K.Venkata Reddy, Visakhapatnam V. The ITO, Visakhapatnam

ITA 305/VIZ/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6395 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R S NARAYAN
• Keywords: Unexplained investment
• Section: 143(3); 147; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER ITA NO. 305 / VIZ /201 5 (ASST. YEAR : 20 05 - 06 ) SRI K. VENKATA REDDY, D.NO. 49 - 48 - 24/4, SHANTIPURAM, VISAKHAPATNAM. VS. ITO, WARD - 4(1), VISAKHAPATNAM. PAN NO. AJTPK 8169 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FC A DEPARTMENT BY : SHRI S.R.S. NARAYAN - SR. DR DATE OF HEARING : 15 / 0 2 /201 7 . DATE OF PRONOUNCEMENT : 27 / 0 3 /201 7 . O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , VISAKHAPATNAM , DATED 2 0 /05 /201 5 FOR THE ASSESSMENT YEAR 2006 - 07 . 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS AN INDIVIDUAL, FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 1,58,926/ - AND AGRICULTURAL INCOME OF RS. 42,000/ - . THE ASSESSING OFFICER WAS OF THE OPINION THAT THERE IS AN ESCAPEMENT OF INCOME , HENCE, NOTICE UNDER SECTION 148 WAS ISSUED AND BY CONSIDERING THE REQUEST OF THE ASSESSEE, REASONS FOR REOPENING ALSO GIVEN TO THE ASSESSEE AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT DURING THE 2 ITA NO. 305/VIZ/2015 (K. VENKATA REDDY) YEAR, THE ASSESSEE ALONG WITH HI S WIFE SMT. K. SEETA MAHALAKSHMI PURCHASED AN IMMOVABLE PROPERTY SITUATED AT NARASIMHANAGAR IN VISAKHAPATNAM FOR A CONSIDERATION OF 21 LAKHS , AS AGAINST MARKET VALUE OF 24,95,000/ - REGISTERED ON 13/07/2005 VIDE SALE DEED DOCUMENT N O . 1690/2005 AND ALSO INCURRED AN AMOUNT OF 2,3 6 ,230/ - TOWARDS STAMP DUTY AND REGISTRATION CHARGES. THE SHARE OF THE ASSESSEE BEING 50% WORKS OUT TO 11,68,115/ - . THIS PROPERTY WAS LATER SOLD IN THE SAME YEAR IN TWO PARTS FOR A TOTAL CONSIDERATION OF 10 LAKHS AS AGAINST MARKET RATE OF 24,94,600/ - VIDE TWO SALE DEEDS REGISTERED AS DOCUMENT NO S . 2719/2005 AND 2720/2005 RESPECTIVELY . THE TRANSACTIONS I.E. BOTH PURCHASE AND SALE DID NOT FIND PLACE IN CASH FLOW STATEMENT SUBMITTED ALONG WITH THE RETURN OF INCOME. THEREFORE, ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF INVESTMENT . THE ASSESSEE VIDE HIS LETTER DATED 23/10/2012 SUBMITTED THAT THE SOURCE OF INVESTMENT AS FOLLOWS : - A) FROM OUT OF PROCEEDS REALIZED ON SALE OF VACANT SITE VIDE DOCUMENT NO. 1722/2004 DATED 22/04/2004 4 LAKHS ; B) FROM OUT OF FUNDS RECEIVED AGAINST AGREEMENT FOR SALE OF PROPERTY 5 LAKHS ; C) FROM OUT OF SAVINGS 2,28,000/ - . THE ASSESSING OFFICER AFTER EXAMINING THE DETAILS FILED BY THE ASSESSEE ONLY ACCEPTED THE SOURCE OF INVESTMENT TO THE TUNE OF 4 LAKHS AND THE REMAINING BALANCE OF 7 ,2 8,000 / - , T HE ASSESSING OFFICER AGAIN ASKED THE ASS ESSEE TO EXPLAIN THE SOURCE OF INVESTMENT . THE ASSESSEE HAS SUBMITTED IN RESPECT OF 5 LAKHS THAT A COPY OF SALE AGREEMENT WRITTEN ON 100/ - 3 ITA NO. 305/VIZ/2015 (K. VENKATA REDDY) STAMP PAPER ON 11/07/2005 AND HE AGREED TO SALE HIS 1/3 RD SHARE OF LAND OUT OF AC. 0 - 31 CENTS SITUATED IN MADHURAWADA FOR A SUM OF 15 LAKHS AND ON THE DATE OF AGREEMENT , HE HAD RECEIVED 5 LAKHS AS ADVANCE FROM SRI NALLAMILLI VEERABHASKARA REDDY S /O NALLAMILLI RAMA REDDY , R/O RAMAVARAM VILLAGE OF ANAPARTHY MANDAL, EAST GODAVARI DISTRICT. IT WAS SUBMITTED THAT FINALLY THE TRANSACTION WAS NOT COMPLETED. THE ASSESSING OFFICER HAS SUSPECTED THE AGREEMENT ENTERED BY THE ASSESSEE WITH SRI NALLAMILLI VEERABHASKARA REDDY AND ISSUED NOTICE TO SRI NALLAMILLI VEERABHASKARA REDDY, WHICH WAS RETURNE D WITH THE COMMENT THAT DECLINED AND HENCE RETURN TO SENDER . LATER , ASSESSING OFFICER SUMMONED DOCUMENT WRITER SRI J. SADASHIVA REDDY AND EXAMINED HIM ON OATH . THE DOCUMENT WRITER DEPOSED THAT HE HAD WRITTEN T HE DOCUMENT ON A SPECIFIC REQUEST OF THE ASSESSEE ABOUT SIX MONTHS AGO, THOUGH THE AGREEMENT WAS DATED 11/07/2005 . ON THE BASIS OF THE ABOVE DEPOSITION, THE ASSESSING OFFICER DISBELIEVED THE ASSESSEES CLAIM IN RESPECT OF ADVANCE OF RS. 5 LAKHS AGAINST AGREEMENT OF SALE AND ADDED THE SAME IN THE HANDS OF THE ASSESSEE. INSOFAR AS THE CLAIM OF SAVINGS OF RS. 2,28,000/ - IS CONCERNED , THE ASSESSING OFFICER HAS NOTED THAT NO MATERIAL WAS PRODUCED TO SUPPORT HIS CLAIM, HENCE, THE SAME IS ADDED UNEXPL AINED INVESTMENT UNDER SECTION 69 OF THE ACT AND THE ASSESSMENT WAS COMPLETED UNDER THE HEAD INCOME FROM OTHER SOURCES . 4 ITA NO. 305/VIZ/2015 (K. VENKATA REDDY) 3. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). IT WAS SUBMITTED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE SRI NALLAMIL LI VEERABHASKARA REDDY AND ALSO THE DOCUMENT WRITER SRI J. SADASHIVA REDDY. WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE AND WITHOUT FOLLOWING PROPER PROCEDURE, ASSESSMENT WAS COMPLETED, THEREFORE, PRAYED THAT ADDITION MAY BE DELETED . 4 . THE COMMISSIONER OF INCOME TAX (APPEALS) A FTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, CONFIRMED THE ORDER OF THE ASSESSING OFFICER . SO FAR AS , THE ALLEGED AMOUNT RECEIVED ON SALE AGREEMENT TO THE TUNE OF 5 LAKHS , THE COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: - 7.1. I HAVE CONSIDERED THE SUBMISSIONS AND CONTENTIONS RAISED. AT THE OUTSET IT IS TO BE NOTED THAT THE ONUS LIES ON THE ASSESSEE TO SUBSTANTIATE HIS CLAIM. THE PARTY WHO HAS ALLEGEDLY G I VEN THE ADVANCE AMOUNT HAD DECLINED TO ACCEPT THE DEPARTMENT'S SUMMONS AND THEREFORE THE ASSESSING OFFICER IS JUSTIFIED TO TAKE AN ADVERSE VIEW ON THE MATTER. THE DOCUMENT WRITER WHO WAS EXAMINED ON OATH HAS DISPOSED THAT HE HAD WRITTEN THE DOCUMENT O NLY 6 MONTHS BACK AND NOT IN 200 5 AS MENTIONED IN THE D OCUMENT. THE DEPOSITION GIVEN BY THE DOCUMENT WRITER ON OATH U/S.131 OF THE INCOME - TAX ACT HAS EVIDENTIARY VALUE AS PER THE PROVISIONS OF OATH ACT. THE SAID DOCUMENT WRITER IS NOT A PARTY TO THE AGREEMENT. HENCE, THE PLEA THAT INQUIRY WAS CONDUCTED AT THE BACK OF THE ASSESSEE HAS NO MERITS. FURTHER THE ASSESSING OFFICER COULD NOT REBUT ANY OF THE ADVERSE FINDINGS OF THE ASSESSING OFFICER DURING THE APPELLATE PROCEEDINGS. THEREFORE, I FIND THAT THE ASSESSING OFFICER WAS JUSTIFIED IN INFERRING THAT THE CLAIM OF ADVANCE OF RS.5LAKH WAS NOT GENUINE. ACCORDINGLY THE IMPUGNED ADDITION TO THE TUNE OF RS.5LAKH IS CONFIRMED. 7.2 AS REGARDS THE CLAIM OF SAVINGS OF RS.2.28 LAKH TO EXPLAIN THE SOURCE, I CONSIDER IT WOULD BE REASONABLE TO ALLOW RS.1.5 LAKH TOWARDS SUCH PLEA TAKING INTO ACCOUNT THE INCOME DECLARED BY THE ASSESSEE FOR THE SUBJECT YEAR. 5 ITA NO. 305/VIZ/2015 (K. VENKATA REDDY) 5 . SO FAR AS THE CLAIM OF SAVINGS OF 2,28,000/ - IS CONCERNED, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED 1.5 LAKHS AND THE REMAINING BALANCE , THE ORDER OF THE ASSESSING OFFICER HAS BEEN CONFIRMED. 6 . I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE FOR CONSIDERATION BEFORE ME IS TH A T THE SOURCE OF INVESTMENT MADE BY THE ASSESSEE IN RESPECT OF PURCHASE OF THE PROPERTY. THE CASE OF THE ASSESSEE IS T H A T HE ENTERED INTO AN AGREEMENT WITH SRI NALLAMILLI VEERABHASKARA REDDY ON 11/07/2005 AND RECEIVED 5 LAKHS AS ADVANCE AND IT WAS SUBMIT TED BEFORE THE ASSESSING OFFICER THAT THE TRANSACTION IS NOT COMPLETED TILL DATE. THE ASSESSING OFFICER DOUBTED ABOUT THE EXPLANATION GIVEN BY THE ASSESSEE AND ISSUED NOTICE THROUGH POSTAL AUTHORITIES , WHICH WAS RETURNED AS DECLINED AND HENCE RETURN TO S ENDER. BASED ON THE ABOVE, THE ASSESSING OFFICER CAME TO THE CONCLUSION T H A T THE TRANSACTION IS NOT A GENUINE TRANSACTION. THE ASSESSING OFFICER LATER CALLED THE DOCUMENT WRITER SRI J. SADASHIVA REDDY AND EXAMINED HIM ON OATH . SRI J. SADASHIVA REDDY SUBMITTED BEFORE THE ASSESSING OFFICER THAT ON A SPECIFIC REQUEST OF THE ASSESSEE, HE HAD WRITTEN THE DOCUMENT ONLY SIX MONTH AGO , THOUGH THE AGREEMENT WAS DATED 11/07/2005 . ON THE BASIS OF DEPOSITION GIVEN BY THE DOCUMENT WRITER SRI J. SADASHIVA REDDY A ND ALSO NON - RESPONSE T O THE NOTICE ISSUED TO SRI NALLAMILLI VEERABHASKARA REDDY, THE ASSESSING 6 ITA NO. 305/VIZ/2015 (K. VENKATA REDDY) OFFICER CAME TO A CONCLUSION THAT THE ENTIRE TRANSACTION IS NOT A GENUINE AND THE AMOUNT OF 5 LAKHS HAS BEEN TREATED AND ADDED AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT , THE SAME WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). I FIND THAT WHEN ASSESSING OFFICER HAS ISSUED NOTICE TO SRI NALLAMILLI VEERABHASKARA REDDY, WHO IS ALLEGED PARTY OF THE AGREEMENT DECLINE TO RECEIVE NOTICE, THE ASS ESSING OFFICER HAS NOT A S KE D ANY EXPLANATION FROM THE ASSESSEE , EVEN NOT ASKED TO PRODUCE SRI NALLAMILLI VEERABHASKARA REDDY BEFORE HIM. IN THIS CASE, THE ALLEGED PARTY SRI NALLAMILLI VEERABHASKARA REDDY IS A CRUCIAL PARTY, THE ASSESSING OFFICER OUGHT TO HAVE GIVEN OPPORTUNITY TO THE ASSESSEE TO PRODUCE BEFORE HIM. SUCH AN OPPORTUNITY HAS NOT BEEN GIVEN TO THE ASSESSEE. EV EN THE ASSESSING OFFICER HAS EXAMINED THE DOCUMENT WRITER SRI J. SADASHIVA REDDY AND NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CROSS EXAMINATION HIM . THEREFORE, I FIND THAT THE ASSESSING OFFICER HAS MADE AN ENQUIRY BEHIND BACK OF THE ASSESSEE WITHOUT FOLLOWING PR O PER PROCEDURE AND WITHOUT GIVING PROPER OPPORTUNITY TO SUBSTANTIATE HIS CASE AND TO PROVE THE SOURCE OF INVESTMENT. T HEREFORE, I FIND TH A T THE ASSESSING OFFICER HAS COMMITTED GROSS VIOLATION IN COMING TO THE CONCLUSION TH A T THE INVESTMENT MADE BY THE ASSESSEE IS NOT A GENUINE TRANSACTION . UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE , I FIND THAT THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 69 CANNOT BE SUSTAINED. INSOFAR AS, THE CLAIM OF SAVINGS OF 2,28,000/ - IS CONCERNED, THE COMMISSIONER OF 7 ITA NO. 305/VIZ/2015 (K. VENKATA REDDY) INCOME TAX (APPEALS) HAS ALREADY GIVEN RELIEF OF 1.5 LAKHS, HENCE, I FIND THAT THE ORDER PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS) IS JUSTIFIED AND NO INTERFERE IS CALLED FOR . IN VIEW OF THE ABOVE, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 7 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 7 T H DAY OF MARCH , 201 7 . S D / - ( V. DURGA RAO ) JUDICIAL MEMBER DATED : 2 7 T H MARCH , 201 7 . VR/ - COPY TO: 1 . THE ASSESSEE - SRI K. VENKATA REDDY, D.NO. 49 - 48 - 24/4, SHANTIPURAM, VISAKHAPATNAM. 2 . THE REVENUE ITO, WARD - 4(1), VISAKHAPATNAM. 3 . THE CIT - 2, VISAKHAPATNAM. 4 . THE CIT(A) - 2, VISAKHAPATNAM. 5 . THE D.R . , VISAKHAPATNAM. 6 . GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY , I.T.A.T., VISAKHAPATNAM