Sahitya Housing Pvt.Ltd, Hyderabad V. DCIT, Cir-3(1), Hyderabad

ITA 246/HYD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74500 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Business expenditure; Ignorance of law
• Section: 40A(3); 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 246/HYD/2011 ASSESSMENT YEAR: 2007-08 SAHITYA HOUSING PVT. LTD., HYDERABAD. PAN AAICS 7065 A VS. DY. COMMISSIONER OF INCOME-TAX, CIRCLE 3(1), HYDERABAD. APPELLANT RESPONDENT APPELLANT BY: SRI S. RAMA RAO RESPONDENT BY: SRI P. SOMA SEKHAR REDDY DATE OF HEARING: 04/12/2013 DATE OF PRONOUNCEMENT: 24/01/2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, HYDERABAD DATED 30/11/2010 FOR THE ASSESSMENT YEAR 2007-08 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIAL GROUN DS: 2. THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITI ON OF RS. 4,09,98,105/- BEING THE PAYMENTS MADE TO THE AGRICULTURISTS FOR PURCHASE OF AGRICULTURAL LANDS M ADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE ACT. THE LE ARNED CIT(A) FAILED TO SEE THAT THE PAYMENTS ARE COVERED BY THE EXCEPTIONS MENTIONED IN RULE 6DD OF THE IT RULE S AND, THEREFORE, IS NOT JUSTIFIED IN CONFIRMING THE ADDITION. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITI ON OF RS. 1,30,00,000 MADE BY THE ASSESSING OFFICER U/S 6 8 OF THE IT ACT. THE CIT(A) OUGHT TO HAVE CONSIDERED THE EXPLANATIONS SUBMITTED BEFORE HIM AND ALLOWED THE GROUND. I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 2 2. BRIEFLY THE FACTS RELATING TO THE GROUND NO 2 WI TH REFERENCE TO ADDITION OF RS. 4,09,98,105/- ARE THAT THE ASSESSEE IS CARRYING ON REAL ESTATE BUSINESS OF DEV ELOPING LAND INTO HOUSING PLOTS. A SURVEY OPERATION U/S 133 A WAS CONDUCTED IN ASSESSEES CASE ON 17/03/2008. IT WAS FOUND THAT PAYMENTS FOR PURCHASE OF LANDS HAD BEEN MADE T O THE TUNE OF RS. 20,49,90,525/-, IN CASH, TO VARIOUS PER SONS, IN EXCESS OF RS. 20,000/-, VIOLATING THE PROVISIONS U/ S 40A(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THESE PAYME NTS SHOULD NOT BE DISALLOWED U/S 40A(3), SINCE THE LAND FORMS THE STOCK IN TRADE IN THE ASSESSEES BUSINESS. IN REPLY , JUSTIFYING THE CASH PAYMENTS, THE ASSESSEE INITIALLY RELIED ON CLAUSE (G) OF RULE 6DD. LATER ON, THE ASSESSEE QUOTED THE CLAU SE (H), WHICH EXCLUDES PAYMENTS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON AN Y BUSINESS, PROFESSION OR VOCATION IN ANY SUCH VILLAGE OR TOWN FROM THE AMBIT OF SECTION 40A(3). THE ASSESSEE FURTHER AVERR ED THAT THE PERSONS TO WHOM PAYMENTS WERE MADE ARE RESIDENTS OF VARIOUS VILLAGES AND THAT THEY WERE NOT SERVED BY B ANKS. 3. HOWEVER, THE ASSESSING OFFICER ON RANDOM VERIFIC ATION OF THE BANKING NETWORKS OF ANDHRA BANK AND STATE BA NK OF HYDERABAD OBSERVED THAT THESE BANKS HAVE THEIR BRAN CHES, EITHER IN THE SAME AREA OR IN THE VICINITY. THE ASS ESSING OFFICER HAD ALSO ENCLOSED EVIDENCE REGARDING THE EX ISTENCE OF BRANCHES AT THESE PLACES IN THE FORM OF DOWN LOADED STATEMENTS FROM THE WEB SITES OF ANDHRA BANK AND ST ATE BANK OF HYDERABAD. BESIDES, HE ALSO NOTED THAT THE CLAIM OF THE ASSESSEE THAT THE PAYEES CONCERNED CARRIED ON THE B USINESS PROFESSION OR VOCATION IN ANY SUCH VILLAGE OR TOWN WAS ALSO NOT CORRECT, AS SRI S. SHANKAR PRASAD, TO WHOM RS. 6,42 ,000/- WAS I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 3 PAID IN CASH IN RESPECT OF ADITYA RESIDENCY, WAS TH E RESIDENT OF RAJAHMUNDRY TOWN, WHICH IS WELL SERVED BY BANKIN G FACILITIES. SIMILARLY, SRI N. SURESH PRASAD REDDY, TO WHOM CASH PAYMENT OF RS. 4,82,55,000/- WAS MADE, ALSO WA S THE RESIDENT OF KAMALAPURI COLONY OF HYDERABAD CITY. AC CORDINGLY, REJECTING THE CLAIM OF EXCEPTION OF CASH PAYMENTS U NDER RULE 6DD OF CLAUSE (H), 20% OF CASH PAYMENTS OF RS. 20,49,90,525/- AMOUNTING TO RS. 4,09,98,105/- WAS D ISALLOWED U/S 40A(3) OF THE ACT. ON APPEAL, THE CIT(A) CONFIR MED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR SUBMITTED BEFORE US THAT THE ASSE SSEES CASE FALLS UNDER THE PURVIEW OF PROVISIONS OF SECTI ON 6DD(1). ACCORDING TO THE LEARNED COUNSEL, THE ASSESSEE MADE PAYMENTS TO THE VILLAGERS, WHO SOLD THE LAND WHERE THERE IS NO BANKING FACILITY. HE SUBMITTED THAT THE FIRST CASH PAYMENT WAS MADE TO VADLA VENKATA CHARY AND THREE OTHERS IN REL ATION TO BALAJI GARDENS PROPERTY OF RS. 60,000/-. THIS PROP ERTY WAS SITUATED IN REDDI PALLY VILLAGE, MOINABAD MANDAL AN D AN AMOUNT OF RS. 60,000/- WAS PAID TO 4 PERSONS CANNOT FALL U/S 43D OF THE ACT. 6. REGARDING ADITYA RESIDENCY PROPERTY, HE SUBMITTE D THAT RS. 10,80,000/- WAS PAID TO SMT. M. POCHAMMA, WHO I S RESIDING WHERE THE PROPERTY IS SITUATED AT THEEGAPU R VILLAGE, KOTHUR MANDAL. ACCORDING TO THE LEARNED AR, THEEGAP UR IS A VILLAGE, WHICH FALLS UNDER THE EXCEPTION CATEGORY M ENTIONED IN RULE 6DD(G). REGARDING ANOTHER RS. 6,42,000/- WAS P AID TO SRI S. SHANKAR PRASAD AND THE PROPERTY SITUATED IN VILL AGE KOTAVUMMAN, WHICH IS NOT COVERED BY BANKING FACILIT Y. I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 4 7. AS REGARDS NATURE PARK PROPERTY, THE AR SUBMITTE D THAT AN AMOUNT OF RS. 1,18,56,250/- WAS PAID TO SRI B. C HINNA BUTCHAIAH, AS THE PROPERTY SITUATED AT RANGAPUR VIL LAGE, KOTHUR MANDAL, WHICH IS NOT COVERED BY BANKING FA CILITY. ANOTHER PAYMENT OF RS. 26,00,000/- WAS PAID TO SRI G. HARI SHANKAR, WHOSE PROPERTY WAS SITUATED AT SALIVENDRAG UDEM VILLAGE, KOTHUR MANDAL, WHICH IS NOT COVERED BY BAN KING FACILITY. THE PAYMENT OF RS. 88,21,100/- MADE TO S RI NAWABPET NARAYANA, WHOSE PROPERTY WAS SITUATED AT RANGAPUR VILLAE, KOTHUR MANDAL IS NOT COVERED BY BA NKING FACILITY. ANOTHER PAYMENT OF RS. 1,14,82,500/- WAS MADE TO SRI P. ANGAIAH & VENKATAIAH, WHOSE PROPERTY WAS SITUATE D AT RANGAPUR VILLAGE, KOTHUR MANDAL, DOES NOT HAVE BANK FACILITY. ANOTHER PAYMENT OF RS. 6,00,000/- WAS MADE TO SRI P . KISTAIAH, WHOSE PROPERTY WAS SITUATED AT RANGAPUR VILLAGE, KOTHUR MANDAL, DOES NOT HAVE BANK FACILITY. AS REGA RDS THE PAYMENT OF RS. 1,00,000/- MADE TO SRI RAJA GOPAL, W HOSE PROPERTY WAS SITUATED AT RANGAPUR VILLAGE, KOTHUR M ANDAL, DOES NOT HAVE BANK FACILITY. 8. AS REGARDS THE PEARL CITY PROPERTY, THE AR SUBMI TTED THAT AN AMOUNT OF RS. 15,60,000/- WAS PAID TO SRI E . NARAYANA, WHOSE PROPERTY WAS SITUATED AT MEKAGUDA V ILLAGE, KOTHUR MANDAL, WHICH IS NOT COVERED BY BANKING FACI LITY. ANOTHER PAYMENT OF RS. 67,60,000/- WAS MADE TO SRI K. CHANDRAMMA AND TWO OTHERS, WHOSE PROPERTIES WERE SI TUATED AT MEKAGUDA VILLAGE, KOTHUR MANDAL, WHICH IS NOT CO VERED BY BANKING FACILITY. ANOTHER PAYMENT OF RS. 31,36,000/ - WAS PAID TO SRI K. KRISHNA REDDY, WHOSE PROPERTY WAS SITUATE D AT MEKAGUDA VILLAGE, KOTHUR MANDAL, WHICH IS NOT COVER ED BY BANKING FACILITY. AS REGARDS THE PAYMENT OF RS. 7,3 9,85,250/- WAS MADE TO SRI K. NARASIMHA REDDY AND FIVE OTHERS, WHOSE I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 5 PROPERTIES WERE SITUATED AT MEKAGUDA VILLAGE, KOTHU R MANDAL, WHICH IS NOT COVERED BY BANKING FACILITY. 9. AS REGARDS THE PEARL CITY-II PROPERTY, THE LEARN ED AR SUBMITTED THAT THE PAYMENT OF RS. 1,45,00,000/- WAS MADE TO SRI CH MALLA REDDY AND 9 OTHERS, WHOSE PROPERTIES W ERE SITUATED AT AT MEKAGUDA VILLAGE, KOTHUR MANDAL, WHI CH IS NOT COVERED BY BANKING FACILITY. ANOTHER PAYMENT OF RS. 16,00,000/- WAS MADE TO SRI MAHAMMAD SAAB & SONS, W HOSE PROPERTY WAS SITUATED AT MEKAGUDA VILLAGE, KOTHUR M ANDAL, WHICH IS NOT COVERED BY BANKING FACILITY. 10. AS REGARDS PEARL CITY (OL) PROPERTY, THE AR SUB MITTED THAT AN AMOUNT OF RS. 55,50,000/- PAID TO SRI Y. SA TTAIAH, WHOSE PROPERTY WAS SITUATED AT MEKAGUDA VILLAGE, KO THUR MANDAL, WHICH IS NOT COVERED BY BANKING FACILITY. A NOTHER PAYMENT OF RS. 74,87,425/- WAS PAID TO SRI D. JANGA IAH AND THREE OTHERS, WHOSE PROPERTIES WERE SITUATED AT MEK AGUDA VILLAGE, KOTHUR MANDAL, WHICH IS NOT COVERED BY BAN KING FACILITY. 11. AS REGARDS THE PEARL CITY III PROPERTY, THE A R SUBMITTED THAT AN AMOUNT OF RS. 28,50,000/- WAS PAI D TO SMT. G. LAKSHMI, WHOSE PROPERTY WAS SITUATED AT PALMAKUL A VILLAGE, SHAMSHABAD MANDAL, DOES NOT HAVE BANKING F ACILITY. ANOTHER PAYMENT OF RS. 15,25,000/- WAS PAID TO SRI M. RANGAIAH AND THREE OTHERS, WHOSE PROPERTIES WERE SI TUATED AT MEKAGUDA VILLAGE, KOTHUR MANDAL, WHICH IS NOT COVER ED BY BANKING FACILITY. 12. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE PAYMENTS TO THOSE PARTIES DO NOT FALL UNDER THE PUR VIEW OF THE PROVISIONS OF RULE 6DD(G) OF THE ACT, AS ACCORDING TO HIM, THE I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 6 PAYMENTS ARE NOT MADE IN VILLAGES AND ALL THE SALE DEEDS EXECUTED IN HYDERABAD. BEING SO, THE PAYMENTS ARE M ADE IN HYDERABAD WHERE THERE IS A BANKING FACILITY AND THE PROPERTY SITUATED AT VILLAGE IS NOT RELEVANT. AS REGARDS APP LICATION OF RULE 6DD(G), ACCORDING TO HIM, STRICT PRINCIPLES OF LAW TO BE APPLIED UNDER THESE PROVISIONS. FOR THIS PURPOSE, H E RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F CIT VS. GWALIOR RAYON SILK MANUFACTURING CO. LTD., REPORTED IN 196 ITR 149. HE ALSO RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 13. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. SEC 40A(3) READS AS UNDER: PROVIDED THAT NO DISALLOWANCE SHALL BE MADE AND N O PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB SECTION (3) AND TH IS SUB SECTION WHERE A PAYMENT OR AGGREGATE OF PAYMENT S MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACC OUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE CONSIDERATIONS OF BUSINESS EXPENDITURE AND OTHER RELEVANT FACTORS. 14. THE EXCEPTIONS TO THE APPLICATION OF SEC 40A (3 ) IS LAID DOWN IN RULE 6DDJ. RULE 6DD AFTER ITS AMENDMENT FRO M 1995, READS AS UNDER: RULE 6DD PRIOR TO 25.7.1995, CLAUSE (J) OF RULE 6DD OF THE I T RULES READ AS FOLLOWS: 6DD....... I) IN ANY OTHER CAUSE, WHERE THE ASSESSEE SATISFIES THE ASSESSING OFFICER THAT THE PAYMENT COULD NOT BE MAD E BY A CROSS CHEQUE DRAW ON A BANK OR BY A DRAWN ON A BANK OR BY A CROSSED BANK DRAFT...... (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCE S OR (2) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NO T PRACTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULT Y TO THE PAYEE, HAVING REGARD TO THE NATURE OF THE TRANS ACTION AND THE NECESSITY FOR EXPEDITIOUS SETTLEMENT THEREO F. I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 7 AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER AS TO THE GENUINENESS OF THE PAYM ENT AND IDENTITY OF THE PAYEE. THE ABOVE CLAUSE (J) OF RULE 6DD HAS BEEN OMITTED B Y THE IT (FOURTEENTH AMENDMENT) RULES 1995 W.E.F. 27.5.1995. IT IS PERTINENT TO REFER AT THIS JUNCTU RE, TO THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN TH E CASE OF SMT. CH. MANGAYAMMA VS. UNION OF INDIA AND OTHERS (239 ITR 687), WHEREIN CONSIDERING THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF S.40A( 3) OF THE ACT IN THE LIGHT OF THE ABOVE AMENDMENT MADE TO RUL E 6DD OF THE IT RULES, THE HONBLE HIGH COURT OBSERVE D AND HELD AT PAGE 693 OF THE REPORTS (239 ITR) AS FOLLOWS: IN VIEW OF THE AFORESAID PRINCIPLES AS LAID DOWN A ND THE OBJECT AS SOUGHT TO BE ACHIEVED U/S 40A(3) OF THE A CT, ANY CHANGES MADE IN THE SUBORDINATE LEGISLATION WOU LD NOT IN ANY WAY AFFECT THE SUBSTANTIVE PROVISION. MOREOVER, BY DELETING THE CIRCUMSTANCES AS CONTEMPLATED EARLIER, VIZ., SUB CLAUSES (1) AND (2 ) OF RULE 6DD(J) THE OBJECTS OF CURBING THE CIRCULATION OF BLACK MONEY AND REGULATING THE BUSINESS TRANSACTIONS BECO ME MORE STRENGTHENED AND IT AVOIDS ANY UNDUE ADVANTAGE BEING TAKEN BY UNSCRUPULOUS ASSESSEES OR LITIGATION BEING MULTIPLIED. AS THE POSITION STANDS NOW 20% O F THE CASH TRANSACTIONS EXCEEDING RS.20,000 ARE DISALLOWE D IN COMPUTING THE BUSINESS EXPENDITURE BUT NOT THE ENTI RE RS.20,000/- WHILE THE AMENDED PROVISION CONFERS ADVANTAGE TO THE ASSESSEE TO THIS EXTENT, THE CIRCUMSTANCES PERMITTED TO BE TAKEN INTO ACCOUNT BY THE ASSESSING AUTHORITY ARE NO LONGER AVAILABLE BY REAS ON OF DELETION OF OLD RULE 6DD(J). BUT THAT BY ITSELF DO ES NOT MAKE SECTION 40A(3) ARBITRARY AND UNCONSTITUTIONAL. ONE CANNOT PLEAD IGNORANCE OF LAW AND MAKE CASH PAYMENT S CONTRARY TO LAW. IT IS TOO LATE IN THE DAY TO ACCE PT ANY SUCH PROPOSITION. FURTHERMORE, IN THE PRESENT DAY BANKING SCENARIO, THE MODE OF PAYMENT BY WAY OF CROSSED CHEQUES OR DEMAND DRAFTS CANNOT BE SAID TO BE ONEROUS DUTY CASE ON AN ASSESSEE WHICH CAN BE MADE A FOUNDATION FOR ATTACKING THE VALIDITY OF THE SAID SECTION. THEREFORE, IT IS NOT OPEN FOR ATTACKING THE PROVISI ON AS VIOLATIVE OF ANY PROVISION OF THE CONSTITUTION. TH ERE IS NO ARBITRARINESS OR DISCRIMINATION IN THE SAID PROVISI ON WARRANTING INTERFERENCE BY THIS COURT UNDER THE CIRCUMSTANCES. IN VIEW OF THE ABOVE THERE IS ABSOLUTELY NO MERITS IN THE CHALLENGE MADE AS TO THE VALIDITY OF SECTION 40A(3) OF I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 8 THE ACT BY MERE DELETION OF SUB CLAUSES (1) AND (2) OF RULE 6DD(J). THE SAID PROVISION IS PERFECTLY VALID AND WE MAY HASTEN TO ADD THAT THE DELETION OF SUB CLAUSES (1) AND (2) OF RULE 6DD(J) IS ONLY A STEP FORWARD IN TH E ACHIEVEMENT OF THE AVOWED OBJECT ENVISAGED U/S 40A( 3) OF THE ACT. 15. THEREFORE THE ONLY EXCEPTION THAT THE ASSESSEE CAN CLAIM IS WHEN PAYMENTS ARE REQUIRED TO BE MADE ON D AYS WHEN THE BANKS WERE CLOSED ON ACCOUNT OF HOLIDAYS O R STRIKE. TRANSACTIONS AFTER THE BANKING HOURS IN THE COURSE OF REGULAR BUSINESS WILL NOT FALL WITHIN THIS EXCEPTION. IN TH OSE TRANSACTIONS, THE PAYMENT IS NOT REQUIRED TO BE MAD E WHEN THE BANKS ARE CLOSED I.E. AFTER BANKING HOURS. FURTHER THE PURPOSE OF THE DISALLOWANCE U/S 40A (3) IS TO DISSUADE TRAN SACTIONS BY CASH. 16. SEC 40A(3) ITSELF PROVIDES THAT THE EXCEPTIONS WILL HAVE TO BE PRESCRIBED HAVING REGARD TO THE NATURE AND EX TENT OF BANKING FACILITIES AVAILABLE, CONSIDERATIONS OF BUS INESS EXPEDIENCY AND OTHER RELEVANT FACTORS. TAKING ALL T HESE FACTORS, CONSIDERING THE NATURE OF ACTIVITY OF THE ASSESSEE AND THE NECESSITY FOR THEM TO PAY CASH TO THE LAND OWNE RS WE ARE OF THE OPINION THAT THE CONDITION UNDER RULE 6DD FO R EXEMPTION VIZ., TRANSACTIONS SHOULD HAVE TAKEN PLACE ON BANK HOLIDAYS SHOULD BE READ DOWN IN THE CASE OF THE ASSESSEE. 17. IN THE CASE UNDER CONSIDERATION, NO BANKING FAC ILITY IS AVAILABLE WHERE THE PROPERTIES WERE PURCHASED BY AS SESSEE, THEREFORE, THERE WAS NO CHOICE FOR THE ASSESSEE EXC EPT TO MAKE THE PAYMENTS IN CASH DUE TO EXCEPTIONAL OR UN AVOIDABLE CIRCUMSTANCES AS PROVIDED UNDER RULE 6DD. IN VIEW O F THE ABOVE DISCUSSION, WE SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS. 4,09,98,105/- MADE U/S 40A(3) O F THE ACT. I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 9 18. AS REGARDS GROUND NO. 3 PERTAINING TO ADDITION OF RS. 1,30,00,000/-, THE ASSESSING OFFICER OBSERVED THAT DURING THE COURSE OF SURVEY PROCEEDINGS, WHILE RECORDING T HE STATEMENT OF SRI T. VEERAIAH CHOWDARY, MD OF THE ASSESSEE COMPANY, REGARDING THE CASH PAYMENT OF RS. 1.30 CRORES MADE TO SRI RTV PRASAD, HE SIMPLY STATE D THAT HE WAS UNABLE TO EXPLAIN THE SAME. HENCE, THE ASSESSING OFFICER ADDED THE SAID AMOUNT U/S.68 OF T HE ACT. 19. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE REPRESENTATIVE OF THE APPELLANT SUBMITTED THAT THE MANAGING DIRECTOR OF THE APPELLANT COMPANY HAD ADMITTED INCOME IN HIS INDIVIDUAL CAPACITY FOR THE ASSESSMENT YEAR 2006-07 WITH REGARD TO THE SUBJECT MATTER AND THE SAME WAS AGAIN RECONSIDERED FOR ADDITION U / S. 68 IN THE HANDS OF THE APPELLANT, W HICH AMOUNTS TO LEVYING TAX TWICE ON THE AMOUNT. IT WAS SUBMITTED THAT THE SAID AMOUNT OF RS. 1,30,00,000/ - HAD BEEN INVESTED BY SRI T. VECRAIAH CHOWDARV, THE MANAGING DIRECTOR OF THE APPELLANT COMPANY. SRI CHOWDARY HAD ADMITTED THE SAID INVESTMENT IN HIS RE TURN FOR THE A.Y. 2006-07. 20. VIDE FURTHER SUBMISSIONS, THE REPRESENTATIVE CONTENDED THAT THE ACTUAL AMOUNT FOUND DURING THE COURSE OF SURVEY AGAINST THE NAME OF SRI T. VEERAIA H CHOWDARV WAS RS. 1,05,00,000/ - ONLY AND NOT RS. 1.30,00,000/-. IN THE ASSESSMENT ORDER IN THE CASE OF SRI CHOWDARY, THE ADDITION OF RS. 1.05 CRORES WAS ACCEPTED, AS THE AMOUNT PAID WAS RS. 1.05 CRORES ON LY AND NOT RS. 1.30 CRORES. HE AVERRED THAT THE ACTUAL AMOUNT AS PER THE IMPOUNDED MATERIAL WAS ONLY RS. 1.05 CRORES AND HAVING BEEN ASSESSED IN THE HANDS O F I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 10 SRI CHOWDARY, THE SAME COULD NOT HAVE BEEN ADDED I N THE HANDS OF THE APPELLANT ONCE AGAIN. THE REPRESENTATIVE ALSO FURNISHED A COPY OF THE ASSESSM ENT ORDER IN THE CASE OF SRI T . VEERAIAH CHOWDARY FOR THE A.Y. 2006-07, ALONG WITH A COPY OF LETTER DATED 18.12.2008 FILED BY THE APPELLANT'S REPRESENTATIVE BEFORE THE DCIT CIRCLE 3(1) HYDERABAD . AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, THE LEARNED CIT(A) HELD AS FOLLOWS: 9. I HAVE GONE THROUGH THE SUBMISSION OF THE APPELLANT AND THE FACTS OF THE CASE. FROM THE LETTER OF THE APPELLANT'S REPRESENTATIVE DATED 18.12.2008, ADDRESSED TO THE DCIT CIRCLE 3(1), HYDERABAD, IT IS SEEN THAT THE APPELLANT HAD ADMITTED THAT DUE TO CONTINGENCIES IN THE MARKET, HE HAD OBTAINED FUNDS TO THE EXTENT OF RS. 1,05,00,000/- FROM VARIOUS PERSONS AND THAT HE WAS NOT IN A POSITION TO GIVE DETAILS TO ESTABLISH THE SAME. ACCORDINGLY, HE HAD ADMITTED THE SAID AMOUNT AS INCOME AS HIS INCOME. AS SEEN FROM THE ASSESSMENT ORDER IN THE CASE OF SRI T. VEERAIAH CHOWDARY FOR THE A.Y. 2006-07, THE AMOUNT OF RS. 1,05,00,000/- WAS CONSIDERED AS UNEXPLAINED IN HIS HANDS. 9.1 FROM THE SAID ASSESSMENT ORDER, HOWEVER, IT IS SEEN THAT DURING THE COURSE OF SURVEY IN THE CASE OF THE APPELLANT COMPANY, A PEN DRIVE HAD BEEN FOUND WITH THE ACCOUNTANT OF THE COMPANY. ON VERIFICATION THEREOF, CERTAIN TRANSACTIONS RELATING TO 'TVR' WERE FOUND, WHICH STOOD FOR SRI T. VEERAIAH CHOWDARY., THE TRANSACTIONS IN THE SAID PEN DRIVE SHOWED THAT THE FOLLOWING AMOUNTS AND INTEREST HAD BEEN PAID TO ONE INDIVIDUAL, SRI R. T. V. PRASAD. SR. DATE NAME AMOUNT DUE INTEREST FEB NO (RS) DATE 1 01.01.06 RTV PRASAD 1,05,00,000 1 780000 PAID 2 24.12.07 REF REF 24 467500 22.02.08 3 29.10.07 REF 1,00,00,000 29 450000 22.02.08 4 01.02.08 REF 1,65,00,000 1 930000 29.02.08 TOTAL 2,70,00000 2627500 I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 11 9.2 IT WAS STATED BY SRI CHOWDARY THAT THE LAND PERTAINED TO PEARL CITY - 11 VENTURE, AND HAD BEEN PURCHASED IN THE NAME OF SRI R. T. V. PRASAD. IN THE REPLY DATED 19.12.2008, THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAD STATED BEFORE THE ASSESSING OFFICER THAT HE WAS NOT IN A POSITION TO ESTABLISH THE FUNDS TO THE EXTENT OF RS. 1,05,00,000/- MENTIONED ABOVE AND THEREFORE THE SAME HAD ADMITTED AS INCOME IN THE HANDS OF THE APPELLANT. HOWEVER, THE AMOUNT OF RS. 1,30,00,000/-, ADDED IN THE CASE OF THE PRESENT APPELLANT HAD BEEN ADMITTED AS UNEXPLAINABLE IN THE SWORN STATEMENT OF SRI CHOWDARY RECORDED ON 24.03.2008 ITSELF. AS SEEN FROM THE ASSESSMENT ORDER ITSELF, THE APPELLANT HAD MADE THE CASH PAYMENT OF RS. 1.30 CRORES TO SRI R T V PRASAD ON 10.11.2006. ON THE CONTRARY, IT CAN BE SEEN FROM THE CHART REPRODUCED ABOVE THAT THE PAYMENT OF RS. 1,05,00,000/- TO SRI R T V PRASAD WAS MADE ON 1.1.2006 ITSELF. THEREFORE, IT IS CLEAR THAT THE PAYMENT OF RS. 1,30,00,000/- WAS A DIFFERENT PAYMENT AND WAS MADE ON A SUBSEQUENT DATE. THE APPELLANT THEREFORE, IS NOT RIGHT IN CONTENDING THAT THE AMOUNT AS PER IMPOUNDED MATERIAL WAS RS. 1,05,00,000/- ONLY. OBVIOUSLY, THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN THE SOURCE OF THE SAID PAYMENT OF RS. 1,30,00,000/- TO SRI R T V PRASAD ON 10.11.2006. ACCORDINGLY, I DO NOT FIND ANY INFIRMITY IN THE ADDITION OF THE SAID AMOUNT BY THE ASSESSING OFFICER. THEREFORE, GROUND NO.S 11 TO 13 ARE ALSO DECIDED AGAINST THE APPELLANT. 21. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT T HESE PAYMENTS ARE RELATING TO SRI T. VEERAIAH CHOWDHARY AND NOT RELATING TO ASSESSEE. WHATEVER THE ENTRIES RELATING TO THESE PAYMENTS ARE FOUND IN THE PENDRIVE WAS TAKEN AND CO NSIDERED IN THE HANDS OF SRI T. VEERAIAH CHOWDHARY FOR AY 20 06-07 AND THERE IS NO ENTRY FOR RS. 1,30,00,000/- IN THE HAND S OF ASSESSEE AS OTHER FOUR ENTRIES ARE CONSIDERED IN TH E CASE OF SRI T. VEERAIAH CHOWDHARY AND THE SAME MATERIAL FOU ND IN THE PENDRIVE. ACCORDING TO THE AR, THE DEPARTMENT IS PL AYING A DUAL ROLE. I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 12 22. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE ENTRY FOUND IN THE PENDRIVE NOT ONLY RELATING TO SR I VEERAIAH CHOUDHARY BUT ALSO RELATING TO ASSESSEE AND WHATEVE R IS RELATING TO SRI VEERAIAH CHOUDHARY WAS CONSIDERED I N THE HANDS OF SRI VEERAIAH CHOUDHARY AND THE BALANCE OF RS. 1,30,00,000/- WAS CONSIDERED IN THE HANDS OF ASSESS EE AS THERE IS NO REASONABLE EXPLANATION FROM ASSESSEE. 23. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE REVENUE AUTHORITIES. IN THIS CASE, THE ENTRY FOUND IN PENDRIVE WAS CONSIDERED N THE CASE OF SRI VEERAIAH CHOUDHARY FOR AY 2006-07. IT IS ALSO BROUGHT TO OUR NOTICE THAT VIDE LETTER DATED 18/12/2008 SHRI T. VEERAIAH CHOWDHARY THROUGH HIS A UDITOR BROUGHT TO THE NOTICE OF THE DCIT, CIRCLE 3(1) THAT THE ACTUAL AMOUNT AS PER THE IMPOUNDED MATERIAL WAS ONLY RS. 1 .05 CRORES AND NOT RS. 1.30 CRORES AND THE SAID AMOUNT WAS OFFERED FOR TAXATION IN THE HANDS OF SHRI T. VEERAI AH CHOUDHARY IN AY 2006-07. A COPY OF THE SAID LETTER WAS KEPT ON RECORD VIDE PAGE 34 OF THE PAPER BOOK. THE ASSES SMENT ORDER FOR AY 2006-07 ALSO SUGGESTS THAT THE ADDITIO N OF RS. 1.05 CRORES WAS ONLY MADE IN THE ASSESSMENT OF SHRI T. VEERAIAH CHOWDHARY. THIS SAME ENTRY PERTAINING TO T HE AMOUNT OF RS. 1,30,00,000/- WAS CONSIDERED IN THE H ANDS OF ASSESSEE, THOUGH THERE IS NO POSITIVE MATERIAL FOUN D IN THE COURSE OF SURVEY TO SUGGEST THAT THIS ENTRY PERTAIN S TO ASSESSEE. BEING SO, IN OUR OPINION, MERE GUESS WOR K IS NOT POSSIBLE WHILE FRAMING ASSESSMENT WITHOUT ANY PROPE R MATERIAL. THE ASSESSING OFFICER SHALL HAVE THE BASI S FOR ASSUMING THE UNEXPLAINED CREDIT IN THE CASE OF THE ASSESSEE AND IT IS NOT POSSIBLE TO ASSESS THE INCOME OF THE ASSESSEE IN THE ABSENCE OF ANY EVIDENCE ON ARBITRARY BASIS. THE I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 13 UNSUBSTANTIATED MATERIAL FOUND IN THE PENDRIVE CANN OT BE CONSIDERED IN THE HANDS OF THE ASSESSEE AS A CONCLU SIVE EVIDENCE SO AS TO MAKE ADDITIONS TOWARDS UNEXPLAINE D CREDIT. IT WAS HELD BY THE HONBLE SUPREME COURT IN THE CAS E OF CBI VS. V.C. SHUKLA [1998] 3 SCC 410 THAT FILE CONTAINING LOOSE SHEETS OF PAPER ARE NOT BOOKS AND ENTRIES THEREIN ARE NOT ADMISSIBLE U/S 34 OF THE EVIDENCE ACT, 1872. IN THE PRESENT CASE, THE PENDRIVE FOUND DURING THE COURSE OF SURVE Y PROCEEDINGS IN THE CASE OF T. VEERAIAH CHOUDHARY, M .D. OF ASSESSEE COMPANY, WHICH REFLECT THE CASH PAYMENT OF RS. 1.3 CRORES MADE TO SHRI RTV PRASAD. THE SAME WAS CONSID ERED IN THE HANDS OF THE SRI T. VEERAIAH CHOUDHARY AS AN IN VESTMENT FOR THE AY 2006-07. IN OUR OPINION, AS THIS IS NOT SUBSTANTIATED BY ANY CORROBORATIVE EVIDENCE TO ESTABLISH THAT THE ASSESSEE IS INVOLVED IN THIS TRANSACTION, SO AS TO MAKE ADDI TION IN THE HANDS OF THE ASSESSEE. HENCE, IN THE ABSENCE OF ANY CORROBORATIVE EVIDENCE OR MATERIAL TO ESTABLISH THA T THE ENTRY IS PERTAINING TO ASSESSEE, WE SET ASIDE THE ORDER O F CIT(A) AND DELETE THE ADDITION ON THIS COUNT. ACCORDINGLY, THIS GROUND APPEAL OF ASSESSEE IS ALLOWED. 24. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 24/01/2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 24 TH JANUARY, 2014 KV I.T.A. NO. 246/HYD/2011 SAHITYA HOUSING PVT. LTD. 14 COPY FORWARDED TO: 1. SAHITYA HOUSING PVT. LTD., C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS RESIDENCY, ROAD NO . 9, HIMAYATNAGAR, HYDERABAD. 2. DCIT, CIRCLE 3(1), HYDERABAD. 3. CIT(A)-IV, HYDERABAD 4 CIT-III, HYDERABAD 5 THE DR, ITAT, HYDERABAD