BHASKARA RAO GUDLA, SRIKAKULAM V. INCOME TAX OFFICER, WARD-1, SRIKAKULAM

ITA 224/VIZ/2022

AI Insights

The case involves Bhaskara Rao Gudla, a vegetable trader, who did not initially file a return of income for the Assessment Year 2015-16 as his income was below the taxable limit. However, following the reopening of his case by the Assessing Officer due to significant cash deposits and withdrawals noted in his bank account, an assessment was made treating both deposits and withdrawals as business transactions. The Income Tax Officer estimated the income at 10% of the total of these transactions. The Commissioner of Income Tax (Appeals) later reduced this to 8% but upheld the inclusion of withdrawals as turnover. The Tribunal found that including withdrawals as turnover led to double taxation and remitted the matter back to the Assessing Officer to correct this.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135907 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 09-11-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 147; 148; 250

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.224/Viz/2022 (ननधधारण वर्ा / Assessment Year : 2015-16) Bhaskara Rao Gudla D.No.10-05-42 Prakash Building Kaling Road Market Street Srikakulam [PAN : AHRPG2923Q] Vs. Income Tax Officer Ward-1 Srikakulam (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri C.Subrahmaniam, AR प्रत्यधथी की ओर से / Respondent by : Shri ON Hari Prasad Rao, DR सुनवधई की तधरीख / Date of Hearing : 01.12.2022 घोर्णध की तधरीख/Date of Pronouncement : 16.02.2023 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No.ITBA/NFAC/S/250/2022-23/ 1046187321(1) dated 06.10.2022 for the Assessment Year (A.Y.) 2015- 16. 2. Brief facts of the case are that the assessee is an individual, engaged in the business of vegetable trading, whereby, he procures vegetables 2 I.T.A. No.224/Viz/2022, A.Y. 2015-16 Bhaskara Rao Gudla, Srikakulam from the farmers and sells them to the vegetable vendors. The assessee also earns insurance commission. During the subject assessment year, the assessee did not file return of income, since income was below taxable limit. The case was reopened by the Assessing Officer (AO), stating that there were cash deposits and cash transactions appearing in the assessee’s bank account. Accordingly, notice u/s 148 of the Income Tax Act, 1961 (in short ‘Act’) was issued on 31.03.2021. Further notices were issued calling for details. In response to the notices, the assessee filed his submissions along with computation of total income and bank statements. The AO completed the assessment u/s 147 r.w.s. 144B of the Act by treating both the cash deposits in the bank account at Rs.1,78,81,720/- and cash withdrawals from bank account at Rs.1,91,17,202/- as business transactions and estimated income at 10% of Rs.3,69,98,740/- (1,78,81,720 + 1,91,17,202) at Rs.36,99,874/-. Besides, the AO also added an amount of Rs.2,03,295/- towards insurance commission. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) has partly allowed the appeal of the assessee by directing the AO to recompute the profit of the assessee @8% of the turnover, sales or gross receipts instead of 10%. 3 I.T.A. No.224/Viz/2022, A.Y. 2015-16 Bhaskara Rao Gudla, Srikakulam 4. Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before the Tribunal and raised the following grounds : 1. That under the facts and circumstances of the case the orders passed under the provisions of section 250 of the I.T.Act is contrary to the facts of the case and provisions of law. 2. The Ld.CIT(A)-NFAC erred in confirming the action of AO wherein the AO, having resorted to estimation of income on the cash deposits in the bank of Rs.1,78,81,720/-, considering the same as business turnover of assessee, on which there is no dispute, also considered the cash withdrawals from assessee’s bank account of Rs.1,91,17,202/- as turnover and estimated income thereon, which is disputed in the present appeal. 3. For these and other grounds that are to be urged at the time of hearing of the appeal, the appellant prays that the order passed by the Ld.CIT(A)-NFAC is liable to be set aside to the extent that is contested in the present appeal. 5. Ground No.1 and 3 are general in nature, which do not require specific adjudication. 6. Ground No.2 is related to treating the cash withdrawals from assessee’s bank account as turnover and estimating the income thereon. The Ld.AR argued that the Ld.CIT(A)-NFAC erred in confirming the addition made by the AO treating the cash withdrawls from bank account as turnover and estimating the income @10% which was confirmed by the Ld.CIT(A) at 8%. He therefore pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the assessee on this ground. 4 I.T.A. No.224/Viz/2022, A.Y. 2015-16 Bhaskara Rao Gudla, Srikakulam 7. Per contra, the Ld.DR relied on the order of the Ld.CIT(A), pleaded to uphold the order passed by the Ld.CIT(A) and dismiss the appeal of the assessee on this ground. 8. We have heard both the parties and perused the material placed on record. The assessee being a vegetable trader has made cash withdrawals of Rs.1,91,17,020/- from his bank account and deposited Rs.1,78,81,720/- in cash during the relevant year. The AO has added these amounts and computed profit @10% on the same, considering the cash deposits and cash withdrawals as business turnover of the assessee. The Ld.AR disputed that the cash withdrawals from assessee’s bank account for Rs.1,91,17,202/- was erroneously treated as turnover and income was estimated thereon @10% on such withdrawals without taking into cognizance that the withdrawals are out of cash deposits, which amounts to double taxation. After careful examination of the records available before us, we find that the AO resorted to estimation of income @10% by adding the cash deposits and withdrawals, without examining the fact that the withdrawals were made out of cash deposits. The Ld.CIT(A), thereby directed the AO to estimate the profit @8% without considering the fact that cash withdrawals are out of cash deposits. We are of the considered opinion that cash withdrawals 5 I.T.A. No.224/Viz/2022, A.Y. 2015-16 Bhaskara Rao Gudla, Srikakulam cannot be considered as turnover, as it is out of cash deposits, which is already taxed @8%. The assessee has also not disputed and accepted the same. Therefore, we remit the matter back to the file of the AO and direct to treat cash deposits as the turnover of the assessee and estimate the profit @8% on sales turnover (cash deposits only). 9. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 16 th February, 2023. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER Dated : 16.02.2023 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee– Shri Bhaskara Rao Gudla, D.No.10-05-42, Prakash Building, Kaling Road Market Street, Srikakulam 2. रधजस्व/The Revenue – The Income Tax Officer, Ward-1, Srikakulam 3. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi 4. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम / DR,ITAT, Visakhapatnam .5गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam