The ITO, Tadepallegudem V. Sri ML Siva Prasad, Tadepallegudem

ITA 225/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7042 (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: 142(1); 69

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.225/VIZAG/2007 ASSESSMENT YEAR : 2004-05 ITO, TADEPALLIGUDEM M.L. SIVA PRASAD TADEPALLIGUDEM (APPELLANT) VS. (RESPONDENT) 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.9.64 LAKHS (OUT OF RS. 18.64 LAKHS) 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 TAKEN OVER WAS DISCHARGED BY THE ASSESSEE DURING THE YEAR ITSELF BY INTRODUCING ALLEGED GIFTS AND LOANS IN THE NAME OF CLOSE RELATIVES OF THE ASSESSEE AND OTHER PERSONS I.E. LOAN OF RS.5 LA KHS IN THE NAME OF V. RAVINDRA, LOAN OF RS.2 LAKHS IN THE NAME OF S RI D.V. RAMANA RAO, RS. 2 LAKHS IN THE NAME OF FATHER AND GIFT OF RS.1 LAKH IN THE NAME OF BROTHER. 4. THE CIT(A) OUGHT TO HAVE SUSTAINED THE UNEXPLAINED INVESTMENT OF RS.9.64 LAKHS AS THE ASSESSEE HAS FAILED TO ESTABLI SH THE GENUINENESS OF THE ALLEGED GIFTS, LOANS AND THE CRE DITWORTHINESS OF THE ALLEGED DONORS AND CREDITORS. 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. BRIEF FACTS BORNE OUT FROM THE RECORD ARE THAT T HE ASSESSING OFFICER HAD RECEIVED THE INFORMATION THAT THE ASSESSEE HAS INVE STED A SUM OF RS.18,64,430/- IN THE PURCHASE OF HOUSE PROPERTY DU RING THE PREVIOUS YEAR 2 RELEVANT TO THE ASSESSMENT YEAR 2004-05. SINCE THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME, A STATUTORY NOTICE U/S 142(1) WAS ISSUED. THE ASSESSEE DID NOT RESPOND THE NOTICE ISSUED U/S 142(1) AND FI NALLY ASSESSING OFFICER TREATED THE ENTIRE INVESTMENT OF RS.18,64,430/- AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) W ITH THE SUBMISSION THAT ON ACCOUNT OF PROLONGED ILLNESS OF HIS PARENTS , THE ASSESSEE COULD NOT MADE THE COMPLIANCE OF THE STATUTORY NOTICE AND THE CORRESPONDENCE FROM THE I.T. DEPARTMENT. HE REQUESTED FOR THE LAST OPP ORTUNITY IN THE INTEREST OF JUSTICE. HE HOWEVER TRIED TO EXPLAIN THE SOURCE OF INVESTMENTS. THE ASSESSEES MATTER WAS REMANDED TO THE ASSESSING OFF ICER AND IN THE REMAND REPORT, THE ASSESSING OFFICER HAS SUBMITTED INTER-A LIA THAT UPON VERIFICATION OF THE BANK ACCOUNT OF THE ASSESSEE, IT WAS FOUND THAT HE HAD BORROWED AND WITHDRAWN A SUM OF RS.6 LAKHS FROM THE STATE BANK O F HYDERABAD ON 28.4.2003. THE ASSESSEE HAS ALSO TAKEN A LOAN OF R S. 3 LAKHS FROM THE SAME BANK ON THE SAME DATE TOWARDS AGRICULTURAL CASH CRE DIT LOAN. THUS THE INVESTMENT TO THE EXTENT OF RS.9 LAKHS COULD BE ACC EPTED TO HAVE BEEN EXPLAINED TOWARDS PURCHASE OF RESIDENTIAL PROPERTY ON 29.4.2003. WITH REGARD TO THE CLAIM OF HAVING INVESTMENT THE ENTIRE LOAN OF RS.5 LAKHS FROM HIS CO-BROTHER, THE A.O. HAS OBSERVED THAT IT HAD N O BEARING ON THE INVESTMENT IN THE PROPERTY IN AS MUCH AS AT THE END OF APRIL, 2003 BY WHICH TIME THE PROPERTY IS TO PURCHASE ONLY AN AMOUNT OF RS.91,000/- HAS BEEN WITHDRAWN FROM OUT OF SUCH RS.5 LAKHS AS BALANCE OF RS.4,09,000/- REMAINED IN THE BANK ACCOUNT. THE A.O. ALSO DISCOUNTED THE CLAIM OF HAVING MADE THE SOURCE OF INVESTMENT TO THE EXTENT OF RS.2 LAKHS AS LOAN FROM HIS FRIEND DR. D.V. RAMANA RAO AND RS. 2 LAKHS AS LOAN FROM HIS FA THER FROM OUT OF HIS RETIREMENT BENEFITS AND RS. 1 LAKH AS CASH GIFT FRO M HIS BROTHER ON THE REASONING THAT NO EVIDENCE COULD BE ADDUCED IN SUPP ORT OF SUCH CLAIMS. THE A.O. CONCLUDED BY STATING THAT OUT OF THE TOTAL INV ESTMENT OF RS.18,64,000/- CREDIT COULD BE GIVEN FOR AN AMOUNT OF RS.9,91,000/ - BALANCE AMOUNT OF RS.8,73,000/- WAS LIABLE TO BE TREATED AS UNEXPLAIN ED INVESTMENT FOR THE PURCHASE OF PROPERTY. 3 4. IN RESPONSE TO THE REMAND REPORT, THE LD. COUNSE L FOR THE ASSESSEE HAS SUBMITTED THAT THE TOTAL COST IN THE PURCHASE OF HO USE PROPERTY WORKED OUT TO BE RS.18,64,000/- INCLUDING STAMP DUTY AND REGISTRA TION ETC. BUT THE ACTUAL OUTFLOW OF THE FUNDS FROM THE HANDS OF THE ASSESSEE WAS TO THE TUNE OF RS.8,64,000/- ONLY FOR THE REASON THAT TOTAL PURCHA SE CONSIDERATION INCLUDE A SUM OF RS.10 LAKHS BEING TAKEN OVER OF THE LOAN LIA BILITY OF THE SELLER TO ANDHRA BANK WHICH LIABILITY STOOD DISCHARGE AS ON T HE DATE OF PURCHASE OF PROPERTY ON 29.4.2003. SINCE AS PER THE ASSESSING OFFICER, THE ASSESSEE HAD EXPLAINABLE SOURCE OF INVESTMENT TO THE EXTENT OF R S.9,91,000/- AGAINST WHICH A SUM OF RS.8,64,000/- HAD ACTUALLY BEEN SPENT TOWA RDS PURCHASE OF SAID PROPERTY, THERE WAS NO SCOPE TO TREAT THE BALANCE A MOUNT OF RS.8,73,000/- AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. 5. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF THESE SUBMISSIONS AND BEING CONVINCED WITH IT HE DELETED THE ENTIRE ADDIT IONS. THE RELEVANT OBSERVATIONS OF THE CIT(A) ARE EXTRACTED HEREUNDER: AFTER HEARING THE LEARNED AUTHORISED REPRESENTATIV E AND ON A CAREFUL CONSIDERATION OF THE FACTS RELATING TO TH E ISSUE, IT MAY BE STATED THAT ON A PERUSAL OF THE SALE DEED NO.1492/2 003 DATED 28.4.2003, AT PAGE NO.2, A RECITAL IN TELUGU LANGUA GE TO THE EFFECT THAT OUT OF THE SALE CONSIDERATION, YOU HAVE TAKEN OVER OUT LIABILITY TO ANDHRA BANK, TADEPALLIGUDEM OF RS.10,00,000/- AN D BEING AGREED TO DISCHARGE IT, AND AN AMOUNT OF RS.5,00,00 0/- WAS GIVEN TO US AT THE TIME OF WRITING THIS DOCUMENT COULD B E SEEN. THE ABOVE RECITAL INDICATES THAT AT THE TIME OF PURCHAS E AND REGISTRATION OF THE PROPERTY, THERE WAS AN OUTFLOW OF RS.5,00,00 0/- FROM THE APPELLANT TO THE SELLER AND ALSO THE UNDERTAKING BY THE APPELLANT TO DISCHARGE THE LOAN LIABILITY OF THE SELLER TO ANDHR A BANK TO THE TUNE OF RS.10,00,000/- WHICH STOOD UNDISCHARGED. IT IS WONDERED AS TO WHY THE ASSESSING OFFICER CHOSE TO IGNORE THE DECIS IVE FACTUM OF THE TAKEOVER BY THE APPELLANT OF THE SELLERS BANK LOAN LIABILITY WHICH WAS APPARENT FROM THE COPY OF THE SALE DEED (THAT W AS CLAIMED TO HAVE BEEN FURNISHED VIDE A PAPER-BOOK TO THE ASSESS ING OFFICER DURING THE REMAND PROCEEDINGS) BEFORE ERRONEOUSLY C ONCLUDING THAT AS ON THE DATE OF PURCHASE OF THE SAID PROPERTY, TH E APPELLANT HAD SPENT THE WHOLE OF COST OF RS.18,64,430. IT, THERE FORE, NEEDS 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.5,00,000/- BUT ALSO THE STAMP D UTY AND REGISTRATION CHARGES ETC. AGGREGATING TO RS.8,64,00 0/-. SINCE AS PER THE FINDING OF THE ASSESSING OFFICER, THE APPEL LANT HAD 4 EXPLAINABLE SOURCES OF INVESTMENT TO THE TUNE OF RS .9,91,000, THERE IS NO SCOPE, WHATSOEVER, TO TREAT THE BALANCE AMOUN T OF RS.8,73,000/- AS UNEXPLAINED INVESTMENT IN THE PURC HASE OF THE SAID PROPERTY. IN THIS VIEW OF THE MATTER, THE ADD ITION OF RS.18,64,430 CANNOT BE SUSTAINED, AND, THEREFORE, I S, HEREBY, DELETED. 6. HOWEVER AS CONTENDED BY THE REVENUE, THE ASSESSE E HAS DISCHARGED THE LOAN OF RS.10,00,000/- DURING THE YEAR ITSELF. THE SOURCES OF SUCH REPAYMENT WERE CLAIMED TO BE GIFTS AND LOANS AND TH E SAME NEEDS EXAMINATION. ACCORDINGLY, WE REVERSE THE ORDER OF LD. CIT(A) AND SET ASIDE THE ISSUE TO THE FILE OF A.O. FOR RE-EXAMINATION, A FTER AFFORDING NECESSARY OPPORTUNITY TO THE ASSESSEES. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED 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 SRI M.L. SIVA PRASAD, 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