K. Ravindranath Reddy, Hyd, Hyderabad V. ACIT, Circle-8(1), Hyderabad

ITA 2091/HYD/2011

• Counselvise Citation: 209122514 RSA 2011
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Gift
• Section: 234B; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 2091 & 2092/HYD/2011 ASSESSMENT YEARS : 2006-07 & 2007-08 K. RAVINDRANATH REDDY HYDERABAD. PAN: AEMPK0543C ASST. COMMISSIONER OF INCOME- TAX, CIRCLE - 8(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI P. SOMASEKHAR REDDY DATE OF HEARING : 06-11-2013 DATE OF PRONOUNCEMENT : 01-01-2014 O R D E R PER BENCH: THESE APPEALS BY ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF CIT(A)-III, HYDERABAD. SINCE IDENTICAL ISSUES ARE I NVOLVED, THESE APPEALS WERE CLUBBED AND HEARD TOGETHER AND, THEREF ORE, WE DISPOSE OF THESE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. ITA NO. 2091/HYD/2011 FOR AY 2006-07. 2. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A)-III, HYDERABAD DATED 14-10-2011. GROUND NO. 1 & 5 ARE GE NERAL NATURE. ADJUDICATION OF GROUND NOS. 2, 3 & 4 ARE AS UNDER: 2 ITA NOS. 2091 & 2092/HYD/11 SHRI K. RAVINDRANATH REDDY 3. GROUND NO. 2 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN CONFIRMING THE ADDITION OF RS. 2,50,000/- MADE BY T HE AO ON ACCOUNT OF GIFT RECEIVED BY APPLYING THE PROVISIONS OF SECT ION 68 OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT ASSESSEE HAD SHOWN CASH GIFT OF RS. 2,50,000/- RECEIVED FROM HIS WIFE SMT. K. SAROJINI DEVI, IN THE CASH-FLOW STATEM ENT FILED AND ASSESSEE HAD FILED A CONFIRMATION LETTER FOR THE SA ME WHEREIN THE DONOR HAD SUBMITTED THAT SHE IS RUNNING A KIRANA ST ORE AT BHEL, HYDERABAD, SINCE LAST 10 YEARS AND HAD GIVEN SUCH G IFT OUT OF HER ACCUMULATED PROFITS. HOWEVER, THE AO HAD NOTED THAT ASSESSEE HAD NOT SHOWN SUCH GIFT IN THE ORIGINAL RETURN FILED BY HIM AND THAT THERE WAS NO SUPPORTING DOCUMENTARY EVIDENCE FOR SAVINGS IN THE HANDS OF HIS WIFE. HE, THEREFORE, DID NOT ACCEPT THE SAID GI FT AS GENUINE AND ADDED THE SAID AMOUNT TO THE INCOME OF ASSESSEE TRE ATING THE SAME AS UNEXPLAINED CREDIT U/S 68 OF THE IT ACT. ON APPE AL, THE CIT(A) CONFIRMED THE ADDITION OBSERVING THAT ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH HER CREDITWORTHINESS AND ALSO THE GENUINE NESS OF SUCH TRANSACTION. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS, PERUSED TH E RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AO AND CIT(A). WE ARE OF THE VIEW THAT SINCE SHE IS RUNNING KIRANA STORE FOR THE LAST 10 YEARS AND, THEREFORE, GIVING RS. 2,50,000/- AS GIFT TO HUSBAND OUT OF HER ACCUMULATED PROFITS IS AN ACCEPTABLE ONE AND IDENTI TY ITSELF IS PROVED AS SHE IS THE WIFE OF ASSESSEE. THEREFORE, THE COND ITIONS LAID DOWN U/S 68, NAMELY, IDENTITY, CREDITWORTHINESS AND GENU INENESS OF THE TRANSACTION HAVE BEEN FULFILLED BY ASSESSEE BY FILI NG CONFIRMATION LETTER WHEREIN ASSESSEES WIFE HAS CLEARLY DISCLOSE D HER IDENTITY AND HER SOURCES FOR MAKING SUCH GIFT DURING THE YEAR. T HEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITI ON IN THIS REGARD. THIS GROUND IS ALLOWED. 3 ITA NOS. 2091 & 2092/HYD/11 SHRI K. RAVINDRANATH REDDY 6. GROUND NO. 3 IS AS FOLLOWS: THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,31,479/- MADE BY THE AO BEING INTEREST CREDITED I N THE BOOKS OF M/S NVM SEETHARAMANJANEYA CONSTRUCTIONS WITHOUT CONSIDERING THE FACT THAT SUCH INTEREST IS CHARGED AT 24% WHILE THE AO ALLOWED ONLY 12% WHILE COMPLETING THE ASSESS MENT OF THE SAID PARTNERSHIP. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND THAT AS PER THE SEIZED DOCUMENT, VIDE ANNEXURE NO. A/DNR/06, ASSESSEE WAS PAID INTEREST AMOUNTING TO RS. 16,11,4 42/- ON HIS CAPITAL BY THE FIRM M/S NVM SEETHARAMANJANEYA CONST RUCTIONS. HOWEVER, STATING THAT THE AMOUNT HAD NOT BEEN OFFER ED BY ASSESSEE FOR TAXATION IN THE RETURN OF INCOME FILED BY HIM FOR THIS ASSESSMENT YEAR, THE AO ADDED THE SAID AMOUNT TO THE INCOME RE TURNED. THE CIT(A) CONFIRMED THE SAID ADDITION. 8. AT THE OUTSET, IT WAS SUBMITTED THAT ASSESSEE HAS N OT RECEIVED ANY ADDITIONAL INTEREST NOR THERE WAS ANY CLAIM IN THE HANDS OF THE FIRM. FURTHER, IT WAS SUBMITTED THAT A NY INTEREST PAID TO PARTNER WHICH WAS NOT ALLOWED AS DEDUCTION, CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE PARTNER. THE LE ARNED COUNSEL PLACED ON RECORD THE DECISION OF COORDINATE BENCH IN THE CASE OF G. VENKAT RAO AND G. MADHAVA RAO IN ITA NO. 1075 & 1076/HYD/2011, ORDER DATED 10-07-2012 WHERE ON SIMILAR SET FACTS ADDITIONS HAVE BEEN MADE AS INTER EST INCOME RECEIVED FROM THE FIRMS AND THE COORDINATE BENCH DE CIDED AS UNDER: 8. WITH RESPECT TO THE ADDITION OF RS. 6,06,332/-, THE ASSESSEE SUBMITTED A COPY OF THE RETURN OF INCOME F OR THE ASSESSMENT YEAR 2008-09. THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THERE IS INCOME FOR THE YEA R UNDER CONSIDERATION AND THE PROFIT & LOSS ACCOUNT DOES NO T DEBIT ANY INTEREST PAID TO THE PARTNERS. EVEN THE CAPITAL ACC OUNT DOES NOT HAVE ANY CREDIT UNDER THE HEAD INTEREST. INTERES T PAID TO PARTNERS, WHICH HAS BEEN DISALLOWED IN THE HANDS OF THE PARTNERSHIP FIRMS CANNOT BE ASSESSED IN THE HANDS O F THE 4 ITA NOS. 2091 & 2092/HYD/11 SHRI K. RAVINDRANATH REDDY PARTNERS. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO SET ASIDE THE ISSUES WITH RESPECT TO THE ADDITION OF RS. 3,54,65 5/- AND THE ADDITION OF RS. 6,06,332/- TO THE FILE OF THE ASSE SSING OFFICER TO DETERMINE THE CORRECT AMOUNT OF INTEREST RECEIVED B Y THE ASSESSEE FROM PARTNERSHIP FIRMS. ACCORDINGLY, GROUN D NOS. 4 & 5 ARE ALLOWED FOR STATISTICAL PURPOSES. 9. IN VIEW OF THE DECISION OF THE COORDINATE BENCH, WE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO B RING TO TAX IN THE HANDS OF ASSESSEE ONLY TO THE EXTENT OF INTEREST AL LOWED IN THE HANDS OF THE FIRM. THUS, GROUND NO. 3 IS ALLOWED F OR STATISTICAL PURPOSES. 10. GROUND NO. 4 IS PERTAINING TO CHARGING OF INTER EST U/S 234 A, 234B & 234C OF THE ACT, WHICH IS CONSEQUENTIAL IN N ATURE AND THE AO IS DIRECTED ACCORDINGLY. 11. IN THE RESULT, APPEAL IN ITA NO. 2091 IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO. 2092/HYD/2011 FOR AY 2007-08 12. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CI T(A)-III, HYDERABAD DATED 14-10-2011. GROUND NO. 1 & 4 ARE GE NERAL IN NATURE. GROUND NO. 2 IS AGAINST THE ACTION OF CIT(A ) IN CONFIRMING THE ADDITION TOWARDS INTEREST ON CAPITAL. GROUND NO.3 I S PERTAINING TO CHARGING OF INTEREST UNDER SECTION 234A AND 234B, W HICH IS CONSEQUENTIAL IN NATURE. 13. AS REGARDS GROUND NO. 2 PERTAINING TO THE ADDIT ION ON ACCOUNT OF INTEREST ON CAPITAL, THE AO NOTED THAT IN THE CA SH FLOW STATEMENT, ASSESSEE HAD SHOWN INTEREST FROM M/S SRI SEETARAMAN JANEYA CONSTRUCTIONS, MADINAGUDA AT RS. 6,83,666/-. HOWEVE R, IN THE COMPUTATION OF TOTAL INCOME FILED ALONG WITH THE RE TURN, THIS AMOUNT WAS NOT ADMITTED BY ASSESSEE. HE FURTHER NOTED THAT THE SEIZED 5 ITA NOS. 2091 & 2092/HYD/11 SHRI K. RAVINDRANATH REDDY MATERIAL ALSO REVEALED THAT ASSESSEE RECEIVED INTER EST OF RS. 6,83,666/- VIDE ANNEXURE NO. A/DNR/18 FOR THE YEAR UNDER CONSIDERATION FROM THE FIRM OF M/S SRI SEETHARAMANJ ANEYA CONSTRUCTION. THE AO, THEREFORE, ADDED THE SAID AMO UNT TO THE INCOME RETURNED U/S 69 OF THE ACT. THE CIT(A) CONFI RMED THE SAID ADDITION. 14. WE HAVE CONSIDERED THE ISSUE. SIMILAR GROUND HA S BEEN DECIDED BY US IN AY 2006-07 (SUPRA) VIDE PARAS 6 TO 11 WHEREIN WE HAVE SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSI NG OFFICER TO BRING TO TAX IN THE HANDS OF ASSESSEE ONLY TO THE E XTENT OF INTEREST ALLOWED IN THE CASE OF THE FIRM. SINCE THE ISSUE IN THIS YEAR IS SIMILAR, WE RESTORE IT TO THE FILE OF ASSESSING OFF ICER WITH IDENTICAL DIRECTIONS. 15. IN THE RESULT, APPEAL IN ITA NO. 2092/HYD/2011 IS ALLOWED FOR STATISTICAL PURPOSES. 16. TO SUM UP BOTH THE APPEALS IN ITA NOS. 2091 & 2092/HYD/2011 ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 1 ST JANUARY, 2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. R AMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT M EMBER HYDERABAD, DATED: 1 ST JANUARY, 2014. KV 6 ITA NOS. 2091 & 2092/HYD/11 SHRI K. RAVINDRANATH REDDY COPY TO:- 1) SHRI K. RAVINDRANATH REDDY, C/O SHRI S. RAMA RAO , ADVOCATE, FLAT NO. 102, SHRIYAS RESIDENCY, ROAD NO. 9, H IMAYATNAGAR, HYDERABAD. 2) ACIT, CIRCLE - 8(1), HYDERABAD. 3) CIT(A)-III, HYDERABAD. 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.