DY. COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE-8, HYDERABAD vs. I MALLAPA RAJU, HYDERABAD

O R D E R PER BENCH :

This Revenue’s appeal for AY.2008-09 arises from the CIT(A)-12, Hyderabad’s order dated 12-11-2018 passed in case No.10317/2017-18 in proceedings u/s.143(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file/paper book perused.

“7. I have carefully considered the submissions of the appellant, the order of the Assessing Officer, the additional evidence furnished as well as the comments of the Assessing Officer thereon. The only issue in this case is the addition of Rs.7,57,98,800/- as unexplained investment made by the Assessing Officer. From the assessment order, which is reproduced in Para 6.1 above, it can be seen that even before the Assessing Officer, the assessee had stated that the amounts were advanced by Shri Suryanarayana Raju, but the Assessing Officer made the addition on the grounds that the assets from these advances were acquired by Shri I.Mallapa Raju, i.e., the assessee, in his name. The Assessing Officer further observed that the assessee had filed a NIL return, and stating that the said advances purported to be taken by him were not commensurate with the returned income, the Assessing Officer went on to treat the entire amount of Rs.7,57,98,800/- as income in the hands of the assessee. Thus, it is seen that there is no dispute on the fact that the amounts in question were advanced to the assessee by Shri B.Suryanarayana Raju, and this fact is not disputed by the Assessing Officer also. The A.O. has simply made the addition on the ground that the investments are made by the assessee in his own name. Nowhere has he questioned or disproved that the amounts were advanced by Suryanarayana Raju. It has been further contended during the course of the appellate proceedings that the statement of affairs of all the family members were submitted during their respective assessment proceedings, and were already available with the Assessing Officer in the assessment records. The advance in question given to the assessee is duly reflected under the heading 'Dues to family members'. Further, the AR of the appellant has furnished the bank accounts of the assessee as well as Shri B.Suryanarayana Raju and the other family members, in which all the transactions are duly reflected. During remand proceedings before the Assessing Officer, the assessee has filed a written submission on 02-08-2017, stating as under:

"v) Kind reference is invited to the bank account of Sri Mallappa Raju with Axis Bank. The entries in the account explain the following credit entries (deposits) pertaining to transfer of the amounts by B.Suryanarayana Raju from his savings bank account with the very same Axis Bank. "Extracted from Axis Bank account of Sri I. Mallapa Raju" Date of credit From whom Amount (Rs.) 17/10/2006 B.S.Raju 59,62,500 31/10/2006 -do- 2,81,22,000 01/11/2006 -do- 3,74,96,000 01/11/2006 -do- 42,18,300 7,57,98,800 Here B.S.Raju indicates B.Suryanarayana Raju vi) The above amount has flown into the investment in immovable properties at Nagpur, by Sri I.Mallappa Raju. The source was as explained above was from Sri B. Suryanarayana Raju. vii) Kind reference of the bank account of Sri B.Suryanarayana Raju with Axis Bank reveals the following debits in his account pertaining to the transfer of the amounts to the bank account of Sri Mallapa Raju with Axis Bank. Date of To whom Amount (Rs.) Amount (Rs.) Debit 17/10/2006 Mallapa Raju 59,62,500 31/10/2006 Mallapa Raju 2,81,22,000 B.Jhansi Rani, 29,22,000 W/o.B.Suryanarayana Raju B.Radha Raju, W/o. 2,23,64,000 5,34,08,000 B.Rama Raju 01/11/2006 Mallapa Raju 3,74,96,000 Mallapa Raju 42,18,300 B.Jhansi Rani 62,82,300 4,79,96,600 10,73,67,100 viii) From the above details it could therefore be noticed that the effective transfer of the amounts from the account of B.Suryanarayana Raju to the account of I Malla a Raiu are as under:

Date of credit Amount (Rs.) 17/10/2006 59,62,500 31/10/2006 2,81,22,000 01/11/2006 3,74,96,000 01/11/2006 42,18,300 7,57,98,800 From the two remand reports of the Assessing Officer reproduced in Para 6.3 and Para 6.7 above, it can be seen that this explanation, alongwith the bank statements has been duly filed before the Assessing Officer, but the Assessing Officer has simply brushed aside the same by stating that "the acceptability of bank statements without due Audit/reflection of same in statement of affairs and its genuineness as accounted transactions stands unreconcilable on merits. The statements provided are related to Axis Bank and the bank account mentioned in the return of income is noticed as HDFC bank in the case of Sri B.Suryanarayana Raju". In this regard, it has been explained by the appellant's AR during remand proceedings before the Assessing Officer, and again during appellate proceedings before the undersigned, that the bank statement of Shri B.Suryanarayana Raju with Axis bank was filed to explain the transactions in question, whereas the bank account with HDFC bank was mentioned in the return for enabling the department to remit the proceeds of refund if any. This does not mean that the assessee / appellant cannot have any other bank account. It has also been explained that the certified extracts of the bank account filed before the Assessing Officer were the copies certified by the officer of the Directorate of the Enforcement. The evidences filed by the assessee/appellant, therefore, cannot be brushed aside by simply stating that they are unacceptable. The Assessing Officer, inspite of having been given opportunities twice to examine the evidences filed, has not been able to point out any valid reasons for not accepting the same. Instead of getting some enquiries conducted if he had any doubt about the bank statements furnished, the AO has just made some vague remarks, which cannot be taken any cognizance of. Apart from the above, the basic issue in the present appeal is whether Shri B.Suryanarayana Raju had advanced the amounts in question to the appellant, which is the source of the appellant for the investment made. As discussed earlier, this has not been disputed by the Assessing Officer in the assessment order also. If at all the amounts were unexplained, therefore, the addition had to be made in the hands of Shri B.Suryanarayana Raju, in whose case, the assessment for AY 2007-08 was completed u/s.143(3) on 14-072010, earlier to the completion of the assessment in appeal here. It is also the contention of the appellant's AR that the investment in question was actually made in the AY 2007-08, and on this ground also, no addition could have been made in the AY 2008-09. It can be seen from the remand report reproduced above in Para 6.7 above that the Assessing Officer has rejected this contention on the grounds that “the assessee’s contention on this analogy is apparently not reconcilable and same is not acceptable not to treat as unexplained investment of assessee of AY 2008- 09 as it is appearing as opening asset in AY 2008-09 without being reflected in earlier year books. Further the assessee could not bring out this clear fact to treat the same as investment of AY 2007-08 during the pendency of assessment proceedings". This statement of the Assessing Officer is also found to be vague and unacceptable. The contention of the Assessing Officer that the investment is appearing as opening asset in the AY 2008-09 and therefore it should be taxed in the said year only, infact goes to show that the investment was not made during AY 2008-09 i.e., the year under appeal. By making such a statement, the Assessing Officer has infact himself accepted that the investment does not pertain to the AY 2008- 09, since it was shown as opening asset in AY 2008-09. In view of the detailed discussion in the preceding paras, the addition made, being found to be without any merits, is ordered to be deleted. All the grounds related to this issue are ALLOWED”.