Sri A C Jagadesh , Mysore V. Income TAx Officer Ward-2(2), Mysore

ITA 1846/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9244 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 11-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Business income; Additional evidence; Set aside
• Section: 44AD; 80C; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI B.R BASKARAN, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.1846/BANG/2017 ASSESSMENT YEAR : 2011-12 SHRI A C JAGADEESH, NO.67, HEMAVATHI MARGA, 1 ST STAGE, TELECOM LAYOUT, BOGADI, MYSORE-570 023. PAN AEDPJ 9237 R. VS. THE INCOME-TAX OFFICER, WARD-2(2), MYSORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.V RAVISHANKAR, ADVOCATE RESPONDENT BY : SMT. R PREMI, JCIT (DR) DATE OF HEARING : 20.11.2019 DATE OF PRONOUNCEMENT : 08.01.2020 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 29/9/2016 PASSED BY LD CIT(A), MYSORE AND IT RELATES TO ASST. YEAR 2011-12. 2. THE GROUNDS OF APPEAL URGED BY THE ASSESSEE RELA TE TO THE FOLLOWING ISSUES:- A) ADDITIONAL OF UNEXPLAINED CASH DEPOSITS - 47. 73 LAKHS ITA NO.1846 /BANG/2017 PAGE 2 OF 8 B) ADDITION OF UNEXPLAINED SUNDRY CREDITORS 40 L AKHS C) ADDITION OF UNPROVED HDFC BANK LOAN 0.84 LAKH S D) DISALLOWANCE OF DEDUCTION CLAIMED U/S 80C OF TH E ACT 0.61 LAKH. 3. THE ASSESSEE IS A CIVIL CONTRACTOR AND HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS.10.08 LAKHS. THE ASSESSEE HAS DECLARED INCOME O N ESTIMATED BASIS BY ADOPTING PROFIT RATE OF 8%. IT IS FURTHER STATED THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNTS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSE E TO FURNISH STATEMENT OF AFFAIRS AS ON 31/3/2010 AND 31.3.2011, SINCE THE ASSESSEE CLAIMED BEFORE HIM THAT HE DID NOT MAINTAI N ANY BOOKS OF ACCOUNTS. IN THE STATEMENT OF TOTAL INCOME FILED FOR 31/3/2011 THE ASSESSEE HAD SHOWN SUNDRY CREDITORS BALANCE OF RS.4 0.00 LAKHS. THE AO ASKED THE ASSESSEE TO PRODUCE ALL THE CREDIT ORS. HOWEVER THE ASSESSEE COULD PRODUCE ONLY 2 CREDITORS NAMED S HRI SRINIVAS AND SHRI ABDUL AHMEED AND BOTH OF THEM COULD NOT CO NFIRM THE BALANCE OUTSTANDING AGAINST THEIR NAME. ACCORDINGL Y THE AO ASSESSED THE SUNDRY CREDIT BALANCE OF RS.40.00 LAKH S AS UNPROVED CREDITS. THE AO ALSO NOTICED THAT THE ASSESSEE HAS DEPOSITED CASH INTO HIS BANK ACCOUNT TO THE TUNE OF RS.47.73 LAKHS . THE ASSESSEE DID NOT OFFER ANY EXPLANATIONS WITH REGARD TO THE S OURCES OF DEPOSITS. HENCE THE AO ASSESSED THE SAME AS INCOME OF THE ASSESSEE. SIMILARLY THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE WITH REGARD TO HDFC LOAN SHOWN AS OUTSTANDING IN TH E STATEMENT OF AFFAIRS AND ALSO COULD NOT FURNISH PROOF FOR THE CL AIM OF DEDUCTION U/S 80C OF THE ACT TOWARDS LIC PAYMENT. HENCE THE AO ADDED THE ITA NO.1846 /BANG/2017 PAGE 3 OF 8 HDFC LOAN OF RS.84,810/- TO THE TOTAL INCOME OF THE ASSESSEE AND DISALLOWED THE CLAIM OF DEDUCTION U/S 80C OF THE AC T. THE LD CIT(A) CONFIRMED ALL THE ADDITIONS AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. WE SHALL FIRST TAKE UP THE ISSUE RELATING TO UNE XPLAINED CASH DEPOSITS OF RS.47.73 LAKHS MADE INTO THE SAVINGS BA NK ACCOUNT OF THE ASSESSEE. AT THE TIME OF HEARING, THE ASSESSEE FURNISHED A CERTIFICATE OBTAINED FROM KANATAKA BANK AS ADDITIO NAL EVIDENCE TO SHOW THAT CASH DEPOSITS TO THE TUNE OF RS.30.24 LAK HS MADE INTO THE SAVINGS BANK ACCOUNT OF THE ASSESSEE WAS OUT OF WITHDRAWALS OF RS.37.27 LAKHS MADE FROM THE CURRENT ACCOUNT OF THE ASSESSEE. THE LD AR PRAYED THAT THE ABOVE SAID CERTIFICATE MAY KI NDLY BE ADMITTED AS ADDITIONAL EVIDENCE. HE FURTHER SUBMITTED THE C ASH DEPOSITS MADE INTO THE SAVINGS BANK ACCOUNT ACTUALLY REPRESE NTS BUSINESS RECEIPTS PARTLY AND SOME OF THE DEPOSITS HAVE BEEN MADE OUT OF EARLIER WITHDRAWALS. HE SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT AND HENCE THE AO WAS JUST IFIED IN REQUESTING FOR FOOL PROOF EVIDENCES. ACCORDINGLY HE PRAYED THAT THIS ADDITION MAY KINDLY BE DELETED. 5. ON THE CONTRARY THE LD AR SUBMITTED THAT THE ASS ESSEE HAS NOT FURNISHED PROPER EXPLANATIONS WITH REGARD THE S OURCES OF DEPOSITS. HE FURTHER SUBMITTED THAT THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE REQUIRE VERIFICATION. 6. SINCE THE ASSESSEE HAS FILED ADDITIONAL EVIDENCE , WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. THE CLAIM OF THE ASSESSEE THAT DEPOSITS MADE C ONSISTED OF ITA NO.1846 /BANG/2017 PAGE 4 OF 8 BUSINESS RECEIPTS AND WITHDRAWALS MADE EARLIER AND THIS CLAIM ALSO REQUIRES VERIFICATION. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CITA() ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO FOR EXAMINING IT AFRESH. 7. THE NEXT ISSUE RELATES TO ADDITION OF SUNDRY CRE DITORS BALANCE OF RS.40.00 LAKHS. THE LD AR SUBMITTED THAT THE AS SESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT DURING THE YEAR UND ER CONSIDERATION AND HE DID NOT FURNISH ANY FINANCIAL STATEMENTS ALONG WITH THE RETURN OF INCOME. HOWEVER, DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, HE FILED A STATEMENT OF AF FAIRS BEFORE THE AO, AT THE REQUEST OF THE AO. HE SUBMITTED THAT TH E STATEMENT OF AFFAIRS HAS BEEN PREPARED ON ESTIMATED BASIS AND HE NCE THE SAME CANNOT BE EQUATED WITH THE FINANCIAL STATEMENTS PRE PARED ON THE BASIS OF BOOKS OF ACCOUNTS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS OFFERED INCOME ON ESTIMATED BASIS @ 8% OF THE G ROSS RECEIPTS. HENCE THE AO SHOULD NOT HAVE PLACED RELIANCE ON THE STATEMENT OF AFFAIRS TO MAKE THE ADDITION OF RS.40.00 LAKHS. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED BEFORE LD CIT(A) THE CONFIRMATION LETTERS OBTAINED FROM ALL THE CREDITOR S SHOWN IN THE STATEMENT OF AFFAIRS. HOWEVER, THE LD CIT(A) HAS P ROCEEDED TO DECIDE THE ISSUE UNDER THE PRESUMPTION THAT THE CON FIRMATION LETTERS WERE NOT FURNISHED, WHICH IS AGAINST THE FA CTS AVAILABLE ON RECORD. HE SUBMITTED THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND HAS BEEN DEALING WITH PEOPLE FROM UNORGANIZED SECTOR, W HO ALSO DID NOT MAINTAIN BOOKS OF ACCOUNT. HENCE THEY COULD NOT ALS O CONFIRM FROM MEMORY THE BALANCES OUTSTANDING AGAINST THEIR NAME AS ON A PARTICULAR DATE, SINCE THE ASSESSEE IS HAVING RUNNI NG ACCOUNT AND ITA NO.1846 /BANG/2017 PAGE 5 OF 8 CONTINUOUS DEALING WITH THEM. THE LD AR RELIED ON A DECISION RENDERED BY KOLKATTA SMC BENCH OF TRIBUNAL IN THE C ASE OF MOHANKUMAR AGARWAL VS. ITO (ITA NO.1750/KOL/2018 DA TED 8/5/2019) AND SUBMITTED THAT NO SEPARATE ADDITION S HOULD BE MADE WHEN INCOME IS ESTIMATED U/S 44AD OF THE ACT. HOWEVER WE NOTICE THAT THE ABOVE SAID CASE WAS RELATED TO AN A SSESSEE TO WHOM THE PROVISIONS OF SEC. 44AD WAS STRAIGHT AWAY APPLI CABLE. UNDER SECTION 44AD, THERE IS STATUTORY REQUIREMENT TO EST IMATE INCOME. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THAT HE PR OVISIONS OF SEC. 44AD ARE NOT APPLICABLE. HOWEVER THE ASSESEEE HAS ESTIMATED INCOME @ 8% BY TAKING CUE FROM SEC.44AD OF THE ACT. HENCE, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT PLACE RELI ANCE ON THE ABOVE SAID CASE LAW. 8. THE LD DR, ON THE CONTRARY, SUBMITTED THAT THE A SSESSEE COULD PRODUCE ONLY TWO CREDITORS, WHO ALSO COULD NOT CONF IRM THE OUTSTANDING BALANCES. 9. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED O N RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT MAINT AINED BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION. THE ASSE SSEE HAS FURNISHED A STATEMENT OF AFFAIRS BEFORE AO, WHICH H AS BEEN PREPARED ON ESTIMATED BASIS, MEANING THEREBY, THE S TATEMENT OF AFFAIRS IS NOT BASED ON ANY BOOKS OF ACCOUNTS. HEN CE THE SUNDRY CREDITORS BALANCE OF RS.40.00 LAKHS SHOWN BY THE AS SESSEE COULD ONLY BE AN ESTIMATED FIGURE. IT IS ALSO AN ADMITTE D FACT THAT THE ASSESSEE HAS OFFERED INCOME ON ESTIMATE BASIS, I.E. , @ 8% OF GROSS RECEIPTS. ITA NO.1846 /BANG/2017 PAGE 6 OF 8 10. THE MAIN REASON FOR DISALLOWANCE OF THE SUND RY CREDITORS BALANCE OF RS.40.00 LAKHS WAS THAT THE ASSESSEE DID NOT FURNISH CONFIRMATION LETTERS AND ALSO HE DID NOT PRODUCE TH E CREDITORS BEFORE THE AO. WE NOTICED FROM THE PAPER BOOK THAT THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS CLAIMED TO HAVE BEEN PRODUCED BEFORE LD CIT(A). THOSE CONFIRMATION LETTERS ARE A DDRESSED TO LD CIT(A) ONLY. HOWEVER THE LD CIT(A) HAS OBSERVED TH AT THE ASSESSEE HAS NOT FURNISHED THE CONFIRMATION LETTERS WHICH IS CONTRADICTORY TO COPIES OF CONFIRMATION LETTERS AVAILABLE ON RECORD. IN ANY CASE THE CONFIRMATION LETTERS HAVE NOT BEEN FURNISHED BEFORE THE AO AND HENCE THERE WAS NO OCCASION FOR THE AO TO EXAMINE T HIS LETTERS. ACCORDINGLY WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY WE S ET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF AO FOR EXAMINING IT AFRESH BY DULY CONSIDER ING THE CONFIRMATION LETTERS FILED BY THE ASSESSEE. WHILE EXAMINING THIS ISSUE, THE AO SHOULD ALSO KEEP IN MIND THAT THE ASS ESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNTS, INCOME HAS BEEN DECLA RED BY THE ASSESSEE ON ESTIMATED BASIS AND THE STATEMENT OF AF FAIRS HAVE BEEN PREPARED ON ESTIMATED BASIS ONLY. 11. THE NEXT ISSUE RELATES TO THE ADDITION OF OUTST ANDING HDFC BANK LOAN OF RS.0.84 LAKH. THE ASSESSEE HAS FURNIS HED A CERTIFICATE OBTAINED FROM HDFC BANK CERTIFYING THE OUTSTANDING BALANCE AS ON 31/3/2011. SINCE IT IS A NEW EVIDENCE PRODUCED FOR THE FIRST TIME BEFORE US, THE SAME REQUIRES EXAMINATION AT THE END OF THE AO. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE LD CIT(A) ON THIS ITA NO.1846 /BANG/2017 PAGE 7 OF 8 ISSUE AND RESTORE THE SAME TO THE FILE OF AO FOR EX AMINING IT AFRESH BY DULY CONSIDERING THE CERTIFICATE FURNISHED BY TH E ASSESSEE. 12. THE LAST ISSUE RELATES TO DISALLOWANCE OF DEDUC TION CLAIMED U/S 80C OF THE ACT. BEFORE US ALSO, THE ASSESSEE D ID NOT FURNISH ANY EVIDENCE TO SUPPORT THE CLAIM AND HENCE WE HAVE NO OTHER OPTION BUT TO CONFIRM THE ORDER PASSED BY THE LD CI T(A) ON THIS ISSUE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2020. SD/ - (PAVAN KUMAR GADALE) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, THE 8 TH JANUARY, 2019. /VMS/ COPY TO: 1. APPELLANT (S) / CROSS OBJECTOR(S) 2. RESPONDENT(S) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, BANGALORE