Vasantha Babu Valluri, Vizianagaram V. The Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam

CO 53/VIZ/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5005 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 22-07-2021
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVASA RAO
• Keywords: Unexplained cash credit; Business income; Business expenditure; TDS
• Section: 201; 69A; 13; 22; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM (THROUGH WEB - BASED VIDEO CONFERENCING PLATFORM) , . . , BEFORE SHRI N.K.CHOUDHRY, HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HONBLE ACCOUNTANT MEMBER ./ I.T. A.NO. 3 4 /VIZ/2021 ( / A SSESSMENT Y EAR : 201 7 - 18 ) DY.COMMISSIONER OF INCOME TAX CIRCLE - 3(1) VISAKHAPATNAM VS. SRI VASANTHA BABU VALLURI #1/211, VASANTH VIHAR OPP. RAILWAY STATION, VIZIANAGARAM [PAN : A DIPV8680J ] ( / APPELLANT) ( / RESPONDENT) CROSS OBJECTION NO.5 3 /VIZ/2021 (ARISING OUT OF I.T.A.NO.3 4 /VIZ/2021) SRI VASANTHA BABU VALLURI #1/211, VASANTH VIHAR OPP. RAILWAY STATION, VIZIANAGARAM [PAN : A DIPV8680J ] VS. DY.COMMISSIONER OF INCOME TAX CIRCLE - 3(1) VISAKHAPATNAM ( / APPELLANT) ( / RESPONDENT) /REVENUE BY : S HRI V.SRINIVASA RAO, DR / ASSESSEE BY : SHRI G.V.N.HARI, AR / DATE OF HEARING : 0 8 .0 9 .2021 / DATE OF PRONOUNCEMENT : 23 .0 9 .2021 / O R D E R P ER SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER TH IS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 1 , VISAKHAPATNAM IN ITA 2 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM NO. 1055 0 /2019 - 20/CIT(A) - 1/VSP/2020 - 21 DATED 1 6.09. 20 20 FOR THE ASSESSMENT YEAR (A.Y.) 201 7 - 18 AND CROSS OBJECTIONS ARE FILED BY THE ASSESSEE . 2 . GROUND NO.1, 6 AND 7 ARE GENERAL IN NATURE WHICH DOES NOT REQUIRE SPECIFIC ADJUDICATION. 3 . GROUND NO.2 IS RELATED TO THE DISALLOWANCE OF AMOUNT OF RS.5,74,016/ - AND RS.77,000/ - AS NOT RELATED TO BUSINESS EXPENDITURE. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD CLAIMED THE INTEREST EXPENDITURE OF RS.5,74,016/ - RELATED TO THE AMOUNT S ADVANCED TO VVC IPL UNDER THE HEAD BUSINESS INCOME. TH EREFORE, THE AO CALLED FOR THE EXPLANATION OF THE ASSESSEE AS TO WHY THE SAID EXPENDITURE SHOULD NOT BE DISALLOWED AND BROUGHT TO TAX. IN RESPONSE, THE ASSESSEE STATED THAT THE EXPENDITURE OF INTEREST WAS CLAIMED UNDER BUSINESS INCOME, HOWEVER, THE ASSE SSEE HAD RECEIVED THE INTEREST OF RS. 6,80,516/ - FROM VVCIPL AND THE SAME WAS OFFERED TO TAX UNDER THE HEAD OTHER SOURCES, THUS, NO EXPENDITURE WAS CLAIMED ON AMOUNTS ADVANCED TO VVCIPL. ASSESSEE HAS ARGUED THAT SINCE, THE EQUAL AMOUNT OF INTEREST WAS RE CEIVED AND OFFERED TO TAX THERE IS NO CASE FOR MAKING THE ADDITION. THE AO , NOT 3 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM BEING CONVINCED WITH THE EXPLANATION OF THE ASSESSEE MAD E THE ADDITION OF RS.5,74,016/ - TO THE RETURNED INCOME. 4 . AGAINST WHICH THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) FOUND THAT THE ASSESSEE HAS PAID THE INTEREST ON BORROWED FUNDS AND LENT TO VVCIPL AND AT THE SAME TIME RECEIVED THE EQUAL AMOUNT OF INTEREST WHICH WAS OFFERED TO INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. SINCE THERE WAS EXCESS EXPENDITURE INCURRED BY THE ASSESSEE, THE LD.CIT(A) HELD THAT THERE IS NO CASE FOR MAKING THE ADDITION AND ACCORDINGLY DELETED THE ADDITION . 5 . AGAINST THE ORDER OF THE LD.CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US. 6 . WE HAVE HEARD BOTH THE PARTIES AN D PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE HAS EARNED INTEREST INCOME ON THE AMOUNTS LENT TO VVCIPL AND AT THE SAME TIME, THE ASSESSEE ALSO PAID THE INTEREST ON BORROWED FUNDS. SINCE THE ASSESSEE HA S EARNED INTEREST OF EQUAL AMOUNTS AND OFFERED TO TAX, THERE IS NO LOSS OF REVENUE. IN THIS REGARD WE ALSO EXTRACT PARA NO.4.1.2 OF THE ORDER OF THE LD.CIT(A) WHICH READS AS UNDER: 4.1.2. I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE FACTS. THERE IS NO DISPUTE THAT THE APPELLANT HAD EARNED INTEREST INCOME OF RS.10,03,668/ - . THERE IS ALSO 4 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM NO DISPUTE THAT THE APPELLANT HAD BORROWED FUNDS AND PAYING INTEREST. IT IS ALSO NOT IN DISPUTE THAT THE BORROWED FUNDS ARE INVESTED IN SISTER CONCERN AND EARNED INTEREST INCOME. IN THIS FACTUAL MATRIX, THE APPELLANTS CLAIM OF INTEREST DEBITING P&L ACCOUNT TO THE EXTENT OF RS.5,74,016/ - IS AN ALLOWABLE EXPENDITURE AND THE INTEREST INCOME IS TREATED AS INCO ME FROM OTHER SOURCES AS IT IS NOT RELATED TO HIS BUSINESS. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION O F RS.5,74,016/ - . THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THE ASSESSEE HAS RECEIVED INCOME OF RS.5,74,016/ - FROM VVCIPL AND OFFERED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, THERE IS NO LOSS OF REVENUE AND THE LD.CIT(A) RIGHTLY DELETED THE ADDITION. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPH ELD . THIS GROUND OF THE REVENUE IS DISMISSED. 7 . THE SECOND ISSUED IN GROUND NO.3 IS RELATED TO THE ADDITION OF RS.77,000/ - . DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS CLAIMED THE AMOUNT OF RS.77,000/ - ON ACCOUNT OF PROFITS ADM ITTED. SINCE THE ASSESSEE COULD NOT EXPLAIN THE NATURE OF THE EXPENDITURE, THE AO MADE THE ADDITION OF RS.77,000/ - TO THE RETURNED INCOME. 8 . AGAINST THE ORDER OF THE AO , THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) OBSERVED THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND SALE OF FLATS AND THE INTEREST AMOUNT IS RELATED TO THE INTEREST PAID ON ADVANCE RECEIVED FOR SALE OF FLATS WHICH WAS CANCELLED 5 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM SUBSEQUENTLY. THE LD.CIT(A) DELETED THE ADDITION HOLDING THAT THE AO DID NOT D OUBT THE GENUINENESS OF THE EXPENDITURE AND ACCORDINGLY DELETED THE ADDITION. 9 . AGAINST WHICH THE DEPARTMENT IS IN APPEAL BEFORE THIS TRIBUNAL. 10 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THOUGH THE ASSESSEE HAS CLAIMED THAT THE INTEREST WAS PAID ON ADVANCE RECEIVED ON SALE OF FLAT WHICH WAS CANCELLED SUBSEQUENTLY, NO DETAILS WE RE MADE AVAILABLE EITHER IN THE ASSESSMENT PROCEEDINGS OR IN THE APPEAL PROCEEDINGS . THE ASSESSEE IS SUPPOSED TO FURNISH THE DETAILS WITH REGARD TO FLAT NO., IDENTIFY THE BUYER ETC . TO CLAIM THE EXPENDITURE. W ITHOUT HAVING FURNISHED THE ABOVE DETAILS, THE AO CANNOT VERIFY THE GENUINENESS OF THE EXPENDITURE. IT ALSO APPEARS THAT THE AO DID NOT MAKE ANY EFFORT TO COLLECT THE DETAILS. THEREFORE, WE REM IT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO RE EXAMINE THE ISSUE IN DETAIL AND DECIDE THE ISSUE AFRESH ON MERITS. APPEAL OF THE REVENUE ON THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 11 . GROUND NO.4 IS RELATED TO THE DISALLOWANCE OF EXP ENDITURE U/S 40( A )(IA) OF THE ACT, AMOUNTING TO RS.39,46,426/ - FOR NON DEDUCTION OF TAX AT SOURCE. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS DEBITED THE EXPENDITURE OF RS.1,31,54,753/ - UNDER THE HEAD, 6 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM COMMISSION, SALARY, ELECTRICAL WORKS, L AND DEVELOPMENT CHARGES, CARPENTARY WORKS, NMR WORKS, PAINTING WORKS ETC AND HAS FURNISHED THE DETAILS FOR RS.1,16,70,494/.HOWEVER, HE HAS NOT CORRELATED THE HEADS OF EXPENDITURE WITH P&L ACCOUNT AND TDS MADE, THEREFORE, THE AO DISALLOWED 30% OF THE EXPEND ITURE FOR NON DEDUCTION OF TAX AT SOURCE. 12 . AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND SUBMITTED THAT TDS WA S LIABLE ON COMMISSION PAYMENTS, CARPENTARY WORKS AND PAINTING WORKS AND THE ASSESSEE HAS DULY DEDUCTED TH E TDS. HOWEVER, THE ASSESSEE ARGUED THAT OTHER HEADS OF EXPENDITURE I.E. SALARY, ELECTRICAL WORKS, LAND DEVELOPMENT CHARGES, NMR WORKS ARE OUT SIDE THE PURVIEW OF TDS , SINCE, EACH PAYMENT WAS BELOW THE PRESCRIBED LIMIT . AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE LD.CIT(A) DELETED THE ADDITION. 13 . AGAINST THE ORDER OF THE LD.CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUNAL. 14 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOUNTS AND THE BOOKS OF ACCOUNTS WERE DULY AUDITED BY QUALIFIED CHARTERED ACCOUNTANT AND GIVEN HIS FINDINGS ON TDS 7 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM LIABILITY. THE ASSESSEE HAS FURNISHED THE DETAILS O F TDS MADE BEFORE THE CIT(A) AND THE LD.CIT(A) HAS GIVEN A FINDING THAT TDS IS APPLICABLE ONLY ON COMMISSION PAYMENT, CARPENTARY WORKS AND PAINTING WORKS AND T HE ASSESSEE HAS DEDUCTED THE TD S. THE R E MAINING PAYMENTS WERE OUTSIDE THE PURVIEW OF TDS SINCE EACH PAYMENT WAS LESS THAN THE THRESHOLD LIMIT FOR DEDUCTION OF TDS. THE AO DID NOT IDENTIFY EACH PAYMENT AND THE QUANTUM OF TDS THAT IS REQUIRED TO BE MADE. IT IS THE OBLIGATION OF THE AO TO ASCERTAIN THE DETAILS O F PAYMENTS MADE TO EACH PERSON FROM THE BOOKS OF ACCOUNTS AND DETERMINE THE TDS LIABILITY TO MAKE THE ADDITION. DURING THE APPEAL HEARING, THE LD.DR DID NOT PLACE ANY MATERIAL TO CONTROVERT THE FINDING GIVEN BY LD.CIT(A). THEREFORE, WE DO NOT FIND ANY REA SON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. APPEAL OF THE REVENUE ON THIS GROUND IS DISMISSED. 15 . THE NEXT GROUND IS CASH DEPOSITS MADE IN THE BANK ACCOUNT DURING DEMONETIZATION PERIOD. THE AO ASKED FOR THE SOURCES FOR CASH DEPOSITS OF RS.11,50,000/ - MADE IN THE BANK ACCOUNT. SINCE THE ASSESSEE COULD NOT EXPLAIN THE SOURCE OF THE CASH DEPOSIT TO THE SATISFACTION OF THE AO, HE MADE THE ADDITION U/S 69A R.W.S. 115BBE OF THE ACT. 8 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM 16 . AGAINST THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND EXPLAINED THE SOURCE OF CASH DEPOSIT AS WITHDRAWALS FROM THE BANK ACCOUNT WHICH WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS. SINCE THE ASSESSEE HAS EXPLAINED THE SOURCE OF CASH DEPOSITS AS WITHDRAWALS FROM THE BANK ACC OUNT, THE LD.CIT(A) DELETED THE ADDITION. 1 7 . AGAINST THE ORDER OF THE LD.CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE THIS TRIBUNAL. 18 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE AO MADE THE ADDITION OF RS.11,50,000/ - CASH DEPOSITS MADE IN THE BANK ACCOUNT DURING THE DEMONETIZATION PERIOD U/S 69A OF THE ACT. THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT AND THE CASH DEPOSITS WERE SOURCED FROM THE CASH BOOK. THE ISSUE IS IDENTICAL TO THE APPEAL IN THE CASE OF MR. JAYA PRAKASH BABU IN ITA NO.3 1 / V IZ/2021. THE ADDITION WAS DELETED PLACING RELIANCE ON THE ORDER COORDINATE BENCH OF ITAT, MUMBAI IN OF M/S KARTHIK CONSTRUCTIONS(SUPRA) IN I.T.A.NO.2292/MUM/2016 DATED 23.02.2018 . SINCE THE FACTS ARE IDENTICAL RESPECTFULLY F OLLOWING THE VIEW TAKEN BY THIS TRIBUNAL IN MR.JAYA PRAK ASH BABU IN ITA NO.13/VIZ/2021, M/S KARTHIK CONSTRUCTIONS (SUPRA) WE UPHOLD THE ORDER OF LD.CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 9 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM 19 . THE NEXT ISSUE IN THIS APPEAL IN GROUND NO.5 IS THE ADDIT ION OF RS.2,10,61,012/ - MADE U/S 68 WHICH WAS DELETED BY THE LD.CIT(A). THE AO FOUND THAT THERE WAS AN INCREASE IN CAPITAL ACCOUNT OF THE ASSESSEE TO THE EXTENT OF RS.2,10,61,012/ - WHICH WAS EXPLAINED TO BE THE AMOUNT GIVEN BY MR.JAYA PRAKASH BABU AND SUBM ITTED THE LEDGER ACCOUNT . SINCE THE ASSESSEE DID NOT PROVE THE INCREASE IN CAPITAL WITH THE SUBSTANTIAL EVIDENCE THE AO TREA T ED THE SAME AS UNEXPLAINED CASH CREDIT AND MADE THE ADDITION U/S 68 OF THE A CT. 20 . AGAINST THE ORDER OF THE AO THE ASSESSEE WENT ON APPEAL BEFORE THE LD.CIT(A) AND THE LD.CIT(A) DELETED THE ADDITION OBSERVING THAT THE AMOUNT WAS TRANSFERRED FROM THE ACCOUNT OF MR.JAYA PRAKASH BABU AND ASSESSEE FURNISHED THE LEDGER ACCOUNT COPY EVIDENCING THE CREDIT. THELD.CIT(A) FURTHER OBSERV ED THAT AO DID NOT CAUSE ANY ENQUIRIES WITH REGARD TO THE TRANSACTION AND HAS NOT DISCHARGED THE BURDEN. AGAINST THE ORDER OF THE LD.CIT(A) THE DEPARTMENT FILED THE APPEAL BEFORE US. 2 1 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE SOURCE F OR INFUSION OF CAPITAL WAS THE AMOUNT GIVEN BY HIS FATHER SHRI JAYA PRAKASH BABU THROUGH TRANSFER FROM HIS CAPITAL ACCOUNT . AS PER THE LEDGER ACCOUNT, THE SAID SUM WAS CREDITED IN THE CAPITAL ACCOUNT ON 10 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM 01.04.2016. SINCE, THE ASSESSEE HAS SUBMITTED THE LEDGER ACCOUNT OF SHRI V.JAYA PRAKASH BABU, WHICH CLEARLY SHOWS THAT THE SAID SUM WAS CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE, THE SOURCE STANDS EXPLAINED. IN FACT SHRI JAYA PRAKASH BABU ALSO ASSESSED IN THE SAME CIRCLE/WARD AND THE AO DID NOT CAUSE ANY ENQUIRIES TO ASCERTAIN THE CORRECTNESS AND THUS DID NOT MAKE OUT ANY CASE FOR ADDITION U/S 68 . H ENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. THE APPEAL OF THE REVENUE ON THIS GROUND IS DISMISSED. 22 . THE ASSESSEE FILED CROSS OBJECTIONS IN SUPPORT OF THE ORDER OF THE LD.CIT(A). SINCE THE APPEAL OF THE REVENUE IS PARTLY ALLOWED THE CROSS OBJECTIONS OF THE ASSESSEE ALSO STAND PARTLY ALLOWED. 23 . IN THE RESULT, APPEALS OF THE ASSESS EE IS PARTLY ALLOWED AND CROSS OBJECTIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2021. SD/ - SD/ - ( ) ( . . ) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) / JUDICIAL MEMBER / ACCOUNTANT MEMBER DATED : 23 .0 9 .2021 L.RAMA, SPS 11 ITA NO. 3 4 /VIZ/20 21 AND CO NO.5 3 /VIZ/2021 , A.Y.20 1 7 - 18 VASANTHA BABU VALLURI, VIZIANAGARAM / COPY OF THE ORDER FORWARDED TO : - 1 . / THE REVENUE DY.COMMISSIONER OF INCOME TAX , CIRCLE - 3(1) , VISAKHAPATNAM 2 . / THE ASSESSEE - SRI VASANTHA BABU VALLURI, #1/211, VASANTH VIHAR OPP. RAILWAY STATION, VIZIANAGARAM 3. THE PR.COMMISSIONER OF INCOME TAX - 1, VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM