Sri M Srikanth., Visakhapatnam v. The ITO, Ward-2,, Srikakulam

ITA 407/VIZ/2007 | 2005-2006
Pronouncement Date: 09-02-2010 | Result: Allowed

Appeal Details

RSA Number 40725314 RSA 2007
Assessee PAN AMNPP2895H
Bench Visakhapatnam
Appeal Number ITA 407/VIZ/2007
Duration Of Justice 2 year(s) 4 month(s) 14 day(s)
Appellant Sri M Srikanth., Visakhapatnam
Respondent The ITO, Ward-2,, Srikakulam
Appeal Type Income Tax Appeal
Pronouncement Date 09-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 09-02-2010
Assessment Year 2005-2006
Appeal Filed On 25-09-2007
Judgment Text
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 NO. 4 06 / VIZAG/200 7 ASSESSMENT YEAR: 2005 - 06 PATHRUNI MADHAVA RA O SRIKAKULAM VS. ITO WARD - 2 SRIKAKULAM (APPELLANT) (RESPONDENT) PAN NO: AMNPP2895H ITA NO. 407 /VI Z AG/200 7 ASSESSMENT YEAR: 2005 - 06 MAVUDELLI SRIKANTH SRIKAKULAM VS. ITO WARD - 2 SRIKAKULAM (APPELLANT) (RESPONDENT) PAN NO: BIHPS 2872Q APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI G.S.S. GOPINATH DR ORDER PER SHRI B R BASKARAN ACCOUNTANT MEMBER: THESE TWO APPEALS FILED AT THE INSTANCE OF THE ASSE SSEES ARE DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A)-I VISAKHAP ATNAM IN THEIR RESPECTIVE HANDS AND THEY RELATE TO THE ASSESSMENT YEAR 2005-06. SINCE THE ISSUES AGITATED IN THESE TWO APPEALS ARE IDENTICAL IN NATURE WE FIND IT CONVENIENT TO DISPOSE THEM OF BY THIS COMMON ORDER. 2. THE ASSESSEE SRI P. MADHAVA RAO AND SHRI M.SRIKA NTH ARE ASSAILING THE DECISION OF LD. CIT(A) IN CONFIRMING THE ADDITIO N TO THE EXTENT OF RS.7.00 LAKHS AND RS.5.00 LAKHS RESPECTIVELY IN THEIR HANDS . 3. THE FACTS RELATING TO THESE ASSESSEES ARE STATED IN BRIEF. THESE TWO ASSESSEES ARE WORKING AS SMALL EMPLOYEES IN A WINE SHOP. THE ASSESSING OFFICER RECEIVED INFORMATION TO THE EFFECT THAT THESE ASSESSEES HAD PURCHASED DEMAND DRAFTS THROUGH THEIR BANK ACCOUNTS IN FEBRUARY 2005. TOTAL AMOUNT OF D.D. PURCHASED THROUGH THE ACCOUNT OF SRI MADHAVA RAO WAS RS.20 LAKHS AND THROUGH THE ACCOUNT OF SRI SRIKA NTH WAS RS.10 LAKHS. BOTH THE ASSESSEES CLAIMED THAT THEY HAVE ONLY FACIL ITATED SOME OTHER PERSONS TO OBTAIN D.D. THROUGH THEIR BANK ACCOUNTS BY UTILIZING THE FUNDS GIVEN BY THE RESPECTIVE PERSONS. IT WAS SUBMITTED THAT THE DEMAND DRAFTS PAGE 2 OF 6 WERE PURCHASED BY THEM FOR THE PURPOSE OF PARTICIPAT ING IN THE AUCTION HELD BY THE GOVERNMENT FOR GIVING LICENCE FOR RUNNING WINE SHOPS. BOTH THE ASSESSEES FILED CONFIRMATION LETTERS FROM ALL THE PERS ONS FOR WHOM THE DEMAND DRAFTS WERE SAID TO HAVE BEEN PURCHASED. LAT ER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL THE SAID PERSONS WERE PRODUCED BEFORE THE ASSESSING OFFICER. BEFORE THE AO THEY CONFIRMED THAT THEY HAVE ONLY PURCHASED THE DEMAND DRAFTS FOR THEIR OWN PURPOSE THR OUGH THE BANK ACCOUNT OF THESE ASSESSEES. THE ASSESSING OFFICER B Y APPLYING THE CREDIT WORTHINESS CONCEPT ACCEPTED THE CLAIM OF THESE PERS ONS TO THE EXTENT OF RS.13 LAKHS IN THE HANDS OF SHRI P. MADHAVA RAO AND RS.5 LAKHS IN THE HANDS OF SRI M. SRIKANTH. ACCORDINGLY HE MADE THE ADDIT ION OF RS.7 LAKHS IN THE HANDS OF P. MADHAVA RAO AND RS.5 LAKHS IN THE HANDS OF M. SRIKANTH. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THEN A.R. OF T HE ASSESSEES AGREED TO THE SAID ADDITION BY STATING THAT HE IS AGREEING TO THE ADDITION IN ORDER TO AVOID LITIGATION PROVIDED NO PENALTY PROCEEDING IS INITIATED. HOWEVER THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IN THE HANDS OF BOTH THE ASSESSEES. AGGRIEVED BY THE O RDER OF AO BOTH THE ASSESSEES CARRIED THE MATTER IN APPEAL BEFORE LD. CI T(A) WHO DISMISSED THE APPEALS OF THE ASSESSEES. HENCE BOTH THE ASSESSEES ARE IN APPEAL BEFORE US. 4. THE CONTENTIONS OF THE ASSESSEES ARE SUMMARIZED B ELOW: A) SHRI P. MADHAVA RAO IS WORKING AS A CLERK IN A WINE SHOP WHILE SHRI M. SRIKANTH IS WORKING AS A DRIVER. THUS THEY ARE SMALL EMPLOYEES WHO DO NOT HAVE THE CAPACITY TO EARN HUGE SUMS OF MONEY AS ALLEGED BY THE ASSESSING OFFICER. RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. P.K. NOORJAHAN (237 ITR 570) IT WAS ARGUED THAT THE ASSESSING OFFIC ER SHOULD NOT HAVE MADE THE ADDITIONS CONSIDERING THE FACTS OF THE CASE AND ALSO TAKING INTO ACCOUNT THE DISCRETION CONFERRED ON HIM U/S 69 OF THE ACT. B) THESE ASSESSEES HAVE ONLY FACILITATED THE PERSONS TO PURCHASE D.D BY UTILIZING THE AMOUNT PROVIDED BY THE OTHER PERSO NS. THE OTHER PERSONS ONLY HAVE UTILISED THE IMPUGNED DEMAND DRAF TS FOR THEIR OWN PURPOSES. PAGE 3 OF 6 C) ALL THE PERSONS FOR WHOM THE DEMAND DRAFTS WERE PURC HASED HAVE CONFIRMED THIS FACT BOTH IN THEIR CONFIRMATION LETTER AS WELL AS ILN THEIR STATEMENT TAKEN BY THE ASSESSING OFFICER. D) SECTION 69 IS NOT APPLICABLE IN THE HANDS OF THE AS SESSEES AS THESE ASSESSEES HAVE NEITHER MADE ANY INVESTMENT NOR RECO RDED THE SAME IN THEIR BOOKS OF ACCOUNTS. THE LD. A.R. FURTHER SUBMITTED THAT ANY AMOUNT WHIC H CANNOT BE TREATED AS AN INCOME OF AN ASSESSEE CANNOT BE TAXED EVEN IN A C ASE WHERE THE ASSESSEE HAS ACCEPTED THE ADDITION SINCE UNJUST ENR ICHMENT OF STATE IS NOT PERMITTED UNDER THE LAW. THE LD. A.R. RELIED UPON THE DECISION OF THIS BENCH IN THE CASE OF CHEMICAL BIOTECH LIMITED VIJAYAWADA IN ITA NO.505/V/08 PASSED ON 12.11.2009 WHEREIN BY PLACING RELIANCE O N THE DECISION OF APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD . 216 CTR 195 HELD THAT THE SHARE APPLICATION MONEY CANNOT BE TAXED UNDER S ECTION 68 OF THE ACT EVEN THOUGH THE ASSESSEE HAD AGREED TO THE ADDITION OF THE SAME. HE FURTHER SUBMITTED THAT THE A.R. OF THE ASSESSEE HAD A GREED TO THE ADDITION WITH A CONDITION THAT NO PENALTY PROCEEDING SHOULD BE INITIATED AGAINST THESE ASSESSEES. SINCE THE ASSESSING OFFICER HAS INI TIATED THE PENALTY PROCEEDINGS THE CONDITIONAL OFFER OF THE LD. A.R. FAI LS. 5. ON THE OTHER HAND LD DR RELIED UPON THE ORD ERS OF THE TAX AUTHORITIES. 6. WE HAVE HEARD THE PARTIES. IT WAS BROUGHT TO OU R NOTICE THAT ISSUE RELATING TO THE PURCHASE OF D.D. UNDER SIMILAR CIRC UMSTANCES WAS CONSIDERED BY THE BENCH IN SOME OTHER APPEALS ALSO. WE NOTICE TH AT IN THE CASE OF BALAGAM SRINIVAS IN ITA NO.518/VIZAG/2007 THIS BENCH VIDE ITS ORDER DATED 13.11.2009 HAS DECIDED THE ISSUE AS UNDER: 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PER USED THE RECORD. WE NOTICE THAT THE LD CIT (A) HAS CONSIDERED FOLLOWING CASE LA W IN SUPPORT OF HIS DECISION: A) R. THYAGARAJ VS. CIT (239 ITR 557( (MAD.)) IN THI S CASE THE APPLICATION FORM PURCHASE OF D.D. WAS SIGNED BY THE ASSESSEE. THE COURT HELD THAT THE INFERENCE DRAWN BY THE AO TO TH E EFFECT THAT THE ASSESSEE HAS PAID NECESSARY CASH FOR OBTAINING THE DRAFT IS NOT JUSTIFIED. B) MOHAN B. SAMTANI VS. CIT (199 ITR 370)(CAL.) IN T HIS CASE THE ASSESSEE CONSIGNED ANTIQUES AS A REPRESENTATIVE OF S TATE TRADING CORPORATION OF SIKKIM. THE DISPATCH OF THE GOODS WE RE DONE ON THE ORAL INSTRUCTION OF CHOGYAL. CHOGYAL ALSO CLAIMED O WNERSHIP OF THE PAGE 4 OF 6 ANTIQUE AND HIS CLAIM WAS NOT DISPROVED. HENCE IT WAS HELD THAT THE VALUE OF ANTIQUE CANNOT BE ADDED TO THE ASSESSEES I NCOME C) CIT VS. SMT. P.K. NOORJAHAN (237 ITR 570)(SC) IN THIS CASE THE ASSESSEE WAS FOUND TO BE NOT CAPABLE ENOUGH TO EARN THE INCOME DURING THE ASSESSMENT YEAR UNDER CONSIDERATION OR W AS IN A POSITION TO EARN IT FOR A DECADE OR MORE. THE HONBLE APEX COU RT HELD THAT SECTION 69 CONFERS A DISCRETION TO THE ASSESSING OFFICER IN T HE MATTER OF TREATING AN INVESTMENT AS INCOME OF THE ASSESSEE AND HENCE TH E QUESTION WHETHER THE SOURCE OF INVESTMENT SHOULD BE TREATED A S INCOME OR NOT U/S 69 HAS TO BE CONSIDERED IN THE LIGHT OF FACTS OF EACH CASE. D) JAYADAYA PODDAR VS. BIBI RAGRA AND OTHERS AIR (197 4 SC 171.) _ IN CASES FALLING U/S 69A 69B AND 69C THE PHRASEOLOGY USED GOES TO SHOW THAT BEFORE ANY OF THESE SECTIONS CAN BE INVOKED TH E CONDITION PRECEDENT AS TO THE EXISTENCE OF INVESTMENT EXPEND ITURE OMISSION TO STATE OR MAKING UNDERSTATEMENT OF VALUE ETC. MUST B E CONCLUSIVELY ESTABLISHED BY EVIDENCE AND/OR MATERIAL ON RECORD. (E) PRAKASH NARIAN VS. CWT (20 CTR 147) (ALL.) THE BU RDEN OF SHOWING THAT A PARTICULAR TRANSACTION IS A BENAMI AND THE O WNER IS NOT THE REAL OWNER RESTS ON THE PERSON ASSERTING IT TO BE SO AND THIS BURDEN HAS TO BE STRICTLY DISCHARGED BY ADDUCING LEGAL EVIDENCE O F DEFINITE CHARACTER WHICH WOULD EITHER DIRECTLY PROVE THE FACT OF BENAMI OR ESTABLISH CIRCUMSTANCES UNERRINGLY AND REASONABLY R AISING AN INFERENCE OF THE FACT. 4.1 WE NOTICE THAT THE ASSESSEE HAS FILED CONFIRMATION LETTERS FROM ALL THE 18 PERSONS ON WHOSE BEHALF THE DDS WERE CLAIMED TO H AVE BEEN PURCHASED BY THE ASSESSEE. SUBSEQUENTLY THE ASSESSEE HAS ALSO PRODUCED 17 PERSONS AND THE AO HAS RECORDED STATEMENT FROM THEM. IN THE SWORN STATEMENT ALSO ALL THE 17 PERSONS HAVE CONFIRMED THE SUBMISSION OF T HE ASSESSEE. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT THAT THE DD S WERE UITILISED BY THESE 18 PERSONS ONLY FOR THEIR OWN PURPOSE I.E. FOR MAKIN G APPLICATION IN THEIR RESPECTIVE NAMES. WE WERE ALSO INFORMED THAT THE REV ENUE DID NOT CAUSE ANY INQUIRY WITH REGARD TO THE DEMAND DRAFTS IN THE INDIVIDUAL HANDS OF THE 18 PERSONS. IN THE FACTS AND CIRCUMSTANCES OF THE C ASE WE ARE OF THE OPINION THAT ONCE INDIVIDUAL PERSONS HAVE ADMITTED THAT THE DDS WERE PURCHASED ON THEIR BEHALF AND THAT THEY HAVE ONLY US ED THEM FOR THEIR OWN PURPOSE THE ONUS PLACED UPON THE ASSESSEE GETS DIS CHARGED. IN SUCH A SITUATION THE REVENUE MAY EXAMINE THE FINANCIAL STA TUS OF THE INDIVIDUAL PERSONS AND THE ADDITION IF ANY IS CALLED FOR IN T HEIR RESPECTIVE HANDS. WE NOTICE THAT THE LD CIT (A) HAS ANALYSED THE ISSUE I N RIGHT PERSPECTIVE AND HAS RENDERED HIS DECISION ON A CONSPECTUS OF MATTER . HENCE WE DO NOT FIND ANY NECESSITY TO INTERFERE IN HIS DECISION. 5.1 SIMILARLY IN THE CASE OF BUD DEPU VARA LAKSHMI IN ITA NO.15/VIZAG/2007 THIS BENCH VIDE ITS ORDER DATED 13-11-2009 HAS DECIDED AN IDENTICAL ISSUE AS UNDER: 6. DURING THE COURSE OF HEARING A SPECIFIC QUERY W AS RAISED TO THE LD. DR I.E. WHETHER THE ASSESSING OFFICER HAS MADE ANY INVES TIGATION IN THE INDIVIDUAL HANDS OF PERSONS ON WHOSE BEHALF THE DEMA ND DRAFTS WERE PURCHASED BY THE ASSESSEE. LD. DR REPLIED IN NEGAT IVE. LD DR ALSO PAGE 5 OF 6 CONFIRMED THAT ONLY THE PERSONS IN WHOSE BEHALF THE DEMAND DRAFTS WERE CLAIMED TO HAVE BEEN PURCHASED HAS APPLIED FOR OBTAI NING LICENSE FOR RUNNING IMFL SHOPS. HENCE IT IS PROVED THAT THE DEMAND DRA FTS WERE USED BY THE RESPECTIVE PERSONS. FURTHER ALL THE PERSONS HAVE A PPEARED BEFORE THE AO AND CONFIRMED THAT THE ASSESSEE HAS ONLY FACILITATED THE PURCHASING OF DEMAND DRAFTS. ONCE THE INDIVIDUAL PERSONS HAVE ADM ITTED THAT THE DEMAND DRAFTS WERE PURCHASED ON THEIR BEHALF AND THAT THEY O NLY HAVE USED THE SAID DEMAND DRAFTS FOR THEIR OWN PURPOSE IN OUR OPINION THE ONUS PLACED UPON THE ASSESSEE GETS DISCHARGED AND THE REVENUE WAS RE QUIRED TO EXAMINE THE FINANCIAL STATUS OF THE INDIVIDUAL PERSONS AND ADDIT ION IF ANY IS CALLED FOR IN THEIR RESPECTIVE HANDS. IN VIEW OF THE FORE GOING W E REVERSE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.12.00 LAKHS. 6.1 IN THE CASES CITED ABOVE THE BENCH HAS TAK EN A VIEW THAT SINCE THE DEMAND DRAFTS WERE PURCHASED BY SOME OTHER PERSONS THROUGH THE BANK ACCOUNT OF THE ASSESSEES THEREIN AND SINCE THE ASSES SEE HAD DISCHARGED THE ONUS IN THIS REGARD NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEES. IN THE INSTANT CASE ALSO IT IS NOT IN DISPUTE THAT THE IMPUGNED DEMAND DRAFTS WERE PURCHASED THROUGH THE BANK ACCOUNT OF TH E ASSESSEES HEREIN BY UTILIZING THE FUNDS PROVIDED BY SOME OTHER PERSONS A ND THEY HAVE ONLY UTILISED THE SAID DEMAND DRAFTS. THUS THE ASSESSEE S HEREIN ONLY HAVE FACILITATED THE OTHER PERSONS TO PURCHASE THE DEMAND DRAFTS. IN THESE CASES ALSO THE REVENUE DID NOT CARRY OUT ANY INVESTIGATI ON IN THE RESPECTIVE HANDS OF THE PERSONS WHO CLAIMED THE OWNERSHIP OF THE DEMAN D DRAFT. THOUGH THE THEN AR AGREED TO THE ADDITION WE NOTICE THAT IT W AS A CONDITIONAL AGREEMENT WITH A CONDITION THAT NO PENALTY PROCEEDI NGS SHOULD BE INITIATED. AS SUBMITTED BY THE LD AR THE AO HAS INITIATED THE PENALTY PROCEEDINGS IN THE HANDS OF BOTH THE ASSESSEES. WE HAVE ALREADY TA KEN THE VIEW THAT THE ASSESSEES IN THESE TYPES OF TRANSACTIONS HAVE ONLY FA CILITATED THE OTHER PERSONS TO PURCHASE DEMAND DRAFTS THEY CANNOT BE FAS TENED WITH THE TAX LIABILITY ON THE SAID FUNDS PROVIDED THE ASSESSEE HAS DISCHARGED THE ONUS PLACED UPON HIM. IN THE INSTANT CASES THE ASSESSE ES HEREIN HAVE DISCHARGED THEIR ONUS. IN VIEW OF THE FOREGOING WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS.7.00 LAKHS AND RS.5.00 LAKHS IN THE HANDS OF SHRI P.MADHAVA RAO AND SHRI M.SRIKANTH RESPECTIVELY. PAGE 6 OF 6 7. IN THE RESULT THE APPEALS OF THE ASSESSEES A RE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 9.2.2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM DATE: 9 TH FEBRUARY 2010 COPY TO 1 SRI P. MADHAVA RAO C/O K. MANOJ KUMAR D.NO.49 - 27 - 4/1 SECOND FLOOR VISAKHAPATNAM-530 016. 2 SRI M. SRIKANTH C/O K. MANOJ KUMAR D.NO.49 - 27 - 4/1 SECOND FLOOR VISAKHAPATNAM 3 ITO WARD - 2 SRIKAKULAM 4 THE CIT (A) - I VISAKHAPATNAM 5 THE CIT - 2 VISAKHAPATNAM 6 THE DR ITAT VISAKHAPATNAM 7 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM