ITO, WARD-2(4), BHUBANESWAR vs. SRI DHUSASAN ROUTRAY, BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG, JUDICIALMEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No.455/CTK/2017 Assessment Year :2011-12 ITO, Ward 2(4), Bhubaneswar. Vs. Sri Dhusasan Routray, Plot No.485/1989, Dumduma, Aiginia, Bhubaneswar. PAN/GIR No.AEBPR 5955 G (Appellant) .. ( Respondent) ITA No.489/CTK/2017 Assessment Year : 2011-12

Sri Dhusasan Routray, Plot Vs. ITO, Ward 2(4), Bhubaneswar. No.485/1989, Dumduma, Aiginia, Bhubaneswar. PAN/GIR No.AEBPR 5955 G (Appellant) .. ( Respondent) Assessee by : Shri S.K. Agarwalla, AR Revenue by : ShriSubhendu Dutta, DR Date of Hearing : 6 /09/ 2019 Date of Pronouncement : 14/10/ 2019

O R D E R Per C.M.Garg,JM The captioned cross appeals have been filed against the order of the

CIT(A),2, Bhubaneswar dated 23.8.2017 for the assessment year 2011-12.

ITA No.455/CTK/2017 -Revenue’s appeal. 2. Ground Nos.1 & 4 are general in nature. 3. Ground Nos.2 & 3 of appeal read as under:

“2. On the facts and in the circumstances of the case, Ld. CIT(A) is not justified in deleting addition to the extent of s.86,00,000/- as against amount of Rs.30,00,000/- suggested P a g e 1 | 17 by the AO in his remand report furnished before the Ld. C1T(A) during the appellate proceedings.

perused the orders of lower authorities and relevant materials placed on the

record of the Tribunal.

addition to the extent of Rs.86 lakhs as against Rs. 30 lakhs suggested by

the Assessing officer in his remand report furnished before him during the

appellate proceedings. Ld DR also submitted that the CIT(A) has grossly

erred and was not correct on the facts and circumstances of the case and

having regard to the detailed remand report furnished by the AO during

appellate proceedings, referred to in para 8.1 (page 13) of the CIT(A)’s

order, wherein, the CIT(A) has allowed excess relief of Rs.56 lakhs to the

assessee out of addition towards “ unexplained investment in fixed

deposits” made by the Assessing Officer in the assessment. Ld DR

submitted that both the CIT(A) and the AO was right in confirming the

remaining part of amounts on FDRs made by the assessee during the

relevant period but for granting the said relief to the assessee, he has

P a g e 2 | 17 ignored some material facts, which were supporting to the sustenance of

disallowance of Rs.56 lakhs. Ld D.R. prayed that the impugned order of the

CIT(A) may kindly be set aside by restoring that of the Assessing Officer.

raised by the revenue, the tax effect is less than Rs.50 lakhs, therefore, in

view of the recent CBDT circular No.17/2019 dated 8th August, 2019, the

appeal of the revenue is not maintainable and deserves to be

dismissed. Ld A.R. further contended that even on merits, if the

observations of the ld CIT(A) are logically evaluated then also in para

8.3, the CIT(A) after carefully examining the remand report as well as

the rejoinder of the assessee found that the Assessing officer has

accepted the investments in fixed deposit of Rs.30 lakhs made by the

assessee on 11.2.2011 and also found that the fixed deposit at Sl.

No.1 to 5, as noted in paragraph in para 8.2 of the impugned order

have been thoroughly explained by the assessee in his submission

dated 4.1.2017. Therefore, the CIT(A) was right in deleting the

addition of Rs.86 lakhs.

may point out that the revenue in its appeal has challenged the

CIT(A)’s order regarding deletion of addition of Rs.86 lakhs and thus,

P a g e 3 | 17 the tax effect pertaining to the sole issue is less than Rs.50 lakhs.

Therefore, in view of CBDT Circular No.17/2019 dated 8.8.2019, the

appeal of the revenue is not maintainable.

CIT(A) while deleting the addition of Rs.86 lakhs made by the

Assessing officer on account of investments in fixed deposits during

the relevant period and find that the CIT(A) has made observations in

para 8.2 and 8.3 of his order, which read as follows:

“8.2 The remand report of the assessing officer was forwarded to the appellant to submission of remand report. The relevant portion is reproduced below

No./Name of Bank Date Face Value Name of Cash Security Opening Interest LIC Other receipts TOTAL Remarks of FDR Account Deposit Deposit Balance Applied (TDS etc) Holder 1. Punjab National 27/09/10 800,000 Dhusasan 400,000 0 400,000 0 0 0 800,000 Opening Balance Bank (SB A/c Routray 4,01,320.10 0553000100139823 2. Andhra Bank 10/08/10 1,000,000 Diksha 0 0 1,000,000 0 0 0 1,000,000 Opening Balance SB A/c. Routray 21,84,153/- 148010100001033 3. Andhra Bank 10/08/10 1,000,000 Deepak 0 0 1,000,000 0 0 0 1,000,000 Opening Balance Routray 21,84,153/- 148010100001033 (balance op left 1,84,153/-) 4. Andhra Bank 12/08/10 1,200,000 Dhusasan 0 1,031,910 168,090 0 0 0 1,200,000 Security Deposit (SB A/c. Routray Rs. 536231+Rs.495679. 148010100001033 Remaining op Balance Rs.16,063/- 5. Andhra Bank 27/10/10 1,550,000 Kunal 0 1,454,650 15,557 53,527 25,000 1,266 1,550,000 Security Deposit Routray Rs. 1,26,462+ 148010100001033 Rs.13,28,188 Remaining op Balance Rs.16,063/- 6. Andhra Bank 21/12/10 885,000 Kuni 885,000 0 0 0 0 0 885,000 Cash deposit by (SB A/c. Routray KuniRoutray out of 148010100001033 his business income & past savings 7. Andhra Bank 21/12/10 890,000 Dhusasan 890,000 0 0 0 0 0 890,000 Cash deposit by Routray DhusasanRoutray out 148010100001033 of her business income, Agricultural income & past savings 8. Andhra Bank 21/12/10 3,000,000 Dhusasan 2,550,000 449,933 67 0 0 0 3,000,000 Out of past savings (SB A/c. Routray & agricultural income 148010100001033 9. Andhra Bank 11/02/11 700,000 Dhusasan 700,000 0 0 0 0 0 700,000 Out of past savings (SB A/c. Routray & agricultural income of 148010100001033 KuniRoutray GRAND TOTAL 11,010,000 54,10,000 2,936,49 2,583,714 53,527 25,000 1,266 11,010,000

P a g e 4 | 17 .'8.3 I have carefully examined the remand report as well as the rejoinder of the appellant. I find that the assessing officer has accepted investment in fixed deposit of Rs 30,00,000/- made by the appellant on 11.02.2011 (see S.N.5 of AO's submission in paragraph 8.1 above). Further, I find that the source of fixed deposits at S.N. 1 to 5 in paragraph "8.2 above has been thoroughly explained by the appellant in his submissions dated 4.1.2017, which was remanded to the AO vide this office letter dated 14.4.2017. Therefore, addition of Rs 85,50,000/- is ordered to be deleted. Regarding cash deposit of Rs 54,10,000/- which were used for the purpose of investment in fixed deposit, the appellant has stated that the cash deposit is by him and his wife out of their business income, agricultural income and past savings. However, no evidence in this regard has been filed by the appellant. Therefore, the addition of Rs 54,10,000/- is confirmed. The assessing officer has made the addition of Rs 1,40,10,000/-. Considering the amount of addition confirmed, the addition of Rs.86,00,000/-is directed to be deleted. The grounds of appeal are partly allowed. 9. In view of above, we have no hesitation to hold that the CIT(A) has

granted relief to the assessee after carefully examining the remand report

as well as the rejoinder of the assessee-appellant and, thereafter found that

the source of fixed deposits at Sl.No.1 to 5 in para 8.2(supra) has been

thoroughly explained by the assessee in his submission dated 4.1.2017. We

also observe that the renewal of FDRs of Rs.30 lakhs has been clarified by

the AO in the remand proceedings and the AO in the remand report stated

that the contention of the assessee is acceptable in view of letter dated

30.11.2014 issued by the Manager, Andhra Bank, Khandagiri Branch,

Bhubaneswar. Further, in the same remand report as per table given in

assessment order, placed at para 6 page 4, there was opening balance of

Rs.42,01,273/- out of which opening balance of Rs.15,65,800/- was

belonging to the wife of the assessee Mrs Kuni Routray in Central Bank of

P a g e 5 | 17 India, Account No.1219026413, as submitted by the assessee. We are in

agreement with the contention of ld A.R. that the amount of Rs.26,35,473/-

(Rs.42,01,273 – Rs.15,65,800) as per said table mentioned in the

assessment order page 4, the opening balance of investment cannot be

treated as unexplained investment. Furthermore, in para 8.2 of the

impugned order, the CIT(A) has noted relevant portion of the remand

report submitted by the Assessing Officer, wherein, the fact of security

deposits given to the different departments of Government in earlier years

was refunded during the year amounting to Rs.29,36,493/-, which gets

support from the confirmation letters issued by the respective departments

placed at paper book pages 32,33 & 34 and said payments have been

refunded by the respective department to the assessee during the year

cannot be treated as unexplained investment in FDRs. Further, amount of

interest on SB of Rs.1768/-. Survival benefits received from LIC OF

Rs.25,000/-, income tax refund of Rs.1266/- as per table given in the first

appellate order at page 14 and assessee’s paper book page 13 cannot be

ignored. These facts have been considered by the CIT(A) in right

perspective while deleting the addition of Rs.86 lakhs on account of

investment made by the assessee in FDRs. Therefore, not only in view of

the CBDT Circular No.17/19 (supra) but also on merits, the deletion of

addition by the CIT(A) is sustainable. We have no reason to interfere with

P a g e 6 | 17 the order of the CIT(A) on this count. Accordingly, we dismiss the grounds

of the revenue.

ITA No.489/CTK/2017- Assessee’s appeal.

Nos.1,2,3,7 & 8 of appeal. Thus, these grounds are dismissed as not

pressed.

“4. For that, the learned Assessing Officer and the Commissioner of Income Tax (Appeals) 2, Bhubaneswar has erred both in law and in fact by making addition of Rs. 67,23,682/- being a differential amount in closing balance and for which same is liable to be deleted.

P a g e 7 | 17

andperused the record of the case, inter alia, impugned assessment and

CIT(A)’s order alongwith paper book filed spread over 44 pages. Ld A.R.

submitted that theassessee is an individual earning income under the head

“ business income” and “other sources” by carrying on the business of

contract works with Government of Odisha. Ld A.R. also pointed out that

Mrs Kuni Routray, wife of the assessee is an income tax assessee earning

income from contract works performing different contract with Government

of Odisha. Ld A.R. also submitted that the assessee andhis wife are

continuously filing return of income since last 20 years and paying tax to

the department as per the book results of the respective assessees. Ld A.R.

further submitted that before the AO during the course of assessment

proceedings, the assessee explained each and every doubt raised in the

mind of the Assessing Officerand every point of addition with source of

income, balance sheet and bank statement of the assessee’s wife Mrs Kuni

Routray. Ld A.R. vehemently pointed outthat the Assessing officer did not

accept the personal balance sheet as these were not filed alongwith return

of income but as per the provisions of the Act, filing ofpersonal balance

sheet is compulsory if return of income exceeds Rs.25 lakhs. Ld A.R.

submitted that the Assessing officer made addition of Rs.67,23,682/- on

account of difference in opening balance and closing balance in the saving

bank account, which is not correct and sustainable. Ld A.R. submitted that

P a g e 8 | 17 A/cNo.1219026413 picked up by the AO is not of the assessee but the same

is belonging to his wife Mrs Kuni Routray and same has been shown by her

in the balance sheet filed with the department for assessment years 2010-

11 & 2011-12.Therefore, the differential amount of Rs.20,04,179/- cannot

be taxed in the hands ofthe assessee. Ld A.R. further submitted that

regarding remaining amount, it has been explained by ld A.R. that out of

opening balance of cash in hand of Rs.49,95,716.83, the amount utilised for

FDR was Rs.45,10,000/- and thus, there was balance of Rs.4,85,717/-. Ld

A.R. further contended that there was an increaseof current liabilities as per

personal balance sheet for financial years 2009-10 and 2010-11 submitted

at the time of hearing of Rs.41,25,177 (Rs.41,88,409- Rs.63,232) resulting

into cash inflow and if interest on SB account of Rs.3,16,849/- is taken into

consideration then the total comes to Rs.69,01,922/- which properly

explains the differential balance of Rs.47,21,503/-.

the differential balance of Rs.67,23,682/- including amount of

Rs.20,04,179/- pertaining to wife of the assessee Mrs Kuni Routray and

balance amount of Rs.47,21,503/- hasbeen properly explained by way of

personal balance sheet after utilizing for FDRs of Rs.4,55,717/-, cash inflow

of Rs.41,25,177/- and interest on SB account of Rs.3,16,849/-, which

properly explain the cash deposit and different amount in four bank

accounts including one account pertaining to assessee’s wife Kuni Routray.

P a g e 9 | 17 Ld A.R. submitted that the authorities below have ignored this glaring facts

and made addition without any basis. Therefore, same may kindly be

ordered to bedeleted.

statements were not disclosed in the return of income, therefore, the AO

was right in deeming the differential amount of bank balance in SB

Accounts to consider the same for determining the total income of the

assessee. Ld D.R. submitted that the assesseecould not explain the

differential amount and amount deposited to the bank accounts, therefore,

the AO was right in making the addition and the CIT(A) was right in

confirming the same.

submitted copies of return of the assessee as well as his wife Mrs Kuni

Routray for assessment year 2010-11 and 2011-12, which were part of the

record of the authorities below. Ld A.R. further contended that FDRs and

bank accounts have been disclosed in the return of income. Ld A.R. drew

our attention towards balance sheet of the assessee attached with the

return of income for the assessment year2010-11 and 2011-12 and

submitted that there was opening balance ofRs.49,95,716.93 as on

31.3.2010 i.e. at the end of the previous assessment year 2010-2011 which

was brought forward to present assessment year 2011-12 and thecash

balance at the of the assessment year as on 31.3.2011 was substantially

P a g e 10 | 17 reduced to Rs.1,17,816.48 and remaining balance amount was utilized for

depositing into bank accounts or for making FDRs and this fact has been

ignored by the authorities below, which is self speaking about the

explanation of the assessee. Ld A.R. submitted that the Assessing Officer

was not right in ignoring the above glaring facts and making the addition of

differential amount deposited into four bank accounts including one bank

account pertaining to Mrs Kuni Routray, wife of the assessee. Therefore, the

addition is not sustainable.

considered view that on being asked by the Bench, ld D.R. could not

controvert the fact that the SB account No.1219026413 with Central Bank of

India belongs to assessee’s wife Mrs Kuni Routray and from the balance

sheet as on 31.3.2010 filed with the department alongwith return of income

of Kuni Routray for assessment year 2010-2011, it is clearly discernible that

this bank account has been shown in the balance sheet having balance of

Rs.35,69,978.85, which was considered by the AO in para 6 of the

assessment order is belonging to the assessee. This is a perverse and

misdirected action of the Assessing Officer. Hence, the differential amount

of Rs.20,04,179/- cannot be added in the hands of the assessee being

differential amount of bank account belonging to the wife of the assessee

Mrs Kuni Routray.

P a g e 11 | 17

concerned,neither the AO nor ld DR before us have demolished the

explanation of the assessee by way of cogent evidence or adverse material

as per balance sheet for the financial year 2009-10 and 2010-2011 of the

assessee pertaining to assessment year 2010-2011 and 2011-12, the cash

inflow of Rs.41,21,177 has been shown, is to be taken into consideration by

the AO.

ofRs.49,95,717/- out of which an amount of Rs.45,40,000/- was utilized for

investment in FDRs and there was balance of Rs.4,51,717/- which cannot

be ignored while considering the explanation of the assessee. Furthermore,

undisputedly, the interest on SB account of Rs.3,16,849/- was also credited

to the bank account of the assessee resulting into enhancement of closing

balance and also leaving positive impact on the differential amount of

opening and closing balance in alleged bank account picked up by the AO .

Obviously, when interest is credited, the closing balance has to be

increased, therefore, interest credited by the bank to the bank account of

respective assessees cannot be ignored while considering the issue of

differential amount in the opening and closing balance of the assessee. To

sum up, after logically analyse the submission of the assessee alongwith

documentary evidence, we are inclined to hold that the AO was not right in

taking into consideration the differential amount of Rs.20,04,179/-

P a g e 12 | 17 pertaining to bank account belonging to the wife of the assessee Kuni

Routray. We also note that the Assessingofficer as well as the CIT(A) has

also ignored the cash balance left with the assesseeof Rs.4,55,717/-, cash

inflow of Rs.41,25,177/- for the financial year 2009-10 & 2010-02011 and

interest credited in SB account by the assessee bank account during the

relevant period of Rs.3,16,849/-. The total of this comes to Rs.69,01,922/-

(Rs.20,04,179 + Rs.4,55,717 + Rs.41,25,177 + Rs.3,16,849) as against

alleged differential amount of Rs.67,23,682/-. Therefore, no addition in this

regard is called for and held to be sustainable.

interestincome from saving bank accounts of Rs.3,16,849/-, which has to be

taxed in the hands of the assessee. Hence, we direct the AO to tax on the

interest income ofRs.3,16,849/- Accordingly, Ground No.4 of the appeal is

partly allowed.

the CIT(A) was not correct and justified in upholding the addition of

Rs.54,10,000/- without considering the relevant fact submitted by the

assessee. Therefore, the addition made by the AO and confirmed by the

CIT(A) is liable to be deleted.

P a g e 13 | 17

justified inupholding the addition of Rs.54,10,000/- on account of

investment in fixed depositsas undisclosed income contrary to the fact and

explanation submitted by theassessee before the authorities below. Ld A.R.

therefore, submitted that the impugned addition partly confirmed by the

CIT(A) of Rs.54,10,000/- may kindly be deleted.

submitted self-speaking explanation regarding the source of funds of each

and every FDR including impugned FDR of Rs.54,10,000/-. Ld A.R.

submitted that the FDR No.148020100013700 amounting to Rs.8,85,000/-

has been made out of cash deposited by Mrs Kuni Routray out of her

personal income and past savings andsame has been disclosed in her

balance sheet filed with the department as on 31.3.2011. Therefore, the

addition of Rs.8,85,000/- on this count cannot be held as sustainable.

No.148020100013719 ofRs.8,90,000/-, No. 148020100015549, No.

148020100015559, and No.148020100015568 of Rs.10 lakhs each totaling

to Rs.30,00,000/-, the amount of Rs.8,90,000/- and Rs.25,50,000/- was

deposited out of cash balance with theassessee at the beginning of the

year, which was brought forward from earlier assessment year 2010-2011

of Rs.49,95,716.93. Therefore, these FDRs cannot betagged or named as

undisclosed investments of the assessee. Ld A.R. submitted that regarding P a g e 14 | 17 FDR No. No. 148020100016929 of Rs.7,00,000/-, the assessee has

deposited Rs.7 lakhs out of same cash balance in the beginning of the year

at Rs.49,95,716.93, which covers the total cash deposit of Rs.45,40,000/-

taken by the Assessing Officer for making the addition. Ld A.R. strenuously

contended that thetotal amount of Rs.8,85,000/- and Rs.45,40,000/- comes

to Rs.54,25,000/-, which ismore than the impugned addition of

Rs.54,10,000/- made by the AO and confirmed by the CIT(A). Ld A.R. finally

prayed that keeping in view the opening cash balance of Rs.49,95,716.93

and amount deposited by the wife of assessee Mrs Kuni Routray regarding

FDR of Rs.8,85,000/-, which has been shown by her in her balance sheet

filed with the department for financial year 2010-2011, the part addition

confirmed by the CIT(A) is also not sustainable and hence be deleted.

explain thesource of investments in FDR, therefore, the CIT(A) was right in

confirming part addition in this regard treating the same as undisclosed

investment of the assessee during the relevant period.

Kuni Routray of Rs.8,85,000/- and opening balance in the hands of the

assessee in the beginning of the year at Rs.49,95,716.93 have not been

controverted by the ld D.R. during the arguments. Therefore, the

explanation of the assessee be accepted and issue decided accordingly.

P a g e 15 | 17

balance sheet of Mrs Kuni Routray for financial year 2010-2011, we clearly

note that FDR No.13700 ofRs.8,85,000/- has been shown in the personal

balance sheet in the name of Mrs Kuni Routray and this fact has not been

controverted that the cash deposit by her was out of her saving and that

she is also an entrepreneur and income tax assessee.

Rs.45,40,000/-, we are satisfied with the explanation of the assessee that in

the balance sheet for the assessment year 2010-2011, the assessee has

shown cash balance of Rs.49,95,716.93 and it was reduced to

Rs.1,17,816.48 at the end of the preceding assessment year as on

31.3.2011 and thus, the balance amount of Rs.45,40,000/-invested by the

assessee for purchase of FDRs also gets explained. These facts were

submitted by the assessee during remand proceedings. The Assessing

Officer and the CIT(A) did not consider the same in right perspective taking

into consideration the declaration by the assessee in any manner and FDR

by her wife in their respective balance sheets.

theassessee has properly explained the source of investment in FDRs of

Rs.54,10,000/-and, therefore, no addition in this regard is called for. Hence,

P a g e 16 | 17 the Assessing Officer is directed to delete the impugned addition of

Rs.54,10,000/-.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cuttack; Dated 14 /10/2019 B.K.Parida, SPS Copy of the Order forwarded to : 1. The revenue: ITO, Ward 2(4), Bhubaneswar.

Sr.Pvt.secretary ITAT, Cuttack

P a g e 17 | 17