Srinivas Kothapally , Secunderabad V. Income Tax Officer, Ward-10(1), Hyderabad

ITA 1290/Hyd/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7389 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 11-12-2019
• Assessment Year: 2016-2017
• Appeal Filed On: 16-08-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOLGU J KOTTARAM
• Assessee Lawyers: MANOJ DAGA
• Keywords: Presumptive income; Business income; Peak credit
• Section: 44AD; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B - SMC BENCH : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1 290 /HYD./201 9 ASSESSMENT YEAR: 20 16 - 17 SRI SRINIVAS KOTHAPALL Y VS. ITO, WARD 10(1) 1 - 8 - 57, P.G. ROAD HYDERABAD SECUNDERABAD 500 003 PAN: ACTPK1585H (APPELLANT) (RESPONDENT) FOR ASSESSE E : SH. MANOJ DAGA, A.R. FOR REVENUE : S H. SOLGU J KOTTARAM , D.R. DATE OF HEARING : 11 / 12 /19 DATE OF PRONOUNCEMENT : 31 / 01 / 20 O R D E R THIS IS ASSESSEES APPEAL FOR A.Y. 20 16 - 17 AGAINST THE ORDER DATED 2 0 .06.201 9 OF LD.CIT(A) - 6 , HYDERABAD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF RUNNING A PAN SHOP IN THE NAME AND STYLE OF M/S DIMMY PAN PALACE . ASSESSEE FILED HIS RETURN OF INCOME FOR THE A.Y. 2016 - 17 ON 27.01.2017 BY ADMITTING A TOTAL INCOME OF RS.6,15,170/ - . HE ADMITTED INCOME FROM HOUSE PROPERTY , PROFITS AND GAINS FROM BUSINESS OR PROFESSION AND INCOME FROM OTHER SOURCES VIZ., INTEREST INCOME AND INCOME FROM COMMISSION AND LIAISONING. 2.1. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T. ACT, 1961 (THE ACT), THE ASSESSEE WAS REQUIRED TO FURNISH BANK ACCOUNT STATEMENTS AND SOURCES OF CASH DEPOSITS INTO THE BANK ACCOUNT S . THE AO OBSERVED THAT TH E ASSESSEE HAD TWO BANK ACCOUNTS IN HDFC BANK AND ONE ACCOUNT WAS DISCLOSED IN THE RETURN OF INCOME, WHILE THE OTHER ACCOUNT WAS NOT DISCLOSED. AO OBSERVED THAT IN ONE ACCOUNT THERE ARE CASH DEPOSITS TO THE TUNE OF RS.11,67,000/ - WHICH IS IN THE NAME OF M /S DIMMY PAN PALACE. AFTER EXAMINING THE TURNOVER OF THE CONCERN , AO WAS SATISFIED THAT CASH DEPOSITS WERE COMMENSURATE WITH THE CASH TURNOVER AND INCOME DISCLOSED. HOWEVER, ITA 1290/HYD/2019 AY 2016 - 17 SRINIVAS KOTHAPALLY VS. ITO, WARD 10(1) 2 REGARDING OTHER BANK ACCOUNT , AO OBSERVED THAT THERE WERE DEPOSITS OF RS.86,9 6,130/ - BUT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE SOURCES OF DEPOSITS. AO THEREFORE ARRIVED AT THE PEAK NEGATIVE CASH BALANCE WHICH WORKED OUT TO RS.30,80,800/ - AND BROUGHT THE SAME TO TAX. 2. 2 . AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE L D.CIT(A) WHO CONFIRMED THE ORDER OF THE AO. 2. 3 . BEFORE THE CIT(A), THE ASSESSEE MADE AN ALTERNATIVE CLAIM THAT THE TOTAL CASH DEPOSITS OF RS. 86,96,130/ - MAY BE TREATED AS BUSINESS TURNOVER OF THE ASSESSEE AND COMPUTE THE INCOME THEREFROM AT 8% BY APPLYING PROVISIONS OF PRESUMPTIVE TAXATION U/S 44A D OF THE ACT. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD ALREADY DISCLOSED A TURNOVER OF RS.21,97,690/ - AND IF CASH DEPOSITS OF RS.86,96,130/ - IS ALSO CONSIDERED AS PART OF TURNOVER , THE TOTAL TURNOVER WOULD BE RS.1,08,93,820/ - WHICH EXCEEDED THE THRESHOLD THE LIMIT OF RS.1 CRORE U/S 44AD OF THE ACT, AND SINCE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNTS AND HAS NOT GOT THE SAME AUDITED, IT CANNOT B E ACCEPTED AS TURNOVER OF THE ASSESSEE AND PRESUMPTIVE RATE OF TAX CANNOT BE ADOPTED. HE, THEREFORE, UPHELD THE ORDER OF AO BRINGING ONLY THE NEGATIVE PEAK CREDIT TO TAX. 3 . AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL. 1. LD.CIT(A) ERRED BOTH IN LAW AND ON FACTS. 2. LD.CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.30,80,800/ - MADE BY AO WITHOUT APPRECIATING FACTS OF THE CASE. 3. LD.CIT(A) IS NOT CORRECT IN REJECTING CONTENTION THAT THE RECEI PTS IN BANK ACCOUNT CONSTITUTES TURNOVER OF THE ASSESSEE FROM THE BUSINESS OF PROVIDING MISCELLANEOUS SERVICES TO THE PARTIES WHO PERFORM FUNCTIONS IN THE VARIOUS FUNCTION HALLS. 4. LD.CIT(A) OUGHT TO HAVE ESTIMATED THE INCOME ON THE TURNOVER AS MENTIONED IN GROUND NO.3 ABOVE. 5. LD.CIT(A) ERRED IN APPLYING THE PRINCIPLE OF PEAK CREDIT AND CONFIRMING THE ADDITION OF RS.30,80,800/ - MADE BY AO. 6. LD.CIT(A) ERRED IN NOT GIVING CREDIT OF RS.3,75,500/ - OFFERED AS INCOME FROM BUSINESS AS MENTIONED IN GROUND NO. 3 ABOVE. 7. LD.CIT(A) FAILED TO APPRECIATE THAT NO SHOW CAUSE NOTICE WAS ISSUED PROPOSING THE ADDITION OF RS.30,80,800/ - MADE IN THE ASSESSMENT ORDER IN TERMS OF CIRCULARS ISSUED BY BOARD. ITA 1290/HYD/2019 AY 2016 - 17 SRINIVAS KOTHAPALLY VS. ITO, WARD 10(1) 3 8. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, ALTER ANY GROUN D OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 4. LD.COUNSEL FOR ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND THE CIT(A). LD.DR , ON THE OTHER HAND , SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO RIVAL CONTENTIONS AND MATERIAL PLACED ON RECORD, I FIND THAT THE CIT(A) HAS PROPERLY APPRECIATED THAT THE ASSESSEE HAS DISCLOSED THE BANK ACCOUNT WHERE THERE ARE CASH DEPOSITS OF RS.86,96,130/ - BUT HA D NOT DISCLOSED THE OTHER BANK ACCOUNT WHEREIN THE DEPOSITS WERE OF R S.2 1,97,690/ - THEREFORE ASSESSEES CONTENTION THAT HE HAS DISCLOSED THE CASH DEPOSITS OF RS.86,96,130/ - TO THE DEPARTMENT HAS TO BE ACCEPTED AND SINCE THE AO W AS SATISFIED THAT THE DEPOSITS OF RS.21,97,690/ - WERE COMMENSURATE WITH BUSINESS RECEIPTS, THE SAME ALSO HAS TO BE CONSIDERED AS DECLARED BY THE ASSESSEE. THE ASSESSEES CONTENTION THAT THE ENTIRE CASH DEPOSITS SHOULD BE TREATED AS ASSESSEES TURNOVER AND ONLY INCOME PORTION OF SUCH RECEIPTS SHOULD BE CONSIDERED FOR ASSESSMENT OF INCOME NEEDS CONSIDERATION. THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED THESE FUNDS ( WHICH ARE DEPOSIT ED INTO THE BANK ACCOUNT ) FOR THE LIAISONING WORK DONE BY HIM WITH VARIOUS PARTIES IN FUNCTION HALLS FOR HOLDING THE WEDDINGS. IF THAT IS THE BUSINESS OF THE ASSESSEE , THE INCOME OF THE ASSESSEE THEREFROM IS TO BE ESTIMATED AT 15% AS DISCLOSED BY ASSESSEE INSTEAD OF WORKING ON THE PEAK CASH CREDIT. THEREFORE, I DEEM IT FOR AND PROPER TO DIRECT THE AO TO ESTIMATE THE NET INCOME OF THE ASSES SEE AT 15% OF THE CASH DEPOSITS OF RS.86,96,130/ - . 6 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 31 ST JANUARY, 2020 . SD/ - (P MADHAVI DEVI) JUDICIAL MEMBER DATED: 31 ST JANUARY, 2020 . *GMV ITA 1290/HYD/2019 AY 2016 - 17 SRINIVAS KOTHAPALLY VS. ITO, WARD 10(1) 4 COPY FORWARDED TO: 1. SRI SRINIVAS KOTHAPALL Y , 1 - 8 - 57, P.G. ROAD, SECUNDERABAD 500 003 . 2. ITO, WARD 10 ( 1 ), HYDERABAD 3. ACIT, RAGE 10, HYDERABAD. 4. CIT(A) - 6 HYDERABAD 5 . PR.CIT - 6, HYDERABAD 6 . D.R. ITAT HYDERABAD 7 . GUARD FILE ITA 1290/HYD/2019 AY 2016 - 17 SRINIVAS KOTHAPALLY VS. ITO, WARD 10(1) 5 1. DRAFT DICTATED ON 28/01/20 2. DRAFT PLACED BEFORE THE AUTHOR 30 /01/20 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO SRPS 6. KEPT FOR PRONOUNCEMENT 31/01/20 7. FILE SENT TO BENCH CLERK