Income Tax Appellate Tribunal - Hyderabad
V.Ravinder Reddy(Huf), Hyderabad vs Assessee on 31 March, 1998
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH ' A ', HYDERABAD
BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
ITA Nos. 618 & 621, 623/Hyd/2006 A.Y. 1999-2000, 01-02
2002-03
Dr. Ravindra Reddy (HUF), Vs ITO, Ward 2, Warangal
Warangal (Respondent)
(PAN AAHHR 8094 N)
(Appellant)
ITA Nos.674, 675, 676, 677/Hyd/2006 A.Y. 1999-2000, 2000-01
2001-02, 2002-03
ITO, Ward 2, Warangal Vs Dr. Ravindra Reddy (HUF),
(Appellant) Warangal
(PAN AAHHR 8094 N)
(Respondent)
(Appellant)
ITA No.619, 620,622,624 /Hyd/2006 A.Y.1999-2000,
2000-01, 01-02, 02-03
Dr. Ravindra Reddy, Warangal Vs ITO, Ward 2, Warangal
(PAN AANPV0324 K)
(Appellant) (Respondent)
ITA Nos.670, 671, 672, 673/H/06 A.Y. 1999-2000, 2000-01,
2001-02, 2002-03,
ITO, Ward 2, Warangal Vs Dr. Ravindra Reddy, Warangal
(Appellant) (Respondent)
ITA No.678, 679 & 680/Hyd/2006 A.Y. 2000-01, 01-02, 02-03
ITO, Ward 2, Warangal Smt. V. Shoba, W/o
Dr. Ravindra Reddy, Warangal
(Appellant) (Respondent)
Appellant by : Shri S. Rama Rao
Respondent by : Shri K.V.N. Charya, D R
2 ITA Nos.618, 619 and other 16 cases
Shri Ravindra Reddy, Warangal
ORDER
Per: Bench These appeals are preferred by different assessees as well as the Revenue are directed against the different orders passed by the CIT(A)-IV, Hyderabad in respect of the above assessees for the assessment years 1999-2000, 2000-01, 2001-02, 2002-03. Since certain issues are inter related and common in nature, these appeals are clubbed together, heard together and disposed off vide this common order for the sake of convenience.
2. First we will take up the Cross appeals in ITA Nos.674/618/675/621/676/677 & 623/Hyd/2006 (Dr. Ravindra Reddy HUF).
3. Brief facts of the case are that the assessee is a HUF consisting of himself, his sons, daughter and wife. The HUF possesses agricultural lands in its names and other members. The total agricultural lands held by the HUF was 55 acres and 17 guntas. A survey operation u/s 133A was conducted at the professional premises Dr. Ravindra Reddy on 8.3.2002, consequent to which the assessee filed its returns of income admitting the following incomes for all the assessment years 1999-00 to 2002-03 on 12.2.2004 as follows:
Assessment year Income from house property Agricultural income (Rs.) (Rs.) 1999-2000 90,000 7,90,000 2000-01 1,05,650 8,30,000 2001-02 3,41,000 8,60,000 2002-03 2,63,810 8,90,000 3.1. The assessing officer issued notice u/s 148 for the assessment years 1999-2000, 2000-01 and 2001-02 to bring to tax the 2 3 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal escaped income and to regularize the belated returns. The assessee field a letter requesting to treat the original returns as in response to the notice issued u/s 148. As the assessee has not maintained proper books of account for agricultural income, the assessing officer proposed to estimate the income from agriculture and arrived at the difference to be included for assessment. During the course of assessment proceedings, the assessing officer has called for information substantiating the acquisition of various assets and the capital balance admitted at Rs.44,67,137/- and agricultural income at Rs.7,90,000 esides property income. In reply the assessee filed statement of affairs as at 31.3.1998 explaining the sources of acquisition of various assets and also filed the receipts and payments account, the details of which are as under:
S.No. Particulars 1999-2000 2000-01 2001-02 2002-03 1 Rent from Mamata 1,20,000 1,20,000 1,20,000 1,80,000 Nursing Home 2 Bid from chit Fund 4,49,830 5,71,225 3,12,000 6,40,000 3 Agricultural income 7,90,000 8,30,000 8,60,000 8,90,000 4 Refund from debtors 7,50,000 NIL 15.00,000 NIL 5 Gifts 1,00,000 70,000 NIL NIL 6 Rent from house at NIL 24,000 68,000 1,99,200 Warangal 7 Advance to its NIL NIL 1,00,000 NIL loans/against purchase of house 8 Loan from V. Shobha NIL NIL NIL 6,80,000 9 Refund from Individual NIL NIL NIL 7,76,408 10 Hand loan from V. NIL NIL NIL 77,900 Ramachandra Reddy 3.2. The assessing officer did not accept the opening capital as on 1.4.1998 of Rs.44,67,137/-. He also did not accept the existence of agricultural income to the extent claimed by the assessee. The receipts from bidding of the chit amounts, the gifts received, the loans received and the internal transaction between the individual and HUF were also not accepted by the assessing officer.3 4 ITA Nos.618, 619 and other 16 cases
Shri Ravindra Reddy, Warangal
4. On appeal, CIT(A) deleted certain additions as follows:
A.Y 99-00 A.Y 00-01 A.Y 01-02 A.Y 02-03 Sl. Nature of additions ITA No. 674/H/06 (D) ITA No. 675/H/06 (D) ITA No. 676/H/06 (D) ITA No. 677/H/06 (D) No. ITA No. 619/H/06 (A) ITA No. 621/H/06 (A) No appeal of the assessee ITA No. 623/H/06 (A) Opening balance 1 added u/s 69 4467137 CIT(A) deleted - - - Returned 790000 Returned 860000 Returned 830000 Returned 890000 Assessing Officer Assessing Officer Assessing Officer Assessing Officer 2 Agricultural income allowed NIL) Allowed 291850 Allowed 102300 Allowed 362740 Entire disallowance 200000+65000+18000+8850 Disallowance deleted Disallowance deleted deleted by CIT(A) Disallowance deleted Bid amount received 3 from Margadarsi 174830 CIT(A) deleted - - - - do - 4 275000 CIT(A) deleted - - - - Gift from father V 5 Rami Reddy 100000 CIT(A) upheld - - - Gift from father in 6 - 70000 CIT(A) upheld - - law Chit from Kapil Chit 7 - 406150 CIT(A) deleted - - funds Chit from Srilight 8 Chit funds - - - 100000 deleted - do - 9 - - - 100000 deleted Refund of loan from 10 Smt. Shobha - - - 680000 deleted Deposit in Warangal - 11 Co-operative bank - - 77900 upheld Investment in WIMS 12 hospital - - - 1400000 upheld 4 5 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal
5. Against this deletion, the Revenue is in appeal before us and sustaining the addition the assessee is in appeal before us.
6. The learned departmental representative submitted that the opening balance of Rs.44,67,137/- relevant to assessment year 1999- 2000 was reflected as on 31.3.1999 in the balance sheet filed along with the return of income for the assessment year 1999-2000. The assessee was owning an agricultural property before 1998 and the assessee purchased the assets reflected in the balance sheet as on 31.3.1999 which could not have acquired by the assessee in earlier years since there is no sources of income for purchase of these assets and these assets are not at all reflected in the balance sheet in earlier years. He submitted that as such these assets are included in the balance sheet as on 31.3.1998, 31.3.1999, 31.3.2000, 31.3.2001 and 31.3.2002 filed along with the respective return of income on 12.2.2004. He submitted that no credit should be given towards opening balance and the same is to be considered as income of the assessee.
7. On the other hand, the authorised representative of the assessee submitted that the assessee is an HUF possesses inherited agricultural lands to the extent of 55 acres and 17 guntas in its name and in its members name. Out of the total agricultural lands, 45 acres and 36 guntas was covered by mango gardens and the balance is used for cultivation of paddy. The cultivation of mango garden was carried on by the assessee itself till July, 99 and thereafter they were given on lease to Shri Komaraiah, Shri U. Chandramouli and Shri M. Srinivas. Besides mango garden, there are coconut trees, neem trees, jam trees 5 6 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal etc. As per the agreement, they were paying rent of Rs.3 lakhs and Rs.2.5 lakhs per year. He drew our attention to the land records specifically in the Pahani and submitted that it shows the cultivation of mango garden was carried on by the assessee. He submitted that the assessee HUF was investing the agricultural returns in various chit funds and drew our attention to various details furnished in the paper book as annexure.
7.1. He submitted that the fixed assets were related to the period prior to 1.4.1989. He drew our attention to the detailed list of the loans given which were outstanding as on 1.4.1998. The assessee adopted the aggregate of Rs.45,38,766/- as the capital as on 31.3.1998. These assets were acquired prior to 1.1.1998, they do not represent the acquisitions made during the previous year relevant to the assessment year 1999-2000 i.e., under consideration. The opening balance does not represent cash introduction by assessee in the assessment year 1999-2000. It acquired various properties with the income derived from agriculture. He drew our attention to the balance sheet which was submitted before the lower authorities. Further he submitted that a building was constructed at Wardhannapet which was leased out to Dr. R. Reddy, Kartha of the family for running Nursing Home and submitted that the assessing officer has not taken into consideration the evidences produced for all the four years. According to him for the assessment year 1999-2000 agricultural income was admitted at Rs.7,90,000. Upto July, 1999 the assessee itself carried on the agricultural activity and derived income. An amount of Rs.1,74,830/- was received on bid from Margadarshi Chit Funds vide chit No.LTO010BW/16 and an amount of Rs.2,75,000 was received on bid vide chit No.LT007TW/50 through cheque. For the assessment 2000-01 agricultural income was admitted at Rs.8,30,000. During the 6 7 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal year, the agricultural income was earned by leasing the mango garden to Shri Komaraiah and others. An amount of Rs.4,06,150/- was realized on bidding the chit of Kapil Chit funds. For the assessment 2001-02 agricultural income was admitted at Rs.8,60,000/- . This amount is derived from lease rentals of mango garden and by selling the paddy crop. For the assessment year 2002-03 agricultural was admitted at Rs.8,90,000/- earned on lease rentals of mango garden and selling paddy crop etc. The chit amount of Rs.2 lakhs was received from Sri Light Chit Fund Company. An amount of Rs.6,88,000 was advanced by Smt. V. Shoba by bidding a chit from Margadarshi Chit Fund. An amount of Rs.77,900/- deposited in Warangal Urban Cooperative Bank was received from Sri. V. Ramachandra Reddy of Raja Rajeswari Chit Fund for which a confirmation letter was received.
8. He drew our attention to the copies of Patta, of land and lease agreement.
9. We have heard both the parties. We have gone through the letter filed by the assessee before the assessing officer on 13.2.2004 wherein statement of affairs dated 31.3.1998 reflects as follows:
Description of asset Year of purchase Value is as per B/S Sources explained construction in assessee's letter dt. 13.2.04 Plot at Waddepalli August 1998 17,506 Purchased out of (300 sq. yards) agricultural income 9.22 acres at 3.10.88 42,866 Purchased out of Wardhannapet agricultural income Plot at REC 1019 30.12.88 45,900 Purchased out of sq. y.) agricultural income 719 acres at 19.7.89 49,820 Purchased out of wardhannapet agricultural income Nursing home Constructed in 88 8,70,000 Constructed and and completed in expanded out of 90 agricultural income and bidding chits 7 8 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal (total Rs.15,10,000) Expanded from 96 6,40,000 however admitted to 98 15,50,000 as in the balance sheet admitted at Rs.15,50,000 Plot at Enumamula 12.9.90 23,181 Purchased out of 413 sq.y. agricultural income House at Advocates 1990-91 7,00,000 Payment made in 3 colony, Warangal years out of agricultural income 15 acres (1/6 at 6.9.91 20,118 Purchased out of Wardhannapet agricultural income House at Kumarpalli 22.4.92 1,46,771 Purchased out of agricultural income and chit withdrawal Plot at Fort, 12.9.94 1,17,116 Purchased out of warangal agricultural income Plot at Nallagandla, 30.3.95 82,118 Purchased out of Hyd 1321 sq,yds. agricultural income and chit withdrawal Plot at Shyampet, 30.3.95 1,91.147 Purchased out of Warangal 2000 sq.y. agricultural income and chit withdrawal Plot at Hunter Road, 27.6.96 4,63,284 Purchased out of Warangal 2070.53 agricultural income sq.y. and chit withdrawal Plot at Zafarguda 400 7.9.96 22,421 Purchased out of sq.y. agricultural income 1,08 acres at 1.5.97 20,213 Purchased out of Wardhannapet agricultural income Building at fort 97-98 2,10,000 Purchased out of agricultural income Margadarshi Chits 22.2,97 to 21.2.98 43,600 Sukhibhava chits chit 13.6.97 to 20.2.98 31,000 No.LTIC-2 Sundry persons loan - 7,50,000 SBH SB A/c - 1,186 Cash on hand - 10,200 TOTAL 45,38,766 9.1. Out of this, the assessee explained that there was a loan from Dr. Rami Reddy at Rs.7,61,629 and the balance amount was at Rs.44,67,137/-. Now the contention of the department is that the assessee has not furnished the date on which these assets came into existence. As seen from the above statement, the assessee furnished the details of acquisition of the above assets except in the case of sundry debtors to the tune of Rs.7,50,000/- . The explanation from the assessee is that the assessee being owning substantial agricultural 8 9 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal property, it has advanced loans to various persons a sum of Rs.7,50,000/- is relates to earlier assessment years. The fact of the assessee owning substantial agricultural property cannot be doubted and being so, deriving of agricultural income is natural that the assessee derived substantial income from the agriculture from the above mentioned land. The assessee submitted various evidences from the Revenue authorities which are placed in Paper Book with regard to the owning of agricultural land and carried out the agricultural operation.
The assessee has also entered into various agreements between the cultivators for carrying out the agricultural operation. With regard to mango garden, it is also admitted fact that the assessing officer examined these cultivators and it was stated by them that the assessee has derived income from the mango gardens. There is also inspector report dated 4/3/2005 on record as per which the mango cultivation was carried on in the land to the extent to 21 acres and 30 Guntas and paddy 12.23 acres of land. The Inspector's report says that the income would be around 8 lakhs per annum. It was also stated by the assessee in its letter dated 22.2.2004 that there was cultivation as follows:
A. Mango garden at Jaggipet
i) S.No.1204, Jaggipet 6.22 Acres
ii) S.No.1207 " 7.19 "
iii) S.No.1206 " 7.29 " 9.2 The mango garden is given on lease to Ch. Komraiah and others from 20.10.1999 for a yearly lease rental. The details are as follows: 9 10 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal Assessment year : 1999 - 2000 Rs.3,30,000 2000 - 2001 Rs.3,50,000 2001 - 2002 Rs.3,80,000 2002 - 2003 Rs.4,00,000 9.3. Mango garden at Kadarigudem i) S.No.252, B.269A, 269C, 269E, 273B. 273C 273D, 273E, 276, 278, 279A, 283, 284, 311A 311B, Karigudem Village 7.00 acres ii) S.No.274, Kadarigudem Village 1.02 acres ------------ 8.02 acres =======
9.4. The mango garden is given on lease to U. Chandramouli and M. Srinivas from 15.3.99 for a yearly lease rental. The details are as foilows:
1999 2000 Rs.2,50,000 2000 2001 Rs.2,80,000 2001 2002 Rs.3,10,000 2002 2003 Rs.3,50,000
9.5. The above facts furnished by the assessee was not at all controverted by the assessing officer and it is to be inferred that the assessee has been owning the agricultural land earlier to these assessment years under consideration and deriving substantial agricultural income from the same and the opening balance shown by 10 11 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal the assessee cannot be treated as income in the assessment year under consideration. According to our humble opinion, the deletion by CIT(A) is justified. This ground taken by the Revenue in ITA No.674/Hyd/2006 is dismissed.
10. The next common ground in ITA Nos. 674/675/676 & 677/Hyd/ 2006 in all the Revenue appeals is with regard to deletion of agricultural income.
11. The learned departmental representative submitted that the assessee has received these incomes on account of leasing mango garden, paddy and maize. Since the assessee has not explained any agricultural income prior to 31.3.1999, the income cannot be treated as agricultural income and the same to be treated as income from other sources. Though the assessee has produced Note Book showing the agricultural income, it cannot be accepted as valid evidence since alleged transactions are written at a stretch by using different pens to suit its requirements. Further he submitted that on earlier occasion, the assessee has filed Xerox copy of the note book. Later, the assessee filed original note book but there are discrepancies when compared to the original with the Xerox. The original note book contained certain entries which are not in the Xerox copy produced by the assessee. So, it means that it is a fabricated one. Further, as per the alleged lease deed filed by the assessee, lease agreements were entered into with Shri Komuraiah on 20.10.1999 and Shri V. Chandra Mouli, Shri M. Srinivas on 15.8.1999 whereas in the above said note book, part of lease rentals are entered as received on 15.4.1999, 20.4.1999 by which time there is no lease agreement. He submitted that this shows the intention of the assessee to fabricate the evidence as and when required 11 12 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal and accordingly, he submitted that these agreements cannot be acted upon and it is not reliable.
12. On the other hand, the authorised representative relied on the order of the CIT(A).
13. We have heard both the parties and perused material available on record. As discussed in earlier Paras, the assessee owns substantial agricultural property which is subjected to cultivation and the assessee is having no other source of income and it is very difficult to hold that the assessee has diverted its taxable income as agricultural income. The assessing officer examined the lessee regarding the agricultural income who is confirmed the same which is placed on record at Page No.55 of the PB. The contention of the department is that these agreements are on plain paper and it is not a genuine one, and the departmental representative wanted the evidence for the area of land subject to cultivation and sale of crop. However, the fact of leasing the agricultural property for cultivation is evidenced by the agreement and also confirmed by the lessees. The fact of cultivation cannot be doubted. According to the departmental representative, the documents procured after the date of survey i.e. agricultural pass book cannot be considered as genuine. This argument of the departmental representative holds no merit. To substantiate the claim of owning the land, the assessee has produced pass book and lease agreement for carrying on the agricultural operation and in our opinion, the findings of the CIT(A) is to be confirmed. Further, our view is supported by judgement of Supreme Court in the case of CIT Vs. Noorjahan (237 ITR
570). Accordingly, we confirm the deletion of addition on account of agricultural income by CIT(A) .12 13 ITA Nos.618, 619 and other 16 cases
Shri Ravindra Reddy, Warangal
14. The next ground in ITA No.674/Hyd/2006 is with regard to deletion of addition on account of Chits at Rs.174,830/- + 2,75,000/- from M/s Margadarshi Chit Funds.
14.1. According to the learned departmental representative, the assessee received the above amount from M/s Margadarshi Chit Fund deposited in Dr. Ravindra Reddy's individual bank account. The departmental representative submitted that the assessee has no source of income other than rental income from Nursing Home for the assessment year under consideration.
14.2. The authorised representative of assessee submitted that an amount of Rs.174,830/- and Rs.2,75,000/- is the matured value of Chits received from M/s Margadarshi Chit Funds. He submitted that the assessee has filed pass book before the lower authorities in support of its claim. He submitted that the originally there was an opening sundry debtors at Rs.7.50,000 and the same was realized from those parties and used for chit contributions. He submitted that the assessee has filed before the lower authorities a list of sundry debtors from whom refunds were received. This explanation of the assessee was properly considered by the CIT(A) and on the basis of evidence the addition was deleted. He relied on the order of the CIT(A).
15. We have heard both the parties and perused the material available on record. As seen from the statement of affairs dt.31.3.1998, the assessee has been subscribing chits. The receipt and payment account submitted by the assessee in the year under consideration also shows contribution to the chit funds. The amount have been received 13 14 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal from the chit funds from the Chit company in the form of cheque and details of cheques also furnished by the assessee to the lower authorities. According to the departmental representative it is after thought to explain sources for various contribution and investments. These amounts are stated to be of HUF and created a receipt and payment account by taking advantage of filing returns in the status as HUF after the survey operations. These findings of the assessing officer are only based on conjunctures and surmises without any evidence. On the other hand, evidence furnished by the assessee shows that the assessee has subscribed chits and received back money. In view of this, we decline to interfere with the order of the CIT(A) and the same is confirmed.
16. The next ground in assessee's appeal in ITA No.618/Hyd/2006 is relating to sustaining of addition of Rs.1 lakh on account of gift from Shri B. Rami Reddy. The authorised representative submitted that there is other sources of income for the assessment year as such neither addition u/s 68 or 69 should have been made.
17. On the other hand, the departmental representative submitted that the assessee has not furnished any evidence regarding the receipt of gifts as such it is to be confirmed.
18. We have heard both the parties and perused the material available on record. Before us, no evidence has been furnished regarding receipt of gifts from Shri Rami Reddy. In the absence of any evidence, we decline to interfere with the order of the CIT(A) on this issue and the same is confirmed. Thus the ITA No.618/Hyd/2006 is dismissed.
14 15 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal
19. The next ground in ITA No.621/Hyd/2006 in assessee's appeal is with regard to receipt of gift of Rs.70,000/- from Shri Rami Reddy. After hearing both the parties on the same reasons as given in earlier Paras in ITA No.618/Hyd/ this addition is confirmed.
20. The next ground in the Revenue appeal in ITA No.675/Hyd/2006 is with regard to bid amount received from M/s Kapil Chits. This deletion of addition is confirmed on the same reason as given in ITA No.674/Hyd/2006 for the assessment year 1999-2000.
21. The next ground in Revenue appeal in ITA No.677/Hyd/2006 is with regard to deletion of addition on account of Chit amount at (Rs.1 lakh + 1 lakh) 2 lakhs from Sri Light Chit funds. The deletion of addition is confirmed on the same reason as given in ITA No.674/Hyd/2006.
22. The next ground in Revenue appeal in ITA No.677/Hyd/2006 is with regard to refund of the amount taken by Smt. Shobha at Rs.6.80,000 who was also separately assessed tax. She also filed receipts and payments account and as per receipts and payment account, the payment of Rs.6.80,000 is shown. In the return of income filed by her, she explained the sources for providing the amount at Rs.6.80,000 /- to the HUF. As such it was deleted by the CIT(A). After hearing both the parties, we are of the opinion that HUF is having only agricultural income and it was admitted agricultural income at Rs.8,90,000/- and the agricultural income in its hand has been confirmed by us. Hence, we are of the opinion that the assessee is 15 16 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal having sources to repay the said amount to the Smt. Shobha. Accordingly, deletion of addition by CIT(A) is confirmed.
23. The next ground of the assessee in ITA No.623/Hyd/2006 is with regard to confirming the addition at Rs.77,900/-.
24. The authorised representative of the assessee submitted that the assessee made the deposits out of agricultural income in Warangal Cooperative Bank from bidding of chits and it was made out of available sources.
25. The departmental representative submitted that there is no evidence to substantiate this investment and the same is to be confirmed.
26. We have heard both the parties and perused material available on record. The receipts and payments of account filed which is placed on on record at Paper Book at Page No.45 shows this investment. The assessee has explained the sources of investments i.e. from agricultural income and bidding of chits and the source of fund shown in the receipt side is enough to meet this application of fund, as such addition cannot be sustained and the same is deleted.
27. The next ground in assessee's appeal in ITA No.623/Hyd/2006 is with regard to sustaining of addition at Rs.14 lakhs towards investments in WIMS Hospitals. The addition was made on account of assessee failure to explain sources of income.
16 17 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal
28. We have heard both the parties on this issue. In the assessment year under consideration, as per receipts and payments account placed at Paper Book No.45. the assessee's total receipts is at Rs.38,95,798/. This includes agricultural income, repayment received from loan from Smt. Shobha and amount received from bidding chits. After considering the total receipts and payments still there is surplus at Rs.3,579/- in the form of cash. Further in this case, the assessing officer on the one hand considered the receipt as undisclosed income and on the other hand, he considered the investments as undisclosed investment. The assessing officer cannot isolated the receipts and payments and he should see the cumulative effect of receipts and payments. Otherwise, it amounts to double addition. In our opinion, the investments are properly explained from the explained sources and the addition cannot be sustained. The addition is deleted.
29. In the result, all the Revenue appeals in ITA Nos.674/675/676/677 /Hyd are dismissed and the assessee's appeals in ITA No.618/Hyd is dismissed and that of ITA Nos.621 and 623/Hyd/ are partly allowed.
30. Now we will take up cross appeals in ITA No.670/Hy/2006, 619/Hyd/2006, 671/Hyd/2006, 620/Hyd/2006, 672/Hyd/2006, 622/Hyd/2006, 673/Hyd/2006 and 624/Hyd/2006.(Dr. Ravindra Reddy, Individual)
31. The first ground in these appeals is with regard to determination of professional income. Brief facts of the case are that Dr. Ravindra Reddy is an individual deriving income from medical profession.
17 18 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal 31.1. For the assessment year 1999 - 2000 the appellant filed the return of income on 22.7.2004 admitting an income of Rs. 1,38,420/- from medical profession. The assessing officer completed the assessment u/s 144 read with Sec.148 on 23.3.2005 determining the total income at Rs. 9,18,370/-. While doing so, the Assessing Officer estimated the income from profession at Rs. 7 lakhs as against the admitted income of Rs. 1,38,421/- and also added Rs. 2,68,371/- as income u/s 68 of the IT Act. In making the addition, the Assessing Officer concluded that the refund from Sri Ram Narayan was not genuine.
32. The assessing officer estimated the professional income on the basis of statement recorded at the time of survey. According to the Assessing Officer, the income from profession for the assessment year 2002-2003 is estimated at Rs. 10,38,243/- and therefore, the income for the assessment year 1999-2000 would be Rs. 7 Lakhs. In so for as the assessment year 2002-03 is concerned the assessing officer is of the view that the total fees from inpatients works out to Rs.23,78,550/-. The assessing officer estimated the fees collected for each of the operation and estimated the no. of operation conducted. Similar estimation has been resorted to in respect of poison cases, scanning, etc. The assessing officer estimated the income as under:
Name of the No. of cases Rate Fees estimated procedure Rs. Treatment of 115 4000 4,60,000 poison cases Scanning 1090 175 1,90,750 Cesarian 101 1500 1,51,500 delivery Normal delivery 303 350 1,06,050 LSC PAH & 1134 1500 17,01,000 18 19 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal appendicitis Others 600 500 to 700 4,20,000
33. The assessing officer observed that the expenditure on the said operation would be 60% and therefore the net income would be 40% before depreciation. Thus the assessing officer arrived at the professional income at Rs.10,38,343/-.
34. In so far as professional income is concerned, the assessee submitted that the place of profession is Wardhannapet which is about 25 kms from Warangal and 30kms from Narsampet. It is a small village and the assessee caters the needs of the poor people of the area. It is submitted that each of the surgery case has to be attended to by a team of 1 surgeon, a jr. doctor and anesthetist. As the surgeon etc. is not available at Wardhannapet, they are to be called from Warangal or Narsempet for conducting the surgery and attending emergency cases like poison cases. The anesthetist is paid a fee of Rs.350/- the visiting surgeons and technicians are to be paid based on the time spent by them. Out of the fees collect from each surgery about 60% has to be paid to the Doctors attending the case. Out of the balance 40% half of the amount is to be spent on kits technicians etc. Therefore out of the total receipt only about 20% would be the receipt for the assessee. And after the normal expenditure of running a hospital the income would be about 5 to 10%.
35. According to the assessee counsel, many a times the assessee has to extent rebate in the prescribed fees to the poor patients. It is further submitted that the hospital consists of 30 beds. It is not possible to accommodate as many patients as mentioned by the 19 20 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal assessing officer. Therefore, the estimation resorted to by the assessing officer is unreasonable and unrealistic. The gross receipts of Rs.32,21,3000 for the assessment years are over stated by the assessing officer. Therefore, the assessee does not agree with the gross receipts estimated by the assessing officer. Even if it were to be agreed, the amount t that falls to the share of the assessee would be only 40% or Rs.12,88,520/- as against which the expenditure would be incurred by the assessee. Therefore, the assessing officer is not justified in determining the professional income at Rs.10,38,243/- for the assessment years 2002-03 and Rs.7 lakhs for the assessment year under consideration.
36. The Assessing Officer also added Rs. 2,68,371/- by applying the provisions of section 68 of the IT Act. It is submitted that this amount represents loan repaid by Sri Ram Narayan. To this effect a letter of confirmation was filed before the Assessing Officer. The assessee briefly stated the fact and arguments for these assessment year s as follows:
Assessment Year 2000-2001
37. For the assessment year 2000-2001, the assessee filed the return of income on 13.01.2003 admitting an income of Rs. 1,51,020/- represent the income from medical profession. The assessee filed income & Expenditure Account and the Balance Sheet. The receipts and payments account also was submitted. The Assessing Office completed the assessment u/s 144 r.w.s. 148 on 23.03.2005 determining the total income at Rs. 12,75,260/-. While doing so, the Assessing Officer estimated the net income from profession at Rs. 8 lakhs and treated Rs.
20 21 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal 4,75,259/- invested by appellant's wife Smt. V. Shobha as the income of the assessee.
38. In so far as the professional income is concerned, the assessee already submitted the explanation in detail for the assessment year 1999-2000. In view of the same, the Assessing Officer is not justified in estimating the income at Rs. 8 lakhs. In so far as income of Smt. V. Shobha is concerned, she separately filed the return of income on 12.2.2004 admitting an income of Rs.70,600. She also filed receipts and payments accounts, capital account and the balance sheet. The capital account includes opening balance of Rs.3,19,897 net income from pathological lab. Of Rs.40,000 and interest from sundry debtors of Rs.30,600. In so far as the opening balance is concerned they represent the cost of land at Jafferguda cost of agriculture land at Wardhannapet and investment made with Margadarshi Chit fund, vaishnavi chit fund etc. Further, there is evidence to show that the following assets which constitute the opening balance of Rs.3,19,897 were acquired prior to 1.4.99.
1. Plot at jefferguda Rs.42,621
2. Agriculture land at wardhanapet Rs.34,776
3. Margadarshi chit fund Rs.40,000
4. Sundry debtors Rs.1,70,00
5. Cash on hand Rs.32,500 Total Rs.3,19,897
39. The assessing officer however is of the view that the opening balance and the receipts during the represents income of the 21 22 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal assessee for the assessment years and added the same protectively in the assessment of Smt. V. Shoba.
40. The assessee submitted that there is no dispute about the fact that Smt. V.Shoba was holding agricultural lands of 7 acres and 30 guntas purchased on 3.10.88. Any of the earlier years she was not filing the returns of income and therefore she did not admit any agricultural income. The agricultural lands and the plot acquired at Jefferguda do not pertain to the year of account. They admittedly represent the assets acquired during 88 and therefore the value of the assets should not have been added as the income for the year under consideration. Similarly, the investments with Margadarsi chit funds and were made prior to the previous year under consideration and therefore the same should not have been added. The assessee submitted that Smt. V. Shoba is running a pathological lab. In the name of Raja Mamamata clinical and pathological lab. At Wardhannapet. She derived income besides the agricultural income and, therefore, she has got independent source of income and hence the same should not be included as the income of the assessee. It also submitted that the cost of the assets which were not acquired during the year cannot be treated as the income of Smt. Shoba and consequently the same cannot be added in the assessment of the assessee.
Assessment years 2001-02.
41. For the assessment years 2001-02 the assessee filed the return of income on 13.1.2003 admitting an income of Rs.2,14,140 from medical profession. The said return was regularized by issue of notice u/s 148. The assessing officer completed the assessment u/s 144 r.w.s.
22 23 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal 148 on 23.3.2005 determining the total income at Rs.13,56,790. While doing so, the assessing officer estimated the income from profession at Rs.9 lakh and treated the investment made by the assessee's wife Smt. V. Shoba of Rs.4,56,786 as the income of the assessee. In so fat as the professional income is concerned, the ase submitted a detailed to the assessing officer is not justified in estimating income at Rs.9 lakhs. In so far as the inclusion of income at Rs.4,56,786 belonging to Smt. V. Shoba is concerned, the assessee submitted as follows:
41.1 Smt. V. Shoba wife of the assessee is running a pathological lab under the name and style of 'Raja Mamata Clinical Pathological laboratory' at Vardannapet. For the assessment years 2001-02 she filed her return of income admitting at Rs.90,000 from the said business and Rs.12,600 towards interest from sundry debtors. She also filed receipts and payments account. In her assessment, the assessing officer determined the total income at Rs.4,56,786 by including all the payments made except the closing cash balance as unexplained investment. The assessing officer did not consider the following available sources.
a) Opening cash balance 35,941 b)income admitted in return of income (this amount is taxed by assessing officer ) 1,02,600 b) Refund from the sundry debtors 70,000 c) Chit realization from Chit STA-6-241 with Vaishnavi Chits 74,000 d) Loan from Dr. Ravindra Reddy, HUF 80,000 23 24 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal
41.2. In so far as the opening balance is concerned, Smt. V. Shobha is assessed to income tax for the immediately preceding year also and this represents the closing balance of the earlier year.
41.3. The income at Rs.1,02,600 is separately taxed by the assessing officer and is available for the assessee for investment. In so far as the refund of the sundry debtors is concerned, it is submitted that the assessing officer accepted the interest on debtors for the immediately preceding year and for the year under consideration also.
The assessee filed details of the persons from whom the sundry debtors were realized.
41.4. In so far as the realization of chit amount from Vaishnavi Chit is concerned, the payment of Rs.74,000 is recorded during the year. For the immediately preceding year, an amount of Rs.16,000 was paid and therefore the assessing officer is not correct in doubting the receipt of realization of the chit.
41.5. In so far as the loan from V. Reddy HUF is concerned, the amount of Rs.80,000 is recorded on the payment side of the HUF account. The HUF is also separately assessed to tax. The sources of the HUF for all the assessment years were examined by the assessing officer. Therefore the assessee submitted that the investments made should not have been treated as the income u/s 69 in the assessment of Smt. V. Shobha and should have been added in the assessment of the assessee.
Assessment years 2002-03 24 25 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal 41.6 For the assessment years 2002-03 the assessee filed return of income on 17.1.2003 admitting as income of Rs.2,43,430/- The assessing officer completed the assessment u/s 144 on 23.3.2005 determine the total income at Rs.24,40,430/- While doing so, the assessing officer estimated the professional receipts at Rs.10,38,243 and also added Rs.14,02,191 being the income determined in the assessment of assessee wife Smt. V. Shobha as the income of the assessee.
41.7 In so far as the assessment of Smt. V. Shobha is concerned, she filed the return of income on 12.2.2004 admitting an income of Rs.1,49,500 from Raja Mata clinical and pathological laboratory. The assessing officer found that she made payment of Rs.12,52,661/- and therefore he is of the view that the entire amount represents the income of the assessee. In this regard the assessee submitted that Smt. V. Shoba filed receipts and payments account. The receipts include the following:
Opening cash balance 8,355
Interest from SB account 30
Income from PL 1,49,500
Amount realized on from bidding chit
From Margadarshi chid fund 7,88,900
41.8 In so far as cash in hand is concerned, it represents closing
balance of the preceding year and cannot be treated as not available for the assessee.
25 26 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal 41.9. The income from pathological laboratory of Rs.1,49,500 is admitted by the assessee in the return of income and the assessing officer held that even this amount is not available.
41.10 In so far as the chit amount of Rs.7,88,900 is concerned, the assessee filed account copy of Margadarshi Chit Fund with Chit No.LT 001XW/32 wherein the assessee realized Rs.7,88,900/- on bidding the chit. This amount was paid by Margadarshi Chit Fund through cheque and the same is recorded in the books of account. The assessing officer has no information to the contrary.
41.11. Similarly the amount of Rs.3,19,000 was received from Shri Ram Chit against chit No.WLX-4/19. This amount was also received by bidding the chit. Account copy of Shri Ram Chit is submitted, according to which the amount was received from the said chit fund company.
41.12. The assessee effected the payments with the fund available, the details of which are submitted above. Therefore, the assessing officer ought not to have treated the amount of Rs.12,52,661/- as the income of the assessee u/s 69 of the IT Act.
42. In view of the above, the assessee submitted that the assessing officer is not justified in making the additions as mentioned above. According to assessee's counsel CIT(A) shall have deleted entire addition instead of sustaining as follows:
Assessment year 1999-2000 : Professional income of Rs.7 lakhs reduced to 4 lakhs 2000-2001 : Professional income of Rs.8 lakhs reduced to 5 lakhs 26 27 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal Income of Smt. Shoba assessed in the assessee's Hands at Rs.475,250 deleted.
2001-2002 Professional income estimated. Professional income of of Rs.9 lakhs reduced to 6 lakhs Income of Smt. Shoba assessed in the hands of Assessee at Rs.456,786 deleted.
2002-2003 Estimated professional income at Rs.10,38,243 reduced at Rs.7.5 lakhs deleted Income of Smt. Shoba clubbed in the hands of the Assessee at Rs.14,02,191/-.
42.1. The assessee's plea is that the estimation of income is at higher side and income may be estimated at 15% of the gross receipts as decided by Hyderabad 'B' Bench of the Tribunal in its order dated 26/6/2009 in the case of Dr. T. Ravikumar, Nellore & Others in ITA Nos.790/2008 & others.
43. On the other hand, the contention of the department is that the assessing officer estimated the receipts based on the number of patients and the fees collected for each treatment and it is based on the information collected during the course of survey.
44. We have heard both the parties and perused material available on record. In this case, it is admitted fact that the books of accounts of the assessee is not at all produced for the purpose of assessment and as such, reasonable estimation of income to be done after giving proper deduction towards expenditure incurred by the 27 28 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal assessee towards assistant doctors, remuneration to technicians and other day to day expenses. Being there is no concrete evidence for the collection, the assessing officer made estimation of income at Rs.7 lakhs for the assessment year 1999-2000 on the basis of income estimated for the assessment year 2002-03 which is at Rs.10,38,243/-. In our opinion, the assessing officer not at all correct in determining the income of this assessment year on the basis of estimation of income of subsequent assessment year 2002-03. Admittedly, the assessee stated in the sworn statement recorded from him on 8/3/2002 as follows:
Qn: As noticed by me, you have got very good medical practice at Wardhannapet, but as per your past income tax record it is seen that you have not declared income proportionate to your practice. Please explain? Ans: My practice picked up during the last 2-3 years. Previously it was very poor. However, I am offering income disclosures as follows which is almost proportionate to my actual income:
1. For the AY 2000-01 Rs.4,00,000
2. For the AY 2001-02 Rs.4,75,000
3. For the AY 2002-03 Rs.4,75,000 Total disclosure Rs.13,50,000 (rupees thirteen lakhs fifty thousand only) and I am issuing post dated cheques for Rs.1 lakh for 2000-01 Rs.1.25 for the AY 2001-02 and Rs.1.25 for the AY 2002-03 as advance tax. I will produce the challans on 15.3.2002 on 25.3.2002 and 28.3.2002 and file the returns simultaneously.
Qn: What are the books of accounts you are maintaining.
Ans: Receipt register, acquaintance roll, medical expenses register, surgery register, FP operation register, in patient and out patient register in the prescribed forms as per IT Rules.
45. The above statements by the assessee not retracted by either parties. Since the offer made by the assessee voluntarily and in the absence of any evidence contrary to this, this is to be considered as 28 29 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal true and correct and the assessing officer is required to consider the same as income of the assessee instead of estimation of income without proper basis. Accordingly, in the interest of justice, we direct the assessing officer to determine the income of the assessee as per sworn statement recorded by him for the assessment year 2000-01, 2001-02 and 2002-03 since there is no external evidence to support, the estimation made by the assessing officer. However, for the assessment year we have no other option to accept the return income in the absence of any material to suggest the income of the assessee at higher amount. Accordingly, this ground in Revenue appeals in ITA No.670, 671, 672 & 673/Hyd/2006 and assessee appeals in ITA No.619/Hy/2006 is dismissed. In assessee appeals in ITA No.620, 622, 624/Hyd/2006, this ground is partly allowed.
46. The next ground in the assessee's appeal in ITA No.619/Hyd/2006 is with reference to sustaining of addition of Rs.2,68,371/- being refund of loan from Ram Narayanan. According to assessing officer the amount returned by Shri Ram Narayanan received by the assessee in cash and credited in the books of accounts for which the assessee has not offered explanation. The assessing officer treated this as unexplained credit u/s 68 of the IT Act. The contention of the assessee is that this amount was advanced to Shri Ram Narayanan in earlier financial year and not in the assessment year under consideration 29 30 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal and it was refunded in the assessment year under consideration and no letter of confirmation could be filed from Shri Ram Narayanan as he was passed away before the assessment proceedings and the refund of amount cannot be considered as unexplained credit.
47. The DR relied on the order of the CIT(A).
48. We have heard both the parties and perused the material available on record. The Revenue is not disputed the fact of advance of money in earlier assessment year and also not disputed the death of Late Shri Ramnarayan. When Ramnarayan is no more, it is impossible to produce confirmation letter from a dead person so it is natural to believe the version of the assessee unless the department is having evidence to show that the assessee has advanced money in the assessment year under consideration. In view of this, we are deleting the addition made on this count.
49. Regarding the addition made on account of clubbing of the income of Smt. V. Shobha for the assessment year 2000-01, 2001-02 and 2002-03, it was submitted by the departmental representative that Smt. V. Shobha has no source of income. There is no evidence that the pathological laboratory was owned by the assessee's wife and there was no evidence that the assets of the pathological laboratory was owned by her and she is not qualified to manage the same as such the 30 31 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal pathological laboratory is not at all belong to assessee's wife. According to DR, the income was rightly assessed in her hand.
50. On the other hand, the AR submitted that the assessee is not stating that the pathological laboratory is owned by Smt. Shobha i.e., assessee's wife. The contention of the assessee is that the assessee's wife is only carrying on the business of the pathological lab.
Though the equipment was not acquired by the assessee's wife, the laboratory was run by her and income was earned by her and it is not the case of acquisition of asset by her. He submitted that the doctor is very busy in his medical profession and he could not devote much attention to the pathological laboratory as such the lab. was managed by Smt. Shobha. She was in possession of 7.3 acres of agricultural land at Wardhapet and investing in Chit funds and as such, it was not correct for the assessing officer to mention that she has no source of income.
She subscribed chits in her own name. The assessing officer has not brought on record any evidence to show that Dr. Ravindra Reddy has carried on the business operation of the pathological lab. In the absence of any evidence, it is not possible to fasten the additional tax liability in the hands of Dr. Ravindra Reddy. Accordingly, in our opinion, the income of Smt. V. Shobha cannot be assessed in the hands of Dr. V. Ravindra Reddy. This ground in the Revenue appeals in ITA No.671, 672 & 673/Hyd/2006 is dismissed.
31 32 ITA Nos.618, 619 and other 16 casesShri Ravindra Reddy, Warangal
51. ITA Nos.678/06, 679/06 and 680/Hyd/2006 (Smt. V. Shobha). All these appeals are department appeals. In these appeals, the grievance of the department is that the assessee is having no source of income in these assessment years and the investment made by her to be assessed as undisclosed income of her. The facts of the case are that the assessee's husband Dr. Ravindra Reddy is running a hospital at Wardhannapeta, Warangal District. The hospital building is owned by the HUF. The assessee is running a pathological laboratory in the name of Raja Mamatha Clinical & Pathological Laboratory within the hospital building. She filed the returns of income fort the assessment year 2000-01 and onwards admitting income from the said pathological laboratory and interest from sundry debtors. She also owns agricultural lands of about 7 acres. While filing the return of income for the assessment year 2000-01, the assessee showed open capital of Rs.3,19,897/- and also shown the payments during the year of Rs.1,62,159/-. The assessing officer disbelieved that the assessee could have run the pathological laboratory and derived any income therefrom.
The assessing officer is of the view that all the income derived by the assessee really belongs to Dr. Ravindra Reddy, her husband.
Accordingly, he made protective assessments in the case of the 32 33 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal assessee and substantive assessments in the case of Dr. Ravindra Reddy.
52. We have perused on this issue. We have already held in assessee husband's case that income of pathological laboratory cannot be assessed in the hands of Dr.V. Ravindra Reddy and to be assessed in the hands of Smt. V. Shobha. The various additions made by the assessing officer cannot be sustained since the assessee is having agricultural land which is subject to cultivation upto 1.4.1999 and thereafter it was subject to cultivation by HUF. The assessee also subscribed various chits in her name and also she received back money.
The subscription was made by her own source of income. As discussed in earlier paras, in assessee's husband case, we are of the opinion that the income declared by the assessee is sufficient to meet her investments. As such, no addition is called for. Accordingly, the deletion of addition made by CIT(A) is justified. The order of CIT(A) is confirmed on this issue. Accordingly, the appeals in ITA No.678, 679 and 680/Hyd/2006 filed by the Revenue are dismissed.
53. In the result, Revenue appeals in ITA No.674, 675, 676, 677, 678, 679, 680, 670, 671, 672 and 673/Hyd/2006 are dismissed.
The assessee appeals in ITA No.619/Hyd/2006 is allowed and in ITA 33 34 ITA Nos.618, 619 and other 16 cases Shri Ravindra Reddy, Warangal Nos. 621 & 623/Hyd/2006, 620, 622 & 624/Hyd/2006 are partly allowed and ITA No.618/Hyd/2006 is dismissed.
Order pronounced in the open Court 18th June, 2010
Sd/- sd/-
N.R.S. GANESAN CHANDRA POOJARI
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the June 2010
Copy forwarded to:
1. Shri Ravindra Reddy,(Individual), Shri Ravindra Reddy (HUF) & Smt. V. Shobha, Warangal c/o Shri S. Rama Rao, Advocate, Flat No.103, H.No.3-6- 542/4, Indiradevi Nilayam, St. No.7, Himayatnagar, Hyderabad
2. ITO, Ward No.2, Warangal
3. CIT(A)-iv, Hyderabad.
4. CIT, Hyderabad
5. The D.R., ITAT, Hyderabad.
Np 34