Sri Laveti Srinivasa Rao, Rajahmundry V. The ITO Ward-3 Rajahmundry, Rajahmundry

ITA 262/VIZ/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67373 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-04-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SASMAL
• Keywords: Unexplained investment; Opportunity of being heard
• Section: 133A

Judgement Text

ITA NO262/VIZ/2011 LAVETI SRINIVASA RAO, RAJAHMUNDRY. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D MANMOHAN, VICE PRESIDENT AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 262/VIZ/2011 ASSESSMENT YEARS: 2008-09 LAVETI SRINIVASA RAO, RAJAHMUNDRY. INCOME TAX OFFICER, WARD-3, RAJAHMUNDRY (APPELLANT) PAN NO: AAVPL3763A VS. (RESPONDENT) APPELLANT BY: SHRI GVN HARI, ADV. RESPONDENT BY: SHRI B. SASMAL, ADDL.CIT DATE OF HEARING: 30.04.2013 DATE OF PRONOUNCEMENT: 03.05.2013 ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 30-05- 2011 PASSED BY LEARNED CIT(A), RAJAHMUNDRY AND IT R ELATES TO THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE INITIALLY URGED ONLY ONE GROUND RELATING TO ASSESSMENT OF DIFFERENCE IN STOCK. LATER THE ASSESSEE HAS FILED ADDITIONAL GROUNDS. ALL THE GROUNDS URGED BY THE ASSESSEE RELATE TO THE FOLLOWI NG ISSUES:- (A) ASSESSMENT OF EXCESS STOCK - RS.14,75,000/- (B) UNEXPLAINED INVESTMENT IN COST OF CONSTRUCTIO N RS.6,67,000/- (C) ASSESSMENT OF EXCESS CASH BALANCE RS.2,79,6 00/-. 3. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS THE PROPRIETOR OF TWO BUSINESS CONCERNS VIZ., M/S SUDAR SAN CUT PIECES & M/S SUDARSAN SHOPPING MALL, WHICH ARE ENGAGED IN THE BU SINESS OF WHOLE SALE AND RETAIL TRADING IN CLOTHS. THE DEPARTMENT CARRI ED OUT A SURVEY OPERATION UNDER SECTION 133A OF THE ACT IN THE BUSINESS PREMI SES OF THE ASSESSEE ON 09-01-2008. DURING THE COURSE OF SURVEY OPERATION, INVENTORY OF STOCK WAS ITA NO262/VIZ/2011 LAVETI SRINIVASA RAO, RAJAHMUNDRY. PAGE 2 OF 5 TAKEN AND THERE WAS VARIATION BETWEEN THE VALUES OF PHYSICAL STOCK AND BOOK STOCK. THE DIFFERENCE OF RS.14,75,000/- BETWE ENS THE TWO VALUES WAS INTERPRETED AS EXCESS STOCK BY THE SURVEY TEAM AN D THE ASSESSEE ALSO AGREED TO ADMIT THE SAME AS HIS INCOME. THE ASSESS EE HAD ALSO CONSTRUCTED A BUILDING ALONG WITH HIS TWO BROTHERS. THE SURVEY TEAM DETERMINED THE COST OF CONSTRUCTION AT RS.40.00 LAK HS. IT WAS NOTICED THAT THE ASSESSEE AND HIS TWO BROTHERS HAD ADMITTED THE COST OF CONSTRUCTION AT RS.22.75 LAKHS ONLY, WHICH RESULTED IN UNEXPLAINED INVESTMENT TO THE TUNE OF RS.17.25 LAKHS. THE ASSESSEE HEREIN AGREED IN T HE STATEMENT TAKEN FROM HIM DURING THE COURSE OF SURVEY THAT HE WOULD OFFER HIS SHARE OF UNEXPLAINED INVESTMENT OF RS.6,67,000/- AS HIS INCO ME. IN THE RETURN OF INCOME, THE ASSESSEE, HOWEVER, DID NOT DECLARE THE ADDITIONAL INCOMES OFFERED BY HIM DURING THE COURSE OF SURVEY. WHEN T HIS LACUNAE WAS POINTED OUT DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE FILED A LETTER DATED 27-8-2010, WHEREIN HE OFFERED BOTH RS.14,75,0 00/- RELATING TO EXCESS STOCK AND RS.6,67,000/- RELATING TO DIFFERENCE IN C OST OF CONSTRUCTION. ACCORDINGLY, THE ASSESSING OFFICER ADDED BOTH THE A MOUNTS TO THE TOTAL INCOME OF THE ASSESSEE. DURING THE COURSE OF SURVE Y OPERATION, THERE WAS DIFFERENCE BETWEEN PHYSICAL CASH FOUND AND THE BOOK BALANCE TO THE TUNE OF RS.2,79,600/-. IN THE STATEMENT TAKEN, THE ASSESSE E REPLIED THAT HE WILL RECONCILE AND EXPLAIN. SINCE THE ASSESSEE DID NOT RECONCILE THE DIFFERENCE, THE ASSESSING OFFICER ASSESSED THE SAID DIFFERENCE OF RS.2,79,600/- ALSO IN THE HANDS OF THE ASSESSEE. 4. THE ASSESSEE CHALLENGED ALL THE THREE ADDIT IONS BY FILING APPEAL BEFORE LEARNED CIT(A). BEFORE LEARNED CIT(A), THE ASSESSE E DEMONSTRATED THAT THE VARIATION BETWEEN PHYSICAL STOCK AND BOOK STOCK HAS ACTUALLY RESULTED IN DEFICIT STOCK ONLY AND HENCE THE REVENUE HAS ERRE D IN ASSUMING THE VARIATION AS EXCESS STOCK. HOWEVER, THE LEARNED CI T(A) REJECTED THE SAID EXPLANATION AS BELATED ONE, AS THE ASSESSEE HAD ADM ITTED THE VARIATION AS EXCESS STOCK DURING THE COURSE OF SURVEY OPERATION AS WELL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LEARNED CIT( A), BY PLACING RELIANCE ITA NO262/VIZ/2011 LAVETI SRINIVASA RAO, RAJAHMUNDRY. PAGE 3 OF 5 ON THE FOLLOWING CASE LAW, UPHELD THE ASSESSMENT OF EXCESS STOCK OF RS.14,75,000/-. (A) RAMESH CHANDRA & CO VS. CIT (BOM) 168 ITR 375 (B) RAMANLAL KAMDAR VS. CIT (MAD) 108 ITR 73 (C) MAHESH B SHAH VS. CIT 238 ITR 130 (KER) (D) D. RAJA RAO (HUF) VS. ITO (ITA 718/H/02 (IT AT-HYD) DT. 29-07-04. THE LEARNED CIT(A) ALSO CONFIRMED THE ADDITION RELA TING TO UNEXPLAINED INVESTMENT IN THE CONSTRUCTION AND ALSO THE DIFFERE NCE IN THE CASH BALANCE. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFOR E US. 5. THE LEARNED A.R SUBMITTED THAT THE STOCK WOR KINGS MADE BY THE SURVEY TEAM ON THE DATE OF SURVEY HAVE ACTUALLY RES ULTED IN DEFICIT STOCK. ACCORDINGLY HE SUBMITTED THAT THE LEARNED CIT(A) WA S NOT JUSTIFIED IN UPHOLDING THE ADDITION, EVEN AFTER APPRECIATING THA T THERE WAS ONLY DEFICIT STOCK. HE SUBMITTED THAT ADMISSION OF ANY SOURCE OF INCOME, WHICH IS CONTRARY TO THE FACTS AVAILABLE ON RECORD, CANNOT S TAND THE TEST OF LAW. HE FURTHER SUBMITTED THAT THE DEFICIT STOCK IS NOT SUS CEPTIBLE TO ANY ADDITION AND THE AMOUNT REALIZED ON DEFICIT STOCK CAN BE USE D AS A SOURCE FOR EXPLAINING THE DIFFERENCE IN THE COST OF CONSTRUCTI ON. HE FURTHER SUBMITTED THAT THE SURVEY TEAM DID NOT CONSIDER THE CASH BALA NCE AVAILABLE IN THE BOOKS OF M/S SUDARSHAN SHOPPING MALL AS ON THE DATE OF SURVEY AND IF THE SAID BOOK BALANCE IS CONSIDERED, THERE WILL NOT BE EXCESS CASH BALANCE, AS DETERMINED BY THE SURVEY TEAM. 6. ON THE CONTRARY, THE LEARNED D.R SUBMITTED T HAT THE SURVEY OPERATION TOOK PLACE IN THE BUSINESS PREMISES OF THE ASSESSEE ON 09-01-08 AND THE ASSESSEE AGREED TO OFFER INCOME RELATING TO EXCESS STOCK AND ALSO UNEXPLAINED INVESTMENT IN THE COST OF CONSTRUCTION IN THE STATEMENT TAKEN FROM HIM DURING THE COURSE OF SURVEY. THOUGH HE DI D NOT DECLARE THE SAME IN HIS RETURN OF INCOME FILED SUBSEQUENTLY, YET DUR ING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME ON 27-8-2010, WHEREIN HE ADMITTED BOTH THE INCOMES, STATED ABOVE. THE ITA NO262/VIZ/2011 LAVETI SRINIVASA RAO, RAJAHMUNDRY. PAGE 4 OF 5 LEARNED D.R, ACCORDINGLY SUBMITTED THAT THE ASSESSE E DID NOT RAISE THE CLAIM OF DEFICIT STOCK EVEN AFTER EXPIRY OF ABOUT 2 -1/2 YEARS BEFORE THE ASSESSING OFFICER AND HENCE IT IS NOT PROPER ON THE PART OF THE ASSESSEE TO RETRACT FROM THE ADMISSION AT THE STAGE OF FIRST AP PELLATE PROCEEDING. WITH REGARD TO THE CLAIM OF AVAILABILITY OF THE CASH IN THE BOOKS OF M/S SUDARSHAN SHOPPING MALL, THE LEARNED D.R SUBMITTED THAT THE S AID BOOKS WERE NOT AVAILABLE AT THE TIME OF SURVEY OPERATIONS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. WE NOTICE THAT THE STOCK WORKINGS MADE BY THE SURVE Y TEAM ON THE DATE OF SURVEY HAVE ACTUALLY RESULTED IN DEFICIT STOCK AS CLAIMED BY THE ASSESSEE. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS AGREED TO OFFER THE STOCK VARIATION AS EXCESS STOCK BOTH DURING THE COURSE OF SURVEY OPERATION AS WELL AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS . WE ALSO NOTICE THAT THE ASSESSEE HAS FILED REVISED COMPUTATION OF INCOM E ADMITTING THE ADDITIONAL INCOME DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, AFTER EXPIRY OF ABOUT 2-1/2 YEARS FROM THE DATE OF SURVEY. AT T HAT POINT OF TIME ALSO, IT DID NOT OCCUR TO THE ASSESSEE THAT THE WORKINGS HAV E ACTUALLY RESULTED IN DEFICIT STOCK. THESE FACTS SHOW THAT ALL IS NOT WE LL WITH THE ASSESSEE. THERE CANNOT BE ANY DISPUTE THAT A PRUDENT BUSINESS MAN WILL NOT ADMIT ANY ADDITIONAL INCOME SO EASILY AND HENCE IT HAS TO BE PRESUMED THAT THE ASSESSEE HAS OFFERED THE VARIATION OF STOCK AS HIS INCOME ON SOME BASIS ONLY. ACCORDINGLY, WE ARE UNABLE TO APPRECIATE THE CLAIM OF DEFICIT STOCK AT THIS STAGE AND ACCORDINGLY UPHOLD THE ORDER OF L EARNED CIT(A) ON THIS ISSUE. 8. WITH REGARD TO THE ADDITION RELATING TO THE UNEXPLAINED INVESTMENT IN COST OF CONSTRUCTION, THE LEARNED A.R MAINLY PLEADE D THAT THE DEFICIT STOCK SHOULD BE TELESCOPED WITH THIS ADDITION. SINCE WE HAVE REJECTED THE CLAIM OF DEFICIT STOCK AT THIS STAGE, THIS GROUND OF THE ASSESSEE ALSO FAILS. ITA NO262/VIZ/2011 LAVETI SRINIVASA RAO, RAJAHMUNDRY. PAGE 5 OF 5 9. WITH REGARD TO THE ASSESSMENT OF EXCESS CASH , THE ASSESSEE HAS FURNISHED BEFORE US CASH BOOK OF M/S SUDARSHAN SHOP PING MALL TO EXPLAIN THE SAID DIFFERENCE. HOWEVER, THE LEARNED D.R HAS POINTED OUT THAT THE SAID CASH BOOK WAS NOT AVAILABLE AT THE TIME OF SUR VEY. WE ALSO DO NOT FIND ANY DISCUSSION ABOUT THE CLAIM MADE BY THE ASSESSEE . ACCORDINGLY, IN OUR VIEW, THIS ISSUE REQUIRES FRESH VERIFICATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LE ARNED CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING O FFICER WITH THE DIRECTION TO EXAMINE THE CASH BOOK OF M/S SUDARSHAN SHOPPING MAL L AND M/S SUDARSHAN CUT PIECE AND TAKE APPROPRIATE DECISION ON THIS ISS UE IN ACCORDANCE WITH LAW, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 03.05.2013 SD/- SD/- (D MANMOHAN) (B R BASKARAN) VICE PRESIDENT ACCOUNT ANT MEMBER VG/SPS VISAKHAPATNAM, DATE: 3 RD MAY, 2013 COPY TO 1 LAVETI SRINIVASA RAO, PROP: SUDARSAN CUT-PIECES A ND SUDARSAN SHOPPINGMAL, SHOP NO.31 & 32, TADITHOTA, RAJAHMUNDR Y, EG DT. 2 INCOME TAX OFFICER, WARD-3, RAJAHMUNDRY. 3 4. THE CIT, RAJAHMUNDRY THE CIT(A), RAJAHMUNDRY 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM