Sri. Venkataramanappa Ravikumar, Bangalore V. Assistant Commissioner Of Income Tax , Central Circle- 3(2)(1), Bangalore

ITA 2660/BANG/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 0882 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-04-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 30-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUZAFFAR HUSSAIN
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained cash credit; Peak credit; Set aside
• Section: 133A; 37(1)

Judgement Text

ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2660/BANG/2019 ASSESSMENT YEAR: 2014-15 SRI VENKATARAMANAPPA RAVIKUMAR # 600, 8 TH MAIN, 4 TH B CROSS RPC LAYOUT, VIJAYANAGAR BENGALURU 560 040. PAN NO : ABDPR5035J VS. ACIT CIRCLE-3(2)(1) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, A.R. RESPONDENT BY : SHRI MUZAFFAR HUSSAIN, D.R. DATE OF H EARING : 06.04.2021 DATE OF PRONOUNCEMENT : 14.07.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 13.11.2019 PASSED BY LD. CIT(A)-3, BENGALURU AND IT RELATES TO THE ASSESSMENT YEAR 2014-15. THE ASSESSEE IS AG GRIEVED BY THE DECISION OF LD. CIT(A) IN UPHOLDING THE ADDITION OF RS.6.07 CRORES MADE BY THE A.O. AS UNEXPLAINED CREDITS IN THE BANK ACCOUNTS OF THE ASSESSEE. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS CARRYING ON THE BUSINESS OF TRADING IN CERAMIC TILES AND OTHER HARDWARE ITEMS UNDER THE NAME OF M/S. MOONLIG HT CERAMICS. ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 2 OF 8 THE ASSESSEE IS ALSO CARRYING ON THE BUSINESS IN RE AL ESTATE AND EARNS COMMISSION INCOME FROM DOING LIAISON WORKS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSI DERATION DECLARING A TOTAL INCOME OF RS.39.91 LAKHS. THE REVENUE CARR IED OUT A SURVEY OPERATION U/S 133A OF THE INCOME-TAX ACT, 1961 ['TH E ACT' FOR SHORT] ON 8.9.2016 IN THE HANDS OF THE ASSESSEE. DURING T HE COURSE OF SURVEY OPERATIONS, IT WAS NOTICED THAT THE ASSESSEE WAS MAINTAINING TWO SAVINGS BANK ACCOUNTS IN M/S. JANATA SEVA CO-OP ERATIVE BANK LTD., VIJAYANAGAR BRANCH, BENGALURU AND THEY WERE N OT DISCLOSED IN THE BOOKS OF ACCOUNTS. IN THE STATEMENT TAKEN DURI NG THE COURSE OF SURVEY, THE ASSESSEE SUBMITTED THAT THESE BANK ACCO UNTS WERE USED IN THE BUSINESS OF DOING LIAISON WORKS IN HIS REAL ESTATE BUSINESS SUCH AS CHANGE OF LAND USE, CONVERSION OF LAND FROM AGRICULTURE TO RESIDENTIAL PURPOSES, TAKING PAN APPROVAL FROM LOCA L AUTHORITIES. HE ALSO ADMITTED THAT THE RECEIPTS AND EXPENSES FRO M THIS BUSINESS WERE NOT REFLECTED IN HIS BOOKS OF ACCOUNTS. 3. THE A.O. NOTICED FROM BOTH THE BANK ACCOUNTS THA T FOLLOWING AGGREGATE AMOUNTS HAVE BEEN DEPOSITED DURING THE YE AR UNDER CONSIDERATION: CASH DEPOSIT - RS.4,10,63,026/- CHEQUE DEPOSIT - RS.2,72,95,445/- TOTAL - RS.6,83,58,471/- THE AO ALSO NOTICED THAT THE ASSESSEE HAS WITHDRAWN AGGREGATE AMOUNTS OF RS.6,33,12,130/- FROM THE ABOVE SAID BAN K ACCOUNTS AND ACCORDINGLY THE CLOSING BALANCE AS ON 31.3.2014 STOOD AT RS.50,46,341/-. THOUGH THE ASSESSEE HAS STATED THA T THESE BANK ACCOUNTS WERE USED FOR THE PURPOSE OF DOING LIAISON WORKS, YET, THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED A NY PROOF IN SUPPORT OF THE ACTIVITIES MENTIONED ABOVE. BEFORE A .O., THE ASSESSEE REQUESTED FOR ASSESSING PEAK CREDIT BALANCE OF THE BANK ACCOUNTS ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 3 OF 8 BUT THE SAME WAS REJECTED BY THE A.O. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE DEPOSITS MADE IN THE BANK ACCOUNT S ARE UNEXPLAINED. ACCORDINGLY, THE A.O. ASSESSED ENTIRE CHEQUE DEPOSIT OF RS.2,72,95,445/- AS UNEXPLAINED INCOME OF THE AS SESSEE. WITH REGARD TO THE CASH DEPOSITS, THE ASSESSEE HAD PRODU CED BEFORE THE AO CERTAIN SALE AGREEMENTS AND ON THE BASIS OF THOS E AGREEMENTS, THE A.O. GAVE CREDIT OF RS.76.00 LAKHS AND ASSESSED THE BALANCE AMOUNT OF RS.3,34,63,026/- AS UNEXPLAINED INCOME OF THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A ). IN THE FIRST ROUND, THE LD. CIT(A) DISMISSED THE APPEAL OF THE A SSESSEE SINCE NONE APPEARED BEFORE HIM. THE ASSESSEE CHALLENGED THE EX-PARTE ORDER PASSED BY LD. CIT(A) BY FILING APPEAL BEFORE THE TRIBUNAL AND THE ITAT, VIDE ITS ORDER DATED 4.6.2018 PASSED IN I TA NO.2901/BANG/2017, RESTORED THE MATTER BACK TO THE FILE OF LD. CIT(A). ACCORDINGLY, THE IMPUGNED ORDER CAME TO BE PASSED BY LD. CIT(A). 5. BEFORE LD. CIT(A), THE ASSESSEE REITERATED ITS C ONTENTIONS THAT THE TRANSACTIONS IN THESE BANK ACCOUNTS REPRESENTED BUSINESS TRANSACTIONS IN HIS REAL ESTATE BUSINESS. IN THE A LTERNATIVE, THE ASSESSEE CLAIMED THAT PEAK CREDIT BALANCE SHOULD HA VE BEEN ASSESSED BY THE A.O. THE PEAK CREDIT BALANCE WORKE D OUT BY THE ASSESSEE WAS RS.94,13,506/-. THE LD. CIT(A) DID NO T ACCEPT THE CONTENTIONS OF THE ASSESSEE, SINCE THE ASSESSEE HAS FAILED TO FURNISH EVIDENCES RELATING TO HIS BUSINESS TRANSACTIONS. H E ALSO DID NOT ACCEPT THE PEAK CREDIT THEORY CANVASSED BY THE ASSE SSEE. THE LD. CIT(A) ALSO TOOK THE VIEW THAT THERE MIGHT BE VIOLA TION OF PROVISIONS OF SECTION 40(A)(3) OF THE ACT AND EXPLANATION 1 TO SECTION 37(1) OF THE ACT. ACCORDINGLY, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE A.O. AGGRIEVED, THE ASSESSEE HAS FILED THIS AP PEAL BEFORE US. ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 4 OF 8 6. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS ALL ALON G HAS STATED THAT THE TWO BANK ACCOUNTS REFERRED ABOVE, H AVE BEEN USED FOR THE PURPOSE OF HIS REAL ESTATE BUSINESS INCLUDI NG THE BUSINESS OF DOING LIAISON WORKS. HE SUBMITTED THAT THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE IN THIS REGARD. HE SUB MITTED THAT THE TRANSACTIONS IN THE BANK ACCOUNTS WOULD SHOW THAT T HERE WERE DEPOSITS AND WITHDRAWALS ALTERNATIVELY. IN FACT, T HE AO HAS GIVEN CREDIT TO THE TUNE OF RS.75.00 LAKHS ACCEPTING THE EXPLANATION OF THE ASSESSEE THAT IT REPRESENTED THE TRANSACTION IN REA L ESTATE BUSINESS. HE SUBMITTED THAT THE ASSESSEE HAS CARRIED OUT THE LIAISON WORKS ON BEHALF OF OTHERS AND IN THAT PROCESS, HE HAS RECEIV ED MONEY FROM THEM AND SPENT IT ON BEHALF OF THEM. HENCE THE ENTI RE DEPOSITS CANNOT BE TAKEN AS THE INCOME OF THE ASSESSEE. HE S UBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT TH E ASSESSEE IS CARRYING ON REAL ESTATE BUSINESS ALSO. HENCE, THE TAX AUTHORITIES ARE NOT JUSTIFIED IN PRESUMING THAT THE ENTIRE DEPOSITS BELONG TO THE ASSESSEE. HE SUBMITTED THAT THE INCOME ELEMENT INV OLVED IN THOSE DEPOSITS ALONE MAY BELONG TO THE ASSESSEE. SINCE T HERE WERE CONTINUOUS TRANSACTIONS OF DEPOSITS AND WITHDRAWALS , AS AN ALTERNATIVE, THE ASSESSEE HAS REQUESTED THE TAX AUT HORITIES TO ASSESS PEAK CREDIT. HE SUBMITTED THAT THE PEAK CREDIT W ORKED OUT TO RS.94.13 LAKHS. ACCORDINGLY HE PRAYED THAT THE AO MAY BE DIRECTED TO ASSESS THE PEAK CREDIT AMOUNT. 7. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE CLAIM OF PEAK CREDIT HAS BEEN REJECTED BY THE LD CIT(A). HE SUBMI TTED THAT THE PEAK CREDIT MAY BE ACCEPTED ONLY IF THE ASSESSEE HA D DISCLOSED TRULY AND FULLY THE SOURCE OF DEPOSITS AND ALSO PROVED TH AT THE MONEY WITHDRAWN WAS DEPOSITED BACK. IN THIS REGARD, THE LD D.R PLACED HIS RELIANCE ON THE DECISIONS RENDERED BY HONBLE H IGH COURT OF ALLAHABAD IN THE CASE OF BHAIYALAL SHYAM BEHARI (20 05)(276 ITR ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 5 OF 8 38), VIJAY AGRICULTURAL INDUSTRIES (2007) (294 ITR 610)(ALL). THE LD D.R ALSO PLACED HIS RELIANCE ON THE DECISION RENDER ED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. D.K.GARG (2 018)(404 ITR 757). THE LD D.R SUBMITTED THAT THE ASSESSEE HAS F AILED TO PROVE THE SOURCES OF DEPOSITS AND ALSO THE PURPOSE OF WIT HDRAWALS. FURTHER, HE HAS FAILED TO SHOW THAT THE MONEY SO WI THDRAWN WAS RE- DEPOSITED. ACCORDINGLY THE LD D.R SUBMITTED THAT T HE CLAIM OF PEAK CREDIT SHOULD BE REJECTED. HE FURTHER SUBMITTED TH AT THE ASSESSEE HAS FAILED TO EXPLAIN THE BANK DEPOSITS AND HENCE T HE ORDER PASSED BY LD CIT(A) SHOULD BE UPHELD. 8. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE FROM THE ASSESSMENT ORDER THAT THE AO HAS OB SERVED AS UNDER WITH REGARD TO THE BUSINESS ACTIVITIES CARRIE D ON BY THE ASSESSEE:- 3. NOTE ON BUSINESS ACTIVITIES THE ASSESSEE IS CARRYING ON THE BUSINESS OF TRADING IN CERAMICS, TILES AND OTHER HARDWARE ITEMS. THE BUSINESS IS CARRIED ON I N THE NAME OF M/S. MOONLIGHT CERAMICS WHICH IS A PROPRIETARY CONCERN. THE ASSESSEE HAS ALSO CARRIED ON THE BUSINESS OF REAL ESTATE AND EAR NS COMMISSION FROM LIASONING WORKS. THE ASSESSEE SUBMITTED THAT HE IS ENGAGED IN DEVELOPING REAL ESTATE PROJECTS AT 1) MAHALAKSHMI E NCLAVE, SY.NO.74, YESHWANTPURA, HOBLI, MANGANAHALLI VILLAGE, BANGALOR E NORTH, 2) NAKSHATRA RESIDENCY SY.NO.5, SULIKERE, KENGERI HOBL I, BANGALORE SOUTH AND 3) AMOGHAVARSHA PREMIUM RESIDENCY LAYOUT KENCHA NAPURA VILLAGE, KENGERI HOBLI, BANGALORE SOUTH. HENCE, THE AO HAS ACKNOWLEDGED THAT THE ASSESSEE HA S EARNED COMMISSION INCOME FROM UNDERTAKING LIAISON WORKS. WE ALSO REFER TO SOME OF THE QUESTION AND ANSWERS FROM THE STATEM ENT TAKEN FROM THE ASSESSEE AT THE TIME OF SURVEY OPERATIONS, WHIC H HAVE BEEN EXTRACTED BY THE AO IN THE ASSESSMENT ORDER:- ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 6 OF 8 Q21. I AM SHOWING THE SAVING BANK ACCOUNT NOS.255 32 & A/C 24777 OF JANTHA SEVA CO-OPERATIVE BANK LTD., VIJAYANAGAR BRANCH IN YOUR NAME (I.E. RAVI KUMAR V) PLEASE COMMENT? ANS. THE SAVING ACCOUNT NUMBERS 25532 AND A/C 24777 OF JANATHA SEVA CO-OPERATIVE BANK LTD., VIJAYANAGAR BRANCH BEL ONG TO ME. THEY WERE OPENED BY ME IN F/Y 2012-13 FOR MY BUSINESS PU RPOSE OF LIASONING, SUCH AS CHANGE OF LAND USE, CONVERSION OF LAND FROM AGRICULTURE TO RESIDENTIAL PURPOSES, TAKING PLAN APPROVAL FROM LOC AL AUTHORITIES. THE RECEIPTS AND EXPENSES FROM THIS BUSINESS WERE NOT S HOWN IN MY BOOKS OF ACCOUNTS. Q22. PLEASE EXPLAIN FOR WHOM YOU HAVE CARRIED OUT L IASONING WORKS? ANS. I CARRIED OUT WORK FOR BUILDERS LIKE BRIGADE B UILDERS PVT. LTD., SHOBHA DEVELOPERS, PURVANKARA DEVELOPERS, LAND BANK ERS. I WILL FURNISH THE COMPLETE DETAILS IN TWO DAYS. Q23. ARE THESE ACCOUNTS REFLECTED IN YOUR BOOK OF A CCOUNTS? ANS. NO. THESE ACCOUNTS ARE NOT REFLECTED IN MY B OOKS OF ACCOUNTS. I DONT KEEP ANY RECORD/BOOKS OF ACCOUNTS OF MY BUSIN ESS TRANSACTION FOR THE LIASONING WORK DONE THROUGH JANATA SEVA CO-OPER ATIVE BANK ACCOUNTS (VIDE ACCOUNTS NO.25532 & A/C 244777). IN REPLY TO OTHER QUESTIONS ALSO, THE ASSESSEE HAS STATED THAT THE TRANSACTIONS IN BOTH THE BANK ACCOUNTS REFLECT HIS REAL ESTATE BUSINESS TRANSACTIONS. IT IS FURTHER STATED THAT T HE TRANSACTIONS RELATING TO LIAISON WORKS WERE NOT RECORDED IN BOOK S OF ACCOUNT AND HENCE THESE TWO BANK ACCOUNTS HAVE NOT BEEN REFLECT ED IN HIS BOOKS. 9. THUS, WE NOTICE THAT THE ASSESSEE HAS MAINTA INED HIS STAND THAT THE TRANSACTIONS IN THESE BANK ACCOUNTS RELATE TO LIAISON WORKS UNDERTAKEN BY HIM IN HIS REAL ESTATE BUSINESS, SUCH AS CHANGE OF LAND USE, CONVERSION OF LAND FROM AGRICULTURE TO RE SIDENTIAL PURPOSES, TAKING PAN APPROVAL FROM LOCAL AUTHORITIE S. SINCE THE ASSESSEE WAS DOING LIAISON WORKS ON BEHALF OF OTHER S, IT WAS ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 7 OF 8 CONTENDED THAT THE ENTIRE DEPOSITS CANNOT BE TAKEN AS HIS INCOME. WE ALSO NOTICE THAT THE AO HAS ACCEPTED EXPLANATION S TO THE TUNE OF RS.75.00 LAKHS OUT OF THE CASH DEPOSITS FOUND IN TH ESE BANK ACCOUNTS ON THE BASIS OF A CANCELLED SALE AGREEMENT . THIS FACT ALSO FORTIFIES THE STAND OF THE ASSESSEE THAT THE TRANSA CTIONS FOUND IN THESE TWO BANK ACCOUNTS RELATE TO HIS REAL ESTATE B USINESS. 10. WE NOTICE THAT THE AO HAS ASSESSED THE ENTI RE AMOUNT OF DEPOSITS AS UNEXPLAINED INCOME OF THE ASSESSEE FOR WANT OF EVIDENCES. HOWEVER, CONSIDERING THE FACTS DISCUSSE D ABOVE, IT IS QUITE NATURAL THAT THE ASSESSEE MAY NOT BE KEEPING RECORDS, SINCE THE TRANSACTIONS WERE CARRIED OUT ON BEHALF OF OTHE RS. HENCE, WE ARE OF THE VIEW THAT THE EXPLANATION OF THE ASSESSE E THAT THE TRANSACTIONS IN THESE TWO BANK ACCOUNTS RELATE TO H IS REAL ESTATE BUSINESS CANNOT BE REJECTED ALTOGETHER. ON THE CON TRARY, THE OBSERVATIONS MADE BY THE AO, THE REPLIES GIVEN BY T HE ASSESSEE WOULD SUGGEST THAT THE EXPLANATIONS GIVEN BY THE AS SESSEE MAY BE ACCEPTED. IN THAT CASE, ENTIRE DEPOSITS COULD NOT ASSESSED AS INCOME OF THE ASSESSEE. ONLY THE INCOME ELEMENT INV OLVED IN THE DEPOSITS REQUIRES TO BE ASSESSED AS INCOME OF THE A SSESSEE. IN THESE BUSINESS TRANSACTIONS, THE ASSESSEE SHOULD BE EARNING COMMISSION AND BROKERAGE INCOME. HOWEVER, WE NOTIC E THAT THE ASSESSEE HAS NOT STATED ANYTHING ABOUT HIS RATE OF COMMISSION/BROKERAGE. CONSIDERING THE FACT THAT TH E INCOME ELEMENT IN THE CASE OF LIAISON WORKS IS USUALLY HIG H, WE ARE OF THE VIEW THAT THE INCOME OF THE ASSESSEE MAY BE ESTIMAT ED @ 20% OF THE ADDITION MADE BY THE AO RELATING TO UNEXPLAINED DEP OSITS. IN OUR CONSIDERED VIEW, THE SAME WOULD BE REASONABLE IN TH E FACTS AND CIRCUMSTANCES OF THE CASE AND FURTHER THE SAME WOUL D ALSO MEET THE ENDS OF JUSTICE. ITA NO.2660/BANG/2019 SRI VENKATARAMANAPPA RAVI KUMAR, BENGALURU PAGE 8 OF 8 11. SINCE WE HAVE HELD THAT THE TRANSACTIONS F OUND IN THE BANK ACCOUNTS MAY RELATE TO THE REAL ESTATE BUSINESS CAR RIED ON BY THE ASSESSEE, THE ALTERNATIVE CONTENTION OF ADDITION OF PEAK CREDIT NEED NOT BE CONSIDERED. 12. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO COMPUTE INCOME OF THE ASSESSEE @ 2 0% OF THE ADDITION MADE AND ASSESS THE SAME IN THE PLACE OF T HE ADDITION MADE BY HIM. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSE SSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUL, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 14 TH JUL, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE