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V. Dayakar Rao Versus Deputy Commissioner of Income Tax

2016 (7) TMI 311 - ITAT HYDERABAD

Scope of assessment u/s 158BD - Held that:- Without any contrary evidence or incriminating material, AO had brought to tax the opening balance and some investments which are explained by the assessee in the cash flow statement. As can be seen from the orders, AO disbelieved certain investments without questioning the source of funds. Details of submissions made by the Ld. Counsel extracted in the above do indicate that for every investment made by the assessee there is corresponding source of th .....

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ssee has explained that he has separate assessment in the status of HUF and some of the investments are made by the HUF, but, without disproving the same AO simply brought to tax all those investments also in the hands of assessee. There is evidence on record that assessee also offered incomes in HUF status, having its own sources of income and those were not disproved. In view of the above, keeping in mind the limited jurisdiction for making assessment u/s 158BD and the fact that assessee could .....

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. Ramakotaiah, Accountant Member For the Assessee : Shri S. Rama Rao, AR For the Revenue : Shri B. Kurmi Naidu, DR ORDER Per B. Ramakotaiah, A. M. This is an appeal filed by assessee, who is a partner of M/s. Padmavathi Oil Producers, Warangal. Briefly stated, the Revenue conducted search and seizure operations on 31-01-1996 at the premises of the said partnership firm consequent to survey u/s. 133A of the Act. The AO initiated proceedings u/s. 158BD in the case of assessee herein. The AO origin .....

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ade same additions as were made at the time of earlier assessment proceedings. Against the said order of assessment, assessee filed the present appeal. 2. Consequent to search operations on 31-01-1996, assessee had filed return for the block period on 06-12-1996 admitting undisclosed income of ₹ 4,00,000/- as under: AY. Total income returned Original return of income Undisclosed Income 1986-87 to 1991-92 NIL NIL NIL 1992-93 4,44,400 44,400 4,00,000 1993-94 NIL NIL NIL 1994-95 NIL NIL NIL 1 .....

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said amounts are to be treated as the undisclosed income for the purpose of Sec.158BC Assessment Year 1992-93 1) Opening cash balance - ₹ 1,51,241/- 2) Gifts received by the appellant herein- ₹ 6,07 ,852/- Assessment Year 1993-94 1) Investments in Ushodaya Oil Producers - ₹ 5,21,180/- 2) Investment in Balaji Oil Producers - ₹ 20,000/- 3) Investments in Chits - ₹ 13,850/- Assessment Year 1994-95 1) Investments in shares of Ushodaya Agro Products - ₹ 23,85,000/ .....

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n shares of Ushodaya Agro Products - ₹ 11,51,000/- 2) Investment in purchase or property - ₹ 14,22,071/- 4. The Assessing Officer erred in arriving at a total undisclosed income of ₹ 91,50, 130/- Ground Nos. 1 & 5 are general in nature. 3.1 As far as the Ground No. 2 regarding order being time barred was not pressed. 3.2 Ground No. 3 is with regard to various additions made by AO in each of the assessment year in the Block. These are considered year wise amount wise as unde .....

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close friends and relatives on simple interest and that the closing cash on hand and bank was treated as ₹ 4,90,496/-. The same amount of ₹ 4,90,496/- was shown in the receipts and payments account filed during the course of assessment proceedings. He further submitted that the facts were already disclosed in the return of income filed before the search. No evidence was found during the course of search. AO is not justified in making the addition of ₹ 1,51,241/-. The addition d .....

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same was admitted by assessee in the return of income filed. 3.5. Ld. Counsel further submitted that gifts received by wife of assessee Smt. Uma of ₹ 2,03,460/- were admitted by her in the return of income filed in response to notice u/s. 158BD. The same should not have been added in the assessment of assessee. AY. 1993-94: 4. AO made an addition for investments in Ushodaya Oil Producers for an amount of ₹ 5,21,180/- which consists of the following items: i) ₹ 2 Lakhs invested .....

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Ushodaya Oil Producers. The capital contribution of ₹ 2 Lakhs by Smt. Vijaya Lakshmi was confirmed by her. She stated that ₹ 1 Lakh was received as a gift at the time of marriage and another ₹ 1 Lakh was received as a loan from her father-in-law Shri M. Lakshmi Narayana. The AO held that the said amount was taxable in the assessment of assessee. Ld. Counsel submitted that there is no evidence during the course of search that the amount was paid by assessee. There is no material .....

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at the said Shri Chandra Mohan is an assessee on file. He was filing returns of income and copies of the returns filed by him are available at Pages 23 to 28 of the Paper Book. He filed the returns as the Partner of Rupa Finance Syndicate. The C.A. Shri T. Gopi Chand was looking after the affairs of Shri V. Chandra Mohan issued certificate on 09- 10-1998 about his properties. According to the said certificate, Shri Chandra Mohan had movable/immovable properties worth ₹ 45,83,500/-. Shri Ch .....

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income. Assessee is not a partner of the said partnership firm. There is no evidence to show that the income derived by the partnership firm belong to assessee, except the presumption of AO. Ld. Counsel urged that the profit cannot be added in the assessment of assessee. 5. As far as investment in Balaji Oil Producers of ₹ 20,000/- is concerned, Ld. Counsel submitted that assessee admitted the investment amount of ₹ 20,000/- made by him. There was an opening balance of ₹ 4,90,4 .....

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gallu Chit Fund and ₹ 9,600/- in Pramida Chit Funds were made by assessee. There was an opening balance of ₹ 4,90,496/- and agricultural income of ₹ 1,25,000/-. The amount of ₹ 13,850/- was paid to chit fund companies and assessee was having sufficient funds on that date. Therefore, the AO was not justified in holding that ₹ 13,850/- represents the undisclosed income of assessee. Ld. Counsel submitted that this addition is also made based on the receipts and payment .....

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tted that the AO added the amount as found in the receipts and payments account and not based on the seized material. 7.1 With regard to the investment of ₹ 6,85,000/- by the wife of the assessee is concerned, Ld. Counsel submitted that she made the investment from her own sources of income. She is separately assessed to tax. She filed the return of income in Form No. 2B. Notice u/s 158BD was issued admitting undisclosed income of ₹ 2 lakhs. He, therefore, submitted that the investme .....

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assessment of the assessee in view of the fact that there is no evidence to show that the investment by HUF were made from out of the funds of the assessee. HUF s receipt and payment account also shows the investment of ₹ 8 lakhs by the HUF. 8. As regards the investment in purchase of property, which consists of plot at Mill Premises purchasd by Smt. V. Uma, Y. Mallaiah, M. Arunkumar and V. Chandra Mohan for ₹ 5,60,896/-, another site in the Mill Premises for ₹ 1,91,583 by the .....

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r persons. He submitted that there is no evidence during the course of search that the investment was made by the assessee. 8.2 With regard to the plot in the name of Sri V.Dayakar for ₹ 65,262/- is concerned, it is submitted that the investment was made from out of his own sources. 9. As far as the alleged investments in chits, which consists of receipt from Orugallu Chit Fund of ₹ 20,000/- and from Pramida Chit Funds of ₹ 65,000/- are concerned, Ld. Counsel submitted that thi .....

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8377; 38,000/- each in the names of the assessee and his wife Smt. Uma at For road, Warangal, are concerned, Ld. Counsel submitted that the Source for acquisition of plots are shown in receipts and payments accounts of the assessee and his wife. AY 1995-96 11. As far as investments in shares of Ushodaya Agro Products, which consists of investment in the shares of Ushodaya Agro Products in the name of the assessee of ₹ 9,00,000/- and in the name of his wife Smt. Um of ₹ 4,00,000/-, ar .....

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e of Smt. Uma is concerned, Ld. Counsel submitted that she invested the said amount towards share application money. She is separately assessed to tax. There is no evidence to show that her investment was made by the assessee. The addition was made based on the receipts and payments account filed and not based on the seized material. 12. As regards the investments in chits, which consists of investment in the Chits of Gunadeep of ₹ 9,875/- and Margardsi Chit Funds of ₹ 9,875/-, are c .....

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ized material. The amount is recorded in the receipts and payments account. 13. As regards investment in Padmavathi Cotton Corporation is concerned, Ld. Counsel submitted that this amount is shown in the Receipts Cotton Cor oration. and Payments account. AY 1996-97 14. As regards the investments in shares of Ushodaya Agro Products, which consists of investment in shares of Ushodaya Agro Products in the name of the assessee of ₹ 19,000/- and in the name of V. Chandra Mohan of ₹ 11,32, .....

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ounsel submitted that this investment is Smt.Uma, Y.Mallaiah, M.Arunkumar made in acquisition of 489 and V.Chandra Mohan for acquisition of sq.Yds. jointly in the names the property of 489 Sq.Yds. The Smt. Uma, Y.Mallaiah, investment was not made by the assessee. There is no evidence in the seized material to show that the investment was made by the assessee. 16. The ld. DR on the other hand defended the order of AO and also filed written submissions as follows: A survey operation u/s 133A of th .....

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; 7,46,956/-, certain unexplained investments and excess cash of ₹ 2 lakhs was found. Then the survey operations were converted into search under section 132 of the Income Tax Act. During the course of search, documents relating to the investment made by the assessee were found and seized. 2. Notice u/s 158BD was issued to the assessee. The assessee filed the return of income declaring undisclosed income of ₹ 4 lakhs for the assessment year 1992-93 in response to notice u/s 158BD. Th .....

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rs. The assessee contended that the Books of account have been misplaced and it is not possible to produce the same. The assessee himself accepted that no proper books of accounts maintained during the course of post-search proceedings. Further, the assessee has not explained how he would substantiate the final accounts relying upon by it in the absence of the books. Further, the assessee has not adduced any evidence for the preparation of Profit and Loss account and computation of income. Durin .....

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However, no documentary evidence was furnished regarding the ownership of lands, crops grown, sales made, expenses incurred etc. As regards the gifts received, it was explained that the gifts were received by his wife on 10th and 11th marriage anniversaries from the close relatives, but they are resisting to confirm the gifts. Thus, the assessee could not substantiate the gifts with necessary evidence except furnishing with the list of donors. Hence, the amounts were added as undisclosed income .....

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it may be observed that the assessee has not offered any explanation. 6. For the assessment year 1994-95 and 95-96, the investment made in shares of M/s. Ushodaya Agro Products ltd., and purchase of properties, plots in Warangal and investment in chits of ₹ 34,35,781/- and ₹ 18,71,580/- respectively were added in the absence of credible explanation by the assessee. During the assessment proceedings, it was found that most of the share-holders of the company are benamis of the assesse .....

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ilable on record. 16.1 In view of the above, Ld. DR submitted that the assessment made may be sustained and the grounds raised by the assessee may be dismissed. 17. We have considered the rival submissions and perused the order of the AO and documents placed on record. As far as the proceedings are concerned, even though AO mentioned in the order that proceedings are u/s 158BC read with section 254, the proceedings are originally initiated u/s 158BD of the Act. The same is also verified from the .....

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satisfied that any undisclosed income belongs to any person, other than the person with reference to whom search was made u/s 132 of the Act, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the AO having jurisdiction over such of the person and the AO shall proceed u/s 158BC against such other person. As can be seen from the provisions of section 158BD, there should be books of account, documents or any assets, which have seized or requisiti .....

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he subject and on the provisions of Chapter XIV-B are very clear that only the undisclosed income which was found consequent to the search i.e. which has not been or would not have been disclosed for the purpose of the Act or any expense, deduction or allowance claimed under this Act, which is found to be false, can be brought to tax in the block period. 17.2 As briefly stated above and contentions reiterated by assessee in the submissions, assessee has filed returns of income before the so-call .....

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ere is no evidence whatsoever to establish that assessee is benami of his wife and others whose amounts have been brought to tax in the hands of the assessee. As submitted by the Ld. Counsel and also placed on record, AO has initiated proceedings u/s 147/158BD in all the cases including the case of V. Chandra Mohan, whose substantial investment is considered to be assessee s investment. Even though, Ld. DR tried to justify that investments made by the assessee and his benami Shri V. Chandra Moha .....

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sons having their own income-tax proceedings with the department and so they cannot be held as benami of the assessee, in the absence of any evidence whatsoever. As seen from the statements recorded or from the show cause notices issued, there is no inclination even to suggest that those investments are benami investments of the assessee. In the absence of any evidence, we are unable to accept AO s contention that the investments made by his wife and Shri V. Chandra Mohan and other amounts are a .....

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