Smt. Ramya R., Bangalore V. ITO, Bangalore

ITA 1176/BANG/2015

• Counselvise Citation: 117621114 RSA 2015
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 24-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT
• Assessee Lawyers: ASHOK A KULKARNI
• Keywords: Business income; Peak credit; Revised return
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO. 1176/BANG/2015 ASSESSMENT YEAR : 2011-12 SMT. RAMYA R., # 310, B. RAMAIAH BUILDING, ANANDAGIRI EXTENSION, 3 RD CROSS, HEBBAL, BANGALORE 560 024. PAN: AHKPR 3734M VS. THE INCOME TAX OFFICER, WARD 13(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI ASHOK A. KULKARNI, ADVOCATE RESPONDENT BY : SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) DATE OF HEARING : 08.12.2015 DATE OF PRONOUNCEMENT : 28.12.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 14.07.2015 OF THE CIT(APPEALS)-5, BENGALURU FOR THE ASSESSMENT YEAR 2011-12. ITA NO.1176/BANG/2015 PAGE 2 OF 8 2. THE ASSESSEE IS AN INDIVIDUAL. SHE FILED THE OR IGINAL RETURN OF INCOME FOR AY 2011-12 ON 30.07.2011 DECLARING INCOM E OF RS.9,61,440. REVISED RETURN OF INCOME WAS FILED ON 19.04.2012 DE CLARING INCOME OF RS.5,82,370. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961. DEPOSITS MADE IN THE SAVINGS BANK ACCOUNT BEARING NO.20018002307 WITH ST ATE BANK OF INDIA DURING THE RELEVANT PERIOD AMOUNTING TO RS.27.91 LA KHS HAVE BEEN ADDED TO THE RETURNED INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. AGGRIEVED BY THE AFORESAID ORDER, THE ASSESSEE F ILED APPEAL BEFORE THE CIT(APPEALS). THE ASSESSEE SUBMITTED THAT HER FATHER WAS TRADING IN RAW SILK, AND THE ABOVE MENTIONED BANK ACCOUNT OF T HE ASSESSEE WAS USED FOR THE PURPOSE OF HIS BUSINESS. THE AMOUNTS DEPOSI TED HAVE BEEN IMMEDIATELY WITHDRAWN BY HER FATHER TO ROTATE THE F UNDS FOR PURCHASE AND SALE OF RAW SILK. TO THIS EFFECT, THE SWORN AFFIDA VIT OF ASSESSEES FATHER, SHRI G.K. RAMAKRISHNA, WAS DISREGARDED BY THE AO WHILE C ONCLUDING THE ASSESSMENT. IT WAS POINTED OUT THAT THE AO HAS ONL Y TAKEN THE SUM OF ALL DEPOSITS FOR MAKING ADDITION TO THE TOTAL INCOME, C OMPLETELY IGNORING THE SIMULTANEOUS WITHDRAWALS MADE FROM THE ACCOUNT. AT ANY POINT OF TIME, IN THE ENTIRE YEAR, THE BALANCE REMAINING IS LESS THAN RS. 20,000/- AND IN MOST OF THE DAYS THE BALANCE HAS NOT EVEN CROSSED RS.1,0 00. THE ASSESSEE FURTHER SUBMITTED THAT SIMILAR ISSUE CAME UP FOR CO NSIDERATION FOR AY 2010- 11 AND THE AO HAD ACCEPTED THE ASSESSEES CONTENTIO N. ITA NO.1176/BANG/2015 PAGE 3 OF 8 4. ALTERNATIVELY AND WITHOUT PREJUDICE, IT WAS SUBM ITTED BEFORE THE CIT(A) THAT ONLY A PEAK CREDIT OUGHT TO HAVE BEEN B ROUGHT TO TAX. WHERE THERE ARE A NUMBER OF CREDITS APPEARING SIDE BY SID E WITH A NUMBER OF DEBITS; A CREDIT FOLLOWING A DEBIT ENTRY SHOULD BE TREATED AS REFERABLE TO THE LATER TO THE EXTENT POSSIBLE; AND NOT THE AGGREGAT E BUT ONLY THE PEAK OF THE CREDITS SHOULD BE TREATED AS UNEXPLAINED. 5. THE CIT(APPEALS) OBSERVED THAT ASSESSEE FURNISH ED AN AFFIDAVIT DATED 02/07/2015 FROM HER FATHER, SHRI RAMAKRISHNA G. K, WHEREIN HE HAS STATED THAT HE WAS IN THE TRADING OF RAW SILK BUSIN ESS FOR MORE THAN 25 YEARS UPTO 2004 UNDER THE NAME RAMYA SILK KOTI AT SATHYA SAI MARKET, VENKATARAYAPPA LANE, BENGALURU - 2. IT WAS FURTHE R STATED THAT HE SHUT DOWN THE BUSINESS TO TAKE CARE OF HIS AILING WIFE A ND STARTED AGAIN IN THE FINANCIAL YEAR 2010-11 PURCHASING RAW MATERIAL FROM ROAD SIDE ON CITY MARKET, AVENUE ROAD, CHICKPET, FROM FARMERS ON DAIL Y BASIS IN SMALL QUANTITIES. HE FURTHER STATED THAT THE RAW SILK TRA DING IS DONE SOLELY BY HIM AND HIS DAUGHTER WAS NOT AWARE OF THE BUSINESS AND NOR ENJOYED ANY PROFITS. AND LASTLY HE STATED THAT QUANTITY OF MATE RIAL SENT WAS LESS, THERE WAS NOT DIRECT CONTACT WITH CUSTOMERS AND THERE WAS NO PROCEDURE OF ISSUE OF INVOICES. 6. THE CIT(APPEALS) FURTHER NOTED THAT THE AO DURIN G THE COURSE OF ASSESSMENT TO VERIFY THE GENUINENESS OF THE CLAIM O F THE ASSESSEE, ISSUED A SUMMONS U/S.131 OF THE ACT TO THE ASSESSEES FA THER, SHRI. G.K. ITA NO.1176/BANG/2015 PAGE 4 OF 8 RAMAKRISHNA TO APPEAR ON 25/03/2014 FOR CROSS EXAMI NATION. BUT THERE WAS NO COMPLIANCE FROM SHRI. G. K. RAMAKRISHNA. AG AIN VIDE AOS LETTER DATED 26/03/2014; ASSESSEE WAS GIVEN A FINAL OPPORT UNITY TO PRODUCE HER FATHER FOR CROSS EXAMINATION ON 27/03/1 AND IT WAS ALSO STATED THAT THE CASH DEPOSITS WOULD BE TAXED IN HER HANDS AS INCOME FRO M OTHER SOURCES. THERE WAS NO COMPLIANCE TO THIS LETTER. THEREFORE THE AO CAME TO THE CONCLUSION THAT NO SUCH BUSINESS ACTIVITY AS CLAIME D WAS CARRIED OUT BY ASSESSEES FATHER AS THE ASSESSEE. THE EXPLANATION OFFERED BY THE ASSESSEE WAS FOUND NOT SATISFACTORY AND NOT ACCEPTA BLE. HENCE, CASH DEPOSITS OF RS.27.91 LAKHS WAS TREATED AS UNEXPLAIN ED INCOME AND ADDITION WAS MADE UNDER THE HEAD INCOME FROM OTHER SOURCES. 7. THE CIT(APPEALS) UPHELD THE ADDITION MADE BY THE AO OBSERVING AS FOLLOWS:- 6. I HAVE CONSIDERED THE REASONS GIVEN BY THE ASS ESSING OFFICER FOR MAKING ADDITION ON ACCOUNT OF UNEXPLAIN ED CASH DEPOSITS. THE AFFIDAVIT FILED BEFORE ME HAS ALSO BE EN EXAMINED. ON VERIFICATION OF STATEMENT OF ACCOUNT OF THE APPE LLANT, IT WAS FOUND THAT DURING THE PREVIOUS YEAR THERE WERE CASH DEPOSITS ON VARIOUS DATES FOR A DENOMINATION OF RS.25000/- THRO UGHT THE YEAR TOTALING TO RS.27.91 LACS. SOME OF THESE DEPOSITS W ERE MADE BY CERTAIN PERSONS LIKE SAI KRISHNA, BABU, SANTOSH. FU RTHER, THERE WERE INTERCITY CHARGES DEBITED TO THE BANK ACCOUNT, WHICH SHOWS THAT THOSE DEPOSIT ARE FROM OUT-STATION. THE A.R EX PLAINED FURTHER THAT SINCE HER FATHER WAS NOT HAVING ANY BANK ACCOU NT AND ILLITERATE, SHE STATED TO BE HELPING HER FATHER IN GETTING MONEY DEPOSITED INTO HER ACCOUNT OUT OF HER FATHERS SILK TRADING BUSINESS. IN FURTHERANCE TO ABOVE ARGUMENT, THE ASS ESSEE FILED AFFIDAVIT FROM HER FATHER STATING THE CARRYING ON T HE SILK TRADING, BUSINESS FOR MORE THAN 25 YEARS BY NAME RAMYA SILK AT SATHYA SAI MARKET, VENKATARAYAPPA LANE 2, BENGALURU. HOWEV ER, NO ITA NO.1176/BANG/2015 PAGE 5 OF 8 TRACES OF SUCH BUSINESS ACTIVITY SUCH AS VOUCHERS, BILLS OR ANY DELIVERY CHALLANS IN SUPPORT OF THE DOING THE BUSIN ESS COULD BE PRODUCED NEITHER BEFORE THE ASSESSING OFFICER NOR B EFORE ME. IN THESE CIRCUMSTANCES, IT IS VERY HARD TO BELIEVE THA T SHRI. RAMAKRISHNA, FATHER OF THE APPELLANT IS DOING ANY S UCH RAW SILK TRADING. 7. I HAVE CONSIDERED THE ABOVE WRITTEN SUBMISSION OF THE APPELLANT AND ALSO GONE THROUGH THE ASSESSMENT ORDE R OF THE APPELLANT PASSED BY THE ASSESSING OFFICER. ON GOING THROUGH THE SAME, IT IS FOUND THAT THE ASSESSING OFFICER IS COR RECT IN HIS OBSERVATION OF TREATING THE CASH DEPOSITS TO THE TU NE OF RS.27.91 LACS AS UNEXPLAINED SINCE HER FATHER ASSUMED TO BE DERIVING INCOME FROM SILK TRADING BUSINESS WHICH IS NOT PROV ED. ON FURTHER ANALYSIS OF THE ASSESSMENT ORDER AND WRITTEN SUBMIS SION, IT IS NOTICED THAT NOWHERE THE ASSESSEE HAS BEEN ABLE TO EITHER SUBMIT ANY EVIDENCE IN THE CONDUCT OF BUSINESS IN SILK TRA DING OR PROVED THAT THE DEPOSITS WERE MADE OUT OF HIS BUSINESS INCOME/TRANSACTIONS. ON THE CONTRARY THE A. R OF TH E APPELLANT VIDE LETTER DATED 03/07/2015 HAS STATED THAT TO TAK E THE PEAK CREDIT OF RS.70550/- APPEARING AS ON 24/01/2011 AND FURTHE R, ARGUED THAT SECTION 40A(3) PROVIDES FOR DISALLOWANCE OF AN Y EXPENDITURE IN RESPECT OF WHICH PAYMENT IN A SUM EXCEEDING RS.2 0000/- IS MADE OTHERWISE THAN CROSS CHEQUE/DRAFT. HERE THE AP PELLANT IS CLAIMING NO PAYMENT IS INVOLVED. THEREFORE, THE PRO VISION OF SECTION 40A (3).IS NOT APPLICABLE. THE ARGUMENT OF THE APPELLANT SEEMS TO BE CONTRARY TO EACH OTHER AND WITHOUT ANY VALID GROUND. THE ASSESSING OFFICER HAS NOWHERE MENTIONED THAT PR OVISION OF SECTION 40A (3) IS APPLICABLE IN APPELLANTS CASE A S HE HAS NEVER CONSIDERED THAT THE APPELLANTS FATHER WAS DOING SO ME TRADING BUSINESS. WHEREAS THE ASSESSING OFFICER HAS RIGHTLY ASSESSED THE CASH TREATING THE SAME AS UNEXPLAINED INCOME. 8. FURTHER, NEITHER THE APPELLANT NOR THE A.R OF T HE APPELLANT WAS ABLE TO PROVE THE TRANSACTION OF CASH DEPOSIT W HICH THE APPELLANT IS TREATING AS DEPOSIT ON BEHALF OF FATHE RS SILK TRADING BUSINESS IN HER ACCOUNT. HAD THERE BEEN ANY BUSINES S ACTIVITY ATLEAST THE WITHDRAWALS SHOWN IN THE BANK ACCOUNT S HOULD HAVE BEEN GENUINELY INCURRED FOR THE BUSINESS PURPOSE AS PAYMENTS FOR RAW SILK SUPPLIERS. EVEN THE WITHDRAWALS EVENTHOUGH THE PROVISIONS U/S.40A(3) NOT APPLICABLE AS STATED BY T HE A.R, COULD NOT BE PROVED FOR HAVING INCURRED FOR THE PURPOSE O F PURCHASING THE RAW SILK. THEREFORE, THE A.RS ARGUMENT OF TAKI NG THE PEAK ITA NO.1176/BANG/2015 PAGE 6 OF 8 CREDIT AND ASSESSED IN THE APPELLANTS HANDS HAS NO BASIS. I HEREBY CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER AS THE CASH DEPOSITS MADE IN THE BANK ACCOUNT OF THE APPELLANT AS UNEXPLAINED. 8. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 2. THE HONBLE CIT(A) ERRED IN UPHOLDING AN ADDIT ION OF RS. 27.91 LAKHS AS UNEXPLAINED INCOME UNDER THE HEAD IN COME FROM OTHER SOURCES. 3. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE HELD THAT THE DEPOSITS AND WITHDRAWAL S MADE IN THE SAVINGS BANK ACCOUNT OF THE APPELLANT ARE IN THE CO URSE OF THE BUSINESS CARRIED ON BY THE APPELLANTS FATHER. 4. THE HONBLE CIT(A) OUGHT TO HAVE APPRECIATED TH AT DURING THE MATERIAL PERIOD THE APPELLANTS FATHER WAS TRAD ING IN RAW SILK AND THE SAID DEPOSITS WERE MADE BY HIS CUSTOMERS FR OM OUT STATION. 5. ALTERNATIVELY AND WITHOUT PREJUDICE; ONLY A PEA K CREDIT OUGHT TO HAVE BEEN BROUGHT TO TAX AND NOT THE CUMUL ATIVE TOTAL OF THE DEPOSITS AMOUNTING TO RS.27.81 LAKHS WHICH REPR ESENTS THE TURNOVER OF RAW SILK BUSINESS OF THE APPELLANTS FA THER. 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. THE LD. DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 10. WE HAVE HEARD BOTH THE PARTIES. WE NOTE THAT S IMILAR ISSUE CAME UP FOR CONSIDERATION IN THE AY 2010-11 AND THE AO ACCE PTED THE DEPOSITS AND WITHDRAWALS AS THAT OF THE ASSESSEES FATHER AND NO ADDITION WAS MADE. ITA NO.1176/BANG/2015 PAGE 7 OF 8 THE ONLY REASON FOR THE AO TO TREAT THE INCOME AS U NEXPLAINED WAS THAT THE ASSESSEE FAILED TO PROVE THE ASSESSEES CLAIM THAT THE SAID ACCOUNT WAS USED BY HER FATHER. IT WAS POINTED OUT BEFORE US T HAT THE VERY SAME EXPLANATION WAS ACCEPTED BY THE DEPARTMENT ON THE B ASIS OF VERY SAME AFFIDAVIT OF THE ASSESSEES FATHER FOR THE AY 2010- 11. WE FIND SOME MERIT IN THE ALTERNATE CONTENTION OF THE ASSESSEE THAT ON LY PEAK CREDIT OUGHT TO BE BROUGHT TO TAX AND WHERE THERE ARE A NUMBER OF CRED ITS AND DEBITS ARE APPEARING, ; A CREDIT FOLLOWING A DEBIT ENTRY SHOU LD BE TREATED AS REFERABLE TO THE LATTER AND ONLY THE PEAK OF THE CREDITS SH OULD BE TREATED AS UNEXPLAINED. GOING THROUGH THE BANK ACCOUNT FURNIS HED AT PAGES 6 TO 16 OF THE ASSESSEES PAPERBOOK, THE PEAK CREDIT ON 24.01. 2011 (PAGE 13) IS RS.70,551. HENCE, WE DIRECT THE AO TO BRING THE PE AK CREDIT TO TAX AND NOT THE CUMULATIVE TOTAL OF THE DEPOSITS AMOUNTING TO R S.27.91 LAKHS. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF DECEMBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 28 TH DECEMBER, 2015. /D S/ ITA NO.1176/BANG/2015 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.