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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI N.K.CHOUDHRY, HON’BLE & SHRI D.S. SUNDER SINGH, HON’BLE
Per Shri D.S.Sunder Singh, Accountant Member This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Visakhapatnam in ITA
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No.10554/2019-20/CIT(A)-1/VSP/2020-21 dated 16.09.2020 for the Assessment Year (A.Y.) 2017-18 and cross objections are filed by the assessee .
Ground No.1 and 6 are general in nature which does not require specific adjudication.
Ground No.2 is related to the disallowance of expenditure to the tune of Rs.17,67,246/- u/s 40(a)(ia) of the Income Tax Act, 1961 (in short ‘Act’). During the assessment proceedings, the Assessing Officer (AO) found that the assessee has debited the sum of Rs.58,90,819/- under various heads. The assessee was requested to furnish the details of TDS made on expenditure claimed in P&L account. Though the assessee has furnished the details, the details of TDS made under various heads of expenditure were not placed before the AO. Therefore, the AO disallowed 30% of such expenditure which worked out to Rs.17,67,246/- and added back to the income.
Against the order of the AO, the assessee went on appeal before the CIT(A) and submitted that the assessee required to deduct TDS on commission and painting works and the rest of the heads of expenditure TDS does not attract, since, the payments were less than the threshold limit
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for deduction of TDS. The Ld.CIT(A) observed that the assessee had deducted the TDS on commission and painting works and accepted the submission that the remaining heads of expenditure are not subjected to TDS, therefore, deleted the addition and allowed the appeal of the assessee.
Against which, the department is in appeal before the Tribunal. During the appeal hearing, the Ld.DR supported the order of the AO.
The Ld.AR submitted that the assessee has maintained regular books of accounts which were produced before the AO. The expenditure under the head, commission and painting was subject to TDS and the assessee has duly deducted the TDS. In the remaining heads of expenditure, the assessee do not require to deduct tax at source, since, the payment to each person was less than the threshold limit for deduction of TDS. Therefore, argued that the Ld.CIT(A) has rightly deleted the addition and no interference is called for.
We have heard both the parties and perused the material placed on record. In the instant case, the assessee has deducted the TDS on payment of commission and on painting works. The assessee has maintained the regular books of accounts and produced before the AO. The AO did not make out a case that each payment made under various heads i.e. salaries,
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electrical charges-flats, NMR workers etc. to each person was more than the prescribed limit for deduction of TDS. The AO did not identify each payment made to the recipient and the quantum of TDS that is required to be deducted. There is no material to suggest that the payments made under the heads salaries, electrical charges-flats, NMR workers etc. to each individual was more than the limit prescribed under the act for deduction of TDS. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue on this ground is dismissed.
Ground No.3 is related to interest payment of Rs.31,06,036/- paid to Vasantha Vihar Construction India Pvt. Ltd.(VVCIPL). The AO found that assessee had borrowed the sums for interest and paid the interest of Rs.67,20,330/- on the loans taken by the him. Out of which a sum of Rs.31,06,036/- was related to the loans given to VVCIPL, a sister concern. The assessee explained during the course of assessment proceedings that he has received equal amount of interest of Rs.31,06,036/- from VVCIPL and offered the same to tax under the head ‘income from other sources’. However, the AO viewed that since, the assessee had incurred the expenditure of Rs.31,06,036/- was not related to the business activity of the assessee, the same was disallowed and added back to the income.
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Against which the assessee went on appeal before the CIT(A) and the Ld.CIT(A) found that the assessee advanced the amounts to VVCIPL on which interest paid to the extent of Rs.31,06,036/-. The assessee also received the equal amount as interest from VVCIPL and also deducted the TDS and the same was offered under the head income from other sources. Since the interest payments and receipts were of the equal amounts, no addition is warranted, accordingly deleted the addition.
We have heard both the parties and perused the material placed on record. In the instant case, there is no doubt that the assessee had incurred the interest expenditure of Rs.31,06,036/- and also received the equal amount of interest from VVCIPL, which was offered to tax. Thus, there was no excess expenditure incurred by the assess on account of amounts given to VVCIPL and hence no addition is called for. Therefore, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.
Ground No.4 is related to the cash deposits of Rs.2,21,24,156/- made during demonetization period, which was added back to income u/s 69A of the Act. During the course of assessment proceedings, the AO found that the assessee has made the cash deposits of Rs.2,21,24,156/- in the bank
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accounts during demonetization period. Therefore, the AO asked the assessee as to why the cash deposits made during the demonetization period should not be added u/s 69A of the Act as unexplained money. The assessee submitted before the AO, that he is dealing in petrol bank as well as in real estate and majority of the receipts were related to petrol bunk. During the demonetization period, Retail outlets of petrol and diesel were permitted to accept the specified bank notes. The assessee further submitted that the entire cash deposits made in the bank account were duly accounted in the books of accounts and represent the sales. Therefore, requested to drop the proposal for making the addition. Not being convinced with the explanation of the assessee, the AO treated the entire cash deposits made in the bank account amounting to Rs.2,21,24,156/- as unexplained money and accordingly made the addition u/s 69A of the Income Tax Act.
Against the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) examined the whole issue and found that the AO proposed the addition of Rs.51,77,200/- comprising of Rs.14,95,500/-, Rs.28,51,700 and Rs.8,30,000/- of various bank accounts maintained by the assessee. Verification of bank account Nos.62283031080 and 62410931624 revealed that total amount of deposits for the whole year
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was Rs.28,51,700/- and Rs.8,30,000. The Ld.CIT(A) further found that the sum of Rs.14,95,500/- made in various bank accounts as per the details given in page No.11 of the Ld.CIT(A) order was considered twice i.e during the demonetization period as well as in cash deposits separately for the whole year. Thus the deposits made during the demonetization period was Rs.8,95,500/- in bank account Nos.62283031080 and 62410931624 as under : (i) Account No.62283031080 - Rs.6,95,500/- (09.11.2016 to 31.12.2016) (ii) Account No.62410931624 - Rs.2,00,000/- (09.11.2016 to 31.12.2016) The total cash deposits in bank accounts excluding the deposits in M/s Venkata Durga Enterprises worked out to be Rs.36,81,700/- for the whole year. The Ld.CIT(A) observed that the assessee is maintaining regular books of accounts and the deposits were made out of the book balances and therefore, following the decision of Karthik Constructions in I.T.A. No.2292/Mumbai/2016 dt. 23.02.2018 of coordinate bench of ITAT Mumbai, the Ld.CIT(A) held that there is no case for making the addition, accordingly deleted the addition.
The next issue is with regard to the deposits made in respect of proprietary concern M/s Venkata Durga Enterprises, which is a retail out
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let of petrol and diesel products under the dealership of HPCL at Kothavalasa. The Ld.CIT(A) after verification of bank account observed that the cash deposits made during the demonetization period was only Rs.83,00,122/- as against the sum of Rs.1,69,46,956/- worked out by the AO in the bank account of 62183479808/-. The Ld.CIT(A) also observed that the AO’s finding of not revealing the bank account to the department was also incorrect, since, the bank account No.62183479808 was found reported in the balance sheet of the assessee as on 31.03.2017 and the closing balance of Rs.33,101/- was matching with the bank account. The Ld.CIT(A) held that since, the assessee has made the cash deposits from the books of accounts maintained, the source of deposits stands explained and hence that there is no case for making addition u/s 69A of the Act. Accordingly, deleted the addition.
Against the order of the Ld.CIT(A), the revenue filed appeal before this Tribunal. During the appeal hearing, the Ld.DR relied on the order of the AO and the Ld.AR relied on the order of the Ld.CIT(A).
We have heard both the parties and perused the material placed on record. In this case, the AO committed factual mistake with regard to quantifying the total cash deposits at Rs.2,21,24,156/- as discussed in 9 ITA No.31/Viz/2021 and CO No.52 /Viz/2021, A.Y.2017-18 Jaya Prakash Babu Valluri, Vizianagaram
earlier paragraph of this order.. Out of the said sum of Rs.2,21,24,156/-, a sum of Rs.51,77,200/- was related to the business of Development of Housing Projects and the sum of Rs.1,69,46,956/- was related to the business of petrol and diesel retail out let of HPCL.
In respect of deposits of Rs.51,77,200/- the Ld.CIT(A) after verification of the Bank statements and books of accounts found that the sum of Rs.14,95,500/- deposited in various bank accounts mentioned in page No.11 of the Ld.CIT(A) order was taken twice by the AO, once in demonetization period as well as for the whole year. In respect of the amounts of Rs.21,51,700/- and Rs.8,30,000/- deposited in bank account No.62283031080 and 62410931624 represents deposits made in whole of the year but not confined to demonetization period alone. The Ld.CIT(A) worked out the deposits made during the demonetization period and the same worked out to Rs.8,95,000/- only. Thus the total cash deposits in respect of Housing Development business was to Rs.36,81,700/- for the whole year and the entire cash deposits made in the bank account were sourced from the cash book or books of accounts maintained by the assessee. Therefore, the entire cash deposits stand explained in the books of accounts. The Ld.DR during the appeal hearing did not place any material to controvert the findings of the Ld.CIT(A) that the cash deposits
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were made out of balances available in books of accounts. Since the assessee is maintaining regular books of accounts and no defects were noticed in the books of accounts and the cash deposits were sourced from the books of accounts, we find no reason to interfere with the order of the Ld.CIT(A) and the same is upheld. This view is supported by the decision of ITAT Mumbai in the case of Karthik Constructions and the decision of ITAT Bangalore in the case of Teena Bethala in I.T.A. No.1383/Bang/2019, accordingly, the order of the Ld.CIT(A) is upheld and no interference is called for.
With regard to cash deposits in respect of Sri Venkata Durga Enterprises, the AO found that the cash deposits during the demonetization period was Rs.1,69,46,956/-, whereas, the Ld.CIT(A) has given a finding that the cash deposits during demonetization was only Rs.83,00,122/- after verification of the material placed before him. For the sake of clarity, we extract para No.4.5.7. of the order of the Ld.CIT(A) which reads as under :
“4.5. 7. I have carefully considered the issue and the facts of the case. In the first place the appellant had disclosed the bank account 62183479808 in his books of account. The completed P&L account consists of the turnover of M/s Sri Venkata Durga Entrerprises. The Assessing Officer’s observation that the account is concealed is far from facts of the case. I have perused the balance sheet of the appellant and noticed that this account is found place in the balance sheet for the year ending 31.03.2017. The closing balance of Rs.33,101/- is matching with the copy of statement of bank account. Therefore,
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it is highly improbable to consider that the bank account as concealed. Further examination of account revealed that the deposits during the demonetization period (09.11.2016 to 31.12.2019) is only Rs.83,00,122/-. The Assessing Officer has considered the cash deposits of Rs.1,69,46,956/- for the whole year. I have perused the account and found that the total deposits for the whole year is Rs.5,91,82,387/- instead of Rs.1,69,46,956/-. It is not known how the Assessing Officer has arrived the figure of Rs.1,69,46,956/-. Be that as it may, a thorough examination of this account revealed that the appellant’s sale of goods are in the form of cash against the sales there were purchases from HPCL. All the transactions are disclosed in the hooks of account. The Government has allowed the dealers of the bunks to deposit the money up to 15.12.2016, There is no bar on the part of appellant to deposit in the bank as per provision of section 69A of the Act. There is a moratorium imposed by RBI. If there is any violation it would be under RBI guidelines but not u/s 69A of the Act. What is required under this section is the ownership of money, the nature of source and reasonable explanation that the money deposited is earned out of natural course of business. In the instant case, the appellant had demonstrated that the source of deposit is the sale proceeds or goods and the proceeds are disclosed in the books of account. The explanation was offered to the Assessing Officer and there is no contravening facts before Assessing Officer. In order to bring the deposit u/s 69A of the Act the Assessing Officer must establish the case that there are no books of accounts maintained and the deposits are not forming part of any books and the appellant fails to explain the nature and source of deposit. There is no such finding of Assessing Officer in this case. Why the Assessing Officer is not satisfied with the explanation needs some material in the possession of Assessing Officer. There is no such finding given by Assessing Officer regarding satisfaction. Regarding the total No. of SBN and non-SBN notes, I am of the opinion that the Assessing Officer must have the details from banks during demonetization period. The Assessing Officer was also not correct in determining the cash deposits as on 31.03.2017 at Rs1,69,46,956/- instead of Rs.5,91,82,387/- leave alone the cash deposits during the demonetization period standing at Rs.83,00,122/-. In all fairness and in the circumstances, there is no case for Assessing Officer to invoke section 69A of the Act to bring the so called deposits of Rs.1.69,46,956/- and tax u/s 115BBE of tire Act. Accordingly, the Assessing Officer is directed to delete the addition of Rs.1,69,46,956/-.
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In the instant case, there is no dispute that the assessee is running Petrol and Diesel retail outlet and he is the dealer of HPCL and the Govt. of India has permitted during the demonetization period to accept the specified bank notes in the case of petrol bunks. There is no dispute that the cash deposits made were relatable to sales and duly accounted in the books of accounts and the same were deposited in the bank account. The Ld.DR did not place any material to show that the source of cash deposits were unexplained. As per section 69A if the assessee is found to be the owner of the money, bullion, jewellery and the same was not recorded in the books of accounts for which the source was not explained the same required to be brought to tax u/s 69A. In the case of the assessee the source of deposit was sales and the same was recoded in the books of accounts. Therefore, there is no case for making the addition u/s 69A and we find no reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The issue is quarely covered by the decision of Karthik constructions in I.T.A. No.2292/Mum/2016 dated 23.02.2018 of Mumbai Bench (supra) in favor of the assessee and we, find no reason to interfere with the order of the Ld.CIT(A) and the same is upheld. Appeal of the revenue is dismissed.
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CO No.52/Viz/2021
The assessee filed cross objections. Ground No.1 in cross objection is against the confirmation of addition of Rs.11,10,000/- in the capital account. During the appeal hearing, the Ld.AR did not press this ground. Therefore, this ground is dismissed as not pressed. Ground Nos. 2 to 5 are in support of the order of the Ld.CIT(A). Since the appeal of the revenue is dismissed, the cross objections become infructuous, hence, dismissed.
In the result appeal of the revenue and cross objections of the assessee are dismissed.
Order pronounced in the open court on 23rd September, 2021. (एन के चौिरी) (धड.एस .सुन्दर धसंह) (N.K.CHOUDHRY) (D.S.SUNDER SINGH) न्याधयक सदस्य/ JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 23.09.2021 L.Rama, SPS
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आदेश की प्रतितिति अग्रेतषि/Copy of the order forwarded to:- 1. राजस्व/The Revenue – Dy.Commissioner of Income Tax, Circle-3(1), Visakhapatnam 2. तिर्ााररिी/ The Assessee - Sri Jaya Prakash Babu Valluri, #1/211, Vasanth Vihar, Opp. Railway Station, Vizianagaram
The Pr.Commissioner of Income Tax-1, Visakhapatnam
The Commissioner of Income Tax (Appeals)-1, Visakhapatnam 5. तवभागीय प्रतितितर्, आयकर अिीिीय अतर्करण, तवशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्ाफ़ाईि / Guard file आदेशािुसार / BY ORDER ////
Sr. Private Secretary ITAT, Visakhapatnam