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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO, HON’BLE
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER ITA No. 397/VIZ/2018 (Asst. Year : 2012-13) Kathala Sankar Ravi Kumar, vs. ITO, Ward-2(1), D.No. 45-55-5, Abid Nagar, Visakhapatnam. Akkayyapalem, Visakhapatnam. PAN No. AFUPK 0648 D (Appellant) (Respondent)
Assessee by : Shri G.V.N. Hari – Advocate. Department By : Shri P.S. Murty – Sr.DR Date of hearing : 26/12/2018. Date of pronouncement : 25/01/2019. O R D E R This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-10, Hyderabad, dated 17/05/2018 for the Assessment Year 2012-13. 2. The only effective ground raised by the assessee is as under:- “2. The ld. CIT(A)-10, Hyderabad is not justified in sustaining the addition of Rs. 25,00,000/- made by the Assessing Officer u/s. 69 of the Act, 1961 towards alleged unexplained payment of capitation fee.”
Facts of the case, in brief, are that assessee is an individual working in M/s. Waltair Chit Funds Pvt. Ltd. In the assessment
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order, the Assessing Officer has noted that there was a survey action in the case of M/s. Mother Theresa Educational Society, Amalapuram, in the premises of KIMS, Amalapuram. The Assessing Officer during the said action certain documents i.e. Annexure/KKR1 were found, which revealed that the assessee paid capitation fee of Rs. 25.00 lakhs to KIMS, Amalapuram towards medical studies of his daughter Kum. Nikitha Kathala. In this regard, a letter was issued to the assessee calling for the details of the source for the sum of Rs. 25.00 lakhs. The assessee replied stating that only a sum of Rs. 7.50 lakhs was paid towards tuition fees and the very same amount he was not able to pay and amount was paid by his elder brother Shri K. Satya Rao. The Assessing Officer considered the explanation and not agreed with the same and by invoking section 69 of the Act and also reliying on the judgment of the Hon'ble Calcutta High Court in the case of Sankar Industries Vs. CIT [(1978) 114 ITR 689 (Cal.)], addition was made in the hands of the assessee. 4. On appeal before the ld. CIT(A), the assessee has made a detailed submission which is as under:-
“M/s. Mother Theresa Educational Society is the institution where assessee's daughter Ms. Nikitha did here bachelors degree in Medicine during the academic years commencing from 2012. Survey proceedings were conducted by the Department of Income Tax in the premises of M/s.
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Mother Theresa Educational Society and alleged that they found from some loose sheets that Capitation fee of Rs. 25,00,000 (Rupees twenty Jive lakhs only) was received from assessee's daughter, the breakup of which is given below. Date Rs. 11.12.2011 10,00,000 03.02.2012 2,00,000 10.02.2012 3,00,000 28.02.2012 2,00,000 06.03.2012 5,00,000 26.03.2012 2,00,000 Total 25,00,000 In response to the Show cause notice, we produced before the learned AO, our letter dated 26th December, 2016, copy of which is enclosed herewith for your ready perusal and assessee objected the observations made by the AO and stated that only an amount of Rs. 7,50,000 is paid by the assessee. It is to bring to your kind consideration that assessee was also summoned by the Dy. Director of Income Tax (Investigation) Rajahmundry, vide their notice bearing F.No. DDIT (INV)/131(JA)/RJY/2013-14 dated 06.11.2013 and assessee appeared before the DDIT and categorically stated that they paid only Rs. 7,50,000/- and additional information as claimed as paid by the assessee to a tune of Rs. 25,00,000/- was abruptly rejected. Assessee contended before the learned AO that the loose sheets as found during the survey proceedings shall not form part of an evidence to add the amount of Rs.25,00,000 as income in the hands of assessee, since there exists no corroboration as there were no receipts for the said amounts as paid by the assessee and such information remain dumb document shall not have any bearing over the assessee. The miscellaneous unsigned information, or the notings in the loose sheets shall not form an evidence to be relied upon, since they loose the basic evidentiary value as it was pronounced in the decision of Ahmedabad Bench of Tribunal in the case of Sanskriti Township Surat vs. Department of Income Tax (ITI N0. 1885/Ahd/2006, order dated 23.09.2011) and Hyderabad Bench of the Tribunal in the case of DCIT vs. Krishna Yadav (2011012) Taxman.com.4 (Hyd). Reliance is also placed on the pronouncements of ITAT Pune Bench A in the case of Pradeep Arnrutlal Ruwal Vs. Tax Recovery Officer, Range- 3, ITA NO. 334 (Pune) of 2013 for AY 2004-05, in respect of the claim that there exists no corroborative evidence and a detailed explanation of the same is placed in our reply to learned AO referred above.
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Learned AO, erred in proper understanding of the submissions made by the assessee and concluded prima facie on stating that assessee failed to establish the source of such payments and offered no explanation about the nature and the source for acquisition of the money, bullion, jewellery or other valuable article and accordingly the submissions were rejected and the amount of Rs.25,00,000 was added to Income. The detailed funds of the learned AO are placed in Page NO. 5 of the order passed under Sec 13(3) of the Income Tax Act, 1961, the copy of which is enclosed here with. Assessee refused the payments made to the tune of Rs.25, 00,000 and substantiated that such findings would not form an evidence with detailed arguments placed on record vide their reply."
The ld. CIT(A) after considering the explanation of the assessee, confirmed the order of the Assessing Officer. 5. Ld. counsel for the assessee has submitted that the addition made by the Assessing Officer is on the basis of loose-sheet found during the course of search in the case of M/s. Mother Theresa Educational Society, Amalapuram. As per section 292C, an asset or books of account, other documents found in the course of search, it has to be presumed that whatever found in the course of search is belonging to the person on whom search is conducted. Therefore, once the assessee has denied that he has not paid capitation fee, he only paid tuition fee, without enquiring or investigation further, addition cannot be made in the hands of the assessee. 6. On the other hand, ld. Departmental Representative strongly relied on the orders passed by the authorities below.
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There is a survey conducted in the case of M/s. Mother Theresa Educational Society, Amalapuram in the premise of KIMS, Amalapuram. During the course of search, some documents were found which reveal that the assessee has paid capitation fee of Rs.25.00 lakhs to KIMS, Amalapuram towards medical studies of assessee’s daughter. When the Assessing Officer has asked the assessee in respect of the above payment, a detailed submission was made wherein he stated that he has only paid an amount of Rs. 7.50 lakhs and very same amount not paid by him, his brother has paid because his financial capacity does not support to make the payment. However, the Assessing Officer not accepted the explanation of the assessee and invoked section 69 of the Act and by following the decision of the Hon'ble Calcutta High Court in the case of Sankar Industries (supra), addition was made. For the sake of convenience, section 69A is extracted as under:- “69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”
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By reading the above section, it is very clear that if Assessing Officer came to a conclusion that if assessee is found to be owner of money or bullion, jewellery or other valuable article or such money, section 69A comes to play. In the present case, certain loose-sheets were found in the premises of M/s. Mother Theresa Educational Society, Amalapuram within the premises of KIMS, Amalapuram. As per section 292C, an asset or books of account, other documents found in the course of search, it has to be presumed that whatever found in the course of search is belonging to the person on whom search is conducted. In the present case, no search is conducted in the premises of the assessee. It is only conducted in the premises of third party. We are unable to understand that how section 69A attracts to the case of the assessee. The addition made by the Assessing Officer based on the loose sheet found during the course of search which is denied by the assessee. The onus is on the Assessing Officer to prove that the assessee has paid an amount of Rs. 25.00 lakhs capitation fee to M/s. Mother Theresa Educational Society, Amalapuram. The Assessing Officer without making any enquiry simply addition is made and the same is confirmed by the ld.CIT(A), in our opinion, the addition made by the Assessing Officer cannot survive. Insofar as case-law relied on by the
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Assessing Officer in the case of Sankar Industries (supra), the Hon'ble Calcutta High Court has observed that when it is found credits in the books of account of the assessee, the assessee has to prove the identity of the creditor, the capacity of such creditor to advance the money, the genuineness of the transaction. In the present case, nothing was found in the hands of the assessee, only loose-sheets were found in the premises of the third party, therefore the case law relied on by the Assessing Officer has no relevancy to the facts of the present case. The ld. CIT(A) without considering the facts and issues in the appeal, simply confirmed the order of the Assessing Officer. In view of the above, the order passed by the ld.CIT(A) deserves to be reversed. Accordingly, we reverse the order of the ld. CIT(A). Thus, this appeal filed by the assessee is allowed. 8. In the result, appeal filed by the assessee is allowed. Order Pronounced in open Court on this 25th day of Jan., 2019.
Sd/- (V. DURGA RAO) Judicial Member Dated: 25th Jan., 2019. vr/-
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Copy to: 1. The Assessee – Kathala Sankar Ravi Kumar, D.No. 45-55-5, Abid Nagar, Akkayyapalem, Visakhapatnam. 2. The Revenue – ITO, Ward-2(1), Visakhapatnam. 3. The Pr.CIT-1, Visakhapatnam. 4. The CIT(A)-10, Hyderabad. 5. The D.R., Visakhapatnam. 6. Guard file. By order
(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.