S.Sivarama Reddy, Visakhapatnam V. THE ITO, Visakhapatnam

CO 23/VIZ/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2661 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 28-09-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M NARAYANA RAO; R GOVINDARAJAN
• Keywords: Unexplained cash credit; Business income; Peak credit; Revised return
• Section: 43B; 143(3); 142(1); 234B; 147; 148

Judgement Text

ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.250 & 252/VIZAG/2015 ( / ASSESSMENT YEARS: 2011-12 & 2012-13) THE ITO, WARD - 1(2), VISAKHAPATNAM VS. S. SIVA RAMA REDDY, VISAKHAPATNAM [PAN: AIXPS6613A ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NOS.272, 274 & 276/VIZAG/2015 ( / ASSESSMENT YEARS: 2010-11, 2011-12 & 2012-13) S. SIVA RAMA REDDY, VISAKHAPATNAM VS. THE ITO, WARD - 1( 4 ), VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NOS.23 & 25/VIZAG/2015 (ARISING OUT OF I.T.A.NOS.250 & 252/VIZAG/2015) ( / ASSESSMENT YEARS: 2011-12 & 2012-13) S. SIVA RAMA REDDY, VISAKHAPATNAM VS. THE ITO, WARD - 1( 2 ), VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI R. GOVINDARAJAN, DR & SHRI M. NARAYANA RAO, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 05.12.2016 / DATE OF PRONOUNCEMENT : 30.12.2016 ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 2 / O R D E R PER BENCH: THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL A S THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRE CTED AGAINST SEPARATE BUT IDENTICAL ORDERS OF THE COMMISSIONER OF INCOME TAX (A)-1, VISAKHAPATNAM FOR THE ASSESSMENT YEAR 2010-11, 2011 -12 & 2012-13. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMO N, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMM ON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SWEETS IN THE N AME OF M/S. SIVARAMA SWEETS, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2010-11, 2011-12 & 2012-13 DECLARING TOTAL INCOME O F ` 11,33,604/-, ` 9,84,314/- AND ` 3,77,341/-, BESIDES AGRICULTURAL INCOME OF ` NIL, ` 2,40,000/- & ` 2,40,000/- RESPECTIVELY. A SURVEY OPERATION U/S 1 33A OF THE ACT WAS CONDUCTED IN THE ASSESSEES CASE ON 12. 11.2012. DURING THE COURSE OF SURVEY, CERTAIN INCRIMINATING DOCUMEN TS FOUND AND IMPOUNDED REVEALS THAT THE ASSESSEE HAS NOT DISCLOS ED CERTAIN BANK ACCOUNTS, PURCHASES AND ALSO SUPPRESSED SALES. THE SURVEY PARTY SEIZED BILLING MACHINE WHICH REVEALS THE UNACCOUNTED TURNO VER OF ` 1,45,76,675/-. DURING THE COURSE OF SURVEY PROCEED INGS ON 12.11.2012, ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 3 A STATEMENT WAS RECORDED FROM THE ASSESSEE, WHEREIN THE ASSESSEE HAS ADMITTED THAT THE SALES FOUND FROM TWO BILLING MACH INES FOR THE PERIOD DECEMBER, 2011 TO MARCH, 2012 HAS NOT BEEN INCLUDED IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED FOR THAT PERIOD. THER EFORE, AGREED THAT HE WOULD INCLUDE THE SALES MADE FOR THE PERIOD FROM DE C11 TO MAR12 IN THE REVISED RETURN FILED. 3. SUBSEQUENTLY, THE CASE HAS BEEN RE-OPENED BY ISS UING NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') FOR THE REASON THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAP ED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSEE HAS FILED REVISED RETURN FOR THE ASSESSMENT YEAR 2011-12 ON 1 .3.2013 ADMITTING TOTAL INCOME OF ` 22,09,314/- AS AGAINST THE ORIGINAL INCOME RETURN OF ` 9,84,314/-. BUT, THE ASSESSEE HAS FILED A LETTER O N 6.3.2013 STATING THAT THE RETURN OF INCOME FILED ON 27.9.2010 FOR THE ASS ESSMENT YEAR 2010- 11 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NO TICE U/S 148 OF THE ACT. IN SO FAR AS ASSESSMENT YEAR 2012-13 IS CONCE RNED, THE ASSESSEE HAD NOT FILED RETURN OF INCOME. THEREFORE, THE A.O . ISSUED NOTICE U/S 142(1) OF THE ACT, CALLING FOR RETURN OF INCOME ON 16.11.2012. IN RESPONSE TO NOTICE U/S 142(1) OF THE ACT, THE ASSES SEE FILED HIS RETURN OF INCOME ON 19.2.2013 DECLARING TOTAL INCOME OF ` 3,77,341/- AND AGRICULTURAL INCOME OF ` 2,40,000/-. ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 4 4. THE CASES HAVE BEEN SELECTED FOR SCRUTINY AND AC CORDINGLY, NOTICES U/S 143(2) & 142(1) OF THE ACT ALONG WITH DETAILED QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO NOTICES, THE ASSESSEES AUT HORIZED REPRESENTATIVE APPEARED FROM TIME TO TIME AND FURNISHED BOOKS OF A CCOUNTS AND OTHER DETAILS CALLED FOR. THE ASSESSMENT WAS COMPLETED U /S 143(3) R.W.S. 147 OF THE ACT AND DETERMINED TOTAL INCOME OF ` 18,22,104/-+ ` 2,35,000/- AGRICULTURAL INCOME, ` 1,20,51,116/-+ ` 2,40,000/- AGRICULTURAL INCOME AND ` 3,84,04,345/- + ` 2,40,000/- AGRICULTURAL INCOME, FOR THE ASSESSMENT YEARS 2010-11, 2011-12 & 2012-13 RESPECT IVELY. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS. THE CIT(A) AFTER CONSIDERING SUBMISSI ONS OF THE ASSESSEE PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE, WHEREI N THE CIT(A) DELETED ADDITIONS MADE TOWARDS UNEXPLAINED CREDITS IN BANK ACCOUNTS, UNACCOUNTED PURCHASES, ADDITIONS TOWARDS VAT PAYMEN T. HOWEVER, THE CIT(A) RE-WORKED ESTIMATION OF TURNOVER AND SCALED DOWN ESTIMATION OF NET PROFIT FROM 60% TO 25% ON TOTAL TURNOVER INCLUD ING UNDISCLOSED TURNOVER. AGGRIEVED BY THE CIT(A) ORDER, THE ASSES SEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 5 5. THE ASSESSEE AS WELL AS REVENUE HAS RAISED COMMO N GROUNDS FOR ALL THE ASSESSMENT YEARS. FROM THESE GROUNDS OF AP PEALS, 4 ISSUES ARISES FOR OUR CONSIDERATION. I) UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT. II) ESTIMATION OF UNACCOUNTED SALES AND NET PROFIT. III) ADDITIONS TOWARDS VAT PAYABLE U/S 43B OF THE A CT. IV) LEVY OF INTEREST U/S 234B OF THE ACT. 6. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 IS ADDITION TOWA RDS UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT. DURING THE SCRUTINY PROCEEDINGS, THE ASSESSEE WAS CALLED UPON TO EXPLAIN WHY THE CASH DE POSITS IN THE BANK ACCOUNT WITH AXIS BANK AMOUNTING TO ` 6,95,170/- SHOULD NOT BE CONSIDERED AS UNEXPLAINED INCOME AND SUBJECT TO TAX . THE A.O. NOTED THAT DURING THE POST SURVEY INVESTIGATION, THE ASSE SSEE HAD ADMITTED THAT THE SAID ACCOUNT BELONGS TO HIM, HOWEVER, IT WAS CL AIMED THAT THE DEPOSITS INTO THE SAID ACCOUNT PARTLY REPRESENTS MO NEY BELONGING TO HIS FRIENDS AND PARTLY FROM THE WITHDRAWAL OF HIS CAPIT AL ACCOUNT. WHEN ASSESSEE WAS CALLED UPON TO EXPLAIN THE CREDITS, TH E ASSESSEE FAILED TO ESTABLISH THE NEXUS BETWEEN THE CAPITAL WITHDRAWAL AND CASH DEPOSITS IN THE BANK ACCOUNT. THEREFORE, THE A.O. OPINED THAT CREDITS FOUND IN THE BANK ACCOUNT REPRESENTS UNDISCLOSED INCOME OF THE A SSESSEE AND ACCORDINGLY ADDED AN AMOUNT OF ` 6,88,500/- TO THE TOTAL INCOME. IT IS THE CONTENTION OF THE ASSESSEE THAT CASH DEPOSITS I N THE BANK ACCOUNT ARE ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 6 OUT OF WITHDRAWALS FROM CAPITAL ACCOUNT OF HIS BUSI NESS. THE ASSESSEE FURTHER CONTENDED THAT THE A.O. WAS NOT JUSTIFIED I N MAKING THE TOTAL CREDITS FOUND IN THE BANK ACCOUNT AND IF AT ALL, AN Y ADDITION IS REQUIRED, THE ADDITIONS CAN BE MADE ONLY TO THE PEAK CREDIT. 7. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IALS ON RECORD, WE FIND THAT THE A.O. HAS MADE ADDITION OF ` 6,88,500/- U/S 68 OF THE ACT FOR THE REASON THAT THE ASSESSEE HAS FAILED TO ESTA BLISH SOURCE FOR THE CREDITS FOUND IN THE BANK ACCOUNT. THOUGH, THE ASS ESSEE CLAIMS TO HAVE RECEIVED AMOUNTS FROM HIS FRIENDS AND RELATIVES AND ALSO PART OF THE AMOUNT WAS OUT OF CAPITAL WITHDRAWAL FROM HIS FIRM, FAILED TO ESTABLISH THE NEXUS BETWEEN WITHDRAWALS FROM CAPITAL ACCOUNT AND DEPOSIT IN THE BANK. THEREFORE, OPINED THAT THE CREDITS FOUND IN THE BANK ACCOUNT REPRESENT UNEXPLAINED INCOME OF THE ASSESSEE. WE D O NOT FIND ANY MERITS IN THE FINDINGS OF THE A.O., FOR THE REASON THAT ON PERUSAL OF THE BANK STATEMENTS FILED BY THE ASSESSEE, WE NOTICED T HAT THERE ARE CREDITS AS WELL AS WITHDRAWALS IN THE BANK ACCOUNTS. IT IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE HAS WITHDRAWN MONEY IN V ARIOUS PLACES FOR THE PURPOSE OF BUSINESS AND THE SAME HAS BEEN RE-DE POSITED IN THE BANK ACCOUNT, THEREFORE, IF AT ALL, ANY ADDITION IS WARR ANTED, ONLY ADDITIONS CAN BE MADE FOR PEAK CREDIT FOUND IN THE BANK ACCOUNT. WE FIND THAT THE ASSESSEE HAS WITHDRAWN CASH ON VARIOUS DATES. UNLE SS THE A.O. PROVES ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 7 THAT CASH WITHDRAWALS HAS BEEN UTILIZED FOR PERSONA L EXPENDITURE OR DEPLOYED FOR ACQUISITION OF ASSETS, THE SOURCES AVA ILABLE IN THE FORM OF CASH WITHDRAWALS CANNOT BE IGNORED WHILE CONSIDERIN G CREDITS IN THE BANK ACCOUNT. THEREFORE, WE ARE OF THE VIEW THAT THE A. O. WAS ERRED IN MAKING ADDITIONS TOWARDS TOTAL CREDITS FOUND IN THE BANK ACCOUNT. HENCE, WE DIRECT THE A.O. TO WORK OUT PEAK CREDITS FOUND IN THE BANK ACCOUNT AND MAKE ADDITIONS TO THE PEAK CREDIT INSTE AD OF TOTAL CREDITS FOUND IN THE BANK ACCOUNT. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS UNDISCLOSED INCOME OUT OF ADDITIONAL UNACCOUNTED SALES AND ESTI MATION OF NET PROFIT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. NOTICED THAT THE ASSESSEE HAS ADMITTED ADDITIONAL TURNOVER OF ` 70 LAKHS EACH FOR THE ASSESSMENT YEAR 2011-12 AND 2012-13 AND ESTIMATED N ET PROFIT OF 17.5% ON SUCH ADDITIONAL TURNOVER. THE A.O. FURTHER OBSE RVED THAT DURING THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE HAS ADMI TTED UNACCOUNTED TURNOVER OF ` 1,45,76,675/- FOR THE PERIOD FROM DEC11 TO MAR12 . IT WAS FURTHER OBSERVED THAT THE ASSESSEE ALSO ADMITTED AD DITIONAL TURNOVER OF ` 60 LAKHS FOR THE REMAINING PERIOD OF 8 MONTHS FROM APR11 TO NOV11. THEREFORE, ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE TURNOVER SHALL NOT BE ESTIMATED FOR WHOLE YEAR BASE D ON THE TURNOVER FOUND FOR THE PERIOD OF 3 MONTHS FROM DEC11 TO MAR 12. IN RESPONSE TO ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 8 SHOW CAUSE NOTICE, THE ASSESSEE HAS SUBMITTED THAT THE TURNOVER FOR THE REMAINING PERIOD OF 8 MONTHS CANNOT BE ESTIMATED AT THE LEVEL OF TURNOVER FOUND FOR THE PERIOD OF 3 MONTHS. THE ASS ESSEE FURTHER SUBMITTED THAT THE BUSINESS FOR THE PERIOD FROM DEC EMBER TO MARCH IS ALWAYS HIGH AND FOR THE REMAINING PERIOD, THE TURNO VER WOULD BE AROUND ` 6 TO 8 LAKHS PER MONTH, THEREFORE, ESTIMATING A TU RNOVER FOR THE WHOLE YEAR BASED ON THE TURNOVER OF 3 MONTHS EQUALLY IS I NCORRECT. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, HELD THAT THE ASSESSEE HIMSELF HAS ADMITTED UNACCOUNTED TURNOVER OF ` 1,45,76,675/- FOR THE PERIOD OF 3 MONTHS AND ALSO ADMITTED ADDITIONAL TUR NOVER OF ` 60 LAKHS FOR THE REMAINING PERIOD OF 8 MONTHS. THE A.O. FUR THER OBSERVED THAT THE PROFIT MARGIN IN UNACCOUNTED TURNOVER IS NORMAL LY HIGH, BECAUSE THE ASSESSEE WILL CLAIM ALL OVERHEADS IN THE REGULAR TU RNOVER DISCLOSED FOR THE PERIOD. WITH THESE OBSERVATIONS, ESTIMATED NET PROF IT OF 60% ON ADDITIONAL TURNOVER DECLARED FOR THE ASSESSMENT YEA R 2011-12 AND AFTER REDUCING NET PROFIT DECLARED BY THE ASSESSEE, BALAN CE AMOUNT OF ` 29,79,000/- HAS BEEN ADDED TO THE TOTAL INCOME OF T HE ASSESSEE. AS REGARDS ASSESSMENT YEAR 2012-13, THE A.O. HAS ESTIM ATED ADDITIONAL TURNOVER OF ` 2,91,53,350/- IN ADDITION TO TURNOVER DECLARED BY THE ASSESSEE AND ESTIMATED NET PROFIT OF 60% ON SUCH AD DITIONAL TURNOVER. ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 9 9. THE LD. A.R. FOR THE ASSESSEE, SUBMITTED THAT TH E A.O. WAS ERRED IN ESTIMATING ADDITIONAL TURNOVER BASED ON THE TURN OVER OF 3 MONTHS FOR THE REMAINING PERIOD OF 8 MONTHS. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF SWEETS AND IN THIS BUSINESS, THE TURNOVER DURING THE PERIOD FROM DECEM BER TO MARCH IS NORMALLY HIGH, THEREFORE, ESTIMATING A TURNOVER EQU ALLY FOR THE WHOLE YEAR BASED ON THE TURNOVER OF 3 MONTHS IS INCORRECT . AS REGARDS ESTIMATION OF NET PROFIT, THE CIT(A) WAS ERRED IN E STIMATING NET PROFIT OF 25% ON TOTAL TURNOVER INCLUDING ADDITIONAL TURNOVER ESTIMATED BASED ON THE IMPOUNDED DOCUMENTS. THOUGH, NET PROFIT IN THE UNDISCLOSED TURNOVER IS HIGH WHEN COMPARED TO DECLARED TURNOVER , THE POSSIBILITY OF PURCHASES AND OTHER EXPENDITURE CANNOT BE RULED OUT , THEREFORE, REQUESTED TO SCALE DOWN THE NET PROFIT ESTIMATED BY THE CIT(A). THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT THE CIT(A) IS ERRED IN SCALED DOWN ESTIMATION OF NET PROFIT FROM 60% TO 25%. THE D.R. FURTHER SUBMITTED THAT NET PROFIT COMPONENT IN THE UNDISCLOSED TURNOV ER IS QUITE HIGH, BECAUSE THE ASSESSEE WILL CLAIM ALL OVERHEADS IN TH E REGULAR BOOKS OF ACCOUNTS AND HENCE PROFIT MARGIN IS VERY HIGH IN UN ACCOUNTED TURNOVER. THE CIT(A) WITHOUT APPRECIATING THE FACT, SIMPLY SC ALED DOWN NET PROFIT ESTIMATION FROM 60% TO 25%, THEREFORE, REQUESTED TO UPHOLD THE ESTIMATION MADE BY THE A.O. ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 10 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE FACTUAL MATRIX OF THE CASE WHICH LEADS TO ESTIMATIO N OF TURNOVER AND ESTIMATION OF NET PROFIT ARE THAT DURING THE COURSE OF SURVEY OPERATION, SALES PERTAINING TO THE PERIOD FROM DEC11 TO MAR1 2 HAS BEEN FOUND AND IMPOUNDED. THE IMPOUNDED DOCUMENTS REVEALS THAT TH E ASSESSEE IS HAVING A TURNOVER OF ` 1,45,76,675/- FOR THE PERIOD OF 4 MONTHS FROM DEC11 TO MAR12. THE A.O. HAS ESTIMATED A PROPORT IONATE TURNOVER FOR THE REMAINING PERIOD OF 8 MONTHS AND ESTIMATED NET PROFIT OF 60% ON SUCH TURNOVER, HOWEVER, ACCEPTED TURNOVER DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12, BUT ESTIMATED HIGHER N ET PROFIT OF 60% AS AGAINST NET PROFIT DECLARED BY THE ASSESSEE. DURIN G THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) HAS RE-WORKED UNA CCOUNTED TURNOVER FOR THE ASSESSMENT YEAR 2011-12 AND 2012-13 WHEREIN THE CIT(A) HAS ENHANCED THE TURNOVER FOR THE ASSESSMENT YEAR 2011- 12, BUT SCALED DOWN NET PROFIT FROM 60% TO 25%. IT IS THE CONTENT ION OF THE ASSESSEE THAT THE CIT(A) WAS ERRED IN ESTIMATING TURNOVER FO R THE ASSESSMENT YEAR 2011-12 BASED ON THE INFORMATION PERTAINS TO ASSESS MENT YEAR 2012-13. IF AT ALL, ESTIMATION IS POSSIBLE, THE ESTIMATION C AN BE MADE BASED ON THE DETAILS OF PART PERIOD TO THE REMAINING PERIOD, BUT IT CANNOT BE EXTENDED TO THE PREVIOUS OR SUBSEQUENT FINANCIAL YEAR. ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 11 11. HAVING HEARD BOTH THE SIDES, WE FIND FORCE IN T HE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THOUGH ESTIMATION OF T URNOVER IS POSSIBLE FOR THE REMAINING PERIOD OF THE FINANCIAL YEAR BASED ON THE INPUTS OF A PART PERIOD, IT CANNOT BE EXTENDED TO PREVIOUS FINANCIAL YEAR. IN THE PRESENT CASE ON HAND, THE ASSESSEE HAS ESTIMATED ADDITIONAL TURNOVER OF ` 70 LAKHS FOR THE ASSESSMENT YEAR 2011-12. BUT THE CIT (A) HAS ENHANCED THE TURNOVER TO ` 1.40 CRORES WITHOUT ANY BASIS. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) WAS INCORRECT IN ENHANCED TURNOVER FROM ` 70 LAKHS TO ` 1.40 CRORES, ACCORDINGLY WE DIRECT THE A.O. TO ACC EPT TURNOVER DECLARED BY THE ASSESSEE. IN SO FAR AS ASSESSMENT YEAR 2012-13, THE ASSESSEE HAS ADMITTED AN UNACCOUNTED TURNOVER OF ` 1,45,76,675/- FOR THE PERIOD OF 4 MONTHS FROM DEC11 TO MAR12 AND FU RTHER ` 60 LAKHS FOR THE PERIOD OF 8 MONTHS FROM APR11 TO NOV11. AS A GAINST THIS, THE A.O. HAS ESTIMATED AN ADDITIONAL TURNOVER OF ` 2,91,53,350/- FOR THE PERIOD OF 8 MONTHS BASED ON THE TURNOVER OF THE PERIOD DEC11 TO MAR12. THOUGH THE CIT(A) HAS REDUCED TURNOVER ESTIMATED BY THE A. O. FROM ` 2,91,53,530/- TO ` 80 LAKHS, FAILS TO GIVE ANY REASONS FOR ESTIMATING HIGHER TURNOVER OF ` 80 LAKHS. THEREFORE, WE ARE OF THE VIEW THAT THE CIT(A) WAS INCORRECT IN ADOPTING HIGHER TURNOVER AS AGAINST TURNOVER DECLARED BY THE ASSESSEE. HENCE, WE DIRECT THE A.O . TO ADOPT TURNOVER ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 12 DECLARED BY THE ASSESSEE IN THE REVISED RETURN FILE D IN RESPONSE TO NOTICE U/S 148 OF THE ACT. 12. IN SO FAR AS ESTIMATION OF NET PROFIT IS CONCER NED, THE ASSESSEE CLAIMS THAT THE NET PROFIT ESTIMATED BY THE CIT(A) IS VERY HIGH. THE ASSESSEE FURTHER CONTENDED THAT THOUGH THERE IS A S LIGHT HIGHER NET PROFIT IN THE UNACCOUNTED TURNOVER, THE POSSIBILITY OF EXP ENDITURE BEING PURCHASES AND OTHER OVERHEADS CANNOT BE RULED OUT. IN THIS CASE, THE ASSESSEE HAS ADMITTED A NET PROFIT OF 12% TO 15% IN HIS BOOKS OF ACCOUNTS. THE ASSESSEE ALSO ADMITTED NET PROFIT OF 17.5% OF ADDITIONAL TURNOVER. THEREFORE, TAKING INTO ACCOUNT THE OVERA LL FACTS, THE NET PROFIT ESTIMATED BY THE CIT(A) MAY BE REASONABLY SCALED DO WN. 13. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATE RIALS AVAILABLE ON RECORD, WE FIND THAT THE CIT(A) HAS ESTIMATED NET P ROFIT OF 25% ON TOTAL TURNOVER INCLUDING TURNOVER DECLARED BY THE ASSESSE E IN THE REGULAR RETURN FILED FOR THE YEAR. THOUGH THE CIT(A) ESTIM ATED NET PROFIT OF 25%, FAILS TO GIVE ANY REASONS FOR ADOPTING SUCH NET PRO FIT. ON THE OTHER HAND, THE ASSESSEE CLAIMS THAT HE HAS DECLARED A NET PROF IT OF 5.65% IN THE REGULAR RETURN FILED FOR THE YEAR AND AFTER CONSIDE RING THE ADDITIONAL NET PROFIT OF 17.5% DISCLOSED ON UNACCOUNTED TURNOVER, THE AVERAGE NET PROFIT WORKS OUT TO 12.99%. THEREFORE, THE CIT(A) WAS ERRED IN CONSIDERING THE NET PROFIT OF 25% ON TOTAL TURNOVER INCLUDING ADDITIONAL ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 13 TURNOVER. WE FIND FORCE IN THE ARGUMENTS OF THE ASS ESSEE, FOR THE REASON THAT ALTHOUGH NET PROFIT IS SLIGHTLY ON HIGHER SIDE IN THE UNACCOUNTED TURNOVER, THE POSSIBILITY OF OVERHEADS IN THE UNACC OUNTED TURNOVER CANNOT BE RULED OUT. THOUGH THE ASSESSEE HAS CONSIDERED O VERHEADS IN THE REGULAR BOOKS OF ACCOUNTS, THE PURCHASE COMPONENT O N UNACCOUNTED TURNOVER AND POSSIBILITY OF OTHER OVERHEADS CANNOT BE IGNORED. MOREOVER, THE ASSESSEE IS IN THE BUSINESS OF SALE O F SWEETS WHICH IS HIGHLY PERISHABLE IN NATURE AND ACCORDINGLY, THE CO ST OF MANUFACTURE OF SWEETS IS NORMALLY HIGH. THEREFORE, CONSIDERING TH E OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO FACT THAT THE AS SESSEE HAS DECLARED A NET PROFIT OF 12.99% TO 16.74% FOR THE YEAR ENDED 3 1.3.2010 AND 31.3.2011, WE DEEM IT APPROPRIATE TO DIRECT THE A.O . TO ESTIMATE NET PROFIT OF 20% ON TOTAL SALES INCLUDING UNACCOUNTED SALES. ACCORDINGLY, WE DIRECT THE A.O. TO ESTIMATE NET PROFIT OF 20% ON TOTAL SALES FOR THE ASSESSMENT YEAR 2011-12 AND 2012-13. 14. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ADDITIONS TOWARDS VAT COMPONENT OF UNACCOUNTED SALES. THE A. O. MADE ADDITIONS OF ` 21,13,618/- TOWARDS VAT PAYABLE TO THE STATE GOVER NMENT BY HOLDING THAT THE ASSESSEE HAS ADMITTED ADDITIONAL T URNOVER OF ` 1,45,76,675/-, BUT THE SAME HAS NOT BEEN DISCLOSED IN THE SALES TAX RETURN FILED AND CORRESPONDING VAT COMPONENT OF ` 21,13,618/- HAS NOT ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 14 BEEN PAID TO THE STATE GOVERNMENT, AS THE VAT COMPO NENT WAS COLLECTED FROM THE PURCHASER WAS PAYABLE TO THE STATE GOVERNM ENT AUTHORITY WAS NOT PAID BY THE ASSESSEE. SINCE, VAT COMPONENT IS INCLUDED IN THE UNACCOUNTED SALES WHICH IS PAYABLE TO THE STATE GOV ERNMENT AND ALSO FACT THAT THE ASSESSEE HAS NOT PAID SUCH VAT TO THE STATE GOVERNMENT, WHICH REPRESENTS THE INCOME OF THE ASSESSEE, ACCORD INGLY, MADE ADDITIONS OF ` 21,15,506/- TO THE TOTAL INCOME OF THE ASSESSEE. IT IS THE CONTENTION OF THE ASSESSEE THAT HE HAS NOT COLLECTE D VAT IN THE SALES BILLS AND HE SELLS SWEETS ON FIXED RATES. IT IS FURTHER CONTENDED THAT THE DATA EXTRACTED FROM THE BILLING MACHINES DID NOT SHOW AN Y SEPARATE COLLECTION OF VAT AND THEREFORE, THE A.O. WAS NOT JUSTIFIED IN MAKING SEPARATE ADDITIONS TOWARDS VAT ON UNDISCLOSED TURNOVER HAVIN G ALREADY ESTIMATED PROFIT ON TURNOVER. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE, FOR THE REASON THAT THE TURNOVER OF THE ASSESSEE HAS BE EN DETERMINED ON ESTIMATION BASIS. IT IS ALSO FACT THAT THE ASSESSE E ALSO NOT COLLECTED VAT SEPARATELY IN THE SALES BILLS. SINCE, THE NET PROF IT OF THE ASSESSEE HAS BEEN ESTIMATED ON TOTAL TURNOVER, THERE IS NO NEED FOR SEPARATE ADDITIONS TOWARDS VAT COMPONENT. THE CIT(A) AFTER CONSIDERIN G THE RELEVANT DETAILS DIRECTED THE A.O. TO DELETE ADDITIONS MADE TOWARDS VAT. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE CIT(A). HENCE, WE ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 15 INCLINED TO UPHOLD THE CIT(A) ORDER AND REJECT GROU ND RAISED BY THE REVENUE. 15. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS LEVY OF INTEREST U/S 234A & 234B OF THE ACT. THE LEVY OF I NTEREST U/S 234A AND 234B OF THE ACT IS MANDATORY IN NATURE AND THE A.O. DO NOT HAVE ANY DISCRETIONARY POWERS TO CHARGE INTEREST. THEREFORE , WE ARE OF THE VIEW THAT INTEREST U/S 234A & 234B OF THE ACT IS CONSEQU ENTIAL AND MANDATORY IN NATURE AND ACCORDINGLY, THE A.O. HAS RIGHTLY LEV IED INTEREST ON TOTAL INCOME DETERMINED, ACCORDINGLY, WE UPHOLD INTEREST CHARGED U/S 234A & 234B OF THE ACT. 16. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NO.272/VIZAG/2015 FOR THE ASSESSMENT YEAR 2010-11 I S PARTLY ALLOWED . THE APPEAL FILED BY THE ASSESSEE IN ITA NO.274/VIZA G/2015 & 276/VIZAG/2015 ARE ALSO PARTLY ALLOWED . THE APPEAL FILED BY THE REVENUE IN ITA NO.250/VIZAG/2015 AND 252/VIZAG/2015 ARE DISMISSED . THE C.O. FILED BY THE ASSESSEE IN CO NOS.23 & 25/VI ZAG/2015 ARE ALSO DISMISSED . THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 30.12.2016 VG/SPS ITA NOS.250, 252, 272, 274 & 276/VIZAG/2015 & CO NO S.23 & 25/VIZAG/2015 S. SIVARAMA REDDY, VISAKHAPATNAM 16 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1(2), VISAKHAPATNA M 2. / THE RESPONDENT SHRI S. SIVARAMA REDDY, PROP: S RI SIVARAMA SWEETS, D.NO.28-02-23, SURYABAGH, VISAKHAPATNAM 3. / THE RESPONDENT THE ITO, WARD-1(4), VISAKHAPATN AM 4. + / THE CIT-1, VISAKHAPATNAM 5. + ( ) / THE CIT (A)-1, VISAKHAPATNAM 6. # . , . , # / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM