Commissioner of Income Tax-III, V. Smt K. V.Lakshmi Savitri Devi,

ITTA/563/2011

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The case revolves around an appeal by the Revenue challenging the decision of the Income Tax Appellate Tribunal, which had allowed the respondent's appeal against the assessment of unaccounted investment in property. The respondent had purchased a property and was later implicated in a case where it was alleged that she paid an additional Rs.1.00 crore in cash, unrecorded in the sale deed. The Tribunal found that the evidence presented by the Revenue, primarily a diary with entries of alleged cash transactions, was insufficient to establish that the respondent made these payments. The Tribunal noted that the diary entries were not in the respondent's handwriting and lacked crucial details that would link her to the alleged cash payments.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 719139 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 31-03-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Cash payment; House property; Income from salary; Real Estate Transaction; Search and seizure; Unaccounted Investment
• Section: 143(2); 69; 153 C; 260-A

Judgement Text

"THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE M.S. RAMACHANDRA RAO ITTA No.563 of 2011 JUDGMENT (Per Hon’ble Sri Justice M.S.Ramachandra Rao) This appeal is filed under Section 260-A of the Income Tax Act, 1961 (for short “the Act”) challenging the order dt. 31-03-2011 in I.T.A.No.1504/Hyd/2010 of the Income Tax Appellate Tribunal, Hyderabad Bench-A, Hyderabad relating to the assessment year 2003-04. 2. The respondent is an individual deriving income from salary in house property. She did not file her original return for the assessment year 2003-04 but in response to a notice issued under Section 153-C of the Act, she filed a return on 23- 09-2009 admitting a taxable income of Rs.4,52,752/-. A notice under Section 143 (2) of the Act was issued to her along with a questionnaire and her authorized representative appeared and furnished information. 3. It appears that the respondent had purchased a property bearing plot No.304-O, plot No,78, Jubilee Hills from Smt. K.Rajani Kumari, wife of C.Radha Krishna Kumar under a registered sale deed dt.21.8.2006 which disclosed a consideration of only Rs.65.00 lakhs. 4. A search and seizure action was conducted on the premises of Sri C.Radha Krishna Kumar on 25-10-2007 and in the said search, a diary was found and entries in the said diary disclosed that certain cash amounts totaling Rs.1.00 crore were also received from the assessee/respondent in addition to Rs.65.00 lakhs, the recorded sale consideration. 5. The respondent was confronted with the above entries in the seized diary. In her statements recorded on 15-11-2007, she stated that a company by name M/s.Globareena Web Technologies Private Limited run by her brothers K.V.Srirama Murthy and K.V.Dakshina Murthy was previously a tenant of the above property, that they had negotiated the purchase of the above property in her name, that she did not know the actual consideration paid for the purchase, that the cheque amounts of Rs.65.00 lakhs are paid her but she has no knowledge of the cash amount of Rs.1.00 crore. Her brother K.V.Srirama Murthy also gave a statement dt.20-11- 2007 stating that the above property was purchased in 2002 and only Rs.65.00 lakhs was paid and there was no cash payment at all. 6. However, Smt. K.Rajani Kumari, in her return of income filed in response to the notice issued under Section 153-C admitted the sale consideration to be Rs.1.40 crores as against the entries recorded in the seized diary of Rs.1.65 crores. 7. The assessing officer in his order 23- 12-2009 held that the entries in the diary show a payment of Rs.1.00 crore in cash by the respondent even though this was not mentioned in the registered sale deed executed in favour of the respondent; that the vendor by filing a return had accepted Rs.1.40 crores as the consideration for the transaction; that in real estate transaction, cash payments are normally made over and above the consideration mentioned in the registered sale deed ; therefore the sum of Rs.1.00 crore is treated as unaccounted investment in the purchase of property and the same is liable to tax under Section 69 of the Act in the hands of the respondent. 8. Challenging the same, the respondent filed an appeal to the Commissioner of Income Tax (Appeals)-IV, Hyderabad. The said appeal was dismissed by order dated 15-10-2010 following the same reasoning given by the assessing officer. He also held that since part of the entries mentioned in the diary (the cheque payments) were admitted to be correct by the respondent and her brothers, the other entries (the cash payments of Rs.1.00 crore) should also be accepted as correct. 9. Challenging the same, the respondent filed an appeal I.T.A.No.1504/Hyd/2010 to the Income Tax Appellate Tribunal, Hyderabad. By order dated 31-03-2011, the said appeal was allowed by the Tribunal. 10. The Tribunal held that there was no search action in the case of the respondent; that the seized material was found not in the premises of the respondent but in the premises of C.Radha Krishna Kumar; that it was a loose slip containing certain entries which was not in the handwriting of the respondent; that it does not contain either date of payment or the name of the person who made the payment; that the name of the respondent was not found in the loose sheet and only the names of C.Radha Krishna Kumar and his wife K.Radha Kumari were found therein. It opined that there was no basis for the Revenue to presume that the respondent had made the cash payment of Rs.1.00 crore even though the registered sale deed dt.21- 08-2006 in respect of the above sale transaction disclosed only a cheque payment of Rs.65.00 lakhs by the respondent. Even if the vendor K.Rajani Kumari admitted receipt of sale consideration of Rs.1.40 crores, the respondent had not admitted payment of Rs.1.65 crores and in the sworn statement only stated that she was not aware of actual consideration paid for the purchase of the property as the transaction was negotiated by her brothers. It held that there was no document or material to show that the respondent actually paid Rs.1.65 crores for the purchase of the property and the Revenue had drawn inferences based on suspicion, conjectures and surmises. 11. Challenging the same, the Revenue has filed the present appeal. 12. Heard Sri B.Narasimha Sarma, learned Standing Counsel for the Revenue. 13. Sri Sarma contended that the Tribunal erred in passing the impugned order; that the assessing officer had rightly come to the conclusion that the sum of Rs.1.00 crore was paid in cash by the respondent in addition to Rs.65.00 lakhs paid by cheque in the above transaction and rightly added the sum of Rs.1.00 crore as unaccounted investment under Section 69 of the Act. 14. We are not inclined to agree with the contention of the learned counsel for the appellant. 15. We are of the view that the Tribunal has rightly held that the registered document dt.21-08- 2006 under which the respondent purchased the above property showed that only Rs.65.00 lakhs was paid to the vendor by the respondent; that there was no evidence to show that the respondent had paid Rs.1.00 crore in cash also to the vendor; that no presumption of such payment of Rs.1.00 crore in cash can be drawn on the basis of an entry found in a diary/loose sheet in the premises of C.Radha Krishna Kumar which is not in the respondent’s handwriting and which did not contain the name of the respondent or any date of payment or the name of the person who made the payment. It rightly held that the Revenue failed to establish the nexus of the seized material to the respondent and had drawn inferences based on suspicion, conjectures and surmises which cannot take the place of proof. We also agree with the Tribunal that the assessing officer did not conduct any independent enquiry relating to the value of the property purchased and the burden of proving the actual consideration in the purchase of the property is on the Revenue and it had failed to discharge the said burden. 16. There is no substantial question of law arising for consideration in this appeal. Therefore it is dismissed at the admission stage. No costs. ____________________________ JUSTICE GODA RAGHURAM ___________________________________ JUSTICE M.S. RAMACHANDRA RAO DT: 10-12-2012 kvr "