DCIT, Central Circle-2(2), Hyderabad, Hyderabad V. M.S.Anand, Hyderabad, Hyderabad

CO 10/HYD/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1935 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Search and seizure; Source of fund; Documents seized
• Section: 143(3); 69; 132

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1893/HYD/2014 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 2(2), HYDERABAD. VS. M.S. ANAND, HYDERABAD PAN BFEPM 7403M (APPELLANT) (RESPONDENT) ITA NO. 1892/HYD/2014 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 2(2), HYDERABAD. VS. B. SHANKAR YADAV, HYDERABAD PAN ACIPY 0044Q (APPELLANT) (RESPONDENT) C.O. NO. 10/HYD/2015 (IN ITA NO. 1893/HYD/2014 ASSESSMENT YEAR: 2010-11) M.S. ANAND, HYDERABAD PAN BFEPM 7403M VS. DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 2(2), HYDERABAD. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI M. SITARAM ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 20-01-2016 DATE OF PRONOUNCEMENT : 22-01-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINST SEPARATE ORDERS OF CIT(A) - I, HYDERABAD, DATED 20 TH OCTOBER, 2014 FOR THE AY 2010-11 IN RESPECT OF TWO ASSESSEES. THE ASSESSEE M .S. ANAND ALSO 2 ITA NOS. 1892 & 1893/HYD/2014 AND CO 10/HYD/15 SHRI M.S. ANAND AND SHRI B. SHANKAR YADAV FILED C.O. AGAINST THE SAID ORDER OF CIT(A). AS THE FACTS OF THE CASE IN BOTH THE ASSESSEES ARE SIMILAR, FOR THE SAKE OF CON VENIENCE, WE ADJUDICATE THESE APPEALS BY WAY OF THIS COMMON ORDE R. 2. TO DISPOSE OF THESE APPEALS, WE REFER TO THE FAC TS OF THE CASE OF M.S. ANAND BEING ITA NO. 1893/HYD/14. 3. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE IS AN INDIVIDUAL EARNING INCOME FROM REAL ESTATE BUSINESS. A SEARCH OPERATION U/S 132 OF THE INCOME-TAX ACT, 1961 (IN SHORT ACT) WA S CONDUCTED ON 29/10/2010 AT THE RESIDENCE AND BUSINESS PREMISES O F SRI SURESH CHAND AGARWAL AND OTHERS. DURING THE SEARCH PROCEED INGS, CERTAIN DOCUMENTS AND OTHER LOOSE SHEETS WERE SEIZED PERTAI NING TO ASSESSEE. BASED ON THE INFORMATION COLLECTED DURING THE SEARCH PROCEEDINGS, A NOTICE U/S 153C OF THE ACT WAS ISSUE D TO ASSESSEE ON 31/01/2012. IN RESPONSE, ASSESSEE FILED RETURN OF I NCOME FOR AY 2010-11 ON 22/02/20103 ADMITTING TAXABLE INCOME OF RS. 1,68,030/-. ASSESSMENT WAS COMPLETED U/S 143(3) READ WITH SECTI ON 153C OF THE ACT ON 31/03/2013. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED SHOW CAUSE NOTICE DATED 22/02/13, THE EXT RACTS WHICH ARE AS UNDER: DURING THE COURSE OF SEARCH OPERATION AT THE BUSI NESS PREMISES OF M/S AGARWAL CHITS AND FINANCE, CERTAIN DOCUMENTS WERE FOUND WHICH PERTAIN TO YOUR INVESTMENT IN H.NO.5-97/1, 5-97/3 AND 5-97/4 IN SURVEY NO. 2 LOCATED AT RAIDURG PAIGA VILLAGE REGISLERED VIDE DOCUMENT NO. 93112010 IN THE NAMES OF SRI B. SHANKAR YADAV AND YOURSELF THIS PROPERTY WAS BOUGHT FOR RS.98,00,000/- FROM SMT D. PADMA, WLO D. SHANKAR KUMAR AND SRI. D. SHANKAR KUMAR, STO SRI. D. YELLAIAH. THE PAYMENTS WERE MADE FROM YOUR BANK ACCOUNT WITH OB C BANK A/C NO.1041204016405O, TO SMT. D. PADMA AND SRI. D SH ANKAR KUMAR. THUS, IT IS FOUND THAT YOU HAVE ACQUIRED THE ABOVE PROPE RTY AND THE PURCHASE CONSIDERATION WAS PAID FROM YOUR BANK ACCOUNT. IT IS FOUND THAT YOU DID NOT FILE INCOME TAX RETURN AND YOU DID NOT INFORM THE INCOME TAX DEPARTMENT OF THE ABOVE INVESTMENT IN THE ABOVE DE TAILED PROPERTY. THEREFORE, IT IS PROPOSED TO TREAT 5O% OF RS.98,99 ,200/-(INCLUDING REGISTRATION CHARGES OF RS. 99,200/-) IE. RS. 49,6 00/- AS YOUR SHARE OF INVESTMENT IN THE ABOVE PROPERTY AND BRING TO TAX THE SAME AS YOUR 'UNDISCLOSED INCOME/INVESTMENT' FOR THE FINANCIAL YEAR 2009-10 RELEVANT TO THE ASST. YEAR 2010-11. IN VIEW OF THE ABOVE, YOU ARE REQUESTED TO SHOW THE REASONS WHY RS. 49, 49, 6001- SHOULD N OT BE TREATED AS YOUR 'UNDISCLOSED INCOME / INVESTMENT' FOR THE ASST. YE AR 2010-11.' 3 ITA NOS. 1892 & 1893/HYD/2014 AND CO 10/HYD/15 SHRI M.S. ANAND AND SHRI B. SHANKAR YADAV 3.1. IN RESPONSE, THE ASSESSEE FILED HIS EXPLANATIO N, AN EXTRACT OF WHICH IS REPRODUCED HEREUNDER: 'PROPERTY BEARING MCH NO.5-97/1, 5-97/3 AND 5-97/4 IN SY. NO.2 LOCATED AT RAIDURG PAIGAH VILLAGE, SERILINGAMPALLY MANDAI, RR. DIST IS JOINTLY PURCHASED BY ME AND SHRI B. SHANKAR YADAV VIDE REG ISTERED AGPA DATED 17/0212010 BEARING NO. 931/201 O. 'HAVE BORROWED R S.50 LAKHS FROM SHRI RAJENDER AGARWAL RIO 1-2-50, DOMALGUDA, HYDER ABAD, AP. THE AMOUNTS WERE RECEIVED FROM SHRI RAJENDER KUMAR AGA RWAL VIDE ACCOUNT PAYEE CHEQUES. A CONFIRMATION LETTER IN RESPECT OF THE LOAN RECEIVED WAS FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDI NGS. THE AMOUNTS WERE LENT BY SHRI RAJENDER KUMAR AGARWAL. THE PROPERTY DOCUMENTS WERE PROVIDED TO HIM AS A SECURITY TOWARDS THE LOAN AMO UNT. HENCE, I PREFER TO DEMARCATE A THIN LINE BETWEEN T HE OWNERSHIP OF THE PROPERTY AND LIABILITY TO PAY THE BORROWED SUM. TH E SHARE IN THE PROPERTY IS OWNED JOINTLY BY ME TOGETHER WITH SHRI SHANKAR YAD AV. OWNERSHIP OVER THE PROPERTY BEYOND DOUBT VESTS WITH ME. SIMILARLY, I CANNOT DENY MY LIABILITY TO REPAY THE SUM BORROWED FROM SHRI RAJENDER KUMAR AGARWAL. THUS, THERE IS A DIRECT NEXUS BETWEEN THE OWNERSHIP AND LIABIL ITY TO PAY THE BORROWED SUM SINCE THE PROPERTY UNDER QUESTION WAS ACQUIRED OUT OF THE BORROWED SUM. THE 50% SHARE IN PROPERTY SUBJECT MATTER OF SHOW C AUSE LETTER WAS BOUGHT FOR RS.49,49,600/- OUT OF THE FUNDS BORROWED FROM A PERSON WHO IS ASSESSED TO INCOME TAX. HIS IDENTITY IS ALSO CLEAR . THE PERSON LENDING THE AMOUNT HAS CAPACITY TO LEND. IN THIS REGARD, HE HA S ALSO CONFIRMED REGARDING THE ADVANCE MADE TO ME. THE FUNDS WERE T RANSFERRED OUT OF THE BANK ACCOUNT OF THE LENDER WHICH HAS BEEN DISCLOSE D IN HIS INCOME TAX ASSESSMENTS BY FILING THE RETURN. THE SOURCES FOR ACQUISITION OF THE PROPERTY ARE EXPLAINED AS SUCH THERE IS NO JUSTIFI CATION TO TAX THE SUBSEQUENT ASSET ACQUIRED OUT OF THE EXPLAINED SOU RCE. ' 3.2 AO DID NOT CONSIDER THE CONTENTIONS OF THE ASSE SSEE. THE AO REFERRED THE DOCUMENTS SEIZED ON 18/02/2010 TYPED O N 100/- STAMP PAPER WHERE THE ASSESSEE ALONG WITH CO-OWNER SHRI B . SHANKAR YADAV ADDRESSED THE LETTER TO SHRI R.K. AGARWAL, AN D THE CONTENTS OF THE DOCUMENTS WERE REPRODUCED BY THE AO IN HIS ORDE R, WHICH ARE AS UNDER: 'DEAR SIR, THIS IS TO PLACE ON RECORD THAT YOU HAVE PAID THE ENTIRE SALE CONSIDERATION OF RS.98,00,000/- (RUPEES NINETY EIGHT LAKHS ONLY) FOR PURCHASE OF HOUSE BEARING NO.5-97/1 (OLD), 5-97/3 AND 5-97/4 ( NEW), ADMEASURING 450 SQ. YARDS, SITUATED AT RAIDURG PAIGH VILLAGE, SERI LINGAMPALLY MANDAI AND MUNICIPALITY, RANGA REDDY DISTRICT TO SMT. D. PAD MA AND D. SHANKAR KUMAR FOR PURCHASE OF THEIR PROPERTY AND 1 DUE TO SOME PROBLEMS, YOU HAVE REQUESTED US TO TAKE AGREEMENT OF SALE IN OUR _ NAME AND RE- TRANSFER THE SAME AS AND WHEN REQUESTED BY YOU. KE EPING OUR ASSOCIATION WITH YOU IN VIEW, WE HAVE ACCEPTED YOUR REQUEST AN D AGREED TO OBTAIN THE AGREEMENT OF SALE-CUM-IRREVOCABLE GENERAL POWER OF ATTORRNEY FROM SMT. D PADMA AND D. SHANKAR KUMAR IN RESPECT OF THEIR P ROPERTY IN OUR NAMES AND WE HEREBY ASSURE YOU AND UNDERTAKE TO TRANSFER THE SAID PROPERTY IN 4 ITA NOS. 1892 & 1893/HYD/2014 AND CO 10/HYD/15 SHRI M.S. ANAND AND SHRI B. SHANKAR YADAV YOUR FAVOUR OR IN FAVOUR OF YOUR NOMINEE AS AND WH EN REQUESTED BY YOU. WE MAKE IT CLEAR THAT WE WILL NOT MAKE ANY CLAIM T O THE PROPERTY COVERED BY THE AGREEMENT OF SALE-CUM-IRREVOCABLE GENERAL P OWER OF ATTORNEY AS WE HAVE NOT CONTRIBUTED ANY AMOUNT FOR PURCHASE OF THE ABOVE PROPERTY. OUT OF TRUST AND CONFIDENCE REPOSED ON US BY YOU, WE ARE TAKING THE AGREEMENT OF SALE-CUM-IRREVOCABLE GENERAL POWER OF ATTORNEY IN OUR NAME FROM THE ABOVE TWO PEOPLE IN RESPECT OF THEIR PROP ERTY. THIS LETTER IS ISSUED TO YOU PLACING THE ABOVE UND ERSTANDING ON RECORD IN RESPECT OF THE ABOVE TRANSACTION. THANKING YOU, YOURS FAITHFULLY, 1. B. SHANKER YADAV SD/- 2. M. S. ANAND. S/D' 3.3 THE AO CONSIDERING THE ABOVE LETTER DATED 18/02 /2010 AND ALSO TAKING INTO CONSIDERATION THE STATEMENTS OF THE ASS ESSEE, SHRI B. SHANKAR YADAV AND SHRI RAJENDER KUMAR AGAWAL, HE MA DE THE SUBSTANTIVE ADDITION IN THE HANDS OF SHRI RAJENDRA KUMAR AGARWAL AND MADE 50% OF RS. 98,99,200/- EACH AMOUNTING TO R S. 49,49,600 PROTECTIVELY IN THE HANDS OF ASSESSEE AND SHRI SHAN KAR YADAV. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A). THE CIT(A) HAS GIVEN RELIEF TO THE ASSESSEE BY HOLD ING THAT THE WHOLE TRANSACTION APPEARS TO BE A SHAM TRANSACTION ENTERE D INTO FOR THE PURPOSE OF CONCEALING THE INCOME OF SHRI RAJENDRA K UMAR AGARWAL BY INTRODUCING THE BENAMEES AND HENCE, THE UNEXPLAINED INVESTMENT NEEDS TO BE TAXED ONLY IN THE HANDS OF SHRI RAJENDR A KUMAR AGARWAL ON SUBSTANTIVE BASIS. ACCORDINGLY, THE ADDITION MAD E ON PROTECTIVE BASIS IN THE HANDS OF THE ASSESSEE CANNOT BE SUSTAI NED. HE DIRECTED THE AO TO DELETE THE ADDITION MADE IN THE HANDS OF ASSESSEE. 5. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCO UNT OF UNDISCLOSED INVESTMENT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF AO BE RESTORED. 5 ITA NOS. 1892 & 1893/HYD/2014 AND CO 10/HYD/15 SHRI M.S. ANAND AND SHRI B. SHANKAR YADAV 6. LD. DR RELIED ON THE ORDER OF THE AO. 7. THE LD. AR, ON THE OTHER HAND, RELIED ON THE ORD ER OF CIT(A) AND ARGUED THAT THE ASSESSEE IS A BENAMI OF SHRI RAJEND RA KUMAR AGARWAL AND THE INVESTMENT WAS MADE IN THE PROPERTY BY SHRI RAJENDRA KUMAR AGARWAL AND ASSESSEE HAS LENT HIS NA ME IN THE PROCESS. HE ALSO SUBMITTED THAT ASSESSEE HAD ACQUIR ED PROPERTY BY UTILIZING THE FUNDS BORROWED FROM SHRI RAJENDRA KUM AR AGARWAL, THEREFORE, PROVISIONS OF SECTION 69 WILL NOT APPLY TO THE CASE OF ASSESSEE. 8. CONSIDERING THE SUBMISSIONS OF BOTH THE COUNSELS AND THE MATERIAL FACTS ON RECORD, THERE IS NO DISPUTE THAT SHRI RAJENDRA KUMAR AGARWAL PURCHASED THE PROPERTY BY USING THE NAMES O F M.S. ANAND AND B. SHANKAR YADAV, ASSESSEES, WHICH WAS ACCEPTED BY THE DEPARTMENT. ACCORDINGLY, THE DEPARTMENT HAS ALREADY ASSESSED TO TAX THE AMOUNT OF RS. 98,99,600 IN THE HANDS OF SHRI RA JENDRA KUMAR AGARWAL. FROM THE RECORDS PRODUCED BEFORE US, IT IS CLEAR THAT MR. MS ANAND AND MR. B. SHANKAR YADAV PURCHASED THIS PROPE RTY OUT OF THE FUNDS RECEIVED FROM SHRI RAJENDRA KUMAR AGARWAL AND PAID THE PURCHASE CONSIDERATION ONLY THROUGH BANKING CHANNEL . SINCE THE MONEY WAS BORROWED FROM SHRI RAJENDRA KUMAR AGARWAL , THE IDENTITY OF THE LENDER IS ESTABLISHED. THE ASSESSEE HAS DISC HARGED THE ONUS OF PROVING THE SOURCE OF FUNDS FOR INVESTMENT, HENCE, THE PROVISIONS OF SECTION 69 WILL NOT APPLY. MOREOVER, SUBSTANTIVE AS SESSMENT WAS ALREADY MADE IN THE HANDS OF SHRI RAJENDRA KUMAR AG ARWAL AND, THEREFORE, AGAIN THE SAME INCOME CANNOT BE ASSESSED IN THE HANDS OF ASSESSEE. WE ARE INCLINED TO UPHOLD THE ORDER OF TH E CIT(A) IN DELETING THE ADDITION MADE IN THE HANDS OF ASSESSEE AND DISMISS THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD. 9. SINCE THE FACTS IN THE CASE OF SHRI B. SHANKAR Y ADAV (ITA NO. 1892/HYD/14 ARE MATERIALLY IDENTICAL TO THAT OF M.S . ANANDS CASE (SUPRA), FOLLOWING THE CONCLUSIONS DRAWN THEREIN, W E UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE IN THIS CASE ALSO. 6 ITA NOS. 1892 & 1893/HYD/2014 AND CO 10/HYD/15 SHRI M.S. ANAND AND SHRI B. SHANKAR YADAV 10. AS WE HAVE UPHELD THE ORDER OF CIT(A) DISMISSIN G THE REVENUES APPEAL, THE C.O. RAISED BY THE ASSESSEE SHRI M.S. A NAND BECOMES INFRUCTUOUS, THEREFORE, THE SAME IS DISMISSED AS I NFRUCTUOUS. 11. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND C.O. FILED BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY , 2016. (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND JANUARY, 2016 KV COPY TO:- 1) DCIT, CENTRAL CIRCLE 2(2), 3 RD FLOOR, POSNETT BHAVAN, TILAK ROAD, RAMKOTE, HYDERABAD 500 095 2) SRI M.S. ANAND, D.NO. 10-5-344/1, NEAR SUBH ASH STATUTE, NORTH LALAGUDA, TUKARAM GATE, HYDERABAD 3) SHRI B. SHANKAR YADAV, D.NO. 11-2-1128/1, B AZARGHAR, HABEEB NAGAR, HYDERABAD 4) CIT(A) - 1, HYDERABAD 5) CIT(CENTRAL), HYDERABAD 6) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.