M/s V.R.Bar & Restaurant, Hyderabad V. ITO., Ward-8(3), Hyderabad, Hyderabad

ITA 1744/HYD/2014

• Counselvise Citation: 174422514 RSA 2014
• Duration Of Justice: 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 14-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Income from undisclosed sources; Agreed addition
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1744/HYD/2014 ASSESSMENT YEAR 2010-2011 M/S. V.R. BAR & RESTAURANT, HYDERABAD. PAN AADFV7852Q VS. THE INCOME TAX OFFICER, WARD 8(3) HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. T. CHAITANYA KUMAR FOR REVENUE : MR. RAJAT MITRA DATE OF HEARING : 23.03.2015 DATE OF PRONOUNCEMENT : 31.03.2015 ORDER PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY ASSESSEE IS AGAINST THE ORDER OF L D. CIT(A)-III, HYDERABAD DATED 20 TH SEPTEMBER, 2014. 2. BRIEFLY STATED, ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF RUNNING A BAR AND RESTAURANT AND FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,64,647, AF TER CLAIMING INTEREST ON CAPITAL AT RS.3,34,138 AND REMUNERATION TO ITS PARTNERS AT RS.2,32,000. THERE WERE SURVEY PROCEEDI NGS IN ASSESSEES BUSINESS PREMISES ON 08.02.2010 AND IN T HE COURSE OF SURVEY, STATEMENT WAS RECORDED FROM ONE OF THE P ARTNERS, WHO ADMITTED NET INCOME AT 5% ON THE SALES AND ALSO AMOUNT OF RS. 24LAKHS TO SETTLE AND TO PURCHASE PEACE W ITH THE DEPARTMENT. THE A.O. AFTER REJECTING THE BOOKS OF ACCOUNTS IN THE ASSESSMENT ESTIMATED THE SALE OF EMPTY BOTTLES AT RS.50,000 AS AGAINST RS.32,945 SHOWN BY THE ASSESSE E IN P & 2 ITA.NO.1744/HYD/2014 M/S. V.R. BAR & RESTAURANT, HYDERABAD L ACCOUNT. ON FOOD SALES OF RS.1,96,400 AO ESTIMAT ED PROFIT AT 20% AND AN AMOUNT OF RS.3,92,800 WAS CONSIDERED AS PROFIT FROM THE FOOD BUSINESS. OUT OF THE STOCK PUT TO SAL E IN LIQUOR BUSINESS OF RS.67,82,480, A.O. ESTIMATED THE PROFIT AT 5%. INSTEAD OF CONSIDERING THE AMOUNT OF RS.3,39,124, H E HAS CONSIDERED IN THE ORDER AT RS.33,91,024, BUT WHILE MAKING ADDITION IN THE COMPUTATION AT RS.3,91,024. FURTHER , ON THE BASIS OF THE STATEMENT ON THE DAY OF SURVEY, A.O. A LSO BROUGHT AN AMOUNT OF RS.24 LAKHS AS ADMITTED INCOME. IN THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE ACCEPTED ESTIMATIO N OF INCOME AT 5%, BUT WITHDREW THE ADMISSION OF RS.24 L AKHS VIDE LETTER DATED NIL STATED TO HAVE BEEN FILED BEFORE T HE ITO, WARD 8(3). 3. THE LD. CIT(A) IN APPEAL, HOWEVER REJECTED THE APPEAL ON THE REASON THAT APPEAL DOES NOT LIE AGAIN ST AN ASSESSMENT RELATING TO ADDITION WHERE THE ASSESSMEN T IN THAT REGARD WAS MADE ON AGREED BASIS. LD. CIT(A) TOOK NO TE OF VARIOUS DECISIONS ON THE ISSUE AND AFTER ANALYZING, VIDE PARAS 4 AND 5 CAME TO THE CONCLUSION THAT APPEAL DOES NOT LIE WHERE ASSESSMENT WAS MADE ON AGREED BASIS, APPLYING RATIO OF DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF STE RLING MACHINE TOOLS VS. CIT 123 ITR 181. 4. CONTESTING THE ABOVE ORDER OF THE LD. CIT(A), I T WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT CIT(A) HAS WRONGLY CONSIDERED THAT ADDITIONS WERE AGREED, WHER EAS ASSESSEE HAS NOT AGREED FOR ANYTHING EXCEPT FOR EST IMATION OF PROFIT ON SALE OF LIQUOR AT 5%. HE REFERRED TO THE LETTER FILED BEFORE THE ITO PLACED AT PAGE-7 OF THE PAPER BOOK T O SUBMIT THAT AFTER THE STATEMENT IN THE COURSE OF SURVEY, A SSESSEE HAS WITHDRAWN THE ADMITTED AMOUNTS AND SUBMITTED THAT N ET PROFIT 3 ITA.NO.1744/HYD/2014 M/S. V.R. BAR & RESTAURANT, HYDERABAD CAN BE ESTIMATED ON STOCK PUT TO SALE AT 3%, BASED ON THE ITAT ORDER IN THE CASE OF MANJIT SINGH BAGGA VS. IT O IN ITA.NO.371 AND OTHERS DATED 30.09.2010. LD. COUNSEL FURTHER SUBMITTED THAT THERE IS NO NEED TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATING THE INCOMES. SINCE THE ORDER OF LD. CIT(A) IS WRONGLY CONSIDERED THAT THE ADDITIONS WERE AGREED,A S SUCH LD. COUNSEL SUBMITTED THAT ISSUES CAN BE DECIDED ON MER ITS BY THE ITAT WITH REFERENCE TO ADDITION OF AMOUNTS. LD. CO UNSEL RELIED ON THE FOLLOWING CASE LAW. (I) CIT VS. SHRI RAMDAS MOTOR TRANSPORT 238 ITR 177 SRMT CASE (II) ACIT, CIRCLE 7(1), HYDERABAD VS. M/S. SURABHI AUTOMOBILES, HYDERABAD ORDER DATED 01.10.2014 IN ITA.NO.1006/HYD/2013. (III) CIT VS. S. KHADERKHAN & SON 352 ITR 480 (SC). 4.1. THE LD. COUNSEL RELYING ON THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF CIT VS. KHADERKHAN SON (SUPRA) SUBMITTED THAT THERE IS NO BASIS FOR MAKING THE ADD ITION AS NOTHING WAS FOUND OUT IN THE SURVEY AND ASSESSEES ENTIRE TURNOVER DURING THE YEAR WAS ONLY AT RS. 1 CRORE ON WHICH RS.24 LAKHS INCOME COULD NOT BE EARNED OUTSIDE BOOK S OF ACCOUNTS. 5. LEARNED D.R. WHILE ADMITTING THAT THERE IS A MISTAKE IN ESTIMATION OF 5% OF THE INCOME ON THE LI QUOR SALES HOWEVER, SUBMITTED THAT ESTIMATION OF INCOME WAS CO RRECTLY DONE BY THE A.O. AS THE BOOKS OF ACCOUNTS ARE NOT R ELIABLE. HE FURTHER SUBMITTED THAT ASSESSEE HAS VOLUNTARILY ADM ITTED HIGHER INCOME AND THEREFORE, WAS PREVENTED IN ENQUI RING IN OTHER MATTERS. 4 ITA.NO.1744/HYD/2014 M/S. V.R. BAR & RESTAURANT, HYDERABAD 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE STATEMENTS PLACED ON RECORD AS WELL AS THE P & L AC COUNT AND OTHER DOCUMENTS. AS SEEN FROM THE ORDERS, EXCEPT AD MITTING INCOME AT 5% ON THE LIQUOR SALES THERE WAS NO OTHER AGREED ADDITION AS STATED BY THE LD. CIT(A) IN THE ORDER. EVEN THOUGH ASSESSEE HAS CONTESTED THE INCOME ON SALE OF LIQUOR AT 5%, WE ARE OF THE OPINION THAT THIS ESTIMATION IS REASONAB LE CONSIDERING THE FACTS OF THE CASE. HOWEVER, THE A.O . IS DIRECTED TO CORRECT THE ARITHMETIC ERROR THAT OCCURRED IN TH E ORDER. 7. COMING TO THE ESTIMATION OF INCOME ON FOOD ITEM S AT 20%, WE ARE OF THE OPINION THAT A.O. HAS NOT GIV EN ANY COMPARABLE CASES TO ARRIVE AT THE PROFIT OF 20% ON FOOD SALES. HE SIMPLY ESTIMATED AT 20% WITHOUT THERE BEING ANY BASIS. CONSIDERING THE FACTS OF THE BUSINESS AND LOCATION OF THE APPELLANT BAR AND RESTAURANT IN HYDERABAD, WE ARE O F THE OPINION THAT INCOME CAN BE ESTIMATED AT 10% OF THE FOOD SALES. ACCORDINGLY, ASSESSEE HAS GETS RELIEF. A.O. IS DIRE CTED TO ADOPT INCOME OF RS.1,96,400 AS AGAINST RS.3,92,800 ADDED BY HIM IN THE ORDER. 8. AS TO THE ADDITION OF RS. 24 LAKHS AS INCOME OFFERED FROM BAR AND RESTAURANT BY THE ASSESSEES P ARTNER, EXCEPT THE STATEMENT GIVEN BY THE PARTNER DURING TH E COURSE OF SURVEY, THERE IS NO OTHER EVIDENCE ESTABLISHING THA T ASSESSEE COULD EARN THAT MUCH INCOME FROM THE BUSINESS. DURI NG THE SURVEY NO INCRIMINATING MATERIAL WAS FOUND NOR ANY EXCESS STOCK WAS FOUND. EVEN THOUGH BOOKS OF ACCOUNTS WERE REJECTED THAT DOES NOT MEAN THE DECLARATION GIVEN BY THE PA RTNER IN THE COURSE OF SURVEY HAS ANY RELEVANCE FOR THE BUSINESS ACTIVITY OF THE ASSESSEE. THERE WAS NO EVIDENCE BROUGHT ON RECO RD BY THE REVENUE EITHER IN THE FORM OF EXCESS STOCK FOUND DU RING THE 5 ITA.NO.1744/HYD/2014 M/S. V.R. BAR & RESTAURANT, HYDERABAD SURVEY OR EXCESS CASH AVAILABLE WITH THE ASSESSEE O R ANY OTHER INCRIMINATING MATERIAL TO ESTABLISH THAT ASSESSEE I S EARNING UNACCOUNTED INCOMES. AS CAN BE SEEN FROM THE STATEM ENT ALSO AFTER ENQUIRING ABOUT ASSESSEES BUSINESS ACTIVITIE S, VARIOUS INVESTMENTS, TURNOVERS ETC., AND AFTER CONCLUSION O F STATEMENT, LAST QUESTION WAS ASKED IN THE 11 PAGE OF THE STAT EMENT ASKING THE ASSESSEE WHETHER HE WANT TO STATE ANY TH ING FURTHER. AT THAT POINT OF TIME, ASSESSEES PARTNER SEEMS TO HAVE DECLARED ADDITIONAL RS. 24 LAKHS IN ORDER TO SETTL E WITH THE INCOME TAX DEPARTMENT. AS CAN BE SEEN FROM THE STAT EMENT RECORDED, THERE IS NO INDICATION THAT THIS ADDITION AL INCOME IS BECAUSE OF ANY INVESTMENT/PROFITS OF THE BUSINESS. MOREOVER, AS POINTED OUT BY THE LD. COUNSEL, ASSESSEE DID RET RACT STATEMENT IMMEDIATELY AFTER THE SURVEY AND SO STATE MENT CANNOT BE CONSIDERED AS A BASIS FOR MAKING THE ADDI TION. IT WAS AN ESTABLISHED LAW THAT ADDITION CANNOT BE MADE SOL ELY ON THE BASIS OF STATEMENT GIVEN BY THE PARTNER OF A FIRM. HONBLE SUPREME COURT IN THE CASE OF CIT VS. KHADERKHAN & S ON 352 ITR 480 HAS UPHELD THE HIGH COURT VIEW THAT IN VIEW OF THE SCOPE AND AMBIT OF THE MATERIALS COLLECTED DURING T HE COURSE OF SURVEY, THE ACTION UNDER SECTION 133A WOULD NOT HAV E ANY EVIDENTIARY VALUE AND THAT IT COULD NOT BE SAID SOL ELY ON THE BASIS OF THE STATEMENT GIVEN BY ONE OF THE PARTNERS OF THE FIRM THAT THE DISCLOSED INCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. THE STATEMENT GIVEN BY THE PARTNER HA S NO RATIONAL LINKING TO THE ISSUES BEING ENQUIRED NOR F OR THE INCOMES OF THE BUSINESS. THEREFORE, THE SAME CANNOT BE CONSIDERED AS A BASIS FOR MAKING THE ADDITION. UNDE R THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THERE IS NO BASIS FOR MAKING AN ADDITION OF RS. 24 LAKHS SOLELY ON THE BA SIS OF STATEMENT. IN VIEW OF THIS, WE HAVE NO HESITATION I N DELETING THE 6 ITA.NO.1744/HYD/2014 M/S. V.R. BAR & RESTAURANT, HYDERABAD SAME. A.O. IS DIRECTED TO RE-WORK OUT THE INCOMES A CCORDINGLY. THE GROUNDS ARE ALLOWED PARTLY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.201 5. SD/- SD/- (SAKJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMB ER HYDERABAD, DATED 31 ST MARCH, 2015 VBP/- COPY TO : 1. M/S. V.R. BAR & RESTAURANT, HYDERABAD C/O. MR. T. CHAITANYA KUMAR, ADVOCATE, FLAT NO.409, METRORESIDE NCY, RAJ BHAVAN ROAD, SOMAJIGUDA, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD 8(3), HYDERABAD 3. CIT(A)-III, HYDERABAD 4. CIT-II, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD 6. GUARD FILE