KOMALI SUBRAHMANYA PRASAD,,RAJAHMUNDRY vs. ITO, WARD-1(2),, RAJAHMUNDRY

The assessee is an LIC agent and during the assessment year the assessee filed return of income declaring total income of Rs.8,76,440/-. The Assessing Officer (AO) found that the assessee has made the deposits in the savings bank account to the extent of Rs. 40,27,000/- as under :

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and filed additional evidence in the form of cash flow statement. The Ld.CIT(A) forwarded the additional evidence filed before him calling for the remand report directing the AO to verify the veracity of the claims made through the additional evidence and the admissibility of the additional evidence. The Ld.CIT(A) considered the remand report, rejoinder submitted by the assessee for the remand report and observed that the AO submitted the remand report without examining the veracity of the assessee’s claim such as sources of credits and destination of the payment and simply relied on the arithmetical verification of the cash flow statement which is not correct and not acceptable. The assessee also did not explain the sources of various credits and debits in the AXIS bank and other bank accounts even at the appeal stage. Therefore, rejected the explanation of the assessee with regard to the explanation of sources as per the cash flow statement. The assessee’s alternative plea to consider the peak credits as addition was considered by the Ld.CIT(A) and directed the AO to consider the peak credit of South Indian Bank and ING Vysya Bank

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld.AR submitted that the assessee is having three bank accounts in the banks i.e. AXIS bank, South Indian Bank and ING Vysya Bank Ltd. The assessee argued that the bank accounts are considered to be declared since the assessee is not maintaining the books of accounts, thus argued that there is no bank account which is undisclosed by the assessee. The assessee has filed cash flow statement before the Ld.CIT(A) and the Ld.CIT(A) has called for the remand report and the AO submitted the remand report after examining the details properly, hence, the Ld.CIT(A) should have considered the remand report submitted by the AO. As per the remand report, the assessee did not submit the details or the supporting evidence for the sums mentioned in closing balances of the bank accounts. The AO submitted that the closing balance was not declared in the return of income. Therefore, argued that the observation of the Ld.CIT(A) that the AO has not examined the veracity of the claim made by the assessee is incorrect. The assessee is a LIC agent not maintaining the books of accounts, therefore,

On the other hand, the Ld.DR supported the orders of the lower authorities.

We have heard both the parties and perused the material placed on record. In this case, the assessee filed cash flow statement before the Ld.CIT(A) which was considered as additional evidence and admitted by the Ld.CIT(A). Perusal of the cash flow statement reveals that the assessee has made the cash deposits and also withdrawals and stated to be made the redeposit in the bank account out of the withdrawls, without giving explanation for the source of the deposit and the destination of the withdrawal. The purpose of the withdrawal, whether the amount was spent or not? was not explained by the assessee. It is observed that the assessee claimed the source for deposits out of small amounts of

The second issue raised by the assessee is for the purpose of considering the peak credits, all the three bank accounts required to be considered. Verification of the bank accounts shows that the assessee has made huge deposits both by cheque and cash. The sources of such deposits and withdrawals was neither explained in the cash flow statement nor explained before the AO or the Ld.CIT(A). For considering the peak credit, every debit and credit entries are required to be explained independently to hold that the withdrawal has come back as a source for the deposit. This exercise was not done either by the Ld.CIT(A) or by the AO. The assessee did not cooperate with the AO and did not furnish the details. Therefore,

In the result, appeal of the assessee is allowed for statistical purpose.