Ch. Chandrasekar Naidu & Ors. Vs DCIT (ITAT Hyderabad)
Summary: The Hyderabad A Bench of the Income Tax Appellate Tribunal disposed of four appeals concerning three assessees, Ch. Chandrasekar Naidu, C.M. Gopal and Ch. Goverdhan Naidu, arising from assessments under Section 143(3) read with Section 153A of the Income-tax Act, 1961. The appeals related to assessment years 2007-08 and 2008-09. In ITA No. 235/Hyd/2019 for AY 2007-08, Ch. Chandrasekar Naidu challenged an unexplained investment addition of ₹1,00,000 arising from a promissory note seized during a search on 25 November 2010. He asserted that the amount represented borrowing from his Hindu undivided family and relied on the HUF balance sheet, explaining that the HUF had not filed a return because its income was below the taxable threshold.
The Tribunal rejected that explanation because the assessee failed to establish the claimed borrowing from the HUF or the mode of payment. It consequently dismissed ITA No. 235/Hyd/2019.
The remaining three appeals for AY 2008-09 concerned alleged undisclosed investments in property. Additions of ₹47,00,100 each had been made in the hands of two assessees and ₹94,00,201 in the hands of Ch. Goverdhan Naidu. The department relied on seized purchase deeds and admissions during search to assert that the total consideration was ₹3.5 crore, whereas the documents indicated consideration of ₹1.49 crore and a stamp registration value of ₹2.73 crore.
The assessees maintained that the property investment belonged to the HUF, not to them individually. The Tribunal found that the HUF had disclosed the Posina Complex property in its balance sheet as on 31 March 2008. The Revenue had not rebutted this material fact or identified evidence establishing that the three individuals paid consideration over and above ₹1.49 crore.
Although the Revenue relied on statements recorded under Section 132(4) and cited judicial authorities concerning admissions, the Tribunal distinguished those authorities and referred to CBDT instructions discouraging reliance on uncorroborated confessions. It directed deletion of the three additions and allowed ITA Nos. 832, 833 and 835/Hyd/2019. The source order refers to a CBDT circular dated 10 March 2013; the commonly cited instruction is dated 10 March 2003, a discrepancy requiring source verification.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
PER S.S. GODARA, J.M. : The instant batch of four cases pertains to three assessees Shri Ch. Chandrasekar Naidu, Shri CM. Gopal, and Ch. Goverdhan Naidu. The first assessee herein has filed his twin appeals ITA Nos.235 and 833/Hyd/2019 for AYs. 2007-08 and 2008-09 against the CIT(A)-11, Hyderabad’s separate orders; dated 30.11.2018 and 29.03.2019 in case Nos.220/2013-14/DCIT CC-1(2)/CIT(A)-11, Hyd and 0221/2013-14/DCIT CC-2/CIT(A)- 11/2018-19/Hyd; respectively.
2. The latter two assessees appeals on ITA Nos.832 and 835/Hyd/2019 are directed against the CIT(A)-11, Hyderabad’s separate orders; both dated 29.03.2019, in case Nos.0214/2013- 14/DCIT CC-2/CIT(A)-11/2018-19/Hyd and 0208/2013-14/DCIT CC-2CIT(A)-11/2018-19/Hyd; respectively. Relevant proceedings in all the instant four cases are u/s 143(3) r.w.s. 153A of the Income Tax Act,1961 [in short, ‘the Act’]. Heard all the assessees appeals as well as the department. Case files perused.
3. We come to the first assessee’s appeal ITA No.235/Hyd/2019 raising his sole substantive grievance that both the lower authorities have erred in law and on facts in making un-explained investment addition of Rs.1,00,000/- during the course of assessment as upheld in the CIT(A)’s order. There is no dispute with impugned addition pertains to a promissory note found and seized during the course of search dated 25.11.2010. The assessee had attributed source thereof to borrowers from his eponymous HUF which could not be proved since the latter had not filed any income tax return pertaining to A.Y. 2007-08.
4. Mr. P. Murali Mohan Rao, vehemently contended during the course of hearing that both the lower authorities have erred in law and on facts in making the impugned addition. He took us to the HUF’s Balance Sheet and other relevant documents forming part of the case file. He submits that just because the said HUF had not derived any taxable income beyond the exemption limit would not form the sole substantive reason to deny the assessee’s explanation herein.
5. We find no merit in assessee’s instant arguments since he has failed to prove the impugned sum of Rs.1,00,000/- as borrowals coming from HUF with the relevant mode of payment as well. We reject the assessee’s instant sole substantive grievance. His first and foremost appeal No.235/Hyd/2019 fails therefore.
6. Next comes the sole identical issue of undisclosed investment addition of Rs.47,00,100/- 2nd and 3rd appeals ITA Nos.833 and 832/Hyd/2019 @ 12.5% share in their hands as against Rs.94,00,201/- involving the last assessee Shri Ch. Goverdhan Naidu; respectively.
7. There is no quarrel between the parties that the department had found / seized the assessees’ four purchase deeds documents Nos.92, 93, 144 and 145/2008 indicating actual consideration as Rs.1,49,00,000/- having SRO value of Rs.2,73,77,000/- followed by the alleged undisclosed investment sum of Rs.3.5 crores (including the foregoing heads); respectively.
8. The department has filed a very detailed note dated 28.07.2021 through learned CIT-DR that the lower authorities have gone by the assessees’ admission made during the course of search that they had actually paid a total sum of Rs.3.5 crores involving the respective shares of 12.5% each and 25% (supra) as well as 50% stake of their eldest brother Shri C. Satyanarayana. And their uniform stand before us is that it was the forgoing HUF only which had made the impugned investment and their individuals / members thereof.
9. We have given our thoughtful consideration to the forgoing rival stands against the impugned and undisclosed investment addition made in these three assessees’ hands. We find no reason to sustain the same. This is because of the fact that it is not these three members / individuals of the HUF but the latter “person” himself who had disclosed the relevant investment in its Balance Sheet as on 31.03.2008 (Pg.No.130) involving “Posina Complex” having value of Rs.43,75,352/- way back on 31.03.2008. This clinching fact has gone unrebutted from Revenue side. It has sought to reemphasize that the impugned addition is based on the assessees’ Sec.132(4) statements which had not been retracted. It also quotes case law Bannalal Jat Constructions Pvt. Ltd Vs. ACIT (2019) 106 taxmann.com 128 (SC), PCIT Vs. Roshan Lal (2013) 30 taxmann.com 367 (Allahabad), Kermex Micro Systems (India) Ltd Vs DCIT (2014) 47 taxmann.com 375 (Andhra Pradesh High Court). Learned CIT-DR could not pinpoint even a single instance in all the foregoing judicial precedents as to whether the additions therein were based on mere search statements or not ? We make it clear that the CBDT has itself issued the twin circulars dt.10.03.2013 and 18.12.2014 that search statements involving admissions and confessions do not carry any significance in absence of evidence collected. We make it clear that the Revenue has not indicated even a single material which could suggest these assessees to have made actual payments over and above Rs.1.49 crore. We thus hold that in this factual backdrop both the learned lower authorities have erred in law and on facts in assessing the alleged impugned / undisclosed investments in these three individuals’ hands wherein the corresponding capital asset had been purchased and declared by the foregoing HUF only. These additions i.e., 47,00,100/- each in ITA Nos.833 and 832/Hyd/2019 and Rs.94,00,201/- in ITA No.835/Hyd/2019 are directed to be deleted. These latter three appeals succeed therefore.
No other ground has been pressed before us.
10. To sum up, the first and foremost appeal ITA No.235/Hyd/2019 is dismissed and the remaining three appeals in ITA No.832, 833 and 835/Hyd/2019 are allowed in above terms. A copy of this common order be placed in respective case files.
Order pronounced on 13th day of September, 2021.
