BOMMINENI RAMANJANEYULU,ENDLURU vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), , GUNTUR

Brief facts of the case are that the assessee is an individual, filed his return of income for A.Y.2018-19, declaring total income of Rs.1,54,55,320/-. The case was selected for scrutiny under CASS. The 2 I.T.A. No.134/Viz/2021, A.Y.2018-19 Bommineni Ramanjaneyulu, Endluru assessee filed details as required vide notices u/s 142(1), from which it was gathered that the assessee had shown unsecured loan to the tune of Rs.1,01,22,406/- as on 31.03.2018 and out of which Rs.33,32,906/- was received during the year under consideration, against which no interest had been shown to have been paid by the assessee. The assessee was asked to produce the documentary evidence to prove the identity, creditworthiness and genuineness of the loan transactions, consequent to which, the said amount remained unexplained to the satisfaction of the AO and added back to total income u/s 68 of the Act.

On being aggrieved, the assessee filed appeal before CIT(A). After considering the submissions of the assessee, the Ld.CIT(A) confirmed the order of the Assessing Officer(AO) and dismissed the appeal of the assessee.

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

The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.33,32,906/- made by the assessing officer u/s 68 of the Act towards alleged unexplained cash credits.

Any other grounds may be urged at the time of hearing.

Ground No.1 and 4 are general in nature which does not require specific adjudication.

Ground No.2 relates to validity of reason of scrutiny selection. The assessee’s case was selected for complete scrutiny under CASS and notice u/s 143(2) of the Act was issued, served on the assessee and assessment order u/s 143(3) r.w.s. 144B of the Act was passed on 23.04.2021. Against which, the assessee preferred an appeal before the CIT(A) and submitted that the assessee’s field of working is erroneously stated as real estate, whereas, the assessee is in the business of rural water scheme, which lacks the juri iction for scrutiny. The Ld.CIT(A) observed that the assessee has totally misplaced the facts that the case was selected for limited scrutiny and accordingly relied on CBDT’s Instruction No.225/169/2019/ITA-II dated 05.09.2019 which relates to manual selection of returns for complete scrutiny, wherein scope of examination /enquiry is described in para 2(ii) in limited scrutiny cases only and whereas, the assessee’s case is selected for complete scrutiny and does

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before the Tribunal. The Ld.AR relied on the grounds raised by the assessee.

On the other hand, the Ld.DR relied on the orders of the authorities below and pleaded for upholding the order of the Ld.CIT(A).

We have heard both the parties and upon perusal of the material available on record, we find that the assessee’s case was selected for complete scrutiny. Therefore, we do not find any infirmity in the order passed by the Ld.CIT(A) on this ground and accordingly, the ground raised by the assessee is allowed.

Ground No.3 is related to confirming the addition of unexplained cash credits made by the AO u/s 68 of the Act. The AO observed from the details furnished by the assessee in response to notice u/s 142(1) and viewed that an amount of Rs.1,01,22,406/- was shown as unsecured loans as on 31.03.2018, out of which an amount of Rs.33,32,906/- is reflected as loans availed during the F.Y.2017-18. The AO further observed that no interest was shown to have been paid on the unsecured

Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) observed that the onus lies with the assessee to prove identity, creditworthiness and genuineness of all the unsecured loans to the satisfaction of the AO. Relying on various judgements of Hon’ble Supreme Court and other High Courts, the Ld.CIT(A) held that mere furnishing of a copy of aadhar card, PAN card, bank statements, etc. do not suffice all the three components of cash credits. In the instant case, it is an undisputed fact that the assessee is getting huge unsecured loan without any collateral security and that too without any interest and failed to show the purpose of such loan and the repayment of these loans. There were business transactions with some of the parties instead of unsecured loan, but failed to file any supporting documents in support of his contention and substantiate the creditworthiness of unsecured loans and genuineness of the loan

Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and submitted that the assessee is a contractor and he has been assessed to tax for the past 10 years and his nature of business was mentioned in the tax returns as ‘construction of waterways and water reservoirs’, which was ignored by the AO. The assessee also submitted that he complied with all the notices issued from time to time and furnished all the relevant details. The Ld.AR further submitted that the Ld.CIT(A) is not justified in sustaining the addition of Rs.33,32,906/- made by the AO u/s 68 of the Act and requested to delete the addition made. It was the further submission of the assessee that except in the case of A.Nageswara Rao and B.Srinivasa Rao for an amount of Rs.2 lakh each, other creditors PAN cards and Aadhar cards were filed before the AO as well as the Ld.CIT(A) and also the creditors gave confirmation letters, but the AO as well as the CIT(A) has not considered the same and passed orders. Therefore, pleaded for setting aside the orders of the lower authorities and allow the ground of appeal.

On the other hand, the Ld.DR submitted that Ld.CIT(A) considered all the aspects and passed orders, therefore, the Ld.CIT(A) rightly

We have heard both the parties and perused the material placed on record. Admittedly, the assessee has filed PAN, Aadhar numbers and bank details of the creditors except two creditors i.e. Sri A.Nageswar Rao for an amount of Rs.2,00,000/- and Sri Bommala Srinivasa Rao for an amount of Rs.2,00,000/-. Therefore, all the transactions are explained except the above said two transactions for an amount of Rs.4,00,000/-. But the Ld.CIT(A) as well as the AO simply ignored the bank statement and passed erroneous order. Therefore, we are of the view that except these two transactions, the remaining transactions are proved by the assessee. Therefore, we confirm the transactions of Sri A.Nageswar Rao and Sri Bommala Srinivasa Rao for an amount of Rs.4,00,000/- (two lakhs each). For remaining amount, the assessee has explained the genuineness of the transactions and credit worthiness of the creditors. Therefore, we direct the AO to delete the addition made by the AO for other loan transactions for an amount of Rs.29,32,906/-. Hence, the ground raised by the assessee is partly allowed.

In the result, the appeal filed by the assessee is partly allowed.