I. SURENDRA BABU, TIRUPATHI,TIRUPATHI vs. INCOME TAX OFFICER, WARD-2(2), TIRUPATHI

Brief facts of the case are that, the assessee, an individual, deriving income from partnership firm M/s. Surabhi Distributors and other sources, filed his return of income on 25-10-2010, admitting a total income of Rs. 3,37,114/- besides agricultural income of Rs. 1,37,000/-. The case was selected for scrutiny under CASS and accordingly, notices have been issued to assessee u/s. 143(2) and 142(1) of the Income Tax Act [Act] calling for information.

The assessee, represented by his AR, filed the relevant documents along with bank account statements. On perusal of the bank account statement, Assessing Officer found that there are certain cash deposits into the bank account. The Assessing Officer recorded statement of one Shri V. Gangadhar Gupta on 20-12-2012, wherein he had stated that he had taken a loan of Rs. 5,50,000/- from the assessee in the earlier years and that the same was not repaid for the FY. 2009-10 relevant to the AY. 2010-11. He had stated that he had paid Rs. 82,500/- as interest to the assessee on the said loan during the FY. 2009- 10. Therefore, the Assessing Officer was of the opinion that assessee’s claim of receipt of the entire loan amount from Shri V. Gangadhar Gupta of Rs. 5,50,000/- during the FY. 2009-10 is not in order. Therefore, Assessing Officer treated it as assessee’s income and also brought to tax both the sum of Rs. 5,50,000/- and the interest of Rs. 82,500/-.

The CIT(A), however, confirmed the additions made by the Assessing Officer and the assessee is in second appeal before us, by raising the following grounds of appeal:

The Authorities below are not justified in making an addition, of an amount being Rs. 6,32,500/-, which was received from Shri V. Gangadhar Gupta, during the impugned Assessment Year 2010-2011, under the facts and circumstances of the case. 5. The Authorities below are not justified in making an addition, of an amount being Rs. 1,15,000/- which was received from Smt. V. Bala Prasuna, during the impugned Assessment Year 2010-2011, under the facts and circumstances of the case. 6. The Authorities below are not justified in making an addition of an amount being Rs. 7,47,500/-, which the Appellant had received from Shri V. Gangadhar Gupta and Smt. V. Bala Prasuna, in cash and credited into the books of account of the Appellant, under the facts and circumstances of the case. 7. The Authorities below are not justified in making an addition of an amount being Rs. 1,77,550/-, under the facts and circumstances of the case. 8. Without prejudice to the right to seek waiver as per the parity of reasoning of the decision of the Hon'ble Apex Court in the case of Karanvir Singh 349 ITR 692, the Appellant denies itself liable to be charged to interest under section 234 A, 234 B & 234 C of the Income Tax Act under the facts and circumstances of the case. 9. Without prejudice the provisions of section 234 B [3] of the Act is applicable as per which interest under section 234 B of the Act can be calculated only from the date of 143[1] or from the date of order of assessment. In the instant case there was an intimation under section 143[1] of the Act, only from such date if at all any interest to be calculated to be reckoned. 10. Without prejudice the levy of interest under section 234 A, 234 B & 234 C of the Act is also bad in law as the period, rate, quantum and method of calculation adopted on which interest is levied are all not discernable and are wrong on the facts of the case. 11. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 12. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity”.

Ld. Counsel for the assessee supporting the grounds of appeal, submitted that the assessment was made only on the basis of the statement of the debtor, Shri V. Gangadhar Gupta with regard to loans taken by him and his wife, Smt. V. Bala Prasuna, and submitted that such statements were taken behind the assessee’s back and assessee was not even given an opportunity to cross-examine them even though assessee had specifically raised a ground before the CIT(A). He submitted that such an addition made on the basis of a statement recorded behind the back of assessee, without an opportunity to cross-examine the said parties, is not sustainable and therefore should be deleted.

Ld.DR, however, supported the orders of the authorities below.

Having regard to the rival contentions, I am of the opinion that, where any statement is sought to be relied upon by the Assessing Officer to make an addition to the returned income of an assessee, the assessee should be given a show cause notice and if so requested, an opportunity to cross-examine the said parties. In this case, though the assessee did not seek an opportunity to examine before the Assessing Officer, he did raise a specific ground before the CIT(A), but he failed to deal with it in his order. Therefore, I deem it fit and proper to remand the issue back to the file of Assessing Officer with a direction to allow the assessee to cross-examine Shri V. Gangadhar Gupta and Smt. V. Bala Prasuna and to reconsider the issue in accordance with law. Needless to mention that the

In the result, the appeal of assessee is treated as allowed for statistical purposes.

CIT (Appeals)-Tirupati. 4. Pr.CIT-Tirupati.

D.R. ITAT, Hyderabad.

Guard File.