ACIT, Circle-1(1), Tirupathi V. Sri K. Reddappa, Madanapalle

ITA 1694/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66147 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 30-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPTA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Unexplained investment
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.1694/HYD/2011 : ASSESSMENT YEAR 2003 -04 ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), TIRUPATI (APPELLANT) V/S SHRI K.REDDAPPA, MADANAPALLE. (PAN - AHTPK 6522 F ) (RESPONDENT) APPELLANT BY : SMT. AMISHA S.GUPTA RESPONDENT BY : SHRI K.A.SAIPRASAD DATE OF HEARING 08.08.2012 DATE OF PRONOUNCEMENT 10. 0 8.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS), GUNTUR DAT ED 28.3.2011 FOR THE ASSESSMENT YEAR 2003-04. 2. EFFECTIVE GROUNDS OF THE REVENUE IN THIS APPEAL READ AS FOLLOWS- 1. .. 2. THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS) GUNTUR ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE WITH REGARD TO THE TRADE DEBTORS OF RS.11,83,490/- WITHOUT ANY EVIDENCE TO T HE FACT THAT THEY ARE ONLY FRIENDS AND RELATIVES. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) ON ONE H AND HAS SUSTAINED THE ADDITION OF UNDISCLOSED TRADING OF SA REES AND ON THE OTHER HAND HAS NOT CONSIDERED THE TRADE DEBTORS REL ATED TO THE BUSINESS. 4. ITA NO.1694/HYD/2011 SHRI K.REDDAPPA, MADANAPALLE. 2 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF SALE OF SILK SAREES. IN THE COURSE OF A SURVEY UNDER S.133A OF THE ACT CONDUCTED IN THE BUSINESS P REMISES OF THE ASSESSEE ON 23.9.2009, SOME INCRIMINATING MATERIAL WAS FOUND. AS PER THE IMPOUNDED MATERIAL, BEING ANNEXURE A/KR/17, AND AS PER THE BOOKS AVAILABLE IN THE BUSINESS PREMISES, THE SALE OF SIL K SAREES WAS WORKED OUT TRADER-WISE AT RS.27,59,805. IN RESPONSE TO THE NO TICE UNDER S.148 OF THE ACT, ASSESSEE FILED RETURN OF INCOME FOR THE AS SESSMENT YEAR 2003-04, ADMITTING ONLY WEAVING AND TRADING OF SILK SAREES A T RS.48,950 AND NOT DISCLOSED THE INCOME FROM TRADING IN SILK SAREES. THE ASSESSING OFFICER ESTIMATED THE NET PROFIT AT 5% OF TRADING OF SAREES ON THE TRADING TURNOVER OF RS.27,59,805, WHICH WORKED OUT TO RS.1, 37,990. FROM THIS, THE ADMITTED INCOME OF RS.48,950 WAS DISCOUNTED AND THE BALANCE AMOUNT OF RS.89,040 WAS ADDED TO THE TOTAL INCOME. THE ASSESSING OFFICER MADE FURTHER ADDITION OF AN AMOUNT OF RS.11 ,83,490 ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE FOR PURCHASE OF SILK SA REES, WORKING OUT THE SAME AS FOLLOWS- TRADE DEBTORS WORK OUT TO AS ON 31/03/2003 RS.13, 19,430/- LESS: TRADE CREDITOR (SHRI M.SIDDAPPA) RS. 46,90 0/- BALANCE RS.12,72,530/- LESS: NET PROFIT ALREADY ADDED TO THE TOTAL INCOME AS DISCUSSED ABOVE RS. 89,040/- NET UNDISCLOSED TRADE DEBTORS RS.11,83,490 THE ASSESSING OFFICER ACCORDINGLY COMPLETED THE ASS ESSMENT, WITH THE ABOVE TWO ADDITIONS OF RS.89,040 AND RS.11,83,490, ON A TOTAL INCOME OF RS.13,21,480, VIDE ORDER OF ASSESSMENT DATED 29.12 .2009 PASSED UNDER S.143(3) READ WITH S.147 OF THE ACT. 4. ON APPEAL, THE CIT(A), THOUGH CONFIRMED THE ADD ITION MADE TO THE INCOME, BY ESTIMATING THE PROFIT EARNED BY T HE ASSESSEE BY TRADING ITA NO.1694/HYD/2011 SHRI K.REDDAPPA, MADANAPALLE. 3 IN SAREES, DELETED THE OTHER ADDITION OF RS.11,83,4 90 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN THE PURCHASE OF SAREES, OBSERVING THAT WHEN PROFIT IS ESTIMATED ON TURNOVER (NOT BELONGING TO THE APPELLANT), SO AS TO PLUG PROBABLE LEAKAGE OF INCOME, AGAIN ADDITION ON ACCOUNT OF DEBTORS IS NOT WARRAN TED. 5. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A) , REVENUE IS IN APPEAL BEFORE US. 6. LEARNED DEPARTMENTAL REPRESENTATIVE, STRONGLY S UPPORTING THE ORDER OF ASSESSMENT , SUBMITTED THAT THE CIT(A) IS NOT JUSTIFIED THE ADDITION OF RS.11,83,490 MADE BY THE ASSESSING OFFI CER. 7. PER CONTRA, LEARNED COUNSEL FOR THE ASSESSEE ST RONGLY SUPPORTED THE IMPUGNED ORDER OF THE CIT(A) AND SUBM ITTED THAT WHEN THE INCOME OF THE ASSESSEE FROM BUSINESS IS DETERMINED BY RESORTING TO ESTIMATION OF PROFIT AS A PERCENTAGE OF THE TURNOVE ER , THERE IS NO SCOPE FOR ANY ADDITION. 8. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED OR DERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON R ECORD. WHEN THE INCOME OF THE ASSESSEE FROM BUSINESS IS ESTIMATED A S A PERCENTAGE OF THE TURNOVER, IN OUR OPINION, THE ADDITION MADE ON THAT BASIS TAKES CARE OF EVERY ITEM OF INCOME OR EXPENDITURE UNDER THAT SOUR CE, AND NO SEPARATE ADDITION UNDER THAT HEAD CAN BE MADE SEPARATELY. W E ARE FORTIFIED IN THIS BEHALF BY THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF INDWELL CONSTRUCTIONS (232 ITR 776), WHEREIN IT HAS BEEN HELD, VIDE HEAD NOTE ON PAGE 776 OF THE REPORTS (232 ITR) AS FOLLOW S- THE PATTERN OF ASSESSMENT UNDER THE INCOM E-TAX ACT, 1961, IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTE D IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTION S 30 TO ITA NO.1694/HYD/2011 SHRI K.REDDAPPA, MADANAPALLE. 4 43D OF THE ACT. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THA T THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER S ECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLE TE, THE INCOM E-TAX OFFICER MAY REJECT THESE BOOKS AND ESTIMATE T HE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ES TIMATE IS MADE, IT IS IN SUBSTITUTION OF THE INCOME THAT I S TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECTION 29 A RE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS WILL ALSO MEAN THAT THE EM BARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. WHEN THE BOOKS OF ACCOUNT HAVE BEEN REJECTED, THE R EVENUE CANNOT RELY ON THE SAME BOOKS FOR ADDITION OF AN E XACT ITEM (OF EXPENDITURE ) IN THE PROFIT AND LOSS ACCOUNT. IN THE ABSENCE OF ANY DECISION TO THE CONTRARY BROU GHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT NOTED ABOVE, WE FIND NO INFIRMITY IN THE VIEW TAKEN BY THE CIT(A) IN THE IMPUGNED ORDER. WE ACCORDINGLY UPHOLD THE SAME AND CONSEQUENTLY, THE GROUNDS OF THE REVENUE IN THIS APPEAL ARE DISMISSED . 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10.8.2012 SD/- SD/- ( ASHA VIJAYARAGHAVAN) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 10 TH AUGUST, 2012 COPY FORWARDED TO: 1. SHRI K.REDDAPPA, PROP. SWARNA SIL K HOUSE, KADIRI RAOD, NEERUGATTU VARI PALLE, MADANAPALLE. ITA NO.1694/HYD/2011 SHRI K.REDDAPPA, MADANAPALLE. 5 2. 3. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 1(1),TIRUPATI. COMMISSIONER OF INCOME - TAX(APPEALS), GUNTUR 4. COMMISSIONER OF INCOME-TAX , TIRUAPTI. 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.