Sri Murniyappa Narayanappa , Bangalore V. Assistant Commissioner of Income TAx Circle-6(2)(1), Bangalore

ITA 1377/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9929 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-11-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 01-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: C RAMESH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B ENGALURU BEFORE S HRI N.V.VASUDEVAN , VICE PRESIDENT AND SHRI INTURI RAMA RAO , ACCOUNTANT MEMBER I TA NO. 1377 / BANG/2 0 1 8 (ASSESSMENT YEAR: 20 14 - 15 ) SHRI MU R NIYAPPA NARAYANAPPA, NO.24/1, SRIKANTHAPURA, DAS ANPURA HOBLI, ANCHEPALLYA, TUMKUR ROAD, BENGALURU - 560 079. PAN: AAZPN 5651 M VS. APPELLANT ASSISTANT COMMISSIONER OF INCOME - TAX, CIRCLE 6(2)(1), BENGALURU. RESPONDENT A PPELLANT BY : SHRI C.RAMESH, CA. RESPONDENT BY : DR . P.V.PRADEEP KUMAR, ADDL.CIT(DR) DATE OF HEARING : 12/11/2018 DATE OF PRONOUNCEMENT : 05 /1 2 /2018 O R D E R PER INTURI RAMA RAO, A M : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX(APPE ALS), BENGALURU - 6, BENGALURU, DATED 12/02/2018 FOR THE ASSESSMENT YEAR 2014 - 15. 2. BRIEFLY, THE FACTS OF THE CASE ARE AS UNDER: THE APPELLANT IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING OF LIQUOR. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2 014 - 15 WAS FILED ON 30/09/2014 DECLARING TOTAL INCOME OF RS.35,43,470/ - . AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE ASST. COMMISSIONER OF INCOME - TAX, CIRCLE - 6(2)(1), BENGALURU, [HEREINAFTER REFERRED TO AS THE ASSESSING OFFICER ], VIDE ORDER DATED 19/12/2016 PASSED U/S 143(3) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] AT TOTAL INCOME OF RS.86,87,419/ - WHILE DOING SO, THE ASSESSING OFFICER MADE ADDITION OF RS.51,43,949/ - ON ACCOUNT OF ALLEGED DI FFERENCE IN THE TURNOVER SHOWN BY THE ASSESSEE ITA NO.1377/BANG/2018 PAGE 2 OF 5 AND THE PURCHASES AS FOUND IN FORM NO.26 AS WITH KARNATAKA STATE BEVERAGES CORPORATION LTD. 3. THE CASE OF THE ASSESSING OFFICER APPEARS THAT TURNOVER AS PER FORM 26 AS IS RS.5,62,66,332/ - WHEREAS THE TURNOVER SHOWN BY THE ASSESSEE WAS RS.5,11,22,383/ - . THUS THE DIFFERENCE OF RS.51,43,949/ - REPRESENTS SUPPRESSED SALES , THEREFORE, BROUGHT THE ENTIRE AMOUNT TO TAX WHEREAS THE CONTENTION OF THE ASSESSEE IS THAT THIS DIFFERENCE OF RS.51,43,949/ - BELONGS TO M/S.MAN JUSRI WINES WHICH IS RUN BY ONE SHRI S.N.RAMESH , THE SAID SH RI S.N.UMESH WAS AUTHORIZED BY THE APPELLANT TO DO THE BUSINESS ON BEHALF OF THE APPELLANT. THUS THE CASE OF THE APPELLANT APPEARS TO BE THAT M/S.MANJUSRI WINES BELONGS TO THE APPELLANT HIMSELF, SUPERVISED AND MANAGED BY SHRI UMESH AND THIS DIFFERENCE OF TURNOVER WAS REFLECTED IN THE HANDS OF M/S.MANJUSRI WINES AND THEREFORE, NO ADDITION IS WARRANTED. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A), WHO VIDE IMPUGNED ORDER DISMIS SED THE APPEAL BY HOLDING THAT IN ABSENCE OF CONCLUSIVE PROOF THAT THIS TURNOVER WAS REFLECTED IN THE HANDS OF M/S.MANJUSRI WINES SINCE SHRI UMESH HAS MANAGED THE AFFAIRS OF M/S.MANJUSRI WINES ON BEHALF OF THE ASSESSEE, THE SUPPRESSED SALES REQUIRES TO BE ADDED ONLY IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY SUSTAINED THE ADDITION. 5. BEING AGGRIEVED, THE APPELLANT IS BEFORE US IN THE PRESENT APPEAL RAISING THE FOLLOWING GROUNDS OF APPEAL: ITA NO.1377/BANG/2018 PAGE 3 OF 5 6. L EARNED AR OF THE ASSESSEE SUBMITTED THAT THE DIFFERENCE IN TURNOVER IS REFLECTED IN THE HANDS OF M/S.MANJUSRI WINES AND THOUGH PURCHASES WERE MADE BY THE ASSESSEE FROM KARNATAKA STATE BEVERAGES CORPORATION LTD. AND CORRESPONDING SALES WERE SHOWN IN THE HANDS OF SAID SHRI UMESH AND IN THIS CONNECTION, HE TOOK US T HROUGH THE STATEMENT OF ACCOUNT OF SAID SHRI UMESH. HE FURTHER SUBMITTED THAT NO PROFIT ACCRUED IN THE HANDS OF ASSESSEE ON ACCOUNT OF THE TURNOVER. WITHOUT PREJUDICE, LEARNED AR OF THE ASSESSEE SUBMITTED THAT ENTIRE SUPPRESS ED SALES CANNOT BE BROUGHT TO TAX AND ONLY PROFIT ELEMENT EMBEDDED I N SUPPRESSED SALES CAN ONLY BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. ON THE OTHER HAND, LD.ADDL.CIT(DR) SUBMITTED THAT LIQUOR PURCHASES ARE MADE FROM KARNATAKA STATE BEVERAGES CORPORATION LTD., AND THEREFORE, PURCHASE PRICE DOES NOT ALTER AT ALL SINCE PURCHASES CAN ONLY BE MADE FROM STATE OWNED CORPORATIONS. SINCE ENTIRE PURCHASES HAVE BEEN ACCOUNTED FOR IN THE BOOKS OF ASSESSEE, THE ENTIRE SUPPRESSED SALES ARE REQUIRED TO BE ADDED IN THE HANDS OF THE ASSESSE E. ACCORDINGLY, LD. ADDL.CIT(DR) SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE IN THE PRESENT APPEAL REVOLVES AROUND WHETHER THE ALLEGED SUPPRESSED SALES OF RS.51,43,94 9/ - REQUIRES TO ITA NO.1377/BANG/2018 PAGE 4 OF 5 BE ADDED IN THE HANDS OF THE ASSESSEE. UNDISPUTEDLY, PURCHASES ARE MADE BY THE ASSESSEE FROM KARNATAKA STATE BEVERAGES CORPORATION LTD., WHICH IS STATED OWNED CORPORATION AND THEREFORE THE PURCHASE TURNOVER DOES NOT AND CANNOT ALTER AS THE ASSESSEE CAN PURCHASE LIQUOR ONLY FROM THE STATE OWNED CORPORATION. THUS THE PURCHASES FROM STATE OWNED CORPORATIONS ARE LIABLE FOR TAX COLLECTION AT SOURCE AND WHICH IS REFLECTED IN FORM 26AS. THIS FIGURE REFLECTED IN FORM 26AS REPRESENTS ONLY THE PURC HASED TURNOVER AND NOT THE SALE AS WRONGLY ASSUMED BY THE AO. THUS, THE PREMISE ON WHICH THE ADDITION MADE BY AO IS PATENTLY WRONG. APPARENTLY, AO HAD NOT DISTURBED THE SALES TURNOVER OF RS.5,11,22,000/ - SHOWN BY THE ASSESSEE. OBVIOUSLY, SALES FIGURES ARE INCLUSIVE OF PROFIT ELEMENT. THEREFORE, RIGHT COURSE OF ACTION OPEN TO AO IS TO FIND OUT THE CORRESPONDING PURCHASE OF THIS TURNOVER BY CORRESPONDING WITH KARNATAKA STATE BEVERAGES CORPORATION LTD., INSTEAD , AO ASSUMED THAT TURNOVER AS PER FORM 26AS AS WELL AS TURNOVER SHOWN BY THE ASSESSEE ARE THE SALES TURNOVER. THIS ASSUMPTION IS APPARENTLY WRONG. THEREFORE, THE VERY BASIS OF ADDITION MADE BY THE AO IS WRONG. FURTHER THE EXPLANATION TENDERED BY THE ASSESSEE THAT DIFFERENCE IN TURNOVER REFLECTED IN THE HANDS OF ONE SAID SHRI UMESH CANNOT BE BELIEVED FOR THE REASON THAT THE ASSESSEE HAD FAILED TO ADDUCE ANY EVIDENCE IN SUPPORT OF THIS CONTENTION LIKE THE FIN ANCIAL STATEMENTS OF SHRI UMESH. THE EXPLANATION THAT SHRI UMESH WAS GIVEN FULL POWER TO S UPERVISE AND MANAGE THE LIQUOR BUSINESS OF THE ASSESSEE ALSO DOES NOT GO TOGETHER WITH THE STAND THAT SHRI UMESH IS RUNNING A DIFFERENT ENTITY. THUS, IN THE LIGHT OF THESE CONTRADICTORY EXPLANATIONS AND IN THE ABSENCE OF ANY EVIDENCE ON RECORD SHOWING THA T DIFFERENCE IN PURCHASE TURNOVER WAS REFLECTED IN THE HANDS OF SHRI UMESH, NO CREDENCE CAN BE GIVEN TO THE EXPLANATION OF THE ASSESSEE. THEREFORE, WE CONSIDER IT APPROPRIATE TO REMIT THE MATER BACK TO THE FILE OF THE AO WITH THE FOLLOWING DIRECTIONS: I. AO SHALL UNDERTAKE EXERCISE OF FINDING OUT THE CORRESPONDING PURCHASES OF SALES TURNOVER RS.5,11,323/ - SHOWN BY THE ASSESSEE AND RECONCILE THE SAME WITH ITA NO.1377/BANG/2018 PAGE 5 OF 5 REFERENCE TO PURCHASE TURNOVER SHOWN IN FORM 26AS OF RS.5,62,66,332/ - . II. FIND OUT THE SOURCE FOR PURCHASE TURNOVER OF RS.5,62,66,332/ - . III. IF IT IS FOUND ON VERIFICATION THAT PART OF THE PURCHASE TURNOVER REFLECTED IN FORM 26AS OF THE ASSESSEE IS SHOWN IN THE HANDS OF SAID UMESH SAME NEED NOT BE CONSIDERED IN THE HANDS OF THE ASSESSEE PROVIDED THE ENTITY RUN BY S HRI UMESH IS DISTINCT AND SEPARATE F ROM THE ASSESSEE. WITH THE ABOVE DIRECTION, WE SET ASIDE THE ASSESSMENT TO TO THE AO. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH DECEMBER , 2018 S D/ - SD/ - (N.V.VASUDEVAN) ( INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT M EMBER PLACE : BENGALURU. D A T E D : 05 / 12 /201 8 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE