ITO Ward-11(1), Hyderabad V. Shri K. Shiva Sankar Reddy, Hyderabad

ITA 1030/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59107 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PHANI KISHORE
• Keywords: Unexplained investment; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBE R. ITA NO.1030/HYD/2011 (ASSESSMENT YEAR 2007-08) INCOME TAX OFFICER, WRD - 11(1), HYDERABAD V/S SHRI K.SHIVA SHANKAR REDDY, HYDERABAD (PAN - AMAPK 0532 F ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PHANI KISHORE RESPONDENT BY : SHRI MOHD. AFZAL DATE OF HEARING 10. 1.2012 DATE OF PRONOUNCEMENT 10.1.2012 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-VI, HYDERABAD DATED 15.2.2011 FOR THE AS SESSMENT YEAR 2007-08. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE ADDITION OF RS.27,66,480 MADE BY THE ASSESSING OFFI CER ON ACCOUNT OF UNEXPLAINED CASH DEPOSITS. 3. FACTS OF THE ASSESSEE IN BRIEF ARE THAT THE ASS ESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONS IDERATION ADMITTING AN INCOME OF RS.1,57,752. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS ASKED TO PRODUCE THE DETAILS OF ACCOUNTS MAINTAINED, CASH DEPOSITS MADE IN THE BANK ACCOUNTS, DETAILS OF PROPERTIES PURCHASED AND INVESTMENTS MADE AND STATEMENT OF AFFAIRS AS ON 31.3.2007 ALONG WITH PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. HOWEVER, THE AUTHO RISED REPRESENTATIVE WAS UNABLE TO FURNISH ANY INFORMATIO N CALLED FOR BY THE ITA NO.1030/HYD/2011 SHRI K.SHIVA SHANKAR REDDY, HYDERABAD 2 ASSESSING OFFICER. HENCE, IN THE ABSENCE OF THE IN FORMATION CALLED FOR, THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASS ESSMENT BASED ON THE RECORDS AVAILABLE WITH HIM, AND THE ASSESSING O FFICER OBSERVED THAT AS PER THE BANK ACCOUNT OF THE ASSESSEE WITH THE VI JAYA BANK, DEPOSITS AMOUNTING TO RS.27,66,480 WERE AVAILABLE AS ON 10.1 1.2006, FOR WHICH THERE WAS NO EXPLANATION. THE ASSESSEE WAS ASKED T O OFFER HIS EXPLANATION AS TO THE SOURCES FOR THE SAID DEPOSITS . IN THE ABSENCE OF PROPER EXPLANATION FROM THE ASSESSEE IN THAT BEHALF , THE ASSESSING OFFICER ADDED THE SAME TO THE RETURNED INCOME, TREA TING THE SAME AS UNEXPLAINED INVESTMENT. 4. ON APPEAL BEFORE THE CIT(A), THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF SUPPLY OF B UILDING MATERIALS AND HE IS ALSO ENGAGED IN PURCHASES AND SALE OF REAL ES TATE ON COMMISSION BASIS. IT WAS SUBMITTED THAT THE ADVANCES COLLECTED FROM THE PURCHASERS WERE DEPOSITED IN THE ASSESSEES ACCOUNT , AS IT IS RISKY TO HOLD SUCH AMOUNTS IN CASH. THE ASSESSEE HAS DEPOSI TED THE SAME IN SAVINGS BANK ACCOUNT, AND SUBSEQUENTLY PAID TO THE OWNERS BY WITHDRAWING THE SAME. IT WAS SUBMITTED THAT THE ASS ESSEE IS AN UNEDUCATED PERSON, WHO COULD NOT MAINTAIN PROPER BO OKS OF ACCOUNT IN RESPECT OF THE TRANSACTIONS AND MOST OF HIS DEALING S WERE IN CASH. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS ENTITLED ONLY TO A SMALL AMOUNT OF COMMISSION OUT OF THE DEPOSITS MADE IN HI S SAVINGS ACCOUNT WITH THE BANK OUT OF THE AMOUNTS COLLECTED FROM THE PROSPECTIVE BUYERS, AS SUBSTANTIAL PORTION OF THE AMOUNTS DEPOS ITED IN BANK HAVE TO BE PAID TO THE LAND OWNER ULTIMATELY. HENCE, IT WAS REQUESTED THAT CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSES SEE, ONLY REASONABLE PROFIT ON THE AGGREGATE AMOUNT OF DEPOSITS MADE INT O THE BANK ACCOUNT HAS TO BE ESTIMATED, FOR MAKING ADDITION, I F ANY, IN THE HANDS OF THE ASSESSEE. THE CIT(A) EVEN THOUGH HAD NOTED T HAT UNDER THE ITA NO.1030/HYD/2011 SHRI K.SHIVA SHANKAR REDDY, HYDERABAD 3 CIRCUMSTANCES, THERE IS NO INFIRMITY IN THE ASSESS MENT MADE BY THE ASSESSING OFFICER IN TREATING THE PEAK AMOUNT AS TH E INCOME OF THE ASSESSEE, LATER ON OBSERVED THAT HE ASSESSEE IS ONL Y A MATERIAL SUPPLIER AND BROKER IN REAL ESTATE BUSINESS, WHO WA S DEPOSITING THE AMOUNT RECEIVED IN BANK AND CONSEQUENTLY DIRECTED T HE ASSESSING OFFICER TO ESTIMATE THE TAXABLE INCOME OF THE ASSES SEE AT 8% OF THE AGGREGATE OF THE DEPOSITS MADE IN THE BANK, VIZ. RS .1,36,26,965 DURING THE YEAR UNDER CONSIDERATION. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), REVENUE I S IN APPEAL BEFORE US. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, SHRI PHANI KISHORE, STRESSED THAT THE ASSESSING OFFICER WAS R IGHT IN ESTIMATING THE INCOME BY ASSUMING THE PEAK AMOUNT IN THE BANK ACCO UNT DURING THE RELEVANT PERIOD, AS THE INCOME OF THE ASSESSEE. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI MOH D. AFZAL, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES. WE FIND NO INF IRMITY IN THE ORDER OF THE CIT(A), AS HE HAD ESTIMATED THE INCOME BY APPLYING THE RATE OF PROFIT AT 8% OF THE AGGREGATE AMOUNT OF DEP OSITS IN THE BANK ACCOUNT OF THE ASSESSEE, WHICH IS THE NORMAL RATE A PPROVED IN THE CASES OF ASSESSEES, DERIVING ONLY COMMISSION OR BRO KERAGE INCOME OUT OF THE AGGREGATE BUSINESS RECEIPTS, BY SUPPLYING C ONSTRUCTION MATERIAL OR IN REAL ESTATE BUSINESS, IN THE BUSINESS OF SU PPLY OF MATERIAL FOR THE PURPOSE OF CONSTRUCTION, THIS TRIBUNAL HAS BEEN CONSISTENTLY APPROVING ESTIMATION OF INCOME AT 8% OF THE AGGREGA TE RECEIPTS IN THE ABSENCE OF PROPER BOOKS OF ACCOUNT MAINTAINED BY TH E ASSESSEE. HOWEVER, CONSIDERING THE ARGUMENT OF THE LEARNED DE PARTMENTAL ITA NO.1030/HYD/2011 SHRI K.SHIVA SHANKAR REDDY, HYDERABAD 4 REPRESENTATIVE THAT THE AMOUNTS OF THE DEPOSIT IN T HE BANK ACCOUNT HAVE NOT BEEN VERIFIED BY THE ASSESSING OFFICER, WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE, THE MATTER SHOULD GO B ACK TO THE ASSESSING OFFICER TO VERIFY THE DETAILS OF DEPOSITS IN BANK A CCOUNT AND THEN TO ESTIMATE THE INCOME OF THE ASSESSEE AT 8%. WE ACCO RDINGLY SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO REFRAME T HE ASSESSMENT, IN ACCORDANCE WITH LAW AFTER VERIFYING THE DEPOSITS IN THE ACCOUNT AND ESTIMATING THE INCOME AT 8%, DULY GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 9. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 10.1.2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER. JUDICIAL MEMBER. DT/- 10TH JANUARY, 2012 COPY FORWARDED TO: 1. SHRI K.SHIVA SHANKAR REDDY, PLOT NO.1039, PRAGAT HI NAGAR, OPP. JNTU, KUKATPALLY, HYDERABAD 2. INCOME TAX OFFICER WARD - 11(1), HYDERABAD 3. COMMISSIONER OF INCOME - TAX(APPEALS) V I, HYDERABAD 4. COMMISSIONER OF INCOME - TAX - V L HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S.