Sri M Kasi Visweswarudu, Vizianagaram, Visakhapatnam V. The DCIT, Central Circle-2, Visakhapatnam

ITA 262/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50172 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Keywords: Search and seizure; Opportunity of being heard

Judgement Text

ITA NO 262 OF 2010 M.KASI VISWESWARUDU VIZIANAGARA M PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 262/VIZAG/2010 ASSESSMENT YEAR: 2006-07 M. KASI VISWESWARUDU, VIZIANAGARAM VS. DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2, VISAKHAPATNAM (APPELLANT) PAN NO: ABVPM 2320 H (RESPONDENT) APPELLANT BY: SHRI Y.A. RAO, CA RESPONDENT BY: SHRI R.K. SINGH, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28.01.2010 PASSED BY LEARNED CIT(A), VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS SIX GR OUNDS, ALL ARE DIRECTED AGAINST THE ADDITION OF RS.30.00 LAKHS CON FIRMED BY LEARNED CIT(A). 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS CARRYING ON THE BUSINESS OF TRADING IN POULTRY FEED UNDER THE NAME M/S MAYURI AGENCIES. BESIDES THE ABOVE, THE ASSESSEE IS ALSO THE MANAGING DIRECTOR OF VIZIANAGARAM CITY COMMUNICATIONS AND AL SO MANAGING PARTNER IN VIZIANAGARAM CABLE NETWORK. SEARCH AND SEIZURE OPER ATIONS WERE CONDUCTED IN THE CASE OF M/S. R.K. REAL ESTATES GRO UP ON 6-10-2006. DURING THE COURSE OF SEARCH, A COMBINED TRIAL BALAN CE OF TWO CONCERNS NAMED M/S MAYURA RESTAURANT & BAR AND M/S VIZIANAGA RA RESTAURANT & BAR ITA NO 262 OF 2010 M.KASI VISWESWARUDU VIZIANAGARA M PAGE 2 OF 6 FOR THE PERIOD FROM 1.1.2006 TO 30.6.2006 WAS FOUND . IN THAT TRIAL BALANCE A CAPITAL OF RS.30.00 LAKHS WAS FOUND TO BE SHOWN A GAINST THE NAME M.K.V.. BASED ON THE SAID TRIAL BALANCE, THE ASS ESSING OFFICER PRESUMED THAT THE ASSESSEE HAS INVESTED A SUM OF RS.30.00 LA KHS IN THE ABOVE SAID TWO CONCERNS. IN THIS REGARD THE ASSESSING OFFICER ISSUED A SHOW CAUSE NOTICE ASKING FOR EXPLANATION OF INVESTMENT OF RS.3 0.00 LAKHS MADE BY THE ASSESSEE IN THE MAYURA RESTAURANT & BAR AND VIZIANA GARA RESTAURANT & BAR. IT WAS EXPLAINED THAT THE ABOVE SAID TWO CONCERNS BE LONG TO TWO PERSONS VIZ., SHRI M. RAVI KUMAR AND SHRI NALLAMMATI VENKAT ESWARA RAO AND FURTHER THE ASSESSEE DENIED OF MAKING ANY SUCH INVESTMENT I N THOSE TWO CONCERNS. THE RELEVANT EXPLANATIONS FURNISHED BY THE ASSESSEE ARE EXTRACTED BELOW: THE ASSESSEE HAS APPLIED FOR COPIES OF SWORN STATE MENTS RECORDED FROM MR. M. RAVI KUMAR AND N. VENKATESWARA RAO AND MR. N. MAHESWARA RAO AND MR.M. KASI VISWESWARUR U PETITIONS FILED ON 14-11-08 AND 10-12-08. THE ASSES SEE UNDERSTAND FROM MR. M. RAVI KUMAR AND MR. N. VENKAT ESWARA RAO AND THEY HAVE NEVER STATED IN THE STATEMENT THA T AMOUNTS WERE RECEIVED BY THEM FROM THE ASSESSEE, IN ORDER TO MAKE INVESTMENTS, IN THE BUSINESS CARRIED ON BY THEM. THE ASSESSEE REQUESTS YOUR HONOUR TO SUPPLY COPIES OF S WORN STATEMENTS SINCE THE ASSESSING OFFICER PROPOSED TO MAKE ADDITIONS BASED ON THE STATEMENTS RECORDED. INCIDENT ALLY THE ASSESSEE WOULD LIKE TO SUBMIT EVEN AT THE TIME OF P ROCEEDINGS UNDER SECTION 132(4) THE ASSESSEE DENIED ANY INVOLV EMENT WITH REFERENCE TO THE ABOVE FIRMS. THE ASSESSEE SHALL FURNISHE DETAILED EXPLANATIONS AFTER THE RECEIPT OF COPIES OF SWORN STATEMENTS ON THE BA SIS OF WHICH THE ASSESSING OFFICER PROPOSED TO MAKE ADDITI ON OF RS.30,00,000/- FOR ASSESSMENT YEAR 2006-07. THE ASS ESSEE WISH TO SUBMIT THE ASSESSING OFFICER IN HIS LETTER MADE GENERAL OBSERVATIONS OF THE SEARCH AND SEIZED PROCE EDINGS, WHICH DO NOT JUSTIFYING THE CLAIM OF THE ASSESSING OFFICER THAT THE ASSESSEE MADE INVESTMENT OF RS.30,00,000/-. THE ASSESSEE MAY BE SUPPLIED THE BASIS ON WHICH THE ASS ESSING OFFICER PROPOSED TO MADE THE ADDITION OF RS.30,00,0 00/- SINCE ANY ADDITIONS CAN BE MADE WITH REFERENCE TO MATERIA LS EVIDENCING INVESTMENT SEIZED AT THE TIME OF SEARCH. ITA NO 262 OF 2010 M.KASI VISWESWARUDU VIZIANAGARA M PAGE 3 OF 6 THE ASSESSEE WOULD LIKE TO SUBMIT THAT THE ABOVE PE RSONS WERE NOT CONNECTED TO THE ASSESSEE EXCEPT THEY WERE KNOWN TO THE ASSESSEE EXCEPT MR. MAHESWARA RAO SINCE A LO NG TINE, WHICH DO NOT JUSTIFY THE ACTION OF THE ASSESSING OF FICER. INCIDENTALLY, THE ASSESSEE WOULD LIKE TO SUBMIT MR. N. RAVI KUMAR, N. MAHESWARA RAO AND MR. N. VENKATESWARA RAO WERE ASSESSED TO INCOME TAX EVEN PRIOR TO DATE OF S EARCH AND NO DISCREPANCIES WERE NOTICED BY THE DEPARTMENT, IN THE RETURNS FILED BEFORE THE DEPARTMENT BEFORE THE DATE OF SEARCH. THE ASSESSEE WOULD LIKE TO SUBMIT THEY ARE ALL INDEPENDENT ASSESSEE, WHO OBTAINED LICENSES UNDER E XCISE ACT AND CARRIED ON BUSINESS. THE ASSESSEE REQUESTS YOUR HONOUR TO GRANT 3 DAYS TIME FOR WILING OBJECTIONS, SINCE T HE ASSESSEE REQUIRES TO STUDY SWORN STATEMENTS TO FILE FINAL OB JECTIONS SO AS TO ENABLE THE DEPARTMENT TO DROP PROPOSED ADDITI ON. IN THE SWORN STATEMENTS TAKEN FROM SHRI M. RAVI KUMA R, ONE OF THE OWNERS OF THE ABOVE SAID CONCERNS, IT WAS STATED BY HIM TH AT THE TWO CONCERNS ARE RUN UNDER COMMON MANAGEMENT AND THE KEY PERSON IS T HE ASSESSEE HEREIN. IT WAS ALSO STATED THAT THE ACCOUNTS OF THE CONCERNS ARE WRITTEN BY A COMMON ACCOUNTANT. THE ASSESSING OFFICER ALSO TOOK THE VIEW THAT THE LICENSE HOLDERS OF THE TWO CONCERNS VIZ., SHRI M. R AVI KUMAR AND SHRI N. VENKATESWARA RAO DO NOT HAVE THE FINANCIAL CAPACITY TO ESTABLISH THE RESTAURANT AND BAR. ACCORDINGLY THE ASSESSING OFFIC ER CAME TO THE CONCLUSION THAT THE CIRCUMSTANTIAL EVIDENCES SHOW T HAT THE TWO PERSONS CITED ABOVE ARE ONLY BENAMIDARS OF THE ASSESSEE HER EIN AND THE ASSESSEE HEREIN, BEING A MAJOR SHARE HOLDER OF THE TWO CONCE RNS, HAS INVESTED THE IMPUGNED AMOUNT OF RS.30.00 LAKHS IN THE SAID CONCE RNS. HENCE THE ASSESSING OFFICER TREATED THE CAPITAL BALANCE OF RS .30.00 LAKHS SHOWN IN THE TRIAL BALANCE CITED ABOVE AS THE UNEXPLAINED INVEST MENT OF THE ASSESSEE. THE LEARNED CIT (A) ALSO CONFIRMED THE SAID ADDITIO N. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE TWO CONCERNS REFERRED ABOVE, VIZ., M/S MAYURA RESTAURAN T & BAR AND VIZIANAGARAM RESTAURENT & BAR ACTUALLY BELONG TO SH RI M. RAVI KUMAR AND ITA NO 262 OF 2010 M.KASI VISWESWARUDU VIZIANAGARA M PAGE 4 OF 6 SHRI N. VENKATESWARA RAO AND THEY ONLY HAVE OBTAINE D LICENCE IN THEIR RESPECTIVE NAMES FOR RUNNING THE BUSINESS. THE ASS ESSEE IS IN NO WAY CONNECTED TO THE BUSINESS OF THE ABOVE SAID TWO PER SONS. HE FURTHER SUBMITTED THAT BOTH THE PERSONS ARE ASSESSED TO INC OME-TAX EVEN PRIOR TO THE DATE OF SEARCH AND THE RETURNS OF INCOME FILED BY THEM HAVE BEEN ACCEPTED BY THE DEPARTMENT. HE FURTHER SUBMITTED T HAT THE ALLEGATION OF THE ASSESSING OFFICER THAT THE ABOVE SAID TWO PERSO NS ARE BENAMIDARS OF THE ASSESSEE IS NOT BASED ON ANY EVIDENCE. FURTHER THE DEPARTMENT DID NOT UNEARTH ANY MATERIAL TO INDICATE THAT THE ASSESSEE HEREIN HAS ACTUALLY INVESTED THE IMPUGNED AMOUNT OF RS.30.00 LAKHS IN T HE ABOVE SAID TWO CONCERNS. THE TRIAL BALANCE FOUND DURING THE COURS E OF SEARCH CANNOT BE TAKEN AS A SOLE BASIS FOR DRAWING ADVERSE CONCLUSIO NS ABOUT THE ALLEGED INVESTMENT WHEN A HOST OF OTHER EVIDENCES ARE AVAIL ABLE AGAINST THE SAID INFERENCE. 5. ON THE CONTRARY, THE LEARNED DEPARTMENTAL RE PRESENTATIVE SUBMITTED THAT THE ASSESSEE HIMSELF, IN HIS SWORN STATEMENT, HAS EXPLAINED ABOUT THE MODUS OPERANDI FOLLOWED IN THE CASE OF LIQUOR BUSIN ESS, VIZ., THE LICENCE IS USUALLY TAKEN IN THE NAME OF EMPLOYEES OR RELATIVES . FURTHER THE ASSESSING OFFICER HAS ESTABLISHED THE LINK BETWEEN THE TWO LI CENCE HOLDERS. ACCORDINGLY HE PLEADED THAT THE ORDER OF LEARNED CI T(A) SHOULD BE UPHELD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE ASSESSING OFFICER HAS MADE THE IMPUGNED ADDITIO N OF RS.30.00 LAKHS ON THE BASIS OF A COMBINED TRIAL BALANCE OF THE TWO CO NCERNS DESCRIBED AS MAYURI & VZM BARS, IN WHICH THE CAPITAL BALANCE W AS SHOWN AT RS.30.00 LAKHS. ACCORDING TO THE ASSESSEE THE CONCERNS REFE RRED TO IN THAT TRIAL BALANCE ARE M/S MAYURI RESTAURANT AND BAR AND M/S V IZIANAGARAM RESTAURANT & BAR. THE PERIOD OF THE TRIAL BALANCE IS SHOWN AS 01-01-2006 TO 30-06-2006. ACCORDING TO THE ASSESSEE, THE LICE NCE HOLDERS OF THE TWO CONCERNS ARE TWO OTHER PERSONS VIZ., SHRI M.RAVI KU MAR AND SHRI N. ITA NO 262 OF 2010 M.KASI VISWESWARUDU VIZIANAGARA M PAGE 5 OF 6 VENKATESWARA RAO AND THEY ARE ASSESSED SEPARATELY. THE ASSESSING OFFICER HAS COME TO THE CONCLUSION THAT THE ABOVE S AID TWO LICENCE HOLDERS ARE THE BENAMIDARS OF THE ASSESSEE. HOWEVER, IN OU R VIEW, THE ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER HAS MANY LOOSE E NDS, SOME OF WHICH ARE LISTED BELOW:- (A) THE IMPUGNED TRIAL BALANCE IS CLAIM ED TO HAVE BEEN PRINTED FROM THE COMPUTER BELONG TO THE ASSESSEE. HOWEVER, THE CLAIM OF THE ASSESSEE IS THAT HE HAS ALLOWED THE COMMON ACCOUNTA NT TO FEED THE ACCOUNTS OF THE IMPUGNED CONCERNS ALSO IN HIS COMPU TER. HOWEVER THE SAID ACCOUNTANT WAS NOT EXAMINED TO FIND OUT THE TRUTH. (B) THE TWO LICENCE HOLDERS ARE SHRI M. RAVIKUMAR AND SHRI N.VENKATESWARA RAO. THE HAS EXAMINED ONLY SHRI M.R AVIKUMAR AND THE OTHER PERSON, VIZ., SHRI N.VENKATESWARA RAO WAS NOT EXAMINED. IN OUR VIEW, THE ASSESSING OFFICER SHOULD HAVE EXAMINED SH RI N.VENKATESWARA RAO ALSO IN ORDER TO FIND OUT THE TRUTH ABOUT THE BENAM I NATURE OF LICENCE HOLDERS. (C) IN THE SWORN STATEMENT TAKEN FROM SHRI M.RAVI KUMAR, HE HAS STATED THAT THE IMPUGNED TWO CONCERNS ARE UNDER COM MON MANAGEMENT OF THE ASSESSEE HEREIN. IT IS NOT KNOWN WHETHER ANY Q UERY WAS RAISED TO HIM WITH REGARD TO THE IMPUGNED CAPITAL INVESTMENT OF R S.30.00 LAKHS. IN OUR VIEW, A SPECIFIC QUERY WITH REGARD TO THE IMPUGNED INVESTMENT SHOULD HAVE BEEN RAISED AND THE DECISION SHOULD HAVE BEEN TAKEN THEREAFTER. (D) IT HAS BEEN CLAIMED THAT BOTH THE CONCERNS VIZ. , M/S MAYURA RESTAURANT AND BAR AND M/S VIZIANAGARAM RESTAURANT AND BAR ARE MAINTAINING BOOKS OF ACCOUNTS. HOWEVER THE ASSESSI NG OFFICER DID NOT CARRY OUT THE EXERCISE OF COMPARING THE IMPUGNED BALANCE SHEET WITH THE SAID BOOKS OF ACCOUNTS VIS--VIS CAPITAL INVESTMENT IN O RDER TO CORROBORATE THE IMPUGNED INVESTMENT OF RS.30.00 LAKHS. (E) THE IMPUGNED TRIAL BALANCE PERTAINS FOR THE P ERIOD FROM 01.01.2006 TO 30.06.2006. THE ASSESSING OFFICER DI D NOT CARRY OUT ANY ENQUIRY TO ESTABLISH THAT THE IMPUGNED INVESTMENT O F RS.30.00 LAKHS WAS MADE BY THE ASSESSEE PRIOR TO 31.3.2006 IN ORDER TO MAKE IT ASSESSABLE FOR THE ASSESSMENT YEAR 2006-07. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE IS SUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER. A CCORDINGLY, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE ITA NO 262 OF 2010 M.KASI VISWESWARUDU VIZIANAGARA M PAGE 6 OF 6 ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE I SSUE AFRESH IN ACCORDANCE WITH THE LAW AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11 TH MAY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:11-05-2011 COPY TO 1 M. KASI VISWESWARUDU, VIZIANAGARAM C/O M/S ROWE & PAL, CHARTERED ACCOUNTANTS, 14-36-1 KRISHNAGAR, VISAKHAPATNAM 2 THE DY.COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 VISAKHAPATNAM 3 4. THE CIT CENTRAL, HYDERABAD THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM