PURNACHANDRA RAO MANDAVA,ELURU vs. INCOME TAX OFFICER, WARD-2, ELURU

1. This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No. ITBA/NFAC/S/250/2023-24/1058833238(1) dated 18.12.2023, arising out of order passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 25.11.2019 for the Assessment Year (A.Y.) 2017-18.

Brief facts of the case are that the assessee is an individual, deriving income from house property and other sources filed his return of income Purnachandra Rao Mandava, Eluru for the A.Y.2017-18 on 27.03.2018 by admitting total income of Rs.4,07,470/-. Subsequently, the case was selected for limited scrutiny under CASS to examine cash deposits during demonetization period. Accordingly, statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. In response thereto, the assessee submitted the information and the same was examined. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee has deposited cash of Rs.20,00,000/- into his bank account bearing No.10616334952 held with State Bank of India on 25.11.2016 during the demonetization period. When the assessee was asked to submit the sources for the same, the assessee stated that the cash of Rs.20,00,000/- deposited into his bank was out of sale proceeds received on sale of fish during the month of November, 2016. In support of the same, the assessee had furnished a copy of certificate of Registration of Freshwater Aquaculture Farm issued by the Government of AP Fisheries Department, but the assessee did not submit any details regarding period of cultivation of fish tanks, details of sale proceeds received therein, mode of receipt, party name etc. The AO also observed that the assessee did not admit the amount received on sale proceeds in his return of income under the head “Business or Profession” for the A.Y.2017-18. Not satisfied with Purnachandra Rao Mandava, Eluru the explanation offered by the assessee, the AO completed the assessment, and passed an order u/s 143(3) of the Act dated 25.11.2019, by treating the cash deposits of Rs.20,00,000/- as unexplained income u/s 69A of the Act to be taxed u/s 115BBE @60%.

Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and raised grounds in Form No.36. Subsequently, the assessee filed a petition for substitution of original grounds with revised grounds of appeal and pleaded for admission of following revised grounds of appeal as the original grounds filed are not in accordance with Appellate Tribunal Rules, 1962 :

The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.

It was the submission of the assessee that the AO wrongly made addition of Rs.20,00,000/- as unexplained income u/s 69A of the Act. The AO has not accepted the explanation of the assessee that the PAN AZIPM5102C was linked to the bank account of the HUF inadvertently by the banker. He further submitted that the cash credit in account bearing No.10616334952 with SBI belongs to his HUF status with PAN AAHHM2149D. The account is a cash credit loan account, wherein, the SBI sanctioned KCC loan of Rs.24,00,000/- on 25.11.2016, the assessee deposited cash of Rs.20,00,000/- in the loan account. The amount was earlier drawn from the same account for fish culture activity and deposited the same out of sale of fish. The HUF is having fish tank to the extent of ac14.08ct. HUF also filed the return of income and shown an income of Rs.2,81,600/-. He further submitted that his individual status has no connection to the transaction. The Ld.AR further submitted that the PAN of the assessee in individual status is linked to the HUF loan account by the bankers, which was not observed by the assessee. The same was explained and information was furnished before the AO during the assessment proceedings. He, further submitted that the cash of Rs.20,00,000/- deposited in the cash credit account No.10616334952 with State Bank of India on 25.11.2016 was met out of cash generated from Purnachandra Rao Mandava, Eluru HUF fish culture activity and out of cash drawn earlier from loan account. Hence, the amount cannot be considered as unexplained money u/s 69A of the Act in the hands of the individual. He, further submitted that he filed affidavit also to that extent, but the AO has not considered the affidavit filed by the assessee. He, therefore, pleaded to set aside the order passed by the AO and allow the appeal of the assessee.

On the other hand, the Ld.DR submitted that the assessee has not explained properly before the lower authorities, therefore, the AO as well as the Ld.CIT(A) have rightly passed the orders. The assessee has not submitted any proof with regard to the fact that the AO has not examined the affidavit filed by the assessee. He, therefore pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee.

We have heard both the parties and perused the material available on record. It is an admitted fact that the assessee has deposited an amount of Rs.20,00,000/- during the demonetization period, but he has filed an explanation before the AO by way of affidavit, but admittedly, the AO has not looked into the affidavit filed by the assessee, wherein, he has explained that the assessee individual status has nothing to do with the cash deposit which belonged to HUF account, but inadvertently, the bank Purnachandra Rao Mandava, Eluru attached the PAN of the assessee, therefore, this confusion arose. The assessee also filed affidavit before the Tribunal, however, it was not placed before the AO. Therefore, I am of the view that it is a fit case to remit the matter back to the AO to examine the affidavit filed by the assessee and also verify the bank account of the assessee, whether the amount is deposited by the assessee individually or deposited by the HUF loan account. Therefore, I remit the matter back to the file of the AO to examine the issue afresh and pass orders. Accordingly, the grounds raised by the assessee are allowed for statistical purpose.

In the result, appeal of the assessee is allowed for statistical purpose.