M/s Padma Priya Funds & Finance, Srikakulam V. The DCIT, Central Circle, Visakhapatnam

ITSSA 16/VIZ/2002

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8772 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-09-2010
• Assessment Year: misc
• Appeal Filed On: 13-03-2002
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Unexplained investment; Search and seizure
• Section: 68

Judgement Text

IT(SS)A NO.16/VIZAG/2002 PADMAPRIYA FUNDS & FINANCE SRIKAKULAM PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER IT(SS)A NO.16/VIZAG/2002 BLOCK PERIOD: 1-4-1988 TO 3-9-1998 PADMA PRIYA FUNDS & FINANCE, SRIKAKULAM VS. DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VISAKHAPATNAM (APPELLANT) PAN NO: AAFFP 1740 H (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI SUBRATA SARKAR, CIT(DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10.1.2002 PASSED BY LD. CIT(A)-I, HYDERABAD AND IT RELATES TO THE BLOCK PERIOD FROM 1.4.1988 TO 03.9.98. THE ASSESSEE IS C HALLENGING THE DECISION OF LEARNED CIT(A) IN CONFIRMING THE ADDITION OF RS. 2.49 LAKHS MADE IN ITS HAND AS ITS UNDISCLOSED INCOME. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE, A PARTNERSHIP FIRM, IS ENGAGED IN THE BUSINESS OF FIN ANCE. IT COLLECTS DEPOSITS FROM THE PUBLIC FOR THE PURPOSES OF ITS BUSINESS. D URING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CARRIED AT THE RESIDENCE OF ONE OF THE PARTNERS OF THE FIRM SHRI KORADA PRASADA RAO ON 3.9.98, CERTAIN DEP OSIT APPLICATIONS WERE SEIZED. THE SAID APPLICATION FORMS WERE RELATED TO THE FINANCIAL YEARS 1995- 96 AND 1996-97. THE AGGREGATE OF THE AMOUNTS SHOWN IN THE APPLICATION FORMS PERTAINING TO THE FINANCIAL YEAR 1995-96 WAS RS.11.20 LAKHS. SIMILARLY THE AGGREGATE OF AMOUNTS SHOWN IN THE APPLICATION F ORM PERTAINING TO THE IT(SS)A NO.16/VIZAG/2002 PADMAPRIYA FUNDS & FINANCE SRIKAKULAM PAGE 2 OF 4 FINANCIAL YEAR 1996-97 WAS RS.2.49 LAKHS. THE ASSE SSING OFFICER COMPARED THESE AMOUNTS WITH THE RETURNS OF INCOME FILED BY T HE ASSESSEE AND NOTICED THAT THE AGGREGATE AMOUNTS PERTAINING TO THE FINANC IAL YEAR 1995-96 WERE DULY RECORDED IN THE RETURN OF INCOME FILED FOR THA T YEAR. HOWEVER THE AGGREGATE AMOUNTS OF RS.2.49 LAKHS PERTAINING TO TH E FINANCIAL YEAR 1996-97 WERE NOT REFLECTED IN THE RETURN OF INCOME FILED FO R THAT YEAR. THE ASSESSING OFFICER CONFRONTED THE SAID DISCREPANCY TO THE PART NER SHRI KORADA PRASADA RAO, WHO IN THE SWORN STATEMENT RECORDED FROM HIM O N 16.10.98 STATED THAT HE CANNOT PRODUCE PEOPLE FOR VERIFICATION FOR AN AMOUNT OF RS.3.00 LAKHS. ACCORDINGLY HE OFFERED A SUM OF RS.3.00 LAKH S AS UNACCOUNTED INVESTMENT MADE BY HIM AND ANOTHER PARTNER SHRI D.B ADRINARAYANA. HOWEVER, IN THE BLOCK RETURN FILED BY THE FIRM, NO AMOUNT WAS DISCLOSED. BEFORE THE ASSESSING OFFICER, THE ASSESSEE CONTENDE D THAT THE COLLECTIONS MADE FROM THE THIRD PARTIES CANNOT BE TERMED AS THE UNDISCLOSED INCOME OF THE ASSESSEE. WHEN ENQUIRED WITH THE OTHER PARTNE R SHRI D.BADRINARAYANA, HE HOWEVER, DID NOT CONFIRM THE STATEMENT OF SHRI KORADA PRASADA RAO. IN VIEW OF THE NON-CONFIRMATION STATED ABOVE, THOUGH A SUM OF RS.3.00 LAKHS WAS OFFERED IN THE SWORN STATEMENT, THE ASSESSING O FFICER TREATED ONLY THE AGGREGATE AMOUNT OF RS.2.49 LAKHS FOUND IN THE APPL ICATION FORMS AS THE UNDISCLOSED INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE LEARNED CIT(A). THE FIRST APPELLATE AUTHORITY ACCEPTED THE CONTENTI ON OF THE ASSESSEE MADE BEFORE HIM THAT SECTION 68 OF THE ACT CANNOT BE INV OKED FOR MAKING THE IMPUGNED ADDITION, SINCE THE ASSESSEE DID NOT CREDI T THE SAID AMOUNT IN ITS BOOKS OF ACCOUNT. HOWEVER, HE CONFIRMED THE ADDI TION SINCE THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE AND SOURCE OF THE AMOUNT FOUND IN THE APPLICATION FORMS. AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE UNDISPUTED FACTS RELATING TO THE ISSUE ARE THAT IT(SS)A NO.16/VIZAG/2002 PADMAPRIYA FUNDS & FINANCE SRIKAKULAM PAGE 3 OF 4 (A) THE ASSESSEE IS ACCEPTING DEPOSITS FROM THE P UBLIC THROUGH THE APPLICATIONS ISSUED BY IT. (B) THE DEPOSIT APPLICATIONS AGGREGATING TO RS.11 .20 LAKHS, WHICH PERTAIN TO THE FINANCIAL YEAR 1995-96 HAVE BEEN ACC OUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. (C) THE DEPOSIT APPLICATIONS AGGREGATING TO RS.2 .49 LAKHS, WHICH PERTAIN TO THE FINANCIAL YEAR 1996-97, HAVE NOT BEE N ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. (D) THOUGH THE PARTNER SHRI KORADA PRASADA RAO H AS ADMITTED A SUM OF RS.3.00 LAKHS IN THE SWORN STATEMENT, THE SA ME WAS NOT ACCEPTED BY THE OTHER PARTNER SHRI D.BADRINARAYANA. HENCE T HE ASSESSING OFFICER RESTRICTED THE ADDITION TO RS.2.49 LAKHS, I.E. TO T HE EXTENT OF THE AMOUNTS FOUND IN THE APPLICATION FORMS. (E) THE ASSESSING OFFICER HAS INVOKED SECTION 68 FOR MAKING THE IMPUGNED ADDITION, THOUGH THE SAID AMOUNTS HAVE NOT BEEN CREDITED IN THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) HAS ACCEPTED THAT SECTION 68 COULD NOT BE INVOKED IN THE INSTANT CASE. 5. THUS, IT IS NOTICED THAT THE STATEMENT GIVEN BY SHRI KORDA PRASADA RAO WAS NOT GIVEN IMPORTANCE BY THE ASSESSING OFFICER H IMSELF, SINCE THE OTHER PARTNER DID NOT CONFIRM THE SAME. THE LEARNED CIT( A) HAS ALSO CONFIRMED THAT SECTION 68 OF THE ACT SHALL NOT APPLY TO THE I NSTANT CASE, SINCE THE ASSESSEE HAS NOT CREDITED THE IMPUGNED AMOUNT IN IT S BOOKS OF ACCOUNT. THUS THE BASIS, ON WHICH THE IMPUGNED ADDITION WAS MADE BY THE ASSESSING OFFICER WAS NOT UPHELD BY THE LEARNED CIT(A). YET T HE FIRST APPELLATE AUTHORITY CONFIRMED THE ADDITION SINCE THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE AND SOURCE OF THE AMOUNTS SHOWN IN THE APPLI CATION FORMS. NOW THE QUESTION THAT ARISES IS THAT WHETHER THE AMOUNT SHO WN IN THE ABOVE SAID DEPOSIT APPLICATION FORMS SHALL CONSTITUTE THE UNDI SCLOSED INCOME OF THE ASSESSEE. THE FACT REMAINS THAT THE ASSESSEE DID N OT ACCOUNT FOR THE AMOUNTS IN ITS BOOKS OF ACCOUNT. ANOTHER IMPORTANT FACT IS THAT THE IMPUGNED APPLICATION FORMS PERTAINED TO A CONCLUDED YEAR, PRIOR TO THE DATE OF SEARCH. IT IS ALSO NOT THE CASE OF THE ASSESSIN G OFFICER THAT ANY OF THE ASSETS HAVE BEEN CREATED OUT OF THE SAID AMOUNT, NO R DID ANY UNACCOUNTED IT(SS)A NO.16/VIZAG/2002 PADMAPRIYA FUNDS & FINANCE SRIKAKULAM PAGE 4 OF 4 CASH WAS FOUND DURING THE COURSE OF SEARCH. THUS, IN OUR VIEW, THE ISSUE HAS NOT BEEN PROPERLY EXAMINED BY THE ASSESSING OFF ICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO MAKE PROPE R INVESTIGATION AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. NEEDL ESS TO MENTION, THE ASSESSEE SHOULD BE GIVEN PROPER OPPORTUNITY OF BEIN G HEARD. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 7 TH OCTOBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:07-10-2010 COPY TO 1 M/S PADMA PRIYA FUNDS & FINANCE, CHINE BHARATAM S TREET, SRIKAKULAM 2 THE DY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, VISAKHAPATNAM 3 4. THE CIT CENTRAL, HYDERABAD THE CIT(A)-I HYDERABAD 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM