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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD
Before: SHRI LAXMI PRASAD SAHU & SHRI K. NARASIMHA CHARY
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”: HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA No. 812/HYD/2016 Assessment Year: 2007-08 Khoday Goverdhan, Vs. Income-tax Officer, Hyderabad. Ward – 7(2), Hydereabad. PAN – AGVPG 0534 G (Appellant) (Respondent) Assessee by: Shri Tej Prakash Toshniwal Revenue by: Shri Rohit Mujumdar Date of hearing: 03/03/2022 Date of pronouncement: 08/03/2022
O R D E R PER BENCH: This appeal filed by the assessee is directed against CIT(A) - 10, Hyderabad’s order, dated 12/01/2016 for AY 1007-08 involving proceedings u/s 143(1) of the Income Tax Act, 1961; in short “the Act” on the following grounds of appeal:
“1. That the order of the Commissioner of Income Tax (Appeals i-If). Hyderabad in confirming the assessment order passed by the Income Tax Officer, Ward-7(2), Hyderabad, for the assessment year 2007-08 under the
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Income Tax Act, 1961, is contrary to law, against the weight of evidence and probabilities of the case. 2. That the Income Tax Officer who passed the assessment order under Section 143(3) of the Income Tax Act for the return of income filed on 09.06.2008 for which the one year period prescribed under the Income Tax Act, expires by 08.06.2009. The Income Tax Officer admitted in the assessment order that first time issued notice on 22.09.2009 is ex-facie barred by limitation and have no authority to assess the petitioner for the assessment year 2007-08. 3. The Income Tax Officer who borrows the amendment for extension period which has been introduced w.e.f. 01.04.2008 have no application to the assessment year 2007-08 for which the financial year ends by 31.03.2007. Thus the extended period applied by the Income Tax Officer have no sanctity in the eye of law. 4. The petitioner who filed return of income voluntarily declared an income of Rs.86,954/under Section 44-AF of the Income Tax Act. The Income Tax Officer added total deposits made in the bank on various dates Rs.10.12,500/- as income of the petitioner. The petitioner who is an old income tax assessee having surplus capital which was subjected to income tax earlier prior to this relevant assessment year, deposited the cash in the bank and withdrawn the cash apart from this the petitioner is having Tijori account which was having sufficient balance was operated and the cash was deposited in the bank and withdrawn on various dates cannot be termed as an income. The Income Tax Officer did not look to the Tijori account nor he looked to the earlier surplus capital although the same is borne on record which the petitioner was possessing and subjected the entire deposits as liable to income tax without conducting any enquiry, verification of the deposits.
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That the Income Tax Officer added Rs.3,60,000/- towards the registered gift received from his real brothers towards gifting of their share in the house property along with whom he purchased the immovable property. The above said registered gift deed which was executed by his two brothers was a registered instrument and the said gift deed was executed by his real brothers. The petitioner have produced the Xerox copy of the registered gift instrument which the Income Tax Officer did not consider and added to the income of the assessee. The manner and method under which the addition have been made are quite arbitrary and illegal one. 6. The method and manner in which the assessment completed by the assessment order is vindictive in nature and made up his mind to add the above said sums as income without conducting any verification or enquiry is quite contrary to law. The Income Tax Officer ought to have verified true nature of the receipts before venturing to add the above said additions. Thus the order of the Income Tax Officer is quite arbitrary and illegal and liable to be set aside. 7. That the Income Tax Officer did not grant the relief of life insurance premium paid for Rs.25,878/- for which the petitioner is eligible for deduction. That the Petitioner craves leave of the Hon'ble Tribunal to permit the Petitioner to add, alter or amend the grounds of appeal during pendency of the same.”
Briefly, the facts of the case are that the assessee filed his return of income on 09/06/2008 declaring total income of Rs. 86,954/-u/s 44AF, which was processed u/s 143(1) of the Act on 06/06/2009. Subsequently, the case was selected for scrutiny under CASS and accordingly, statutory
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notices were issued to the assessee. The AO completed the assessment u/s 143(3) of the Act determining the total income at Rs. 15,18,530/- by making following additions:
Addition on account of cash deposits in bank - Rs. 10,12,500 2. Addition on account of gift received – Rs. 3,60,000 3. Addition on account of LIC u/s 80C - Rs. 25,878 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the order of the AO.
Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT.
Ground Nos. 1 & 3 are not pressed by the ld. AR of the assessee at the time of hearing before is, therefore, the same are dismissed as not pressed. Ground NO. 7 is general in nature, hence, need no adjudication.
As regards ground No. 4 regarding the addition of Rs. 10,12,500/- on account of bank deposits, during the course of assessment proceedings, the Assessing Officer asked the assessee filed details of bank accounts held by the assessee. Though the assessee furnished details of accounts with Sri. A.P. Mahesh co-operative bank and HDFC bank, he did not mention anything about the account maintained with the Andhra Bank, Chandanagar branch. However, subsequently the assessee filed the copy of the bank account with Andhra
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Bank, Chandanagar and he tried to explain the sources for deposits in that account as the sale proceeds of the business and also withdrawals from HDFC bank. It was claimed that the sale proceeds were Rs. 15,16,414/- and the cash deposits during the relevant period comes to Rs. 10,12,500/-. The Assessing Officer also noticed that in the first incidence the assessee has claimed that he has not maintained any books of account and estimated the income u/s. 44AF of the I. T. Act, 1961. Observing that in the absence of the details of credits in Andhra Bank, Chandanagar Branch and in the absence of proper explanation as to the source of credits, the AO treated the entire amount of deposits of cash of Rs. 10,12,500/- as unexplained credits and added back to the total income.
6.1 The CIT(A), upheld the addition made by the AO by holding that even before the appellate proceedings, no bills etc. were filed to support the assessee’s claim.
6.2 Before us, the ld. AR of the assessee submitted that the assessee disclosed income from retail readymade dresses business u/s 44AF @ 5% of turnover of Rs. 17,39,080/- i.e. Rs. 86,954/- and the rental income of Rs. 84,388/- and total income declared was Rs. 1,46,026/-. He, therefore, contended that the bank deposits cannot be added as income as the said deposits are from out of the retail sales, from past savings and realization from
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receviables and the opening capital & cash balances brought forward from the earlier years.
6.3 The ld. DR, on the other hand, besides relying on the orders of revenue authorities, submitted that the assessee failed to explain the bank deposits properly before the AO and CIT(A) and failed to produce any documentary evidence in support of his claim before them.
6.4 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. It is observed that there is no dispute that the assessee has declared his income u/s 44AF of the Act, which has been accepted by the revenue authorities and turnovers have also been accepted as per section 44AF of the Act. Considering the submissions of the ld. AR of the assessee that the deposits are from out of the retail sales and from out of the opening capital and cash balances brought forward from the earlier years and inter bank deposits, we restrict the addition to 10% i.e. Rs. 1,01,251/- as against the addition of Rs. 10,12,510/- made by the AO on account bank deposits. Thus, this ground of the assessee is partly allowed.
As regards ground No. 5 with regard to addition of Rs. 3,60,000/- representing gifts received from assessee’s brothers, during the course of assessment proceedings the
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assessee produced capital account which showed that Rs. 2,40,000/- and Rs. 1,20,000/- were claimed to have been received from Sri. K. Nursing Rao and Sri. K. Purshottam respectively. Assessee claimed that these two persons were his brothers and they have gifted the immovable property bearing No. 13.2.784, kakjiguda, Hyderabad to him on 14.03.2007 through registered gift deed dated 31/05/2007 and they are assessed to income tax and submitted PANs. However, the Assessing Officer did not accept the explanation by stating that identity, genuineness, credit worthiness of the person who gifted the property is not proved and accordingly, made the addition of Rs. 3,60,000/- and added to the total income of the assessee.
7.1 The CIT(A) observed that in the confirmation letter no amount was mentioned and registered gift deed was not produced for perusal. He, therefore, held that the AO had correctly treated the above amounts as unexplained cash credits.
7.2 Before us, the ld. AR of the assessee invited the Bench attention to the family partition deed and gift deed, which are placed on record to submit that the gift was received from his brothers through gift deed and therefore, the same qualifies for deduction u/s 56(2) of the Act.
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7.3 The ld. DR, on the other hand, submitted that the gift deed was executed on 31st May, 2007, whereas the amount recorded in the financial statement for the year ended 31 st March, 2007. He, therefore, pointed out that how the assessee can make entry before executing the gift deed and submitted that the assessee was unable to explain the gift received properly before the lower authorities. He further submitted that the value of the property has been recorded more than the gifted amount.
7.4 We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. On perusal of the financial statements, we find that for the FY ended 31/03/2007, the assessee has credited gift amount in his capital account and correspondingly effect has been given on the assets side in the balance sheet as house at kakajiguda. Further, on observing the financial statement for the year ended 31/03/2006, there is a house at Kakajiguda valued at Rs. 1,50,000/- and the same was inflated as Rs. 3,60,000/- out of gift received. When the Bench asked a specific question to ld. AR regarding increase in the value of house at Kakajiguda, the ld. AR replied that the value of gift received from his brothers of Rs. 3,60,000/- Rs. 1,20,000 + Rs. 2,40,000) has been added and, hence, the value has been recorded at Rs. 5,10,000/- (Rs. 1,50,000 + Rs. 3,60,000/-). We are of the view that there is no movement of any
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cash/kind from the transaction recorded nd the gift which has been executed on 31st May, 2007, but, the assessee has recorded the figure before executing the gift deed, will not attract any cash/kind transactions, as the assessee only inflated the figures. The assessee has made a wrong entry in the books of account, which will not warrant any addition as held by the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd vs Commissioner Of Income Tax, ... on 17 August, 1971, 1972 SCR (1) 277. No doubt the assessee has wrongly mentioned the amount and the gift has been materialized in the following Financial Year. In view of our above observations, we delete the addition made on this count. Accordingly, this ground is allowed.
As regards ground No. 7 that the AO did not grant relief of LIC premium paid for Rs. 25,878/-, during the course of assessment proceedings, the assessee was asked to produce proof for payment of LIC premium of Rs. 25,878/-. The AO observed that though the assessee claimed in his letter dated 24/.04/2009 that LIC receipts were produced, no such enclosure was available. In the absence of proof, the AO disallowed deduction claimed u/s 80C. The CIT(A) confirmed the same on the ground that before him also no premium paid receipts were enclosed.
We have heard both the parties and perused the material on record as well as gone through the orders of
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revenue authorities. Before us, the ld. AR of the assessee has produced LIC premium paid receipts, which are placed on record. We, therefore, direct the AO to allow the assessee’s claim of Rs. 25,878/- towards LIC premium paid, u/s 80C of the Act. Thus, this ground is allowed.
In the result, Appeal of the assessee is partly allowed in above terms.
Pronounced in the open court on 8th March, 2022.
Sd/- Sd/- (K. NARASIMHA CHARY) (L. P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated: 8th March, 2022. kv Copy to : 1 Khoday Goverdhan, C/o Shri Tejprakash Toshniwal, Advocate, 4- 1-6/B/4, Ramkote, Hyderabad – 500 095 2 ITO, Ward – 7(2), Hyderabad 3 CIT(A) – 10, Hyderabad 4 CIT 9 IT & TP), Hyderabad ITAT, DR, Hyderabad. 5 6 Guard File.
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S.No. Details Date 1 Draft dictated on 2 Draft placed before author Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement 7 File sent to Bench Clerk 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order