Ch. Srinivasulu Reddy, Hyd, Hyderabad V. ITO, Ward-1(2), Hyderabad

ITA 759/HYD/2012

• Counselvise Citation: 75922514 RSA 2012
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained cash credit
• Section: 143(3); 68; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIAFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO. A.Y. APPELLANT RESPONDENT 758/H/2012 2007 - 08 MR. CH. SRINIVASULU REDDY, HYDERABAD. PAN AATPC3959K THE INCOME TAX OFFICER, WARD-1(2), HYDERABAD. 759/H/2012 2008 - 09 614/H/2014 2007 - 08 615/H/2014 2008 - 09 FOR ASSESSEE : MR. K.C. DEVDAS & MR. K.A. SAI PRASAD FOR REVENUE : SMT. VASUNDHARA SINHA DATE OF HEARING : 10 . 11 .2 015 DATE OF PRONOUNCEMENT : 04 . 1 2 .2015 ORDER PER SMT. P. MADHAVI DEVI, J.M. ITA.NOS.758 & 759/HYD/2014 ARE ASSESSEES APPEALS AGAINST THE ORDERS OF THE CIT UNDER SECTION 263 OF THE I.T. ACT, 1961, WHILE ITA.NOS.614 AND 615/HYD/2 014 ARE ASSESSEES APPEALS AGAINST THE ORDER OF THE CIT (A) CONFIRMING THE DISALLOWANCE MADE BY THE A.O. WHILE GIVING EFFECT TO THE ORDER OF THE CIT UNDER SECTION 143(3) READ WITH SECTION 263 OF THE I.T. ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND THE MANAGING DIRECTOR OF M/S. CHAMUNDESWARI BULK MARKET P. LTD., AND ALSO A PARTN ER IN THE FIRM OF M/S. CHAMUNDESWARI CONSTRUCTIONS. ASSESSEE IS ALSO RUNNING A PROPRIETARY CONCERN BY N AME 2 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. CBM AGENCIES AND SRI SRINIVASA ENTERPRISES. ASSESSE E FILED HIS RETURNS OF INCOME FOR BOTH THE A.YS. 2007 -08 AND 2008-09 RESPECTIVELY. THE ASSESSMENTS FOR BOTH THE A.YS. WERE COMPLETED UNDER SECTION 143(3) OF THE I.T. ACT ACCEPTING THE RETURN OF INCOME OF THE ASSESSEE AFTE R CONSIDERING THE CONFIRMATION LETTERS FILED BY THE A SSESSEE AS REGARDS THE CASH CREDITS RECEIVED BY THE ASSESSE E. THE CIT, HOWEVER, INITIATED REVISION PROCEEDINGS UNDER SECTION 263 OF THE I.T. ACT BY OBSERVING THAT THE A.O. DID NOT PROPERLY ENQUIRE INTO THE CREDITWORTHINESS OF THE L ENDERS DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143 (3) OF THE I.T. ACT AND THEREFORE, THE ASSESSMENT ORDER WAS BOTH ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. THE ASSESSEE FILED HIS OBJECTIONS T O THE PROPOSED REVISION PROCEEDINGS WHICH WERE NOT ACCEPT ED BY THE CIT AND AN ORDER UNDER SECTION 263 OF THE I.T. ACT WAS PASSED DIRECTING THE A.O. TO RE-DO THE ASSESSMENT A FTER VERIFICATION OF ALL THE CASH CREDITS. AGAINST THE O RDER OF THE CIT UNDER SECTION 263, THE ASSESSEE IS IN APPEAL BE FORE US IN ITA.NO.758 AND 759/HYD/2012. CONSEQUENT TO THE ORDER UNDER SECTION 263, THE A.O. COMPLETED THE ASSESSMENTS UNDER SECTION 143(3) READ WITH SECTION 263 OF THE I.T. ACT BY BRINGING ALL THE CASH CREDITS TO TAX AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 OF THE I. T. ACT. AGGRIEVED BY THE SAME, THE ASSESSEE PREFERRED APPEA LS TO THE LD. CIT(A) WHO CONFIRMED THE ADDITIONS MADE BY THE A.O. AND AGAINST SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS ALSO IN APPEAL BEFORE US IN ITA.NOS.614 AND 615/HYD/2014 RESPECTIVELY. 3 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. 3. IN THE APPEALS AGAINST THE ORDER UNDER SECTION 263 OF THE I.T. ACT, THE ASSESSEE HAS RAISED A GROU ND OF APPEAL THAT THE CIT(A) OUGHT TO HAVE OBSERVED THAT THE A.O. HAS GATHERED ALL THE NECESSARY DETAILS WITH RE GARD TO THE CREDITWORTHINESS OF THE CREDITORS AND THEREFORE , THE ORDER DID NOT SUFFER FROM INSUFFICIENT ENQUIRY CAUS ING PREJUDICE TO THE INTERESTS OF THE REVENUE AND THAT THE CIT INVOKED THE PROVISIONS OF SECTION 263 OF THE I.T. A CT TO MAKE FURTHER ROVING ENQUIRIES, IN RESPECT OF A MATT ER WHICH HAS ALREADY REACHED FINALITY AND HENCE, THE S AID ORDER CANNOT BE HELD TO BE VALID IN LAW. 4. THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE OBJECTIONS RAISED BY THE ASSESSEE B EFORE THE CIT HAS DRAWN OUR ATTENTION TO THE ASSESSMENT ORDER AND ALSO THE REPLY FILED BY THE ASSESSEE BEFORE THE LD. CIT TO DEMONSTRATE THAT THE A.O. HAD CALLED FOR AND THE ASSESSEE HAD GIVEN ALL THE DETAILS WITH REGARD TO T HE CASH CREDITS SUCH AS CONFIRMATION LETTERS OF THE CREDITO RS ALONG WITH THE DETAILS OF THE AGRICULTURAL LANDS OWNED BY THEM REGARDING THE SOURCE OF ADVANCES MADE TO THE ASSESS EE. HE HAS SUBMITTED THAT THE ASSESSEE HAVING PRODUCED ALL THE DETAILS BEFORE THE A.O. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT AN D THE A.O. HAVING ACCEPTED THE SAME, THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, ACCORDI NG TO HIM, THE ASSESSMENT ORDER IS TO BE UPHELD. HE FURTH ER SUBMITTED THAT THE A.O. WHILE GIVING EFFECT TO THE ORDER 4 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. UNDER SECTION 263 HAS ONLY MADE THE ADDITIONS SUGGE STED BY THE CIT UNDER SECTION 263 AND THE ASSESSEE HAD F ILED ALL THE DETAILS BEFORE THE LD. CIT(A) WHO CALLED FO R A REMAND REPORT FROM THE A.O. AND THE A.O. HAS GIVEN A REPORT IN FAVOUR OF THE ASSESSEE. BUT THE LD. CIT(A ) DISREGARDING THE REMAND REPORT HAS CONFIRMED THE ADDITIONS MADE BY THE A.O. BY RELYING UPON THE RATI ON CARDS OF THE CREDITORS BY HOLDING THAT THEIR INCOME IS BELOW POVERTY LINE AND THEREFORE, THE CREDITORS CAN NOT BE ACCEPTED TO BE CREDITWORTHY TO ADVANCE SUCH ADVANCE S TO THE ASSESSEE. THUS, ACCORDING TO HIM, THE ORDER OF THE LD. CIT(A) IS ALSO NOT SUSTAINABLE. 4.1. THE LD. COUNSEL FOR THE ASSESSEE, FURTHER SUBMITTED THAT IT WAS DURING THE PROCEEDINGS UNDER SECTION 271D OF THE I.T. ACT TO EXAMINE THE CASH LO ANS TAKEN BY THE ASSESSEE THAT THE RATION CARDS OF THE CREDITORS WERE EXAMINED AND IT WAS FOR THIS REASON THAT THE CIT HAS COME TO THE CONCLUSION THAT THE RATION CARDS ARE THE PROOF OF THE CREDITWORTHINESS OF THE LENDER S. HE SUBMITTED THAT THE CASH CREDITS WERE ACCEPTED AS GE NUINE BY THE A.O. EVEN DURING THE REMAND PROCEEDINGS AFTE R CONSIDERING THE EXTENT OF AGRICULTURAL LAND HELD BY THE CREDITORS AND THAT RATION CARDS CANNOT BE CONSIDERE D AS EVIDENCE OF THEIR CREDITWORTHINESS, AS IN ORDER TO OBTAIN THE RATION CARDS FOR AVAILING VARIOUS WELFARE SCHEM ES OF THE GOVERNMENT SUCH AS GETTING THE COMMODITIES AT A N AFFORDABLE PRICE ETC., THE INCOME IS REPORTED AT A LOWER END. THEREFORE, ACCORDING TO HIM, THE RATION CARDS ALONE 5 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. CANNOT BE HELD AS RELIABLE EVIDENCE IN RESPECT OF T HE CREDITWORTHINESS OR OTHERWISE OF THE CREDITORS. FUR THER, HE SUBMITTED THAT THE A.O. HAS CONSIDERED THE CONFIRMA TION LETTERS FILED BY THE CREDITORS INCLUDING THE EXTENT OF AGRICULTURAL LAND HELD BY THEM TO BE SATISFIED ABOU T THE CREDITWORTHINESS TO ADVANCE THE SUMS TO THE ASSESSE E. HE SUBMITTED THAT THE FACT THAT MOST OF THE DEPOSITS H AVE BEEN MADE INTO THE BANK ACCOUNT OF THE ASSESSEE ALS O PROVES THAT THE CASH CREDITS ARE GENUINE. HE FURTHE R SUBMITTED THAT THE A.O. AFTER VERIFICATION OF THE D ETAILS FILED BY THE ASSESSEE, HAS ADOPTED ONE OF THE POSSI BLE VIEWS AND IN SUCH CIRCUMSTANCES, THE CIT CANNOT EXE RCISE THE POWERS UNDER SECTION 263 OF THE I.T. ACT. IN SU PPORT OF THIS CONTENTION, HE HAS PLACED RELIANCE UPON THE JU DGMENT OF THE HONBLE A.P. HIGH COURT IN THE CASE OF SPECT RA SHARES & SCRIPS P. LTD., VS. CIT-III, HYD. (2013) 3 6 TAXMANN.COM 348 (A.P.). THUS, ACCORDING TO HIM, THE ORDERS OF THE CIT UNDER SECTION 263 AS WELL AS THE ORDERS OF THE LD. CIT(A) CONFIRMING THE ORDERS OF THE A.O. UNDER SECTION 143(3) GIVING EFFECT TO THE ORDER UNDER SEC TION 263 ARE TO BE QUASHED. 5. THE LD. D.R. ON THE OTHER HAND, SUBMITTED THAT DURING THE PROCEEDINGS UNDER SECTION 143(3), T HE A.O. HAS MERELY ACCEPTED THE CASH CREDITS AS EXPLAI NED BY THE ASSESSEE WITHOUT MAKING ANY VERIFICATION ABOUT THE CREDITWORTHINESS OF THE CREDITORS. HE HAS SUBMITTED THAT THE CONFIRMATION LETTERS ONLY PROVE THE IDENTITY AN D THE GENUINENESS OF THE TRANSACTION BUT NOT THE 6 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. CREDITWORTHINESS OF THE CREDITORS. HE HAS SUBMITTED THAT THE RATION CARDS HAD COME TO THE NOTICE OF THE DEPA RTMENT ONLY DURING THE PROCEEDINGS UNDER SECTION 271D SUBSEQUENT TO THE COMPLETION OF THE ASSESSMENT AND THEREFORE, THE INITIATION OF PROCEEDINGS UNDER SECT ION 263 BY THE CIT WAS JUSTIFIED. HE PLACED RELIANCE UPON T HE JUDGMENT OF JAMMU & KASHMIR HIGH COURT IN THE CASE OF RAJKUMAR VS. UNION OF INDIA REPORTED IN 222 CTR (J& K) 539 IN SUPPORT OF ITS CONTENTION THAT THE MATERIAL WHICH HAS COME TO THE KNOWLEDGE OF THE CIT SUBSEQUENT TO THE ASSESSMENT PROCEEDINGS CAN ALSO BE TAKEN INTO CONSIDERATION FOR ASSUMING JURISDICTION UNDER SECTI ON 263 OF THE ACT. AS REGARDS THE ASSESSEES CONTENTION TH AT THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEW AND THEREFO RE, THE CIT WAS PROHIBITED FROM REVISING THE ASSESSMENT ORD ER UNDER SECTION 263 OF THE I.T. ACT, THE LD. D.R. SUB MITTED THAT THE A.O, WHEN TAKES A POSSIBLE VIEW OF LAW, TH E CIT CANNOT INTERFERE UNDER SECTION 263, BUT THE SAME IS NOT APPLICABLE WHEN THE A.O. TAKES A VIEW ON FACTS AS T HERE CANNOT BE TWO VIEWS ON FACTS. HE ALSO PLACED RELIAN CE UPON THE ORDER OF THE ITAT, HYDERABAD IN THE CASE O F PARAS COLLINS DISTILLERS VS. ITO, 130 ITD 114 (HYD) TO SUBMIT THAT IF THE ASSESSEE CLAIMS THAT SOURCES OF INVESTMENT IS AGRICULTURAL INCOME, THE ONUS WOULD B E ON THE ASSESSEE TO PROVE THAT IT IS AGRICULTURAL INCOM E AND THAT EVEN THE TAHSILDAR CERTIFICATE ABOUT THE INCOM E IS NOT RELIABLE. AS REGARDS THE ORDER GIVING EFFECT TO BY THE A.O, TO THE DIRECTIONS OF THE CIT UNDER SECTION 263 OF THE I.T. ACT 7 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. AND THE DISALLOWANCES CONFIRMED BY THE LD. CIT(A), THE LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 6. IN REBUTTAL, THE LD. COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE DECISIONS RELIED UPON BY THE LD. D.R. ARE DISTINGUISHABLE ON FACTS AND ARE NOT APPLICABLE TO THE FACTS OF THE CASE BEFORE US. HE FURTHER SUBMITTED T HAT THE PROCEEDINGS UNDER SECTION 271D ARE NOT RELEVANT FOR THE PROCEEDINGS UNDER SECTION 143(3) AND THEREFORE, THE EVIDENCE FILED THEREIN CANNOT BE TAKEN AS THE BASIS FOR REVISION UNDER SECTION 263 OF THE I.T. ACT. ACCORDI NG TO HIM, THE ASSESSEE HAS EXPLAINED THE REASONABLE CAUS E FOR TAKING THE LOANS IN CASH AND THE SAME BEING SATISFA CTORILY EXPLAINED, CANNOT FORM THE BASIS FOR REVISION UNDER SECTION 263 OF THE I.T. ACT. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT UNDISPUTEDLY THE ASSESSEE HAS OBTAINED LOANS FROM VARIOUS MEMBERS OF HIS FAMILY IN CASH. IT IS ALSO NOT IN DISPUTE THAT THES E CREDITORS OWN AGRICULTURAL LAND IN THEIR VILLAGES A ND HAS SHOWN THE PROCEEDS FROM THE AGRICULTURAL LAND AS TH E SOURCE FOR THE CREDIT INTO THE ASSESSEES ACCOUNT. IT IS ALSO NOT IN DISPUTE THAT THESE CREDITORS HAVE OBTAINED R ATION CARDS ACCORDING TO WHICH, THEIR INCOME IS BELOW POV ERTY LINE. IT IS BECAUSE OF THE DISCREPANCY IN THESE TWO EVIDENCES THAT THE CIT HAS SOUGHT TO REVISE THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT. THE RATION CARDS PROVE THE IDENTITY OF THE CRE DITORS, 8 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. WHILE THE CONFIRMATION LETTERS PROVE BOTH THE IDENT ITY AS WELL AS THE GENUINENESS OF THE TRANSACTIONS. THE QU ESTION BEFORE US IS, ONLY ABOUT THE CREDITWORTHINESS OF TH E CREDITORS. THE ELIGIBILITY OF THE CREDITORS TO OBTA IN RATION CARDS DEPENDS ON THE SELF-DECLARATION MADE BY THEM AS WELL AS THE CERTIFICATE ISSUED BY THE RELEVANT REVE NUE AUTHORITIES ABOUT THE INCOME EARNED BY THEM. THE CREDITORS BEING AGRICULTURISTS, MIGHT HAVE DECLARED THEIR INCOME BELOW POVERTY LINE TO OBTAIN RATION CARDS. F URTHER, THE ELIGIBILITY OF THE CREDITORS FOR ISSUANCE OF TH E RATION CARDS WILL BE CONSIDERED AT THE TIME WHEN THE RATIO N CARDS ARE ISSUED AND THEY MAY OR MAY NOT BE REVISED PERIODICALLY ON THE BASIS OF THEIR INCOME. THE DATE OF ISSUE OF THE RATION CARDS IN FAVOUR OF THE CREDITORS HERE IN IS NOT KNOWN IN THE PRESENT CASE. FURTHER, WE FIND THAT IN SUPPORT OF THEIR CAPACITY TO LEND THE MONEY, THE CR EDITORS HAVE GIVEN THE EXTENT OF THEIR AGRICULTURAL LAND WH ICH IS SHOWN AS THE SOURCE OF THEIR INCOME. AS SEEN FROM T HE PARTICULARS FILED BY THE ASSESSEE, THE AGRICULTURAL LANDS ARE MOSTLY IRRIGATED LANDS AND THEREFORE, THE INCOM E YIELD FROM SUCH LANDS IS USUALLY GOOD. WE FIND THAT THE A .O. HAS ACCEPTED DURING THE REMAND PROCEEDINGS THE CRED ITS AS GENUINE. BRUSHING ASIDE OF THE REMAND REPORT OF THE A.O. BY THE CIT AND PLACING RELIANCE UPON ONLY ON T HE RATION CARDS TO COME TO THE CONCLUSION ABOUT THE LA CK OF CREDITWORTHINESS OF THE CREDITORS, IS, IN OUR OPINI ON, NOT SUSTAINABLE. IN VIEW OF THE SAME, WE ALLOW THE ASSE SSEES APPEALS BOTH AGAINST THE ORDER UNDER SECTION 263 AS WELL AS THE CIT(A) ORDER AGAINST THE CIT CONFIRMING THE 9 ITA.NOS.758, 759/H/2012 AND 614 & 615/H/2014 MR. CH. SRINIVASULU REDDY, HYDERABAD. DISALLOWANCES MADE BY THE A.O. WHILE GIVING EFFECT TO THE ORDER OF CIT UNDER SECTION 263 OF THE I.T. ACT. 7. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.12.2015. SD/- SD/- (S. RIAFAR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 04 TH DECEMBER, 2015 VBP/- COPY TO : 1. MR. CH. SRINIVASULU REDDY, HYDERABAD. C/O. B. NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO.554, ROAD NO - 92, JUBILEE HILLS, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD - 1(2), HYDERABAD. 3 . CIT(A) - I (I/C.) CHIEF COMMISSIONER OF INCOME TAX (OSD), 3 RD FLOOR ANNEXE, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 4 . AD DL. CIT, RANGE - 1, HYDERABAD. 5 . D.R. ITAT B BENCH, HYDERABAD. 6 . GUARD FILE