SAMIR KUMAR PAIKRAY,KHURDA vs. ITO, KHURDA WARD, KHURDA

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ITA 53/CTK/2016Status: DisposedITAT Cuttack03 January 2017AY 2011-125 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the source of the deposits in the bank account was explained and accepted, the subsequent utilization of these explained funds through withdrawals could not be treated as unexplained investments.

What were the facts?

The assessee had cash deposits in his bank account which were accepted as sale proceeds. However, withdrawals from this account, claimed to be payments to Indian Oil Corporation (IOC), were not reflected in IOC's ledger, leading to an addition as unexplained investment.

What were the issues?

Whether withdrawals from an explained bank account can be treated as unexplained investments if their specific utilization is not reflected in the recipient's records?

Which sections of the Income-tax Act were involved?

Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,

Before: SHRI N.S SAINI

For Appellant: Shri S.D.Nayak/K.K.Bal, AR
For Respondent: Shri D.K.Pradhan, DR
Pronounced: 03/01

This is an appeal filed by the assessee against the order of CIT(A)-1,

Bhubaneswar, dated 9.11.2015, for the assessment year2011-12 on the

following grounds:

‘1. For that the order of the forum below is arbitrary and unjust in the facts and circumstances of the case hence liable to be quashed. 2. For that when there is no investment and the nature and source of deposit and withdrawals has been explained the addition on the ground of unexplained investment is arbitrary and liable to be quashed.

2 ITA No. 53 /CT K/20 16 Asse ssme nt Ye ar :2011-12

3.

For that the ld CIT(A) rightly not disallowed the addition made by ld AO on the ground that the addition cannot be made as unexplained investment. This fact explains the assessment is non- application of mind and liable to be quashed. 4. For that the ld CIT(A) erred in enhancing the assessment on the ground of bogus expenditure without issuing show cause against such enhancement and without granting opportunity. Therefore, the enhancement is illegal and liable to be reduced.”

2.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. In the instant case, the

assessee derives income from retail trading in petrol, diesel & lubricants. The

assessee filed his return of income on 30.9.2011 showing total income of

Rs.6,51,880/-. The Assessing Officer found from the AIR information that the

assessee had made cash deposits of Rs.43,83,920/- on different dates in his

SB Account No.046401503027 with ICICI Bank, Khurda during the year under

consideration. The Assessing Officer asked the assessee to explain the

sources of cash deposits in the bank account and after considering the

explanation of the assessee and examining the relevant facts/details,

concluded that the cash deposits are out of sale proceeds of the assessee.

However, he observed that there were withdrawals on four dates amounting

to Rs.10,00,719/-, the utilization of which could not be explained satisfactorily

by the assessee. The assessee claimed that all the withdrawals were through

RTGS and the transfers were by way of payment to Indian Oil Corporation

(IOC). From the details furnished by the IOC, the Assessing Officer found that

3 ITA No. 53 /CT K/20 16 Asse ssme nt Ye ar :2011-12

the withdrawals were not reflected in the ledger account of IOC as payments

received from the assessee. For this reason, he made an addition of

Rs.10,00,719/- as unexplained investments.

3.

On appeal, ld CIT(A) confirmed the action of the Assessing Officer.

4.

Before me, ld A.R. of the assessee argued that the Assessing Officer

made an addition of Rs.10,00,719/- as unexplained investments only because

the destination/utilization of certain withdrawals from the SB account could

not be satisfactorily explained and addition on account of unexplained

investments can be made only when the source of such investment is not

explained satisfactorily. In the case of the assessee, the source of the

impugned withdrawals is the SB account with ICICI Bank itself and all the

deposits in that account have been accepted as out of the disclosed sale

proceeds by the Assessing officer. This being so, the addition cannot be made

as unexplained investments.

5.

On the other hand, ld D.R. supported the orders of lower authorities.

6.

I find force in the arguments of ld A.R. of the assessee. As per the

provisions of section 69 of the Income Tax Act, 1961, where in the financial

year immediately preceding the assessment year the assessee has made

investments which are not recorded in the books of account, if any, maintained

by him for any source of income, and the assessee offers no explanation about

4 ITA No. 53 /CT K/20 16 Asse ssme nt Ye ar :2011-12

the nature and source of the investments or the explanation offered by him is

not, in the opinion of the Assessing Officer, satisfactory, the value of the

investments may be deemed to be the income of the assessee of such financial

year. In the instant case, the Assessing Officer himself after verification and

investigation was satisfied about the source of deposits in the SB Account No.

046401503027 of the assessee with ICICI Bank being out of the sale proceeds

of the assessee. From these explained deposits, the assessee made payment

to IOC, which was found to be not reflected in the ledger account of IOC.

Therefore, the addition was made for Rs.10,00,719/- as unexplained

investments by the Assessing Officer and confirmed in appeal by the ld CIT(A).

7.

I find that the addition as made by the Assessing Officer cannot be

sustained in law. The reason being that the source of deposit in SB Account

No. 046401503027 of the assessee with ICICI Bank has been explained

satisfactorily by the assessee to the Assessing Officer, which is accepted as

the sale proceeds of the assessee. Thus, the deposits in the bank account of

the assessee was duly explained by the assessee and accepted by the

Assessing Officer. Thereafter, the payments made to IOC of Rs.10,00,719/-

which was not found to be reflected in the ledger account of IOC, the addition

was made in the hands of the assessee as unexplained investments. The

utilization of the funds from the explained funds of the assessee in his SB

Account No. 046401503027 with ICICI Bank cannot be treated as unexplained

5 ITA No. 53 /CT K/20 16 Asse ssme nt Ye ar :2011-12

deposits or investments of the assessee. The source is explained by the

assessee and accepted by the Assessing Officer being the sale proceeds of the

assessee. Therefore, I set aside the orders of lower authorities and deleted

the disallowance of Rs.10,00,719/- and allow the grounds of appeal of the

assessee.

8 In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 03/01/2017 in the presence of parties.

Sd/- (N.S Saini) ACCOUNTANT MEMBER

Cuttack; Dated 03/01 /2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Samir Kumar Paikray, At: Sriram Nagar, Khurda, 2. The Respondent. ITO, Khurda Ward, Khurda 3. The CIT(A)-1, Bhubaneswar 4. CIT, Bhubaneswar. 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//

BY ORDER,

ASST.REGISTRAR, ITAT, Cuttack

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