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TCA.No.34 of 2019
correctness of the stand taken by the assessee and whether the assessee was
able to establish that there was no unexplained cash credit.
9. On a perusal of the appeal papers filed before the CIT(A), we
find that it may not be a case where the assessee has not produced any proof
to substantiate their stand. In fact, in the appeal, they have stated that the
sum of Rs.1,02,06,929/- was not introduced by the assessee either in the
form of cash or bank during the previous year relevant to the assessment
year 2012-13. In this regard, a working was given as to how a sum of
Rs.1,18,42,598/- has been arrived at as opening capital of the assessee for
the assessment year 2003-04. It was further stated that out of the sum of
Rs.1,18,42,598/-, which represents the opening balance, the land holdings at
cost and the bank balance as on 31.03.2003 were reduced to arrive at the
sum of Rs.1,02,06,929/- for invoking the provisions of Section 68 of the
Act. Further, it was stated that the alleged cash credit treated as unexplained
under Section 68 does not belong to the year in question, but relates to the
assessment year 2004-05 and the statutory presumption that the said sum is
treated as income of the previous year is not factually applicable.
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TCA.No.34 of 2019
10. The assessee produced a photostat copy of the return of
income filed by it for all the assessment years i.e., from 2003-04 to 2010-11
along with computation of income for all the years in the form of annexure
to the written submissions. The appellant also submitted photostat copies of
the bank statements starting from 01.04.2002 to 31.03.2010 as annexures
along with the written submissions. These facts appear to have weighed in
the mind of the CIT(A) for granting relief to the assessee. The Revenue
alleged in paragraph 16 of the order of CIT(A) dated 15.02.2017, sufficient
reasons have not been recorded. But, the Revenue would not be right in
contending that the assessee never offered an explanation in spite of this
alleged cash credit. Probably, if the CIT(A) had recorded its opinion upon
perusal of the records placed in the form of annexures, in all probabilities,
the Revenue would have been on appeal before us and not the assessee.
11. In any event, considering the fact that the assessee is an
individual and also taking note of the fact that there is an explanation
offered by the assessee, this Court is of the view that the matter can be
remanded back to the CIT(A) for fresh consideration of the explanation
offered by the assessee in respect of the alleged cash credit of
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TCA.No.34 of 2019
Rs.1,02,06,929/- and pass a speaking order on merits and in accordance
with law.
12. For the above reasons, the Tax Case Appeal is allowed and the
order passed by the Tribunal is set aside and the matter is remanded back to
the CIT(A) for a fresh consideration on the above mentioned issue also.
Consequently, the substantial questions of law are left open. No costs.
(T.S.S.,J.) (R.N.M.,J.)
08.03.2021
Index: Yes/No
Internet:Yes/No
hvk
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TCA.No.34 of 2019
To
1. The Income Tax Appellate Tribunal,
Madras 'C' Bench, Chennai.
2. The Commissioner of Income Tax (Appeals)-15,
No.121, Mahatma Gandhi Road,
Nungambakkam, Chennai - 600 034.
2. The Income Tax Officer,
Non Corporate Ward - 15(1),
Chennai.
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TCA.No.34 of 2019
T.S.SIVAGNANAM,J
AND
R.N.MANJULA,J
hvk
TCA.No.34 of 2019
08.03.2021
https://www.mhc.tn.gov.in/judis/
