Marri Srikanth Reddy , Secundrabad V. Dy. Commissioner of Income Tax , Circle-10(1), Hyderabad

ITA 1019/Hyd/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3257 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 29-04-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 19-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR PANDEY
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Gross profit estimation; Unexplained cash credit; Rejection of books of accounts; Business income; Assessment record
• Section: 72; 13; 145(3); 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI L . P . SAHU, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO. 1 019 /HYD/20 1 9 (ASSESSMENT YEAR : 2012 - 13) SHRI SRIKANTH REDDY MARRI , PROP. M/S. SATYA WINES, 2 - 4 - 31, TARBUND, SECUNDERABAD - 09 P AN A JNPM 7692N ..APPELLANT. VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 10(1), HYDERABAD. . .RESPONDENT. APPELLANT BY : SHRI K.A. SAI PRASAD. RESPONDENT BY : SHRI SUNIL KUMAR PANDEY (D.R) DATE OF HEARING : 2 9 .04 .2021. DATE OF PRONOUNCEMENT : 15 .0 6 . 2021. O R D E R PER L .P. SAHU , A .M. : THIS IS AN APPE A L FILED BY THE ASSESSEE AG A INST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 6, HYDERABAD DT.20.03.2019 FOR THE ASSESSMENT YEAR 2012 - 13 . 2 ITA NO. 1 019 /HYD/2019 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED CIT (APPEALS) - 6 OUGHT TO HAVE HELD THAT NET PROFITS BE ESTIMATED AT 3% ON THE TURNOVER RATHER THAN AT 5% AS ADOPTED BY THE ASSESSING OFFICER AND SUSTAINING ADDITION OF RS.61,49,209. 2. THE LEARNED CIT (APPEALS) - 6 HAVING APPRECIATED THAT RS.6,06,413 IS FROM MATURITY OF OLD FIXED DEPOSIT IS INCORRECT IN HOLDING THAT THE SAME WAS NOT CREDITED TO CAPITAL ACCOUNT OF APPELLANT AND HENCE COVERED U/S.68 OF THE IT ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING OF APPE AL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME ON 26.06.2010 DECLARING AN INCOME OF RS.32,05,568. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE BUT HE DID NOT APPEA R BEFORE THE ASSESSING OFFICER AND THE BOOKS OF ACCOUNT WAS NOT PRODUCED. THEREAFTER THE ASSESSING OFFICER ISSUED NOTICE ON 27.02.2015 AND AFTER GIVING REASONABLE TIME , COMPLETED THE ASSESSMENT U/S. 1 4 4 OF THE INCOME TAX ACT, 1961 ('THE ACT'). ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT, IT WAS NOTICED THAT THE 3 ITA NO. 1 019 /HYD/2019 ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF INDIAN MADE FOREIGN LIQUOR IN THE NAME AND STYLE OF SATYA WINES SITUATED AT D - 2 - 163, TA D BUND, SECUNDERABAD AND THE TOTAL GROSS RECEIPTS OFRS.19,96,41,952 AND RECEIVED NET PROFIT OF RS.29,11,084. AS PER THE DOCUMENT/RECORDED FILED BY THE ASSESSEE AT SL.NO.9( B ) OF 3CD REPORT THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT AND GENERAL LEDGER BUT THE BOOKS OF ACCOUNTS ALONG WITH VOUCHERS W ERE NOT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE IN THIS SITUATION, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNTS AND INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE NET PROFIT OF THE ASSESSEE AFTER RELYING THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. (1991) 188 ITR 44 (SC). THE ASSESSING OFFICER ALSO RELIED ON THE ORDER OF THE CO - ORDINATE BENCH OF ITA T, HYDERABAD WHERE THE NET PROFIT 5% OF THE TOTAL TURNOVER HAS BEEN UPHELD. THE A.O. ALSO OBSERVED AS UNDER : 4 ITA NO. 1 019 /HYD/2019 05. .. IT IS ALSO HELD IN THE CASE OF NAMMASSIVAYAM CHETTIYAR (SN) VS. CIT, 1960 38 ITR 579 (SC) THAT WHERE THE ACCOUNTS OF THE ASSESSEE WERE REJECTED ON THE GROUND THAT CORRECT PROFIT COULD NOT BE DEDUCTED THERE FROM BECAUSE OF NON - PRODUCTION OF BILLS FOR HUGE EXPENSES ETC., ESTIMATION OF PROFIT MADE ON THE BASIS OF AVAILABLE MATERIAL W AS HELD AS PROPER. FURTHER THE ASSESSING OFFICER ALSO OBSERVED AS UNDER : 11. THE ASSESSEE HAS INTRODUCED CAPITAL OF RS.6,06,413/ - ON 10.11.11 AND RS.6,19,816/ - ON 27.02.12 AS SEEN FROM HIS CAPITAL ACCOUNT FOR THE YEAR ENDED 31.03.12. THERE IS NOTHING ON RECORD TO ESTABLISH THE SOURCE OF THE CAPITAL INTRODUCTION DURING THE YEAR BY THE ASSESSEE. IN THE ABSENCE OF ANY EVIDENCE, THE SUM OF RS.12,26,229/ - IS TREATED AS UNEXPLAINED CREDITS AND ACCORDINGLY TREATED AS INCOME U/S 68. 12. HERE IT IS PERTINENT TO BRING ON RECORD THAT IT IS FOR THE ASSESSEE TO PROVE THAT EVEN IF THE CASH CREDIT REPRESENTS INCOME, IT IS FROM A SOURCE WHICH HAS ALREADY BEEN TAXED. IN THE CASE OF CIT VS DEVI PRASAD VISHWANATH PRASAD 72 ITR 194, THE HON'BLE S UPREME COURT HAS HELD THAT THERE IS NOTHING IN LAW WHICH PREVENTS THE AO IN TAXING BOTH UNEXPLAINED CASH CREDIT AND BUSINESS INCOME ESTIMATED AFTER REJECTING BOOKS BEING UNRELIABLE. SIMILAR VIEW HAS BEEN HELD BY HON'BLE AP HIGH COURT IN CIT VS MADURI RAJAI AHGARI KISHTAIAH 120 ITR 294. THEREFORE, IN THIS CASE, EVEN IN A SITUATION WHERE THE BOOKS ARE REJECTED, THE CREDIT ENTRIES APPEARING IN THE BOOKS OF ALE ARE BEING TAXED SEPARATELY U/S 68 RESPECTIVELY. ACCORDINGLY, THE ASSESSING OFFICER CO MPLETED THE AS SESSMENT U/S. 144 OF THE ACT. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE FILED AN APPEAL BEFORE 5 ITA NO. 1 019 /HYD/2019 THE CIT(APPEALS) AND THE CIT(APPEALS) UPHOLD 5% ESTIMATION OF PROFIT ON TOTAL TURNOVER AND IN RESPECT OF ADDITION U/S. 68 OF THE ACT OF R S.12,26,229, PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE APPROXIMATE ESTIMATION BY THE ASSESSING OFFICER A ND CONFIRMED BY THE CIT(APPEALS) IS ON HIGHER SIDE. THE ASSESSEE HAS SHOWN NET PROFIT WHICH IS CORRECT AND THE BOOKS OF ACCOUNTS HAVE BEEN AUDITED BY THE CHARTERED ACCOUNTANT AND HE HAS EXAMINED ALL THE DOCUMENTS , ACCORDINGLY WHEN HE WAS GOT SATISFIED TH EREAFTER. HE ISSUED THE TAX AUDIT REPORT, MERELY NON - QUESTIONING OF BOOKS OF ACCOUNTS AND VOUCHERS IS NOT SUFFICE TO REJECT BOOKS OF ACCOUNT AND APPLIED THE ESTIMATED PROFIT. FURTHER IN RESPECT OF CONFIRMING ADDITION OF RS.6,06,413 THERE WAS A CAPITAL I NTRODUCTION INTO THE CAPITAL ACCOUNT WHICH WAS AFTER MATURITY OF THE FIXED DEPOSIT MADE BY THE 6 ITA NO. 1 019 /HYD/2019 ASSESSEE IN THE EARLIER YEAR, THEREFORE IT CANNOT BE TAX ED . HE SUBMITTED SYNOPSIS SUBMISSION WHICH IS AS UNDER : 7 ITA NO. 1 019 /HYD/2019 8 ITA NO. 1 019 /HYD/2019 5. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE AUTHORITIES BELOW AND FURTHER STATED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS GIVEN MANY OPPORTUNITIES FOR PRODUCING THE BOOKS OF ACCOUNT AND VOUCHERS IN SUPPOR T OF THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT BUT THE ASSESSEE FAILED TO PRODUCE THE DOCUMENTS AS REQUIRED BY THE ASSESSING OFFICER . FURTHER IN CASE OF RS.6,06,413, ON MATURITY OF F.D. THE ONLY INTEREST AMOUNT CAN BE CREDITED 9 ITA NO. 1 019 /HYD/2019 INTO THE CAPITAL ACCOUNT BUT NOT THE ENTIRE MATURITY AMOUNT OF THE F.D. , IF THE INTEREST AMOUNT HAD ALREADY BEEN OFFERED TO TAX IN THE RESPECTIVE YEAR. THEREFORE HE SUBMITTED THAT THE ORDER OF THE CIT(APPEALS) SHOULD BE RESTORED AND THE CASE LAW S RELIED ON BY THE LD. AR ARE DISTINGUISHABLE AND NOT APPLICABLE IN THE PRESENT CASE ON HAND. 6. AFTER HEARING BOTH THE PARTIES AND PERUSAL OF THE ORDERS OF AUTHORITIES BELOW, THE ASSESSING OFFICER HAS APPLIED 5% ON THE TOTAL TURNOVER OF THE ASSES SEE FOR WANT OF NON - PRODUCTION OF BILLS AND VOUCHERS AS WELL AS BOOKS OF ACCOUNTS . THE ASSESSING OFFICER HAS GIVEN MANY OPPORTUNITIES TO THE ASSESSEE AND THIS ISSUE HAS BEEN DECIDED BY THE CIT(APPEALS) AS UNDER : 6.2.2 I HAVE CONSIDERED THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND THE FACTS OF THE CASE AS EMANATING FROM THE ASSESSMENT ORDER AND ASSESSMENT RECORDS OBTAINED FROM THE AO. AT THIS JUNCTURE, IT IS IMPORTANT TO NOTE THAT, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS FAIL ED TO SUBSTANTIATE THE GROUNDS OF APPEAL RAISED ALONG WITH SUPPORTING DOCUMENTARY EVIDENCE. FURTHER, IN THE GROUNDS OF APPEAL, THE ASSESSEE MADE A BALD CONTENTION THAT THE AO IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE INCOME @5% OF THE COST OF GOODS PUT TO SALE AND OPINED THAT ESTIMATION OF INCOME @3% IS JUSTIFIED ON THE BASIS OF OTHER CASES WITH SIMILAR TURNOVERS. HOWEVER, THE ASSESSEE HAS NOT PRODUCED ANY . 10 ITA NO. 1 019 /HYD/2019 11 ITA NO. 1 019 /HYD/2019 12 ITA NO. 1 019 /HYD/2019 13 ITA NO. 1 019 /HYD/2019 14 ITA NO. 1 019 /HYD/2019 15 ITA NO. 1 019 /HYD/2019 16 ITA NO. 1 019 /HYD/2019 17 ITA NO. 1 019 /HYD/2019 FROM THE ABOVE EXTRACTS OF ORDER OF THE CIT(APPEALS), WE FIND THAT THERE IS NO INFIRMITY IN HIS ORDER. THE CIT(APPEALS) HAS DISCUSSED IN HIS ORDER MANY CASE LAWS WHICH ARE SIMILAR IN NATURE AS BUSINESS CONDUCTED BY THE ASSESSEE. IT IS ALSO OBSERVED THAT THE GOVERNMENT HAS NOTIFIED THAT THE GROSS PROFIT RATE IS 24% IN SIMILAR LINE OF BUSINESS BUT THE ASSESSEE HAS SHOWN VERY LOW GROSS PROFIT WHICH IS 3.58%. THE CASE LAW CITED BY THE AUTHORITIES BELOW AND ASSESSEE, WE CONFIRM THE 5% NET PROFIT AS CONFIRM ED BY THE CIT(A) AND THERE IS NO INFIRMITY ON THIS ISSUE IN THE ORDER OF CIT(A). THEREFORE WE ARE OF THE CONSIDERED VIEW 18 ITA NO. 1 019 /HYD/2019 TO UPHOLD THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE. THEREFORE THIS GROUND OF APPEAL OF ASSESSEE IS DISMISSED. 7. IN RESPECT OF GROUND NO.2, THE ADDITION MADE U/S. 68 OF THE ACT OF RS.6,06,413 WHICH WAS ADDED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(APPEALS). IN THIS REGARD, THE ASSESSEE WAS UNABLE TO SUBSTANTIATE THAT THIS AMOUNT WAS SHOWN IN EARLIER YEAR IN HIS BA LANCE SHEET/STATEMENT OF AFFAIRS AS INVESTMENT. IF I T HAD BEEN SHOWN AS INVESTMENT IN EARLIER YEAR , THE ONLY INTEREST AMOUNT CAN BE CREDITED INTO CAPITAL ACCOUNT OF THE ASSESSEE BUT THE ASSESSEE WAS UNABLE TO PROVE BY FURNISHING ANY DOCUMENTARY EVIDENCE. ON PERUSAL OF THE DOCUMENTS AVAILABLE ON RECORD AND SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE THAT THE AMOUNTS HAVE BEEN CREDITED INTO THE BANK ACCOUNT OF THE ASSESSEE ON 10.11.2011 BY CLOSURE PROCEEDS OF F.D. NO.05825200051323 , T HE ASSESSEE HAS PRODUCED COPY OF THE DCB BANK ACCOUNT. IN THE BANK STATEMENT OF FIXED DEPOSIT, IT IS SHOWING OPENING BALANCE OF RS.5,80,958, IT 19 ITA NO. 1 019 /HYD/2019 CLEARLY SHOWS THAT THE FIXED DEPOSIT WAS MADE EARLIER. IN THE LIGHT OF ABOVE, THE ENTIRE PRINCIPLE AND INTERE ST AMOUNT IS INCLUDED AS PER THE ASSESSMENT RECORD, THE AUTHORITIES BELOW HAVE NOTICED THAT THE ENTIRE AMOUNT HAS BEEN CREDIT IN THE CAPITAL ACCOUNT OF THE ASSESSEE. IT CLEARLY SHOWS THAT EARLIER THIS AMOUNT WAS NOT SHOWN IN HIS STATEMENT OF AFFAIRS I.E. THAT WAS MADE OUT OF BOOKS OF ACCOUNTS OF THE ASSESSEE. W E DO NOT FIND ANY SUBSTANCE ON THE SUBMISSIONS MADE BY THE ASSESSEE THEREFORE . THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 15TH JUNE , 2021. SD / - SD/ - ( S.S. GODARA ) ( L . P . SAHU ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DT. 15 .0 6 .2021. * REDDY GP 20 ITA NO. 1 019 /HYD/2019 COPY TO : 1. SHRI SRIKANTH REDDY MARRI, PROP. M/S. SATYA WINES, 2 - 4 - 31, TARBUND, SECUNDERABAD - 09 2. DCIT, CIRCLE 10(1), HYDERABAD. 3. PR. C I T - 6 , HYDERABAD. 4. CIT(APPEALS) - 6, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.