Assistant Commissioner of Income Tax, Circle-2, Rajahmundry V. Gunuputi Yerrayya Raw & Central Boiled Rice Mill, Kalla Mandal, WG Dist

ITA 234/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0293 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 11-11-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Principle of natural justice
• Section: 69; 132; 142(1); 153A; 143(2); 153C

Judgement Text

आयकरअपीऱीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्ि ू रु आर एऱ रेड्डी, न्याययक सदस्य एिं श्री एस बाऱाक ृ ष्णन, ऱेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपीऱ सं./I.T.A.No.234/Viz/2021 (निर्धारण वषा / Assessment Year : 2016-17) Asst.Commissioner of Income Tax Circle-2 Rajahmundry Vs. M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill D.No.5-9, Main Road Seesali Village, Kalla Mandal [PAN : ACWFS9807R] (अपीऱार्थी/ Appellant) (प्रत्यर्थी/ Respondent) Cross Objection No.3/Viz/2022 (Arising out of I.T.A. No.234/Viz/2021) M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill D.No.5-9, Main Road Seesali Village, Kalla Mandal [PAN : ACWFS9807R] Asst.Commissioner of Income Tax Circle-2(1) Rajahmundry (अपीऱार्थी/ Appellant) (प्रत्यर्थी/ Respondent) राजस्व की ओर से / Revenue by : Shri MN Murthy Naik, CIT(DR) निर्ााररती की ओर से/ Assessee by : None स ु िवधई की तधरीख / Date of Hearing : 02.06.2022 घोषणध की तधरीख/Date of Pronouncement : 08.07.2022 O R D E R 2 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill PER S. BALAKRISHNAN, Accountant Member : This appeal is filed by the revenue against the order of the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”]-3, Visakhapatnam in Appeal No.587/10764/2019-20/CIT(AA)-3/VSP/2021- 22 dated 25.08.2021 for the Assessment Year (A.Y.) 2016-17 and the cross objections are raised by the assessee in support of the order of the Ld.CIT(A). 2. The revenue has raised the following grounds of appeal : 1. On the facts and circumstances of case, the ld.CIT(A) erred in deleting the addition of Rs.4,85,85,795/- made by the AO towards unexplained investment u/s 69 of the IT Act by holding that the AO did not have any incriminating material when in fact the AO has made the addition with reference to the annexure – A/GS/BVRM/RES/PO/1 pages 125 to 140 dated 30.12.2017 of seized material and also the sale agreement dated 27.08.2015 which is also annexed as seized material. 2. The ld.CIT(A) erred in deleting the addition of Rs.4,85,85,795/- made by the AO towards unexplained investment u/s 69 of the IT Act by holding that there were no details of payment of money, even though the bank account No.1333491150100013 of the IDBI bank of M/s Sri Sai Kanchana Modern Rice Mill clearly depicted the deposits of Rs.3,47,10,000/- by cheque and cash from 19.09.2015 to 23.12.2015 which includes payment of Rs.12,10,000/- in cash by Shri Gunuputi Lakshmayya, Managing partner of the assessee-firm over and above the registered value of Rs.1,90,00,000/- of the said property on three dates 30.11.2015, 05.12.2015 and 23.12.2015 and the same was confirmed by him vide his statement u/s 131(1A) dated 13.03.2018. 3 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill 3. The ld.CIT(A) erred in accepting the additional evidence furnished by the assessee in respect of unsecured loans amounting to Rs.61,00,000/- during the course of appellate proceedings without giving due opportunity to the AO as per rule 46A of IT Rules, 1962 and also without spelling out the reasons for such admission of new evidence. 4. Any other ground of appeal that may be urged at the time of hearing. 2. Ground No.1 and 2 are related to the unexplained investment of Rs.4,85,85,795/-. Brief facts of the case are that the assessee is a partnership firm engaged in the business of raw and boiled rice mill during the F.Y.2015-16 relevant to A.Y.2016-17. The assessee filed it’s return of income, declaring ‘Nil’ income for the A.Y.2016-17. A search and seizure operation u/s 132 of the Income Tax Act, 1961 (in short ‘Act’) was conducted in the case of Sri Gunuputi Lakshmayya & Others, in which a sale deed regarding purchase of Sai Kanchana Rice Mill was found and seized. Notices u/s 153C r.w.s. 153A and 143(2) and 142(1) were also issued and served on the assessee, in response to which the assessee filed return of income, admitting ‘Nil’ income. During the course of search, the department further found that the assessee firm has purchased M/s Sri Sai Kanchana Modern Rice Mill for a consideration of Rs.1,90,00,000/- in bank auction vide sale deed No.1972/2015 dated 15.09.2015. An agreement dated 27.08.2015 was found between Jaddu Bhaskara Rao (seller) and Kolli 4 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill Venkata Surya Subbarayudu for a consideration of Rs.4,45,00,000/- towards sale of M/s Sri Sai Kanchana Modern Rice Mill comprising of buildings and land. But, the managing partners of the assessee firm denied that they paid more than Rs.1,90,00,000/- and stated that they are unaware of the sale agreement. Shri Kolli Venkata Surya Subbarayudu in his sworn statement submitted that he entered into the agreement for purchase of the said rice mill, only to protect the seller from bank auction and to protect the farmers who supplied the paddy to the rice mill. It was noticed by the AO that A/c No.1333491150100013 of IDBI bank was credited with Rs.3,47,10,000/- from 19.09.2015 to 23.12.2015 which was adjusted towards loan payable and this consideration was not recorded anywhere for purchase of rice mill. Shri Gunuputi Satyanarayana, Managing Partner of the assessee firm confirmed that a total of Rs.12,10,000/- deposited by him on different dates in addition to the payment of Rs.1,90,00,000/-. Payments of farmers dues accounted to Rs.2,30,85,795/-. The assessee was requested to show cause as to why the unexplained investment worked out to Rs.4,85,85,795/- made for purchase of rice mill should not be added to the total income and brought to tax for the A.Y.2016-17. But, since the assessee failed to submit any cogent evidences in support of his claim and in the absence of any corroboratory 5 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill evidence to substantiate the assessee’s explanation, a total amount of Rs.4,85,85,795/- (Rs.4,45,00,000 +2,30,85,795 – 1,90,00,000) was treated as unexplained investment in the hands of the assessee firm in purchase of rice mill for the A.Y.2016-17 towards on money paid beyond the consideration shown in the document u/s 69 of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) deleted the addition made by the AO observing that the sale deed was between the assessee firm and M/s Sri Sai Kanchana Modern Rice Mill for a sale consideration of Rs.1,90,00,000/-, whereas the sale agreement for Rs.4,45,00,000/- was between M/s Sri Sai Kanchana Modern Rice Mill and J.Bhaskara Rao. The Ld.CIT(A) held that the AO failed to prove that the assessee has paid an amount of Rs.6,75,85,795/- (Rs.4,45,00,000 + Rs.2,30,85,795) over and above the sale consideration and made addition of Rs.4,85,85,795/- to the returned income of the assessee as unexplained investment. 4. Aggrieved by the order of the Ld.CIT(A), the revenue preferred an appeal before the Tribunal and requested to set aside the order passed by the Ld.CIT(A) and allow the appeal of the revenue. 5. None appeared on behalf of the assessee. 6 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill 6. We have heard the Ld.DR and perused the material available on record. It is apparent from the records that the assessee is given many opportunities to substantiate it’s case. But the assessee failed to comply with the notices and appear before the Tribunal. Hence, we are of the view that the assessee is not willing to pursue it’s case. Accordingly, we allow the appeal of the revenue on this ground. 7. Ground No.3 is related to unsecured loans amounting to Rs.61,00,000/-. During the course of post search operations and during the course of sworn statement recorded from Sri Gunuputi Satyanarayana, Managing Partner of the assessee firm, while explaining the sources for purchase of rice mill, he stated that they have obtained unsecured loans from 8 known persons and the same were repaid after obtaining the bank loans. The assessee was requested to furnish the details of unsecured loans, along with confirmation letters and ID proof of such loan creditors and to produce them for examination. However, the assessee failed to substantiate the identity, genuineness and creditworthiness of the unsecured loan creditors amounting to Rs.61 lakhs. In the absence of the same, the nature and the source of the loan remains unexplained. Hence, treated the amount of Rs.61 lakhs as unexplained credits and brought to tax for the A.Y.2016-17 as per the provisions of sec.68 of the Act. 7 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill 8. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) deleted the addition made by the AO holding that the assessee submitted confirmation letters from the four creditors from whom it availed loan of Rs.61,00,000/- along with copy of their return of income for the A.Y.2016-17, ledger extracts and balance sheet in support of the claim of the assessee availed loan from the said persons and the transaction took place through banking channel. The Ld.CIT(A) held that the action of the AO in bringing to tax the amount of Rs.61,00,000/- u/s 68 of the Act as unexplained credits is unwarranted and uncalled for and against the natural justice in the eyes of law. 9. Aggrieved by the order of the Ld.CIT(A), the revenue filed appeal before the Tribunal and pleaded to set aside the order passed by the Ld.CIT(A) and uphold the addition made by the AO. 10. None appeared on behalf of the assessee. 11. We have heard the Ld.DR and perused the material available on record. It is apparent from the records that the assessee is given many opportunities to substantiate it’s case. But the assessee failed to comply with the notices and appear before the Tribunal. Hence, we are of the view that the assessee is not willing to pursue it’s case. Accordingly, we allow the appeal of the revenue on this ground. 8 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill 12. Ground No.4 is general in nature that does not require any specific adjudication. 13. The assessee filed cross objections in support of the order of the Ld.CIT(A). Since the appeal of the revenue is allowed, the cross objections filed by the assessee becomes infructuous, hence, dismissed. 14. In the result, appeal of the revenue is allowed and the cross objections filed by the assessee are dismissed. Order Pronounced in open Court on 08 th July, 2022. Sd/- Sd/- (द ु व्ि ू रु आर.एऱ रेड्डी) (एस बाऱाक ृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययक सदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER Dated : 08.07.2022 L.Rama, SPS आदेश की प्रनतनिनि अग्रेनषत/Copy of the order forwarded to:- 1. रधजस्व/The Revenue – Asst.Commissioner of Income Tax, Central Circle-2, Shiva Towers, 5 th Floor, Danavaripeta, Rajahmundry 2. निर्धाररती/ The Assessee– M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill, D.No.5-9, Main Road, Seesali Village, Kalla Mandal 3. प्रर्ाि आयकर आय ु क्त / The Principal CIT (Central), Visakhapatnam 4. आयकर आय ु क्त (अपीऱ) / The Commissioner of Income Tax (Appeals)-3, Hyderabad 5. ववभधगीय प्रनतनिधर्, आयकर अपीऱीय अधर्करण, ववशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईऱ / Guard file 9 ITA No.234/Viz/2019 & CO No.3/Viz/2022, A.Y.2016-17 M/s Gunuputi Yerrayya Raw & Central Boiled Rice Mill आदेशधि ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam