Andhra HC (Pre-Telangana)
Pendurthi Chandrasekhar, Plot ... vs The Deputy Commissioner Of Income Tax, ... on 26 April, 2018
Author: J.Uma Devi
Bench: J.Uma Devi
HONBLE SRI JUSTICE V.RAMASUBRAMANIAN AnD HONBLE Ms. JUSTICE J.UMA DEVI
I.T.T.A.No.700 of 2016
26-4-2018
Pendurthi Chandrasekhar, Plot No.8-2-696/697, Apartment S4-S5, La Creative Heights, Road No.12, Banjara Hills, Hyderabad-500
The Deputy Commissioner of Income Tax, Central Circle-11, Hyderabad Respondent
Counsel for the Appellant:Mr. K.Vasanth Kumar
Counsel for Respondent:Ms. M.Kiranmayee, Senior Standing Counsel
<Gist:
>Head Note:
? Cases referred:
Nil.
HONBLE SRI JUSTICE V.RAMASUBRAMANIAN
AND
HONBLE Ms. JUSTICE J.UMA DEVI
I.T.T.A.No.700 of 2016
Judgment: (per V.Ramasubramanian, J.)
The assessee has come up with the above appeal under
Section 260A of the Income Tax Act, 1961, challenging
a common order passed by the Income Tax Appellate Tribunal
in a batch of Income Tax Appeals. This appeal is confined to
I.T.A.No.2122/H/2011, relating to the Assessment Year
2008-09.
2. Heard Mr. K.Vasanthkumar, learned counsel
appearing for the appellant and Smt. M.Kiranmayee, learned
Senior Standing Counsel appearing for the Department.
3. The substantial questions of law with which the
appellant came up before this Court, were later sought to be
reframed. We permitted the questions to be reframed.
The reframed substantial questions of law are as follows:
1. Whether on the facts and in the circumstances of the case, the
Income Tax Appellate Tribunal is legally correct in confirming the
addition of Rs.23,35,000/- being cash found during the course of search
on the basis of statement at the time of search holding subsequent
explanation as afterthought without appreciating the fact that at the time
of search one would not be conscious enough about the facts?
2. Whether the on the facts and in the circumstances of the case,
the Income Tax Appellate Tribunal is right in law in not directing to verify
the claim made with regard to availability of cash of Rs.23,35,000/-
instead of confirming the addition as unexplained? and
3. Whether on the facts and in the circumstances of the case, the
Income Tax Appellate Tribunal while confirming the addition of
Rs.38,74,350/- as interest income on mere ground of claiming credit for
TDS on entire amount in utter disregard to the provisions of Section 145
of the Act and method of accounting followed by the assessee?
BRIEF FACTS:
4. A search and seizure operation under Section 132 of
the Income Tax Act, 1961, was carried out in the group cases
of M/s. Ambiance Properties Private Limited and its sister
concerns. The assessee is one of the Directors of a company
by name Dakshin Shelters Private Limited. His residential
house was also searched on 09-10-2007.
5. Thereafter, notices under Section 153A dated
20-10-2008 were issued, in relation to the Assessment Years
2002-03 to 2007-08. For the Assessment Year 2008-09, the
assessee filed his return of income on 02-02-2009.
6. Subsequently, notices under Sections 143(2) and
142(1) were issued on 27-4-2009. The assessee filed his
response and after giving an opportunity of hearing, the
Assessing Officer passed an order on 24-12-2009.
7. In the order of assessment, the focus of attention was
on three items. One was unexplained cash of Rs.23,35,000/-
found in the residential premises in the course of search and
seizure operation. Out of the said amount, Rs.22,50,000/-
was seized as unexplained. The Assessing Officer rejected the
explanation offered by the assessee and made an addition of
Rs.23,35,000/- to the income returned by the assessee.
8. The second item which became the focus of attention
in the order of assessment was an interest income to the tune
of Rs.38,74,350/-. The Assessing Officer added this amount
to the income returned by the assessee on the ground that
this represented interest on the unsecured loans advanced to
Dakshin Shelters Private Limited and that as per the TDS
Certificate, this income had to be added back. It is these two
issues viz., (i) unexplained cash found in the residence at the
time of search and seizure and (ii) interest income, that form
the subject matter of the present appeal.
9. As against the order of assessment, the petitioner
filed an appeal before the Commissioner of Income Tax
(Appeals). The CIT (Appeals) upheld the order of the Assessing
Officer insofar as the second aspect viz., the interest income
is concerned. But insofar as the first aspect is concerned, the
CIT (Appeals), even while confirming the addition, directed the
Assessing Officer to verify the exact amount found during the
search, since there was a discrepancy as to whether it was
Rs.23,35,000/- or Rs.23,35,500/-.
10. As against the order of the CIT (Appeals), the
assessee filed an appeal in I.T.A.No.2122/H/2011 before the
Income Tax Appellate Tribunal. The Tribunal took the appeal
along with a few other appeals filed by the assessee and a few
other appeals filed by the Revenue. By a common order dated
22-3-2013, the Income Tax Appellate Tribunal dismissed
I.T.A.No.2122/H/2011 forcing the appellant/assessee to
come up with the above appeal.
11. It can be seen from the substantial questions of law
that we have extracted earlier that the first two questions
revolve around the unexplained cash found in the residence
of the assessee at the time of search. The third substantial
question of law revolves around the interest income.
12. Insofar as the third substantial questions of law is
concerned, it is admitted by the learned Senior Standing
Counsel for the Department that the same is covered by the
decision of this Court in I.T.T.A.Nos.701 and 702 of 2016,
dated 23-02-2018. Reframed substantial question No.7 in
I.T.T.A.No.701 of 2016, as recorded in the judgment of this
Court, dated 23-02-2018, reads as follows:
7. Whether on the facts and in the circumstances of the
case, the Income Tax Appellate Tribunal while confirming
the addition of Rs.3,05,713/- as interest income on mere
ground of claiming credit for TDS on entire amount in utter
disregard to the provisions of Sec.145 of the Act and
method of accounting followed by the assessee?
13. The answer to the above question is found to be in
paragraph-42 of the judgment dated 23-02-2018, which reads
as follows:
42. As regards the first mentioned aspect, it defies any
logic for, crediting of interest in account books does not
enable the assessee to withdraw the amount as the same
was not physically made available by M/s. Dakshin
Shelters Private Limited for the assessee to make such
withdrawal. The finding that the assessee has received
interest income but chose to keep it in the account in order
to get interest, is in conflict with his previous observations
that there is no prohibition for the assessee to withdraw the
interest on the unsecured loan in the books of account of
the company. Indeed, the Revenue has not disputed the
claim of the assessee that the loanee company converted
the unsecured loan and unpaid interest into equity shares
during the year 2011-12 and accordingly issued equity
shares certificates in lieu of repayment of unsecured loans
and unpaid interest thereon. As submitted by the learned
counsel for the assessee, the AO could have at best directed
to restrict the claim of TDS in proportion to the income
admitted and to allow the balance in the year in which
interest income is admitted on receipt basis.
14. Therefore, the third substantial question of law is
answered in favour of the assessee, following the decision in
I.T.T.A.Nos.701 and 702 of 2016, dated 23-02-2018.
15. Insofar as the substantial questions of law 1 and 2
are concerned, there is no dispute about the fact that the
unexplained cash was recovered at the time of search. When
the cash was seized during search, the assessee was
questioned about its source. The questions put to him and
the answers given by the assessee at that time are reproduced
in the order of assessment. They read as follows:
Q.16 An amount of Rs.22.50 lakhs was found in your
bank locker which was brought in the house.
Explain the sources of the said amount?
Ans. The amount was given partly by my partner
Sri K.Srinivasarao, partly by brother
Mr. Chandramohan and partly belongs to my mother
who sold her house property at Gollapudi Village,
Vijayawada, about a year back.
Q.17 Can you prove the receipt of the above amount as
replied by you?
Ans. My brother and my partner brought parties willing to
buy my lands at Vattinagulapally, who paid these
advances through them. However, the persons who
paid advance were reluctant to take back the
advances in view of rise in prices. I shall confirm the
transactions in a couple of days.
16. But subsequently in the course of assessment
proceedings, the assessee came up with a completely different
story, which is reproduced by the Assessing Officer in the
following words:
1. Mrs Anantha Lakshmi has given him an amount
of Rs.25,00,000/- on 18-9-2007 for purchase of the land at
Nanakramguda to the extent of Ac.0.05 gts out of total
consideration of Rs.40,00,000/- vide agreement of sale
dated 18-9-2007.
2. Further, he has claimed that Smt. Anantha
Lakshmi W/o Ramachander Rao, A-5, Prajashakti Nagar,
Vijayawada has advanced the said amount of
Rs.25,00,000/- out of sale proceeds of her agriculture land
situated at Penamaluru village vide agreement of sale with
possession dated 21-7-2007.
3. In this connection the assessee has submitted
a confirmation letter allegedly signed by Smt. Anantha
Lakshmi dated 13-10-2009 along with the above said
documents.
17. The Assessing Officer as well as the CIT (Appeals)
refused to buy this theory. The Tribunal concurred with the
Assessing Officer and the Appellate Authority.
18. Assailing the decision of all the three authorities,
it is contended by Mr. K.Vasanthakumar, learned counsel for
the appellant
(i) that an answer provided by an assessee at the time of
a raid, when he will be in a state of shock, cannot be held
against him especially when his subsequent claim was
evidenced by documents;
(ii) that at the time when the search was conducted,
Section 269SS had not been amended, but was applicable
only to loans and advances and not sales;
(iii) that when admittedly the assessee had no source of
income, the explanation offered by him had to be accepted;
(iv) that in support of the explanation offered by the
assessee later, he had not only produced the sale agreement
with Anantha Lakshmi, but the Assessing Officer also got
a letter of confirmation from Anantha Lakshmi and that
therefore the Tribunal committed a serious error in law in
confirming the addition.
19. We have carefully considered the above
submissions. We fail to appreciate the contention that
an assessee will be in a state of shock at the time of the raid.
A person who had done no wrong, cannot be shaken by
a search and seizure operation. The search admittedly took
place on 09-10-2007. The alleged agreement with
Smt. Anantha Lakshmi had been entered into by the
assessee, according to his subsequent theory, on 18-9-2007.
In other words, the assessee, even according to his story, had
received the said cash towards part of the sale consideration,
just 21 days before the date of conduct of the search. It is
quite strange that such a huge amount was kept in the house
for nearly 20 days and the assessee, in a state of shock, had
forgotten, to recall how he received the said cash, when
questioned during the search operations.
20. The learned counsel for the appellant invited our
attention to a letter of confirmation allegedly given by
Smt. Anantha Lakshmi, the agreement purchaser, to the
Deputy Commissioner of Income Tax. This letter is dated
13-10-2009. The learned counsel for the appellant also drew
our attention to a copy of the agreement of sale purportedly
entered into between the assessee and Smt. Anantha
Lakshmi on 18-9-2007. But the agreement of sale is hardly
reliable, on account of the following:
(i) It is typed on Non-Judicial Stamp Paper of a value of
Rs.100/-, issued by a stamp vendor on 05-5-2006 and the
agreement itself is dated 18-9-2007.
(ii) In the first two pages of the agreement of sale, the
signature of the agreement vendor viz., the assessee alone is
found. It is only in the last page that the signature of Anantha
Lakshmi, the vendee, is found.
(iii) The agreement was purportedly for the sale of half
undivided share that the assessee had in an agricultural
land. The property sought to be sold under the said
agreement is described throughout as agricultural land. But
in the last clause in the agreement of sale, it is stated that
if the vendor failed to obtain clearance from Urban Land
Ceiling authorities, the agreement would stand cancelled.
21. Therefore, if the authorities failed to take note of
such an agreement of sale, they cannot be found fault with.
We have now taken into account the agreement and it does
not inspire the confidence of this Court.
22. It is true that at that time when the assessment was
completed, Section 269SS was confined only to loans and
advances. But the authorities did not invoke Section 269SS to
disbelieve the claim of the assessee. The authorities went by
the statement of the assessee at the time of the raid and the
explanation offered by him subsequently as an after thought
and disbelieved the story with which he came up later.
23. Therefore, in our considered view, the reframed
substantial questions of law 1 and 2 are liable to be answered
against the assessee. Accordingly, they are answered against
the assessee.
24. In fine, the appeal is partly allowed, answering the
reframed substantial question No.3 in favour the appellant/
assessee and answering the reframed substantial questions of
law 1 and 2 against the assessee. The applications, if any,
pending in this appeal shall stand closed. No costs.
___________________________
V.RAMASUBRAMANIAN, J.
_______________ J.UMA DEVI, J. 26th April, 2018.