Sri D Padmanabhaiah, Vijayawada V. The ACIT, Central Circle, Vijayawada

ITA 287/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50245 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Keywords: Unexplained cash credit; Search and seizure; Opportunity of being heard; Corroborative evidences; Set aside
• Section: 69B; 68; 69; 132

Judgement Text

ITA NO.287 OF 2010 D PADMANABHAIAH VIJAYAWADA 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. 287/VIZAG/2010 ASSESSMENT YEAR: 2007-08 D. PADMANABHAIAH, VIJAYAWADA VS. ACIT, CENTRAL CIRCLE, VIJAYAWADA (APPELLANT) PAN NO: AFVPD 7527 H (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, 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 10.03.2010 PASSED BY LEARNED CIT(A), VIJAYAWADA AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING 4 GROUNDS: I) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ASSESSMENT ORDER UNDER SECTION 143(3 ) WHICH IS PASSED WITHOUT ISSUANCE OF NOTICE UNDER SE CTION 143(2). II) THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE LOWER AUTHORITY ERRED IN NOT CONSIDERING THE SOURCE S EXPLAINED WITH SUPPORTING EVIDENCE, AND THEREBY TREATING THE AMOUNT OF RS.500000/- AS UNDISCLOSED INCOME/UNEXPLAINED CASH CREDIT. III) THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE LOWER AUTHORITIES IS NOT CORRECT IN CONFIRMING THE TREATMENT OF RS.500000/- AS UNDISCLOSED INCOME WITH OUT BRINGING ANY CORROBORATIVE EVIDENCE O RECORD TO JUS TIFY THE ADDITION. IV) THE LOWER AUTHORITY IS NOT CORRECT IN MAKING THE ADDITIONS BASED ON PRESUMPTIONS AND ASSUMPTIONS. ITA NO.287 OF 2010 D PADMANABHAIAH VIJAYAWADA PAGE 2 OF 5 HOWEVER, DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE RESTRICTED HIS ARGUMENT TO THE ADDITION OF RS.5.00 LAKHS RAISED IN GROUND NO.II & III STATED ABOVE. ACCORDINGLY THE 1 ST GROUND STATED ABOVE IS DISMISSED AS NOT PRESSED. 3. THE FACTS RELATING TO THE ISSUE OF ADDITION OF R S.5.00 LAKHS ARE STATED IN BRIEF. THE ASSESSEE IS A PARTNER IN GOWTHAM RESI DENTIAL ENTRANCE COLLEGE AND AN EMPLOYEE OF M/S GOWTHAM RESIDENTIAL JR. COLL EGE. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS UNDER SEC TION 132 OF THE ACT IN THE HANDS OF SHRI M. VENKATA NARAYANA, ONE OF THE P ARTNERS OF M/S GOWTHAM RESIDENTIAL JR. COLLEGE AND ALSO THE BROTHE R-IN-LAW OF THE ASSESSEE HEREIN. CONSEQUENT TO THE SEARCH STATED ABOVE, PRO CEEDINGS UNDER SECTION 153C OF THE ACT WERE INITIATED IN THE HANDS OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT CASH DEPOSITS OF RS.1.00 LAKH AND RS.4.00 LAKHS HAVE BEE N MADE ON 26.5.2006 AND 20.6.2006 RESPECTIVELY INTO THE BANK ACCOUNT MA INTAINED BY THE ASSESSEE WITH IOB, VIJAYAWADA. THE ASSESSEE CLAIMED THAT THESE AMOUNTS BELONG TO SHRI M. VENKATA NARAYANA AND THEY WERE GI VEN BY HIM TO THE ASSESSEE TO MEET SOME EXPENSES ON HIS BEHALF. IN S UPPORT OF THE SAID CLAIM, THE ASSESSEE FILED CONFIRMATION LETTER OBTAI NED FROM SHRI M. VENKATA NARAYANA, WHO CONFIRMED THE SAID CLAIM OF THE ASSES SEE. IN THAT LETTER, SHRI M.VENKATANARAYANA CLAIMED THAT HE HAS WITHDRAWN THE IMPUGNED AMOUNTS FROM HIS CAPITAL ACCOUNT KEPT WITH M/S GOWTHAM ACAD EMY, HYDERABAD. THE COPY OF CAPITAL ACCOUNT MAINTAINED WITH M/S GOWTHAM ACADEMY, HYDERABAD, WAS ALSO FILED. THE ASSESSING OFFICER, H OWEVER, WAS NOT SATISFIED WITH THE SAID CLAIM OF THE ASSESSEE AND A CCORDINGLY ADDED THE IMPUGNED AMOUNT OF RS.5.00 LAKHS IN THE HANDS OF TH E ASSESSEE AS UNDISCLOSED INCOME TOWARDS UNEXPLAINED CREDITS. THE SAID ADDITION WAS ALSO CONFIRMED BY THE LEARNED CIT (A). HENCE THE ASSESSE E IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, BY INVITIN G OUR ATTENTION TO PAGES 32 TO 37 OF THE PAPER BOOK COMPILED BY THE AS SESSEE, SUBMITTED THAT THE ASSESSEE HAS DULY SUBSTANTIATED HIS CLAIM THAT THE IMPUGNED AMOUNTS ITA NO.287 OF 2010 D PADMANABHAIAH VIJAYAWADA PAGE 3 OF 5 BELONG TO SHRI M. VENKATA NARAYANA WITH NECESSARY E VIDENCES. HOWEVER, THE ASSESSING OFFICER HAS REJECTED THE SAID CLAIM O F THE ASSESSEE WITHOUT FINDING FAULT WITH THE SAID DOCUMENTS AND EVEN WITH OUT EXAMINING SHRI M.VENKATANARAYANA, WHO CLAIMED TO BE THE OWNER OF T HE IMPUGNED AMOUNTS. ACCORDINGLY THE LEARNED AUTHORISED REPRES ENTATIVE PRAYED FOR THE DELETION OF THE IMPUGNED ADDITION OF RS.5.00 LAKHS. THE LEARNED AUTHORISED REPRESENTATIVE ALSO INVITED OUR ATTENTIO N TO THE PETITION FILED BY THE ASSESSEE FOR ADMISSION OF AN ADDITIONAL GROUND AND SUBMITTED THAT THE SAID ADDITIONAL GROUND MAY ALSO BE CONSIDERED WHILE DISPOSING THE APPEAL OF THE ASSESSEE. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THE IMPUGNED AMOUNTS WERE CLAIMED TO HAVE BEEN WITHDRAWN FROM M/S GOWTHAM ACADEMY, HYDERABAD ON TH E SAME DAY IN WHICH THEY WERE FOUND DEPOSITED IN THE BANK ACCOUNT MAINTAINED AS VIJAYAWADA. THE LEARNED D.R FURTHER SUBMITTED THAT VIJAYAWADA IS LOCATED FAR AWAY FROM HYDERABAD AND HENCE IT WOULD NOT BE P OSSIBLE TO DEPOSIT THE MONEYS TAKEN FROM HYDERABAD INTO THE ACCOUNT MAINTA INED AT VIJAYAWADA WITHIN THE BANKING HOURS ON THE SAME DAY. SINCE TH E CLAIM OF THE ASSESSEE WAS BEYOND THE SCOPE OF HUMAN PROBABILITIES, THE LE ARNED CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. ACCORDINGLY HE PRAYED THAT THE ORDER OF THE LEARNED CIT(A) SHOULD BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE CLAIM OF THE ASSESSEE IS THAT THE IMPUG NED AMOUNTS ACTUALLY BELONG TO SHRI M. VENKATA NARAYANA. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE HAS FILED CONFIRMATION LETTER OBTAINED FRO M THE SAID PERSON. IN THE SAID CONFIRMATION LETTER, SHRI M. VENKATA NARAYANA HAS STATED THAT THESE AMOUNTS WERE WITHDRAWN BY HIM FROM HIS CAPITAL ACCO UNT AVAILABLE WITH M/S GOWTHAM ACADEMY, HYDERABAD. THE COPY OF CAPITAL ACC OUNT OF SHRI M.VENKATANARAYANA AS AVAILABLE WITH M/S GOWTHAM ACA DEMY WAS ALSO FILED. HOWEVER, WE NOTICE THAT THE ASSESSING OFFICER HAS R EJECTED THE SAID CLAIM OF THE ASSESSEE BY DRAWING SOME INFERENCES, I.E. THE A SSESSING OFFICER HAS FAILED TO EXAMINE THE SAID DOCUMENTS AND ALSO FAILE D TO EXAMINE SHRI M. ITA NO.287 OF 2010 D PADMANABHAIAH VIJAYAWADA PAGE 4 OF 5 VENKATA NARAYANA, WHO HAS CLAIMED TO BE THE OWNER O F THE IMPUGNED AMOUNTS. IN OUR VIEW, WHEN A PERSON CLAIMS TO BE OW NER OF THE IMPUGNED DEPOSITS, THE ASSESSING OFFICER SHOULD EXAMINE THE SAID PERSON IN ORDER TO ASCERTAIN THE TRUTH OF THE CLAIM. IN THESE CIRCUMST ANCES, WE ARE OF THE VIEW THAT THE ISSUE NEEDS TO BE CONSIDERED AFRESH BY DUL Y CONSIDERING THE CLAIM OF THE ASSESSEE AND ALSO BY EXAMINING SHRI M. VENKA TA NARAYANA. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED C IT (A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO EXAMINE THE ISSUE AFRESH IN ACCORDANCE WITH LAW BY AFFORDING NE CESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. THE ASSESSEE HAS MOVED A PETITION FOR ADMIS SION OF FOLLOWING ADDITIONAL GROUND. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AD DITION OF RS.5,00,000 TOWARDS UNEXPLAINED DEPOSITS IN BANK AC COUNT CANNOT BE MADE UNDER SECTION 68 OF THE INCOME TAX AC T, 1961, IN AS MUCH AS THE SAID PROVISIONS CAN BE INVO KED ONLY WITH REGARD TO CASH CREDITS IN BOOKS OF ACCOUNT AND BANK ACCOUNT IS NOT A BOOK OF ACCOUNT. THUS, THE CONTENTION OF THE ASSESSEE IN THIS ADDITI ONAL GROUND IS THAT THE BANK ACCOUNT CANNOT BE TREATED AS BOOKS FOR THE P URPOSE OF INVOKING SEC. 68 OF THE ACT. IN THIS REGARD, WE EXTRACT BELOW THE OBSERVATIONS MADE BY THE SPECIAL BENCH IN THE CASE OF MANOJ AGGARWAL VS. DY. CIT (DELHI) (113 ITD 377): 26. THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE BEFORE US WAS THAT THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND THE DEPOSIT WERE FOUND ONLY IN THE ASSESSEES B ANK STATEMENT WHICH CANNOT BE CONSIDERED AS THE BOOKS OF ACCOUNT OF THE ASSESSEE AND, THEREFORE, SECTION 68 WAS NOT APPLICA BLE. OUR ATTENTION WAS DRAWN TO THE CONFIRMATION LETTERS PLA CED AT PAGES 159 AND 160 OF THE PAPER BOOK. WE ARE HOWEVER UNAB LE TO ACCEPT THE ARGUMENT. THOUGH SECTION 68 OF THE ACT MAY NOT BE STRICTLY APPLICABLE SINCE THE ASSESSEE WAS NOT MAINTAINING A NY BOOKS OF ACCOUNT AND THE BANK STATEMENT CANNOT BE CONSIDERED AS THE ASSESSEES BOOKS OF ACCOUNT, ON THE BASIS OF THE JU DGMENT OF THE SUPREME COURT IN THE CASE OF A.GOVINDARAJULU MUDALI AR V. CIT (1958) (34 ITR 807), IT IS THE ONUS OF THE ASSESSEE TO EXPLAIN THE CASH RECEIVED BY HIM AND IF THERE IS NO EXPLANA TION OR ACCEPTABLE EVIDENCE TO PROVE THE NATURE AND SOURCE OF THE RECEIPT, THE AMOUNT MAY BE ADDED AS THE ASSESSEES INCOME ON GENERAL PRINCIPLES AND IT IS NOT NECESSAR Y TO ITA NO.287 OF 2010 D PADMANABHAIAH VIJAYAWADA PAGE 5 OF 5 INVOKE SECTION 68, NOR IS IT NECESSARY FOR THE INCOME TAX AUTHORITIES TO POINT OUT THE SOURCE OF THE MONIES R ECEIVED. EVEN IF SECTION 68 IS NOT APPLICABLE, THE CASH DEPOSIT IN T HE BANK CAN BE ASKED TO BE EXPLAINED BY THE ASSESSEE UNDER SECTION 69 OR SECTION 69B OF THE ACT. THE DECISION OF SPECIAL BENCH DECISION IS BINDING O N THE DIVISION BENCH OF THE TRIBUNAL. ACCORDING TO THE DECISION OF THE SPE CIAL BENCH CITED ABOVE, THE ASSESSEE IS UNDER AN OBLIGATION TO EXPLAIN THE NATURE AND SOURCE OF DEPOSITS FOUND IN HIS BANK ACCOUNT. HENCE, WE REJE CT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREA TED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 3/6/2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 3 RD JUNE, 2011. COPY TO 1 SRI D. PADMANABHAIAH, D.NO. 54-16-8/25/6 BHARATHI NAGAR, VIJAYAWADA 2 THE ASTT. COMMISSIONER OF INCOME TAX, CENTRAL CIR CLE, VIJAYAWADA 3 4. THE CIT CENTRAL, VISAKHAPATNAM THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM