Sri G Srinivasa Reddy., Visakhapatnam V. The ITO, Ward-5(2), Visakhapatnam

ITA 270/VIZ/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50314 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: C V S MURTHY
• Keywords: Opportunity of being heard; Source of fund; Corroborative evidences; Onus to prove; Set aside
• Section: 5(2); 68

Judgement Text

ITA 270 OF 2008 G. SRINIVASA REDDY VISAKHAPATNAM PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.270/VIZAG/2008 ASSESSMENT YEAR:2005-06 G. SRINIVASA REDDY, VISAKHAPATNAM VS. ITO WARD-5(2) VISAKHAPATNAM (APPELLANT) PAN NO: AJCPG 1922 E (RESPONDENT) APPELLANT BY: SHRI C.V.S. MURTHY, CA RESPONDENT BY: SHRI D.S.SUNDER SINGH, SR.DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.02.2008 PASSED BY LEARNED CIT(A)-I, VISAKHAPATNA M AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS CONTESTING THE FOLLOWING TWO ADD ITIONS, WHICH WERE CONFIRMED BY THE LEARNED CIT (A): (A) ADDITION PERTAINING TO CASH CREDITS - RS.3,59,000/- (B) ADDITION PERTAINING TO THE DEMAND DRAFTS PURCHASED IN THE NAME OF DIFFERENT PERSONS RS.8,30,890/- FROM TH E BANK ACCOUNT OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE IS A DEALER IN INDIAN MADE FOREIGN LIQUOR. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ADMITTING AN INCOM E OF RS.2,51,050/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED LOANS FROM T HE FOLLOWING PERSONS IN CASH. ITA 270 OF 2008 G. SRINIVASA REDDY VISAKHAPATNAM PAGE 2 OF 5 I) D. APPALAREDDY - RS.1,78,000 II) P.D. NAIDU - RS. 80,000 III) P.V.RAMANA - RS.2,00,000 IV) B. ATCHANNA - RS. 79,000 TOTAL = RS. 5,37,000 ======= THE EXPLANATIONS FURNISHED BY THE ASSESSEE WITH REG ARD TO THOSE LOANS WERE NOT SATISFACTORY IN THE OPINION OF THE ASSESSI NG OFFICER AND ACCORDINGLY HE ADDED THE SUM OF RS.5,37,000/- UNDER SECTION 68 OF THE ACT. THE ASSESSING OFFICER ALSO NOTICED THAT TH E ASSESSEE HAS PURCHASED DEMAND DRAFTS FROM THE BALANCE AVAILABLE IN HIS BANK ACCOUNT IN THE NAME OF FOLLOWING PERSONS.. I) P. RAJARAO - RS.2,80,302 II) S. MOHAN KUMAR - RS.1,05,110 III) G. VENKATA REDDY - RS.2,65,286 IV) BOTTA APPARAO - RS.1,80,192 TOTAL = RS.8,30,890 ======= IT WAS STATED THAT THESE DEMAND DRAFTS WERE OBTAINE D FOR THE PURPOSE OF APPLYING LIQUOR LICENSES. SINCE THE ASSESSEE CO ULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF FUNDS, THE ASSESSING OFFICER ADDED THE ABOVE SAID AMOUNT OF RS.8,30,890/- ALSO TO THE TOTAL INCO ME OF THE ASSESSEE. IN THE APPEAL FILED BY THE ASSESSEE, THE LEARNED CI T (A) GRANTED RELIEF OF RS.1,78,000/- PERTAINING TO THE LOAN OBTAINED FR OM SHRI D. APPALA REDDY CITED ABOVE. THE LEARNED CIT (A) CONFIRMED TH E ADDITION OF BALANCE AMOUNT OF CASH CREDITS AND ALSO THE ADDITIO N PERTAINING TO THE DEMAND DRAFTS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE COULD NOT PROPERLY EXPLAIN THE CASH CREDIT S AND HENCE ONE MORE OPPORTUNITY SHOULD BE GIVEN TO THE ASSESSEE. I N RESPECT OF ADDITION PERTAINING TO THE DEMAND DRAFTS, THE LEARN ED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE FUNDS FOR PURCHAS ING THE DEMAND DRAFTS WERE PROVIDED BY THE CONCERNED PERSONS AND T HE ASSESSEE HAS ITA 270 OF 2008 G. SRINIVASA REDDY VISAKHAPATNAM PAGE 3 OF 5 ONLY ACTED AS A FACILITATOR. ACCORDINGLY HE SUBMITT ED THAT THIS MATTER MAY ALSO BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION. 5. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS OBTAINED THE IMPUGNED LOANS B Y WAY OF CASH AND HE HAS FAILED MISERABLY TO DISCHARGE INITIAL BU RDEN OF PROOF PLACED UPON HIM UNDER SECTION 68 OF THE ACT. ACCORDINGLY H E CONTENDED THAT THE ADDITION PERTAINING TO THE CASH CREDITS SHOULD BE SUSTAINED. WITH REGARD TO THE ADDITION PERTAINING TO THE DEMAND DRA FTS, THE LEARNED DEPARTMENTAL REPRESENTATIVE AGREED THAT THE MATTER MAY BE SET ASIDE FOR EXAMINATION OF THE CLAIM OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. WITH REGARD TO THE CASH CREDITS, WE NOTICE THAT THE LEARNED CIT (A) HAS CONFIRMED THE ADDITION WITH THE FOLLOWI NG OBSERVATIONS: IN SO FAR AS THE CREDITS STANDING IN THE NAME OF S RI P.D. NAIDU OF RS.80,000/- AND SRI P.V. RAMANA OF RS.2,00,000/- IT IS NOTED THAT THEY WERE NOT PRODUC ED FOR EXAMINATION BEFORE THE ASSESSING OFFICER. THE APPELLANT RELIED UPON THE CONFIRMATION CERTIFICATES FURNISHED BY THEM TO PROVE SUCH LOANS AS GENUINE. HOWEVER, IN THIS CONTEXT, IT IS OBSERVED THAT MERE FILING OF CONFIRMATION LETTER IS NOT ENOUGH TO PROVE THE C REDIT ENTRIES FOUND IN THE BOOKS OF ACCOUNT AS GENUINE. B Y NOT PRODUCING THEM BEFORE THE ASSESSING OFFICER, TH E APPELLANT HAS NOT DISCHARGED HIS PRIMARY ONUS OF ESTABLISHING THE GENUINENESS OF THE LOAN TRANSACTIO NS WITH RESPECT TO THESE TWO CREDITORS. HENCE, THE ASSESSING OFFICERS ACTION IN TREATING THESE TWO CR EDITS AS UNEXPLAINED IS CORRECT AND ADDITION OF RS.2,80,0 00/- MADE IN THIS REGARD IS HEREBY CONFIRMED . COMING TO THE CREDIT STANDING IN THE NAME OF SRI B. ATCHANNA, IT IS NOTICED THAT THE SAID CREDITOR WAS PRODUCED BEFORE THE ASSESSING OFFICER FOR EXAMINATION. IN THIS REGARD, IT IS OBSERVED THAT THE PRIMARY ONUS OF PROVING ANY CASH CREDIT IS ON THE ASSESSEE. SUCH ONUS INCLUDES ITA 270 OF 2008 G. SRINIVASA REDDY VISAKHAPATNAM PAGE 4 OF 5 ESTABLISHING THE IDENTITY OF THE CREDITOR, GENUINEN ESS OF THE TRANSACTION AND ESTABLISHING THE CREDITWORTHINE SS OF THE CREDITORS. FROM THE SWORN STATEMENT RECORDED FR OM SRI B. ATCHANNA, THE ASSESSING OFFICER NOTICED THAT HIS MONTHLY INCOME AND EXPENDITURE WAS TO THE EXTENT OF RS.3,500/- AND RS.2,000/- RESPECTIVELY. THE IMPUGNE D LOAN TRANSACTION OF RS.79,000/- WAS IN CASH WITHOUT ANY SUPPORTING EVIDENCE LIKE EXECUTION OF PRO-NOTE ETC. THE ABOVE FACTS, AS STATED BY THE CREDITOR HIMSELF IN H IS SWORN STATEMENT, CLEARLY INDICATES THAT HE WAS NOT A MAN OF MEANS. HIS CREDITWORTHINESS IS NOT PROVED AT ALL. BESIDES, THE GENUINENESS OF THE TRANSACTION IS ALSO NOT ESTABLISHED IN AS MUCH AS THAT THE SAID TRANSACTION WAS IN CASH WITHOUT ANY SUPPORTING EVIDENCE. UNDER THES E CIRCUMSTANCES THOUGH HE WAS PRODUCED BEFORE THE ASSESSING OFFICER, IT CAN BE NOTED THAT THE APPELLA NT FAILED TO DISCHARGE HIS ONUS OF PROVING THE SAID CR EDIT TRANSACTION AS GENUINE. HENCE, THE ASSESSING OFFICE R IS JUSTIFIED IN DISALLOWING THE SAME BY INVOKING THE PROVISIONS OF SECTION 68. THE SAME IS HEREBY CONFIRMED . WITH REGARD TO THE CASH CREDITS, IT IS NOW WELL SET TLED THAT THE INITIAL BURDEN OF PROOF IS PLACED UPON THE ASSESSEE UNDER S ECTION 68 OF THE ACT, I.E. THE ASSESSEE HAS TO PROVE THE IDENTITY OF THE CREDITORS, GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTH INESS OF THE CREDITOR. THE OBSERVATIONS MADE BY THE CIT (A) CLEA RLY SHOW THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE INITIAL BURDEN OF PROOF PLACED UPON HIM. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF THE LEARNED CIT (A) AND ACCORDINGLY CONFIRM HIS ORDER O N THIS ISSUE. 7. THE NEXT ISSUE PERTAINS TO THE ADDITION OF RS.8, 30,890/- PERTAINING TO THE DEMAND DRAFTS PURCHASED THOUGH TH E BANK ACCOUNT OF THE ASSESSEE. THE SUBMISSION OF THE LEARNED AUTH ORISED REPRESENTATIVE IS THAT THE ASSESSEE HAS ONLY ACTED AS A FACILITATOR AND HAS PURCHASED THE DEMAND DRAFTS THROUGH HIS BANK AC COUNT OUT OF THE FUNDS PROVIDED BY THE RESPECTIVE PERSONS. BEFORE U S BOTH THE PARTIES ITA 270 OF 2008 G. SRINIVASA REDDY VISAKHAPATNAM PAGE 5 OF 5 HAVE AGREED THAT THE SAID CLAIM OF THE LEARNED AUTH ORISED REPRESENTATIVE MAY BE VERIFIED AT THE END OF THE AS SESSING OFFICER. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED C IT (A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING O FFICER WITH A DIRECTION TO REEXAMINE THE ISSUE IN ACCORDANCE WITH THE LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 4 TH JULY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER PVV/SPS VISAKHAPATNAM, DATE:04-07-2011 COPY TO 1 SHRI G. SRINIVASA REDDY, DOOR NO.18-4-76, KAILASH NAGAR, GAJUWAKA, VISAKHAPATNAM 2 THE ITO, WARD - 5(2) VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A)-I VISAKHAPATNAM , 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM