ITO, Nellore V. Sri A.Balakrishnaiah, Nellore

ITA 1208/HYD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7155 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 29-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Keywords: Unexplained cash credit; Unexplained investment; Gift; Additional evidence
• Section: 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO. 1208/HYD/2009 ASSESSMENT YEAR 2004-05 THE ITO, WARD 4, NELLORE VS SHRI A. BALA KRISHNAIAH, NELLORE DISTRICT. (PAN AGCPA3380K) APPELLANT RESPONDENT APPELLANT BY : SHRI B.V. PRASAD REDDY RESPONDENT BY : NONE DATE OF HEARING : 21.11.2011 DATE OF PRONOUNCEMENT : 16.12.2011 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRE CTED AGAINST THE ORDER PASSED BY THE CIT(A) HYDERABAD D ATED AND PERTAINS TO THE ASSESSMENT YEAR 2. THE ASSESSEE IS AN INDIVIDUAL AND FILED ITS RET URN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 ADMITTING T AXABLE INCOME AT RS.91,960/- AND AGRICULTURAL INCOME AT RS.40,000/-. SUBSEQUENTLY, THE ITO, NELLORE ISSUED NOTICE U/S 148 AND THE ASSESSING OFFICER MADE THE FOLLOWIN G ADDITIONS TO THE RETURNED INCOME OF RS.91,960/-: I) UNEXPLAINED CASH CREDITS RS.1,50,000 II) UNEXPLAINED INVESTMENT IN M/S NELLORE STRAW BOARDS RS.29,18,000/- ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 2 III) UNDISCLOSED INTEREST FROM M/S NELLORE STRAW BOARDS RS.75,050/- IV) DIFFERENCE IN COST OF CONSTRUCTION OF RS.9,36,0 00/- V) AGRICULTURAL INCOME TREATED AS NON AGRICULTURAL INCOME RS.40,000/- 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT: THE RESIDENTIAL HOUSE IN WHICH THE ASSESSEE IS PRESENTLY RESIDING HAS BEEN ACQUIRED ON 10.9.2003 B Y THE WAY OF GIFT FROM THE SISTER OF ASSESSEE VIZ., SURABATTU LAKSHAMMA THROUGH SETTLEMENT DEED REGISTERED IN SRO, ALLURU, NELLORE DISTRICT. THE PROPERTY RECEIVED ON SETTLEMENT COMPRISES 176 SQ. YARDS HOUSE PLOT AND IN WHICH GROUND FLOOR BUILDING OF 936 SQ. FEET AND 1 ST FLOOR OF SAME EXTENT WAS ALREADY EXISTING. SUBSEQUENTLY OBTAINED BANK LOAN OF RS.5. 47 LAKES TO RENOVATE THE EXISTING RESIDENTIAL PROPERTY AND THE TOTAL RENOVATION EXPENSES OF RS.8 LAKHS HAVE BE EN DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS WITHOUT TAKING THE ORIGINAL VALUE OF THE PROPERTY IN TO THE BOOKS OF ACCOUNTS OWING TO THE FACT THAT THE VALUE OF THE PROPERTY HAS BEEN TAKEN AS NIL SINCE RECEIVED THRO UGH GIFT. IF THIS NOTIONAL VALUE OF GIFT IS TAKEN INTO ACCOUNT THE TOTAL VALUE OF THE BUILDING COMES TO RS.15 LAKH S. THE VALUATION DEPARTMENT WHILE ARRIVING AT THE VALU E OF THE PROPERTY WRONGLY CONSTRUED AS ENTIRE BUILDING I S NEWSLY CONSTRUCTED ONE AND ESTIMATED THE VALUE OF T HE PROPERTY. IN THIS CONTEXT A LETTER WAS FILED BEFORE THE ASSES SING OFFICER ON 24.12.2007 OBJECTING TO THE VALUATION MA DE BY THE DEPARTMENT VALUES IS BASELESS AS IMAGINARY. ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 3 5. FURTHER, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADDITION OF RS.9,36,000/- ON THIS AC COUNT IS TO BE DELETED. 6. THE CIT(A) AT PARA 15 AND 16 OF HIS ORDER HAS ELABORATELY DISCUSSED THE ISSUE AND HELD AT PARA 17 AS FOLLOWS: THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATIONS OFFERED BY THE ASSESSEE ONLY ON ACCOUN T OF THE DISCREPANCIES IN THE NUMBER OF PROPERTY MENTIONED IN THE SETTLEMENT DEED, DISREGARDING COMPLETELY THE OTHER EVIDENCES FILED BY THE ASSESSE E. THE ASSESSING OFFICER HAS NOT DISPUTED THE ASSESSEE S CLAIM THAT THIS IS THE ONLY PROPERTY IN THE NAME OF THE ASSESSEE IN FACT THE INSPECTOR OF ITS REPORT CONFI RMS THIS. THE ASSESSING OFFICER HAS ALSO NOT DISPUTED THAT THE PROPERTY IN THE ASSESSEES NAME STOOD IN THE NA ME OF THE ASSESSEES SISTER ORIGINALLY. THE GIFT ITSE LF HAS NOT BEEN QUESTIONED BY THE ASSESSING OFFICER. IN V IEW OF THIS, THE ASSESSING OFFICER HELD THAT THE EXPLAN ATION OFFERED BY THE ASSESSEE IS ACCEPTABLE AND NO ADDITI ON ON ACCOUNT OF COST OF CONSTRUCTION IS WARRANTED. T HE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCO UNT IS DELETED. THE CIT(A) THUS DELETED THE ADDITION. 7. THE NEXT GROUND BEFORE THE CIT(A) WAS THAT THE ASSESSING OFFICER HELD THAT : THE ASSESSEE HAD FAILED TO DISCLOSE THAT HE HAD CONTRIBUTED AN AMOUNT OF RS.2,91,800/- AS SHARE CAPITAL IN THE FIRM NELLORE STRA IN WHICH THE ASSE SSEE WAS ADMITTED AS PARTNER FROM 1.12.2003. ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 4 8. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OF THE FIRM, IT WAS SUBMITTED THAT THE SOURCES FOR THE CAPITAL CONTRIBUTION MADE BY THE PARTNERS WAS ADVANCES COLL ECTED ON SALE OF LAND HELD BY THE FIRM. THE ASSESSING OF FICER HOWEVER DID NOT ACCEPT THE EXPLANATION GIVEN SINCE NO FURTHER DETAILS COULD BE PROVIDED TO ESTABLISH THE SOURCES. THE CAPITAL CONTRIBUTION MADE BY 3 PARTNERS TOTALLI NG TO RS.1,17,68,000/- WAS ADDED BACK IN THE HANDS OF THE FIRM. 9. ON APPEAL THE CIT(A) HELD AS FOLLOWS: WHILE DECIDING THE APPEAL IN THE CASE OF THE FIRM, THE ADDITIONAL EVIDENCE SUBMITTED IN THE CASE OF THE FI RMS APPEAL TO EXPLAIN THE SOURCES OF THE CAPITAL INTROD UCED BY THE PARTNERS WAS REMANDED TO THE ASSESSING OFFIC ER AND VERIFIED DURING THOSE PROCEEDINGS. THE ASSESSI NG OFFICER FOUND THAT THE SOURCES FOR ALL EXCEPT AN AM OUNT OF RS.80,000/- SHOWN AS INTRODUCED BY THE ASSESSEE WAS PROPERLY EXPLAINED AND VERIFIED. IN THE ORDER DATED 30.1.2009, IN ITA NO.0266/CIT(A)/2006-07 IN THE CASE OF M/S NELLORE STRAW BOARDS, THIS AMOUNT OF RS.80,000/- WHICH COUL D NOT BE VERIFIED WAS TREATED AS UNEXPLAINED CREDITS IN THE BOOKS OF THE FIRM. SINCE THE AMOUNT HAS ALREAD Y BEEN BROUGHT TO TAX AS UNEXPLAINED CREDIT IN THE FI RMS HANDS AND THE FIRM IS THE ULTIMATE BENEFICIARY, HE HELD THAT NO ADDITION ON THIS ACCOUNT IS TO BE MADE TO T HE ASSESSEES INCOME. THE ENTIRE ADDITION MADE AS UNEXPLAINED INVESTMENT IN THE FIRM IS DELETED. 10. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE US. ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 5 11. AT THE TIME OF HEARING NONE APPEARED ON BEHAL F OF THE ASSESSEE AND WE HEARD THE DEPARTMENTAL REPRESENTATIVE SHRI B.V. PRASAD REDDY, WHO STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SU BMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE I MPUGNED ADDITION. 12. WITH RESPECT TO THE FIRST GROUND, WE FIND THA T THE ASSESSING OFFICER AGREED WITH THE FINDINGS OF T HE CIT(A) IN HIS REMAND REPORT AND HENCE THE DEPARTMENT SHOUL D NOT HAVE ANY GRIEVANCE. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO, WHEN QUESTIONED BY THE BENCH, FAIRLY CONCEDED ON THE ISSUE. HENCE, WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE ADDITION U/S 69 OF THE ACT O F THE INVESTMENT OF RS.29,18,000/- ADDED BY THE ASSESSING OFFICER TO THE INCOME OF THE ASSESSEE TOWARDS UNEXPLAINED INVESTMENT IN THE FIRM. 13. THE SECOND GROUND OF APPEAL BY THE DEPARTMENT IS AS FOLLOWS: THE ORDER OF THE CIT(A) IS ERRONEOUS IN DELETING TH E ADDITION MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE VALUE SHOWN BY THE ASSESSEE AND THE VALUE ARRIVED A T BY THE VALUATION OFFICER ON THE GROUND THAT THE ASSESSEE OWNS ONE HOUSE WHEN HAS BEEN BEING OWNED FROM 2000-01 AND TREATING IT AS GIFT RECEIVED FROM HIS SISTER BY GIFT DEED CREATED ON 10.9.2003. ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 6 14. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER BEFORE THE CIT(A) AND THE SUBMISS IONS OF THE ASSESSEE IS AS FOLLOWS: THE PROPERTY IN QUESTION WAS SETTLED ON THE ASSESS EE BY HIS SISTER THROUGH A SETTLEMENT DEED REGISTERED IN SRO, ALLURU, NELLORE DISTRICT. IT WAS SUBMITTED TH AT THE PROPERTY CONSISTS OF 176 SQ. YARDS OF HOUSE PLOT, I N WHICH THE GROUND FLOOR BUILDING COMPRISING OF 936 S Q. FEET AND THE FIRST FLOOR OF THE SAME EXTENT WAS ALR EADY EXISTING. IT WAS SUBMITTED THAT SUBSEQUENTLY BANK LOAN OF RS.5.47 LAKHS WAS TAKEN TO RENOVATE THE EXISTING RESIDENTIAL PROPERTY AND THE TOTAL RENOVAT ION EXPENSES OF RS.80,000/- HAS BEEN ACCOUNTED FOR. IT WAS ALSO SUBMITTED THAT THE ORIGINAL VALUE OF THE PROPERTY WAS TAKEN AT NIL IN THE BOOKS, SINCE IT WA S RECEIVED BY THE ASSESSEE AS A GIFT. IT WAS SUBMITT ED THAT IF THE NOTIONAL VALUE OF THIS GIFT IS TAKEN IN TO ACCOUNT THEN THE VALUE OF THE PROPERTY WOULD AMOUNT TO RS.15,00,000/- AS ESTIMATED BY THE DVO. 10. WE FIND THAT THE ASSESSING OFFICER HAS NOT ACCEPTED THAT THE SAID PROPERTY WAS GIFTED BY THE A SSESSEES SISTER TO HIM. HOWEVER, IT IS SEEN THAT THE ASSESS EE HAD INDICATED THAT THE CONSTRUCTION HAD BEEN CARRIED OU T ON PROPERTY THAT HAD BEEN SETTLED ON HIM, IN THE RETUR N FILED BY HIM ALSO. THE SETTLEMENT DEED WHICH WAS ALSO FILED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS BY THE ASSESSEE CLEARLY INDICATES THAT THE GROUND AND FIRST FLOORS OF 936 SQUARE FEET WERE ALREADY CONSTRUCTED. THE ASSESSING OFFICER HAS DISPUTED THAT THE ASSESSEE HA S RECEIVED THIS PROPERTY BY WAY OF SETTLEMENT FROM HI S SISTER, ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 7 IN VIEW OF THE DISCREPANCIES IN THE ASSESSMENT NUMB ERS. THE ASSESSEE HAS HOWEVER FILED A CERTIFICATE FROM T HE PANCHAYAT SECRETARY OF ALLURU VILLAGE. THIS CERTIF ICATES THAT A HOUSE BELONGING TO S. LAKSHMAMA, THE ASSESSEES S ISTER HAD BEEN REGISTERED IN FAVOUR OF THE ASSESSEE IN TH E YEAR 2000-01 ALONG WITH ALL DOCUMENTARY RIGHTS SUCH AS G ROUND FLOOR, FIRST FLOOR, COMPOUND WALL, ELECTRICITY CONN ECTION ETC. THE CERTIFICATE ALSO CLEARLY STATES THAT THE HOUSE IS THE ONLY HOUSE IN THE NAME OF THE ASSESSEE. THIS IS ALSO CORROBORATED BY THE INSPECTOR OF INCOME TAXS REPOR T WHICH STATES THAT THE ASSESSEE OWNS ONLY ONE PROPERTY. SINCE AS PER THE CERTIFICATE ISSUED, THE PROPERTY ORIGINALLY STOOD IN THE NAME OF THE ASSESSEES SISTER THE ASSESSEES CL AIM THAT HE RECEIVED THE PROPERTY FROM HIS SISTER HAS TO BE ACCEPTED. AS PER THE SETTLEMENT DEED THE VALUE OF THE PROPERT Y GIFTED WAS RS.6,69,000/- THE ASSESSEES CLAIM IS THAT HE HAD THEREAFTER INCURRED ONLY AN AMOUNT OF RS.8 LAKHS W HICH WAS FULLY ACCOUNTED FOR IN THE BOOKS. THE ASSESSEE S CLAIM IS ALSO THAT THE TOTAL VALUE OF THE PROPERTY CORRES PONDS TO THE VALUE DETERMINED BY THE DVO. 11. SINCE THE ASSESSING OFFICER HAS NOT DISPUTED THE ASSESSEES CLAIM THAT THIS IS ONLY PROPERTY IN THE ASSESSEES NAME, THOUGH STOOD IN THE NAME OF THE ASSESSEES SI STER ORIGINALLY AND THE GIFT MADE BY HER TO THE ASSESSEE HAS NOT BEEN QUESTIONED BY THE ASSESSING OFFICER, NO ADDITI ON ON ACCOUNT OF COST OF CONSTRUCTION CAN BE MADE. THERE FORE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE REV ENUE APPEAL ON THIS ISSUE. ITA NO.1208/HYD/2009 SHRI A. BALA KRISHNAIAH, ALLURU 8 12. IN THE RESULT, THE REVENUE APPEAL STANDS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT 14.12.2011 SD/- SD/-` (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAVAN) ACCOUNTANT MEMBER JUDICIAL M EMBER DATED THE 14 TH DECEMBER, 2011 COPY FORWARDED TO: 1. THE ITO WARD-4, NELLORE 2. SHRI A. BALAKRISHNAIAH, RAJULA STREET, ALLURU POST, NELLORE DISTRICT. 3. THE CIT(A)- GUNTUR 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/