S. Venkat Reddy, Hyd, R.R.Dist V. ITO, Ward-8(2), Hyd, Hyderabad

ITA 492/HYD/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4307 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-09-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Keywords: Unexplained cash credit; Opportunity of being heard; Peak credit
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 492/HYD/2016 ASSESSMENT YEAR: 2009-10 S. VENKAT REDDY, HYDERABAD. PAN-AZHPS1342P VS. INCOME TAX OFFICER, WARD 8(2), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A. SRINIVAS REVENUE BY : SHRI A. SITARAMA RAO DATE OF HEARING 21.09.2016 DATE OF P RONOUNCEMENT 04.10.2016 ORDER PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY CIT(A)-II, HYDERABAD AND IT PER TAINS TO THE A.Y. 2009-2010. THE FOLLOWING GROUNDS WERE URGE D BEFORE US. 1. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE DISMISSED THE APPEAL ON THE GROUND THAT THE ASSESSEE WAS NOT INTERESTED IN PROSECUTING THE APPEAL. 2. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER OF AN AMOUNT OF RS.18,98,800/- BEING CASH DEPOSITS IN BANK ACCOUNTS. 3. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE CONFIRMED THE DISALLOWANCE OF LIC PREMIUM PAID. 2 ITA.NO.492/HYD/2016 SHRI S. VENKAT REDDY, HYDERABAD. 4. ANY OTHER GROUNDS WHICH THE APPELLANT MAY URGE EITHER AT OR BEFORE THE DATE OF HEARING. 2. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE DID NOT ADVANCE ANY ARGUMENTS WITH REGARD TO GROUND NO.3. GROUND NO.4 IS GENERAL IN NATURE. THER EFORE, GROUNDS 3 AND 4 ARE NOT TAKEN INTO CONSIDERATION. G ROUND NO.2 IS WITH REGARD TO NOT GIVING AN OPPORTUNITY OF BEING HEARD BEFORE THE CIT(A). THOUGH THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE ARE SUFFICIENT RE ASONS FOR NON-APPEARANCE ON THE DATES FIXED FOR HEARING, IT COULD NOT BE SUBSTANTIATED BEFORE US AND THEREFORE, GROUN D NO.1 IS REJECTED. THUS, THE ONLY GROUND SURVIVES FOR OUR CONSIDERATION IS WITH REGARD TO THE ADDITION OF RS.18,98,800 REFERABLE TO THE CASH DEPOSITS IN BANK ACCOUNT. 2.1. AS COULD BE NOTICED FROM THE ASSESSMENT ORDER , THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF GENERAL GOODS AND ALSO DEALER IN GAS. FOR T HE YEAR UNDER CONSIDERATION, THE ASSESSEE ADMITTED TOTAL IN COME OF RS.1,54,700. DURING THE SCRUTINY ASSESSMENT PROCEED INGS THE ASSESSEE WAS CALLED-UPON TO FURNISH THE RATIO O F HEAD- WISE EXPENSES TO TURNOVER FOR THE LAST 03 YEARS, CO MPLETE DETAILS OF PARTIES FROM WHOM HUGE PURCHASES WERE MA DE, DETAILS OF SISTER CONCERNS AND ALSO DETAILS OF INVE STMENTS MADE. THE ASSESSEE NEITHER APPEARED NOR SUBMITTED A NY INFORMATION ON THE ABOVE POINTS. AGAIN A FRESH OPPO RTUNITY WAS GIVEN INDICATING THAT IN THE ABSENCE OF ANY REP LY THE ASSESSMENT WOULD BE COMPLETED UNDER SECTION 144 OF THE 3 ITA.NO.492/HYD/2016 SHRI S. VENKAT REDDY, HYDERABAD. ACT AND AN ADDITION OF RS.18,98,800 WOULD BE MADE S INCE THERE WERE CASH DEPOSITS WITH ICICI BANK, SANTOSHNA GAR BRANCH WHICH WAS NOT EXPLAINED. ON 08.12.2011 THE ASSESSEE APPEARED IN RESPONSE TO THE ABOVE SHOW CAU SE NOTICE AND REQUESTED TIME TILL 12.12.2011 BUT ON TH E SAID DATE IT DID NOT APPEAR AND THEREFORE, ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, ASSESSMENT WAS COMPLE TED WHEREIN TOTAL OF THE CASH DEPOSITS IN THE YEARS UND ER CONSIDERATION WAS TREATED AS UNEXPLAINED CREDITS AD DED BACK TO THE INCOME RETURNED PRESUMABLY UNDER SECTIO N 68 OF THE ACT. THE ASSESSMENT WAS THUS COMPLETED AT A TOTAL INCOME OF RS.21,00,800. 3. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE CIT(A) THAT THE ASSESSEE WAS NOT GIVEN A PROPER OPPORTUNIT Y OF BEING HEARD BEFORE CONCLUDING THE ASSESSMENT PROCEEDINGS. IT WAS ALSO CONTENDED, IN THE STATEMEN T OF FACTS FILED BEFORE THE CIT(A), THAT DURING THE FINA NCIAL YEAR THE ASSESSEE DEPOSITED CASH OF RS.18,98,800 ON DIFF ERENT DATES IN THE SAVINGS BANK ACCOUNT AND THE SAID DEPO SITS WERE MADE OUT OF EARLIER WITHDRAWAL FROM THE SAME B ANK ACCOUNT. IN OTHERWORDS, THE SAME CASH WAS RECYCLED ROUND THE YEAR AND IT WAS EXPLAINED TO THE ASSESSING OFFI CER AT THE TIME OF SUBMITTING BANK STATEMENT. BUT THE ASSE SSING OFFICER FAILED TO APPRECIATE THE SAME AND SOUGHT TO ADD ALL THE DEPOSITS AS UNEXPLAINED DEPOSITS. 4. EVEN BEFORE THE CIT(A) THE ASSESSEE DID NOT APPEAR, DESPITE GRANTING SEVERAL OPPORTUNITIES. THE REFORE, THE LD. CIT(A) CONCLUDED THAT THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THE APPEAL AND HENCE IT I S LIABLE 4 ITA.NO.492/HYD/2016 SHRI S. VENKAT REDDY, HYDERABAD. TO BE DISMISSED IN THE LIGHT OF DECISION OF THE APE X COURT IN THE CASE OF B.N. BHATTARJEE AND OTHERS 118 ITR 4 61. WE ALSO OBSERVED THAT THE LAW ASSISTS A PERSON WHO IS VIGILANT AND NOT THOSE WHO SLEEP OVER THEIR RIGHTS. THUS, WI THOUT GOING INTO THE MERITS OF THE ADDITION, THE LD. CIT( A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER . 5. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN IF AN ASSESSEE HAS NOT APPEARED BEFORE THE ASSESSIN G OFFICER AND THE CIT(A), THE TAX AUTHORITIES SHOULD NOT TAKE THE BENEFIT OUT OF IT AND IT IS THEIR DUTY TO BRING TO TAX THE CORRECT INCOME ASSESSABLE UNDER THE ACT. LEARNED CO UNSEL FOR THE ASSESSEE SOUGHT TO BRING OUT THE PRINCIPLE LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE O F INDIAN EXPRESS 140 ITR 705 AT 722 TO SUBMIT THAT IT IS NOT A LIS BETWEEN THE TWO PARTIES BUT WHAT IS EXPECTED OF FROM THE ASSESSING OFFICER IS TO MAKE PROPER ADJUSTMENTS SO AS TO BRING TO TAX THE CORRECT INCOME THAT IS ASSESSAB LE UNDER THE ACT. HE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN KIRANA BUSINESS AND DISTRIBUTION OF GAS AND HIS INC OME OVER THE PAST SEVERAL YEARS NEVER CROSSED ABOVE RS. 2 LAKHS. HE ALSO SUBMITTED THAT IN THE IMMEDIATELY PRECEDING YEAR AS WELL AS IN SUBSEQUENT YEAR, THE I NCOME OFFERED TO TAX WAS ACCEPTED BY THE ASSESSING OFFICE R, WHICH WAS HOVERING AROUND RS.2 LAKHS, WHICH CLEARLY PROVE S THAT THE ASSESSEE COULD NOT HAVE EARNED INCOME FROM THE SAID BUSINESS OVER AND ABOVE RS.2 LAKHS IN WHICH EVENT, MERELY BECAUSE THERE ARE CERTAIN DEPOSITS, ASSESSING OFFIC ER CANNOT MAKE ANY ADDITION ON THE GROUND THAT ASSESSE E HAS 5 ITA.NO.492/HYD/2016 SHRI S. VENKAT REDDY, HYDERABAD. NOT FURNISHED PROOF WITH REGARD TO SOURCE OF CASH M ORE PARTICULARLY WHEN THE DEPOSITS WERE STATED TO BE RE CYCLED - IN WHICH EVENT ONLY THE PEAK CASH CREDIT IS ASSESSA BLE TO TAX WHICH WORKS-OUT, IN THIS CASE TO RS.2,80,154. I T IS THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT EVEN WHILE MAKING THE ADDITION UNDER SECTION 68 OF THE ACT THE ASSESSING OFFICER HAS TO LOGICALLY VERIFY AS TO WHETHER AN ASSESSEE COULD HAVE EARNED SUCH INCOME OR NOT, I N THE LIGHT OF PRINCIPLE LAID DOWN BY THE APEX COURT IN T HE CASE OF P.K. NOORJAHAN 237 ITR 570. IN THE INSTANT CASE, THE ASSESSEE IS A SMALL TIME BUSINESSMAN WHO COULD NOT HAVE EARNED SUCH INCOME IN ONE YEAR AND IN FACT, THIS FA CT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) ALSO IN THE FORM OF STATEMENT OF FACTS BUT THE APPEAL WAS DISMISSED MER ELY ON THE GROUND THAT NONE APPEARED FOR THE ASSESSEE, OVERLOOKING THE FACT THAT IN THE EARLIER YEAR AS WE LL AS SUBSEQUENT YEARS THE INCOME OFFERED BY THE ASSESSEE , HOVERING AROUND RS.2 LAKHS, WAS ACCEPTED BY THE REV ENUE. 6. ON THE OTHER HAND, LD. D.R. STRONGLY SUBMITTED THAT JUSTICE IS ONLY MEANT FOR PEOPLE WHO ARE VIGIL ANT AND NOT THOSE WHO ARE INDOLENT. DESPITE THE FACT THAT T HE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE GIVEN NUMBER OF OPPORTUNITIES ASSESSEE DID NOT COME FORWARD TO F URNISH THE DETAILS AND THEREFORE, THERE WAS NO OTHER ALTER NATIVE EXCEPT TO MAKE THE IMPUGNED ADDITION. HE THUS, STRO NGLY SUPPORTED THE ORDERS OF THE TAX AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE CASE OF P.K. NOORJAHAN ( SUPRA), THE HONBLE SUPREME COURT OBSERVED THAT SECTION 68 OF THE 6 ITA.NO.492/HYD/2016 SHRI S. VENKAT REDDY, HYDERABAD. ACT IMPOSES BURDEN ON THE PART OF THE ASSESSEE TO E XPLAIN THE SOURCE OF CASH DEPOSITS BUT MERELY BECAUSE IT C OULD NOT BE EXPLAINED THE AMOUNT CANNOT AUTOMATICALLY BE ADDED SINCE THE EXPRESSION MAY USED IN SECTION 68 OF THE ACT IMPOSES AN OBLIGATION ON THE ASSESSING OFFICER TO VERIFY AS TO WHETHER ASSESSEE COULD HAVE EARNED SUC H HUGE INCOME IN ONE YEAR. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEES INCOME EITHER IN THE EARLIER YE AR OR IN SUBSEQUENT YEARS HAS NEVER CROSSED THE THRESHOLD OF RS.2 LAKHS IN WHICH EVENT THE ASSESSING OFFICER COULD HA VE KEPT THE SAME IN MIND WHILE MAKING THE ADDITION. EVEN WH ILE COMPUTING THE ASSESSMENT TO THE BEST OF HIS JUDGMEN T, UNDER SECTION 144 OF THE ACT, IT IS THE DUTY OF THE ASSESSING OFFICER TO MAKE AN ADDITION ON THE BASIS OF THE AVAILABLE MATERIAL AND CIRCUMSTANCES OF EACH CASE. JUDGEMENT IS A FACULTY TO DECIDE THE MATTERS WITH W ISDOM, TRULY AND LEGALLY AND IT SHOULD NOT DEPEND ON THE A RBITRARY CAPRICE OF AN OFFICER. IN OTHERWORDS, THOUGH AN ELE MENT OF GUESS WORK IS INVOLVED IN BEST JUDGEMENT IT SHOULD NOT BE A WILD ONE, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF STATE OF KERALA VS. VELUKUTTI 60 ITR 329. I N THE INSTANT CASE, THE ASSESSING OFFICER OUGHT TO HAVE T AKEN INTO CONSIDERATION THE NORMAL TURNOVER OF THE ASSES SEE, THE EXPECTED PROFIT IN EACH YEAR, BASED ON THE EARLIER YEARS INCOME DECLARED AND ACCEPTED IN ORDER TO ESTIMATE T HE INCOME OF THE CURRENT YEAR; WHILE HOLDING THAT THER E WAS SOME UNDISCLOSED INCOME ASSESSABLE TO TAX UNDER SEC TION 68 OF THE ACT. THE ASSESSEE HAVING FURNISHED THE BA NK STATEMENT ASSESSING OFFICER COULD HAVE VERIFIED AND NOTICED THAT THERE WERE CREDITS AND CORRESPONDING D EBITS 7 ITA.NO.492/HYD/2016 SHRI S. VENKAT REDDY, HYDERABAD. WHICH WOULD GIVE AN INDICATION THAT SOME AMOUNT HAS BEEN RECYCLED AND IT IS A SETTLED PRINCIPLE THAT IN SUCH CASES ORDINARILY, PEAK CREDIT IS TAKEN INTO CONSIDE RATION FOR THE PURPOSE OF MAKING AN ADDITION. ON A CONSPEC TUS OF THE MATTER, WE ARE OF THE VIEW THAT AN ADDITION OF PEAK CREDIT WOULD MEET THE ENDS OF JUSTICE. WE, THEREFOR E, DIRECT THE ASSESSING OFFICER ACCORDINGLY. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.10.2016. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER HYDERABAD, DATED 04 TH OCTOBER, 2016 VBP/- COPY TO 1. SHRI S. VENKAT REDDY, 8-1-127, MAILARDEVPALLY, KATTEDAN, RR DT.HYDERABAD. 2. ITO, WARD 8(2), HYDERABAD. 3. CIT(A) 2, HYDERABAD 4. PR. CIT 2, HYDERABAD 5. THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., A BENC H, HYDERABAD. 6. GUARD FILE