J. Ranjit Reddy, Hyderabad V. ITO, Ward-3(2), Hyderabad

ITA 1023/HYD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0306 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Onus to prove
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1023/HYD/2012 ASSESSMENT YEAR: 2008-09 J. RANJIT REDDY, HYDERABAD PAN AEBPJ3470J VS. INCOME-TAX OFFICER, WARD 3(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V. RAGHURAM REVENUE BY : SHRI RAJAT MITRA DATE OF HEARING : 16-07-2015 DATE OF PRONOUNCEMENT : 29-07-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE OR DER DATED 29/02/2012 OF LD. CIT(A) IV, FOR THE AY 2008-09. 2. THE ONLY ISSUE ARISING OUT OF THE GROUNDS RAISED BY ASSESSEE IS IN RELATION TO THE ADDITION OF AN AMOUNT OF RS. 26, 59,500 AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 3. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL I S ONE OF THE DIRECTORS IN M/S SURYA TEJA REALTORS (P.) LTD. AND IS BASICALLY ENGAGED IN REAL ESTATE BUSINESS. FOR THE AY UNDER C ONSIDERATION, ASSESSEE FILED HIS RETURN OF INCOME ON 28/07/2008 D ECLARING TOTAL INCOME OF RS. 2,78,396. DURING THE ASSESSMENT PROCE EDING, AO ON VERIFICATION OF THE BANK ACCOUNT OF ASSESSEE, NOTIC ED CERTAIN CASH DEPOSITS IN THE BANK ACCOUNT. HE, THEREFORE, CALLED UPON ASSESSEE TO EXPLAIN THE SOURCE OF SUCH CASH DEPOSITS. IN RESPON SE TO THE QUERY 2 ITA NO. 1023 /HYD/2012 J. RANJIT REDDY, HYD. RAISED BY AO, ASSESSEE IN HIS LETTER DATED 03/11/20 10 STATED THAT CASH DEPOSITS WERE RELATED TO HIS REAL ESTATE BUSIN ESS OUT OF WHICH BROKERAGE INCOME WAS OFFERED TO TAX. IT WAS SUBMITT ED BY ASSESSEE THAT MOST OF THE CASH DEPOSITS WERE OUT OF THE WITH DRAWALS MADE EARLIER. APART FROM CASH DEPOSITS, AO ALSO DETECTED DEPOSITS BY WAY OF CHEQUES/DDS/PAY ORDERS IN TO THE BANK ACCOUNT AM OUNTING IN TOTAL TO RS. 12,36,000. WHEN ASSESSEE WAS CALLED UPON TO EXPLAIN THE SOURCE OF SUCH DEPOSITS, IT WAS SUBMITTED BY ASSESS EE THAT HE IS ACTING AS A MIDDLEMAN/AGENT FOR NEGOTIATING PURCHAS E OF LAND BY PROSPECTIVE BUYERS. EXPLAINING THE MODUS OPERANDI, ASSESSEE SUBMITTED, ONCE A PROSPECTIVE BUYER APPROACHES HIM FOR PURCHASING LAND, HE SCOUTS FOR IDENTIFYING LAND IN DIFFERENT A REAS, WHICH ARE MOSTLY AGRICULTURAL LANDS AND ONCE HE FINDS SOME SU ITABLE LAND, HE NEGOTIATES WITH THE LAND OWNER AND RECEIVES ADVANCE FROM PROSPECTIVE BUYER, WHICH IS DEPOSITED IN TO HIS BAN K ACCOUNT. IF THE DEAL IS SETTLED, ASSESSEE PAYS ADVANCE AMOUNT ALONG WITH BALANCE SALE CONSIDERATION TO THE LAND OWNER AND RECEIVES H IS COMMISSION. HOWEVER, IF THE DEAL DOES NOT MATERIALIZE, HE REFUN DS BACK THE MONEY TO THE PERSONS FROM WHOM HE RECEIVED THE ADVANCE. AS OBSERVED BY AO, WHEN ASSESSEE WAS CALLED UPON TO FURNISH THE DE TAILS OF THE PERSONS WHO ADVANCED MONEY, SUCH AS, NAMES, ADDRESS ES AND ANY OTHER DETAILS TO ESTABLISH THE FACT THAT ADVANCES W ERE RECEIVED FROM PROSPECTIVE BUYERS, ASSESSEE EXPRESSED HIS INABILI TY TO FURNISH ANY DETAILS. AO TAKING NOTE OF THE FACT THAT ASSESSEE N EITHER COULD ESTABLISH THE IDENTITY OF THE CREDITORS NOR GENUINE NESS OF THE TRANSACTION AS WELL AS CREDITWORTHINESS HELD THAT T HE DEPOSITS MADE IN CHEQUES AMOUNTING TO RS. 12,36,000 TO THE BANK ACCO UNT ARE TO BE TREATED AS UNEXPLAINED CASH CREDITS OF ASSESSEE. AS FAR AS THE CASH DEPOSITS ARE CONCERNED, AO DISBELIEVING ASSESSEES EXPLANATION OF AVAILABILITY OF OPENING CASH BALANCE AS WELL AS DEP OSITS HAVING BEEN MADE FROM EARLIER WITHDRAWALS, WORKED OUT THE PEAK CASH DEPOSIT AT RS. 14,23,500 AND TREATED IT AS UNEXPLAINED CASH CR EDIT. THEREFORE, TOTAL AMOUNT CONSIDERED FOR ADDITION U/S 68 WAS TO THE TUNE OF RS. 3 ITA NO. 1023 /HYD/2012 J. RANJIT REDDY, HYD. 26,59,600. BEING AGGRIEVED OF SUCH ADDITION, ASSESS EE PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF HEARING BEFORE LD. CIT(A), ASSESSEE EXPLAINING THE SOURCE OF CASH DEPOSITS MADE INTO THE BANK ACCOUNT SUBMITTED THAT ASSESSEE HAD OPENING CASH BALANCE OF RS. 7,46,645 W HEREAS AO WORKED OUT THE OPENING CASH BALANCE AT NIL. HE SUBM ITTED, IF ASSESSEES OPENING CASH BALANCE OF RS. 7,46,645 IS CONSIDERED, THEN, THERE WILL BE NO NEGATIVE CASH BALANCE SO AS TO MAK E ADDITION ON ACCOUNT OF PEAK CASH DEPOSITS. AS FAR AS THE CHEQUE DEPOSITS ARE CONCERNED, ASSESSEE SUBMITTED THAT OUT OF THE DEPOS ITS OF RS. 12,36,000, AMOUNTS OF RS. 1,15,000 AND RS. 21,000 R EPRESENTED LOANS FROM SRI P. DAMODAR REDDY AND SRI G. RAVINDER , FOR WHICH CONFIRMATIONS FROM THE SAID PARTIES WERE ALSO FILED . REMAINING DEPOSITS OF RS. 11 LAKHS REPRESENT THE TURNOVER OF THE BUSINESS. TO SUBSTANTIATE HIS CLAIM THAT HE WAS ACTING AS A MIDD LEMAN/AGENT AND THE AMOUNTS RECEIVED ARE TOWARDS ADVANCES FROM PROS PECTIVE BUYERS OF LAND, ASSESSEE PRODUCED TWO PERSONS CLAIMING THE M TO BE REAL ESTATE AGENTS. ON THE BASIS OF THE SUBMISSIONS MADE BY ASSESSEE, LD. CIT(A) CALLED FOR A REMAND REPORT FROM AO. AFTER CO NSIDERING THE SUBMISSIONS OF ASSESSEE AS WELL AS EXAMINING THE PE RSONS CLAIMED TO BE AGENTS, AO SUBMITTED HIS REPORT STATING THEREIN THAT ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN AS TO WHERE AND HOW THE MO NIES WERE LYING IN THE INTERVENING PERIOD BETWEEN BEING WITHDRAWN A ND RE-DEPOSITED IN TO THE SAME BANK ACCOUNTS. HE FURTHER STATED THA T HE HAD ALSO FAILED TO FURNISH VERIFIABLE EVIDENCE TO SUBSTANTIA TE HIS CLAIM AND PROVE THE IDENTITY OF PERSONS FROM WHOM THE MONIES WERE SAID AS RECEIVED, THEIR CREDITWORTHINESS OR EVEN THE GENUIN ENESS OF CREDIT. 5. LD. CIT(A) AFTER GOING THROUGH THE REMAND REPORT VIS--VIS SUBMISSIONS MADE BY ASSESSEE HELD THAT ASSESSEE HAS FAILED TO EXPLAIN THE AMOUNT OF RS. 12,36,000 REPRESENTING DE POSITS MADE IN CHEQUES INTO BANK ACCOUNT. AS FAR AS CASH DEPOSITS ARE CONCERNED, LD. CIT(A) DID NOT FIND MERIT IN THE SUBMISSIONS OF ASSESSEE AND 4 ITA NO. 1023 /HYD/2012 J. RANJIT REDDY, HYD. ACCORDINGLY, CONFIRMED THE ADDITION OF PEAK CASH DE POSITS AMOUNTING TO RS. 14,23,500. 6. LD. AR REITERATING THE SUBMISSIONS MADE BEFORE T HE DEPARTMENTAL AUTHORITIES CONTENDED THAT ASSESSEE IS ENGAGED IN THE REAL ESTATE BUSINESS MOSTLY AS MIDDLEMAN/AGENT FOR PROSPECTIVE BUYERS. AFTER KNOWING REQUIREMENT OF BUYERS, ASSESS EE SCOUTS FOR SUITABLE LAND, MOSTLY, AGRICULTURAL LAND IN VILLAGE S AND AFTER THE LAND IS IDENTIFIED AND LAND OWNER AGREES TO SELL HIS LAND M ONEY RECEIVED FROM THE BUYER AS ADVANCE WHICH IS DEPOSITED IN ASSESSEE S BANK ACCOUNT IS HANDED OVER TO LAND OWNER. THUS, IT WAS SUBMITTE D BY LD. AR, CHEQUE DEPOSITS MADE IN TO BANK ACCOUNT ARE ADVANCE S RECEIVED FROM PROSPECTIVE BUYERS OF LAND. LD. AR SUBMITTED, SINCE ASSESSEE IS ONLY A MIDDLEMAN/AGENT, AND ONLY EARNS COMMISSION FROM S UCH TRANSACTIONS, HE HAS NEITHER MAINTAINED ANY BOOKS O F ACCOUNT NOR IT IS POSSIBLE ON HIS PART TO MAINTAIN DETAILS WITH REGAR D TO ADVANCES RECEIVED FROM PROSPECTIVE BUYERS, SUCH AS, THEIR NA MES AND ADDRESSED OR ANY OTHER DETAILS. THUS, LD. AR SUBMIT TED, SINCE THE DEPOSITS MADE INTO BANK ACCOUNT ARE NOT ASSESSEES MONEY, ADDITION MADE U/S 68 SHOULD BE DELETED. AS FAR AS ADDITION O N ACCOUNT OF PEAK CASH DEPOSITS IN THE BANK IS CONCERNED, LD. AR SUBM ITTED, AO WHILE WORKING OUT PEAK CASH DEPOSITS HAS TOTALLY IGNORED/ OVERLOOKED OPENING CASH AVAILABLE WITH ASSESSEE, THOUGH, ASSES SEE HAS SUBMITTED NECESSARY EVIDENCE/WORKING TO INDICATE AV AILABILITY OF CASH BALANCE. THUS, IT WAS SUBMITTED, ADDITION MADE SHOU LD BE DELETED. 7. LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTING T HE FINDING OF AO AND LD. CIT(A) SUBMITTED BEFORE US, ASSESSEE HAVING FAILED TO DISCHARGE THE ONUS CAST UPON HIM TO PROVE THE SOURC E OF CREDITS MADE INTO THE BANK ACCOUNT, ADDITION MADE U/S 68 IS JUST IFIED. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. THERE IS NO DISPUTE TO THE FACT THAT DEPOSITS IN CH EQUE AMOUNTING TO RS. 12,36,000 WERE FOUND IN ASSESSEES BANK ACCOUNT . THEREFORE, THE 5 ITA NO. 1023 /HYD/2012 J. RANJIT REDDY, HYD. PRIMARY ONUS IS ON ASSESSEE TO SATISFACTORILY PROVE THE SOURCE OF SUCH DEPOSITS. IT IS EVIDENT FROM RECORD THAT THOUGH IN COURSE OF ASSESSMENT PROCEEDING AO HAS CALLED UPON ASSESSEE T O FURNISH DETAILS OF THE PERSONS FROM WHOM ADVANCES WERE CLAI MED TO HAVE BEEN RECEIVED, BUT, HE FAILED TO FURNISH A SINGLE P IECE OF EVIDENCE TO DEMONSTRATE THAT EVEN ONE OF THE DEPOSITS MADE IN T HE BANK REPRESENTS ADVANCE RECEIVED FROM CUSTOMER TOWARDS S ALE OF LAND. ASSESSEE HAS NOT IDENTIFIED EVEN A SINGLE PROSPECTI VE BUYER OF LAND NOR ANY LAND OWNER WHO SUPPOSED TO HAVE SOLD LAND T HROUGH ASSESSEE. NO SAMPLE COPY OF SALE DEED OR AGREEMENT OF SALE HAS BEEN SUBMITTED BEFORE THE DEPARTMENTAL AUTHORITIES TO SUBSTANTIATE THE CLAIM THAT DEPOSITS MADE INTO BANK ACCOUNT REPR ESENT ADVANCES RECEIVED FROM CUSTOMERS. IT IS WELL SETTLED PRINCIP LE OF LAW THAT WHEN A CREDIT APPEARS IN THE BOOKS OR BANK ACCOUNT OF ASSE SSEE, ONUS IS ON HIM TO PROVE THE SOURCE OF SUCH CREDIT BY ESTABLISH ING THE IDENTITY OF THE CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THOUGH, IN THE PRESENT CASE, DEPOSITS WERE RECEIVED THROUGH CHEQUES, BUT, ASSESSEE HAS FAILED TO IDENTIFY EVEN A SINGLE CREDITOR, LEAVE ALONE THE CREDITWORTHINESS OF THE CREDITOR. E VEN, ASSESSEE HAS FAILED TO ESTABLISH FULLY THE GENUINENESS OF HIS CL AIM OF RECEIVING UNSECURED LOANS. IN THE AFORESAID FACTS AND CIRCUMS TANCES, PROVISIONS OF SECTION 68 ARE CLEARLY ATTRACTED TO THE DEPOSITS MADE IN CHEQUES TO ASSESSEES BANK ACCOUNT AS ASSESSEE HAS FAILED TO D ISCHARGE HIS ONUS TO PROVE THE CREDITS. IN THE AFORESAID FACTS A ND CIRCUMSTANCES, WE DO NOT FIND ANY JUSTIFIABLE REASON TO DELETE ADD ITION MADE ON ACCOUNT OF DEPOSITS MADE IN CHEQUES IN ASSESSEES B ANK ACCOUNT AMOUNTING TO RS. 12,36,000. AS FAR AS, ADDITION OF PEAK CASH DEPOSITS OF RS. 14,23,500 IS CONCERNED, WE ARE OF THE VIEW T HAT ASSESSEES CLAIM OF AVAILABILITY OF OPENING CASH BALANCE NEEDS TO BE EXAMINED AFRESH BY AO. IT IS NOT IN DISPUTE THAT ASSESSEE HA S BEEN FILING HIS RETURN OF INCOME FOR THE LAST SO MANY YEARS DECLARI NG INCOME. HIS WIFE ALSO IS CLAIMED TO BE AN INCOME TAX ASSESSEE. THERE FORE, IT IS QUITE POSSIBLE AND PROBABLE THAT ASSESSEE WOULD BE HAVING SOME SURPLUS 6 ITA NO. 1023 /HYD/2012 J. RANJIT REDDY, HYD. CASH, WHICH IS AVAILABLE TO HIM AS OPENING BALANCE. THEREFORE, WITHOUT PROPERLY EXAMINING ASSESSEES CLAIM OF HAVI NG OPENING CASH BALANCE OF RS. 7,46,645 THE SAME CANNOT BE REJECTE D. WE, THEREFORE, REMIT THE ISSUE RELATING TO THE ADDITION OF RS. 14, 23,500 AS PEAK CASH DEPOSIT IN TO THE BANK ACCOUNT TO THE FILE OF AO FO R DECIDING AFRESH AFTER DUE OPPORTUNITY OF HEARING TO ASSESSEE. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 29 TH JULY, 2015 KV COPY TO:- 1) SHRI J. RANJIT REDDY, BLOCK A 38, SANSKRUTHI T OWNSHIP, POCHARAM, GHATKESAR, HYDERABAD. 2) ITO 3(2), HYDERABAD. 3) CIT(A) IV, HYDERABAD 4) CIT-III HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER