SHRI. RAMAREDDY RAMESH,ANEKAL vs. COMMISSIONER OF INCOME TAX, BANGALORE

O R D E R

PER SHRI A.K.GARODIA, AM

as per which although the assessee has raised as many as 6 grounds but the effective grievance is only one i.e. bout addition made by the AO of Rs. 57,09,961/-.

3. In the course of hearing, learned AR of the assessee submitted a copy of the Tribunal order rendered in the case of Smt. Sudha Loyalka vs. ITO in dated 18.07.2018 and pointed out that in this case, it was held by the tribunal that in that case, it is not mentioned by the AO or by CIT (A) as to under which section, the closing credit balance can be added and held that non mentioning the precise section makes the addition bad in law. He pointed out to para 6 (i) of this tribunal order on page 5 of the tribunal order. Thereafter, he pointed out that in the present case also, in the assessment order, the AO has not specified as to under which section, he is making this addition of Rs. 57,09,961/-. He further pointed out that in the order of CIT (A) also, the addition is although confirmed by him but it is not specified as to under which section, he is confirming the addition. He submitted that under these facts, this tribunal order is squarely applicable and the entire addition made by the AO is bad in law. Thereafter he submitted that the total addition made by the AO of Rs. 57,09,961/- includes three items i.e. Rs. 30,21,961/- received by the assessee from his spouse Mrs. Bhaghya Ramesh, Rs. 17,44,000/- received from Mr. Krishna Reddy and Rs. 944,000/- received from Mr. Lakshman A. He pointed out that the amounts received by the assessee from Mr. Krishna Reddy and Mr. Lakshman A. were in fact not received in the present year but these are opening balances and therefore, for this reason also, these two additions are bad in law. He submitted that on pages 27 and 28 of the paper book is the confirmation of these two persons and from the same, it is clear that these two amounts are opening balances. He placed reliance on the judgment of Hon’ble Karnataka High Court rendered in the case of CIT vs. Sridev Enterprises, 192 ITR 165. He also submitted that in para 6.1 of his order, learned CIT (A)has noted about the contentions raised by the assessee before him in respect of credit from wife Mrs. Bhaghya Ramesh Rs. 30,21,961/- and it is noted by CIT (A) in this para that this is the argument of the assessee that the wife of the assessee is having 10 Acres of agricultural land from which she is earning agricultural income of Rs. 10 lacs per anumn and out of that agricultural income, this amount was advanced by her to her husband for his business purpose. He submitted that on pages 29to 31 of the paper book is the certificate issued by Village Administrative Officer in which it is certified that the wife of the assessee is holding 5 Acres of Agricultural Land and she is growing Banana, Cabbage, Beans, Carrot, Ragi, Neelagiri and other fruits and vegetables and her annual income is certified by him at Rs. 12 Lacs. He submitted that this certificate cannot be ignored and hence, it should be accepted that the wife of the assessee was capable of advancing Rs. 30,21,961/- to the assessee and this addition is not justified for this reason also. As against this, learned DR of the revenue supported the orders of the authorities below. He submitted that regarding two amounts shown by the assessee as opening balance, he has nothing to say but about the third amount of Rs. 30,21,961/-, he submitted that this addition should be confirmed because in the certificate of Village Administrative Officer, some crops are stated but without quantity and without the rate and name of buyer and therefore, on the basis of this certificate, the claim of the assessee should not be accepted that the wife of the assessee was capable of advancing Rs. 30,21,961/- to the assessee. About this argument that no section is mentioned by AO or CIT (A), he submitted that although no section is specifically mentioned but it is held that loan shown from Smt. Bhagya Ramesh is added and hence, it should be accepted that the

5. We have considered the rival submissions. About two amounts of Rs. 17.44 lacs and Rs. 9.44 lacs, we hold that addition of these two amounts cannot be sustained because these are opening balances and not received in the present year.

6. About the third amount of Rs. 30,21,961/-, we find that his is a fact that no section is mentioned by the AO or CIT (A) for making this addition and for this reason alone, the addition is bad in law as per the tribunal order cited by the learned AR of the assessee having been rendered in the case of Smt. Sudha Loyalka vs. ITO (Supra) wherein it was held that non mentioning the precise section makes the addition bad in law. Even if we accept the argument of the learned DR of the revenue that this addition is u/s 68 because this addition is made by the AO by holding that loan shown by the assessee is added because creditworthiness of the loan creditor is not established, we are of the considered opinion that the assessee has established the creditworthiness of his wife by bringing a certificate of Village Administrative Officer that the wife of the assessee is holding 5 Acres of Agricultural Land and she is growing Banana, Cabbage, Beans, Carrot, Ragi, Neelagiri and other fruits and vegetables and her annual income is certified by him at Rs. 12 Lacs. For this reason also, this addition is not justified. Hence, we delete all three additions. 7. In the result, assessee’s appeal is allowed. Pronounced in the open court on the date mentioned on the caption page.