Katikaneni Prem Kumar, Hyderabad V. ITO,Ward-8(3), Hyderabad

ITA 875/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6277 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Income from undisclosed sources; Peak credit; Additional evidence
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 875/HYD/2014 ASSESSMENT YEAR: 2009-10 KATIKANENI PREM KUMAR, HYDERABAD. PAN ALTPK 1992 R VS. INCOME-TAX OFFICER, WARD 8(3), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SMT. SUMAN MALIK DATE OF HEARING : 04-01-2017 DATE OF PRONOUNCEMENT : 13-01-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- III, HYDERABAD, DATED 25/02/2014 FOR AY 2009-10. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED HIS RETURN OF INCOME FOR AY 2009-10 ON 31/07/2009 DECLA RING TOTAL INCOME OF RS. 1,76,650/-. THE AO COMPLETED THE ASSESSMENT U/S 143(3) BY DETERMINING THE TOTAL INCOME AT RS. 1,34,33,150/- A S AGAINST RS. 1,76,650/- ADMITTED BY THE ASSESSEE BY MAKING THE ADDITION OF RS. 1,32,56,500/- BEING THE AGGREGATE OF ALL THE CASH D EPOSITS MADE DURING THE YEAR UNDER CONSIDERATION IN THE SAVINGS BANK ACCOUNTS OF THE ASSESSEE IN ING VYSYA BANK (RS. 98,12,000/-) AN D ICICI BANK (RS. 34,44,500/-). 3. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE WAS CONFRONTED WITH ITS BANK ACCOUNTS WHERE THE AFOREME NTIONED CASH DEPOSITS WERE MADE BY THE ASSESSEE. IN SPITE OF VAR IOUS NOTICES 2 ITA NO. 875/H/2014 KATIKANENI PREM KUMAR ISSUED BY THE AO OVER A SPAN OF MORE THAN 15 MONTHS AND OPPORTUNITIES PROVIDED TO THE ASSESSEE, THERE WAS N O COMPLIANCE FROM THE ASSESSEE AND DID NOT PROVIDE ANY EXPLANATION RE GARDING CASH DEPOSITS IN HIS OWN BANK ACCOUNTS. THEREFORE, THE A O ADDED THE AFOREMENTIONED AMOUNTS BY GIVING FOLLOWING REASONS: 13. ON ALL THE OCCASIONS REFERRED TO ABOVE, THE AS SESSEE AND HIS AR WERE ASKED SPECIFICALLY TO EXPLAIN THE SOURCES F OR THE CASH DEPOSITS MADE, DURING PREVIOUS YEAR RELEVANT TO THE ASSESSMENT UNDER CONSIDERATION AGGREGATING TO RS.1,32,56,500/- INTO HIS S.B ACCOUNTS WITH ING VYSA BANK - RS.98,12,000/- AND IC ICI BANK RS.34,44,500/-. HOWEVER NEITHER THE ASSESSEE NOR HI S AR CHOSE TO COMPLY WITH THE NOTICES AND TO EXPLAIN THE SOURC ES FOR THE SAID CASH DEPOSITS. ALSO IT WAS SPECIFICALLY MENTIONED I N THE ABOVE NOTICES THAT (I) THE ASSESSEE SHOULD FILE THE INFOR MATION AS CALLED FOR THEREIN, (II) IN THE EVENT OF NON-COMPLIANCE FR OM THE ASSESSEE THE ASSESSEE WOULD LOSE OPPORTUNITY TO FILE THE SAM E SUBSEQUENTLY BEFORE ANY APPELLATE AUTHORITY AND ALS O THE ASSESSMENT WOULD BE FINALIZED EX-PARTE, UNDER SEC. 144 OF THE ACT. 4. THE ASSESSEE'S FAILURE TO COMPLY WITH THE NOTICE S AND ADJOURNMENTS AS GRANTED ABOVE WOULD LEAD TO THE INF ERENCE THAT HE HAS NO REASONABLE EXPLANATION TO OFFICER FOR THE SUBJECT CASH DEPOSITS. IN THE CIRCUMSTANCES AS THIS IS A TIME-BA RRING ASSESSMENT, IT IS CONSIDERED NECESSARY AND REASONAB LE TO TREAT THE ENTIRE CASH DEPOSITS OF RS.1,32,56,500/- AS AN INCOME FROM UNDISCLOSED SOURCES. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) AND BEFORE THE CIT(A) THE ASSESSEE FILED A PETITION REQUESTING FOR ADMISSION OF ADDITIONAL EVIDENCE, WHICH PERTAINS TO ONE AFFIDAVIT FROM SRI S. VENKATESWARA RAO, S/O LATE SRI THIRUPATHI RA O RESIDENT OF MADINAGUDA, HYDERABAD WHO IS SUPPOSED TO BE A RELAT IVE OF THE ASSESSEE AND WHO IS SAID TO HAVE USED THE BANK ACCO UNTS OF THE ASSESSEE FOR HIS OWN BUSINESS OF REAL ESTATE. THE A SSESSEE STATED THAT THE AMOUNTS DEPOSITED IN THE BANK ACCOUNT AND THE AMOUNTS WITHDRAWN DO NOT BELONG TO HIM BUT TO THIS PERSON. 3 ITA NO. 875/H/2014 KATIKANENI PREM KUMAR 5. THE CIT(A) REFERRING TO THE PROVISIONS OF RULE 4 6A, REJECTED TO ADMIT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE IN THE FORM OF AFFIDAVIT. 5.1 ON MERITS, THE CIT(A) REFERRING TO THE STANDARD TERMS OF OPENING OF BANK ACCOUNT, OBSERVED THAT ALLOWING ANOTHER PER SON TO USE THE ACCOUNTS IS A SERIOUS OFFENCE AS IT AMOUNTS TO ABET MENT BOTH FOR TAX EVASION AND FOR CONCEALING THE IDENTITY OF THE REAL PERSON. THIS IS ALSO A SERIOUS VIOLATION OF THE CONTRACT OF THE ASSESSEE WITH THE BANKS. THE CIT(A) FURTHER OBSERVED THAT IT IS ALSO ON RECORD T HAT ALL THE CHEQUES FOR WITHDRAWALS WERE SIGNED BY THE ASSESSEE AND NO DETAILS OF THE SOURCES WITH RESPECT TO THE RELATIVE HAVE BEEN PROV IDED. WHY IS IT THAT THE ASSESSEE ALLOWED THIS RELATIVE TO CLANDESTINELY USE HIS BANK ACCOUNT WHEREAS THE RELATIVE WHO IS SUPPOSED TO HAV E A LEGALLY VALID PAN COULD HAVE EASILY OPENED HIS BANK ACCOUNT ANYWH ERE. CIT(A) NOTED THAT WHEN A QUERY POSED TO ASSESSEE; WHETHER THE ENTIRE TRANSACTIONS HAD BEEN DISCLOSED BY THE SO-CALLED RE LATIVE IN HIS INCOME TAX RETURNS, THE ASSESSEE COULD NOT PROVIDE ANY REPLY. 5.2 IN VIEW OF THE ABOVE OBSERVATIONS, THE CIT(A) C ONFIRMED THE ADDITION MADE BY THE AO BY HOLDING AS UNDER: 4.13 IT IS CLEAR FROM ABOVE THAT THE AMOUNTS IN QUE STION WERE UNACCOUNTED AND BELONGS TO THE APPELLANT WHO ONLY D EPOSITED THESE AMOUNTS IN HIS OWN BANK ACCOUNTS. WHEN THESE UNACCOUNTED TRANSACTIONS WERE DISCOVERED BY THE ASS ESSING OFFICER, THE APPELLANT DID NOT APPEAR BEFORE HIM. A S AN AFTERTHOUGHT HE OBTAINED A SELF-SERVING EVIDENCE BY GETTING SOME PERSON TO FILE AN INCOME TAX RETURN AND TO OBTAIN A PAN SO AS TO SHOW A BOGUS BUSINESS. THE EXPLANATION OF THE APPEL LANT DOES NOT HAVE ANY EVIDENCE IN ITS SUPPORT. THE ENTIRE CO NDUCT OF THE APPELLANT IS CLEARLY AIMED AT TAX EVASION AND THE P RESENTATION OF SELF SERVING EVIDENCE. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US R AISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 4 ITA NO. 875/H/2014 KATIKANENI PREM KUMAR 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT ADMITTING THE ADDITIONAL EVIDENCE PRODUCED WITH OUT CONSIDERING THE FACT THAT THE EVIDENCE IS REQUIRED TO DECIDE APPEAL AND IS RELEVANT FOR ASCERTAINING THE FACTS. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE APPELLANT WAS PREVENTED BY SUFFIC IENT REASON IN NOT FURNISHING THE SAID INFORMATION BEFORE THE ASSE SSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION OF RS.1,32,56,500 MADE BY THE ASSESSING OFFICER TREATING THE AGGREGATE OF THE DEP OSITS MADE INTO THE ING VYSYA BANK OF RS. 98,12,000 AND ICICI BANK OF RS. 34,44,500 AS THE UNEXPLAINED INCOME OF THE APPELLAN T. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE ACCEPTED THAT THE DEPOSITS WERE MADE BY ONE SH RI S. VENKATESWARA RAO AND UTILIZED THE BANK ACCOUNT FOR HIS PURPOSES AND THEREFORE, THE DEPOSITS MADE DO NOT RE LATE TO THE APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THAT SHRI S. VENKATESWARA RAO, THROUGH HI S AFFIDAVIT CONFIRMED THE FACT AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IGNORED THE IMPORTANT EVIDENCE WHICH SHOW S THAT THE DEPOSITS MADE DO NOT BELONG TO THE APPELLANT. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) OUGHT TO HAVE SEEN THAT THE APPELLANT EXPLAINED THE SOURCES FOR THE DEPOSITS MADE INTO THE ABOVE MENTIONED TWO BANK ACC OUNTS AND OUGHT TO HAVE HELD THAT THE DEPOSITS WERE PROPERLY EXPLAINED BY THE APPELLANT. 7. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT TH E AGGREGATE OF THE DEPOSITS SHOULD NOT HAVE BEEN TREATED AS THE IN COME OF THE APPELLANT WITHOUT CONSIDERING THE WITHDRAWALS. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ASSESSMENT MADE BY THE ASSESSING OFF ICER WITHOUT ADMITTING THE ADDITIONAL EVIDENCE PRODUCED BEFORE HIM. 9. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 7. BEFORE US, THE LD. AR SUBMITTED THAT THE ADDITIO NAL EVIDENCE FILED BY WAY OF AN AFFIDAVIT TO CLAIM THAT THE DEPO SITS MADE IN THE ASSESSEES ACCOUNT WERE BELONGED TO SHRI S. VENKATE SWARA RAO, WHO HAD CONFIRMED THE TRANSACTIONS THROUGH AN AFFIDAVI T. HE, THEREFORE, 5 ITA NO. 875/H/2014 KATIKANENI PREM KUMAR PRAYED THAT THE ADDITIONAL EVIDENCE MAY BE ACCEPTED AND THE ADDITION MAY BE DELETED. 7.1 ALTERNATIVELY, THE AR SUBMITTED THAT, IN CASE, ADDITIONAL EVIDENCE IS NOT ENTERTAINED BY THE HONBLE BENCH, T HERE ARE SUBSEQUENT WITHDRAWALS IN THE BANK ACCOUNT, WHICH S IGNIFY THAT THEY ARE BUSINESS TRANSACTIONS. HE, THEREFORE, SUBMITTED THAT ALL THE DEPOSITS CANNOT BE TREATED AS INCOME INSTEAD ONLY P ROFIT OF THE BUSINESS SHOULD BE BROUGHT ON RECORD OR PEAK CREDIT IN THE BANK ACCOUNT MAY BE TREATED AS INCOME OF THE ASSESSEE. 8. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E REVENUE AUTHORITIES HAVE GIVEN ENOUGH OPPORTUNITY TO THE A SSESSEE TO SUBSTANTIATE HIS CLAIM BY WAY OF MATERIAL EVIDENCE, BUT, THE ASSESSEE DID NOT COMPLY, THEREFORE, THE CIT(A) HAS REJECTED THE ADDITIONAL EVIDENCE SUBMITTED BEFORE HIM. LD. DR PLACED RELIAN CE ON THE ORDER OF THE CIT(A). 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. THE ASSESSEE HAS BROUGHT ON RECORD THE A DDITIONAL EVIDENCE AFTER A LAPSE OF 2 YEARS. THE ADDITIONAL EVIDENCE SUBMITTED BEFORE US COULD HAVE BEEN SUBMITTED BEFORE THE AO T O SUBSTANTIATE HIS CLAIM, SO THAT THE DEPARTMENT COULD HAVE INITIA TED PROPER PROCEEDING IN THE CASE OF SRI. S. VENKATESWARA RAO. AT THIS JUNCTURE, WE FIND INAPPROPRIATE TO CONSIDER THE ADDITIONAL EV IDENCE FILED BY THE ASSESSEE BEFORE US AND, ACCORDINGLY, WE REJECT THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. 9.1 COMING TO THE ALTERNATE SUBMISSIONS OF THE AR O F THE ASSESSEE, WE AGREE THAT ONLY THE INCOME SHOULD BE BROUGHT TO TAX AND NOT THE CREDITS IN THE BANK ACCOUNT. CONSIDERING THE TRANSA CTIONS IN THE BANK ACCOUNT, THERE ARE RECEIPTS AS WELL AS PAYMENTS TAK EN PLACE, HENCE, IT CAN BE TREATED AS BUSINESS TRANSACTIONS AND ONLY TH E NET PROFIT ALONE 6 ITA NO. 875/H/2014 KATIKANENI PREM KUMAR CAN BE BROUGHT TO TAX AS HELD IN VARIOUS DECISIONS OF THE COURTS. ACCORDINGLY, WE DIRECT THE AO TO ESTIMATE THE PROFI T ON THE GROSS RECEIPTS @ 8% OR THE PROFIT %AGE AS DECLARED BY THE ASSESSEE IN HIS OWN BUSINESS FOR THE AY UNDER CONSIDERATION, WHICHE VER IS HIGHER. ACCORDINGLY, THE GROUNDS RAISED IN THIS REGARD BY T HE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 13 TH JANUARY, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 13 TH JANUARY 2017 KV COPY TO:- 1) KATIKANENI PREM KUMAR, C/O S. RAMA RAO, ADVOCATE , FLAT NO. 102, SHRIYAS ELEGANCE, ROAD NO. 9, HIMAYAT NAGAR, H YDERABAD 29. 2) ITO, WARD - 8(3), HYDERABAD. 3) CIT(A) - III, HYDERABAD 4 CIT II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE