Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 6111 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-01-2016
Appeal Filed By
Assessee
Bench Allotted
B
Next Hearing Date
11-01-2016
Assessment Year
2011-2012
Appeal Filed On
12-06-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 797/HYD/2015 2005 - 06 A. PANDURANGA REDDY, HYDERABAD [PAN: AFTPA2984H] THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 3(1), HYDERABAD 798/HYD/2015 2006 - 07 799/HYD/2015 2007 - 08 800/HYD/2015 2008 - 09 801/HYD/2015 2009 - 10 802/HYD/2015 2010 - 11 803/HYD/2015 2011 - 12 FOR ASSESSEE : SHRI A.V. RAGHU RAM , AR FOR REVENUE : S HRI M. SITARAM , DR DATE OF HEARING : 11 - 0 1 - 201 6 DATE OF PRONOUNCEMENT : 20 - 0 1 - 201 6 O R D E R PER B ENCH : THESE ARE SEVEN APPEA LS BY ASSESSEE FROM AYS. 2006 - 07 TO 2011 - 12 AGAINST THE ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEALS) - XI , HYDERABAD DATE D 12 - 03 - 2015 AND FOR AY . 2005 - 06 DATED 23 - 03 - 15 . THERE ARE VARIOUS ISSUES BUT COMMONLY ARISING IN ALL THE YEARS. HENCE, THESE APPEALS ARE DECIDED ISSUE - WISE: 2. WE HAVE HEARD LD. COUNSEL AND LD.DR AND TH EIR ARGUMENTS ARE INCORPORATED, WHEREVER NECESSARY. 3. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND A LONG WITH OTHERS WERE COVERED IN OPERATIONS U/S. 132 OF THE INCOME TAX ACT [ACT] CONDUCTED ON 02 - 09 - 2010. ASSESSEE IS RUNNING UN - REGISTERED CHIT I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 2 - : BUSINES SES AND IN THE COURSE OF SEARCH PROCEEDINGS, VARIOUS INCRIMINATING DOCUMENTS, CERTAIN PROPERTY DOCUMENTS, CERTAIN PRO - NOTES WERE NOTICED AND SEIZED. THE ASSESSING OFFICER (AO) MADE VARIOUS ADDITIONS BASED ON THE DOCUMENTS AND RETURN S FILED BY THE ASSESSEE . AGRICULTURAL INCOME: 4. ASSESSEE HAD OFFERED AGRICULTURAL INCOME OF RS. 1,89,919/ - IN AY. 2005 - 06; RS. 1,01,880/ - IN AY. 2006 - 07; AND RS. 1,04,270/ - IN AY. 2007 - 08. AO , ON THE REASON THAT ASSESSEE HAS NOT SUBSTANTIATED THE INCOMES , HAS TREATED THE AGRI CULTURAL INCOME AS INCOME FROM OTHER SOURCES AND BROUGHT TO TAX. BEFORE THE LD.CIT(A), ASSESSEE FURNISHED PATTADAR PASS BOOK AS ADDITIONAL EVIDENCE WHICH WAS SENT TO AO FOR VERIFICATION AND REPORT. HOWEVER, LD.CIT(A) DID NOT ACCEPT ASSESSEES CONTENT IONS ON THE REASON THAT POSSESSION OF AGRICULTURAL LAND IS ONE THING AND DERIVING AGRICULTURAL INCOME THEREON IS ANOTHER THING. IF THE CLAIM WAS CORRECT, AS SESSEE SHOULD HAVE BEEN IN A POSITION TO FILE NECESSARY DOCUMENTARY EVIDENCES RELATING TO EXPENDITU RE AND CULTIVATION AND SALE OF PRODUCE. SINCE NO EVIDENCE WAS FURNISHED AND SINCE NO INCOMES WERE OFFERED I N LATER ASSESSMENT YEARS OF 2008 - 09 TO 2011 - 12, LD.CIT(A) CONFIRMED THE TREATMENT OF AGRICULTURAL INCOME AS INCOME FROM OTHER SOURCES. 5. LD. COU NSEL SUBMITTED THAT ASSESSEE OWNS 1 ACRE 27 GUNTAS IN SURVEY NO. 93 SITUATED AT R AVIRYAL VILLAGE, MAHES H WARAM MANDAL, RANGA REDDY DIST., AND THIS LAND IS USED FOR AGRICULTURAL PURPOSES, SINCE SO MANY YEARS AND HAS SUBMITTED , REFERRING TO THE LETTER FILED B EFORE THE AO , THAT ASSESSEE HAS GROWN GRAPES, PADDY I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 3 - : AND VEGETABLES . S INCE NO BOOKS OF ACCOUNT WERE MAINTAINED, THE INCOME WAS ESTIMATED. IT IS SUBMITTED THAT IN ADDITION TO THE 1.27 GUNTAS, ASSESSEE ALSO PURCHASED AGRICULTURAL LAND OF 4.71 GUNTAS IN SURV EY NO. 371/A AT MA N GALAPALLY VILLAGE, IBRAHIMPATNAM MANDAL, RANGA REDDY DIST., VIDE SALE DEED NO. 6310/04 DT. 22 - 09 - 2004 FOR A CONSIDERATION OF RS. 2,35,000/ - . IT WAS SUBMITTED THAT ASSESSEE OFFERED REASONABLE INCOMES OF THIS 5.98 GUNTAS OF LAND. LD. DR, HOWEVER, OBJECTED TO ASSESSEES COUNSELS CONTENTIONS SUBMITTED THAT NO EVIDENCE WAS FURNISHED AND NO INCOMES WERE OFFERED IN LATER YEARS. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT ASSESSEE OWNS A GRICULTURAL LAND AND ALSO PURCHASED 4.71 GUNTAS OF LAND IN SEPTEMBER, 2004. CONSIDERING THE VALUE OF THE LAND PURCHASED AND THE EXTENT OF AGRICULTURAL INCOME OFFERED, THE AOS CONTENTIONS SEEMS TO BE PARTIALLY CORRECT. SINCE ASSESSEE IS NOT IN A POSITION TO FURNISH ANY EVIDENCE TO SUBSTANTIATE THE INCOMES EARNED AND RETURNED, WE HAVE NO OPTION THAN TO ESTIMATE THE AGRICULTURAL INCOME AT A REASONABLE BASIS. ASSESSEES SUBMISSION THAT IT HAS GROWN PADDY, GRAPES AND VEGETABLES ON A PIECE OF LAND OF 1.27 ACR ES CANNOT BE ACCEPTED AS IT IS NOT POSSIBLE TO CULTIVATE ALL T HE THREE IN SMALL PIECE OF LAND. H OWEVER, SINCE ASSESSEE OWNS SOME AGRICULT URAL LAND IN THE IMPUGNED YEARS, W E ARE OF THE OPINION THAT INCOM E AT RS. 10,000/ - PER ACRE CAN BE JUSTIFIED AS A REASO NABLE INCOME EARNED ON THE SAID LANDS. ACCORDINGLY, AO IS DIRECTED TO ACCEPT INCOME AT RS. 10,000/ - PER ACRE FO R AY. 2005 - 06, 2006 - 07, 2007 - 08. T HE BALANCE OF THE INCOME IN EACH YEAR IS CONFIRMED AS INCOME FROM OTHER SOURCES AS WAS DONE BY THE AO. ASSE SSEES GROUNDS ARE PARTLY ALLOWED. I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 4 - : DISALLOWANCE U/S. 80C OF THE ACT: 7. ASSESSEE CLAIMS CERTAIN INVESTMENTS AND REPAYMENTS U/S. 80C WHICH THE AO DISALLOWED. LD.CIT(A) WHILE ALLOWING THE PAYMENT TO LIC IN AYS. 2006 - 07 & 2007 - 08, DID NOT ALLOW THE REPAYMEN T OF PRINCIPAL AMOUNT ON THE HOUSING LOAN OBTAINED, CLAIMED AT RS. 1 LAKH AND RS. 68,042/ - RESPECTIVELY IN THE ABOVE YEARS . BEFORE US, LD. COUNSEL FAIR LY ADMITTED THAT ASSESSEE DID NOT HAVE ANY EVIDENCE OF PAYMENT OF THESE AMOUNTS. SINCE ASSESSEE IS NOT FORTHCOMING WITH ANY EVIDENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE GROUNDS ON DISALLOWANCE U/S.80C ARE DISMISSED. ADDITION S BASED ON AGREEMENT OF SALE: 8. ASSESSEE , AS STATED EARLIER , IS INVOLVED IN UN - R EGISTERED CHIT BUSINESS IN HIS OWN NAME AND ALSO IN HIS FAMILY MEMBERS NAMES. IN THE COURSE OF SEARCH, APART FROM A CHIT NOTE S , CERTAIN PROMISSORY NOTES AND AGREEMENT S OF SALE WERE ALSO SEIZED. BASED ON THE VALUE AS MENTIONED IN THE AGREEMENT OF SALE, A O HAS MADE ADDITIONS IN THE IMPUGNED ASSESSMENT YEARS TOWARDS UN - ACCOUNTED INVESTMENT IN PURCHASE OF PROPERTY. IT WAS SUBMITTED THAT THESE PROPERTIES WERE NOT INTENDED TO BE PURCHASED BY ASSESSEE, BUT WERE OBTAINED AS A SECURITY FOR THE AMOUNT DISBURSED IN THE CHIT BUSINESS. A SSESSEE EXPLAINED THAT WHENEVER A SUCCESSFUL BIDDER TAKES THE MONEY , IN ORDER TO SECURE THE REPAY MENT, ASSESSEE GENERALLY TAKES EI THER A PROMISSORY NOTE FOR HIGHER VALUE OR AN AGREEMENT OF SALE ALONG WITH TITLE DEEDS OF THE PROPERTY SO AS TO SECURE THE AMOUNTS. CONSIDERING THE EXPLANATION, LD. CIT(A) IN AY. 2005 - 06 HAS I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 5 - : ACCEPTED ASSESSEES CONTENTION AND DELETED THE ADDITION OF RS. 8 LAKHS BY STATING AS UNDER: 07.0 DECISION: THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS FURNISH ED BY THE APPELLANT HAVE BEEN CONSIDERED CAREFULLY. THE APPELLANT SUBMITTED THAT THE AGREEMENT OF SALE FOR THE PROPERTY AT 18 - 1 - 436/28, PHOOLBAGH, CHANDRAYANGUTTA, HYDERABAD WAS ONLY TAKEN AS A MEASURE OF SECURITY AGAINST THE PRIZE MONEY FOR THE CHIT BUSI NESS RUN BY HIS FATHER SRI A. NARASIMHA REDDY. HE HAS GIVEN AN AFFIDAVIT FROM SHRI MOHD. SALEEM SON OF SMT. AISHA BEE WHO WAS THE PARTY TO THE AGREEMENT. ON PERUSAL OF THE SAME IT IS SEEN THAT SHRI MOHD. SALEEM HAD SUBSCRIBED FOR CHIT AMOUNTING TO RS. 5,0 0,000/ - , AND FOR THAT THE PROPERTY WAS GIVEN AS SECURITY BY HIS MOTHER. THE AGREEMENT OF SALE FOR THE SAID PROPERTY WAS FOR OF TOTAL CONSIDERATION OF RS.8 LAKHS AGAINST WHICH RS. 4 LAKH WAS PURPORTED TO HAVE BEEN PAID IN ADVANCE. ACCORDING TO THE AFFIDAVIT THERE WAS NO MOVEMENT OF MONEY. IT IS SEEN THAT THE SAME PROPERTY WAS AGAIN GIVEN AS A SECURITY IN THE CASE OF SHRI A. NARASIMHA REDDY IN AY 2008 - 09. THE ASSESSING OFFICER HAS NOT MADE ANY INQUIRY WITH RESPECT TO THE CLAIM MADE BY THE APPELLANT. HE HAS SU MMARILY REJECTED THE APPELLANT'S CONTENTION. THE PARTY TO THE TRANSACTIONS HAVE NOT BEEN SUMMONED OR EXAMINED, NOR ANY THIRD PARTY ENQUIRY WAS CONDUCTED. AS ALREADY MENTIONED, TAKING OF PROPERTY AS SECURITY IS A NORM IN THIS KIND OF BUSINESS. FURTHER, NO F INDING HAS BEEN GIVEN BY THE ASSESSING OFFICER IN CONTRADICTION TO THE CLAIM MADE BY THE APPELLANT THAT THE TRANSACTION ENTERED INTO AND AFFIDAVITS SUBMITTED WERE NOT GENUINE. IT IS, THEREFORE, HELD THAT THE AGREEMENTS ARE DOCUMENTS CONSTITUTING SECURITY C OLLECTED BY THE ASSESSEE/HIS FATHER IN NORMAL COURSE OF THE CHIT BUSINESS; THEY DO NOT REPRESENT ANY INVESTMENT. HENCE, THERE IS NO OCCASION TO TREAT IS AS UNEXPIAINED INVESTMENT AND DEEM THE SAME TO BE THE ASSESSEE'S INCOME. THE ADDITION OF RS. 8,00,000/ - IS DELETED. 9. IN AY. 2006 - 07 ON SIMILAR LINES, LD. CIT(A) ACCEPTED AN AMOUNT OF RS. 22 LAKHS, BUT CONFIRMED AN AMOUNT OF RS. 16 LAKHS OUT OF RS. 38 LAKHS ADDED BY THE AO. THE REASON FOR CONFIRMING THE AMOUNT OF RS. 16 LAKHS IS THAT ASSESSEE DID NOT F URNISH NECESSARY EVIDENCES IN SUPPORT OF THE CONTENTIONS. LIKE - WISE IN AY. 2007 - 08, AO HAS ADDED AN AMOUNT OF RS. 2,60,000/ - ON A PROPERTY AT TROOP BAZAR, HYDERABAD , WHICH WAS ALSO CONFIRMED BY THE LD. CIT(A). IN AY. 2010 - 11, LD. CIT(A) DELETED THE ADDIT ION OF RS. I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 6 - : 4,49,000/ - AND CONFIRMED THE ADDITION OF RS. 1,01,500/ - IN THAT YEAR. ASSESSEE IS AGGRIEVED OF THE CONFIRMATION OF THE ABOVE AMOUNTS IN RESPECTIVE ASSESSMENT YEARS. 10. LD. COUNSEL REFERRING TO THE SUBMISSIONS MADE BEFORE THE AUTHORITIES INCLU DING ADDITIONAL EVIDENCE FILED, SUBMITTED THAT LD. CIT(A) ACCEPTED THE MODUS O PARANDI IN VARIOUS YEARS AND DELETED SUBSTANTIAL AMOUNTS, BUT CONFIRMED PARTLY ON THE REASON THAT ASSESSEE FAILED TO FURNISH NECESSARY EVIDENCE. IT WAS SUBMITTED THAT ASSESSEE HAS FURNISHED THE ADDRESSES AND ENCUMBRANCE CERTIFICATE TO PROVE THAT THESE PROPERTIES WERE NEVER INTENDED FOR PURCHASE AND IT WAS THE FAILURE OF THE AO IN NOT ENQUIRING PROPERLY WHICH RESULTED IN GETTING THE CONFIRMATION. HE REFERRED TO THE ORDERS OF THE CIT(A) TO SUBMIT THAT ASSESSEE HAS DISCHARGED HIS PRIMARY ONUS AND SINCE THIS SO CALLED AGREEMENT OF SALE ARE SECURITIES OBTAINED IN THE COURSE OF CHIT FUND BUSINESS, THE INCOME OF WHICH WERE ALREADY OFFERED, NO FURTHER ADDITION CAN BE MADE ON THE FAILURE OF THE AO TO EXAMINE THE ABOVE TRANSACTIONS. LD. DR SUPPORTED THE ORDERS OF THE CIT(A). 11. WE HAVE CONSIDERED THE ISSUE AND EXAMINE D THE RIVAL CONTENTIONS AND ORDERS OF THE CIT(A). SUBSTANTIAL ADDITION WAS MADE IN AY. 2006 - 07, WHEREIN AO HAS MADE AMOU NT TO AN EXTENT OF RS. 38 LAKHS, THE ORDER OF THE LD. CIT(A) IN THAT YEAR IS AS UNDER: DECISION: 09.1 THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS FURNISHED BY THE APPELLANT HAVE BEEN CONSIDERED CAREFULLY. THE APPELLANT SUBMITTED THAT T HE AGREEMENTS OF SALE FOR TILE PROPERTY AT 17 - 3 - C/2(OLD), 17 - 3 - 198/4 (NEW) YASRABNAGAR, OUTSIDE YAKUTPURA, H YDERABAD FOR A CONSIDERATION OF RS.16 LAKHS AND FOR THE PROPERTY AT H. NO. 18 - 8533/C/1, KUMARWADI, EDI BAZAR, HYDERABAD WERE ONLY TAKEN AS A MEASURE OF SECURITY AGAINST THE I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 7 - : PRIZE MONEY FOR THE CHIT BUSINESS RUN BY HIS FATHER SRI A. NARASIMHA REDDY. HE HAS GIVEN AN AFFIDAVIT FROM MS. SALMA BEE D/O. MD. CHAND WHO WAS THE PARTY TO THE AGREEMENT. ON PERUSAL OF THE SAME IT IS SEEN THAT SHRI MUSTAQ HAD SUB SCRIBED FOR CHIT AMOUNTING TO RS. 5,00,000/ - , AND FOR THAT THE PROPERTY WAS GIVEN AS SECURITY BY HIS MOTHER. THE AGREEMENT OF SALE FOR THE SAID PROPERTY WAS FOR OF TOTAL CONSIDERATION OF RS.6 LAKHS AGAINST WHICH RS. 1 LAKH WAS PURPORTED TO HAVE BEEN PAID I N ADVANCE. HE HAS ALSO GIVEN AN AFFIDAVIT FROM MOH AMMAD SHARFUDIN S/O. MD. NASEERUDDIN WHO WAS THE PARTY TO THE AGREEMENT. ON PERUSAL OF THE SAME IT IS SEEN THAT SHRI RAHEEM HAD SUBSCRIBED FOR CHIT AMOUNTING TO RS. 5,00,000/ - , AND FOR THAT THE PROPERTY WAS GIVEN AS SECURITY BY HIS RELATIVE. THE AGREEMENT OF SALE FOR THE SAID PROPERTY WAS FOR OF TOTAL CONSIDERATION OF RS.16 LAKHS AGAINST WHICH RS. 6 LAKHS WAS PURPORTED TO HAVE BEEN PAID IN ADVANCE. ACCORDING TO THE AFFIDAVIT THERE WAS NO MOVEMENT OF MONEY. R EGARDING THE THIRD DOCUMENT OF AGREEMENT OF SALE FOR PROPERTY AT H.NO. 16 - 11/677 AT YASRABNAGAR, FOR A CONSIDERATION OF RS.16 LAKHS, NO AFFIDAVIT, ETC. HAS BEEN FILED BY THE APPELLANT. THOUGH THE AFFIDAVITS AND ENCUMBRANCE CERTIFICATES WHICH WERE FILED AS ADDITIONAL EVIDENCE WERE SENT TO THE ASSESSING OFFICER, HE HAS NOT MADE ANY INQUIRY WITH RESPECT TO THE CLAIM MADE BY THE APPELLANT AND HAS MERELY STATED THAT NO ADDITIONAL EVIDENCE WAS BROUGHT ON RECORD AND HAS OFFERED NO COMMENTS. HE HAS SUMMARILY REJECT ED THE APPELLANT'S CONTENTION. THE PARTY TO THE TRANSACTIONS HAVE NOT BEEN SUMMONED OR EXAMINED, NOR WAS ANY THIRD PARTY ENQUIRY CONDUCTED. AS ALREADY MENTIONED, TAKING OF PROPERTY AS SECURITY IS A NORM IN THIS KIND OF BUSINESS. FURTHER, NO FINDING HAS BEE N GIVEN BY THE ASSESSING OFFICER IN CONTRADICTION TO THE CLAIM MADE BY THE APPELLANT THAT THE TRANSACTION ENTERED INTO AND AFFIDAVITS SUBMITTED WERE NOT GENUINE. IT IS, THEREFORE, HELD THAT THE AGREEMENTS ARE DOCUMENTS CONSTITUTING SECURITY COLLECTED BY TH E ASSESSEE/ HIS FATHER IN NORMAL COURSE OF THE CHIT BUSINESS; THEY DO NOT REPRESENT ANY INVESTMENT. HENCE, THERE IS NO OCCASION TO TREAT IS AS UNEXPLAINED INVESTMENT AND DEEM THE SAME TO BE THE ASSESSEE'S INCOME. BUT AS ALREADY MENTIONED THE APPELLANT HAS NOT GIVEN ANY CONFIRMATION WITH REGARD TO PROPERTY AT H.NO. 16 - 11/677 AT VASRABNAGAR, FOR A CONSIDERATION OF RS. 16 LAKHS. IN THIS CONNECTION HE HAS FAILED TO DISCHARGE HIS INITIAL ONUS OF FURNISHING NECESSARY DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM. TO PROVE A CLAIM MADE BY HIM, THE ASSESSEE HAS TO SUBSTANTIATE IT. THIS IS MORE SO WHEN HE IS MADE A PARTY TO TRANSACTIONS IN THE UNORGANISED CHIT BUSINESS RUN BY HIS FATHER. CLAIMS AND RELIEFS CANNOT BE GIVEN AS A LARGESSE AND AS BLANKET APPROVALS. EACH TRANSACTION HAS TO PASS THE LITMUS TEST OF VERIFICATION. THE APPELLANT HAS NOT FILED ANY AFFIDAVIT OR CONFIRMATION LETTER IN RESPECT OF THE PROPERTY IN QUESTION. IN VIEW OF THIS OUT OF THE TOTAL ADDITION RS. 38 LAKHS ON ACCOUNT OF I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 8 - : AGREEMENTS OF SALE, ADDIT ION OF RS. 22,00,000/ - IS DELETED AND RS. 16 LAKHS IS CONFIRMED. 12. AS CAN BE SEEN FROM THE ABOVE, ASSESSEE NOT ONLY SUBMITTED VARIOUS EVIDENCE , BUT ALSO AFFIDAVIT S IN SUPPORT OF THE CONTENTIONS THAT THE DOCUMENT OF AGREEMENT OF SALE IS ONLY A SECURITY OBTAINED FOR CHIT FUND BUSINESS. AO DID NOT MAKE ANY ENQUIRY, THE FACT OF WHICH IS ALSO NOTED BY THE LD. CIT(A). IN VIEW OF THIS, SINCE ASSESSEES MODUS O PARANDI WAS ACCEPTED BY THE CIT(A), WE ARE OF THE OPINION THAT THE ADDITIONS CANNOT BE MADE SIMPLY O N THE BASIS OF AGREEMENT OF SALE FOUND WITH THE ASSESSEE, WHEN THEY ARE NOT INTENDED FOR PURCHASE OF PROPERTY. HOWEVER, SINCE AO HAS NOT ENQUIRED PROPERLY, WE HEREBY SET ASIDE THE ISSUE TO THE FILE OF AO TO EXAMINE THE CONCERNED PARTIES FROM WHOM AGREEMEN T OF SALE WERE OBTAINED TO ESTABLISH WHETHER THE TRANSACTION IS OF AGREEMENT OF SALE OR SECURITY FOR CHIT FUND BUSINESS AND GRANT NECESSARY RELIEF AFTER DUE ENQUIRY. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY TO SUBSTANTIATE THE CLAIM AND ASSESSEE IS FR EE TO FURNISH NECESSARY DOCUMENTS/EVIDENCES/CONFIRMATION S/ AFFIDAVITS IN SUPPORT OF HIS CONTENTIONS. WITH THESE OBSERVATIONS, BALANCE OF ADDITION AS RAISED BY ASSESSEE FOR AYS. 2006 - 07, 2007 - 08 AND 2010 - 11 ARE RESTORED TO THE FILE OF AO FOR PROPER ENQUIRY AND ADJUDICATION. GROUNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ADDITION BASED ON PROMISSORY NOTES: 13. AO MADE ADDITION OF RS. 6 LAKHS IN AY. 2009 - 10 AND 1,50,000/ - IN AY. 2010 - 11 ON TWO PROMISSORY NOTES FOUND IN THE COURSE OF SEARCH PROCEE DINGS. AO WAS OF THE OPINION THAT AN AMOUNT OF RS. 6 LAKHS WAS LENT ON 03 - 07 - 2008 AGAINST CASH RECEIPT TO SHRI A. RAJAVARDHAN REDDY, WHICH WAS BROUGHT TO TAX IN AY. I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 9 - : 2009 - 10 AND AN AMOUNT OF RS. 1,50,000/ - LENT ON 31 - 12 - 2009 AGAINST PROMISSORY NOTE TO SHRI V. RAVI KUMAR WAS BROUGHT TO TAX IN AY. 2010 - 11. SIMILAR TO THE AGREEMENT S OF SALE SEIZED BY THE DEPARTMENT, ASSESSEE CONTENDED THAT PROMISSORY NOTES WERE ALSO OBTAINED FOR SECURING THE CHIT BUSINESS . O N THE REASON THAT ASSESSEE HAS NOT SUBSTANTIATE D W ITH ANY DOCUMENTARY EVIDENCE, L D. CIT(A) CONFIRMED ABOVE AMOUNTS . 14. BEFORE US, LD. COUNSEL SUBMITTED THAT IN THE UN - ORGANISED CHIT BUSINESS CONDUCTED BY THE ASSESSEE AND HIS FAMILY MEMBERS, SOMETIMES SECURITY WAS TAKEN IN THE FORM OF AG REEMENT OF SALE IF THE BIDDERS ARE HAVING PROPERTIES AND SOME TIMES, BY WAY OF PROMISSORY NOTES FOR A HIGHER AMOUNT THAN WHAT WAS LENT. IT WAS SUBMITTED THAT THESE TWO TRANSACTIONS ALSO PERTAIN TO CHIT BUSINESS. IT WAS FURTHER SUBMITTED THAT THE RELEVANT PRO - NOTES WERE SEIZED BY THE DEPARTMENT AND ARE AVAILABLE WITH THEM. LD. DR SUPPORTED THE ORDERS OF THE LD. CIT(A). 15. O N THIS ISSUE ALSO, WE ARE OF THE OPINION THAT AO HAS NOT MADE OUT ANY ENQUIRIES. IT IS ACCEPTED THAT ASSESSEE IS CONDUCTING UN - ORGANISED CHIT BUSI NESS AND AS DISCUSSED EARLIER FOR THE AGREEMENT S OF SALE FOUND DURING THE COURSE OF SEARCH, THE MODUS O PARANDI HAS BEEN ACCEPTED. IN VIEW OF THAT, ASSESSEES CONTENTIONS CANNOT BE BRUSHED ASIDE WITHOUT PROPER ENQUIRY. SINCE THE PROMISSORY NOTES ARE AVA ILABLE WITH THE DEPARTMENT (BY THIS TIME, THEY WOULD HAVE BEEN TIME BARRED), IT IS NECESSARY THAT AO MAKES NECESSARY ENQUIRIES WITH THE PERSONS WH O EXECUTED THE PROMISSORY NOTES TO ASCERTAIN WHETHER ASSESSEE HAS ADVANCED CASH OR OBTAINED THEM TOWARDS SECU RITY FOR THE CHIT AVAILED BY THEM. UNLESS PROPER ENQUIRY IS MADE, IT WOULD NOT BE PROPER TO REFUSE I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 10 - : ASSESSEES CONTENTIONS , WHEN PART OF THE CONTENTIONS WITH REFERENCE TO AGREEMENT S OF SALE WERE ACCEPTED. IN VIEW OF THIS, WE ARE OF THE OPINION THAT NECE SSARY ENQUIRIES WITH THE PERSONS WHO E XECUTED PROMISSORY NOTES IS REQUIRED TO BE CONDUCTED BY THE AO TO KNOW THE EXACT NATURE OF A TRANSACTION AND THEN TAKE A DECISION WHETHER THE AMOUNT CAN BE BROUGHT T O TAX AS UNEXPLAINED INVESTMENT/ UNEXPLAINED ASSET OR NOT . FOR THIS PURPOSE, WE SET ASIDE THE ORDERS OF THE AO AND CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ENQUIRY. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY AND ASSESSEE IS FREE TO FURNISH THE NECESSARY EVIDENCES IN SUPPORT OF HIS CLAIM . WITH THESE DIRECTIONS/OBSERVATIONS, THE GROUNDS IN THESE TWO YEARS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. CLAIM OF INTEREST ON THE BANK OD: 16 . ASSESSEE CLAIMS AMOUNT OF RS. 1 , 71 , 629 / - AS INTEREST PAID ON THE OVER DRAFT AMOUNT OBTAI NED FOR HIS BUSINESS FROM BANK OF INDIA. EVEN THOUGH NO EVIDENCE WAS FURNISHED BEFORE THE AO, ASSESSEE FU RNISHED THE ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A), WHICH WAS ALSO ADMITTED BY THE LD. CIT(A). HOWEVER, STATING THAT ASSESSEE HAS NOT COMMENTED AB OUT THIS AND HAS NOT FURNISHED ADDITIONAL EVIDENCE BEFORE HIM, THE AMOUNT WAS CONFIRMED BY THE LD. CIT(A). 17. WE ARE OF THE OPINION THAT THE ASSESSEE CONTENTION CANNOT BE REJECTED SIMPLY BECAUSE AO DID NOT COMMENT ON THE ISSUE. THERE IS EVIDENCE THAT A SSESSEE HAS OBTAINED OVER DRAFT FROM THE BANK . I F THE AMOUNT WAS UTILIZED FOR THE PURPOSE OF BUSINESS, THE INTEREST PAID THEREON SHOULD BE ALLOWED AS A DEDUCTION WHILE COMPUTING INCOME FROM PROFITS AND GAINS OF BUSINESS . SINCE TH E AO HAS NOT I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 11 - : EXAMINED TH IS CLAIM , WE SET ASIDE THE ISSUE TO THE FILE OF AO TO EXAMINE THE CLAIM OF THE ASSESSEE AND THE PURPOSE FOR WHICH THE BORROWED FUNDS WERE UTILIZED. ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY , BEFORE TAKING ANY DECISION ADVERSE TO THE INTEREST OF ASSES SEE. ACCORDINGLY, THIS ISSUE IN AY. 2011 - 12 IS RESTORED TO THE FILE OF AO FOR FRESH CONSIDERATION. 18 . IN THE RESULT, APPEAL IN AY. 2005 - 06 IS PARTLY ALLOWED AND A PPEALS IN AYS. 2006 - 07 TO 2011 - 12 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 20 TH JANUARY, 2016 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH JANUARY, 2016 TNMM I.T.A. NO S . 797 TO 803 / HYD / 201 5 SHRI A. PANDURANGA REDDY : - 12 - : COPY TO : 1. SHRI A. PANDURA NGA REDDY , 17 - 2 - 678, MADANNAPET, HYDERABAD. C/O. K. VASANTKUMAR, A.V. RAGHU RAM, P. VINOD, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2 . DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE - 3 ( 1 ) , AAYAKAR BHAVAN, HYDERABAD. 3 . CIT (APPEALS) - XI , HYDERABAD. 4. PR. CIT , CENTRAL , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.
Mehul