ACIT, Hyderabad V. Venugopal Mundada (HUF), Warangal

ITA 891/HYD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6286 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-09-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 31-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P MURALI MOHAN RAO
• Assessee Lawyers: VASUNDHARA SINHA
• Keywords: Unexplained cash credit; Document seized; Source of fund; Accommodation entries; Documents seized
• Section: 143(3); 153A; 32; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NOS.882, 1110, 1111 & 1112/HYD/2009 ASSESSMENT YEARS 2002-03 TO 2005-06 SHRI VENUGOPALA MUNDADA (HUF), HYDERABAD (PAN AABHM 4739 F) VS THE ACIT, CIRCLE 3, HYDERABAD (APPELLANT) (RESPONDENT) ITA NOS.890, 891,892 & 893/HYD/2009 ASSESSMENT YEARS 2002-03 TO 2005-06 THE ACIT, CIRCLE 3, HYDERABAD VS SHRI VENUGOPALA MUNDADA (HUF), HYDERABAD (PAN AABHM 4739 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. MURALI MOHAN RAO RESPONDENT BY : SMT. VASUNDHARA SINHA, DR O R D E R PER BENCH : THESE ARE CROSS APPEALS DIRECTED AGAINST THE COM MON ORDER PASSED BY THE CIT(A) III, HYDERABAD DATED 21.5.200 9 AND PERTAINS TO THE ASSESSMENT YEARS 2002-03 TO 2005-06. SINCE CERTAIN ISSUES ARE COMMON IN NATURE IN THESE APPEALS, THEY ARE CLUBBED TOGETH ER, HEARD TOGETHER AND DISPOSED OFF VIDE THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE FILED THE APPEALS AFTER 88 DAYS DELAY AND ALSO FILED PETITIONS PRAYING CONDONATION OF THE DELAY ST ATING THAT DUE TO MULTIPLE LITIGATIONS AT VARIOUS PLACES, THE ASSESSEE COULD N OT FILE THE PRESENT APPEAL IN TIME AND THE APPEALS ARE FILED BELATEDLY BY 88 D AYS AND PRAYED FOR CONDONATION OF DELAY. WE HAVE GONE THROUGH THE PE TITION FILED BY THE ITA NO.890 TO 893/H/2009 & 882, 1110 TO 1112/H/2009 SHRI VENUGOPALA MUNDADA (HUF) 2 2 ASSESSEE. ADMITTEDLY, THE ASSESSEE IS CAME ACROSS VARIOUS LITIGATIONS ON INCOME TAX MATTERS WITH THE DEPARTMENT ONE AFTER AN OTHER. THE DELAY IN FILING THE APPEAL IS BONA FIDE AND THE SAME IS COND ONED AND THE APPEALS OF THE ASSESSEES ARE ADMITTED. 3. FIRST WE WILL TAKE UP THE ASSESSEES APPEALS IN ITA NOS. 882, 1110, 1111 & 1112/HYD/2009. THE ASSESSEE IS GRIEVA NCE IS WITH REGARD TO NOT CONSIDERING THE SOURCES TO EXPLAIN THE UNEXPLAI NED CREDITS FOR THE ASSESSMENT YEARS AS STATED BELOW: ASSESSMENT YEAR (RS. IN LAKHS) 2002-03 4.5 LAKHS 2003-04 26.60 LAKHS 2004-05 43.50 LAKHS 2005-06 26,49,602/- 3.1. IN THESE ASSESSMENT YEARS THE ASSESSING OF FICER FOUND INTRODUCTION OF CASH ON VARIOUS DATES WHILE PERUSING THE SEIZED DOCUMENTS. THE ASSESSEE WAS ASKED TO FURNISH THE NAME AND ADDRESSE S OF THE PERSONS INVOLVED IN THESE SEIZED DOCUMENTS. THE ASSESSEE H AS TAKEN A PLEA THAT THIS MONEY HAS BEEN RECEIVED FROM VARIOUS PARTIES F OR THE PURPOSE OF PURCHASING SHARES AND THE SHARES WERE SOLD BY THE A SSESSEE IN SUBSEQUENT YEARS. THE ASSESSING OFFICER NOT AGREEING WITH THE ASSESSEES CONTENTION MADE ADDITIONS AS ABOVE. ON APPEAL, CIT(A) GIVEN A FINDINGS THAT THE SHARE TRANSACTIONS IN THE NAME OF VARIOUS FAMILY ME MBERS WERE NOT GENUINE, HOWEVER, PROFIT FROM THESE TRANSACTIONS T O BE ASSESSED UNDER HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, HE HAS GIVEN A DIRECTION THAT THE INCOME ASSESSED IN THE HANDS OF FAMILY MEM BERS AT RS.1,46,87,520/- UNDER THE HEAD INCOME FROM OTHE R SOURCES TO BE CONSIDERED AS A SOURCE OF FUND EITHER AVAILABLE TO THE ASSESSEE OR TO THE FAMILY MEMBERS TO EXPLAIN THE ABOVE CREDIT. FUR THER, HE HAS GIVEN A ITA NO.890 TO 893/H/2009 & 882, 1110 TO 1112/H/2009 SHRI VENUGOPALA MUNDADA (HUF) 3 3 DIRECTION THAT THERE WAS ADDITIONAL INCOME DECLARED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2002-03 AND 2003-04 TO BE TELESCOPE D TOWARDS THESE CREDITS. AGAINST THESE FINDINGS, BOTH ARE IN APPEA L BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. WITH REGARD TO GROUND IN ITA NO.1110/ H/2009 & 1111/H/2009, THE ASSESSEE SUBMITTED THAT THE ADDITI ONAL INCOME OFFERED BY THE ASSESSEE AT RS.6 LAKHS AND RS.12.20 LAKHS FO R THE ASSESSMENT YEAR 2002-03 & 2003-04 RESPECTIVELY TO BE CONSIDERED AS A SOURCE OF INCOME TO EXPLAIN THE IMPUGNED CREDIT. IT IS ALSO SUBMITTED THAT THE MEMBERS OF THE ASSESSEE (HUF) VIZ., SHRI VENUGOPAL, SHRI PURUSHOTT AM, SMT. SANTOSH DEVI AND SMT. SUNITA WERE FILED THEIR RESPECTIVE R ETURNS OF INCOME IN ALL THESE ASSESSMENT YEARS AND THE INCOME DECLARED BY T HEM IN THEIR RETURNS TO BE CONSIDERED AS AVAILABLE SOURCES IN ADDITION T O THE INCOME GENERATED FROM SALES OF SHARES AS WELL AS ADDITIONAL INCOME D ECLARED BY THE ASSESSEE. THE ASSESSEE ALSO FURNISHED COPIES OF IT RETURNS FI ELD BY THE ABOVE PARTIES AND STATEMENT OF INCOME WHICH ARE PLACED ON RECORD. WE HAVE CAREFULLY GONE THROUGH THESE DOCUMENTS. IT IS AN ADMITTED FA CT THAT THESE PERSONS ARE INCOME TAX ASSESSEES AND THERE IS NO RECORD WIT H REGARD TO UTILIZATION OF INCOME DECLARED BY THEM IN THEIR RESPECTIVE HAND S. BEING SO, IT IS TO BE CONSIDERED THAT THE SAID AMOUNT OF INCOME DECLARED BY THOSE ASSESSEES IN THEIR INDIVIDUAL RETURNS IS AVAILABLE AS A SOURCE O F INVESTMENT IN THE ASSESSEE (HUF). THE CONTENTION OF THE DEPARTMENT IS THAT THE CIT(A) HAS NOT ALLOWED THE ASSESSING OFFICER TO VERIFY THE MAT ERIALS AVAILABLE ON RECORD BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE. FURTHE R IT WAS SUBMITTED BY THE LEARNED DR THAT THE ADDITIONAL INCOME DECLARED BY THE ASSESSEE CANNOT BE TELESCOPED AGAINST THE ADDITION UNEXPLAIN ED CASH CREDIT SINCE THAT BENEFIT OF ADDITIONAL INCOME HAS ALREADY BEEN GIVEN TO THE ASSESSEE MAKING NO ADDITION ON ACCOUNT OF UNEXPLAINED CASH C REDIT APPEARING IN THE NAMES OF EMPLOYEES OF THE FIRM M/S SATYANARAYAN A VENUGOPAL . WE HAVE GONE THROUGH THE ASSESSMENT ORDERS OF 2002-03 AND 2003-04. BUT ITA NO.890 TO 893/H/2009 & 882, 1110 TO 1112/H/2009 SHRI VENUGOPALA MUNDADA (HUF) 4 4 THERE IS NO DISCUSSION OF THIS ISSUE BY ASSESSING O FFICER IN THE ASSESSMENT ORDERS OF THESE TWO YEARS. THE LEARNED DEPARTMENT AL REPRESENTATIVE IS ALSO NOT ABLE TO PIN POINT HOW THE ASSESSING OFFICER HAS GIVEN THE CREDIT TOWARDS THE ADDITIONAL INCOME DECLARED BY THE ASSESSEE TOWA RDS UNEXPLAINED CASH CREDIT APPEARING IN THE NAMES OF EMPLOYEES OF FIRM M/S SATYANARAYANA VENUGOPAL. HENCE, WE ARE NOT ABLE TO AGREE WITH TH E CONTENTION OF THE DR. ACCORDINGLY, IT IS FAIR TO GIVE CREDIT TO THE INCOM E DECLARED BY THE MEMBERS OF THE ASSESSEE HUF IN THEIR RETURNS AS WELL AS THE ADDITIONAL INCOME DECLARED BY THE ASSESSEE AS FUND AVAILABLE TO EXP LAIN THE UNEXPLAINED CREDIT APPEARING IN THE BOOKS OF ASSESSEE HUF PROVI DED THESE INCOME HAS NOT BEEN UTILIZED BY RESPECTIVE PARTIES BY ANY WA Y. REGARDING GIVING OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE MATERIAL AVAILABLE ON RECORD, BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE FOR TELESCOPING THE ADDITIONS WITH THE DECLARED INCOME OF ASSESSEES FA MILY MEMBERS, THE CIT(A) ONLY GIVEN THE DIRECTION TO TELESCOPE AND IT IS OPEN TO THE ASSESSING OFFICER TO GO THROUGH THE RECORDS BEFORE PASSING CO NSEQUENT ORDER AND AS SUCH, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 5. FURTHER, THE ASSESSEE IS HAVING THE GRIEVANCE WITH REGARD TO CONFIRMING THE ORDER OF THE ASSESSING OFFICER WHERE IN LONG TERM CAPITAL GAIN ON SALE OF SHARES AT RS.64,59,452/- IN ASSESSMENT Y EAR 2004-05 HAVE BEEN CONSIDERED AS INCOME FROM SHORT TERM CAPITAL G AIN BEING INCOME FROM OTHER SOURCES. THIS ISSUE IS ALREADY DECIDED BY TH IS TRIBUNAL IN THE CASE OF SHRI VENUGOPALA MUNDADA & OTHERS IN ITA NO.857/HYD /2009 VIDE ORDER DATED 23.12.2009 IN PARA 8 PAGE 23 WHEREIN IT WAS HELD AS FOLLOWS : 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THIS IS THE ASSESSMENT MADE U/S 143(3) RE AD WITH SECTION 153A CONSEQUENT TO SEARCH ACTION. THE ASSESSEE DIS CLOSED THESE SHARE TRANSACTIONS IN ITS REGULAR RETURN OF INCOME FILED WITH THE DEPARTMENT BEFORE THE DATE OF SEARCH. NO MATERIALS WERE FOUND IN THE COURSE OF SEARCH ACTION REGARDING THE BOGUS NATURE OF THE TRANSACTIONS. THE RATE AT WHICH THE SHARES WERE BO UGHT AND SOLD ALSO ITA NO.890 TO 893/H/2009 & 882, 1110 TO 1112/H/2009 SHRI VENUGOPALA MUNDADA (HUF) 5 5 NOT DOUBTED. THE PAYMENTS ALSO NOT DOUBTED. THE T RANSACTIONS THROUGH THE BROKER. THE DEPARTMENT DOUBTED THE TRA NSACTIONS ON THE REASON THAT THE PURCHASE AND SALES BILLS ARE NOT IN CHRONOLOGICALLY NUMBERED. CERTAIN BILLS LATER SERIAL NO. WERE SHOW N TO HAVE BEEN ISSUED FOR EARLIER PERIOD. THERE IS NO DOUBT REGAR DING THE PURCHASE PRICE OR SALE PRICE OR THERE IS NO DOUBT REGARDING THE EXISTENCE OF THE COMPANY. NO STATEMENT RECORDED EITHER FROM THE AGE NT M/S SRIRAM SECURITIES OR FROM THE PURCHASER SMT. E. ASHTALAKSH MI, E. VENKANNA AND SHRI S. SAI BABA. THERE IS NO INCRIMINATED DOC UMENT TO SUGGEST THE BOGUS NATURE OF THE DOCUMENTS. NO SEIZED MATER IAL BROUGHT ON RECORD TO SUGGEST ANY CASH AMOUNT WAS PAID BACK BY THE ASSESSEE TO THE PURCHASER. THE ASSESSING OFFICER CAME TO THE CONCLUSION TO THE BOGUS NATURE OF TRANSACTION ONLY ON ASSUMPTION AND PRESUMPTION. IT IS SETTLED LAW THAT SUSPICION HOWEVER STRONG CANNOT TAKE PLACE OF LEGEL PROOF AS HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF CHARAN SHAW AND OTHERS VS. CIT (37 ITR 271). IN THIS CASE , ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE WHICH CAN EVEN REMOTEL Y SUGGEST THAT MATERIAL PLACED BEFORE HIM THROUGH SEARCH ACTION WA S UNRELIABLE THE CONTENTION OF THE DEPARTMENTAL REPRESENTATIVE IS TH AT THESE ARE COOKED UP TRANSACTIONS . AND RECORDING IN THE BOOK S OF ACCOUNT IS NOT ENOUGH TO TREAT IT DISCLOSED TRANSACTION. HOWEVER , THERE IS NO MATERIAL TO SUGGEST THAT THESE TRANSACTIONS NOT CAR RIED OUT BY THE ASSESSEE AS AN INVESTOR IN SHARES. EVIDENCE COLL ECTED BY THE REVENUE AUTHORITIES WAS NOT SUFFICIENT TO ESTABLISH THEIR S TAND THAT THE SHARE TRANSACTIONS CARRIED ON BY THESE ASSESSEES WERE ONL Y PAPER TRANSACTIONS OR BOGUS AND THE SAME WERE PUT THROUGH BY ACCOMMODATION ENTRIES IN ORDER TO SHOW THE UNDISCLO SED INCOME UNDER HEAD LONG TERM CAPITAL GAIN. WE HAVE FOUND IT DIFFICULT TO REJECT THE ASSESSEES PLEA ABOUT THE GENUINENESS OF THE TRANSACTIONS AS OPPOSED TO NORMAL COURSE OF HUMAN CONDUCT EVEN APPL YING THE PRINCIPLES LAID DOWN BY THE HONBLE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DURGAPRASAD MORE (82 ITR 540), SUMATI DE VI VS. CIT (214 ITR 801). WE ALSO FOUND THAT FROM THE CIRCUMSTANCE S SURROUNDING THE CASE WERE NOT STRONG ENOUGH TO HOLD THE CLAIM OF AS SESSEES ABOUT THE GENUINENESS OF THESE TRANSACTIONS AS TOTALLY UNBELI EVABLE OR OUTRAGEOUS. WE HAVE ALSO FOUND THAT NO EVIDENCE OF ANY CONSEQUENCE WAS UNEARTHED DURING THE COURSE OF SEARCH TO DIRECT LY SHOW THAT THE SHARE TRANSACTIONS WERE BOGUS AND THAT IT WAS ONLY ACCOMMODATION ENTRY BUSINESS. ON THE OTHER HAND, THE EVIDENCE SU BMITTED BY ASSESSEE IN THE FORM OF STATEMENT OF AFFAIRS, FILED BY THE ASSESSEE BEFORE THE DATE OF SEARCH WITH REGULAR RETURN OF IN COME WAS FOUND TO BE RELIABLE TO SUPPORT THE CASE OF THE ASSESSEE THA T THE RELEVANT TRANSACTIONS OR PURCHASE AND SALE SHARES WERE GENUI NE. THE ONLY REASON TO TREAT THE TRANSACTIONS ARE NOT GENUINE IS THAT THE SERIAL NOS. OF THE PURCHASE AND SALES BILLS WERE NOT IN CHRONOL OGICAL ORDER. THE PURCHASE SALES BILLS ARE NOT IN SERIAL NUMBER THAT MAY BE THE MISTAKE OF BROKER M/S SRIRAM SECURITIES AND FOR THAT MISTAK E THE ASSESSEE CANNOT BE HELD RESPONSIBLE SINCE THE BILL BOOK NOT UNDER THE CUSTODY OF THE ASSESSEE. MOREOVER, THE DEPARTMENT HAS NOT TAKEN ANY PAIN TO EXAMINE ALL THE PARTIES INVOLVED AND RECORDED THEIR STATEMENT AND ITA NO.890 TO 893/H/2009 & 882, 1110 TO 1112/H/2009 SHRI VENUGOPALA MUNDADA (HUF) 6 6 CONFRONTING THOSE STATEMENTS TO THE ASSESSEE. NO S TATEMENT RECORDED FROM ANY PARTY CONFIRMING THE BOGUS NATURE OF SHARE TRANSACTIONS. IN THESE CASES, M/S SRIRAM SECURITIES IS A SUB BROKER AND THE MAIN BROKER IS SHILPA STOCK BROKER (P) LTD. THE ASSESSI NG OFFICER CALLED FOR INFORMATION REGARDING THE SCRIPT WISE DETAILS OF SA LE AND PURCHASE MADE BY SRIRAM SECURITIES. FROM THE INFORMATION SU BMITTED BY SHILPA STOCK BROKER, IT WAS OBSERVED THAT ON THE DA TES WHEN THESE ASSESSEES HAVE SHOWN SALE AS PER SALE BILL THERE WA S ALSO PURCHASE OF THE SAME SCRIPTS. ON THAT BASIS OF THIS, THE ASSES SING OFFICER CAME TO THE CONCLUSION THAT ON THAT DATE THE SALE WAS MADE BY THE ASSESSEE THERE WERE PURCHASES OF EQUAL AMOUNT OF SHARE BY OT HER PERSONS OF THE SAME SCRIPT. THE ASSESSING OFFICER CALLED FOR DETA ILS OF PERSONS WHO HAVE MADE THESE PURCHASES. THE ASSESSEE FAILED TO FURNISH THE DETAILS. ON THAT REASON HE DREW CONCLUSION THAT PU RCHASE AND SALES OF SHARES ARE BOGUS. IN OUR OPINION, THIS IS NOT CORR ECT. IT WAS WITHIN THE KNOWLEDGE OF THE REVENUE THAT DETAILS OF NAME A ND ADDRESS OF THE SELLER AND PURCHASER OF THE SHARES. THE ASSESSING OFFICER APART FROM ASKING THE DETAILS FROM THE ASSESSEES, HE HAS NOT T AKEN ANY EFFORT TO ISSUE NOTICE U/S 131 OF THE IT ACT AND DID NOT PURS UE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCES O F INCOME OF THE SAID PURCHASERS TO FIND OUT WHETHER THEY WERE CREDI T WORTHY OR WERE SUCH WHO COULD BUY THE SHARES. THERE WAS NO EFFORT MADE TO PURSUE THE SO CALLED ALLEGED PURCHASER OR SELLER. IN THES E CIRCUMSTANCES, WE ARE OF THE OPINION, THAT THE EVIDENCE GATHERED BY T HE DEPARTMENT ARE NOT ENOUGH TO FASTEN THE HIGHER TAX LIABILITIES TO THE ASSESSEES. ACCORDINGLY, WE ARE OF THE OPINION THAT THE TRANSAC TIONS DISCLOSED BY THE ASSESSEE BEFORE THE DATE OF SEARCH ACTION U/S 1 32 CANNOT BE CONSTRUED AS BOGUS TRANSACTIONS OR ACCOMMODATION AS ENTRIES. ACCORDINGLY, THIS GROUND OF APPEAL IN THE ASSESSEES APPEALS ARE ALLOWED. 6. IN VIEW OF THE ABOVE ORDER OF THIS TRIBUNAL, WE ARE OF THE OPINION THAT THIS ISSUE IS RELATING TO THE INCOME E ARNED ON SALE OF SHARES IS TO BE ASSESSED UNDER HEAD INCOME FROM LONG TERM CA PITAL GAIN ONLY. . WE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE TREATIN G THE SAME AS LONG TERM CAPITAL GAIN ITA NO.890 TO 893/H/2009 & 882, 1110 TO 1112/H/2009 SHRI VENUGOPALA MUNDADA (HUF) 7 7 7. IN THE RESULT, THE ASSESSEES APPEALS IN ITA N OS. 882, 1110, 1111 & 1112/HYD/2009 ARE ALLOWED AND REVENUE APPEAL S IN ITA NOS. 890, 891,892 & 893/HYD/2009 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 30. 9.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 30 TH SEPTEMBER, 2010 COPY FORWARDED TO: 1. SHRI P. MURALI & CO. , CAS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD-82. 2. ACIT, CIRCLE 3, HYDERABAD 3. CIT(A)- III, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP