ITO, W-7(3), Hyd, Hyderabad V. Hameed Khan, Hyd, Hyderabad

ITA 1210/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6601 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 15-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V HEMALATHA DEVI
• Assessee Lawyers: S SWAMINATHAN

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. 1231/HYD/2015 ASSESSMENT YEAR: 2011-12 HAMEED KHAN, HYDERABAD. PAN AEDPK 2416B VS. INCOME-TAX OFFICER, WARD 7(4), HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: SHRI S. SWAMINATHAN REVENUE BY: SMT. G.V. HEMALATHA DEVI ITA NO. 1210/HYD/2015 ASSESSMENT YEAR: 2011-12 INCOME-TAX OFFICER, WARD 7(4), HYDERABAD. VS. HAMEED KHAN, HYDERABAD. PAN AEDPK 2416B APPELLANT RESPONDENT ASSESSEE BY: SHRI MOHD. AFZAL REVENUE BY: SHRI B. RAMANJANEYULU DATE OF HEARING: 07/04/2016 DATE OF PRONOUNCEMENT: /04/2016 O R D E R PER S. RIFAUR RAHMAN, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AS WE LL AS REVENUE AGAINST THE ORDER OF CIT(A)-3, HYDERABAD, D ATED 19/08/15 FOR AY 2011-12. 2. BRIEF FACTS OF THE CASE ARE, ASSESSEE IS AN INDI VIDUAL FILED HIS RETURN OF INCOME ON 17/09/12 ADMITTING TO TAL INCOME OF RS. 4,74,280/-. THIS CASE IS SELECTED FOR SCRUTINY. DURING ASSESSMENT PROCEEDINGS, ASSESSEE WAS ASKED TO EXPLA IN THE CASH DEPOSITS REPORTED IN AIR INFORMATION FOR RS. 4 7,09,460/-. I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 2 IN RESPONSE, ASSESSEE SUBMITTED THAT HE HAD TWO KIN DS OF TURNOVER, RETAIL BUSINESS OF RS. 2,90,60,566/- DEAL ING IN ORGANISED SECTOR AND WHOLESALE BUSINESS OF RS. 64,4 6,043/- DEALING IN UNORGANISED SECTOR. HE HAS REPORTED BOTH THE BUSINESSES IN RETURN OF INCOME, BUT, FOLLOWED THE P ROVISIONS OF SECTION 44AB ONLY TO THE TURNOVER OF RETAIL SECTOR. SINCE THE WHOLESALE BUSINESS IS DEALING WITH UNORGANISED SECT OR, ONLY SELF-MADE BILLS/VOUCHERS WERE MADE AVAILABLE AND TH ESE WERE NOT OFFERED FOR AUDIT AS PER SECTION 44AB. THE PORT ION OF THE SALE PROCEEDS WERE DEPOSITED IN ASSESSEES PERSONAL ACCOUNT, WHICH WERE REPORTED IN AIR INFORMATION. AO DECLINED TO ACCEPT THE SUBMISSIONS OF THE ASSESSEE AND OPINED AS BELOW : THE ASSESSEE'S SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED. IT IS PERTINENT TO MENTION HERE THAT TH E ASSESSEE HAS NOT DISCLOSED THE BANK ACCOUNT MAINTAI NED WITH STATE BANK OF HYDERABAD, DABEERPURA BRANCH, HYDERABAD, I.E. S.B. ACCOUNT NO.62020094110. COPY O F THE BANK STATEMENT WAS OBTAINED BY THE UNDERSIGNED DIRECTLY FROM THE BANK. WHEN THE ASSESSEE WAS QUESTIONED ABOUT THE TRANSACTIONS IN THE BANK ACCOU NT, HE COULD NOT EXPLAIN THE SAME. A SHOW CAUSE LETTER WAS ISSUED TO THE ASSESSEE AS TO WHY THE TRANSACTIONS I N THE BANK ACCOUNT SHOULD NOT BE TREATED AS UNDISCLOSED INCOME. THEN ONLY THE ASSESSEE CAME OUT WITH A REPL Y TAKING A DIFFERENT STAND THAT THE CASH DEPOSITS WER E MADE BY HIM IN THE BANK ACCOUNT OUT OF THE SALE PROCEEDS OF WHOLESALE BUSINESS TO THE TUNE OF RS.64,46,043/-, F OR WHICH NO BOOKS OF ACCOUNT WERE MAINTAINED AND AUDIT ED. SECONDLY, THE ASSESSEE HIMSELF HAS ADMITTED IN HIS LETTER THAT NO BOOKS OF ACCOUNT WERE MAINTAINED IN RESPECT OF THE TURNOVER OF RS.64,46,043/- AND THE VOUCHERS ARE ALSO SELF-MADE VOUCHERS. EVEN THE BOOKS OF ACCOUNT PRODU CED IN RESPECT OF THE TURNOVER OF RS.2,90,60,566/- ARE NOT COMPLETE. AS THE TURNOVER OF THE ASSESSEE EXCEEDS R S. 40 LAKHS, HE HAS TO GET HIS ACCOUNTS IN RESPECT OF THE TOTAL TURNOVER I.E. RS.3,55,06,609/- (RS.2,90,60,56 6 + RS.64,46,043) AUDITED BY AN ACCOUNTANT BEFORE THE SPECIFIED DATE AND FURNISH A REPORT OF SUCH AUDIT A S PER THE PROVISIONS OF SECTION 44AB OF THE INCOME TAX AC T, 1961. HOWEVER, THE ASSESSEE HAS FAILED TO MAINTAIN COMPLETE BOOKS OF ACCOUNTS AND GET HIS ACCOUNTS AUD ITED. I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 3 IN VIEW OF THE ABOVE FACTS, THE ASSESSEE HAS FAILED TO MAINTAIN THE COMPLETE BOOKS OF ACCOUNT AS REQUIRED UNDER THE PROVISIONS OF THE INCOME TAX ACT. HENCE, I AM N OT SATISFIED ABOUT THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND, THEREFORE, THE BOOKS OF ACCOUNT ARE REJECTED AS PER THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT AND TH E ASSESSMENT IS COMPLETED ESTIMATING THE INCOME @ 10% ON THE TOTAL TURNOVER OF RS.3,55,06,609/-, WHICH WO RKS OUT TO RS. 35,50,660/-. IN RESPECT OF BANK TRANSACTIONS IN THE SB ACCOUNT NO.62020094110 WITH STATE BANK OF HYDERABAD, DABEERPURA BRANCH, HYDERABAD, IN THE ABSENCE OF BOO KS OF ACCOUNT AND RELEVANT INFORMATION TO VERIFY THE TRANSACTIONS MADE BY THE ASSESSEE AND THE EXPLANATI ON OFFERED BY THE ASSESSEE IS NOT SATISFACTORY, THE TO TAL AMOUNT OF THE CASH DEPOSITS OF RS.47,09,460/- IN TH E BANK ACCOUNT OF THE ASSESSEE IS TREATED AS UNDISCLOSED I NCOME U/S. 69A OF THE I.T. ACT AND ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE CIT(A). THE CIT(A) HAS DELETED TH E ADDITION MADE U/S 69A OF THE ACT, AS THE DEPOSITS WERE MADE OUT OF WHOLESALE BUSINESS OF THE ASSESSEE AND CIT(A) HAS R EDUCED THE ESTIMATED INCOME OF 10% TO 5% BY OBSERVING AS T HAT NO BOOKS OF ACCOUNT WERE MAINTAINED FOR TURNOVER AMOUN TING TO RS. 64,46,043/-, THE ENTIRE BUSINESS OF RS.3.55 CRO RES ARE IN CASH AND THE PURCHASES WERE SUPPORTED BY ONLY SELF- MADE VOUCHERS, HE CONSIDERED IT APPROPRIATE TO ESTIMATE THE INCOME AT 5% OF TOTAL TURNOVER OF RS. 3.55 CRORES. 4. AGGRIEVED WITH THE ABOVE ORDER, BOTH ASSESSEE AN D REVENUE ARE IN APPEAL BEFORE US. 5. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST THE LAW, WEIGHT OF EVIDENCE AN D PROBABILITIES OF CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSING OFFICER, IN RESPECT OF TURNOVER OF RS.2,90,60,566/- THAT PROPER BOOKS I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 4 ARE NOT MAINTAINED AND FURTHER ERRED IN ESTIMATING THE RATE OF PROFIT AT 5%. 3. THE LEARNED COMMISSIONER OF INCOME TAX OUGHT TO HAVE CONSIDERED THE ORDER FOR THE ASSESSMENT YEAR 2 009- 10, WHEREIN, PROFIT ON REGULAR SALES WAS ESTIMATED AT 3.25% AND FROM THE SALE OF BURNT OIL AT 3.5%. 4. THE LEARNED COMMISSIONER ERRED IN ESTIMATING THE PROFIT AT 5% IN RESPECT OF THE TOTAL TURNOVER OF RS.3,55,06,609/- WHEREAS NO DEFECTS WERE POINTED OU T BY THE ASSESSING OFFICER IN RESPECT OF TURNOVER OF RS.2,90,60,566/- AND FURTHER ERRED IN ASSUMING THAT THE PURCHASES ARE SUPPORTED BY ONLY SELF VOUCHERS IN RE SPECT OF EN TIRE TURNOVER. 6. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPE AL. 1. LD.C1T(A) ERRED ON BOTH LAW AND FACTS OF THE CA SE. 2. LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.47,09,460/- MADE U/S 69A OF THE ACT, WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT EX PLAIN THE SOURCES , FOR THE SAME. 3. LD.CIT(A) ERRED IN DELETING THE ADDITION MADE U/ S 69A OF RS.47,09,460/- WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT FURNISH THE PARTICULARS OF DEPOS ITS STATED TO HAVE BEEN MADE BY VARIOUS PURCHASERS FROM DIFFERENT PLACES, AND ALSO WRONGLY CONCLUDING THAT THE SAID DEPOSITS ARE A PART OF UNACCOUNTED TURNOVER OF THE ASSESSEE. 4. LD.C1T(A) ERRED IN RESTRICTING THE ESTIMATION OF INCOME TO 5% FROM 10% ESTIMATED BY ASSESSING OFFICER, WITH OUT BRINGING ANY COMPARABLE CASES ON RECORD. 7. LD. AR SUBMITTED THAT ASSESSEE IS IN THE BUSINES S OF TRADING OF LUBRICANT OILS, MADE SALE OF RS. 2,90,60 ,566/-. PROPER BOOKS WERE MAINTAINED DURING THIS AY AND AUD ITED AS PER THE PROVISIONS OF SECTION 44AB. IN ADDITION TO THIS, ASSESSEE ALSO MADE SALE OF LOOSE BURNT OIL TO THE E XTENT OF RS. 64,46,043/-. IT IS SUBMITTED THAT PURCHASE OF THESE OILS ARE FROM UNORGANISED SECTOR IN CASH. THE SALES ARE SUPP ORTED WITH DEPOSITS IN BANK. FOR BOTH PURCHASE AND SALES, ASSE SSEE WAS ABLE TO CREATE ONLY SELF-MADE VOUCHER, WHICH WERE S UBMITTED I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 5 BEFORE AO BUT THE SAME WERE REJECTED BY HIM. HE CON TENDED THAT THE AO ALSO REJECTED THE BOOKS OF ACCOUNT ON T HE GROUND THAT THEY ARE INCOMPLETE AND THE AO ESTIMATED INCOM E AT 10%. 7.1 LD. AR ALSO SUBMITTED THAT CIT(A) HAS REDUCED T HE ESTIMATED INCOME @ 5% BY OBSERVING THAT NO BOOKS OF ACCOUNT WERE MAINTAINED FOR TURNOVER AMOUNTING TO R S. 64,46,043/-, THE ENTIRE BUSINESS OF RS. 3.55 CRORES ARE IN CASH AND THE PURCHASES WERE SUPPORTED BY ONLY SELF-MADE VOUCHERS. HE SUBMITTED THAT THE OBSERVATIONS OF THE CIT(A) ARE NOT TRUE. HE SUBMITTED THAT THE ASSESSEE HAD MA INTAINED PROPER VOUCHERS OF SALES AND PURCHASES IN THE RETAI L BUSINESS AND ONLY WHOLESALE BUSINESS, THE SELF-MADE VOUCHERS WERE MADE FOR PURCHASES AND SALES. HE ALSO SUBMITTED TH AT THE ASSESSEE HAD OFFERED THE BOOKS OF ACCOUNT FOR AUDIT AS PER SECTION 44AB AND GOT IT AUDITED (REFER PAGES 71-79 OF THE PAPER BOOK). 7.2 LD. AR FURTHER SUBMITTED THAT IN THE EARLIER AY 2009-10, ASSESSEE ADMITTED SALES OF RS. 3,01,86,331/-, INADV ERTENTLY SALE OF RS. 96,41,731/- RELATING TO BURNT OIL WAS N OT REFLECTED IN THE P&L A/C FILED BY THE ASSESSEE. HE SUBMITTED THA T AO HAD ESTIMATED THE G.P AT 3.25% ON TURNOVER OF RS. 3,03, 69,027/- AND ON BURNT OIL TURNOVER OF RS. 96,47,739/-, THE G P WAS ESTIMATED @ 3.5%. HE SUBMITTED THAT WHEN IT WAS CON TENDED BEFORE THE CIT(A) TO ACCEPT THE GP @ 3.5% ON WHOLES ALE BUSINESS, THE CONTENTION OF THE ASSESSEE WAS REJECT ED BY THE CIT(A). 7.3 LD. AR ALSO SUBMITTED THAT THERE IS NO CHANGE I N THE NATURE OF BUSINESS WITH REGARD TO SALES AND PURCHAS ES. REFERRING TO THE PRINCIPLES OF CONSISTENCY, LD. AR PLEADED TO ADOPT THE GP @ 3.5% ON RS. 64,46,043/- OF THE WHOLE SALE I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 6 BUSINESS OF THIS AY. FOR THIS PROPOSITION, LD. AR R ELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F SMT. RADHA SOAMI SATSANG SAOMI BAGH VS. CIT, [1992] 193 ITR 321. 8. LD. DR, ON THE OTHER HAND, RELIED ON THE AOS OR DER. 9. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON RECORD. THE ASSESSEE IS DEALING I N TWO KINDS OF BUSINESSES, VIZ., RETAIL AND WHOLESALE BUSINESS. IN RETAIL BUSINESS, ASSESSEE IS DEALING IN LUBRICANT OIL, HAV ING PROPER VOUCHERS FROM MANUFACTURERS AND SELLING IT IN ORGAN ISED SECTOR BY MAINTAINING PROPER BOOKS OF ACCOUNT. IT WAS AUDI TED ONLY TO THE EXTENT OF RETAIL BUSINESS. WHERE AS IN THE WHOL ESALE BUSINESS, HE HAD NOT MAINTAINED ANY BOOKS OF ACCOUN T, AND ALL THE VOUCHERS RELATING TO PURCHASE AND SALES WERE SE LF-MADE. THERE IS NO DISPUTE WITH REGARD TO THE TURNOVER. A O AND CIT(A) REJECTED THE BOOKS OF BOTH THE BUSINESSES AN D PREFERRED TO ESTIMATE THE INCOME. LD. AR SUBMITTED BEFORE US CLEARLY THAT THE RETAIL BUSINESS WAS AUDITED BY A C HARTERED ACCOUNTANT AS PER THE PROVISIONS OF SECTION 44AB. T HE ISSUE BEFORE US IS RELATING TO WHOLESALE BUSINESS, WHICH WAS NOT AUDITED AND ONLY SELF-MADE VOUCHERS ARE AVAILABLE. SINCE THERE IS NO CHANGE IN THE NATURE OF BUSINESS FROM A Y 2009-10 TO THE CURRENT AY, WE DO NOT FIND ANY REASON TO ADO PT THE RATE OF 3.5% ON WHOLESALE BUSINESS AS ADOPTED BY THE AO IN THE PREVIOUS AY 2009-10. WITH REGARD TO RETAIL BUSINESS , ASSESSEE OFFERED 3% IN THE AY 2009-10 AND AO MADE SOME DISALLOWANCE. BUT IN THE CURRENT AY 2011-12, ASSESS EE HAD OFFERED ONLY 2%. IN LINE WITH THE INCOME DETERMINED IN AY 2009-10, WE ARE INCLINED TO DIRECT AO TO ASSESS THE INCOME OF THE ASSESSEE @ 3.5% OF THE TOTAL TURNOVER I.E. BOTH RETAIL AND WHOLESALE TURNOVER. I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 7 10. ACCORDINGLY, GROUNDS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED AND GROUND NO. 4 OF THE REVENUE IS D ISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1210/HYD/2015 APPEAL BY THE REVENUE 12. GROUND NOS. 2 & 3 RAISED BY THE REVENUE ARE AGA INST THE DELETION OF ADDITION BY THE CIT(A), MADE ON ACCOUNT OF UNDISCLOSED INCOME OF RS. 47,09,460/- U/S 69A BY TH E AO. 13. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND MATERIAL FACTS ON RECORD. AS SUBMITTED BY THE ASSES SEE THAT THE SALES OF THE WHOLESALE BUSINESS WERE DEPOSITED IN PERSONAL SAVINGS BANK. ASSESSEE HAD PREPARED SELF-M ADE VOUCHERS TO PROVE THE SALES MADE. AS CAN BE SEEN FR OM THE BANK STATEMENT SUBMITTED BY THE ASSESSEE, THE CASH DEPOSITS ARE IN SMALL DENOMINATIONS RANGING FROM RS. 2000/- TO RS. 25000/-. REVENUE HAS NOT BROUGHT ANY MATERIAL/EVIDE NCE ON RECORD CONTRARY TO THE SUBMISSIONS OF ASSESSEE TO P ROVE THAT THE ASSESSEE HAD OTHER SOURCE OF INCOME. THEREFORE, WE ARE INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSEE T HAT THESE CASH DEPOSITS WERE MADE OUT OF THE WHOLESALE BUSINE SS. MOREOVER, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MADDI SUDARSHNAM OIL MILLS CO., 37 ITR 369 HAS OBS ERVED THAT WHEN BOOKS OF ACCOUNT ARE REJECTED AND INCOME IS ESTIMATED, ASSESSING OFFICER IS NOT ENTITLED TO MAK E FURTHER ADDITION BASING ON THE SAME BOOKS OF ACCOUNT. ACCOR DINGLY, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE DIS MISSING THE GROUNDS RAISED BY THE REVENUE. 14. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. I.T.A. NOS. 1231 & 1210/HYD/2015 HAMEED KHAN 8 15. TO SUM UP, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AND THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL, 2016 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER SD/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER HYDERABAD, DATED APRIL, 2016 KV COPY FORWARDED TO: 1. SHRI HAMEED KHAN, C/O MOHD. AFZAL, ADVOCATE, 11-5- 465, SHERSONS RESIDENCY, FLAT NO. 402, CRIMINAL COURT ROAD, RED HILLS, HYDERABAD 500 004. 2. THE IT), WARD 7(4), HYDERABAD 3. CIT(A) - 3, HYDERABAD 4 PR. CIT - 3, HYDERABAD 5 THE DR, ITAT, HYDERABAD