Income Tax Appellate Tribunal - Hyderabad
Laxmi Narayan Agarwal, Hyd, Hyderabad vs Acit, Cirlce-6(1), Hyd, Hyderabad on 20 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B-SMC", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
ITA No. 789/Hyd/2016
Assessment Year: 2006-07
Sri Laxmi Narayan Agarwal, vs. Asst. Commissioner of
Hyderabad. Income Tax,
Circle-6(1),
PAN - ACDPA7791B Hyderabad.
(Applicant) (Respondent)
Assessee by : Shri P. Murali Mohan Rao
Revenue by : Shri M. Sitaram
Date of hearing : 14-06-2018
Date of pronouncement : 20-06-2018
ORDER
PER P. MADHAVI DEVI, J.M.:
This is assessee's appeal for the A.Y 2006-07 against the order of the CIT(A)-9, Hyderabad, dated 22.03.2016.
2. Brief facts of the case are that the assessee, an individual, was searched u/s 132 of the IT Act on 07.11.2007. Thereafter, a notice u/s 153A of the IT Act was issued to the assessee calling for his return of the income for the A.Ys. 2002-03 to 2008-09. In response to the notices, the assessee filed his returns and admitting additional income.
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Sri Laxmi Narayan Agarwal., Hyd.
3. The A.O found that the assessee is engaged in the trading of scrap and had filed his original return of income for the A.Y 2006-07 on 06.07.2006 admitting the taxable income of Rs. 1,17,300/- while in response to the notice u/s 153A of the IT Act, the assessee has admitted the taxable income of Rs. 2,35,350/-. He observed that during the course of search, evidence in the form of original blank cheques and original promissory notes, which were obtained by the assessee from the customers towards security for advancing the loans were found and seized. He observed that a cheque drawn on SBH, Kavadiguda branch is a blank signed cheque dated 08.02.2006 given by the proprietor of M/s Sri Raja Rajeshwari Steel Traders for an amount of Rs. 10 lakhs and that the cheque did not contain the details of the payee. The assessee was asked to explain as to why the blank cheques were lying with him during the course of search itself and the assessee stated that this cheque belonged to the person, who intended to obtain loan from him and also further deposed that he has not advanced any amounts to them.
3.1 During the course of assessment proceedings, summons u/s 131 of the IT Act were issued to Sri G. 3 ITA.No. 789/Hyd/2016 Sri Laxmi Narayan Agarwal., Hyd.
Rajeswara Rao, proprietor of M/s. Sri Raja Rajeswari Steel Traders, who did not appear. Therefore summons were issued to close relative of Shri Rajeswara Rao, Shri G. Ram Mohan, who stated that shri Rajeswara Rao borrowed huge amounts and due to heavy pressure for repayment of loans, he has run away from Hyderabad and his whereabouts are not known. Shri G. Ram Mohan also confirmed that the signatures affixed on the cheque (mentioned) above are of Shri G. Rajeswara Rao. In view of the same, the A.O held that the sum of Rs. 10 lakhs is an unexplained loan for the A.Y 2006-07 and brought it to tax.
3.2 Further, he also observed that the assessee has made some deposits with the Post Office, Sanath Nagar, Hyderabad and evidence with regard to the same was found. The assessee has stated that these amounts belonged to his daughter Smt. Deepa, but could not produce any evidence in support of the said contentions. During the course of assessment proceedings, the assessee explained that his daughter Smt. Deepa, was married to one Mr. Nikhil Agarwal in the year 2002, and in the same year, a case was filed in the Civil Court for divorce and settlement and the Hon'ble Civil Court had pronounced an 4 ITA.No. 789/Hyd/2016 Sri Laxmi Narayan Agarwal., Hyd.
award on 19.04.2003 in favour of Smt. Deepa, as per which, she received Rs. 3,00,000/- in cash as alimony towards final settlement. The assessee explained that the cash received by his daughter was given to him on 27.07.2005 which was brought into his books of accounts and fixed deposits of each Rs. 1,50,000/- were made on the same day. In support of this claim the assessee furnished a copy of the order of the court and other relevant documents. The A.O observed that the court had ordered Smt. Deepa to keep Rs. 2 lakhs in the fixed deposit in any Nationalized Bank till her minor child attained majority and the receipt for the same was supposed to be handed over to the Court by 26.04.2003, but no such fixed deposits were made by Smt. Deepa. He also disbelieved the assessee's contentions because the alimony was received by Smt. Deepa in the year 2003, whereas the assessee had brought the same into his books on 27.07.2005 after with a gap of more than two years. He also observed that the fixed deposits should have also been made in the assessee's daughter's name and the assessee has not explained as to why the fixed deposits are made in his name. Therefore, he brought the sum of Rs. 3 lakhs to tax. 5 ITA.No. 789/Hyd/2016
Sri Laxmi Narayan Agarwal., Hyd.
3.3 Further, the assessee had reported net profit in the business of coal between 2.04% to 3.0% over a period of time. The assessee was asked to produce the books of accounts along with bills for purchases and sales. The assessee furnished the accounts, which were prepared on the basis of entries available in the bank statements and submitted that the bills for purchase and sales are not available with him. The A.O observed that the assessee has not maintained books of accounts even though his turnover exceeded Rs. 40 lakhs for some of the years. He, therefore, held that the books of accounts maintained by the assessee are not reliable and accordingly rejected the same and estimated the net profit at a uniform rate of 6% for all the years. Accordingly, he brought a sum of Rs. 76,600/- to tax for the relevant assessment year. 3.4 The A.O also observed from the computation of income, that the assessee has claimed the deduction u/s 80U of the IT Act of Rs. 50,000/- for physical disability and submitted a certificate issued by the Civil Surgeon, Gandhi Hospital in support of his claim. However, when he was asked to prove the genuineness of the certificate , the assessee had agreed to withdraw the claim made u/s 80U 6 ITA.No. 789/Hyd/2016 Sri Laxmi Narayan Agarwal., Hyd.
of the IT Act. Accordingly, the same was disallowed and brought it to tax.
4. Aggrieved by all the above disallowance and additions, the assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O and the assessee is in second appeal before us by raising the following grounds of appeal:
"1. The order of the Ld. CIT(A) is erroneous both on f acts and in law.
2. The Ld. CIT(A) erred in upholding the additions made to the income of the assessee based on the loose sheets made to the income of the assessee based on the loose sheets and dumb materials which have no evidentiary value.
3. The Ld. CIT(A) ought to have annulled the assessment made u/s 143(3) r.w.s 153A in the absence of any incriminating material in support of the additions made.
4. The Ld. CIT(A) erred in conf irming the addition of Rs. 10,00,000/- made towards unexplained loan.
5. The Ld. CIT(A) erred in appreciating that the impugned lonee Sri Rajeswara Rao or any other person on his behalf had not conf irmed the loan transaction of Rs. 10,00,000/-
6. The Ld. CIT(A) erred in appreciating that the cheque in question has been issued as security and that no amount has actually been advanced by the appellant to M/s Raja Rajeswari Steel Traders.
7. The Ld. CIT(A) ought to have appreciated that these is no material evidence, what so ever, in support of the impugned money lending business of the appellant.
8. The Ld. CIT(A) erred in conf irming the addition of Rs. 3,00,000/- made towards unexplained deposits made in post off ice.7 ITA.No. 789/Hyd/2016
Sri Laxmi Narayan Agarwal., Hyd.
9. The Ld. CIT(A) ought to have appreciated that the source for the deposit of Rs. 3,00,000/- has been duly explained by the appellant, that the amount represents alimony received by his daughter Smt. Deepa Agarwal in the year 2003 and that the amount has been given to the appellant on 27.07.2005 on which date it has been brought in the books of the appellant.
10. The Ld. CIT(A) ought to have appreciated that there is no delay in depositing the amount of Rs. 3,00,000/- received from the appellant's daughter.
11. The Ld. CIT(A) erred in conf irming the addition of Rs. 3,00,000/- even though the A.O has not brought any evidence on record in this regard by making enquiry with Smt. Deepa Agarwal, the appellant's daughter.
12. The Ld. CIT(A) erred in conf irming the addition of Rs. 76,600/- which has been arrived at by estimation of prof it @ 6% of sales.
13. The Ld. CIT(A) erred in conf irming the addition of Rs. 76,600/- made in the asst. u/s 143(3) r.w.s 153A on estimation of prof it in the absence of any incriminating material suggesting that book results are to be rejected.
14. The Ld. CIT(A) erred in conf irming the addition made by the A.O without f ollowing the decision of Hon'ble ITAT in the appellant's own case f or the A.Ys 2005-06 and 2007-08 in ITA Nos 1390, 1391/Hyd/2010 dated 17.06.2015. Where in it has been held that, it is trite law that in the absence of any incriminating material suggesting that book results should be rejected the addition cannot be made on estimate basis in the assessment made u/s 153A.
15. The Ld. CIT(A) erred in conf irming the disallowance of deduction claimed u/s 80U of the Act f or Rs. 50,000/-.
16. The Ld. CIT(A) erred in conf irming the disallowance of Rs. 50,000/- claimed u/s 80U of the Act in the asst. completed u/s 143(3) r.w.s 153A even though there is no incriminating material suggesting the disallowance.
17. The assessee may add, alter, or modif y or substitute any other points to the grounds of appeal at any time bef ore or at the time of hearing of appeal.8 ITA.No. 789/Hyd/2016
Sri Laxmi Narayan Agarwal., Hyd.
4.1 Further, the assessee has also raised the above grounds as only additional grounds of appeal along with an application for admission of the same stating as under:
"In respect of the ground of appeal f iled from serial No. 1 to 17 in respect of the assessee f or the A.Y 2006-07, the additional grounds of appeal bearing serial No. 1 to 17 are enclosed herewith. You are hereby requested to kindly admit the additional grounds of appeal. The additional grounds so raised hereunder relate to the question of law arising from the facts which are on record in the assessment proceedings and therefore, in view of the judgment of the Hon'ble Supreme Sourt of India in the case of National Thermal Power Co. Ltd. Vs. CIT 229 ITR 383, the same may please be accepted".
5. As regards the additional grounds are concerned, I find that they are the same as the original grounds of appeal and are against the additions made by the A.O, and therefore very much part of the record and there is no need to admit the same as it would only result in duplication of grounds. Therefore, the grounds are adjudicated as under.
6. I find that the grounds No. 1 to 3 are against the assessment made u/s 143(3) r.w.s 153A of the Act, whereas ground of appeal Nos. 12 to 14 are against the estimation of net profit at @ 6% of sales.
7. The Ld. Counsel for the assessee submitted that the issue in grounds 12 to 14, is covered in favour of the assessee by the decision of the 'B' Bench of this Tribunal in 9 ITA.No. 789/Hyd/2016 Sri Laxmi Narayan Agarwal., Hyd.
the assessee's own case for the A.Ys 2005-06 and 2007-08, wherein it has been held that unless there is an incriminating material found during the course of search for rejection of books of accounts, the assessee's books of account cannot be rejected and income estimated.
8. The Ld. DR, however, supported the orders of the authorities below.
9. Having regard to the rival contentions and material on record, I find that the A.O and CIT(A), have rejected the books of account for all the six years and have estimated the profit @ 6% of sales and this issue was considered by the Coordinate bench of this Tribunal in the assessee's own case for the A.Ys 2006-06 & 2007-08 and has deleted the addition. For the sake of clarity and ready reference, the relevant paragraph in the order of the Tribunal for the 2005-06 is reproduced hereunder:
" 12. We heard the rival parities. Admittedly, there is no incriminating material seized as a result of search and seizure operation indicating that the books of accounts maintained by the assessee are either defective or appellant had inf lated the expenditure or suppressed the sales resulting in lower returned income. It is trite law that in the absence of any incriminating material suggesting that book results should be rejected the addition cannot be made on estimate basis in the assessment made u/s 153A. Accordingly, the addition is deleted. Hence, this ground of appeal f iled by the assessee is allowed".10 ITA.No. 789/Hyd/2016
Sri Laxmi Narayan Agarwal., Hyd.
9.1 Respectfully following the same, the grounds of appeal No. 12 to 14 are allowed and the addition after estimation of income @ 6% by the A.O and CIT(A) is deleted. 9.2 As regards the addition of Rs. 10 lakhs in grounds 4 to 7 are concerned, I find that the during the course of search, certain blank signed cheques were found in the possession of the assessee, however, the proprietor of Shri Raja Rajeswari Steel Traders could not be traced and the signatures on the cheques were only confirmed by the relative of Shri G. Rajeswar Rao i.e Shri G. Ram Mohan. The transaction of the loan has not been proved either by Shri Rajeswar Rao or by Shri G. Ram Mohan. Further, similar issue had arisen in the assessee's own case for the A.Y 2005-06, wherein at para 6 of the order, the Tribunal has deleted the additions by observing as under:
"6. The next ground relates to the addition of Rs. 2,15,000/- based on the blank singed original cheques belonging to the following persons:
S. Date of Cheque Name of person Amount
No. Cheque No. issued mentioned on
cheque
1. 12.04.2004 499869 M/s. Diamond 1,15,000
Steel
Corporation
2 23.07.2004 300051 Md. Shameen 1,00,000
Total: 2,15,000
11
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Sri Laxmi Narayan Agarwal., Hyd.
Marked as Annexure A/LNA/Res/01. During the course of assessment proceedings, the explanation of the appellant was that he never advanced any loans to the above persons and cheques were obtained since they intend to borrow money from the appellant. However, actual advancing of money had never taken place. However, on examining the proprietor of Diamond Steel Corporation, Aslam Hussain, he stated that he borrowed money of Rs. 1,15,000/- and the cheques were given as a security for the said amount. During the course of assessment proceedings, AO also examined Mr. Md. Shamim, wherein he stated that the cheque was issued by him to the appellant f or purchase of scrap. However, the transaction of purchase of scrap never took place. However, cheque was lying with the appellant and the AO observed that in the balance sheet of the appellant for the year ending 31-03-2005 Mr. Shamim is reflected his debtor for Rs. 1 lakh. Thus, he concluded that in view of the contradictory statements made by both the parties, made addition of Rs. 2,15,000/-.
7. On appeal before the CIT(A), it was submitted bef ore the CIT(A) that those blank cheques were obtained from the persons, who intended to borrow from him. However, the appellant stated that he never advanced any money to the said person therefore, no addition was called for. The Ld.CIT(A) af ter examining the explanation had disbelieved the explanation offered by the appellant and finally held that the appellant was using his own unaccounted money in providing unaccounted loans against security of promissory notice and cheques and therefore, upheld the addition.
8. It was contended before us that the documents seized are only dumb documents and theref ore, no addition can be made. On the other hand, Ld.CIT(A) had placed reliance on the lower authorities and submitted that the seized documents cannot be called dumb documents since the documents are duly signed and filled up. Since the assessee had failed to explain satisfactorily under what circumstances, the blank cheques came into his possession of the appellant, the addition should be upheld.
9. We heard the rival parties. We noticed that the addition was made by the AO based on the Xerox copies of blank signed cheques and promissory notes issued by the f ollowing:
S. Date of Cheque Name of person Amount
No. Cheque No. issued mentioned on
cheque
1. 12.04.2004 499869 M/s. Diamond 1,15,000
12
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Sri Laxmi Narayan Agarwal., Hyd.
Steel
Corporation
2 23.07.2004 300051 Md. Shameen 1,00,000
Total: 2,15,000
The statement given by the proprietor of M/s. Diamond Steel Corporation was not confronted with the appellant and whereas the statement given by Mr. Md. Shamim that no loan was obtained by him remains un-controverted. Thus, there is no conclusive evidence on record in support of the allegation that the appellant had advanced the money to these two parties and the original seized photo copies and material are not brought on record nor traced. In these circumstances, we are not in a position to uphold the addition. Hence, this ground of appeal is deleted.
9.3 In the relevant assessment year before us also, the alleged loan given to Sri Rajeswar Rao has not been proved.
Respectfully following the above decisions on similar set of facts, the addition of Rs. 10 lakhs is deleted.
9.4 As far as grounds 8 to 11 are concerned, the assessee has stated that he has received the money from his daughter, Smt. Deepa, who in turn has received the same from her divorced husband, towards her sons maintenance and permanent alimony. Though, the assessee has filed the copy of the court order in support of the contention that Smt. Deepa has received the money, as rightly pointed out by the Ld. A.O and CIT(A), the assessee has not been able to prove with substantial evidence that this is the money advanced by Smt. Deepa, particularly when the 13 ITA.No. 789/Hyd/2016 Sri Laxmi Narayan Agarwal., Hyd.
conditions of granting alimony have not been fulfilled by Smt. Deepa. In view of the same, the grounds are rejected.
9.5 As regards the deduction claimed u/s 80U of the IT Act for Rs. 50,000/- is concerned which is arising in grounds 15 and 16, I find that this issue has been held against the assessee by the Coordinate Bench of this Tribunal for the A.Y 2005-06 and 2007-08. Respectfully following the same, these grounds are rejected.
10. In the result, the appeal filed by the assessee is partly allowed.
Pronounced in the open court on 20 th June, 2018.
Sd/-
(P. MADHAVI DEVI) JUDICIAL MEMBER Hyderabad, Dated: 20 th June, 2018 KRK
1) Shri Laxmi Narayan Agarwal C/o P. Murali & Co. CAs, 6-3-655/2/3, 1 s t floor, Somajiguda, Hyderbad -82.
2) ACIT, Circle-6(1) Hyderabad.
3) CIT(A)-9, Hyderabad
4) Pr. CIT-9, Hyderabad.
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File.