POREDDY SUDHAKARAMMA,KURNOOL vs. INCOME TAX OFFICER, WARD-1, KURNOOL

During the course of assessment proceedings, the Assessing Officer observed that the total amounts credited in the two bank accounts held by the assessee with Karnataka Bank aggregated to Rs.5,07,20,264/-, while for the total sales booked by her in the profit and loss account for the subject year amounted to 4 Rs.4,37,82,360/-. As the assessee despite having been afforded sufficient opportunity failed to reconcile the aforesaid discrepancy, therefore, the Assessing Officer was constrained to treat the unreconciled differential amount of Rs.69,37,904/-, viz. [Rs. 5,07,20,264/- (-) Rs. 4,37,82,360/-] as her unexplained money under Section 69A of the Act. Accordingly, the Assessing Officer vide his order u/s 147 r.w.s. 144B of the Act dt.25.03.2022 determined the income of the assessee at Rs.76,36,404/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. Although it was the assessee’s claim that the impugned difference of Rs. 69,37,904/- (supra) was relatable to the realization of the credit sales of the preceding years, repayment of dues by sundry debtors, loan and advances, and other business receipts, but the same did not find favour with the first appellate authority. The CIT(A) held a conviction that as the assessee had come up with an inadequate explanation as regards the source of the amount of Rs. 69,37,904/- (supra) and, thus, failed to discharge the onus that 5 was cast upon her; therefore, the A.O. had rightly added the said amount under Section 69A of the Act. Accordingly, the CIT(A) based on his aforesaid conviction dismissed the appeal.

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

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

Shri S. Rama Rao, learned Authorized Representative (for short “ld.AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the lower authorities had based on premature observations made/sustained the addition of Rs.69.37 lacs (approx.) u/s 69A of the Act. Elaborating on his contention, the ld.AR submitted that though it was the assessee’s claim before the CIT(A) that the amounts credited in her bank accounts maintained with Karnataka Bank account viz.,(i). Bank account No. 42870000600191301: Rs.5,03,40,535/-;and (ii) Bank account No.4282500100315001:

Per contra, the learned Departmental Representative (for short “Ld. DR”) relied upon the orders of lower authorities.

We have thoughtfully considered the issue involved in the present case which lies in a narrow compass, i.e., sustainability 7 of the addition of Rs.69.37 lacs (supra) made by the Assessing Officer u/s 69A of the Act.

Ostensibly, the Assessing Officer while framing the assessment, had observed, that during the subject year there were total credits of Rs.5,07,20,264/- in the two bank accounts held by the assessee with Karnataka Bank, viz. i) Bank account No.42870000600191301: Rs.5,03,40,535/-; and (ii) Bank account No. 4282500100315001: Rs.3,79,729/-. The Assessing Officer, based on the fact that the total sales credited in the “Profit and loss account” of the assessee for the subject year aggregated to Rs. 4,37,82,360/-, while for the total credits in her aforementioned bank accounts amounted to Rs.5,07,20,264/-, had thus, called upon her to put forth an explanation as regards the impugned variance of Rs.69,37,904/- (supra). Although the assessee had come forth with an explanation that the credit entries in her bank account were sourced out of multi-facet streams viz., (i) sale proceeds of fertilizers for the subject year; and (ii) realization of the credit sales of the preceding years, repayment of dues by sundry debtors, loan and advances, and 8 other business receipts, but the same was summarily rejected by both the lower authorities.

We have given our thoughtful consideration and are unable to persuade ourselves to subscribe to the view taken by the lower authorities. Although, it is an admitted fact that the assessee could not substantiate her aforesaid explanation regarding the source of cash deposits in her bank account to the satisfaction of the A.O, but her claim that part of the amounts credited in her bank accounts were sourced out of the realization of her credit sales of the preceding years, repayment of dues by sundry debtors, loan and advances, and other business receipts could not have been summarily rejected.

Considering the fact that the assessee in all probabilities would have realized the credit sales of the preceding years, and received repayment of outstanding loans and advances, and other business receipts, but could not substantiate the same to the satisfaction of the Assessing Officer, therefore, we are of the view that the matter in all fairness requires to be revisited by the Assessing Officer. We thus, in terms of our aforesaid 9 observations restore the matter to the file of Assessing Officer with a direction to re-adjudicate the issue. Needless to say, the Assessing Officer shall in the course of set-aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate her claim qua the source of the credits in her bank accounts based on fresh documentary evidence, if any.

As we have restored the issue to the file of the Assessing Officer for fresh adjudication, therefore, we refrain from dealing with the merits of the case which, thus, are left open.

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