Dy Commissioner of Income Tax ,Circle -8(1) , Hyderabad V. Thirupalappa Chowdary Nageli, Hyderabad

ITA 779/Hyd/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4122 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2016-2017
• Appeal Filed On: 20-12-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MOHAMMED AFZAL
• Keywords: Unexplained investment; Opportunity of being heard; Additional evidence
• Section: 69B; 13

Judgement Text

ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 1 of 13 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri K. Narasimha Chary, Judicial Member ITA No.779/Hyd/2020 Assessment Year: 2016-17 Dy. C.I.T. Circle 8(1) Hyderabad Vs. Shri Thirupalappa Chowdary Nageli, Hyderabad PAN:ADBPN9171H (Appellant) (Respondent) Assessee by : Shri Mohammed Afzal, Advocate Revenue by: Shri Kumar Aditya, CIT (DR) Date of hearing: 18/08/2022 Date of pronouncement: 23/08/2022 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 23.09.2020 of the learned CIT (A)-8, Hyderabad relating to A.Y.2016-17. 2. Grounds of appeal 1 & 2 raised by the Revenue are as under: “1. The learned CIT (A) erred in deleting the addition u/ 68 of Rs.40,50,000/- under the fact and circumstances of the case. 2. The learned CIT (A) failed to appreciate that the assessee failed to establish with documentary evidences that the rental receipts received in Puttaparthi were deposited in cash in Hyderabad which is far of place”. ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 2 of 13 3. Facts of the case, in brief, are that the assessee is an individual and engaged in the business of contract works. He filed his return of income for the A.Y 2016-17 on 22.12.2017 declaring total income of Rs.29,56,260/-. During the course of assessment proceedings, the Assessing Officer noted that the assessee has deposited cash of Rs.44,90,000/- in Saving Bank A/c(s) during the financial year 2015-16. He, therefore, asked the assessee to explain the nature and source for the deposits made in the said Bank A/c with supporting documentary evidence. 3.1 The assessee explained that during the year he has deposited an amount of Rs.43,48,500/- in various bank a/c the source of which is out of income from house properties to the tune of Rs.26,87,500/-, an amount of Rs.4,40,000/- pertains to amounts drawn from other banks and Rs.10,21,000/- pertains to accumulated cash balance in hand. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. From the various details furnished by the assessee, he noted that the assessee does not have any income from house property. Therefore, an amount of Rs.26,87,500/- pertaining to rental income was rejected by him. So far as the drawal from other Banks of Rs.4,40,000/- is concerned, the Assessing Officer accepted the same. So far as accumulated cash balance of Rs.10,21,000/- is concerned, the Assessing Officer, in absence of any satisfactory explanation given by the assessee, rejected the same. Thus, out of total cash deposits Rs.44,90,000/-, the Assessing Officer accepted the explanation of the assessee to the tune of Rs.4,40,000/- and invoking the provisions of section 68 r.w.s. 115BBE of the Act made addition of Rs.40,50,000/-. ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 3 of 13 4. Before the learned CIT (A), the assessee made elaborate arguments and filed certain additional evidences based on which the learned CIT (A) called for a remand report from the Assessing Officer. After considering the remand report from the Assessing Officer and the rejoinder of the assessee to such remand report, the learned CIT (A) deleted the addition by observing as under: “5.2.5 I have carefully perused the submissions made by the appellant, as well as the order of the Assessing Officer and the remand report and the comments of the appellants thereon. The assessee has rental incomes Rs.26,87,500/- which was offered to tax in the return of income for the Assessment year 2016-17 and has opening cash balance of Rs.1,44,96,544/-stated in the return of income for the assessment year 2015-16. When income was offered to tax it cannot be denied as sources merely because the rents were received in cash. The incomes are duly offered to tax and the accumulated cash balance was also reflected in the return of income. In the rejoinder fled, the appellant explained which is reproduced at para 5.2.4. 