Sudarsan Rao Avula, Secunderabad V. Income Tax Officer, Ward-15(1), Hyderabad

ITA 1790/Hyd/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9611 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 01-01-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 02-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B SHANTHI KUMAR
• Keywords: Unexplained investment; Business income
• Section: 143(3)

Judgement Text

ITA NO 1790 OF 2017 SUDARSHAN RAO AVULA SECUNDERABA D. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A SMC BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.1790/HYD/2017 ASSESSMENT YEAR: 2013-14 SHRI SUDARSHAN RAO AVULA SECUNDERABAD PAN:ACCPA8892Q VS. INCOME TAX OFFICER WARD 15(1) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI B. SHANTHI KUMAR REVENUE BY : SRI SUNKU SRINIVAS, DR DATE OF HEARING: 01/01/2020 DATE OF PRONOUNCEMENT: 08 /01/2020 ORDER THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE CIT (A)-7, HYDERABAD, DATED 14-09- 2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, ENGAGED IN THE BUSINESS OF RUNNING A HO STEL MESS AND MANUFACTURING OF PAPER PLATES, FILED HIS RETURN OF INCOME FOR THE A.Y 2013-14 ON 29.10.2014 ADMITTING TOTAL INCOME OF RS.1,99,900/-. THE CASE WAS SELECTED FOR SCRUTINY U NDER CASS AND DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE HAS DECLARED THE GROS S RECEIPTS FROM MESS AT RS.12,50,000/- AND SALES OF PAPER PLAT ES AT RS.14.00 LAKHS AND NET PROFIT FROM BOTH THE BUSINES SES AT RS.3,18,898/-. HE ALSO NOTICED THAT THE ASSESSEE HA S INVESTED A SUM OF RS.15,11,000/- FOR THE PURCHASE OF FIXED ASS ETS AND THAT THE ASSESSEE HAD ALSO INVESTED AN AMOUNT OF RS.12.0 0 LAKHS DURING THE YEAR. THEREFORE, THE ASSESSEE WAS REQUIR ED TO FURNISH ITA NO 1790 OF 2017 SUDARSHAN RAO AVULA SECUNDERABA D. PAGE 2 OF 5 THE INFORMATION TO PROVE THE SOURCES OF SUCH FUNDS. THE ASSESSEE FURNISHED HIS REPLY. 3. FROM THE DETAILS SO FURNISHED BY THE ASSESSEE, T HE AO NOTICED THAT THE GROSS RECEIPTS FROM MESS AS WELL A S SALE OF PAPER PLATES WAS RS.26,50,000/-, WHEREAS THE CASH DEPOSIT S IN THE BANK A/C OF THE ASSESSEE ARE AT RS.58,08,640/-. THE DIFFERENCE OF RS.31,58,640/- WAS DIRECTED TO BE EXPLAINED. THE AS SESSEE ACCEPTED TO TREAT THE DIFFERENCE OF THE AMOUNT ALSO AS TOTAL TURNOVER OF THE ASSESSEE AND THE INCOME BE ESTIMATE D AT 12.03% AS OFFERED BY HIM ON THE DECLARED RECEIPTS. ACCORDI NGLY, AO TREATED THE ENTIRE DEPOSITS AS GROSS TURNOVER OF TH E ASSESSEE AND ESTIMATED THE INCOME AT 12.03% ON THE SAME WHICH WO RKED OUT TO RS.6,98,779/- AND THE AO ACCORDINGLY BROUGHT IT TO TAX. 4. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS PURCHASED FURNITURE AND PLANT & MACHINERY OF RS.15, 11,000/- AND INTRODUCED IT AS CAPITAL ALONG WITH CASH DEPOSI TS. THE ASSESSEE WAS THUS ASKED TO EXPLAIN THE SOURCES FOR THE TOTAL OF CAPITAL INTRODUCED OF RS.24,00,229/- (INCLUDING THE PLANT & MACHINERY AND CASH DEPOSITS). THE ASSESSEE COULD NO T EXPLAIN PROPERLY AND SINCE THE AO HAS ALREADY ESTIMATED THE PROFIT FROM BUSINESS AT RS.6,98,779/-, HE EXCLUDED THE SAME FRO M RS.24,00,229/- TO ARRIVE AT THE NET UNEXPLAINED INV ESTMENT OF RS.17,26,750/- AND BROUGHT IT TO TAX. AGGRIEVED, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO GRANTED PARTIAL RELIEF BY CONSIDERING THE OPENING CAPITAL B/F AND ALSO GIVING CREDIT TO THE EXPENSES DEBITED TO THE CAPITAL A/C AMOUNTING TO RS .12,00,229/-. THUS, HE ARRIVED AT THE NET CAPITAL INTRODUCED BY T HE ASSESSEE AT RS.12.00 LAKHS AND THEREAFTER, HE PROCEEDED TO ALLO W THE PROFIT ITA NO 1790 OF 2017 SUDARSHAN RAO AVULA SECUNDERABA D. PAGE 3 OF 5 ACCEPTED BY THE ASSESSEE AT RS.3,79,881/- AND THE B ALANCE AMOUNT OF RS.8,00,119/- WAS TREATED AS UNEXPLAINED. THUS, THE CIT (A) RESTRICTED THE ADDITION TO RS.8,20,119/-. A GGRIEVED, THE ASSESSEE IS IN BEFORE THE TRIBUNAL BY RAISING THE F OLLOWING GROUNDS OF APPEAL: 1. THE CIT (A) IS NOT JUSTIFIED IN UPHOLDING ADDIT ION OF RS.8,20,119/- OUT OF THE ADDITION MADE BY THE AO AT RS.17,26,752/- TOWARDS UNEXPLAINED INVESTMENT. 2. THE CIT (A) OUGHT TO HAVE APPRECIATED THE EXPLAN ATION SUBMITTED BOTH BEFORE THE AO AND BEFORE THE CIT (A) AND DELETED THE ENTIRE ADDITION OF RS.17,26,252/- INSTE AD OF RESTRICTING THE SAME TO RS.8,20,119/-. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE UNEXPLAINED CASH DEPOSITS WHICH HAVE BEEN CONSIDERED AS THE GROSS RECEIPTS FROM THE ASSESSEE BY THE AO A ND THE INCOME ESTIMATED THEREON SHOULD ALSO BE CONSIDERED AS THE SOURCES OF INTRODUCTION OF CAPITAL AND ALSO FOR PURCHASE OF TH E MACHINERY. HE SUBMITTED THAT THE ASSESSEE HIMSELF HAS ALREADY OFF ERED A SUM OF RS.3,18,898/- AND THE AO HAS AGAIN WORKED OUT THE P ROFIT OF THE UNEXPLAINED CASH DEPOSITS AT RS.6,00,779/- TOTALING TO RS.10.00 LAKHS. AS THE CIT (A) HAS ARRIVED AT THE TOTAL NET CAPITAL OF RS.12.00 LAKHS ONLY, THE PROFIT OF RS.10.00 LAKHS S HOULD BE TELESCOPED AND THE ADDITIONS SHOULD BE DELETED. 6. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. HAVING CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, I FIND THAT THE GROSS DEPOSITS INTO THE BANK ITA NO 1790 OF 2017 SUDARSHAN RAO AVULA SECUNDERABA D. PAGE 4 OF 5 A/C HAVE BEEN TREATED AS THE GROSS BUSINESS RECEIPT S OF THE ASSESSEE AND THE NET PROFIT THEREON AT RS. 6,98,779 /- HAS BEEN ARRIVED AT, WHICH HAS BEEN ACCEPTED BY THE ASSESSEE . THE ADDITION TO THE CAPITAL IN THE FORM OF PLANT & MACHINERY AND ALSO CASH DEPOSITS WAS ASKED TO BE EXPLAINED. THE CIT (A) HAS ACCEPTED THE NET PROFIT OF RS.6,98,779/- AS AVAILABLE SOURCE. TH E BALANCE OF RS.17,01,450/- -(24,00,229)= 6,98,779/- REMAINS TO BE EXPLAINED. THE CIT (A) HAS PERUSED THE CAPITAL A/C AND HAS HEL D THAT THE AO HAS NOT DEDUCTED THE EXPENSES DEBITED IN THE CAPITA L A/C AMOUNTING TO RS.12,00,229/- AND HAS HELD THAT THE C ORRECT CAPITAL INTRODUCED BY THE ASSESSEE DURING THE YEAR WAS RS.12.00 LAKHS ONLY. I FIND THAT ALL THE CASH CREDITS HAVE B EEN TREATED AS THE ASSESSEES BUSINESS RECEIPTS AND THE INCOME THERE F ROM HAS BEEN ESTIMATED. IF THESE RECEIPTS ARE TO BE CONSIDERED T O BE OF BUSINESS RECEIPTS OF THE ASSESSEE, THEN THEY SHOULD ALSO BE CONSIDERED AVAILABLE WITH THE ASSESSEE FOR INTRODUCTION OF THE CAPITAL IN THE FORM OF PLANT & MACHINERY AND CASH DEPOSITS. THE GR OSS RECEIPTS DEFINITELY EXCEEDED THE NET CAPITAL OF RS.12.00 LAK HS INTRODUCED BY THE ASSESSEE AND THE EXPENDITURE INCURRED BY THE AS SESSEE. THEREFORE, I AM INCLINED TO ACCEPT THE CONTENTION O F THE ASSESSEE AND DELETE THE ADDITION OF RS.8,20,119/- AS CONFIRM ED BY THE CIT (A). 8. IN THE RESULTS, THE ASSESSEES APPEAL IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2020. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 8 TH JANUARY, 2020. VINODAN/SPS ITA NO 1790 OF 2017 SUDARSHAN RAO AVULA SECUNDERABA D. PAGE 5 OF 5 COPY TO: 1 SHRI AVULA SUDARSAN RAO, FLAT NO.401, SSV RESIDEN CY, H.NO.1-5- 784, BHAVANI NAGAR, HYDERABAD 2 ITO WARD 15(1) IT TOWERS, HYDERABAD 3 CIT (A)-7, HYDERABAD 4 PR. CIT 7 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER