Sri T Lakshmana Rao, Eluru V. The ITO, Ward-1, Eluru

ITA 476/VIZ/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7047 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 24-11-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SUBRATA SARKAR
• Keywords: Opportunity of cross examination
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO.462/VIZAG/2006 ASSESSMENT YEAR : 2004-05 ITO WARD-1, ELURU VS. T. LAKSHMANA RAO, ELURU (APPELLANT) (RESPONDENT) . PAN NO: ACBPT 2971 J I.T.A. NO.476/VIZAG/2006 ASSESSMENT YEAR : 2004-05 T. LAKSHMANA RAO, ELURU VS. ITO WARD - 1, ELURU (APPELLANT) (RESPONDENT) PAN NO: ACBPT 2971 J APPELLANT BY: SHRI SUBRATA SARKAR, CIT (DR) RESPONDENT BY : SH RI G.V.N. HARI, CA O R D E R PER B..R. BASKARAN, ACCOUNTANT MEMBER : 1. THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 14.9.2006 PASSED BY LD CIT(A), RAJAHMUNDRY AND THEY RELATE TO THE AS SESSMENT YEAR 2004-05. 2. THE ADDITIONS MADE THE ASSESSING OFFICER IN THE ACCELERATED ASSESSMENT PASSED U/S 175 OF THE ACT, HAVING BEEN PARTIALLY SU STAINED BY THE LD CIT(A), BOTH THE PARTIES ARE IN APPEAL BEFORE US. 3. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE ASSESSEE WAS FILING HIS RETURN OF INCOME WITH THE ITO, WARD-I, ELURU. IT CAME TO THE KNOWLEDGE OF THE DEPARTMENT THAT THE ASSESSEE HAD PURCHASED DEMAND D RAFTS FOR AN AGGREGATE VALUE OF RS.33.75 LAKHS IN FAVOUR OF SUPERINTENDENT , PROHIBITION AND EXCISE DEPARTMENT, AP. THESE DEMAND DRAFTS WERE PURCHASED FOR THE PURPOSE OF PARTICIPATING IN THE AUCTION FOR ALLOTMENT OF IMFL RETAIL SHOPS. THE ASSESSEE SUBMITTED THAT HE BORROWED A SUM OF RS.32.50 LAKHS AND FURTHER WITHDREW A SUM 2 OF RS.3.00 LAKHS FROM A CONCERN NAMED M/S CHAKRI BA R & RESTAURANT FOR THE PURPOSE OF OBTAINING THE IMPUGNED DEMAND DRAFTS. THE ASSESSING OFFICER PARTIALLY ACCEPTED THE SOURCES AND DID NOT ACCEPT T HE FOLLOWING LOANS. (A) LOAN OF RS.4.00 LAKHS TAKEN FROM P.AMARNATH BA BU FOR THE REASON THAT THE SAID PERSON STATED IN THE STATEMENT RECORDED FR OM HIM THAT THE IMPUGNED TRANSACTIONS WERE MADE WITHOUT HIS KNOWLEDGE AND HE HAS NOT GIVEN ANY LOAN TO THE ASSESSEE. (B) LOAN OF RS.5.00 LAKHS EACH TAKEN FROM VEPURI V ENKATA SATYANARAYANA BABU AND THOTA LELA VENKATA SATYANARAYANA BAPULAPAD U, WERE ADDED FOR THE REASON THAT BOTH THE PERSONS FAILED TO APPEAR BEFOR E THE AO EVEN THOUGH SEVERAL OPPORTUNITIES WERE GIVEN AND SUMMONS WERE ISSUED. EVEN THOUGH THE AGGREGATE AMOUNT OF THE ABOVE SAID THREE LOANS WERE RS.14.00 LAKHS, THE AO ARRIVED AT A FIGURE OF RS.12 .50 LAKHS FOR THE PURPOSE OF MAKING ADDITION. 3.1 THE AO NOTICED THAT THE ASSESSEE HAD MADE C ASH DEPOSITS IN HIS TWO BANK ACCOUNTS MAINTAINED WITH UCO BANK DURING THE YEAR. THE AGGREGATE AMOUNT OF SUCH DEPOSITS WAS RS.1,40,20,390/-. THE AO SET OFF THE SALES AMOUNT OF RS.77.43.204/- AND ADDED THE BALANCE AMOUNT OF RS.6 2,77,186/- U/S 68 OF THE ACT. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE THAT THE WITHDRAWALS MADE FROM THE BANK ACCOUNT NO.1452 OF GODAVARI GRA MEENA BANK WERE RE-- DEPOSITED IN THE TWO ACCOUNTS MAINTAINED WITH UCO B ANK. 3.2 THE AO ALSO NOTICED THAT A SUM OF RS.14.94 LAKHS WAS FOUND DEPOSITED IN BANK ACCOUNT NO.9636 MAINTAINED IN THE NAME OF SRI VANNEMREDDY MALLIKARJUNA RAO. THE SAID PERSON, IN THE STATEMENT RECORDED FROM HIM STATED THAT THE TRANSACTIONS CARRIED IN ACCOUNT NO.9636 WERE TRANSA CTED ON BEHALF OF THE ASSESSEE. ACCORDINGLY, THE AO ADDED THE ABOVE SAID AMOUNT OF RS.14.94 LAKHS. 3.4 THE AO ALSO ADDED A SUM OF RS.1,25,000/-, B EING NON REFUNDABLE DEPOSITS MADE ALONG WITH THE APPLICATION FILED FOR AUCTION O F IMFL RETAIL SHOPS. 4. IN THE APPEAL FILED BY THE ASSESSEE, LD CIT( A) PARTIALLY GRANTED RELIEF WHICH ARE SUMMARIZED BELOW: 3 (A) THE LD CIT(A) HELD THAT THE ASSESSEE HAS DIS CHARGED HIS ONUS IN RESPECT OF THE LOAN AMOUNT OF RS.5.00 LAKHS EACH O BTAINED FROM VEPURI VENKATA SATYANARAYANA BABU AND THOTA LELA VENKATA SATYANARA YANA BAPULAPADU AND ACCORDINGLY HE HELD THAT NO ADDITION IS WARRANTED I N RESPECT OF THESE TWO LOANS. HOWEVER, THE LD CIT(A) CONFIRMED THE ADDITION PERTA INING TO THE LOAN OF RS.4.00 LAKHS TAKEN FROM P.AMARNATH BABU,. (B) IN RESPECT OF CASH DEPOSITS MADE IN THE TWO B ANK ACCOUNTS, LD CIT(A) ALLOWED CREDIT FOR THE AMOUNT DEPOSITED WITHIN THRE E DAYS FROM THE DATE OF WITHDRAWAL. ACCORDINGLY THE LD CIT(A) WORKED OUT T HE RELIEF TO THE EXTENT OF RS.54.45 LAKHS AND CONFIRMED THE ADDITION OF BALANC E AMOUNT OF RS.8.31 LAKHS. (C) THE LD CIT(A) DELETED THE ADDITION OF RS.14. 94 LAKHS PERTAINING TO THE DEPOSITS MADE IN THE ACCOUNT STANDING IN THE NAME O F VENNEEMREDDY MALLIKHARJUNA RAO FOR THE REASON THAT THE AO HAS AD DED THE SAID AMOUNT WITHOUT MAKING FURTHER INVESTIGATION AND WITHOUT AFFORDING OPPORTUNITY TO THE ASSESSEE FOR CROSS EXAMINATION. THE LD CIT(A) ALSO HELD THAT TH E AO HAS FAILED TO ESTABLISH THE BENAMIDARSHIP SATISFACTORILY. (D) THE LD CIT(A) CONFIRMED THE ADDITION OF RS.1. 25 LAKHS PERTAINING TO THE NON REFUNDABLE DEPOSITS MADE ALONG WITH THE APP LICATION. 5. AGGRIEVED BY THE RELIEF GRANTED BY THE LD CI T(A), THE REVENUE IS IN APPEAL BEFORE US. AGGRIEVED BY THE ADDITIONS SUSTAINED BY THE LD CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE RECORD. IN THE APPEAL OF THE ASSESSEE, FOLLOWING TWO LEGAL ISSUES HAVE BEEN RAISED. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) SHOULD HAVE SEEN THAT AN ASSESSMENT U/S 175 IS NOT CALLED FOR UNDER THE CIRCUMSTANCES OF THE CASE. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) FAILED TO SEE THAT THE ASSESSING OFFICER HAD NO JURISDICTION OVER THE APPELLANTS CASE. 6.1 WITH REGARD TO THE FIRST LEGAL ISSUE, LD AR RELIED UPON THE DECISION OF ITAT, HYDERABAD IN THE CASE OF ITO VS. SMT. A.BRAHMARAMBA (1984) (8 IITD (HYD) 232). IN THAT CASE THERE WAS A COURT SALE BY PUBLI C AUCTION AND HENCE THE TRIBUNAL HELD THAT THERE WAS NO QUESTION OF SALE WI TH A VIEW TO AVOID TAX AND HENCE THERE WAS NO OCCASION FOR THE ITO TO ASSUME J URISDICTION U/S 175. IN THE INSTANT CASE, THE DEMAND DRAFTS CONSTITUTE THE ASSE T. HENCE THE AO HAS PROCEEDED TO INITIATE ACTION U/S 175 OF THE ACT BY MAKING PROVISIONAL ATTACHMENT OF THE DEMAND DRAFTS U/S 281B OF THE ACT. THE LD C IT(A) HAS OBSERVED THAT THE 4 APPREHENSION OF THE AO IS DISCERNIBLE FROM THE ASSE SSMENT ORDER. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) O N THIS ISSUE. 6.2 WITH REGARD TO THE JURISDICTION OF THE ITO, WE NOTICE THAT THE ASSESSEE WAS FILING HIS RETURN OF INCOME WITH THE ITO, WARD-I, E LURU. ON RECEIPT OF NOTICE U/S 175 OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME WITH THE ITO, WARD-2, ELURU ON THE GROUND THAT THE ASSESSEE HAS SHIFTED TO A NEW A DDRESS. THE LD CIT(A) NOTICED THAT THE ASSESSEE DID NOT INFORM ABOUT THE CHANGE OF ADDRESS TO THE DEPARTMENT. SINCE THE NOTICE U/S 175 WAS ISSUED ON THE BASIS OF HIS EARLIER RETURN OF INCOME AND HIS OLD ADDRESS, THE LD CIT(A) DISMIS SED THIS GROUND OF THE ASSESSEE RELATING TO THE JURISDICTION. WE NOTICE THAT THE LD CIT(A) HAS TAKEN A CONSCIOUS DECISION AFTER ANALYZING THE CHRONOLOGICA L EVENTS AND HENCE WE DO NOT FIND ANY INFIRMITY IN HIS DECISION ON THIS ISSUE. 7. THE FIRST ISSUE RELATES TO THE LOAN OBTAINE D FOR THE PURPOSE OF PURCHASING THE DEMAND DRAFTS WORTH RS.33.75 LAKHS. THE FOURTH ISSU E RELATES TO THE NON REFUNDABLE DEPOSIT OF RS.1.25 LAKHS. THUS THE ASSES SEE HAS IN AGGREGATE INVESTED A SUM OF RS.35.00 LAKHS. THE SOURCES FOR THE SAID INVESTMENT ARE EXPLAINED AS UNDER. (A) ACCEPTED BY THE AO: WITHDRAWAL FROM CHAKRI BAR & RESTAURANT 3.00 LAKHS LOANS OBTAINED FROM: (ACCEPTED BY AO) SRI BALAJI FINANCE CORPORATION 7.00 VALLBHANENI SOMASEKHARA RAO 4.00 VALLABHANENI SRIKANTH 4.00 MAGANTI VENKATA RAM MOHAN RAO 3.50 --------------- 21.50 LAKHS (B) NOT ACCEPTED BY THE AO:- LOANS TAKEN FROM: P.AMARNATH BABU 4.00 VEPURI VENKATA SATYANARAYANA BABU 5.00 THOTA LELA VENKATA SATYANARAYANA BAPULAPADU 5.00 ------------- 35.50 LAKHS ======= SINCE THE NON REFUNDABLE DEPOSIT OF RS.1.25 LAKHS I S ALSO COVERED BY THE SOURCES EXPLAINED ABOVE, IN OUR OPINION, NO SEPARATE ADDITI ON OF RS.1.25 LAKHS IS CALLED FOR. ACCORDINGLY, WE REVERSE THE ORDER OF LD CIT(A ) ON RS.1.25 LAKHS AND DIRECT THE AO TO DELETE THE SAID ADDITION. 5 7.1 THE REVENUE IS IN APPEAL WITH REGARD TO THE RELIEF GIVEN IN RESPECT OF THE LOAN OF RS.5.00 LAKHS EACH OBTAINED FROM VEPURI VEN KATA SATYANRAYANA BABU AND THOTA LELA VENKATA SATYANARAYANA BAPULAPADU. T HE LD CIT(A) HAS DELETED THE SAID ADDITIONS FOR THE FOLLOWING REASONS: (A) THE ASSESSEE HAS FILED CONFIRMATION LETTERS F ROM THE ABOVE PERSONS INDICATING THEREIN THE IDENTITY OF THE CREDITORS, T HE SOURCES FOR THE LOANED FUNDS AND THE MODE OF TRANSACTIONS BY WAY OF CHEQUES DRAW N ON GODAVARI GRAMEENA BANK. THUS THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS PLACED UPON HIM. (B) ON SUCH DISCHARGE OF THE PRIMARY ONUS, THE BU RDEN SHIFTS UPON THE ASSESSING OFFICER AND THE AO HAS ACCORDINGLY ISSUED THE SUMMONS TO THESE TWO PERSONS. (C) IT IS NOT THE RESPONSIBILITY OF THE ASSESSEE TO ENSURE THE PRODUCTION OF THE TWO CREDITORS BEFORE THE AO. IF SUCH PARTIES D O NOT APPEAR BEFORE THE AO FOR DEPOSITION AND TENDERING OF EVIDENCE, IT WAS LEFT T O THE AO TO EXERCISE HIS POWER AND AUTHORITY UNDER THE PROVISIONS OF THE ACT TO EN FORCE THE ATTENDANCE. (D) THE AO, HAVING FAILED TO DO SO AND HAVING NO T TAKEN FURTHER STEPS TO ENFORCE COMPLIANCE FROM THE TWO PARTIES, CANNOT BE SAID TO HAVE DISCHARGED THE ONUS SHIFTED UPON HIM. IN OUR OPINION, THE LD CIT(A) HAS ANALYSED THE LEGA L POSITION WITH REGARD TO THESE TWO LOANS AND TAKEN A CONSCIOUS DECISION. AS OBSE RVED BY THE LD CIT(A), THE AO HAS NOT TAKEN ANY STEPS TO ENFORCE THE ATTENDANC E OF THE TWO CREDITORS. HENCE THE ASSESSEE COULD NOT BE BURDENED WITH THE L IABILITY ONCE HE HAS DISCHARGED HIS PRIMARY ONUS. HENCE WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) IN GRANTING RELIEF PERTAINING TO THESE TWO LOANS. 7.2 THE ASSESSEE IS IN APPEAL AGAINST THE CONFI RMATION OF THE ADDITION PERTAINING TO THE LOAN OF RS.4.00 LAKHS OBTAINED FR OM SRI P.AMARNATH BABU. THE LD CIT(A) CONFIRMED THE ADDITION OF THE SAME FOR TH E REASON THAT THE SAID CREDITOR HAS STATED IN HIS DEPOSITION THAT HE HAD NO IDEA OR KNOWLEDGE OF THE IMPUGNED LOAN OF RS.4.00 LAKHS. HOWEVER, ON A CAREFUL PERUS AL OF THE RECORD, FOLLOWING POSITION EMERGES OUT: (A) THE SAID AMARNATH BABU HAS SUBMITTED A CONFI RMATION LETTER DATED 8.8.2005, WHERE IN HE HAS CONFIRMED THAT HE LENT A SUM OF RS.4.00 LAKHS TO THE ASSESSEE ON INTEREST OF RS.1.50 PER HUNDRED PER MON TH BY WAY OF CHEQUE. HE HAS CLAIMED THAT HE HAS GIVEN THE AMOUNT OUT OF HIS AGRICULTURAL INCOME. (B) IN THE ANSWER TO THE Q. NO.7, HE HAS STATED AS UNDER: 6 (I) HE KNOWS THE ASSESSEE FOR 10 YEARS. (II) OUT OF FRIENDSHIP HE GAVE LOAN OF RS.5.00 LAKH S IN THE MONTH OF FEBRUARY 2005 TO THE ASSESSEE HEREIN. (III) EXCEPT TO THE ASSESSEE HEREIN, HE HAS NOT GIV EN ANY LOAN TO ANY BODY. (C) LATER HE HAS STATED THAT THE TRANSACTIONS OF LU MP SUMS CARRIED IN HIS BANK ACCOUNT DO NOT BELONG TO HIM. HOWEVER HE DID NOT POINT OUT WHO HAS CARRIED OUT THE SAID TRANSACTIONS. ALSO IN THE ANSWER TO THE QUESTION NO.8, THE SAID PERSON HAS STATED THAT HE H AS NOT GIVEN ANY LOAN TO THE ASSESSEE. (D) THE ASSESSING OFFICER HAS FAILED TO AFFORD T HE OPPORTUNITY OF THE CROSS EXAMINATION TO THE ASSESSEE AND FULLY PLACED HIS RE LIANCE TO THE STATEMENT GIVEN BY THE AMARNATH BABU. AS CAN BE SEEN FROM THE CHRONOLOGICAL ANALYSIS OF T HE EVENTS, IT IS CONCEIVABLE THAT THE SAID CREDITOR HAS SHIFTED STANDS OFTEN IN ORDER TO SAVE HIS SKINS. HENCE, THE AO, BEFORE GIVING CREDENCE TO THE STATEMENT OF GIVEN BY THE AMARNATH BABU, SHOULD HAVE AFFORDED AN OPPORTUNITY OF CROSS VERIFI CATION TO THE ASSESSEE. IN THE ABSENCE OF ANY SUCH OPPORTUNITY AND ALSO IN THE ABS ENCE OF ANY OTHER CORROBORATIVE MATERIAL TO SUBSTANTIATE THE STATEMEN T OF THE AMARNATH BABU, THE AO CAN BE SAID TO HAVE MADE THE SAID ADDITION ONLY ON SUSPICION AND SURMISES. THE FACT REMAINS THAT THE ASSESSEE HAS RECEIVED THE LOAN CHEQUES FROM THE BANK ACCOUNT OF THE AMARNATH BABU. HENCE THE ADDITION MA DE BY THE AO, ONLY ON THE BASIS OF SUSPICION AND SURMISES CANNOT STAND IN THE EYES OF LAW. IN VIEW OF THE ABOVE, WE REVERSE THE ORDER OF THE LD CIT(A) ON THI S ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS.4.00 LAKHS RELATING TO TH E AMARNATH BABU. 8. THE NEXT ISSUE RELATES TO THE ADDITION OF RS .62,77,186/- RELATING TO THE CASH DEPOSITS FOUND IN THE TWO BANK ACCOUNTS BEARING NO. 605 AND 9812, MAINTAINED WITH THE UCO BANK. THE ASSESSEE HAS ALSO MAINTAINE D ONE MORE BANK ACCOUNT BEARING NO.1452 WITH GODAVARI GRAMEENA BANK (GG BA NK) IN WHICH THE VARIOUS LOANS TAKEN BY THE ASSESSEE WERE DEPOSITED. THE AS SESSEE CLAIMED THAT THE CASH WITHDRAWN FROM GG BANK WERE RE DEPOSITED IN TH E TWO UCO BANK ACCOUNTS ON VARIOUS DATES. HOWEVER THE AO DID NOT ACCEPT TH E INTERLACING OF FUNDS BETWEEN THE BANK ACCOUNTS FOR THE REASON THAT (A) C ASH DENOMINATIONS OF THE WITHDRAWAL AND DEPOSIT DO NOT TALLY. (B) THERE IS MISMATCH BETWEEN THE AMOUNT WITHDRAWN AND THE AMOUNT DEPOSITED. THE AO ARRIVED AT THE TOTAL AMOUNT OF DEPOSIT MADE IN THE TWO BANK ACCOUNTS MAINTAINED WI TH UCO BANK AT 7 RS.1,40,20,390/-. THE AO ASSUMED THAT THE SAID DE POSITS WOULD CONSIST OF SALES REALIZATIONS AND ACCORDINGLY ALLOWED DEDUCTION OF S ALES TURNOVER OF RS.77,43,204/- AND ADDED THE BALANCE AMOUNT OF RS.6 2,77,186/- AS INCOME FROM OTHER SOURCES U/S 68 OF THE ACT. HOWEVER THE LD C IT(A) THOUGHT IT FAIR, EQUITABLE AND JUST TO ALLOW CREDIT FOR THE DEPOSITS MADE ON T HE SAME DATE OF WITHDRAWAL OR WITHIN THREE DAYS FROM THE DATE OF WITHDRAWAL. ON GIVING CREDIT FOR THE DEPOSITS MADE WITHIN THREE DAYS, THE AMOUNT TO THE EXTENT OF RS.54,45,920/- WAS FOUND EXPLAINED. ACCORDINGLY THE LD CIT(A) GRANTED RELIE F OF THE AMOUNT STATED ABOVE AND CONFIRMED THE ADDITION OF BALANCE AMOUNT OF RS. 8,31.266/-. 8.1 ON A CAREFUL PERUSAL OF THE COPIES OF BANK ACCOUNTS SUBMITTED IN THE PAPER BOOK COMPILED BY THE ASSESSEE, WE NOTICE THAT, ON M AJORITY OF THE OCCASIONS, THE ASSESSEE IS MAKING CASH DEPOSITS CONTINUOUSLY FOR F EW DAYS AND THERE AFTER A DEMAND DRAFT IS TAKEN FOR ALMOST EQUAL TO THE AGGRE GATE OF THE AMOUNTS SO DEPOSITED. HENCE, IT APPEARS THAT THE AO WAS CONVI NCED THAT THE SALES PROCEEDS COULD HAVE BEEN ROUTED THROUGH THESE TWO BANK ACCOU NTS AND ACCORDINGLY GAVE CREDIT FOR THE SAME. AT THE SAME TIME, IN THE ABS ENCE OF ANY MATERIAL TO CONTRADICT THE CONTENTION OF THE ASSESSEE THAT THE WITHDRAWALS MADE FROM THE BANK ACCOUNT MAINTAINED WITH GG BANK WERE ALSO USED FOR MAKING THE DEPOSITS, THE SAID CONTENTIONS CANNOT BE ALTOGETHER RULED OUT . ACCORDINGLY THE LD CIT(A) THOUGHT FIT TO GRANT CREDIT FOR THE AMOUNTS DEPOSIT ED WITHIN THREE DAYS FROM THE DATE OF WITHDRAWAL. HOWEVER THE LD CIT(A) DID NOT MENTION THE RATIONALE FOR FIXING THE TIME LIMIT OF THREE DAYS. IF WE EXTEND THE THE ORY OF THE LD CIT(A), I.E. THE TIME LIMIT TO ONE WEEK, THE ASSESSEE WOULD GET FURTHER B ENEFIT OF RS.6.09 LAKHS FOR THE FOLLOWING DEPOSITS 31.7.04 25,000 02.08.04 85,000 01.10.04 2,50,000 01.10.04 77,000 04.02.05 48,000 07.02.05 1,24,000 HOWEVER, AS STATED EARLIER, THERE IS NO SCIENTIFIC BASIS FOR FIXING THE DATE SPANS. WHEN THERE IS REGULAR INFLOW AND OUTFLOW OF CASH/CH EQUES, IT IS NOT LOGICAL TO MAKE ADDITION ONLY IN RESPECT OF DEPOSITS WITHOUT GIVING CREDIT TO THE WITHDRAWALS MADE EARLIER, PARTICULARLY IN THE ABSENCE OF ANY OTHER M ATERIAL TO SUGGEST THAT THE EARLIER WITHDRAWALS HAVE BEEN SPENT AWAY. IN THE METHODOLO GY ADOPTED BY THE LD 8 CIT(A), AS STATED EARLIER, IF EXPAND THE TIME SPAN FURTHER, NO ADDITION COULD BE WARRANTED. AS STATED EARLIER, THERE IS NO SCIENTIF IC BASIS FOR DETERMINING THE TIME SPAN. HOWEVER, ON A CAREFUL PERUSAL OF PATTERN OF THE TRANSACTIONS, THE POSSIBILITY OF ASSESSEE ENGAGING IN ANY OTHER BUSINESS ACTIVITI ES CANNOT BE RULED OUT. AS STATED EARLIER, THE ASSESSEE IS MAKING DEPOSITS CON TINUOUSLY FOR FEW DAYS AND THEREAFTER HE WITHDRAWS THE ENTIRE AMOUNT EITHER BY WAY OF CASH OR BY DEMAND DRAFT/ CHEQUE. HENCE, INSTEAD OF GIVING OUTRIGHT C REDIT FOR THE WITHDRAWALS, IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE, IF WE E STIMATE THE INCOME OUT OF THE SAID TRANSACTIONS TREATING THE SAME AS BUSINESS TRA NSACTIONS. THE AO HIMSELF HAS GIVEN CREDIT OF THE SALES TURN OVER OUT OF THE TOTA L DEPOSITS, BY ASSUMING THAT THE PART OF DEPOSITS REPRESENTS THE SALES TURNOVER. BY EXTENDING THE ASSUMPTION OF THE AO, THE REAMING DEPOSIT AMOUNT OF RS.62,77,186/ - IS ALSO TREATED AS THE SALES TURNOVER OUTSIDE THE BOOKS OF ACCOUNT. ACCO RDINGLY WE ESTIMATE A PROFIT OF 8% ON THE SAID DEPOSITS AND THE SAME WORKS OUT TO R S.5,02,175/-. ACCORDINGLY, THE AO IS DIRECTED TO MAKE A ROUND SUM ADDITION OF RS.5.00 LAKHS AND IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE AND WE O RDER ACCORDINGLY. 9. THE NEXT ISSUE RELATES TO THE ADDITION OF RS .14,94,000/- RELATING TO THE BANK ACCOUNT STANDING IN THE NAME OF SHRI VENNEMREDDY MA LLIKHARJUNA RAO. THE AO ADDED THE SAID AMOUNT ON THE SUBMISSIONS OF ABOVE S AID MALLIKHARJUNA RAO THAT THE TRANSACTIONS IN THE BANK ACCOUNT WERE CARRIED O N BEHALF OF THE ASSESSEE. THE LD CIT(A) DELETED THE SAID ADDITION WITH THE FOLLOW ING OBSERVATIONS: 7.3 AFTER HEARING THE LEARNED AUTHORIZED REPRESENT ATIVE AND ON A CAREFUL CONSIDERATION OF THE FACTS RELATING TO THE ISSUE, IT MAY BE STATED THAT ALTHOUGH ANY STATEMENT OF SHRI VENNEMRE DDY MALLIKHARJUNA RAO TO THE EFFECT THAT HE DID NOT DEP OSIT THE AMOUNTS IN THE ACCOUNT STANDING IN HIS NAME SHOULD HAVE SPURRE D THE ASSESSING OFFICER INTO UNDERTAKING FURTHER INVESTIGATION INTO THE DE FACTO OWNERSHIP AND OPERATION OF THE ACCOUNT NO.9636 WITH UCO BANK, ELURU BRANCH, ELURU, YET NO FURTHER INVESTIGATION H AD BEEN UNDERTAKEN BY THE ASSESSING OFFICER AND MOST IMPORT ANTLY, NO OPPORTUNITY FOR CROSS-EXAMINATION HAD BEEN AFFORDED TO THE APPELLANT. ON THE FACE OF IT, THE OWNER OF ACCOUNT NO.9636 IS SHRI VENNEMREDDY MALLIKHARJUNA RAO, AS THE ACCOUNT IS ST ANDING IN HIS NAME, BUT HIS BENAMIDARSHIP IS REQUIRED TO BE SATIS FACTORILY PROVED BEYOND REASONABLE DOUBT, BY THE ASSESSING OFFICER S O AS TO SHIFT THE ONUS TO THE APPELLANT. THEREFORE, IN THE ABSENCE OF ANY OPPORTUNITY FOR CROSS-EXAMINATION, THE ENTIRE PROCESS OF FACTS FINDING STOOD VITIATED, AND, HENCE, NOT SUSTAINABLE IN THE EYES O F LAW. THUS, THE 9 ADDITION OF RS.14,94,000 IS LIABLE TO BE DELETED, A ND THE SAME IS HEREBY DELETED. AS OBSERVED BY THE LD CIT(A), THE AO HAS MADE THIS ADDITION WITHOUT ESTABLISHING THE BENAMIDARSHIP, WITH OUT AFFORDING OPPORTUNITY OF CROSS EXAMINATION AND WITHOUT HAVING IN HAND ANY CORROBOR ATIVE MATERIAL TO SUPPORT THE STATEMENT OF SHRI MALLIKHARJUNA RAO. HENCE THE ADD ITION HAS BEEN MADE ONLY ON SUSPICION AND SURMISES AND THE SAME IS LIABLE TO TH E DELETED. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) . 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 05-03-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 5 TH MARCH, 2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 THE ITO WARD-1, ASHOKNAGAR, ELURU 534002 02 SHRI TUTHA LAKSHMANA RAO, PROP: CHAKRI BAR & RES TAURANT, CANAL ROAD, ELURU-1 03 THE CIT (A), RAJAHMUNDRY, 04 THE CIT, RAJAHMUNDRY 05 DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH