Varada Venkata Prabhakara Rao, V. THE ITO., WARD-1, Machilipatnam

ITA 152/VIZ/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94104 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M N M NAIK SR
• Keywords: Unexplained investment
• Section: 69

Judgement Text

ITA NOS.152/VIZAG/2013 VARADA VENKATA PRABHAKARA RAO, CHALLAPALLI IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 152 /VIZAG/ 201 3 ASSESSMENT YEAR : 2009-10 VARADA VENKATA PRABHAKARA RAO CHALLAPALLI VS. ITO WARD-1 MACHILIPATNAM (APPELLANT) (RESPONDENT) PAN NO.AATPV 0753G ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SHRI M.N.M. NAIK, SR. AR DATE OF HEARING : 30.07.2015 DATE OF PRONOUNCEMENT : 30.07.2015 ORDER THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING TH E ORDER DATED 21.12.2012 PASSED BY LD. CIT(A) VIJAYAWADA AND IT R ELATES TO THE ASSESSMENT YEAR 2009-10. THE APPEAL IS BARRED BY LIMITATION B Y 27 DAYS. THE ASSESSEE HAS FILED A PETITION BEFORE THE BENCH WITH A REQUES T TO CONDONE THE DELAY. I HEARD THE PARTIES ON THIS PRELIMINARY ISSUE. HAVI NG REGARD TO THE SUBMISSIONS MADE IN THE PETITION, I CONDONE THE DELA Y AND ADMIT THE APPEAL FOR HEARING. 2. FOLLOWING ISSUES ARE URGED IN THIS APPEAL: A. ADDITION OF RS.7,34,700/- MADE U/S 69 OF THE INCOME- TAX ACT. B. ADHOC DISALLOWANCE OF OTHER EXPENSES. 3. I HEARD THE PARTIES AND PERUSED THE RECORD. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS RUNNING A RICE MILL UNDER THE NAME AND STYLE OF M/S. SRI LAKSHMI VIGNESWARA RICE & FLOUR MILL. THE RETURN F ILED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS TAKEN UP FOR SCRUT INY. IN THE BALANCE SHEET, THE ASSESSEE DISCLOSED SUNDRY CREDITORS TO THE EXTE NT OF RS.58,79,886/-. THE ASSESSEE FILED CONFIRMATION LETTERS OBTAINED FROM T HE TRADE CREDITORS. THE ASSESSING OFFICER DIRECTED THE INSPECTOR OF INCOME- TAX TO MAKE ENQUIRIES WITH ITA NOS.152/VIZAG/2013 VARADA VENKATA PRABHAKARA RAO, CHALLAPALLI 2 THE INDIVIDUAL CREDITORS. SOME OF THE CREDITORS AP PEAR TO HAVE STATED THAT THEY HAD RECEIVED THE PAYMENTS IMMEDIATELY AFTER TH E SALE OF PADDY. BASED ON THE REPORT OF THE INSPECTOR, THE A.O. HELD THAT THE CREDITORS TO THE EXTENT OF RS.7,34,985/- WOULD NOT BE PROVED AS GENUINE AND ACCORDINGLY ASSESSED THE SAME AS UNEXPLAINED INVESTMENT U/S 69 OF THE AC T. THE A.O. ALSO MADE AN ADDITION OF RS.1,19,990/- OUT OF EXPENDITURE FOR NON-MAINTENANCE OF PROPER VOUCHERS. 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) CONF IRMED ADDITION OF RS.7,34,700/- MADE U/S 69 OF THE ACT. WITH RESPECT TO THE OTHER DISALLOWANCE MADE OUT OF EXPENSES, THE LD. CIT(A) RESTRICTED THE ADDITION OF RS.35,000/-. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFOR E ME. 5. WITH REGARD TO THE FIRST ISSUE, THE LD. A.R. SUB MITTED THAT THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS OBTAINED FROM AL L CREDITORS. HOWEVER, THE ASSESSING OFFICER DEPUTED INSPECTOR TO MAKE ENQUIRIE S WITH THE CREDITORS AND IT APPEARS THAT SOME OF THEM HAVE REPORTED THAT THE Y HAVE RECEIVED MONEY IMMEDIATELY AFTER SALE OF PADDY. THE LD. A.R. SUBM ITTED THAT THE ASSESSEE IS MAINTAINING BOOKS OF ACCOUNTS AND THE PURCHASES OF PADDY HAVE BEEN MADE IN THE MONTHS OF FEBRUARY AND MARCH I.E. AT THE FAG END OF THE YEAR AND THE PAYMENTS HAVE BEEN MADE IN THE SUBSEQUENT YEAR. TH E LD. A.R. SUBMITTED THAT THE FARMERS HAVE NOT MAINTAINED ANY BOOKS OF A CCOUNTS AND THEY MIGHT HAVE GIVEN A STATEMENT OUT OF THEIR MEMORY. ACCORD INGLY, HE SUBMITTED THAT THE IMPUGNED ADDITION HAS BEEN MADE OUT OF SUSPICIO N ONLY. HE FURTHER PLACED RELIANCE ON THE DECISION RENDERED BY THE HON BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS. KAMAL TRADING COMP ANY 346 ITR 60 AND SUBMITTED THAT THE INSPECTOR OF INCOME-TAX WAS NOT AUTHORISED TO RECORD AND COLLECT STATEMENTS AND HENCE THE STATEMENT GIVEN BY FARMERS SHOULD NOT HAVE BEEN RELIED UPON BY THE TAX AUTHORITIES. 6. ON THE CONTRARY, THE LD. D.R. SUBMITTED THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.7,34,700/- ONLY, OUT OF THE TOTAL CREDITORS BALANCE OF RS.58,79,886/-. THE LD. D.R. FURTHER SUBMITTED THA T THE ASSESSEE, DURING THE ITA NOS.152/VIZAG/2013 VARADA VENKATA PRABHAKARA RAO, CHALLAPALLI 3 COURSE OF ASSESSMENT PROCEEDING, AGREED FOR REASONA BLE ADDITION IN RESPECT OF TRADE CREDITORS. ACCORDINGLY, HE SUBMITTED THAT THE ORDER OF LD. CIT(A) ON THIS ISSUE SHOULD BE SUSTAINED. 7. IN THE REJOINDER, THE LD. A.R. SUBMITTED THAT THE ASSESSING OFFICER HAD PROPOSED TO MAKE ADDITION TOWARDS SUPPRESSION OF SA LES ON THE BASIS OF ELECTRICITY CONSUMPTION. HENCE THERE WAS A SCOPE F OR TELESCOPING THE ADDITION RELATING TO SUNDRY CREDITORS AGAINST ADDITION RELAT ING TO SUPPRESSION OF SALES. HENCE, THE ASSESSEE AGREED FOR MAKING REASONABLE AD DITION WITH THE HOPE THAT THE SAME CAN BE TELESCOPED AGAINST THE OTHER A DDITION. THE LD. A.R. SUBMITTED THAT THE ADDITION MADE BY THE ASSESSING O FFICER ON ACCOUNT OF SUPPRESSION OF PURCHASE AND SALES HAS SINCE BEEN DE LETED BY THE LD. CIT(A). 8. THE FACTS THAT EMANATES FROM THE CASE ARE THAT T HE ASSESSEE HAS FILED CONFIRMATION LETTERS OBTAINED FROM VARIOUS CREDITOR S IN ORDER TO SUBSTANTIATE THE OUTSTANDING TRADE CREDITORS BALANCE. SUBSEQUEN T TO THE FILING OF CONFIRMATION LETTERS, THE ASSESSING OFFICER HAS CAU SED ENQUIRIES THROUGH INSPECTOR OF INCOME-TAX. IT APPEARS THAT SOME OF THE CREDITORS HAVE EXPRESSED THAT THEY HAVE RECEIVED THE PAYMENTS IMME DIATELY AFTER THE SALE OF PADDY. THE ASSESSEE HAS EXPLAINED THAT IT HAS MAIN TAINED BOOKS OF ACCOUNTS