M.Janardhan Reddy, L/R.S.Srilaxmi, Hyd, Hyderabad V. JCIT(OSD), Central Circle-4, Hyd, Hyderabad

ITA 203/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6546 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Keywords: Source of fund
• Section: 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 203/HYD/2016 ASSESSMENT YEAR: 2007-08 LATE SHRI M. JANARDHAN REDDY, L/R SMT. SRILAXMI, HYDERABAD. PAN ACQPM 2046L VS. JT. COMMISSIONER OF INCOME- TAX, (OSD) CENTRAL CIRCLE 4, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : S/SHRI HARI AGARWAL & VIVEK AGARWAL REVENUE BY : SHRI B. KURMI NAIDU DATE OF HEARING 17-05-2016 DATE OF PRONOUNCEMENT 20-05-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) - 12, HYDE RABAD, DATED 27/10/2015 FOR AY 2007-08. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH OP ERATION U/S 132 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) W AS CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 20/10/09. NOTICE U/S 15 3A OF THE ACT WAS ISSUED ON 28/09/10. IN RESPONSE TO THE NOTICE, ASSE SSEE HAS FILED A RETURN OF INCOME ON 19 TH JULY, 2011 ADMITTING AN INCOME OF RS. 8,907/- AS INCOME FROM OTHER SOURCES. SUBSEQUENTLY, NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND IN RESPONSE, ASSESSEE HAS FILED RELEVANT INFORMATION. ASSESSING OFFICER NOTICED THAT SHRI M. JANARDHAN REDDY PURCHASED THREE PLOTS FROM M/S PCR DEVELOPERS PVT. LTD., HYDERABAD 2 ITA NO. 203/H/16 LATE SHRI M. JANARDHAN REDDY (L/R SMT. SRILAXMI) AT RS. 2,40,000/- FOR EACH PLOT ON 30/08/06. THE SA ID PLOTS WERE REGISTERED @ RS. 54,755/- PER EACH PLOT AND PAID TH E PURCHASE CONSIDERATION ACCORDINGLY. THE ACTUAL CONSIDERATION PAID TO THE VENDOR I.E. M/S PCR DEVELOPERS PVT. LTD. IS RS. 7,2 0,000/-. THE DIFFERENCE BETWEEN THE ACTUAL PURCHASE CONSIDERATIO N OF RS. 7,20,000/- AND REGISTERED SALE CONSIDERATION OF RS. 1,64,265/- WAS TREATED AS UNDISCLOSED INVESTMENT U/S 69B OF THE AC T, BY THE ASSESSING OFFICER AND ACCORDINGLY THE SAME WAS ADDE D TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICE R, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), ASSESSEE HAD SUBMITTED THE SO URCE OF THE PLOTS PURCHASED BY LATE SHRI M. JANARDHAN REDDY. AN AMOUNT OF RS. 4 LAKHS WAS PAID BY SMT. VASUNDHARA REDDY, (W/O OF SH RI M. JANARDHAN REDDY) ON 07/09/06 IN FAVOUR OF THE ASSES SEE. THIS PAYMENT WAS MADE FOR THE PURCHASE OF PLOTS BY THE A SSESSEE, FOR WHICH A RECEIPT BEARING NO. 1823 DATED 07/09/06 WAS ISSUED BY M/S PCR DEVELOPERS PVT. LTD. ASSESSEE HAS ALSO SUBMITTE D THAT ASSESSEE HAS TAKEN RS. 3,20,000/- FROM SHRI K. VENKAT REDDY (RELATIVE OF ASSESSEE) ON 30/08/06. HE ALSO SUBMITTED THAT SHRI K. VENKAT REDDY MAINTAINED SB ACCOUNT IN SYNDICATE BANK, ASHOK NAGA R BRANCH, BEARING A/C NO. 30102010079952. ASSESSEE ALSO SUBMI TTED BANK STATEMENT OF SHRI VENKAT REDDY FOR WHICH SOURCE OF INCOME OF SHRI VENKAT REDDY WAS EXPLAINED, HE HAD SOLD A PROPERTY FOR RS. 10 LAKHS ON 10/08/06, OUT OF WHICH, AN AMOUNT OF RS. 3,20,00 0/- WAS PAID TO M/S PCR DEVELOPERS PVT. LTD. VIDE CHEQUE NO. 439495 DATED 30/08/06 AND THE SAME WAS REFLECTED IN THE BANK STA TEMENT OF SHRI VENKAT REDDY. M/S PCR DEVELOPERS PVT. LTD. ISSUED T WO RECEIPTS DATED 30/08/06 IN THE NAME OF SHRI M. JANARDHAN RED DY VICE VOUCHERS NO. 1771 AND 1772. 3 ITA NO. 203/H/16 LATE SHRI M. JANARDHAN REDDY (L/R SMT. SRILAXMI) 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) HAS ACCEPTED THE SUBMISSIONS OF THE ASSESSEE RELATI NG TO THE AMOUNT RECEIVED FROM ASSESSEES WIFE WHEREAS HE HAS DECLIN ED TO ACCEPT THE PAYMENTS FROM SHRI VENKAT REDDY. THE RELEVANT OBSER VATIONS OF THE CIT(A) ARE EXTRACTED BELOW: 5.4 HOWEVER, THE CLOSE LOOK AT THE FACTS BROUGHT O N RECORD AT THE TIME OF ASSESSMENT PROCEEDINGS INDICATE THAT THE AO DID NOT EXAMINE THE FULL DETAILS ON THE CONSIDERATION OF RS .7,20,000/- PAID, EXCEPT THE SOURCES. THE COPIES OF THE QUESTIO NNAIRE ISSUED FOR A.Y.2004-06 TO 2010-11 DTD.01-08-2011, DOES NOT INDICATE THE DETAILS RELATED TO THIS ISSUE. EVEN THE GROUNDS RAI SED BY THE APPELLANT DO NOT RELATE THE EXPLANATION OF THE SOUR CES FOR THE SAID INVESTMENTS, BUT ONLY QUESTION THE ADOPTION OF TOTA L PURCHASE CONSIDERATION AT RS.7,20,000/- WITH TOTAL COST OF E ACH PLOT INCURRED IS RS.2,40,000/-. HOWEVER, THE FACT REMAIN S THAT THE PLOTS WERE PURCHASED FOR RS.7,20,000/- WHILE BEING REGISTERED FOR RS.1,64,265/- WITH NO AMOUNT FLOWN FROM THE SOURCES OF THE ASSESSEE LATE MRJANARDHAN REDDY, BUT MET THROUGH TH E SOURCES OF MRS.VASUNDHARA REDDY, W/O JANARDHAN REDDY, TO TH E EXTENT OF RS. 4,00,000/- AND RS.3,20,000/- FROM MR.VENKAT REDDY, A DISTANT RELATIVE OF THE ASSESSEE. THE APPELLANT DID NOT DENY THESE FACTS AND IN FACT TRIED TO EXPLAIN THE PAYMENTS THR OUGH THE TWO PERSONS. WHILE THE AMOUNTS PAID FROM THE ACCOUNTS O F MRS.VASUNDHARA REDDY, BEING WIFE OF JANARDHAN REDDY , BEING EXPLAINED THROUGH THE KNOWN SOURCES, MAY MEET THE E XPECTED LEVELS OF EXPLANATION, WITH THE AMOUNTS MET THROUGH THE SPOUSE'S ACCOUNT. FURTHER, THERE NO DOUBTS ON THE AVAILABILI TY OF FUNDS TO MRS. VASUNDHARA REDDY, AS ON 07-09-2006. IN THIS MA NNER THE SOURCES FOR THE INVESTMENTS IN PLOTS PURCHASED FROM M/S PCR DEVELOPERS PVT. LTD AND REGISTERED IN NAME OF JANAR DHAN REDDY TO THE EXTENT OF RS 4,00,000/-, MAY BE TREATED AS E XPLAINED. HOWEVER, THE AMOUNTS OF RS.3,20,000/- SHOWN TO HAVE BEEN MET FROM THE ACCOUNT OF THIRD PERSON VIZ., MR.VENKAT RE DDY, THOUGH MET OUT OF BANK BALANCES AVAILABLE TO HIM, MAY NOT BE ACCEPTABLE AS EXPLAINABLE SOURCES ON BEHALF OF THE APPELLANT FOR THE REASONS THAT NO CONFIRMATION/AFFIDAVIT WAS FURN ISHED FROM MR. VENKAT REDDY, INDICATING HIS INVOLVEMENT IN TRANSAC TION APART FROM HIS RELATION TO THE ASSESSEE. FURTHER, THERE I S NO MENTION OF SUCH TRANSACTION IN THE CASH FLOW STATEMENTS FURNIS HED. THUS, ON FACTS AS NARRATED, IT IS REASONABLE TO HOLD THAT TH E AMOUNTS FLOWN FROM THIRD PARTY ACCOUNT WITHOUT ESTABLISHING THE N ATURE, SOURCE AND ACTUAL PURPOSE OF TRANSACTION, WITH NEEDED PROO F, CANNOT EXPLAIN AS SOURCES IN HANDS OF THE APPELLANT. ACCOR DINGLY, THE AMOUNT OF RS.3,20,000J- ATTEMPTED TO BE EXPLAINED W ITH THE HELP OF PAYMENTS MADE FROM THIRD PARTIES ACCOUNT (MR.VEN KAT REDDY) FOR THE PURPOSE OF PURCHASE OF PROPERTY IN THE NAME OF ASSESSEE, HELD TO BE NOT EXPLAINING WITH THE HELP OF KNOWN SO URCES FOR THE 4 ITA NO. 203/H/16 LATE SHRI M. JANARDHAN REDDY (L/R SMT. SRILAXMI) ASSESSEE. ACCORDINGLY, THE ADDITION IS HELD TO THE EXTENT OF RS.3,20,000/-. THIS GROUND OF APPEAL, THUS TREATED AS, PARTLY ALLOWED 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US R AISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS)-12 IS CONTRARY TO THE FACTS AND CIRCU MSTANCES OF THE APPELLANT'S CASE AND IS CONTRARY TO THE PROVISI ONS OF INCOME- TAX ACT, 1961. 2. THE HON'BLE COMMISSIONER OF INCOME-TAX (APPEALS) -12 ERRED IN RETAINING THE ADDITION OF RS. 3,20,000/- DISBELI EVING THE AMOUNT RECEIVED FROM SRI. VENKAT REDDY. THE HON'BLE COMMISSIONER OF INCOME-TAX (APPEALS)-12 OUGHT TO HA VE TOTALLY DELETED THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER. 7. LD. AR SUBMITTED THAT ALL THE INFORMATION RELEVA NT TO THE SOURCE OF FUNDS FOR PURCHASE OF PLOTS BY THE ASSESSEE IS S UBMITTED BEFORE THE CIT(A). CIT(A) HAS GIVEN PARTIAL RELIEF TO THE ASSE SSEE, BUT, DID NOT ACCEPT THE FUNDS RECEIVED FROM SHRI K. VENKAT REDDY . IN SUPPORT OF THE SOURCE FOR RECEIPT OF LATE. M. JANARDHAN REDDY, HE SUBMITTED BANK STATEMENT OF SHRI VENKAT REDDY (REFER PAGE 9 OF PAP ER BOOK) IN WHICH SHRI JANARDHAN REDDY HAS ISSUED A CHEQUE BEARING NO . 439595 IN FAVOUR OF M/S PCR DEVELOPERS PVT. LTD. AND M/S PCR DEVELOPERS PVT. LTD. HAS ISSUED A RECEIPT OF SUCH PAYMENT VIDE VOUC HER NOS. 1771 & 1772 IN THE NAME OF SHRI M. JANARDHAN REDDY FOR RS. 3,20,000/-. HE ALSO SUBMITTED THAT THE SOURCE OF RS. 5,60,000/- IN THE ACCOUNT OF SHRI VENKAT REDDY WAS THAT HE HAD SOLD A PROPERTY ON 10/ 08/06. TO THIS EFFECT, RELEVANT SALE DEED WAS SUBMITTED (REFER PAG ES 10 TO 16 OF THE PAPER BOOK). HE SUBMITTED THAT THE ASSESSEE HAS SU BMITTED THE SOURCE OF SOURCES OF THE INCOME. HE ALSO SUBMITTED THAT, IN THE COURSE OF SEARCH PROCEEDING, LATE SHRI M. JANARDHAN REDDY HAS DEPOSED BEFORE THE DDIT ON 25/02/10 THAT PAYMENT OF RS. 3,2 0,000/- MADE TOWARDS PURCHASE OF THE PROPERTY FROM M/S PCR DEVEL OPERS PVT. LTD. BY SHRI K. VENKAT REDDY, WHO IS A RELATIVE. LD. AR SUBMITTED THAT IT CLEARLY DEMONSTRATES THAT ASSESSEE HAS MADE PAYMENT TOWARDS PURCHASE OF LAND ARRANGING PAYMENT THROUGH SHRI VEN KAT REDDY. HE, 5 ITA NO. 203/H/16 LATE SHRI M. JANARDHAN REDDY (L/R SMT. SRILAXMI) THEREFORE, SUBMITTED THAT THE ASSESSEE HAS CLEARLY DEMONSTRATED THE SOURCE OF PAYMENT. 8. LD. DR, ON THE OTHER HAND, SUBMITTED THAT ASSESS EE HAS NOT FILED ANY CONFIRMATION FROM SHRI VENKAT REDDY NEITH ER DURING THE ASSESSMENT PROCEEDING NOR BEFORE THE CIT(A). HE REL IED ON THE ORDERS OF THE REVENUE AUTHORITIES. 9. CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES A ND PERUSED THE MATERIAL FACTS ON RECORD. FROM THE RECORD, IT IS CL EAR THAT LATE SHRI M. JANARDHAN REDDY HAD MADE PAYMENT TOWARDS PURCHASE O F PLOTS FROM M/S PCR DEVELOPERS PVT. LTD. AND THE RELEVANT SOURC ES ARE RS. 4 LAKHS FROM HIS WIFE AND RS. 3,20,000/- FROM SHRI K. VENKAT REDDY. IT IS CLEARLY EVIDENT THAT RECEIPT OF PAYMENT OF RS. 3 ,20,000/- WAS ISSUED IN THE NAME OF ASSESSEE BY THE SELLER AND THE CHEQU E WAS ISSUED BY SHRI VENKAT REDDY. THE SOURCE FOR SHRI VENKAT REDDY FOR ISSUE OF SUCH CHEQUE WAS ALSO CLEARLY SUBMITTED BEFORE THE C IT(A) AS WELL AS BEFORE US. (REFER PAGE 9 OF THE ASSESSEES PAPER BO OK). SINCE SHRI M. JANARDHAN REDDY HAS PASSED AWAY, THE LD. AR BROUGHT TO OUR NOTICE THAT DURING THE SEARCH PROCEEDING SHRI JANARDHAN RE DDY HAS MADE A SWORN STATEMENT ON 25/02/10, IN WHICH, TO THE QUE RY NO. 5, HE HAS CLEARLY SUBMITTED THAT RS. 3,20,000/- WAS PAID BY S HRI VENKAT REDDY, TOWARDS PURCHASE CONSIDERATION TO M/S PCR DEVELOPER S PVT. LTD. FROM THE ABOVE INFORMATION, WHICH IS AVAILABLE ON R ECORD, CLEARLY ESTABLISHES THAT ASSESSEE HAS, IN FACT, RECEIVED A SUM OF RS. 3,20,000/- FROM SHRI VENKAT REDDY, IN SUPPORT OF WH ICH, M/S PCR DEVELOPERS PVT. LTD., HAS ISSUED A RECEIPT VOUCHER IN FAVOUR OF SHRI M. JANARDHAN REDDY. IT CLEARLY ESTABLISHES THE SOUR CE OF PAYMENT TOWARDS PURCHASE OF PLOTS. IN VIEW OF THE ABOVE OBSERVATIONS/DISCUSSION, WE ARE INCLINED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD ARE ALLOWED. 6 ITA NO. 203/H/16 LATE SHRI M. JANARDHAN REDDY (L/R SMT. SRILAXMI) 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 20 TH MAY, 2016 KV COPY TO:- 1) LATE SHRI M. JANARDHAN REDDY (L/R SMT. SRILAXMI) , C/O HARI AGARWAL AND ASSOCIATES, CAS, 5-9-58/30 4, GUPTA ESTATE, BASHEERBAGH, HYDERABAD 500 082. 2) JCIT (OSD), CENTRAL CIRCLE 4, 3 RD FLOOR, POSNETT BHAVAN, RAMKOTI, HYDERABAD. 3 CIT(A) - 12, HYDERABAD 4) PR. CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.