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.304/2013-14/ITO W-1(4),Vsp/2016-17 dated 30.9.2016 for the

assessment year 2010-11.

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP 2. Ground No.1 is not pressed therefore this ground is dismissed as

not pressed.

adjudication.

amounting to ` 10.00 lakhs. During the assessment proceedings for

the assessment year 2010-11, the A.O. found that the assessee had

undisclosed bank account in Indian Bank, Maharanipeta,

Visakhapatnam with account No.713957051 and made cash deposits in

the bank account to the tune of ` 10.00 lakhs for which the assessee

explained the source as advances received for sale of land. The

assessee stated that a sum of ` 5 lakhs was received from Sri K.

Venkata Ganesh and K. Gouri Devi as per the agreement dated

21.1.2010 and further sum of ` 5 lakhs from Sri A. Venkata Rao and A.

Padmavathi vide agreement dated 3.2.2010. In respect of K. Venkata

Ganesh, the agreement was dated 21.1.2010 and stamp paper was

purchased on 28.10.2009 which leads to suspicion with regard to the

genueiness of the agreement. Both the agreements were unregistered

and the advances were stated be received in cash. In respect of

agreement with Mr. Kothala Venkata Ganesh, the sale agreement was 2

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP dated 21/01/2010 for sale of land for a consideration of ` 60 lakhs and

stated to have received ` 5 lakhs as advance. The land was situated at

Maharanipeta, Visakhapatnam in survey No.1206 admeasuring 163.80

Sq.yds. of site and the agreement was unregistered. The second

agreement was entered into by the assessee with Shri Ambati Venkata

Rao and Smt. Ambati Padmavathi on 3.2.2010 for sale of land at

Dr.No.26-7-22, Panda Street, Visakhapatnam for a consideration of `

16 lakhs and received the advance of ` 5 lakhs. Both the amounts are

received in cash and the agreements furnished were photocopies. In

both the cases the stamp papers were purchased on 28.10.2009. The

assessee has not produced the subsequent sale deeds and submitted

during the appeal hearing that the sale was not concluded and sale

deeds were not executed. The CIT(A) confirmed the order of the A.O.

holding that the alleged sale agreements were only make believe

arrangements to explain the source of the impugned cash deposits. For

the sake of clarity and convenience we extract the relevant part of the

CIT(A) order which reads as under:

“5.3 I have considered the submissions and details flied. It is pertinent to note that the assessee was asked to explain the source for the cash deposit to the tune of Rs.10 lakhs noted in his bank account, which was not disclosed to the Department. The assessee had raised a plea that it represented advance from sale of property. But the inquiry made by the AO clearly reveal that such a claim was not genuine. It is also relevant to note that the alleged parties who have purportedly made the impugned 3

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP advances were related parties, and they did not have creditworthiness to make the advance. The lack of financial capacity of these parties clearly give an indication that the alleged sale agreements were only a make-believe arrangement to explain away the source for the impugned deposits. No explanation was given as to why the advance received on sale of property already disclosed was deposited in undeclared bank account. Considering the totality of all facts, I find that the AO is justified in making the impugned addition. The alternative plea for telescoping is also without merits, as the plea all along had been that the credit was out of advance received. Therefore, the alternative plea without supporting evidence is rejected.”

on record and gone through the orders of the authorities below. In the

instant case, the assessee had made the cash deposits of ` 10 lakhs `

5 lakhs on 21.1.2010 and ` 5 lakhs on 3.2.2010 both the deposits

explained to be advances received from sale of lands. In support, the

assessee had furnished the photocopy of the sale agreements but the

originals sale agreements were not furnished. No confirmations were

furnished before the A.O. or before the CIT(A). The assessee also did

not furnish the subsequent sale deeds evidencing the receipt of the

cash. The agreements were entered on 21.1.2010 and 3.2.2010 on the

stamp paper purchased on 28.10.2009. Though A.O. issued summons

the assessee failed to furnish the evidence. The A.O. has also given a

finding that the sale agreements do not bear the signatures of the

purchasers. The enquiries of the A.O. revealed that the parties who

have purportedly made the impugned advances were related parties

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP and they did not have the creditworthiness to make the advances. The

lack of financial capacity of the parties clearly shows an indication that

the sale agreements were only make believe arrangements. Since the

assessee failed to furnish the evidence to establish the genuineness of

the advance, we do not find any reason to interfere with the order of

the CIT(A) and the same is upheld. Ground No.1.1 of the assessee’s

appeal on this issue is dismissed.

Ground No.1.2 is related to the cash deposit of ` 19,30,950/- by 6.

cheque. The assessee has made cheque deposits of ` 19,30,930/- in

the Indian Bank of Maharanipeta, Visakhapatnam which is not disclosed

to the department. The aggregate cheque deposits made in the bank

account were ` 26,80,476/- out of which ` 7,49,506/- was held to be

the receipts from Orissa Stevedores which was accepted by the A.O.

For the remaining amount, the assessee has neither explained the

source of credit with names and parties from whom the amounts were

received nor the expenditure incurred in connection with the receipt of

` 19,30,930/-. Therefore, the A.O. treated the entire deposit of `

19,30,930/- as unexplained money and accordingly brought to tax.

The Ld. CIT(A) confirmed the addition since the assessee failed to

furnish any information whatsoever with regard to the cheque receipts.

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP For the sake of clarity we extract relevant part of the Ld.CIT(A)’s order

which reads as under:

“4.6 The perusal of the bank accounts with Indian Bank, which were not disclosed to the Department, show that there were cheque deposits to the tune of Rs.26,80,436/- of which Rs.7,49,506/- was explained to relate to receipts from M/s. Orissa Stevedores and for which ledger extract of M/s.Orissa Stevedores was filed. With regard to the remaining cheque deposits amounting to Rs.19,30,930/the assessee was not able to explain and prove the nature of these receipts. It is noted that the AO had given several opportunities to prove the nature of these receipts. But the assessee failed to prove that these receipts were from his business operation. No information whatsoever, was filed in regard to these cheque receipts. Therefore, the AO is justified in assessing the amount of Rs.19,30,930/- as unexplained income of the assessee. The plea reiterated during the appeal proceedings that they were business receipts was not substantiated and hence rejected.”

that these deposits were the business receipts but no evidence was

furnished with regard to the source of deposits as well as expenditure

incurred in connection with the earning of this money.Therefore it is

established that the cheque deposits were from unexplained sources

and the Ld.CIT(A) has rightly confirmed the addition. Hence, we do not

find any infirmity in the order of the CIT(A) and the same is upheld. In

the result, the appeal of the assessee on this ground is dismissed.

Ld. A.R. argued during the appeal hearing that the Ld. CIT(A)

considered the percentage of profit @ 4% in the immediately preceding

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP assessment year i.e. A.Y 2009-10, hence requested to adopt the

estimation of income @ 4% instead of 5% confirmed by the Ld.

CIT(A). Ld. CIT(A) held that estimation of income @ 5% was

reasonable after considering the entire material placed before him and

observed that the assessee had agreed for estimation of income @ 5%

in his letter dated 21.3.2013 filed before the A.O. For ready reference,

we extract relevant paragraph of the order of the Ld. CIT(A) made

available in para No.4.4, which reads as under:

“4.4 I have considered the above submissions made vide paper book dated 40.12.2014 and written submissions dated 28.1.2016. I have also perused the assessment folder. It is not in dispute that the assessee could not produce proper bills & vouchers for expenses, and as most of the expenses were in cash they were not verifiable. Therefore, the AO is justified in rejecting the books of account. It is also relevant to note that the assessee has agreed for estimation of business receipts at 5% in his letter dated 21.3.2013 filed before the AO. It is also pertinent to note that for the relevant year, the assessee's turnover has increased fourfolds and hence, considering the nature of business and other overall facts of the case, I consider that the estimate of the business receipts at 5% is fair and reasonable and the same is upheld.”

had agreed for estimation of income @ 5% before the A.O. Both the

A.O. and Ld. CIT(A) have estimated the income @ 5% after careful

consideration of the net profit of earlier years and considering the fact

that the assessee failed to produce the books of accounts. The A.O.

has rejected the books of accounts and estimated the income. The Ld.

A.R. did not make out a case for estimation of income @ 4% with

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP relevant evidences except arguing that earlier percentage of income

required to be adopted. We are unable to consider the request of the

assessee to reduce the estimation of income without placing the

material to substantiate that the estimation of profit @5% was

unreasonable. Therefore, we uphold the order of the CIT(A) and

dismiss the appeal of the assessee.

telescopic benefit of estimated income for the additions made

independently i.e. cash credits and cheque deposits. However, the Ld.

A.R. did not make out a case for allowing the telescopic benefit by

furnishing the necessary details. Therefore, we do not find any

justification for allowing the telescopic benefit and request of the Ld.

A.R. is hereby rejected.

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 : 9.2.2018 VG/SPS 8

ITA No.425/Vizag/2016 Korapolu Kanaka Raju, VSKP

आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-