Raj Kishore Agarwal, Hyderabad V. DCIT, Central Circle-4, Hyderabad

CO 27/HYD/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6874 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K MYTHILI RANI
• Assessee Lawyers: GANGAIAH
• Keywords: Search and seizure
• Section: 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, AM & SMT. ASHA VIJAYARAGHAVAN , JM ITA NO.1692/HYD/2010 ASSESSMENT YEAR 2006-07 THE DCIT, CENTRAL CIRCLE(4), HYDERABAD VS SHRI RAJ KISHORE AGARWAL, HYDERABAD (PAN ABFPA5489B) APPELLANT RESPONDENT CO.27/HYD/2011 IN ITA NO.1692/HYD/2010 ASSESSMENT YEAR 2006-07 SHRI RAJ KISHORE AGARWAL, HYDERABAD (PAN ABFPA5489B) VS THE DCIT, CENTRAL CIRCLE(4), HYDERABAD APPELLANT RESPONDENT REVENUE BY : SMT. K. MYTHILI RANI ASSESSEE BY : SHRI GANGAIAH DATE OF HEARING : 27.12.2011 DATE OF PRONOUNCEMENT : 12.1.2012 ORDER PER ASHA VIJAYARAGHAVAN, JM . THE APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDE R PASSED BY THE CIT(A) VII, HYDERABAD DATED 25.10.2010 AND THEY PE RTAINS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE THERE WAS A SEARCH AND SEIZURE OPERATIONS U/S 132 OF THE IT ACT, IN THE CASE OF S HRI JAI BALAJI GROUP OF CASES ON 12.9.2006 AND COMPLETED ON 11.11.2006. DURING THE SEARCH OPERATION AND SURVEY CONDUCTED IN ASSESSEES BUSINESS PREMISES, CERTAIN INCRIMINATING DOCUMENTS WERE FOUN D AND SEIZED. ITA NO.1692/10 & CO.27/11 SHRI RAJ KISHORE AGARWAL, HYDERABAD 2 SUBSEQUENTLY, THE ASSESSEES CASE WAS NOTIFIED WITH DCIT CENTRAL CIRCLE 4, HYDERABAD AND THE ASSESSMENT WAS COMPLETE D BASED ON THE INFORMATION COLLECTED BY THE ASSESSING OFFICER. TH E ASSESSEE IS A PARTNER IN M/S JAI BALAJI POLYMERS DOING THE BUSINE SS OF MANUFACTURING OF WATER TANKS AND WAS STARTED IN THE YEAR 1997 WITH SHRI RAJ KISHORE AGARWAL AND SRI C.. SRINIVAS REDDY AS PARTNERS HAVING EQUAL SHARE I.E. 50% SHARE EACH. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER QUESTIONED SHRI C.. SRINIVAS REDDY U/S 133A. 3. SHRI C SRINIVAS REDDY IN HIS STATEMENT RECORDE D U/S 133A ON 12.9.2006 HAS STATED AS UNDER: Q.NO.1 PLEASE INTRODUCE YOURSELF? ANS: I AM SRI C SRINIVAS REDDY S/O SRI C. NARASIN HA REDDY AGED 34 YEARS. MY WIFE SMT. C. KAVITA IS THE PROPR IETOR OF M/S BALAJI INDUSTRIES BUT I LOOK AFTER ALL THE AFFAIRS OF THE BUSINESS. Q.NO.2: PLEASE GIVE DETAILS OF YOUR BUSINESS I.E . SINCE WHEN YOU ARE ENGAGED IN THIS BUSINESS PRODUCT LINE? ANS: MYSELF I.E. C SRINIVAS REDDY ALONG WITH SRI RAJ KISHORE AGARWAL STARTED THE BUSINESS OF MANUFACTURING WATER TANKS IN THE YEAR 1997 WITH THE CAPITAL OF RS.2 LAKHS EACH IN TH E NAME OF M/S JAI BALAJI POLYMERS. THIS ARRANGEMENT WAS CONTINUE D FOR NEXT 3 YEARS. DURING THE YEAR 2000, THERE WAS SOME FAMILY DISPUTE BETWEEN THE MEMBERS OF THE AGARWAL FAMILY AND THE F ATHER OF SRI RAJ KISHORE AGARWAL, SRI ISWARLAL AGARWAL INSISTED THAT HE WILL HIMSELF LOOK AFTER THE AFFAIRS OF THE ABOVE MENTION ED FIRM AND THE PROFIT SHARE OF AGARWAL FAMILY WAS RECEIVED BY SRI ISWARLAL AGARWAL. THIS CONTINUED FOR APPROXIMATELY FOR 1 YEARS. THEREAFTER, THE YOUNGER BROTHER OF SRI RAJ KISHORE AGARWAL, SRI ANIL KISHORE AGARWAL STARTED LOOKING AFTER THE AFFA IRS OF THE PARTNERSHIP FIRM AND THE PROFIT SHARE OF THE AGARWA L WAS RECEIVED BY SRHI ANIL KISHRE AGARWAL. THIS CONTINUED TILL T HE YEAR 2003. FROM THE YEAR 2003 ONWARDS THE FACTORY STARTED RUNN ING IN LOSSES AND IT WAS CLOSED OUT. IT REMAIN CLOSED TILL JANUA RY, 2006, WHEN I ITA NO.1692/10 & CO.27/11 SHRI RAJ KISHORE AGARWAL, HYDERABAD 3 TOOK OVER THERE 50% SHARE IN THE SAID FIRM AND THE FIRM M/S JAI BALAJI POLYMERS BECAME MY PROPRIETARY CONCERN. THI S CONCERN WAS BEING RUN FROM PLOT NO.341, 342 SURVEY NO.169, DOOLAPALLY ROAD, JEDIMETLA. THIS PREMISES IS A FACTORY PREMIS ES WHERE THE MANUFACTURING OF OVER HEAD TANKS WAS DONE. Q.NO.3: PLEASE STATE WHAT WAS THE AMOUNT PAID BY YOU TO THEM TO TAKE OVER THERE 50% SHARE OF THE PARTNERSHIP? ANS: THE SETTLEMENT WAS DONE FOR THE TOTAL AMOUNT OF RS.8 LAKHS. OUT OF WHICH RS.4 LAKHS WERE ADJUSTED AGAIN ST THE WORKING CAPITAL WHICH WAS IN POSSESSION OF AGARWAL FAMILY AND THE BALANCE OF RS.4 LAKHS WAS PAID BY ME TO SRI ISW ARLAL AGARWAL IN CASH IN THE MONTH OF JANUARY, 2006. Q.NO.4: WHO WAS LOOKING AFTER THE DAY TO DAY MANA GEMENT OF THE FIRM M/S JAI BALAJI POLYMERS SINCE ITS INCEPTIO N? ANS: I WAS LOOKING AFTER THE DAY TO DAY AFFAIRS O F THE JAI BALAJI POLYMERS WITHOUT ANY INTERFERENCE FROM THE AGARWAL FAMILY TILL THE YEAR 2000. FROM THE YEAR 2000 SRI ISWAR AGARWAL ST ARTED MANAGING FIRM HIMSELF AND ALL THE CONTROL WAS TAKEN AWAY FROM ME. THIS CONTINUED TILL THE YEAR 2006 WHEN I TOOK OVER THE PARTNERSHIP FIRM. Q.NO.5: DO YOU HAVE ANY OTHER BUSINESS CONCERN BE SIDE THE ABOVE MENTIONED FIRM? ANS: IN THE YEAR 2000 I STARTED A FIRM NAME M/S B ALAJI INDUSTRIES AS A PROPRIETARY CONCERN OF MY WIFE SMT. D. KAVITA. HOWEVER, ALL THE AFFAIRS OF THIS CONCERN ARE MANAGE D BY ME. AS SEEN FROM THE STATEMENT OF SRI C. SRINIVAS REDDY , THE SETTLEMENT FOR TAKING OVER 50% OF SHARE OF JAI BALA JI POLYMERS WAS DONE FOR A TOTAL AMOUNT OF RS.8 LAKHS, OUT OF WHICH RS.4 LAKHS WAS REPORTEDLY ADJUSTED AGAINST THE WORKING CAPITAL WHICH WAS IN THE POSSESSION OF AGARWAL FAMILY AND THE BALANCE OF RS.4 LAKHS WAS PAID BY CASH TO SRI ISWAR AGARWAL IN THE MONTH OF JANUARY, 2006. SINCE THE ASSESSEE HAS NOT ADMITTED THE CASH RECEIPTS OF RS.4 LAKHS, AND THE AMOUNT OF RS.4 LAKHS REPRESENTI NG CESSATION ITA NO.1692/10 & CO.27/11 SHRI RAJ KISHORE AGARWAL, HYDERABAD 4 OF LIABILITY AGAINST WORKING CAPITAL IN THE FIRM M/ S JAI BALAJI POLYMERS, IN HIS BOOKS OF ACCOUNT, THEY ARE REQUIRE D TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. 4. THE ASSESSING OFFICER HELD AS FOLLOWS: THE ASSESSEES EXPLANATION HAS BEEN CONSIDERED AND IT IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: I) AFTER THE TAKING OVER OF 50% IN THE BUSINESS OF BALAJI POLYMERS BY SRI C. SRINIVAS REDDY, THE AMOUNT RECEIVED OF RS .5 LAKHS IN CASH FROM SRI C. SRINIVAS REDDY HAS NOT BEEN RECORD ED IN THE BOOKS OF THE ASSESSEE. AS IT IS A RECEIPT WHICH IS REQUIRED TO BE BROUGHT TO TAX IN THE HANDS SO THE ASSESSEE. FURTH ER, ANOTHER AMOUNT OF RS.4 LAKHS REPRESENTING CESSATION OF LIAB ILITY AGAINST WORKING CAPITAL IN THE FIRM M/S JAI BALAJI POLYMERS IS ALSO A REVENUE RECEIPT WHICH IS REQUIRED TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. II) THE ASSESSEE COULD NOT PRODUCE ANY REGULAR BOOK S OF ACCOUNT RELATING TO JAI BALAJI POLYMERS EITHER DURING THE S URVEY OPERATION OR DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO FAILED TO ESTABLISH THAT THE RECEIPT OF RS.8 LAKHS HAD BEE N ACCOUNTED FOR IN HIS BOOKS OF ACCOUNT. AS SUCH THE CASH RECEIPT OF RS.4 LAKHS, THE AMOUNT OF RS.4 LAKHS REPRESENTING CESSATION OF LIABILITY AGAINST WORKING CAPITAL IN THE FIRM M/S JAI BALAJI POLYMERS AND RS.2 LAKH REPRESEN TING VALUE OF RELEASE OF THE ASSESSEES 50% SHARE IN THE LAND ON WHICH M/S JAI BALAJI POLYMER IS LOCATED ARE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFOR E THE CIT(A) AND POINTED OUT THAT IT IS CLEAR FROM THE RELEASE DEED ITSELF THAT THE ASSESSEE NEVER PAID AMOUNTS TO SHRI C. SRINIVAS RED DY BUT HAD RECEIVED AN AMOUNT OF RS.2 LAKHS FOR RELEASING 50% SHARE IN JAI BALAJI POLYMERS. IT WAS ALSO EXPLAINED THAT THE AMOUNT IN VOLVED IN THE TRANSACTION IS ONLY RS.2 LAKHS AND THE SAME WAS BRO UGHT TO THE ITA NO.1692/10 & CO.27/11 SHRI RAJ KISHORE AGARWAL, HYDERABAD 5 ASSESSEES CASH FLOW STATEMENT. FURTHER, IT WAS STA TED THAT RS.8 LAKHS WAS RECEIVED BY SHRI ISHWARLAL AGARWAL AND SHRI ANI L KUMAR AGARWAL WHO HAD ALSO MADE BUSINESS CONTRIBUTIONS FROM THE Y EARS 2003 TO 2006 IN CASE OF JAI BALAJI POLYMERS. HENCE THE ASS ESSING OFFICER HAD WRONGLY CONCLUDED THAT THE ASSESSEE HAD RECEIVED TH E ENTIRE AMOUNT OF RS.10 LAKHS AND MADE THE ADDITION OF RS.10 LAKHS AS UNACCOUNTED RECEIPTS. 6. THE CIT(A) HELD THAT RS.8 LAKHS IS THE PAYMENT MADE TO OTHER FAMILY MEMBERS AND THEREFORE CANNOT BE TREATED AS P AYMENT TO THE ASSESSEE AND DELETED THE ADDITION MADE BY THE ASSES SING OFFICER. 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE VERIFIED THE FACTS OF THE CASE AND FIND THAT THE ASSESSEE HAS RECEIVED ONLY RS.2 LAKHS WHICH IS EVID ENT FROM THE RELEASE DEED DATED 25.1.2006, WHEREAS THE OTHER RS .8 LAKHS WAS RECEIVED BY S/SHRI ISHWARLAL AGARWAL AND ANIL KUMAR AGARWAL BEING THE CONTRIBUTION MADE BY THEM IN THE BUSINESS. IT IS ALSO SEEN THAT THE AMOUNT OF RS.4 LAKHS PAID TO EACH OF THE FAMILY MEMBER VIZ., S/SHRI ISHWARLAL AGARWAL AND ANIL KUMAR AGARWAL DO NOT FIGURE AT ALL IN ANY BOOKS OF ACCOUNT. FURTHER, IT WAS STATED TH AT RS.4 LAKHS HAS BEEN PAID TO SHRI ISHWARLAL AGARWAL AT THE TIME OF RELINQUISHMENT OF ASSESSEES SHARES IN THE PARTNERSHIP FIRM. SHRI C. SRINIVAS REDDY IN HIS STATEMENT CLEARLY STATED THAT RS.4 LAKHS WAS AD JUSTED TOWARDS THE WORKING CAPITAL WHICH WAS SAID TO HAVE BEEN BROUGHT BY THE ASSESSEES FATHER AND BROTHER. HENCE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.10 LAKHS IN T HE HANDS OF THE ASSESSEE. ITA NO.1692/10 & CO.27/11 SHRI RAJ KISHORE AGARWAL, HYDERABAD 6 9. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A ND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT: 12 1.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH JANUARY, 2012 COPY FORWARDED TO: 1. THE DCIT, CENTRAL CIRCLE 4, HYDERABAD 2. SHRI RAJ KISHORE AGARWAL, 4-1-587/588/3, TROOP BAZA R, HYDERABAD 3. CIT(A) VII, HYDERABAD 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/