Sri S Ramakrishna Reddy, Visakhapatnam V. The ITO, Ward-1(4), Visakhapatnam

ITA 413/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2554 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-10-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 23-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: V K VISWESWARA RAO
• Section: 44AD; 69; 144

Judgement Text

ITA 413 S.RAMAKRISHNA REDDY OF 2010 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.413/VIZAG/2010 ASSESSMENT YEAR: 2007 - 08 S. RAMA KRISHNA REDDY, VISAKHAPATNAM VS. ITO WARD-1(4) VISAKHAPATNAM (APPELLANT) PAN NO: AICPR 7735 R (RESPONDENT) APPELLANT BY: SHRI V.K. VISWESWARA RAO, CA RESPONDENT BY: SHRI R.K. SINGH, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.5.2010 PASSED BY LD. CIT(A), VISAKHAPATNAM AND I T RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS ASSAILING THE DECISION OF LEARNE D CIT(A) IN CONFIRMING THE ADDITION MADE TO TOWARDS UNEXPLAINED CASH DEPOSITS TO THE EXTENT OF RS.18,33,600/-. 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS A CIVIL CONTRACTOR. HE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION BY DECLARING INCOME AS PER SEC. 44AD OF THE ACT @ 8% OF HIS GROSS CONTRACT RECEIPTS. DURING THE SCRUTINY PROCE EDINGS, THE ASSESSEE DID NOT FURNISH VARIOUS DETAILS CALLED FOR BY THE ASSES SING OFFICER. THE ASSESSEE WAS MAINTAINING A BANK ACCOUNT WITH AXIS BANK LTD A ND THROUGH CIB INFORMATION, IT CAME TO THE KNOWLEDGE OF THE ASSESS ING OFFICER THAT THE ASSESSEE HAD DEPOSITED CASH FOR AN AGGREGATE AMOUNT OF RS.29,64,619/- IN THAT BANK ACCOUNT DURING THE YEAR UNDER CONSIDERATI ON. SINCE THE ASSESSEE DID NOT GIVE ANY EXPLANATION WITH REGARD TO THE SAI D CASH DEPOSITS, THE ASSESSING OFFICER TREATED THE SAME AS UNEXPLAINED C ASH CREDIT UNDER SECTION ITA 413 S.RAMAKRISHNA REDDY OF 2010 PAGE 2 OF 5 68 OF THE ACT AND ACCORDINGLY ADDED IT AS UNEXPLAI NED CASH DEPOSITS. IN THE APPEAL BEFORE LEARNED CIT(A), IT WAS EXPLAINED THAT THE ASSESSEE WAS TRANSFERRING FUNDS FROM ANOTHER BANK ACCOUNT MAINTA INED WITH CENTRAL BANK OF INDIA. ACCORDINGLY THE LEARNED CIT(A) DIRECTED T HE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESSEE AND THE ASSESSING OFFICER CONFIRMED THAT A SUM OF RS.11.76 LAKHS WAS FOUND TALLYING BETWEEN TH E WITHDRAWALS FROM THE CENTRAL BANK AND DEPOSITS MADE WITH AXIS BANK. ACC ORDINGLY THE LEARNED CIT(A) DELETED THE ADDITION TO THE TUNE OF RS.11.76 LAKHS CONFIRMED THE BALANCE ADDITION OF RS.18,33,600/-. STILL AGGRIEVE D, THE ASSESSEE IS IN APPEAL BEFORE US. 4. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN ANY BOOKS OF ACCOUNT FOR HIS BUSINESS AND HE HAS OFFERED INCOME AS PER THE PROVISIONS OF SEC. 44AD OF THE AC T. IN THE ABSENCE OF BOOKS OF ACCOUNT, THE ASSESSING OFFICER COULD NOT I NVOKE THE PROVISIONS OF SEC. 68 FOR MAKING THE IMPUGNED ADDITION AS THE BAN K PASS BOOK CANNOT BE TREATED AS THE BOOKS OF ASSESSEE. FOR THIS PROPOSI TION, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE FOLLOWING CASE LAW: CIT VS. BHAICHAND H GANDHI (1983)(141 ITR 67 (BOM )) ANAND RAM RAITANI VS. CIT (1997) (223 ITR 544 (GAU )) HE FURTHER CONTENDED THAT THE BANK PASS BOOK CONTAI NED BOTH CASH DEPOSITS AND WITHDRAWALS AND HENCE THE ASSESSING OFFICER SHO ULD HAVE GIVEN CREDIT FOR THE EARLIER WITHDRAWALS. HE ALSO CONTENDED THAT AFTER ESTIMATING THE INCOME FROM CONTRACT WORK, NO SEPARATE ADDITION CAN BE MADE ON ACCOUNT OF CASH CREDITS AND FOR THIS PROPOSITION, HE RELIED UPON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AGGARWAL ENGG. CO. (2008) (302 ITR 246). HE ALSO CONTENDED THAT T HE ASSESSING OFFICER SHOULD HAVE GIVEN TELESCOPING BENEFIT FOR THE INCOM E DISCLOSED BY THE ASSESSEE. 5. ON THE CONTRARY, THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE ASSESSEE DID NOT FURNISH THE DETAILS CALLE D FOR BY THE ASSESSING OFFICER AND HENCE THE ASSESSING OFFICER WAS CONSTRA INED TO MAKE THE ITA 413 S.RAMAKRISHNA REDDY OF 2010 PAGE 3 OF 5 IMPUGNED ADDITION. THE LEARNED CIT(A) HAS ALREADY DELETED THE ADDITION PARTLY WHEN IT WAS SEEN THAT THERE IS TRANSFER OF F UNDS FROM CENTRAL BANK ACCOUNT TO AXIS BANK ACCOUNT. THE BALANCE ADDITION WAS CONFIRMED BY THE LEARNED CIT(A), SINCE THE ASSESSEE DID NOT FURNISH NECESSARY EXPLANATIONS. ACCORDINGLY HE PRAYED FOR THE CONFIRMATION OF ORDER OF LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAD TO COMPLET E THE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 OF THE ACT, SINCE THE ASSESSEE DID NOT FURNISH THE DETAILS AND EXPLANATIONS CALLED FOR BY THE ASSESSING OFFICER. BEFORE THE LEARNED CIT(A), THE ASSESSEE FURNISHED C OPIES OF TWO BANK ACCOUNTS AND THE RELIEF WAS GRANTED TO THE EXTENT T HE WITHDRAWALS FROM ONE BANK ACCOUNT MATCHED WITH THE DEPOSITS MADE IN OTHE R BANK ACCOUNT. THE CONTENTION OF THE ASSESSEE ON LEGAL POINT IS THAT T HE BANK ACCOUNT CANNOT BE TREATED AS BOOKS FOR THE PURPOSE OF INVOKING SEC. 68 OF THE ACT. IN THIS REGARD, WE EXTRACT BELOW THE OBSERVATIONS MADE BY T HE SPECIAL BENCH IN THE CASE OF MANOJ AGGARWAL VS. DY. CIT (DELHI) (113 ITD 377): 26. THE ARGUMENT ADVANCED ON BEHALF OF THE ASSESSEE BEFORE US WAS THAT THE ASSESSEE WAS NOT MAINTAINING ANY BOOKS OF ACCOUNT AND THE DEPOSIT WERE FOUND ONLY IN THE ASSESSEES B ANK STATEMENT WHICH CANNOT BE CONSIDERED AS THE BOOKS OF ACCOUNT OF THE ASSESSEE AND, THEREFORE, SECTION 68 WAS NOT APPLICA BLE. OUR ATTENTION WAS DRAWN TO THE CONFIRMATION LETTERS PLA CED AT PAGES 159 AND 160 OF THE PAPER BOOK. WE ARE HOWEVER UNAB LE TO ACCEPT THE ARGUMENT. THOUGH SECTION 68 OF THE ACT MAY NOT BE STRICTLY APPLICABLE SINCE THE ASSESSEE WAS NOT MAINTAINING A NY BOOKS OF ACCOUNT AND THE BANK STATEMENT CANNOT BE CONSIDERED AS THE ASSESSEES BOOKS OF ACCOUNT, ON THE BASIS OF THE JU DGMENT OF THE SUPREME COURT IN THE CASE OF A.GOVINDARAJULU MUDALI AR V. CIT (1958) (34 ITR 807), IT IS THE ONUS OF THE ASSESSEE TO EXPLAIN THE CASH RECEIVED BY HIM AND IF THERE IS NO EXPLANA TION OR ACCEPTABLE EVIDENCE TO PROVE THE NATURE AND SOURCE OF THE RECEIPT, THE AMOUNT MAY BE ADDED AS THE ASSESSEES INCOME ON GENERAL PRINCIPLES AND IT IS NOT NECESSAR Y TO INVOKE SECTION 68, NOR IS IT NECESSARY FOR THE INCOME TAX AUTHORITIES TO POINT OUT THE SOURCE OF THE MONIES R ECEIVED. EVEN IF SECTION 68 IS NOT APPLICABLE, THE CASH DEPOSIT IN T HE BANK CAN BE ASKED TO BE EXPLAINED BY THE ASSESSEE UNDER SECTION 69 OR SECTION 69B OF THE ACT. ITA 413 S.RAMAKRISHNA REDDY OF 2010 PAGE 4 OF 5 IN VIEW OF THE SPECIAL BENCH DECISION CITED ABOVE, W E ARE OF THE VIEW THAT THE ASSESSEE IS UNDER AN OBLIGATION TO EXPLAIN THE NATURE AND SOURCE OF DEPOSITS FOUND IN HIS BANK ACCOUNT. ACCORDINGLY, W E REJECT THIS LEGAL GROUND OF THE ASSESSEE. 7. THE LEARNED A.RS CONTENTION THAT NO ADDITIO N CAN BE MADE TOWARDS CASH CREDIT ONCE THE INCOME OF THE ASSESSEE IS ESTI MATED ALSO DOES NOT SURVIVE IN THE FACTS OF THE INSTANT CASE. IN THE CA SE OF AGGARWAL ENGG. CO., (SUPRA), THE ASSESSEE THERE IN MAINTAINED BOOKS OF ACCOUNT AND THE BOOKS WERE REJECTED. HOWEVER, IN THE INSTANT CASE, THE A SSESSEE CLAIMS THAT HE DID NOT MAINTAIN BOOKS OF ACCOUNT. HENCE WE ARE OF THE VIEW THAT THE ASSESSEE COULD NOT DRAW SUPPORT FROM THE SAID DECIS ION. 8. IT IS NOT DISPUTED THAT THE ASSESSEES TURNO VER WAS LESS THAN RS.40.00 LAKHS AND ACCORDINGLY THE INCOME OFFERED BY HIM AS PER THE PROVISIONS OF SEC.44AD WAS ACCEPTED. THERE IS ALSO NO DISPUTE TH AT THERE WAS INTER LACING OF FUNDS BETWEEN THE TWO BANK ACCOUNTS AND T HE LEARNED CIT(A) HAS DELETED A SUM OF RS.11.76 LAKHS ON THE BASIS OF THE REPORT OF THE ASSESSING OFFICER. FOR THE REMAINING AMOUNT, THE ASSESSEE IS UNDER AN OBLIGATION TO OFFER EXPLANATIONS. THE SUBMISSION OF LEARNED A.R I S THAT THE LEARNED CIT(A) HAS DELETED ONLY THOSE DEPOSITS WHERE THERE WAS CORRESPONDING WITHDRAWAL ON THE SAME DATE. THE CONTENTION OF THE LEARNED A.R IS THAT THE WITHDRAWALS MADE ON DATES PRIOR TO THE DATE OF DEPOSIT SHOULD ALSO HAVE BEEN CONSIDERED BY THE ASSESSING OFFICER. THE RE IS A FORCE IN THE CONTENTION OF THE LEARNED A.R. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS USED BOTH THE BANK ACCOUNTS FOR HIS BUSINESS PURPOS ES. IT IS ALSO NOT IN DISPUTE THAT THERE WAS INTERLACING OF FUNDS BETWEEN BOTH THE BANK ACCOUNTS. IT IS NOW WELL SETTLED PROPOSITION THAT W HEN THERE ARE CONTINUOUS TRANSACTIONS OF CASH WITHDRAWALS AND CASH DEPOSITS, CREDIT MAY BE GIVEN FOR THE EARLIER WITHDRAWALS IF THE ASSESSEE HAS NOT SPE NT THE SAME. IF CREDIT IS NOT SO GIVEN, THEN IT MAY RESULT IN DOUBLE TAXATION OF SAME INCOME, WHICH IS NOT PERMISSIBLE UNDER THE LAW. THERE IS ALSO A FOR CE IN THE CONTENTION OF THE ASSESSEE THAT THE INCOME FROM CONTRACT WORKS SH OULD BE TELESCOPED ITA 413 S.RAMAKRISHNA REDDY OF 2010 PAGE 5 OF 5 AGAINST THIS ADDITION. HOWEVER, WE FEEL THAT IT IS THE RESPONSIBILITY OF THE ASSESSEE TO SHOW THAT THE SAID CONTRACT HAS BEEN CO MPLETED AND THE GROSS CONTRACT RECEIPTS HAVE BEEN REALIZED DURING THE YEA R ITSELF. HOWEVER, THE ENTRIES FOUND IN THE BANK ACCOUNTS REQUIRE VERIFICA TION IN THE LIGHT OF DISCUSSIONS MADE IN THE PRECEDING LINES. ACCORDING LY, WE SET ASIDE THE ISSUE RELATING TO THE ADDITION OF RS.18,33,600/- TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION OF THE SAME AFRESH WITH A DIRECTION TO VERIFY THE CLAIMS OF THE ASSESSEE MADE IN THIS REGARD AND DETE RMINE THE INCOME COMPONENT IN THE LIGHT OF PRINCIPLES DISCUSSED EARL IER. THE ASSESSEE IS ALSO DIRECTED TO EXTEND ALL THE REQUIRED CO-OPERATION TO THE ASSESSING OFFICER. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREA TED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 24 TH DECEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 24-12-2010 COPY TO 1 SHRI S. RAMAKRISHNA REDDY, 55-42-8 DOCTORS COLONY , SEETHAMMADHARA, VISAKHAPATNAM 2 THE ITO WARD-1(4) VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM