Income Tax Appellate Tribunal - Hyderabad
B. Nagabhushanam, Karimnagar vs Department Of Income Tax on 17 October, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND
SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 413/HYD/2012
Assessment Year: 2005-06
B. Nagabhushanam & Others, ... Appellant
Karimnagar.
(PAN - AAABB0566A)
Vs.
Income-tax Officer, Ward-1, ...Respondent
Karimnagar.
ITA No. 497/HYD/2012
Assessment Year: 2005-06
Income-tax Officer, Ward-1, ... Appellant
Karimnagar.
Vs.
B. Nagabhushanam & Others, ... Respondent
Karimnagar.
(PAN - AAABB0566A)
Assessee by : Shri S. Rama Rao
Revenue by : Smt. Amisha S. Gupt
Date of Hearing : 17/10/2012
Date of Pronouncement : 31/10/2012
ORDER
PER ASHA VIJAYARAGHAVAN, J.M.:
Both these appeals filed by the revenue as well as assessee are directed against the respective orders of CIT(A)-III, Hyderabad for the assessment year 2005-06.
2413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam ITA NO. 413/Hyd/2012 - appeal by the assessee
2. Briefly the facts of the case are that the assessee is an Association of Persons (AOP in short). As noted by the Assessing Officer (AO in short), as Return (AIR) data received by him, the assessee AOP, in a bank account, maintained in the joint names of Sri B Nagabhushanam and Sri M Malia Reddy, in Union Bank of India, has deposited an amount of Rs.22,00,000/- during the financial year 2004-05. From such information received by him, the AO noticed that the assessee was having taxable income for the Asst.Year. 2005-06. However, as the assessee ha$ not filed return of income for the said assessment year and income chargeable to tax in their hands for the said assessment year has escaped assessment, the AO has issued a notice u/s 148 of the Act to the assessee for Asst.Year. 2005-06 on 22.01.2008. As noted by him, the assessee AOP has filed return of income on 28.12.2007 for the Asst.Year. 2005-06, showing income of Rs.15,699/-. The case of the assessee was taken up for the scrutiny assessment. During the assessment proceedings, the assessee, while explaining about the interest income of Rs.15,699/- shown in that return, has referred to the note furnished along with that return, where it is stated regarding formation of an AOP by name "M/s. B Nagabhushanam & Others", object of that AOP, opening of bank account at the first instance in the joint names of Sri B . Nagabhushanam and Sri Malia Reddy which was operated up to 05.10.2004 and later opening of an account in the individual name of Sri B Nagabhushanam, which was operated upto 31.03.2005.
3. During the assessment proceedings, on query raised by the AO, for explaining the sources of the cash deposits made In that bank account held with Union Bank of India, the assessee has 3 413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam submitted that the same were made out of the amounts contributed by the members of the AOP as their capital. It was stated that the AOP was formed between Sri B Nagabhushanam and 16 other persons. In support of the same, the assessee has furnished a copy of Memorandum of Understanding dated 01.04.2004. As noted by the AO, the assessee has submitted that all the members contributed an amount of Rs.2,00,000/- each on different dates between 10.07.2004 and 30.08.2004 and have withdrawn the same later on 01.10.2004. It was stated, later, again some of the members have re-invested the amounts withdrawn by them during the period from 06.12.2004 to 29.03.2005. It was Submitted that the total investment made by all the members during the F.Y. 2004-05) was to the extent of Rs.28,OO,000/-. It was further submitted that the joint bank account maintained in the names of Sri B Nagabhushanam and Sri Malia Reddy was closed on 05.10.2004 and later a fresh account was opened in the name of Sri B Nagabhushanam. It was further stated that the balance amount standing in that joint account was transferred to that individual account. The assessee has also furnished a copy of that bank account bearing number 18540.
4. The amount claimed to have been invested by each member, the sources for the same in case of each member as explained by the assessee~ are referred to by AO in a tabular form at page 3, 4 and 5 of the assessment order. Referring to such submission relating to the sources of such investment in case of each member, the AO also furnished his remarks in the last column of that chart, furnished at those pages of the assessment order. He noted that, except five members including Sri B Nagabhushanam, all other members were having income from agricultural activities. Those members, who stated that their source of income is from agriculture, could not produce any supporting evidence for 4 413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam the same like sale receipt etc. Even though the assessee has furnished copies of Pahani Pattadar Pass books and certificates issued by MRO, it cannot be accepted those persons have invested such amounts. He further noted that those persons could not explain the source of such investment shown in their names. With these discussions he treated a sum of Rs.25,000/- each, out of the amounts shown in the names of all the 17 persons, as unexplained investment made in the assessee AOP and thus, added the said amounts aggregating to Rs. 4,25,OOO/-, treating as unexplained cash credits ujs 68 of the Act, to the returned income of the assessee. In support of such addition he referred to the decisions in the case of CIT vs. Anupam Udyog 142 ITR 133 (Patna) and in the case of CIT vs. Shiv Shakti Timbers 229 ITR 505 (M.P). With the above addition, he completed the assessment on a total income of Rs.4,40,700/- vide the said order dated 31.12.2008.
5. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A).
6. There was a delay of 138 days in filing of the appeal before the CIT(A). The assessee has filed an affidavit and a separate petition requesting for condonation of the delay in filing the appeal. The submissions made in the said affidavit were reproduced by the CIT(A) in his order at pages 1 & 2. After considering such submissions made in the said affidavit and in the said petition filed by the assessee and having regard to the ratio of decision of the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. t'1st. Katiji (1987) 167 ITR 471, the delay in filing of the appeal was condoned by the CIT(A) and the same was admitted for adjudication.
5413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam
7. In grounds of appeal before the CIT(A), the assessee has raised four grounds. Ground No.1 and 4 are of general nature. In ground No.2, the assessee has objected to the said addition of Rs. 4,25,OOO/- made in the assessment. In ground No.3, it has objected to charging of interest ujs 234A, 2348 and 234C of the Act in the assessment.
8. During the hearing of appeal, referring to the written submission filed on 10.02.2010, it was submitted that during the assessment proceedings, the assessee has produced all the members of the AOP before the AO and submitted that the deposits made in the bank account were made by those members. It was stated that the assessee has filed a letter before the AO explaining the source of such deposit by each member. Referring to such submission made by the assessee durinq assessment proceedings, it was stated that the AO was not justified in making such addition of Rs. 4,25,000/- towards unexplained investment in the assessment in this case. Further stating that the AO was not justified in rejecting such claim of assessee, it was requested that the appeal may be allowed.
9. After considering the submissions of the assessee, the CIT(A) held as under:
"5.1 I have carefully considered the submissions made on behalf of the assessee in that written submission filed on
10.02.2010. I have perused the assessment record. As regard such addition towards unexplained investment at F:s.25,000j-, pertaining to investment shown in case of each member of the assessee AOP is concerned, the AO has clearly stated the reasons for the same in the last para at page 5 of the assessement order. In fact, the assessee has not been able to controvert various observations made and the findings given by the AO in that para of the assessment order. Having regard to his such findings given in that para of the assessment order, the said total addition of Rs.
6413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam 4,25,000/- towards unexplained investment made in the hands of the assessee in this case, in my view, is justified. Further, the addition of the said amount made ujs.68 of the Act in the assessment order is justified. Hence, the same is upheld. Accordingly the said ground of appeal No.2 is rejected.
5.2 However, after carefully going through the observations made by the AO at page 3 to 5 of the assessment order, it was noticed he has not accepted the investments shown in the names of 12 persons amounting to Rs.30,35,000/--. The names of those persons are referred to at SI.No.2, 3,4, 5, 6,7, 8,9, 11, 14, 15 and 17 of the said list given at page 3 to 5 of the assessment order. Since the AO has added only an amount of pertaining to each of those 12 members, in view of such findings given by him, the balance amount or RS.27,35,OOOj- pertaining to investments shown in case of those members, are liable for addition ujs.68 to the already assessed income in the case of the assessee for this assessment year. Therefore, vide a show-cause notice dated 15.12.2011 issued u/s 251(2) of the Act, while bringing such facts to the notice of the assessee, it was asked to explain as to why the balance amount of RS.27,35,OOOj- should not be added to the assessed income in their case. The assessee was asked to furnish their explanation to the said show- cause notice on 23.12.2001. The said show-cause notice issued to the assessee is reproduced as under.
To Sri B. Nagabhushanam & Others, C/o. S. Rama Rao, Advocate, Flat No. 209, Priyanka Block"
RBR Towers, Miyapur, Hyderabad.
Sub : Appeal proceedings in the case of Sri B. Nagabhushanam & Others, Miyapur, Hyderabad (ITA No.D030/09-10) - Asst. Year 2005-06 pShow Cause notice for enhancement of income u/s.251(2) of the Income-tax Act, 1961 - Reg.
*****
2. You have filed an appeal against the assessment order dt. 31.12.2008 passed for the Asst. Year 2005-06 by the ITO, Ward-1, Karimnagar.7
413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam
3. In the assessment order passed by the AO, he has made addition of Rs.4,25,OOO/- u/s.68 of the Act. The said addition has been made by him after treating investment to the extent of Rs. 25, 000/-, in case of each of the 17 members, as unexplained investment made in the AOP.
4. From the assessment order, however, it is seen that, while referring to the details of the member-wise investment and source for the same, at page-3 to 5 of the assessment order, under remarks column, in respect of 12 persons, he has noted that on verification, it is found that there are no proper sources, except agricultural income and also there are no proper evidences with regard to the investment in the AOP. Further, in the first para, at page-5, he has mentioned, as seen from the above, except four and leaving out Sri B. Nagabhushanam, all the other members are having income from agricultural activities as their sources (If income. He further noted, the members who have stated that their source of income is agriculture could not produce any evidence in support of their agricultural income like sale receipts etc. He further mentioned, as evidenced by the Pahani Pattedar Pass books and certificates issued by the MRO, though they are doing some agricultural activities, it cannot be deduced that they have invested such amounts.
3. Having regard to the above findings given by the AO in the assessment order, it is thus seen that, he has not accepted the investments shown in the names of the following 12 persons amounting to Rs.30,35,000/-.
Sl. Sl.No. as Name of the member & Amount
No shown in address investe
the asst. d (Rs.)
order
1 2 Sri. M. Mallareddy, R/o 200000
Myadampally, Karimnagar.
2 3 Sri M. Sudhaman Reddy, R/o 275000
Balwanthapur, Karimnagar
3 4 Sri M. Sadasiva Reddy, R/o 200000
Balwanthapur, Karimnagar
4 5 Sri J. Damaodar Rao, R/o 200000
Kodimial, Karimnagar
5 6 Sri J. Rajgopal Rao, R/o 200000
8
413 & 497/Hyd/2012
B. Nagabhushanam & Others & B. Nagabhushanam Boinpally, Karimnagar 6 7 Sri J. Sampath Rao, R/o 200000 Narsingapur, Karimnagar 7 8 Sri K. Parthasarathi Rao, R/o 200000 Hyderabad 8 9 Sri K. Laxma Reddy, R/o 400000 Gumlapur, Karimnagar.
9 11 Sri K. Venkat Narotham 400000 Reddy, R/o Choppadani, Karimnagar Dt.
10 14 Sri K.V. Shankar Rao, R/o 200000 Thummenala, Karimnagar Dt.
11 15 Sri Aleti Peda Bhumanna, R/o 360000 Joganpally 12 17 Sri A. Ram Reddy, R/o 200000 Joganpall, Karimnagar
5. In fact, as per such findings given by the AD, he . has not accepted the investments shown in the names of the above persons in the said AOP and hence the entire amount of Rs.30,35,0001- was to be added by him uls.68 of the 1. T. Act, in the assessment order made by him on 31.12.2008. In other words, total amount of Rs.30,35,OOO/-, pertaining to, amounts shown in the names of those 12 persons, ought to have been added uls.68 of the Act, in the assessment. However, he has added only a sum of Rs.3,OO,OOO/-, i.e. at Rs.25,000/- per member, in respect of those 12 members uls.68 of the Act. Therefore, balance amount of Rs.27,35,000/- has to be added to the already assessed income in your case, which would result in enhancement of income by that amount.
6. In view of the above, please explain as to why an amount of Rs.27,35,000/-should not be added to your assessed income uls.68 of the Act. Please furnish your explanation to this show cause notice, issued u/s 251(2) of the Act, on 23/12/2011 at 11.30 a.m. when your case is posted for hearing.
Though, the said show-cause notice was duly served on 15.12.2011, no reply was furnished by the assessee on 23.12.2011. Even no reply has been furnished till date. Under these circumstances, it shows that the assessee has nothing to say on that matter, with reference to the said show-cause notice issued u/s 251(2) of the Act, to them. Therefore, and for the reasons stated in the said show-cause 9 413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam notice, further amount of Rs.27,35,000/- shall be added to the already assessed income of the assessee u/s 68 of the Act, which would result in consequential enhancement to the assessed income. The AO is directed accordingly.
6 In ground No.3, the assessee has stated that the AO erred in charging interest u/s 234A, at Rs.31,407/-, u/s 2348 at RsA8,735/- and u/s 234C at RsA,104/-.
6.1 Though, such ground has been raised, no submission has been made by the assessee with reference to the same during hearing of appeal. Further, charging of interest under the aforementioned sections, are mandatory and the same are not appeallable. Therefore, the said ground is rejected. However, charging of such interest being consequential to the assessed income, the AO has to re-compute the same, in view of such enhancement of income of Rs.27,35,000/-, made in this case.
7. In the result, not only the appeal is dismissed, but also the income is enhanced by an amount of Rs. 27,35,000/- ."
10. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
"1. The order of the CIT(A) is erroneous both on facts and in law.
2. The CIT(A) erred in deciding the appeal ex-parte without providing proper opportunity to the assessee herein.
3. The CIT(A) erred in confirming the addition made by the AO of Rs. 4,25,000/-
4. The CIT(A) erred in enhancing the income by Rs. 27,35,000/- without providing proper opportunity to the assessee herein.
5. The CIT(A) extracted a letter said to have been addressed to the assessee wherein the address of the assessee is wrongly taken.
6. The CIT(A) ought to have provided proper opportunity before ordering enhancement of the income by an amount of Rs. 27,35,000/-."
11. We have heard the arguments of both the parties and perused the record as well as gone through the orders of the authorities below. The main grievance of the learned counsel for the assessee in the grounds of appeal is that the CIT(A) decided 10 413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam the appeal ex-parte without providing proper opportunity to the assessee and confirmed the addition of Rs. 4,25,000/- made by the AO and enhanced the income by Rs. 27,35,000/-. After considering the totality of the facts and circumstances of the case, to meet the ends of justice, we find it fit and proper to remit the matter to the file of the AO with a direction to decide the issues de-novo in accordance with law and after providing reasonable opportunity of hearing to the assessee. We order accordingly.
12. In the result, appeal of the assessee is allowed for statistical purposes.
ITA No. 497/Hyd/12 - appeal by the revenue13. In this appeal, the revenue has raised the following grounds of appeal:
"1. The CIT(A) erred in facts & in law in deleting the addition of Rs. 24.68 lacs representing unexplained cash deposits in the bank account no. 18540 in the name of the individual.
2. The CIT(A) has seriously erred in facts & in law in holding that the two cash withdrawals aggregating to Rs. 26 lacs on 01/10/2004 i.e. in the joint account no. 18316 were the source for numerous cash deposits made in the individual account in the name of the assessee starting from the period from 18/11/2004, thereby ignoring the substantial gap of more than one and half months between the cash withdrawal in one account and the cash deposit made in the other account and further ignoring that there was no evidence nor corroboration for such version of the assessee requesting for telescoping, that the joint account had been closed on 05/10/2004.
3. The CIT(A) seriously erred in facts & in law in ignoring that the cash withdrawals aggregating to Rs. 26 lacs made in the joint account in the name of Sri B. Nagabushanam and Sri M. Mallareddy i.e. on 01/10/2004 were evidently 11 413 & 497/Hyd/2012 B. Nagabhushanam & Others & B. Nagabhushanam purported as transfer to OD/DD as clearly evidenced by the narration in the relevant bank account extract vide Annex-2 wherein the relevant narrative entry reads "Tr to OD/DD".
4. The CIT(A) has seriously erred in facts & in law in ignoring that whereas the cash withdrawals of Rs. 26 lacs in the joint account were made in two instalments on a single day i.e. 01/10/2004, the cash deposits in the individual account starting from 18/11/2004 were as many as 15 in number running up to the date 29/03/2005.
5. The CIT(A) has erred in facts & in law in allowing the assessee's version of telescoping cash withdrawals in the joint account into cash deposits into the individual account for which there was absolutely no evidence of any kind on record nor submitted by the assessee at any time."
14. Since the matter in the case of Sri B. Nagabhushanam & Others, AOP (supra) we have remitted the matter to the file of the AO to decide the issues de-novo, in this case also, we remit the matter to the file of the AO to decide the same with identical directions.
15. In the result, this appeal of the revenue is treated as allowed for statistical purposes.
16. To sum up, both the appeals of the assessee as well as revenue are treated as allowed for statistical purposes.
Pronounced in the open court on 31 st October, 2012.
Sd/- Sd/-
(CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 31 st October, 2012.
kv
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413 & 497/Hyd/2012
B. Nagabhushanam & Others & B. Nagabhushanam Copy to:-
1) ACIT, Circle 10(1), Room No. 515, AC Guards, IT` Towers, Hyderabad.
2) Smt. Sunitha Devi Gaggar, Plot No. 158, Road No. 12, Phase-II, Gunrock Enclave, Secunderabad.
3) The CIT(A)-VI, Hyderabad
4) The CIT-V, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.