PILLI RAJA RAGHAVENDRA,VISAKHAPATNAM vs. THE ASSISTANT COMMISSIONER OF INCOME TAX,. CENTRAL CIRCLE-2,, VISAKHAPATNAM

Brief facts of the case are that the assessee is an individual, deriving income from agriculture and business.. A search & seizure operation u/s 132 of the Income Tax Act, 1961 (in short ‘Act’) was conducted in the case of Sri Pilli Nooka Raju, father of the assessee and others on 13.07.2011. Certain incriminating material pertaining to the assessee was found and seized. Accordingly, a notice u/s 153C of the Act was issued to the assessee on 02.11.2012 In response, the assessee filed return of income for the A.Y.2010-11 on 18.02.2014 admitting total income of Rs.1,88,630/- and agricultural income of Rs.5,50,000/-. During the assessment proceedings, the Assessing Officer(AO) had rejected the agricultural income admitted by the assessee at Rs.5,50,000/- and also the cash deposits made into the bank account to the tune of Rs.1,80,400/- in the absence of satisfactory explanation with proper evidence. The AO has completed the assessment proceedings and passed an order u/s 143(3) r.w.s. 153C, by adding back Rs.1,80,400/- to the income returned and treating the agricultural income as Nil.

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, the assessee preferred an appeal before the Tribunal and raised the following grounds :

1. The order of the Learned Commissioner of Income Tax(Appeals)-3, Visakhapatnam is contrary to the facts and also the law applicable to the facts of the case.

Ground No.1 and 3 are general in nature, which do not require specific adjudication.

Ground No.2 is related to restricting the agricultural income to the extent of Rs.4,78,000/- as against Rs.5,50,000/- admitted by the assessee. At the outset, the Ld.AR submitted that the assessee had taken Ac.23.91cnts of agricultural lands on lease from his grandfather, grand mother and uncle and cultivating cashew, casuarinas, paddy etc. The assessee produced agricultural income certificate from the Village Revenue Officer (VRO) in support of his claim before the AO. Ld.AR contended that the AO without verifying the records and without bringing any contrary facts on record, rejected the agricultural income of the assessee. The Ld.AR, therefore, pleaded to set aside the order of the Ld.CIT(A) and allow the appeal of the assessee on this ground.

Per contra, the Ld.DR submitted that the Ld.CIT(A) has rightly restricted the agricultural income to the extent of Rs.4,78,200/- for the agricultural land to the extent of Ac.23.91 cnts, taking into account the proposition that any agricultural land with commercial / cash crop will fetch net income of Rs.20,000/- per acre. Therefore, pleaded to confirm the addition sustained by the Ld.CIT(A) and dismiss the appeal of the assessee on this ground.

We have heard both the parties and perused the material available on record. It is apparent from the records that the assessee has taken agricultural lands to the extent of Ac.23.91 cnts from his grandfather, grandmother and uncle on lease and cultivating cashew, casurina, paddy etc, which was verified by the Ld.CIT(A) from the records produced before him. The Ld.CIT(A) has also perused the confirmation letters produced by the assessee from Sri Pilli Rajulu, grandfather, Smt. K.Akkamma, grandmother and Sri K.Vijay Kumar, uncle of the assessee. The Ld.CIT(A) viewed that it is an accepted proposition that any agricultural land with commercial / cash crop would fetch net income of Rs.20,000/- per acre. The agricultural land of the assessee, being Ac.23.91 cnts, the Ld.CIT(A) viewed that it is reasonable to earn Rs.4,78,200/- (i.e. Rs.20,000/- x Ac.23.91 cnts) as the ownership was not in doubt. The Ld.CIT(A) therefore, directed the AO to restrict the addition to Rs.4,78,200/- and disallow Rs.71,800/-. We find, that the Ld.CIT(A) has rightly estimated the agricultural income of the assessee basing on the valid proposition. Hence, we do not find any infirmity in the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee on this ground.

The order of the learned Commissioner of Income Tax (Appeals)-3, Visakhapatnam is contrary to the facts and also the law applicable to the facts of the case.

Ground No.2 is related to unexplained cash deposits. During the assessment proceedings, the AO observed that there are several cash deposits in the bank accounts held by the assessee in Axis bank and Yes bank. Since the assessee has no regular source of income and could not explain the sources of cash deposits, the assessee treated the amount of Rs.1,98,000/- as unexplained income and brought to tax.

On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) restricted the addition to Rs.1,33,000/- since there is corroborative evidence of a gift of Rs.50,000/- received from the father of the assessee.

On being aggrieved, the assessee preferred an appeal before the Tribunal and contended that the deposits of Rs.1,98,000/- were made on various dates out of his earnings and also from agricultural income. The assessee also contended that out of the above amount, an amount of Rs.50,000/- was received as gift from his father, Sri Pilli Nooka Raju and furnished a confirmation letter. The Ld.AR submitted that the Ld.CIT(A) is not justified in confirming the addition of Rs.1,98,000/- as unexplained deposits. The Ld.AR, therefore, pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the assessee on this ground.

Per contra, the Ld.DR relied on the order of the Ld.CIT(A) and pleaded to uphold the same and dismiss the appeal of the assessee on this ground.

We have heard both the parties and perused the material placed on record. It is apparent from records that the assessee made cash deposits of Rs.1,98,000/- in his bank account No.3600000176 held in Yes Bank during the A.Y.2012-13. It is observed that the assessee could not furnish the source of the cash deposits except the confirmation letter received from his father, Sri Pilli Nooka Raju for the gift of Rs.50,000/- received from him. In these circumstances, we hold that after verifying the return of income filed by the assessee admitting income from auto consultancy and agriculture and bank account statements, the Ld.CIT(A) has rightly considered the cash deposits of Rs.15,000/- as explained, as in the earlier years, the agricultural income earned by the assessee is reasonable and treated the cash deposits to the extent of Rs.1,33,000/- as unexplained. Since, the assessee could not furnish any corroborative evidence either during the appellate proceedings or before the Tribunal except the confirmation letter for the gift received, we are inclined to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee on this ground.

Ground No.3 is related to investment towards insurance premium of Rs.90,000/-. The assessee contended that insurance premium of Rs.90,000/- was made out of gross earnings received through agriculture and auto consultancy. The assessee further submitted that the assessee had issued a cheque for Max New York Life Insurance out of the cash deposits accumulated in his Yes Bank account and also filed copy of statement of Yes Bank account in support of his claim. The assessee pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the assessee on this ground.

Per contra, the Ld.DR relied on the order of the Ld.CIT(A) and pleaded to uphold the same and dismiss the appeal of the assessee on this ground.

We have heard both the parties and perused the material placed on record. It is the case of the assessee that an amount of Rs.90,000/- was paid towards insurance premium, out of gross earnings received through agriculture and auto consultancy. The assessee claimed that a cheque was issued for Max New York Life Insurance out of cash deposits accumulated in his Yes Bank account. The statement of account of the assessee held in Yes Bank savings bank account No.004693600000176 was examined and it is observed that the assessee made cash deposits from 12.04.2011 to 13.04.2011 amounting to Rs.90,000/-, which was found credited to the account of Max Newyork Life Insurance Company Ltd. on 13.04.2011 towards insurance premium. The AO has made an addition of cash deposit of Rs.90,000/- and the payment made to Insurance Company as unexplained. The bank statement shows that cash deposits were made on 12th and 13th and made cheque payment of Rs.90,000/- to the Insurance Company for insurance premium. Then only one addition should be made. Hence, the insurance premium amount of Rs.90,000/- cannot be sustained. Therefore, the AO is directed to delete the said amount of Rs.90,000/-. Hence, we set aside the order of the Ld.CIT(A) and allow the appeal of the assessee on this ground.

In the result, appeal of the assessee is dismissed for the A.Y.2010- 11 and appeal of the assessee is partly allowed for the A.Y.2012-13. Order pronounced in the open court on 29th March, 2023. Sd/- Sd/- (एस बालाकृष्णन) (दुव्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated : 29.03.2023 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Shri Pilli Raja Raghavendra, D.No.45-57- 10/1/1, Narasimha Nagar, Visakhapatnam 2. रधजस्व/The Revenue – The Asst. Commissioner of Income Tax , Central Circle-2, 4th Floor, Pratyakshakar Bhavan, M.V.P.Colony, Visakhapatnam 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT, Visakhapatnam 5..गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER