A M J Narsinga Rao, S/o Sri Venkatesam V. Assistant Commissioner of Income Tax Circle-1 (1), Hyderabad

ITTA/5/2008

AI Insights

The case involves A M J Narsinga Rao, the managing partner of M/s A N Cigarette Trading Company, who appealed against the order of the Income Tax Appellate Tribunal, Hyderabad. The appeal was related to the block assessment period from April 1, 1987, to February 11, 1999, following a search operation under Section 132 of the Income Tax Act, 1961. During the search, incriminating materials were found, leading to undisclosed income admissions by the appellant. The Assessing Officer (AO) added undisclosed income to the appellant's account, which was partially upheld by the CIT(A) and later by the Appellate Tribunal. The appellant's main contention was the retraction of his earlier statements, which the Tribunal found unconvincing, leading to the dismissal of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 799809 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 11-10-2023
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax vs. Shri Ramdas Motor Transport, Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell Pvt. Ltd., Roshan Lal Sanchiti vs. Principal Commissioner of Income-Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: S RAVI
• Keywords: Block assessment; Income Tax; Retraction of statement; Search and seizure; Undisclosed income
• Section: 142(1); 143(2); 132; 158BC; 260-4

Judgement Text

"[ 3386 ] IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY, THE ELEVENTH DAY OF OCTOBER TWO THOUSAND AND TWENTYTHREE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY INCOME TAX TRIBUNAL APPEAL No: 5 of 2008 lncome Tax Tribunal.Appeal Under Section 260-4 of the lncome Tax Act, .1961 arising out of the order of the lncome{ax Appellate Tribunal, Hyderabad Bench 'A, Hyderabad, in I.T.(SS).A.No.8lHydt20o2, dated 31-05-2007, preferred against the Order of the Commissioner of lncome Tax (Appeals)-V, Hyderabad, ITA No.665/DC.1(1)lClT(A')-Vl2OO1-02 dated:21-O1-2002, preferred against the Order of the Assistant Commissioner of lncome Tax Circle-1 (1), Hyderabad pAN/GlR No.ADDPA9594R. Between: A MJ Narsinga. Rao, S/o.Sri Venkatesam, aged 67 years, Rt/o.5-4-435, Market, Hyderabad. ...AppellariUpetitioner AND Petition under Order 39 Rule 1 of C.P.C. praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pass an order restraining the respondent from initiating any recovery proceedings pursuant to the order dated 31.05.2007 passed by the lncome Tai Appellate, pending disposal of the ITTA Assistant Commissioner of lncome Tax. Circle-1 (i), Hyderabad. ...Respondent l.A. NO:1 F 2OO8(ITTAMP. NO: oF 2008) Counsel for the Appellant: SRI S. RAVI Counsel for the Respondent: SRI J.V. PRASAD, SC FOR INCOME TAX The Court delivered the following: JUDGMENT HONOT'RABLE SRI JUSTICE P.SAM KOSEY AND HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY INCOME TAX TRIBUNA L APPEAL NO.s OF 2OO8 JUDGMENT: (Per Hol7'ble Sn,Jllstice Loxtrli Narayana Atishetty) The present appeal has been filed under Section 26O-A of Income Tax Act, 196 I (for short, the \"Act') assailing the order passed by Income Tax Appellate Tribunal, Bench-A, Hyderabad (for short \"Tribunal\") in I.T.(SS).No 8/Hyd/2002, dated 3105 2OO7 for the block periocl between Ol .04.1987 to 11.O2.1999' 2- We have heard the learned counsel Sri Naga Deepak on behalf of Sri S.Ravi for the appeliant and the learned senior standing counsel Sri J.V. Prasad for the respondent' 3. The brief facts leading to filing of present appeal are AS under: 4. The appellant is a Managing Partner of M/s' A N Cigarette Trading Company, which is a partnership hrm, engaged in distribution of 'Four Square' cigaiettes in Hyderabad city A search operation under Section 132 of the Act was conducted on 1 1.02.1999 on the residential premises as well as the business premises of the appellar-rt. During the course of search' certain ,'i PSK,J & LNA,J rrTA n'o.5 of2008 2 incriminating material in the form of loose papers/slips was found and seized, which indicate huge expenses made by the asessee for purchase of jewellery etc. On examination of capital account of the assessee, it was found that assessee did not make any drawings lrom the firm for household expenses. 5. The assessee was asked to explain the reason for not showing household expenses. The assessee in his statement admitted that approximate household expenses for maintaining his family to the tune of Rs.7O,OOO/- to Rs.85,OOO /- per year. He also admitted the undisclosed income of Rs.8,65,000/ - towards on- accounted household expenditure and Rs.2,O0,000/- towards expenses incurred on the marriages of his two children. The assessee also filed a letter before the DDIT conhrming the admission towards personal expenses and functional expenses, which were not reflected in the accounts. However, despite admission, the assessee filed return for block period without admitting the income towards undisclosed expenditure incurred by him. 6. A notice under Section 158BC of the Act was issued to the appellant on 15.06.1999. In response to the said notice, the assessee filed the block period return in Form-2B admitting a sum of Rs.3,23,5841- as undisclosed income of the block period. I'SK,J <1 I-NA J 1n..1 l'o.5 of )408 J Thereafter, notices under Sections 143 (2) ar,d 142 (1) of the Act were issuecl seeking further information and in response, the Chartered Accountant of the appellant appeared before the authority on 19.09.2000. Written replies were also filed through the Chartered Accountant from time to time. 7. A detailed questionnaire dated O6.10.2000 was issued to the assessee to explain as to how the admitted income has not been offered. In response, the assessee filed his reply dated 12.I2.2OOO and not satisfied with the same, the Assessing Ofhcer (AO) vide his office letter dated 21.12.2OOO asked the assessee to substantiate his explanation. In response, the assessee fi1ed reply dated 27.12.2OOO. The A.O. did not satisfy with the explanBtion filed by the assessee and was of the view that explanation given by the assessee is only an alter thought and assessee has failed to substantiate the explanation and came to conclusion that entire amount of Rs.1O.65 lakhs, out of which sum of Rs.2,59,280/- was admi tted by the assessee as undisclosed income and balance amount of Rs.8,O5,720/- was added by the A.O., as undisclosed rncome. 8. Aggrieved thereby the order of A.O., dated 29.03.2001, the assessee preferred appeal vide ITA No.665/DC.1(l)/ CIT(A)-V l2OOl' 02 before Lhe Commissioner of Income Tax (Appeals)-V, Hyderabad PSK,J & LNA,J ITTA i|o 5 of2008 [for short, 'CIT(A)'1. The CIT(A), on due consideration of facts and material, vide order dated 21.01.2002, held that expenditure incurred by the appellant amounting to Rs. 1O,65,O00/- was explained only to the extent of Rs.1,OO,000/- and the remaining amount of Rs.9,65,00O/- represented unaccounted expenditure of the appellant, out of which, Rs.2,59,28O1- had been admitted, as such in the block return. Hence, the addition of Rs-8,05,720/- made by the A.O., was restricted to Rs.7,05,72O/- and the addition of Rs.3,O7,942/- representing unaccounted expenses towards medical expenses, purchase of jewellery and other purchases assessed by the A.O., was confirmed and accordingly, allowed the the appeal partly. 9 . Not satisfied with the order of CIT (Appeal), dated 2l .Ol .2OO2, the assessep preferred appeal before lncome Tax Appellate Tribunal, vide I.T.(SS).A.No.8/Hyd/02' 10. karned counsel for appellant would submit that appellant retracted the statement earlier given and there is no time limit for such statement and thus, the same ought to have been considered by the assessing officer. Learned counsel referred to orders of CIT(A) and the Appellate Tribunal in a great detail and submitted that Appellate Tribunal committed erred in sustaining the addition of Rs.5,09,60O/- only on the basis of statement of appellant. The 4 PSK,.I A LNA,J ITTA No 5 of20A8 learncd counsel lor the appellant relied upon the following decisions in support o[ his contention: i) Commissioner of Income Tax vs. Shri Ramdas Motor TransPortl; and ii) Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P rt. Ltd.'2 11. Per contra, learned senior counsel for the respondent relied upon the decision of the Hon'ble Apex Court in Roshan Lal Sanchiti vs. Principal Commissioner of Income-Tax3 to support his contention that retraction of statement after a sufhcient long gap or point of time loses its signilicance and is an afterthought and referred to obserwation of Hon'ble Apex Court at page 237 of the decision, which is reproduced as under: \"... [n our view, retraction after a sufhcient long gap or point of time, as in the instant case, loses its signihcance and is al afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 732 l4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an assessee plcads that the statements have been obtained forcefully/ by coercion/undue influence without material / contrary to the material, then it should be ' (rggs) z:s rrR tzz(np) ' (zoz:) qsa trn zrz (sc) ' lzozzl asz rrR 229 (sc) 5 PSK,J & LNA,J IlYl l 'io.5 of)408 supported by strong evidence which we have observed hereinbefore. Once a statement is recorded under section 132(4), such a statement carl be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time. .... \" Consideration: 12. Before the Appellate Tribunal, the appellant raised the following grounds: (1) General in nature and in the absence of any specific plea, the same is therefore rejected being not pressed. (2) The CIT(A) is not justifred in sustaining the addition of Rs.7,O5,72O/- out of the total addition of Rs 8,05,720l- representing explained household expenditure incurred during the block period. The CIT (A) did not appreciate the appellant's contention that the domestic expenditure under consideration was met out of the cash available with the appellant, which was admitted by the appellant as undisclosed income during the earlier search operation conducted in 1986. (3) The CIT(A) failed to appreciate that probability of the availability of funds which the appellant which was beyond doubt proved during the assessment proceedings itself and which explanation would cannot be ruled out of the possibilit ies. (a) The CIT(A) is not justified in upholding the addition of Rs.3,O7 ,942 / - as allegedly representing unaccounted 6 PSK,J & LNA.J l1-fA No 5 oJ 2()08 expenses towards medical expenses, purchase of jewellery etc., during the previous years reievant to the block assessment period. Here also neither the AO nor the CIT(A) considered the probabilities and possibilities of the position explained by the appellant concerning the lose papers on the basis of which the addition was made. The CIT(A) also did not take into consideration the judicial opinions wherein it was held that lose papers found during search do not represent 'document' and could not be taken as basis for making any addition.\" i 3. On due consideration of grounds, facts and submissions the Appellate Tribunal vide order dated 31.O5.20O7 considered ground Nos.2 and 3 had held that the assessee is entitled to get the total benelrt of Rs.2,96,12Ol- inclusive of the relief of Rs.1,00,0OO/- allowed by the CIT(A), out of total addition of Rs.8,05,720/- made by the A.O. Thus, the addition sustained by the learned CIT(A) of Rs.7 ,O5,72O / - is reduced to Rs.5,O9,6OO/-. 14. With regard to ground no.4, the Appellate Tribunal came to conclusion that in the absence of any contrary material brought on record by the revenue, the addition of Rs.3,07,942 f - was not sustainable and accordingly deleted the same. The Appellate Tribunal came to the above conclusion by relying upon the decision of I.T.(SS).A.Nos.a5-87 lHydl9T in the case of G.Muralikrishna vs. ACIT and others, dated 08.09.2003 and 7 i PSK.J & LN-,l J nTA No.5 of 2008 8 recorded the reasons at paragraph-13, which is reproduced hereunder for ready reference. \"13. Having heard the submissions of the rival parties and perusing the material available on record, we frnd that there is no dispute that the assessee has contended that the loose papers do not belong to him, therefore, the quantum of expenditure noted therein be not taken cognizance thereof inasmuch as, the medical expenses incurred on his daughter's delivery were met by her husband and father in law and not by the assessee. The revenue has placed no material on record to show that the loose papers are in the hand-writing of the assessee or the notings made therein are belonging to the assessee. There is no corroborative material on record to prove that the expenditure recorded in the said loose papers is incurred by the assessee. The AO has not recorded arty statement of the assessee's daughter or her husband or her father-in-law.\" 15. Perusal of the order of CIT(A) as well as Appellate Tribunal, shows that the contentions raised by the appellant have been considered and detailed reasons have also been recorded by the Appellate Tribunal while passing order. As mentioned supra, the Appellate Tribunal had considered the grounds raised as well as submissions made on behalf of the appellant and recorded the detailed reasons for its conclusion. Conclusion: 16. In the above factual matrix and circumstances of the case, the question of law on which the present appeal is filed is factual in naturc and finding of facts, which was already considered by the PSK.J & I-NA,J 11'T) i 'o 5 of 2003 9 Appellate l'ribunal. TItcrefore, we do not find any reason to interfere u,ith the ordcr passed by the Appellate Tribunal. The Appeal thus fails and dcserves to be and is accordingly dismissed. There shall be no ordcr as to costs. 17. Pending miscellaneous applications, if any, shall stand closed. Sd/- K. SRINIVASA RAO JOINT REGISTRAR //TRUE COPY// SECTION OFFICER '1 . The lncome-tax Appellate Tribunal' Hyderabad Bench'A' Hyderabad 2. The Commissioner of lncome Tax (Appeals)-V' Hyderabad 3. The Assistant Commissioner of lncome Tax Circle-1 (1)' Hyderabad 4. One CC to SRI S. RAVI, Advocate [OPUC] 5. One CC to SRI J.V. PRASAD, SC FOR INCOME TAX [OPUCI 6. Two CD CoPies kam W @ To, I Ir I l HIGH COURT DATED:1 111012023 JUDGMENT ITTA.No.S of 2008 THE APPEAL IS DISMISSED I *f4 rr- 2.f luttl \"\"$ *s I + r.j q o L! (. "