Vikas Kumar Hisariya, Sec'bad, Hyderabad V. ITO, Hyderabad

ITA 251/HYD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69937 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-10-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANJALA SAHU
• Assessee Lawyers: TEJ PRAKASH TOSHNIWAL
• Keywords: Unexplained cash credit; Unexplained investment; Opportunity of being heard; Additional evidence; Revised return
• Section: 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.251/HYD/2011 ASSESSMENT YEAR 2004-2005 VIKAS KUMAR HISARIYA, PROP. M/S. VISHAL PERIPHERALS, SECUNDERABAD PAN AFHPM1954P VS. ITO, WARD 10(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI TEJPRAKASH TOSHNIWAL (A.R.) FOR RESPONDENT : SMT. ANJALA SAHU (D.R.) DATE OF HEARING : 24.09.2013 DATE OF PRONOUNCEMENT : 13.11.2013 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. MISCELLANEOUS PETITION 47/HYD/2013 FILED BY THE ASSESSEE SEEKING FOR RECALL /RECTIFICATION OF THE O RDER DATED 4 TH JULY, 2012 IN ITA. NO. 251/HYD/2011 FOR THE ASSESSMENT YE AR 2004- 2005 AND THE CASE HAS BEEN RECALLED BY ORDER DATED 08.03.2013 AND THEREFORE, THE APPEAL ITA.NO.251/HYD/2011 HEARD AFRESH. 2. BRIEF FACTS ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-2005 ON 25.10.2004, DE CLARING TOTAL INCOME AT RS.2,53,606/-. THEREAFTER, THE ASSESSEE F ILED REVISED RETURN ON 29.11.2004 DECLARING INCOME OF RS.19,10,6 99/- ON THE GROUND THAT SET-OFF OF LOSSES FOR ASSESSMENT YEAR 2 003-2004 WAS ADDED IN THE RETURN. SURVEY OPERATION WAS CONDUCTED ON THE 2 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. ASSESSEES PREMISES DURING THE ASSESSMENT YEAR 2003 -2004. DURING THE COURSE OF SURVEY OPERATION, THE ASSESSEE ADMITT ED LOAN CREDITORS AS UNEXPLAINED CREDITS FOR AN AMOUNT OF RS.30,80,37 3/- AND THE ASSESSING OFFICER ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2003-2004. 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED INTEREST ON SUCH CASH CREDITS, WHICH WAS NO T ALLOWABLE AND HENCE, THE A.O ISSUED A NOTICE U/S 14 8 OF THE I.T. ACT 1961 DATED 23-10-2006 AND SERVED UPON THE ASSESSEE ON SUCH INTEREST ESCAPED ASSESSMENT. THERE AFTER, NOTICES UNDER SECTION 143(2) AND 142(1) WERE ISSUED FROM TIME TO TIME AND THE ASSESSMENT WAS COMPLETED WITH THE FOLLOWING ADDITIONS: A) INTEREST DISALLOWED RS.2,38,002/ - B) STOCK DIFFERENCE AS PER THE SALES TAX ORDER RS.2,63,194/ - C) DISALLOWANCE OF COMPOUNDING FEE RS. 21,056/ - 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE INTER EST ON THE LOAN CREDITORS SHOULD BE DISALLOWED AND BROUGHT TO TAX. IN THE CASE OF LOAN CREDITORS VIZ., KISHORILAL HISARIY A, AN INTEREST OF RS.36,018/-, PRAHALAD PRASAD HISARIYA(HUF), AN A MOUNT OF RS.94,036/- AND SRI PRAHALAD PRASAD HISARIYA AN AMOUNT OF RS.L,07,948/- WAS FOUND RECORDED AS INTEREST PAI D. THE LEARNED A.R. OF THE ASSESSEE VIDE LETTER DATED NIL SUBMITTED THAT 'TO PURCHASE PEACE FROM THE DEPARTMENT, WE OFFER TO TREAT SUCH CREDITS AS CASH CREDITS BUT THE LOAN CRE DITORS AMOUNT HAS NOT BEEN TRANSFERRED TO THE CAPITAL OF THE 3 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. PROPRIETOR'. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER SINCE THE ASSES SEE HIMSELF OFFERED TO TREAT THE LOAN CREDITORS AS UNEX PLAINED CASH CREDITS AND OFFERED THE SAME TO TAX. 5. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT WAS SEEN THAT THERE WAS A SALE-TAX INSPECTION ON THE ASSESSEE'S PREMISES AND THE SALES TAX AUTHORITIES F OUND A STOCK DIFFERENCE OF RS.2,63,194/-. THE LEARNED A.R. OF THE ASSESSEE WAS ASKED TO SHOW-CAUSE AS TO WHY THE DIFF ERENCE OF RS.2,63,194/- SHOULD NOT BE TREATED AS THE INCOME O F THE ASSESSEE AS UNEXPLAINED INVESTMENT. VIDE LETTER DAT ED 27/9/2007, THE A.R. OF THE ASSESSEE STATED THAT THE SALES TAX AUTHORITY ARRIVED AT THE VALUE OF THE BOOK STOCK ON THE BASIS OF THE GROSS PROFIT METHOD AND THE ASSESSEE MAINTAI NED THE STOCK REGISTER OF EACH ITEM AND NO DIFFERENCE WAS F OUND IN QUANTITY. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER AS THE ASSESSEE D ID NOT PRODUCE ANY EVIDENCE TO THIS EFFECT THAT THERE WAS NO DIFFERENCE IN THE QUANTITATIVE TERMS OF THE STOCK. IT WAS ALSO STATED IN THE ORDER THAT THE ASSESSEE DID NOT AGITA TE OR CONTEND THIS ISSUE BEFORE THE SALES TAX AUTHORITIES AND PAID THE COMPOUNDING FEE LEVIED BY THE SALES TAX AUTHORI TIES WHICH PROVED THAT THERE WAS A DIFFERENCE IN THE VAL UE OF THE STOCK AND ACCORDINGLY, THE DIFFERENCE IN STOCK OF RS.2,63,194/- WAS ADDED BACK TO THE INCOME OF THE A SSESSEE. 6. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT THE COMPOUNDING FEE OF RS.21,05 6/- WAS 4 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. PAID TO THE SALES TAX AUTHORITIES WHICH AROSE ON AC COUNT OF THE STOCK DIFFERENCE DURING THE COURSE OF THE INSPE CTION. SINCE THE COMPOUNDING FEE IS NOT AN ALLOWABLE EXPEN DITURE, THE SAME HAS BEEN ADDED BACK TO THE INCOME OF THE A SSESSEE. 7. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE CIT(A). THE ASSESSEE CHALLENGED THE JURISDICTION OF THE INCOME TAX OFFICER TO PASS ORDERS IN ASSESSEES CASE. FURT HER, WITH RESPECT TO MERITS DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THE INCOME TAX RETURNS IN T HE CASE OF LOAN CREDITORS VIZ., MR. KISHORILAL HISARIYA RS.36, 018/-, MR. PRAHLAD PRASAD & SONS (HUF) RS.94,036/- AND MR. PRA HLAD PRASAD HISARIYA RS.1,07,948/- AGGREGATING TO RS.2,3 8,0902/- TO SHOW THAT LOAN CREDITORS HAD THE CAPACITY TO LEN D MONEY TO THE ASSESSEE. THE LEARNED CIT(A) HELD AS FOLLOWS : 9.0. . . . . . .A PERUSAL OF THE RETURN SHOWS CONTRARY. MR.PRAHALAD PRASAD HISARIYA(HUF) FILED ITS RETURN OF INCOME FOR THE A.Y. 2004-05 ON 29/12/2004, MR. PRAHALAD PRASAD HISARIYA FILED HIS RETURN OF INCOME ON 27-12-2004, MR. KISHORILAL HISARIYA FILED HIS RETURN OF INCOME ON 17-12-2004 AT SEETHAMARHI. ALL THESE RETURNS WERE FILED ONLY AFTER THE SURVEY TOOK PLACE AT THE ASSESSEE'S PLACE AND DURING THE SURVEY, THESE LOAN CREDITORS WERE ALREADY ADMITTED BY THE ASSESSEE AS CASH CREDITS. NO RETURN PRIOR TO THIS PERIOD IN THE CASE OF THE ABOVE PERSONS WERE FILED BY THE ASSESSEE TO SHOW THAT THEY HAVE THE CAPABILITY TO EXTEND LOANS TO TH E ASSESSEE. THE ASSESSEE ALSO DID NOT FILE ANY WRITTEN ARGUMENTS TO SHOW OR SUBSTANTIATE THE CREDITWORTHINESS OF THE CREDITORS TO EXTEND SUCH LOANS. JUST FILING THE RETURNS DOES NOT PROVE THAT THEY ARE CAPABLE TO EXTEND SUCH LOANS. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS UPHELD. 5 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. 8. THE CIT(A) SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 9. WITH RESPECT TO THE SECOND ISSUE THE FACT IS THA T THERE WAS SALES TAX INSPECTION ON THE ASSESSEES PREMISES AND THE SALES TAX AUTHORITIES FOUND A STOCK DIFFERENCE AT RS.2,63,194/-. THE CIT(A) HELD THAT : 10.0. THE APPELLANT DID NOT SUBMIT ANY EVIDENCE PERTAINING TO THE ASSESSMENT OF THE DIFFERENCE IN STOCKS BY THE SALES TAX AUTHORITIES, HIS CONTEST PERTAINING TO THE VALUATION OF QUANTITATIVE STOCK, ETC. IT IS FOUND THAT THE ASSESSEE PAID COMPOUNDING FEE LEVIED BY THE SALES TAX AUTHORITIES ON THE DIFFERENCE IN THE VALUE OF STOCK. SINCE THE DIFFERENCE IN STOCK IS ALSO NOT EXPLAINED DURING THE ASSESSMENT PROCEEDINGS U/S 143, IT SEEMS THAT THE APPELLANT DID NOT HAVE ANY EVIDENCE TO SUBSTANTIATE THIS EXPENDITURE INCURRED IN PURCHASE OF STOCKS. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.2,63,194/- IS UPHELD AS INCOME OF THE APPELLANT IN THE FORM OF UNEXPLAINED INVESTMENT IN STOCKS. 10. THE LAST ISSUE IS WITH RESPECT TO DISALLOWANCE O F COMPOUNDING FEES OF RS.21,056/- BY THE INCOME TAX O FFICER STATING THAT IT IS NOT AN ALLOWABLE EXPENDITURE. TH E CIT(A) ALSO CONFIRMED THAT THE COMPOUNDING FEES IS NOT ALLO WABLE EXPENDITURE INCURRED DURING THE COURSE OF BUSINESS A ND UPHELD THE ORDER OF THE ASSESSING OFFICER. 11. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE TRIBUNAL. IT WAS SUBMITTED THAT THE INCOME TAX APPEAL FILED BEFORE THE HON'BLE INCOME TAX APPELLATE TRIBUNAL AT HYDERABAD 6 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. AGAINST THE ASSESSMENT ORDER PASSED FOR THE ASSESSM ENT YEAR 2004- 05 DISALLOWING CERTAIN DEDUCTIONS AND ADDITION MADE ON ACCOUNT OF STOCK VARIATION NOTICED BY THE COMMERCIAL TAX OFFIC ER. THE ABOVE SAID ADDITION MADE BY THE INCOME TAX OFFICER ARE NO T SUSTAINABLE, IN VIEW OF THE FACTS THAT THE PETITIONER WHO MADE T HE INTEREST PAYMENT TO THOSE CREDITORS HAVE DECLARED THE SAID R ECEIPT OF INTEREST IN THEIR RETURNS OF INCOME AND THE SAID RETURNS OF INCOME HAVE BEEN FILED WITH THE INCOME TAX DEPARTMENT BY THE RESPECT IVE ASSESSES. COPIES OF THE SAID RETURN OF INCOME ARE ENCLOSED AS ADDITIONAL EVIDENCE TO BRING THE SAID FACT ON RECORD. THE OBSE RVATION OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT SURVEY TO OK PLACE IN THE ASSESSMENT YEAR 2003-04 AND THE RETURNS OF INCOME W ERE FILED SUBSEQUENTLY, IS NOT SUSTAINABLE SINCE THOSE ASSESS ES ARE VERY OLD ASSESSEES WITH THE DEPARTMENT. IT IS RESPECTFULLY S UBMITTED THAT THE ASSESSMENT YEAR UNDER APPEAL IS 2004-05 AND NOT 200 3-04. NO ASSESSEE CAN FILE RETURN OF INCOME IN 2003-04 FOR T HE ASSESSMENT 2004-05. 12. IT WAS FURTHER SUBMITTED THAT THE ABOVE DIFFERE NCE IS DUE TO ARITHMETICAL ERRORS IN THE CALCULATION, WHICH RESUL TED IN DIFFERENCE IN THE STOCK. AGAINST THE ASSESSMENT ORDER PASSED BY T HE COMMERCIAL TAX OFFICER IN MAKING THE ADDITION, THE PETITIONER PREFERRED AN APPEAL TO THE APPELLATE DEPUTY COMMISSIONER VIDE AP PEAL NO.S/221/2007-08 AND THE SAID APPEAL WAS REMANDED B ACK TO THE ASSESSING AUTHORITY TO REDO THE WORKING OF THE CALC ULATION ERRORS. THE ASSESSEE HAS ENCLOSED THE XEROX COPY OF THE PHY SICAL STOCK INVENTORY NOTED DOWN BY THE INSPECTING AUTHORITY AN D THEIR CALCULATION ERRORS WITH THE APPEAL ORDER TOGETHER W ITH NEAT COPY TO SUBSTANTIATE THAT THE ABOVE SAID ADDITION OF RS.2,6 3,194/- MADE BY 7 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. THE COMMERCIAL TAX OFFICER IS NOT SUSTAINABLE. 13. THE LEARNED D.R. ON THE OTHER HAND RELIED ON TH E ORDER OF THE LOWER AUTHORITIES. 14. WE HAVE HEARD BOTH THE PARTIES. SINCE THE ASSES SEE HAS BROUGHT ADDITIONAL EVIDENCE ON RECORD IN THE APPEAL FILED FOR THE ASSESSMENT YEAR 2004-2005 VIZ., COPIES OF THE SAID RETURN OF INCOME FILED BY THE RESPECTIVE ASSESSEES DISCLOSING THE I NTEREST INCOME, AND THE ORDER OF THE APPELLATE DEPUTY COMMISSIONER (CT) SECUNDERABAD DIVISION, HYDERABAD IN APPEAL NO.S/221/07-08 DATED 21.01.2009 WHO SET ASIDE THE ORDER OF THE COMMERCIA L TAX OFFICER VIDE ORDER DATED 27.12.2005 IN LEVYING SALE S TAX ON DIFFERENCE TURNOVER OF RS.2,63,194/- AND REMANDED B ACK THE MATTER TO THE COMMERCIAL TAX OFFICER FOR RE-WORKING OF CALCULATION ERRORS. WE, THEREFORE, REMIT THE ISSUE T O THE FILE OF THE ASSESSING OFFICER TO RECONSIDER THE ISSUE DEN OVO IN THE LIGHT OF ADDITIONAL EVIDENCE PRODUCED BY THE AS SESSEE AND DECIDE THE CASE IN ACCORDANCE WITH LAW, AFTER G IVING A DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.11.2013. SD/- SD/- (CHANDRA POOJARI) (SMT. ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 13.11.2013 VBP/- 8 ITA.NO.251/H/2011 VIKAS KUMAR HISARIYA, SECUNDERABAD. 1. VIKAS KUMAR HISARIYA, PROP. M/S. VISHAL PERIPHER ALS, SECUNDERABAD C/O. TEJPRAKASH TOSHNIWAL, ADVOCATE, 4-1-6/B/4, RAMKOTE, HYDERABAD 500095. 2. INCOME TAX OFFICER, WARD NO. 10(2), HYDERABAD. 3. CIT(A) - VI, 6A, I.T. TOWERS, A.C. GUARDS, HYDERABAD 500 004. 4. CIT - V, HYDERABAD 5. D.R. ITAT B BENCH, HYDERABAD .