Income Tax Officer, Ward-2, Khammam V. Shri Ashok Bandi, Khammam

ITA 224/HYD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87437 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Gift; Opportunity of being heard
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.224/HYD/2013 ASSESSMENT YEAR 2007-2008 THE INCOME TAX OFFICER, WARD-2, KHAMMAM. VS. MR. ASHOK BANDI KAKIKONDAIGUDEM, KHAMMAM. PAN AFJPB9915R (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MR. S. RAMA RAO DATE OF HEARING : 12.03.2015 DATE OF PRONOUNCEMENT : 13.03.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), VIJAYAWADA DATED 14.12.201 2 WHEREBY HE DELETED THE ADDITIONS OF RS.5,32,930 AND RS.40,9 5,286 MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED INVESTME NT MADE IN THE CAPITAL AND UN-PROVED SUNDRY CREDITORS RESPE CTIVELY, IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 263 OF THE I.T. ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDU AL WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN GRAN ITE SLABS IN THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S. SRI LAKSHMI SAI GRANITES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 31.10.2007 DECLAR ING LOSS OF RS.4,27,117. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER 2 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. SECTION 143(3) OF THE ACT VIDE ORDER DATED 30.10.20 09, THE TOTAL INCOME OF THE ASSESSEE WAS COMPUTED BY THE A.O. AT RS.7,35,600. THE RECORD OF THE SAID ASSESSMENT CAME TO BE SUBSEQUENTLY EXAMINED BY THE LD.CIT AND ON SUCH EXAMINATION, HE FOUND THAT THE ASSESSMENT ORDER PAS SED BY THE A.O. UNDER SECTION 143(3) WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE INTER A LIA, IN ACCEPTING THE CLAIM OF THE ASSESSEE OF HAVING MADE INVESTMENT IN CAPITAL ACCOUNT FROM THE HUF FUNDS AND AS SUNDRY CREDITORS AMOUNTING TO RS.40,95,286 SHOWN BY THE ASSESSEE WIT HOUT MAKING PROPER AND SUFFICIENT ENQUIRY AS WARRANTED I N THE FACTS AND CIRCUMSTANCES OF THE CASE. HE, THEREFORE, PASSE D AN ORDER UNDER SECTION 263 DIRECTING THE A.O. TO MAKE A FRES H ASSESSMENT AFTER CONDUCTING PROPER AND SUFFICIENT E NQUIRY AND AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD. ACCORDINGLY, FRESH ASSESSMENT PROCEEDINGS WERE INIT IATED BY THE A.O. AND THE ASSESSEE WAS CALLED UPON BY HIM TO FURNISH ALL THE RELEVANT DETAILS SUCH AS FULL NAMES AND POS TAL ADDRESSES OF THE CONCERNED 13 CREDITORS AGGREGATING TO RS.40,95,286. AS NOTED BY THE A.O. IN THE ASSESSMEN T ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 263, THE ASSESSEE HOWEVER, DID NOT FURNISH THE POSTAL ADDRES SES OF THE CONCERNED CREDITORS DESPITE HAVING BEEN GIVEN SUFFI CIENT OPPORTUNITY IN THIS REGARD. THE A.O. THEREFORE WAS LEFT WITH NO OPTION BUT TO TREAT THE 13 CREDITORS AGGREGATING TO RS.40,95,286 AS UNPROVED AND MADE AN ADDITION OF RS.40,95,286 ON THIS ISSUE TO THE TOTAL INCOME OF T HE ASSESSEE. THE ASSESSEE ALSO COULD NOT SUBSTANTIATE BEFORE THE A.O. THE SOURCE OF INVESTMENT OF RS.5,23,930 MADE IN THE CAP ITAL ACCOUNT STATED TO BE FUNDS RECEIVED FROM HUF. THE A MOUNT OF RS.5,23,930 THEREFORE WAS ALSO ADDED BY THE A.O. TO THE TOTAL 3 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 263 VIDE ORDER DAT ED 21.03.2012. 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECT ION 143(3) READ WITH SECTION 263, AN APPEAL WAS PREFERR ED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERIN G THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MAT ERIAL PLACED ON RECORD BEFORE HIM, THE LD. CIT(A) DELETED BOTH THE ADDITIONS OF RS.5,23,930 ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE IN THE CAPITAL AND RS.40,95,286 MADE ON ACCOUN T OF UNPROVED SUNDRY CREDITORS BY THE A.O. FOR THE FOLLO WING REASONS GIVEN IN PARAS 4A AND 4B OF HIS IMPUGNED OR DER. 4A. INASMUCH AS INVESTMENT FROM HUF STATUS IS CONCERNED, IT IS EXPLAINED BY THE APPELLANT THAT TH E PROPRIETARY CONCERN BY NAME M/S. SRI LAKSHMI SAI GRANITES, BANDI ASHOK HUF HAS INVESTED RS.5,32,930, WHICH IS ASSESSED TO TAX REGULARLY. UPON OBSERVING THAT THERE WAS NO ENTRY IN THE BOOKS OF THE APPELLANT EI THER AS LOAN RECEIVED OR GIFT MADE THE A.O. HAS SUBJECTED S UCH INVESTMENT TO TAX, WHICH IS CONTESTED. IN COURSE OF THE APPELLATE PROCEEDINGS, IT IS EXPLAINED BY THE AR TH AT, THE AMOUNT WAS NOT SHOWN AS LOAN OR GIFT BUT SHOWN IN T HE APPELLANTS CAPITAL ACCOUNT AS CAPITAL OBTAINED AND IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HUF IS ASSESSED TO TAX REGULARLY FROM YEAR AFTER YEAR AND SUGGESTED TH AT THE SAME MAY BE ACCEPTED. THE EXPLANATION BEING IN ORDE R, THE SAME IS ACCEPTED AND ACCORDINGLY THE A.O. IS DI RECTED TO DELETE THE SAME. 4B. SO FAR AS THE SECOND ADDITION UNDER THE HEAD SUNDRY CREDITORS AT RS.40,95,286 IS CONCERNED THE A .O. HAS SUBJECTED SUCH ITEMS TO ADDITION WITH REFERENCE TO THOSE PARTIES WHOSE DETAILS WERE NOT PRODUCED TO TH E A.O. ON ONE HAND AND ON THE OTHER HAND, WHERE DETAILS WE RE PRODUCED, SOME OF THE LETTERS WRITTEN TO SUCH PARTI ES WERE RETURNED UN-SERVED AND THE THINGS LIKE THAT. IN COU RSE OF APPELLATE PROCEEDINGS, THE AR HAS SUBMITTED THAT BALANCES OF SUCH SUNDRY CREDITORS OUTSTANDING AS ON 31 ST MARCH, 2007, WERE PAID IN THE SUBSEQUENT YEARS. SOM E 4 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. PAYMENTS WERE MADE THROUGH CHEQUES OR DDS AND SOME ARE THROUGH CASH. THUS, IT IS EXPLAINED WITH FACTS AND FIGURES THAT THE IMPUGNED SUNDRY CREDIT BALANCES OF 5 PARTIES HAVE BEEN CLEARED IN THE SUBSEQUENT YEARS. IN THE CIRCUMSTANCES, THE ADDITION MADE BY THE A.O. IS ILL FOUNDED AND ACCORDINGLY, THE A.O. IS DIRECTED TO DE LETE THE SAME. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE AS ABOVE, THE REVENUE HAS PR EFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS : A. THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CASE IN HOLDING THAT THE SOURCES FOR INTRODUCING FRESH CAPI TAL BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS FROM OUT OF THE CASH AVAILABLE IN HIS HUF STATUS, WHEREAS THE ASSESSEE COULD NOT ESTABLISH THE SAME, BEFORE THE A.O. WITH REASONABLE EXPLANATION. B. WHETHER THE LD. CIT(A) IS CORRECT IN HOLDING THAT T HE ASSESSEE HAS EXPLAINED THE SOURCE SATISFACTORILY WH EN THERE IS NO EVIDENCE TO THAT EXTENT IN ACCOUNTS MAINTAINED WITH RESPECT TO INVESTMENT FROM HUF STATUS. C. WHETHER THE LD. CIT(A) IS CORRECT IN GIVING RELIEF OF RS.40,95,286/- BASED ON THE FRESH MATERIAL EVIDENCE PRODUCED BEFORE THE LD. CIT(A), STATING THAT THE CR EDITS WERE CLEARED IN THE SUBSEQUENT YEARS THROUGH CHEQUES/DDS AND CASH WITHOUT VERIFICATION WHETHER THESE PAYMENTS WERE GENUINELY RECEIVED BY SUNDRY CREDITORS. D. THE LD. CIT(A) FAILED TO NOTE THAT SOME CREDITORS H AVE DENIED THE TRANSACTION WITH THE ASSESSEE AND IN SOM E CASES THE BALANCE IS NOT TALLYING WITH THE BALANCE SHOWN IN THE BOOKS OF THE ASSESSEE AND THE ASSESSEE HAS NOT FURNISHED EVEN ADDRESSES IN RESPECT OF EIGH T CREDITORS. E. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT W HEN THE GENUINENESS OF CREDITS ITSELF IS NOT ESTABLISHE D HOW HE COULD BELIEVE THAT CREDIT IS SQUARED UP IN SUBSEQUENT YEARS. 5 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. F. WHETHER THE LD. CIT(A) IS NOT CORRECT IN ADMITTING FRESH EVIDENCE, WHICH IS NOT SUBMITTED BEFORE THE A.O. AT THE TIME OF SCRUTINY, EVEN THOUGH SEVERAL OPPORTUNITIES WERE GIVEN ? G. WHETHER THE LD. CIT(A) IS CORRECT IN ADJUDICATING T HE MATTER BASED ON THE FRESH MATERIAL EVIDENCE PRODUCE D FOR THE FIRST TIME BEFORE THE CIT(A) WITHOUT GIVING AN OPPORTUNITY TO THE A.O. AS PER RULE 46A OF THE I.T. RULES. H. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. A S REGARDS THE FIRST ISSUE INVOLVED IN GROUND NO. A AND B RELA TING TO THE DELETION BY THE LD. CIT(A) OF THE ADDITION OF RS.5, 32,930 MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CAPITAL, IT IS OBSERVED THAT ALTHOUGH, SOURCE OF TH E SAID CAPITAL WAS CLAIMED BY THE ASSESSEE TO BE THE FUNDS RECEIVE D FROM HUF, THE SAME WAS NOT SUBSTANTIATED BY THE ASSESSEE BEFORE THE A.O. BY FURNISHING RELEVANT DOCUMENTARY EVIDENC E AND DETAILS. A PERUSAL OF THE IMPUGNED ORDER OF THE LD. CIT(A) ALSO SHOWS THAT THE EXPLANATION OF THE ASSESSEE AS REGAR DS THE SOURCE OF CAPITAL BEING THE FUNDS RECEIVED FROM HUF WAS ACCEPTED BY HIM MERELY ON THE BASIS OF THE SUBMISSI ON OF THE ASSESSEE THAT THE HUF IS REGULARLY ASSESSED TO TAX WITHOUT THERE BEING ANY DOCUMENTARY EVIDENCE TO SUPPORT AND SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THE AMO UNT OF RS.5,32,930 WAS ACTUALLY RECEIVED FROM THE HUF AND THAT THE SAME WAS DULY REFLECTED IN THE ACCOUNTS OF HUF. AS RIGHTLY CONTENDED BY THE LEARNED D.R., THE HUF IS A SEPARAT E ENTITY, DIFFERENT FROM THE ASSESSEE AND THEREFORE, THE ONUS IS ON THE ASSESSEE TO EXPLAIN THE SOURCE OF CAPITAL CLAIMED T O BE FUNDS RECEIVED FROM THE HUF ON EVIDENCE. THE LD. COUNSEL FOR THE 6 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. ASSESSEE AT THE TIME OF HEARING BEFORE US HAS NOT D ISPUTED THIS POSITION. HE, HOWEVER, HAS CONTENDED THAT ONE MORE OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE TO ESTABLI SH THE RECEIPT OF FUNDS FROM HUF ON EVIDENCE. HAVING REGAR D TO THE FACTS OF THE CASE, WE CONSIDER IT FAIR AND PROPER A ND IN THE INTEREST OF JUSTICE, TO GIVE SUCH OPPORTUNITY TO TH E ASSESSEE AND SINCE THE LEARNED D.R. HAS ALSO NOT RAISED ANY OBJE CTION IN THIS REGARD, WE RESTORE THIS ISSUE TO THE FILE OF THE A. O. FOR DECIDING THE SAME AFRESH, AFTER GIVING THE ASSESSEE AN OPPOR TUNITY TO ESTABLISH THE SOURCE OF CAPITAL CLAIMED TO BE FUNDS RECEIVED FROM HUF ON EVIDENCE. GROUND NOS. A AND B OF REVENU E APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. AS REGARDS THE COMMON ISSUE INVOLVED IN GROUND NOS. C TO G RELATING TO DELETION BY THE LD. CIT(A) OF THE ADDITION OF RS.40,95,286 MADE BY THE A.O. ON ACCOUNT OF UNPR OVED CREDITORS, IT IS OBSERVED THAT THE CONCERNED 13 CRE DITORS WERE HELD TO BE UNPROVED BY THE A.O. DUE TO THE FAILURE OF THE ASSESSEE TO EVEN FURNISH THE BASIC DETAILS SUCH AS FULL NAMES AND POSTAL ADDRESSES. THE LD. CIT(A) HOWEVER, TREAT ED THE SAID CREDITORS AS PROVED RELYING ON THE DETAILS FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE HIM SHOWING THAT THE BALA NCES OUTSTANDING AS ON 31 ST MARCH, 2007 AGAINST THE CONCERNED CREDITORS WERE PAID IN THE SUBSEQUENT YEARS THROUGH CHEQUES OR DDS. AS RIGHTLY POINTED OUT BY THE LEARNED D.R. FROM THE RELEVANT PORTION OF THE IMPUGNED ORDER OF THE LD. C IT(A), FINDING IN THIS REGARD WAS GIVEN BY THE LD. CIT(A) ONLY IN RESPECT OF 5 CREDITORS OUT OF THE 13 CREDITORS AND THAT TOO WITHOUT GIVING ANY OPPORTUNITY TO THE A.O. TO VERIF Y THE CLAIM OF THE ASSESSEE MADE BEFORE HIM FOR THE FIRST TIME THA T THE RELEVANT SUNDRY CREDITORS HAVING BEEN FULLY PAID IN THE SUBSEQUENT YEARS, THE EXISTENCE OF THE SAID CREDITO RS WAS 7 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. PROVED. LD. COUNSEL FOR THE ASSESSEE HAS ALSO NOT B EEN ABLE TO DISPUTE THIS POSITION CLEARLY EVIDENT FROM THE IMPU GNED ORDER OF THE LD. CIT(A). WE, THEREFORE, AGREE WITH THE CO NTENTION OF THE LEARNED D.R. THAT THIS ISSUE IS REQUIRED TO BE SENT BACK TO THE A.O. FOR GIVING HIM AN OPPORTUNITY TO VERIFY TH E CLAIM OF THE ASSESSEE FROM THE RELEVANT FACTS AND FIGURES THAT T HE ENTIRE AMOUNT IN QUESTION PAYABLE TO THE 13 CREDITORS WAS ACTUALLY PAID BY THE ASSESSEE IN THE SUBSEQUENT YEARS SHOWIN G THE EXISTENCE OF THE SAID CREDITORS ON 31 ST MARCH, 2007. ACCORDINGLY, THE IMPUGNED ORDER OF THE LD. CIT(A) O N THIS ISSUE IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF A.O. FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE CLAIM OF THE ASSESSEE AS MADE BEFORE THE LD. CIT(A) FOR THE FIRS T TIME. NEEDLESS TO OBSERVE THAT THE A.O. SHALL AFFORD SUFF ICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE ASSESSEE SHALL EXTEND FULL COOPERATION TO THE A.O. IN ORDER TO COMPLETE THE ASSESSMENT AFRESH. GROUND NOS. C TO G OF THE RE VENUES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATI STICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03.2 015. SD/- SD/- (ASHA VIJAYARAGHAVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH MARCH, 2015 VBP/- 8 ITA.NO.224/HYD/2013 MR. ASHOK BANDI, KHAMMAM. COPY TO 1. THE INCOME TAX OFFICER, WARD-2, AAYAKAR BHAVAN, BEH IND KINNERASANI THEATRE, RAJIV GUNJ, KHAMMAM. 2. MR. ASHOK BANDI, PROP. LAXMI SAI GRANITES, S.Y. NO.283/A/K A5 & A6, KAKIKONDAIGUDEM, KHAMMAM. 3. CIT(A), VIJAYAWADA 4. CIT, VIJAYAWADA 5. D.R. I.T.A.T. B BENCH, HYDERABAD. 6. GUARD FILE