Sai Ram Murthy Konduri, Hyderabad V. Income Tax Officer, Ward-15(1), Hyderabad

ITA 2194/Hyd/2017

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7458 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 11-01-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation; Opportunity of being heard
• Section: 143(3); 201; 143(2); 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU , ACCOUNTANT MEMBER (THROUGH VIRTUAL CONFERENCE) S. NO. ITA NO. AY APPELLANT RESPONDENT 1 2194/H/2017 2013 - 14 SAI RAM MURTHY KONDURI, HYDERABAD. PAN - CDDPK 1262N INCOME - TAX OFFICER, WARD 15(1), HYDERABAD. DATE OF HEARING : 1 1 - 0 1 - 20 2 1 DATE OF PRONOUNCEMENT : 20 - 01 - 20 2 1 O R D E R PER LAXMI PRASAD SAHU, A .M. : T H IS IS AN APPEAL FILED BY THE ASSESSE E DIRECTED AGAINST THE ORDER OF CIT(A) 7 , HYDERABAD, DATED 1 5 / 0 9 / 201 7 RELATING TO AY 20 1 3 - 1 4 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE APPELLATE COMMISSIONER IS CONTRARY TO THE LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING AN AMOUNT OF RS.1,80,00,000 / - AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE INCOME TAX ACT, AS ADDED BY THE A. O 3. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING AN AMOUNT OF RS.34,59,182 / - AS UNEXPLAINED INVESTMENTS U/S.69 OF THE INCOME TAX ACT, AS ADDED BY THE A. O. FOR ASSESSEE : SHRI A. SRIRAM FOR REVENUE : SHR I SUNIL KUMAR PANDEY ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 2 - : 4. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING AN AMOUNT OF RS.17 ,6401 - BEIN G DEPRECIATION CLAIMED BY THE ASSESSEE AND DISALLOWED BY THE A. O 5. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING AN AMOUNT OF RS.24,0001 - BEING DISALLOWANCE U/S.80GG AS DISALLOWED BY THE A.O 6. THE APPELLATE COMMISSIONER ERRED IN CONFIRMING AN AMOUNT OF RS.4,16,129 / - BEING EXPENSES CLAIMED BY THE ASSESSEE AND DISALL OWED BY THE A.O 7. ANY OTHER GROUNDS WHICH THE APPELLANT MAY URGE EITHER BEFORE OR AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRADING IN MS STEEL, MS ANGLES AND OTHER RELATED PRO DUCTS, FILED HIS RETURN OF INCOME FOR THE AY 2013 - 14 ON 30/09/2013 ADMITTING TOTAL INCOME OF RS. 9,98,500/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND A NOTICE U/S 143(2) DATED 12/09/2014 WAS ISSUED AND SERVED ON THE ASSESSEE ON 15/0 9/2014. SUBSEQUENTLY, IN RESPONSE TO THE NOTICES ISSUED U/S 143(2) AND 142(1), THE AR OF THE ASSESSEE SUBMITTED THE INFORMATION S . 2. THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT DETERMINING THE ASSESSED INCOME AT RS. 67,13,711/ - BY MAKING VARIOU S ADDITIONS/DISALLOWANCES. 3. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 3 - : 4. AGAINST THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE ASSESSEE HAS RAISE D 7 GROUNDS OF APPEAL, OUT OF WHICH GROUND NOS. 1 & 7 ARE GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NOS. 4 & 5, THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 7. AS REGARDS G ROUND NO. 2 REGARDING ADDITION OF RS. 1,80,00,000/ - U/S 68 OF THE ACT TOWARDS UNEXPLAINED CASH CREDITS, FROM THE PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE IS IN RECEIPT OF UNSECURED LOANS AMOUNTING TO RS. 1.80 CRORES FR OM THREE PARTIES, VIZ., M/S CANDID WEALTH MANAGEMENT PVT. LTD., NEW DELHI, - RS. 90 LAKHS, FROM M/S SAFARI TRADEX PVT. LTD., NEW DELHI, - RS. 30 LAKHS, AND FROM M/S WIZARD REALCON PVT. LTD., NEW DELHI RS. 60 LAKHS. WHEN THE ASSESSEE WAS ASKED TO FURNI SH CONFIRMATIONS OF THE LOAN CREDITORS ALONG WITH THEIR INCOME - TAX PARTICULARS, THE ASSESSEE FILED LEDGER EXTRACTS OF THE LOAN CREDITORS WITH THEIR SIGNATURE OBTAINED FORM THEM ON THE EXTRACTS AND ALSO FILED NAME, ADDRESS AND PAN OF THE PARTIES . ON VERIFIC ATION OF THE LEDGER EXTRACTS, THE AO FOUND THAT ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 4 - : THE ASSESSEE HAD NOT PAID ANY INTEREST ON THE SAID BORROWINGS OF RS. 1.80 CRORES. IN ORDER TO VERIFY THE IDENTITY OF THE CREDITORS, CAPACITY OF THE CREDITORS TO ADVANCE MONEY AND GENUINENESS OF THE TRANSACTIO N, THE AO ISSUED LETTERS TO ALL THE LOAN CREDITORS AS PER THE ADDRESS GIVEN BY THE ASSESSEE, HOWEVER, THE LETTERS WRITTEN TO THE LOAN CREDITORS WERE RETURNED UNSERVED BY THE POSTAL AUTHORITIES WITH THE REMARK THAT NO SUCH FIRM IS AVAILABLE. HENCE, THE AO A SKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE UNSECURED LOANS CLAIMED TO HAVE BEEN RECEIVED BY HIM SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDITORS. IN RESPONSE, THE ASSESSEE VIDE LETTERS DATED 28/03/2016, SUBMITTED COPIES OF CONFIRMATION LETTERS FROM T HE ABOVE SAID LOAN CREDITORS ALONG WITH THEIR BANK ACCOUNT STATEMENTS. ON VERIFICATION OF THE SAME, THE AO OBSERVED THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY OF THE LOAN CREDITORS, GENUINENESS OF THE LOAN TRANSACTION AND CREDIT WORTHINESS OF T HE LOAN CREDITORS AND, THEREFORE, TREATED THE UNSECURED LOANS OF RS. 1.80 CRORES AS UNEXPLAINED CASH CREDITS OF THE ASSESSEE U/S 68 OF THE ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THE CIT(A) CONFIRMED THE SAID ADDITION. 7.1 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FILED A PAPER BOOK CONTAINING 97 PAGES, CONSISTING OF FINANCIAL STATEMENTS, CONFIRMATIONS AND BANK STATEMENTS OF LOAN CREDITORS ETC. AS WELL AS BALANCE SHEET, PROFIT & LOSS ACCOUNT AND TAX AUDIT REPORT OF THE ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 5 - : ASSESSEE. REFERRI NG TO THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT , THOUGH , THE ASSESSEE HAS FILED ALL THE DOCUMENTARY EVIDENCE AS ABOVE , WHICH ESTABLISHED THE IDENTITY OF THE LOAN CREDITORS, GENUINENESS OF THE LOAN TRANSACTIONS AND CREDIT WORTHINESS OF THE LOAN CREDITORS, THE LOWER AUTHORITIES WERE NOT APPRECIATED THE SAME AND DOUBTED THE TRANSACTIONS AND MADE THE ADDITION. HE, THEREFORE, PLEADED THAT THE ISSUE MAY BE REMITTED BACK TO THE FILE OF THE AO FOR REVERIFICATION OF THE DOCUMENTS FILED BY THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 7.2 THE LD. DR HAS NO OBJECTION TO REMIT THE MATTER BACK TO THE FILE OF THE AO. 7.3 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AS WELL AS GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE, WE ARE INCLINED TO REMIT THIS ISSUE BAC K TO THE FILE OF AO TO VERIFY THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE , WHICH ARE PLACED ON RECORD; THE AO IS ALSO DIRECTED TO VERIFY THE COMPANYS MASTER DATA FROM ROC OF LENDERS COMPANIES REGARDING THEIR AUTHORISED CAPITAL SHOWN IN THE BALANCE SHEET AS WEL L AS ASSESSEES SUBMISSIONS AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AT THE SAME TIME, WE DIRECT THE ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 6 - : ASSESSEE ALSO TO FILE ALL THE RELEVANT INFORMATION BEFORE THE AO AND, IF NECESSAR Y, PRODUCE THE LOAN CREDITORS BEFORE THE AO FOR VERIFICATION, AS PER THE DIRECTIONS OF THE AO, IN ORDER TO VERIFY IN THE LIGHT OF THE PROVISIONS OF SECTION 68 OF THE ACT. 8. AS REGARDS GROUND NO. 3 REGARDING THE ADDITION OF RS. 34,59,182/ - U/S 69 OF THE ACT TOWARDS UNEXPLAINED INVESTMENT, FROM THE PERUSAL OF THE BALANCE SHEET, THE AO NOTICED THAT THE ASSESSEE HAD SHOWN OPENING BALANCE OF CAPITAL AS ON 01/06/2012 AT RS. 29,26,5 00/ - AND DURING THE YEAR ADDITIONS TO CAPITAL WERE SHOWN AT RS. 5,32,682/ - , TOTALLING TO RS. 34,59,182/ - . WHEN ASKED TO EXPLAIN THE SOURCES FOR THE INVESTMENT ALONG WITH NECESSARY DOCUMENTARY EVIDENCE, THE ASSESSEE VIDE HIS LETTER DATED 28/03/2016 HAS STAT ED THAT THE CAPITAL WAS INVESTED OUT OF HIS PAST SAVINGS. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCES FOR THE INVESTMENT OF CAPITAL OF RS. 34,59,182/ - , THE AO TREATED THE SAME AS UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S 69 OF THE ACT AND ADDED THE S AME TO THE TOTAL INCOME OF THE ASSESSEE. 8.1 THE CIT(A) CONFIRMED THE ADDITION BY HOLDING THAT NO DOCUMENTARY EVIDENCE WAS FURNISHED EVEN BEFORE HIM TO PROVE THE SOURCE OF CAPITAL INTRODUCED. ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 7 - : 8.2 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSI ONS AS MADE IN GROUND NO. 2 THAT THE LOWER AUTHORITIES FAILED TO CONSIDER THE EXPLANATION OFFERED BY THE ASSESSEE AND, HE REQUESTED TO REMIT THE ISSUE BACK TO THE FILE OF THE AO TO REDECIDE THE SAME, FOR WHICH, THE LD. DR HAS NO OBJECTION. 8.3 AFTER CONS IDERING THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW, WE REMIT THIS ISSUE ALSO BACK TO THE FILE OF THE AO WITH A DIRECTION TO REDECIDE THE ISSUE AFTER TAKING INTO CONSIDERATION THE S UBMISSIONS OF THE ASSESSEE. THE ASSESSEE IS DIRECTED TO SUBMIT THE DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CASE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. 9. AS REGARDS GROUND NO. 6 REGARDING DISALLOWANCE OF EXPENDITURE RS. 4,16,129/ - TOWARDS HAMALI EXPENSES, HAMALI LOADING & UNLOADING AND TRANSPORT CHARGES, FROM THE PERUSAL OF P&L ACCOUNT, THE AO FOUND THAT THE ASSESSEE DEBITED EXPENDITURE UNDER THE HEADS HAMALI EXPENSES AT RS. 51,618/ - , HAMALI LOADING AT RS. 21,02,213/ - , HAMALI LOADING AT RS. 7,83,5 28/ - AND TRANSPORT CHARGES AT RS. 12,23,933/ - , TOTALING TO RS. 41,61,292/ - . ON VERIFICATION OF THE BILLS AND VOUCHERS, THE AO NOTICED THAT SOME OF THE VOUCHERS WERE SELF - MADE AND NOT SUPPORTED BY PROPER BILLS AND SUFFERS FROM CERTAIN DEFECTS SUCH AS NAME OF THE PAYEE NOT ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 8 - : MENTIONED, NO SIGNATURES WERE OBTAINED ETC., AND THE SAME WERE NOT AMENABLE FOR VERIFICATION. HE, THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY IN VIEW OF THE ABOVE DEFECTS, 10% OF THE ABOVE EXPENSES SHOULD NOT BE DISALLOWED, FOR W HICH THERE WAS NO REPLY FROM THE ASSESSEE. HE, THEREFORE, DISALLOWED 10% OF THE ABOVE EXPENSES OF RS. 41,61,292/ - , WHICH WORKED OUT TO RS. 4,16,129/ - . ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE. 9.1 AFTER HEARING BOTH THE PARTIES, WE ARE OF THE VIE W THAT THE AO HAS ACCEPTED THE EXPENDITURE INCURRED BY THE ASSESSEE UNDER THE SAID HEADS, BUT, DISALLOWED 10% ON THE GROUND OF SOME OF THE VOUCHERS WERE SELF - MADE AND NOT SUPPORTED BY PROPER BILLS. TO MEET THE ENDS OF JUSTICE, WE HEREBY RESTRICT THE DISALL OWANCE TO 5% OF TOTAL EXPENDITURE, INSTEAD OF 10% OF TOTAL EXPENDITURE MADE BY THE AO AND CONFIRMED BY THE CIT(A). ACCORDINGLY, THIS GROUND IS PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUN CED IN THE OPEN COURT ON 20 TH JANUARY, 2021 S D/ - SD/ - ( P. MADHAVI DEVI ) ( LAXMI PRASAD SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDE RABAD, DATED : 20 TH JANUARY, 20 2 1 K V ITA NO. 2194 /HYD/1 7 SAI RAM MURTHY KONDURI, HYD. : - 9 - : C OPY TO : 1 SRI SAI RAM MURTHY KONDURI, H.NO. 29 - 1427/133, STREET NO. 4, NETAJI MARG, KAKATIYA NAGAR, EAST NEREDMET, HYDERABAD 500 0 56. . 2 ITO, WARD 15 ( 1 ) , HYDERABAD. 3 CIT(A) 7 , HYDERABAD. 4 PR. CIT - 7 , HYDERABAD 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.