Narasimha Rao Mandavalli, Hyderabad V. ITO,. Ward-6(1), Hyderabad

ITA 956/HYD/2012

• Counselvise Citation: 95622514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 18-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Income from undisclosed sources; Opportunity of being heard; Peak credit; Additional evidence
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.306/HYD/2011 & 956/HYD/2012 ASSESSMENT YEAR 2007-2008 MANDAVALLI NARASIMHA RAO HYDERABAD PAN AHKPM 5414F VS. THE ITO, WARD 6(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. K.A. SAI PRASAD FOR REVENUE : MR. P. SOMASEKHAR REDDY DATE OF HEARING : 27.02.2014 DATE OF PRONOUNCEMENT : 05.03.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE TWO APPEALS ARE FOR THE A.Y. 2007-2008 ARISING OUT OF SEPARATE PROCEEDINGS ON THE ORDERS O F THE A.O. AND CIT. 2. WE HAVE HEARD THE LD. COUNSEL AND LEARNED D.R. IN DETAIL. 3. BRIEF FACTS RELATING TO THE PRESENT APPEALS ARE THAT THE ASSESSEE IS AN INDIVIDUAL, FILED RETURN OF INCO ME DECLARING TOTAL INCOME OF RS.3,62,730/-. A.O. NOTICED ON THE BASIS OF COPY OF THE TRIAL BALANCE FILED BY THE ASSESSEE, TH AT UNSECURED LOANS TO THE EXTENT OF RS.71,39,765/- AND ADVANCES OF RS.32,09,266/- WERE RECEIVED FROM DIFFERENT PERSONS . SINCE THE DETAILS WERE NOT FURNISHED, A.O. ADDED THE ENTIRE A MOUNT OF RS.1,03,49,031/- AS INCOME OF THE ASSESSEE. LD. CIT (A) AFTER 2 ITA.NO.306/HYD/2011 & 956/HYD/2012 MANDAVALLI NARASIMHA RAO, HYDERABAD CONSIDERING THE ASSESSEES SUBMISSIONS, REFUSED TO ADMIT THE ADDITIONAL EVIDENCE AND CONFIRMED THE ADDITIONS. AS SESSEE IS IN APPEAL ON THE ABOVE ISSUE OF ADDING THE OUTSTANDING LOANS AND ADVANCES. 4. IN THE MEANTIME, THE LD. CIT-III, HYDERABAD INVOKED PROVISIONS OF SECTION 263, AS THE A.O. HAS NOT EXAMINED THE CASH DEPOSITS IN THE BANKS AND DEPOSIT S IN CHIT FUNDS BUT ONLY CONSIDERED THE OUTSTANDING AMOUNTS I N THE BALANCE SHEET WHICH WERE RECEIVED BY WAY OF CHEQUES . ACCORDING TO THE LD.CIT, THE PEAK CASH DEPOSITS (US ED THE WORD DEFICIT IN THE ORDER) WORKS OUT TO RS.4,01,90,700 /-. ACCORDINGLY, HE INVOKED THE PROVISIONS OF SECTION 2 63 AND ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE. AFTER C ONSIDERING THE SUBMISSIONS, LD. CIT DIRECTED THE A.O. TO VERIF Y AND EXAMINE ALL THE SOURCES OF DEPOSITS IN BANKS AND LO ANS IN ACCORDANCE WITH LAW, AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HE ALSO DIRECTED THAT WHILE EXAMINING THE SOURCE FOR THE CASH AVAILABILITY, THE A.O. SHOU LD FACTOR IN/ ADJUST THE ABOVE ADDITION OF RS.1,03,49,031/- (MADE IN THE COURSE OF ASSESSMENT UNDER SECTION 143(3). THE ASSE SSEE IS AGGRIEVED ON THE ORDER OF THE CIT PASSED UNDER SECT ION 263. 5. LD. COUNSEL PLACING THE FACTS SHEET ON RECORD SUBMITTED THAT INITIALLY A.O. EXAMINED ONLY OUTSTAN DING CLOSING BALANCES UNDER THE HEAD UNSECURED LOANS AND ADVANC ES AND MADE AN ADDITION OF RS.1,03,49,031/- WHICH WERE NOTHING BUT CHEQUE PAYMENTS RECEIVED BY THE ASSESSEE. LD. C IT(A) DID NOT ADMIT ANY ADDITIONAL EVIDENCE AND CONFIRMED THE SAME. IN THE MEANTIME, LD. CIT ON THE BASIS OF THE DOCUMENTS FURNISHED AT THE TIME OF ASSESSMENT, ARRIVED AT THE PEAK CASH DEPOSITS OF RS.4,01,30,700/- WHICH ACCORDING TO HIM , ARE NOT 3 ITA.NO.306/HYD/2011 & 956/HYD/2012 MANDAVALLI NARASIMHA RAO, HYDERABAD EXAMINED BY THE A.O. AND THEREBY, THERE WAS AN UNDE R ASSESSMENT. EVEN THOUGH ASSESSEE SUBMITTED THAT THI S ISSUE WAS EXAMINED BY THE A.O. AND THERE WAS MISTAKE IN W ORKING OUT THE PEAK CREDIT BY THE CIT AND CASH BOOK DID NO T INDICATE ANY DEFICIT CASH, LD. CIT, CONSIDERED THE RECEIPT A ND PAYMENT ACCOUNT AND REMITTED THE MATTER TO THE A.O. FOR EXA MINATION, WHILE ACCEPTING THE ADDITION OF INCOME AGREED OF RS .9,52,831/- IN THE ORDER. LD. COUNSEL FURTHER SUBMITTED THAT TH E IN CONSEQUENTIAL ORDERS PASSED UNDER SECTION 143(3) RE AD WITH SECTION 263, THE A.O. ARRIVED AT THE NET PEAK CASH DEPOSIT AT RS.1,30,86,700/- AND REDUCED THE AMOUNT WHICH WAS A LREADY ASSESSED AT RS.1,03,49,031/- (CHEQUE PAYMENTS) AND MADE AN ADDITION OF THE NET AMOUNT ONLY OF RS.27,37,669/-. IT WAS SUBMITTED THAT THE ASSESSEE HAS ENTIRE CONFIRMATION S AS FAR AS THE RECEIPT OF UNSECURED LOANS AND ADVANCES TOTALIN G TO RS.1,03,49,031/- AND THERE IS EVIDENCE TO SUPPORT C ASH DEPOSITS WHICH WAS ARRIVED AT BY THE A.O. AT RS.1,3 0,86,700/-. FURTHER IT WAS SUBMITTED THAT SINCE THE ADDITION OF RS.27,37,669/- WAS MADE, ASSESSEE WAS MAKING SUBMIS SIONS ONLY TO THAT EXTENT. 6. LD. D.R. HOWEVER, RELIED ON THE ORDERS OF THE A .O. AND CIT TO SUPPORT THE ORDERS PASSED BY THE RESPECT IVE AUTHORITIES. 7. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE ORDERS ON RECORD, INCLUDING THE CONSEQUENTIAL ORDER PASSED WITH RESPECT TO SECTION 263 DIRECTIONS. WE ARE OF T HE OPINION THAT ALL THE AUTHORITIES HAVE CONSIDERED THE ISSUES WRONGLY. FIRST OF ALL, A.O. SHOULD HAVE VERIFIED VARIOUS CRE DITS AND DEBITS BOTH CASH AND CHEQUE IN THE COURSE OF SCRUTINY AND COULD HAVE EXAMINED WHETHER ANY UNACCOUNTED INCOME WAS EARNED BY 4 ITA.NO.306/HYD/2011 & 956/HYD/2012 MANDAVALLI NARASIMHA RAO, HYDERABAD WAY OF CREDITS OR INVESTMENTS ETC., SO AS TO CONSID ER INVOKING THE PROVISIONS OF SECTION 68, 69, 69A WHICH ARE APP LICABLE. HOWEVER, AO EXAMINED ONLY THE OUTSTANDING AMOUNTS A T THE END OF THE YEAR AND MADE THE ADDITION ON THE REASON THAT ASSESSEE COULD NOT FURNISH NECESSARY CONFIRMATIONS. LD. CIT(A) ALSO ERRED IN NOT ACCEPTING THE ADDITIONAL EVIDENCE WHEN SUFFICIENT OPPORTUNITY WAS NOT GIVEN BY A.O. AND AS SESSEE WAS IN A POSITION TO SUBSTANTIATE HIS TRANSACTIONS. BY REJECTING THE ADDITIONAL EVIDENCE, WE ARE OF THE OPINION THAT, LE ARNED CIT(A) ALSO ERRED IN CONFIRMING THE ADDITION, WITHOUT EXAM INING THE FACTS, ON LEGAL PRINCIPLES ALONE. THE LD. CIT-III E VEN THOUGH HAS CORRECTLY STARTED THE PROCEEDINGS UNDER SECTION 263 (ASSESSEE ADMITTED ADDITIONAL INCOME), AND DIRECTED THE A.O. TO EXAMINE THE PEAK CASH DEPOSITS, WRONGLY DIRECTED THE A.O. T O FACTOR THE ADDITION ALREADY MADE, WHICH WERE NOT OUT OF CASH D EPOSITS BUT ON CHEQUE RECEIPTS. A.O., THEREFORE, MADE NET A DDITION OF ONLY RS.27,37,669/-, EVEN THOUGH IN HIS OWN WORKING HE ARRIVED AT NET PEAK CASH DEPOSIT OF RS.1,30,86,700/ -. THEREFORE, THE ORDERS WHICH ARE FOR ADJUDICATION BE FORE US SUFFER IN MANY RESPECTS. MORE OVER THE ADDITIONAL E VIDENCE OF ASSESSEE WAS NOT CONSIDERED. IN VIEW OF THIS, WE AR E OF THE OPINION THAT ALL THE ORDERS OF THE AUTHORITIES ARE TO BE SET ASIDE AND THE ENTIRE ISSUE OF EXAMINATION OF RECEIPTS AND PAYMENTS/ DEPOSITS IN BANK AND OTHER ACCOUNTS ARE REQUIRED TO BE EXAMINED AFRESH BY THE A.O. BY GIVING DUE OPPORTUNI TY TO THE ASSESSEE AND TAKING NECESSARY EXPLANATION/EVIDENCE. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDERS OF BOTH THE CIT(A) AND CIT-III PASSED UNDER RESPECTIVE PROVISIONS AND ALSO THE ORDERS OF A.O. PASSED ORIGINALLY (AND CONSEQUENTIAL ORDER TO THE 263, WHICH BECOMES AB-INITIO VOID ) AND RESTORE THE ENTIRE ASSESSMENT TO THE FILE OF TH E A.O. TO BE 5 ITA.NO.306/HYD/2011 & 956/HYD/2012 MANDAVALLI NARASIMHA RAO, HYDERABAD DONE AFRESH. ASSESSEE IS FREE TO MAKE SUBMISSIONS A ND FURNISH NECESSARY EVIDENCES IN SUPPORT OF THE TRANSACTIONS. THE GROUNDS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSES. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05.03.20 14. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 05 TH MARCH, 2014 VBP/- COPY TO : 1. MANDAVALLI NARASIMHA RAO, 6-3-883/2/803, UNIT-II I, 7 TH FLOOR, TOPAZ BUILDING, PUNJAGUTTA, HYDERABAD C/O. B. N ARSING RAO & CO. C.A. PLOT NO.554, ROAD NO.92, JUBILEE HILLS, HY DERABAD 96. 2. ITO, WARD 6(1), HYDERABAD. 3. CIT(A) - IV , H YDERABAD 4. CIT-III, HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.