Sri. Nagaraj Venkataramanappa, Bangalore V. Income Tax Officer, Ward- 2(2)(1), Bangalore

ITA 458/BANG/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0239 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 31-05-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice; Additional evidence; Reasonable cause; Set aside
• Section: 44AD; 133(6); 13

Judgement Text

ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “C’’BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.458/Bang/2020 Assessment Year: 2012 – 13 Sri Nagaraj Venkataramanappa No.65 Gottigere Palya BSK II Stage Vidyapeeta Kengeri Hobli Bangalore PAN NO : ADAPV5255F Vs. ITO Ward 2(2)(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri Ravishankar, A.R. Respondent by : Shri Priyadarshini Basaganni, D.R. Date of Hearing : 30.12.2021 Date of Pronouncement : 12.01.2022 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the order dated 26.11.2019 passed by Ld. CIT(A)-3, Bengaluru and it relates to assessment year 2012-13. The grounds of appeal urged by the assessee relate to the following issues:- a) Disallowance of expenses - Rs.15,00,000/- b) Addition of Advances - Rs.31,45,000/- c) Addition cash deposits - Rs.43,60,000/- ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 2 of 9 2. The appeal is barred by limitation by 124 days. The assessee has filed petition before the bench requesting the bench to condone the delay. We heard the parties on this preliminary issue. In the petition it is stated that the assessee was exploring the possibility of settling the disputes under VSV Scheme and taking professional advices. However, by that time lock down also announced. All these reasons have caused the delay of 124 days in filing the present appeal. Having regard to the submissions made in the petition, we are of the view that there was reasonable cause for the delay in filing the appeal before the Tribunal. Accordingly, we condone the delay and admit the appeal for hearing. 3. The facts relating to the case are stated in brief. The assessee is carrying on business of landscaping under the name and style M/s. “Balaji Developers”. The assessee filed its return of income declaring total income of Rs.2,76,470/-. The AO made above said additions and the same was also confirmed by Ld CIT(A). Hence the assessee has filed this appeal before the Tribunal. 4.0 The first issue relates to the disallowance of Rs.15.00 lakhs out of landscaping expenses. During the scrutiny proceedings, the A.O. noticed that the assessee did not declare any income from business. He noticed that the income from landscaping amounting to Rs.85,200/- was declared under the head “income from other sources”. Hence, the A.O. asked the assessee to furnish the details of receipts and payments of landscaping business. The assessee submitted that it has received a sum of Rs.39,25,000/- and spent a sum of Rs.37,45,000/- in landscaping activity. The assessee did not maintain books of accounts and accordingly submitted that he is agreeing for estimation of income @ 8% u/s 44AD of the Income- tax Act,1961 ['the Act' for short]. He submitted that all expenditure ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 3 of 9 was incurred by way of cheque payments only. The A.O. called for details of expenditure and noticed that they were not supported by any bills or invoices. Accordingly, the A.O. took the view that, without supporting bills and invoices, these payments cannot be considered as incurred towards expenditure. Accordingly, he disallowed a sum of Rs.15 lakhs out of the expenses and added the same to the total income. The Ld. CIT(A) also confirmed the same. 4.1 We heard the parties on this issue and perused the record. We noticed earlier that the assessee has received a sum of Rs.39.25 lakhs towards landscaping activity. It is the claim of the assessee that he has spent a sum of Rs.37,45,000/- as expenses. The Ld. A.R. submitted that materials required for landscaping work are mainly soil, grass, etc. Further, the assessee has to spent money towards labour and transportation. He submitted that all these items are purchased from unorganized sector, who do not normally issue bills. Accordingly, he submitted that the A.O. was not justified in making adhoc addition of Rs.15 lakhs. The Ld. A.R. submitted that the assessee has not maintained books of accounts and hence his income may be estimated @ 8% of the gross receipts as provided u/s 44AD of the Act. 4.2 We notice that the expenditure claimed by the assessee was Rs.37.45 lakhs and it is a fact that the assessee did not maintain books of accounts. It is also a fact that the assessee could not furnish any bill or voucher in support of the expenditure claim. Accordingly, we are of the view that some disallowance out of expenditure is called for to take care of deficiencies. Considering the quantum of expenditure and level of operations of the assessee, we are of the view that the disallowance of Rs.15 lakhs made by the tax authorities is on the higher side. Accordingly, we are of the view ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 4 of 9 that a disallowance of Rs.3 lakhs would take care of the deficiencies in maintenance of vouchers relating to expenditure and the same would also meet the ends of justice. Accordingly, we modify the order passed by the Ld. CIT(A) on this issue and direct the A.O. to restrict the disallowance on this issue at Rs.3.00 lakhs. We order accordingly. 5.0 The next issue relates to addition of Rs.31.45 lakhs made by the A.O. During the course of assessment proceedings, the A.O. noticed that the assessee has purchased land measuring one acre at Chennasandra village, Uttarahalli, Bengaluru for a consideration of Rs.1 crore plus registration charges. It was submitted that the assessee had received a sum of Rs.110 lakhs from M/s. Dharma Preet Developers (P) Ltd in connection with development of the above said land and the same was used to meet the consideration in purchase of land. The assessee also furnished an agreement entered by him with above said concern. The A.O. noticed that the total investment made in the property was Rs.1,36,71,967/-. The above said land was developed in sites. It was submitted that the sources of above said amount was the advance of Rs.110 lakhs received from M/s. Dharma Preet Developers (P) Ltd and the additional amount of Rs.31.45 lakhs received as advance from customers towards sale of sites. Hence, the A.O. asked the assessee to furnish breakup details of advances of Rs.31.45 lakhs. The assessee furnished copies of certain of sale agreements entered for sale of developed sites. However, on verification of those sale agreements, the A.O. noticed that the advances paid by cheque/RTGS transfer mentioned in the sale deed were not reflected in the bank account of the assessee. Hence the claim of the assessee that the amount of Rs.31.45 lakhs was received as advance from customers was proved wrong. Accordingly, the A.O. ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 5 of 9 took the view that the assessee has failed to explain the sources for advances of Rs.31.45 lakhs and assessed the same as income of the assessee. 5.1 Before Ld. CIT(A), the assessee took an altogether different stand. He submitted that the above said amount of Rs.31.45 lakhs was actually advance payments received for landscaping works. It was further submitted that the work was completed in the succeeding assessment year and income @ 8% was offered on presumptive basis u/s 44AD of the Act in that year. In support of the same, the assessee furnished copies of letter written to Manager, HDFC Bank asking for copies of relevant cheques and also the copies of 4 cheques furnished by the bank. The aggregate amount of cheques was Rs.31.45 lakhs. Since these documents were filed as additional evidence before Ld. CIT(A), he called for a remand report from the A.O. In the remand report, the A.O. expressed the view that the assessee is changing his stand before Ld CIT(A) and it is an afterthought. He also opined that the assessee may not be entitled to furnish additional evidence as per Rule 46A. The Ld. CIT(A) also refused to admit additional evidences observing that the assessee was provided with a sufficient opportunity by the A.O. during the course of assessment proceedings. On merits, the Ld. CIT(A) took the view that the assessee has failed to furnish any confirmation letters from the payers of cheques to prove that they were received for the purpose of landscaping work. Accordingly, he confirmed the addition of Rs.31.45 lakhs made by the A.O. 5.2 We heard the parties on this issue and perused the record. The Ld. A.R. pleaded for admission of additional evidences. He submitted that the assessee could not properly explain the facts ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 6 of 9 before the AO during the course of assessment proceedings for want of correct details. Accordingly the Ld A.R prayed that the assessee may be provided with one more opportunity to explain the facts before the A.O. 5.3 We heard Ld. D.R., who supported the order passed by Ld. CIT(A). It is a fact that the assessee has offered altogether new explanation before Ld. CIT(A). The assessee has also furnished copies of cheques received from customers and the said cheques were stated to be advance payments for landscaping works, which was completed in the succeeding year. Since the assessee was not maintaining books of accounts, it is quite possible that the assessee could not give proper explanation before the AO. Accordingly, we are of the view that, in the interest of natural justice, the assessee may be provided with one more opportunity to substantiate the advance amount of Rs.31.45 lakhs. In fact, offering one more opportunity to the assessee would actually promote cause of justice. Accordingly, we admit the additional evidences furnished by the assessee before Ld CIT(A). Since these evidences require examination, we restore this issue to the file of the A.O. who shall examine the additional evidences by considering the information and explanation that may be furnished by the assessee. After affording adequate opportunity of being heard to the assessee, the A.O. may take appropriate decision in accordance with law on this issue. 6.0 The last issue contested by the assessee relates to addition of Rs.43,60,000/- being cash deposits made into the bank account of the assessee. The A.O. noticed that the assessee has made total cash deposit of Rs.55,83,500/- in ING Vysya Bank. When asked to explain the sources, the assessee stated that he received an ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 7 of 9 advance of Rs.43,60,000/- from Shri M. Muniratnam in connection with sale of property belonging to the assessee. He submitted that the sale did not went through and accordingly the above said advance of Rs.43,60,000/- was returned back subsequently to Shri Muniratnam. In support of the same, the assessee also filed a confirmation letter obtained from Shri Muniratnam. Hence, the A.O. issued notice u/s 133(6) of the Act to Shri Muniratnam calling for details of transaction entered by him with the assessee. However, there was no reply from Muniratnam. The A.O. took the view that mere filing confirmation letter would not discharge the responsibilities of the assessee. 6.1 The AO also noticed that the assessee had received Rs.1 crore from M/s. Dharma Preet Developers (P) Ltd on 7.12.2011 and withdrawn a sum of Rs.40 lakhs on 8.12.2011 out of the above said amount. It was claimed by the assessee that the above said Rs.40 lakhs was used to repay the amount to Shri Muniratnam. However, the AO noticed that the assessee had stated earlier before him that the amount of Rs.1 crore received from the above said concern was used to purchase the property located at Chennasandra village. In view of the conflicting replies, the A.O. took the view that the assessee has not explained the deposit of Rs.43.6 lakhs properly. Accordingly, he assessed the same as income of the assessee. The Ld. CIT(A) also confirmed the same. 6.2 We heard the parties on this issue and perused the record. There should not be any doubt that the responsibility to prove the cash deposits lies upon the shoulders of the assessee. We notice that the AO has made the addition primarily for two reasons, viz., (A) Shri Munirathinam did not respond to the notice issued by the AO. ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 8 of 9 (B) There is contradiction with regard to the sources for repayment of advance taken from Shri Munirathinam. With regard to the first reasoning, the Ld A.R submitted that the assessee has furnished a confirmation letter containing name, address and PAN number of Shri M Munirathinam. Accordingly, he submitted that the AO could have conducted further enquiries with him by issuing summons. He submitted that the assessee has discharged his primary responsibility. With regard to the second reasoning, the Ld A.R submitted that the AO has found fault with the assessee by considering abstract entries. On the contrary, the Ld D.R submitted that the assessee has failed to prove the sources of deposits. 6.3 The Ld CTI(A) has stated that mere furnishing of name, address and PAN number will not discharge the responsibility of the assessee. Accordingly, he has confirmed this addition. However, in the instant case, the assessee has also furnished a confirmation letter and the AO has also acted upon it by issuing notice u/s 133(6) of the Act. Thereafter, it appears that both the assessee as well as AO did not carry the matter further. We notice that the AO has intimated about the non-compliance to the assessee on 23-03- 2015 and the assessment was completed on 30-03-2015. Thus, enough time could not have been given by the AO to furnish details called for from Munirathinam. Before us the Ld A.R reiterated that the assessee has received funds from Shri Munriathanam as Sales advance. Under these set of facts, we are of the view that the assessee may be provided with one more opportunity to prove the claim of receipt of money from Shri Munirathinam. With regard to repayment of money to him, it is a fact that the assessee did not maintain books of accounts. In the absence of books of accounts, examining the cash flow in piece meal will give incorrect results. ITA No.458 /Bang/2020 Sri Nagaraj Venkataramanappa, Bangalore Page 9 of 9 However, it is possible for the assessee to furnish a cash flow statement to explain the transactions of the repayment of advance to Shri Munirathinam and also purchase of land. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of AO for examining it afresh. The assessee is also directed to furnish necessary evidences and information to the satisfaction of the AO. 7. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 12 th Jan, 2022 Sd/- (Beena Pillai) Judicial Member Sd/- (B.R. Baskaran) Accountant Member Bangalore, Dated 12 th Jan, 2022. VG/SPS 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.