THE ITO,, GUDIVADA vs. SRI KOGANTI POORNACHANDRA PRASAD,, GUDIVADA

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, HON’BLE ACCOUNTANT MEMBER ITA No. 38/VIZ/2017 (Asst. Year : 2011-12) ITO, Ward-3(1), vs. Koganti Poornachandra Vijayawada. Prasad, D.No. 8-315-3, Rajendra Nagar, Gudivada. PAN No. AIBPK 7846 F (Appellant) (Respondent)

Assessee by : None. Department By : Shri M.R. Bangari – Sr.DR Date of hearing : 27/02/2018. Date of pronouncement : 07/03/2018. O R D E R PER V. DURGA RAO, JUDICIAL MEMBER

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals), Vijayawada, dated 22/09/2016 for the Assessment Year 2011-12. 2. Facts of the case, in brief, are that the assessee is working as a Business Development Manager in Shriram Life Insurance Company Ltd., filed his return of income admitting total income of Rs. 2,29,600/-. Return filed by the assessee was initially processed under section 143(1) of the Income Tax Act, 1961

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(hereinafter referred to as 'Act'). Subsequently, assessee’s case was selected for scrutiny and after following due procedure, assessment is completed under section 143(3) by assessing income of the assessee at Rs. 2,16,41,242/-. In the assessment order, the Assessing Officer has noted that during the course of assessment proceedings, he called the details of bank accounts operated by the assessee. In response to which, the assessee has furnished the details of the bank accounts in respect of many savings bank accounts held with ICICI Bank Ltd., Axis Bank Ltd., State Bank of India, Union Bank of India, HDFC Bank and Karur Vysys Bank Ltd. On verification of the copies of the bank accounts, the Assessing Officer found that assessee has made voluminous transactions in the guise of deposits and withdrawals. The Assessing Officer found that total unexplained deposits were made in all bank accounts, amounting to Rs. 2,14,11,644/-. When the Assessing Officer has asked the assessee to explain the source of the said deposits and the purpose of withdrawals, the assessee submitted that his main source of income is only salary. The said amounts in the bank accounts are collected by the agents of Shriram Group of Companies against Insurance premia and NCDs. For that purpose, the company provided him a temporary receipt book and also RRR book and these receipts are valid up to

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issuance of permanent receipt by the company. It was also submitted that all the deposits in the bank accounts are belonging to the company, which were collected from customers through agents. For security reasons, the deposits were made in his bank account and subsequently transferred to the accounts of Shriram Group of Companies. In his deposition dated 28/01/2014, he has submitted that he is working as business development manager in Shriram Life Insurance Company Ltd. and drawing a salary of Rs.20,900/- p.m. and he does not get any commission on any policy or bond and that he gets yearly incentive, if he achieves the target; that about 20 agents are working under his supervision and his duty is to motivate the agents so as to get business for the company; that Shriram Life Insurance Company Ltd. and its sister concerns viz., Sri Ram Transport Finance Company Ltd., Sri City Union Finance Ltd. and Sri Ram Insurance Company Ltd. etc. do not accept cash payments towards insurance and fixed deposits and only cheques/demand drafts are accepted. Hence, the cash collected by the agents are initially handed over to the assessee, which were in turn deposited by him in his savings accounts. Afterwards, the payments are made by him to the company through cheques on behalf of the customers; that he maintains the receipt book and receipts are issued to the individual

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customers and the ‘used book’ is returned to the company; that there were about 150 customers during the Financial Year 2010-11. It was further submitted that a similar issue came up before the ld. CIT(A) for the Assessment Year 2009-10, who deleted the addition of Rs. 1,67,24,827/- towards unexplained deposits under section 69 of the Act. The assessee filed a letter dated 22/03/2014 issued by the company to the extent of Rs.84,23,694/-, wherein it has been mentioned that Mr. K.P.C. Prasad B.D.M., Gudivada collected from agents policy holders on behalf of the company and issued TR in their favour for life insurance business for the Financial Year 2010-11 relevant to Assessment Year 2011-12. Subsequently, Assessing Officer has issued notice under section 133(6) to the Shriram Life Insurance Company Ltd. and not received any response. Therefore, the Assessing Officer was of the opinion that the amounts deposited in various banks by the assessee to the tune of Rs. 2,14,11,644/- has been treated as ‘unexplained income’ within the meaning of section 69 of the Act. 3. On appeal, ld. CIT(A) has issued notices on various dates to the assessee, however, assessee has not appeared before the ld. CIT(A). The ld. CIT(A) by considering the material available on record, partly allowed the appeal filed by the assessee. Ld. CIT(A)

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has noted that ITMR (Information Technology and Media Resource Club) revealed that Shriram Life Insurance Company Ltd. in his letter dated 22/03/2014 confirmed that Mr. K.P.C. Prasad B.D.M., Gudivada collected from agents policy holders on behalf of the company and issued TR in their favour for life insurance business for the Financial Year 2010-11, amount of Rs. 84,23,694/-. The ld. CIT(A) has also considered another letter issued by Sri Ram Transport Finance Company Ltd., dated 22/03/2014 wherein it is stated that Mr. K.P.C. Prasad B.D.M., Gudivada collected from agents deposits/NCDs on behalf of the company and issued TR in their favour for deposits/NCD business for the Financial Year 2010-11 amount of Rs.82,24,000/- The ld. CIT(A) has considered both the letters issued by Shriram Group of Companies and came to a conclusion that assessee is duly explained the source of cash deposits to the extent of Rs.1,66,47,494/- (Rs. 84,23,694 + Rs.82,24,000). The ld. CIT(A) has considered that the Assessing Officer has not believed the assessee on the ground that Shriram Group of Companies have not responded to the notice issued under section 133(6) of the Act. However, Shriram Group of Companies confirmed the source of deposits to the tune of Rs. 1,66,47,694/-. Therefore, ld. CIT(A) directed the Assessing Officer to delete the addition to the extent of Rs. 1,66,47,694/-

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and restrict the addition to the tune of Rs.47,63,950/- (Rs.2,14,11,646 – Rs.1,66,47,694). 4. On being aggrieved, Revenue carried the matter in appeal before the Tribunal. 5. We have heard the ld. Departmental Representative and also gone through the orders of the authorities below. 6. In this case, the assessee has made various deposits in different banks, amounting to Rs. 2,14,11,646/-. When the Assessing Officer has asked to explain the source of deposits, it is submitted that he is working in the Shriram Group of Companies and the agents will collect money from the customers, the same is deposited in his bank accounts and subsequently, transferred to the accounts of Shriram Group of Companies. In turn, Shriram Group of Companies after receiving the payment, issued bonds/ certificate/regular receipts etc. The Assessing Officer after considering the explanation given by the assessee, has issued a notice to the Shriram Group of Companies under section 133(6) of the Act. The Shriram Group of Companies have not responded to the notice issued, therefore, the Assessing Officer is of the opinion that the assessee failed to prove the genuineness of the transactions and addition was made to the extent of Rs.2,14,11,646/- . On appeal, ld. CIT(A) has considered the

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confirmation letters issued by the company dated 22/03/2014 by stating that Mr. K.P.C. Prasad B.D.M., Gudivada collected from agents, policy holders on behalf of the company and issued TR in their favour for life insurance business for the Financial Year 2010-11, amount of Rs. 84,23,694/- and in another letter Rs.82,24,000/-. The ld. CIT(A) by considering the letters issued by the Shriram Group of Companies dated 22/03/2014, deleted the addition on the ground that assessee has explained the source of cash deposits to the extent of Rs. 1,66,47,694/-, hence, directed the Assessing Officer to restrict the addition to Rs.47,63,950/-. Therefore, we find no infirmity in the order of the ld. CIT(A). Thus, this appeal filed by the revenue is dismissed. 7. In the result, appeal filed by the Revenue is dismissed. Order Pronounced in open Court on this 07th day of March, 2018. Sd/- sd/- (D.S. SUNDER SINGH) (V. DURGA RAO) Accountant Member Judicial Member Dated : 07t h March, 2018. vr/- Copy to: 1. The Assessee - Koganti Poornachandra Prasad, D.No. 8-315-3, Rajendra Nagar, Gudivada. 2. The Revenue – ITO, Ward-3(1), Vijayawada. 3. The Pr.CIT, Vijayawada. 4. The CIT(A), Vijayawada. 5. The D.R., Visakhapatnam. 6. Guard file. By order