Sri M S N Varma, Vizianagaram V. The ITO, Ward-2, Vizianagaram

ITA 524/VIZ/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0623 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 28-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: C V S MURTHY
• Keywords: Principle of natural justice; Set aside
• Section: 69B; 69

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.524/VIZAG/2007 ASSESSMENT YEAR: 2005-06 M.S.N. VARMA VS. ITO WARD-2 JANUMALLA VALASA VIZIANAGARAM (APPELLANT) (RESPONDENT) PAN NO.AAIHM 9492G APPELLANT BY: SHRI C.V.S. MURTHY, CA RESPONDENT BY: SHRI G.S.S. GOPINATH, DR ORDER PER B R BASKARAN, ACCOUNTANT MEMBER: THESE APPEAL FILED AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.10.2007 PASSED BY THE LD CIT (A)-I, VISAKH APATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE AGITATED IN THIS APPEAL IS WHETHE R THE LD CIT (A) IS JUSTIFIED IN CONFIRMING THE ADDITION PERTAINING TO THE PURCHASE OF DEMAND DRAFTS THROUGH THE BANK ACCOUNT OF THE ASSESSEE. 3. THE FACTS ARE STATED IN BRIEF. THE ASSESSING OFF ICER RECEIVED INFORMATION TO THE EFFECT THAT THE ASSESSEE HEREIN HAS PURCHASED DEMAN D DRAFTS WORTH RS.15,60,000/- THROUGH HIS BANK ACCOUNT. IN THIS CONNECTION, THE AO CALLED FOR EXPLANATIONS FROM THE ASSESSEE. THE CASE OF THE ASSESSEE WAS THAT THE IMPUGNED DEMAND DRAFTS WERE PURCHASED BY HIM ON BEHALF OF 24 PERSONS AT THEIR S PECIFIC REQUEST BY UTILIZING THE MONEY PROVIDED BY THEM. THE ASSESSEE FURTHER EXPLA INED THAT THESE DDS WERE USED BY THE RESPECTIVE PERSONS IN ORDER TO APPLY FOR EXC ISE LICENSE FOR RUNNING WINE SHOPS. THE ASSESSEE FILED CONFIRMATION LETTERS FROM ALL TH E PERSONS. THE AO ISSUED SUMMONS TO ALL THE PERSONS, ON WHOSE BEHALF THE D.DS WERE C LAIMED TO HAVE BEEN PURCHASED. HOWEVER ONLY 15 PERSONS APPEARED BEFORE THE AO AND THE AO ALSO RECORDED STATEMENT FROM ALL OF THEM, WHEREIN THEY CONFIRMED THE SUBMISSIONS MADE BY THE ASSESSEE. HOWEVER, THE AO TOOK THE VIEW THAT ONLY TWO PERSONS HAD THE CAPACITY TO PURCHASE THE DEMAND DRAFTS AND THE REMAINING 22 PER SONS DID NOT HAVE THE REQUIRED PAGE 2 OF 4 CREDIT WORTHINESS AND ACCORDINGLY ADDED A SUM OF RS .15.20 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPEAL PREFERRED BEFORE TH E LD CIT (A), THE FIRST APPELLATE AUTHORITY GAVE RELIEF TO THE EXTENT OF RS.9.70 LAKH S AND CONFIRMED THE BALANCE AMOUNT OF RS.5.50 LAKHS PERTAINING TO 9 PERSONS WHO DID NO T APPEAR BEFORE THE AO. THE ASSESSING OFFICER FURTHER ADDED A SUM OF RS.15,000/ - OUT OF THE AGRICULTURAL INCOME CLAIMED BY THE ASSESSEE AND THE SAME WAS CONFIRMED BY LEARNED CIT(A). AGGRIEVED BY THE ORDER OF LD CIT(A), THE ASSESSEE IS IN APPEA L BEFORE US. 4. WE HAVE HEARD THE PARTIES. IT WAS BROUGHT TO OUR NOTICE THAT IDENTICAL ISSUE WAS CONSIDERED BY THE BENCH IN SOME OTHER APPEALS A LSO. WE NOTICE THAT IN THE CASE OF BALAGAM SRINIVAS IN ITA NO.518/VIZAG/2007, THIS BENCH, VIDE ITS ORDER DATED 13.11.2009 HAS DECIDED THE ISSUE AS UNDER: 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PE RUSED THE RECORD. WE NOTICE THAT THE LD CIT (A) HAS CONSIDERED FOLLOWING CASE L AW IN SUPPORT OF HIS DECISION: A) R. THYAGARAJ VS. CIT (239 ITR 557( (MAD.)) IN THI S CASE, THE APPLICATION FORM PURCHASE OF D.D. WAS SIGNED BY THE ASSESSEE. THE COURT HELD THAT THE INFERENCE DRAWN BY THE AO T O THE EFFECT THAT THE ASSESSEE HAS PAID NECESSARY CASH FOR OBTAI NING THE DRAFT IS NOT JUSTIFIED. B) MOHAN B. SAMTANI VS. CIT (199 ITR 370)(CAL.) IN T HIS CASE, THE ASSESSEE CONSIGNED ANTIQUES AS A REPRESENTATIVE OF STATE TRADING CORPORATION OF SIKKIM. THE DISPATCH OF THE GOODS W ERE DONE ON THE ORAL INSTRUCTION OF CHOGYAL. CHOGYAL ALSO CLAIM ED OWNERSHIP OF THE ANTIQUE AND HIS CLAIM WAS NOT DISPROVED. HENCE IT WAS HELD THAT THE VALUE OF ANTIQUE CANNOT BE ADDED TO THE AS SESSEES INCOME C) CIT VS. SMT. P.K. NOORJAHAN, (237 ITR 570)(SC) IN THIS CASE, THE ASSESSEE WAS FOUND TO BE NOT CAPABLE ENOUGH TO EARN THE INCOME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OR W AS IN A POSITION TO EARN IT FOR A DECADE OR MORE. THE HON BLE APEX COURT HELD THAT SECTION 69 CONFERS A DISCRETION TO THE AS SESSING OFFICER IN THE MATTER OF TREATING AN INVESTMENT AS INCOME OF T HE ASSESSEE AND HENCE THE QUESTION WHETHER THE SOURCE OF INVEST MENT SHOULD BE TREATED AS INCOME OR NOT U/S 69 HAS TO BE CONSID ERED IN THE LIGHT OF FACTS OF EACH CASE. D) JAYADAYA PODDAR VS. BIBI RAGRA AND OTHERS, AIR (197 4 SC 171.) _ IN CASES FALLING U/S 69A, 69B AND 69C, THE PHRASEOL OGY USED GOES TO SHOW THAT BEFORE ANY OF THESE SECTIONS CAN BE IN VOKED, THE CONDITION PRECEDENT AS TO THE EXISTENCE OF INVESTME NT, EXPENDITURE, OMISSION TO STATE OR MAKING UNDERSTATEMENT OF VALUE ETC., MUST BE CONCLUSIVELY ESTABLISHED BY EVIDENCE AND/OR MATERIA L ON RECORD. PAGE 3 OF 4 (E) PRAKASH NARIAN VS. CWT (20 CTR 147) (ALL.) THE BU RDEN OF SHOWING THAT A PARTICULAR TRANSACTION IS A BENAMI A ND THE OWNER IS NOT THE REAL OWNER RESTS ON THE PERSON ASSERTING IT TO BE SO AND THIS BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCI NG LEGAL EVIDENCE OF DEFINITE CHARACTER WHICH WOULD EITHER D IRECTLY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERR INGLY AND REASONABLY RAISING AN INFERENCE OF THE FACT. 4.1 WE NOTICE THAT THE ASSESSEE HAS FILE D CONFIRMATION LETTERS FROM ALL THE 18 PERSONS ON WHOSE BEHALF THE DDS WERE CLAIMED TO HAVE BEEN PURCHASED BY THE ASSESSEE. SUBSEQUENTLY THE ASSESSE E HAS ALSO PRODUCED 17 PERSONS AND THE AO HAS RECORDED STATEME NT FROM THEM. IN THE SWORN STATEMENT ALSO ALL THE 17 PERSONS HAVE CO NFIRMED THE SUBMISSION OF THE ASSESSEE. THERE IS ALSO NO DISPUT E WITH REGARD TO THE FACT THAT THE DDS WERE UITILISED BY THESE 18 PERSON S ONLY FOR THEIR OWN PURPOSE, I.E.FOR MAKING APPLICATION IN THEIR RESPEC TIVE NAMES. WE WERE ALSO INFORMED THAT THE REVENUE DID NOT CAUSE ANY IN QUIRY WITH REGARD TO THE DEMAND DRAFTS IN THE INDIVIDUAL HANDS OF THE 18 PERSONS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT ONCE INDIVIDUAL PERSONS HAVE ADMITTED THAT THE DDS WERE PURCHASED ON THEIR BEHALF AND THAT THEY HAVE ONLY USED THEM FOR THEIR OWN PURPOSE, THE ONUS PLACED UPON THE ASSESSEE GETS DISCHARGED. IN S UCH A SITUATION THE REVENUE MAY EXAMINE THE FINANCIAL STATUS OF THE IND IVIDUAL PERSONS AND THE ADDITION, IF ANY, IS CALLED FOR IN THEIR RESPEC TIVE HANDS. WE NOTICE THAT THE LD CIT (A) HAS ANALYSED THE ISSUE IN RIGHT PERS PECTIVE AND HAS RENDERED HIS DECISION ON A CONSPECTUS OF MATTER. HE NCE WE DO NOT FIND ANY NECESSITY TO INTERFERE IN HIS DECISION. 4.1 SIMILARLY IN THE CASE OF BUDDEPU VARA LAKSH MI IN ITA NO.15/VIZAG/2007, THIS BENCH, VIDE ITS ORDER DATED 13-11-2009, HAS DECIDED AN IDE NTICAL ISSUE AS UNDER: 6. DURING THE COURSE OF HEARING, A SPECIFIC QUERY WAS RAISED TO THE LD. DR, I.E. WHETHER THE ASSESSING OFFICER HAS MADE ANY INV ESTIGATION IN THE INDIVIDUAL HANDS OF PERSONS ON WHOSE BEHALF THE DEMAND DRAFTS WERE PURCHASED BY THE ASSESSEE. LD. DR REPLIED IN NEGATIVE. LD DR ALSO CONFIRMED THAT ONLY THE PERSONS IN WHOSE BEHALF THE DEMAND DRAFTS WERE CLAI MED TO HAVE BEEN PURCHASED HAS APPLIED FOR OBTAINING LICENSE FOR RUN NING IMFL SHOPS. HENCE IT IS PROVED THAT THE DEMAND DRAFTS WERE USED BY THE R ESPECTIVE PERSONS. FURTHER ALL THE PERSONS HAVE APPEARED BEFORE THE AO AND CONFIRMED THAT THE ASSESSEE HAS ONLY FACILITATED THE PURCHASING OF DEM AND DRAFTS. ONCE THE INDIVIDUAL PERSONS HAVE ADMITTED THAT THE DEMAND DR AFTS WERE PURCHASED ON THEIR BEHALF AND THAT THEY ONLY HAVE USED THE SAID DEMAND DRAFTS FOR THEIR OWN PURPOSE, IN OUR OPINION, THE ONUS PLACED UPON THE A SSESSEE GETS DISCHARGED AND THE REVENUE WAS REQUIRED TO EXAMINE THE FINANCI AL STATUS OF THE INDIVIDUAL PERSONS AND ADDITION, IF ANY, IS CALLED FOR IN THEI R RESPECTIVE HANDS. IN VIEW OF THE FORE GOING, WE REVERSE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.12.00 LAKHS. 5. BOTH THE PARTIES AGREED THAT THE FACTS AND C IRCUMSTANCES PREVAILING IN THE CASE NOW CONSIDERED ARE IDENTICAL WITH THE CASES DECIDED EAR LIER. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE TRIBUNAL IS SETTING ASIDE THE MA TTER TO THE FILE OF THE ASSESSING OFFICER IN PAGE 4 OF 4 ORDER TO MAKE FRESH EXAMINATION OF THE PERSONS WHO WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. IN THE INSTANT CASE ALSO, THE LEARNED CIT(A) HAS CONFIRMED THE ADDITION PERT AINING TO THE PERSONS WHO COULD NOT BE PRODUCED BEFORE THE ASSESSING OFFICER. LEARNED AU THORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WOULD BE IN A POSITION NOW TO PRODUCE THEM FOR MAKING FRESH EXAMINATION. HENCE, CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CITED CASES AND OTHER CASES, IN THE INTEREST OF NATURAL JUSTICE, WE REVERSE THE ORDER O F LD CIT(A) AND SET ASIDE THE MATTER TO THE FILE OF AO WITH A DIRECTION TO MAKE FRESH EXAMI NATION OF THE PARTIES RELATING TO THE ADDITION OF RS.5.50 LAKHS CONFIRMED BY THE LEARNED CIT(A). 6. WITH REGARD TO THE ADDITION PERTAINING TO TH E AGRICULTURAL INCOME, WE NOTICE THAT THE ASSESSEE HAS FAILED TO SUBMIT ANY EVIDENCE AND ACCO RDINGLY WE CONFIRM THE ORDER OF LEARNED CIT(A) ON THAT ISSUE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20/07/2010. SD/ - SD/ - (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 20 TH JULY, 2010 COPY TO 1 SHRI M.S.N. VARMA, T.B. VARA VILLAGE, S. KOTA MANDAL, VI ZIANAGARAM DIST. 2 THE ITO WARD - 2 , VIZIANAGARAM 3 THE CIT(A) - I, VISAKHAPATNAM . 4 THE CIT, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM 6 . GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM