ITO, Wared-2(1), Hyderabad V. Shri Krishna Kishore Kuchipudi, Hyderabad

ITA 1805/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2840 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K SAI PRASAD
• Assessee Lawyers: AMISHA S GUPT
• Keywords: Unexplained cash credit; Earning of tax free income; Source of fund; Corroborative evidences
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, J UDICIAL MEMBER ITA NO. 1805/HYD/2012 ASSTT. YEAR : 2007-08. ITO, WARD- 2(1), HYDERABAD. V/S. SRI KRISHNA KISHORE KUCHIPUDI, HYDERABAD. PAN:ADOPK9347 B . (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. AMISHA S. GUPT DEPARTMENT BY : SHRI K. SAI PRASAD DATE OF HEARING 13 - 3 - 2013 DATE OF PRONOUNCEMENT 03-5-2013 . O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST ORDER DATED 26-06-2012 OF CIT (A), VIJAYAWADA PASSED IN APPEAL NO.142/CIT(A)/TR/VJA/10-11 PERTAINING TO THE ASSESSMENT YEAR 2007- 08. 2. THE DEPARTMENT HAS FILED THE FOLLOWING GROUNDS:- 1. THE DECISION OF THE CIT(A) IS ERRONEOUS IN LAW A ND ON FACTS. 2. THE CIT(A) ERRED IN GIVING A FINDI NG THAT UP TO 50% OF THAT ALLEGED COST OF IMPROVEMENT OF FLAT IS GENUINE, THOUGH THE ENTRIES MADE BY THE ASSESSEE ARE BOGUS AND WHICH A VIEW TO REDUC E THE TAX LIABILITY. 3. THE CIT(A) ERRED IN HOLDING THAT THE A SSESSING OFFICER HAS TO PROVE THE NEXUS BETWEEN EXEMPT INCOME AND THE INVES TMENT THOUGH SEC. 14A IS CLEARLY ATTRACTED IN THE PRESENT CASE. ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 2 4. THE CIT (A) ERRED IN LAW IN HOLDING TH AT THE TWO CREDITORS ARE GENUINE THOUGH SUCH CREDITORS WERE NEVER PRODUCED I N EITHER IN THE ASSESSMENT OR APPELLATE PROCEEDINGS NOR THEIR S OURCES HAVE BEEN VERIFIED. 5. THE CIT (A) ERRED IN DELETING THE ADDIT ION U/S 68 THOUGH CREDITWORTHINESS OF CREDITORS ISNOT ESTABLISHED. 6. ANY OTHER GROUND THAT MAY BE TAKEN AT T HE TIME OF THE HEARING. 3. GROUND NOS. 1 AND 6 ARE GENERAL IN NATURE AND HEN CE THEY DO NOT REQUIRE ANY ADJUDICATION. 4. IN GROUND NO.2, THE DEPARTMENT HAS CHALLENGED T HE ORDER OF THE CIT(A) RESTRICTING THE DISALLOWANCE MADE ON ACCOUNT OF EXPENDITURE INCURRED ON IMPROVEMENT OF THE PLOT TO RS.1,20,000/ -. 5. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSMENT YEAR UNDER DISPUTE HE FILED HIS RETURN OF INCOM E ON 31-10- 2007 DECLARING INCOME OF RS.7,49,406/-. ASSESSEES CASE WAS SE LECTED FOR SCRUTINY ASSESSMENT. DURING THE SCRUTINY ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DECLAR ED INCOME FROM SHORT TERM CAPITAL GAINS ON SALE OF FLAT AT RS.1,40 ,000/-. IT WAS FURTHER NOTICED BY THE ASSESSING OFFICER THAT WHILE COMPUT ING THE SHORT TERM CAPITAL GAINS THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.2,40,000/- TOWARDS COST OF IMPROVEMENT OF THE FLAT. IN RESPONSE TO THE QUERY MADE BY THE ASSESSING OFFICER, IT WAS STATED BY THE ASSESSEE THAT HE HAD PURCHASED THE FLAT ON 4-3-2005 FOR CONSIDE RATION OF RS.RS.5,50,000/-. AFTER PURCHASE OF FLAT THE ASSESSEE HAS SP ENT AN AMOUNT OF RS.2,40,000/- TOWARDS MARBLE FLOORING, WARD ROBE IN BED- ROOM, KITCHEN HALL, FALSE CEILING, CHANGING BATH-ROOM T ILES ETC. THE ASSESSING OFFICER ON EXAMINING THE CASH BOOK OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS SHOWN THE EXPENDITURE OF RS.2,40,00 0/- INCURRED TOWARDS IMPROVEMENT OF THE FLAT ON 12-5-2006 I.E, J UST PRIOR TO THE ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 3 SALE OF FLAT. THE ASSESSING OFFICER OBSERVING THAT THERE IS NO SUPPORTING EVIDENCE FOR THE EXPENDITURE INCURRED, DISALLOWED AN AMOUNT OF RS.2,40,000/-. 6. THE ASSESSEE CHALLENGED THE ADDITION BY PREFERRING AN APPEAL BEFORE THE CIT (A). THE CIT (A) ON CONSIDERING THE FACT THAT THE ASSESSEE HAS RECORDED THE EXPENDITURE INCURRED TOWARDS THE IMPROVEMENT OF THE FLAT IN THE BOOKS OF ACCOUNT WHICH W AS IMPOUNDED BY THE DEPARTMENT OPINED THAT IT CANNOT BE AN AFTERT HOUGHT OR FABRICATION OF THE BOOKS OF ACCOUNT. ACCORDINGLY, THE CI T (A) HELD THAT 50% OF THE EXPENDITURE CLAIMED TO BE REASONABLE , DIR ECTED THE ASSESSING OFFICER TO ALLOW EXPENDITURE ON IMPROVEMENT T O THE EXTENT OF RS.1,20,000/- WHILE RE-COMPUTING THE SHORT-TERM CAPITA L GAINS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS RECORDED THE EXPENDITURE INCURRED OF AN AMOUNT OF RS.2 ,40,000/- TOWARDS IMPROVEMENT MADE IN THE FLAT IN THE BOOKS OF ACCOUNT WHICH WAS IMPOUNDED BY THE DEPARTMENT IN THE COURSE OF SURVEY OPERATION. THEREFORE, ASSESSEES CLAIM OF INCURRING OF EXPENDITURE CAN NOT BE REJECTED OUTRIGHT. HOWEVER, REASONABLENESS OF SUCH EXPEND ITURE CERTAINLY CAN BE EXAMINED. CONSIDERING THE FACTS OF TH E CASE, WE ARE OF THE VIEW THAT THE CIT (A) WAS CORRECT IN RESTRICTING THE CLAIM OF EXPENDITURE TO RS.1,20,000/-. WE THEREFORE UPHOLD THE SAME AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. 8. GROUND NO.3 RELATES TO DELETION BY THE CIT (A) OF THE DISALLOWANCE MADE OF AN AMOUNT OF RS.1,19,749/- BY INVOKING TH E PROVISION OF SECTION 14A OF THE ACT. ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 4 9. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.1,19, 749/- AS DEDUCTION ON ACCOUNT OF INTEREST PAID ON LOANS TAKEN BY HIM. THE ASSESSING OFFICER AFTER VERIFYING THE DETAILS OF LOAN TAK EN AND THE DETAILS OF INTEREST PAID AND RECEIVED BY THE ASSESSEE NOTED THAT THE ASSESSEE HAD NO CAPITAL TO INVEST IN PROPERTIES, SHARES AND ADVA NCES OF LOANS. IT WAS FURTHER NOTED THAT THE ASSESSEE WAS TAKING UNSECURED L OANS EVERY YEAR WHICH AS ON 31-3-2007 STOOD AT RS.1,91,60,691/- A ND THE ASSESSEE WAS ALSO PAYING INTEREST ON THE SAID LOANS. SIMILA RLY, THE ASSESSEE IS ALSO ADVANCING LOANS WHICH AS ON 31-3-2007 AMOUN TED TO RS.27,08,232/- ON WHICH THE ASSESSEE HAD RECEIVED INTEREST OF RS.1,28,800/-. THE ASSESSING OFFICER FURTHER NOTED THAT N O INTEREST HAD BEEN RECEIVED FROM SRI T. RAMESH TO WHOM AN AMOUNT O F RS.15 LAKHS WAS ADVANCED AND FROM SRI T. CHALAPATHI RAO TO WHOM A N AMOUNT OF RS.11.4 LAKHS WAS ADVANCED. THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE EXPENDITURE INCURRED ON BORROWINGS A MOUNTING TO RS.1,19,749/- FOR INVESTING IN SHARES ETC., WHICH IS NOT I N RELATION TO THE INCOME NOT INCLUDIBLE IN TOTAL INCOME, IS NOT DEDUCTIB LE U/S 14A AND THEREFORE DISALLOWED THE SAME. THE ASSESSEE CHALLENGED TH E DISALLOWANCE IN APPEAL BEFORE THE CIT (A). BEFORE TH E FIRST APPELLATE AUTHORITY, THE ASSESSEE CONTESTING THE ADDITION MADE BY THE ASSESSING OFFICER SUBMITTED THAT THE ASSESSEE HAS PAID INTEREST ON T HE LOANS UTILISED FOR BUSINESS PURPOSE IN THE CURRENT YEAR WHEREA S THE INVESTMENTS IN SHARE RELATE TO THE PREVIOUS YEAR AND TH ERE IS NO FRESH INVESTMENT IN SHARES IN THE CURRENT YEAR. IT WAS SUBMITT ED THAT THERE BEING NO NEXUS BETWEEN INVESTMENT IN SHARES AND THE LO AN TAKEN, THE INTEREST CANNOT BE DISALLOWED U/S 14A OF THE ACT. THE CIT(A) ACCEPTING THE CONTENTION OF THE ASSESSEE HELD THAT IN ABSENCE OF NEX US BEING ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 5 ESTABLISHED BETWEEN THE INVESTMENTS MADE AND THE LOANS TAKEN, THE PROVISIONS OF SECTION 14A OF THE ACT CANNOT BE INVOKED. THE CIT(A) FURTHER HELD THAT WHEN THE INVESTMENTS WERE MADE IN T HE EARLIER YEAR AND THE LOANS WERE TAKEN IN THE CURRENT YEAR, THERE I S APPARENTLY NO NEXUS BETWEEN THE TWO. ACCORDINGLY, HE DELETED THE A MOUNT OF RS.1,19,749/-. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS THE CONTENTION O F THE LEARNED AR THAT NO INVESTMENT IN SHARES WAS MADE DURING THE FINAN CIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER DISPUTE. WHATEVER INVESTMENTS IN SHARES HAVE BEEN MADE WERE IN THE EARLIER ASSESSMENT Y EARS. IN THIS CONTEXT, THE LEARNED AR HAS REFERRED TO CERTAIN DO CUMENTS SUBMITTED IN THE PAPER BOOK. FROM THE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR THAT THE ASSESSING OFFICER HAS NOT ESTABL ISHED THE FACT THAT INVESTMENT IN SHARES WAS MADE DURING THE CURRENT Y EAR. THEREFORE, THERE BEING NO NEXUS BETWEEN THE INTEREST PAID BY THE ASSESSEE ON BORROWALS, CLAIMED TO HAVE BEEN MADE FOR BUSI NESS PURPOSE, AND THE INVESTMENTS IN SHARES NO DISALLOWANCE COULD BE MADE U/S 14A OF THE ACT. IN AFORESAID VIEW OF THE MAT TER, WE DO NOT FIND ANY INFIRMITY WITH THE ORDER OF THE CIT (A) WH ICH IS UPHELD. THE GROUND RAISED BY THE DEPARTMENT IS DISMISSED. 11. GROUND NOS. 4 AND 5 ARE WITH REGARD TO DELETION OF ADDITION OF RS.14,97,500/- U/S 68 OF THE ACT. 12. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD RECEIVED AD VANCES FROM TWO CREDITORS VIZ. SMT. A. PADMAJA RS.5,47,500/ - AND SRI B. ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 6 VASUDEVA RAO RS.9,50,000/- WHO ARE CLOSELY RELATED TO T HE ASSESSEE AND ARE STAYING IN THEIR NATIVE VILLAGES IN KRISHNA DI STRICT. IN SUPPORT OF THE ADVANCE RECEIVED THE ASSESSEE SUBMITTED CONFIRMATIONS FR OM THE CREDITORS ALONG WITH THEIR BANK STATEMENT. FROM THE INFORMATION SUBMITTED, THE ASSESSING OFFICER NOTED THAT THE CREDITORS A RE AGRICULTURISTS AND BOTH THE CREDITORS WERE IN POSSESSION OF BANK ACCOUNTS WITH ORIENTAL BANK OF COMMERCE, CHIRAG ALI LA NE, HYDERABAD. IT WAS FURTHER NOTED THAT THE ADDRESS GIVEN IN THE BAN K STATEMENT OF THE CREDITOR IS THE SAME AS THAT OF RESIDENTIAL ADDRESS O F THE ASSESSEE. ON EXAMINING THE BANK STATEMENT, THE ASSESSING OFFICER NO TED THAT CASH/CHEQUES WERE DEPOSITED INTO THE BANK ACCOUNTS JUST IMME DIATELY BEFORE OR ON THE DATE OF ADVANCING LOANS TO THE ASSESSEE. IT WAS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THE TWO CREDITORS W ERE NOT ONLY RELATED TO THE ASSESSEE BUT ALSO SUBSCRIBERS IN THE CHITS OF J EEVANMITRA CHIT FUND PVT. LTD., OF WHICH THE ASSESSEE IS THE MANAGI NG DIRECTOR. 13. WITH REGARD TO THE EXPLANATION SUBMITTED BY TH E ASSESSEE THAT THE CREDITORS HAD MADE THE ADVANCES OUT OF THE AMOUNT S RECEIVED ON LIFTING THE CHITS WHICH WERE CREDITED TO THEIR BANK ACCOU NTS, ON VERIFICATION OF DETAILS FURNISHED, THE ASSESSING OFFICER NO TED THAT THE SMT. PADMAJA RECEIVED AN AMOUNT OF RS.3,47,500 ON 31 -10-2006 ON BIDDING A CHIT AND SRI VASUDEVA RAO RECEIVED AN AMOUN T OF RS.2,99,500/- TOWARDS BIDDING OF A CHIT. THE ASSESSING O FFICER AFTER VERIFYING THE RELEVANT DETAILS OF THE CHIT SUBSCRIPTIONS MADE BY THE TWO CREDITORS AND BID DETAILS ALONG WITH THE RELEVANT REG ISTERS AND BOOKS OF ACCOUNTS OF JEEVAN MITRA CHIT FUND PVT. LTD. FOUND THA T THE MONTHLY SUBSCRIPTIONS ARE PAID BY THEM EVERY MONTH AT HYDERABAD IN CASH. IT WAS NOT CLARIFIED AS TO HOW THE PERSONS LIVING IN A REMO TE VILLAGE IN KRISHNA DISTRICT CAN COME AND DEPOSIT THEIR MONTHLY SUBSCRI PTIONS FOR ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 7 THEIR CHITS. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE COPULA NOT EXPLAIN THAT THE CHIT SUBSCRIPTIONS BEING REMI TTED BY THE SAID TWO PERSONS WERE OUT OF THEIR SOURCES. THE ASSESSING OFFI CER FURTHER NOTED THAT THE DETAILS OF THE CHITS REVEALED THAT SRI VASUDEVA RAO LIFTED CHIT OF RS.5 LAKHS IN THE VERY SECOND MONTH THAT TOO AT A LOSS AND ADVANCED THE BID AMOUNT OF RS.2,99,500 RECEIVED, AS LO AN TO THE ASSESSEE ON THE SAME DAY. SMT. A. PADMAJA ALSO AFTER LIF TING THE CHIT HAD IMMEDIATELY ADVANCED AS LOAN TO THE ASSESSEE. FROM THIS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ONLY PURP OSE OF THE INVESTMENT IN THE CHIT AND PURPORTED BIDDING OF THE SAME BY THE TWO CREDITORS IS ONLY TO ADVANCE LOANS TO THE ASSESSEE. THE ASSESSI NG OFFICER FURTHER OBSERVED THAT THE BANK STATEMENTS OF T WO CREDITORS DOES NOT REFLECT MANY TRANSACTIONS EXCEPT FOR THE CASH DEPOSITS A ND THE AMOUNTS RECEIVED FROM THE CHIT FUND COMPANY ON LIFTI NG THE CHITS WHICH ARE AGAIN ADVANCED TO THE ASSESSEE. THE ASSESSING OFFI CER WAS OF THE VIEW THAT THE BANK ACCOUNTS OF THE CREDITORS ARE MAINTAINED AT HYDERABAD ONLY FOR THE ASSESSEES CONVENIENCE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE FAILED TO PROVE THE V ERY SOURCE OF THE CASH DEPOSITS OR THE SUBSCRIPTIONS PAID BY THE CREDITORS TO THE CHIT FUND WHICH ARE ALSO PAID IN CASH. THE ASSESSING OFFICER FUR THER ALLEGED THAT ON ENQUIRY WITH THE ORIENTAL BANK OF COMMERCE W HERE TWO CREDITORS HAD THEIR ACCOUNTS IT WAS FOUND THAT THE ASSESSEE IS THEIR MANDATE HOLDER WHO CAN OPERATE THEIR ACCOUNTS, SIGN T HEIR CHEQUES AND DEPOSIT THEM ON THEIR BEHALF. ON THE BASIS OF THE AFORESAID FACTS, THE ASSESSING OFFICER CONCLUDED THAT THE MONTHLY INSTALMEN TS OF CHITS WERE SUBSCRIBED BY THE ASSESSEE IN THE NAMES OF HIS RELATIVE S SO AS TO LIFT THE CHITS TO MEET HIS REQUIREMENTS. ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 8 14. THE ASSESSING OFFICER RELYING UPON THE DECISION OF TH E SUPREME COURT IN CASE OF SUMATI DAYAL V/S. CIT (214 ITR 801) AND CIT V/S. DURGA PRASAD MORE (82 ITR 540) ULTIMATELY CAME TO A CONCLUSION THAT THE ASSESSEE HAS ADOPTED A COLORABLE DEVICE TO BRING IN H IS OWN MONEY IN THE FORM OF CHITS AND LOANS IN THE NAMES OF OTHER P ERSONS WHO ARE HIS CLOSE RELATIVES. ON THE AFORESAID ANALYSIS OF FACTS, THE ASSESSING OFFICER HELD THE CREDIT OF RS.14,97,500/- AS UNEXPLAINE D AND ADDED IT TO THE RETURNED INCOME U/S 68 OF THE ACT. THE ASSESSEE CHAL LENGED THE ADDITION BEFORE THE CIT (A). 15. IN COURSE OF APPEAL HEARING BEFORE THE CIT(A), IT WAS CONTENDED BY THE ASSESSEE THAT HE HAS SUFFICIENT SOURCE FOR HIS MONTHL Y CHIT CONTRIBUTIONS AND DO NOT HAVE TO RESORT TO INVESTMENT THROUGH BENAMI. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS HAVING A CRED IT BALANCE OF RS.73,34,530/- IN JEEVANMITRA FINANCE CORPORATION WHI CH IS AVAILABLE TO HIM INTEREST FREE AND THERE IS NO NEED TO RESORT TO CON TRIBUTING THE CHITS IN BENAMI SINCE THERE IS SUFFICIENT SOURCE AVAILABLE. I T WAS FURTHER CONTENDED THAT NO INCRIMINATING MATERIAL WAS FOUND SUCH AS BOGUS MEMBERSHIP ETC., DURING THE SURVEY OPERATIONS CONDUCTED B Y THE DEPARTMENT. 16. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE WAS CONVINCED WITH THEM AND OBSERVED THAT BOTH THE LOAN CREDITORS HAVE AGRICULTURAL LANDS IN COASTAL AREA WHICH IS KNOWN AS HIGH YIELDING FERTILE AGRICULTURAL LAND. IT WAS FURTHER OBSERVED TH AT THE AMOUNTS ARE RECEIVED FROM THE CHIT FUND COMPANY ON CHIT AUCTIONS THR OUGH BANKING CHANNEL BY THE CREDITORS AND HAS BEEN ADVANCED TO THE ASSESSEE WHO OTHERWISE HAD SUFFICIENT SOURCE OF FUND AT HIS DISPOSAL. THE CIT (A) WAS OF THE VIEW THAT THE SOURCE OF THE LOAN HAVING COME FR OM CHIT AUCTION IF THE ASSESSING OFFICER HAD DOUBT, THE INFORMATION OUGH T TO HAVE BEEN ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 9 PASSED TO THE ASSESSING OFFICER OF THE LOAN CREDITORS FOR EX AMINATION THEREOF AND BRINGING THE SAME TO TAX AT THE HANDS OF THE CREDITORS, IF NECESSARY. THE CIT(A) HELD THAT THE SINCE THE ASSESSEE H AS RECEIVED THE LOAN THROUGH BANKING CHANNELS FROM THE PERSONS WHO HAVE SOURCE IN THE FORM OF CHIT AUCTION MONEY, THE ADDITION OF RS. 14,97,500/- AS UNEXPLAINED CREDIT U/S 68 OF THE ACT CANNOT BE MADE. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO DELETE THE SAME. 17. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTIN G THE REASONING OF THE ASSESSING OFFICER SUBMITTED THAT THE MATE RIALS ON RECORD CLEARLY REVEALED THAT THE CREDITOR DID NOT HAVE SUFFICIENT SOURCE TO INVEST IN THE CHITS AND THEREAFTER LIFT THE SAME FOR THE PURPOSE OF ADVANCING LOAN TO THE ASSESSEE. THE LEARNED DEPARTMENT AL REPRESENTATIVE SUBMITTED THAT THE BANK ACCOUNTS OF THE CREDITORS REVEALED THE FACT THAT APART FROM THE AMOUNT RECEIVED FROM THE CHIT, THERE IS NO OTHER TRANSACTION. 18. THE LEARNED AR FILED WRITTEN SUBMISSIONS WHEREIN IT IS CONTENDED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THE FACT T HAT THE CREDITS IN THE BANK ACCOUNTS OF THE CREDITORS ARE EITHER THE REP AYMENT OF THE EARLIER LOAN BY THE ASSESSEE HIMSELF OR CHIT AUCTION PROCEE DS. THE CHIT LEDGER ACCOUNT COPIES FILED ESTABLISH THE FACT THAT THE CR EDITORS SOURCES ARE CHIT AUCTION PROCEEDS RECEIVED THROUGH BANKING CHANN ELS. IT WAS FURTHER STATED THAT THE SURVEY OPERATIONS CONDUCTED IN THE CASE OF THE ASSESSEE AS WELL AS CHIT FUND COMPANY DID NOT REVEAL ANY BOGUS CHIT TRANSACTIONS AND THE ASSESSING OFFICER HAS ALSO NOT BROUGHT ANY MATERIAL ON RECORD TO PROVE THE TRANSACTION IS NOT GENU INE. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER FAILED TO AP PRECIATE THE FACT THAT OUT OF RS.5,47,500/- RECEIVED FROM A. PADMAJA D URING THE YEAR, ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 10 AN AMOUNT OF RS.2 LAKHS WAS OUT OF THE EARLIER REPAYME NT MADE BY THE ASSESSEE AND FRESH CREDIT IS OF RS.3,47,500 WHICH IS OUT OF CHIT AUCTION. IN THIS CONTEXT, THE LEARNED AR REFERRED TO THE CONFIR MATION LETTER DATED 21-8-2009 OF SMT. PADMAJA AND THE COPY OF THE CHIT A CCOUNT WITH JEEVAN MITRA CHIT FUND PVT. LIMITED WHICH ARE AT PA GES 29 AND 30 OF THE PAPER BOOK. THE LEARNED AR FURTHER SUBMITTED THAT SO FAR AS LOAN OF RS.9,50,000/- FROM SRI B. VASUDEVA RAO IS CONCERNED RS.6,50,000 WAS OUT OF EARLIER REPAYMENT MADE BY THE ASSESSEE AND T HE NET FRESH CREDIT IS OF RS.3 LAKHS WHICH IS OUT OF CHIT AUCTION. IN THIS CONTEXT, THE LEARNED AR REFERRED TO THE LETTER DATED 3-8-2009 OF SRI B. VASUDEVA RAO ADDRESSED TO THE ASSESSING OFFICER AND ALSO THE COPY OF THE BANK ACCOUNT OF B. VASUDEVA RAO. IT WAS FURTHER SUBMITTED T HAT SON OF SMT. PADMAJA AT THE RELEVANT TIME WAS PURSUING HIS STUDIES AT HYDERABAD AND OTHER CREDITOR B. VASUNDEVA RAO WAS STAYING AT HYDER ABAD FOR HIS WIFES MEDICAL TREATMENT. HE FURTHER SUBMITTED THAT T HOUGH ALL THESE FACTS WERE STATED IN THE WRITTEN SUBMISSIONS MADE BEFORE THE FIRST APPELLATE AUTHORITY AND A COPY OF WHICH WAS SENT TO THE ASSESSING OFFICER CALLING FOR A REMAND REPORT, THE ASSESSING OFFICER WAS TOTALLY SILENT ON THE SUBMISSIONS MADE BY THE ASSESSEE. HE FURTHER SUB MITTED THAT THERE IS NO BAR IN RECEIVING LOAN FROM RELATIVES. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE ASSESSM ENT ORDER, IT IS QUITE CLEAR THAT THERE IS NO DISPUTE WITH REGARD TO TH E IDENTITY OF THE CREDITORS. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT BOT H THE CREDITORS ARE AGRICULTURISTS HAVING THEIR OWN AGRICULTUR AL LANDS. IT IS ALSO A FACT ON RECORD THAT BOTH THE CREDITORS HAVE CONFIRMED OF HAVING ADVANCED THE LOANS TO THE ASSESSEE AND ALSO EXPLAINED THE SOURCE OF SUCH ADVANCES. IT IS ALSO A FACT ON RECORD THAT THE ASSESSING OFFICER ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 11 HAS NOT DISPUTED THE FACT THAT SMT. A. PADMAJA HAD LIFTED A CHIT AND RECEIVED A BID AMOUNT OF RS.3,47,500/- FROM JEEVAN MI TRA CHIT FUND PVT. LIMITED AND B. VASUDEVA RAO HAD LIFTED A CHIT A ND RECEIVED A BID AMOUNT OF RS.2,99,500/- FROM JEEVAN MITRA CHIT FUND PVT. LIMITED WHICH WERE DEPOSITED INTO THE BANK ACCOUNT OF THE CREDIT OR AND SUBSEQUENTLY ADVANCED AS LOAN TO THE ASSESSEE THROUGH CHEQU ES. IT WAS FURTHER EXPLAINED THAT APART FROM THE CHIT AMO UNT RECEIVED, THE CREDITORS HAD ADVANCED THE LOAN OUT OF EARLIER REPAYME NTS RECEIVED FROM THE ASSESSEE WHICH ARE DEPOSITED TO THE BANK ACCOUNTS OF THE CREDITOR. ON PERUSAL OF THE BANK ACCOUNTS OF THE CREDITO RS WHICH ARE SUBMITTED IN THE PAPER BOOK, IT IS SEEN THAT THERE ARE REGULAR TRANSACTIONS IN THE BANK ACCOUNT AND THE RECORDS OF JE EVAN MITRA CHIT FUND PVT. LIMITED ALSO REVEALS THE FACT THAT BOTH THE CREDITORS ARE REGULAR SUBSCRIBERS TO THE CHIT. FROM THE AFORESAID FACTS, IT IS CLEAR THAT ASSESSEE HAS SATISFACTORILY DISCHARGED THE BURDEN OF PROVING ALL THE THREE INGREDIENTS OF THE CREDIT I.E., IDENTITY OF THE CREDITOR, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE CREDITOR WHICH WAS AL SO NOT DOUBTED BY THE ASSESSING OFFICER. THE SOURCE FROM WHICH THE LOAN W AS ADVANCED BY THE CREDITOR WAS ALSO SATISFACTORILY EXPLAINE D AND WHICH ARE ALSO BEEN CONFIRMED BY THE CREDITORS AND SINCE THE ENTIRE TRANSACTION OF ADVANCEMENT OF LOAN HAS BEEN DONE THROUG H BANKING CHANNELS, THE GENUINENESS OF THE TRANSACTION ALSO CANNOT BE DOUBTED. AS IT APPEARS FROM THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS TREATED THE AMOUNT AS UNEXPLAINED MERELY ON DOUBTS AN D SUSPICIONS. WHEN THE ASSESSEE HAS PROVED THE FACT THAT THE SOURCE OF L OAN WAS OUT OF BID AMOUNT RECEIVED FROM THE CHIT AND EARLIER REPA YMENT MADE TO THE CREDITORS AND WHICH WERE DEPOSITED IN THE BANK ACCOU NT OF THE CREDITORS, THE ASSESSEE CANNOT FURTHER BE ASKED TO PROVE T HE SOURCE OF ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 12 CHIT SUBSCRIPTIONS MADE BY THE CREDITORS. THE ASSESSEE CERTAIN LY CANNOT BE ASKED TO PROVE THE SOURCE OF SOURCE. IT IS ALSO A FACT T O TAKE NOTE OF THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SU RVEY OPERATION CONDUCTED ON THE ASSESSEE AND THE CHIT COMPANY WHICH COULD P ROVE THE FACT THAT THE ASSESSEE WAS MAKING BENAMI INVESTMENTS IN CH ITS. IN AFORESAID VIEW OF THE MATTER, WE ARE OF THE OPINION THAT THE ADDITION MADE U/S 68 OF THE ACT AS UNEXPLAINED CASH CREDIT CANNOT B E SUSTAINED. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT (A) AND D ISMISS THE GROUND RAISED BY THE DEPARTMENT. 20. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 3 RD MAY, 2013 . SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 3 RD MAY, 2013 JMR* COPY FORWARDED TO: 1. 2. 3. 4. ITO, WARD-2(1), ROOM NO.837, C- BLOCK, 8 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. SRI KRISHNA KISHORE KUCHIPUDI, ROOM NO.6 & 62, RAGHAVA RATNA TOWERS, CHIRAG ALI LANE, ABIDS, HYDERABAD. CIT (A), VIJAYAWADA. CIT CONCERNED, HYDERABAD. 5. THE DR B BENCH ITAT, HYDERABAD. ITA NO.1805 OF 2012 KRISHNA KISHORE KUCHIPUDI,HYD. 13