Sri Satish Lal, Hyderabad V. ITO,Ward-1, Kothagudem

ITA 1078/HYD/2014

• Counselvise Citation: 107822514 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Assessment record
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1078/HYD/2014 (ASSESSMENT YEARS 2 009-10) SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. (PAN - AAEPL 2793 D ) V/S INCOME TAX OFFICER, WAD - 1, KOTHAGUDEEM (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.CHANDRAMOULESWARA RAO RESPONDENT BY : SHRI J.SIRI KUMAR CIT-DR DATE OF HEARING 3.12.2015 DATE OF PRONOUNCEMENT 18.12.2015 O R D E R PER SMT. P. MADHAVI DEVI, JUDICIAL MEMBER : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME-TAX, VIJAYAWADA PASSED UNDER S.263 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-1 0. 2. IN THIS APPEAL, THE ASSESSEE HAS URGED THE FOL LOWING GROUNDS OF APPEAL- 1. THE REVISIONARY ORDERS OF THE LD. COMMISSIONER OF INCOME-TAX IS ERRONEOUS AND BOTH ON FACTS AND ALSO IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX HAS ERRED IN TREATING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BY WRONGLY ASSUMING JURISDICTION U/S. 263 OF THE ACT I N AS MUCH AS THE ASSESSMENT ORDER DATED 31/05/2011 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX IS NOT JUSTIFIE D ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 2 IN DIRECTING THE ASSESSING OFFICER TO RE-EXAMINE T HE FOLLOWING: A. APPROPRIATENESS OF THE ESTIMATION OF SALES COMMISSION INCOME AT 50% OF SUCH DEALERS COMMISSION WHICH IS WORKING OUT TO RS.4,47,379/- AS AGAINST RS.2,23,690 I.E. 50% OF SUCH COMMISSION. B. CORRECTNESS OF THE DEBTORS AMOUNT OF RS.13,00,000/- AS PER BOOKS OF ACCOUNT OF KALANJALI PICTURE PALACE AS AGAINST RS.8,00,00/- SHOWN AS LIABILITY TO KALANJALI PICTURE PALACE IN THE BOOKS OF ACCOUNT OF THE APPELLANT. C. CORRECTNESS OF THE COMPUTATION OF UNACCOUNTED PETROL SALES AT 3648 LITRES WHICH WORKS OUT TO RS.1,61,752/- SOLD OUT OF BOOKS OF ACCOUNTS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAD ALREADY ENQUIRED INTO ALL THE ABOVE ISSUES AND MERELY BECAUSE THE RATE ESTIMATED IS NOT SUFFICIENT IN THE OPINION OF THE LD. COMMISSIONER OF INCOME-TAX AND IN HIS VIEW FURTHER ENQUIRIES OUGHT TO HAVE BEEN CONDUCTED, THE ASSESSMENT ORDER HAS CANNOT NOT BE TERMED AS ERRONEOUS. 5. SUCH OTHER GROUND/GROUNDS THAT MAY BE URGED DURING THE COURSE OF HEARING OF THE APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF RUNNING PETROL STATIO N UNDER THE NAME AND STYLE OF M/S. JANAPRIYA PETROL FILLING STATION. HE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 13.9.2009 , DECLARING A TOTAL INCOME OF RS.3,44,640. DURING THE ASSESSMENT PROCEEDINGS UNDER S.143(3) OF THE ACT, THE ASSESSING OFFICER OB SERVED THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF RS.20,25,501 TOWARD S GROSS PROFIT. THEREFORE, THE ASSESSEE WAS ASKED TO RECONCILE THE GROSS PROFIT WITH REFERENCE TO THE DEALER COMMISSION PAID BY THE ASSE SSEE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THERE HAVE BEEN VARIOUS FACTORS SUCH AS ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 3 PRICE VARIATIONS AND DIESEL SALES MADE AT COST PRIC E TO REGULAR CUSTOMERS DUE TO WHICH THERE HAS BEEN VARIATION BET WEEN THE GROSS PROFIT SHOWN AND THE DEALER COMMISSION. THE ASSESS EE ALSO SUBMITTED A LETTER DATED 27.5.2011 DULY FURNISHING THE DETAI LS IN RESPECT OF LOSS ON SALE DUE TO PRICE VARIATION AND SALE MADE AT COS T PRICE. A COPY OF THE SALES LEDGER ACCOUNT WAS ALSO FILED. ON EXAMIN ATION OF THE SAME, THE ASSESSING OFFICER FOUND THAT THERE WAS A SALE O F 7,09,000 LITRES OF HSD DURING THE PERIOD FROM 29.1.2009 AND 31.3.2009 , CLAIMED TO HAVE BEEN MADE AT COST PRICE, I.E. WITHOUT DEALER C OMMISSION. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE SALE BILLS FOR SUCH SALES. THE ASSESSEE EXPRESSED HIS INABILITY TO PROD UCE THE SAME. IN VIEW OF THE SAME, THE ASSESSING OFFICER PROPOSED TO ADD THE DEALERS COMMISSION OFFERED BY THE ASSESSEE DURING SUCH PERI OD, WHICH WAS AT RS.631 PER KL (KILOLITRE) ON THE HSD SALES OF 70900 0 LITRES. HE WORKED OUT THE DEALER COMMISSION AT RS.4,47,379, AND AFTER CONSIDERING THE ASSESSEES EXPLANATION THAT THE SALE MADE AT COST P RICE WAS DUE TO BUSINESS EXPEDIENCY OF INCREASING THE TURNOVER AND THE PRACTICE OF MAKING SALES AT COMPETITIVE PRICES BEING IN VOGUE I N THIS LINE OF BUSINESS, HE ADDED 50% OF THE QUANTIFIED DEALER COM MISSION, WHICH WORKED OUT TO RS.2,23,690 TO THE RETURNED INCOME OF THE ASSESSEE. THE ASSESSEE ALSO ACCEPTED SUCH ADDITION. 4. SUBSEQUENTLY, THE COMMISSIONER CALLED FOR THE ASSESSMENT RECORD UNDER S.263 OF THE ACT, AND ON PERUSAL OF TH E SAME, HE WAS OF THE OPINION THAT THE ASSESSING OFFICER HAS ADDED BA CK ONLY 50% OF THE DEALER COMMISSION INSTEAD OF BRINGING THE TOTAL COM MISSION TO TAX. HE FURTHER OBSERVED THAT VIDE LETTER DATED 17.1.2011, THE ASSESSEES AUTHORISED REPRESENTATIVE HAS STATED THAT RS.8 LAKH S WAS DRAWN FROM M/S. KALANJALI PICTURE PALACE, YELLANDU, IN WHICH T HE ASSESSEE IS A PARTNER, WHEREAS THE ASSESSEE WAS SHOWN AS A DEBTOR FOR RS.13 LAKHS ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 4 IN THE BOOKS OF M/S. KALANJALI PICTURE PALACE, AS P ER THE BALANCE SHEET FOR THE YEAR ENDING 31.3.2009. SINCE IN THE ASSESSE ES BOOKS OF ACCOUNT, THE LIABILITY WAS SHOWN ONLY TO THE EXTENT OF RS. 8 LAKHS, THE COMMISSIONER WAS OF THE OPINION THAT THE ASSESSMENT ORDER WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE WITHIN THE SCOPE OF S.263 OF THE ACT. HE THEREFORE , ISSUED A SHOW CAUSE NOTICE DATED 11.5.2012 UNDER S.263 OF THE ACT . THE ASSESSEE FILED ITS OBJECTIONS TO SUCH PROCEEDINGS, VIDE LETT ER DATED 7.11.2013. THE COMMISSIONER, HOWEVER, WAS NOT CONVINCED BY THE ASSESSEES CONTENTIONS AND HELD THAT THE ASSESSEE COULD NOT FU RNISH ANY MATERIAL IN SUPPORT OF HIS CLAIM THAT HE HAS SOLD DIESEL AT COST PRICE FOR BUSINESS EXPEDIENCY AND THEREFORE, THE ASSESSING OFFICER SHO ULD HAVE DISALLOWED THE ENTIRE DEALER COMMISSION. HE HELD THAT THE ASSE SSMENT IS ERRONEOUS ON THIS ISSUE. AS REGARDS THE SECOND ISSU E, I.E. THE QUANTUM OF LOAN FROM M/S. KALANJALI PICTURE PALACE, HE OBSE RVED THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE NATURE AND QUANT UM OF HIS LIABILITY TO M/S. KALANJALI PICTURE PALACE AND THEREFORE, THE SA ID CLAIM BEING UNVERIFIABLE, IS DEVOID OF MERIT, MAKING THE ASSESS MENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 5. THE COMMISSIONER OF INCOME-TAX FURTHER OBSERVE D THAT THERE WAS UNACCOUNTED PETROL SALE OF 3,468 LITRES, WHICH WORKED OUT TO RS.1,61,752, AND SINCE THIS IS THE COST OF PETROL S OLD OUTSIDE THE BOOKS OF ACCOUNT, ASSESSEE IS NOT ENTITLED TO ANY DEDUCT ION THEREFROM. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO DIS ALLOW THE ENTIRE COST OF UNACCOUNTED SALES. ACCORDINGLY, THE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO DISALLOW THE ENTIRE COST OF UN ACCOUNTED SALE, AND TO THAT EXTENT, ON THIS ISSUE, HE REVISED THE ASSES SMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO REDO THE ASSESSME NT DE NOVO ON THAT ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 5 ISSUE, AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. AGAINST THIS ORDER OF THE COMMISSIONER OF INC OME-TAX, UNDER S.263, ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE, SHRI CHANDRAMOULESWARA RAO, SUBMITTED THAT THE THER E ARE THREE ISSUES ON WHICH THE COMMISSIONER HAS SOUGHT TO REVI SE THE ASSESSMENT ORDER. HE SUBMITTED THAT THE FIRST ISSU E IS ABOUT THE DIFFERENCE BETWEEN THE GROSS PROFIT RECORDED IN THE ASSESSEES BOOKS AND THE GROSS PROFIT DETERMINED ON THE BASIS OF DE ALERS COMMISSION. HE SUBMITTED THAT THIS ISSUE WAS CONSIDERED BY THE ASSESSING OFFICER IN DETAIL DURING THE ASSESSMENT PROCEEDING UNDER S.14 3(3) OF THE ACT, AS IS EVIDENT FROM THE DETAILED REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. HE SUBMITTED THAT THE ASSES SING OFFICER, AFTER DETAILED EXAMINATION OF THE ARGUMENTS OF THE ASSESS EE HAS ACCEPTED THE ASSESSEES CONTENTION WITH REGARD TO THE VARIAT ION IN THE GROSS PROFIT AS PER ASSESSEES BOOKS AND THE DEALERS COM MISSION, AND ALSO THE EXPLANATION WITH REGARD TO BUSINESS EXPEDIENCY FOR SELLING THE PETROL AT COST PRICE, BEFORE MAKING THE ADDITION OF 50% OF THE QUANTIFIED DEALERS COMMISSION. HE SUBMITTED THAT T HE ASSESSING OFFICER HAS ACCEPTED THE ASSESSEES CONTENTION TO B E REASONABLE, AND THEREFORE, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEV ER, SUPPORTED THE ORDER OF THE COMMISSIONER. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND TH E MATERIAL ON RECORD, WE FIND THAT DURING THE ASSESSMENT PROCEED INGS, THE ASSESSING ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 6 OFFICER HAD APPLIED HIS MIND TO THE DETAILS FURNISH ED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME AND ALSO CALLED FOR FURTHER DETAILS BEFORE BEING SATISFIED ABOUT THE ASSESSEES EXPLAN ATION ABOUT THE VARIATION BETWEEN THE GROSS PROFIT AS PER THE BOOKS AND THE DEALERS COMMISSION. HE HAS THUS RESTRICTED THE ADDITION TO 50% OF THE QUANTIFIED DEALERS COMMISSION, WHICH SHOWS THAT TH E ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION THE VARIOUS ASPECTS OF THE ASSESSEES BUSINESS AND HAS TAKEN A CONSCIOUS VIEW. UNDER S.2 63 OF THE INCOME- TAX ACT, THE COMMISSIONER CANNOT SUBSTITUTE THE ASS ESSING OFFICERS FINDING WITH HIS OWN VIEW. THEREFORE, WE ARE SATISF IED THAT ON THIS ISSUE, THE ASSESSMENT ORDER CANNOT BE SAID TO BE ER RONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE. 10. AS REGARDS THE OTHER TWO ISSUES ON WHICH THE COMMISSIONER HAS SOUGHT TO REVISE THE ASSESSMENT O RDER, WE FIND THAT THE ASSESSING OFFICER HAS NOT CALLED FOR OR VERIFI ED ANY OF THE DETAILS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCE EDINGS UNDER S.143(3) OF THE ACT. THUS, THE ASSESSMENT ORDER BEC OMES ERRONEOUS INSOFAR AS THIS CONDITION IS CONCERNED. HOWEVER, I N ORDER TO REVISE THE ASSESSMENT ORDER, THE TWIN CONDITIONS, I.E. ASSESSM ENT ORDER BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE HAVE TO BE SATISFIED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF DIFFERENCE IN THE LIABILITY OF THE ASSESSE E TO M/S. KALANJALI PICTURE PALACE, YELLANDU HAS ONLY BEEN CONSIDERED B Y THE COMMISSIONER, BUT THE COMMISSIONER HAS FAILED TO DE MONSTRATE AS TO HOW THE SAME WAS PREJUDICIAL TO THE INTERESTS OF RE VENUE. HE HAS DRAWN OUR ATTENTION TO PARA 7.2 OF THE COMMISSIONER S ORDER, WHEREIN THE COMMISSIONER HAS DISCUSSED THIS ISSUE. ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 7 11. AS REGARDS THE THIRD ISSUE, THE LEARNED COUNS EL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO THE WRITTEN SUB MISSIONS FILED BY THE ASSESSEE BEFORE US TO DEMONSTRATE THAT THERE W AS DISCREPANCIES IN THE WORKING OF THE OPENING AND CLOSING BALANCES OF PETROL FOR VARIOUS MONTHS, IN THE TABLE REPRODUCED BY THE COMMISSIONER AT PARA 5 OF HIS ORDER, AND SUBMITTED THAT IF THE DISCREPANCIES ARE RECTIFIED, THERE WAS NO VARIATION IN THE CLOSING OR OPENING STOCK AND THERE WOULD BE NO UNACCOUNTED SALE OF PETROL OUTSIDE THE BOOKS OF ACC OUNT. THEREFORE, ACCORDING TO HIM, THE COMMISSIONER HAS FAILED TO DE MONSTRATE THAT THE ASSESSMENT ORDER WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THIS COUNT ALSO. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON T HE OTHER HAND, SUPPORTED THE ORDER OF THE COMMISSIONER ON TH ESE ASPECTS AS WELL. 13. HAVING REGARD TO THE RIVAL CONTENTIONS AND TH E MATERIAL ON RECORD, WE FIND THAT THE ASSESSMENT ORDER IS ERRON EOUS WITH REGARD TO BOTH THESE ASPECTS, BECAUSE THE ASSESSING OFFIC ER HAS NOT VERIFIED THESE DETAILS DURING THE ASSESSMENT PROCEEDINGS. WE HOWEVER, FIND THAT THE COMMISSIONER HAS FAILED TO DEMONSTRATE THA T THE ASSESSMENT ORDER IS ALSO PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. AS REGARDS THE SECOND ISSUE OF THE DISCREPANCY IN THE BOOKS OF THE ASSESSEE AND M/S.KALANJALI PICTURE PALACE WITH REGARD TO ASSESSE ES LIABILITY, WE FIND NO FINDING OF THE COMMISSIONER AS TO HOW SUCH DISCR EPANCY IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREF ORE, ON THIS ISSUE, WE ARE NOT SATISFIED THAT THE ASSESSMENT ORDER IS REVI SABLE UNDER S.263 OF THE ACT. ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 8 14. AS REGARDS THE THIRD ISSUE WITH REGARD TO THE SALE OF PETROL OUTSIDE THE BOOKS OF ACCOUNT, WE FIND FROM THE TABL E AT PARA 5 OF THE ORDER OF THE COMMISSIONER THAT CLOSING STOCK AT THE END OF APRIL, 2008 TO AUGUST, 2008 IS NOT TAKEN AS THE OPENING BALANCE FOR THE RESPECTIVE SUCCEEDING MONTHS. THE ASSESSEE HAS FILED THE WORKI NG OF THE CLOSING STOCK ON THE BASIS OF THE TABLE REPRODUCED BY THE C OMMISSIONER AT PARA 5 AND HAS WORKED OUT THE VALUE OF THE CLOSING STOCK. ON EXAMINATION OF THE SAME, WE FIND THAT THERE IS NO V ARIATION AT ALL, AND THUS, THE COMMISSIONERS FINDING ABOUT THE VARIATIO N IN STOCK IS UNSUBSTANTIATED. IN THIS VIEW OF THE MATTER, ON TH IS ISSUE ALSO, THE ASSESSMENT ORDER IS NOT REVISABLE. 15. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE O F THE VIEW THAT THE IMPUGNED ORDER OF THE COMMISSIONER PASSED UNDER S.263 OF THE ACT IS NOT SUSTAINABLE, AND THE SAME IS ACCORDI NGLY QUASHED. 16. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE COURT ON 18 TH DECEMBER, 2015 SD/- SD/- (S.RIFAUR RAHAMAN) (P.MADHAVI DEVI) ACCOUNTANT MEMBER. JUDICIAL MEMBER DT/- 18TH DECEMBER, 2015 COPY FORWARDED TO: 1. SHRI SATISH LAL (YELLANDU, KHAMMAM DIST.), C/O. SHRI M.CHANDRAMOULESWARA RAO, CHARTERED ACCOUN TANT, C-3, SKYLARK APARTMENTS, BASHEERBAGH, HYDERABAD 500 029. 2. INCOME TAX OFFICER WARD 1, KOTHAGUDEM ITA NO.1078/HYD/2014 SHRI SATISH LAL, YELLANDU, KHAMMAM DIST. 9 3. COMMISSIONER OF INCOME - TAX, VIJAYAWADA 4. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.