Chandrasekhara Rao Joginpally Hyd Hyderabad v. Dcit Central Circle 4 Hyd Hyderabad

The Income Tax Appellate Tribunal Hyderabad Bench A Hyderabad Before Smt P Madhavi Devi Judicial Member And Shri S Rifaur Rahman Accountant Member Ita No 808 Hyd 2016 Assessment Year 2007 08 Ita No 809 Hyd 2016 Assessment Year 2008 09 Shri Chandrasekhar Rao Joginapally Hyderabad Pan Adipj 5829 R Vs Dcit Central Circle 4 Hyderabad Appellant Respondent Assessee By Shr S Rama Rao Revenue By Shri J Siri Kumar Date Of Hearing 13 12 2017 Date Of Pronouncement 22 12 2017 Order Per P Madhavi Devi J M Both The Appeals Are Filed By The Assessee For The A Ys 2007 08 And 2008 09 Respectively 2 Brief Facts Of The Case Are That The Assessee An Individual And A Director Of A Company Named Ganga Seed Company Private Limited Was Searched U S 132 Of The It Act On 06 01 2009 Along With Kavery Group Of Companies And Consequently The Notice U S 153 A Of The It Act Was Issued To The Assessee During The Assessment Proceedings A O Observed That Assessee Has Filed His 2 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad Return Of Income On 15 09 2009 By Declaring Total Income Of Rs 2 96 270 Which Includes Short Term Capital Gains Of Rs 99 615 And That The Assessee Has Introduced A Fresh Capital Of Rs 13 10 000 During The Relevant Assessment Year And That There Were Credits In His Bank Account To An Extent Of Rs 10 25 000 3 The Assessee Was Therefore Asked To Explain The Sources For The Introduction Of Capital And Credits Into His Bank Account As Regards The Sources For The Capital Introduced During The Relevant Financial Year The Assessee Submitted That He Has Received Gifts From His Daughter And Also Amounts Were Received From His Children Against The Expenses Incurred By Him On Their Behalf In Earlier Years This Explanation Of The Assessee Was Not Accepted By The A O Similarly With Regard To The Credits Of Rs 10 25 000 The Assessee Explained That He Had Received Rs 8 Lakhs From Smt Nadipally Sridivya And Rs 2 25 000 From His Father In Law Sri Saini Achutha Rao The A O Was Not Convinced With Explanation Of The Assessee On These Sources As Well Therefore He Made The Addition Of Capital As Well As Unexplained Credits And Brought It To Tax 3 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad 4 Aggrieved The Assessee Preferred An Appeal Before The Cit A Along With Additional Evidence In Support Of His Contentions With Regard To The Sources Of Additional Capital Introduced During The Relevant Financial Year He Explained That The Assessee Had Drawings From The Earlier Assessment Years Which Were Given To His Father In Law For Acquisition Of Agricultural Lands But Since He Could Not Acquire The Suitable Land His Father In Law Had Refunded The Same To The Assessee Which He Introduced As An Additional Capital In The Company The Assessee Filed His Returns Of Income Of The Earlier Assessment Years Along With The Receipts And Payments Statement And Also The Confirmation Letter Of His Father In Law In Support Of This Contention As Regards The Credits Of Rs 10 25 000 The Assessee Submitted That An Amount Of Rs 8 Lakhs Was Received From Smt Nadipally Srividya And An Amount Of Rs 2 25 000 From Shri S Achutha Rao By Way Of Cheques And That The Amount Of Rs 8 Lakhs Was Also Repaid By Cheque During The Relevant Financial Year The Cit A Called For A Remand Report From The A O Who Confirmed That These Was Sufficient Credit Balance In The Bank Account Of Shri S Achutha Rao Before Transferring The Same To The 4 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad Assessee And Also That The Same Was Transferred To The Assessee Through A Cheque As Regards The Credits Received From Smt Nadipally Srividya Of Rs 8 00 000 Also The A O Reported That She Is The Sister Of The Assessee And An Nri And The Said Amount Was Transferred And Also Repaid By Way Of Cheques With Regard To The Capital Introduced The A O Reported That Sri S Achutha Rao Had Passed Away And Therefore He Is Not Able To Appreciate The Evidence Filed By The Assessee 5 The Cit A Accepted The Sources For The Transfer Of Rs 8 Lakhs From Smt Nadipally Shrividya However He Confirmed The Additions Of Rs 13 10 000 And Rs 2 25 000 Allegedly Given By Assessees Father In Law Shri S Achutha Rao Only The Ground That He Had Died In 2013 But The Assessee Has Not Stated So Even While Submitting The Additional Evidence He Thus Held That The Confirmation Letter Filed By Shri S Achutha Rao Cannot Be Accepted And Also That The Assessee Has Taken Different Stands Before The A O And The Cit A And Hence It Is Only An Afterthought Therefore He Confirmed The Additions Of Rs 2 25 000 And Rs 13 10 000 Against This Order Of The Cit A The Assessee Is In Appeal Before Us 5 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad 6 The Ld Counsel For The Assessee While Reiterating The Submissions Made By The Authorities Below Has Drawn Our Attention To The Fund Flow Statement For The Fys 2002 03 To 2008 09 To Demonstrate That For The Capital Of Rs 13 10 000 Introduced In F Y 2006 07 He Had With Him Drawings To An Extent Of Rs 17 09 656 For The Fy 2004 05 And Rs 11 85 672 For The Fy 2005 06 Which Were Given To His Father In Law For Purchase Of Agricultural Land Which Were Returned By Him And The Same Was Utilized For Introduction Of Additional Capital The Ld Counsel For The Assessee Also Submitted During The Search And Seizure Operation The Department Has Not Been Able To Collect Any Evidence To Show That These Drawings Have Been Utilized For Any Other Purpose A O Submitted That Even If The Confirmation Of Shri Chandrasekhar Rao Is Not Accepted By The Authorities Below The Availability Of The Drawings In His Hand Should Be Considered 7 Ld Dr However Relied Upon Order Of The Cit A 8 Having Regard To The Rival Contentions And The Material On Record We Find That It Is Not Disputed That The Assessee Had Drawings To An Extent Of Rs 29 Lakhs From The Earlier Assessment Years Which Have Not Been Found To 6 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad Have Been Utilized For Any Other Purposes Therefore Even If The Confirmation Of Shri Chandrasekhar Rao Is Not To Be Accepted The Drawings Can Be Considered As Available To The Assessee As A Source For Introduction Of The Fresh Capital Further The Assessees Father In Law Is Said To Have Expired On 27 02 2013 I E After The Passing Of Assessment Order Dated 31 12 2010 And Also After Filing Of The Appeal Before The Cit A On 03 02 2011 But Before The Conclusion Of The Hearing Since The Letter Is Undated The Cit A Has Refused To Accept The Contents Of The Confirmation Letter However We Find That The Confirmation Letter Is Not Only With Regard To The Sum Of Rs 13 10 000 But It Also Contains The Details Of The Cash Credit Of Rs 2 25 000 Paid To Assessee Through Cheque The Assessee Has Also Given The Details Of The Bank Transfer From Shri S Achutha Rao To The Combined Account Of The Assessee As Well As His Wife In The Subsequent A Y 2008 09 And The A O In The Remand Report Has Reported That There Were Credit Balances Before The Transfer Of Funds To The Assessee Therefore Shri S Achutha Rao Is Proved To Be A Person Of Means And The A O Has Not Adversely Commented Against The Sources Even In The Remand Report In View Of The 7 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad Same We Are Inclined To Accept The Source For The Introduction Of Capital As Well As The Cash Credit Therefore Both The Grounds Of The Assessee Are Allowed 9 As Regards The Assessees Appeal For The A Y 2008 09 It Is Against The Order Of The Cit A Confirming The Addition Of Rs 20 10 000 As Unexplained Credit During The Assessment Proceedings U S 143 3 R W S 153 A Of The It Act 10 The A O Noticed That The Assessee Has Received A Sum Total Of Rs 20 10 000 During The Relevant Financial Year Since The Assessee Could Not Explain The Sources For These Deposits The A O Brought It To Tax As Unexplained Cash Credits However Before The Cit A The Assessee Furnished The Evidence And Also The Confirmation Letter Of Sri S Achutha Rao To Demonstrate That These Funds Were Transferred Vide Various Cheques From The Bank Thus Establishing The Genuineness Of The Transaction And The Credit Worthiness Of The Creditor Sri S Achutha Rao His Father In Law The Cit A Called For A Remand Report And The A O Confirmed The Transfer Of Funds Through Bank Account By Way Of Account Payee Cheque However Since Shri S Achutha Rao Had Expired The Cit A Refused To 8 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad Consider The Contents Of Confirmation Letter Given By Him As Correct And Held That The Assessee Did Not Prove The Genuineness Of The Transaction Accordingly He Confirmed The Addition Made By The A O 11 The Ld Counsel For The Assessee Has Filed Before Us The Copy Of The Joint Bank Account Statement Held By Him With His Wife To Demonstrate That The Funds Were Transferred By Shri S Achutha Rao To The Assessee And His Wife Through Account Payee Cheques And That Shri S Achutha Rao Had Sufficient Funds For Such Transfers 12 The Ld Dr However Supported The Orders Of The Authorities Below 13 We Find That Even Though Shri S Achutha Rao Had Died Before The Conclusion Of The Appellate Proceedings By The Cit A And That The Letter Of Confirmation Is Not Dated These Substantial Evidence In The Form Of Bank Statement In Support Of These Transfers And The A O Has Confirmed The Same In The Remand Report Therefore We Are Inclined To Accept The Assessees Contentions And Particularly Since In Remand Report Of The A O He Has Not Stated Adversely Against The Evidence Filed By The Assessee In View Of The 9 Ita Nos 808 809 Hyd 2016 Shri Chandrasekhar Rao J Hyderabad Same The Ground Of Appeal Raised By The Assessee Is Allowed 14 In The Result The Assessees Appeals For Both The Assessment Years Are Allowed Pronounced In The Open Court On 22 Nd December 2017 Sd Sd S Rifaur Rahman P Madhavi Devi Accountant Member Judicial Member Hyderabad Dated December 2017 Krk 1 Shri Chandrasekhar Rao J C O Sri S Rama Rao Advocate Flat No 102 Shriyas Elegance 3 6 643 Street No 9 Himayatnagar Hyderabad 29 2 Dy Cit Central Circle 4 Hyderabad 3 Cit A 10 Hyderabad 4 Cit It Tp Hyderabad 5 The Dr Itat Hyderabad 6 Guard File