Atluri Venugopal, Vijayawada V. The Income Tax Officer, Ward-2(3), Vijayawada

CO 5/VIZ/2022

AI Insights

The case involves an appeal by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Vijayawada, which had partly allowed the assessee's appeal by deleting the addition of Rs. 1,55,57,267 on account of unexplained sundry creditors and allowing telescoping of Rs. 8,77,000 on account of unexplained cash deposits. The Revenue contested the CIT(A)'s decision, arguing that the CIT(A) did not adequately consider the defects in the confirmation letters from the creditors and the controversial statements given by them. The Tribunal found that the Assessing Officer had not adequately verified the genuineness of all creditors and directed a re-examination.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128500 (ITAT-VISAKHAPATNAM)
• Appeal Type: Cross Objection
• Pronouncement Date: 15-11-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-10-2022
• Assessment Year: misc
• Appeal Filed On: 21-12-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 143(3); 142(1)

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.05/Viz/2020 (Ǔनधा[रण वष[ / Assessment Year : 2012-13) Income Tax Officer, Ward-2(3), Vijayawada. Vs. Sri Atluri Venugopal, Vijayawada. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) C.O. No. 05/Viz/2022 (In आयकर अपील सं./ I.T.A. No.05/Viz/2020) (Ǔनधा[रण वष[ / Assessment Year : 2012-13) Income Tax Officer, Ward-2(3), Vijayawada. Vs. Sri Atluri Venugopal, Vijayawada. (अपीलाथȸ/ Appellant in appeal) (Cross Objector) अपीलाथȸ कȧ ओर से/ Assessee by : Sri C. Subrahmanyam, CA Ĥ×याथȸ कȧ ओर से / Revenue by : Sri ON Hari Prasada Rao, Sr. AR सुनवाई कȧ तारȣख / Date of Hearing : 12/10/2022 घोषणा कȧ तारȣख/Date of Pronouncement : 16/11/2022 O R D E R 2 PER S. BALAKRISHNAN, Accountant Member : The captioned appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Vijayawada [Ld. CIT(A)] in appeal No. 10204/CIT(A)/VJA/2017- 18, dated 24/10/2019 arising out of the order passed U/s. 143(3) r.w.s 263 of the Income Tax Act, 1961 [the Act], dated 29/12/2017 for the AY 2012-13. 2. Brief facts of the case are that the assessee is an individual deriving income from business ie., agro products, filed his return of income admitting a total income of Rs. 2,49,800/- for the AY 2012-13. The case was selected for scrutiny under CASS to examine ‘large amount of sundry creditors and capital gains consideration in ITR is less than sale of property reported in AIR/CIB’. Subsequently, the assessment was completed u/s. 143(3) on 30/03/2015 determining the total income of Rs. 15,07,540/-. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A) against the additions made by the Ld. AO. In the meantime, the Learned Principal Commissioner of Income Tax [Pr. CIT], Vijayawada exercising his powers u/s. 263 vide order dated 30/03/2017 set aside the original assessment order and directed the Ld. AO to re-do the 3 assessment de-novo on the lines indicated in his order u/s. 263 after affording a reasonable opportunity of being heard to the assessee. Accordingly, a notice U/s. 142(1) along with a questionnaire was issued on 22/05/2017. In response to the notice, the assessee’s representative filed the information as required by the Ld. AO. The assessee was asked to produce confirmations from the various creditors totaling to Rs. 1,55,57,267/-. In response the assessee produced confirmation letters from 7 creditors in his final reply on 28/12/2017. The Ld. AO in the original assessment disallowed a sum of Rs. 7,60,350/- on the basis of verification of sundry creditors balances. However, the Ld. Pr. CIT in his order has found that the confirmation letters do not contain the details of lands, ownership of the land and the details of lease, if any. The Ld. Pr. CIT observed that there was no correlation between the paddy purchased by the assessee and the paddy claimed to have been sold by the land owners in comparison with the land holding submitted by the creditors. Accordingly, the Ld. Pr. CIT directed the Ld. AO to verify the genuinity of the creditors and also the details of sale of husk corresponding to the cash deposit in the bank account of the assessee. The Ld. AO based on the directions of the Ld. Pr. CIT completed the assessment U/s. 4 143(3) r.w.s 263 of the Act assessing the total income at Rs. 1,96,91,452/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee’s Representative filed written submissions relying on various decisions and pleaded that the assessment order be set-aside. Further, the Ld. AR also objected that the Ld. AO has not mentioned the section under which the addition of the outstanding sundry creditors has been made while framing the assessment order. The Ld. AR also placed on record before the Ld. CIT(A) that the Ld. AO has questioned 7 creditors produced by the assessee and not satisfied with the reply and treated the entire sundry creditors amounting to Rs. 1,55,57,267/- as unexplained investment. The Ld. AR also placed on record due to the addition of sundry creditors totaling to Rs. 1,55,57,267/- the income of the assessee stood by 81% of the turnover which is totally unrealistic. Further, the Ld. AR also pleaded before the Ld. CIT(A) to give the benefit of telescoping with respect to cash deposits on account of sale of husk of Rs.8,77,000/- out of excess cash deposit over the sale consideration of the property held by the assessee amounting to Rs. 25,10,000/-. Considering the various submissions made by the Ld. AR, the Ld. CIT(A) partly allowed the appeal by directing 5 the Ld. AO to delete the addition of Rs. 1,55,57,267/- on account of unexplained sundry creditors and also allowed the telescoping of Rs.8,77,000/- on account of unexplained cash deposits into the bank account. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the us. 3. Initially the Revenue raised six grounds. Due to objection of the assessee regarding the tax effect below Rs. 50 lakhs, the Revenue has revised the grounds of appeal which is extracted herein below: “1. The Ld. CIT(A) has nor justif ied in allowing the appeal without taking into account the f acts and merits of the case. 2. The Ld. CIT(A) has not taken into account the def ects in the conf irmation letters submitted by the assessee and has controversial statements given by the 7 sundry creditors in the statement recorded f rom them on oath. 3. The Ld. CIT(A) f ailed to identif y that the period of cash deposits in the bank account is April, 2011 to November, 2011 and the period of Husk yielded is January, 2012 to March, 2012. Hence, the decision of CIT(A) that the sources of cash deposits as prof it earned f rom yielding of husk is not sustainable. Theref ore the telescoping made by CIT(A) in deleting the addition of Rs. 8,77,000/- against the cash deposi t of Rs. 25,10,000/- is not tenable. 4. Any other grounds that may be urged at the time of hearing.” 6 4. With respect to Ground no.2 the Ld. DR submitted that the confirmation from 7 creditors is unreliable because no evidence has been produced before the Ld. AO regarding the ownership of the land or lease of lands. The Ld. DR further submitted that the 7 creditors gave a standard reply as follows: “We do no t reme mber any de tails regarding paddy sold, amount received etc., but confirm that we have sold so me paddy and the payment has been received within a period of one month.” 5. The Ld. DR therefore pleaded that these statements cannot be relied upon and prayed that the order of the Ld. AO be upheld. Per contra, the Ld. AR argued that the assessee has produced confirmation from 7 creditors out of the total 69 creditors. The Ld. AR also pleaded that the benefit of telescoping shall also be sustained. 6. We have heard both the sides and perused the materials available on record and the orders of the Ld. Revenue Authorities. The Ld. AR could not justify as to why the Ld. AO questioned only 7 creditors out of the total 69 creditors where the sample is not proportionate to the total amount of outstanding creditors. It is also seen from the order of the Ld. AO that the 7 7 creditors has given standard replies as argued by the Ld. DR which cannot be relied upon. The onus is on the assessee to prove that the creditors are genuine with supporting evidences and confirmation from creditors. In the instant case, the assessee has failed to produce convincing replies with cogent evidences even for the random sample selected by the Ld. AO. We therefore are of the considered view that the Ld. AO is being directed to verify the 69 creditors with regard to outstanding payables from all the sundry creditors and provide one more opportunity to the assessee following the principles of natural justice. Accordingly, we remit the matter back to the file of the Ld. AO and allow this ground no.2 for statistical purposes. 7. With respect to ground No.3 on the allowance of telescoping of Rs. 8,77,000/- against the cash deposits of Rs. 25,10,000/-, we find it relevant to extract the findings of the Ld. CIT (A) which are extracted herein below: “46. As regards the claim of the assessee in the written submission that he is eligible f or telescoping the addition of undisclosed prof it f rom sale of husk of Rs. 8,.77,000/- and addition of estimated income f rom sale of apartment of Rs. 4,29,750/- into the addition of unexplained cash deposits in the bank account of Rs. 25,10,000/-, it considered that the said claim is acceptable only in respect of the addition of undisclosed prof it f rom sale of husk of Rs. 8,77,000/-. Since the generation of undisclosed income f rom sale of husk represents a source of income and making cash deposits in 8 the bank account represents the application of income, it is held that the assessee is eligible f or telescoping of the undisclosed income f rom sale of husk against the addition of unexplained cash deposits in the bank account of Rs. 25,10,000/-. On the other hand, as the entire cash f low of Rs. 33,55,000/- arising f rom the sale of apartment has already been given credit while arriving at the quantum of unexplained cash deposits f ound in the bank account and as the said cash f low is inclusive of the income of Rs. 4,29,750/- arising f rom the said sale of apartment, it is held that no f urther telescoping can be given in respect of the same against the addition of unexplained cash deposits in the bank account of Rs. 25,10,000/-. 47. In view of the discussion above, the addition of Rs. 25,10,000/- made towards unexplained cash deposits int eh bank account and the addition of Rs. 8,77,000/- made towards undisclosed prof it f rom sale of husk are hereby upheld. However, the AO is directed to allow telescoping of the addition of Rs. 8,77,000/- towards undisclosed income from sale of husk against the addition of unexplained cash deposits in the bank account of Rs. 25,10,000/-. The ground nos. 8 and 10 of the appeal are therefore partly allowed.” 8. On perusal of the above findings of the Ld. CIT(A), we are of the considered view that the Ld. CIT(A) has rightly considered the telescoping benefit and therefore we find no infirmity in the order of the Ld. CIT (A) on this issue and hence, this ground raised by the Revenue is dismissed. 9. Grounds No. 1 and 4 are general in nature and need no adjudication. 10. In the result, appeal filed by the Revenue is partly allowed for statistical purposes. 9 C.O. No. 05/Viz/2022 (In आयकर अपील सं./ I.T.A. No.05/Viz/2020) (Ǔनधा[रण वष[ / Assessment Year : 2012-13) 11. With respect to the Cross Objection raised by the assessee, there is a delay of 19 days in filing the CO before the Tribunal which is beyond the prescribed time limit. In this regard, the Ld. AR brought our attention to the affidavit filed by the assessee and submitted that due to serious illness of the assessee’s mother in law, the assessee was prevented in filing the CO before the Tribunal within the stipulated time. Further, the Ld. AR also read out the relevant portions from the affidavit filed by the assessee and pleaded that the delay in filing may be condoned and the cross objection filed by the assessee may be admitted. Considering the reasonable and sufficient cause as explained by the assessee in his affidavit filed before the Tribunal, we are of the considered view that this is a fit case for condoning the delay. Accordingly, we hereby condone the delay of 19 days in filing the Cross Objection before the Tribunal proceed to adjudicate the Cross Objection filed by the Assessee. 12. On perusal of the Grounds of Appeal raised by the assessee in its cross Objection, we are of the considered view that since 10 the grounds raised in his cross objection are in supportive nature, the adjudication of the cross objection becomes infructuous. Accordingly, Cross Objection raised by the assessee is dismissed as infructuous. 13. In the result, the appeal filed by the Revenue is partly allowed for statistical purposes and the Cross Objection filed by the assessee is dismissed as infructuous. Pronounced in the open Court on the 16 th November, 2022. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated : 16.11.2022 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Sri Atluri Venugopal, 32-14-11, Sivalayam Road, Mogalrajupuram, Vijayawada, Andhra Pradesh – 520002. 2. राजèव/The Revenue – Income Tax Officer, Ward-2(3), C.R,. Buildings, MG Road, Governor Pet, Vijayawada, Andhra Pradesh- 520002. 3. The Principal Commissioner of Income Tax, Vijayawada. 11 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax (Appeals), Vijayawada. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam