KAVITHA CHAKRAPANI,BANGALORE vs. JCIT, BANGALORE

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ITA 1443/BANG/2013Status: DisposedITAT Bangalore17 June 2016AY 2007-088 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the lower authorities erred in ignoring the affidavits from the creditors retracting their earlier statements and confirming the dues. The Tribunal found that the sale agreement for the Rs. 30 lakhs was witnessed, and the creditor's claim of receiving cash from the assessee was unsubstantiated. The construction completion for the Rs. 32,80,000/- was also confirmed by the creditor.

What were the facts?

Following a search, the AO invoked Section 153A and 153C against the assessees. The assessees showed liabilities of Rs. 30 lakhs and Rs. 32,80,000/- respectively, which the AO treated as unexplained income after the creditors denied the amounts were due. The CIT(A) upheld the additions.

What were the issues?

Whether the unexplained liabilities shown by the assessees could be treated as income when the creditors later confirmed the dues through affidavits, retracting their earlier statements to the AO.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 153C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE

Heard together (2 matters)

ITA No.1443/Bang/2013
ITA No.1444/Bang/2013

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER 1. (Asst. Year : 2007-08) 2. (Asst. Year : 2007-08) 1. Smt. Kavitha Chakrapani, PAN : AGDPC5947P 2. Shri. Chakrapani, PAN : AGDPC5948C No.1298, Gnanakshi Rajeshwari Road, Kodigehalli Main Road, Virupakshapura, Kodigehalli, Bengaluru 560 097 .. Appellants v. Joint Commissioner of Income-tax (OSD), Central Range, Bengaluru .. Respondent Assessees by : Shri. V. Srinivasan, CA Revenue by : Shri. A. R. V Sreenivasan, JCIT Heard on : 02.06.2016 Pronounced on : 17.06.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :

These are appeals filed by assessees both of whom were subject to assessment proceedings, pursuant to a search u/s.132 of the Income-tax Act, 1961 (‘the Act’ in short), carried out in the premises of one Shri. K.

ITA.1443 & 1444/Bang/2013 Page - 2 Prakash Shetty, M/s. Gold Finch Hotels Group and others. One of the assessee here, namely Shri. Chakrapani was also searched as a part of such proceedings. Section153A of the Act, was invoked by the AO on Shri. Chakrapani. Other assessee, namely, Smt. Kavitha Chakrapani was proceeded u/s.153C of the Act. Assessees in response to notices had filed their returns on 27.06.2011, declaring income of Rs.11,18,810/- and Rs.6,66,770/- respectively. During the course of assessment proceedings of Shri. Chakrapani, AO noticed that he had shown a sum of Rs.30 lakhs as due to one Shri. A. T. Vijay Kumar in the statement of affairs filed. Similar to this, in the statement of affairs filed by Smt. Kavitha Chakrapani, a sum of Rs.32,80,000/- was shown as liability due to one Shri. K. M. Giri. AO required the assessees to explain and file evidence in support of the above liabilities.

2.

Vis-a-vis liability of Rs.30 lakhs due to Shri. A. T. Vijay Kumar, submission of the assessee was that the said amount was received as advance from Shri. Shri. A. T. Vijay Kumar, for sale of a property owned by Shri. Chakrapani, at No.5/1, Chikkabettahalli, Yelahanka Hobli, Bengaluru. As per the assessee, payments were received pursuant to an agreement dt.20.05.2006. AO examined Shri. A. T. Vijay Kumar. Shri.

ITA.1443 & 1444/Bang/2013 Page - 3 A. T. Vijay Kumar stated the sum of Rs.30 lakhs paid to the assessee, through three DDs of Rs.10 lakhs each, were out of cash of Rs.30 lakhs received from the assessee and deposited by him in his bank account with ICICI Bank, Kalyan Nagar. As per Shri. A. T. Vijay Kumar, the cash of Rs.30 lakhs was received from the assessee as a loan. Shri. A. T. Vijay Kumar denied the agreement for sale produced by the assessee in support of the receipt of Rs.30 lakhs from Shri. A. T. Vijay Kumar. Version of Shri. A. T. Vijay Kumar was that a sum of Rs.30 lakhs was received by him as loan in cash from the assessee for purchasing a site from the assessee and since the transaction did not go through, he had returned the amount through the DDs. Another statement was recorded on 18.05.2010, from Shri. A. T. Vijay Kumar, wherein he reiterated his stand taken earlier. When assessee was put on notice of the version of Shri. A. T. Vijay Kumar, assessee denied the statement of Shri. A. T. Vijay Kumar. According to the assessee what was received from Shri. A. T. Vijay Kumar was only advance for sale of a site at Chikkabettahalli, Yelahanka Hobli.

3.

In so far as the credit of Rs.32,80,000/- shown by Smt. Kavitha Chakrapani as due to Shri. K. M. Giri, explanation was that she had entered into a contract with Shri. K. M. Giri for construction of a complex in ITA.1443 & 1444/Bang/2013 Page - 4 Kodigehalli Main Road. As per Smt. Kavitaha Chakrapani, the contract was for construction of 9,000 sft building at the rate of Rs.550/- per sft, for a total amount of Rs.52,80,000/-. Smt. Kavitha Chakrapani submitted to the AO that she had already paid Rs.20 lakhs to Shri. K. M. Giri and the balance sum of Rs.32,80,000/- was shown as liability due to Shri. K. M. Giri, since the construction of commercial complex was complete. AO thereupon recorded a statement from Shri. K. M. Giri on 10.06.2010. Shri. K. M. Giri confirmed that he had entered into a contract for constructing a commercial complex for Smt. Kavitha Chakrapani. However, according to him, he had received only Rs.20 lakhs and the construction was still to complete. As per Shri. K. M. Giri, work on two floors alone were only complete and the work on balance two floors was pending As per Shri. K. M. Giri, nothing was receivable from Smt. Kavitha Chakrapani since the building was incomplete. When this was put to the assessee, reply of the assessee was that construction was complete and the balance due to Shri. K. M. Giri was pending and the contract was never terminated by either of the parties.

4.

However, AO was not impressed by the submissions of either Shri. Chakrapani or Smt. Kavitha Chakrapani. He held that Shri. Chakrapani ITA.1443 & 1444/Bang/2013 Page - 5 could not prove the liability of Rs.30 lakhs shown as due to Shri. A. T Vijay Kumar and Smt. Kavitha Chakrapani could not show sufficient evidence to explain the liability of Rs.32,80,000/- due to Shri. K. M. Giri. Additions were made in both the cases accordingly.

5.

Both the assessees moved in appeal before the CIT (A). Before the CIT (A), assessees in addition to reiterating the contentions taken before the AO also produced letters from the concerned creditors. Through these letters, the creditors retracted from their earlier statements and confirmed that these amounts were due from the assessees to them. In the case of Shri. A. T. Vijay Kumar, he stated that the earlier statement given was due to confusion. Shri. K. M. Giri confirmed that the construction was complete and the balance was due to him. Assessees also filed affidavits of Shri. A. T. Vijay Kumar and Shri. K. M. Giri, in support. However, CIT (A) did not accept these submissions or affidavits filed by the assessee. According to him, facts and circumstances demonstrated that the creditors had declined the version of the assessee and affirmed that nothing was due to them from the assessees. He thus upheld the additions.

6.

Now before us, Ld. AR strongly assailing the orders of CIT (A) submitted that in the case of assessee, Shri. Chakrapani, version of Shri.

ITA.1443 & 1444/Bang/2013 Page - 6 Vijay Kumar was unbelievable. According to him, money received from Shri. A. T. Vijay Kumar, was through DDs. It was supported by an agreement for sale of a property owned by the assessee. Version of Shri. A. T. Vijay Kumar that assessee had paid Rs.30 lakhs in cash and this was used by him for giving advance to the assessee could not be believed. In any case, as per the Ld. AR, Shri. Vijay Kumar had retracted his earlier statement and confirmed the dues from the assessee. Similarly in the case of Smt. Kavitha Chakrapani also, Ld. AR submitted that Shri. K. M. Giri had later filed an affidavit in which he accepted completion of the building. He also stated that the sum of Rs.32,80,000/- was due from the assessee. According to him, in total disregard of these affidavits CIT (A) had confirmed the additions.

7.

Per contra, Ld. DR supported the orders of lower authorities. He submitted that the retraction made by the creditors could not be believed since they could not show any good reason for such retractions.

8.

I have perused the orders and heard the rival contentions. In so far as Rs.30 lakhs shown as due from Shri. A. T. Vijay Kumar is concerned, it is not disputed that the assessee had filed a copy of sale agreement dt.20.05.2006. No doubt, Shri. A. T. Vijay Kumar had later denied his ITA.1443 & 1444/Bang/2013 Page - 7 signature on the sale agreement, when a statement was taken from him. But the sale agreement, copy of which has been placed at pages 9 to 11 of the paper book, clearly show that it was witnessed by two persons who had given their respective signatures and address. Version of Shri. A. T. Vijay Kumar that Rs.30 lakhs money was given in cash by the assessee, which was used by him to give cheques to the assessee, in my opinion, was not supported by any evidence. Shri. A. T. Vijay Kumar was only trying to wriggle out of a situation in which he had to answer for the source of Rs.30 lakhs. In any case, Shri. A. T. Vijay Kumar had through an affidavit, retracted his earlier statement and confirmed having given Rs.30 lakhs as advance .

9.

Coming to the sum of Rs.32,80,000/- shown by Smt. Kavitha Chakrapani, as due to Sri. K. M. Giri, it is not disputed that a contract for construction was entered by her with Shri. K. M. Giri. The contract was for construction of 9,000 sq.ft at the rate of Rs.550/- per sft. Total amount payable by Smt. Kavitha Chakrapani to Shri. K. M. Giri on completion of the work, as per this contract was Rs.52,80,000/-. Shri. K. M. Giri had accepted the receipt of Rs,20 lakhs as also the factum of entering into the contract. What he stated was that the building was not yet complete.

ITA.1443 & 1444/Bang/2013 Page - 8 However, this was later retracted by him through an affidavit. Once Shri. K. M. Giri, confirmed that the building was complete, it was necessary for the assessee to show a liability of Rs.32,80,000/- as due to Shri. K. M. Giri, being the balance amount as per the contract. I am of the opinion that the lower authorities fell in error in ignoring these facts which were glaring on record. In my opinion, both the additions were not warranted. In the facts and circumstances of the case, additions stand deleted.

10.

In the result, appeals of the assessees are allowed.

Order pronounced in the open court on 17th day of June, 2016.

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