Smt T Sesha Ratnam, v. The DCIT, Central Circle, Vijayawada

ITA 49/VIZ/2010 | 2005-2006
Pronouncement Date: 29-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 4925314 RSA 2010
Assessee PAN AVRPS1311C
Bench Visakhapatnam
Appeal Number ITA 49/VIZ/2010
Duration Of Justice 1 year(s) 1 month(s) 27 day(s)
Appellant Smt T Sesha Ratnam,
Respondent The DCIT, Central Circle, Vijayawada
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 29-03-2011
Date Of Final Hearing 17-03-2011
Next Hearing Date 17-03-2011
Assessment Year 2005-2006
Appeal Filed On 01-02-2010
Judgment Text
ITA NOS 49 50 93 AND 94 OF 2010 T SESHA RATNAM- KRISHN A DISTT. 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.49 & 50/VIZAG/2010 ASSESSMENT YEARS:2005-06 & 2006-07 SMT.NOOKALA SESHA RATNAM YAKAMURU KRISHNA DISTT. VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA (APPELLANT) PAN NO: AVRPS 1311 C (RESPONDENT) ITA NOS.93 & 94/VIZAG/2010 ASSESSMENT YEARS:2005-06 & 2006-07 DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA VS. SMT. NOOKAKLA SESHA RATNAM YAKAMURU KRISHNA DISTT. (APPELLANT) (RESPONDENT) PAN NO: AVRPS 1311 C ASSESSEE BY: SHRI C. SUBRAMANYAM CA DEPARTMENT BY: SHRI T.H. LUCAS PETER CIT (DR) & D.S.SUNDER SINGH SR.DR ORDER PER BENCH: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDERS PASSED BY LEARNED CIT(A) VIJAYAWADA AND THEY RELATE TO THE A SSESSMENT YEARS 2005- 06 & 2006-07. SINCE THE ISSUES URGED IN THESE APPEA LS ARE IDENTICAL IN NATURE THEY WERE HEARD TOGETHER AND ARE BEING DISP OSED OF BY THIS COMMON ORDER. 2. IN THE APPEALS FILED BY THE ASSESSEE THE ADDITIO N OF ACCRUED INTEREST ON PRONOTES IS CONTESTED IN BOTH THE YEARS. IN THE APPEALS FILED BY THE REVENUE THE DECISION OF LEARNED CIT(A) IN ACCEPTIN G THE CLAIM OF RECEIPT OF ITA NOS 49 50 93 AND 94 OF 2010 T SESHA RATNAM- KRISHN A DISTT. PAGE 2 OF 6 GIFT OF RS.12.50 LAKHS FROM THE BROTHER OF ASSESSEE IS BEING CONTESTED IN BOTH THE YEARS. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 09-09-2005 IN TH E BUSINESS AND RESIDENTIAL PREMISES OF SHRI TALLAM HANUMANTHA RAO THE HUSBAND OF THE ASSESSEE. DURING THE COURSE OF SEARCH DOCUMENTS E VIDENCING INVESTMENTS MADE BY THE ASSESSEE WERE FOUND. THE INVESTMENTS W ERE IN THE FORM OF ADVANCING LOANS ON THE BASIS OF PRONOTES AND THE RE CEIPTS EVIDENCING MAKING OF FIXED DEPOSITS WITH BANKS. CONSEQUENT TH ERETO A NOTICE UNDER SECTION 153C WAS ISSUED TO THE ASSESSEE. OUT OF TH E TOTAL VALUE OF PRO NOTES AND FIXED DEPOSIT RECEIPTS (FDR) SO FOUND A SUM OF RS.9.25 LAKHS WAS RELATED TO THE ASSESSMENT YEAR 2005-06 AND RS.5 .45 LAKHS WAS RELATED TO THE ASSESSMENT YEAR 2006-07. FOR THE PURPOSE OF EXPLAINING THE SOURCES FOR THE INVESTMENTS CITED ABOVE THE ASSESSEE PREPA RED CASH FLOW STATEMENTS FOR BOTH THE YEARS. IN THE SAID CASH FL OW STATEMENT THE ASSESSEE HAD SHOWN RECEIPT OF FUNDS TO THE TUNE OF RS.12.50 LAKHS FROM SHRI N.V. SESHAGIRI RAO THE BROTHER OF THE ASSESSEE WH ICH WAS LATER CLARIFIED AS GIFT RECEIPTS. IN SUPPORT OF THE SAID CLAIM BOTH THE ASSESSEE AS WELL AS SHRI N.V. SESHAGIRI RAO FILED AFFIDAVITS. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE RECEIPT OF GIFT AND ACCORDINGLY ASSE SSED THE INVESTMENTS TO THE EXTENT UNEXPLAINED WHICH WORKED OUT TO RS.9 69 752/- FOR THE ASSESSMENT YEAR 2005-06 AND RS.5 45 000/- FOR THE A SSESSMENT YEAR 2006- 07. THE ASSESSING OFFICER ALSO ASSESSED THE INTERE ST RECEIVABLE ON PRO NOTES ON ACCRUAL BASIS BY ESTIMATING THE ACCRUED IN TEREST AT RS.67 259/- FOR THE ASSESSMENT YEAR 2005-06 AND RS.60 169/- FOR THE ASSESSMENT YEAR 2006-07. AGGRIEVED THE ASSESSEE CARRIED THE MATTE RS IN APPEAL BEFORE THE LEARNED CIT (A). THE FIRST APPELLATE AUTHORITY CONF IRMED THE ADDITIONS RELATING TO ACCRUED INTEREST. HOWEVER HE ACCEPTED THE CLAIM OF RECEIPT OF GIFT OF RS.12.50 LAKHS FROM THE BROTHER OF THE ASSE SSEE. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A) BOTH THE PARTIES ARE IN APPEAL BEFORE US. ITA NOS 49 50 93 AND 94 OF 2010 T SESHA RATNAM- KRISHN A DISTT. PAGE 3 OF 6 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE APPEALS FILED BY THE ASSESSEE THE ONLY ISSUE URGED RELATES TO THE ASSESSMENT OF ACCRUED INTEREST ON PRONOTES. DURING THE COURSE OF HEARING THE LEARNED A.R SUBMITTED THAT THE ASSESSEE IS NOT A REGULAR MONEY LENDER AND HENCE HE WAS OFFERING INTEREST INCOME ON RECEIP T BASIS WHEREVER THERE IS NO CERTAINTY OF RECEIPT OF INCOME. ACCORDINGLY HE PLEADED THAT THERE IS NO JUSTIFICATION IN ASSESSING THE INTEREST INCOME ON A CCRUAL BASIS. HOWEVER IT WAS NOTICED THAT THE ASSESSEE HAD ACCOUNTED FOR INT EREST ON ACCRUAL BASIS IN RESPECT OF TWO PARTIES. HENCE THE SAID CLAIM WAS R EJECTED BY THE TAX AUTHORITIES. THE LEARNED A.R SUBMITTED THAT THE IN TEREST INCOME IN THE INSTANT CASE IS TO BE ASSESSED ON REAL INCOME PRI NCIPLE. HENCE THE ASSESSEE PREFERRED TO OFFER INTEREST INCOME ON RECE IPT BASIS WHENEVER HE IS NOT SURE OF DEFINITE RECOVERY OF PRINCIPAL AND INTE REST. TO A SPECIFIC QUERY RAISED BY THE BENCH THAT WHETHER THE ASSESSEE HAS O FFERED THE INTEREST INCOME ON RECEIPT BASIS IN SUBSEQUENT YEARS THE LE ARNED A.R STATED THAT THE MATTERS MAY BE SET ASIDE TO THE FILE OF ASSESSI NG OFFICER FOR VERIFICATION. THE LEARNED D.R ALSO AGREED WITH THE PLEA MADE BY T HE LEARNED A.R. ACCORDINGLY WE SET ASIDE THE ORDER OF LEARNED CIT( A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO VERIFY WHETHER THE ASSESSEE HAS OFFERED INTEREST INCOME ON THE PRONOTES ON RECEIPT BASIS IN SUBSEQUENT YEARS AND IF HE IS SATI SFIED WITH THE SAID CLAIM OF THE ASSESSEE THEN THE ASSESSING OFFICER SHALL DELE TE THE INTEREST ASSESSED ON ACCRUAL BASIS. OTHERWISE THE INTEREST INCOME AS SESSED ON ACCRUAL BASIS SHALL STAND. WE ORDER ACCORDINGLY. 5. IN THE APPEAL FILED THE REVENUE THE DEPARTMENT IS ASSAILING THE DECISION OF LEARNED CIT(A) IN ACCEPTING THE CLAIM OF RECEIPT OF GIFTS OF RS.12.50 LAKHS FROM THE BROTHER OF THE ASSESSEE. IT WAS SUBMI TTED THAT SHRI N.V.SESHAGIRI RAO WAS ALSO SUBJECTED TO SEARCH AND HE HAD OFFERED HUGE AMOUNT AS ADDITIONAL INCOME AND FURTHER HE HAS DISC LOSED THE PAYMENT OF ITA NOS 49 50 93 AND 94 OF 2010 T SESHA RATNAM- KRISHN A DISTT. PAGE 4 OF 6 GIFT TO THE ASSESSEE IN HIS STATEMENT. WE NOTICE T HAT THE LEARNED CIT(A) HAS ALSO TAKEN INTO CONSIDERATION THE DECISION REND ERED BY HIM IN THE CASE OF SHRI N.V.SESHAGIRI RAO TO THE EFFECT THAT THE AD DITIONAL INCOME OFFERED BY THE ASSESSEE WOULD BE AVAILABLE TO HIM AS A POTENTI AL SOURCE FOR EXPLAINING THE INVESTMENTS MADE BY HIM. THE RELEVANT OBSERVAT IONS MADE BY LEARNED CIT(A) IN THE ASSESSEES HAND IN THE APPEAL RELATIN G TO THE ASSESSMENT YEAR 2005-06 ARE EXTRACTED BELOW: 9.2 THE TOTAL UNEXPLAINED INVESTMENT DURING THE YE AR IN PRONOTES AND FDRS HAS BEEN QUANTIFIED AT RS.9 25 00 0/- IN THE ASSESSMENT ORDER. AS AN EXPLANATION FOR THE REQUISI TE SOURCES FOR THE INVESTMENT THE FUNDS FLOW STATEMENT AS AB OVE HAS BEEN RELIED UPON BY THE APPELLANT. AS SEEN FROM THE STATEMENT THE MAJOR SOURCE IS RS.12 50 000/- CLAIM ED TO HAVE BEEN RECEIVED AS A GIFT FROM SRI N.V.SESHAGIRI RAO BROTHER OF THE APPELLANT. . AS PER THE AFFIDAVIT OF THE APPELLANT SHE CLAIMED THAT SHE HAD RECEIVED A CASH GIFT OF RS.12 50 000/- DURING THE F INANCIAL YEAR 2004-05 AND OUT OF SUCH FUNDS SHE HAD IN TURN GIVE N A CASH GIFT OF RS.2 00 000/- TO HER HUSBAND SHRI T. HANUMA NTA RAO DURING THE YEAR. SRI N.V.SESHAGIRI RAO HAS ALSO CON FIRMED IN HIS AFFIDAVIT DT: 25/9/2007 THAT HE HAD GIVEN A CASH GI FT OF RS.12.5 LAKHS TO HIS SISTER THE APPELLANT OUT OF HIS INCO ME FROM OTHER SOURCES. I AM IN AGREEMENT WITH THE REASONING OF TH E LEARNED REPRESENTATIVE THAT IN CASE OF NON-MAINTENANCE OF B OOKS OF ACCOUNT THERE CAN BE NO OTHER PROOF FOR CASH GIFTS FROM THE CONFIRMATION FROM THE TWO PARTIES TO THE TRANSACTIO N AND ESTABLISHING THE FACT THAT THE DONOR HAD ADEQUATE F UNDS FOR MAKING SUCH A GIFT. IN THE STATEMENTS RECORDED DURI NG THE SEARCH OPERATIONS NO QUESTIONS REGARDING GIFTS MAD E OR RECEIVED WERE PUT TO EITHER THE APPELLANT OR THE AP PELLANTS BROTHER. THE FACT THAT THE ISSUE OF GIFTS WERE NOT COVERED IN ANY STATEMENTS DURING THE COURSE OF SEARCH SHOULD N OT BE TWISTED AND HELD AGAINST THE APPELLANT THAT THE APP ELLANT HAD NOT DEPOSED ABOUT THE CASH GIFT FROM SRI N.V.SESHAG IRI RAO. THE ASSESSING OFFICER HAS REJECTED THE THEORY OF CA SH GIFT OF RS.12 50 000/- AS AN AFTER THOUGHT AND WHILE DOING SO HE HAS ACCEPTED THE CLAIM OF THE APPELLANT THAT SHE HAD MA DE A GIFT OF RS.2 00 000/- TO SRI T. HANUMANTHA RAO OUT OF THE C ASH GIFT OF RS.12 50 000/-. IF THE SOURCES FOR THE CASH GIFT OF RS.2 00 000/- TO SRI T. HANUMANTHA RAO IS ACCEPTED BY THE ASSESSING OFFICER THEN THE CASH GIFT RECEIVED FROM SRI N.V.SESHAGIRI RAO WOULD HAVE TO BE IMPLIEDLY ACCEPT ED AS ITA NOS 49 50 93 AND 94 OF 2010 T SESHA RATNAM- KRISHN A DISTT. PAGE 5 OF 6 GENUINE AS WITHOUT THE FUNDS OF RS.12 50 000/- THE APPELLANT WOULD NOT HAVE BEEN IN A POSITION TO GIVE THE CASH GIFT OF RS.2 00 000/- TO SRI T. HANUMANTHA RAO. BOTH THE GI FTS ARE COVERED IN THE SAME AFFIDAVIT. THE LEARNED AUTHORIS ED REPRESENTATIVE HAS RIGHTLY CONTENDED THAT THERE CAN BE NO PARTIAL ACCEPTANCE OF AN AFFIDAVIT. 9.3 THE NEXT ISSUE FOR CONSIDERATION IS WHETHER SRI N.V.SESHAGIRI RAO HAD SUFFICIENT FUNDS TO MAKE A GI FT OF RS.12 50 000/- TO HIS SISTER. WHILE DECIDING THE AP PEAL IN THE CASE OF SRI N.V.SESHAGIRI RAO FOR THE ASSESSMENT YE AR 2006-07 AFTER EXAMINING ALL THE ISSUES RAISED I HAVE HELD I N THE APPELLATE ORDER VIDE ITA NO.26/TR/CIT(A)/VJA/09-10 DT.23/11/2009 THAT THE UNACCOUNTED INCOME OFFERED T OWARDS CASH SHORTAGE AND UNDER THE HEAD OTHER SOURCES FO R THE ASSESSMENT YEAR 2005-06 WAS AVAILABLE TO HIM AS A P OTENTIAL SOURCE FOR TELESCOPING THE UNDISCLOSED AND UNEXPLAI NED INVESTMENTS MADE SUBSEQUENTLY. THE RELEVANT EXTRACT FROM THE ORDER IS REPRODUCED BELOW: IT IS EVIDENT FROM THE JUDICIAL PRINCIPLES ENUNCIA TED ABOVE THE APPELLANTS CLAIM FOR TELESCOPING THE INVESTMENT IN EXCESS STOCK FOR THE ASSESSMENT YEAR 2006-07 INTO THE ADDITIONAL INCOME OFFERED UNDER THE HEAD OTHER SOURCES AND TOWARDS DEFICIT CASH BALANCE FOR THE ASSESSMENT YEAR 2005-06 REQUIRES TO BE ACCEPTED. UNACCOUNTED PAYMENTS UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE CAN BE SOURCED TO THE UNACCOUNTED INCOME DECLARED BY THE APPELLANT. ACCORDINGLY IT CAN SAFELY BE CONCLUDED THAT UNACCOUNTED INVESTMENT OF RS.6 58 298/- IN THE STOCK IS EXPLAINED BY UNDISCLOSED INCOME OFFERED FOR THE ASSESSMENT YEAR 2005-06. SINCE UNDISCLOSED AND ADDITIONAL INCOME OF RS.73 LAKHS HAS ALREADY BEEN ASSESSED FOR THE ASSESSMENT YEAR 2005-06 THE ADDITION OF RS.6 58 298/- IS CONSIDERED AS TELESCOPED INTO THE INCOME ASSESSED FOR THE ASSESSMENT YEAR 2005-06 AND ACCORDINGLY DELETED. 9.4 IN THE LIGHT OF THE ABOVE IT HAS TO BE CONSTRUE D THAT SRI N.V.SESHAGIRI RAO HAD ADEQUATE FUNDS TO MAKE THE CA SH GIFT OF RS.12 50 000/- TO THE APPELLANT DURING THE PERIOD R ELEVANT TO THE ASSESSMENT YEAR 2006-07. AS THE CLAIM OF CASH G IFT IS CONFIRMED BY BOTH DONOR AND DONEE BY WAY OF AFFIDAV ITS AND THE CAPACITY OF THE DONOR TO MAKE THE GIFT IS NOT Q UESTIONABLE THE GIFT PER SE NEEDS TO BE ACCEPTED. THE ADDITION OF RS.9 69 752/- AS UNEXPLAINED INVESTMENT UNDER SECTI ON 69 OF ITA NOS 49 50 93 AND 94 OF 2010 T SESHA RATNAM- KRISHN A DISTT. PAGE 6 OF 6 THE ACT THEREFORE IS NOT SUSTAINABLE AS THE APPELL ANT HAD ADEQUATE SOURCES FOR THE SAME AND HENCE THE ADDITI ON IS DELETED. ON A SIMILAR PRINCIPLE THE LEARNED CIT(A) DELETED T HE ADDITION MADE IN THE ASSESSMENT YEAR 2006-07 ALSO. ON A CAREFUL CONSIDE RATION OF THE ORDER OF LEARNED CIT(A) WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS TAKEN A CONSCIOUS DECISION AFTER DULY APPRAISING THE FACTS OF THE CASE. HENCE WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS DECISION AND ACCORDINGLY UPHOLD HIS DECISION ON THIS ISSUE. 6. IN THE RESULT THE APPEALS OF THE ASSESSEE AR E TREATED AS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 29-03-2011 COPY TO 1 SMT. NOOKALA SESHARATNAM W/O SRI T. HANUMANTHA RA O C/O SUDHIR TIMBER DEPOT YAKAMURU VUYYURU MANDAL KRISHNA DIS TT.521 165 2 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE VIJAYAWADA 3 4 THE CIT CENTRAL HYDERABAD THE CIT(A) VIJAYAWADA 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM