KORAPOLU KANAKA RAJU,,VISAKHAPATNAM vs. THE ITO,, VISAKHAPATNAM

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the assessee is directed against order of the

Commissioner of Income Tax-1 {CIT(A)}, Visakhapatnam vide ITA

No.0254/2014-15/ITO W-1(4),Vsp/2015-16 dated 30.9.2016 for the

assessment year 2009-10.

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP 2. The assessee filed return of income declaring total income of `

3,31,219/-. The case was selected for scrutiny and during the course of

assessment proceedings, the A.O. found the undisclosed bank account

maintained by the assessee with Indian Bank, Maharanipeta,

Visakhapatnam with account No.713957051. The A.O. called for the

bank account and found that the assessee had made aggregate deposits

of ` 30,04,218/- in the bank account, inclusive of cash deposits of ` 14

lakhs and the remaining amount of ` 16,04,218/- by cheque. During the

assessment proceedings, the A.O. called for explanation of the assessee

for cash deposits and the assessee explained that the cash deposit of `

11.00 lakhs was made out of the advances received for sale of

agricultural lands as per agreements dated 18.7.2008 for ` 5 lakhs and

18.8.2008 for ` 6 lakhs and a sum of ` 2 lakhs was out of personal

savings. The assessee has not offered any explanation for the balance

amount of ` 1 lakh. The A.O. being not convinced with the explanation

of the assessee treated the entire cash deposits of ` 14 lakhs as

unaccounted income and accordingly brought to tax.

that the sources were out of postal savings scheme and assured to

furnish the necessary evidences to the AO but failed to furnish the

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP evidences. Hence, the A.O. treated the entire cheque deposits as

unexplained income and brought to tax.

before the CIT(A) and the Ld. CIT(A) confirmed the cash deposit of ` 14

lakhs and also confirmed the cheque deposit of ` 15,04,218/- and

allowed relief in respect of ` 1 lakh cheque deposit since the same was

explained.

raising the following grounds of appeal:

1.0 That under the facts and circumstances of the case and provisions of law the assessment completed u/s 143(3) r.w.s. 147 of the I.T. Act is bad in law.

1.1 The learned Commissioner of Income Tax(A)(in short "CIT(A)") is not correct in confirming the action of the AG in making addition pertaining to cash deposits to the tune of Rs.14 lakhs in Bank a/c. The learned CIT(A) rendered his decision on mere suspicion and without any substantive acceptable reasoning.

1.2 The learned CIT(A) if he had considered the assessee's submissions in the right perspective he would not have resorted to confirming the addition pertaining to cheque deposit in Bank of Rs.15,04,218/-. The learned CIT(A) ought to have considered these cheque deposits from out of business receipts.

1.3 For these and other reasons that are to be urged at the time of hearing of the case the appellant prays that the orders of the learned CIT(A) are to be quashed in the interest of justice and fair play.

No.1 is dismissed as not pressed.

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP 7.0 Ground No.1.3 is general in nature, which does not require

specific adjudication.

8.0 Ground No.1.1 is related to the cash deposits amounting ` 14

lakhs in the undisclosed bank account. During the course of

assessment proceedings, the A.O. found the cash deposit of ` 14 lakhs

which was explained as advances received for sale of agricultural lands.

The advances received were ` 5 lakhs from Shri N. Swami Naidu on

18.7.2008, ` 6 lakhs from Shri K. Ramakrishna on 18.7.2008, ` 2 lakhs

was stated to be personal savings and the source of remaining ` 1 lakh

was not explained. The aggregate cash deposits made in the bank

account was ` 14 lakhs. The bank account was not disclosed to the

Income Tax Department and there was an outstanding balance of `

29,04,894/- as at the end of the year in the Indian Bank savings bank

account, which represents the undisclosed asset. During the

assessment proceedings, the assessing officer has called for the source

of cash deposits and the assessee had explained that the source of `

11.00 lakhs was out of the advances received from the buyers of the

land by an agreement dated 18.7.2008 and 18/08/2008. ` 2 lakhs was

from personal savings and no explanation was offered for the

remaining amount of ` 1 lakh. With regard to the advances received

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP for sale of land, the assessee has furnished the photocopy of the sale

agreement entered into by the assessee with Mr. K. Ramakrishna for `

7 ½ lakhs for sale of land at Revallapalem, Madhurawada

Visakhapatnam Dist. admeasuring 50 Sqyds. in survey No.27 along

with thatched house. The agreement was unregistered and as per the

recitals of the agreement, out of ` 7 ½ lakhs, the assessee had

received a sum of ` 6 lakhs from Shri K. Rama Krishna by an

agreement dated 18.8.2008 in cash and the balance amount of ` 1 ½

lakhs required to be paid by the buyer within one month from the date

of the agreement and the assessee required to transferred the land to

the buyer or the nominee of the buyer. Similarly, the assessee had

also entered into an agreement for sale of land at., Srinivasapuram

Colony, Kovvur Mandalam, W.G. Dist admeasuring 884 Sq.yds. for a

consideration of ` 6 ½ lakhs and had received a sum of ` 5 lakhs as

advance and balance due was ` 1 ½ lakhs which should be paid

according to the agreement within 2 months from the date of the

agreement and the assessee required to register the land to the buyer

or to the nominee of the buyer. The assessee has furnished both the

photo copies of the agreement before the A.O but not the originals.

The A.O. has issued summons to one of the buyer Mr. M. Swami Naidu

who had not responded to the summons issued u/s 131 of the Income 5

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP Tax Act, 1961 (hereinafter called as 'the Act'). Therefore, the A.O.

issued summons to the assessee and requested the assessee to appear

before him along with original sale agreement, sale deeds and other

evidences to substantiate the sources of the cash. The assessee failed

to furnish the evidences and did not respond to the summons issued by

the A.O. Therefore, the A.O. treated the entire amount of ` 14 lakhs

cash deposit as unexplained and made the addition to the returned

income. Before the Ld. CIT(A), the assessee had reiterated the

submissions made before the A.O. but did not furnish any fresh

evidence to substantiate the cash deposits. Therefore, the Ld. CIT(A)

confirmed the addition.

9.0 During the appeal hearing, the Ld. A.R. argued that the source

of cash deposit was advances received from the buyers of the land.

The Ld. A.R. filed paper book enclosing the photo copies of agreement

discussed above. The Ld. A.R. argued that since the assessee has

produced the copies of sale agreements, the the same should be

treated as genuine and addition be deleted. The Ld. A.R. further

submitted that in the case of Mr. N. Swami Naidu, the entire advance

was repaid, hence argued that the receipt of advance is genuine and

requested to delete the additions.

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP 10.0 We have heard both the parties, perused the materials

available on record and gone through the orders of the authorities

below. The assessee had made the cash deposits of ` 14 lakhs in the

savings bank account and the savings bank account was not disclosed

to the Income Tax department. There was a balance of ` 29,04,894/-

in the bank account, which remained undisclosed asset. The assessee

explained before the A.O., the Ld. CIT(A) and before us that the cash

deposits were out of the advances received for sale of land. The

agreements were not registered and the sale deeds were not executed.

The entire advance was received in cash. Except photocopy of the sale

agreement, no other evidence was placed before us to substantiate the

claim that amounts were in fact received from Mr. K. Rama Krishna and

Mr. N. Swami Naidu as advances. The assessee had neither furnished

the original sale agreements before the A.O. or before the CIT(A), no

confirmation letter was also furnished by the assessee to the A.O. It is

obligation on the part of the assessee to prove the source of cash

deposits. When assessee claimed to have received the advances, it is

also obligation on the part of the assessee to establish the receipt with

the identity of the person from whom the advance received,

genuineness and creditworthiness of the advances given by the

creditors. In the instant case, the assessee has neither furnished

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP confirmation letter nor produced the creditors who has made the

advances to the assessee. The photo copy of unregistered sale

agreement cannot be considered as a valid evidence unless it is

supported by the sale deed or the confirmation from the buyer.

Though the summons were issued to one of the creditors, there was no

response from the creditor. The A.O. has issued the summons to the

assessee but there was no response from the assessee. During the

appeal hearing before the first Appellate authority also the assessee did

not place any evidence to establish the source of the credits except the

photocopies of the unregistered sale agreements which cannot be

treated as a valid evidence unless it is supported by the registered sale

deeds or the confirmation from the creditor. In this case as submitted

by the assessee the sale did not materialise in respect of both the

agreements and in case of Mr. Swami Naidu the agreement was

cancelled and the assessee stated to have repaid the entire advance in

cash and in case of Mr. Rama Krishna till date the sale was not

concluded. As stated earlier, the entire transactions were in cash and

no supporting evidence was furnished for receipt of advance. Hence

we are of the considered opinion that the assessee failed to establish

the source of Rs.11.00 lakhs and the photo copies of sale agreements

are nothing but self serving documents.

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP 11.0 With regard to ` 2 lakhs personal saving claimed the assessee

has not furnished any evidence before lower authorities and no

explanation was offered in respect of the remaining amount of Rs.1.00

lac. Therefore, we hold that the assessee failed to establish the

source of the deposit of Rs.14.00 and accordingly, we uphold the order

of the Ld. CIT(A) and dismiss the appeal of the assessee on this

ground.

12.0 Ground No.1.2 is related to cheque deposit in bank account

for a sum of ` 16,04,218/-. The assessee explained before the A.O.

source for the deposits represent postal savings but no evidence was

furnished. Before the Ld. CIT(A) stated that the deposits represent

business receipts. There was apparent inconsistency in the explanation

offered by the assessee before the A.O. and the Ld. CIT(A). The Ld.

CIT(A) has deleted the addition of ` 1.00 lac and confirmed the

balance amount of ` 15,04,218/- for want of evidence.

13.0 During the appeal hearing before us, the Ld. A.R. submitted

that the cheque deposits represent the business receipts, but no

evidence was placed before us to establish the business receipts. No

bills or vouchers etc. were furnished before the lower authorities. For a

query from the Bench with regard to the details of expenses relating to 9

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP the business receipts, the Ld. A.R. could not place any details of

expenses relatable to the purported business receipts of ` 15.04 lakhs

and the relevant expenditure. Therefore, it is established that there

was no expenditure incurred for earning the income (unaccounted

receipt) of ` 15,04,218/-. Since the assessee failed to furnish any

evidences to substantiate the source of ` 15,04,218/-, we do not see

any reason to interfere with the order of the Ld.CIT(A) who confirmed

the addition. Accordingly, this ground of appeal of the assessee is

dismissed.

14.0 In the result, the appeal of the assessee is dismissed. The above order was pronounced in the open court on 9th Feb’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 09.02.2018 VG/SPS

ITA No.424/Vizag/2016 Korapolu Kanaka Raju, VSKP आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-

Sr. Private Secretary ITAT, VISAKHAPATNAM