Dodda Lakshmi, Rajahmundry V. The Income Tax Officer, Ward-4, , Rajahmundry

ITA 180/VIZ/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0467 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 15-09-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Depreciation; Additional evidence
• Section: 68; 44AD

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No.180/Viz/2020 (निर्धारण वर्ा / Assessment Year : 2009-10) Smt.Dodda Lakshmi Prop/M/s Sri Venkateswara Granites, D.No.20-10-4 Weavers Colony Rajahmundry [PAN : AFKPD2533G] Vs. Income Tax Officer Ward-4 Rajahmundry (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) निर्धारितऩ की ओर से/ Assessee by : Shri G.V.N Hari, AR िधजस्व की ओर से / Revenue by : Shri S.P.G.Mudaliar, DR सुिवधई की तधरीख / Date of Hearing : 18.05.2022 घोर्णध की तधरीख/Date of Pronouncement : 10.06.2022 O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”], Vijayawada in Appeal No.10128/CIT(A)/VJA/2019-20 DIN : ITBA/APL/M/250/ 2019 - 20/1025882007(1) dated 28.02.2020 for the Assessment Year (A.Y.) 2009-10. 2 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry 2. Brief facts of the case are that the assessee is an individual and is proprietrix of M/s Sri Venkateswara Granites. She filed her return of income for the A.Y.2009-10 on 25.09.2009 admitting total income of Rs.3,34,760/- and agricultural income of Rs.1,56,000/-. The assessment u/s 144 was completed on 26.12.2011 determining the total income at Rs.1,49,51,600/-. The Assessing Officer (AO) made various additions / disallowances. 3. On being aggrieved, the assessee preferred an appeal before the Ld.CIT(A). After considering the submissions of the assessee, the Ld.CIT(A) partly allowed the appeal of the assessee. 4. On being aggrieved, the assessee preferred an appeal before us by raising the following grounds : 1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.12,00,000/- made by the assessing officer u/s 68 of the Act towards alleged unexplained sundry creditors. 3. The learned Commissioner of Income Tax (Appeals) is not justified in restricting the depreciation to Rs.90,000/- as against Rs.4,58,904/- claimed by the appellant. 4. a. The learned Commissioner of Income Tax (Appeals) ought to have held that the assessing officer is not justified in estimating the income without rejecting the books of the appellant. b. The learned Commissioner of Income Tax (Appeals) out to have directed the assessing officer to accept the income admitted by the 3 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry appellant instead of directing him to estimate income @10% of the receipts. c. Without prejudice to the above, the rate of profit @10% directed by the learned Commissioner of Income Tax (Appeals) is on higher side. 5. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have held that once the income was assessed on estimate basis no other additions could have been made by the assessing officer and ought to have deleted the additions made by the assessing officer. 6. Any other grounds may be urged at the time of hearing. 5. The Ld.Counsel for the assessee submitted that the Ld.CIT(A) is not justified in sustaining the addition of Rs.12,00,000/- made by the AO u/s 68 of the Act. He further submitted that sundry creditors of Rs.12,00,000/- represent the earth work advance received from various farmers. The assessee also furnished ledger copy before the Ld.CIT(A). The Ld.CIT(A) asked for remand report based on the ledger copy filed by the assessee. The Ld.AO examined the ledger copies and submitted a report, the Ld.CIT(A) has not appreciated the fact properly and he confirmed the addition of Rs.12,00,000/- on account of sundry creditors. Therefore, the addition may be deleted. 6. On the other hand, the Ld.DR submitted that in the remand report, the AO has categorically held that the vouchers are self made vouchers which do not contain primary information such as voucher number, date of receipt and address of the person who paid the advances to the assessee. 4 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry He further submitted the Ld.AO categorically mentioned that the assessee did not furnish any information as to how the said advances were squared up at a later date. He further submitted that after considering the facts and circumstances of the case, the Ld.CIT(A) upheld the order passed by the AO, therefore, the orders passed by the Ld.CIT(A) to be upheld. 7. We have heard both the parties and perused the material placed on record. On this aspect, the Ld.CIT(A) examined the issue and passed a detailed order, relevant part of which is extracted as under : “56. On perusal of the P&L account of the assessee, it is seen that the assessee is engaged in carrying out earth work and she has admitted receipts to the extent of Rs.7,69,000/- in respect of earth work during the year. However, on perusal of the ledger account of “Earth work advance for 2008- 09” wherein earth work advances aggregating to Rs.12,00,000/- were credited during the year, it is seen that though the advances were shown to have been received throughout the year from 02.04.2008 to 20.03.2009, none of the said advances were adjusted against the earth work done during the year. It is not plausible that the farmers have paid the advances for getting earth work done by the assessee and no such work was actually carried out by the assessee even in a single case even after lapse of many months after the receipt of the advance. Moreover, the fact that the advances were shown to have been received in cash and the addresses of the persons from whom the advances were received are neither available in the ledger account nor in the credit vouchers clearly shows that the assessee has not evidence to prove the genuineness of the said advances. As the earth work advances of Rs.12,00,000/- were credited in the books of the assessee during the year, the onus is on the assessee to lead evidence with regard to the identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. However, as evident from the remand report of the AO, the assessee failed to establish the said essential ingredients either during the assessment proceedings or the appellate proceedings. In the said facts of the case, it is held that the sundry creditors of Rs.12,00,000/- are required to be treated as unexplained credits u/s 68 of the Act. 5 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry 57. In view of the foregoing discussion, the addition of Rs.12,00,000/- made u/s 68 of the Act towards unexplained sundry creditors is hereby upheld. This ground of appeal is therefore dismissed.” After perusal of the order passed by the Ld.CIT(A), it is observed that the assessee has not filed any satisfactory evidence before the lower authorities, therefore, the Ld.CIT(A) rightly confirmed order passed by the AO and upheld the addition of Rs.12,00,000/- u/s 68. The assessee failed to furnish information, therefore, the Ld.CIT(A) has no other option, except confirming the orders passed by the AO. Therefore, we do not find any infirmity in the order passed by the Ld.CIT(A) and dismiss the ground No.2 raised by the assessee. 8. Ground No.3 is related to the restriction of depreciation. The main contention of the Ld.AR is that the Ld.CIT(A) is not justified in restricting the depreciation to Rs.90,000/- as against Rs.4,58,904/- claimed by the assessee. On this aspect, we have perused the assessment order, wherein, the Ld.AO held that the assessee has shown the additions towards plant and machinery to the tune of Rs.36,09,358/- in the depreciation schedule filed along with the return of income. The AO further observed that the assessee did not furnish any evidences during the assessment proceedings in support of the acquisition of the said assets during the year. Therefore, the AO made the disallowance of depreciation of Rs.4,58,904/- claimed by 6 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry the assessee in the return of income. During the course of appellate proceedings, the assessee furnished some details. The assessee furnished additional evidence and the same was forwarded to the AO to examine and submit the remand report. After considering the remand report and additional evidence filed by the assessee, the Ld.CIT(A) restricted the claim of the depreciation amounting to Rs.90,000/-. Relevant part of the order of Ld.CIT(A) is extracted as under : 92. In view of the facts stated above, it is required to be concluded that the assessee failed to prove the genuineness of the additions of Rs.11,50,000/- made to the block of assets during the year. The depreciation claimed by the assessee in respect of the said additions amounted to Rs.90,000/- (@15% on addition of Rs.50,000/- upto 30.09.2008 and @7.5% on the addition of Rs.11,00,000/- after 30.09.2008. The said depreciation of Rs.90,000/- is therefore liable for disallowance. 93. In view of the foregoing discussion, the AO is directed to restrict the disallowance of depreciation to Rs.90,000/- as against Rs.4,58,904/- made in the assessment order. This ground of appeal is therefore partly allowed.” We do not find any infirmity in the orders passed by the Ld.CIT(A), hence, the ground raised by the assessee is dismissed. 9. Ground No.4 is related to estimation of income. On this aspect, it was the submission of the Ld.AR that the Ld.CIT(A) ought to have held that the AO is not justified in estimating the income without rejecting the books of accounts. The Ld.CIT(A) ought to have directed the AO to accept the income estimated by the assessee instead of directing him to estimate the income @10%. It was further submission of the Ld.AR that the rate of profit @10% 7 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry is on higher side. He further submitted that once the income was assessed on estimation basis, no other addition could have been made by the AO. On this aspect, we have perused the orders passed by the AO as well as the Ld.CIT(A). In this case, the AO estimated the business income at Rs.19,03,811/- by working out the same at 25% of the turnover. 10. It was the contention of the Ld.DR that the assessee failed to produce the books of accounts and the bills and vouchers in support of the expenditure debited to P&L account for verification during the course of assessment proceedings. In view of the said failure, the AO held that business income of the assessee arising from sale of spalls shown at Rs.68,46,245/- and the earth work receipts shown at Rs.7,69,000/- required to be estimated @25% on aggregate turnover of Rs.76,15,245/-. Accordingly, the AO determined the business income atRs.19,03,811/-. He further submitted that the Ld.CIT(A) after examining this issue gave a direction to the AO to restrict the profit @10% instead of 25%. Therefore, the Ld.CIT(A) has reasonably estimated the income, hence, the order passed by the Ld.CIT(A) to be confirmed. 11. We have head both the parties and perused the material available on record. As regards the rate of net profit adopted by the AO for estimating 8 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry the business income, it was contended by the assessee that the rate of 25% adopted by the AO is very high and that estimation of profit at 8% to 10% of the turnover is fair and reasonable considering that the business operations of the assessee are conducted on a small scale. The AO did not furnish any reasons in the assessment order in support of the rate of net profit of 25% adopted by him. The provisions of section 44AD have prescribed the presumptive rate of net profit of 8% of the turnover, in cases of business where the turnover is below the turnover specified therein. The specified turnover amounted to Rs.40 lakhs for A.Y.2011-12 when the modified provisions of section 44AD were introduced making them applicable to any business other than the business covered by the provisions of section 44AE. Though the said provisions are not applicable to the case of the assessee for the A.Y.2009-10, the said presumptive rate of net profit can be kept in view for the purpose of arriving at a reasonable rate of net profit. The Ld.CIT(A) held that having regard to the fact that the turnover of the assessee amounted to Rs.76,15,245/- and keeping in view the presumptive rate of net profit specified in section 44AD, it is considered that adoption of rate of net profit at 10% of the turnover is fair and reasonable. The business income of the assessee works out to Rs.7,61,524/- on adoption of the said rate of net profit. The Ld.CIT(A) 9 ITA No.180/Viz/2020, A.Y.2009-10 Dodda Lakshmi, Rajahmundry directed the AO to adopt the business income at Rs.7,61,524/- as against Rs.19,03,811/- estimated in the assessment order. We do not find any infirmity in the order passed by the Ld.CIT(A), therefore, ground No.4 and the remaining grounds filed by the assessee are dismissed. 12. In the result, appeal of the assessee is dismissed. Order Pronounced in open Court on 10 th June, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयकसदस्य/JUDICIAL MEMBER Dated : 10.06.2022 L.Rama, SPS आदेश की प्रनतनिनि अग्रेनषत/Copy of the order forwarded to:- 1. निर्धाऩरती/ The Assessee– Smt.Dodda Lakshmi, Prop/M/s Sri Venkateswara Granites, D.No.20-10-4, Weavers Colony, Rajahmundry 2. रधजस्व/The Revenue – Income Tax Officer, Ward-4, Aayakar Bhavan Annex, Veerabhadrapuram, Kambala Cheruvu, Rajamahendravaram 3. प्रर्धि आयकर आयुक्त / The Pr.Commissioner of Income Tax-2, Visakhapatnam 4. आयकर आयुक्त (अपील) / Commissioner of Income Tax (Appeals), Vijayawada 5. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam