Harinath Padmanabhachetty, Chittoor, Chittoor V. ITO, Ward-1, Chittoor, Chittoor

ITA 1434/HYD/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2991 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V RAMA MOHAN
• Assessee Lawyers: S RAMA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES CIRCUIT BENCH A, AT TIRUPATI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1434/HYD/2016 ASSESSMENT YEAR: 2010-11 P. HARINATH, CHITTOOR [PAN: ANRPP5824F] VS THE INCOME TAX OFFICER, WARD-1, CHITTOOR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SHRI V. RAMA MOHAN, DR DATE OF HEARING : 15-05-2018 DATE OF PRONOUNCEMENT : 23-05-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-TIRUPATI, DATED 06-09-2016. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO ESTIMATION OF PROFIT ON TURNOVER UNDERTAKEN BY ASSESSEE WHICH WAS NOT DISCLOSE D IN THE RETURN OF INCOME. 2. BRIEFLY STATED, ASSESSEE IS A PROPRIETOR OF BUSINE SS OF SALE OF TOBACCO PRODUCTS. HE DECLARED A TURNOVER OF RS. 45,7 7,770/- AND OFFERED NET PROFIT AT 5% ON TURNOVER AT RS. 2,28,889/-. IT HAS COME TO THE KNOWLEDGE OF AO THAT ASSESSEE HAS MAINTAINED 11 BANK I.T.A. NO. 1434/HYD/2016 :- 2 - : ACCOUNTS AT VARIOUS PLACES AND HAD DEPOSITS TO AN EXTE NT OF RS. 8,29,98,143/-. THE ASSESSMENT WAS REOPENED AND IN T HE COURSE OF REASSESSMENT, ASSESSEE SUBMITTED THAT HE ACTED ON BEHALF OF M/S. DHANAPAL CHETTY & CO., CHITTOOR AND HE DID NOT EARN ANY PROFIT. HOWEVER, AO FOUND THAT THE SAID TURNOVER WAS NOT OWNED U P BY THE SAID FIRM AND AFTER EXCLUDING THE ACCOUNTED TURNOVER OF ONE BANK ACCOUNT AT CHITTOOR, AO ESTIMATED THE PROFIT AT 5% ON THE TU RNOVER. 3. BEFORE THE LD.CIT(A), ASSESSEE MADE DETAILED SUBMI SSIONS AND FILED LETTER FROM M/S. DHANAPAL CHETTY & CO., CH ITTOOR AND SUBMITTED THAT HE DID THE BUSINESS ON BEHALF OF THE ABOVE FIRM AND WITHDRAWALS TO AN EXTENT OF RS. 2,48,93,952/- WERE R E-DEPOSITED, SO THAT MUCH HAS TO BE EXCLUDED. WITH REFERENCE TO THE PRO FIT, IT WAS SUBMITTED THAT THE PROFIT DECLARED BY THE SAID FIRM WAS AT 0.06% AND SO THE SAME CAN BE ADOPTED. IN THE ALTERNATE, IT W AS SUBMITTED THAT THE AO ESTIMATED THE PROFIT AT 2.2% IN AY. 2011-12 W HICH WAS ACCEPTED BY ASSESSEE IN THAT YEAR. 4. LD.CIT(A) HAS PARTLY ACCEPTED THE CONTENTIONS AND H ELD AS UNDER: 5.1 AS SEEN FROM THE GROUNDS ONE OF THE CONTENTION S OF THE APPELLANT IS THAT HE MADE WITHDRAWALS AND REDEPOSIT ED TO THE TUNE OF RS.2,48,93,952 AND THESE AMOUNTS SHOULD NOT BE CONS IDERED AS HIS TURNOVER. I HAVE CAREFULLY CONSIDERED THE CONTENTIO N OF THE APPELLANT. THERE IS NO DIRECT EVIDENCE TO SHOW THAT THE DEPOSITS INT O THE BANK ACCOUNTS WERE FROM THE WITHDRAWALS. IT IS ADMITTED FACT THAT APPELLANT DEPOSITED THE TRADE RECEIPTS IN THE FORM OF CASH AND ALSO TRA NSFERRED CASH TO THE WHOLESALER. IN THE PROCESS, IN ALL PROBABILITY THE CASH WITHDRAWALS RELATE TO THE PAYMENTS MADE TO M/S. DHANAPAL CHETTY & CO. WHO HAVE EXTENDED THEIR PRODUCTS TO APPELLANT FOR SALE. THIS FACT IS ALSO EVIDENT FROM THE LETTER DATED 23-03-2015 FROM THE ITC DISTRIBUTOR (M/S . DH ANAPAL CHETTY & CO.) WHEREIN THE FOLLOWING IS STATED: I.T.A. NO. 1434/HYD/2016 :- 3 - : 'WE FURTHER DECLARE THAT YOU REMITTED CASH TO US AN D SOMETIMES BY WAY OF DEMAND DRAFT IN FAVOUR OF ITC LTD AND THE CASH REMITTED FROM YOUR END ALSO WAS REMITTED TO ITC IN THE FORM OF DEMAND DRAFT ONLY'. AS SEEN FROM ABOVE THE APPELLANT WAS REGULARLY REMI TTING CASH AND DEMAND DRAFTS TO THE DISTRIBUTOR. IF THE APPELLANT' S CONTENTION IS ACCEPTED, THEN THERE WOULD BE NO CASH PAYMENTS TO THE WHOLESA LER WHICH IS NOT TRUE. FURTHER PART OF THE CASH WITHDRAWALS COULD BE FOR P ERSONAL USE. THE ONUS IS ON THE APPELLANT TO PROVE THAT THE CASH WITHDRAW ALS WERE IN FACT FULLY OR PARTLY USED FOR CASH DEPOSITS. THE APPELLANT HAS CL EARLY FAILED TO ESTABLISH ANY NEXUS. HENCE, IT IS NOT POSSIBLE TO CONCEDE TO THE REQUEST OF THE APPELLANT TO GIVE CREDIT TO THE WITHDRAWALS. ACCORD INGLY, THE CONTENTION THAT THE WITHDRAWN CASH WAS REDEPOSITED HAS NO MERI T THE PLEA OF THE ASSESSEE IS REJECTED. 5.2 THE SECOND CONTENTION IS THAT THE ESTIMATION OF INCOME @ 5.02% ON THE TURNOVER IS EXCESSIVE. THE APPELLANT PLEADED THAT A S IN COMPARABLE CASES THE INCOME OF THE DEALER SHOULD HAVE BEEN ASSESSED @ 0.06%. DURING THE APPELLATE PROCEEDINGS, THE AUTHORIZED REPRESENTATIV E ARGUED THAT THE ESTIMATE OF INCOME IS ON HIGH SIDE AND TOTALLY UNJU STIFIED. ON 31.08.2016 THE AUTHORIZED REPRESENTATIVE FILED ADDITIONAL GROU NDS OF STATEMENT OF FACTS IN SUPPORT OF THE GROUNDS OF STATEMENT OF FAC TS IN SUPPORT OF THE GROUNDS OF APPEAL, WHEREIN IT IS CONTENDED THAT FOR ASSESSMENT YEAR 2011- 12 THE AO ESTIMATED THE INCOME @2.2% ON THE TURNOVE R ON SIMILAR FACTS AND ACCORDINGLY THE ESTIMATION @5.02% IS EXCESSIVE. THE CONTENTION OF THE APPELLANT IS CONSIDERED. IT I S A FACT THAT NET PROFIT @2.2% IS ESTIMATED BY THE AO IN THE ASSESSEE 'S OWN CASE FOR THE ASSESSMENT YEAR 2011-12. CONSIDERING THIS ESTIMATIO N @5.02% IS EXCESSIVE AND UNREASONABLE IN THIS LINE OF BUSINESS . ACCORDINGLY ESTIMATION OF NET PROFIT @ 3% WOULD BE FAIR AND REA SONABLE. ACCORDINGLY THE NET PROFIT MAY BE REWORKED AT RS.23,72,780/-. C ONSEQUENTIALLY THE APPELLANT GETS A RELIEF OF RS.15,97,670/-. 5. LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE C IT(A) AND LD.DR RELIED ON THE ORDER OF THE LD.CIT(A). 6. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF TH E OPINION THAT THE TURNOVER BELONGS TO ASSESSEE BUSINESS. M/S. D HANAPAL CHETTY & CO., CHITTOOR CONFIRMED THAT ASSESSEE WAS DOI NG BUSINESS AS CONSIGNMENT AGENT. ASSESSEE ALSO ACCEPTED SIMILAR ESTIMATION OF INCOME IN LATER AY. 2011-12. THEREFORE, THE FINDIN GS OF THE I.T.A. NO. 1434/HYD/2016 :- 4 - : LD.CIT(A) ON TURNOVER ARE UPHELD. COMING TO THE ESTIM ATION OF INCOME, LD.CIT(A) HAS REDUCED THE ESTIMATION FROM 5% TO 3%, WHEREAS ASSESSEE SUBMISSION WAS THAT THE PROFIT IN LAT ER YEAR WAS ESTIMATED AT 2.2% BY AO. THE RATE OF 0.06% RELIED ON BY LD. COUNSEL HAS NO MERIT. SINCE THE RATE OF 2.2% WAS AC CEPTED BY ASSESSEE IN LATER YEAR, WE DIRECT THE AO TO ADOPT THE SA ME. ORDER OF THE CIT(A) IS MODIFIED TO THAT EXTENT. 7. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT ME MBER HYDERABAD, DATED 23 RD MAY, 2018 TNMM I.T.A. NO. 1434/HYD/2016 :- 5 - : COPY TO : 1. SHRI P. HARINATH, C/O. M/S. KGM GUPTA & CO., CHA RTERED ACCOUNTANTS, 10/67, GANDHI ROAD, CHITTOOR. 2. THE INCOME TAX OFFICER, WARD-1, CHITTOOR. 3. CIT(APPEALS)-TIRUPATI. 4. PR.CIT-TIRUPATI. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.