Manne Srinivas Rao, Hyderabad V. ITO, Ward-12(4), Hyderabad, Hyderabad

ITA 1912/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2553 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: R D BHUTODA RAMDEV
• Keywords: Unexplained investment; Opportunity of being heard
• Section: 143(3)

Judgement Text

ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1912/HYD/2014 (ASSESSMENT YEAR: 2010-11) SHRI MANNE SRINIVAS RAO HYDERABAD PAN: ANSPM 3871 G VS INCOME TAX OFFICER WARD 12(4) HYDERABAD FOR ASSESSEE : SHRI R.D. BHUTODA RAMDEV FOR REVENUE : SMT. SUMAN MALIK, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2010-11 AGAIN ST THE ORDER OF THE CIT (A)-II HYDERABAD DATED 29.09.2 014. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE CIT (A) IN CONFIRMING THE ADDITIONS MADE BY THE AO. THE GROUND S RAISED BY THE ASSESSEE ARE AS UNDER: 1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LEARNED AO HAS ERRED IN TREATING THE ENTIRE CASH DEPOSITS OF RS. 15,01,000/- IN ASSESSEES BANK ACCOUNT AS FROM UNEXPLAINED SOURCES AND ADDING THE SAME TO THE RETURNED INCOME DESPITE OF THE FACT THAT ASSESSEE HAS EXPLAINED THE SOURCES AND FURNISHED THE EVIDENCES THERE FOR AS BEING COLLECTION FROM CUSTOMERS. (2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LEARNED AO HAS ERRED IN DATE OF HEARING : 02.03.2017 DATE OF PRONOUNCEMENT : 26.04.2017 ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 2 OF 7 TREATING S. 32,00,000/= AS UNEXPLAINED INVESTMENT AND ADDING THE SAME TO THE RETURNED INCOME DESPITE OF THE FACT THAT THE ASSESSEE HAS FURNISHED FULL DETAILS AND EVIDENCES REGARDING SOURCES AND HAS FACTUALLY CONTRIBUTED ONLY RS. 18,50,000/- CAPITAL IN FILMORS AND NOT RS. 32,00,000/- AS PRESUMED BY THE LEARNED AO. (3) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE LEARNED CIT (APPEALS) - II, HAS FAILED TO JUSTIFY HER APPREHENSIONS AND HAS FORMED OPINION WITHOUT FINDING TENABLE FAULT IN THE EXPLANATIONS SUBMITTED BY THE ASSESSEE. (4) ANY OTHER GROUND AS MAY BE RAISED DURING THE PROCEEDINGS OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE A.Y 2 010-11 ON 11.10.2010 DECLARING A TOTAL TAXABLE INCOME OF RS.3 ,87,000. THE RETURN WAS SELECTED FOR SCRUTINY AS PER CASS AND NO TICE U/S 143(2) WAS ACCORDINGLY ISSUED. MEANWHILE, THE AO RE CEIVED AIR INFORMATION THAT THE ASSESSEE HAS MADE CASH DEPOSIT S INTO HIS SAVINGS BANK ACCOUNTS TO THE TUNE OF RS.15,01,000 D URING THE FINANCIAL YEAR 2009-10 RELEVANT TO THE A.Y 2010-11. DURING THE PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCES FOR THE DEPOSITS INTO HIS SAVIN GS BANK ACCOUNT. THE ASSESSEE SUBMITTED THAT M/S SAMARITAN AGENCIES WAS A PROPRIETARY CONCERN OF THE ASSESSEE WHICH WAS LATER CONVERTED TO A PARTNERSHIP FIRM W.E.F. 1-4-2008. HE SUBMITTED THAT THE CUSTOMERS OF M/S. SAMARITAN AGENCIES WERE DEALING WITH THE ASSESSEE ALONE AND INSPITE OF CONVERSION INTO A PARTNERSHIP FIRM, THE DEBTORS WERE PAYING THE AMOUNTS DUE TO M/ S. SAMARITAN ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 3 OF 7 AGENCIES TO THE ASSESSEE THROUGH CHEQUES WHICH WERE DEPOSITED INTO THE ASSESSEES SAVINGS BANK A/C AND THAT THE A SSESSEE WAS WITHDRAWING THE SAME ON DIFFERENT DATES AND DEPOSIT ING THE SAME INTO HIS BANK A/C AS CASH DEPOSIT AND THEN PAYING B ACK TO M/S. SAMARITAN AGENCIES THROUGH CHEQUES/CASH AS THE ASSE SSEES CONTRIBUTION TOWARDS HIS CAPITAL. IT WAS ALSO SUBMI TTED THAT NO REPAYMENT HAS BEEN MADE TO THE FIRM M/S. SAMARITAN AGENCIES TOWARDS DEBTORS. THE AO, VIDE SHOW CAUSE NOTICE DAT ED 20.02.2013 ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE DEBTORS DID NOT PAY DIRECTLY TO THE FIRM BY WAY OF CHEQUES AND AS TO WHY THE AMOUNT BELONGING TO THE FIRM WAS INTRODUCED AS ASSESSEES CAPITAL IN THE FIRM AND WHETHER THE ASSESSEE WAS RE CEIVING ANY INTEREST ON THE CAPITAL OF THE ASSESSEE. THE ASSESS EE, VIDE LETTER DATED 14.3.2013 SUBMITTED THE PARTNERSHIP FIRM WAS STARTED W.E.F. 4.5.2009 AND THAT THE CUSTOMERS OF THE FIRM WHO WER E SMALL TIME TRADERS USUALLY MADE PAYMENTS IN CASH AND ALSO BY C HEQUES AND THAT THE ASSESSEE HAD KEPT THE CASH WITH HIM FOR SO ME TIME TO TAKE CARE OF HIS PERSONAL REQUIREMENTS AND SUBSEQUE NTLY DEPOSITED INTO THE FIRMS ACCOUNT. IT WAS ALSO SUBM ITTED THAT THE AMOUNT RECEIVED FROM THE DEBTORS BY THE ASSESSEE IS REFLECTED IN THE BOOKS OF THE FIRM AND IT IS SHOWN AS PAYABLE IN ASSESSEES BOOKS OF ACCOUNT. THE ASSESSEE ALSO SUBMITTED THE C ONFIRMATION LETTER FROM THE FIRM IN THIS REGARD. 3. THE AO WAS NOT CONVINCED WITH THE ASSESSEES CONTENTIONS AND TREATED THE ENTIRE DEPOSITS AS UNEX PLAINED CASH DEPOSITS AND BROUGHT IT TO TAX. ON APPEAL, THE CIT (A) CONFIRMED THE ADDITION BY HOLDING THAT THE ASSESSEE HAS NOT S ATISFACTORILY ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 4 OF 7 EXPLAINED THE SOURCES FOR THE DEPOSIT ALONG WITH NE CESSARY EVIDENCE. AGGRIEVED, THE ASSESSEE IS IN SECOND APP EAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW, WHILE THE LEARNED DR SUPPORTED THE ORDERS OF THE AU THORITIES. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT UNDISPUTEDLY THE ASSESSEE H AD DEPOSITED CASH INTO HIS BANK ACCOUNT AND HAS EXPLAINED THE SO URCE TO BE THE PAYMENTS RECEIVED FROM THE DEBTORS OF THE FIRM. SINCE THE ASSESSEE WAS THE PROPRIETOR OF THE BUSINESS PRIOR T O ITS CONVERSION INTO A PARTNERSHIP FIRM AND SINCE HE CONTINUES TO B E THE MANAGING PARTNER OF THE FIRM, WE ARE INCLINED TO ACCEPT THE ASSESSEES CONTENTIONS THAT THE DEBTORS OF THE FIRM ISSUED CHE QUES IN HIS NAME OR THAT THEY PAID IN CASH TO THE ASSESSEE. THE ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THIS AMOUNT WAS SHOWN IN THE BOOKS OF THE FIRM AS LOANS AND ADVANCES, WHILE IT I S SHOWN AS PAYABLE IN THE ASSESSEES BOOKS OF ACCOUNT. THIS CO NTENTION OF THE ASSESSEE HAS NOT BEEN VERIFIED BY ANY OF THE AUTHOR ITIES BELOW. THE AO HAS BRUSHED IT ASIDE ON THE GROUND THAT THE COPIES OF THE LEDGER EXTRACTS ARE PREPARED BY THE ASSESSEE HIMSEL F/THE FIRM AS PER HIS/THEIR CONVENIENCE AND THEREFORE NOT RELIABL E. THE ASSESSEE HAS FILED THE COPY OF THE PARTNERSHIP DEED AND WE F IND THAT THE PARTNERS INDUCTED ARE NOT IN ANY WAY RELATED TO THE ASSESSEE AND ALSO THEY ARE ENTITLED TO EQUAL SHARE OF PROFIT AS THE ASSESSEE. IN SUCH CIRCUMSTANCES, IT CANNOT BE HELD THAT THE BOOK S OF THE FIRM ARE PREPARED AS PER THE CONVENIENCE OF THE ASSESSEE . THEREFORE, WE ARE OF THE OPINION THAT THE BOOKS OF THE ASSESSEE A RE TO BE ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 5 OF 7 COMPARED WITH THE ENTRIES IN THE BOOKS OF THE FIRM, PARTICULARLY WITH REGARD TO THE DEBTORS, BEFORE COMING TO ANY CO NCLUSION ABOUT THE ACCEPTABILITY OF ASSESSEES CONTENTION. WITHOUT THIS EXERCISE, IN OUR OPINION, THE ADDITION IS NOT SUSTAINABLE. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMAND THIS ISSU E TO THE FILE OF THE AO FOR RE-EXAMINATION DE NOVO IN ACCORDANCE WIT H LAW. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVE N A FAIR OPPORTUNITY OF BEING HEARD. THUS, GROUND OF APPEAL NO.1 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. THE OTHER ADDITION CHALLENGED BEFORE US IS THE UNEXPLAINED INVESTMENT OF RS.32,00,000 IN M/S. FILMO RS LTD. ACCORDING TO THE ASSESSEE, HE HAS CONTRIBUTED ONLY RS.18,50,000 AND NOT RS.32,00,000 AS PRESUMED BY THE AO. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW WHILE THE LEARNED DR SUPPORTED THEIR ORDERS. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE BECAME A PARTN ER IN M/S. FILMOR ON ACCOUNT OF A RECONSTITUTION OF THE FIRM W. E.F. 1.4.2009. THE AO FOUND THAT DURING THE YEAR, THE ASSESSEE HAS INTRODUCED A CAPITAL OF RS.32.00 LAKHS DURING THE YEAR AND REQUI RED THE ASSESSEE TO EXPLAIN THE SOURCES FOR SUCH CAPITAL. T HE ASSESSEE EXPLAINED THAT THE TRANSACTIONS DONE WITH M/S. FILMO RS DURING THE YEAR IS RS.32.00 LAKHS BUT THE NET INVESTMENT I S ONLY RS.18,50,000. THE SOURCE FOR THIS INVESTMENT WAS EX PLAINED AS THE AMOUNT RECEIVED FROM VARIOUS DEBTORS OF M/S. SA MARITANS ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 6 OF 7 AGENCIES ON VARIOUS DATES BY THE ASSESSEE. THE AO D ID NOT ACCEPT THE ASSESSEES CONTENTIONS BECAUSE IN THE AUDITED B OOKS OF M/S. FILMORS, THE CAPITAL INTRODUCED BY THE ASSESSEE IS S HOWN TO BE RS.32.00 LAKHS. HE ALSO HAS NOT ACCEPTED THE ASSESS EES CONTENTIONS AS REGARDS THE SOURCE OF THE DEPOSIT AS WELL. WE FIND THAT THE CIT (A) HAS REPRODUCED THE CAPITAL ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. FILMORS WHEREIN THE CA PITAL BROUGHT IN IS SHOWN AS RS.32.00 LAKHS AND THE OPENING BALAN CE IS SHOWN AS NIL AND THE CLOSING BALANCE AT RS.19,32,370.50 . AS PER THE PARTNERSHIP DEED, ALL THE PARTNERS HAVE EQUAL SHARI NG RATIO AND IT IS SEEN THAT THE OTHER PARTNERS WHO HAVE JOINED THE FIRM ALONG WITH THE ASSESSEE HAVE INTRODUCED RS.18,50,000/- EA CH AND THERE ARE WITHDRAWALS BY THEM TOO. THE AO HAS SOUGHT EXPL ANATION FOR THE CAPITAL INTRODUCED AND WE SEE NO REASON TO INTE RFERE WITH THE FINDINGS OF THE AUTHORITIES BELOW AS SUCH FINDINGS ARE BASED ON THE AUDITED BOOKS OF THE FIRM M/S FILMORS. AS REGARD S THE SOURCE FOR SUCH CAPITAL, WE ARE OF THE OPINION THAT THIS N EEDS RE- VERIFICATION, AS WE HAVE REMANDED THE ISSUE OF THE SOURCES FOR THE CASH DEPOSITS TO THE AO TO VERIFY THE BOOKS OF M/S. SAMARITAN AGENCIES AND THE BANK DEPOSITS TO SEE WHETHER THE A SSESSEE WAS IN FACT IN RECEIPT OF THE PAYMENTS FROM THE DEBTORS OF M/S. SAMARITAN AGENCIES. THE AO, THEREFORE, SHALL ALSO E XAMINE IF THE ASSESSEE WAS IN RECEIPT OF THE AMOUNTS FROM THE DEB TORS OF M/S. SAMARITAN AGENCIES, THE AMOUNT WHICH WAS COLLECTED AND WHETHER IT WAS SUFFICIENT SOURCE FOR BOTH CASH DEPOSITS AS WELL AS THE CAPITAL INTRODUCTION IN M/S. FILMORS. THIS GROUND O F APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSES ONLY WITH REGARD TO THE SOURCE OF THE CAPITAL. ITA NO 1912 OF 2014 MANNE S RINIVAS RAO HYDERABAD PAGE 7 OF 7 9. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL, 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 26 TH APRIL, 2017. VINODAN/SPS COPY TO: 1 SHRI MANNE SRINIVAS RAO, C/O SRI SARVESH SOMANI, CA, 403, QUEENS COURT APARTMENTS, STREET NO.19, HIMAYATNAGAR , HYDERABAD 500029 2 INCOME TAX OFFICER WARD 12(4) HYDERABAD 3 CIT (A)-II HYDERABAD 4 CIT I HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER