ACIT, Central Circle-1(1), Hyd, Hyderabad V. Alluri Krishna Reddy, Hyd, Hyderabad

ITA 1127/HYD/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2350 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-08-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Unexplained investment; Document seized; Condonation of delay; Documents seized
• Section: 143(3); 153A; 69; 132

Judgement Text

ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1127/HYD/2015 (ASSESSMENT YEAR: 2009-10) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), HYDERABAD VS SRI ALLURI KRISHNA REDDY HYDERABAD PAN: ACHPA 5457 C C.O.51/HYD/2016 (ARISING OUT ITA NO.1127/HYD/2015) (ASSESSMENT YEAR: 2009-10) SRI ALLURI KRISHNA REDDY HYDERABAD PAN: ACHPA 5457 C VS ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), HYDERABAD FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR FOR ASSESSEE : SHRI V. RAGHAVENDRA RAO O R D E R PER SMT. P. MADHAVI DEVI, J.M. THE APPEAL IS FILED BY THE REVENUE FOR THE A.Y 2009 -10 AGAINST THE ORDER OF THE CIT (A)-XI HYDERABAD, DATE D 10.06.2015 AND THE CROSS OBJECTION FOR THE SAME A.Y IS FILED BY THE ASSESSEE WITH A DELAY OF 305 DAYS. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: DATE OF HEARING : 17.04.2017 DATE OF PRONOUNCEMENT : 07.07.2017 ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 2 OF 7 1 THE ORDER OF THE LD. CIT(APPEALS) IS ERRONEOUS ON FACTS AND IN LAW. 2. THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS. 4,37,58,507/- BEING THE EXCESS SHARE APPLICATION MONEY AS 'UNEXPLAINED INVESTMENT' RELYING ONLY ON THE BALANCE SHEET FURNISHED BY THE ASSESSEE AND WITHOUT PRODUCTION OF PROPER OR SUBSTANTIAL EVIDENCES TO CORROBORATE THE SAME. 3 ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND IS ENGAGED IN CIVIL CONTRACT WORK. H E HAS FLOATED A COMPANY UNDER THE NAME AND STYLE OF M/S. AKR CONSTR UCTION LTD WHICH IS ENGAGED IN EXECUTING CONTRACT WORK/SUB-CON TRACTED TO IT BY M/S. NCCL. ASSESSEE FILED HIS RETURN OF INCOME O N 30.09.2009 ADMITTING AN INCOME OF RS.90,83,540. THE RETURN WAS PROCESSED U/S 143(1) ON 15.3.2011. MEANWHILE, A SEARCH AND SE IZURE OPERATION WAS CONDUCTED U/S 132 OF THE ACT AT THE R ESIDENTIAL PREMISES OF THE ASSESSEE ON 6.10.2010. CONSEQUENT T O THE SAME, A NOTICE U/S 153A OF THE ACT WAS ISSUED ON 22.02.20 11, IN RESPONSE TO WHICH, THE ASSESSEE FILED HIS RETURN OF INCOME ON 31.3.2011 ADMITTING AN INCOME OF RS.90,83,540. DURI NG THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 153A OF TH E ACT, THE AO OBSERVED THAT DURING THE COURSE OF SURVEY OPERATION S U/S 153A OF THE ACT, IN THE CASE OF AKR CONSTRUCTION (P) LTD, S OME INCRIMINATING MATERIAL WAS IMPOUNDED OUT OF WHICH P AGES 53 AND 54 OF ANNEXURE A/AKR/133A/10-11/2 REPRESENTED CERTI FICATE OF NET WORTH GIVEN BY SRI V. MOHAN RAO, COMPANY SECRET ARY ACCORDING TO WHICH M/S. AKR CONSTRUCTION HAS TAKEN OVER ALL THE ASSETS AND LIABILITIES OF THE ASSESSEES PROPRIETAR Y BUSINESS. IT WAS ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 3 OF 7 FOUND FROM THE P&L A/C THAT THE INTEREST OF RS.91,8 3,544 WAS DISCLOSED AS INCOME FROM BUSINESS. OBSERVING THAT T HE BUSINESS OF THE ASSESSEE HAS BEEN TAKEN OVER BY AKR CONSTRUC TIONS AND NO INVESTMENT WAS AVAILABLE WITH THE PROPRIETARY CONCE RN OF THE ASSESSEE TO DISCLOSE INTEREST INCOME, THE AO OBSERV ED THAT THE INTEREST INCOME IS TO BE RECOGNIZED IN THE CASE OF THE COMPANY AND NOT IN THE HANDS OF THE ASSESSEE. THE ASSESSEE WAS THEREFORE, ASKED TO EXPLAIN AS TO WHY INVESTMENTS IN FDRS SHO ULD NOT BE ADDED TO THE ASSESSEES INCOME AS UNEXPLAINED INVES TMENT U/S 69 OF THE ACT. THE ASSESSEE FILED ITS RESPONSE STATING THAT MOST OF THE FDRS WERE IN FACT BANK GUARANTEES TAKEN IN THE NAME OF THE ASSESSEE AS THE PROPRIETOR OF THE BUSINESS BUT COUL D NOT BE TRANSFERRED IN THE NAME OF THE COMPANY DUE TO THE O BJECTIONS FROM THE BANKS FOR PRACTICAL DIFFICULTIES AND THERE FORE, AS AND WHEN THE FDRS MATURED, THEY ARE CREDITED TO THE ACC OUNTS OF THE COMPANY BUT TILL THEN AS PER THE UNDERSTANDING, THE INTEREST ON FDR IS SHOWN IN THE NAME OF THE ASSESSEE AS HE ALONE IS ENTITLED TO SHOW IT AS HIS INCOME. IT WAS ALSO SUBMITTED THA T THE COMPANY M/S. AKR CONSTRUCTIONS HAS NOT PAID TO THE ASSESSEE ANY REMUNERATION AND THE BANK IS PAYING INTEREST DIRECT LY TO THE ASSESSEE BY MAKING TDS AND THEREFORE, THERE IS NO U NEXPLAINED INVESTMENT MADE BY THE ASSESSEE. AO WAS HOWEVER, NO T CONVINCED AND MADE AN ADDITION OF RS.91,83,544. FURTHER AS PER THE SEIZED DOCUMENTS, THE NET WORTH OF ALL THE ASSETS AND LIAB ILITIES TAKEN OVER BY THE COMPANY AND THE EQUITY SHARES WAS VALUE D AT RS.15,97,03,280. ON VERIFICATION OF THE BALANCE SHE ET FILED ALONG WITH THE RETURN OF INCOME FOR THE A.Y 2009-10, THE AO FOUND THAT THE ASSESSEE HAS SHOWN RS.20,51,16,078 AS INVESTMEN T. THE AO THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DIFFERENCE SHOULD NOT BE TREATED AS UNEXPLAINED INVESTMENT. TH E ASSESSEE ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 4 OF 7 EXPLAINED THAT THE ADDITIONAL AMOUNTS WERE INVESTED BY THE ASSESSEE COMPANY DURING THE YEAR 2008-09, THE TOTAL OF WHICH WERE RS.4,37,58,507 AND THAT THIS AMOUNT IS REFLECT ED IN THE BOOKS OF ACCOUNT AS WELL AS THE BALANCE SHEET OF M/ S. AKR CONSTRUCTION AS SHARE APPLICATION MONEY. IT WAS ALS O SUBMITTED THAT THERE WERE UNSECURED LOANS OF RS.10.10 CRORES AS ON 31.03.2009 OUT OF WHICH RS.4.37 CRORES IS INVESTED IN SHARE APPLICATION MONEY IN THE COMPANY AND ALL THE TRANSA CTIONS ARE ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND CANNOT BE TREATED AS UNEXPLAINED INVESTMENT. THE AO WAS HOWEVER, NOT CON VINCED AND OBSERVED THAT THE ASSESSEE HAS ADMITTED THE ADDITIO NS AND WAS UNABLE TO EXPLAIN THE SOURCES OF EXCESS OF ASSETS. ACCORDINGLY, HE BROUGHT IT TO TAX AS UNEXPLAINED INVESTMENT. SIMILA RLY, THE AO ALSO ESTIMATED THE INCOME OF THE ASSESSEE AT 5% OF T HE TOTAL TURNOVER AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO GRANTED RELIEF TO THE ASSESSEE AND THE REVENUE IS IN APPEAL BEFORE US. THE ASSESSEE HA D ALSO CHALLENGED THE VALIDITY OF THE ASSESSMENT BEFORE TH E CIT (A) ON THE GROUND THAT NO INCRIMINATING MATERIAL WAS FOUND DUR ING THE COURSE OF SEARCH. OBSERVING THAT THE ADDITIONS HAVE BEEN DELETED, THE CIT (A) DID NOT ADJUDICATE THIS GROUND OBSERVIN G THAT IT IS ONLY AN ACADEMIC EXERCISE. AGAINST THE RELIEF GIVEN BY T HE CIT (A), THE REVENUE IS IN APPEAL BEFORE US, WHILE THE ASSESSEE HAS FILED CROSS OBJECTIONS FOR NON ADJUDICATION OF THE GROUND AGAIN ST THE VALIDITY OF THE ASSESSMENT BY THE CIT (A). 4. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS F AILED TO PRODUCE ANY EVIDENCE BEFORE THE CIT (A) TO SUBST ANTIATE ITS CLAIM OF INVESTMENT IN FDRS AS WELL AS SHARE CAPITA L AND THE CIT (A), WITHOUT VERIFYING ANY DOCUMENTS WHATSOEVER, HA S GRANTED ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 5 OF 7 RELIEF TO THE ASSESSEE. HE THEREFORE, PRAYED THAT T HE ORDER OF THE AO BE CONFIRMED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SUBMITTED WHEN THE ASSESSEE HAS FILED ALL THE DETAILS BEFORE THE AO AND ARE ALL PART OF THE RECORD OF THE AO, BU T THE AO HAS NOT VERIFIED THE SAME AND THAT THE CIT (A) AFTER CO NSIDERING THE ISSUE ON MERITS HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THEREFORE, THE ORDER OF THE CIT (A) ON MERITS N EEDS TO BE CONFIRMED. 6. AS REGARDS THE PETITION FOR CONDONATION OF DELAY FILED BY THE ASSESSEE, THE LEARNED DR OBJECTED TO THE CON DONATION OF DELAY AND ALSO SUBMITTED THAT THE ASSESSEE CANNOT F ILE A CROSS OBJECTION WHEN THERE IS NO DECISION GIVEN BY THE CI T (A) ON THE VALIDITY OF THE ASSESSMENT. HE SUBMITTED THAT IN SU CH CIRCUMSTANCES, THE ASSESSEE CAN ONLY FILE A CROSS A PPEAL. IN SUPPORT OF THIS CONTENTION, HE PLACED RELIANCE UPON THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL AT BANGALORE I N THE CASE OF DCIT VS. INDO AMERICAN HYBRID SEEDS REPORTED IN (20 17) 183 TTJ (BANG) PAGE 474. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS TRIED TO E XPLAIN THE DISCREPANCIES NOTICED BY THE AO DURING THE ASSESSME NT PROCEEDINGS, BUT THE AO HAS NOT CONSIDERED ANY OF T HE SAID EVIDENCE AND MADE THE ADDITIONS TO THE RETURNED INC OME OF THE ASSESSEE. EVEN THE CIT (A) HAS NOT DISCUSSED THE IS SUE ON MERIT, BUT HAS GIVEN RELIEF TO THE ASSESSEE BY HOLDING THA T THE ASSESSEE ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 6 OF 7 HAS EXPLAINED THE DISCREPANCIES. THE ONLY REASON GI VEN BY THE CIT (A), IS THAT THE AO HAS NOT RAISED ANY QUERIES WITH REGARD TO THE EXPLANATION GIVEN BY THE ASSESSEE. IF THE CIT (A) H AD COME TO SUCH CONCLUSION, SHE OUGHT TO HAVE MADE HER OWN INQUIRIE S BEFORE GIVING RELIEF TO THE ASSESSEE OR SHOULD HAVE CALLED FOR A REMAND REPORT FROM THE AO. SINCE THE EVIDENCE FILED BY THE ASSESSEE WAS NOT VERIFIED EITHER BY THE AO OR BY THE CIT (A), WE DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF THE CIT (A) AND RE MAND THE ENTIRE ISSUE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATI ON IN ACCORDANCE WITH LAW. IT SHALL BE OPEN TO THE ASSESSEE TO RAISE ANY OBJECTION INCLUDING OBJECTIONS ABOUT THE VALIDITY OF THE ASSE SSMENT BEFORE THE AO. SINCE THE ASSESSMENT ITSELF HAS BEEN SET AS IDE TO THE FILE OF THE AO IN THE REVENUES APPEAL, WE ARE NOT INCLI NED TO GO INTO THE DELAY CONDONATION PETITION FILED BY THE ASSESSE E OR THE MAINTAINABILITY AND ADMISSIBILITY OF THE CROSS OBJE CTION FILED BY THE ASSESSEE AS IT WOULD ONLY BE AN ACADEMIC EXERCI SE. 8. IN THE RESULT, REVENUES APPEAL IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES AND THE C.O. FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JULY, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 7 TH JULY, 2017. VINODAN/SPS ITA NO.1127 OF 2015 ALLURI KRISHNA REDDY HYDERABAD PAGE 7 OF 7 COPY TO: 1 ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), 3 RD FLOOR, ROOM NO.310 CHURCH BUILDING POSNETT BHAVAN, KINGKOT I HYDERABAD 2 SRI ALLURI KRISHNA REDDY, H.NO.8-2-684/J4 KANAKA DURGA TEMPLE LANE, ROAD NO.12, BANJARA HILLS, HYDERABAD 3 CIT (A)-XI HYDERABAD 4 PR. CIT CENTRAL, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER