Income Tax Appellate Tribunal - Panji
The Ito,, Vijayawada vs Sri Dhanekula Lakshmaiah,, Vijayawada on 27 October, 2017
आयकर अपीलीय अधधकरण, धिशाखापटणम पीठ, धिशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
श्री िी. दुगाा राि,न्याधयक सदस्य एिं श्री धड.एस. सुन्दर ससह, लेखा सदस्य के समक्ष
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER&
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.No.384/Viz/2016
(धनधाारण िर्ा/Assessment Year:2006-07)
आयकर अपील सं./I.T.A.No.385/Viz/2016
(धनधाारण िर्ा/Assessment Year:2007-08)
आयकर अपील सं./I.T.A.No.386/Viz/2016
(धनधाारण िर्ा/Assessment Year:2008-09)
आयकर अपील सं./I.T.A.No.387/Viz/2016
(धनधाारण िर्ा/Assessment Year:2009-10)
The Income Tax Officer Sri Dhanekula Lakshmaiah
Vs.
Ward-1(3) S/o Dhanekula Anjaiah
Vijayawada Rao, D.No.6-67, Devinenivari
Street, Near Post Office
Gollapudi, Vijayawada
[PAN : AUKKPD7244B]
(अपीलाथी/ Appellant) (प्रत्यथी/ Respondent)
आयकर अपील सं./I.T.A.No.359/Viz/2016
(धनधाारण िर्ा/Assessment Year:2006-07)
आयकर अपील सं./I.T.A.No.360/Viz/2016
(धनधाारण िर्ा/Assessment Year:2008-09)
आयकर अपील सं./I.T.A.No.361/Viz/2016
(धनधाारण िर्ा/Assessment Year:2009-10)
Sri Dhanekula Lakshmaiah Vs. The Income Tax Officer
S/o Dhanekula Anjaiah Ward-1(2)
Rao, D.No.6-67, Devinenivari Street, Vijayawada
Near Post Office
Gollapudi, Vijayawada
[PAN : AUKKPD7244B]
(अपीलाथी/ Appellant) (प्रत्यथी/ Respondent)
राजस्व की ओर से / Revenue by : Shri M.K.Sethi, DR
धनधााररती कीओर से/ 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.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
आदेश /O R D E R
PER Bench:
ITA Nos.384-387/Viz/2016, A.Ys.1006-07 to 2009-10
1. These appeals are filed by the Revenue against the order of the
Ld. Commissioner of Income Tax (Appeals) [CIT(A)], Vijayawada vide ITA
Nos.91, 92, 93 & 94/CIT(A)/VJA/2014-15 dated 31.03.2016 for the A.Ys.
2006-07 to 2009-10. Since, 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 all the assessments raised by Revenue
are related to the addition made by the assessing officer towards
unexplained cash deposits. The assessee is an individual. 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 course of survey proceedings, it
was noticed that M/s Vasudha Shelters has entered into Development
Agreement dated 16.06.2008 with Shri Dhanekula Lakshmaiah and others
(land owners) for construction of apartments at Gollapudi. Simultaneously,
survey u/s 133A was conducted in the premises of the assessee on
23.02.2010 and during the course of survey, certain loose sheets /
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
documents / bank statements were found which were impounded u.s
133A(3)(ia) of the Income Tax Act, 1961. As the assessee has not filed the
returns of income, notice u/s 148 was issued on 15.06.2012. The assessee
is having savings bank account in State Bank of India, Gollapudi bearing a/c
No.10103401208 and another account in M/s Swarna Cooperative Urban
Bank Ltd., A/c No.189. During the assessment proceedings, the assessing
officer found that the assessee has made the cash deposits as under :
Asst. Year Total Cash Deposits (Rs.)
2006-07 28,76,000
2007-08 13,85,000
2008-09 18,50,000
2009-10 61,60,000
2.1. The assessing officer called for the explanation of the assessee as to
why the cash deposits should not be treated as unexplained income. The
assessee could not offer satisfactory explanation. The assessee stated in his
explanation before the assessing officer that the sources of the cash was
business turnover and the assessee was not maintaining the books of
accounts and requested the assessing officer to estimate the income @ 5%
to 8% of the turnover and complete the assessment. Not being convinced
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
with the explanation of the assessee, the assessing officer completed the
assessment holding that the cash deposits made in State Bank of India as
well as Swarna Cooperative Urban Bank Ltd. as unexplained and brought to
tax the unexplained cash deposits as under :
Asst. Year Total Cash Deposits (Rs.)
2006-07 28,76,000
2007-08 13,85,000
2008-09 18,50,000
2009-10 61,60,000
3. Aggrieved by the order of the assessing officer, the assessee went on
appeal before the CIT(A) and the Ld.CIT(A) agreed with the assessing
officer's observation that the assessee was unable to furnish (a) since when
he is in such the real estate business (b) what was the extent of initial
capital and source thereof (c) names and addresses of parties from whom
advances were received (d) names and addresses of parties to whom
advances were returned (e) date of receipt and return of such advances (f)
documentary evidence like agreement for such purported land transactions
(g) opening cash balance available financial year wise etc. However, the
Ld.CIT(A) applied the peak credit theory and confirmed the addition of
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
Rs.8,00,000/- for A.Y.2006-07, Rs.73,000/- for the A.Y.2007-08,
Rs.6,49,000/- for the A.Y.2008-09 and Rs.12,20,000/- for the A.Y.2009-10.
Aggrieved by the order of the Ld.CIT(A) the revenue is in appeal before this
Tribunal.
4. Appearing for the revenue, Ld.DR argued that the assessee has made
huge cash deposits in the bank account and the Ld.CIT(A) confirmed the
addition of Rs.8,00,000/- for A.Y.2006-07, Rs.73,000/- for the A.Y.2007-08,
Rs.6,49,000/- for the A.Y.2008-09 and Rs.12,20,000/- for the A.Y.2009-10
and deleted the remaining additions even though the assessee has not
furnished any evidence. Though the assessee has made huge cash deposits
for which the source was not explained, the CIT(A) deleted the addition
applying peak credit theory which is not correct. The assessing officer has
examined the submissions of the assessee and since the assessee failed to
explain the nature and source of each receipt, the assessing officer made
the addition u/s 69 of the I.T.Act. Ld.DR argued that close scrutiny of the
bank account of the assessee reveals that the assessee has withdrawn the
amounts and after sufficient gap of time made the deposits during the
intervening period, the assessee has withdrawn the small amounts also
which indicate that there was no cash available with the assessee out of the
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
withdrawals to make redeposit. The conduct of account clearly shows that
the assessee has made use of the withdrawn amount and then deposited
the cash for which source was not explained. The conduct of account shows
that the assessee might have spent the withdrawn amount for unaccounted
investments. Though the assessee has claimed that the assessee was in the
business, the nature of business was not explained by the assessee and
never filed the returns of income. The returns of income were filed only
after the issue of notices u/s 148. The huge credits and debits of the cash
deposits showed that the assessee is in the unknown business. The
assessee has not furnished any evidence to show that it has carried on
business. Though the Ld.CIT(A) applied peak credit theory, the Ld.CIT(A)
has not given any opportunity to the assessing officer at least to verify the
true nature of the receipts before applying the peak credit theory. Further,
the assessee himself has admitted during the assessment proceedings to
estimate the income @ 5% to 8% on the receipts which the Ld.CIT(A) did
not consider during the appellate proceedings. Therefore, Ld.DR argued
that the aggregate of deposits should be confirmed and the CIT(A)'s order
is to be set aside and the assessing officer's order to be restored.
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
5. On the other hand, Ld.AR argued that the assessee is in real estate
activity earning commission income towards services rendered to the
customers. The assessee has received the advance for purchase of landed
property on behalf of its customers which was paid to the vendors. The
credits and debits in the savings bank account related to the real estate
business. Therefore, Ld.AR argued that no prudent person will make huge
withdrawals and deposits within the short period unless he is engaged in
the business activity. Therefore, Ld.AR argued that the Ld.CIT(A) has
rightly applied the peak credit theory which is in consonance with the
judicial precedent and required to be upheld.
6. We have heard the rival submissions and perused the material placed
on record. During the previous year relevant to the assessment year, the
assessee has made the cash deposits in the savings bank accounts as per
the details given below
Asst. Year Total Cash Deposits (Rs.)
2006-07 28,76,000
2007-08 13,85,000
2008-09 18,50,000
2009-10 61,60,000
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
7. The assessee also has made cash withdrawals out of the above
deposits. However, the assessee has not furnished the return of income
and the details of business carried on in the earlier years and no evidence
was furnished by the assessee with regard to the business carried on by the
assessee. During the survey proceedings also, the department could not lay
their hands on the business activity carried on by the assessee. In these
facts and circumstances, the true and correct nature of the receipts was not
ascertained. Though the assessee stated that it had received the advances
from the buyers of the lands and paid to the vendors, the names and
addresses of the buyers and vendors was not furnished by the assessee. In
the absence of non furnishing the names and addresses of the buyers and
vendors, the assessee has become an instrument to evade the income tax
by the buyers and vendors of the properties. It is a known fact that lot of
unaccounted money was pumped into real estate business. Though the
assessee's submission that the assessee had received the amounts from the
buyers and vendors is accepted, it is not clear whether the assessee has
purchased the property and sold or merely acted as an agent or the
assessee has carried on hawala activity for transfer of funds from one hand
to another. If it is accepted that the assessee is carrying on business the
applicability of the provisions of section 40A(3) and 40(a)(ia) is required
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
to be examined which was not examined either by the assessing officer or
by the Ld.CIT(A). Though the assessing officer made the addition of cash
deposits in the bank account while applying the peak credit theory, the
Ld.CIT(A) has neither conducted the necessary enquiry nor given any
opportunity to the assessing officer to find out the true and correct nature
of the receipts. The conduct of the account shows that withdrawals were
made after substantial gap of credit and in between the assessee has
withdrawn small amounts also on certain occasions. The account shows
that the amounts withdrawn are not available to the assessee for redeposit.
The assessee has withdrawn the amounts in quick succession which shows
that the amounts are not available to the assessee for making any deposits
of the same. Therefore, it is necessary to ascertain the true nature of the
receipts, names of the persons from whom the advances were received and
names and addresses of the persons to whom the advances were paid. In
the absence of any such information, the entire deposits required to be
brought to tax since the assessee neither established that it has carried on
the business nor established the source of the credit. The Hon'ble Delhi
High Court in the case of CIT Vs. DK Garg, 84 taxmann.com 257 held that in
the case of accommodation entry provider if the assessee is unable to
explain all sources of deposits and corresponding payments he would not
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
be entitled to benefit of peak credit. In the assessee's case, the assessee has
neither established the fact that he is carrying on business and the sources
of the credit. Though the assessee had offered the income on estimation
basis ranging from 5% to 8% on turnover, the Ld.CIT(A) has not considered
the same at the time of disposing the appeal. During the appeal hearing
also the assessee could not furnish any details with regard to the sources of
deposit and the destination of payment. No evidence was filed by the
assessee to establish that he is carrying on the business. Therefore, we are
of the considered opinion that the matter should be remitted back to the
file of the assessing officer with a direction to ascertain the true nature of
the receipts and payments and the details of persons to whom the monies
were paid and received. The AO is directed to obtain and find out the
complete modus operandi and decide the issue afresh on merits.
Accordingly, appeal of the revenue on this issue for the assessment year
2006-07 to 2009-10 is allowed for statistical purposes.
8. The next issue of revenue for the assessment year 2009-10 is the
assessee's claim of deduction u/s 54F of I.T.Act. The assessee claimed
deduction u/s 54F on capital gains, which was rejected by the assessing
officer, since the assessee has given the property on rent to NRI academy
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
which is an educational academy. The property was not used for the
purpose of residential purpose, hence 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 assessee went on appeal before
the Ld.CIT(A) and the Ld.CIT(A) allowed the appeal of the assessee. Hence,
the revenue is in appeal before us.
9. 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
assessing officer was of the view that the assessee 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 further verification at
the level of assessing officer. Therefore we remit the matter back to the file
of the assessing officer to make further verifications of the impugned
property and give finding whether the property given for rent to the school
is residential property with all amenities like kitchen etc.. or not and decide
the issue afresh on merits. The appeal of the revenue is allowed for
statistical purposes.
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
ITA Nos.359-361/Viz/2016
10. These appeals are filed by the Revenue against the order of the
Ld. Commissioner of Income Tax (Appeals) [CIT(A)], Vijayawada vide ITA
Nos.91, 92, 93 & 94/CIT(A)/VJA/2014-15 dated 31.03.2016 for the A.Ys.
2006-07 to 2009-10. Common issue in all the appeals is credit for opening
balance. The remaining grounds were not pressed by the Ld.AR.
11. The assessing officer made the addition of cash deposits made in the
bank for the A.Y.2006-07 to 2009-10 as per the details given below :
2006-07 28,76,000
2007-08 13,85,000
2008-09 18,50,000
2009-10 61,60,000
12. The assessee went on appeal before the Ld.CIT(A) and the Ld.CIT(A)
confirmed the peak credits as discussed in Revenue appeal in this order as
under:
2006-07 8,00,000
2007-08 73,000
2008-09 6,49,000
2009-10 12,22,000
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
13. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal
before this Tribunal requested to allow the opening cash balance as on
01.04.2005. According to the Ld.AR as on 01.04.2005, there was opening
cash balance of Rs.14,90,000/- which should be allowed from the peak
credit worked out by the Ld.CIT(A). Ld.CIT(A) rejected the claim of the
assessee since the assessee failed to furnish the return of income for the
earlier years and there was no evidence to show that the assessee has
carried on the business. The assessee did not maintain any books of
accounts. The assessee did not file any regular return of income till the
survey was conducted and the returns were filed only after the issue of
notice u/s 148. In the absence of any evidence to establish that the
business was carried on by the assessee and earned the income, the
Ld.CIT(A) held that the opening cash balance claimed by the assessee is not
established and cannot be treated as explained. Ld.CIT(A) relied on the
judgement of Hon'ble Madras High Court in the case of C.Pakirsamy Vs.
ACIT(Mad) [315 ITR 293] and dismissed the appeal of the assessee.
Ld.CIT(A) has confirmed the addition holding that the assessee did not file
the 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.
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
14. We have heard both the parties and perused the material placed on
record. Though the assessee stated to have opening cash balance of
Rs.14,90,000/- there was no evidence to establish the cash balance
available with the assessee. 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 available and
suffered to tax the same required to be brought 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.Pakirisamy 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. Accordingly, the appeals of
the assessee for the A.Y. 2006-07, 2007-08 and the A.Y.2008-09 are
dismissed.
15. In the result appeals of the revenue are allowed for statistical
purpose and the appeal of the assessee are dismissed.
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ITA Nos.359-361/Viz/2016 and ITA Nos.384-387/Viz/2016
Sri Dhanekula Lakshmaiah, Vijayawada
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)
लेखासदस्य/ACCOUNTANT MEMBER न्याधयकसदस्य/JUDICIALMEMBER
धिशाखापटणम /Visakhapatnam
ददनांक /Dated : 27.10.2017
L. Rama, SPS
आदेश की प्रधतधलधप अग्रेधर्त / Copy of the order forwarded to:-
1. धनधााररती / The Assessee - Sri Dhanekula Lakshmiah, Vijayawada
2. राजस्व / The Revenue - The Income Tax Officer, Ward-1(2), Vijayawada
3. The Pr. Commissioner of Income Tax, Vijayawada
4. The Commissioner of Income Tax (Appeals)-, Vijayawada
5. धिभागीयप्रधतधनधध, आयकरअपीलीयअधधकरण, धिशाखापटणम /DR, ITAT, Visakhapatnam
6. गाडाफ़ाईल / Guard file
आदेशानुसार / BY ORDER
// True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM