L. Nageswara Rao, Warangal, Hyderabad V. ITO, W-3, Warangal

ITA 401/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53612 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T DIWAKAR PRASAD
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained investment; Peak credit
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA 401/HYD/2011 ASSESSMENT YEAR 2007-08 M R. L. NAGESWARA RAO, WARANGAL. ( PAN ACHPL 1519Q) VS ITO, WARD - 3, WARANGAL. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SHRI T. DIWAKAR PRASAD O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT (A)-VI, HYDERABAD, DATED 30 -11-2010 AND IT PERTAINS TO THE ASSESSMENT YEAR 2007-08. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL IS WITH REGARD TO THE ADDITION OF RS.5,26,000/- MADE UNDER SECTION 69 OF THE INCOME- TAX ACT ON THE GROUND THAT THE DEPOSITS INTO THE BA NK ACCOUNT ARE NOT PROPERLY EXPLAINED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INDIVIDUAL DERIVING INCOME FROM KIRANA AND GENERAL STORES AT K ESAMUDRAM, WARANGAL. HE HAS FILED THE RETURN OF INCOME FOR TH E ASSESSMENT YEAR ITA 401/HYD/2011- L. NAGESWARA RAO L.L HYDERABAD 2 UNDER CONSIDERATION ON 16-7-2008 ADMITTING TOTAL IN COME AT RS.75,500/- THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 14 3(1) OF THE ACT ON 24-4-2009. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY A NOTICE UNDER SECTION 143(2) DATED 7-9-2009 WAS ISSUED. TH ERE WAS NO COMPLIANCE FROM THE ASSESSEE FOR THE NOTICE ISSUED AND THEREBY A FINAL OPPORTUNITY LETTER DATED 26-11-2009 WAS ISSUED BY A SKING THE ASSESSEE TO APPEAR BEFORE THE ASSESSING OFFICER ON OR BEFORE 2-12-2009. HOWEVER, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED BEFORE THE ASSESSING OFFICER AND PRODUCED BANK ACCOUNT OF ANDHRA BANK ALONG WITH VAKALAT. THE AUTHORIZED WAS ASKED TO PRODUCE THE EXPLANATIONS ALONG WITH THE SOURCES FOR THE CASH DEPOSITS MADE I N THE GIVEN BANK ACCOUNT. THE ASSESSING OFFICER, ON VERIFICATION OF THE BANK ACCOUNT OF ANDHRA BANK, FOUND THAT THERE ARE CERTAIN CASH DEPO SITS MADE BY THE ASSESSEE ON DIFFERENT DATES TO THE EXTENT OF RS.13, 20,000/- AND THE EXPLANATION FOR SAME IS CALLED TO WHICH THE ASSESSE E COULD NOT GIVE ANY EXPLANATION AND THEREBY THE PEAK WAS WORKED OUT TO RS.5,26,000/- AND THE SAME WAS TREATED AS UNEXPLAINED INVESTMENT UNDE R SECTION 69 OF THE ACT BY THE ASSESSING OFFICER. ACCORDINGLY, THE ASSESSING OFFICER CALCULATED THE TAX AND TAX PAYABLE WORKED OUT TO RS .1,92,935/- AND PENALTY PROCEEDINGS ARE INITIATED SEPARATELY BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, TH E ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) HELD AS FOLLOWS IN HIS ORDER:- 6. I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPE LLANT AND THE FACTS OF THE CASE. THE SUBMISSIONS OF THE AUTHO RIZED REPRESENTATIVE THAT THE BANK ACCOUNT HAS BEEN USED AS A CONDUIT TO DEPOSIT THE SALES AND WITHDRAWALS WERE MADE AS W HEN PURCHASES WERE NECESSITATED HAS NOT BEEN SUPPORTED BY ANY DOCUMENTARY EVIDENCE. THE OPENING AND CLOSING BALA NCE DO NOT SIGNIFY THE NATURE OF ANY TRANSACTIONS CONDUCTED IN BETWEEN. ON ITA 401/HYD/2011- L. NAGESWARA RAO L.L HYDERABAD 3 THE OTHER HAND, KEEPING IN VIEW OF THE NATURE OF BU SINESS ENGAGED BY THE ASSESSEE IN RUNNING OF A KIRANA STOR ES, IT IS OBVIOUS THAT THE CASH DEPOSITS HAVE BEEN MADE AS AN D WHEN SALES ARE MADE AND WITHDRAWALS COULD HAVE BEEN MADE AS AND WHEN PURCHASES WERE NECESSITATED. SINCE THE MATCH ING OF SUCH BANK ACCOUNT WITH SALES DEPOSITS AND PURCHASE WI THDRAWALS HAS NOT BEEN DONE AT THE TIME FO ASSESSMENT PROCEED INGS, IT WOULD BE DIFFICULT TO COME TO A CONCLUSION THAT THE ENTIRE DEPOSITS AND WITHDRAWALS MADE ARE FOR THE PURPOSE O F BUSINESS ONLY. IT IS NOT THE CASE OF THE APPELLANT THAT SUC H AN EXPLANATION WAS NOT FURNISHED BEFORE THE ASSESSING OFFICER WHO COULD HAVE EXAMINED THE SAME AT THE TIME OF ASSESSMENT ITSELF. SINCE THE CLAIM OF HE ASSESSEE APPEARS TO BE ONLY AN AFTER TH OUGHT WHICH IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE, I AM DEC LINED TO INTERFERE WITH THE ACTION OF THE ASSESSING OFFICER AND THE WORKING OUT OF PEAK OF CASH DEPOSITS APPEARING IN THE BANK ACCOUNT UNDER SECTION 69 AMOUNTING TO RS.5,26,000/- STANDS CONFIRM ED. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E MAINTAINED ACCOUNTS WITH ANDHRA BANK AND THE ASSESSEE WAS DEPO SITING THE SALES EFFECTED IN THE BANK AND WAS WITHDRAWING THE AMOUN TS FOR THE PURPOSE OF MAKING THE PURCHASES. IT IS SUBMITTED THAT THE D EPOSITS DURING THE YEAR IN THE SAID ACCOUNT REPRESENT THE TURNOVER OF THE ASSESSEE AND AS SUCH THE WORKING OF PEAK CREDIT IN THE ABSENCE OF M AINTENANCE OF ANY BOOKS OF ACCOUNTS BY THE ASSESSEE IS NOT CORRECT. IT IS FURTHER SUBMITTED THAT THE ASSESSING OFFICER SHOULD HAVE RESORTED TO ESTIMATION OF INCOME AT 5% ON SUCH TURNOVER UNDER SECTION 44AF OF THE AC T SINCE THE ASSESSEE HIMSELF ADMITTED AN INCOME OF RS.75,500/- AND THE SAME IS IN EXCESS OF 5% AS PER THE PROVISIONS OF 44AF OF THE ACT. HENCE, THERE IS NO NECESSITY OF SEPARATE ADDITION UNDER SECTION 69 OF THE ACT. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITTED THAT ON VERIFICATION OF BANK ACCOUNT OF A NDHRA BANK, THE ASSESSING OFFICER FOUND THAT THERE ARE CERTAIN CASH DEPOSITS MADE BY THE ITA 401/HYD/2011- L. NAGESWARA RAO L.L HYDERABAD 4 ASSESSEE TO THE EXTENT OF RS.13,20,000/- DURING THE YEAR UNDER CONSIDERATION AND THE EXPLANATION OF THE ASSESSEE W AS CALLED FOR AND THEREFORE THE ASSESSEE HAS NOT GIVEN ANY EXPLANATIO N IN THIS REGARD. THEREFORE, THE FIRST APPELLATE AUTHORITY HAS RIGHTL Y CONFIRMED THE ADDITION UNDER SECTION 69 OF THE ACT AND PROCEEDED TO WORK O UT THE PEAK OF SUCH CASH DEPOSITS AT RS.5,26,000/- AND ADDED THE SAME T O THE INCOME OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASS ESSEE IS AN INDIVIDUAL DERIVING INCOME FROM KIRANA AND GENERAL STORES. IT IS POSSIBLE THAT THE CASH DEPOSITS HAVE BEEN MADE AS AND WHEN SALES ARE MADE AND WITHDRAWALS COULD HAVE BEEN DONE AS AND WHEN PURCHA SES WERE MADE. THE LOWER AUTHORITIES SIMPLY ADDED THE AMOUNT OF RS .5,26,000/- ON THE GROUND THAT THE MATCHING OF BANK ENTRIES WITH THE S ALES DEPOSIT AND PURCHASES HAVE NOT BEEN DONE AT THE TIME OF ASSESSM ENT PROCEEDINGS. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND THE CIRCUMSTANCES OF THE CASE, IN OUR OPINION, ESTIMATING THE INCOME AT 5% ON ENTIRE TURNOVER OF RS.13,20,000/- BY ASSUMING THE ENTIRE CASH DEPOSIT IN THE BANK ACCOUNT AS SALES TURNOVER, WOULD BE PROPER AND JUST . SINCE THE ASSESSEE HIMSELF ADMITTED AN AMOUNT OF RS.75,500/- AS RETURN ED INCOME, THERE IS NO FURTHER ADDITION WHICH IS CALLED FOR IN THIS RE GARD. HENCE, WE REVERSE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE C LAIM OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 16 -9- 2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT. ACCOUNTANT MEMBER. ITA 401/HYD/2011- L. NAGESWARA RAO L.L HYDERABAD 5 DT/- 16-9-2011. COPY FORWARDED TO: 1. SHRI S. RAMA RAO, ADVOCATE, FLAT NO.102, DOOR NO .3-6-643, SHRIYAS ELEGANCE STREET NO.9, HIMAYATNAGAR, HYDERA BAD. 2. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 6, HYDERABAD. 3. CIT(A) - I, HYDERABAD. 4. CIT, AP - I, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. JMR*