GULAN SINGH,HYDERABAD vs. INCOME TAX OFFICER, WARD-7(2), HYDERABAD

At the outset, it is observed from the record that there is a delay of 544 days in filing the appeal before the Tribunal. In this regard, the assessee had filed petition seeking condonation of delay wherein the reasons for not filing the appeal within the prescribed time limit was explained. For reference, the relevant portion from the affidavit is extracted herein below:-

“……… The order of the Commissioner was received on 23/08/2016 and within a week days’ time the same was handed over to Sri S.S. Chary to an employee of V. Malyal & Co Chartered Accountants, to bring it to the notice of Authorized Representative of the assessee CA, M.V. Raja Shekar Rao. It appears that the staff members were busy with the audit work of their clients and the order was not brought to the notice of Sri M.V. Raja Shekhar Rao and it remained misplaced till a show cause letter was received from the Assessing officer for levy of penalty U/s. 271(1)(c) of the Act. At this point of time the assessee brought to the notice of the AR that the order was handed over to S.S. Chary long back in the month of August 2016 and the assessee further stated that he is under the impression that the AR has taken appropriate action. However, no appeal has been filed against the order of the Appellate Commissioner, therefore, the assessee with the help of AR has identified another counsel for filing the appeal before the Hon’ble ITAT, with the delay of 544 days. The delay is on account of misplacement of the order by the employee of the Chartered Accountant and not attributable to the assessee. On account of lack of knowledge and with a trust the assessee was under an impression an appropriate action was taken by the Authorized Representative, which proved to be not correct. Considering the facts and circumstances and the ignorance of the assessee on account of lack of education of not being persuasive, the Hon’ble Bench is pleaded to condone the delay of 544 days to admit the appeal to adjudicate the matter on merits.”

On perusal of the explanation given by the assessee which is supported by the affidavit of Mr. S.S. Chary, Junior Assistant and Mr. M.V. Raja Sekhar Rao, Chartered Accountant wherein the reasons for delay in filing the appeal before the Tribunal is explained, I find to be reasonable, because the delay in filing the appeal is not attributable to the assessee. Therefore, in the interest of justice, I hereby condone the delay of 544 days in the filing the appeal before the Tribunal and proceed to hear the appeal on merits.

The assessee has raised several grounds in his appeal however, the crux of the issue is that the assessee is aggrieved by the order of the Ld. CIT (A) for having confirmed the order of the Ld. AO wherein he had made addition in the hands of the assessee for Rs. 12,83,408/- by holding that the cash deposited in the bank account of the assessee are from undisclosed source.

The brief facts of the case are that the assessee is a resident individual engaged in the business of running a wine shop as a partner in the firm. The assessee filed his return of income for the AY 2005-06 on 27/03/2006 declaring total income of Rs. 1,03,721/- . Subsequently, from the annual information returned it was revealed that the assessee had deposited Rs. 12,83,406/- in his SB Account maintained with UTI Bank Ltd during the relevant FY. Since, the cash deposit was not disclosed in the return of income filed by the assessee notice U/s. 148 of the Act was issued and finally assessment was completed U/s. 143(3) r.w.s 147 of the Act wherein the Ld. AO made an addition of Rs. 12,83,408/- by treating it as unexplained credit in his bank account. On appeal, the Ld. CIT (A) confirmed the order of the Ld. AO because the assessee could not produce proper books of accounts and other evidence to prove that the amount deposited in the bank account is duly accounted and did not escape tax. Aggrieved by the order of the Ld. CIT (A) the assessee is now in appeal before us.

During the course of scrutiny assessment proceedings, the Ld. AO had directed the assessee to produce proper evidence to establish the source for the bank deposit of Rs. 12,93,408/-. The assessee had explained that the amount deposited in the bank account was out of the sale proceeds of his partnership firm M/s. Shri Shakthi Wines. It was further explained that due to dispute between the partners for certain period the bank account of the firm was not operated and therefore the assessee had opened another bank account and the sale proceeds from the firm was deposited in that account. However, the assessee did not produce the books of accounts of M/s. Shri Shakthi Wines and did not reconcile the bank account with the accounts of the firm before the Ld.AO. Further, the assessee did not produce the bank statement and other relevant documents to establish the genuineness of the bank deposit of Rs. 12,83,408/-. Therefore, the Ld. AO added the amount of Rs. 12,83,408/- as the unexplained investment in the bank account maintained by the assessee in UTI Bank Ltd. On appeal, the Ld. CIT (A) confirmed the order of the Ld. AO after obtaining a remand report from the Ld.AO and after elaborate consideration because even after providing sufficient opportunities the assessee had failed to furnish the books of accounts of M/s. Shri Shakthi Wines and reconcile the bank account. Further, the assessee could not produce any cogent evidence to establish that the bank deposits made by him were from disclosed sources wherein tax have not escaped.

Before me the Ld. AR reiterated the submissions made before the Ld. Revenue Authorities on earlier occasions and argued that the bank deposits made in the UTI bank account of the assessee are arising out of the sale proceeds of the firm which was duly accounted for and tax paid. It was therefore pleaded that the addition made by the Ld AO which was further sustained by the Ld. CIT (A) may be deleted. The Ld. DR on the other hand argued in support of the orders of the Ld. Revenue Authorities and prayed for confirming the same.

I have heard the rival submissions and carefully perused the materials on record. From the facts of the case it is apparent that neither the assessee nor the firm M/s. Shri Shakthi Wines has maintained proper books of accounts. The bank account wherein the assessee had deposited the amount of Rs. 12,83,408/- is also not reconciled with the business operation of M/s. Shri Shakthi Wines. The Ld. AO as well as the Ld. CIT (A) after obtaining a remand report from the Ld AO has made a categorical finding on this regard. Further, even before us the assessee has not produced any cogent evidence to establish that the amount deposited in the bank account of the assessee for Rs. 12,83,408/- has not escaped tax. In this situation, I do not find any much merit in the submission of the Ld. AR. However, from the facts of the case it is also apparent that the assessee does not have any other substantial source of income other than from the running of the Wines Shop as a partner in M/s. Shri Shakthi Wines. Therefore, the cash deposited in the bank account of the assessee can be safe presumed to be from the sale proceeds of the firm. However, the Revenue has also shown laxity by not obtaining the statement from the UTI bank with respect to the transactions made by the assessee. In this situation, it will not be fair to treat the entire cash deposits of Rs. 12,83,408/- as the unaccounted income of the assessee as it can be reasonably construed to represent as the undisclosed turnover of the firm in which the assessee is a partner. Keeping in view of these facts and circumstances of the case, I am of the considered view that addition of 17% on the undisclosed turnover of the firm of Rs. 12,83,408/- can be treated as the unaccounted income earned by the assessee to meet the end of justice. Therefore, in the interest of justice I hereby sustain the addition for Rs. 2,18,000/- as the unaccounted income of the assessee. It is ordered accordingly.

Before parting, it is worthwhile to mention that this order is pronounced after 90 days of hearing the appeal, which is though against the usual norms, I find it appropriate, taking into consideration of the extra-ordinary situation in the light of the lock-down due to Covid-19 pandemic. While doing so, I have relied in the decision of Mumbai Bench of the Tribunal in the case of DCIT vs. JSW Ltd. In and 6103/M/2018 for AY 2013-14 order dated 14th May 2020.

In the result, appeal of the assessee partly allowed.