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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
Before: SHRI VIJAY PAL RAO
Per Vijay Pal Rao, Judicial Member
This appeal by the assessee is directed against the order dated 13.01.2017 of CIT(A) for the assessment year 2009-10. The assessee has raised the following grounds:
2. The only issue arises in this appeal of the assessee is whether in the facts and circumstances of the case, the AO has erred in making an addition of Rs. 20,76,000/- on account of deposits in bank. The assessee is an individual and employed in ING Vysya Bank. The assessee filed his return of income for the year under consideration on 29.07.2009. The scrutiny assessment u/s. 143(3) was completed on 11.10.2010 wherein the AO made an addition of Rs. 5,051/-. Consequently the commissioner of Page 3 of 10 Income Tax on examination of assessment record noticed that the AO has accepted the explanation of the assessee regarding the sources of cash deposit of Rs. 20,76,000/- in the bank without any material evidences. Accordingly, the commissioner issued a show cause notice u/s. 263 on 01.11.2012 in response, the assessee furnished his reply. The assessment order was set aside with the direction to the AO to complete the assessment afresh vide revision order dated 21.01.2013. The AO has completed the assessment in pursuant to the order passed u/s. 263 on 28.03.2014 whereby the AO made an addition of such amount of Rs. 20,76,000/-. Aggrieved by the action of the AO the assessee filed before the CIT(A) but could not succeed.
3. Before the Tribunal, the ld. Counsel for the assessee has submitted that the CIT(A) while passing the revision order u/s. 263 set aside the assessment on the reason that the assessee was unable to file the confirmation letters from his mother, brother and sister in respect of cash deposit of Rs. 20,76,000/- in bank. The ld. Counsel has pointed out that in the set aside proceedings the assessee reproduced the confirmation from all three persons and also produced these persons before the AO for examination however the AO has not examined these parties and made an addition by citing the reason that these parties have not appeared before Page 4 of 10 the AO. The ld. Counsel has further submitted that the assessee has furnished the income tax details, full particulars of address and identity as well as the credit worthiness of the parties by showing the sources of the amount therefore, the assessee has discharged its onus to prove the identity, credit worthiness as well as genuineness of the transactions. He has referred to the para 4.1(c) of the assessment order and submitted that the AO has not disputed the credit worthiness of these parties but has questioned the payment in cash instead of through banking channel. The AO has not disputed the sources that these three parties have the sales receipt against the property sold. Thus it is proved that all three brothers have individual funds in their bank accounts to give the assessee interest free loan. The ld. AR has pointed out that this amount was deposited in bank due to the reason that the son of the assessee was going abroad for higher education and it was required to show the liquid fund in the bank of the assessee. Thus this amount was deposited in the bank in order to show the sufficient liquid fund with the assessee to meet the expenses towards education and stay abroad. He has contented that the law requires the identity of creditors and their credit worthiness to be proved which has been proved by the assessee with number of the relevant record including the confirmation. Page 5 of 10 4. Alternatively, the ld. AR has contented that since the assessee is only a salaried employee and does not maintain any books of accounts therefore the deposit in bank cannot be treated as cash credit in the books for the purpose of section 68 and therefore the addition made u/s. 68 is not sustainable.
5. On the other hand, the ld. DR has contented that the commissioner in the revision order has directed the AO to complete the assessment afresh and therefore no specific direction was given. He has further contented that despite the bank balances with the creditors the amount was paid in cash to the assessee which is not a plausible explanation. He has further contented the assessee has also changed its stand before the CIT(A) what he took it before the AO. He has pointed out that the assessee has explained the sources of fund with the creditors as sale proceeds of property whereas before the CIT(A) the assessee has explained the sources as sale of gold. He has relied upon the orders of the authorities below.
I have considered the rival submissions as well as relevant material on record. The commissioner in the revision order passed u/s. 263 dated 21.01.2013 set aside the assessment order with the directions to complete the assessment afresh by considering the facts as discussed by the Page 6 of 10 commissioner in the said order. The relevant part of 263 order is as under.
“A show cause notice was issued to the assessee on 1.11.2012. In response to the notice, the assessee Sri B R Nanjunda Prasad along with his Authorised Representative Sri G S Rajaram, ITP appeared on the dates mentioned above and the case was heard. He has also filed written submissions regarding the sources of cash deposits of Rs. 20.76 lakhs into his bank account. In his written submissions he has reiterated that his three brothers who are all employed in Banks and his wife who is also working in Syndicate Bank, since 28 years have given him cash out of their salary income which has already suffered tax, in order to help his son to pursue his higher studies abroad. However, the assessee was unable to furnish any evidence in this regard, except producing the copy of the return of income filed by his brothers. As mentioned by the assessee his family members may be assessed to tax. But there is no confirmation from any one of them that they gave money to the assessee. In view of the above submissions, the assessment order of the Assessing Officer is setaside with a direction to complete the assessment afresh by considering the above facts and after giving reasonable opportunity to the assessee.”
The explanation of the assessee was considered by the commissioner that the assessee as well as his three brothers who are all employed in bank and his wife who is also working in Syndicate Bank since 28 years have given cash out of their salary income which has already suffered tax.
This amount was given to the assessee in order to help his son to pursue higher studies in abroad. The commissioner has further observed that the assessee was unable to furnish any evidence in this regard except producing the copy of the return of income filed by his brothers. Thus it is clear that the identity of these creditors were not in dispute as the Page 7 of 10 assessee produced the return of income filed by these creditors who are the family members of the assessee. The commissioner has set aside the order with the specific observation that there is no confirmation from any of them that they gave the money to the assessee. Thus, the identity and credit worthiness of the creditors was not at all doubted by the commissioner while passing the revised order u/s.
It is pertinent to note that the AO in the original assessment accepted the explanation regarding the sources of deposit of cash in the bank account. The commissioner invoked the provision of section 263 only on the ground that the AO has accepted the explanation without any material. While passing the revision order the only infirmity pointed out by the commissioner in the claim of the assessee is non-furnishing of confirmation from the creditors. In the set aside proceedings, the assessee undisputedly furnished the confirmation from these creditors who are the family members of the assessee. Further neither the AO nor the CIT(A) has disputed that all these creditors are employed in banks and further they also received sale proceeds of property and having sufficient balance in their respective bank accounts. The AO has rejected the explanation mainly on two counts firstly despite the sufficient balance in the bank there was no justification for giving the money in cash and secondly the assessee failed to produce these creditors for examination Page 8 of 10 despite the summons issued by the AO. On careful perusal of the assessment order it is noted that the AO stated to have issued the summons to the creditors on 28.10.2013 asking them to appear on 05.11.2013 to give evidences. Further, as per the details recorded by the AO in column 9 of the particulars of assessment order there was no hearing after 14.08.2013 and particularly there was no date of hearing on 05.11.2013 which goes to support the submissions of the assessee that the creditors appear before the AO but the AO did not examine them. The statement of the AO in the assessment order that these creditors were summoned to appear on 05.11.2013 is contrary to the details of the dates of hearing recorded by the AO in the memo of the parties. Therefore, when the assessee has established the identity and credit worthiness of the creditors by producing the return of income as well as the bank details and also proved the genuineness of transaction by producing the confirmation of all the creditors which was the only objection of the commissioner while passing the revision order u/s. 263 then the addition made by the AO is not justified.
The CIT(A) while confirming the addition has also not disputed the identity but has misconducted himself by considering only the income declared by these creditors in the return of income. It is pertinent to note Page 9 of 10 that there is no direct connection of income declared in the return of income and the amount balance in the bank account. Once the source of credit was proved by showing the amount in the hands of the creditors which is much more than the amount paid to the assessee then ignoring the availability of fund with the creditors by the CIT(A) is not justified. Further once the creditors are all income tax assessees and have confirmed the transaction in question then even if the taxing authority are of the view that the creditors have not been able to show the source of such credit it is only the matter to be considered in the respective assessment of the creditors. In view of the above facts and circumstances of the case addition made by the authorities below is not justified and the same is deleted.
In the result the appeal of the assessee is allowed.
Pronounced in the open court on this 31st day of March, 2017