Bedridden person can have agriculture income, advance loan. Summarily Rejecting creditworthiness despite pattadar passbook without verification wrong-ITAT

Bedridden person can have agriculture income, advance loan. Summarily Rejecting creditworthiness despite pattadar passbook without verification wrong-ITAT. This was held by ITAT Hyderabad in a recent judgment as under:

Case Law Details:
ITA No. 1535/Hyd/2014 (Assessment year: 2009-10)
Chenna Reddy Sesha Reddy  (Appellant) vs. Income Tax Officer (Respondent)
Date of order/Judgment: 13/05/2016

Brief Facts of the Case:
The assessee was a civil contractor. His case was selected for scrutiny u/s 143(2). During the assessment proceedings u/s 143(3), the Assessing Officer (AO) issued notices to the assessee asking him to explain the credits into assessee’s bank a/c with respect to  loan received from the two parties namely Shri P. Siva Kumar Reddy (Loan creditor 1)  and Shri C. Srinivasulu Reddy (Loan creditor 2). Confirmation letter from the 1st loan creditor was submited. As regards loan from the 2nd loan creditor namely, Shri C. Srinivasulu Reddy of Madaraju Gudur Village of Nellore District, it was stated that the same was received vide cheque No.616641 on 23.02.2011 and confirmation letter was also submitted. The AO, however, did not accept the contention of the assessee on the ground that Shri Siva Kumar Reddy has a family to support and was not in a position to advance such a huge amount, secondly the cheque numbers given by the assessee and those in confirmation letter were different.  Also for the 2nd loan loan creditor, C. Srinivasulu Reddy AO opined that he was a bedridden person and could not have performed agricultural operations and thus his creditworthiness was not proved. Accordingly, AO made an addition of Rs.4,60,000 disbelieving the creditworthiness of both the loan creditors. The additions made by the AO have been confirmed by the CIT (A) also.

The assessee contested the additions made before the tribunal in the present appeal and filed an application seeking admission of additional evidence u/s 29 of ITAT Rules, 1963.

Contentions of the Assessee:
The assessee contended that he had filed the following evidence before CIT(A)
(1) a letter from Shri P. Siva Kumar Reddy confirming that he had loaned an amount of Rs.4,60,000 to the assessee
(2) copy of the pattadar passbook showing ownership of 22.29 acres of agricultural land by Shri P. Siva Kumar Reddy and
(3) copy of the pattadar passbook showing ownership of 8.94 acres of agricultural land by Smt. P. Padmaja, wife of Sri P. Siva Kumar Reddy.

He submitted that the CIT (A) summarily rejected the said evidence without verifying the same. He therefore, prayed that the same may be admitted by the Tribunal and remanded to the file of the AO for verification.

Important Excerpts from ITAT Judgment:

However, before the CIT (A) the assessee has filed evidence to prove the creditworthiness of Shri P. Siva Kumar Reddy which has been brushed aside by the CIT (A) summarily. Further, we also find from the records that though Shri C. Srinivasulu Reddy is a bedridden person, he is the the owner of 22.29 acres of agricultural land and is deriving agricultural income. These factors need proper appreciation by the authorities below. Therefore, in our opinion, the evidence filed by the assessee need verification by the AO. In view of the same, we are inclined to admit the additional evidence filed by the assessee and remand both the issues to the file of the AO for denovo consideration in accordance with the law.