MAJETI VENKATA MUTYALA RAO,,TANUKU vs. THE INCOME TAX OFFICER, WARD-1,, TANUKU

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 144/VIZ/2018 (Asst. Year : 2009-10) Majeti Venkata Mutyala Rao, vs. ITO, Ward-1, F.No.1, Koppaka Vari Street, Tanuku. Tanuku. PAN No. AICPM 0535 C (Appellant) (Respondent)

Assessee by : Shri G.V.N. Hari – Advocate. Department By : Smt. Suman Malik – Sr.DR

Date of hearing : 01/08/2019. Date of pronouncement : 07/08/2019. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-12, Hyderabad, dated 08/02/2018 for the Assessment Year 2009-10. 2. Facts of the case, in brief, are that assessee is an individual, filed his return of income admitting total income of Rs. 1,84,780/- on 30/09/2019. Subsequently, case was taken up for scrutiny under CASS and assessment was completed u/sec. 143(3) by determining total income of Rs. 2,99,154/-. Subsequently, ld. CIT

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by exercising the powers conferred on him u/sec. 263, called the assessment records and find that the Assessing Officer has not examined in respect of the transactions with Corporation Bank, therefore, he was of the opinion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue and directed the AO to treat the entire amount of deposits appearing in the bank account with Corporation Bank, Tanuku as unexplained investment u/s.69 of the Act, after giving an opportunity of being heard to the assessee. 3. The above order passed by the ld. CIT is not challenged by the assessee. Subsequently, the Assessing Officer has passed assessment order u/sec. 143(3) r.w.s. 263, dated 25/02/2015 by issuing a notice dated 07/08/2014. Assessee neither appeared before the Assessing Officer not filed any details. Therefore, the Assessing Officer has completed the assessment as directed by the ld. CIT and the entire amounts deposited in the Corporation Bank to the tune of Rs. 23,31,191/- treated as unexplained investment u/sec. 69 of the Act and accordingly added the same to the total income of the assessee. 4. On appeal, ld. CIT(A) confirmed the order of the Assessing Officer by observing as under:- “6.3 I have carefully considered the submissions of the appellant,

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the order of the Assessing Officer, and the written submissions of the AR. The addition of Rs. 23,31,191/- made by the Assessing Officer on account of unexplained cash deposits in Corporation Bank, has been made pursuant to order u/s.263 passed by the CIT (Rajahmundry) vide Order No.3/2631C1T/RJY/2012-13, dt.13-03- 2014. The contention of the assessee's AR during the course of appellate proceedings is that the deposits in the said bank account were duly examined by the Assessing Officer during the course of the original assessment proceedings, and that the order u/s.263 passed by the CIT (Rajahmundry) is based on surmises and conjectures. To begin with, it is noted here that the said order u/s.263 passed by the CIT(Rajahmundry) has not been challenged by the assessee before the appropriate judicial authorities, and therefore, challenging the said order now before the undersigned, does not serve any purpose. Secondly, it is the contention of the assessee's AR that proper opportunity was not afforded to the assessee during the revision proceedings as well as during the reassessment proceedings. This contention is also found to be baseless and incorrect. In reassessment order i.e., Order u/s.263 r.w.s. 143(3) which is the subject matter of the appeal here, the Assessing Officer has clearly stated that "in spite of the opportunity afforded to the assessee he could not substantiate his claim or prove otherwise". In fact, on perusal of the order u/s.263 passed by the CIT(Rajahmundry), it is seen that not only has repeated opportunity been given to the assessee to explain the matter, which the assessee has chosen not to avail, but also that the issue regarding deposits in the said bank account has also been thoroughly examined and investigated by the CIT (Rajahmundry), while passing the said order u/s.263. The relevant portion of the said order of CIT(Rajahmundry) is reproduced herewith: 10. In response to the show cause notice dated 11-09-2013 fixing the case for hearing on 3009-2013, Shri Majeti Venkata Mutyala Rao, assessee vide letter dated 23-09-2013 received in this office on 30-09-2013 requested for adjournment of hearing for 10 days. Accordingly, the case was fixed for hearing on 15- 10-2013. In response to this, neither any one appeared nor any submission made or any request seeking adjournment of hearing was received. However, vide this office letter dated 05-11-2013, the assessee was given a final opportunity of hearing on 22-11- 2013, which was received by the assessee on 08-11-2013. In response to this also, neither any one appeared nor any submission made or any request seeking adjournment of hearing was received. 11. In the absence of compliance to the show-cause notice, and after carefully considering the material available on record, the issues are decided ex-parte on merits as under (1) Transactions in

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bank accounts with Corporation Bank : Though the assessee asked for adjournment vide letter dated 23- 09-2013, the assessee never responded to the subsequent notice issued. Even to the letters issued by the assessing officer during the assessment proceedings also, the assessee never responded. It is seen from the extracts of the bank account held with Corporation Bank in the joint name of the assessee and his wife that there are cash deposits on various dates and there are withdrawals by way of cheques given to Andhra Sugars Limited and ATM card withdrawals and cheques drawn on Anantha Lakshmi Satyavathi Devi Rice Mill, Sri VV Durga Prasad etc. The total deposits in the bank account are Rs.23,31,191/- during the financial year 2008-09 relevant to the assessment year 2009-10 in Savings Bank account no.499, which was opened on 07-03-2007 in the name of the assessee and his wife Smt. M. Ananthalakshmi. Enquiries were conducted with Andhra Sugars Limited and they have furnished copies of two accounts maintained in their books of account in the name of Shri Majeti Mutyala Rao, Tanuku for the period 01-04-2008 to 31-03-2009 wherein the total credits in the name of the assessee are to the tune of Rs.27,69,374/- + Rs.15,35,775/- and purchases made at Unit-I, Tanuku and Unit-Ill, Bhimadole. It is seen that the amounts were credited to the assessees account by Andhra Sugars Limited. It is further seen that the payments made to Andhra Sugars Limited during the April, May, June are appearing in the statement of bank account of Corporation Bank, Tanuku. Therefore, it is clear that there is one more bank account through which these cheques were Issued to Andhra Sugars Limited. Therefore, the assessee was asked to furnish the sources for cash deposits and payments made to Andhra Sugars Limited. It is further seen that some amounts have gone through the account maintained with Andhra Bank, Tanuku, Account No.00C/01/00001652. This account is in the name of the assessee and disclosed in the balance-sheet. Therefore, it is clear that the assessee has done transactions through bank accounts with 0CC account of Andhra Bank, Tanuku and Corporation Bank, Tanuku whereas Andhra Bank account is admitted in the books of account and the Corporation Bank Is not appearing. It is claimed in the notes to the account that the assessee is running a rice business and the turnover admitted is Rs.48,47,422/- in respect of 4% VAT goods and Rs.17,54,027 in respect of exempted goods. Therefore, it is clear that the transactions are not disclosed In the books of account and it is for the assessee to prove the source for cash deposits in the bank account maintained with Corporation Bank, Tanuku. It Is further seen that the total purchases admitted by the assessee from Andhra Sugars Limited is Rs.18,65,105/- out of total purchases of Rs.74,46,841/-, Rs.47,94,145/- 4% at goods

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on Rs.24,60,969/- (exempted goods). However, the assessing officer erroneously treated the deposits as representing turnover of the assessee and estimated income @5% which is prejudicial to the interests of the Revenue. These purchases include purchases from Andhra Sugars Limited during the year. Therefore, the assessing officer is directed to treat the entire amount of deposits appearing In the bank account with Corporation Bank, Tanuku as unexplained investment u/s.69 of the I.T. Act, after giving an opportunity of being heard to the assessee". From the perusal of the order u/s.263 reproduced above, it is clearly evident that enough opportunity has been afforded to the assessee to explain the said deposits, and he explanations given by him in the original assessment proceedings regarding the said deposits pertaining to his son, and the Assessing Officer's action in the original assessment proceedings of considering the said deposits as the business turnover of the assessee, have been examined in detail, and all the explanations given by the assessee have been found to be unacceptable, and therefore, finding the original assessment order to be erroneous, the CIT (Rajahmundry) has directed the Assessing Officer to treat the entire amount of the deposits as unexplained investment u/s.69 of the Income Tax Act, after giving an opportunity of being heard to the assessee. As already discussed above, the said opportunity has been duly accorded to the assessee by the Assessing Officer, and since the assessee has not been able to give any explanations in the matter, and has not been able to furnish any evidences to substantiate the claims earlier made, the addition u/s.69 has been made by the Assessing Officer. During the course of appellate proceedings also, apart from repeating the story earlier put forth before the Assessing Officer during original assessment proceedings, the assessee has not been able to furnish any evidences to substantiate his claims. The addition u/s.69 is therefore found to have been rightly made by the Assessing Officer, and is confirmed. All the grounds related to this issue are therefore DISMISSED.” 4. On being aggrieved, assessee carried the matter in appeal before this Tribunal. 5. Ld. counsel for the assessee has submitted that the entire addition made by the Assessing Officer on account of deposits made in the Corporation Bank, Tanuku is not justified and submitted that the addition may be deleted.

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Rs.27,69,374/- + Rs. 15,35,775/- and purchases made at Unit-I, Tanuku and Unit-Ill, Bhimadole. It is seen that the amounts were credited to the assessee's account by Andhra Sugars Limited. It is further seen that the payments made to Andhra Sugars Limited during the April, May, June are not appearing in the statement of bank account of Corporation Bank, Tanuku. Therefore, it is clear that there is one more bank account through which these cheques were issued to Andhra Sugars Limited. Therefore, the assessee was asked to furnish the sources for cash deposits and payments made to Andhra Sugars Limited. It is further seen that some amounts have gone through the account maintained with Andhra Bank, Tanuku, Account No.00C/01/00001652. This account is in the name of the assessee and disclosed in the balance-sheet. Therefore, it is clear that the assessee has done transactions through bank accounts with 0CC account of Andhra Bank, Tanuku and Corporation Bank, Tanuku whereas Andhra Bank account is admitted in the books of account and the Corporation Bank is not appearing. It is claimed in the notes to the account that the assessee is running a rice business and the turnover admitted is Rs.48,47,422/- in respect of 4% VAT goods and Rs. 17,54,027 in respect of exempted goods. Therefore, it is clear that the transactions are not disclosed in the books of account and it is for the assessee to prove the source for cash deposits in the bank account maintained with Corporation Bank, Tanuku. It is further seen that the total purchases admitted by the assessee from Andhra Sugars Limited is Rs.18,65,105/- out of total purchases of Rs.74,46,841/-, Rs.47,94,145/- 4% at goods on Rs.24,60,969/- (exempted goods). However, the assessing officer erroneously treated the deposits as representing turnover of the assessee and estimated income @5% which is prejudicial to the interests of the Revenue. These purchases include purchases from Andhra Sugars Limited during the year. Therefore, the assessing officer is directed to treat the entire amount of deposits appearing in the bank account with Corporation Bank, Tanuku as unexplained investment u/s.69 of the I.T. Act, after giving an opportunity of being heard to the assessee.” 8. From the above, it is very clear that the ld. CIT directed the Assessing Officer to treat the deposits made by the assessee with

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the Corporation Bank, Tanuku as unexplained investments u/sec.69 of the Act. Accordingly, the Assessing Officer issued a notice to the assessee. The assessee neither appeared before the Assessing Officer nor filed any written submissions. Therefore, the Assessing Officer by following the directions of the ld. CIT, assessment was completed u/sec. 143(3) r.w.s. 263 of the Act, dated 25/03/2015. We find that the assessee has not challenged the order passed by the ld. CIT, therefore order passed by him is attained finality. It is the duty of the Assessing Officer to pass the assessment order as directed by the ld. CIT u/sec. 263. Accordingly, the Assessing Officer has completed the assessment, the same is confirmed by the ld. CIT(A). We find no reason to interfere with the order passed by the ld. CIT(A). Thus, this appeal filed by the assessee is dismissed. 9. In the result, appeal filed by the assessee is dismissed. Order Pronounced in open Court on this 07th day of August, 2019.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated: 07th August, 2019. vr/-

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Copy to: 1. The Assessee - Majeti Venkata Mutyala Rao, F.No.1, Koppaka Vari Street, Tanuku. 2. The Revenue – ITO, Ward-1, Tanuku. 3. The Pr.CIT, Rajamahendravaram. 4. The CIT(A)-12, Hyderabad. 5. The D.R., Visakhapatnam. 6. Guard file. By order

(VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Visakhapatnam.