DCIT, Circle-1, Warangal V. M/s. Manikanta Concerns, Warangal

ITA 1224/HYD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74635 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 10-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Business expenditure
• Section: 133(6); 32; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1224/HYD/2012 ASSESSMENT YEAR 2008-09 THE DEPUTY CIT CIRCLE-1, HYDERABAD & WARANGAL I/C. VS. M/S. MANIKANTA CONCERNS WARANGAL PAN: AACFM8523C [APPELLANT] [RESPONDENT] C.O. NO. 133/HYD/2012 (IN ITA NO. 1224/HYD/2012) ASSESSMENT YEAR 2008-09 THE DEPUTY CIT CIRCLE-1, HYDERABAD & WARANGAL I/C. VS. M/S. MANIKANTA CONCERNS WARANGAL PAN: AACFM8523C [APPELLANT] (CROSS OBJECTOR) REVENUE BY: SRI SOLGY JOSE T. KOTTARAM ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 23.01.2014 DATE OF PRONOUNCEMENT: 21.02.2014 ORDER PER CHANDRA POOJARI, AM: THE ABOVE APPEAL BY THE REVENUE AND CROSS OBJECTIO N (CO) BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 15.5.2012 FOR A.Y. 2008- 09. 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW. (2) THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF BROKERAGE BY THE ASSESSING OFFICER. ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 2 (3) THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED ADDITION OF PROPORTION OF BUSINESS EXPENSES. (4) THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED ADDITION FROM UNDISCLOSED CONTRACTS. 3. THE REVENUE RAISED THE FOLLOWING ADDITIONAL GROUND: (1) THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE DECISION OF THE AO IN DISALLOWING THE CLAIM OF DEPRECIATION OF RS. 5.01 LAKHS ON VEHICLE WHICH WAS REGISTERED IN THE NAME OF THE PARTNERS OF THE FIRM. THE LEARNED CIT(A) DELETED THIS ADDITION BASED ON THE PRESUMPTION THAT THE ASSESSEE FULFILLED THE CONDITION OF 'OWNERSHIP' I.E., ASSESSEE WAS IN POSSESSION OF VEHICLES AND ALSO UTILISING OR THE PURPOSE OF THE BUSINESS. THE PRESUMPTION OF CIT(A) IS NOT BASED ON ANY EVIDENCE SUBMITTED BY THE ASSESSEE. 4. THE REVENUE ALSO FILED A PETITION REQUESTING THE BE NCH FOR ADMISSION OF ADDITIONAL GROUND. THE LEARNED D R PLEADED BEFORE US THAT THOUGH THE ADDITIONAL GROUND EMANATE S FROM THE ORDER OF THE CIT(A), INADVERTENTLY IT WAS NOT R AISED ON EARLIER OCCASION. HE PRAYED THAT THE SAME MAY BE A DMITTED FOR ADJUDICATION. THE LEARNED AR NOT RAISED ANY SE RIOUS OBJECTION FOR THE SAME. AFTER HEARING BOTH THE SID ES, WE ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION AS THE SAME EMANATES FROM THE ORDER OF THE CIT(A). 5. IN THE CROSS OBJECTION, THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: (1) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE BROKERAGE AMOUNT FROM TWO DIFFERENT PARTIES I.E., M/S. SOUBHIK EXPORTS LTD. RS. 5,84,106 AND M/S. PKS EXPORTS LTD., RS. 4,71,967/- IS TO BE BROUGHT TO TAX. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE AMOUNT DID ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 3 NOT ACCRUE DURING THE PREVIOUS YEAR AND, THEREFORE, IS NOT LIABLE FOR TAXATION. (2) THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITION OF RS. 38,202 OUT OF RS. 86,152 MADE BY THE ASSESSING OFFICER HOLDING THAT THERE IS INCOME NOT ACCOUNTED FOR. 6. FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNE RSHIP FIRM CARRYING ON TRADING IN MAIZE, BROKERAGE IN RIC E AND SHARE TRANSACTIONS. THE ASSESSEE FIELD RETURN OF INCOME AT RS. 43,70,450 FROM THIS BUSINESS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SEC. 143(3), THE ASSES SING OFFICER REQUIRED THE ASSESSEE TO FURNISH COMPLETE L IST OF SUNDRY CREDITORS WHEREIN THE CLOSING BALANCES WERE MORE THAN RS. 1.00 LAKH. ACCORDINGLY, THE ASSESSEE FURNI SHED THE LIST. THE ASSESSING OFFICER MADE ENQUIRIES INVOKING THE PROVISIONS OF SEC. 133(6) OF THE IT ACT. ALL THE CR EDITORS TO WHOM THE LETTERS WERE ISSUED BY THE ASSESSING OFFIC ER HAVE COMPLIED WITH AND SUBMITTED COPIES OF ACCOUNT OF TH E ASSESSEE AS APPEARING IN THEIR BOOKS OF ACCOUNT. TH IS FACT IS AGREED TO BY THE ASSESSING OFFICER. DURING THE COUR SE OF SUCH ENQUIRY, THE ASSESSING OFFICER NOTICED THAT THERE A RE DISCREPANCIES IN THE BALANCES AS APPEARING IN THE B OOKS OF M/S. SOUBHIK EXPORTS, KOLKATA AND M/S. PKS LTD. KOLKA TA AND THE LEDGER ACCOUNT OF THE ASSESSEE. EXCEPT THE ABOV E TWO PERSONS, IN THE CASE OF NO OTHER SUNDRY CREDITOR DI SCREPANCIES HAVE BEEN NOTICED BY THE ASSESSING OFFICER. IN RESP ECT OF M/S. SOUBHIK EXPORTS, THE DISCREPANCY WAS THAT ACCOUNT C OPY OF THE ASSESSEE IN THE BOOKS OF THE ABOVE CONCERN SHOW ED A CREDIT BALANCE OF RS. 1,85,27,427/- AS AGAINST DEBI T BALANCE OF RS. 1,81,96,513/- IN THE BOOKS OF ACCOUNT OF THE AS SESSEE IN RESPECT OF THE ABOVE CONCERN. WITH REGARD TO THE DISCREPANCIES IN THE CASE OF M/S. PKS LTD., IT IS NO TICED BY THE ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 4 ASSESSING OFFICER THAT AS PER THE BOOKS OF THE ASSE SSEE, THERE WAS A CREDIT BALANCE OF RS. 49,45,911/- IN THE ACCO UNT OF THE ABOVE CONCERN AND AS PER THE ACCOUNT COPY OF THE AS SESSEE IN THE BOOKS OF THE ABOVE CONCERN, THERE WAS A CREDIT BALANCE OF RS. 3,36,14,451/-. WHEN THE ASSESSEE WAS ASKED TO S UBMIT RECONCILIATION IN RESPECT OF THE ABOVE DISCREPANCIE S, THE ASSESSEE SUBMITTED HIS EXPLANATIONS ON 20.12.2010, 24.12.2010 AND 29.12.2019 EXPLAINING THE REASONS FO R THE DISCREPANCIES. 7. IN RESPECT OF PKS TRADERS, THE ASSESSEE SUBMITTED T HAT THE QUALITY OF RICE IN SOME OF THE RAILWAY RAKES WA S NOT UP TO THE AGREED STANDARDS AND ALSO THERE WAS SHORTAGE IN QUANTITY. HOWEVER, THE PARTY EXPRESSED INABILITY TO PAY BROKE RAGE TO THE ASSESSEE AS THE RICE IS NOT OF THE AGREED STAND ARDS. AS THE SAID PARTY DISPUTED THE PAYMENT DUE FROM THEM, THE ASSESSEE HAS NOT RAISED ANY BILL FOR THE BROKERAGE AND NOT P ROVIDED FOR IT IN ITS BOOKS OF ACCOUNT. IN RESPECT OF SOUBHIK E XPORTS LTD., IT WAS EXPLAINED BY THE ASSESSEE THAT THE SAID PART Y MADE THE ENTRY IN THEIR BOOKS OF ACCOUNT IN THE MONTH OF AUG UST, 2008 AND PAID TDS OF RS. 1,16,415 DURING AUGUST, 2008. E VEN THIS AMOUNT OF RS. 10,27,495/- WHICH WAS ENTERED BY THEM IN THEIR BOOKS OF ACCOUNT IN THE MONTH OF AUGUST, 2008 WAS N OT EVEN PAID BY THEM ON THE GROUND THAT THERE WERE QUALITY AND QUANTITY DIFFERENCES IN THE RICE SUPPLIED TO THEM. THIS AMOUNT ALSO IS DISPUTED BY THEM. 8. WHEN THESE FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER VIDE LETTERS OF THE ASSESSEE REFE RRED TO ABOVE, THE ASSESSING OFFICER OPINED THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT COMPLETE AND COR RECT FOR THE PURPOSE OF DEDUCING THE CORRECT BROKERAGE INCOM E AND ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 5 ACCORDINGLY INVOKING THE PROVISIONS OF SEC. 145 OF THE IT ACT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE E STIMATED THE INCOME FROM BROKERAGE AT RS. 3.15 PER QUINTAL O F QUANTITY SUPPLIED BY THE ASSESSEE TO VARIOUS PARTIES. THUS H E ESTIMATED THE INCOME FROM BROKERAGE AT RS. 37,07,62 3/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, TAXABILITY IS ATTRACTED ONLY WHEN INCOME IS ACCRUED AND THE INCOME ACCRUES WHEN IT FALLS DUE., BROKERAGE CAN BE CLAIMED BY THE ASSESSE E WHEN ALL THE PRIMARY CONDITIONS OF SUPPLY TO THE PARTIES IS FULFILLED I.E. THE RECEIVER OF THE GOODS RECEIVED THEM IN GOOD CON DITION WHICH ARE IN ACCORDANCE WITH THE AGREED QUALITY, TH E ACTUAL QUANTITY LOADED RECEIVED BY THEM AND THE PAYMENT IS RECEIVED IN FULL BY THE RICE MILLERS FROM THE EXPOR T HOUSES EITHER DIRECTLY FROM THEM OR THROUGH THE ASSESSEE. IN RESPECT OF THE ABOVE TWO TRANSACTIONS, PAYMENTS FROM THEM H AVE DISPUTED. IT WAS ALSO SUBMITTED THAT THE ABOVE SAID PARTIES DISPUTED PAYMENT OF BROKERAGE TO THE ASSESSEE AS A RESULT THE BROKERAGE DID NOT ACCRUE TO THE ASSESSEE AND HENCE THE BROKERAGE WAS NOT OFFERED TO TAX DURING THE FINANCI AL YEAR 2008-09. NOTWITHSTANDING WHAT HAS BEEN SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 37,07,623/-. IN ADDITION TO THIS, THE ASSESSING OFF ICER ALSO DISALLOWED AN AMOUNT OF RS. 10,46,151/- REPRESENTIN G THE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT ON ESTIMATE BASIS IN PROPORTION TO THE BROKERAGE RECEIPTS SHOWN . 9. BEFORE THE CIT(A), THE LEARNED AR SUBMITTED THAT TH E AO WRONGLY REJECTED THE BOOKS OF ACCOUNT AND DISALLOWE D EXPENDITURE RELATING TO BROKERAGE THOUGH THERE WAS A ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 6 DISCREPANCY NOTICED BY THE AO IN RESPECT OF TWO PAR TIES LOCATED AT KOLKATA. ACCORDING TO THE AR, THE AO CA NNOT GENERALISE THE DISCREPANCIES FOUND IN THE CASE OF T WO PARTIES AND REJECT THE BOOKS OF ACCOUNT. HE ALSO BROUGHT T O THE NOTICE OF THE CIT(A) THAT THOUGH THE AO CAUSED NECE SSARY ENQUIRIES IN RESPECT OF ALL SUNDRY CREDITORS, HE CO ULD NOT FIND ANY DISCREPANCY IN RESPECT OF OTHER CREDITORS. BEI NG SO, IT CANNOT BE SAID THAT THE ASSESSEE HAS FABRICATED THE BOOKS OF ACCOUNT. IT IS ALSO BROUGHT TO THE NOTICE OF THE C IT(A) THAT THERE IS NO DISCREPANCY IN MAINTENANCE OF BOOKS OF ACCOUNT IN RESPECT OF SALE OF MAIZE AND IT IS ALSO SUBMITTE D BEFORE THE CIT(A) THAT ESTIMATION OF INCOME AT RS. 3.15 PER QU INTAL IS AT HIGHER SIDE. 10. IT WAS ALSO BROUGHT TO THE NOTICE OF THE CIT(A) THA T THE AO OVER AND ABOVE THE RETURNED INCOME OF RS. 43,70, 450 WHICH INCLUDE GROSS PROFIT FROM BROKERAGE, GROSS PR OFIT FROM TRADING IN MAIZE AND TRANSACTION OF PURCHASE AND SA LE OF SHARES, HE WENT ON FURTHER ESTIMATION OF INCOME FRO M BROKERAGE WHICH RESULTED IN DOUBLE ADDITION. ACCOR DING TO THE AR, HE SHOULD HAVE LIMITED ESTIMATION OF ADDITI ONAL INCOME ONLY IN RESPECT OF TRANSACTION WITH M/S. SOUB HIK EXPORTS AND M/S. PKS LTD. ALONE WHERE THERE WERE CER TAIN DISCREPANCIES. 11. REGARDING DELETION OF BROKERAGE RECEIVED FROM M/S. SOUBHIK EXPORTS AND M/S. PKS LTD., THE CIT(A) OBSERV ED THAT THE FACT THAT THERE WERE DISCREPANCIES IN THE ACCOU NTS OF THE TWO PARTIES NEEDS TO BE TAKEN NOTE OF AND DEALT WIT H. THE ASSESSEE HAS ADMITTED THAT IT HAD NOT RECORDED THE BROKERAGE FROM THESE TWO PARTIES FOR THE REASON THAT IT HAD E ITHER NOT RECEIVED THE BROKERAGE OR IT WAS OF A VIEW THAT IT WAS NOT ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 7 LIKELY TO RECEIVE IT. IN THE MERCANTILE SYSTEM OF A CCOUNTING, WHICH THE ASSESSEE WAS FOLLOWING, SUCH SUBJECTIVITY IN RECORDING OF TRANSACTIONS IS NOT PERMITTED. IF THE ASSESSEE WERE TO RECORD ONLY THOSE AMOUNTS WHICH IT HAD ACTU ALLY RECEIVED, IT WOULD NO LONGER BE CONSIDERED TO BE FO LLOWING THE MERCANTILE SYSTEM. THE BROKERAGE ON THE BUSINESS WI TH THESE PARTIES (5,84,106.35 QUINTALS TO M/S. SOUBHIK EXPORT S AND 4,71,967.65 QUINTALS TO PKS LTD ), THEREFORE, NEEDS TO BE BROUGHT TO TAX. THE AR HAS ALSO OBJECTED TO THE BRO KERAGE RATE OF RS. 3.15/- PER QUINTAL BEING ADOPTED BY THE ASSE SSING OFFICER. THE CIT(A) OBSERVED THAT THE ASSESSEE'S G RIEVANCE IN THIS REGARD IS JUSTIFIED. THERE IS NOTHING ON RECO RD TO SUGGEST THAT THE ASSESSEE HAD BEEN RECEIVING BROKERAGE RANG ING FROM RS. 1.75/- TO RS. 5/- PER QUINTAL. ON THE OTHER HA ND, THE ASSESSEE IN ITS LETTER DT. 29.12.2010 TO THE ASSESS ING OFFICER HAD SUBMITTED THAT THE RATE OF BROKERAGE IN RESPECT OF M/S. SOUBHIK EXPORTS LTD. WAS RS. 1.75 PER QUINTAL AND W AS RS. 1 PER QUINTAL IN RESPECT OF M/S. PKS LTD. THEREFORE, T HE CIT(A) DIRECTED THE ASSESSING OFFICER TO COMPUTE THE RECEI PT OF BROKERAGE FROM THESE TWO PARTIES AT RS. 1.75 PER QU INTAL FOR 5,84,106.35 QUINTALS FOR M/S. SOUBHIK EXPORTS LTD AN D RS. 1/- PER QUINTAL FOR 4,71,967.65 QUINTALS FOR M/S. PKS LT D., AND BRING IT TO TAX. AGAINST DELETION OF A PORTION OF BROKERAGE FROM THE ABOVE TWO PARTIES, THE REVENUE IS IN APPEA L BEFORE US. AGAINST SUSTAINING OF CERTAIN PORTION OF ADDIT ION ON BROKERAGE RECEIVED FROM THE ABOVE TWO PARTIES, THE ASSESSEE HAS FILED THE CO BEFORE US. 12. FURTHER IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THA T DISALLOWANCE OF DEPRECIATION ON CARS USED BY THE AS SESSEE FIRM IS NOT JUSTIFIED ON THE REASON THAT THE VEHICL ES ARE USED ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 8 FOR THE PURPOSE OF ASSESSEE'S BUSINESS AND IT WAS R EGISTERED IN THE NAME OF THE PARTNERS. 13. FURTHER, REGARDING DEPRECIATION OF RS. 5,01,453/- O N VEHICLES AND OTHER ASSETS, THE CIT(A) OBSERVED THAT SINCE THEY WERE REGISTERED IN THE NAME OF THE PARTNERS AND NOT IN THE NAME OF THE FIRM. IN ITS REPLY DT. 20.12.2010 TO TH E ASSESSING OFFICER, THE AR SUBMITTED THAT THOUGH THE VEHICLES HAD BEEN REGISTERED IN THE NAMES OF THE PARTNERS, THEY WERE USED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE FIRM . IN HIS SUBMISSIONS BEFORE ME, THE AR HAS SUBMITTED THAT TH E CONDITIONS PRECEDENT FOR ALLOWING DEPRECIATION ARE OWNERSHIP AND USAGE OF THE ASSET, THAT A PARTNERSHIP FIRM CAN NOT HAVE AN EXISTENCE SEPARATE FROM THE PARTNER AND THAT WHEN T HE PARTNERS ALLOWED THE FIRM TO USE THE VEHICLES FOR I TS BUSINESS PURPOSES EXCLUSIVELY, BOTH THE CONDITIONS FOR ALLOW ING OF DEPRECIATION WERE FULFILLED. 14. THE CIT(A) OBSERVED THAT REGISTRATION UNDER THE MOT OR VEHICLES ACT WAS NOT AN ESSENTIAL PRE-REQUISITE FOR THE ACQUISITION OF THE OWNERSHIP OF THE MOTOR VEHICLES BUT WAS ONLY AN OBLIGATION CAST UPON AN OWNER OF THE VEHICL E FOR THE PURPOSE OF RUNNING THE VEHICLES IN ANY PUBLIC PLACE . AN ASSESSEE WOULD BE CONSIDERED TO BE AN OWNER UNDER S ECTION 32 IF HE WAS IN A POSITION TO EXERCISE THE RIGHTS O F AN OWNER NOT ON BEHALF OF THE PERSON IN WHOM THE TITLE VESTE D, BUT IN HIS OWN RIGHT. IN THE INSTANT CASE, THE CONDITIONS OF 'OWNERSHIP' HAVE BEEN SATISFIED IN THAT SENSE. THER EFORE, THE CIT(A) HELD THAT THE ASSESSEE WAS ENTITLED TO DEPRE CIATION UNDER SECTION 32 OF THE ACT. AGAINST THIS, THE REV ENUE FILED THE ADDITIONAL GROUND. ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 9 15. FURTHER THERE WAS A DISALLOWANCE BY THE AO AT RS. 86,152 TOWARDS UNDISCLOSED CONTRACT INCOME ON THE TRANSACTION WITH EMMSONS INTERNATIONAL LTD. AND ADA NI ENTERPRISES LTD. 16. BRIEF FACTS ABOUT THE ABOVE TWO TRANSACTIONS ARE TH AT THE ASSESSEE SELLS MAIZE AND ALSO SUPPLIES RICE ON BROK ERAGE TO M/S. EMMSONS INTERNATIONAL LTD. IN RESPECT OF M/S. AD ANI ENTERPRISES LTD., THE ASSESSEE ENTERED INTO A TRANS PORT CONTRACT WITH THIS COMPANY. DURING THE YEAR, IN RES PECT OF M/S. EMMSONS INTERNATIONAL LTD., ONE PARTY NAMELY, MULKANOOR COOP. CREDIT SOCIETY LTD. DIRECTLY SUPPLI ED RICE TO THE ABOVE NAMED COMPANY, INSTEAD OF SENDING THE SAM E THROUGH THE ASSESSEE. THE MULKANOOR COOP. CREDIT SO CIETY LTD. HAS PAID TRANSPORTATION CHARGES FOR THE ABOVE GOODS SUPPLIED. AS M/S. EMMSONS INTERNATIONAL LTD. WAS UND ER THE IMPRESSION THAT THE GOODS WERE RECEIVED BY THEM THR OUGH THE ASSESSEE, HAS REIMBURSED THE TRANSPORT CHARGES OF R S. 47,950/- BY CREDITING THE ASSESSEE'S ACCOUNT AND MA DE A TDS OF RS. 1,087/- AND THE TDS CERTIFICATE WAS ACCORDIN GLY SENT TO THE ASSESSEE. SINCE THE COMPANY HAS ONLY MADE A CRE DIT ENTRY IN ITS BOOKS OF ACCOUNT IN THE ACCOUNT OF THE ASSES SEE AND NO TRANSFER OF CASH WAS MADE, THE ASSESSEE HAS NOT MAD E ANY ENTRY IN ITS BOOKS OF ACCOUNT. IN FACT M/S. EMMSONS INTERNATIONAL SHOULD HAVE CREDITED THE AMOUNT OF RS . 47,950/- IN ITS BOOKS TO THE ACCOUNT OF THE MULKANOOR COOP. CREDIT SOCIETY LTD. AND TDS CERTIFICATE ISSUED TO THEM. AS ERRONEOUSLY THE TDS CERTIFICATE HAS BEEN ISSUED IN THE NAME OF THE ASSESSEE, THE ASSESSEE CLAIMED THE SAME IN I TS RETURN OF INCOME. SINCE THE CREDIT ENTRY IN THE BOOKS OF ACCO UNT OF M/S. EMMSONS INTERNATIONAL LTD. ITSELF WAS A WRONG ENTRY , WHICH ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 10 THE ASSESSEE WAS NOT AWARE, THE ASSESSEE HAS NOT TA KEN THIS AMOUNT AS ITS INCOME. THIS FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER ON 20.12.2010 THROUGH A LETTE R DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 17. COMING TO THE TRANSACTIONS WITH M/S. ADANI ENTERPRIS ES LTD., IT IS SUBMITTED THAT THE ASSESSEE HAS A TRANS PORT CONTRACT AGREEMENT WITH THE ABOVE COMPANY. THE ASSESSEE HAS RECEIVED A SUM OF RS. 17,30,739/- FROM THEM BEING R S. 8,80,739/- TOWARDS RAILWAY WAGON FREIGHT, GUNNIES E TC. AND RS. 8,50,000/- TOWARDS LORRY TRANSPORT CHARGES, LOA DING CHARGES AT GOODS SHED AND ALSO TOWARDS MISC. EXPENS ES AND SERVICE CHARGES. THE ABOVE COMPANY HAS MADE A TDS O F RS. 19,261/- ON THE AMOUNT OF RS. 8,50,000/- WHICH WAS CLAIMED BY THE ASSESSEE IN ITS RETURN OF INCOME. OUT OF THE AMOUNT OF RS. 17,30,739/- RECEIVED UNDER THIS CONTRACT, THE A SSESSEE HAS SPENT AN AMOUNT OF RS. 16,92,537/- ON BEHALF OF THE ABOVE COMPANY AND THE BALANCE AMOUNT OF RS. 38,202/- REPR ESENTS THE SERVICE CHARGES RECEIVED BY THE ASSESSEE,. THE ASSESSEE HAS NOT OFFERED THIS INCOME OF RS. 38,202/- IN ITS RETURN OF INCOME INADVERTENTLY. HENCE THE ASSESSEE ADMITS THA T THIS AMOUNT OF RS. 38,303/- HAS TO BE BROUGHT TO TAX INS TEAD OF RS. 86,152/- ADDED BY THE ASSESSING OFFICER. ACCORDINGL Y, THE ASSESSEE CHALLENGED THE FOLLOWING ADDITIONS: SL. NO. PARTICULARS OF THE ADDITION AMOUNT (RS.) 1. ADDITIONAL BROKERAGE INCOME BASED ON ESTIMATION DONE AFTER REJECTING THE BOOKS OF ACCOUNT. 37,07,623 2. BUSINESS EXPENSES DISALLOWED IN PROPORTION TO BROKERAGE INCOME SHOWN IN PROFIT AND LOSS A/C. 10,46,151 3. DEPRECIATION DISALLOWED 5,01,453 4. UNDISCLOSED CONTRACT INCOME 86,152 ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 11 18. THE ASSESSEE ALSO CHALLENGED REJECTION OF BOOKS OF ACCOUNT. REGARDING REJECTING OF BOOKS OF ACCOUNT T HE CIT(A) OBSERVED THAT IT IS NOT EVERY DISCREPANCY IN THE BO OKS OF ACCOUNT THAT MERITS REJECTION OF BOOKS. IT IS UNDISPUTED THAT THE DISCREPANCY FOUND BY THE AO WAS CONFINED TO ONL Y TWO OF THE VARIOUS PARTIES WITH WHOM THE ASSESSEE HAD TRAN SACTIONS AND WHICH WERE VERIFIED BY THE AO. IT IS ALSO UNDI SPUTED THAT THERE WERE NO DISCREPANCIES FOUND IN THE BOOKS OF A CCOUNT RELATING TO THE OTHER BUSINESS OF THE ASSESSEE, OF TRADING IN MAIZE AS ALSO IN THE BOOKS OF ACCOUNT RELATING TO T HE OTHER SOURCES. THE CIT(A) OBSERVED THAT THIS DOES NOT CO NSTITUTE ENOUGH REASONS FOR REJECTION OF BOOKS OF ACCOUNT PE R SE AND CONSEQUENTIAL ESTIMATION OF INCOME. ACCORDINGLY, H E HELD THAT REJECTION OF BOOKS OF ACCOUNT IS UNWARRANTED. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 19. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. REGARDING THE FINDINGS OF THE CIT(A) THAT REJECTION OF BOOKS OF ACCOUNT IS NOT WARRANTED, THE REVENUE IS IN APPEAL BEFORE US. IN THIS CASE, THERE WAS A DIS CREPANCY IN RESPECT OF ACCOUNTS OF TWO PARTIES I.E., M/S. SOUBHI K EXPORTS AND M/S. PKS LTD. AS NOTED IN PARA 6 OF THIS ORDER. AS ARGUED BY THE AR, THE DISCREPANCIES NOTICED IN RESPECT OF THESE TWO PARTIES CANNOT BE GENERALISED SO AS TO REJECT THE B OOKS OF ACCOUNT. THE AO CAUSED NECESSARY ENQUIRY AND FOUND THAT ALL THE SUNDRY CREDITORS' ACCOUNTS ARE IN CORRECT POSIT ION AND THERE IS NO DISCREPANCY IN THOSE ACCOUNTS. BEING S O, IT IS APPROPRIATE TO ACCEPT THE BOOK RESULT IN RESPECT OF TRANSACTIONS REFLECTED IN THE BOOKS OF ACCOUNT AND THE AO HAS TO ESTIMATE THE INCOME ONLY IN RESPECT OF OTHER TWO PARTIES. THE CIT(A) IS JUSTIFIED IN HOLDING THAT THE AO HAS NOT POINTED ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 12 OUT ANY DISCREPANCY IN MAINTENANCE OF ACCOUNTS WITH RESPECT OF THE SALE OF MAIZE AND ALSO ACCOUNTS SUBMITTED IN RESPECT OF OTHER TRANSACTIONS. ACCORDINGLY, IN OUR OPINION , REJECTION OF BOOKS OF ACCOUNT IS NOT WARRANTED IN THIS CASE. FIRST GROUND OF THE REVENUE IS DISMISSED. 20. THE NEXT GROUND OR REVENUE IS WITH REGARD TO DELETI ON OF ADDITION OF PROPORTIONATE BUSINESS EXPENSES. SI NCE THE BOOKS OF ACCOUNT RELATING TO THE BROKERAGE INCOME H AD BEEN REJECTED BY THE AO AND INCOME ESTIMATED THEREON, TH E AO ALSO DISALLOWED EXPENSES OF RS. 10,46,151 RELATING TO THE BROKERAGE BUSINESS FORMING AN INTEGRAL PART OF THE COMPOSITE PROFIT AND LOSS A/C. DRAWN UP BY THE ASSESSEE. SINC E THE REJECTION OF BOOKS AND ESTIMATION OF BROKERAGE INCO ME HAS BEEN SET ASIDE, THE DISALLOWANCE OF BROKERAGE EXPEN SES IS NOT CALLED FOR AND THIS GROUND OF ASSESSEE IS ALLOWED B Y THE CIT(A). 21. WE HAVE GONE THROUGH THE ORDER OF THE CIT(A). THE AO DISALLOWED EXPENSES IN THE PROFIT AND LOSS A/C. IN P ROPORTION TO THE BROKERAGE RECEIVED AS THE BOOKS OF ACCOUNT O F THE ASSESSEE WERE REJECTED AND DISALLOWED EXPENSES OF R S. 10,46,151 RELATING TO THE BROKERAGE BUSINESS FORMIN G INDIVIDUAL PART OF THE PROFIT AND LOSS A/C. PREPARED BY THE ASSESSEE. SINCE WE HAVE HELD THAT BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE REJECTED, IN OUR OPINION, THERE IS NO QUESTION OF DISALLOWANCE OF PROPORTIONATE BUSINESS EXPENSES. THIS GROUND OF THE REVENUE IS DISMISSED. 22. COMING TO DELETION OF ADDITION FROM UNDISCLOSED CONTRACT AT RS. 47,950 RELATING TO M/S. EMMSONS INTE RNATIONAL LTD. ACCORDING TO THE THIS DOES NOT CONSTITUTE INC OME TO THE ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 13 ASSESSEE AND THE TDS CERTIFICATE ISSUED TO THE ASSE SSEE BY EMMSONS INTERNATIONAL LTD., WRONGLY AS THE ASSESSEE HAS NOT SUPPLIED RICE TO M/S. EMMSONS INTERNATIONAL LTD. IN STEAD, ONE PARTY VIZ., MULKANOOR CO-OPERATIVE CREDIT SOCIETY L TD., SUPPLIED RICE TO M/S. EMMSONS INTERNATIONAL LTD. DI RECTLY. ON THE OTHER HAND, THE TDS CERTIFICATE SUGGESTED PAYME NT HAS BEEN MADE TO THE ASSESSEE. HOWEVER, THE ASSESSEE N OT BROUGHT ANYTHING ON RECORD TO SUGGEST THAT M/S. MULK ANOOR COOPERATIVE CREDIT SOCIETY ITSELF SOLD RICE TO M/S. EMMSONS INTERNATIONAL LTD. AND ASSESSEE IS ONLY RECEIVING C OMMISSION ON IT. IN THE ABSENCE OF POSITIVE MATERIAL TO SUGG EST THAT THE RICE HAS BEEN SOLD BY MULKANOOR COOPERATIVE SOCIETY DIRECTLY TO M/S. EMMSONS INTERNATIONAL LTD., THE TDS CERTIFIC ATE WILL BE CONSIDERED AS GENUINE AND THE SAME HAS TO BE TAX ED AS MENTIONED IN THE TDS CERTIFICATE AS INCOME OF THE A SSESSEE. THIS GROUND OF THE REVENUE IS ALLOWED. 23. THE NEXT GROUND (ADDITIONAL GROUND) IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION ON VEHICLES. THE VEHI CLE IS IN THE NAME OF THE PARTNER AND THE VEHICLE WAS USED FO R THE PURPOSE OF BUSINESS OF THE ASSESSEE AND A PARTNERSH IP CANNOT BE SAID TO BE SEPARATE FROM PARTNERS AND THE VEHICL E IS IN THE NAME OF PARTNER AND IF IT HAS APPEARED IN THE BALAN CE SHEET OF THE ASSESSEE, DEPRECIATION ON THAT ASSET IS TO BE A LLOWED. ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A). T HIS GROUND OF THE REVENUE IS REJECTED. ITA NO. 1224/HYD/2012 IS PARTLY ALLOWED. 24. IN CO THE ASSESSEE CHALLENGED SUSTAINING ADDITION O N INCOME FROM TRANSACTION WITH M/S. SOUBHIK EXPORTS AT RS. 1.75 PER QUINTAL FOR 5,84,106.35 QUINTALS AND M/S. P KS LTD. AT RS. 1 PER QUINTAL OF 4,71,967.65 QUINTALS. ACCORDI NG TO THE ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 14 ASSESSEE THE ABOVE RATE ADOPTED BY THE CIT(A) HAS N O BASIS AND IT IS EXCESSIVE. WE HAVE GONE THROUGH THE RECO RD. THE ASSESSEE VIDE ITS LETTER DATED 29.12.2010 PLACED AT PAGE NO. 71 OF THE PAPER BOOK ITSELF HAS MENTIONED THE RATE OF BROKERAGE AT RS. 1.75 PER QUINTAL IN RESPECT OF M/S. SOUBHIK EXPORTS AND RS. 1 IN RESPECT OF M/S. PKS LTD., KOLKA TA AND THE SAME WAS ADOPTED BY THE CIT(A). THE ADDITION SUSTA INED BY THE CIT(A) IS BASED ON THE SUBMISSION OF THE ASSESS EE. BEING SO, THE ASSESSEE CANNOT HAVE ANY GRIEVANCE AND THE SAME IS CONFIRMED. THIS ADDITION IS SUSTAINED AND THE GROU ND TAKEN BY THE ASSESSEE IS DISMISSED. 25. THE NEXT GROUND BY THE ASSESSEE IS WITH REGARD TO SUSTAINING ADDITION OF RS. 38,202 AS INCOME FROM UN DISCLOSED CONTRACT. BEFORE THE CIT(A) THE ASSESSEE ADMITTED THE LIABILITY TO THE EXTENT OF RS. 38,802 PERTAINING TO M/S. ADANI ENTERPRISES. BEING SO, THE ASSESSEE CANNOT HAVE AN Y GRIEVANCE. THIS GROUND IS REJECTED AND THE CO BY T HE ASSESSEE IS DISMISSED. 26. IN THE RESULT, ITA NO. 1224/HYD/2012 BY REVENUE IS PARTLY ALLOWED AND CO NO. 133/HYD/2012 BY THE ASSESSE E IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST FEBRUARY, 2014. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 21 ST FEBRUARY, 2014 TPRAO ITA NO. 1224/HYD/2012 & CO NO. 133/HYD/2012 M/S. MANIKANTA CONCERNS =================== 15 COPY FORWARDED TO: 1. THE DEPUTY CIT, CIRCLE-1, AAYAKAR BHAVAN, STATIO N ROAD, WARANGAL. 2. M/S. MANIKANTA CONCERNS, H. NO. 16-7-91, OLD GRAI N MARKET AREA, WARANGAL. 3. THE CIT(A)-VI, HYDERABAD. 4. THE CIT-VI, HYDERABAD. 5. THE DR BENCH 'B', ITAT, HYDERABAD