Dy.CIT, Central Circle-3, Hyderabad V. Mr. Audinarayana Reddy, Hyderabad

ITA 1147/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1336 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAVINDER SAIBABA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Document seized; Application of stay; Additional evidence; Block assessment; Retraction; Documents seized
• Section: 69C; 142(1); 153A; 131; 68; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1147/HYD/2012 ASSESSMENT YEAR 2008-09 DCIT CENTRAL CIRCLE-3 HYDERABAD VS. MR. A. AUDINARAYANA REDDY, HYDERABAD PAN: ADAPA6161B APPELLANT RESPONDENT CO NO. 119/HYD/2012 ARISING OUT OF ITA NO. 1147/HYD/2012 ASSESSMENT YEAR 2008-09 MR. A. AUDINARAYANA REDDY, HYDERABAD PAN: ADAPA6161B VS. DCIT CENTRAL CIRCLE-3 HYDERABAD APPELLANT RESPONDENT SA NO. 176/HYD/2012 ARISING OUT OF ITA NO. 1147/HYD/2012 ASSESSMENT YEAR 2008-09 MR. A. AUDINARAYANA REDDY, HYDERABAD PAN: ADAPA6161B VS. DCIT CENTRAL CIRCLE-3 HYDERABAD APPELLANT RESPONDENT REVENUE BY: SRI M. RAVINDER SAIBABA ASSESSEE BY: SRI A.V. RAGHURAM DATE OF HEARING: 06.12.2012 DATE OF PRONOUNCEMENT: 22.02.2013 O R D E R PER CHANDRA POOJARI, AM: THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION AND STAY APPLICATION BY THE ASSESSEE ARE DIRECTED A GAINST THE ORDER OF THE CIT(A)-VII, HYDERABAD DATED 14.5.2 012 FOR ASSESSMENT YEAR 2008-09. SINCE THE ISSUES INVOLVED ARE ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 2 INTERLINKED, THE APPEAL ALONG WITH THE CO AND SA AR E HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. 2. THE REVENUE RAISED THE GROUND IN ITS APPEAL THAT TH E CIT(A) ERRED IN QUANTIFYING THE DONATION OF GOLD TO SHRI SHIRDI SANSTHAN AT 114.590 KG AS AGAINST 124.253 KG THAT THE ASSESSEE HIMSELF HAS QUANTIFIED THE SAME. 3. THE REVENUE ALSO RAISED A GROUND THAT THE CIT(A) ER RED IN ADMITTING ADDITIONAL EVIDENCE BY WAY OF RECEIPT FROM SHRI SHIRDI SANSTHAN WITHOUT AFFORDING OPPORTUNITY TO TH E ASSESSING OFFICER. 4. THERE IS ONE MORE GROUND BY THE REVENUE THAT THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE SOURCE OF SOURCE WAS NOTHING BUT DIVERSION OF FUNDS IN THE GU ISE OF SUBCONTRACT TO SRI N. SRINIVASA RAO. 5. THE ASSESSEE RAISED GROUND IN THE CROSS OBJECTION W ITH REGARD TO SUSTAINING ADDITION TOWARDS DONATION OF G OLD VALUED AT RS. 9,82,80,246. 6. THE ASSESSEE ALSO RAISED A GROUND WITH REGARD TO SUSTAINING OF ADDITION U/S. 68 OF THE INCOME-TAX AC T, 1961 AT RS. 13 LAKHS RECEIVED AS ADVANCE AGAINST SALE OF AGRICULTURAL PRODUCE FROM M/S. LORDVEN ENTERPRISES AND ALSO RS. 6 LAKHS TOWARDS RECEIPT FROM MR. VEERENDRA KUMAR. 7. BRIEF FACTS OF THE CASE ARE THAT THERE IS A SEARCH ACTION U/S. 132 OF THE ACT IN THE GROUP CASES OF M/S. AMR CONSTRUCTIONS LTD., ON 16.12.2008. AS PART OF THIS SEARCH ACTION, THE ASSESSEE WAS ALSO COVERED U/S. 132 OF T HE ACT. CONSEQUENT TO THE SEARCH ACTION NOTICE U/S. 153A WA S ISSUED. THE ASSESSEE FILED A RETURN OF INCOME ON 5 .4.2010 ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 3 FOR A.Y. 2008-09 WHEREIN THE ASSESSEE DECLARED INCO ME OF RS. 1,13,87,900 WHICH INCLUDES RS. 90 LAKHS AS ADDI TIONAL INCOME TOWARDS FAILURE TO EXPLAIN THE FOLLOWING INV ESTMENTS. A) DONATION TO SSS - RS. 25,00,000 B) ADVANCE ON PROPERTIES DAMODAR REDDY RS. 55,80,000 C) PURCHASE OF WOOD COMPLEX - RS. 9,20,000 ------------------ TOTAL RS. 90,00,000 ============ 8. IT WAS ALSO NOTICED DURING THE COURSE OF SEARCH ACT ION IN THE CASE OF M/S. AMR CONSTRUCTIONS LTD., THAT TH E DIRECTOR AND FAMILY MEMBERS OF THE COMPANY HAVE MAD E HUGE DONATIONS IN THE FORM OF GOLD TO SHIRDI SAIBAB A SANSTHAN. DURING THE COURSE OF SEARCH ACTION SRI MA HESH REDDY WHO LOOKED AFTER ALL THE AFFAIRS OF THE ASSES SEE GROUP DISCLOSED BEFORE THE REVENUE AUTHORITIES THAT THE F AMILY HAS DONATED 124 KG OF GOLD TO SHIRDI SAIBABA SANSTHAN. IT IS ALSO STATED BY HIM THAT OUT OF THE ABOVE 124 KG GOL D, 16KG WAS DONATED BY THE DIRECTOR AND FAMILY MEMBERS AND BALANCE OF THE GOLD WAS COLLECTED FROM FRIENDS AND RELATIVES AND OFFERED THE SAME TO THE TEMPLE. IT IS ALSO ON RECORD THAT THE ASSESSEE HAS PRODUCED FEW PERSONS WHO HAVE CONF IRMED BEFORE THE REVENUE AUTHORITIES THAT THEY HAVE DONAT ED GOLD FOR THE PURPOSE OF DONATING THE SAME TO THE SHIRDI SAIBABA SANTHAN. THE DIRECTOR OF THE COMPANY AND FAMILY ME MBERS ADMITTED INCOME IN THEIR RETURNS OF INCOME TO THE T UNE OF RS. 1.82 CRORES TOWARDS DONATION OF GOLD TO THE SHR IDI SAIBABA SANSTHAN AS THEY COULD NOT EXPLAIN THE SOUR CE. THE RECEIPTS COLLECTED FROM THE SHRIDI SAIBABA SANSTHAN TOWARDS SHOW THE DONATION RECEIVED FROM 'A.N. REDDY FAMILY AND ASSOCIATES' AND THE SAID RECEIPTS WERE SIGNED BY SR I AUDINARAYANA REDDY IN THE PLACE PROVIDED FOR DEVOT EE'S SIGNATURE, FOR CLARITY WE REPRODU THE SAID RECEIPTS : (1) (2) ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 4 SIGNATURE, FOR CLARITY WE REPRODU CE HEREUNDER THE COPIES OF THE SAID RECEIPTS : ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== CE HEREUNDER THE COPIES OF (3) (4) ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 5 ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 6 9. ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE FA ILED TO FURNISH THE DETAILS OF NAME AND ADDRESS OF THE F RIENDS AND RELATIVES FROM WHOM THE ASSESSEE COLLECTED THE GOLD FOR THE PURPOSE OF DONATING THE SAME TO SHRIDI SAIBABA SANS THAN. ACCORDING TO THE ASSESSING OFFICER THOUGH THE ASSES SEE AND THE FAMILY MEMBERS STATED IN THEIR SWORN STATEMENT THAT THEY HAVE DONATED 16 KG GOLD AND BALANCE WAS COLLEC TED FROM FRIENDS AND RELATIVES, THE ASSESSEE FAILED TO FURNISH THE DETAILS OF REGISTER MAINTAINED BY THE ASSESSEE FOR COLLECTION OF SUCH BALANCE GOLD FROM THE FRIENDS AND RELATIVES AND DETAILS OF THE RECEIPTS ISSUED TO THE DONORS. DURI NG THE POST SEARCH PROCEEDINGS AROUND 60 DONORS WERE EXAMINED B Y THE REVENUE AUTHORITIES ON 4.6.2009, 5.6.2009, AND 6.6. 2009. THESE RANDOM 60 DONORS THOUGH STATED THAT THEY HAVE MADE DONATIONS, THEY FAILED TO PRODUCE ANY RECORDED EVID ENCE TO PROVE THE GENUINENESS OF THE DONATION. IN FACT, NON E OF THEM FILED RETURN OF INCOME AND BASICALLY THEY ARE AGRIC ULTURISTS. FROM THE ABOVE, THE ASSESSING OFFICER DREW THE INFE RENCE THAT THE BALANCE GOLD SAID TO HAVE BEEN COLLECTED F ROM VARIOUS FRIENDS AND RELATIVES FROM NELLORE DISTRICT FROM WHERE THE ASSESSEE HAILS, AS NON GENUINE. ACCORDING LY, THE ASSESSEE WAS ASKED TO FILE CONFIRMATION LETTERS IN SUPPORT OF RECEIPT OF GOLD AS DONATION FROM VARIOUS PARTIES BY THE ASSESSEE. THE ASSESSEE IN REPLY TO THESE FILED A LE TTER DATED 26.4.2010 STATING AS FOLLOWS: 'A DETAILED NOTE WAS CALLED FOR ASKING WHY AN AMOUN T OF RS. 11,88,00,0001 SHOULD NOT BE BROUGHT TO TAX AS UNEXPLAINED INCOME ON ACCOUNT OF DONATION OF 108 KG S OF GOLD SIMHASANA TO SHIRDI SAIBABA SANSTHAN. IN TH IS REGARD IT IS HEREBY SUBMITTED THAT A DETAILED CALCU LATION OF THE TOTAL DONATION IS ALREADY GIVEN, A COPY OF T HE SAME IS GIVEN ALONG WITH THIS LETTER FOR READY REFE RENCE. FIRST OF ALL, WE WOULD LIKE TO CLARIFY THE FACT THA T THE TOTAL NO., OF KGS INVOLVED IN THE DONATION WAS 114. 59 KGS AND THIS CAN BE VERIFIED FROM THE RECEIPTS ISSU ED BY ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 7 THE SHIRDI SANS THAN THE COPIES OF THE SAME ARE ENCLOSED FOR YOUR REFERENCE. TO GIVE A SMALL BACKGROUND ABOUT THIS WHOLE ACTIVIT Y CARRIED OUT, WE ARE STAUNCH DEVOTEES OF LORD SRI SH IRDI SAIBABA AND WE REGULARLY VISIT SHIRDI TO TAKE HIS DARSHAN AND PRAY HIM REGULARLY. ONCE A THOUGHT CAME ACROSS MY FATHER'S MIND THAT THE GOD SHOULD HAVE A GOLDEN THRONE (SIMHASANAM). ACCORDINGLY HE SHARED THIS DESIRE WITH US AND OUR FAMILY TOOK A DECISION TO DONATE A GOLDEN THRONE. AS THIS WAS A VERY COSTLY T ASK, WE BRAIN STORMED TOGETHER AND FINALLY ARRIVED AT AN IDEA, THAT APART FROM DONATING SOME OF THE AMOUNT F ROM THE FAMILY ALONE WE DECIDED TO PROPAGATE THIS HOLY TASK AMONG RELATIVES, FRIENDS AND OTHER DEVOTEES. THERE ARE NUMEROUS DEVOTEES OF SRI SHIRDI SAIBABA L IKE US AROUND MY NATIVE PLACE AND BUSINESS PLACE. ACCORDINGLY, WE HAVE CIRCULATED THIS IDEA AND AS EXPECTED MANY DEVOTEES LIKE US CAME FORWARD AND HAVE AGREED TO JOIN HANDS IN THE HOLY CAUSE. WITH A LL THE SUPPORT OF THE LIKEMINDED, WE COULD ABLE TO DON ATE THE 'GOLDEN SIMHASANAM' TO THE HOLY LORD. IN ADDITI ON TO THIS WE IN FACT THIS GOLD WAS COLLECTED BY ME, MY F AMILY MEMBERS, FRIENDS AND ASSOCIATES OVER PERIOD OF TIME . IT IS A TIME TAKING TASK AND WAS DONE OVER NUMBER OF YEARS. WE HAVE IN FACT PROVIDED ALL THE INFORMATION AND DOCUMENTS MAINTAINED IN THIS CONNECTION AT VARIOUS STAGES OF ENQUIRIES AND EVEN DURING POST SEARCH PROCEEDINGS. AS SUBMITTED EARLIER AS THIS WAS NOT A BUSINESS DEAL AND WAS FOR A HOLY CAUSE WITHOUT ANY PROFIT OR BENEFIT MOTTO AND WAS A VOLUNTARY EFFORT, THE DOCUMENTS WERE NOT MAINTAINED TO FULL EXTENT AS REQUIRED UNDER LAW. THESE FACTS WERE SUBMITTED TO T HE DEPARTMENT BY US AND EVEN BY SOME OF THE DONORS WHO WERE SUMMONED FOR DURING THE ENQUIRY. BUT THE FACT THAT IT IS A VOLUNTARY EFFORT AND CONTRIBUTION OF M ANY LIKE MINDED IS WELL EXPLAINED AND DEMONSTRATED BEFO RE THE DEPARTMENT. HOWEVER, TO BE CO OPERATIVE WITH THE DEPARTMENT AND JUST TO PURCHASE PEACE WITH THE DEPARTMENT WE HAVE ACCEPTED TO OFFER THE DIFFERENCE AMOUNT C ADDITIONA L INCOME BY ME AND MY FAMILY MEMBERS. HOWEVER, IN ORDER TO AVOID PROTRACTED LITIGATIONS, TO BUY PEACE AND IN ORDER TO PUT A QUIETUS TO THE WHOLE ISSUE, WE HA VE ACCEPTED TO OFFER THE DIFFERENCE AMOUNT AS ADDITION AL ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 8 INCOME T ME AND MY FAMILY MEMBERS. WE HAVE TAKEN UP THE ISSUE REGARDING THE BALANCE CONTRIBUTIONS, W E ACCEPT TO MAKE AN ADDITIONAL DECLARATION OF RS. 7,67,74,956/- THIS ADDITIONAL DECLARATION MADE IS ADOPTED AS INCOME ONLY FOR THE PURPOSE ( COMPUTING TAX AND IS OTHERWISE IS NOT AN INCOME. IT IS ALSO PRAYED BEFORE YOUR GOOD SELF THAT THE PE NALTY PROCEEDINGS BE KINDLY DROPPED BY YOUR GOOD SELF IN VIEW OF THE FACT, ELABORATELY EXPLAINED (ABOVE, THA T THE DISCLOSURE WAS MADE VOLUNTARILY BY US WITHOUT THE DISCOVERY (ANY MATERIAL, POINTING TO THE SAME, DURI NG THE COURSE OF SEARCH. ALL THE DISCLOSURES WERE MADE IN GOOD FAITH IN ORDER TO BUY PEACE AND WITH THE HONE BELIEF AND CONVICTION THAT NO PENALTY PROCEEDINGS W OULD BE INITIATED ON THE ASSESSEES. HENCE IT IS ALSO HER EWITH REQUESTED NOT TO INITIATE ANY PENAL PROCEEDINGS', 10. THUS, THE ASSESSEE MADE AN ADDITIONAL OFFER OF INCO ME AT RS. 7,67,74,956 IN THE NAMES OF FOLLOWING PERSON S: NAME FY 2007-08 FY 2008-09 TOTAL A. MAHESH REDDY 1,63,38,890 28,54,850 1,91,93,740 A. GIRISH REDDY 1,63,38,890 28,54,850 1,91,93,740 A. AUDINARAYANA REDDY 3,26,77,776 57,09,700 3,83,87,476 D. TOTAL 6,53,55,556 1,14,19,400 7,67,74,956 11. HOWEVER THE ASSESSEE FILED FURTHER LETTER ON 28.12. 2010 WHICH READS AS FOLLOWS: 'IN SO FAR AS THE ASSESSMENT OF MYSELF, MY FATHER, MR. A. AUDINARAYANA REDDY AND MY BROTHER, MR. A. GIRIS H REDDY IS CONCERNED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HAVE FILED A LETTER DECLARING AN ADD ITIONAL INCOME OF RS 7,67,74,956/- IN THE HANDS OF MYSELF, MY BROTHER AND MY FATHER FOR THE ASSESSMENT YEARS 2008 - 09 & 2009-10. THE SAID DECLARATION WAS MADE IN THE FOLLOWING CIRCUMSTANCES: WE BEING DEVOTEES OF SHRI SHIRIDI SAIBABA BABA HAD DECIDED TO DONATE 'GOLDEN SIMHASANAM ' TO THE DEITY . IN THE PROCESS, WE POOLED THE DONATIONS FROM VARIOU S DEVOTEES AND ALSO SPENT OUR OWN MONEY AND DONATED THE SAID 'GOLDEN SIMHASANAM'. THE TOTAL WEIGHT OF 'GOLDEN SIMHASANAM' WAS 108 KGS , OUT OF WHICH THE CONTRIBUTION FROM MY FAMILY MEMBER S WAS APPROXIMATELY 19 KGS OF GOLD. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 9 ORIGINALLY DURING THE COURSE OF SEARCH WE DECLARED AN AMOUNT OF RS 1,90,00,000/- AND ALSO SUBMITTED THAT THE BALANCE OF GOLD WAS POOLED/DONATED BY VARIOUS PERSONS, THE LIST OF WHOM WAS ALREADY PROVIDED. WE WERE ASKED TO FURNISH EVIDENCE IN RESPECT OF THE SAID OTHER DEVOTEES. WE WERE OF THE VIEW THAT WE SHOULD NOT TROUBLE THE DEVOTEES, WHO MADE VOLUNTARY CONTRIBUTIONS, WHO DONATED GOLD BY MAKING THEM APPEAR BEFORE THE AUTHORITIES. THEREFORE, WE, MYSELF AND MY FAMILY MEMBERS ACCEPTED TO DECLARE BALANCE QUANTITY OF GOL D AS WELL, WHICH WAS QUANTIFIED AT RS 7,67,74,956/- IN THE ABOVE CIRCUMSTANCES, WE WERE OF THE VIEW THA T IF A DECLARATION WERE TO BE MADE, THE DEPARTMENT WOULD NOT CONTACT THE DONORS AND WOULD NOT VERIFY THE VER ACITY OF THE DONATIONS. THEREFORE, WE THOUGHT IT WOULD BE PROPER TO PURCHASE PEACE BY PAYING TAX AND OFFERED THE SAID AMOUNT. HOWEVER, WE UNDERSTOOD THAT THE INCOME-TAX AUTHORITIES HAVE ALREADY CONDUCTED VERIFICATION WIT H MANY/MAJORITY OF THE DONORS BY RECORDING THE STATEMENTS FROM THEM WITH REGARD TO THE DONATIONS MADE BY THEM. AS THE INCOME- TAX AUTHORITIES ALREAD Y CONTACTED THE DONORS AND AS THE DONORS WERE ALREADY MADE TO APPEAR BEFORE THE AUTHORITIES, WE ARE OF TH E VIEW THAT SUCH AN ADMISSION IS NOT REQUIRED. THEREF ORE, I HUMBLY SUBMIT THAT THE EARLIER LETTER OFFERING TH E AMOUNT OF RS. 7,67,74,956/- IN ADDITION TO WHAT WAS DECLARED DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS MAY PLEASE BE TREATED AS WITHDRAWN. THEREFORE, WHAT REMAINS IS THE ADMISSION MADE AT TH E TIME OF SEARCH. FURTHER I HUMBLY SUBMIT THAT IN SO FAR AS THE DONORS OF THE GOLD FOR 'GOLDEN SIMHASAMAN' A RE CONCERNED, THEY DONATED THE GOLD; THE LIST OF SUCH DONORS ALONG WITH THEIR ADDRESSES AND THE AMOUNT OF DONATION WAS ALREADY PROVIDED TO THE DEPARTMENT. SOME OF THE DONORS WERE CONSIDERED BY THE DEPARTMEN T AND ALL OF THEM ACCEPTED TO HAVE DONATED THE GOLD O R AMOUNT EQUAL TO THE GOLD. THEREFORE, NO ADDITION ON ACCOUNT OF THE DONATION TO SHRI SHIRIDI SAIBABA BAB A MAY BE MADE.' ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 10 12. THE ASSESSING OFFICER REJECTED THIS LETTER STATING THAT THIS WAS FILED ON 28.12.2010 JUST BEFORE COMPLETION OF THE ASSESSMENT I.E., ON 31-12-2010 AND MADE AN ADDITION OF RS. 11.88 CRORES VALUING 108 KG OF GOLD AT RS. 11 LAKHS PER KG. IN ADDITION TO THIS, THE ASSESSING OFFICER ALSO MAD E ADDITION OF RS. 57 LAKHS U/S. 68 OF THE ACT AS FOLLOWS: LORDVEN ENTERPRISES RS. 13 LAKHS SRI. SRINIVASA RAO NUKKALA RS. 18 LAKHS SMT. K. SUBBA LAKSHMI RS. 20 LAKHS SRI. VEERENDRA KUMAR RS. 6 LAKHS 13. ON APPEAL, THE CIT(A) SUSTAINED THE ADDITION IN RES PECT OF DONATION OF GOLD AT RS. 9,82,80,426. THE CIT(A) ARRIVED AT THIS FIGURE ON THE BASIS OF RECEIPTS WHICH SHOW THA T TOTAL QUANTITY OF GOLD DONATED AT 1,14,590.390 GRAMS VALU ED AT RS. 11,72,80,426 (RS. 1023.575 PER GRAM). AS THE A SSESSEE ALREADY DISCLOSED ADDITIONAL INCOME IN HIS RETURN O F INCOME AT RS. 1.90 CRORES, THE CIT(A) SUSTAINED THE BALANC E AMOUNT AT RS. 9,72,80,426. AGAINST THIS SUSTENANCE AND DEL ETION BOTH REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. 14. REGARDING UNEXPLAINED CREDIT U/S 68 THE CIT(A) DELE TED RS. 20 LAKHS RECEIVED FROM K. SUBBA LAKSHMI AND RS. 18 LAKHS FROM N. SRINIVASA RAO AND BALANCE UNEXPLAINED AMOUNT U/S 68 IN THE NAME OF LORDVEN ENTERPRISES AT RS. 13 LAKHS AND VEERENDRA KUMAR AT RS. 6 LAKHS WAS SUSTAI NED BY THE CIT(A). AGAINST THE DELETION OF RS. 18 LAKHS IN THE NAME OF N. SRINIVASA RAO THE REVENUE IS IN APPEAL BEFORE US. AGAINST SUSTAINING OF RS. 13 LAKHS IN THE CASE OF L ORDVEN ENTERPRISES AND RS. 6 LAKHS IN THE NAME OF VEERENDR A KUMAR THE ASSESSEE IS IN APPEAL BEFORE US BY WAY OF C.O. 15. AT THE OUTSET, THE DR OBJECTED THE TAKING GROUND BY ASSESSEE BY WAY OF A CROSS OBJECTION. THE OBJECTIO N OF THE ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 11 DR IS OVERRULED IN VIEW OF SUPREME COURT JUDGEMENT IN THE CASE OF HARI SHANKAR RASTOGI V. SHAM MOHAN (2005 AI R (SCW) 0-1712) WHEREIN HELD THAT CROSS OBJECTION IS LIKE AN APPEAL. IT HAS ALL THE TRAPPINGS OF AN APPEAL. EV EN WHEN THE APPEAL IS WITHDRAWN OR IS DISMISSED, CROSS OBJE CTION CAN STILL BE HEARD AND DETERMINED. 16. THE LEARNED AR SUBMITTED WITH REGARD TO ASSESSEE'S FIRST GROUND THAT THE ASSESSEES SON A. MAHESH REDD Y WHILE RECORDING STATEMENT U/S 132 (4) OF THE ACT WHILE AN SWERING TO QUESTION NO. 20 HAS CATEGORICALLY STATED THAT TH E ENTIRE CONTRIBUTION OF GOLD WAS NOT MADE BY ASSESSEES FAM ILY MEMBERS ALONE. BUT ASSESSEES FRIENDS AND RELATIVES WHO ARE CLOSELY RELATED TO THE ASSESSEE AND WHO HAVE JOINED FOR THE PURPOSE OF A NOBLE CAUSE INITIATED BY THE ASSESSEE AND WAS THE COLLECTIVE EFFORT OF MANY LIKEMINDED PEOPLE. HE SUBMITTED THAT THIS FACT WAS CONTINUOUSLY REITERATE D BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES ON VARIOUS OC CASIONS. HOWEVER, TO BUY PEACE THE ASSESSEE IN HIS LETTER DA TED 26.4.2010 ADMITTED TO DISCLOSE ADDITIONAL INCOME IN THE NAME OF THE ASSESSEE, A. MAHESH REDDY AND A. GIRISH REDDY. ACCORDINGLY THE ASSESSING OFFICER DRAFTED T HE ASSESSMENT ORDER MAKING SUCH ADDITION IN RESPECTIVE HANDS AS OFFERED BY THE ASSESSEE IN THE DRAFT ASSESSMENT ORDER AND SENT FOR APPROVAL OF ADDITIONAL CIT IN THE MONTH OF MAY 2010 AND SAME WERE APPROVED U/S 153D OF THE ACT. HE SUBMITTED THAT THE COPIES OF SAME WERE FURNISHED BE FORE THE CIT(A). ACCORDING THE AR INSTEAD OF FINALISING THE ASSESSMENT ORDER IN ACCORDANCE WITH THE OFFER OF TH E ASSESSEE TO THE SURPRISE OF THE ASSESSEE THE ASSESS ING OFFICER ISSUED A FRESH NOTICE U/S 143(2) AND 142(1) IN THE MONTH OF NOVEMBER 2010 AFTER A LAPSE OF 6 MONTHS FR OM THE DATE OF LAST HEARING. ACCORDING TO THE ASSESSEES C OUNSEL IT IS ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 12 NOT THE ASSESSEE HAS GONE BACK FROM THE OFFER BUT I T IS THE DEPARTMENT WHICH RETRACTED THE OFFER OF THE ASSESSE E. ACCORDING TO THE ASSESSEE COUNSEL THE OFFER WAS MAD E BY THE ASSESSEE WITH A REQUEST THAT THE DEPARTMENT HAS SHA LL NOT CAUSE ANY OTHER ENQUIRY AND OFFER OF THE ASSESSEE H AS TO BE ACCEPTED. HOWEVER, THE DEPARTMENT GONE BACK AND MAD E FRESH ENQUIRY AT THE BACK OF THE ASSESSEE AND ASSES SEE WAS NOT AWARE OF THE ENQUIRIES MADE BY THE DEPARTMENT I N THE MONTH OF JUNE 2009 AT THE TIME OF FILING THE INITIA L OFFER LETTER. FURTHER HE SUBMITTED THAT THE DEPARTMENT HA S MADE ADDITION ONLY ON THE BASIS OF ASSESSEE OFFER LETTER THOUGH IT CAUSED ENQUIRY WITH REGARD TO THE VERACITY OF DONAT ION AND THE ENQUIRY CAUSED BY THE DEPARTMENT FULLY SUPPORTS THE CLAIM OF THE ASSESSEE THAT DONATIONS ARE GENUINE AS THE PARTIES WHOM THE DEPARTMENT CONTACTED SAID CATEGORI CALLY THAT THEY HAVE DONATED THE GOLD. THE DEPARTMENT DEN IED THE DONATIONS AND HELD IT AS NOT GENUINE ONLY ON THE RE ASON THAT THE DONORS ARE AGRICULTURISTS. THE ASSESSEE HAILS F ROM A RESPECTABLE FAMILY AND IS A BIG BUSINESSMAN HAVING GREAT FAITH IN SHIRIDI SAIBABA BABA AND ALL THE PEOPLE IN HIS VILLAGE HAVE SUPPORTED THIS NOBLE CAUSE. THE ASSESS ING OFFICER ONLY RELIED ON THE LETTER GIVEN BY THE ASSE SSEE IN THE INITIAL STATE. FURTHER HE SUBMITTED THAT EVEN THE R ECEIPTS ISSUED BY THE SHIRDI SAIBABA SAMSTHAN SHOW THAT THE DONOR IS NOT ASSESSEE HIMSELF AND IT WAS MENTIONED CLEARL Y THEREIN THAT A.N. REDDY FAMILY AND ASSOCIATES IN THE ''DE VOTEE'S COLUMN'. THIS FACT WAS ADMITTED BY THE ASSESSING OF FICER IN THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT AS PER SWORN STATEMENT RECORDED U/S 131 OF THE ACT ON 12/1/2009 FROM MR. A. MAHESH REDDY SON OF ASSESSEE WHO HAS CLEARLY MENTIONED THAT IT WAS DONATED BY DIFFERENT DONORS I N HIS VILLAGE. ACCORDINGLY HE DREW OUR ATTENTION TO THE L IST OF ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 13 DONORS PRODUCED BEFORE THE LOWER AUTHORITIES PLACED BEFORE US IN PAPER BOOK I PAGE NUMBERS 44 TO 381. FURTHER HE SUBMITTED THAT DURING THE POST SEARCH ENQUIRY, THE REVENUE AUTHORITIES HAVE SUMMONED 70 PERSONS AND RECORDED STATEMENTS U/S 131 OF THE ACT WHO ARE POOR AND INNO CENT AGRICULTURISTS HAVING NO KNOWLEDGE OF INCOME TAX AC T AND GIVEN A FIRSTHAND INFORMATION THAT THEY DONATED GOL D ACCORDING TO THEIR CAPACITY FOR THE NOBLE CAUSE. IN SPITE OF CONFIRMATION FROM THOSE INNOCENT AGRICULTURISTS HAV ING NO KNOWLEDGE OF INCOME TAX, THE DEPARTMENT IS NOT READ Y TO BELIEVE THE TRUE STATEMENTS OF THE TRUE DONORS ON T HE REASON THAT NO EVIDENCE WAS FOUND DURING THE SEARCH REGARD ING THEIR DONATIONS. FURTHER HE SUBMITTED THAT EVEN AFT ER OFFER OF ADDITIONAL INCOME AT RS. 7,67,74,956 BY THE ASSE SSEE, THE DEPARTMENT STARTED ENQUIRY AND WHEN THE ENQUIRY REP ORT WAS FOUND FAVOURABLE TO THE ASSESSEE, THE DEPARTMEN T IS NOT READY TO ACCEPT THE SAME. HE SUBMITTED THAT THERE I S A CATEGORICAL STATEMENT FROM THE DONORS IN FAVOUR OF THE ASSESSEE. THE DEPARTMENT WITHOUT BRINGING THE EVIDE NCE AGAINST THE ASSESSEE SIMPLY BRUSHED ASIDE THE SAME. HE SUBMITTED THAT THE FACT OF CONTRIBUTION BY VARIOUS FRIENDS AND RELATIVES OF THE ASSESSEE IS NOT DISPUTED MUCH LESS DISPROVED BY THE DEPARTMENT. ACCORDING TO THE AR WH EN THE ASSESSEE PRODUCED THE EVIDENCE IN SUPPORT OF THE AS SESSEES CLAIM IT CANNOT BE BRUSHED ASIDE WITHOUT BRINGING A CONTRA EVIDENCE AGAINST THE ASSESSEE. THE AR SUBMITTED THA T ADDITION WAS MADE U/S 69 OF THE ACT AS UNEXPLAINED INVESTMENT. BEING SO, THE PRINCIPLE LAID DOWN IN RE SPECT OF THE ONUS IS NOT STRONG AS IN THE CASE OF SECTION 68 . ACCORDING TO THE AR THE ASSESSEE IS ONE AMONG THE D ONORS AS SUGGESTED IN THE RECEIPTS GIVEN BY THE SHIRDI SA IBABA SAMSTHAN AND TO THE EXTENT OF THE ASSESSEES DONATI ON ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 14 ASSESSEE OFFERED ADDITIONAL INCOME IN THE RETURN OF INCOME AT RS. 25 LAKHS AND THE BALANCE IS COLLECTED FROM V ARIOUS PERSONS. U/S 69 OF THE ACT, THE REVENUE IS REQUIRED TO SHOW THAT THE INVESTMENT HAS BEEN MADE IN THE NAME OF TH E ASSESSEE. IN OTHER WORDS, THE INCURRING OF THE INVE STMENT HAS TO BE CONCLUSIVELY ESTABLISHED BY THE DEPARTMEN T. WHEN THE INCURRING OF THE INVESTMENT IS ITSELF NOT PROVE D THERE IS NO QUESTION OF ADDITION IN THE HANDS OF THE ASSESSE E. HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF CIT V SHAHZAD LOOKMAN QUADIR (3 ITR (TRIB) 177) FOR THIS PROPOSITION WHEREIN IT WAS HELD AS FOLLOWS: 'HELD, DISMISSING THE APPEAL, THAT UNDER THE PROVISIONS OF SECTION 69C ADDITION ON ACCOUNT OF ANY UNEXPLAIN ED EXPENDITURE COULD BE MADE ONLY WHEN THE ASSESSEE HAD INCURRED ANY EXPENDITURE ABOUT WHICH IT HAD OFFERED NO EXPLANATION. THE BURDEN WAS ON THE DEPARTMENT TO SHOW THAT THE EXPENDITURE HAD BEEN ACTUALLY INCURRED WHICH WAS NOT EXPLAINED. THE ASSESSING OFFICER HAD ESTIMATED THE EXPENSES ON THE BASIS OF COMPARISON WITH THE OLD UNIT. THE ASSESSE E HAD GIVEN EXPLANATION REGARDING LOWER EXPENDITURE I N THE NEW UNIT WHICH WAS A NEW AND MODERN UNIT HAVING ADVANTAGE OF ECONOMY OF SCALE. THE PRODUCT AND THE INDUSTRIAL ENVIRONMENT WERE ALSO DIFFERENT AS THE T WO UNITS WERE LOCATED IN DIFFERENT STATES. WHILE THE ASSESSEE GAVE A REASONABLE EXPLANA TION, THE ASSESSING OFFICER FAILED TO PRODUCE ANY EVIDENCE TO SHOW THAT THE ASSESSEE HAD ACTUALLY INCURRED ANY EXPENDITURE WHIC H WAS NOT ACCOUNTED FOR OR WAS DIVERTED TO THE OLD CONCERN. THERE WAS NO INFIRMITY IN THE ORDER OF THE COMMISSIONER (APPEALS) DELETING THE ADDITION.' 17. FURTHER HE SUBMITTED THAT ORIGINALLY THE ASSESSEE M ADE A SURRENDER AND OFFERED INCOME WHICH WAS DULY RETRA CTED BY THE ASSESSEE AS THE DEPARTMENT DISREGARDED THE CONT ENTS THEREIN AS PER WHICH THE DEPARTMENT CANNOT CAUSE FU RTHER ENQUIRY AND THE DEPARTMENT CANNOT PICK AND CHOOSE T O ITS CONVENIENCE. HE RELIED ON THE FOLLOWING JUDGEMENTS: ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 15 A. PULLANGODO RUBBER PRODUCE CO. LTD. V. CIT (91 ITR 1 8) (SC) B. TS KUMARA SWAMY V. ACIT (65 ITD 188) (MAD) C. HOTEL KIRAN (82 ITD 453) 18. FURTHER HE SUBMITTED THAT THE OFFER LETTER MADE BY THE ASSESSEE IS NOT U/S 132 OF THE ACT. THE OFFER WAS M ADE SUBSEQUENT TO THE POST SEARCH ENQUIRY. THE OFFER IS ALSO CONDITIONAL. BEING SO, THE ARGUMENT OF THE DEPARTM ENT IS NOT PROPER TO STATE THAT THE OFFER MADE BY THE ASSE SSEE U/S 132(4) IS BINDING ON THE ASSESSEE. ACCORDING TO THE AR THE OFFER WAS MADE ON CONDITIONAL BASIS AND THE CONDITI ON ON WHICH THE OFFER WAS MADE CEASED TO BE EXIST. AS SUC H THE ASSESSEE CANNOT BE FORCED TO COMPLY WITH THE OFFER LETTER. ONCE THE OFFER IS NOT ACTED UPON IN ACCORDANCE WITH THE OFFER CONDITIONS, IT CANNOT BE SAID TO BE SURVIVED. HE R ELIED ON THE JUDGEMENT IN THE CASE OF VINOD SOLANKI V. UNION OF INDIA (239 ELT 157) WHEREIN HELD THAT EVIDENCE BROUGHT BY CONFESSION, IF RETRACTED MUST BE CORROBORATED BY INDEPENDENT AND COGENT EVIDENCE. FURTHER HE SUBMIT TED THAT ADDITION MADE ONLY ON THE BASIS OF CONFESSION STATEMENT CANNOT BE SUSTAINABLE WITHOUT CORROBORATI VE MATERIAL. HE RELIED ON THE ORDER OF THE TRIBUNAL C HENNAI BENCH IN THE CASE OF G. KANAGARAJ V. DCIT (73 TTJ 7 31). HE ALSO RELIED ON THE CBDT INSTRUCTION NO. 286/2/2003- IT (INV.) DATED 10.3.2003 WHICH IS AS FOLLOWS: 'CIRCULAR NO. 286/2/2003-IT (INV), DATED 10.3.2003 (CLARIFICATION) SEARCH & SEIZURE - CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH & SEIZURE SURVEY OPERAT ION INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHER E ASSESSES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE AR E LATER RETRACTED BY THE CONCERNED ASSESSES WHILE FIL ING RETURNS OF INCOME. IN THESE CIRCUMSTANCES, ON ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 16 CONFESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPO SE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCU S AND CONCENTRATION ON COLLECTION OF EVIDENCE OF ........ ...INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE T HE INCOME-TAX DEPARTMENTS, SIMILARLY, WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH AND SEIZURES AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTA IN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDIN GS ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE THE RELEVANT ASSESSMENT ORDERS.' 19. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ADDITION WAS MADE ON THE BASIS OF OFFER MADE BY THE ASSESSEE. HE SUBMITTED THAT THE FIRST THING IT MAY BE NOTED THAT THE ADDITION FLOWS OUT OF STATEMENT MADE AT THE TIM E OF SEARCH. IN FACT, AS REMARKED BY THE COUNSEL IN HIS OPENING REM ARKS, THE VERY SEARCH IS ATTRIBUTED TO THIS ISSUE OF DONATION OF G OLDEN SIMHASAN. THE ASSESSEE MADE CONTINUOUS OFFERS - FIRST SOME AM OUNT, THEN SOME MORE AND CULMINATING IN THE OFFER LETTER DT 26 .04.2010. THE FINAL OFFER CAME 12 MONTHS AFTER CONCLUSION OF ENQU IRIES AND EXAMINATION. SO NOTHING TO PROVOKE BY WAY OF PRESS URE OR A NOBLE IMPULSE TO PROTECT OTHER 'DONORS'. THERE WERE NO E NQUIRIES BY THE ASSESSING OFFICER AT ALL BECAUSE THIS ISSUE WAS CON SIDERED AS CLOSED TILL THE ASSESSEE RETRACTED AT 11 TH HOUR. THUS, DEPARTMENT WAS VERY MUCH PREVENTED BY THIS FEINT AND LAST MINU TE WITHDRAWAL. THE REGISTER WAS NOT FOUND AT THE TIME OF SEARCH AT ALL. IT WAS PRODUCED LATER. AS REGARDS THE AVERMENTS THAT FROM THE BEGINNING IT WAS BEING TOLD THAT IT WAS NOT THE 'ASSESSEE' AL ONE, IT IS SUBMITTED THAT OF COURSE, ANY PERSON WILL TELL THAT RATHER THAN OWN UP ENTIRE THING AT FIRST OUTING BUT IS SAYING ENOUG H? WHAT MATTERS IS CONDUCT AND EVIDENCES. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 17 20. THE DR FURTHER SUBMITTED THAT THERE IS NO MENTION O F REGISTER IN THE STATEMENT. HE COULD HAVE EASILY TO LD THAT IT CAME FROM MANY WHOSE NAMES ARE RECORDED AND DETAILS ARE MAINTAINED, ESPECIALLY SINCE HE IS THE LYNCHPIN WHO CO-ORDINATE D THE ENTIRE THING. INSTEAD HE JUST SAYS ANR-FAMILY AND OTHERS. THE ASSESSEE OFFERS INCOME TOWARDS THIS ITEM TO PROTECT OTHERS A ND WHO IT WAS PROTECTING? ENQUIRIES WERE OVER AND DUSTED WITH IN JUNE 2009. HE SUBMITTED THAT THE DEPARTMENT DID NOT DOUBT THAT AGRICULTURALISTS CANNOT DONATE BUT THE ABILITY OF A PERSON WITH SMALL INCOME THAT TOO WITHOUT GETTING HIS NAME REGI STERED FOR THE SAME. IT IS DIFFERENT IF THE REGISTER WAS MAINTAIN ED BY SHIRIDI SAIBABA SANSTHAN OR RECEIPTS WERE ISSUED BY SHIRIDI SAIBABA SANSTHAN. MORE IMPORTANTLY WHEN A TEMPLE ISSUES RE CEIPT FOR EVEN RS 500/- DONATION, CAN SHIRIDI SAIBABA SANSTHAN DEN Y ISSUE OF RECEIPT FOR GOLD OF EVEN 10 GRAMS WHICH IS EASILY 1 5000+ ? SO THE RECEIPTS NOT BEING ISSUED BY SHIRIDI SAIBABA SANSTH AN, AND NOT BEING ASKED BY DONORS IS UNACCEPTABLE AS WELL AS UN BELIEVABLE. 21. THE DR SUBMITTED THAT IN THE INDIAN CONTEXT-WHERE F AMILIES STORE GOLD AND VIEW IT AS INVESTMENT FOR FUTURE AND A RAINY DAY (WHERE GOLD IS VALUED AND STORED SO MUCH THAT WE AR E RUNNING INTO CURRENT DEFICIT PROBLEM) GOLD FOR LADIES OF FAMILY- FOR DAUGHTERS MARRIAGE-SO MANY ISSUES WOULD BE THERE AND ON DONAT ION, A FAMILY WITH 4/5 MEMBERS, DOES NOT EVEN ASK FOR A RECEIPT O R ITS SHARE OF CONTRIBUTION? THIS IS IN AN AGE WHERE TEMPLE WALLS ARE PASTED WITH SLABS ANNOUNCING DONATION OF EVEN RS 1000. MUCH WA S MADE OF ASSESSEE OWNING UP AND OFFERING ONLY TO PROTECT OTH ERS AND HOW IT WENT BACK BECAUSE ENQUIRIES WERE MADE. THIS CLAIM DOES NOT MATCH WITH CHRONOLOGY OF EVENTS AS ALREADY NARRATED . REGARDING THE DISTINCTION BETWEEN 68 AND 69C, HE SUBMITTED TH AT-THE REQUIREMENT IS DIFFERENT BECAUSE ONE TAXES CREDIT W HILE OTHER TAXES EXPENDITURE-AND THE CRUCIAL DIFFERENCE IS THIS - ON CE EXPENDITURE IS ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 18 TRACED TO 'CREDITS' (HERE IN KIND) ALL THE REQUIREM ENTS OF SECTION 68 COME INTO PLAY. THIS CANNOT BE IGNORED. HENCE THE CASE LAWS CITED ARE VERY MUCH RELEVANT. 22. THE DR SUBMITTED THAT THE PAPER BOOKS FILED TODAY, OSTENSIBLY THE EVIDENCES OF DONORS, THE ENTIRE PAPE RS ARE WHAT DEPARTMENT HAD EXAMINED AND COLLECTED-NOTHING NEW F ROM HIS SIDE. SECONDLY, THEY ALL PERTAIN TO MAY TO JUNE 20 09 PERIOD WHEN THE INVESTIGATION WING WAS ENQUIRING. THIS DISCLOS URE WAS IN JUNE 2010 AND WITHDRAWAL WAS IN DECEMBER, 2010 ON THE EV E OF TIME BARRING DATE FOR THE ASSESSMENTS. THE LEARNED DR D REW THE ATTENTION OF THE BENCH TO PAGES 44 AND 45- OF PAPER BOOK 1. THE ENTIRE LABOUR OF THE ASSESSEE AND HIS COUNSEL IN FI LING 2000 PAGES IS ONLY TO JUSTIFY ABOUT 9 KG OF GOLD AND THERE IS NO EVIDENCE FOR THE REST OF 90% OF GOLD. ACCORDINGLY, HE SUBMITTED THA T THE ADDITION MADE BY THE ASSESSING OFFICER AND AS MODIFIED BY TH E CIT(A) MAY BE UPHELD. FURTHER HE RELIED ON THE ASSESSMENT ORD ER. 23. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY PERUSED THE R ECEIPTS RECEIVED FROM SHIRDI SAIBABA SANSTHAN PLACED ON REC ORD AT PAGE NOS. 1027, 1028,1029, 1030, 1031 OF THE PAPER BOOK. AS PER THESE RECEIPTS THE GOLD DONATION WAS RECEIVE D FROM SRI AUDINARAYANA REDDY FAMILY AND ASSOCIATES. ACCOR DINGLY THE ASSESSEE TAKEN A PLEA BEFORE THE LOWER AUTHORIT IES THAT HE DONATED GOLD WORTH RS. 25 LAKHS AND BALANCE WAS COLLECTED FROM VARIOUS FRIENDS AND RELATIVES FROM H IS NATIVE VILLAGE. HOWEVER, IN ORDER TO AVOID PROTRACTED LITI GATION, THE ASSESSEE MADE AN OFFER VIDE HIS OFFER LETTER DATED 26.4.2010 AT RS. 7.67 CRORES IN THE NAME OF THREE PERSONS I.E ., A. MAHESH REDDY, A. GIRISH REDDY AND AUDINARAYANA REDD Y. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 19 NAME FY 2007-08 FY 2008-09 TOTAL A. MAHESH REDDY 1,63,38,890 28,54,850 1,91,93,740 A. GIRISH REDDY 1,63,38,890 28,54,850 1,91,93,740 . A. AUDINARAYANA REDDY 3,26,77,776 57,09,700 3,83,87,476 H. TOTAL 6,53,55,556 1,14,19,400 7,67,74,956 24. THIS LETTER WAS RETRACTED BY THE ASSESSEE VIDE HIS LETTER DATED 28/12/2010 WHICH READS AS FOLLOWS: 'IN SO FAR AS THE ASSESSMENT OF MYSELF, MY FATHER, MR. A. AUDINARAYANA REDDY AND MY BROTHER, MR. A. GIRIS H REDDY IS CONCERNED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HAVE FILED A LETTER DECLARING AN ADD ITIONAL INCOME OF RS 7,67,74,956/- IN THE HANDS OF MYSELF, MY BROTHER AND MY FATHER FOR THE ASSESSMENT YEARS 2008 - 09 & 2009-10. THE SAID DECLARATION WAS MADE IN THE FOLLOWING CIRCUMSTANCES: WE BEING DEVOTEES OF SHRI SHIRIDI SAIBABA BABA HAD DECIDED TO DONATE 'GOLDEN SIMHASANAM ' TO THE DEITY . IN THE PROCESS, WE POOLED THE DONATIONS FROM VARIOU S DEVOTEES AND ALSO SPENT OUR OWN MONEY AND DONATED THE SAID 'GOLDEN SIMHASANAM'. THE TOTAL WEIGHT OF 'GOLDEN SIMHASANAM' WAS 108 KGS , OUT OF WHICH THE CONTRIBUTION FROM MY FAMILY MEMBER S WAS APPROXIMATELY 19 KGS OF GOLD. ORIGINALLY DURING THE COURSE OF SEARCH WE DECLARED AN AMOUNT OF RS 1,90,00,000/- AND ALSO SUBMITTED THAT THE BALANCE OF GOLD WAS POOLED/DONATED BY VARIOUS PERSONS, THE LIST OF WHOM WAS ALREADY PROVIDED. WE WERE ASKED TO FURNISH EVIDENCE IN RESPECT OF THE SAID OTHER DEVOTEES. WE WERE OF THE VIEW THAT WE SHOULD NOT TROUBLE THE DEVOTEES, WHO MADE VOLUNTARY CONTRIBUTIONS, WHO DONATED GOLD BY MAKING THEM APPEAR BEFORE THE AUTHORITIES. THEREFORE, WE, MYSELF AND MY FAMILY MEMBERS ACCEPTED TO DECLARE BALANCE QUANTITY OF GOL D AS WELL, WHICH WAS QUANTIFIED AT RS 7,67,74,956/- IN THE ABOVE CIRCUMSTANCES, WE WERE OF THE VIEW THA T IF A DECLARATION WERE TO BE MADE, THE DEPARTMENT WOULD NOT CONTACT THE DONORS AND WOULD NOT VERIFY THE VER ACITY OF THE DONATIONS. THEREFORE, WE THOUGHT IT WOULD BE ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 20 PROPER TO PURCHASE PEACE BY PAYING TAX AND OFFERED THE SAID AMOUNT. HOWEVER, WE UNDERSTOOD THAT THE INCOME-TAX AUTHORITIES HAVE ALREADY CONDUCTED VERIFICATION WIT H MANY/MAJORITY OF THE DONORS BY RECORDING THE STATEMENTS FROM THEM WITH REGARD TO THE DONATIONS MADE BY THEM. AS THE INCOME- TAX AUTHORITIES ALREAD Y CONTACTED THE DONORS AND AS THE DONORS WERE ALREADY MADE TO APPEAR BEFORE THE AUTHORITIES, WE ARE OF TH E VIEW THAT SUCH AN ADMISSION IS NOT REQUIRED. THEREF ORE, I HUMBLY SUBMIT THAT THE EARLIER LETTER OFFERING TH E AMOUNT OF RS. 7,67,74,956/- IN ADDITION TO WHAT WAS DECLARED DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS MAY PLEASE BE TREATED AS WITHDRAWN. THEREFORE, WHAT REMAINS IS THE ADMISSION MADE AT TH E TIME OF SEARCH. FURTHER I HUMBLY SUBMIT THAT IN SO FAR AS THE DONORS OF THE GOLD FOR 'GOLDEN SIMHASAMAN' A RE CONCERNED, THEY DONATED THE GOLD; THE LIST OF SUCH DONORS ALONG WITH THEIR ADDRESSES AND THE AMOUNT OF DONATION WAS ALREADY PROVIDED TO THE DEPARTMENT. SOME OF THE DONORS WERE CONSIDERED BY THE DEPARTMEN T AND ALL OF THEM ACCEPTED TO HAVE DONATED THE GOLD O R AMOUNT EQUAL TO THE GOLD. THEREFORE, NO ADDITION ON ACCOUNT OF THE DONATION TO SHRI SHIRIDI SAIBABA BAB A MAY BE MADE.' 25. THE DEPARTMENT IS NOT READY TO ACCEPT THE RETRACTIO N STATEMENT. THE PLEA OF THE ASSESSEE BEFORE US IS TH AT THE OFFER MADE BY THE ASSESSEE IS CONDITIONAL STATING T HAT THE DEPARTMENT SHALL NOT CAUSE ANY ENQUIRY. THE CONTENT S OF THE OFFER LETTER ARE AS FOLLOWS: 'TO THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-3 HYDERABAD DATED 28.12.2010 SIR, SUB: INCOME-TAX ASSESSMENT - ASST. YEAR - 2008- 09 & 2009-10 A MAHESH REDDY EXPLANATION SUBMISSION OF - REG. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 21 REF: ASSESSMENT PROCEEDINGS IN THE CASE OF SRI AUDINARYANA REDDY, SRI A GIRISH REDDY AND MR. A MAHESH REDDY. AS THE ASSESSING OFFICER IS WELL AWARE, THE INCOME-TAX AUTHORITIES CONDUCTED SEARCH AND SEIZURE OPERATIONS AT THE PREMISES OF THE COMPANY AMR CONSTRUCTIONS LTD., AND OTHER SISTER CONCERNS BESID ES MY RESIDENTIAL PREMISES. THE INCOME-TAX AUTHORITIES RECORDED A STATEMENT U/S 132(4) OF THE IT ACT. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S 153A OF THE IT ACT IN RESPONSE TO WHICH MYSELF AND ALL OTHER GROUP PERSONS FILED THE RETURNS OF INCOME. TH E ASSESSING OFFICER THEREAFTER REQUIRED US TO EXPLAIN VARIOUS ITEMS AND WE HAVE FILED THE EXPLANATIONS, I N RESPONSE TO THE QUERIES RAISED. IN SO FAR AS THE ASSESSMENT OF MYSELF, MY FATHER, MR. A AUDINARAYANA REDDY AND MY BROTHER, MR. A GIRISH REDDY IS CONCERNED, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, I HAVE FILED A LETTER DECLA RING AN ADDITIONAL INCOME OF RS. 7,67,74,956/- IN THE HA NDS OF MYSELF, MY BROTHER AND MY FATHER FOR THE ASSESSM ENT YEARS 2008-09 & 2009-10. THE SAID DECLARATION WAS MADE IN THE FOLLOWING CIRCUMSTANCES: A) WE BEING DEVOTEES OF SHRI SHIRIDI SAIBABA BABA HAS DECIDED TO DONATE 'GOLDEN SIMHASANAM' TO THE DEITY. IN THE PROCESS, WE POOLED THE DONATIONS FRO M VARIOUS DEVOTEES AND ALSO SPENT OUR OWN MONEY AND DONATED THE SAID 'GOLDEN SIMHASANAM' B) THE TOTAL WEIGHT OF 'GOLDEN SIMHASANAM' WAS 108 KGS., OUT OF WHICH CONTRIBUTION FROM OUR FAMILY MEMBERS WAS APPROXIMATELY 19 KGS OF GOLD. C) ORIGINALLY DURING THE COURSE OF SEARCH WE DECLARED AN AMOUNT OF RS. 1,90,00,000/- AND ALSO SUBMITTED THAT THE BALANCE OF GOLD WAS POOLED/DONATED BY VARIOUS PERSONS, THE LIST OF WHOM WAS ALREADY PROVIDED. D) WE WERE ASKED TO FURNISH EVIDENCE IN RESPECT OF THE SAID OTHER DEVOTEES. E) WE WERE OF THE VIEW THAT WE SHOULD NOT TROUBLE THE DEVOTEES, WHO MADE VOLUNTARY CONTRIBUTIONS, WHO DONATED GOLD BY MAKING THEM APPEAR BEFORE THE ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 22 AUTHORITIES. THEREFORE, WE, MYSELF AND MY FAMILY MEMBERS ACCEPTED TO DECLARE BALANCE QUANTITY OF GOLD AS WELL, WHICH WAS QUANTIFIED AT RS. 7,67,24,956/-. IN THE ABOVE CIRCUMSTANCES, WE WERE OF THE VIEW THAT IF A DECLARATION WERE TO BE MADE, THE DEPARTMENT WOULD NOT CONTACT THE DONORS AND WOULD NOT VERIFY THE VERACITY OF THE DONATIONS. THEREFORE, WE THOUGHT IT WOULD BE PROPER TO PURCHASE PEACE BY PAYING TAX AND OFFERED THE SAID AMOUNT. HOWEVER, WE UNDERSTOOD THAT THE INCOME-TAX AUTHORITIES HAVE ALREADY CONDUCTED VERIFICATION WIT H MANY/MAJORITY OF THE DONORS BY RECORDING THE STATEMENTS FROM THEM WITH REGARD TO THE DONATIONS MADE BY THEM. AS THE INCOME-TAX AUTHORITIES ALREADY CONTACTED THE DONORS AND AS THE DONORS WERE ALREADY MADE TO APPEAR BEFORE THE AUTHORITIES, WE ARE OF TH E VIEW THAT SUCH AN ADMISSION IS NOT REQUIRED. THEREF ORE, I HUMBLY SUBMIT THAT THE EARLIER LETTER OFFERING TH E AMOUNT OF RS. 7,67,74,956/- IN ADDITION TO WHAT WAS DECLARED DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS MAY PLEASE BE TREATED AS WITHDRAWN. THEREFORE, WHAT REMAINS IS THE ADMISSION MADE AT TH E TIME OF SEARCH. FURTHER I HUMBLY SUBMIT THAT INSOFA R AS THE DONORS OF THE GOLD FOR 'GOLDEN SIMHASANAM' IS CONCERNED, THEY DONATED THE GOLD; THE LIST OF SUCH DONORS ALONG WITH THEIR ADDRESSES AND THE AMOUNT OF DONATION WAS ALREADY PROVIDED TO THE DEPARTMENT. SOME OF THE DONORS WERE CONTACTED BY THE DEPARTMENT AND ALL OF THEM ACCEPTED TO HAVE DONATED THE GOLD O R AMOUNT EQUAL TO THE GOLD. THEREFORE, NO ADDITION ON ACCOUNT OF THE DONATION MADE BY VARIOUS OTHERS FOR THE 'GOLDEN SIMHASANAM' PRESENTED TO SHRI SHIRDI SAIBAB A BABA MAY BE MADE. YOURS FAITHFULLY, SD/- A. MAHCSH REDDY' 26. AS SEEN FROM THE ABOVE LETTER THE OFFER WAS CONDITI ONAL. THE DEPARTMENT IS REQUESTED NOT TO TAKE ANY ENQUIRY AND ALSO SHALL NOT LEVY ANY PENALTY. HOWEVER, AS SEEN F ROM THE RECORD, THE DEPARTMENT INSTEAD OF ACTING UPON THE O FFER ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 23 STARTED ENQUIRY WITH THE DONORS AND MADE DETAILED E NQUIRY. EVEN IN ENQUIRY THE DONORS CONFIRMED THE DONATIONS. WHEN THE DONORS CONFIRMED THE DONATIONS THE DEPARTMENT I S OF THE OPINION THAT THE DONORS ARE AGRICULTURISTS AND THE DONATIONS ARE NOT GENUINE AS THEY HAVE NO CAPACITY TO MAKE SU CH DONATIONS. HOWEVER, WHEN THE DONORS MADE CONFIRMATI ONS IN FAVOUR OF THE ASSESSEE THE DEPARTMENT HAS NOT BROUG HT ANYTHING ON RECORD TO SHOW THAT THE CONFIRMATIONS A RE FALSE. IN OUR OPINION, THE EVIDENCE AND THE MATERIAL COLLE CTED BY THE DEPARTMENT IS TO BE ACCEPTED AS CORRECT UNLESS IT IS PROVED CONTRARY. 27. AS SEEN FROM THE COPIES OF RECEIPTS FILED BEFORE US , THE RECEIPTS ARE NOT IN THE NAME OF THE ASSESSEE HIMSEL F. THEY ARE IN THE NAME OF 'A.N. REDDY FAMILY ASSOCIATES'. THE ASSESSEE'S SON SRI A. MAHESH REDDY ACCEPTED THE DON ATION AND SURRENDERED THE INCOME AT RS. 7,67,74,956 IN TH E FOLLOWING NAMES: NAME FY 2007-08 FY 2008-09 TOTAL A. MAHESH REDDY 1,63,38,890 28,54,850 1,91,93,740 A. GIRISH REDDY 1,63,38,890 28,54,850 1,91,93,740 A. AUDINARAYANA REDDY 3,26,77,776 57,09,700 3,83,87,476 TOTAL 6,53,55,556 1,14,19,400 7,67,74,956 28. IT WAS ALSO MADE CLEAR IN THE SWORN STATEMENT RECOR DED ON 16.12.2008 FROM A. MAHESH REDDY THAT THE ENTIRE CONTRIBUTION OF GOLD WAS NOT MADE BY THE ASSESSEE H IMSELF OR HIS FAMILY MEMBERS ALONE BUT MANY OTHER FRIENDS AND RELATIVES CLOSELY ASSOCIATED WITH THE ASSESSEE'S FA MILY. FURTHER, IT WAS ALSO MADE CLEAR THAT TO AVOID ANY INCONVENIENCE TO THE DEVOTEES AND TO PURCHASE PEACE WITH THE DEPARTMENT, THE DIFFERENCE AMOUNT OF RS. 7,67,7 4,956 WAS ACCEPTED AS ADDITIONAL INCOME OF THE ASSESSEE A ND HIS FAMILY MEMBERS. THIS AMOUNT WAS DECLARED VIDE LETT ER DATED ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 24 26.4.2010. HOWEVER, IN THE MEANTIME THE DEPARTMENT STARTED ENQUIRY WITH THE VARIOUS DEVOTEES AND RECOR DED STATEMENTS AND COLLECTED EVIDENCES REGARDING DONATI ONS MADE BY THEM. IT IS ALSO ON RECORD THAT ABOUT 70 D ONORS APPEARED BEFORE THE DEPARTMENT AND CONFIRMED THE DONATION. WHEN THIS WAS GOING ON THE ASSESSEE FILE D A LETTER DATED 28.12.2010 RETRACTING THE EARLIER LETTER DATE D 26.4.2010 WHERE THE ASSESSEE OFFERED ADDITIONAL INC OME ON THE REASON THAT MANY OF THE DEVOTEES/ASSOCIATES WER E ALREADY SUMMONED AND EXAMINED BY THE DEPARTMENT. TH E ASSESSEE STATED THE REASON FOR RETRACTION THAT THE DEPARTMENT HAD NOT KEPT ITS PROMISE AS THE OFFER MA DE BY THE ASSESSEE IS CONDITIONAL THAT THE DEPARTMENT SHA LL NOT CAUSE FURTHER ENQUIRY AND SHOULD NOT CAUSE UNDUE HA RDSHIP TO THE DEVOTEES. AS THE BASIC CONDITION AND PURPOS E FOR WHICH THE DECLARATION WAS MADE CEASED TO BE EXIST, THE ASSESSEE WENT OUT OF HIS EARLIER OFFER. 29. NOW THE QUESTION BEFORE US IS WHETHER THE OFFER MAD E BY THE ASSESSEE IS TO BE CONSIDERED OR NOT. IN OUR OPINION, THIS IS A CASE OF SEARCH U/S. 132 OF THE ACT. THE DEPARTMENT FRAMED THE ASSESSMENT U/S. 153A OF THE ACT AFTER TH E SEARCH. AS PER THE PROVISIONS OF SECTION 153A THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE INCOME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD CONSEQUENT TO SEARCH A CTION U/S. 132 OF THE ACT. THE ASSESSING OFFICER IS PREC LUDED FROM COLLECTION ANY CONFESSION STATEMENT IN THE COURSE O F SEARCH ACTION AND BASE THE ADDITION ON THAT BASIS. THE CB DT INSTRUCTION NO. 286/2/2003-IT (INV.) DATED 11.3.200 3 STRICTLY PROHIBITS PLACING RELIANCE ON THE CONFESSI ON STATEMENTS. THE ASSESSING OFFICER CANNOT PRESUME T HE INCOME OF THE ASSESSEE FOR THE PERIOD COVERED BY SE CTION 153A ON THE BASIS OF CONFESSION STATEMENT. THE ASS ESSING ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 25 OFFICER IS REQUIRED TO BRING ON RECORD POSITIVE MAT ERIAL IN SUPPORT OF THE ADDITION. THE ADDITION MADE BY THE ASSESSING OFFICER IN THE PRESENT CASE IS CONTRARY TO THE EVID ENCE BROUGHT ON RECORD. THE ADDITION MADE ON THE BASIS OF STATEMENT RECORDED FROM THE ASSESSEE OR FROM THE AS SESSEE'S SON WHICH IS NOT RECORDED U/S. 132(4) OF THE ACT. IT IS RECORDED CONSEQUENT TO THE POST SEARCH ENQUIRY AND THAT STATEMENT WAS ALSO RETRACTED BY THE ASSESSEE. THE ASSESSING OFFICER HEREIN MADE THE ADDITION ONLY ON THE BASIS OF STATEMENT OF THE ASSESSEE'S SON DATED 26.4.2010. THE CONTENTS OF THIS STATEMENT WERE RETRACTED VIDE LETT ER DATED 28.12.2010. BEING SO, THE ASSESSMENT IS NOT BASED ON ANY COGENT MATERIAL. THE ASSESSMENT CANNOT BE MADE ON THE BASIS OF PROBABILITY. IT SHOULD BE BASED ON THE EV IDENCE BROUGHT ON RECORD. (A) FURTHER IN THE CASE OF PULLANGODE RUBBER PRODUCTS CO. LTD., (91 ITR 18) (SC)) THE APEX COURT HELD THA T ADMISSION MADE BY THE ASSESSEE IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID T HAT IT IS CONCLUSIVE. IT IS OPEN TO THE ASSESSEE WHO M ADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUNT DO NOT DISCLOSE THE CORRECT STATE OF FACTS. (B) IN THE CASE OF T.S. KUMARASWAMY VS. ACIT (65 ITD 188) (MADRAS) WHEREIN HELD THAT THE ENTRIES IN BOOK S OF ACCOUNT FOUND IN THE SEARCH OPERATION U/S. 132 HAVE TO BE ACCEPTED AS TRUE AND IT IS NOT OPEN TO T HE ASSESSING OFFICER TO TURN AROUND AND SAY IN MAKING THE BLOCK ASSESSMENT THAT THE ENTRIES IN THE BOOKS OF ACCOUNT ARE UNTRUE OR FALSE UNLESS IT IS PROVED BY ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 26 LEGALLY ACCEPTABLE EVIDENCE THAT THE ADMISSION INVOLUNTARY AND THE SAME COULD NOT BE RETRACTED. (C) IN THE CASE OF HOTEL KIRAN VS. ACIT (82 ITR 453) WHEREIN HELD THAT ADDITION CAN BE MADE ON THE BASIS OF ADMISSION IN THE STATEMENT U/S. 132(4) IN ABSENC E OF ANY EVIDENCE INDICATING THAT THE STATEMENT U/S. 132(4) WAS OBTAINED UNDER COERCION, THREAT, DURESS OR UNDUE INFLUENCE OR THAT THE ASSESSEE WAS IN ABSOLUTELY DISTURBED STATE OF MIND. 30. FURTHER IT WAS HELD IN THE CASE OF CIT V. VMRP FIR M (56 ITR 67) AS FOLLOWS: 'THE DOCTRINE OF 'APPROBATE AND REPROBATE' IS ONLY A SPECIES OF ESTOPPELS' IT APPLIES ONLY TO THE CONDUC T OF PARTIES. AS IN THE CASE OF ESTOPPEL, IT CANNOT OPER ATE AGAINST THE PROVISIONS OF A STATUTE. IF A PARTICULA R INCOME IS NOT TAXABLE UNDER THE INCOME-TAX ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OR ANY OTH ER EQUITABLE DOCTRINE. EQUITY IS OUT OF PLACE IN TAX L AW; A PARTICULAR INCOME IS EITHER EXIGIBLE TO TAX UNDER T HE TAXING STATUTE OR IT IS NOT. IF IT IS NOT, THE INCO ME-TAX OFFICER HAS NO POWER TO IMPOSE TAX ON THE SAID INCO ME.' 31. AN ASSESSEE CANNOT BE TIED DOWN TO A WRONG CONCESSI ON MADE IN THE RETURN. IN THE CASE OF A. VENKATARAIMAI H 57 ITR 185 V, THE HON'BLE SUPREME COURT, AFFIRMED THE PRINCIPL E THAT MERELY BECAUSE THE ASSESSEE HIMSELF HAS RETURNED THE SUM O F RS.79,494 UNDER THE HEAD CAPITAL GAIN LEADS US TO NOWHERE. ' HE MIGHT HAVE DONE IT UNDER THE ADVICE OF SOME 'INCOME-TAX EXPERT '. THE ASSESSEE CANNOT BE TIED DOWN TO AN INADVISABLY MADE WRONG ST ATEMENT. IN THE CIRCUMSTANCES, WE DELETE THE ADDITION. ' 32. WE PLACE RELIANCE ON THE JUDGEMENT IN THE CASE OF B HARAT GENERAL RE-INSURANCE CO. LTD (81 ITR 303) (DELHI), WHEREIN HELD THAT: 'IT IS TRUE THAT THE ASSESSEE ITSELF HAD INCL UDED THAT DIVIDEND INCOME IN ITS RETURN FOR THE YEAR IN QUESTION BUT T HERE IS NO ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 27 ESTOPPEL IN THE IT ACT AND THE ASSESSEE HAVING ITSE LF CHALLENGED THE VALIDITY OF TAXING THE DIVIDEND DURING THE YEAR OF ASSESSMENT IN QUESTION IT MUST BE TAKEN THAT IT HAD REALIZED FROM THE POSITION WHICH IT HAD WRONGLY TAKEN WHILE FILING THE RETURN. ' 33. IN OUR OPINION, TAX CAN BE COLLECTED ONLY AS PROVID ED UNDER THE ACT. IF AN ASSESSEE, UNDER A MISTAKE, MISCONCEP TION OR ON NOT BEING PROPERLY INSTRUCTED, IS OVER ASSESSED, THE AU THORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COLLECTED. IN THE CASE OF VINAY CHAND ULAL SATIA V. N.D. PAREKH, CIT [SPL. CIVIL APPLICATION NO. 622 OF 1981 DATED 20- 8-1981], AND REFERRED TO THE DECISION OF THE APEX C OURT: 'THE SUPREME COURT HAS OBSERVED IN NUMEROUS DECISIONS, INCLUDING RAMLAL V. REWA COALFIELDS LTD. AIR 1962 SC 361, STATE OF WEST BENGAL V. ADMINISTRATOR, HOWRAH MUNICIPALITY AIR 1972 SC 749 AND BABUTMAL RAICHAND OSWAL V. LAXMIBAI R. TARTE AIR 1975 SC 1297, THAT THE STATE AUTHORITIES SHOULD NOT RAISE TECHNICAL PLEAS IF THE CITIZENS HAVE A LAWFUL RIGHT AND THE LAWFUL RIGHT IS BEING DENIED TO THEM MERELY ON TECHNICAL GROUNDS. THE STATE AUTHORITIES CANNOT ADO PT THE ATTITUDE WHICH PRIVATE LITIGANTS MIGHT ADOPT.' ( S.R. KOSHTI V. CIT 193 CTR 518) (GUJ.).' 34. FURTHER THE CBDT CIRCULAR 14(XL-35) OF 1955, DATED 11-4- 1955 STATES THAT, OFFICERS OF THE DEPARTMENT MUST N OT TAKE ADVANTAGE OF THE IGNORANCE OF AN ASSESSEE AS TO ITS RIGHTS. IT IS SETTLED LAW THAT CBDT CIRCULARS ARE BINDING ON REVE NUE AUTHORITIES. THIS CIRCULAR OF THE BOARD IS IN CONSO NANCE WITH THE CONSTITUTIONAL PROVISION THAT NO TAX CAN BE LEVIED WITHOUT THE AUTHORITY OF LAW. THIS ALSO ACCORDS WITH THE PRINCI PLES ENUNCIATED BY THE COURTS. 35. IF THE ASSESSEE OUT OF IGNORANCE INCLUDED INCOME AS TAXABLE IN THE RETURN AND IT APPROACHED THE COURT TO DIRECT THE AO TO EXCLUDE SAID AMOUNT FROM ASSESSABLE INCOME THEN AN APPROPRIATE DECISION IS TO BE TAKEN. PLEA OF THE REVENUE WAS T HAT DEPARTMENT ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 28 COULD NOT BE FAULTED FOR ACCEPTING RETURNS FILED BY ASSESSEE WHERE HE HIMSELF HAD OFFERED THE DONATIONS FOR TAX. THE P LEA OF THE DEPARTMENT CANNOT BE ACCEPTED IN VIEW OF THE JUDGEM ENT IN THE CASE OF SDS MONGIA V. CBDT (160 TAXMAN 101) WHERE IN HELD THAT THE REVENUE IS NOT ENTITLED TO TAX THE INCOME WHICH WAS OFFERED BY THE ASSESSEE HIMSELF THOUGH IT IS NOT TA XABLE AND IT SHOULD TAX ONLY THAT AMOUNT WHICH IS CHARGEABLE U/S . 4 OF THE INCOME-TAX ACT, 1961. 36. IN THE CASE OF NARAYANAN VS. GOPAL AIR 1960 SC 235, THE HON'BLE SUPREME COURT HELD THAT AN ADMISSION IN THE RETURN IS NOT CONCLUSIVE AND IT WOULD BE DECISIVE ONLY IF NOT SUB SEQUENTLY WITHDRAWN OR PROVED TO BE ERRONEOUS. IT IS WELL EST ABLISHED THAT THE OBJECT OF AN ASSESSMENT IS TO DETERMINE THE COR RECT INCOME AND CONSEQUENTLY THE CORRECT TAX LIABILITY. IN THE LIGH T OF ABOVE WELL SETTLED PRINCIPLES, FACTUAL POSITION OF THE CASE AN D AO'S OWN OBSERVATION RETURN FILED IN THE STATUS OF HUF SHOUL D HAVE BEEN IGNORED. 37. IN OUR OPINION, THE CIT(A) SHOULD HAVE APPRECIATED THAT ALL THE INCRIMINATING EVIDENCES AVAILABLE IN THE SEIZED DOCUMENTS WERE CONSIDERED BY THE DDIT (INV.) IN TOTO IN COURS E OF POST SEARCH INVESTIGATION IN THE HANDS OF INDIVIDUAL AND ALSO B Y THE ASSESSING OFFICER IN COURSE OF ASSESSMENT PROCEEDING AND UNDI SCLOSED INCOME RESULTING FROM THESE SEIZED PAPERS WERE TO BE CONSI DERED IN THE ASSESSMENT OF THE ASSESSEE LEAVING NO ROOM FOR ANY FURTHER ADDITION IN THE HANDS OF ASSESSEE ON THE BASIS OF O FFER BY THE ASSESSEE, IN SUCH CIRCUMSTANCES THERE COULD BE NO U NDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE PARTICULARLY ON THE BASIS OF RECEIPTS RELATING TO DONATION AS THE IMPUGNED RECEI PT IS NOT IN THE NAME OF THE PRESENT ASSESSEE. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 29 38. THE CIT(A) SHOULD HAVE APPRECIATED THE SALUTATORY PRINCIPLE THAT THE INCOME-TAX IS A LEVY ON INCOME. THE SUBSTA NCE OF THE MATTER IS THE INCOME. IF INCOME DOES NOT RESULT AT ALL, THERE CANNOT BE A TAX, EVEN THOUGH THERE IS OFFER BY THE ASSESSE E WHICH DID NOT MATERIALISE. WHERE THE INCOME CAN BE SAID NOT TO HA VE RESULTED AT ALL, THERE IS OBVIOUSLY NEITHER ACCRUAL NOR RECEIPT OF INCOME, EVEN THOUGH AN OFFER TO THAT EFFECT MIGHT, IN CERTAIN CI RCUMSTANCES, HAVE BEEN MADE BY THE ASSESSEE. AS EXPLAINED, THE SHIFTI NG OF SOME TRANSACTIONS OF SOME OTHERS TO THE HANDS OF THE ASS ESSEE IS NOT JUSTIFIED IN VIEW OF ABSENCE OF ANY INCRIMINATING M ATERIAL FOUND IN THE COURSE OF SEARCH AS BELONGING TO PRESENT ASSESS EE. 39. IN VIEW OF THE ABOVE DISCUSSION, IN OUR OPINION, TH E EVIDENCE BROUGHT ON RECORD IS NOT ENOUGH TO SUSTAIN THE ADDITION IN THE HANDS OF THE ASSESSEE. THE GROUND RAISED BY THE ASSESSEE IN HIS C.O. WITH REGARD TO ADDITION TO WARDS DONATION OF GOLD TO SHIRIDI SAIBABA SANSTHAN IS ALL OWED. BEING SO, THE GROUND RAISED BY THE REVENUE REGARDIN G SUSTAINING OF ADDITION ON THIS COUNT IS DISMISSED A S INFRUCTUOUS. 40. THE NEXT GROUND IN THE REVENUE APPEAL IS WITH REGAR D TO DELETION OF ADDITION OF RS. 18 LAKHS IN THE NAME OF SRI N. SRINIVASA RAO U/S. 68 OF THE ACT. BRIEF FACTS OF T HE ISSUE ARE THAT IT HAS BEEN EXPLAINED BY THE ASSESSEE THAT THE SOURCES FOR THE ADVANCES OF RS. 18,00,000 GIVEN TO THE ASSESSEE, AR E OUT OF THE WITHDRAWALS MADE FROM RELIANT METROPOLITAN DEVELOPE RS PVT. LTD AND M/S. LIVE-IN SHELTERS PVT. LTD., WHO WERE SHOWN TO HAVE EXECUTED SOME CONTRACT WORKS FOR M/S. AMRCL AND THE SAME WERE SHOWN TO HAVE BEEN REFLECTED IN THE INCOME TAX RETU RNS FILED FOR THE ASSESSMENT YEAR 2008-09 ONWARDS. THE ASSESSEE HAS M ADE A DETAILED SUBMISSION REPLYING TO THE QUERIES AS RAIS ED BY THE ASSESSING OFFICER, REGARDING THE CREDITWORTHINESS O F MR. SRINIVASA ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 30 RAO NUKALA. IT WAS FURTHER CONTENDED BY THE ASSESSE E THAT WHILE COMING TO A CONCLUSION THAT SUB-CONTRACT CARRIED BY MR. SRINIVASA RAO NUKALA WAS NOT GENUINE, THE ASSESSING OFFICER D ID NOT EVEN VERIFY THE WORKS GIVEN ON CONTRACT BY M/S. AMRCL AN D NO ENQUIRIES WERE CARRIED WHETHER THE RECEIPT ON ACCOU NT ON SUCH CONTRACT WORK WAS ACCOUNTED FOR OR WHETHER ANY EXPE NDITURE OF SAME NATURE .IN RESPECT OF THE SAME WORK WAS SEPARA TELY CLAIMED BY THE COMPANY ETC. AND AS SUCH THIS OBSERVATIONS O F THE ASSESSING OFFICER WAS SOLELY BASED ON SUSPICION, DI SBELIEVE AND PRESUMPTIONS. THE ASSESSEE ALSO CONTENDED THAT MR.S RINIVASA RAO NUKALA WAS ASSESSED TO TAX IN HIS OWN RIGHT AND THE AMOUNTS ADVANCED BY HIM CANNOT BE TREATED AS UNEXPLAINED CR EDIT IN THE CASE OF THE ASSESSEE AND THE TAXABILITY IF ANY, HAS TO BE EXAMINED IN THE HANDS OF SUCH OTHER PERSON WHO ADVANCED MONE Y, BY HIS ASSESSING OFFICER. 41. AS REGARDS TO THE APPLICATION OF SEC. 68 IN TREATIN G THE SAID ADVANCES AS UNEXPLAINED CREDIT, IT WAS SUBMITTED BY THE ASSESSEE THAT THE IMPUGNED AMOUNTS WERE RECEIVED BY THE ASSE SSEE BY ACCOUNT PAYEE CHEQUES FROM THE PERSONS WHO ARE ASSE SSED TO INCOME TAX BY FILING THEIR RETURNS, SHOWING INCOME FROM VARIOUS SOURCES, WHICH IS A PRIMA FACIE EVIDENCE ABOUT THEI R CREDITWORTHINESS AND THE ASSESSEE IS NOT EXPECTED T O MAKE ANY FURTHER ENQUIRIES INTO THE EXACT SOURCE OF THEIR IN COME OR THE AMOUNT ADVANCED. IT WAS FURTHER CONTENDED THAT THOU GH AS PER SEC. 68, THE PRIMARY ONUS TO OFFER AN EXPLANATION A S TO THE NATURE AND SOURCE OF THE CREDIT IS ON THE ASSESSEE, WHAT W OULD BE THE DEGREE OF ONUS AND WHAT SHOULD BE THE EXTENT OF AN EXPLANATION IN SUCH CIRCUMSTANCES, HAS BEEN LAID DOWN IN VARIOUS J UDICIAL PRONOUNCEMENTS AND IT IS A SETTLED PRINCIPLE OF LAW THAT THE STRICT RULES OF EVIDENCE DO NOT APPLY TO THE INCOME TAX PR OCEEDINGS AND THE ADMISSIBILITY OF AN EXPLANATION HAS TO BE DETER MINED CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 31 AND HUMAN PROBABILITY. IT WAS ALSO ARGUED BY THE AS SESSEE THAT THE ASSESSEE HAS BEEN HELD TO HAVE DISCHARGED THE P RIMARY ONUS WHERE THE AMOUNT REPRESENTING THE CREDIT IN QUESTIO N WAS RECEIVED BY ACCOUNT PAYEE CHEQUES, WITH THE DETAILS OF CREDI TORS, THEIR INCOME TAX PARTICULARS AND WRITTEN CONFIRMATIONS FR OM SUCH PERSONS WERE FILED, AS PER THE RULINGS OF VARIOUS C OURTS. IN THIS REGARD, THE ASSESSEE RELIED ON THE DECISIONS OF SUP REME COURT IN THE CASE CIT V. ORISSA CORPORATIONS PVT. LTD (159 I TR 78) AND THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT V . GUJARAT HEAVY CHEMICALS LTD (256 ITR 795). 42. THE CIT(A) DELETED THIS ADDITION BY OBSERVING THAT THE ASSESSING OFFICER COULD NOT FORM AN OPINION AS REGA RDS TO THE CREDITWORTHINESS OF THE CREDITOR BASED ON THE FACTS THAT HAVE EMERGED AND EXPLAINED TO HIM AND DRAWN HIS OWN CONC LUSIONS TREATING THE SAID CREDITS AS THE UNEXPLAINED CREDIT S FOR WANT OF MORE INFORMATION/EVIDENCE ON THE ISSUE OF CREDITWOR THINESS. THIS CONCLUSION DO NOT CONSTITUTE THE CORRECT DECISION B ASED ON THE RATIO THAT HAVE EMANATED FROM THE DECISIONS OF SUPR EME COURT IN THE CASE OF CIT VS GUJARAT HEAVY CHEMICALS PVT. LTD REPORTED IN 256 ITR 795, WHEREIN THE HON'BLE SUPREME COURT EXPR ESSED ITS OPINION THAT IN CASE WHERE THE SHARE APPLICANTS WER E TO BE CONSIDERED GENUINE, THE RIGHT COURSE FOR THE ASSESS ING OFFICER IS TO IDENTIFY THE REAL PERSON TO WHOM THE MONEY BELONG A ND ASSESS HIM TO TAX INSTEAD OF ASSESSING THE COMPANY AND AS SUCH THERE WAS NO JUSTIFICATION FOR ASSESSING THE COMPANY. FURTHER, T HE RATIO OF THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS TANIA INVESTMENTS (P) LTD. (322 ITR 394) IS SQUARELY APPLICABLE IN THIS CASE, WHEREIN THE CREDITORS WERE EXAMINED BY THE AS SESSING OFFICER, DURING THE ASSESSMENT PROCEEDINGS, WHO MAI NTAINED THE BOOKS OF ACCOUNTS, WHICH COULD NOT HAVE BEEN BRUSHE D ASIDE. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 32 43. FURTHER, IT MAY BE RELEVANT TO NOTE THAT THE CONTRA CT WORKS AWARDED BY M/S AMRCL WAS DISBELIEVED AND THE ADDITI ONS WERE MADE IN THE HANDS OF M/S AMRCL ON THE SAID ACCOUNT. FURTHER, THE AMOUNT OF CONTRACT RECEIPTS APPEARS TO HAVE ALR EADY SUFFERED TAX IN THE HANDS OF THE COMPANY, AS SUCH THERE IS N O BASIS FOR MAKING THE ADDITION ORIGINATING FROM THE SAME AMOUN TS IN THE HANDS OF THE ASSESSEE, BEING THE LOANEE. ON THIS CO UNT, THE ADDITION OF RS. 18,00,000 MADE ON ACCOUNT OF AMOUNT STANDING IN THE NAME OF MR. SRINIVASA RAO NUKALA, AS UNEXPLAINE D CREDIT IS NOT SUSTAINABLE. ACCORDINGLY, DELETION BY CIT(A) I S CONFIRMED. THIS GROUND IS DISMISSED. 44. IN C.O. THE ASSESSEE RAISED THE GROUND WITH REGARD TO SUSTAINING OF ADDITION OF RS. 13 LAKHS U/S. 68 IN T HE NAME OF LORDVEN ENTERPRISES. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE HAS FURNISHED THE CONFIRMATION FOR THE ADV ANCES RECEIVED FROM THE PARTY DURING THE COURSE OF THE APPELLATE P ROCEEDINGS, BUT SUCH CONFIRMATION DO NOT GIVE THE PRIMARY DETAILS S UCH AS THE INCOME TAX ASSESSMENT PARTICULARS, AND THE BANK ACC OUNT EXTRACTS SO AS TO VERIFY THE CREDITWORTHINESS OF THE CREDITO R ALONG WITH THE GENUINENESS OF THE TRANSACTION. IN THE CASE, NEITHE R IT HAS BEEN EXPLAINED BY THE ASSESSEE WHY ADVANCE WAS RECEIVED TOWARDS THE SALE OF AGRICULTURAL PROCEEDS OF THE ASSESSEE NOR T HE DETAILS RELATED TO THE AGRICULTURAL INCOME OF THE ASSESSEE THOUGH F ALLING IN THE SUBSEQUENT YEAR. PROVISIONS OF SECTION 68 OF THE IT ACT PUT THE ONUS ON THE ASSESSEE TO EXPLAIN THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR APART FROM THE IDENTITY. IN THIS CASE, THE ASSESSEE COULD FURNISH THE MERE DETA ILS OF THE IDENTITY WITHOUT BRINGING OR EXPLAINING THE RELEVAN T INFORMATION REGARDING GENUINENESS OF THE TRANSACTION AND THE CR EDITWORTHINESS OF THE CREDITOR. THE ONUS IS ON THE ASSESSEE TO PRO VE THE TRANSACTION BY EXPLAINING THE SAME WITH REFERENCE T O THE ABOVE THREE FACTORS ON CUMULATIVE BASIS. IN THE ABSENCE O F THE SAME, THE ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 33 TRANSACTION CANNOT BE TREATED AS GENUINE ONE AND AS SUCH THE CREDIT WILL BE TREATED AS UNEXPLAINED CREDIT. THE R ATIOS OF THE CASE LAWS CITED BY THE ASSESSING OFFICER IN THE ASSESSME NT ORDER, MORE SPECIFICALLY THE DECISION OF THE JURISDICTIONAL HIG H COURT IN THE CASE OF R.B. MITTAL V.CIT (246 ITR 283) ARE VERY MUCH RE LEVANT FOR THE FACTS OF THE CASE. ACCORDINGLY, THE TREATMENT METED OUT BY THE ASSESSING OFFICER FOR THE CREDIT OF RS. 13,00,000/- FROM M/S LORDVEN ENTERPRISES IS HELD TO BE SUSTAINABLE AND A S SUCH THE ADDITION MADE ON THIS COUNT IS CONFIRMED. 45. THE NEXT GROUND IN CO IS WITH REGARD TO SUSTAINING OF RS. 6 LAKHS IN THE NAME OF SRI VEERENDRA KUMAR. BR IEF FACTS OF THE ISSUE ARE THAT AN ADVANCE OF RS. 6,00,000 SH OWN TO HAVE BEEN RECEIVED FROM SHRI VEERENDRA KUMAR TOWARDS THE ADVANCE OF PROPERTY AND THE AMOUNT WAS RETURNED IN THE SAME YE AR SINCE THE TRANSACTION DID NOT MATERIALIZE. HOWEVER, IT HAS BE EN OBSERVED THAT THE AMOUNTS WERE RECEIVED AND REPAID IN CASH AND NO CONFIRMATION IN THIS REGARD WAS FURNISHED EITHER BEFORE THE LOWE R AUTHORITIES. THERE WAS NO INDICATION AS REGARD TO THE DETAILS OF THE TRANSACTION WITH WHICH SUCH AMOUNT WAS RECEIVED AND REPAID. IN ABSENCE OF THE NEEDED EXPLANATION WITH EVIDENCES AS REGARD TO THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR, IT IS HELD THAT PROVISIONS OF SECTION 68 ARE APPLICABLE. PROVISIONS OF SECTION 68 PUTS THE ONUS ON THE ASSES SEE/ASSESSEE TO EXPLAIN THE TRANSACTIONS WITH REFERENCE TO THE IDEN TITY AND CREDITWORTHINESS OF THE CREDITOR, APART FROM THE GE NUINENESS OF THE TRANSACTION AND WE ARE OF THE OPINION THAT THE ASSE SSEE HAD FAILED ON THIS COUNT. HENCE, THE AMOUNT OF RS. 6,00,000/- RECEIVED BY SHRI VEERENDRA KUMAR WHICH WAS TREATED BY THE ASSES SING OFFICER AS UNEXPLAINED CREDIT IS CONFIRMED. 46. IN THE RESULT, REVENUE APPEAL IS DISMISSED AND ASSESSEE'S CO IS PARTLY ALLOWED. ITA NO. 1147/HYD/2012 & ORS. SRI A. AUDINARAYANA REDDY ======================== 34 47. SINCE WE HAVE DISPOSED OF THE REVENUE APPEAL AND ASSESSEE'S CO, THE STAY APPLICATION FILED BY THE AS SESSEE BECOMES INFRUCTUOUS AND DISMISSED ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2013. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 22 ND FEBRUARY, 2013 TPRAO COPY FORWARDED TO: 1. THE DY. COMMISSIONER OF INCOME - TAX (CENTRAL CIRCLE - 3), 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD-500 004. 2. SRI A. AUDINARAYANA REDDY, PLOT NO. 530, ROAD NO. 26, JUBILEE HILLS, HYDERABAD. 3. THE CIT(A) - VII, HYDERABAD. 4. THE CIT (CENTRAL), HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD.