Sri Madupalli Krishna Kishore, Eluru v. The Commissioner of Income Tax, Rajahmundry

ITA NO.509/VIZAG/2010 MADUPALLI KRISHNA KISHORE ELU RU PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 510/VIZAG/2010 ASSESSMENT YEAR: 2008 - 09 MADUPALLI KRISHNA KISHORE ELURU VS. COMMISSIONER OF INCOME TAX RAJAHMUNDRY (APPELLANT) PAN NO: ACEPM 0229 K (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI T.H. LUCAS PETER CIT (DR) ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 01.9.2010 PASSED BY LEARNED CIT RAJAHMUNDRY UNDER SECTION 263 OF THE ACT AND IT RELATES TO THE ASSESSMENT YEAR 2008-09. THE ASSESSEE IS CHALLENGING THE REVISION PROCEEDINGS INITIATED BY L EARNED CIT. 2. THE FACTS RELATING TO THE CASE ARE STATED I N BRIEF. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION UNDER SECTION 143(3) OF THE ACT BY PASSING A CRYPTIC ORDE R. SUBSEQUENTLY THE LEARNED CIT INITIATED REVISION PROCEEDINGS UNDER SE CTION 263 OF THE IN RESPECT OF THE FOLLOWING ISSUES: A) LOSS DECLARED IN THE BUSINESS OF TRADING IN SH ARES B) LEVYING OF PENALTY UNDER SECTION 271B OF THE A CT. C) LOSS FROM MONEY LENDING BUSINESS D) CASH CREDIT OF RS.2.10 CRORES THE ASSESSEE DID NOT RESPOND TO THE SHOW CAUSE NOTI CE ISSUED BY LEARNED CIT AND HENCE HE PASSED AN EX-PARTE ORDER. ON APPE AL FILED BY THE ASSESSEE THE TRIBUNAL SET ASIDE THE REVISION ORDER OF LEARNED CIT AS THE SAME WAS PASSED WITHOUT HEARING THE ASSESSEE AND HE NCE RESTORED THE MATTER TO THE FILE OF LEARNED CIT. ACCORDINGLY THE LEARNED CIT HAS PASSED THE IMPUGNED ORDER DIRECTING THE ASSESSING OFFICER TO REVISE THE ASSESSMENT ITA NO.509/VIZAG/2010 MADUPALLI KRISHNA KISHORE ELU RU PAGE 2 OF 5 ORDER ON THE LINES DISCUSSED IN THE REVISION ORDER. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. IT IS NOTICED THAT THE LEARNE D CIT HAS MENTIONED THE DATE OF THE ASSESSMENT ORDER PASSED UNDER SECTION 1 43(3) AS 28-11-2008. HOWEVER WE FIND THAT THE RETURN OF INCOME OF THE A SSESSEE WAS PROCESSED UNDER SECTION 143(1) ON 28-11-2008 AND THE ASSESSME NT ORDER UNDER SECTION 143(3) WAS PASSED ON 28-05-2009. 3. THE FIRST ISSUE RELATES TO THE CLAIM OF NET LOSS OF RS.82 98 360/- FROM THE BUSINESS OF TRADING IN SHARES/DERIVATIVES. THE ASSESSEE HAS CARRIED OUT THE BUSINESS OF TRADING IN SHARES/DERIVATIVES THROU GH TWO BROKERS NAMED M/S BALAJI EQUITIES AND M/S INDIA BULLS SECURITIES L TD. ACCORDING TO LEARNED CIT A) THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM OF LOSS WITHOUT PROPERLY AND COMPREHENSIVELY EXAMINING THE ISSUE BY CALLING FURTHER INFORMATION VIS--VIS LEGAL PROVISIONS. B) THE ACCOUNT COPIES OF THE ABOVE SAID TWO BROKERS SHOW A NET CREDIT BALANCE OF RS.360 238/- AND RS.47 171/- AS A T THE YEAR END WHICH IS THE NET OUT COME OF THE VARIOUS TRANSACTIO NS CARRIED OUT BY THE ASSESSEE. C) THE OPENING CREDIT BALANCE OF THE ASSESSEE IN THE BOOKS OF M/S BALAJI EQUITIES IS RS.12 121.70 WHICH UPON DEDUCTI ON FROM THE CLOSING CREDIT BALANCE OF RS.3 60 238.87 RESULTS IN A NET CREDIT BALANCE OF RS.3 48 117/- WHICH REFLECT THE OVER AL L PROFIT IN RESPECT OF THE TRANSACTIONS UNDER TAKEN THROUGH M/S BALAJI EQUITIES. THE OPENING CREDIT BALANCE OF RS.1 41 978/- WHEN SET OF F AGAINST THE CLOSING CREDIT BALANCE OF RS.47 170/- IN THE BOOKS OF THE OTHER BROKER M/S INDIA BULLS SECURITIES LTD RESULTS IN AN OVER AL L LOSS OF RS.94 808/- IN RESPECT OF TRANSACTIONS UNDERTAKEN THROUGH SUCH SECOND BROKER. THUS THERE IS AN OVER ALL NET PROFIT OF RS.2 53 309 /- (RS.3 48 117/- (-) RS.94 808/-). 3.1 LEARNED A.R SUBMITTED THAT THE ASSESSING OF FICER HAS VERIFIED THE IMPUGNED TRANSACTIONS DURING THE COURSE OF ASSESSME NT PROCEEDINGS EVEN THOUGH THERE IS NO DISCUSSION THE ASSESSMENT ORDER. HE SUBMITTED THAT THE ASSESSING OFFICER HIMSELF HAS OBTAINED DIRECTLY FR OM THE SHARE BROKERS THE ACCOUNT COPIES OF THE ASSESSEE AS AVAILABLE IN THEI R BOOKS. A COMPARISON OF THE SAID ACCOUNT COPIES WITH THE BOOKS OF ASSESSEE WOULD SHOW THAT THE TRANSACTIONS BETWEEN THE TWO TALLIED WITH EACH OTHE R. ACCORDINGLY THE ITA NO.509/VIZAG/2010 MADUPALLI KRISHNA KISHORE ELU RU PAGE 3 OF 5 LEARNED A.R CONTENDED THAT THE CLAIM OF THE LOSS OF RS.82 98 360/- WAS VERY MUCH EXAMINED BY THE ASSESSING OFFICER AND HEN CE IT IS WRONG ON THE PART OF THE LEARNED CIT TO PRESUME THAT THERE WAS N O EXAMINATION. HE FURTHER SUBMITTED THAT THE PRESUMPTION OF THE LEARN ED CIT THAT THE EVERY CREDIT AND DEBIT AVAILABLE IN THE SAID ACCOUNT COPI ES REPRESENTS THE PROFIT OR LOSS FROM THE SHARE TRANSACTIONS IS PATENTLY WRONG. HE INVITED OUR ATTENTION TO PAGE 28 OF THE PAPER BOOK TO SHOW THAT THE SAID ACCOUNT HAS ALSO BEEN CREDITED WITH THE PAYMENTS MADE BY THE ASSESSEE TO THE CONCERNED BROKER. ACCORDINGLY HE CONTENDED THAT NO REVISION PROCEEDI NG IS CALLED FOR ON THIS ISSUE. HOWEVER LEARNED D.R SUPPORTED THE ORDER OF LEARNED CIT. 3.2 IT IS WELL SETTLED PROPOSITION THAT THE LEA RNED CIT BEFORE INVOKING THE REVISION PROCEEDINGS UNDER SECTION 263 OF THE A CT HAS TO SATISFY HIMSELF THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE INSTANT ISSUE IT IS STATED THAT THE ASSESSING OFFICER HIMSELF HAS CALLED FOR T HE ACCOUNT COPIES FROM THE CONCERNED SHARE BROKERS. THUS IT IS NOT A CASE THA T THERE WAS NO EXAMINATION BY THE ASSESSING OFFICER. FURTHER THE LEARNED A.R INVITED OUR ATTENTION TO CERTAIN INSTANCES TO PROVE THAT THE TR ANSACTIONS WERE TALLYING BETWEEN THE BOOKS OF THE ASSESSEE AND THE SAID ACCO UNT COPIES. HENCE THERE COULD NOT HAVE BEEN AN OCCASION TO SUSPECT TH E VERACITY OF THE LOSS DECLARED BY THE ASSESSEE. ON THE OTHER HAND THERE IS BASIC FLAW IN THE PRESUMPTION ENTERTAINED BY THE LEARNED CIT THAT THE EVERY CREDIT AND DEBIT ENTRY REPRESENTS THE PROFIT/LOSS FROM SHARE TRANSAC TIONS. THE LEARNED A.R HAS POINTED OUT CERTAIN INSTANCES OF THE PAYMENTS M ADE BY THE ASSESSEE AND IF THE SAID PAYMENTS WERE REMOVED THE NET BALA NCE IN THE ACCOUNT OF THE ASSESSEE WOULD AUTOMATICALLY TURN INTO DEBIT BA LANCE. HENCE WE FIND THE PRESUMPTION OF LEARNED CIT TO BE ERRONEOUS AND HENCE WE ARE OF THE VIEW THAT THE DIRECTION ISSUED BY LEARNED CIT ON T HIS ISSUE IS ALSO ERRONEOUS. SINCE THE ASSESSING OFFICER HAS EXAMIN ED THE ISSUE AND NO FLAW WAS FOUND THEREIN WE ARE OF THE VIEW THAT THE REVI SION JURISDICTION IS NOT WARRANTED ON THIS ISSUE. ACCORDINGLY SET ASIDE THE DIRECTION OF LEARNED CIT ON THIS ISSUE. ITA NO.509/VIZAG/2010 MADUPALLI KRISHNA KISHORE ELU RU PAGE 4 OF 5 4. THE NEXT ISSUE THAT WAS AGITATED BY LEARNED A.R RELATES TO DIRECTION WITH REGARD TO THE CASH CREDIT OF RS.2.10 CRORES. THE FACTS RELATING TO THE SAID ISSUE ARE THAT THE ASSESSEE HAD OBTAINED A LOA N OF RS.2.10 CRORES FROM A PERSON NAMED SMT. RATNA DEVI SHARAF. ACCORDING T O LEARNED CIT THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE SAID LO AN AND BRING THE SAME TO TAX UNDER SECTION 68 OF THE ACT. ACCORDINGLY HE D IRECTED THE ASSESSING OFFICER TO TAX THE ABOVE SAID AMOUNT OF RS.2.10 CRO RES AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 4.1 THE LEARNED A.R SUBMITTED THAT THE ASSESSIN G OFFICER HAS EXAMINED THE IMPUGNED LOAN OF RS.2.10 CRORES DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS FURNISHED A CONFIRMA TION LETTER OBTAINED FROM THE SAID CREDITOR SMT. RATNA SARAF. LATER TH E ASSESSEE ALSO FURNISHED COPIES OF HER PASS PORT AND PAN ACCOUNT NUMBER. IT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE SAID LENDE R IS A NRI WITH SUFFICIENT MEANS. THE ASSESSING OFFICER AFTER EXAMINATION OF THESE DOCUMENTS WAS SATISFIED WITH THE GENUINENESS OF THE CREDIT WITHOU T ASKING FURTHER DETAILS AND HENCE THERE WAS NO OCCASION FOR THE ASSESSEE TO FURNISH ANY OTHER PARTICULARS. ACCORDINGLY HE SUBMITTED THAT THE AS SESSING OFFICERS ACTION CANNOT BE FOUND FAULT WITH AS IT IS HE WHO HAS TO D ECIDE THE SCOPE OF AN ENQUIRY AND HIS VIEW ON THIS ISSUE CANNOT BE TERMED AS ERRONEOUS. HOWEVER THE LEARNED D.R PLACED RELIANCE ON THE ORD ER OF LEARNED CIT. 4.2 HAVING HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE WE NOTICE THAT THE ASSESSING OFFICER HAS EXAMINED THE IMPUGNED ISSUE O F FRESH LOAN AND THE ASSESSEE HAS FILED CONFIRMATION LETTERS AND OTHER D OCUMENTS IN SUPPORT OF THE LOAN TAKEN BY HIM. THE ASSESSING OFFICER WAS S ATISFIED WITH THE CONFIRMATION LETTER AND OTHER DOCUMENTS THAT WERE F ILED BY THE ASSESSEE AND HAS ACCEPTED THE IMPUGNED CASH CREDIT. IN THE C ONFIRMATION LETTER THE LENDER HAS CONFIRMED THE LOAN. BESIDES IT WAS SHOW N THAT THE LENDER WAS A NRI AND WAS ALSO ASSESSED TO INCOME TAX. HENCE WE NOTICE THAT THE ASSESSING OFFICER HAS EXAMINED THE IMPUGNED ISSUE A ND HENCE WE ARE OF ITA NO.509/VIZAG/2010 MADUPALLI KRISHNA KISHORE ELU RU PAGE 5 OF 5 THE VIEW THAT THE ACTION OF THE ASSESSING OFFICER C ANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. HENCE WE ARE OF THE VIEW THAT THE IMPUGNED ISSUE IS OUTSIDE THE SCO PE OF REVISION PROCEEDING AND ACCORDINGLY SET ASIDE THE ORDER OF L EARNED CIT ON THIS ISSUE. 5. WITH REGARD TO THE REMAINING ISSUES WE ARE NOT CONVINCED WITH THE ARGUMENTS OF THE LEARNED A.R AND ACCORDINGLY WE DI SMISS THE GROUNDS RELATING TO THE SAME. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 18-02-2011 COPY TO 1 MR. MADUPALLI KRISHNA KISHORE D.NO.7D-1-54 EASTE RN STREET ELURU 534 001 2 THE COMMISSIONER OF INCOME TAX RAJAHMUNDRY 3 THE DR ITAT VISAKHAPATNAM. 4 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM