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Income Tax Appellate Tribunal, “SMC - A” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC - A” BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT Assessment Year : 2017-18 Shri. Subhasa Poojari, Vs. ITO, Old No.6, New No.18/2, Ward – 1(2)(3), Dodda Kattappa Road, Ulsoor, Bengaluru. Bengaluru – 560 008. PAN : EHRPS 6826 N APPELLANT RESPONDENT Assessee by : Shri. Chythanya V. Mudrabettu, Advocate Revenue by : Shri. Ganesh R Ghale, Standing Counsel for Department. Date of hearing : 01.08.2022 Date of Pronouncement : 10.08.2022 O R D E R
This is an appeal by the assessee against the order dated 15.03.2022 of National Faceless Appeal Centre (NFAC), Delhi, relating to Assessment Year 2017-18.
The assessee is an individual. For Assessment Year 2017-18, the assessee filed a return of income declaring a total income of Rs.5,60,000/-. The source of income of the assessee was income from salary and income from other sources. The assessee was a partner in a partnership firm by name Siddivinayaka Ventures and as partner he received salary of Rs.3,60,000/-. In the course of assessment proceedings, the AO issued several notices to the assessee and the assessee did not respond to any of these notices. These have set out in para 4 of the Order of Assessment. The AO finally proceeded to frame an ex-parte assessment under section 144 of the Income Tax Act, 1961 (Act). The AO noticed that the assessee had a bank account in Canara Bank, Account No.0647101057607 According to the AO, there were cash deposits of Rs. 5,22,971/- and other credits of Rs. 8,32,179/- into this bank account. The AO also found that the assessee had another bank account with Corporation Bank, Basaveshwaranagar Branch bearing account No.SB/01/014068 in which they were cash deposits of Rs.16,500 and credits of Rs.47,594/-. Thus the total cash deposits and credits in the aforesaid two bank accounts were Rs.5,36,697 and Rs.8,79,773 respectively. However, in the return of income filed on 23.09 2019, the assessee has shown income from Salary of Rs. 3,60,000/- and shown income from other sources of Rs.2,00,000/-under sub-head 'rent'. Out of the total cash & other credits of Rs. 14,16,470/- (Rs. 5,36,697 + Rs. 8,79,773), the assessee had shown income of Rs.5,60,000/- only. The assessee had failed to substantiate the differential amount of Rs.8,56,470/-. Further, there is no loan shown by the assessee in his return filed on 23.09.2019. Hence, the differential amount received by the assessee is not a loan, not a business income and the same is not offered in the return of income to tax.
Thereafter the AO made a reference to the provision of section 69A of the Act which provides as follows:
"Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account. if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”
According to the AO, the assessee is found to be the owner of money/cash deposited into the bank accounts. There are no books of account submitted by the assessee in support of return of income filed. The assessee offered no explanation about the nature and sources of the acquisition of money deposited into bank accounts, as discussed above. Therefore, the provisions of section 69A of the Act are clearly applicable in to the case. With the aforesaid observations, the AO brought to tax the differential amount of cash deposited & other credits in bank accounts of Rs.8,56,470/- to total income of the assessee under section 69A of the Act as unexplained money.
The AO further noticed that a sum of Rs.10 lacs was introduced as capital by the assessee in the partnership firm M/s. Siddivinayaka Ventures vide deed of reconstitution dated 29.6.2016. The source of funds for contribution to capital to the extent of Rs.5 lacs was explained as from assessee’s bank account and this was accepted by the AO. With regard to the remaining sum of Rs.5 lacs, the AO found no records. Hence, he treated the capital contribution of Rs.5 lacs as unexplained money u/s/69A of the Act.
Further the AO held that the tax liability of the assessee has to be computed as per the provisions of section 115BBE of the Act as the addition is made under section 69A of the Act.
Before the CIT(A), the assessee filed the required details explaining each of the credit entries in the bank account of the assessee. The CIT(A) however confirmed the orders of the AO with the following observations:
“7.3 I have considered the matter. According to Assessing Officer, out of cash and other deposits in the bank accounts, the income-tax return of assessee was sufficient to cover only credits to the extent of Rs.5.60.000/-. Under the circumstances. the assessee ought to give explanation regarding each item of credit entries in the bank account. Further, assessee had introduced capital of Rs.10.00,000/- in the partnership firm in which he was partner. According tt5 the Assessing Officer, out of Rs.10,00,000/- only Rs.5.00.000/-was through assessee's banks account. The remaining sum was not explained before the Assessing Officer. 7.3.1 Coming to documents filed by assessee. it is seen that the car refinance of Rs.6,00,000/- is not a part of credit appearing in account maintained with Canara Bank. The purported loan confirmations mentioned at Para 7.2 of this order cannot be treated as authentic. They were given on written plain paper without addresses and full names of alleged loan givers. Even the PANs are not available in some of the confirmations. Identity. creditworthiness and genuineness of transactions are not proved. Therefore the sources of deposits made in the bank account cannot be treated as explained. In view of this, the documents submitted in appeal cannot be treated as authentic. Considering the above, grounds Nos. 4 and 5 are dismissed.”
Aggrieved by the order of the CIT(A), assessee is in appeal before the Tribunal. I have considered the rival submissions and the evidence filed by the assessee before the lower authorities and the Tribunal. The first and foremost aspect which was highlighted by the learned counsel for the assessee, was that provisions of Sec.69A of the Act, will not apply to the case at all because, the entry in the bank pass book has to be regarded as recorded in the books of accounts. Sec.69A of the Act can be invoked only when the assessee is found to be owner of money, bullion, jewellery or other valuable article or thing is not recorded in the books of accounts maintained by him for any source of income and the assessee offers no explanation or the explanation offered is not satisfactory. When the entries are found recorded in the books of accounts, the aforesaid provisions cannot be invoked at all. The source of income of the assessee is salary from the partnership firm “Siddivinayak Ventures” and ‘income from other sources’. A credit entry in the bank pass book regarding receipt of money into that account cannot be the basis to hold that the assessee is found to be owner of any money, bullion, jewellery or other valuable article or thing and therefore the first condition for invoking the provisions of Sec.69A of the Act, does not stand satisfied.
Though, I have expressed the opinion that the conditions for invoking the provisions of Sec.69A of the Act, are not satisfied in the present case, nevertheless, I will proceed to examine each one of the credit entries in the bank account based on which the addition was made by the AO. These entries are as follows:
Details of credit entry in the bank account based on which additions were made by the AO are as follows: Rs.8,56,470 (credit entries in the bank account) + Rs.5 lacs (capital contribution of the Assessee to the firm Siddivinayaka Ventures): Total addition of Rs.13,56,470: Confirm ation Name of Party Amount Ashok 12000 YES Lingfin (Bangalore) Private Limited - Axis Bank 590500 YES Raghu Shetty (.Paid to the firm direcity on behaf of Subash) 500000 YES Venka Reddy 149838 YES Ashwin 18000 Yes M Krishna Mohan Reddy 41000 YEs Ankitha - Wife of Subash Poojari 17000 YES Others 28132 NO TOTAL 1356470
We will deal with each of the items in the above chart with reference to the evidence filed by the assessee: i. Mr. Ashok – Rs. 12,000/- : In so far as this credit appearing in the bank account is concerned, Mr. Ashok has given an affidavit giving details of his PAN and has confirmed that he has paid a sum of Rs.12 lakhs through banking channel to the Assessee in the following manner:
Date Amount (Rs.) 12/05/2016 3,000 16/06/2016 1,500 22/07/2016 1,500 23/09/2016 1,500 23/11/2016 1,500 01/02/2017 1,500 01/02/2017 1,500 TOTAL 12,000 The CIT(A) did not accept the plea of the assessee for the reason that Mr. Ashok had filed the confirmation before the CIT(A) in a plain paper without PAN as well as address. The fact however remains that the payment to the assessee was through banking channels and this aspect has been overlooked by the CIT(A). Now in the light of the affidavit and details of PAN provided, I am of the view that the explanation of the assessee in this regard has to be accepted as satisfactory. ii. Lingfin (Bangalore) Pvt. Ltd., - Rs.5,90,500/- : In so far as this person is concerned, it is a Pvt. Ltd., company. The assessee has approached the aforesaid company for loan to buy a Duster vehicle. The finance company has sanctioned loan of Rs. 6 lakhs. This finance company approached Axis Bank for a refinance and Axis Bank ultimately gave the finance company a sum of Rs.5,92,579/-. Out of the said sum they gave a sum of Rs.5,90,500/- to the assessee by way of RTGS and this entry appears in the assessee’s passbook on 18.02.2017. The payment has come through banking channels. The document evidencing taking loan of Rs.6 lakhs from Axis Bank was filed before the CIT(A) but the CIT(A) did not take cognizance of the same, on the plea that the document is not authentic. In the light of the evidence now available with the Tribunal, I find that the credit has been satisfactorily explained by the assessee and the impugned addition cannot be sustained. iii. Mr. Raghu Shetty : The AO made addition of Rs.5 lacs which was capital contribution of the Assessee to the partnership firm M/S.Siddivinayaka Ventures. In so far a sum of Rs.5 lakhs is concerned, Mr. Raghu Shetty filed a handwritten confirmation before the CIT(A) giving his PAN wherein he affirmed that he paid Rs.5 lacs on behalf of the Assessee as capital contribution of the Assessee to the aforesaid firm. The CIT(A) did not accept the said confirmation on the ground that it was handwritten on a plain paper. In an affidavit filed before the Tribunal, Mr. Raghu Shetty has confirmed that he paid Rs.5 lakhs as an unsecured loan to the assessee and this was paid by way of transfer of Rs.5 lakhs to Siddivinayaka Ventures in which the assessee was a partner and this payment was intended to be given as a capital contribution by the assessee to the firm. The transaction having happened through banking channels cannot be disputed or disbelieved. Hence, the sum of Rs.5 lakhs stands duly explained. iv. Mr. Venka Reddy : Mr. Venka Reddy had filed a confirmation affirming that he gave unsecured loan to the Assessee and this confirmation was filed before the CIT(A). In this confirmation only the PAN was given and that was found to be insufficient by the CIT(A). Before us, Mr. Venka Reddy has filed a confirmation confirming that he had given unsecured loan to the assessee through banking channels as follows:
Date Amount (Rs.) 19/09/2016 96,890 20/09/2016 3,000 30/01/2017 49,948 TOTAL 1,49,838 In the light of this evidence, I am of the view that this credit also stands explained satisfactorily. v. Mr. Ashwin : The Assessee filed confirmation before the CIT(A) that he had given unsecured loan to the Assessee. The CIT(A) did not accept the said confirmation on the ground that it was handwritten on a plain paper. As far as the aforesaid payment is concerned, Mr. Ashwin has filed an affidavit before the Tribunal confirming that he had made following payments through banking channels:
Date Amount (Rs.) 17/02/2017 100 28/02/2017 1,000 28/02/2017 17,000 TOTAL 18,100 In the light of the said confirmation, the credit in question has to be accepted as duly explained. vi. Mr. M. Krishna Mohan Reddy - Rs.41,000/- : Mr. M. Krishna Mohan Reddy filed the confirmation before the CIT(A) which did not have proper particulars but before the Tribunal, an affidavit has been filed giving all details like address and PAN confirming that he had paid Rs.41,000/- through banking channels. In the light of these evidence, I am satisfied that this credit also stands satisfactorily explained. vii. Smt. Ankitha W/o of the assessee – Rs.17,000/- : Smt. Ankitha filed a confirmation before the CIT(A) confirming that she gave a sum of Rs.17,000/- as unsecured loan to the assessee through banking channel which was disbelieved by the CIT(A) for want of PAN and other details. Now before the Tribunal, she has filed an affidavit confirming that she made the following payments through banking channels to the assessee. Date Amount (Rs.) 28/03/2017 2,000 31/03/2017 15,000 TOTAL 17,100 In the light of these evidence, I am satisfied that this credit also stands satisfactorily explained.
In so far as the remaining sum of Rs.28,132/- is concerned, it represents a sum of Rs.17,000/- being interest on the SB A/c from 01.02.2017 to 30.04.2017. With reference to the remaining sum of Rs.11,132/- is concerned, the basis on which this was arrived at by the AO is not clear from the Order of the Assessment. Hence in so far as this addition is concerned, I remit the matter back to the AO for verification with liberty to the assessee to substantiate this credit entry also. Accordingly, I partly allow appeal of the assessee.
In the result, the appeal of the assessee is partly allowed.
Pronounced in the open court on the date mentioned on the caption page.