Smt. Ammani, W/o. B. Naga Malla Reddy and Smt. B. Ammani, W/o. B.C. Subba Reddy V. Income Tax Department

ITTA/14/2004

AI Insights

The case involves appeals under Section 260-A of the Income Tax Act, 1961 against a common order by the Income Tax Appellate Tribunal, Hyderabad. The appellant, whose husband is a partner in M/s Mallikarjuna Traders, was implicated following a survey that uncovered promissory notes in her favor. She claimed to have engaged in a money lending business with funds from her co-sisters, for which she sought deductions for interest paid. The Assessing Officer disbelieved her claims due to lack of supporting evidence, leading to the treatment of the amounts as undisclosed income. The Commissioner (Appeals) initially allowed her appeals, but this was overturned by the Tribunal, which found procedural errors in admitting additional evidence. The High Court upheld the Tribunal's decision, emphasizing the lack of substantial evidence to support the appellant's claims.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 795992 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 18-11-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: A V KRISHNA KAUNDINYA
• Keywords: Additional evidence; Income Tax; Money lending business; Rule 46-A; Undisclosed income
• Section: 260-A

Judgement Text

"THE HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.Nos.310 of 2003, 14, 20 & 24 of 2004 COMMON JUDGMENT: (Per the Hon’ble Sri Justice L. Narasimha Reddy) These appeals are preferred under Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’) against the common order dated 27- 02-2002 passed by the Hyderabad Bench of the Income Tax Appellate Tribunal (for short ‘the Tribunal’), in I.T.A.Nos.1250/H/1996 and batch. The appellant is common, but the appeals are referable to the assessment years 1988-89 to 1992-93. The husband of the appellant is a partner of M/s Mallikarjuna Traders, which carried on business as Commission Agent in the market yard, Kadapa. A survey was conducted in the premises of the Mallikarjuna Traders on 04-09-1992. Promissory notes worth Rs.18.78 lakhs written in favour of the appellant were found. Three days thereafter, the appellant and her two co-sisters, by name Smt.Ammani, W/o. B. Naga Malla Reddy, and Smt. B. Ammani, W/o. B.C. Subba Reddy, filed returns for various assessment years. The appellant pleaded that she was carrying on money lending business with her own funds, borrowed from her co-sisters and she claimed deduction for the interest, said to have been paid on the amounts borrowed by her. During the course of enquiry, the Assessing Officer found that none of the co-sisters of the appellant filed any balance sheets with their returns, and disbelieved the version of the assessee. The appellant filed a batch of appeals before the Commissioner (Appeals). At that stage, additional evidence in the form of confirmatory letters, from the persons, who have said to have received loans from the co-sisters, were filed. That was an attempt to indicate that the co-sisters were possessed of funds and they lent the same to the appellant. The Commissioner allowed the appeals. Thereupon, the department filed appeals before the Tribunal. Through the common order dated 27-02-2002, the Tribunal has set aside the order passed by the Commissioner (Appeals). Heard Sri A.V. Krishna Kaundinya, learned counsel for the appellant and Sri S.R. Ashok, learned Senior Counsel for the respondent. The appellant filed returns for six years, only after the search was conducted in the premises of the firm, in which, her husband is a partner. It appears that till then, she did not file returns at all. Once the returns were filed, the Assessing Officer examined the various details, furnished therein. The appellant pleaded that she borrowed about Rs.7 lakhs from both her co-sisters, over the period of six years. Though the affidavits of the co-sisters were also filed, no other supporting material was forthcoming. As a matter of fact, those two women have filed returns for different years. On examination, it was found that the returns were not supported by any books of account, or balance sheet. The Assessing Officer treated the amount as undisclosed income, and levied tax. In the appeals, fresh evidence was adduced. The record discloses that the procedure prescribed under Rule 46-A of the Income Tax Rules was not followed. Fresh evidence was in the form of letters of confirmation from the persons, who are said to have borrowed amount from the co-sisters. They were filed about 40 months after the date of filing of returns. Rule 46-A of the said Rules stipulates the circumstances under which additional evidence can be received at the stage of appeal. It cannot be received as a matter of course. The Tribunal found that the Commissioner did not take note of the circumstances under which, the additional evidence can be received, and the additional evidence ought not to have been taken into account, before us also. Learned counsel for the appellant is not able to substantiate as to how the appellant has proved her case. The raid has taken place o n 04-09-1992. Her plea could have been accepted only with reference to any document, that existed prior to that date. Filing of affidavits three days after the raid can certainly be treated as an effort to justify an otherwise objectionable act. Added to that, the persons who are said to have borrowed the amount also failed to prove that they had amounts at their disposal and were lent to their co-sister, i.e. the appellant. At any rate, no substantial question of law arises for consideration in these appeals. They are accordingly dismissed. The miscellaneous petitions filed in these appeals shall also stand disposed of. There shall be no order as to costs. __________________________ L. NARASIMHA REDDY, J. __________________________ CHALLA KODANDA RAM,J. Dt.18-11-2014 KO Note: LR Copy to be marked. B/O KO "