ACIT, Circle-1(1), Tirupathi, Tirupathi V. Sri Venkata Balaji Transports, Renigunta, Renigunta

ITA 1246/HYD/2015

• Counselvise Citation: 124622514 RSA 2015
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 02-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Keywords: Business income; Business expenditure; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.1246/HYD/2014 : ASSESSMENT YEARS 2011- 12 ASSTT . COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), TIRUPATI V/S M/S. SRI VENKATA BALAJI TRANSPORTS, RENIGUNTA, CHITTOOR DIST. (PAN - AAJFS 1302 A ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.SITARAM RESPONDENT BY : NONE DATE OF HEARING 2 .1 2 .2015 DATE OF PRONOUNCEMENT 23.12.2015 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) T IRUPATI AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. FOLLOWING GROUNDS ARE URGED BEFORE US- 1) THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH O N FACTS AND LAW. 2) THE LD. CIT(A) ERRED IN CONCLUDING THAT THE CHIT DIVIDEND FORMED PART OF BUSINESS INCOME. 3) THE ORDER OF THE CIT(A) IS ERRONEOUS SINCE HE ADMITTED ADDITIONAL EVIDENCE WITHOUT GIVING OPPORTUNITY TO THE ASSESSING OFFICER TO REBUT THE SAME WITH REGARDS TO DIVIDEND INCOME. 4) THE LD. CIT(A) ERRED IN HOLDING THE INTEREST I NCOME AS PART OF THE ESTIMATED BUSINESS INCOME. 5) THE LD. CIT(A). CIT(A) FAILED TO APPRECIATE THAT T HE ASSESSEE ITSELF HAS SHOWN DIVIDEND INCOME AND ITA NO.1246/HYD/2014 M/S. SRI VENKATA BALAJI TRANSPORTS, RENIGUNTA, CHITTOOR DI ST. 2 INTEREST INCOME AS OTHER INCOME IN THE ROI FILED. 6) ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF APPEAL. 3. FACTS NECESSARY FOR THE DISPOSAL OF THE APPEAL ARE STATED IN BRIEF: ASSESSEE FIRM IS ENGAGED IN THE BUSINESS O F RENDERING TRANSPORT SERVICES. FOR THE YEAR UNDER CONSIDERATION, IT DECL ARED TOTAL INCOME OF RS.62,54,810. UPON TAKING UP THE CASE FOR SCRUTINY , THE ASSESSING OFFICER ISSUED A NOTICE UNDER S.143(2) AS WELL AS UNDER S.142(1) OF THE ACT CALLING UPON THE ASSESSEE TO FURNISH DETAIL S WITH REGARD TO THE CLAIMS MADE. SINCE THE ASSESSEE DID NOT RESPOND TO THE NOTICES, THE ASSESSMENT WAS MADE UNDER S.144 OF THE ACT, DETERMI NING THE TOTAL INCOME AT RS.1,88,60,943, WHEREIN THE ASSESSING OFF ICER HAS ESTIMATED THE INCOME AT 8% WHICH WORKED OUT TO RS.1,64,16,352 , AND ADDED DIVIDEND INCOME OF RS.13,74,200 AND ALSO ADDED INTE REST OF RS.1,29,812 UNDER THE HEAD OTHER SOURCES. 4. ON APPEAL FILED BY THE ASSESSEE, THE LEARNED C IT(A) OBSERVED THAT IN THE ABSENCE OF ANY DOCUMENTARY PRO OF, THE ASSESSING OFFICER IS ENTITLED TO ESTIMATE THE TRUE AND CORRE CT PROFIT. WHILE CONSIDERING THE CORRECTNESS OF THE PROFIT, THE LEAR NED CIT(A) OBSERVED THAT THE ASSESSEE DECLARED NET PROFIT OF RS.62,54,8 10 WHICH WORKED OUT TO 3.04% OF THE GROSS RECEIPTS, WHICH IS VERY LOW. HOWEVER, HE ALSO NOTICED THAT IN THE IMMEDIATELY PRECEDING YEAR , I.E. ASSESSMENT YEAR 2006-07, ASSESSMENT WAS MADE UNDER S.143(3) O F THE ACT, BY ESTIMATING THE NET PROFIT AT 5% OF THE GROSS RECEI PTS. IN HIS OPINION, THE ASSESSING OFFICER, WHO HAS MADE THE ASSESSMENT IN THE EARLIER YEAR, HAD NO TIME TO GO THROUGH THE DETAILED CLAMS MADE BY THE ASSESSEE AND CONSIDERING THE CIRCUMSTANCES OF THE C ASE, HE WAS OF THE OPINION THAT THE INCOME ESTIMATED AT 8% ON THE GROS S RECEIPTS, ITA NO.1246/HYD/2014 M/S. SRI VENKATA BALAJI TRANSPORTS, RENIGUNTA, CHITTOOR DI ST. 3 WITHOUT ANY DEDUCTION TOWARDS PARTNERS INTERESTS A ND REMUNERATION, IS REASONABLE, AND HENCE, APPROVED THE ACTION OF THE A SSESSING OFFICER. 5. ALTERNATIVE PLEA OF THE ASSESSEE BEFORE THE CI T(A) WAS THAT WHILE ESTIMATING THE INCOME, THE ASSESSING OFFICER OUGHT TO HAVE TAKEN INTO CONSIDERATION THE FACT THAT THE CHIT DIVIDEND AND INTEREST SHOULD NOT BE ESTIMATED SEPARATELY, SINCE THEY FORM PART O F THE INCOME ESTIMATED AT 8%. IT WAS CONTENDED THAT THE ABOVE I NCOME HAS NOT ARISEN OUT OF SURPLUS FUNDS MEANT FOR INVESTMENT. THE CHIT DIVIDEND AROSE OUT OF SUBSCRIPTION TO CHITS; SUBSCRIBED IN O RDER TO OBTAIN LOANS AT A LATER POINT OF TIME AND THE CHIT DISCOUNT OF R S.9,81,818 HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS PART OF BUSINE SS EXPENDITURE AND INCLUDED IT WHILE MAKING THE ESTIMATE AT 8% IN WHI CH EVENT, THE CHIT DIVIDEND CANNOT BE KEPT OUTSIDE THE SCOPE OF ESTIM ATION. FURTHER, FIXED DEPOSITS AND DEPOSIT MONIES IN BANK ACCOUNT A RE BUSINESS FUNDS KEPT FOR SECURITY PURPOSES. HENCE, THE INTEREST FO RMS PART OF INCOME, WHICH WAS SUBJECT TO ESTIMATION. THEREFORE, INTERE ST CANNOT BE ADDED SEPARATELY. THE LEARNED CIT(A) ACCEPTED THESE ALTER NATIVE CONTENTIONS OF THE ASSESSEE. 6. THE ASSESSEE HAD NOT PREFERRED ANY APPEAL AGAI NST THE ESTIMATION OF INCOME AT 8%, BUT REVENUE HAS PREFERR ED THIS APPEAL, ON THE LIMITED ISSUE THAT CHIT DIVIDEND AND INTEREST INCOME OUGHT TO HAVE BEEN TREATED AS INCOME FROM OTHER SOURCES, IN ADD ITION TO THE INCOME ESTIMATED FROM BUSINESS. 7. AT THE TIME OF HEARING THE LEARNED DEPARTMENTA L REPRESENTATIVE WAS CALLED UPON TO EXPLAIN AS WHETHE R THE CHIT DISCOUNT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER AS PART OF BUSINESS EXPENDITURE. HE HAS NOT CHALLENGED THE CONTENTION OF THE ASSESSEE IN THIS REGARD. WHEN CHIT DISCOUNT HAS BEEN ACCEPTED A S REVENUE ITA NO.1246/HYD/2014 M/S. SRI VENKATA BALAJI TRANSPORTS, RENIGUNTA, CHITTOOR DI ST. 4 EXPENDITURE, CHIT DIVIDEND ALSO DESERVES TO BE TAKE N INTO ACCOUNT AS INCOME FROM BUSINESS AND CONSEQUENTLY, WHEN INCOME FROM BUSINESS IS ESTIMATED, THERE CANNOT BE SEPARATE ADDITION OF INC OME TOWARDS CHIT DIVIDEND. SIMILARLY, FIXED DEPOSITS ARE MADE WITH T HE BANKS FOR SECURITY PURPOSES TO RUN THE BUSINESS AND THEY ARE USED ORDI NARILY TO AVAIL OD FACILITIES. IF INTEREST EXPENDITURE IS TREATED AS B USINESS EXPENDITURE, INTEREST INCOME HAS TO BE SET OFF AGAINST SUCH INTE REST EXPENDITURE SINCE, AT ANY RATE, THE SAME FORMS PART OF THE BUSI NESS INCOME, IN WHICH EVENT, THERE CANNOT BE SEPARATE ADDITION TOWA RDS INTEREST INCOME, IN THE LIGHT OF THE FACT THAT INCOME FROM B USINESS IS ESTIMATED AT 8%. UNDER THESE CIRCUMSTANCES, WE DO NOT SEE AN Y INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A), AND THEREFORE, DISMISS THE APPEAL FILED BY THE REVENUE. PRONOUNCED IN THE COURT ON 23.12.2015 SD/- SD/- (B.RAMAKOTAIAH) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 23 RD DECEMBER, 2015 COPY FORWARDED TO: 1. M/S. SRI VENKATA BALAJI TRANSPORTS, 17 - 45 - 1, NEAR OLD CHECKPOST, AIRPORT ROAD, RENIGUNTA, CHITTO OR DIST. 2. ASST. COMMISSIONER OF INCOME - TAX(TDS) CIRCLE 1(1) TIRUPATI 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS), TIRUPATI PR. COMMISSIONER OF INCOME - TAX , TIRU P A TI HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.