ITO, Ward-14(2), Hyd, Hyderabad V. Salla Ram Reddy, Hyd, Hyderabad

ITA 1184/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6389 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 22-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-10-2015
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: K K GUPTA
• Keywords: Unexplained cash credit; Peak credit; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST YEAR APPELLANT RESPONDENT 1184/HYD/15 2010 - 11 THE INCOME TAX OFFICER, WARD-14(2), HYDERABAD SRI SALLA RAM REDDY, HYDERABAD [PAN: AITPS2464F] 1061/HYD/15 2010 - 11 SRI SALLA RAM REDDY, HYDERABAD [PAN: AITPS2464F] THE INCOME TAX OFFICER, WARD-14(5), HYDERABAD C.O. NO. 63/HYD/2015 (IN ITA NO. 1184/HYD/2015) ASSESSMENT YEAR: 2010-11 SRI S ALLA RAM REDDY, HYDERABAD [PAN: AITPS2464F] VS THE INCOME TAX OFFICER, WARD-14(2), HYDERABAD (CROSS-OBJECTOR) (RESPONDENT) FOR REVENUE : SHRI K.E. SUNIL BABU, DR FOR ASSESSEE : SHRI K.K. GUPTA, AR DATE OF HEARING : 05-07-2016 DATE OF PRONOUNCEMENT : 19-08-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THESE TWO CROSS-APPEALS AND CROSS-OBJECTION ARE AGA INST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-4, HYDERABAD, DATED 30-07-2015 ON THE ISSUE OF CASH DE POSITS IN BANK ACCOUNTS. I.T.A. NOS. 1184 & 1061/HYD/15 C.O. NO. 63/HYD/15 :- 2 -: 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND HAS VARIOUS SOURCES OF INCOME SUCH AS RENTAL INCOMES/DEPOSITS/LOA NS AND RECEIPTS FROM FIRMS. AS THERE ARE VARIOUS CASH TRANSA CTIONS IN THE BANK ACCOUNTS OF ASSESSEE, THE CASS SYSTEM HAS SELECTE D THE CASE FOR SCRUTINY. ASSESSING OFFICER (AO) HAS ISSUED VAR IOUS NOTICES AND COMBINED THE TRANSACTIONS IN HDFC BANK, UCO BANK AND SBI, CLASSIFIED THEM INTO CHEQUE TRANSACTIONS/CASH TRANSACTION S AND FURTHER CLASSIFIED THEM INTO EXPLAINED AND UNEXPLAINED CREDITS. EVEN THOUGH, SUCH WORKING DETAILS ARE NOT PLACED ON RE CORD, THE ORDER INDICATES THAT THERE WAS NEGATIVE CASH BALANCE OF RS. 13,93,124/- AND PEAK UNEXPLAINED CREDITS OF RS. 2,46 ,38,903/- WHICH WERE BROUGHT TO TAX SEPARATELY. 3. ASSESSEE CONTENDED BEFORE LD. CIT(A) THAT SCOPE OF SCRUTINY SHOULD HAVE BEEN LIMITED TO HDFC BANK ALONE AND THAT TOO CASH TRANSACTIONS ONLY. HE RELIED ON THE BOARD CI RCULAR ISSUED FOR SCRUTINY OF CASS CASES. FURTHER, ASSESSEE EXPLA INED THE SOURCE OF FUNDS AS UNDER: RS. A. U NSECURED LOANS 97,85,000 B. TRANSFER FROM SMT. VANAJA REDDY, WIFE 54.20 LAKHS C. TRANSFER FROM SRR CONSTRUCTIONS 24.05 LAKHS D. RENTS AND RENTAL DEPOSITS RENTS 29,31,097 - RENTAL ARREARS 9,47,789 - RENTAL SECURITY DEPOSIT 12,17,000 E. TRANSACTIONS NO T ADMITTING IN BANK STATEMENT 6,71,359 4. LD. CIT(A) SENT THE DETAILS ON REMAND AND AFTER OBTAINING THE REPORT OF AO, HAS CONSIDERED THE VARIOUS SOURCES VIDE PARA 8 OF THE ORDER. LD. CIT(A), I.T.A. NOS. 1184 & 1061/HYD/15 C.O. NO. 63/HYD/15 :- 3 -: A. DELETED THE AMOUNT OF RS. 97,85,000/- ACCEPTING THE SOURCE OF UNSECURED LOANS; B. CONFIRMED PEAK AMOUNT OF RS. 9,70,063/- OUT OF RS. 54.20 LAKHS STATED TO HAVE RECEIVED FROM ASSESSEES WIFE; C. DELETED RS. 24.05 LAKHS, AS SOURCE FROM SRR CON STRUCTIONS WAS ACCEPTED; D. DELETED AMOUNT PERTAINING TO RENTS, RENTAL DEPOSITS AND ARREARS; 4.1. HOWEVER, LD. CIT(A) FURTHER VERIFIED THE CASH D EPOSITS AND CONFIRMED AN AMOUNT OF RS. 17.15 LAKHS AS AGAINS T THE NEGATIVE CASH BALANCE OF RS. 13,93,124/- ASSESSED BY AO. FURTHER, AN AMOUNT OF RS. 19,33,017/- WAS CONFIRMED AS THE EXP LANATION OF ASSESSEE WAS NOT THERE FOR THE ABOVE AMOUNT. 5. BOTH ASSESSEE AND REVENUE ARE IN APPEAL. REVEN UE IS AGGRIEVED ON THE AMOUNTS DELETED BY THE LD. CIT(A) WHE REAS ASSESSEE IS CONTENDING THE ISSUE OF SCOPE OF SCRUTIN Y UNDER THE CASS MECHANISM AND ALSO THE AMOUNTS CONFIRMED BY THE CIT(A). AN ADDITIONAL GROUND ON THE SAME ISSUE WAS RAISED IN ASSESSEE APPEAL AND CROSS-OBJECTION WAS ALSO ON SIMILAR ISSUE S. CONSEQUENTLY, WE ARE TO DEAL WITH TWO ISSUES I.E., SCO PE OF SCRUTINY UNDER CASS AND THE MERITS OF THE ADDITIONS MADE. 6. AS FAR AS THE SCOPE OF SCRUTINY IS CONCERNED, IT WAS THE CONTENTION THAT AO HAS EXCEEDED HIS JURISDICTION BY VE RIFYING THE VARIOUS OTHER BANK ACCOUNTS AND ALSO CHEQUE TRANSACTI ONS. ASSESSEE RELIED ON BOARD CIRCULAR IN F.NO. 225/268/ 2006-ITA. II (PT) DT. 08-08-2010. LD. COUNSEL RELIED ON THE ORDER O F THE I.T.A. NOS. 1184 & 1061/HYD/15 C.O. NO. 63/HYD/15 :- 4 -: CO-ORDINATE BENCH (SMC) OF AMRITSAR IN THE CASE OF SM T. GURPREET KAUR, IN ITA NO. 87(ASR)/2016 DT. 24-03-2016 FOR THE PROPOSITION THAT AO SHOULD HAVE RESTRICTED HIS ENQUIRY TO THE CASH DE POSITS MADE ALONE AND NOT THE CHEQUE DEPOSITS AND FURTHER TO H DFC BANK ALONE. 6.1. LD. DR IN RESPONSE TO CROSS-OBJECTION, PLACED O N RECORD THE CASS STATEMENT RECEIVED TO EXPLAIN THAT THE SELECTION IS ON THE BASIS OF CASH DEPOSITS IN BANK ACCOUNTS AND NOT RESTR ICTED TO ONE BRANCH AS CONTENDED BY ASSESSEE. FURTHER, IT WAS EXPL AINED THAT ASSESSEE EXPLAINED THE SOURCE OF FUNDS IN VARIOUS BA NKS WHICH ARE BOTH BY CASH AND CHEQUES SO THEY ALSO REQUIRE EXAMIN ATION. 6.2. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE EVIDENCE PLACED ON RECORD. AS FAR AS THE SCOPE O F SCRUTINY IS CONCERNED, THE NOTE INDICATES THAT THE CASE IS SELECTED IN THE BASIS OF INFORMATION CATEGORISED AS UNDER: REASONS FOR SCRUTINY SELECTION NON-CORPORATE ASSESSEES HAVING NO BUSINESS; EXAMINING THE SOURCE OF CASH DEPOSITS MADE BY THE AS SESSEE IN SAVINGS BANK ACCOUNTS. THUS, THE REASON FOR SELECTION WAS TO EXAMINE THE SOUR CES OF CASH DEPOSITS IS SAVINGS BANK ACCOUNTS. THAT INDICATES ALL SAVINGS BANK ACCOUNTS AND NOT HDFC ALONE. TO THAT EXTENT, ASSESSEES OBJECTION IS NOT VALID. WITH REFERENCE TO CHEQUE PAYMENTS, WHEN THE SAME ARE EXPLAINED AS CASH WITHDRAWALS FROM ONE BANK AND DEPOSITS IN ANOTHER, WE ARE OF THE OPINION THAT THE AO HAS JURISD ICTION TO EXAMINE THE SAME. IT WAS THE ASSESSEES CONTENTION THAT THE LOANS I.T.A. NOS. 1184 & 1061/HYD/15 C.O. NO. 63/HYD/15 :- 5 -: OR FUNDS TRANSFERRED ARE SOURCE OF CASH DEPOSITS IN BANKS. SINCE CASH DEPOSITS ARE THERE, I.E., DRAWN FROM ONE BANK A ND DEPOSITED IN ANOTHER, INEVITABLY THE SOURCES OF CHEQUES IN BANK RE QUIRE EXAMINATION. IN THAT WAY, THE SOURCE OF CHEQUE DEPOSI TS AND CASH DEPOSITS, BEING INTER-LINKED, REQUIRE EXAMINATION. W E ARE OF THE OPINION THAT THE AO HAS NOT EXCEEDED THE SCOPE OF SCRUT INY AS PRESCRIBED BY BOARD CIRCULAR. THE FACTS IN THE CASE OF SMT. GURPREET KAUR RELIED (SUPRA) BY ASSESSEE ARE DIFFERE NT. WE AGREE WITH THE PRINCIPLE THERE IN, BUT ON FACTS, WE FIND T HAT IT IS INEVITABLE TO EXAMINE THE DEPOSITS OF CHEUQES WHICH ARE EXPLAINE D AS SOURCE OF CASH WITHDRAWALS. THE GROUNDS ON THIS ISSUE IN A SSESSEES APPEAL AND CROSS-OBJECTION ARE ACCORDINGLY REJECTED. 7. COMING TO THE ISSUE OF ADDITION MADE BY AO AND ADJUDICATION BY CIT(A), WE ARE OF THE OPINION THAT BO TH AUTHORITIES WERE WRONG IN DETERMINING THE AMOUNTS AND IN ITS ADJU DICATION. WHEN ASSESSEE EXPLAINS THAT THE MONEYS ARE WITHDRAWN FR OM ONE BANK ACCOUNT TO DEPOSIT THE SAME IN ANOTHER BANK ACCOU NT, THE SAME SEEMS TO HAVE NOT BEEN EXAMINED. THERE IS NO IN DICATION OF EXACT AMOUNT OF DEPOSITS IN EACH BANK ACCOUNT AND SOURC ES THEREOF. BY CLUBBING ALL THE SUMS THERE SEEMS TO HAVE BEEN DUPLICATION OF AMOUNTS. MOREOVER, THE AO ARRIVED AT PEAK NEGATIVE CASH BALANCE AND PEAK CREDITS AND BOTH ARE NOT POSSIBL E WHICH INDICATES THAT THE ISSUE IS NOT EXAMINED PROPERLY. AS SEEN FROM THE ORDER OF CIT(A), THE EXPLANATION FOR PEAK CREDIT WAS O N THE BASIS OF VARIOUS SOURCES OF FUNDS. INSTEAD OF CORRELATING WIT H THE DEPOSITS, LD. CIT(A) EXAMINED THE SOURCES OF FUNDS AND GAVE FI NDING WHILE EXCLUDING SOME OF THEM. IN THE BARGAIN, LD. CIT(A) C ONFIRMED POSITIVE CASH BALANCE INSTEAD OF NEGATIVE CASH BALANCE MADE BY I.T.A. NOS. 1184 & 1061/HYD/15 C.O. NO. 63/HYD/15 :- 6 -: AO. MOREOVER, WHEN PEAK CREDIT WAS ADDED, THE INDIVI DUAL SOURCES REDUCES THE PEAK CREDIT. INSTEAD PART OF THE SOURCES ARE CONFIRMED AS UNEXPLAINED. THE CORRECT METHOD IS TO EXAMINE EAC H OF THE SOURCE OF DEPOSITS AND WHEN A PARTICULAR SOURCE IS NO T VERIFIABLE OR UNEXPLAINED, TO CONSIDER THE SAME AS UNEXPLAINED. WE HAVE ENQUIRED FROM THE COUNSEL OF ASSESSEE WHETHER ANY EXP LANATION WITH REFERENCE TO EACH OF THE CASH DEPOSITS WAS MADE. NO SUCH EXPLANATION WAS PLACED ON RECORD. 7.1. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE OR DER OF LD. CIT(A) CANNOT BE ACCEPTED AS SUCH. CONSEQUENTLY, WE SET ASIDE THE SAME AND DIRECT THE CIT(A) TO EXAMINE THE ISSUES IN CORRECT PERSPECTIVE BY EXAMINING THE SOURCE OF EACH DEPOSIT O F CASH IN EACH BANK ACCOUNT AND THEN ARRIVE AT CONCLUSIONS BASE D ON FACTS SO EXPLAINED. THE MATTER OF EXAMINATION OF CASH DEPO SITS IS ACCORDINGLY, SET ASIDE TO THE FILE OF CIT(A). IF REQU IRED, LD. CIT(A) CAN REMAND THE MATTER FOR EXAMINATION BY AO AFRESH, AFT ER GIVING DUE OPPORTUNITY TO ASSESSEE TO EXPLAIN THE SOURCES THERE OF. THE REVENUES GROUNDS AND ASSESSEES GROUNDS ON THIS AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSES AND ASSESSEES APPEAL IS ALSO ALLOWED PARTL Y FOR STATISTICAL PURPOSES. CROSS-OBJECTION IS HOWEVER, REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 19 TH AUGUST, 2016 TNMM I.T.A. NOS. 1184 & 1061/HYD/15 C.O. NO. 63/HYD/15 :- 7 -: COPY TO : 1. THE INCOME TAX OFFICER, WARD-14(2), HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-14(5), HYDERABAD. 3. SRI SALLA RAM REDDY, C/O. CH. K.K. GUPTA, FCA., CHARTERED ACCOUNTANT, 3464, DUNDOO VIHAR, R.P. ROAD , SECUNDERABAD. 4. CIT(APPEALS)-4, HYDERABAD. 5. CIT-6, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.