Income Tax Appellate Tribunal - Hyderabad
Desaraju Ravi Shankar, Secunderabad vs Assessee on 5 November, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" : HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND
SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
ITA.No.1801/Hyd/2012
Assessment Year 2008-2009
Desaraju Ravi Shankar vs. Income Tax Officer
Hyderabad Ward 12 (3)
PAN AKYPD0343D Hyderabad
(Appellant) (Respondent)
For Assessee : Mr. S. Rama Rao
For Revenue : Mr. Rajat Mitra
Date of Hearing : 30.09.2014
Date of Pronouncement : 05.11.2014
ORDER
PER B. RAMAKOTAIAH, A.M.
This is an assessee's appeal against the Order of Ld. CIT(A)-II, Hyderabad dated 11.09.2012 for the A.Y. 2008-
09. The only effective ground No.2 is as under :
"The Ld. CIT(A) is in-correct to reject the explanation offered by the appellant and to confirm the credits of Rs.27,82,050 appearing in the bank account."
2. Briefly stated, A.O. noticed that there are cash deposits amounting to Rs.28,87,650 in assessee's bank accounts and asked to explain the source for these cash deposits. Assessee having no income and being partly employed at the relevant point of time explained that monies were withdrawn using his credit cards from M/s. Gandhi Jewellery and Sri Krishna Sarees on commission basis at 3% and the said amounts were given to his friend Mr. Srinivas who was running an 'Airtel relationship centre' in the name of Surya Teja Communications in Malkajgiri, Secunderabad. Money so obtained by way of discounting with the said concerns were advanced for the business purposes of Mr. Srinivas and as and when the dues of credit cards came up for payment, the cash was repaid to assessee and the same in turn was deposited in the bank accounts and repaid to the credit cards. A.O. asked the assessee to produce the above mentioned three parties. Later, A.O. also issued summons to Mr. Srinivas as per address provided by assessee. Since the summons were returned un-served, A.O. was of the view that explanation given by assessee is not proved and therefore, brought the entire amount of Rs.27,82,060 as unexplained income being deposits in the bank account.
3. Before the Ld. CIT(A), it was submitted that assessee withdrew money by using his credit cards by making bogus purchases in the known shops and paying shop-keeper only the processing charges of 2% and additional 1% towards handling charges (total 3%) and funds so received in the deal are advanced to Mr. Srinivas. In support evidence furnished before A.O. like that of transactions of credit card, deposits in the bank account and repayment to credit cards and the negotiations between Mr. Srinivas and assessee when there is default and such other evidences were furnished before the Ld. CIT(A) as well. Further, as recorded by Ld. CIT(A), assessee's father was also present in the appeal proceedings and submitted as under :
"4.1. The appellant's father was also present during the appeal proceedings, and reiterated what was stated before the AO and submitted that:
"Mr. Srinivas put us in great trouble for long time with the skill of escapism. After so many phone calls, vigorous persuation, he finally gave us around Rs.2.7 lakhs as against Rs. 6.00 lakhs, which too in piecemeal basis continued till March 2012, as final settlement besides given three undated cheques of Rs.35,000/- each of Bank of Baroda, Malkajgiri Branch, copies enclosed. This is the evidence to show Mr Srinivas has availed finances arranged by my son to run the Airtel shop. At this stage your department issued a notice simultaneously with my son to. Mr Srinivas to his shop address but was returned un-delivered.
I tried my best to obtain an affidavit from Mr Srinivas to the fact that he utilized the money arranged by my son on rotation basis and repaid by him in to. ING Vysya a/c. but he is not at all co-operating.
Here I would like to invite your attention to a letter dated 6th Nov, 2011, addressed and submitted to. the then Income Tax Officer, Ward. 12(3), 2nd floor, Aayakar Bhavan, Basheerbagh, Hyderabad, wherein my son explained all the facts and requested far dropping the case on mercy grounds, in one of the hearings. (copy enclosed for perusal) In Nov.2011, I got around Rs.3.5 lakhs as my Provident Fund savings upon my retirement which I clubbed with the money collected from Mr Srinivas, and approached the Credit Card Banks with a request for one time settlement of dues and also to permanently close the cards to arrest further use.
The banks obliged my request and waived off penalties, overdue interests etc.. Thus, I have closed almost all the credit cards as well as loans obtained against the cards (copies of letters/receipts obtained against closure of different credit cards after one time payment are enclosed for perusal). As a father, I did all this to give him a chance to set right his behaviour, safeguard career and keep away from bad friendships and wrong acts. It is a fact that I have observed repentance besides change in his behaviour".
4. However, Ld. CIT(A), did not accept the assessee's contentions on the reason that assessee has not discharged the onus in proving the above statements, by stating as under:
"4.2. Along with the written submissions, the appellant filed a copy of bank statement which has already been filed before the AO and a copy of the alleged settlement receipt with Sri Srinivas. However, the appellant expressed his inability to produce Sri Srinivas for examination or any confirmation from him to support the claim of payments received from him. The onus is on the appellant to substantiate his claim that the said deposits in the bank account were the amounts received from Sri Srinivas which were the repayment of monies paid by him by withdrawing the money through the above mentioned modus operandi of credit cards. The appellant has failed in discharging this onus. In absence of any evidences substantiating the claim, the contention of the appellant cannot be accepted and therefore the addition made by the AO is hereby confirmed".
5. Ld. Counsel reiterated the submissions made and filed detailed paper book of the entire evidences available with assessee and was submitted before the authorities, from pages 1 to 169. It was the submission that assessee did use his credit cards obtained during his employment as software engineer, from ICICI Bank, Citi Bank, HSBC Bank, Axis Bank, SBI, ABN Amro, Ing Vysya Bank and Citi Bank-Reliance. All the statements of credit card transactions were placed on record. The full and final card settlements by way of various banks were also placed in paper book at pages 136 to 157, the arrangement between Mr. Srinivas and assessee towards final payment of Rs.2,72,000 in a stamp paper was also placed on record along with various payments of drafts towards settlement. Correspondence with various credit card issuers were also placed on record to explain that those credit card institutions waived the penalties and interest also considering 5 ITA.No.1801/Hyd/2012 Mr. Desaraju Ravi Shankar, Secunderabad.
the nature of transactions. It was the submission that assessee accommodated his friend who defaulted at the end and put the assessee to lot of inconvenience and assessee's father has to discharge the liabilities and in view of the strained relationship between assessee and his friend Mr. Srinivas, he could not be produced before the authorities. With reference to explanation that monies were obtained on 3% commission, he referred to the statements placed on record of the credit cards and most of the purchases are from M/s Gandhi gold jewelers and M/s Srikrishna Sarees shop. It was also submitted that Revenue did not consider that assessee was in the trading of either jewellery or sarees or invested in them. Therefore, the explanation given by assessee stands not disproved. In view of this, since the assessee has given a bonafide explanation on the facts, the same should be accepted.
6. Learned D.R. however submitted that assessee has not produced parties for examination. Therefore, authorities are justified in confirming the amounts as unexplained.
7. After considering the rival contentions and examining the detailed statements/documents placed on record along with the explanation of the assessee's father placed before the Ld. CIT(A) as extracted in the order, we are of the opinion that assessee has genuinely explained the whole arrangement. In the course of appeal before us, assessee was also present in the court room and admitted that he has taken some benefit from his friend when he was unemployed and with that loyalty, he accommodated his friend in providing finance to his business of Airtel Relationship centre. Since they are friends and since he was genuinely honouring the payments to credit cards as and when became due, he was not 6 ITA.No.1801/Hyd/2012 Mr. Desaraju Ravi Shankar, Secunderabad.
having any problem at that point of time and has not considered the income tax angle at all, being a software engineer. He admitted that Mr. Srinivas has incurred losses and consequently there was default at his end, which assessee has to fulfill putting lot of burden on his parents. Considering the explanation given by assessee and conduct of assessee which can be gauged from the periodic credit card transactions with the two parties of purchase of gold and sarees regularly and repaying the amount by obtaining cash from Mr. Srinivas do indicate that assessee's explanation is genuine. Not only that, statements with various credit card institutions and the final receipt given by Mr. Srinivas on a stamp paper do indicate that assessee was really put to inconvenience by the default of Mr. Srinivas. The receipt given by assessee to Mr. Srinivas is as under :
RECEIPT "I, D. Ravi Shanker s/o. D. Narasimha, aged 29 years, Occupation : Private Service, Resident of Malkajgiri, Hyderabad do hereby acknowledge the receipt of cheque bearing No.531173 for amount of Rs.2,72,000 (Rs. Two Lakh Seventy Two thousand only) drawn in Bank of Baroda, Malkajgiri Branch, Hyderabad dated 31.05.2011 from M. Srinivas s/o. M.Guravaih, aged about 41 years, resident of H.No.20, Paigah Colony, S.P. Road, Secunderabad, towards the amounts receivable from him.
The previous cheques of (B.O.B) Bank of Baroda, Malkajgiri Branch vide Cheque baring Nos.504740, 527432, 527433, 527434, 527435 and 527436 will be cancelled. The remaining documents if any and agreements and receipts it is related for any transactions previous entered shall get cancelled in lieu of the above cheque payment.
In witness whereof the above said parties have signed in the presence of this the 13th day of March, 2011 at Secunderabad, in before the witnesses.7 ITA.No.1801/Hyd/2012
Mr. Desaraju Ravi Shankar, Secunderabad.
WITNESSES :
01.Sd/-xxx Sd/- D. Ravi Shanker (D. RAVI SHANKER) First Party
02.Sd/-xxx Sd/- Srinivas (M. Srinivas) Second Party".
8. Coupled with the fact that assessee's father had settled his P.F. amount of Rs. 3.5 lakhs also, in settlement of credit card dues and his explanation before the Ld. CIT(A) also indicate that the transactions are genuine transactions. It is general practice in the market that some of the shops are accommodating credit card holders by providing cash on discount of 3% to 4% and as seen from the transactions of M/s. Gandhi Jewellers and Srikrishna Sarees and periodic purchases from them and repayments to the credit cards do indicate that funds are obtained in this manner for Mr. Srinivas business purposes and these are only temporary finance arrangement undertaken to help assessee's friend. Therefore, we are of the opinion that A.O. is not correct in considering all deposits as unexplained when there is explanation from assessee which is not disproved. Not only that we are surprised to see that the A.O. as well as Ld. CIT(A) did not accept any of the statements placed on record and insisted to produce Mr. Srinivas. Ld. CIT(A) confirmed the addition only on the reason that assessee has not discharged the onus. It is a fact that Mr. Srinivas has defaulted and present whereabouts are not known to assessee. In these circumstances, the other evidences furnished by assessee should have been considered by Revenue. Since the overwhelming evidence furnished by assessee does indicate that the transactions are undertaken to help his friend in 8 ITA.No.1801/Hyd/2012 Mr. Desaraju Ravi Shankar, Secunderabad.
getting temporary finance for his business and since Mr. Srinivas repaid the amounts to a large extent out of total transactions, we are of the opinion that deposits in the bank account cannot be considered as unexplained. As seen from the credit card statements as well as bank statements, there are payments to Airtel also which indicates that Mr. Srinivas had Airtel business transactions. In view of this, we are of the opinion that the authorities were not justified in treating the cash deposits as income of assessee as unexplained. Since assessee has given bonafide explanation which is not disproved, the same should be accepted. In the circumstances, we see no reason to assess the entire cash deposits made periodically into the bank account for repayment of credit card amounts cannot be considered as income of the assessee. Therefore, we delete the same. Assessee's grounds are allowed.
9. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 05.11.2014.
Sd/- Sd/- (SMT. P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 05th November, 2014 VBP/- Copy to
1. Mr. Desaraju Ravi Shankar, Malkajgiri, Hyderabad. C/o. Sri S. Rama Rao, Advocate, Flat No.102, Shriya's Elegance, 3-6-643, Street No.9, Himayatnagar, Hyderabad - 500 029.
2. The Income Tax Officer, Ward 12(3), Aayakar Bhavan, Hyderabad.
3. Commissioner of Income Tax-II, Hyderabad
4. Commissioner of Income Tax-I, Hyderabad
5. D.R. "B" Bench, ITAT, Hyderabad.