V V S K D N SOMA RAJU,BHIMAVARAM vs. ACIT CENTRAL CIRCLE -2, RAJAHMUNDARY

PER S. BALAKRISHNAN, Accountant Member :

All the captioned appeals are filed by the assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)-12, Hyderabad in Appeal No. 10168/2019-20; 10121/2019-20; 10122/2019-20; 10123/2019-20 and 10249/2019-20 dated

2 10/02/2022 for the AYs 2011-12 to 2015-16 respectively arising

out of the orders passed U/s. 143(3) r.w.s 153C of the Income

Tax Act, 1961 [the Act].

appeals. Therefore, for the sake of convenience, these appeals

are clubbed, heard together and disposed off in this consolidated

order. Considering the similarity of the issues involved in these

appeals, we shall first take up ITA No. 69/Viz/2022 (AY 2011-

12) as a lead appeal:

ITA No. 69/Viz/2022 (AY: 2011-12)

an individual deriving income from leased fish tank and also from

Suguna Communication. A search and seizure operation U/s.

132 of the Act was conducted in the case of Sri Kundula Veera

Venkata Satyanarayana, Managing Partner of the firm M/s.

KVVSN Associates on 22/01/2015 wherein certain incriminating

documents in the form of loose sheets as lessee of Pendyala-

Kanuru Sand Reach to the Director, Mines & Geology were found

and seized. Consequently, the case of the assessee was notified to

Central Circle-2, Rajahmundry vide order U/s. 127 passed by the

3 Pr. CIT, Rajahmundry in F.No. 62/Juris/CIT/RJY/2016-16,

dated 26/02/2016. Accordingly, notice U/s. 153C of the Act was

issued to the assessee on 27/04/2016 calling for the return of

income for the AY 2011-12 which was returned un-served.

Therefore, a fresh notice U/s. 153C dated 5/7/2016 was issued

and the same was duly served on the assessee on 12/07/2016.

As no response from the assessee, another letter was served on

the assessee on 26/8/2016 and in reply thereto, the assessee

sought 2 months time to file the return of income. Thereafter,

another letter dated 9/9/2016 was issued calling the assessee to

file return of income within 7 days from the date of receipt of the

letter. Since, there was no response from the assessee, a show

cause notice dated 20/10/2016 along with notice U/s. 142(1)

was issued on the assessee. Thereafter, in reply to the show

cause notice for initiation of prosecution U/s. 276CC of the Act,

the assessee filed the return of income U/s. 153C on 30/11/2016

declaring total income of Rs. 2,27,500/-. Accordingly, notice U/s.

143(2) of the Act was issued to the assessee on 1/12/2016 and

duly served and on the assessee. In reply, the assessee’s

Representative appeared from time to time and made submissions

before the Ld. AO wherein it was stated that the assessee has not

maintained any regular books of account. The assessee further

4 submitted that the return of income was filed based on the bank

accounts and rough noting only. On verification of the return of

income and the AIR information, it was noted by the Ld. AO that

though the assessee has shown gross total income of Rs.

2,27,500/- during the year under consideration, as per the bank

account statements of the assessee obtained U/s. 133(6) of the

Act, the assessee made huge cash deposits during the year

aggregating to Rs. 3,38,81,825/-. On being asked, the assessee

failed to produce any books of account so as to explain the

sources of the above cash deposits and to justify the correctness

of the income returned. Therefore, the Ld. AO in the absence of

any evidence furnished by the assessee in support of the income

returned, treated the cash deposits of the assessee in his various

bank accounts aggregating to Rs. 3,38,81,825/- as unexplained

income of the assessee and made addition of Rs. 3,38,81,825/-

and completed the assessment U/s. 143(3) r.w.s 153C of the Act

determining the assessed income at Rs. 3,41,09,325/-. Aggrieved

by the order of the Ld. AO, the assessee preferred an appeal

before the Ld. CIT(A). The Ld. CIT(A) in the first round of

proceedings, dismissed the appeal of the assessee in limine on the

ground that the assessee has not attended the proceedings nor

has filed any written submissions despite several opportunities.

5 Aggrieved by the order of the Ld. CIT(A), the assessee preferred

an appeal before the ITAT. On appeal, the ITAT, Vizag Bench has

remitted the matter back to the file of the Ld. CIT(A) with a

direction to decide the appeal on merits and in accordance with

law vide order in ITA No.115 to119/Viz/2019, dated 14/6/2019.

CIT(A) issued various notices to the assessee. However, before the

Ld. CIT(A) none appeared on behalf of the assessee. The Ld.

CIT(A), during the second round of appellate proceedings, based

on the various issues raised by the assessee before him, called

for a remand report from the Ld. AO vide letter dated 4/2/2020.

Before the Ld. CIT(A), it is the submission of the assessee that

the Ld. AO merely relied on the seized slips found during the

course of search in the case of Sri KVV Satyanarayana which do

not constitute an admissible evidence and therefore placing

reliance on such inadmissible evidence vitiates the assessment.

The assessee further submitted that the loose slips seized and

relied on by the Ld. AO are admittedly the letters written by the

assessee to the Chief Minister of Andhra Pradesh and hence they

do not constitute ‘incriminating material’. The assessee further

submitted that, in the absence of any incriminating material,

6 invoking the provisions of section 153C is not sustainable in law

and that vitiates the assessment made based on such material.

After considering the submissions of the assessee Ld. CIT (A)

dismissed the assessee’s contention by holding that the letter

written and signed by the assessee contained the details of

license fee paid by him and the amounts claimed as due from the

Mining Department. Thus, the Ld. CIT(A) came to a conclusion

that the seized document contains a valuable information and the

facts relating to the assessee’s sand mining business and

therefore they do constitute incriminating material and

accordingly confirmed the Ld. AO’s decision of invoking of section

153C of the Act. Further, with regard to the huge cash deposits

amounting to Rs.3,38,81,825/- the Ld. CIT(A) held that there is a

direct nexus between the seized material and the bank

statements of the assessee. Further, the assessee has also

admitted that except for bank statements and way bills, he does

not maintain any books of account. Therefore, the Ld. CIT(A)

came to a conclusion that since the assessee does not maintain

any books of account of account and the sale proceeds are

deposited in the bank account, the Ld. AO is right in bringing to

tax the total cash deposits in the bank account totaling to Rs.

3,38,81,825/-. Accordingly, the Ld. CIT(A) confirmed the

addition made by the Ld. AO. Thus, the Ld. CIT(A) dismissed the

appeal of the assessee. Aggrieved by the order of the Ld. CIT(A),

the assessee is in appeal before the Tribunal by raising the

following Grounds of Appeal:

“1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case.

before us that the Ld. AO has not recorded any valid satisfaction

as required U/s. 153C of the Act. The Ld. AR then referred to

page 4 of the Paper Book wherein the Satisfaction Note recorded

by the Ld. AO is placed before us. The Ld. AR further referred to

8 the Satisfaction Note and stated that the assessee has sent a

letter to the Chief Minister of Andhra Pradesh requesting for

proportionate refund of the license fee paid by the assessee for

sand mining activities. The Ld. AR vehemently argued that this

letter addressed to the Government Authorities cannot be

considered as an incriminating material and the satisfaction

recorded by the Ld. AO based on such letter is not a valid

satisfaction and not in accordance with law.

Per contra, the Ld. Departmental Representative submitted

that the assessee is a non-filer and has not filed any return of

income for the impugned assessment year. The Ld. DR further

submitted that it was noticed during the search operations that

the assessee has paid license fee of Rs. 4 Crs to the Government

of Andhra Pradesh for sand mining business. The Ld. DR further

submitted that the source for the payment of Rs. 4 Crs was also

not explained by the assessee. The Ld. DR also further

submitted that since the assessee is engaged in the business of

sand mining, has failed to file the return of income for the

impugned assessment year which was discovered during the

search proceedings. Hence, the letter addressed by the assessee

to the Chief Minister of Andhra Pradesh should be considered as

9 an incriminating material and accordingly the notice U/s. 153C

issued by the Ld. AO is valid in law.

available on record as well as the orders of the Ld. Revenue

Authorities. This is the second round of proceedings before the

Tribunal. It is an admitted fact that the assessee has not filed

his return of income even though engaged in the business of

sand mining during the impugned assessment year. There is a

merit in the argument of the Ld. DR that if the search had not

been taken place, the assessee would not have filed his return of

income, admitting the income and paid the taxes on the same.

Therefore, considering the facts and circumstances of the case, in

our considered view, the letter addressed to the Chief Minister

of Andhra Pradesh for refund of the license fee for the

proportionate period is a valid incriminating document and

accordingly the satisfaction recorded by the Ld. AO on

05/07/2016 should be considered as a valid satisfaction for

the purpose of proceedings U/s. 153C of the Act. We therefore

find no merit in the argument of the Ld. AR and accordingly we

are of the considered view that the proceedings initiated U/s.

153C of the Act is in accordance with law and the Grounds No. 2

10 & 3 raised by the assessee should be dismissed. It is ordered

accordingly.

the Ld. AR could not offer any valid explanation before us. Per

contra, the Ld. DR heavily relied on the order of the Ld. AO.

available on record and the orders of the Ld. Revenue Authorities

on this issue. It is an admitted fact that the assessee has failed

to produce any books of accounts and could not provide the

sources for cash deposits. It was also accepted by the Ld. AR

that the assessee did not maintain any books of accounts except

for the bank statements and way-bills. Further, it is an

undisputed fact that the assessee was engaged in the sand

mining operations and the sale receipts (net) was deposited into

the bank account after it reaches a considerable amount of Rs. 4

lakhs to Rs. 5 lakhs. Further, the assessee in a statement

recorded on oath on 27/2/2015 vide Q. No. 34 & 35 has accepted

that only the surplus money after meeting the expenditure

towards proclainer charges and labour charges were deposited

into the bank account. Therefore, it can be safely concluded that

the net sale proceeds of the sand mining business after incurring

11 various expenses was deposited into the bank account. Since the

net sale proceeds was deposited in the bank accounts, we are of

the considered view that the Ld. Revenue Authorities had rightly

brought the entire cash deposits made into the bank accounts of

the assessee aggregating to Rs. 3,38,81,825/- as income of the

assessee and therefore in our opinion there is no infirmity in

the orders of the ld. Revenue Authorities. Accordingly, we do

not want to interfere in the order of the Ld. CIT(A) on this

ground. Hence, the Grounds No.4 raised by the assessee is

dismissed.

prejudice to the Ground No.4 which reads as under:

“Further, without prejudice G. no.4 above, the Ld. CIT(A) ought to have treated the deposits in the bank account as the turnover of the appellant and estimated reasonable percentage of profit.”

the assessee was engaged in the sand mining operations and the

sale receipts (net) was deposited into the bank account after it

reaches a considerable amount of Rs. 4 lakhs to Rs. 5 lakhs.

Further, the assessee in a statement recorded on oath on

27/2/2015 vide Q. No. 34 & 35 has accepted that only the

surplus money after meeting the expenditure towards proclainer

12 charges and labour charges were deposited into the bank

account. Therefore, we have no hesitation to conclude that the

net sale proceeds of the sand mining business after incurring

various expenses was deposited into the bank account, and hence

it cannot be treated as a turnover of the assessee but only as

income for the impugned assessment years. We therefore find no

infirmity in the orders of the Ld. Revenue Authorities in treating

the entire cash deposits as income and hence no interference is

required in their orders. Accordingly, the Ground No.5 raised by

the assessee is dismissed.

they need no adjudication.

ITA Nos. 70, 71, 72 & 73/Viz/2022 (AY: 2012-13 to 2015-16)

grounds which are identical in nature and they revolve around

the following issues viz.,

(i) Whether the Ld. CIT(A) is correct in sustaining the

decision of the Ld. AO in invoking the provisions of

section 153C of the Act the thereby completing the

assessment U/s. 143(3) r.w.s 153C of the Act?

(ii) Whether the Ld. CIT(A) is correct in upholding the

addition made by the Ld. AO towards undisclosed income

from the business / unexplained cash deposits in the

bank accounts of the assessee?

(iii) The Ld. CIT(A) ought to have treated the deposits in the

bank account as the turnover of the assessee and

estimated reasonable percentage of profit? (Ground No.5

for the AYs 2011-12, 2014-15 & 2015-16).

the assessee’s appeal in ITA No.69/Viz/2022 (AY: 2011-12) in the

preceding paragraphs of this order. Considering the similarity

of these issues involved in the lead appeal (ITA No.69/Viz/2022)

of the assessee for the AY 2011-12 as well as in the appeals (ITA

No. 70, 71, 72 & 73/Viz/2022) for the AYs 2012-13 to 2015-16,

our decision given therein while adjudicating the assessee’s

appeal for the AY 2011-12 mutatis mutandis applies to the issues

raised by the assessee in his appeals for the AYs 2012-13 to

14 2015-16 also. Accordingly, the grounds raised by the assessee in all the appeals for the AYs 2012-13 to 2015-16 are dismissed.

Pronounced in the open Court on 22nd December, 2023.

Sd/- Sd/- (दु�वू� आर.एल रे�डी) (एस बालाकृ�णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) �या�यकसद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER Dated : 22.12.2023 OKK - SPS

आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – Vegesna Venkata Satya Kanaka Durga 1. Soma Raju, D.No. 27-17-85/2, Penthouse-2, Prince Towers, ASR Nagar, Bhimavaram, Andhra Pradesh – 534202. राज�व/The Revenue – The Asst. Commissioner of Income Tax, 2. Central Circle-2, Aayakar Bhavan, Veerabhadrapuram, Rajahmundry, Andhra Pradesh – 534222.

15 3. The Principal Commissioner of Income Tax, आयकर आयु�त (अपील)/ The Commissioner of Income Tax 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam गाड� फ़ाईल / Guard file 6. आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam