Laghuvarapu Ramanadham, Guntur V. ACIT, Vijayawada

ITA 17/VIZ/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7257 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Set aside

Judgement Text

ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 17 /VIZAG/ 20 09 ASSESSMENT YEAR : 2006 - 07 LAGHUVARAPU RAMANAD HAM PIDUGURALLA ACIT CENTRAL CIRCLE VIJAYAWADA (APPELLANT) VS. (RESPONDENT) PAN NO. ABDPC 3008M APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI D.S. SUNDER SINGH, SR. DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS APPEAL IS PREFERR ED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS BUT THEY ALL RELATE TO AN ADDITION OF RS.21 LAKHS FOUND DURING THE COURSE OF SEARCH AT THE ASSESSEES PREMISES. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT A SEARCH AND SEI ZURE OPERATION WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 8.2.2006. DURING THE COURSE OF SEARCH, A STATEMENT OF L. PULLA RAO, SON OF THE ASSESSEE WAS RECORDED IN WHICH HE HAS STATED THAT THEY HAVE ENTERED INTO AN AGREEMENT 3 DAYS BACK FOR SALE OF TH EIR HOUSE SITUATED AT J ANAPADU ROAD FOR A SUM OF RS.24 LAKHS WITH MODERN BUILDERS, HYDERABAD. HE HAS ALSO STATED THAT MR. V. MAHARAJ, PARTNER OF MODERN BUILDERS DELIVERED THE CASH TO HIM AT HYDERABAD ON 7.2.2006 AT 11 . 30 AM WHICH WAS BROUGHT BY HIM TO PID UGURALLA AT 2.30 AM EARLY MORNING OF 8.2.2006 ACCOMPANIED BY SHRI SAMBASIVA RAO, SUPERVISOR OF MODERN BUILDERS BY TRAIN. IT WAS ALSO STATED THAT HE DID NOT POSSESS EVIDENCE FOR RECEIPT OF CASH AT THAT POINT OF TIME SINCE THE ACKNOWLEDGEMENT GIVEN BY THE M ODERN BUILDERS WAS LEFT WITH THE MODERN BUILDERS AT HYDERABAD. THESE EXPLANATIONS WERE NOT ACCEPTED BY THE A.O. AND HE DISBELIEVED L. PULLA RAO AND MADE THE ADDITION OF RS.21 LAKHS FOUND DURING THE COURSE OF SEARCH IN THE HANDS OF THE ASSESSEES. ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA 2 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND FILED THE FOLLOWING WRITTEN SUBMISSIONS BEFORE HIM: IT MAY BE SUBMITTED THAT DURING THE COURSE OF THE SEARCH OPERATION, THIS SUM WAS FOUND IN THE RESIDENTIAL PREMISES OF THE APPELLANT AND THEN IT WAS E XPLAINED BY THE APPELLANT TO THE INVESTIGATING AUTHORITIES OF THE DEPARTMENT TO THE EFFECT THAT THIS REPRESENTED THE ADVANCE SALE PROCEEDS RECEIVED BY HIS TWO SONS, BY NAME SRI L. VENKATESWARLU AND SRI L. PULLA RAO WHO ENTERED INTO AGREEMENT WITH ONE M/S . MODERN BUILDERS OF HYDERABAD FOR SALE OF THEIR OLD HOUSE AT PIDUGURALLA. AS PER THE `SALE AGREEMENT ENTERED INTO WITH THE VENDEE, M/S. MODERN BUILDERS, THE AGREED SALE CONSIDERATION WAS RS.24,00,000 OUT OF WHICH THE FOLLOWING ADVANCE WAS PAID BY IT. A) RS.1,00,000 : 20.01.2006 B) RS.10,00,000 : 29.01.2006 C) RS.10,00,000 : 04.02.2006 TOTAL RS.21,00,000 THE ABOVE ADVANCE AMOUNT WAS RETAINED WITH SRI V. MAHARAJ, PARTNER OF M/S. MODERN BUILDERS AT HYDERABAD FOR SAFETY PURPOSES AND IT WAS BROU GHT BY THE APPELLANTS SON SRI L. PULLA RAO ON THE EARLY HOURS OF 8 TH FEBRUARY, 2006 (AT 2.30 AM) DULY ASSISTED BY SRI V. SAMBASIVA RAO, SUPERVISOR OF MODERN BUILDERS, WHO ACCOMPANIED SRI PULLA RAO, M/S. MODERN BUILDERS AND SRI L. PULLA RAO ALSO CONFIRMED THE ABOVE FACTUAL POSITION. BUT, HOWEVER, THE LEARNED A.O. DECLINED TO ACCEPT THE AFFIRMATIONS MADE FROM TIME TO TIME AND HE ADDED BACK THE SAME WITH A FINDING THAT THE AGREEMENT WAS PREPARED SUBSEQUENT TO THE DATE OF SEARCH. THE OPERATIVE PART OF THE FI NDINGS OF THE LEARNED A.O. CONTAINED IN THE IMPUGNED ASST. ORDER WERE DULY REPRODUCED IN THE STATEMENT OF FACTS ANNEXED TO THE ABOVE PETITION WHICH MAY KINDLY BE TREATED AS A PART OF THE PRESENT WRITTEN SUBMISSIONS. WHILE INVITING KIND ATTENTION OF THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) TO THE PLEADINGS RECORDED IN THE STATEMENT OF FACTS AND ALSO `GROUNDS OF APPEAL ANNEXED TO THE AFORESAID APPEAL PETITION, THE APPELLANT WOULD REITERATE SOME OF THE SALIENT FEATURES CONNECTED TO THE ISSUE UND ER DISPUTE FOR FAVOUR OF KIND CONSIDERATION. A. DURING THE COURSE OF SEARCH OPERATION ITSELF THE APPELLANT AFFIRMED IN UNEQUIVOCAL TERMS TO THE EFFECT THAT THE IMPUGNED AMOUNT OF RS.21,00,000 DID NOT BELONG TO HIM AND THAT THE SAME BELONGED TO HIS TWO SONS B Y NAME SRI L. VENKATESWARLU AND SRI L. PULLA RAO AND THAT THE SAME REPRESENTED THE `ADVANCE SALE PROCEEDS OF THE HOUSE WHICH ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA 3 WAS AGREED TO BE SOLD TO M/S. MODERN BUILDERS OF HYDERABAD. B. THAT THE ABOVE AFFIRMATION OF THE APPELLANT WAS DULY CONFIRMED BY SRI L. PULLA RAO IN THE SWORN DEPOSITION RECORDED FROM HIM BY THE AUTHORITIES INDEPENDENTLY AND THAT THE SAME STATEMENT WAS ALSO ENDORSED BY ANOTHER CONTRACTING PARTY VIZ., M/S. MODERN BUILDERS OF HYDERABAD. C. THAT THE ABOVE TRANSACTION WAS ALSO REFLECTED IN T HE BOOKS OF M/S. MODERN BUILDERS OF HYDERABAD AND HENCE THE SAME IS SUBSTANTIATED BY A DOCUMENTARY EVIDENCE WHICH IS MAINTAINED DURING THE COURSE AND FOR PURPOSES OF BUSINESS; D. THERE WAS NO MATERIAL IDENTIFIED AND ESTABLISHED EITHER BY THE SEARCH TEAM OF T HE DEPT. OR BY THE A.O. TO TESTIFY THAT THE ABOVE AMOUNT BELONGED TO THE APPELLANT AND CONTRARY TO THE SAME, THERE EXISTED AMPLE EVIDENCE, AS ENUNCIATED SUPRA, TO ESTABLISH THAT THE AMOUNT IN QUESTION BELONGED TO SRI L. VENKATESWARLU AND SRI L. PULLA RAO. E. IT MAY FURTHER BE SUBMITTED THAT THERE WAS NO FINDING ARRIVED AT BY THE LEARNED A.O. TO THE EFFECT THAT THE APPELLANT DERIVED ANY UNEXPLAINED INCOME IN ANY OF THE EARLIER YEARS OR DURING THE YEAR UNDER REVIEW FROM ANY BUSINESS ACTIVITY OR IN ANY OTHER FOR M EXCEPTING IN CASH OF RS.21,00,000 SEIZED BY THE AUTHORITIES WHICH IS NOT RELATED TO HIM. F. EVEN ACCORDING TO THE OBSERVATIONS OF THE LEARNED A.O. CONTAINED AT PAGE 4 OF THE IMPUGNED ASST. ORDER, THE AFORESAID CASH TRANSACTION OF RS.21 LAKHS FOUND PLACE IN THE BOOKS OF ACCOUNT OF M/S. MODERN BUILDERS OF HYDEABAD; THAT THE CONFIRMATION LETTER ISSUED BY THE MANAGING PARTNER OF THE ABOVE FIRM WAS ALSO FILED WITH THE A.O. AND THAT THE OPPOSITE CONTRACTING PARTIES VIZ. SRI L. VENKATESWARLU AND SRI L. PULLA RAO A LSO AFFIRMED THAT THE IMPUGNED CASH BELONGED TO THEMSELVES ONLY; G. WHILE USING THE TERM ORAL AGREEMENT REFERRED TO BY THE LEARNED A.O., THE DEPONENT SRI L. PULLA RAO MIGHT HAVE ONLY CONCURRED WITH THE VERBAL EXPRESSION OF THE THEN INVESTIGATING AUTHORITY THAT AN UNREGISTERED DOCUMENT MAY NOT CONVEY BETTER RIGHTS THAN THAT OF ORAL AGREEMENT AND SUCH AN AVERMENT OR EXPRESSION OF INFORMAL VIEW MAY NOT BE A GUIDING FACTOR TO ARRIVE AT A NEGATIVE VIEW AGAINST THE APPELLANT. H. CONSEQUENT TO THE SEARCH OPERATION , THERE WAS SOME DELAY IN GETTING THE PROPERTY REGISTERED AND SUCH A DELAY MAY NOT BE HELD TO BE A VALID GROUND TO ARRIVE AT A NEGATIVE ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA 4 CONCLUSION AGAINST THE APPELLANT AND THE LEARNED A.O. OUGHT TO HAVE NOTICED THAT DISCHARGE OF A CONTRACTUAL OBLIGATION I S A MATTER CONNECTED TO THE CONTRACTING PARTIES AND HENCE MERELY BASED UPON THE GROUND THAT THERE WAS PASSAGE OF SOME TIME IN EFFECTING REGISTRATION OF THE IMPUGNED TRANSACTION, IT DOES NOT APPEAL REASONABLE TO FORM A VIEW THAT THERE WAS NO SUCH TRANSACTIO N AT ALL. 4. A REMAND REPORT WAS CALLED ON THESE WRITTEN SUBMISSIONS. THE ASSESSING OFFICER CONDUCTED THE NECESSARY ENQUIRY AND VERIFICATION IN THE LINES SUGGESTED BY THE CIT(A). HE HAS ALSO RECORDED THE STATEMENT OF V. MAHARAJ OF MODERN BUILDERS AND E XAMINED OTHER ASPECTS ALSO AND SUBMITTED THE REMAND REPORT TO THE CIT (A) . THE CIT (A) HAS EXAMINED THE REMAND REPORT IN THE LIGHT OF ASSESSEES CONTENTION BUT WAS NOT CONVINCED WITH THE ASSESSEES EXPLANATION AND CONFIRMED THE ADDITIONS. 5. NOW THE ASSE SSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT ASSESSEE AND HIS SONS WERE LIVING TOGETHER IN THE SAME HOUSE WHICH WAS SEARCHED BY THE REVENUE ON 8.2.2006. ADMITTEDLY ASSESSEE WAS NOT AVAILABLE AT HIS RESIDENCE AT THE TIME OF SEA RCH. THE SON OF THE ASSESSEE SHRI L. PULLA RAO WAS EXAMINED DURING THE COURSE OF SEARCH WITH REGARD TO THE CASH FOUND AT THE HOUSE AND L. PULLA RAO HA S ADMITTED THAT THIS CASH BELONGS TO HIM AS IT WAS RECEIVED FROM MODERN BUILDERS AS A SALE PROCEEDS OF HI S PROPERTY. THE ASSESSEE NEVER OWNED THIS CASH FOUND AT THE HOUSE. THE REVENUE HAS ALSO EXAMINED THE PARTNER OF THE MODERN BUILDERS WHO ADMITTED THIS AMOUNT GIVEN TO THE SON OF THE ASSESSEE TOWARDS SALE CONSIDERATION OF THE PROPERTY. THEY HAVE ALSO DIS CLOSED THE AVAILABILITY OF THE FUNDS OUT OF WHICH THIS AMOUNT WAS GIVEN TO THE SON OF THE ASSESSEES. THESE ASPECTS WERE NOT TAKEN INTO ACCOUNT BY THE REVENUE AUTHORITIES. THEY HAVE SIMPLY GONE ON THE PREMISE THAT SINCE THE CASH WAS FOUND AT THE RESIDENCE OF THE ASSESSEE, IT SHOULD BE ADDED IN THE HANDS OF THE ASSESSEE ONLY. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT ASSESSEE HAS TAKEN A STAND THAT THE CASH FOUND AT THE RESIDENCE BELONGS TO HIS SON WHO HAS RECEIVED THIS AMOUNT AS A SALE PROCE EDS AGAINST THE SALE OF THEIR PROPERTY. THE SONS OF THE ASSESSEE HAVE ALSO OWNED THIS CASH. IN THESE CIRCUMSTANCES, IF THE ASSESSING OFFICER IS NOT SATISFIED WITH THE EXPLANATIONS OF THE SON OF THE ASSESSEE, THE ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA 5 ADDITION CAN ONLY BE MADE IN THE HANDS OF THE SON AND NOT IN THE HANDS OF THE ASSESSEE WHO NEVER OWNED THIS CASH. BUT THE REVENUE WITHOUT BRINGING ANYTHING ON RECORD THAT THE CASH BELONG TO THE ASSESSEE MADE AN ADDITION IN THE HANDS OF THE ASSESSEE ONLY. THEREFORE, IT DESERVES TO BE DELETED. 6 . THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED THAT ASSESSING OFFICER HAS EXAMINED THE PARTNER OF THE MODERN BUILDERS FROM WHOM THE SONS OF THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED THE SAID AMOUNT OF CASH AND VARIOUS CONTRADICTIONS WERE POINTED OUT BY T HE A.O. IN THE STATEMENT OF MR. V. MAHARAJ, PARTNER OF MODERN BUILDERS AND L. PULLA RAO. THE A.O. HAS ALSO EXAMINED THE VERACITY OF THE SALE AGREEMENT AND ON VERIFICATION, IT WAS FOUND TO BE BOGUS DOCUMENT AS IT WAS NOT PURCHASED FROM THE STAMP VENDOR FRO M WHOM IT WAS CLAIMED TO HAVE BEEN PURCHASED. SINCE THE CASH WAS FOUND FROM THE ROOM OF THE ASSESSEE, THE REVENUE HAS RIGHTLY ADDED THE SAME IN THE HANDS OF THE ASSESSEE. BESIDES THIS, THE LD. D.R. HAS PLACED A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) . 7 . HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDER OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD, WE FIND THAT AT THE TIME OF THE SEARCH, ASSESSEE WAS NOT AVAILABLE AND THE SON OF THE ASSESSEE HAS OWNED THE CASH FOU ND IN HOUSE IN HIS STATEMENT RECORDED DURING THE COURSE OF SEARCH. THE SON OF THE ASSESSEE MR. L. PULLA RAO HAS CATEGORICALLY STATED THAT HE HAS RECEIVED THE SAID AMOUNT IN CASH FROM MR. V. MAHARAJ, PARTNER OF THE MODERN BUILDERS AND THE SAME WAS BROUGHT BY HIM IN EARLY HOURS ON 8.2.2006. THE REVENUE HAS CLAIMED THAT THIS STORY IS A CONCOCTED ONE BUT WE DONT AGREE TO THIS VIEW BECAUSE THE SON OF ASSESSEE HAS ADMITTED THE CASH IN HIS STATEMENT RECORDED AT THE FIRST INSTANCE DURING THE COURSE OF SEARCH. T HEREFORE, THE STATEMENT RECORDED AT THE FIRST INSTANCE DURING THE COURSE OF SEARCH CANNOT BE DISBELIEVED BECAUSE NOBODY CAN CONCOCT STORY IMMEDIATELY WHEN UNEXPECTED SEARCH IS CONDUCTED. MORE OVER, THE STATEMENT OF THE SON OF THE ASSESSEES WAS ALSO CORROB ORATED WITH THE STATEMENT OF V. MAHARAJ, PARTNER OF THE MODERN BUILDERS. THOUGH THERE MAY BE SOME CONTRADICTIONS IN THE STATEMENT BUT THAT CONTRADICTIONS DO NOT MAKE THE ENTIRE STATEMENT OF THE SON OF THE ASSESSEES AND THE PARTNER OF THE ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA 6 MODERN BUI LDERS W HO HAS GIVEN THIS CASH TO THE SON OF THE ASSESSEES , UNBELIEVABLE. THE STATEMENT OF MR. V. MAHARAJ, PARTNER OF MODERN BUILDERS WERE ALSO RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF REMAND PROCEEDINGS IN WHICH HE HAS EXPLAINED AS TO HOW AND WHEN THE CASH WAS GIVEN TO MR. L. PULLA RAO AND THE AVAILABILITY OF THE FUNDS IN ITS BOOKS OF ACCOUNTS. BUT THESE STATEMENTS WERE NOT ACCEPTED BY THE A.O. AND HE MADE THE ADDITIONS IN THE HANDS OF THE ASSESSEES WHO NEVER OWNED THE CASH FOUND DURING THE COURSE OF SEARCH. IT IS ALSO EVIDENT FROM THE R ECORD THAT PROPERTY WHICH WAS PUT UNDER SALE BELONG TO THE CHILDRENS OF THE ASSESSEES AND THE SONS OF THE ASSESSEES HAVE RECEIVED THE AFORESAID SUM AS A PART OF SALE CONSIDERATION. NOWHERE THE REVENUE HAS RECORDED THE STATEMENT OF THE ASSESSEE IN THIS REGARD. WHEN THE CASH FOUND DURING THE COURSE OF SEARCH IS OWNED BY SOME ONE IT SHOULD NOT BE ADDED IN THE HANDS OF THE SOME OTHER PERSON. IF THE REVENUE HAS ANY DOUBT IN THE STATEMENT OF THE PERSON WHO OWNED THE MONE Y AND THEY HAVE FORMED A VIEW THAT IT BELONGED TO SOME ONE ELSE, THE RIGHT COURSE IS THAT THEY SHOULD FRAME THE ASSESSMENT ON PROTECTIVE AND SUBSTANTIVE BASIS IN BOTH THE HANDS, SO THAT IT CAN FINALLY ASSESSED EITHER ONE HAND OR THE OTHER. BUT IN THE INST ANT CASE, THE REVENUE HAS NOT TAKEN ANY PAIN TO ASSESS THIS INCOME EVEN ON PROTECTIVE BASIS IN THE HANDS OF THE SON. WHEN THE CASH FOUND OWNED BY THE SON AND NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT IT BELONGS TO ASSESSEE, WE FIND NO JUSTIFICATIO N IN THE REVENUES ACTION TO TREAT THIS AMOUNT AS UNEXPLAINED IN THE HANDS OF THE ASSESSEE. WE THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION IN THE HANDS OF THE ASSESSEES. 8 . IN THE RESULT, THE APPEAL OF THE ASSE SSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 24.1 .20 1 1 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 24 TH JANUARY , 20 1 1 ITA 17/VIZ/09 L. RAMANADHAM, PIDUGURALLA 7 COPY TO 1 SRI LAGHUVARAPU RAMANADHAM, SAI MAN DHIR, JANAPADU ROAD, PIDUGURALLA, GUNTUR DIST., ANDHRA PRADESH 2 ACIT, CENTRAL CIRCLE, VIJAYAWADA 3 THE CI T, HYDERABAD 4 THE CIT (A) - I, HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVA TE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM