Upender Ganna, Hyderabad V. Income Tax Officer, Ward-15(4), Hyderabad

ITA 518/Hyd/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2276 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 30-10-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 16-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained cash credit; Business income; Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES SMC, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO. 518/HYD/2018 ASSESSMENT YEAR: 2014-15 UPENDER GANNA, MEDIPALLY VILLAGE, GHATKESAR MANDAL, R.R.DISTRICT [PAN: AXMPG5005G] VS INCOME TAX OFFICER, WARD-15(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A.SAI PRASAD, AR FOR REVENUE : SHRI NILANJAN DEY, DR DATE OF HEARING : 30-10-2019 DATE OF PRONOUNCEMENT : 04-12-2019 O R D E R THIS APPEAL FILED BY THE ASSESSEE FOR THE AY.2014-15, IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCO ME TAX (APPEALS)7, HYDERABAD, DATED 09-01-2018. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF RUNNING A KIR ANA & GENERAL STORES, FILED HIS RETURN OF INCOME FOR THE AY. 2014-15 ON 11-09-2014, ADMITTING TOTAL INCOME OF RS.2,29,540/-. 3. DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE OF THE INCOME TAX ACT [ACT], THE ASSESSING OFFICER (AO) OB SERVED THAT THE ASSESSEE IS MAINTAINING A SAVINGS BANK A/C WITH AXIS BANK, NALLAKUNTA BRANCH, HYDERABAD VIDE A/C NO.913010029036358. ON PERUSAL OF THE BANK ACCOUNT STATEMENT, THE AO OBSERVED THAT THE ASSESSEE HAS MADE CA SH ITA NO. 518/HYD/2018 :- 2 -: DEPOSITS TO THE TUNE OF RS.64,14,695/-. HE ALSO NOTICED THAT ON SEVERAL OCCASIONS, CASH HAS BEEN DEPOSITED FROM OUTS TATION. THE ASSESSEE WAS THEREFORE ASKED TO FURNISH THE DETAILS OF THE SOURCES OF FUNDS FOR THE CASH DEPOSITS, THE NATURE OF TRANSACTIONS MADE IN THE SB A/C AND THE TRANSACTION-WISE ANALYSIS OF CASH/CHEQUE DEPOSITS, REFLECTED IN THE BA NK ACCOUNT. 3.1. IN REPLY, THE ASSESSEE SUBMITTED THAT THE CASH DEP OSIT OF RS.9,90,000/- REPRESENTED THE LOAN TAKEN FROM ONE SHR I S.KRISHNAIAH AND CASH DEPOSITS TO THE TUNE OF RS.30 L AKHS RELATE TO KIRANA BUSINESS AND THE REMAINING TRANSACTIONS RELATE TO THE HAND LOANS TAKEN FROM FRIENDS AND RELATIVE S. IT WAS ALSO SUBMITTED THAT OUT OF THE CASH DEPOSITS, THE ASSE SSEE INVESTED AN AMOUNT OF RS.13,50,000/- IN PURCHASE OF A HOUSE PROPERTY. THE AO, HOWEVER, WAS NOT CONVINCED WITH THE CONTENTIONS OF ASSESSEE IN TOTO. HE THEREFORE ASKED THE ASSESSEE TO EXPLAIN WHY THE PEAK CREDIT OF RS.15,14,186/-, APPE ARING AS ON 25-07-2013 IN THE SB A/C OF THE ASSESSEE SHOULD NO T BE TREATED AS UN-EXPLAINED CASH CREDIT U/S.68 OF THE ACT. SINCE THE ASSESSEE DID NOT OFFER ANY SUBSTANTIAL EVIDENCE, TH E AO BROUGHT THE SAME TO TAX U/S.68 OF THE ACT. 3.2. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A), WHO CONFIRMED THE ADDITION. 4. BEFORE THE CIT(A), THE ASSESSEE HAD ALSO CONTENDED THAT THE ASSESSEE HAS NO OTHER SOURCE OF INCOME OTHER THAN K IRANA BUSINESS AND THEREFORE THE UNEXPLAINED DEPOSITS MAY A LSO BE ITA NO. 518/HYD/2018 :- 3 -: TREATED AS RECEIPTS FROM KIRANA BUSINESS AND ONLY THE PROFIT ELEMENT FROM SUCH TURNOVER BE BROUGHT TO TAX. HOWEVER, T HE CIT(A) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE A ND CONFIRMED THE ADDITION MADE BY THE AO. HENCE, THE ASSES SEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE F OLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX, APPEAL IS NOT CORRECT EITHER ON FACTS OR IN LAW AND IN BOTH. 2. THE LEARNED COMMISSIONER OF INCOME TAX IS NOT JU STIFIED IN CONFIRMING THE ADDITION OF RS.15,14,186/- AS UNEXPL AINED PEAK CASH CREDITS IN SAVINGS BANK ACCOUNT WITHOUT PROPER APPR ECIATION OF THE FACTS. 3. THE LEARNED COMMISSIONER OF INCOME TAX FAILED TO APPRECIATE THE FACT THAT THE PEAK CASH CREDITS IN SAVINGS BANK ACC OUNT IS THE TURNOVER OF THE APPELLANT, ONLY NET PROFIT IS TO BE ADDED NOT THE ENTIRE PEAK CREDIT. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND OR AL TER ANY OF THE GROUNDS AT THE TIME OF HEARING OF APPEAL. 5. THE LD.COUNSEL FOR THE ASSESSEE, SHRI K.A.SAI PRA SAD, SUBMITTED THAT THOUGH THE ASSESSEE HAD TAKEN THE CONTENTION OF HAND LOANS FROM FRIENDS ETC., BEFORE THE AO BUT COU LD NOT SUBSTANTIATE HIS CLAIM, BEFORE THE CIT(A), THE ASSESSEE HAS THEREFORE OFFERED TO TREAT THE CASH DEPOSITS AS THE BUSI NESS TURNOVER OF THE ASSESSEE AND HAS OFFERED TO PAY THE TAX ONLY ON THE PROFIT ELEMENT EMBEDDED THEREIN. HE MADE A SIMILAR PRAYER BEFORE THE TRIBUNAL AS WELL. 6. THE LD.DR, ON THE OTHER HAND, SUPPORTED THE ORDERS O F THE LOWER AUTHORITIES AND ALSO PLACED RELIANCE UPON TH E FOLLOWING DECISIONS: ITA NO. 518/HYD/2018 :- 4 -: I. KALE KHAN MOHAMMAD HANIF VS. CIT (1963) [50 ITR 1] (SC); II. CIT VS. DEVI PRASAD VISHWANATH (1969) [72 ITR 194] (SC); III. CIT VS. MADURI RAJAIAHGARI KISTAIAH (1979) [120 ITR 294] (AP); 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, I FIND THAT IN THE CASE OF KALE KHAN MOHAMMAD HANIF VS. CIT (SUPRA), THE ASSESSEE THERE-IN WAS A TRADER, CARRYING ON TWO BUSINESSES AND HE HAD SUBMITTED A RETURN BUT AS HIS ACCOUNTS WERE NOT FOUND TO BE COMPLETE AND RELIABLE, A O HAD ASSESSED THE GROSS PROFITS OF THE BUSINESS AS CERTAIN PERCENTAGE OF TOTAL SALES, WHICH HAD ALSO TO BE FIXED BY ESTIMATES. SUBSEQUENTLY, THE AO NOTICED VARIOUS CREDIT E NTRIES IN THE ASSESSEES BOOKS OF ACCOUNT, WHICH HAD ESCAPED THE ASSESSMENT AT THE TIME OF ASSESSMENT. THEREFORE, HE RE- OPENED THE ASSESSMENT AND BROUGHT THE CASH CREDITS TO TAX AS INC OME FROM OTHER SOURCES. THE HON'BLE SUPREME COURT HELD TH AT WHERE THE ASSESSEE NEVER RAISED A QUESTION AND NEVE R SUBMITTED THAT THESE CASH CREDITS RELATE TO BUSINES S, THE AO WAS NOT PRECLUDED FROM TREATING THE SAME AS INCOME FRO M OTHER SOURCES. THIS VIEW WAS ALSO FOLLOWED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DEVI PRASAD VISHWANATH (S UPRA). HOWEVER, I FIND THAT IN THE CASE OF KALE KHAN MOHAMM AD HANIF VS. CIT (SUPRA), THE ASSESSEE THEREIN HAD RAISE D THE CONTENTIONS OF BUSINESS INCOME ONLY BEFORE THE HON'BLE SUPREME COURT AND IT WAS IN THOSE CIRCUMSTANCES THAT THE HON'BLE APEX COURT HELD THAT AS IT WAS A QUESTION OF FAC T, IT ITA NO. 518/HYD/2018 :- 5 -: COULD NOT HAVE BEEN RAISED FOR THE FIRST TIME BEFORE THE HON'BLE HIGH COURT OR HON'BLE SUPREME COURT. BUT, IN THE CASE B EFORE THE TRIBUNAL, THE ASSESSEE HAS RAISED THIS GROUND BEFO RE THE CIT(A) ITSELF, AND THE CIT(A) HELD THAT THE CLAIM OF THE ASSESSEE THAT THE ENTIRE CASH DEPOSITS REPRESENTS BUSINESS TRANSA CTION, IS NOT ESTABLISHED WITH ANY DOCUMENTARY EVIDENCE. THER EFORE, THE DECISION OF THE HON'BLE SUPREME COURT IS NOT STRICTL Y APPLICABLE TO THE CASE ON HAND. I ALSO FIND THAT THE ASS ESSEE HAS NOT ESTABLISHED THAT THE DEPOSITS ARE OUT OF BUSINESS TRANSACTIONS, BUT THE PEAK CASH CREDIT ADDED BY THE AO AN D CONFIRMED BY THE CIT(A) ALSO CANNOT BE UPHELD BECAUSE THE ASSESSEE HAD DECLARED THE GROSS TURNOVER OF RS.30,00 ,000/- WHICH IS ALSO PART OF THE CASH DEPOSITS. THEREFORE, TH E PEAK CREDIT WORKED OUT BY THE AO COULD BE A RECEIPT FROM BUS INESS TRANSACTIONS ALSO. IN VIEW OF THESE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, I DIRECT THE AO TO TREAT ALL T HE UNEXPLAINED CASH CREDITS ALSO AS THE BUSINESS TURNOVE R OF THE ASSESSEE AND ESTIMATE THE INCOME THEREON AT THE SAME RA TE AT WHICH THE DISCLOSED INCOME IS BROUGHT TO TAX. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2019 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED: 04-12-2019 TNMM ITA NO. 518/HYD/2018 :- 6 -: COPY TO : 1. SHRI UPENDER GANNA, C/O.CH.PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST.NO.1, ASHOKNAGAR, HYDERABAD. 2. INCOME TAX OFFICER, WARD-15(4), HYDERABAD. 3. CIT(APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.