Sri P. Chandrasekhar,, Hyderabad vs Department Of Income Tax

Income Tax Officer Vs. Sri P. Chandrasekhar Ward 16(2) Hyderabad 1-3-25/1 Kisan Nagar, Bhongir, Nalgonda Distt. PAN:ACJPP 6123 C (Appellant) (Respondent)

Department by: Smt.Esther Nianghauvung Hangal, (DR) Assessee by: Shri S. Rama Rao, Advocate

Date of Hearing: 21/01/2015 Date of Pronouncement: 28/01/2015

ORDER

Per Saktijit Dey, J.M.

This appeal by the Revenue is against the order of the ld CIT (A)-V, Hyderabad, dated 31.07.2013 pertaining to A.Y 2009-10. The Department being aggrieved with the decision of the ld CIT (A) in deleting the addition of Rs.50,89,000/- has raised the following effective grounds:

"1. The CIT (A) ought to have not alowed relief to the assessee ignoring the remand report which is based on information filed by the assessee. The assessee's argument before the CIT (A) is withdrawals are re- deposited in the bank account, whereas before the AO the source was shown as withdrawals from chit fund company M/s PCS Chits Pvt Ltd in which assessee is a Director.

2. The CIT (A) ought to have considered the request of the assessee's written submission that alternatively,

Page 1 of 7 ITA No.1385 of 2013 P Chandrasekhar, Bhongir

the AO should have considered the peak deposits of cash, instead of the gross amounts deposited (Refer page 3 para 4 of the order of CIT (A)-V".

2. Brief facts of the case are, the assessee is an individual deriving income from salary; house property, business in cloth and income from other sources besides agricultural income. For the A.Y under consideration, the assessee filed his return of income on 23.01.2010 declaring total income of Rs.5,01,884/-. On the basis of information available with the AO that the assessee has made cash deposits of Rs.19,01,000/- in his saving bank account with ICICI Bank, Secunderabad and Rs.31,88,000/- in Yadagiri Lakshmi Narasimha Bank, Bhongir during the financial year 2008-09, assessee's case was selected for scrutiny assessment. As noted by the AO in the assessment order, inspite of notices issued u/s 142(1) on more than one occasion as well as show cause notices issued, neither the assessee, nor any representative of the assessee appeared before the AO to explain the cash deposits. In view of the non compliance of the assessee, AO proceeded to complete the assessment ex parte on the basis of information available on record. The AO observed, as the assessee has not explained the sources of cash deposited into the bank account, the same has to be treated as unexplained cash deposit and added to the income. Accordingly he made the addition as a result of which the total income was determined at Rs.55,90,884/-

3. Being aggrieved of the addition made, assessee preferred appeal before the ld CIT (A). In course of proceedings before the ld CIT (A), assessee submitted that the cash deposits made into the two savings bank accounts were from explainable sources. It was

Page 2 of 7 ITA No.1385 of 2013 P Chandrasekhar, Bhongir

submitted that during the relevant financial year, assessee had the following receipts:

a) receipts from cloth business carried on in the name of

Sri Mallikarjuna Agencies, Bhongir- Rs.31,85,660

b) Remuneration received from M/s PCS Chits (P) Ltd, Bhongir: Rs.9.00 lakhs

c) Income from house property being rent: Rs. 1,62,000

4. Besides these, it was also submitted by the assessee, withdrawals during the relevant financial year from the two bank accounts referred to by the AO were totaling to Rs.53,02,800/-. Thus it was submitted as the cash deposits were made out of funds available with the assessee, the additions made is not justified. On the basis of the submissions made, the ld CIT (A) called for a remand report from the AO. After considering the submissions of the assessee and the remand report of the AO, as well as other materials brought on record, the ld CIT (A) deleted the additions by holding as under:

"7.1 The ld AR before me filed the details of the deposits made and the sources available for making each of such deposit. It is submitted by the ld AR that the appellant derived income of Rs.9.00 lakhs from salary; Rs.1,82,381/- towards income from house property and also achieved a turnover of Rs.31,85,660/- from his business. It is further submitted by the ld AR that there were withdrawals of Rs.26,95,000/- from ICICI Bank and Rs.26.00 lakhs from Uadagiri Laxmi Narasimha Swamy Bank, Bhongir which are also available with the appellant for re-deposit. The appellant, therefore, pleaded that he possessed the required sources for the deposits made into the bank.

Page 3 of 7 ITA No.1385 of 2013 P Chandrasekhar, Bhongir

7.2 I have carefully considered the submissions filed by the appellant. I find that the submissions also contained the details of withdrawals and the deposits made. On perusal of the receipts and payments of cash, it is clear that the appellant was in the possession of the required sources for the deposits made. I also find that the gross receipts from all the sources aggregate to Rs.42,47,660/- and the said amount was available with the appellant. Further, the appellant was in possession of excess of withdrawals to deposits by Rs.9,94,000/-. If the receipts from the declared sources and withdrawals from the banks are considered, it can be concluded that the appellant was in possession of the required sources. Therefore, I am satisfied that the appellant satisfactorily explained the sources for the deposits and therefore, I direct the AO to delete the addition of Rs.50,89,000/-".

5. Being aggrieved of the aforesaid decision of the ld CIT (A), the Department is in appeal before us. The ld DR submitted that the assessee has not at all explained the sources of cash deposited into the bank accounts as there was total non compliance by the assessee during the course of assessment proceedings. It was submitted, even before the CIT (A) also the evidences produced does not reveal the fact that the assessee has been able to match the deposits with withdrawals. In this context the ld DR relied upon the observations made by the AO in the remand report. Thus it was submitted that the CIT (A) was not correct in deleting the entire addition.

6. The ld AR on the other hand referring to the written submissions and evidences produced before the first appellate authority, submitted that the assessee has sufficiently explained

Page 4 of 7 ITA No.1385 of 2013 P Chandrasekhar, Bhongir

the source of deposits into the bank account. The ld AR referring the worksheet of withdrawals and deposits, a copy of which was enclosed at page No.26 of the paper book, submitted that a verification of the withdrawals and deposits would clearly establish assessee's claim that the cash deposited into the two bank accounts were out of cash available with the assessee from the earlier withdrawals from the same accounts, as well as other funds. The ld AR submitted that even though all these evidences were submitted before the AO in the course of the remand proceedings, but without pointing out any discrepancy in assessee's claim, the AO has merely raised doubts regarding the source of deposits.

7. In the rejoinder ld DR submitted, assessee's claim that it has receipts from cloth business is not verifiable as the assessee has not maintained any books of accounts, nor he had maintained any personal cash book. Therefore, at least peak of deposits can be considered for addition.

8. We have heard the parties, perused the orders of the revenue authorities, as well as the materials on record. It is a fact on record that during the assessment proceedings, the assessee did not comply with the notices issued by the AO, therefore, the AO was compelled to complete the assessment ex parte by adding the cash deposits made into the two bank accounts referred to by the AO, since the source of such deposits remained unexplained. However, before the first appellate authority, as it appears from the order of the ld CIT (A) as well as materials placed on record,

Page 5 of 7 ITA No.1385 of 2013 P Chandrasekhar, Bhongir

the assessee has not only explained the source of cash deposits, but has also submitted supporting evidences in that regard. On a perusal of the details of deposits and withdrawals as submitted in the worksheet, vis-à-vis bank statement of the two bank accounts, the contention of the assessee that it was having sufficient balance out of withdrawals made earlier to make the deposits appears to be correct. Moreover, it is also a fact on record that the assessee has receipts from cloth business, income from salary, as well as rental income which is quite substantial. Therefore, if the cash withdrawals made earlier from the bank account is considered together with the other receipts, it will clearly show that they are sufficient to explain the cash deposits made in the two bank accounts. It is also evident that during the remand proceedings, the assessee has explained the source of deposits date-wise by furnishing necessary details. It is also apparent from the remand report, a copy of which was submitted before us, the AO has verified all these evidences and has not found any justifiable reason to disbelieve them. However, by entertaining doubts the AO has observed that the claim of the assessee that it has utilized the same withdrawals for the purpose of deposits in the bank account could not be verified. In our view, such observation of the AO is without any basis. Since the assessee has explained the source of cash deposits with supporting evidences, in our view, the ld CIT (A) was justified in deleting the addition made by the AO. We also cannot accept the submissions of the ld DR, the CIT (A) should have considered the peak cash deposits for addition. As stated earlier, the assessee has furnished the details of the withdrawals and deposits in a worksheet. A perusal of the same clearly reveals that the withdrawals are more

Page 6 of 7 ITA No.1385 of 2013 P Chandrasekhar, Bhongir

than the deposits and there are no peak deposits. In these circumstances, no addition can be made on the basis of peak cash deposits. In view of the aforesaid, we do not find any infirmity in the order of the ld CIT (A) which is accordingly upheld. Grounds raised by the Department are dismissed.

9. In the result, appeal of the Department is dismissed.

Order pronounced in the Open Court on 28th January, 2015.

Sd/- Sd/- (P.M. Jagtap) (Saktijit Dey) Accountant Member Judicial Member

Hyderabad, dated 28th January, 2015. Vnodan/sps Copy to:

1. Income Tax Officer Ward 16(2) Room No.615, 6th Floor, Aayakar Bhavan, Basheerbagh Hyderabad 500004

2. Shri P. Chandrasekhar, 1-3-25/1 Kisan Nagar, Bhongir, Nalgonda

3. The CIT(A) - V Hyderabad

4. The CIT Hyderabad

5. The DR, ITAT, Hyderabad

6. Guard File

By Order

Page 7 of 7