R Gopal Reddy and Co, Ramakrishnapur, Hyderabad V. ITO, Ward-1, Karimnagar, Karimnagar

ITA 1592/HYD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2203 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 25-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N SWAPNA
• Assessee Lawyers: S RAMA RAO
• Keywords: Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1592/HYD/2016 ASSESSMENT YEAR: 2007-08 R. GOPAL REDDY & CO., MANDAMARRI MANDAL, ADILABAD DIST. [PAN: AAKFR0424P] VS INCOME TAX OFFICER, WARD-1, MANCHERIAL, KARIMNAGAR RANGE, KARIMNAGAR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SMT. N. SWAPNA, DR DATE OF HEARING : 21-12-2017 DATE OF PRONOUNCEMENT : 29-12-2017 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)-2, HYDERABAD, D ATED 28-06-2016. THE ISSUES IN THIS APPEAL ARE WITH REFERE NCE TO ADDITION OF RS. 13 LAKHS BEING THE INTRODUCTION OF CAP ITAL BY THE PARTNERS AND DISALLOWANCE OF CERTAIN EXPENDITURE. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRACT AND ADMITTEDLY FORMED ON 04-04-2006 W .E.F. 01-04-2006. ON THAT DAY, ASSESSEE HAS INTRODUCED CAP ITAL TO THE EXTENT OF RS. 15 LAKHS, OUT OF WHICH AN AMOUNT OF RS. 2 LAKHS I.T.A. NO. 1592/HYD/2016 :- 2 - : PERTAINS TO THE MANAGING PARTNER WAS ACCEPTED AS GENUI NE. WITH REFERENCE TO BALANCE AMOUNT OF RS. 13 LAKHS, SINCE AS SESSEE COULD NOT FURNISH CONFIRMATION FROM THE PARTNERS, AO TREATED TH E SAME AS UN-EXPLAINED CASH CREDIT. IT WAS THE CONTENTION OF A SSESSEE THAT THESE WERE INTRODUCED BY THE PARTNERS, WHO ARE AGRICULT URISTS AND THAT CANNOT BE CONSIDERED AS INCOME AS THE SAME WAS I NTRODUCED ON THE VERY FIRST DAY OF THE FORMATION OF PARTNERSHIP. IT WAS ALSO EXPLAINED THAT ASSESSEE DID NOT DO BUSINESS IN THE LAT ER YEARS AND THERE WERE DISPUTES BETWEEN THE PARTNERS, HENCE THE CON FIRMATIONS COULD NOT BE FILED. AO TREATED THE AMOUNT AS UNEXPLAI NED. HE ALSO DISALLOWED AN AMOUNT OF RS. 60,000/- TOWARDS UN VOUCHED EXPENDITURE NOT VERIFIABLE. 2.1. BEFORE THE LD.CIT(A), ASSESSEE HAS RAISED VARIO US CONTENTIONS INCLUDING THAT INTRODUCTION OF CAPITAL ON THE VERY FIRS T DAY COULD NOT BE CONSIDERED AS INCOME AND RELIED ON VARIOUS CASE LAW AS STATED IN THE ORDER OF THE CIT(A). LD.CIT(A), HOWEVER, CONFIRMED THE ACTION OF AO AS ASSESSEE FAILED TO FURNISH ANY CONFIR MATION LETTERS BEFORE THE AUTHORITIES. THE OTHER ADDITION MADE BY AO W ITH REFERENCE TO DISALLOWANCE OF EXPENDITURE WHICH WAS NO T VOUCHED TO THE EXTENT OF RS. 60,000/- WAS CONFIRMED. HENCE THE P RESENT APPEAL. 3. ASSESSEE FILED ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION LETTERS FROM THE PARTNERS. ON RECEIPT OF THE ADDITIONAL EVIDENCE, LD.DR, SOUGHT A REPORT FROM AO, WHO VIDE HIS LETTER D T. 06-11-2017 REPORTED THAT THE ADDITIONAL EVIDENCE HAS NOT BEEN FURN ISHED BEFORE THE AUTHORITIES, INSPITE OF GIVING SUFFICIENT TIME AND FU RTHER, THERE ARE INCONSISTENCIES IN THE DOCUMENTS ENCLOSED IN SUPPO RT OF THE I.T.A. NO. 1592/HYD/2016 :- 3 - : PROPERTY HOLDING AND OBJECTED TO ADMISSIBILITY OF AD DITIONAL EVIDENCE. 4. LD. COUNSEL REITERATING THE SUBMISSIONS MADE AND TH E PRAYER MADE SUBMITTED THAT ASSESSEE WAS HAVING PROBLEMS WITH THE OTHER PARTNERS DUE TO CLOSURE OF THE FIRM AND NOW IS IN A PO SITION TO FURNISH THE CONFIRMATION LETTERS WHICH HAS FILED AS A DDITIONAL EVIDENCE WHICH CAN BE REFERRED TO THE AO FOR VERIFICA TION. IT WAS SUBMITTED THAT ALL THE OTHER PARTNERS ARE AGRICULTURISTS A ND THEY HAVE SOURCE AND THEREFORE, THE CREDIT SHOULD NOT BE DOU BTED. IT WAS FURTHER SUBMITTED THAT THERE IS NO DISPUTE WITH REFEREN CE TO IDENTITY AND GENUINENESS OF THE TRANSACTION AS THE AO HA S ACCEPTED THE CONSTITUTION OF PARTNERSHIP FIRM WITH ALL THE PERSO NS AND FURTHER ALLOWED THE INTEREST/REMUNERATION PAID AS THE C LAIMS WERE NOT DISALLOWED. IT WAS FURTHER SUBMITTED THAT THESE PARTNE RS ARE GENUINE PARTNERS AND THE CAPITAL WAS INTRODUCED ON THE V ERY FIRST DAY OF FORMATION OF THE PARTNERSHIP, HENCE, CANNOT BE TR EATED AS INCOME OF THE FIRM. 5. LD.DR RELYING ON THE REPORT OF THE AO SUBMITTED THAT THE SO CALLED CONFIRMATIONS COULD NOT BE ACCEPTED AND FURTHER THE GENUINENESS OF THE CREDITS HAVE NOT BEEN PROVED. LD.D R RELIED ON THE CO-ORDINATE BENCH DECISION IN THE CASE OF ACIT VS. M/S. PENNAR AQUA EXPORTS PVT. LTD., IN ITA NO. 1846/HYD/201 1 DT. 20- 12-2012 TO SUPPORT THAT INTRODUCTION OF SHARE CAPITAL C AN BE ASSESSED AS ASSESSEE FAILED TO PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE PARTIES. I.T.A. NO. 1592/HYD/2016 :- 4 - : 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IT IS TRU E THAT THE FIRM WAS CONSTITUTED BY 14 MEMBERS, OUT OF WHICH SHR I R. GOPAL REDDY IS AN INCOME TAX ASSESSEE. HENCE HIS INTRODUCTION ON THAT DAY WAS ACCEPTED BY THE AO, EVEN THOUGH THERE IS NO SP ECIFIC REFERENCE TO THAT. BALANCE OF THE CAPITAL INTRODUCED BY THE OTHER 13 MEMBERS AT RS. 1 LAKH EACH WAS CONSIDERED AS UNEXPL AINED CASH CREDIT. AS FAR AS THE IDENTITY OF THE PERSONS AND GE NUINENESS OF THE TRANSACTION IS CONCERNED, THESE TWO ARE ESTABLISHED AS THE AO DID NOT DISTURB THE STATUS OF THE FIRM AND ALSO ALLOWED THE I NTEREST OF PARTNERS CAPITALS PAID RS. 10,000/- PER RS. 1 LAKH AN D REMUNERATION ALSO AS LAID OUT TO THE WORKING PARTNERS. SINCE THESE PARTNERS HAVE CONTRIBUTED THE CAPITAL, THE IDENTITY AND G ENUINENESS ARE ESTABLISHED. THE ONLY ISSUE IS WHETHER THEY HAVE CREDITWORTHINESS TO INTRODUCE THE CAPITAL ON THE VERY F IRST DAY. IT WAS THE SUBMISSION THAT THERE WERE DISPUTES AS THE FIRM W ENT INTO LOSSES AND HENCE AT THE RELEVANT POINT OF TIME, ASSESSE E WAS NOT ABLE TO FURNISH THE CONFIRMATIONS OF CREDIT FROM THE PA RTNERS AND NOW IT IS IN A POSITION TO SUBSTANTIATE THE CLAIM. 6.1. CONSIDERING THE FACTS OF THE CASE AND REQUEST MAD E, WE ARE OF THE OPINION THAT THESE DOCUMENTS FURNISHED IN CONFIRMATI ON OF CREDITS REQUIRE VERIFICATION BY THE AO. KEEPING IN MIN D THE OBJECTIONS OF THE AO ALSO, IT IS NECESSARY THAT THE LETTE RS FILED SHOULD BE VERIFIED BY THE AO PROPERLY. IN VIEW OF THAT, WE ARE OF THE OPINION THAT THE ADDITIONAL EVIDENCE FILED BEFORE THIS F ORUM IS TO BE SENT TO AO FOR DUE EXAMINATION, FOR WHICH PURPOSE, THE ISSUE OF INTRODUCTION OF CAPITAL OF RS. 13 LAKHS IS RESTORED TO TH E FILE OF AO FOR FRESH EXAMINATION AND TO TAKE NECESSARY DECISION DEPENDING ON FACTS AND LAW. ASSESSEE SHOULD BE GIVEN DUE OPPORTU NITY IN THE I.T.A. NO. 1592/HYD/2016 :- 5 - : CONSEQUENTIAL PROCEEDINGS. THE GROUND PERTAINS TO THI S ISSUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. THE OTHER ISSUE WHICH IS AGITATED BY ASSESSEE IS T HE DISALLOWANCE OF EXPENDITURE DEBITED TO P&L A/C OF AN AMOUNT OF RS. 60,000/- DUE TO NON-MAINTENANCE OF PROPER VOUCHER S. SINCE ASSESSEE IS IN THE BUSINESS OF TRANSPORT CONTRACT, IT MAY NOT BE POSSIBLE TO TAKE PROPER VOUCHERS FOR EVERY AMOUNT SPE NT. HOWEVER, AO HAS SELECTED A FEW ITEMS AND THAT TOO, PROPORTIONATE EXPENDITURE HAS BEEN DISALLOWED. CONSIDERING THE NATUR E OF BUSINESS AND EXPENDITURE INVOLVED, WE ARE OF THE OPI NION THAT THE DISALLOWANCE OF RS. 60,000/- IS PROPER AND APPROPRI ATE ON THE FACTS OF THE CASE. IN VIEW OF THAT, THE GROUND PERTAINING TO T HIS IS REJECTED AND DISALLOWANCE MADE BY THE AO IS CONFIRME D. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 29 TH DECEMBER, 2017 TNMM I.T.A. NO. 1592/HYD/2016 :- 6 - : COPY TO : 1. R. GOPAL REDDY & CO., C/O. SRI S. RAMA RAO, ADVO CATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO . 9, HIMAYAT NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, MANCHERIAL, ADIL ABAD DIST., (PRESENTLY MANCHERIAL DIST). 3. CIT(APPEALS)-2, HYDERABAD. 4. PR.CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.