TIRUMALAIAH SOMA,PRODDATUR vs. ACIT, CENTRAL CIRCLE, , TIRUPATI

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the Ld.CIT(A), the assessee has filed detailed written submissions on the issue, which has been extracted in pages 5 to 15 of Ld.CIT(A) order. The appellant had also furnished certain additional evidences and the same have been forwarded to the A.O. for his remand report and his comments. The A.O. has submitted his remand report on 12.05.2025 and commented upon the additional evidences filed by the assessee and also recorded statement from Smt.G.Hymavathi, creditor, with regard to source for the loan amount given to the appellant for Rs.31,00,000/-. The A.O. had also examined sundry debtors and recorded their statements in respect of 20 persons, where all the parties have confirmed payment in cash. The remand report of the A.O. has been forwarded to the appellant for his comments, for which the appellant has furnished detailed submissions.

The Ld.CIT(A) after considering the relevant submissions of the appellant and also taking note of remand report of the A.O. accepted the explanation of the assessee with regard to loan received from Smt.G.Hymavathi for Rs.31,00,000/-. The Ld.CIT(A) had also accepted the explanation of the assessee with regard to realization from sundry debtors to the tune of Rs.3,57,100/-, which pertains to amount received from 20 debtors and examined by the A.O. during the remand proceedings. Similarly, the Ld.CIT(A) had accepted the explanation of the assessee with regard to cash in hand available as per cash book submitted by the assessee. Thus, out of the total additions made by the A.O. of Rs.49,00,000/-, the Ld.CIT(A) accepted the explanation of the assessee with regard to source from unsecured loan of Rs.31,00,000/- from Smt.G.Hymavathi, realization of sundry debtors to the tune of Rs.3,57,100/- and availability of cash in hand as on 23.03.2019 at Rs.3,64,000/-, in all totalling to Rs.38,21,100/-. The remaining amount of Rs.10,78,900/- has been sustained as unexplained money u/s 69A of the Act.

Aggrieved by the order of the Ld.CIT(A), the assessee is now in appeal before the Tribunal.

Shri E.Phalguna Kumar, the learned counsel for the assessee submitted that, the Ld.CIT(A) erred in sustaining the additions to the tune of Rs.10,78,900/-, even though the appellant has explained the cash found during the course of patrolling by flying squad with known sources of income, including realization from sundry debtors and the same has been recorded in the books of account maintained by the appellant. The learned counsel for the assessee, further referring to the remand report submitted by the A.O., argued that the appellant received cash from 85 debtors, out of which, has submitted confirmation from 32 parties. During the remand proceedings, the A.O. has randomly picked up 20 parties and examined them, where, in the statement recorded during the course of remand proceedings, 20 persons have confirmed the transaction with the appellant. Once the parties have appeared before the A.O. and confirmed the transactions, it is presumed that the remaining transactions with sundry debtors are also genuine and the appellant has received 7 Tirumalaiah Soma cash from the parties. The A.O. and the CIT(A) without verifying the parties, simply made additions towards cash found during the course of requisition, even though the appellant had explained the source for the cash found by producing relevant cash book and thus, the question of invoking provisions of section 69A does not arise. Therefore, he submitted that the additions made by the A.O. and sustained by the Ld.CIT(A) should be deleted.

Ms.Aditi Goyal, Learned Sr.AR for the Revenue, supporting the order of the Ld.CIT(A) submitted that the Ld.CIT(A) has rightly accepted the explanation of the assessee with regard to receipt from sundry debtors, wherever the A.O. has examined the parties during the remand proceedings and confirmed by the sundry debtors. In respect of remaining parties, in the absence of relevant details, the Ld.CIT(A) has rightly sustained additions of Rs.10,78,900/-, because the cash found during the course of requisition to the extent of Rs.10,78,900/- remained unexplained. Therefore, she submitted that the order of the Ld.CIT(A) should be upheld.

We have heard both the parties, perused the material on record and gone through the orders of the authorities below. Although the A.O. has made addition of Rs.49,00,000/- towards cash found during the course of requisition u/s 132A of the Act, but the Ld.CIT(A) sustained the additions to the extent of Rs.10,78,900/-, which is the amount explained by the assessee out of realization from sundry debtors. The appellant had explained the source for cash seized out of realization from sundry debtors to the tune of Rs.14,36,000/- and claimed that he has received Rs.14,36,000/- from 85 parties. The appellant had also furnished confirmation from 32 parties. During the remand proceedings, the A.O. randomly picked up 20 parties and examined them by recording statement, where all 20 persons have admitted to have paid cash to the appellant, against payables or sundry debtors. No doubt, the Ld.CIT(A) has allowed relief to the extent of Rs.3,57,100/- towards amount received from 20 parties, because the A.O. has examined them and confirmed the transactions. The dispute is only with regard to remaining amount of Rs.10,78,900/- pertaining to 65 parties.

Admittedly, the appellant has filed confirmation from 35 parties wherever possible and in respect of remaining parties had furnished relevant books of accounts, including cash book and proved that he has received cash from parties against sundry debtors. The Ld.CIT(A) never disputed the fact that the appellant received cash from sundry debtors and also recorded in the books of account, however, sustained additions to the tune of Rs.10,78,900/- only on the ground that for the remaining parties, the appellant has not submitted any further details. In our considered view, the Ld.CIT(A) grossly erred in coming to the above conclusion for the simple reason that the appellant had submitted confirmation in respect of 35 parties, whereas, the A.O. and Ld.CIT(A) have examined 20 parties by picking up randomly and chose not to examine the remaining parties. All 20 parties have confirmed the transactions with the appellant. Once the parties have confirmed the transactions, in our considered view, it is assumed that remaining amount received by the appellant from 65 parties against sundry debtors also appear to be genuine and there is no reason for the A.O. and the Ld.CIT(A) to make 10 Tirumalaiah Soma additions only on the ground that the appellant has not submitted further details. We further note that the appellant has recorded realization from sundry debtors in the books of accounts and also filed confirmation from few parties, wherever possible. Therefore, in our considered view, the appellant has discharged his onus by filing relevant evidences and it is only the A.O. who has not taken any steps to enquire into the issue further by calling for details. In our considered view, merely for the reason of not submitting confirmations, additions cannot be made towards source explained by the assessee out of the realization of sundry debtors. The Ld.CIT(A), without considering relevant facts, simply sustained the addition of Rs.10,78,900/-. Thus, we set aside the order of the Ld.CIT(A) and direct the A.O. to delete the addition to the extent of Rs.10,78,900/- made towards cash seized u/s 69A of the Act.

In the result, appeal filed by the assessee is allowed.