MATTA REKHA, BANGALORE,HYDERABAD vs. DCIT, CENTRAL CIRCLE-1(1), HYD, HYDERABAD

The assessee filed these appeals with a delay of 45 days. To this effect, assessee filed a petition for condonation of the said delay wherein she stated that she has shifted her residence to Bangalore to look after her ill mother due to which the delay occurred in filing the appeals after discussing the issues in detail with her advocate who is stationed at Hyderabad. She further stated that the delay is for the reasons beyond her control and is not intentional. Considering the submissions of the assessee and the objection of the ld. DR, we hereby

Briefly the facts of the cases, as taken from AY 2009-10, are, the assessee filed her return of income for the AY 2009-10 dated 12/08/2009 admitting income of Rs. 10,97,600/-. A search and seizure operation under section 132 of the Income-tax Act, 1961 (in short ‘the Act’) was conducted at the residential premises of the assessee on 03/08/2011. Subsequent to the search, a notice u/s 153A of the Act was issued on 01/03/2012 for AYs 2006-07 to 2011-12. In response to the above notice, the assessee filed the return of income on 09/10/2012, admitting an income of Rs. 18,30,120/-. Notices u/s 143(2) and 142(1) of the Act along with the questionnaire were issued to the assessee. In response to the notices, the AR of the assessee filed the information as called for. The AO completed the assessment determining the assessed income at Rs. 45,54,070/- by making the additions towards i) unexplained cash credit of Rs. 3,23,949/- and ii) unaccounted cash salary of Rs. 24,00,000/-, which is the subject matter in the three appeals under consideration.

Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).

The CIT(A) passed a consolidated order from AY 2006-07 to 2012-13. As regards the said addition of Rs. 24,00,000/- as unexplained cash credit u/s 68 of the Act, the CIT(A) confirmed the same in the AYs under consideration by observing as under: “08.4 The undisputed position emerging from this set of facts is that the monthly income of Rs.2 Iakhs derived from the Narayana Group from March, 2008 onwards rests on more than the mere statement of the assessee. It is therefore a reliable basis for computing assessable income for the relevant period. It is seen that the additional income offered by the assessee does not bear correspondence with this factual position. The additional income offered for the AYs 2008-09 to 2012-13 is Rs.2.40 lakhs, Rs.2.75 lakhs, Rs.15.25 lakhs, Rs.47.75 lakhs and Rs.2,15,150/- respectively. During the hearing when questioned about this aspect, Ld. AR admitted this position, however, contended that the additional income offered was on the basis of accretion to fixed deposits in the bank accounts. This position is clearly unacceptable. Income has to be recognised as it accrues, arises or is received. Application of this income into assets is not only a subsequent fact but is also discretionary. To recognise income only at the stage of its application would, therefore, give rise to anomalous results. In this case, it is seen that there is an admitted receipt of Rs.2 lakhs per month which is also corroborated by accompanying circumstances for the entire period of the assessee's association with the Narayana Group. Under the circumstances offering additional income of Rs.2.75 lakhs in AY 2009-10 is as much unacceptable as admitting Rs.47.75 lakhs on this issue in the later AY 2011-12 is incorrect. The additional income correctly chargeable to tax should, therefore, be Rs.2 lakhs in AY 2008-09 and Rs.24 lakhs in each of the AYs from 2009-10 to 2012-13.”

Aggrieved by the order of CIT(A), the assessee is in appeal before us challenging the action of the CIT(A) in confirming the addition of Rs. 24,00,000/- u/s 68 of the Act made by the AO in the appeals under consideration.

Ld. AR submitted that the assessee is a Doctor employed at Narayana Hospital. There was search in the case of Narayana Educational Society at Nellore on 03/08/2011 and consequent to search, the premises of the assessee was also searched and a statement u/s 132(4) was recorded. In such statement, assessee has disclosed salary income received by her from the Institution from 2001 onwards and also accepted to have received Rs. 2.00 lakhs per month in cash apart from regular salary from March’08 onwards. This disclosure was made mainly due to deposits in bank, which was detected by the department. She has filed two affidavits before the officers explaining the facts, as per which, she has disclosed this additional salary in cash under distress and later she found that some of the bank deposits, which have matured were deposited. Such deposits were properly reconciled and accordingly disclosed the additional deposits made in the bank. Ld. AR submitted that assessee has clearly brought on record the additional deposits made in bank and it is not proper to add Rs. 2 lakhs per month till the end of the year in which search took place. He further submitted that ld. CIT(A) was wrong in confirming the additions made by the AO. With regard to AY 2012-13, he submitted that addition should be restricted to the date of search not till the end of the AY.

Ld. DR relied on the order of CIT(A).

Considered the rival submissions and perused the material on record. Assessee has declared in sworn statement that she was in receipt of Rs. 2 lakhs per month in cash apart from salary. However, while filing the revised return of income, assessee has not disclosed the above Rs. 2 lakhs per month, but, disclosed additional income based on the bank deposits made during that period. By doing so, assessee has disclosed additional income in AY 2009-10 – Rs. 7,32,520/-, in AY 2010-11 – Rs. 23,02,2010/-, in AY 2011-12 – Rs. 55,79,680/- and in AY 2012-13 – Rs. 21,40,450/-. After the search,

In the result, all the three appeals under consideration are partly allowed. Pronounced in the open Court on 11th May, 2018.