Income Tax Officer, Ward-10(3), Hyderabad V. Nakkirtha Gangadhar, Secunderabad

CO 28/HYD/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9846 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: PAVAN KUMAR CHAKRA
• Keywords: Unexplained cash credit; Business income; Principle of natural justice
• Section: 234B; 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 703/HYD/2014 ASSESSMENT YEAR 2009-10 THE INCOME TAX OFFICER WARD-10(3) HYDERABAD VS. SRI NAKKIRTHA GANGADHAR SECUNDERABAD PAN: AHGPG6679Q APPELLANT RESPONDENT C.O. NO. 28/HYD/2014 ARISING OUT OF ITA NO. 703/HYD/2014 ASSESSMENT YEAR 2009-10 SRI NAKKIRTHA GANGADHAR SECUNDERABAD PAN: AHGPG6679Q VS. THE INCOME TAX OFFICER WARD-10(3) HYDERABAD APPELLANT RESPONDENT REVENUE BY: SRI KIRAN KATTA ASSESSEE BY: SRI PAVAN KUMAR CHAKRAPANI DATE OF HEARING: 08.08.2014 DATE OF PRONOUNCEMENT: 16 .09.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THE APPEAL BY DEPARTMENT AND THE CROSS OBJECTION (CO) BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-VI, HYDERABAD DATED 13.12.2013 FOR ASSESSMEN T YEAR 2009-10. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF SUB-CONTRACTS IN UNDERGROUND DRAINAGE W ORKS 2 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== AND FILED HIS RETURN OF INCOME ADMITTING TOTAL INCO ME OF RS. 3,99,560. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT AN AMOUNT OF RS. 34,52,500 WAS DEPOSITED AS CASH ON VARIOUS DATES IN THE BANK ACCOUNT MAINTAINED WITH VYSYA BANK, LABBIPET BRANCH, VIJAYAWADA AND IN ABSENCE OF ANY DETAILS AN D EXPLANATION FOR SOURCES FOR CASH DEPOSITS, ENTIRE C ASH DEPOSITS WERE TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE WHILE FINALISING THE PROCEEDINGS U/S. 144 OF THE INCOME-TAX ACT, 1961. DURING THE COURSE OF APPELLAT E PROCEEDINGS THE ASSESSEE OBJECTED TO THE TREATMENT OF CASH DEPOSIT AS UNEXPLAINED INCOME OF THE ASSESSEE ON THE GROUND THAT THE PROCEEDINGS WERE FINALIZED U/S. 144 OF INCOME TAX ACT. THE ASSESSEE SUBMITTED THAT THEY RECEIVED GROSS CONTRACT RECEIPTS OF RS. 1,24,08,000 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION FROM SRI V. SAN JEEVA REDDY TOWARDS EXECUTION OF A WORK AT VIJAYAWADA, AWARDED BY VIJAYAWADA MUNICIPAL CORPORATION. THE G ROSS SUB CONTRACT RECEIPT WAS DISCLOSED IN THE P&L ACCOU NT OF THE ASSESSEE, INCLUDING THE CASH RECEIPT OF RS. 33, 58,000 FROM THE MAIN CONTRACTOR. THIS SUBMISSION OF THE ASSESSEE WAS HELD TO BE CONSTITUTED ADDITIONAL EVID ENCE SINCE SUCH INFORMATION WAS NOT AVAILABLE BEFORE THE ASSESSING OFFICER TO PASS EX-PARTE ORDER AND THE SA ME WERE REFERRED TO ASSESSING OFFICER FOR NECESSARY VERIFICATION AND REPORT. 3. THE ASSESSING OFFICER IN HIS REMAND REPORT OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE SRI SANJEEVA REDDY FOR EXAMINATION, WHO WAS REQUIRED TO BE EXAMINED AS TO THE NATURE OF TRANSACTIONS AND THE CIRCUMSTANCES UNDER WHICH THE CASH WAS DEPOSITED IN TO 3 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== BANK ACCOUNT. THE AO ALSO OBSERVED THAT THE ASSESS EE COULD NOT PRODUCE ANY OTHER EVIDENCE IN PROOF OF EXECUTING THE CONTRACT WORKS OTHER THAN THE SUB CON TRACT AGREEMENT. THE AO HELD THAT THE CLAIM OF THE SUB CONTRACT AGREEMENT WAS A MAKE BELIEVE TRANSACTION A S NO TDS WERE MADE ON PAYMENTS FOR SUB CONTRACT WORKS. 4. IN REPLY TO THE REMAND REPORT, THE ASSESSEE SUBMITTED THAT CONFIRMATION FROM THE CONTRACTOR/PAY ER WERE PRODUCED ALONG WITH COPY OF THE SUB CONTRACT AGREEMENT. THE ASSESSEE CONTENDED THAT ALL THE CONDITIONS OF SEC. 68 WERE SATISFIED AND THE IDENTI TY, CREDIT WORTHINESS OF PAYER WERE ESTABLISHED BY SUBM ITTING PAN DETAILS OF MR SANJEEVA REDDY. THE ASSESSEE HAD ALSO FURNISHED CONTRACT ACCOUNT, BANK ACCOUNT, CONTRACT AGREEMENT ETC. IT WAS CONTENDED THAT THE AO IS NOT JUSTIFIED IN HOLDING THAT NEXUS BETWEEN THE CASH DE POSITS AND SOURCES COULD NOT BE ESTABLISHED JUST BECAUSE T HE MAIN CONTRACTOR AND SRI SANJEEVA REDDY WERE NOT PRODUCED BEFORE THE AO. IT WAS ALSO CONTENDED THAT CASH DEPOSIT OF RS. 33,58,000 RECEIVED FROM MAIN CONTRAC TOR I.E. PAYER WAS INCLUDED IN TOTAL GROSS CONTRACT REC EIPTS OF RS. 1,24,08,000 SHOWN IN THE P&L ACCOUNT WHICH WAS PREPARED FOR COMPUTING THE TAXABLE BUSINESS INCOME OF THE ASSESSEE. IT WAS ALSO CONTENDED THAT JUST BECA USE TDS WAS NOT MADE, THE CONTRACT RECEIPTS OF RS. 33,5 8,000 CANNOT BECOME MAKE BELIEVE TRANSACTIONS, AS OPINED BY THE AO. THE ASSESSEE RELIED ON THE FOLLOWING JUDIC IAL DECISIONS. A) HARISH KUMAR VS. DCIT (2003) 85 ITO 366. B) DR RAJESH SARDNHA VS. ITO (2004) 86 TTJ (DEL TRIBUNAL) 116. 4 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== C) ACIT VS CHANDRESH KUMAR MAHESWARI (2009) 120 TTJ 132. D) BADRI PRASAD GUPTA VS. ACIT (2008) 14 DTR 348. 5. THE CIT(A), AFTER PERUSING THE REMAND REPORT, ASSESSMENT ORDER AND THE SUBMISSION OF THE ASSESSEE HELD THAT IT WAS A FACT THAT THE INFORMATION BROUGH T ON RECORD OF THE ASSESSEE IN ACTING AS SUB CONTRACTOR VIDE AGREEMENT DT. 25.1.2008 WITH MR V SANJEEVA REDDY IS GENUINE AND FOR THE YEAR UNDER REFERENCE THE TOTAL SUB CONTRACT RECEIPTS ARE SHOWN AT RS. 1,24,08,000. IT WAS ALSO OBSERVED BY CIT(A) THAT THE CONTRACT RECEIPTS SHOWN TO HAVE INCLUDED RS. 33,58,000 PAID IN CASH BY THE CONTRACTOR INTO THE BANK ACCOUNT OF THE ASSESSEE WH ICH HAS BEEN CONFIRMED BY MR SANJEEVA REDDY, SUBSEQUENT LY. HOWEVER, ON THE INSISTENCE OF THE AO FOR THE PRESEN CE OF MR. SANJEEVA REDDY IN HIS OFFICE AND IN ABSENCE OF COMING IN PERSON AND FOR NON DEDUCTION OF TDS ON SUCH CASH REMITTANCES OF CONTRACT AMOUNTS, THE AO TREATED THE SAID CASH DEPOSITS INTO BANK ACCOUNT, AS UNEXPLAINED. T HE CIT(A) POINTED OUT THAT THE AO HAS BELIEVED THE PAY MENTS RECEIVED IN CHEQUE FROM THE CONTRACTOR WHILE DISBEL IEVING THE CASH PAYMENTS, IN SPITE OF THE CONFIRMATION BY THE CONTRACTOR AND IN SPITE OF FURNISHING THE SUB CONTR ACTOR AGREEMENT BETWEEN THE ASSESSEE AND MR SANJEEVA REDD Y. 6. THE CIT(A) OBSERVED THAT THE TOTAL CONTRACT AMOUNT RECEIVED IN THE BOOKS OF THE ASSESSEE FOR THE YEAR STOOD AT RS. 1,24,08,000 AND THE BOOKS OF THE ASSESSEE WERE NOT REJECTED. HENCE, THE CIT(A) HELD THAT THE CONTRACT PAYMENT RECEIVED IN CASH TO THE EXTENT OF RS. 33,58,000/- E XPLAIN THE CASH DEPOSITS INTO THE BANK ACCOUNT AND MERELY 5 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== BECAUSE THE CONTRACTOR DID NOT APPEAR BEFORE THE AO THE TRANSACTION CANNOT BE HELD TO BE A MAKE BELIEVE ONE . IT WAS ALSO POINTED OUT BY THE CIT(A) THAT THE BANK AC COUNT OF THE ASSESSEE EXPLAIN THE RECEIPTS BOTH IN CASH A ND CHEQUE FROM THE CONTRACTOR AND HENCE THE DETAILS OF CHEQUE PAYMENT AS WELL AS THE CASH PAYMENTS CANNOT BE HELD TO BE A MAKE BELIEVE TRANSACTION. THE AO CANNO T BELIEVE THE CHEQUE PAYMENT ALONE WILL DISBELIEVING THE PAYMENT RECEIVED IN CASH. THE CIT(A) POINTED OUT T HAT THE ASSESSEE HAS COMPLIED WITH THE PROVISION OF SEC. 68 BY FURNISHING THE SOURCES OF DEPOSITS IN TO BANK ACCOU NT, INCLUDING CASH DEPOSITS WHICH EMANATED FROM CONTRAC T RECEIPTS. THE CIT(A) STATED THAT THE CASES RELIED O N BY THE ASSESSEE SUPPORT THIS VIEW. HOWEVER, THE CIT(A) HEL D THAT THE ASSESSEE COULD ESTABLISH THE SOURCES FOR RS 33, 58,000 ONLY THROUGH THE CASH RECEIPTS TOWARDS THE CONTRACT AMOUNTS FROM THE CONTRACTOR FOR THE YEAR AS AGAINST THE TOTAL CASH DEPOSITS OF RS. 34,52,500 INTO BANK ACCO UNT, THUS LEAVING A BALANCE OF RS. 94,500 FOR WHICH THE ASSESSEE WAS NOT ABLE TO OFFER ANY EXPLANATION EITH ER IN THE REMAND PROCEEDINGS OR APPELLATE PROCEEDINGS BEF ORE THE CIT(A). THEREFORE, THE CIT(A) CONFIRMED THE ADD ITION ON ACCOUNT OF TREATING CASH DEPOSITS TO THE EXTENT OF RS 94,500 AS AGAINST RS 34.52,500/- MADE BY THE AO IN THE ASSESSMENT ORDER. THE CIT(A) PARTLY ALLOWED THE ASSESSEE'S APPEAL BY DELETING THE ADDITION OF RS. 33,58,000 TOWARDS CASH DEPOSIT INTO BANK ACCOUNT. AGGRIEVED THE ASSESSEE AND DEPARTMENT ARE ON APPEAL BEFORE US. 7. THE ASSESSEE HAS FILED CROSS OBJECTIONS WHICH ARE AS FOLLOWS 6 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN SO FAR AS IT IS AGAINST THE RESPONDENT / CROSS OBJECTOR ARE OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABLE TO BE ASSESSED OVER AND ABOVE THE TOTAL INCOME REPORTED BY THE RESPONDENT / CROSS OBJECTOR OF RS. 3,99,560/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS NOT JUSTIFIED IN LAW IN CONFIRMING AN ADDITION OF RS. 94,500/- MADE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 68 OF THE ACT, BEING UNEXPLAINED CASH CREDIT UNDER THE FACTS AND CIRCUMSTANCE OF THE CASE. 4. THE LEARNED AUTHORITIES FAILED TO APPRECIATE THE FACT THAT THE CASH DEPOSITS IN THE BANK ACCOUNTS ARE FROM THE CASH AVAILABLE IN THE BOOKS OF THE RESPONDENT / CROSS OBJECTOR UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE RESPONDENT / CROSS OBJECTOR DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234 B & 234 C OF THE INCOME TAX ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. FURTHER THE LEVY OF INTEREST UNDER SECTION 234 B & 234 C OF THE ACT IS ALSO BAD IN LAW AS THE PERIOD, RATE, QUANTUM AND METHOD OF CALCULATION ADOPTED ON 7 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== WHICH INTEREST IS LEVIED ARE ALL NOT DISCERNIBLE AND ARE WRONG ON THE FACTS OF THE CASE. 6. THE RESPONDENT / CROSS OBJECTOR CRAVES LEAVE OF THIS HON'BLE TRIBUNAL TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. 7. IN VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE CROSS OBJECTION, YOUR RESPONDENT / CROSS OBJECTOR HUMBLY PRAY THAT THE CROSS OBJECTION MAY BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 8. GROUNDS OF APPEAL BY THE DEPARTMENT ARE AS FOLLOWS: 1. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW, OR BOTH. 2. THE HON'BLE CIT(A) IS GIVING RELIEF TO THE ASSESSEE INDIVIDUAL DID NOT APPRECIATE THAT HE HAD NOT FULLY DISCHARGED THE ONUS OF ESTABLISHING THE SOURCE OF THE ALLEGED CASH DEPOSIT IN HIS SAVINGS ACCOUNT. 3. THE HON'BLE CIT(A) ACCEPTED THE VERSION OF THE ASSESSEE-INDIVIDUAL IN STATING THAT HE WAS A SUB- CONTRACTOR EVEN WHERE THE BASIC REQUIREMENT OF LAW, NAMELY, THE NEED FOR TDS HAS BEEN INFRACTED. 4. THE HON'BLE CIT(A) DID NOT APPLY THE EMERGENT SURROUNDING CIRCUMSTANCES AND THE HUMAN 8 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== PROBABILITY TO UNDERSTAND THE CONDUCT OF THE ASSESSEE-INDIVIDUAL, IN A SITUATION WHERE HE HIMSELF HAS OBSERVED THAT THERE WAS AN UNEXPLAINED GAP OF RS. 94,500/- IN THE VERSION OF THE ASSESSEE-INDIVIDUAL THAT HE WAS SUB- CONTRACTOR. 9. WE HAVE HEARD BOTH THE PARTIES. OUT OF THE AMOUNT OF RS. 34,52,500 BEING THE CASH DEPOSITS INT O BANK ACCOUNT, THE ASSESSEE WAS ABLE TO ESTABLISH TH E SOURCES FOR RS. 33,58,000 ONLY. THE ASSESSEE HAD EXPLAINED THAT THE CASH RECEIPTS TOWARDS THE CONTRA CT AMOUNTS FROM THE CONTRACTOR FOR THE YEAR WAS ONLY R S. 33,58,000 AND HENCE BALANCE OF RS. 94,500 WAS LEFT UNEXPLAINED. THE CIT(A) HAS RIGHTLY HELD THAT THE AMOUNT OF RS. 33,58,000 WHICH HAVE BEEN EXPLAINED AS CASH RECEIPTS TOWARDS CONTRACT PAYMENT IS TO BE DELETED. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THI S COUNT. HENCE, WE DISMISS THE DEPARTMENT'S APPEAL. 10. WITH RESPECT TO THE RETENTION OF ADDITION OF RS. 94,500 MADE BY THE AO, THE CIT(A) HAS RIGHTLY HELD THAT U/S. 68 ADDITION CAN ONLY BE MADE WHEN THE ASSESSEE FAILS TO EXPLAIN THE CASH CREDIT IN THE BOOKS OF AC COUNT MAINTAINED BY THE ASSESSEE AND IN THIS CASE THE ASS ESSEE HAS FAILED TO EXPLAIN THE CASH CREDIT FOR AN AMOUNT OF RS. 94,500. HENCE, THE SAME HAS BEEN CONFIRMED BY THE CIT(A) AND WE SEE NO REASON TO HOLD A DIFFERENT VIE W. HENCE CROSS OBJECTION ON THIS ISSUE IS DISMISSED. 11. GROUND NO. 5 IN THE CROSS OBJECTION RAISED BY THE ASSESSEE WITH RESPECT TO INTEREST U/S. 234B AND 234 C, THE 9 ITA NO. 703/HYD/2014 CO NO. 28/HYD/2014 SRI NAKKIRTHA GANGADHAR ==================== MATTER IS SET ASIDE TO THE FILE OF THE ASSESSING OF FICER TO EXAMINE THE SAME AND DECIDE THE ISSUE AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO REPRESENT HIS CASE. 12. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED AND THE CO OF THE ASSESSEE IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 16 TH SEPTEMBER, 2014 TPRAO COPY TO: 1. THE INCOME TAX OFFICER, WARD - 10(3), ROOM NO. 627, IT TOWERS, AC GUARDS, HYDERABAD. 2. SRI NAKKIRTHA GANGADHA R, # 4 - 98/3, NEAR HANUMAN TEKDI, MACHHA BOLLARUM, SECUNDERABAD. 3 . THE CIT(A) - VI , HYDERABAD . 4 . THE CIT - V , HYDERABAD . 5 . THE DR, A - BENCH, ITAT, HYDERABAD.