C M Ramesh, Hyderabad V. DCIT., Circle-3(1), Hyderabad, Hyderabad

ITA 1779/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0307 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 26-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Loose papers
• Section: 147

Judgement Text

ITA NO.1779 OF 2014 CM RAMESH HYDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SMT.ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1779/HYD/2014 (ASSESSMENT YEAR: 2008-09) SHRI C.M. RAMESH HYDERABAD PAN-ACYPC 8722 B VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P. MURALI MOHAN RAO FOR REVENUE : SHRI RAJAT MITRA, DR DATE OF HEARING : 27.07.2015 DATE OF PRONOUNCEM ENT : 29 .07.2015 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT (A)-IV, HYDERABAD, DATED 12.09.2014. THE ONLY ISSUE IN THE APPEAL IS WITH REFERENCE TO ESTIMATION OF INCOME AT RS.26,90,783 ON THE BASIS OF CERTAIN LOOSE SHEETS IMPOUNDED IN T HE COMPANYS PREMISES. 2. BRIEFLY STATED, ASSESSEE IS MANAGING DIRECTOR OF A COMPANY CALLED M/S RITWIK PROJECTS PRIVATE LIMITED. IN THE COURSE OF SURVEY IN THE SAID PREMISES ON 4.7.2011, TWO LOOSE SHEETS WERE FOUND AND IMPOUNDED AS PART OF OTHER LOOSE SHEETS F OUND IN THE PREMISES. ON VERIFICATION OF THE DOCUMENTS, AO WAS OF THE OPINION THAT THE DOCUMENTS PERTAINS TO SHRI C.M. RA MESH INVESTMENTA AND INTEREST CALCULATION AND ACCORDINGL Y INITIATED PROCEEDINGS U/S 147 TO ASSESS THE INCOME FOR A.Y 20 08-09. THE SATISFACTION NOTE RECORDED HAS BEEN EXTRACTED BY TH E LD CIT (A) IN PARA NO.5.1 WHICH DOES NOT REQUIRE ANY FRESH EXTRAC TION. SUFFICE TO SAY THAT ON THE BASIS OF THE REASONS RECORDED TH EREIN, PROCEEDINGS U/S 147 WERE INITIATED. ITA NO.1779 OF 2014 CM RAMESH HYDERABAD PAGE 2 OF 5 3. IN THE COURSE OF ASSESSMENT AO ARRIVED AT UNDISC LOSED INTEREST ACCRUED ON THE BASIS OF TWO DOCUMENTS (PA GE NOS.44 AND 45) TO DETERMINE THE INCOME RECEIVED BY ASSESSE E DURING THE YEAR AT 2% ON THE OUTSTANDING PRINCIPLES OF RS.1,12 ,11,595, AT RS.26,90,783. IT WAS THE SUBMISSION OF THE ASSESSEE THAT NEITHER DOCUMENTS PERTAIN TO HIM, NOR MADE ANY INVESTMENT ON INTEREST TO ANY COMPANY. HOWEVER, AO ON THE BASIS OF THE DOC UMENTS DEYERMINED THE ACCRUED INTEREST INCOME AND BROUGHT TO TAX. THE LD CIT (A) CONFIRMED THE SAME FOR THE SAME REASONS AS THE SAID DOCUMENTS WERE IMPOUNDED IN THE COMPANYS HANDS AND PERTAIN TO ASSESSEE. 4. CONTENDING THE OBSERVATIONS OF THE AO AND THE CI T (A), IT WAS THE SUBMISSION OF THE LD COUNSEL THAT PAGE NO.4 6 IN WHICH CERTAIN TRANSACTIONS OF RAYALASEEMA ENTERPRISES WER E RECORDED DOES NOT PERTAINS TO ASSESSEE AS THE ASSESSEE HAS N OT ADVANCED ANY FUNDS TO ANYBODY AS CONTENDED BY THE REVENUE. M OREOVER, EVEN THOUGH PAGE NOS. 44 AND 45 CONTAIN C.M. RAMES H INVESTMENT AND INTEREST CALCULATION, IT WAS SUBMIT TED THAT THERE IS NO BASIS FOR ABOVE CALCULATION AND WORKING OF IN TEREST. MOREOVER, EVEN IN THE COURSE OF SURVEY, NO STATEMEN T WAS RECORDED PERTAINING TO THESE THREE DOCUMENTS AND AS SESSEE WAS NEVER ASKED ANY QUESTIONS AT THE TIME OF SURVEY. HE ALSO SUBMITTED THAT IN A.Y 2009-10, WHICH WAS RELEVANT Y EAR OF THE SURVEY, THE AO DID NOT MAKE ANY ADDITION OF ANY INT EREST AMOUNT, EVEN THOUGH THE SAID DOCUMENTS INDICATE A C ALCULATION OF INTEREST UPTO 31.03.2009. IT WAS CONTENDED THAT WITHOUT ANY SUPPORT EITHER FROM THE ASSESSEES OWN STATEMENTS O R DOCUMENTS, OR BANK ACCOUNT, THESE DOCUMENTS ARE DUM B DOCUMENTS WHICH SHOULD NOT BE GIVEN ANY CREDIT. IT WAS FURTHER SUBMITTED THAT ASSESSEE CLEARLY STATED BEFORE THE A O THAT THEY ARE NOT DOING ANY MONEY LENDING BUSINESS AND HE WOU LD NOT ADVANCED AN AMOUNT OF RS.1,12,11,595 ON INTEREST T O M/S RAYAL SEEMA ENTERPRISES AS CONTENDED BY THE REVENUE. BEIN G A PUBLIC PERSON, MANY PEOPLE WOULD HAVE COME AND DROPPED DOC UMENTS THERE AND ASSESSEE COULD NOT EXPLAIN TO WHOM THE DO CUMENTS PERTAINS TO. FURTHER IT WAS CONTENDED THAT THESE DO CUMENTS WERE FOUND IN THE PREMISES OF RITWIK PROJECTS (P) LTD AN D CANNOT BE RELATED TO THE ASSESSEE. IT WAS FURTHER CONTENDED T HAT ASSESSEE ITA NO.1779 OF 2014 CM RAMESH HYDERABAD PAGE 3 OF 5 FOLLOWS CASH SYSTEM OF ACCOUNTING BEING AN INDIVIDU AL AND THERE IS NO EVIDENCE THAT THE AMOUNT WAS RECEIVED DURIN G THE YEAR. THEREFORE, BRINGING TO TAX ON ACCRUAL BASIS IS ALSO NOT CORRECT. 5. THE LD DR HOWEVER, SUBMITTED THAT THERE IS CLEAR EVIDENCE ON THE STATEMENT ITSELF THAT THE DOCUMENTS PERTAINS TO SHRI C.M. RAMESH AND THE CAPTION ITSELF INDICATES C M RAMESH INVESTMENT AND INTEREST CALCULATION. HE SUPPORTED T HE ORDERS OF THE AO AND THE LD CIT (A). 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE DOCUMENTS. PAGE NOS. 44 AND 45 PERTAINS TO INVESTM ENT FROM 10.06.2001 YEAR-WISE CALCULATION I.E. FIRST TABLE I NDICATING THAT THE AMOUNT ADVANCED TO 31.03.2002 AND CALCULATION O F INTEREST ON DAY TO DAY BASIS (NO. OF DAYS) UPTO 31.03.2009. THUS IN THE YEAR ENDING 31.03.2002, AMOUNT ADVANCED WAS TAKEN A T RS.33,03,270 AND THE INTEREST WAS CALCULATED AT RS. 60,79,996. THE NEXT TABLE-B INDICATES ADVANCE OF RS.21,07,000 FOR THE YEAR ENDING 31.03.2003 AND CALCULATION OF INTEREST AT RS .35,12,819 UPTO 31.03.2009. LIKEWISE, TABLE-C FOR THE YEAR END ING 31.03.2009 CALCULATES PRINCIPLES AT RS.37,09,225 AN D INTEREST AT RS.51,01,033. FOR THE YEAR ENDING 31.03.2005 IN TAB LE-D, THE PRINCIPLES WAS TAKEN AT RS.21,01,100 AND INTEREST A T RS.24,94,003. THUS, AN AMOUNT OF RS.1,12,11,595 AS PRINCIPLE AND THE INTEREST WAS CALCULATED AT RS.171,87,851 TO TALLING TO AMOUNT OF RS.283,99,446. THIS AMOUNT WAS CARRIED OV ER INTO PAGE NO.46 AND SHOWN RECEIPTS AT RS.99,80,822 TO IN DICATE OUTSTANDING BALANCE AT RS.184,18,624. AS FAR AS THE RECEIPTS OF RS.99,80,822 ARE CONCERNED, THERE IS A SEPARATE TAB LE IN PAGE NO.46 WITH CAPTION OF RAYAL SEEMA ENTERPRISES RECE IVABLE AMOUNT AND INTEREST CALCULATION. THE PRINCIPLES AM OUNT WAS SHOWN AT RS.50.00 LAKHS AND INTEREST FROM 27.01.200 5 TO 31.03.2009 WAS TAKEN ON RS.25.00 LAKHS AND FROM 14. 02.2005 TO 31.03.2009 ON ANOTHER RS.25.00 LAKHS AT RS.49,80,82 2. THUS, THE PRINCIPLE RS.50.00 LAKHS AND INTEREST OF RS.49, 80,822 TOTALLING RS.99,80,822 WAS REDUCED FROM THE PRINCIP LE AND INTEREST CALCULATED IN OTHER TWO PAGES. AO MAY BE C ORRECT IN COMING TO A CONCLUSION THAT THESE TWO SETS OF DOCUM ENTS ARE INTER-RELATED. HOWEVER, WHAT WE COULD NOT UNDERSTAN D IS HOW AO COULD DETERMINE THE AMOUNT AS ADVANCED BY ASSESSEE AND ASSESS ITA NO.1779 OF 2014 CM RAMESH HYDERABAD PAGE 4 OF 5 ACCRUED INTEREST IN THIS YEAR. AS SEEN FROM THE ORD ER FOR A.Y 2009-10, THERE IS NO ADDITION OF INTEREST IN THAT YEAR BY THE AO IN THE SCRUTINY ASSESSMENT COMPLETED U/S 143(3). IT IS TO BE NOTED THAT THE SURVEY WAS CONDUCTED ON 4.7.2011 AND THAT THE ASSESSMENT HAS BEEN COMPLETED ON 26.12.2011 I.E. IM MEDIATELY AFTER 5 MONTHS OF DATE OF SURVEY. AO DID NOT MAKE A NY ADDITION INSPITE OF HAVING THE DOCUMENTS, WHICH INDICATED TH AT INTEREST WAS CALCULATED UPTO 31.03.2009 RELEVANT FOR A.Y 200 9-10. THIS INDICATES THAT THE AO HAS NOT CONSIDERED THE DOCUME NTS AS VALID DOCUMENTS SO AS TO BRING IT TO TAX INTEREST CALCULA TED ON CERTAIN NOTIONAL METHOD. THEREFORE, WE ARE OF THE OPINION T HAT THESE DOCUMENTS ARE DUMB DOCUMENTS. 7. NOT ONLY THAT AO HAS NEITHER CO-RELATED THE SAID TRANSACTIONS WITH EITHER RAYAL SEEMA ENTERPRISES OR WITH ANY OF THE BOOKS OR BANK ACCOUNT OF THE ASSESSEE. JUST BEC AUSE CERTAIN DOCUMENTS WERE SEIZED, THAT TOO IN COMPANYS PREMIS ES, THEY CANNOT BE ATTRIBUTED TO THE ASSESSEE UNLESS THE TRA NSACTIONS INDICATES UNACCOUNTED TRANSACTIONS OF THE ASSESSEE. EVEN THE INTERPRETATION GIVEN BY THE AO ABOUT THE PRINCIPLE AMOUNT IS NOT CORRECT. EVENTHOUGH PAGE NO.44 AND 45 INDICATES THE PRINCIPLE AMOUNT AT RS.112,11,595, IN PAGE NO.46, AMOUNT OF R S.50.00 LAKHS STATED TO BE PRINCIPLE WAS NOT BEEN CONSIDERE D, EVEN THOUGH THAT TABLE ALSO INDICATE CALCULATION OF INTE REST UPTO 31.03.2009. ASSESSEES CONTENTION THAT NOTIONAL/ A CCRUED INTEREST CANNOT BE BROUGHT TO TAX IN THE YEAR UNDER CONSIDERATION AS ASSESSEE IS MAINTAINING BOOKS OF ACCOUNTS ON REC EIPT BASIS HAS VALIDITY. IT IS AN ADMITTED FACT THAT THE INTER EST WAS NOT RECEIVED IN THE YEAR ENDING 31.03.2008 AS THE INTER EST WAS CALCULATED UPTO 31.03.2009. THEREFORE, ON THAT REAS ON ALSO, THE INTEREST CANNOT BE BROUGHT TO TAX AS IT WAS NOT REC EIVED. MOREOVER AS SEEN FROM THE REASONS FOR REOPENING, AS EXTRACTED IN CIT (A) AT PARA 5.1, AO HIMSELF RECORDS THAT AGAIN ST ITEM NO.4, PAGE NO.46 RAYAL SEEMA ENTERPRISES RECEIVABLE AMOUN T AND THE INTEREST CALCULATION IS AT RS.2% FOR THE PERIOD 27. 01.2005 TO 31.03.2009 IN THE BREAK UP GIVEN AND RS.99,80,822 DATE OF RECEIPT NOT MENTIONED. WHEN THE DATE OF RECEIPT ITS ELF IS NOT KNOWN, HOW THE AMOUNT CAN BE BROUGHT TO TAX IN THE RELEVANT YEAR, WITHOUT ESTABLISHING WHETHER THE TRANSACTIONS PERTAIN TO ASSESSEE OR NOT IS NOT EXPLAINED. ITA NO.1779 OF 2014 CM RAMESH HYDERABAD PAGE 5 OF 5 8. BE THAT AS IT MAY, WE ARE NOT CONVINCED WI TH THE ACTION OF THE AO IN BRINGING TO TAX THE INTEREST AS CALCULATE D IN THE PAGES WITHOUT EITHER ESTABLISHING WHETHER ASSESSEE HAS AD VANCED MONEYS AND IF SO WHETHER AMOUNT ADVANCED WAS RS.112 ,11,595 OR RS.162,11,595 AND FURTHER WITHOUT CO-RELATING RA YALASEEMA ENTERPRISES, TO WHICH ATLEAST THERE IS SOME IDENTIT Y. IN PAGE NO.44 AND 45, THERE IS NO IDENTITY OF CONCERN WHERE THE INVESTMENTS WERE MADE AND WHO IS BEARING THE INTERE ST BURDEN. WE ARE NOT SURE WHETHER THE CALCULATION OF INTEREST IS CORRECT OR NOT, AS IT SEEMS THEY ARE CALCULATED NUMBER OF DAYS BASIS AT RS.2%, WHETHER IT IS PER MONTH OR PER DAY OR PER YE AR BASIS IS ALSO NOT CLEAR. SINCE AO HAS NOT DONE ANYTHING TO E STABLISH THAT THE FUNDS WERE INDEED INVESTED BY SHRI C.M. RAMESH AND ALSO THE FACT THAT IMMEDIATELY AFTER SURVEY, AO HAS NOT BROUGHT ANY AMOUNT TO ASSESSMENT IN A.Y 2009-10 TO INDICATE THA T THE DOCUMENTS ARE DUMB DOCUMENTS, WE CANNOT APPROVE TH E ACTION OF THE AO IN BRINGING PART OF THE AMOUNT THIS YEAR AS INTEREST ACCRUED. FOR THE REASONS DISCUSSED ABOVE, ASSESSEE S GROUNDS ARE ALLOWED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. S D/ - S D/ - (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH JULY, 2015. VNODAN/SPS COPY TO: 1. SHRI C. RAMESH, C/O P. MURALI & CO, CAS, 6-3-655/2/ 3 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 500082 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 3(1) HYDERAB AD 3. CIT(A) IV HYDERABAD 4. CIT III HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER