Income Tax Officer, Ward-9(3), Hyderabad V. Shri Pavan Kumar Agarwal, Hyderabad

ITA 1673/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82263 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 03-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Keywords: Unexplained investment
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1673/HYD/2013 ASSESSMENT YEAR 2008-2009 ITO, WARD 9(3) HYDERABAD. VS. MR. PAVAN KUMAR AGARWAL HYDERABAD. (APPELLANT) (RESPONDENT) FOR REVENUE MR. KIRAN KATTA FOR ASSESSEE -NONE- DATE OF HEARING 24.07.2014 DATE OF PRONOUNCEMENT 06.08.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS REVENUE APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-VI, HYDERABAD DATED 23.08.2013 FOR THE ASSES SMENT YEAR 2008-09. THE ISSUE IN THIS APPEAL IS WITH REFE RENCE TO ADDITION MADE BY THE A.O. OF A SUM OF RS.27,85,840 AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE I.T. ACT, 1961. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND R ETAIL TRADER IN KITCHENWARE AND HOME APPLIANCES. HE FILED RETURN OF INCOME FOR A.Y. 2008-09 ADMITTING TOTAL INCOME OF R S.1,97,568. ASSESSING OFFICER CONDUCTED SURVEY PROCEEDINGS ON 1 9.02.2010 AND IMPOUNDED CERTAIN DOCUMENTS INCLUDING COPY OF T HE RETURN OF INCOME ITR-4 PREPARED ALONG WITH ITS COMP UTATION OF INCOME. THE AMOUNTS MENTIONED THEREIN IN THE ITR-4 DIFFERED FROM THE AMOUNTS ULTIMATELY FILED WITH THE RETURN O F INCOME 2 ITA.NO.1673/HYD/2013 MR. PAVAN KUMAR AGARWAL, HYDERABAD. WITH THE DEPARTMENT. A.O. NOTICED THAT CLOSING STOC K SHOWN IN THE IMPOUNDED ITR-4 WAS AN AMOUNT OF RS.47,65,601 W HEREAS, THE CLOSING STOCK SHOWN IN THE STATEMENTS FILED WIT H THE DEPARTMENT WAS ONLY RS.19,79,761. HE HAS ISSUED A S HOW CAUSE NOTICE TO THE ASSESSEE WHY THE DIFFERENCE IN THE CLOSING STOCK OF RS.27,85,840 SHOULD NOT BE BROUGHT TO TAX. IT WAS SUBMITTED BY THE ASSESSEE THAT ITR-4 WAS PREPARED F OR THE PURPOSE OF OBTAINING LOAN FROM ICICI BANK AND THERE WAS CORRESPONDING INCREASE IN SUNDRY CREDITORS TO THE S AME EXTENT. IT WAS MENTIONED THAT SUNDRY CREDITORS SHOWN WERE T O THE TUNE OF RS.40,66,751 WHEREAS, ACTUAL SUNDRY CREDITORS AR E ONLY RS.12,80,911. HOWEVER, A.O. DID NOT AGREE AND MADE ADDITION OF RS.27,75,840 AS UNEXPLAINED INVESTMENT IN THE CL OSING STOCK UNDER SECTION 69 OF THE I.T. ACT. ASSESSEE PREFERRE D APPEAL BEFORE THE LD. CIT(A) BUT DID NOT APPEAR BEFORE HIM . HOWEVER, LD. CIT(A), CONSIDERED THE SUBMISSIONS MADE ALONG W ITH THE APPEAL IN THE FACTS OF THE CASE AND OBSERVED THAT T HE DIFFERENCE BETWEEN THE INCREASE IN CLOSING STOCK IS SAME AS TH AT OF INCREASE IN SUNDRY CREDITORS. THEREFORE, ASSESSEE H AS VALID EXPLANATION IN THE FORM OF SUNDRY CREDITORS TO EXPL AIN THE INVESTMENT IN THE STOCK. HE, WHILE NOT APPROVING T HE ADDITION OF RS.27,85,840 HOWEVER, WAS OF THE OPINION THAT TH E ESTIMATION OF INCOME AT 8% ON THE ABOVE AMOUNT TREA TING IT AS SOLD WOULD MEET THE ENDS OF JUSTICE AND ACCORDINGLY , HE MODIFIED THE ADDITION AND PARTLY ALLOWED THE APPEAL . 3. WE ARE NOT SURE WHETHER ASSESSEE HAS PREFERRED ANY APPEAL ON THE SUSTAINING 8% PROFIT ON THE AMOUN T OF RS.27,85,840 BUT REVENUE HAS PREFERRED THE PRESENT APPEAL OBJECTING TO THE ACTION OF THE LD. CIT(A). 3 ITA.NO.1673/HYD/2013 MR. PAVAN KUMAR AGARWAL, HYDERABAD. 4. LD. D.R. HOWEVER, MADE SUBMISSIONS AND PLACED ON RECORD THE COPIES OF THE IMPOUNDED MATERIAL. 5. WE HAVE PERUSED THE ARGUMENTS AND DOCUMENTS PLACED ON RECORD. WE ARE NOT IN AGREEMENT WITH THE ORDER OF THE LD. CIT(A) FOR THE REASON THAT WITHOUT EXAMINING TH E SUNDRY CREDITORS, HE CANNOT COME TO A CONCLUSION THAT THE INCREASE IN STOCK WOULD GET EXPLAINED BY THE INCREASE IN SUNDRY CREDITORS. FURTHER, WHAT WE NOTICE IS THAT THE ASSESSEE IS MAI NTAINING BANK ACCOUNT WITH STANDARD CHARTERED BANK WHEREAS, THE EXPLANATION GIVEN BEFORE THE LD. CIT(A) WAS FOR OBT AINING A CREDIT LOAN IN ICICI BANK. WE ARE UNABLE TO UNDERST AND HOW ASSESSEE HAVING A BANK ACCOUNT WITH STANDARD CHARTE RED BANK, CAN GO TO ANOTHER BANK FOR OBTAINING A CREDIT LOAN. MOREOVER, BOTH THE DOCUMENTS HAVE BEEN SIGNED BY TH E SAME C.A. AND IT IS SURPRISING TO NOTE THAT THE DOCUMENT S ARE COMPLETE IN ALL RESPECTS INCLUDING FILLING OF ITR-V . GENERALLY IF STATEMENTS ARE PREPARED FOR THE PURPOSE OF OBTAININ G LOAN, THEY WILL NOT GO TO AN EXTENT OF FILLING UP THE INCOME T AX RETURN FORM ALSO. THIS INDICATES THAT THE IMPOUNDED DOCUMENTS M AY BE GENUINE AND ORIGINAL DOCUMENTS, WHICH WERE MODIFIED SO AS TO ADJUST THE RESULTS. IT IS ALSO NOTICED THAT LD. CIT (A) CONFIRMED THE ESTIMATION OF PROFIT AT 8% WITHOUT ANY BASIS. F IRST OF ALL, THESE DOCUMENTS WERE IMPOUNDED SUBSEQUENT TO THE CL OSURE OF THE ACCOUNTING YEAR I.E., SOME TIME IN FEBRUARY, 20 10. BOTH THE STATEMENTS INDICATE THAT THE STOCK WAS AVAILABL E AS ON 31 ST MARCH, 2008. WHEN THE STOCK WAS AVAILABLE AT THE EN D OF THE YEAR, HOW THE SAME CAN BE TREATED AS DEEMED SALE AN D PROFIT CAN BE ESTIMATED ON THAT, WAS NOT EXPLAINED BY THE LD. CIT(A). SINCE THE APPEAL WAS EXPARTE, LD. CIT(A) ALSO DID N OT HAVE THE BENEFIT OF EXAMINING THE BOOKS OF ACCOUNTS OR OBTAI NING 4 ITA.NO.1673/HYD/2013 MR. PAVAN KUMAR AGARWAL, HYDERABAD. EXPLANATION FROM THE ASSESSEE. FOR THESE REASONS, W E ARE UNABLE TO APPROVE THE ORDER OF THE LD. CIT(A). 6. ONE STATEMENT AVAILABLE IN THE STATEMENTS ENCLOSED TO THE ITR-IV IS ANNEXURE PART-A. THIS STA TEMENT WAS ALSO CERTIFIED BY THE SAME C.A. DATED 29.09.2008 AS PER WHICH THE GROSS TURNOVER WAS SHOWN AT RS.94,10,386 AND TH E GROSS PROFIT WAS SHOWN AT RS.10,73,791. HOWEVER, IN THE F INAL STATEMENTS FILED WITH THE DEPARTMENT, THE TURNOVER WAS SHOWN AT RS.1,21,96,226 WHEREAS, THE PROFIT WAS SHOWN AT THE SAME AMOUNT OF RS.10,73,791. THE DIFFERENCE BETWEEN THE SALES AS PER THE ANNEXURE PART-A AND THE SALES ACTUALLY DECL ARED (RS.1,21,96,226 - RS.94,10,386) WAS SAME FIGURE AS THAT OF RS.27,85,840. WHAT IT INDICATES IS THAT ASSESSEE HA S EARNED THE GROSS PROFIT OF RS.10,73,791 ON TURNOVER OF RS. 94,10,386 BUT REDUCED THE CLOSING STOCK BY THE AMOUNT OF RS.2 7,85,840 BY INCREASING THE SALES TO THE SAME EXTENT. CONSEQ UENTLY, THE SUNDRY CREDITORS WERE ALSO REDUCED TO THE SAME EXTE NT. THIS IS ONLY AN OBSERVATION AS THE DIFFERENCE IN THE SALES FIGURE IS ALSO EQUIVALENT TO THE DIFFERENCE IN CLOSING STOCK AND T HE SUNDRY CREDITORS. SINCE ASSESSEE HAS FILED VAT RETURNS AND MADE SUBMISSIONS THAT ASSESSEE VAT RETURNS WERE ALSO TAL LYING WITH THE BOOKS OF ACCOUNTS, IT IS NECESSARY THAT A.O. EX AMINED THE BOOKS OF ACCOUNTS AS TO HOW THE DISCREPANCIES AROSE IN VARIOUS STATEMENTS. MOREOVER, ESTIMATION OF INCOME AT 8% WI THOUT CONSIDERING THE ACTUAL PROFIT AND IN THE ABSENCE OF SALES OF THE STOCK ALSO IS NOT CORRECT. THEREFORE, WE SET ASIDE THE ORDERS OF THE LD. CIT(A) AND A.O. AND RESTORE THE MATTER TO THE FILE OF A.O. FOR RE-EXAMINATION OF THE WHOLE ISSUE AND COMP LETE THE ASSESSMENT AFTER EXAMINING THE RELEVANT STATEMENTS/ BOOKS OF ACCOUNTS AND IF REQUIRED BY EXAMINING THE C.A. WHO CERTIFIED 5 ITA.NO.1673/HYD/2013 MR. PAVAN KUMAR AGARWAL, HYDERABAD. THE ACCOUNTS. FOR THIS PURPOSE, THE REVENUE GROUNDS ARE CONSIDERED AS ALLOWED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.08.2014. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 06 TH AUGUST, 2014 VBP/- COPY TO 1. THE ITO, WARD 9(3), BLOCK NO.2D, INCOME TAX TOWE RS, A.C. GUARDS, HYDERABAD 500 004. 2. MR. PAVAN KUMAR AGARWAL, PROP. POOJA BARTHAN GHA R, 9-31, LALITHANAGAR, DILSUKHNAGAR, HYDERABAD. 3. CIT(A)-VI, HYDERABAD 4. CIT-VI, HYDERABAD 7. D.R. A BENCH, ITAT, HYDERABAD.