P Sathi Reddy, Hyderabad V. ITO, Hyderabad

ITA 268/HYD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3269 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-04-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 19-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI N.R.S. GANSAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA.268/HYD/2010 A.Y. 2001-02 ITA.269/HYD/2010 A.Y. 2002-03 SHRI P. SATHI REDDY, HYDERABAD (PAN AEWPP 0624 D) VS ITO, WARD 9 (1), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI H. PHANI RAJU, DR O R D E R PER: CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTE D AGAINST DIFFERENT ORDERS PASSED BY THE CIT (A)-VI, DAT ED 18.9.2007 AND PERTAINS TO THE ASSESSMENT YEARS 2001-02 AND 2002-03 RESPE CTIVELY. 2. IN THIS APPEAL, THE MAIN GRIEVANCE OF THE ASSESSEE I S W.R.T. . CONFIRMING THE LEVY OF PENALTY U/S 271(1) ( C) OF TH E IN COME TAX ACT. IN THE ASSESSMENT 2001-02. THERE WAS AN INVESTMENT OF R S.6,32,490/- ON THE PURCHASE OF A PLOT OF 483 SQ. YARDS BY ASSESSEE JO INTLY WITH OTHER TWO PARTNERS. THE ASSESSEES SHARE OF INVESTMENT IS AT RS.2,10,830/- AND THE SAME WAS TREATED AS UNEXPLAINED INVESTMENT IN THE HANDS OF THE ASSESSEE BY THE ASSESSING OFFICER AND ADDIT ION WAS MADE. HOWEVER, ON APPEAL THE CIT(A) SUSTAINED THE AD DITION AT ITA NOS.268 & 269/HYD/2010 P. SATHI REDDY, HYDERABAD 2 2 RS.10,000/- ONLY ON THIS COUNT. CONSEQUENTLY, THE ASSESS ING OFFICER CONSIDERED THIS SUSTAINED AMOUNT FOR LEVY OF PENALTY U/ S 271 (1) (C ). FURTHER, THERE WAS AN UNEXPLAINED CREDIT OF RS.85,000/ - IN THE BALANCE SHEET FILED BY THE ASSESSEE WHICH IS SAID TO BE BORROWED FR OM SMT. PREETI REDDY WIFE OF SRINIVAS REDDY, DAUGHTER IN LAW OF THE ASSESSEE RESIDING IN CANADA. THOUGH THE ASSESSEE FURNISHED THE CON FIRMATION LETTER FROM THE CREDITOR, ACCORDING TO THE ASSESSING OFFICE R, THE SAME IS NOT SATISFACTORILY EXPLAINED. HENCE THE SAME WAS TREATE D AS UNEXPLAINED CREDIT U/S 68 OF THE IT ACT. FURTHER ON APPEAL, THE CIT(A) CONFIRMED THE ADDITION ON THIS TWO COUNTS AND PENALTY W AS LEVIED U/S 271 (1) ( C), IN THE ASSESSMENT YEAR 2002-03 THERE WAS UN EXPLAINED CREDIT OF RS.5 LAKHS IN THE NAME OF SAME PERSON AS MENTI ONED ABOVE WHO IS RESIDING IN CANADA AND HENCE THE PENALTY WAS LE VIED AT RS.2 LAKHS U/S 271 (1) (C ). 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE LEARNED AUTHORIZED REPRESEN TATIVE CONTENDED THAT IN CASE OF UNEXPLAINED INVESTMENT, THE INVESTMENT WAS MADE UNDER THE NAME AND STYLE OF AOP CONSISTING OF THREE PERSONS AN D THE AOP HAS BEEN FILING RETURN OF INCOME. MORESO, THE ENTIRE INV ESTMENT WAS NOT CONSIDERED, AS UNEXPLAINED INVESTMENT, ONLY A PORTION OF RS.10,000/- WAS CONSIDERED AS BECAUSE OF SMALLNESS OF AMOUNT, THE ASSESSEE NOT ITA NOS.268 & 269/HYD/2010 P. SATHI REDDY, HYDERABAD 3 3 FILED ANY APPEAL BEFORE THE ITAT IN CASE OF QUANTUM A DDITION AND THE DEPARTMENT HAS NOT ESTABLISHED THAT THERE IS A CONCEALMEN T OF INCOME AND HE RELIED ON THE JUDGEMENT IN THE CASE OF CIT V S. RATAN LAL AGARWAL (ALLAHABAD HC) (317 ITR 336). 4. ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE RELIED ON THE FOLLOWING JUDGEMENTS: 1. UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILES P ROCESSORS & OTHERS (306 ITR 277) (SC). 2. K.P. MADHUSUDHANAN VS. CIT (251 ITR 99) (SC). 5. REGARDING THE UNEXPLAINED CREDIT, IT WAS STATED B Y THE AUTHORISED REPRESENTATIVE THAT THE ASSESSEE HAS FILED CONF IRMATION LETTER AND BY THE CONFIRMATION LETTER, THE ASSESSEE HAS DISCHARGE D THE BURDEN CAST UPON HIM. ONCE THE ASSESSEE HAS DISCHARGED HIS BURDEN, THE BURDEN SHIFTS TO THE DEPARTMENT TO PROVE THAT WHAT IS STATED BY THE ASSESSEE IS FALSE. WITHOUT ESTABLISHING THIS, THE DEPARTME NT CANNOT LEVY PENALTY U/S 271 (1) ( C) . WE FIND FORCE IN THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE. IN THIS CASE, INVESTMENT O F RS.2 LAKHS WAS ACCEPTED BY THE DEPARTMENT AS GENUINE INVESTMENT AN D ONLY THE BALANCE RS.10,000/- WAS NOT ACCEPTED AS EXPLAINED INVESTM ENT. THE ITA NOS.268 & 269/HYD/2010 P. SATHI REDDY, HYDERABAD 4 4 REASON GIVEN BY THE LOWER AUTHORITIES ARE NOT SUFFICIE NT FOR SUSTAINING THE PENALTY. MOREOVER, THE INVESTMENTS MADE BY THE ASSESSEE AS IN THE CAPACITY AS A MEMBER OF AOP AND THIS FACT IS NOT DISPUTED . AOP IS FILING RETURN OF INCOME REGULARLY. REGARDING THE UNEXPLAIN ED CREDIT, THE ASSESSEE FILED CONFIRMATION LETTER AND IN THAT, NAME A ND ADDRESS OF THE CREDITOR WAS FURNISHED. THE ASSESSING OFFICER REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE WITHOUT MAKING ANY ENQUIRY TO PR OVE THAT THE LOAN TRANSACTIONS WERE NOT GENUINE. ONCE THE ASSESSEE FIL ED CONFIRMATION LETTER, THE BURDEN CAST UPON THE ASSESSEE SHIF TS ON THE SHOULDERS OF THE DEPARTMENT. THE DEPARTMENT IS REQUI RED TO BRING THE FACTS ON RECORD REGARDING THE FALASITY OF THE INFORMA TION FURNISHED BY THE ASSESSEE, AND WITHOUT DOING SO STRAIGHT AWAY THE PENALTY CANNOT BE LEVIED. HENCE, WE ARE OF THE OPINION THAT THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS AND THE REVENUE HAS FAILED TO PROVE T HAT THESE CREDITORS ARE NOT GENUINE OR THEY HAVE NO CAPACITY TO A DVANCE THE LOAN TO THE ASSESSEE. THE CASE LAWS RELIED UPON BY THE ASSESSEES CO UNSEL SUPPORTS HIS CASE. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY REASON TO CONFIRM THE PENALTY. ACCORDINGLY, WE DELETE THE PENAL TY. ITA NOS.268 & 269/HYD/2010 P. SATHI REDDY, HYDERABAD 5 5 6. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSE ES ARE ALLOWED ON BOTH COUNTS. ORDER PRONOUNCED IN THE OPEN COURT 14.5.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH MAY, 2010 COPY FORWARDED TO: 1. SHRI P. SATHI REDDY, HYDERABAD C/O SHRI S. RAMA RAO, ADVOCATE, 102, SHRIYAS ELEGANCE , DOOR NO.3-6-643, ST.NO.9, HIMAYATNAGAR, HYDERABAD 2. ITO, WARD 9(1), HYDERABAD 3. CIT(A)-VI, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP