ITO, Ward-3, Warangal V. Ramulu Valudandi, Warangal

ITA 193/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66166 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V RAMANA RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Business income; Opportunity of being heard; Principle of natural justice; Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.193/HYD/2012 : ASSESSMENT YEAR 2007- 08 ITA NO.194/HYD/2012 : ASSESSMENT YEAR 2007-08 INCOME-TAX OFFICER, WARD-3, WARANGAL. (APPELLANT) V/S SHRI RAMULU VALUDANDI, WARANGAL. (PAN - ACYPV 7071 J ) (RESPONDENT) APPELLANT BY : SHRI V.V.RAMANA RAO RESPONDENT BY : SHRI S.RAMA RAO DATE OF HEARING 09.08.2012 DATE OF PRONOUNCEMENT 24.08.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX(A PPEALS) VI, HYDERABAD BOTH DATED 25.11.2011 FOR THE ASSESSMENT YEAR 2007-08. SINCE CONNECTED ISSUES ARE INVOLVED, THESE TWO APPE ALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.193/HYD/2012 : ASSESSMENT YEAR 2007-08 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS QUANTU M APPEAL READ AS FOLLOWS- 1. 2. THE CIT(A)S PRESUMPTION THAT CASH DEPOSITS REPR ESENTS ASSESSEES TURNOVER IS TOTALLY INCORRECT AND WITHOU T ANY BASIS, SINCE IMMEDIATE TRANSFER OF MONEY WITHDRAWAL S TO VARIOUS PARTIES IS NOT THE CRITERIA TO DETERMINE TH E CASH DEPOSIT AS BUSINESS TURNOVER. HERE, THE NATURE OF TRANSACTIONS BETWEEN THE PERSONS FROM WHOM MONEY HA S BEEN RECEIVED, ASSESSEE AND THE PERSONS TO WHOM MON EY IS TRANSFERRED IS NOT EXAMINED AND ALSO NO PROVED GENU INE. ITA NO.193 AND 194/HYD/2012 S SHRI RAMULU VALUDANDI, WARANGAL 2 3. THE CIT(A) HERSELF HAS GIVEN A CATEGORICAL FIND ING IN PARA 5 OF THE ORDER THAT THE CASH DEPOSITS ARE ASSESSEES OWN, SINCE THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE T O PROVE THAT THE CASH DEPOSITS WERE MADE BY PERSONS OTHER T HAN THE ASSESSEE. ONCE THE CIT(A) CONFIRMED THAT THE CASH DEPOSITS ARE ASSESSEES OWN, THE SAME STANDS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AS HE HAD FAILED TO PROVIDE E VIDENCE OR ESTABLISH TO WHOM THE CASH DEPOSITS BELONG. 4. THE CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MAD E BY A.O. AS THE CASH DEPOSITS STOOD UNEXPLAINED. 5. THE CIT(A) OUGHT NOT TO HAVE TREATED THE CASH DE POSITS AS TURNOVER AND RESORTED TO ESTIMATION OF INCOM E ON UNDISCLOSED TURNOVER. 6. . 5. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVING INCOME FROM WHOLE SALE CLOTH BUSINESS IN T HE NAME AND STYLE OF M/S. LALITHA TEXTILES. ASSESSEE FILED RETURN OF IN COME FOR THE ASSESSMENT YEAR 2007-08 ON 28.12.2007 ADMITTING A TOTAL INCOME OF RS.1,22,726/-. THOUGH THE SAID RETURN WAS INITIALLY PROCESSED UNDE R S.143(1) OF THE ACT, IN THE SCRUTINY ASSESSMENT THAT FOLLOWED, THE ASSE SSING OFFICER NOTICED ON VERIFICATION OF THE ASSESSEES BANK ACCOUNTS WITH H DFC BANK AND AXIS BANK THAT THERE WERE CERTAIN CASH DEPOSITS MADE ON DIFFERENT DATES TO THE EXTENT OF RS.18,75,130 IN HDFC BANK AND RS.74,57,91 1 IN AXIS BANK. AS THE ASSESSEE COULD NOT PRODUCE ANY EXPLANATION F OR SUCH CASH DEPOSITS, THE ASSESSING OFFICER PROCEEDED TO WORK O UT THE PEAK DEPOSITS AT RS.18,75,130 WITH HDFC BANK AND AT RS.67,96,611 /- WITH AXIS BANK, AND ACCORDINGLY MADE AN AGGREGATE ADDITION OF RS.86 ,71,741, TREATING THE SAME AS UNEXPLAINED INVESTMENT UNDER S.69 OF THE AC T. HE ACCORDINGLY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF RS.87 ,94,467, VIDE ORDER OF ASSESSMENT DATED 30.12.2009, PASSED UNDER S.143 (3) OF THE ACT. 6. DURING THE PROCEEDINGS BEFORE THE CIT(A), THE A SSESSEE SUBMITTED THAT IMPUGNED DEPOSITS BELONG TO OTHERS, WHO USED THE BANK ACCOUNT OF THE ASSESSEE AND THESE DEPOSITS DO NOT P ERTAIN TO THE ASSESSEE. HOWEVER, ASSESSEE COULD NOT DEMONSTRATE THE ABOVE ASSERTION ITA NO.193 AND 194/HYD/2012 S SHRI RAMULU VALUDANDI, WARANGAL 3 CONCLUSIVELY. THEREFORE, CONSIDERING THE NON-DISCH ARGE OF ONUS, THE CIT(A) ASSUMED THAT THE SAID DEPOSITS RELATE TO THE ASSESSEE ONLY. HOWEVER, SHE DID NOT APPROVE THE ADDITION MADE BY T HE ASSESSING OFFICER UNDER S.69 OF THE ACT, RATHER, INVOKED THE PRINCIP LE OF GP ADDITION OF RS.8,52,461 ON THE IMPUGNED CASH DEPOSITS, OF COURS E, ON PEAK CREDITS. ASSESSEE ACCEPTED THE DECISION OF THE CIT(A) AND TH E REVENUE RESENTS THE SAID DECISION AND CONSEQUENTLY, THE REVENUE FI LED THE PRESENT APPEAL BEFORE THE TRIBUNAL WITH THE GROUND MENTIONED ABOVE . 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE REITERA TING THE AVERMENTS MADE IN THE ABOVE GROUNDS OF THE REVENUE SUBMITTED THAT THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE DEPOSITS MADE IN THE BANK ACCOUNTS IN QUESTION REPRESENT THE BUSINESS TR ANSACTIONS OF THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE SAID CAS H DEPOSITS BELONG TO OTHERS. IN SUCH CIRCUMSTANCES, THE CIT(A) IS NOT J USTIFIED IN GRANTING RELIEF TO THE ASSESSEE ON SOME OTHER BASIS, WHICH W AS NOT RAISED BEFORE THE ASSESSING OFFICER. THE CIT(A) NEVER CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER TOO. LEARNED DEPARTMENTAL REP RESENTATIVE ARGUED THAT REVENUE SHOULD HAVE HEARD BEFORE GRANTING RELI EF ON GP BASED CONCESSIONS. 8. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE CIT(A). 9. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF T HE REVENUE AUTHORITIES, AND OTHER MATERIAL AVAILABLE ON RECORD . THE CASE OF THE REVENUE IS THAT THE CIT(A), WHO REJECTED THE ASSESS EES CONTENTION THAT THE CASH DEPOSITS BELONG TO THE ASSESSEE, SHOULD H AVE UPHELD THE ADDITION BY THE ASSESSING OFFICER, WHO INVOKED THE PROVISIONS OF S.69 OF THE ACT. THE SUSTAINING OF THE SUM OF RS.8,52,461/ - BASING ON THE GP RATE IS NOT THE CASE OF THE ASSESSEE AS IT CONSTITU TES A NEW BASIS NOT ITA NO.193 AND 194/HYD/2012 S SHRI RAMULU VALUDANDI, WARANGAL 4 RAISED BY THE ASSESSEE IN APPEAL, THAT TOO WITHOUT GRANTING REQUISITE OPPORTUNITY TO THE ASSESSING OFFICER, WHICH AMOUNTS TO VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. PER CONTRA, THE CAS E OF THE ASSESSEE IS THAT THE CIT(A)S ORDER IS JUSTIFIED AS THE SAME IS ACCE PTABLE TO HIM. 10. ON CONSIDERING THE RIVAL VIEW POINTS, WE FIND THAT THE ASSESSEES SUBMISSIONS REVOLVED AROUND THE ARGUMENT THAT THE IMPUGNED CASH CREDITS IN THE BANK ACCOUNT BELONG TO OTHERS AND NOT TO THE ASSESSEE, MEANING THEREBY, THAT THEY ARE UNCONNECTE D AND NOT FLOWN FROM THE ASSESSEES BUSINESS. IT IS IN FACT THE SE T PRINCIPLE THAT IT IS THE ASSESSEE, WHO SHOULD DEMONSTRATE THE SOURCE OF THE SAID CREDITS, WHETHER THEY BELONG TO THE OTHERS, WHO ARE NOT IDENTIFIED OR THE BUSINESS OF THE ASSESSEE, WHICH IS ALSO NOT CONCLUSIVELY PROVED. I N SUCH FACTUAL MATRIX, THE DECISION OF THE CIT(A), IN GRANTING SUBSTANTIAL RELIEF, WITHOUT ANY EVIDENCE, IN OUR OPINION, IS PREMATURED AND UNSUSTA INABLE. WE HAVE PERUSED PARA 5 OF THE IMPUGNED ORDER AND FIND THAT THE CIT(A) HAS NOT PASSED A SPEAKING ORDER, WHILE CONCLUDING THAT THE DEPOSITS IN BANK ACCOUNTS IN QUESTION REPRESENTS THE BUSINESS TRANSA CTIONS OF THE ASSESSEE AND CONSEQUENTLY IT CONSTITUTES ITS SUPPRESSED TURN OVER. THIS CONCLUSION IS ARRIVED AT BASED ON PRESUMPTIONS AND NOT EVIDENC ES. THE CIT(A)S INFERENCE OR CONCLUSION THAT THE CASH DEPOSITS IN THE BANK SHOULD BE TAKEN AS BUSINESS RECEIPTS OF THE ASSESSEE ARE PREM ATURED IN VIEW OF THE ASSESSEES ASSERTION THAT THE SAID DEPOSITS BELONG TO OTHERS, WHICH HAS NOT BEEN CONFIRMED BY HIM DURING THE PROCEEDINGS B EFORE THE LOWER AUTHORITIES. THE ISSUE HERE IS WHO IS THE OWNER O F THESE CREDITS AND THE SOURCE OF THE SAME. THE ASSESSING OFFICER EXAMINED ONLY THE ISSUE OF OWNERSHIP AND NEVER TRAVELLED INTO THE FACTS RELA TING TO THE SOURCE OF THE SAME. WHEN SUCH FACT WAS NOT EXAMINED BY THE ASSESS ING OFFICER, IN THE ORDINARY COURSE, THE CIT(A) SHOULD HAVE CALLED FOR A REMAND REPORT ON THAT ASPECT OF THE SOURCE BEFORE COMING TO THE CON CLUSION THAT THE SAME HAS GENESIS IN THE BUSINESS OF THE ASSESSEE. IN TH ESE FACTS AND ITA NO.193 AND 194/HYD/2012 S SHRI RAMULU VALUDANDI, WARANGAL 5 CIRCUMSTANCES OF THE CASE, THE CIT(A) IS NOT JUSTIF IED IN BRUSHING ASIDE THE APPLICABILITY OF THE PROVISIONS OF S.69 OF THE ACT, WHEN THE ASSESSEE FAILED TO DISCHARGE ITS ONUS. AT THE SAME TIME, WE DO NOT WANT TO ARRIVE AT HASTY CONCLUSIONS WITHOUT GRANTING REASONABLE OPPORTUNITY OF BEING HEARD TO THE PARTIES ON THE NEWLY INCORPORATED BASIS RELATING T O THE G.P. THEREFORE, IN ALL FAIRNESS TO THE PARTIES, WE SET ASIDE THE ORDER OF THE CIT(A), WHO SHOULD PASS A SPEAKING ORDER. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO DISPOSE OFF THE APPEAL AFRESH, DULY DISCUSSING THE CONTENTIONS OF THE ASSESSEE BEFORE HIM AND DISPOSING OFF THE ISSUES IN VOLVED IN THE MATTER, BY PASSING A SPEAKING ORDER IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY FOE HARING TO THE ASSESSEE. 11. IN THE RESULT, REVENUES APPEAL ITA NO.193/HYD /2012 IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.194/HYD/2012 : ASSESSMENT YEAR 2007-08 12. EFFECTIVE GROUND OF THE REVENUE IN THIS APPEAL , FILED IN THE CONTEXT OF RELIEF GRANTED BY THE CIT(A) OUT OF PENA LTY LEVIED BY THE ASSESSING OFFICER UNDER S.271(1)(C) OF THE ACT, REA D AS FOLLOWS- 1. 2. THE CIT(A) HERSELF HAS GIVEN A CATEGORICAL FINDI NG IN PARA 5 OF THE ORDER THAT THE CASH DEPOSITS ARE ASSESSEES OWN, SINCE THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE T O PROVE THAT THE CASH DEPOSITS WERE MADE BY PERSONS OTHER T HAN THE ASSESSEE. ONCE THE CIT(A) CONFIRMED THAT THE CASH DEPOSITS ARE ASSESSEES OWN, THE SAME STANDS UNEXPLAINED IN THE HANDS OF THE ASSESSEE AS HE HAD FAILED TO PROVIDE E VIDENCE OR ESTABLISH TO WHOM THE CASH DEPOSITS BELONG. 3. THE CIT(A) OUGHT TO HAVE UPHELD THE PENALTY LEVI ED U/S. 271(1)((C) BY THE A.O. IN TOTO SINCE THE IDENTITY A ND SOURCE OF CASH DEPOSITS ARE NOT PROVED. 4. . ITA NO.193 AND 194/HYD/2012 S SHRI RAMULU VALUDANDI, WARANGAL 6 13. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. RS.86,71,741, TREATING THE SAME AS UNE XPLAINED INVDSTEMENT UNDER S.69 OF THE ACT. WHILE COMPLETING THE ASSESS MENT ON A TOTAL INCOME OF RS.87,94,467, VIDE ORDER OF ASSESSMENT D ATED 30.12.2009, ASSESSING OFFICER PASSED ORDER UNDER S.143(3) OF TH E ACT, AS STATED ABOVE. WHILE NARRATING THE FACTS OF THE CASE IN THE CONTEXT OF QUANTUM APPEAL, ITA NO.194/HYD/2012, THE ASSESSING OFFICER INITIATED THE PROCEEDINGS, DULY ISSUING NOTICE UNDER S.271(1)(C) OF THE ACT, AND IN THE ABSENCE OF NO EXPLANATION FROM THE ASSESSEE TO THE PENALTY NOTICE, CONSIDERING THE FACTS OF THE CASE, THE ASSESSING OF FICER IMPOSED A PENALTY OF RS.29,01,800/- UNDER S.271(1)(C) WITH REFERENCE TO THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.86,71,741 M ADE BY HIM, VIDE ORDER OF PENALTY DATED 30.6.2010. ON APPEAL, THE C IT(A), FOLLOWING HIS ORDER IN THE QUANTUM PROCEEDINGS, DIRECTED THE ASSE SSING OFFICER TO RECOMPUTE THE PENALTY UNDER S.271(1)(C) WITH REFERE NCE TO THE ADDITION OF RS.8,52,461 SUSTAINED BY HIM. ON THE SAID QUAN TUM APPEAL, WE HAVE CONSIDERED TO REMAND THE MATTER TO THE CIT(A) WITH CERTAIN DIRECTIONS AND ALLOWED THE QUANTUM APPEAL FOR STATISTICAL PURPOSES . IN VIEW OF OUR FINDINGS IN THE CONTEXT OF QUANTUM APPEAL, VIZ. ITA NO.193/HYD/2012, WHEREBY WE SET ASIDE THE ORDER OF THE CIT(A), WE SE T ASIDE THE ORDER IMPUGNED IN THE PRESENT PENALTY APPEAL AS WELL, AND RESTORE THE MATTER TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE T HE SAME AFRESH, IN CONSONANCE WITH THE VIEW THAT MAY BE TAKEN IN THE C ONTEXT OF THE QUANTUM APPEAL. THE CIT(A) SHALL RE-DECIDE THE PEN ALTY APPEAL ALSO AFRESH IN ACCORDANCE WITH LAW AND BY PASSING A SPEA KING ORDER DULY DISCUSSING THE VARIOUS CONTENTIONS OF THE ASSESSEE BEFORE HER, AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 14. IN THE RESULT, REVENUES APPEAL ITA NO.194/HYD /2012 IS ALSO ALLOWED FOR STATISTICAL PURPOSES. ITA NO.193 AND 194/HYD/2012 S SHRI RAMULU VALUDANDI, WARANGAL 7 15. TO SUM UP, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 24 TH AUGUST, 2012 SD/- SD/- ( ASHA VIJAYARAGHAVAN) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 24 TH AUGUST, 2012 COPY FORWARDED TO: 1. SHRI RAMULU VALUDANDI, H.NO.16 - 6 - 46, PERUKAWADA, WARANGAL. 2. 3. INCOME - TAX OFFICER, WARD - 3 , WARANGAL COMMISSIONER OF INCOME-TAX(APPEALS) VI, HYDERABAD 4. COMMISSIONER OF INCOME-TAX V, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.