The ITO, Ward-3, Rajahmundry, Rajahmundry V. SRI Manthena Vikram Simha, Rajahmundry

ITA 129/VIZ/2012

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9880 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI SANKAR NARAYANDR
• Assessee Lawyers: N O N E
• Keywords: Unexplained cash credit

Judgement Text

ITA NO.129/VIZAG/2012 MATHENA VIKRAM SIMHA, RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ./I.T.A.NO.129/VIZAG/2012 ( / ASSESSMENT YEAR: 2007-08) ITO, WARD - 3, RAJAHMUNDRY VS. MANTHENA VIKRAM SIMHA, RAJAHMUNDRY [PAN: ALTPM0960B ] ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI RAVI SANKAR NARAYAN,DR / RESPONDENT BY : N O N E / DATE OF HEARING : 23.08.2016 / DATE OF PRONOUNCEMENT : 09.09.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 30.12.2011 FOR THE ASSE SSMENT YEAR 2007-08. ITA NO.129/VIZAG/2012 MATHENA VIKRAM SIMHA, RAJAHMUNDRY 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS IN REAL ESTATE BUSINESS FILED HIS RETURN OF INCOME ADMITTING TOTAL INCOME OF ` 4,56,400/-. IN THE ASSESSMENT ORDER, A.O. HAS FOUND THAT THE ASSESSEE INVESTED AN AMOUNT OF 18,51,000/- ON PURCHASE AND SALE OF LAND TO M/S. HIMADRI ENTERPRISES LTD. FOR A CONSIDERATION OF ` 42,91,920/- AS AGAINST THESE, THE ASSESSEE IN HIS RETURN OF INCOME REFLECTED ONLY ` 10,05,190/- AND ARRIVED AT NET PROFIT OF ` 4,19,111/-, AFTER CLAIMING THE EXPENSES. WHEN THE A.O. HAS ASKED THE ASSESSEE THE REASONS FOR DIFFERENCE, IT W AS SUBMITTED THAT THERE WAS A FAMILY AGREEMENT DATED 12.9.2005, ACCOR DINGLY HE HAS TO SHARE THE AMOUNT RECEIVED WITH OTHERS. HOWEVER, HE DID NOT FILE THE AGREEMENT DATED 12.9.2005 BEFORE THE A.O. ACCORDIN GLY, THE A.O. HAS DISBELIEVED THE AGREEMENT DATED 12.9.2005 AND ASSES SMENT WAS COMPLETED. BEFORE LD. CIT(A), HE HAS REITERATED TH E SAME SUBMISSIONS, WHICH HE WAS MADE BEFORE THE A.O. THE LD. CIT(A) B Y SIMPLY CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, WITHOUT EXAMINING THE AGREEMENT DATED 12.9.2005, ACCEPTED THE PLEA OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE A.O. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 3.6 I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSE E AND HAVE GONE THROUGH THE REPORT OF THE AO AND I AM IN TOTAL AGREEMENT WITH TH E CONCLUSION OF THE AO WHO HELD THAT THE UNSECURED LOANS FROM SMT. G.V.LAKSHMI , SRI V.NEELADRI RAJU AND SRI S.S.R.K.REVIVARMA ARE GENUINE AND NO ADDITION IN TH IS REGARD NEEDS TO BE MADE. ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE LOA NS PERTAINING TO SRI G.V.RAGHAVA ITA NO.129/VIZAG/2012 MATHENA VIKRAM SIMHA, RAJAHMUNDRY 3 RAJU AND SMT.K.KIRANMAYEE. IT IS THUS HELD THAT AO IS CORRECT IN ADDING THESE AMOUNTS AS UNEXPLAINED CREDITS. CONSEQUENTLY THE IN TEREST CHARGED ON GENUINE LOANS IS DIRECTED TO BE ALLOWED AND THE DISALLOWANCE OF I NTEREST PERTAINING TO SRI G.V.RAGHAVA RAJU AND SMT. K.KIRANMAYEE IS UPHELD. T HUS OUT OF DISALLOWANCE OF RS.10,50,000/- AN AMOUNT OF RS.2,90,000/- IS CONFIR MED. SIMILARLY OUT OF DISALLOWANCE OF INTEREST AN AMOUNT OF RS.40,598/- I S CONFIRMED. 3.7 WITH REGARDS TO THE UNSECURED CREDITS FROM THE FAMILY MEMBERS THIS ISSUE IS LINKED TO THE ISSUE OF FAMILY ARRANGEMENT REGARDING PROFIT SHARING. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE PRODUCED A STAMPED AGRE EMENT BETWEEN THE FAMILY MEMBERS WHICH IS DTD.12.09.2005. THE GENUINENESS OF THIS AGREEMENT IS NOT DOUBTED BY THE AO. THE RETURNS OF INCOME WHICH REFL ECTED THE RESPECTIVE INVESTMENT OF THE FAMILY MEMBERS ARE FILED BEFORE THE SAME AO LONG BEFORE THE DATE OF SURVEY AND IN THESE RETURNS THE PROFIT FROM THE ABOVE TRAN SACTION IS REFLECTED ON WHICH DUE TAXES HAVE BEEN PAID BY ALL FAMILY MEMBERS. THIS AS PECT IS ALSO NOT DISPUTED BY AO. THE FAMILY MEMBERS MS. SANTA, MS. SEETA DEVI, MRS. REKHA RANI AND MRS.VIJAYA SIMHA REFLECTED TOTAL PROFIT OF RS.8,22,428/- (RS.2 ,05,607/- EACH IN THEIR RESPECTIVE RETURNS). THIS ITSELF GIVES CREDENCE TO THE GENUINE NESS OF THE FAMILY ARRANGEMENT. AO DOUBTED THE GENUINENESS BECAUSE THE ASSESSEE PRO VIDED BOTH FOR INTEREST AS WELL AS PROFIT ON THE SAME TRANSACTION. HOWEVER IT IS NO T UNCOMMON THAT SUCH TYPE OF TRANSACTIONS WHEREIN INTEREST AS WELL AS PERCENTAGE OF PROFIT IS PROVIDED. FURTHER THE FAMIL Y MEMBERS WHO ARE SAID TO HAVE RECEIVED PROFITS AND INTEREST HAVE DISCLOSED THESE AMOUNTS IN THEIR RETURNS OF INCOME WHICH ARE ACCEPTED BY THE AO. IN VIEW OF THE ABOVE, IT IS HELD THAT THE ASSESSEE PAID BOTH INTEREST AND SHARE OF PROFITS TO THE FAMILY ME MBERS AND BOTH ARE ALLOWABLE EXPENDITURE IN CALCULATING THE PROFITS FROM THE REA L ESTATE TRANSACTION. THUS AD IS DIRECTED TO ALLOW THE SAME ACCORDINGLY. 4. ANOTHER ISSUE IS THAT THE ASSESSEE HAD VOLUNTARI LY ADMITTED A NET INCOME OF RS.12 LAKHS AS INCOME FOR A.Y.2007-08. HOWEVER ASSESSEE D URING THE APPELLATE PROCEEDINGS STATED THAT IN CONNECTION WITH THE ABOV E REAL ESTATE TRANSACTIONS HE WAS EXAMINED ON OATH DURING WHICH IT WAS STATED BY HIM THAT HE WILL DECLARE A PROFIT OF RS.12 LAKHS ON THE SALE OF 'RIVERDALE SITE' VIDE HI S LETTER DTD.20.09.2007. IT IS STATED BY HIM THAT HE HAS COMPLIED WITH THE ABOVE DECLARAT ION, AS A TOTAL PROFIT FROM THE ABOVE TRANSACTION OF RS.12,41,539/- IS DECLARED BY HIM AND HIS FAMILY MEMBERS AS PER THE FOLLOWING DETAILS. A) M.VIKRAM SIMHA :RS. 4,19,111/ - B) M.SARITHA :RS. 2,05,607/ - C) M.SITA DEVI :RS. 2,05,607/ - D) M.V.REKHA RANI :RS. 2,05,607/ - E) M.VIJAY SIMHA :RS. 2,05,607/ - :RS. 12,41,539/- ITA NO.129/VIZAG/2012 MATHENA VIKRAM SIMHA, RAJAHMUNDRY 4 IN SUPPORT OF HIS ARGUMENT HE FURNISHED THE COPIES OF RETURNS FILED BY HIS FAMILY MEMBERS SHOWING PROFIT OF RS.2,05,607/- EACH . THUS IT IS ARGUED THAT AS THE TOTAL PROFIT DECLARED OUT OF THIS TRANSACTION IS MO RE THAN 12 LAKHS THERE IS NO FURTHER REQUIREMENT OF MAKING ANY ADDITION ON THIS COUNT. I HAVE CONSIDERED THE ARGUMENT OF THE ASSESSEE AND HAVE GONE THROUGH THE COPIES OF RETURNS FILED BY HIM. ASSESSEE'S STATEMENT IS CORRECT. HOWEVER AO IS DIRECTED TO VER IFY THE AMOUNT OF PROFIT DECLARED BY THE ASSESSEE AND HIS FAMILY MEMBERS FROM THE RET URNS AVAILABLE FROM HIM AND IF THE TOTAL PROFIT DECLARED IS MORE THAN RS.12 LAKHS NO ADDITION IN THIS REGARD NEEDS TO BE MADE. 5. IN-A-NUTSHELL, IT IS SUMMARIZED THAT ADDITION OF RS.2,90,000/- ON ACCOUNT OF ADDITION MADE U/S.68 AND AN AMOUNT OF RS.40,598/- O N ACCOUNT OF INTEREST CLAIMED ON THOSE LOANS IS CONFIRMED. SHARING OF PROFIT WITH THE FAMILY MEMBERS AND PAYMENT OF INTEREST TO THEM IS HELD TO BE GENUINE AND HENCE NO DISALLOWANCE ON THIS ISSUE IS CALLED FOR. AO IS THUS DIRECTED TO RECOMPUTE THE IN COME ACCORDINGLY. 3. I FIND THAT THE MATERIAL DOCUMENT CONSIDERING TH IS CASE IS AGREEMENT DATED 12.9.20056 WHICH IS NEITHER FILED B EFORE THE A.O. NOR BEFORE THE CIT(A). EVEN BEFORE ME, NONE APPEARED. IN VIEW OF THE ABOVE, I REVERSE THE ORDER PASSED BY THE CIT(A) AND UPHOLD THE ORDER OF THE A.O. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 TH SEPT16. SD/- ( . ) (V. DURGA RAO) /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 09.09.2016 VG/SPS ITA NO.129/VIZAG/2012 MATHENA VIKRAM SIMHA, RAJAHMUNDRY 5 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-3, RAJAHMUNDRY 2. / THE RESPONDENT SRI MANTHENA VIKRAM SIMHA, D.NO .79-15-5/1, PRASANTHI ESTATES, OPP. MADHAVI NURSING HOME, TILAK ROAD, RAJAHMUNDRY 3. ) / THE CIT, RAJAHMUNDRY 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM