ITO, WARD-2, Kadapa V. Shri M. Subha Krishna Kumar, Kadapa

ITA 1263/HYD/2011

• Counselvise Citation: 126322514 RSA 2011
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2002-2003
• Appeal Filed On: 05-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Gift
• Section: 143(3); 133A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1263, 1266 & 1267/HYD/2011 ASSESSMENT YEAR 2002-03, 2007-08 & 2008-09 THE INCOME TAX OFFICER WARD-2, KADAPA VS. MR. MITTA SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST., PAN ARRPM1278N (APPELLANT) (RESPONDENT) FOR REVENUE : MR. P. SOMASEKHAR REDDY FOR ASSESSEE : MR. S. RAMA RAO DATE OF HEARING : 15.09.2014 DATE OF PRONOUNCEMENT : 29.10.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE THREE ARE REVENUE APPEALS AGAINST THE COMMON ORDER OF LD. CIT(A), GUNTUR DATED 22.03.2011 . IN FACT, LD. CIT(A) DECIDED 7 APPEALS FROM A.Y. 2002-03 TO 2 008-09 BY COMMON ORDER, WHEREAS, REVENUE IS AGGRIEVED ONLY IN THREE ASSESSMENT YEARS I.E., 2002-03, 2007-08 AND 2008-09 . 2. WE HAVE HEARD THE LEARNED D.R. AND LD. COUNSEL IN DETAIL AND PERUSED THE PAPER BOOK PLACED ON RECO RD. 3. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSI NESS OF GOLD JEWELLERY, MONEY LENDING, REAL ESTATE AND I NVESTMENTS. A SURVEY OPERATION UNDER SECTION 133A WAS CONDUCTED I N THE BUSINESS PREMISES OF ASSESSEE ON 13.08.2008 AND IN THE INVENTORY OF VARIOUS STOCK IN TRADE AND MONEY LENDI NG PRONOTES 2 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . RESULTED IN UNEARTHING ASSETS TO AN EXTENT OF RS. 1 CRORE. SINCE NONE OF THE FAMILY MEMBERS WERE ASSESSED TO TAX INC LUDING ASSESSEE, NOTICE UNDER SECTION 148/142(1) WAS ISSUE D FOR THE IMPUGNED ASSESSMENT YEARS. ASSESSEE WAS ASKED TO EX PLAIN VARIOUS TRANSACTIONS AND ASSESSEE FILED CASH FLOW S TATEMENT BOTH IN INDIVIDUAL CAPACITY AS WELL AS HUF CAPACITY . A.O. HAS COMPLETED THE ASSESSMENT MAKING VARIOUS ADDITIONS I NTER ALIA ADDING OPENING CAPITAL IN A.Y. 2002-03. IN A.Y. 200 7-08 AND 2008-09 A.O. HAS ADDED CASH GIFTS FROM WIFE AND ALS O TREATED INCOME IN THE HUF STATUS AS THAT OF INDIVIDUAL. SIN CE, LD. CIT(A) GAVE RELIEF ON THE ABOVE ISSUES, REVENUE IS AGGRIEVED. WE HAVE CONSIDERED THE REVENUES CONTENTIONS AS UND ER. ASSESSMENT YEAR 2002-2003 : 4. THE ISSUE CONTESTED BY REVENUE IN THIS ASSESSMENT YEAR IS THAT LD. CIT(A) ERRED IN ACCEPTI NG THE OPENING CAPITAL RELYING ON THE FACTUALLY INCORRECT GROWTH STATEMENT FURNISHED BY ASSESSEE AND WITHOUT VERIFY ING THAT THERE ARE NO PROMOTES ACCOUNTED RELATING TO A.Y. 20 02-03 OR EARLIER YEARS. IT WAS ALSO CONTENDED THAT LD. CIT(A ) SHOULD HAVE EXAMINED ASSESSEES CLAIM OF SUNDRY DEBTORS TO AN E XTENT OF RS.4,50,000 WHICH IS MAJOR PART OF OPENING BALANCE OF RS.7,00,450. LD. CIT(A) CONSIDERED THE ISSUE AS UND ER : 5.1. WITH REGARD TO FIRST GROUND THAT THE A.O. HAS ERRONEOUSLY MADE ADDITION OF U/S. 68 AMOUNTING TO RS.6,60,460/- FOR THE A.Y. 2002-03 TOWARDS UNEXPLAI NED OPENING CAPITAL, THE APPELLANT HAD SUBMITTED THAT D ETAILS OF CAPITAL GROWTH AMOUNTING TO RS.7,00,450/- WAS SUBMI TTED TO THE A.O. AT THE TIME OF ASSESSMENT. IT WAS SUBMITTE D THAT ASSESSEE'S FATHER LATE SRI M. SRINIVASULU WAS ON IN COME TAX ROLLS AND WAS FILING HIS RETURN OF INCOME WITH THE STATUS OF HUF. IN THIS CONTEXT, IT WAS FURTHER SUBMITTED THAT IT WAS BROUGHT TO THE KIND NOTICE OF THE AO THAT THE ASSES SEE WAS 3 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . HELD AS CREDITOR IN THE BOOKS OF ACCOUNTS OF M. SRI NIVASULU, HUF FOR AN AMOUNT OF RS.1,50,799/- FOR THE FINANCIAL YEAR ENDING AS ON 31.03.1990 AND WAS REGULARLY EARNING I NTEREST INCOME. THE EVIDENCE FOR THE SAME IS BOOKS OF ACCOU NT MAINTAINED BY LATE M. SRINIVASULU AND A COPY OF LED GER EXTRACT IS ENCLOSED FOR READY REFERENCE. THE SAID C REDIT BALANCE IN THE BOOKS OF M. SRINIVASULU, HUF, WAS RE PAID TO M. SUBHA KRISHNA KUMAR. THE APPELLANT HAS SUBMITTED THAT THE ABOVE LEDGER BALANCE ALONG WITH INTEREST ACCUMU LATION OVER A PERIOD OF TIME FROM THE YEARS 1990-91 TO 199 1-92 WAS INTRODUCED AS CAPITAL BY THE ASSESSEE DURING TH E YEAR 1992-93 FOR AN AMOUNT OF RS.1,95,940/- . SINCE, THE RECORD PERTAINING TO THE F.Y. 1989-90 WAS NOT LOCATED AT T HE TIME OF PROCEEDINGS OF THE AO AND HENCE, THE SAME IS NOW SUBMITTED FOR DUE CONSIDERATION OF HON'BLE CIT(APPE ALS). HENCE, THE CAPITAL GROWTH AMOUNTING TO RS.7,00,450/- FROM AN AMOUNT OF RS.1,95,940/- FROM THE F.Y. 1992-93 TO 2001-02 WAS EXPLAINED IN DETAIL. 5. EVEN THOUGH GROUND WAS RAISED ABOUT NON- VERIFICATION OF SUNDRY DEBTORS BY LD. CIT(A) WHICH IS ALSO MAJOR PART OF OPENING BALANCE OF RS.7,45,000, WHAT WE EXA MINED FROM ASSESSING OFFICERS ORDER IS THAT HE ASKED FOR CONFIRMATIONS OF THE AMOUNTS ADVANCED BY ASSESSEE A ND IN THE ABSENCE OF SAME, HE TREATED THE INTEREST OFFERED AT RS.68,655 AS INCOME FROM OTHER SOURCES. THERE IS NO SEPARATE ADDITION OF RS.4,50,000 SUNDRY DEBTORS AS IT IS FORMING PART OF CAPITAL ITSELF. THEREFORE, THERE IS NO JUSTIFICATION FOR TH E REVENUE TO CONTEND THAT LD. CIT(A) SHOULD HAVE EXAMINED THE CL AIM OF SUNDRY DEBTORS WHEN A.O. HIMSELF HAS NOT TREATED IT SEPARATELY AND ONLY TREATED THE CONSEQUENTIAL INTEREST OFFERED ON THE DEBTS GIVEN BY ASSESSEE AS INCOME FROM OTHER SOURCE S. HOWEVER, LD. CIT(A) CONSIDERED THIS ASPECT ALSO AND DECIDED THE ISSUE VIDE PARA 5.3 OF HIS ORDER AS UNDER : 5.3. I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT, GONE THROUGH THE ORDER OF THE AO AND HEA RD THE AR IN PERSON. IN AS MUCH AS THE OPENING CAPITAL OF THE APPELLANT IS CONCERNED, IN A CASE OF NO BOOKS FOUND IN 4 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . SURVEY, THE APPELLANT HAS TO BE ALLOWED TO PREPARE A CASH FLOW STATEMENT OR CAPITAL GROWTH STATEMENT TO EXPLA IN HIS STATE OF AFFAIRS WHICH HAS TO BE SEEN WHETHER SUCH A STATEMENT IS FITTING INTO THE FINDINGS OF THE SURVE Y TEAM, IN CASE IT IS NOT THEN NECESSARY AMENDS HAVE TO BE MAD E. IT IS SEEN FROM THE RECORDS THAT THE APPELLANT'S MOTHER D IED ON 13-04-1990, WHO WAS HAVING A LIC POLICY, WHOSE MATU RITY AMOUNT IS RS. 1,00,000/-. SINCE THE APPELLANT WAS T HE NOMINEE HE WAS IN RECEIPT OF THAT AMOUNT AFTER THE DEMISE OF HIS MOTHER. IN ADDITION IT IS SEEN FROM THE RECORDS THAT THE APPELLANT HAS BEEN REGISTERED UNDER APGST ACT, 1957 DURING DECEMBER 1993 AND STARTED JEWELLERY BUSINESS IN THE NAME AND STYLE OF PADMA JEWELERS, WITH THE AMOUNTS INCLUDING RS. 1,00,000/- RECEIVED BY HIM FROM HIS M OTHER'S LIC POLICY. BASED ON SUCH INFORMATION AND OTHER PAP ERS, ROUGH RECORDS, VOUCHERS, BILLS ETC FOUND IN COURSE OF THE SURVEY OPERATIONS THE AR HAS PREPARED THE CASH FLOW STATEMENT OR CAPITAL GROWTH STATEMENT, WHICH COULD NOT BE BRUSHED ASIDE BY THE REVENUE. AS PER THESE EVIDENCE S AND MATERIAL AN OPENING CAPITAL OF RS.7,00,450/- WAS TH ERE IN THE CASE OF THE APPELLANT AS ON 01-04-2005. IT CONS ISTED OF 4 ITEMS, VIZ., OPENING CASH BALANCE OD RS.81,450/- , SUNDRY DEBTORS OF RS.4,50,000/- , INVESTMENTS IN BANKS AS FDRS OF RS.1,44,000/- AND INVESTMENT IN PADMA JEWELLERS OF RS.25,000/- . NOW THE AO, ON THE GROUND THAT THE APPELLANT WAS FOUND NOT MAINTAINING BOOKS DURING THE OPERATIO NS UNDER SECTION 133A, BENT ON ADDING THE OPENING CAPI TAL OF RS.7,00,450/- , BUT FOR THE REASONS BETTER KNOWN TO HIM REDUCED THE INVESTMENTS MADE DURING THE YEAR IN SAH ARA INDIA PARIVAR AT RS.40,000/- AND SUBJECTED THE REMA INING AMOUNT OF OPENING BALANCE OF RS.6,60,450/- TO TAX. SINCE, THERE IS NO BASE FOR SUCH AN ADDITION, THE AO IS DI RECTED TO DELETE THE SAME. 6. SINCE NOTHING WAS BROUGHT ON RECORD TO COUNTER THE FINDINGS OF LD. CIT(A), WE DO NOT SEE ANY REASO N TO INTERFERE WITH THE ORDER OF LD. CIT(A). FIRST OF ALL, REVENUE COULD NOT COUNTER THE SUBMISSIONS OF ASSESSEE THAT THERE WERE ASSESSMENTS/ EVIDENCES IN THE CASE OF MR. M. SRINIV ASULU HUF WAY BACK IN A.Y. 1990-1991 AND FUNDS WERE AVAILABLE REGULARLY FROM THAT POINT OF TIME. EVEN THE RECEIPT OF LIC PA YMENTS AND OTHER PAYMENTS EXAMINED BY LD. CIT(A) AND ACCEPTED COULD NOT BE DISPROVED IN THE ABSENCE OF ANY EVIDENCE CONTRAR Y TO THE 5 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . CONTENTIONS OF ASSESSEE THAT HE HAS THE OPENING CAP ITAL OF RS.7,00,450. NOT ONLY THAT ASSESSEE HAS GIVEN A GR OWTH STATEMENT EXPLAINING THE RECEIPTS AND PAYMENTS OVE R A PERIOD OF TIME WHICH ITSELF IS BASIS FOR A.OS ASSESSMENTS . HAVING ACCEPTED THE GROWTH STATEMENTS IN VARIOUS YEARS, WE ARE UNABLE TO UNDERSTAND HOW THE OPENING BALANCE CLAIM CAN BE TREATED AS THE INCOME OF ASSESSEE WITHOUT DISPROVIN G THE SAME THAT NO INCOME ACCRUED TO ASSESSEE IN EARLIER YEARS . ON THE BASIS OF THE EVIDENCES ON RECORD, WE ARE OF THE OPI NION THAT LD. CIT(A) ORDER IS JUSTIFIED ON THE FACTS. IN VIEW OF THIS, WE FIND NO MERIT IN REVENUE GROUNDS. ACCORDINGLY, THE SAME ARE DISMISSED. ASSESSMENT YEAR 2007-08 : 7. REVENUE IS AGGRIEVED ON THE DELETION OF ADDITIO N OF RS.3,40,000 RECEIVED FROM ASSESSEES WIFE AS GIFT A ND DELETION OF INCOME ASSESSED AS THAT OF HUF STATUS IN THE IND IVIDUAL HAND WHICH WAS DELETED AGAIN BY LD. CIT(A). GROUND NO.3 IS NOT RELATED TO THE ISSUE BUT GENERALLY RAISED IN AL L THE YEARS EVEN THOUGH THERE IS NO BASIS FOR DELETION OF THE A DDITIONS DURING THE YEAR. THEREFORE, GROUND NO.3 NEED NOT BE ADJUDICATED AS THE ISSUE DOES NOT ARISE IN THE IMPU GNED YEAR. 8. GROUND NO.2 PERTAIN TO DELETION OF ADDITION ON THE BASIS OF GIFT RECEIVED FROM WIFE. ASSESSEES WIFE S MT. SUCHITRA HAS GIFTED AN AMOUNT OF RS.20,000 IN A.Y. 2005-06, RS.1,20,000 IN A.Y. 2006-07 AND RS.3,40,000 IN THE IMPUGNED YEAR AND RS.8,90,000 IN THE LATER YEAR (WHICH WAS A LSO CONTESTED IN THAT YEAR BY REVENUE). THESE AMOUNTS W ERE ADDED AS UNEXPLAINED CASH CREDITS BY A.O. IN RESPECTIVE A SSESSMENT YEARS. EVEN THOUGH, LD. CIT(A) DELETED ALL SUCH ADD ITIONS BY 6 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . HIS COMMON ORDER, REVENUE IS AGGRIEVED ONLY IN A.Y. 2007-08 AND 2008-09. THE FINDINGS OF LD. CIT(A) ON THE ISSU E ARE AS UNDER : 8.4. IN RESPECT OF OTHER GIFTS RECEIVED BY THE AP PELLANT FOR THE A.YS. 2005-06 TO 2008-09, THE APPELLANT HAD SUB MITTED THAT THESE GIFTS WERE RECEIVED BY HIM FROM HIS WIFE SMT M.SUCHITRA, WHO IS AN INCOME TAX ASSESSEE. IT WAS SUBMITTED THAT THE APPELLANT'S WIFE SMT M. SUCHITRA IS HOLDING PAN AND WAS CARRYING ON MONEY LENDING BUSIN ESS AND OTHER INVESTMENT ACTIVITIES. OUT OF HER INCOME ACCUMULATIONS, SHE HAS GIFTED MONIES TO HER HUSBAND WHICH IS DULY ACCOUNTED FOR IN THE RETURN OF INCOME OVER VARIOUS YEARS. IT WAS FURTHER SUBMITTED THAT FROM THE FACTS THAT THE AUTHORIZED OFFICER HAS INITIATED TO REMIT INCOME TA X AMOUNTING TO RS.3,00,000/- AT THE TIME OF SURVEY IN THE NAME OF M. SUCHITRA, PULIVENDLA IMPLIES THAT THE SU RVEYING OFFICER BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE HAD ACCEPTED THE EXISTENCE OF M.SUCHITRA'S INCOME AND C APITAL. IN THE LIGHT OF ABOVE, THE ADDITIONS MADE FOR THE A. Y S. 2004-05 TO 2008-09 AS CASH GIFTS WERE EXPLAINED IN DETAIL. 8.5. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN FROM THE RECORDS THAT THE DON OR AND DONEE HAVE ACCEPTED THAT THE DONATIONS HAVE BEEN GI VEN AND ACCEPTED. BOTH ARE INCOME TAX PAYERS AND ASSESS ED TO TAX. THE GIFTS GIVEN BY THE WIFE TO THE HUSBAND HAV E BEEN REFLECTED IN THE CAPITAL ACCOUNTS OF THE WIFE. IT H AS BEEN DEMONSTRATED BY THE APPELLANT THAT WHEN EVER A GIFT WAS MADE SUFFICIENT CASH BALANCE WAS THERE FOR ALL THE YEARS UNDER CONSIDERATION. IN THE CIRCUMSTANCES, I DIRECT THE AO TO DELETE THE ADDITION ON ACCOUNT OF DONATIONS FROM WI FE FOR ALL THE ASSESSMENT YEARS. 9. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE SUBMISSIONS MADE BY ASSESSEE BEFORE TH E LD. CIT(A) PLACED IN PAPER BOOK, WE ARE OF THE OPINION THAT THERE IS NO NEED TO INTERFERE WITH THE ORDERS OF LD. CIT(A). AS BRIEFLY STATED ABOVE, NEITHER THE ASSESSEE NOR THE ASSESSEE S FAMILY MEMBERS ARE INCOME TAX ASSESSEES EARLIER. THEY HAVE FILED RETURNS CONSEQUENTIAL TO THE SURVEY OPERATIONS. R ETURNS WERE FILED BY ASSESSEE AS WELL AS HIS WIFE WITH PERMANEN T ACCOUNT 7 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . NUMBER (PAN) AND VARIOUS INVESTMENTS IN RESPECTIVE STATUS WERE CONSOLIDATED AND EXPLAINED BEFORE A.O. SMT. SU CHITRA IS ALSO AN ASSESSEE WITH THE SAME A.O. AND CERTAIN FUN DS FLOWN TO ASSESSEE WERE EXPLAINED AS GIFTS FROM WIFE. WHATEVE R MAY BE THE NATURE OF AMOUNT, THE FACT IS THAT ASSESSEE TOO K CREDIT FOR THE AMOUNTS RECEIVED FROM WIFE IN HIS GROWTH STATE MENT. SINCE THE FLOW OF FUNDS ARE FROM ASSESSEES WIFE WHO ALSO HAS INDIVIDUAL SOURCE AND BUSINESS ACTIVITY AND WHICH W AS ALSO SHOWN IN HER STATEMENTS AS FUNDS GIVEN TO HER HUSBA ND, THE FINDINGS OF LD. CIT(A) HAS TO BE ACCEPTED ON THE GI VEN FACTS. THE AMOUNTS CANNOT BE TREATED AS UNEXPLAINED AS THE SAME A.O. IS EXAMINING BOTH THE ASSESSEES AND SHE CONFIR MED SUCH GIFTS. IN VIEW OF THIS, WE AFFIRM THE ORDER OF LD. CIT(A) AND DISMISS GROUND NO.2 OF THE REVENUE. 10. THE OTHER ISSUE RAISED IN THIS ASSESSMENT YEAR IS WITH REFERENCE TO DELETION OF AN AMOUNT OF RS.5,45, 859 BROUGHT TO TAXBEING INCOME OF HUF IN THE INDIVIDUAL HANDS. THIS ISSUE ALSO AROSE IN LATER YEAR AND LD. CIT(A) ANALYSED TH E WHOLE ISSUE COMMONLY AND DECIDED AS UNDER : 11.1. WITH REGARD TO OTHER ADDITION MADE TOWARDS HUF INCOME AMOUNTING TO RS.5,45,859/- AND RS.L,18,770/- AS DIVERTED INCOME, RESPECTIVELY FOR THE A.YS. 2007-08 AND 2008-09, THE APPELLANT HAS SUBMITTED HIS EXPLANATIO N AS UNDER :- '(I) THE AO HAS ERRED IN ADDING INCOME OF HUF TO THE ASSESSEE'S TOTAL INCOME ON THE CONTENTION THAT IT W AS ASSESSEE'S UNDISCLOSED INCOME. ASSESSEE'S FATHER SR I M. SRINIVASULU WAS ON INCOME TAX ROLLS WITH THE STATUS OF HUF UP TO THE A.Y.1978-79. AFTER THAT NO RETURNS WERE FILED SINCE, HE HAD NO TAXABLE INCOME. THIS WAS EVI DENT FROM OLD BOOKS OF ACCOUNT TRACED LATER. HENCE, THE SAME COULD NOT BE SUBMITTED TO THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS. MOREOVER, THE EXISTENCE OF HUF WAS NOT STATED AT THE TIME OF SURVEY JUST BECAUSE THE ASSESSEE WAS IN BLANK 8 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . STATE OF MIND AND WAS LITERALLY TENSED AND UNAWARE OF WHAT TO TELL AND WHAT NOT AND IN THAT STATE OF MIND HE C OULD NOT REITERATE THE ACTUAL FACTS OF HIS FILING INCOME TAX RETURNS UNDER SIMPLIFIED PROCEDURE AND ALSO ACQUIRING INCOM E AND IMMOVABLES FROM HIS FATHER'S HUF. (II). THE DETAILED CAPITAL GROWTH FROM THE ASSESSM ENT YEAR 1994-95 ONWARDS, IS HEREWITH SUBMITTED. OLD BO OKS OF ACCOUNT MAINTAINED BY LATE SRI M. SRINIVASULU UP TO THE FINANCIAL YEAR ENDING AS ON 31.03.1990 ARE ALSO HER EWITH SUBMITTED FOR SUPPORT OF THE FACT THAT THE HUF STAT US OF M. SRINIVASULU WAS IN EXISTENCE AND ASSESSEE HAS NOT T RIED TO EXPLAIN THE SOURCE OF INVESTMENTS BY SPLITTING INCO ME UNDER HUF CAPACITY. MOREOVER, INCOME TAX WAS REGULARLY PA ID BY THE ASSESSEE UNDER ERSTWHILE SIMPLIFIED PROCEDURE ( CHAPTER XII-C OF THE INCOME TAX ACT 196L) AT RS.1400/- PER YEAR. THE FOLLOWING IS ALSO BROUGHT TO THE KIND NOTICE OF THE A.O. : (A) THE COPY OF THE ASSESSMENT ORDER U/S. 143(3) OF THE IT ACT 1961 FOR THE ASST YEAR 1978-79 IN THE NAME OF M.SREENIVASULU, WITH THE STATUS OF HUF IS HEREWITH SUBMITTED FOR YOUR KIND CONSIDERATION. NO RETURNS' WERE FILED BY THE ASSESSEE SINCE HE HAD NO TAXABLE INCOME FROM THERE ONWARDS. ASSESSEE WAS THE ONLY ONE MALE CO-PARCENER AND ASSESSEE'S MOTHER WAS ALSO EXPIRED AND HENCE THERE DOESN'T EXIST DIVISION OR PARTITION OF HUF PROPERTY. AND TH E CAPITAL AND DEBTORS OF M. SRINIVASULU, HUF WAS AS SUCH CARR IED ON BY THE ASSESSEE UNDER HUF STATUS ON THE DEATH OF M. SRINIVASULU. (B) AS STATED BY THE ASSESSING OFFICER'S ORDER U/S. 171 DOES NOT ARISE SINCE THE ASSESSEE HAS NO TAXABLE INCOME AND WAS NOT ON INCOME TAX ROLLLS. (C) IN RELATION TO DOCUMENT WRITTEN ON 24.09.1999, WHEREIN, THE ASSESSEE HAS ENTERED INTO ARRANGEMENT WITH HIS SISTERS, THE SAME BEING FAMILY ARRANGEMENT WAS NOT REGISTERE D. MOREOVER REGISTRATION OF THE SAME IS NOT MANDATORY. AS STATED EARLIER PARTITION OF HUF PROPERTY DOES NOT E XIST IN THE SAID CASE SINCE THE ASSESSEE IS THE SINGLE MALE CO- PARCENER AND ENTIRE HUF PROPERTY WAS CARRIED ON BY THE ASSES SEE IN HIS HUF CAPACITY. (D) AT THE TIME OF SURVEY, KEEPING IN VIEW THE STAT E OF MIND OF ASSESSEE, THE ABOVE INFORMATION COULD NOT BE SUBMIT TED. IN A TOWN LIKE PULIVENDLA, SURVEY OPERATIONS WERE VERY R ARE AND 9 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . LOCAL PEOPLE AND MEDIA PERSONS WERE SURROUNDED AND IN SUCH AN EMBARRASSING SITUATION, ASSESSEE COULD NOT EVEN PROVIDE THE FACTUAL INFORMATION TO THE SURVEYING OF FICER. (E) ALSO HEREWITH SUBMITTING CAPITAL GROWTH STATEME NT OF M. SUBHA KRISHNA KUMAR, HUF, FROM THE FINANCIAL YEARS 1994- 95 TO 2000-01 AMOUNTING TO RS.1,98,048/-. (F) INCOME OFFERED UNDER HUF STATUS WAS ALSO CLUBBE D WITH THE INCOME OF THE ASSESSEE UNDER INDIVIDUAL STATUS FOR PROTECTIVE ASSESSMENT. ACCORDINGLY TOTAL INCOME OF HUF AMOUNTING TO RS.1,08,800/- ALONG WITH OPENING CAPIT AL OF HUF AMOUNTING TO RS.4,37,059/- TOTALLING TO RS.5,45 ,859/- IS ADDED TO ASSESSEE'S INDIVIDUAL INCOME. THIS IS U NJUSTIFIED SINCE THE SAME IS DULY EXPLAINED AND THERE DOES NOT EXIST CLUBBING OF HUF CAPITAL AND INCOME WITH INDIVIDUAL INCOME.' 11.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E APPELLANT, GONE THROUGH THE ORDER OF THE AO AND HEA RD THE AR IN PERSON. IT MAY BE NOTED HERE THAT AS SEEN FRO M THE RECORDS FOR THE ASSESSMENT YEAR 2007-08, THE AO HAS THOUGHT OF MAKING SIMILAR ADDITION BOTH IN THE STAT US OF HUF AND IN THE STATUS OF INDIVIDUAL. THE AMOUNT THOUGHT WAS OPENING CAPITAL OF RS.4,37,059/- AS ON 01-04-2006 I N THE CAPACITY OF HUF. IT IS SEEN FROM THE HUF FILE OF TH E APPELLANT THAT FOR THE ASSESSMENT YEAR 2007-08, THE APPELLANT HUF HAS EARNED TOTAL INCOME OF RS.1,08,800/- . PROBABLY, IN HIS HURRY AND ENTHUSIASM TO BE ONE UP, THE AO HAS CLUBB ED THE INCOME ALSO WITH THE OPENING CAPITAL TOTALLING TO RS.5,45,859/- ( RS.4,37,059/- OPENING CAPITAL PLUS INCOME OF THE YEAR OF RS.1,08,800/- ) AND SUBJECTED SUCH AMOUNT TO TAX IN THE INDIVIDUAL CAPACITY OF THE APPELLANT. THERE IS ANOTHER ASPECT TO THIS, THAT IS, WHEN HUF STATUS WAS THE OR IGIN FOR ENTERTAINING SUSPICION AS THE APPELLANT, AS PER THE AO, COULD NOT PRODUCE THE SUNDRY DEBTORS FOR VERIFICATION, TH E SUBSTANTIVE ADDITION COULD HAVE BEEN IN THE STATUS OF HUF AND THE PROTECTIVE ADDITION IN THE CASE OF INDIVIDU AL, BUT FOR REASONS BETTER KNOWN TO THE AO, THE PROTECTIVE ADDI TION WAS MADE IN THE STATUS OF HUF WHILE SUBJECTING SUCH AMO UNT PLUS INCOME OF THE ASSESSMENT YEAR 2007-08 IN HUF S TATUS OF RS.1,08,800/- AS SUBSTANTIVE ADDITION. FOR THE ASSESSMENT YEAR 2007-08, THE APPELLANT HUF HAS GONE FOR APPEAL AND THE CIT(A), IN HIS ORDER DATED 22-03-201 1 HAS ADJUDICATED THAT ADDITION OF OPENING CAPITAL OF RS. 4,09,059/- AS STATED ALREADY, THERE IS NO QUESTION OF SUBSTANT IVE ADDITION OR PROTECTIVE ADDITION, AS THE AO HAS NOT BROUGHT ON RECORD ANY SUCH SITUATION. AS DISCUSSED ALREADY, TH E AO BY 10 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . MISTAKE INCLUDED THE INCOME OF RS.1,08,800/- THE IN COME IN THE HUF STATUS, WHICH CANNOT BE SUSTAINED. REGARDIN G THE OPENING CAPITAL OF RS.4,37,059/- AS APPEARING IN TH E HUF CAPACITY FOR THE ASSESSMENT YEAR UNDER CONSIDERATIO N, IT WAS CONSIDERED IN THE APPEAL OF THE APPELLANT HUF A ND ADJUDICATED. HENCE, SUCH ADDITION IN THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE INDIVIDUAL CAPACIT Y IS INFRUCTUOUS AND AS SUCH, THIS ADDITION IS ALSO NOT SUSTAINABLE. THUS, THE AO IS DIRECTED TO DELETE THE ENTIRE ADDITION OF RS.5,45,859/- . 11.3. IN AS MUCH AS THE ASSESSMENT YEAR 2008-09 IS CONCERNED, IT MAY BE NOTED HERE THAT THE ADDITION A GAIN EMANATED FROM THE APPELLANT HUF. IT MAY BE NOTED HE RE THAT THE APPELLANT HAS GOT TWO STATUSES OF HUF AND INDIV IDUAL. THE APPELLANT HUF DERIVED A TOTAL INCOME OF RS.1,18 ,770/- FOR THE YEAR UNDER CONSIDERATION AND FILED A RETURN ACCORDINGLY. THIS HUF RETURN WAS ACCEPTED UNDER SEC TION 143(1). NOW, WHILE FINALISING THE ASSESSMENT OF THE APPELLANT INDIVIDUAL, THE AO HAS MADE THE ADDITION OF THIS AMOUNT OF RS.1,18,770/- WITH OUT ANY SPECIFIC MENTI ON. BUT, HOWEVER, THE AO ALL ALONG HAS BEEN HOLDING THE VIEW THAT THE APPELLANT WAS THE MAIN PERSON WHO HAS BEEN MANAGING THE BUSINESS AFFAIRS OF SELF, WIFE, HUF BUSINESS AND AS SUCH THESE CAPACITIES AND STATUSES ARE NOTHING BUT DIVER SION OF INCOME IS NOT BORNE OUT OF MATERIAL ON RECORD. SINC E MATERIAL AVAILABLE ON RECORD IS NOT IN FAVOUR OF THE AO, THE ADDITION MADE BY HIM IN THIS REGARD HAS TO BE CANCELLED. THU S, THE AO IS DIRECTED TO DELETE THE ADDITION. 11. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF LD. C IT(A). REVENUE DID NOT BRING OUT ANY THING ON RECORD TO CO UNTER THE FINDING THAT THE SAME AMOUNT WAS ASSESSED IN THE HA NDS OF ASSESSEE HUF AND SEPARATE ADJUDICATION WAS THERE IN ASSESSEES HUF STATUS. AS POINTED OUT BY LD. CIT(A) A.O. DID NOT EVEN EXPLAIN WHETHER THE SAME INCOME WAS ASSESS ED IN THE SUBSTANTIVE WAY OR PROTECTIVE WAY. SINCE A.O. ACCEP TED THE HUF STATUS AND COMPLETED ASSESSMENT IN HUF STATUS, THERE IS NO NEED TO CONSIDER THE SAME INCOME AS INDIVIDUAL I NCOME IN A 11 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . DIFFERENT STATUS. THEREFORE, WE AFFIRM THE ORDER OF LD. CIT(A) AND DISMISS GROUND NO.3 OF THE REVENUE. ASSESSMENT YEAR 2008-09 : 12. IN THIS ASSESSMENT YEAR, GROUND NO.2 IS THE IS SUE OF CLAIM OF CASH GIFT RECEIVED FROM WIFE AND IN GRO UND NO.3 ISSUE OF ADDITION TO AN EXTENT OF RS.18,770 OF HUF INCOME WERE CONTESTED BY REVENUE. SINCE THESE ISSUES ARE COMMON AND CONSIDERED IN A.Y. 2007-08, THERE IS NO MERIT IN RE VENUE CONTENTIONS. ACCORDINGLY, GROUNDS RAISED ON THESE I SSUES ARE DISMISSED. 13. AS PART OF GROUND NO. 3.2 THE REVENUE IS ALSO CONTENDING THAT THERE ARE NO PROMOTES IMPOUNDED REL ATING TO A.Y. 2002-03 OR EARLIER YEARS AND GROUND RAISED SEP ARATELY IN A.Y. 2007-08 WAS DISMISSED AS INFRUCTUOUS. THE SAME APPLY THIS YEAR ALSO. GROUNDS RAISED IN THIS YEAR BY REVE NUE ARE ACCORDINGLY DISMISSED. 14. IN THE RESULT, ALL THREE APPEALS OF REVENUE AR E DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.10.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH OCTOBER, 2014 VBP/- 12 ITA.NO.1263, 1266 & 1267/HYD/2011 MR. M. SUBBA KRISHNA KUMAR, PULIVENDULA, KADAPA DIST . COPY TO 1. THE INCOME TAX OFFICER, WARD-2, SIMHAPURI COLONY , KADAPA. 2. MR. M. SUBBA KRISHNA KUMAR, D.NO.8/24, AMMAVARISALA STREET, PULIVENDULA, KADAPA DISTRICT. 3. CIT(A), GUNTUR 4. CIT, TIRUPATI 5. D.R. ITAT A BENCH, HYDERABAD.