AND THE FARMERS HAVE NOT MAINTAINED ANY BOOKS AND T HEY MIGHT HAVE MADE SUBMISSIONS TO I.T. INSPECTOR OUT OF MEMORY. ACCORDI NGLY, THE ASSESSEE HAS PLACED RELIANCE ON THE BOOKS OF ACCOUNT MAINTAINED BY IT. FURTHER, THE ASSESSEE HAS ALSO SUBMITTED THAT THE PURCHASES HAVE BEEN MADE AT THE FAG END OF THE YEAR. ALL THESE FACTS AVAILABLE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAVE NOT BEEN CONTROVERTED BY THE ASSESSIN G OFFICER. INSTEAD THE ASSESSING OFFICER HAS PLACED FULL RELIANCE ON THE REPORT GIVEN BY THE INSPECTOR OF INCOME-TAX. IT IS NOT KNOWN AS TO WHETHER THE INS PECTOR OF INCOME-TAX HAS RECORDED STATEMENTS FROM THE CREDITORS. IT IS A LSO NOT KNOWN AS TO WHETHER THE ASSESSEE WAS GIVEN ANY OPPORTUNITY TO C ROSS EXAMINE THE CREDITORS. IN FACT, IN THE ASSESSMENT ORDER, THE AS SESSING OFFICER DID NOT LIST OUT THE NAME OF THE CREDITORS WHO HAVE GIVEN SUCH S TATEMENT. UNDER THESE SET OF FACTS, I AM OF THE VIEW THAT THE ASSESSING OF FICER HAS MADE THIS ADDITION WITHOUT PROPER BASIS. FROM THE ORDER OF LD. CIT(A) , I NOTICE THAT LD. CIT(A) ITA NOS.152/VIZAG/2013 VARADA VENKATA PRABHAKARA RAO, CHALLAPALLI 4 HAS CONFIRMED THE ADDITION ONLY ON THE REASONING TH AT THERE IS CLOSE NEXUS BETWEEN THE FARMERS AND MILLERS, MEANING THEREBY, T HE LD. CIT(A) HAS ALSO NOT GIVEN PROPER REASONING FOR CONFIRMING THIS ADDI TION. IN MY VIEW, THE EXISTENCE OF CLOSE NEXUS CANNOT BE A GROUND TO CONF IRM THE ADDITION MADE U/S 69 OF THE ACT. I NOTICE THAT THE ASSESSEE HAS DISCH ARGED THE BURDEN PLACED UPON HIM U/S 69 OF THE ACT BY FILING CONFIRMATION L ETTERS OBTAINED FROM VARIOUS FARMERS. THE SAID BURDEN HAS NOT BEEN PROP ERLY DISPROVED BY THE ASSESSING OFFICER BY BRINGING SUFFICIENT MATERIAL O N RECORD. UNDER THESE SET OF FACTS, I DO NOT FIND ANY MERIT IN THE IMPUGNED ADDIT ION. ACCORDINGLY, I SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND DIR ECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE U/S 69 OF THE ACT. 9. NEXT ISSUE RELATES TO ADHOC DISALLOWANCE MADE FO R NON-MAINTENANCE OF BOOKS OF ACCOUNTS. BEFORE ME THE LD. A.R. COULD NO T FURNISH ANY MATERIAL IN ORDER TO COMPEL ME TO INTERFERE WITH THE ORDER PASS ED BY LD. CIT(A). ACCORDINGLY, I CONFIRM THE ORDER OF LD. CIT(A) ON T HIS ISSUE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. P RONOUNCED IN THE OPEN COURT ON 30 TH JULY, 2015 SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER VISAKHAPATNAM, DATED 30 TH JULY, 2015 VG/SPS COPY TO 1 VARADA VENKATA PRABHAKARA RAO, PROP: SRI LAKSHMI VEGNESWARA RICE & FLOUR MILL, VYSYA BAZAR, CHALLAPALLI 2 ITO WARD NO.1, MACHILIPATNAM 3 THE CIT, VIJAYAWADA 4 THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER ASST. REGISTRAR INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM