IN INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA Nos.669 & 670/Bang/2013 Assessment years : 2009-10 Shri B.Y. Raghavendra PAN: AGTPB 6097M Commissioner of Vs. Income Tax, Shri B.Y. Vijayendra Davangere. PAN: ACDPV 0300M # 381, Davalagiri, II Main, 6th Cross, RMV Extension, 80 Feet Road, Bangalore 560 094. APPELLANT RESPONDENT Assessees by : Shri V. Srinivasan, CA Revenue by : Ms. Neera Malhotra, CIT(DR) Date of hearing : 02.08.2016 Date of Pronouncement : 18.10.2016 ORDER Per A.K. Garodia, Accountant Member Both these appeals are filed by two different but connected assesses and both these appeals are directed against two separate orders passed by ld. CIT (Appeals), Davangere dated 19.03.2013 for assessment year 2009-10 passed by him u/s. 263 of Income-tax Act, ITA Nos.669 & 670/Bang/2013 Page 2 of 10 1961 ["the Act"]. Both these appeals were heard together and are being disposed of by way of this common order for sake of convenience. 2. grounds raised by assessee in ITA No.669/B/13 are as under:- 1. order of learned Commissioner of Income tax, Davangere setting aside assessment order passed for assessment year 2009-10 with direction to recompute income by making addition of Rs 1,28,50,000/- in place of Rs 32,55,000/- in so far as it is against appellant is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of case. 2. learned Commissioner of Income-tax, Davangere failed to consider fact that appellant filed his return duly supported by his statement of accounts such as receipt and payment a/c, Income a/c, Capital a/c and Balance Sheet and these statements clearly reflect advance tax paid by appellant and these statements have been examined by AO. 3. learned Commissioner of Income tax failed to observe that difference in bank balance noticed by learned AO arose after debiting advance tax payments in Daybook by appellant. 4. order of learned Commissioner of Income tax amounts to giving directions to learned AO to make addition TWICE for difference in bank balance. 5. learned Commissioner of Income tax, Davangere failed to appreciate that AO, after verification of cash flow statement filed, stated that appellant has admitted availability of cash on hand for payment of taxes. 6. learned Commissioner of Income tax failed to inform defects he claimed to have noticed in cash flow statement filed by appellant as appellant had specifically written to learned Commissioner of income tax to inform any variation noticed in cash flow statement to appellant for reconciliation. ITA Nos.669 & 670/Bang/2013 Page 3 of 10 7. learned Commissioner of Income tax had not informed appellant about defects he claimed to have noticed in cash flow statement filed before coming to conclusion that appellant had filed different cash flow statement at time of assessment. 8. learned Commissioner of Income tax failed to notice that statement filed before learned AO was statement containing cash and bank transactions whereas statement filed before learned Commissioner of income tax was only cash flow statement as desired by him. 9. revision powers under section 263 cannot be exercised by assuming that there has been non-application of mind, where income has been computed after scrutiny under section 143(3) taking into consideration tax audit report and certificate computing eligible relief as held by Hon'ble Mumbai High Court in case of CIT v. Design and Automation Engineers [2010] 323 ITR 632 (Bom) following inter alia decision in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). 10. For these and such other grounds that may urged at time of hearing , order of Commissioner of Income tax Davangere passed u/s 263 of IT Act 1961 for assessment year 2009-10 may be cancelled. 11. For these and such other grounds that may urged at time of hearing, order of Commissioner of Income tax Davangere passed u/s 263 of IT Act 1961 for assessment year 2009-10 may be cancelled. 3. grounds raised by assessee in ITA No.670/B/13 are as under:- 1. order of learned Commissioner of Income tax, Davangere setting aside assessment order passed for assessment year 2009-10 with direction to recompute income by making addition of Rs 1,28,00,000/- in place of Rs 14,45,000/- in so far as it is against appellant is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of case. ITA Nos.669 & 670/Bang/2013 Page 4 of 10 2. learned Commissioner of Income-tax, Davangere failed to consider fact that appellant filed his return duly supported by his statement of accounts such as receipt and payment a/c, Income a/c, Capital a/c and Balance Sheet and these statements clearly reflect advance tax paid by appellant and these statements have been examined by AO. 3. learned Commissioner of Income tax failed to observe that difference in bank balance noticed by learned AO arose after debiting advance tax payments in Daybook by appellant. 4. order of learned Commissioner of Income tax amounts to giving directions to learned AO to make addition TWICE for difference in bank balance. 5. learned Commissioner of Income tax, Davangere failed to appreciate that AO, after verification of cash flow statement filed, stated that appellant has admitted availability of cash on hand for payment of taxes. 6. learned Commissioner of Income tax failed to inform defects he claimed to have noticed in cash flow statement filed by appellant as appellant had specifically written to learned Commissioner of income tax to inform any variation noticed in cash flow statement to appellant for reconciliation. 7. learned Commissioner of Income tax had not informed appellant about defects he claimed to have noticed in cash flow statement filed before coming to conclusion that appellant had filed different cash flow statement at time of assessment. 8. learned Commissioner of Income tax failed to notice that statement filed before learned AO was statement containing cash and bank transactions whereas statement filed before learned Commissioner of income tax was only cash flow statement as desired by him. 9. revision powers under section 263 cannot be exercised by assuming that there has been non-application of mind, where income has been computed after scrutiny under section 143(3) taking into consideration tax audit report and ITA Nos.669 & 670/Bang/2013 Page 5 of 10 certificate computing eligible relief as held by Hon'ble Mumbai High Court in case of CIT v. Design and Automation Engineers [2010] 323 ITR 632 (Bom) following inter alia decision in CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). 10. For these and such other grounds that may urged at time of hearing, order of Commissioner of Income tax Davangere passed u/s 263 of IT Act 1961 for assessment year 2009-10 may be cancelled. 4. It was submitted by ld. AR of assessee that various submissions were made by assessee before ld. CIT explaining that amount of Rs.128.50 lakhs was paid by assessee by issuing bearer cheque dated 30.3.2009 which was paid by bank on 2.4.2009 and therefore, there is no actual excess balance with bank as on 31.3.2009 as compared to balance with bank as per assessee s books as such bearer cheque was issued to agriculturists to repay advance which was taken on 23.3.2009 and payment of advance tax was made on 24.3.2009 out of said advances taken from agriculturists. He submitted that ld. CIT has not given any decision regarding this claim and explanation of assessee and straight away directed AO to make addition which is not proper and correct. At this juncture, this proposition was put forward by Bench that direction of CIT may be modified by asking AO to examine claim and explanation of assessee. ld. AR of assessee agreed to this proposition. ld. DR of revenue supported order of ld. CIT. ITA Nos.669 & 670/Bang/2013 Page 6 of 10 5. We have considered rival submissions. First of all, we reproduce para No.5.3 from order of ld. CIT in both cases, where facts relating to payment of advance tax are noted:- ITA No.669/B/2013 5.3 error in assessment order passed by AO lay in fact that while he has considered issue payment of advance tax in cash and balance available in bank in detail, he has telescoped one into another without appreciating that both are two distant points of time. advance tax payments made in cash are on following dates; 24.03.2009 - Rs.85,95,000, 14.03.2009 - Rs.5,00,000, 15.12.2008 - Rs.5,00,000. Total Rs.95,95,000/-. AO has brought to tax this amount of advance tax paid in cash as same was not routed through bank and sources for same were not explained. After these payments it was noticed that there is cash deposit into bank and hence bank balance in Corporation Bank in account 641/SB/01/000707 as on 31.03.2009 should have been taken at 1,29,14,255 instead assessee has stated balance at Rs.64,255/- in cash at Bank which is balance as on 02.04.2009. cash deposit into bank occurred after payments of advance tax and hence there is no satisfactory explanation for cash deposit into bank. plea now sought to be raised by assessee that advances obtained from agriculturists for sale of land and that on failure of such transactions advances were returned is not substantiated by assessee as brought out above as explanation provided at time of assessment differs with explanation now sought to be given. ITA No.670/B/2013 5.3 error in assessment order passed by AO lay in fact that while he has considered issue payment of advance tax in cash and balance available in bank in detail, he has telescoped one into another without appreciating that both are two distant points of time. advance tax payments made in cash are on following dates; 24.03.2009 - Rs.1,07,05,000, 14.03.2009 - Rs.5,00,000, 23.11.2008 - Rs.1,50,000. Total Rs.1,17,05,000/-. AO has ITA Nos.669 & 670/Bang/2013 Page 7 of 10 brought to tax this amount of advance tax paid in cash as same was not routed through bank and sources for same were not explained. After these payments it was noticed that there is cash deposit into bank and hence bank balance in Vijaya Bank in account 117801010019429 as on 31.03.2009 should have been taken at 1,28,32,493 instead assessee has stated balance at Rs.32,493/- in cash at Bank which is balance as on 04.04.2009. cash deposit into bank occurred after payments of advance tax and hence there is no satisfactory explanation for cash deposit into bank. plea now sought to be raised by assessee that advances obtained from agriculturists for sale of land and that on failure of such transactions advances were returned is not substantiated by assessee as brought out above as explanation provided at time of assessment differs with explanation now sought to be given. 6. We reproduce paras No. 6.1 & 7 from order of ld. CIT in both cases containing finding and direction of ld. CIT to AO:- ITA No.669/B/2013 6.1 In view of above mentioned facts there is no option but to come to conclusion that amount of Rs.1,28,50,000 which forms part of balance in Corporation Bank as on 31.03.2009 should be considered as excess of assets over liabilities and is to be brought to tax as such. payment of taxes made earlier in cash cannot be given set off to this amount in view of fact that moment taxes have been paid there is cash outflow which is no longer available to substantiate balance in bank account. 7.0 In view of this Assessment order passed on 26.12.2011 by AO namely Additional Commissioner of Income-tax, Shimoga Range for A.Y. 2009-10 is set aside with direction to AO to recompute income by making addition of above amount of Rs.1,28,50,000, in place of Rs.32,35,000/-. ITA Nos.669 & 670/Bang/2013 Page 8 of 10 ITA No.670/B/2013 6.1 In view of above mentioned facts there is no option but to come to conclusion that amount of Rs.1.28 crores which forms part of balance in Vijaya Bank as on 31.03.2009 should be considered as excess of assets over liabilities and is to be brought to tax as such. payment of taxes made earlier in cash cannot be given set off to this amount in view of fact that moment taxes have been paid there is cash outflow which is no longer available to substantiate balance in bank account. 7.0 In view of this Assessment order passed on 26.12.2011 by AO namely Additional Commissioner of Income-tax, Shimoga Range for A.Y. 2009-10 is set aside with direction to AO to recompute income by making addition of above amount of Rs.1.28 crores, in place of Rs.14,45,000/-. 7. In our considered opinion, if assessee can establish claim regarding receipt of advance from agriculturists on date prior to date of payment of advance tax and addition is ultimately made by AO in respect of assessee s failure to establish receipt of that advances from those agriculturists and such claim of refund to those agriculturists is by way of cheques issued on 30.3.2009 which were actually encashed from bank on 2.4.2009, then assessee deserves telescoping of addition made by AO on account of payment of advance tax out of undisclosed sources of fund. But since there is no finding of AO or of CIT on these aspects, we think it proper to modify directions of ld. CIT in both cases and accordingly we direct AO in both cases to examine veracity of claim of assessee that payment of advance tax was made by assessee out of advances received from ITA Nos.669 & 670/Bang/2013 Page 9 of 10 agriculturists, which assessee failed to establish and difference in balance as on 31.3.2009 as per bank and as per assessee s books is on this account that cheques were issued by assessee to those agriculturists on 30.3.2009 which were encashed by bank on 2.4.2009. Addition should be made by AO as per law after examining veracity of these contentions of assessee. To this extent, direction of ld. CIT in both cases stands modified. 8. In case, consequential order has already been passed by AO as per direction of ld. CIT in his order u/s. 263, then such modified direction of ld. CIT should be considered by ld. CIT (Appeals) if matter is pending before CIT (Appeals) against consequential order passed by AO u/s. 143(3) r.w.s. 263 of I.T. Act. 9. In result, both appeals by assessee stand partly allowed for statistical purposes in terms indicated above. Pronounced in open court on this 18th day of October, 2016. Sd/- Sd/- (SUNIL KUMAR YADAV ) ( A.K. GARODIA ) Judicial Member Accountant Member Bangalore, Dated, 18th October, 2016. /D S/ ITA Nos.669 & 670/Bang/2013 Page 10 of 10 Copy to: 1. Appellants 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. 6. Guard file By order Assistant Registrar, ITAT, Bangalore. B.Y. Raghavendra v. Commissioner of Income Tax, Davangere