N. Ramakrisna Rao, Hyderabad V. ACIT, Circle-13(1), Hyderabad

ITA 1675/HYD/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2615 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1998-1999
• Appeal Filed On: 12-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Keywords: Reopening of assessment; Unexplained investment; Gift; Tangible material; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1675/HYD/2012 ASSESSMENT YEAR: 1998-99 MR. N. RAMAKRISHNA RAO, HYDERABAD [PAN: ABFPN1324E] VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 17-11-2017 DATE OF PRONOUNCEMENT : 12-01-2018 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-II, HYDERABAD, DATED 17-09-2012. 2. ASSESSEE FILED APPEAL ON 10-09-2012 WITH VARIOU S GROUNDS, WHICH INCLUDE SUBMISSION AND CASE LAW. ASS ESSEE FILED REVISED FORM 36 ON 24-08-2017, REVISING SOME COLUMN S AND GROUNDS AS WELL. THE REVISED GROUNDS ARE AS UNDER: REVISED GROUNDS OF APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX, (APPEA LS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. I.T.A. NO. 1675/HYD/2012 :- 2 - : 2. THE CIT(A) FAILED TO APPRECIATE THAT REOPENING OF A SSESSMENT UNDER SECTION 147 WAS BAD IN LAW; AND THUS OUGHT TO HAVE ANNULLED THE ASSESSMENT. 3. THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 23,00,200/- BROUGHT TO TAX AS UNEXPLAINED INVESTMENT. 4. CRAVE LEAVE TO URGE/RAISE ANY GROUND THAT MIGHT BE NECESSARY AT THE TIME HEARING. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE HAS FILED HIS RETURN OF INCOME ON 21-10-1999 DECLARING A TOTAL INCOM E OF RS. 78,480/. THE RETURN WAS ACCEPTED U/S 143(1). HOWEVER , NOTICES U/S. 148 OF THE INCOME TAX ACT [ACT] HAS BEEN ISSUED O N THE REASON THAT THE INCOME HAS ESCAPED ASSESSMENT. THE ASSESSING O FFICER (AO) HAS COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 147 VIDE ORDER DT. 27-03-2006 BY MAKING THE ADDITION ON ACCOUN T OF UNEXPLAINED INVESTMENT OF RS. 23,00,200/-. 4. BEFORE THE LD.CIT(A), ASSESSEE RAISED TWO GROUND S MAINLY ONE WAS THAT THE ISSUANCE OF NOTICE U/S. 148 AN D REOPENING OF ASSESSMENT IS BAD IN LAW AND OTHER WAS THE ADDITION OF RS. 23,00,200/- ON ACCOUNT OF UNEXPLAINED INVESTMENT. IT W AS THE CONTENTION OF ASSESSEE THAT THE REOPENING WAS AT THE INSTAN CE OF REPORT OF JCIT, BHUBANESWAR, THAT THE REASONS FOR REOP ENING WERE NOT COMMUNICATED, THAT THE NOTICES WERE NOT SERVED PROPERL Y. NO ENQUIRIES WERE MADE AND THOSE REPORTS OF ENQUIRY WHIC H WERE RELIED WERE NOT FURNISHED TO ASSESSEE AND NO CROSS-EX AMINATION WAS PROVIDED. FURTHER, RELIANCE OF ENQUIRIES CONDUCTE D IN THE COMPANYS CASE DOES NOT ESTABLISH THE UNACCOUNTED NATURE OF AMOUNTS INVOLVED AND NO FRESH MATERIAL WAS AVAILABLE . IT WAS FURTHER CONTENDED THAT ASSESSEE HAD DISCLOSED THE INVESTM ENTS AND I.T.A. NO. 1675/HYD/2012 :- 3 - : SOURCES IN THE RETURNS FILED ORIGINALLY AND THESE RETUR NS WERE ACCEPTED WITHOUT ANY SCRUTINY. IN THE PROCEEDINGS BEFOR E LD.CIT(A), ASSESSEE FILED FRESH AFFIDAVITS FROM THE CREDITORS IN SUPPORT OF BORROWALS. LD.CIT(A) RELYING ON THE ORDER OF N. SRID HAR HAS NEGATIVED THE ASSESSEE CONTENTIONS AND CONFIRMED THE ADD ITION, HENCE THE PRESENT APPEAL. 5. LD. COUNSEL EXPLAINED THAT ASSESSEE ALONG WITH OTH ER FAMILY MEMBERS (WHOSE APPEALS ARE SEPARATELY DEALT W ITH) HAS INVESTED IN A COMPANY (M/S SANKHYA INFOTECH LTD, BHUB ANESWAR) PROMOTED BY THEM AND THE INVESTMENT BY ASSESSEE WAS TO THE TUNE OF RS. 23,00,200/-. THE SOURCES OF THE AMOUNT WAS S TATED IN THE ORIGINAL RETURN FILED. OUT OF WHICH, SAVINGS ARE TO AN EXTENT OF RS. 7.50 LAKHS AND LOAN FROM 20 PERSONS IS RS. 15.50 LA KHS. 5.1. IT WAS SUBMITTED THAT THERE WAS NO ENQUIRY ABOUT THE SOURCES WHICH INCLUDE ENCASHMENT OF FD, BUT AO HAS TRE ATED THE SAME ALSO AS UNEXPLAINED AND LD.CIT(A) HAS NOT EVEN DISCUSSED ABOUT THE SAME. 5.2. IT WAS SUBMITTED THAT ASSESSEE HAS BORROWED FROM TH E FOLLOWING PERSONS: I.T.A. NO. 1675/HYD/2012 :- 4 - : SL.NO. NAME OF THE CREDITOR AMOUNT (RS) 1 BAPUJI 5 0,000 2 BHOJI 5 3 ,000 3 CHITTEMMA 73 ,000 4 EESWARA RAO 80 ,000 5 JAYA RAJU 5 0,000 6 JAYAPAL 1,00,000 7 JAYARAJU 4 5,00 0 8 KANAKAIAH 9 5 ,000 9 MARIYAMMA 9 5 ,000 10 NALLAIAH 42 ,000 11 PUPPALA RAMBABU 95 ,000 12 RAJU 92 ,000 13 RAMBABU 5 0 ,0 0 0 14 RAMBABU 73 ,000 15 SAMBHASIVA RAO 9 0,000 16 SATYAVATHI 5 0,000 17 SRINIVAS 1,00,000 18 TILAPALAMMA 1, 43 ,000 19 VEERABHADRA RA O 9 0, 0 00 20 YUGANDAR 84,000 TOTAL: 15,50,000 5.3. IT WAS FURTHER SUBMITTED THAT THE ENQUIRIES WERE ORIGINALLY CAUSED IN THE CASE OF COMPANY AND THERE TH E PROMOTERS INVESTMENT WAS CONSIDERED BUT THE ADDITION WAS MADE AS UNEXPLAINED INVESTMENT IN MACHINERY. DURING THE ASSESS MENT PROCEEDINGS OF THE COMPANY, THE DDIT, VIJAYAWADA MAD E ENQUIRIES OF SOURCES OF SOURCE AND THAT TOO BEHIND THE BACK OF A SSESSEES PROMOTERS AFTER A LAPSE OF TIME AND NO CROSS-EXAMINATI ON WAS PROVIDED. ASSESSEES FILED DETAILED REPLIES IN THE C ASE OF COMPANYS APPEAL AND LD.CIT(A) DELETED THE ADDITIONS SO MADE. ANTICIPATING AN ADVERSE ORDER, THE JCIT, BHUBANESWAR HAS WRITTEN A LETTER TO THE OFFICERS IN HYDERABAD TO REOPEN THE ASSESSMENTS AN D THAT WAS THE BASIS FOR ISSUANCE OF NOTICE. EVEN THOUGH ASSESSE E FILED THE RETURNS OF INCOME DISCLOSING THE INVESTMENTS AND SOURCE S, THE AO WHO HAS NO JURISDICTION HAD REOPENED THE ASSESSMENT AN D WITHOUT I.T.A. NO. 1675/HYD/2012 :- 5 - : FURTHER ENQUIRIES RELIED ON THE EARLIER REPORTS AND CO MPLETED THE ASSESSMENT. 5.4. REFERRING TO THE ORDER OF LD.CIT(A) IT WAS SUBM ITTED THAT THE FACT IS THAT THE REASONS FOR REOPENING WERE NOT COMMU NICATED BY AO AND COMMUNICATED ONLY DURING THE PRESENT APPEAL PROCEEDINGS RECENTLY THAT TOO IN THE FORM OF PAPER BOO K FILED BEFORE THIS FORUM AND REFERRED TO THE LETTER OF AO GIVEN TO CIT (A) THAT REASONS FOR REOPENING WERE NOT COMMUNICATED EVEN THOUG H ASSESSEE ASKED FOR IT. 5.5. ON MERITS, REFERRING TO THE ORDER OF LD.CIT(A), BHUBANESWAR IN THE COMPANYS APPEAL, IT WAS SUBMITTE D THAT THERE ARE ENQUIRIES IN THE CASE OF ASSESSEE BUT EVEN IN TH E ENQUIRIES CONDUCTED, THERE WAS NO DENIAL OF INVESTMENT. IT WAS FUR THER SUBMITTED THAT AO STATED TO HAVE SENT 78 ENQUIRY LETTERS AND 48 OF THEM WERE RETURNED UNSERVED. IT WAS THE CONTENTION THAT AS SESSEE HAS BORROWED ONLY FROM 20 LOAN CREDITORS AN AMOUNT OF RS. 15.50 LAKHS AND FURNISHED AFFIDAVITS IN THE COURSE OF APPEA L PROCEEDINGS. AO HAS REPLIED THAT THE CONFIRMATIONS TALLY WITH DETAILS O N RECORD EXCEPT IN ONE CASE OF TILAPALAMMA WHICH WAS NOT SIGNE D. BUT CIT(A) RELYING ON OTHER ORDER IN THE CASE OF N. SRIDH AR HAS REJECTED THE APPEAL WITHOUT DISCUSSING THE FACTS. THUS, THE ORDE R OF LD.CIT(A) IS THEREFORE DEVOID OF FACTS AND SHOULD BE SET ASIDE. 5.6. REGARDING THE ISSUE OF REOPENING, THE SUMMARY OF CONTENTIONS ARE AS UNDER: I.T.A. NO. 1675/HYD/2012 :- 6 - : PRECEDENTS ON RE-OPENING NO TANGIBLE MATERIAL IN THE RETURNS OF INCOME FIL ED ORIGINALLY IN ALL THE CASES, NOTES WERE APPENDED TO THE ROI ABOUT INVESTM ENT IN SHARES OF SANKHYA INFOTECH, BHUVANESHWAR. DETAILS OF LOANS T AKEN AND CONFIRMATION LETTER ETC. WERE FILED IN CASE OF RAMA KRISHNA, PARVATHAVARDINI, INDIRA RAMANI, N. SRIDHAR AND N. G AYATRI. EXCEPT THESE NOTES, EVIDENCES AND THE LETTER RECEIVED FROM ADDLN . CIT, BHUVANESHWAR, TO TAKE ACTION U/S. 147 THERE IS NO TANGIBLE MATERI AL THAT INCOME HAS ESCAPED ASSESSMENT. ( JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. ATUL KUMAR SWAMI WHERE REFERENCE TO NOTES FILED ALO NG WITH ORIGINAL RETURN OF INCOME ARE MADE) . THE ENTIRE REASONS RECORDED FOR RE-OPENING OF ASSESSMENT IS BORROWED SATISFACTION AND NOT THAT OF THE ASSESSING OFFICER. REASONS FOR RE-OPENING NOT COMMUNICATED IN ANY OF T HE CASES FATAL TO RE-ASSESSMENT NOT FURNISHING OF REASONS OR ITS NON-COMMUNICATION IS FATAL TO REASSESSMENT PROCEEDINGS. PLS. SEE CASE LAW RELIED UPON AS UNDER SR. NO. CASE LAW ITR PAGE COURT I. CIT VS. TECUMSEH PRODUCT 361 429 AP & TELANGANA II. CIT VS. TREND ELECTRONICS 379 456 MUMBAI III. CIT VS. VIJAYA TALKIES & DISTRIBUTORS 398 13 DELHI IV. CIT VS. KOTHARI MILLS 377 581 KARNATAKA 6. LD.DR, HOWEVER, DEFENDED THE ORDER OF THE AO/CIT( A) VEHEMENTLY. REGARDING THE LETTER OF AO DENYING THE REC ORDING OF REASONS, IT WAS STATED THAT THE LETTER IS NOT CORRECT AND HOW THE SAME REACHED ASSESSEE IS NOT KNOWN. WHILE ADMITTING THA T THE REASONS RECORDED WERE TRACED AND PROVIDED TO ASSESSEE RECENTLY (IN PG.17, IN THE FORM OF PAPER BOOK FILED). IT WAS SUBMI TTED THAT THE ENQUIRIES WERE CONDUCTED AND ASSESSEE IS AWARE OF AL L THE PROCEEDINGS AND THERE WAS NON-CO-OPERATION FROM ASSE SSEE. HE REFERRED TO VARIOUS ORDERS- THAT OF LD.CIT(A), BHUBA NESWAR, THE ORDER OF AO AND CIT(A)- TO SUPPORT THE AOS ACTION. I.T.A. NO. 1675/HYD/2012 :- 7 - : 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE ORDERS AND DOCUMENTS PLACED ON RECORD AND PRECEDENTS RELIED. BEFORE ADVERTING TO THE ADJUDICATION OF ISSUES, THE FO LLOWING FACTS ARE TO BE NOTED: A) ASSESSEE FILED THE RETURN OF INCOME ON 21-10-1999 WITH THE JURISDICTION OF ITO 5(5), HYD ADMITTING INCOMES AND STA TING THE SOURCES OF INVESTMENT OF RS. 23,00,200/- IN M/S. SANK YA INFOTECH LTD., THIS WAS ACCEPTED U/S. 143(1) AND NO SCRUTINY W AS TAKEN UP; B) THE COMPANY M/S. SANKYA INFOTECH LTD., WAS ASSESSE D AT BHUBANESWAR AND ENQUIRIES WERE CONDUCTED IN SOME PRO MOTERS CASES INCLUDING ASSESSEE CASE ; C) IN THE COMPANY APPEAL, LD.CIT(A), BHUBANESWAR HAS DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS/FINDINGS: IN THIS CASE, THE AO HAS MADE CERTAIN ENQUIRIES THR OUGH THE DDTI (LNV.), HYDERABAD AND VIJAYAWADA REGARDING THE SOU RCES OF INVESTMENT TOWARDS SHARE CAPITAL CONTRIBUTED BY FOUR SHAREHOLDERS NAME LY, (I) SHRI N. RAMAKRISHNA RAO, (II) SMT N. PARAVATHAVARHINI, (III) SMT. N. GA YATRI AND (IV) SMT. N. INDIRA RAMANI. THE AO HAS RELIED UPON THE REPORT OF THE D DLT(LNV.), HYDEMBAD AND THE STATEMENTS RECORDED BY HIM ON OATH FROM SHRI BA BU RAO, SHRI SURYANARAYANA AND SHRI G. KANAKAIAH TO STATE THAT T HE LOANS WERE BOGUS AND THAT THE AGENT WHO ARRANGED THE LOANS HAD OBTAINED SIGNATURES ON THE LOAN CONFIRMATION LETTERS AFTER BRIBING THE AGRICULTURIS TS. OF COURSE THIS REPORT WAS NOT CONFRONTED TO THE APPELLANT BY THE AO, BUT THE SAME HAD BEEN CONFRONTED IN COURSE OF THE REMAND PROCEEDING. THE APPELLANT-COMP ANY HAVE ALSO CITED FROM THE SAME REPORT TO CONTEND THAT SHRI G. KANAKAIAH T OGETHER WITH HIS FAMILY MEMBERS HAVE GIVEN MONEY TO SHRI BABU RAO, WHO HAS GIVEN THE MONEY 10 THE APPELLANT-COMPANY AND THAT THE FARMER-CREDITORS HAV E STATED THAT THEY HAVE SIGNED THE LOAN CONFIRMATION LETTERS. THE AO HAS RE LIED UPON THE SAID REPORT TO QUESTION THE CREDITWORTHINESS OF THE FARMERS ON THE GROUND THAT, THE LAND WAS DROUGHT PRONE AREA FOR THE LAST FIVE TO SIX YEARS A ND SUFFICIENT INCOME WAS NOT GENERATED. THE APPELLANT-COMPANY HAS QUOTED FROM TH E SAME REPORT TO ASSERT I.T.A. NO. 1675/HYD/2012 :- 8 - : THAT FROM 1986 TO 1996, PRAWN WAS BEING CULTIVATED IN THE LAND WHERE THE YIELD PER ACRE WAS RS.1 LAKH PER ANUM. THE AO HAS DRAWN A TTENTION TO THE DISCREPANCIES BETWEEN THE PLOT/SURVEY NUMBERS AND T HE EXTENT OF LAND AREA GIVEN BY THE CULTIVATORS AND AS APPEARING IN THE LAND REC ORDS. THIS DISCREPANCY HAS BEEN ATTEMPTED TO BE EXPLAINED BY THE APPELLANT-COM PANY BY ATTRIBUTING THE SAME TO NON-MUTATION OF LAND AND TYPOGRAPHICAL AND UNINTENTIONAL ERROR ETC., ALTHOUGH THE VERACITY OF THE ALLEGATION HAS BEEN AD MITTED IN FEW CASES. THE DIFFERENCE REGARDING THE EXTANT OF LAND AREA WAS AT TRIBUTED TO CAUSES LIKE SALE/GIFT OR SHARING OF LAND SUBSEQUENTLY. BUT, BE THAT AS IT MAY, THE ENQUIRY REPORT DOES NOT INDICATE THAT THE SOURCES OF SOURCE , I.E., THE LOANS ADVANCED BY THE FARMERS TO THE DIRECTORS/SHAREHOLDERS; WERE TOT ALLY BOGUS OR THAT THEY COMPLETELY LACK CREDITWORTHINESS. BUT, THERE APPEA RS TO BE SOME SUBSTANCE IN THE ASSERTION OF THE AO/JT.CIT THAT CERTAIN ELEMENT S LIKE THE GENUINENESS OF THE TRANSACTIONS AND COMPLETE CREDITWORTHINESS OF THE F ARMERS WAS NOT CONCLUSIVELY ESTABLISHED. THESE MATTERS NEVERTHELESS REQUIRE FUR THER ENQUIRY AS ONLY SIXTEEN OUT OF SEVENTY FIVE FARMER-CREDITORS, WHO HAVE ADVA NCED LOANS TO THE FOUR SHARE HOLDERS HAVE BEEN EXAMINED. NO ENQUIRY HAS BEEN CON DUCTED IN RESPECT OF LOANS AVAILED BY THE TWO PROMOTER-DIRECTORS; NAMELY SHRI N. SRINIVAS AND SHRI N. SRIDHAR. THEREFORE THE AO OR THE CONCERNED AOS CAN CONDUCT FURTHER ENQUIRIES AND IF IT IS FOUND THAT THE LOANS GIVEN BY THE FARM ERS WERE NEITHER CREDIBLE NOR GENUINE; THE ADDITIONS COULD BE MADE IN THE HANDS O F THE SHAREHOLDERS WHO HAVE SUBSCRIBED TO THE SHARES OF THE APPELLANT-COMPANY. THE SOURCES OF FUNDS IN SUCH CASES CAN BE TACKLED BY THE AO IN THE HANDS OF THE SUBSCRIBERS TO THE EQUITY SHARES WHO HAVE AVAILED THE LOANS. THEREFORE, THE AO IS FREE TO CONDUCT FURTHER ENQUIRIES IN THE CASE OF INDIVIDUAL SHARESHOLDERS A S PER THE EXTANT PROVISIONS OF LAW AND CONSIDER THESE AMOUNTS IN THEIR HANDS IN VI EW OF THE DISCUSSIONS IN PARA 4.1 AND 4.2 AND THE JUDICIAL DECISIONS CITED SUPRA . D) BEFORE THE ORDER OF LD.CIT(A), BHUBANESWAR WAS PA SSED, THE JCIT HAS REPORTED HIS FINDINGS TO THE OFFICERS AT HYDE RABAD WITH A REQUEST TO REOPENING THE ASSESSMENT S FOR PROTECTING THE INTEREST OF REVENUE. AS PER THE PAPER BOOK FILED BY THE DEPT (PA GE 15), THERE WAS A DIRECTION BY ADDL. CIT LETTER NO 49/R-13/04-05 TO ACIT TO SUBMIT PROPOSAL FOR INITIATING ACTION U/S. 147 IMMEDIA TELY BY THE LETTER DT. 02-03-2005; I.T.A. NO. 1675/HYD/2012 :- 9 - : E) THE ORDER SHEET ENDORSES THE SAID LETTER AND THE RE OPENING BY THE AO, ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13(1 ) , WAS CONSEQUENTIAL TO THE ABOVE LETTER AND AO RECORDED THE SATISFACTION THAT ASSESSEE HAS NOT FILED RETURN AND HENCE ESCAPED A SSESSMENT. F) ASSESSEE RECEIVED NOTICE U/S. 148 DT. 16-03-2005 BUT THE REASONS RECORDED WERE NOT COMMUNICATED EITHER DURING ASSESSMENT PROCEEDINGS OR DURING APPEAL PROCEEDINGS. G) EVEN THOUGH CONFIRMATIONS IN THE FORM OF AFFIDAVIT S WERE FILED, NO FURTHER ENQUIRIES WERE CAUSED NOR THE EARLIER REP ORTS WERE GIVEN TO ASSESSEE AND CROSS EXAMINATION WAS NOT PROVIDED; H) AO IN THE ASSESSMENT ORDER STATES TO HAVE SENT 78 LE TTERS OF ENQUIRY WHEN ASSESSEE HAS BORROWED ONLY FROM 20 PER SONS. EVEN THOUGH 48 LETTERS SEEM TO HAVE RETURNED UNSERVED, HOW M ANY OF THEM ARE FROM THE CREDITORS CLAIMED BY ASSESSEE ARE NO T STATED. THE AO ENQUIRY SEEMS TO BE MISDIRECTED. I) THE AFFIDAVITS FILED BY ASSESSEE BEFORE CIT(A), H YD. HAS BEEN SENT TO AO AND AO HAS MORE OR LESS ACCEPTED THE AFFID AVITS, EXCEPT IN ONE CASE OF TILAPALAMMA ON THE REASON THAT THE SAM E WAS NOT SIGNED; J) THE ADDITION OF RS. 23 LAKHS WAS NOT CORRECT EVEN TH OUGH THE LOAN AMOUNTS WERE ONLY RS. 15.50 LAKHS; BALANCE BEI NG SAVINGS CAN NOT BE TAXED AS UNEXPLAINED LOANS, AS ASSESSEE S TATED TO HAVE ENCASHED FD. THIS WAS NOT EXAMINED NOR COMMENTED UPO N IN ANY OF THE PROCEEDINGS BY REVENUE. I.T.A. NO. 1675/HYD/2012 :- 10 -: 8. NOW, COMING TO THE MERITS OF THE ADDITION, THE FINDI NGS OF AO AND CIT(A) ARE NOT BASED ON FACTS. NO ENQUIRY W AS CONDUCTED IN ASSESSEES CASE ON THE AFFIDAVITS FILED AND THOSE E NQUIRIES CONDUCTED IN COMPANY CASE CANNOT BE RELIED, IN THE AB SENCE OF CROSS-EXAMINATION. THE STATEMENT OF SHRI KANAKAIAH (S UPPOSED TO BE A MEDIATOR) WAS BEHIND THE BACK OF ASSESSEE AND AS SESSEE NEVER CLAIMED THAT HE IS THE MEDIATOR. THE CONFIRMATION AND A FFIDAVITS GIVEN LATER HAVE NOT BEEN DISPROVED. THE STATEMENT OF SHRI G. SRINIVAS IN FACT CONFIRMS THAT THERE WAS PRAWN CULTIVA TION AND RYOTS GOT AFFECTED DUE TO CYCLONE IN 1999, MUCH LATER TO THE ADVANCE OF MONIES. SUBSEQUENT PROBLEM BY FARMERS COU LD BE REASON FOR ASSESSEES INABILITY TO GET THEM PRODUCED B EFORE AO IN THE PROCEEDINGS, BUT IT DOES NOT PROVE THAT THE CLAIM OF C REDITS IS NOT GENUINE. THE RELIANCE ON CIT(A), BHUBANESWAR ORD ER BY THE PRESENT CIT(A), HYDERABAD IS ALSO MISPLACED. IN FAC T, THE ORDER OF CIT(A) HAS THIS TO STATE: BUT, BE THAT AS IT MAY, THE ENQUIRY REPORT DOE S NOT INDICATE THAT THE SOURCES OF SOURCE, I.E., THE LOANS ADVANCE D BY THE FARMERS TO THE DIRECTORS/SHAREHOLDERS; WERE TOTALLY BOGUS OR THAT THEY COMPLETELY LACK CREDITWORTHINESS. BUT, THERE APPEARS TO BE SOME SUB STANCE IN THE ASSERTION OF THE AO/JT.CIT THAT CERTAIN ELEMENTS LI KE THE GENUINENESS OF THE TRANSACTIONS AND COMPLETE CREDITWORTHINESS OF T HE FARMERS WAS NOT CONCLUSIVELY ESTABLISHED. THESE MATTERS NEVERTHELES S REQUIRE FURTHER ENQUIRY AS ONLY SIXTEEN OUT OF SEVENTY FIVE FARMER- CREDITORS, WHO HAVE ADVANCED LOANS TO THE FOUR SHARE HOLDERS HAVE BEEN EXAMINED. NO ENQUIRY HAS BEEN CONDUCTED IN RESPECT OF LOANS AVAILED BY T HE TWO PROMOTER- DIRECTORS; NAMELY SHRI N. SRINIVAS AND SHRI N. SRID HAR. THEREFORE THE AO OR THE CONCERNED AOS CAN CONDUCT FURTHER ENQUIRIES AND IF IT IS FOUND THAT THE LOANS GIVEN BY THE FARMERS WERE NEITHER CREDIBL E NOR GENUINE; THE ADDITIONS COULD BE MADE IN THE HANDS OF THE SHAREHO LDERS WHO HAVE SUBSCRIBED TO THE SHARES OF THE APPELLANT-COMPANY. THE SOURCES OF FUNDS IN SUCH CASES CAN BE TACKLED BY THE AO IN THE HANDS OF THE SUBSCRIBERS TO THE EQUITY SHARES WHO HAVE AVAILED THE LOANS. THER EFORE, THE AO IS FREE TO CONDUCT FURTHER ENQUIRIES IN THE CASE OF INDIVIDUAL SHARESHOLDERS AS PER THE EXTANT PROVISIONS OF LAW AND CONSIDER THESE AMO UNTS IN THEIR HANDS IN I.T.A. NO. 1675/HYD/2012 :- 11 -: VIEW OF THE DISCUSSIONS IN PARA 4.1 AND 4.2 AND THE JUDICIAL DECISIONS CITED SUPRA. THUS, THE OBSERVATION OF CIT(A) INDEED DOES NOT STATE TH AT THE SOURCES ARE TOTALLY BOGUS AND AO WAS IN FACT, ASKED TO MAKE FURTHER ENQUIRIES. SINCE NO ENQUIRIES WORTH WERE MAD E, THE ORDER OF CIT(A) BHUBANESWAR CANNOT BE RELIED ON FOR DENYIN G THE GENUINENESS OF THE CREDITS. SINCE SO MUCH TIME HAS LA PSED AND THE AFFIDAVITS FURNISHED HAVE NOT BEEN DISPROVED, MORE OR LESS ACCEPTED BY AO IN REMAND PROCEEDINGS, THE CONTENTIONS OF ASSESS EE IN THIS REGARD HAS MERIT. I AM OF THE OPINION THAT REVENUE WRO NGLY RELIED ON THE REPORTS IN THE CASE OF COMPANY AND ON THE ORDER OF CIT(A), BHUBANESWAR AND HAS NOT MADE ANY ENQUIRY IN ASSESSEE CASE TO DISPROVE THE CREDITS CLAIMED. IN THE CIRCUMSTANCES, I DIRECT THE AO TO ACCEPT THE CREDITS AS SUCH AS GENUINE. IN FACT, THE B ORROWALS ARE ONLY TO THE EXTENT OF RS. 15.50 LAKHS. ADDITION OF RS 2 2.30 LAKHS IS NOT CORRECT AND HENCE DELETED. 9. THAT LEAVES US THE MATTER OF REOPENING. EVEN THOUGH THE SAME IS ACADEMIC NOW, IN VIEW OF THE ACCEPTANCE OF ISSUE OF CREDITS ON MERIT, IT IS TO BE PLACED ON RECORD THAT THE CONTENTIONS ON THE ISSUE HAVE MERIT. FIRST OF ALL, ASSESSEE HAS D ISCLOSED THE INVESTMENT IN THE ORIGINAL RETURN WHICH WAS ACCEPTED. THERE WAS A DIRECTION BY ADDL. CIT, RANGE-13 TO REOPEN THE ASSESSM ENT. THE SATISFACTION INDICATE THAT ASSESSEE HAS NOT FILED RETU RN HENCE ESCAPED ASSESSMENT IS NOT CORRECT AS ASSESSEE FILED RE TURN IN DUE COURSE AND ASSESSEE ON RECORD. ANOTHER OFFICER (WHO SE JURISDICTION IS NOT EXAMINED) HAS ISSUED THE NOTICES, EVEN THOUGH AS SESSEE WAS ASSESSED EARLIER. THE REASONS FOR REOPENING WERE NO T COMMUNICATED VIOLATING THE DIRECTIONS OF HON'BLE SUPREM E COURT IN I.T.A. NO. 1675/HYD/2012 :- 12 -: THE CASE OF GKN DRIVE SHAFT, 259 ITR 19 (SC). THE CO NTENTIONS EXTRACTED IN ASSESSEE COUNSELS SUBMISSIONS AND THE CASE LAW RELIED, DO RESULT THAT THE REOPENING ITSELF IS BAD IN LAW. 10. ON THESE REASONS, THE ORDER OF AO AND CIT(A) CA NNOT BE UPHELD. THE GROUNDS ARE ALLOWED. 11. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2018 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH JANUARY, 2018 TNMM I.T.A. NO. 1675/HYD/2012 :- 13 -: COPY TO : 1. MR. N. RAMAKRISHNA RAO, C/O. SHRI K.C. DEVDAS, CHARTERED ACCOUNTANTS, R.P. ROAD, SECUNDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-13( 1), HYDERABAD. 3. CIT (APPEALS)-II, HYDERABAD. 4. CIT-I, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.