Ganna Sarvaiah, Hyderabad V. ITO, Suryapet

ITA 192/HYD/2014

• Counselvise Citation: 19222514 RSA 2014
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital expenditure
• Section: 40A(3); 143(3); 133A; 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 192/HYD/2014 ASSESSMENT YEAR: 2010-11 GANNA SARVAIAH, KODAD PAN AMKPG 4755A VS. INCOME-TAX OFFICER, SURYAPET (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI K.E. SUNIL BABU DATE OF HEARING : 16/11/2015 DATE OF PRONOUNCEMENT : 04/12/2015 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF CIT(A)-VI, HYDERABAD DATED 14/10/2013 FOR THE AY 20 10-11. 2. BRIEF FACTS OF THE CASE ARE, A SURVEY U/S 133A W AS CONDUCTED IN THE BUSINESS PREMISES OF ASSESSEE ON 08/03/2010. DU RING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE STARTED C ONSTRUCTION OF CENTRALIZED AIRCONDITIONED FUNCTION HALL WITH THE P ROBABLE INVESTMENT OF RS. 1 CRORE. ASSESSEE IS A SMALL SCALE CLOTH TRA DER FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,87,990/- AND AGRICULTURE INCOME OF RS. 2,37,500 ON 01/11/2010. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSMENT U/S 143(3) WAS COMPLETED D ETERMINING THE TOTAL INCOME AT RS. 56,53,930 BY MAKING DISALLOWAN CES WITH THE FOLLOWING OBSERVATIONS: A) THE TOTAL TURNOVER OF THE CLOTH BUSINESS WAS RS . 25,41,000 AND ASSESSEE DECLARED INCOME U/S 44AF @ RS. 1,71,6 00/-, THE 2 ITA NO. 192 /HYD/2014 GANNA SARVAIAH PROFIT PERCENTAGE WAS 6.75% OF SALES AND THE SAME WAS ACCEPTED BY AO. B) AS PER SURVEY U/S 133A, THE ASSESSEE STARTED CO NSTRUCTION OF A/C FUNCTION HALL DURING AY 2008-09 AND CONTINUED TILL AY 2010- 11. THE ESTIMATED COST OF THE CONSTRUCTION WAS RS. 56 LAKHS. IT WAS FOUND THAT THE SAME WAS FINANCED BY HIS NRI SO N AND DAUGHTER-IN-LAW. ALL THE FUNDS WERE UTILIZED FROM THE BANK A/C MAINTAINED WITH INDUS IND BANK, IN WHICH THE NRI S ON HAD DEPOSITED IN USD EQUIVALENT TO RS. 50,22,500 DURIN G THE YEAR AND THE BANK ACCOUNT HAD OPENING BALANCE OF RS. 10 ,26,911/-. HENCE, THE SOURCE OF INVESTMENT MADE IN CONSTRUCTI ON OF FUNCTION HALL WAS ACCEPTED BY AO FROM HIS NRI SON. C) THE ASSESSEE MAINTAINED THREE BANK ACCOUNTS AND HE HAD MADE CASH DEPOSITS IN THESE ACCOUNTS AS DETAILED B ELOW: INDUS IND BANK RS. 10,01,500 SBH, HYDERABAD RS. 7,50,000 SBI, KODAD RS. 15,00,000 TOTAL RS. 32,51,500 =========== D) CASH PAYMENTS IN EXCESS OF RS. 20,000 WERE DISA LLOWED U/S 40A(3) OF THE ACT, WHICH THE ASSESSEE MADE FOR CON STRUCTING THE FUNCTION HALL TO THE EXTENT OF RS. 22,14,435/-. 3. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFERR ED AN APPEAL BEFORE THE LD. CIT(A)-VI, HYDERABAD FOR DISALLOWANC ES U/S 68 AND 40A(3) OF THE ACT. THE LD. CIT(A) HAD CANCELLED THE DISALLOWANCE MADE U/S 40A(3) CONSIDERING THE FACT THAT THESE PAY MENTS WERE MADE TOWARDS CAPITAL EXPENDITURE. THE CIT(A) HAD GIVEN P ARTIAL RELIEF TO THE ASSESSEE FOR DISALLOWANCE U/S 68 SUSTAINING THE DIS ALLOWANCE MADE FOR CASH DEPOSITS MADE IN SBH, KODAD FOR RS. 7,50,0 00/-. 4. THE LD. AR SUBMITTED THAT THE AMOUNT OF RS. 7,50 ,000, DEPOSITED IN SBK, KODAD CONSISTS OF SIX DEPOSITS MA DE BY THE 3 ITA NO. 192 /HYD/2014 GANNA SARVAIAH ASSESSEE. ON 28/05/09, AN AMOUNT OF RS. 1,50,000 WA S DEPOSITED. THE ASSESSEE WITHDREW AN AMOUNT OF RS. 1,50,000/- O N 26/05/09 FROM SBI AND DEPOSITED RS. 1,50,000/- WITH SBH. THEREFOR E, THE AO WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS. 1,5 0,000/- WAS NOT EXPLAINED. HE SUBMITTED THAT THE ASSESSEE DEPOSITED RS. 50,000/- ON 09/07/09, RS. 2,00,000/- ON 01/02/10, RS. 25,000 ON 01/02/10 AND RS. 25,000/- ON 04/02/10 AGGREGATING TO RS. 3,00,000/-. THE ABOVE DEPOSITS WERE MADE OUT OF CLOTH BUSINESS. IT WAS SU BMITTED THAT THE ASSESSEE WAS NOT MAINTAINING BOOKS OF ACCOUNT AS TH E ASSESSEE HAD DECLARED INCOME U/S 44AF OF THE ACT. CONSIDERING TH E FACT THAT THE ASSESSEE MADE GROSS SALE OF RS. 25,41,000/-, IT EST ABLISHES THAT THE CASH DEPOSITS WERE MADE OUT OF CLOTH BUSINESS ONLY. LD. AR ALSO SUBMITTED THAT THE CASH DEPOSIT OF RS. 3 LAKHS ON 1 5/03/10 WAS FROM THE SALE OF AGRICULTURAL PRODUCTS. 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF CIT(A). 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL FACTS ON RECORD AS WELL AS THE ORDERS OF REVENUE AUTHORITIES. THE ONLY ISSUE UNDER CONSIDERATION HER E IS THAT THE DISALLOWANCE OF RS. 7,50,000/- RELATING TO THE CASH DEPOSITS IN SBH, KODAD BRANCH. WHILE ANALYZING THE CASH DEPOSITS IN DETAIL, WE FIND THAT THE ASSESSEE HAD DEPOSITED AS BELOW: 28/05/09 RS. 1,50,000 09/07/09 RS. 50,000 01/02/10 RS. 2,00,000 01/02/10 RS. 25,000 04/02/10 RS. 25,000 ON 28/05/09, RS. 1,50,000/- WAS DEPOSITED AND BASED ON THE ASSESSEES SUBMISSION, ON 26/05/09, ASSESSEE HAD WI THDRAWN RS. 2,00,000 FROM SBI KODAD BRANCH. THE SAME WAS DEPOSI TED IN SBH, KODAD, WHICH MAY BE ACCEPTED BY GIVING BENEFIT OF D OUBT TO THE ASSESSEE. 4 ITA NO. 192 /HYD/2014 GANNA SARVAIAH 6. AS FAR AS THE OTHER CASH DEPOSITS FROM SALE PROC EEDS OF CLOTH BUSINESS WAS MADE IN VARIOUS DATES INVOLVING RS. 3, 00,000 IN TOTAL, WE ARE OF THE VIEW THAT THE ASSESSEE HAD MADE RS. 2 5,41,000/- GROSS SALES IN THE CLOTH BUSINESS, WHICH WAS DECLARED BY HIM IN RETURN OF INCOME. ASSESSEE HAD DEPOSITED RS. 8,02,500/- INDUS IND BANK AND MADE RS. 3,00,000 IN SBH OUT OF THE GROSS SALES OF RS. 25,41,400/-. TOTAL CASH DEPOSITS MADE IN INDUS IND BANK AND SBH PUT TOGETHER COMES TO RS. 11,02,500/- WHICH WAS HALF THE COLLECT ION FROM THE CLOTH BUSINESS. WE DO NOT SEE ANY REASON TO DISBELIEVE TH E SUBMISSIONS OF THE LD. AR. 7. AS FAR AS, THE LAST DEPOSIT OF RS. 3,00,000/- MA DE ON 15/03/2010 IS CONCERNED, ACCORDING TO ASSESSEE IT W AS FROM THE SALE OF AGRICULTURAL PRODUCT. THE ASSESSEE HAD DECLARED RS. 2,37,500/- AS NET AGRICULTURAL INCOME. THE GROSS AGRICULTURAL INC OME COULD ALSO BE RS. 3 LAKHS, AS CLAIMED BY THE LD. AR. THE AO DID NOT BRING ANY EVIDENCE ON RECORD CONTRARY TO THIS EXCEPT MADE VAG UE FINDING THAT ON 15 TH MARCH THE CROP WOULD BE STILL IN GROWING STAGE AND PRODUCE CANNOT BE SOLD. SINCE THERE IS NO MERIT IN THE FIN DING OF THE AO, WE ARE INCLINED TO PASS THE BENEFIT IN FAVOUR OF THE A SSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMA N) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 4 TH DECEMBER, 2015 KV 5 ITA NO. 192 /HYD/2014 GANNA SARVAIAH COPY TO:- 1)SHRI GANNA SARAVAIAH, C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H. NO. 3- 6-643, ST. NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029 2) ITO, SURYAPET 3 CIT(A)-VI, HYDERABAD 4) CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.