ITO, Ward-1, Kadapa, Kadapa V. Kodatala Narasimha Reddy, Kadapa, Kadapa

ITA 811/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6120 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 12-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Keywords: Income from undisclosed sources

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 811/HYD/2015 ASSESSMENT YEAR: 2010-11 INCOME-TAX OFFICER, WARD 1, KADAPA. VS. KODATALA NARASIMHA REDDY, KADAPA. PAN AOAPK5811P (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B. KURMI NAIDU ASSESSEE BY : NONE DATE OF HEARING : 05-01-2016 DATE OF PRONOUNCEMENT : 20-01-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A), KURNOOL, DATED 23/03/2015, FOR THE AY 2010-11 WHE REIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD.CIT(A) HAS ERRED IN ALLOWING THE DIFFERE NCE BETWEEN DEBITS AND CREDITS OF RS. 38,07,9701- IN THE BANK ACCOUNT OF SYNDICATE BANK HELD BY THE ASSESSEE WITHOUT ASSIGNING ANY VALID REASONS. THE LD.CIT(A) AGREED THAT THOUGH THE BALANCE AS ON 31.03.2010 IN BANK A CCOUNT IS REFLECTED IN BALANCE SHEET, THERE IS NO CORRELATION BETWEEN BAN K ACCOUNT AND BUSINESS OF THE ASSESSEE, AS CORRECTLY POINTED OUT BY THE A .O. HOWEVER, THE LD.CIT(A) HAS ESTIMATED THE INCOME @ 8% ON THE GRO SS BILLS OF THE ASSESSEE AND NOT DECIDED THE DIFFERENCE AMOUNT BET WEEN DEBITS AND CREDITS. 2. THE LD.CIT(A) OUGHT NOT TO HAVE ALLOWED THE AGR ICULTURAL INCOME TO THE EXTENT OF RS.1,00,000/- WHEN THE AGRICULTURE LANDS ARE BELONGED TO HUF WHICH IS EVIDENT FROM THE ADANGAL PASS BOOK PRODUC ED BY THE ASSESSEE. EVEN OTHERWISE THE ASSESSEE DID NOT PRODUCE ANY DO CUMENTARY EVIDENCE WITH REGARDS TO THE AGRICULTURE EXPENDITURE INCURR ED AND ALSO AGRICULTURE INCOME EARNED. 3. WITH REGARD TO 'REFUNDABLE AMOUNT', THE LD.CIT (A) HAS ERRED IN DIRECTING THE AO TO BROUGHT TO TAX ONLY THE INTEREST COMPONE NT OF RS.4,515/- OUT OF TOTAL REFUNDABLE AMOUNT OF RS.2,92,751/- AS SHOWN IN CAPITAL ACCOUNT. THE FACT THAT THE 'REFUNDABLE AMOUNT' IS NOT 'REFUNDAB LE AMOUNT' OF EARLIER YEAR AS VERIFIED BY THE AO FROM THE PREVIOUS YEAR'S CAP ITAL ACCOUNT AND INCOME & EXPENDITURE STATEMENT. 2 ITA NO. 811 /HYD/2015 KODATALA NARASIMHA REDDY 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A CIVIL CONTRACTOR. HE HAD FILED HIS RETURN OF INCOME FOR A Y 2010-11 ON 31/03/2012 ADMITTING TAXABLE INCOME OF RS. 1,93,880 /-. IN SCRUTINY ASSESSMENT U/S 143(3), DATED 28/03/2013, THE INCOME WAS DETERMINED AT RS. 50,21,600/- BY MAKING THE FOLLOWI NG ADDITIONS: I) DIFFERENCE BETWEEN CREDITS AND DEBITS RS. 38,07 ,970 II) AGRICULTURAL INCOME TREATED AS INCOME RS. 3, 00,000 III) REFUND AMOUNT OF EARLIER YEAR RS. 2,92,751 IV) SALE OF VEHICLE RS. 4,27,000 3. AS REGARDS THE FIRST ISSUE OF DIFFERENCE BETWEEN CREDITS AND DEBITS, DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE AO EXAMINED THE SYNDICATE BANK ACCOUNT OF THE ASSESSEE NO. 3190 3070001877 FOR THE PERIOD 01/04/2009 TO 31/03/2010 AND OBSERVED TH AT THERE WERE RECEIPTS TO THE TUNE OF RS. 21,50,000/- AND THERE W ERE PAYMENTS TO THE TUNE OF RS. 59,57,970/-. THUS, THERE WAS DIFFER ENCE OF RS. 38,07,970/- WHICH SHOULD HAVE BEEN REFLECTED IN THE BALANCE SHEET AS DEBTORS/RECEIVABLE. HOWEVER, THE BALANCE SHEET SHOW S THE LOAN RECEIVED OF RS. 15,31,552/- ONLY. WHEN THE AO CALLE D FOR THE EXPLANATION OF THE ASSESSEE AS TO WHY RS. 38,07,970 /- SHOULD NOT BE TREATED AS HIS UNACCOUNTED INCOME U/S 68, IT WAS EX PLAINED BY THE ASSESSEE THAT ALL THE AMOUNTS RECEIVED FROM PARTIES WERE CREDITED TO HIS BANK ACCOUNT AND ALL THE PAYMENTS WERE DEBITED TO HIS BANK ACCOUNT. AFTER TAKING INTO ACCOUNT THE RECEIPTS AN D PAYMENTS, THERE WAS DEBIT BALANCE OF RS. 15,13,551/- AS ON 31/03/20 10, WHICH IS APPEARING AS A LOAN IN THE BALANCE SHEET, THEREFORE , THERE IS NO DISCREPANCY AS NOTED BY AO. THE AO WAS NOT CONVINCE D WITH THE REPLY GIVEN BY ASSESSEE AND FURTHER OBSERVED THAT A S PER THE FORM NO. 26AS, THE AMOUNTS RECEIVED FROM M/S SAI SINDHU INDUSTRIES, WERE NOT REFLECTED IN THE ASSESSEES BANK ACCOUNT WITH S YNDICATE BANK, KADAPA. IN VIEW OF THE ABOVE OBSERVATIONS, AO HELD THAT THE TRANSACTIONS REFLECTED IN THE BANK ACCOUNT DO NOT P ERTAIN TO 3 ITA NO. 811 /HYD/2015 KODATALA NARASIMHA REDDY ASSESSEES BUSINESS AND HENCE, ADDED AN AMOUNT OF R S 38,07,970 TO THE INCOME RETURNED BY ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) 5. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAILED FROM A REMOTE VILLAGE IN KADAPA DISTRICT UND ERTAKING SMALL CONTRACTS OF HIRING OF VEHICLES TO COMPANIES BESIDE S DOING AGRICULTURAL ACTIVITIES IN THE VILLAGE AND PRESENTLY LIVING IN A RAVIND NAGAR, KADAPA. IT WAS SUBMITTED THAT THE ASSESSEE IS ON INCOME TAX ROLLS FOR MANY YEARS AND IS FILING RETURNS OF INCOME REGULARLY AND BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE MAINTAINED REGULARLY. IT WA S ALSO SUBMITTED THAT THE BALANCE AS PER THE SYNDICATE BANK ACCOUNT TALLIES WITH THE AMOUNT MENTIONED IN THE BALANCE SHEET AND ALL THE A MOUNTS RECEIVED EITHER IN CASH OR ON CREDIT WERE CREDITED TO BANK A CCOUNT. 6. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) HELD AS FOLLOWS: HAVING CONSIDERED THE REPLY OF APPELLANT DURING A SSESSMENT PROCEEDINGS AS WELL AS DURING APPEAL PROCEEDINGS, ONE CAN COME TO OBVIOUS CONCLUSION THAT NONE OF THE PAYMENTS REFLECTED IN FORM NO.26A S, THE PAYMENTS MADE BY M/S.SRI SAI SINDHU INDUSTRIES LTD., WERE REFLEC TED IN/CREDITED IN APPELLANT'S BANK ACCOUNT. AS PER FORM NO.26AS, M/S .SRI SAI SINDHU INDUSTRIES LTD., PAID THE AMOUNT TO THE APPELLANT ON NINE OCCASIONS DURING F.Y. 2009-10 TOTALING TO RS.49,24,450/- - NONE OF THEM REFLECTED IN BANK ACCOUNT. THOUGH THE BALANCE AS ON 31.03.2010 IN BA NK ACCOUNT IS REFLECTED IN BALANCE SHEET, THERE IS NO CORRELATION BETWEEN BANK ACCOUNT AND BUSINESS OF ASSESSEE, AS CORRECTLY POINTED OUT BY THE ASSESSING OFFICER. 7. NONE APPEARED ON BEHALF OF THE RESPONDENT-ASSESS EE. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIAL ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. AS POINTED OU T BY THE REVENUE IN THE GROUND OF APPEAL, THOUGH THE CIT(A) AGREED THAT THE BALANCE AS ON 31/03/2010 IN BANK ACCOUNT IS REFLECTED IN THE B ALANCE SHEET THERE IS NO CORRELATION BETWEEN BANK ACCOUNT AND BUSINESS OF THE ASSESSEE AS POINTED OUT BY THE AO, CIT(A) HAS ESTIMATED THE INCOME @ 12% ON THE GROSS BILLS OF THE ASSESSEE, HOWEVER, NOT DECID ED THE DIFFERENCE AMOUNT BETWEEN DEBITS AND CREDITS. IT IS ALSO OBSER VED THAT CIT(A) HAD CONSIDERED ONLY THE GROSS RECEIPTS AS PER 26AS WHEREAS THERE 4 ITA NO. 811 /HYD/2015 KODATALA NARASIMHA REDDY ARE OTHER DEBITS IN SYNDICATE BANK ACCOUNTS, WHICH ARE POINTED OUT BY AO I.E. ASSESSEE HAD PAID TO MR. SURESH KUMAR, M/S SSP SPONGE, R.V. RAMANA REDDY, RUDRA MOHAN REDDY, MR. M. SANKAR AND MR. R. YEZAR. THIS IS NOT CLEAR WHETHER THE ABOVE PAYMENTS ARE MADE FOR THE BUSINESS AND WHAT IS THE SOURCE FOR ABOVE PAYMENTS. ACCORDINGLY, WE REMIT THIS ISSUE TO THE FILE OF THE OF THE CIT(A) T O DECIDE THE SAME. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 8. AS REGARDS GROUND NO. 2 AGAINST THE ACTION OF TH E AO IN TREATING THE AGRICULTURAL INCOME AS TAXABLE INCOME, THE AO T REATED THE SAME AS AGRICULTURAL INCOME FOR THE FOLLOWING REASONS: A) THAT THE ASSESSEE FAILED TO FURNISH SATISFACTO RY EVIDENCES OF SALE RECEIPTS, NAMES AND ADDRESSES TO WHOM THE PRO DUCE WAS SOLD. B) THAT THE LANDS ARE DRY LANDS AND THE EXTENT OF LAND IS ONLY 8.67 ACRES. WITH THIS LAND HOLDING ONE CANNOT EARN RS.3,00,000/- AGRICULTURAL INCOME. C) THAT THE LANDS ARE IN THE NAME OF HUF, NO PARTI TION TOOK PLACE, THEREFORE, PROCEEDS BELONG TO HUF. D) AS THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE IN SUPPORT OF AGRICULTURAL INCOME OF RS.3,00,000/-, THE SAME IS BROUGHT TO TAX BY ADDING TO THE INCOME RETURNED. 9. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED AS UND ER: A) THAT THE APPELLANT HAILED FROM AGRICULTURAL FAM ILY AND THAT AGRICULTURAL ACTIVITIES ARE CARRIED OUT BY HIMSELF AND BY HIS FATHER. B) AS A PROOF OF OWNERSHIP OF LAND, COPIES OF ADAN GALS WERE SUBMITTED TO THE ASSESSING OFFICER. C) THAT THE APPELLANT IS THE ONLY SON TO HIS FATHE R, THEREFORE, THERE WAS NO NEED FOR PARTITION IN THE FAMILY. THE REFORE, THE CONCLUSION OF THE ASSESSING OFFICER THAT PROPERTY BELONGS TO HUF IS BASELESS. D) THAT THE PRODUCE WAS SOLD IN OPEN MARKET AND NO SALE BILLS ARE AVAILABLE. IT IS THE USUAL PRACTICE TO SELL TH E AGRICULTURAL PRODUCE IN THE OPEN MARKET. THE PERSONS TO WHOM TH E PRODUCE WAS SOLD ARE NOT IDENTIFIABLE AND ALSO NO SALE BIL LS ARE AVAILABLE. 5 ITA NO. 811 /HYD/2015 KODATALA NARASIMHA REDDY E) SEASONAL CROPS LIKE GROUNDNUTS, COTTON, PADDY, ETC., ARE GROWN. THEREFORE, THE AGRICULTURAL INCOME RETURNED SHOULD BE ACCEPTED. 10. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE, THE CIT(A) HELD AS FOLLOWS: HAVING CONSIDERED THE OBSERVATIONS OF THE ASSESSI NG OFFICER AND THE SUBMISSIONS OF THE APPELLANT, MORE SO KEEP ING IN VIEW THE FACT THAT THE LANDS ARE DRY LANDS AND APPELLAN T OWNS LAND TO THE TUNE OF 8.67 ACRES ONLY AND AS POINTED OUT BY THE ASSESSING OFFICER DERIVING INCOME OF RS.3,00,000/- FROM AN A REA OF 8.67 ACRES IS HIGHLY IMPROBABLE. TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES, THE INCOME FROM AGRICULTURE MAY AT BEST BE TAKEN AT RS. 1,00,000/-. 11. AFTER HEARING THE LD. DR AND PERUSING THE MATER IAL FACTS ON RECORD, WE ARE OF THE VIEW THAT THE ASSESSEE IS THE ONLY SON IN THE HUF OF HIS FATHER COMPRISING OF FATHER, MOTHER AND SON AND THE ASSESSEE HAS SHOWN THE INCOME FROM THE HANDS AS HIS OWN INCOME INSTEAD OF HUF. THE COLOR OF THE SOURCE WILL NOT CH ANGE AS LONG AS IT IS DECLARED AS INCOME. THEREFORE, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE CIT(A) IN REDUCING THE ADDITION TO RS. 1,00,000/- AS AGRICULTURAL INCOME AND THE SAME IS HEREBY UPHELD D ISMISSING THE GROUND OF APPEAL OF REVENUE. 12. AS REGARDS GROUND NO. 3 PERTAINING TO THE ADDIT ION OF RS. 2,92,751/-, IT WAS EXPLAINED THAT THIS AMOUNT ACTU ALLY PERTAINS TO THE REFUND OF THE EARLIER YEAR RECEIVED DURING THE FINA NCIAL YEAR 2009-10 RELEVANT TO THE ASSESSMENT YEAR 2010-11. SINCE THE RECEIPT OF THE EARLIER YEAR'S REFUND AMOUNT IS NOT AN INCOME IT WA S ADDED TO THE CAPITAL ACCOUNT. HOWEVER THE INTEREST ON THE REFUND AMOUNTING TO RS.2,92,751/- WAS NOT ADMITTED AS INCOME FOR THIS Y EAR BY OVER RSIGHT. THE SAID INTEREST AMOUNT OF RS.4,515/- MAY BE ADDE D TO THE INCOME RETURNED. SINCE THE OMISSION IS NOT INTENTIONAL AND DELIBERATE, A LENIENT VIEW MAY KINDLY BE TAKEN WHILE COMPLETING A SSESSMENT OF ASSESSEE. HOWEVER, THE AO ADDED BACK THE SAME TO TH E TOTAL INCOME AS EXCESS ADDITION OF UNDISCLOSED INCOME TO THE CAP ITAL ACCOUNT. 6 ITA NO. 811 /HYD/2015 KODATALA NARASIMHA REDDY 13. THE CIT(A) HELD THAT THE RECEIPT OF EARLIER YEA RS REFUND IS NOT AN INCOME AND ONLY THE INTEREST, IF ANY, RECEIVED O N THE REFUND WOULD CONSTITUTE INCOME. ACCORDINGLY, HE DIRECTED THE AO TO BRING TO TAX ONLY THE INTEREST COMPONENT OF RS. 4,515/- OUT OF TOTAL REFUNDABLE AMOUNT OF RS. 2,92,751/- AS SHOWN IN THE CAPITAL ACCOUNT. 14. WE HAVE HEARD THE LD. DR AND PERUSED THE MATERI AL FACTS ON RECORD. WE DO NOT FIND ANY ERROR IN THE DECISION OF THE CIT(A) IN DIRECTING AO TO BRING TO TAX ONLY THE INTEREST COMP ONENT OUT OF TOTAL REFUNDABLE AMOUNT. THEREFORE, THIS GROUND OF REVENU E IS DISMISSED. 15. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY , 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 20 TH JANUARY, 2016 KV COPY TO:- 1) ITO, WARD 1(3), SIMHAPURI COLONY, KADAPA 2) SRI KODATALA NARASIMHA REDDY, D. NO. 4-520- 5, ARAVINDNAGAR, KADAPA 3 CIT(A), KURNOOL 4) CIT, KURNOOL 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.