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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri S.S. Godara & Shri Laxmi Prasad Sahu
Assessment Year: 2009-10 The Income Tax Officer Vs. Sri Hajeebu Venkata Seeta (IT)-II, Rama Chandra Hyderabad. Ravindranath, Hyderabad. PAN : AMPPR2485R (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao Revenue by: Shri Rohit Majumdar Date of hearing: 03.01.2022 Date of pronouncement: 05.01.2022 O R D E R Per S. S. Godara, J.M. This Revenue’s appeal for A.Y. 2009-10 arises from the Commissioner of Income Tax (Appeals) - 10, Hyderabad’s order dated 18.07.2019 in involving proceedings u/s. 144 r.w.s. 147 of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.
The Revenue pleads the following twin substantive grounds in the instant appeal :
1. The Ld. CIT(A) erred in deleting the addition of Rs.2,84,00,000/-, (which was received as interest free loan from M/s Synchron Infotech Pvt. Ltd.) made under section 56(2)(vi). The Assessing Officer made a discussion that the company being struck off", there will be no repayment.
2. The Ld. CIT(A) ought to have accepted the A.O. contention of treating the entire sum of Rs. 2,84,00,0000/- was received by the assessee without proper consideration which squarely falls in the ambit of provision of section 56(2)(vi) of the LT. Act.
The Ld. CIT(A) failed to appreciate that the assessee not retaining the money received from M/s Synchron Infotech Pvt. Ltd. is of no consequence. Rather the fact that the assessee need not return his loan makes it a income from other sources in the hands of the assessee in accordance with the provisions of section 56(2)(vi).
The Ld. CIT(A) ought to have considered the modus-operandi adopted by the assessee in routing the unaccounted money.
The Ld. CIT(A) erred in the deleting the addition made by the Assessing Officer to the extent of Rs. 40,00,000/- which were shown as advances received from M/s M N Solutions Pvt. Ltd. and M/s NAM Hotels Pvt Ltd. (Rs. 25,00,000/- and 15,00,000/- respectively). The claim of the assessee is that the advances received by him in the guise of purchase of immovable property and since the transaction did not materialize the same advances were returned to the concerned parties. There are no evidences in support of such claim.”
3. There is hardly any dispute that the sole issue herein is that of correctness of section 56(2)(vi) ‘income from other sources’ addition made by the Assessing Officer in his assessment order dt.30.12.2016. The CIT(A)’s detailed discussion deleting the same reads as under :
“7. The issue relates to the addition made of Rs. 2,84,00,000/-towards 'income from other sources' in the hands of the appellant by applying the provisions of Section 56(2)(vi) of the I.T. Act, 1961. There is no dispute on the fact that the appellant received a sum of Rs. 2,84,00,000/- from M/s. Synchron Infotech Pvt. Ltd. There is also no dispute on the fact that the sum of Rs. 2,84,00,000/-, so received, was paid to M/s. Legend Infra Homes Pvt. Ltd. Therefore, the sum under consideration was not retained and kept with the appellant. The stated purpose of the transactions, relating to the said receipt and payment, is to purchase immovable property from M/s. Legend Infra Homes Pvt. Ltd., by M/s. Synchron Infotech Pvt. Ltd. It is also stated by the appellant that the sum under consideration was received and paid on behalf of M/s. Synchron Infotech Pvt. Ltd. Therefore, the appellant handled the said transactions by only acting as a mediator. What was received from M/s. Synchron Infotech Pvt. Ltd has been paid to M/s. Legend Infra Homes Pvt. Ltd. 7.1 The sum total of the position, as above, is supported by the bank transactions and the ledger account copies in the books of M/s. Synchron Infotech Pvt. Ltd, M/s. Legend Infra Homes Pvt. Ltd. and the appellant, taken together. The book entry in the case of the appellant is that the relevant sum was given to M/s. Legend Infra "towards advance for purchase of property on behalf of M/s. Synchron". The ledger account of M/s. Legend Infra Homes Ltd. shows the relevant sums as advances towards purchase of property on behalf of M/s. Synchron and the same are not in the name of the appellant. 7.2 The facts mentioned at paras 7 and 7.1, as above, are very well reflected in the assessment order. The fundamental fact is that the appellant has not received the sum of Rs.2,84,00,000/-, without consideration. It is not the case of the AO that the appellant received the relevant sum and retained the same. Once there is no receipt, without consideration, there is also no income in the hands of the appellant. Therefore, the provisions of Section 56 (2)(vi) are not applicable to the facts of the case. 7.3 The AO made a reference to the point that M/s. Synchron Infotech Pvt. Ltd. is a "strike off' company. Irrespective of the status of M/s. Synchron Infotech Pvt. Ltd., the fact is that the transactions, in effect, happened between M/s. Synchron Infotech Pvt. Ltd and M/s. Legend Infra Homes Pvt. Ltd. Both are companies and the relevant amounts, in the books of M/s. Legend Infra Homes Pvt. Ltd. are outstanding advances against M/s. Synchron Infotech Pvt. Ltd. Undoubtedly, the issue, if any, is between these two entities. The appellant pointed out that he has discharged his obligation by making the payment of Rs. 2,84,00,000/-, which was received, for the stated purpose.
7.4 As already mentioned, the appellant has not received the relevant sum, without consideration. The credit for the relevant amount, in the books of My s. Legend Infra Homes Pvt. Ltd., has gone to M/s. Synchron Infotech Pvt. Ltd. In fact, just before making the addition, the AO observed that it is deemed that the amount I property that is going to be received, from MI s. Legend Infra Homes Pvt. Ltd., would be the income of the appellant. Clearly, Section 56(2)(vi) does not apply.
7.5 In the given factual matrix, the observation made by the AO, with reference to Section 2(22)(e), has no bearing on the issue involved. 7.6 In view of the facts and the legal position discussed, as above, the AO is directed to delete the addition made and the grounds of appeal no. 13 to 23 are allowed.
8. The grounds of appeal no. 24 to 29 relate to the addition made of Rs. 40 lakhs towards income from other sources u/s 56(2)(vi).
8.1 The relevant discussion made in the assessment order and the submissions made by the appellant are reproduced at paras 6 and 6.1, as above. 8.2 During the year under consideration, the appellant received a total sum of Rs. 40 lakhs from two parties towards advance for sale of property. While a sum of Rs. 25 lakhs was received from M/s. MN Solutions Pvt. Ltd., a sum of Rs. 15 lakhs was received from M/s. NAM Hotels Pvt. Ltd. The appellant submitted that the sale transactions did not materialize due to legal issues and that the advances were returned to the parties in the subsequent year. In this connection, the appellant also furnished confirmation letters from both the parties. Along with the confirmation letters, copies of acknowledgement of returns of income, filed by both the parties, for A.Y. 2010-11, are furnished. The stand of the appellant is that when the advances received have been repaid, there is no sum received, without consideration, which can be taxed u/s. 56(2)(vi). 8.3 The case of the AO is that the appellant failed to prove the sources for the repayment of advance received. The AO also noted that the details of the litigation were not furnished and so also the details of the mode of repayment. 8.4 The confirmation letters of the two parties and proof of their filing of return of income, for A.Y. 2010-11, have come on record. There is nothing on record, in respect of repayment of advance as such. With this position, it cannot be said that the appellant received the relevant sums, without consideration. In other words, the relevant sums cannot be taxed u/s 56(2)(vi). Accordingly, the grounds of appeal no.24 to 29 are allowed.”
4. Mr. Majumdar vehemently contended during the course of hearing that the Assessing Officer had rightly made the impugned addition since he had found the assessee to have received the sum in question of Rs.2,84,00,000/- from M/s. Synchron Infotech Pvt. Ltd without any consideration. And also that the assessee interalia had adopted self-contradictory stand in 4 his three replies filed before the Assessing Officer as per para 4.2 of the assessment order dt.30.12.2016. He lastly sought to highlight the clinching fact that M/s. Synchron Infotech Pvt. Ltd had also been found to have been ‘struck off’ as on 31.03.2012.
5. Learned authorized representative has drawn a strong support from the CIT(A)’s detailed discussion extracted in preceding paras. He also referred to assessee’s detailed paper book running into 23 pages involving copies of financial statements of M/s. Synchron Infotech Pvt. Ltd for the F.Y. 2008-09, confirmation of accounts from M/s. Legend Infra Homes Pvt. Ltd to the former entity, copy of confirmation letter from M/s. NAM Hotels Pvt. Ltd qua an amount of Rs.15 lakhs, its return, confirmation letter pertaining to refund of advance in F.Y. 2009-10, its ITR acknowledgment for A.Y. 2010-11, confirmation letter from M/s. NAM Hotels Pvt. Ltd for Rs.25 lakhs, refund thereof in F.Y. 2009- 10 as well as ITR acknowledgment; respectively.
6. We have given our thoughtful consideration to rival contentions against and in support of the CIT(A)’s action deleting the impugned section 56(2)(vi) addition and find no merit in the Revenue’s stand. We make it clear first of all that the Assessing Officer had not invoked section 68 of the Act in order to treat the impugned sums as an unexplained cash credit on account of the assessee’s failure to prove the identity, genuineness and creditworthiness of all the parties herein. He has rather invoked section 56(2)(vi) of the Act wherein the facts are admitted as correct and an assessee can very well be assessed in case he is found to received any amount over and above the specified sum in the relevant previous year without consideration. Learned departmental representative fails to dispute that the Assessing Officer had himself made it clear in para 4.2.2. of the assessment order that M/s. Synchron Infotech Pvt. Ltd had given an interest free loan to the assessee, who happens to be the son of its director. That being the case, we are of the opinion that a loan sum accepted as correct in principle, could not be treated as an amount received since there is a pre-condition of its return to be made to the creditor party. We thus reject the Revenue’s arguments for this precise reason alone so far as the impugned sum of Rs.2.84 crores is concerned.
The factual position is no difference qua the latter issue of Rs.40 lakhs is concerned since the assessee has already been found to have returned the sum to the twin entities M/s. MN Solutions Pvt. Ltd and M/s. NAM Hotels Pvt. Ltd. There is no rebuttal to this clinching finding coming from the Revenue side.
Mr. Rohit Majumdar lastly argued that M/s. Synchron Infotech Pvt. Ltd had been found as strike off from the rolls as on 31.03.2012. We are afraid that such an argument runs contrary to the factual position in impugned A.Y. 2009-10 wherein the assessee has also proved immovable transaction(s) involving both M/s. Synchron Infotech Pvt. Ltd as well as M/s. Legend Infra Homes Pvt. Ltd (supra). The Revenue fails in its twin substantive grounds therefore.
This Revenue’s appeal is dismissed in above terms.
Order pronounced in the Open Court on 5th January, 2022.