SRI YELURI CHANDRASEKHAR RAO, GUNTUR V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, GUNTUR

CO 13/VIZ/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9532 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2022
• Assessment Year: 2019-2020
• Appeal Filed On: 25-07-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 131; 132; 44AD; 142(1); 153A; 143(2)

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.(SS)A.No.02-07/Viz/2022 (निर्धारण वर्ा / Assessment Year : 2015-16 to 2020-21) Dy.Commissioner of Income Tax Central Circle-1 Guntur Vs. Sri Yeluri Chandrasekhar Rao B1-C35, 3 rd Line, Ravindra Nagar Guntur [PAN : ABEPY9302L] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) Cross Objection No.9/Viz/2022 to 14/Viz/2022 (Arising out of I.T.(SS)A.No.02-07/Viz/2022) (निर्धारण वर्ा / Assessment Year : 2015-16 to 2020-21) Sri Yeluri Chandrasekhar Rao B1-C35, 3 rd Line, Ravindra Nagar Guntur [PAN : ABEPY9302L] Vs. Dy.Commissioner of Income Tax Central Circle-1 Guntur (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) राजस्व की ओर से / Revenue by : Shri M.N.Murthy Naik, CIT(DR) निर्ााररती की ओर से / Assessee by : Shri M.V.Prasad, AR सुिवधई की तधरीख / Date of Hearing : 18.10.2022 घोर्णध की तधरीख/Date of Pronouncement : 28.10.2022 O R D E R Per Bench : These appeals are filed by the revenue against the orders of the Commissioner of Income Tax (Appeals) [in short, [CIT(A)], Visakhapatnam- 3 dated 28.04.2022 for the Assessment Year (A.Y.) 2015-16 to 2020-21 2 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur and the cross objections are filed by the assessee in support of the orders of the Ld.CIT(A). Since the grounds raised in these appeals are common, these appeals are clubbed, heard together and a common order is being passed and the facts are extracted from I.T.(SS)A.02/Viz/2022, for the sake of convenience as under. 2. Brief facts of the case are that the assessee is a General Manager (Finance) of M/s Polisetty Somasundaram group of business concerns and also a Director in M/s Polisetty Somasundaram Tobacco Products (India)Pvt. Ltd. and M/s Polisetty Somasundaram Global Limited. The assessee is involved in the operations of M/s Polisetty Somasundaram groups. A search u/s 132 of the Income Tax Act, 1961 (in short ‘Act’) was conducted in the group cases of M/s Polisetty Somasundaram on 29.01.2020, including the residence of the assessee. During the search, it was found that the firm was maintaining unaccounted cash book from the F.Y.2012-13 to the date of search in a pen drive, which was seized by the department. During the sworn deposition on 29.01.2020, Shri Polisetty Shyam Sundar, Managing Partner of the firm confirmed that the pen drive was seized from his office premises and the data in the pen drive in Excel Sheets pertain to unaccounted cash transactions. He further stated that the payments were made to the assessee for the services rendered by him in 3 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur tobacco exports. It was further stated by him that the assessee looked after various works relating to exports including grading and other pre-export processes. He further stated that the payment was mentioned in Euros / dollars due to the oral settlement entered into by the assessee and the firm with respect to payment for JTI exports and non-JTI exports . It was worked out at the rate of 0.012 Euros per kilo of tobacco exported to JTI and at the rate of USD 0.03 per kilo of tobacco exported to non JTI entities, converted into Indian rupees and paid to the assessee. He also further confirmed that no tax was deducted at source on the payments made to the assessee for the purpose of export related services such as grading, stripping, threshing, packing and shipment. He also further stated that these payments to the assessee are made over and above the expenses debited to P&L account of the company and therefore, these payments are not recorded in the books of accounts. The AO reproduced herewith the payments made to the assessee as follows : S.No. Fin.Year Asst.Year Amount (in Rs.) 1. 2012-13 2013-14 24,27,600 2. 2013-14 2014-15 1,25,94,430 3. 2014-15 2015-16 1,67,33,012 4. 2015-16 2016-17 2,77,46,425 5. 2016-17 2017-18 3,02,50,375 6. 2017-18 2018-19 2,60,39,825 7. 2018-19 2019-20 3,05,40,700 8. 2019-20 2020-21 3,10,05,750 9. Total 17,73,38,117 4 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur 3. The assessee in sworn statement recorded, admitted the receipts of Rs.17.73 crores from the F.Y.2012-13 to the date of search. The assessee also admitted to declare the income accrued / received detected during the search operations. Consequent to the search, notice u/s 153A was issued to the assessee on 19.03.2021 to file his return of income for the A.Y.2015- 16 within 15 days of the receipt of such notice, which was served on 19.03.2021. In response, the assessee filed return of income admitting total income of Rs.18,95,290/- on 29.03.2021. Subsequently, notice u/s 143(2) dated 30.06.2021 and 142(1) dated 31.08.2021 was issued and served on the assessee. Summons u/s 131 were also issued on 08.09.2021. In response, the assessee’s representative furnished information and clarification as required by the AO. After verification of the submissions made by the assessee’s representative, the AO found that the assessee has not declared the total receipts admitted during the search operations, but has declared 8% of the gross receipts as income while filing the return of income. Not convinced with the assessee’s declaration of income, the Ld.AO proposed to tax the entire gross receipts received by the assessee during the relevant assessment year and accordingly made an addition of Rs.1,64,06,370/- during the impugned assessment year. 5 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur 4. Aggrieved by the order of the Ld.AO, the assessee filed appeal before the CIT(A). Before the Ld.CIT(A), the assessee’s representative, submitted all the information as provided before the AO. Considering the submissions made by the assessee’s representative, the Ld.CIT(A) allowed the appeal of the assessee. 5. Against the order of the Ld.CIT(A), the revenue is in appeal before us. The Ld.DR argued that no evidence with regard to cash payments were seized during the search operations. Therefore, the claim made by the assessee that certain cash expenditure was incurred, cannot be accepted. The Ld.DR further argued that the assessee, working as General Manager (Finance) of Polisetti Somasundaram Group of companies, has never declared that he is carrying on business, while filing the return of income. The Ld.DR further submitted that the pen drive seized during the search operations, contained only the payments made to the assessee outside the books of accounts. The Ld.DR further submitted that the AO has rightly observed the contradictions in the statement recorded by the assessee. The Ld.DR pleaded that the order of the Ld.AO be upheld. 6. Per contra, the Ld.AR fully relied on the order of the Ld.CIT(A). He further submitted that the revenue has not disputed the fact that certain expenses were incurred with relation to pre export services by the 6 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur assessee out of the funds received from the M/s Polisetty Somasundaram group. He pleaded that the order of the Ld.CIT(A) be upheld. 7. We have heard both the sides and perused the material placed on record. Admittedly, there is no dispute on the fact that the assessee has received cash payments aggregating to 17,73,38,117/- from the F.Y.2012- 13 to till the date of search. It was also admitted that the assessee has failed to disclose the receipts or income received from the firm while filing his return of income. On being confronted by the search team, the assessee admitted that he has received Rs.17.73 crores, but has incurred expenses relating to pre-export services, such as grading, stripping, threshing, packing and shipment. The assessee has also admitted that he has not maintained any books of accounts, but has declared the income in response to the notice u/s 153A at 8% of the gross receipts, in accordance with the provisions of section 44AD of the Act. The contention of the assessee declaring the income under presumptive basis u/s 44AD is not valid in law as he exceeded the turnover limits specified u/s 44AD of the Act. However, the revenue authorities have not denied the fact that the assessee has incurred certain expenses which is unaccounted in relation to export of tobacco and has made various payments in the form of cash to the 7 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur labourers for grading, stripping, threshing, packing and shipment. Further the Ld.CIT(A) in para 4.4 has recorded his findings as follows: “I am in agreement with the submissions made on behalf of the appellant that presuming the appellant had not incurred any expenditure and simply received such huge amount from the company M/s Polisetty Somasundaram the department would have either found cash in his house or evidences with regard to acquisition of property in the form of assets such as land and buildings in the search at the residence of the appellant. No such acquisition of properties was noticed nor any cash was found at the premises of the appellant and even the impugned material relied upon by the AO in making the addition was not found from the premises of the appellant but from the business premises of M/s Polisetty Somasundaram group.” We are therefore, of the considered view that these unaccounted expenditure should also be considered while determining the taxable income of the assessee. In this regard, we find that the Hon’ble Supreme Court in the case of CIT Vs. Williamson Financial Services (2007) 165 Taxman 638 (SC) held as under : “It is important to bear in mind that u/s 4, the levy is on total income of the assessee computed in accordance with and subject to the provisions of the Income Tax Act. What is chargeable to tax under the Income Tax Act is not the gross receipt but the income under the Income Tax Act. The tax is on income but not on gross receipts.” Judicially following the directions of the Hon’ble Supreme Court, we are of the considered view that only the income shall be chargeable to tax and not the gross receipts. In the absence of any material contrary to the fact that the assessee has not incurred any expenditure in relation to pre- 8 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur export of tobacco, we find that Ld.CIT(A) has reasonably considered 8% as net profit of the assessee and hence, we find that no interference is required in the order of the Ld.CIT(A). Accordingly, the appeal of the revenue is dismissed. 8. The assessee filed cross objections in support of the Ld.CIT(A). Since the appeal of the revenue is dismissed, the cross objections filed by the assessee will become infructuous, hence, dismissed. 9. In the result, the appeal of the revenue as well as the cross objections of the assessee are dismissed. Order pronounced in the open court on 28 th October, 2022. Sd/- Sd/- (द ु व्वूरुआर.एल रेड्डी) (एस बालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBERलेखासदस्य/ACCOUNTANT MEMBER Dated : 28.10.2022 L.Rama, SPS 9 IT(SS)A No.02-07/Viz/2022 & CO No.09-14/Viz/2022, A.Y.2015-16 to 2020-21 Sri Yeluri Chandrasekhar Rao, Guntur आदेश की प्रनतनिनि अग्रेनषत/Copy of the order forwarded to:- 1. रधजस्व/The Revenue – Dy.Commissioner of Income Tax, Central Circle-1, 3 rd Floor, Raj Kamal Complex, Lakshmipuram Main Road, Guntur 2. निर्धाऩरती/ The Assessee– Sri Yeluri Chandrasekhar Rao, B1-C35, 3 rd Line, Ravindra Nagar, Guntur 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam 4. The Commissioner of Income Tax (Appeals)-3, Visakhapatnam 5. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam