Sri Venkateswara Agencies, Hyderabad V. Income Tax Officer, Ward-5(1), Hyderabad

ITA 2054/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0857 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2015-2016
• Appeal Filed On: 16-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYA PRASHANT
• Keywords: Additional evidence
• Section: 133(6); 201; 20

Judgement Text

` IN 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. 2054 / HYD/201 8 ASSESSMENT YEAR: 20 15 - 16 SRI VENKATESWARA AGENCIES , HYDERABAD. PAN A BCFS 5748J VS. INCOME - TAX OFFICER, WARD 5 ( 1 ), HYDERABAD. APPELLANT RESPONDENT ASSESSEE BY: S HRI K.C. DEVDAS REVENUE BY: SHRI SATYA PRASHANT DATE OF HEARING: 18 / 0 2 / 201 9 DATE OF PRONOUNCEMENT: 27 / 0 3 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 4 , HYDERABAD, DATED, 1 3 /0 8 /201 8 FOR AY 20 15 - 16 . 2. BRIEF FACTS OF THE CASE ARE , ASSESSEE, A PARTNERSHIP FIRM AND DISTRIBUTOR OF SCOOPS ICE CREAMS , FILED ITS RETURN OF INCOME FOR THE AY 2015 - 16 ON 2 3/0 1 /201 6 ADMITTING TAXABLE INCOME OF RS. 18,26,140/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND THE AO ISSUED NOTICES ACCORDINGLY. IN RESPONSE TO THE NOTICES, THE AR OF THE ASSESSEE FILED THE INFORMATION CALLED FOR. 2.1 THE AO OBSERVED THAT ON PERUSAL OF THE PROFIT &. LOSS A /C , THE ASSESSEE SHOWN PU RCHASES TO THE TUNE OF RS. 19.62 CRORES FROM M / S SRI SRINIVASA DAIRY P RODUCTS PVT LTD(SSDPL). IT IS ALSO SEEN FROM THE BALANCE SHEET M / S S S DPL WAS SHOWN I.T.A. NO. 2054 /HYD/1 8 SRI VENKATESWARA AGENCIES, HYD. 2 AS SUNDRY CREDITORS TO THE EXTENT OF RS.6 , 59 , 29,369/ - . IN O RDER TO VERIFY THE GENUINENESS OF THE SAME, INFORMATION WAS CALLED FOR U / S 133(6) OF THE I. T. ACT FROM M / S SSDPL. IN RESPONSE, M/S SSDPL VIDE LETTER DATED 28.11 . 2017 HAS STATED THE CL OSING BALANCE OF THE ASSESSEE FIRM AS ON 31.03.2015 STANDS AT RS.6,93,03,554/ - AS AGAINST R S.6,59,29,369/ - AS SHOWN BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO RECONCILE THE DISCREPANCY. IN RESPONSE, THE ASSESSEE FURNISHED A RECONCILIATION STATEMENT ALONG WITH A LETTER FROM M / S SSDPL CONFIRMING THE ABO VE RECONCILIATION STATING THAT THESE ERRORS/DISCREPANCIES WERE RECTIFIED IN NEXT FINANCIAL YEARS. ON PERUSAL OF THE RECONCILIATION STATEMENT FILED, AO OBSERVED THAT PURCHASES AGGREGATING TO RS.18,89,198 IS NOT REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSE SSEE FIRM THOUGH THE SAME WERE RECORDED AS IN THE BOOKS OF M / S SSDPL. WHEN THE ASSESSEE WAS ASKED TO RECONCILE THE DISCREPANCY HE COULD NOT EXPLAIN SATISFACTORILY WITH SUPPORTING DOCUMENTARY EVIDENCE. THUS , THE PURCHASES AS WELL AS CORRESPONDING SALES HAVE NOT BEEN REFLECTED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM. IN THE ABSENCE OF DOCUMENTARY EVIDENCE, THE AO OPINED THAT THE ASSESSEE FIRM HAS MADE UNACCOUNTED PURCHASES TO THE TUNE OF RS.18,89,198/ - AND SOLD THE SAME OUT OF BOOKS. IN VIEW OF THE SAM E , RS.18,89,198/ - IS ADDED TO THE TOTAL INCOME AS UNACCOUNTED PURCHASES. FURTHER GROSS PROFIT@ 25% TO THE TUNE OF RS . 4 ,72,300/ - IS ESTIMATED ON SALE OF SUCH PURCHASES. HENCE, THE TOTAL ADDITION COMES TO RS. 23,61,498/ - (RS.18,89,198 + RS.4,72,3 00). 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). I.T.A. NO. 2054 /HYD/1 8 SRI VENKATESWARA AGENCIES, HYD. 3 4. BEFORE THE CIT(A), THE ASSESSEE FURNISHED AN ADDITIONAL EVIDENCE UNDER RULE 46A IN R ESPECT OF ADDITION OF RS. 23,61,498/ - TOWARDS DISALLOWANCE OF UNACCOUNTED PURCHASES AND GROSS PROFIT. THE CIT(A) FORWARDED THE SAME TO AO FOR EXAMINING AND SUBMITTING A REMAND REPORT. 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND RE MAND REPORT FROM THE AO, OBSERVED AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER, REMAND REPORT AND SUBMISSIONS OF THE APPELLANT. THE AO HAD ADOPTED @ 25% ON PURCHASES AS PROFIT. THE APPELLANT FAILED TO RECONCILE THE PURCHASES BEFORE APPELLATE PROCEEDINGS AND ALSO AT REMAND STAGE BEFORE THE AO. THEREFORE, THE ADDITION OF AO ADOPTING PROFITS IS CORRECT. BUT, AT THE SAME TIME AFTER CONSIDERING THE SUBMISSIONS OF THE APPELLANT, IT IS NOTICED THAT 25% GROSS PROFIT ON PURC HASES IS HIGHER SIDE AS AGAINST TO THE DISCLOSED PROFIT OF 2% BY THE APPELLANT. THEREFORE, THE AO IS DIRECTED TO ADOPT 2% OF THE GROSS PROFIT AS DISCLOSED BY THE APPELLANT ON THESE PURCHASES INSTEAD OF 25% SINCE THE AO NOT DISPUTED THE PROFIT DISCLOSED BY THE APPELLANT. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 4, HYDERABAD I N IN TREATING AND CONFIRMING THE ADDITION OF RS.18,89,198 AS UNACCOUNTED PURCHASES IS UNSUSTAINABLE BOTH IN LAW AND ON FACTS. 2. THE LD.CIT(A ) FAILED TO APPRECIATE THAT THE AMOUNT OF RS 18,89,198 DUE ON THE SAID PURCHASES ARE STILL SHOWN AS RECEIVABLE BY SRI SRINIVASA DAIRY PRODUCTS PRIVATE LIMITED IN THEIR BOOKS OF ACCOUNTS AND ALSO THE PURCHASES ARE ACCOUNTED AS PRIOR PERIOD EXPENDITURE IN THE BOOKS OF THE APPELLANT FIRM IN THE FY 2018 - 19. THEREFORE, TO HOLD THE SAME AS UNACCOUNTED PURCHASES IS NOT JUSTIFIED AND BAD IN LAW. 3. THE LD.CIT (A ) HAVING ESTIMATED THE GROSS PROFIT @ 2% ON THE SAID PURCHASES ON A PRESUMPTION THAT THE UNACCOUNTED PU RCHASES ARE SOLD CANNOT MAKE A SEPARATE ADDITION TOWARDS UNACCOUNTED PURCHASES. IT IS A SETTLED PRINCIPLE OF LAW THAT IN RESPECT OF UNACCOUNTED PURCHASES AND UNACCOUNTED SALES ONLY A PERCENTAGE OF I.T.A. NO. 2054 /HYD/1 8 SRI VENKATESWARA AGENCIES, HYD. 4 PROFIT SHOULD BE ADOPTED AS INCOME. THEREFORE, ERRED IN CON FIRMING AN AMOUNT OF RS 18,89,198 AS UNACCOUNTED PURCHASES. 4. ANY OTHER GROUND(S ) THAT MAY BE URGED AT THE TIME OF HEARING. 7. LD. AR ADMITTED THAT THE ASSESSEE HAS FAILED TO RECORD THE PURCHASES AND SUBMITTED THAT ASSESSEE CAN MAKE VALUE ADDITION ON THE PURCHASES IS ONLY THE PROFIT. AO AND LD. CIT(A) HAVE ALREADY ESTIMATED THE PROFIT AND THERE IS NO JUSTIFICATION OF MAKING ADDITION ON WHOLE PURCHASES. HE PRAYS FOR DELETION. 8. LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE ASSESSEE HAS FAILED TO RECORD PURCHASES TO THE EXTENT OF RS. 18,89,198/ - . IT WAS NOTICED BY THE AO DURING SCRUTINY. BY NOT RECORDING THE PURCHASES BY OMISSION, THE ASSESSEE MUST HAVE SOLD THE SAME AND MADE A PROFIT. IN OUR VIEW, AO CAN BRING TO TAX ONLY THE PROFIT EARNED BY THE ASSESSEE AND BRINGING THE PURCHASES, WHICH IS COST TO THE ASSESSEE TO TA X WILL INCREASE THE PROFIT MANY FOLD. AO IS EXPECTED TO CHARGE TAX ON REAL PROFIT. SINCE, LD. CIT(A) HAS DIRECTED AO TO ESTIMATE THE PROFIT @ 2% INSTEAD OF 25%, WE FURTHER DIRECT THE AO TO ESTIMATE THE PROFIT OF 2 % ON THE UNDISCLOS ED PURCHASES AS P ER LD. C IT(A) FINDING AND DELETE THE ADDITION OF PURCHASE, WHICH IS NOTHING BUT COST TO TH E ASSESSEE; IT CAN NEVER BE PART OF PROFIT. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. I.T.A. NO. 2054 /HYD/1 8 SRI VENKATESWARA AGENCIES, HYD. 5 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH , 201 9. SD / - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 27 TH MARCH , 201 9. KV COPY FORWARDED TO: 1. SRI VENKATESWARA AGENCIES, H.NO. 4 - 6 - 464 - 1, ESAMIA BAZAR , KOTI, HYDERABAD 500 0 27 2 . IT O , WARD 5 ( 1 ), 3 RD FLOOR, D BLOCK, IT TOWERS, AC GUARDS, HYDERABAD . 3 . CIT (A) - 4 , HYDERABAD 4. PR. CIT 4 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE