Mahesh Kumar, Hyderabad V. ITO,Ward 8(2), Hyderabad

ITA 293/HYD/2014

• Counselvise Citation: 29322514 RSA 2014
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 25-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 293/HYD/2014 ASSESSMENT YEAR : 2009-10 MAHESH KUMAR, HYDERABAD. PAN AGMPM 9822C DY. COMMISSIONER OF INCOME- TAX, CIRCLE 3(3),HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. RAMA RAO REVENUE BY SHRI RAJAT MITRA DATE OF HEARING 09-09-2014 DATE OF PRONOUNCEMENT 19-09-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 08/01/2014 OF CIT(A)-III, HYDERABAD FOR AY 2009-10. 2. ASSESSEE HAS RAISED 7 GROUNDS. GROUND NO. 1 & 7 BEING GENERAL IN NATURE ARE NOT REQUIRED TO BE ADJUDICATE D. 3. GROUND NOS. 2 TO 4 RELATE TO THE ISSUE OF ADDITI ON OF AN AMOUNT OF RS. 25 LAKHS U/S 68 OF THE ACT. 4. BRIEFLY THE FACTS RELATING TO THE ABOVE ISSUE AR E, ASSESSEE IS AN INDIVIDUAL, FOR THE AY UNDER DISPUTE HE FILED HIS R ETURN OF INCOME ON 31/07/2009 DECLARING TOTAL INCOME OF RS. 1,66,550. DURING THE SCRUTINY ASSESSMENT PROCEEDING, AO ON EXAMINING THE INFORMATION 2 ITA NO. 293/HYD/2014 MAHESH KUMAR AVAILABLE ON RECORD NOTICED THAT ASSESSEE HAS SHOWN AN AMOUNT OF RS. 25 LAKHS IN THE LIABILITY SIDE OF THE BALANCE S HEET AS ON 31/03/2009. WHEN THE AO CALLED UPON ASSESSEE TO EXP LAIN THE SOURCE OF THE UNSECURED LOANS OF RS. 25 LAKHS, ASSESSEE SU BMITTED THAT HE IS OWNER OF SOME MULGIES AT RIKAB GUNJ, HYDERABAD, WHI CH HE WANTED TO SELL. IT WAS STATED BY THE ASSESSEE THAT THE AMOUNT OF RS. 25 LAKHS WAS RECEIVED AS ADVANCE FROM PROSPECTIVE BUYERS, WH O WANTED TO PURCHASE THESE MULGIES FROM ASSESSEE. AO ISSUED SUM MONS TO THE PERSONS CONCERNED FROM WHOM ASSESSEE STATED TO HAVE RECEIVED ADVANCES. AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER, THERE WAS NO RESPONSE FROM THE PERSONS TO WHOM SUMMONS WE RE ISSUED. WHEN THIS FACT WAS INTIMATED TO ASSESSEE, HE REQUES TED THE AO TO GRANT HIM OPPORTUNITY TO PRODUCE CONCERNED PERSONS. AS PER ASSESSEES REQUEST, AO HANDED HIM OVER COPIES OF TH E SUMMONS ISSUED TO THE PERSONS FROM WHOM ASSESSEE STATED TO HAVE RECEIVED ADVANCES. HOWEVER, AS STATED BY AO, ASSESSEE COULD PRODUCE ONLY ONE PERSON AND WHO ALSO LEFT IN THE MIDST OF RECORD ING OF STATEMENT BY AO, WITHOUT SIGNING THE STATEMENT. AO, THEREFORE, H ELD THAT THE ASSESSEE HAVING FAILED TO PROVE THE CREDITS WITH EV IDENCE, THE UNSECURED LOAN OF RS. 25 LAKHS HAS TO BE TREATED AM OUNT AS UNEXPLAINED CREDIT U/S 68 OF THE ACT AND ADDED IT T O THE INCOME OF ASSESSEE. THE ADDITION MADE WAS CHALLENGED BEFORE T HE CIT(A). THE CIT(A) ALSO CONFIRMED THE ADDITION BY HOLDING AS UN DER: 5.2 I HAVE SEEN CAREFULLY THE FACTS AND EVIDENCE, F IRST OF ALL, THE ONUS LIES SQUARELY ON THE APPELLANT TO EXPLAIN THE SOURCES AND GENUINENESS OF THE CREDITS APPEARING IN HIS BAL ANCE SHEET. SECTION 68 OF THE INCOME TAX ACT PERTAINS TO ALL TH E CREDITS WHICH MAY HAVE BEEN INTRODUCED DURING THE YEAR. HOW THEY ARE CLASSIFIED IN THE BALANCE SHEET DOES NOT MATTER AS LONG AS THEY ARE CREDITS INTRODUCED DURING THE YEAR. THE APPELLA NT HAS TO EXPLAIN THE IDENTITY OF THE PERSONS GIVING THE CRED IT, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TIONS. 5.3 IN THE CURRENT CASE, IT IS CLEAR THAT THE IDENT ITY OF ONLY ONE PERSON I.E. MR. ASHISH WAS PROVIDED TO THE AO DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS. IN SPITE OF SUMMONS BEIN G ISSUED U/S 131 OF THE IT ACT, ONLY THE AFOREMENTIONED PERS ON APPEARED. 3 ITA NO. 293/HYD/2014 MAHESH KUMAR IT IS ON RECORD THAT WHEN QUESTIONED ABOUT THE DETA ILS OF THE TRANSACTIONS, THIS PERSON ABRUPTLY LEFT THE OFFICE AND DID NOT EVEN SIGN THE STATEMENTS WHICH HE HAD GIVEN. AS IS EVIDENT FROM THE STATEMENT OF THIS PERSON REPRODUCED SUPRA, HE DID NOT HAVE THE CREDITWORTHINESS AND THE SOURCES TO ADVANC E SUCH HUGE AMOUNTS TO THE APPELLANT. THE GENUINENESS OF T HE TRANSACTIONS IS SERIOUSLY IN DOUBT BECAUSE APART FR OM GIVING THE ADDRESS OF ONE PROPERTY, THERE IS NO OTHER EVIDENCE TO SHOW THAT SUCH A PROPERTY DEAL EVER TOOK PLACE. NO COPY OF TH E AGREEMENT TO SELL HAS BEEN PRODUCED, IT IS NOT EVEN CLEAR WHE THER THE PROPERTY IN QUESTION WAS ULTIMATELY SOLD OR NOT, TH E APPELLANT HAS NOT EVEN PROVIDED ANY DETAILS OF WHEN THE PROPE RTY WAS PURCHASED AND WHETHER ANY CAPITAL GAINS HAVE EVER B EEN SHOWN ON THIS PROPERTY. IT IS CLEAR FROM THE ABOVE FACTS THAT THE ENTIRE STORY ABOUT ADVANCE RECEIVED AGAINST THE PURPORTED SALE OF THE PROPERTY IS UNSUBSTANTIATED AND HAS BEEN MANUFACTUR ED BY THE APPELLANT AS A SELF SERVING EXPLANATION. THE TRANSI TION FROM AN EXPLANATION TO FACT HAS TO BE MADE ON THE SHOULDERS OF EVIDENCE AND THE LATTER IS ABSOLUTELY MISSING. IT IS CLEAR T HEREFORE THAT THE CREDITS INTRODUCED ARE NOT EXPLAINED AT ALL AND I A GREE WITH THE AO THAT THE SAME HAVE BEEN RIGHTLY ADDED AS UNEXPLA INED CREDITS. THE ADDITION ON THIS ACCOUNT IS ORDERED TO BE CONFIRMED. 5. LEARNED AR MOSTLY REITERATING THE SUBMISSIONS MA DE BEFORE THE REVENUE AUTHORITIES, CONTENDED THAT AO WAS NOT CORR ECT IN TREATING THE ADVANCES RECEIVED BY THE ASSESSEE AS UNSECURED LOAN . FURTHER, IT WAS SUBMITTED THAT ASSESSEE HAVING FURNISHED THE CO NFIRMATION LETTERS FROM THE PERSONS, WHO ADVANCED THE AMOUNT, AO AS WE LL AS CIT(A) WERE NOT CORRECT IN TREATING THE ADVANCE RECEIVED A S UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. LEARNED AR SUBMITTED THAT IT IS NOT AT ALL A FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENC E. IN FACT, WHEN ASSESSEE PRODUCED THREE PERSONS, AO EXAMINED ONLY O NE LEAVING ASIDE THE OTHER TWO PERSONS PRODUCED BY ASSESSEE. L EARNED AR SUBMITTED THAT MONEY RECEIVED BEING IN THE NATURE O F ADVANCE, TESTS FOR PROVING CASH CREDIT WILL NOT APPLY. FURTHER, LE ARNED AR SUBMITTED, WHEN ULTIMATELY ASSESSEE COULD NOT SALE THE MULGIES TO THE CONCERNED PERSONS, HE REPAID THE ADVANCES IN THE YEAR 2012 TH ROUGH CHEQUES. THUS, IT WAS SUBMITTED BY ASSESSEE THAT ADVANCES HA VING BEEN REFLECTED IN THE BOOKS OF ACCOUNT AND CONFIRMED BY THE CONCERNED PERSONS, ADDITION MADE IS NOT JUSTIFIED. 4 ITA NO. 293/HYD/2014 MAHESH KUMAR 6. LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT AS SESSEE HAVING FAILED TO PRODUCE ANY EVIDENCE TO PROVE INTRODUCTIO N OF CASH AMOUNTING TO RS. 25 LAKHS, IT IS RIGHTLY TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS OF TH E REVENUE AUTHORITIES. AS IS EVIDENT FROM THE ASSESSMENT ORDE R DURING THE ASSESSMENT PROCEEDING, THE AO HAD ISSUED SUMMONS TO THE PERSONS FROM WHOM ASSESSEE STATED TO HAVE RECEIVED ADVANCE OF RS. 25 LAKHS TOWARDS SALE OF MULGIES, HOWEVER, NONE OF THE PERSO NS RESPONDED TO THE SUMMONS ISSUED BY AO. SUBSEQUENTLY, ASSESSEE TH OUGH CLAIMED TO HAVE PRODUCED THREE PERSONS, BUT, AS PER THE VER SION OF THE AO ONLY ONE PERSON, NAMELY, SHRI ASISH KUMAR AGARWAL W AS PRODUCED WHO ALSO LEFT IN THE MIDST OF RECORDING OF STATEMEN T WITHOUT SIGNING THE SAME. BEFORE THE CIT(A) ALSO, ASSESSEE HAS NOT MADE ANY ATTEMPT TO PRODUCE THE PERSONS CONCERNED, TO PROVE THE FACT THAT THE ADVANCES WERE ACTUALLY RECEIVED FROM THOSE PERSONS TOWARDS SALE OF MULGIES. IN THESE CIRCUMSTANCES, ONLY RELYING UPON THE CONFIRMATION LETTERS OF THE PERSONS CONCERNED, IT CANNOT BE ACCE PTED THAT ASSESSEE HAS RECEIVED ADVANCES FROM THEM. MORE SO, WHEN THEY HAVE FAILED TO APPEAR BEFORE THE AO IN RESPONSE TO THE SUMMONS ISS UED. WHEN A CREDIT APPEARS IN THE BOOKS OF ACCOUNT BURDEN IS ON THE ASSESSEE TO PROVE SOURCE AND GENUINENESS OF SUCH CREDIT BY PROD UCING ADEQUATE EVIDENCE. THOUGH, ASSESSEE HAS STATED THAT THE AMOU NTS RECEIVED ARE TOWARDS ADVANCE OF SALE OF MULGIES, BUT, A PERUSAL OF THE BALANCE SHEET WOULD SHOW THAT IT IS ONLY SHOWN AS LIABILITI ES WITHOUT MENTIONING AS ADVANCES. BE THAT AS IT MAY, IT IS T HE DUTY OF THE ASSESSEE TO PROVE, THE AMOUNTS CREDITED IN THE BOOK S OF ACCOUNT, MORE SO, WHEN IT IS RECEIVED IN CASH. THE CONTENTIO N OF THE LEARNED AR THAT SUBSEQUENTLY ASSESSEE HAS PAID BACK THE AMO UNTS TO THE CONCERNED PERSONS IN THE YEAR 2012, THROUGH CHEQUE IS NOT ENOUGH TO 5 ITA NO. 293/HYD/2014 MAHESH KUMAR PROVE THE GENUINENESS OF THE TRANSACTION. FURTHER, ASSESSEES CONTENTION THAT THE PRINCIPLES RELATING TO CASH CRE DIT WILL NOT APPLY TO ADVANCE IS ALSO NOT ACCEPTABLE CONSIDERING THE FACT THAT THE CASH HAS BEEN INTRODUCED IN THE BOOKS OF ACCOUNT, THE SOURCE OF WHICH NEEDS TO BE PROVED. AS THE ASSESSEE HAS NOT PROVED THE SOURC E OF SUCH DEPOSITS WITH ADEQUATE EVIDENCE EITHER BEFORE THE A O OR BEFORE THE FIRST APPELLATE AUTHORITY OR EVEN BEFORE US, WE ARE UNABLE TO ACCEPT THE CLAIM OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A), WHICH IS ACCORDINGLY UPHELD. 8. THE NEXT ISSUE AS RAISED IN GROUND NO. 5 RELATES TO DISALLOWANCE OF CLAIM OF EXPENDITURE OF RS. 2 LAKH TOWARDS IMPROVEMENT COST. 9. DURING ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAS CLAIMED EXPENSES TOWARDS IMPROVEMENT AND COMMISSION OF RS. 2 LAKHS WHILE COMPUTING CAPITAL GAIN. . HOWEVER, AO O BSERVED THAT ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF SUCH EXPENDITURE INCURRED. ACCORDINGLY, HE DISALLOW ED THE AMOUNT OF RS. 2 LAKH AND ADDED IT TO THE INCOME OF ASSESSEE. THE CIT(A) ALSO CONFIRMED THE ADDITION BY OBSERVING THAT ASSESSEE H AS NOT PROVIDED ANY EVIDENCE TOWARDS INCURRING OF THE SAID EXPENDIT URE. 9. LEARNED AR HAS SUBMITTED BEFORE US THAT ASSESSEE IS OWNING LAND ADMEASURING ACRES 16.19 GUNTAS AT RAJAPUR MAND AL, MEHABOOB NAGAR DISTRICT, WHICH WAS DISPOSED OFF DURING THE P REVIOUS YEAR FOR CONSIDERATION OF RS. 6 LAKHS. IT WAS SUBMITTED THAT BEFORE SELLING THE LAND, ASSESSEE INCURRED SOME EXPENDITURE TOWARDS IM PROVEMENT OF LAND BY LEVELING THE GROUND AND REMOVING UNWANTED T REES, BUSHES, SHRUBS, ETC. IT WAS SUBMITTED THAT CONSIDERING THE EXTENT OF LAND, THE EXPENDITURE INCURRED IS REASONABLE. LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF CIT(A). 6 ITA NO. 293/HYD/2014 MAHESH KUMAR 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OT HER MATERIALS ON RECORD. WE ARE OF THE VIEW THAT THE EXPENDITURE INC URRED CANNOT BE DISALLOWED IN ITS ENTIRETY. AS CAN BE SEEN, WHILE A O HAS DISALLOWED THE EXPENSES ON THE GROUND OF NON-SUBMISSION OF EVI DENCE, CIT(A) HAS OBSERVED THAT ASSESSEE COULD NOT PROVIDE DETAIL S OF ANY VOUCHER OR RECEIPT REGARDING ANY MATERIAL PURCHASED. HE HA S FURTHER OBSERVED THAT THE ENTIRE EXPENSES CANNOT BE TOWARDS LABOUR W ITHOUT HAVING ANY ELEMENT OF MATERIAL. HOWEVER, CONSIDERING THE FACT THAT THE EXPENDITURE INCURRED WAS TOWARDS LABOUR FOR LEVELIN G, CUTTING TREES, BUSHES, SHRUBS ETC., WE ARE OF THE VIEW THAT IT WIL L NOT INVOLVE ANY MATERIAL COST. THEREFORE, IN THESE CIRCUMSTANCES, T HE ENTIRE EXPENDITURE INCURRED CANNOT BE DISALLOWED. HOWEVER, KEEPING IN VIEW THE POSSIBILITY OF INFLATING THE EXPENDITURE TO SOM E EXTENT BY ASSESSEE, WE DIRECT THE AO TO DISALLOW 25% OF THE T OTAL EXPENDITURE CLAIMED. THIS GROUND IS PARTLY ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19/09/2014. SD/- SD/- (P.M. JAGTAP) (SAKT IJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 19 TH SEPTEMBER, 2014 KV COPY TO:- 1) MAHESH KUMAR, C/O SHRI S. RAMA RAO, ADVOCATE, F LAT NO. 102 SHRIYAS ELEGANCE, H.NO. 3-6-643, ST. NO. 9, HI MAYATNAGAR, , HYDERABAD 500 029 2) ITO, WARD 8(2), HYDERABAD 3) CIT(A)-III, HYDERABAD. 4) CIT-II, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.