Dr B. Padmaja, Hyderabad V. ACIT, Karimnagar

ITA 500/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66246 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Opportunity of being heard; Principle of natural justice
• Section: 234B; 131; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 500/HYD/2010 ASSESSMENT YEAR: 2004-05 DR. B. PADMAJA, KARIMNAGAR.. .... APPELLANT PAN: AEWPB 2333M VS. ACIT, CIR-1, KARIMNAGAR. ... RESPONDENT APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI K. VISWANATHAM DATE OF HEARING : 18-07-2012 DATE OF PRONOUNCEMENT : 14-09-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 25-1-2010 OF CIT (A)-III, HYDER ABAD PASSED IN APPEAL NO.0375/CIT (A)-III/06-07 AND IT PERTAINS TO THE ASSESSMENT YEAR 2004-05. 2. GROUND NOS. 1 AND 7 ARE GENERAL IN NATURE, HENCE NEEDS NO ADJUDICATION. 2 ITA NO. 500 OF 2010 DR. B. PADMAJA. 3. IN GROUND NOS. 2 AND 3, THE ASSESSEE HAS RAISED A COMMON ISSUE WITH REGARD TO ADDITION OF AN AMOUNT OF RS.14 ,20,000/- U/S 69 OF THE ACT. THE GROUNDS READ AS FOLLOWS:- 2. THE LD.CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS.13,70,000/- AND FURTHER ERRED IN ENHANCING THE SAME BY AN AMOUNT OF RS.50,000/-. 3. THE LD. CIT (A) ERRED IN DIRECTING THE AO TO ADD RS.14,20,000/- WITHOUT CONSIDERING THE EXPLANATIONS OFFERED IN THIS REGARD. 4. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A DOCTOR BY PROFESSION. FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE F ILED HER RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.5,5 1,860. DURING THE ASSESSMENT PROCEEDING THE AO FINDING THAT THE A SSESSEE HAS MADE AN INVESTMENT OF RS.13,70,000 IN HOTEL RAJA RA VINCHANDRA (PRESENTLY KNOWN AS M/S VENNELA HOSPITALS) CALLED F OR INFORMATION FROM THE ASSESSEE WITH REGARD TO THE SOURCES OF FUN DS FOR AFORESAID INVESTMENT. THE ASSESSEE IN HER REPLY SU BMITTED THAT INVESTMENT OF RS.13,70,000/- WAS MADE OUT OF LOAN A MOUNT OF RS.25.00 LAKHS TAKEN FROM APSFC WARANGAL IN THE NA ME OF DR. K. NARAYANA BY MORTGAGING THE IMMOVABLE PROPERTY OF H OTEL RAJA RAVICHANDRA WHICH BELONGED TO THE ASSESSEE. THE AS SESSEE ALSO SUBMITTED THE COPIES OF THE BANK STATEMENT OF DR. K . NARAYANA AND STATEMENT OF APSFC. THE AO AGAIN ASKED THE ASS ESSEE TO PRODUCE THE LOAN AGREEMENT WITH APSFC, RETURN OF IN COME OF DR. K. NARAYANA, WARANGAL AND EVIDENCES TO SHOW THAT TH E LOAN WAS TAKEN FOR UTILISATION BY THE ASSESSEE. THE ASSESSE E REPLIED THAT LOAN WAS TAKEN IN THE NAME DR. K. NARAYANA BY OFFER ING THE IMMOVABLE PROPERTY OF THE ASSESSEE AS COLLATERAL SE CURITY. THE SANCTIONED AMOUNT WAS WITHDRAWN FROM THE S.B. A/C N O.50999. 3 ITA NO. 500 OF 2010 DR. B. PADMAJA. THE AO HOWEVER DID NOT ACCEPT THE EXPLANATION OF TH E ASSESSEE ON THE GROUND THAT HOW A LOAN FROM APSFC COULD BE OBTA INED BY KEEPING THE PROPERTY OF THE FIRM HOTEL RAJA RAVICHA NDRA AS SECURITY WHEN DR. K. NARAYANA IS NOT A PARTNER IN T HE SAID FIRM. MOREOVER THE RETURNS OF INCOME FILED BY DR. K. NARA YANA FOR THE ASSTT. YEARS 2004-05, 2005-06 AND 2006-07 ALSO DID NOT DISCLOSE ANY CREDIT TRANSACTIONS BETWEEN HIM AND THE ASSESSE E. THE CONCERNED LOAN ACCOUNT WITH APSFC ALSO LISTS ALL EN TRIES IN THE NAME OF DR. K. NARAYANA ONLY. THE RECEIPT OF LOAN ALSO HAS NOT COME TO ANY OF THE ASSESSEES BANK ACCOUNTS. ON T HE BASIS OF THE AFORESAID FINDING THE AO TREATED THE INVESTMENT OF RS.13,70,000/- AS UNEXPLAINED INVESTMENT U/S 69 AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSEE CHALLENGED THE ADDITION BY FILING AN APPEAL BEFORE THE CIT (A). REITERATING THE STAND TAKEN BE FORE THE AO, IT WAS CONTENDED BY THE ASSESSEE BEFORE CIT (A) THAT THE LOAN AMOUNT OF RS.25 LAKHS DISBURSED BY THE APSFC WAS DE POSITED IN THE CANARA BANK, WARANGAL IN THE ACCOUNT OF DR. K. NARAYANA AND WAS WITHDRAWN ON 24-11-2004 BY DR. K. NARAYANA AND GIVEN TO ASSESSEE FOR UTILISATION IN HER PROFESSIONAL ACTIVI TIES AND ACQUISITION OF DIFFERENT ASSETS DURING THE PERIOD 2 004-05. IT WAS SUBMITTED THAT THE AMOUNT OF RS.25 LAKHS WAS TAKEN TO THE RECEIPTS AND PAYMENTS A/C., AND OUT OF THE SAID AM OUNT THE ASSESSEE MADE VARIOUS EXPENDITURES INCLUDING THE I NVESTMENT OF RS.13,70,000 IN HOTEL RAJA RAVICHANDRA. IT WAS FUR THER SUBMITTED THAT SINCE THE ASSESSEE HAD ALREADY AVAILED LOAN FR OM APSFC AND WAS NOT ELIGIBLE TO AVAIL FURTHER LOAN SHE APPROACH ED DR. K. NARAYANA WHO IS A CLOSE FRIEND AND OBTAINED THE LOA N BY OFFERING HER OWN IMMOVABLE PROPERTY AS SECURITY. THE CIT(A) ISSUED LETTER TO THE ACIT, CIRCLE-1, KARIMNAGAR ASKING HIM TO EXA MINE DR. K. 4 ITA NO. 500 OF 2010 DR. B. PADMAJA. NARAYNA FOR ASCERTAINING THE CORRECTNESS OF THE CLA IM MADE BY THE ASSESSEE. THE AO IN HIS REMAND REPORT SUBMITTED TH AT IN SPITE OF ISSUANCE OF A LETTER AND SUMMONS U/S 131 ISSUED TO DR. K. NARAYANA IN THE GIVEN ADDRESS HE WAS NOT FOUND AND HIS FAMILY MEMBERS ALSO REFUSED TO RECEIVE THE SUMMONS. WHEN THE ASSESSEE WAS CONTACTED TO PRODUCE DR. K. NARAYANA F OR EXAMINATION SHE STATED THAT SHE HAS BEEN ADMITTED I N A HOSPITAL FOR SPINE SURGERY AND EXPRESSED HER INABILITY TO PR ODUCE DR. K. NARAYANA. IN ADDITION TO THE AFORESAID REPORT OF T HE AO, THE JCIT, KARIMNAGAR RANGE IN HER REPORT SUBMITTED THAT THE A SSESSEE HAS MADE A TOTAL INVESTMENT OF RS.14,20,000 IN CASH DUR ING THE RELEVANT PERIOD IN TWO INSTALMENTS F RS.7,45,000 ON 19-4-2003 AND RS.6,75,000 ON 3-11-2003. THE JCIT COMMENTED T HAT SINCE THE INVESTMENTS WERE MADE BY THE ASSESSEE PRIOR TO THE WITHDRAWAL OF THE LOAN AMOUNT OF RS.25 LAKHS ON 24- 11-2003 IT CANNOT BE SAID THAT THE INVESTMENTS WERE MADE OUT OF THE LOAN AMOUNT. 6. THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO THE REMAND REPORTS HELD THAT SINC E THE ASSESSEE HAS MADE THE INVESTMENTS IN HOTEL RAJA RAV ICHANDRA MUCH PRIOR TO THE RECEIPT OF ALLEGED LOAN OF RS.25 LAKHS TAKEN IN THE NAME OF DR. K. NARAYANA IT CANNOT BE SAID THAT THE INVESTMENTS WERE OUT OF THE LOAN AMOUNT. THE CIT ( A) SUSTAINED THE ADDITION MADE BY THE AO U/S 69 BY HOLDING THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF INVESTMENT IN H OTEL RAJA RAVICHANDRA. THE CIT (A) HAS ALSO OBSERVED THAT TH E CONTENTION OF THE ASSESSEE THAT THE LOAN AMOUNT OF RS.25 LAKHS WAS SHOWN IN THE RECEIPT AND PAYMENT ACCOUNT IS NOT CORRECT SINC E THE DOCUMENTS FILED ALONG WITH THE RETURN OF INCOME DID NOT SHOW LOAN AMOUNT OF RS.25 LAKHS. THE CIT (A) HOLDING THAT T HE ACTUAL 5 ITA NO. 500 OF 2010 DR. B. PADMAJA. INVESTMENT MADE BY THE ASSESSEE WAS RS.14,20,000 DI RECTED THE AO TO ENHANCE THE ADDITION BY A FURTHER AMOUNT OF R S.50,000. 7. THE LD. AR SUBMITTED BEFORE US THAT THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN MAKING THE ADDITION SINCE THE ASSESSEE HAS EXPLAINED THE SOURCE OF INVESTMENT. THE LD. AR SU BMITTED THAT THE FACTS THAT THE ASSESSEE HAS UTILISED THE LOAN AMOUNT OF RS.25 LAKHS TAKEN IN THE NAME OF DR. K. NARAYANA IS AMPLY PROVED FROM THE FACT THAT THE ASSESSEES IMMOVABLE PROPERTY WAS OFFERED AS COLLATERAL SECURITY TO APSFC, WARANGAL TOWARDS THE LOAN AVAILED IN THE NAME OF DR. K. NARAYANA. THE LD. AR SUBMITTED T HAT THE LOAN AMOUNT OF RS.25 LAKHS AS WELL AS INTEREST PAYMENT O F RS.57,140.00 HAS BEEN SHOWN IN THE RECEIPT AND PAYM ENT ACCOUNT, CAPITAL ACCOUNT AND STATEMENT OF AFFAIRS F OR THE FINANCIAL YEAR 2003-04. THAT APART DR. K. NARAYNA IN HIS AFF IDAVIT HAS ADMITTED OF HAVING GIVEN THE LOAN AMOUNT OF RS.25 L AKHS TO THE ASSESSEE. THE LD. AR SUBMITTED THAT THE LOAN AMOUN T OF RS.25 LAKHS DISBURSED BY APSFC WAS DEPOSITED IN THE BANK ACCOUNT OF DR. K. NARAYANA ON 22-11-2003 AND THE ENTIRE AMOUNT WAS WITHDRAWN ON 24-11-2003 AND GIVEN TO THE ASSESSEE. THE LD. AR FINALLY SUBMITTED THAT CIT (A) HAS DIRECTED THE AO TO ENHANCE THE ADDITION BY RS.50,000 WITHOUT GIVING ANY NOTICE TO THE ASSESSEE WHICH IS IN VIOLATION OF RULES OF NATURAL JUSTICE. 8. THE LD. DR SUPPORTING THE ORDER OF THE CIT (A) S UBMITTED THAT THE ASSESSEE HAVING FAILED DOT PROVE THE SOURC E OF INVESTMENT THE ADDITION WAS JUSTIFIED. THE LD. DR FURTHER SUBMITTED THAT SINCE DR. K. NARAYANA FAILED TO APPE AR FOR EXAMINATION BEFORE AO ADVERSE INFERENCE HAS TO BE D RAWN AGAINST THE ASSESSEE. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. THE BONE OF CONTENTION BETWEEN THE ASSE SSEE AND 6 ITA NO. 500 OF 2010 DR. B. PADMAJA. DEPARTMENT IS WHETHER THE LOAN AMOUNT OF RS.25 LAKH S SANCTIONED BY APSFC, WARANGAL BRANCH IN THE NAME OF DR. K. NAR AYANA WAS UTILISED BY HER TOWARDS INVESTMENT IN HOTEL RAJA RA VICHANDRA. THE CIT (A) HAS HELD THAT NOT ONLY THE ASSESSEE HAS FAILED TO PROVE BY PRODUCING SUFFICIENT EVIDENCE THAT THE LOA N AMOUNT OF RS.25 LAKHS WAS ACTUALLY GIVEN BY DR.K. NARAYANA TO THE ASSESSEE BUT THE FURTHER FACT THAT THE INVESTMENTS MADE BY T HE ASSESSEE WERE PRIOR TO WITHDRAWAL OF THE LOAN AMOUNT BY DR. K. NARAYANA ALSO PROVES THE FALSITY OF THE ASSESSEES CLAIM. T HE CIT (A) HAS FURTHER OBSERVED THAT NEITHER THE RETURN OF INCOME FILED BY THE ASSESSEE NOR THE ENCLOSED DOCUMENTS MENTIONED ABOUT THE LOAN AMOUNT OF RS.25 LAKHS. 10. IT IS A FACT ON RECORD THAT EXCEPTING THE AFFID AVIT OF DR. K. NARAYANA THERE IS NO DIRECT EVIDENCE ON RECORD TO S HOW THAT THE AMOUNT OF RS.25 LAKHS WAS ACTUALLY GIVEN BY DR. K. NARAYANA TO THE ASSESSEE. NOTHING HAS BEEN STATED REGARDING MO DE AND MANNER OF PAYMENT OF RS.25 LAKHS BY DR. K. NARAYANA TO THE ASSESSEE. HAD DR. K. NARAYANA APPEARED BEFORE THE AO AND WOULD HAVE BEEN EXAMINED MATERIAL FACTS COULD HAVE COME ON RECORD WHICH COULD HAVE HELPED IN ARRIVING AT A PRO PER CONCLUSION. HOWEVER, FACT REMAINS THAT APSFC, WARANGAL BRANCH H AS SANCTIONED A LOAN OF RS.25 LAKHS TO DR. K. NARAYAN A WHICH WAS DEPOSITED IN HIS BANK ACCOUNT ON 22-11-2003 AND ON 24-11-2003 THE ENTIRE AMOUNT OF RS.25 LAKHS WAS WITHDRAWN IN C ASH WHICH WAS STATED TO HAVE BEEN GIVEN TO THE ASSESSEE. FR OM THE RECEIPT PAYMENT ACCOUNT SUBMITTED BEFORE US WE ALSO FIND TH AT THE ASSESSEE HAS SHOWN THE LOAN AMOUNT OF RS.25 LAKHS F ROM APSFC, WARANGAL BRANCH. THE LD. AR HAS ALSO STATED BEFORE US THE ASSESSEE IS PAYING THE INTEREST AMOUNT ON THE LOAN OF RS.25 LAKHS AND FOR THE ASSESSMENT YEAR UNDER DISPUTE AN AMOUNT OF 7 ITA NO. 500 OF 2010 DR. B. PADMAJA. RS.57,140 HAS BEEN PAID AS INTEREST WHICH HAS BEEN SHOWN IN THE RECEIPT AND PAYMENT ACCOUNT AS WELL AS THE CAPITAL ACCOUNT. THE DEPARTMENT HAS ALSO NOT REBUTTED THE FACT THAT ASS ESSES IMMOVABLE PROPERTY HAS BEEN GIVEN AS COLLATERAL SEC URITY FOR AVAILING LOAN OF RS.25 LAKHS. CUMULATIVE EFFECT OF ALL THESE FACTS DOES NOT TOTALLY DISAPPROVE THE FACT THAT THERE MAY BE A POSSIBILITY THAT THE LOAN GIVEN BY APSFC TO DR. K. NARAYANA WAS ACTUALLY UTILISED BY THE ASSESSEE FOR THE PURPOSE O F INVESTMENT. BUT FOR ARRIVING AT A CONCLUSIVE FINDING, A PROPER ENQUIRY HAS TO BE MADE BY THE AO. WE ALSO FIND FORCE IN THE CONTE NTION OF THE LD. AR THAT THE CIT (A) HAS DIRECTED FOR ENHANCING THE ADDITION BY RS.50,000 WITHOUT GIVING ANY NOTICE TO ASSESSEE TO EXPLAIN. IN THE AFORESAID CIRCUMSTANCES WE THINK IT PROPER TO R ESTORE THIS ISSUE TO THE AO WITH A DIRECTION TO MAKE PROPER ENQ UIRY TO FIND OUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE. IN THIS REGARD EXAMINATION OF DR. K. NARAYANA IS CRUCIAL SINCE HE HAS FILED AN AFFIDAVIT CLAIMING TO HAVE GIVEN THE AMOUNT OF RS.2 5 LAKHS TO THE ASSESSEE. THE AO MUST ENSURE THE ATTENDANCE OF DR. K. NARAYANA BY EXERCISING POWER CONFERRED UPON HIM BY THE STATU TE. IT IS ALSO IN THE INTEREST OF THE ASSESSEE TO CO-OPERATE IN TH E PROCEEDING AND PRODUCE CREDIBLE EVIDENCE TO ENSURE THAT THE PR OCEEDING REACHES FINALITY. THE AO SHALL PASS A REASONED ORD ER AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUNDS RAISED BY THE ASSESSEE ARE SET ASIDE TO THE AO. 11. GROUND NO.4 RELATES TO ADDITION OF AN AMOUNT OF RS.4,50,000. WHILE EXAMINING ASSESSEES CAPITAL AC COUNT, THE AOP FOUND INTRODUCTION OF CASH AMOUNTING TO RS.4,50 ,000. THE ASSESSEE ALSO EXPLAINED THE SOURCE OF THIS AMOUNT T O HAVE ORIGINATED FROM THE LOAN AMOUNT OF RS.25 LAKHS AVAI LED IN THE NAME OF DR. K. NARAYANA. THE AO ADDED THE AMOUNT O F 8 ITA NO. 500 OF 2010 DR. B. PADMAJA. RS.4,50,000 U/S 69A ON THE SAME REASONING AS WAS MA DE IN CASE OF ADDITION OF RS.13,70,000. 12. BEFORE THE CIT (A), THE ASSESSEE CONTENDED THAT THE AMOUNT CAME OUT FROM LOAN RECEIVED FROM APSFC THROUGH DR. NARAYANA. THE CIT (A) HOLDING THAT THE ASSESSEE HAS NOT EXPLA INED THE SOURCE OF CASH INTRODUCED BY HER DURING THE YEAR SU STAINED THE ADDITION. 13. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IN VIEW OF OUR REASONING WHILE DECIDING GROUND 2 AND 3 ABOVE, WE ALSO RESTORE THIS ISSUE TO THE AO FOR T AKING A DECISION AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 14. GROUND NO.5 RELATES TO DISALLOWANCE OF ELECTRI CITY PAYMENT OF RS.93,355/-. 15. IT IS SEEN THAT OUT OF TOTAL CLAIM OF RS.1,94,0 10 TOWARDS ELECTRICITY CHARGES THE ASSESSING OFFICER DISALLOWE D A SUM OF RS.93,355/- FOR WANT OF BILLS AND VOUCHERS. THE DI SALLOWANCE WAS ALSO SUSTAINED BY THE CIT (A). THE LD. AR SUBMITTI NG BEFORE US THAT AMOUNT HAS BEEN SHOWN EXCEPT SUBMITTING BEFORE US THAT AMOUNT HAS BEEN SHOWN IN THE RECEIPT AND PAYMENT AC COUNT COULD NOT PRODUCE EVIDENCE TOWARDS PAYMENT OF THE AFORESA ID AMOUNT. THEREFORE, THERE IS NO REASON TO TAKE A DIFFERENT V IEW IN THE MATTER. THE GROUND RAISED BY THE ASSESSEE IS DISMI SSED. 16. IN GROUND NO.6, THE ASSESSEE HAS CHALLENGED LEV Y OF INTEREST U/S 234A AND 234B OF THE ACT. SINCE CHARGING OF IN TEREST U/S 234A AND 234B WOULD DEPEND UPON THE FINAL DETERMINA TION OF INCOME IN THE ASSESSMENT. WE RESTORE THIS ISSUE TO THE FILE OF THE AO. 9 ITA NO. 500 OF 2010 DR. B. PADMAJA. 17. IN THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 14 -9-2012. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 14 TH SEPTEMBER, 2012. COPY TO:- 1) C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRI YAS ELEGANCE, DOOR NO. 3-6-643, STREET NO.9, HIMAYATNAG AR, HYDERABAD. 2)ACIT, CIR-1, KARIMNAGAR. 3) THE CIT (A)-III,HYDERABAD. 4) THE CIT CONCERNED, 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 10 ITA NO. 500 OF 2010 DR. B. PADMAJA.