Income Tax Appellate Tribunal - Hyderabad
S Nanda Gopal Reddy, Kattuvapalli vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND
SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
M.A.No.141/Hyd/2009 Asstt. Year 2003-2004
(In ITA No.194/Hyd/09)
Sri Nandagopal Reddy, vs. ACIT, Circle 16 (2),
Katuvapalli village Hyderabad
PAN AIPQS0061B
Applicant by : Shri R.V.Seshaiah Naidu,Advocate
Respondent by : Shri H.Phani Raju, DR
ORDER
Per Shri Chandra Poojari, Accountant Member:
This miscellaneous application filed by assessee is directed against the order passed by the Tribunal in ITA No.194/Hyd/2009 dt. 9-10-2009 for the assessment year 2003-04.
2. The learned counsel for the assessee made the following written submissions at the time of hearing which are reproduced herein below.
"I. The Honourable Tribunal in its order observed in its para no.1 and para no.2 regarding allowing seized cash of Rs.1,50,000 in the hands of the assessee and also interest.
Submission:2
The appellant submits humbly that the observation made by the Honourable Tribunal regarding seized cash of Rs.1,50,000 and cash allowing interest and appellant was in no way concerned and therefore the observation may kindly be deleted.
II. In page No.2 para no.3 the Honourable Tribunal observed that the assessing officer requested the assessee to produce the 19 persons before him but the assessee failed to do so.
Submission:
The observations of the Honourable Tribunal is not correct. All the 19 persons appeared personally, before the learned Income tax Officer filed statements together with evidence such as land pass books and other evidence answered questions.
III. The Honourable Tribunal in its order observed that the assessing officer got enquired through his inspector regarding the genuineness of the credits. As per the enquiry report submitted by the inspector the parties have not given any advance for purchase of flats in Bangalore as claimed by the assessee.
Submission:
The assessing officer got enquired through his inspector for the next ay 2004-05 but not for the ay 2003-04, under consideration. The inspector enquired according to his information given by the creditors he threatened them with dire consequences and took their signatures and left. The inspector report given for 5 persons cannot be taken into consideration as the said 5 persons later denied and they gave statements, confirming the advances made to the appellant before the income tax officer. Therefore, the Honourable Tribunal is not justified in taking into account the statement of the 5 creditors regarding amount advanced in the subsequent year 2004-05. Therefore the Honourable Tribunal is not justified that the parties have not given any advance is not justified. The enquiry report relates 5 persons but not 19 persons. All the 19 persons appeared with a evidence and confirmed that they lent the amount to the appellant. Out of 5 persons one person Sri P.Ramachandra Reddy, Kattuvapalli expired earlier and no report had been obtained. The inspector report is concerned with regard to 4 persons only but not 19 persons. The observations made by the Hon'ble Tribunal regarding all the parties area not correct.3
IV. The Hon'ble tribunal at page no.7 para no.8 observed that the assessee declined the right to cross examine the creditors.
Submission:
The observation as per material available on record is not correct. During the course of examination of the creditors the appellant was never allowed before the Income tax Officer and he was kept outside of the office and he enquired creditors before the authorized representative. Therefore, the observation of the Hon'ble Tribunal regarding that the assessee declined to cross examine the creditors is not correct.
During the hearing before the 1st appellant authority, the authorized representative submitted and denied the observation made by the Income tax Officer by way of affidavit which was already filed before the Hon'ble Tribunal. In the affidavit the authorized representative informed that the assessee was kept outside the room and never gave chance to cross examine the creditors.
The Hon'ble tribunal on the basis of Inspector report who enquired 4 pers0ns is not justified in observing that most of the creditors denied the fact of advancing the money to the assessee. The observation of the Hon'ble Tribunal is not correct and against to the facts of the case. All the 4 persons confirmed that they advanced the amount to the appellant.
V. The Hon'ble Tribunal at page no.7 para 7 followed the observations of the Hon'ble Tribunal for the next AY 2004-05. The appellant also denied the observations and filed a petition for the above asst.year 2004-05 against the observation made by the Hon'ble Tribunal. The petition filed by the authorized representative was rejected by the Hon'ble Tribunal on the ground that the Hon'ble Tribunal has no right to review its order. Therefore it is submitted that Hon'ble Tribunal is not justified in taking into account the observation made for the next ay 2004-05 which was appellant objected and his petition was rejected on the ground that the Hon'ble Tribunal has no jurisdiction to review its order.
VI. The Hon'ble Tribunal at page no.9 observed some judgements relied upon by the assessee are not applicable to the facts of the case.
Submission:4
The appellant, it appears, did relied upon the judgement mentioned by the Hon'ble Tribunal. The observations of the Hon'ble Tribunal may kindly be deleted.
VII. The Hon'ble Tribunal in its last paragraph observed that the appellant failed to prove the genuineness and creditworthiness of the parties who have advanced the money to the assessee. In the present case, the assessee is required to prove the identity of the party, capacity of the party to advance money and lastly genuineness of transaction.
Submission:
The assessee had discharged initial onus which lay on it in terms of sec.68 by proving identity of creditors by giving the identity of these persons was established beyond doubt. The creditors explained their respective source of income along with their monthly expenses therefore their creditworthiness stands explained and sufficiently proved on record.
The learned Income tax Officer ought to have considered the attested affidavit and statements and also evidence such as bank pass boo, agricultural land pass book etc. in its true perspective.
The observation made by the learned ITO regarding withdrawals of amount by the creditors area unjustified and he ought to have given an opportunity to cross examine the creditors, if there are any contradictions.
The learned ITO ought to have seen and appreciated that the appellant had proved the identity of the creditors and also their creditworthiness and also their statements in its true perspective. The transactions area a genuine and rejected expressing doubts.
The ITO and also appellant authorities rejected the explanation and evidence produced together with a the statements of the creditors and other material arbitrarily, unreasonably and the reasons given by the lower authorities were based on surmises, conjectures and suspicious.
VIII. Submission:5
The Hon'ble Tribunal ought to have considered several grounds urged, particularly ground no.15 in the grounds of appeal, regarding the assessment made, barred by limitation.
FURTHER SUBMISSION:
1. Addition u/s 68 was unwarranted as creditors had explained cash credits by way of confirmation letters. Baldawa Builders (P) Ltd. V. ITO (2002) 29 DTC 288 (Jod-Trib) 1534. Kind further attention is invited that the assessee in this case has discharged the initial burden cast upon him and now it is for department to discharge their burden, which they had failed. The moment initial burden is discharged by assessee, no addition u/s 68 can be made. Swagar Synthesis P.Ltd. v.
ITO (2003) 33 DTC 320 (Jod-Trib) (2002) 77 TTJ (Jod-Trib) 987 (537).
2. The learned ITO filed to see that the amounts were received for construction of flats for the first time and it was only capital expenditure and the learned ITO under the above circumstances is not justified in considering the amounts received as income of the appellant and applying sec.68 of the I.T.Act. He ought to have estimated the income when the construction work was completed taking into account the total value of construction.
3. The Hon'ble Tribunal ought to have seen the surrounding circumstances after applying test of human probabilities. In this case, all the creditors are having agricultural savings, having landed property, capable of lending amounts to their friends and relatives. In this case, if there are any doubts, the department ought to have given notices to the creditors under the provisions of the income tax Act and also ought to have given an opportunity to the appellant to cross examine the creditors.
4. The Hon'ble Tribunal and also lower authorities that the amounts were received before starting of the project the amounts have tobe considered as capital amount and any amount received in this connection have to be considered as capital expenditure.
5. The learned ITO and also the Hon'ble Tribunal ought to have considered the submission of the appellant there are no contradictions and if there are any contradictions in their statements of the creditors, an opportunity ought to have been given to the appellant to cross examine them.
66. During the course of hearing, the authorized representative filed written submissions and also prayed the Hon'ble Tribunal consider the points urged in the written submissions.
In view of the above submissions, I pray the Hon'ble tribunal to kindly set aside the order passed and grant relief as prayed, rectifying and do justice. "
3. The learned Departmental Representative submitted that there is no mistake in the order of the Tribunal other than the wrong reproduction of grounds of appeal, which can be rectified.
4. We have heard both the parties and perused the material on record. The grounds of appeal were wrongly reproduced in the order of the Tribunal. As such, the same are to be re-read as follows in the place of grounds of appeal mentioned in the above order.
"1. The learned CIT(A), Guntur erred in confirming the total addition of Rs.52,35,000 received from nineteen creditors as advance and loans for construction of flats by the appellant during the ay 2003-04 u/s 68 of the I.T.Act. The reasons adduced by the learned CIT(A) while confirming the total additions are unjustified and are against to the facts of the case.
2. The learned CIT(A) further erred in confirming the addition, on the ground that the creditors have not furnished any evidence to show that they had sufficient savings out of their agricultural income to make such advances, ignoring the evidence available.
3. The learned CIT(A) ought to have seen that all the 19 creditors appeared before the Income tax Officer produced their respective Pattadar Pass Book and in their statements they confirmed that advanced the amounts to the appellant to help him in his business. They also informed that they paid the amounts out of their agricultural income.
4. The learned CIT(A) ought to have seen that all the creditors are agriculturists having huge agricultural income from their land holdings. Generally they keep their savings in their houses, they do not have 7 bank accounts and they are not assessee under the provisions of I.T.Act.
5. The learned CIT(A) erred in c0onfirming the observations made by the learned Income tax Officer regarding withdrawals of amounts by the creditors from the banks and she ought to have directed the learned ITO to give an opportunity to the appellant to cross-examine the creditors, if there are any contradictions in their statements. The action of the lower authorities is unjustified and against to the principles of natural justice.
6. The learned Income tax Officer and also the learned CIT(A) ought to have seen that the department is in no way concerned with the utilization of the amounts advanced after receipt from the appellant and the reasons adduced in this connection by the department are unjustified and are liable to be set aside.
7. The learned CIT(A) as an appellate authority, ought to have exercised her judicious mind, and ought to have taken the statements given by creditors in its true perspective and ought to have accepted the same.
8. The learned CIT(A) is not justified in observing that there are severe doubts on the genuineness of the advances. She ought to have considered al the facts in its true perspective and each transaction carefully and making general remarks.
9. The learned CIT(A) ought to have directed the Income tax Officer to issue notices to all the creditors to file returns of income, if she had any doubts. The learned CIT(A) ought to have seen that the ITO never allowed the appellant to cross-examine the creditors.
10. The learned CIT(A) and the ITO filed to see that the amounts were received for construction of flats for the firm time and it was on capital expenditure and the ITO under the above circumstances is not justified in considering the amounts received as income of the assessee and applying section 68 of the IT Act. He ought to have estimated the income when the construction work was completed taking into the account and total value of construction.
11. The learned CIT(A) ought to have seen that the addition u/s 68 was unwarranted as creditors had explained cash credits by way of affidavits and confirmation letters together with Pattadar Land Pass Book and statements. She ought to have accepted the statements 8 and evidence produced. The statements of the creditors and other material rejected arbitrarily, unreasonably and the reasons given by the ld. ITO were based on surmises, conjectures and suspicious.
12. The CIT(A) ought to have seen that the identity of these person s was established beyond doubt. Kind attention is invited to recent judgement of the Hon'ble ITAT in ITO Vs. Satyanarayana Agarwal (2007) 112TTJ (Jd.) 717 reported in Tax references (2008) 99 (1) the Tax Reference, Baldewe Builders (P) Ltd. Vs. ITO (2002) 29 DTC (Jod.
Tribunal) 1534) (S).
13. The ld. Appellate Authorities ought to have further seen that the assessee in this case had discharged the initial burden cast upon him and now it is for the department to discharge their burden, which they had failed. The moment initial burden is discharged by the assessee no addition u/s 68 can be made. Swagar Synthesis (P) Ltd. Vs. ITO (2003) 33 DTC 320 (Jod. Trib) (2002) 77 TTJ (Jod. Trib) 987 (537).
14. The ld. Appellate authorities ought to have seen that all they have confirmed the factum of their cash credits. The Tribunal Jodhpur Bench has taken a similar view in the case of ITO Vs. Vardhman Industries (2006) n99 TTJ (Jd.) 509 Kamal & Co. Vs. ACIT (1998) 62 TTJ 527 and Raja Ram Mohan Lal Vs. ITO (1991) 40 TTJ (Jp) 320.
15. The ld. Lower Authorities ought to have seen that the assessment made is barred by limitations.
16. The ld. Lower Authorities ought to have held that charging interest u/s 234 A and 234 B was not justified. No finding had been given by the Lower Authorities.
5. Regarding the mentioning of the certain case law in page 9 of the Tribunal's order, the assessee filed a copy of petition relating to the miscellaneous petition in ITA No.634/Hyd/2008 for ay 2004-05 and requested the bench to consider the same. In view of this, the Bench took pain to go through those judgements and opined that they are not applicable to the facts of the case. At this juncture, the assessee cannot say that these judgements were not cited by the assessee's counsel. Further, regarding the other arguments of the assessee's 9 Counsel, we are of the opinion that the decision of the Tribunal has not to be scrutinized sentence by sentence, to find out whether all the facts have been set out in detail by the Tribunal or whether some incidental facts which appear on record have not been noticed by the Tribunal in its judgement. If the person on a fair reading of the judgement of the Tribunal finds that it has taken into account all relevant material and has not taken into any irrelevant material in basing its conclusion, the decision of the Tribunal is not liable to be interfered with, unless of course, the conclusions arrived at by the Tribunal are perverse. In our opinion, it is not necessary for the Tribunal to state in its order specifically or in express words that it has taken into account the cumulative effect of the circumstances or has considered the totality of the facts, as if that were a magic formula; if the order of the Tribunal shows that it has, in fact done so, there is no reason to interfere with the decision of the Tribunal. In the present case, the Tribunal considered all the relevant facts and came to the conscious conclusion that the credits are not satisfactorily explained by the assessee to the department and as such held that it is the unexplained credit and to be taxed accordingly. Thus, we do not find any situations warranting the rectification of the order of the Tribunal on merit.
6. Accordingly, the miscellaneous application of the assessee is partly allowed.
10 Order pronounced in the Court on 20 -11-2009
Sd/- sd/-
(N.R.S. GANESAN) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dt/- 20-11-2009.
*vnr
Copy forwarded to:
1. Shri R.V.Seshaiah Naidu, Advocate, Noa.12/82, Old Hospital Road, Santhapet, Nellore-524 001.
2. ITO, Ward 1, Gudur.
3. CIT(A), Guntur.
4.CIT, AP, Hyderabad.
5.. The D.R., ITAT, Hyderabad.