C.Swapna, Hyd, Hyderabad V. DCIT, Central Circle-6, Hyd, Hyderabad

ITA 959/HYD/2015

• Counselvise Citation: 95922514 RSA 2015
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Keywords: Unexplained investment; Search and seizure; Additional evidence
• Section: 143(3); 153A; 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 959/HYD/2015 ASSESSMENT YEAR: 2005-06 SMT. C. SWAPNA, HYDERABAD PAN ACGPG3298C VS. DY. COMMISSIONER OF INCOME- TAX, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI Y. RATNAKAR REVENUE BY : SHRI M. SITARAM DATE OF HEARING 15-10-2015 DATE OF PRONOUNCEMENT 16-10-2015 O R D E R PER P. MADHAVI DEVI, J.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER DATED 08/06/2015 OF LD. CIT(A)-XI, HYDERABAD, IN CONFIRMI NG THE PENALTY U/S 271(1)(C) OF THE IT ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF REAL ESTA TE. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE IT ACT WAS CONDUCT ED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE ON 19/02/2008. SUBSEQUENTLY, A NOTICE U/S 153A DATED 08/09/08 FOR THE AYS 2002-03 TO 2007-08 WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO T HE SAID NOTICE, ASSESSEE FILED HER RETURN OF INCOME FOR THE AY 2005 -06 ON 29/10/08 DECLARING TOTAL INCOME AT RS. 7,88,796. DURING THE COURSE OF ASSESSMENT PROCEEDING U/S 143(3) READ WITH SECTION 153A OF THE IT ACT, FOR AY 2005-06, AO CALLED FOR VARIOUS DETAILS AND EXAMINED THE 2 ITA NO. 959 /HYD/2015 C. SWAPNA DETAILS FURNISHED BY THE ASSESSEE. HE OBSERVED THA T DURING THE YEAR UNDER CONSIDERATION, AS PER THE SEIZED MATERIAL, PA GES 29 TO 33 OF A/CH/01, THE ASSESSEE HAS PURCHASED AGRICULTURAL LA NDS OF 4 ACRES 2 GUNTAS ON 01/01/2005 IN BHANOOR VILLAGE FOR RS. 68, 85,000 AND HAS PAID CASH OF RS. 20 LAKHS AS AN ADVANCE. ASSESSEE WAS, THEREFORE, ASKED TO EXPLAIN THE SOURCE FOR THE PURCHASE OF THE SAID LAND. AS ASSESSEE DID NOT FILE ANY REPLY, THE AO TREATED THE ENTIRE AMOUNT OF RS. 68,85,000 AS UNEXPLAINED INVESTMENT U/S 69 OF T HE IT ACT AND ADDED IT TO THE TOTAL INCOME OF ASSESSEE. 3.1 SIMILARLY, THE AO ALSO OBSERVED THAT ASSESSEE H AS PURCHASED GOLD AND DIAMONDS WORTH RS. 6,49,024 ON VARIOUS DAT ES OF RELEVANT FY. ASSESSEE WAS REQUIRED TO EXPLAIN THE SOURCE FOR THE INVESTMENT, BUT, SINCE ASSESSEE FAILED TO FURNISH ANY EXPLANATI ON, THE AO TREATED THE ENTIRE AMOUNT OF RS. 6,49,024 AS UNEXPLAINED IN VESTMENT OF ASSESSEE U/S 69 OF THE IT ACT AND BROUGHT IT TO TAX . AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO GRANTED PARTIAL RELIEF TO ASSESSEE, AGAINST WHICH, ASSESSEE FURTHER PREFERRED AN APPEAL BEFORE THE ITAT WHEREIN THE ADDITION TO THE EXTENT OF RS. 20 LAKHS AS UNEXPLAINED INVESTMENT IN PURCHASE OF A GRICULTURAL LAND AND UNEXPLAINED INVESTMENT TO THE EXTENT OF RS. 1,7 5,134 AS UNEXPLAINED INVESTMENT IN GOLD AND JEWELLERY WAS CO NFIRMED BY ITAT. 4. CONSEQUENTLY, THE AO INITIATED PENALTY PROCEEDIN GS U/S 271(1)(C) OF THE IT ACT BY ISSUING NOTICE U/S 274 R .W.S. 271(1)(C) OF THE IT ACT. ASSESSEE SUBMITTED A DETAILED REPLY STATIN G THAT PENALTY IS NOT LEVIABLE IN THE CASE OF ASSESSEE. THE AO WAS, HOWEV ER, NOT CONVINCED WITH THE SAID EXPLANATION OF ASSESSEE AND LEVIED A PENALTY OF RS. 7,19,807 BEING 100% OF THE TAX SOUGHT TO BE EVADED. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND ALSO FURNISHED ADDITIONAL EVIDENCE IN SUPPORT OF HE R CONTENTION THAT THE AGREEMENT OF SALE FOR THE PURCHASE OF AGRICULTU RAL LAND WAS NOT ACTED UPON AND FURTHER THAT THE ASSESSEE HAS NOT PA ID A SUM OF RS. 20 LAKHS AS ALLEGED BY REVENUE. IT WAS FURTHER CONT ENDED THAT EVEN IF 3 ITA NO. 959 /HYD/2015 C. SWAPNA IT IS TO BE CONSIDERED THAT THE ASSESSEE HAS PAID A SUM OF RS. 20 LAKHS, IT PERTAINS TO AY 2006-07 AND NOT AY 2005-0 6. THE LD. CIT(A), HOWEVER, DID NOT CONSIDER THE SAID CONTENTION AND B Y RELYING UPON THE FINDINGS OF HER PREDECESSOR AS WELL AS ITAT IN THE QUANTUM PROCEEDINGS, HELD THAT THE ISSUE IS SETTLED THAT A SSESSEE HAS MADE PAYMENTS OUT OF HER UNACCOUNTED MONEY AND ALSO THAT THERE WAS UNDISCLOSED INVESTMENT IN GOLD AND JEWELLERY. SHE, ACCORDINGLY, CONFIRMED THE PENALTY ORDER, AGAINST WHICH, ASSESSE E IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI Y. RA TNAKAR, WHILE REITERATING THE SUBMISSIONS MADE BY ASSESSEE BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT THE BASIS FOR THE ADDITION U/ S 69 IN RESPECT OF UNEXPLAINED INVESTMENT IN AGRICULTURAL LAND, IS TH E AGREEMENT OF SALE FOR PURCHASE OF AGRICULTURAL LAND. HE SUBMITTED THA T DURING THE COURSE OF SEARCH, A PHOTO COPY OF THE AGREEMENT WAS FOUND FROM THE PREMISES OF THE ASSESSEE. HE SUBMITTED THAT THE DOC UMENT WAS NEVER SIGNED BY ASSESSEE, BEING THE VENDEE. HE FURTHER SU BMITTED THAT THERE WERE NEGOTIATIONS BETWEEN ASSESSEES FATHER O N BEHALF OF ASSESSEE AND THE VENDORS IN THE AGREEMENT OF SALE A ND IT WAS STIPULATED THAT THE REGISTRATION OF THE LAND SHOULD TAKE PLACE WITHIN A PERIOD OF ONE MONTH FROM THE DATE OF AGREEMENT AND IF SUCH REGISTRATION DID NOT TAKE PLACE, ADVANCE PAID BY AS SESSEE WOULD BE FORFEITED. HE SUBMITTED THAT THERE WAS AN ELDERLY PERSON IN THE VILLAGE BY NAME MR. SRISAILAM, WHO NEGOTIATED BETWEEN BOTH THE PARTIES AND HAD BROUGHT THE TYPED AGREEMENT OF SALE TO ASSESSEE , BUT, SINCE NEGOTIATIONS FAILED, THE VENDEE NEVER SIGNED SUCH D OCUMENT AND, THEREFORE, IT WAS NOT ACTED UPON. HE FURTHER DREW O UR ATTENTION TO THE FACT THAT THOUGH IN THE FIRST PARAGRAPH OF THE DOCU MENT, IT IS STATED THAT AGREEMENT OF SALE IS EXECUTED ON 1 ST JANUARY, 2005, THE STAMP PAPER ITSELF WAS PURCHASED 28/12/2005 AND, THEREFOR E, THERE IS NO CREDENCE TO THE DATE BEING MENTIONED AS 01/01/2005 ON THE FIRST PAGE OF THE AGREEMENT. HE SUBMITTED THAT HAVING PURCHAS ED THE DOCUMENT ON 28/12/2005, THE SAME COULD NOT HAVE BEEN EXECUTE D ON 4 ITA NO. 959 /HYD/2015 C. SWAPNA 01/01/2005 AND, THEREFORE, EVEN IF IT IS TO BE CONS IDERED THAT THE AGREEMENT OF SALE WAS ACTED UPON AND ASSESSEE HAS M ADE PAYMENT OF ADVANCE, IT WOULD FALL WITHIN THE AY 2006-07 AND NOT IN AY BEFORE US. FURTHER, TO DEMONSTRATE THAT THE DOCUMENT WAS NOT ACTED UPON, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPO N THE AFFIDAVIT OF THE NEGOTIATOR I.E. MR. SRISAILAM, WHEREIN, MR. S RISAILAM HAS EXPLAINED THAT THE VENDEE WANTED THE VENDORS TO CON VERT THE AGRICULTURAL LAND INTO NON-AGRICULTURAL LAND FOR TH E PURPOSE OF REGISTRATION AND SINCE THE VENDORS DID NOT AGREE TO THE SAME AND ALSO TO LOWERING THE SALE CONSIDERATION, THE TRANSACTION NEVER TOOK PLACE. FURTHER, LD. COUNSEL FOR THE ASSESSEE HAS ALSO DRAW N OUR ATTENTION TO THE ADDITIONAL EVIDENCE FILED BY ASSESSEE TO DEMONS TRATE THAT THE SAID LAND WAS SUBSEQUENTLY SOLD TO THE NEGOTIATOR MR. S RISAILAM VIDE REGISTERED SALE DEED DATED 31/01/2006. A COPY OF T HE SALE DEED AND THE MARKET VALUE OF THE SAID LAND AS ON THE DATE OF SALE ARE FILED AS PART OF THE ADDITIONAL EVIDENCE ALONG WITH AN APPLI CATION FOR ADMISSION OF ADDITIONAL EVIDENCE. THUS, THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED THAT THE TRANSACTION NEVER TOOK PLACE AS ASSESSEE HAS NEVER SINGED SUCH A DOCUMENT AND EVEN IF IT IS TO B E CONSIDERED AS EXECUTED, THEN, IT WOULD FALL WITHIN THE AY 2006-07 AND NOT IN AY 2005-06. 5.1 AS REGARDS THE INVESTMENT IN GOLD AND JEWELLERY , THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BILLS AND VOUCH ERS FOR THE PURCHASE OF THE SAID JEWELLERY WERE LOST IN THE MAZ E OF PAPERS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND FURTHER THAT ASSESSEE HERSELF DID NOT MAKE ALL THE PAYMENTS, BUT, THEY WE RE MADE OUT OF THE FUNDS OF ASSESSEES FATHER. IT WAS FURTHER SUBMITTE D THAT ASSESSMENT WAS MADE ON THE ASSESSEES FATHER RUNNING INTO SEVE RAL TENS OF CRORES OF RUPEES AND ALMOST ALL THE ADDITIONS WERE DELETED AND IN THIS MAZE, THE JEWELLERY PURCHASE VOUCHERS AMOUNTING TO RS. 1, 75,134 WERE LOST. IT WAS SUBMITTED THAT THERE IS NO INTENTION ON THE PART OF THE ASSESSEE TO CONCEAL PARTICULARS OF ANY INCOME. THUS, ACCORD ING TO THE LEARNED 5 ITA NO. 959 /HYD/2015 C. SWAPNA COUNSEL, ASSESSEES BONAFIDE EXPLANATION SHOULD BE CONSIDERED FOR DELETING THE PENALTY. 6. LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT CERTAIN PAPERS WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH FROM THE RESIDEN TIAL PREMISES OF THE ASSESSEE, HENCE, THE BURDEN IS ON ASSESSEE TO P ROVE THAT THE INCOME MENTIONED IN SUCH DOCUMENTS DOES NOT BELONG TO HER. HE SUBMITTED THAT THE ASSESSEE HAS FAILED TO SUBMIT AN Y EXPLANATION WITH REGARD TO INVESTMENT IN JEWELLERY AND, THEREFORE, P ENALTY LEVIED BY AO AND CONFIRMED BY LD. CIT(A) ON BOTH THE ISSUES IS J USTIFIED. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE PENALTY HAS BEEN LEVIED ON ACCOUNT OF I) UNEXPLAINED INVESTMENT IN AGRICULTURAL LAND AND II ) UNEXPLAINED INVESTMENT IN GOLD AND JEWELLERY BOTH OF WHICH ADDI TIONS HAVE BEEN CONFIRMED BY ITAT. 7.1 AS REGARDS THE FIRST ISSUE IS CONCERNED, WE FIN D THAT THE VERY BASIS FOR THE ADDITION AND THE LEVY OF PENALTY IS A GREEMENT OF SALE FOUND AND SEIZED DURING THE COURSE OF SEARCH. AS SE EN FROM THE DOCUMENT OF AGREEMENT OF SALE WRITTEN ON A STAMP P APER, IT IS STATED THAT THE AGREEMENT OF SALE WAS EXECUTED ON 01/01/05 , BUT ON THE LAST PAGE IT IS STATED TO BE SIGNED AND SEALED ON 01/01/ 06. WHEN THERE IS A VARIATION IN DATES ON BOTH THE PAGES, THEN, CIRCU MSTANTIAL EVIDENCE WOULD ATTAIN IMPORTANCE. THE DATE OF ISSUE OF STAMP PAPER WOULD, THEREFORE, BECOME CRUCIAL TO ASCERTAIN THE DATE OF EXECUTION OF THE DOCUMENT. AS SEEN FROM THE DOCUMENT, THE STAMP PAPE R ITSELF HAS BEEN PURCHASED ON 28/12/2005. THEREFORE, AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE DOCUMENT COULD NOT HAVE BEEN EXECUTED ON 01/01/05 WHEN THE STAMP PAPER ITSE LF WAS NOT PURCHASED. THEREFORE, THE DATE OF EXECUTION OF THE DOCUMENT IS MORE PROBABLE AND IS TO BE TAKEN AS 01/01/2006. WHEN THE DOCUMENT HAS BEEN EXECUTED ON 01/01/2006, WE FIND THAT THE TRANS ACTION WOULD FALL WITHIN FY 2005-06 RELEVANT TO AY 2006-07 AND, HENCE , THE SAID 6 ITA NO. 959 /HYD/2015 C. SWAPNA TRANSACTION EVEN IF IT IS TO BE ASSUMED TO HAVE BEE N EXECUTED BY BOTH THE VENDOR AS WELL AS VENDEE, IT CANNOT BE BROUGHT TO TAX IN AY 2005- 06. THOUGH THE ADDITION IS CONFIRMED BY CIT(A) AND ALSO BY ITAT, WE FIND THAT THIS CRUCIAL FACT WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL DURING THE COURSE OF QUANTUM PROCEEDINGS AND THE AS SESSEE HAS RAISED THIS ISSUE ONLY BEFORE LD. CIT(A) DURING THE PENALTY PROCEEDINGS. PENALTY PROCEEDINGS BEING INDEPENDENT OF THE QUANTUM PROCEEDINGS, WE HOLD THAT LD. CIT(A) OUGHT TO HAVE CONSIDERED AND APPRECIATED THE CONTENTIONS OF THE ASSESSEE DURING THE COURSE OF PENALTY PROCEEDINGS. HAVING REGARD TO THE FACTS OF THE CASE AS BROUGHT OUT ABOVE, WE HOLD THAT PENALTY CANNOT BE LEVIED DURING THE AY 2005-06 ON THIS ISSUE. IN VIEW OF THE FINDINGS O F THE TRIBUNAL, WE ARE NOT INCLINED TO ADMIT THE ADDITIONAL EVIDENCE A S NO USEFUL PURPOSE WOULD BE SERVED BY DOING SO AT THIS STAGE. 7.2 AS REGARDS THE SECOND ISSUE, ON WHICH PENALTY O F RS. 1,74,134 HAS BEEN IMPOSED ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN GOLD AND JEWELLERY, WE FIND THAT THE EXPLANATION OF THE ASSE SSEE THAT PAYMENTS MADE TOWARDS PURCHASE OF JEWELLERY WAS NOT ONLY BY HER BUT ALSO BY HER FATHER, HAS NOT BEEN ACCEPTED BY LOWER AUTHORIT IES EITHER IN THE QUANTUM PROCEEDINGS OR IN THE PENALTY PROCEEDINGS. THOUGH, THE BURDEN IS ON THE ASSESSEE TO PROVE HER CONTENTION W ITH SUBSTANTIAL EVIDENCE, DISALLOWANCE OF SUCH PAYMENTS WOULD NOT A UTOMATICALLY ATTRACT THE PENALTY PROVISIONS U/S 271(1)(C) OF THE IT ACT. ASSESSEES EXPLANATION WAS NOT FOUND TO BE FALSE BY ANY OF THE AUTHORITIES BELOW. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT PEN ALTY IS NOT LEVIABLE ON THIS ISSUE AS WELL. 7 ITA NO. 959 /HYD/2015 C. SWAPNA 8. IN THE RESULT, THE PENALTY LEVIED U/S 271(1)(C) IS DELETED AND ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 16 TH OCTOBER, 2015. SD/- SD/- (P.M. JAGTAP) (P. MADHAVI DEVI) ACCOUNTANT MEMBER J UDICIAL MEMBER HYDERABAD, DATED: 16 TH OCTOBER, 2015 KV COPY TO:- 1) SMT. C. SWAPNA, PLOT NO. 723/A, ROAD NO. 37, JU BILEE HILLS, HYDERABAD. 2) DCIT, CENTRAL CIRCLE 6, HYDERABAD. 3 CIT(A)-XI, HYDERABAD 4) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.