Dy. CIT, CIRCLE - 2(1), Vijayawada V. Smt. Vadde Haritha, Vijayawada

ITA 114/VIZ/2013

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9723 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Salary income; Additional evidence; Revised return; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 54F; 142(1); 143(2); 13

Judgement Text

ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.114/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) DCIT, CIRCLE - 2(1), VIJAYAWADA VS. SMT. VADDE HARITHA, VIJAYAWADA [PAN: AARPV72 21P ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.119/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) DCIT, CIRCLE - 2(1), VIJAYAWADA VS. S RI VADDE ANANTH, VIJAYAWADA [PAN: AARPV7222Q ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI ARAVINDAKSHAN, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 14.09.2016 / DATE OF PRONOUNCEMENT : 08.11.2016 ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST SEPARATE BUT IDENTICAL ORDERS OF THE CIT(A), VIJAYAWADA DATE D 7.12.2012 FOR THE ASSESSMENT YEAR 2009-10. SINCE, THE FACTS ARE IDEN TICAL AND ISSUES ARE COMMON, THEY ARE HEARD TOGETHER AND DISPOSED OFF, B Y THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS EXTRACTED FROM ITA NO.119/VIZAG/ 2013 ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM HOUS E PROPERTY, INCOME FROM OTHER SOURCES AND INCOME FROM CAPITAL GAINS FI LED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 20.11.200 9 DECLARING TOTAL INCOME OF RS.9,07,529/- BESIDES AGRICULTURAL INCOME OF RS.20,000/-. SUBSEQUENTLY, THE ASSESSEE HAS FILED REVISED RETURN ON 15.10.2010 ADMITTING TOTAL INCOME OF RS.26,37,102/-. IN THE R EVISED RETURN, THE ASSESSEE ADMITTED CAPITAL GAINS ON SALE OF SITE AT RS.17,29,573/-, IN ADDITION TO THE INCOME ALREADY DECLARED IN THE ORIG INAL RETURN OF INCOME FILED ON 20.11.2009. THE CASE HAS BEEN SELECTED FO R SCRUTINY THROUGH CASS AND ACCORDINGLY, NOTICES U/S 143(2) & 142(1) O F THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED T HE DETAILS CALLED ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 3 FOR. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF TH E ACT ON 29.12.2011 BY DETERMINING TOTAL INCOME OF RS.91,39, 950/- AFTER MAKING THE FOLLOWING ADDITIONS/ DISALLOWANCES. 1) LONG TERM CAPITAL GAINS ON SALE OF LAND - RS.55,44, 070/-. 2) UNEXPLAINED RECEIPTS SHOWN IN RECEIPT AND PAYMENTS ACCOUNT, U/S 68 OF THE ACT - RS.13,50,000/- 3) UNEXPLAINED RECEIPT FROM SMT. B. VIJAYA LAKSHMI - R S.4,50,000/-. 4) DISALLOWANCE OF INTEREST - RS.8,33,985/-. 5) ADDITIONS TOWARDS SHORT TERM CAPITAL GAIN - RS.22,4 00/-. 6) ADDITIONS TOWARDS INTEREST RECEIVED ON SAVINGS BANK ACCOUNT - RS.32,015/-. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE HAS AGITATED 4 ISSUES. 1) ADDITION TOWARDS LONG TERM CAPITAL GAIN ON SALE OF LAND. 2) UNEXPLAINED CREDITS U/S 68 OF THE ACT. 3) UNEXPLAINED RECEIPT FROM SMT. V. VIJAYA LAKSHMI AND 4) DISALLOWANCE OF INTEREST. 4. THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISS IONS AND ALSO FILED ADDITIONAL EVIDENCES TO SUPPORT HIS ARGUMENTS. THE CIT(A), AFTER CONSIDERING THE EXPLANATIONS OFFERED BY THE ASSESSE E AND ALSO TAKEN INTO ACCOUNT THE ADDITIONAL EVIDENCES FILED BY THE ASSES SEE, PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE, WHEREIN THE CIT(A ) HAS DIRECTED THE ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 4 A.O. TO RE-COMPUTE THE LONG TERM CAPITAL GAIN TOWAR DS SALE OF LAND AFTER ALLOWING INDEXED COST OF IMPROVEMENT AND EXPENSES O F TRANSFER TO THE EXTENT OF RS.2 LAKHS, OUT OF TOTAL EXPENDITURE CLAI MED BY THE ASSESSEE OF RS.2.5 LAKHS, ALLOWED EXEMPTIONS U/S 54F OF THE ACT , TOWARDS RE- INVESTMENT IN PURCHASE OF RESIDENTIAL HOUSE OF RS.3 8,70,600/- AS AGAINST ASSESSEES CLAIM OF RS.40 LAKHS THE CIT(A) FURTHER DIRECTED THE A.O. TO DELETE ADDITIONS MADE U/S 68 OF THE ACT, TOWARDS UN EXPLAINED RECEIPT SHOWN IN RECEIPT AND PAYMENTS ACCOUNT OF RS.13,50,0 00/- AND UNEXPLAINED RECEIPT OF RS.4,50,600/- RECEIVED FROM SMT. V. VIJAYA LAKSHMI. THE CIT(A) ALSO DIRECTED THE A.O. TO DELE TE ADDITIONS MADE TOWARDS DISALLOWANCE OF INTEREST U/S 57 OF THE ACT, FOR RS.8,33,985/-. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. 5. THE REVENUE HAS RAISED COMMON GROUNDS IN BOTH TH E CASES. FROM THESE GROUNDS OF APPEALS, THE REVENUE HAS AGITATED THE FOLLOWING ISSUES: 1) DELETION OF ADDITIONS TOWARDS EXPENSES OF TRANSFER AND COST OF IMPROVEMENTS. 2) DELETION OF ADDITIONS TOWARDS DISALLOWANCE OF EXEMP TION U/S 54F OF THE ACT. 3) DELETION OF ADDITIONS TOWARDS UNEXPLAINED CREDITS U /S 68 OF THE ACT. 4) DELETION OF ADDITIONS TOWARDS DISALLOWANCE OF INTER EST U/S 57 OF THE ACT. ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 5 6. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS TOWARDS DISALLOWANCE OF COST OF IMPROVEMENTS AND EX PENSES OF TRANSFER BEING LEGAL EXPENSES. THE A.O. DISALLOWED COST OF IMPROVEMENTS AND LEGAL EXPENSES CLAIMED BY THE ASSESSEE OF RS.2,50,0 00/- FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PROVE THE NATURE OF IMPROVEMENTS DONE FOR THE LAND AND ALSO FAILED TO PROVE THE EXPENDITU RE INCURRED TOWARDS LEGAL EXPENDITURE WITH NECESSARY EVIDENCES. THE A. O. WAS OF THE OPINION THAT THE ASSESSEE CLAIMS TO HAVE CONSTRUCTE D COMPOUND WALL AND ALSO INCURRED AMOUNT TOWARDS LEVELING OF LAND, HOWE VER, FAILED TO PROVE THE CONSTRUCTION OF COMPOUND WALL WITH NECESSARY EV IDENCES. THOUGH, THE ASSESSEE HAD FILED SOME PHOTOGRAPHS INDICATING CONSTRUCTION OF COMPOUND WALL, FAILED TO PROVE THE SAID PHOTOGRAPHS HAVE BEEN TAKEN IN THE LAND BELONGING TO THE ASSESSEE. SIMILARLY, THE A.O. OBSERVED THAT THE ASSESSEE CLAIMS TO HAVE INCURRED LEGAL EXPENSES TOWARDS RESOLVING THE DISPUTE ON THE LAND, FAILED TO FILE NECESSARY E VIDENCES TO PROVE THE EXPENDITURE. THEREFORE, OPINED THAT THE ASSESSEE H AS FAILED TO PROVE THE EXPENDITURE INCURRED TOWARDS COST OF IMPROVEMEN TS AND LEGAL EXPENSES AND ACCORDINGLY DISALLOWED THE SAME. IT I S THE CONTENTION OF THE ASSESSEE THAT HE HAD PURCHASED LAND IN THE YEAR 1998 FOR A CONSIDERATION OF RS.2,75,000/- AND CONSTRUCTED A CO MPOUND WALL IN THE YEAR 1999. THE ASSESSEE FURTHER CONTENDED THAT THE SITE HOLDERS IN THE ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 6 SURROUNDING AREAS CREATED LEGAL PROBLEMS AND THE PE RSONS AFFECTED HAD APPROACHED THE HIGH COURT AND FILED WRIT PETITION A ND THE HONBLE HIGH COURT VIDE WRIT PETITION NO.348 OF 2008 DATED 18.1. 2008 ORDERED FOR THE STATUS QUO TO BE MAINTAINED FOR 8 WEEKS. FOR THIS LEGAL DISPUTE, THE ASSESSEE HAS INCURRED LEGAL EXPENDITURE OF RS.50,00 0/-. THEREFORE, THE A.O. WAS NOT CORRECT IN DISALLOWING THE COST OF IMP ROVEMENTS BEING CONSTRUCTION OF COMPOUND WALL AND EXPENSES OF TRANS FER BEING LEGAL EXPENDITURE INCURRED FOR SAFEGUARDING THE TITLE OF THE LANDS. 7. HAVING HEARD BOTH THE PARTIES AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE A.O. DISALLOW ED COST OF IMPROVEMENT AND EXPENSES OF TRANSFER BEING LEGAL EX PENDITURE INCURRED BY THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HA S FAILED TO PROVE THE COST OF IMPROVEMENT AND EXPENSES OF TRANSFER WITH N ECESSARY EVIDENCES. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF TH E ASSESSEE AND ALSO TAKEN INTO ACCOUNT THE ADDITIONAL EVIDENCES FILED B Y THE ASSESSEE IN THE FORM OF PHOTOGRAPHS OF SITE TAKEN BY THE ASSESSEE A ND ALSO COPIES OF WRIT PETITION TO PROVE THE LEGAL DISPUTE ON THE IMP UGNED LAND DIRECTED THE A.O. TO ALLOW COST OF IMPROVEMENTS OF RS.1,50,0 00/-, AS AGAINST RS.2 LAKHS CLAIMED BY THE ASSESSEE AND RS.50,000/- TOWAR DS EXPENSES OF TRANSFER BEING LEGAL EXPENDITURE INCURRED. THE FAC TS REMAIN UNCHANGED. ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 7 THE REVENUE FAILS TO BRING ON RECORD ANY MATERIALS TO PROVE THE FINDINGS OF FACTS RECORDED BY THE CIT(A) IS INCORRECT. HENC E, WE INCLINED TO UPHOLD CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE REVENUE. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ADDITION TOWARDS EXEMPTION U/S 54 OF THE ACT, TOWARDS RE-INV ESTMENT IN PURCHASE OF RESIDENTIAL HOUSE. THE ASSESSEE CLAIMS EXEMPTIO N U/S 54F OF THE ACT FOR RS.40 LAKHS. THE A.O. DISALLOWED EXEMPTION CLA IMED BY THE ASSESSEE FOR THE REASON THAT THE ASSESSEE FAILED TO UTILIZE THE SALE CONSIDERATION FOR PURCHASE OF RESIDENTIAL HOUSE WITHIN 1 YEARS BE FORE THE DATE OF TRANSFER OR WITHIN 2 YEARS FROM THE DATE OF TRANSFE R, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 54F OF THE ACT. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS SOLD THE PRO PERTY ON 25.6.2008 AND TO CLAIM EXEMPTION U/S 54F OF THE ACT, OUGHT TO HAVE INVESTED THE SALE CONSIDERATION FOR PURCHASE OF ANOTHER RESIDENT IAL HOUSE ON OR BEFORE 24.6.2010. AS PER THE SALE AGREEMENT DATED 6.8.200 8 FURNISHED BY THE ASSESSEE, THE ASSESSEE HAS AGREED TO PURCHASE A RES IDENTIAL PROPERTY FOR A CONSIDERATION OF RS.20 LAKHS AS AGAINST THIS PAID ADVANCE OF RS.2,50,000/- AND THE REMAINING SALE CONSIDERATION OF RS.17,50,000/- WAS NOT PAID WITHIN THE PERIOD OF 2 YEARS FROM THE DATE OF TRANSFER AND ALSO NOT INVESTED IN CAPITAL GAIN DEPOSIT SCHEME AS REQUIRED UNDER SUB- ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 8 SECTION (4) OF SECTION 54F OF THE ACT, THEREFORE, O PINED THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM EXEMPTION U/S 54 OF THE AC T. 9. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAD SOLD HIS PROPERTY ON 9.7.2008 AND INVESTED SALE CONSIDERATION FOR PUR CHASE OF ANOTHER RESIDENTIAL HOUSE BY ENTERING INTO A SALE AGREEMENT -CUM-CONSTRUCTION AGREEMENT DATED 6.8.2008 INVOLVING AN AMOUNT OF RS. 20 LAKHS TOWARDS PURCHASE OF FLAT AND A FURTHER SUM OF RS.20 LAKHS T OWARDS ADDITIONAL WORKS FOR THE FLAT. THE ASSESSEE FURTHER CONTENDED THAT HE HAD ENTERED ANOTHER AGREEMENT WITH SRI CH. VARA PRASAD ON 23.10 .2008 FOR ADDITIONAL WORKS SUCH AS FLOORING, WOOD WORK, ELECT RICAL FITTINGS, PAINTINGS, ETC. TO THE FLAT AND PAID ADVANCE BEFORE FILING THE RETURN OF INCOME AND THE BALANCE AMOUNT HAS BEEN PAID IN THE SUBSEQUENT FINANCIAL YEAR. THE ASSESSEE FURTHER CONTENDED THA T HE HAD PURCHASED UNDER CONSTRUCTION FLAT AND AS PER THE PROVISIONS O F SECTION 54F OF THE ACT FOR THE PURPOSE OF CONSTRUCTION, THE ASSESSEE C AN INVEST THE SALE CONSIDERATION RECEIVED FROM TRANSFER OF CAPITAL ASS ET WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSERT. SINCE, HE HAD TRANSFERRED HIS ASSET ON 9.7.2008, THE TIME AVAILABLE TO INVEST THE SALE CONSIDERATION FOR PURCHASE OR CONSTRUCTION OF HOUSE PROPERTY IS UP TO 8.7.2011. THE ASSESSEE FURTHER CONTENDED THAT HE HAD INVESTED SAL E CONSIDERATION ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 9 WITHIN 3 YEARS FROM THE DATE OF SALE OF ORIGINAL AS SET I.E. ON 27.6.2011 WHEN HE GOT SALE DEED IN HIS FAVOUR TOWARDS PURCHAS E OF APARTMENT. THEREFORE, THE A.O. WAS NOT CORRECT IN DISALLOWING THE EXEMPTION CLAIMED TOWARDS RE-INVESTMENT IN PURCHASE OF ANOTHE R RESIDENTIAL HOUSE PROPERTY. 10. HAVING HEARD BOTH THE SIDES AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE A.O. DISALLOWED EXEMPTI ON CLAIMED U/S 54F OF THE ACT, FOR THE REASON THAT THE ASSESSEE OUGHT TO HAVE INVESTED THE SALE CONSIDERATION FOR PURCHASE OF NEW RESIDENTIAL HOUSE WITHIN 1 YEARS BEFORE THE DATE OF TRANSFER OR WITHIN 2 YEARS FROM THE DATE OF TRANSFER. SINCE, THE ASSESSEE HAS FAILED TO UTILIZE THE SALE CONSIDERATION TOWARDS RE-INVESTMENT WITHIN THE TIME SPECIFIED U/S 54F OF THE ACT, OPINED THAT THE ASSESSEE IS NOT ELIGIBLE FOR CLAIMING EXEMPTION U/S 54F OF THE ACT. THE CIT(A) FOR THE DETAILED REASONS RECORDED IN HIS ORDER, DIRECTED THE A.O. TO ALLOW EXEMPTION CLAIMED U/S 54F OF THE ACT, TO THE EXTENT OF RS.38,70,600/-, OUT OF TOTAL EXEMPTION CLAIMED BY T HE ASSESSEE OF RS.40 LAKHS. THE RELEVANT PORTION OF THE CIT(A) ORDER IS EXTRACTED BELOW: 5C. THIRD ISSUE IS DENIAL OF DEDUCTION UNDER SECTI ON 54F. THE AO HAS FOUND THAT THE SALE PROCEEDS ON SALE OF SITE AT HYD ERABAD ON 28.06.2008, WHICH WERE INVESTED IN CONSTRUCTION OF FLAT BY ENTE RING INTO AN AGREEMENT ON 20.06.2008 INVOLVING AN AMOUNT OF RS. 20,00,000 AND ANOTHER AGREEMENT ON 29.11.2008 FOR RS. 20,00,000 FOR FLOOR ING, WOODWORK, ELECTRICAL FITTINGS, PAINTS ETC. BUT, HOWEVER, THE AG WAS OF THE VIEW THAT ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 10 54F DEDUCTION IS AVAILABLE TO THE APPELLANT ONLY WH EN THE FLAT WAS PURCHASED ONE YEAR BEFORE OR TWO YEARS AFTER THE DA TE OF SALE OF THE SITE AND FOUND THAT THE APPELLANT HAS NOT GOT THE FLAT R EGISTERED IN HER NAME. IT WAS FURTHER OBSERVED BY THE AG THAT EXCEPT AGREEM ENTS ENTERED INTO, NO EVIDENCE OF PAYMENTS WAS FURNISHED BEFORE HIM. I T IS FURTHER HELD BY THE AG THAT THE CONFIRMATION PRODUCED BY THE APPELL ANT FROM THE BUILDER THAT THE AMOUNT AS PER AGREEMENT DATED 20.06.2008 H AS BEEN RECEIVED WAS ADVERSELY COMMENTED OBSERVING FURTHER THAT AS T O HOW MUCH AMOUNT WAS RECEIVED WAS NOT THERE AND THE APPELLANT HAS NO T PRODUCED THE EVIDENCE FOR MAKING PAYMENTS. FOR SUCH REASONS, THE AG HAS HELD THAT THE APPELLANT WAS NOT ENTITLED FOR THE IMPUGNED DED UCTION, WHICH APPEARS TO BE NOT CORRECT. HERE IT IS RELEVANT TO NOTE THAT THE APPELLANT HAS ENTERED INTO AN AGREEMENT FOR CONSTRUCTION OF FLAT, BUT NOT PURCHASE OF FLAT. THUS, SINCE IT IS THE CONSTRUCTION BUT NOT READY BUILT FL AT, THE TIME LIMIT IS 3 YEARS, BUT NOT 2 YEARS. IN ADDITION THERE ARE UMPTEEN NUMBE R OF DECISIONS TO SAY THAT BEFORE THE CUT-OFF DATE, SUBSTANTIAL INVESTMEN TS COULD HAVE BEEN MADE IN CONSTRUCTION OF THE FLAT. THUS, THE FOUNDAT ION FOR REJECTION OF THE CLAIM FOR DEDUCTION UNDER SECTION 54F IS SHAKY. WIT HOUT GIVING A FINDING THAT THE SALE PROCEEDS HAVE NOT BEEN INVESTED IN CO NSTRUCTION OF THE FLAT BY 27.6.2011, I.E., THREE YEARS AFTER SALE OF THE S ITE AT HYDERABAD ON 28.6.2008. EVEN THOUGH THE IMPUGNED ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) ON 29.12.2011, I.E., AFTER THE END OF THREE YEARS FROM THE DATE OF SALE OF SITE ON 28.6.2008 (THREE Y EARS EXPIRES ON 27.6.2011) NO FINDING WAS GIVEN BY THE AO REGARDING SUBSTANTIAL INVESTMENT IN CONSTRUCTION OF FLAT, AS THE AG HAS R EJECTED THE CLAIM ITSELF TAKING THE PERIOD FOR INVESTMENT AS TWO YEARS FROM THE DATE OF SALE OF THE SITE. IN THIS CONTEXT, IT MAY BE NOTED HERE THAT AS PER BOARD CIRCULAR NO.672 DATED 16-12-1993, THE ACQUISITION OF FLAT UN DER CONSTRUCTION HAS TO BE TAKEN AS A CASE OF CONSTRUCTION OF RESIDENTIAL F LAT AND NOT PURCHASE OF RESIDENTIAL FLAT AND THEREFORE THE TIME LIMIT FOR I NVESTMENT U/S.54F EXTENDS TO THREE YEARS BUT NOT TWO YEARS AS OPINED BY THE A SSESSING OFFICER. IN THIS CONTEXT, RELIANCE COULD BE HAD FROM THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF KISHORE H. GALIYA VS. ITO REPORTED IN ( 2012) 137 LTD 229 (MUM). IT IS THE CONTENTION OF THE AR THAT INVESTME NTS IN CONSTRUCTION OF FLAT HAVE BEEN COMPLETED WITHIN THREE YEARS AND THA T THE FLAT WAS ALSO REGISTERED IN THE NAME OF THE APPELLANT ON 27.6.201 1 AS EVIDENT FROM THE COPY OF THE REGISTERED SALE DEED PRODUCED, WHICH SA TISFIES THE PROVISIONS OF SECTION 54F FOR CLAIMING EXEMPTION. HOWEVER ON V ERIFICATION OF REGISTERED SALE DEED, IT IS SEEN THAT THE APPELLANT HAS INCURRED AN AMOUNT OF RS.1740000/- TOWARDS PURCHASE, RS. 130600/- TOWA RDS STAMP DUTY AGGREGATING TO RS.1870600/- AND THE APPELLANT HAS N OT FURNISHED THE DETAILS OF EXPENDITURE TO THE EXTENT OF RS.1,29,400 /-. HENCE, THE AO IS DIRECTED TO ALLOW THE CLAIM OF EXEMPTION MADE BY TH E APPELLANT U/S 54F OF THE ACT BY RESTRICTING THE VALUE OF PURCHASE OF NEW FLAT AT RS.38,70,600/-. ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 11 11. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAI LS FILED BY THE ASSESSEE INCLUDING COPY OF SALE DEED HELD THAT THE ASSESSEE HAS INVESTED SALE CONSIDERATION TOWARDS CONSTRUCTION OF RESIDENT IAL PROPERTY WITHIN 3 YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET. THE CIT(A) FURTHER HELD THAT AS PER BOARD CIRCULAR NO.672 DATED 16.12. 1993, THE ACQUISITION OF PLOT UNDER CONSIDERATION HAS TO BE TAKEN AS A CA SE OF CONSTRUCTION OF RESIDENTIAL FLAT AND NOT PURCHASE OF RESIDENTIAL FL AT AND THEREFORE, THE TIME LIMIT FOR INVESTMENT U/S 54F OF THE ACT EXTEND S TO 3 YEARS BUT NOT 2 YEARS AS OPINED BY THE A.O. THE FACTS REMAIN UNCHA NGED. THE REVENUE FAILS TO BRING ON RECORD ANY EVIDENCES TO PROVE THA T THE FINDINGS OF FACTS RECORDED BY CIT(A) IS INCORRECT. THEREFORE, WE UPH OLD THE CIT(A) ORDER AND REJECT THE GROUND RAISED BY THE REVENUE. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION TOWARDS UNEXPLAINED CREDITS U/S 68 OF THE ACT. THE A.O. MADE ADDITIONS OF RS.13,50,000/- U/S 68 OF THE ACT, FOR THE REASON THAT THE ASSESSEE FAILED TO PROVE THE CREDIT OF RS.13,50,000/- RECEIV ED FROM SMT. V. HARITA. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS R ECEIVED AMOUNT FROM SMT. V. HARITA, HOWEVER FAILED TO PROVE THE IDENTIT Y, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTY. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAD RECEIVED RS.13,50,000/- FR OM M/S. SUJANA ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 12 CONSTRUCTIONS PVT. LTD. TOWARDS SALE OF LAND THROUG H SMT. V. HARITA, HIS SISTER. THE PURCHASER OF THAT HAS PAID PART OF SAL E CONSIDERATION IN THE NAME OF SMT. V. HARITA, HIS SISTER AND SMT. V. HARI TA LATER TRANSFERRED THE SAID AMOUNT TO HIS ACCOUNT BY WAY OF BANK TRANS FERS. IN THE RECEIPT AND PAYMENT ACCOUNT, THE ASSESSEE HAS SHOWN SEPARAT ELY THE SALE CONSIDERATION OF RS.60 LAKHS RECEIVED FROM M/S. SUJ ANA CONSTRUCTIONS PVT. LTD. AND ALSO SHOWN AMOUNT RECEIVED FROM SMT. V. HARITA FOR THE PURPOSE OF DISCLOSURE OF EACH RECEIPTS IN BANK STAT EMENTS. THEREFORE, THE A.O. WAS INCORRECT IN HOLDING THAT ASSESSEE FAI LED TO PROVE THE CREDIT WITH NECESSARY EVIDENCES. WE FIND FORCE IN THE ARG UMENTS OF THE ASSESSEE FOR THE REASON THAT ON PERUSAL OF LEDGER E XTRACT OF SMT. V. HARITA AND ALSO COPY OF RECEIPT AND PAYMENTS ACCOUN TS OF THE ASSESSEE, WE FIND THAT SMT. V. HARITA HAS RECEIVED AN AMOUNT OF RS.13.50 LAKHS FROM M/S. SUJANA CONSTRUCTIONS PVT. LTD. ON BEHALF OF THE ASSESSEE TOWARDS SALE OF LAND. LATER SMT. V. HARITA HAS TRA NSFERRED THE SAID AMOUNT TO THE ASSESSEES ACCOUNT. IN THE LEDGER EX TRACT OF SMT. V. HARITA RS.13.50 LAKHS APPEARS IN BOTH THE SIDES. T HE A.O. WITHOUT APPRECIATING THE FACTS, SIMPLY OBSERVED THAT THE AS SESSEE HAS RECEIVED AN AMOUNT OF RS.13.50 LAKHS FROM SMT. V. HARITA, BU T FAILED TO PROVE THE CREDIT WITH NECESSARY EVIDENCES. THEREFORE, WE DIR ECT THE A.O. TO DELETE THE ADDITION TOWARDS RECEIPT FROM SMT. V. HARITA. ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 13 13. IN RESPECT OF ADDITIONS TOWARDS UNEXPLAINED CAS H CREDITS OF RS.4.5 LAKHS RECEIVED FROM SMT. V. VIJAYA LAKSHMI, THE A.O . OBSERVED THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.4.5 LAKHS FROM SM T. V. VIJAYA LAKSHMI, MOTHER OF THE ASSESSEE, HOWEVER FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAD RECEIVED AMO UNT FROM SMT. V. VIJAYA LAKSHMI, HIS MOTHER AND FURNISHED NECESSARY EVIDENCES IN THE FORM OF CONFIRMATION LETTERS AND INCOME TAX RETURN COPIES OF HIS MOTHER TO THE A.O. THE ASSESSEE FURTHER CONTENDED THAT SM T. V. VIJAYA LAKSHMI IS ALSO ASSESSED TO TAX WITH THE SAME A.O. AND HER INCOME TAX RETURNS ARE AVAILABLE WITH THE A.O. TO VERIFY THE TRANSACTI ONS. THE A.O. WITHOUT APPRECIATING THE FACTS, SIMPLY MADE ADDITIONS U/S 6 8 OF THE ACT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REAS ON THAT THE ASSESSEE HAS PROVED THE CREDIT BY FILING NECESSARY EVIDENCES IN THE FORM OF CONFIRMATION LETTERS FROM THE CREDITORS ALONG WITH HER INCOME TAX RETURNS. ON PERUSAL OF THE INCOME TAX RETURNS FILE D BY THE CREDITORS, WE FIND THAT THE CREDIT HAS SHOWN THE AMOUNT ADVANCED TO THE ASSESSEE IN HER INCOME TAX RETURNS. THEREFORE, WE ARE OF THE V IEW THAT THE A.O. WAS NOT CORRECT IN MAKING ADDITIONS OF RS.4,50,000/- U/ S 68 OF THE ACT. THE CIT(A) AFTER CONSIDERING THE RELEVANT FACTS RIGHTLY DELETED THE ADDITIONS MADE BY THE A.O. TOWARDS UNEXPLAINED CREDIT FROM SM T. V. HARITA AND ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 14 SMT. V. VIJAYA LAKSHMI. WE DO NOT SEE ANY REASONS TO INTERFERE WITH THE ORDER OF CIT(A), HENCE, WE INCLINED TO UPHOLD THE C IT(A) ORDER AND REJECT THE GROUND RAISED BY THE REVENUE. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION OF RS.8,72,000/- RECEIVED FROM SHRI Y. BOSE BABU AS UN EXPLAINED CASH CREDIT U/S 68 OF THE ACT. THE A.O. MADE ADDITIONS OF RS.8,72,000/- FOR THE REASON THAT THE ASSESSEE HAS FAILED TO PROVE TH E CREDIT WITH NECESSARY EVIDENCES. THE A.O. FURTHER OBSERVED THA T THOUGH ASSESSEE CLAIMS TO HAVE RECEIVED THE AMOUNT BY ACCOUNT PAYEE CROSSED CHEQUE, FAILED TO FURNISH THE NECESSARY DETAILS OF BANK ACC OUNT COPY OF THE CREDITOR TO VERIFY THE CLAIM MADE BY THE ASSESSEE. THE A.O. FURTHER OBSERVED THAT ON VERIFICATION OF THE BANK ACCOUNT C OPY OF THE ASSESSEE, IT WAS FOUND THAT NO CREDIT IN THE NAME OF SHRI Y. BOSE BABU WAS APPEARED IN THE BANK ACCOUNT OF THE ASSESSEE, THERE FORE, OPINED THAT THE CREDIT IN THE NAME OF SH. Y. BOSE BABU IS UNEXP LAINED, ACCORDINGLY, MADE ADDITIONS U/S 68 OF THE ACT. IT IS THE CONTEN TION OF THE ASSESSEE THAT SHE HAD RECEIVED RS.8,72,000/- FROM SH. Y. BOS E BABU BY ACCOUNT PAYEE CROSSED CHEQUES. THE ASSESSEE FURTHER CONTEN DED THAT SH. Y. BOSE BABU HAS FURNISHED CONFIRMATION LETTER CONFIRM ING THE ADVANCE GIVEN TO THE ASSESSEE AND NECESSARY DETAILS OF CONF IRMATION LETTERS HAVE ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 15 BEEN FILED BEFORE THE A.O. THEREFORE, THE A.O. WAS NOT CORRECT IN MAKING ADDITIONS U/S 68 OF THE ACT. 15. HAVING HEARD BOTH THE PARTIES AND CONSIDERED TH E MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE A.O. MADE ADD ITIONS TOWARDS CREDIT IN THE NAME OF SH. Y. BOSE BABU U/S 68 OF THE ACT, FOR THE REASON THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY, GENUINEN ESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE PARTIES. THE CIT(A) AF TER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE AND ALSO CONSIDERING T HE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE IN THE FORM OF CONF IRMATION LETTERS AND BANK STATEMENT OF CREDITOR, DIRECTED THE A.O. TO DE LETE THE ADDITIONS MADE TOWARDS UNEXPLAINED CREDIT OF RS.8,72,000/- FR OM SH. Y. BOSE BABU. THE FACTS REMAIN UNCHANGED. THE REVENUE FAIL S TO BRING ON RECORD ANY EVIDENCES TO PROVE THE FINDINGS RECORDED BY THE CIT(A) IS INCORRECT. HENCE, WE INCLINED TO UPHOLD CIT(A) ORDER AND REJEC T THE GROUND RAISED BY THE REVENUE. 16. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITION TOWARDS DISALLOWANCE OF INTEREST U/S 57 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT THE ASSESSEE HAS CLAIMED INTEREST PAID TO SHRI V. KISHORE AND SMT. C . SITA RAVAMMA AGAINST INTEREST RECEIVED FROM FIXED DEPOSITS AND N ET INCOME HAS BEEN ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 16 CONSIDERED UNDER THE HEAD INCOME FROM OTHER SOURCES . TO ASCERTAIN THE CORRECTNESS OF INTEREST DEDUCTION, THE A.O. ISSUED A SHOW CAUSE NOTICE AND ASKED TO FURNISH THE DETAILS OF INTEREST PAID T O THE ABOVE PERSONS. IN REPLY, THE ASSESSEE SUBMITTED THAT HE HAD BORROW ED AMOUNT FROM SMT. E. SITA RAVAMMA AND SH. V. KISHORE LONG BACK W HICH WAS INVESTED IN FIXED DEPOSITS WITH VARIOUS COMPANIES. THE ASSE SSEE FURTHER SUBMITTED THAT THESE DEPOSITS WERE IN THE NAME OF S H. V. KISHORE AND LATER RENEWED FROM TIME TO TIME AND ON REQUEST OF S H. V. KISHORE, SOME OF THE F.DS HAVE BEEN TRANSFERRED IN THE NAME OF TH E ASSESSEE. TO THIS EFFECT, FURNISHED NECESSARY LETTERS FROM M/S. INTEG RATED ENTERPRISES INDIA LTD, WHEREIN M/S. INTEGRATED ENTERPRISES INDI A LTD. HAS CONFIRMED THAT THESE DEPOSITS WERE TRANSFERRED FROM SH. V. KI SHORES NAME TO THE ASSESSEES NAME. THE ASSESSEE ALSO FURNISHED A LET TER FROM M/S. KCP SUGAR AND INDUSTRIES CORPORATION LTD., WHEREIN THE COMPANY HAS CERTIFIED THAT THE DEPOSITS STANDING IN THE NAME OF MR. V. KISHORE HAS BEEN INTER-CHANGED TO THE ASSESSEES NAME. IT WAS FURTHER ARGUED THAT THESE DEPOSITS WERE KEPT LONG AGO AND ASSESSEE IS C LAIMING INTEREST PAID TO THESE PARTIES AGAINST INTEREST RECEIVED FROM FIX ED DEPOSITS IN THESE COMPANIES, THEREFORE, THE A.O. WAS NOT CORRECT IN D ISALLOWING INTEREST U/S 57 OF THE ACT. ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 17 17. HAVING HEARD BOTH THE PARTIES AND CONSIDERED TH E MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED NECESSARY EVIDENCES IN THE FORM OF LETTERS FROM M/S. INTEGRAT ED ENTERPRISES INDIA LTD. AND M/S. KCP SUGAR & INDUSTRIES CORPORATION LT D. AND CONFIRMED THE CHANGE OF DEPOSITS IN THE NAME OF SH. V. KISHOR E TO ASSESSEES NAME. THE ASSESSEE ALSO FURNISHED CONFIRMATION LET TERS ALONG WITH WEALTH TAX RETURNS OF SH. V. KISHORE, WHEREIN THESE FIXED DEPOSITS WERE DISCLOSED IN THE WEALTH TAX RETURNS FILED BY THE CR EDITOR. THE CIT(A) AFTER CONSIDERING THE RELEVANT DETAILS DELETED THE ADDITIONS MADE BY THE A.O. TOWARDS DISALLOWANCE OF INTEREST BY OBSERVING AS UNDER: 5F SIXTH ISSUE RELATED TO DISALLOWANCE OF CLAIM F OR DEDUCTION OF INTEREST OF RS.3,04,7851- UNDER SECTION 57 OF THE ACT FROM T HE INTEREST RECEIVED. IT TRANSPIRES FROM RECORDS THAT MAIN SOURCE OF INCOME OF THE APPELLANT IS FROM INCOME FROM SALARY, INCOME FROM HOUSE PROPERTY AND INTEREST FROM DEPOSITS. THE APPELLANT IS RECEIVING INTEREST YEAR A FTER YEAR ON FIXED DEPOSITS WITH THE K.C.P. LIMITED AND SUNDARAM FINAN CE. THE INVESTMENTS IN THE K.C.P. LIMITED WERE MADE LONG AGO AS CAN BE VERIFIED FROM THE INCOME AND WEALTH STATEMENTS FILED FROM THE ASSESSME NT YEARS 1999- 2000 ONWARDS. SOURCES FOR INVESTMENTS WERE PARTLY O WN FUNDS AND PARTLY BORROWINGS FROM SRI V. KISHORE AND SMT. V. VIJAYA L AKSHRNI. SINCE BORROWED FUNDS WERE INVESTED IN DEPOSITS AND EARNED INTEREST INCOME, ON SUCH INCOME, INTEREST PAYMENTS WERE REDUCED TO ARRI VE AT NET INTEREST INCOME. FROM THE ASSESSMENT YEAR 1999-00, THE APPEL LANT HAS SHOWN DEPOSITS UNDER NON BUSINESS MOVABLE ASSETS AND THE BORROWINGS UNDER NON BUSINESS LIABILITIES AND THUS ESTABLISHED THE N EXUS BETWEEN BORROWINGS AND DEPOSITS. HENCE, IT HAS TO BE HELD T HAT THE AO WAS NOT JUSTIFIED IN DENYING THE DEDUCTION CLAIMED BY THE A PPELLANT IN PAYMENT OF INTEREST, AS THE NEXUS HAS BEEN DEMONSTRATED BEYOND DOUBT AND ACCORDINGLY THE AG IS DIRECTED TO ALLOW THE SAME. ITA NOS.114 & 119/VIZAG/2013 SMT. VADDE HARITHA & SRI VADDE ANANTH, VJA 18 FACTS REMAIN UNCHANGED. THE REVENUE FAILS TO BRING ON RECORD ANY EVIDENCES TO PROVE THE FINDINGS OF FACTS RECORDED B Y THE CIT(A) IS INCORRECT. THEREFORE, WE UPHOLD THE CIT(A) ORDER A ND REJECT THE GROUND RAISED BY THE REVENUE. 18. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.114 & 119/VIZAG/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 TH NOV16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 08.11.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWAD A 2. / THE RESPONDENT SMT. VADDE HARITHA, NO.59A-7-32 /2, RTC COLONY, 2 ND LANE, VIJAYAWADA. 3. / THE RESPONDENT SRI VADDE ANANTH, NO.59A-7-32/2 , RTC COLONY, 2 ND LANE, VIJAYAWADA 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM