THE ITO., VIJAYAWADA vs. SRI MUDDA ANIL KUMAR,, VIJAYAWADA

Ground No.1 and 6 are general in nature which does not require specific adjudication.

Ground No.2 is related to the addition of Rs.16,98,150/- pertaining to cash deposits in Axis Bank. The assessee is engaged in the business of manufacturing and trading of food products and filed his return of income declaring total income of Rs.5,20,420/- and the case was selected for scrutiny and the assessment was completed u/s 143(3) on total income of Rs.90,91,734/-. During the assessment proceedings, the AO found that there were total credits of Rs.27,06,800/- in Axis Bank A/c No.069010100362054 and this account was not disclosed to the department. The assessee explained that the credits in the bank account represent the trade transactions and the amounts were deposited by customers from various locations of the state, hence requested not to make the addition. However, the assessee could not produce any evidence to support the explanation of the assessee to prove the credits in the bank account were in fact related to business transactions. The break-up of the creditors of Rs.27,06,800/- is as follows :

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) found that the source of the cash deposits was not explained by the assessee and the deposits stated to be made by various customers from various locations was not supported by any evidence. Therefore, rejected the assessee’s contention that the deposits were business transactions. However, the Ld.CIT(A) directed the AO to make the addition of peak credit of Rs.12,29,969/- (after excluding the sum of Rs.1,16,150/- transferred by cheque) instead of Rs.16,98,150/- and allowed the relief of Rs.4,68,181/-. Accordingly the appeal of the assessee was partly allowed.

Against the order of the Ld.CIT(A), the revenue filed appeal before this Tribunal.

We have heard both the parties and perused the material placed on record. AXIS Bank account of the assessee was undisclosed to the department and the total deposits made in the bank account was Rs.27,06,800/- . Out of the said sum of Rs.27,06,800/-, an amount of Rs.10.00 lakhs was related to the unsecured loan received from Smt. A.Sharada which was taxed separately by the AO. A sum of Rs.2,16,510/- was received from Shri K.Suresh Kumar by cheque and it was not cash deposit made in the bank account. Therefore, the net deposits in the bank account were Rs.14,81,640/-. All the deposits were made in the bank account in amounts less than Rs.50,000/- on each occasion and the debit entries in the bank account was found to be mostly by ATM cash withdrawals. The assessee did not furnish any evidence either before the AO or before the CIT(A) to establish that the genuineness and the source of credits made in the bank accounts. Therefore, the Ld.CIT(A) has held that the cash deposits made in the bank account were not business transactions and they were unaccounted deposits. Since, there were withdrawals as 5 Sri Mudda Anil Kumar, Vijayawada well as deposits in the bank account it is reasonable to hold that the deposits were made out of cash withdrawals and the deposits and withdrawals are circulation of the same money. Therefore, we are of the considered view that in the facts and circumstances of frequent cash deposit and the withdrawal, it is correct to make the addition of peak credit balance, but not the entire deposits which the Ld.CIT(A) has directed the AO. Hence, we do not see any reason to interfere with the order of the CIT(A) and the same is upheld. The appeal of the revenue on this ground is dismissed.

Ground No.3 is related to the addition of Rs.10,00,000/- unsecured loans received from the creditor, Alluri Sharada. During the course of assessment proceedings, the AO found that the assessee has received the sum of Rs.10 lakhs from Smt.A.Sharada by cheque No.58534. The assessee was asked to explain the source for Rs.10 lakhs the and the assessee explained that he had already submitted the complete details before the AO at the time of original assessment, therefore requested to accept the transaction. Since the assessee did not explain the creditworthiness and identity of the creditor in the reassessment proceedings, the AO issued letter to the creditor, Smt.A.Sharada which was returned unserved with a 6 Sri Mudda Anil Kumar, Vijayawada reason ‘unclaimed’. Though this fact was brought to the notice of the assessee, the assessee did not furnish the required details before the AO. Therefore, the AO made the addition of Rs.10 lakhs u/s 68 of the Act.

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and submitted that the loan was accepted by cheque and furnished the complete details before the AO at the time of original assessment. The assessee also furnished the copy of Aadhar card to provide the identity of the creditor with a petition for admission of additional evidence under Rule 46A of Income Tax Rules. The Ld.CIT(A) verified available income tax records, copy of the confirmation letter and AXIS bank statement copy for the relevant period and observed that there was balance of Rs.11,23,400/- credit as on 03.02.2011 and out of which a sum of Rs.10,00,000/- was paid by cheque dated 03.02.2011 to the assessee. Thus, found that the assessee had established the identity, credit worthiness, genuineness of the transaction, hence, deleted the addition.

Aggrieved by the order of the Ld.CIT(A), the revenue has filed appeal before this Tribunal.

We have heard both the parties and perused the material placed on record. The revenue’s contention is that the assessee has furnished the additional evidence and the Ld.CIT(A) should not have acted upon the additional evidence under Rule 46A without giving opportunity to the AO as required under Rule 46A of the Income Tax Rules. Though the contention of the revenue appears to be correct, the only additional evidence produced by the assessee before the Ld.CIT(A) is Aadhar card number to establish the identity of the party. This is second round of assessment of this case and in the first round, the assessment was completed u/s 143(3) by selecting the case for scrutiny vide order dated 08.02.2013. During the course of original assessment as discussed in the assessment order, the assessee had furnished the details of confirmation which was accepted by the AO and the same was not disputed at the time of original assessment. No lapse or the defect was found in the confirmation letter at the time of reassessment proceedings. Therefore, the AO cannot agitate against the proof of identity furnished before the Ld.CIT(A). Even otherwise, the Ld.CIT(A) is competent to entertain the additional evidence on his own and conduct enquiries as provided u/s 250(4) of the Act. In the instant case, what the commissioner has examined is the income tax

Ground No.4 is related to the addition of Rs.42,24,817/-. During the assessment proceedings, the AO found that there were credits in the bank account of ING Vysya bank account No.705010053543 to the tune of Rs.42,50,176/- for which the assessee explained that the deposits were business transaction and the customers from various locations have made the deposits towards sales. However, the assessee failed to furnish the evidence to support the credits or the sales. Therefore, the AO treated the 9 Sri Mudda Anil Kumar, Vijayawada deposits made in the bank account totaling to Rs.42,24,817/- as income of the assessee.

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and the Ld.CIT(A) observed that most of the credits in the account represent the assessee’s business transactions on the basis of additional evidences produced by the assessee, i.e. confirmation letters from some of the parties. The Ld.CIT(A) made verification of random confirmations produced by the assessee and observed that the contention of the assessee that the transactions in the bank account represent business transactions was true. For this purpose, the Ld.CIT(A) relied on the confirmation letters produced by the assessee from M/s Vamsi Food Products, Sri M.Rajeswara Rao, Sri K.Praveen Babu and Sri Babu Rao. The credits in the bank account related to deposit of collections of Punganur / Palamaner / Saroor Nagar / Kakinada and Ponnur branches. Accordingly, the CIT(A) held that the claim of the assessee is true to the extent of transactions were related to the business transactions. Therefore the Ld.CIT(A) held that the estimation of income @10% on undisclosed turnover of Rs.42,29,817/- is reasonable and accordingly confirmed the 10 Sri Mudda Anil Kumar, Vijayawada addition of 10% being the profit on total sales of Rs.42,24,817/- and deleted the balance addition.

Against the order of the Ld.CIT(A), the revenue filed appeal before this Tribunal. At the outset, the Ld.DR during the appeal hearing argued that the Ld.CIT(A) ought not to have entertained the additional evidence without remanding the same to the AO. Therefore, argued that the Ld.CIT(A) entertained the additional evidence without giving opportunity to the AO, hence the order of the Ld.CIT(A) is unacceptable and accordingly argued that the same should be remitted back to the file of the AO. On the other hand the Ld.AR relied on the orders of the Ld.CIT(A).

We have heard both the parties and perused the material placed on record. In the instant case, in ING Vysya Bank, there were credits to the extent of Rs.42,24,817. Though the assessee stated that the deposits in the bank account represented the sales, no evidence was produced by the assessee before the AO to support that the deposits in the bank account actually represent the trade transactions. Before the Ld.CIT(A), the assessee furnished the confirmation letters from four parties, Sri M.Rajeswara Rao, Sri K.Praveen Babu, Sri Babu Rao and A.Sharada

Ground No.5 is related to the addition of Rs.21,67,758/- in IndusInd Bank. During the assessment proceedings, the AO found that there was cash deposit of Rs.23,89,857/- in the Indus Ind Bank, Vijayawada a/c No.0057-F81050-050 as under : Cash deposits - Rs.6,70,450/- Cheque transactions - Rs.9,86,011 Cheque returns - Rs.2,22,099 Other Deposit - Rs.5,11,297 Total - Rs.23,71,857/- The AO has asked the assessee to furnish the complete details of these credits with evidences. However, the assessee could not submit any evidence to explain the source of the credits. Therefore, the AO after excluding the cheque returns of Rs.2,22,099/- brought to tax the remaining amount of Rs.21,67,758/-.

Against the order of theLd.CIT(A), the revenue has filed appeal before this Tribunal.

We have heard both the parties and perused the material placed on record. The Ld.CIT(A) deleted the addition with the following observations : “In view of the above, I am of the view that there is no unexplained deposit in IndusInd Bank A/c. Assessing Officer had not specifically identified any such cash deposit as unexplained. Assessing Officer acknowledged in the assessment order about availability of confirmation letters regarding sales. Assessing Officer did not cause any enquiry in respect of such confirmations though some of them contained full address, PAN etc. Further, total cash credit in Induslnd Bank during the relevant Assessment Year was only Rs.670,450/-, others are cheque transactions (Rs.9,86,O11/-) RTGS/NEFT transactions (Rs.5,11,297/-). All of them totalled to Rs.21,67,758/-.”

In the result, the appeal of the revenue is partly allowed for statistical purpose. Order pronounced in the open court on 30th April 2019. (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 30.04.2019 L.Rama, SPS