The order of the Bench was delivered by
S. Rifaur Rahman (Accountant Member)- This appeal is preferred by the assessee against the order of the learned Commissioner of Income-tax (Appeals)-VI, Hyderabad, dated May 6, 2015 for the assessment year 2009- 10.
2. Briefly the facts of the case are that the assessee is an individual deriving income from house property. She filed her return of income on March 26, 2010, declaring total income of Rs. 3,09,830. The Assessing Officer completed the assessment under section 143(3) by making the following additions :
| 1. Unexplained investment in purchase of land |
Rs. 12,50,000 |
2. Unexplained investment in house property |
Rs. 19,00,000 |
3. Unexplained credits in the bank account |
Rs. 3,13,710 |
Accordingly, the Assessing Officer determined the total income of the assessee at Rs. 37,73,540. On appeal, the Commissioner of Income-tax (Appeals) confirmed the order of the Assessing Officer.
3. Aggrieved, the assessee is in appeal before us raising the following grounds of appeal :
"1. The learned Commissioner of Income-tax (Appeals) has erred on facts and in law.
2. The learned Commissioner of Income-tax (Appeals) is not justified in holding that the amount of Rs. 12.50 lakhs paid on October 22, 2008 to the seller of the property has been made out of unexplained sources. The entries in cash flow statement are unreasonably doubted.
3. (a) The learned Commissioner of Income-tax (Appeals) is not justified in sustaining the addition of Rs. 19,00,000 as unexplained investment. The entries in cash flow statement are unreasonably doubted.
(b) The learned Commissioner of Income-tax (Appeals) is not justified in doubting the source of Rs. 13.45 lakhs given to the asses see by her son for the purpose of construction from out of the loan obtained by him.
4. The learned Commissioner of Income-tax (Appeals) is not justified in sustaining the addition of Rs. 3,13,710 appearing in the Central Bank of India, Kalyana Nagar Branch account of the assessee.
5. Having held that the earning of the assessee were sufficient only for the livelihood of the assessee, the lower authorities have unjustifiably made additions to the income returned without any iota of evidence that the assessee had any other source of income. The ratio of the decision of the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570 (SC) applies to the facts of the case."
4. Ground Nos. 1 and 5 are general in nature.
5. As regards ground No. 2 relating to the addition of Rs. 12,50,000, the assessee entered into an agreement for purchase of land at Kondapur and paid Rs. 50 lakhs towards her share. When questioned about the sources for payment of Rs. 50 lakhs, it was explained that the same was met out from her own sources, loan account of spouse and son on different dates through cash and cheques. Out of the total sources explained by the assessee, the Assessing Officer accepted the same up to an extent of Rs. 37.50 lakhs and treated the amount of Rs. 12.50 lakhs claimed to have been paid on October 22, 2008 as unexplained. The main reason brought out by the Assessing Officer for treating the amount of Rs. 12.50 lakhs as unexplained is that the assessee later deviated from her earlier version of sources for the said amount.
6. Before the Commissioner of Income-tax (Appeals), the assessee filed a cash flow statement wherein the assessee submitted that the amount of Rs. 12.50 lakhs was paid on October 22, 2008. The sources were explained as loans taken by her, her spouse and her son. However, there is a gap of around 3 months from the date of obtaining the loans and the payment made towards purchase of land at Kondapur. When the Commissioner of Income-tax (Appeals) remanded the cash flow statement to the Assessing Officer, the Assessing Officer referring to the cash flow statement pointed out that the assessee has piled up the cash balance to that date to fill up the deficiencies pointed by the Assessing Officer and this statement is prepared afterthought without any basis and do not carry any evidentiary value.
6.1 Against these comments of the Assessing Officer in the remand report, the assessee submitted that the consolidated cash flow statement was never called for by the Assessing Officer and this was filed during appeal proceedings and this cannot be construed as prepared to suit the convenience and fill up the vacuums pointed out by the Assessing Officer. Referring to the gap in withdrawals from the bank and the payment on subsequent date, the assessee reverts to the cash flow statement and has not explained the gap with any plausible explanation.
6.2 The Commissioner of Income-tax (Appeals) observed that it is pertinent to mention here that the assessee is claiming that the Assessing Officer had not called for the consolidated cash flow statement. He further observed that though he did not have any occasion to call for any cash flow statement from the assessee, it is only on her own, filed the cash flow statement explaining the sources for cash payments for purchase of land at Kondapur. No reasons were brought by the assessee for not furnishing such statement before the Assessing Officer during assessment proceedings and what prompted them to file the same during appeal proceedings, except mentioning to the lack of proper awareness in the matter on the part of the assessee. Therefore, in the absence of any conclusive evidences for the sources of cash payment of Rs. 12.50 lakhs on October 22, 2008, the Commissioner of Income-tax (Appeals) confirmed the addition made by the Assessing Officer on this count.
7. Before us, the learned authorised representative of the assessee referred to the letter dated October 10, 2011 filed by the assessee to the Assessing Officer wherein it was stated as under :
"On July 19, 2008, I have paid by cash Rs. 25,00,000 (rupees twenty five lakhs only) as advance which was drawn from my loan account No. (TLN- 573 Rs. 15 lakhs) (P 17 of P.S) and Rs. 10 lakhs (P 22 of P.S) from my husband V. Venkateswara Rao loan account No. (TLN 569 Rs. 15 lakhs) (P 22 of P.S) and subsequently paid Rs. 12.50 lakhs on August 9, 2008 by way of cheque No. 560712 (P 17 of paper book) drawn on Adarsh Bank SB A/c. No. 19641 and finally paid Rs. 12.50 lakhs on October 22, 2008 from the amount received from my son V. Srinivas Pradeep loan account No. TLN 574 which was drawn on July 21, 2008 (Rs. 20 lakhs)" (page 25 of the paper book).
7.1 Referring to the above, the learned authorised representative submitted that the assessee has clarified that she had also received Rs. 5,00,000 from husband, Sri Venkateswara Rao and Rs. 7.50 lakhs from her son. This is the amount withdrawn from his Adarsh Bank loan account on July 21, 2008 and on October 21, 2008 (page 22 of paper book). A working of the source and payment of Rs. 50,00,000 has been given to the Assessing Officer (Page 8 of the paper book). The learned authorised representative submitted that the assessee, her husband and her son V. Sreenivas Pradeep raised total loans of Rs. 50,00,000 being, Rs. 15,00,000, Rs. 15,00,000 and Rs. 20,00,000 respectively from Adarsh Bank with a view to acquire the site for which they paid the amounts and the withdrawals are from those loan accounts routed through their savings bank accounts. Copies of savings bank accounts for the previous year of all the three form part of the paper book (P 17, 22 and 25 of the paper book). He submitted that the assessee paid cash of Rs. 12,50,000 (that is Rs. 7,50,000 out of son's loan and Rs. 5,00,000 husband's loan) on October 22, 2008. He contended that the Assessing Officer has not accepted that the cash could be kept with her for about 3 months.
7.2 The learned authorised representative contended that the Commissioner of Income-tax (Appeals) also went along with the Assessing Officer on the point. He submitted that the assessee explained during the remand proceedings that there were doubts about the title to the land which cropped up after the agreement and that the cash was paid later on October 22, 2008 (page 2 of the paper book) and not immediately. In fact, till today the land remains unregistered by way of regular sale deed. He submitted that the Assessing Officer and the Commissioner of Income-tax (Appeals) both did not even advert to the explanation, in the remand report or in the appellate order, respectively.
7.3 It is submitted that the addition of Rs. 12,50,000 is totally unjustified. The explanation is rejected purely on the basis of suspicion, surmise or conjecture. There is no material to suggest that the amount of Rs. 12,50,000 was not available to pay to the vendor. In this context, the authorised representative relied on the observation of the Supreme Court in the case of Umacharan Shaw and Bros v. CIT [1959] 37 ITR 271 (SC) that "Mere suspicion however strong, cannot take the place of evidence". Similar observations have been made by the hon'ble Supreme Court in the case of Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC). The hon'ble Delhi Bench of the Tribunal held in the case of Asst. CIT v. Baldev Raj Charla [2009] 121 TTJ (Delhi) 366 as follows : "There is no finding recorded by the learned Assessing Officer or by the learned Commissioner of Income-tax (Appeals) that apart from depositing these cash into bank as explained by the assessee, there was any other user by the assessee of these amounts and in the absence of that, simply because there was a time gap, the explanation of the assessee cannot be rejected and hence the addition confirmed by the learned Commissioner of Income-tax (Appeals) is not correct. We, therefore, delete the same. This ground of the assessee is allowed".
8. The learned Departmental representative, on the other hand, relied on the orders of the Revenue authorities.
9. Considered the rival submissions and perused the material facts on record. The facts are that the assessee is deriving income only from rental and there is no other source brought on record. Considering the fact, the assessee would not have considered this additional investment except by taking loan from bank or from her relatives. The assessee had clearly explained the source of Rs. 50 lakhs, from the loan taken by her, her spouse and her son. It was not brought on record any other utilisation for the loan taken by her and her family. Her son withdrew cash of Rs. 20 lakhs on July 21, 2008 and the same was utilised to pay on October 22, 2008. There is no other diversion or utilisation of Rs. 20 lakhs was brought on record. Considering the above discussion, in our view, the assessee has clearly explained the sources for the investment. The Revenue disputes on Rs. 12.50 lakhs payment for which there is clear evidence that her husband withdrew Rs. 5 lakhs and her son withdrew Rs. 7.50 lakhs from their respective bank account. Once the assessee demonstrates the sources clearly, there is no room for other views. There may be some delay in making the payment but the sources are clear, it has to be considered. Accordingly, this ground of the assessee is allowed.
10. As regards ground No. 3 pertaining to the addition of Rs. 19,00,000 treating the investment in house property as unexplained, the facts are that the assessee claimed to have invested Rs. 19 lakhs in construction of house during the financial year 2008-09. The sources for this investment were explained as loan of Rs. 15 lakhs from Adarsha Bank. However, observing that the said loan was obtained on November 24, 2011, the Assessing Officer questioned the sources for investment made during current year. For this, it was brought out by the assessee that the same was met out of receipts from her brother Sri V. K. Naidu (Rs. 10 lakhs), her son Sri V. S. Pradeep (Rs. 13.40 lakhs) and the balance from her spouse Sri V. V. Rao. Referring to the change of stances in the version of the assessee and bringing out the mismatch of dates and loans obtained, the Assessing Officer treated the entire investment of Rs. 19 lakhs in construction of house property as unexplained.
11. Before the Commissioner of Income-tax (Appeals), in support of her claim, the assessee referred to the cash flow statement and claims that the total sources were out of loans from her son and receipts from her brother. When remanded the same to the Assessing Officer, in the remand report, the Assessing Officer brought out that the assessee is changing her version whenever a lapse was pointed in the earlier version and that the cash flow statement filed after conclusion of the assessment proceedings is an afterthought to fill in the gaps pointed out in the assessment and that such cash flow statement without any supporting evidences cannot be considered.
11.1 Against the above comments of the Assessing Officer, the assessee submitted that the amount of Rs. 19 lakhs was met out of loans obtained by her son Sri V. S. Pradeep from M/s. Reliance Capital on November 12, 2008, which was withdrawn from Axis Bank on November 17, 2008.
11.2 The Commissioner of Income-tax (Appeals) held that from the material furnished by the assessee, Sri V. S. Pradeep obtained a loan of Rs. 13.70 lakhs and has withdrawn Rs. 13.54 lakhs on November 17, 2008. There is no iota of evidence that the said amount was given to his mother and the same was invested in construction. Apart from this figure of Rs. 13.54 lakhs, there is no mention about the sources of the balance amount invested in construction. There is no whisper of amount received from her brother Sri V. K. Naidu. The Commissioner of Income-tax (Appeals), therefore, concluded that in the absence of any cogent material evidences that the loan amount withdrawn by her son was utilised for construction of house property and no sources for the balance amount, confirmed the action of the Assessing Officer.
12. Before us, the learned authorised representative submitted that explanation of the assessee has not been accepted mainly due to the fact that in the letter dated October 10, 2011 (page 16 of the paper book), a loan drawn much later than the previous year has been stated as the source. This was clarified in the remarks on the remand report (last two paras of page 2 of the paper book). One main source is stated to be the money provided by son Mr. V. Srinivas Pradeep of Rs. 13,40,000 which was withdrawn from his Axis Bank account (page 32 of paper book). Source of this money is loan obtained from Reliance Capital and transferred by cheque to Axis Bank account from where withdrawal has been made. Apart from Rs. 13,40,000 the assessee has shown several withdrawals from bank accounts to explain the source of construction cost of Rs. 19,00,000. They are cash drawn from Central Bank of India Bank account of Rs. 3,00,000 on April 26, 2008 and of Rs. 5,00,000 on February 4, 2009 pages 12 and 13 of the paper book). These amounts have been shown during assessment proceedings (page 8 of paper book) to prove the source for construction.
12.1 The learned authorised representative submitted that in the course of appeal proceedings, the assessee has prepared a cash flow statement to prove the availability. He submitted that the assessee has also incomes from rents, agricultural incomes which are shown in cash flow statement. According to cash flow statement, Rs. 13,40,000 and other income sources have been included. Source of Rs. 19,00,000 as well as house hold expenses, etc., have also been explained. No flaw was found in the cash flow statement. He submitted that it is rejected only on the ground that it was not filed at the time of original proceedings. But in particular source of Rs. 13,40,000 have been shown in the course of assessment proceedings itself as well as agricultural income receipts and other cash withdrawals from Central Bank of India (page 8 of the paper book). He contended that the assessee's explanation has been rejected only on the ground that the same was not given at the time of filing the original letter dated October 10, 2011.
12.2. The learned authorised representative submitted that the assessee has shown availability of the bulk funds of Rs. 50,00,000 (all loans from Adarsh Bank by the member of the family) and Rs. 13,40,000 (loan from Reliance Capital raised by the son) to explain Rs. 69,00,000 of investment. As the assessee has other incomes also and as the Assessing Officer has doubted the explanations only on the ground of not stating it all in the very first instance, a cash flow statement has been prepared and filed before the learned Commissioner of Income-tax (Appeals) which he sent to the Assessing Officer for remand report. But it has been rejected by the Assessing Officer during remand proceedings on suspicion that it was a contrived statement. But, not a single mistake or incorrectness has been noticed or commented upon. It has been unreasonably rejected.
13. The learned Departmental representative on the other hand relied on the orders of the Revenue authorities.
14. Considered the rival submissions and perused the material facts on record. The assessee has shown that the amount of Rs. 13.40 lakhs was received from her son, which was taken as loan by her son from Reliance capital. The Assessing Officer in his remand report rejected this source based on the fact that her son has not indicated that this amount was given to her. The assessee and her family has not invested the amount taken on loan or at least it was not brought on record by the Assessing Officer that they utilised the amount taken on loan for making any other investment other than the investment of construction of house, we cannot deny the benefit of accepting their contention. The family has no other source to make the investment. Hence, we accept the submission of the assessee and accordingly ground raised by the assessee is allowed.
15. Ground No. 4 is pertaining to the addition towards unexplained credits of Rs. 3,13,710. The Assessing Officer made the said addition on the ground that the explanation of the assessee with regard to the source of cash deposits was not acceptable, hence, the same treated as unexplained credits.
16. During the appeal proceedings, it was contended by the assessee that she has been earning agricultural income and other sources and that the credits were out of her past savings. In the remand report, it was opined by the Assessing Officer that the past earnings are sufficient for the livelihood of the assessee and the past savings cannot be a source for the present credits appearing in the bank account.
17. Against these comments of the Assessing Officer, it was brought out by the assessee that the earnings of her husband and son are sufficient for her livelihood and her past earnings are the source for the credits appearing in the bank account.
18. The Commissioner of Income-tax (Appeals) observed that the submissions of the assessee were general in nature and no specific evidences were furnished explaining the sources of credits appearing in her bank account. He therefore confirmed the addition made by the Assessing Officer.
19. Before us, the learned authorised representative submitted that these amounts are three cash deposits in the assessee's account of Central Bank of India (page 12 of the paper book). The assessee gave the explanation for the source of cash deposits at page 8 of the paper book. The sources are receipts from V. L. Prasanna's (employed unmarried daughter) ICICI Bank account, cash withdrawals from husband (husband was an Assistant Registrar of Co-op. Societies at the time) account apart from rental income for two preceding months. The assessee had also agricultural income receipts of Rs. 2,90,800 during the year. The Assessing Officer has not considered the explanation at all.
The learned authorised representative submitted that during appeal proceedings, the assessee submitted cash flow statement to show the availability of funds. The Assessing Officer remarked in his remand report that the agricultural income would have been sufficient for family needs (page 7 of the paper book). In reply, the assessee submitted that for the family needs, there are sources of salaries of Rs. 3,00,000 per annum of the husband and of Rs. 7,00,000 of unmarried son (page 2 of paper book). The assessee further submitted that she filed copies of their returns before the Assessing Officer in support of the incomes. However, the learned Commissioner of Income-tax (Appeals) held that proof was not filed. The Commissioner of Income-tax (Appeals) omitted to take note of the fact of filing of copies of returns and simply brushed aside the explanation of the assessee holding that the statement of incomes is too general in nature. Both the learned Assessing Officer and the Commissioner of Income-tax (Appeals) did not take cognizance of the cash flow statement in which regular rental income of the assessee's agricultural incomes and household expenses were all included. The addition of Rs. 3,13,710 and its being upheld by the learned Commissioner of Income-tax (Appeals) is not justified. It is submitted that the same may also be deleted.
20. The learned Departmental representative, on the other hand, relied on the orders of the Revenue authorities.
21. Considered the rival submissions and perused the material facts on record. From the record, the Assessing Officer has not brought on record any other material to show that the assessee has other source of income. The assessee is earning only rental income. The assessee has claimed that she has income from agriculture also, we are not sure whether the same was declared in return of income, it was not placed on record. Even otherwise, as claimed, the assessee is not depended on the income to run the family. She is earning rental income of Rs. 26,000 per month. This itself is enough to make the above deposits in the bank. In the absence of any cogent material found by the Revenue, we give benefit of doubt in favour of the assessee and accordingly we delete the addition.
22. In the result, the appeal of the assessee is allowed.
The order pronounced in the open court on November 16, 2016.