V V S K D N Soma Raju, Bhimavaram V. ACIT Central Circle -2, Rajahmundary

ITA 72/VIZ/2022

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9360 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-12-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 06-04-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 143(3); 142(1); 133(6); 72; 153C

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. Nos. 69, 70, 71, 72 & 73/Viz/2022 (Ǔनधा[रण वष[ / Assessment Years: 2011-12 to 2015-16) Vegesna Venkata Satya Kanaka Durga Naga Soma Raju, Bhimavaram, West Godavari District, Andhra Pradesh – 534202. PAN: BLKPS 4553 A Vs. The Asst. Commissioner of Income Tax, Central Circle-2, Rajahmundry, Andhra Pradesh – 534222. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸ कȧ ओर से/ Assessee by : Sri GVN Hari, AR Ĥ×याथȸ कȧ ओर से / Revenue by : Dr Satyasai Rath, CIT-DR सुनवाई कȧ तारȣख / Date of Hearing : 12/12/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 22/12/2023 O R D E R PER S. BALAKRISHNAN, Accountant Member : All the captioned appeals are filed by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)-12, Hyderabad in Appeal No. 10168/2019-20; 10121/2019-20; 10122/2019-20; 10123/2019-20 and 10249/2019-20 dated 2 10/02/2022 for the AYs 2011-12 to 2015-16 respectively arising out of the orders passed U/s. 143(3) r.w.s 153C of the Income Tax Act, 1961 [the Act]. 2. The assessee has raised identical grounds in all these appeals. Therefore, for the sake of convenience, these appeals are clubbed, heard together and disposed off in this consolidated order. Considering the similarity of the issues involved in these appeals, we shall first take up ITA No. 69/Viz/2022 (AY 2011- 12) as a lead appeal: ITA No. 69/Viz/2022 (AY: 2011-12) 3. Briefly stated the facts of the case are that the assessee is an individual deriving income from leased fish tank and also from Suguna Communication. A search and seizure operation U/s. 132 of the Act was conducted in the case of Sri Kundula Veera Venkata Satyanarayana, Managing Partner of the firm M/s. KVVSN Associates on 22/01/2015 wherein certain incriminating documents in the form of loose sheets as lessee of Pendyala- Kanuru Sand Reach to the Director, Mines & Geology were found and seized. Consequently, the case of the assessee was notified to Central Circle-2, Rajahmundry vide order U/s. 127 passed by the 3 Pr. CIT, Rajahmundry in F.No. 62/Juris/CIT/RJY/2016-16, dated 26/02/2016. Accordingly, notice U/s. 153C of the Act was issued to the assessee on 27/04/2016 calling for the return of income for the AY 2011-12 which was returned un-served. Therefore, a fresh notice U/s. 153C dated 5/7/2016 was issued and the same was duly served on the assessee on 12/07/2016. As no response from the assessee, another letter was served on the assessee on 26/8/2016 and in reply thereto, the assessee sought 2 months time to file the return of income. Thereafter, another letter dated 9/9/2016 was issued calling the assessee to file return of income within 7 days from the date of receipt of the letter. Since, there was no response from the assessee, a show cause notice dated 20/10/2016 along with notice U/s. 142(1) was issued on the assessee. Thereafter, in reply to the show cause notice for initiation of prosecution U/s. 276CC of the Act, the assessee filed the return of income U/s. 153C on 30/11/2016 declaring total income of Rs. 2,27,500/-. Accordingly, notice U/s. 143(2) of the Act was issued to the assessee on 1/12/2016 and duly served and on the assessee. In reply, the assessee’s Representative appeared from time to time and made submissions before the Ld. AO wherein it was stated that the assessee has not maintained any regular books of account. The assessee further 4 submitted that the return of income was filed based on the bank accounts and rough noting only. On verification of the return of income and the AIR information, it was noted by the Ld. AO that though the assessee has shown gross total income of Rs. 2,27,500/- during the year under consideration, as per the bank account statements of the assessee obtained U/s. 133(6) of the Act, the assessee made huge cash deposits during the year aggregating to Rs. 3,38,81,825/-. On being asked, the assessee failed to produce any books of account so as to explain the sources of the above cash deposits and to justify the correctness of the income returned. Therefore, the Ld. AO in the absence of any evidence furnished by the assessee in support of the income returned, treated the cash deposits of the assessee in his various bank accounts aggregating to Rs. 3,38,81,825/- as unexplained income of the assessee and made addition of Rs. 3,38,81,825/- and completed the assessment U/s. 143(3) r.w.s 153C of the Act determining the assessed income at Rs. 3,41,09,325/-. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) in the first round of proceedings, dismissed the appeal of the assessee in limine on the ground that the assessee has not attended the proceedings nor has filed any written submissions despite several opportunities. 5 Aggrieved by the order of the Ld. CIT(A), the assessee preferred an appeal before the ITAT. On appeal, the ITAT, Vizag Bench has remitted the matter back to the file of the Ld. CIT(A) with a direction to decide the appeal on merits and in accordance with law vide order in ITA No.115 to119/Viz/2019, dated 14/6/2019. 4. Adhering the direction of the Hon’ble Tribunal, the Ld. CIT(A) issued various notices to the assessee. However, before the Ld. CIT(A) none appeared on behalf of the assessee. The Ld. CIT(A), during the second round of appellate proceedings, based on the various issues raised by the assessee before him, called for a remand report from the Ld. AO vide letter dated 4/2/2020. Before the Ld. CIT(A), it is the submission of the assessee that the Ld. AO merely relied on the seized slips found during the course of search in the case of Sri KVV Satyanarayana which do not constitute an admissible evidence and therefore placing reliance on such inadmissible evidence vitiates the assessment. The assessee further submitted that the loose slips seized and relied on by the Ld. AO are admittedly the letters written by the assessee to the Chief Minister of Andhra Pradesh and hence they do not constitute ‘incriminating material’. The assessee further submitted that, in the absence of any incriminating material, 6 invoking the provisions of section 153C is not sustainable in law and that vitiates the assessment made based on such material. After considering the submissions of the assessee Ld. CIT (A) dismissed the assessee’s contention by holding that the letter written and signed by the assessee contained the details of license fee paid by him and the amounts claimed as due from the Mining Department. Thus, the Ld. CIT(A) came to a conclusion that the seized document contains a valuable information and the facts relating to the assessee’s sand mining business and therefore they do constitute incriminating material and accordingly confirmed the Ld. AO’s decision of invoking of section 153C of the Act. Further, with regard to the huge cash deposits amounting to Rs.3,38,81,825/- the Ld. CIT(A) held that there is a direct nexus between the seized material and the bank statements of the assessee. Further, the assessee has also admitted that except for bank statements and way bills, he does not maintain any books of account. Therefore, the Ld. CIT(A) came to a conclusion that since the assessee does not maintain any books of account of account and the sale proceeds are deposited in the bank account, the Ld. AO is right in bringing to tax the total cash deposits in the bank account totaling to Rs. 3,38,81,825/-. Accordingly, the Ld. CIT(A) confirmed the 7 addition made by the Ld. AO. Thus, the Ld. CIT(A) dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following Grounds of Appeal: “1. The order of the Ld. CIT(A) is contrary to the f acts and also the law applicable to the f acts of the case. 2. The Ld. CIT(A) ought to have held that the notice issued U/s. 153C of the Act is not in accordance with the law and is liable to be quashed and ought to have quashed the assessment proceedings as void-ab-initio. 3. Without prejudice to the above, the Ld. CIT(A) ought to have held that the addition made by the Assessing Officer is outside the scope of assessment U/s. 143(3) r.w.s 153C of the Act. 4. Without prejudice to G. No. 2 and G. No. 3 above, the Ld. CIT(A) is not justif ied in conf irming the addition of Rs. 3,38,81,825/- made by the AO towards alleged unexplained cash deposits. 5. Further, without prejudice G.No.4 above, the Ld. CIT(A) ought to have treated the deposits in the bank account as the turnover of the appellant and estimated reasonable percentage of prof it. 6. Any other grounds may be urged at the time of hearing.” 5. At the outset, the Ld. Authorized Representative submitted before us that the Ld. AO has not recorded any valid satisfaction as required U/s. 153C of the Act. The Ld. AR then referred to page 4 of the Paper Book wherein the Satisfaction Note recorded by the Ld. AO is placed before us. The Ld. AR further referred to 8 the Satisfaction Note and stated that the assessee has sent a letter to the Chief Minister of Andhra Pradesh requesting for proportionate refund of the license fee paid by the assessee for sand mining activities. The Ld. AR vehemently argued that this letter addressed to the Government Authorities cannot be considered as an incriminating material and the satisfaction recorded by the Ld. AO based on such letter is not a valid satisfaction and not in accordance with law. Per contra, the Ld. Departmental Representative submitted that the assessee is a non-filer and has not filed any return of income for the impugned assessment year. The Ld. DR further submitted that it was noticed during the search operations that the assessee has paid license fee of Rs. 4 Crs to the Government of Andhra Pradesh for sand mining business. The Ld. DR further submitted that the source for the payment of Rs. 4 Crs was also not explained by the assessee. The Ld. DR also further submitted that since the assessee is engaged in the business of sand mining, has failed to file the return of income for the impugned assessment year which was discovered during the search proceedings. Hence, the letter addressed by the assessee to the Chief Minister of Andhra Pradesh should be considered as 9 an incriminating material and accordingly the notice U/s. 153C issued by the Ld. AO is valid in law. 6. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. This is the second round of proceedings before the Tribunal. It is an admitted fact that the assessee has not filed his return of income even though engaged in the business of sand mining during the impugned assessment year. There is a merit in the argument of the Ld. DR that if the search had not been taken place, the assessee would not have filed his return of income, admitting the income and paid the taxes on the same. Therefore, considering the facts and circumstances of the case, in our considered view, the letter addressed to the Chief Minister of Andhra Pradesh for refund of the license fee for the proportionate period is a valid incriminating document and accordingly the satisfaction recorded by the Ld. AO on 05/07/2016 should be considered as a valid satisfaction for the purpose of proceedings U/s. 153C of the Act. We therefore find no merit in the argument of the Ld. AR and accordingly we are of the considered view that the proceedings initiated U/s. 153C of the Act is in accordance with law and the Grounds No. 2 10 & 3 raised by the assessee should be dismissed. It is ordered accordingly. 7. With respect to Grounds No. 4 regarding the cash deposits, the Ld. AR could not offer any valid explanation before us. Per contra, the Ld. DR heavily relied on the order of the Ld. AO. 8. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities on this issue. It is an admitted fact that the assessee has failed to produce any books of accounts and could not provide the sources for cash deposits. It was also accepted by the Ld. AR that the assessee did not maintain any books of accounts except for the bank statements and way-bills. Further, it is an undisputed fact that the assessee was engaged in the sand mining operations and the sale receipts (net) was deposited into the bank account after it reaches a considerable amount of Rs. 4 lakhs to Rs. 5 lakhs. Further, the assessee in a statement recorded on oath on 27/2/2015 vide Q. No. 34 & 35 has accepted that only the surplus money after meeting the expenditure towards proclainer charges and labour charges were deposited into the bank account. Therefore, it can be safely concluded that the net sale proceeds of the sand mining business after incurring 11 various expenses was deposited into the bank account. Since the net sale proceeds was deposited in the bank accounts, we are of the considered view that the Ld. Revenue Authorities had rightly brought the entire cash deposits made into the bank accounts of the assessee aggregating to Rs. 3,38,81,825/- as income of the assessee and therefore in our opinion there is no infirmity in the orders of the ld. Revenue Authorities. Accordingly, we do not want to interfere in the order of the Ld. CIT(A) on this ground. Hence, the Grounds No.4 raised by the assessee is dismissed. 9. Further, the assessee has raised Ground No.5 without prejudice to the Ground No.4 which reads as under: “Further, without prejudice G. no.4 above, the Ld. CIT(A) ought to have tre ate d the deposits in the bank account as the turnover of the appell ant and esti mated re ason ab l e percentage of profit.” 10. We have heard both the sides. It is an undisputed fact that the assessee was engaged in the sand mining operations and the sale receipts (net) was deposited into the bank account after it reaches a considerable amount of Rs. 4 lakhs to Rs. 5 lakhs. Further, the assessee in a statement recorded on oath on 27/2/2015 vide Q. No. 34 & 35 has accepted that only the surplus money after meeting the expenditure towards proclainer 12 charges and labour charges were deposited into the bank account. Therefore, we have no hesitation to conclude that the net sale proceeds of the sand mining business after incurring various expenses was deposited into the bank account, and hence it cannot be treated as a turnover of the assessee but only as income for the impugned assessment years. We therefore find no infirmity in the orders of the Ld. Revenue Authorities in treating the entire cash deposits as income and hence no interference is required in their orders. Accordingly, the Ground No.5 raised by the assessee is dismissed. 11. Ground No. 1 and 6 are general in nature and therefore, they need no adjudication. 12. In the result, appeal of the assessee is dismissed. ITA Nos. 70, 71, 72 & 73/Viz/2022 (AY: 2012-13 to 2015-16) 13. In all these appeals, the assessee has raised various grounds which are identical in nature and they revolve around the following issues viz., 13 (i) Whether the Ld. CIT(A) is correct in sustaining the decision of the Ld. AO in invoking the provisions of section 153C of the Act the thereby completing the assessment U/s. 143(3) r.w.s 153C of the Act? (ii) Whether the Ld. CIT(A) is correct in upholding the addition made by the Ld. AO towards undisclosed income from the business / unexplained cash deposits in the bank accounts of the assessee? (iii) The Ld. CIT(A) ought to have treated the deposits in the bank account as the turnover of the assessee and estimated reasonable percentage of profit? (Ground No.5 for the AYs 2011-12, 2014-15 & 2015-16). 14. The above issues are adjudicated by us while dealing with the assessee’s appeal in ITA No.69/Viz/2022 (AY: 2011-12) in the preceding paragraphs of this order. Considering the similarity of these issues involved in the lead appeal (ITA No.69/Viz/2022) of the assessee for the AY 2011-12 as well as in the appeals (ITA No. 70, 71, 72 & 73/Viz/2022) for the AYs 2012-13 to 2015-16, our decision given therein while adjudicating the assessee’s appeal for the AY 2011-12 mutatis mutandis applies to the issues raised by the assessee in his appeals for the AYs 2012-13 to 14 2015-16 also. Accordingly, the grounds raised by the assessee in all the appeals for the AYs 2012-13 to 2015-16 are dismissed. 15. In the result, four appeals of the assessee for the AYs 2012-13 to 2015-16 are dismissed. 16. Ex-consequenti, all the appeals filed by the assessee are dismissed. Pronounced in the open Court on 22 nd December, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated : 22.12.2023 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Vegesna Venkata Satya Kanaka Durga Soma Raju, D.No. 27-17-85/2, Penthouse-2, Prince Towers, ASR Nagar, Bhimavaram, Andhra Pradesh – 534202. 2. राजèव/The Revenue – The Asst. Commissioner of Income Tax, Central Circle-2, Aayakar Bhavan, Veerabhadrapuram, Rajahmundry, Andhra Pradesh – 534222. 15 3. The Principal Commissioner of Income Tax, 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam