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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: Shri Rama Kanta Panda & Shri Laliet Kumar
Per Shri Laliet Kumar, J.M: These two appeals are filed by the assessee, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-11, Hyderabad, dated 29.03.2019 for the AY 2009-10 & 2010-11 respectively.
ITA No.830/Hyd/2019 for AY 2010-11
Assessee has raised the following grounds of appeal:- 1. The Ld.CIT (A) Commissioner of Income Tax (Appeals) erred both on facts and in law by dismissing the appeal. 2. The Ld CIT(A) erred in sustaining the addition made by the A.O. for an amount of Rs.11,00,000 on account of amount lent by Sri K.Venkata subbaiah 3. The Ld CIT(A) ought to have appreciated the fact that assessee has discharged his onus by submitting the confirmation from Sri K.Venkata Subbaiah.
2 Ch.Chandrasekhar Naidu 4. The Ld CIT(A) erred in holding that the appellant even during the course of appeal proceedings .had not produced any satisfactory evidence for proving the identity and creditworthiness of the creditor.
The Ld CIT(A) ought to have appreciated that in spite of the fact that the return of income has been filed after the date of search ,there exists a valid return filed by the HUF where in the impugned investment of Rs.1,00,000/- has been shown.
The Ld CIT(A) ought to have considered the objections filed by the assessee in response to the remand report sent by the Assessing officer.
The Ld CIT(A) erred in not treating the confirmation letter submitted by the assessee as a proof for establishing the identity of the assessee.
The Ld CIT(A) erred in sustaining the addition of Rs.1,00,000 on account of loan given in the capacity of HUF.
The Ld CIT(A) ought to have appreciated the fact that A.O. has submitted the remand report without making any enquiries with Sri K. Venkata Subbaiah.
The Ld CIT(A) erred in considering that the amount of Rs.1,00,000 was claimed in the returns of the HUF for A Y 2010- 11,only because the respective promissory notes were found at the time of search proceedings. 11. The ld.CIT(A) erred in treating the amount of Rs.1,00,000 as unexplained investment though the amount was claimed in the returns filed by the HUF for the AY 2010-11. 12. The ld.CIT(A) erred in treating the amount of Rs.1,00,000 as unexplained investment just because the return of the HUF was filed after the date of search.
The ld. A.R. for the assessee had submitted that the assessee is challenging the additions made by the ld. A.O. and confirmed by the ld.CIT(A) in respect to the amount of Rs. 11 lacs as unexplained cash credit and also the amount of Rs.1 lac towards the unexplained investment.
With respect to the first issue of unexplained cash credit of Rs. 11 lacs, the submission of the assessee was before the ld.CIT(A), the amount was received by the assessee vide cheque bearing No. 745520 through the banking channel from Mr. Kamana Venkata
3 Ch.Chandrasekhar Naidu Subbaiah. He had confirmed this fact in the confirmation letter issued to revenue authority. He drew our attention to page 4-8 of the paper book, where the confirmation letter along with statement of account and copy of ledger are placed to the following effect :-.
CONFIRMAT10N LETTER
To
The Assistant Commissioner,
Central Circle-2, Aayakar Bhavan,
Basheerbagh, HYderabad.
Dear Sir,
I, K Venkata Subbaiah, S/u. K.subbarayudu residing at Dbannavada Village, Vaddirala Post, Mylavaram Mandal, Kadapa Dist had given a loan of Rs. 11,00,000/. (Rupees Eleven Lakhs only) to Sri. C. Chandra Sekhar Naidu. S/o. Late C.M. Subba Naidu, and the said the amount is given by way of Cheque bearing No. 745520. I am not I.T. Assessee and am agriculturist and above loan is given Out of accumulated agricultural savings. I am enclosing Pattadaru Pass Book.
STATEMENT OF THE A/C 11300068728 FROM 15/03/2010 TO 31/05/2010
VALUEDAT AMOUNT BALANCE NARRATION CHEQUE NO 20100330 1100000 1100769.540 20100330 -1100000 769.540 CHQ NO745520 PAID 20100520 300000 300769.54 TR 20100520 -300025 744.54372536 SBINH10140324811 N SUBRAMANYAM 20100520 300000 300744.540 TR 20100520 -300025 719.54 372537 SBINH10140331091 N SUBRAMANYAM 20100527 1133000 1133719.54 CR 113300068728 372537 DR 10558466198 20100527 200 113919.540 20100527 -1132820 1099.54372538
4 Ch.Chandrasekhar Naidu
C.Chandra Sekhar Naidu-09-10 Potladurthi village Yerraguntla Mandal Kadapa dist
K.Venkata Subbaiah Ledger Account 1-Apr-2009 to 31 Mar-2010 Date Particulars Vch Type Vch No. Debit Amount 30-03-2010 Dr. State bank of India Receipt 11,00,000 Ch. No.:Loan Received from K.Venkata subbaiah --------------------------------- 11,00,000 Cr. Closing Balance 11,00,000.00 ------------------------------------- 11,00,000.00 11,00,000 --------------------------------------
It was the contention of the ld. A.R. that the ld.CIT(A), has not examined the issue and despite the assessee proving the identity, creditworthiness and genuineness of transactions and made the addition. Our attention was drawn to the order of the ld.CIT(A) wherein this issue was dealt by the ld.CIT(A) at para 4.2 of the order.
“4.2) I have considered the assessment order and submissions of the assessee. It is seen that the assessee has not filed confirmation from the creditor for examination. Only claim of the assessee is that the loan is obtained through cheque and the creditor is land lord. Obtaining loan through cheque itself does not prove the genuineness of the transaction. In absence of confirmation at least from the creditor, the genuineness cannot be said to be proved. Without producing the primary document, i.e. confirmation, the assessee cannot claim that the onus is discharged. In view of the above, the addition made by A.O. is confirmed. “
It was the contention of the ld. A.R. before us that, documents at page 4 to 8, clearly shows the identity, creditworthiness and genuineness of the transactions. In fact the lender had confirmed extending of loan of Rs 11lacs to the assessee .
5 Ch.Chandrasekhar Naidu 7. Per contra, the ld. D.R., relied upon the order passed by the lower authorities. He drew our attention to following paragarh of Assessing Officer order:- “ A. Since he was out of station I could not produce him before you for examination, but it is again submitted that the loan is received through banking channel, it may kindly be considered as genuine. Q.30 Please state whether Mr. Kamana Venkata Subbaiah is assessed to tax or not If so, where. A. I am not aware whether he is income tax assessee or not.
Even on repeatedly being asked, the assessee could not furnish the confirmation letter from the said person. The assessee did not furnish the copy of the bank statement of the alleged creditor. The assesse also states that he is not aware whether the said person is assessed to income tax or not. The assessee failed to furnish any evidence to prove the identity and creditworthiness of the alleged creditor though the onus is on him to prove the same. Hence, the said amount of Rs.11,00,000/- is treaed as unexplained credit in the hands of the assessee.”
We have heard the rival contentions of the parties and perused the material available on record. Admittedly in balance sheet at page 4 of P.B., assessee has shown the liability of Kamana Venkata Subbaiah for Rs11,00,000/-and at page 5, there is a confirmation letter from the said K.Venkata Subbaiah confirming that he had given a loan of Rs. 11 lacs to the assessee by cheque. Further, it is also matter of record the said amount was transferred by the said person from the banking channel and the same is further clear from the bank pass book, also having the photograph of the said K. Venkata Subbaiah and other details, which indeed proves the identity of the said person. In our view, once the assessee was able to prove the identity, creditworthiness by way of submitting the documents, then no addition should be made by the revenue authority. In this regard, we may fruitfully rely upon the decisions cited by the assessee in the case of Narendra chandubhai vs ITO in ITA No.103/Ahd/2019, Hon’ble Madras High court in CIT vs. Mark Hospitals Pvt. Ltd. [2015] 58 taxmann.com 226 and Hon’ble ITAT Hyderabad in Rajesh Kumar Malpani vs ITO Ward-8(2) in ITA No.497/H/2018. In view of the
6 Ch.Chandrasekhar Naidu above, the additions sustained by the ld.CIT(A) is deleted with respect to Rs. 11 lacs.
Now, the second issue raised before us pertains to the confirmation of Rs. 1 lacs made by the ld.CIT(A). With respect to unexplained investment of Rs. 1 lac, it is explained by the assessee before the A.O. that the amount was lent by the HUF to the assessee and after receiving the amount from the HUF, the same was duly reflected in the return of income filed by HUF on 28.03.2011. However, despite that the ld. A.O. has confirmed the addition and it was observed by the A.O. that the ITR filled with a view to avoid tax liability in the individual hand. Feeling aggrieved appeal was filed by the assessee before ld.CIT(A). The ld.CIT(A) has confirmed the addition of Rs. 1 lac observing as under:-
5.2 I have considered the assessment order and submissions of the assesse. There was no claim made during the search proceedings that the money lent was from HUF are filed after the search. The assessee is only trying to take advantage. In view of the assessee, the action of A.O. is confirmed and the ground raised is dismissed. The decision relied on are not relevant for deciding the ground raised by the assessee.
Feeling aggrieved, the assessee is in appeal before us. It was submitted by the assessee that the loan amount of Rs. 1 lac was given by the assessee to T.Janardhan Naidu by way of promissory note and the source of fund was from HUF. It was the submission of the assessee that the HUF was having sufficient source of income to offer a loan to the assessee. The said fact was duly mentioned in the return of income of the HUF. Our attention was drawn to page 9 to 11 of the paper book contending that the sums were lent by the HUF to the assessee, which in turn were given to Shri Janaradhan Naidu. The ITR and ledger of HUF are supplied as under:-
7 Ch.Chandrasekhar Naidu
8 Ch.Chandrasekhar Naidu C.Chandra Sekhar Naidu-09-10 3/942 YMR COLONY PRODDATUR
T. Janardhan Naidu Ledger Account 1-Apr-2009 to 31 Mar-2010 Date Particulars Vch Type Vch No. Debit Credit 13-07-2009 Cr. Cash payment 1,00,000.00 Being Loan given --------------------------------- 1,00,000.00 Dr. Closing Balance 1,00,000.00 ------------------------------------- 1,00,000.00 1,00,000.00 --------------------------------------
Per contra, the ld. D.R., had submitted that the above said explanation is self serving and with a view to come out of the rigors of the section 153A.
We have heard the rival contentions of the parties and perused the material available on record. Undeniably, in this case, the search and seizure operation was carried out in the assessee's premises on 25.11.2010 and during the search, a promissory note relating to F.Y. 2009-10 (AY 2010-11) was found and have been seized.
The A.O. had noticed that the assessee with a view to show the availability of funds , had filled the return of income of HUF after the search had taken place in the case of assessee. In this way the assessee had shown availability of fund with him with a view to lend the same to the borrower. The return of income placed at page 9 clearly shows that the said return of income was filed after the search on 28.03.2011 for the AY 2010-11. In view of the above, the finding recorded by the lower authorities cannot be faulted . The assessee lent the amount during the F.Y. 2009-10 on 13.07.2009 and assessee was required to be prove that the said HUF was having availability of fund before it was given by
9 Ch.Chandrasekhar Naidu promissory note therefore, we do not find any merit in the submission of the A.R. Accordingly, this ground raised by the assessee is dismissed. In a result, this appeal of the assessee is partly allowed.
ITA No.885/Hyd/2019 for AY 2009-10
In this case, the A.O. had made the addition of unexplained cash credit of Rs. 9,36,200/- because the assessee was not able to prove the cash received by the assessee from 64 individuals who had given loan to the assessee, for the amount below Rs20,000/ each (para 2 of the assessment order). The ld. A.O. has repeatedly asked the assessee to furnish evidence to prove the identity and creditworthiness of the creditors and the genuineness of these 64 transactions. However, the assessee failed to prove the same and accordingly, the A.O. has confirmed the addition of Rs. 9,36,200/-.
Before us, feeling aggrieved by the order passed by the A.O., the assessee preferred an appeal before the ld.CIT(A). The assessee has filed the additional evidence and the remand report was called by the ld.CIT(A) and however, the ld.CIT(A) was not persuaded by justification the assessee gave; accordingly, he confirmed the addition of Rs. 9,36,200/-.
Feeling aggrieved by the order passed by the ld.CIT(A), the assessee, is before us. It was contended by the assessee that the ld.CIT(A) have failed to appreciate that the assessee provided the confirmation letters during the assessment proceedings as well as remand proceedings before the ld.CIT(A), which proves the identity of the creditor. All the persons have accepted to have given such loans. It was argued that since the assessee had discharged his onus, the impugned order is required to be
10 Ch.Chandrasekhar Naidu annulled and relief to be granted to assessee. The ld. A.R. relied upon the following judgments
i.Hon’ble ITAT Ahmedabad in Narendra chandubhai vs ITO in ITA No.103/Ahd/2019 ii. Hon’ble Madras High court in CIT vs. Mark Hospital sPvt. Ltd. [2015] 58 taxmann.com 226 iii. Hon’ble ITAT Hyderabad in Rajesh Kumar Malpani vs ITO Ward-8(2) in ITA No.497/H/2018.
On the other hand, the ld. D.R. had submitted that though the assessee had filed confirmation letter from 64 labours along with their election voter I card. Still, it cannot be believed the labours, who were hands to mouth would be giving the loans to the assessee, which is less than Rs.20,000/-.
We have heard the rival contentions of the parties and perused the material on record. Undoubtedly, the assessee is a man of means and has filed the list of 64 unsecured creditors along with their respective election cards and confirmation letter to the lower authorities.
Though it is correct that the assessee has filed the election card/identity proof of the 64 creditors along the confirmation letter, but the question which arises is whether it can be believed these 64 persons, who were men of limited means have given loans to the assessee. Tribunal cannot close its eyes to the gross root reality and accept identical self-serving evidence filed by the assessee. The revenue could have quickly demolished the justification of the assessee by examining creditors by using their power under section 133(6) of the Act; therefore fault also lies with the lower authorities as, despite the availability of details of these persons, the authorities have not exercised their statutory power to summon few of them on sample basis to find out whether there was actual lending of the amount by such persons
11 Ch.Chandrasekhar Naidu to the assessee or not. In the light of the above-said fact when the fault lies with both that is the revenue as well as assessee. In our considered view, the balance is required to be maintained and accordingly, we uphold the additions of Rs. 4,36,000/- and grant relief of Rs. 5 lacs to the assessee. In the result the ground is parly allowed .
The second ground raised by the assessee pertains to the addition made by the A.O. for unexplained investment of Rs. 10 lacs. In this regard, it was the contention of the assessee that the A.O. has made the above said addition without considering the explanation of the assessee.
On appeal ld.CIT(A) had confirmed the addition of Rs. 10 lacs in the hands of the assessee. Before us, Ar drew our attention to paragraph 4.2 and 4.3 of the order passed by the ld.CIT(A).
4.2 while furnishing the objections on the remand report, the assessee contended as under:
7.1 Suring the course of survey conducted u/s 133A in the case of M/s. Sri Krishna Constructions, the following pro-notes were found and impounded. Page No in Date Lender Lendee Amount(Rs.) seized material 31 08.05.2008 The G.Prasad 10,000,000/- assessee Rao Total 10,00,000/-
7.2 During the course of scrutiny proceedings the assessing officer has added the amount of Rs.10,00,000/- all the basis that the assessee has not disclosed the above transactions each in his original return of income for the year under consideration which is not correct, not justified and is bad in law. The appellant submitted that all the amounts mentioned in the pro-notes were duly accounted for by him in the books of account maintained by him. There is no reason for the same to be added in the hands of the appellant.
7.3 In this connection, it is submitted that, the addition is not warranted for the reason that the assessing officer has not called for any further details in this regard. The funds are clearly generated from the books of
12 Ch.Chandrasekhar Naidu account of the appellant and as such it cannot be added as unexplained investment.
7.4 Further to submit that, during the course of survey u/s 133-A in another case, a pro-note to the tune of Rs. 10,00,000/- were found and when the Assessing Officer questioned the assessee, it was replied that during the year, the assessee lent a sum of Rs.10,00,000/- to Sri G Prasad Rao on 08.05.2008 were from out of the sources available in the hands of appellant's Individual status. However, the Assessing Officer has treated the amount of Rs. 10,00,000/- as unexplained investment in the hands of the appellant on the ground that the assessee failed to explain the sources of the same. The A.O. ought to have appreciated the fact as stated by the assessee in his statement that the advance lent to G. Prasad Rao of Rs. 10,00,000/- on 08.05.2008 was from out of the past accumulated savings of the assessee in his "Individual Status". The A.O. should have considered the incomes admitted from past several years in the return of income filed in the status of Individual. Therefore, it is requested to delete the addition made by A.O. which is without any cogent basis.
7.5 In support of above, reliance is placed in the case of CIT Vs. Vinod Viyogi [2004] 140 Taxmann 711 (Punj. &Har.). (H.c') Wherein it was held that;
"In this case, the Tribunal has set aside the order of the Assessing Officer and directed him to delete the addition holding that the onus was on the revenue to prove that the cash was not available with the assessee, as the assessee has proved that source of cash was available with him The Hon'ble High Court of Punjab and Haryana held that -
A perusal of the above clearly show that the findings recorded by the Tribunal are based on appraisal of the evidence on record, in which no infirmity has been pointed out.
In view of the above, we are satisfied that no substantial question of law arises out of the order of the Tribunal for interference by this Court. Dismissed. II
7.6 In this connection, it is to submit that the appellant has submitted ledger copy of Sri G Prasad Rao in the books of C. Chandrasekhar Naidu in individual status of the appellant through paper book vide pg no-21-22 and ITR, computation of income for kind perusal. In view of the above, we request the Ld. CIT (A) to delete the addition made towards unexplained investment of the Act for the Assessment Year 2009-10.
7.7 In view of the facts submitted above, the action of the A.O. in making addition of Rs.10,00,000/- as un-explained investment is unwarranted, is against to the provisions of the Act, is against to the Principles of Natural Justice and is bad in law.
4.3 I have considered the assessment order and submissions of the assessee. The original return filed by the assessee did not reflect the
13 Ch.Chandrasekhar Naidu transaction in question. The explanation being given later on is only an after thought and explanation just to overcome the rigours of law. The explanation given is vague and general in nature which is not backed by credible evidence. The explanation of the assessee is based on probabilities and not on facts. In view of the factual position being as above, the action of the A.O. is justified and the addition is confirmed.”
Ar submitted, that assessee had submitted that the assessee has produce the balance sheet of the assessee shown he amount of loan to Shri Prasad Rao and our attention was drawn to the following extract to the balance sheet
BALANCE SHEET AS ON 31.03.2009. LIABILITIES AMOUNT ASSETS AMOUNT Capital Account of Site Ward No.20, 109300 S.No.493 Rameshwaram, Proddatur Sri c.Chandra 1682580 s.No.95, 305200 Sekhar Naidu Nanganurupalle 5.00 acres, Agril. Land c.M.gopal 330000 Kapil chits 462800 Kapil chit funds- 194543 contribution 1964543 Sravan chiffin (P) Ltd. Deposits 440000 Unsecured Loans 936200 Loans & Advances- 1738814 Prasad Rao C.Sreedevi 492800 TDS A.Y.2009-10 226600 TDS A.Y.2008-09 34710 TDS A.Y.2007-08 10810 BANKbALANCE-SBI 10558 Cash & bank 181535 Balance 3574380 3574380
The A.R. contended that once the investment made by the assessee was duly reflected and recorded in the books of the accounts (balance sheet) as on 31.03.2009, then the same cannot be treated as an unexplained investment.
The ld. A.R. relied upon following judgments:-
i. Hon’ble ITAT Delhi Bench in ACIT vs. Yashovardhan Tyagi in ITA No.5998/Del/2014.
14 Ch.Chandrasekhar Naidu ii. Hon’ble ITAT Bangalore in ITO vs Smit. Teena Bethala in ITA No.s1383& 1384/Bang/2019 25. On the other hand, the ld. D.R. had submitted that in this case, the survey was conducted in the case of Krishna Construction u/s. 133A and pro-notes dated 8.5.2009 were found and impounded. The assessee has tried to explain the same in the return of income filed pursuant to notice u/s. 153A. It was the contention of the ld. D.R. that the proceedings u/s. 153A are not for the assessee's advantage; therefore, the assessee cannot be permitted to take the benefit of the action initiated u/s. 132/153A.
We have heard the rival contentions of the parties and perused the material on record. Undoubtedly, it is undeniable that the assessee in the balance sheet prepared on 31.03.2009, has mentioned the amount of Rs.17,38,814/- being due to G.Prasad Rao. The ledger of Shri G.Prasad Rao at page 7, confirms the same . We find that in the preset case, the search action was initiated in the premises of the assessee on 25.11.2010. Before that the assessee had filed the return of income for the AY 2009-10 on 05.02.2010 declaring the income of Rs.1,60,000/- and thereafter, the assessee had filed the return of income in response to the notice under section 153A of the Act on 16.03.2012 declaring the return of income of Rs. 2,67,000/- and agricultural income of Rs. 1,36,000/-. The earlier return of income filled on 5.2.2010 was filled on the basis of the balance sheet and P&L account prepared as on 31.03.2009 wherein amount was duly recorded. In our view the explanation of the assessee can not be said to be an afterthought, once the assessee had shown the investment in the balance sheet and further based on that ROI was filed. Therefore, the action on the part of the revenue, making the addition as an unexplained investment, can not be upheld. The law requires the revenue to prove that the
15 Ch.Chandrasekhar Naidu investments were made by the assessee outside the books of account. In view of the above, we find that the assessee is entitled relief. Accordingly, we grant relief to the assessee.
The last ground raised by the assessee is with respect to disallowances of the expenditure of Rs. 2,34,000/-. In this regard, the assessee has submitted that before the A.O. the assessee has proved the earning of the interest income for Rs.3,40,843/-. However, the A.O. has not accepted the interest expenses incurred by the assessee. It was the contention of the assessee before us that, the benefit of netting off of interest should be given to the assessee.
On the other hand, the ld. D.R. had submitted that the netting off of the interest could not be given to the assessee is disputed as the investment and borrowing are disputed by the revenue.
We have heard the rival contentions of the parties and perused the material available on record. In the present case, the assessee had given the loan of Rs. 10 lacs to G.Prasad Rao, and we had already adjudicated the above said fact in favour of the assessee . Therefore, the interest earned by the assessee on the said amount is required to be adjusted from the interest payable on Rs.9,36,000/-. In view of the above, we hold the assessee is entitled to netting of interest . Let the AO grant the benefit to the assessee .
In the light of the above, both the appeals of the assessee are partly allowed.
In the result, both appeals of the assessee are partly allowed.
16 Ch.Chandrasekhar Naidu Order pronounced in the Open Court on 21st July, 2022.
Sd/- Sd/- (RAMA KANTA PANDA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 21st July, 2022. Thirumalesh/sps
Copy to:
S.No Addresses 1 Ch. Chandrasekhar Naidu c/o P Murali &Co. chartered Accountants. 6-3-655/2/3, Somajiguda Hyderabad-500 082 2 DCIT, Central Circle-2 Signature towers Opp. Botanical Garden Hyderabad 3 CIT(A)-11 Hyderabad 4 Pr.CIT(Central) Hyderabad 5 D.R., ITAT Hyderabad Benches 6 Guard File
By Order