A Somalingam Goud, Hyderabad V. ITO, Ward 9(3), Hyderabad

ITA 813/HYD/2013

• Counselvise Citation: 81322514 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S RAMA RAO
• Assessee Lawyers: RAMAKRISHNA BANDI
• Keywords: Unexplained investment; Reason to believe
• Section: 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 813/HYD/2013 ASSESSMENT YEAR: 2006-07 A. SOMALINGUM GOUD, HYDERABAD PAN AENPA1970J INCOME TAX OFFICER, WARD 9(3), HYDERABAD. (APPELLANT) (RESPONDENT) REVENUE BY SHRI S. RAMA RAO ASSESSEE BY SHRI RAMAKRISHNA BANDI DATE OF HEARING 15-12-2014 DATE OF PRONOUNCEMENT 19-12-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 07/03/2013 OF LD. CIT(A)-18, MUMBAI, CAMP AT HYDERA BAD FOR THE ASSESSMENT YEAR 2006-07. 2. ASSESSEE HAS RAISED FOUR GROUNDS. GROUND NOS. 1 & 4 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SPECIFIC ADJU DICATION. AT THE OUTSET, LD. AR EXPRESSED HIS INTENTION NOT TO PRESS GROUND NO.2, IN VIEW OF SUCH SUBMISSION, GROUND NO. 2 IS DISMISSED AS NOT PRESSED. 3. THEREFORE, THE ONLY GROUND, WHICH REMAINS TO BE ADJUDICATED IS GROUND NO. 3 RELATING TO ADDITION OF RS. 25 LAKH MA DE BY AO U/S 69 OF THE ACT AND CONFIRMED BY LD. CIT(A). 2 ITA NO. 813/HYD/2013 A. SOMALINGAM GOUD 4. BRIEFLY, THE FACTS RELATING TO THE ISSUE IN DISP UTE ARE, ASSESSEE IS AN INDIVIDUAL. FOR AY UNDER CONSIDERATION, ASSES SEE FILED HIS RETURN OF INCOME ON 27/10/2006 DECLARING TOTAL INCOME OF R S. 1,10,208. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) ON 30/03/ 2007. SUBSEQUENTLY, INFORMATION CAME TO THE POSSESSION OF AO THAT ASSESSEE HAD FIXED DEPOSITS OF RS. 25 LAKHS WITH TH E CITIZEN COOPERATIVE SOCIETY LTD. HE OBSERVED THAT ASSESSEE HAS NOT DECLARED SUCH INVESTMENT IN THE RETURN OF INCOME NOR OFFERED ACCRUED INTEREST AS INCOME. IN THE MEANTIME, ASSESSEE FILED A REVIS ED RETURN ON 17/04/09 SHOWING INTEREST ON FDR AMOUNTING TO RS. 7 3,316. AO HAVING REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT REOPENED THE ASSESSMENT BY ISSUING A NOT ICE U/S 148 ON 02/07/09. IN RESPONSE TO THE SAID NOTICE, ASSESSEE SUBMITTED A LETTER ON 30/07/09 REQUESTING AO TO TREAT THE RETURN FILED ON 17/04/09 AS A RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. D URING THE ASSESSMENT PROCEEDING, AO CALLED UPON ASSESSEE TO E XPLAIN THE SOURCE OF INVESTMENT MADE IN FDS. IN RESPONSE TO TH E QUERY MADE BY AO, IT WAS SUBMITTED BY ASSESSEE THAT HE IS A COMMI SSION AGENT IN REAL ESTATE BUSINESS AND IN THIS PROCESS OF BUSINES S ACTIVITY, THE AMOUNTS KEPT BY PERSONS INTENDING TO PURCHASE PLOTS ARE DEPOSITED WITH THE SOCIETY FOR A SHORT PERIOD IN FDS. IN SUP PORT OF SUCH CLAIM, ASSESSEE ALSO FURNISHED CERTAIN DETAILS OF AMOUNTS RECEIVED FROM PURCHASER OF PLOTS OUT OF WHICH DEPOSITS WERE CLAIM ED TO HAVE BEEN MADE IN FDS. HOWEVER, AO ALLEGED THAT ASSESSEE HAS NOT SUBSTANTIATED ITS CLAIM WITH ANY DOCUMENTARY EVIDEN CE TO PROVE THAT PURCHASERS MONIES WERE UTILIZED FOR MAKING DEPOSITS WITH CITIZEN CO- OPERATIVE SOCIETY LTD. HE ALSO OBSERVED THAT ASSESS EE HAS NOT DECLARED ANY SUCH ADVANCE OR ITS DUES IN THE BALANC E SHEET. AO NOTED THAT ASSESSEE IS ACTING JUST AS A MIDDLEMAN AND USE D TO GET SOME PERCENTAGE OF COMMISSION FROM ARRANGING THE REAL ES TATE TRANSACTIONS. HE OBSERVED THAT IN THE PROCESS OF MEDIATION IN THE REAL ESTATE TRANSACTIONS, NO PURCHASER WILL GIVE MONEY TO A MED IATOR EXCEPT COMMISSION DUE TO HIM. HE OBSERVED THAT SELLER OF P ROPERTY SELLS HIS 3 ITA NO. 813/HYD/2013 A. SOMALINGAM GOUD LANDS FOR WANT OF MONEY FOR HIS IMMEDIATE NEEDS. TH E PURCHASER GENERALLY GIVES MONEY TO THE SELLER ONLY AFTER TAKI NG SIGNATURE ON THE AGREEMENT OF SALE OR ON THE SALE DEED. THE MEDIATOR IS NOT THE OWNER OF THE PROPERTY TO BE SOLD, THEREFORE, NO PURCHASER WILL ADVANCE MONIES OR HANDOVER MONIES TO THE MEDIATOR, ON THE C ONTRARY, THEY WILL HAND OVER MONEY TO THE SELLER DIRECTLY. AO OBSERVED THAT IF ASSESSEE IS A RECIPIENT OF MONIES FROM PROSPECTIVE BUYERS, H E WOULD HAVE HANDED OVER SUCH MONEY TO THE SELLER ON THE DATE OF SALE ITSELF. ULTIMATELY, AO OBSERVED, AS ASSESSEE HAS FAILED TO PROVE THE SOURCE OF SUCH INVESTMENTS WITH DOCUMENTARY EVIDENCE, THE AMOUNT HAS TO BE TREATED AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT AND ACCORDINGLY MADE ADDITION TO THE INCOME RETURNED FO R THE IMPUGNED AY. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREF ERRED APPEAL BEFORE LD. CIT(A). 5. IN COURSE OF HEARING OF APPEAL, ASSESSEE PRODUCE D CERTAIN DOCUMENTS IN THE FORM OF AGREEMENT OF SALE-CUM-GPA AND SALE DEEDS TO ESTABLISH ITS CLAIM THAT THE AMOUNTS INVESTED IN FIXED DEPOSITS ARE OUT OF THE ADVANCES MADE BY PURCHASERS OF LAND. ON THE BASIS OF THE EVIDENCES SUBMITTED BY ASSESSEE, LD. CIT(A) CALLED FOR A REMAND REPORT FROM AO. ON PERUSING THE REMAND REPORT, LD. CIT(A) OBSERVED THAT IN COURSE OF REMAND BEFORE AO, ASSESSEE HAD C LAIMED THAT AFTER PURCHASING PROPERTIES FROM THE LAND LORDS AS A GPA HOLDER, ASSESSEE HAS EXECUTED SALE DEEDS IN FAVOUR OF SEVEN PERSONS FROM WHOM ADVANCES WERE CLAIMED TO HAVE BEEN RECEIVED. HOWEVE R, WHEN AO MADE ENQUIRIES WITH THOSE SEVEN PERSONS, REPLY CAME ONLY FROM ONE PERSON NAMELY SRI M.S. KRISHNA PRASAD WHEREIN IT WA S STATED BY HIS MOTHER THAT AS HER SON IS PRESENTLY STAYING IN USA, SHE IS NOT AWARE OF THE TRANSACTIONS. LD. CIT(A) OBSERVED THAT AS PE R SECTION 69, ONUS IS ALWAYS ON ASSESSEE TO ESTABLISH THE SOURCE OF IN VESTMENTS BY PRODUCING COMPLETE EVIDENCE TO PROVE GENUINENESS OF THE INVESTMENT. AS ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE INVESTMENTS MADE IN FDS., IT WAS RIGHTLY ADDED U/S 69. LD. CIT(A) 4 ITA NO. 813/HYD/2013 A. SOMALINGAM GOUD RELIED UPON A DECISION OF HONBLE SUPREME COURT IN CASE OF ROSHAN DIHATTI VS. CIT, 107 ITR 938 CONFIRMED THE ADDITION S ADDITION OF RS. 25 LAKHS. 6. LD. AR REITERATING SUBMISSIONS MADE BEFORE THE R EVENUE AUTHORITIES CONTENDED THAT ASSESSEE AS A GPA HOLDER ENTERS INTO AN AGREEMENT OF SALE WITH THE PROSPECTIVE BUYERS AND R ECEIVES ADVANCES FROM THEM. THESE ADVANCES WERE TO BE IN SHORT TERM DEPOSITS WITH CITIZEN CO-OPERATIVE SOCIETY LTD. LD. AR SUBMITTED THAT EVEN FINAL SALE DEEDS WERE ALSO EXECUTED BY ASSESSEE AS A GPA HOLDER ON BEHALF OF THE ORIGINAL LAND OWNERS. IN THIS CONTEXT , HE DREW OUR ATTENTION TO THE REGISTERED SALE DEED COPIES FURNIS HED IN THE PAPER BOOK. THUS, IT WAS SUBMITTED BY LD. AR THAT WHEN TH E SOURCE OF INVESTMENT HAS NOT BEEN DOUBTED AND EVEN AO IN THE REMAND REPORT HAS ACCEPTED IT, THERE IS NO REASON WHY ADDITION OF RS. 25 LAKHS IS TO BE SUSTAINED. HE SUBMITTED THAT WHEN THE FACTS AND MATERIALS ON RECORD CLEARLY PROVES THAT IT IS THE ASSESSEE WHO I S INVOLVED IN THE SALE TRANSACTION AS GPA HOLDER, THERE IS NO REASON TO DISBELIEVE THAT THE AMOUNTS WERE NOT RECEIVED BY ASSESSEE. 7. LD. DR ON THE OTHER HAND SUBMITTED THAT IN SPITE OF ENOUGH OPPORTUNITY BEING GIVEN TO ASSESSEE DURING THE ASSE SSMENT PROCEEDING AS WELL AS BEFORE THE FIRST APPELLATE AU THORITY, ASSESSEE COULD NOT ESTABLISH THE NEXUS BETWEEN THE DEPOSITS MADE AND SO CALLED ADVANCES RECEIVED FROM PURCHASERS. MOSTLY RE ITERATING THE VIEW EXPRESSED BY AO, LD. DR SUBMITTED THAT THE ADVANCES DO NOT APPEAR AS LIABILITY IN THE BALANCE SHEET OF ASSESSEE. EVEN IN THE SALE DEEDS ALSO, THERE IS NO MENTION ABOUT ADVANCES RECEIVED B Y ASSESSEE. THEREFORE, SALE DEED CANNOT BE LINKED WITH THE DEPO SITS MADE IN THE FDS. LD. DR SUBMITTED THAT ASSESSEE BEING A MEDIATO R BUYERS ARE NOT EXPECTED TO GIVE SALE CONSIDERATION TO ASSESSEE WHE N LAND LORDS ARE AVAILABLE. LD. DR SUBMITTED THAT ONUS IS ON THE ASS ESSEE TO EXPLAIN THE SOURCE OF DEPOSITS MADE BY HIM. IF ASSESSEE FAI LS TO EXPLAIN THE 5 ITA NO. 813/HYD/2013 A. SOMALINGAM GOUD SOURCE OF DEPOSIT SATISFACTORILY , THEN, INVESTMENT S MADE ARE TO BE TREATED AS UNEXPLAINED INVESTMENT U/S 69. IN SUPPOR T OF SUCH CONTENTION, HE RELIED ON THE FOLLOWING DECISIONS: 1. ROSHAN DI HATTI VS. CIT 107 ITR 938 (SC) 2. CIT VS. MAF ACADEMY P. LTD., 361 ITR 258 (DEL.) 3. CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD., 342 ITR 169 (DEL.) 8. IN THE REJOINDER, LD. AR SUBMITTED THAT THE ENTI RE SALE CONSIDERATION HAS BEEN REFLECTED IN THE REGISTERED SALE DEEDS, HENCE, LD. DRS CONTENTION THAT THERE IS NO REFERENCE TO T HE AMOUNT ADVANCED TO ASSESSEE, IS WITHOUT ANY BASIS. AS FAR AS ALLEGA TION OF AO THAT THE ADVANCE IS NOT REFLECTED IN THE BALANCE SHEET AS L IABILITY, LD. AR SUBMITTED THAT SINCE MONEY DID NOT BELONG TO ASSESS EE, IT WAS NOT SHOWN IN THE BALANCE SHEET. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF PARTIES AN D PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATE RIALS ON RECORD. AS CAN BE SEEN FROM THE FACTS AND MATERIALS ON RECORD, ASSESSEE EXPLAINED THE SOURCE OF INVESTMENTS IN FDS TO BE OU T OF THE ADVANCES RECEIVED FROM PROSPECTIVE BUYERS TOWARDS SALE OF LA ND TO BE MADE. IT IS TO BE NOTED THAT ON PERUSAL OF REGISTERED SALE D EED, COPIES OF WHICH ARE IN THE PAPER BOOK, SUBMITTED BY ASSESSEE, IT IS CLEAR THAT ASSESSEE HAS EXECUTED THE AGREEMENT WITH THE PROSPE CTIVE BUYERS AS A GPA HOLDER ON BEHALF OF LAND OWNERS. THEREFORE, A SSESSEES CLAIM THAT ADVANCES WERE GIVEN BY PROSPECTIVE BUYERS TO C ERTAIN EXTENT APPEARS PLAUSIBLE. MOREOVER, IN THE REMAND REPORT A O HAS MADE THE FOLLOWING OBSERVATIONS: ON VERIFICATION OF THE INFORMATION FILED IT IS NOT ICED THAT THE ASSESSEE ACTED AS REAL ESTATE AGENT. HE ACTS AS GPA HOLDER ON BEHALF OF PROSPECTIVE PURCHASERS OF THE LAND FOR WHICH HE GETS SOME AMOUNT OF COMMISSION. THE FIXED DEPOSITS OF RS. 25,00,000 REPRESENT THE MONIES THUS RECEIVED AS ADV ANCES FROM VARIOUS PROSPECTIVE PURCHASERS. THE AMOUNTS SO RECE IVED WERE INVESTED IN FIXED DEPOSITS OF RS. 1,00,000 EACH WIT H AN INTENTION TO WITHDRAW THE SAME AS AND WHEN THE PROPERTIES TO THEIR 6 ITA NO. 813/HYD/2013 A. SOMALINGAM GOUD SPECIFICATIONS ARE AVAILABLE. SUBSEQUENTLY, THE ASS ESSEE PURCHASED THE PROPERTIES FROM THE LAND LORDS AS GPA HOLDER AND EXECUTED SALE DEEDS IN FAVOUR OF SEVEN PERSONS FROM WHOM THE ADVANCES WERE RECEIVED AND FILED COPIES OF SALE DEE DS IN SUPPORT OF HIS SUBMISSIONS. FROM THE AFORESAID OBSERVATIONS OF AO, IT APPEARS, AO AFTER VERIFICATION OF INFORMATION SUBMITTED BEFORE HIM AC CEPTS THE FACT THAT FIXED DEPOSITS OF RS. 25 LAKHS REPRESENT THE MONIES RECEIVED AS ADVANCES FROM PROSPECTIVE PURCHASERS. IN THESE CIRC UMSTANCES, LD. CIT(A), IN OUR VIEW, WAS NOT JUSTIFIED IN CONFIRMIN G THE ADDITION OF RS. 25 LAKH AS UNEXPLAINED INVESTMENT AT THE HANDS OF A SSESSEE. MOREOVER, ON PERUSAL OF THE REGISTERED SALE DEED CO PIES, IT IS CLEARLY EVIDENT THAT THE SALE CONSIDERATION MENTIONED THERE IN AGAINST THE SEVEN PURCHASERS MATCHES WITH THE AMOUNT OF FIXED D EPOSITS MADE BY ASSESSEE. THEREFORE, IN OUR VIEW, ASSESSEE HAS DISC HARGED THE INITIAL ONUS CAST UPON HIM FOR PROVING THE DEPOSITS. THAT B EING THE CASE, WITHOUT BRINGING ANY CONTRARY EVIDENCE, IT CANNOT B E PRESUMED THAT ASSESSEES CLAIM OF HAVING MADE FDS OUT OF ADVANCES RECEIVED FROM PURCHASERS OF LAND IS FALSE OR FICTITIOUS. ONLY BEC AUSE THE AMOUNT IS NOT MENTIONED AS LIABILITY IN THE BALANCE SHEET OR THE FACT THAT ASSESSEE IS ACTING AS A MEDIATOR WILL NOT BE GOOD E NOUGH REASON TO CONCLUDE THAT THE AMOUNT OF RS. 25 LAKHS INVESTED I N FDS ARE OUT OF UNDISCLOSED SOURCES, HENCE, TO BE ADDED U/S 69 OF T HE ACT. SIMILARLY, ONLY BECAUSE THE CONCERNED PURCHASERS FAILED TO RES POND TO THE LETTERS OF AO IT CANNOT BE PRESUMED THAT ASSESSEES SUBMISSIONS ARE FALSE. IF THE AO HAD DOUBTS ABOUT ASSESSEES CLAIM, HE COULD HAVE CONDUCTED FURTHER ENQUIRY AND AT LEAST COULD HAVE S UMMONED THE PURCHASERS FOR ASCERTAINING CORRECTNESS OF ASSESSEE S CLAIM. WITHOUT DOING THAT, AO CANNOT MAKE ADDITION ON CONJECTURE A ND SUSPICION. IN VIEW OF THE AFORESAID, WE DIRECT AO TO DELETE THE A DDITION MADE OF RS. 25 LAKHS. 7 ITA NO. 813/HYD/2013 A. SOMALINGAM GOUD 10. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 19/12/2014. SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT D EY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 19 TH DECEMBER, 2014 KV COPY TO:- 1) SHRI A. SOMALINGAM GOUD, C/O SRI S. RAMA RAO, AD VOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H.NO. 3-6-643, ST. NO. 9, HIMAYATNAGAR, HYDERABAD 500 029 2) ITO, WARD 9(3),, HYDERABAD 3) CIT(A)-VI, HYDERABAD 4) CIT-VI, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER