Sri Kondala Raja, Hyderabad V. ITO, Hyderabad

ITA 1412/HYD/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7160 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained investment; Income from undisclosed sources
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBE R. ITA NO.1412/HYD/2010 : ASSESSMENT YEAR 2006-07 SHRI N. KONDALA RAJU, HYDERABAD (PAN - ABUPN 8574 F ) V/S INCOME TAX OFFICER, WARD - 4(3), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.A.SAIPRASAD RESPONDENT BY : SHRI T.DIWAKAR PRASAD DATE OF HEARING 13 10.2011 DATE OF PRONOUNCEMENT O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YE AR 2006- 07 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONE R OF INCOME- TAX(APPEALS)-V, HYDERABAD DATED 1.10.2010 FOR THE A SSESSMENT YEAR 2006-07. 2. ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF I NCOME ON 5.6.2006 FOR THE ASSESSMENT YEAR 2006-07, DECLAR ING A TOTAL INCOME OF RS.1,46,080. THE ASSESSING OFFICER COMPLE TED THE ASSESSMENT UNDER S.143(3) OF THE ACT, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.18,96,000. WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER MADE AN ADDITION ON ACCOUNT O F UNEXPLAINED INVESTMENT OF RS.17,50,000 UNDER S.69 OF THE ACT. 3. FACTS ARE THAT THE ASSESSEE HAS PURCHASED A P ROPERTY ON 14.3.2006 FOR A CONSIDERATION OF RS. 23 LAKHS. THE ASSESSEE STATED THE FOLLOWING TO BE SOURCES FOR THE PURCHASE OF THIS PR OPERTY- ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 2 (A) LOAN OF RS.7 LAKHS FROM HIS WIFE, SMT. N.PRIYA RANI BY ACCOUNT PAYEE CHEQUE ON 14.33.2006 (B) LOAN OF RS.6 LAKHS FROM SMT. N.RAJESWARI, DAUGHTER OF THE ASSESSEE BY ACCOUNT PAYEE CHEQUE ON 16.3.2006 (C) LOAN OF RS.4,50,000 OBTAINED IN CASH N MARCH, 2006 FROM THE ASSESSEES DAUGHTER. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER, ISSUED SUMMONS TO THE ASSESSEES DAUGHTER AND WIFE. THE C ONTENTIONS OF THE WIFE AND DAUGHTER AND THEIR STATEMENTS ON OATH WERE RECORDED. IT WAS STATED BY THEM THAT THEY HAVE ENGAGED THEMSELVES IN MONEY LENDING BUSINESS FOR MANY YEARS AND HAD ACCUMULATED CAPITAL AND SAVING, WHICH WAS THE SOURCE FOR THE LOANS GIVEN BY THEM TO THE ASSESSEE. THE ASSESSING OFFICER MADE THE ADDITION THE ADDITION OF RS.17,50,000 TOWARDS UNEXPLAINED INVESTMENT UNDER S.69 OF THE AC T, GIVING THE FOLLOWING REASONING- 6. HOWEVER, TO CONFIRM WHETHER THE WIFE AND DAUGHT ER OF THE ASSESSEE ACTUALLY INVOLVED IN MONEY LENDING BUS INESS, I HAVE DIRECTED MY INSPECTOR TO ENQUIRE INTO THE ACTI VITIES OF TWO LADIES. AS DIRECTED, THE INSPECTOR OF THIS OFFICE E NQUIRED ABOUT MONEY LENDING TRANSACTIONS WITH THEIR NEIGHBORS AND THE NEIGHBORS CONFIRMED THAT THERE ARE NO MONEY LENDERS IN THE AREA. WHEN SPECIFICALLY ENQUIRED ABOUT THESE LADIES , THEY CONFIRMED THAT THEY DID NOT CARRY SUCH BUSINESS ACT IVITY. 7. IN VIEW OF THE ABOVE, IT IS APPARENT THAT THE ASSESSEE MADE THE INVESTMENT IN PURCHASE OF HOUSE, THE VALUE OF THE INVESTMENT IS TO BE DEEMED AS INCOME OF THE ASSESSEE FOR THE FINANCIAL YEAR, CONSIDERING THE NATURE AND SOURCE OF THE LOANS. AS SUCH THE SAID AMOUNT OF RS.17,50,000/- I S BROUGHT TO TAX AS THE ASSESSEES INCOME FOR THE AY 2006-07 IN ACCORDANCE WITH THE PROVISIONS OF SECTION 69 OF THE IT ACT, 19 61. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE LOANS WERE REFLECTED IN THE CASH FLOW STATEMENTS FILED BY THE TWO LADIES AND THAT BOTH WE RE INCOME-TAX ASSESSEES. BEFORE THE CIT(A), IT WAS FURTHER SUBMI TTED THAT THE ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 3 OBSERVATION OF THE ASSESSING OFFICER THAT NO PROOF WAS FILED, IS ERRONEOUS IN AS MUCH AS THE COPIES OF THE ACKNOWLED GEMENTS OF RETURN, STATEMENTS OF TOTAL INCOME AND CASH FLOW ST ATEMENT FILED BY BOTH THE LADIES, VIZ. PRIYA RANI AND RAJESWARI FOR EARLIER YEARS, WERE PLACED AT PAGES 16 TO 59 OF THE PAPER-BOOK FILED BE FORE THE ASSESSING OFFICER. CONFIRMATION LETTERS WERE ALSO FILED BY TH E DAUGHTER AND WIFE AND HENCE, IT WAS SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE ONUS THAT LIED ON HIM, SO FAR AS THE SOURCES FOR TH E MONIES TAKEN AS LOAN ARE CONCERNED. IT WAS POINTED OUT BEFORE THE CIT(A) THAT BOTH THE LADIES ARE ASSESSED TO TAX BEFORE THE VERY SAME ASS ESSING OFFICER, WHO COMPLETED THE ASSESSMENT OF THE ASSESSEE AND HENCE, FROM THE RECORDS AVAILABLE, THE ASSESSING OFFICER COULD HAVE EXAMINED THE TRANSACTIONS. 5. THE CIT(A) VIDE PARA 4.3 OF HIS ORDER, RECORDED THE FACTS WHICH, ACCORDING TO HIM, CLEARLY PROVE THAT THERE I S NO BUSINESS BEING CARRIED ON BY THE LADIES AND HENCE THE SOURCE OF IN COME IS DOUBTFUL. FURTHER, THE CIT(A) OBSERVED THAT ASSESSEE'S FAMILY DOES NOT HAVE ENOUGH DRAWINGS, WHICH WERE NECESSARY FOR NORMAL HO USEHOLD EXPENSES. THE CIT(A) WAS OF THE OPINION THAT THE AS SESSEES OWN UNACCOUNTED INCOME HAS BEEN ROUTED BACK THROUGH THE DEMAND DRAFTS DEPOSITED IN THE BANK ACCOUNT OF HIS WIFE AND DAUGH TER. ACCORDINGLY, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFF ICER.. 6. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. . 7. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI K.A .SAI PRASAD, SUBMITTED THAT THE ASSESSING OFFICER HAS RECORDED A NSWER TO A QUESTION, AT PARA 4 OF HIS ORDER IN CONCLUDING PART OF PAGE-2 THEREOF, WHICH READS AS FOLLOWS- ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 4 'Q. YOU HAVE STATED THAT YOU HAVE LENT A SUM OF RS . 7 LAKHS AT 15% INTEREST. WHEREFROM THIS RS.7 LAKHS YOU HAVE RECEIV ED. ANS: I HAVE AN PAPER AGENCY OF DECCAN CHRONICLE, W HERE I USED TO GET AGENCY COMMISSION. I LEFT THIS AGENCY 10 YEA RS AGO. I DO NOT REMEMBER ABOUT THE COMMISSION. THE ACCUMULA TIONS OF AGENCY COMMISSION PUT TOGETHER MY CAPITAL COMES TO RS.7,00,000/-.' IN THESE CIRCUMSTANCES, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE ASSESSEES WIFE HAD GIVEN A SATI SFACTORY EXPLANATION REGARDING THE SOURCE OF HER INCOME. FUR THER, THE STATEMENTS WERE RECORDED ON OATH AFTER SUMMONS WERE ISSUED UNDER S.131 OF THE ACT, AND THEREIN THE WIFE OF THE ASSES SEE STATED THAT SHE WAS DOING MONEY LENDING BUSINESS AND USED TO GIVE SMALL LOANS LIKE RS. 10,000 TO RS.15,000 TO KNOWN PERSONS AND NEIGH BORS AND DURING THE FINANCIAL YEAR 2005-06, SHE HAS GIVEN LOANS APP ROXIMATELY FOR AN AMOUNT OF RS.7 LAKHS. 8. SIMILARLY, IN THE CASE OF THE DAUGHTER, IT WAS SUBMITTED THAT MONEY LENDING BUSINESS HAD BEEN CARRIED ON BY HER ALSO AND THE ACCUMULATED INCOME OVER THE PERIOD OF YEARS WOULD B E ENOUGH SOURCE OF INCOME FOR ADVANCING THE LOANS IN QUESTION TO TH E ASSESSEE. 9. WHEN THE FACT THAT AMOUNTS HAVE NOT BEEN WITH DRAWN FOR PERSONAL EXPENSES WAS POINTED OUT TO THE LEARNED CO UNSEL FOR THE ASSESSEE, IT WAS SUBMITTED THAT THE ASSESSEE WAS LI VING IN HIS OWN HOUSE AND WAS USED TO FRUGAL LIVING AND HENCE NOT M UCH MONEY WAS REQUIRED FOR THE HOUSEHOLD EXPENSES, AS HE WAS OFTE N SPONSORED BY RELATIVES. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE, SHRI T.DIWAKAR PRASAD, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND ALSO PLACED RELIANCE ON THE DECISION OF THE DE LHI HIGH COURT IN THE CASE OF CIT V/S. OASIS HOSPITALITIES P.LTD. (333 ITR 119)-DEL. ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 5 11. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDE RS OF THE LOWER AUTHORITIES AND THE FACTS OF THE CASE. IT H AS BEEN BROUGHT TO OUR NOTICE THAT SMT. PRIYA RANI, ASSESSEES WIFE, HAS BEEN FILING RETURNS OF INCOME REGULARLY AND IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2006-07 IN SEPTEMBER, 2006, SHE HAS SHOWN LOAN GIVEN TO THE ASSESSEE AS WELL AND ALSO OFFERED TO TAX INTEREST RECEIVED BY HER, ON THE SAID LOAN GIVEN BY HER TO THE ASSESSEE. THE SA ID RETURN FILED BY HER IN THE NORMAL COURSE, HAS BEEN ACCEPTED BY THE DEPA RTMENT. FOR THE ASSESSMENT YEAR 2006-07, SMT. PRIYA RANI HAS SHOWN LONG TERM CAPITAL GAIN OF RS.17,38,140 AND HAS PAID TAX ON TH E SAME. THE RETURN FOR THAT YEAR HAS ALSO BEEN ACCEPTED BY THE DEPARTM ENT UNDER S.143(1) OF THE ACT. THAT BEING SO, THERE IS NO B ASIS FOR THE DEPARTMENT FOR DOUBTING THE SOURCE AVAILABLE TO SM T. PRIYA RANI FOR LENDING RS.7 LAKHS TO ASSESSEE. SIMILARLY, SMT.RA JESWARI HAS GIVEN LOAN OF RS.10.50 LAKHS. SMT. RAJESWARI, DAUGHTER OF THE ASSESSEE, HAS ALSO BEEN FILING RETURNS OF INCOME REGULARLY. SHE H AS ALSO FURNISHED CASH FLOW STATEMENT SHOWING THE INCOME FOR VARIOUS YEARS, TO PROVE THAT SHE HAD ENOUGH SOURCE TO LEND THE AMOUNT OF RS .10.50 TO THE ASSESSEE. IN THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR 2002-03, SHE HAS SOLD CERTAIN ASSETS FOR RS.6,50,000 AND ALS O SOLD VEHICLES FOR RS.1,20,000. THESE THINGS HAVE BEEN DULY DISCLOSED IN THE RETURN OF INCOME FILED FOR THAT YEAR. FOR THE ASSESSMENT YE AR 2003-04, SHE HAD OFFERED THE INCOME OF RS.1,05,000. FOR THE ASSESSM ENT YEAR 2004-05 ALSO, SHE HAS SHOWN INCOME OF RS.1,05,00 IN THE CAS H FLOW STATEMENT, AND THE INCOMES FOUND IN THE CASH FLOW STATEMENT WE RE DULY REFLECTED IN THE RETURNS OF INCOME FILED FOR THE RESPECTIVE Y EARS. THE SAID CASH FLOW STATEMENT HAS BEEN FILED FOR ESTABLISHING THA T SMT.RAJESWARI HAS THE SOURCE FOR LENDING THE AMOUNT OF RS.10,50,000 I N QUESTION TO THE ASSESSEE. ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 6 12. THE DECISION RELIED ON BY THE LEARNED DEPARTM ENTAL REPRESENTATIVE IN THE CASE OF OASIS HOSPITALITIES P . LTD. (SUPRA) IS NOT RELEVANT TO THE ISSUE INVOLVED IN THIS APPEAL, SINC E IN THAT CASE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS REC EIVED SHARE APPLICATION MONEY OF RS.3 LAKHS EACH FROM SIX PRIVA TE LIMITED COMPANIES DURING THE YEAR RELEVANT TO ASSESSMENT YE AR 2004-05. NOTICE UNDER S.148 WAS ISSUED FOR THE ASSESSMENT YE AR 2003-04 AND LATER ASSESSMENT WAS DONE BY THE ASSESSING OFFICER MAKING AN ADDITION OF RS. 18 LAKHS TO THE INCOME OF THE ASSESSEE ON PR OTECTIVE BASIS FOR THE ASSESSMENT YEAR 2004-05. ON FURTHER APPEAL TO THE HIGH COURT, THE HIGH COURT HELD THAT CASH CREDITS IN THE FORM O F SHARE APPLICATION MONEY, WHERE FINDING HAS BEEN GIVEN THAT IDENTITY A ND CREDITWORTHINESS OF THE SHARE APPLICANT HAS NOT BEE N PROVED, THE ADDITION IS JUSTIFIED UNDER S.68 OF THE ACT. THIS D ECISION IS NOWHERE RELEVANT TO THE FACTS OF THE PRESENT CASE, AND HENC E, THIS DECISION IS NOT APPLICABLE. THE ASSESSING OFFICER IN THIS CASE HAS MADE THE ADDITION UNDER S.69 OF THE ACT, WHICH READS AS FOLLOWS - 69. WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECED ING THE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS W HICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINT AINED BY HIM FOR ANY SOURCE OF INCOME, AND THE ASSESSEE OFFERS N O EXPLANATION ABOUT THE NATURE AND SOURCES OF THE INV ESTMENTS OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINI ON OF THE ASSESSING OFFICER, SATISFACTORY, THE VALUE OF THE I NVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE OF S UCH FINANCIAL YEAR. 13. WE FIND THAT THE ASSESSEE HAD FURNISHED THE PA N NUMBER DETAILS, BANK ACCOUNT COPIES, AND COPIES OF THE INC OME TAX RETURNS AND HAS EXPLAINED THE SOURCE OF INCOME FOR THE LENDERS, NAMELY, HIS WIFE AND DAUGHTER. IN THE CASE OF THE WIFE, IT HAS BEEN STATED THAT SHE WAS HAVING AN AGENCY BUSINESS FROM WHICH SOME AMOUNTS H AVE BEEN ACCUMULATED OVER A PERIOD OF YEARS. THE CASH FLOW S TATEMENT PRODUCED SHOW ENOUGH FUNDS IN THE HANDS OF THE LENDER. WE RELY ON THE ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 7 DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF GO PALDAS T. AGARWAL V/S. CIT(113 ITR 447), WHEREIN IT HAS BEEN HELD THA T S.69 MERELY GIVES ONLY STATUTORY RECOGNITION TO, WHAT MAY BE C ALLED, A COMMON SENSE APPROACH. IT DOES NOT BRING ON STATUTE BOOK ANY ARTIFICIAL EVIDENCE, PRESUMPTION OR LEGAL FICTION. FOR INSTANC E, IF AN AMOUNT IS BOUGHT INTO THE ASSESSEES BUSINESS BY THE ASSESSEE AND ON BEING QUESTIONED, THE ASSESSEE GIVES A FAR FETCHED EXPLAN ATION WHICH IS REJECTED OR HIS EXPLANATION IS FOUND UNSATISFACTORY , THERE WOULD BE NOTHING IMPROPER FOR THE AMOUNT BEING CONSIDERED AS THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES FOR THE LAST YEAR. THERE MAY, HOWEVER, BE SOME INTRINSIC FACTOR OR SOME MATERIAL OR CIRCUMSTANCE ALREADY AVAILABLE, WHICH MAY HAVE SOME BEARING ON T HE QUESTION, WHEN SUCH MATERIAL OR CIRCUMSTANCE WILL BE REQUIRED TO BE CONSIDERED. THE EXPLANATION SHOULD NOT BE REJECTED IN WHOLE OR IN PART ARBITRARILY, WHEN IT IS QUITE REASONABLE IN THE CIRCUMSTANCES OF THE CASE. WE FIND THAT IN THIS CASE, THE DEPARTMENT HAS NOT BROUGHT O N RECORD ANY MATERIAL TO COUNTER THE EXPLANATION OF THE ASSESSEE . FURTHER, RELYING ON THE DECISION OF THE GUJARAT HIGH COURT IN THE CA SE OF TIPUSHKUMAR O. DESAI V/S. CIT (247 ITR 568), WHEREIN IT HAS BEE N HELD THAT WHERE A CASH FLOW STATEMENT WAS FILED TO PROVE THE SOURCE OF INVESTMENT, IT SHOULD BE CONSIDERED BY THE AUTHORITIES CONCERNED. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ASSES SEE HAS ESTABLISHED THE SOURCE OF THE LOANS SHOWN TO HAVE BEEN TAKEN FR OM HI9S WIFE AND DAUGHTER, WHO HAVE BEEN REGULARLY FILING THEIR RETU RNS OF INCOME, AND THE ALSO FILED CASH FLOW STATEMENTS FOR PROVING THE SOURCES FOR THE LOANS, WORKED OUT ON THE BASIS OF SUCH ACCEPTED RET URNS. 14. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THE ASSESSEE HAS DISCHARGED THE ONUS ON HIM TO PROVE THE SOURCE OF THE LOAN AS WELL AS THE SOURCES OF THE CREDITORS, WHO HAVE GIVEN THE LOANS. WE ACCORDINGLY DELETE THE ADDITION OF RS.17,50,000 MAD E BY THE ASSESSING ITA NO.1412/HYD/2010 SHRI KONDALA RAJU, HYDERABAD 8 OFFICER AND CONFIRMED BY THE CIT(A) UNDER S.69 OF T HE ACT. CONSEQUENTLY, GROUNDS OF THE ASSESSEE IN THIS APPEA L ARE ALLOWED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE COURT ON 14.12.2011 SD/- S D/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 14TH DECEMBER, 2011 COPY FORWARDED TO: 1. SHRI KONDALA RAJU, C/O. SHRI CH.PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, STREET NO.1, ASHOKNAGAR, HYDERABAD 2. INCOME - TAX OFFICER, WARD - 4 ( 3 ) , HYDERABAD 3. COMMISSIONER OF INCOME - TAX(A) - V HYDERABAD 4. COMMISSIONER OF INCOME - TAX IV , HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S.