Sri P Vithal Raju, Tanuku V. The ACIT, Central Cirlce, Rajahmundry

ITA 186/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50138 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH L PETER
• Keywords: Unexplained expenditure
• Section: 69C

Judgement Text

ITA NO.186 TO 189 OF 10 P. VITHAL RAJU, TANUKU IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 186 TO 189 /VIZAG/ 20 10 ASSESSMENT YEAR : 2003 - 04 TO 2006 - 07 DR. P. VITHAL RAJU TANUKU VS. ACIT CENTRAL CIRCLE RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AAVPV 3883B APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) ORDER PER BENCH:- THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAIN ST THE CONSOLIDATED ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YE AR 2003-04 TO 2006-07 ON COMMON GROUNDS THAT THE CIT(A) HAS ERRED IN SUSTAIN ING THE ADDITION MADE U/S 69C OF THE I.T. ACT. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT FOR THE ASSESSMENT YEAR 2003-04 TO 2006-07, ON VERIFICATION OF THE BANK ACCOUNT OF THE ASSESSEE, IT WAS NOTICED BY THE A.O. THAT THE A SSESSEE HAS OBTAINED LOAN FROM APSFC OF RS.25 LAKHS IN 2002. THE SAID LOAN A LONG WITH INTEREST AMOUNTING TO RS.27,88,496/- WAS REPAID DURING THE F INANCIAL YEAR 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003-04. REPAYMENT OF THE LOAN WAS MADE OUT OF THE LOAN OF RS.15 LAKHS OBTAINED FROM INDIAN BANK, TANUKU. THE REPAYMENT OF THE INDIAN BANK LOAN WAS ALSO MADE THR OUGH A MONTHLY INSTALMENT OF RS.32,000/- INCLUDING INTEREST PORTIO N. IT WAS ALSO NOTICED BY THE A.O. THAT ASSESSEE HAS NOT REFLECTED IN HIS BOO KS OF ACCOUNTS EITHER THE ACCEPTANCE OF THE ABOVE LOANS OR THE REPAYMENT OF T HE SAID LOANS. THE A.O. ACCORDINGLY TREATED THE REPAYMENT OF LOANS AS UNEXP LAINED EXPENDITURE U/S 69C OF THE ACT AND ADDED A SUM OF RS.13,76,236/- TO THE TOTAL INCOME OF THE ASSESSEES FOR A.Y. 2003-04 AND SUM OF RS.3,84,000/- EACH IN A.Y. 2004-05 TO 2006-07. THE ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A) WITH THE ITA NO.186 TO 189 OF 10 P. VITHAL RAJU, TANUKU 2 SUBMISSION THAT THE ASSESSEE HAS BORROWED FROM THE SAID FINANCIAL CORPORATION A SUM OF RS.25 LAKHS FOR A PARTICULAR P URPOSE BUT HE HAS NOT UTILIZED THESE FUNDS AND KEPT THE SAID FUNDS WITH H IM. THE SAID AMOUNT WAS UTILIZED IN REPAYMENT OF THE LOAN. THEREFORE, IT W AS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES. IN SUBSEQUENT YEARS FOR A.Y. 2005-06 AND 2006-07 THE REPAYMENT WAS RECORDED IN THE BOOKS OF ACCOUNTS, THEREFORE, NO ADDITION IN THOSE YEARS IS CALLED FOR. IT WAS ALSO CONTENDED BEFORE THE CIT(A) THAT ASSESSEE HAS OBTAINED A LOAN OF RS.15 LAKHS FR OM INDIAN BANK IN THE ASSESSMENT YEAR 2003-04 AND THE SAID LOAN WAS UTILI ZED FOR THE REPAYMENT OF LOAN TAKEN FROM APSFC AS WELL AS THE ANNUAL REPAYME NT OF RS.3,84,000/-. CIT(A) RE-EXAMINED THE CONTENTIONS OF THE ASSESSEE BUT WAS NOT CONVINCED WITH IT AND HE CONFIRMED THE ADDITION. 3. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS AS RAISED BEFORE LOWER A UTHORITIES. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE F ACT THAT UNDISPUTEDLY THE ASSESSEE HAS OBTAINED A LOAN FROM APSFC OF RS.25 LA KHS IN FINANCIAL YEAR 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003-04. T HIS LOAN WAS REPAID WITHIN THE SAME FINANCIAL YEAR. IT IS ALSO AN ADMI TTED FACT THAT OUT OF THE BORROWED FUNDS OF RS.25 LAKHS, ASSESSEE HAS NOT ACQ UIRED ANY TANGIBLE ASSETS. THEREFORE, THE ENTIRE AMOUNT MUST BE LYING WITH THE ASSESSEES WHICH WAS UTILIZED FOR REPAYMENT OF THE LOAN. IT IS ALSO EVIDENT FROM THE RECORD THAT ASSESSEE HAS ALSO OBTAINED A LOAN OF RS.15 LAKHS FR OM THE INDIAN BANK WHICH WAS ADMITTEDLY UTILIZED FOR REPAYMENT OF THE LOAN O F APSFC. THEREFORE, THE REPAYMENT OF LOAN INCLUDING INTEREST TO APSFC WAS M ADE OUT OF RS.15 LAKHS BORROWED FROM INDIAN BANK AND UNUTILIZED BORROWED L OAN FROM APSFC. NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENUE A UTHORITIES TO ESTABLISH THAT THE FUNDS BORROWED FROM APSFC OF RS.25 LAKHS W AS INVESTED OR UTILIZED IN ACQUIRING SOME TANGIBLE ASSETS. THEREFORE, THE PRE SUMPTION IS IN FAVOUR OF THE ASSESSEE THAT CERTAIN FUNDS OUT OF THE BORROWED LOAN MUST BE AVAILABLE WITH THE ASSESSEES FOR REPAYMENT OF THE LOAN. 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED WITH REGARD TO THE ADDITION OF RS.3,84,000/- EACH IN A.Y. 2005-06 & 20 06-07 THAT THE SEARCH WAS ITA NO.186 TO 189 OF 10 P. VITHAL RAJU, TANUKU 3 CONDUCTED AT THE PREMISES OF THE ASSESSEES ON 4.8.2 005 AND BY THAT TIME THE RETURN FOR THE ASSESSMENT YEAR 2005-06 WAS NOT DUE TO BE FILED. IT IS ALSO EVIDENT FROM THE RECORD THAT REGULAR BOOKS OF ACCOU NTS SEIZED DURING THE COURSE OF SEARCH WERE NOT COMPLETE. WHILE COMPLETI NG THE BOOKS OF ACCOUNTS, THE CORRESPONDING ENTRIES REGARDING PAYME NT OF INSTALMENT OF RS.32,000/- P.M. TO INDIAN BANK WAS DULY RECORDED I N THE BOOKS OF ACCOUNTS PREPARED FOR ASSESSMENT YEAR 2005-06 & 2006-07. TH EREFORE, THIS PAYMENT TO INDIAN BANK CANNOT BE CALLED TO BE THE UNEXPLAIN ED EXPENDITURE U/S 69C OF THE ACT. SO FAR AS THE PAYMENT OF RS.3,84,000/- DU RING THE A.Y. 2004-05 IS CONCERNED, THE SAME WAS MADE OUT OF THE SURPLUS FUN DS LEFT OUT WITH THE ASSESSEES AFTER MAKING THE REPAYMENT OF LOAN IN A.Y . 2003-04. THESE ASPECTS WERE NOT PROPERLY EXAMINED AND APPRECIATED BY THE LOWER AUTHORITIES. UNLESS AND UNTIL IT IS PROVED THAT THE BORROWED FUN DS WAS UTILIZED IN A PARTICULAR PROJECT OR ACQUIRING ANY TANGIBLE ASSETS , THE CONTENTION OF THE ASSESSEES THAT IT WAS LYING WITH HIM CANNOT OUTRIGH TLY BE REJECTED. 5. THE LD. D.R. ON THE OTHER HAND HAS PLACED A HEAV Y RELIANCE UPON THE ORDER OF THE CIT(A). IT WAS ALSO CONTENDED ON BEHA LF OF THE LD. D.R. THAT THE ASSESSEE HAS MADE THE REPAYMENT OF LOAN OF RS.27,79 ,736/- IN A.Y. 2003-04 AND THE ASSESSING OFFICER HAS ALREADY GRANTED A CRE DIT OF LOAN OF RS.15 LAKHS OBTAINED FROM THE INDIAN BANK. BESIDES, ASSESSEE H AS ALSO MADE THE PAYMENT OF RS.3,84,000/- P.A. IN A.Y. 2004-05 TO 20 06-07 AS REPAYMENT OF LOAN TO INDIAN BANK. THEREFORE, THE REVENUE HAS RI GHTLY TREATED THE SAID AMOUNT AS UNEXPLAINED EXPENDITURE U/S 69C OF THE AC T. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDER OF THE LOWER AUTHORITIES AND DOCUMENTS PLACED ON RECORD, WE FIND THAT UNDISPUTEDLY ASSESSEE HAS OBTAINED A LOAN FROM APSF C OF RS.25 LAKHS IN 2002. THE EXACT DATE OF BORROWING OF THIS LOAN IS NOT AVAILABLE ON RECORD BUT IT WAS ADMITTEDLY TAKEN IN THE YEAR 2002 AND THE SA ME LOAN WAS REPAID ALONG WITH INTEREST WITHIN THE FINANCIAL YEAR 2002-03 REL EVANT TO THE ASSESSMENT YEAR 2003-04. MEANING THEREBY, WITHIN A YEAR THE E NTIRE BORROWED FUND WAS REPAID TO THE APSFC ALONG WITH INTEREST. IT IS ALS O EVIDENT FROM THE RECORD THAT BEFORE THE REPAYMENT, ASSESSEE HAS ALSO OBTAIN ED A LOAN OF RS.15 LAKHS ITA NO.186 TO 189 OF 10 P. VITHAL RAJU, TANUKU 4 FROM THE INDIAN BANK. IT HAS NOT BEEN BROUGHT OUT ANYTHING ON RECORD AS TO HOW THE BORROWED FUND OF RS.25 LAKHS OBTAINED FROM APSFC WAS UTILIZED. IT IS ALSO EVIDENT FROM THE RECORD THAT NO TANGIBLE AS SETS WERE ACQUIRED OUT OF THIS BORROWED FUND OF RS.25 LAKHS. MOREOVER, REVEN UE HAS ALSO NOT BROUGHT ANYTHING ON RECORD TO ESTABLISH THAT BORROWED FUND OF RS.25 LAKHS WAS UTILIZED BY THE ASSESSEES EITHER IN SOME PROJECT OR IN SOME INVESTMENT. MEANING THEREBY, THE ENTIRE AMOUNT OF RS.25 LAKHS B ORROWED BY THE ASSESSEES WERE NOT TOTALLY EXHAUSTED AND SOME PART OF IT MUST BE LYING WITH THE ASSESSEES. BEFORE THE REPAYMENT OF LOAN ASSESS EE HAS OBTAINED RS.15 LAKHS FROM THE INDIAN BANK AND THE ENTIRE AMOUNT WA S UTILIZED IN THE REPAYMENT OF EARLIER LOAN OBTAINED FROM APSFC AND T HESE FACTS WERE ALSO ACCEPTED BY THE REVENUE AUTHORITIES. THE REVENUE H AS TREATED THE DIFFERENCE AMOUNT OF RS.13,76,236/- AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT WITHOUT REALIZING THE FACT THAT THE AMOUNT BORROWED BY THE ASSESSEE FROM APSFC OF RS.25 LAKHS WITHIN THE SAME YEAR WAS AVAIL ABLE WITH HIM FOR THE REPAYMENT OF LOAN BORROWED BY IT. UNLESS AND UNTIL IT IS PROVED OR BROUGHT ON RECORD THAT THE ENTIRE BORROWED FUND OF RS.25 LAKHS WAS UTILIZED BY THE ASSESSEE EITHER IN SOME PROJECT OR IN INVESTMENT IN ANY TANGIBLE ASSETS, THE CONTENTION OF THE ASSESSEES THAT THIS FUND WAS LYIN G WITH HIM UNEXHAUSTED CANNOT OUTRIGHTLY BE REJECTED, IN THE LIGHT OF THE FACTS THAT BOTH THE TRANSACTIONS OF BORROWINGS AND REPAYMENTS TOOK PLAC E WITHIN THE SAME FINANCIAL YEAR. THEREFORE, WE ARE OF THE VIEW THAT REVENUE WAS NOT JUSTIFIED IN TREATING THE DIFFERENTIAL AMOUNT OF RS.13,76,236/- AS UNEXPLAINED EXPENDITURE U/S 69C IN A.Y. 2003-04. 7. FOR THE ASSESSMENT YEAR 2004-05, THE CONTENTION OF THE ASSESSEE THAT REPAYMENT OF RS.3,84,000/- TO INDIAN BANK AGAINST T HE LOAN OF RS.15 LAKHS WAS PAID OUT OF THE SURPLUS FUNDS LEFT OUT IN EARLI ER YEAR CANNOT BE REJECTED. THEREFORE, WE FIND NO MERIT IN THE ADDITION OF RS.3 ,84,000/- IN A.Y. 2004-05. SO FAR AS ADDITION OF RS.3,84,000/- P.A. IN A.Y. 20 05-06 & 2006-07 ARE CONCERNED, WE FIND AT THE TIME OF SEARCH BOOKS OF A CCOUNTS OF THE ASSESSEE WERE NOT COMPLETE AND THE RETURN OF INCOME WAS ALSO NOT DUE TO BE FILED THAT THE ASSESSEE HAS ACCORDINGLY INCORPORATED ALL THE P AYMENTS IN ITS BOOKS OF ACCOUNTS AND FILED THE RETURN OF INCOME. SINCE THE ASSESSEE HAS ALREADY ITA NO.186 TO 189 OF 10 P. VITHAL RAJU, TANUKU 5 DECLARED THE PAYMENTS OF INSTALMENTS IN ITS BOOKS O F ACCOUNTS, THE SAME CANNOT BE ADDED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. IN THE LIGHT OF THESE FACTS, WE ARE OF THE CONSIDERED VIEW THAT REVENUE WAS NOT JUSTIFIED IN MAKING THE AFORESAID ADDITIONS U/S 69C IN A.Y. 2003 -04 TO 2006-07 AND WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND D ELETE THE ADDITIONS MADE IN THIS REGARD. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 6.4.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL ME MBER VG/SPS VISAKHAPATNAM, DATED 6 TH APRIL, 2011 COPY TO 1 P. VITHAL RAJU, VIJAYA NURSING HOME, D.NO.33 - 8 - 2, BABUGARI STREET, TANUKU 2 ACIT, CENTRAL CIRCLE, RAJAHMUNDRY 3 THE CI T, RAJAHMUNDRY 4 TH E CIT (A) , RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM