ITO, Ward-1, Kurnool, Kurnool V. S.Shakir Basha, Kurnool, Kurnool

ITA 309/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2297 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 16-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJALA SAHU
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Business income; Source of fund
• Section: 143(3); 68; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 309/HYD/2016 ASSESSMENT YEAR: 2011-12 INCOME-TAX OFFICER, WARD 1, KURNOOL. VS. S. SHAKIR BASHA, KURNOOL. PAN AIBPB 7235K (APPELLANT) (RESPONDENT) REVENUE BY : SMT. ANJALA SAHU ASSESSEE BY : SHRI B. SATYANARAYANA MURTHY DATE OF HEARING : 05-07-2017 DATE OF PRONOUNCEMENT : 31-07-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS IS AN APPEAL OF THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(A) - KURNOOL , HYDERABAD, DATED 11 TH DECEMBER, 2015 FOR AY 2011-12. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE AY 20 11-12 ON 30/09/2011 ADMITTING AN INCOME OF RS. 4,97,920/-. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED U/S 143(3) O F THE IT ACT ON 19/03/2014 AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 53,57,524/- AS AGAINST RS. 5,97,920/- DECLARED BY T HE ASSESSEE BY MAKING VARIOUS ADDITIONS INCLUDING THE ADDITION OF RS. 39,75,000/- ON ACCOUNT OF DEPOSITS IN ING VYSYA BANK, WHICH IS THE SUBJECT MATTER IN THE APPEAL OF THE REVENUE. 2 ITA NO. 309/H/16 S. SHAKIR BASHA 2.1 THE ASSESSEE MADE CASH DEPOSITS OF RS.39,75,000/- IN SB A/C. NO.311010117609 WITH ING VYSYA BANK, KURNOOL. THE A SSESSING OFFICER NOTED THAT THE TRANSACTIONS IN THIS ACCOUNT WERE NOT REFLECTED IN THE RETURN OF INCOME. THE AO ALSO NOTED THAT THE DEPOSITS WERE MADE FROM JUNE, 2010 TO MARCH, 2011 AS DETAILED IN THE ASSESSMENT ORDER ON TWENTY THREE OCCASIONS. THE ASSESSING OFFI CER FURTHER NOTED THAT AGAINST EACH CASH DEPOSIT IN KURNOOL, THERE WA S IMMEDIATE WITHDRAWAL ON THE SAME DAY OR IN THE SUBSEQUENT DAY S BY WAY OF ATM WITHDRAWALS AT HYDERABAD. THE ASSESSING OFFICER THE REFORE CONSIDERED THE ENTIRE WITHDRAWALS PERTAINING TO EAC H CASH DEPOSIT IN THE SAID BANK ACCOUNT HAVE BEEN SPENT OUT. ACCORDIN GLY, THE ASSESSING OFFICER HELD THAT THE ASSESSEE MADE THE C ASH DEPOSITS FROM HIS UNEXPLAINED SOURCES OF INCOME TO MEET HIS EXPLAINED PURPOSES AND HENCE TREATED THE ENTIRE CASH DEPOSITS AS FROM UNEXPLAINED SOURCES AND MADE THE ADDITION. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) AND FILED WRITTEN SUBMISSI ONS BEFORE THE CIT(A), WHICH WERE EXTRACTED BY THE CIT(A) AT PAGES 3 TO 8 OF HIS ORDER. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E WITH REGARD TO CASH DEPOSIT AT KURNOOL AND THE WITHDRAWALS AT H YDERABAD AS DETAILED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER'S OBSERVATION T HAT AS AGAINST EACH DEPOSIT AT KURNOOL THERE IS IMMEDIATE WITHDRAW AL IN HYDERABAD FROM ATM, HOWEVER, THE ASSESSING OFFICER HAS NOT AD VERSELY COMMENTED ON ASSESSEE'S SUBMISSION THAT THE PURCHAS ES OF PEN DRIVES AND MEMORY CARDS AND OTHER PERIPHERALS WERE PURCHASED IN HYDERABAD. THE CIT(A) NOTED THAT THERE IS CLEAR NE XUS BETWEEN DEPOSITS AT THE PLACE OF ASSESSEE'S BUSINESS AT KUR NOOL AND WITHDRAWALS AT THE PLACE WHERE PURCHASES WERE MADE VIZ., HYDERABAD, AND THEREFORE, INCLINED TO ACCEPT THE SU BMISSION OF THE 3 ITA NO. 309/H/16 S. SHAKIR BASHA ASSESSEE THAT THE IMPUGNED CASH DEPOSITS ARE FROM O UT OF THE ASSESSEES SALE PROCEEDS. 4.1 FURTHER, THE CIT(A) OBSERVED THAT ASSESSEE ALS O SUBMITTED THAT THE ASSESSING OFFICER HAS TREATED THE DEPOSITS OF R S.39,75,000/- ARE FROM UNEXPLAINED SOURCES AND ADDED TO THE INCOME AN D ALSO SUBMITTED THAT ONCE THE INCOME OF THE ASSESSEE FROM HIS BUSINESS IS ESTIMATED NO ADDITIONS FROM THE SAME BOOKS CAN BE M ADE U/S 68. THE CIT(A) NOTED THAT THE ASSESSEE SUBMITTED THAT AFTER REJECTING THE BOOKS AND ESTIMATING THE INCOME OF THE ASSESSEE, TH E AO CANNOT MAKE ANY ADDITION ON ACCOUNT OF UNEXPLAINED ENTRIES . IN THIS REGARD, THE ASSESSEE RELIED UPON THE JUDGMENTS OF VARIOUS H IGH COURTS AND TRIBUNALS. 4.2 IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) H ELD AS UNDER: 5.6 CONSIDERING THE FACTS, ISSUES AND CIRCUMSTANCE S OF THE INSTANT CASE WHICH HAS BEEN BROUGHT OUT SUPRA THERE IS MERIT IN THE CONTENTION OF THE ASSESSEE. THE SUBMISSIONS OF THE AR AND THE FACTS AND ISSUES ARE QUITE CLEAR. THERE IS FORC E IN THE ASSESSEE'S AR'S ARGUMENT THAT WHEN BOOK RESULTS ARE REJECTED AND INCOME ESTIMATED THE ASSESSING OFFICER IS NOT J USTIFIED IN RELYING ON THE REJECTED BOOKS TO TREAT THE DEPOSITS AS UNEXPLAINED SOURCE. THE ASSESSEE'S AR ALSO PLACED R ELIANCE ON THE BINDING DECISIONS OF THE HONBLE AP HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS, 232 ITR 776 AND MADDI SUD ARSANAM OIL MILLS CO. VS. CIT, 37 ITR 369. IN THE LIGHT OF THE ABOVE STATED FACTS, ISSUES AND CIRCUMSTANCES, THE ADDITIO N OF CASH DEPOSITS OF RS. 39,75,000/- IS DELETED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) FAILED TO APPRECIATE THAT CASH CREDI T CANBE ASSESSED U/S 68 OF THE I.T. ACT, 1961, EVEN WHEN BU SINESS INCOME IS ESTIMATED, WHEN THE CASH CREDITS ARE FROM UNDISCLOSED BANK ACCOUNT/SOURCES. THIS VIEW WAS HEL D BY THE SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMED HAN IF VS. CIT REPORTED IN 50 ITR 1; AP HIGH COURT IN THE CASE OF CIT VS. DEVI PRASAD VISWANATH PRASAD REPORTED IN 72 ITR 194 AND ALSO 4 ITA NO. 309/H/16 S. SHAKIR BASHA AP HIGH COURT IN THE CASE OF CIT VS. MADURI RAJAIAH GARI KISTAIAH REPORTED IN 120 ITR 294. 2. THE C1T(A), KURNOOL FAILED TO APPRECIATE THE FAC T THAT THE ENTIRE CASH DEPOSITS OF RS.39,75,000/- DEPOSITED IN ING VYSYA BANK SB ACCOUNT, ARE NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND NO INCOME IS ESTIMATED BY THE AO O N THESE DEPOSITS. THE ASSESSEE HAS NOT FURNISHED ANY EXPLAN ATION ON THE SOURCES FOR THESE CASH DEPOSITS AND HENCE THE A .O. HAS RIGHTLY ADDED THESE CASH DEPOSITS AS UNEXPLAINED CA SH CREDITS U/S 68 OF THE I.T. ACT, 1961. 6. LD. DR SUBMITTED THAT LD. CIT(A) HAS ERRED IN DE LETING THE ADDITION MADE U/S 68 AS THE AO CAN MAKE ADDITION U/ S 68 EVEN THE INCOME IS ESTIMATED BY REJECTING BOOKS OF ACCOUNT. SHE RELIED ON THE CASE LAW M/S HYCONS INFRASTRUCTURE (INDIA) LTD., IT A NO. 1787/HYD/2011. 7. LD. AR RELIED ON THE ORDER OF CIT(A) AND ALTERNA TIVELY, SUBMITTED THAT DEPOSITS CAN BE TREATED AS BUSINESS RECEIPTS A ND INCOME CAN BE ESTIMATED AS DONE FOR THE OTHER BANK DEPOSITS. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. IT IS FACT THAT THE ASSESSEE HAS MADE DE POSITS IN THE BANK ACCOUNT MAINTAINED WITH ING VYSYA BANK , KURNOOL. A T THE SAME TIME, THERE IS CORRESPONDING WITHDRAWALS. AO HAS MADE THE ADDITION BY INVOKING SECTION 68 CONSIDERING ONLY THE DEPOSITS. LD. CIT(A) HAS DELETED THE ABOVE ADDITION BY OBSERVING THAT WHEN B OOK RESULTS ARE REJECTED AND INCOME ESTIMATED, AO CANNOT MAKE ANY A DDITION ON ACCOUNT OF UNEXPLAINED SOURCES BY RELYING ON THE D ECISIONS IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA) AND MADDI SUD ARSANAM OIL MILLS (SUPRA). ON CAREFUL CONSIDERATION, THE INCOME IS ESTIMATED FOR BUSINESS INCOME FOR WHICH THE PROVISIONS OF INCOME TAX APPLIES FROM SECTION 28 TO SECTION 44DB. AS PER VARIOUS DECISION S OF JUDICIAL FORUMS, AO CANNOT INVOKE PROVISIONS FROM SECTION 28 TO 44DB WHILE ESTIMATING INCOME. AO CAN INVOKE OTHER PROVISIONS I N THE IT ACT AFTER ESTIMATING THE INCOME. IN THIS CASE, AO CAN INVOKE SECTION 68 WHICH 5 ITA NO. 309/H/16 S. SHAKIR BASHA IS OUTSIDE THE INCOME FROM BUSINESS/PROFESSION AND DEEMING PROVISION. ACCORDINGLY, GROUND NO. 1 IS ALLOWED. 8.1 COMING TO THE FACTS OF THE CASE, ASSESSEE HAS M AINTAINED TWO SETS OF BANK ACCOUNT AND FAILED TO BRING THE TRANSA CTIONS DONE THROUGH ING VYSYA BANK. NOWHERE IN THE ASSESSMENT ORDER, AO HAS BROUGHT ON RECORD THAT THE ASSESSEE HAS OTHER SOURCE OF INC OME, BUT, MADE ADDITION BASED ON DEPOSITS OVERLOOKING THE CORRESPO NDING WITHDRAWALS. IN THE ABSENCE OF ANY OTHER SOURCE FOR SUCH DEPOSIT, WE ARE INCLINED TO TREAT THE SAME AS BUSINESS RECEIPT S AND WITHDRAWALS. ACCORDINGLY, WE DIRECT AO TO ESTIMATE THE INCOME SI MILAR TO THE ESTIMATION OF INCOME FOLLOWED BY HIM FOR OTHER GROS S RECEIPTS OF THE ASSESSEE. ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 31 ST JULY, 2017. KV COPY TO:- 1) ITO, WARD 1, AAYKAR BHAVAN, OPP. CHILDRENS PA RK, NR PET, KURNOOL. 2) SRI S. SHAKIR BASHA, 40/321-5A, ABDULLAH KHAN ES TATE, PARK ROAD, KURNOOL 3) CIT(A), KURNOOL. 4 PR. CIT, KURNOOL. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE 6 ITA NO. 309/H/16 S. SHAKIR BASHA S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER