The Commissioner of Income Tax -VI V. Sri V.Bhupal Reddy

ITTA/40/2012

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The case revolves around the Revenue's appeal against the Tribunal's decision which deleted certain additions made by the Assessing Officer regarding undisclosed income of Pasumarthi Ranganayakulu, a managing partner of a theatre firm. The Tribunal had found that the investments questioned by the Assessing Officer were made by the firm and not by Ranganayakulu personally. The Revenue's appeal contested the Tribunal's findings, but the court upheld the Tribunal's decision, agreeing that the Assessing Officer had not substantiated his claims adequately.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 681462 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 26-03-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Block period; Family partition; Lease agreement; Search and seizure; Undisclosed income; Theatre construction
• Section: 131; 158(BC)

Judgement Text

"THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B.LOKUR AND THE HON’BLE SHRI JUSTICE SANJAY KUMAR W.A.M.P. No. 3018 of 2011 and WRIT APPEAL (SR) NO.189093 OF 2011 DATED 26th MARCH, 2012 Between Pasumarthi Ranganayakulu …Appellant and The Government of A.P., Rep. by its Principal Secretary, Department of Higher Education, Secretariat, Hyderabad and others. ...Respondents THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B.LOKUR AND THE HON’BLE SHRI JUSTICE SANJAY KUMAR I.T.T.A. No.40 OF 2012 JUDGMENT: (per the Hon’ble the Chief Justice Shri Madan B. Lokur) 1. The Revenue is aggrieved by the deletion of some additions made by the Assessing Officer in the order of the Income Tax Appellate Tribunal, Hyderabad dated 7.3.2008 in I.T. (SS) A. No.05/Hyd/2004, relevant for the block period 1989-90 to 1990-2000. 2. The assessee is an individual and is a Managing Partner of a firm called M/s. Rukmini 70 MM theatre at Patancheru, Medak District. 3. As a result of search operations conducted on 19.3.1999 at the residential premises of the assessee and his brothers, certain books of accounts were seized along with loose sheets. Thereafter, a notice was issued to the assessee under Section 158 BC of the Income Tax Act,1961 (hereinafter referred to as “the Act”). The assessee filed his return of income admitting nil undisclosed income. 4. The Assessing Officer assessed the undisclosed income of the assessee at about Rs.48.00 lakhs. The Assessing Officer asked the assessee to explain the investments made in the construction of the theatre. 5. We are concerned for the time being, with an amount of Rs.2.00 lakhs said to have been paid by Jagadish to take the theatre on lease. It appears that at the time of search and seizure operations, the assessee had stated that the aforesaid amount of Rs.2.00 lakhs was taken from Jagadish for leasing out the theatre to him, but subsequently, the assessee said that the amount was received from one Hanumantha Rao, who had also filed an affidavit to this effect. Neither the Assessing Officer nor the Commissioner of Income Tax (Appeals) accepted the version given by the assessee. 6. In a further appeal filed by the assessee, the Tribunal took the view that merely because Jagadish and Hanumantha Rao were not produced by the assessee before the Assessing Officer, is no ground to reject the explanation given by the assessee. The Assessing Officer could have issued summons to Jagadish or Hanumantha Rao under Section 131 of the Act and recorded their statements. In view of the fact that the Assessing Officer himself did not take any trouble to confirm the statement of Hanumantha Rao, which was given on affidavit, the burden cannot be passed on to the assessee. The Tribunal also held that since the unexplained investment is said to have been made by Jagadish or Huanumantha Rao, the addition could not have been made in the hands of the assessee. 7. We are in agreement with the view expressed by the Tribunal and see no reason to hold a different opinion. 8. The next item of deletion was an amount of 3.00 lakhs, which was said to have been received by the assessee as his share in respect of a family property surrendered in favour of his brothers. The Assessing Officer was of the view that this amount was not explained by the assessee and the view of the Assessing Officer was accepted by the Commissioner of Income Tax (Appeals). 9. The Tribunal, however, took a different view and held that during the search operations, the statement of the assessee was recorded and a partition deed was also made available subsequently, which clearly states that the amount of Rs.3.00 lakhs was the share of the assessee in the family partition. There was no evidence produced by the Revenue to show that this investment made by the assessee was not as a result of a family partition. We are of the view that since the assessee had produced some material before the Assessing Officer, the onus was then on him to bring forth some material to contradict what was stated by the assessee and which statement was supported by documentary evidence. 10. The third deletion that we are concerned with, is an amount of Rs.5.00 lakhs which is said to have been invested in the theatre by Mrs. Saritha Reddy, daughter of the assessee. In this regard also, the Tribunal took the view that if at all there was an un-explained investment, that was made by the assessee’s daughter and therefore, the addition cannot be made in the hands of the assessee. On merits also, the Tribunal took a view in favour of the assessee. But, it is unnecessary for us to go into this aspect of the matter. 11. In view of what has been stated above, it has to be held that the theatre was constructed by the firm of which the assessee was only the managing partner and the investments were not made by the assessee in his personal capacity, but by the firm towards construction of the theatre. 12. Under the circumstances, we find that essentially questions of fact have been raised by the Revenue. In any event, no substantial question of law arises in this appeal. The appeal is accordingly dismissed. _____________________ MADAN B.LOKUR, CJ. ____________________ SANJAY KUMAR, J. 28th MARCH, 2012. pnb "