Sama Janardhan Reddy,, Hyderabad vs Assessee

ITA Nos.1312 and 1313 of 2014 Sama Srinivasa and Sama Janardana Reddy Hyd

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad 'B' Bench, Hyderabad

Before Shri B. Ramakotaiah, Accountant Member & Smt.Asha Vijayaraghavan, Judicial Member

ITA No.1312/Hyd/2014 (Assessment year: 2009-10)

Shri Sama Srinivas Reddy Income Tax Officer Hyderabad Vs. Ward 9(1) PAN- ASAPS 6729 A Hyderabad (Appellant) (Respondent)

ITA No.1313/Hyd/2014 (Assessment Year: 2009-10)

Shri Sama Janardhan Reddy Income Tax Officer Hyderabad Vs. Ward 9(1) PAN- BJEPS 6092 N Hyderabad (Appellant) (Respondent)

For Assessee : Shri S. Rama Rao, Advocate For Revenue : Shri Rajat Mitra, CIT (DR)

Date of Hearing : 09.04.2015 Date of Pronouncement : 17.06.2015

ORDER

Per Smt. Asha Vijayaraghavan, J.M.

These appeals are preferred by the assessees directed against separate orders of the Commissioner of Income- tax(Appeals)-VI, Hyderabad dated 20.11.2013, for the assessment year 2009-10. Since certain common issues are involved, these appeals are being disposed of with this common consolidated order for the sake of convenience.

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ITA No.1312/Hyd/2014-Shri Sama Srinivas Reddy

2. In this appeal, there is a delay of 126 days in filing the appeal before the ITAT. The reasons given by the petitioner is as follows:

"For the A.Y under consideration, he filed the return of income on 17.11.2009 admitting an income of Rs.7,09,060. AO completed the assessment u/s 144 of the I.T. Act determining the total income at Rs.32,82,960. Aggrieved with the order of assessment, the petitioner filed an appeal before the CIT (A)-VI Hyderabad. The said appeal was disposed of vide order in Appeal No.282/2011-12(CIT(A)-VI dated 20.11.2013. The representation of matter before the CIT (A) was entrusted to an Advocate. The appellate order was served on the said Advocate on 4.1.2014. The receipt of the appellate order was not in the knowledge of the petitioner. However, when the TRO issued notice u/s 226(3) of the I.T. Act on 4.6.2014, he came to understand through Tax Recovery Officer that the appeal was already decided by the ld CIT (A). There was no advice from the Advocate as to the further course of action against the order of the ld CIT (A) and information regarding the date when such order was served on him. The date of service of the order of the CIT (A) was to be ascertained from the office of the CIT (A). When the petitioner came to know the matter through the notices of the TRO, he decided to change the Counsel. There was a delay on the part of the Advocate in returning the files to the petitioner. The files were returned to the petitioner in the last week of June, 2014. The petitioner, thereafter consulted another Advocate in the first week of July, 2014 and the appeal papers were got prepared on 8.7.2014 as the Advocate was out of station. Therefore, the appeal is being filed on 9.7.2014 with a delay of 126 days. The petitioner humbly submits that the delay is for the reasons submitted above which are beyond the control of thepetitioner and is not intentional. The petitioner, therefore, requests the Hon'ble ITAT to kindly condone the delay and pass appropriate orders in the matter".

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3. We find the reasons for the delay in filing the appeal are genuine and hence condone the delay.

4. Brief facts of the case are that the assessee is an individual and is engaged in the business of running tent house and derives business profit, apart from income from property and agricultural income.

5. During the assessment proceedings, AO observed that the amount of Rs.25,73,902 was deposited as cash on various dates in the bank account maintained with Andhra Bank and in the absence of any details and explanations for the sources of cash deposits, AO treated the entire cash deposits as unexplained income of the assessee and passed an ex-parte order u/s 144 of the Income Tax Act.

6. Aggrieved, assessee preferred appeal before the CIT (A) objecting to the ex-parte order and submitted that he was not provided an opportunity of being heard and the amounts and the deposits are explainable as the income was earned during the year by the assessee and the assessee was having cash on hand. It was explained that the assessee earned income through various sources, such as rents, business receipts and loans etc.

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7. The CIT (A) held that non submission of information before the AO constituted additional evidence and hence referred the issue back to the AO for necessary verification and remand report. As per the report of AO, the cash deposits are not explainable though there was cash on hand, which was shown to be a meager amount of Rs.70,180/-. Further, the gross receipts of the business are only Rs.7,11,026 as per the return of income filed by the assessee as against the amount of Rs.12,29,026 shown in the revised computation, thereby inflating/increasing the amounts by Rs.5,18,000. Similarly, it was submitted by the AO that there were no appropriate evidence as regards to the rental income of Rs.10,07,114/- and agricultural income of Rs.1,50,000 except the furnishing of computation of rental income and the pass books for agricultural lands. Subsequently, a revised remand report was furnished indicating the contents/entries of one more bank account (Vijaya Bank, Sahebnagar Branch) which was not shown to the department, wherein the total credits were quantified at Rs.8,80,668/- including the cash deposits of Rs.94,000.

8. While furnishing the remand report, AO observed that the assessee has shown gross receipts from the business of tent house, shown at increased amount of Rs.12,29,026 in the revised computation, as against Rs.7,11,026 shown in the original return of income. Further, as per 26AS, the rental receipts are shown at Rs.13,28,016 as against Rs.10,07,114 shown in the return of income, which means the assessee has understated the rental receipts by Rs.3,20,902 which was further observed to be considered as undisclosed income under the head "income from

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house property". Regarding the rental receipts, it was further observed that no such receipts were deposited into Andhra Bank account, while an amount of Rs.2,46,208 were credited by way of cheque, representing the rental receipts, into the Vijaya Bank account. It was pointed out in the revised report that out of total deposits of Rs.8,80,668 into Vijaya Bank, an amount of Rs.94,000 was in cash, with remaining amounts of Rs.7,86,668 in cheques which include the rental receipts of Rs.2,46,208 and the transactions of the said bank account were not reflected in return of income furnished. It was further pointed out that no proof were furnished for agricultural income of Rs.1,50,000 and the claims for deduction under Chapter VI A amounting to Rs.1,24,000.

9. In the rejoinder to the remand reports, assessee submitted that during the year an amount of Rs.7,11,026 was earned as commission in real estate business in which the receipts were both in cash and cheques, without assessee involving in the purchase and sale of any property.

10. The CIT (A) after discussing elaborately at para Nos. 5.4 and 5.5 of his order concluded as follows:

"........ Thus, the additions stand confirmed at Rs.5,69,121 and Rs.5,18,000 being the credits into Andhra Bank Account. Similarly, credits of Rs.8,80,668 into the account with Vijaya Bank, except Rs.2,46,208 which is subject matter of further verification, being the rental receipts credited through cheques, stand confirmed, based on the additional information brought on record, as against the total addition of Rs.25,73,902 made in assessment order,

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based on cash credits into Andhra Bank account. Further, the amount of Rs.3,20,902 as pointed out by AO in remand report being the difference between rental receipts as per 26AS (Rs.13,28,106) and the amounts offered for tax vide the return of income (Rs.10,07,114) may also represent the unexplained income of the appellant, being the excess rental receipts not offered for tax. However, such treatment is directed to be as per the outcome of the further verifications of the information on record vis-à-vis the information in 26AS. Subject to the above observations, this ground of appeal is treated as partly allowed".

11. Aggrieved, assessee has filed appeal before us. The ld Counsel for the assessee submitted that the AO had considered the deposits only in Andhra Bank account and not Vijaya Bank account. It was further pointed out that only before the CIT (A), assessee had mentioned about the Vijaya Bank account and had filed the details of the same. It was the argument of the ld Counsel that the ld CIT (A) should have deleted the credits of Rs.8,80,668 with Vijaya Bank instead of directing that amount of Rs.2,46,208 is to be deleted by the AO after verification of the credits. It was also submitted that the CIT (A) erred in directing the AO to verify the addition of Rs.3,20,902 in Andhra Bank.

12. It was also submitted by the ld Counsel for the assessee that an amount of Rs.25,73,902 which has been deposited on various dates in Andhra Bank account are not taxable amount, because the amount of Rs.25,73,902 is cash on hand as per the books of accounts and includes the income which has been earned for the financial year 2008-09 and earlier years. The

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assessee also enclosed his cash book and bank statements which indicate that the amount of Rs.25,73,902 is cash rotated through business. It was therefore, argued that the addition of Rs.5,69,121 and Rs.5,18,000 representing the credits into the Andhra Bank account have been confirmed by the CIT (A) without considering the explanations offered by the assessee.

13. The ld DR raised no objection for the matter to be sent back to the file of the CIT (A) to verify the deposits/withdrawals in Vijaya Bank.

14. In these circumstances, since the AO has verified only one account namely Andhra Bank and has passed the assessment order u/s 144 as ex-parte order and also that the assessee has informed about the Vijaya Bank a/c only before the CIT (A), we are of the opinion that the matter should be remitted back to the file of the AO to verify the bank accounts. Since the assessee has provided copy of the bank statements with Andhra Bank and Vijaya Bank and Form No.26AS for the A.Y 2009-10 in the paper book, the AO shall verify the same and decide the issue in accordance with law.

15. In the result, appeal in ITA No.1312/Hyd/2014 is allowed for statistical purposes.

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ITA No.1313/Hyd/2014-Shri Sama Janardhan Reddy

16. In this appeal, there is a delay of 126 days in filing the appeal before the ITAT. The reasons given by the petitioner is as follows:

""For the A.Y under consideration, he filed the return of income on 31.8.2009 admitting an income of Rs.3,50,490. AO completed the assessment u/s 144 of the I.T. Act determining the total income at Rs.41,29,490. Aggrieved with the order of assessment, the petitioner filed an appeal before the CIT (A)-VI Hyderabad. The said appeal was disposed of vide order in Appeal No.281/2011-12(CIT(A)-VI dated 20.11.2013. The representation of matter before the CIT (A) was entrusted to an Advocate. The appellate order was served on the said Advocate on 4.1.2014. The receipt of the appellate order was not in the knowledge of the petitioner. However, when the TRO issued notice u/s 226(3) of the I.T. Act on 4.6.2014, he came to understand through Tax Recovery Officer that the appeal was already decided by the ld CIT (A). There was no advice from the Advocate as to the further course of action against the order of the ld CIT (A) and information regarding the date when such order was served on him. The date of service of the order of the CIT (A) was to be ascertained from the office of the CIT (A). When the petitioner came to know the matter through the notices of the TRO, he decided to change the Counsel. There was a delay on the part of the Advocate in returning the files to the petitioner. The files were returned to the petitioner in the last week of June, 2014. The petitioner, thereafter consulted another Advocate in the first week of July, 2014 and the appeal papers were got prepared on 8.7.2014 as the Advocate was out of station. Therefore, the appeal is being filed on 9.7.2014 with a delay of 126 days. The petitioner humbly submits that the delay is for the reasons submitted above which are beyond the control of thepetitioner and is not intentional. The petitioner, therefore, requests the Hon'ble ITAT to kindly condone the delay and pass appropriate orders in the matter".

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17. We find the reasons for the delay in filing the appeal are genuine and hence condone the delay.

18. Briefly stated, the assessee is an agriculturist and is working as a Real Estate Agent. He is also earning income from business profits apart from income from property and agricultural income. AO observed that an amount of Rs.37,79,001 was deposited in cash into SB account with ICICI Bank on various dates. In the absence of any compliance to the notices issued and any explanation from the assessee regarding the cash credits, AO treated the same as unexplained credit u/s 144 of the I.T. Act.

19. Assessee objected to the ex parte order and the addition holding that he was not provided with an opportunity of being heard. It was further submitted that the deposits into the ICICI Bank account were explainable through various sources such as rents, business receipts, loans etc.

20. As the information furnished at the stage of the appellate proceedings along with reasons for non submission of information before the AO, constituted an additional evidence, the same was referred to the AO for necessary verification. As per the report of the AO, explanation of the assessee is without any proper evidence and reasoning. Further as per the AO the gross receipts of the business are only Rs.3,71,150 as per the return of

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income filed by the assessee as against the amount of Rs.10,88,650 shown in the revised computation, thereby inflating/increasing the amounts by Rs.7,17,500. Similarly it was submitted that there were no appropriate evidence as regards to the rental income of Rs.4.00 lakhs and agricultural income of Rs.1.50 lakhs except the furnishing of computation of rental income and the pass books for agricultural lands. Subsequently, a revised remand report was furnished by the AO indicating the contents/entries of one more bank account (Vijaya Bank, Sahebnagar Branch) which was not shown to the AO wherein the total credits were quantified at Rs.16,98,100/- including the cheque deposits of Rs.15,23,561.

21. While elaborating in the remand report, AO observed that the gross receipts from the business of tent house, shown at increased amount of Rs.10,88,650 in the revised computation, as against Rs.3,71,150 shown in the original return of income. Regarding the rental receipts, it was further observed that though there was no change in rental amounts of Rs.4.00 lakhs as per 26AS, as against Rs.4.00 lakhs shown in return of income, it was observed that no such receipts were deposited into ICICI Bank account, while an amount of Rs.2,46,208 were shown to have been credited by way of cheque, representing the rental receipts into the Vijaya Bank account. It was pointed out in the revised report that out of total deposits of Rs.16,98,100 into Vijaya Bank, an amount of Rs.1,74,539 was made in cash, with remaining amounts of Rs.15,23,561 in cheques which include the rental receipts of rs.2,46,208 and the transactions of the said bank account were observed to be not reflected in return

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of income furnished. It was further pointed out that records were furnished for agricultural lands of 4.14 acres at Duppalli Village, where as per balance sheet, 3.33 acres were shown at Kalvancha village for explaining agricultural income of Rs.1.50 lakhs. In the rejoinder to the remand reports, assessee submitted that during the year an amount of Rs.3,71,550 was earned as commission in real estate business in which the receipts were both in cash and cheques, without involving in purchase and sale of any properties.

22. The CIT (A) after discussing elaborately at para Nos. 5.4 and 5.5 of his order concluded as follows:

".................Thus, the additions on account of unexplained investments, being the credits into the two bank accounts standing in the name of appellant during the year, stand quantified on the basis of sources of credits of Rs.43,05,776 in ICICI Bank account and Rs.16,98,100 in Vijaya Bank Account vis- à-vis the total explainable sources of Rs.16,39,548 into ICICI Bank and Rs.2,46,208 into Vijaya Bank subject to further verification. Further, the difference in business receipts as per the return of income and revised computation which is to the extent of Rs.7,17,500 represent the unexplained income/ investment, as the appellant failed to explain the sources for such amounts. Thus, the additions stand confirmed at Rs.26,66,228 in addition to the amount of Rs.7,17,500 being the credits into ICICI Bank. Similarly credits of Rs.16,98,100 into Vijaya Bank except Rs.2,46,208 which is subject matter of further verification, being the rental receipts credited by cheques, stand confirmed, based on the additional information brought on record, as against the total additions of Rs.37,79,001 made in assessment order, quantifying the cash credits alone into ICICI Bank account. Subject to the above observations, this ground

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of appeal is treated as partly allowed as far as the credits into the ICICI Bank account is concerned. However, by considering the credits into Vijaya Bank, which emerged in the course of Appellate/Remand proceedings, the total additions confirmed for the year under reference stand enhanced".

23. Aggrieved, assessee has filed appeal before us. The ld Counsel for the assessee submitted that the AO had considered the deposits only in ICICI Bank account and not Vijaya Bank account. It was further pointed out that only before the CIT (A), assessee had mentioned about the Vijaya Bank account and had filed the details of the same. The ld CIT (A) erred in holding that the deposits made into the ICICI Bank of Rs.37,79,001 are not properly explained. The CIT (A) erred in confirming the addition of Rs.26,66,228 on the ground that the deposits made into the ICICI Bank to the said extent are not properly explained. Further the CIT (A) erred in holding that there was difference in the business receipts as per the return of income and revised computation which works out to Rs.7,17,500 and that the said amount is to be assessed as income for the year under consideration. Further, the ld CIT (A) erred in confirming the addition of Rs.14,51,892 being the deposits made into the Vijaya Bank on the ground that the deposits to the said extent are not properly explained. The CIT (A) ought to have considered the explanation submitted and ought not to have confirmed any part of the addition and ought not to have enhanced the addition made by the AO.

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24. It was also submitted by the ld Counsel for the assessee that an amount of Rs.37,79,001 which has been deposited on various dates in ICICI Bank account are not taxable amount, because the amount of Rs.37,79,001 is cash on hand as per the books of accounts and includes the income which has been earned for the financial year 2008-09 and earlier years. The assessee also enclosed his cash book and bank statements which indicate that the amount of Rs. 37,79,001 is cash rotated through business. It was therefore, argued that the addition of Rs. 26,66,228 representing the credits into the ICICI Bank account have been confirmed by the CIT (A) without considering the explanations offered by the assessee. Further it was submitted that the assessee owns agricultural land of 5 acres and his wife owns 7 acres which is income earning.

25. The ld DR raised no objection, for the matter to be sent back to the file of the CIT (A) to verify the deposits/withdrawals in Vijaya Bank.

26. In these circumstances, since the AO has verified only one account namely ICICI Bank and has passed the assessment order u/s 144 as ex-parte order and also that the assessee has informed about the Vijaya Bank a/c only before the CIT (A), we are of the opinion that the matter should be remitted back to the file of the AO to verify the bank accounts. Since the assessee has provided copy of the bank statements with ICICI Bank and Vijaya Bank and in form No.26AS for the A.Y 2009-10 in the paper

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book. AO shall verify the same and decide the issue in accordance with law.

27. In the result, appeal in ITA No.1313/Hyd/2014 is allowed for statistical purposes.

28. To sum up, both the appeals of the assessee are allowed for statistical purposes.

Order pronounced in the Open Court on 17th June, 2015.

Sd/- Sd/- (B. Ramakotaiah) (Asha Vijayaraghavan) Accountant Member Judicial Member

Hyderabad, dated 17th June, 2015.

Vnodan/sps Copy to:

1. Sri S. Rama Rao, Advocate, Flat No.102, Shriya's Elegance, H.No.3-6-643, street No.9, Himayatnagar, Hyderabad 500029

2. Income Tax Officer Ward 9(1) IT Towers, AC Guards, Masab Tank, Hyderabad

3. The CIT(A)-VI Hyderabad

4. The CIT -VI Hyderabad

5. The DR, ITAT, Hyderabad

6. Guard File

By Order

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