The ITO, Ward-1., Anakapalle V. Sri B Adinarayana (AOP), Anakapalle

ITA 475/VIZ/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0114 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 22-11-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: C V S MURTHY
• Keywords: Unexplained investment
• Section: 131; 69

Judgement Text

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.475/VIZAG/2006 ASSESSMENT YEAR: 2003 - 04 ITO WARD-1 ANAKAPALLE VS. B. ADINARAYANA (AOP), ANAKAPALLE (APPELLANT) (RESPONDENT) GIR NO: V-6765 B APPELLANT BY: SHRI D.S.SUNDER SINGH, DR RESPONDENT BY: SHRI CVS MURTHY, CA ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 8.9.2006 PASSED BY THE LD CIT (A)-I VISAKHAPATNAM AND IT RELA TES TO THE ASSESSMENT YEAR 2003-04. 2. THE REVENUE IS ASSAILING THE DECISION OF THE LD CIT (A) ON THE FOLLOWING THREE ISSUES: A) ADDITION OF RS.7.33 LAKHS MADE AS UNEXPLAINED CAPIT AL CONTRIBUTION. B) UNEXPLAINED ASSET/LOAN IN THE NAME OF SHRI A. RAMES H, - RS.4.65 LAKHS C) UNEXPLAINED ASSET/LOAN IN THE NAME OF SHRI J.B.SING H RS.63,000/- 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE IS CARRYING ON THE BUSINESS OF FINANCE AND MONEY LENDI NG IN THE STATUS OF PAGE 2 OF 6 ASSOCIATION OF PERSONS (AOP). FOR THE ASSESSMENT YE AR 2003-04, THE ASSESSEE FILED ITS RETURN OF INCOME ON 17-3-2004 DISCLOSING AN INCOME OF RS.64,690/-. DURING THE COURSE OF SCRUTINY PROCEEDING THE AO NOT ICE THAT DURING THE YEAR UNDER CONSIDERATION, 9 NEW MEMBERS HAVE BEEN ADMITT ED TO THE AOP WHO HAVE MADE CAPITAL CONTRIBUTION TO THE TUNE OF RS.7. 33 LAKHS IN AGGREGATE. IN ORDER TO ASCERTAIN THE SOURCES FOR SAID CAPITAL CON TRIBUTION, THE AO EXAMINED ALL THE NEW MEMBERS UNDER OATH BY ISSUING SUMMONS U /S 131 OF THE ACT. DURING THE COURSE OF SUCH EXAMINATION, THE AO NOTIC ED THAT ALL THE NEW MEMBERS ADMITTED THAT THEY HAVE ADVANCED THE SAID M ONEY TO SHRI B. ADINARAYANA, THE MAIN PERSON WHO IS MANAGING THE AF FAIRS. THEY ALSO SAID THAT THEY GAVE THE MONEYS IN THE FINANCIAL YEARS 20 00-01 AND 2001-02 RELEVANT TO THE ASSESSMENT YEARS 2001-02 AND 2002-0 3 RESPECTIVELY. THUS NONE OF THEM SAID THAT THEY GAVE THE MONEY DURING T HE FINANCIAL YEAR 2002- 03 RELEVANT TO THE ASSESSMENT YEAR 2003-04, I.E. TH E YEAR UNDER CONSIDERATION. IN VIEW OF THE CONTRADICTION IN THE D ATES, THE AO CAME TO THE CONCLUSION THAT AMOUNT OF RS.7.33 LAKHS CREDITED IN THE CAPITAL ACCOUNT OF THE NEW MEMBERS ARE NOT GENUINE AND ACCORDINGLY ASSESSE D THE SAME U/S 69 OF THE ACT AS UNEXPLAINED INCOME OF THE ASSESSEE. 4. THE LD AR SUBMITTED THAT THESE NINE NEW MEMBERS HAVE CONFIRMED PAYMENT OF MONEY TO SHRI B. ADINARAYANA AND ALSO HA VE EXPLAINED THE SOURCES FOR MAKING SUCH PAYMENT IN THE SWORN STATEM ENT RECORDED FROM THEM BY THE AO. THESE PERSONS ADVANCED THE MONEY DU RING THE FINANCIAL YEARS 2000-01 AND 2001-02 TO SHRI B. ADINARAYANA, W HO KEPT THE SAME WITH HIMSELF. WHEN THESE NEW PERSONS WERE ADMITTED AS PA RTNERS IN THE AOP THE SAID LOANS WERE BROUGHT INTO THE BOOKS OF AOP AS CA PITAL THEIR RESPECTIVE CAPITAL CONTRIBUTION. THUS, THE LD AR CONTENDED THA T THE IDENTITY OF THE PERSONS HAS BEEN PROVED AND FURTHER THEY HAVE CONFI RMED CAPITAL CONTRIBUTION ALONG WITH THE EXPLANATION FOR THE SOURCES FOR MAKI NG SUCH CONTRIBUTION. LD PAGE 3 OF 6 AR FURTHER SUBMITTED THAT THE AO MADE THE IMPUGNED ADDITION ON THE SOLE GROUND THAT THERE IS DIFFERENCE IN THE DATES. ON T HE OTHER HAND, THE LD DR STOOD BY THE ORDER OF THE AO. 4.1. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSE D THE RECORD ON THIS ISSUE. AS SUBMITTED BY THE LD AR, THE AO HAS MADE T HE ADDITION ONLY FOR THE REASON THAT THERE IS CONTRADICTION IN THE DATES BET WEEN THE DEPOSITION GIVEN BY THE MEMBERS AND DATE OF ENTRY IN THE BOOKS OF AC COUNTS. AS CAN BE NOTICED FROM THE SWORN STATEMENTS, WHICH ARE EXTRAC TED IN THE ORDER OF THE LD CIT (A), THESE MEMBERS HAVE CONFIRMED THAT THEY HAVE ADVANCED THE MONEY TO SHRI B. ADINRAYANA IN THE EARLIER FINANCIA L YEARS AND THEY HAVE ALSO RECEIVED INTEREST FROM HIM. THEY HAVE BEEN ADMITTED AS PARTNERS IN THE AOP AND THE AMOUNT INITIALLY RECEIVED BY SHRI B. ADINAR AYANA WAS BROUGHT INTO THE BOOKS OF THE ASSESSEE AS THEIR RESPECTIVE CAPITAL C ONTRIBUTION. FROM THE ORDER OF LD CIT(A), WE NOTICE THAT THE LD CIT(A), ON ANAL YZING THE FACTS AND CIRCUMSTANCES OF THE CASE, HAS CAME TO THE CONCLUSI ON THAT THE IMPUGNED AMOUNTS CREDITED IN THE CAPITAL ACCOUNT OF THE MEMB ERS STANDS EXPLAINED. LD CIT (A) HAS ALSO HELD THAT THE PROVISIONS OF SECTIO N 69 ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WHICH IS A PPLICABLE TO THE UNEXPLAINED INVESTMENTS. THE PRESENT ISSUE RELATES TO THE RECEIPT OF MONEY BY WAY OF CAPITAL CONTRIBUTION AND NOT INVESTMENT. ACCORDINGLY LD CIT (A) HAS DELETED THE IMPUGNED ADDITION. ON EXAMINATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A CAREFULLY PERUSA L OF THE ORDER OF LD CIT(A), WE DO NOT FIND ANY INFIRMITY IN THE DECISIO N OF THE LD CIT (A). ACCORDINGLY WE UPHOLD THE ORDER OF LD CIT(A) ON THI S ISSUE. 5. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.4,6 5,000/-. FROM THE BOOKS OF ACCOUNTS, THE AO NOTICED THAT A SUM OF RS. 4,65,000/- WAS ADVANCED TO A PERSON NAMED SHRI A. RAMESH ON 11.5.02. THE SA ID ADVANCE WAS ALSO PAGE 4 OF 6 REFLECTED IN THE ASSET SIDE OF THE BALANCE SHEET FI LED BY THE ASSESSEE. ACCORDING TO THE AO, CERTAIN PAPERS WERE FOUND DURI NG THE COURSE OF SURVEY, WHICH INDICATED THAT THE ADVANCE WAS GIVEN ON 8.3.2 002 AND 21.3.2002, WHICH CARRIED AN INTEREST OF RS.39, 712/-, WHICH UL TIMATELY TOTALED TO RS.4,65,000/-. HENCE, THE AO CAME TO THE CONCLUSI ON THAT THE ADVANCE SHOWN IN THE BOOKS OF ACCOUNT DOES NOT RELATE TO TH E ASSESSMENT YEAR UNDER CONSIDERATION. ACCORDINGLY THE AO CAME TO THE CONC LUSION THAT THE SAID ADVANCE OF RS.4,65,000/- CANNOT BE TREATED AS GENUI NE AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE LD CIT (A) DELETED THE ADDITION, FOR THE REASON THAT THE PAPERS FOUND DURING THE COURSE OF SURVEY DO NOT CONTAIN DETAILS OF ACTUAL AMOUNT OF THE ADVANCE AND THE DET AILS OF PAYMENT MADE ON 8.3.2002 AND 21.3.2002 AND FURTHER THERE WAS NO EVI DENCE TO SUGGEST THAT THE AMOUNT MENTIONED IN THE PAPERS AND IN THE BOOKS OF ACCOUNTS ARE ONE AND THE SAME. 5.1 THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS RECORDED THE PAYMENT OF RS.4,65,000/- TO SHRI A. RAMESH ON 11.5.2002 IN ITS BOOKS OF ACCOUNTS AS ADVANCE. FOR THE ASSESSEE, THE SAID ADVANCE IS AN ASSET AND ACCORDINGLY THE SAME WAS ALSO DISCLOSED IN THE ASSET SIDE OF THE BA LANCE SHEET. WHEN AN ASSET HAS ALREADY BEEN RECORDED IN THE BOOKS OF ACC OUNTS, WE DO NOT FIND ANY RATIONALE IN THE ACTION OF THE AO IN TREATING THE S AME AS A NON-EXISTING LOAN. THE AO HAS ALSO NOT MENTIONED THE SECTION OF THE AC T UNDER WHICH THE ADDITION CAN BE MADE, IF AN ASSET IS TREATED AS NOT GENUINE. THE LD CIT (A) HAS ALSO CLEARLY OBSERVED THAT THERE IS NO EVIDENCE TO SUGGEST THAT THE NOTINGS FOUND IN THE PAPERS ARE REFERABLE TO THE EN TRIES FOUND IN THE BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE WE DO NOT FIND ANY R EASON TO INTERFERE WITH THE DECISION OF THE LD CIT (A). PAGE 5 OF 6 6. THE NEXT ISSUE RELATES TO THE ADDITION OF RS.63, 000/-. IN THIS CONNECTION, WE EXTRACT THE OBSERVATIONS AND THE DEC ISION OF THE LD CIT (A). IV. AS PER THE BOOKS OF ACCOUNTS OF THE APPELLANT, AN AMOUNT OF RS.33,000/- WAS ADVANCED TO ONE SRI J. BHAGAVAN SIN GH ON 19- 07-2002. HOWEVER, AS PER THE SLIPS OF PAPERS FOUND IN COURSE OF THE SURVEY, WHICH WERE SUBSEQUENTLY IMPOUNDED, THER E WAS AN ADVANCE OF RS.1,00,000/- IN THE NAME OF THE SAID SR I J. BHAGVAN SINGH, BETWEEN 23-2-2002 AND 04-06-2002 AND THE BAL ANCE AS ON 11-9-2002 IS RS.63,800/-. THEY WERE ALSO REPORTE D (SIC. DEPOSITS) AGAINST HIS NAME OF RS.54,800/- ON 16-8 -2002. NONE OF THESE ENTRIES WERE FOUND TO BE RECORDED IN THE B OOKS OF ACCOUNTS WHERE ONLY AN AMOUNT OF RS.33,000/- WAS SH OWN AS THE AMOUNT ADVANCED TO HIM ON 19-07-2002. AS THE TRANSACTIONS FOUND IN THE SLIPS OF PAPERS WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER CONCLU DED THAT THE AMOUNT OF LOAN OF RS.1 LAKH WOULD HAVE BEEN ADVANCE D IN EQUAL INSTALMENTS BETWEEN FEBRUARY,2002 TO JUNE,2002 AND THE SAME HE ESTIMATED AT RS.60,000/- IN THE PREVIOUS YEAR RE LEVANT ASST. YEAR 2003-04. TO THIS LOAN AMOUNT , HE ADDED THE IN TEREST OF RS.3,800/- TO ARRIVE AT A BALANCE OF RS.63,800/-, W HICH HE TREATED AS THE UNEXPLAINED INCOME OF THE APPELLANT. THE ABOVE METHOD OF COMPUTATION ADOPTED BY THE ASSESSING OFFI CER IS HIGHLY CONFUSING AND DOES NOT MAKE ANY SENSE. IF IT IS PRESUMED THAT THE AMOUNT OF RS.1 LAKH WAS ADVANCED IN TWO EQ UAL INSTALMENTS AS ON 23-02-2002 AND 04-06-2002, THE VA LUE OF INSTALMENT WILL BE RS.50,000/- AND NOT RS.60,000/- AS ESTIMATED BY THE ASSESSING OFFICER. MOREOVER, THE ASSESSING O FFICER HAS NOT ESTABLISHED THE FACT THAT THERE IS DIRECT NEXUS BETWEEN THE TRANSACTIONS RECORDED WITH RESPECT TO SRI J. BHAGAV AN SINGH IN THE SLIP OF PAPER AND AS RECORDED IN THE BOOKS OF A CCOUNTS. THIRDLY, AS SHOWN BY THE ASSESSING OFFICER, THE TOT AL AMOUNT ADVANCED TO THE SAID SRI J. BHAGAVAN SINGH BETWEEN 23-02- 2002 TO 04-06-2002 IS RS.1 LAKH AND THERE IS A DEPO SIT OF RS.54,800/- AGAINST HIS NAME ON 16-08-2002. IF THE S AID DEPOSIT OF RS.54,800/- IS CONSIDERED AS REPAYMENT, THEN THE BALANCE WILL BE RS.45,200/- AND NOT RS.63,800/- AS SHOWN IN THE SLIPS OF PAPERS. THE ASSESSING OFFICER HAS NOT EXAMINED SUCH DISCREPANCIES AND THEREFORE, HIS CONCLUSION THAT TH E AMOUNT OF RS.63,800/- REPRESENTS UNEXPLAINED INCOME OF THE AP PELLANT, IS NOT CORRECT AND HENCE THE SAME IS DELETED . PAGE 6 OF 6 6.1. WE NOTICE THAT THE LD CIT (A) HAS DELETED THIS ADDITION AFTER PROPERLY ANALYZING THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, WE UPHOLD HIS ORDER ON THIS ISSUE. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 16.9.2009 SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 16 TH SEPTEMBER, 2009. COPY TO 1 THE ITO, WARD-1, AAYAKAR BHAVAN, GANDHINAGAR, ANA KAPALLE 2 SRI BODDEDA ADINARAYANA (AOP), 5 - 9 - 32, LAXMIDEVEPETA, ANAKAPALLE 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A)-I, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM