The Income Tax Officer, Ward-1, , Tuni V. Kasireddy Venkateswara Rao, , Tuni

ITA 397/VIZ/2019

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 8877 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 10-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MINI CHANDRAN
• Keywords: Additional evidence
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 397 / VIZ /201 9 (ASST. YEAR : 20 11 - 12 ) ITO, WARD - 1, TUNI V S . KASIREDDY VENKATESWARA RAO, PROP: BALAJI PROCESS, TUNI PAN NO. ANVPK 6272 G (APPELLANT) (RESPONDENT) C.O.NO. 131/VIZ/2019 (ARISING OUT OF ITA NO. 397 / VIZ /201 9) (ASST. YEAR : 20 11 - 12 ) KASIREDDY VENKATESWARA RAO, PROP: BALAJI PROCESS, TUNI VS. ITO, WARD - 1, TUNI PAN NO. ANVPK 6272 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SMT. MINI CHANDRAN SR. DR DATE OF HEARING : 1 9 / 1 1 /201 9 . DATE OF PRONOUNCEMENT : 22 / 1 1 /201 9 . O R D E R PER V. DURGA RAO , JUDICIAL MEMBER TH IS APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2 , VISAKHAPATNAM , DATED 18 /0 2 /201 9 FOR THE ASSESSMENT YEAR 20 11 - 12 . 2 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) 2. THERE IS A DELAY OF 28 DAYS IN FILING THIS APPEAL . THE REVENUE HAS FILED AN AFFIDAVIT FOR CONDO N ATION OF DELAY. WE HAVE GONE THROUGH THE AFFIDAVIT AND FIND THAT THERE IS A SUFFICIENT CAUSE TO CONDONE THE DELAY. ACCORDINGLY, DELAY IS CON D ONED. 3 . FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF PROCESSING OF MANUFACTURING OF CASHEW IN THE NAME AND STYLE OF SRI BALAJI PROCESS, FILED HIS RETURN OF INCOME BY ADMITTING TOTAL INCOME OF RS. 3,85,725/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS CONVERT E D INTO SCRUTINY AND AFTER FOLLOWING DUE PROCEDURE , ASSESSMENT WAS COMPLETED U/SEC. 1 43(3) BY MAKING ADDITION OF RS. 1,19,18,600/ - AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS BORROWED AN AMOUNT OF RS. 2,85,24,750/ - FROM VARIOUS PEOPLE NUMBER IN 1357 . WHEN THE ASSESSING OFFICER ASKED TO FILE THE DETAILS, THE ASSESSEE IS ONLY ABLE TO FILE DETAILS TO THE EXTENT OF RS. 28,35,000/ - PERTAINS TO 162 PERSONS AND CONFIRMATION LETTERS WERE ALSO FILED TO THAT EXTENT . THE ASSESSING OFFICER HAS CONSIDERED THE ENTIRE CASE AND CONFIRMATIONS FILED FOR 162 PERSONS AND CAME TO A CONCLUSION THAT THERE IS NO CREDITWORTHINESS , THE TRA NSACTION S ARE NOT GENUINE A S THE LOANS OBTAINED FROM THE FARMERS , MILK SUPPLIERS AND 3 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) COMMISSION AGEN TS AND THEREFORE THE ENTIRE AMOUNT BORROWED BY THE ASSESSEE IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE HAS FILED CONFIRMATION LETTERS FROM ALL OTHER CREDITORS. THE LD. CIT(A) BY ADMITTING THE ADDITIONAL EVIDENCE IN TERMS OF RULE 46A OF THE I.T. RULES, 1962 REFERRED THE ADDITIONAL EVIDENCE TO THE ASSESSING OFFIC ER FOR HIS COMMENTS . THE ASSESSING OFFICER HAS SUBMITTED HIS REMAND REPORT WHICH IS EXTRACTED BY THE LD. CIT(A) AS UNDER: - 4) OUT OF 1275 LOAN CREDITORS, 401 CREDITORS AMOUNTING TO R5.73,91,700 HAVE BEEN EXA MINED AND SWORN STATEMENTS WERE RECORDED FROM T HEM OUT OF THE 401 CREDITORS, R E PAYMENT WAS MADE TO 367 CREDITORS AMOUNTING TO RS 67,70 , 700 O F THE 367 CREDITORS TO WHOM REPAYMENT WAS MADE, 173 CREDITORS WERE REPAID BY CASH MODE AMOUNTING TO RS.31,58,000 AND REMAINING 194 CREDITORS WERE REPAID THROUGH CHEQUE AMOUNTING TO RS. 36,12,700. STILL 34 CREDITORS ARE YET TO BE REPAID AMOUNTING TO RS. 6,21,000 AT THE TIME OF RECORDING STATEMENTS. FURTHER, NONE OF THE 401 LOAN CREDITORS RECEIVED ANY INTEREST. THE PERSONS EXAMINED WERE MAINLY FROM RURAL AREAS SUCH AS K . O . MALL AVARAM, D.POLAVARAM AND GUNI P UDI ETC. MOST OF THEM ARE AGRICU L TURISTS, DAILY LABOURS AND PERSONS WORKING IN UNORGANISED SECTORS. 