Sri P.Manohara, Chttoor District V. ITO, Maanapalle

ITA 723/HYD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9833 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: K NEERAJA
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.723/HYD/09 : ASSESSMENT YEAR 2005-06 SHRI P.MANOHARA, MADANAPALLE. ( PAN AFMPK 1766 N ) V/S. INCOME-TAX OFFICER, WARD-1 MADANAPALLE. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. K.NEERAJA RESPONDENT BY : SHRI K.E.SUNIL BABU O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2005- 06 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME -TAX(APPEALS). 2. GROUNDS OF APPEAL OF THE ASSESSEE IN THIS APPEAL REA D AS UNDER- 1. THE LEARNED CIT(A) IS ERRONEOUS BOTH IN LAW AND ON FACTS. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACTS P LACED BEFORE HIM IN THE COURSE OF THE SET-ASIDE APPEAL AND MEREL Y WAS LEAD AWAY BY THE REMARKS OF THE ASSESSING OFFICER IN HIS REMAND REPORT. 3. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING TH E ADDITION OF THE FOLLOWING GIFTS IN THE HANDS OF THE APPELLANT W ITHOUT PROPERLY APPRECIATING THE EVIDENCE PLACED BEFORE H IM IN THIS RESPECT. (I) SMT. P.NAGARATNAMMA RS.1,00,000 (II) SRI P.SUBRAHMANYAM RS.2,00,000 ITA NO.723./HYD/ 09 SHRI P.MANOHARA, MADANAPALLE 2 (III) SRI M.SRIRAMULU RS.1,00,000 4. THE LEARNED CIT(A) WENT WRONG IN UPHOLDING THE ADDI TION OF THE AMOUNTS BORROWED BY THE APPELLANT FROM THE FOLLOWIN G PERSONS, WITHOUT PROPERLY APPRECIATING THE FACTS AND THE EVI DENCE AVAILABLE ON RECORD. (I) SMT.P.AKKULAMMA RS. 50,000 (II) SRI T MADDI REDDY RS. 1,60,000 (III) SRI M.NAASIMHA REDDY RS. 2,00,000 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF HANDLOOM SAREES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS INVESTED IN PURCHASE OF DEMAND DRAFTS FOR SECURING LI QUOR LICENCE FROM THE STATE GOVERNMENT. SOURCES FOR THE FUNDS UTILIZED FOR THE PURCHASE OF DEAND DRAFTS WAS STATED TO BE GIFTS AGGREGATING TO RS. 4,00,000 FROM THREE PERSONS AND LOANS AGGREGATING TO RS.4,10,000 FROM THREE PERSONS, CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE. AFTER DETAILED ENQU IRY INTO THE MATTER, DULY SUMMONING THE CONCERNED PERSONS WHO HAVE GIVEN THE GIFTS/LOANS TO THE ASSESSEE, THE ASSESSING OFFICER CONCLUDING THAT THE SAID DONORS OF GIFTS AND CREDITORS DO NOT HAVE CREDITWORTHINESS, AND ACCORDINGLY M AKING ADDITIONS ON ACCOUNT OF UNPROVED GIFTS AND LOANS BROUGHT THE ENTIRE AMOUNT OF RS.8,10,000 TO TAX AS THE INCOME OF THE ASSESSEE. ON AP PEAL, THE CIT(A) CONFIRMED THE SAID ADDITION. HENCE, ASSESSEE IS IN SECOND AP PEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE CONTENTIONS URGED BEFORE THE LOWER AUTHORITIES SUBMITTED THAT TH E ASSESSEE HAS DONE ALL THAT IT IS POSSIBLE FOR HIM TO DISCHARGE THE ONUS THAT L AY ON HIM TO PROVE THE GIFTS AND LOANS RECEIVED BY HIM. THE DONORS AS WELL AS THE CREDITORS HAVE NOT ONLY FILED CONFIRMATION LETTERS/AFFIDAVITS ADMITTING THE LOANS/GIFTS GIVEN BY ITA NO.723./HYD/ 09 SHRI P.MANOHARA, MADANAPALLE 3 THEM, BUT ALSO APPEARED BEFORE THE ASSESSING OFFICER. IN THE CIRCUMSTANCES, IT IS SUBMITTED THAT THE ASSESSEE HAS CLEARLY ESTABLISHED TH E IDENTITY OF THE DONORS/CREDITORS, AND IF ANY OF THEM DISOWNED THE TRA NSACTIONS DISCLOSED BY THE ASSESSEE, IT MAY BE FOR THEIR OWN REASONS AND ASSESSEE CAN NOT BE PENALIZED FOR THE SAME, AND AS SUCH THERE IS NO JUSTIFIC ATION FOR ANY ADDITION, DISBELIEVING THE GIFT/ LOAN TRANSACTIONS CLAIMED BY THE ASSESSEE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, STRONGLY RELIED ON THE ORDERS OF THE ASSESSING OFFICER AN D THE CIT(A), AND SUBMITTED THAT THE ALLEGED DONORS/ CREDITORS HAVE NO CAP ACITY TO GIVEN THE LOANS/GIFTS CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM THEM, AND TWO OF THE CREDITORS HAVE NOT CORRECTLY IDENTIFIED THEM SELVES WITH THE TRANSACTIONS OF LOAN ATTRIBUTED TO THEM BY THE ASSESSEE. IT IS THEREFORE PLEADED THAT THE ASSESSING OFFICER WAS VERY MUCH JUSTIFIED IN MAKING THE IMPUGNED ADDITIONS. IN SUPPORT OF HER CONTENTIONS, SH E PLACED RELIANCE ON THE FOLLOWING DECISIONS- (A) CIT V/S. MORLAY TRADING CO. LTD. (232 ITR 820 )-CAL. (A) CIT V/S. MOHANAKALA(291 ITR 278)-SC (C) DY. CIT V/S. SMT.PHOOLWATI DEVI (314 ITR (AT)1 )-DEL. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD . IT IS AN UNDISPUTED FACT EVIDENT FROM THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD THAT THE ASSESSEE HAS NOT ONLY THE FILED THE CONFIRMATION LETTERS/SWORN AFFIDAVITS OF THE CONCERNED DONORS/CREDITORS, BUT THE D ONORS/CREDITORS HAVE EVEN APPEARED BEFORE THE ASSESSING OFFICER, WHO RECORDED THEIR STATEMENT ON OATH. THUS, THE ASSESSEE HAS CLEARLY ESTABLISHED THE IDENT ITY OF THE DONORS/ ITA NO.723./HYD/ 09 SHRI P.MANOHARA, MADANAPALLE 4 CREDITORS. HOWEVER, IT IS MAINLY ON THE GROUND THAT CREDITWORTHINESS OF THE SAID DONORS/CREDITORS TO GIVE THE GIFTS LOANS ATTRIBUTE D TO THEM, HAS NOT BEEN PROVED THAT THE ASSESSING OFFICER HAS MADE ADDITIONS OF RS. 4,00,000 BY DOUBTING THE UNPROVED GIFTS AND RS.4,10,000 BY DOUBTI NG UNPROVED LOANS CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE. WE AGREE WITH THE LOWER AUTHORITIES THAT THE ASSESSEE IS OBLIGED TO ESTABLISH NOT O NLY THE IDENTITY OF THE DONORS/CREDITORS, BUT ALSO THEIR CREDITWORTHINESS, BE SIDES THE GENUINENESS OF THE TRANSACTIONS, SO AS TO PROVE THE GIFTS/ LOANS CLAIM ED TO HAVE BEEN RECEIVED BY IT. MERELY BECAUSE THE DONORS/CREDITORS HAV E NOT ONLY GIVEN CONFIRMATION LETTERS/AFFIDAVITS BUT EVEN APPEARED BEF ORE THE ASSESSING OFFICER AND SOME OF THEM OWNED UP THE TRANSACTIONS ATTRIBUTED T O THEM BY THE ASSESSEE, IT CANNOT BE CONCLUDED THAT THE ASSESSEE HAS DISCHARGED ITS ONUS, SINCE THE CREDIT-WORTHINESS OF THE DONORS/CREDITORS IS EQUA LLY AN IMPORTANT ASPECT WHICH SHOULD ALSO BE ESTABLISHED. WE ACCORDINGLY UP HOLD THE VIEW TAKEN BY THE LOWER AUTHORITIES IN THIS BEHALF. 7. WE MAY HOWEVER, EXAMINE THE CORRECTNESS OF THE REA SONING GIVEN BY THE LOWER AUTHORITIES FOR HOLDING THAT THE CREDITWORTHINESS OF THE DONORS/CREDITORS IS NOT PROVED. OF THE THREE DONORS, F ROM WHOM ASSESSEE CLAIMED TO HAVE RECEIVED GIFTS AGGREGATING TO RS.4 LAKH S, WE FIND THAT ASSESSEES FATHER, SHRI SRIRAMULU AND ASSESSEES SISTER SMT.P.NAGARATHNAMMA ARE CLAIMED TO HAVE GIVEN GIFTS O F RS.1 LAKH EACH, AND ASSESSEES BROTHER P.SUBRAHMANYAM IS CLAIMED TO HAVE GIVEN GIFT OF RS.2- LAKH. WHILE ASSESSEES FATHER IS CLAIMED TO BE OWNING T HREE ACRES OF WET AGRICULTURAL LAND AND DERIVING AGRICULTURAL INCOME THE REFROM OF THE ORDER OF RS.40,000 PER ANNUM, ASSESSEES SISTER WAS STATED TO BE A TEA CHER AND HER HUSBAND WAS STATED TO BE A REGISTERED MEDICAL PRACTITION ER. CONSIDERING THE FACT THAT THESE TWO DONORS IN QUESTION ARE CLOSE FAMILY M EMBERS OF THE ITA NO.723./HYD/ 09 SHRI P.MANOHARA, MADANAPALLE 5 ASSESSEE, AND THEY HAVE REASONABLE INCOME AND RESOURCES TO MAKE THE GIFTS IN QUESTION TO THE ASSESSEE, WE FIND THAT THE ASSESSING OFF ICER IS NOT JUSTIFIED IN MAKING ADDITION, DISBELIEVING THESE TWO GIFTS AGGR EGATING TO RS.2 LAKHS. WE ACCORDINGLY DELETE THE SAME. TO THIS EXTENT, GROUND NO.3 OF THE ASSESSEE IN THIS APPEAL IS ALLOWED. 8. AS FOR THE GIFT OF RS.2 LAKHS CLAIMED TO HAVE BE EN RECEIVED BY THE ASSESSEE FORM HIS BROTHER, SHRI SUBRAHMANYAM, WE FIND THAT THE CIT(A) HAS NOT DEALT WITH THIS ASPECT OF THE MATTER IN THE IMPUG NED APPELLATE ORDER PASSED BY HIM AND HAS THUS OMITTED TO CONSIDER THE SAME. HENCE, INT EH INTERESTS OF JUSTICE, WE DEEM IT FAIR AND PROPER TO RE STORE THIS ASPECT OF THE MATTER TO THE FILE OF THE CIT(A) FOR EXAMINING THE GIFT CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM SHRI SUBRAHMANYAM, AND PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW, ON THAT ASPECT OF THE MATT ER, AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN R ELATION TO THE GIFT CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM HIS BRO THER, SHRI SUBRAHMANAYAM, GROUND NO.3 OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. 9. NOW, WE MAY EXAMINE THE LOANS CLAIMED TO HAVE BEE N RECEIVED BY THE ASSESSEE AGGREGATING TO RS.4,10,000 FROM THREE PE RSONS. ONE, SMT.AKKULAMMA IS CLAIMED TO HAVE GIVEN A LOAN OF RS.6 0,000 TO THE ASSESSEE. IT IS EVIDENT FROM THE MATERIAL ON RECORD THAT THIS PERSON IS ONLY A LABOURER WORKING IN HANDLOOM UNITS, WITH HERSELF AND HER HUSBAND TOGETHER EARNING ABOUT RS.2,000 TO RS.3,000 PER MONTH, AND POSSE SSING A WHITE RATION CARD FOR PURCHASE OF RICE AT SUBSIDISED RATE FROM GOVERN MENT. WE FIND NO JUSTIFICATION TO INTERFERE WITH THE VIEW TAKEN BY THE LOWER AUTHORITIES WITH REGARD TO THE CREDITWORTHINESS OF THIS ALLEGED CREDITOR , STM.AKKULAMMA. WITH ITA NO.723./HYD/ 09 SHRI P.MANOHARA, MADANAPALLE 6 REGARD TO THE ALLEGED CREDITOR SHRI T.MADDI REDDY WH O IS CLAIMED TO HAVE GIVEN LOAN OF RS.1,60,000, IT IS EVIDENT FROM THE RECO RD THAT HE CLAIMED TO HAVE STATED THAT HIS SIGNATURE WAS OBTAINED ON BLANK W HITE PAPER SOME TIME BACK AND HE WAS NOT AWARE OF WHAT HAS BEEN WRITTEN ON THE SAME. SIMILARLY, WITH REGARD TO THE THIRD CREDITOR, SHRI NARSIMHA REDD Y, WHO IS CLAIMED TO HAVE GIVEN LOAN OF AN AMOUNT OF RS.2 LAKHS, THE LOWER AUTHORITIES FOUND THAT THERE WERE CONTRADICTIONS EVEN WITH REGARD TO THE AMOU NT OF LOAN ALLEGEDLY GIVEN BY HIM, AS HE STATED IN ONE LETTER TO HAVE GIVE N A LOAN OF RS.1 LAKH AND STATED TO HAVE GIVEN A LOAN OF RS.2 LAKHS IN A DIFFERE NT LETTER. IT IS ON ACCOUNT OF THESE CONTRADICTIONS, THAT THE LOWER AUTHORITIES HAV E DISBELIEVED THE VERSION OF THE ASSESSEE WITH REGARD TO THE LOANS CLAIMED TO HAVE BEEN BY SHRI MADDI REDDY AND SHRI NARASIMHA REDDY. WE FIND NO IN FIRMITY IN THE ACTION OF THE LOWER AUTHORITIES IN THIS BEHALF. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) INSOFAR AS HE HAS UPHELD THE ADDITION OF RS.4,10 ,000 MADE BY THE ASSESSING OFFICER DISBELIEVING THE LOANS CLAIMED TO HAVE B EEN RECEIVED BY THE ASSESSEE FROM THESE THREE PERSONS. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11 TH FEBRUARY, 2011 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 11TH FEBRUARY, 2011 ITA NO.723./HYD/ 09 SHRI P.MANOHARA, MADANAPALLE 7 COPY FORWARDED TO: 1. SHRI P.MANOHARA, III-146-23-6-4, CHOWDESWARI NAGA R, NEERUGATTUVARIPALLI, MADANAPALLE. CHITTOOR DISTRICT. 2. INCOME-TAX OFFICER, WARD-I, MADANAPALLE 3. COMMISSIONER OF INCOME-TAX(APPEALS), TIRUPATI. 4. COMMISSIONER OF INCOME-TAX TIRUPATI 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S