GUDE KOTESWARA RAO, Gudivada V. PRINCIPAL COMMISIONER OF INCOME TAX, Vijayawada

ITA 122/VIZ/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0868 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-09-2022
• Assessment Year: misc
• Appeal Filed On: 29-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift
• Section: 263; 143(3); 142(1); 143(2)

Judgement Text

आयकरअपीलȣयअͬधकरण, ͪवशाखापटणमपीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įीदुåवूǽआरएलरेɬडी, ÛयाǓयकसदèयएवंĮीएसबालाकृçणन, लेखासदèयकेसम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No.122/Viz/2022 (Ǔनधा[रणवष[/ Assessment Year :2017-18) Gude Koteswara Rao, Gudivada, Krishna District, Andhra Pradesh-521301. PAN: BAPPG 5209 M Vs. Principal Commissioner of Income Tax, Vijayawada. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸकȧओरसे/ Appellant by : Sri K. Siva Ram Kumar, CA Ĥ×याथȸकȧओरसे/ Respondent by : Sri MN Murthy Naik, CIT-DR सुनवाईकȧतारȣख/ Date of Hearing : 21/09/2022 घोषणाकȧतारȣख/Date of Pronouncement : 13/10/2022 O R D E R PERS. BALAKRISHNAN, Accountant Member: This appeal filed by the assessee against the order of the Ld. Principal Commissioner of Income Tax [Ld. Pr. CIT] in DIN & Order No.ITBA/REV/F/REV5/2021-22/1041368426(1), dated 23/3/2022 arising out of the order passed by the Ld. Assessing 2 Officer U/s. 143(3) of the Income Tax Act, 1961 [the Act], dated 28/12/2019. 2. Brief facts of the case are that the assessee is an individual is engaged in the business of purchase and sale of Cull Birds. The assessee also derives income from agricultural activities. The assessee filed his return of income for the AY 2017-18 on 23/10/2017 admitting a total income of Rs. 6,82,310/- and agricultural income of Rs.1,72,140/-. Subsequently, the return was selected for complete scrutiny to examine the abnormal increase in the cash deposits during the demonetization. Accordingly, statutory notices U/s. 143(2) and 142(1) of the Act dated 4/9/2018 and 9/7/2018 respectively were issued and served on the assessee. Further, a show cause notice dated 22/12/2019 was issued to explain the sources of cash deposits and low profit on turnover over the preceding year. In response to the notices, the assessee representative submitted the books of accounts and explained that the purchase and sale of Cull Bird are mostly in cash. Considering the explanation of the assessee, the Ld. AO non-convinced with the supporting evidences which are mostly self-made vouchers, estimated the net profit as 0.85% on the turnover of Rs. 9,56,17,104/- as against the net profit of 3 0.76% admitted by the assessee is his return of income. The Ld. Pr. CIT exercising this powers U/s. 263 of the Act considered the assessment order as erroneous insofar as it is prejudicial to the interest of the revenue. The detailed show cause notice U/s. 263 dated 13/1/2022 was issued to assessee calling for his objections against the proposed revision of the assessment. In response to the above show cause notice, the assessee filed his reply on 25/1/2022. Considering the submissions made by the assessee, the Ld. Pr. CIT partially set-aside the assessment order passed U/s. 143(3) of the Act dated 28/12/2019 with a direction to re-do the assessment after making all necessary enquiries in accordance with law and after affording a reasonable opportunity of being heard to the assessee. Aggrieved by the order of the Ld. Pr. CIT, the assessee is in appeal before us. 3. The assessee has raised the following grounds of appeal: “1. On the facts and in the circumstan ces of the case an d in l aw, the Ld. Pr. CIT erre d in l aw an d facts in assuming jurisdiction U/s. 263 as there was no satisf action of the duel conditions of error in the assessment order coupl ed wi th prejudice to the interes ts of the Revenue in the impugned assessment order dated 28/12/2019 u/s. 143(3) for AY 2017-18. 2. On the facts and in the circumstan ces of the case an d in l aw, the Ld. Pr. CIT erred in l aw and f acts in his observation th at the Ld. AO h as not disal l o wed the cash payments in excess of Rs. 20,000/- for broil er purchases from a poul try f arming company, since no such dis al l owance is permissibl e when business income of the 4 appel l ant was reckoned by the Ld. AO on estimate; even the said esti mate itsel f was submitted as not made as per l aw. 3. On the facts and in the circumstan ces of the case an d in l aw, the Ld. Pr. CIT ought to have verifi ed the account copy from the broil er supplier fil ed in the course of revisionary proceedings to observe that the impugned payments were not hit by section 40A(3); payments to ano ther comp an y made b y the appell ant for si il ar purch ase were al l o wed b y the Ld. AO and not objecte d to by the Ld. Pr. CIT. 4. On the facts and in the circumstan ces of the case an d in l aw, the Ld. Pr. CIT ought to h ave verified th at the appel l ant has fil ed the detail s and proof of having derived ag ricul tural income as per the assessment record and al so as per the record of revisions proceedings. 5. On the facts and in the circumstan ces of the case an d in l aw, the Ld. Pr. CIT ought to h ave verified the detail s fil ed before the Ld. AO as wel l as the information fil ed before him in the revision proceedings (including the data fil ed before the Ld. AO ag ain fil ed before the Ld. Pr. CIT) before parti al l y setting aside the assessment order. 6. On the facts and in the circumstan ces of the case an d in l aw, the Ld. Pr. CIT’s order of parti al set-asi de is erroneous on facts an d in l aw. 7. Your appell ant craves l eave to add or amend an y of the above grounds of appe al .” 4. The Ld. Authorized Representative [Ld. AR] argued that the Ld. AO has estimated the profit @ 0.85% against 0.76% admitted by the assessee. The Ld. AR further submitted that an amount of Rs. 9 lakhs was deposited during the demonetization period. He also further submitted that the assessee has mistakenly declared the agricultural income received by his daughter in the return of income filed by the assessee. The Ld. AR submitted that there is 5 no decrease in the net profit as compared to earlier years and hence the estimation of a higher percentage by the Ld. AO could not be accepted. The Ld. AR also submitted that there is no finding in the assessment order regarding the rejection of books of accounts but the Ld. AO has erroneously estimated the income without rejecting the books of account. Ld. AR also further submitted that the provisions of section 40A(2) read with Rule 6DD of the Income Tax Rules, 1962 cannot be applied for this trade as it is covered by the exemptions envisaged in the Rules. The Ld. AR relied on the decision of the Hon’ble High Court of Andhra Pradesh in the case of Maddi Sudarsanam Oil Mills Co., vs. CIT reported in [1957] 37 ITR 369 (AP). Per contra, the Ld. DR relied on the order of the Ld. Pr. CIT. 5. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. Admitted facts are that the assessee is engaged in the business of purchase and sale of Cull Birds which is predominantly in cash. From the comparative statement filed by the Ld. AR, we find that the assessee has earned its profit percentage of 0.76% on the turnover. Further, it is also found from the order of the Ld. AO that the Ld. AO has verified the 6 ledger account copies of purchases and sales, month-wise bills / vouchers for the expenditure incurred, stock ledger and closing stock valuation. The Ld. AO has not relied on the books due to the fact that most of the bills do not have details of transactions and the expenditure is supported by self-made vouchers. Therefore, the Ld. AO estimated the profit @ 0.85% of the turnover. Since the books of accounts could not be relied upon the only option available to the Assessing officer is to estimate the income and accordingly he has estimated the income without mentioning the facts in the assessment order that he has rejected the books of accounts. In this trade of purchase and sale of Broilers and Cull Bird, segregation of sale bills and the veracity of the assessee’s transactions are practically difficult and hence the books of accounts cannot be relied upon. In these circumstances the Ld. AO has estimated the net profit which is considered reasonable. Further, the net profit ratio of 0.76% declared by the assessee in the earlier years was not disputed by the Ld. AO. We therefore, find the estimation is reasonable and the order of the Ld. AO is not erroneous or prejudicial on this ground. 7 6. With regard to the agricultural income of Rs. 1,72,140/-, the Ld. AR submitted that it has been received from the Andhra Pradesh Civil Supplies Corporation into Canara Bank account of the assessee. It was also submitted that the assessee’s daughter who was owning agricultural lands and a copy of the Pattadar Pass Book was submitted as a proof of such ownership. The daughter of the assessee Ms. Gude Kalyani also submitted that she derived the agricultural income and has gifted the same to her father due to his illness. The assessee has mistakenly disclosed this as an agricultural income while filing his return of income. The observation of the Ld. Pr. CIT that the assessee did not claim any expenditure for earning such income could not be accepted because of the fact of confirmation of gift received from the assessee’s daughter where she has earned agricultural income. 7. With regard to the cash payments to M/s. CPF (India) Private Limited the Ld. Pr. CIT has invoked the provisions of section 40(A)(3) of the Act and observed that exemption under Rule 6DD of the IT Rules is not available for these transactions. Further, the Ld. Pr. CIT has also recorded in his order that M/s. CPF (India) Private Limited vide letter dated 21/1/2022 has 8 confirmed the receipt of Rs. 16,99,711/- in cash from the assessee towards supply of poultry feeding to the assessee. The Rule 6DD(e) of the Income Tax Rules (Rules) clearly exempts the payments of cash for the purpose of poultry feedings. Rule 6DD(e) is extracted herein below for reference: “Rule 6DD(e) where the payment is made for the purchase of— (i) agricultural or forest produce; or (ii) the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or (iii) fish or fish products; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; It is also observed that the Ld. Pr. CIT has not objected to the cash payment made to M/s. Venkateswara Hatcheries Private Limited for Rs. 13,04,048/-. Further, it is noted from the submissions of the assessee that the assessee has submitted SFT 13 for the cash payments to the suppliers of Broiler birds and poultry feedings. Since the Ld. AO has recorded in his order that he has verified the copies of purchases, sales, bills, vouchers, stock register etc., and has formed an opinion that the estimating the income at 0.85% of the turnover which amounts to verification by the Ld. AO and does not require invoking the 9 provision of section 263 of the Act by the Ld. Pr. CIT by considering the order of the Ld. AO as erroneous and prejudicial to the interests of the Revenue. In the case of JRD Tata Trust vs. DCIT reported in [2020] 122 taxmann.com 275 (Mum. – Trib.) in the context of exercising the powers U/s. 263 of the Act observed as follows: “...........Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bonafide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bonafide, and as long as the path adopted by the Assessing Officer is taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case strial Co Ltd v. CIT [(2000) 243 ITR 83 (SC)], Hon'ble Supreme Court has held that "Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law." The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have 10 done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bonafide in a real-life situation. It is also important to bear in mind the fact that lack of bonafides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances.” 8. We therefore are of the considered view that the Ld. AO merely accepting the explanation of the assessee cannot be faulted merely because it could have been lawful to make more detailed inquiries or because he did not write specific reasons of accepting the explanation cannot be a reason to invoke the powers U/s. 263 of the Act. In view of the above discussions, we hereby vacate the impugned revision order and restore the order of the Ld. AO. It is ordered accordingly. 9. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 13 th October, 2022. Sd/- Sd/- (दुåवूǽआर.एलरेɬडी) (एसबालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखासदèय/ACCOUNTANT MEMBER Dated : 13.10.2022 OKK - SPS 11 आदेशकȧĤǓतͧलͪपअĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee– Gude Koteswara Rao, 13/448, Pati Meeda, Gudivada – 521301, Krishna District, Andhra Pradesh – 521301. 2. राजèव/The Revenue –Principal Commissioner of Income Tax, SVR Plaza, Revenue Colony, Mogalrajapuram, Vijayawada-520010. 3. The Principal Commissioner of Income Tax, Ward-1, Gudiwada. 4. आयकरआयुÈत (अपील)/ The Commissioner of Income Tax 5. ͪवभागीयĤǓतǓनͬध, आयकरअपीलȣयअͬधकरण, ͪवशाखापटणम/ DR,ITAT, Visakhapatnam 6. गाड[फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam