Sri Manchukonda Mani, Visakhapatnam V. The ITO, Ward-1(1)., Visakhapatnam

ITA 310/VIZ/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7182 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-11-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 04-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Assessee Lawyers: C V S MURTHY
• Keywords: Unexplained cash credit; Opportunity of being heard
• Section: 68; 69; 148

Judgement Text

ITA NOS 314 OF 2007 AND 310 OF 2008 MANCHUKONDA MAN I VIZAG PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.310/VIZAG/2008 ASSESSMENT YEAR:2001-02 MANCHUKONDA MANI, VISAKHAPATNAM VS. ITO WARD-1(1), VISAKHAPATNAM (APPELLANT) PAN NO: AHVPM 9252 E (RESPONDENT) ITA NO.314/VIZAG/2007 ASSESSMENT YEAR:2002-03 ITO WARD-1(1), VISAKHAPATNAM VS. MANCHUKONDA MANI, VISAKHAPATNAM (RESPONDENT) (RESPONDENT) PAN NO: AHVPM 9252 E APPELLANT BY: SHRI C.V.S. MURTHY, CA RESPONDENT BY: SHRI T.H. LUCAS PETER, CIT (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS RELATED TO THE ASSESS MENT YEAR 2001- 02 AND APPEAL OF THE REVENUE IS RELATED TO THE ASSE SSMENT YEAR 2002-03. BOTH THE APPEALS ARE DIRECTED AGAINST THE ORDERS OF LEARNED CIT(A)-1, VISAKHAPATNAM. BOTH THE APPEALS WERE HEARD TOGETHE R AND HENCE, FOR THE SAKE OF CONVENIENCE, WE ARE DISPOSING OF BOTH THE A PPEALS BY THIS COMMON ORDER. 2. THE APPEAL FILED BY THE ASSESSEE IS RELATED TO THE ASSESSMENT YEAR 2001-02 AND FOLLOWING ISSUES ARE CONTESTED IN THAT APPEAL: A) VALIDITY OF REOPENING UNDER SECTION 148 B) ADDITION OF RS.6,63,500/-MADE UNDER SECTION 69 OF THE ACT. 3. DURING THE COURSE OF HEARING, THE LEARNED AUTHOR ISED REPRESENTATIVE RESTRICTED HIS ARGUMENT WITH REGARD TO THE ADDITION OF RS.6,63,500/- ONLY. ACCORDINGLY WE DISMISS THE GROUND RELATING TO THE V ALIDITY OF REOPENING OF ITA NOS 314 OF 2007 AND 310 OF 2008 MANCHUKONDA MAN I VIZAG PAGE 2 OF 6 THE ASSESSMENT. THE FACTS RELATING TO THE ADDITIONS OF RS.6,63,500/- ARE STATED IN BRIEF. THE ASSESSEE DID NOT FILE HER RETU RN OF INCOME FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2001-02. I N THE COURSE OF ASSESSMENT PROCEEDINGS RELATING TO THE ASSESSMENT Y EAR 2002-03, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPE NDITURE OF RS.1,39,335/- ON UNSECURED LOANS TAKEN FOR THE PURPOSE OF CONSTRU CTION OF HOUSE PROPERTY. IN THIS CONTEXT, THE ASSESSING OFFICER CA LLED FOR THE DETAILS OF UNSECURED LOANS TAKEN BY THE ASSESSEE. IN RESPONSE THE ASSESSEE FURNISHED A LIST OF LOAN CREDITORS CONTAINING 36 PERSONS FROM WHOM THE ASSESSEE HAD TAKEN CASH LOANS ON VARIOUS DATES AND THE AMOUNT OF LOAN IN EACH CASE WAS LESS THAN RS.20,000/-. IN ORDER TO EXAMINE THESE C REDITORS, THE ASSESSING OFFICER ISSUED LETTERS AND SUMMONS TO THEM. THE LE TTERS ISSUED TO SOME OF THE CREDITORS WERE RETURNED UN-SERVED FOR THE REASO N THAT THE ADDRESS WAS INCOMPLETE, SUMMONS ISSUED TO CERTAIN CREDITORS WER E RECEIVED BACK WITH POSTAL REMARKS NO SUCH PERSON AND CERTAIN CREDITO RS DENIED THE LOAN TRANSACTIONS. HENCE THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF THE ASSESSMENT YEAR 2001-02 BY ISSUING NOTICE UNDER SEC TION 148 OF THE ACT, SINCE THE SAID LOANS WERE CLAIMED TO HAVE BEEN TAKE N IN THAT YEAR. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ADDIN G THE UNSECURED LOAN AMOUNT OF RS.6,63,500/- TO THE TOTAL INCOME OF THE ASSESSEE. THE LEARNED CIT (A) TOOK THE VIEW THAT THESE CREDITS CANNOT BE ADDED UNDER SECTION 68 OF THE ACT, SINCE THE ASSESSEE DID NOT MAINTAIN BOO KS OF ACCOUNT. HOWEVER, SINCE THESE LOANS HAD BEEN EXPLAINED TO BE THE SOUR CE FOR THE CONSTRUCTION OF A HOUSE, THE LEARNED CIT(A) HELD THAT THE ASSESS EE IS REQUIRED TO PROVE THESE LOANS UNDER SECTION 69 OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO PROVE THE CREDITORS, THE LEARNED CIT(A) CONFIRMED T HE SAID ADDITION UNDER SECTION 69 OF THE ACT. HENCE THE ASSESSEE IS IN APP EAL BEFORE US. 3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. ACCORDING TO THE LEARNED AUTHORISED REPRESENTATIVE THE ASSESSMENT WAS REOPENED AFTER SEVERAL YEARS BY WHICH TIME MANY OF THE CREDITORS HAD SHIFTED THEIR RESIDENCES AND HENCE THE ASSESSEE COU LD NOT PROPERLY COOPERATE WITH THE ENQUIRIES MADE BY THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER CONDUCTED ENQU IRES DURING THE COURSE ITA NOS 314 OF 2007 AND 310 OF 2008 MANCHUKONDA MAN I VIZAG PAGE 3 OF 6 OF ASSESSMENT PROCEEDINGS RELATING TO THE ASSESSMEN T YEAR 2002-03 AND NOT IN THE ASSESSMENT YEAR 2001-02. ACCORDINGLY IT WAS PLEADED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE MAY BE AFFORDED ONE MORE OPPORTUNITY TO PROVE THESE CREDITORS. THE LEARNED D EPARTMENTAL REPRESENTATIVE ALSO DID NOT OBJECT TO THE SAID PLEA MADE BY THE LEARNED A.R. 3.2 UNDER SEC. 69 OF THE ACT, AN ASSESSEE IS UN DER AN OBLIGATION TO OFFER EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVE STMENTS WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINE D BY HIM FOR ANY SOURCE OF INCOME. IN THE INSTANT CASE, THE ASSESSEE HAS MA DE INVESTMENT IN CONSTRUCTION OF BUILDING AND HENCE SHE IS UNDER OBL IGATION TO EXPLAIN THE SOURCES FOR THE SAID CONSTRUCTION, EVEN IF SHE DOES NOT MAINTAIN ANY BOOKS OF ACCOUNT. THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE GENUINENESS OF THE LOANS AND ACCORDINGLY ADDED THE ABOVE SAID AMOU NT AND THE LEARNED CIT(A) ALSO CONFIRMED THE SAME. SINCE BOTH THE PAR TIES HAVE AGREED THAT THE IMPUGNED ISSUE MAY BE SET ASIDE FOR EXAMINATION AFRESH, WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO E XAMINE THESE CREDITORS AFRESH IN ACCORDANCE WITH THE LAW, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. THE ASSESSEE IS ALSO DIRECTED TO COOPE RATE WITH THE ASSESSING OFFICER IN THIS REGARD. 4. THE APPEAL FILED BY THE REVENUE IS RELATED TO TH E ASSESSMENT YEAR 2002-03 AND THE REVENUE IS ASSAILING THE DECISION O F LEARNED CIT(A) IN GRANTING RELIEF IN RESPECT OF THE FOLLOWING TWO ADD ITIONS.: A) CLAIM OF INTEREST EXPENDITURE OF RS.1,39,335/- B) UNEXPLAINED CREDITS RS.14,13,970/- 4.1. THE ASSESSEE CLAIMED INTEREST EXPENDITURE OF R S.139,335/- ON THE UNSECURED LOANS CLAIMED TO HAVE BEEN TAKEN IN THE I MMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER CONDUCTED ENQUIRIES AN D HE WAS NOT SATISFIED WITH THE GENUINENESS OF THE LOANS. HENCE THE ASSES SING OFFICER DISALLOWED THE INTEREST CLAIMED ON THE SAID LOANS. THE LEARNE D CIT(A) NOTICED THAT THE ITA NOS 314 OF 2007 AND 310 OF 2008 MANCHUKONDA MAN I VIZAG PAGE 4 OF 6 SAID LOANS HAD BEEN OBTAINED BY THE ASSESSEE IN THE PRECEDING PREVIOUS YEAR AND ACCORDINGLY THE ASSESSING OFFICER HAD REOP ENED THE ASSESSMENT OF THE PRECEDING YEAR. ACCORDINGLY THE LEARNED CIT(A) OPINED THAT THE SAID ADDITION IS NOT SUSTAINABLE SINCE THE LOANS HAVE NO T BEEN PROVED TO BE BOGUS BY THAT TIME. ACCORDINGLY THE LEARNED CIT(A) DELETED THE IMPUGNED ADDITION OF RS.1,39,335/-. 4.2 IN THE APPEAL OF THE ASSESSEE FILED FOR THE ASS ESSMENT YEAR 2002-01, VIDE OUR ORDER IN PARAGRAPH NO.4 (SUPRA), WE HAVE S ET ASIDE THE ADDITION RELATING TO THE LOAN CREDITORS TO THE FILE OF ASSES SING OFFICER WITH A DIRECTION TO EXAMINE THE LOAN CREDITORS AFRESH. IT WAS ACCEPT ED BY BOTH THE PARTIES THAT THE IMPUGNED INTEREST EXPENDITURE OF RS.1,39,3 35/- IS RELATED TO THE ABOVE SAID LOAN CREDITORS AND HENCE THE SUSTAINABIL ITY OF THE SAME WOULD DEPEND UPON THE OUTCOME OF THE FRESH ENQUIRY CONDUC TED BY THE ASSESSING OFFICER ON THE SAID LOAN CREDITORS. ACCORDINGLY WE FEEL IT PROPER TO SET ASIDE THIS ISSUE ALSO TO THE FILE OF THE ASSESSING OFFICE R, AS THE SUSTAINABILITY OF THE IMPUGNED ADDITION WOULD DEPEND UPON THE OUT COME OF THE ENQUIRIES CONDUCTED ON THE LOAN CREDITORS. WE ORDER ACCORDIN GLY. 4.3 THE NEXT ISSUE RELATES TO THE ADDITION OF CAS H CREDIT OF RS.14,13,970/-. DURING THE SCRUTINY PROCEEDINGS, THE ASSESSING OFFI CER NOTICED EXAMINED THE BANK ACCOUNT OF THE ASSESSEE AND CALLED FOR EXPLANA TIONS WITH REGARD TO THE TWO CREDITS MENTIONED BELOW:- A) CREDIT FOUND ON 16.3.2002 RS.11,50,000/- B) CREDIT FOUND ON 4.7.2001 - RS. 2,63,970/- THE EXPLANATIONS FURNISHED BY THE ASSESSEE WERE NOT CONVINCING TO THE ASSESSING OFFICER AND HENCE HE ADDED BOTH THE AMOUN TS TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE LEARNED CIT (A) THE AS SESSEE EXPLAINED THAT THE AMOUNT OF RS.2,63,970/- WAS RECEIVED FROM M/S SRI D EVI CHIT FUNDS (P) LTD. THE ASSESSEE ALSO FURNISHED OBTAINED FROM THE CHIT FUND COMPANY. THE AMOUNT OF RS.11,50,000/- WAS CLAIMED TO HAVE BEEN R ECEIVED FROM THE MOTHER OF THE ASSESSEE NAMED SMT. M. GAJALAKSHMI, W HO CLAIMED THAT SHE HAS PAID THE ABOVE SAID AMOUNT OUT OF THE SALE PROC EEDS OF RS.10.00 LAKHS OBTAINED ON SALE OF A HOUSE PROPERTY. BASED ON THES E EXPLANATIONS, THE ITA NOS 314 OF 2007 AND 310 OF 2008 MANCHUKONDA MAN I VIZAG PAGE 5 OF 6 LEARNED CIT (A) DELETED BOTH THE ADDITIONS. HENCE T HE REVENUE IS IN APPEAL BEFORE US. 4.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WITH REGARD TO THE ADDITION OF RS.2,63,970/-, WE NOTICE THAT THE ASSESSING OFFICER HAS SUMMONED THE BANK OFFICIAL AND HE PRODUCED AN O UTWARD REGISTER MAINTAINED BY THE BANK. ON EXAMINATION OF THE SAID RECORD OF BANK, THE ASSESSING OFFICER FOUND THAT THE SAID CHEQUE WAS RE CEIVED FROM LAKSHMI SRI DEVI CHIT FUNDS. ACCORDINGLY, THE ASSESSING OFFICE R HAS OBSERVED THAT THE ASSESSEE MIGHT HAVE RECEIVED THE BID AMOUNT FROM TH E SAID CHIT COMPANY. HOWEVER, HE PREFERRED TO ADD THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE LEARNED CIT (A), WE NOTICE THAT THE ASSE SSEE HAS FURNISHED THE COPY OF ACCOUNTS OBTAINED FROM THE CHIT FUND COMPAN Y AND THE LEARNED CIT (A) HAS DELETED THE SAID ADDITION AFTER MAKING DUE VERIFICATION OF THE SAME. THUS THE VIEW EXPRESSED BY THE ASSESSING OFF ICER WAS CONFIRMED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) BY FURNISHIN G NECESSARY EVIDENCES. THE LEARNED CIT(A) HAS ALSO EXAMINED THE ACCOUNT CO PY PRODUCED FROM THE CHIT FUND COMPANY AND WAS SATISFIED WITH THE EXPLAN ATIONS OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED CIT (A) IN DELETING THE IMPUGNED ADDITION O F RS.2,63,970/- AND WHEN THIS WAS PUT TO THE LEARNED DEPARTMENTAL REPRE SENTATIVE ALSO, HE DID NOT OBJECT TO THE VIEWS EXPRESSED BY US. HENCE WE UPHOLD THE ORDER OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.2,63, 970/-. 4.5 IN SO FAR AS THE ADDITION OF RS.11,50,000/- IS C ONCERNED, IT IS NOTICED THAT THE ASSESSEE HAD CLAIMED BEFORE THE ASSESSING OFFICER THAT SHE HAD TAKEN THE SAME AS ADVANCE FROM M.V. JAGANNADHAM AND FURTHER STATED THAT THE SAID AMOUNT MAY BE THE SAME AMOUNT WHICH WAS TA KEN AS ADVANCE FROM THE BUILDER. SINCE THE REPLY WAS VERY VAGUE, THE ASSESSING OFFICER ADDED THE CREDIT OF RS.11.50 LAKHS TO THE TOTAL INC OME OF THE ASSESSEE. BEFORE THE LEARNED CIT (A), THE ASSESSEE CHANGED HI S VERSION AND STATED THAT IT HAS BEEN RECEIVED FROM HER MOTHER NAMED SMT . GAJALAKSHMI, WHO CLAIMED THAT SHE HAS PAID THE AMOUNT OUT OF THE SAL E PROCEEDS OF RS.10.00 LAKHS OBTAINED ON SALE OF A HOUSE PROPERTY. WE NOTI CE THAT THE LEARNED CIT ITA NOS 314 OF 2007 AND 310 OF 2008 MANCHUKONDA MAN I VIZAG PAGE 6 OF 6 (A) DID NOT CONFRONT THESE NEW EXPLANATIONS WITH TH E ASSESSING OFFICER. HENCE, WE ARE OF THE VIEW THAT THE NEW EXPLANATIONS OFFERED BEFORE THE LEARNED CIT (A) SHOULD BE EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED CIT (A) ON TH IS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WI TH A DIRECTION TO EXAMINE THE DEPOSIT OF RS.11,50,000/- AFRESH IN ACCORDANCE WITH THE LAW, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREA TED AS ALLOWED AND THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:15-02-2011 COPY TO 1 SHRI MANCHUKONDA MANI, PLOT NO.26, PANDURANGAPURA M, VISAKHAPATNAM 2 THE ITO WARD-1(1) VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A)-1, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM