Sri Sivakarthikeya, Advocate V.

ITTA/567/2012

AI Insights

The case involves appeals by the appellant against the orders of the Income Tax Appellate Tribunal, which pertained to the assessment years 2002-03, 2003-04, and 2004-05. The primary issues revolved around unexplained investments and the sources of income declared by the appellant. A survey conducted at the appellant's business premises revealed numerous promissory notes and other documents, leading to questions about unreported income. The assessing officer made significant additions to the appellant's income based on these findings, which were partly upheld by the CIT (Appeals) and the Tribunal. The appellant contested these additions, arguing that the income and investments were from legitimate sources, including his wife's contributions. However, the Tribunal found insufficient evidence to support these claims, leading to the dismissal of the appeals.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 799938 (HC-VISAKHAPATNAM)
• Appeal Type: Others
• Pronouncement Date: 29-01-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: SIVAKARTHIKEYA
• Keywords: Assessment years; Income Tax; Money lending; Promissory notes; Unexplained investment; Chit fund schemes
• Section: 142(1); 271(1)(b); 234 A; 234 B; 234 C; 133-A; 260-A

Judgement Text

"HONOURABLE SRI JUSTICE GODA RAGHURAM AND HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO I.T.T.A.Nos.550, 554 and 567 of 2012 COMMON JUDGMENT: (per Hon’ble Sri Justice M.S.Ramachandra Rao): These appeals are filed by the assessee under Section 260-A of the Income Tax Act, 1961 (for short “the Act”) in respect of assessment years 2002-03, 2003-04 and 2004-05 challenging the common orders dated 07- 04-2011 passed by the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam in I.T.A.Nos.488/Vizag/2007, 27/Vizag/2007 and 489/Vizag/2007 dismissing the appeals filed by him. 2. The brief facts of the case are that a survey under Section 133-A of the Act was conducted at the business premises of the appellant on 29-01-2003. During the course of the survey, copies of a large number of promissory notes as well as certain original promissory notes dating from 1999 to 2003 were found. It was noticed that though he was deriving income from money lending, he had not filed his return of income for the previous year or for the assessment year 2002-03. 3. A notice under Section 142 (1) of the Act was issued to him on 16-07-2004 as he had failed to file his return of income for the assessment year 2003-04 within the due date. As there was no response for this notice, a show cause notice for levy of penalty under Section 271 (1) (b) of the Act was issued on 30-08-2004. 4. On 27-09-2004, the assessee filed his return of income for assessment year 2002-03 declaring a taxable income of Rs.2,17,850/- and agricultural income of Rs.1,48,000/-. On the same day, he also filed his return of income for 2003-04 declaring a taxable income of Rs.2,12,460/- and agricultural income of Rs.1,62,000/-. For the assessment year 2004-05 he filed a return of income on 31-03-2005 declaring a taxable income of Rs.1,46,360/- along with agricultural income of Rs.1,62,000/-. 5. According to the appellant, he had earned the said income from house property, money lending business and from other sources. An issue common to all three assessment years is the unexplained investment made by the appellant in the construction of a property at Ramachandrapuram. For 2002-03, there was an issue of addition of unexplained investment in promissory notes and interests accrued thereon; for the assessment year 2003-04, there was an issue as to whether and how much the appellant’s wife had lent monies to the appellant for the purpose of money lending through pronotes; for the assessment year 2004-05, the question was a whether a sum of Rs.6,94,335/- invested by the appellant in M/s Sriram Chits Pvt.Ltd in the name of his wife could be said to be the appellant’s own income liable to be taxed in his hands. 6. The assessing officer by orders dated 27- 11-2006, 31-03-2006 and 27-11-2006 respectively determined the taxable income of the appellant for 2002-03, 2003-04 and 2004-05 as Rs.16,30,318/-, Rs.24,10,492/- and Rs.40,67,870/- respectively and held that he was liable to pay Rs.8,57,068/-, Rs.10,61,575/- and Rs.18,63,997/- comprising of balance tax, sur-charge and interest under Section 234-A, B and C of the Act. 7. Challenging the same, the appellant filed appeals to the CIT (Appeals), Rajahmundry. The appeals were partly allowed by him by orders dated 26-09-2007, 24-11-2006 and 26-09-2007 respectively. 8. Challenging the orders of the appellate authority, the appellant filed I.T.A.Nos.488, 27 and 489/Vizag/2007 before the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam. 9. By a common order dated 07-04-2011, the appeals were partly allowed by the Tribunal on the ground that the assessing officer was not a technically qualified person to determine the cost of construction of the residential property at Ramachandrapuram; that he should have obtained report from the valuation cell of the department in order to arrive at the cost of construction; that the assessing officer cannot make any addition on the basis of his own estimate; that revised valuation reports filed before the assessing officer as well as the CIT (Appeals) showed that the cost of construction was Rs.26.31 lakhs and the assessing officer should assess the difference in the cost of construction in all the three years by adopting the said amount as the cost of construction. The Tribunal also held that the appellant did not press the issue of addition of unexplained investment in promissory notes and interests accrued thereon for the assessment year 2002-03 before the CIT (Appeals) in his appeal No.ITA 488/Vizag/2007 and therefore he cannot agitate the said issue before the Tribunal. As regards the appeal for the assessment year 2003-04, it held that the CIT (Appeals) had estimated that a sum of about Rs.25,000/- could have been received by the wife of the appellant at the time of her marriage as gifts; that the appellants could not produce any material to enable the Tribunal to set aside the said estimate; that the CIT (Appeals) had also rightly held that a sum of Rs.1,90,000/- could be treated as funds available in the hands of the wife of the appellant on the basis of chit contributions; and that there is no warrant to interfere with the said finding. In respect of the assessment year 2004-05, the Tribunal held that the CIT (Appeals) had rightly made addition of Rs.6,94,335/- relating to investment in chit fund schemes in the name of the appellant’s wife and the contention of the appellant that the said addition should be reduced by Rs.2,64,135/- is without any merit and the reasoning given by the CIT (Appeals) in that regard is correct as the transactions, on the basis of which relief was sought, had taken place after the close of the relevant year. 10. Challenging the said orders of the Tribunal, the present appeals have been filed by the appellant. 11. Heard Sri Sivakarthikeya, learned counsel for the appellant at the stage of admission. He contended that the orders of the Tribunal are erroneous and unsustainable. 12. He further contended that the Tribunal erred in sustaining the view of the assessing officer in regard to the additions made to the income of the appellant; that for the assessment years 2002-03 and 2003-04, the Tribunal should have held that the sums lent on pronotes by him included substantially the monies given to him by his wife Smt. Ch.Triveni; that she had received gifts from her family members and relatives at the time of her marriage to the appellant in the year 1985 and that she had sources from which she had lent amounts to the appellant. 13. We are unable to agree with the said contention. The CIT (Appeals) in his order had held that it is reasonable to assume that the wife of the appellant had received cash gifts during her marriage in the year 1985 of at least Rs.25,000/- although the appellant’s claim that she received gifts of Rs.1.00 lakh is exaggerated and that a further amount of Rs.1,90,000/- could be said to be belonging to her as evidence was produced by the appellant corroborated his claim only to the said extent. Therefore only Rs.2.15 lakhs can be treated as funds available in the hands of the wife of the appellant for circulation in the money lending business and only to that extent, the unaccounted pro-notes can be allowed set off. This was confirmed by the Tribunal rightly as the appellant could not produce any other evidence to contradict the findings of the CIT (Appeals). We are of the view that the Tribunal and the CIT (Appeals) have properly appreciated the evidence on record and their conclusion cannot be said to be perverse or arrived at by ignoring or misreading evidence. Therefore we see no reason to interfere with it. 14. For the assessment year 2002-03, the learned counsel for the appellant contended that investment in pronotes and the interest accrued thereon ought not to have been treated as the income of the appellant and that the pronotes belong to the wife of the appellant. The CIT (Appeals) had held that the explanation was called for from the appellant as to the source of investments together with other details including the information about the dates of the repayment of loans granted by way of promissory notes; that the appellant did not furnish the said information in respect of six transactions for an amount of Rs.2.85 lakhs; and when questioned by the CIT (Appeals), the authorized representative of the appellant stated that he does not wish to press the issue. The Tribunal also did not permit the appellant to raise the issue before it as the appellant had not pressed the said ground before the CIT (Appeals) and had conceded it. We do not find any error in the said action of the CIT (Appeals) or the Tribunal and we agree that the appellant cannot raise the issue in this appeal also as he had conceded the said issue before the CIT (Appeals). 15. In respect of the appeal for the year 2004-05, the learned counsel for the appellant contended that the Tribunal erred in sustaining the addition of Rs.6,94,335/- towards investment in chit fund scheme in the name of the wife of the assessee to the income of the assessee and that the assessee this amount should be reduced by Rs.2,64,135/- as this amount was available with him. The assessing officer had held that the wife of the assessee had given a statement stating that she did not have any source of income for making the subscriptions with M/s.Sriram Chits Pvt. Ltd. and had also stated that the money relating to any investment made in her name belongs to her husband i.e. appellant. He therefore added the said sum of Rs.6,94,335/- as unexplained investment in the hands of the appellant and added it to his income. The CIT (Appeals) confirmed the same holding that the maturity/auction proceeds of the chit with M/s.Sriram Chits Pvt. Ltd., Kakinada is shown to have been credited in the joint bank account of the appellant and his wife on 16-04-2004, 16 days after the expiry of the relevant accounting period; that an amount of Rs.2,19,400/- was debited to the said account on 28-04- 2004, 28 days after the expiry of the relevant accounting period; that as the investments referred to in the assessment order by the assessing officer were made as on 31-03-2004, long before the receipt of the maturity proceeds, it is difficult to appreciate that a sum of Rs.4,55,000/- received as a maturity/auction value of the earlier chit subscription went to finance the chit subscriptions made in the earlier period ending 31-03- 2004. This finding was affirmed by the Tribunal holding that the assessee is aggrieved only to the extent of Rs.2,64,135/- out of the impugned addition of Rs.6,94,335/- and transactions on the basis of which relief was sought by the appellant had taken place after close of the year and could not have provided the source for the investments in M/s.Sriram Chits Pvt. Ltd. during the assessment year 2004-05. We fully agree with the reasoning of the Tribunal and the CIT (Appeals) on this issue and hold that the said finding is based on proper appreciation of the material on record and does not warrant any interference in exercise of jurisdiction of this Court under Section 260-A of the Act. 16. On the aforesaid analyses, we are of the view that the appeals are without any merit and hence they are dismissed without costs. ____________________________ JUSTICE GODA RAGHURAM __________________________________ JUSTICE M.S.RAMACHANDRA RAO Date:29-01-2013 Kvr "