The Income Tax Officer, Ward-1(1), Visakhapatnam V. Tatiparti Satyanarayana, Visakhapatnam

MA 29/VIZ/2022

AI Insights

The case revolves around a Miscellaneous Application (MA No. 29/Viz/2022) filed by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) in ITA No. 76/Viz/2021, which pertained to the assessment year 2017-18. The Revenue challenged the acceptance of additional evidence by the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that it violated Rule 46A of the Income Tax Rules, 1962. The CIT(A) had accepted the assessee's evidence regarding long-term capital gains and cash deposits, which the Assessing Officer (AO) had initially treated as unexplained investments under Section 69 of the Act. The ITAT upheld the CIT(A)'s decision, noting that the transactions were recorded in the books and thus, Section 69 could not be invoked. The Tribunal also dismissed the Revenue's application, stating that there was no apparent mistake in the original judgment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135989 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-12-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 16-08-2022
• Other Referred Cases: Karthik Construction Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 69; 133(6); 69A

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणमपीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्रीद ु व्वूरुआरएलरेड्डी, न्याधयकसदस्यएिंश्रीएसबालाकृ ष्णन, लेखासदस्यके समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER MA No. 29/Viz/2022 (In आयकरअपीलसं./ I.T.A. No.76/Viz/2021) (ननधधारणवर्ा/ Assessment Year :2017-18) Income Tax Officer, Ward-1(1), Visakhapatnam. Vs. Sri Tatiparti Satyanarayana, D.No. 25-8-9 and 10, Sri Satyanarayana Gold Complex, Main Road, Visakhapatnam. PAN: AGGPT 5353 F (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथीकीओरसे/ Appellant by : Sri G.V.N. Hari, Advocate प्रत्यधथीकीओरसे/ Respondent by : Sri ON Hari Prasada Rao, Sr. AR सुनवधईकीतधरीख/ Date of Hearing : 23/12/2022 घोर्णधकीतधरीख/Date of Pronouncement : 19/01/2023 O R D E R PERS. BALAKRISHNAN, Accountant Member : This Miscellaneous Application is filed by the Revenue seeking to recall the order of the Tribunal in ITA No. 76/Viz/2021, AY-2017-18, dated 16/3/2022. 2. At the outset, the Ld. Departmental Representative [DR] contended that the Ld. CIT(A) has not followed the Rule-46A of 2 the IT Rules, 1962 while accepting the additional evidence filed by the assessee with respect to long term capital gains and cash deposits. The Ld. DR further submitted that the Hon’ble ITAT confirmed the order of the Ld. CIT(A) without considering the fact that the assessee has not filed the details before the Ld. AO inspite of various opportunities provided to the assessee but has preferred to file the documentary evidence before the Ld. CIT(A). the Ld. DR further submitted that the Ld. CIT(A) has also erred in not calling for the remand report from the Ld. AO with respect to the additional evidence filed by the assessee. The Ld. DR submitted that the order is curable and covered by section 292B of the Act. 3. The Ld. Authorized Representative relied on the order of the ITAT. 4. We have heard both the sides and perused the materials available on record. We find from, the order of the Ld. CIT(A) that the assessee merely filed a d-mat account statement for claiming of exemption of long term capital gains u/s. 10(38) of the Act. We find that the Ld. CIT(A) has deleted the additions made by the Ld. AO U/s. 69 of the Act where the Ld.AO treated the long term capital gains as unexplained investment. The Ld. CIT(A) in para 6.1.1 of his order held as under: 3 “6.1.1. The contention of the appellant is that the addition cannot be made U/s. 69 of the Act. I have carefully perused the provision of section 69 of the Act. This section reads as under: “69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” A plain reading of the section reveals that the scope of section covers only investments which are not recorded in the books of account. The transaction in the case of the appellant is one that of sale of shares and not an investment. Moreover, the transaction is recorded in the books of account as evident from the financial statements. Therefore, the assessing officer erred in making the addition u/s. 69 of the Act. The assessing officer is directed to delete the addition.” 5. This Bench of the ITAT has confirmed the order of the Ld. CIT(A) in para 5 of its order which is reproduced herein below: “6. With respect to Ground No.2, we have heard both the parties and perused the material placed on record. We find force in the argument of the Ld.AR that section 69 cannot be invoked when the assessee has disclosed investment in the books of accounts and in the computation of income which was offered for taxation. In this aspect, we concur with the findings of the Ld.CIT(A) and uphold the same.” 6. The ITAT has upheld the order of the Ld. CIT(A) on the fact that section 69 cannot be invoked when the assessee has disclosed investments in the books of accounts and has also disclosed in the computation of income while filing the return of income. Similarly, the Ld. CIT(A) deleted the addition of Rs. 42 lakhs U/s. 69A of the Act relying on the fact that the bank 4 account in which the cash was deposited by the assessee is duly disclosed in the balance sheet of the assessee’s business Sri Satyanarayana Jewellery House. The Ld. CIT(A) has held as follows: “6.3.1. I have carefully perused the documents in the paper book. The appellant deposited Rs. 33,00,000 on 10/11/2016 and Rs. 9,00,000 on 16/11/2016 in his bank account No. 0163083000000572 with South India Bank Limited. The appellant is having cash balance of Rs. 40,81,687.54 at the beginning of 10/11/2016 and the appellant deposited Rs. 33,00,000 in the bank account on this date. Likewise, the appellant had balance of Rs. 8,26,063.54 at the beginning of 16/11/2016 and the appellant had cash sales of near about Rs. 2,00,000 on the said date. The appellant deposited Rs. 9,00,000 from this amount on 16/11/2016 and still had closing balance of Rs. 91,337.54. Most of the receipts in the cash book are found to be cash sales. Thus, I find that all the cash deposits are duly explained from the entries in the books of account. Even legally, the addition deserves to be deleted. The bank account with South India Bank Limited is duly disclosed in the Balance Sheet of Sri Satyanarayana Jewellery House. When the bank account is duly disclosed the assessing officer cannot apply the provisions of section 69A of the Act. The Hon’ble ITAT, Mumbai Bench held as under in the case of Karthik Construction Co. (supra) 6. We have heard rival submissions and perused material on record. We have also applied our mind to the decision relied upon by the learned Departmental Representative. As could be seen, the Assessing Officer raised suspicion on the loan repayment by doubting the genuineness of the unsecured loan availed by the assessee against M/s. Karthik Construction Co. which such loan repayment was made. However, as per the facts on record, unsecured loans which were repaid by the assessee during the year were availed in financial years 2000- 5 01, 2001-02 and 2002-03. In fact, the Assessing Officer himself has accepted that the unsecured loans which were repaid during the year were availed before 1 st April 2005. It is also admitted factual position that in the earlier years wherein such unsecured loans were availed by the assessee no doubts were raised by the Assessing Officer and the unsecured loans have been accepted. Further, to verify the genuineness of the unsecured loans taken from a large number of persons the Assessing Officer issued notices under section 133(6) on random basis to 15 creditors and summons under section 131 of the Act to five creditors. The Assessing Officer has himself observed in the assessment order that in response to the notices issued under section 133(6) the concerned parties submitted their replies before the Department. Out of five persons to whom summons were issued two persons actually appeared before the Assessing Officer and were examined. The Assessing Officer accepted the unsecured loan taken from one such person to be genuine while holding the loans taken from other persons to be non- genuine doubting the creditworthiness of the concerned parties on the basis of income declared by them in the impugned assessment year. Thus, as could be seen from the facts on record, the existence of the M/s. Karthik Construction Co. creditors have been established. Moreover, when the unsecured loans were not taken in the impugned assessment year but were taken in earlier assessment years wherein the genuineness of such loans were never questioned, it cannot be questioned in the impugned assessment year. Therefore, the only thing which requires to be examined in the present appeal is whether the addition made under section 69A of the Act can be sustained. A reading of section 69A of the Act makes it clear, addition can only be made when the assessee is found to be in possession of money bullion jewellery, etc., not recorded in his books of account. It is not the case of the Department that the loan repayment made during the year was either not recorded in the books of account or the source of fund utilised in repaying the loan is doubtful. That being the case, the addition under section 69A of the Act cannot be made. Therefore, the decision of the learned Commissioner (Appeals) has to be sustained. So far as the decision cited before us by the learned Departmental Representative, on careful reading of the same, it is found to be factually distinguishable as in the facts of that case, a large amount of money were found deposited in various bank 6 accounts held by the assessee and the assessee was unable to explain the source of such deposits. Whereas, in the facts of the present case, there is no doubt with regard to recording of repayment of loan in the books of account and the source of such M/s. Karthik Construction Co.fund. What the Assessing Officer has doubted to disallow the repayment is the genuineness of unsecured loans received by the assessee in the earlier assessment years. In the aforesaid view of the matter, the decision cited by the learned Departmental Representative will be of no help to the Revenue. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised.” Respectfully following the above decision, I hold that the addition made by the assessing officer u/s. 69A of the Act is invalid.” 7. The ITAT concurred with the decision of the Ld. CIT(A) relying on the fact that the section 69A cannot be invoked when the bank account and the cash balances have been disclosed in the books of account and has been filed while filing the return of income of the assessee. 8. Further, it is pertinent to mention that the Ld. CIT(A) has exercised his statutory powers u/s. 250(4) of the Act when the assessee in an appeal does not invoke the Rule 46A for submission of additional evidence. Further, we are also of the considered view that the Ld. CIT(A)’s powers which are coterminous with that of the powers of the Ld. AO and the Ld. CIT(A) is empowered to call for any details of documents which he deems necessary for proper adjudication of the issue. 7 9. Considering these circumstances of the case as stated above, the ITAT has dismissed the grounds raised by the Revenue in ITA No.76/Viz/2021 relying on the fact that the Ld. AO cannot make additions U/s. 69 or 69A of the Act in the instant case. Therefore, we are of the considered view that there is no mistake apparent from record in the order of the ITAT, dated 16/3/2022 and accordingly the MA filed by the Revenue is dismissed. 10. In the result, Miscellaneous Application filed by the Revenue is dismissed. Pronounced in the open Court on the 19 th January, 2023. Sd/- Sd/- (द ु व्वूरुआर.एलरेड्डी) (एसबालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखासदस्य/ACCOUNTANT MEMBER Dated : 19.01.2023 OKK - SPS 8 आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee–Sri Tatiparti Satyanarayana, D.No. 25-8-9 and 10, Sri Satyanarayana Gold Complex, Main Road, Visakhapatnam. 2. रधजस्व/The Revenue – Income Tax Officer, Ward-1(1), Visakhapatnam. 3. The Principal Commissioner of Income Tax-1, Visakhapatnam. 4. आयकरआयुक्त (अपील)/ The Commissioner of Income Tax (Appeals)-1, Visakhapatnam. 5. नवभधगीयप्रनतनननध, आयकरअपीलीयअनधकरण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6. गधर्ाफ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam