RAVI CHIKKALINGAIAH,PALA BOVI DODDI RAMANAGARAM vs. INCOME TAX OFFICER, WARD - 1, , RAMNAGAR

The brief facts of the case are that the assessee is an individual and not filed his return of income. He earned income from agriculture, interest on FD, sale of sheep, goat, hen & eggs. Based on the information that the assessee had deposited cash of Rs. 52,95,000/- into his bank accounts, notice u/s. 148A(b) was issued. The assessee filed his reply on 02/03/2023. The AO not satisfied that the reply as conclusive, had passed an order u/s. 148A(d) of the Act and also issued notice u/s. 148. Thereafter the assessee filed his return of income offering the total income of Rs. 2,27,260/-. Thereafter notices u/s. 142(1) were issued on 23/10/2023, 10/11/2023 and 14/11/2023. The assessee replied that out of the above activities, he earned the income of Rs. 16,02,903/- under the income from other sources and declared 8% of the said gross receipts as income. The AO based on the cash book had concluded that a receipt of Rs. 4,42,550/- was not declared and proposed to tax 8% of the said receipts. In respect of the cash deposits, the assessee replied that a sum of Rs. 17,20,000/- was deposited by his friends who are running wine shops for onward transmission to the KSBCL for purchasing the liquor. The assessee also explained that the friend’s bank account had some glitches and therefore the amounts were deposited into the assessee’s bank account. The AO again sought for the confirmation from the friends’ bank about the software problem.

The assessee filed his reply but the AO had not accepted the reply since the confirmation letters were not submitted by the assessee. Thereafter, the AO issued a show cause notice proposing to treat the cash deposits as unexplained income u/s. 69A of the Act and treated the 8% of the difference amount earned from the sale of sheep, goat and hen as business income. The assessee not filed his reply and therefore the AO confirmed the proposals and made the assessment u/s. 147 of the Act.

As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had confirmed the additions.

The assessee is in appeal before this Tribunal challenging the order of the Ld.CIT(A).

At the time of hearing, the Ld.AR submitted that the cash deposits are made by his friends to transfer the same to the KSBCL for purchase of liquors to their shops since their bank account had some glitches. The assessee also demonstrated that the cash deposits made were immediately transferred through RTGS to KSBCL which was also accounted for in the books of KSBCL. The Ld.AR also submitted that all the transactions are effected through banking channel and the assessee also furnished the bank details, third party confirmation letters, cash book & ledger etc. before the Ld.CIT(A) but the Ld.CIT(A) without considering the said documents, had confirmed the order of the AO. The Ld.AR further submitted that even though the assessee had furnished various details, the AO without ascertaining the genuineness of the transactions by conducting enquiry, had simply confirmed the additions. The Ld.AR further submitted that the AO might have been utilized his powers u/s. 133(6) of the Act and examined the KSBCL and also the wine shop owners to elucidate the truth since the assessee had furnished all the details about the wine shop owners and the KSBCL. The Ld.AR further submitted that the affidavit given by the shop owners would support the case of the assessee. The assessee also filed a paper book compilation enclosing the documents such as bank statement, RTGS details, ledger of the KSBCL and the affidavits furnished by the shop owners and therefore, prayed to allow the appeal.

The Ld.DR submitted that the assessee had not furnished the confirmation letter from the bankers and the assessee also not established the facts beyond doubt and therefore, the orders of the lower authorities are liable to be sustained.

We have heard the arguments of both sides and perused the materials available on record.

We have perused the assessment order, appellate order and various documents filed by the assessee. The AO made the allegation that the cash deposits are the unaccounted income u/s. 69A of the Act. We have considered the submissions made by the assessee. It is the assessee’s case that his friends own wine shops and in order to purchase liquor, they have to RTGS the entire purchase consideration to the supplier KSBCL and then only KSBCL would supply the liquors. It is the case of the assessee that his friends’ bank has some glitches and therefore they have deposited cash into the assessee’s bank account which in turn was RTGS to KSBCL on behalf of his friends. We have perused the bank statement of the assessee in which the cash deposits made on various dates were transferred to KSBCL by RTGS. We have also noticed that in some occasions only, the assessee had transferred the amount to KSBCL. The AO had disbelieved the version of the assessee but took no steps to enquire about the reason for transferring the amount to KSBCL. The AO could have summoned the KSBCL and enquired about the RTGS and get all the information and details. No doubt the assessee had tried his best to explain the transactions. Even before the Ld.CIT(A), the assessee filed the confirmation received from his two friends. The authorities had found out some technical defects in it. The AO could have summoned the owners of the wine shops and verify their books of accounts. The AO could have done this exercise since the assessee had furnished the documents which are available with him. We have also noticed that the Bankers expressed their inability to furnish the details about the glitches. In such circumstances, the AO could have issued notices u/s.

We have also perused the documents filed in the paper book by the assessee. The assessee had furnished the copy of the bank statement, details of the RTGS made by the assessee, copy of the ledger of KSBCL and the confirmation letters given by the wine shop owners. From the said documents, the assessee had almost proved that the money belonged to the wine shop owners which was sent to KSBCL for effecting the purchase of liquor. The AO without probing the issue further by conducting enquiry, simply confirmed the addition as unexplained money.

We, therefore, inclined to set aside the orders of the lower authorities. The documents filed by the assessee would satisfy that the addition is not required in this case.

In the result, the appeal filed by the assessee is allowed.