D.V. Krishna Reddy., Hyderabad V. ACIT, Circle -8(1), Hyderabad

ITA 79/HYD/2012

• Counselvise Citation: 7922514 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 23-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Source of fund
• Section: 234B; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 79/HYD/2012 ASSESSMENT YEAR : 2007-08 D.V. KRISHNA REDDY HYDERABAD. PAN: ANAPD8409K VS. ASST. COMMISSIONER OF INCOME- TAX, CIRCLE - 8(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI P. SOMASEKHAR REDDY DATE OF HEARING : 28-10-2013 DATE OF PRONOUNCEMENT : 29 -11-2013 O R D E R PER BENCH: THIS IS AN APPEAL BY ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A)-III, HYDERABAD, DATED 20-12-2011 FOR THE AY 2007-08. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO THE ADDIT ION OF RS. 2.42 CRORES MADE BY THE AO, WHICH WAS ENHANCED BY THE CI T(A) TO RS. 3.00 CRORES AS UNEXPLAINED AMOUNT INVESTED. ASSESSE E HAS RAISED THE FOLLOWING GROUNDS APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOTH O N FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INV ESTMENT WITH SVK SRI SEETHARAMANJANEYA CONSTRUCTIONS AMOUNTS TO RS. 3,00,00,000/- AND THAT THE AMOUNT INVESTED WAS NOT PROPERLY EXPLAINED BY THE APPELLANT. 2 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 2,42,00,000/- MADE BY THE AO ON THE GROUND THAT THE SAID AMOUNT REPRESENT THE INVESTMENT MADE BY THE APPELLA NT IN SRI SEETHARAMANJANEYA CONSTRUCTIONS. 4. THE LEARNED CIT(A) ERRED IN ENHANCING THE ADDITI ON MADE BY THE AO OF RS. 2,42,00,000/- TO RS. 3,00,00,000/- AN D FURTHER ERRED IN DIRECTING THE AO TO MAKE A FURTHER ADDITIO N OF RS. 58,00,000/-. THE LEARNED CIT(A) OUGHT TO HAVE ACCEP TED THE EXPLANATION SUBMITTED BY THE APPELLANT HEREIN AND D ELETED THE ADDITION MADE BY THE AO. 5. THE LEARNED CIT(A) ERRED IN CONFIRMING LEVY OF I NTEREST U/S 234A, 234B AND 234C OF THE IT ACT. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND IS A PARTNER IN THE FIRMS M/S SVK SRI SITHARAMANJANEYA CONSTRUCTIONS (S VK SSC) AND M/S SVK PROJECTS. THERE WAS A SEARCH AND SEIZURE OP ERATION CONDUCTED U/S 132(1) OF THE IT ACT, ON 29-10-2007, IN THE CASE OF SRI D. NAGARJUNA RAO, WHO IS ALSO A PARTNER IN THE FIRM M/S SVK SRI SITARAMANJANEYA CONSTRUCTIONS. IN THE COURSE OF SEA RCH AND SEIZURE PROCEEDINGS, PAGE 23 OF THE LEDGER ACCOUNT BOOKS SE IZED VIDE ANNEXURE A/DNR/04 DATED 29-10-2007 WAS ENQUIRED I NTO. SHRI D. NAGARJUNA RAO HAS STATED IN HIS STATEMENT THAT M/S SVK AGAINST WHOM THAT LEDGER ACCOUNT WAS MAINTAINED IS A GROUP PERSONS REPRESENTED BY SHRI D.V. KRISHNA REDDY,(ASSESSEE), WHO IS A PARTNER IN THE FIRM M/S SVK SSC ALSO. HIS STATEMENT RECORDE D VIDE ANNEXURE A/DNR/03, WAS EXTRACTED BY THE AO AT PAGE NO. 3 OF HIS ORDER WHEREIN SHRI D. NAGARJUNA RAO GAVE THE DETAILS OF P ARTNERS AND ALSO STATED THAT ASSESSEE SHRI D.V. KRISHNA REDDY HAS IN VESTED THE AMOUNT OF RS. 3,58,90,000/- ON BEHALF OF M/S SVK. W HEN CONFRONTED WITH THE ABOVE STATEMENT, ASSESSEE SHRI D.V. KRISHN A REDDY ACCEPTED THAT HE HAS CONTRIBUTED THE AMOUNT ON VARI OUS DATES AS PARTNERS CAPITAL TO M/S SVK SSC AND THE SOURCE OF F UNDS BEING RECEIVED FROM M/S SVR PROJECTS, A FIRM FORMED ON 21 -06-2006. HE GAVE A LIST OF PARTNERS ALSO AND THE STATEMENT WAS EXTRACTED BY THE AO AT PAGES 3 & 4 OF HIS ORDER. IT WAS SUBMITTED TH AT THE FIRM M/S SVK PROJECTS FORMED ON 21-06-2006 WITH AN INTENTION OF DEVELOPING AND 3 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY CONSTRUCTING RESIDENTIAL FLATS AND INDEPENDENT HOUS ES AND ACQUIRING LANDS. IN THIS PROCESS, THE FIRM ACQUIRED LAND TO T HE EXTENT OF 2.7 ACRES AT BAHADURPALLY, QUTUBULLAPUR, R.R. DIST. FOR A CONSIDERATION OF RS. 23,22,500/- AND THE LAND WAS REGISTERED ON 17-0 8-2006. THE ABOVE FIRM ALSO PURCHASED 5 ACRES OF LAND AT SAYEED AGUDA VILLAGE, CHINA GOLKONDA, SHAMSHABAD ON 22-11-2006 FOR A CONS IDERATION OF RS. 3,00,000/-. ALSO EXPLAINED THE REASONS FOR PURC HASE OF LAND AND THE PROJECTS BEING DEVELOPED ON THAT LAND. IT WAS F URTHER SUBMITTED THAT M/S SVK PROJECTS WAS NOT MAINTAINING REGULAR B OOKS OF ACCOUNT SINCE THE CONSTRUCTION HAS NOT COMMENCED. HOWEVER, ASSESSEE EXPLAINED THAT HE HAD WRITTEN THE DETAILS OF ADVANC ES RECEIVED FROM PROSPECTIVE BUYERS OF LAND AT PROPOSED BAHADURPALLY VENTURE (WHERE RESIDENTIAL FLATS AND 20 DUPLEX HOUSES WOULD BE CON STRUCTED). HE FURNISHED KATCHA CASH-BOOK OF THE FIRM M/S SVK PR OJECTS ALONG WITH DETAILS OF FUNDS COLLECTED. AS PER THE DETAILS EXT RACTED IN PAGES AT 4 & 5 OF ASSESSMENT ORDER, ASSESSEE HAD RECEIVED RS. 3,00,50,000/- IN CASH FROM VARIOUS PARTIES IN THE MONTHS OF NOVEMBER AND DECEMBER, 2006 AND THE AMOUNTS RECEIVED BY WAY OF CHEQUES TO AN EXTENT OF RS. 58,90,000/- IN THE MONTH OF JANUARY, 2007. AS SUBM ITTED BEFORE THE AUTHORITIES, ASSESSEE FURNISHED THE DETAILS OF PERS ONS FROM WHOM THE FIRM SO RECEIVED THE FUNDS AND SOME OF THEM HAVE BE EN EXAMINED ON OATH. ALL THE PERSONS HAVE EXPLAINED (EXTRACTED IN PAGES 6 TO 19 OF THE ASSESSMENT ORDER OF 19 PERSONS) AND CONFIRMED THAT THEY HAVE ADVANCED THE FUNDS ON VARIOUS DATES TO M/S SVK PROJ ECTS. HOWEVER, AS SEEN FROM PARA 5 OF THE ORDER, ALL THESE CONFIRM ATIONS WERE REJECTED AND THE AO MADE ADDITION OF RS. 2,42,00,00 0/- STATING AS UNDER: 5. FROM THE ABOVE DISCUSSION, IT CAN BE SEEN THAT A LL THE AFOREMENTIONED PERSONS CLAIMED TO HAVE MADE THE ADV ANCES IN CASH AND HAVE FAILED TO FURNISH DOCUMENTARY EVIDENC E IN SUPPORT OF THEIR ACCUMULATED SAVINGS. FURTHER, THE BANK STATEMENTS DO NOT SHOW THE ADVANCEMENT OF CASH TO T HE ASSESSEE ON RESPECTIVE DATES AND THE DATES AND AMOU NTS OF WITHDRAWAL BY ABOVE PERSONS DO NOT MATCH WITH THE C ASH ADVANCES CLAIMED TO HAVE BEEN MADE TO THE ASSESSEE. THUS, 4 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY THE DETAILS OF THE SAID WITHDRAWALS ARE FAR APART A ND WELL AHEAD OF THE SAID CASH ADVANCES TO THE ASSESSEE. EVEN IN CASES WHERE THE SOURCE OF FINANCE IS STATED TO BE AMOUNTS RECEIVED FROM OVERSEAS, THERE IS NO REASON WHY THE ADVANCES WERE RECEIVED ONLY IN CASH. 5.1 IN THE LIGHT OF THE DISCUSSION MADE ABOVE, THE CLAIM OF THE ASSESSEE REGARDING RECEIPT OF ADVANCES IN CASH FROM THE ABOVE PERSONS AGGREGATING TO RS. 2,42,00,000/- AND INVEST MENT OF THE SAME AS PARTNERS CAPITAL TO M/S SRI SVK SRI SITARA MANJANEYA CONSTRUCTIONS BY THE ASSESSEE STOOD UNEXPLAINED. TH EREFORE, THE SAME IS CONSIDERED AS UNEXPLAINED INVESTMENT U/ S 69 OF THE IT ACT AND ADDED TO TOTAL INCOME. 3. AGGRIEVED, ASSESSEE CONTESTED THE SAME BEFORE TH E LEARNED CIT(A) AND THE MAIN THRUST OF THE SUBMISSIONS ARE T HAT M/S SVK PROJECTS IS A FIRM AND WHOSE EXISTENCE IS PROVED BE YOND DOUBT, AND RECEIPT OF THE ADVANCES WERE ALSO PROVIDED AND CONF IRMATIONS WERE FURNISHED. ASSESSEE AND OTHER PARTNERS WITHDREW THE AMOUNTS OF RS. 60 LAKHS EACH DURING THE YEAR UNDER CONSIDERATION F ROM THE ADVANCES RECEIVED BY M/S SVK PROJECTS AND THESE AMOUNTS WERE WRONGLY ASSESSED IN THE HANDS OF ASSESSEE. 4. THE CIT(A) NOT ONLY CONSIDERED THE SUBMISSIONS O F ASSESSEE AND REJECTED THEM, BUT, ALSO ENHANCED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ID. AR. AND THE FACTS OF THE CASE. I HAVE GONE THROUGH THE SAID STATEMENT OF THE APPELLANT: RECORDED ON 14.11.2007 AND LATER, ON 17.01.2008. I MAY MENTION HERE THAT THE ID. AR. HAS WRONGLY REFERRED TO THE DATE OF THE FIRST STATEMENT AS 29.10.2007. FURTHER, HIS SUBMISSION THAT, IN THE SA ID STATEMENT RECORDED ON 14.11.2007, HE DID NOT AGREE THAT HE MA DE ANY INVESTMENT IS NOT CORRECT. IN FACT, IN THAT STATEME NT, WHILE REFERRING TO THE STATEMENT OF SRI D. NAGARJUNA RAO, CONFIRMING CONTRIBUTION OF RS.3,00,OO,OOO/- IN CASH MADE BY HI M ON 30.12.2006 TO THE FIRM M/S.SVK. SRI SEETHARAMANJANE YA CONSTRUCTIONS; HE HAS CONFIRMED THE CONTENTS OF SUC H STATEMENT GIVEN BY SRI D. NAGARJUNA RAO. THE SAID QUERY NO.9 AND REPLY GIVEN BY THE APPELLANT TO THAT QUERY, AS PER SUCH S TATEMENT RECORDED ON 14.11.2007 ARE REPRODUCED AS UNDER: 5 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY Q.NO.9. I AM SHOWING YOU THE STATEMENT DATED 29.10. 2007 OF SRI D. NAGARJUNA RAO, PARTNER IN M/S.SVK SRI SEETHARAMANJANEYA CONSTRUCTIONS WHEREIN HE HAS CONFI RMED THAT YOU ARE A PARTNER OF THE FIRM AND ON 30.12.200 6, YOU HAVE CONTRIBUTED CASH OF RS.3,00,00,000/- TO M/S. SVK. S RI SEETHARAMANJANEYA CONSTRUCTIONS. PLEASE FURNISH THE DETAILS OF THE TRANSACTIONS AND SOURCES OF FINANCE FOR RS.3,00 ,00,000/- WITH DOCUMENTARY EVIDENCE. A. YES, I HAVE GONE THROUGH THE STATEMENT OF SRI D. NAGARJUNA RAO DATED 29.10.2007 AND I CONFIRM THE CONTENTS OF THAT STATEMENT. I WILL FURNISH THE DETAILS OF CAST' CONTRI BUTED BY ME AT RS.3,OO,OO,OOO/- BY 19.11.2007. FROM THE ABOVE, THUS, IT I? EVIDENT THAT HE HAS ADM ITTED CASH INVESTMENT OF RS.3,00,00,000/- MADE BY HIM ON 30.12. 2006' IN THE SAID FIRM M/S.SVK. SRI SEETHARARNANJANEYA CONSTR UCTIONS. FURTHER, IN THE SAID SUBMISSIONS MADE BEFORE ME, THE ID. AR. HAS NOT EXPLAINED WITH REFERENCE TO THE SPECIFIC QUE RY RAISED BY ME. IT IS MERELY STATED THAT THE SAID AMOUNTS WITH~ RAWN BY THOSE PARTNERS WERE DEPOSITED WITH M/S. SVK SRI SEETHARAMANJANEYA CONSTRUCTIONS ON 30.12.2006. HOWEV ER SUCH PLEA CANNOT BE ACCEPTED. AS PER THE SAID KUTCHA CASH BOOK, COPIES OF WHICH WERE FILED BY THE APPELLANT EAR LIER, SUMS OF RS.75,00,000/- WERE PAID BY THAT FIRM M/S.SVK. P ROJECTS, TO THOSE FOUR PARTNERS ON 28.12.2006. UNDER THIS CIRCU MSTANCE, IT CANNOT BE SAID THAT THE SAID AMOUNTS WERE DEPOSITED BY THOSE FOUR PARTNERS, AFTER TWO DAYS I.E. ON 30.12.2006 IN THE SAID FIRM M/S.SVK. SRI SEETHARAMANJANEVA CONSTRUCTIONS. IN FAC T, IT CANNOT BE ACCEPTED THAT SUCH CASH DEPOSIT OF RS.3, 00,000/- MADE BY THE APPELLANT ON 30.12.2006 IN M/S. SVK. SRI SEETHARAMANJANEYA CONSTRUCTIONS, WAS MADE FROM SUCH AMOUNTS PAID TO THOSE FOUR PARTNERS TWO DAYS EARLIER . SINCE, THE SOURCE OF THE SAID CASH INVESTMENT OF RS.3,00,00,00 0/- MADE, BY THE APPELLANT ON 30.12.2006 IN THE SAID FIRM REM AINS UNEXPLAINED, THE SAID ENTIRE AMOUNT IS LIABLE FOR A DDITION. BUT AS THE AD HAS MADE ADDITION OF RS.2,42,00,000/-ONLY, THE BALANCE AMOUNT OFRS.58,00,000/-, HAS TO BE FURTHER ADDED TO THE INCOME OF THE APPELLANT, TREATING AS UNEXPLAINED INVESTMENT MADE BY HIM DURING THE FINANCIAL YEAR 2006-07, 'WHIC H WOULD RESULT IN ENHANCEMENT OF INCOME BY THAT AMOUNT. HENC E, THE AD IS DIRECTED ACCORDINGLY. 6.1. EVEN OTHERWISE, THE SAID ENTIRE AMOUNT OF RS.3 ,00,00,000/- TOWARDS INVESTMENT MADE BY THE APPELLANT IN CASH ON 30.12.2006 IN THE SAID FIRM M/S. SVK SRI SEETHARAMAN JANEYA CONSTRUCTIONS, IS LIABLE FOR ADDITION, IN THE CIRCUM STANCE OF THE CASE, TREATING AS UNEXPLAINED INVESTMENT MADE BY HI M DURING 6 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY THE F.Y. 2006-07. AT THE TIME OF HIS SWORN STATEMEN T RECORDED ON 14.11.2007, WHILE ADMITTING SUCH INVESTMENT MADE B Y HIM IN THAT FIRM, HE HAS FURTHER STATED THAT HE WOULD FU RNISH THE DETAILS OF THE SAID CASH CONTRIBUTION MADE BY HIM BY 19.11.2007. HOWEVER, HE DID NOT FURNISH THE DESIRED DETAILS ON THAT DATE. MUCH AFTER ON 17.01.2008, HE FURNISHED B EFORE THE DDIT(INV.), THE SAID KUTCHA CASH BOOK PERTAINING TO THAT FIRM M/S. SVK. PROJECTS, TRYING TO EXPLAIN THE ~H CASH D EPOSIT MADE BY HIM. HAD THE APPELLANT ACTUALLY INVESTED THAT AMOUNT IN CASH ON 30.12.2000, OUT OF THE ADVANCES RECEIVED IN THE CASE OF THE FIRM M/S SVK. PROJECTS, HE WOULD HAVE FURNISHED SUC H DETAILS ON THAT DATE I.E. 19.11.2007, AS PROMISED BY HIM BEFORE THE DDITNNV.). HOWEVER, HE TOOK MORE THAN TWO MONTHS TI ME TO EXPLAIN THE SOURCE OF SUCH INVESTMENT. DURING THIS PERIOD, HE FABRICATED THE SAID KUTCHA CASH BOOK IN THE CASE OF THAT FIRM M/S. SVK. PROJECTS, FOR EXPLAINING THE SAID INVESTMENT. FURTHER, EVEN I F IT IS PRESUMED THAT THE SAID FIRM M/S.SVK. PROJECTS, HAS RECEIVED SUCH AMOUNTS FROM DIFFERENT PERSONS ON THOSE DATES AS .SHOWN BY THE APPELLANT, IT CANNOT BE SAID THAT SUCH AMOUNTS WERE LYING IN T HE CUSTODY OF THE APPELLANT WITHOUT MAKING ANY INVESTMENT. IT IS OBVIOUS, THAT THE SAID AMOUNTS AFTER RECEIPT FROM THOSE PERSONS, MUST HAVE BEEN INVESTED SOMEWHERE BY THAT FIRM. UNDER THIS CIRCUMS TANCE, IT CANNOT BE ACCEPTED THAT THE SAID CASH INVESTMENT OF RS. 3,00,00,000/- MADE BY THE APPELLANT AS A PARTNER IN M/S SVK. SRI SEETHARAMANJANEYA CONSTRUCTIONS WAS ACTUALLY MADE O UT OF SUCH ADVANCES RECEIVED IN THE CASE OF M/S SVK PROJECTS. SINCE, THE APPELLANT HAS FAILED TO EXPLAIN THE SOURCE OF THE S AID CASH INVESTMENT OF RS.3,00,00,000/- MADE BY HIM WITH CRE DIBLE EVIDENCE, THE SAID AMOUNT IS LIABLE FOR ADDITION, T REATING THE SAME AS UNEXPLAINED INVESTMENT MADE BY HIM DURING THE F.Y. 2006-07. HOWEVER, AS AN AMOUNT OF RS.2,42,OO,900/-ONLY, HAS BEEN ADDED IN THE ASSESSMENT, THE BALANCE AMOUNT OF RS.58,00,0 00/- HAS TO BE FURTHER ADDED TO THE INCOME OF THE APPELLANT, WH ICH WOULD RESU!T IN CONSEQUENTIAL ENHANCEMENT TO THE INCOME OF THE A PPELLANT. THE AO IS DIRECTED ACCORDINGLY. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT BOTH THE AUTHORITIES HAVE WRONGLY CONSIDERED ASSESSEE AS OW NER OF THE ENTIRE INVESTMENT WHEREAS BOTH SHRI D. NAGARJUNA RAO AS WE LL AS ASSESSEE IN THEIR STATEMENTS SUBMITTED THAT THE FUNDS INVEST ED IN M/S SVK PROJECTS WERE THROUGH ASSESSEE SHRI D.V. KRISHNA RE DDY AND ADDITIONS WERE MADE IN THE HANDS OF ASSESSEE WHEREA S ENQUIRIES WERE MADE IN THE HANDS OF M/S SVK PROJECTS. HE ALSO REFERRED TO THE STATEMENTS GIVEN AND THE CONFIRMATIONS FILED BY THE PARTIES TO SUBMIT 7 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY THAT THEY HAVE ALL ADVANCED MONIES TO M/S SVK PROJE CTS AND NOT TO ASSESSEE SHRI D.V. KRISHNA REDDY, THEREFORE, THIS C ANNOT BE CONSIDERED AS UNEXPLAINED CASH CREDITS IN THE HANDS OF ASSESSEE. THE LEARNED COUNSEL CONTENDED THAT THE ALLEGATIONS OF CIT(A) THAT ASSESSEE FABRICATED KUTCHA PASS BOOK IN THE CASE OF M/S SVK PROJECTS IS NOT CORRECT AS ASSESSEE HAS RECEIVED VA RIOUS AMOUNTS MUCH BEFORE THE SEARCH AND THERE WERE AMOUNTS RECEI VED BY WAY OF CHEQUES AND, HENCE, IT CANNOT BE SAID THAT ASSESSEE FABRICATED THE THINGS AS ALLEGED BY THE CIT(A). ADMITTEDLY, ALL TH E PARTIES, WHO ARE ENQUIRED BY THE DIT HAVE CONFIRMED THAT THEY HAVE A DVANCED TO M/S SVK PROJECTS BUT WHY THE ADDITION WAS MADE IN THE H ANDS OF INDIVIDUAL IS NOT EXPLAINED AT ALL. ON THIS PRELIMI NARY ISSUE ITSELF, THE LEARNED COUNSEL SUBMITTED THAT ASSESSEE CAN ONLY EX PLAIN TO THE EXTENT OF HIS SHARE OF INVESTMENT WHERE AS BOTH T HE AO AND CIT(A) CONSIDERED THE ENTIRE INVESTMENT MADE IN M/S SVK PR OJECTS WAS BY ASSESSEE ONLY. IT WAS FURTHER SUBMITTED THAT CIT(A) ERRED IN ENHANCING THE ADDITION MADE BY THE AO OF RS. 2.42 C RORES TO RS. 3 CRORES BY TAKING INTO CONSIDERATION AMOUNTS RECEIVE D BY WAY OF CHEQUES BY M/S SVK PROJECTS. HE PLACED ON RECORD BA LANCE SHEET OF M/S SVK PROJECTS IN SUPPORT OF THE CONTENTIONS AND ALSO PLACED RECONCILIATION OF OUTSTANDING BALANCE AT THE END OF THE YEAR AS SHOWN IN THE BALANCE SHEET. 8. THE LEARNED DR, WHO WAS ASKED TO FURNISH LEDGER COPY PAGE 23 OF ANNEXURE, FAIRLY ADMITTED THAT SUCH LEDGER ACCOU NT IS IN THE NAME OF M/S SVK PROJECTS AND NOT IN THE NAME OF ASSESSEE . HOWEVER, HE SUBMITTED THAT ASSESSEE HAS NOT EXPLAINED THE SOURC ES BEFORE THE AUTHORITIES AND ACCORDINGLY ADDITIONS WERE MADE IN THE HANDS OF ASSESSEE, WHO IS ADMITTED TO HAVE ADVANCED THE FUND S. HE SUPPORTED THE ORDER OF AO AND CIT(A). 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND EXAMINE D THE FACTS AS PLACED ON RECORD. AS SEEN FROM THE ORDER OF AO, THERE IS NO 8 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY DISPUTE WITH RESPECT TO THE EXISTENCE OF M/S SVK PR OJECTS AND AO HIMSELF RECORDED THAT M/S SVK PROJECTS FORMED WITH THE PARTNERS, NAMELY, I) C. SATYANARAYANA REDDY, II) CH. SEETA RA MU, III) D. SRINIVAS REDDY, IV) K. MANOHAR REDDY AND V) DV KIRS HNA REDDY. THERE IS ALSO NO DISPUTE ABOUT THE EXISTENCE OF M/S SVK PROJECTS PRIOR TO SEARCH AS PROPERTY WAS PURCHASED ON 17-08- 2006 AND 22-11- 2006 BY THE SAID FIRM. THERE ARE ALSO CHEQUE RECEIP TS AS STATED IN PAGE 5 OF THE ASSESSMENT ORDER TO AN EXTENT OF RS. 58,90,000/-, WHICH PROVES THE EXISTENCE OF THE SAID FIRM MUCH PRIOR TO THE DATE OF SEARCH. EVEN SHRI D. NAGARJUNA RAO IN HIS STATEMENT ADMITTE D THAT ASSESSEE SHRI D. V. KRISHNA REDDY, PROMOTER OF M/S SVK SSC I S ALSO REPRESENTING M/S SVK PROJECTS. ASSESSEE ALSO ADMITT ED ON BEHALF OF M/S SVK PROJECTS THAT HE HAS CONTRIBUTED THE FUNDS TO A LARGE EXTENT IN M/S SVK SSC AND HE GAVE DETAILS OF VARIOUS PERSO NS FROM WHOM THE FUNDS RECEIVED BY WAY OF CHEQUES AND CASH AND THE SAME WERE INVESTED IN M/S SVK PROJECTS. IT IS ALSO A FACT THA T ADIT MADE ENQUIRIES WITH REFERENCE TO VARIOUS PEOPLE, WHO HAV E ADMITTED THE SOURCE OF FUNDS AS WELL AS CONFIRMED THAT THEY HAVE INVESTED IN M/S SVK PROJECTS. IN SPITE OF EXPLANATIONS AND EVIDENCE FURNISHED THAT THE AMOUNTS WERE RECEIVED BY M/S SVK PROJECTS AND THESE FUNDS WERE WITHDRAWN BY THE PARTNERS AND INVESTED IN M/S SVK S SC, THE AO CONSIDERED THE AMOUNTS IN THE HANDS OF ASSESSEE ON A THIN REASON THAT ASSESSEE SHRI D.V. KRISHNA REDDY ADMITTED TO H AVE CONTRIBUTED ON BEHALF OF THE PARTNERS. IT IS OBVIOUS THAT ASSES SEE SHRI D.V. KRISHNA REDDY IS ACTING AS A PARTNER IN M/S SVK SSC AND ITS SOURCE OF FUNDS ARE FROM M/S SVK PROJECTS. THERE IS NO DIS PUTE ON THESE FACTS. THE AO, AT BEST, COULD HAVE EXAMINED THE SOU RCE OF FUNDS IN M/S SVK PROJECTS AND COULD HAVE MADE THE ADDITION I N THE HANDS OF M/S SVK PROJECTS, IF DOUBTED. WE ARE ALSO OF THE OP INION THAT THE LEARNED CIT(A) ON FRIVOLOUS PRESUMPTIONS ENHANCED T HE ADDITION TO RS. 3.00 CRORES FROM RS. 2.42 CRORES, COPRISING OF CHEQUE RECEIPTS WHICH AO HAS ACCEPTED AND NOT DOUBTED. IN OUR VIEW, WHEN THE RECEIPTS BY WAY OF CHEQUES HAVE NOT EVEN DOUBTED BY THE AO OR BY 9 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY THE INVESTIGATION TEAM, THE ORDER OF CIT(A) IN ENHA NCING THE AMOUNT CANNOT BE JUSTIFIED AT ALL ON THE FACTS OF THE CASE . THEREFORE, TO THE EXTENT OF ADDITION ENHANCED BY THE CIT(A), THE SAME STANDS DELETED. 10. COMING TO THE ADDITION MADE BY THE AO OF RS. 2. 42 CRORES, WHICH IS PART OF THE INVESTMENT MADE BY ASSESSEE IN M/S SVK SSC, THE EXPLANATION GIVEN WAS THAT THEY HAVE WITHDRAWN THE FUNDS FROM M/S SVK PROJECTS AND INVESTED IN THE FIRM AND TO TH AT EXTENT THE SOURCE OF FUNDS STAND EXPLAINED AS WITHDRAWALS FROM THE FIRM. PAGE 23 OF THE LEDGER, WHICH WAS NARRATED BY THE AO ALSO MENTIONS THAT CONTRIBUTION FROM M/S SVK ACCOUNT. THE COPY OF ANNE XURE A/DNR/04 CONSISTING PAGES 1 TO 71 WERE PLACED IN PAPER BOOK. PAPER BOOK WHICH IS A COPY OF NOTE BOOK WAS ALSO PERUSED BY US AND PAGE 1 IS ACCOUNT OF SHRI D.N. RAO, PAGE 3 ALSO AS DNR AS CAS H CREDIT ON 30- 12-2006 OF RS. 101/-. PAGE 7 IS IN THE NAME OF ASSE SSEE WHEREIN THERE IS REDIT OF RS. 101. LIKE WISE, THERE ARE OTH ER PARTNERS ACCOUNTS. PAGE 23 IS CREDIT OF RS. 3 CRORES ON 30-12-2006, WH ICH WAS AS STATED BY ASSESSEE AS WITHDRAWAL FROM M/S SVK PROJECTS AND INVESTMENT IN M/S SVK SSC ON BEHALF OF M/S SVK. THE BALANCE ENTR IES STARTING FROM 03-01-2007 TO 22-10-2007 INDICATE THAT THERE A RE WITHDRAWALS AND DEPOSITS FROM VARIOUS PERSONS. FOR EXAMPLE, THE RE IS DEPOSIT OF RS. 15 LAKHS ON 03-01-2007 BY SHRI SATYANARAYANA BY WAY OF CHEQUE ON ICICI NO 078807. LIKE WISE ON 19-01-2007 THERE W AS DEPOSIT OF RS. 10 LAKHS BY WAY OF THREE CHEQUES ON ICICI AND S BH BANKS IN TO THE ACCOUNT OF M/S SVK. THERE ARE ALSO CREDITS IN V ARIOUS NAMES. THESE TRANSACTIONS DO INDICATE THAT THE LEDGER ACCO UNT IN PAGE 23 DOES NOT PERTAIN TO ASSESSEE SHRI D.V.KRISHNA REDDY BUT PERTAINS TO M/S SVK PROJECTS. THEREFORE, WE ARE UNABLE TO UNDER STAND AS TO HOW THE ADDITION CAN BE MADE IN THE HANDS OF ASSESSEE, WHO IS A PARTNER IN BOTH THE FIRMS. WE WERE INFORMED THAT NO ACTION HAS BEEN TAKEN IN THE HANDS OF M/S SVK PROJECTS. SINCE ALL THE CONTRI BUTIONS/ TRANSACTIONS ARE PERTAINING TO M/S SVK, WE ARE OF T HE CONSIDERED OPINION THAT THE AMOUNT CANNOT BE ADDED IN THE HAN DS OF ASSESSEE. 10 ITA NO. 79/HYD/2012 D.V. KRISHNA REDDY IN VIEW OF THIS, WE HAVE NO HESITATION IN DELETING THE AMOUNT IN THE HANDS OF ASSESSEE. IF THERE IS ANY INCRIMINATING MA TERIAL OR DOUBT ABOUT SOURCES, REVENUE IS FREE TO ENQUIRE IN THE HA NDS OF M/S SVK, IF REQUIRED, BUT THIS IS ONLY AN OBSERVATION BUT NOT A DIRECTION. WITH THESE OBSERVATIONS, ADDITION MADE IN THE HANDS OF A SSESSEE STANDS DELETED. 11. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 29 TH NOVEMBER, 2013. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RA MAKOTAIAH) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED:29 TH NOVEMBER, 2013. KV COPY TO:- 1) SHRI D.V. KRISHNA REDDY, C/O SHRI S. RAMA RAO, A DVOCATE, FLAT NO. 102, SHRIYAS RESIDENCY, ROAD NO. 9, HIMAY ATNAGAR, HYDERABAD. 2)ACIT, CIRCLE - 8(1), HYDERABAD. 3) CIT(A)-III, HYDERABAD. 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A .T., HYDERABAD.