2010 (10) TMI 1198 - AT - Income Tax

Summary

Issues Involved:
1. Chit Transaction
2. Difference in Cost of Construction
3. Disallowance of Exemption u/s 54F
4. Unrecorded Investment

Summary:

1. Chit Transaction:
The first issue pertains to chit transactions in the case of Dr. S.V. Krishna Reddy for A.Ys. 2003-04, 2004-05, and 2005-06. The Revenue authorities claimed that a spiral notebook found during a search operation contained details of chit contributions. The assessee denied the notebook's relevance, stating it was found in a public place and not in his control. The Tribunal held that the burden of proof was on the Revenue to corroborate the details in the notebook, which they failed to do. Consequently, the addition towards unexplained investment was deleted.

2. Difference in Cost of Construction:
This issue arises in multiple appeals involving Dr. S.V. Krishna Reddy, Smt. S. Vijaya Lakshmi, and Smt. S. Sudarsanamma. The assessee argued that the reference to the valuation officer was unjustified as the books of account were maintained and not rejected. The Tribunal agreed, citing that no defects were pointed out in the books of account. It was held that the reference to the valuation officer was bad in law. Additionally, the Tribunal granted a 15% reduction for self-supervision and rate differences, leading to the deletion of most additions except for an unrecorded voucher amounting to Rs. 2,03,184.

3. Disallowance of Exemption u/s 54F:
For A.Ys. 2005-06 and 2006-07, Dr. S.V. Krishna Reddy claimed exemption u/s 54F for a hostel building. The Tribunal held that a hostel building does not qualify as a "residential house" u/s 54F, as it is used for temporary accommodation. Therefore, the claim for exemption was rightly disallowed by the lower authorities.

4. Unrecorded Investment:
This issue involves the Departmental appeal in the cases of S. Vijaya Lakshmi for A.Y. 2004-05 and S. Sudarsanamma for A.Y. 2003-04. Promissory notes amounting to Rs. 14.5 lakhs were found during the search. The CIT(A) concluded that these notes were not self-serving agreements and were linked to earlier promissory notes. The Tribunal upheld the CIT(A)'s finding that the investments were explained and recorded in the books of account, thus not constituting unexplained investments.

Conclusion:
The appeals were disposed of with ITA Nos. 514, 515 & 516/Hyd/2009 allowed; ITA No. 587/Hyd/2010 partly allowed; ITA No. 615/Hyd/2010, ITA No. 480/Hyd/2009, ITA No. 371/Hyd/2010, and ITA No. 389/Hyd/2010 dismissed; ITA Nos. 520, 375, 519/Hyd/2009, and ITA No. 374/Hyd/2010 allowed; and ITA No. 867/Hyd/2010, ITA No. 606/Hyd/2009, and ITA No. 605/Hyd/2009 dismissed.