SRI DHARIPALLI SAMPATH,WRANGAL vs. ACIT, CENTRAL CIRCLE-2, VISAKHAPATNAM

per the information available on record and on the basis of the seized

material found during the course of search.

assessee has made cash deposits in various bank accounts for the

assessment years 2006-07 to 2012-13, the details of which are follows:

Name of Name of the Bank Account No. Deposits the A/c holder (In Rs.) (Sri/Smt.) Financial Year 2005-06 relevant to A.Y. 2006-07 D. Sampath Andhra Bank, Sanath Nagar, 05261001104612 7,59,700 Hyderabad D. Sampath Development Credit Bank, 01510100066468 95,000 Warangal Total 8,54,700 Financial Year 2006-07 relevant to A.Y. 2007-08 D. Sampath ICICI Bank, Dwarakanagar, 006001527017 27,000 Visakhapatnam D. Sampath Development Credit Bank, 07211300012926 26,12,550 S.R. Nagar, Hyderabad D. Sampath Development Credit Bank, 01510100066468 4,74,700 Warangal Total 31,14,250

Financial Year 2007-08 relevant to A.Y. 2008-09 D. Sampath Development Credit Bank, 07211300012926 1,44,500 S.R. Nagar, Hyderabad D. Sampath Oriental Bankof Commerce, 10812010003930 46,000 Kukatpally, Hyderabad D. Sampath ICICI Bank, Dwarakanagar, 006001527017 59,900 Visakhapatnam D. Sampath Axis Bank, Narasaraopet 369010100141499 14,54,900

D. Sampath HDFC Bank, Dwarakanagar, 00501000158277 1,35,000 Visakhapatnam D. Sampath Development Credit Bank, 01510100066468 82,500 Warangal Total 19,22,800

Financial Year 2008-09 relevant to A.Y. 2009-10 D. Sampath Axis Bank, Narasaraopet 369010100141499 33,26,000

D. Sampath HDFC Bank, Dwarakanagar, 00501000158277 1,50,000 Visakhapatnam D. Sampath ICICI Bank, Dwarakanagar, 006001527017 10,000 Visakhapatnam D. Sampath Axis Bank, Ramnagar, 369010100219211 60,000 Visakhapatnam D. Sampath Andhra Bank, Sanath Nagar, 05261001104612 2,980 Hyderabad D. Sampath Development Credit Bank, 01510100066468 16,500 Warangal Total 35,65,480

Financial Year 2009-10 relevant to A.Y. 2010-11 D. Sampath Development Credit Bank, 07211300012926 45,000 S.R. Nagar, Hyderabad D. Sampath Oriental Bank of Commerce, 10812010003930 83,500 Kukatpally, Hyderabad D. Sampath Axis Bank, Ramnagar, 369010100219211 2,47,000 Visakhapatnam D. Sampath ICICI Bank, Dwarakanagar, 006001527017 38,000 Visakhapatnam D. Sampath Axis Bank, Narasaraopet 193010100133074 5,27,000

D. Sampath HDFC Bank, Dwarakanagar, 00501000158277 46,000 Visakhapatnam Total 9,86,500

Financial Year 2010-11 relevant to A.Y. 2011-12 D. Sampath Development Credit Bank, 07211300012926 73,000 S.R. Nagar, Hyderabad D. Sampath Oriental Bank of Commerce, 10812010003930 27,000 Kukatpally, Hyderabad D. Sampath Andhra Bank, Sanath Nagar, 05261001104612 49,000 Hyderabad D. Sampath Axis Bank, Narasaraopet 193010100133074 3,98,000

D. Sampath Axis Bank, Narasaraopet 369010100141499 5,96,000

D. Sampath HDFC Bank, Dwarakanagar, 00501000158277 62,000 Visakhapatnam D. Sampath Yes Bank, Visakhapatnam 004683800002039 9,40,000

Total 26,76,000 Financial Year 2011-12 relevant to A.Y. 2012-13 D. Sampath Axis Bank, Narasaraopet 193010100133074 50,000

D. Sampath HDFC Bank, Dwarakanagar, 00501000158277 28,000 Visakhapatnam Total 78,000

Total Deposits for the F.Ys. 2005-06 to 2011-12 relevant to A.Ys. 2006-07 1,31,97,730 to 2012-13

The AO called for explanation from the assessee to explain the

sources of cash deposits through the notices, reminders and letters, but no

compliance was made by the assessee. Therefore, the AO issued the final

show cause notice, for which, assessee submitted his reply vide letter dated

27.03.2014 and stated that cash deposits made in various bank accounts of

the assessee pertain to Smt. Uppu Rajya Lakshmi, for whom he made the

transactions of purchases and sale of lands. He also stated that this fact was

stated by him in his deposition recorded on 09.08.2011 before the I.T.

Department. The amount was received from her and was spent as per the

directions of Smt. U.Rajya Lakshmi. He further submitted that she has also

confirmed the said fact in her deposition before the I.T. Department. The

assessee further stated in his reply that the amounts were received from

Smt. U.Rajya Lakshmi for specific purpose of purchase of urban land and

agricultural lands on her behalf, by which, he received the commission from

her. During the assessment proceedings, the AO called for the evidence to

support his claim that money was belonged to Smt. U.Rajya Lakshmi, but

assessee failed to furnish any evidence to show that cash deposits in the

bank account were pertaining to Smt. U.Rajya Lakshmi. The assessee

neither produced confirmation letter nor produced Smt. U.Rajya Lakshmi

before the AO for examination. No evidence whatsoever was produced to

show that the cash deposits made in the bank accounts were pertaining to

Smt. U.Rajya Lakshmi and were not related to the assessee. Therefore, the

AO held that the assessee has not discharged his onus to prove that the cash

deposits made in the bank accounts were not belonging to him and

accordingly made the addition as ‘undisclosed income’ in the respective

assessment years as per the details given below.

A.Y. Amount of additions in Rs.

2006-07 8,54,700 2007-08 31,14,250 2008-09 19,22,800 2009-10 35,65,480 2010-11 9,86,500 2011-12 26,76,000 2012-13 78,000

the CIT(A), but not produced any evidence to establish that the cash

deposits in the assessee’s bank account were related to Smt. U.Rajya

Lakshmi but not belonging to the assessee. Therefore, the Ld.CIT(A)

confirmed the addition made by the AO. For the sake of clarity and

convenience, we extract the relevant part of the order of the Ld.CIT(A) for

the assessment year 2006-07 is as under.

“I have carefully considered the facts of the case, grounds of appeal and the submissions made by the appellant. In this case, it appears that the appellant seems to have been non-co-operative and evasive in providing information to the department. It is seen from the records that the assessing authorities have to locate the appellant from one address to another in order to serve the statutory notices. The undisputable fact about the case is that the appellant owns bank accounts in Andhra Bank and Development Credit Bank. There is no contravening fact on the file to conclude that the bank accounts do not belong to the appellant. The appellant's assertion that the money deposited in the bank accounts does not belong to him is also not supported with any corroborative evidence. Even during the appellate proceedings, the appellant has not made any attempt to explain his stand instead he took the route which is more convenient to say that the cash deposits in the bank accounts do not belong to him and that they belongs to

Smt. Uppu Rajyalakshmi. No evidence was produced in this regard. A mere denial of fact is no ground for relief. In this background, I have called for the assessment orders passed by the Assessing Officer in the case of Smt. Uppu Rajyalakshmi for the Asst.Years 2006-07 to 2012-13 in order to verify the facts. The Assessing Officer of Smt. Uppu Rajya Lakshmi has supplied the copies of assessment orders and also the status report of Smt. Rajyalakshmi's proceedings in the department. It is seen from the assessment order that the assessments in the case of Smt. Uppu Rajyalakshmi were also completed u/s 144 of the Act and she has not filed any returns of income for the Asst. Years 2006-07 to 2012-13. 4.2 In the instant case, the appellant has filed return of income whereas in the case of Smt. U.Rajya Lakshmi, were was no return of income filed at all. The Assessing Officer has made the assessment on the issue of cash deposits and there was no evidence that Smt. U.Rajya Lakshmi has owned up the bank accounts of the appellant as claimed by him before the Assessing Officer. Therefore, the arguments of the appellant that the deposits in his bank accounts belongs to Smt. Uppu Rajya Lakshmi is prima-facie not correct and hence rejected. From the status report of the Assessing Officer dated 08/03/2007, it is noticed that prosecution proceedings under section 276CC of the Act have been launched against Smt. Uppu Rajyalakshmi for non-filing of returns of income. In view of the facts discussed above, I considered to confirm the addition of Rs. 8,54,700/- made by the Assessing Officer as there are no facts emerging in support of the claim of the appellant.”

before this Tribunal. During the appeal hearing, Ld.AR submitted that the

assessee had handled the monetary transactions of Smt.Uppu Rajya

Lakshmi on her behalf from his account, for purchase and sale of urban

lands/agricultural lands on her behalf and received the commission. The

assessee was unable to furnish the evidence as there was tremendous

pressure from Smt. U.Rajya Lakshmi and others and was also having life

threat. He placed a copy complaint made to Director General of Police,

Hyderabad, dated 19/07/2011 before us. The Ld. AR further submitted

that assessee was running from pillar to post to make a hide out to save his

life and in these circumstances, he could not appear before the AO and

submit the necessary evidence. Hence he requested one more opportunity

to prove his case before the AO. The Ld.AR further submitted that the AO

made the entire cash deposits as income in the assessee’s hands, which is

incorrect method of computing the income. Since there were cash deposits

as well as withdrawals in the same bank account, he submitted that only

the peak deposits required to be added to the income, but not the entire

cash deposits. The Ld.AR further submitted that cash deposits be treated

as made from the cash withdrawals. The Ld. AR further submitted that, if

one more opportunity is given, the assessee would be in a position to

explain his case for taxing peak deposits instead of entire cash deposits,

and this time, the A.R assured of full cooperation from the assessee.

Therefore, requested to remit the matter back to the file of the AO to

re-examine the issue of cash deposits afresh.

sufficient opportunities both by the AO and the Ld.CIT(A). The AO/CIT(A)

posted the case number of times, but assessee neither furnished any

information before the AO nor before the Ld.CIT(A). Both the lower

authorities have given sufficient opportunities to the assessee, but the

assessee did not prove his case with relevant evidence. Therefore, argued

that Ld.CIT(A) has rightly confirmed the addition and requested to uphold

the orders of the authorities below. The Ld.DR vehemently opposed for

taxing the peak credits and to remit the matter back to the file of the AO.

record. In this case, assessment was completed u/s 144 r.w.s. 153A of the

Act to the best judgment of the AO. It is a fact that both the AO as well as

the CIT(A) has given sufficient opportunities to represent assessee’s case

before the lower authorities. But as per the record, the assessee has not

furnished the required information before the lower authorities on the

ground of life threat from Smt. U.Rajya Lakshmi, whose money stated to

have been handled by the assessee. It is a fact that search was conducted in

the assessee’s case in connection with the case of Smt.U. Rajya Lakshmi and

others as is evident from the assessment order. Considering the

explanation of the assessee that there was a life threat from Smt.U. Rajya

Lakshmi and others and also on the basis of assurance given by the Ld.AR

to cooperate with the department and to submit the required information

in the time frame, we are of the view that one more opportunity to be given

to the assessee to explain his case. In this case, the AO made the addition of

entire cash deposits made in the bank accounts, but not examined the

source and the application of cash withdrawals in the absence of

information from the assessee. The case of the assessee is that cash

withdrawals made from the bank accounts were used for depositing the

same in the bank account, hence, only peak credit required to be taxed but

not the entire cash deposits. However, the Ld.AR did not explain the

purpose and the utilization of the cash withdrawals. Since the frequent

cash deposits and withdrawals were made by the assessee in the bank

account, the surplus if any, would be used for depositing the same into

bank account, which is not ruled out. Therefore, we are of the view that the

peak cash deposits required to be brought to tax, as there was frequent

cash deposits and withdrawals in the same bank account. Accordingly, we

remit the matter back to the file of the AO to examine the source of deposits

and application of withdrawals and to consider the peak deposits for

addition in the respective assessment years after analyzing the entire bank

deposits and the cash withdrawals. The AO is also required to allow due

credit for opening balance and closing balance of each year while arriving

at the peak balances. It is needless to say that the AO should give

opportunity to the assessee to present his case and the assessee is required

to cooperate with the AO for completion of the assessment. Accordingly,

the appeals of the assessee on this issue for the A.Y.2006-07 to 2012-13 are

set aside and the issue is remitted back to the file of the AO for fresh

consideration. Accordingly, the appeals of the assessee on this ground are

allowed for statistical purpose for the A.Y. 2006-07 to 2012-13.

of cash given by Smt. U.Rajya Lakshmi for the purpose of purchase of

agricultural and urban lands on behalf of her, the assessee could not

produce any evidence to substantiate his claim either before the Ld.CIT(A)

or before AO. During the appeal hearing also, the Ld.A.R failed to furnish

the evidence to support his claim. The assessee stated in his letter before

the AO that said Smt. U.Rajya Lakshmi has given a statement before the

Investigating authority, confirming the payment of cash to the assessee, but

the Ld.A.R. could not take our attention to the relevant statement during

the appeal hearing. Therefore, we hold that the assessee failed to prove

that the money deposited in the bank account does not belong to him.

Hence, we do not find any reason to interfere with the order of the

Ld.CIT(A) on this issue.

under:

“The CIT(A) having called for the records and assessment orders of Smt. U. Rajya Lakshmi ought to have given an opportunity to verify the same and explain the facts, after considering the same ought to have deleted the addition.”

During the appeal hearing, the Ld.AR has not pressed this ground.

Therefore, this ground is dismissed as not pressed. Accordingly, this issue

raised in appeals of the assessee for the A.Ys. 2007-08 to 2012-13 are

dismissed.

which reads as under :

“Your appellant submits that the addition is not based on any seized material but on the basis of cash deposited in bank account, the addition is bad in law and may be deleted.’ During the appeal hearing, the Ld.AR submitted that the AO made

the addition only on the basis of the bank deposits, but not on the basis of

any material found and seized during the course of search. Therefore,

argued that the additions made without the basis of seized material

required to be deleted and the AO is not permitted to make the addition

without having the seized material.

assessee has not filed the return of income, before issue of notice under

section 153A and filed the same only in response to the notice issued

u/s.153A of the Act. There was no assessment made u/s 143(3) by the

Assessing Officer earlier. Since there was no assessment made in this case

and search was conducted in the assessee’s case u/s 132, as per section

153A of the Act, the AO has jurisdiction to initiate proceedings u/s 153A of

the Act and to assessee or reassess the income for the six assessment years

immediately preceding the assessment year relevant to the previous year,

in which search was conducted or requisition made for the relevant

assessment year. The Ld.DR further submitted that in the assessee’s case,

no assessment was made by the AO u/s 143(3) earlier, thus, argued that the

assessment made by the AO u/s 153A is in accordance with law and

requested to uphold the orders of the lower authorities.

record. In this case, as per the information available on record, no

assessment was made u/s 143(3) in the earlier years and the Ld.AR did not

place any evidence to show that the assessee had filed the return of income

in the regular course. As per information available on record, the assessee

has filed the return of income only in response to the notice issued u/s

153A. As per the provisions of section 153A, the AO is permitted to initiate

the proceedings to assess or reassess the total income in respect of each

assessment year following within such six assessment years and for the

relevant assessment year also. For ready reference, we extract relevant

part of section 153A as under:-

Assessment in case of search or requisition. 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. [(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside.]”

assessment years as provided in the Act. During the course of search, bank

accounts were found, on which assessee was required to explain the source

of cash deposits, but the assessee failed to explain the sources with tangible

evidences. In the search assessments to be framed u/s 153A, the AO is

required to assess or reassess the total income, but not only the income

resulting out of the search proceedings u/s 132. During the appeal hearing,

the Ld.AR did not bring any decision of the Hon’ble High Court or the Apex

Court to support his argument. Therefore, we hold that the lower

authorities have rightly assessed the total income and accordingly the

appeal of the assessee on this ground is dismissed for the A.Y.s. 2006-07 to

2012-13.

disallowance of deduction under Chapter VIA of the Act as per the details

given below :

A.Y. Rs. 2006-07 24,000 2007-08 1,32,000 2008-09 1,90,150 2009-10 1,59,700 2010-11 1,64,000 2011-12 1,64,000 2012-13 1,64,000

either before the AO or before the CIT(A). Therefore, the AO made the

addition and the same was confirmed by the Ld.CIT(A). During the appeal

hearing, Ld.AR fairly conceded that there is no evidence available to

support the claim. Therefore, we do not find any reason to interfere with

the order of the Ld.CIT(A) and the assessee’s appeal on this ground is

dismissed for the A.Ys 2006-07 to 2012-13.

17. For the assessment year 2007-08 apart from the issues/grounds

discussed and adjudicated in the above paragraphs, the assessee raised one

more issue as ground No.5, which is related to the addition on account of

purchase of scorpio vehicle.

During the course of search proceedings, certain incriminating

material was found and seized vide Annexure A/DS/P.O-1/1, as per which

the assessee had purchased the Scorpio car with down payment of Rs.4.00

lakhs in cash and the evidence was found for purchase of second car from

the loan taken from ICICI Bank for Rs.2,70,000/-. Further, the evidence was

also found for payment of Rs.1,04,620/-in cash to Mahindra Finance for

Scorpio car No.AP36 4567. The assessee failed to explain the source for

payment of Rs.5,04,620/- (Rs. 4,00,00 + Rs. 1,04,620) before the AO.

Therefore, the AO proposed to make the addition of Rs.5,04,620/- as

unexplained income for the A.Y.2007-08. In response, the assessee

explained that the source was made out of the amount received from

Smt.U.Rajya Lakshmi, but failed to submit any evidence to prove the claim.

Therefore, the AO made the addition of Rs.5,04,620/- as undisclosed

income in the hands of the assessee.

the CIT(A), who confirmed the addition stating that no evidence was

furnished by the assessee to support the claim that the funds were received

from Smt.Uppu Rajya Lakhsmi for purchase of car. For ready reference, we

extract the relevant part of the order of the Ld.CIT(A) is as under :

“4.3. With regard to purchase of Scorpio vehicle, it is the contention of the appellant that the said purchase was met out of the amount received from Smt.U.Rajyalakshmi towards commission income. On the other hand, the Assessing Officer has denied the explanation of the appellant stating that no evidence in support of the claim has been furnished by the appellant and treated the same as expenditure met out of unaccounted /unexplained income in the hands of the appellant. I have carefully considered the facts of the case and also the contents of the assessment order of Smt. Uppu Rajyalakshmi. There are no facts emerging to support the claim of the appellant regarding purchase of vehicle, Both the appellant as well as Smt. Rajyalakshmi prima-facie, appears to be non-co- operative and evasive, In view of these facts, I am restrained to confirm the addition of Rs.5,04,620/- made by the Assessing Officer on account of purchase of Scorpio vehicle.”

made before the lower authorities, but no evidence was produced to

support the claim that the amount was received from Smt.U Rajya Lakshmi.

Therefore, we do not find any reason to interfere with the order of the

Ld.CIT(A) and the same is upheld. The appeal of the assessee on this

ground is dismissed.

addition of Rs.25,000/- being the litigation expenses to protect the

property of Smt.Rajya Lakshmi which was claimed to be received from her.

21. During the assessment proceedings, the AO found that the assessee

had incurred expenditure amounting to Rs.25,000/- towards share of

payment made to Smt. Ganneboyina Anasuya relating to the litigation

expenses on behalf of Smt U.Rajya Lakshmi, which was stated to be

incurred out of the amounts received from Smt.U Rajya Lakshmi. However,

the assessee failed to furnish any evidence to support his claim. Therefore,

the AO made the addition of Rs.25,000/- as unexplained expenditure.

failed to furnish the evidence or to explain the sources. For the sake of

clarity and convenience, we extract relevant part of the order of the

Ld.CIT(A) order which reads as under :

“4.5. Regarding the payment of Rs.25,000/- to Smt. Ganneboyina Anasutya, it is stated by the appellant that the payment was made on behalf of Smt. U.Rajyalakshmi towards litigation expenses. However, the Assessing Officer was not satisfied with the explanation furnished as no evidence for the sources was produced by the appellant during the course of assessment proceedings. No material facts were brought even before me. Hence, I am constrained to confirm the addition of Rs.25,000/- made by the Assessing Officer.” 23. During the appeal hearing also, the Ld.AR did not furnish any

evidence and fairly conceded that no evidence is available to support the

claim of the assessee. Therefore, we do not find any infirmity in the order

of the Ld.CIT(A) and the same is upheld.

on more issue as Ground No.5 relating to the addition of Rs.4,81,000/-

being the repayment of loan which was stated to be met out of the amount

received from Smt. U Rajya Lakshmi. This issue is also involved for the A.Y.

2011-12 as per the details given under:

2009-10 5,75,000/-

2011-12 3,45,000/-

During the assessment proceedings, the AO found that the assessee

has received the loan from his father as per the seized material bearing No.

A/DS/11 at page No.16 of Annexure and made the repayment of loan to the

extent of Rs.5,75,000/- on various dates for the A.Y.2009-10 and

Rs.5,00,000/- for the A.Y.2011-12. The assessee explained that the sums

were paid out of the commission received from Smt. U Rajya Lakshmi.

However, the assessee could not substantiate the source with the relevant

evidences. Therefore, the AO made the addition of Rs.5,75,000/- for the

A.Y.2009-10 and Rs.5,00,000/- for the A.Y. 2011-12.

credit for the commission received by the assessee for the relevant

assessment year and confirmed the addition of Rs. 4,81,000/- for the

A.Y.2009-10 and Rs.3,45,000/- for the A.Y. 2011-12.

before us.

27. During the appeal hearing, the Ld.AR did not furnish any evidence to

explain the source or support the claim of the assessee with the evidence

that the repayment was made out of the amounts received from Smt.

U.Rajya Lakshmi. The assessee also did not explain or furnish the evidence

for the source. Therefore, we do not find any infirmity in the order of the

Ld.CIT(A) and the same is upheld.

2012-13 are partly allowed.

Order pronounced in open Court on this 26th day of October, 2018.

Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Visakhapatnam Dated : 26.10.2018 L.Rama & vr/ SPS Copy of the order forwarded to:- 1. TheAssessee- Sri Dharipalli Sampath, D.No.11-23-2053, Teachers Colony L.B.Nagar, Warangal 2. The Revenue – ACIT, Central Circle-2, Visakhapatnam 3. The Pr.Commissioner of Income Tax (Central), Visakhapatnam 4. The Commissioner of Income-Tax(Appeals)-12, Hyderabad 5. DR, ITAT, Visakhapatnam 6. Guard file

BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM