ITO, Ward - 1., Khammam V. Sri Venkateswara Cold Storage, Khammam Dist

ITA 1277/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0309 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Unexplained investment
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1277/HYD/2014 ASSESSMENT YEAR: 2010-11 INCOME-TAX OFFICER, WARD 1, HYDERABAD. VS. SRI VENKATESWARA COLD STORAGE, HYDERABAD. PAN AARFM2394L (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJAT MITRA ASSESSEE BY : SHRI M. CHANDRAMOULESWARA RAO DATE OF HEARING 22-07-2015 DATE OF PRONOUNCEMENT 29-07-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST ORDER DATED 25/05/2014 OF LD. COMMISSIONER OF INCOME-TAX( A), VIJAYAWADA FOR AY 2010-11. 2. THE DEPARTMENT HAS RAISED 1O GROUNDS. GROUND NOS . 1 & 10 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 3. IN GROUND NOS. 2 TO 6 DEPARTMENT IS CHALLENGING LD. CIT(A)S DECISION IN ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S 35AD OF THE ACT, FOR AN AMOUNT OF RS. 3,23,16,963. 4. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE, ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RUNNI NG A COLD STORAGE AT DENDUKURU. FOR THE AY UNDER CONSIDERATION, ASSES SEE FILED ITS 2 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE RETURN OF INCOME ON 26/11/2010 DECLARING TOTAL INCO ME AT RS. NIL AFTER CLAIMING DEDUCTION U/S 35AD OF THE ACT. IN COURSE O F ASSESSMENT PROCEEDING, AO CALLED UPON ASSESSEE TO PRODUCE BILL S AND VOUCHERS FOR CONSTRUCTION OF COLD STORAGE, EVIDENCES IN SUPP ORT OF COMMENCEMENT OF BUSINESS ACTIVITY, BONDS/RECEIPTS I SSUED TO THE FARMERS FOR OBTAINING BANK LOAN, LIST OF FARMERS WH O PRESERVED THEIR STOCKS IN THE COLD STORAGE FOR JUSTIFYING THE CLAIM OF DEDUCTION U/S 35AD. AS STATED BY AO, IN RESPONSE TO THE QUERY RAI SED BY HIM ASSESSEE PRODUCED ITS BOOKS OF ACCOUNT, BILLS AND V OUCHERS FOR THE EXPENDITURE INCURRED TOWARDS COST OF CONSTRUCTION O F COLD STORAGE, LIST OF FARMERS WHO STORED THEIR PRODUCE IN THE COLD STO RAGE ETC. IT WAS ALSO SUBMITTED BY ASSESSEE THAT THE TOTAL COST OF C ONSTRUCTION OF COLD STORAGE WAS RS. 3.23 CRORES AND ASSESSEE HAS TAKEN A LOAN OF RS. 2.40 CRORES FROM THE INDIAN OVERSEAS BANK FOR THE P URPOSE OF CONSTRUCTION AS WELL AS PURCHASE OF MACHINERY OF CO LD STORAGE. IT WAS SUBMITTED BY ASSESSEE THAT IT HAS COMMENCED ITS PRO DUCTION IN THE MONTH OF MARCH10 FOR A SHORT PERIOD OF 10 DAYS AND FOR THE FINANCIAL YEAR 2009-10, THE INCOME FROM COLD STORAGE AMOUNTED TO RS. 1,85,000. 5. AO REFERRING TO THE ACKNOWLEDGMENT ISSUED BY GEN ERAL MANAGER, DISTRICT INDUSTRIES CENTRE, KHAMMAM OBSERV ED THAT THE ISSUANCE OF ACKNOWLEDGMENT DOES NOT CONFER ANY LEGA L RIGHT ON THE COLD STORAGE AND IT IS REQUIRED TO SEEK REQUISITE C LEARANCE AND LICENCE/PERMIT AS PER LAW. AO ALSO OBSERVED THAT AS SESSEE OBTAINED LICENCE TO WORK FROM THE DY. CHIEF INSPECTOR OF FAC TORIES, WARANGAL ON 31/03/2013 (SUBSEQUENTLY RECTIFIED TO 31/03/10 U /S 154.) HE FURTHER OBSERVED THAT AS PER THE INFORMATION FILED BY ASSES SEE AND REPORT OF THE AUDITOR, THE COLD STORAGE PLANT COMMENCED ITS A CTIVITY W.E.F. 23/03/10. HOWEVER, FROM THE LIST OF FARMERS, IT WAS SEEN THAT THEY HAVE STATED STORING THEIR PRODUCE IN THE COLD STORA GE FROM 09/03/10. FURTHER, FROM THE INFORMATION OBTAINED FROM INDIAN OVERSEAS BANK, MADHIRA. IT WAS FOUND THAT FARMERS STATED TO HAVE K EPT THEIR AGRICULTURAL PRODUCE IN THE COLD STORAGE AND OBTAIN ED LOANS FROM THE 3 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE BANK FROM 25/02/10 (WRONGLY MENTIONED AS 25/02/13). FROM THE AFORESAID FACTS, AO INFERRED THAT ASSESSEE HAS ISSU ED BONDS TO THE FARMERS TO WHOM LOANS WERE GIVEN BY BANK EVEN PRIOR TO THE DATE OF COMMENCEMENT OF BUSINESS I.E. 23/03/10. AO OBSERVED THAT WITHOUT OBTAINING STATUTORY LICENCE FROM THE GOVT. AUTHORIT IES, ASSESSEE COULD NOT HAVE COMMENCED ITS BUSINESS. HE THEREFORE PROPO SED TO DISALLOW ASSESSEES CLAIM OF DEDUCTION U/S 35AD. THOUGH, ASS ESSEE OBJECTED TO THE PROPOSED DISALLOWANCE BY SUBMITTING A DETAIL ED REPLY, BUT, AO REJECTING THE EXPLANATION OF ASSESSEE HELD THAT ASS ESSEE HAVING FAILED TO PROVE THAT IT HAS COMMENCED ITS BUSINESS ACTIVIT Y IN THE RELEVANT FY REJECTED ASSESSEES CLAIM OF DEDUCTION U/S 35AD. WH ILE DOING SO, HE REFERRED TO THE ENQUIRY CONDUCTED WITH SOME OF THE FARMERS, WHO ALLEGEDLY STATED THAT COLD STORAGE BUSINESS OF ASSE SSEE STARTED OPERATING IN THE MONTH OF APRIL, 2010. BEING AGGRIE VED OF THE AFORESAID DISALLOWANCE MADE BY AO, ASSESSEE CHALLEN GED IT IN AN APPEAL PREFERRED BEFORE LD. CIT(A). 6. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , ASSESSEE APART FROM REITERATING WHAT WAS STATED BEFORE AO SUBMITTE D THAT THOUGH IT OTHERWISE FULFILLS ALL THE CONDITIONS OF SECTION 35 AD, BUT, THE ONLY DISPUTE REMAINS WITH REGARD TO THE DATE OF COMMENCE MENT OF THE BUSINESS. IN THIS CONTEXT, ASSESSEE SUBMITTED THAT THE MOST VALID EVIDENCE FOR COMMENCEMENT OF THE INDUSTRIAL UNIT IS ELECTRICITY CONSUMPTION. IN THIS CONTEXT, ASSESSEE PRODUCED ELE CTRICITY BILLS FOR THE MONTHS OF FEBRUARY10 AND MARCH10 TO SHOW THAT COMMENCEMENT OF THE BUSINESS CAN BE PROVED FROM CONSUMPTION OF E LECTRICITY. ASSESSEE ALSO PRODUCED BONDS ISSUED TO THE FARMERS AGAINST THE PRODUCTS STORED BY THEM IN THE COLD STORAGE. AS FAR AS ALLEGATION OF AO THAT SOME OF THE FARMERS HAVE STATED THAT OPERAT ION OF THE COLD STORAGE STARTED FROM APRIL10, ASSESSEE SUBMITTED T HAT THE STATEMENTS RECORDED FROM THE FARMERS HAVE NO RELEVANCE TO THE DATE OF COMMENCEMENT OF OPERATION OF THE COLD STORAGE. IT W AS FURTHER SUBMITTED THAT AO HAVING NOT CONFRONTED THE STATEME NTS OF THE FARMERS NOR ALLOWED ANY OPPORTUNITY TO ASSESSEE TO CROSS-EXAMINE THE 4 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE FARMERS EVIDENCE COLLECTED BEHIND THE BACK OF ASSES SEE CANNOT BE UTILIZED FOR THE PURPOSE OF DISALLOWING ASSESSEES CLAIM. 7. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, OBSERVED THAT AS PER THE PROVISIONS OF SECTION 35AD OF THE ACT, ASSESSEE HAS TO SATISFY TWO CONDITIONS, FIRSTLY, THE EXPENDITURE MUST BE INCURR ED PRIOR TO THE COMMENCEMENT OF ITS OPERATION AND SECONDLY THE AMOU NT IS CAPITALIZED IN THE BOOKS OF ACCOUNT OF ASSESSEE ON THE DATE OF COMMENCEMENT OF ITS OPERATION. LD. CIT(A) REFERRING TO THE ELECTRICITY BILLS OF ASSESSEE FOR THE RELEVANT PERIOD FOUND THA T THERE IS SUBSTANTIAL CONSUMPTION OF ELECTRICITY WHICH PROVES THE FACT OF COMMENCEMENT OF COLD STORAGE. SHE ALSO NOTICED THAT ASSESSEE HAS MA INTAINED RECEIPT BOOK AND RECEIPT REGISTER CONTAINING DATE OF RECEIP T OF STOCK, QUANTITY OF STOCK, ETC., WHICH WERE ALSO PRODUCED BEFORE AO. SHE ALSO REFERRED TO THE ACKNOWLEDGMENT OF THE INDUSTRIES DEPARTMENT, WHICH INDICATED THAT ASSESSEE HAS COMMENCED ITS OPERATIONS FROM 23/ 03/2010. SHE ALSO FOUND THAT ASSESSEE HAS ISSUED BONDS TO FARMER S, WHICH INDICATED THE DATE OF COMMENCEMENT OF COLD STORAGE FROM 22/02/2010. THUS, ON THE BASIS OF EVIDENCES AVAILABLE ON RECORD , LD. CIT(A) CONCLUDED THAT ASSESSEES CLAIM OF HAVING COMMENCED ITS BUSINESS WITHIN THE RELEVANT FY IS ACCEPTABLE, HENCE, ASSESS EE IS ELIGIBLE FOR CLAIM OF DEDUCTION U/S 35AD OF THE ACT. ACCORDINGLY , SHE DELETED THE ADDITION MADE BY AO. 8. LD. DR SUBMITTED BEFORE US, ASSESSEE IN COURSE O F ASSESSMENT PROCEEDING, HAS CHANGED ITS STAND FROM TIME TO TIME WITH REGARD TO THE DATE OF COMMENCEMENT OF BUSINESS. THOUGH, INITIALLY , HE STATED TO HAVE COMMENCED THE BUSINESS FOR A PERIOD OF 10 DAYS IN THE MONTH OF MARCH10, BUT, SUBSEQUENTLY, IT HAS CLAIMED THAT BU SINESS STARTED IN THE MONTH OF EARLY PART OF MARCH10, WHEREAS, THE BONDS ISSUED ON THE BASIS OF WHICH THE FARMERS OBTAINED LOAN FROM B ANK REVEALED THAT DATE OF COMMENCEMENT OF BUSINESS WAS IN THE MONTH O F FEBRUARY10. THUS, IT WAS SUBMITTED BY LD. DR, ASSESSEE HAS NOT PRODUCED ANY 5 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE AUTHENTIC EVIDENCE TO JUSTIFY ITS CLAIM THAT BUSINE SS WAS COMMENCED IN THE RELEVANT FY. FURTHER, LD. DR REFERRING TO TH E ENQUIRY MADE BY AO SUBMITTED, WHEN SOME OF THE FARMERS HAVE STATED THAT THE COLD STORAGE COMMENCED ITS OPERATION FROM APRIL, 10, ASS ESSEES CLAIM IN THE FACE OF SUCH EVIDENCE CANNOT BE ACCEPTED. 9. LD. AR, ON THE OTHER HAND, STRONGLY SUPPORTING T HE FINDING OF LD. CIT(A) SUBMITTED, LD. CIT(A) HAVING GIVEN A FINDING OF FACT REGARDING COMMENCEMENT OF BUSINESS ON THE BASIS OF EVIDENCES BROUGHT ON RECORD, THE SAME CANNOT BE DISTURBED UNLESS THE DEP ARTMENT BRINGS SUFFICIENT MATERIAL ON RECORD TO CONTROVERT THE FIN DING OF LD. CIT(A). LD. AR SUBMITTED, EVIDENCES SUCH AS ELECTRICITY BILL, B ONDS ISSUED TO THE FARMERS, RECEIPTS, ETC. CLEARLY DEMONSTRATE THAT AS SESSEE HAS COMMENCED ITS COLD STORAGE OPERATION DURING THE REL EVANT FY. ONLY BECAUSE OF SOME TECHNICAL REQUIREMENT LIKE OBTAININ G LICENCE ETC., IT CANNOT BE SAID THAT ASSESSEE HAS NOT COMMENCED ITS BUSINESS. HE, THEREFORE, SUBMITTED THAT THERE IS NO REASON TO INT ERFERE WITH THE ORDER OF LD. CIT(A). 10. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIAL ON RECORD. ON PERUSAL OF THE ORDER OF AO, IT IS VERY MUCH EVID ENT THAT ONLY ON ENTERTAINING DOUBT WITH REGARD TO THE COMMENCEMENT OF OPERATION OF THE COLD STORAGE. AO HAS DISALLOWED ASSESSEES CLA IM OF DEDUCTION U/S 35AD. TO JUSTIFY HIS ACTION, AO HAS PRIMARILY RELIED UPON THE ENQUIRY CONDUCTED WITH SOME OF THE FARMERS AND ALSO THE FACT THAT LICENCE FOR OPERATING COLD STORAGE WAS GRANTED BY C OMPETENT AUTHORITY ON 31/03/2010. HOWEVER, AS COULD BE SEEN FROM THE E LECTRICITY BILL OF COLD STORAGE UNIT FOR THE MONTH OF FEBRUARY10 AND MARCH10 IT IS FOUND, WHILE IN THE BILL FOR FEBRUARY10, THE ELECT RICITY UNITS CONSUMED IS O (ZERO), IN MARCH10, ASSESSEE HAS CONSUMED 17,367 UNITS. THIS ITSELF PROVES THAT ASSESSEE HAS COMMENCED OPERATION OF COLD STORAGE PARTLY IN THE MONTH OF FEBRUARY & MARCH10. COUPLE D WITH CONSUMPTION OF ELECTRICITY, THE OTHER EVIDENCES LIK E BONDS/RECEIPTS 6 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE ISSUED BY ASSESSEE AGAINST STORAGE OF AGRICULTURAL PRODUCE OF THE FARMERS ALSO PROVES THE FACT THAT ASSESSEE HAS COMM ENCED THE OPERATION OF THE COLD STORAGE DURING THE RELEVANT F Y. AS COULD BE SEEN, AO IN COURSE OF THE ASSESSMENT PROCEEDING HAS CONDUCTED ENQUIRY WITH INDIAN OVERSEAS BANK, MADHIRA AND FROM THE INFORMATION OBTAINED FROM THE BANK AUTHORITIES, IT IS EVIDENT T HAT THE BANK HAS GRANTED LOANS TO THE FARMERS ON THE BASIS OF BONDS/ RECEIPTS ISSUED BY ASSESSEE TOWARDS PRODUCTS STORED BY FARMERS IN THE COLD STORAGE. THUS, IT CANNOT BE SAID THAT THE BANK AUTHORITIES W ITHOUT VERIFYING THE FACT WHETHER THE FARMERS ACTUALLY STORED THEIR PROD UCTS IN THE COLD STORAGE HAD GRANTED LOAN TO THE CONCERNED FARMERS. MOREOVER, THE MOST CRUCIAL EVIDENCE, IN OUR VIEW, IS THE FACT THA T AO WHILE MAKING ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN ST OCK HAS HIMSELF OBSERVED THAT ASSESSEE WAS HAVING STOCKS OF RS. 1,4 3,05,000 DURING THE RELEVANT FY IN THE COLD STORAGE. IT IS ANOTHER MATTER, AO HAS INFERRED THAT SUCH STOCK OF CHILLIES BELONG TO ASSE SSEE AS HE HAS PURCHASED THEM FROM FARMERS AND STORED IN THE COLD STORAGE BUT THE FACT REMAINS, AO ADMITS THAT THERE ARE STOCK KEPT I N THE COLD STORAGE WORTH RS. 1,43,05,000. THIS ITSELF PROVES THAT THE COLD STORAGE WAS OPERATING DURING THE RELEVANT FY. IN THE AFORESAID VIEW OF THE MATTER, THERE CANNOT BE ANY DOUBT WITH REGARD TO ASSESSEES CLAIM THAT THE COLD STORAGE HAS STARTED OPERATING DURING THE RELEV ANT FY, IRRESPECTIVE OF THE FACT WHETHER IT IS IN FEBRUARY 10 OR MARCH10. THE DEPARTMENT HAS FAILED TO BRING ANY MATERIAL ON RECO RD TO EITHER CONTROVERT THE FACTUAL FINDING OF LD. CIT(A) OR ANY OTHER CONTRARY EVIDENCE TO CONCLUSIVELY PROVE THE FACT THAT THE CO LD STORAGE HAS STARTED OPERATING IN APRIL10. AS FAR AS THE ALLEGA TION OF AO THAT SOME OF THE FARMERS HAVE STATED THAT COLD STORAGE STARTE D OPERATING IN APRIL10, WE FIND MERIT IN THE SUBMISSIONS OF LD. A R THAT IN ABSENCE OF CONFRONTATION OF SUCH STATEMENT TO ASSESSEE AND ALL OWING OPPORTUNITY TO CROSS-EXAMINE THE FARMERS, AO COULD NOT HAVE USE D SUCH ADVERSE MATERIAL FOR DISALLOWING ASSESSEES CLAIM OF DEDUCT ION U/S 35AD. EVEN OTHERWISE ALSO, IN THE FACE OF SUBSTANTIVE EVIDENCE BROUGHT ON RECORD 7 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE IN THE FORM OF ELECTRICITY BILL, BONDS/RECEIPTS ISS UED TO FARMERS, ETC. DEMONSTRATING THAT ASSESSEE HAS COMMENCED OPERATION OF COLD STORAGE IN THE FY 2009-10, THE STATEMENT OF THE FAR MERS CANNOT BE GIVEN MUCH CREDENCE. IN THE AFORESAID VIEW OF THE MATTER, THERE BEING NO INFIRMITY IN THE ORDER OF LD. CIT(A), WE UPHOLD THE SAME BY DISMISSING THE GROUND RAISED BY REVENUE. 11. THE NEXT ISSUE AS RAISED IN GROUND NOS. 7,8 & 9 RELATES TO THE ADDITION MADE OF AN AMOUNT OF RS. 1,43,05,000 U/S 6 9 OF THE ACT BY AO, BUT, DELETED BY LD. CIT(A). 12. BRIEFLY THE FACTS ARE, FOR VERIFYING THE GENUIN ENESS OF ASSESSEES CLAIM THAT IT HAS RECEIVED PRODUCTS OF T HE FARMERS IN THE COLD STORAGE, AO CALLED FOR COPIES OF THE BONDS GIV EN TO THE FARMERS. HOWEVER, AS OBSERVED BY AO, ASSESSEE FAILED TO PROD UCE COPIES OF THE BONDS, INSTEAD, ASSESSEE SUBMITTED A LIST OF FA RMERS, WHO KEPT THEIR STOCK FOR PRESERVATION IN ASSESSEES COLD STO RAGE. AO ON VERIFYING THE LIST SUBMITTED BY ASSESSEE, WITH THE LIST OF FARMERS, WHO OBTAINED LOANS BY PLEDGING THEIR BONDS WITH INDIAN OVERSEAS BANK, MADHIRA FOUND THAT MOST OF THE LOANS OBTAINED BY FA RMERS WERE EVEN BEFORE ISSUANCE OF RECEIPTS BY ASSESSEE. HE FURTHER NOTICED THAT SOME OF THE FARMERS WHO APPEARED IN THE LIST OF BANK WER E NOT FOUND IN THE LIST GIVEN BY ASSESSEE. WHEN THIS WAS POINTED OUT, ASSESSEE SUBMITTED THAT THEY HAVE ISSUED TEMPORARY RECEIPTS TO THE PERSONS, WHO MAY NOT BE ACTUAL OWNERS OF PRODUCE OR RECEIPTS MIGHT HAVE BEEN ISSUED IN THE NAME OF VEHICLE DRIVER OR IN THE NAME OF PERSONS WHO BROUGHT CHILLIES. AO, HOWEVER WAS NOT CONVINCED WIT H THE EXPLANATION OF ASSESSEE. AO OBSERVED THAT ASSESSEE COULD NOT P RODUCE COPIES OF BONDS IN CASE OF 16 FARMERS, WHO OBTAINED LOAN F ROM BANKS FOR TOTAL AMOUNT OF RS. 85,83,000. AO, THEREFORE, CONCLUDED T HAT ASSESSEE HAS ACTUALLY PURCHASED STOCK FROM FARMERS AND STOCK OF CHILLIES KEPT IN THE COLD STORAGE BELONG TO ASSESSEE, WHICH WAS PURCHASE D OUT OF ITS INCOME FROM UNEXPLAINED SOURCES. ON THE BASIS OF A SSESSEES EXPLANATION THAT BANK GIVES LOAN FOR AN AMOUNT OF 6 0 TO 70% OF VALUE 8 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE OF CHILLIES HELD IN THE COLD STORAGE, AO QUANTIFIED THE VALUE OF TOTAL STOCKS HELD BY ASSESSEE AT RS. 1,43,05,000, WHICH W AS TREATED AS UNEXPLAINED INVESTMENT OF ASSESSEE IN PURCHASE OF S TOCKS AS PER SECTION 69 OF THE ACT AND ADDED TO THE INCOME OF AS SESSEE. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE CHALLENGED THE SAME BEFORE LD. IT(A). LD. CIT(A) DELETED THE ADDITION BY HOLDING A S UNDER: 5.2.1 AFTER GOING THROUGH THE FACTS OF THE CASE AND THE EVIDENCES AVAILABLE ON RECORD, I AM IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT THE APPELLANT HAS ISSUED BONDS TO THE ALLEGED FARMERS FOR PRESERVIN G THEIR STOCKS IN THE APPELLANTS COLD STORAGE, WHICH WER E ALSO PRODUCED BEFORE THE ASSESSING OFFICER. IT IS ALSO A FACT THAT THE FARMERS HAVE BEEN GRANTED LOANS BY THE INDIAN OVERSEAS BANK. IT IS ONLY ON THE REASON THAT THE NAMES OF THE PERSONS ARE NOT APPEARING IN THE BOOKS OF THE APPELLANT AND NO RENTS WERE OFFERED CANNOT BE THE CRITERION FOR CONSTRUI NG THAT THE STOCK OF CHILLIES BELONG TO THE APPELLANT AS THER E IS SUBSTANTIAL EVIDENCES IN THE FORM OF BONDS ISSUED TO THE ALLE GED FARMERS BY THE APPELLANT, LOANS TAKEN BY THEM FROM THE BANK AND THE RENTS COLLECTED BY THE APPELLANT FROM THE FARMERS IN THE NEXT YEAR. HENCE, THE ASSESSING OFFICER IS NOT JUSTIFI ED IN CONSTRUING THAT THE STOCK OF CHILLIES STORED IN THE APPELLAN T'S COLD STORAGE BELONG TO THE APPELLANT AND ACCORDINGLY T HE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT U/S.69 OF THE ACT IS HEREBY DELETED. 13. LD. DR SUBMITTED BEFORE US, APART FROM THE DISC REPANCY FOUND IN THE LIST SUBMITTED BY ASSESSEE AND THE BANK, IT IS ALSO A FACT THAT DURING THE ASSESSMENT PROCEEDING, ASSESSEE DID NOT PRODUCE THE BONDS ISSUED TO THE FARMERS AGAINST WHICH LOAN WAS GRANTED BY BANK TO THE CONCERNED FARMERS. THEREFORE, IN THE ABSENCE OF NECESSARY EVIDENCE, AO TREATED THE STOCK HELD IN THE COLD STO RAGE AS ASSESSEES OWN STOCK AND THEREBY TREATED AS UNEXPLAINED INVEST MENT U/S 69. LD. DR SUBMITTED, IN SPITE OF THE FACT THAT IN COURSE O F ASSESSMENT PROCEEDING ASSESSEE DID NOT PRODUCE THE BONDS ISSUE D TO FARMERS, BUT, LD. CIT(A) HAS DELETED THE ADDITION ON AN INCO RRECT ASSUMPTION OF FACT THAT ASSESSEE PRODUCED THE BONDS BEFORE AO. HE , THEREFORE, SUBMITTED, ORDER OF LD. CIT(A) ON THIS ISSUE SHOULD BE SET ASIDE. 9 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE 14. LD. AR, ON THE OTHER HAND, SUBMITTED BEFORE US, THOUGH ASSESSEE DID NOT SUBMIT THE BONDS BEFORE AO, AND SU BMITTED BEFORE LD. CIT(A), BUT, FACT REMAINS THAT AO HIMSELF HAS CONDUCTED ENQUIRY WITH THE CONCERNED BANK AND HAS ALSO SUMMONED BANK AUTHORITIES FOR FURNISHING NECESSARY INFORMATION. IT WAS SUBMITTED, IN RESPONSE TO THE SUMMONS ISSUED BY AO, BANK AUTHORITIES SUBMITTE D ALL RELEVANT INFORMATIONS RELATING TO LOAN OBTAINED BY FARMERS, THEREFORE, IT CANNOT BE SAID THAT BONDS ISSUED BY ASSESSEE TO FARMERS WE RE NOT IN THE NOTICE OF AO. LD. AR SUBMITTED, THERE BEING NO EVID ENCE ON RECORD TO INDICATE THAT STOCK OF CHILLIES KEPT IN THE COLD ST ORAGE BELONG TO ASSESSEE, THE ADDITION MADE ON PRESUMPTIONS AND SUR MISES, IS NOT VALID. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED MATERIALS ON RECORD. AS COULD BE SEEN, ONLY ON T HE BASIS OF THE FACT THAT THERE ARE VARIATIONS IN THE NAMES OF FARMERS I N THE LIST SUBMITTED BY ASSESSEE AND THE LIST SUBMITTED BY BANK, AND THE FACT THAT ASSESSEE HAS NOT SUBMITTED BONDS ISSUED TO THE FARM ERS TO PROVE THE FACT THAT IT WAS FARMERS STOCK, WHICH HAS BEEN KEP T IN THE COLD STORAGE, AO HAS MADE THE ADDITION U/S 69 BY TREATIN G THEM AS ASSESSEES STOCK. HOWEVER, ON PERUSAL OF THE ASSESS MENT ORDER, IT IS VERY MUCH EVIDENT THAT AO IN FACT HAS MADE AN ENQUI RY WITH THE INDIAN OVERSEAS BANK, MADHIRA WITH REGARD TO THE LO ANS GRANTED TO FARMERS. IT IS ALSO EVIDENT THAT IN RESPONSE TO SUM MONS ISSUED BY AO, BANK AUTHORITIES APPEARED AND FURNISHED ALL INFORMA TIONS RELATING TO GRANT OF LOANS TO THE FARMERS. THAT BEING THE CASE, WHEN ALL INFORMATIONS RELATING TO LOANS GRANTED TO THE FARME RS ARE AVAILABLE BEFORE AO, HE CANNOT SAY THAT THERE IS NO EVIDENCE TO SHOW THAT STOCKS KEPT IN COLD STORAGE BELONG TO ASSESSEE. ON THE CONTRARY, THERE IS NO EVIDENCE BROUGHT ON RECORD BY AO TO PROVE THE FACT THAT STOCK OF CHILLIES HELD IN THE COLD STORAGE WERE PURCHASED BY ASSESSEE FROM FARMERS. AS IT APPEARS, ADDITION U/S 69 OF THE ACT HAS BEEN MADE PURELY ON CONJECTURES AND SURMISES. THE DEPARTMENT S CONTENTION THAT BONDS WERE NOT PRODUCED BEFORE AO BY ASSESSEE, THOU GH, TECHNICALLY 10 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE MAY BE CORRECT, BUT, AT THE SAME TIME, IT IS TO BE NOTED THAT BANK AUTHORITIES HAVE SUBMITTED ALL INFORMATIONS RELATIN G TO LOAN GRANTED TO FARMERS ON THE BASIS OF THE BONDS/RECEIPTS GIVEN BY ASSESSEE. THEREFORE, ON THE FACE OF SUCH EVIDENCE, IT CANNOT BE SAID THAT STOCKS KEPT IN THE COLD STORAGE ARE UNEXPLAINED INVESTMENT OF ASSESSEE. DEPARTMENT HAVING FAILED TO BRING ANY MATERIAL ON R ECORD TO CONTROVERT THE AFORESAID FACTS, ADDITION MADE HAS NO LEGS TO S TAND. ACCORDINGLY, LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION A ND, HENCE, UPHOLDING THE ORDER OF LD. CIT(A), WE DISMISS THE GROUNDS RAI SED BY REVENUE. 16. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN ON 29 TH JULY, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 29 TH JULY, 2015 KV COPY TO:- 1) ITO, WARD 1, AAYAKAR BHAVAN, BEHIND KINNERSA SANI THEATRE, RAJIV GUNJ, KHAMMAM 2) M/S SRI VENKATESWARA COLD STORAGE, 597/A, DENDUK URU, MADHIRA MANDAL, KHAMMAM DIST. 3 CIT(A), VIJAYAWADA 4) CIT, VIJAYAWADA 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 11 ITA NOS. 1277 /HYD/2014 SRI VENKAETESWARA COLD STORAGE DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER