ITO, Ward-11(3), Hyderabad V. Sri Shivarama Krishna Gogineni, Hyderabad

ITA 1619/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74718 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Additional evidence
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1619/HYD/2013 ASSESSMENT YEAR 2009-10 THE INCOME TAX OFFICER WARD-11(3) HYDERABAD VS. SRI SHIVARAMA KRISHNA GOGINENI, HYDERABAD PAN: AHCPG1470B APPELLANT RESPONDENT APPELLANT BY: SRI SOLGY JOSE T. KOTTARAM RESPONDENT BY: NONE DATE OF HEARING: 26.03.2014 DATE OF PRONOUNCEMENT: 26.03.2014 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL BY REVENUE IS DIRECTED AGAINST ORDER O F THE CIT(A)-VI, HYDERABAD DATED 23.08.2013 FOR A.Y. 2009 -10. 2. THE GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL IS W ITH REGARD TO ADMISSION OF ADDITIONAL EVIDENCE WHICH WA S NOT PRODUCED BEFORE THE AO AND THE CIT(A) DECIDED THE APPEAL ON THAT BASIS WITHOUT GIVING OPPORTUNITY TO THE AO THEREBY VIOLAT ING RULE 46A OF INCOME-TAX RULES, 1962. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME FOR THE A.Y. 2009-10 , ADMITTING TOTAL INCOME AT RS. 4,52,610. AS THERE WAS NO RESPONSE F ROM THE ASSESSEE TO THE NOTICES ISSUED BY THE AO, THE ASSES SMENT WAS COMPLETED U/S. 144 BY BRINGING VARIOUS AMOUNTS TO T AX. THE SHORT TERM CAPITAL GAIN OF RS. 1,38,894 FOUND TO HAVE ARI SEN TO THE ASSESSEE FOR THE TRADING IN SECURITIES, AND WAS BRO UGHT TO TAX. THE NEXT ADDITION IS IN RESPECT OF CASH DEPOSITS OF RS. 17,06,750 MADE IN BANK ACCOUNT AND WAS BROUGHT TO TAX AS UNEXPLAIN ED CASH INVESTMENT U/S. 69A. THE THIRD ADDITION IS IN RESP ECT OF TREATMENT 2 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= OF CREDITS OF RS. 5,37,627 INTO THE ACCOUNTS TOWARD S CREDIT CARD PAYMENTS, WHICH WERE TREATED AS UNEXPLAINED INVESTM ENT AND BROUGHT TO TAX. 4. BEFORE THE CIT(A) THE ASSESSEE NOT CONTESTED THE IS SUE RELATING TO SHORT TERM CAPITAL GAIN. HOWEVER, THE ASSESSEE CONTESTED THE ADDITION RELATING TO UNEXPLAINED INVE STMENT AT RS. 22,44,377 AND UNEXPLAINED INVESTMENT FOR CREDIT CAR D PAYMENT AT RS. 5,37,627. AS PER THE INFORMATION RECEIVED FROM THE BANK, THE AO OBSERVED THAT THE ASSESSEE HAD MADE CASH DEPOSIT S OF RS. 17,06,750 INTO THE BANK DURING THE YEAR UNDER CONSI DERATION. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD MADE CRED IT CARD REPAYMENTS TO THE EXTENT OF RS. 5,37,627 INTO CITI B ANK AND OTHER BANK, WITHOUT EXPLAINABLE SOURCES. AS NO INFORMATIO N WAS FORTHCOMING FROM THE ASSESSEE UNDER THESE TWO HEADS, THE AO BROUGHT THE AMOUNTS OF RS. 17,06,750 AND RS. 5,37,6 27/-, TO TAX AS UNEXPLAINED CASH INVESTMENT U/S . 69A. 5. DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS, I T WAS SUBMITTED THAT THE ASSESSEE WAS A SUB-CONTRACTOR OF THE WORKS GIVEN BY M/S. SURYA CONSTRUCTIONS PVT. LTD AND OTHE RS DURING THE YEAR UNDER CONSIDERATION HAD UNDERTAKEN EARTH WORK AND EXCAVATION CONTRACT WORTH RS. 41.38 LAKHS FOR M/S. SURYA CONSTRUCTIONS PVT. LTD. IT WAS ALSO STATED THAT SIM ILAR WORK CONTRACT WAS ALSO DONE FOR M/S SURYA CONSTRUCTIONS PVT. LTD. DURING THE YEAR 2007-08, AND THE OUTSTANDING BILLS OF RS. 40.80 LAK HS WERE RECEIVED IN THE MONTH OF APRIL, 2008 AND THAT THE C HEQUES RECEIVED TO THIS EFFECT WERE DEPOSITED IN DHANALAKSHMI BANK. IT WAS STATED THAT THE ASSESSEE HAD WITHDRAWN AN AMOUNT OF RS. 40 .79 LAKHS FROM DHANALAKSHMI BANK AND UTILISED FOR THE BUSINES S, PERSONAL NEEDS AND INVESTMENT DURING THE YEAR 2008-09. THE A SSESSEE TO THIS EFFECT HAD FURNISHED ACCOUNT COPY OF M/S. SURY A CONSTRUCTION PVT. LTD AND BANK STATEMENT OF DHANALAKSHMI BANK. T HE ASSESSEE 3 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= FURTHER STATED THAT HE HAD USED ICICI BANK SAVINGS ACCOUNT NO. 007501523481 TOWARDS BUSINESS NEEDS AND STATED THAT HE DEPOSITED MONEY INTO ICICI BANK AND HAD ISSUED CHEQ UES TO VARIOUS PARTIES DURING THE YEAR FOR 2008-09 FOR OPE RATIONAL AND BUSINESS CONVENIENCE. THE ASSESSEE AVERRED THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE ADDED THE DEPOSITS IN THE ICICI BANK ACCOUNT TO THE EXTENT OF RS. 17,06,750 AS UNEXPLAIN ED INVESTMENT U/S. 69A. IT WAS FURTHER SUBMITTED THAT THE ASSESSE E HAD UTILISED CITY BANK CREDIT CARD AND BARCLAYS BANK CREDIT CARD FOR HIS BUSINESS NEEDS AND PERSONAL NEEDS. IT WAS STATED TH AT THE AMOUNT PAID TO THE BANK FOR UTILISATION OF CREDIT CARD TO THE EXTENT OF RS. 5.37 LAKHS TOWARDS VARIOUS PURCHASES, SHOULD NOT H AVE BEEN ADDED AS UNEXPLAINED INVESTMENT. THE ASSESSEE IN THIS REGARD HAD FURNISHED LEDGER EXTRA CT OF THE CREDIT CARDS AND COPIES OF THE CREDIT CARDS AND PRAYED THAT THE ADDITION MADE UNDER THE A BOVE TWO HEADS BE DELETED. AS THE INFORMATION FURNISHED DURI NG THE STAGE OF APPELLATE PROCEEDINGS CONSTITUTED ADDITIONAL EVIDEN CE, THE SUBMISSIONS MADE ALONG WITH EXTRACTS OF BANK ACCOUN TS AND CONTRACT WORKS DONE WAS FORWARDED TO THE ASSESSING OFFICER CALLING FOR A REMAND REPORT AFTER EXAMINATION OF THE CLAIMS OF THE ASSESSEE . 6. THE AO VIDE REMAND REPORT SUBMITTED THAT THE ASSESS EE DID SUB CONTRACT WORKS FOR M/S. SURYA CONSTRUCTIONS PVT . LTD. AND ALSO DID SOME OTHER PETTY CONTRACT WORKS AND HAS SUNDRY DEBTORS TO THE TUNE OF RS. 49,49,165.93 AS ON 01.04.2008, AND THIS WAS REFLECTED IN THE RETURN OF INCOME FILED BY THE ASSE SSEE FOR THE ASST. YEAR 2008-09. IT WAS SUBMITTED THAT M/S. SURYA CONS TRUCTIONS PVT. LTD. WAS A DEBTOR FOR AN AMOUNT OF RS. 40,79,514/-, FOR THE WORKS CARRIED OUT FOR THE COMPANY BY THE ASSESSEE IN THE EARLIER YEAR. IT WAS STATED THAT THE ASSESSEE FILED CASH FLOW STATEMENT AND STATED THAT THE ASSESSEE REALIZED AMOUNTS TOTALLING TO RS. 40,79,514/- FROM THE COMPANY THROUGH CHEQUES, WHICH WERE DEPOSI TED IN D HANALAKSHMI BANK, IN THE MONTH OF APRIL, 2008, AND APART FROM 4 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= THIS, THE ASSESSEE HAD ALSO GOT REALIZATION FROM SOME OF THE DEBTORS FROM THE BALANCE SUNDRY DEBTORS LIKE KSN SO LUTIONS AND SOME OTHER PETTY PARTIES. THE ASSESSEE FURTHER STATED THAT HE HAD TAKEN A LOAN OF RS. 3,17,696 FROM HOB FINANCIAL SER VICES LTD IN THE MONTH OF NOVEMBER, 2008 AS SHOWN IN THE ICICI BANK SAVINGS ACCOUNT AND ALSO GOT AN AMOUNT OF RS. 1.39 LAKHS OF PROFIT FROM SHARES BUSINESS, WHICH WAS UTILISED FOR HIS BUSINES S. HOWEVER, IT IS RELEVANT TO MENTION HERE THAT THE ASSESSEE FAILED TO TURN UP AND FURNISH HIS SUBMISSIONS WITH RESPECT TO THE FINDING S IN REMAND REPORT. 7. AS FAR AS THE WITHDRAWAL OF ENTIRE AMOUNT OF RS. 40 .79 LAKHS IN APRIL, 2008 AND ITS UTILISATION IS CONCERNED, TH E ASSESSEE EXPLAINS THAT HE WITHDREW THE WHOLE AMOUNT OF RS. 40.79 LAKHS AND KEPT IT WITH HIM AND HAD GIV EN SOME PORTION OF IT AS INTEREST FREE HAND LOANS TO RELATIVES AS FAMILY OBLI GATION AND THERE IS NO BANK AT THE REMOTE PLACE OF WORK I.E. KONDAGATTU, KARIMNAGA R. IT WAS ALSO STATED BY THE ASSESSEE BEFORE THE AO THAT WHENEVER HE NEEDED MONEY IN BUSINESS, HE HAD TAKEN SUCH HAND LOANS BAC K AND UTILISED THEM FOR DEPOSIT IN BANK TOWARDS CREDIT CARD PAYMEN TS AND ALSO FOR HIS BUSINESS NEEDS, AS HE HAD BEEN COMING BACK FROM SITE TO HYDERABAD ON SATURDAYS AND SUNDAYS, AND HENCE KEPT SOME PORTION OF MONEY AS LIQUID CASH FOR CONVENIENCE AND TO TAKE THE SAME TO THE WORKING PLACE. IT WAS EXPLAINED BEFORE THE ASSESSING OFFICER BY THE ASSESSEE THAT DUE TO THE NATURE OF PAYMENTS IN HIS BUSINESS I.E. MOST OF THE PAYMENTS WERE MADE TO LAB OURERS FOR CLEARING OF JUNGLE, JUNK, EXCAVATION AND EARTH WORK , THERE IS EXIGENCY OF KEEPING LIQUID CASH WITH HIM. THE REPOR T OF THE AO NEITHER ENDORSED THE EXPLANATION OF THE ASSESSEE NOR DOUBTED THE CREDENTIALS OF SUCH EXPLANATION. 8. THE CIT(A) OBSERVED THAT THE ASSESSEE IS AN INDIVIDUAL REGULARLY INVOLVED IN SHARE TRADING/SPECULATION AND DERIVING PROFITS/GAINS FROM SUCH ACTIVITY. IN ADDITION, CIVI L CONTRACT WORKS 5 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= WERE SHOWN TO HAVE BEEN EXECUTED FOR FEW PARTIES SU CH AS M/S. SURYA CONSTRUCTIONS ETC. AND HUGE DEBTORS FOR THE W ORKS DONE WERE SHOWN IN THE BALANCE SHEET, YEAR AFTER YEAR AND THE PAYMENTS RECEIVED IN THE SUBSEQUENT YEAR WERE DEPOSITED INTO DHANALAKSHMI BANK, FROM WHICH THE AMOUNTS WERE DRAWN IN CASH FRO M THE EARLIEST DATE OF CHEQUE DEPOSITS IN TO SUCH BANK. THERE ARE CASH DEPOSITS IN TO ICICI BANK AND CITY BANK, TO THE TUNE OF RS. 17, 06,750/- AND RS. 5,37,627/- RESPECTIVELY, WHICH WERE TREATED AS THE UNEXPLAINED INVESTMENTS. IT WAS THE EXPLANATION OF THE ASSESSEE THAT THE CREDITS WERE OUT OF THE AMOUNTS OF CASH WITHDRAWALS MADE FROM DHANALA KSH MI BANK, WHICH WERE KEPT WITH HIS FRIENDS AND RELAT IVES, FOR A TEMPORARY PERIOD AND WERE COLLECTED BACK AND DEPOSITED IN TO ICICI BANK . IT IS NOT KNOWN OR EXPLAINED WHY CASH WAS WITHDRAWN FROM DHANALA KSH MI BANK AND ROTATED ELSEWHERE AND THEN TO REACH ANOTHER BANK, ICICI BANK. IT IS ALSO NOT KNOWN WHAT WAS THE SOU RCE FOR CLEARING HIS DUES FOR THE WORKS DONE, FOR WHICH PAYMENTS WERE RECEIVED FROM HIS PRINCIPAL CONTRACTORS ONLY IN THE SUBSEQUENT YEARS. THE INCOME LEVELS SHOWN IN THE HANDS OF ASSESSEE ARE NOT ENOUGH TO EXPLAIN THE REQUIREMENTS OF HIS BUSINESS AND PERSONAL NEEDS. IT IS ALSO NOT EXPLAINED HOW CASH WAS USED F OR GIVING LOANS TO FRIENDS AND RELATIVES, TO BE COLLECTED BACK AGAI N IN CASH. IT IS REPEATEDLY HELD THAT UNLESS THE PATTERN BETWEEN THE CASH WITHDRAWALS AND CASH DEPOSITS ARE ESTABLISHED, THE CASH WITHDRAWALS NEED NOT BE CONSIDERED FOR EXPLAINING T HE CASH DEPOSITS. IN THIS CASE FOR THE YEAR UNDER REFERENCE , NEITHER SUCH PATTERN IS ESTABLISHED NOR PROVED FULLY, TO EXPLAIN THAT CASH WITHDRAWALS MADE FROM DHANALA KSH MI BANK MET THE SOURCES FOR THE CASH DEPOSITS INTO ICIC I BANK AS WELL AS THE CITY BANK, FOR MEETING THE BILLS OF CREDIT CARDS. 9. THE CIT(A) FURTHER OBSERVED THAT THOUGH IT IS A FAC T THAT THE ASSESSEE REALISED THE DEBTORS OF EARLIER YEARS DURING THE Y EAR, IT IS ALSO RELEVANT TO MENTION THAT THE ASSESSEE IS EXECUTING THE 6 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= CONTRACTS AND PAYMENTS FOR EXPENSES WERE SHOWN IN C ASH AND SUCH EXPENSES OF EARLIER YEAR CONTRACTS IN THE FORM OF C REDITORS AND THE EXPENSES RELATED TO THE CURRENT YEAR CONTRACT WORKS CONSUME THE CASH WITHDRAWN FROM THE BANK IN TO WHICH THE REALIS ED AMOUNTS OF DEBTORS DEPOSITED/CREDITED, LEAVING MEAGRE BALANCES OR NO BALANCES, TO MEET THE CASH DEPOSITS INTO ANOTHER BA NK ACCOUNT. THOUGH IT HAS BEEN SUBMITTED THAT THE ASSESSEE OBTAINED SOME LOANS AND EARNED PROFITS FROM TRADING IN SHARES, TH E AMOUNTS ARE TOO MEAGRE TO EXPLAIN THE CREDITS AND IT IS A FACT THAT THE ASSESSEE FAILED TO FURNISH THE DETAILS OF LOANS GIVEN AND RE COVERED. THE ASSESSEE ALSO FAILED TO INDICATE THE REALISATION FROM SMALL DEBTORS. AS THE TRANSACTIONS INVOLVED ARE IN CASH, IN ABSENC E OF INFORMATION WITH CERTAIN EVIDENTIARY VALUE, SUCH TRANSACTIONS A SSUME DOUBTFUL PROPOSITIONS. THUS IN THIS CASE, THOUGH THE ASSESSEE COULD INDICATE THE SOURCES FOR THE CREDITS INTO ICIC I BANK AND CIT IB ANK, COULD NOT DISCHARGE HIS RESPONSIBILITY OF PROVING THE CRE DITS WITH COGENT EVIDENCE. THE ONUS OF PROVING THE INVESTMENTS RECOR DED IN BOOKS (BANK A/C.), LIED WITH THE ASSESSEE , WHICH COULD NOT BE DISCHARGED BY THE ASSESSEE FULLY, WHICH INVITES TREATING SUCH INVESTMENTS AS UN EXPLAINED. DECISION OF HON'BLE SUPREME COURT IN THE CASH OF ROSHAN D. HUTTI VS. CIT (107 ITR 938), SUPPORT THIS VIEW. THE CIT(A) WAS OF THE OPINION THAT THE ASSESSEE FAILED TO EXPLAIN THE CASH DEPOSITS INTO ICICI BANK (RS. 17,06,750) AND RS. 5,37,627 INTO CIT IBANK WITH RELIABLE EVIDENCE AND THE EXPLANATION OF CASH WITHDRAWN FROM DHANALA KSH MI BANK AND LOANS ARE ACCEPTABLE, PARTIALLY. HENCE, SUCH DEPOSITS CAN ONLY BE TREATED AS PARTIALLY EXPLAINED, TO THE EXTENT OF THE DEPOSITS OF RS. 17, 06,750/- MADE INTO ICICI BANK, KEEPING THE EXPLANATION OF THE ASSESSEE IN MIND. THUS, THE SOURCES FOR THE DEPOSITS MADE INTO CITIBA NK TO THE EXTENT OF RS. 5,37,627/- STAND UNEXPLAINED. ACCORDINGLY, T HE ADDITION OF ON ACCOUNT OF RS. 5,37,627/- STAND SUSTAINED, AS AGAIN ST THE TOTAL ADDITION OF RS. 22,44,627/-, MADE IN THE ASSESSMENT ORDER U / S. 7 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= 69A OF IT ACT. THUS, THE CIT(A) ALLOWED THIS GROUND PARTLY. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 10. NONE APPEARED FOR THE ASSESSEE. WE HAVE HEARD THE LEARNED DR. IN THIS CASE ADMITTEDLY THE CIT(A) CON SIDERED THE COPY OF ACCOUNTS OF M/S. SURYA CONSTRUCTIONS PVT. LTD. A ND BANK STATEMENT OF DHANALAKSHMI BANK. THE CIT(A) ALSO GO NE THROUGH THE SB A/C. NO. 007501523481 WITH ICICI BANK AND GIVEN A FINDING THAT AN AMOUNT OF RS. 17,06,750 WAS DULY EXPLAINED AND THERE CANNOT BE ANY ADDITION TOWARDS UNEXPLAINED BANK DEP OSIT MADE INTO THE ICICI BANK A/C. THE SOURCE FOR THE DEPOSI T WAS DULY EXPLAINED. ACCORDINGLY, HE DELETED THE ADDITION TO WARDS THIS. 11. IN OUR OPINION, THE ASSESSMENT ORDER WAS PASSED BY THE AO EX-PARTE U/S. 144 OF THE ACT. FILING ADDITIONAL EV IDENCE BEFORE THE CIT(A) IN THE FORM OF BANK ACCOUNT AND OTHER RELATE D DOCUMENTS CAN BE CONSIDERED AFTER GIVING AN OPPORTUNITY TO TH E AO TO COMMENT ON THIS SO AS TO ENSURE PROPER ADJUDICATION OF THE ISSUE. THE CIT(A) IN THIS CASE HAS NOT PROPERLY CONFRONTED THE DOCUME NTS FURNISHED BEFORE HIM TO THE AO. THERE IS CLEAR VIOLATION OF RULE 46A OF INCOME-TAX RULES, 1962. HENCE WE ARE INCLINED TO A SIDE THE ORDER OF THE CIT(A) ON THE ISSUE RELATING TO DELETION OF ADDITION OF RS. 17,06,750 MADE TOWARDS UNEXPLAINED BANK DEPOSIT TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 12. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26 TH MARCH, 2013 SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 26 TH MARCH, 2014 TPRAO 8 ITA NO. 1619/HYD/2013 SRI SHIVARAMA KRISHNA GOGINENI ========================= COPY TO: 1. THE INCOME TAX OFFICER, WARD-11(3), 'D' BLOCK, 5 TH FLOOR, IT TOWERS, AC GUARDS, HYDERABAD. 2. SRI SHIVARAMA KRISHNA GOGINENI, 22-1-45/B, FLAT NO. 108, PANCHAVATI APARTMENTS, BAGHYA NAGAR COLONY, KUKATPA LLY, HYDERABAD. 3. THE CIT(A)-VI, HYDERABAD 4. THE CIT-V, HYDERABAD. 5. THE DR, B BENCH, ITAT, HYDERABAD.