ELUMALAI SUMATHI,BAPATLA V. INCOME TAX OFFICER, WARD-1, ONGOLE

ITA 1165/HYD/2024

AI Insights

The case involves Elumalai Sumathi Bapatla, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs.36,60,000 as unexplained investment under section 69 of the Income Tax Act, 1961, for the Assessment Year 2016-17. The assessee argued that the investment was funded through her business income and loans from relatives, which the Assessing Officer initially rejected due to lack of evidence. The Tribunal, after considering the assessee's income declarations and the nature of her business, accepted part of her explanation and directed a partial relief.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472534 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SM-B
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SAI PRASAD
• Keywords: Condonation of delay; Business income; Additional evidence; Reasonable cause; Unexplained investment; Source of fund
• Section: 147; 148; 142(1); 69

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad Before Shri Manjunatha G., Accountant Member and Shri K. Narasimha Chary, Judicial Member आ.अपी.सं /ITA No.1165/Hyd/2024 (निर्धारण वर्ा/Assessment Year: 2016-17) Elumalai Sumathi Bapatla [PAN :ABIPE4083C] Vs. Income Tax Officer Ward-1 Ongole (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri K.A.Sai Prasad, AR रधजस् व द्वधरध/Revenue by:: Shri U.Mini Chandran, DR सुिवधई की तधरीख/Date of hearing: 18/12/2024 घोर्णध की तधरीख/Date of Pronouncement: 30/12/2024 आदेश / ORDER PER. MANJUNATHA G., A.M: This appeal filed by the assessee is directed against the order dated 09.08.2024 of the learned Commissioner of Income Tax (Appeals) [Ld.CIT(A)], National Faceless Appeal Centre (NFAC), Delhi pertaining to A.Y.2016-17 on the following grounds : 1. The Ld.CIT(A) erred in law and on facts in confirming the addition of Rs.36,60,000 as unexplained investment u/s 69 of the Act after having admitted the additional evidence filed by the assessee under Rule 46A. 2. Any other ground or grounds that may be urged at the time of hearing. 2 2. This appeal filed by the Assessee is time barred by 7 days. The assessee filed a petition for condonation of delay and submitted that she could not file appeal in time due to lack of proper awareness and knowledge of ITAT proceedings and its timelines and also since she was staying almost 300 kms away from Hyderabad, it took time for her to approach suitable consultant to file appeal before the Tribunal. The assessee further submitted that the reasons for the delay in filing the appeal before the Tribunal were neither deliberate nor on account of any malafide intention. She, therefore, pleaded to condone the delay and admit the appeal for hearing. 3. The Ld.DR opposed petition filed for condonation of delay. 4. We have gone through the condonation petition filed by the assessee. In this case, the order of the Ld.CIT(A) was passed and served on the assessee on 09.08.2024 and as per the amended provisions of section 253(3) of the Act, the assessee ought to have filed appeal before the Tribunal within 60 days from the end of the month in which the order of the Ld.CIT(A) is communicated to the assessee, i.e., on or before 30.10.2024, but the assessee could file appeal before the Tribunal on 07.11.2024 with the delay of 07 days. We find that there is a reasonable cause for the assessee to file the appeal belatedly, therefore, we condone the delay and admit the appeal for hearing in the interest of justice. 5. The brief facts of the case are that the assessee, an individual, carrying on business in operating hydraulic mobile crane, filed return of income for the A.Y.2016-17 on 15.11.2017, 3 admitting total income of Rs.8,31,220/-. The assessment has been subsequently reopened u/s 147 of the Income tax Act, 1961 (“the Act”) for the reasons recorded, as per which, the income assessable to tax has escaped assessment, on account of under assessment of unexplained investment in purchase of property for Rs.36,60,000/-. Accordingly, a notice u/s 148 of the Act dated 14.06.2019 was issued to the assessee. In response to the notice, the assessee filed a letter and stated that the return of income furnished on 17.07.2019 should be treated as return filed in response to notice u/s 148 of the Act. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer issued notice u/s 142(1) on four occasions, but the assessee, neither appeared nor filed any submission. Therefore, the Assessing Officer taking into account, the details of purchase of immovable property for Rs.36,60,000/- observed that the assessee could not explain the source for purchase of the property, therefore, made addition of Rs.36,60,000/- u/s 69 of the Act as unexplained investment for the A.Y.2016-17. The Assessing Officer had also made an addition of Rs.73,734/- towards deduction claimed under Chapter VIA of the Act for want of evidences. 6. Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A) and before the Ld.CIT(A), the assessee has filed detailed written submission on the issue, which has been reproduced in para 4 from pages 3 to 7 of the Ld.CIT(A) order. The sum and substance of the arguments of the assessee are that the assessee hails from business family and has built up capital since inception of her business. Further, she has obtained 4 loans from friends and relatives to the extent of Rs.8,53,000/- for purchase of property and claimed that out of her known source of income and loans from friends, she has purchased the property. Therefore, submitted that the Assessing Officer is erred in making addition towards purchase of property u/s 69 of the Act. 7. The Ld.CIT(A), after considering relevant submissions and also taking into account the facts gathered during the assessment proceedings observed that although the assessee has claimed that she built up capital to the tune of Rs.30,23,100/-, but no evidences have been filed to justify the source of income for the said capital. Further, the assessee has made cash deposit of Rs.20,00,000/- from 07.11.2015 to 07.12.2015 and failed to establish the source for the said cash deposit, therefore, observed that the assessee has only cooked up explanation for capital formation for previous years. Further, the assessee has not been able to demonstrate how the cash has been deposited in her bank account before making payment for purchase of the property. Therefore, considering the totality of facts and circumstances of the case, rejected the explanation of the assessee and sustained the additions made by the Assessing Officer towards investment in purchase of immovable property as unexplained investment u/s 69 of the Act. 8. Aggrieved by the Ld.CIT(A) order, the assessee is now in appeal before the Tribunal. 9. The learned Counsel for the assessee submitted that the Ld.CIT(A) erred in rejecting the claim of the assessee towards source of income for purchase of the property, even though the 5 assessee has filed relevant evidences including the returns filed for the A.Y.2011-12 to 2016-17 and also the details of nature of income earned before 01.04.2010. The learned Counsel for the assessee, further referring to opening capital as on 01.04.2010, submitted that the assessee derives income from her business, remuneration from partnership firm and also agricultural income. The assessee is in the business for many years and if we consider the nature of business carried out by the assessee and the income declared for the A.Y.2011-12 to 2016-17, the possibility of accruing cash and cash equivalent from her business for the previous years cannot be ruled out. Therefore, he submitted that considering the income declared by the assessee and nature of income, the additions made by the Assessing Officer should be deleted. 10. The Ld.DR on the other hand, supporting the order of the Ld.CIT(A) submitted that before the Assessing Officer, the assessee could not appear and file any details. Before the Ld.CIT(A), the assessee explained the source, out of opening capital as on 01.04.2010 and also out of income from subsequent years. Although, the assessee has claimed to have saved out of her own known sources of income, but, no evidences have been filed to justify the huge cash deposit within a period of one month before the purchase of the property. Further, the assessee claimed to have availed loan from her friends and relatives, but no details have been filed. The Ld.CIT(A), after considering relevant submissions of the assessee rightly rejected the arguments and rightly sustained the additions made by the Assessing Officer. Therefore, their order should be upheld. 6 11. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. Admittedly, proceedings before the Assessing Officer are ex-parte. The assessee neither appeared nor furnished any details. Therefore, the Assessing Officer made addition of Rs.36,60,000/- towards investment in purchase of immovable property as unexplained investment u/s 69 of the Act. It was the argument of the assessee before the Ld.CIT(A) that, she has known sources of income, out of her business income and other receipts including agricultural income and as on 01.04.2010, she has accumulated cash and cash equivalent of Rs.30,23,100/-. The assessee had also furnished the returns of income filed for the A.Y.2011-12 to 2016-17 and declared total income of Rs.25,10,620/- for six assessment years upto A.Y.2016-17. The assessee claims that she hails from a business family and right from inception she was carrying on business and out of her business income, accumulated cash and cash equivalent to the extent of Rs.30,23,100/-. We find that the assessee has declared income from business and also remuneration from partnership firm and agricultural income from over a period of six assessment years. If we consider the nature of income declared by the assessee for the A.Y.2011-12 to 2016-17 amounting to Rs.25,10,620/-, the arguments of the assessee that she has savings out of her own source of income, which is the source for investment in purchase of property cannot be ruled out. Similarly, the assessee claims to have accumulated Rs.30,23,100/- as on 01.04.2010, out of her known source of income. Although there is no direct evidence for opening capital as on 01.04.2010, but going by the nature of 7 income and her status as business woman, the possibility of accumulating income out of her known source of income for the period prior to 01.04.2010 cannot be ruled out. Although the amount of opening capital claimed by the assessee seems to be on higher side, since the assessee is earning regular income from her business and other sources, income earned by the assessee cannot be treated as unexplained. We further note that the total income declared by the assessee including opening capital as on 01.04.2010 is amounting to Rs.55,33,720/-. If we allow 50% income for her personal drawings and other investments, the availability of 50% in the form of cash and cash equivalent cannot be ruled out. Therefore, we are of the considered view that the arguments of the assessee that out of her known sources of income, she has accumulated cash and cash equivalent, which is the source for purchase of the property for the A.Y.2016-17 needs to be accepted. 12. Therefore, considering the totality of the facts and circumstances of the case and also the evidences filed by the assessee to prove her source of income, we deem it appropriate to consider 50% of her income including opening capital as on 01.04.2010 is available as cash and cash equivalent to explain the source for investment in the purchase of property for Rs.36,60,000/-. Therefore, we are of the considered view that the assessee is able to explain the source to the extent of Rs.27,60,000/- out of total investment for purchase of property to the tune of Rs.36,60,000/-. In other words, since the assessee is able to explain the source, we direct the Assessing Officer to delete the addition made u/s 69 for Rs.27,60,000/- and the balance 8 amount of Rs.9,00,000/- remains unexplained. Therefore, we direct the Assessing Officer to sustain the addition of Rs.9,00,000/- towards investment in purchase of immovable property as unexplained investment u/s 69 of the Act. 13. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the Open Court on 30th December, 2024. Sd/- Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER (MANJUNATHA G.) ACCOUNTANT MEMBER Hyderabad, Dated 30th December, 2024 L.Rama, SPS Copy to: S.No Addresses 1 Smt.Elumalai Sumathi, 9-214, Cheruvu Street, Martur, Bapatla 2 The Income Tax Officer, Ward-1, Ongole 3 The Pr.CIT, 4 The DR, ITAT Hyderabad Benches 5 Guard File By Order "