Srinivasa Reddy Yenumula. Shankarpally, Hyderabad V. ITO, Ward-1, Vikarabad, Vikarabad

ITA 1303/HYD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1525 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 07-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V RAJITHA; K RAVI KUMAR
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Unexplained investment; Capital receipt
• Section: 143(3); 133A; 234B

Judgement Text

ITA NO 1303 OF 2016 SRINIVASA REDDY YENUMULA SHANK ARPALLY. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1303/HYD/2016 (ASSESSMENT YEAR: 2009-10) SHRI SRINIVASA REDDY YENUMULA SHANKARPALLY PAN:AAOPE6283B VS INCOME TAX OFFICER WARD-1 VIKARABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SMT. V. RAJITHA & SHRI K. RAVI KUMAR, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAI NST THE ORDER OF THE CIT (A)-2, HYDERABAD, DATED 31.03. 2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS T O THE EXTENT IT IS PREJUDICIAL TO THE APPELLANT. 2. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTI ON OF THE AO IN ESTIMATING THE INCOME BY REJECTING THE BO OKS OF ACCOUNT AND FURTHER ERRED IN ESTIMATING THE INCO ME AT 3%. 3. THE LEARNED CIT (A) OUGHT TO HAVE CONSIDERED THE CIRCUMSTANCES EXPLAINED AND HELD THAT THE ESTIMATIO N AT 3% IS EXCESSIVE ON THE FACTS OF THE APPELLANTS CAS E. 4. THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTI ON OF THE AO IN TREATING THE INVESTMENT OF RS.18,0,000 TOWARDS CAPITAL AS THE INCOME FOR THE A.Y UNDER CONSIDERATION WITHOUT CONSIDERING THE SOURCES FOR INVESTMENT. DATE OF HEARING: 14.09.2018 DATE OF PRONOUNCEMENT : 28.11.2018 ITA NO 1303 OF 2016 SRINIVASA REDDY YENUMULA SHANK ARPALLY. PAGE 2 OF 4 5. THE LEARNED CIT (A) ERRED IN CONFIRMING LEVY OF INTEREST U/S 234B OF THE I.T. ACT. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL AND RUNNING A WINE SHOP, FILED HIS RETUR N OF INCOME FOR THE A.Y 2009-10 DECLARING INCOME OF RS.3,05,150/-. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A O OBSERVED THAT THE RELEVANT A.Y IS THE FIRST YEAR OF THE BUSI NESS OF THE ASSESSEE AND FROM THE BALANCE SHEET, IT WAS OBSERVE D THAT THE ASSESSEE HAS INTRODUCED A CAPITAL OF RS.21,05,152/- . A SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 25.03.2010, DURING THE COURSE OF WHICH, THE ASSESSE E GAVE A STATEMENT THAT THE INITIAL INVESTMENT IN THE BUSINE SS IS RS.18.00 LAKHS TOWARDS THE FIRST INSTALMENT OF LICENSE FEE A ND LIFTING OF STOCK FROM THE BEVERAGE CORPORATION AND SOURCES FOR SUCH INVESTMENT IS FROM AGRICULTURAL OPERATIONS OF THE F AMILY. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE LA ND HOLDINGS ALONG WITH THE DETAILS OF THE CROPS PRODUCED, PROOF OF SALE OF THE AGRICULTURAL PRODUCE ETC., THE ASSESSEE COULD NOT P RODUCE THE RELEVANT DETAILS, BUT ULTIMATELY ON 11.10.2011, THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT AND COPIES OF THE AGR ICULTURAL LAND HOLDINGS, CASH FLOW STATEMENT FROM 1996-97 TO 2008- 09. THE ASSESSEE SUBMITTED THAT THE CAPITAL INTRODUCED IN T HE BUSINESS WAS RS.18.00 LAKHS ONLY AND THE CAPITAL AS ON 31.03 .2009 INCLUDING THE CURRENT YEARS PROFIT AMOUNTED TO RS.2 1,05,152/-. 3. THE AO ALSO ASKED THE ASSESSEE TO EXPLAIN THE B ASIS FOR RECORDING THE SALE IN THE BOOKS OF ACCOUNT AND ASKE D HIM TO PRODUCE THE RELEVANT DETAILS. THE ASSESSEE SUBMITTE D THAT IN THIS TYPE OF BUSINESS, IT IS NOT POSSIBLE TO MAINTAIN TH E BILLS AND ITA NO 1303 OF 2016 SRINIVASA REDDY YENUMULA SHANK ARPALLY. PAGE 3 OF 4 THEREFORE, THE AO ESTIMATED THE NET PROFIT OF THE S ALE OF BEVERAGES AT 3% OF THE GOODS PUT TO SALE. WITH REGARD TO THE SOURCES FOR INVESTMENT, SINCE THE AO WAS NOT SATISFIED WITH THE ASSESSEES CONTENTION, AS REGARDS THE SOURCES, HE TREATED THE SUM OF RS.18.00 LAKHS AS UNEXPLAINED INVESTMENT AND ALONG WITH TWO OTHER SMALL ADDITIONS BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY DELETING THE SMALL ADDITIONS. AGAIN ST THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. AS R EGARDS GROUNDS 2 AND 3, HE SUBMITTED THAT THIS ISSUE IS CO VERED BY VARIOUS DECISIONS OF THIS TRIBUNAL WHEREIN THE INCO ME FROM THE SALE OF LIQUOR HAS BEEN ESTIMATED AT 3% OF THE COST OF THE GOODS PUT TO SALE AND THEREFORE, HE HAS NO GRIEVANCE AGAI NST THE ASSESSMENT ORDER TO THIS EXTENT IS CONFIRMED. AS RE GARDS THE ADDITION OF RS.18.00 LAKHS TOWARDS UNEXPLAINED INVE STMENT IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE PLA CED RELIANCE ON THE JUDGMENT OF THE HON'BLE SUPREME COURT OF IND IA IN THE CASE OF CIT VS. BHARAT ENGG. & CONSTRUCTION CO. REP ORTED IN (1972) 83 ITR 0187 WHEREIN THE HON'BLE SUPREME COUR T HELD THAT THE UNEXPLAINED CASH CREDIT ENTRIES IN THE FIRST YE AR OF ITS BUSINESS REPRESENTS CAPITAL RECEIPTS AND COULD NOT BE ITS IN COME. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AO AND PLACED RELIANCE UPON THE DECIS ION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF AC IT VS. M/S. PENNAR AQUA EXPORTS PVT. LTD IN ITA NO.1946/HYD/201 1 FOR THE A.Y 1994-95 WHEREIN THE COORDINATE BENCH OF THIS TR IBUNAL HAS HELD THAT THE ASSESSEE FAILS TO PROVE THE GENUINENE SS AND ITA NO 1303 OF 2016 SRINIVASA REDDY YENUMULA SHANK ARPALLY. PAGE 4 OF 4 CREDITWORTHINESS OF PERSONS MAKING CASH CREDITS, TH E ADDITIONS HAS TO BE SUSTAINED. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT ADMITTEDLY, THIS IS THE FIR ST YEAR OF OPERATION OF THE ASSESSEE AND THE ASSESSEE COULD ST ART THE BUSINESS ONLY AFTER OBTAINING LICENSE FROM THE GOVT . AND BY MAKING PAYMENT OF THE LICENSE FEE. THE ASSESSEE HAS MADE THE PAYMENT OF RS.18.00 LAKHS TOWARDS THE FIRST INSTALM ENT OF THE LICENSE FEE AND THEREFORE, SUCH AN AMOUNT CANNOT BE TREATED AS UNEXPLAINED INCOME FROM THE BUSINESS OF THE ASSESSE E. THIS IS THE CAPITAL INTRODUCED BY HIM AND IF AT ALL, IT CAN ONL Y BE THE INCOME FROM THE EARLIER YEARS AND NOT FROM THE RELEVANT PR EVIOUS YEAR. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF T HE HON'BLE SUPREME COURT, WE DELETE THE ADDITION OF RS.18.00 L AKHS. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 28 TH NOVEMBER, 2018. VINODAN/SPS COPY TO: 1 SHRI S.RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYA'S ELEGANCE, 3-6- 643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 500029 2 ITO WARD -1 VIKARABAD 3 CIT (A)-2, HYDERABAD 4 PR. CIT 2 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER