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ITA 158/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2915 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 12-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T CHAITANYA KUMAR
• Assessee Lawyers: K J RAO
• Keywords: Additional evidence; Corroborative evidences
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 255/HYD/12 ASST. YEAR: 2008-09 INCOME - TAX OFFICER, WARD 11 (2), HYDERABAD V/S. SRI N. NARASIMHA REDDY, HYDERABAD. (PAN ABKPN8808N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. J. RAO RESPONDENT BY : SHRI T. CHAITANYA KUMAR DATE OF HEARING 08 - 05 - 213 DATE OF PRONOUNCEMENT 22 - 0 5 - 2013 ORDER PER SAKTIJIT OEY, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 08-02-2011 OF CIT(A)-VI, HYDERABAD PASSED IN APPEAL NO.0703/08-09/CIT(A)-VI/2010-11 PERTAINING TO THE A SSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: '1. THE ORDER OF THE CIT( A) IS ERRONEOUS IN LA WAN D ON FACTS. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAD RIGHTLY ADDED BACK THE DIFFER ENCE IN RECEIPTS AS PER THE IMPOUNDED MATERIAL AND THE RECE IPTS SHOWN IN THE RETURN OF INCOME, AS SUPPRESSION OF CONSTRUCTION RECEIPTS. 3. THE CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MAD E BY THE ASSESSING OFFICER AS THE ASSESSEE FAILED TO DIS CHARGE HIS DUTY OF RECONCILING THE FIGURES FOUND IN THE IM POUNDED 2 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY MATERIAL VIS-A-VIS THE REGULAR BOOKS OF ACCOUNT AS NO PARTY WISE LEDGERS WERE MAINTAINED BY THE ASSESSEE. 4. THE CIT(A) ERRED IN COMING TO A CONCLUSION THAT THE BOOKS OF ACCOUNT AND THE OTHER DOCUMENTS IMPOUNDED DID NOT REVEAL ANY EXCESS RECEIPTS OTHER THAN THOSE REF LECTED IN REGULAR BOOKS. 5. THE CIT(A) ERRED IN HOLDING THAT THERE ARE NO CORROBORATIVE EVIDENCES TO COME TO A CONCLUSION THA T THE TRIAL BALANCE FOUND DURING THE SURVEY PROCEEDINGS REFLECTED THE ACTUAL STATE OF AFFAIRS. 6. THE CIT(A) OUGHT TO HAVE REJECTED THE ASSESSEE'S CONTENTION AS THE ONUS LIES ON THE ASSESSEE TO EXPL AIN THE CONTENTS IN THE ATERIAL FOUND AND IMPOUNDED FROM HI S BUSINESS PREMISES.' 3. BRIEFLY THE FACTS ARE THE ASSESSEE IS AN INDIVI DUAL, DERIVING INCOME FROM REAL ESTATE AND POULTRY FARMING UNDER T HE NAME AND STYLE OF M/S SUPRABHAT REAL ESTATES AND DEVELOP ERS AND M/S SINDU POULTRY FARM, RESPECTIVELY. HE FILED HIS RETURN OF INCOME FOR THE AY 2005-06 ON 01/11/2005, DECLARING TOTAL INCOME OF RS. 14,14,766/- FROM BUSINESS AND RS. 1,9 2,400 FROM AGRICULTURE. IN COURSE OF A SURVEY U/S 133A CA RRIED OUT IN THE ASSESSEE'S BUSINESS PREMISES, A TRIAL BALANCE A S ON 31/03/2005 WAS FOUND. COMPARISON OF THE SAID TRIAL BALANCE WITH THE STATEMENTS ENCLOSED TO RETURN REVEALED VAR IATION TO THE EXTENT OF RS. 45,63,311/- UNDER THE HEAD 'BUILD ING CONSTRUCTION COLLECTION'. IN COURSE OF THE ASSESSME NT PROCEEDING, WHEN THE ASSESSING OFFICER ASKED THE AS SESSEE TO EXPLAIN THE REASONS FOR SUCH DIFFERENCE, THE ASSESS EE STATED THAT THE TRIAL BALANCE WAS NOT A FINAL ONE AND THE SAME MIGHT HAVE BEEN PREPARED BY THE ACCOUNTANT FOR HIS OWN PU RPOSE. THE ACTUAL PICTURE IS DEPICTED IN THE AUDITED BALAN CE SHEET WHICH IS FILED WITH THE RETURN. IT WAS STATED THAT THE TRIAL 3 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY BALANCE FOUND DURING SURVEY IS A COMPUTER PRINTOUT WITHOUT BEARING ANY SIGNATURE AND, HENCE, IT HAS NO EVIDENT IARY VALUE FOR THE PURPOSE OF COMPUTATION OF INCOME WHEREIN TH E ADVANCES RECEIVED IS ALSO SHOWN AS INCOME AGAINST SALE OF PLOTS WHICH IS INCORRECT. 4. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT MAJOR ITEMS APPEARING IN THE TRIAL BALANCE FOUND WERE MATCHING WITH THE STATEMENT ENCLOSED TO THE RETURN, BUT THE WORKING S HEETS IN WHICH AMOUNTS WERE SHOWN TO HAVE BEEN RECEIVED TOWARDS SA LE OF LAND AND COST OF CONSTRUCTION PARTLY IN CASH AND PARTLY THROUGH BANK LOANS NEEDS TO BE ANALYSED AND RECONCILED WITH THE STATEMENTS FILED. SINCE THE ASSESSEE DID NOT RECONCILE THE SAI D AMOUNTS, THE ASSESSING OFFICER ADDED THE SUPPRESSED RECEIPTS TO THE EXTENT OF RS. 45,63,331/- TO THE INCOME RETURNED ON THE BASIS OF THE RECEIPT SHOWN IN THE TRIAL BALANCE. 5. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) FILED WRITTEN SUBMISS IONS, WHICH WERE REPRODUCED BY THE CIT(A) IN HIS IMPUGNED ORDER AT 5 TO 8 PAGES AND THE SAME WERE EXTRACTED BELOW: '1. THE TRIAL BALANCE DISCOVERED IN COURSE OF SURVEY WAS NOT A FINAL ONE. THE SAME HAS BEEN PREPARED BY THE ACCOUNTANT BEFORE FINALIZATION OF ACCOUNTS. QUIET LIKELY, THE ACCOUNTANT MIGHT HAVE TAKEN INTO ACCOUN T THE RECEIPTS RELATABLE TO SOME CUSTOMERS WHO APPROACHED THE APPELLANT FOR PURCHASE OF HOUSE BUT LATER ON WITHDREW FROM THE DEAL RESULTING IN CANCELLATION OF THE DEAL. SUCH TYPE OF TRANSACTIONS NEVER MATERIALIZED. SINCE THIS WAS A ORAL COMMITMEN T BY THE BUYERS, THE AMOUNT ATTRIBUTABLE TO THE SAME WAS EXCLUDED AT THE TIME OF FINALIZATION OF ACCOUNT. THE SAME DOES NOT BEAR ANY SIGNATURE OF ANY PERSON. IT IS 4 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY THEREFORE REQUESTED NOT TO ATTACH ANY EVIDENTIARY V ALUE TO THE SAME. 2. IT MAY KINDLY BE SEEN THAT THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS IMPOUNDED BY THE DEPARTMENT DO NOT REVEAL ANY EXCESS RECEIPT OTHER THAN WHAT IS REFLECTED IN THE REGULAR BOOKS. THUS THERE IS NO CORROBORATIVE EVIDENCE TO COME TO A CONCLUSION THAT THE TRIAL BALANCE REFLECTED THE ACTUAL STATE OF AFFAIRS . THEREFORE THE ENTRIES MADE IN THE TRIAL BALANCE MAY BE IGNORED. 3. WITHOUT PREJUDICE TO THE SUBMISSIONS ABOVE THAT THE ENTRIES MADE IN THE TRIAL BALANCE SHOULD BE IGNORED , IT IS SUBMITTED THAT THE GROSS RECEIPT CANNOT BE THE INCO ME OF THE APPELLANT. AT BEST THE ASSESSING OFFICER SHOULD HAVE ADOPTED A PERCENTAGE OF THE GROSS RECEIPT AS THE IN COME OF THE APPELLANT. ' 6. THE CIT(A) NOTED THAT SINCE THE ASSESSEE HAD FI LED ADDITIONAL EVIDENCES IN SUPPORT OF HIS CONTENTIONS DURING THE APPEAL PROCEEDINGS, A REMAND REPORT WAS CALLED FOR FROM THE ASSESSING OFFICER. 7. IN THE REMAND REPORT, THE ASSESSING OFFICER HAD MENTIONED THAT SINCE THE ASSESSEE HAD FAILED TO DIS CHARGE HIS DUTY OF RECONCILING THE FIGURES FOUND IN THE IMPOUN DED MATERIAL VIS-A-VIS BOOKS OF ACCOUNT AND ALSO IN THE ABSENCE OF ANY REASONABLE EXPLANATION, THE EXCESS OF RECEIPTS AS PER THE IMPOUNDED MATERIAL OVER AND ABOVE THE RECEIPTS SHOW N IN THE BOOKS OF ACCOUNT, AMOUNTING TO RS. 45,63,311/-, WAS TREATED AS SUPPRESSED CONSTRUCTION RECEIPTS AND WERE RIGHTL Y ADDED BACK. THE AO FURTHER STATED IN HIS REMAND REPORT TH AT SINCE THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE DULY AUDI TED AND THE NET PROFIT WAS ARRIVED AT AFTER DEDUCTING ALL T HE EXPENSES, NO FURTHER DEDUCTION OF EXPENDITURE WAS ALLOWABLE A GAINST THE SUPPRESSED RECEIPTS AND HENCE REJECTED THE ASSESSEE 'S PLEA 5 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY THAT CERTAIN PERCENTAGE OF PROFIT BE ESTIMATED ON T HE GROSS RECEIPTS, INSTEAD OF CHARGING THE ENTIRE GROSS RECE IPTS TO TAX. 8. THE AO WHILE FORWARDING THE REMAND REPORT REQUE STED TO UPHOLD THE ADDITION MADE ON THIS COUNT. 9. WHEN THIS REMAND REPORT WAS PUT TO THE ASSESSEE , THE ASSESSEE IN HIS WRITTEN SUBMISSIONS STATED THAT THE TRIAL BALANCE DISCOVERED DURING THE COURSE OF SURVEY WAS NOT A FINAL ONE; THAT THE SAME WAS PREPARED BY THE ACCOUN TANT BEFORE FINALIZATION OF ACCOUNT; THAT THE TRIAL' BAL ANCE FOUND IN THE SURVEY DOES NOT BEAR ANY SIGNATURE OF ANY PE RSON AND HENCE REQUESTED NOT TO ATTACH ANY EVIDENTIARY VALUE TO THE SAME. THE APPELLANT FURTHER STATED THAT EXCEPT THE NOTINGS IN THE TRIAL BALANCE, NO OTHER SUPPORTING MATERIAL LIKE ACTUAL SALE, RECEIPT OF AMOUNT TOWARDS SUCH ADDITIONAL SAL ES WERE UNEARTHED BY THE DEPARTMENT DURING THE COURSE OF SU RVEY OPERATIONS U/S. 133A. THE ASSESSEE ALSO STATED THAT THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS IMPOUNDED BY T HE DEPARTMENT DO NOT REVEAL ANY EXCESS RECEIPT OTHER T HAN WHAT IS REFLECTED IN THE REGULAR BOOKS AND PLEADED THAT THERE IS NO CORROBORATIVE EVIDENCE TO COME TO A CONCLUSIO N THAT THE TRIAL BALANCE REFLECTED THE ACTUAL STATE OF AFF AIRS. THE ASSESSEE FINALLY REQUESTED THAT IN THE ABSENCE OF A NY SUPPORTING DOCUMENT, THE ENTRIES MADE IN THE TRIAL BALANCE MAY BE IGNORED. THE ASSESSEE ALSO OBJECTED FOR ADOP TING THE NET PROFIT RATE, ON THE ALLEGED SUPPRESSION OF CONS TRUCTION RECEIPTS, SINCE THERE WERE NO ADDITIONAL RECEIPTS W HEN COMPARED TO TRIAL BALANCE IMPOUNDED AND STATEMENTS FILED ALONG WITH THE RETURN OF INCOME, EXCEPT REGROUPING MADE FOR PRESENTING CORRECT STATE OF AFFAIRS OF THE BUSINESS . 6 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY 10. THE REPLY OF THE ASSESSEE TO THE REMAND REPORT WAS FORWARDED TO THE AO FOR HIS COMMENTS. THE AO, AFTER VERIFYING THE MATERIAL IMPOUNDED AND CONSIDERING TH E FACTS OF THE CASE, IN HIS REPORT DT. 21-01-2011, HAS STATED THAT THE APPEAL MAY BE DISPOSED ON MERITS. 11. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, MATERIAL AVAILABLE ON RECORD AND REMAND REPORT SUBM ITTED BY THE ASSESSING OFFICER, THE CIT(A) DELETED THE ADDIT ION OF RS. 45,63,311/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SUPPRESSED CONTRACT RECEIPTS BY OBSERVING AS UNDER: '12. RETURN OF INCOME WAS FILED ON 01-11-2005 FOR T HE AY 2005-06 ALONG WITH AUDITED REPORT / STATEMENTS. SURVEY WAS CONDUCTED U/S. 133A IN THE BUSINESS PREMISES OF THE APPELLANT ON 21-03-2006, IE., AFTER FILING OF THE RETURN OF INCOME. ON THE BASIS OF TRI AL BALANCE AS ON 31-03-2005 FOUND DURING THE COURSE OF SURVEY U/S. 133A OF THE IT ACT, ADDITION WAS MADE. THE PLEA OF THE APPELLANT BEFORE THE AO IS THAT THE AMOUNT OF RS. 45,63,311 WAS SHOWN IN THE BALANCE SHEET TOWARDS 'ADVANCES RECEIVED'. THOUGH THE FACT WAS BROUGHT TO THE NOTICE OF THE AO DURING THE COUR SE OF ASSESSMENT, THE AO WAS NOT MADE ANY ATTEMPT TO ENQUIRE INTO THE CONTENTIONS OF THE APPELLANT, NOR HE HAS RAISED ANY DOUBTS ON THE AUDITED ACCOUNTS OF TH E APPELLANT IN THIS REGARD. THE APPELLANT HAS EXPLAIN ED BEFORE ME THAT THERE ARE NO ADDITIONAL RECEIPTS, AND WHATEVER AMOUNTS RECEIVED AS PER THE TRIAL BALANCE ARE EITHER REFLECTED IN THE TURNOVER IN THE P&L ACC OUNT OR ADVANCES RECEIVED IN THE BALANCE SHEET. FURTHER, THE AD HAS FAILED TO BRING ANY MATERIAL ON RECORD T O SHOW SUPPRESSION OF CONSTRUCTION RECEIPTS EXCEPT DEPENDING ON THE TRIAL BALANCE WHICH IS NOT A FINAL ACCOUNT AND WHICH HAS NO EVIDENTIARY VALUE. THEREFORE, ADDITION MADE MERELY ON THE BASIS OF LOO SE SHEETS / TRIAL BALANCE ETC., FOUND AT THE TIME OF SURVEY IS NOT JUSTIFIED. IN THIS CASE, I RELY ON THE JUDIC IAL DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF C BI VS. V. C. SHUKLA, 1998 AIR VOL.3 SC 410, WHEREIN IT 7 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY WAS HELD THAT ENTRIES IN THE LOOSE SHEETS MAY NOT H AVE ANY EVIDENCE VALUE. TAKING CLUE FROM THE DECISION' I AM OF THE VIEW THAT THE TRIAL BALANCE FOUND DURING THE COURSE OF SURVEY MAY NOT BE SUFFICIENT FOR THE AD T O PROVE THAT THE ENTRIES REPRESENT UNDISCLOSED INCOME OF THE APPELLANT. 13. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED VI EW THAT THE ADDITION OF RS. 45,63,311 MADE IS WITHOUT PROPER BASIS AND THE SAME DESERVES TO BE DELETED. ACCORDINGLY, THE ADDITION OF RS. 45,63,311/-, IS DELETED.' 12. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US. 13. THE LEARNED OR CONTENDED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICER HAD RIGHTLY ADDED BACK THE DIFFERENCE IN RECEIPTS AS PER THE IMPOUNDED MATERIA L AND THE RECEIPTS SHOWN IN THE RETURN OF INCOME, AS SUPPRESS ION OF CONSTRUCTION RECEIPTS. THE LEARNED OR SUBMITTED THA T THE ADDITION MADE BY THE ASSESSING OFFICER AS THE ASSESSEE FAILE D TO DISCHARGE HIS DUTY OF RECONCILING THE FIGURES FOUND IN THE IM POUNDED MATERIAL VIS-A-VIS THE REGULAR BOOKS OF ACCOUNT AS NO PARTY WISE LEDGERS WERE MAINTAINED BY THE ASSESSEE AND THE CIT (A) ERRED IN COMING TO A CONCLUSION THAT THE BOOKS OF ACCOUNT AN D THE OTHER DOCUMENTS IMPOUNDED DID NOT REVEAL ANY EXCESS RECEI PTS OTHER THAN THOSE REFLECTED IN REGULAR BOOKS. FURTHER, THE LEARNED AR SUBMITTED THAT CIT(A) ERRED IN HOLDING THAT THERE A RE NO CORROBORATIVE EVIDENCES TO COME TO A CONCLUSION THA T THE TRIAL BALANCE FOUND DURING THE SURVEY PROCEEDINGS REFLECT ED THE ACTUAL STATE OF AFFAIRS. 14. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY RELIED UPON THE ORDER OF THE CIT(A). HE SU BMITTED THAT 8 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY APART FROM THE TRIAL BALANCE NO OTHER MATERIAL IS I N POSSESSION OF THE DEPARTMENT TO PROVE THE FACT OF SUPPRESSED RECE IPTS. HE FURTHER SUBMITTED THAT NO EVIDENTIARY VALUE CAN BE ATTACHED TO THE UNSIGNED AND UNDATED TRIAL BALANCE. 15. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 16. WE FIND THAT THE ASSESSING OFFICER MADE THE AD DITION OF RS. 45,63,331/- ON ACCOUNT OF SUPPRESSED CONTRACT RECEIPTS BASED ON THE TRIAL BALANCE FOUND IN THE COURSE OF SURVEY U/S 133A. ON PERUSAL OF THE ASSESSMENT ORDER IT IS FURTHER EVIDE NT THAT APART FROM THE TRIAL BALANCE THERE IS NO OTHER MATERIAL O N RECORD BEFORE THE ASSESSING OFFICER TO INDICATE THAT THE ASSESSEE HAD ACTUALLY RECEIVED THE AMOUNT OF RS. 45,63,311 TOWARDS THE AL LEGED CONSTRUCTION RECEIPTS. THE ASSESSING OFFICER HAD NE ITHER CONDUCTED ANY ENQUIRY NOR MADE ANY EFFORT TO ESTABL ISH THE FACT BY BRINGING MATERIAL ON RECORD THAT THE AMOUNT SHOW N IN THE TRIAL BALANCE WAS ACTUALLY RECEIVED BY THE ASSESSEE. WHEN THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT AN D HAS SUBMITTED AUDITED STATEMENT OF ACCOUNTS THE SAME CA NNOT BE DISBELIEVED WITHOUT BRINGING COGENT EVIDENCE ON REC ORD TO PROVE THEM WRONG. NO ADDITION CAN BE MADE MERELY ON THE B ASIS OF THE TRIAL BALANCE WHICH BY ITS VERY NATURE IS NOT FINAL . THAT BESIDES THE TRIAL BALANCE FOUND DURING THE SURVEY BEING UNS IGNED ONE NO IMPORTANCE CAN BE ATTACHED TO SUCH A DOCUMENT WHEN THE ASSESSEE HAS SUBMITTED AUDITED P&L ACCOUNT AND BALA NCE SHEET, WHICH CANNOT BE DISCARDED UNLESS THERE IS STRONG EV IDENCE TO PROVE THEM WRONG. AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASO N TO INTERFERE IN THE ORDER OF THE CITCA) IN DELETING THE ADDITION OF RS. 9 ITA NO. 975/H/11 SRI N. NARASIMHA REDDY 45,63,311/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SUPPRESSED RECEIPTS AND, THEREFORE, THE ORDER OF TH E CITCA) IS HEREBY UPHELD ON THIS COUNT. ACCORDINGLY, THE GROUN DS RAISED BY THE REVENUE ARE DISMISSED. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 22/05/2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DTD. 22 ND MAY, 2013. KV COPY FORWARDED TO: 1. INCOME TAX OFFICER, WARD - 11(2), 6 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. SRI NO. NARSIMHA REDDY, 1-9-669/A/1, KANHAYALAL COMPLEX, VIDHA NAGAR, HYDERABAD 3. CIT (A)-VI, HYDERABAD. 4. CIT-V, HYDERABAD 5 DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD.