Vikas Awasthy, Judicial Member - These eighteen appeals have been filed by the Revenue in the case of five assesses, for the Assessment Years (AYs) 2004-05 to AY. 2009-10. The assessees have also filed cross-objections in the appeals of the Revenue, impugning the findings of CIT(Appeals), upholding the validity of re-assessment proceedings. ITA No.1492/2013 relevant to the AY.2004-05 has been filed in the case of Shri P.D. Dinakaran J. ITA Nos.1857 to 1859/2013 for the AYs.2007-08 to 2009-10 have been filed by the Revenue in the case of Canaan Gardens Pvt. Ltd., ITA Nos.1860 to 1862/2013 for the AYs.2007-08 to 2009-10 have been filed by the Revenue in the case of Amudham Gardens Pvt. Ltd., ITA Nos.1863 to 1865/2013 for the AYs.2007-08 to 2009-10 have been filed by the Revenue in the case of Amirtham Gardens Pvt. Ltd., and ITA Nos.1866 to 1868/2013 for the AYs.2007-08 to 2009-10 have been filed by the Revenue in the case of M/s. Dear Lands India Pvt. Ltd. ITA No.1971 to 1975/2013 for the AYs.2004-05 to 2009-10 have been filed by the Revenue in the case of Dr. K.M. Vinodini Dinakaran, W/o. Shri P.D. Dinakaran. It is alleged that in all the aforesaid companies Shri P.D. Dinakaran J. & his family members are interested.
Since, in all the appeals, common and inter-related issues are involved, all the appeals of Revenue and the cross-objections by the assessees are taken up together for adjudication. As the facts in all the appeals are similar, for the sake of convenience, the same are taken from ITA No.1492/2013.
2. The assessee - Shri P.D. Dinakaran, filed his return of income for the AY.2004-05 on 02-08-2004 declaring income of Rs. 6,97,370/- including agricultural income of Rs. 2,13,930/-. All other assessees herein filed their respective returns for the AYs under consideration within due date as specified u/s.139(1) of the Act. The return of income of the assessees were processed u/s.143(1) of the Income Tax Act, 1961 (herein after referred to as 'the Act'). Thereafter, re-assessment proceedings were initiated against the assessees and notice u/s.148 were issued to the assessees on the basis of information collected by the Judges Enquiry Committee (JIC).
A Judges Inquiry Committee (JIC) was constituted on 15-01-2010 to investigate into the allegations leveled against Shri P.D.Dinakaran J. when he was holding the position of a judge of Hon'ble Karnataka High Court. During the pendency of investigation by JIC, the assessee demitted the office of a Judge. The JIC had to drop its proceedings without giving any interim/final findings or report. The JIC was later woundup on 23-09-2011. However, one Shri J.V. Mahapatra, IRS who at that time was holding the position of Joint Secretary, Rajya Sabha forwarded the information collected by JIC to the Assessing Officer of the assessee.
3. On the basis of information received, re-assessment proceedings were initiated against all the assessees/appellants herein. The Assessing Officer included income of some of the relatives of Shri P.D. Dinakaran, in his hands on the ground, that the relatives of the assessee were holding lands of the assessee in their names. The lands were later transferred to the companies in which Shri P.D. Dinakaran and his family members have substantial interest. To understand the factual matrix of the case, it is essential to know the names and relations of the persons whose incomes have been added in the income of the assessee or otherwise their names figure in the gamut of assessment:
Names of the Relatives - Relation
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Mr. James Kuppusamy (Father-in-law); |
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Mrs. M.G. Paripoornam (Mother-in-law); |
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Dr.Mrs.K.M.Vinodini Dinakaran (Wife); |
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Smt. P. Vimala (Sister); |
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Mr. Jacob Williams (Husband of Smt. P. Vimala); |
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Ms. Amuda Dinakaran (Daughter -I); |
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Ms. Amritha Dinakaran (Daughter -II); |
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M. Raja Rabidev, (Brother of Dr. VinodiniDinakaran); |
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Ms. S. Sangamitra (Sister of Dr. VinodiniDinakaran); |
The extent of land held by above mentioned persons are as under:
Land owner (Shri/Smt) |
Extent of land |
Location |
Shri P.D. Dinakaran |
48.38 acres |
Kaverirajapuram |
Dr. Vinodini Dinakaran |
25.02 acres |
Kaverirajapuram |
Smt. M.G. Paripoornam |
50.36 acres |
Kaverirajapuram |
Shri Raja Rabidev |
52.75 acres |
Kaverirajapuram |
Shri Jacob Williams |
55.82 acres |
Kaverirajapuram |
Smt. P. Vimala |
4. The companies in which the assessee and his family members were alleged to have substantial interest are as under:
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M/s. Canaan Garden Pvt. Ltd., |
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M/s. Amudam Garden Pvt. Ltd., |
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M/s. Amirtham Garden Pvt. Ltd., |
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M/s. Dearland Pvt. Ltd., |
The aforesaid companies were incorporated in the year 2005. Some of the above mentioned individuals who were having land-holdings, transferred their agricultural lands to the aforesaid companies. In consideration of transfer of land, the shares of the companies were allotted to the respective individuals in proportion to their contribution of land. All the companies (except M/s. Amirtham Garden Pvt. Ltd.) leased out their lands to Shri Jacob Williams, Smt. M.G. Paripoornam and Shri Raja Rabidev. The agriculture income from the lands were shared between the companies and the lessees in the ratio of 1/3rd and 2/3rd.
5. On the basis of the information received from the Joint Secretary, Rajya Sabha, assessment in respect of all the assessees were re-opened. The Assessing Officer made additions/dis-allowances in the income returned by the assessees on various counts viz:
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Treating part of agriculture income as 'Income from other sources'. |
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Dis-allowing gifts received by assessee from relatives and additing the same as 'Income from other sources' in the hands of assessee. |
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Clubbing of income & gifts received by family members in the income of one assessee. |
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Addition of 'Agriculture Income' of the relatives of the assessee in the income of the assessee. |
Aggrieved by the assessment orders in the respective cases, the assessees preferred appeals before the CIT(Appeals) assailing re-assessment proceedings u/s.147, as well as additions/dis-allowances made by the Assessing Officer in the each case. The CIT(Appeals) in first appellate proceedings upheld the validity of re-assessment proceedings but allowed the appeals of the assessees on merits.
6. Now, the Revenue has come in appeal assailing the findings of the CIT(Appeals) in deleting the additions/dis-allowances made in the respective cases. The assessees have filed cross-objections against the findings of CIT(Appeals) upholding the validity of re-assessment proceedings.
7. Shri B. Ramakrishnan, appearing on behalf of the assessees submitted that initially, assessments were completed u/s.143(1) in case of all the assessees. It was on the basis of information collected during JIC proceedings that the re-assessment proceedings were initiated against all the assessees. The ld.AR submitted that the information was forwarded by Joint Secretary, Rajya Sabha to the Assessing Officer of the assessee. From the information collected under the Right to Information Act, it transpired that Shri J.B. Mahapatra, joined Rajya Sabha, Secretariat on deputation on 09-08-2010 and was relieved from the Secretariat of Rajya Sabha on 10-10-2011. During his tenure in the Rajya Sabha Secretariat, he was never entrusted with the task of dealing with JIC in the case of Justice P.D. Dinakaran. Thus, Shri Mahapatra was not the competent authority to transmit the information to the Assessing Officer. The ld.AR argued that JIC proceedings were dropped in between as Justice P.D. Dinakaran had demitted his office. The JIC was wound up without giving any interim or final report. In such circumstances, the Assessing Officer should not have taken cognizance of information forwarded to him. The Assessing Officer acted beyond his jurisdiction in initiating re-assessment proceedings. The Assessing Officer without having any 'reasons to believe' cannot invoke the provisions of section 147 even if original assessment is done u/s.143(1). In order to support his submissions, the ld.AR placed reliance on the judgment of the Hon'ble Delhi High Court in the case of CIT v. Orient Craft Ltd., [2013] 354 ITR 536/215 Taxman 28/29 taxmann.com 392 (Delhi).
Controverting the submissions made by the ld.AR on the issue of re-opening, the Senior Standing Counsel representing the Department submitted that source of information is not the criteria for questioning the validity of re-opening assessment. The Assessing Officer has power to question assessee on the basis of information received from any quarter. The ld.Counsel for the Revenue in order to support his contentions that the Assessing Officer can initiate action against assessee on the basis of information gathered from any private source and that the provisions of the Evidence Act, 1872 are not applicable under Income Tax proceedings, placed reliance on the following judgments of the Hon'ble Apex Court:
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C. Vasantilal and Co. v. CIT [1962] 45 ITR 206 (SC) |
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Chuharmal v. CIT [1988] 172 ITR 250/38 Taxman 190 (SC) |
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Dhakeswari Cotton Mills Ltd., v. CIT [1954] 26 ITR 775 (SC). |
He further submitted that in all the cases, the return filed by the assessees were processed u/s.143(1). In none of the cases the Assessing Officer formed any opinion on the issues raised in re-assessment proceedings. The Assessing Officer did not get opportunity to go behind the transactions. Since no opinion was formed there is no question of change of opinion. In order to give strength to his submission, the ld.Counsel for the Revenue draws support from the judgment of the Hon'ble Jurisdictional High Court in the case of Rayala Corpn. (P.) Ltd. v. Asstt. CIT [2014] 363 ITR 60/49 taxmann.com 145 (Mad.).
8. On merits, the ld.Counsel for the Revenue submitted that the CIT(Appeals) has erred in deleting the additions made by the Assessing Officer on account of assessing the income of other persons in the hands of the assessees. The ld. Standing Counsel argued that the income should be assessed in the hands of the right person. In the present case, the right person is Shri P.D.Dinakaran. Therefore, the Assessing Officer has rightly added income of his relatives in the income returned by Shri P.D.Dinakaran.
The next question raised by the Revenue is; Whether the entire agriculture income disclosed by the assessees is indeed 'Agriculture Income'?
The ld.Counsel for the Revenue submitted that Shri P.D.Dinakaran, (assessee) was not having income from agriculture operations. The land allegedly owned by the assessee and his relatives is not cultivable in the period relevant to the AYs under consideration. The quantum of agriculture income declared in the return of income is much higher than the actual income. It is not disputed that the land was purchased in 1990's i.e., prior to assessee's elevation as High Court Judge. It is also not disputed that certain parcels of land were inherited by Shri P.D.Dinakaran and other assessees. However, the income from land earned by other assessees travelled to the family members of Shri P.D. Dinakaran in the form of gifts. The ld.Counsel for the Revenue referred to page No.134 of the Paper Book filed by the Department containing sworn statement of Shri Raja Rabidev, wherein he has stated that the accounts are maintained by the family auditor, Mr. Pari. He referred to the statements made by the other assessees, where they have stated that the accounts relating to the income from agriculture are maintained by their auditor, Mr. Pari. Thereafter, ld.Counsel for the Revenue referred to the statement made by Mr. Pari, Chartered Accountant before the JIC. The statement of Mr. Pari is placed at Page Nos.232 to 259 of the Paper Book. The ld.Counsel for the Revenue contended that a perusal of the statement clearly shows that Shri P.D. Dinakaran, was controlling the affairs of all the companies. All accounts and details concerning agricultural operations and income from the lands held by the individuals and the companies were maintained under the instructions from Shri P.D. Dinakaran. The Chartered Accountant has categorically stated that High Court staff was used by Shri P.D. Dinakaran J. for managing the affairs of the company. The ld.Counsel pointed that Shri P.D. Dinakaran J. never rebutted the statements made by other assessees, nor did he bring any evidence to controvert the stand of Revenue. The assessees have failed to show that during the period under consideration, any agriculture activity was undertaken by them. There is nothing on record to show that the land was developed or the assessees were carrying on any agriculture operations. There is no record of secondary or inter-crop.
The ld. Standing Counsel argued that the assessees made gifts to the family members of Shri P.D. Dinakaran in all the AYs under consideration, without any occasion. He further stated that the sequence of events show that the gifts were one way i.e., from the persons holding lands in a particular area to the family members of Shri P.D. Dinakaran. The gifts were nothing but mode of payment of agriculture produce. Thus, the gifts were sham. In order to support his arguments, the ld.Standing Counsel placed reliance on the judgment of the Hon'ble Supreme Court of India in the case of CIT v. Smt. P.K. Noorjahan [1999] 237 ITR 570/103 Taxman 382 (SC).
The ld.Standing Counsel finally argued that the assessees have taken loan. A perusal of the records would show that the loans were repaid in a fast mode. Whereas the source of funds for re-payment of the loans were never explained. The ld.Counsel vehemently supported the assessment orders and prayed for setting aside of the impugned orders passed by CIT(Appeals).
9. The ld.AR controverting the submissions made by the ld. Standing Counsel for the Revenue submitted that the Assessing Officer initiated re-assessment proceedings on the basis of information collected during JIC proceedings. The Assessing Officer did not make any independent inquiry and was carried away by the statements made by the assessees during the proceedings of Inquiry Commission. No assessee was examined by the Assessing Officer. The allegations leveled against Shri P.D. Dinakaran J. were not supported by any cogent evidence. The ld.AR submitted that in the Paper Book filed by the Revenue, there is a report of District Collector at Page No.52 to 128, which shows that there was cultivation of secondary/inter-crops and there were fruit trees standing on the land since 1996 and even prior to that. The ld.AR further submitted that a perusal of Collector's report make it clear that the lands owned by the assessees were cultivable. On the basis of information compiled in Collector's report, it can be safely constructed that the lands of the assessees can easily yield Rs. 9,000/- to Rs. 10,000/- per acre. Whereas, the assessees have claimed income of Rs. 4,000/- to Rs. 5,000/- per acre only. This itself shows that the assessees have returned income from agriculture less than the Collector's estimate. The land was acquired by Shri P.D. Dinakaran way back in the year 1989 and he was elevated as High Court Judge in the year 1996. All other individual assessees have been owning land since long and have been showing income from agriculture in their respective returns since early 1990s.
The Assessing Officer has been taking inconsistent views in respect of different assessees. In the case of Mr. Jacob Williams, the AO has accepted the quantum without any addition or dis-allowance. In case of Mr. Raja Rabidev and Mrs. Paripoornam, the Assessing Officer has accepted agriculture income. Whereas, in the case of Dr. VinodiniDinakaran, the Assessing Officer has accepted agriculture income in some of the years and in some other years, he has declined. In later years, the Assessing Officer has accepted agriculture income partly. The land of all the assessees are located at same place and are contiguous. Thus, the Assessing Officer is inconsistent with his findings. The assessee has been receiving income from sale of mangoes by way of cheque. Some of the Vendees were examined but their statements were not placed on record by Assessing Officer. This fact has been mentioned by the CIT(Appeals) in his order. Thus, the Assessing Officer was not fair in giving his findings.
The ld.AR submitted that the companies were floated in the Financial Year (FY) 2005-06 to take the benefit of Horticulture Loan Scheme floated by the Government. The individuals transferred their lands to the companies. The land owners were allotted shares in the company in proportion of their contribution of land. The companies there after leased the same land to the assessees. As far as the issue of gifts is concerned, Shri Jacob Williams has no children of his own. Therefore, he made gifts to the daughters of Justice P.D. Dinakaran and Dr. VinodiniDinakaran. To ascertain the genuineness of gifts, three conditions are required to be satisfied; viz:
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Creditworthiness of the Donor; |
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Identity of the Donor; and |
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Genuineness of the gift/transaction In the instant case, all these conditions are satisfied. The ld.AR of the assessee strongly supported the findings of the CIT(Appeals) on merits and prayed for dismissing the appeals of the Revenue. |
10. We have heard the submissions made by the representatives of both the sides at length and have perused the orders of the authorities below. We have also considered the extracts of the paper book referred to, as well as, the judgments relied on by both the sides. For the sake of brevity, the facts narrated herein above are not repeated again. Before proceeding with the merits of the appeals, we take up the objections raised by the assessees with regard to re-opening of assessment. The only objection raised by the assessee in respect of re-opening is that proceedings u/s.147 have been initiated on the basis of information not procured from authorized source. Re-assessment proceedings are bad in law as there are no 'reasons to believe' that income has escaped assessment.
11. We do not find force in the argument of the ld.AR. It is a well settled law that for initiating re-assessment proceedings, the source of information is not relevant. It is the information and its authenticity that matters. If the Assessing Officer has reliable information and on the basis of said information he has 'reason to believe' that the income has escaped assessment, the Assessing Officer is well within his jurisdiction to initiate re-assessment proceedings.
In the present case, original assessment in respect of all the assessees were completed u/s.143(1). The Assessing Officer had no occasion to analyse the transactions and form any opinion. It was only after the receipt of information in the form of data collected by JIC that the Assessing Officer initiated re-assessment proceedings. After examining the information received, the Assessing Officer might have reasons to believe that income has escaped assessment. The Hon'ble Madras High Court in the case of Rayala Corpn. Pvt. Ltd., (supra) has held:
"47. In terms of sub section (1D) inserted in Section 143 by Finance Act 2012, w.e.f., 01.07.2012, notwithstanding anything in sub section (1) of Section 143 of the I.T. Act, processing of return shall not be necessary, where a notice is issued under Section 143(2) of the I.T. Act. It is only under Section 143(2) of the I.T. Act, the role of the Assessing Officer comes in. The intimation given under section 143(1)(a) of the I.T. Act is without prejudice to the provisions of section 143(2) of the I.T. Act and though the intimation is deemed to be a demand, it does not foreclose the right of the Assessing Officer to proceed under Section 143(2) of the I.T. Act. It is to be noted that the word Assessing Officer is conspicuously absent in Section 143(1) of the I.T.Act. The resultant position is made clear, when we read Section 143(3) of the I.T. Act. Thus the process of assessment in the real sense of the term commences only when notice is issued under Section 143(2) of the I.T. Act. Here too notice has to be served on the Assessee within the period of one year from the end of the month, in which the return is furnished. Thus, if no notice is served within the stipulated period of twelve months, the assessment proceedings under section 143 of the I.T. Act come to an end. Thus, though technically there is no assessment framed in such a case, yet the proceedings as far as section 143 of the I.T.Act is concerned, the same stand terminated. Though the procedure of centralised processing under sub section 1A of Section 143(1) of the I.T. Act finds place under the heading "Assessment" under section 143 of the I.T. Act, there appears to be a clear distinction and dichotomy in procedure. Between April 1, 1998, and May 31, 1999, sending of an intimation under section 143(1)(a) of the I.T. Act, was mandatory.
48. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee by making adjustments under the first proviso to section 143(1)(a) of the I.T. Act, no addition which is impermissible by the information given in the return could be made by the Assessing Officer. This is so because no opportunity is afforded to the assessee under Section 143(1)(a) of the I.T. Act, and the Assessing Officer merely proceeds to accept the return and making permissible adjustments only. Thus an assessment under Section 143(3) of the I.T. Act, is based on a different methodology which has to be borne in mind while considering the scope, purpose, ambit and import of Section 147 of the I.T. Act.
49. As held by the Hon'ble Supreme Court, the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff and it can hardly be said that any assessment is done therein by them. Therefore, as per the scheme under Section 143(1)(a) of the I.T. Act, the same cannot be treated as an order of assessment in the true sense of its term it being a summary procedure. The intimation under section 143(1)(a) of the I.T. Act, is deemed to be a notice of demand under section 156 of the I.T. Act, for the purpose of facilitating the machinery provisions relating to recovery of tax. Thus, the purpose of such intimation is only for recovery of the tax and no other expansive meaning can be given to such deeming provision. Therefore, the Hon'ble Supreme Court held that there being no assessment under section 143(1)(a) of the I.T. Act, the question of change of opinion, as contended, does not arise.
50. The Division Bench of this Court in the cases of WCI (Madras) (P) Ltd. v. Assistant Commissioner of Income-tax reported in [2010] 324 ITR 181(Mad), and Commissioner of Income-tax v. Ravindran Prabhakar reported in [2010] 326 ITR 363, held that there was only processing under section 143(1) of the I.T. Act, such intimation cannot be treated as assessment order and reassessment was held to be valid in such cases and hence the argument of change of opinion would not apply. As held by the Hon'ble Supreme Court in the case of Asst. CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500(SC), the legislative intent is very clear from the use of the word intimation as substituted for assessment that two different concepts emerged".
12. The ld.AR on the other hand has placed reliance on the judgment of the Hon'ble Delhi High Court in the case of Orient Craft (supra). The Hon'ble High Court in the peculiar facts of that case observed that 'reasons to believe', cannot have two meanings one applicable in assessment made u/s.143(3) and another applicable u/s.143(1). In Orient Craft notice u/s.148 of the Act was issued for reopening assessment on the ground that income chargeable to tax had escaped assessmemnt. While recording the reasons for reopening, the Assessing Officer stated that on going through the return of income, it revealed that while deducting 90% of other income from the profits of the business, premium on sale of quota included in the sale, was not considered. The Hon'ble Court after discussion various judgments rendered by the Hon'ble Supreme Court of India held, that the reason disclosed by the Assessing Officer stating 'on going through the return of income' does not satisfy the expression 'reason to believe'. Thus, in the said case, re-assessment proceedings were initiated on the basis of information given in the return, no tangible material came to the possession of the Assessing Officer after the issue of intimation u/s.143(1).
Whereas, in the present case, original assessment was made u/s.143(1). The provisions of section 147 for re-opening were invoked after the information collected by JIC was passed on to the Assessing Officer of the assessee. The Assessing Officer had substantial material to believe that income has escaped assessment. In this background, we are of considered view that the judgment of the Hon'ble Delhi High Court cannot be applied in the case of assessee. In view of the well settled law and the facts of the case, the cross-objections filed by the assessee are dismissed and the re-opening of assessment is held to be justified.
13. ITA No.1492/Mds/2013:
The Assessing Officer in re-assessment proceedings made addition of Rs. 43.26 Lakhs in the income returned by the assessee. The original list of additions made by the Assessing Officer is as under:
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Assessee's claim of agriculture income was dis-allowed and agricultural receipts of Rs. 2,77,310/- were treated as 'Income from Other Sources'; |
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Gifts from Shri Jacob Williams Rs. 1,05,000/- dis-allowed and treated as 'Income from Other Sources'; |
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Agricultural income of wife of the assessee Rs. 2,82,750/-added in the total income of the assessee; |
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Gifts received by assessee's wife from her brother Rs. 15,00,000/- added in the income of the assessee; |
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Cash deposits in the account of assessee's wife Rs. 8,42,000/- added in the income of the assessee; |
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Cash deposits in the accounts of assessee's daughters (Rs. 2,25,000 and Rs. 3,50,600/-) added in the income of the assessee; |
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Agriculture income of assessee's brother-in-law Rs. 3,60,820/-, mother-in-law Rs. 3,18,750/- and assessee's sister's husband Rs. 49,330/- were added in the income of the assessee; In first appeal by assessee, the CIT(Appeals) deleted all the additions. Now, the Revenue has assailed the findings of CIT(Appeals) in its appeal before the Tribunal. |
13.1 The first issue raised in the appeal is with regard to agriculture income. The Revenue has treated the agriculture income of the assessee as 'Income from other Sources'. The ld.Standing Counsel for the Revenue has contended that the land owned by the assessee is not cultivable and thus, could not produce huge yield as claimed by the assessee. It is not disputed that the assessee owns land measuring 48.38 acres. As per revenue records, majority of lands are wet lands. The Revenue has placed on record District Collector's report at page 52 to 128 of the Paper Book. As per the report, the land of the assessee is cultivable, irrigated, have high yielding fruit bearing trees and thus have potential of generating income Rs. 9,000/- to Rs. 10,000/- per acre. A further perusal of Collector's Report shows that Mango, Amla, Sapota and Guava trees are standing on the land owned by the assessee. The Collector in his report has further confirmed inter-crop cultivation. Thus, the stand of the assessee that he is getting agriculture yield of Rs. 4,000 to Rs. 5,000/- per acre is justified. The ld.Standing Counsel for the Revenue has not been able to controvert the observations given in the Survey Report which has been placed on record in the form of Paper Book by Revenue itself. The CIT(Appeals) while giving well reasoned findings on the issue has held that the Assessing Officer's conclusions are only presumptions and are not based on any material facts. We see no reason to differ with the findings of CIT(Appeals). This ground of appeal of the Revenue is accordingly dismissed.
13.2 The next issue in appeal is with regard to gift of Rs. 1,05,000/-from Mr.Jacob Williams. Mr. Williams has confirmed the fact of making gift. It is undisputed that the donar and the assessee are closely related. The gift has been made by way of Demand Draft. The donor has been able to show the source of income for making the gifts. Since, the assessee has been able to show the source of gift and the creditworthiness of the donor has also been established, the Assessing Officer has acted in an arbitrary manner & without any justification in making the addition of gift amount as 'Income from other sources.' We do not find any error in the findings of the CIT(Appeals) on this issue. Accordingly, this ground of appeal of the Revenue is dismissed.
13.3 The next issue in appeal is with regard to addition of agriculture income of Dr. Vinodini Dinakaran, wife of assessee, in the income of assessee. The Assessing Officer has included the income of Dr. Vinodini Dinakaran, in the hands of assessee on the ground that Dr. Vinodini Dinakaran does not have independent source of income as she hails from modest family. The Revenue has failed to take into consideration the fact that Dr. Vinodini Dinakaran is a qualified medical practitioner and is working with CSI Kalyani Hospital. Thus, she is having independent source of income. It is also an admitted fact that Dr. Vinodini Dinakaran is having more than 29 acres of agriculture land in her name. The said land is cultivable and she is carrying on agriculture operation thereon. She is having mango orched with 296 mango trees of high yielding varieties. The CIT(Appeals) in his order has categorically held that Dr. Vinodini Dinakaran is having independent source of income from her profession as well as agriculture income. The ld.Counsel for the Revenue has not been able to controvert the findings of CIT(Appeals). Thus, in view of the unrebutted findings, the arguments raised by the ld. Standing Counsel that the wife of assessee is not having independent source of income does not hold ground. The CIT(Appeals) has rightly held that the Assessing Officer's action of assessing Dr. Vinodini Dinakaran'sagriculture income in the hands of the assessee is only on presumptions and not based on any material facts and evidences. We confirm the findings of CIT(Appeals) on the issue. Accordingly, this ground of appeal of the Revenue is dismissed.
13.4 The next ground on which the Revenue has assailed the findings of CIT(Appeals) is with regard to gifts received by wife of the assessee from her brother Shri Raja Rabidev. The Assessing Officer made addition of Rs. 15,00,000/- in the hands of the assessee on account of gifts received by his wife from her brother. The wife of the assessee is an independent assessee having separate Permanent Account Number (PAN) and has been filing her separate return of income. She is independently assessed to tax. The total sum of Rs. 15,00,000/- has been gifted by her brother Raja Rabidev on different dates i.e., Rs. 7,00,000/- on 07-01-2004, Rs. 3,00,000/- on 16-03-2004 and Rs. 5,00,000/- on 08-01-2004. He is a close blood relative of Dr. Vinodini Dinakaran. The donor has been able to explain the source of gifts. Once the identity and the creditworthiness of the donor is established, there is no reason to doubt the veracity of the gift.
In view of the fact that the wife of the assessee is filing her separate return of income and the fact that it has been clearly established that the gifts were given by Shri Raja Rabidev to her sister-Dr. Vinodini Dinakaran, there is no question of making addition of the said gifts in the hands of the assessee. The CIT(Appeals) has rightly deleted the addition made by Assessing Officer . Therefore, this ground of appeal of Revenue is dismissed being devoid of merit.
13.5 The next issue raised in the appeal by the Revenue is with regard to cash deposits in the account of Dr. VinodiniDinakaran, wife of the assessee. The Assessing Officer has made addition of Rs. 8,42,000/- as un-explained deposit in the bank account of Dr. Vinodini Dinakaran. The Assessing Officer has made substantive assessment in the hands of the assessee as well as his wife. The Assessing Officer in the case of Dr. Vinodini Dinakaran for the AY.2004-05 has treated cash deposits/payments of Rs. 7,98,000/- out of Rs. 8,42,000/- as income from other sources and has made addition of the same. The wife of assessee in her return of income has explained the source of said deposit. Since, the wife of the assessee is an independent income tax assessee and this amount is reflected in her return of income, there is no question of making addition of the same amount in the return of income of the assessee. We do not find any merit in this ground of appeal of the Revenue. There is no reason to interfere with the findings of CIT(Appeals) on the issue, thus, this ground of appeal of the Revenue is dismissed.
13.6 The next issue in appeal is with regard to cash deposits in the bank accounts of daughters of the assessee, Ms. AmudhaDinakaran (Rs. 2,25,000/-) and Ms. Amirtha Dinakaran (Rs. 3,50,600/-). The daughters of the assessee have received gifts of the aforesaid amount from Shri Jacob Williams. It is an un-disputed fact that the donor and done are close relatives. The donor has confirmed the gift and the donor has also been able to show the source of income for making such gifts. Since, the gifts and the source of gifts have been fully established, we find no reason to add gift amounts in the income of the assessee. This ground of appeal of the Revenue is thus dismissed being without merit.
13.7 The last issue in this appeal is with regard to addition of agriculture income of the relatives of the assessee i.e., Shri Raja Rabidev, Smt. M.G. Paripoornam and Mr. Jacob Williams, in the return of income of the assessee. All the three persons are independently assessed to tax and have been filing separate return of income reflecting agriculture income over the period of time. All the aforesaid persons are having land-holdings in their individual names. The lands were purchased by them way back in 1980s and 1990s. All the aforesaid persons are carrying agriculture operations on their respective lands. Nothing is emanating from records that the land cultivated by these persons is in any way owned or controlled by the assessee. The Revenue has not been able to establish any credible reason for making addition of the agriculture incomes earned by the aforesaid persons in the hands of the assessee. The Assessing Officer in the case of Shri Jacob Williams in re-assessment proceedings have accepted his entire claim of agriculture income. Once the claim is found to be genuine in the hands of a particular assessee, the same amount cannot be added in the income of another person. In the case of other two persons also, the Assessing Officer has accepted part of agriculture income as genuine and assessed the remaining income as 'Income from other sources' in their respective return. If the income is assessed to tax in the hands of one person, the same income cannot be brought to tax on protective basis in the hands of some other person. We concur with the reasoned findings of the CIT(Appeals) in deleting the addition and uphold the same. Accordingly, this ground of appeal of the Revenue is also dismissed.
In result, the appeal of the Revenue is dismissed being devoid of any merit.
14. ITA No.1857 to 1868/Mds/2013 (AYs.2007-08 to 2009-10): The above appeals by the Revenue are against the companies:
i. |
|
M/s. Canaan Gardens (P) Ltd., |
ii. |
|
M/s. Amudham Gardens (P) Ltd., |
iii. |
|
M/s. Amirtham Gardens (P) Ltd., |
iv. |
|
M/s. Dear Lands (India) (P) Ltd., |
14.1 In all the appeals, the Revenue has raised common issue. The Assessing Officer had dis-allowed part of 'Agriculture Income' returned by the assessee-companies and treated the same as income from other sources/un-explained income. The Assessing Officer during the course of assessment proceedings observed that the assessee companies have shown substantial amount of agriculture income in their respective returns of income for the AYs.2007-08, 2008-09 & 2009-10. The Assessing Officer held that the agriculture income shown by the assessee companies are excessive and un-reasonable and hence, treated the part of agriculture income as 'Income from Other Sources'. The details of agriculture income returned by the companies and the dis-allowance made by the Assessing Officers in case of respective companies are as under:
Name of the Company |
Assessing Officer |
Asst. Year |
Agri. Income shown by the company |
Agri. Income accepted by the Assessing Officer |
Treated as Income from other Sources |
M/s. Dearlands (I) P. Ltd., |
ITO, Company Ward-I(1), Chennai |
2007-08 |
5,11,710 |
2,80,542 |
2,31,168 |
2008-09 |
8,00,110 |
2,99,600 |
5,00,510 |
2009-10 |
11,48,800 |
3,75,780 |
7,73,020 |
M/s. Canaan Gardens P. Ltd., |
ITO, Company Ward-I(1), Chennai |
2007-08 |
7,86,000 |
1,53,330 |
6,32,670 |
2008-09 |
11,06,300 |
3,59,153 |
7,47,147 |
2009-10 |
11,71,300 |
3,58,810 |
8,12,490 |
M/s. Amudham Gardens P. Ltd., |
ITO, Company Ward-I(1), Chennai |
2007-08 |
7,86,000 |
(-)4,68,032 |
12,54,032 |
2008-09 |
5,27,350 |
(-)8,85,040 |
14,12,390 |
2009-10 |
13,14,160 |
(-)3,36,135 |
16,50,295 |
M/s. Amirtham Gardens P. Ltd., |
ITO, Company Ward-I(1), Chennai |
2007-08 |
75,800 |
(-)11,54,886 |
12,30,686 |
2008-09 |
4,03,973 |
(-)9,13,471 |
13,17,444 |
2009-10 |
11,36,106 |
(-)2,80,484 |
14,16,590 |
The companies were floated in the year 2005 and the lands were transferred to the above companies by the relatives of Shri P.D. Dinakaran. The extent of land transferred by various persons to these companies and crops grown thereon are as under:
Name of company |
Land Transferred by |
Extent of land transferred to Co. (in acres) |
Crops grown |
M/s. Canaan Gardens P. Ltd., |
K. Raja Rabidev |
20.42 |
Mango, Inter crop and Vegetables |
Shanti Sangamithra |
27.85 |
|
48.27 |
M/s. Amudham Gardens P. Ltd., |
Jacob Willams |
16.49 |
Mango, Ground nut, Vegetables and Paddy |
Dr. PKA Chandrasekar |
04.75 |
M.G. Paripoornam |
20.83 |
K. Raja Rabidev |
15.91 |
|
57.98 |
M/s. Amirtham Gardens P. Ltd., |
Dr. PKA Chandrasekar |
13.72 |
Mango, Inter crop, Paddy, Ground nut and Vegetables |
Jacob Willams |
16.59 |
M.G. Paripoornam |
18.21 |
K. Raja Rabidev |
03.34 |
|
51.86 |
M/s. Dear Lands India P. Ltd., |
Jacob Willams |
13.42 |
Vegetables, Mango and Ground nut |
K. Raja Rabidev |
08.49 |
Shanti Sangamithra |
18.37 |
|
40.28 |
The shares in companies were allotted to the persons who transferred their land to the companies. The shares were allotted in the proportion of landholdings transferred. Subsequently, the companies leased out agricultural lands to some of its shareholders. M/s. Canaan Gardens P. Ltd. leased out its land to Smt. M.G. Paripoornam, M/s.Amudham Gardens P. Ltd. leased out its land to Shri K. Raja Rabidev and M/s. Dear Lands (India) P. Ltd. leased out its land to Shri Jacob Williams. As per the lease agreements, the proceeds of agriculture produce from the lands was to be shared between the company and the lessees in the ratio of 1:2. Since, the Assessing Officer in case of the companies and the lessees were different, the Assessing Officers followed different criteria for assessing agriculture income of the companies and the assessees. The same is evident from the table given as under:
Name of the Individual (Lessees of the lands owned by the companies) |
Assessing Officer |
Asst. Year |
Agri. Income shown by the Lessee |
Agri. Income accepted by AO |
Treated as Income from Other Sources |
Shri J. Williams [Lessee for the lands of M/s. Dearlands (I) P. Ltd] |
ITO, Company Ward-I(6), Vellore |
2007-08 |
9,92,500 |
9,92,500 |
0 |
|
2008-09 |
9,46,418 |
9,46,418 |
0 |
|
2009-10 |
13,52,100 |
13,52,100 |
0 |
Smt. M.G. Paripoornam [Lessee for the lands of M/s. Canaan Garden P Ltd] |
ITO, Salary Ward-I(3), Coimbatore |
2007-08 |
9,74,926 |
5,77,005 |
3,97,921 |
|
2008-09 |
13,69,065 |
Not assessd |
|
|
2009-10 |
13,69,065 |
3,48,465 |
10,20,600 |
Shri Raja Rabidev [Lessee for the lands of M/s. Amudham Gardens P Ltd] |
ITO, Salary Ward-I(5), Coimbatore |
2007-08 |
0 |
Not assessd |
|
|
2008-09 |
45,000 |
Not assessd |
|
|
2009-10 |
6,63,550 |
0 |
6,63,550 |
A perusal of the above table shows that, the Assessing Officer of Shri J. Williams, who is the lessee of M/s. Dear Land (India) P. Ltd., in re-assessment proceedings after verification of the details, accepted the agriculture income disclosed by Shri Williams in his return of income for the AYs.2007-08, 2008-09 and 2009-10. The Revenue has placed on record District Collector's Report which is based on a detailed survey of agricultural land conducted by the officials of Horticulture Department, Agriculture Department and Revenue Department. A perusal of report shows that the land owned by the assessee companies and other persons are wet lands, with irrigation facilities. The lands are under cultivation with inter-crop and high yielding fruit trees viz., Mango, Guava, Sapota etc., with age 5 years to 20 years. The agriculture land of all the companies are located in the same area and are contiguous. Have same type of soil and irrigation facilities, the crops grown are also the same, the quality and yield of crops is more or less the same. Therefore, the agriculture income derived by one assessee is indicative of the agriculture income derived by the others. The Assessing Officer of Shri Jacob Williams before accepting the returned income, conducted field enquiries, recorded the statement of neighboring farmers and ultimately came to the conclusion that, apart from Mangoes, inter crops and Vegetables are grown on the agriculture land owned by the Lessor company. Based on the enquiries and reports, the Assessing Officer of Shri Jacob Williams came to the conclusion that the income disclosed by the assessee is reasonable and genuine. The Assessing Officer also accepted the yield and rates of Mangoes based on the report of District Horticulture and Revenue Departments. Once the agriculture income from the adjacent land is accepted, there is no question as to why the agriculture income from the contiguous parcel of land should not be accepted. We are in full agreement with the detailed findings of the CIT(Appeals) in deleting the additions made by the Assessing Officer in respect of all the four companies.
14.2 The next argument raised by the ld.Counsel for the Revenue is that assessments in the case of companies have been made on protective basis. Substantive assessments have to be made in the hands of Shri P.D. Dinakaran as he was the person, controlling affairs of the companies. In support of his submissions the ld.Standing Counsel referred to the statements of Shri Raja Rabidev, Shri G. Pari, Chartered Accountant and Shri J. Williams recorded before JIC and u/s.131 of the Act before Income Tax Authorities.
We have examined the statements referred to by the ld.Standing Counsel. From perusal of the statements, it is not made out that the income of the companies is in any manner assessable in the hands of Shri P.D. Dinakaran. Except from the statements, the Revenue has not been able to bring on record any document to substantiate that Shri Dinakaran was the person controlling the affairs and management of the companies. There is absolutely no material to suggest that the agriculture income of the companies is in fact the income of Shri Dinakaran. The list of persons who have transferred their lands to the assessee-companies have been given elsewhere in the order. The lands were purchased by the said persons in their own names way back in late 1980's and early 1990's, i.e., the period prior to Shri P.D. Dinakaran was appointed as Judge of the High Court. The lands were transferred by the landowners to the companies in lieu of shares in the said companies. Thereafter, the companies leased out their lands. As per lease agreements, the income is to be shared between the company (lessor) and the lessee in the ratio of 1:2. The lessees have declared their income in their respective return of income and the companies being separate legal entities are assessable to tax independently. The companies have filed their return of income disclosing their share of agriculture income. We see no reason to club the income of companies with the income of Shri P.D. Dinakaran. We do not find any substance to accept the submissions of the ld.Standing Counsel.
14.3 The ld.Standing Counsel for the Revenue has further assailed the findings of CIT(Appeals) on the statement made by Shri Babu. The assessees have been selling their produce to various persons including some processing industries. The Revenue made investigations from the buyers of mangos of the assessees. The buyers include M/s. Reliance Foods Ltd., M/s. Capricorn Food Products Ltd., M/s. Geeta Enterprises, M/s. Masofi Foods Ltd., etc. All the buyers have shown purchases in their books of account. The investigation wing of the department verified the rates, quantities and income from the sale of mangoes. The payments were received by the assessees through cheques.
Shri R. Babu, one of the buyer of mangoes and vegetables from the assessees was examined by the Department on 24-11-2010 and 29-12-2010. On 24-11-2010, he admitted that he had purchased groundnuts from the assessees. Therefore, on 29-12-2010, he denied purchase of groundnuts from assessees and stated that Shri P.D. Dinakaran sent cash through Shri Selvam. The cash was deposited in the Bank and Cheques were issued. Subsequently, in a sworn affidavit, R. Babu retracts from his statement made on 29-12-2010 and reverts to the admission made by him on 24-11-2010. In his affidavit he further states that, he was forced to make statement on 29-12-2010 under threat from Shri J. Saravanan (Deputy Director of Income Tax). An affidavit was also taken on 30-12-2010 under threat.
The Revenue is harping on the statement of Shri R. Babu made on 29-12-2010 to say that the assessees were indulging in dubious sales. The Revenue has failed to take note of the fact that substantial sales of the produce were made by the assessees to processing industries. The Investigation Wing of the department has found the same to be genuine. Shri R. Babu is comparatively small trader. He made a statement then retracts and again reverts back to his original stance. Since, he has been shifting his stand, his statement is not reliable and trustworthy. Therefore, much importance cannot be attached to his statement while taking a holistic view of the circumstances. We do not find force in this argument of the Revenue and the same is rejected.
14.4 All the appeals of the Revenue are dismissed being devoid of merit.
15. ITA No.1971 to 1975/Mds/2013 (AYs.2004-05 to 2007-08 & 2009-10):
In appeals, the Revenue has assailed the findings of CIT(Appeals) in deleting the additions with respect to: 1.Agriculture Income; 2.Gifts received by the assessee; and 3.Payments made to Tamil Nadu Housing Board. The additions deleted by the CIT(Appeals) in AYs under consideration are as under:
|
AY 2004 -05 |
AY 2005 -06 |
AY 2006 -07 |
AY 2007 -08 |
AY 2009 -10 |
Agril. Income |
1,85,625 |
1,44,969 |
4,75,448 |
4,34,183 |
8,00,94 |
Gifts |
15,00,000 |
12,16,200 |
12,50,000 |
20,50,000 |
-- |
Cash payments to TNEB |
7,98,000 |
4,41,900 |
-- |
-- |
-- |
Total additions |
24,83,625 |
18,03,069 |
17,25,448 |
24,84,183 |
8,00,949 |
After hearing both the sides at length our issue-wise findings are as under:
15.1 The assessee is a medical practitioner and is having independent source of income from her medical profession, as well as from agricultural operations. The assessee owns agriculture land measuring 29.96 acres at Kaverirajapuram, Tiruttani Taluk. The land was acquired by the assessee somewhere in late 1980s and early 1990s. As per the documents on record, the assessee has fruit bearing trees such as Mango and is also cultivating paddy, ground nuts and some intercrops on the land. The agriculture income as disclosed by the assessee and as dealt with by the Assessing Officer during the impugned AYs is tabulated as under:
Asst. Year |
Agr. Income shown by the assessee (Rs. ) |
Agri. Income accepted by Assessing Officer (Rs. ) |
Treated as Income from other sources by AO (Rs. ) |
2004-05 |
2,82,750 |
97,125 |
1,85,625 |
2005-06 |
2,45,113 |
97,125 |
1,44,969 |
2006-07 |
5,90,992 |
1,00,144 |
4,75,448 |
2007-08 |
6,49,870 |
2,00,287 |
4,34,183 |
2009-10 |
11,16,780 |
3,00,341 |
8,00,949 |
The Assessing Officer restricted the assessee's claim of agriculture income as stated above and treated the remaining amount as 'Income from Other Sources/un-explained Sources'. The assessee has claimed agricultural income from sale of Mango crop as well as from sale of paddy and other crops. From perusal of survey report placed on record by the Revenue, it is evident that the assessee is having fruit bearing trees in her land and is having fertile land fit for cultivation. The land is irrigated and inter crops are cultivated on the land. The assessee has planted hybrid & high yielding varieties of Mangoes viz., Banginapalli, Thothapuri and Himampasanth. The buyers have confirmed the purchase of mangoes from the assessee. In the assessee's own case for the AY.2008-09, the Assessing Officer while completing assessment u/s.143(3), accepted the sale price of Mangoes at Rs. 15/Rs. 16.50/Rs. 18 per kg (depending on the variety) as claimed by the assessee in her return of income. Whereas, in the impugned AYs, the Assessing Officer applied the rate of Rs. 2.5 per kg for the AYs.2004-05, 2005-06 & 2006-07, Rs. 5/- per kg in the AY.2007-08 and Rs. 7.15 per kg in the AY.2009-10. No reason what so ever is given by the Assessing Officer for arbitrary fixing such low rates. The assessee has adopted the rates fixed by the National Horticulture Board. It is observed that the land of the assessee is adjacent to the land of Shri Jacob Williams. The Assessing Officer of Jacob Williams accepted the rates applied by Mr. Jacob Williams. The Assessing Officer of the assessee in our opinion has merely acted on presumptions and estimations without actual study to make disallowance. The CIT(Appeals) in the impugned order has given detailed findings with respect to yield as well as rates given in the District Collector's report. The yield claimed by the assessee is well below the average yield mentioned in Collector's report. There is no reason to disbelieve the agriculture income returned by the assessee. The ld.Standing Counsel for the Department has not been able to controvert any of the findings of the CIT(Appeals) on this issue. We do not find any reason to interfere with the detailed and well reasoned findings of the CIT(Appeals) on the issue. Accordingly, this ground of appeal of the Revenue is dismissed.
15.2 The next issue raised by the Revenue in the appeal is gifts received by the assessee from her husband and her close relatives. The Assessing Officer made addition of the gifts received by the assessee from her husband and relatives on the ground that the assessee has not filed any documentary evidence in support of the genuineness of the gifts and the sources of the donors. The assessee has received all the gifts by way of cheques/demand draft. The assessee had furnished the details of the donors, confirmation letters and affidavits from the donors. All the donors have reflected gifts made by them in their respective statement of affairs and return of income. All the donors have their independent source of income and are filing returns of income regularly. Thus, the assessee had discharged its onus to prove the identity of the donors, genuineness of the gifts and creditworthiness of the donors. Once, these three basic conditions in respect of gift are proved, there is no reason to doubt the genuineness of the gifts. The contention of the Revenue that the assessee has not brought any corroborative or documentary evidence to prove the genuineness of the gifts is un-sustainable. We do not find any merit in this ground raised by the Revenue. Accordingly, the same is dismissed.
15.3 The last issue raised by the Revenue in its appeals against Smt. Vinodini Dinakaran, is with regard to cash payments made to Tamil Nadu Housing Board. The Assessing Officer has made dis-allowance of cash payments to Tamil Nadu Housing Board for purchase of plots. The Revenue has questioned the nexus between the application and source of income. The CIT(Appeals) in his order has observed that the addition has been made by the Assessing Officer merely stating:
"……….the cash payments of Rs. 7,98,000/- on payment to TNHB is added to the total income as un-explained income'.
The Assessing Officer has made no other discussion except above observations on the issue in the entire assessment order. Whereas, the assessee in her Books of Account had reflected the source as well as application of funds.
In first appeal, the CIT(Appeals) has given his findings on this issue as under:
"I have considered the submissions of the assessee. First of all the Assessing Officer has not given the reasons as to why the said payments are disallowed and added to the total income. The assessee reflected the payments in her statement of affairs by showing the plots purchased. The sources income for the purchase (payments) are the professional income, agricultural income, gifts received etc as shown in the returns of income. Thus, the payments as well the sources are shown in the returns of income filed. Hence the payments cannot be treated as unaccounted investments/expenditure. Further, the sources like agricultural income, gifts etc are separately examined and added to the total income of the assessee in the assessment orders. Therefore, once the source is examined and added to the income of the assessee (or allowed as genuine, as the case may be), any subsequent payments from the said sources is only an application of income and hence no separate addition disallowance is warranted on such payments (application of income). As mentioned in the forging paras, the assessee's claim of agriclultural income and the gifts are held to be genuine. Hence the payments to TNHB for purchase of housing plots are the application of income from the said declared sources of income. Hence no addition/disallowance is warranted on account of these payments.
Further, these payments, which are apparently paid by way of cash, are not business expenses claimed u/s.28 to 37 of the Act and hence even the provisions of sec.40A(3) of the Act cannot be invoked in the present case".
The ld.Standing Counsel for the Department has not been able to substantiate his contentions in rebutting the findings of the CIT(Appeals). We do not find any reason to differ with the findings of the First Appellate Authority on the issue. Accordingly, this ground of appeal of the Revenue is also dismissed.
In result, ITA Nos.1971 to 1975/2013 for the AYs. 2004-05 to 2007-08 & 2009-10 of the Revenue are dismissed.
16. To conclude, ITA Nos.1492/Mds/2013, 1857 to 1868/Mds/13, 1971 to 1975/Mds/2013 of the Revenue and C.O.Nos. 149/Mds/13, 174 to 185/Mds/2013 of the assessee are dismissed.