Income Tax Appellate Tribunal - Panji
The Ito,, Vijayawada vs Sri Dhanekula Chowdary,, Vijayawada on 27 October, 2017
आयकरअपीलीयअधधकरण, धिशाखापटणमपीठ, धिशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
श्रीिी. दुगााराि,न्याधयकसदस्यएिंश्रीधड.एस. सुन्दरससह, लेखासदस्यके समक्ष
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER&
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकरअपीलसं./I.T.A.No.380/Viz/2016
(धनधाारणिर्ा/Assessment Year:2006-07)
आयकरअपीलसं./I.T.A.No.381/Viz/2016
(धनधाारणिर्ा/Assessment Year:2008-09)
आयकरअपीलसं./I.T.A.No.382/Viz/2016
(धनधाारणिर्ा/Assessment Year:2009-10)
आयकरअपीलसं./I.T.A.Nos.383/Viz/2016
(धनधाारणिर्ा/Assessment Year:2010-11)
The Income Tax Officer Sri Dhanekula Chowdary
Ward-1(3) D.No.6-67, Devinenivari
Vijayawada Street, Near Post Office
Gollapudi, Vijayawada
[PAN : ALWPD9351L]
(अपीलाथी/ Appellant) (प्रत्यथी/ Respondent)
आयकरअपीलसं./I.T.A.No.353/Viz/2016
(धनधाारणिर्ा/Assessment Year:2006-07)
Sri Dhanekula Chowdary The Income Tax Officer
D.No.6-67, Devinenivari Street Ward-1(2)
Near Post Office Vijayawada
Gollapudi, Vijayawada
[PAN : ALWPD9351L]
(अपीलाथी/ Appellant) (प्रत्यथी/ Respondent)
राजस्व कीओरसे / Revenue by : Shri M.K.Sethi, DR
धनधााररती कीओरसे/ Assessee by : Shri C Subrahmanyam, AR
सुनिाई की तारीख / Date of Hearing : 05.10.2017
घोषणा की तारीख/Date of Pronouncement : 27.10.2017
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
आदेश /O R D E R
PER Bench:
These appeals are filed by the Revenue against the order of the
Ld. Commissioner of Income Tax (Appeals) [CIT(A)], Vijayawada vide ITA
Nos.84, 85, 86 & 87/CIT(A)/VJA/2014-15 dated 31.03.2016 for the A.Ys.
2006-07, 2008-09, 2009-10 and 2010-11. Since the common grounds are
involved, all the appeals are clubbed, heard together and disposed off in
common order as under.
2. Common grounds of appeal in Revenue's appeals for all the A.Y.s are
related to the deletion of addition made by the assessing officer towards
unexplained cash deposits. A survey u/s 133A was conducted in the case of
M/s Vasudha Shelters, LIC Colony, Gollapudi, Vijayawada on 23.02.2010
and during the survey the assessing officer found that M/s Vasudha
Shelters had entered into development agreement dated 16.06.2008 with
Shri Dhanekula Chowdary and others (land owners) for construction of
apartments at Gollapudi. Simultaneously, the assessing officer conducted
survey u/s 133A in the case of Sri Dhanekula Venkateswara Rao, father of
the assessee on 23.02.2010 and during the course of survey, loose sheets,
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
documents, bank statements were found and impounded u/s 133A of
Income Tax Act. The assessee is having savings bank account in State Bank
of India, Gollapudi with a/c No.10103383038 and also in Andhra Bank,
Savings account No.25703100031048 and found cash deposits for the
assessment year 2006-07 and 2008-09 to 2010-11 as under :
Asst.Year Amount (Rs.)
2006-07 18,60,000
2008-09 48,16,650
2009-10 52,93,000
2010-11 9,30,000
2.1. The assessing officer completed the assessment holding that the
entire cash deposits as unexplained income and accordingly brought to tax.
The assessee went on appeal before the CIT(A) and the Ld.CIT(A) applied
the theory of peak credit and confirmed the addition of Rs.11,55,000/- for
the assessment year 2006-07 and deleted the additions for the remaining
years. Aggrieved by the order of the Ld.CIT(A), the revenue is in appeal
before us and the assessee filed the appeal for the A.Y.2006-07 requesting
for credit of opening balance.
3. Appearing for the revenue, Ld.DR argued that the assessee has made
frequent cash deposits and withdrawals in the bank account. Though the
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
assessee stated that the source of deposit was real estate business, the
assessee has not established the real estate business and the income
earned on it by him and did not furnish the names and addresses of
persons from whom the monies were received and to whom the monies
were paid. There was no iota of evidence having carried on the business by
the assessee and the deposits made in the Bank account were from
unexplained sources and there is no evidence to show that the withdrawals
were used for redepositing in the bank account. Hence, the theory of peak
credit is not applicable in the case of the assessee's case. In this case, the
assessee did not explain the source and also did not explain the destination
of withdrawal, therefore it cannot be presumed that every withdrawal is
available to the assessee to make the credit in the bank account. The peak
credit theory is applied when the same cash was in circulation for deposit
and withdrawals. In the assessee's case, the assessee has not established
that the money was circulated by him. Accordingly, Ld.DR argued that the
entire cash deposits required to be added to the income without applying
peak credit theory.
4. On the other hand, Ld.AR argued that the assessee was in the real
estate business for the past so many years. He was receiving advances
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
from the customers which were used for purchase of the property. The
amount received by the assessee was deposited in the bank account and
the same was utilized by the assessee for payment of property by
withdrawing the same from the bank account. Ld.AR argued that the
Ld.CIT(A) has rightly applied peak credit theory holding that the cash
deposits were made out of withdrawal from savings bank account and in
case the peak credit theory is not followed it amounts amounts to double
taxation of the same amount. The Ld.AR argued that the assessee is
engaged in the business activity of real estate,hence estimation of
reasonable income instead of entire cash deposits would be fair and
reasonable.
5. We have heard the rival submissions and perused the material placed
on record. The assessee has filed return of income subsequent to the
survey for the assessment years 2006-07 to 2010-11 and after issue of
notice u/s 147. In the return of income, the assessee has declared the
business of construction and real estate and admitted the income from
business. The assessee submitted that the sources for the cash deposits
were the amounts received from the customers for purchase of property
and the assessee has not maintained the books of accounts. However, the
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
assessing officer was not being convinced with the explanation of the
assessee and made the entire deposits as addition. The ld.CIT(A) held that
the assesse had made frequent cash deposits and the withdrawals and the
addition of peak credit is reasonable and accordingly allowed the partial
relief. The Ld. CIT(A) upheld peak credit theory and confirmed the addition
of Rs.11,55,000/- for the A.Y. 2006-07 and deleted the additions in the
remaining assessment years. The assessee had made cash deposits as
follows:
Asst.Year Amount (Rs.)
2006-07 - 18,60,000/-
2008-09 - 48,16,650/-
2009-10 - 52,93,000/-
2010-11 - 9,30,000/-
5.1. Though the assessee has made huge cash deposits and withdrawals
ranging from multiples of lacs to small amounts, the Ld. CIT(A) applied the
peak credit theory. In this case, the assessee has not given any evidence to
show that the assessee has carried on any real estate business and the
returns were not filed till the survey was conducted and the notices were
issued u/s 148. The assessee has not produced any material evidence on
record to show that the deposits were made out of previous withdrawals.
Though the assessee has submitted that he had received the advances for
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
purchase of properties from the prospective buyers and made the payment
for purchase of the properties the assesse neither furnished the names of
the buyers nor the vendors. The conduct of the bank account does not
support that the withdrawals are available to the assesse to make redeposit
in the bank account. On careful verification of the Bank account it reveals
that the assesse made deposits in bank account and withdrawn
substantial amounts and also small amounts like Rs.3,400/-, Rs.1,000/-,
Rs.500/- on various dates giving indication that amount withdrawn were
made use of and no cash is available to redeposit. For example, the assessee
has withdrawn small amounts as follows:
Asst.Year Amount (Rs.)
07.01.2006 - Rs. 1000/-
20.01.2006 - Rs. 1000/-
13.02.2006 - Rs. 500/-
17.02.2006 - Rs. 500/-
5.2. On 3.4.2007 the assessee had withdrawn Rs.12,48,000/- and on
4.4.2007 the assessee had deposited a sum of Rs.4,50,000/-. Subsequently
on 19.4.2007 and 21.4.2007, the assessee has withdrawn Rs.5,000/-. The
above conduct of the account clearly indicates that the periodical
withdrawal were used by the assessee and no cash was left with him for
making the redeposit. It is common understanding that a person does not
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
withdraw frequently in small amounts when substantial cash is available
with him. The above conduct of the account clearly shows that the assessee
has not withdrawn the cash with purpose to redeposit. Therefore, it is for
the assessee to explain and establish each source of the credit and
destination of the withdrawals. In the case of assessee, the withdrawals
and deposits do not indicate that the withdrawn amount was in circulation.
Even the assessee's explanation that the advances were received from the
customers for purchase of property was used for making advances on
behalf of the customers, the same should be established by the assessee
with the names and address of the persons from whom the monies were
received and the name and address of the persons to whom the advances
were made so that both the buyer and vendor explain the source and to pay
the capital gain tax. The Hon'ble Delhi High Court in the case of CIT Vs. D.K.
Garg reported in 84 taxmann.com 257 held that in a case of
accommodation entry provider if the assessee is unable to explain the
sources of deposits and corresponding payments he would not be entitled
to benefit of peak credit. In the instant case in the absence of details such as
the names and addresses of the person from whom the monies were
received and paid, it is not possible to ascertain whether the assessee is
really engaged in real estate business, money laundering, hawala operator
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
or the entry providers. Therefore, in this case, the credits and debits
require further verification by the A.O. to find out the true nature of
transaction. The assessing officer simply made the addition without
verifying the true nature of receipts and the Ld.CIT(A) adopted the peak
credit theory without going into the further details. Though the Ld.CIT(A)
upheld the peak credit, the CIT(A) did not compute the income on the
balance turnover though the assessee had agreed for estimation of income.
During the appeal hearing also the Ld.AR did not furnish any evidence for
business carried out by the assessee and modus operandi of the assessee
with evidence. Therefore, we are of the considered opinion that issue needs
detailed investigation by the A.O. Accordingly we remit the matter back to
file of the A.O. to examine true nature of transactions and verify the source
of each credit and the destination of each payment / investment and decide
the issue afresh on merits. Appeals of the revenue on this ground is
allowed for statistical purpose.
ITA No.382/VIZ/2016
6. The next issue in this appeal No.382/Viz/2016 for the A.Y. 2009-10
is the assessee's claim of deduction u/s 54F to the extent of Rs.7,61,000/-.
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
The assessee has admitted the long term capital gains of Rs.7,61,000/- and
claimed the deduction u/s 54F of I.T.Act. The assessing officer rejected the
claim of the assessee stating that the assessee has entered into lease
agreement with M/s NRI Academy and the subject flat was given for
running the school. Since the property was not used for the purpose of
residential purpose, the assessing officer viewed that the assessee is not
eligible for deduction u/s 54F. Accordingly rejected the claim of the
assessee u/s 54F of I.T.Act. The Ld.CIT(A) deleted the addition and the
Revenue is in appeal before us.
7. We have heard the rival submissions and perused the material
placed on record. As per the development agreement, the assessee has
acquired the residential flat but given it to NRI academy for running the
school. The AO is of the view that the assesse had acquired the commercial
property but not the residential property and using it for commercial
purpose. It is not ascertainable from the information whether the flat in
question was residential or not and require verification at the level of AO.
Therefore we remit the matter back to the file of the AO to make physical
verification of the impugned property and give finding whether the
property given for rent to the school is residential property with all
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
amenities like kitchen etc.. or not and decide the issue afresh on merits.The
appeal of the revenue is allowed for statistical purposes.
ITA No.353/VIZ/2016
8. The assessee has raised six grounds in this appeal and has not pressed
ground nos.1.0, 1.1., 1.2, 1.4 and 1.5 therefore ground No.1.0,1.1,1.2,1.4. and
1.5 are dismissed as not pressed.
9. Ground No. 1.3 is related to the addition of Rs. Rs.7,80,000/-confirmed
by the Ld.CIT(A). The assesse had claimed the opening cash balance of
Rs.7,80,000/- and requested for relief. The Ld.CIT(A) did not allow the
credit holding that opening balance cannot be treated as explained unless
the assesse produce evidence in support of his claim. Since the assessee
failed to furnish evidence the Ld.CIT(A) confirmed the addition relying on
the decision of Hon'ble Madras High court judgement in the case of
C.Pakirsamy Vs. ACIT (Mad) 315 ITR 293.Aggrived by the order of the
CIT(A) the assessee filed appeal requesting to allow the credit of opening
balance from the peak credit.
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
10. Ld.AR argued during the appeal proceedings that the assessee had
opening cash balance of Rs.7,80,000/- as on 01.04.2005 which should be
allowed as deduction from the peak credit. The assessee relied on the
following case laws :
(a) Rahul Vijay Munot Vs. ITO, ITA No.1923/PN/2013 ITAT, Pune
Bench, "B" Pune.
(b) In the Delhi Bench of ITAT in Sanjeev Kapoor case, ITA
2091/DeI/2010.
(c) ITA No.1434/KoI/2009 in the ITAT "A" Bench Kolkata.
(d) Hon'ble Allahabad High Court in the case of CIT vs. Fertilizer
Traders, (2014) 98 DTR 323(All)
(e) Hon'ble Bombay High Court in the case of CIT vs. Jawanmal
Gemaji Gandhi, (1985) 151 1TR353(Bom)
11. Ld.CIT(A) has confirmed the addition holding that the assessee did
not file return of income and failed to furnish any evidence with regard to
the opening cash balance on real estate business and did not maintain the
books of accounts.
12. We have heard both the parties and perused the material placed on
record. Though the assessee stated to have opening cash balance of
Rs.7,80,000/- there was no evidence to establish that there was opening
cash balance with the assessee. The assessee also did not establish that he
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
has earned the income from the business. As rightly stated by the CIT(A),
the assessee has not furnished the return of income for the earlier years
and in the absence of any evidence to show that the cash balance was
suffered to tax the same required to be assessed to tax. Mere claim of
availability of sufficient opening balance without supporting evidence is
not acceptable. Ld.CIT(A) relied on the decision of Hon'ble Madras High
Court in the case of Sri C.Pakirsamy Vs. ACIT [315 ITR 293] and confirmed
the addition. During the appeal proceedings before us also, the assessee
has not placed any evidence to show that there was sufficient cash balance
available with the assessee. Therefore, we do not find any infirmity in the
order of the Ld.CIT(A) and the same is upheld.
13. In the result appeal of the revenue is allowed for statistical purpose
and the appeal of the assessee is dismissed.
The above order was pronounced in the open court on 27th Oct 2017.
Sd/- Sd/-
(धड.एस. सुन्दर ससह) (िी.दुगाा राि)
(D.S. SUNDER SINGH) (V. DURGA RAO)
लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER
धिशाखापटणम /Visakhapatnam
ददनांक /Dated : 27.10.2017
L. Rama, SPS
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ITA Nos.353/Viz/2016 and ITA Nos.380-383/Viz/2016
Sri Dhanekula Chowdary, Vijayawada
आदेश की प्रधतधलधप अग्रेधर्त/Copy of the order forwarded to:-
1. राजस्व / The Revenue - The Income Tax Officer, Ward-1(3), Vijayawada
2. धनधााररती / The Assessee - Sri Dhanekula Chowdary, D.No.6-67,
Devinenivari Street, Near Post Office, Gollapudi, Vijayawada
3. The Commissioner of Income Tax-2, Visakhapatnam
4. The Commissioner of Income Tax (Appeals)-2, Visakhapatnam
5. धिभागीयप्रधतधनधध, आयकरअपीलीयअधधकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam
6. गाडाफ़ाईल / Guard file
आदेशानुसार / BY ORDER
// True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM