The ITO, -, Tadepallegudem V. Smt M Ratna Manikya Ramani, Tadepallegudem

ITA 224/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7052 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 25-05-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Unexplained investment; Gift; Set aside
• Section: 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.224/VIZAG/2007 ASSESSMENT YEAR : 2004-05 ITO TADEPALLIGUDEM SMT. M. RATNA MANIKYA RAMANI TADEPALLIGUDEM (APPELLANT) VS. (RESPONDENT) GIR NO.R-1714 APPELLANT BY: SHRI G.S.S. GOPINATH, DR RESPONDENT BY: SHRI D.L. NARASIMHA RAO, ADVOCATE ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT(A) IS NOT ACCEPTABLE ON FA CTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.7,40,000/- (OUT OF RS. 14,86,855/-) ON THE GROUND THAT THE AMOUNT REPRESENTS THE BANK LIAB ILITY OF THE SELLER TAKEN OVER BY THE ASSESSEE AND NOT ACTUAL OU TFLOW OF FUNDS. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ENTIR E LIABILITY OF RS.7,40,000/- WAS DISCHARGED BY THE ASSESSEE DURING THE YEAR ITSELF BY INTRODUCING ALLEGED GIFTS IN THE NAME OF CLOSE R ELATIVES OF THE ASSESSEE. 4. THE CIT(A) OUGHT TO HAVE SUSTAINED THE UNEXPLAINED INVESTMENT OF RS.7,40,000/- IN ADDITION TO RS.1,46,000/- AS THE A SSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE ALLEGED GIFTS AND THE CREDITWORTHINESS OF THE ALLEGED DONORS. 5. FOR THESE AND OTHER GROUNDS OF APPEAL THAT MAY BE U RGED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PRAYS BEFORE THE HON'BLE ITAT THAT THE ADDITIONS MADE BY THE ASSESSI NG OFFICER MAY KINDLY BE RESTORED. 2. THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS OF APPEAL BUT THEY ALL RELATE TO AN ADDITION OF RS. 7,40,000/- MADE ON ACC OUNT OF UNEXPLAINED INVESTMENTS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RE CORD. THE ASSESSING 2 OFFICER HAS FRAMED THE EX-PARTE ASSESSMENT U/S 144 OF THE ACT BRINGING TO TAX A SUM OF RS.14,86,855/- REPRESENTING INVESTMENT IN THE PURCHASE OF HOUSE PROPERTY AS UNEXPLAINED SOURCES U/S 69 OF THE ACT. 4. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) W ITH THE SUBMISSION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, S HE COULD NOT PURSUE HER CASE BECAUSE HER FATHER-IN-LAW AND MOTHER-IN-LAW WE RE SUFFERING FROM PROLONGED ILLNESSES. ON ACCOUNT OF THEIR ILLNESS S HE COULD NOT PAY ATTENTION TO THE PROCEEDINGS PENDING BEFORE THE ASSESSING OFFICE R AND ASSESSING OFFICER HAS TREATED THE ENTIRE INVESTMENT AS AN UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. THE CIT(A) FINDING FORCE IN THE CONTENTION OF THE ASSESSEES CALLED A REMAND REPORT ON THE EVIDENCE FURNISHED BEFORE HIM. IN HIS REMAND REPORT THE ASSESSING OFFICER HAS SUBMITTED INTER-ALIA THAT UPON VERIFICATION OF THE BANK ACCOUNTS OF THE ASSESSEES, IT WAS FOUND THAT S HE HAS BORROWED AND WITHDRAWN A SUM OF RS.6 LAKHS FROM THE STATE BANK O F HYDERABAD ON 28.4.2003 TOWARDS MORTGAGE LOAN. BUT WITH REGARD T O THE CLAIM OF GIFT RECEIVED BY THE ASSESSEES FROM HER FATHER-IN-LAW, S ISTER-IN-LAW AND HER BROTHER, THE A.O. OBSERVED THAT IT REMAINED UNPROVE D AND HE FURTHER OBSERVED THAT EVEN IF IT WAS PRESUMED THAT ASSESSEE HAS RECEIVED ANY SUCH GIFT, SUCH GIFT AMOUNTS HAD NO BEARING ON THE INVES TMENT IN THE PROPERTY IN AS MUCH AS THAT SUCH AMOUNTS WERE ALLEGEDLY RECEIVED O NLY SUBSEQUENT TO THE DATE OF PURCHASE OF THE PROPERTY. IN CONCLUSION TH E ASSESSING OFFICER HAS CONTENDED THAT ONLY A SUM OF RS.6 LAKHS COULD BE AC CEPTABLE AS GENUINE SOURCE OF INVESTMENT AND THE BALANCE AMOUNT OF RS.8 ,86,000/- WAS LIABLE TO BE TREATED AS INVESTMENT FROM UNEXPLAINED SOURCES I N THE PURCHASE OF THE SAID PROPERTY. 5. IN RESPONSE TO THE REMAND PROCEEDINGS, THE LD. C OUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT TOTAL COST FOR THE PURC HASE OF THE HOUSE PROPERTY WORKED OUT TO BE RS.14,86,000/- INCLUDING STAMP DUT Y AND REGISTRATION ETC. BUT THE ACTUAL OUTFLOW OF THE FUNDS FROM THE HANDS OF THE ASSESSEE WAS TO THE TUNE OF RS.7,46,000/-, FOR THE REASON THAT TOTAL PU RCHASE CONSIDERATIONS INCLUDED A SUM OF RS.7,40,000/- BEING A TAKEOVER OF THE LOAN LIABILITIES OF THE SELLER TO THE ANDHRA BANK, WHICH LIABILITY STOOD UN DISCHARGED AS ON THE DATE OF 3 THE PURCHASE OF THE PROPERTY ON 29.4.2003. THERE W AS ONLY A MARGINAL EXCESS SUM OF RS.1,46,000/- WHICH COULD BE ATTRIBUT ABLE TO THE GIFTS RECEIVED FROM VARIOUS RELATIVES AS STATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 6. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF DETAILED FACTS AND HE WAS CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE THAT SHE HAD UNDERTAKEN THE LOAN LIABILITY OF THE SELLER TO ANDHRA BANK TO THE TUNE OF RS.7,40,000/- WHICH STOOD DISCHARGED. HE FURTHER OBSERVED THAT A DDITIONAL INVESTMENT OF RS.1,46,000/- CAN BE SAID TO HAVE BEEN MADE FROM TH E UNEXPLAINED SOURCE ON THE REASONING THAT ASSESSING OFFICER HAS GIVEN A CL EAR FINDING TO THE FACT THAT ALLEGED GIFTS AMOUNTS FROM THE FAMILY RELATIONS HAV ING BEEN RECEIVED ONLY AFTER THE PURCHASE OF REGISTRATION OF PROPERTY. TH E CIT(A) ACCORDINGLY RESTRICTED THE ADDITION TO A SUM OF RS.1,46,000/-. 7. NOW THE REVENUE IS BEFORE US AND PLACED HEAVY RE LIANCE UPON THE A.OS ORDER. 8. ON CAREFUL PERUSAL OF THIS ORDER OF THE CIT(A), WE FIND THAT ASSESSEE HAS EXPLAINED THE SOURCE OF INVESTMENT OF RS.14,86, 855/- REPRESENTING INVESTMENT IN THE PURCHASE OF PROPERTY. AT THE MOS T THE EXCESS AMOUNT OF RS.1,46,000/- WAS NOT EXPLAINED AND THE SAME WAS AD DED BY THE CIT(A) U/S 69 OF THE ACT. THE RELEVANT OBSERVATIONS OF THE CI T(A) ARE EXTRACTED AS UNDER: AFTER HEARING THE LEARNED AUTHORISED REPRESENTATIVE AND ON A CAREFUL CONSIDERATION OF THE FACTS RELATING TO THE ISSUE, I T MAY BE STATED THAT ON A PERUSAL OF THE SALE DEED NO.1493/2003 DATED 28.4.20 03, AT PAGE NO.2, A RECITAL IN TELUGU LANGUAGE TO THE EFFECT THAT OUT OF THE SALE CONSIDERATION, YOU HAVE TAKEN OVER OUR LIABILITY TO ANDHRA BANK, T ADEPALLIGUDEM OF RS.7,40,000/- AND BEING AGREED TO DISCHARGE IT, AND AN AMOUNT OF RS.4,41,000 WAS GIVEN TO US AT THE TIME OF WRITING THIS DOCUMENT COULD BE SEEN. THE ABOVE RECITAL INDICATES THAT AT THE TIME OF PURCHASE AND REGISTRATION OF THE PROPERTY, THERE WAS AN OUTFLOW OF RS.4,41,000 FROM THE APPELLANT TO THE SELLER AND ALSO THE UNDERTAKING BY THE APPELLANT TO DISCHARGE THE LOAN LIABILITY OF THE SELLER TO ANDHRA BANK TO THE TUNE OF RS.7,40,000/- WHICH STOOD UNDISCHARGED. IT IS WONDERED AS TO WHY THE ASSESSING OFFICER CHOSE TO IGNORE THE DECISIVE FACTUM OF THE TAKEOVER BY THE APPELLANT OF THE SELLERS BANK LOAN LIABILITY WHICH WAS APPARENT FRO M THE COPY OF THE SALE-DEED (THAT WAS CLAIMED TO HAVE BEEN FURNISHED VIDE A PAP ER-BOOK TO THE ASSESSING OFFICER DURING THE REMAND PROCEEDINGS) BEFORE ERRON EOUSLY CONCLUDING THAT AS 4 ON THE DATE OF PURCHASE OF THE SAID PROPERTY, THE A PPELLANT HAD SPENT THE WHOLE OF COST OF RS.14,86,855. IT, THEREFORE, NEED S TO BE SEEN WHETHER THERE WERE ACCEPTABLE SOURCES OF FUNDS AS ON THE DATE OF PURCHASE OF THE PROPERTY SO AS TO MEET NOT ONLY THE BALANCE CONSIDERATION OF RS.4,41,000 BUT ALSO THE STAMP DUTY AND REGISTRATION CHARGES ETC. AGGREGATIN G TO RS.7,46,000. SINCE AS PER THE FINDING OF THE ASSESSING OFFICER, THE AP PELLANT HAD EXPLAINABLE SOURCES OF INVESTMENT TO THE TUNE OF RS.6,00,000, T HE ADDITIONAL INVESTMENT OF RS.1,46,000 CAN BE SAID TO HAVE BEEN MET FROM UN EXPLAINED SOURCES ON THE REASONING THAT THE ASSESSING OFFICER HAD GIVEN A CLEAR FINDING TO THE EFFECT THAT THE ALLEGED GIFTS AMOUNTS FROM FAMILY RELATION S HAVING BEEN RECEIVED ONLY AFTER THE PURCHASE AND REGISTRATION OF THE PROPERTY , THEY COULD NOT BE SAID TO BEAR A DIRECT NEXUS WITH THE ACTUAL COST INCURRED O F RS.7,46,000. THEREFORE, ONLY A SUM OF RS.1,46,000 AND NOT THE WHOLE OF RS.1 4,86,855 COULD BE TREATED AS INVESTMENT FROM UNEXPLAINED SOURCES IN T HE HOUSE PROPERTY. ACCORDINGLY, THE ADDITION ON THIS ACCOUNT IS SUSTAI NED TO THE EXTENT OF RS.1,46,000 AND THE BALANCE OF RS.13,40,855 IS HERE BY DELETED. 9. HOWEVER AS CONTENDED BY THE REVENUE, THE ASSESSE E HAS DISCHARGED THE LOAN OF RS.7,40,000/- DURING THE YEAR ITSELF. THE SOURCES OF SUCH REPAYMENT WERE CLAIMED TO BE GIFTS AND THE SAME NEE DS EXAMINATION. ACCORDINGLY, WE REVERSE THE ORDER OF LD. CIT(A) AND SET ASIDE THE ISSUE TO THE FILE OF A.O. FOR RE-EXAMINATION, AFTER AFFORDING NE CESSARY OPPORTUNITY TO THE ASSESSEES. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 5-3-2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 5 TH MARCH, 2010 COPY TO 1 THE ITO, TADEPALLIGUDEM 2 SMT. M. RATNA MANIKYA RAMANI, W/O M.L. SIVA PRASA D, D.NO.4-51-3, SUBBARAOPETA, TADEPALLIGUDEM, W.G. DIST. 3 THE CIT, RAJAHMUNDRY 4 THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM