K.RAM REDDY,MAHABUNAGAR vs. INCOME TAX OFFICER, WARD-2, KARIMNAGAR

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ITA 1732/HYD/2017Status: DisposedITAT Hyderabad13 March 2019AY 2012-134 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the CIT(A) had not adjudicated a specific addition of Rs. 5,91,000/-. Therefore, the issue was remitted back to the CIT(A) for adjudication.

What were the facts?

During a survey operation, the assessee admitted Rs. 15 lakhs as unexplained income towards construction of a residential cum commercial building. The Assessing Officer made additions for unexplained investment in house property for multiple assessment years. The CIT(A) deleted one addition but failed to adjudicate another significant addition.

What were the issues?

Whether the CIT(A) properly adjudicated all additions made by the AO. The specific issue of Rs. 5,91,000/- as unexplained investment was not adjudicated by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 133A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCH ‘A, HYDERABAD

Before: SHRI V. DURGA RAO & SHRI S. RIFAUR RAHMAN

For Appellant: Shri T. Chaitanya Kumar
For Respondent: Smt. V. Rajitha
Hearing: 07/03/2019Pronounced: 13/03/2019

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ‘A', HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 1732/Hyd/2017 Assessment Year: 2012-13 K. Ram Reddy, vs. Income-tax Officer, Ward – Mahabubnagar. 2, Mahabubnagar. PAN – ANNPK6689D Appellant Respondent Assessee by: Shri T. Chaitanya Kumar Revenue by: Smt. V. Rajitha Date of hearing: 07/03/2019 Date of pronouncement: 13/03/2019 O R D E R PER S. RIFAUR RAHMAN, AM:

This appeal filed by the assessee is directed against the order of CIT(A) – 4, Hyderabad, dated, 23/06/2017 for AY 2012-13 .

2.

Brief facts of the case are that the assessee is one of the partners in the firm M/s Swathi Silk Centre, Jadcherla and M/s Shubodaya Constructions Company Jadcherela, Mahabubnagar. During the year under consideration, the assessee had not filed return of income. A survey operation u/s 133A of the Income-tax Act, 1961 (in short ‘the Act’) was conducted in the case of M/s Swathi Silk Centre, Jadcherla on 31/10/2013, in which the assessee was a partner, to examine the stock and profit of the firm. During the course of survey, it was noticed that the assessee had constructed a residential cum commercial building in his individual capacity at K.P. Street, Jadcherla, Mahaboobnagar and the cost of

2 I.T.A. No. 1732/Hyd/17 K. Ram Reddy, Mahabubnagar construction of building was admitted by the assessee at Rs.35 lakhs. The assessee admitted Rs.15 lakhs as income in his hands towards unexplained sources in construction during survey operation. Apart from this, the assessee in the capacity of Managing Partner of the firm M/s. Swathi Silk Centre admitted the excess stock of Rs.15,20,564/- as income in the hands of firm. Further, notice u/s 148 was issued to the assessee and in response to that, assessee filed return of income for AYs 2010-11, 2011-12 and 2012-13 admitting income of Rs.2,23,615/-, Rs.1,28,899/- and Rs.1,28,899/- respectively. The Assessing Officer completed the assessments by making additions of Rs.10,22,500/-, Rs.18,25,000/- and Rs.8,50,000/- for the AYs 2010-11, 2011- 12 and 2012-13 respectively towards unexplained investment in house property.

2.1 For the year under consideration, i.e. Asst. Year 2012- 13, the assessee has claimed the cost of construction at RS.8,50,000/- and the sources for the same has been explained as under:-

Withdrawals from Shubodaya Construction Rs. 1,50,000/- Loan From brother Sri K. Sudhakar Reddy Rs. 2,50,000/- Loan From brother Sri K. Srinivas Reddy Rs. 2,50,000/- Loan From brother Sri K. Thirupathi Reddy Rs.3,50,000/- Loan From Father Sri K. Raghurama Reddy Rs.1,25,000/-

Out of Sources mentioned above, the assessee has shown Rs.8,50,000/- as investment in A.Y. 2012-13 and the balance amount is claimed in A.Y 2013-14 by carrying forward the amount in capital account. In the Asst. Year 2013-14, the cost of construction is claimed at Rs. 6,00,000/- and the sources for the same has been Explained as under:-

Opening balance of capital Rs.1,50,000/-

3 I.T.A. No. 1732/Hyd/17 K. Ram Reddy, Mahabubnagar Loan from brother Sri K. Srinivas Reddy Rs. 1,50,000/- Loan from brother Sri K. Thirupathi Reddy Rs. 2,50,000/-

2.2 The AO observed that the assessee had not carried out any construction activity in AY 2013-14 and the period of construction is taken as A.Ys 2010-11, 2011-12 and 2012-13 only. Therefore, the claim of construction and Sources in Asst. Year 2013-14 is not accepted. Even though the assessee claimed cost of construction at Rs.52,97,000/-, the cost of construction is adopted at Rs.52,88,000/- as determined by Valuation Officer. The cost considered from A.Ys 2010-11 to 2012-13 is Rs. 46.97 lakhs (Rs, 10,22,500 + Rs.28,25,000 + Rs. 8,50,000/-). Thus, the difference amount of Rs. 5,91,000/- is treated as unexplained investment in Asst. Year 2012-13 as construction was completed in AY 2012-13, the balance amount of Rs. 5,91,000/- being the difference between cost of construction valued by Valuation Officer and cost of construction claimed by the assessee in returns of income upto AY 2012-13 is treated as unexplained investment and added back to the income returned.

3.

When the assessee preferred an appeal before the CIT(A), the CIT(A) deleted the addition made by the AO of Rs. 8,50,000/-. However, the CIT(A) has not adjudicated the addition of Rs. 5,91,000/- made by the AO towards difference of construction cost shown by the assessee and determined by Valuation Officer (Rs. 52,88,000 – Rs. 46,97,000), as unexplained investment.

4.

Aggrieved by the order of CIT(A), the assessee is in appeal before us contending that the CIT(A) erred in not adjudicating the addition of Rs. 5,91,000/- made by the AO as unexplained investment.

4 I.T.A. No. 1732/Hyd/17 K. Ram Reddy, Mahabubnagar

5.

Considered the rival submissions and perused the material on record. As contended by the assessee, the CIT(A) has not adjudicated the addition of Rs. 5,91,000/- in his order. Therefore, we remit this issue to the file of CIT(A) with a direction to adjudicate the same in accordance with law after providing reasonable opportunity of being heard to the assessee.

6.

In the result, appeal of the assessee is treated as allowed for statistical purposes. Pronounced in the open court on 13th March, 2019.

Sd/- Sd/- (V. DURGA RAO) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 13th March, 2019. kv Copy forwarded to: 1. K. Ram Reddy, C/o T. Chaitanya Kumar, Advocate, Flat No. 102, Gouri Apartment, Urduline, Himayatnagar, Hyderabad. 2. ITO, Ward - 2, Hyderabad. 3. CIT(A) - 4, Hyderabad 4. Pr. CIT – 4, Hyderabad 5. The DR, ITAT, Hyderabad 6. Guard File

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