Itta/65/2003 Of Reddy Satyanavathi Nidadavolu v. Income Tax Officer Tanuku

* THE HON’BLE SRI JUSTICE L.NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM + I.T.T.A.Nos. 54, 60, 62, 63, 65, 75, 152, 192 & 207 of 2003AND I.T.T.A.No. 16 of 2004 I.T.T.A.No.54 of 2003 % Date: 02.09.2014# Reddy Satyavathi, Nidadavolu. … Appellant And$ Income Tax Officer, Ward-I, Tanuku. … Respondent ! Counsel for Appellants: Sri A.V.Krishna Kaundinya ^ Counsel for Respondent: Sri S.R.Ashok. < GIST: > HEAD NOTE: ? Cases referred HON’BLE SRI JUSTICE L. NARASIMHA REDDYAND HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A Nos.54, 60, 62, 63, 65, 75, 152, 192 &207 OF 2003ANDITTA.No.16 OF 2004 COMMON JUDGMENT:-(Per Hon’ble Sri Justice L.Narasimha Reddy) It is not uncommon that the anxiety to be law abiding exhibited by acitizen, turns out to be counter productive and lands him in trouble. Thatexactly happened in the instant case. The appellant in all these appeals is an assessee since a very longtime. She hails from a rich and reputed family, and was married to a doctor,who commanded a fairly good practice at Nidadavolu. She filed the returnsfor the assessment years 1982-83 to 1988-89 showing not only the income inthe form of profits that fell to her share in the partnership business, but alsothe one, from agriculture. Orders of assessment were passed under Section143(1) of the Income Tax Act, (for short, ‘the Act’) and the matter ended atthat. On 30.03.1989, the appellant filed revised returns covering the period1982-83 to 1988-89, disclosing the extra income from money lendingbusiness and receipt of gifts. She has also mentioned that certain items of theproperties were purchased from the money derived from those two sources. The Assessing Officer, who processed the returns, did not agree with the pleaof the appellant and treated the entire amount mentioned in the revisedreturns, as unexplained investment. Aggrieved by that order, the appellantfiled 7 appeals before the Commissioner (Appeals). The appeals weredisposed of in 2 batches. The first set covered assessment years 1982-83 to1986-87 and the second set covered 1987-88 and 1988-89. In both the orders, the plea of the appellant as to the income from the money lendingbusiness was accepted. However, one relation to gifts covering fourassessment years, was rejected. The department filed 7 appeals before the Visakhapatnam Bench ofIncome Tax Appellate Tribunal, feeling aggrieved by the orders passed by theappellate authority. The appellant, on the other hand, filed 4 appeals insofaras the Commissioner (Appeals) rejected the plea in relation to gifts. All the 11appeals were heard together by the Tribunal. Through a common order dated19.04.2000, the Tribunal allowed the appeals preferred by the departmentand dismissed those filed by the appellant. Hence, these appeals underSection 260A of the Act. Sri A.V. Krishna Kaundinya, learned counsel for the appellant, submitsthat the Tribunal failed to take into account, two important factors viz., that theappellant herself filed the revised returns covering 7 assessment years andthat she has adequate sources to start money lending business. He furthersubmits that the resources of the family of the appellant are such that givingand taking of gifts is a matter of course and that, she sold some of the goldenornaments to mobilise resources for purchasing the properties. He contendsthat the Tribunal proceeded in a hyper- technical manner and has undertakenminute verification of the things, as though it is a case where search wasconducted or the assessments were reopened on discovery of theundisclosed income. Sri A.V. Krishna Kaundinya, learned counsel for the appellant, submitsthat the Tribunal failed to take into account, two important factors viz., that theappellant herself filed the revised returns covering 7 assessment years andthat she has adequate sources to start money lending business. He furthersubmits that the resources of the family of the appellant are such that givingand taking of gifts is a matter of course and that, she sold some of the goldenornaments to mobilise resources for purchasing the properties. He contendsthat the Tribunal proceeded in a hyper- technical manner and has undertakenminute verification of the things, as though it is a case where search wasconducted or the assessments were reopened on discovery of theundisclosed income. Sri S.R. Ashok, learned Senior Counsel for the respondent, on theother hand, submits that once the appellant pleaded that she has undertakenmoney lending business, heavy burden rested upon her to show the sourcesof income and that she miserably failed in this behalf. He contends that theAssessing Officer as well as the Tribunal have analysed the matterthoroughly and, on being satisfied that the attempt made by the appellant wasonly to legalise what she has acquired contrary to law, passed appropriateorders. He submits that the Tribunal has referred to several decided cases in support of its conclusion and that no substantial question of law arises forconsideration, in this batch of appeals. Not even a semblance of doubt was expressed in relation to theregular returns submitted by the appellant for the 7 assessment years referredto above, much less any proceedings were initiated under Sections 147 or154 of the Act. That only shows the truthfulness of the returns submitted bythe appellant. The appellant felt that some of the items of income ought to have beenreflected in the relevant assessment years. Though there was not even anindication as to the suppression of income, she voluntarily filed revisedreturns for as many as 7 assessment years. She reflected two sources ofincome. The first is through money lending business and the second is in theform of gifts received by her. As regards the first item, the Assessing Officerhimself proceeded to examine several persons, whom the appellant is said tohave lent amounts. The named borrowers vouched for the correctness of thestatement. It is only the father-in-law of the appellant that pleaded theignorance about the details, but not the activity as such. That constituted thebasis for the Assessing Officer to doubt the correctness of the facts mentionedby the appellant. As regards gift also, the same view was taken. The respective Commissioners (Appeals), who passed the orders in 2sets, have taken into account, the financial capacity and family background ofthe appellant and found that for a person of the status of the appellant, itwould not be difficult to mobilise Rs.30,000/- to commence money lendingbusiness. It was clearly mentioned that the parents of the appellant are fairlyresourceful and her husband is also a doctor, commanding considerablepractice. Accordingly, the income through money lending business wastreated as legal and proper. However, they affirmed the view taken by theAssessing Officer regarding gifts. In the appeals preferred by the department as well as the appellant, the The respective Commissioners (Appeals), who passed the orders in 2sets, have taken into account, the financial capacity and family background ofthe appellant and found that for a person of the status of the appellant, itwould not be difficult to mobilise Rs.30,000/- to commence money lendingbusiness. It was clearly mentioned that the parents of the appellant are fairlyresourceful and her husband is also a doctor, commanding considerablepractice. Accordingly, the income through money lending business wastreated as legal and proper. However, they affirmed the view taken by theAssessing Officer regarding gifts. In the appeals preferred by the department as well as the appellant, the Tribunal has undertaken extensive discussion with reference to each andevery ground. One of the grounds that weighed with the Tribunal in notaccepting the income through money lending business was that the activitywas not mentioned in the original returns. That in fact would amount tobegging the question. The very occasion for the appellant to submit revisedreturns was that she did not mention the same inadvertently or otherwise inthe original returns. Further, it is not a case where the appellant came forwardwith the revised returns, on being issued notice by an authority under the Act. As regards the source to commence the money lending business, the plea ofthe appellant was that she has savings through agricultural income. However, the Tribunal took the view that the income, which the respondentderived from agriculture, may have been spent for social obligations. Therecannot be a better instance of stretching a totally unrelated fact to the extent ofstraining it. It is not in dispute that in the original and regular returns, theappellant has shown the income through agriculture. That having beenexempted, it had accrued to her free from any obligation and she has everyright to put the amount to the use of her choice. It was nobody’s case that theincome earned by the appellant through agriculture was spent for socialobligations. For all practical purposes, the Tribunal has permitted itsimagination to cross all barriers of propriety and reasonableness. The ground on which the income through gifts was denied, was thatthe donors, who were examined in the course of enquiry, were found to beunrelated to the appellant. In a way, the Tribunal and the authorities haveredefined the concept of gift by adding a clause to the effect that a gift can betreated as valid only when presented by a closely related person. The law onthe subject does not indicate that a gift must emanate only from a knownperson. Further, it is difficult to describe let alone define, as to when a personcan be said to be related to another, in the context of making gifts. A smallgesture of affection may result in presentation of quite a fabulous gift and,even where stupendous service is rendered, it may not fetch even an act ofgratitude. Much would depend upon the thinking of the concerned persons as well as their financial conditions. We are not at all in agreement with the viewtaken by the Tribunal. We, therefore, allow the appeals and set aside the orders passed bythe Assessing Authority. We, accordingly, direct that the claims made by theappellant through her revised returns, shall stand accepted. There shall beno order as to costs. Miscellaneous Petitions, if any, pending in these appeals shall alsostand disposed of. ___________________________ L. NARASIMHA REDDY, J Date:02.09.2014Note: L.R.copy B/o vv/gk ____________________________CHALLA KODANDA RAM, J HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE CHALLA KODANDA RAM vv/gk I.T.T.A Nos.54, 60, 62, 63, 65, 75, 152, 192 &192 & 207 of 2003 AND 16 of 2004 Date:02.09.2014