J. Vinay Sagar, Hyd, Hyderabad V. ITO, Ward-2(1),Hyd, Hyderabad

ITA 1179/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6024 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 09-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Additional evidence
• Section: 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1179/HYD/2016 ASSESSMENT YEAR: 2008-09 J. VINAY SAGAR, HYDERABAD. PAN AHCPJ 7207 P VS. INCOME-TAX OFFICER, WARD 2(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SMT. SUMAN MALIK DATE OF HEARING : 16-03-2017 DATE OF PRONOUNCEMENT : 31 -03-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX APPEALS - 5, HYDERABAD DATED 30.06.2016. 2. THE BRIEF FACTS OF THE CASE ARE, ASSESSEE IS TH E MANAGING DIRECTOR OF M/S E-LOAD SERVICES PVT LTD. SINCE THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME, NOTICE U/S 148 WAS ISSU ED ON 16.02.2010 DULY RECORDING THE REASONS. THE ASSESSEE FILED THE RETURN OF INCOME IN RESPONSE TO ABOVE NOTICE ON 16.11.2010 DECLARING TO TAL INCOME OF RS. 1,15,000/-. NOTICE U/S 143(2) WAS ISSUED ON 7.12.20 10. THE ASSESSEE HIMSELF APPEARED BEFORE THE AO AND SUBMITTED THE IN FORMATION CALLED FOR. 2 ITA NO. 1179/HYD/2016 J. VINAY SAGAR, 3. THE AO OBSERVED THAT THE ASSESSEE HAS MADE THE INVESTMENT IN THE COMPANY M/S E-LOAD SERVICES PVT LTD TO THE EXTE NT OF RS.1040,000/-, IN WHICH HE IS A DIRECTOR AND IS HOL DING 50% SHARE. THE INVESTMENT CONSISTS OF RS.150,000 IN SHARE CAPI TAL AND RS.890,000 IN SHARE APPLICATION MONEY. THE ASSESSEE HAS SUBMITTED THAT THE SOURCE OF ABOVE INVESTMENT WERE OUT OF GIF T FROM HIS MOTHER OF RS.350,000/- AND FOR THE BALANCE HE SUBMITTED TH AT THE FAMILY OWNED A PROPERTY, WHICH WAS SOLD ON 3.08.2001 FOR R S. 18,50,000/-. HE SUBMITTED THAT THE FAMILY HAS INVESTED THE ABOVE SALE PROCEEDS WITH HIS UNCLE, WHICH WAS COLLECTED BACK FOR MAKING THE ABOVE INVESTMENT. THE AO DID NOT ACCEPT THE ABOVE SUBMISS ION DUE TO THE FACT THAT THE INVESTMENT WAS MADE IN AY 2007-08 AFT ER LAPSE OF 4 YEARS AND THE ASSESSEE HAS NEITHER PRODUCED ANY EVI DENCE TO SHOW THAT THE MONEY WAS GIVEN TO HIS UNCLES NOR HAS PROD UCED ANY OF HIS UNCLES TO CONFIRM THE ABOVE CLAIM. HE FURTHER OBSER VED THAT ASSESSEE DOES NOT EVEN HAVE A BANK ACCOUNT TO CLAIM THAT HE HAS RECEIVED MONEY, BECAUSE ALL THE TRANSACTIONS TOOK PLACE IN C ASH. HENCE HE OPINED THAT THE CLAIM OF THE ASSESSEE IS DOUBTFUL A ND HIS MOTHER IS A FAMILY PENSIONER AND PROBABLY HAVE SPENT MONEY RECE IVED ON SALE OF PROPERTY FOR BRINGING UP THE FAMILY OF TWO KIDS. TH E AO ACCEPTED THE MONEY GIVEN BY ASSESSEES MOTHER AND THE DIFFERENCE OF RS. 6,90,000/- WAS ADDED AS UNEXPLAINED INVESTMENT AND BROUGHT TO TAX U/S 69 OF THE ACT. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFER RED AN APPEAL BEFORE CIT(A). LD CIT(A) HAS GIVEN NUMBER OF OPPORT UNITIES TO ASSESSEE FOR APPEARANCE BUT DUE TO REASONS KNOWN TO ASSESSEE, HE FAILED TO APPEAR OR REPRESENT IN THIS CASE. HENCE T HE CASE WAS DISMISSED BY CONFIRMING THE FINDINGS OF THE AO. 5. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE US RAISING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DISMIS SING THE 3 ITA NO. 1179/HYD/2016 J. VINAY SAGAR, APPEAL OF THE APPELLANT IS ERRONEOUS, ILLEGAL AND U NSUSTAINABLE IN LAW. 2. THE COMMISSIONER (APPEALS) OUGHT TO HAVE GRANTED SUFFICIENT OPPORTUNITY TO THE APPELLANT FOR PUTTING FORTH HIS CASE. 3. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ADDITION OF RS.6,90,000 BEING THE AMOUNT INVESTED BY THE APP ELLANT IN THE SHARE CAPITAL OF M/S.. E-LOAD SERVICES PVT. LTD. TH E COMMISSIONER (APPEALS) FAILED TO APPRECIATE THAT TH E APPELLANT HAS EXPLAINED THE SOURCE FOR THE INVESTMENT MADE WI TH EVIDENCE AND THE SAME OUGHT TO HAVE BEEN ACCEPTED. 4. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE PRESUMPTION OF THE ASSESSING OFFICER THAT THE SOURC ES EXPLAINED BY THE APPELLANT WOULD HAVE BEEN UTILIZED FOR SOME OTHER PURPOSES. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE HON'BLE TRIBUNAL MAY BE PLEASED TO ALLOW THE APPEAL. 6. LD AR OF THE ASSESSEE SUBMITTED THAT THE ASSES SEE HAS MADE THE INVESTMENT IN THE COMPANY OUT OF THE MONEY GIVE N BY HIS MOTHER AND THE SALE PROCEEDS OF FAMILY PROPERTY DURING THE YEAR 2001. THE FAMILY HAS SAVED THE SALES PROCEEDS BY INVESTING WI TH MR. J.NAGA SOMESWARA RAO, WHO IS UNCLE OF THE ASSESSEE. AT THE TIME OF SALE, THE ASSESSEE WAS STUDYING IN COLLEGE. AFTER COMPLET ING THE STUDIES, ASSESSEE WAS IN A POSITION TO START A BUSINESS AND THUS THE FAMILY HAS WITHDRAWN THE INVESTMENT MADE WITH HIS UNCLE. T HE SAME WAS INVESTED IN THE COMPANY AS CAPITAL. TO SUPPORT HIS SUBMISSION, THE LD COUNSEL SUBMITTED AFFIDAVITS OF MS. J RAMA LAKSHMI AND MR. J NAGA SOMESWARA RAO AS ADDITIONAL EVIDENCE. IN THE AFFIDA VIT, THE MOTHER AND UNCLE OF THE ASSESSEE HAVE CONFIRMED THE SAVING S MADE BY THE FAMILY AND THE SOURCE OF THE ABOVE INVESTMENT. 7. LD DR RELIED ON THE FINDINGS OF THE AO AND OPPO SED THE AFFIDAVITS FILED BY THE ASSESSEE. 8. CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL F ACTS OF RECORD. THE ASSESSEE HAS MADE THE INVESTMENT IN THE COMPAN Y BY DRAWING MONEY FROM HIS MOTHER AND UNCLE. THE AO HAS ACCEPTE D THE MONEY 4 ITA NO. 1179/HYD/2016 J. VINAY SAGAR, RECEIVED FROM MOTHER BUT REFUSED TO ACCEPT THE MONE Y FROM HIS UNCLE AS THE EVIDENCE WAS NOT PRODUCED BEFORE HIM. AO ALS O REFUSED TO ACCEPT THE SOURCE OF SUCH MONEY FROM UNCLE DUE TO T HE FACT THAT THE FAMILY HAS INVESTED THE MONEY OUT OF THE SALES PROC EEDS WHICH WAS RECEIVED BY THE FAMILY 4 YEARS AGO. AO FURTHER FOUN D THAT ALL TRANSACTIONS WERE MADE ONLY IN CASH, WHICH WAS ACCO RDING TO HIM, DOUBTFUL. WE HAVE NOTICED THAT THE FAMILY DID NOT H AVE ANY EARNING MEMBER AT THE TIME OF SELLING THE PROPERTY, IT HAD OPTIONS TO INVEST IN THE BANK OR MAKING INVESTMENT IN THE BUSINESS SO TH AT FAMILY COULD HAVE MEANS OF LIVING. THEY APPEAR TO HAVE SELECTED THE SECOND METHOD AND INVESTED THE SAME WITH THE UNCLE OF THE ASSESSEE. THE SAME IS NOW CONFIRMED BY WAY OF AFFIDAVITS OF THE MOTHER AND UNCLE OF THE ASSESSEE SUBMITTED BEFORE US AS ADDITIONAL E VIDENCE. 9. WE HAVE ALSO NOTICED THAT THE AO HAS NOT BROUGH T ANYTHING CONTRARY TO SHOW THAT THE ASSESSEE OR HIS MOTHER H AVE INVESTED THE SALE PROCEEDS AS UTILIZED FOR ANY OTHER PURPOSES EX CEPT MAKING ASSUMPTION THAT THE MOTHER IS A FAMILY PENSIONER AN D PROBABLY HAVE SPENT MONEY FOR BRINGING UP THE FAMILY OF TWO KIDS. AO HAS NOT BROUGHT ANY COGENT MATERIAL TO SUPPORT HIS ASSUMPTI ON. 10. WE HAVE NOTICED THAT AT THE TIME OF SALE OF PR OPERTY, THE ASSESSEE WAS A STUDENT AND NOW HE CLAIMS TO HAVE ES TABLISHED THE BUSINESS WITH THE HELP OF MONEY RECEIVED FROM HIS M OTHER AND ALSO SAVINGS OF FAMILY OUT OF SALE PROCEEDS, WHICH WAS I NVESTED WITH THE UNCLE. THE AO REFUSED TO ACCEPT THE CONTENTION OF T HE ASSESSEE DUE TO LAPSE OF 4 YEARS FROM THE DATE OF SALE AND THE T RANSACTIONS WERE DONE IN CASH ONLY. ON RECORD, THE ASSESSEE HAS BROU GHT ON RECORD THE DOCUMENT TO PROVE THAT THE SALES PROCEEDS WERE RECE IVED BY THE FAMILY. THE GREY AREA IN THIS APPEAL IS THE RETAINI NG OF THE SALE PROCEEDS WITHIN THE FAMILY IN THE FORM OF CASH AND FOR A PERIOD OF 4 YEARS. CONSIDERING THE FAMILY SITUATION THAT THERE WAS NOBODY TO SUPPORT AND NO EARNING MEMBER IN THE FAMILY, THE FA MILY WILL BE MORE CAUTIOUS TO SAVE ANY LITTLE MONEY FOR THE FUTURE AN D IT WILL BE THE FIRST 5 ITA NO. 1179/HYD/2016 J. VINAY SAGAR, PRIORITY. WE THEREFORE DEEM IT FIT AND PROPER TO AD MIT THE ADDITIONAL EVIDENCE. AS THE APPEAL WAS DISMISSED BY CIT(A) DUE TO NON- APPEARANCE, IT IS APPROPRIATE TO REMIT THIS CASE BA CK TO AO TO VERIFY THE ADDITIONAL EVIDENCE WITH THE FACTS OF THE CASE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STAT ISTICAL PURPOSES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: MARCH, 2017. KV COPY TO:- 1) SHRI J. VINAY SAGAR, C/O SHRI AV RAGHU RAM, ADVO CATE, 610, BABHUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001 2) ITO, WARD 2(1), SIGNATURE TOWERS, KONDAPUR, HYD. 3) CIT(A) - 5, HYDERABAD 4 PR. CIT - 5, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE