YEDUKONDALU KATREDDY,HYDERABAD vs. ITO., WARD-12(1), HYDERABAD

The CIT(A), holding a firm conviction that the assessee had failed to come forth with any explanation regarding the source of credit card payments of Rs. 33.38 lacs (supra), upheld the addition made by the A.O. and dismissed the appeal.

The assessee, being aggrieved by the order of the CIT(A), has carried the matter in appeal before us.

We have heard the learned Authorized Representatives of both parties, perused the orders of lower authorities and considered the material available on record.

Shri Y.V. Bhanu Narayan Rao, C.A., the learned Authorized Representative (for short “Ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the assessee had during the subject year given his Indusind bank credit card to his uncle, viz. Shri K. Deva Phani Kumar, who had used the same for making purchases in the normal course of his business of running a general store under the name and style of M/s. Sri Balaji 5 Yedukondalu Katreddy Kirana and General Stores. Elaborating on the reason for giving the credit card to Shri K. Deva Phani Kumar (supra), the Ld. AR submitted that the same was done to facilitate him to tide over the temporary financial difficulties arising out of a working capital shortage. The Ld. AR submitted that Shri K. Deva Phani Kumar (supra) had thereafter made the payments towards the credit card dues both by way of direct remittances from his bank account and cash deposit.

On being queried as to why the assessee had failed to furnish the aforesaid explanation before the lower authorities, the Ld. AR submitted that the assessee had lost his mother during the course of the assessment proceedings and, therefore, he had, for the said reason, failed to appear before the A.O. and furnish the requisite details. The Ld. AR submitted that the said fact was brought to the notice of the A.O. in the course of the assessment proceedings and is found mentioned in the assessment order.

Further, the Ld. AR submitted that as the assessee in the course of the appellate proceedings before the CIT(A) was taken unwell, therefore, for the said reason, he had failed to furnish his 6 Yedukondalu Katreddy reply on 04.12.2024. Elaborating further on his contention, the Ld. AR submitted that Shri K. Deva Phani Kumar (PAN No. ALNPD4537F) had duly confirmed vide his “Affidavit”, dated 17- 02-2025, the fact that he had used the credit cards of the assessee and thereafter, made the payment of the credit card dues. The Ld. AR to buttress his aforesaid claim submitted that the fact that the payments clearing the outstanding credit card dues were made through the current account No.33855692277 of M/s. Sri Balaji Kirana and General Stores, i.e the proprietary concern of Shri K. Deva Phani Kumar (supra), duly established the aforesaid claim of the assessee.

The Ld. AR submitted that a similar arrangement also existed in the immediately preceding year, i.e., A.Y. 2017–18, wherein too the assessee had given his credit cards to his uncle, viz. Shri K. Deva Phani Kumar (supra). The Ld. AR submitted that the assessee’s case for the same reason was in the preceding year selected for scrutiny assessment i.e., to verify the payment/use of the credit cards beyond the prescribed limits and the assessment was framed by the A.O., who, after verifying the explanation of the assessee regarding the usage of his credit card by his uncle Shri 7 Yedukondalu Katreddy K. Deva Phani Kumar (supra) for making purchases pertaining to his proprietary concern, had accepted the same. The Ld. AR, to buttress his claim, had taken us through the assessment order passed in the case of the assessee for A.Y. 2017–18, Pages 144– 145 of APB. Apart from that, the Ld. AR, to support his explanation, had taken us through the bank account of M/s. Sri Balaji Kirana and General Stores, i.e., Current Account No. 3385692277 with State Bank of India, Branch: NRI Kukatpally, for the subject year, which revealed the payments made in the credit card account of the assessee.

Per contra, Shri Waseem UR Rehman, the learned senior Departmental Representative (for short “Ld. DR”) relied upon the orders of the lower authorities. It was submitted by him that as the assessee had failed to come forth with any explanation during the course of the assessment proceedings before the authorities below, therefore, they had rightly treated the source of the payments aggregating to Rs. 33.38 lacs made in the assessee’s credit card account as an unexplained expenditure incurred by him under Section 69C of the Act.

We have thoughtfully considered the facts involved in the present case in the backdrop of the contentions advanced by the learned authorized representatives of both parties.

At the threshold, we may herein observe that Shri K. Deva Phani Kumar (supra), who is the uncle of the assessee, had duly confirmed the assessee’s explanation that he had given his various credit cards, viz. HDFC credit card (no. 5523 6503 0054 9556), Indusind Bank Credit Card (nos. 5244 8012 6523 8002 and 4147 5240 0630 3007), SBI Credit Card (card no. 4335 8778 6462 3813 and nos. 4377 4866 0414 1927) and Axis Bank credit card (card no. 4514 5700 0478 8264) to him for using the same for making purchases in his business of running a provision store. Also, it is confirmed by him that the outstanding credit card bills were cleared by him out of his business receipts, Page 3 of APB. We find that both the assessee and Shri. K. Deva Phani Kumar (supra) had confirmed the aforesaid factual position based on the depositions made by them in their respective affidavits.

We have thoughtfully considered the issue in hand in the backdrop of the material available on record. Considering the 9 Yedukondalu Katreddy aforesaid explanation of the assessee and the additional documentary evidence that have been filed before us to substantiate the same, and also the fact that, involving identical facts, the case of the assessee was selected for scrutiny assessment for the preceding year, i.e., A.Y. 2017-18 i.e., to verify the sources of the credit card payments, which based on the same explanation was accepted by the A.O. vide his order passed under Section 143(3) of the Act, dated 27-11-2019, we are of the firm conviction that, in the totality of the facts and circumstances involved in the present case, the matter, in all fairness, requires to be restored to the file of the A.O., who is directed to frame afresh assessment. Needless to say, the A.O. shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at liberty to substantiate his contentions based on fresh documentary evidence, if any.

Resultantly, the appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.