ITO, Kakinada V. Kancherla Mangaraju, Jaggampeta

ITA 160/VIZ/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2790 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 07-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 06-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Unexplained cash credit; Source of fund; Corroborative evidences
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 160 /VIZAG/ 20 09 ASSESSMENT YEAR : 2005 - 06 ITO WARD - 1 KAKINA DA KANCHERLA MANGARAJU JAGGAMPETA (APPELLANT) VS. (RESPONDENT) PAN NO.AEPPK 7331H APPELLANT BY: SHRI J. SIRI KUMAR, DR RESPONDENT BY: SHRI C. SUBRAHMANYAM, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10,00,600/ - WITHOUT APPRECIATING THE FACT THAT SECOND SET OF CONFIRMATORY LETTERS FILED BY THE ASSESSEE IS ONLY AN AFTER THOUGHT. 2. WE HAVE H EARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD. THE ASSESSEE HA D BORROWED LOANS RANGING BETWEEN RS.10,000/ - TO RS.18,000/ - FROM LOCAL PEOPLE FOR BUSINESS REQUIREMENT. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE CONFIRMATION LETTERS AND THE PROOF OF IDENTITY AND THE CREDITWORTHINESS OF THE CREDITORS. IN RESPONSE THERETO, ASSESSEE FILED THE CONFIRMATORY LETTERS FROM THE CREDITORS INDICATING THEIR MAIN SO URCE OF INCOME WITH A CON VIC TION THAT THE INFORMATION CONTAINED IN SUCH CONFIRMATORY LETTERS WOULD MEET THE REQUIREMENT OF THE DEPARTMENT , AND UPON THE ASSESSING OFFICER NEEDING EVIDENCE IN SUPPORT OF THE IDENTITIES OF THE CREDITORS, THEIR CREDITWORTHINESS AND THE GENUINENESS OF TRANSACTIONS, THE CREDITORS , VIDE SECOND SET OF CONFIRMATORY LETTERS , HAVE FURNISHED FULL PARTICULARS OF SOURCE OF THEIR INCOME INCLUDING THE INCOME EARNED FROM AGRICULTURE BY CULTIVATING LEASED LANDS. THE EXPLANATIONS FURNISHED BY THE ASSESSEE WERE NOT ACCEPTED BY THE A.O. AND HE TREATED THE ENTIRE AMOUNT AS 2 UNEXPLAINED CASH CREDIT AND MADE AN ADDITION U/S 68 OF THE ACT. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WITH THE SUBMISSIONS THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD TO FALSIFY THE CLAIM OF THE ASSESSEE. THE CIT(A) RE - EXAMINED THE ISSUE AND BEING CONVINCED WITH ITS EXPLANATIONS, HE DELETED THE ENTIRE ADDITIONS. THE RELEVANT OBSERVATION OF THE CIT(A) IS EXTRACTED HEREUNDER: AFTER HEARING THE LEAR NED AUTHORIZED REPRESENTATIVE AND ON A CAREFUL CONSIDERATION OF THE FACTS RELATING TO THE ISSUES, THE FOLLOWING OBSERVATIONS MADE AND DECISION TAKEN: - (I) UPON EXAMINING THE FIRST SET OF CONFIRMATORY LETTERS FILED, THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE CREDITWORTHINESS OF 61 CREDITORS IN RESPECT OF WHICH HE SOUGHT EVIDENCES IN SUPPORT OF THEIR CLAIM OF HAVING EARNED INCOME FROM THE SPECIFIED SOURCES, SO AS TO SATISFACTORILY DRAW A NEXUS BETWEEN THE SOURCES OF INCOME AND THE AMOUNTS CLAIMED HAD BEEN LENT TO THE APPELLANT. THEREAFTER, THE APPELLANT FILED A SECOND SET OF CONFIRMATORY LETTERS FROM SUCH CREDITORS CLAIMING TO HAVE EARNED, IN ADDITION TO THEIR DECLARED SOURCES OF INCOME, FURTHER INCOME FROM AGRICULTURE BY CULTIVATING THE LEASED AGRIC ULTURAL LANDS. IN SUPPORT OF SUCH CLAIM, THE CONFIRMATORY LETTERS FROM THE VARIOUS LANDLORDS WERE FILED TOGETHER WITH COPIES OF RYTHU/PATTADAR PASSBOOKS. NO DOUBT, THE SECOND SET OF CONFIRMATORY LETTERS INDICATING A NEW SOURCES OF INCOME OF THE CREDITORS WAS BOUND TO RAISE DOUBT AND SUSPICION IN THE MIND OF THE ASSESSING OFFICER INVESTIGATING INTO THE GENUINENESS OF THE LOANS WITH PARTICULAR REFERENCE TO THE CREDITWORTHINESS OF THE LENDERS. BUT, THEN, THE APPELLANT CAN BE SAID TO HAVE RESPONDED TO THE RE QUIREMENTS OF THE ASSESSING OFFICER BY IDENTIFYING A NEW SOURCE OF INCOME OF THE CREDITORS TOGETHER WITH THE SUPPORTING EVIDENCES, THE MOST IMPORTANT BEING THE CONFIRMATORY LETTERS FROM THE LANDLORDS. IN THIS SENSE, THE APPELLANT CAN BE SAID TO HAVE SHIFT ED THE ONUS TO THE DEPARTMENT FOR DISPROVING THE FURTHER CLAIM OF THE CREDITORS THAT THEY HAD CULTIVATED THE LEASED AGRICULTURAL LANDS AND EARNED INCOME THEREOF FOR LENDING CERTAIN AMOUNTS TO THE APPELLANT. THEREAFTER, THE ASSESSING OFFICER REMAINED IN TH E REALM OF SUSPICION, SURMISE AND CONJECTURE, BUT NEVER WENT BEYOND SUCH LEVEL TO MAKE FURTHER INQUIRIES WITH THE LANDLORDS NOR SUMMONED THE ALLEGED CREDITORS FOR EXAMINATION. HAD THE ASSESSING OFFICER COME UP WITH ANY FRESH FINDING DISPROVING ANY CLAIM O F LEASING AND CULTIVATING OF AGRICULTURAL LANDS, THE ONUS WOULD HAVE SHIFTED BACK TO THE APPELLANT. HAVING NOT DONE SO, THE ASSESSING OFFICER HAS NOT BEEN ABLE TO DISPROVE THE CLAIM OF GENUINENESS OF THE CREDITS BY THE APPELLANT. SINCE THE APPELLANT HAS CLEARLY IDENTIFIED THE CREDITORS BY FURNISHING THEIR NAMES AND POSTAL ADDRESSES, FURNISHED THE INFORMATION WITH SUPPORTING DOCUMENTS REGARDING THE SOURCES OF INCOME OF THE CREDITORS (EVEN THOUGH A SECOND SET OF CONFIRMATORY LETTERS HAVE BEEN FILED FOR AN A DDITIONAL SOURCES OF 3 INCOME), AND ALSO CLAIMED TO HAVE RECEIVED THE LOAN AMOUNTS IN CASH, SHE HAS, PRIMA FACIE, SATISFIED THE THREE CONDITIONS FOR ESTABLISHING THE GENUINENESS OF A CASH CREDIT. HENCE, THE ASSESSING OFFICER CAN BE SAID TO HAVE UNJUSTIFIABL Y TREATED THE AGGREGATE OF LOANS OF RS.10,00,600 AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT, AND, AS SUCH, SUCH ADDITION IS LIABLE TO BE DELETED, WHICH IS HEREBY DELETED. (II) AS REGARDS THE DISALLOWANCE OF INTEREST, THE ENTIRE DISALLOWANCE QUALIFY TO BE DELETED ON ACCOUNT OF THE FINDING GIVEN HEREINABOVE THAT ALL THE 61 LOANS COULD NOT HAVE BEEN TREATED AS UNEXPLAINED CASH CREDITS. EVEN OTHERWISE, IT APPEARS THAT THE ASSESSING OFFICER HAS WORKED OUT INTEREST DISALLOWANCE AT A MUCH HIGHER FIGURE OF RS. 1,80,108 WITHOUT SPECIFIC REFERENCE TO THE AMOUNT AND THE DURATION OF EACH OF THE 61 CREDITS, WHICH, ACCORDING TO THE APPELLANT, WORKS OUT TO A SUM OF RS.35,376 ONLY. IN ANY CASE, SINCE THE LOANS HAVE BEEN HELD AS GENUINE, NO DISALLOWANCE OF INTEREST THER EOF WOULD SURVIVE AND, ACCORDINGLY, THE DISALLOWANCE OF RS .1, 80,108 IS, HEREBY, DELETED. 2. NOW THE REVENUE IS BEFORE US AND PLACED A HEAVY RELIANCE UPON THE ORDER OF THE A.O. WHEREAS THE LD. COUNSEL FOR THE ASSESSEE RAISED HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) WITH THE SUBMISSION THAT THE ASSESSEE HAS DISCHARGED THE INITIAL ONUS THAT LAY UPON IT BY FILING THE EVIDENCE WITH REGARD TO THE GENUINENESS OF TRANSACTIONS AND IDENTITY AND CREDITWORTHINESS OF THE CREDITORS. THEREFORE, THE ADDITION WAS WRO NGLY MADE BY THE ASSESSING OFFICER. 3. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, WE FIND THAT ASSESSEE HAS DISCHARGED THE PRIMARY ONUS WHICH LAY UPON IT. THEREFORE, THE ONUS SHIFTS UPON THE REVENUE BUT THE ASSESSING OFFICER HAS NO T BROUGHT ANYTHING ON RECORD TO DISPROVE THE CLAIM OF THE ASSESSEES. WE HAVE ALSO EXAMINED THE ORDER OF THE CIT(A) AND FIND NO INFIRMITY THEREIN. WE THEREFORE, CONFIRM HIS ORDER. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 - 09 - 20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 27 - 9 - 20 10 4 COPY TO 1 ITO, WARD - 1, KAKINADA 2 SMT. KANCHERLA MANGARAJU, W/O SHRI K.V.K. SURYA NARAYANA, PROPX: PADMA SRINIVASA KAOLIN, D.NO.7.327, JAGGAMPETA, E.G. DIST. 3 THE CI T, RAJAHMUNDRY 4 THE CIT (A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM