B.VISWESWARA RAO vs. THE ACIT, VIJAYAWADA

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 (Appeals) {CIT(A)}, Vijayawada vide

Appeal No.71/CIT(A)/VJA/13-14 dated 30.7.2014 for the assessment

year 2010-11.

ITA No.546/Vizag/2014 B. Visweswara Rao, Gannavaram 2. Assessee filed return of income for the assessment year 2010-11

admitting total income of Rs.2,43,740/- and agricultural income of

Rs.2.00 lakhs. The return was processed u/s 143(1) of the Income Tax

Act (hereinafter called as the ‘Act’) and the assessment was completed

on total income of ` 54,71,345/-. All the grounds of appeal are related

to the addition made by the A.O. amounting to Rs.52,77,605/- u/s 69A

of the Act towards peak unexplained cash credits. In this case, the

assessee filed return of income declaring total income of Rs.2,43,740/-

and agricultural income of Rs.2.00 lakhs on 27.7.2010. The case was

selected for scrutiny and the notice u/s 143(2) of the Act was issued.

During the course of assessment proceedings, the A.O. found that the

assessee had made cash deposits in savings bank account to the extent

of Rs.67,15,000/- in Indian Bank and Rs.93,00,605/- in State Bank of

India and Rs.45,32,364/- in Andhra bank. The A.O. compiled the cash

flow statement and arrived at the peak credit balance of Rs.52,27,605/-

and treated the same as unexplained cash deposits u/s 69A of the Act

and brought to tax.

before the CIT(A) and explained before the CIT(A) that he had received

cash of Rs.2.00 crores from his father and made various investments in

shares worth Rs.3,83,00,000/-. From the advances given by him to the

ITA No.546/Vizag/2014 B. Visweswara Rao, Gannavaram farmers, the cash received was circulated and deposited in the bank

account and the same was withdrawn. The assessee explained that the

deposits made in the Andhra bank, State Bank of India and Indian Bank

in Savings bank account was nothing but cash rotation out of the funds

available with him and realization of advances from the farmers. The

assessee also stated that he has not maintained the books of accounts.

However, the explanation offered by the assessee did not convince the

Ld. CIT(A) and she confirmed the addition made by the A.O. and the

appeal of the assessee was dismissed.

before this Tribunal. During the appeal hearing, the ld. A.R. argued that

the assessee is an Income Tax assessee on rolls for several years and

filing the returns of income regularly. There was cash deposits made in

the State Bank of India, Indian Bank and Andhra bank and the A.O. has

prepared a cash flow statement for arriving at the peak cash credit. The

assessee was maintaining always sufficient cash balance which is

evidenced by the statements recorded on oath on 7.5.2012 by the A.O.

u/s 131 of the Act, wherein the assessee had replied to question No.4

that he had cash balance of Rs.10 lakhs to Rs.15 lakhs in his house and

Rs.2 lakhs in various bank accounts, which evidences that the assessee

ITA No.546/Vizag/2014 B. Visweswara Rao, Gannavaram was maintaining huge cash balances for rotation of the cash to give

advances to the farmers on interest basis. The ld. A.R. brought to our

notice that though assessee was filing the returns admitting income for

several years, the A.O. has compiled the cash book by taking opening

cash balance on 2.4.2009 as zero which is apparently contradictory to

the financial status of the assessee, as evidenced by the returns of

income. The Ld. A.R. invited our attention to the return of income for

the assessment year 2007-08, wherein the assessee had admitted the

capital gains of shares of Rs.18,73,981/- for sale of shares amounting to

Rs.2,73,88,316/-. The Ld. A.R. submitted that on sale of shares, the

assessee had realized the net sale price of Rs.2,73,88,316/- and

admitted the capital gains of Rs.18,73,981/-. Since the assessee was

regularly admitting the income, the Ld. A.R. argued that compiling the

cash flow statement with zero opening balance is incorrect and require

reconsideration. The ld. A.R. argued that assessee was having sufficient

cash balance for making any deposits. Keeping in view of the returns of

income, the working of the cash flow statement is incorrect. Therefore,

requested to allow the appeal of the assessee. The ld. A.R. also filed

additional evidence with a petition for admission of additional evidence

stating that the assessee had received the advances to the extent of

ITA No.546/Vizag/2014 B. Visweswara Rao, Gannavaram Rs.50 lakhs for sale of land. The sale agreement was unregistered and

on a plain paper.

authorities and argued that the assessee has neither produced any

evidence in respect of opening cash balance nor furnished the cash flow

statements. Therefore, the A.O. has rightly worked out the cash flow

statement with zero opening balance and the Ld. CIT(A) confirmed the

peak credits and no interference is called for and requested to uphold

the order of the CIT(A).

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

assessee has made cash deposits in savings bank account of State Bank

of India, Andhra Bank and Indian Bank. The assessee is filing the

returns of income regularly with the Income Tax Department and

admitting the positive income. For the assessment year 2007-08, the

assessee had shown sale of shares worth ` 2,73,88,316/- and declared

the short term capital gains of ` 18,73,981/-. Application of the said

funds was not considered by the A.O. while preparing cash flow

statement. A survey u/s 133A of the Act was conducted in the

ITA No.546/Vizag/2014 B. Visweswara Rao, Gannavaram assessee’s case and a statement was recorded from the assessee as on

the date of survey on 7.5.2012. During the course of survey, the

assessee had stated that he was having cash balance of ` 10 to 15 lakhs

in house and ` 2 lakhs in various banks which indicates that the

assessee is maintaining substantial cash balances in house. All these

facts indicate that the assessee is having sufficient cash sources to make

the deposits in the bank accounts. Though assessee has filed returns of

income regularly, the A.O. has taken zero opening balance while

working the cash flow statement to arrive at the peak credits which

needs to be reconsidered. Therefore, we are of the considered opinion

that the case required to be remitted back to the file of the A.O. for de-

novo consideration to rework the cash flow statement adopting

appropriate opening cash balance considering the funds available with

the assessee as per the returns of income. The assessee has filed

petition for admission of additional evidence along with copy of

unregistered sale agreement for sale of agricultural land. This required

to be considered after verifying the subsequent sale deeds executed by

the assessee with the relevant dates of payment. Therefore, we direct

the assessee to canvass the additional evidence before the A.O. who will

consider it on merits. Accordingly, we set aside the order of the lower

ITA No.546/Vizag/2014 B. Visweswara Rao, Gannavaram authorities and remit the matter back to the file of the A.O. for de-novo

consideration.

purposes.

The above order was pronounced in the open court on 10th Jan’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 : 10.01.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-