Sri. M. Venkatesha Reddy, Bangalore V. ITO, Bangalore

ITA 1247/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80656 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 26-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU J
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Unexplained investment; Condonation of delay
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE , ACCOUNTANT MEMBER ITA NO. 1 247 / BANG/20 1 2 (ASSESSMENT YEAR: 20 0 6 - 0 7 ) SHRI M.VENKATESH A REDDY, NO.2, 27 TH CROSS, 6 TH BLOCK, JAYANAGAR, BANGALORE. APPELLANT VS. INCOME - TAX OFFICER WARD 4(1), BANGALORE . RESPONDENT A PPELLANT BY: SHRI V.SRINIVASAN, CA. RESPONDENT BY: SHRI M.K.BIJU, JCIT(DR) DATE OF HEARING : 0 5 - 08 - 2014 DATE OF PRONOUNCEMENT: 22 - 08 - 2014 O R D E R PER SMT. P.MADHAVI DEVI, JM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A) - II, BANGALORE, DATED 31 - 8 - 2010 FOR THE ASSESSMENT YEAR 2006 - 07. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.16,22,000/ - AS UNEXPLAINED CASH CREDIT AND FURTHER ENHANCEMENT OF INCOME TO THE TUNE OF RS.13,45,000/ - . ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 2 OF 10 2. AT THE OUTSET, IT IS NOTICED THAT THERE IS A DELAY OF 691 DAYS IN FILING OF THE APPEAL BEFORE US. T HE ASSESSEE HAS FILED AN AFFIDAVIT AND APPLICATION TO CONDONE THE DELAY OF 691 DAYS. IT IS STATED IN THE AFFIDAVIT THAT THE ASSESSMENT ORDER WAS PASSED BY THE AO, AGGRIEVED BY WHICH THE ASSESSEE HAD FILED AN APPEAL BEFORE THE CIT(A) ON 19 - 1 - 2009. THE APPE AL WAS DISPOSED OF ON 31 - 8 - 2010 ENHANCING THE INCOME FOR THE RELEVANT ASSESSMENT YEAR AND AGAINST THE SAME, THE ASSESSEE PREFERRED RECTIFICATION PETITION U/S 154 OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT ]. THE CIT(A) HAD DISMISSED THE RECTIFICATION PETITION, ON 21 - 2 - 2011 AGAINST WHICH THE ASSESSEE PREFERRED AN APPEAL BEFORE THE ITAT CHALLENGING THE ADDITION CONFIRMED BY THE CIT(A) AND ALSO THE ENHANCEMENT OF INCOME. THE ITAT, HOWEVER, DISPOSED OF AND DISMISSED THE APPEAL FILED AGAI NST 154 ORDER , VIDE ORDER DATED 14 - 9 - 2012 , ON THE GROUND THAT THE APPEAL FILED AGAINST THE ORDER PASSED BY THE CIT(A) ON THE RECTIFICATION PETITION IS NOT MAINTAINABLE. IT WAS, THEREAFTER, ON 26 - 9 - 2012, THE ASSESSEE HA S FILED THE PRESENT APPEAL AGAINST TH E ORIGINAL ORDER OF THE CIT(A) RESULTING IN THE DELAY OF 691 DAYS. IT WAS STATED THAT THE ASSESSEE WAS UNDER A GENUINE BELIEF THAT THE ORDER OF THE CIT(A) IN RECTIFICATION PETITION U/S 154 IS THE FINAL ORDER AND THEREFORE THE APPEAL FILED AGAINST THE ORDE R U/S 154 WOULD SUFFICE, WHICH WAS AN INADVERTENT AND GENUINE MISTAKE AND THAT HE WAS NOT AWARE THAT AN APPEAL HAD TO BE FILED AGAINST THE CIT(A) S ORDER DATED 31 - 8 - 2010 DUE TO WHICH IT HAS RESULTED ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 3 OF 10 IN THE DELAY. HE, THEREFORE, PRAYED THAT THE DELAY MAY B E CONDONED AND THE APPEAL BE HEARD AND DISPOSED OF ON MERITS FOR THE ADVANCEMENT OF SUBSTANTIAL CAUSE OF JUSTICE. 2.1 THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE IN THE AFFIDAVIT AND STATED THAT THE ASSESSEE WAS VIGILANT AND HAD FILED THE APPEAL IN TIME BEFORE THE CIT(A) AS WELL AS THE ITAT AND THE DEFAULT IN FILING APPEAL AGAINST THE ORDER OF THE CIT(A) ON MERITS WAS ONLY AN INADVERTENT MISTAKE. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, OPPOSE D THE CONDONATION OF DELAY ON THE GROUND THAT THE ASSESSEE IS REPRESENTED AND ADVISED BY AN ADVOCATE WHO APPEARED BEFORE THE CIT(A) AND ALSO BEFORE THE TRIBUNAL AND THEREFORE IT CANNOT BE SAID THAT HE WAS ILL - ADVISED AND WAS NOT AWARE OF THE LEGAL POSITION . THUS, ACCORDING TO HIM, THE DELAY HAS NOT BEEN PROPERLY EXPLAINED BY THE ASSESSEE AND HENCE SHOULD NOT BE CONDONED. 2.3 HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A) WITHIN TIME AND HAS ALSO FILED AN APPLICATION U/S 154 OF THE ACT WITHIN TIME FOR RECTIFICATION OF THE ORDER OF THE CIT(A) . AGAINST THE ORDER OF THE CIT(A) U/S 154, THE ASSESSEE HAS AGAIN FILED AN APPEAL BEFORE THE ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 4 OF 10 TRIBUN AL WITHIN TIME AND AFTER DISPOSAL OF THE APPEAL BY THE ITAT AS NOT MAINTAINABLE, THE ASSESSEE HAS AGAIN FILED THIS APPEAL WITHIN THE PERIOD OF 15 DAYS WHICH SHOWS THAT THE ASSESSEE HAS BEEN VIGILANT AND HAS FILED THE APPEALS IN TIME. THE ASSESSEE HAS NOT BE EN LETHARGIC IN APPROACHING THE APPROPRIATE AUTHORITY AGAINST THE GRIEVANCE . T HE HON BLE SUPREME COURT IN VARIOUS CASES HAS HELD THAT WHERE THE ASSESSEE HAS A CASE ON MERIT AND WHERE THE ASSESSEE HAS NOT WILLFUL LY DELAYED THE PROCEEDINGS, THE DELAY SHOULD BE CONDONED. IN VIEW OF THE SAME, WE ARE INCLINED TO CONDONE THE DELAY OF 697 DAYS AND PROCEED TO HEAR THE APPEAL ON MERITS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, HAD FILED HIS RETURN OF INCOME IN HIS INDIVIDUAL STATUS BEYOND T HE SPECIFIED DATE BUT WITHIN THE EXTENDED PERIOD ALLOWED U/S 139(4) OF THE ACT DECLARING TOTAL INCOME OF RS.1,96,130/ - . THE ASSESSEE HAS ALSO DECLARED AGRICULTURAL INCOME OF RS.30,000/ - . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) READ WITH SEC.144 OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAD OPERATED A BANK ACCOUNT IN THE FEDERAL BANK, J AYANAGAR BRANCH, BANGALORE AND THE TOTAL PEAK CASH CREDIT IN THE SAID ACCOUNT WORKED OUT TO RS.16,22,000/ - . HE OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY EX PLANATION FOR THE SAID CREDIT AND, THEREFORE, TREATED IT AS UNEXPLAINED CASH CREDIT AND BROUGHT IT TO TAX FOR THE RELEVANT ASSESSMENT YEAR. ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 5 OF 10 3.1 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) CHALLENGING THE ADDITION MADE AND HAS ALSO FURNISH ED DETAILED REPLY AND EXPLANATION REGARDING THE SOURCE S OF LOANS AND DEPOSIT S INTO THE BANK ACCOUNTS OF THE ASSESSEE WITH FEDERAL BANK, VIJAYA BANK AND SUBRAMANYESHWARA CO - OP . BANK . THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING AUTHORITY AND AL SO CONSIDERED THE CONTENTIONS OF THE ASSESSEE . HE ACCEPTED THE SOURCES OF THE DEPOSITS TO CERTAIN EXTENT , BUT WITH REGARD TO LOANS ADVANCED TO ASSESSEE S WIFE SMT. N.S.JAYANTHY OF A SUM OF RS.28,47,500/ - , H E OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SOURCE. HE THEREFORE HELD THAT THE ASSESSEE S INCOME NEEDS TO BE ENHANCED. HE, ACCORDINGLY, ISSUED A NOTICE TO THE ASSESSEE AND AFTER CONSIDERING THE ASSESSEE S EXPLANATION AND AFTER ESTIMATING THE WITHDRAWALS TOWARDS HOUSEHOLD AND OTHER EXP ENSES AT RS.1,20,000/ - PER ANNUM , DETERMINED THE UNDISCLOSED INCOME AT RS.29,67,000/ - AND ENHANCED THE INCOME BY RS.13,45,000/ - (RS.29,67,500 RS.16,22,000/ - ). AGAINST ENHANCEMENT OF INCOME AS WELL AS CONFIRMATION OF THE ADDITION OF RS.16,22,000/ - , THE ASSES SEE IS IN SECOND APPEAL BEFORE US. 3.2 THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT THE ASSESSEE HAD EXPLAINED THE SOURCES OF ALL THE DEPOSIT S AS WELL AS THE PAYMENTS MADE TO HIS WIFE SMT.N.S.JAYANTHY . AS REGARDS ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 6 OF 10 THE ADDITION OF RS.16,22,000/ - , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT PERTAINS TO THE PEAK OF THE CASH CREDITS INTO THE ASSESSEE S ACCOUNT IN FEDERAL BANK, JAYANAGAR BRANCH. HE SUBMITTED THAT BEFORE THE CIT(A), THE ASSESSEE HAD CLEARLY EXPLAINED THAT THESE CREDITS PERTAIN TO THE ADVANCES RECEIVED FROM ONE K.V.SATISH FOR SALE OF SITE AND THAT EXCEPT FOR A SUM OF RS.10 LAKHS , T HE BALANCE WAS RECEIVED BY CHEQUES AND SINCE THE AGREEMENT FELL THROUGH , THE SAI D AMOUNT WAS ALSO RETURNED ON 3 - 12 - 2005 AND A RECEIPT ISSUED BY THE MANAGING PARTNER OF M/S.VINEYARD BUILDER & CONSTRUCTIONS SHRI K.V.SATISH WAS ALSO FURNISHED. HE SUBMITTED THAT THE ASSESSEE COULD NOT P RODUCE SHRI K.V.SATISH BEFORE THE AO IN THE REMAND P ROCEEDINGS AS THE ASSESSEE WAS NOT AWARE OF THE WHEREABOUTS OF SHRI SATISH, BUT THE PAN NO. OF SHRI K.V.SATISH WAS FURNISHED TO THE AO WITH THE HELP OF WHICH AO COULD HAVE SUMMONED AND EXAMINED THE SAID PERSON. HE SUBMITTED THAT THE CIT(A) HAS ACCEPTED TH E AO S REMAND REPORT IN TOTO WITHOUT CONSIDERING THE ASSESSEE S CONTENTION THAT REPAYMENT TO SH RI SATISH HAS ALSO BEEN MADE BY CHEQUE ONLY. AS REGARDS THE LOANS ALLEGED TO HAVE BEEN ADVANCED TO ASSESSEE S WIFE N.S.JAYANTHI , HE SUBMITTED THAT THE ASSESSEE HAD EXPLAINED TO THE CIT(A) IN HIS WRITTEN SUBMISSIONS THAT HE H AS NOT ADVANCED ANY LOANS TO HIS WIFE DURING THE RELEVANT PREVIOUS YEAR AND THE OPENING BALANCE OF RS.4,50,000/ - WAS THE ONLY OUTSTANDING LOAN TO HIS WIFE ADVANCED IN THE EARLIER YEARS. THE L EARNED COUNSEL FOR THE ASSESSEE HAS ALSO DRAWN OUR ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 7 OF 10 ATTENTION TO THE LEDGER ACCOUNTS AND BALANCE SHEET OF M/S.SHARADA PETROLEUM TO INDICATE THAT THE ASSESSEE S WIFE SMT.JAYANTHI , WHO IS ITS PROPRIETOR , HAS SHOWN ONLY A SUM OF RS.4,50,000/ - AS A LOAN FROM TH E ASSESSEE. THUS, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE , THE AO AND THE CIT(A) HA VE NOT APPRECIATED THE CONTENTIONS OF THE ASSESSEE AS WELL AS THE EVIDENCE PRODUCED BY THE ASSESSEE PROPERLY. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTH ER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 3.3 HAVING CONSIDERED THE MATERIAL ON RECORD AND ALSO THE RIVAL CONTENTIONS , WE ARE OF THE OPINION THAT AS REGARDS THE UNEXPLAINED CASH DEPOSITS OF RS.16,22,000/ - IS CONCERNED, THE ASSESSEE HAS EXPLA INED THE SOURCE AS WELL AS PRODUCED ALL THE NECESSARY DETAILS. THE AO HAS FAILED TO VERIFY THESE DETAILS AND REFUSED TO ACCEPT THE CONTENTION OF THE ASSESSEE ON THE MERE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE SHRI K.V.SATISH. THIS, IN OUR OPINION , IS NOT JUSTIFIABLE. THE ASSESSEE HAS FURNISHED THE PAN NO. OF SHRI K.V.SATISH WITH THE HELP OF WHICH, THE AO, IF IT WAS SO WARRANTED, COULD HAVE SUMMONED HIM AND EXAMINED HIM. FURTHER, THE EVIDENCE FILED BY THE ASSESSEE RELATING TO THE ADVANCES RECEIVE D AND REPAYMENT OF THE SAME THROUGH BANK ACCOUNT COULD HAVE BEEN VERIFIED BY THE AO BEFORE REJECTING THE ASSESSEE S PLEA. FURTHER, AS REGARDS THE LOANS ALLEGED TO HAVE BEEN ADVANCED TO ASSESSEE S WIFE, WE FIND THAT ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 8 OF 10 IN THE STATEMENT OF FACTS BEFORE US, THE ASSESSEE HAS STATED THAT THE ASSESSEE HAD ADVANCED A LOAN OF RS.4,50,000/ - TO HIS WIFE IN THE EARLIER ACCOUNTING YEAR AND THAT THIS HAS BEEN SHOWN AS OPENING BALANCE IN THE BALANCE - SHEET FOR ASSESSMENT YEAR 2006 - 07 AND THAT THERE WAS NO FURTHER ADVANCE OF LOAN TO SMT.JAYANTHI DURING THE RELEVANT PREVIOUS YEAR AND THAT THE CHEQUES ISSUED IN THE NAME OF SMT.JAYANTHI WAS ONLY TO ENABLE HER TO ENCASH THE SAME ON BEHALF OF THE ASSESSEE WHO TREATED THESE TRANSACTIONS AS SELF - WITHDRAWALS FROM HIS BANK ACCOUNT AND HENCE NOT REFLECTED AS LOAN IN HIS BOOKS OF ACCOUNT. WE FIND THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND HIS WIFE CLEARLY PROVE THE POSSIBILITY OF THE ASSESSEE GIVING CHEQUE S IN THE NAME OF HIS WIFE WHO HAS WITHDRAWN THE SAME AND USED IT FOR THE ASSES SEE . HOWEVER, THE ASSESSEE HAS FAILED TO ADDUCE NECESSARY EVIDENCE SUCH AS HIS BANK STATEMENT , AS WELL AS THE BANK STATEMENT OF HIS WIFE TO DEMONSTRATE THAT CASH HAS BEEN IMMEDIATELY WITHDRAWN BY SMT.JAYANTHI AND THAT IT HAS BEEN UTILIZED BY THE A SSESSEE FOR HIS BUSINESS AND ALSO THAT THESE WITHDRAWALS HAVE BEEN TREATED AS SELF - WITHDRAWALS IN HIS BOOKS OF ACCOUNT. IN VIEW OF THE SAME, WE ARE INCLINED TO REMIT BOTH TH E S E ISSUE S TO THE FILE OF THE AO ONLY FOR VERIFICATION OF THE DETAILS TO BE FURNI SHED BY THE ASSESSEE SUCH AS THE BANK STATEMENT OF THE ASSESSEE AS WELL AS SMT.JAYANTHI AND IF IT IS FOUND THAT THE ASSESSEE HAS ISSUED CHEQUE S IN THE NAME OF HIS WIFE AND THE SAME HAS BEEN IMMEDIATELY WITHDRAWN, THEN THE SAID AMOUNT SHALL NOT BE ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 9 OF 10 TREATED A S A LOAN TO THE WIFE OF THE ASSESSEE. HOWEVER, IF IT IS FOUND THAT THE ACCOUNT PAYEE CHEQUES HAVE BEEN ISSUED AND THE AMOUNT HAS BEEN DEPOSITED IN THE NAME OF SMT.JAYANTHI , WHICH HAS BEEN UTILIZED BY HER FOR HER BUSINESS PURPOSES , THEN THE SAID TRANSACTIO N WILL HAVE TO BE TREATED AS A LOAN TO HER AND THE ASSESSEE WILL HAVE TO EXPLAIN THE SOURCE OF SUCH INVESTMENT AND IF THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE SOURCES AND THAT THESE HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AS SELF - WITHDRAWALS, THEN THE SAME SHALL NOT BE TREATED AS UNEXPLAINED INVESTMENT. AS REGARDS THE ADDITION OF RS.16,22,000/ - ALSO , WE DIRECT THE AO TO EXAMINE AND VERIFY THE BANK STATEMENTS OF THE ASSESSEE WITH REGARD TO THE RECEIPT AND REPAYMENT OF ADVANCE TO SHRI K.V.SATISH AND IF IT IS FOUND TO BE GENUINE AND CORRECT, THEN NO ADDITION SHALL BE MADE. WITH THESE DIRECTIONS, THE ISSUE IS SET ASIDE TO THE FILE OF THE AO ONLY FOR THE PURPOSE OF VERIFICATION OF THE DETAILS TO BE FURNISHED BY THE ASSESSEE IN VIEW OF OUR OBSERVATION S ABOV E. 4. IN THE RESULT, THE ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRON OUNCED IN THE OPEN COURT ON 22 ND OF AUGUST , 201 4. S D/ - SD/ - ( ABRAHAM P GEORGE ) ( SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU ITA NO . 1247/BANG/ 2012 SHRI M.VENKATESHA REDDY PAGE 10 OF 10 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE