CV Radhakrishna, Tirupathi V. ACIT, Central Circle, Tirupathi

ITA 658/HYD/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6638 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 15-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 658, 659, 660 & 661/HYD/2011 ASSESSMENT YEARS : 2002-03, 2004-05, 2006-07 & 2007 -08 C.V. RADHAKRISHNA, TIRUPATHI PAN: ABGPV4959G VS. ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI P. SOMASEKHAR REDDY DATE OF HEARING : 31-10-2013 DATE OF PRONOUNCEMENT : 20-12-2013 O R D E R PER BENCH: THESE APPEALS BY ASSESSEE ARE AGAINST ORDERS OF LD .CIT(A) IN RESPECTIVE YEARS. THIS CASE IS RELATED TO SRI C VAR ADARAJU IN WHOSE CASE SEARCH AND SEIZURE OPERATIONS WERE CONDUCTED U / 132 ON 27-09- 2007 AND ASSESSEE IS SON OF THAT PERSON. ASSESSMENT S IN THE GROUP WERE COMPLETED ON THE BASIS OF WAYS AND MEANS STATE MENTS FILED. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS T HEY WERE CLUBBED AND HEARD, THEREFORE, A COMMON ORDER IS PAS SED FOR THE SAKE OF CONVENIENCE. ITA NO. 658/HYD/2011 FOR AY 2002-03 2. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A)-VII, HYDERABAD DATED 02-02-2011. THE ONLY ISSUE RAISED I S AGAINST THE 2 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA ADDITION OF RS. 70,000/- AS UNEXPLAINED INCOME ON A CCOUNT OF DEPOSITS MADE IN THE BANK. 3. THE AO FOUND THAT THERE WAS A CASH DEPOSIT OF RS . 70,000/- ON 27-03-2002 IN SB ACCOUNT OF ASSESSEE. IN THE ABSENC E OF BOOKS OF ACCOUNT AND SATISFACTORY EXPLANATION, THE AO TREATE D THE SAME AS UNEXPLAINED CASH CREDIT AND ADDED THE SAME TO THE T OTAL INCOME. BEFORE THE CIT(A), IT WAS SUBMITTED THAT ASSESSEE H AD SHOWN THE DEPOSIT AND WITHDRAWAL OF THE SAID AMOUNT IN THE WA YS AND MEANS ACCOUNT. IT WAS ALSO CLAIMED THAT THE SAID AMOUNT W AS DEPOSITED OUT OF ASSESSEES OWN FUNDS. THE CIT(A) CONFIRMED THE A DDITION BY OBSERVING AS UNDER: THE SUBMISSION MADE BY THE AR HAS BEEN CONSIDERED. IT IS SEEN THAT IN THE WAYS AND MEANS ACCOUNT OF THE APPE LLANT, THE APPELLANT HAD DRAWN ONLY RS. 30,000. HOWEVER, THERE IS NO EVIDENCE TO SHOW THAT THE APPELLANT HAD WITHDRAWN R S. 70,000/- AND DEPOSITED IN THE BANK. THEREFORE, I AM OF THE V IEW THAT THE APPELLANTS EXPLANATION CANNOT BE ACCEPTED IN THE A BSENCE OF NECESSARY EVIDENCES AND OTHER DETAILS. 4. BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT TH E CIT(A) FAILED TO NOTE THAT THE BANK ACCOUNT DISCLOSED IN THE WAYS AND MEANS STATEMENT CONTAINED BOTH DEPOSITS AND WITHDRAWALS AND EACH DEPOSIT AND WITHDRAWAL WILL NOT FIGURE IN THE SAID STATEMEN T AND THE OPENING BALANCE AT THE BEGINNING OF THE YEAR AND CLOSING BA LANCE AT THE END OF THE YEAR WILL ONLY BE REFLECTED THEREBY, THE DEPOSI T AND WITHDRAWALS OF THE ENTIRE YEAR ARE MERGED, LEAVING THE UNACCOUNTED SOURCES OF THE ENTIRE YEAR REPRESENTING AS THE INCOME OF THAT YEAR . 5. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSING THE PAPER BOOK, WE ARE OF THE OPINION THAT BOTH THE AO AND CI T(A) WERE WRONG IN MAKING THE ADDITION OF RS.70,000. AS SEEN FROM T HE PAPER BOOK AT PAGES 15 TO 17, WHICH IS A BANK STATEMENT, THERE I S AN ENTRY WITH REFERENCE TO THE DEPOSIT OF RS. 70,000/- ON 27-03- 2002 AND ENTRIES WITH REFERENCE TO CORRESPONDING WITHDRAWALS. NOT ON LY THE ASSESSEE 3 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA EXPLAINED THAT THIS AMOUNT WAS DEPOSITED ON 27-03-2 002 AND MADE CORRESPONDING WITHDRAWALS ALSO. THEREFORE, SINCE TH E ASSESSMENT WAS MADE BASED ON THE WAYS AND MEANS STATEMENT, WE ARE OF THE OPINION THAT AO DID NOT APPRECIATE THE CONTENTIONS. THERE WERE FUNDS AVAILABLE TO ASSESSEE OUT OF INCOMES EARNED AND DIS CLOSED. THE ARGUMENT THAT THIS WAS OUT OF ASSESSEE OWN SOURCE C AN NOT BE REJECTED. THEREFORE, THE ADDITION MADE BY THE AO CA NNOT BE SUSTAINED AND ACCORDINGLY ASSESSEES GROUND IS ALLOWED. 6. IN THE RESULT, APPEAL IN ITA NO. 658/HYD/2011 I S ALLOWED. ITA NO. 659/HYD/2011 FOR AY 2004-05 7. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A)-VII, HYDERABAD DATED 02-02-2011. THE ISSUE RAISED IN THI S APPEAL IS ALSO SIMILAR TO THAT OF AY 2002-03 REGARDING DEPOSIT OF RS. 44,320/- MADE BY ASSESSEE IN THE BANK, WHICH WAS TREATED AS UNEXP LAINED INCOME IN THE ABSENCE OF NECESSARY EVIDENCES. 8. ON PERUSAL OF PAPER BOOK AT PAGES 15 TO 17, WHIC H IS A BANK STATEMENT WHEREIN THERE WAS AN ENTRY ON 28-04-2003 WITH REFERENCE TO THE DEPOSIT OF RS. 44,340/-. SINCE THE FACT OF D EPOSIT IS EVIDENCED, FOLLOWING THE CONCLUSIONS DRAWN IN AY 2002-03, WE A LLOW CREDIT TO THE AMOUNT OUT OF DISCLOSED INCOMES AND DELETE THE ADDI TION MADE BY THE AO. 9. IN THE RESULT, APPEAL IN ITA NO. 659/HYD/2011 IS ALLOWED. ITA NO. 660/HYD/2011 FOR AY 2006-07 10. THE GROUND RAISED BY ASSESSEE IN THIS APPEAL IS THAT REVENUE AUTHORITIES HAVE ERRED IN HOLDING THAT THE DEPOSIT OF RS. 12,00,000/- (I.E. RS. 1,00,000/- ON 25/01/2006 AND RS. 11 LAKHS ON 27/01/2006) 4 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA MADE IN ANDHRA BANK, TIRUCHANOOR ROAD IS NOT EXPLAI NED AND THUS TO BE TREATED AS UNEXPLAINED INCOME. 11. THE AO NOTED THAT THERE WAS A CASH DEPOSIT OF RS. 1,00,000/- AND RS. 11,00,000/- ON 25-01-2006 AND 27-01-2006 RE SPECTIVELY IN SB ACCOUNT OF ASSESSEE IN ANDHRA BANK. SINCE ASSESSEE COULD NOT EXPLAIN ABOUT THE SOURCE OF INCOME AND IN THE ABSEN CE OF BOOKS OF ACCOUNT, THE AO TREATED THE SAID AMOUNTS OF RS. 12, 00,000/- AS UNEXPLAINED CASH CREDITS AND ADDED THE SAME TO THE INCOME OF ASSESSEE. ON APPEAL, THE CIT(A) CONFIRMED THE ACTIO N OF THE AO BY OBSERVING AS UNDER: 4.1 IT MAY BE SEEN THAT THE APPELLANT HAS WITHDRAWN RS. 10,00,000/- FROM HIS WAYS AND MEANS ACCOUNT AND DEP OSITED WITH ANDHRA BANK, TIRUPATI ON 15-02-2006. HOWEVER, IT APPEARS THAT THE APPELLANT ALSO HAD DEPOSITED RS. 1,00,000/ - ON 25-01- 2006 AND RS. 11,00,000/- ON 27-01-2006 IN ANDHRA BA NK, TIRUCHANOOR ROAD BRANCH, TIRUPATI. AS IT COULD BE S EEN FROM THE WAYS AND MEANS ACCOUNT, THAT THERE IS A WITHDRAWAL OF RS. 10 LAKHS WHICH IS SEEN TO HAVE BEEN DEPOSITED WITH AND HRA BANK. HOWEVER, THERE IS NO CLEAR CUT SOURCE FOR HAVING DE POSITED RS. 1 LAKH AND RS. 11 LAKHS WITH ANDHRA BANK. THEREFORE , IT CAN BE SAID THAT THE APPELLANT HAD WITHDRAWN RS. 12 LAKHS FROM HIS WAYS AND MEANS ACCOUNT FOR MAKING A DEPOSIT OF RS. 11 LAKHS. HOWEVER, SINCE THERE IS NO SUFFICIENT EVIDENCES IN SUPPORT OF DEPOSITS MADE AT RS. 12 LAKHS BY THE APPELLANT, I A M OF THE VIEW THAT THE APPELLANT HAD MADE A DEPOSITS OF THE SAID DEPOSIT OUT OF APPELLANTS UNKNOWN SOURCES. THEREFORE, HAVING V ERIFIED THE FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE VIE W THAT THE AO IS JUSTIFIED TO MAKE AN ADDITION OF RS. 12 LAKHS WHICH IS DEPOSITED WITH ANDHRA BANK, TIRUCHANOOR ROAD BRANCH , TIRUPATI. THEREFORE, THE ADDITION MADE BY THE AO IS CONFIRMED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD. IN THE PAPER BOOK AT PAGE 48 & 54, WHICH AR E WAYS AND MEANS ACCOUNT AND BALANCE SHEET, WHEREIN OPENING BALANCE OF CASH & DEBTORS IS SHOWN AT RS. 11,97,524/- AND FIXED DEPOS IT OF RS. 10,00,000/- ON 15/02/2006. THE FIXED DEPOSIT ON 15- 02-06 IS OUT OF EARLIER CASH DEPOSITS INTO BANK ACCOUNT OF RS.12,00 ,000 IN JANUARY,2006. SINCE ASSESSEE IS IN MONEY LENDING BU SINESS AND 5 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA RECOVERIES WERE SHOWN IN THE WAYS AND MEANS STATEME NT, THEREFORE, THE EXPLANATION OFFERED BY ASSESSEE BEFORE THE REVE NUE AUTHORITIES CANNOT BE BRUSHED ASIDE. HOWEVER, ONLY DEPOSIT OF R S 10,00,000 WAS TAKEN CREDIT IN THE WAYS AND MEANS STATEMENT. THERE FORE, WE ACCEPT ASSESSEES CONTENTIONS TO THE EXTENT OF RS 10 LAKHS AND RESTRICT THE ADDITION TO RS. TWO LAKHS ONLY, AS UNEXPLAINED CASH DEPOSIT, IN THE ABSENCE OF ANY LINKING WITH DEBTORS OR INCOMES EARN ED. THE GROUND RAISED IS PARTLY ALLOWED. 13. IN THE RESULT, APPEAL IN ITA NO. 660/HYD/201 1 IS PARTLY ALLOWED. ITA NO. 661/HYD/2011 FOR AY 2007-08. 14. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF TH E CIT(A)-VII, HYDERABAD DATED 09-03-2011. THE AO MADE THE FOLLOW ING ADDITIONS: 1. ADDITION ON ACCOUNT OF CASH DEPOSIT OF RS. 10,07 ,808/-IN TIRUPATI COOPERATIVE BANK ACCOUNT, AS UNEXPLAINED C ASH CREDIT. 2. ADDITION ON ACCOUNT OF CASH DEPOSIT OF RS. 2,30, 000/- IN BANK DEPOSIT WITH BANK OF BARODA, AS UNEXPLAINED INCOME. 3. ADDITION OF RS. 2,00,000/- BEING THE ADVANCE GIV EN TO SRI K. NARASIMHULU, AS UNEXPLAINED CASH. 4. ADDITION OF RS. 2,00,000/- ON ACCOUNT OF MORTGAG E LOAN TO THE SAME PERSON 15. WITH REGARD TO THE ADDITION OF RS. 10,07,808/-, BEFORE THE CIT(A) IT WAS SUBMITTED BY THE AR THAT ASSESSEE IS HAVING ENOUGH BALANCE IN HIS WAYS AND MEANS ACCOUNT, THEREFORE, THE AO SHOUL D NOT HAVE MADE ADDITION. THE CIT(A) AFTER CONSIDERING THE SUBMISS IONS, SUSTAINED THE ADDITION OBSERVING AS UNDER: 4.` IT IS SEEN FROM THE WAYS AND MEANS ACCOUNT OF T HE APPELLANT FOR THE YEAR ENDING 31-03-2007 THAT THERE IS NO WITHDRAWAL OF RS. 10,07,808/- FOR MAKING DEPOSIT IN TIRUPATI COOPERATIVE BANK LTD. THE APPELLANT HAS NOT CLEARL Y GIVEN THE 6 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA SOURCE OF THE SAID DEPOSIT. THE AR CLAIMS THAT THE APPELLANT HAS GOT THE SUFFICIENT FUNDS BUT THE APPELLANT SHOULD H AVE GIVEN NECESSARY DETAILS IN SUPPORT OF THE FIXED DEPOSIT W ITHDRAWN AND BALANCES AVAILABLE WITH THE BANKS. THEREFORE, IN TH E ABSENCE OF THESE DETAILS, IT CANNOT BE SAID THAT THE APPELLANT HAD REAL SOURCE TO WITHDRAW AND MAKE DEPOSIT WITH TIRUPATHI COOPERATIVE BANK LTD. THEREFORE, IN ABSENCE OF NECESSARY DETAI LS, I AM OF THE VIEW THAT THE AO HAS RIGHTLY ADDED ABOVE ADDITI ON AND THEREFORE THE SAME IS CONFIRMED. HENCE THIS GROUND OF APPEAL IS DISMISSED. 16. WITH REGARD TO THE ADDITION OF RS. 2,30,000/-, THE CIT(A) OBSERVED THAT IT WAS AGAIN THE ARGUMENT OF THE AR T HAT ASSESSEE IS HAVING A SUFFICIENT FUND, THEREFORE, THE DEPOSIT MA DE BY ASSESSEE IN BANK OF BARODA IS ONLY OUT OF ASSESSEES OWN SOURCE S, HOWEVER, IT WAS SEEN FROM THE WAYS AND MEANS ACCOUNT, THE MONEY DRAWING FROM THE WAYS AND MEANS ACCOUNT AT RS. 2,30,000/- AND DE POSITING THE SAME WITH THE BANK OF BARODA IS NOT REFLECTED. HE, THEREFORE, REJECTED THE EXPLANATION OF ASSESSEE AND CONFIRMED THE ADDIT ION MADE BY THE AO. 17. AS REGARDS ADDITIONS OF RS. 4,00,000/- AS ADVAN CE OF RS. 2,00,000/- AND MORTGAGE LOAN OF RS. 2,00,000/- TO SHRI K. NARASIMHULU, IT WAS THE SUBMISSION OF THE AR THAT A SSESSEE HAD ORIGINALLY OBTAINED A PRONOTE FROM THE PARTY AND ON THE SAME DAY CONVERTED THE LOAN ON PRONOTE AS MORTGAGE LOAN WITH SIMILAR AMOUNT ON SAME DAY AND, THEREFORE, THERE IS ONLY ONE TRANS ACTION. IT WAS OBSERVED BY THE AO THAT DURING SEARCH OPERATION, A PROMISSORY NOTE WAS FOUND VIDE ANNEXURE A/CVV/06 AND AS PER THIS PR OMISSORY NOTE, ASSESSEE IS SAID TO HAVE MADE ADVANCE OF RS. 2,00,0 00/- ON 27.07.2006 TO SRI K. NARASIMHULU. THE ASSESSEE EXPL AINED THAT THE SAID WAS GIVEN FROM HIS OWN FUNDS. HOWEVER, THE AO WAS OF THE VIEW THAT SINCE ASSESSEE HAD FILED THE RETURN OF INCOME AFTER THE SEARCH IS CONDUCTED WHEREIN ASSESSEE HAD CLAIMED THAT RS. 2,0 0,000/- HAD BEEN ADVANCED TO SRI K. NARASIMHULU IS OUT OF HIS O WN FUNDS IS ONLY AN AFTER THOUGHT EXPLANATION. THE AO, THEREFORE, DI D NOT ACCEPT THE 7 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA ASSESSEES EXPLANATION AND ADDED THE SAME TO THE TO TAL INCOME OF ASSESSEE. FURTHER, THE AO HAD ALSO MADE A FURTHER A DDITION OF RS. 2,00,000/- SINCE ASSESSEE HAVING TAKEN PROMISSORY N OTE FROM SRI. K. NARASIMHULU HAD ENTERED INTO THE MORTGAGE DEED. THE REFORE, THE AO MADE THE ADDITION TOWARDS PROMISSORY NOTE AT RS. 2, 00,000/- AN ANOTHER RS. 2,00,000/- TOWARDS MORTGAGE DEED ENTERE D BY ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE, THE CIT(A) HELD AS FOLLOWS: 6.1 THE SUBMISSION MADE BY THE AR HAS BEEN CONSIDER ED. IT IS SEEN THAT THE APPELLANT HAS SHOWN WITHDRAWAL OF RS. 2,00,000/- FROM WAYS AND MEANS ACCOUNT FOR LENDING MONEY TO SRI K. NARASIMHULU. THEREFORE, THE AMOUNT SAID TO H AVE ADVANCED TO SRI K. NARASIMHULU HAS BEEN CONSIDERED AS EXPLAINED. THEREFORE, THE ADDITION MADE BY AO AT RS . 2,00,000/- IS DELETED. HOWEVER, THE DETAILS WITH RE GARD TO THE ADDITION MADE BY THE AO AT RS. 2,00,000/- TOWARDS M ORTGAGE LOAN IS NOT VERY CLEARLY EXPLAINED. THEREFORE, THE ADDITION MADE BY THE AO ON THE COUNT OF MORTGAGE DEED IS CONFIRME D. HENCE, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 18. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE RECORD. AS REGARDS THE DEPOSIT OF RS. 10,07,808/- I N TIRPATHI COOPERATIVE BANK AND RS. 2,30,000/- IN BANK OF BARO DA, THESE AMOUNTS WERE SQUARELY REFLECTED IN THE WAYS AND MEA NS STATEMENT AND THE BALANCE SHEET FILED AT PAGES 77 & 78 OF THE PAPER BOOK. WE ARE OF THE VIEW THAT SINCE THE ASSESSMENT WAS MADE BASED ON THE WAYS AND MEANS STATEMENT, THE ADDITIONS SUSTAINED B Y THE CIT(A) IS NOT CORRECT AND, THEREFORE, WE DELETE THE ADDITIONS MADE IN THIS REGARD. SIMILAR ADDITIONS MADE BY AO WERE DELETED B Y THE CIT(A) ON THE SAME REASON THAT ASSESSMENTS WERE COMPLETED BY ACCEPTING WAYS AND MEANS STATEMENT. SINCE ALL TRANSACTIONS DU RING THE YEAR GET CONSOLIDATED IN ASSETS AND LIABILITIES AND ANY DIFFERENCE WAS SHOWN AS INCOME, THERE IS NO NEED TO CONSIDER THE I NDIVIDUAL DEPOSITS. ACCORDINGLY, GROUND NOS. 1 & 2 ARE ALLOWE D. 8 ITA NOS. 658,659, 660 & 661/HYD/2011 C.V. RADHAKRISHNA 20. AS REGARDS THE ADDITION OF RS. 2,00,000/- ON AC COUNT OF PRONOTE LOAN OF M. NARASIMHULU, IT WAS EXPLAINED THAT THESE PERTAIN TO SAME TRANSACTION. IT IS A BUSINESS PRACTICE TO TAKE PROM ISSORY NOTE AS WELL AS A MORTGAGE DEED WHEN FUNDS ARE ADVANCED BY WAY O F SECURITY. CONSIDERING THAT BOTH ARE FROM SAME PERSON AND FOR THE SAME AMOUNT, THERE IS CREDENCE IN ASSESSEE SUBMISSION. H AVING ACCEPTED ONE PART OF TRANSACTION THE OTHER PART ALSO STANDS EXPLAINED. THEREFORE WE ARE OF THE OPINION THAT ADDITION OF SA ME AMOUNT AS MORTGAGE LOAN IS NOT REQUIRED. THE ADDITION IS DELE TED. THE GROUND IS ALLOWED. 21. IN THE RESULT, APPEAL IN ITA NO. 661/HYD/2011 I S ALLOWED. 22. TO SUM UP, ITA NOS. 658, 659 AND 661/HYD/2011 A RE ALLOWED WHERE AS 660/HYD/2011 IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2013. (ASHA VIJAYARAGHAVAN) (B. RA MAKOTAIAH) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: 20 TH DECEMBER, 2013. KV COPY TO:- 1) SHRI C.V. RADHAKRISHNA , C/O SHRI S. RAMA RAO, A DVOCATE, FLAT NO. 102, SHRIYAS RESIDENCY, ROAD NO. 9, HIMAYATNAGAR, HYDERABAD. 2) ACIT, CENTRAL CIRCLE, TIRUPATHI. 3) CIT(A)-VII, HYDERABAD. 4) CIT(CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.