K Vijaya Bhaskar Reddy, Hyderabad V. DCIT., Circle-1(1), Hyderabad, Hyderabad

ITA 96/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5914 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Gift; Reasonable cause
• Section: 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 96/HYD/2015 ASSESSMENT YEAR: 2011-12 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD. PAN AGKPK 7677B VS. DY COMMISSIONER OF INCOME TAX, CIRCLE 1(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S RAMA RAO (AR) REVENUE BY : SHRI K.J. RAO (DR) DATE OF HEARING : 29-11-2016 DATE OF PRONOUNCEMENT : 16-12-2016 ORDER PER B. RAMAKOTAIAH, A.M.: THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF T HE CIT(A)-II, HYDERABAD, DATED 22-07-2014. THE ISSUE IN THIS APP EAL IS WITH REFERENCE TO CONFIRMING OF AN ADDITION OF RS. 24,53 ,000/-, BY THE CIT(A), WHICH ARE DEPOSITS MADE INTO BANK ACCOUNTS TREATED BY A.O. AS UNEXPLAINED. THE ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS, WHICH ARE MATERIAL FOR DISPOSAL OF THIS APPEAL: 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ERRED IN DIRECTING TO MAKE ADDITION OF RS. 24,53,000/-. THE LEARNED COMMISSIONER OF INCOME-TAX (A) OUGHT TO HAVE SEEN T HAT ALL THE DEPOSITS INTO THE BANK ACCOUNT ARE EXPLAINED PROPER LY. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN L EVYING INTEREST U/S 234A,234B AND 234C OF THE I.T. ACT. ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 2 OF 8 2. GROUND NO. 1 AND 4 ARE GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. 3. THE APPEAL IS FILED WITH THE DELAY OF 14 DAYS AN D ASSESSEE HAS FILED AN AFFIDAVIT THAT HE WAS SUFFERING FROM FEVER AND COULD NOT FILE THE APPEAL WITHIN THE STIPULATED TIME. AFTER CONSID ERING THE AFFIDAVIT FILED AND THE OBJECTIONS FROM THE DR, WE ARE OF THE OPINION THE ASSESSEE HAS SUFFICIENT AND REASONABLE CAUSE FOR FI LING THE APPEAL BELATEDLY, ACCORDINGLY THE DELAY IS CONDONED. THE A PPEAL IS ADMITTED. 4. ASSESSEE IS AN INDIVIDUAL AND AN EXECUTIVE DIREC TOR IN M/S. ASHOKA DEVELOPERS AND BUILDERS LTD. HE DERIVED INCO ME FROM SALARY, HOUSE PROPERTY, OTHER SOURCES AND CAPITAL GAINS. T HE ASSESSEE ADMITTED INCOME OF RS. 1,12,09,974/-. APART FROM VA RIOUS ADDITIONS / DISALLOWANCES MADE BY THE A.O. WHICH ARE ADJUDICAT ED BY CIT(A) IN FAVOUR OF THE ASSESSEE, LD. CIT(A) SUSTAINED THE AD DITION TO THE EXTENT OF RS. 24,53,000/- AS AGAINST RS. 20,70,00 0/- MADE BY THE A.O. ON ACCOUNT OF CASH DEPOSITS IN THE BANK. A.O . NOTICED THAT ASSESSEE HAS DEPOSITED CASH AMOUNTING TO RS. 15,10, 000/- IN BANK OF BAHRAIN AND KUWAIT ON VARIOUS DATES DURING THE YEAR . IN ADDITION, HE ALSO MADE DEPOSIT TO THE EXTENT OF RS. 5,60,000/- I N ING VYSYA BANK. THERE IS ONE MORE ACCOUNT IN PUNJAB NATIONAL BANK I N WHICH THERE WAS CASH DEPOSIT OF RS. 15,00,000/-, BROUGHT TO TAX AS A GIFT WHICH WAS ACCEPTED BY THE LD. CIT (A) AS GENUINE GIFT. THUS THE DEPOSITS TO THE TUNE OF RS. 20,70,000/- WERE TAKEN UP BY THE A.O. IT WAS EXPLAINED THAT ASSESSEE HAS WITHDRAWN LOT OF AMOUNT S FROM THE BANK, AND THESE WERE RE-DEPOSITED INTO THE ACCOUNT. ASSE SSEE PREPARED A CASH FLOW STATEMENT CONTAINING RECEIPTS IN CASH FRO M THE RENTS AND OTHER SOURCES AND DRAWALS FROM THE BANK AND EXPENDI TURE INCURRED IN CASH ALONG WITH DEPOSITS IN THE BANK ACCOUNT. A.O. DID NOT ACCEPT THE EXPLANATION STATING THAT ANY PRUDENT BUSINESS M AN DOES NOT ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 3 OF 8 WITHDRAW CASH AND KEEP IT WITH HIM WITHOUT ANY PURP OSE. IT CAN BE SAID THAT THE CASH WITHDRAWN IS UTILISED BY THE ASS ESSEE FOR HIS PERSONAL PURPOSES AND HAVE NOTHING TO DO WITH THE D EPOSITS MADE IN THE RESPECTIVE BANKS. THUS, REJECTING THE EXPLANAT ION OF ASSESSEE, A.O. TREATED THE AMOUNT AS UNEXPLAINED AND BROUGHT TO TAX U/S 68 OF THE IT ACT. 5. BEFORE THE LD. CIT(A), ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE A.O. AND STATED THAT THE CASH DEPOS ITS IN VARIOUS BANK ACCOUNTS ARE SOURCED FROM EARLIER WITHDRAWALS MADE BY HIM FROM VARIOUS BANKS. THE LD CIT (A) HOWEVER DID NOT ACCEPT THE ASSESSEES EXPLANATION AND CONSIDERED THAT THE TOTA L DEPOSITS ARE NOT RS. 20,70,000/- AS WORKED OUT BY THE A.O. BUT RS.25 ,70,000/- IN BOTH THE BANKS AND AFTER GIVING CREDIT FOR THE AMOU NT OF RENTAL INCOME RECEIVED AT RS. 1,17,000/-, CONFIRMED THE AD DITION AT OF RS. 24,53,000/- AS AGAINST OF RS. 20,70,000/- MADE BY T HE A.O. IN THIS REGARD, THE FINDINGS OF THE CIT (A) IN PARA 7.3 TO 7.6 ARE AS UNDER: 7.3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS TH E ASSESSEE MADE CASH FLOW STATEMENT WHERE HE TOOK INTO ACCOUNT THE CASH WITHDRAWALS FROM HIS DIFFERENT BANK ACCOUNTS AND TRIED TO EXPLA IN THE CASH DEPOSITS IN DIFFERENT BANK ACCOUNTS. HOWEVER, THE ASSESSING OFF ICER DID NOT ACCEPT THE EXPLANATION GIVEN BY THE ASSESSEE FOR THE REASONS: A) THAT NO PRUDENT BUSINESSMAN WOULD WITHDRAW CASH AND KEEP IT WITH HIMSELF WITHOUT ANY PURPOSE. B) THAT THE ASSESSEE COULD HAVE UTILIZED THE CASH W ITHDRAWN FOR HIS PERSONAL PURPOSES, THEREFORE, THE CASH DEPOSITS HAV E NOTHING TO DO WITH THE CASH WITHDRAWN. 7.4 DURING THE COURSE OF APPEAL PROCEEDINGS ALSO, T HE AUTHORIZED REPRESENTATIVE SUBMITTED THE SAME COPY OF CASH FLOW STATEMENT WHEREIN HE CONSIDERED THE CASH WITHDRAWALS FROM THE BANKS ON O NE SIDE AND TRIED TO EXPLAIN THE CASH DEPOSITS MADE IN BANKS ON THE OTHE R SIDE. HOWEVER, THE EXPLANATION GIVEN BY THE AUTHORIZED REPRESENTATIVE CANNOT BE CONSIDERED FOR THE FOLLOWING REASONS: ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 4 OF 8 A) THAT THE CASH FLOW STATEMENT STARTS WITH CASH ON HAND OF RS.6,75,136/-. NO SOURCES WERE EXPLAINED FOR THIS C ASH ON HAND. WITHOUT THE OPENING CASH BALANCE, THE APPELLANT CAN NOT EXPLAIN ANY OF THE CASH DEPOSITS MADE SUBSEQUENTLY. B) THERE IS TIME GAP BETWEEN THE CASH WITHDRAWN AND CASH DEPOSITS MADE. C) AS RIGHTLY POINTED OUT BY THE ASSESSING OFFICER, NO PRUDENT PERSON WOULD WITHDRAW THE CASH AND KEEP IT IDLE AND DEPOSI T THE SAME AFTER SOME TIME. D) CASH IS USUALLY WITHDRAWN AS AND WHEN REQUIRED A ND UTILIZED FOR THE PURPOSE FOR WHICH IT IS WITHDRAWN. 7.5. THEREFORE, THE EXPLANATION GIVEN BY THE APPEL LANT IS NOT ACCEPTED. NEVERTHELESS THE APPELLANT HAS SHOWN THE RENTS RECE IVED FROM THE FOLLOWING PROPERTIES AS SOURCE FOR CASH DEPOSITS. THIS RENTAL INCOME IS ALREADY OFFERED TO TAX BY THE APPELLANT UNDER THE HEAD 'INCOME FROM HOUSE PROPERTY'. THEREFORE, THIS AMOUNT OF RENTAL INCOME OFFERED OF RS.117000/- IS TO BE REDUCED FROM THE ADDITION OF CASH DEPOSITS TO BE MA DE. NAME OF THE PROPERTY RENT RENT FROM BAGH AMBERPET PROPERTY RS. 60,000 RENT FROM KAMALAPURI COLONY PROPERTY RS. 30,000 RENT FROM BANJARA HILLS PROPERTY RS. 24,000 TOTAL RS.1,17,000 7.6. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO MAKE ADDITION OF RS.24,53,OOO/- (2570000 - 117000). 6. LD. COUNSEL REFERRING TO THE CASH FLOW STATEME NT FILED BEFORE THE AUTHORITIES EXPLAINED THAT THE OPENING CASH BAL ANCE DOUBTED BY THE CIT(A) AT RS. 6,75,135/- WAS NOTHING BUT THE CA SH ON HAND AVAILABLE AS PER THE INCOME & EXPENDITURE STATEMENT FILED WITH THE RETURN OF INCOME EARLIER AND REFERRED TO THE RETURN FOR A. Y. 2010-11, FILED ON 24-07-2010, IN WHICH THE BALANCE OF CASH O N HAND AT RS. 6,75,136/- WAS SHOWN TO HAVE BEEN AVAILABLE. IT W AS SUBMITTED, THE OPENING CASH BALANCE WAS FROM THE ASSESSEES OWN RE CORD WHICH SHOULD BE ACCEPTED. IN ADDITION, REFERRING TO THE RECEIPTS AND PAYMENTS AS MENTIONED IN THE CASH FLOW STATEMENT FI LED, IT WAS ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 5 OF 8 SUBMITTED THAT ASSESSEE HAS RECEIVED FROM VARIOUS R ENTS AND OTHER SOURCES A TOTAL OF RS. 9,17,135/- INCLUDING AGRICUL TURAL INCOME AND DREW AMOUNTS TO AN EXTENT OF RS. 75,000/- FROM ING VYSYA BANK, RS. 47,30,130/- FROM BANK OF BAHRAIN AND KUWAIT AND RS. 22,37,500/- FROM STATE BANK OF INDIA, TOTALLING TO 59,59,765/- DURING THE YEAR. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS SPENT AN AM OUNT OF RS. 17,72,538/- IN CASH TOWARDS PERSONAL EXPENDITURE AN D DEPOSITED RS. 5,60,000/- IN ING VYSYA BANK AND RS.20,10,000/- IN BANK OF BAHRAIN AND KUWAIT AND RS.15,01,228/- IN PUNJAB NATIONAL BA NK TOTALLING TO RS. 58,43,766/-, LEAVING A CASH ON HAND OF RS. 1,15 ,999/-, WHICH IS REFLECTED IN THE RETURN FILED BY THE ASSESSEE FOR T HE YEAR UNDER CONSIDERATION. SINCE THE ENTIRE CASH FLOW IS SHOWN IN THE RECEIPT AND PAYMENT STATEMENT, THE SAME HAS TO BE ACCEPTED AS T HE ASSESSEE HAS NOT SPENT ANY OTHER AMOUNTS. AS ALWAYS THERE AR E WITHDRAWALS FROM THE BANK PRIOR TO DEPOSITS IN THE BANK ACCOU NT, THERE WAS ENOUGH CASH BALANCE WITH THE ASSESSEE AS CAN BE SEE N IN THE STATEMENT. 7. THE LD. DR, HOWEVER, SUPPORTED THE ORDERS OF TH E AUTHORITIES AND SUBMITTED THAT ASSESSEE HAS NOT EXPLAINED THE S OURCES OF THE AMOUNTS. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE DOCUMENTS PLACED ON RECORD. THE ENTIRE BASIS FOR A SSESSMENT MADE BY THE A.O. IS THE DEPOSITS IN THE BANK ACCOUNT. A SSESSEE WAS REGULARLY DRAWING FUNDS AND ALSO DEPOSITING THE FUN DS AND FROM ONE ACCOUNT TO ANOTHER ACCOUNT IN FOUR SUCH BANK ACCOUN TS. RECEIPTS & PAYMENTS STATEMENT WAS THE BASIS FOR BOTH A.O.S AC TION IN DETERMINING THE AMOUNT AT RS. 20,70,000/- AND ALSO CIT(A) ENHANCING THE AMOUNT TO RS. 24,53,000/-. THE CASH FLOW STATEMENT SHOWS NO UNACCOUNTED TRANSACTION. FIRST OF ALL, TH E CIT(A) DOUBTED ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 6 OF 8 THE OPENING CASH BALANCE. AS SEEN IN THE BALANCE S HEET FOR THE YEAR ENDING MARCH 2010 FILED ALONG WITH ASSESSMENT YEAR 2010-11 RETURN, THERE WAS CASH ON HAND REPORTED AT RS. 6,75,136/-, WHICH IS THE BASIS FOR TAKING THE OPENING CASH BALANCE. LIKE-WIS E AFTER VARIOUS WITHDRAWALS AND RE-DEPOSITS, THE CLOSING CASH BALAN CE TALLIES WITH THE STATEMENT IN THE ROI. ASSESSEE HAS CLEARLY STATED THAT THERE WERE CASH RECEIPTS FROM RENTS AND OTHER SOURCES (OTHER T HAN WITHDRAWALS) TO AN EXTENT OF RS. 9,17,135/- ( LD CIT(A) GAVE CRE DIT TO ONLY TO RS. 1,17,000/- ) AND HE HAS SPENT IN CASH TOWARDS VARIO US EXPENDITURE TO THE TUNE OF RS. 17,72,538/-. CONSIDERING THE QUANT UM OF INCOME DECLARED BY THE ASSESSEE AT RS. 1,12,09,947/- AND F LOW OF CASH FROM VARIOUS BANK ACCOUNTS, IT CAN BE STATED THAT THE AS SESSEE HAS PROPERLY EXPLAINED THE WITHDRAWALS AND DEPOSITS. T HE ARGUMENT OF THE A.O. AND ACCEPTED BY CIT(A) IS THAT ASSESSEE BE ING A BUSINESSMAN SHOULD NOT KEEP SO MUCH CASH ON HAND AN D IT IS NOT PRUDENT BUSINESS ACTIVITY. WE ARE UNABLE TO SUBSCR IBE TO SUCH OPINION, AS ASSESSEE IS NOT HAVING ANY BUSINESS ACT IVITY. AS STATED EARLIER HIS INCOMES ARE FROM SALARY, OTHER SOURCES, RENTAL INCOMES AND CAPITAL GAINS. THEREFORE, THE PRUDENCY IN BUS INESS ACTIVITY DOES NOT ARISE IN THE ASSESSEES CASE. WE ARE UNABLE TO SUBSCRIBE THE OPINION EXPRESSED BY THE A.O. AND CIT (A) IN REJECT ING THE ASSESSEE CONTENTIONS. SINCE THE ENTIRE DEPOSITS ARE EXPLAIN ED FROM THE AVAILABLE BALANCES IN ASSESSEE POSSESSION, THE ADDI TION AS SUSTAINED BY THE CIT(A) CANNOT BE APPROVED. 9. HOWEVER, AS SEEN FROM THE CASH FLOW STATEMENT TH ERE WAS A DEFICIT CASH BALANCE OF RS. 60,113/- ON 14-01-2011 . NO EXPLANATION WAS THERE, FOR THE SOURCE OF SO MUCH AMOUNT (DEPOSI T OF CASH IN BANK ACCOUNT OF RS. 5,00,000/- ) WHEN THERE IS ONLY CASH BALANCE OF RS. 4,39,887/- AS PER THE STATEMENT PREPARED BY THE A SSESSEE. IN VIEW OF THAT, AMOUNT TO THE EXTENT OF RS. 60,113/- DEPOS ITED IN BANK ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 7 OF 8 ACCOUNT HAS TO BE CONSIDERED FROM SOURCES OUTSIDE T HE BOOKS OF ACCOUNT, THEREFORE INSTEAD OF RS. 24,53,000/- CONFI RMED BY THE CIT(A), WE RESTRICT THE ADDITION TO AN AMOUNT OF R S. 60,113/- BASED ON THE ASSESSEES OWN RECEIPT AND PAYMENT STATEMENT . IN THE RESULT, THE ASSESSEE GETS RELIEF ON THE QUANTUM OF ADDITION . A.O. IS DIRECTED TO RECOMPUTE THE ADDITION ACCORDINGLY AND CONSEQUEN T INTEREST, IF ANY, UNDER OTHER PROVISIONS OF THE ACT AS CONTESTED IN GROUND NO.3. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16TH DECEMBER , 2016 SD/- SD/- (P. MADHAVI DEVI) ( B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNT ANT MEMBER HYDERABAD, DATED: 16 TH DECEMBER, 2016 KRK COPY TO:- 1) SHRI K VIJAYA BHASKAR REDDY,C/O S RAMA RAO, A DVOCATE, FLAT NO.102, SHRIYAS ELEGANCE, 3-6- 643, STREET NO.9,, HIMAYAT NAGAR, HYDERABAD 500 029. 2) DCIT, CIRCLE - 1(1), HYDERABAD. 3) CIT (A) II, HYDERABAD 4) ACIT, RANGE-1, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 6) GUARD FILE. ITA NO.96/HYD/2015 SHRI K VIJAYA BHASKAR REDDY, HYDERABAD PAGE 8 OF 8