Sambasiva Rao Muppala, Guntur V. The Commissioner of Income Tax(Appeals)-1, , Guntur

ITA 192/VIZ/2020

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The case involves Muppalla Sambasiva Rao, an individual deriving income from various sources including house property, real estate business, bank interest, and agricultural income. The Income Tax Officer (ITO) scrutinized his returns for the Assessment Year 2016-17 and disallowed certain deductions claimed under business expenses, which led to an increased tax demand. The CIT(A) upheld these disallowances, which were contested by the assessee before the Tribunal. The Tribunal dismissed the appeal, agreeing with the CIT(A)'s findings and the ITO's original assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135853 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 06-03-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 07-10-2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Condonation of delay
• Section: 40A(3); 143(3)

Judgement Text

आयकरअपीलीयअधिकरण, धिशाखापटणम एस एम सी पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER आयकर अपील सं./I.T.A.No.192/Viz/2020 (ननधधारण वर्ा / Assessment Year : 2016-17) Muppalla Sambasiva Rao D.No.5-60/2-164 4/4, Ashok Nagar Guntur [PAN : AHNPM0052G] Vs. Income Tax Officer Ward-2(2) Guntur (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri G.V.N.Hari,AR प्रत्यधथी की ओर से / Respondent by : Shri O.N.Hari Prasada Rao, DR सुनवधई की तधरीख / Date of Hearing : 07.03.2023 घोर्णध की तधरीख/Date of Pronouncement : 01.06.2023 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : Condonation of Delay : This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur vide DIN : ITBA/APL/M/250/2019-20/1025431626(1) dated 10.02.2020, arising out of the assessment order passed by the Assessing Officer (AO) u//s 143(3) of the Income Tax Act, 1961 (in short “Act”) for the Assessment Year (A.Y.) 2016-17 with the delay of 167 days. The assessee filed affidavit for condonation of delay, submitting that the assessee could not 2 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur file appeal on time due to Covid pandemic and lockdown imposed by the Government. The assessee further submitted that he was prevented by sufficient cause in not filing the appeal within time, therefore, pleaded to condone the delay and admit the appeal for hearing. 2. I have heard the Ld.AR and gone through the affidavit filed by the assessee for condonation of delay. It is evident that the order of the Ld.CIT(A) dated 10.02.2020 was served on the assessee on 13.02.2020 and the assessee ought to have filed appeal against the said order on or before 09.04.2020. The assessee submitted that despite his efforts, the appeal could be filed on 30.09.2020 with the delay of 175 days due to Covid-19 lockdown imposed by the Government and pleaded to admit the appeal as empowered u/s 249(3) of the Act. On going through the affidavit filed, I find sufficient cause for filing the appeal belatedly. Hon’ble Supreme Court has extended the time limit due to corona pandemic by an order M.A.No.665/2021 in SMW(C) No.3/2020 dt.15.07.2020 for the limitation falling during the period between 15.03.2020 to 14.03.2021 by 90 days from 15.03.2021. Therefore, this appeal is treated as filed within the limitation period and accordingly admitted for hearing. 3 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur 3. Brief facts of the case are that the assessee is an individual, deriving income from house property, income from real estate business, bank interest and agricultural income. The case was selected for scrutiny under CASS to examine whether the deduction claimed on account of business expenses is admissible. Notices were issued and served on the assessee and scrutiny proceedings were finalized by the AO u/s 143(3) of the Act, by disallowing 10% of total expenditure claimed towards “Marketing Commission” and “Site Development Expenses” which worked out to Rs.13,75,878/-, thus raising a demand of Rs.4,99,437/-. 4. On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) enhanced the assessment made. 5. On being aggrieved, the assessee preferred an appeal before the Tribunal and raised the grounds of appeal. Later, the grounds of appeal were revised, as the original grounds of appeal filed along with Form 36 are argumentative and not in accordance with the Income Tax Appellate Tribunal Rules. The revised grounds are as follows : 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 to the extent of Rs.6,87,939, the addition of 4 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur Rs.13,75,878 made by the assessing officer towards ad-hoc disallowance @10% of the marketing commission and site development expenses. 3. The learned Commissioner of Income Tax (Appeals) is not justified in enhancing the assessment by making addition of Rs.9,20,000 towards disallowance u/s 40A(3) of the Act in respect cash payment for purchase of land. 4. The expenditure towards purchase of land was not an issue which is subject matter of appeal before the learned Commissioner of Income Tax (Appeals) and hence the enhancement is outside the scope of powers conferred on learned Commissioner of Income Tax (Appeals). 5. Without prejudice to the above, even on merits the addition of Rs.9,20,000 is not warranted. 6. Any other ground that may be urged at the time of appeal hearing. 6. Ground No.1 and 6 are general in nature which does not require specific adjudication. 7. Ground No.2 is related to disallowance of 10% of expenditure claimed under the head marketing staff commission and site development expenses. The Ld.AR filed written submissions before the Tribunal and submitted that all the expenses are fully vouched and verifiable and produced the same from time to time. All the major expenses have been paid by crossed and account payee cheques. The Ld.AR further submitted that though the vouchers were self made, the same were prepared by the assessee on printed stationery and obtained 5 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur acknowledgements in token of the payments made. He, therefore, pleaded to delete the balance amount of 5% of the addition restricted by the Ld.CIT(A). 8. Per contra, the Ld.DR relied on the order of the Ld.CIT(A) and pleaded to uphold the same and dismiss the appeal of the assessee on this ground. 9. I have heard both the parties and perused the material available on record. The assessee has shown to have incurred site development expenses at Rs.75,47,115/- and marketing staff commission at Rs.62,11,670/-. The assessee was asked to produce details of targets given to each marketing staff, targets achieved by them , commission paid to each representative, complete addresses and also to produce the bills / invoices towards site development expenses during assessment / appeal proceedings. But the assessee failed to produce the same except ledger account extracts of these expenditure and self-made vouchers either during the assessment or appellate proceedings. Hence, the AO disallowed 10% of the said expenditure as the assessee failed to prove the genuineness of the expenditure. I also find from the order of the Ld.CIT(A) that the assessee has not produced any verifiable documents 6 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur before the Ld.CIT(A) also. The Ld.CIT(A) has therefore held that since the self made vouchers are not completely verifiable and since the assessee has not proved beyond doubt that the said expenditure is genuine, he directed the AO to restrict the disallowance to 5% of Rs.1,37,58,785/-. I also find that the assessee failed to provide any genuine vouchers before me. In the absence of cogent evidences produced either before the revenue authorities or before me, I find that no intereference is therefore required on this ground. Hence, I sustain the order of the Ld.CIT(A) on this ground. 10. Ground No.3 and 5 are related to disallowance of cash payments made of Rs.9,20,000/-. The Ld.AR submitted that, vide document No.16844 dated 21.10.2015, the assessee had purchased land from Sri M.Ramachandra Rao and Sri K.Venkata Subba Rao by paying total consideration of Rs.15,60,000/-, out of which Rs.6,00,000/- each was paid to the vendors and the balance amount of Rs.3,60,000/- was paid in cash. Similarly, vide document No.14770 dated 09.09.2015, the assessee had purchased land from Sri C.Rami Reddy and Sri C.Brahma Reddy, by paying total consideration of Rs.15,60,000/-, out of which Rs.5,00,000/- each was paid to the vendors and the balance amount of Rs5,60,000/- was paid in cash. The Ld.AR further submitted that the payments in cash 7 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur for purchase of plots were made at the time of agreements as the sellers insisted for part payment of cash, which was paid after withdrawing the amounts from the bank account hence, no disallowance u/s 40A(3) is warranted. 11. Per contra, the Ld.DR relied on the order of the Ld.CIT(A). He pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee on this ground. 12. I have heard both the parties and gone through the sale deeds filed in the paper book and other relevant records, from which it is evident that the assessee had made cash payments of Rs.5,60,000/- and Rs.3,60,000/- amounting to Rs.9,20,000/- at the time of agreement on two occasions. There is no merit in the argument of the Ld.AR that the payments in cash were at the instance of the vendors for their business expediency. The Ld.AR did not bring any material or confirmation from the vendors to substantiate that there is any business expediency for making payments in cash for purchase of the lands. Further, I also observe that the payments have been made by way of banking channels and also by cash and hence, the argument of the Ld.AR that the vendors are agriculturists and therefore, the amount is exempted under Rule 6DD 8 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur of the IT Rules is not sustainable. Further, I find from the order of the Ld.CIT(A) that the payments were not made on bank holidays to the vendors. No material was also placed before me, substantiating the business expediency of the vendors for the payment made by cash for purchase of lands. I am therefore, inclined to confirm the order of the Ld.CIT(A) on this ground. 13. Further, with respect to ground No.4, when the assessee has questioned the enhancement of the appeal, I am of the considered view that the Ld.CIT(A) has co terminus power with that of the AO as provided u/s 251(1A) of the Act, which is produced below for reference : Powers of the 84 [Joint Commissioner (Appeals) or the] Commissioner (Appeals). 251. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers— (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment; The Ld.CIT(A) has righly, after considering the materials on record and by exercising powers vested in him u/s 251(1)(a) of the Act, enhanced the assessment. I, therefore, find no infirmity in the order of the Ld.CIT(A) and the ground No.4 raised by the assessee is dismissed 13. In the result, appeal filed by the assessee is dismissed. 9 I.T.A. No.192/Viz/2020, A.Y.2016-17 Muppalla Sambasiva Rao,Guntur rder pronounced in the open court on 1 st June 2023. Sd/- (द ु व्वूरु आर.एल रेड्डी) (DUVVURU RL REDDY) न्याधयक सदस्य/JUDICIAL MEMBER Dated : 01.06.2023 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Sri Muppalla Sambasiva Rao, D.No.5-60/2-164 4/4, Ashok Nagar, Guntur 2. रधजस्व/The Revenue – The Income Tax Officer, Ward-2(2), Guntur 3. The Principal Commissioner of Income-Tax, Guntur 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT, Visakhapatnam 5..गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam