Sri. S. Srinivasa Rao, Hyderabad V. Dy.CIT, Central Circle-5, Hyderabad

ITA 252/HYD/2014

• Counselvise Citation: 25222514 RSA 2014
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 22-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 18-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained cash credit; Search and seizure; Opportunity of being heard
• Section: 143(3); 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA.NO.252/HYD/2014 ASSESSMENT YEAR 2004-2005 SRI S. SRINIVASA RAO HYDERABAD. PAN AWMPS6837M VS. DCIT, CENTRAL CIRCLE-5 HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A. SRINIVAS FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 22.04.2015 DATE OF PRONOUNCEMENT : 24.04.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-VII, HYDERABAD DATE D 27.11.2013 AND THE SOLITARY ISSUE ARISING OUT OF TH E SAME RELATES TO THE ADDITION OF RS.8,28,000 MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF THE AMOUNT CLAIMED TO BE BORROWED BY THE ASSESSEE FROM SMT. K. SWARAJYAM TREATING THE SAME A S UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT . 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDU AL. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 WAS C ONDUCTED IN THE CASE OF MR. VENGELLA ANANDA PRASAD AND OTHER S ON 07.10.2009. DURING THE COURSE OF SEARCH, CERTAIN DO CUMENTS SHOWING THE INVESTMENT MADE BY THE ASSESSEE IN PURC HASE OF 2 ITA.NO.252/HYD/2014 SRI S. SRINIVASA RAO, HYDERABAD. AGRICULTURAL LANDS WERE FOUND. SUBSEQUENTLY, NOTICE UNDER SECTION 153C WAS ISSUED BY THE A.O. IN RESPONSE TO WHICH, THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION I .E., A.Y. 2004-2005 WAS FILED BY THE ASSESSEE DECLARING TOTAL INCOME OF RS.40,322. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE WHILE EXPLAINING THE INVESTMENT MADE IN PU RCHASE OF AGRICULTURAL LAND SUBMITTED THAT SUBSTANTIAL UNSECU RED LOANS WERE BORROWED BY HIM FROM HIS FAMILY MEMBERS. DURIN G THE YEAR UNDER CONSIDERATION, SUCH LOANS WERE CLAIMED T O BE RECEIVED BY THE ASSESSEE FROM HIS MOTHER-IN-LAW SMT . K. SWARAJYAM TO THE EXTENT OF RS.8,28,000 AND SISTER K . HARITHA TO THE EXTENT OF RS. 2 LAKHS. ON EXAMINATION OF THE RELEVANT DOCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF HIS C LAIM, THE A.O. HELD THAT THE CAPACITY OF THE CONCERNED TWO CR EDITORS TO GIVE THE AMOUNTS IN QUESTION TO THE ASSESSEE WAS NO T SATISFACTORILY ESTABLISHED. ACCORDINGLY, HE TREATED THE LOANS CLAIMED TO BE RECEIVED BY THE ASSESSEE FROM HIS MOT HER-IN-LAW AND SISTER AS UNEXPLAINED AND THE AMOUNT OF RS.10,2 8,000 WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSE E UNDER SECTION 68 IN THE ASSESSMENT COMPLETED UNDER SECTIO N 143(3) READ WITH SECTION 153C OF THE ACT VIDE ORDER DATED 26.12.2011. 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECT ION 143(3) READ WITH SECTION 153C, AN APPEAL WAS PREFER RED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND AFTER CONSIDERIN G THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MAT ERIAL AVAILABLE ON RECORD, THE LD. CIT(A) TREATED THE LOA N OF RS. 2 LAKHS CLAIM TO BE RECEIVED BY THE ASSESSEE FROM HIS SISTER HARITHA AS EXPLAINED. HE HOWEVER, UPHELD THE ACTION OF THE A.O. IN TREATING THE LOAN OF RS.8,28,000 CLAIM TO B E RECEIVED BY THE ASSESSEE FROM HIS MOTHER-IN-LAW SMT. K. SWARAJY AM AS 3 ITA.NO.252/HYD/2014 SRI S. SRINIVASA RAO, HYDERABAD. UNEXPLAINED FOR THE FOLLOWING REASONS GIVEN IN PARA GRAPH NOS. 7.1 TO 7.4 OF HIS IMPUGNED ORDER. 7.1. TO ESTABLISH THE GENUINENESS OF ANY LOAN, THR EE FACTORS HAVE TO BE SEEN (A) EXISTENCE OF THE PERSON , (B) CAPACITY OF THE PERSON TO LEND AND (C) MODE OF LOAN/LENDING OF LOAN. 7.2. IN THE INSTANT CASE, THE EXISTENCE OF THE PERS ON I.E., SMT. K. SWARAJYAM IS ESTABLISHED. SHE HAS NO PERSONAL CAPACITY TO LEND AS THE SOURCE OF LENDING IS RECEIPT OF FUNDS FROM HER DAUGHTER AND SON IN LA W WHO ARE RESIDING IN USA. HOWEVER, THERE IS NO VISIBLE, IMMEDIATE NEXUS BETWEEN THE DATE OF RECEIPT OF AMOUNT FROM HER DAUGHTER AND GIVING OF THE LOAN TO THE APPELLANT. THERE ARE A NUMBER OF TRANSACTIONS IN BETWEEN AND ACTUALLY BEFORE GIVING LOAN THERE ARE FRESH CREDITS WHICH ARE IN TURN CLAIMED TO HAVE BEEN EMANATING FROM TEMPORARY HAND LOANS AND ADVANCES GIVEN TO FRIENDS AND RELATIVES AND ROTATED FROM ORIGINAL LOAN AMOUNT GIVEN BY SMT. HARITA AND SRI RATNA BABU. THUS, THERE IS NO IMMEDIATE NEXUS FOR THE EXPLANATION FURNISHED. 7.3. MODE OF RECEIPT OF LOAN IS IMPORTANT BECAUSE I T ESTABLISHES THE SOURCES OF A CREDIT AND FUND FLOW THROUGH A VERIFIABLE AND AN INDEPENDENT THIRD PARTY NAMELY, THE BANK. IT IS TO BE NOTED THAT THE LOAN AMOUNTS FROM SMT. SWARAJYAM, WERE RECEIVED BY WAY OF CASH. THUS, AN INDEPENDENT EVIDENCE FOR FUND FLOW IS MISSING. IF THERE WERE NO OTHER TRANSACTIONS OF TEMPORARY HAND LOANS BETWEEN RECEIPT OF FUNDS FROM THE NON-RESIDENT DAUGHTER AND FROM THE ADVANCEMENT OF LOAN TO THE APPELLANT, THERE WOULD HAVE BEEN SOME CREDIBILITY IN THE EXPLANATION. NOW, ONE DOES NOT REALLY KNOW WHETHER THE SAME FUNDS SURFACED WITH THE APPELLANT OR VANISHED AS TEMPORARY LOANS TO SOMEONE ELSE. THE ONUS IS ON THE APPELLANT TO PROVE BEYOND DOUBT. THAT IS NOT DONE. 7.4. IN THE LIGHT OF THE ABOVE, AS TWO OF THREE KEY FACTORS TO ESTABLISH GENUINENESS OF A LOAN ARE NOT PROVED BEYOND DOUBT, THE ADDITION ON ACCOUNT OF LOAN 4 ITA.NO.252/HYD/2014 SRI S. SRINIVASA RAO, HYDERABAD. AMOUNT OF RS.8,28,000 PURPORTEDLY RECEIVED FROM SMT. K. SWARAJYAM IS UPHELD AND THE EXPLANATION OF THE ASSESSEE IS NOT ACCEPTED. 4. THE LD. CIT(A) THUS CONFIRMED THE ADDITION OF RS.8,28,000 MADE BY THE A.O. ON ACCOUNT OF LOAN CLA IMED TO BE RECEIVED BY THE ASSESSEE FROM HIS MOTHER-IN-LAW SMT . K. SWARAJYAM TREATING THE SAME AS UNEXPLAINED CASH CRE DIT HOLDING THAT THE CAPACITY OF THE CREDITOR AS WELL A S THE GENUINENESS OF THE TRANSACTION WAS NOT PROPERLY EST ABLISHED BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. A S SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, UNSECURED LOAN S CLAIMED TO BE RECEIVED BY THE ASSESSEE FROM SMT. K. SWARAJY AM IN A.Y. 2008-2009 WERE ALSO TREATED BY THE A.O. AS UNEXPLAI NED AND WHEN THE MATTER REACHED TO THE TRIBUNAL, THE COORDI NATE BENCH OF THIS TRIBUNAL VIDE ITS ORDER DATED 28.08.2 014 PASSED IN ITA.NO.1786/HYD/2012 RESTORED THE MATTER TO THE FILE OF THE A.O. FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH N O.23. 23. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTI ES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE MATERIALS ON RECORD. AS CAN BE SEEN FROM THE ASSESSMENT ORDER AS WELL AS ORDER PASSED BY THE CIT(A) THE ASSESSEE IN FACT HAS NOT ONLY ESTABLISHE D THE IDENTITY OF THE CREDITOR, BUT HAS ALSO SUBMITTE D CONFIRMATION LETTERS IN SUPPORT OF THE LOAN RECEIVE D. FURTHER, THE A.O. HAS ALSO OBSERVED THAT FUNDS WERE TRANSFERRED FROM THE ACCOUNTS OF THE CREDITOR TO TH E ASSESSEE. IF THAT IS THE CASE, THEN THE A.O. CANNOT DISBELIEVE THE LOAN UNLESS THERE IS STRONG EVIDENCE BEFORE HIM TO SUGGEST THAT IT IS ONLY THE ASSESSEE S MONEY, WHICH WAS ROUTED THROUGH THE BANK ACCOUNT OF THE CREDITOR. FURTHER, ON A PERUSAL OF THE ORDER 5 ITA.NO.252/HYD/2014 SRI S. SRINIVASA RAO, HYDERABAD. PASSED BY THE CIT(A) FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 IT APPEARS SIMILAR LOAN RECEIVED FROM THE SAME CREDITOR WAS ACCEPTED BY THE CIT(A) AFTER EXAMINING THE BANK STATEMENTS AND OTHER EVIDENCES PRODUCED BY THE ASSESSEE. THEREFORE, IF THE ASSESSEE IS ABLE TO PROVE THE CRE DIT BY PRODUCING SIMILAR EVIDENCE AS IS THE CASE IN A.Y . 2006-07 AND 2007-08, THEN, THERE WILL BE NO REASON TO TREAT THE LOAN AS UNEXPLAINED CASH CREDIT AT THE HANDS OF THE ASSESSEE. IN THE AFORESAID VIEW OF THE MATTER, WE ARE INCLINED TO REMIT THIS ISSUE TO THE FILE OF THE A.O. FOR DECIDING AFRESH AFTER EXAMINING ALL FACTS AND MATERIALS BROUGHT ON RECORD AND ONLY AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5.1. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION AS WELL AS THE MATERIAL FACTS RELEVAN T THERETO ARE SIMILAR TO A.Y. 2008-2009 AS AGREED EVEN BY THE LEA RNED D.R., WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FO R A.Y. 2008- 2009 AND RESTORE THE ISSUE RELATING TO ADDITION MAD E ON ACCOUNT OF LOAN CLAIMED TO BE RECEIVED BY THE ASSES SEE FROM SMT. K. SWARAJYAM TREATING THE SAME AS UNEXPLAINED TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AS PER THE SAME DIRECTIONS AS GIVEN BY THE TRIBUNAL IN A.Y. 2008-20 09. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24.0 4.2015. SD/- SD/- (SMT. P. MADHAVI DEVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 24 TH APRIL, 2015. VBP/- 6 ITA.NO.252/HYD/2014 SRI S. SRINIVASA RAO, HYDERABAD. COPY TO 1. MR. S. SRINIVASA RAO, H.NO.1-7-502/11, JAMISTANPUR, MUSHEERBAD, HYDERABAD 500 020. 2. DCIT, CENTRAL CIRCLE-5, HYDERABAD. 3. CIT(A)-VII, HYDERABAD 4. CIT (CENTRAL), HYDERABAD. 5. D.R. I.T.A.T. B BENCH, HYDERABAD.