Sri Kunchara Kondal Rao, Plot No. 11,, ... vs Department Of Income Tax

Income tax Officer, Ward - 9(1), vs. Sri Kunchara Kondal Rao, Hyderabad. Hyderabad PAN - AKZPK 3015C (Appellant) (Respondent)

Assessee by : Shri Ramakrishna Bandi Revenue by : Shri B. Shanthi Kumar

Date of hearing 11-03-2015 Date of pronouncement 20-03-2015

O RDE R

PER SAKTIJIT DEY, J.M.:

This appeal by the revenue is directed against order dated 29/07/2013 passed by ld. CIT(A)-VI, Hyderabad for A.Y. 2009-10.

2. The effective grounds raised by the department are as under:

"2. The ld. CIT(A) erred in treating the contract receipts to the extent of Rs. 25,12,650, which are explained to be the business receipts as the source of cash deposits, for which the assessee has not produced any evidence in support that the receipts admitted were only the deposits made into the bank account.

3. The CIT(A) erred in accepting the amount of Rs. 8,50,000 which was shown as the advances from the prospective parties only on the basis of affidavits, whereas, the three persons are lowly paid Govt. Employees and do not have credit worthiness to advance such cash."

3. As can be seen from the grounds raised, department is aggrieved with the decision of the ld. CIT(A) in deleting addition to 2 ITA No. 1466/Hyd/2013 Sri Kunchara Kondal Rao

the extent of Rs. 33,62,650 out of the total addition of Rs. 36,66,000 made by AO.

4. Briefly stated, assessee an individual is engaged in the business of civil contract work. For the AY under consideration, assessee filed his return of income on 28/05/09 declaring total income of Rs. 1,96,659. As noted by AO in the assessment order, in spite of notices issued u/s 143(2) and 142(1) on several occasions, assessee did not appear. As a result, AO finally issued a letter on 17/11/2011 calling upon assessee to explain the source of cash deposits made into the bank account as revealed from the AIR informations. In response to the said letter, though, assessee appeared before AO on 29/11/11 and subsequently, assessee's AR also appeared and furnished the bank account statement, but, as alleged by AO, the source of cash deposits in the bank account were not furnished in spite of several opportunities being given to assessee. Therefore, AO proceeded to complete the assessment ex-parte u/s 144 on the basis of informations available on record. AO observed that in absence of any details and explanation furnished by assessee explaining the source of cash deposits, entire cash deposits of Rs. 36,66,000 have to be treated as unexplained income of assessee. Accordingly, while completing the assessment, AO added the said amount to the income returned. Being aggrieved of such addition, assessee preferred appeal before ld. CIT(A).

5. In course of appeal hearing, it was submitted by assessee that he only undertakes work of construction of residential houses on contract basis over plots owned by individuals. It was submitted, in this process plot owners used to advance monies to assessee and assessee undertakes construction of work by employing labourers and purchasing construction materials. Explaining the source of cash deposits to the bank account, it was submitted by assessee that the deposits are only advances received from the plot owners towards construction work. It was submitted, out of the total cash deposits of 3 ITA No. 1466/Hyd/2013 Sri Kunchara Kondal Rao

Rs. 36,66,000, assessee had already disclosed amount of Rs. 25,06,650 as contract receipts in the P&L a/c. It was submitted, an amount of Rs. 8,50,000 being the advance received from three plot owners were subsequently returned to them as they expressed their intention to get the work done through others. As far as the remaining amount of Rs. 3,03,500 is concerned, it was submitted by assessee, they represent other receipts. In support of such contention, assessee also furnished sworn affidavits of persons to whom advances were returned. It was also submitted by assessee that necessary information could not be submitted before AO as assessment was completed u/s 144. On the basis of the submissions made by assessee as well as evidence produced before him, ld. CIT(A) called for a remand report from the AO. As observed by ld. CIT(A) in his order, AO in his report, though, agreed that assessee has obtained confirmations from the persons to whom amounts were claimed to have been returned, but, he also observed that though amounts were deposited in cash but were never withdrawn in cash and assessee has also failed to produce documentary evidence for payments made towards construction material purchased and labour charges. AO observed, assessee could not prove that the cash deposits in bank account actually represent the gross receipts from contract business. As far as the amount of Rs. 8,50,000 received from three persons which subsequently was claimed to have been returned, AO observed that though the said persons appeared before him and confirmed of having advanced the money to assessee, but, their claim cannot be accepted in absence of supporting evidence.

6. Ld. CIT(A) after considering the submissions of assessee as well as the report submitted by AO in the context of facts and materials on record, observed that as far as the amount of Rs. 8,50,000 representing advances received by assessee from prospective clients is concerned, not only the said persons have confirmed of advancing money to assessee by filing affidavit but they 4 ITA No. 1466/Hyd/2013 Sri Kunchara Kondal Rao

also appeared before AO and in their sworn statement admitted of having advanced the money to assessee. As far as the amount of Rs. 25,12,650 claimed to have been deposited into the bank account out of gross contract receipts, ld. CIT(A) observed that apart from having certain reservations, AO could not prove substantively that the amount of Rs. 25,12,650 deposited into bank account was not out of gross contract receipts. In this context, ld. CIT(A) observed that assessee had been filing returns of income showing contract receipts which have been accepted by the department. Further, all along assessee's income has been shown on estimate basis in absence of books of account. In these circumstances, assessee's claim that the amount of Rs. 25,12,650 is towards gross contract receipts cannot be disbelieved. Accordingly, ld. CIT(A) concluded that out of the total cash deposits of Rs. 36,66,000, an amount of Rs. 33,62,650 were explained. Accordingly, he sustained the addition for an amount of Rs. 3,03,650. Being aggrieved, department is before us.

7. We have heard the arguments of ld. DR as well as ld. AR on this issue. It is to be seen that while completing assessment u/s 144 of the Act, AO added the entire cash deposits in the bank account amounting to Rs. 36,66,000 as unexplained income of assessee on the pretext that assessee could not explain the source of such deposits. However, before ld. CIT(A), assessee has explained the source of cash deposits of Rs. 36,66,000 as under:

1. Gross Contract Receipts Rs. 25,12,650

2. Advances received from three Persons returned subsequently Rs. 8,50,000

3. Miscellaneous receipts Rs. 3,03,650

Further, as could be seen from the materials on record, as far as the amount of Rs. 8,50,000 claimed to be advances received from three persons, namely, Smt. Prabhavati, Shri Chandrasekhar and Sri Yadaiah, which subsequently assessee claimed to have returned, there is no dispute to the fact that assessee not only filed affidavits of 5 ITA No. 1466/Hyd/2013 Sri Kunchara Kondal Rao

the concerned persons confirming the advancing of the amount of Rs.

8,50,000, during remand also, AO summoned these persons and examined them on oath and in their deposition the said persons categorically admitted of having advanced the amount of Rs. 8,50,000 to assessee and subsequently got back their money. Therefore, when the person concerned have admitted of having advanced money to assessee, which was subsequently returned back to them and there is no evidence with the AO to disprove such claim, merely on presumption and surmises, the evidence brought on record cannot be overlooked/ignored. Therefore, as far as the amount of Rs. 8,50,000 is concerned, the source of such deposit having been explained there cannot be any addition of that amount. As far as the balance amount of Rs. 25,12,650 is concerned, AO has raised a doubt that there is no evidence that assessee is engaged in contract business. However, the returns filed by assessee, which were examined by ld. CIT(A) clearly establish the claim of assessee. Moreover, there is no dispute to the fact that in the returns of income assessee has disclosed the gross contract receipts of Rs. 25,12,650. Therefore, assessee's explanation that the said amount received in cash from the plot owners were deposited in the bank account cannot be brushed aside without bringing any material on record to prove assessee's claim to be false. In these circumstances, in our view, ld. CIT(A) was justified in deleting the addition of Rs. 33,62,650 as evidences brought on record by assessee clearly proved the source of such deposits in the bank account. In the aforesaid view of the matter, we do not find any infirmity in the order of ld. CIT(A), which is accordingly upheld. Grounds raised are therefore dismissed.

6 ITA No. 1466/Hyd/2013 Sri Kunchara Kondal Rao

8. In the result, department's appeal is dismissed.

Pronounced in the open court on 20 th March, 2015.

Sd/- Sd/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 20 th March, 2015 kv Copy to:-

1) ITO, Ward - 9(1), Block No. 2D , Income-tax Towers, AC Guards, Hyderabad - 500 004.

2) Sir Kunchara Kondal Rao, Plot No. 11, Kamala Nagar, Vanasthalipuram, Hyderabad

3) CIT(A)-VI, Hyderabad

4) CIT-VI, Hyderabad

5) The Departmental Representative, I.T.A.T., Hyderabad.