DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6(2)(1), BANGALORE vs. SRI RAMAKRISHNA MANJUNATH, BANGALORE

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ITA 2116/BANG/2018Status: DisposedITAT Bangalore24 April 2019AY 2013-147 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that additional evidence submitted to the CIT(A) was not confronted to the AO as required by Rule 46A. Due to discrepancies in the provided documents, the Tribunal set aside the CIT(A)'s order and remanded the issue for fresh consideration.

What were the facts?

The Assessing Officer added unsecured loans totaling Rs. 1,03,78,910/- to the assessee's income as unexplained credit. The assessee argued that a significant portion was an opening balance from the previous year, not subject to assessment in the current year.

What were the issues?

Whether the CIT(A) was justified in admitting additional evidence without confronting it to the AO, and whether the addition made by the AO under Section 68 was appropriate for opening balances.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH : BANGALORE

Before: SHRI N.V. VASUDEVAN & SHRI JASON P. BOAZ

For Appellant: Shri R.N. Siddappaji, Addl.CIT
For Respondent: Smt. Vani H, Advocate

Assessment Year : 2013-14 Sri Ramakrishna Manjunath, Dy. Commissioner of Income Tax, No.48, Shiva Farms, Circle-6(2)(1), Vs. Kamakshipalya, BANGALORE BANGALORE [PAN: AKXPM9955F] APPELLANT RESPONDENT Appellant by : Shri R.N. Siddappaji, Addl.CIT Respondent by : Smt. Vani H, Advocate Date of hearing : 16-04-2019 Date of Pronouncement : 24-04-2019 O R D E R Per N V Vasudevan, Vice President :

This is an appeal by the Revenue against the order dated 27-02-2018 of the Commissioner of Income Tax (Appeals)-6, Bengaluru, relating to Assessment Year 2013-14.

2.

The grounds of appeal raised by the Revenue, reads as follows:

“1. The order of the CIT(Appeals) is opposed to law and the facts and circumstances of the case.

2. On the facts and circumstances of the case, whether the Ld.CIT(A) was right in passing the order without providing an opportunity to the AO to examine the additional evidence submitted by the assessee as per the provisions of rule 46A of IT Rules.

3. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed that the order of the CIT(A), in so far as it relates to the above grounds may be reversed and that of the Assessing Officer be restored.

4.

The appellant craves leave to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal”

3.

The Assessee is an individual, who derives income from house property, income from business and income from other sources. In the course of assessment proceedings for the AY. 2013-14, the Assessing Officer (AO) noticed that there were unsecured loans totaling to Rs. 1,03,78,910/-, appearing in the Balance Sheet of the assessee as on 31- 03-2013. The details of the individuals and unsecured loans outstanding against each of them were as follows:

Sl.No. Name of the Creditors Amount (Rs) (Shri/Smt/Kum) 1 Annapurna 2,50,000 2 Ram Murthy 1,50,000 3 Bore Gowda 3,00,000 4 Jaya 2,00,000 5 Kamal Kishore 2,80,000 6 Channegowda 3,20,000 7 Karthik 3,50,000 8 Lingappa 3,00,000 9 Prakash 3,50,000 10 Ramachandra 3,20,000 11 Lingappa 3,80,000 12 Rent advance received 14,10,000 13 Punith 3,15,910

14 Ramu 3,15,000 15 Srinivas 4,50,000 16 Ajay 3,50,000 17 Prakash 4,00,000 18 Dilip 3,50,000 19 Mahalingappa 7,50,000 20 Raju 5,00,000 21 Girish 15,50,000 22 Kumar 4,35,000 23 Lokesh 3,53,000 Total 1,03,78,910 3.1. According to the AO, the assessee did not file any documentary evidence to prove the identity of the creditors, genuineness of the transaction and creditworthiness of the creditors and he therefore added the total of the unsecured creditors as aforesaid to the total income of the assessee as unexplained credit u/s. 68 of the Income Tax Act, 1961 (Act).

4. Before the CIT(A), assessee submitted that out of the sum of Rs. 1,03,78,910/-, appearing as unsecured loans in the Balance Sheet, a sum of Rs. 98,65,410/- was Opening Balance in the creditors A/c as on 1.4.2013 and since Opening Balance is the closing balance as on 31.3.2013 relevant to AY 2012-13, the same cannot be subject matter of investigation in the AY. 2013-14 and in this regard relied on the decision of the Hon'ble Karnataka High Court in the case of CIT Vs. N.L. Satyanarayana Shetty [129 ITR 226] (KAR), wherein it was held that it is only credits that are appearing in the books of accounts of an Assessee for the relevant previous year, the provisions of Sec.68 of the Act will be attracted. The Assessee submitted copies of ledger accounts relating to the aforesaid unsecured creditors before the CIT(A). The details given by the assessee before the CIT(A) were as follows:

Sl. Name of the Creditors Brought Forward Amount Total No. Balance as on received liability 01-04-2012 during payable as 01-04-2012 on to 31-03-2013 31-03-2013 1 Ajay 3,50,000 NIL 3,50,000 2 Annapurna 2,50,000 NIL 2,50,000 3 Bore Gowda 3,00,000 NIL 3,00,000 4 Chinnegowda 3,20,000 NIL 3,20,000 5 Dilip 1,52,410 1,97,590 3,50,000 6 Girish 15,50,000 NIL 15,50,000 7 Jaya 2,00,000 NIL 2,00,000 8 Kamal Kishore 2,80,000 NIL 2,80,000 9 Karthik 2,00,000 1,50,000 3,50,000 10 Kumar 4,35,000 NIL 4,35,000 11 Lingappa 3,80,000 NIL 3,80,000 12 LIngappa N 3,00,000 NIL 3,00,000 13 Lokesh 3,53,000 NIL 3,53,000 14 Mahalingappa 7,50,000 NIL 7,50,000 15 Prakash 3,50,000 NIL 3,50,000 16 Prakash K 4,00,000 NIL 4,00,000 17 Punith 1,50,000 1,65,910 3,15,910 18 Raju 5,00,000 NIL 5,00,000 19 Ramachandra 3,20,000 NIL 3,20,000 20 Rammurthy 1,50,000 NIL 1,50,000 21 Ramu 3,15,000 NIL 3,15,000 22 Srinivas 4,50,000 NIL 4,50,000 23 Rental Advance 2,80,000 NIL 2,80,000 1. Adigas Fast Food Pvt Ltd., 2. M/s. Veon Retail 2,80,000 NIL 2,80,000 Ventures Pvt. Ltd., 3. M/s. Cosmo Clothing 8,50,000 NIL 8,50,000 Total 98,65,410 5,13,500 1,03,78,910 4.1. Ld.CIT(A) on a consideration of the above submissions, deleted the addition accepting the contentions of the assessee to the extent of Rs. 98,65,410/-, observing as follows:

6. The Appellant submits herewith the Ledger Folios of the Creditors in respect of the amount of Brought Forward Liability as on 01-04-2012 amounting to Rs. 98,65,410/- inclusive of Rental Advance of Rs. 14,10,000/-. The Appellant also submits herewith the relevant case laws of the cases mentioned above for kind perusal and consideration. Therefore the Ld.AO was not justified to hold a sum of Rs. 98,65,410/- as income chargeable to tax u/s. 68 of the Act which is not applicable to the Appellant’s case. Hence the addition made of Rs. 1,03,78,910/- inclusive of Rs. 5,13,500/- being the advance received relating to the amount of Liability received during the previous year ending 31-03-2013 relevant to the A.Y 2013-14. Therefore the addition of Rs. 1,03,78,910/- is not justifiable in law as the said credits were not found credited during the Previous year except a sum of Rs. 5,13,500/-.

4.2. Aggrieved by the order of CIT(A), the revenue has filed the present appeal before the Tribunal.

5.

We have heard the rival submissions. Ld. Counsel for the assessee who tried to point out that in the assessments completed for the earlier assessment year i.e., for the AY. 2012-13, the details of unsecured loans as on 31-03-2012 appearing in Schedule-3 of the Balance Sheet, which was part of assessment records of the assessee were available before the AO and therefore, there was no violation of Rule 46A of the Income Tax Rules, 1962 (Rules).

5.1. We have considered the submissions of Ld. Counsel for the assessee and we find that the ledger accounts which were filed before the CIT(A) were admittedly an additional evidence, which were not confronted to the AO by the CIT(A) as per the mandate laid down in Rule 46A of the Rules. We also find that Schedule-3 of the Balance Sheet as on 31-03-2012 and the details of Sundry Creditors as on 01- 04-2012 as appearing in the order of the CIT(A), which we have extracted in the earlier part of the order, does not tally and there are some discrepancies. In these circumstances, we are of the view that it would be just appropriate to set aside the order of CIT(A) and remand the issue to the file of CIT(A) for fresh consideration. The CIT(A) will confront the evidence filed by the assessee before the CIT(A) to the AO and get the remand report of the AO and thereafter decides the issue after affording opportunity of being heard to both the parties.

6.

In the result, the appeal of Revenue is treated as allowed for statistical purposes.

Pronounced in the open court on this 24th day of April, 2019

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