TMI Blog2021 (1) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. Hence, we hold that the assessee is permitted to take opening balance as source. Sources for receipts during the year - From the order of CIT(A), it is observed that during the appellate proceedings, G. Balkishna Rao and G. Narayana Rao have confirmed the payment to the assessee u/s 131 of the Act. Therefore, there is no reason to reject the credit. If the AO was not convinced with the explanation offered by the creditors, the same is required to be brought to tax in the hands of the creditors, since, they have confirmed the credit and explained the source, but, not in the hands of the assessee. Thus we hold that there is no case for rejection of opening balance and the loans from G.Balakrishna Rao and G.Narayana Rao and accordingly we direct the AO to accept the same. Amount received from Shri E. Madan Mohan Rao - Creditor has issued the legal notice for recovery of the loan with the dates of amounts lent. Since the legal notice is available the AO should have caused necessary enquiries instead of pressing the assessee to produce the creditor. Having not caused the enquiries and did not bring any material to show that the advance received from E.Madan Mohan Rao ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition confirmed by the ld.CIT(A) for an amount of ₹ 85,63,498/- made by the AO u/s 69 of the IT Act. 4. Brief facts of the case are that the assessee did not file the return of income for the AY 2009-10, hence, the AO issued notice u/s 148 of the Act, to which, there was no response from the assessee. Later, the AO issued the notice u/s 142(1) of the IT Act calling for the details and, in response to which, the AR of the assessee appeared before the AO and furnished the details and the assessment was completed u/s 144 rws 147 of the Act on a total income of ₹ 1,04,57,680/-. In the assessment order framed u/s 144 r.w.s.147 of the Act, the AO made the following additions: (i) Income from house property as admitted In the computation of total income filed During the assessment proceedings ₹ 7,57,680 (ii) Unexplained investment made in purchase of land at Shaikpet assessed to tax u/s 69 ₹ 97,00,000 Out of the above additions, the dispute is with regard to the unexplained investment made in purchase of land at Shaikpet, which is assessed u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from HSBC amounting to ₹ 39,50,000/ as a source and the AO did not allow the credit for source,since, the assessee failed to explain the nexus between the loan taken from HSBC and the advance made for purchase of land. Similarly, the assessee said to have been received the sums from Aparna Constructions Estates Pvt. Ltd. and from her husband, which was also not allowed by the AO. All the transactions were related to the A.Y.2008-09. Thus the AO reduced the source of opening cash balance available to the assessee. 4.4. In the cash flow statement for the A.Y.2009-10, the assessee has shown the receipts of ₹ 20 lakhs from Shri G. Balakishan Rao, G. Narayana Rao and Sri. E. Madan Mohan Rao towards sale of land as under: Shri G. Balakishan Rao ₹ 5.00 lacs SriG. Narayana Rao ₹ 10.00 lacs Sri. E. Madan Mohan Rao ₹ 5.00 lacs The Assessee furnished the confirmation letters from Shri G. Balakishan Rao, and G. Narayana Rao in support of the advance. However, since the assessee failed to establish creditworthiness of the said crdito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in the cash flow statement merely because huge balances were maintained which is the presumption of the AO. Ld. AR further submitted that for AY 2008-09, the assessment was completed in a scrutiny manner and the assessee furnished the cash flow statement and the balance sheet before the AO for AY 2008-09, which is placed at page no. 91 of the paper book, wherein the assessee had worked out the opening balance of ₹ 64,30,048/- as on 01.04.2007 and the closing balance of ₹ 75,70,268/- as on 31.03.2008 which was accepted by the AO. In the assessment proceedings, for AY 2008-09, out of the entries in cash flow statement, the AO picked up one item i.e. advances for land of ₹ 5 lakhs and added the same to the returned income and thus accepted the remaining cash flow statement and the balance sheet. The Ld.AR argued that the balance available in cash flow statement as at the end of the FY 2008-09 has become final and, therefore, the AO cannot revisit the same in the proceedings for the subsequent years and reject the opening balances and entries in the cash flow statement of 2008-09. There must be an end for litigation and therefore, argued that the payment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee is having sufficient sources of income and explained before the AO and the Ld.CIT(A), both the lower authorities have rejected the contentions of the assessee without any evidences. Ld. AR brought the attention of the Bench to page 140 of paper book relating to remand report submitted by the AO to CIT(A) wherein he had acknowledged the filing of cash flow statement by the assessee for FY 2007-08 and no defects were brought by the AO to reject the assessee s contention. 6.2. With regard to the addition of ₹ 5.00 lakhs addition made by the AO for the A.Y.2008-09, the ld. AR submitted that the Hon ble ITAT has remitted the matter back to the file of the AO vide its order dated 12/01/2016 and, thus, argued that the source for the payment of ₹ 97,00,000/- was clearly explained in the cash flow statement and balance sheet, filed at page 51 of the paper book. therefore, he argued that there is no case for making the addition u/s 69 of the Act. He, accordingly, contended that the orders of the lower authorities be set aside and allow the appeal of the assessee. 6.3. The ld. AR also submitted that since, the additions were made u/s 69 of the Act, the burden is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintaining such huge cash balances and not substantiating the correctness of entries made in the cash flow statement of earlier years. In the immediately preceding AY, the assessment was completed in scrutiny manner u/s 144 r.w.s. 147 of the Act and the assessment orders are placed at page nos. 139A and 139B of the paper book II. During the assessment proceedings for AY 2008-09, the assessee has furnished cash flow statement, which is also placed at page 149 of the paper book II. As per the cash flow statement of A.Y.2008-09, the opening balance was ₹ 64,30,048/- and the closing balance was ₹ 75,70,268/-. From the cash flow statement of F.Y.2007-08 , the receipts and payments aggregated to the sum of ₹ 1,02,83,962/ including the opening and the closing balances of cash. The AO selected the item of advance for land of ₹ 5 lakhs and disbelieved the source of ₹ 5.00 lakhs and added back to the returned income of the assessee for AY 2008-09. The remaining entries and opening and closing cash balances were untouched by the AO in the assessment proceedings for AY 2008-09. Thus, it is established that entries made in the cash flow statement for AY 2008-09 bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant AY i.e. receipts and payments during the year under consideration, but, not the entries that were made in the earlier year. Thus, the closing balance declared by the assessee as at the end of the FY2007- 2008 stands explained and the assessee is entitled to claim the credit for the opening balance in the year under consideration. Hence, we hold that the assessee is permitted to take opening balance of ₹ 75,70,268/- as source. 8.1. Then the issue comes to sources for receipts during the year. Out of the receipts during the year, the AO rejected the advance amount of ₹ 20 lakhs received from S/Shri G. Balkishna Rao, G. Narayana Rao and E. Madan Mohan Rao. The assessee furnished confirmation letters from G. Balkishna Rao and G. Narayana Rao and the AO did not make any further enquiries. From the order of CIT(A), it is observed that during the appellate proceedings, G. Balkishna Rao and G. Narayana Rao have confirmed the payment to the assessee u/s 131 of the Act. Therefore, there is no reason to reject the credit. If the AO was not convinced with the explanation offered by the creditors, the same is required to be brought to tax in the hands of the creditors, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in partnership firm. i,e ₹ 20 lakhs in Shivam Builders, ₹ 10,50,000/- in SSAARGORAP Constructions Pvt. Ltd. and ₹ 20 lakhs in Land at Shaikpet admeasuring 1800 sq.yds., aggregating to ₹ 50,50,000/-. The assessee explained the sources of the above investment was out of the opening cash balance of ₹ 33,13,802/- and rental deposit of ₹ 20 lakhs. The AO did not believe the source of rental deposit as well as opening cash balance, hence, made the addition u/s 69 of the Act. When the assessee carried the matter in appeal before the CIT(A), the Ld.CIT(A) confirmed the assessment order. 10. As regards the first issue of opening cash balance of ₹ 33,13,802/- available as on 01/04/2010, we have already made a detailed discussion and allowed the closing balance of ₹ 33,13,802/- in the appeal for the A.Y.2009-10. Therefore, the balance of ₹ 33,13,802/- stands explained. Hence, we delete the addition of ₹ 33,13,802/- in respect of opening cash balance. 11. As regards the issue of rental deposit of ₹ 20 lakhs, which was stated to have been received by the assessee, the AO made the addition disbelieving the rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, there was a civil case filed by the assessee in the Civil Court wherein the sum of ₹ 20 lakhs stated to have been adjusted towards monthly rentals. Therefore, the issue needs to be considered after verification of the details and genuineness of the transaction. Both the parties have agreed to remit the issue back to the file of the AO to examine the receipt of ₹ 20 lakhs as advance from the tenant. The assessee is directed to cooperate with the AO and submit necessary information to substantiate her claim with regard to the receipt of rent deposit of ₹ 20 lakhs. Since the legal dispute is pending the AO also need to make sincere efforts to verify the correct fact by causing the enquiries instead of simply asking the assessee to produce the creditor. Thus, the issue is remitted back to the file of AO to decide afresh on merits and in accordance with law. Thus, this issue is treated as allowed for statistical purposes. 16. In the result, appeal in ITA no. 734/hyd/2014 for AY 2009-10 is allowed and the appeal in ITA no. 1364/Hyd/2015 for AY 2010-11 is partly allowed for statistical purposes. Order pronounced in the Open Court on 6th January, 2021. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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