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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
ITA No 153 of 2018 Jaya Diagnostic आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No.153/Hyd/2018 Assessment Year: 2014-15 Jaya Diagnostic & Vs. Dy. C.I.T. Circle 2(2) Research Centre Ltd, Hyderabad Hyderabad PAN:AACJ5137J (Appellant) (Respondent) Assessee by: Shri Pawan Kumar Chakrapani Revenue by: Shri Kumar Aditya, DR Date of hearing: 19/09/2022 Date of pronouncement: 17/10/2022 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 27th October, 2017 of the learned CIT (A)-2, Hyderabad relating to A.Y.2014-15.
There is a delay of 7 days in filing of this appeal by the assessee for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit explaining the reasons for such delay and after hearing the learned DR, the delay in filing of this appeal by the assessee is condoned and the appeal is admitted for adjudication. Page 1 of 13
ITA No 153 of 2018 Jaya Diagnostic 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of diagnostic and medical services, filed its return of income declaring total income of Rs.1,70,06,210/-. The case was selected for scrutiny through CASS and notice u/s 143(2) and 142(1) were duly issued and served on the assessee. During the course of assessment proceedings, the Assessing Officer noted that the assessee company has shown to have received unsecured loan of Rs.3,45,00,000/- from Mrs. M. Srimani, Director of the assessee company. From verification of the details furnished by the assessee, he noted that an amount of Rs.1,65,00,000/- was carried forward from earlier year’s share application money and transferred to unsecured loan a/c and balance of Rs.1,80,00,000/- has been freshly given by Mrs. M. Srimani to the assessee company as unsecured loan. In response to the query raised by the Assessing Officer, the assessee company submitted confirmation letter from Mrs. M. Srimani in which she stated that source for giving unsecured loan to company is out of her borrowings. It was submitted that on behalf of M. Srimani, Mr. M. Bharat, Son has transferred an amount of Rs.62,00,000/- and Mrs. N. Tejaswini, daughter-in-law has transferred Rs.1,18,00,000/- to the assessee company’s a/c directly which Mrs. M. Srimani has treated as her borrowings. From perusal of the Bank statement of Mr. M. Bharat, the Assessing Officer noticed the following: S.No Date Nature of transaction Amount (Rs.) 1 27.11.2013 Cash deposit 22,00,000 2 28.11.2013 Amount transferred to Jaya 22,00,000 Diagnostic 3 28.11.2013 Cash Deposit 40,00,000 4 30.11.2013 Amount transferred to Jaya 20,00,000 Diagnostic 5 03.12.2013 Amount transferred to Jaya 20,00,000 Diagnostic
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ITA No 153 of 2018 Jaya Diagnostic 3.1 From the above, he noted that there are cash deposits immediately prior to transferring amount to assessee’s bank a/c. He observed from the return of income filed by Mr. Bharat for the A.Y 2014-15 that the income offered by M. Bharat is Rs.5,80,400/- only which is very less in comparison to the amounts given to assessee company. He further noted that M. Bharat has submitted his confirmation letter stating that the loan was given out of gift money received. To ascertain the genuineness of the transaction and creditworthiness of Mr. M Bharat, the Assessing Officer issued summons u/s 131 of the I.T. Act on 16.12.2016. Neither he appeared before the Assessing Officer nor anybody appeared on his behalf by filing the requisite details. However, subsequently a written submission was filed on behalf of Mr. Bharat according to which he has received an amount of Rs.62,67,018/- from various relatives and friends on the occasion of marriage and he submitted the list of parties from whom gifts have been received. It was also mentioned in the letter that scrutiny proceedings in case of M. Bharat is pending for the A.Y 2014-15 before Income Tax Officer Ward 2(2) Hyderabad. In absence of satisfactory explanation given by the assessee to substantiate the loan, the Assessing Officer made addition of Rs.62.00 lakhs on protective basis in the hands of the assessee u/s 68 of the I.T. Act.
3.2 The Assessing Officer similarly noted from the bank statement of Mrs.N. Tejaswini that the following transactions have taken place. S.No Date Nature of transaction Amount (Rs.) 1 29.11.2013 Cash deposit 14,75,000 2 3.12.2013 Cash deposit 25,000 3 10.12.2013 Amount transferred to Jaya Diagnostic 15,00,000 4 15.02.2014 Cash deposit 60,00,000 5 17.02.2014 Amount transferred to Jaya Diagnostic 20,00,000 6 24.2.2014 Cash Deposit 47,99,000 Page 3 of 13
ITA No 153 of 2018 Jaya Diagnostic 7 24.02.2014 Cash Deposit 1,50,000 8 25.02.2016 Amount transferred to Jaya Diagnostic 20,00,000 9 6.3.2014 30,00,000 10 10.3.2014 Amount transferred to Jaya Diagnostic 25,00,000 11 20.03.2014 Amount transferred to Jaya Diagnostic 8,00,000
3.3 He noted from the above that there are cash deposits immediately prior to the transfer of amounts to the assessee’s bank a/c. Further, there are no other credit entries in the bank a/c of N. Tejaswini except the cash deposits. From the return of income filed by N. Tejaswini for the A.Y 2014-15, the Assessing Officer noted that the income offered by N. Tejaswini for the A.Y 2014-15 is Rs.10,66,256/- which is very less in comparison to the amounts given to the assessee company. Further, as per the confirmation letter, she has submitted that the said loan was given out of gift money received. To ascertain the creditworthiness of N. Telaswini, summon u/s 131 of the I.T. Act was issued and served to her. In response to the same, neither she did appear nor anybody attended to file any details. The Assessing Officer, therefore, held that the assessee company has brought its unexplained income from M. Srimani which are in turn transferred through Mr. M. Bharat & Mrs. N Tejaswini. He, therefore, made an addition of Rs.1,80,00,000/- i.e. (Rs.62,00,000 + Rs.1,18,000/-) by invoking the provisions of section 68 of the I.T. Act.
In appeal, the learned CIT(A) confirmed the addition by observing as under: “7. I have carefully considered the issue and the submissions made The by the AR. unsecured loan by Smt. Srimani to the appellant was given from the bank accounts of her son Mr. Bharat and Daughter-in-law Ms. Tejaswini. It is therefore, pertinent and relevant to examine the credit worthiness of Mr. Bharat and Ms. Tejaswini. As contended by the AR, Smt. Srimani, her son Mr. Bharat and daughter in-law Ms. Tejaswini are from a highly reputed family in the society enjoying high social status. In the above background, the explanations of Mr. Bharat and Ms. Tejaswini
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ITA No 153 of 2018 Jaya Diagnostic that they have given interest free loan to her mother out of cash gifts received during the marriage are fantastic and unbelievable. It is beyond Comprehension that the newly wed would give the gifts received by them in marriage, as a loan for business purpose. 7.1 The quantum of the alleged cash gifts received by Mr. Bharat and Ms. Tejaswini on the occasion of marriage is unbelievably high figure. It is beyond imagination that Rs. 1.90 cr. in cash was received as gifts by them apart from other gift items etc. It is evident from the bank statements of Mr. Bharat and Ms. Tejaswini, which are annexed to the order, that there are no other entries in the bank statement but for the cash deposits made in the bank accounts, funds from which have been subsequently transferred to the account of the appellant. The bank accounts reveal the real story of the appellant and the creditor. 7.2 One further interesting and unusual thing to observe is that while the marriage happened on 21.8.2013, Ms. Tejaswini claims to have made cash deposits out of cash gifts received on marriage, on various dates right from 29.11.2013 to 24.02.2014, for almost 6 months. Similarly, is the case with that of Mr. Bharat. It is incomprehensible as to why and how the so called cash gifts received on 21.08.2013 have been deposited in instalments over a period of six months in the bank CERTIFIED TRUL0US in the bank accounts. 7.3 The above mentioned facts establish beyond doubt that the credit worthiness of the creditor is not established and therefore the provisions of Section 68 would be squarely applicable to the appellant. AS regards the contention of the AR that since scrutiny assessment of Mr. Bharat has been completed without making addition, the protective addition made in the appeal under consideration has no legs to stand misplaced and misconceived. Completion of assessment u/s. 143(3) does not grant a stamp of genuineness/authenticity of the affairs of the assessee. The issue in the appeal under consideration is regarding sources for the loan given by Mr. Bharat and not that of income to be assessed in his hands. Therefore, scrutiny assessment Completed in the case of Mr. Bharat has no relevance to the issue under consideration in the appeal. In view of the above, the addition made by the AO u/s.68 of Rs.62 lakhs and Rs.1.18 crores totaling to Rs.1.80 cores is upheld and grounds of appeal are dismissed”.
Aggrieved with such order of the learned CIT (A) the assessee is in appeal before the Tribunal by raising the following grounds: “1. Learned Commissioner of Income Tax (Appeals) - 2 [CIT(A)-2], Hyderabad has erred on facts and in law. 2 Learned CIT(A) has erred in sustaining the additions of Rs. 62,00,000/- and Rs. 1,18,00,000/- made u/s 68 of the IT Act.
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ITA No 153 of 2018 Jaya Diagnostic 3 The learned CIT(A) has failed to notice that the burden of proof lying on the assessee-company and Rs. 1,18,00,000/- has to explain the source of credits of Rs. 62,00,000/- and Rs. 1,18,00,000/- has been discharged. 4. The learned CIT(A) and the AO are not justified in asking for proof of source of source the depositor Smt M Srimani. 5. Learned CIT(A) has grossly erred in sustaining the addition on the basis of suspicion and surmises about the date of deposits by newly married Sri Bharat and Smt. N Tejaswini who have confirmed payments to assessee-company on behalf of Smt. M Srimani. 6. Learned CIT(A) and AO are not justified in making protective assessment of Rs. 62,00,000/- in hands of the assessee-company although Mr. Sri Bharat's assessment has been completed without adding Rs. 62,00,000/-. Protective addition without Corresponding substantive addition has no legs to stand. 7. Learned CIT(A) and AO are not justified in making addition of Rs. 1,18,00,000/- invested by Smt M Srimani through Mrs. N Tejaswini, in the hands of the assessee company. 8 For these and any other grounds that may be raised at / before the time of hearing, it is prayed that the two additions amounting to Rs. 1,80,00,000/- be kindly deleted”.
The learned Counsel for the assessee strongly challenged the order of the learned CIT (A) in confirming the addition made by the Assessing Officer. Referring to Page No.22 of the Paper Book, he drew the attention of the Bench to the confirmation filed by Mrs. M. Srimani confirming the interest free unsecured loan of Rs.1,80,00,000/- given to Jaya Diagnostic. He submitted that in the said confirmations she has also explained her source which is out of borrowing and she has enclosed the confirmation letter for the unsecured loan borrowed during the impugned A.Y. Referring to page No.23 of the paper book, he drew the attention of the Bench to the confirmation letter given by M. Tejaswini according to which she has directly transferred an amount of Rs.1,18,00,000/- to Jaya Diagnostic on behalf of Smt. M. Srimani through RTGS. Referring to page No.24 of the paper book, he drew the attention of the Bench to the confirmation letter given by Smt. Page 6 of 13
ITA No 153 of 2018 Jaya Diagnostic N. Tejaswini. Referring to page No.25 of the Paper Book, he drew the attention of the Bench to the confirmation letter giving unsecured loan by Shri M. Bharat on behalf of Mrs. M. Srimani through RTGS to Jaya Diagnostic. Referring to page Nos.26 & 27 of the Paper Book, he drew the attention of the Bench to the Bank A/c of Sri M. Bharat. Referring to page No.29 of the Paper Book, he drew the attention of the Bench to the assessment order passed u/s 143(3) in case of Shri Bharat wherein the Assessing Officer has accepted the returned income of Rs.4,94,040/-. Referring to page Nos. 32 & 32 of the Paper Book, he drew the attention of the Bench to the assessment order passed u/s 143(3) on 9.11.2016 by the Assessing Officer in case of Smt., Tejaswini Nandamuri accepting the returned income of Rs.9,56,260/-. Referring to the assessment order, he drew the attention of the Bench to the findings given by the Assessing Officer wherein he has accepted large amount of cash deposit in the bank A/c as gift at the time of marriage from friends and relatives and father & grandfather. He accordingly submitted that the assessee in the in instant case has not only explained the source but the source of the source also, therefore, no addition could have been made.
Referring to various decisions, the learned Counsel for the assessee submitted that when the assessee proves the identity and creditworthiness of the loan creditors and the genuineness of the transaction, no addition is called for u/s 68. Further, the Assessing Officer in the instant case has made protective addition of Rs.68.00 lakhs in the hands of Mr. M. Bharat and in the final assessment order, no addition has been made in the hands of Mr. M. Bharat. Therefore, Rs.62.00 lakhs in the hands of Mr. Bharat has to be deleted. Similarly, the Assessing Officer in the case of Smt. N. Tejaswini after considering the huge cash deposit in the Page 7 of 13
ITA No 153 of 2018 Jaya Diagnostic Bank A/c has accepted the deposits and therefore, when Smt. N. Tejaswani has transferred the money to the assessee company on behalf of Mrs. M. Srimani, no addition u/s 68 should have been made. He accordingly submitted that the order of the learned CIT(A) should be set aside and the grounds raised by the assessee should be allowed.
The learned DR, on the other hand, strongly relied on the order of the Assessing Officer and the learned CIT (A).
We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.1,80,00,000/- being the amount of unsecured loan given by Smt. M. Srimani to the assessee company on the ground that the two persons namely Mr. M. Bharat and Mrs. N. Tejaswini who had deposited money in the Bank A/c on behalf of the assessee did not appear before him in response to the summons issued u/s 131. Further the Bank Accounts of the persons who transferred money to the assessee company shows that there were immediate cash deposits before the transfer and their creditworthiness is doubtful. We find the learned CIT (A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the learned Counsel for the assessee that the Assessing Officer of the two creditors namely Mrs. N. Tejaswini and Mr. M. Bharath has accepted their respective return of income u/s 143(3) and therefore, once their returns were accepted by the Assessing Officer in the order passed u/s 143(3), there is no reason on the part of the learned
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ITA No 153 of 2018 Jaya Diagnostic CIT (A) to sustain the addition since their creditworthiness is proved beyond doubt. 10. We find in the instant case despite summons issued by the Assessing Officer u/s 131 of the I.T. Act, the two creditors namely Mr. M. Bharat and Mrs. N. Tejaswini never appeared before the Assessing Officer. At the same time, it is also an admitted fact that the Assessing Officer in the case of Mr. Bharat and Mrs. Tejaswini has completed the assessment u/s 143(3) of the Act accepting the various deposits made by them in their respective Bank Accounts which according to them are out of gifts received at the time of marriage. We find the Assessing Officer in the case of Mr. M. Bharat passed the order u/s 143(3) on 14.12.2016 accepting the returned income of Rs.4,94,040/-which is as under:
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ITA No 153 of 2018 Jaya Diagnostic
10.1 Similarly, we find that the Assessing Officer in the case of Mrs. Tejaswini has passed the order u/s 143(3) on 9.11.2016 accepting the returned income of Rs.9,56,260/- which is as under:
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10.2 However, it is an admitted fact that these assessment orders were not available at the time of completion of the assessment although these were available at the time of hearing of the appeal before the CIT (A). We do not find from the record as to whether the orders passed by the Assessing Officer u/s 143(3) in case of Mr. M. Bharat and Mrs. Tejaswini have been reopened or any 263 proceedings have been initiated. Since the above two persons were never produced before the Assessing Officer for his examination and since it is not known as to whether the assessment orders passed by the Assessing Officer u/s 143(3) have attained finality by either reopening of the assessment or initiation of the proceedings u/s 263 of the Act, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh. The assessee is hereby directed to produce the two persons for examination of the Assessing Officer and also file necessary details as may be called for by the Assessing Officer to substantiate as to why cash was immediately deposited prior to issue of cheques and why the so-called huge cash gifts were not Page 12 of 13
ITA No 153 of 2018 Jaya Diagnostic immediately deposited into the Bank Ac/. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed for statistical purposes.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 17th October, 2022. Sd/- Sd/- (LALIET KUMAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 17th October, 2022. Vinodan/sps Copy to: S.No Addresses 1 M/s. Jaya Diagnostic & Research Centre Ltd, 100 Raghava Ratna Towrs, Chirag Ali Lane, Abids, Hyderabad 500001 2 Dy.CIT, Circle 2(2) Hyderabad 3 CIT (A)-2,Hyderabad 4 Pr. CIT-2, Hyderabad 5 DR, ITAT Hyderabad Benches 6 Guard File By Order
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