Sri. U. Annam Naidu,, Hyderabad vs Department Of Income Tax

Income-tax Officer, Ward - Sri U. Annam Naidu, 13(2), Hyderabad Secunderabad

PAN - AMMPU 9667 M (Appellant) (Respondent)

Revenue by Shri Ramakrishna Bandi Assessee by Shri S. Rama Rao

Date of hearing 02-03-2015 Date of pronouncement 13-03-2015

O RDE R

PER ASHA VIJAYARAGHAVAN, J.M.:

This appeal by the Revenue is directed against the order of ld. CIT(A)-V, Hyderabad dated 23/12/2013 for AY 2009-10, wherein the revenue has raised the following effective grounds:

"2. The learned CIT(A) erred in deleting the addition made towards unexplained investment made u/s 69A of the Act in the absence of substantial documentary evidence of the assessee in support of the creditworthiness of the source of the cash deposits made in assessee's bank account.

3. The learned CIT(A) erred in not considering the fact that except pension amount no other amounts have been credited in the bank account of the assessee's father-in-law as stated by assessee."

2. Briefly the facts of the case are that assessee is working as Dy. Chief Engineer, I&CAD Department, Govt. of Andhra Pradesh. He filed the return of income for the year under consideration declaring 2 ITA No. 609/Hyd/2014 Sri U. Annam Naidu

total income of Rs. 3,53,684. The AO found that he had a bank account with HDFC bank and certain deposits were made aggregating to Rs. 25,40,000 during October, 2008 to February, 2009 on various dates. When the AO required the assessee to explain the source for such deposits, assessee submitted that his father-in-law Sri Ch. Bairagi Naidu passed away on 15/06/2008. He was the retired Head Master in Govt. School at Guptavelli Village Burja Mandal of Srikakulam Dist. Sri Bairagi Naidu was in possession of 10 acres of wet agricultural lands and he derived substantial agricultural income. He had substantial savings from his agricultural income. From out of such savings he kept the amounts with his daughter, assessee's wife. He was deriving pension and also interest income from the monies he used to led to others. The said Sri Bairagi Naidu left a will according to which assessee's wife has to get an amount of Rs. 5 lakhs, Smt. Annapurna, Mother-in-law has to get an amount of Rs. 4,00,000, Sri Ch. V. Sanyasi Rao, brother-in-law of the assessee has to get an amount of Rs. 12,00,000, and Smt. Ch. Tirumala, wife of brother-in- law has to get an amount of Rs. 4,00,000, totaling Rs. 25 lakhs. The said amount was kept with assessee through a will as the father-in- law of assessee got immense faith in assessee. After the death of the father-in-law, assessee deposited the aforesaid amount in his bank account on different dates and paid the same to the above said persons as per the will. To this effect, copy of the bank account and copy of the will and other documents were furnished before AO. In addition, assessee also furnished confirmation letters from the above said persons in token of payment of the amounts to them. Assessee also filed confirmation letters from the witnesses to the will. The AO did not accept the submissions made by assessee and made an addition of Rs. 25 lakh by holding that the creditworthiness of the assessee's father-in-law is not proved. Aggrieved by the order of AO, assessee carried the matter in appeal before the CIT(A).

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3. In course of appellate proceedings, ld. AR of assessee was directed to file copies of the bank accounts to show the withdrawals for payments made as per the will. Assessee accordingly filed copies of the bank accounts which are as follows:

i) A/c No. 06961930000789 with HDFC Bank, Petbasheerabad branch, Hyderabad for the period from 03/10/2008 to 12/04/2010.

ii) A/c No. 06961930001125 with HDFC Bank, Petbasheerabad branch, Hyderabad for the period from 16/11/2009 to 24/09/2010.

4. After considering the submissions of the assessee as well as the documentary evidence produced before him, the CIT(A) deleted the addition of Rs. 25,40,000 by observing as under:

"5.3.......................I find that Sri Byragi Naidu was employed as Head Master of School in Srikakulam District and worked as such for number of years. He possessed agricultural land admeasuring 10 acres, the revenue records of which were submitted. The said Sri Byragi Naidu retired on superannuation. As becoming old, Sri Byragi Naidu left a will, a copy which is filed. According to the will, he authorized the appellant to distribute the amount of Rs. 25 lakhs among his legal heirs. He passed away on 15/06/08. The deposits were made during October, 2008 to February, 2009. The appellant also effected withdrawals of the amount on 15/01/2010 for being paid to the legal heirs as provided for in the Will.

5.4 The appellant filed the supporting documents i.e. will dated 15/05/2008 wherein it is mentioned that an amount of Rs. 25 lakhs was due from various persons which was authorized to be collected by the appellant. The appellant filed letters of confirmation from Sri D. Ananda Rao, K.V. Satyanarayana confirming the fact that the Will was executed in their presence. The appellant also filed letters of confirmation from Ch. Annapurna, U. Vanisri, Ch. V. Sanyasi Rao and Ch. Tirumala confirming the fact of the existence of the Will and the recovery of the amount of Rs. 25 lakhs by the appellant from the debtors and the distribution of the amount amongst the legal heirs. All the above evidences clearly indicate that the amount of Rs. 25,40,000 deposited by the appellant is properly explained. The facts of the case and the evidences produced by the appellant clearly support the case of the appellant.

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5.5 Therefore, I hold that the amount of Rs. 25,40,000 is properly explained by the appellant and, therefore, I delete the addition."

Aggrieved by the order of CIT(A), the revenue is in appeal before us.

5. Before us, the ld. DR submitted that the money flow should be verified. Further, he argued that since there were no cheque payments it is probable that relatives had accommodated to lend their names for the above scheme evolved by the son-in-law, viz. Sri Annam Naidu, the assessee. The ld. DR further submitted that according to the Employee Conduct Rules of the State Govt., prior permission is to be obtained with respect to any amount received from any one. In certain cases, at least the same is to be informed to the Govt.

6. The ld. counsel for the assessee invited our attention to the Rule 9 of Conduct Rules and brought to our notice Sub-rule 5(i) which states that the provisions of sub-rules (1) & (2) shall not apply to

(i) the acquisition or possession of any property as trustee, executor or administrator;

(ii) any Government land which is sold or granted on lease to any Government employee, in accordance with the rules in force.

The learned counsel for assessee drawing support Sub-rule (5) argued that as Government employee, Assessee is not required to seek permission for receiving amounts from his father-in-law in the capacity of Trustee. The ld. counsel further produced details in response to the query of the Bench with respect to the withdrawals, as under:

Date Chq No. Amount Transaction Remarks details 15/0/2010 288140 9,00,000 Chq paid- Cash withdrawal Hyderabad-PetB using cheque 15/0/2010 288141 9,00,000 Chq paid- Cash withdrawal Hyderabad-PetB using cheque 5 ITA No. 609/Hyd/2014 Sri U. Annam Naidu

15/0/2010 288142 2,00,000 Chq paid- Cash withdrawal Hyderabad-PetB using cheque 16/0/2010 288143 1,50,000 Chq paid- Cash withdrawal Hyderabad-PetB using cheque

7. We have considered the submissions of the parties and perused the orders of revenue authorities as well as material on record. The AO after noticing that assessee had deposits amounting to Rs. 25,40,000 in his HDFC bank, treated the same as unexplained investment u/s 69A after rejecting the submissions made by assessee. CIT(A) deleted the addition made by AO holding that the evidences produced by assessee clearly support the case of assessee.

8. The basis for deletion of the amount was so called Will executed on 15/05/08, supported by confirmation letters received from the legal heirs Ch. Annapurna, U. Vani Sri, Ch. V. Sanyasi Rao and Ch. Tirumala. These documents, in our opinion, are not enough to explain that the funds deposited in the bank account are arising from the sources of assessee's father-in-law. What assessee has explained is source of the source. It may be that assessee's father-in- law is having his own sources and may also be true that the monies are kept with the assessee for money circulation. In a way assessee has explained the source of source and not the immediate source of the funds. The immediate source of deposits, which happened after the death of assessee's father-in-law was not at all explained. It may be noted that the deposits happened much later to the death of assessee's father-in-law. Even though the Will executed by assessee's father-in-law Shri Bairagi Naidu says that the amount of Rs. 25 lakhs was in custody of assessee, the same was not kept in bank account. If the money is in circulation as claimed, then, the recovery of the money has to be explained, as deposits happened at a later point of time. Therefore, what is required to be explained is the name of the persons from whom monies were collected so as to 6 ITA No. 609/Hyd/2014 Sri U. Annam Naidu

deposit in bank the amount. This immediate source was not explained. Further, assessee also has to explain the time gap from the death of father-in-law to the time of deposits and why the monies are kept in FDs in assessee's name, when the same are to be distributed to the heirs as per the Will. We were also informed that interest on FDs was offered by assessee. The bank statement filed in support of the payments made to heirs indicate that the amounts were paid by cheques. There is also variation in the amounts mentioned in the cheques, stated to have been given in discharge of will, to that of amounts acknowledged by the legal heirs. On enquiry assessee's counsel filed a letter indicating that they are cash withdrawals only, on 15 January, 2011. Since this evidence requires examination and the issues raised above require enquiry, in the interest of justice, we are of the opinion that the matter can be reexamined by the AO by giving opportunity to assessee. Accordingly, we set aside the order of CIT(A) and restore the matter to the file of AO for fresh examination and deciding both on facts and law. Needless to state that assessee should be given due opportunity.

9. In the result, appeal of revenue is allowed for statistical purposes.

Pronounced in the open court on 13 th March, 2015

Sd/- Sd/-

(B. RAMAKOTAIAH) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER

Hyderabad, Dated: 13 th March, 2015 kv 7 ITA No. 609/Hyd/2014 Sri U. Annam Naidu

Copy to:- .

1. Income-tax, W ard - 13(2), Room No. 612, 2 nd Floor, Aayakar Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad - 500 004.

Sri U. Annam Naidu, Flat No. 503, Pavani Residency, Pet Basheerbagh, Jeedimetla Village, Medchal Road, Secunderabad.

3. CIT(A)-V, Hyderabad

11. CIT-I, Hyderabad

12. The DR, ITAT, Hyderabad