ITO, Ward-2, Kurnool V. P.Bharath Kumar Reddy, Kurnool

ITA 35/HYD/2014

• Counselvise Citation: 3522514 RSA 2014
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 27-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Unexplained cash credit; Opportunity of being heard; Peak credit; Additional evidence
• Section: 68; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 35/HYD/2014 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER, WARD-2, KURNOOL VS SHRI P. B HARATH KUMAR REDDY, MADHAVA NAGAR, KURNOOL [PAN: ALHPP0585P] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR FOR ASSESSEE : S HRI T.CHAITANYA KUMAR, AR DATE OF HEARING : 2 7 - 0 4 - 201 5 DATE OF PRONOUNCEMENT : 08 - 0 5 - 2015 O R D E R PER SAKTIJIT DEY, J.M. : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 25-10-2013 PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, HYDERABAD FOR THE ASSESSMENT YEAR (AY) 2009-10. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE DEPARTME NT IS AS UNDER: '2. THE HON'BLE CIT(A) OUGHT TO HAVE CONFRONTED THE ADDITIONAL EVIDENCE OF 'CASH BOOK' TO THE ASSESSING OFFICER B EFORE ENTERTAINING THE ADDITIONAL EVIDENCE'. 3. BRIEFLY THE FACTS ARE, ASSESSEE IS AN INDIVIDUAL . FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED HIS RETURN OF INCOME ON 18-06-2009 DECLARING TOTAL INCOME OF RS. 1,12,230/- . DURING THE ASSESSMENT PROCEEDINGS, AS NOTED BY THE ASSESSING O FFICER (AO), THE I.T.A. NO. 35/HYD/2014 P. BHARATH KUMAR REDDY :- 2 -: ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE SOUR CE OF THE DEPOSITS APPEARING IN SB A/C IN ICICI BANK AGGREGATING TO RS . 62.32 LAKHS. AS NOTED BY THE AO, IT WAS ALSO MADE CLEAR TO THE ASSE SSEE THAT IN CASE HE FAILS TO FURNISH THE NECESSARY INFORMATION BY 13-12 -2011, THE ASSESSMENT WOULD BE COMPLETED EXPARTE. HOWEVER, SI NCE THE ASSESSEE DID NOT APPEAR AND FURNISH THE REQUIRED INFORMATION EXPLAINING THE SOURCE OF DEPOSITS, THE AO PROCEEDED TO COMPLETE TH E ASSESSMENT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. THE AO BY ADOPTING THE PEAK CREDIT METHOD, ARRIVED AT A PEAK CREDIT OF RS. 41,7 8,385/- IN THE BANK ACCOUNT AND TREATED IT AS UNEXPLAINED CREDIT U/S. 6 8 OF THE INCOME TAX ACT (ACT) AND ADDED IT TO THE INCOME OF THE ASSESS EE FOR THE YEAR UNDER CONSIDERATION. BEING AGGRIEVED OF SUCH ADDITION, A SSESSEE FILED APPEAL BEFORE THE LD.CIT(A). IN COURSE OF HEARING BEFORE FIRST APPELLATE AUTHORITY, ASSESSEE SUBMITTED THAT HE DERIVES INCOM ES FROM LIC COMMISSION AND PETTY CONTRACT WORKS. IT WAS ALSO SU BMITTED, HE MAINTAINS TWO BANK ACCOUNTS ONE IN ICICI BANK, NAVA RANG THEATRE COMPLEX, KURNOOL AND ANOTHER IN SBI, TIF CAMPUS, KU RNOOL. ASSESSEE ALSO SUBMITTED THAT IN THE COURSE OF ASSESSMENT PRO CEEDINGS, THE AO ALLOWED A VERY SHORT TIME FOR FURNISHING THE INFORM ATION. AS A RESULT OF WHICH, ASSESSEE WAS UNABLE TO FURNISH THEM. HOWEVE R, BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE FURNISHED CERTAIN ADD ITIONAL EVIDENCES TO SUBSTANTIATE HIS CLAIM THAT THE DEPOSITS MADE IN TH E BANK ACCOUNTS WERE FROM EXPLAINED SOURCES. LD.CIT(A) ON THE BASIS OF SUBMISSIONS MADE BY THE AO AS WELL AS THE ADDITIONAL EVIDENCES SUBMITTE D, CALLED FOR A REMAND REPORT FROM THE AO. AFTER PERUSING THE REMA ND REPORT SUBMITTED BY THE AO AS WELL AS CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE VIS--VIS THE FACTS AND MATERIALS AVAILABL E ON RECORD, LD.CIT(A) FOUND A PEAK CASH DEFICIT OF RS. 6,20,945/- WHICH C OULD NOT BE EXPLAINED BY THE ASSESSEE. ACCORDINGLY, LD.CIT(A) SUSTAINED ADDITION U/S. 68 TO I.T.A. NO. 35/HYD/2014 P. BHARATH KUMAR REDDY :- 3 -: THE EXTENT OF RS. 6,20,945/- AS AGAINST THE ADDITIO N OF RS. 41,78,385/- MADE BY THE AO. 4. LD. DR SUBMITTED, EXISTENCE OF A SECOND BANK ACC OUNT IN SBI WAS NEVER DISCLOSED BY ASSESSEE BEFORE AO. HE SUBMITTE D, LD.CIT(A) HAS ACCEPTED ASSESSEE'S CLAIM ON THE BASIS OF CASH BOOK PRODUCED BEFORE HER WITHOUT GIVING AN OPPORTUNITY TO THE AO TO VERIFY, HENCE, ORDER OF CIT(A) DESERVES TO BE SET ASIDE. 5. LD. AR ON THE OTHER HAND THOUGH STRONGLY SUPPORT ED THE ORDER OF LD. CIT(A) BUT HE AGREED THAT MATTER CAN BE REMITTE D TO THE AO FOR VERIFYING THE PEAK CASH DEFICIT IN THE BANK ACCOUNT ARRIVED ON THE BASIS OF CASH BOOK SUBMITTED BEFORE CIT(A). 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD. AS CAN BE SEEN, THE SOLE GRIEVANCE OF THE DEPARTMENT IS RELATED TO THE CONSIDERATION OF ADDIT IONAL EVIDENCE IN THE NATURE OF CASH BOOK BY THE LD.CIT(A) WITHOUT ALLOWI NG AN OPPORTUNITY TO THE AO TO VERIFY THE SAME. ON PERUSAL OF LD.CIT(A) 'S ORDER IT IS SEEN IN COURSE OF HEARING, ASSESSEE EXPLAINED THAT THE DEPO SITS APPEARING IN ICICI BANK ACCOUNT WERE FROM ANOTHER BANK ACCOUNT H ELD BY ASSESSEE IN SBI. FURTHER, EXPLAINING THE SOURCE OF DEPOSITS IN SBI ACCOUNT, ASSESSEE HAD STATED THAT AMOUNTS WERE RECEIVED FROM HIS BROT HER SHRI P. TEJESHWAR REDDY AND ONE PARIKSHIT SINGH. TO SUBSTA NTIATE SUCH CLAIM, ASSESSEE HAS PRODUCED COPIES OF HIS BANK ACCOUNTS A LONG WITH THE BANK ACCOUNT OF SHRI P. TEJESHWAR REDDY. CONFIRMATION L ETTERS FROM CONCERNED PERSONS WERE ALSO FILED CONFIRMING TRANSF ER OF MONEY TO ASSESSEE'S BANK ACCOUNT. ASSESSEE ALSO SUBMITTED S TATEMENT ANALYZING THE CASH DEPOSITS MADE IN THE TWO BANK ACCOUNTS. A LL THESE EVIDENCES WERE FORWARDED TO THE AO FOR VERIFICATION. IT IS A LSO EVIDENT, ON THE BASIS OF EVIDENCES PRODUCED BY ASSESSEE, AO CONDUCTED ENQ UIRY WITH SHRI P. I.T.A. NO. 35/HYD/2014 P. BHARATH KUMAR REDDY :- 4 -: TEJESHWAR REDDY AND PARIKSHIT SINGH AND AFTER VERIF ICATION OF THEIR BANK ACCOUNTS SUBMITTED A REMAND REPORT ACCEPTING THE GE NUINENESS OF THE TRANSACTIONS, THOUGH, HE OBSERVED THAT THE TOTAL AM OUNT RECEIVED BY ASSESSEE FROM THE CONCERNED PERSONS WAS RS. 32,88,8 64/- AS AGAINST DEPOSITS OF RS. 54,12,200/-, WHICH STILL LEAVES UNE XPLAINED BALANCE OF RS. 21,23,336/-. WHEN, THE REMAND REPORT WAS CONFRO NTED TO THE ASSESSEE BY LD.CIT(A), HE SUBMITTED A CASH BOOK, PR EPARED ON THE BASIS OF CASH TRANSACTIONS IN THE TWO BANK ACCOUNTS, WORK ING OUT THE PEAK CASH DEFICIT AT RS. 6,20,945/- AS ON 23-08-2008. L D.CIT(A) ON VERIFYING THE TWO BANK ACCOUNTS FOUND THE ACTUAL DEPOSITS MAD E BY ASSESSEE TO BE RS. 42,33,100/- AND NOT RS. 54,12,200/- AS STATED B Y AO. FURTHER, ON THE BASIS OF CASH BOOK SUBMITTED BY ASSESSEE LD.CIT (A) CONCLUDED THAT UNEXPLAINED CREDIT WHICH CAN BE CONSIDERED FOR ADDI TION IS PEAK CASH DEFICIT OF RS. 6,20,945/- AND NOT RS. 21,23,336/- A S WORKED OUT BY AO IN THE REMAND REPORT. IN OUR VIEW, BEFORE ACCEPTING T HE PEAK CASH DEFICIT OF RS. 6,20,945/- WORKED OUT ON THE BASIS OF CASH BOOK , LD.CIT(A) SHOULD HAVE GIVEN AN OPPORTUNITY TO THE AO, TO VERIFY THE SAME. FAILURE ON THE PART OF LD.CIT(A) IN DOING SO HAS RESULTED IN VIOLA TION OF RULE 46A OF THE I.T. RULES, 1962. THAT BEING THE CASE, WE ARE INCL INED TO SET ASIDE THE IMPUGNED ORDER OF LD.CIT(A) AND REMIT THE MATTER BA CK TO THE FILE OF AO FOR THE LIMITED PURPOSE OF VERIFYING THE PEAK CASH DEFICIT WORKED OUT AS PER THE CASH BOOK AND DECIDE THE ISSUE ACCORDINGLY AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSESSEE. 7. IN THE RESULT, DEPARTMENT'S APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 8 TH MAY, 2015 SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 8 TH MAY, 2015 TNMM I.T.A. NO. 35/HYD/2014 P. BHARATH KUMAR REDDY :- 5 -: COPY TO : 1. INCOME TAX OFFICER, WARD - 2, KURNOOL AAYAKAR BHAVAN, OPP: CHILDREN'S PARK, N.R. PETA, KURNOOL. 2. SHRI P. BHARATH KUMAR REDDY, 87/574, MADHAVA NAG AR, KURNOOL. 3. CIT(APPEALS)-IV, HYDERABAD. 4. CIT-III, HYDERABAD. 5. D.R. ITAT, HYDERABAD