ITO, Ward-10(1), Hyderabad V. Shri Anil Kishore Doulagtar, Hyderabad

ITA 1865/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66333 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 02-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: S RAMA RAO
• Keywords: Peak credit
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1865/HYD/2011 ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER, WARD-10(1), ... APPELLANT HYDERABAD. VS. SHRI ANIL KISHORE DOULAGAR, RESPONDENT SECUNDERABAD. (PAN ABVPD6670F) APPELLANT BY : SHRI AMISHA S. GUPT RESPONDENT BY : SHRI S. RAMA RAO DATE OF HEARING : 25/09/2012 DATE OF PRONOUNCEMENT : 28/09/ 2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 25/08/2011 FOR THE ASSESSMENT YEAR 2008-09. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS AN INDIVIDUAL RUNNING A PROPRIETARY RETAIL BUSINESS IN TEXTILES, FILED HIS RETURN OF INCOME ON 30/04/2009 DECLARING TOTAL INCOME AT RS. 3,05,330/-. HIS INCOME ALSO INCLUDES INCOME FROM HOUSE PROPERTY. THE AO DISALLOWED RS. 11,06,7 94/- ON ACCOUNT OF LOANS NOT UTILIZED FOR THE PURPOSE OF BU SINESS AND ADDED A SUM OF RS. 12,000 AND RS. 1,56,000/- TOWARD S INTEREST ON LOANS ADVANCED BY THE ASSESSEE AND ADDE D A SUM ITA NO. 1865/HYD/11 SHRI ANIL KISHORE DOULAGAR. 2 OF RS. 16,36,772/- TOWARD PEAK CREDIT OF THE DEPOSI TS IN THE BANK. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 4. AS REGARDS THE FIRST ADDITION OF RS. 6,11,794/- MADE BY THE AO ON ACCOUNT OF INTEREST PAYABLE ON LOANS TAKE N BY THE ASSESSEE FROM THE BANKS, IT IS SEEN THAT THE ASSESS EE HAD TAKEN THE LOAN OF RS. 75 LAKHS FROM CITY FINANCIAL SERVICES LTD., ON WHICH INTEREST OF RS. 6,94,727/- WAS DEBIT ED TO THE P&L ACCOUNT. THE AO HELD THAT PART OF THE LOAN HAD BEEN GIVEN TO PERSONS OTHER THAN TRADE CREDITORS. THE AS SESSEE HAD ALSO LENT AN AMOUNT OF RS. 17,05,802/- TO HIS W IFE ON WHICH HE HAD RECEIVED AN INTEREST OF RS. 2,80,000/- . THE AO DISALLOWED AN AGGREGATE AMOUNT OF RS. 6,11,794/-. 5. THE CIT(A) NOTED THAT THE ASSESSEE IS ENGAGED IN RETAIL BUSINESS WITH A TOTAL TURNOVER OF RS. 32,01,312/- A ND THE NET LOSS AS PER THE P&L ACCOUNT WAS RS. 37,896/-. H E FURTHER NOTED THAT THE ASSESSEE HAD RETURNED AN INCOME OF R S. 1,60,065/- FROM THE RETAIL BUSINESS U/S 44AF. HE, T HEREFORE, HELD THAT SINCE THE ASSESSEE FALLS WITHIN THE PURVI EW OF SECTION 44AF AND THE INCOME RETURNED IS IN ACCORDAN CE WITH SECTION 44AF, THERE IS NO SCOPE FOR FURTHER DISALLO WANCES OR ADDITIONS AS MADE BY THE AO. ACCORDINGLY, HE DELETE D THE DISALLOWANCE OF RS. 6,11,794/- MADE BY THE AO. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE CASE OF THE AS SESSEE ITA NO. 1865/HYD/11 SHRI ANIL KISHORE DOULAGAR. 3 FALLS U/S 44AF AND THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT, 232 ITR 776 HAS HELD AS UNDER:- THE PATTERN OF ASSESSMENT UNDER THE INCOME-TAX ACT, 1961, IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINE D IN SECTIONS 30 TO 43D OF THE ACT. SECTION 40 PROVID ES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION U/S 29 IS TO BE MADE U/S 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOK S ARE NOT CORRECT OR COMPLETE, THE ITO MAY REJECT THO SE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE, IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U NDER SECTION 29. IN OTHER WORDS ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECTION 29 ARE DEEMED TO HAVE BEE N TAKEN INTO ACCOUNT WHILE MAKING SUCH AS ESTIMATE. T HIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 4 0 IS ALSO TAKEN INTO ACCOUNT. 8. ONCE THE ASSESSEE HAS RETURNED THE INCOME UNDER 44AF, THERE IS NO SCOPE FOR FURTHER DISALLOWANCE OR ADDITIONS AS MADE BY THE AO. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF INDWELL CONSTRUCTIONS (SUPRA) WE HOLD THATTHE DISAL LOWANCE OF RS. 6,11,794/- MADE BY THE AO ON ACCOUNT OF INTE REST PAYABLE ON LOANS TAKEN BY THE ASSESSEE FROM BANKS, IS NOT WARRANTED. THE CIT(A) HAS RIGHTLY DELETED THE SAID DISALLOWANCE, HENCE, WE CONFIRM THE ORDER OF THE CI T(A) ON THIS ISSUE. 9. AS REGARDS THE ADDITION ON ACCOUNT OF INTEREST O F RS. 12,000/- & RS. 1,56,000/- ON THE LOANS GIVEN TO THE RELATIVES, IT IS SEEN THAT THE ASSESSEE HAD ADVANC ED A SUM OF RS. 1 LAC TO SRI S. APPA RAO AND RS. 13 LAKHS TO SHRI D. ITA NO. 1865/HYD/11 SHRI ANIL KISHORE DOULAGAR. 4 ANIL KUMAR (HUF). NO INTEREST HAD BEEN RETURNED ON THESE LOANS. THE AO ADDED RS. 12000 & 1,56,000/- AS INTER EST @ 12% ON THESE LOANS, TO THE INCOME OF THE ASSESSEE. 10. THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A ) WAS THAT SRI S. APPA RAO WAS A RELATIVE AND SRI D. ANIL KUMAR (HUF) WAS THE ASSESSEES OWN HUF OF WHICH HE WAS TH E KARTA. HE ALSO CLAIMED THAT THE LOANS HAD BEEN GIVE N FREE OF INTEREST KEEPING IN MIND THEIR RELATIONSHIP TO THE ASSESSEE. 11. THE CIT(A) HELD THAT IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS ACTUALLY CHARGED INTEREST AND THEN FAILED TO DISCLOSE IT. HE, THEREFORE, HELD THAT WHEN THE ASSE SSEE HAS NOT CHARGED ANY INTEREST, THERE IS NO PROVISION IN THE ACT TO BRING TO TAX INTEREST ON PRESUMPTIVE BASIS. HENCE, HE DELETED THE ADDITION OF RS. 12,000 AND RS. 1,56,000 /- MADE BY THE AO. 12. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 13. AFTER HEARING THE PARTIES AND PERUSING THE RECO RD, WE FIND NO INFIRMITY IN THE ACTION OF THE CIT(A) IN DE LETING THE ADDITION BY HOLDING THAT WHEN THE ASSESSEE HAS NOT CHARGED ANY INTEREST, THERE IS NO PROVISION IN THE ACT TO B RING TO TAX INTEREST ON PRESUMPTIVE BASIS. WE CONFIRM THE ORDER OF THE CIT(A) ON THIS COUNT. 14. AS REGARDS THE LAST ISSUE RELATING TO THE ADDIT ION AMOUNTING TO RS. 16,36,772/- TOWARDS PEAK CREDIT AS ON 08/02/2008 IN THE ASSESSEES BANK ACCOUNT WHEREIN C ASH DEPOSITS OF RS. 33,75,500/- HAD BEEN MADE, THE AO H AD OBSERVED THAT THE ASSESSEE HAD PRODUCED BOOKS OF AC COUNT ITA NO. 1865/HYD/11 SHRI ANIL KISHORE DOULAGAR. 5 IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, BUT, H E CONCLUDED THAT THE BOOKS HAD BEEN PREPARED FOR THE PURPOSE OF ASSESSMENT AND, THEREFORE, NOT ACCEPTABLE. 15. BEFORE THE CIT(A), THE ASSESSEE HAD SUBMITTED T HAT HE HAD FURNISHED ALL THE DETAILS OF DEPOSITS MADE INTO THE BANK ACCOUNT WHICH HAD BEEN DULY RECORDED IN THE BOOKS O F ACCOUNT OF THE BUSINESS. 16. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE AO HAS ACCEPTED THAT THE BOO KS OF ACCOUNT HAD INDEED BEEN PRODUCED BEFORE HIM, BUT, T HE ONLY OBJECTION THE AO HAD AGAINST THE BOOKS OF ACCOUNT I S THAT THEY ARE PREPARED FOR THE PURPOSE OF THE ASSESSMENT . THE CIT(A) WAS OF THE VIEW THAT THE OBJECTION ITSELF CA NNOT BE A GROUND FOR DISBELIEVING THE BOOKS AS NO DEFECT HAS BEEN FOUND IN THE BOOKS OF ACCOUNT AND NO EVIDENCE HAS B EEN BROUGHT ON RECORD TO SHOW THAT ANY OF THE DEPOSITS WERE MADE OUT OF SOURCES NOT EXPLAINED BY THE ASSESSEE. HE, THEREFORE, HELD THAT THERE IS NO REASON WHATSOEVER FOR THE ADDITION OF THE PEAK CREDIT IN THE BANK ACCOUNT, HE NCE, THE ADDITION WAS DELETED. 17. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 18. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES , PERUSED THE RECORD AND GONE THROUGH THE ORDERS OF T HE AUTHORITIES BELOW. THE CIT(A) REJECTED THE OBJECTIO N RAISED BY THE AO THAT THE BOOKS OF ACCOUNT ARE PREPARED BY THE ASSESSEE ONLY FOR THE PURPOSE OF ASSESSMENT. HE GAV E A CATEGORICAL FINDING THAT THE OBJECTION RAISED BY TH E AO CANNOT BE A GROUND FOR DISBELIEVING THE BOOKS AND T HE AO ITA NO. 1865/HYD/11 SHRI ANIL KISHORE DOULAGAR. 6 HAS NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT AN D NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT AN Y OF THE DEPOSITS WERE MADE OUT OF SOURCES NOT EXPLAINED BY THE ASSESSEE. WE FIND MERIT IN THE FINDINGS GIVEN BY T HE CIT(A) WHILE DELETING THE ADDITION OF RS. 16,36,772/- TOWA RDS PEAK CREDIT, THEREFORE, WE UPHOLD THE SAME AND CONFIRM T HE ACTION OF THE CIT(A) IN DELETING THE SAID ADDITION MADE BY THE AO. 19. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 28/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHAVIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED:28 TH SEPTEMBER, 2012. KV COPY TO:- 1) ITO, WARD 10(1), ROOM NO. 516, AC GUARDS, IT TOWERS, HYDERABAD 2) SHRI ANIL KISHORE DOULAGAR, H.NO. 2-1-191, TOBACCO BABAR, SECUNDERABAD. 3) THE CIT (A)-VI, HYDERABAD 4) CIT-V HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.