5) PREPONDERANCE OF PROBABILITY OF BANK ACCOUNT REPAYMENT TO SAID TO HAVE MADE THROUGH CHEQUE. IN THIS CASE THERE IS BANK ACCOUNT THE ASSESSEE FAILS TO EXPLAIN THE NECESSITY OF TAKING LOAN IN CASH. SO IN THE CIRCUMSTANCES IT IS DIFFICULT TO BELIEVE THAT THE SAID LOAN TRANSACTIONS ARE GENUINE. 6) SINCE IT IS FOUND THAT ALL THE DEPO NENTS ARE WELL TUTORED BY THE ASSESSEE IN AS MUD AS ALL OF THE PERSONS WHO WERE EXAMINED GAVE STEREO TYPED REPLIES. IT CAN BE DEDUCED THAT THE EXERCISE OF EXAMINING THE ALLEGED LOAN CREDITORS MAY NOT RESULT ILLUSOR Y THE TRUTH . HENCE THE LEARNT CIT(A) IS RE QUESTED TO APPRECIATE THE EFFORTS TAKEN AND UPHOLD THE ADDITION MADE IN VIEW OF THE OVERWHELMING EVIDENCE THAT CIRCUMSTANCE EVIDENCE POINTS TO THE FA C T THAT THE ALLEGED LOAN CREDITOR ARE ALL LABOUR, MEN OF NO MEANS WHO EKE THEIR LIVELY HARD ON DAY TO DAY EARNING BASIS MOST OF THE WAGERS. FURTHER, IT IS A FACT THAT WHILE, THE LOAN CREDITORS ARE MEN OF NO MEAN, IT SHOWS THAT THE ALLEGED LOANS CLAIMED TO H AVE BEEN GIVEN BY THEM WERE THE ASSESSEE FOR INORDINATE AMOUNT OFT/ME. IT IS DIFFICULT TO BELIEVE SUCH DAILY EARNERS WOULD LEAVE THE ASSESSEE AND NOT ASK IT IN SPITE OF THE LAPSE 4 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) OF MANY YEARS.' 5. THE LD. CIT(A) BY CONSIDERING THE REMAND REPORT HAS OBSER VED THAT THE ASSESSEE HAD DISCHARGED BURDEN CASTED UPON HIM, THEREFORE ADDITION CANNOT BE SURVIVED . FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER : 6.4 ON A CAREFUL PERUSAL OF THE REMAND REPORT, IT IS NOTICED THAT ALL THE CREDITORS WHO HAVE APPEARED BEFORE THE ASSESSING OFFICER CONFIRMED THE LOAN TRANSACTION. FURTHER, IT IS NOTICED FROM THE LOAN CONFIRMATION LETTERS THAT ALL THE CREDITORS HAVE GIVEN A VERY CLEAR ACCOUNT OF THE NATURE OF THEIR SOURCE OF INCOME, EXTENT O F INCOME AND THE BASIS OF INCOME, THE SIZE OF THEIR FAMILY, THE DETAILS OF FAMILY EXPENSES AND SAVINGS ETC. FURTHER, THEY HAVE SUBMITTED THEIR PROOF OF IDENTITY. THE ASSESSING OFFICER DID NOT POINT OUT ANY SPECIFIC DEFECT IN THE CONFIRMATION LETTERS RATHER SAYING THAT THE PERSONS EXAMINED WERE MAINLY FROM RURAL AREAS SUCH AS K.O.MALLAVARAM, D. POLAVARAM AND GUNIPUDI ETC. MOST OF THEM ARE AGRICULTURISTS, DAILY LABOURS AND PERSONS WORKING IN UNORGANISED SECTORS. PREPONDERANCE OF PROBABILITY OF BANK ACCOUNT RE PAYMENT TO SAID TO HAVE MADE THROUGH CHEQUE. IT WAS FURTHER STATED THAT WHEN THE APPELLANT IS HAVING BANK ACCOUNT HE FAILED TO EXPLAIN THE NECESSITY OF TAKING LOAN IN CASH. THE ASSESSING OFFICER STATED THAT ALL THE DEPONENTS ARE WELL TUTORED BY THE ASSESSE E IN AS MUCH AS ALL OF THE PERSONS WHO WERE EXAMINED GAVE STEREO TYPED REPLIES. WHEN THE CREDITORS APPEARED BEFORE THE ASSESSING OFFICER, HE COULD HAVE QUESTIONED THEM TO ELICIT THE TRUTH IN CASE HE CONSIDERED THE FACTS STATED IN THE LETTERS TO BE ILLUSORY AND NOT GENUINE. NO SUCH EFFORTS WERE MADE BY THE ASSESSING OFFICER IN THIS REGARD. UNDER THE CIRCUMSTANCES, IT IS DIFFICULT TO AGREE WITH THE VIEW TAKEN BY THE ASSESSING OFFICER IN SAYING THAT THE CREDITORS WERE TUTORED BY THE APPELLANT. THERE IS NO COGE NT FOR THIS VIEW FORMED BY THE ASSESSING OFFICER. THE CREDITORS HAVE ANSWERED THE QUESTIONS POSED BY THE ASSESSING OFFICER IN THE SWORN STATEMENTS AND THE QUESTIONS PUT TO THEM, SO WILL BE THE ANSWERS. THE ASSESSING OFFICER CANNOT DISREGARD THE RESULTS OF HIS OWN ENQUIRY. FURTHER, IT IS NOTICED THAT THE AMOUNT GIVEN BY EACH LOAN CREDITOR IS VERY SMALL AMOUNT. FROM THE DETAILS OF THE SOURCES EXPLAINED BY THE CREDITORS AND THE AMOUNT OF ANNUAL SAVINGS, THEIR CREDITWORTHINESS TO EXTEND SUCH A SMALL AMOUNT OF LOAN CAN BE SAID TO HAVE BEEN DULY EXPLAINED. FURTHER, THE APPELLANT IS NEW TO BUSINESS AND THE ASSESSMENT YEAR IN QUESTION, IS ONLY SECOND YEAR OF HIS BUSINESS. THE AUTHORISED REPRESENTATIVE STATED THAT IT WOULD BE DIFFICULT FOR HIM TO AVAIL A LOAN FROM 5 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) THE BANK. THE APPELLANT FOUND IT CONVENIENT TO BORROW SMALL AMOUNT OF LOAN FROM A LARGE NUMBER OF INDIVIDUALS WHOM THE APPELLANT EITHER KNEW DIRECTLY OR INDIRECTLY. IT WAS FURTHER STATED THAT OUT OF THE 401 CREDITORS FROM WHOM THE APPELLANT OBTAINED A L OAN AMOUNT OF RS.73,91,700, AS MANY AS 367 CREDITORS WERE REPAID TO THE EXTENT OF RS.67,70,700 AND MORE THAN 50% OF THE AMOUNT REPAID WAS BY CHEQUE. AFTER CAREFUL CONSIDERATION OF ALL THESE FACTS, I AM OF VIEW THAT THE APPELLANT FULFILLED HIS BASIC OBLIGAT ION TO PROVE THE IDENTITY OF THE CREDITORS, THE CREDITWORTHINESS OF SUCH CREDITORS AND GENUINENESS OF THE TRANSACTION I.E., UNSECURED LOANS. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER ON MERE PREPONDERANCES AND PROBABILITIES CANNOT WITHSTAND AND THE ASSESSING OFFICER IS HEREBY DIRECTED TO DELETE THE ADDITION OF RS.2,85,24,750. THE APPEAL MADE BY THE APPELLANT ON THE ABOVE GROUNDS STANDS ALLOWED. 6 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORE THIS TRIBUNAL. 7 . LD.DR HAS SUBMITTED THAT ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN CASTED UPON HIM, THEREFORE LD. CIT(A) IS NOT CORRECT IN DELETING THE ADDITION AND STRONGLY SUPPORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 8 . ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ASSESSEE FILED ALL THE DETAILS AND CONFIRMATIONS FROM ALL THE PARTIES, THEREFORE THE ASSESSEE HAS DISCHARGED HIS BURDEN, IF AT ALL ASSESSING OFFICER HAS ANY DOUBT, HE HAS TO ISSUE SUMMONS A ND EXAMINE AND DECIDE THE CASE ON MERITS AND SUBMITTED THAT LD. CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 9. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 6 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) 10 . THE ASSESSEE CARRYING SMALL TIME CASHEW PROCESSING BUSINESS. HE HAS BORROWED SMALL AMOUNTS FROM LOCAL PEOPLE WHO ARE MILK VENDORS, RYOTVAARI C OOLIES AND COMMISSION AGENTS TO CARRY HIS BUSINESS. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS FOUND THAT ASSESSEE HAS BORROWED MONEY FROM 1357 PERSONS , BUT HE FILED CONFIRMATION LETTERS IN RESPECT OF 162 PERSONS . B Y EXAMI NI NG THE CONFIRMATION LETTERS FILED BY THE ASSESSEE, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THESE PEOPLE FROM WHOM THE ASSESSEE BORROWED F UNDS, HAVE NO CREDITWORTHINESS FOR THE REASON THAT THEY ARE SMAL L TIME MILK VENDORS, RYOTVAARI C OOLIES AND COMMISSION AGENT S . IN OUR OPINION , THE ASSESSING OFFICER HAS COMMITTED A MISTAKE IN OBSERVING ABOVE FOR THE REASON THAT IF AT ALL HE IS HAVING ANY DOUBT, HE SHOULD HAVE TO ISSUE SUMMONS TO THE PARTIES AND EXAMINE THEM , WITHOUT DOING THAT SIMPLY DISBELIEVING THE CONFIRMATION LETTERS IS NOT CORRECT. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS FROM ALL THE REMAINING CREDITORS. THE LD. CIT(A) CALLED THE REMAND REPORT FROM THE ASSESSING OFFICER AND IN THE REMAND REPORT, THE ASSESSING OFFICER HAS OBSERVED THAT MOST OF THE CREDITORS ARE AGRICULTURISTS, DAILY LABOURS AND PERSONS WORKING IN UNORGANISED SECTORS . HE HAS ALSO OBSERVED THAT PAYMENT S SHOULD HAVE BEEN MADE THROUGH BANKING CHANNEL , BUT THE ASSESSEE HAS 7 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) BORROWED THE FUNDS BY TAKING CASH AND REPAID THE SAME IN CA SH. WE FIND THERE IS NOTHING WRONG IN BORROWING FUNDS FROM DAILY LABOURERS, AGRICULTURISTS AND MILK VENDORS, IF AT ALL ASSESSING OFFICER IS HAVING DOUBT, HE SHOULD HAVE CALLED THEM BY ISSUING SUMMONS AND EXAMINE THEM. SIMPLY ON THE BASIS OF THAT THEY ARE NOT FILING RETURN S OF INCOME, THEREFORE THE AMOUNTS BORROWED BY THE ASSESSEE CANNOT BE CONSIDERED AS NOT GENUINE TRANSACTION , IS NOT CORRECT . THE ASSESSING OFFICER HIMSELF OBSERVED THAT THE ASSESSEE HAS ALREADY REPAID RS. 67,70,700/ - TO 367 PEOPLE AND 1 7 3 CREDITORS WERE R E PAID BY CASH MODE AMOUNTING TO RS. 3 1 , 58 , 0 00/ - AND REMAINING 194 CREDITORS WERE REPAID THROUGH CHEQUE AMOUNTING TO RS. 36,12,700/ - . STILL 34 CREDITORS ARE YET TO BE REPAID AMOUNTING TO RS. 6,21,000/ - . BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE OPINION TH A T THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS FROM THE LOAN CREDITORS THOUGH SMALL LOAN CREDITORS WHO ARE AGRICULTURISTS, MILK VENDORS & COMMISSION AGENTS. ALL THE DETAILS ARE AVAILABLE WITH THE ASSE SSING OFFICER. WITHOUT ISSUING SUMMONS AND WITHOUT EXAMINING THEM, SIMPLY ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS , CONFIRMATIONS GIVEN BY THE ASSESSEE CANNOT BE DISCARDED . WE FIND THAT THE ASSESSEE HAS DISCHARGED HIS BURDEN CASTED UPON HIM TO PROVE THAT HE HAS BORROWED FUNDS FROM 8 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) VARIOUS PEOPLE BY GIVING ALL THE DETAILS, IF AT ALL THE ASSESSING OFFICER HAS ANY DOUBT , HE SHOULD HAVE TO MAKE ENQUIRIES AND DISPROVE THE CONFIRMATION LETTERS GIVEN BY THE ASSESSEE ARE NO T CORRECT . I N THIS CASE, THE ASSESSING OFFICER HAS NOT DISCHARGED HIS BUR D EN AND SIMPLY ON THE BASIS OF CONJECTURES AND SURMISES , THE ADDITION IS MADE . IN VIEW OF THE ABOVE, WE FIND THAT LD. CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 11 . THE CROSS OBJECTION FILED BY THE ASSESSEE IS DELAYED BY 03 DAYS . NO DELAY CONDONATION APPLICATION IS FILED . THEREFORE, THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED IN LIMIN I . 12 . IN THE RESULT, APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 2 2 N D DAY OF NOV . , 201 9 . S D / - S D / - (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 2 N D NOVEMBER , 201 9 . VR/ - 9 ITA NO. 397/VIZ/2019 C.O.NO.131/VIZ/2019 (KASIREDDY VENKATESWARA RAO ) COPY TO: 1. THE ASSESSEE KASIREDDY VENKATESWARA RAO, PROP: BALAJI PROCESS, TUNI, E.G. DISTRICT. 2. THE REVENUE ITO, WARD - 1, TUNI. 3. THE PR. CIT - 2, VISAKHAPATNAM. 4. THE CIT(A) - 2, VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.