Sudhakara Rao Potnuru, Srikakulam V. ITO, Ward-1, Srikakulam

ITA 133/VIZ/2022

AI Insights

The case involves Sudhakara Rao Potnuru, who appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The appeal was related to the assessment year 2017-18, where the AO had added Rs.11,51,000 as unexplained cash deposits during the demonetisation period to the assessee's income under sections 69A and 115BBE of the Income Tax Act, 1961. The assessee contested that the bank passbook should not be considered as books of account and that the cash deposits were from legitimate sources, including previous cash balances and sale of property. The Tribunal admitted additional evidence from the assessee and remitted the matter back to the AO for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135952 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 13-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 20-06-2022
• Other Referred Cases: Smt. Rameela Ben Patel vs. ITO, ITA No.3393(Ahd)/2014, CIT vs. Bhaichand H Gandhi / [1983] (41 ITR 67(1983)), Rameswaram Paper Mills Pvt. Ltd Vs. State of UP and others 06-08-2009 Civil Writ petition No.1301 of 2009
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Set aside; Capital Gains
• Section: 142(1); 143(1); 143(2); 69A

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम “एसएमसी”पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER आयकर अपील सं./I.T.A.No.133/Viz/2022 (ननधधारण वर्ा / Assessment Year : 2017-18) Sudhakara Rao Potnuru D.No.13-128, Jogipeta Street Narasannapeta Srikakulam [PAN : AELPP5479F] Vs. Income Tax Officer Ward-1, Palakonda Road Srikakulam (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri KVRK Sarma, AR प्रत्यधथी की ओर से / Respondent by : Shri O.N.Hari Prasada Rao, DR सुनवधई की तधरीख / Date of Hearing : 14.03.2023 घोर्णध की तधरीख/Date of Pronouncement : 23.05.2023 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi vide DIN & Order No.ITBA/NFAC/S/250/2022-23/1043032922(1) dated 13.05.2022 for the Assessment Year (A.Y.) 2017-18. 2. Brief facts of the case are that the assessee is an individual, filed his return of income for the A.Y.2017-18 on 24.01.2018, admitting income 2 I.T.A. No.133/Viz/2022, A.Y.2017-18 Sudhakara Rao Potnuru, Srikakulam under the heads “business or Profession” at Rs.96,000/-, “capital gains” at Rs.4,59,182/- and “other Sources” at Rs.8,106/- . The return of income was processed u/s 143(1) of the Income Tax Act, 1961 (in short “Act”) and selected for scrutiny to examine the cash deposits made during the demonetisation period. Notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. The AO observed that the assessee had deposited cash amounting to Rs.11,51,000/- during demonetisation period and the assessee was asked to furnish the details of sources for the cash deposits made during demonetisation period, but the assessee could not furnish the sources with cogent verifiable evidence. The AO viewed that the assessee is not maintaining books of accounts, hence, the bank account does not constitute books of account. Therefore, the AO added the cash deposits u/s 69A of the Act at Rs.11,51,000/- to the income returned and held that it should be taxable u/s 115BBE of the Act. Accordingly made addition of Rs.11,51,000/-. 3. On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) partly allowed the appeal of the assessee. 3 I.T.A. No.133/Viz/2022, A.Y.2017-18 Sudhakara Rao Potnuru, Srikakulam 4. On being aggrieved with the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and raised the following grounds : 1. The order of the Hon’ble Commissioner of Income Tax (Appeals) was arbitrary and quite injustice. 2. The CTT(A) ought to have considered the fact that the bank pass book not regarded as books of the assessee. The Assessing Officer made the addition of Rs.11,51,OOO/- as unexplained money as provisions of Seo.69A of LT Act clearly speaks that the Appellant is found to be "owner of any money bullion. jewellery or other valuable articles and such money bullion, jewelry or valuable article is not recorded in books account, if any maintained by him far source of income" when the appellant have not maintained any books of account, the provisions of 69A is not applicable in assessee's case. Further the bank account copies etc cannot be regarded as books of account as per the case law Smt. Rameela Ben Patel vs. ITO, ITA No.3393(Ahd)/2014 and in the case of Bombay high court CITv. Bhaichand H Gandhi / [1983] (41 ITR 67(1983) held that a pass books supplied by the bank to the assessee cannot be regarded as a book of assessee i.e a book maintained by a assessee. 3. The CIT(A) ought to have taken into account of brought forwarded cash for earlier years and the sale amount of sites before October 2015 while judging the entire notes deposited were unaccounted income. Which is arbitrary and not justified. 4. Is it proper on the part of the Assessing officer when one side the Assessing Officer has taken into cogence that the deposits made in the bank are invalid and treated as against the RBI guideline and other hand the Assessing Officer treating it has tender notes. When it is tender note why the AO treating as valid notes when deposits of old notes made in bank. This is not justified and against the principles of natural justice. 5. The CIT(A) ought to have taken into consideration the Hon’ble decision of ITAT Ahmedabad dt.11.12.2018 in the case Smt. Rameela Ben Patel vs ITO, ITA . No3393(Ahd)/2014 wherein it was held that income credited m the bank passbooks maintained by the bank could not be regarded as account books of the assessee. Any sum found credited in the bank passbook cannot be treated as unexplained cash credit since the bank passbooks cannot be treated books of accounts. In the instant case the AO taken only the entries in the bank passbook treating as books accounts and added to the income returned which is quite arbitrary and injustice. 6. Is it not proper on the part of the CIT(A) when one side the Assessing Officer has taken into contingence that the deposits made in the bank are invalid and treated as against the RBI guideline and other hand the Assessing Officer treating it has tender notes. When it is tender notes why the AO treating as valid notes when deposits of old 4 I.T.A. No.133/Viz/2022, A.Y.2017-18 Sudhakara Rao Potnuru, Srikakulam dotes made in bank. This is not justified and against the principles of natural justice as held in the case of Rameswaram Paper Mills Pvt. Ltd Vs. State of UP and others 06-08-2009 Civil Writ petition No.1301 of 2009. In the instant case the AO has taken only entries in the pass book and added to the income returned which is quite arbitrary and injustice. 7. Any other ground(s) that may be urged at the time of hearing before the Hon’ble ITAT. 5. Ground No.1 and 7 are general in nature which does not require any specific adjudication. 6. The only issue raised by the assessee in Ground Nos.2 to 6 is that the Ld.CIT(A) erred in confirming the order of the AO by sustaining the addition of Rs.11,51,000/- made on account of unexplained investment u/s 69A of the Act. The Ld.AR filed paper book and written submissions before the Tribunal and submitted that the assessee is filing returns of income even before the A.Y.2015-16 onwards. The assessee submitted that as per return of income filed for A.Y.2016-17, the assessee admitted in the return that cash in hand was Rs.3,36,609/- as admitted in the Balance Sheet as on 31.03.2016. Thus the opening cash balance for the A.Y.2017-18 was at Rs.3,36,609/-. The assessee further submitted that he had sold his vacant site on 15.06.2016 vide doc No.1052/2016 for Rs.2,51,000/- and sold another site on 24.08.2016 vide doc No.1646/2016 for Rs.4,49,000/-. Thus the total amount available as on August 2016 was at Rs.10,36,609/- and the balance amount was met out 5 I.T.A. No.133/Viz/2022, A.Y.2017-18 Sudhakara Rao Potnuru, Srikakulam of the income disclosed for the A.Y.2017-18 (upto October 2016). Thus the fund available to the assessee as on 01.11.2016 was at Rs.11,51,000/-. The assessee submitted that irrespective of the above fact, the AO treated the deposits of Rs.11,51,000/- as unexplained investment which is arbitrary and unjustified. The Ld.AR relied on the decision of coordinate bench of Hon’ble ITAT, Ahmedabad in the case of Smt.Ramilaben B.Patel Vs Income Tax Officer, Ward-3, Gandhinagar vide I.T.A.3393/AHD/2014 dated 11.12.2018, which held that any sum found credit in the bank passbook cannot be treated as an unexplained cash credit. The Ld.AR further submitted that the AO, on one hand treated the deposits made in the bank are against the RBI guidelines and are invalid, on the other hand, the AO treated the same as tender notes. The contention of the assessee is that when the AO treated them as tender notes, why the AO treated them as valid notes when deposits of old notes was made in the bank, which is not justified and against the principles of natural justice. The assessee relied on the decision in the case of Rameswaram Paper Mills Pvt. Ltd. Vs. State of UP and others 06.08.2009 Civil Writ Petition No.1301 of 2009. The assessee further contended that the AO has taken only entries in the bank pass book and added to the income returned which is quite arbitrary and injustice, since the pass 6 I.T.A. No.133/Viz/2022, A.Y.2017-18 Sudhakara Rao Potnuru, Srikakulam book is not part and parcel of books of account. He, therefore, pleaded to set aside the order passed by the CIT(A) and delete the addition made by the AO. 7. Per contra, the Ld.DR relied on the order of the Ld.CIT(A) and submitted that the Ld.CIT(A) has rightly given relief for the cash balance of Rs.3,34,609/- available out of the addition of Rs.11,51,000/- made by the AO. He, therefore, pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal filed by the assessee. 8. I have heard both the parties and perused the material placed on record. The assessee filed additional evidence before the Tribunal. After considering the additional evidence, I admit the additional evidence filed by the assessee. The additional evidence relates to factual issues, therefore, I remit the matter back to the file of the AO with a direction to complete the assessment after considering the additional evidence filed by the assessee. The assessee is directed to file the additional evidences before the AO and cooperate with the proceedings of the AO. Hence, I set aside the orders passed by the lower authorities and to meet the principles of natural justice I provide one more opportunity of being heard to the assessee to establish his claim before the AO 7 I.T.A. No.133/Viz/2022, A.Y.2017-18 Sudhakara Rao Potnuru, Srikakulam 9. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 23 rd May, 2023. Sd/- (द ु व्वूरु आर.एल रेड्डी) (DUVVURU RL REDDY) न्याधयक सदस्य/JUDICIAL MEMBER Dated : 23.05.2023 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Sudhakara Rao Potnuru, D.No.13-128, Jogipeta Street, Narasannapeta, Srikakulam 2. रधजस्व/The Revenue – The Income Tax Officer, Ward-1, Palakonda Road Srikakulam 3. The Principal Commissioner of Income Tax, Visakhapatnam 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT, Visakhapatnam 5..गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam