Reddy Satyavathi, Nidadavolu V. Income Tax Officer, Ward-I, Tanuku

ITTA/62/2003

AI Insights

The case involves an appellant, Reddy Satyavathi, who filed revised income tax returns for the assessment years 1982-83 to 1988-89, disclosing additional income from a money lending business and gifts received. The Assessing Officer treated this additional income as unexplained investment, leading to appeals by both the appellant and the department. The Income Tax Appellate Tribunal (ITAT) initially sided with the department, rejecting the appellant's claims. However, upon further examination, the High Court found that the Tribunal had not adequately considered the appellant's financial background and the nature of the gifts, leading to the decision to allow the appellant's appeals and accept the revised returns.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 796090 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 02-09-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: A V KAUNDINYA
• Keywords: Assessment years; Gifts; Money lending business; Revised Returns; Unexplained investment
• Section: 143(1); 260A

Judgement Text

"* THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.Nos. 54, 60, 62, 63, 65, 75, 152, 192 & 207 of 2003 AND I.T.T.A.No. 16 of 2004 I.T.T.A.No.54 of 2003 % Date: 02.09.2014 # Reddy Satyavathi, Nidadavolu. … Appellant And $ Income Tax Officer, Ward-I, Tanuku. … Respondent ! Counsel for Appellants: Sri A.V.Krishna Kaundinya ^ Counsel for Respondent: Sri S.R.Ashok. < GIST: > HEAD NOTE: ? Cases referred HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A Nos.54, 60, 62, 63, 65, 75, 152, 192 & 207 OF 2003 AND ITTA.No.16 OF 2004 COMMON JUDGMENT:- (Per Hon’ble Sri Justice L.Narasimha Reddy) It is not uncommon that the anxiety to be law abiding exhibited by a citizen, turns out to be counter productive and lands him in trouble. That exactly happened in the instant case. The appellant in all these appeals is an assessee since a very long time. She hails from a rich and reputed family, and was married to a doctor, who commanded a fairly good practice at Nidadavolu. She filed the returns for the assessment years 1982-83 to 1988-89 showing not only the income in the form of profits that fell to her share in the partnership business, but also the one, from agriculture. Orders of assessment were passed under Section 143(1) of the Income Tax Act, (for short, ‘the Act’) and the matter ended at that. On 30.03.1989, the appellant filed revised returns covering the period 1982-83 to 1988-89, disclosing the extra income from money lending business and receipt of gifts. She has also mentioned that certain items of the properties were purchased from the money derived from those two sources. The Assessing Officer, who processed the returns, did not agree with the plea of the appellant and treated the entire amount mentioned in the revised returns, as unexplained investment. Aggrieved by that order, the appellant filed 7 appeals before the Commissioner (Appeals). The appeals were disposed of in 2 batches. The first set covered assessment years 1982-83 to 1986-87 and the second set covered 1987-88 and 1988-89. In both the orders, the plea of the appellant as to the income from the money lending business was accepted. However, one relation to gifts covering four assessment years, was rejected. The department filed 7 appeals before the Visakhapatnam Bench of Income Tax Appellate Tribunal, feeling aggrieved by the orders passed by the appellate authority. The appellant, on the other hand, filed 4 appeals insofar as the Commissioner (Appeals) rejected the plea in relation to gifts. All the 11 appeals were heard together by the Tribunal. Through a common order dated 19.04.2000, the Tribunal allowed the appeals preferred by the department and dismissed those filed by the appellant. Hence, these appeals under Section 260A of the Act. Sri A.V. Krishna Kaundinya, learned counsel for the appellant, submits that the Tribunal failed to take into account, two important factors viz., that the appellant herself filed the revised returns covering 7 assessment years and that she has adequate sources to start money lending business. He further submits that the resources of the family of the appellant are such that giving and taking of gifts is a matter of course and that, she sold some of the golden ornaments to mobilise resources for purchasing the properties. He contends that the Tribunal proceeded in a hyper- technical manner and has undertaken minute verification of the things, as though it is a case where search was conducted or the assessments were reopened on discovery of the undisclosed income. Sri S.R. Ashok, learned Senior Counsel for the respondent, on the other hand, submits that once the appellant pleaded that she has undertaken money lending business, heavy burden rested upon her to show the sources of income and that she miserably failed in this behalf. He contends that the Assessing Officer as well as the Tribunal have analysed the matter thoroughly and, on being satisfied that the attempt made by the appellant was only to legalise what she has acquired contrary to law, passed appropriate orders. He submits that the Tribunal has referred to several decided cases in support of its conclusion and that no substantial question of law arises for consideration, in this batch of appeals. Not even a semblance of doubt was expressed in relation to the regular returns submitted by the appellant for the 7 assessment years referred to above, much less any proceedings were initiated under Sections 147 or 154 of the Act. That only shows the truthfulness of the returns submitted by the appellant. The appellant felt that some of the items of income ought to have been reflected in the relevant assessment years. Though there was not even an indication as to the suppression of income, she voluntarily filed revised returns for as many as 7 assessment years. She reflected two sources of income. The first is through money lending business and the second is in the form of gifts received by her. As regards the first item, the Assessing Officer himself proceeded to examine several persons, whom the appellant is said to have lent amounts. The named borrowers vouched for the correctness of the statement. It is only the father-in-law of the appellant that pleaded the ignorance about the details, but not the activity as such. That constituted the basis for the Assessing Officer to doubt the correctness of the facts mentioned by the appellant. As regards gift also, the same view was taken. The respective Commissioners (Appeals), who passed the orders in 2 sets, have taken into account, the financial capacity and family background of the appellant and found that for a person of the status of the appellant, it would not be difficult to mobilise Rs.30,000/- to commence money lending business. It was clearly mentioned that the parents of the appellant are fairly resourceful and her husband is also a doctor, commanding considerable practice. Accordingly, the income through money lending business was treated as legal and proper. However, they affirmed the view taken by the Assessing Officer regarding gifts. In the appeals preferred by the department as well as the appellant, the Tribunal has undertaken extensive discussion with reference to each and every ground. One of the grounds that weighed with the Tribunal in not accepting the income through money lending business was that the activity was not mentioned in the original returns. That in fact would amount to begging the question. The very occasion for the appellant to submit revised returns was that she did not mention the same inadvertently or otherwise in the original returns. Further, it is not a case where the appellant came forward with the revised returns, on being issued notice by an authority under the Act. As regards the source to commence the money lending business, the plea of the appellant was that she has savings through agricultural income. However, the Tribunal took the view that the income, which the respondent derived from agriculture, may have been spent for social obligations. There cannot be a better instance of stretching a totally unrelated fact to the extent of straining it. It is not in dispute that in the original and regular returns, the appellant has shown the income through agriculture. That having been exempted, it had accrued to her free from any obligation and she has every right to put the amount to the use of her choice. It was nobody’s case that the income earned by the appellant through agriculture was spent for social obligations. For all practical purposes, the Tribunal has permitted its imagination to cross all barriers of propriety and reasonableness. The ground on which the income through gifts was denied, was that the donors, who were examined in the course of enquiry, were found to be unrelated to the appellant. In a way, the Tribunal and the authorities have redefined the concept of gift by adding a clause to the effect that a gift can be treated as valid only when presented by a closely related person. The law on the subject does not indicate that a gift must emanate only from a known person. Further, it is difficult to describe let alone define, as to when a person can be said to be related to another, in the context of making gifts. A small gesture of affection may result in presentation of quite a fabulous gift and, even where stupendous service is rendered, it may not fetch even an act of gratitude. Much would depend upon the thinking of the concerned persons as well as their financial conditions. We are not at all in agreement with the view taken by the Tribunal. We, therefore, allow the appeals and set aside the orders passed by the Assessing Authority. We, accordingly, direct that the claims made by the appellant through her revised returns, shall stand accepted. There shall be no order as to costs. Miscellaneous Petitions, if any, pending in these appeals shall also stand disposed of. ___________________________ L. NARASIMHA REDDY, J ____________________________ CHALLA KODANDA RAM, J Date:02.09.2014 Note: L.R.copy B/o vv/gk HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A Nos.54, 60, 62, 63, 65, 75, 152, 192 & 192 & 207 of 2003 AND 16 of 2004 Date:02.09.2014 vv/gk "