Ponmani Suresh v. The Deputy Commissioner of Income-tax Non-Corporate Ward 2, Chennai
[Citation -2020-LL-0915-29]

Citation 2020-LL-0915-29
Appellant Name Ponmani Suresh
Respondent Name The Deputy Commissioner of Income-tax Non-Corporate Ward 2, Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 15/09/2020
Assessment Year 2012-13
Judgment View Judgment
Keyword Tags indexed cost of acquisition • documentary evidence • service of notice • sale of property • sale transaction • cash deposit • unexplained cash deposit
Bot Summary: Subsequently, as a result of enquiry conducted by I CI Unit of the Income Tax Department, Chennai, the assessee had filed a revised return of income on 31.03.2014 with a total income of Rs.19,14,060/-. In the absence of confirmation from debtors/parties from whom the assessee has claimed to have received real estate advance in cash, the assessee's claim for availability of such cash was not accepted and consequently, the entire cash deposits made into the assessee's bank account were treated as unexplained. The ITAT dismissed the ground of the assessee that the return filed by the assessee on 31.03.2014 cannot be treated as return of income filed as per Section 139(5) of the Act, since the return is not filed on account of discovery of omission by the assessee but as a result of enquiry, by holding that assessee actively participated during the course of assessment proceedings and therefore, the said ground cannot be entertained before the Tribunal. Though the statement of Stephen John was recorded in the presence of assessee's spouse, an opportunity of cross examination was not at all given to the assessee. Before the Income Tax Appellate Tribunal, the learned counsel who appeared on behalf of the assessee, contended that an opportunity of cross examination of Shri.Stephen John was not provided to the assessee by the CIT that too even after raising the said issue before the CIT(Appeals). The Income tax Appellate Tribunal, after going through the entire submissions made on both sides, held as under:- In the present case, though the statement from Stephen John was recorded in the presence of the assessee's spouse, an opportunity of cross examination was not at all given to the assessee. Since the Income Tax Appellate Tribunal has remitted back the matter to the CIT giving opportunity to the assessee for cross examination, and further directed the CIT to decide the matter, after giving opportunity of cross examination to the assessee, the substantial questions of law 1 and 2 are concerned, they are left open to the CIT to decide the same on merits and in accordance with law.


T.C.A.No.181 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 15.09.2020 CORAM: HON'BLE MR.JUSTICE N.KIRUBAKARAN and HON'BLE MR.JUSTICE P.VELMURUGAN T.C.A.No.181 of 2018 and C.M.P.No.2396 of 2018 Ponmani Suresh ..Appellant/Appellant -Vs- Deputy Commissioner of Income Tax Non-Corporate Ward 2 Chennai ..Respondent / Respondent. Prayer:Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961, against order dated 21.09.2017 made in ITA.No.1011/Mds/2017 relating to Assessment Year 2012-13. For Appellant : Mr.K.Ravi For Respondent : Ms.R.Hemalatha, Standing counsel JUDGMENT P.VELMURUGAN,J. Tax Case Appeal is filed by appellant/assessee as against order of Income Tax Appellate Tribunal, Chennai Bench 'D' dated http://www.judis.nic.in 1/12 T.C.A.No.181 of 2018 21.09.2017 passed in ITA.No.1011/Mds/2017 relating to Assessment Year 2012-13. 2.1 facts of this case is that assessee declared total income of Rs.3,08,330/- in original return of income filed on 30.05.2012 for assessment year 2012-13. Subsequently, as result of enquiry conducted by I & CI Unit of Income Tax Department, Chennai, assessee had filed revised return of income on 31.03.2014 with total income of Rs.19,14,060/-. case was selected for scrutiny and notice under Section 143(2) of Income Tax Act, 1961 [hereinafter called as 'Act'] dated 04.09.2014 was served on assessee. Subsequently, notice under section 142(1) dated 12.12.2014 seeking details and documents, was also served on assessee. After careful examination of case, assessment order was passed computing taxable income assessed as Rs.7,29,75,896/-. 2.2 Under head Capital Gains, appellant/assessee had admitted income from Long term capital gains of Rs.96,465/- from sale of her property being Flat No.14, G.N.Chetty Road, T.Nagar, Chennai-17, jointly held with her husband. Since no evidence had been adduced in respect of cost of renovation of Rs.6,18,500/-, it was disallowed. indexed cost of acquisition http://www.judis.nic.in 2/12 T.C.A.No.181 of 2018 was reworked at Rs.31,62,950/- as against Rs.37,03,535/- and consequently, long term capital gains had been assessed as Rs.5,37,050/- as against Rs.96,465/-. Thus, additional long term capital gains assessed was Rs.4,40,585/-. 2.3 Secondly, under head of Profit on facilitating sale of property at Velacherry, since there was no supporting evidence in respect of claim of payment/expenditure of Rs.6,64,95,000/- adduced by assessee, notice u/s.142(1) of Act, dated 17.03.2015 was issued to following effect:- 1. ' In respect of your transaction in connection with sale of property at Velachery owned by Mr.Stephen John, out of sum of Rs.6.8 crores received from M/s.ITC Ltd., you have claimed that sum of Rs.4.5 crores has been given to Mr.Stephen John (Vendor). However, from details of cheques issued, it is seen that same has been issued in names of various other parties. In this background, you are requested to furnish documentary evidence in support of your claim that Rs.4.5 crores was given to Mr.Stephen John, by producing confirmation to this effect from parties to whom above cheques have been issued. Also produce copy of your agreement with Mr.Stephen John in connection with this transaction. 2. Further, sum of Rs.2,14,95,000/- has been claimed as payments made to various persons involved in vacating tenants http://www.judis.nic.in 3/12 T.C.A.No.181 of 2018 for putting property for sale. said payments have been made by way of cheques issued. Furnish copies of receipts obtained at time of issue of cheques detailing purpose behind payment or confirmation from such parties. 2.4 assessee, by reply dated 20.03.2015, stated that she did not have any records in said transaction and therefore, requested department to exercise powers under section 131 to summon Mr.Stephen John, residing at No.11/724, Pipeline Road, Cochin University Post, Cochin, to get further details of transaction. 2.5 department made enquiries with Stephen John and DDIT (Inv.) Kochi, had recorded statement from Stephen John on 26.03.2015. It is stated that he was paid cheque for Rs.8 crores in sale transaction and he has not received single rupee from either Ponmani Suresh or other persons. 2.6 Therefore, Assessing Officer, viewed that claim of assessee that she is mere real estate intermediary lacks truth and is proven that she is major beneficiary in transaction. Assessing Officer further viewed that case under consideration is not isolated issue and while undertaking assessment proceedings of assessee's spouse, K.Suresh, large scale unexplained http://www.judis.nic.in 4/12 T.C.A.No.181 of 2018 cash deposits into bank accounts held by him were found and baseless explanation given to support source of cash availability was not found acceptable. In absence of confirmation from debtors/parties from whom assessee has claimed to have received real estate advance in cash, assessee's claim for availability of such cash was not accepted and consequently, entire cash deposits made into assessee's bank account were treated as unexplained. Thus, sum of Rs.95,00,000/- was added to total income under section 68 of Act. computation of taxable income redrawn by Assessing Officer was Rs.7,29,75,896/- and said demand was directed to be paid as per Demand Notice. 3. Aggrieved by said order of Assessing Officer/Deputy Commissioner of Income Tax, Non Corporate Circle-2, Chennai, appellant/assessee filed appeal before Commissioner of Income Tax (Appeals)-1. 4. CIT (Appeals)-1, on analysis of facts and circumstances of case, held that appellant did not avail opportunity of cross examination of Stephen John and did not emphasize need to undertake similar process to examine so called debtors. Therefore, at stage of remand proceedings, http://www.judis.nic.in 5/12 T.C.A.No.181 of 2018 no evidence was submitted to substantiate genuineness of claim. It is further pointed out by CIT (Appeals)-1 that cash obtained by Appellant through self drawn cheques and covered under provisions of Section 40A(3) cannot be telescoped with that of cash deposit since withdrawal date succeeds deposit date. Accordingly, appeal of assesse was dismissed. 5. Aggrieved by said order of CIT (Appeals)-1, dated 31.03.2017, assessee filed appeal before Income Tax Appellate Tribunal. 6. ITAT found that Assessing Officer, on examination of accounts and veracity of claims did not accept nexus between payments and receipts and therefore, entire expenditure relating to six parties of Rs.4,50,00,000/- and in respect of balance, amount of Rs.1,61,21,250/- was found to be ineligible as deduction and added same to taxable income. ITAT found that assessee is not owner of asset transferred to ITC Ltd., but had received consideration of Rs.6.80 crores. obvious reason is that assessee was compensated in lieu of facilitating unencumbered conveyance of property to buyer. http://www.judis.nic.in 6/12 T.C.A.No.181 of 2018 7. ITAT dismissed ground of assessee that return filed by assessee on 31.03.2014 cannot be treated as return of income filed as per Section 139(5) of Act, since return is not filed on account of discovery of omission by assessee but as result of enquiry, by holding that assessee actively participated during course of assessment proceedings and therefore, said ground cannot be entertained before Tribunal. 8. other ground taken by appellant/assessee was that opportunity of cross examination of Stephen John was not provided to assessee by CIT (Appeals). 9. ITAT, was of opinion that when assessee asks for cross examination of parties from whom evidences are collected, it is appropriate to provide opportunity for cross examination. Though statement of Stephen John was recorded in presence of assessee's spouse, opportunity of cross examination was not at all given to assessee. If CIT (Appeals)/Assessing Officer collects evidences from parties during remand proceedings, CIT(Appeals)/AO should have given opportunity of cross examination to assessee. In such view of matter, ITAT remitted entire issue to CIT (Appeals) with direction to give opportunity of http://www.judis.nic.in 7/12 T.C.A.No.181 of 2018 cross examination before deciding issue. 10. ITAT thus remitted entire issue to file of CIT (Appeals) and directed CIT (Appeals) to give opportunity of cross examination to assessee before deciding issue. 11. Aggrieved by said order of ITAT, present Tax Case Appeal is filed by appellant/assessee raising following substantial questions of law:- (1) Whether return filed on 31/03/2014 for Assessment Year 2012- 13 is non-est return and not return u/s.139(5) of Income Tax Act, 1961? Consequently, whether assessement framed u/s.143(3) based on non-est return filed is valid in eyes of law? (2) If assessment based on non-est return is invalid, whether such invalidity can be cured by provision of Section 292BB of Income Tax Act, 1961 which deals only with service of notice and further for reason that appellant was heard during assessment proceedings? (3) Whether assessment order dated 30.03.2015 passed without giving http://www.judis.nic.in 8/12 T.C.A.No.181 of 2018 opportunity of cross examination in respect of evidence gathered behind back of appellant during assessment proceedings is void and nullity? (4) Whether assessment order, which was passed without giving opportunity of cross examination in respect of evidence gathered behind back of appellant during assessment proceedings, can be validated by giving opportunity of cross examination in appellate proceedings? 12. Heard learned counsel on either side and perused materials available on record. 13. Before Income Tax Appellate Tribunal, learned counsel who appeared on behalf of assessee, contended that opportunity of cross examination of Shri.Stephen John was not provided to assessee by CIT (Appeals) that too even after raising said issue before CIT(Appeals). learned counsel further contended before ITAT that while examining Stephen John, statement was recorded by Assessing Officer in presence of assessee's spouse, viz., Kalyanasundaram Suresh, but no opportunity of cross examination of Stephen John was provided to assessee. learned counsel for assessee thus contended before ITAT that http://www.judis.nic.in 9/12 T.C.A.No.181 of 2018 opportunity may be given to assessee to cross examine Stephen John, before framing assessment. 14. Income tax Appellate Tribunal, after going through entire submissions made on both sides, held as under:- In present case, though statement from Stephen John was recorded in presence of assessee's spouse, opportunity of cross examination was not at all given to assessee. If CIT (Appeals)/AO collects evidences from parties during remand proceedings, CIT (Appeals)/Assessing Officer should have given opportunity of cross examination to assessee. Hence, in interest of justice, we are of opinion that entire issues to be remitted to CIT (Appeals) with direction to give opportunity of cross examination before deciding issue. 15. Since appellant/assessee has raised issue of opportunity of cross examination of Stephen John and same was given to assessee and for same, matter is remitted back to CIT (Appeals), we are of view that there is no infirmity in order of Income Tax Appellate Tribunal and thus, we find no merit in Tax Case appeal and Appeal is liable to be dismissed. http://www.judis.nic.in 10/12 T.C.A.No.181 of 2018 16. Since Income Tax Appellate Tribunal has remitted back matter to CIT (Appeals) giving opportunity to assessee for cross examination, and further directed CIT (Appeals) to decide matter, after giving opportunity of cross examination to assessee, substantial questions of law 1 and 2 are concerned, they are left open to CIT (Appeals) to decide same on merits and in accordance with law. As far as Substantial questions of law 3 and 4 are concerned, in view of matter remitted back to CIT (Appeals) by Income Tax Appellate Tribunal and said order is confirmed now, same has been answered accordingly. 17. In result, Tax Case (Appeal) stands dismissed. order of Income Tax Appellate Tribunal in remitting back matter to CIT (Appeals) is confirmed. No costs. INDEX:Yes/No [N.K.K.,J] [P.V.,J] 15.09.2020 http://www.judis.nic.in 11/12 T.C.A.No.181 of 2018 N.KIRUBAKARAN, J. and P.VELMURUGAN, J. nvsri To 1.The Deputy Commissioner of Income Tax Non-Corporate Ward 2 Chennai T.C.A.No.181 of 2018 15.09.2020 http://www.judis.nic.in 12/12 Ponmani Suresh v. Deputy Commissioner of Income-tax Non-Corporate Ward 2, Chennai
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