R.Sandeep Goud, Hyd, Hyderabad V. ITO, Ward-7(2), Hyd, Hyderabad

ITA 1186/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5988 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 29-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2015
• Court: TRIBUNAL
• Department Lawyers: B V GOPINATH
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Difference of opinion; Change of opinion
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 118 6 /H YD /201 5 ASSESSMENT YEAR : 2009 - 10 SRI R . SANDEEP GOUD, HY DERABAD [PAN: A O PPR8050L ] VS THE INCOME TAX OFFICER, WARD - 7 ( 2 ) , HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD , AR FOR REVENUE : S HRI B.V. GOPINATH, DR DATE OF HEARING : 29 - 0 2 - 201 6 DATE OF PRONOUNCEMENT : 04 - 0 3 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M : TH IS IS A SSESSEE S APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX - VI , HYDERABAD, DATED 11 - 0 3 - 201 4 . ASSESSEE IS CHALLENGING THE JURISDICTION U/S. 263 OF THE INCOME TAX ACT [ACT] INVOKED BY THE CIT IN SETTING A SIDE THE ORDER OF AO . 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND IS A RETAIL DEALER OF IMFL. ASSESSEE FILED RETURN OF INCOME ON 31 - 08 - 2009 DECLARING AN INCOME OF RS. 2,06,130/ - . THE CASE WAS SELECTED FOR SCRUTINY UNDER COMPUTER AIDED SCRUTINY SELE CTION [CASS] METHOD FOR VERIFYING THE SOURCES OF CASH DEPOSITS ABOVE THE THRESHOLD LIMIT IN SAVING BANK ACCOUNT. IN THE SCRUTINY ASSESSMENT, SINCE ASSESSEE I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 2 - : HAS PRODUCED THE SAVINGS BANK A/C COPIES AND EXPLAINED THAT DEPOSITS ARE MADE FROM SALE PROCEEDS OF IMFL AND THE CORRESPONDING WITHDRAWALS WERE UTILIZED FOR BUSINESS PURPOSES , AO ACCEPTED THEM . SINCE ASSESSEE DID NOT FURNISH THE EVIDENCE IN SUPPORT OF EXPENDITURE CLAIMED, ASSESSING OFFICER (AO) DISALLOWED ROUND - S UM AMOUNT OF RS. 3 LAKHS TO THE RETURNED INCOME. HOWEVER, WHILE MAKING THE ADDITION IN THE COMPUTATION OF INCOME, AO ADDED AN AMOUNT OF RS. 2,75,800/ - ONLY. 3. LD. CIT INVOKING THE POWERS U/S. 263 HAS ISSUED A SHOW CAUSE NOTICE ON THE FOLLOWING REASONS: I. AO PROPOSED FOR AN ADDITION OF RS. 3 LA KHS BUT ADDED ONLY RS. 2,75,800/ - ; II. AO HAS NOT ESTIMATED THE INCOME ON PURCHASES OF RS. 2,02,29,205/ - WHICH SHOULD HAVE BEEN ESTIMATED AT 5% ON NET PURCHASES AS DECIDED IN NUMBER OF CASES; III. AO HAS NOT VERIFIED THE PROOF OF PAYMENT OF LICENSE FEE OF RS. 38,20 ,875/ - ; IV. AO HAS NOT VERIFIED THE RENT RECEIVABLE FROM RELIANCE, FROM WHOM ADVANCE OF RS. 60,000/ - WAS RECEIVED ; V. AO HAS NOT VERIFIED RENT RECEIVABLE FROM BIDAR HOUSE PROPERTY; 4. IN SPITE OF SERVING VARIOUS NOTICES ON ASSESSEE, ASSESSEE DID NOT REPRESENT BE FORE THE LD. CIT. CONSEQUENTLY, LD. CIT HAS NO OCCASION TO CONSIDER A SSESSEES SUBMISSIONS ON THE ABOVE F IVE ISSUES. HE CAME TO THE OPINION THAT AO HAS NOT EXAMINED THE ISSUES PROPERLY WHILE COMPLETING THE SCRUTINY ASSESSMENT AND SET I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 3 - : ASIDE THE ASSESSMENT WITH THE DIRECTION TO RE - DO THE ASSESSMENT AS PER THE DIRECTIONS GIVEN . 5. ASSESSEE IS AGGRIEVED ON THE ABOVE, BUT PREFERRED APPEAL WITH A DELAY OF 281 DAYS. ASSESSEE HAS FILED A CONDONATION PETITION. IT WAS EXPLAINED THAT ASSESSEE WA S RUNNING M /S. BALAJI WINES AS A PROPRIETARY CONCERN AND BUSINESS OPERATED IN THE YEAR 2008 AND CLOSED IN THE YEAR 2010. CONSEQUENTLY, THE DEPARTMENTAL NOTICES WERE NOT PROPERLY SERVED ON HIM. FURTHER, THE MATTERS WERE HAND L ED BY ASSESSEES UNCLE WHO APPROACHED AN ADVOCATE TO SUBMIT THE INFORMATION BEFORE THE CIT. SINCE THERE IS NO REPRESENTATION, NO ORDER WAS ALSO RECEIVED BY ASSESSEE. SUBSEQUENTLY , IT WAS NOTICED THAT THE ORDER ISSUED BY THE CIT WAS STATED TO HAVE BEEN SERV ED ON 23 - 12 - 2014 AND THAT CASE WAS NOT PROPERLY REPRESENTED BEFORE THE CIT. CONSEQUENTLY, ASSESSEES UNCLE APPROACHED ANOTHER ADVOCATE/TAX CONSULTANT, WHO PREPARED THE APPEAL PAPERS, OBTAINED THE SIGNATURE AND PAID THE FEE ALSO OF RS. 10,000/ - ON 19 - 02 - 2005. HOWEVER, THE APPEAL COULD NOT BE F ILED IN TIME AND CONSEQUENTLY FILED ONLY ON 05 - 10 - 2015 WITH THE DELAY OF 281 DA YS. IT WAS EXPLAINED THAT THE FEE PAYABLE WAS ONLY RS. 500/ - BUT PAID MORE, THE CONSULTANT WAS REQUESTING THE BANK AUTHORITIE S TO RECTIFY THE SAME AND PEND ING THAT THEY DID NO T FILE THE APPEAL. IN THE MEAN TIME, ASSESSEES UNCLE ALSO MET WITH AN ACCIDENT AND ASSESSEE LOST TRACK OF THE ISSUE . O NLY AFTER AO CONTACTED ASSESSEE FOR PAYMENT OF TAXES AFTER THE CONSEQUENTIAL ORDER WAS PASSED WHICH WAS ALSO P ASSED EX - PARTE, ASSESSEE R EALISED THAT APPEAL WAS NOT BE FILED. LD. COUNSEL EXPLAINED THAT PAYMENT CHALLAN ITSELF PROVES THAT ASSESSEE HAS BONAFIDELY INTEND TO PREFER THE APPEAL BUT DUE TO SOME REASONS, THE APPEAL COULD BE FILED BELATEDLY. HE ALSO SHOWED THE CORRESPONDENCE TO THE BANK IN I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 4 - : SUPPORT OF THE CONTENTION THAT COUNSEL WHO PREPARED THE APPEAL COULD NOT FILE IT IN TIME . S UBSEQUENTLY, PRESENT COUNSEL CAME INTO PICTURE AND PREFERRED THE APPEAL. IT IS PRAYED THAT THE DELAY MAY BE CONDONED. 5. 1 . AFTER CONSIDERING THE OBJECTION S FROM THE LD. DR AND PERUSING THE AFFIDAVIT PLACED ON RECORD ALONG WITH REASONS SUBMITTED, WE ARE OF THE OPINION THAT THERE WERE BONAFIDE REASONS FOR NOT PREFERRING THE APPEAL IN TIME. ACCORDINGLY, THE DELAY IN FILING THE APPEAL WAS CONDONED AND APPEAL I S ADMITTED. 6. LD. COUNSEL REFERRING TO THE SHOW CAUSE NOTICE AND CONSEQUENTIAL ORDER PASSED BY THE AO , SUBMITTED THAT ASSESSEE HAS NO OBJECTION FOR THE ADDITION OF BALANCE AMOUNT OF RS. 24,200/ - AS IT WAS A MISTAKE COMMITTED BY THE AO. AS FAR AS THE ISS UES IN ITEM NO. 4 & 5 ARE CONCERNED IE. ADVANCE RENT FROM RELIANCE AND RENT RECEIVABLE FROM BIDAR, IT WAS SUBMITTED THAT ASSESSEE DO NOT OWN ANY PROPERTIES AS ALLEGED BY THE CIT AND REFERRED TO THE BALANCE SHEET AND P&L A/C FILED ALONG WITH RETURN OF INCOM E. HE FURTHER SUBMITTED THAT AO IN THE CONSEQUENTIAL ORDER ALSO DID NOT MAKE ANY ADDITION WHICH INDICATES THAT THESE TWO ISSUES RAISED BY THE CIT DO NOT PERTAIN TO ASSESSEE. 7. NOW, COMING TO THE ISSUES AT ITEM NO. 2 & 3 ARE CONCERNED, THE OPINION OF THE CIT IS NOT CORRECT AS ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS WHICH WERE NOT REJECTED BY THE AO. WHAT AO HAS DONE AFTER VERIFYING THE DEPOSITS WHICH WERE REQUIRED TO BE VERIFIED UNDER CASS, HAS DISALLOWED THE EXPENDITURE CLAIMED IN THE BOOKS OF ACCOUNTS . SINCE AO ACCEPTED THE BOOKS OF ACCOUNTS, ESTIMATION OF INCOME ON THE PURCHASES DOE S NOT ARISE. I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 5 - : CONSEQUENTLY, THE OPINION OF THE CIT FOR DIRECTING TO ESTIMATING THE INCOME TO 5% OF NET PURCHASES IS ON LY A CHANGE OF OPINION OF A SUPERI OR OFFICER WHICH CA NNOT BE RESORTED TO IN THE PROCEEDINGS U/S. 263. WITH REFERENCE TO THE PROOF OF PAYMENT OF LICENSE FEE, LD. COUNSEL SUBMITTED THAT THIS AMOUNT WAS CLAIMED IN THE P&L A/C WHICH THE AO HAS EXAMINED AT THE TIME OF SCRUTINY AND ACCEPTED. THEREFORE, IT WAS SU BMITTED THAT DIRECTIONS OF THE CIT ON THESE TWO ISSUES ARE NOT CORRECT. 7.1 . LD. DR, HOWEVER, ACCEPTED THE FACT THAT ITEM NO. 4 & 5 MAY NOT PERT AIN TO ASSESSEE, BUT HE SUPPORTED THE ORDER OF CIT U/S. 263 AS AO HAS NOT EXAMINED VARIOUS ISSUES WHILE COM PLETING THE ASSESSMENT. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS ON RECORD. AS FAR AS ORIGINAL SCRUTINY ASSESSMENT IS CONCERNED, AS CLEARLY STATED BY THE AO IN THE ORDER ITSELF, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS METHOD FOR VERIFYING THE SOURCES OF CASH DEPOSITS ABOVE THRESHOLD LIMIT IN THE SB A/C. THEREFORE, AOS DUTY IN SCRUTINY IS CONFINED TO THE EXAMINATION OF VARIOUS DEPOSITS AS PER THE BOARDS GUIDELINES ISSUED UNDER THE CASS SCHEME OF SELECTION OF SCRUTINY. HOWEVER, AO NOT ONLY EXAMINED THE ABOVE , BUT ALSO EXAMINED VARIOUS CLAIMS AND DISALLOWED ROUND - SUM AMOUNT OF RS. 3 LAKHS , WITHOUT REJECTING THE BOOKS OF ACCOUNTS. CONSEQUENTLY, ESTIMATION OF INCOME AS PROPOSED BY THE LD. CIT DOES NOT ARISE IN THIS CASE. IN FACT, WHEN AO ACCEPTS THE BOOKS OF ACCOUNTS AND DOES NOT REJECT THE SAME, CIT IN THE ORDER U/S. 263 CANNOT DIRECT THE AO TO REJECT THE BOOKS OF ACCOUNTS TO ESTIMATE THE INCOME. THEREFORE, IN OUR VIEW, CIT IS NOT CORRECT IN EXERCISING JURISDICTION ON THIS ISSUE. LIKE - WISE, THE I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 6 - : EXAMINATION OF LICENSE FEE OF RS. 38 , 2 0,875/ - WHICH WAS CLAIMED IN P & L ACCOUNT. AO EXAMINED VARIOUS DEPOSITS IN THE BANK ACCOUNT AND CORRESPONDING WITHDRAWALS. HIS FINDING IN THE ASSESSMENT ORDER IS AS UNDER: WHEN ASKED, A SSESSEES AR SAYS THAT THE CASH DEPOSITS ARE MET FROM THE SALE PROCEEDS OF IMFL AND THE CORRESPONDING WITHDRAWALS WERE ALSO UTILIZED FOR BUSINESS PURPOSES. THIS INDICATES THAT THE EXPENDITURE CLAIM TOWARDS IMFL IS EITHER FROM THE SALE PROCEEDS OF THE I MFL OR WITHDRAWALS FROM THE BANK ACCOUNT. IT MAY BE TRUE THAT AO DID NOT LEAVE ANY NOTES ABOUT THE EXAMINATION OF VARIOUS ITEMS. BUT HAVING COMPLETED ASSESSMENT BY RECORDING THE ABOVE NOTING, IT CAN BE SAFELY PRESUMED THAT AO HAS EXAMIN ED THE DEPOSITS AN D WITHDRAWALS IN THE COURSE OF ASSESSMENT PROCEEDINGS. EVEN OTHERWISE, AO DISALLOWED A ROUND - SUM OF RS. 3 LAKHS , OUT OF THE EXPENDITURE CLAIMS WHICH INDICATE THAT HE HAS SATISFIED HIMSELF ABOUT THE OTHER CLAIMS MADE IN THE P&L A/C. AS SEEN FROM THE P&L A /C, APART FROM PURCHASES OF RS. 2,05,05,123/ - , THE OTHER CHARG ES ARE (FREIGHT RS. 1,93,185/ - ), SALARIES RS. 1,80,000/ - AND OTHER EXPENSES RS. 1,78,008/ - . THE MAJOR ITEM OF EXPENDITURE IS ONLY RATES AND TAXES OF RS. 38,20,875/ - . THEREFORE, IT CANNOT BE ST ATED THAT AO DID NOT EXAMINE THIS MAJOR ITEM. BE THAT AS IT MAY, IN OUR OPINION, FURNISHING OF PROOF IN THE COURSE OF ASSESSMENT ON RECORD MAY NOT BE REQUIRED IN ALL CASES , WHEN AO TAKES UP THE SCRUTINY FOR EXAMINING SPECIFIC ISSUES SINCE THE CASE HAS BEE N SELECTED UNDER CASS SYSTEM . M AY BE THAT AO IS CONSTRAINED TO EXAMINE ONLY THE ISSUE ON WHICH SCRUTINY WAS TAKEN UP. IN VIEW OF THIS, IT CANNOT BE HELD THAT ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 7 - : INTEREST OF REVENUE. AS ALREADY STATED ABOVE , ITEM NO. 4 & 5 IE. ADVANCE RECEIPTS OF RS. 60,000/ - FROM RELIANCE TOWER AND RENT RECEIVABLE FROM BIDAR DOES NOT EVEN PERTAIN TO ASSESSEE. THIS INDICATES THAT THE NOTICE ISSUED BY THE CIT ON THE ABOVE ISSUES IS ERRONEOUS. BE THAT AS IT MAY, THERE IS THE FIRST ISSUE ONLY ON WHICH THE PROCEEDINGS U/S 263 COULD HAVE BEEN VALIDLY UPHELD. CONSEQUENTLY, WHILE UPHOLDING THE PROCEEDINGS U/S. 263, THE DIRECTIONS GIVEN WITH REFERENCE TO ITEM NOS. 2 TO 5 ARE HEREBY SET ASIDE. WE MODIFY THE DIRECTION S OF THE CIT O NLY TO THE ISSUE OF MAKING THE ADDITION OF RS. 24,200/ - WHICH SHOULD HAVE BEEN ADDED BY THE AO IN THE ORIGINAL ORDER. THE ORDER TO THAT EXTENT IS SUSTAINED. ASSESSEES GROUNDS ON BALANCE ISSUE S ARE ACCORDINGLY ALLOWED. 9. IN THE RESULT, APPEAL OF ASS ESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH MARCH , 201 6 S D/ - S D/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 04 TH MARCH , 2016 TNMM I.T.A. NO. 1186 / HYD / 201 5 SRI R. SANDEEP GOUD : - 8 - : COPY TO : 1. SRI R. SANDEEP GOUD, 7 - 1 - 246/2/1/A/85, BALKAMPET, HYDERABAD. C/O. CH. PARTHASARATHY & CO., 1 - 1 - 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO. 1, ASHOKNAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER , WARD - 7 (2), HYDERABAD. 3 . CIT - VI , HYDERABAD. 4 . D.R. ITAT, HYDERABAD. 5 . GUARD FILE.