Sri Pendyala Venkateswra Rao, Nalgonda V. ACIT, Hyderabad

ITA 536/HYD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3117 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VENKAT REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Onus to prove; Set aside
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI N.R.S. GANSAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA-536/HYD/2009 A.Y. 2005-06 SHRI P. VENKATESWARA RAO, NALGONDA (PAN ADRPV 1141 M) (APPELLANT) VS ACIT, CIRCLE 9(1), HYDERABAD (RESPONDENT) APPELLANT BY : SHRI S. RAMA RAO RESPONDENT BY : SHRI T. VENKAT REDDY, DR O R D E R PER: CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER PASSED BY THE CIT(A)- VIJAYAWADA DATED 27.1.200 9 AND PERTAINS TO THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE RAISED A CONSTRUCTIVE GROUND IN THIS A PPEAL THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.17 LA KHS MADE BY THE ASSESSING OFFICER WITHOUT CONSIDERING THE FACT THAT THE DEMAN D DRAFTS AGGREGATING TO RS.17 LAKHS WERE OBTAINED BY ABOUT 15 DIFFERENT PER SONS FOR THE PURPOSE OF MAKING APPLICATIONS BY THEM . 3. BRIEF FACTS OF THE CASE ARE THAT GOVT. OF ANDHRA PRADESH CHANGED THE SYSTEM OF ALLOTTING LICENCE FOR RETAIL LIQ UOR SHOP FROM ACTION SYSTEM TO LOTTERY SYSTEM. IN THE NEW SYSTEM, ALL PROSPE CTIVE LICENCE APPLICANTS WOULD FILE APPLICATION FORM AND A DEMAND DR AFT OF RS.5000/- AS NON REFUNDABLE FEE. THERE WERE 1,43,000 APPLICAN TS AND THE DDS SUBMITTED WERE AMOUNTING TO RS.1900 CRORES. THE INVESTI GATION WING OF THE ITO MADE CERTAIN DISCREET ENQUIRIES AND FOUND LARG E NUMBER OF BENAMI APPLICANTS. DURING THE MONTH OF FEBRUARY MA RCH, 2005 THERE WAS HEAVY RUSH AT ALL BANK BRANCHES FOR PURCHASING DEMAND DRAFTS TO ITA-536/H/2009 SHRI P. VENKATESWARA RAO, NALGONDA 2 2 PARTICIPATING IN AUCTION FOR OBTAINING LICENCE FOR RETA IL OUTLETS. THE INVESTIGATION WING RECEIVED SPECIFIC INFORMATION THAT N AGARJUNA GRAMEENA BANK, MG ROAD, BRANCH NALGONDA WAS THE SOURCE FOR ISSUING LARGE NUMBER OF DDS. IT IS NECESSARY WHOSOEVER INTENDS TO PURCHASE A DD OR BANKERS CHEQUE FOR AN AMOUNT EXCEEDING RS.50,000 OR MORE TO WRITE HIS/HER/THEIR PAN ON THE APPLICATION. HOWEVER , THIS BRANCH OF NAGARJUNA GRAMEENA BANK DID NOT FOLLOW THIS STIPULAT ION. THE INVESTIGATION WING, THEREFORE, CARRIED OUT A SEARCH OPE RATION U/S 132 ON 6/4/2005 AT THIS BANK BRANCH AND NOTICE THAT ASSESSEE PURCH ASED 15 DEMAND DRAFTS BY FILLING EQUAL NUMBER OF APPLICATIONS. THESE DEMAND DRAFTS WERE APPLIED AND PURCHASED BY THE ASSESSEE. THE ASSE SSEE WAS SUMMONED BY DY.DIRECTOR ITO AND HE EXPLAINED THAT THE SE DEMAND DRAFTS WERE PURCHASED BY A GROUP OF PEOPLE INTENDING T O DO WINE BUSINESS. THEY APPROACHED HIM TO BUY DD AND THEREAFTE R HANDED OVER TO THEM. B) THE ASSESSING OFFICER ISSUED A NOTICE U/S 153A OF THE IT ACT ON 1/6/2005 AND IT WAS RESPONDED BY FILING A RETURN O N 22/9/2005 DECLARING INCOME FROM AGRICULTURE ONLY. ASSESSEE, DURING ASSESSMENT PROCEEDINGS, FURNISHED AFFIDAVITS FROM THE PERSONS IN WH OSE NAME THE DRAFTS WERE PURCHASED. ASSESSEE ALSO EXPLAINED THAT THESE PERSONS ARE HIS FRIENDS AND THEY REQUESTED HIM TO PURCHASE DDS IN THE NAME OF EXCISE DEPT. ASSESSEE ALSO SUBMITTED THAT THESE PERSONS HAD SUFFICIENT INCOME FROM AGRICULTURAL ACTIVITIES AND ALSO FILED PHOT OGRAPHS OF THEIR ORCHARDS. THE COPIES OF SUCH AFFIDAVITS WERE ALSO FILED BE FORE THE ASSESSING OFFICER CONTENDING THAT: I) THEY ADVANCED THE SPECIFIED AMOUNT OF MONEY TO THE ASSESSEE TO DRAW DD IN FAVOUR OF EXCISE SUPERINTENDENT. ITA-536/H/2009 SHRI P. VENKATESWARA RAO, NALGONDA 3 3 II) THEY CAME TO KNOW THAT THE SAID BANK, HAD CHARGED LESSER COMMISSION IF DEMAND DRAFTS TAKEN WERE MORE. HENCE, THEY HAD GIVEN THE MONEY TO THE ASSESSEE TO SAVE COMMISSION AMOUNT. III) THE ASSESSEE OBTAINED DEMAND DRAFTS AND HANDED OVER TO THE DEPONENTS. IV) SOURCE OF THE DEMAND DRAFTS IS OUT OF AGRICULTURAL INCOME ACCUMULATED OVER A PERIOD OF TIME. V) THE BANK WAS INSISTING FOR PAN FOR OBTAINING DEMAN D DRAFTS. 3.1 THE ASSESSEE FILED HIS RETURNS OF INCOME FOR THE ASSESSM ENT YEAR 2000-01 TO 2005-06 ADMITTING FOLLOWING AGRICUL TURAL INCOMES: ASSESSMENT YEAR AGRICULTURE INCOME (IN RS.) 2000-01 50,000 2001-02 54,000 2002-03 `58,000 2003-04 62,000 2004-05 64,000 2005-06 96,000 3.2. THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, ALSO FI LED CONFIRMATIONS FROM THESE PERSONS ALONG WITH COPY OF APPLI CATIONS SUBMITTED BEFORE THE EXCISE AUTHORITY FOR OBTAINING LI CENCE FOR WINE SHOP. THESE PERSONS APPEARED BEFORE THE INVESTIGATION W ING AND DEPOSED THAT THEY HAD GIVEN MONEY TO THE ASSESSEE FOR OB TAINING DRAFTS. THE SOURCE OF THEIR INCOME IS AGRICULTURE. THE ASSESSEE PL EADED BEFORE THE ASSESSING OFFICER THAT IT CANNOT BE UNEXPLAINED INVE STMENT. THE HONBLE SUPREME COURT IN CASE OF CIT VS. P.K. NOORJEHA N (237 ITR 570) HAS HELD THAT THE WORD IN SEC.69 IS MAY WHICH GIVES A DISCRETION TO THE ASSESSING OFFICER IN THE MATTER OF TREATING THE SOURCE OF INVESTMENT WHICH HAVE NOT BEEN SATISFACTORY EXPLAINED BY THE ASSESSEE AND THE ASSESSING OFFICER IS NOT OBLIGED TO TREAT SUCH SOURCE OF INV ESTMENT AS ITA-536/H/2009 SHRI P. VENKATESWARA RAO, NALGONDA 4 4 INCOME IN EVERY CASE WHERE THE EXPLANATION IS FOUND TO BE NON SATISFACTORY. THE ALLEGED INVESTMENT IN THE DRAFT IS N OT USED BY THE ASSESSEE FOR HIMSELF AND THE PERSON WHO USED IT FOR APPLYI NG FOR WINE SHOP LICENCE HAD CONFIRMED THAT IT WAS GIVEN BY THEM. NOT AGREEING WITH THE ARGUMENTS OF THE ASSESSEE, THE ASSESSING OFFICER MAD E AN ADDITION OF RS.17 LAKHS AS UNDISCLOSED INCOME. 4. ON APPEAL, CIT(A) CONFIRMED THE ORDER OF THE A SSESSING OFFICER ON THE REASON THAT MOST OF THE PERSON IN WHOSE NAMES THE DEMAND DRAFTS WERE TAKEN OR CLAIMED TO BE AGRICULTURIS TS HAVING MEAGER LAND HOLDINGS. FEW PERSONS CLAIMED THAT LAND BELONG TO THEIR WIFE OR FATHER AND THE CONFIRMATION LETTER FILED BY THE ASSESSEE ARE IN THE SAME STYLE AND LANGUAGE AND THE AFFIDAVIT MADE BY THEM SHO WS THAT THEY ARE IN FINANCIAL HARDSHIP. ACCORDING TO CIT(A), THE CAPACI TY OF THOSE PERSONS TO TAKE DEMAND DRAFTS ARE DOUBTABLE. MORE SO, THESE P ERSONS NEVER VISITED THE BANK TO PURCHASE DEMAND DRAFTS AND THE DEMA ND DRAFT APPLICATION FORM DOES HAVE PAN OF THEM. THE CASH WAS HA NDLED BY ASSESSEE ONLY. ACCORDINGLY, THE CIT(A) CONFIRMED THE ORD ER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUES CAME FOR CONSIDERATI ON BEFORE THIS TRIBUNAL (SMC) IN THE CASE OF SHRI PONUGOTI VENKATESWA R RAO, NALGONDA IN ITA NO.623/HYD/2009 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN THE TRIBUNAL HELD IN ITS ORDER DATED 31/8/2009 AS FOLLOW S: 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AN ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE DEMA ND DRAFTS WERE TAKEN IN FAVOUR OF THE EXCISE DEPARTMENT FOR THE PURPOSE OF PARTICIPATING IN THE AUCTION FORGETTING LICENCE TO RUN WINE SHOP. THE D EMAND DRAFTS WERE TAKEN IN THE NAMES OF FOUR PERSONS. THE CONTENTION OF THE R EVENUE IS THAT THE ASSESSEE DEPOSITED THE MONEY AND TOOK THE DEMAND DR AFTS AND, THEREFORE, THE ITA-536/H/2009 SHRI P. VENKATESWARA RAO, NALGONDA 5 5 MONEY BELONGS TO THE ASSESSEE. HOWEVER, THE FACTS REMAINS THAT THE DEMAND DRAFTS WERE DEPOSITED BY THE FOUR PERSONS WITH THE EXCISE DEPARTMENT FOR PARTICIPATING IN THE AUCTION. THEREFORE, AS RIGHTL Y SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE BURDEN OF PROOF IS ON THE REVENUE AND NOT ON THE ASSESSEE. NO MATERIAL EVIDENCE ON RECORD TO SU GGEST THAT THE ASSESSEE DEPOSITED HIS OWN FUNDS. THE AGRICULTURISTS WHO AR E SAID TO HAVE GIVEN THE MONEY HAVE CONFIRMED THAT THEY GAVE THE MONEY TO TH E ASSESSEE FOR OBTAINING THE DEMAND DRAFTS. THE CONFIRMATION LETT ERS WERE REJECTED ON THE GROUND THAT THE LAND HOLDINGS WERE NOT DISCLOSED AN D THEY HAVE ONLY MEAGER SOURCE OF INCOME. IF THAT IS SO, THE ADDITION HAS TO BE MADE ONLY IN THE HANDS OF THE FOUR PERSONS WHO CLAIMED TO HAVE GIVEN THE M ONEY AND NOT IN THE HANDS OF THE PRESENT ASSESSEE. AS FAR AS THE ASSES SEE IS CONCERNED, THE IDENTITY OF THE PARTIES AND THE GENUINENESS OF THE TRANSACTION ARE PROVED. TO PROVE THE CREDITWORTHINESS, THE AGRICULTURIST CLAIM ED THAT THEY PAID THE MONEY TO THE ASSESSEE. THE DEMAND DRAFTS TAKEN IN FAVOUR OF THE EXCISE DEPARTMENT AND THE SAME WERE DEPOSITED ON BEHALF OF THE FOUR P ERSONS. IN THAT FACTUAL SITUATION, THERE CANNOT BE ANY PRESUMPTION THAT THE MONEY BELONGS TO THE ASSESSEE. UNLESS AND UNTIL THE DEPARTMENT PROVES T HAT THE INCOME ACCRUED TO THE ASSESSEE, THE SAME CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE FOR THE PURPOSE OF TAXATION. IN VIEW OF THE ABOVE, THE ADD ITION MADE IN THE HANDS OF THE PRESENT ASSESSEE IS NOT JUSTIFIED. WHAT IS OBV IOUS IS THAT THE DEMAND DRAFTS WERE DEPOSITED BY THE FOUR PERSONS FOR PARTI CIPATING IN THE AUCTION. THEREFORE, THE NATURAL PRESUMPTION IS THAT THE MONE Y BELONGS TO THE ABOVE SAID FOUR PERSONS, UNLESS THE CONTRARY IS OTHERWISE PROVED. IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE ABOVE SAID RS.4 LAKHS BELONGS TO THE ASSESSEE, THERE CANNOT BE ADDITION IN THE HANDS OF THE ASSESS EE. ACCORDINGLY, THE ORDER OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ADDI TION OF RS.4 LAKHS IS DELETED. 6. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE T RIBUNAL, WE ARE INCLINED TO REVERSE THE ORDER OF THE CIT(A). ACCOR DINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT 18.6.2010 SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 18 TH JUNE, 2010 ITA-536/H/2009 SHRI P. VENKATESWARA RAO, NALGONDA 6 6 COPY FORWARDED TO: 1. PONUGOTI V. RAO, H.NO.6-6-228, RAVINDRANAGAR, NA LGONDA 2. ACIT CIRCLE 9(1), HYDERABAD 3. CIT(A)-IV, HYDERABAD. 4. CIT(A) VIJAYAWADA, CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP