ITO, Ward-1, Warangal V. Sri Srinivasa Reddy Desidi, Warangal

ITA 1028/HYD/2013

• Counselvise Citation: 102822514 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Keywords: Unexplained cash credit; Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1028/HYD/2013 ASSESSMENT YEAR : 2009-10 INCOME-TAX OFFICER, WARD 1, WARANGAL. SRI SRINIVASA REDDY DESIDI, WARANGAL. PAN AINPD 4652 N (APPELLANT) (RESPONDENT) REVENUE BY SHRI RAJAT MITRA ASSESSEE BY NONE DATE OF HEARING 15-10-2014 DATE OF PRONOUNCEMENT 22-10-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - VI, HYDERABA D, DATED 25.3.2013 FOR THE ASSESSMENT YEAR 2009-10. 2. AS NO ONE HAS APPEARED ON BEHALF OF THE RESPOND ENT-ASSESSEE WHEN THE APPEAL WAS CALLED FOR HEARING, WE PROCEED TO HEAR THE APPEAL EX-PARTE QUA RESPONDENT-ASSESSEE, AFTER HEAR ING THE LEARNED DR. 2 ITA NO 1028/HYD/2013 SRI SRINIVASA REDDY DESIDI 3. THERE IS A DELAY OF 3 DAYS IN FLING OF THE AFORE SAID APPEAL. AFTER CONSIDERING THE CAUSE OF DELAY AS EXPLAINED IN THE DELAY CONDONATION OF PETITION SUPPORTED BY AN AFFIDAVIT, WE ARE INCLI NED TO CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 4. THE DEPARTMENT HAS RAISED 5 GROUNDS. GROUND NOS. 1 & 5 BEING GENERAL IN NATURE, NOT REQUIRED TO BE ADJUDICATED. 5. GROUND NOS. 2 & 3 ARE IN RESPECT OF ADDITION OF AN AMOUNT OF RS. 1,33,83,486 MADE BY ASSESSING OFFICER, BUT, DEL ETED BY CIT(A). 6. BRIEFLY THE FACTS RELATING TO THE AFORESAID ISSU E ARE, ASSESSEE AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF RETAIL TRADE IN FOREIGN LIQUOR. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSE SSEE FILED HIS RETURN OF INCOME ON 16/07/2009 DECLARING TOTAL INCO ME OF RS. 4,17,363. IN COURSE OF ASSESSMENT PROCEEDING, ASSES SING OFFICER NOTICED THAT IN THE SAVING BANK ACCOUNT BEARING NO. 581607738 MAINTAINED BY ASSESSEE WITH INDIAN BANK, CERTAIN CA SH DEPOSITS HAVE BEEN MADE DURING THE YEAR. ASSESSEE HAD SHOWN THE S OURCE OF THE SAID CASH DEPOSITS INTO THE BANK ACCOUNT, CASH WITH DRAWALS MADE FROM THE SAME BANK ACCOUNT. ON FURTHER EXAMINATION OF THE BANK ACCOUNT STATEMENT, ASSESSING OFFICER NOTICED THAT T HERE WERE NO CASH WITHDRAWALS ON THE SAID DATE FROM THE BANK ACCOUNT. THE TOTAL OF SUCH CASH DEPOSITS IN THE BANK ACCOUNT WAS FOUND TO BE RS. 1,19,88,176. FURTHER, IN RESPECT OF ANOTHER SAVINGS BANK ACCOUNT BEARING NO. 581590529 MAINTAINED WITH INDIAN BANK, KOTHAGUDA BR ANCH SIMILAR CASH DEPOSITS WERE RECORDED IN THE BOOKS OF ACCOUNT AS CASH WITHDRAWALS FROM THE SAME BANK. TOTAL VOLUME OF SUC H TRANSACTIONS WAS FOUND TO BE RS. 12,39,000. ASSESSING OFFICER FU RTHER OBSERVED THAT THE SAID AMOUNTS OF RS. 1,19,88,176 AND RS. 12 ,39,000 WERE UTILIZED BY ASSESSEE FOR PURCHASING DEMAND DRAFTS I N FAVOUR OF APBCL, WARANGAL DEPOT TOWARDS PURCHASE OF LIQUOR. A CCORDINGLY, ASSESSING OFFICER CALLED UPON ASSESSEE TO SHOW CAUS E AS TO WHY THE 3 ITA NO 1028/HYD/2013 SRI SRINIVASA REDDY DESIDI CASH DEPOSITS IN BANK ACCOUNTS SHOULD NOT BE TREAT ED AS ASSESSEES UNEXPLAINED INCOME. IN RESPONSE TO THE SAID NOTICE, IT WAS SUBMITTED BY ASSESSEE THAT HE HAD DEPOSITED THE SALE PROCEEDS OF LIQUOR INTO SAVING BANK ACCOUNT ON DAILY BASIS AND USED THE AMO UNT TO PURCHASE DDS FROM SAVING BANK ACCOUNT IN FAVOUR OF APBCL TOW ARDS PURCHASE OF LIQUOR. IT WAS SUBMITTED THAT THE ACCOUNTANT MIS TAKENLY HAD FIRST DEBITED THE BANK ACCOUNT WITH THE AMOUNT DEPOSITED INTO BANK ACCOUNT AND, THEN, CASH WITHDRAWAL WITH DD AMOUNTS FOR WHICH CHEQUES WERE ISSUED WHILE MAKING ENTRIES IN THE CAS H BOOK. FURTHER, IT WAS EXPLAINED THAT NO INVESTMENTS WERE MADE OUT OF THE WRONGLY SHOWN CASH WITHDRAWALS AS HE DOES NOT HAVE ANY BUSI NESS OTHER THAN LIQUOR WHICH WAS ALSO CLOSED IN JUNE, 2010. ASSESSI NG OFFICER, HOWEVER, REJECTING THE EXPLANATION OF ASSESSEE HELD THAT FOR CREATING THE SOURCE OF PURCHASE OF DDS, ASSESSEE HAS RECORDE D CHEQUE TRANSFER AS CASH WITHDRAWALS FROM THE BANK AND THE SAME SHOWN AS CASH WITHDRAWAL BROUGHT INTO THE CASH BOOK. FOR EXP LAINING THE SOURCE OF PURCHASE OF DDS ENTIRE CREDITS BROUGHT INTO THE CASH BOOK AS CASH WITHDRAWALS FROM TWO BANK ACCOUNTS WERE TREATED AS UNEXPLAINED CREDIT AND THE AMOUNTS OF RS. 1,19,88,176 AND RS. 1 2,39,000 TOTALLING TO RS. 1,33,83,486 WERE TREATED AS INCOME OF ASSESS EE. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPE AL BEFORE THE CIT(A). 7. IN COURSE OF PROCEEDING BEFORE THE CIT(A), REITE RATING THE SUBMISSIONS MADE BEFORE THE AO, ASSESSEE SUBMITTED THAT THE ENTIRE CASH DEPOSITS MADE INTO TWO SAVING BANK ACCOUNTS FR OM WHICH DDS WERE PURCHASED IN FAVOUR OF APBCL EMANATED FROM THE SALE PROCEEDS OF LIQUOR BUSINESS ONLY. IT WAS SUBMITTED THAT DUE TO IGNORANCE, THE ACCOUNTANT HAD WRONGLY WRITTEN TWO ENTRIES FOR TAKI NG DDS, ONE AS CASH WITHDRAWN FROM BANK AND AGAIN CASH PAID TOWARD S PURCHASE OF DDS WHEREAS THE CHEQUES WERE ISSUED TO PURCHASE DDS TO THE BANKERS AS YOURSELF AND ACTUALLY DDS WERE PURCHAS ED OUT OF BANK BALANCE AVAILABLE IN THE ACCOUNT, WHICH WAS DEPOSIT ED FROM THE SALE 4 ITA NO 1028/HYD/2013 SRI SRINIVASA REDDY DESIDI PROCEEDS OF LIQUOR. IT WAS SUBMITTED THAT ONLY BECA USE OF MISTAKE COMMITTED BY THE ACCOUNTANT WHILE MAKING ENTRIES IN CASH BOOK, AO HAS TREATED THE AMOUNT AS UNEXPLAINED INCOME OF ASS ESSEE WHEREAS ACTUALLY THE CASH DEPOSITS ARE NOTHING BUT THE SALE PROCEEDS FROM LIQUOR BUSINESS. CIT(A) AFTER CONSIDERING THE SUBMI SSIONS OF ASSESSEE, DELETED THE ADDITION OF RS. 1,32,27,176 W ITH THE FOLLOWING OBSERVATIONS: AS COULD BE SEEN, THE SOURCE FOR MAKING ENTRIES IN THE BOOKS, SPECIFICALLY THE CASH BOOK IS THE SALE PROCE EDS OF BUSINESS AND THE MISTAKE APPARENTLY ON ACCOUNT OF P OSTING OF THE ENTRIES, BECAUSE OF THE MISTAKE OF THE ACCOU NTANT. THE ENTRIES COULD HAVE BEEN EASILY CROSS EXAMINED WITH REFERENCE TO THE QUESTION OF CASH SALES MADE ON THE PARTICULAR DAYS AND SUCH VERIFICATION/EXPLANATION C OULD HAVE EXPLAINED THE ISSUE CLEARLY. TO BE PRECISELY, IF TH E CASH CREDITS AND CASH SALE PROCEEDS ARE MUTUALLY EXCLUSI VE, THE OBSERVATION OF THE A.O COULD BE HELD AS CORRECTLY C ONCLUDED. HOWEVER, THERE IS NO SUCH OCCASION AND THE CASH DEP OSITS DOES NOT EXCEED THE TOTAL SALE PROCEEDS, WHICH WERE QUANTIFIED AT RS. 1,90,33,523/-, FOR THE YEAR. UNDER THE CIRCUMSTANCES, IT CAN BE HELD THAT THE ANOMALIES PO INTED OUT BY THE A.O, ARE ONLY TECHNICAL IN NATURE, THERE BY RENDERING THE BOOKS OF ACCOUNT MAINTAINED, AS UNRELIABLE. BUT SUCH MISTAKE ALONE WILL NOT HELP IN TREATING THE ENTIRE QUANTUM OF ENTRIES FOR CASH, AMOUNTING TO RS.L,32,27,176/- (RS . 1,19,88,176+ 12,39,000), AS UNEXPLAINED CREDITS AND TO CONSTITUTE UNACCOUNTED INCOME OF THE APPELLANT, AS IT MAY NOT BE POSSIBLE TO MAKE A PROFIT OF RS. 1,32,27,176 /- ON A TOTAL PURCHASE OF RS. 1,74,44,342/-, THAT TOO WHERE PURCHASES ARE MADE FROM THE SINGLE SOURCE OF APBCL, WHICH WAS NEVER IN QUESTION. IN FACT, SUCH ENTRIES WERE A CCEPTED AS MISTAKE, BY THE APPELLANT, ON ACCOUNT OF THE MIS TAKES COMMITTED BY APPELLANT. UNDER THE CIRCUMSTANCES, I DO NOT HAVE ANY HESITATION IN HOLDING THAT THERE IS NO BAS E FOR THE A.O TO TREAT THE AMOUNTS OF RS. 1,32,27,176/- REPRESENTING THE ENTRIES POSTED WRONGLY IN BOOKS, A S UNEXPLAINED CREDITS. 8. SO FAR AS THE REMAINING ADDITION OF RS. 1,07,244 , THE CIT(A) DIRECTED THE AO AS UNDER: 5.7 PERUSED THE OBSERVATIONS OF THE APPELLANT AND T HE OBSERVATIONS OF THE A.O. AS COULD BE SEEN, THE AMOU NTS OF RS. 1,07,244/- REPRESENT 3 CREDITS, THROUGH BANKING 5 ITA NO 1028/HYD/2013 SRI SRINIVASA REDDY DESIDI CHANNELS, BUT WERE TREATED AS UNEXPLAINED, BY THE A .O ON ACCOUNT OF NON-COMPLIANCE BY THE ASSESSEE AT THE ST AGE OF THE ASSESSMENT PROCEEDINGS. HOWEVER, THE INFORMATIO N BROUGHT ON RECORD, CLEARLY INDICATE THAT THE AMOUNT S OF RS. 7,895/- AND RS. 28,726/- REPRESENT THE PAYMENTS REC EIVED FROM TRADE DEBTORS AND RS. 70,620/- REPRESENT THE I NCOME TAX REFUND FOR AY 2007-08. THE NATURE OF THE ENTRIE S CLEARLY EXPLAIN THE TRANSACTIONS. HOWEVER, AS THE SAME WERE NOT EXPLAINED, AT THE TIME OF THE ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER MAY EXAMINE AND ALLOW THE SAME, B ASED ON THE SAID EXPLANATION AND ON THE BASIS OF VERIFIC ATION ON THOSE LINES. SUBJECT TO THE ABOVE VERIFICATION, THI S GROUND OF APPEAL IS TREATED AS ALLOWED, FOR STATISTICAL PURPO SES. 9. HAVING CONSIDERED THE SUBMISSIONS OF LEARNED DR AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) . FROM THE FACTS AVAILABLE ON RECORD, IT IS QUITE EVIDENT THAT THE C ONFUSION AROSE BECAUSE OF A MISTAKE COMMITTED BY ACCOUNTANT WHILE MAKING ENTRIES IN THE CASH BOOK BY TREATING THE AMOUNTS UTILIZED F OR PURCHASE OF DDS AS CASH WITHDRAWALS. AS RIGHTLY POINTED OUT BY LEAR NED CIT(A), AO HAS NEITHER FOUND ANY CASH INTRODUCED IN THE NAME OF TH IRD PARTIES NOR ANY OTHER SOURCE OF INCOME EXCEPT LIQUOR BUSINESS CARRI ED OUT BY ASSESSEE. THEREFORE, IT IS HIGHLY IMPROBABLE THAT A SSESSEE WOULD BE MAKING A PROFIT OF RS. 1,32,27,176 ON A TOTAL SALE TURNOVER OF RS. 1,90,33,523. IT IS ALSO OBSERVED THAT AS AGAINST TH E TOTAL SALE QUANTIFIED AT RS. 1,90,33,523, THE DEPOSITS IN THE BANK ACCOUNT AMOUNTED TO RS. 1,32,27,176. THEREFORE, THE EXPLANA TION OF ASSESSEE THAT DEPOSITS WERE OUT OF THE SALE PROCEEDS AND UTI LIZED FOR PURCHASE OF DDS IN FAVOUR OF APBCL ARE QUITE PLAUSIBLE. 10. SIMILARLY, IN RESPECT OF ADDITION OF RS. 1,07, 244 ALSO, AS CAN BE SEEN FROM THE DISCUSSION MADE BY CIT(A) IN PARA 5.7 OF HIS ORDER, ASSESSEE IN COURSE OF PROCEEDING BEFORE CIT(A) HAS EXPLAINED THE SOURCE OF SUCH DEPOSITS AND AFTER EXAMINING THE SAM E, CIT(A) HAS ISSUED DIRECTIONS TO VERIFY AND ALLOW THE CLAIM OF ASSESSEE. IN THE 6 ITA NO 1028/HYD/2013 SRI SRINIVASA REDDY DESIDI AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY RE ASON TO INTERFERE WITH THE ORDER OF LEARNED CIT(A). 11. THE NEXT ISSUE AS RAISED IN GROUND NO. 5 IS IN RESPECT OF ADOPTING NET PROFIT RATE OF 5% BY CIT(A) ON LIQUOR TRADE. AS CAN BE SEEN FROM THE GROUNDS RAISED, THE DEPARTMENT HAS NO T CHALLENGED THE CIT(A)S DECISION WITH REGARD TO REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT PER SE. THE GRIEVANCE OF THE DEPARTMENT IS RESTRICTED TO ADOPTION OF NET PROFIT RATE AT 5%. H OWEVER, AS IS CLEAR FROM THE ORDER OF CIT(A), 5% NET PROFIT RATE ADOPTE D BY CIT(A) IS IN CONSONANCE WITH THE DECISION TAKEN BY THE TRIBUNAL IN SIMILAR NATURE OF CASES. HENCE, THERE IS NO REASON TO INTERFERE WI TH THE ORDER OF CIT(A) IN THIS REGARD. 12. IN THE RESULT, DEPARTMENTS APPEAL IS DISMISSED . PRONOUNCED IN THE OPEN COURT ON 22/10/2014 SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 22 ND OCTOBER, 2014 KV COPY TO:- 1) ITO, WARD 1, AAYAKAR BHAVAN, STATION ROAD, WA RANGAL. 2) SRI SRINIVASA REDDY DESIDI, H.NO. 1/69, KOTHAGUD A VILLAGE, GUDUR MANDAL, WARANGAL. 3) CIT(A)-VI, HYDERABAD 4) CIT-VI, HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD. 7 ITA NO 1028/HYD/2013 SRI SRINIVASA REDDY DESIDI