THE INCOME TAX OFFICER, WARD-3(2), VISAKHAPATNAM vs. SRI MUTCHUAKARLA APPA RAO, VISAKHAPATNAM

PER S. BALAKRISHNAN, Accountant Member :

This appeal filed by the Revenue against the order of the Ld.

The assessee also voluntarily offered to pay the income tax on the same.

The assessee also stated that no books of accounts have been maintained in respect of his business and that of the firms in which he is a partner. Subsequently a notice U/s. 142(1) of the Act was issued on 3/10/2011 and duly served on the assessee. In response, the assessee filed his return of income on 19/12/2011 admitting a total income of Rs. 6,57,000/-. Subsequently, the case was taken up for scrutiny and notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response, the assessee’s Authorized Representative appeared from time to time and furnished the information called for by the Ld. AO. Considering the information furnished and the material available on record, the Ld. AO concluded the assessment by making the following additions:

(i) Unexplained money found in the possession of Rs. 12,00,000 assessee (ii) Unexplained investment in purchase of Rs. 43,59,500 property at Pendurti (iii) Short Term Capital Gains Rs. 99,00,500 (iv) Additional profit Rs. 1,99,510 (v) Unexplained credits in various bank accounts Rs. 54,89,800

Aggrieved by the above additions made by the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), Visakhapatnam. Later the appeal was transferred to the Ld. CIT(A)-2, Guntur.

3. On appeal, the Ld. CIT(A), issued notices U/s. 250A on 14/7/2014; 10/12/2014 and 19/3/2019. In response to the notices, the assessee’s Authorized Representative filed various details and made written submissions before the Ld. CIT(A). During the course of the appeal proceedings, the Ld. CIT(A) forwarded the additional evidence filed by the assessee and called for remand report from the Ld. AO. The Ld. AO submitted his remand report on 3/3/2017. The remand report of the Ld. AO was forwarded to the assessee for his rebuttal thereon. In addition to rebuttal of the remand report, the assessee’s Representative filed a detailed note before the Ld. CIT(A). Considering the submissions of the assessee and the material furnished before the Ld. CIT(A), the Ld. CIT(A) partly allowed the appeal by deleting the additions made by the Ld. AO.

Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.

“1. The Ld. CIT(A) has erred in both in law and facts of the case.

2. The Ld. CIT(A) ought not have give relief in respect of unexplained cash of Rs. 12 lakhs found in the possession of assessee since the assessee failed to prove the nexus between the cash withdrawals from bank and the subject cash in absence of maintenance of books of account.

4. The Ld. CIT(a) has erred in not considering the fact that as the ownership lies with the assessee himself, the sources for investment amounting to Rs. 43,59,500 has to be explained by the assessee individual.

With respect to Ground No.2, the Ld. AR submitted that the 5. assessee is a Real Estate broker earning income from commission by way of cash. The Ld. AR further submitted that the assessee has received advances from his customers for identifying and buying a property for one of his customer and hence carried the money from Hyderabad to Visakhapatnam when he was intercepted by the DDIT (Inv.) in Visakhapatnam Airport. The Ld. AR further submitted that since the purchase could not go through, the assessee was returning with the same money from Hyderabad to Visakhapatnam. The Ld. AR further submitted that various judicial decisions have rendered and laid down the ratio that the statement recorded U/s. 131(1) of the Act is not binding on the assessee and hence the additions cannot be made based on the statement recorded from the assessee U/s. 131(1) of the Act. The Ld. AR further submitted that the books of accounts, balance sheet, bank statements have been produced before the Ld. AO but the Ld. AO has not examined the same but has purely relied on the statement made by the assessee U/s. 131 of the Act while making the addition of Rs. 12 lakhs cash found and seized by the Department.

Per contra, the Ld. DR submitted that the assessee could not explain the sources for the cash and has voluntarily admitted to pay the amount as advance tax in his hands and in the hands of his wife and has paid the taxes accordingly. The Ld. DR further submitted that the assessee has recorded a statement U/s. 131 that he does not maintain any books of account for the purpose of business activities carried out by him. The Ld. DR therefore pleaded that the order of the Ld. AO be upheld as the assessee could not explain the sources even during the scrutiny proceedings.

6. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly, the assessee has carried cash of Rs. 12 lakhs and while recording the statement in response to Q.No. 15, the assessee denied to give the detailed sources for the same. However, the assessee has submitted bank statements, copy of cash book and balance sheet which was prepared based on the entries in the bank pass book before the Ld. CIT(A). The Ld. CIT (A) observed that the Ld. AO has neither examined nor rejected the books of accounts, but by relying on the statement recorded u/s. 131 of the Act made the addition of Rs. 12 lakhs U/s. 69A of the Act. The Ld. CIT(A) found that the assessee has shown cash balance as on 30/08/2010 at Rs. 64,62,446/- and concluded that sufficient cash balance was available with the assessee and therefore directed the Ld. AO to delete the addition made for Rs. 12 lakhs. In the statement recorded by the assessee on 28/8/2010, the assessee has clearly stated in response to Q. No. 14 that he has not taken any loan from any person and has also denied to give any detailed sources for the seized amount. The assessee also in response to Q.No. 16 has voluntarily agreed to pay income tax both in his name and in his wife’s name. The Ld. AO observed in para 2.1 that after repeated opportunities provided to the Ld. AR of the assessee, the assessee filed a letter dated 5/11/2012 that the seized amount of Rs. 12 lakhs is appearing in the books of accounts. The Ld. AO found that since the assessee has not maintained any books of accounts and has accepted that he has not maintained any books of accounts at the time of interception as well as during the survey action, production of books of accounts after a period of 3 months is an afterthought of the assessee and hence the Ld. AO did not consider the books of accounts submitted by the assessee. We find that the Ld. AO has rightly considered the issue of submission of books of accounts as an afterthought of the assessee and hence we do not find any reason to interfere in the decision of the Ld. AO and we hereby set-aside the order of the Ld. CIT(A) on this ground. Accordingly, Ground No.2 raised by the Revenue is allowed.

No. 1558/2010 and 1559/2010, dated 29/4/2010 from Sri R.P. Naidu and Sri Gandhi Babji. The Ld. DR further submitted that the Document was registered in the individual name of the assessee but the assessee has explained the sources that the purchase of property was made from partnership firm M/s. A.R. Builders. The Ld. DR further submitted that the property cannot be considered as a firms property as it is registered in the individual name and subsequently, the assessee in his individual capacity has entered into a development agreement with M/s. MVV Builders. The Ld. DR further submitted that the assessee has paid cash of Rs. 30 lakhs for the purchase of the property but has not furnished any sources for the cash payment and for the payment of stamp duty aggregating to Rs. 43,59,500/-. The Ld. DR therefore pleaded that the Ld. AO has rightly treated the same as assessee’s unexplained investment u/s. 69A of the Act and the order of the Ld. AO be upheld.

Per contra, the Ld. AR submitted that the assessee and his wife are partners in M/s. AR Builders and the property was purchased in the name of the assessee due to sentimental reasons. Further, the Ld.AR submitted that the payment for the purchase of the property through cheques and cash was made by the firm M/s AR Builders which is evidenced by the submissions in the paper book. Further, the Ld. AR also submitted that the stamp duty for the same was also paid by cheque which is also evidenced by the recitals in the sale deed and the bank statements. The Ld. AR further submitted that with respect to the cash payments that the firm has received an advance from RP Naidu which was utilized for the purchase of the property along with the advance for land received from M/s. MVV Builders and capital infusion by the partners. The Ld. AR further submitted that the cash book of the firm has been submitted the paper book page 27. The Ld. AR therefore pleaded that the order of the Ld. CIT(A) be upheld.

Per contra, the Ld. AR submitted that the sale of property has been stalled by the Government and the assessee has filed a Writ Petition before the Hon’ble High Court of Andhra Pradesh vide its Petition M.P.

No. 40552/2011 praying to direct the State of Andhra Pradesh and others not to interfere in the possession of the assessee. The Hon’ble AP High Court has directed the State that the cancellation of the Registered Sale Deeds unilaterally is illegal and without any jurisdiction and authority and set aside the impugned order. The Ld. AR further submitted that the amount of Rs. 65 lakhs from M/s. MVV Builders against the development agreement was refunded to M/s. MVV Builders by way of cheque on 5/5/2010. Similarly, the cash receipts for Rs. 70 lakhs was also refunded to M/s. MVV Builders which is evidenced by the confirmation letters provided by M/s. MVV Builders as submitted in the paper book. The Ld. AR further submitted that advance received from Mr. MVV Satyanarayana for Rs. 46 lakhs by way of cash was also repaid to Mr. MVV Satyanarayana during the year 2011. The Ld AR further pleaded that the confirmation letter from Mr. MVV Satyanarana confirming the repayment of Rs. 46 lakhs from the assessee was also submitted before the Ld. AO during the assessment proceedings. The Ld. AR therefore pleaded that since the transaction has not been materialized no transfer of property has taken place and hence capital gains does not arise. He pleaded that the order of the Ld. CIT(A) be upheld.

Per contra, the Ld. AR submitted that the details of cheque deposits has been submitted before the Ld. AO and the Ld. CIT(A). The Ld. CIT(A) has rightly considered the amount of Rs. 9,52,700/- being the cheque deposits in the assessee’s account as explained. The Ld. AR further submitted that the Ld. CIT(A) has also accepted the cash deposits made by the assessee out of the cash balance available with the assessee on the respective dates and hence pleaded that the order of the Ld. CIT(A) be upheld.

Pronounced in the open Court on then 17th March, 2023.