Sri Karri Ramu, Visakhapatnam V. The ITO, Ward-1(1)., Visakhapatnam

ITA 120/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7028 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 20-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C SUBRAMANYAM
• Keywords: Unexplained cash credit; Opportunity of being heard; Set aside

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.120/VIZAG/2007 ASSESSMENT YEAR:2005-06 KARRI RAMU, VISAKHAPATNAM VS. ITO WARD-1(1) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO. APPELLANT BY: SHRI C.SUBRAMANYAM, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30-03-2007 PASSED BY THE LD CIT (A)-I VISAKHAPATNAM AND IT RELA TES TO THE ASSESSMENT YEAR 2005-06. 2. THE ADDITION OF RS.10.95 LAKHS HAVING BEEN CONFI RMED BY THE LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSING OFFICER OBTAINED AN INFORMATION TO THE EFFECT THAT THE ASSE SSEE HAS DEPOSITED AN AMOUNT OF RS.10,95,000/- DURING THE MONTH OF FEBRUARY, 200 5 IN HIS BANK A/C MAINTAINED WITH THE BANK OF INDIA. FROM THE SAID BANK A/C, DEM AND DRAFTS WORTH RS.10.95 LAKHS WERE PURCHASED IN FAVOUR OF THE EXCISE DEPART MENT, GOVT. OF ANDHRA PRADESH FOR OBTAINING LIQUOR LICENSE IN THE NAMES O F SHRI K. NEELAKANTESWARA RAO, SHRI L. NARASA RAO AND SMT. K. SAMUDRAM. IN RES PONSE TO THE NOTICE ISSUED U/S 142 R.W.S. 175 OF THE ACT, THE ASSESSEE FILED H IS RETURN OF INCOME ADMITTING AN INCOME OF RS.60,000/- AND THE AGRICULTURAL INCOM E OF RS.35,000/-. THE SOURCE PAGE 2 OF 4 OF INCOME DECLARED BY THE ASSESSEE WAS SALARY AND I NTEREST INCOME. WITH REGARD TO THE DEPOSIT OF RS.10.95 LAKHS MADE IN HIS BANK A /C, THE ASSESSEE SUBMITTED THAT HE ALONG WITH 5 OTHER PERSONS CONSTITUTED A PA RTNERSHIP FIRM ON 12.02.2005 UNDER THE NAME AND STYLE OF M/S VAMSI ENTERPRISES A ND THE IMPUGNED DEPOSIT WAS MADE FROM OUT OF THE CAPITAL AMOUNT CONTRIBUTED BY THE PARTNERS AS PER THE DETAILS GIVEN BELOW: NAME OF THE PARTNER AMOUNT (RS.) SHRI K. RAMU 1,00,000 SHRI K. NEELAKANTESWARA RAO 4,50,000 SHRI L. SATYANARAYANA 3,50,000 SMT.JAYA LAKSHMI 1,00,000 SMT. K. SAMUDRAM 60,000 SRI L. NARASA RAO 60,000 HOWEVER, THE AO UPON INQUIRY FOUND OUT THAT THE S TAMP PAPERS ON WHICH THE SAID PARTNERSHIP FIRM WAS EXECUTED WAS PURCHASED ON LY ON 21-04-2005. THE AO ALSO NOTICED THAT SUCH PARTNERSHIP DEED WAS NOT REG ISTERED WITH THE REGISTRAR OF STAMPS; NO BANK ACCOUNT WAS OPENED IN THE NAME OF T HE FIRM; NO PAN NUMBER WAS OBTAINED BY THE FIRM AND FURTHER THE SIGNATURES OF ALLEGED PARTNERS DID NOT TALLY WITH THE SIGNATURES FOUND IN THE CONFIRMATION LETTERS FILED IN THE COURSE OF ASSESSMENT PROCEEDING. WITH REGARD TO THE DIFFERENC E IN THE DATE OF CONSTITUTION OF PARTNERSHIP, THE ASSESSEE SUBMITTED THAT ALL THE PARTNERS FORMALLY AGREED TO CONSTITUTE A PARTNERSHIP ON 09-02-2005 AND THE PART NERSHIP DEED WAS DRAFTED IN THE PLAIN PAPER INITIALLY. SUBSEQUENTLY, AFTER PURC HASING THE STAMP PAPERS ON 21- 04-2005, THE PARTNERSHIP DEED WHICH WAS EXECUTED EA RLIER IN PLAIN PAPERS WAS COPIED IN THE STAMP PAPER. WITH REGARD TO THE NON- OPENING OF BANK ACCOUNT, IT WAS SUBMITTED THAT THE DEPARTMENT ISSUED PROHIBITOR Y ORDERS TO THE BANK IN RESPECT OF THE DEMAND DRAFTS ALREADY PURCHASED FOR PARTICIPATION IN EXCISE AUCTION AND FURTHER SINCE THE AUCTION ITSELF WAS CA NCELLED LATER, THE PARTNERSHIP FIRM DID NOT OPEN BANK ACCOUNT. THE AO, HOWEVER, DI D NOT ACCEPT THE SAID PAGE 3 OF 4 EXPLANATIONS OF THE ASSESSEE BY TERMING THAT THE SA ID EXPLANATIONS ARE ONLY AN AFTER THOUGHT. ACCORDINGLY, THE AO CONCLUDED THAT THE FIRM WAS NEVER EXISTED AND CONSEQUENTLY THE AO DID NOT ACCEPT THE EXPLANAT ION OF CAPITAL CONTRIBUTION OF THE ALLEGED PARTNERS. CONSEQUENTLY, THE AO TREATED THE ENTIRE AMOUNT OF RS.10.95 LAKHS AS UNEXPLAINED CREDIT IN THE HANDS O F THE APPELLANT AND THE SAME WAS ALSO CONFIRMED BY THE LD CIT (A). AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THE MAIN CONTENTION OF THE LD AR IS THAT THOUGH THE ASSESSEE HAS EXPLAINED THE SOURCES OF FUNDS FOR MAKING THE IMPUGNED DEPOSIT OF RS.10.95 L AKHS, THE TAX AUTHORITIES CONFINED THEMSELVES ON VERACITY OF CONSTITUTION OF PARTNERSHIP FIRM AND ACCORDINGLY MADE THE ADDITION AS ACCORDING TO THEM, THE FIRM DID NOT CAME INTO EXISTENCE AT ALL. THE TAX AUTHORITIES HAVE FAILED TO CONSIDER THE EXPLANATIONS WITH REGARD TO THE SOURCES AVAILABLE WITH THE PERSONS WH O HAD CONTRIBUTED THE MONEY, DESPITE THE FACT THAT THE PARTNERS HAVE DULY EXPLAI NED THEIR SOURCES FOR MAKING THEIR SHARE OF CAPITAL AMOUNT. ON THE OTHER HAND, THE CONTENTION OF THE LD DR WAS THAT THE IMPUGNED DEMAND DRAFTS WERE NOT PURCHA SED IN THE NAME OF ALL THE PERSONS WHO HAVE CLAIMED TO HAVE MADE THE CONTR IBUTION, WHICH CONTRADICTS THE CLAIM OF THE ASSESSEE. ACCORDING TO THE LD DR T HE TAX AUTHORITIES HAVE EXAMINED THE ISSUE IN CORRECT PERSPECTIVE AND HENCE THE ADDITION MADE SHOULD BE SUSTAINED. 5. ON A CAREFUL PERUSAL OF THE ORDERS OF THE TAX AU THORITIES, WE NOTICE THAT BOTH THE TAX AUTHORITIES HAVE GIVEN MUCH IMPORTANCE TO THE GENUINENESS OF THE CLAIM WITH REGARD TO THE CREATION OF THE PARTNERSHI P FIRM. AS CONTENTED BY THE LD AR THE SOURCES CLAIMED BY THE ASSESSEE FOR MAKING I MPUGNED DEPOSIT OF RS.10.95 LAKHS WERE NOT EXAMINED BY THE AO. EVEN IF THE FIRM IS ESTABLISHED AS NON GENUINE, THE CLAIM OF THE ASSESSEE REMAINS THAT THE IMPUGNED AMOUNT WAS CONTRIBUTED BY HIM AND 5 OTHER PERSONS. THE SAID CL AIM OF THE ASSESSEE WAS NOT EXAMINED IN PROPER PERSPECTIVE AND HENCE THE SAME N EEDS VERIFICATION. AS PAGE 4 OF 4 CONTENDED BY LD AR, THE AO HAS MADE THE ADDITION WI THOUT MAKING ANY VERIFICATION WITH REGARD TO THE SOURCES OF THE PERS ONS WHO HAVE CLAIMED TO HAVE CONTRIBUTED THE MONEY. IN VIEW OF THE ABOVE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO CONSIDER THE SOURCES CLAIMED BY THE PARTIES STATED ABOVE AND ADJUDICATE THE ISSUE IN ACCORDANCE WITH T HE LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 25-02-2010. COPY TO 1 SRI KARRI RAMU, C/O C. SUBRAHMANYAM, CA, 102 LAKS HMI APARTMENTS, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM 530 00 3 2 THE ITO, WARD-1, VISAKHAPATNAM 3 THE CIT-(A)I, VISAKHAPATNAM 4 THE CIT-I VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM