Appeal Details
Counselvise Citation
[2014] 120 COUNSELVISE.COM (IT) 5576 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
10 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-02-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2009-2010
Appeal Filed On
28-03-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 401/HYD/2013 ASSESSMENT YEAR 2009-10 DR. CHILUKURI SHART BABU WARANGAL PAN: AEBPC2265G VS. THE ASST. CIT CIRCLE-1 WARANGAL [APPELLANT] [RESPONDENT] APPELLANT BY: SRI K.V. CHALAMAIAH RESPONDENT BY: SMT. K. HARITA DATE OF HEARING: 11.02.2014 DATE OF PRONOUNCEMENT: 11.02.2014 ORDER PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-VI, HYDERABAD DATED 10.12.2012 FOR A.Y. 2009-10. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE SUSTAINING ADDITION OF RS. 10,00,000 OUT OF TOTAL GIFTS OF RS. 14,60,000 RECEIVED FROM MRS. SUBBAYAMMA, MOTHER OF APPELLANT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS WHILE SUSTAINING ADDITION OF RS. 6,47,883 BEING DISALLOWANCE OF INTEREST PAID ON BANK LOAN ON THE GROUND THAT THE LOAN OBTAINED FROM BANK WAS UTILISED FOR PERSONAL USE BY APPELLANT'S WIFE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATI ON ADMITTING TOTAL INCOME OF RS. 22,67,220. IN THE AS SESSMENT COMPLETED U/S. 143(3), THE AO HAD MADE THE FOLLOWING ADDITIONS TO THE INCOME RETURNED AND THEREBY ARRIVE D AT THE TAXABLE INCOME OF RS. 46,71,870: 1. UNEXPLAINED CASH CREDITS : RS. 17,60,000 2. DISALLOWANCE OF INTRAOCULAR CARE EXPENSES : RS. 74,791 3. ADDITION U/S. 40A(2)(B) : RS. 6,47,883 4. UNACCOUNTED INCOME AS PER TDS CERTIFICATES : RS. 33,000 4. AGAINST ALL THE ABOVE ADDITIONS, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). HOWEVER, BEFORE THE CIT( A), THE ASSESSEE NOT PRESSED THE GROUND RELATING TO DISALLO WANCE OF INTRAOCULAR CARE EXPENSES AT RS. 74,791 AND UNACCOU NTED INCOME AS PER TDS CERTIFICATES OF RS. 33,000. ACCO RDINGLY, THESE GROUNDS ARE DISMISSED BY THE CIT(A). 5. ADDITION OF UNEXPLAINED CASH CREDITS OF RS. 17,60,0 00 . THIS ADDITION IS MADE TREATING THE GIFTS RECEIVED F ROM PARENTS OF THE ASSESSEE AS UNEXPLAINED. THE ASSESSEE HAS S HOWN CERTAIN CREDITS IN TO HIS BOOKS DURING THE YEAR AND AMONG THEM AN AMOUNT OF RS. 14,60,000 HAS REPRESENTED THE GIFTS FROM SMT. C. SUBBAYAMMA, MOTHER OF THE ASSESSEE AND RS. 3,00,000 FROM DR. C. SRI RAMA MURTHY, FATHER OF T HE ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 3 ASSESSEE. THE AO DISBELIEVED THE GIFTS FOR THE FOLL OWING MAIN REASONS AND TREATED THEM AS UNEXPLAINED CREDITS IN THE HANDS OF THE ASSESSEE, FOR THE YEAR UNDER REFERENCE: (A) THE STAMP PAPERS ON WHICH THE GIFT DEEDS WERE MADE, WERE NOT GENUINE, AS THE SAME WERE NOT SOLD ON THE DATE, ON WHICH THEY ARE SHOWN TO HAVE BEEN PURCHASED BY THE AGENTS OF MRS. C. SUBBAYAMMA AND MR. C. SRI RAMA MURTHY. (B) THE ASSESSEE FAILED TO SHOW THE CREDITWORTHINESS OF THE DONORS, BY FAILING TO FURNISH THE REQUIRED INFORMATION, EXCEPT THE ITR FOR AY 09-10. 6. THE ASSESSEE OBJECTED TO THE ABOVE ADDITIONS AND TH E EXPLANATIONS OFFERED TO SUBSTANTIATE THE GENUINENES S OF THE GIFTS AND CREDITWORTHINESS OF DONORS, APART FROM CO NTESTING THE OBSERVATIONS OF THE AO ON THE CASH GIFTS, ABSEN CE OF GIFT DEEDS FOR EACH GIFT AND THE CORRECT DETAIL/NUMBER OF THE STAMP PAPERS USED FOR DRAFTING THE GIFT DEEDS BY TH E PARENTS OF THE ASSESSEE ETC. AS PER THE ASSESSEE, THE AO DI SBELIEVED THE EXPLANATION OFFERED BY THE ASSESSEE DURING ASSE SSMENT PROCEEDINGS, SOLELY DOUBTING THE AUTHENTICATION OF STAMP PAPERS USED FOR GIFT DEEDS. IT HAS BEEN FURTHER CON TENDED THAT THE DONORS ARE PARENTS OF ASSESSEE AND BOTH HAVE EX PLAINABLE SOURCES OF INCOME AND CAPABLE OF EXTENDING GIFTS AS REFLECTED IN FINANCIAL STATEMENTS FILED ALONG WITH RETURN OF INCOME FILED BY THEM. IT WAS FURTHER CONTESTED BY THE ASSESSEE T HAT AO CANNOT SIMPLY IGNORE THE CONFIRMATIONS OF GIFTS MAD E BY ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 4 ASSESSEE'S MOTHER. IN CASE OF DR. SREE RAMA MURTHY , THE ASSESSEE'S FATHER, THE NET INCOME DECLARED FOR THE A.Y. 2009- 10 IS RS. 4,20,461/- BESIDES HAVING OPENING DEBIT B ALANCE OF RS. 3,46,096/- OUT OF WHICH GIFT OF RS. 3,00,000/-W AS GIVEN TO THE ASSESSEE, DURING THE YEAR UNDER REFERENCE. 7. THE CIT(A) OBSERVED THAT AS PER THE INFORMATION BROUGHT ON RECORD, THE ASSESSEE A MEDICAL DOCTOR RU NNING A NURSING HOME AT WARANGAL AND DURING THE YEAR UNDER REFERENCE, GIFTS TO THE EXTENT OF RS. 17,60,000/- W ERE OBTAINED, WITH GIFTS OF RS. 14,60,000/- FROM MRS. C . SUBBAYAMMA, THE MOTHER AND RS. 3,00,000/- FROM MR. SREE RAMA MURTHY, FATHER OF ASSESSEE. AS PER THE AO, GIF TS OF RS. 3,00,000/- FROM DR. SREE RAMA MURTHY, WITH INDIVIDU AL GIFTS OF RS. 1,00,000/- MADE ON 09.01.2009 AND RS. 2,00,0 00/- ON. 06.02.2009, WERE EXECUTED BY GIFT DEED NO. 4782 DAT ED 12.12.2008 AND WAS BEARING STAMP PAPER NO. R380281. SIMILARLY, TOTAL GIFTS OF RS. 14,60,000/- WERE EXEC UTED BY MRS. SUBBAYAMMA THROUGH THE GIFT DEED DATED 12.12.2008, ON STAMP PAPER BEARING NO. R380415 AND THE DETAILS OF INDIVIDUAL GIFTS EXECUTED ALONG WITH DATES AND AMOU NTS ARE AS UNDER: 14.04.2008 - RS. 1,50,000 14.04.2008 - RS. 1,10,000 30.09.2008 - RS. 1,00,000 03.12.2008 - RS. 3,65,000 ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 5 10.12.2008 - RS. 4,00,000 15.12.2008 - RS. 2,00,000 11.01.2009 - RS. 35,000 19.01.2009 - RS. 1,00,000 8. AS COULD BE SEEN FROM THE ABOVE, SOME OF THE GIFTS, INDICATED DATE-WISE IN THE CASE OF MRS. C. SUBBAYAM MA, AND BOTH THE GIFTS IN CASE OF DR. SRI RAMA MURTHY ARE S UBSEQUENT TO THE DATE OF EXECUTION OF THE GIFT DEEDS DATED 12 .12.2008. FURTHER, THE REASON FOR DISBELIEVING WAS THE ENQUIR Y CONDUCTED BY THE A.O. ON THE CORRECTNESS OF THE INF ORMATION ON THE STAMP PAPERS USED FOR EXECUTING THE GIFT DEE DS. AS PER AO, THE STAMP PAPERS USED FOR BOTH THE GIFT DEEDS A RE NOT MATCHED WITH THE INFORMATION COLLECTED FROM REGISTR AR OF STAMPS. HENCE, THE AO PRESUMED THAT THE GIFTS ARE N OT GENUINE AND ONLY TO LEGITIMISE THE SAME, THE GIFT D EEDS ON STAMP PAPERS, WERE UTILISED. THE SUMMARY OF THE REA SONS GIVEN BY THE AO FOR DISBELIEVING THE GIFTS ARE; (A) AUTHENTICITY OF STAMP PAPERS. (B) THE NON-PRODUCTION OF STAMP PAPER PURCHASERS WHO PURCHASED IN FAVOUR OF DONORS AND NOT PROVIDING ADDRESSES OF THEM. (C) REASONS FOR EACH GIFT NOT SUPPORTED BY SEPARATE GIF T DEED. (D) ASSESSEE WAS ASKED TO FURNISH THE ITRS AND FINANCIA L STATEMENTS OF LAST THREE YEARS OF DONORS, BUT FURNISHED FOR ONLY ONE YEAR I.E. 2009-10 A.Y. ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 6 9. THE CIT(A) OBSERVED THAT THERE IS TRUTH IN THE OBSERVATIONS BY THE AO FOR DISBELIEVING THE GIFT DE EDS SHOWN TO HAVE EXECUTED BY THE DONORS MRS. C. SUBBAYAMMA A ND DR. SREE RAMA MURTHY, IN FAVOUR OF THE ASSESSEE, SINCE ALL THE ABOVE FACTS RELATED TO THE GIFTS ARE NOT BROUGHT ON THE RECORD. HOWEVER, AS SUBMITTED BY THE ASSESSEE, THE GIFTS CA N ALSO BE TRANSFERRED THROUGH ORAL AGREEMENT/CONSENT AS WELL A ND NOT NECESSARY THROUGH THE DEED, NOT TO MENTION ABOUT SE PARATE DEED FOR EACH GIFT. IN SUCH A CASE, RELIANCE ON THE PROCEDURE ON GIFTING MAY BE LESS DESIRABLE. THE REASONS OF SA ID NATURE ARE MORE RELEVANT IN THIS CASE, SINCE BOTH THE DONO RS ARE PARENTS OF THE ASSESSEE WHO SIGNED THE CONFIRMATION S FOR THE GIFTS AND THERE IS NO DENIAL OF THIS FACT. IN SUCH A SITUATION WHAT IS RELEVANT TO STRESSED 'UPON IS THE CREDITWOR THINESS OF THE DONORS AND GENUINENESS OF THE TRANSACTIONS. AS COULD BE SEEN FROM THE GIFT DEEDS AND AS INDICATED, SOME OF THE GIFTS ARE POSTERIOR TO THE GIFT DEEDS AND ALL THE GIFTS A RE BY CASH, AND AS SUCH THERE ARE REASONS TO RAISE DOUBTS ON TH E TRANSACTIONS. HOWEVER, KEEPING THE FACT THAT DONORS ARE PARENTS OF ASSESSEE AND HAVING CONFIRMED THE TRANSA CTIONS, THE MAIN REASON FOR OF DISBELIEVING THE GIFTS FALLS ON THE CREDITWORTHINESS OF THE DONORS, RATHER THAN THE IDE NTITY OF THE DONORS AND GENUINENESS OF THE GIFTS. ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 7 10. THE CIT(A) OBSERVED THAT IN CASE OF THE GIFTS SHOWN TO HAVE RECEIVED FROM DR. SREE RAMA MURTHY, THE FATHER OF THE ASSESSEE, THE SOURCES EXPLAINED ARE FOR THE INCOME FROM HIS PROFESSION AND FOR THE YEAR UNDER REFERENCE, SUCH I NCOME WAS SHOWN TO BE ABOVE RS. 4 LAKHS APART FROM DEBIT BALA NCES, CARRIED FROM THE EARLIER YEARS WHICH MAY EXPLAIN TH E GIFTS OF RS. 3 LAKHS, QUITE COMFORTABLY. IN VIEW OF THE ABOV E, THE CIT(A) WAS INCLINED TO ACCEPT THE ARGUMENT OF THE A SSESSEE THAT DR. SREE RAMA MURTHY HAVE ENOUGH SOURCES TO EX PLAIN THE GIFT OF RS. 3.00 LAKHS GIVEN TO THE ASSESSEE, A ND TREATMENT OF SUCH GIFT OF RS. 3,00,000/- AS UNEXPLAINED CREDI T IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED. 11. THE CIT(A) OBSERVED THAT IN THE CASE OF THE GIFT OF RS. 14,60,000/-, SHOWN TO HAVE RECEIVED FROM MR. SUBBAY AMMA, MOTHER OF ASSESSEE, THE SOURCES WERE SHOWN AS INTER EST INCOME. HOWEVER, THE RETURN OF INCOME WAS FILED ONL Y FOR AY 2009-10 AND THERE IS NO PROOF FOR HAVING FILED THE RETURNS OF INCOME FOR EARLIER YEARS. HENCE, THE SOURCES FOR TH E MONEY CIRCULATED FOR THE MONEY LENDING ACTIVITY AND SALE PROCEEDS OF LAND THAT WAS STATED TO HAVE RECEIVED THROUGH HER B ROTHER ARE MUCH IN THEORY, THAN ON THE SUBSTANCE. AS PER THE R ETURN OF INCOME FOR AY 2009-10, WHICH WAS FILED BELATEDLY, T HE TOTAL INCOME OF THE DONOR (MRS. C. SUBBAYAMMA) IS AROUND RS. 3.00 ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 8 LAKHS, UNDER THE HEAD BUSINESS INCOME OF MONEY LEND ING FROM WHICH INCOME SHOWN AS INTEREST. THERE IS NO CO NCRETE INFORMATION FOR THE REST OF THE EXPLANATIONS OFFERE D BY THE DONOR, MRS. SUBBAYAMMA, FOR EXPLAINING HER SOURCES FOR MAKING GIFTS TO HER SON, THE ASSESSEE, TO THE TOTAL EXTENT OF RS. 14,60,000/-. 12. THE CIT(A) REFERRED TO THE PROVISIONS OF SEC. 68 WH ICH DEAL WITH THE CASH CREDITS SINCE GIFTS ALSO FALL IN THE AMBIT OF CASH CREDIT. SEC. 68 OF IT ACT PROVIDES FOR ADDITIO N TO INCOME, IF ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNT, MAINTAINED FOR ANY PREVIOUS YEAR, AND ASSESSEE OFFE RS NO EXPLANATION ABOUT THE NATURE AND SOURCES OF SUCH CR EDIT OR EXPLANATION OFFERED BY ASSESSEE IS NOT SATISFACTORY IN THE OPINION OF ASSESSING OFFICER. IN THIS CASE THE CRED ITS OF RS. 14:,60,000/- SHOWN IN THE NAME OF MRS. C. SUBBAYAMM A, WERE EXPLAINED THROUGH THE GIFTS FROM HER, BUT SUCH EXPL ANATION IS NOT CONSIDERED AS SATISFACTORY FOR THE REASONS THAT MRS. SUBBARAYAMMA HAS FILED THE RETURN OF INCOME ONLY FO R ONE YEAR I.E. AY 2009-10 AND SUCH TOTAL INCOME IS NOT E XCEEDING RS. 3,05,970/-, FROM ALL HER SOURCES AND THERE ARE NO CONCRETE INFORMATION ON SOURCES OF INCOME TO HER IN THE EARL IER YEARS, TO EXPLAIN THE CREDITS/GIFTS OF FULL AMOUNT OF RS. 1 4,60,000/- SIMPLE FILING OF CONFIRMATION OF THE DONOR MAY NOT ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 9 SUBSTANTIATE THE AMOUNTS OF GIFTS/CREDITS. IN THIS CONTEXT, IT IS RELEVANT TO REFER TO THE JUDICIAL DECISIONS OF HON' BLE SUPREME COURT IN THE CASES OF 1) ROSHAN DI HATTI VS. CIT (1 07 ITR 938) AND 2) KALE KHAN MOHAMMAD HANIF VS. CIT (50 ITR 1), WHEREIN THE RATIO OF DECISIONS INDICATE THAT, WHEN THE SOUR CE OF A RECEIPT CANNOT BE-EXPLAINED SATISFACTORILY BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT IT IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES O N THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICU LAR SOURCE. 13. THE CIT(A) OBSERVED THAT IN THE INSTANT CASE, AS RE GARD TO THE SOURCES FOR MRS. C. SUBBAYAMMA, FOR MAKING G IFTS OF RS. 14,60,000/- TO THE ASSESSEE, THE EXPLANATION OF THE ASSESSEE WAS THAT SUFFICIENT DOCUMENTARY EVIDENCE I N THE FORM OF VALID RETURNS OF INCOME WERE FILED, TO PROV E THE SOURCES AND AS SUCH THERE IS NO JUSTIFICATION TO AD D BACK THE GIFT. THIS ARGUMENT IS NOT TENABLE, FOR THE SIMPLE REASON THAT RETURN OF INCOME FILED BY MRS. SUBBAYAMMA IS ONLY F OR SOLITARY YEAR OF AY 2009-10 ALONG WITH THE STATEMEN T OF AFFAIRS INDICATING THE UNPROVED/UNVERIFIED CREDITS O R DEBITS IN THE BALANCE SHEET/CAPITAL ACCOUNT FURNISHED WITH A T OTAL INCOME NOT EXCEEDING RS. 3.05 LAKHS, CANNOT EXPLAIN THE GIFT OF RS. 14,60,000/-. UNDER THE CIRCUMSTANCES, IT CAN BE HELD ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 10 THAT ASSESSEE COULD PROVE THE CREDITS TO THE MAXIMU M EXTENT OF RS. 4,60,000/- WITH RS. 3,00,000/- OUT OF THE CU RRENT YEAR INCOME AND BALANCE OF RS. 1,60,000/- RELATED TO THE EARLIER YEARS IF ANY, CARRIED FORWARD. THUS, THE CIT(A) CON CLUDED THAT ASSESSEE FAILED TO EXPLAIN THE CREDITS TO THE FULLE ST EXTENT OF GIFTS OF RS. 14,60,000/- FROM MRS. SUBBAYAMMA, AND CONFIRMED THE ADDITION OF RS. 10,00,000/- TREATING THE PART OF THE GIFTS AS UNEXPLAINED, AFTER ALLOWING CREDITS FO R THE AMOUNTS OF RS. 4,60,000/- FOR WHICH THE SOURCES ARE ASCERTAINABLE. AGAINST THIS, THE ASSESSEE IS IN APP EAL BEFORE US BY WAY OF GROUND NO. 1. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, AN AMOUNT OF RS. 14,60,000 WAS TAKEN BY THE ASSESSEE FROM HIS MOTHER SMT. SUBBAYAMMA. THE CIT(A) ACCEPTED ONLY RS. 3 LAKHS A S THE ASSESSEE FILED THE RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION AND ANOTHER AMOUNT OF RS. 1,60,000 AS IT IS CARRIED FORWARD FROM EARLIER YEAR BUT NOT ACCEPTED RS. 10 LAKHS. THE ASSESSEE DREW OUR ATTENTION TO THE COPY OF BALANCE SHEET AS ON 31.3.2009 AND ALSO CAPITAL ACCOUNT OF S MT. SUBBAYAMMA. THE BALANCE SHEET AND CAPITAL ACCOUNT ARE REPRODUCED FOR READY REFERENCE: ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 11 BALANCE SHEET AS ON 31.03.2009 LIABILITIES (RS.) ASSETS (RS.) CAPITAL A/C. OF C. SUBBAYAMMA 884,666.00 CASH ON HAND 21,573.00 MARGADARSHI CHIT FUND (P) LTD. CHIT NO. LT001DW/11 1,566,000.00 CASH AT THE KARUR VYSYA BANK LTD. A/C. NO. 1445155000052800 12,248.00 RAO BROTHERS CHIT FUND (P) LTD., CHIT NO. 37 650,000.00 MARGADARSHI CHIT FUND (P) LTD., CHIT NO. LT001DW/11 1,399,840.00 RAO BROTHERS CHIT FUND (P) LTD., CHIT NO. 37 806,505.00 SUNDRY DEBTORS 860,500.00 3,100,666.00 3,100,666.00 CAPITAL A/C. OF C. SUBBAYAMMA TO DRAWINGS 60,000.00 BY BALANCE B/F. 2,132,831.00 TO CASH GIFTS TO SON` 1,460,000.00 BY INTEREST ON S B A/C. 418.00 TO CHIT LOSS IN RAO BROS. CHIT 94,955.00 BY NET PRO FIT 291,372.00 TO BALANCE C/F. 884,666.00 BY AGRIL. INCOME 76,000. 00 2,499,621.00 2,499,621.00 15. AS SEEN FROM THE ABOVE BALANCE SHEET AND CAPITAL ACCOUNT, AN AMOUNT OF RS. 14,60,000 IS REFLECTED IN ASSESSEE'S CAPITAL ACCOUNT. FOR GIVING GIFT OF RS. 14,60,000 THERE IS ENOUGH BALANCE IN THE CAPITAL ACCOUNT OF SMT. SUBBA YAMMA. SMT. SUBBAYAMMA RAISED THE ABOVE FUND BY WAY OF WITHDRAWAL FROM CHITS WHICH IS DULY REFLECTED IN TH E BALANCE SHEET. IN OUR OPINION, THE MOTHER OF THE ASSESSEE MADE SUCH GIFT TO THE ASSESSEE OUT OF NATURAL LOVE AND AFFECT ION AND IT CANNOT BE DOUBTED. IT IS TRUE THAT THE ASSESSEE HA S TO DISCHARGE THE ONUS CAST ON HIM WITH REGARD TO IDENT ITY OF THE DONOR, CAPACITY OF THE DONOR AND GENUINENESS OF THE ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 12 TRANSACTION. IN OUR OPINION, IN THE PRESENT CASE A LL THESE INGREDIENTS ARE DULY DISCHARGED BY THE ASSESSEE. I F THE DEPARTMENT HAS ANY DOUBT REGARDING CAPACITY OF THE DONOR TO MAKE GIFT TO THE ASSESSEE, IT WOULD HAVE PROCEEDED AGAINST THE DONOR. ONCE THE DEPARTMENT ACCEPTED THE BALANC E SHEET AND CAPITAL ACCOUNT FILED BY THE DONOR WITH THEM IN HER RETURN OF INCOME, THE DEPARTMENT CANNOT QUESTION TH OSE ENTRIES OR DISBELIEVING THE GIFT REFLECTED IN ASSES SEE'S ACCOUNT AS NON GENUINE AND MADE BELIEVE STORY. IN OUR OPIN ION, THE GIFT MADE BY THE MOTHER TO THE SON OUT OF NATURAL L OVE AND AFFECTION CANNOT BE DOUBTED SO AS TO MAKE ADDITION U/S. 68 OF THE ACT. ACCORDINGLY, THE ADDITION IS DELETED. TH IS GROUND IS ALLOWED. 16. THE NEXT GROUND IS WITH REGARD TO ADDITION TOWARDS DISALLOWANCE OF INTEREST ON THE FUNDS DIVERTED FOR NON- BUSINESS PURPOSES OF RS. 6,47,883. 17. FACTS OF THE ISSUE, IN BRIEF, ARE THAT DURING THE ASSESSMENT PROCEEDINGS IT HAS BEEN OBSERVED BY THE AO THAT THERE ARE DEBIT BALANCES IN THE NAME OF MRS. ANNAPU RNA, WIFE OF THE ASSESSEE, AS PER THE BOOKS OF ACCOUNT OF TH E ASSESSEE, WITH BORROWED FUNDS DIVERTED TO HER ACCOUNT. IT WA S OBSERVED THAT SUCH TRANSFER OF THE FUNDS AMONG THE YEAR WAS AT RS. 22,00,255, IN ADDITION TO THE OPENING DEBIT BALANCE OF ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 13 RS. 21,99,037. THE CLOSING BALANCE, THUS, WAS PUT AT RS. 43,99,292/-. AFTER GIVING CREDIT FOR THE AMOUNTS O F SALARY, RENT FOR MACHINERY, SURGERY CHARGES ETC. TO THE EXT ENT OF RS. 7,99,361/-, THE NET CLOSING DEBIT BALANCES FOR THE YEAR UNDER REFERENCE WAS CALCULATED AT RS. 35,99,931/- ON WHIC H THE INTEREST WAS CALCULATED AT RS. 6,47,883/- AND DISAL LOWED THE SAME AGAINST THE CLAIM OF EXPENDITURE UNDER THE HEA D 'INTEREST', AMOUNTING TO RS. 7,18,000/-. THE INTERE ST WAS SHOWN TO HAVE CALCULATED AT THE RATE OF 13% AS APPL IED BY BANK ON THE LOANS GRANTED TO THE ASSESSEE. THE ASS ESSEE OBJECTED TO THE ABOVE ADDITION. AS PER THE ASSESSE E, THE FACTS OF THE DIVERSION OF BORROWED FUNDS TO THE ACCOUNT O F WIFE OF THE ASSESSEE (MRS. ANNAPURNA) IS NOT DENIED. HOWEV ER, SUCH AMOUNTS ARE QUANTIFIED AT RS. 21,00,000/- FOR THE Y EAR UNDER REFERENCE, AS AGAINST RS. 22,00,255/- AS QUANTIFIED BY THE AO. IT WAS ALSO ARGUED BY THE ASSESSEE THAT THE INTERES T CALCULATION SHOULD BE CONFINED TO THE CURRENT YEAR DEBIT BALANCES, BY EXCLUDING THE OPENING BALANCES, WHICH WAS PUT AT RS. 21,99,038/-. IT WAS ALSO ARGUED BY THE ASSES SEE THAT THOUGH THE AO MENTIONED ABOUT CHARGING INTEREST @13 P.A. IN ASSESSMENT ORDER, IT WAS CHARGED AT 18% P.A. 18. THE CIT(A) OBSERVED THAT THE ASSESSEE BEING A DOCTO R BY PROFESSION BORROWED CERTAIN INTEREST BEARING LOANS FROM ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 14 BANKS, BUT A PORTION OF SUCH FUNDS FOUND DIVERTED T O THE ACCOUNT OF MRS. ANNAPURNA, HIS WIFE, ALSO A DOCTOR. SINCE, THE AMOUNTS WERE BORROWED ON INTEREST, THE AMOUNTS DIVE RTED FOR THE PURPOSES OTHER THAN WHAT IT IS BORROWED FOR, DE SERVED TO BE CHARGED WITH INTEREST. ASSESSEE FAILED TO CHARG E INTEREST IN THIS REGARD, BUT THE AO DISALLOWED PROPORTIONATE IN TEREST ON SUCH DEBIT BALANCE, SINCE, THE ASSESSEE FOUND CLAIM ING EXPENSES UNDER THE HEAD 'INTEREST' TO THE EXTENT OF RS. 7,18,000/-. THE DISALLOWANCE WORKED OUT BY THE AO I S QUANTIFIED AT RS. 6,47,883/-. SINCE THERE IS NO FU RTHER EXPLANATION ON THE PART OF THE ASSESSEE FOR NOT CHA RGING INTEREST ON SUCH DEBIT BALANCES THE CIT(A) IN PRINC IPLE UPHELD THE DISALLOWANCE OF INTEREST ON PROPORTIONATE BASIS , AS ADOPTED BY THE AO. HOWEVER, THE ASSESSEE FURTHER CO NTENDED THAT INTEREST CANNOT BE CHARGED ON OPENING DEBIT BA LANCES. THE CIT(A) OBSERVED THAT THERE IS NO REASON FOR SUC H ARGUMENTS. IN CASE THE BORROWINGS BY ASSESSEE CONTI NUED FROM THE EARLIER YEAR WITH PAYMENT OF INTEREST ON S UCH BORROWED FUNDS, THERE IS NOTHING UNUSUAL IN CHARGIN G OF INTEREST ON OPENING DEBIT BALANCES OF THE DEBTOR (M RS. ANNAPURNA) IN THIS CASE. ACCORDINGLY, HE UPHELD CH ARGING OF INTEREST ON OPENING DEBIT BALANCES IS UPHELD. HOWE VER, THE RATE OF INTEREST ADOPTED IS ORDERED TO BE RESTRICTE D TO 13% AS CHARGED BY THE BANK, AS CONSIDERED BY AO, AS AGAINS T 18% IN ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 15 CHARGING THE DISALLOWABLE INTEREST IN THE ASSESSMEN T ORDER. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, IN THE ASSESSM ENT YEAR UNDER CONSIDERATION, THE ASSESSEE ADVANCED AN AMOUN T OF RS. 22,00,255 AND THERE WAS ALSO OPENING BALANCE OF RS. 21,99,037. ACCORDING TO THE AO, THE TOTAL LIABILIT Y FROM SMT. ANNAPURNA IS AT RS. 43,99,292. THE AO COMPUTED INT EREST ON THE AMOUNT OWED BY THE ASSESSEE TO SMT. ANNAPURNA O F RS. 7,99,361 AS THE NET BALANCE OF RS. 35,99,931. THE AO COMPUTED INTEREST AT 18% P.A. ON RS. 35,99,351, COM PUTED DISALLOWANCE OF RS. 6,47,883 U/S. 40A(2)(B) OF THE I T ACT AS THE ASSESSEE HAS INCURRED INTEREST LIABILITY AT RS. 7,18,000. IN OUR OPINION, THE TOTAL INTEREST LIABILITY INCURRED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION IS RS. 7,18,000 ON TOTAL BORROWINGS. ACCORDINGLY, WE DIRE CT THE AO DISALLOW PROPORTIONATE INTEREST AS ATTRIBUTABLE TO THE AMOUNT ADVANCED TO SMT. ANNAPURNA INSTEAD OF DISALLOWING A T 18% ON TOTAL OUTSTANDING OF RS. 35,99,931. IN OTHER WORDS , INTEREST IS TO BE DISALLOWED PROPORTIONATELY ON THE AMOUNT ADVA NCED TO SMT. ANNAPURNA WHICH BEARS TO THE TOTAL BORROWINGS I.E., TOTAL INTEREST PAID X AMOUNT ADVANCED TO SMT. ANNAP URNA TOTAL AMOUNT BORROWED ITA NO. 401/HYD/2013 DR. CHILUKURI SHARAT BABU ===================== 16 THE AO SHALL DISALLOW THE INTEREST AS DIRECTED ABOV E. THIS GROUND IS PARTLY ALLOWED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEBRUARY, 2014. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 11 TH FEBRUARY, 2014 TPRAO COPY FORWARDED TO: 1. DR. CHILUKURI SHARAT BABU, H. NO. 3-1-119, KAKAT IYA COLONY, HANAMKONDA, WARANGAL. 2. THE ASST. CIT, CIRCLE-1, WARANGAL. 3. THE CIT(A)-VI, HYDERABAD. 4. THE CIVI, HYDERABAD. 5. THE DR BENCH 'A', ITAT, HYDERABAD
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No Objection Letter for Use of Property – Partnership Firm
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