SUDHAKARA RAO POTNURU,SRIKAKULAM vs. ITO, WARD-1, SRIKAKULAM

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 vide DIN & Order No.ITBA/NFAC/S/250/2022-23/1043032922(1) dated 13.05.2022 for the Assessment Year (A.Y.) 2017-18.

Brief facts of the case are that the assessee is an individual, filed his return of income for the A.Y.2017-18 on 24.01.2018, admitting income under the heads “business or Profession” at Rs.96,000/-, “capital gains” at Rs.4,59,182/- and “other Sources” at Rs.8,106/- . The return of income was processed u/s 143(1) of the Income Tax Act, 1961 (in short “Act”) and selected for scrutiny to examine the cash deposits made during the demonetisation period. Notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. The AO observed that the assessee had deposited cash amounting to Rs.11,51,000/- during demonetisation period and the assessee was asked to furnish the details of sources for the cash deposits made during demonetisation period, but the assessee could not furnish the sources with cogent verifiable evidence. The AO viewed that the assessee is not maintaining books of accounts, hence, the bank account does not constitute books of account. Therefore, the AO added the cash deposits u/s 69A of the Act at Rs.11,51,000/- to the income returned and held that it should be taxable u/s 115BBE of the Act. Accordingly made addition of Rs.11,51,000/-.

On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) partly allowed the appeal of the assessee.

On being aggrieved with the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and raised the following grounds :

The order of the Hon’ble Commissioner of Income Tax (Appeals) was arbitrary and quite injustice.

Ground No.1 and 7 are general in nature which does not require any specific adjudication.

The only issue raised by the assessee in Ground Nos.2 to 6 is that the Ld.CIT(A) erred in confirming the order of the AO by sustaining the addition of Rs.11,51,000/- made on account of unexplained investment u/s 69A of the Act. The Ld.AR filed paper book and written submissions before the Tribunal and submitted that the assessee is filing returns of income even before the A.Y.2015-16 onwards. The assessee submitted that as per return of income filed for A.Y.2016-17, the assessee admitted in the return that cash in hand was Rs.3,36,609/- as admitted in the Balance Sheet as on 31.03.2016. Thus the opening cash balance for the A.Y.2017-18 was at Rs.3,36,609/-. The assessee further submitted that he had sold his vacant site on 15.06.2016 vide doc No.1052/2016 for Rs.2,51,000/- and sold another site on 24.08.2016 vide doc No.1646/2016 for Rs.4,49,000/-. Thus the total amount available as on August 2016 was at Rs.10,36,609/- and the balance amount was met out of the income disclosed for the A.Y.2017-18 (upto October 2016). Thus the fund available to the assessee as on 01.11.2016 was at Rs.11,51,000/-. The assessee submitted that irrespective of the above fact, the AO treated the deposits of Rs.11,51,000/- as unexplained investment which is arbitrary and unjustified. The Ld.AR relied on the decision of coordinate bench of Hon’ble ITAT, Ahmedabad in the case of Smt.Ramilaben B.Patel Vs Income Tax Officer, Ward-3, Gandhinagar vide I.T.A.3393/AHD/2014 dated 11.12.2018, which held that any sum found credit in the bank passbook cannot be treated as an unexplained cash credit. The Ld.AR further submitted that the AO, on one hand treated the deposits made in the bank are against the RBI guidelines and are invalid, on the other hand, the AO treated the same as tender notes. The contention of the assessee is that when the AO treated them as tender notes, why the AO treated them as valid notes when deposits of old notes was made in the bank, which is not justified and against the principles of natural justice. The assessee relied on the decision in the case of Rameswaram Paper Mills Pvt. Ltd. Vs. State of UP and others 06.08.2009 Civil Writ Petition No.1301 of 2009. The assessee further contended that the AO has taken only entries in the bank pass book and added to the income returned which is quite arbitrary and injustice, since the pass book is not part and parcel of books of account. He, therefore, pleaded to set aside the order passed by the CIT(A) and delete the addition made by the AO.

Per contra, the Ld.DR relied on the order of the Ld.CIT(A) and submitted that the Ld.CIT(A) has rightly given relief for the cash balance of Rs.3,34,609/- available out of the addition of Rs.11,51,000/- made by the AO. He, therefore, pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal filed by the assessee.

I have heard both the parties and perused the material placed on record. The assessee filed additional evidence before the Tribunal. After considering the additional evidence, I admit the additional evidence filed by the assessee. The additional evidence relates to factual issues, therefore, I remit the matter back to the file of the AO with a direction to complete the assessment after considering the additional evidence filed by the assessee. The assessee is directed to file the additional evidences before the AO and cooperate with the proceedings of the AO. Hence, I set aside the orders passed by the lower authorities and to meet the principles of natural justice I provide one more opportunity of being heard to the assessee to establish his claim before the AO

In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 23rd May, 2023.