MALLIKARJUNA H.S. V. THE INCOME TAX OFFICER,

ITA/100029/2017

AI Insights

The case involves Mallikarjuna H.S., an employee of LIC of India, who appealed against the orders of the Income Tax Appellate Tribunal (ITAT) concerning unexplained cash deposits in his bank account for the assessment year 2009-2010. The Assessing Officer had added Rs.61,88,940 to the appellant's income under Section 69A of the Income Tax Act, 1961, which was later modified by the ITAT to Rs.18,62,500 based on the peak cash credit method. The appellant contested that the CIT (Appeals) and ITAT ignored a crucial remand report that supported his explanations for the deposits. The High Court of Karnataka found that the ITAT and CIT (Appeals) had not adequately considered the second remand report and thus remanded the matter back to the CIT (Appeals) for a thorough reconsideration.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 697907 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-01-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: ASHOK KULKARN
• Keywords: Assessment Year 2009-10; Cash flow statement; Income Tax; Remand Report; Unexplained deposits
• Section: 69A; 260A

Judgement Text

"IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 22ND DAY OF JANUARY, 2018 PRESENT THE HON’BLE MRS. JUSTICE S. SUJATHA AND THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA ITA No.100029/2017 BETWEEN: MALLIKARJUNA H.S., R.S.NO.177/3, P/No.5, VIDYANAGAR EXTENSION, GOKAK-591 307. …APPELLANT (BY SRIYUTHS ASHOK A.KULKARNI, NEILOO PRASAD, SIDDA REDDY.K.G., ROOPA ANAVEKAR, H.R.KAMBIYAVAR, K.R.PRASAD, ADVS.) AND: THE INCOME TAX OFFICER, WARD-1, GOKAK-591 307. …RESPONDENT (BY SRI.Y.V.RAVIRAJ, ADV.) THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 PRAYING TO ALLOW THE APPEAL BY SETTING ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO.50/PNJ/2015 DATED 28.07.2015 FOR AY:2009-10 IN ANNEXURE-A, THE ASSESSMENT ORDER PAN NO.ADBPM6725E ON 22.12.2011 FOR THE ASSESSMENT YEAR 2009-10 IN ANNEXURE-B AND APPELLATE ORDER NO.163/BGM/2011-12 DATED 03.11.2014 FOR THE ASSESSMENT YEAR 2009-10 IN ANNEXURE-C. THIS APPEAL COMING ON FOR ADMISSION THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING: : 2 : JUDGMENT This appeal is filed by the assessee challenging the order passed by the Income Tax Appellate Tribunal Panaji Branch, Panaji-Goa (‘ITAT’ for short) relating to assessment year 2009-2010. 2. The assessee/appellant an individual is regularly assessed to Income Tax. The appellant is working as a Development Officer in Life Insurance Corporation of India and had filed income tax return for the Assessment Year 2009-2010 declaring taxable income of Rs.8,33970/-. During the material period, the appellant’s main source of income was from salary, commission and incentives received from LIC of India. In the said assessment proceedings, the respondent noticed huge deposits in Savings Bank account of the assessee with the Corporation Bank, Gokak. On enquiry made, it was explained by the assessee that such deposits are from out of the savings from salary, earnings from incentives and bonus received from the : 3 : LIC of India. Not agreeing with the same, the respondent-Assessing Officer made an addition of Rs.61,88,940/- by invoking Section 69A of the Income Tax Act, 1961 (‘the Act’ for short). Being aggrieved by the same, the assessee preferred an appeal before the CIT(A), wherein, the Appellate Authority called for the remand reports to verify the stand of the appellant. Two remand reports were furnished, one is dated 20.08.2013 and other is dated 15.04.2014. The remand report dated 15.04.2014 reads thus: “As directed by the Commissioner of Income Tax (Appeals), Belgaum, I have examined the cash flow statement with reference to Bank statements of the assessee. It is ascertained from the cash flow statements that all the cash deposits are out of cash withdrawals from the Bank accounts and receipts from the LIC agent who has repaid the hand loans given earlier. However, on 14.03.2009 a sum of Rs.2,50,000/- is shown as deposit into Axis Bank but the cash on hand is not reduced by equal amount. The assessee is not in a position to explain the discrepancy. Thus, the cash on hand as on : 4 : 31.03.2009 should be Rs.99,650/- and not Rs.3,49,650/-.” 3. The Appellate Authority proceeded to consider the first remand report dated 20.08.2013 and confirmed the additions of Rs.23,31,600/- on the ground of cash deposits. Being aggrieved, the appellant preferred an appeal before the ITAT. The ITAT considering the peak cash credit in the cash flow statement, modified the addition made by the Assessing Officer, reducing it to Rs.18,62,500/- representing the peak of the cash credit in the cash flow of the assessee. Being aggrieved by the same, the assessee is in appeal under Section 260A of the Act, raising the following substantial questions of law. i) Whether on the facts and in the circumstances of the case the finding of the Tribunal that any part of the cash deposits made by the appellant is his bank account, in excess of Rs.2,50,000/-, is unproved or not satisfactorily explained is perverse inasmuch as it is totally contrary to the finding of the Assessing Officer in the second remand report, which was totally ignored by the ITAT though it : 5 : was a part of the record and urged for consideration at the time of hearing and such remand report was submitted after verification by the Assessing Officer at the instance of CIT(A)? ii) Whether on the facts and in the circumstances of the case any part of the addition in a sum of Rs.18,62,500/- as unexplained deposits upheld by the ITAT is liable to tax u/s 69A of the Act? 4. We have heard the learned counsel appearing for the parties and perused the material on record. 5. The only grievance of the appellant/assessee is that the Appellate Authority CIT (Appeals) ignored the second remand report dated 15.04.2014 submitted by the Assessing Officer, wherein it was categorically observed by the Assessing Officer that, cash flow statement with reference to bank statements of the assessee was ascertained and it was found that all cash deposits are out of cash withdrawals from the bank account and receipts from the LIC agent, who has repaid the hand loans given earlier. Such being the situation, the CIT (Appeals) placing reliance on the first : 6 : remand report dated 20.08.2013 confirmed the addition of Rs.23,31,600/- under Section 69A of the Act, which is wholly unsustainable. However, the ITAT also failed to appreciate the same and not adverting to the remand report submitted by the Assessing Officer proceeded to decide the matter based on the peak cash credit as per the cash flow statement. Accordingly, learned counsel submitted that the approach of the CIT(Appeals) as well as ITAT is contrary to the second remand report submitted by the Assessing Officer. Hence, he seeks for a remand to the Appellate Authority to reconsider the matter in the light of the second remand report submitted by the Assessing Officer. 6. The learned counsel appearing for the revenue has no objection to remand the matter to the Appellate Authority, in view of the categorical finding given in the second remand report of the Assessing Officer, as extracted in para 5.3 of the order of the Appellate Authority. : 7 : 7. Having heard the rival submissions of the parties, indisputably the CIT (Appeals) has relied only on first remand report of the Assessing Officer dated 20.08.2013. Despite extracting the contents of the second remand report, no finding is given on the same, which goes contrary to the submissions of the Assessing Officer. It was obligatory on the part of ITAT to examine this aspect when the records were before it. The ITAT proceeded to reduce the addition made by the Assessing Officer confirmed by the CIT(Appeals) to Rs.18,62,500/-, which is prima facie vitiated and requires reconsideration. In the facts and circumstances of the case, without answering the substantial questions of law raised by the assessee/appellant herein, we deem it appropriate to remand the matter to the CIT (Appeals) to consider the second remand report of the Assessing Officer dated 15.04.2014 and pass appropriate orders in accordance with law in an expedite manner. Accordingly, we proceed to pass the following: : 8 : ORDER i) The appeal is allowed in part. ii) The impugned order is set aside. The matter is remanded to the CIT (Appeals) to reconsider the same in the light of the second remand report dated 15.04.2014 submitted by the Assessing Officer and to pass an appropriate order as expeditiously as possible. iii) The assessee shall appear before the CIT (Appeals) on 05.02.2018 without anticipating any notice and shall receive further orders. Sd/- JUDGE Sd/- JUDGE MBS/- "