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

per the seized material annexure A/DS/13, it is found that the assessee had

acquired the land admeasuring 166.83 sq.yds at Gorrekunta,

Sthambampalli (v) through sale deed executed on 28.02.2006 vide

document No.2178/2006 for an amount of Rs.73,305/-. The AO issued the

show cause notice to explain the sources of the payment and the assessee

explained that the expenditure was met out of his income and the amounts

received from his father. With regard to his income, it is observed that the

assessee did not file the return of income and thus the source remained

unexplained. With regard to the advance received from his father also, no

evidence was furnished from his father. In the absence of any evidence, the

AO treated the sum of Rs.73,305/- as ‘undisclosed income’ and made the

addition.

the CIT(A), who confirmed the addition.

before this Tribunal. During the appeal hearing, the Ld.AR did not furnish

any evidence to support the claim of the assessee that the assessee was

having surplus income to meet the investment for purchase of the land.

The assessee also did not furnish any evidence to show that he had received the said sum from his father. Therefore, we do not find any reason

to interfere with the order of the Ld.CIT(A) and the same is upheld.

u/s 132(4) of the Act. During the appeal hearing, the Ld.AR did not furnish

any evidence having admitted the income u/s 132(4) and paid relevant

taxes for the impugned assessment years. As per the assessment order, the

assessee did not file the return of income in response to the notice issued

u/s 153C. Having not filed the return of income and did not pay the taxes,

there is no sanctity for the admission given by the assessee u/s 132(4),

hence, the appeals of the assessee on this ground are dismissed for all the

A.Ys. 2006-07 to 2012-13.

153C, without having the seized material and this is a common ground for

the A.Ys 2006-07 to 2012-13. During the appeal hearing, Ld.AR submitted

that search u/s 132 was conducted in the case of Shri Dharipalli Sampath

and the assessment was made in the case of the assessee u/s 153C of the

Act. The Ld.AR argued that the additions were made on the basis of the

bank deposits but not on the basis of the seized material, hence, argued

that the assessments made u/s 153C are bad in law.

authorities.

record. As per the information available on record, the assessee has not

filed the return of income for the impugned A.Ys. 2006-07 to 2012-13

before the issuance of notice u/s 153C and no assessments were made

u/s.143(3). Search u/s 132 was conducted in the case of Shri D.Sampath

and during the course of search, bank accounts relating to the assessee

were found wherein, huge cash deposits were made in the bank accounts

apart from the evidence for purchase of land as per the impounded

material annexure A/DS/13 at page No.101 to 110. Further the promissory

notes were also found and seized relating to the advances made by the

assessee during the F.Y.2006-07-2010-11. On the basis of material found

during the course of search, the AO issued notice u/s 153C and initiated

proceedings for completing the search assessments. In this case, the Ld.AR

did not bring any evidence to show that the assessee had filed the regular

returns for the A.Y.s involved before the date of search or before initiating

the proceedings u/s153C. There is no case of completed assessments

which are required to be disturbed. Since the bank accounts and the

deposits were never disclosed by the assessee and said bank accounts were found during the course of search, the information found constitute the

incriminating material for taking the action u/s 153C. During the search

assessment proceedings also, though, AO had issued notice u/s 153C of the

Act, assessee has not filed the return of income for all the assessment years

of 2006-07 to 2012-13. Therefore, we hold that the AO has rightly initiated

the proceedings u/s 153C, and we do not find any infirmity in the orders of

the lower authorities and accordingly, dismiss the appeals of the assessee

on this ground for the A.Ys. 2006-07 to 2012-13.

A.Y.2006-06 discussed in paragraph No. 2 to 15 in this order, the assessee

has raised the following issue as ground No.4.

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

This issue is also involved for the A.Ys 2007-08 2012-13. During the

appeal hearing, the Ld.AR did not explain the connection between Smt.

U.Rajya Lakshmi and the assessee and also did not place any evidence to

show that the transactions of the assessee and Smt. U. Rajya Lakshmi are

interlinked. The Ld.AR did not press this ground during the appeal

hearing. Therefore, the appeal of the assessee on this ground is dismissed

as not pressed for the A.Y. 2007-08 to 2012-13.

Rs.75,000/- given as loans and advances. This issue is involved for the A.Ys

2007-08 to 2011-12. The details of advances made by the assessee for the

assessment years from 2007-08 to 2011-12, as per the seized material are

as under:-

F.Y. Name of person to whom Amount Reference in seized advance was given material F.Y. 2006-07 Various persons on 55,000 Page No. 1 to 6 in promissory notes annexureA/DS/13 F.Y. 2006-07 Samba Murthy 20,000 Page No. 44 in annexureA/DS/13 Total for F.Y. 2006-07 75,000 relevant A.Y. 2007-08 F.Y. 2007-08 Various persons on 1,00,000 Page No. 1 to 6 in promissory notes annexureA/DS/13 F.Y. 2007 A.P. Srinu 23,340 Page No. 18 in annexure A/DS/11 F.Y. 2007 Gattu Venkata Ramana 15,000 Page No. 54 in annexure A/DS/13 Total for F.Y. 2007-08 1,38,340 relevant A.Y. 2008-09 F.Y. 2008-09 Various persons on 15,000 Page No. 1 to 6 in promissory notes annexure A/DS/13 F.Y. 2008 G. Sattemma 25,000 Page No. 27 in annexure A/DS/13 F.Y. 2008 A. Ravikumar 15,000 Page No. 32 in annexure A/DS/13 F.Y. 2008 G. Naveen Kumar 40,000 Page No. 47 in annexure A/DS/13 F.Y. 2008 J. Ramachander 20,000 Page Nos. 51 & 52in annexure A/DS/13 Total for F.Y. 2008-08 relevant A.Y. 2009-10 F.Y. 2009-10 Mathena Surender 20,000 Page No. 53 in annexure A/DS/13 F.Y. 2009-10 Various persons 3,65,000 Page Nos. 67 to 85 in annexure A/DS/13 Total for F.Y. 2009-10 relevant A.Y. 2010-11 F.Y. 2010-11 T. Saraswathi 36,000 Page No. 77 in annexureA/DS/11 F.Y. 2010-11 Various persons (15 in 8,76,000 Page No. 18 in number) annexureA/DS/11 F.Y. 2010-11 Various persons (15 in 1,90,000 Page No. 69 in number) annexureA/DS/12 Total for F.Y. 2010-11 19,12,000 relevant A.Y. 2011-12 Grant Total 26o,25,340

During the course of search, the AO found that the assessee has made

the advances to various persons on promissory notes as per details given in

Annexure A/DS/13. Since the assessee failed to explain the sources, the AO

made the addition as undisclosed income for the A.Ys. 2007-08 to 2012-13

as under:

A.Y (undisclosed income relating to Amount of Loans and advances) 2007-08 75,000 2008-09 1,38,000 2009-10 3,85,000 2010-11 1,15,000 2011-12 19,12,000 18. On appeal, the Ld.CIT(A) confirmed the addition since the assessee

failed to produce any evidence to explain the sources. For the sake of

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

CIT(A) in para No.4.3 for the A.Y.2006-07 is as under :

“4.3. Regarding the Loans and advances given to various persons, it is the contention of the appellant that the source for the same was his daily finance business and interest income earned thereon. But, the Assessing Officer has not accepted the explanation offered by the appellant as he has not produced any evidence to prove that the Loans and advances are out of his daily finance business and treated the same unexplained loans and advances in the hands of the appellant. added back the entire amount of Rs.75,000/- to the income. Even during the appellate proceedings, no evidence was furnished / produced by the appellant. Accordingly, the addition of Rs.75,000/- is hereby confirmed.”

material to support sources. The assessee also did not file any return of

income for the A.Y. under consideration. The assessee explained that the

cash deposits, withdrawals and the daily finance are interlinked, hence, the

cash deposits and the loans and advances cannot be seen in isolation. Since

the assessee is dealing in daily finance as stated by him and the cash

deposits, withdrawals and the sources for finances as well as collections

from the debtors required to be considered collectively, hence, in the

interest of justice, we are of the considered view that this issue requires to

be considered along with the sources of cash deposits. The Assessing Officer

required to consider the totality of the facts for the sources in finance

business, collections, cash deposits made in the bank account and the cash

withdrawals and its application and required to tax the amounts

representing the unexplained sources and the interest income earned

therefrom. Accordingly, we remit the matter back to the file of the AO for

fresh consideration and to examine the entire issue of loans and advances

and decide the issue afresh on merits. The assessee required to cooperate with the department and submit necessary information to complete the

assessment in time frame. Accordingly the appeal of the assessee, on this

ground, for the A.Ys2007-08 to 2011-12 is allowed for statistical purposes.

to the advance for purchase of land at Waddepalli for Rs.1,64,350/-.

During the course of search, the AO found that the assessee made the

investment of Rs.1,64,350/- for purchase of land in Nirup Nagar,

Waddepalli (V) admeasuring 250 sq.yds from his co-brother Shri

D.Venkatachari through sale deed dated 05.10.2007 vide document

No.11687/2007, which was found vide seized in annexure A/DS/13 at page

no.111 to 122. The assessee has been asked to explain the source for

Rs.1,64,350/-, but assessee failed to explain the source. The assessee in his

reply submitted to the show-cause notice dated Nil, has accepted

Rs.1,64,350/- as undisclosed income for the A.Y. 2008-09. Therefore, the

Assessing Officer made the addition of Rs. 1,64,350/- as undisclosed

income in the hands of the assessee.

the CIT(A), who confirmed the addition since the assessee has neither

cooperated with the department nor furnished any evidence before the

Ld.CIT(A).

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

support the source for purchase of land at Waddepalli. As evidenced from

the CIT(A)’s order and the assessment order, the assessee did not

cooperate with the department and support his case in spite of repeated

opportunities. Since the assessee failed to produce any evidence before the

lower authorities as well as during the appeal hearing, we do not find any

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

gold for Rs.40,000/-. The AO found during the course of search in the case

of D.Sampath as per the seized material annexure A/DS/11 page No.77,

that the assessee had purchased gold worth Rs.40,000/- during the

Financial Year 2007-08. The AO issued show cause notice requesting the

assessee to explain as to why the same should not be treated as undisclosed

income. The assessee explained that the gold was purchased out of the

interest income which was undisclosed, therefore, the AO made the

addition of Rs.40,000/-as ‘undisclosed income’.

the CIT(A), who confirmed the addition since no credible information had

been filed even before the Ld.CIT(A).

before us. During the appeal hearing, the Ld.AR did not furnish any

evidence to explain the source for purchase of gold. Therefore, we do not

find any infirmity in the order of the CIT(A) and the same is upheld.

of deduction claimed u/sec. Chapter - VIA for Rs.82,127/-. This issue is

involved for the A.Ys. 2009-10, 2010-11 and 2011-12. The assessee did not

furnish any evidence before the AO/CIT(A) to support his claim. During the

appeal hearing before us, the Ld.AR fairly conceded that no evidence is

available for the claim. Therefore, appeals of the assessee on this ground

are dismissed for A.Y.2008-09 to 2011-12 .

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. The Assessee- Sri Dharipalli Sriramulu, 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)-3, Visakhapatnam. 5. DR, ITAT, Visakhapatnam 6. Guard file

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