P. Ashok Kumar, Hyderabad V. Dy.CIT, Central Circle, Tirupathi

ITA 54/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6235 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Search and seizure; Cost of acquisition; Documents seized
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 54/HYD/2014 ASSESSMENT YEAR: 2005-06 P. ASHOK KUMAR, TIRUPATHI PAN ABZPP5247J VS. DY. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE, TIRUPATHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI A. SITARAMA RAO DATE OF HEARING 23-08-2016 DATE OF PRONOUNCEMENT 21-09-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A), GUNTUR, DATED 30/10/2013, FOR AY 2005-06. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE, AN INDIVIDUAL, DERIVING INCOME FROM HOUSE PROPERTY AND INTEREST INCOME, FILED HIS RETURN OF INCOME FOR THE ASST. YEAR 2005- 06 ON 31.03.2006 ADMITTING TOTAL INCOME OF RS.77,200/-. A SEARCH & S EIZURE OPERATION U/S.132 OF THE I.T. ACT WAS CONDUCTED IN THE CASE O F DR. K. RAMACHANDRA ON 12.02.2009, DURING THE COURSE OF WHI CH, CERTAIN DOCUMENTS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED. SUBSEQUENTLY, NOTICE U/S.153C OF THE I.T. ACT WAS I SSUED TO THE ASSESSEE ON 23.09.2010 CALLING FOR THE RETURNS OF I NCOME FOR THE ASST. YEARS 2003-04 TO 2008-09. IN RESPONSE TO THE SAID N OTICE, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASST. Y EAR 2005-06 ON 2 ITA NO. 54/H/14 P. ASHOK KUMAR 24.11.2010 ADMITTING INCOME OF RS.77,200/-, AS DISC LOSED IN HIS ORIGINAL RETURN OF INCOME. ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S.153C OF THE INCOME-TAX ACT, 1961 ON 29.12.201 0 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS,23,77,200/-, BY MAKING ADDITION TOWARDS UNEXPLAINED CASH CREDITS : RS. 23,00,000. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) RAISING THE FOLLOWING GROU NDS OF APPEAL: 1) THE ORDER OF THE AO IS ERRONEOUS, UNJUST AND CO NTRARY TO THE FACTS OF THE CASE. 2) THE AO ERRED IN INITIATING PROCEEDINGS U/S 153C OF THE IT ACT WITHOUT ANY MATERIAL FOUND DURING THE COURSE OF SE ARCH AND SEIZURE OPERATIONS. 3) WITHOUT PREJUDICE TO THE ABOVE, THE AO ERRED IN HOLDING THAT THE AMOUNT RECEIVED FROM SRI R. SUDHAKAR CHOWDARY, TIRUPATHI OF RS. 20,00,000/- REPRESENTS THE INCOME OF THE AP PELLANT HEREIN. 4) THE AO ERRED IN HOLDING THAT THE AMOUNT OF RS. 2,00,000/- RECEIVED FROM SRI K.A. PANDURANGAM CHETTY AND RS. 1,00,000/- RECEIVED FROM SRI K.S. PRADEEP KUMAR REPRESENT THE INCOME OF THE APPELLANT. 5) THE ASSESSING OFFICER ERRED IN DETERMINING THE TOTAL INCOME AT RS.23,77,20/- AS AGAINST THE INCOME ADMITTED OF RS.77,200/- 6) THE ASSESSING OFFICER ERRED IN CHARGING INTERES T U/S.234A OF RS.15,410/- AND U/S.234B OF RS.5,31,920/-. 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT T HE ONLY ADDITION MADE BY THE ASSESSING OFFICER IS UNDER SEC .68 OF THE I.T. ACT. HE SUBMITTED THAT THE ASSESSING OFFICER DISBEL IEVED THE RECEIPT OF RS. 2,00,000/- RECEIVED FROM SHRI K.A.PANDURANGA M CHETTY, TIRUPATHI; RS.1,00,000/- RECEIVED FROM K.S. PRADEEP KUMAR AND RS.20,00,000/- RECEIVED FROM SHRI R. SUDHAKAR CHOWD ARY. ALL THE CREDITS WERE SHOWN IN THE ORIGINAL RETURN OF INCOME FILED BY THE APPELLANT. THE INCOME-TAX AUTHORITIES DID NOT FIND ANY MATERIAL FOR THE YEAR UNDER CONSIDERATION DURING THE COURSE OF SEARC H AND SEIZURE OPERATIONS. THEREFORE, THE PROCEEDINGS UNDER SEC.15 3C ARE NOT VALIDLY INITIATED FOR THE YEAR UNDER CONSIDERATION AND THE ADDITIONS MADE 3 ITA NO. 54/H/14 P. ASHOK KUMAR WITHOUT REFERENCE TO ANY SEIZED MATERIAL ALSO CANNO T BE SUSTAINED. IN THIS REGARD, THE APPELLANT RELIES ON THE FOLLOWING DECISIONS, WHEREIN IT IS HELD THAT UNLESS DOCUMENTS ARE FOUND DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS, NO ADDITION CAN BE MADE. A) 117 ITO 201- P.SRINIVASA NAIK VS. ACIT B) 6 ITR 360 (AT) MEGHANI ORGANICS LTD., VS. DCIT C) 60 DTR 148 K.V.LAKSHMI SAVITHRI DEVI VS. ACIT 4.1 THE ASSESSEE FURTHER SUBMITTED THAT THE SAID, C REDIT IS SHOWN IN THE BALANCE SHEET FILED ALONG WITH THE ORIGINAL RET URN OF INCOME. THERE IS NO MATERIAL TO SHOW THAT THE SAID AMOUNT WAS NOT RECEIVED FROM THE SAID PERSONS AND THAT THE SAID AMOUNT REPRESENTS TH E INCOME OF THE APPELLANT. 4.2 AS REGARDS RS. 20,00,000/- RECEIVED FROM SHRI R . SUDHAKAR CHOWDARY, THE ASSESSEE SUBMITTED THAT THERE WERE DI SPUTES BETWEEN THE ASSESSEE AND M/S.TIRUPATI HOTELS AND RESORTS PV T. LTD, REPRESENTED BY SHRI K.SUDHAKAR CHOWDARY IN CONNECTI ON WITH TRANSFER OF 9.91 ACRES OF LAND SITUATED AT SURVEY NO.203, TH IMMANAIDU PALEM VILLAGE, TIRUPATHI URBAN MANDAI. THE SAID DISPUTE W AS SETTLED DURING THE PREVIOUS YEAR UNDER CONSIDERATION AND AS PER TH E SETTLEMENT DEED, THE SAID SHRI R.SUDHAKAR CHOWDARY AGREED TO P AY RS.20,00,000/- TO THE APPELLANT. A DEED OF COMPROMI SE FOR DISPUTED RIGHTS FILED BEFORE THE COURT IS SUBMITTED. THEREFO RE, THE APPELLANT SUBMITTED THAT THE AMOUNT OF RS.20,00,000/- SHOULD NOT HAVE BEEN ADDED BY THE ASSESSING OFFICER. 4.3 AS REGARDS RS.2,00,000/- DISBELIEVING THE REC EIPT FROM SHRI KA.PANDURANGAM CHETTY, THE APPELLANT FILED A LETTE R OF CONFIRMATION FROM THE SAID PERSON. HE STATED THAT HE IS ASSESSED TO TAX AND ALSO PROVIDED THE PAN NUMBER. THE AMOUNT WAS PAID THROUG H CHEQUE. HE ALSO STATED THAT THE AMOUNT WAS RECEIVED BACK THROU GH CHEQUE. IT IS SUBMITTED THAT THE CREDITOR IS ASSESSED TO TAX AND DERIVES INCOME 4 ITA NO. 54/H/14 P. ASHOK KUMAR FROM BUSINESS. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER OUGHT NOT TO HAVE ADDED THE AMOUNT. 4.4 AS REGARDS THE ADDITION OF RS.1,00,000/- RECEI VED FROM SHRI K.S.PRADEEP KUMAR, THE ASSESSEE FILED A LETTER OF CONFIRMATION FROM THE SAID PERSON. HE STATED THAT HE IS ASSESSED TO T AX AND ALSO PROVIDED THE PAN NUMBER. THE AMOUNT WAS PAID THROUG H CHEQUE. HE ALSO STATED THAT THE AMOUNT WAS RECEIVED BACK THROU GH CHEQUE. IT IS SUBMITTED THAT THE CREDITOR IS ASSESSED TO TAX AND DERIVES INCOME FROM BUSINESS. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER OUGHT NOT TO HAVE ADDED THE AMOUNT. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E THE CIT(A), REGARDING ASSUMPTION OF JURISDICTION U/S 153C, OBSE RVED THAT ON PLAIN READING OF SECTION 153C IT IS SEEN THAT IF AN ASSES SING OFFICER, WHILE COMPLETING ASSESSMENT U/S.153A IN THE CASE OF ANY P ERSON, IS SATISFIED THAT ANY VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNTS OR DOCUMENTS SEIZED DURING SEARCH PERTAINS TO SOME OTH ER PERSON, THEN HE SHALL HAND OVER SUCH VALUABLE ARTICLE OR THING O R BOOKS OF ACCOUNTS OR DOCUMENTS TO THE ASSESSING OFFICER HAVING JURISD ICTION OVER THAT OTHER PERSON AND SUCH ASSESSING OFFICER SHALL PROCE ED TO REASSESS THE INCOME OF SUCH OTHER PERSON IN ACCORDANCE WITH PROVISIONS OF SECTION 153A. THUS, SECTION 153C REQUIRES THAT A BO NAFIDE BELIEF SHOULD BE FORMED IN THE MIND OF THE ASSESSING OFFIC ER COMPLETING ASSESSMENT U/S.153A THAT SOME ASSET/EVIDENCE GATHER ED DURING THE COURSE OF SEARCH BELONGS TO A PERSON OTHER THAN THE ONE THAT HE IS ASSESSING. IT IS POSSIBLE THAT ONCE THE PROCEEDINGS U/S.153C ARE INITIATED, THE SAID EVIDENCE/ASSET MAY BE SATISFACT ORILY EXPLAINED BY THE APPELLANT CONCERNED AND MAY NOT CALL FOR DISTUR BING THE INCOME ORIGINALLY RETURNED BY HIM. HOWEVER, ONCE THE PROCE EDINGS U/S.153C ARE INITIATED, THE INCOME TAX ACT DOES NOT PLACE RE STRICTIONS UPON THE ASSESSING OFFICER REGARDING THE NATURE OF INCOME, W HICH CAN BE BROUGHT TO TAX. SECTION 153C CLEARLY STATES THAT TH E ASSESSING OFFICER, WHO HAS ISSUED THE NOTICE UNDER THIS SECTION, SHALL ASSESS OR 5 ITA NO. 54/H/14 P. ASHOK KUMAR REASSESS THE TOTAL INCOME OF A PERSON TO WHOM SUCH NOTICE HAS BEEN ISSUED FOR THE STIPULATED ASSESSMENT YEARS IN THE M ANNER PROVIDED IN SECTION 153A. SECTION 153A IN TURN DOES NOT PLACE A NY RESTRICTIONS ON THE AO, WHO IS FREE TO ASSESS OR REASSESS THE TOTAL INCOME FOR A PERIOD OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDIN G THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH A SEARCH WAS CONDUCTED. THERE IS NO CLAUSE, WHICH RESTRICTS THE ASSESSMENT TO SUCH ISSUES AS ARRIVE FROM THE EVIDENCE GATHERED DURING THE' COURSE OF SEARCH AN/OR ASSETS SEIZED DURING THE SEARCH. IN VI EW OF THE ABOVE OBSERVATIONS, THE CIT(A) HELD THAT THE ASSESSING O FFICER IN THIS CASE HAS CORRECTLY PROCEEDED IN COMPLETING THE ASSESSMEN T U/S 153C AND NO INTERVENTION IS CALLED FOR. 5.1 AS REGARDS THE ADDITION OF RS.23,00,000/- U/S.6 8 OF THE INCOME TAX ACT, THE CIT(A) OBSERVED THAT THE ASSESSEE INH ERITED CERTAIN CLAIMS, RIGHTS AND INTERESTS IN THE SAID IMMOVABLE PROPERTY AT TIRUPATI FROM HIS DECEASED FATHER SRI P. SUBBARAYUDU, WHO IN TURN ACQUIRED SUCH CLAIMS, RIGHTS AND INTERESTS BY MEANS OF AN AG REEMENT DATED 04.11.1978, AND IN PURSUANCE OF WHICH HE FILED A SU IT FOR SPECIFIC PERFORMANCE. THUS, THE RECEIPT OF RS.20,00,000/- VI DE DEED OF COMPROMISE DATED 10.03.2005 IS FOR RELINQUISHING OF RIGHTS, INTERESTS AND CLAIMS ON THE SAID PROPERTY AND AMOUNTS TO LONG TERM CAPITAL GAINS IN THE HANDS OF THE APPELLANT. THE CIT(A) DIR ECTED THE ASSESSING OFFICER TO BRING THIS AMOUNT OF RS.20,00, 000/- TO TAX AS LONG TERM CAPITAL GAINS IN THE HANDS OF THE ASSESSE E. THE COST OF ACQUISITION SHALL BE THE AMOUNT, IF ANY, PAID IN PU RSUANCE OF THE ABOVE MENTIONED AGREEMENT DATED 04/11/1978 DULY IND EXED. 5.2 AS REGARDS THE OTHER ADDITION OF RS. 3,00,000/- BEING THE CREDITS RECEIVED FROM SRI K.A. PANDURANGAM CHETTY OF RS. 2, 00,000/- AND SRI K.S. PRADEEP KUMAR OF RS. 1,00,000/- IS CONSIDERED BY THE CIT(A) AS EXPLAINED AND DELETED THE SAID ADDITION. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 6 ITA NO. 54/H/14 P. ASHOK KUMAR 1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS TO THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT HEREIN. 2. THE LEARNED CIT (A) ERRED IN HOLDING THAT THE PR OCEEDINGS U / S 153C OF THE I.T. ACT ARE APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. THE LEARNED CIT (A) OUGHT TO HAVE SEEN THAT W HEN THERE IS NO MATERIAL RELATING TO THE YEAR OF ACCOUNT THE PRO CEEDINGS U/S 153C CAN NOT BE INITIATED. 3. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ADDI TION MADE OF RS.20,00,000/- BY DISBELIEVING THE RECEIPT FROM SRI R.SUDHAKAR CHOWDARY, TIRUPATI. THE LEARNED CIT (A) OUGHT TO HA VE SEEN THAT THE APPELLANT PROVED THE ACTUAL RECEIPT OF RS.20,00 ,000/- 4. THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE A MOUNT RECEIVED OF RS.20,00,000/- CANNOT BE SUBJECTED TO T AX IN ITS ENTIRETY. 5. WITHOUT PREJUDICE THE APPELLANT SUBMITS THAT THE LEARNED CIT (A) OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO DEDUCT THE COST OF ACQUISITION OF THE PROPERTY AND THE EXPENDI TURE INCURRED AND ARRIVED THE INCOME UNDER THE HEAD 'CAPITAL GAIN ' 7. THE LD. AR OF THE ASSESSEE CONTENDED THAT THE RE VENUE AUTHORITIES HAVE NOT FOUND ANY MATERIAL FOR THE YEA R UNDER CONSIDERATION DURING THE COURSE OF SEARCH AND SEIZU RE OPERATIONS AND HENCE INITIATION OF PROCEEDINGS U/S 153C IS INVALID . HE, THEREFORE, SUBMITTED THAT THE PROCEEDINGS INITIATED U/S 153C M AY BE QUASHED. 8. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF REVENUE AUTHORITIES. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY THE PROCEEDINGS IN THE PRESENT CASE HAVE BEEN CONDUCTED UNDER SECTION 153C OF THE ACT. IT HAS ALSO BEEN ADMITTED BEFORE US THAT THERE WAS NO SATISFACTION R ECORDED BY THE AO BEFORE INITIATING PROCEEDINGS UNDER SECTION 153C OF THE ACT. HOWEVER, THE CIT(A) HAS DISCUSSED THE LEGAL INTERPRETATIONS FOR INITIATION OF PROCEEDINGS U/S 153C BUT HE HAS NOT ADJUDICATED WHE THER ANY INCRIMINATING MATERIAL WAS BROUGHT ON RECORD FOR IN ITIATION OF PROCEEDINGS U/S 153C OR WHETHER THE ASSESSING OFFIC ER HAS RECORDED SATISFACTION BEFORE INITIATING PROCEEDINGS U/S 153C , SINCE, THESE 7 ITA NO. 54/H/14 P. ASHOK KUMAR FINDINGS ARE VITAL AND IMPORTANT. VARIOUS COURTS HA VE HELD THAT THE ASSESSING OFFICER CANNOT INITIATE PROCEEDINGS U/S 1 53C WITHOUT ANY INCRIMINATING MATERIAL OR WITHOUT RECORDING OF SATI SFACTION. HENCE, WE FIND IT APPROPRIATE TO REMIT THIS CASE BACK TO THE CIT(A) TO ADJUDICATE WHETHER THE PROCEEDINGS INITIATED U/S 153C ARE PROP ER. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2016. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN ) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED: 21 ST SEPTEMBER, 2016 KV COPY TO:- 1) SHRI P. ASHOK KUMAR, C/O SRI S. RAMA RAO, ADVOC ATE, FLAT NO. 102, SHRIYAS ELEGANCE, H. NO. 3-6-643 , ST. NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029 2)DCIT, CENTRAL CIRCLE, TIRUPATI. 3) CIT(A), GUNTUR 4 CIT(CENTRAL) , HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE 8 ITA NO. 54/H/14 P. ASHOK KUMAR S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER