Dismissed

A.Narsinga Rao v. Assistant Commissioner of Incoeme Tax

Telangana HC11 Oct 2023ITTA/5/2008

Case brief

AI extract

What is this about?

In Income Tax Tribunal Appeal No. 5 of 2008, the High Court of Telangana entertained an appeal against the order of the Income Tax Appellate Tribunal regarding undisclosed income additions. The court found the case to be a question of law in nature, depending on factual findings already made by the Tribunal. Consequently, the High Court found no reason to interfere with the Tribunal's order and di

What did the court decide?

The appeal filed under Section 260-A of the Income Tax Act was dismissed with a prayer for withdrawal and dismissal of No. 1. The appeal was dismissed with no order as to costs.

A.Narsinga Rao Vs Assistant Commissioner of Incoeme Tax — Income Tax | Telangana HC (2023)

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[³³⁸⁶ ]

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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WEDNESDAY, THE ELEVENTH DAY OF OCTOBER TWO THOUSAND AND TWENTYTHREE

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PRESENT

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THE HONOURABLE SRI JUSTICE P.SAM KOSHY

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AND

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THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY

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INCOME TAX TRIBUNAL APPEAL No: 5 of 2008

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lncome Tax Tribunal.Appeal Under Section 260-4 of the lncome Tax Act,^.1961 arising out of the order of the lncome{ax Appellate Tribunal, Hyderabad Bench 'A, Hyderabad, in I.T.(SS).A.No.8lHydt20o2, dated 31-05-2007, preferred against the Order of the Commissioner of lncome Tax (Appeals)-V, Hyderabad, ITA No.665/DC.1(1)lClT(A')-Vl2OO1-02 dated:21-O1-2002, preferred against the Order of the Assistant Commissioner of lncome Tax Circle-1 (1), Hyderabad pAN/GlR No.ADDPA9594R.

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Between:

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A Narsinga. Rao, S/o.Sri Venkatesam, aged 67 years, Rt/o.5-4-435, MJ Market, Hyderabad. ...AppellariUpetitioner

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AND

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Assistant Commissioner of lncome Tax. Circle-1 (i), Hyderabad. ...Respondent

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l.A. NO:1 F 2OO8(ITTAMP. NO: oF 2008)

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Petition under Order 39 Rule 1 of C.P.C. praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pass an order restraining the respondent from initiating any recovery proceedings pursuant to the order dated 31.05.2007 passed by the lncome Tai Appellate, pending disposal of the ITTA

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Counsel for the Appellant: SRI S. RAVI

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Counsel for the Respondent: SRI J.V. PRASAD, SC FOR INCOME TAX

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The Court delivered the following: JUDGMENT

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,'i

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HONOT'RABLE SRI JUSTICE^{P.SAM KOSEY} AND HON'BLE SRI JUSTICE^{LAXMI NARAYANA ALISHETTY}

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INCOME TAX TRIBUNA^{L APPEAL NO.s OF2OO8}

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JUDGMENT:^{(Per Hol7'ble Sn,JllsticeLoxtrli Narayana Atishetty)}

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The present appeal^{has been filed under Section26O-A of} Income Tax Act,¹⁹⁶ I^{(for short, the "Act') assailingthe order} passed by Income^{Tax AppellateTribunal,Bench-A, Hyderabad(for} short "Tribunal") in^{I.T.(SS).No8/Hyd/2002, dated 3105 2OO7for} the block^{periocl between Ol .04.1987 to 11.O2.1999'}

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2- We have heard the^{learnedcounsel Sri Naga Deepakon} behalf of Sri S.Ravi^{for the appeliant and the learned senior} standing counsel Sri^{J.V. Prasad for the respondent'}

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The brief facts leading^{to filing of present appeal are} AS under:

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The appellant is a^{ManagingPartner of M/s' A N Cigarette} Trading Company,^{whichis apartnership hrm, engaged in} distribution of 'Four^{Square'cigaiettes in HyderabadcityA search} operation under Section^{132 of the Act was conductedon} 1 1.02.1999 on the^{residential premisesas well as the business} premises of the^{appellar-rt.During the course of search'certain}

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PSK,J & LNA,J rrTA n'o.5 of2008

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incriminating material in the form of^{loosepapers/slipswas found} and seized, which indicate huge expenses made by the asessee for purchase of^jewellery etc. On examination of capital account of the assessee, it was found that assessee did not make any drawings lrom the firm for household expenses.

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The assessee was asked to explain the reason for not showing household expenses. The assessee in his statement admitted that approximate household expenses for maintaining his family to the tune of Rs.7O,OOO/- to Rs.85,OOO /-^{per year.} He also admitted the undisclosed income of Rs.8,65,000/ -^{towards on-} accounted household expenditure and Rs.2,O0,000/- towards expenses incurred on the marriages of his two children. The assessee also filed a letter before the DDIT conhrming the admission towards personal expenses and^{functionalexpenses,} which were not reflected in the accounts. However, despite admission, the assessee filed return for block^{periodwithout} admitting the income towards undisclosed^{expenditure incurred by} him.

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A notice under Section 158BC of the Act^{was issued} to the appellant on 15.06.1999. In response to the said notice, the assessee filed the block period return in^{Form-2B admitting a sum} of Rs.3,23,5841- as undisclosed income of the block^period.

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I'SK,J <1 I-NA J 1n..1 l'o.5 of )408

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Thereafter, notices under^{Sections 143 (2) ar,d 142 (1) of the Act} were issuecl seeking further^{information and inresponse, the} Chartered Accountant of^{theappellantappeared before the} authority on 19.09.2000. Written^{replies were also filed through} the Chartered Accountant^{from time to time.}

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A detailed questionnaire dated^{O6.10.2000 was issued to the} assessee to explain as to^{how the admittedincomehas not been} offered. In response, the^{assesseefiled his reply dated 12.I2.2OOO} and not satisfied with^{the same, the Assessing Ofhcer(AO)vide his} office letter dated 21.12.2OOO^{askedthe assesseeto substantiate} his explanation. In^{response, the assesseefi1ed reply dated} 27.12.2OOO. The A.O. did^{not satisfywith the explanBtion filed by} the assessee and was of the^{view that explanationgivenby the} assessee is only an alter thought^{and assesseehas failed to} substantiate the explanation and^came to^{conclusion thatentire} amount of Rs.1O.65 lakhs,^{out of which sum of Rs.2,59,280/- was} admi tted by the assessee as^{undisclosedincome and balance} amount of Rs.8,O5,720/- was added by^{the A.O., as undisclosed} rncome.

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Aggrieved thereby the order of A.O.,^{dated 29.03.2001,the} assessee preferred appeal vide ITA No.665/DC.1(l)/^CIT(A)-V l2OOl' 02 before Lhe Commissioner of Income Tax^{(Appeals)-V, Hyderabad}

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PSK,J & LNA,J ITTA i|o 5 of2008

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[for^{short, 'CIT(A)'1.The CIT(A), on due considerationof factsand} material, vide order dated 21.01.2002, held^{that expenditure} incurred by the appellant amounting to^{Rs. 1O,65,O00/- was} explained only to the extent of^{Rs.1,OO,000/-and the remaining} amount of Rs.9,65,00O/- represented^{unaccounted expenditure of} the appellant, out of which, Rs.2,59,28O1-^{had been admitted, as} such in the block return. Hence, the^{additionof Rs-8,05,720/-} made by the A.O., was restricted^{to Rs.7,05,72O/-and the addition} of Rs.3,O7,942/- representing^{unaccountedexpensestowards} medical expenses,^purchase of^{jewelleryand other purchases} assessed by the A.O.,^{was confirmedand accordingly,allowed the} the appeal partly.

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9 . Not satisfied with the order of^{CIT (Appeal), dated} 2l .Ol .2OO2, the assessep^{preferred appeal before lncome Tax} Appellate Tribunal, vide I.T.(SS).A.No.8/Hyd/02'

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karned counsel for appellant^{would submit thatappellant} retracted the statement earlier^given and^{there is no time limit for} such statement and thus, the same^{ought to have beenconsidered} by the assessing officer. Learned^{counsel referredto orders of} CIT(A) and the Appellate Tribunal in^{a great detail and submitted} that Appellate Tribunal committed erred in sustaining^{the addition} of Rs.5,09,60O/- only on the basis of statement^{of appellant.The}

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PSK,.I A LNA,J ITTA No 5 of20A8

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learncd counsel lor the appellant^{relied upon the following} decisions in support^{o[ his contention:}

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i) Commissioner of Income^{Tax vs. ShriRamdas} Motor TransPortl; and

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ii) Principal Commissioner of Income^{Tax, Central-3} vs. Abhisar Buildwell^{P\rt. Ltd.'2}

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Per contra, learned^{senior counsel for the respondent relied} upon the decision of the^{Hon'ble ApexCourt inRoshan Lal} Sanchiti vs. Principal Commissioner^{of Income-Tax3 to support} his contention that^{retractionof statement after a sufhcientlong} gap or point of time loses its^{signilicanceand is an afterthought} and referred to obserwation^{of Hon'ble Apex Court at page 237 of} the decision, which is reproduced^{as under:}

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"... [n our view, retraction after^{a sufhcient long gap} or point of time, as in the^{instantcase, loses its} signihcance and is al afterthought.^{Once statements} have been recorded on oath, duly^{signed, it has a great} evidentiary value and it is^{normally presumed that} whatever stated at the time of^{recording of statements} under section 732 l4), are^{true and correct and brings} out the correct picture, as by^{that timethe assesseeis} uninfluenced by external agencies.^{Thus,wheneveran} assessee plcads that the statements^{have been obtained} forcefully/ by coercion/undue influence^without material / contrary to the material, then it^shouldbe

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'^{(zoz:)qsa trn zrz (sc)}

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' lzozzl^{aszrrR 229 (sc)}

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PSK,J & LNA,J IlYl l'io.5 of)408

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supported by strong^{evidencewhich we have observed} hereinbefore. Once a^{statementisrecorded under} section 132(4), such a statement^{carl be used as a strong} evidence against the assessee^{in assessingthe income,} the burden lies on the^{assessee to establish that the} admission made in^{the statements are incorrect/wrong} and that burden has to^{be discharged by an assesseeat} the earliest point of time.^{.... "}

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Consideration:

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Before the Appellate^{Tribunal,the appellant raised the} following grounds:

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(1) General in nature andⁱⁿ the^{absenceof any specificplea,} the same is therefore^{rejected being not pressed.}

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(2) The CIT(A) is not^justifred in^{sustainingthe addition of} Rs.7,O5,72O/- out of^{the total additionof Rs 8,05,720l-} representing explained^{householdexpenditure incurred} during the block^{period. The CIT (A) did not appreciate} the appellant's contention^{that the domestic expenditure} under consideration^{was met out of the cash available} with the appellant,^{whichwasadmitted by the appellant} as undisclosed income^{duringthe earlier search operation} conducted in 1986.

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(3) The CIT(A) failed to appreciate^{that probabilityof the} availability of funds^{which the appellantwhichwas} beyond doubt^{proved during the assessmentproceedings} itself and which explanation^{would cannot be ruled out of} the possibilit ies.

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(a) The CIT(A) is not^justified in^{upholdingthe addition of} Rs.3,O7 ,942 / - as^{allegedly representing unaccounted}

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PSK,J & LNA.J l1-fA No 5 oJ 2()08

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expenses towards medical^{expenses, purchaseof jewellery} etc., during the previous^{years reievant tothe block} assessment period. Here also^{neither the AO nor the} CIT(A) considered the^{probabilities and possibilities of the} position explained by the appellant^{concerningthe lose} papers on the basis of which the addition^{was made.} The CIT(A) also did not take into^{consideration the} judicial opinions wherein it was held that lose papers found during search do not^represent 'document'^and could not be taken as basis^{for makingany addition."}

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i 3. On due consideration of^{grounds, facts and submissionsthe} Appellate Tribunal vide order^{dated 31.O5.20O7consideredground} Nos.2 and 3 had held that the assessee^{is entitled to get the total} benelrt of Rs.2,96,12Ol- inclusive of the^{relief of Rs.1,00,0OO/-} allowed by the CIT(A), out of total^{addition of Rs.8,05,720/-made} by the A.O. Thus, the addition^{sustained by the learnedCIT(A) of} Rs.7 ,O5,72O / - is reduced to Rs.5,O9,6OO/-.

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With regard to ground no.4, the Appellate^{Tribunal came to} conclusion that in the absence of^{any contrary materialbrought on} record by the revenue, the addition of^Rs.3,07,942 f^{- was not} sustainable and accordingly^deleted the^{same. TheAppellate} Tribunal came to the above conclusion by relying upon^the decision of I.T.(SS).A.Nos.a5-87 lHydl9T^{in thecaseof} G.Muralikrishna vs. ACIT^{and others,dated08.09.2003and}

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PSK.J &^LN-,l J nTA No.5 of 2008

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recorded the reasons at^{paragraph-13,which isreproduced} hereunder for ready reference.

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"13. Having heard the submissions^{of the rivalparties and} perusing the material available on^{record, we frnd that there is} no dispute that the assessee has contended^{that the loose} papers do not belong to him, therefore,^{the quantumof} expenditure noted therein be^{not takencognizance thereof} inasmuch as, the medical^{expensesincurred on his daughter's} delivery were met^by her^{husband and father in law and not by} the assessee. The revenue has^{placed no materialon record to} show that the loose^papers are^{inthe hand-writingof the} assessee or the notings^{made therein are belongingto the} assessee. There is^{no corroborativematerialon recordto prove} that the expenditure recorded^{inthe saidloose papers is} incurred by the^{assessee.The AO has not recorded arty} statement of the assessee's daughter^{or her husband or her} father-in-law."

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Perusal of the order^{of CIT(A)as well as AppellateTribunal,} shows that the contentions^{raised by the appellant havebeen} considered and detailed^{reasons have also been recorded by the} Appellate Tribunal while^{passing order. As mentionedsupra, the} Appellate Tribunal had^{consideredthe grounds raisedas well as} submissions made on^{behalf of the appellant and recordedthe} detailed reasons for its^conclusion.

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Conclusion:

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In the above factual^{matrix and circumstancesof the case,} the question of law on^{which the presentappealis filed is factual} in naturc and finding of facts,^{whichwas already consideredby the}

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PSK.J & I-NA,J 11'T) i'o 5 of 2003

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Appellate l'ribunal.^{TItcrefore, we do not find any reasonto} interfere u,ith the ordcr^{passed by the AppellateTribunal. The} Appeal thus fails and dcserves^{to be and is accordinglydismissed.} There shall be no ordcr as to costs.

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