SBC Marine Exports, Guntur V. The Assistant Commissioner of Income Tax Central Circle, Vijayawada

ITA 109/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0785 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 23-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 143(3); 142(1); 153A; 143(2); 69A; 44AB

Judgement Text

आयकरअपीऱीयअधिकरण, विशाखापटणमपीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्रीद ु व्ि ू रुआरएऱरेड्डी, न्याययकसदस्यएिंश्रीएसबाऱाक ृ ष्णन, ऱेखासदस्यकेसमक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअऩीऱसं./ I.T.A. No.109/Viz/2021 (ननधधारणवषा/ Assessment Year :2005-06) M/s. SBC Marine Exports, Guntur. PAN: AAIFS 3444 A Vs. ACIT, Central Circle, Vijayawada. (अऩीऱधथी/ Appellant) (प्रत्यथी/ Respondent) अऩीऱधथीकीओरसे/ Appellant by : Sri G.V.N. Hari प्रत्यधथीकीओरसे/ Respondent by : Sri M.N Murthy Naik-CIT(DR) स ु नवधईकीतधरीख/ Date of Hearing : 04/05/2022 घोषणधकीतधरीख/Date of Pronouncement : 30/05/2022 O R D E R PERS. BALAKRISHNAN, Accountant Member : This appeal filed by the assessee is against the order of the Ld. CIT(A), Guntur in appeal No.0635/CIT(A)/GNT/07-08, dated 27/12/2011 passed U/s. 143(3) r.w.s 153A and U/s. 250(6) of the Act for the AY 2005-06. 2. The assessee has raised the following grounds in its appeal: “1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) ought to have granted one more opportunity to the appellant before deciding the appeal exparte. 3. (a) Without prejudice to the above, the Ld. CIT(A) is not justified in sustaining the addition of Rs. 2,09,15,776/- made by the AO u/s. 69A of the Act towards peak negative cash balance. (b) The Ld. CIT(A) ought to have appreciated that the AO on one hand accepted the income returned by the appellant as per the duly rectified books of account and on the other hand ignored these books of account while making addition U/s. 69A of the Act. 4. Any other grounds may be raised at the time of hearing.” 3. At the outset, the Ld. AR submitted that the order of Ld.CIT(A) was not served on the assessee. Pursuant to the request made by the assessee during April 2021 a copy of the order of Ld.CIT(A) dt 27.12.2011 was provided to the assessee on 01.05.2021. The Ld. DR also produced the record that the order of Ld.CIT(A) was sent through post in 2011 has been returned back to the Department with remarks “un-served”. The Ld.AR pleaded that the there is no delay in filing the appeal before Tribunal. Considering the facts as above we are of the view that there is no delay attributable to the assessee in filing the appeal before the Tribunal and hence we proceed to adjudicate the appeal on merits. 4. Brief facts of the case are that the assessee firm is an exporter of Marine Products filed its return of income for the AY 2005-06 on 01/11/2005 admitting a total income of Rs.1,62,990/-. A search and seizure operation was carried out in the business premises of the assessee along with residential and other business premises of Sri R.V.K. Prasad, a managing partner, on 8/2/2006 and a notice U/s. 153A was issued. In response to the notice, the assessee filed return of income on 27/11/2007 and has declared the income as declared in the original return of income. Statutory notices U/s. 143(2) and 142(1) of the Act were issued along with a questionnaire and the assessee’s representative filed the detailed explanation called for by the Ld. AO. After verification of the submissions made by the assessee’s representative, the Ld. AO based on the rough cash book seized during the seizure operation made an addition of Rs. 2,09,15,776/-, being peak negative cash balance during the relevant AY, treating it as unexplained money U/s. 69A of the Act. Aggrieved by the order of the Ld.AO, the assessee filed an appeal before the CIT(A), Guntur. The Ld.CIT(A) relied on the decision of the ITAT Vizag Bench in ITA Nos. 426 to 429 of 2009 in the case of Dr. Grandhi Aravindam vs. ACIT, Central Circle, Rajahmundry wherein the Tribunal upheld the order of the AO and dismissed the appeal of the assessee on identical facts. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 5. The Ld. AR submitted that the assessee made cash sales from the opening stock as disclosed in the P & L Account filed before the AO. The Ld. AR also argued that during the search and seizure operation, the rough cash book was seized however the final cash book which was subjected to audit was not seized during the operations. The Ld. AR also invited our attention to the P & L Account wherein the insurance on stock has been paid by the assessee and submitted that since the stock was available, the stock was insured by the assessee. The Ld. AR also referred to para 10.6 of the Assessment Order the assessee stated that the audited cash book was produced during search proceedings. The Ld. AR relied on the decision of the Hon’ble Delhi High Court in the case of Pr. CIT vs. Akshit Kumar [2021] 124 taxmann.com 123 (Delhi). Per contra, the Ld. DR questioned the argument of the Ld. AR that since the goods are of perishable nature how the stock was held for a period of more than two years. The Ld. DR also relied on the order of the Ld. AO where there are no purchases made for a long period. The Ld. DR pointed out that in para 6 of the assessment order, the Ld. AO has extracted purchase ledger of the assessee clearly evidencing that there are no purchases after March, 2003 till March, 2004. The Ld. DR also confronted that no regular cash book was produced before the Ld. AO and the Ld.AO therefore relied on the rough cash book seized during the search operations. The Ld. DR also referred to para 7.1 of the order of the Ld. CIT(A) and submitted that the authorized representative of the assessee has not appeared before the Ld. CIT(A) irrespective of the fact that the case was posted on various dates. 6. We have heard both the sides and perused the material available on record and the order of the authorities below. We find from the arguments of the Ld. AR that since the accounts have been subjected to audit U/s. 44AB and the return of income filed by the assessee disclosing the cash sales and it has been accepted by the Ld. AO. The Ld. AR has also filed the computation of total income and the Income Tax return filed by the assessee, duly disclosing the profits as per the P & L Account, admitted by the AO. We find no merit in the argument of the Ld. DR that there were no sufficient purchases during the period when the sales made by the assessee has been accepted by the AO. The sales can be either made from the opening stock maintained by the assessee or from purchases made by the assessee. In the instant case, the Ld. AO has not disputed the fact that the assessee had opening stock, but confronted that there are no purchases, but has accepted the sales shown in the P & L Account for the year ended on 31/3/2005. The AO also failed to establish on how the sales were made, when there is no opening stock or purchases. The Ld. AR also submitted in the paper book, the detailed cash book for the period from April 2004 to March 2005 which was subjected to audit which was available on record during the search and seizure operations. From the submissions made by Ld AR, we understand that it was not seized by the Department. The AO simply placed reliance on the rough cash book which was not subjected to audit. The Ld. AO has merely relied on the rough cash book seized during the search operation but has failed to appreciate about the existence of the cash book which was subjected to audit. We therefore find no merit in the arguments of the Ld. DR that the peak negative cash balance in the rough cash book for Rs. 2,09,15,776/- should be treated as unexplained money U/s. 69A of the Act. We also gone through the reply reproduced in para 10.6 of the AO’s order, which is extracted below: “10.6. Sri RVK Prasad, Partner of assessee firm was asked to explain the negative cash balances and his reply vide statement dated 14/12/2007 is reproduced below: Q.4. The cash book which is maintained in computer and seized for the financial year 2004-05 in the case of SBC Marine Exports indicates negative cash balances. In the month of March, 2005, the opening negative cash balance was Rs. 96,56,676/-. On 5 th March, 2005, it was Rs. 1,06,50,676/-. On 9 th March, 2005 the negative cash balance was Rs. 1,16,50,676/- and on 29 th March, 2005 the peak negative cash balance was Rs. 2,09,15,776/-. Please explain why it shall not be treated as unexplained cash in accordance with the provisions of Income Tax Act. A. It is a draft cash book maintained by the cashier roughly. But actual cash book prepared was given and Income Tax return was accordingly filed within due date with the Department. We have also given the cash book and ledger pertaining to FY 2004-05 during the search proceedings.” 7. It is pertinent to note here that the cash book was prepared, audited and the return of income was filed accordingly. The assessee has also produced the cash book during the search operation which was not seized during the search operations should not give raise to the suspicion that the assessee has not maintained actual cash book. We therefore find no merit in the argument of Ld DR and consequently, we allow the appeal of the assessee with respect to ground No.3. 8. Ground No.1 and 4 are general in nature and they need not be adjudicated. Since the appeal is allowed, Ground No.2 raised by the assessee becomes infructuous. 9. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 30 th May, 2022. Sd/- Sd/- (द ु व्ि ू रुआर.एऱरेड्डी) (एसबाऱाक ृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER ऱेखासदस्य/ACCOUNTANT MEMBER Dated : 30.05.2022 OKK - SPS आदेशकीप्रनतलऱपऩअग्रेपषत/Copy of the order forwarded to:- 1. ननधधाररती/ The Assessee–M/s. SBC Marine Exports, D.No.4-5-5/9, 2 nd Lane, Navabharat Nagar, Ring Road, Guntur. 2. रधजस्व/The Revenue – ACIT, Central Circle, Gopalareddy Street, Governorpet, Vijayawada. 3. The Principal Commissioner of Income Tax, (ii) The Commissioner of Income Tax (Central), Hyderabad. 4. आयकरआय ु क्त (अऩीऱ)/ The Commissioner of Income Tax (A), Guntur. 5. पवभधगीयप्रनतननधध, आयकरअऩीऱीयअधधकरण, पवशधखधऩटणम/ DR,ITAT, Visakhapatnam 6. गधर्ाफ़धईऱ / Guard file आदेशधन ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam