Garlapati Jagan Mohana Rao, Machilipatnam V. Deputy Commissioner of Income Tax, Circle-2(1), Vijayawada

ITA 235/VIZ/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0783 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 14-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 44AD; 142(1); 153A; 143(2); 48; 73

Judgement Text

आयकर अपीऱीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्ि ू रु आर एऱ रेड्डी, न्याययक सदस्य एिं श्री एस बाऱाक ृ ष्णन, ऱेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अऩीऱ सं./ I.T.A. No.235/Viz/2021 (ननधधारण वषा / Assessment Year :2014-15) Sri Garlapati Jagan Mohana Rao, Machilipatnam-521001. PAN:ARMPG 1332 L Vs. DCIT, Circle-2(1), Vijayawada. (अऩीऱधथी/ Appellant) (प्रत्यथी/ Respondent) अऩीऱधथी की ओर से/ Appellant by : Sri MV Prasad प्रत्यधथी की ओर से / Respondent by : Sri MN Murthy Naik, CIT-DR स ु नवधई की तधरीख / Date of Hearing : 10/05/2022 घोषणध की तधरीख/Date of Pronouncement : 30/05/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal is filed by the assessee against the order of the Ld. CIT(A)-12, Hyderabad in appeal No. 10284/2016-17, dated 29/09/2021 emanating from the order of the Ld. AO passed U/s. 143(3) r.w.s 153A of the Act for the AY 2014-15. 2 2. The assessee has raised the following grounds of appeal in his appeal: “1. The Ld. CIT(A) is erred in f acts as well as in the law while passing the order. 2. The Ld. CIT(A) erred in sustaining the addition of Rs. 29,53,580/- out of sundry creditors and advances f rom various millers of Rs. 77,53,580/- ignoring the f act that these are trade transactions. 3. The Ld. CIT (A) erred in making the addition towards sundry creditors /advances f rom various millers as the income was admitted U/s. 44AD by the appellant since no books of accounts were maintained. 4. The Ld. CIT(A) ignored the f act that during the course of search proceedings, a statement u/s. 132(4) of the IT Act was recorded and appellant categorically stated that he has not maintained books of account and he also pleaded that he is a paddy commission agent. 5. The Ld. CIT(A) and AO erred in making addition towards sundry creditors and advances taken from millers on one side and on other side accepting that the income was admitted u/s. 44AD in the return of income which is against the provisions of law. 6. The Ld. CIT(A) erred in not considering that when once no books of accounts have been maintained and prof it is estimated, no reliance can be placed again on the same books of accounts f or making f urther additions. 7. The appellant craves to add to, amend or modif y the above grounds of appeal either bef ore or at the time of hearing of the appeal, if it is considered necessary.” 3. Brief facts of the case are that the assessee is a paddy commission agent and also a commission agent for lorry transport business, and derives income from commission. On 16.03.2014 cash amounting to Rs 48 lakhs was seized from the assessee and since the assessee was unable to explain the 3 source, agreed to admit it as income for the AY 2014-15. Subsequently cash amounting to Rs.31,14,000/- was seized from the assessee by the Police on 30.03.2015 and handed over to the office of the DDIT (Inv.), Unit-11(1), Hyderabad. The cash received from police was remitted in to P.D Account of CIT(Central), Hyderabad on 8.4.2015. Search proceedings were initiated and notice U/s. 153A was issued on 2/8/2016 for the AY 2014-15 and duly served on the assessee. In response to the notice U/s. 153A, the assessee filed his return of income on 21/12/2016 admitting a total income of Rs. 4,11,510/- and agricultural income of Rs.1,50,000/-. Subsequently, statutory notices U/s. 143(2) and 142(1) are issued to the assessee. In response to the said notices, assessee’s representative appeared and filed the details called for by the AO. The assessee explained that the amount was received from Rice millers and payable to farmers, net of commission to assessee. The AO after considering the submissions made an addition towards unproved sundry creditors of Rs. 77,53,580/- and unexplained income / expenditure for Rs. 49,33,570/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the CIT(A). Before the CIT(A), the assessee’s representative pleaded that the assessee does not maintain any books of accounts and has disclosed 4 income u/s. 44AD of the Act. The assessee’s representative also submitted that since the income is estimated U/s. 44AD of the Act, no addition can be made with respect to trade creditors. Ld. AR also pleaded that the assessee has accepted the cash seized Rs. 48 lakhs as income of the assessee and has paid taxes thereon. Considering the submissions of the Ld. AR, the Ld.CIT(A) deleted the amount of Rs. 48 lakhs accepted by the assessee, as on account of receipt from sundry creditors and given the benefit of Rs. 48 lakhs from the addition of Rs. 73,55,380/- and directed that the balance amount of Rs. 29,53,580/- be added to the total income of the assessee. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 4. The Ld. AR vehemently argued that since the income is estimated by the Ld. AO, the addition of trade creditors should not be done based on the books of accounts. The Ld. AR also relied on the following case laws: 1. CIT vs. Bahubali Neminath Muttin [2016] 73 Taxmann.com 100 2. Indwell constructions vs. CIT [1998] 232 ITR 776 (AP) 3. CIT vs. Amman Steel and Allied Industries [2015] 377 ITR 568 5 The Ld. AR pleaded that when no reliance is placed on the books of account with respect to income, similar treatment is required for the trade creditors also. Ld. AR also submitted that as per the books of account the trade creditors for the year ending 31/3/2014 is Rs. 77,53,580/- as against the trade creditors of 31/3/2013 which stood at Rs. 62,32,009/- and pleaded that the addition to the creditors is only Rs. 15,21,571/- during the year and hence the entire addition made by the Ld. CIT(A) is not in accordance with law. The Ld. AR also submitted that the cash seized by the Department on 16 th March, 2014 which was returned to the assessee on subsequent date net of adjustment of taxes, is disclosed in the balance sheet at Rs. 48,64,919/-. 5. Per contra, the Ld. DR placed reliance on the orders of the authorities below. 6. We have heard the rival submissions and perused the materials available on record and orders of the authorities below. Admitted facts are that the assessee has filed his tax returns on presumptive basis and has admitted that no books of account has been maintained by him. The assessee admitted the same in his sworn statement recorded U/s. 132(4) of the Act in response to question No.10 which is reproduced below: 6 “10) Please state whether you are maintaining any books of account for the commission earned. Ans: I have not maintained any books for the commissioner earned by me.” 7. The Ld. AO also has not disputed that the cash seized were the amounts that have been received from trade creditors (Rice Millers). The Assessing Officer has also accepted the return of income filed U/s. 44AD of the Act. It is also observed from the order of the AO that the AO has not examined the books of accounts. In this scenario placing reliance on the statement of affairs submitted by the assessee with respect to trade creditors is not correct. In the case of CIT vs. Bahubali Neminath Muttin (supra) it has been held that when the income is estimated no addition would be made with respect to trade creditors. The ratio laid down in this judgment is extracted below: “15. The principle that if a finding of fact is not challenged as being perverse, the High Court is bound to accept such finding. Therefore, as no such substantial question of law has been framed and the questions pertain to finding of fact, which cannot be said to be perverse as it is evident that the books of accounts of the respondent had not been rejected by the assessing authority, in which case the same books of accounts could not be relied upon in an addition on account of trade creditors and also for arriving at the closing stock. This is an established principle as has been held in the decisions relied upon by the respondent namely Indwell Constructions case (supra), Banwari lal Banshidhar’s case (supra), Aggarwal Engg. Co.’s case (supra) and Amman Steel & Allied Industries Case (supra).” 7 8. Respectfully following the ratio laid down in the case referred above, we hereby delete the addition of Rs. 29,53,580/- made by the CIT(A). 9. Since the Ground No.2 is adjudicated, the legal issue raised in Grounds No. 3 to 6 become infructuous. Grounds No.1 and 7 are general in nature and need not be adjudicated. 10. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 30 th May, 2022. Sd/- Sd/- (द ु व्ि ू रु आर.एऱ रेड्डी) (एस बाऱाक ृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER Dated : 30.05.2022 OKK - SPS 8 आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the order forwarded to:- 1. ननधधाररती/ The Assessee – Sri Garlapati Jagan Mohana Rao, D.No.60-7-13, Ground Floor, Siddhartha Nagar, 4 th Lane, Vijayawada. 2. रधजस्व/The Revenue – DCIT, Circle-2(1), Vijayawada. 3. The Principal Commissioner of Income Tax, Vijayawada. 4. आयकर आय ु क्त (अऩीऱ)/ The Commissioner of Income Tax (A)-12, Hyderabad. 5. पवभधगीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, पवशधखधऩटणम/ DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईऱ / Guard file आदेशधन ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam