DCIT, Central Circle-9, Hyderabad V. Prapurna Properties P. Ltd., Secunderabad

ITA 22/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74459 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARITHA
• Assessee Lawyers: A V RAGHURAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.22/HYD/12 : ASSTT. YEAR 2008 - 09 DY. COMMISSIONER OF INCOME - TAX CENTRAL CIRCLE 9, HYDERABAD V/S. M/S. PRAPURNA PROPERTIES P. LTD., HYDERABAD ( PAN - A ACCS 8996 A ) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. HARITHA, DR RESPONDENT BY : SHRI A.V.RAGHURAM DATE OF HEARING 31.12.2013 DATE OF PRONOUNCEMENT 10.1.2014 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX( APPEALS) VII, HYDERABAD, DATED 27.10.2011 FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE ONLY GRIEVANCE OF THE REVENUE I N THIS APPEAL RELATES TO THE ADDITION UNDER S.68 OF THE ACT, MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS MADE INTO BANK ACCOUNTS. 3. FACTS OF THE CASE IN BRIEF LEADING TO THE FILING OF THE PRESENT APPEAL BEFORE US ARE THAT ASSESSEE IS ENGAGED IN REAL ES T ATE BUSIN ES S AND INDULGED IN PU RC H AS E OF LANDS IN AND AROUND HYDERABAD, FROM AG R ICUL T URISTS AND OTHER, WHICH STATED TO INVOLVE IN CERTA IN CASH TRAN S AC T ION S FOR SUCH PU R CHA S ES . THE ASSESSING OFFICER DURING THE COURSE OF SCRUTINY PROCEEDINGS FOR THE YEAR UNDER APPEAL, HAS NOTICED THE FOLLOWING CASH DEPOSITS MADE INTO TWO BRANCHES OF ANDHRA BANK AT PET BAHEERABAD AND JUBILEE HILLS. I TA NO. 22 / HYD/201 2 M/S. PRAPURNA PROPERTIES, P. LTD., HYDERABAD . 2 ANDHRA BANK PET BASHEERABAD BRANCH ANDHRA BANK JUBILEE HILLS BRANCH SL. NO. DATE AMOUNT SL. NO. DATE AMOUNT 1. 16.11.2007 4,00,000 1. 2.2.2008 10,00,000 2. 22.1.2008 20,00,000 2. 11.2.2008 10,00,000 3. 15.2.2008 5,00,000 3. 25.2.2008 25,00,000 4. 19.2.2008 5,00,000 TOTAL 34,00,000 TOTAL 45,00,000 4. WHEN CALLED UPON TO EXPLAIN THE CASH DEPOSITS INTO THE ABOVE TWO ACCOUNTS AND CERTAIN OTHER SUMS WHICH WERE CLAIMED TO HAVE BEEN RECEIVED FROM CUSTOMERS AS ADVANCES, ASSESSEE STATED VIDE W R ITT E N SUBMI S SIONS DATED 29.12.2010 AS FOLLOWS - WE ARE FURTHER ASKED TO EXPLAIN THE HUGE CASH WITHDRAWALS FROM BANK AND E SUBMIT THAT THE MAIN OBJECT OF THE COMPANY IS A DEVELOPMENT AND CONSTRUCTION OF PROPERTIES. DURING THE YEAR 2006 - 07 AN 2007 - 08, THE REAL ESTATE BUSINESS IN AND AROUND OF HYDERABAD WA S IN ENCOURAGING STATE THE MANAGEMENT WANTS TO PU R CH AS E LANDED PROPERTIES FOR DEVELOPMENT AND C O N S TRUC T ION OF RESIDENTIAL HOUSE. IN THIS PROCESS THE MANAGEMENT APPROACHED SOME LAND LORDS TO PURCHASE A LAND SITUATED AT RR DISTRICT AND MEDAK DISTRICT. AS MO ST OF THE LAND OWNERS ARE AGR I CU L TURIST AND THEY DEMAND CASH PAYMENTS, THE MANAGEMENT HAS WITHDRAWN CASH FROM BANK. IN THE MEANTIME THE FINANCIAL CRISIS STARTED ANT EH VALUE O F THE LANDS FALLEN DRASTICALLY AND THE MANAGEMENT CANCELL E D THE NEGOTIATIONS AND DEPOSITED THE CASH IMMEDIATELY IN THE BANK. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. HE ACCORDINGLY REJECTED THE EXPLANATION OF THE ASSESSEE OBSERVING THAT EXPLANATION IS ONLY A THEORY PROPOUNDED TO SATISFY THE RE VENUE AND ASSESSEE COMPANY HAS CLEARLY USED THE TECHNIQUE OF CREATING FICTITIOUS CASH IN ITS BOOK, SO AS TO CAMOUFLAGE THE UNACCOUNTED MONEY IN THE FORM O F RE - DEPOSI T S IN THE BANK ACCOUNT. . THE ASSESSING OFFICER FOUND NO MERIT IN THE E XPLANATION OF THE ASSESSEE FOR THE FOLLOWING FURTHER REASONS AS WELL - I TA NO. 22 / HYD/201 2 M/S. PRAPURNA PROPERTIES, P. LTD., HYDERABAD . 3 ( A ) TH E RE IS NO DIRECT N E XUS BETWEEN TH E CASH WITHDRAWALS AND CASH DEPOSITS ( B ) THE ASSESSEES THEORY OF CASH WITHDRAWALS WAS TO ACQUIRE LAND AND HAS NO MERIT/MEANING IN ITSELF AND THE SAME IS FALSIFIED ONE. ( C ) THE RE IS NO MATERIAL EVIDENCE IN SUPPORT OF THE ABOVE THEORY. ( D ) THE CASH WITHDRAWAL IS IN PIECE - MEAL ON VARIOUS OCCASIONS, I.E. TO BUILD FICTITIOUS CASH BALANCE IN CASH BOOK TO CAMOUFLAGE THE UNACCOUNTED MONEY. THE ASSESSING OFFICER ACCORDINGLY MADE AN ADD ITION OF RS.79,00,000 ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS INTO THE ABOVE TWO BANK ACCOUNTS WITH ANDHRA BANK, BESIDES ANOTHER ADDITION OF RS.1,72,49,411, REPRESENTING AGGREGATE AMOUNT OF ADVANCES OF RS.1,72,49,411 RECEIVED FROM FIVE CUSTOMERS BOTH UNDER S.68 OF THE ACT, WHILE COMPLETING THE ASSESSMENT ON A TOTAL INCOME OF RS.2,92,52,891, WHILE COMPLETING THE ASSESSMENT ON A TOTAL INCOME OF RS.2,92,52,891, VIDE ORDER OF ASSESSMENT DATED 30.12.2010 UNDER S.143(3) OF THE ACT. 5. ON APPEAL BEFORE THE CI T(A), IT WAS POINTED OUT DULY FURNISHING COPY OF THE EXTRACT OF CASH BOOK FOR THE RELEVANT PERIOD, THAT THE DEPOSITS WERE OUT OF CASH BALANCE AVAILABLE WITH THE ASSESSEE, AS ON THE RESPECTIVE DATES OF DEPOSITS; AND THAT CASH BALANCES REPRESENTED BOTH THE B ALANCE AS AT THE BEGINNING OF THE YEAR AND WITHDRAWALS MADE FROM THE BANK ACCOUNTS, DURING THE YEAR . I T WAS ALSO SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE SUBJECT TO STATUTORY AUDIT, B OTH UNDER THE COMPANY LAW AND INCOME - TAX LAW; AND THE A SSESSING OFFICER NEITHER REJECTED THE BOOKS OF ACCOUNT, NOR GATHERED ANY EVIDENCE TO SHOW THAT THERE WAS ANY DISCREPANCY IN SUCH BOOKS. IT WAS ALSO SUBMI T TED THAT THE BANK STATEMENTS FILED SUPPORT THE WITHDRAWALS MADE DURING THE Y E AR, AND THE NATURE O F T HE BUSINESS OF THE ASSESSEE MAN D ATE S MAINTENANCE OF HUGE CASH BALANCES TO MEET THE REQUIREMENT OF SUITABLE PROPERTIES WHOSE OWNERS INSIST FOR I TA NO. 22 / HYD/201 2 M/S. PRAPURNA PROPERTIES, P. LTD., HYDERABAD . 4 CASH. RELIANCE WAS ALSO PL A CED ON TH E ABMEDABAD BENCH OF THE T RIBUNAL IN THE CASE OF ANAND AUTORIDE LTD. V/S. JCI T (99TTJ 1250). THE CIT(A), ON CAREFUL CONSID E RATION OF THE SUBMISSIONS OF THE ASSESSEE, FOUND NO JUSTIFICATION FOR HOLDING THE CASH DEPOSITS INTO BANK ACCOUNTS AS UNEXPLAINED AND CONSEQUENTLY MAKING THE ADDITION MADE UNDER S.68 OF THE ACT. EVEN AS FO R THE ADDITION MADE ON ACCOUNT OF ADVANCES RECEIVED FROM FIVE CUSTOMERS, AGGREGATING TO RS.1,72,49,411, THE ASSESSEE FURNISHED CONFIRMATION LETTERS FROM FOUR PARTIES ALONGWITH THE ACCOUNT EXTRA C T IN THE CASE OF FIFTH PARTY, IN RESPECT OF WHOM CONFIRMATIO N LETT E R WAS NOT AVAILABLE. EXAMINING THE CONTENTION S O F THE ASSESSEE IN THE LIGHT OF THE SAID EVIDENCE ON RECO R D, THE CIT(A) FOUND NO MERIT, AND DELETED THE ADDITION OF R S .1,72,49,411 REPR E SENTING AD V ANCES RECEIVED FROM CU S TOMERS. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 7. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS - 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOTH ON THE FACTS AND IN THE EYES OF LAW. 2. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE REASONING OF THE ASSESSING OFFICER AS TO WHY THE EXPLANATION OF THE ASSESSEE IS NOT SATISFACTORY IN RESPECT OF THE CASH DEPOSITS MADE INTO BANK ACCOUNT. 3. THE LEARNED CIT(A) IGNORED THE ABNORMALITY OF THE CA S H BOOK MAINTAINED BY THE ASS ESSEE SO AS TO CREATE FICTI TI OUS CASH BALANCE TO ACCOMMODATE THE C ASH DEPOSITS INTO BANK ACCOUNTS. 4. THE LEARNED CIT(A) OUG H T TO HA V E AP P RECI A TED THE FACT THAT THE ASSESSEE S EXPLANATION IS ONLY A THEORY AND NO T BASED ON DOCUMENTARY EVIDENCE. 5. .. 8. WE HEARD BOTH SIDES AND PERUSED THE MATERIAL ON RECORD. IT IS THE HUGE CASH DEPOSITS AGGREGATING TO RS.79,00,000 MADE INTO TWO BANK ACCOUNTS OF THE ASSESSEE WITH ANDHRA BANK, THAT LED TO THE ADDITION UNDER DISPUTE, MADE BY I TA NO. 22 / HYD/201 2 M/S. PRAPURNA PROPERTIES, P. LTD., HYDERABAD . 5 THE ASSESSING OFFICER UNDER S.68 OF THE ACT. IT WAS THE EXPLANATION OF THE ASSESSEE THAT THE DEPOSITS IN QUESTION WERE MADE OUT OF THE WITHDRAWALS MADE EARLIER, AND IN THE NATURE OF ASSESSEES BUSINESS, VIZ. REAL ESTATE, INCIDENTS OF HUGE CASH DEPOSITS AND WITHDRAWALS ARE FREQUENT , AND AS LONG AS THE SAME ARE SUPPORTED BY THE ENTRIES IN THE BOOKS OF ACCOUNT AND AVAILABILITY OF CASH AS PER SUCH BOOKS REGULARLY MAINTAINED, NO ADDITION IS CALLED FOR. THE CIT(A) NOTED AT THE OUTSET THAT THE BANK DEPO S ITS OF THE ASSESSEE ORIGINATED FROM TH E REGULAR CASH BOOK MAI N TA I NED BY TH E ASSESSEE , AS EXPLAINED DURING THE COURSE OF ASSESSMENT P R OCEEDIN G S AND THERE IS NO DISPUTE ON IT. THE CIT(A) ALSO NOTED THAT THE ASH BALAN C E SHOWN BY THE ASSESSEE IN HIS CASH BOOK IS ON HIGHER SIDE BUT IT WA S NO T PROVED BY THE ASSESSING OFFICER THAT THE SAID CASH DO NO T HAVE THE EXPLAINABLE SOURCES, AS THE SAME ARE REGULAR WITHDRAWALS FROM THE BANK APART FROM THE CARRIED FORWARD BALAN C ES IN THE CASH BOOK AS MAINTAINED BY THE ASSESSEE. THE CIT(A) FURTHER NOT ED THAT THE ASSESSEE WAS ON RECORD TO SHOW THAT IN THE PRECEDING YEAR, THE BOOKS W E RE SCRUTINIZED BY THE ASSESSING OFFICER AND WERE ACCEPTED WITH NO DOUBTS WHATSOEVER RAISED ON THE CLOSING BALANCE OF THE COMPANY IN THE CASH BOOK. IN THE CIRCUMSTANCES, TH E CIT(A) NOTED, IT CAN BE ASSUMED AND CONCLUDED THAT THE ASSESSEE HAS PROVED THE SOU R CES FOR THE DEPOSITS MADE INTO THE BANK ACCOUNTS, WHICH STOOD EXPLAINED BY CASH BOOK MAINTAINED BY THE ASSESSEE COMPANY AND IT IS ALSO A FACT THAT THE ASSESSING OFFICER HA S NO T REJECTED THE BOOKS OR DISPROVED THE SOU R CES OF THE FLOW OF SUCH CASH INTO THE C ASH BOOK, AND THER E FROM INTO BANK ACCOUNTS O F THE COMPANY. EVEN THOUGH THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLEVERLY USED THE TECHNIQUE OF TR E ATING FICTI TI OUS CASH IN ITS BOOKS, THE CIT(A) OB S ERVED IN THIS CONTEXT THAT TH E RE WAS NO DISCUSSION WHATSOE V ER ON THE GENERATION OF TH E UNACC O UN T ED MONEY IN THIS CASE, AND AS SUCH IT IS NO T CORRECT TO LINK SUCH MONEY TO THE CASH DEPO S ITED INTO THE BANK ACCOUNTS, THROU GH THE CASH BOOK, IN THIS CASE. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS NO T B R OUGHT ON RECORD ANY EVIDENCE TO IND I CATE OR PROVE THAT THE EXCESS CASH BALANCES ARE USED FOR ANY OTHER PURPOSES OTHER THAN THE BUSINESS. FOR THESE REASONS AND ALSO RELYING ON THE DECISION O F THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CA S E I TA NO. 22 / HYD/201 2 M/S. PRAPURNA PROPERTIES, P. LTD., HYDERABAD . 6 OF ANAND AUTORIDE LTD. V/S. JCIT(97 TTJ 1250), THE CIT(A) FOUND NO JUSTIFICATION FOR THE ADDITION OF RS.79,00,000 MADE UNDER S.68 OF THE ACT A ND ACCORDINGLY DELETED THE S AME. WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A). IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD BY THE ASSESSING OFFICER IN SUPPORT OF HIS OBSERVATION THAT THE ASSESSEE HAS CLEVERLY USED THE TECHNIQUE OF TREATING FICTITIOUS CASH IN ITS BOOKS, WE FIND NO JUSTIFICATION FOR THE ADDITION MADE BY THE ASSESSING OFFICER ON THAT COUNT, AND THE CIT(A), IN OU R CONSIDERED VIEW, IS JUSTIFIED IN DELETING THE SAME. EVEN BEFORE US, THE REVENUE HAS NOT BROUGHT ON RECORD ANY EVIDENCE EITHER TO CONTRADICT THE FINDINGS OF THE CIT(A) DISCUSSED ABOVE OR TO SUPPORT THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSES SEE HAS INDULGED IN THE TECHNIQUE OF TR E ATIN G FICTI TI OUS CASH IN ITS BOOKS, SO AS TO CAMOUFLAGE THE UNACCOUN T ED MONEY IN TH E FORM OF R E - DEPOSITS INTO THE BANK ACCOUN TS . IN THE CIRCUM S TANC E S, WE FIND NO INFIRMITY IN THE IMPU G N E D ORDER OF THE CIT(A), WHICH IS ACCORDINGLY UPHELD AND THE GROUNDS O F THE REVENUE IN THIS APPEAL ARE REJECTED. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10.1.2014 SD/ - SD/ - ( B.RAMAKOTAIAH ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 10 TH J ANUARY, 2014 COPY FORWARDED TO: 1. M/S. PRAPURNA PROPERTIES P.LTD., SURVEY NO.74/E, NEAR L A Y O LA COLLEGE, ALWAL ROAD, QUTHBULLAPUR, SECUDNERABAD 500 055. 2 . DY. COMMISSIONER OF INCOME - TAX, CNETRAL CIRCELE 9, HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) V II , HYDERABAD 4. COMMISSIONER OF INCOME - TAX CENTRAL HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S