The Assistant Commissioner of Income Tax, Hyderabad V. Shri A Potharaju, Hyderabad

ITA 852/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66270 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Unexplained investment; Search and seizure
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO. 852/HYD/2011 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX, APPELLAN T CIRCLE 8(1), HYDERABAD VS. A. POTHARAJU, RESPONDENT HYDERABAD. (PAN ADUPA5296P) APPELLANT BY : SMT. AMISHA S. GUPT RESPONDENT BY : SHRI V. RAGHAVENDRA RAO DATE OF HEARING : 31/07/2012 DATE OF PRONOUNCEMENT :07/09/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL IS PREFERRED BY THE REVENUE DIRECTED A GAINST THE ORDER OF CIT(A), VIJAYAWADA, DATED 11/02/2011 F OR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S.132 OF THE INCOME-TAX ACT, 1961 WAS C ONDUCTED IN THE CASE OF SRI D.NAGARJUNA RAO, SRI K.SRINIVASA RE DDY & OTHERS, MIYAPUR, HYDERABAD ON 29.10.2007 IN THE F.Y . 2007-08. DURING THE COURSE OF SEARCH IT WAS FOUND THAT MR A. POTHURAJU, THE ASSESSEE HAD INTRODUCED UNACCOUNTED CREDITS AMO UNTING TO RS.40,00,101/- IN THE FIRM M/S. SVK. SREE SEETARAMA NJANEYA CONSTRUCTIONS. THIS HAS BEEN CONFIRMED BY THE MANA GING PARTNER, MR D.NAGARJUNA RAO OF THE FIRM. IN THIS R EGARD, A 2 ITA NO. 852HYD/2011 A. POTHARAJU STATEMENT ON OATH WAS RECORDED U/S.131 OF THE I.T.A CT, 1961 ON 6.2.2008 OF THE ASSESSEE. 3. THE AO OBSERVED THAT THE ASSESSEE HAD MADE AN IN VESTMENT OF RS.40,00,101/- IN CASH ON 30.12.2006 IN M/S. SVK SREE SEETHARAMANJANEYA CONSTRUCTIONS. OUT OF THE LAND A DVANCE OF RS.40,00,000/- RECEIVED FROM SRI JAGANNADHAM & OTHE RS AGAINST THE AGREEMENT OF SALE ENTERED INTO FOR SALE OF 2 AC RES OF LAND SITUATED AT BATHOLE, NEAR RAMACHANDRAPURAM, BHEL, H YDERABAD. 4. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE F ILED A LETTER STATING THAT AN AMOUNT OF RS.40,00,101/- WAS GIVEN AS LOAN OUT OF THE FUNDS MOBILIZED FROM PEOPLE KNOWN T O HIM. IT WAS ALSO STATED THAT THE LOAN OF RS.15,00,000/- WAS TAKEN FROM MR T.V.SETHUMADHAVA RAO, VICE PRESIDENT OF WIPRO TE CHNOLOGIES LTD. BY WAY OF CHEQUE FOR WHICH PURPOSE CONFIRMATIO N LETTER WAS ALSO FILED. THE AO FELT THAT THERE WAS CONTRADICTI ON IN THE STATEMENT RECORDED U/S.131 OF THE IT ACT, 1961 AND THE LETTER FILED DURING THE ASSESSMENT PROCEEDINGS, THE AO CON CLUDED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE SOURCE OF INVESTMENT OF RS.40,00,101 AND THEREFORE THE AMOUNT WAS TAXABLE A S UNEXPLAINED INVESTMENT DURING THE YEAR. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) AND SUBMITTED THAT AS THE SALE AGREEMENT COU LD NOT BE EXECUTED IN TIME AND SRI JAGANNADHAM WAS PRESSURIZI NG FOR THE RETURN OF THE AMOUNT ADVANCED, THE AMOUNT OF RS.15, 00,000 WAS TAKEN FROM HIS RELATIVES AND FOR THE REPAYMENT OF B ALANCE AMOUNT PROMISSORY NOTES WERE EXECUTED TO SRI JAGANN ADHAM. HENCE, HE ARGUED THAT ADVANCE MONEY OF RS.40,00,0 00 WAS INVESTMENT IN THE FIRM WHICH WAS UNDISPUTED AND TH E REPAYMENT OF RS. 40.00 LAKHS TO SHRI JAGANNADHAM WAS PARTIALL Y MADE BY 3 ITA NO. 852HYD/2011 A. POTHARAJU PAYMENT OF RS.15 LAKHS RAISED FROM RELATIVE SHRI T. V. SETHUMADHAVA RAO AND FOR THE BALANCE OF RS.25 LAKH S PROMISSORY NOTES WERE EXECUTED IN FAVOUR OF 7 PERSO NS IN PROPORTION TO THEIR CONTRIBUTION OF AMOUNT. IN SUP PORT OF THIS AN AFFIDAVIT FROM SRI JAGANNADHAM WAS ALSO FILED. 6. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT TH E ASSESSING OFFICER WRONGLY OBSERVED THAT IN THE STATEMENT RECO RDED U/S 131 OF THE IT ACT, 1961 ON 06/02/2008 OF THE ASSESSEE, IN REPLY TO QUESTION NO. 8 THE ASSESSEE STATED THAT THE SOURCES FOR THE ABOVE INVESTMENT OF RS. 40,00,101/- ARE OUT OF THE LAND ADVANCE OF RS. 40.00 LAKHS RECEIVED FROM SHRI JAGANNADHAM A ND OTHERS, BUT, DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD STATED THAT HE HAS RECEIVED RS. 15,00,000/- FROM ONE SHRI T. V. SETHUMADHAVA RAO AND REMAINING 250,00,000/- FROM 7 INDIVIDUALS AND THAT THE ASSESSEE IS CONFLICTING T HE STATEMENT MADE U/S 131 OF THE ACT DURING THE ASSESSMENT PROCE EDINGS WHEREAS THE ACTUAL FACT IS THAT HE HAD ONLY RECEIV ED THE AMOUNTS FOR REPAYMENT OF MONEY ADVANCED BY SHRI JAGANNADHAM AND, HENCE, THE SAME CANNOT BE TREATED AS UNEXPLAINED INVESTMENT U/S 68 OF THE IT ACT. 7. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS MA DE BY THE ASSESSEE HELD THAT THE ARRANGEMENT CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE BY MAKING A PARTIAL PAYMENT OF RS.1 5 LAKHS AND SEEKING TIME FOR THE RETURN OF BALANCE AMOUNT HAS B EEN CONFIRMED BY THE VENDEE WHEREAS THE AO HAS NEITHER DISPUTED THE CONTENTS OF THE SALE AGREEMENT NOR THE CLAIM OF THE ASSESSEE THAT HE HAD RECEIVED A SUM OF RS.40 LAKHS IN CASH A S ADVANCE FROM SRI JAGANNADHAM, AS PER THE SALE AGREEMENT. T HE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE 4 ITA NO. 852HYD/2011 A. POTHARAJU GROUND THAT THE EXPLANATION OF THE ASSESSEE WAS REA SONABLE AND ACCEPTABLE. 8. AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEFORE U S AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN LAW AND FACTS IN ACCEPTING THE APPEAL OF T HE ASSESSEE AND GRANTING RELIEF TO THE ASSESSEE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACTS AND CIRCUMSTANCES IN HOLDING THE CASH DEPO SITS STATED TO BE OBTAINED FROM SEVEN INDIVIDUALS AS EXP LAINED SOURCES WITHOUT ESTABLISHING ANY IDENTITY, CREDIT W ORTHINESS OF THE INDIVIDUALS AND GENUINETY OF THE TRANSACTION S. 9. BEFORE US, THE LD. DR SMT AMISHA S. GUPT, VEHEME NTLY CONTESTED THAT THE AFFIDAVIT FILED BY SRI JAGANNAD HAM DATED 31/01/2011 HAD NOT BEEN PLACED BEFORE THE ASSESSING OFFICER, WHO PASSED THE ORDER ON 30/12/2009 AND IT WAS CLEAR LY AN AFTER THOUGHT. IN THE AFFIDAVIT, THE SOURCE FOR REPAYMENT OF ADVANCE OF RS.40 LAKHS TO SHRI JAGANNADHAM(VENDEE) HAS BEEN AF FIRMED STATING THAT A SUM OF RS.15 LAKHS BY CHEQUE HAD BEE N RECEIVED FROM THE RELATIVE OF THE ASSESSEE, NAMELY, MR T.V.S ETHUMADHAVA RAO AND THE BALANCE RS.25 LAKHS WAS ASSURED BY DRAW ING PROMISSORY NOTES IN FAVOUR SHRI JAGANNADHAM BY 7 PE RSONS, WHO ARE CARRYING ON THE ACTIVITY OF AGRICULTURE. 10. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI V. RA GHAVENDRA RAO, RELIED UPON THE ORDER OF THE CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AU THORITIES BELOW. IT IS OBSERVED THAT THE AO HAS NOT BEEN EXPL AINED ABOUT REPAYMENT OF SUM OF RS. 40.00 LAKHS, WHICH WAS ADVA NCED BY 5 ITA NO. 852HYD/2011 A. POTHARAJU SHRI JAGANNADHAM FOR THE PURPOSE OF INVESTMENT BY T HE ASSESSEE IN THE FIRM. THE AFFIDAVIT FILED BY SHRI J AGANNADHAM AND CONFIRMATION BY THE RELATIVE SHRI T. V. SETHUMA DHAVA RAO AND THE 7 OTHERS, WHO HAD EXECUTED PROMISSORY NOTES IN FAVOUR OF SHRI JAGANNADHAM, WERE BROUGHT TO THE NOTICE OF THE CIT(A), HOWEVER THE SAME HAD NOT BEEN EXPLAINED/PRODUCED BE FORE THE ASSESSING OFFICER. IN THESE CIRCUMSTANCES, WE DEEM IT FIT TO RESTORE THE MATTER TO THE FILE OF AO TO EXAMINE THE PROMISSORY NOTES EXECUTED BY THE 7 PERSONS, WHO ARE HAVING AGR ICULTURAL LAND. FURTHER, THE ASSESSING OFFICER SHALL GATHER D ETAILS WITH RESPECT TO THE PROOF FOR HOLDING AGRICULTURAL LAND AND PROOF OF INCOME FROM THE SAME ALONG WITH CONFIRMATIONS FROM THE 7 PERSONS. THE AO SHALL ALSO SUMMON SRI JAGANNADHAM AND AFTER THOROUGH EXAMINATION AS TO THE FACTS AND DECIDE THE ISSUE IN ACCORDANCE OF THE LAW. WE ORDER ACCORDINGLY. 12. IN THE RESULT, APPEAL OF THE REVENUE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 07/09/2012. SD/- SD/- (D. KARUNAKARA RAO) ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 7 TH SEPTEMBER, 2012 KV COPY TO:- 1. ACIT, CIRCLE 8(1), HYDERABAD 2. SHRI A. POTHARAJU, FLAT NO. 410, PUJITHA ESTATES , SUNDER NAGAR, KAVYA BLOCK, HYDERABAD 3. CIT(A),-VIJAYAWADA 4. CIT-II, HYDERABAD. 5. THE DR, ITAT, HYDERABAD