Lakshmaiah Gunuputi, Bhimavaram V. ACIT Central Circle-2, Rajahmundary

ITA 55/VIZ/2022

AI Insights

The case involves Lakshmaiah Gunuputi, an individual engaged in the business of Prawn commission and Fish culture, who appealed against the order of the Commissioner of Income Tax (Appeals)-3, Visakhapatnam. The appeal arose from an assessment order passed under sections 153A and 143(3) of the Income Tax Act, 1961, for the assessment year 2018-19, which included additions for unexplained investments in personal jewelry, a deficit cash balance at the assessee's residence, and disallowances under section 40A(3) of the Act. The Tribunal examined the submissions and evidence presented, particularly focusing on the nature of cash payments made for business purposes and the circumstances under which these payments were made.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128568 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 22-02-2023
• Assessment Year: 2018-2019
• Appeal Filed On: 29-03-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 69; 132; 40A(3); 143(3); 142(1); 153A; 143(1); 143(2); 69A

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.55/Viz/2022 (Ǔनधा[रण वष[ / Assessment Year :2018-19) Lakshmaiah Gunuputi, Bhimavaram, W.G. Dist, Andhra Pradesh. PAN: ABKPG 1084 H Vs. Asst. Commissioner of Income Tax, Central Circle-2 Rajahmundry, E.G. Dist., Andhra Pradesh. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Sri K. Siva Ram Kumar, CA Ĥ×याथȸ कȧ ओर से / Respondent by : Sri MN Murthy Naik, CIT-DR सुनवाई कȧ तारȣख / Date of Hearing : 23/02/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 28/02/2023 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-3, Visakhapatnam [Ld. CIT(A)] in DIN & Order No. ITBA/APL/S/250/2021- 2 22/1039669126(1), dated 11/2/2022 arising out of the order passed U/s. 153A r.w.s 143(3) of the Act for the AY 2018-19. 2. Briefly stated facts of the case are that the assessee is an individual engaged in the business of Prawn commission and Fish culture and is a partner in M/s. Dhanlakshmi Rice & Flour Mill and M/s. Yerrayya Raw and Boiled Rice Mill. The assessee filed his return of his return of income admitted a total income of Rs. 3,10,000/- for the AY 2018-19 on 22/10/2018. Initially, the return was processed U/s. 143(1) of the Act. A search and seizure operation u/s. 132 of the Act was conducted on 2/11/2017 in the case of the assessee at his residential premises. A search warrant was executed in the name of the assessee and various incriminating material was found and seized. Subsequently, an order U/s. 127 of the Act for centralization of the case was passed by the Principal Commissioner of Income Tax, Rajahmundry vide order in F.No. 62,Juris/Pr.CIT/RJY/2017-18, dated 13/3/2018 and notified the assessee’s case to Central Circle-2, Rajahmundry. Accordingly, notice U/s. 143(2) of the Act was issued on 29/9/2018 and served on the assessee on 02/11/2018. Further, a detailed questionnaire u/s. 142(1) of the Act was issued on 11/6/2019 and was served on the assessee on 3 13/6/2019 and the assessee submitted its reply on 14/11/2019. Thereafter, certain questionnaire calling for the information were issued on 11/6/2019; 9/9/2019; 18/10/2019; 2/12/2019 and 16/12/2019 and duly served on the assessee. In reply the assessee’s representative appeared before the Ld. AO and furnished the relevant information. After duly considering and examining the various information furnished by the assessee’s representative, the Ld. AO completed the assessment U/s. 143(3) of the Act on 27/12/2019 and passed the assessment order wherein the Ld. AO made certain additions viz., (i) Unexplained investment in personal jewellery (Gold jewellery Rs.23,55,600 + Rs. 1,66,400/- Silver Jewellery) aggregating to Rs. 25,22,000/- (ii) Deficit cash balance at Residence of the assessee Rs. 78,163/- and made addition U/s. 69 r.w.s 115BBE of the Act and (iii) Disallowance U/s. 40A(3) of the Act Rs.58,26,321/- and determined the assessed income at Rs. 87,36,584/- against the returned income of Rs. 3,10,000/-. In the assessment the Ld.AO also determined the agricultural income of the assessee at Rs. 4,47,592/- and brought to tax. Aggrieved by the order of the Ld. AO, the assessee is in appeal before the Ld.CIT (A). Before the Ld. CIT(A), the assessee has file written submissions through online. On appeal, the Ld. CIT(A) considered the written submissions 4 made by the assessee and granted part relief to the assessee with respect to the addition of Rs. 25,22,000/- on account of unexplained investments in personal jewellery and confirmed the addition of deficit cash amounting to Rs. 78,163/- made U/s. 69 r.w.s 115BBE of the Act as well as the addition of Rs. 58,26,321/- made towards disallowance of cash expenditure beyond the specified limit made u/s. 40A(3) of the Act. Thus, the Ld. CIT(A) partly allowed the appeal of the assessee. Aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before us. 3. The assessee has raised four grounds in his grounds of appeal however, the cruxes of the issues are: (i) The Ld. CIT(A) erred in confirming the addition made by the Ld. AO U/s. 40A(3) of the Act and (ii) The Ld. CIT (A) erred in confirming the addition made by the Ld. AO u/s. 69 r.w.s 115BBE of the Act on account of deficit cash. 4. With respect to the addition made U/s. 40A(3) of the Act, at the outset, the Ld. Authorized Representative submitted that considering the nature of business of the assessee (aqua trading), 5 it is obvious to the assessee to make payments in cash to the farmers. The Ld. AR further submitted that the payments were made at remote places where there were hardly any banking facilities and the fish farmers insist on cash payments due to their illiteracy and apprehension and therefore the payments were made on bank holidays. The Ld. AR referred to the provisions of Rule 6DD(j) of the IT Rules, 1962 and submitted that since the payments were made during the bank holidays as well as neither the assessee nor the payees had bank accounts, the provisions of section 40A(3) of the Act does not attract to the payments made by the assessee. Per contra, the Ld. DR strongly relied on the orders of the Ld. Revenue Authorities and supported the decision taken by them. 5. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. Before us, it is submission of the Ld. AR that since the payments were made during the bank holidays as well as neither the assessee nor the payees had bank accounts, the provisions of section 40A(3) of the Act does not attract to the payments made by the assessee. The Ld. AR also referred to Rule 6DD(j) of the Act which reads as under: 6 “Rule 6DD: No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account... (a) ..... (b) ... ... .... .... (j) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike:” 6. As per the above provisions, the Ld. AR submitted before us the working of the cash payments made during the holidays which is as under: Sl No Date Amount paid in cash Rs. Reasons for non-disallowance: payment made on a holiday and multiple payments to different payees for Prawn supply – All are Prawn farmers 1. 30/07/2017 1,29,831 Sunday 2. 30/07/2017 199,074 Sunday 3. 30/07/2017 1,55,797 Sunday 4. 02/09/2017 1,48,366 Bakrid – Public Holiday 5. 02/09/2017 1,99,400 Bakrid – Public Holiday 6. 02/09/2017 1,92,150 Bakrid – Public Holiday 7. 02/09/2017 1,98,950 Bakrid – Public Holiday 8. 02/09/2017 1,79,950 Bakrid – Public Holiday 9. 02/09/2017 1,96,750 Bakrid – Public Holiday Total 16,00,268 7 7. On careful reading of Rule 6DD(j) of the IT Rules, 1962 and on perusal of the details of payments made by the assessee during the holidays, as tabulated above, we find merit in the argument of the Ld. AR and hence we are of the opinion that the payments made by the assessee to the extent of Rs. 16,00,268/- do not attract the provisions of the section 40A(3) of the Act and hence the Ld. AO is hereby directed to delete the addition to this extent. It is ordered accordingly. Thus, this ground raised by the assessee is partly allowed. 8. The other issue involved in this appeal is with respect to addition of Rs. 78,163/- on account of deficit cash. It is the case of the Ld. AO that as per the books of account the total cash balance should be Rs. 1,02,886/- in the hands of the assessee against the cash found of Rs. 24,723/- and the assessee did not offer any explanation before Ld. AO. On appeal, the Ld. CIT(A) confirmed the addition made by the Ld. AO. Before us, the Ld. AR submitted that the disputed sum was utilized by the assessee for urgent personal needs and expenses towards domestic front and the same were to be recorded in the cash book. Per contra, the Ld. DR relied on the orders of the Ld. Revenue Authorities. 8 9. We have heard both the sides and perused the materials available on record as well as the orders of the Ld. Revenue Authorities. We find it relevant to extract the finding of the Ld. CIT(A) on this issue which reads as under: “16. I have considered the grounds of appeal, gone through the submissions of the appellant and the order of the AO. It has been submitte d that there was no warrant to invoke sec tion 69A and make an addition. The submissions of the appellant are not directed against the facts of the case when deficit cash was detec ted for which the appellant submitted that the amount was explained for the purchase of gold for his daughter. It was the responsibility of the appellant to explain the same with cogent evidence. In the submissions adduced during appeal the appellant has confined his arguments on a hypo thetical situation surrounding the warrant invoking section 69A of the Act. The appellant in appeal is offering a contrary explanation unrelated with the submissions furnished during the assessment proceedings. Considering the above facts and circumstances the appellant has no explanation to offer for the above deficit cash which is accordingly confirmed and this ground of appeal is dismissed.” 10. From the above it is apparent that the Ld. CIT(A) has discussed the issue at length before confirming the addition made by the Ld. AO and thereby denying the claim of the assessee. Even before us the assessee has not produced any cogent evidence in support of the expenditure claimed by assessee. Under these circumstances, we are inclined not to 9 interfere with the decision of the Ld. CIT(A)on this issue and accordingly the relevant ground raised by the assessee is dismissed. 11. In the result, appeal filed by the assessee is partly allowed. Pronounced in the open Court on the 28 th February, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated :28.02.2023 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Lakshmaiah Gnuputi, 19-9-3/3, Bank Colony, Near Water Tank, Bhimavaram-534201, WG Dist, Andhra Pradesh – 534201. 2. राजèव/The Revenue – Asst. Commissioner of Income Tax, Central Circle- 2, Aayakar Bhavan, Rajahmundry, EG Dist., Andhra Pradwesh-533101. 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam. 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax (Appeals)-3, Visakhapatnam. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam