M Udaya Sree, Kodad, Kodad V. ITO, Suryapet, Nalgonda

ITA 703/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2643 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Keywords: Opportunity of cross examination; Cost of acquisition
• Section: 143(3); 133A; 148

Judgement Text

ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A (SMC) BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.703/HYD/2016 (ASSESSMENT YEAR: 2008-09) SMT. M. UDAY SREE W/O SHRI KANAKANALA SAMBASIVA RAO, KODAD PAN: ATGPK 9500 J VS INCOME TAX OFFICER SURYAPET NALGONDA (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A. SRINIVAS FOR REVENUE : SHRI V. SREEKAR, DR O R D E R THIS IS ASSESSEES APPEAL FOR THE A.Y 2008-09. IN T HIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A)-3, DATED 8.3.2016 CONFIRMING THE ADDITION OF RS.24,42, 768 MADE BY THE AO AS CAPITAL GAIN. THE ASSESSEE IS ALSO AGGRIE VED THAT THE CIT (A) HAS CONFIRMED THE ADDITIONS MADE ON THE BASIS O F NOTINGS FOUND AT THE PREMISES OF A THIRD PARTY, WITHOUT GIV ING THE ASSESSEE AN OPPORTUNITY TO CROSS EXAMINE THE THIRD PARTY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND SALARIED EMPLOYEE, SHE DID NOT FILE ANY RETURN OF INCOME FOR THE RELEVANT A.Y. DURING THE COURSE OF SU RVEY U/S 133A OF THE ACT IN THE CASE OF THE FIRM, M/S. SRI SAI BA LAJI CONSTRUCTIONS, KODAD, IT WAS FOUND THAT THE PARTNER S OF THE FIRM DATE OF HEARING : 17.08.2017 DATE OF PRONOUNCEMENT : 30.08.2017 ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 2 OF 7 PURCHASED PIECES OF LAND FROM THE ASSESSEE BY INVES TING HUGE AMOUNT. SINCE THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME, A NOTICE U/S 148 WAS ISSUED ON 18.3.2013. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED A RETURN OF INCOME ON 5. 9.2013 ADMITTING TOTAL INCOME AT RS.1,44,530. 3. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W .S. 147 OF THE ACT, THE ASSESSEE WAS ASKED TO SHOW-CAUS E AS TO WHY THE SALE CONSIDERATION MENTIONED IN THE DOCUMENTS F OUND AND IMPOUNDED DURING THE COURSE OF SURVEY, SHOULD NOT B E BROUGHT TO TAX. IN HER REPLY DATED 28.10.2013, THE ASSESSEE ST ATED THAT SHE HAD NEVER RECEIVED SUCH HUGE AMOUNT AND REQUESTED T O ALLOW CROSS EXAMINATION OF THE PARTIES FROM WHOSE POSSESS ION THE DOCUMENTS WERE IMPOUNDED. AO HOWEVER, OBSERVED THAT THE PARTNERS HAVE LEFT KODAD AREA IMMEDIATELY AFTER THE INCOME TAX SURVEY AND WERE NOT TRACEABLE. THEREFORE, HE COMPLE TED THE ASSESSMENT MAKING THE ADDITION OF THE AMOUNTS MENTI ONED IN THE IMPOUNDED MATERIAL. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT (A) AND ALSO PRAYED FOR AN OPPORTUNITY TO CROSS EXAMINE THE PARTNERS OF THE FIRM. THE CIT (A) CALLED FOR A REMA ND REPORT FROM THE AO. VIDE REPORT DATED 9.2.2016, THE AO REPORTED THAT THE PARTNERS OF THE FIRM LEFT KODAR TOWN AFTER THE SUR VEY AND THAT THE DATES MENTIONED IN THE IMPOUNDED MATERIAL TALLIED W ITH THE REGISTERED DOCUMENTS AND ALSO THE CHALLANS PAID FOR REGISTRATION AND THEREFORE, THE ENTRIES IN THE SAID DOCUMENTS AR E GENUINE. TAKING THE SAME INTO CONSIDERATION, THE CIT (A) DIS MISSED THE ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 3 OF 7 ASSESSEES APPEAL AND THE ASSESSEE IS IN SECOND APP EAL BEFORE THIS TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REIT ERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUT HORITIES BELOW, SUBMITTED THAT THE SURVEY WAS NOT CONDUCTED IN THE PREMISES OF THE ASSESSEE BUT WAS CONDUCTED ON THE T HIRD PARTIES WHO HAVE PURCHASED LAND FROM THE ASSESSEE. HE DREW OUR ATTENTION TO THE IMPOUNDED DOCUMENTS WHICH ARE PLAC ED AT PAGES 11 TO 13 OF THE PAPER BOOK TO DEMONSTRATE THAT THE ASSESSEES NAME WAS NOT MENTIONED IN ANY OF THE DOCUMENTS BUT THE NAME MENTIONED THERE IS OF THE ASSESSEES FATHER. HE SUB MITTED THAT NEITHER THE ASSESSEE NOR HER FATHER RECEIVED SUCH H UGE AMOUNTS MENTIONED IN THE DOCUMENTS ON THE BASIS OF WHICH TH E ADDITIONS HAVE BEEN MADE. HE SUBMITTED THAT UNLESS AND UNTIL, THE ASSESSEE HAS BEEN GIVEN AN OPPORTUNITY TO CROSS EXA MINE THE PARTIES, THE SAID DOCUMENTS CANNOT BE RELIED UPON T O MAKE THE ADDITIONS IN THE CASE OF THE ASSESSEE. IN SUPPORT O F THESE CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE P LACED RELIANCE UPON THE FOLLOWING DECISIONS: A) CIT VS. SMC SHARE BROKERS LTD, 288 ITR 345 (DEL .) B) CIT VS. S.M AGGARWAL REPORTED IN 293 ITR 43 (DEL .) C) AMARJIT SINGH BAKSHI (HUF) VS. ACIT REPORTED IN (2003) 86 ITD 13 (DEL.) 6. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND PARTICULARLY THE REMAND REPOR T OF THE AO WHEREIN HE HAS MENTIONED THAT SOME OF THE PAYMENTS AND ALSO THE PAYMENTS TOWARDS CHALLANS MENTIONED IN THE IMPO UNDED ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 4 OF 7 DOCUMENTS TALLIED WITH THE REGISTRATION DATES AND T HEREFORE, THE ENTIRE DOCUMENTS HAVE TO BE TREATED AS GENUINE DOCU MENTS AND THE ADDITIONS SHOULD BE SUSTAINED. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, UNDISPUTEDLY THE SURVEY WAS CONDUCTED IN THE CASE OF M/S. SRI SAI BALAJI CONSTRUCTIONS, WHO HAVE PURCHAS ED A PIECE OF LAND FROM THE ASSESSEE. IN THE DOCUMENTS IMPOUNDED, THE SAID FIRM HAS RECORDED AS HAVING PAID CERTAIN AMOUNTS TO ASSESSEES FATHER, SHRI CHENNA RAO. IN THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY, THE SAID PARTIES HAVE ALSO MENTIO NED THAT THEY ARE NOT MAINTAINING ANY BOOKS OF ACCOUNT. THEREFORE , IT IS NOT CLEAR AS TO WHETHER THEY HAVE OFFERED ANY INCOME ON THE SALE OF FLATS CONSTRUCTED ON THE PIECE OF LAND PURCHASED FR OM THE ASSESSEE AND WHAT IS THE COST OF ACQUISITION OF THE SAID LAND SHOWN BY THEM. THE ONLY BASIS FOR MAKING THE ADDITI ONS IS THE ENTRIES IN THE IMPOUNDED DOCUMENTS. IT HAS BEEN HEL D BY VARIOUS COURTS THAT ADDITIONS CANNOT BE MADE SOLELY ON THE BASIS OF MATERIAL FOUND DURING THE COURSE OF SEARCH SURVEY, BUT THEY SHOULD ALSO BE CORROBORATED BY OTHER EVIDENCE. THOU GH, THE LEARNED DR TRIED TO JUSTIFY THE ADDITIONS BY TALLYI NG THE DATES OF SALE DEED WITH THE DATES OF PAYMENTS AS MENTIONED I N THE IMPOUNDED MATERIAL, I FIND THAT THE MATERIAL IMPOUN DED IS FROM THE POSSESSION OF A THIRD PARTY WHO WAS NOT ALLOWED CROSS EXAMINATION BY THE ASSESSEE INSPITE OF HER SPECIFIC REQUEST FOR THE SAME. ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 5 OF 7 8. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SMC SHARE BROKERS LTD, 288 ITR 345 (DEL.) HAS HELD THAT THE STATEMENT OF A THIRD PARTY HAD EVIDENTIARY VALUE BU T NO WEIGHT SHOULD BE GIVEN TO IT IN PROCEEDINGS AGAINST THE AS SESSEE WITHOUT IT BEING TESTED UNDER CROSS EXAMINATIONS. 9. SIMILARLY, IN THE CASE OF CIT VS. S.M AGGARWAL R EPORTED IN 293 ITR 43 (DEL.) IT WAS HELD THAT THE STATEMENT MADE BY THE ASSESSEES DAUGHTER COULD NOT BE SAID TO BE RELEVANT OR ADMISSIBLE EVIDENCE AGAINST THE ASSESSEE, SINCE THE ASSESSEE WA S NOT GIVEN ANY OPPORTUNITY TO CROSS-EXAMINE HER AND EVEN FROM THE STATEMENT, NO CONCLUSION COULD BE DRAWN THAT THE ENTRIES MADE O N THE RELEVANT PAGE BELONGED TO THE ASSESSEE AND REPRESENTED HIS UNDI SCLOSED INCOME. IT WAS ALSO AN ADMITTED FACT THAT THE STATEM ENT OF THE ASSESSEE WAS NOT RECORDED AT ANY STAGE DURING THE ASSE SSMENT PROCEEDINGS. THE ONLY PERSON COMPETENT TO GIVE EVIDE NCE ON THE TRUTHFULNESS OF THE CONTENTS OF THE DOCUMENT IS THE WRITER THEREOF. SO, UNLESS AND UNTIL THE CONTENTS OF THE DOCUMENTS ARE PROVED AGAINST A PERSON, THE POSSESSION OF THE DOCUMENT OR HANDWRITING OF THAT PERSON ON SUCH DOCUMENT BY ITSELF COULD NOT PROV E THE CONTENTS OF THE DOCUMENTS 10. THE THIRD MEMBER IN THE CASE OF AMARJIT SINGH B AKSHI (HUF) VS. ACIT REPORTED IN (2003) 86 ITD 13 (DEL.), THE THIRD MEMBER AT PARA 55 OF ITS ORDER HAS HELD AS UNDER: 55. I MAY MENTION AT THIS STAGE THAT THE PROVISIONS OF THE INDIAN EVIDENCE ACT ARE NOT STRICTLY APPLICABLE TO THE PROCEEDINGS UNDER THE IT ACT , BUT THE BROAD PRINCIPLES OF LAW OF EVIDENCE DO APPLY TO SUCH PROCEEDINGS. FURTHER, AN ENTRY IN THE BOOKS OF ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 6 OF 7 ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINES S IS RELEVANT FOR PURPOSES OF CONSIDERING THE NATURE AND IMPACT OF A TRANSACTION, BUT NOTINGS ON SLIPS O F PAPER OR LOOSE SHEETS OF PAPER CANNOT FALL IN THIS CATEGORY. NOTINGS ON LOOSE SHEET OF PAPERS ARE REQUIRED TO BE SUPPORTED/CORROBORATED BY OTHER EVIDENCE AND WHICH MAY INCLUDE THE STATEMENT OF A PERSON, WHO ADMITTEDLY IS A PARTY TO THE NOTINGS. A FURTHER DISTINCTION HAS TO BE DRAWN BETWEEN SLIPS O F PAPER OR LOOSE SHEETS FOUND FROM THE POSSESSION OF AN ASSESSEE AND SIMILAR DOCUMENTS FOUND FROM A THIRD PERSON. IN CASE THE STATEMENT OF THE THIRD PERSON IS RECORDED WITH REFERENCE TO THE NOTINGS, THEN SUCH A STATEMENT UNDOUBTEDLY HAS TO BE CONFRONTED TO THE ASSESSEE AND HE IS TO BE ALLOWED AN OPPORTUNITY OF CROSS-EXAMINATION. IN THE PRESENT REFERENCE THE DOCUMENT IN QUESTION HAS NOT BEEN FOUND FROM THE ASSESSEE'S POSSESSION, BUT FROM THE POSSESSION OF SHRI ATWAL AND UNDOUBTEDLY NO OPPORTUNITY OF CROSS-EXAMINATION HAS BEEN ALLOWED TO THE ASSESSEE AND IT HAS CLEARLY EMERGED FROM THE RECORD AND AS AMPLY DISCUSSED IN THE PRESENT ORDER ITSELF THE TESTIMONY OF SHRI ATWAL IS NOT CREDIBLE AT ALL SINCE IN THREE SEPARATE STATEMENTS HE HAS INDICATED DIFFERENT FIGURES, HIS SECRETARY, SHRI GANESHAN, HA S GIVEN YET ANOTHER FIGURE AND IN PROCEEDINGS BEFORE THE TWO DIFFERENT COURTS AT DELHI AND AS FAR AWAY A T DHANBAD, HE HAS GIVEN A DIFFERENT PICTURE ALTOGETHE R AND LASTLY, IN HIS IT ASSESSMENT HE HAS RETRACTED FROM ALL HIS EARLIER STATEMENTS AND HAS CATEGORICAL LY STATED THAT THE DOCUMENT WHICH HAS BEEN SIGNED BOTH BY HIM AND BY THE ASSESSEE CONTAINS ONLY PROJECTION S AND PURPORTED FIGURES IN RESPECT OF THE PROPERTY IN QUESTION. IN OTHER WORDS, THE ENTIRE ADDITION IN TH E HANDS OF THE ASSESSEE IS BASED ON THE DOCUMENT FOUND, BUT THERE IS NO IOTA OF EVIDENCE TO SUPPORT THE REVENUE'S CASE THAT A HUGE FIGURE WHATEVER BE ITS QUANTUM OVER AND ABOVE THE FIGURE BOOKED IN THE RECORDS AND ACCOUNTS CHANGED HANDS BETWEEN THE PARTIES. 11. APPLYING THE RATIONALE IN THE ABOVE DECISIONS T O THE FACTS OF THE CASE BEFORE ME, IT IS CLEAR THAT THE D OCUMENTS FOUND AND IMPOUNDED WAS FROM THE POSSESSION OF A THIRD PA RTY AND THE ITA NO 703 OF 2016 SMT M UDAY SREE KODAD . PAGE 7 OF 7 STATEMENT OF SUCH PARTY HAS BEEN THE BASIS FOR MAKI NG THE ADDITIONS IN THE HANDS OF THE ASSESSEE WITHOUT GIVI NG THE ASSESSEE ANY OPPORTUNITY OF CROSS EXAMINATION EVEN THOUGH TH E ASSESSEE HAS SPECIFICALLY REQUESTED FOR SUCH AN OPPORTUNITY. THE ASSESSEE HAD ALSO ASKED FOR AN OPPORTUNITY TO CROSS EXAMINE HER FATHER, THE THIRD PARTY, IN WHOSE NAME THERE ARE RECORDINGS IN THE NOTE BOOK BUT EVEN THE ASSESSEES FATHER HAS NOT BEEN CALLED BY THE DEPARTMENT FOR HIS STATEMENT OR CROSS EXAMINATION T HEREAFTER. THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS CIT ED SUPRA, I HOLD THAT THE ADDITIONS CANNOT BE MADE BY THE AO IN THE ASSESSEES CASE ON THE BASIS OF A NOTING OR A STATEMENT OF A T HIRD PARTY WITHOUT IT BEING TESTED BY WAY OF CROSS EXAMINATION . ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 12. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2017. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 30 TH AUGUST, 2017. VINODAN/SPS COPY TO: 1 SMT. M. UDAY SREE, W/O SRI KANKANALA SAMBASIVA RA O, H.NO.3- 296/2/9/1/1 SREENAGAR COLONY, KODAD 508206 2 INCOME TAX OFFICER,SURYAPET, NALGONDA 3 CIT (A)-3 HYDERABAD 4 PR. 3 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER