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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI. CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 26.03.2018 passed by Ld.CIT(A), Davangere for Assessment Year 2011-12 on following grounds of appeal: “1. The orders of the authorities below in so far as they are against the appellant, are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The order of re-assessment is bad in law and void-ab- initio for want of requisite jurisdiction especially, the mandatory requirements to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re-assessment requires to be cancelled.
3. Without prejudice to the above, the CIT[A] is not justified in sustaining the addition of a sum of Rs.6,05,000/- in respect of income from real estate business that was declared by the appellant on estimate basis at Rs.1,95,000/-and thus sustaining the income estimated at Rs.8,00,000/- under the facts and in the circumstances of Page 2 of the appellant's case. The aforesaid addition sustained by the learned CIT[A] is purely on suspicion and surmises, assumptions and presumption and therefore, the same deserves to be deleted.
The learned CIT[A] is not justified in upholding the addition of Rs.5,63,675/- as unexplained investment made by the appellant in agricultural lands and other properties purchased although the benefit of telescoping was allowed against the income from real estate sustained in appeal under the facts and in the circumstances of the appellant's case. 4.1 The learned CIT[A] ought to have appreciated that there was no such unexplained investment made by the appellant at all and the source for the investments made were duly explained alongwith documentary evidence and consequently, the addition made ought to have been deleted.
The learned CIT[A] is not justified in sustaining the addition of Rs.11,55,000/- as undisclosed deposits in the bank account under the facts and in the circumstances of the appellant's case. He failed to appreciate that the appellant had explained that the said bank account did not relate to him and at any rate, the appellant's father had explained the sources of the deposits made and thus, the addition made is opposed to law and facts of the appellant's case the same deserves to be deleted. 5.1 The learned CIT[A] is not justified in sustaining the addition of Rs.11,55,000/- from out of the addition of Rs.53,17,808/- considered as unexplained cash deposits in the bank account by rejecting the explanation of the appellant in respect of certain deposits made on 26/10/2010, 09/11/2010, 27/11/2010, 01/12/2010 and 21/12/2010, which were explained out of anterior cash withdrawals as well as amounts belonging to the appellant's sister-in-law for which evidence was also laid before the authorities below and consequently, the additions sustained by the learned CIT[A] deserves to be deleted.
The learned CIT[A] is not justified in sustaining the addition of a sum of Rs.1,00,000/- towards inadequate drawings under the facts and in the circumstances of the appellant's case.
Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-B of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled.
For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly Page 3 of Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
Brief facts of the case are as under: 2.1 The assessee is an individual and derives income from real estate business. There was a survey u/s. 133A of the Act, conducted in the premises of the assessee’s father Shri K. Srinath Reddy on 05.08.2013. During the course of survey, it was found that the assessee made investments in purchase of immovable properties. For the year under appeal, the assessee had not filed any return of income since according to the assessee did not have taxable income. 2.2 The Ld.AO issued notice u/s. 148 of the Act on 06.11.2013 calling upon the assessee to file his return of income for the above assessment year. In response to the aforesaid notice, the assessee e- filed his return of income on 08.01.2014 declaring total income at Rs.1,95,000/-. The Ld.AO issued statutory notices calling upon the assessee to file various details which were furnished by the assessee from time to time. 2.3 While concluding the assessment proceedings, by the order u/s. 143(3) rws 147 dated 17.03.2015, the Ld.AO has made following additions / disallowances:- (a) Difference in real estate income – Rs.6,05,000 (b) Unexplained investment in agricultural lands – Rs.5,63,675 (c) Undisclosed deposits in bank account – Rs.53,17,808 (d) Drawings – Rs. 1,00,000 2.4. Aggrieved by the order of the Ld.AO, assessee filed appeal before the Ld.CIT(A). The Ld.CIT(A) upheld the additions made by the Ld.AO. 2.5. Aggrieved by the order of the Ld.CIT(A), assessee filed appeal before this Tribunal.
The Ld.AR submitted that Ground no.1 is general in nature.
Page 4 of 3.1. The Ld.AR submitted that assessee do not wish to press the issue raised in Ground no.2. Accordingly this ground raised by assessee is dismissed as not pressed.
4. Ground No.3 is raised on account of addition made to the real estate business amounting to Rs.6,05,000/-. The Ld.AR submitted that during the course of assessment proceedings the Ld.AO proposed to estimate the income of the assessee from real estate business at Rs.15,00,000/- as the assessee had not produced his books of accounts in support. 4.1. The Ld.AR submitted that it was due to his father’s contact that assessee obtained small businesses. The Ld.AR submitted that assessee while filing the return of income estimated his net income at Rs.1,95,000/- which was increased by the Ld.AO to Rs.8,00,000/-, thereby making addition of the difference. He submitted that the Ld.AO did not have any basis to estimate the income from business in the hands of assessee at Rs.8,00,000/-. 4.2. Before us the Ld.AR submitted that assessee did not maintain any books of accounting terms of section 44AA, having regard to the income declared by assessee. He submitted that the Ld.AO in the notice calling upon assessee to produce the books of accounts had intimated as to why the estimation should not be at Rs.15,00,000/-. 4.3. The Ld.AR submitted before us that assessee did not had such volume of business in order to estimate his business income to Rs.8,00,000/-. He submitted that the net income declared by assessee was after claiming minimum expenditure towards, travelling, telephone etc. The Ld.AO ultimately estimated the income from real estate business at Rs.8,00,000/- which is based on surmises and conjunctures and therefore prayed for its deletion.
Page 5 of 4.4. On the contrary, the Ld.DR placed reliance on the orders passed by authorities below. 4.5. We have perused the submissions advanced by both sides in light of records placed before us. We note that it is not the case of revenue that assessee had suppressed turnover. Further that assessee had himself estimated his income. Merely because assessee estimated his income does not mean that the Ld.AO cannot arbitrarily estimate the same at a higher income. The estimation by the Ld.AO is not based on the income earned by the assessee in the preceding assessment years. Further we note that there is nothing relied by the revenue to hold the estimation by assessee to be false. We are therefore of the opinion that the estimated addition by the Ld.AO do not hold good the tests of law. Accordingly we allow this ground raised by assessee.
5. Ground no.4: Unexplained investment in agricultural lands – Rs.5,63,675. The Ld.AR submitted that during the year under consideration, the assessee made certain investments in the purchase of property/agricultural lands. The Ld.AO called upon the assessee to furnish source for purchase of the aforesaid immovable properties along with material evidence in support of the same. The total investment made by the assessee for the year under appeal came to Rs. 52,32,125/-. 5.1. In response to the query raised by the Ld.AO, the assessee submitted that, he purchased the lands to form residential layout and develop by obtaining approval from various statutory authorities like Deputy Commissioner, DHUDA, BESCOM/KUWSD Board, etc., as part of real estate/property developer business. From this activity, the assessee reported income for assessment years 2008-09 to 2010-11 and the extent of saving from the same was Rs.3,26,180/-.
Page 6 of 5.2. The assessee submitted that his father was in the business of real estate and property developer and was an income-tax assessee and he had given a gift of Rs. 26,00,000 on 21.04.2010, which gift given to the assessee was declared in his return filed before the income-tax authorities. The assessee stated that he received a gift from his grandfather Shri M.H. Narayanappa, who was an agriculturist and doing some business to the extent of Rs. 5,00,000/-. Furthermore, the assessee submitted that during the financial year 2009-10 relevant to the assessment year 2010-11, the assessee had also received gift of Rs. 15,00,000/- in the form of cash and in support of the same, the assessee had filed confirmation and affidavits from the donors. Finally, with regard to the source for the balance investment made, the assessee submitted that the same was from out of accumulated and closing balances of earlier year brought forward and the investments were made from out of the available funds as reflected in the receipts and payments account filed. 5.3 The Ld.AO did not accept the claim of the assessee that he received a gift from his grandfather Shri Narayanappa, the same was not proved in the absence of documentary evidence such as filing of return of income, details of agricultural land with copies of RTC/Pahani, crops grown and furnishing of bank pass sheet and his credit worthiness. After disbelieving the aforesaid source claimed by the assessee, the Ld.AO accepted the sources to the extent of Rs.49,56,000/- as per the receipt and payment account filed by the assessee. Accordingly, he computed the unexplained investment made by the assessee in purchase of properties during the year at Rs.5,63,675/-. 5.4 Aggrieved by the addition, made by the Ld.AO, assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) confirmed the addition made in a mechanical way.
Page 7 of 5.5 Aggrieved by the addition, made by the Ld.AO, assessee preferred appeal before this Tribunal. The Ld.AR submitted that no enquiries were carried out by the authorities in respect of the evidences filed by assessee. He submitted that the addition is based on surmises by the Ld.AO. It is submitted that Rs.5,00,000/- is from past savings and Rs.63,000/- is current years income. The Ld.AO submitted that the Ld.CIT(A) did not call for any details to verify the same and upheld the addition. He submitted that the Ld.AO did not even accept the current year income. 5.6 On the contrary, the Ld.Sr.DR relied on orders passed by authorities below. 5.7 We have perused the submissions advanced by both sides in light of records placed before us. We note that assessee has not filed any details to establish the availability of monies amounting to Rs.5,63,000/-. The letter dated 09/02/2015 filed by assessee before the Ld.AO, contains details of income declared by assessee in the preceding assessment years. These details have not been considered by the Ld.AO. In the interest of justice we, remand the issue back to the Ld.CIT(A) to carryout necessary verification. The Ld.CIT(A) is directed to pass a detailed order on merits after considering the details filed by assessee. Needless to say that proper opportunity of being heard may be granted to assessee in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes.
6. Ground No.5: Undisclosed deposits in bank account - Rs.53,17,808/- It is submitted that in course of assessment proceedings, the Ld.AO called upon the assessee to explain the sources of deposits made in Page 8 of ING Vysya Bank Ltd., which was not reflected in the return of income of the assessee. 6.1 The assessee submitted that the aforesaid bank account did not belong to him at all. It was explained that the said account was opened as a joint account by his father Sri K.Srinath Reddy, who was the first depositor or account holder. It was submitted that the name of the assessee was included a second depositor only for the sake of operational convenience. The assessee further submitted that his father Sri K.Srinath Reddy was carrying on contract work during the above period and was also carrying on real estate business and was an Income-tax assessee. His father was maintaining the said bank account to facilitate certain payments and collections and that the assessee was made the second depositor of the said joint account only for operational convenience in the event his father was out of station. 6.2 The assessee submitted that the transactions carried out through this bank account pertain to his father and the assessee was not aware of, or connected with, the aforesaid transactions reflected in the bank account in his individual capacity. In support of the same, the assessee specifically pleaded that he had not made any deposits or withdrawals in the said bank account. The assessee further submitted that the nature and source of the deposits/transactions with the said bank account are related to his father's business/personal affairs and in this connection, the assessee has also filed a letter from his father explaining the sources of the various deposits made in the said bank account. 6.3 The Ld.AO, however, did not accept the aforesaid contentions. He found that the aforesaid bank account was not disclosed in the income tax returns of the assessee's father Sri. K.Srinath Reddy. He observed that the assessee had also not disclosed this bank account and the source for the deposits made in the said bank account were Page 9 of not reflected in the receipts and payments account filed by the assessee. For these reasons, the Ld AO made addition of Rs. 53,17,808/- . 6.4 Aggrieved by the addition, made by the Ld.AO, assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) confirmed the addition made in a mechanical way. 6.5 Aggrieved by the addition, made by the Ld.AO, assessee preferred appeal before this Tribunal. Before us the Ld.AR submitted that assessee had filed affidavit from Smt. Suvarna Giri Devi, cash flow statement prepared during assessment proceedings etc. However, none of these were verified by neither the Ld.AO, nor the Ld.CIT(A). 6.6 On the contrary, the Ld.Sr.DR relied on orders passed by authorities below. 6.7 We have perused the submissions advanced by both sides in light of records placed before us. We note that assessee had filed letter from K.Srinath Reddy, father of assessee, and various documents to explain the source of funds. It is the submission of the assessee that assessee’s name appears second to the fathers name and the bank account originally belongs to his father which is an admitted position in the letter dated 13/03/2015. Neither the Ld.CIT(A), nor the Ld.AO carried out necessary verification in respect of the evidences filed by assessee supporting the cash deposits. 6.8 In the interest of justice we therefore remand the issue back to the Ld.CIT(A) to carryout necessary verification. The Ld.CIT(A) is directed to pass a detailed order on merits after considering the details filed by assessee. Needless to say that proper opportunity of being heard may be granted to assessee in accordance with law.
Page 10 of Accordingly, this ground raised by assessee stands allowed for statistical purposes.
7. Ground No.6: Drawings - Rs.1,00,000/- 7.1 It is submitted that during the previous year the assessee had shown drawings to the extent of Rs.36,000/- and the Ld.AO asked the assessee to substantiate the drawings with material evidence. In response to the same the assessee submitted that the assessee was staying with his parents and all his household expenses were borne by his parents and the drawing shown by him was sufficient having regard to his standard of living. However, the Ld.AO without considering the reasonable explanation added a sum of Rs.1,00,000/-. 7.2 We have heard both sides. We note that house hold expenses to the extent of Rs.1,00,000/- as against Rs.36,000/-. Considering the fact that this is on an estimate basis and that assessee is a bachelor who stays along with his parents, the estimated addition by the Ld.AO is not justified, with such cogent reasons. There is no basis for such estimation by the revenue and the same deserves to be deleted. Accordingly this ground raised by assessee stands allowed. In the result, the appeal filed by assessee stands partly allowed as indicated above. Order pronounced in the open court on 31st January, 2022.