The ACIT, Circle-4(1), Visakhapatnam v. Sri K Subramanyameswara Rao, Visakhapatnam

ITA 545/VIZ/2002 | 1995-1996
Pronouncement Date: 05-10-2010 | Result: Partly Allowed

Appeal Details

RSA Number 54525314 RSA 2002
Assessee PAN VIZAG2002K
Bench Visakhapatnam
Appeal Number ITA 545/VIZ/2002
Duration Of Justice 8 year(s) 2 month(s) 20 day(s)
Appellant The ACIT, Circle-4(1), Visakhapatnam
Respondent Sri K Subramanyameswara Rao, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 05-10-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 05-10-2010
Assessment Year 1995-1996
Appeal Filed On 15-07-2002
Judgment Text
ITA NO.545/VIZAG 2002 K.SUBRAMMANYESWAR RAO VISAKHAPATNAM 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.545/VIZAG/2002 ASSESSMENT YEAR: 1995-96 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4(1) VISAKHAPATNAM VS. K.SUBRAMANYESWAR RAO VISAKHAPATNAM (APPELLANT) (RESPONDENT) GIR NO: S-727 APPELLANT BY: SHRI SUBRATA SARKAR CIT(DR) RESPONDENT BY: SHRI C.V.S. MURTHY CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 14-03-2002 PASSED BY LEARNED CIT (A)-II VISAKHAPATN AM AND IT RELATES TO THE ASSESSMENT YEAR 1995-96. 2. THE GROUNDS RAISED BY THE REVENUE GIVE RISE TO T HE FOLLOWING ISSUES: A) ADDITIONAL RELIEF GRANTED IN RESPECT OF JEWELLE RY B) DELETION OF ADDITION RELATING TO UNEXPLAINED CA SH C) DELETION OF ADDITION RELATING TO DIAMOND JEWELL ERY 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS ON 28-6-1 994 IN A GROUP OF CONCERNS IN WHICH THE ASSESSEE WAS A KEY PERSON. TH E ASSESSMENT IN THE HANDS OF THE ASSESSEE WAS ORIGINALLY COMPLETED UNDE R SECTION 144 OF THE ACT. IN THE APPEAL PREFERRED BY THE ASSESSEE AGAINS T THE SAID BEST JUDGMENT ASSESSMENT THE LEARNED CIT(A) RESTORED BA CK THE CASE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REDO T HE ASSESSMENT. ITA NO.545/VIZAG 2002 K.SUBRAMMANYESWAR RAO VISAKHAPATNAM PAGE 2 OF 6 ACCORDINGLY THE ASSESSING OFFICER COMPLETED THE AS SESSMENT UNDER SECTION 143(3) R.W.S. 250 OF THE ACT BY MAKING VARIOUS ADDI TIONS. THE APPEAL PREFERRED BY THE ASSESSEE AGAINST THE SAID ASSESSME NT ORDER BEFORE LEARNED CIT (A) WAS PARTLY ALLOWED. AGGRIEVED THE REVENUE HAS FILED THIS APPEAL ASSAILING THE DECISION OF THE LEARNED CIT (A) IN GR ANTING RELIEF IN RESPECT OF ISSUES CITED IN THE PRECEDING PARAGRAPH. 4. THE FIRST ISSUE RELATES TO THE ADDITIONAL RELIEF GRANTED IN RESPECT OF JEWELLERY. DURING THE COURSE OF SEARCH THE DEPART MENT FOUND GOLD JEWELLERY OF 1464GM WITH THE ASSESSEE. THE ASSESSEE CLAIMED THAT THEY BELONG TO HIS WIFE SMT. K.VIJAYA LAKSHMI AND HIS DA UGHTER SMT. BHAVANI. THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANATIO NS FURNISHED IN THIS REGARD FULLY. ACCORDINGLY HE GRANTED A DEDUCTION OF 900 GMS IN AGGREGATE I.E. 500GM FOR THE DAUGHTER AND 400GM FOR THE WIFE OF THE ASSESSEE. ACCORDINGLY THE VALUE OF BALANCE GOLD JEWELLERY OF 564GM WAS ADDED IN THE HANDS OF THE ASSESSEE. BEFORE THE LEARNED CIT (A) IT WAS CONTENDED THAT THE DAUGHTER OF THE ASSESSEE SMT. BHAVANI IS ASSESS ED TO INCOME TAX AND HENCE THE JEWELLERY BELONGING TO HER WEIGHING 922G M SHOULD BE GIVEN FULL CREDIT. IT WAS ALSO SUBMITTED THAT THE ASSESSEES WI FE MRS. K. VIJAYA LAKSHMI WAS IN POSSESSION OF 460GM AT THE TIME OF SEARCH AN D HENCE THE SAME SHOULD BE GIVEN CREDIT. THE LEARNED CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE AND GRANTED RELIEF TO THE EXTENT CLAIMED B Y THE ASSESSEE. THE REVENUE IS ASSAILING THE SAID DECISION OF LEARNED C IT(A). 4.1 WE NOTICE THAT THE ASSESSING OFFICER HAD GRANTE D DEDUCTION OF 400GM OF GOLD JEWELLERY FOR SMT. K. VIJAYA LAKSHMI BY PLACING RELIANCE ON THE WEALTH TAX RETURN FILED BY HER FOR THE ASSESSME NT YEAR 1992-93. IN THIS CASE THE SEARCH HAS TAKEN PLACE IN JUNE 1994 I.E AFTER TWO YEARS FROM THE VALUATION DATE OF THE WEALTH TAX RETURN CITED ABOVE . IN THESE TWO YEARS A ITA NO.545/VIZAG 2002 K.SUBRAMMANYESWAR RAO VISAKHAPATNAM PAGE 3 OF 6 WOMAN CAN REASONABLY BE EXPECTED TO HAVE PURCHASED ADDITIONAL 60 GMS OF JEWELLERY I.E. TO THE EXTENT OF ADDITIONAL RELIEF GRANTED BY THE LEARNED CIT(A). HENCE WE FIND THE DECISION OF LEARNED CIT( A) RELATING TO THE JEWELLERY OF SMT. K.VIJAYALAKSHMI TO BE REASONABLE AND ACCORDINGLY WE UPHOLD THE SAME. 4.2 NEXT ITEM IN THIS ISSUE RELATES TO THE CLA IM OF ASSESSEES DAUGHTER SMT. BHAVANI. WITH RESPECT TO THIS CLAIM WE FEEL IT PERTINENT TO EXTRACT BELOW THE OBSERVATIONS MADE BY THE LEARNED CIT (A) IN THIS REGARD. SIMILARLY AS CLAIMED BY THE APPELLANTS DAUGHTER AT 922GMS ALSO HAS TO BE CONSIDERED AS A REASONABLE POSSESSIO N. THIS ASPECT HOWEVER HAS TO BE VERIFIED IN HER OWN ASSESSMENT WHO IS ALSO ASSESSED IN THE GIR NO.B-70 4 WITH A.C.I.T CIRCLE-4(1) VISAKHAPATNAM. AFTER HAVING OBSERVED THAT THE SAID CLAIM MADE BY T HE DAUGHTER OF THE ASSESSEE REQUIRES VERIFICATION THE LEARNED CIT (A) HAS GRANTED FULL CREDIT OF 922GMS. WE FIND THIS DECISION OF LEARNED CIT(A) TO BE CONTRADICTORY TO THE OBSERVATIONS MADE BY HIM. IN OUR VIEW THE RIGHT CO URSE OF ACTION FOR LEARNED CIT(A) SHOULD HAVE BEEN TO REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR MAKING NECESSARY VERIFICATION AS OPINED BY HIM. THUS THE DECISION OF LEARNED CIT(A) ON THIS ISSUE REQUIR ES MODIFICATION. ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO MAKE NECESSARY VERIFICATION AS OPINED BY THE LEARNED CIT (A) AND GRANT APPROPRIATE DEDUCTION IN RESPECT OF JEWEL LERY THAT WERE CLAIMED TO BELONG TO THE DAUGHTER OF THE ASSESSEE SMT. BHAVAN I. 5. THE NEXT ISSUE RELATES TO THE ADDITION OF UNEXPL AINED CASH OF RS.1 32 624/-. THE BACK GROUND OF THIS ADDITION IS SET OUT IN BRIEF. ON THE DATE OF SEARCH THE SEARCH PARTY NOTICED A DEFICIT CASH BALANCE OF RS.88 728/- IN THE BOOKS OF M/S VIJAYA DURGA FOUNDR IES A CONCERN IN WHICH ITA NO.545/VIZAG 2002 K.SUBRAMMANYESWAR RAO VISAKHAPATNAM PAGE 4 OF 6 THE ASSESSEE HEREIN IS A MAIN PARTNER. THE SEARCH P ARTY ALSO FOUND A CASH BALANCE OF RS.24 398/- AT HIS RESIDENCE AND FURTHER A SUM OF RS.19 500/- WITH HIM. THE ASSESSEE EXPLAINED THAT HE HAD TAKEN CASH FROM M/S VIJAYADURGA FOUNDRIES AND THE CASH FOUND WITH HIM A ND AT HIS RESIDENCE WAS PART OF THE SAID WITHDRAWALS. THE ASSESSING OFFICE R REJECTED THE SAID EXPLANATIONS AND ACCORDINGLY ADDED ALL THE THREE IT EMS IN THE HANDS OF THE ASSESSEE TREATING THEM AS UNEXPLAINED CASH. THE SAI D ADDITION WAS DELETED BY LEARNED CIT (A). 5.1 IT IS AN UNDISPUTED FACT THAT THE CASH BOOKS OF M/S VIJAYA DURGA FOUNDRIES WAS SHOWING A CASH BALANCE OF RS.88 728/- . THE ASSESSEE IS A MAIN PARTNER IN THE SAID CONCERN AND HENCE THE CLAI M MADE BY HIM IN THIS REGARD THAT HE HAD DRAWN THE ENTIRE CASH FROM THE S AID CONCERN IS A PROBABLE CLAIM AND THE SAME CANNOT BE REJECTED WITH OUT ANY MATERIAL TO CONTRADICT THE SAME. THE ASSESSEE HAS ALSO EXPLAINE D THAT THE CASH BALANCE OF RS.19 500/- FOUND WITH HIM AND OF RS.24 398/- FO UND AT HIS RESIDENCE ARE PART OF THE ABOVE SAID CASH BALANCE OF RS.88 728/-. THE SAID EXPLANATION OF THE ASSESSEE IS ALSO REASONABLE AS THERE IS NO MAT ERIAL TO SHOW THAT THE CASH BALANCE DRAWN FROM THE CONCERN COULD NOT HAVE BEEN AVAILABLE WITH THE ASSESSEE. ACCORDINGLY WE DO NOT FIND ANY INFIR MITY IN THE DECISION OF THE LEARNED CIT (A) IN DELETING THE ADDITION OF RS.1 32 624/-. 6. THE NEXT ISSUE RELATES TO THE ADDITION OF VA LUE OF DIAMOND JEWELLERY. DURING THE COURSE OF SEARCH THE SEARCH PARTY NOTIC ED A DIAMOND NECKLACE AND A DIAMOND RING IN THE POSSESSION OF THE ASSESSE E. THE ASSESSING OFFICER GOT IT VALUED BY A REGISTERED VALUER WHO E STIMATED THEIR VALUE AT RS.74 000/-. THE ASSESSEE EXPLAINED THAT THEY WERE PURCHASED OUT OF SAVINGS FROM AGRICULTURAL INCOME AND RENTAL INCOME BUT HE COULD NOT FILE ANY EVIDENCE FOR AVAILABILITY OF AGRICULTURAL INCOM E. ACCORDINGLY THE ITA NO.545/VIZAG 2002 K.SUBRAMMANYESWAR RAO VISAKHAPATNAM PAGE 5 OF 6 ASSESSING OFFICER ADDED THE SAID AMOUNT OF RS.74 00 0/- IN THE HANDS OF THE ASSESSEE. BEFORE LEARNED CIT(A) THE ASSESSEE EXPL AINED THAT HE HAS USED PART OF CASH DRAWN FROM M/S VIJAYADURGA FOUNDRY AND AGRICULTURAL INCOME FOR PURCHASING THE SAID DIAMOND JEWELLERY. THE ASS ESSEE ALSO FILED A VALUATION CERTIFICATE FROM ANOTHER REGISTERED VALUE R WHO HAD ESTIMATED THE VALUE OF DIAMOND JEWELLERY AT RS.55 000/-. THE LEA RNED CIT(A) FELT THAT THE ASSESSEE WAS HAVING SUFFICIENT CASH BALANCE TO PURC HASE THE IMPUGNED DIAMOND JEWELLERY AND ACCORDINLY DELETED THE ENTIR E AMOUNT OF RS.74 000/- 6.1 IN THE EARLIER PARAGRAPHS WE HAVE HELD THAT THE ASSESSEE COULD HAVE DRAWN CASH OF RS.88 728/- FROM THE CONCERN M/S VIJA YADURGA FOUNDRIES. AFTER DEDUCTING THE CASH BALANCE FOUND AT HIS RESID ENCE AND WITH HIM THE ASSESSEE WAS LEFT WITH A CASH BALANCE OF RS.44 832/ -. THE CLAIM OF THE ASSESSEE IS THAT HE HAD UTILIZED THE SAID CASH BALA NCE AND PART OF HIS AGRICULTURAL INCOME TO PURCHASE THE IMPUGNED DIAMON D JEWELLERY. THE VALUE OF DIAMOND JEWELLERY ACCORDING TO THE VALUATI ON OBTAINED BY THE ASSESSING OFFICER IS RS.74 000/- WHILE IT IS RS.55 000/- ACCORDING TO THE ASSESSEE. THE CLAIM OF THE ASSESSEE IS THAT HE HAD PURCHASED THIS JEWELLERY ONLY FEW DAYS BEFORE THE DATE OF SEARCH. IN THAT C ASE THE ASSESSEE COULD BE IN A POSITION TO PRODUCE PURCHASE BILLS IN SUPPO RT OF HIS CLAIM OF COST OF JEWELLERY INSTEAD OF RELYING UPON A VALUATION CERT IFICATE. HOWEVER THE ASSESSEE FAILED TO DO SO. FROM THE ASSESSMENT ORDE R WE NOTICE THAT THE ASSESSING OFFICER HAS ACCEPTED THE AGRICULTURAL INC OME AT RS.45 000/-. HENCE THE SAVINGS FROM AGRICULTURAL INCOME CANNOT B E ALTOGETHER RULED OUT. HENCE ON CONSIDERING THE AVAILABILITY OF AGRICULTU RAL INCOME AVAILABILITY OF CASH OUT OF THE WITHDRAWALS MADE FROM M/S VIJAYADUR GA FOUNDRIES IT IS POSSIBLE THAT THE ASSESSEE COULD HAVE UTILIZED THEM FOR MAKING INVESTMENT IN THE IMPUGNED DIAMOND JEWELLERY. HENCE ON A CONS PECTUS OF THE MATTER WE ARE OF THE VIEW THAT AN ADDITION OF RS.15 000/- ON ACCOUNT OF DIAMOND ITA NO.545/VIZAG 2002 K.SUBRAMMANYESWAR RAO VISAKHAPATNAM PAGE 6 OF 6 JEWELLERY WOULD MEET THE ENDS OF JUSTICE AND DIRECT THE ASSESSING OFFICER TO MAKE THE ADDITION ACCORDINGLY. THE ORDER OF LEARNE D CIT(A) STANDS MODIFIED ACCORDINGLY. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS TREAT ED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 5 TH OCTOBER 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 5-10-2010 COPY TO 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-4( 1) RANGE-4 VISAKHAPATNAM 2 SHRI K. SUBRAMANYESWAR RAO MANAGING PARTNER M/S VIZAG FOUNDRIES VISAKHAPATNAM 3 4. THE CIT 2 VISAKHAPATNAM THE CIT(A)-II VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM