Sri Ramesh Harish , Bangalore V. Income Tax Officer Ward-2(1), Bangalore

ITA 3114/BANG/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0023 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 18-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OSD
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Opportunity of being heard; Peak credit
• Section: 143(3); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.3114/Bang/2018 Assessment year : 2011-12 Shri Ramesh Harish, #54/5, 7 th Cross, Lakshmi Road, Shanthinagar, Bengaluru-560 027. PAN –AAUPH 4344 N Vs. The Income-tax Officer, Ward-2(1), Bengaluru. APPELLANT RESPONDENT Assessee by : Shri V Srinivasan, Advocate Revenue by : Shri Sankar Ganesh K, JCIT(DR OSD) Date of hearing : 03.01.2022 Date of Pronouncement : 18.01.2022 O R D E R Per Beena Pillai, Accountant Member This appeal by the assessee is directed against the order of the CIT(A) dated 20/9/2021 for the asst. year 2011-12. 2. The assessee filed a return of income electronically before the Income Tax Office Ward (2) declaring an income of Rs.16,96,522/- on 17/10/2011 and also filed ITA No.3114/Bang/2018 Page 2 of 14 revised return on 24/12 2011 declaring an income of Rs.16,96,522/-. The AO completed the asst. u/s 143(3) of the Income-tax Act 1961 (the Act) making various additions to the tune of Rs.1,03,14,544/- as given below (i) Cash Deposits - Rs.70,01,500/- (ii) EPF and ESI - Rs.11,72,222/- (iii) Vehicle Tax - Rs. 48,000/- (iv) Interest on Other Loans - Rs. 3,81,233/- (v) Chapter VIA claim - Rs. 1,00,000/- (vi) Depn & Int on vehicles - Rs. 16,11,589/- 3. Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A), who partially allowed the appeal and confirmed the below additions:- (i) Unexplained cash deposit u/s.69 -Rs.70,01,500/- (ii) Unsubstantiated claim of Vehicle Tax -Rs. 48,000/- 4. Now the assessee is before us, having issues against the additions made by the CIT(A) as mentioned herein above. 4.1. The assessee is an individual carrying on the business of garbage transport contract with Bangalore Mahanagra Palike. The case of the assessee was selected ITA No.3114/Bang/2018 Page 3 of 14 for scrutiny where the cash deposit of Rs.70,01,500 was added as unexplained income u/s.69 by the AO 4.2. The AO made the additions since he was not convinced by the facts stated by the assessee in his letter dated 17/12/13 wherein the assessee has mentioned that “This property which I purchased belonged to Mr. M Seetharamaiah. In view of my desire to purchase the property I was after him since a few years before purchase and he was promising to sell the property and dodging me for one reason or the other. For the reasons best known to him initially, he gave me a sum of Rs.10,00,000/- in cash and wanted me to deposit in my bank account and give him a cheque in his favour. Since, I was interested in purchasing the aforesaid property and to please him I obliged in depositing the money given by him in cash in my account No.6862 in Hanumanth Nagar Co-operative bank limited, Bangalore and gave him a cheque. There afterwards, he wanted me to repeat the act and every time after my issuing the cheque in his favour, he used to give me Rs.10,00,000/every time and wanted me to deposit in my account and issue him a cheque, which I did. This act of depositing the cash received from him and issuing a cheque came to be repeated in his favour and the deposits to the extent of Rs.70,00,000/- represents the funds provided by him to deposit in my bank account. I do not really know what is the object and motive in requiring me to deposit the cash in my bank account and issuing the cheque in his favour. The amount issued to him by way of cheque is not shown as an asset in my balance sheet and similarly the amount received from him by way of cash is also not shown in the balance sheet. In other words, neither the asset nor the liability is shown on the two sides ITA No.3114/Bang/2018 Page 4 of 14 of the balance sheet. Your honour may kindly summon Mr. M. Seetharamaiah and ascertain from him as to the reason for requiring me to do this act of giving him the cheque and depositing the cash given by him in my bank account, which is a circular transaction." The AO concluded the assessment stating that the assessee neither produced any details /proofs not appeared in response to notices issued and added the sum of Rs.70,01,500 as unexplained income u/s.69. 4.3. Before the CIT(A) the assessee filed an sworn affidavit of Shri M Seetharamiah where he has stated that one Sri Srinivas had given him a sum of Rs.10,00,000/- on 09/03/2011 and this money was deposited by him in the Account of Sri Ramesh Harish on the someday i.e. on 09/03/2011. Sri Ramesh Harish had issued a bearer cheque in the name of Shri Seethramaiah. On encashing this bearer cheque, the cash was redeposited in the account of Sri Ramesh Harish and this transaction was repeated another six times i.e. on 09/03/201, 01/03/2011, 11/03/2011, 12/03/2011 (Twice) and on 13/03/2011. It is further stated that this arrangement was done on the advice of Sri Srinivas in order to Secure loan. 4.4 To verify the details the CIT(A) called for a remand report from the Income Tax Officer Ward 7(2)(2) (ITO). ITA No.3114/Bang/2018 Page 5 of 14 Before the ITO the assessee along with Shri M Seetharamaiah appeared for cross examination and also submitted evidences. The ITO after cross examining Shri M Seetharamaiah and verifying the evidences submitted the report to the CIT(A). In the remand report the ITO made the following observations: (i) Shri Seetharamaiah, has not stated any reasons for involving in such a huge risky transaction, when he is already in serious debts. (ii) As per the affidavit filed by Sri Seetharamaiah, he had taken Rs.10,00,000 from Sri Srinivas on 09/03/2011 (no security was given by Sri Seetharamaiah to Sri Srinivas) and deposited the some in the account of Sri Ramesh Harish (without knowing Sri Ramesh Harish personally and Without seeing him) (iii) In his answer to Question No.5, in the statement recorded on 13/04/2011, Sri Seethararnaiah has stated that "Sri Ramesh Harish would give the cheques on the Bank Account in Hanurnantha Nagar Co- operative Society Bank Ltd., in my name and I will draw the money and the money will be re-deposited in the Sri Ramesh Harish Bank account in the some Bank". This statement of Shri Seetharamaiah is clearly in contradiction to the fact. (iv) On verification of the Pay in slips, it is seen that none of the cash deposits relevant to the issue on hand is made by Sri Seethararmaiah, as in none of the slips he has signed against "Depositor". (v) In the same manner when the bearer cheques issued in the name of 'Sri Seetharamaiah were encashed across the table in the Bank, they were not signed by Sri Seetharamaiah. ITA No.3114/Bang/2018 Page 6 of 14 (vi) Shri Seetharamaiah could not explain as to what happened to the money he had received on 16/03/2011 from Shri Ramesh Harish, as it was not re-deposited as claimed. (vii) Sri Seetharamaiah could not substantiate his claim that the money deposited is the same money that was withdrawn. 4.5 Before the CIT(A) the assessee filed a rejoinder in reply to the remand report from the ITO where the assessee made the following submissions (i) That the assessee was very keen to purchase a property which belonged to one Sri M.Seetharamaiah, who was dodging him for one reason or other and to please him he agreed to have a sum of Rs.10,00,000 cash deposited in his bank account No.6862, Hanurnanthanagar Co-operative Bank and immediately thereafter the assessee issued a cheque of Rs.10,00,000/- in favour of Sri M.Seetharamaiah, since the money belonged to the aforesaid Sri M.Seetharamaiah. (ii) That he does not know the object and motive with which the aforesaid Sri M.Seetharamaiah wanted the cash to be deposited and return by means of a cheque which transaction was repeated 7 times. (iii) That a statement recorded from Sri M.Seetharamaiah on 13.04.17, which statement fully endorses the claims of the assessee. (iv) That the learned AO failed to appreciate that Sri M.Seetharamaiah was already in huge debt and that he had nothing to lose since the initial money to deposit funds in the account of the assessee did not came from him but from Sri Srinivas, ITA No.3114/Bang/2018 Page 7 of 14 (v) That the learned A.O. failed to appreciate that, in terms of the scheme devised by Sri Srinivas, all that Sri M.Seetharamaiah had to do was to sign the back of the cheques drown in his name and return it back to Sri Srinivas, who would take care of the balance leg work such as drawing from the bank, etc. (vi) That these reasons adduced by the learned A.O. are merely on suspicion and surmise, assumptions and presumptions and contrary to the facts on record. (vii) That the learned A.O. has not brought anything on record to show that the explanations tendered by the appellant and confirmed by Sri M.Seetharamaiah are factually incorrect or inconsistent. (viii) That the A.O. failed to appreciate that Sri M.Seetharamaiah had never said in any statement that he had personally deposited the money. All that was stated by Sri M.Seetharamaiah was that certain deposits were made in the account of the appellant which would be withdrawn by a cheque drawn in the name of Sri M.Seetharamaiah, which he would have to return. Since, all this was done at the instance of Sri Srinivas and the signature of Sri Srinivas also appears in several cheque counter foils, it can be only presumed that Sri Srinivas was the remitter of the money in the bank account and similarly was the person who physically withdrew the money from the bank account after the signature of Sri M.Seetharamaiah was obtained on the back of the cheque. Thus, nothing in Q.No.5 to suggest that the facts stated by the appellant and Sri M.Seetharamaiah are incorrect. 4.6. The Ld.CIT(A) did not accept the contentions of the assessee on the ground that the assessee could not prove that the amounts were deposited by Mr. M Seetharamaiah ITA No.3114/Bang/2018 Page 8 of 14 as his signature was not there in any of the deposit slips and also that Mr. M Seetharamaiah does not have the credit worthiness to deposit such huge amount for which the source was not explained. 4.7 The Ld.CIT(A) held that the AO has rightly observed that no prudent person will take or give sum of Rs.10 lakhs from a person with whom he had no business transaction and whom he has never met earlier. The Ld.CIT(A) agreed with the AO that merely a statement given M Seetharamaiah will not prove the genuineness of the claim made by the assessee and confirmed the addition of Rs.70,01,500/-. 4.8. Before us, the Ld.AR brought to our notice the statement of oath given by M Seetharamaiah, where in response to question No.4 to M Seetharamaiah stated that Shri Ramesh Harish is not related to him and met him only when he executed sale deed in favour of Shri Ramesh Harish on his property at Bengaluru-560 073 which transaction was brokered by one Shri Srinivas. The Ld.AR contended that the transaction of cash deposit of Rs.10 lakhs in the account of the assessee is independent sale transaction happened between the assessee and Mr. ITA No.3114/Bang/2018 Page 9 of 14 M Seetharamaiah and that the assessee took a loan from Tata Capital Housing Finance Ltd for the purpose purchasing the property from Mr. M Seetharamaiah. The Ld.AR also brought to our notice that a bank statement which reflected the transactions of deposit and withdrawals of Rs.10 lakhs on 7 occasions in the short period of time from 9/3/2011 to 16/3/2011, which is the subject matter of addition. It is submitted that it is the same amount circulated repeatedly by Mr. M Seetharamaiah at the advice of one Sri Srinivas and it is an independent transaction. Considering the time gap between the deposit and withdrawals of said amount, the Ld.AR substantiated his claim based on the Affidavit given by M Seetharamaiah where he has stated these facts in point number 6 & 7 of the sworn statement. The Ld AR further submitted that the above stand is also supported by what is mentioned by Mr. M Seetharamaiah in the statement of oath recorded where while answering to question Nos.6 & 10 he has answered as under Q.No.6 What is the nature of such transaction Ans. The nature of transaction is that Sri Srinivas gave the money initially of a about Rs.10,00,000/- which was deposited in the bank account of Sri Ramesh Harish in Hanumantha Nagar Co-operative Bank. A cheque use to be taken from Sri Ramesh Harish which were bearer cheque in my name. The money so drawn from the Bank account of Sri Ramesh Harish, would be again redeposited by way of Cash in the Bank account of Sri Ramesh Harish. in Hanumantha Nagar Co- ITA No.3114/Bang/2018 Page 10 of 14 operative Bank Probabably a record was created by Sri Srinivas that was in business and received monies from Sri Ramesh Harish to secure loans financial In fact. In fact I have not received any money at all. To my recollection we have done it as many as six to seven times. The Bank account in Hanumanthanagar cooperative bank of Sri Ramesh Harish would indicate the exact amount. This we have done for six to seven times. I got a doubt since once I was cheated by Sri Venkatesh Babu, Son of Smt. Prema Leela, therefore, I did not want such transactions any further. Since, .1 was in huge debts, so I told him to execution of sale in favour of Sri Ramesh Harish which I have executed. In fact Smt. Prema Leela, has filed a case against me in the court. Sri Srinivas told me not to disclose the earlier transaction to Sri Ramesh Harish, accordingly I did not tell him. After clearning the liability I left the Bangalore once and for all and I am now working as an agricultural labourer at Village in Tumkur. I became so depressed, I did not attend the court proceedings also as I left it to God and my fate. Q.No.10: Is there any agreement drawn between you and Sri Ramesh Harish for making such transaction? If so produce the same? If not please explain as to how such huge transactions are being made Ans. No agreement in writing was drawn between me and Sri Ramesh Harish. Sri Srinivas never allowed me to meet Sri Ramesh Harish, prior to the execution of the sale deed. I was in distress financially and I did not understand what was the plan of Sri Srinivas to Bail me from out of my problems, as directed by him I use to encash the cheque issued by Sri Ramesh Harish which use to be collected by Srinivs first and I use to go to the Bank to draw the said money and redeposit the money in the said bank account on the basis of the challan I was not allowed to meet Sri Ramesh Harih and I was not the real beneficiary of encashing the uncrossed cheques given by Sri Harish Ramesh which were again deposited in his Bank account. was steeped in debts and I could not withstand the pressure of the creditors etc. Sri Srinivas came into the scene o help me and therefore with no other go I had accepted his suggestion initially and did what he wanted me to do.” ITA No.3114/Bang/2018 Page 11 of 14 4.9. The Ld.DR argued that in the documents submitted the signature of Mr. M Seetharamaiah in the sworn Affidavit, Sale Deed and the withdrawals slips did not match and that the whole transaction is orchestrated and hence, the addition made by the AP u/s.69 of the Act is justified. 4.10. We have heard both the parties and perused the materials on record. The AO and CIT(A) did not cross verify or question the signature mis-match of Mr. M Seetharamaiah in various records as argued by the Ld.DR though the same is mentioned in the orders. No statements were recorded or verification was done of Sri Srinivas who according to the sworn statement of Mr. M Seetharamaiah operated the whole transaction to understand the basic nature of the transaction and the intention behind the repeated deposit of the cash. The contrary evidence to prove that whether it is not the same Rs.10,00,000 which got rotated 7 times and that they are 7 separate deposits is not produced before us. The claim of Mr. M Seetharamaiah that this whole transaction is done to show a better financial position is not contradicted by the CIT(A) / AO whereas the amount is ITA No.3114/Bang/2018 Page 12 of 14 not at all routed through Mr. M Seetharamaia’s bank as claimed in the sworn statement of Mr. M Seetharamaiah. 4.11 Be that as may be we note that the revenue could not establish that the money deposited into the bank account of the assessee is not out of the withdrawals. Admittedly there are withdrawals and deposits in the bank account of Rs.10,00,000/-. We are of the view that when there are deposits and withdrawals from the cash book and the source of cash deposits in the cash account is explained, the earlier withdrawal of cash can be explained as source for the subsequent deposit of cash, provided there are no evidence or the circumstances to show that the earlier withdrawals could not be available to the assess as a source for the subsequent deposit. The peak credit theory has to take into consideration before treating the entire cash deposit as unexplained cash credit. In such circumstance one has to see the peak credit balance in the cash account and add only peak credit. The peak credit alone would have to be treated as unexplained 4.12. However in the present facts, the source of deposits into assessee’s bank accounts are based on the affidavit ITA No.3114/Bang/2018 Page 13 of 14 given by Shri M Seetharamiah. We note that no other details have been neither furnished by the assessee, nor called for by the AO for verification. Based on the surmises, benefit of peak credit cannot be granted to the assessee. We therefore find it fit and proper to remand this issue to the Ld.AO for proper verification of facts. Assessee is directed to establish the entries in the bank accounts independently. Needless to say that proper opportunity of being heard must be granted to assessee. 5. Ground no.2 for addition towards payment of vehicle tax is not pressed by the assessee and hence we have no reason to interfere with the decision of CIT(A) and the same is upheld. 6. The appeal of the assessee therefore is partially allowed for statistical purposes. 7. In the result, assessee’s appeal is partly allowed Order pronounced in court on 18 th January, 2022 Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, 18 th January, 2022 / vms / ITA No.3114/Bang/2018 Page 14 of 14 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.