Sri Gadde Muralikrishna, Visakhapatnam V. The ITO, Ward-3(2), Visakhapatnam, Visakhapatnam

ITA 663/VIZ/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6865 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 13-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Assessee Lawyers: C SUBRAMANYAM
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Source of fund; Additional evidence; Onus to prove
• Section: 44AD; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH , VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 663/VIZ/2013 ASSESSMENT YEAR : 2009-10 GADDE MURALIKRISHNA, VISAKHAPATNAM PAN AGEPG0007H ASST. COMMISSIONER OF INCOME, CIRCLE 1, ELURU. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI C. SUBRAMANYAM REVENUE BY SHRI D. MANOJ KUMAR DATE OF HEARING 07-07-2014 DATE OF PRONOUNCEMENT 07-07-2014 O R D E R PER J. SUDHAKAR REDDY, A.M.: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE CIT(A), VISAKHAPATNAM, DATED 27/09/2013 FOR THE ASSESSMENT YEAR 2009-10. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN I NDIVIDUAL ENGAGED IN CIVIL CONTRACTS. HE FILED HIS RETURN OF INCOME FOR AY 2009-10 DECLARING A TOTAL INCOME OF RS. 3,23,020/-. THE ASSESSEE CARRIE D OUT THE CIVIL CONTRACT WORKS, THE TURNOVER OF WHICH WAS RS. 37,25,251/-. T HE ASSESSEE OFFERED THE INCOME UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT, WHICH ARE PROVISIONS FOR PRESUMPTIVE COMPUTATION OF INCOME. T HE AO VIDE HIS ORDER DATED 27/12/2011 PASSED U/S 143(3) OF THE ACT, MADE THE FOLLOWING ADDITIONS: A) UNEXPLAINED CASH DEPOSIT IN BANK ACCOUNT RS. 2, 79,000/- B) LOAN TAKEN FROM BROTHER-IN-LAW UNPROVED RS. 6,0 0,000/- C) UNEXPLAINED INVESTMENT TOWARDS CONTRACT WORKS RS.19,25,251/- 2 ITA NO. 663/VIZ/2013 GADDE MURALIKRISHNA, VISAKHAPATNAM 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). THE FIRST APPELLATE AUTHORITY SUBSTANTIALLY CONFIRMED THE ORDER OF THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1.0 THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, ADDITIONS MADE TO THE RETURNED INCOME TO THE EXTENT SUSTAINED BY THE LEARNED CIT(A) IS CONTRARY TO THE FACTS OF THE CASE AND PRO VISIONS OF LAW. 1.1 THE FINDING OF THE LEARNED CIT(A), DISBELIEVING THE EXPLANATION WITH REGARDS TO THE DEPOSITS IN THE BANK TO AN EXTE NT OF RS. 2,79,000/-, CONTRARY TO THE FACTS OF THE CASE. 1.2 THE LEARNED CIT(A) GROSSLY ERRED IN SUSTAINING THE ADDITION OF RS. 6 LAKHS, PERTAINING TO AMOUNT BORROWED AND DEPO SITED IN BANK. THE LEARNED CIT(A) ERRED IN LAW IN PLACING THE BURD EN ON THE ASSESSEE TO PROVE THE SOURCE FOR THE SOURCE OF THE AMOUNT THAT WAS LENT BY THE CREDITOR. 1.3 THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDIT ION MADE UNDER THE GUISE OF ALLEGED UNEXPLAINED INVESTMENT TOWARD S CONTRACT WORKS OF RS. 19,25,251/- WITHOUT CONSIDERING THE E XPLANATIONS OF THE ASSESSEE IN A JUDICIOUS MANNER. 1.4 THE LEARNED CIT(A) OUGHT TO HAVE KNOWN THAT WHE N THE ASSESSEE ADMITTED BUSINESS INCOME UNDER THE PROVISI ONS OF SECTION 44AD OF THE IT ACT NO OTHER ADDITIONS HAVING NEXUS WITH GROSS RECEIPTS DIRECTLY OR INDIRECTLY CAN BE MADE SINCE S ECTION 44AD CONTEMPLATES COMPUTATION OF BUSINESS PROFITS ON PR ESUMPTIVE BASIS. 4. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED COU NSEL FOR THE ASSESSEE SHRI C. SUBRAMANYAM ON BEHALF OF THE ASSES SEE AND THE LEARNED DR SHRI D. MANOJKUMAR ON BEHALF OF THE REVENUE. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD AS FOLLOWS: 4.1 ON THE ISSUE OF ADDITION OF RS. 2,79,000/-, WHI CH IS REGARDING UNEXPLAINED CASH DEPOSIT MADE IN THE BANK ACCOUNT, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS GRAN TED TELESCOPIC BENEFIT 3 ITA NO. 663/VIZ/2013 GADDE MURALIKRISHNA, VISAKHAPATNAM AND , HENCE, HE DOES NOT WANT TO PRESS THIS GROUND. THUS, THIS GROUND IS DISMISSED AS NOT PRESSED. 4.2 AS REGARDS THE ADDITION OF RS. 6,00,000/- MADE U/S 68 ON THE GROUND THAT THE INCOME IS UNEXPLAINED CREDIT, WE FIND THAT THIS IS A LOAN TAKEN FROM SHRI VIJAYKUMAR, WHO IS WORKING FOR A GOVERNMENT C OMPANY IN UAE, AND IS THE BROTHER-IN-LAW OF THE ASSESSEE. THE ADDITION WAS MADE ON THE GROUND THAT THE AN AMOUNT OF RS. 6, 00,000/- WAS DE POSITED IN THE BANK OF ACCOUNT OF SHRI VIJAYKUMAR, CREDITOR ONE DAY BEFORE THE CROSS CHEQUE WAS ISSUED TO THE ASSESSEE FROM THIS BANK ACCOUNT. 4.3 THE AO WAS OF THE VIEW THAT THIS DEPOSIT OF CAS H WAS NOT EXPLAINED. WE FIND THAT SHRI VIJAYKUMAR HAS FILED A CONFIRMATI ON LETTER. IN THE CONFIRMATION LETTER, WHICH IS ON RS. 100/- NON-JUDI CIAL STAMP PAPER, , SHRI VIJAYKUMAR SUBMITTED THAT HE HAS TRANSFERRED/WITHDR AWN THE AMOUNT FROM NRE ACCOUNT WITH HSBC, SIRIPURAM BRANCH, VISAKHAPAT NAM AS WELL AS OTHER ACCOUNTS AND THAT HE HAS TRANSFERRED THESE AM OUNTS TO HIS BROTHER- IN-LAWS (ASSESSEE) ACCOUNT WITH ICICI BANK. HE FUR THER STATES THAT HE IS WORKING FOR THE GOVERNMENT IN UAE AND THE FUNDS IN QUESTION ARE OUT OF HIS SAVINGS. TO THIS EFFECT A COPY OF THE PASSPORT AND A COPY OF THE BANK STATEMENTS WERE SUBMITTED. THE AO MADE THE ADDITION IN THE ASSESSEES ACCOUNT ON THE GROUND THAT THE SOURCE OF CASH DEPOS IT IN NRE ACCOUNT OF SHRI VIJAYAKUMAR IS NOT PROVED. IN OUR VIEW, THE AD DITION CANNOT BE SUSTAINED ON THESE GROUNDS. IT IS FOR SHRI VIJAYAKU MAR TO EXPLAIN THE SOURCES OF FUNDS IN HIS BANK ACCOUNT. IT IS ALWAYS OPEN FOR THE REVENUE AUTHORITIES TO ENQUIRE INTO THE SOURCE OF FUNDS IN THE HANDS OF SHRI VIJAYKUMAR AND IF HE IS NOT ABLE TO EXPLAIN PROPERL Y THE SAME, MAKE AN ADDITION IN HIS CASE. AS FAR AS THE ASSESSEE IS CON CERNED, HE HAS DISCHARGED THE BURDEN OF PROOF THAT LAY ON HIM WITH NECESSARY EVIDENCES. HE HAS RECEIVED THE MONEY THROUGH BANK CHANNELS FRO M HIS CLOSE RELATIVE, WHO IS THE FINANCIAL CAPABILITY OF GIVING MONEY. TH E TRANSACTION IS GENUINE AS CONFIRMATION LETTERS WERE FILED. THERE IS NO ENQ UIRY CONDUCTED BY THE 4 ITA NO. 663/VIZ/2013 GADDE MURALIKRISHNA, VISAKHAPATNAM AO IN THIS REGARD. UNDER THESE CIRCUMSTANCES, THIS ADDITION OF RS. 6,00,000/- IS HEREBY DELETED. 4.4 WITH REGARD TO THE ADDITION OF RS. 19,25,251/-, THE CASE OF THE REVENUE IS THAT THE ASSESSEE HAD DONE CONTRACT WORK S FOR M/S PRESIDENCY GRAND AMOUNTING TO RS. 37,25,251/- AND HE HAS RECEI VED THE BILLS TO THE TUNE OF RS. 18 LAKHS AND THE BALANCE AMOUNT OF RS. 19,25,251/- WAS THE INVESTMENT OF THE ASSESSEE, THE SOURCE OF WHICH WAS NOT EXPLAINED. THE ASSESSEE EXPLAINED THE SOURCE OF FUNDS AS A) CREDIT ORS TO THE TUNE OF RS. 9,00,000/- WERE OUTSTANDING PAYABLE, B) LOAN TO TH E EXTENT OF RS. 8.5 LAKHS WAS TAKEN FROM SHRI VIJAYKUMAR AND C) RS. 3 LAKHS PROFIT WAS DECLARED. THESE EXPLANATIONS WERE NOT ACCEPTED BY T HE AO. THE LEARNED CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 4.5 AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE CONSIDERED OPINION THAT SUCH ADDITION CANNOT BE SUSTAINED FOR THE SIMP LE REASON THAT THE ASSESSEE HAS FILED HIS RETURN OF INCOME U/S 44AD, W HICH CONTEMPLATES DETERMINING THE INCOME ON PRESUMPTIVE BASIS. THE A O AND THE CIT(A) DISPUTED THE CLAIM OF THE ASSESSEE THAT SECTION 44A D APPLIES TO HIM. THE BOOKS OF ACCOUNT ARE NOT MAINTAINED AND HENCE THE Q UESTION OF ADDITION MADE ON ACCOUNT OF SHORTAGE IN CASH FLOW ETC. DOES NOT ARISE. UNDER THESE CIRCUMSTANCES ASKING THE ASSESSEE TO EXPLAIN THE CA SH FLOW TO QUANTIFY THE INVESTMENT IS ERRONEOUS THIS IS A CASE WHERE THE AO HAS NOT EVEN TRIED TO IDENTIFY WHAT IS THE INVESTMENT. WHILE MAKING ADDI TION U/S 68, HE CHOSE NOT TO TREAT THE LOAN AS A SOURCE OF INVESTMENT. TH E PLEADING OF THE ASSESSEE IS THAT HE HAS OUTSTANDING BILLS PAYABLE T O VARIOUS PARTIES. THIS PLEA WAS WRONGLY REJECTED BY THE LEARNED CIT(A). T HUS, SUCH ACTION, IN OUR VIEW, IS NOT REASONABLE AND HAS TO BE VACATED. 4.6 IN VIEW OF THE ABOVE DISCUSSION, AS THE ASSESSE E HAS EXPLAINED THE SOURCE OF INVESTMENT FOR UNDERTAKING THIS CONTRACT WORK AND AS THE INCOME ITSELF IS ASSESSED U/S 44AD, THE QUESTION OF MAKING SEPARATE ADDITION OF RS. 19,25,251/- DOES NOT ARISE. THIS GROUND IS ALLO WED. 5 ITA NO. 663/VIZ/2013 GADDE MURALIKRISHNA, VISAKHAPATNAM 5. THE ASSESSEE MOVED AN APPLICATION UNDER RULE 29 OF THE ITAT RULES FOR ADMITTING EVIDENCES WHICH IS IN THE FORM OF LETTERS/CORRESPONDENCE TO DEMONSTRATE THAT THE ASSE SSEE HAS OUTSTANDING PAYMENTS TO BE MADE TO VARIOUS PARTIES. IN VIEW OF OUR DECISION TO DELETE THE ADDITION OF RS. 19,25,251/-, WE DO NOT CONSIDER THIS APPLICATION FILED FOR ADMISSION OF ADDITIONAL EVIDENCE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 07/07/2014. SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM, DATED: 07/07/2014 KV COPY TO:- 1) SHRI G. MURALIKRISHNA, FLAT NO. G-2, LOTUS PLAZA , CBM COMPOUND, VIP ROAD, VISAKHAPATNAM. 2) ITO, WARD 3(2), VISAKHAPATNAM 3) CIT(A), VISAKHAPATNAM 4) ADDL. CIT-1, VISAKHAPATNAM. 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., VIZAG.