5.2.6 Considering all the facts and circumstances and also the additional evidence and subsequent reports thereon, it is considered that the appellant has received rents and duly offered for tax in the assessment year itself and as such there is no case for making addition towards cash deposits. Also, the appellant has exhibited that there was a cash balance of more than Rs.1 Crore at the beginning of the Financial Year, which has been supported by ROI and statements filed for the A.Y. 2015-16. Hence, the contention of the appellant that he has got sufficient cash balances on hand to invest/incur has been considered. In the light of these facts the addition made by the AO on account of as unexplained cash deposits is not warranted. The addition is therefore directed to be deleted. Accordingly, this ground is allowed.” 5. Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal. 6. The learned DR strongly challenged the order of the learned CIT (A) in deleting the addition made by the Assessing Officer. Referring to the contents of the remand report which have been reproduced by the learned CIT (A) in his order, he drew the attention of the Bench to the same and submitted that the entire rents were received in cash and no particulars of tenants or ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 4 of 13 receipt books were furnished substantiating such rental income. Further, the assessee could not explain satisfactorily regarding the availability of accumulated cash of Rs.10,21,000/-. Referring to the computation of income filed in the paper book, he submitted that the rent is offered as annual lettable value and the rent receivable is shows at Nil. Therefore, in absence of names of the tenants and the manner of receipt of such cash from the properties which are situated at different places such as Puttaparthi, Visakhapatnam and Gachibowli etc., such rental income as source for deposit in the Bank A/c could not have been accepted by the learned CIT (A) without proper verification. He submitted that in the instant case, the Assessing Officer had clearly brought on record the non-availability of various evidences such as rent receipts, name of the tenants etc., and the rental income has been declared on the basis of annual lettable value. Therefore, the learned CIT (A) is not justified in deleting the addition. 7. The learned Counsel for the assessee, on the other hand, strongly supported the order of the learned CIT (A). He submitted that the assessee is having rental income of Rs.26,87,000/- for the year under consideration which is available to the assessee for depositing into the Bank A/c. Further, the opening cash of Rs.10,21,000/- is as per the return of income filed for the A.Y 2015-16 where cash balance of more than Rs.1.00 crore was shown. Therefore, the learned CIT (A) is fully justified in deleting the addition. He accordingly submitted that the grounds raised by the Revenue on this issue should be dismissed. 8. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 5 of 13 the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.40,50,000/- out of cash deposits, Rs.44,90,000/- made by the assessee in his Savings Bank A/c on the ground that the assessee could not explain the nature and source of such cash deposits in the Bank A/c. We find the learned CIT (A) deleted the addition, the reason of which have already been reproduced in the preceding paragraph. It is the submission of the learned DR that when the assessee has shown such rental income on the basis of annual lettable value and the assessee failed to produce the names of the tenants and the rent receipts issued for receiving such rent in cash, therefore, the learned CIT (A) without properly appreciating the facts should not have allowed the source to the extent of Rs.26,80,000/-. Similarly, the learned CIT (A) is also not justified in accepting cash deposit of Rs.10,21,000/- being out of accumulated cash without appreciation of the facts properly. 9. We find some force in the above argument of the learned DR. A perusal of the computation of income filed by the assessee in the paper book shows that the assessee has declared the income from house property on the basis of annual lettable value and not on actual rent receipt. Therefore, when the assessee failed to file the details of rent receipts and the names of the tenants etc., the learned CIT (A) without verifying the contents of the remand report accepted the claim of the assessee regarding availability of cash to the tune of Rs.26,87,000/- as available for deposit in the Bank A/c which, in our opinion, is not justified. Similarly, the explanation of the assessee to the tune of Rs.10,21,000/- as available for deposit in the Bank A/c out of the accumulated cash was also not properly verified by the learned ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 6 of 13 CIT (A) especially when the assessee in his balance sheet is showing cash in hand and cash balance differently. In our opinion, the matter requires a revisit to the file of the learned CIT (A) to decide as to how rent declared on the basis of annual lettable value can be available for cash deposit in the Bank A/c especially when the assessee is showing rent receivable at nil. Since the reasoning given by the learned CIT (A) while deleting both the additions are cryptic and merely based on the submissions filed by the assessee, therefore, considering the totality of the fact of the case and in the interest of justice, we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to adjudicate the issue afresh after going through the computation of total income filed by the assessee for the impugned A.Y. The learned CIT (A) shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds of appeal No. 1 & 2 are accordingly allowed for statistical purposes. 10. Ground of appeal No.3 raised by the Revenue reads as under: “3. The learned CIT (A) erred in deleting the addition u/s 69B of Rs.5,14,62,561/- under the facts and circumstances of the case in absence of documentary evidence”. 11. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings noted from the balance sheet as on 31.3.2016 that the assessee has shown capital of Rs.12,68,81,350/- as on 31.3.2016 whereas the opening balance as on 1.4.2015 was Rs.1,36,36,127/- as per the return of income filed for the A.Y 2015-16. Thus, there is an increase in the capital a/c to the tune of Rs.11,32,45,223/- during the year. He, therefore, asked the assessee to substantiate ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 7 of 13 with documentary evidence for the large increase in the capital. The assessee submitted that while filing the return, the assessee in the balance sheet has considered his personal assets and liabilities by showing his capital of Rs.12,68,81,350/- whereas the capital was Rs.1,36,36,127/- as per the return filed for the preceding year. The difference of Rs.11,32,45,223/- is on a/c of introduction of various assets made out of the earlier source of income. The assessee filed a detailed statement showing the purchase of various properties during different financial years. From the various details furnished by the assessee, the Assessing Officer noted that during the year under consideration, the assessee has purchased a property at Gachibowli for Rs.4,32,18,311/-, one new Benz Car at Rs.91,50,000 and one Audi Car at Rs.79,94,250/- all totaling to Rs.6,03,62,561/-. He noted that an amount of Rs.40.00 lakh is financed by way of car loan for the purchase of Benz Car at Rs.91,50,000/-. Similarly, the Audi car was purchased by obtaining finance to the tune of Rs.46.00 lakhs. Thus, out of the two cars purchased at Rs.1,71,44,250/-, the assessee could explain the source of Rs.89.00 lakhs and the remaining amount of Rs.82,44,250/- was treated as unexplained investment by the assessee. Similarly, the investment in the house property at Gachibowli at Rs.4,32,18,311/- was also treated by the Assessing Officer as unexplained in absence of any satisfactory explanation to substantiate the source of the same. The Assessing Officer accordingly invoked the provisions of section 69B of the Act and made addition of Rs.5,14,62,261/- (i.e., Rs.82,44,250/- + Rs.4,32,18,311/-). 12. Before the learned CIT (A), the assessee made elaborate arguments and filed certain additional evidences based ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 8 of 13 on which the learned CIT (A) called for a remand report from the Assessing Officer and after considering the remand report of the Assessing Officer and rejoinder of the assessee to such remand report, the learned CIT (A) sustained the addition to the tune of Rs.14.00 lakhs and deleted the balance addition of Rs.4,18,18,311/- by observing as under: “5.3.4. I have carefully perused the submissions made by the appellant, as well as the order of the Assessing Officer and in the remand report and the comments of the appellant thereon. From the facts figures filed as additional evidence during the Course appellant proceedings, it is clear that the appellant has received unsecured loans of Rs.4,60,00,000/- and Rs.2,10,00,000/-respectively from M/s Swiss India resorts Pvt Ltd and M/s Swiss India infrastructure Pvt Ltd through banking channels. The appellant has explained before the AO during the course of remand proceedings and also before undersigned that the loan transactions routed and duly reflected in the audited financials of the respective assessees. Therefore, it has to be construed that the appellant has got clear sources for the investments made by him during the financial year expect two small amounts aggregating to Rs. 14,00,000/-which has been discussed elsewhere in this order. 5.3.5. Further, on perusal of the record and as well as the remand report, the following aspects emerged: a) Rs. 1,50,000/-utilized for purchase of Benz car not explained, (b) loan sanction letter from LIC for Rs. 17,56,167/-was not submitted, d) loan confirmation from B.V.S.C Babu for Rs. 12,50,000/- was not submitted (d) Rs.5,50,250/-for purchase of Audi car was not reflected in the cash book. Out of the above, the appellant has produced the evidence for LIC loan of Rs. 17,56,167/-and the amount of Rs. 5,50,250/- incurred for purchase of Benz car and are clearly verifiable. Hence the contentions of the appellant in this regard are found to be in order. Therefore, it is construed that the appellant could not explain sources for the loan amount of Rs. 12,50,000/-availed from B.V.S.C Babu and initial amount of Rs.1,50,000/-paid for purchase of Benz car. 5.3.6 In the light of the above detailed discussion, I am convinced that the appellant has clear sources for the ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 9 of 13 investment made during the year except for Rs.1,50,000/-for purchase of Benz car and Rs.12,50,000/for the acquisition of house property. Therefore, the addition of Rs. 14,00,000/- warranted under section 69B. Hence, the addition is restricted to 14,00,000/-. This ground is therefore partly allowed”. 13. Aggrieved with such order of the learned CIT (A), the Revenue is in appeal before the Tribunal. 14. The learned DR strongly challenged the order of the learned CIT (A) in deleting the addition of Rs.4,18,18,311/- out of the addition of Rs.5,14,62,261/- made by the Assessing Officer. Referring to the remand report of the Assessing Officer, the contents of which have been reproduced by the learned CIT (A) in the body of his order, he submitted that the assessee has submitted the source for investment as out of the unsecured loan received from one Shri K. Venkatanarayana. However, Mr. Venkatanarayana in his letter dated 27.5.2019 has stated that he had transferred the amounts to the tune of Rs.4.60 crores to M/s. Swiss India Infrastructures (P) Ltd and Rs.2.10 crores to M/s Swiss India Resorts (P) Ltd on behalf of the assessee as per the terms of the MOU. He submitted that the MOU was never produced before the Assessing Officer. Further, the assessee himself is the Director of the two companies from which he is stated to have obtained the amount. Both the companies are having meagre share capital and are showing nil income. Therefore, the learned CIT (A) without verifying the veracity of the statement and the creditworthiness of the above two companies was carried away by the submissions made before him and deleted the addition which under the facts and circumstances of the case is not justified. ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 10 of 13 15. The learned Counsel for the assessee, on the other hand, heavily relied on the order of the learned CIT (A). He submitted that the assessee has filed all the details before the learned CIT (A) to substantiate the unsecured loan of Rs.2,10,00,000/- received from Swiss India Infrastructures (P) Ltd and Rs.4,60,00,000/- from Swiss India Resorts (P) Ltd and the amounts were received through proper banking channel. Therefore, the learned CIT (A) was fully justified in deleting the addition. 16. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs 5,14,62,261/- being unexplained investment u/s 69B read with 115BBE on the ground that out of the acquisition of property of Rs.4,32,18,311/- and purchase of two cars worth Rs.1,71,44,250/-, the assessee could explain the source to the tune of Rs.89.00 lakhs only for purchase of the two cars and could not explain the source for the remaining investment. We find the learned CIT (A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned DR that the learned CIT (A) without going through the contents of the remand report has deleted the addition which is not justified especially when the assessee had never submitted the MOU between the assessee and Mr. K. Venkatanarayana which is the basis for giving huge amount to the two companies from which the assessee has obtained the loan. ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 11 of 13 16.1 We find some force in the above argument of the learned DR for the Revenue. We find the assessee is having 50% shareholding in both the companies and is also the Director of the above said companies. In other words, the assessee himself has transferred the money from the two companies to his personal a/c as per his submissions. However, the MOU between assessee and Mr. K.Venkatanarayana who had given such huge money to the two companies was never submitted before the Assessing Officer. The identity and creditworthiness of Mr. K. Venkatanarayana was also not established. We find the learned CIT (A) deleted the addition merely on the ground that the assessee has received the amount of Rs.4,60,00,000/- and Rs.2,10,00,000/- respectively from M/s. Swiss India Resorts P Ltd and M/s. Swiss India Infrastructure (P) Ltd through banking channels. A perusal of the submission filed before the learned CIT (A), copy of which is placed at Page Book Pages 15 to 18, shows that the assessee has shown to have taken loan from Shri K. Venkatanarayana on various dates and not from the two companies as mentioned by him. The details of the loan taken by him and as submitted before the learned CIT (A) are as under: “With respect to the Acquisition of house property of Rs.4,32,18,311/- we have paid the above consideration in the following dates and their sources are as follows: Date Amount Sources 27.4.2015 10,00,000 Un Secured Loan of Rs. 11,00,000/- from k venkatanarayana on 24-04-2015. 9.5.2015 10,00,000 LIC Loan Rs17,56,167/- on 27-4-2015. 4.6.2015 30,00,000 Un Secured Loan of Rs. 31,00,000/- from k venkatanarayana on 29-05-2015. 6.10.2015 50,00,000 Un Secured Loan of Rs. 50,00,000/- from k venkatanarayana on 05-10-2015. 6.10.2015 1,00,000 Out of business proceeds 29.10.2015 18,03,078 Un Secured Loan of Rs. 50,00,000/- from k venkatanarayana on 26-10-2015. 31.10.2015 2,00,00,000 Unsecured loan of Rs.2,00,00,000/- rom k venkatanarayana on 30.10.2015 Improvement 1,07,90,233 Unsecured loan of Rs.1,60,00,000 from k ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 12 of 13 expenses from 30.10.2015 venkatanarayana on 30.10.2015 04.11.2015 2,00,000 Out of business proceeds 21.11.2015 2,00,000 Out of business proceeds 22.12.2015 25,000 Out of business proceeds 10.2.2016 1,00,000 Out of business proceeds TOTAL 4,32,18,322 With respect to the Benz Car of Rs.91,50,000/- we have paid the said consideration in the following dates and their sources are as follows: Date Amount Sources 9.3.2016 5,00,000 Unsecured loan of Rs.25,00,000 from k venkatanarayana on 9.3.2016 11.3.2016 46,50,000 Unsecured loan of Rs.51,50,000 from k venkatanarayana on 11.3.2016 11.3.2016 40,00,000 Out of Andhra Bank Car Loan TOTAL 91,50,000 With respect to the Audi Car of Rs.79,94,250/- we have paid the same consideration in the following dates and their sources are as follows: Date Amount Sources 27.7.2015 1,00,000 Out of business proceeds 31.8.2015 25,44,000 Out of business proceeds 3.9.2015 4,00,000 Out of business proceeds 3.9.2015 49,00,000 Out of Audi Finance Car Loan 21.9.2015 50,250 Out of business proceeds TOTAL 79,94,250 16.2 Thus, the above explanation given by the assessee before the learned CIT (A) and findings of the learned CIT (A) are contradictory. Further, the receipt of money from one company through banking channel, in our opinion, does not absolve the assessee from proving the three ingredients i.e., identity & capacity of the creditor and genuineness of the transaction. In the instant case, it is not stated as to why the MOU was not filed before the Assessing Officer and what was the reason for Mr. K. Venkatanarayana to transfer the money to the two companies which in turn has been transferred to the account of the assessee instead of directly giving the amount to the assessee. The learned CIT (A) in the instant case has failed to go into these issues. We find the learned CIT (A), in the instant case, without appreciating ITA No 779 of 2020 Thirupalappa Chowdary Nageli Page 13 of 13 the observations made by the Assessing Officer in the remand report deleted the addition merely on the ground that the amount was transferred through proper banking channel without ascertaining the creditworthiness of the two companies and Mr. K. Venkatanarayana. Therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the learned CIT (A) with a direction to re-adjudicate the issue. Needless to say, the learned CIT (A) shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The ground raised by the Revenue is accordingly allowed for statistical purposes. 17. Ground No.4 being general in nature is dismissed. 18. In the result, the appeal filed by the revenue is allowed for statistical purposes. Order pronounced in the Open Court on 23 rd August, 2022. Sd/- Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER (R.K. PANDA) ACCOUNTANT MEMBER Hyderabad, dated 23 rd August, 2022. Vinodan/sps Copy to: S.No Addresses 1 Dy.CIT, Circle 8(1) 9 th Floor, Signature Towers, Kondapur, Hyderabad 500084 2 Sri Thirupalappa Chowdary Nageli, Plot No.84 & 84 Road No.2 Banjara Bills, Hyderabad 500032 3 CIT (A)- 8,Hyderabad 4 Pr. CIT-2, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order