ESWARAWAKA SUDHAKAR REDDY, Tirupati V. Asst. Commissioner of Income tax, Circle-1(1), Tirupati

ITA 503/Hyd/2023

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9981 (ITAT-HYDERABAD)
• Duration Of Justice: 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 14-11-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 19-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI NATHA REDDY
• Keywords: Gift; Source of fund
• Section: 143(3); 142(1); 143(2); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “SMC”, HYDERABAD BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER ITA No.503/Hyd/2023 Assessment Year: 2017-18 Eswarawaka Sudhakar Reddy, Tirupati. PAN : ACMPR7248F Vs. The Assistant Commissioner of Income Tax, Tirupati. (Appellant) (Respondent) Assessee by: Sri Hari Natha Reddy, C.A. Revenue by : Ms. P. Sumitha, Sr. AR. Date of hearing: 15/11/2023 Date of pronouncement: 15/11/2023 O R D E R PER LALIET KUMAR, J.M. The appeal of the assessee for A.Y. 2017-18 arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.25.08.2023 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”). 2. The grounds raised by the assessee reads as under : “1. The Learned First Appellate Authority is not justified in deciding the appeal without affording the appropriate and fair opportunity to the appellant. ITA No.503/Hyd/2023 2 2. The Learned First Appellate Authority, is not justified in confirming the addition of Rs.18,05,200/- as unexplained cash credit u/s.69A made by the Ld. Assessing Officer. 3. The Learned First Appellate Authority, is not justified in confirming the action of the Ld. Assessing Officer in making the addition of Rs.18,05,200/- u/s.69A of the I.TAct and bringing the same to tax u/s.115BBE of the I.T. Act. 4. The Learned First Appellate Authority is not justified not considering the evidences submitted by the appellant for sources to explain the deposits in the bank accounts. 5. The Learned First Appellate Authority is not justified not considering the fact that the appellant had sources to explain the deposits in the bank accounts.” 3. Facts of the case, in brief, are that assessee is an individual filed his return of income for A.Y. 2017-18 on 01.03.2018 declaring a total income of Rs.17,67,960/-. Subsequently, the case was selected for Limited Scrutiny through CASS and accordingly a notice u/s 143(2) was issued on 06.09.2018 and duly served on the assessee. Subsequently, a notice u/s 142(1) dated 25.07.2019 was issued and served on the assessee on 27.07.2019 requiring him to furnish a copy of ITR-V along with return of income, statement of income relevant to AY 2017-18, balance sheet, profit and loss statement and audit report u/s 44AB, if any. 3.1. After examining the details and submissions furnished by the assessee, Assessing Officer observed that assessee has made cash deposits of Rs.18,05,200/- on various dates throughout the financial year 2016-17 starting from 11.04.2016 through 28.03.2017 into his bank accounts and that the same are not properly explained by the assessee. Assessing Officer further noticed that the assessee has filed his return of income for AY ITA No.503/Hyd/2023 3 2016-17 after the demonetization period. Finally, Assessing Officer opined that the cash deposited in bank accounts of the assessee stands unexplained. Therefore, Assessing Officer held that the amount of cash deposits by the assessee are from undisclosed sources. Accordingly, the Assessing Officer added the entire amount of Rs.18,05,200/- to the total income of the assessee and brought to tax as “Unexplained Money” u/s 69A r.w.s. 115BBE of the Income Tax Act,1961 and thus, completed the assessment u/s 143(3) dt.24.11.2019. 4. Feeling aggrieved with the order of Assessing Officer, assessee filed an appeal, which was later migrated to the ld.CIT(A), NFAC, Delhi, who confirmed the addition made by the Assessing Officer. 5. Before us, ld. AR submitted that out of the total addition of Rs.18,05,200/-, rupees ten lakhs were received by the assessee as gift from his wife on various occasions. Similarly, he had also received Rs.2,40,000/- as gift from his father on two occasions i.e., 10.11.2016 and 28.03.2017 and that an amount of Rs.5 lakhs was received, being the withdrawal from M/s. Apollo Multi Specialty Hospital, Tirupati, in which he is a partner along with his wife. It is the submission of the assessee that the gift received by the assessee from his wife and the father is permissible being gift from “relatives” which comes under section 56(2)(vii) of the Act. Therefore, no addition can be made in the hands of the assessee. With respect to the amount of Rs.5 lakhs, the contention of the assessee is that he, being a partner in M/s. Apollo Multi Specialty ITA No.503/Hyd/2023 4 Hospital, has withdrawn the amount and deposited it in his bank account. It was submitted that the assessee has provided confirmation letter from the wife, father and also from M/s.Apollo Multi Specialty Hospital 6. Per contra, ld. DR had submitted that no gift deed was filed by wife or the father and they have merely shown the amounts in their return of income after demonetization period and therefore, the return of income filed by them was afterthought and therefore, return of incomes were required to be ignored. 7. With respect to the amount of Rs.5,00,000/-, ld. DR submitted that assessee being the partner in the firm M/s.Apollo Multi Specialty Hospital, there has to be some reason for withdrawal of the amount and merely saying that the amount was available and therefore, he has withdrawn and shown it in deposits in his bank account did not leads to any credence more particularly, when the amount has not been reflected in the books of account of the said firm. 8. On a pointed query, ld. AR submitted that after withdrawing the amount from the account of M/s. Apollo Multispecialty Hospital Firm as it was adjusted against the salary income / adjusted towards the capital account of the assessee in the firm. Further, on enquiry, ld. AR submitted that out of the sum deposited, Rs.99,000/- after receiving from his father, were deposited in the Specified Bank Notes (prohibited notes). ITA No.503/Hyd/2023 5 9. I heard both the parties and perused the material available on record. Firstly, I will deal with the issue of gift received at Rs.10 lakhs by the assessee from his wife on various dates. Addition of Rs.10 lakhs : With respect to cash gift from wife Dr.J. Radha of Rs.10 lakhs is concerned, ld.CIT(A) in page 7 of his order has decided as under : “1. Cash gift from wife Dr. J. Radha of Rs.10.00 lakhs: During the appellate proceedings, appellant mentioned that appellant wife Dr. J Radha is a qualified doctor employed in SV Medical College, Tirupati working as professor in anesthesia department having 25 years of experience in that department. Further, appellant mentioned that her wife is also a partner in M/s Appollo multi speciality hospital, from the partnership firm also she is deriving an income. Appellant has submitted the ITR of his wife & confirmation letter from his wife and mentioned that he has taken gift of amount of Rs.10 lakh to meet his financial commitment of repayment of bank loan. Further, Appellant mentioned that the cash deposits are made shortly before issuing the cheques. On perusal of ITR of assessee, it is seen that Dr. J Radha has shown gross total income of Rs.2296219/- which include income under salary of Rs.18,46,670 and PGBP income of Rs.478213/-. Hence, the Dr. J Radha, wife of appellant has the capacity to gift Rs.10 Lakhs. However, assessee has not been able to prove the genuineness of receipt of gift of Rs.10 Lakhs. The primary onus is on the assessee to prove that the cash deposits made did not bear the character of income. Further, no gift deed has been submitted by the appellant in this regard. In this connection, assessee has not submitted the bank statement of him & his wife to substantiate the genuineness of cash available with his wife. On the basis of submission and explanation given by appellant, it can not be ascertained whether appellant has received the cash of Rs.10 lakh from his wife during the year under consideration. As the primary onus of the same lies with assessee and the assessee has not submitted the documentary evidence to substantiate the receipt of gift of cash deposit, I find that the AO is justified in disallowing the alleged cash deposit of Rs.10 lakh.” ITA No.503/Hyd/2023 6 9.1. In this regard, the assessee has submitted that the wife of the assessee was an income-tax assessee and was working as Professor in Anesthesia Department of S.V. Medical College, Tirupati and was drawing a salary from there and besides that she was also a partner in M/s. Apollo Multispecialty Hospital. The ld.CIT(A) has disallowed the cash gift received by the assessee from his wife on the pretext that the onus is on the assessee to prove that the cash deposit did not bear the character of income. In my view, by filing confirmation from his wife and also the return of income showing the gross total income of Rs.22,96,219/- during the assessment year under consideration, assessee discharged his onus. In the said confirmation, the wife of the assessee had submitted that Rs.10 lakhs were given by her to her husband as gift. In my opinion, the wife of the assessee falls within the exempt category of ‘relative’ as mentioned under section 56(2)(vii) of the Act and even otherwise, once the wife admits to have given the cash of Rs.10 lakhs to her husband, the Revenue cannot object to the said gift. As the Revenue cannot disbelieve the confirmation given by the wife and moreover, the Revenue had accepted the return of income filed by the wife of the assessee showing Rs.10 lakhs as cash gift to her husband. In view of the above, the addition of Rs.10 lakhs is deleted. ITA No.503/Hyd/2023 7 10. Addition of Rs.2.40 lakhs With respect to the second issue i.e., cash gift received from the father of the assessee at Rs.2.40 lakhs, the ld.CIT(A) has decided the issue by observing as under : “2. Cash gift from father Rs. 2.40 lakhs: The appellant claimed to have received a cash gift of Rs. 2.40 lakh from his late father as an act of love and affection. However, the appellant failed to provide substantial evidence to authenticate the genuineness of the cash gift. Despite the appellant's self- declaration, there is a lack of documentation such as a gift deed to support the claim. The burden of proof rests on the appellant to establish that the cash deposits are not of an income nature. The appellant's submission doesn't conclusively establish the receipt of the Rs. 2.40 lakh cash gift from his father during the relevant year. Given the absence of concrete documentary evidence and the primary responsibility of proof on the appellant, the disallowance of the claimed cash gift by the Assessing Officer appears reasonable. Accordingly, I find that the AO is justified in disallowing the alleged cash gift of Rs.2.40 lakh from his father.” 10.1. In this regard, ld. AR has submitted that the father of the assessee is an agriculturist and was having an agricultural land of Ac.3.79 gts on which he used to cultivate paddy, sugarcane etc and the father of the assessee had given the amount of Rs.2,40,000/- out of love and affection and he further submitted that his father expired recently. I have examined the order passed by the ld.CIT(A) as well as the submissions of the assessee. In the case of the father, admittedly, no return of income has been shown whereby the father of the assessee had shown to given Rs.2,40,000/- as cash gift to the assessee. In the absence of any return of income or any other document to prove the cash gift, it cannot be assumed that the father of the assessee has given Rs.2,40,000/- as gift to the assessee. There is no evidence to show that the father of the ITA No.503/Hyd/2023 8 assessee had given Rs.2.40 lakhs as a gift to the assessee. The plea of the assessee is self-serving and is not tenable. 10.2. Further, during the course of hearing, though the bench has directed to restrict the addition to Rs.99,000/- being the amount deposited in the prescribed specified bank notes, however, while finalizing the order, the facts of non-filing of return of income and expiry of father of the assessee were noticed however, the said facts were not been brought to my notice previously, and therefore, in the light of the above, I uphold the addition of Rs.2,41,000/- made by the Assessing Officer. 11. Coming to the last issue i.e., cash withdrawal from the firm M/s. Apollo Multispecialty Hospital as partner of the firm Rs.5 lakhs and saving cash available on hand deposited Rs.65,000/-, ld.CIT(A) at page 8 of his order has decided the issue by observing as under : “3. Appellant mentioned that appellant and his wife are only the partners in firm M/s Apollo multi specialty hospital and the appellant had withdrawn money from the firm to meet his commitment. In this connection, appellant has submitted confirmation letter from the firm. However, appellant has not submitted any supporting document to substantiate the withdrawal of Rs.5 lakh from the firm. Further, appellant has submitted that he has deposited Rs.65,200/- from the cash balance in hand for emergencies and contingences. As the primary onus of the same lies with assessee and the assessee has not submitted the documentary evidence to substantiate the receipt of cash deposit, I find that the AO is justified in disallowing the alleged cash withdrawals.” ITA No.503/Hyd/2023 9 11.1. In this regard, ld. AR has submitted that the assessee and his wife are only the partners in the aforesaid partnership firm and that assessee had withdrawn money from the firm to meet his commitment and that Assessing Officer and did raise any objection while assessment or in the assessment order about this, however, he simply added the amount to the returned income. 11.2 I have heard the rival contentions and perused the material on record. The Assessing Officer and ld.CIT(A) had not disputed the fact that amount of Rs.5 lakhs were withdrawn by the assessee from the bank account of M/s. Apollo Multispecialty Hospital, (where he was the partner), and thereafter, assessee had deposited the said amount in his account. Even the firm had issued confirmation letter confirming the withdrawing of amount towards the partner account. I find that along with confirmation letter given by the firm, assessee has also shown the financials of the firm wherein the capital account of the firm was debited by Rs.5 lakhs. In view of the explanation given by the assessee, objection raised by the Assessing Officer and ld.CIT(A) in this regard are duly answered, so assessee had proved identity, creditworthiness and source of cash deposit. In view of the above, I do not find any reason to sustain the order passed by the Assessing Officer and ld.CIT(A) and accordingly, the addition of Rs.5 lakhs is deleted. 11.3. Ld. AR further submitted that assessee being an employee used to keep some cash balance in hand for emergencies and contingencies and that deposit of Rs.65,200/- was very small amount when compared to his gross salary income of Rs.17.27 ITA No.503/Hyd/2023 10 lakhs during the year 2016-17 apart from other sources of income admitted in his return of income for A.Y. 2017-18. Ld. AR further submitted that due to work pressure, assessee filed return of income belatedly. 11.4 With respect to the amount of Rs.65,200/-, the opening balance which was disallowed by the Assessing Officer and confirmed by the ld.CIT(A), no documentary evidence was shown by the assessee showing that the amount was available with the assessee. Hence, I do not find any reason to acknowledge the submission of the assessee and accordingly, I uphold the addition of Rs.65,200/-. 12. In the result, the appeal of the assessee is partly allowed. Order pronounced in the Open Court on 15 th November, 2023. Sd/- (LALIET KUMAR) JUDICIAL MEMBER Hyderabad, dated 15 th November, 2023. TYNM/sps ITA No.503/Hyd/2023 11 Copy to: S.No Addresses 1 Eswarawaka Sudhakar Reddy, D.No.10-15-17/10, KK Layout, Tirupati – 517501. 2 Asst.Commissioner of Income Tax, Tirupati. 3 PCIT, Tirupati 4 DR, ITAT Hyderabad Benches 5 Guard File By Order