Nimma Durga Reddy, Hyderabad V. ITO, Ward-1, Medak Dist, Medak Dist

ITA 1875/HYD/2014

• Counselvise Citation: 187522514 RSA 2014
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: G KALYAN DAS
• Keywords: Unexplained cash credit; Onus to prove
• Section: 143(3); 131; 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1875/HYD/2014 ASSESSMENT YEAR: 2010-11 NIMMA DURGA REDDY, MEDAK DISTRICT. PAN ADEPN 2237 M VS. INCOME-TAX OFFICER, WARD 1, SIDDIPET, MEDAK DISTRICT (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G. KALYAN DAS REVENUE BY : SHRI M. SITARAM DATE OF HEARING : 24/11/2015 DATE OF PRONOUNCEMENT : 18/12/2015 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A)-IV, HYDERABAD DATED 22/10/2014 FOR THE AY 20 10-11. 2. BRIEF FACTS OF THE CASE ARE, ASSESSEE FILED HIS RETURN OF INCOME ON 27/06/2011 WITH ADMITTED INCOME OF RS. 1,77,561/ -, WHICH INCLUDES ESTIMATED INCOME OF RS. 1,02,000 FROM BROKERAGE AND COMMISSION. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT W AS COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT A CT) WITH THE TOTAL ASSESSED INCOME OF RS. 37,97,800/-. THE AO FOUND TH AT THE ASSESSEE MADE VARIOUS DEPOSITS ON DIFFERENT DATES IN ICICI B ANK A/C NO. 069101500009 TOTALLING TO RS. 47,09,864. SUBSEQUENT LY, ASSESSEE FILED A LIST OF 24 CREDITORS, WHO HAD ADVANCED TO H IM RS. 36,16,000/- FOR THE PURPOSE OF BUYING LAND FOR THEM. AO SENT LE TTERS U/S 133(6). SOME OF THE CREDITORS LETTERS WERE RETURNED AND OTH ERS SUBMITTED THEIR CONFIRMATION. FOR FURTHER VERIFICATION, AO ISSUED S UMMONS U/S 131 AND SWORN STATEMENTS WERE RECORDED. AO NOTED THAT ALL T HE CREDITORS ARE 2 ITA NO. 1875/HYD/2014 NIMMA DURGA REDDY. AGRICULTURISTS WITH SMALL INCOMES. HE ALSO OPINED T HAT THOUGH MAJORITY OF THE ALLEGED CREDITORS HAVE DEPOSED THAT THEY HAV E GIVEN AMOUNTS TO THE ASSESSEE IN SMALL AMOUNTS ON VARIOUS DATES C OULD NOT SPECIFY THE DATES OR PRODUCE ANY EVIDENCE IN SUPPORT OF THE IR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS ARE NOT PROVED. CONSIDERING THE ABOVE, AO REJECTED THE CLAIM OF THE ASSESSEE AND TR EATED THE ADVANCES FROM CREDITORS AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT AND ADDED RS. 36,16,000. AGGRIEVED WITH THE ABOVE O RDER, ASSESSEE FILED APPEAL BEFORE THE CIT(A). 3. CIT(A) MADE FURTHER ENQUIRY IN DETAIL AND RECONC ILED THE TRANSACTIONS AND WITHDRAWALS INDIVIDUALLY. HE NOTED THAT THERE IS NO NEXUS BETWEEN THE AMOUNT WITHDRAWN AND THE SETTLEME NT MADE BY THE AO TOWARDS THE PURCHASE OF LAND. THE CIT(A) HELD T HAT THE CREDITWORTHINESS OF THE CREDITORS AND THE GENUINENE SS OF THE TRANSACTION WAS NOT ESTABLISHED BY THE ASSESSEE AND HE JUSTIFIED THE ACTION OF THE AO FOR ADDING THE SUM OF RS. 36,16,00 0 AS UNEXPLAINED CASH CREDITS U/S 68. 4. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE IS IN A PPEAL BEFORE US AND RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LEARNED COMMISSIONER INC OME TAX (APPEALS) IS CONTRARY TO LAW AND THE FACTS. 2. THAT THE LD. CIT(A) ERRED IN SUSTAINING ADDITIO N OF RS.35.16 LAKHS AMOUNTS RECEIVED FROM THE CLIENTS FOR PURCHASE OF THEIR PLOTS, AS UNEXPLAINED CREDITS. 3. THAT THE LD CIT(A) OUGHT TO HAVE NOTED THAT IN THE PROCESS OF DEVELOPMENT OF PLOTS, SALE DEEDS IN FAVOUR OF CLIE NTS GOT DELAYED WHICH CANNOT WARRANT UNDER LAW FOR ASSESSMENT OF CLIENTS DEPOSITS FOR PLOTS AS UNEXPLAINED CREDITS OF THE ASSESSEE. 4. THAT THE LD AO HAVING HELD, THAT MAJORITY OF CR EDITORS DEPOSED THAT THEY HAD GIVEN ADVANCES IN SMALL AMOUNTS FOR PURCH ASE OF PLOTS ERRED IN DISBELIEVING THEIR CONFIRMATIONS, ON SURMISES, SUS PICION AND ON EXTRANEOUS CONSIDERATIONS. 5. THAT THE LD CIT(A) ERRED IN HOLDING THAT CLIENT CREDITORS DENIED ANY PAYMENT OF ADVANCES FOR PLOTS WHILE CLIENTS OWNED AND ADMITTED THE CORRECTNESS OF SUCH ADVANCES DIS. 131 OF THE ACT. 3 ITA NO. 1875/HYD/2014 NIMMA DURGA REDDY. 6. THAT THE AUTHORITIES BELOW FURTHER ERRED IN DIS BELIEVING AFFIDAVITS FILED BY THE CLIENTS IN CONFIRMATION OF ADVANCES M ADE FOR PURCHASE OF PLOTS AND ASSESSING SUCH ADVANCES AS UNEXPLAINED CREDITS . 7. THAT THE LD CIT(A) ERRED IN HOLDING, THAT CLIENT S DEPOSITS FOR PLOTS, WITHDRAWALS OF CASH FROM BANK, REGISTRATION OF SAL E DEEDS, REFUND OF BALANCE AMOUNT TO THE CLIENTS, HAVE NO NEXUS. THE APPELLANT CONTENDS, FINDINGS OF AUTHORITIES BELOW ARE BASED ON SURMISE S AND SUSPICION WITHOUT ANY CONTRARY EVIDENCE. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED, THE APPELLANT PRAYS THAT THE ADDITION OF RS.36.16 LAKHS KINDLY BE DELETED. 5. LD. AR SUBMITTED THAT ASSESSEE IS A COMMISSION A GENT HAVING GOOD REPUTATION AND RELIABILITY AMONG THE LAND OWNE RS AND CLIENTS, WHO ARE AGRICULTURISTS AND HAVING SMALL INCOME. HE IS SO RELIABLE THAT THE CREDITORS WILL GIVE ADVANCES TO BUY LANDS IN TH EIR NAME. SINCE, IT IS REAL ESTATE, IT TAKES SOME TIME, MORE THAN ONE YEAR TO GET REGISTRATION FORMALITIES COMPLETED. THE SUM WHICH HE HAD RECEIVE D AS ADVANCE WHICH CANNOT BE UTILIZED FOR PURCHASE OF LAND, ASSE SSEE USED TO DEPOSIT THE SAME IN BANK. LD. AR SUBMITTED THAT THE IDENTITY OF THE CREDITORS WERE PROVED THROUGH CONFIRMATION LETTERS AND DEPOSITIONS CONDUCTED BY AO. HE ALSO BROUGHT TO THE NOTICE OF T HE BENCH THE STATEMENT OF AFFAIRS OF THE ASSESSEE FOR THREE YE ARS I.E. 2010-11, 2011-12 AND 2012-13 (REFER PAPER BOOK PAGES 22, 25 & 29). ASSESSEE HAD ALREADY DECLARED THE SAME AS CREDITORS, THE STA TUS OF CREDITORS STOOD IN THE RESPECTIVE YEARS AS FOLLOWS: 1. RS. 36,16,000 IN 2010-11, 2. RS. 12,48,400/- IN 2011-12 AND 3. RS. 6,89,315/- IN 2012-13. LD. AR ALSO SUBMITTED THAT CIT(A) HAD TRIED TO MAKE NEXUS IN EACH TRANSACTION AND EXPRESSED THAT THERE IS NO NEXUS IN EVERY WITHDRAWAL. LD. AR SUBMITTED THAT EACH WITHDRAWAL CANNOT BE MAT CHED AS THE AMOUNT DRAWN AND REGISTRATION DATES MAY NOT BE SAME . CONSIDERING THE FACT THAT THE AMOUNT DRAWN MAY BE X BUT THE A MOUNT SETTLED FOR REGISTRATION MAY BE Y. IT IS NOT PRACTICAL TO COR RELATE THE FINAL SETTLEMENT WITH ACTUAL WITHDRAWAL. 4 ITA NO. 1875/HYD/2014 NIMMA DURGA REDDY. 5.1 LD. AR ALSO SUBMITTED THAT THE ASSESSEE SHOULD HAVE BEEN GIVEN OPPORTUNITY TO SUBSTANTIATE ITS CLAIM BY RELY ING ON THE JUDGMENTS OF HONBLE APEX COURT IN THE CASE OF D. YASODAMMA R EPORTED IN 70 ITR 515 AND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF S.R. VENKATA RATHAM REPORTED IN 127 ITR 807 (KAR.). HE A LSO SUBMITTED THAT THE CREDITORS, WHO WERE NOT PRESENT FOR DEPOSI TIONS CONDUCTED BY AO, CAN HAVE RIGHT TO FILE AFFIDAVITS. HE SUBMITTE D THAT AO CANNOT DRAW ADVERSE INFERENCE JUST BECAUSE THE PARTIES COU LD NOT APPEAR IN PERSON. IN PARTICULAR, THE ASSESSEE HAD PROVED THE GENUINENESS OF THE LOAN AND SUBMITTED THE IDENTITY OF THE CREDITORS. A SSESSEE ALSO FILED THE DETAILED RECEIPTS AND PAYMENTS OF THE TRANSACTI ON. HE RELIED ON THE FOLLOWING JUDGMENTS OF THE HONBLE SUPREME COUR T: 1. ANIS AHMAD & SONS VS. CIT, [2008] 297 ITR 441 2. CIT VS. ORISSA CORPORATION (P) LTD., [9860 159 ITR 78 3. MEHTA PARIKH & CO. VS. CIT, 30 ITR 181 4. LALCHAND BHAGAT AMBICA RAM VS. CIT, 37 ITR 288 6. LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE AS SESSEE IS NOT A COMMISSION AGENT IN REAL ESTATE BUSINESS AND THE P ROCEEDS RECEIVED WERE FROM THE CLIENTS. ASSESSEE HAD TO EXPLAIN EACH CREDIT IN THE BOOKS ON THE CHRONOLOGICAL ORDER. HE ALSO SUBMITTED THAT THE CREDITORS OUGHT TO HAVE PRESENT AT THE TIME OF DEPOSITIONS AN D AFFIDAVITS ARE NOT SUBSTITUTE FOR DEPOSITIONS. HE RELIES ON THE ORDERS OF CIT(A) AND AO. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDER S OF REVENUE AUTHORITIES. WE HAVE ALSO GONE THROUGH THE DECISION S CITED BY THE LD. AR. ON CAREFUL ANALYSIS OF THE WHOLE SCENARIO AND EPISODES IN THE ASSESSMENT. WE ARE OF THE VIEW THAT THE AO HAD ACCE PTED THE INCOME OFFERED BY THE ASSESSEE ON ESTIMATION IN THE CURREN T AY AND FOLLOWING AY. IT IS THE DUTY OF THE AO WHEN HE ACCEPTS THE IN COME UNDER ESTIMATION TO SEE THAT THE TURNOVER REPORTED BY THE ASSESSEE IS CORRECT. ONCE THE INCOME IS ACCEPTED UNDER PRESUMPT IVE BASIS, IT MEANS THAT THE TURNOVER REPORTED BY THE ASSESSEE AL SO CORRECT. THE 5 ITA NO. 1875/HYD/2014 NIMMA DURGA REDDY. INCOME REPORTED BY THE ASSESSEE WAS RS. 1,02,000/- THEN THE TURNOVER WOULD BE RS. 12,75,000/-. SIMILARLY FOR AY 2011-12, IT WAS RS. 1,96,000/-, THE CORRESPONDING TURNOVER WOULD BE RS. 24,50,000/-. ONCE THE ASSESSEE DECLARES INCOME UNDER PRESUMPTIVE BASIS U/S 44AD, ASSESSEE ENJOYS CERTAIN BENEFITS LIKE HE DOES NOT HAVE TO MAINTAIN BOOKS OF ACCOUNT AS REQUIRED U/S 44AA OF T HE ACT AND HE NEED NOT HAVE TO PAY ADVANCE TAX. CONSIDERING THE A BOVE FACTS, THE ASSESSEE NEED NOT HAVE TO MAINTAIN BOOKS OF ACCOUNT , HE HAD MAINTAINED ONLY THE RECEIPTS & PAYMENTS AND CREDITO RS LEDGERS. ON THE OTHER HAND, AO FOUND CREDITS IN THE BANK STATEM ENTS, WHICH IS NOT THE PART OF BOOKS OF ACCOUNT AS PER SECTION 44AA. T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAI CHAND H. GANDHI[1982] 141 ITR 67 (BOM.) HELD THAT PASS BOOK SUPPLIED BY BANK TO THE ASSESSEE CANNOT BE REGARDED AS BOOKS OF THE ASSESSEE. 7.1 THE AO HAD NOT CONSIDERED THE SUBMISSIONS OF AS SESSEE BUT MADE THE ASSESSMENT, WITHOUT GIVING PROPER OPPORTUN ITY TO THE ASSESSEE PRESUMED THAT THE CREDITS WERE UNEXPLAINED AND ADDED THE SAME U/S 68. IT IS IMPORTANT TO NOTE HERE THAT IT I S ESSENTIAL THAT TO MAKE ADDITION U/S 68, IT HAS TO BE PROVED THAT THE ASSESSEE HAD MAINTAINED PROPER BOOKS OF ACCOUNT AS HELD IN THE C ASE OF ANAND RAM RAITANI VS. CIT [1997] 223 ITR 544 (GAUHATHI). 7.2 MOREOVER, THE ASSESSEE SUBMITTED THAT HE IS RUN NING THE REAL ESTATE OPERATION FOR COMMISSION WITH THE REPUTATION AND CREDIBILITY IN THE REGION. HE WAS TRUSTED BY BOTH LANDLORDS AND BU YERS. THEY DEPOSIT THE ADVANCES WELL IN ADVANCE TO PURCHASE TH E LAND. THE SAME WAS ESTABLISHED IN THE DEPOSITION MADE U/S 131 OF THE ACT. AS PER THE OBSERVATION OF AO MAJORITY OF ALLEGED CREDITORS HAV E DEPOSED THAT THEY HAVE GIVEN AMOUNTS TO ASSESSEE IN SMALL AMOUNT S ON VARIOUS DATES. IT PROVES THAT THE ASSESSEE IN FACT IN RECEI PT OF ADVANCES FOR PURCHASE OF LANDS. IT IS ENOUGH TO PROVE THE IDENTI TY OF THE ALLEGED CREDITORS AND ALSO ESTABLISHED THAT THERE EXIST A S YSTEM OF RECEIVING ADVANCE FOR PURCHASE OF LAND IRRESPECTIVE OF THE FA CT THAT THE ALLEGED 6 ITA NO. 1875/HYD/2014 NIMMA DURGA REDDY. CREDITORS ARE SMALL AGRICULTURISTS AND THEIR EARNIN GS ARE LOW. THE FACT THAT IN DEPOSITION, MOST OF THEM CONFIRMED THAT THE Y PAID ADVANCE FOR PURCHASE OF LAND, IT SHOWS THAT THE ASSESSEE WAS DO ING THIS BUSINESS OF LAND DEALINGS FOR COMMISSION. THE AO HAD NOT BRO UGHT ANYTHING CONTRARY TO THIS EXCEPT EXPRESSING DOUBT AND PRESUM ING THAT THIS KIND OF DEALINGS NOT APPROPRIATE IN THE NORMAL COURSE OF REAL ESTATE BUSINESS. IN REALITY, THE SITUATION OR CUSTOM OF TH E REGION MAY PROMPT PEOPLE TO ADOPT THIS KIND OF BUSINESS DEALINGS. THE ONUS TO PROVE THAT THESE ARE NOT GENUINE TRANSACTIONS LIES WITH THE DE PARTMENT. HIS MAIN INCOME IS GENERATED ON SUCCESSFUL COMPLETION OF THE LAND DEAL AND HAVING RECEIPTS FROM THE ALLEGED CREDITORS. THE FUN DS MOBILIZATION IN THE BANK ACCOUNT MAY BE MORE THAN THE INCOME, IT DO ES NOT ALLOW THE AO TO PRESUME THAT ALL THE FUNDS MOVEMENTS ARE THE INCOME OF THE ASSESSEE. 7.3 CONSIDERING THE ABOVE OBSERVATIONS, WE ARE OF T HE VIEW THAT THE INCOME WAS ACCEPTED ON PRESUMPTIVE BASIS AND HAS TO EXTEND THE BENEFITS AVAILABLE IN THE PROVISIONS OF THE INCOME- TAX ACT, 1961 TO THE ASSESSEE AND PROPER OPPORTUNITY WAS NOT GIVEN TO TH E ASSESSEE TO PROVE THAT THESE ARE GENUINE TRANSACTIONS. SINCE TH E AO HAD NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THESE ARE NOT GENUINE TRANSACTION AND ASSESSEE HAD PROVED THAT THE SYSTEM OF RECEIVING ADVANCE PRIOR TO IDENTIFICATION AND REGISTRATION OF LAND AND SUBMITTED THE LEDGER COPY OF EACH TRANSACTION. WE ARE INCLINE D TO ACCEPT THE TRANSACTIONS AS GENUINE AND ALLOW THE GROUNDS RAISE D BY THE ASSESSEE. 7 ITA NO. 1875/HYD/2014 NIMMA DURGA REDDY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED:18 TH DECEMBER, 2015 KV COPY TO:- 1) SHRI NIMMA DURGA REDDY, C/O M/S KALYANDAS & CO., CAS., 15, VENKATESWARA COLONY, NARAYANAGUDA, HY DERABAD500029 2) ITO, WARD 1, SIDDIPET. 3 CIT(A)-IV, HYDERABAD 4) CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.