Mr V Satyanarayana Raju, Visakhapatnam v. The DCIT, Central Circle-2, Visakhapatnam

ITA 160/VIZ/2010 | 2001-2002
Pronouncement Date: 04-07-2011 | Result: Allowed

Appeal Details

RSA Number 16025314 RSA 2010
Assessee PAN AHAPP1548F
Bench Visakhapatnam
Appeal Number ITA 160/VIZ/2010
Duration Of Justice 1 year(s) 3 month(s) 27 day(s)
Appellant Mr V Satyanarayana Raju, Visakhapatnam
Respondent The DCIT, Central Circle-2, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 04-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 04-07-2011
Date Of Final Hearing 11-04-2011
Next Hearing Date 11-04-2011
Assessment Year 2001-2002
Appeal Filed On 08-03-2010
Judgment Text
ITA NOS 155 TO 160 PS MANGAPATHI RAJU & OTHERS VISA KHAPATNAM PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NOS.155 TO 158/VIZAG/2010 ASSESSMENT YEARS: 2000-01 TO 2001-02 & 2004-05 TO 2 005-06 P.S. MANGAPATHI RAJU VISAKHAPATNAM VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) PAN NO:AHAPP 1548 F (RESPONDENT) ITA NOS.159 TO 160/VIZAG/2010 ASSESSMENT YEARS: 2000-01 TO 2001-02 V. SATYANARAYANA RAJU VISAKHAPATNAM VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM (APPELLANT) PAN NO:AAQPV 8682 R (RESPONDENT) APPELLANT BY: SHRI C.V.S. MURTHY CA RESPONDENT BY: SHRI T.H. LUCAS PETER CIT (DR) ORDER PER BENCH: ALL THESE APPEALS FILED BY THESE ASSESSEES ARE DIRE CTED AGAINST THE ORDERS PASSED BY LEARNED CIT(A) VISAKHAPATNAM IN T HEIR RESPECTIVE HANDS. SINCE CERTAIN ISSUES ARE IDENTICAL IN NATURE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER. A. ITA NOS. 155-156 & 159-160 OF 2010:- 2. THE APPEALS FILED BY BOTH THE ASSESSEES FOR THE ASSESSMENT YEARS 2000-01 AND 2001-02 ARE ARISING OUT OF COMMON SET O F FACTS. HENCE WE PROCEED TO DISPOSE THEM OF FIRST. THE DEPARTMENT C ARRIED OUT SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF THE ASSESSEES ON 25.8.2005. DURING THE COURSE OF SEARCH CERTAIN INCRIMINATING MATERIALS I NDICATING UNDISCLOSED RECEIPTS PERTAINING TO A PARTNERSHIP FIRM NAMED M/S CHARTERED CONSTRUCTION AND CO. WERE FOUND. THE ASSESSEES HEREIN VIZ. SH RI P.S. MANGAPATHI RAJU AND SHRI V. SATYANARAYANA RAJU WERE THE PARTNERS IN THE SAID FIRM WITH A ITA NOS 155 TO 160 PS MANGAPATHI RAJU & OTHERS VISA KHAPATNAM PAGE 2 OF 6 PROFIT SHARING RATIO OF 66.69% AND 33.31% RESPECTIV ELY. THE SAID FIRM EXECUTED A PROJECT OF CONSTRUCTION OF APARTMENT COM PLEX CONSISTING OF 66 FLATS IN THE NAME OF PASUPATI TOWERS UNDER A DEVE LOPMENT AGREEMENT. AS PER THE AGREEMENT 8 FLATS BELONGED TO THE LAND OWN ERS 22 FLATS TO THE FIRST BUILDER AND 36 FLATS TO THE PARTNERSHIP FIRM. THE S EARCH MATERIALS INDICATED UNDISCLOSED RECEIPTS OF RS.57 37 235/- OUT OF WHICH A SUM OF RS.9 87 560/- WAS CLAIMED TO BELONG TO THE FIRST BUILDER. ACCORDI NGLY THE ASSESSING OFFICER DETERMINED THE UNDISCLOSED RECEIPTS PERTAINING TO T HE PARTNERSHIP FIRM AT RS.47 49 695/-. SINCE THE SAID FIRM HAD BEEN CLOSE D BY THE TIME OF SEARCH THE ASSESSING OFFICER PROPOSED TO ASSESS THE ABOVE SAID UNDISCLOSED INCOME IN THE HANDS OF PARTNERS IN THEIR PROFIT SHARING RA TIO. 3. IN THE RETURN FILED UNDER SECTION 153A OF THE ACT IN PURSUANCE OF THE SEARCH BOTH THE ASSESSEES TOGETHER OFFERED A SUM O F RS.18.00 LAKHS AS DETAILED BELOW: ASSESSMENT YEAR SHARE OF PARTNERS TOTAL UNDISCLOSED INCOME OFFERED PSM RAJU- 66.69% VSN RAJU- 33.31% 2000-01 4 00 140 1 99 860 6 00 000 2001-02 8 00 280 3 99 720 12 00 000 TOTAL 12 00 420 5 99 580 18 00 000 THE BASIS OF OFFERING THE ABOVE SAID SUM OF RS.18.0 0 LAKHS WAS EXPLAINED AS UNDER BY THE ASSESSEES. A SURVEY OPERATION US/ 133A OF THE ACT WAS CONDUCTED IN THE HANDS OF M/S CHARTERED CONSTRUCTIO NS & CO. EARLIER AND IN CONSEQUENT OF THE SURVEY THE FIRM OFFERED A SUM OF RS.29 85 040/- IN THE ASSESSMENT YEAR 1998-99 AND 1999-2000. THE SAID OFF ER WAS SAID TO HAVE BEEN MADE ON ACCOUNT OF CESSATION OF LIABILITIES. A CCORDINGLY THE ASSESSEES SOUGHT TO DEDUCT THE ABOVE SAID OFFER FROM THE UNDI SCLOSED RECEIPTS OF RS.47 49 695/- DETERMINED BY THE ASSESSING OFFICER AND OFFERED THE BALANCE AMOUNT AT A ROUND FIGURE OF RS.18.00 LAKHS (I.E. RS .48.00 LAKHS (-) RS.30.00 LAKHS). HOWEVER THE ASSESSING OFFICER DID NOT ACC EPT THE SAID CLAIM OF ASSESSEES AND ACCORDINGLY ADDED THE DIFFERENCE AMOU NT BETWEEN RS.47 49 695/- AND RS.18.00 LAKHS AS DETAILED BELOW : ASSESSMENT YEAR SHARE OF PARTNERS TOTAL UNDISCLOSED INCOME OFFERED PSM RAJU- 66.69% VSN RAJU- 33.31% 2000-01 6 66 900 3 16 330 9 83 230 2001-02 13 33 800 6 32 665 19 66 465 ITA NOS 155 TO 160 PS MANGAPATHI RAJU & OTHERS VISA KHAPATNAM PAGE 3 OF 6 THE ASSESSEES CHALLENGED THE ABOVE SAID ADDITIONS B EFORE THE LEARNED CIT (A) BUT COULD NOT SUCCEED. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE IMPUGNED UNDISCLOSED RECEIPTS ACTUALLY BELONG TO THE PARTNER SHIP FIRM AND HENCE THE ASSESSING OFFICER IS WRONG IN ASSESSING THE SAME IN THE HANDS OF THE ASSESSEES HEREIN FOR THE REASON THAT THE PARTNERSH IP FIRM IS A SEPARATE ASSESSABLE ENTITY UNDER THE INCOME TAX ACT. HE FURT HER SUBMITTED THAT SINCE THE ASSESSEES HAVE OFFERED THE INCOME OF RS.1 8.00 LAKHS VOLUNTARILY THE SAME MAY BE SUSTAINED AND THE ADDITIONS MADE BY THE ASSESSING OFFICER SHOULD BE DELETED. 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE PARTNERSHIP FIRM DID NOT EXIST A T THE TIME WHEN THE SEARCH TOOK PLACE AND HENCE AFTER HAVING CONSULTAT IONS WITH THE ASSESSEES THE ASSESSING OFFICER HAS ASSESSED THE UNDISCLOSED RECEIPTS IN THEIR HANDS. THE ASSESSEES THEMSELVES HAVE OFFERED RS.18.00 LAKH S IN AGGREGATE IN THEIR RESPECTIVE HANDS AND THE REASON FOR THE SAID OFFER IS THE UNDISCLOSED RECEIPTS CITED ABOVE. ACCORDINGLY HE CONTENDED THA T THE ASSESSING OFFICER WAS RIGHT IN ASSESSING THE DIFFERENCE BETWEEN THE U NDISCLOSED RECEIPTS AND THE AMOUNT OF RS.18.00 LAKHS IN THE HANDS OF THE AS SESSEES. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. SEC.189 OF THE ACT PRESCRIBES THE PROCEDURE TO BE F OLLOWED IN CASE OF A DISSOLVED FIRM. WE EXTRACT BELOW SUB SECTION 1 OF S ECTION 189: 189 (1). WHERE ANY BUSINESS OR PROFESSION CARRIED ON BY A FIRM HAS BEEN DISCONTINUED OR WHERE A FIRM IS DISSO LVED THE ASSESSING OFFICER SHALL MAKE AN ASSESSMENT OF THE T OTAL INCOME OF THE FIRM AS IF NO SUCH DISCONTINUANCE OR DISSOLUTION HAD TAKEN PLACE AND ALL THE PROVISIONS OF THE ACT INCLUDING THE PROVISIONS RELATING TO THE LEVY OF A PENALTY OR ANY OTHER SUM CHARGEABLE UNDER ANY PROVISION OF THIS ACT SHA LL APPLY SO FAR AS MAY BE TO SUCH ASSESSMENT. ITA NOS 155 TO 160 PS MANGAPATHI RAJU & OTHERS VISA KHAPATNAM PAGE 4 OF 6 THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF GIR DHARDAS KOTHARI VS. ITO (79 ITR 490 (CAL.)) HAD AN OCCASION TO CONSIDER TH E ISSUE WHETHER A NOTICE OF REOPENING OF ASSESSMENT CAN BE ISSUED TO A PARTN ER OF THE DISSOLVED FIRM IN RESPECT OF INCOME UNDISCLOSED BY THE SAID FIRM. THE HON'BLE HIGH COURT HELD THAT THE PROCEEDINGS CANNOT BE STARTED AGAINST THE PARTNER FOR NON DISCLOSURE OF CERTAIN RECEIPTS BY THE FIRM. THE HON 'BLE SUPREME COURT IN THE CASE OF ITO VS. CH. ATCHAIAH (218 ITR 239) (S.C) HA S HELD AT PAGE 243 THAT THE ASSESSING OFFICER CAN AND HE MUST TAX THE RIGHT PERSON AND THE RIGHT PERSON ALONE I.E. THE PERSON WHO IS LIABLE TO BE TA XED ACCORDING TO THE LAW. 7. IN THE INSTANT CASES THERE IS NO DISPUTE WITH RE GARD TO THE FACT THAT THE UNDISCLOSED RECEIPTS PERTAIN TO THE PROJECT NAM ED PASUPATI TOWERS WHICH WAS EXECUTED BY THE PARTNERSHIP FIRM M/S CHAR TERED CONSTRUCTIONS & CO. HENCE THE SAID UNDISCLOSED RECEIPTS CAN ONLY B E TAXED IN THE HANDS OF THE SAID FIRM AND NOT IN THE HANDS OF THE PARTNERS. HOWEVER DURING THE COURSE OF HEARING THE LEARNED AUTHORISED REPRESENT ATIVE SUBMITTED THAT THE ASSESSEES ARE NOT AGGRIEVED IN SUSTAINING THE ADDIT ION OF THE AGGREGATE AMOUNT OF RS.18.00 LAKHS BY THEM VOLUNTARILY IN THE RETURNS OF INCOME FILED BY THEM UNDER SECTION 153A OF THE ACT. HENCE WE D O NOT WISH TO INTERFERE WITH THE SAID OFFER ALREADY MADE BY THE ASSESSEES. THE FOREGOING DISCUSSIONS SHOW THAT THE ADDITIONS MADE BY THE ASS ESSING OFFICER ARE NOT IN ACCORDANCE WITH LAW. ACCORDINGLY WE SET ASIDE T HE ORDERS OF LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFIC ER TO DELETE THE ADDITIONS MADE BY HIM IN RELATION TO THE UNDISCLOSED RECEIPTS BELONGING TO THE PARTNERSHIP FIRM REFERRED (SUPRA). B. ITA NOS. 157-158 OF 2010- P.S.MANGAPATHI RAJU: 8. IN THESE TWO APPEALS THE ASSESSEE IS CHALLENG ING THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS THE UNEXPLAINED INVES TMENT MADE IN GOLD JEWELLERY. 9. DURING THE COURSE OF SEARCH CERTAIN BILLS E VIDENCING PURCHASE OF JEWELLERY TO THE TUNE OF RS.14.19 LAKHS WERE FOUND. IN THE STATEMENT TAKEN ITA NOS 155 TO 160 PS MANGAPATHI RAJU & OTHERS VISA KHAPATNAM PAGE 5 OF 6 FROM THE ASSESSEE HE AGREED TO OFFER A SUM OF RS.1 4.00 LAKHS IN THE YEARS DETAILED BELOW: F.Y 2003-04 (A.Y 2004-05) - RS. 3.00 LAKHS F.Y.2004-05 (A.Y.2005-06) - RS. 4.00 LAKHS F.Y.2005-06 (A.Y.2006-07) - RS. 7.00 LAKHS HOWEVER DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE TRIED TO EXPLAIN THE SOURCES FOR MAKING THE ABOVE SAID INVES TMENT BY WAY OF CASH FLOW STATEMENTS. THE ASSESSING OFFICER ACCEPTED TH E SOURCES TO THE EXTENT OF RS.2.00 LAKHS FOR THE FINANCIAL YEAR 2004-05 REL EVANT TO THE ASSESSMENT YEAR 2005-06. ACCORDINGLY HE MADE ADDITIONS OF RS. 3.00 LAKHS AND RS.2.00 LAKHS RESPECTIVELY IN THE ASSESSMENT YEARS 2004-05 AND 2005-06. THE LEARNED CIT(A) ALSO SUSTAINED THE SAID ADDITIONS. 10. DURING THE COURSE OF HEARING THE LEARNED A UTHORISED REPRESENTATIVE SUBMITTED THAT THE AMOUNT OF RS.12.00 LAKHS VOLUNTA RILY OFFERED IN THE HANDS OF THE ASSESSEE IN THE ASSESSMENT YEARS 2000- 01 AND 2001-02 IS AVAILABLE FOR MAKING THE IMPUGNED INVESTMENT IN JEW ELLERY AND ACCORDINGLY SOUGHT TELESCOPING OF THE SAME AGAINST THE SAID VOL UNTARY OFFER. ON THE OTHER HAND THE LEARNED D.R SUBMITTED THAT THE PARTN ERSHIP FIRM VIZ. M/S CHARTERED CONSTRUCTIONS & CO. HAD OFFERED A SUM OF ABOUT RS.30.00 LAKHS TOWARDS CESSATION OF LIABILITY FOR WHICH TELESCOPI NG BENEFIT CANNOT BE GIVEN. 11. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSUE. AS STATED EARLIER THE ASSESSEE AND HIS OTHER PARTNER TOGETHER HAD OFF ERED A SUM OF RS.18.00 LAKHS IN THEIR RESPECTIVE HANDS CONSIDERING THE EVI DENCES OF UNDISCLOSED RECEIPTS TO THE TUNE OF ABOUT RS.48.00 LAKHS. THES E ASSESSEES HAVE DEDUCTED A SUM OF ABOUT RS.30.00 LAKHS BEING THE A DDITIONAL INCOME OFFERED BY THE SAID PARTNERSHIP FIRM IN PURSUANCE O F SURVEY. THE CONTENTION OF THE LEARNED D.R IS THAT THE SAID ADDITIONAL INCO ME OF RS.30.00 LAKHS WAS OFFERED TOWARDS CESSATION OF LIABILITY. THUS IT MA Y BE SEEN THAT THE AMOUNT OF RS.18.00 LAKHS OFFERED BY THE ASSESSEES IS OVER AND ABOVE THE AMOUNT OF RS.30.00 LAKHS AND HENCE THE SAID RS.18.00 LAKHS CA NNOT BE TAKEN AS CESSATION OF LIABILITY. SECONDLY WE HAVE ALREADY HELD IN THE FOREGOING PARAGRAPHS THAT THE UNDISCLOSED RECEIPTS PERTAINING TO THE FIRM CAN ONLY BE ASSESSED IN THE HANDS OF THE SAID FIRM ONLY. THIRD LY THE ASSESSEES HAVE ITA NOS 155 TO 160 PS MANGAPATHI RAJU & OTHERS VISA KHAPATNAM PAGE 6 OF 6 VOLUNTEERED THEMSELVES TO AGREE TO THE SUSTENANCE O F ADDITION OF RS.18.00 LAKHS CITED ABOVE. FOURTHLY THERE IS NO EVIDENCE TO SHOW THAT THE ABOVE SAID AMOUNT HAS BEEN SPENT AWAY. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO SEEK TELESCOPING B ENEFIT FOR THE IMPUGNED INVESTMENT IN THE JEWELLERY. ACCORDINGLY WE SET A SIDE THE ORDERS OF LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFIC ER TO ALLOW THE TELESCOPING BENEFIT SOUGHT BY THE ASSESSEE. 12. IN THE RESULT ALL THE APPEALS OF THE ASSESSEES ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 4 TH JULY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 04-07-2011 COPY TO 1 SHRI P.S. MANGAPATHI RAJU PLOT NO.90 DASPALLA HI LLS VISAKHAPATNAM 2 SHRI V. SATYANARAYANA RAJU 50-27-8/21 SEETHAMMAD HARA VISAKHAPATNAM 3 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM 4 5. THE CIT CENTRAL HYDERABAD THE CIT(A) VISAKHAPATNAM 6 THE DR ITAT VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM