BADRI NARAYAN DARAK, HYDERABAD V. INCOME TAX OFFICER, WARD-8(1), HYDERABAD, HYDERABAD

ITA 475/Hyd/2023

AI Insights

The case revolves around an appeal by Badri Narayan Darak against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, which upheld the addition of Rs.5,76,550 as 'unexplained investment' and disallowed a deduction of Rs.90,977 under section 80C of the Income Tax Act, 1961. The assessee argued that the cash deposits were from legitimate sources including an opening cash balance and business proceeds, and that the LIC payments were substantiated by bank statements. The Tribunal, after reviewing the submissions and evidence, found in favor of the assessee, leading to the allowance of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133392 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 07-11-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 04-10-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 44AD; 80C

Judgement Text

आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “SMC”, HYDERABAD BEFORE SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 475/Hyd/2023 (निर्धारण वर्ा / Assessment Year: 2016-17) Badri Narayan Darak, Hyderabad [PAN No. AFQPD9675M] Vs. Income Tax Officer, Ward-8(1), Hyderabad अपीलधर्थी / Appellant प्रत्‍यर्थी / Respondent निर्धाररती द्वधरध/Assessee by: Shri S. Phanindra, AR रधजस्‍व द्वधरध/Revenue by: Shri B. Naveen Kumar, DR सुिवधई की तधरीख/Date of hearing: 08/11/2023 घोर्णध की तधरीख/Pronouncement on: 09/11/2023 आदेश / ORDER Aggrieved by the order dated 14/08/2023 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Badri Narayan Darak (“the assessee”) for the assessment year 2016-17, assessee preferred this appeal. 2. Brief facts of the case are that, during the year under consideration, the assessee filed his return of income on 02/06/2016 declaring an income of Rs.3,25,017/-. Finding cash deposits in the accounts of the assessee, the ITA No. 475/Hyd/2023 Page 2 of 7 case was picked up for scrutiny. During the course of assessment, assessee filed cash flow statement explaining cash deposits in bank account. On perusal of the same, learned Assessing Officer noticed that there was difference of Rs.5,76,550/ between cash deposit and withdrawal. Assessee had stated that the source for this amount is out of cash balances as on 01/04/2015 and profits for the year. However, on verification of return of income for assessment year 2015-16, learned Assessing Officer found that there was no cash balance available which was reflected in the return of income. Further the profit earned during the year is just sufficient for drawings. Learned Assessing Officer, therefore, proposed to add a sum of Rs.5,76,550/- treating the same as ‘unexplained investment’. Apart from this, assessee was asked to furnish evidence for the claim under section 80C of the Income Tax Act, 1961 (for short “the Act”). Learned Assessing Officer recorded that the assessee had merely uploaded the return of income for the assessment year 2015-16, but did not offer any explanation, nor did he file any evidence for section 80C of the Act and, therefore, the amount of Rs.90,977/- was disallowed. 3. Assessee preferred appeal and submitted before the learned CIT(A) that since 2007-08 he has been an income tax assessee and regularly filing the returns of income in the concerned ward and doing business of participating dealing in Government auction/tender for scrap material like paper waste, steel etc, for which the general practice of the business was to deposit amount to Government for bidding in the auction and if bid is final in his favour he had to pay the balance amount by way of demand draft otherwise the same amount will be returned to his account, which fact is evident from the bank statement. He further submitted that since ITA No. 475/Hyd/2023 Page 3 of 7 he was filing his return of income under section 44AD of the Act, declaring more than 8% of gross receipts while filing the ITR-4S, the figures of cash in hand and others are not filled on the basis of bona fide belief that no need to mention the figures in ITR on the income declared under section 44AD of the Act where no books are required to maintain. He, for the perusal of the learned CIT(A) submitted the cash flow statement and also his previous year’s return to establish that the cash deposits were made out of opening balance only and from the business proceeds. As far as deductions under section 80C of the Act, assessee submitted that disallowance by learned Assessing Officer was incorrect since the LIC payments totalling to an amount of Rs.91535/- were marked in bank statements. 4. On a perusal of the papers and considering the contentions raised by the assessee, learned CIT(A), as a matter of fact found that the assessee uploaded a copy of cash book bearing opening balance of Rs. 6,52,369/- which is more than the additional cash deposited by him during the year, but since the assessee could not furnish any supporting documentary evidence with respect to the transactions reflecting in the cash book along with opening balance, cash in hand shown by the assessee, the same cannot be accepted. On this premise, he upheld the addition. 5. In respect of disallowance of deduction of Rs.90,970/- claimed by the assessee under section 80C of the Act, the learned CIT(A) observed that during the assessment proceedings, the assessee could not furnish any documentary evidence to substantiate his claim under section 80C of the Act, and though the assessee uploaded only written submission and claimed that such deduction was claimed by him on account of payment ITA No. 475/Hyd/2023 Page 4 of 7 made to LIC, during the appellate proceedings, he could not submit any supporting documentary evidences. Learned CIT(A), therefore, brushed aside this contention also. 6. Assessee is, therefore, in this appeal submitting that the authorities below did not appreciate the documents filed by the assessee including the cash flow statement etc., in their proper perspective. Learned AR submitted that there was an opening cash balance of Rs. 6,52,369/- and the total withdrawals during the year were Rs. 30,86,500/- and put together it amounts to Rs. 37,38,869/-. He, therefore, submitted that out of this available Rs. 37,38,869/-, assessee deposited a sum of Rs. 34,04,050/- which leaves a further cash of Rs. 3,34,819/- in the hands of the assessee. Basing on this he submitted that the explained amount of cash exceeds the total deposits by Rs. 3,34,819/- which does not warrant any addition on this score. He further submitted that the bank statements filed by the assessee clearly reflected the payments made to LIC and, therefore, that itself constitute proper evidence to support the claim under section 80C of the Act. 7. Learned DR submitted that as is evident from the written submissions dated 25/04/2018 made before the learned Assessing Officer, the assessee submitted only copy of computation of income, bank account statements and the cash flow statement and he never produced the cash book nor the LIC receipts and, therefore, the authorities are justified in making and sustaining the additions. 8. I have gone through the record in the light of the submissions made on either side. Though the Revenue contended that neither the cash book ITA No. 475/Hyd/2023 Page 5 of 7 nor the LIC receipts were filed before the authorities below, order of the learned CIT(A) shows that on a perusal of the copy of cash book bearing opening balance of Rs. 6,52,369/- uploaded by the assessee, learned CIT(A), as a matter of fact found that such an opening balance was more than the additional cash deposited by him during the year. Learned CIT(A), however, did not accept the same on the ground that the assessee could not furnish any supporting documentary evidence with respect to the transactions reflecting in the cash book along with opening balance cash in hand shown by the assessee. 9. Learned AR submitted that there was no requirement by the learned CIT(A) to produce any sort of evidence, and, therefore, the assessee could not produce the same. Be that as it may, copy of such statement is produced before me also and on a perusal of the same, I too find that the cash book for the financial year 2015-16, there was an opening balance of Rs. 6,52,369/- which was the closing balance for the financial year 2014-15. The return of income for the corresponding assessment year 2015-16 was accepted without any dispute and, therefore, it is not open for the Revenue to dispute the same now. 10. It is, therefore, clear that the total cash available during the year is Rs. 37,38,869/- which is certainly more than the deposited amount of Rs. 34,04,050/- and this factual position militates against the findings of the learned Assessing Officer. I, therefore, accept the contention of the learned AR that there was sufficient cash available to the assessee, explaining the deposits and no addition on that score is sustainable. ITA No. 475/Hyd/2023 Page 6 of 7 11. Coming to the disallowance of claim under section 80C of the Act, I find that the bank statement relating to Tamil Nadu Mercantile Bank clearly reflects the payments to the LIC. Apart from this, the assessee also produced the copies of LIC receipts. Considering this material, I am of the opinion that the disallowance of claim under section 80C of the Act cannot be sustained and the same is directed to be deleted. 12. In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 9 th day of November, 2023. Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER Hyderabad, Dated: 09/11/2023 TNMM ITA No. 475/Hyd/2023 Page 7 of 7 Copy forwarded to: 1. Badri Narayan Darak, 19-1-987/1, Murali Qummaz, Bahadurpura, Hyderabad. 2. The Income Tax Officer, Ward-8(1), Hyderabad. 3. Pr.CIT, Hyderabad. 4. DR, ITAT, Hyderabad. 5. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD