ITO, Ward-6(4), Hyderabad V. Sri Suresh Goud Mula, Hyderabad

ITA 278/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5593 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADAGIRI
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure
• Section: 69C; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.310/HYD/2013 ASSESSMENT YEAR 2009-2010 SURESH GOUD MULA HYDERABAD PAN AJDPM 2469H VS. ITO, WARD 6(4) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.278/HYD/2013 ASSESSMENT YEAR 2009-2010 ITO, WARD 6(4) HYDERABAD. VS. SURESH GOUD MULA HYDERABAD PAN AJDPM 2469H (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. C.P. RAMASWAMI FOR REVENUE : MR. B. YADAGIRI DATE OF HEARING : 30.01.2014 DATE OF PRONOUNCEMENT : 19.02.2014 ORDER PER B. RAMAKOTAIAH, A.M. THESE ARE CROSS-APPEALS BY REVENUE AND ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A)-IV, HYDERABAD DATED 13.12.2012. THE ISSUE IN THESE APPEALS ARE WITH REFER ENCE TO ESTIMATION OF INCOME IN LIQUOR BUSINESS AND ADDITIONS MADE BY A.O. AFTER REJECTING BOOKS OF ACCOUNT. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL DERIVIN G INCOME FROM TRADING IN INDIAN MADE FOREIGN LIQUOR. RETU RN OF ITA.NO.278 & 310/HYD.2013 SRI SURESH GOULD MULA, HYDERABAD INCOME WAS FILED ON 29.09.2009 ADMITTING A TOTAL INCO ME OF RS.4,25,000/-. THE A.O. MADE THE FOLLOWING ADDITIONS TO THE TOTAL INCOME : (I) UNEXPLAINED EXPENDITURE TOWARDS LICENSE FEE RS.13,36,000/- (II) UNEXPLAINED INVESTMENT TOWARDS LICENSE FEE RS.15,50,125/- (III) UNACCOUNTED SALES AS ESTIMATED RS.10,79,918/ - (IV) DEDUCTION U/S.80C DISALLOWED RS.4,000/-. 3. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE CONFIRMED THE FIRST TWO ADDITIONS AND THE LAS T ONE OF DEDUCTION UNDER SECTION 80C. THE ESTIMATION OF UNACCOUNTED SALES BY A.O. WAS MODIFIED ON THE BASIS OF ITAT ORDERS IN SIMILAR BUSINESS AS ESTIMATION AT 5% ON COST OF PURCHASES OR STOCK SOLD. REVENUE IS AGGRIEVED ON MODIFYI NG THE ESTIMATION, WHEREAS ASSESSEE IS AGGRIEVED ON ADDITIONS CONFIRMED. ITA.NO.278/HYD/2013 A.Y.2009-2010 (REVENUE APPEAL) : 4. THIS REVENUE APPEAL IS AGAINST THE ACTION OF LEARNED CIT(A) IN DIRECTING A.O. TO ESTIMATE INCOME @ 5 % ON THE COST OF GOODS SOLD. THE A.O. OBSERVED THAT THE ASSES SEE HAD DECLARED A NET PROFIT OF RS.4,70,000/- ON THE SALES OF RS.4,20,23,072/- @ 1.12%. THE A.O. HELD THAT AS PER THE GOVERNMENT OF ANDHRA PRADESH, REVENUE (EXCISE-II) DEPARTMENT ORDER IN G.O.MS.NO.184 DATED 7.2.2005, THE RETAILERS MARGIN, I.E., GROSS PROFIT IS 27% ON SALE OF ORDINARY LIQUOR PRODUCTS, 20% ON MEDIUM AND PREMIUM VARIETIES OF INDIAN LIQUOR AND 25% ON BEER. HE CONCLUDED THAT THE C OST OF GOODS SOLD DURING THE YEAR WAS RS.3,60,10,57/- AND ACCORDINGLY, THE GROSS SALES @ 24% MARGIN ON COST OF G OODS SOLD WORKS OUT TO RS.4,46,53,115/-. SINCE THE ASSESSEE HAD ITA.NO.278 & 310/HYD.2013 SRI SURESH GOULD MULA, HYDERABAD ALREADY ADMITTED SALES OF RS.4,20,23,072/-, HE TREATED THE BALANCE SUM OF RS.26,30,043/- AS UNDISCLOSED SALES A ND AFTER REDUCING THE UNACCOUNTED INVESTMENT OF RS.15,50,125/ - FROM IT, BROUGHT TO TAX THE DIFFERENCE OF RS.10,79,918/-. 4.2. FOLLOWING THE ORDER OF ITAT IN THE CASE OF M/S. AMARAVATI WINE SHOP ITA.NO.1196/HYD/2011 DATED 08.06.2012. LEARNED CIT(A) DIRECTED A.O. TO ESTIMATE NET PROFIT AT 5% OF THE PURCHASES OR STOCK PUT TO SALE DURING THE YEAR, SUBJECT TO NET PROFIT BEING NOT LESS THAN RETURNED PROFIT. SINCE THE LEARNED CIT(A) FOLLOWED COORDINATE BENCH DECISION, WE DO NOT SEE ANY REASON TO MODIFY THE DIRECTION. ACCORDINGLY, REVENUE GROUNDS ARE DISMISSED. ITA.NO.310/HYD/2012 A.Y. 2009-2010 (ASSESSEES APPE AL) 5. ASSESSEE FILED REVISED GROUNDS IN THE COURSE OF PRESEN T APPEAL. THESE ARE AS UNDER : 1. THE ORDER OF THE LEARNED CIT(A), IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE APPELLANT, IS AGAINST LAW, WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION O F THE A.O. IN REJECTING THE BOOKS OF ACCOUNT AND FURTHER ERRED IN HOLDING THAT THE NET PROFIT BE ESTIMATED AT 5% OF THE PURCHASES OR THE STOCK PUT T O SALE. 3. WITHOUT PREJUDICE TO GROUND NO.2, THE LEARNED CIT (A) ERRED IN CONFIRMING AN ADDITION OF RS.15,50,125/- AS NOT REFLECTED IN THE P & L ACCOUNT DESPITE THE F ACT OF REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE NET PROFIT AT 5% OF THE PURCHASE PRICE BY FOLLOWING THE DECISION OF HONBLE ITAT, HYDERABAD BENCH. SHE OUGHT TO HAVE DELETED THIS ADDITION IN ACCORDANCE WITH THE RATIO LAID DOWN BY THE HONBLE A.P. HIGH COURT. 4. WITHOUT PREJUDICE TO GROUND NO.2, THE LEARNED CIT (A) ERRED IN CONFIRMING AN ADDITION OF RS.13,36,000/- ITA.NO.278 & 310/HYD.2013 SRI SURESH GOULD MULA, HYDERABAD U/S. 69C DESPITE THE FACT THAT THE APPELLANT HAD BEEN IN THE BUSINESS OF RETAIL SALE OF IMFL SINCE MANY YEARS AND CONSEQUENTLY PAID THE LICENSE FEE OUT OF DECLARED SOURCES. SHE OUGHT TO HAVE DELETED THIS ADDITION. 5. FOR THE ABOVE GROUNDS AND SUCH OTHER GROUNDS THA T MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED. 6. THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND OR MODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 6. GROUND NOS. 1, 5 AND 6 ARE GENERAL IN NATURE. GROUND NO.2 WAS NOT PRESSED IN THE COURSE OF HEARING. HENCE GROUND WAS TREATED AS WITHDRAWN. 7. GROUND NOS. 3 AND 4 ARE INTERLINKED IN THE SENSE THAT PAYMENTS ON BEHALF OF LICENSE FEE WAS EXAMINED AN D BROUGHT TO TAX U/S. 69 AND 69C. THE PAYMENT OF LICENSE FEE IN JUNE, 2008 WAS EXAMINED BY A.O. AND HE MADE AN ADDIT ION OF RS.13,36,000/- U/S. 69C. FURTHER, ON RECONCILIATION OF TOTAL PAYMENT IN THE YEAR AND CLAIM MADE, HE BROUGHT AN AMOU NT OF RS.15,50,125/- AS EXCESS OF ASSETS OVER LIABILITIES AS PREPAYMENT WAS NOT REFLECTED IN BALANCE SHEET. LEARNED CIT(A) CONFIRMED THE SAME. 8. AT THE OUTSET, LEARNED COUNSEL RAISED A PRELIMINARY OBJECTION THAT THE AMOUNTS CANNOT BE TAXED WHEN THE INCOMES ARE ESTIMATED. IN VIEW OF THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KALEKHAN MOHAMMED HANIF VS. CIT 50 ITR 1 WHICH IN TURN WAS FOLLOWED IN CIT VS. DEVI PRASAD VISHWANATH PRASAD 72 ITR 194 (SC), A.O. WAS NOT PRECLUDED FROM ADDING ANY UNEXPLAINED CASH CREDIT OR OTHER AMOUNTS EVEN WHEN ESTIMATION OF INCOME W AS ITA.NO.278 & 310/HYD.2013 SRI SURESH GOULD MULA, HYDERABAD RESORTED TO. IN VIEW OF THIS, THE PRELIMINARY OBJECTION RA ISED IN GROUND NO.3 WAS REJECTED. 9. COMING TO THE MAIN ISSUE OF ADDITIONS, THE LEARNED COUNSEL PLACED ON RECORD, THE STATEMENT FILED IN EARLI ER YEAR TO SUPPORT THAT THE ASSESSEE WAS IN SAME BUSINESS IN EARL IER YEARS AND SO A.O./CIT(A) WAS NOT CORRECT IN REJECTING T HE SOURCES. EXPLAINING THE FACTS, ASSESSEE CLAIMED ONLY THE AMOUNT PERTAINING TO THE YEAR AS THE ABKARI YEAR IS FROM 1 ST JULY TO 30 TH JUNE WHICH SPREADS OUT IN TWO FINANCIAL YEARS. 10. ON PERUSING THE STATEMENTS AND THE DOCUMENTS PLACED ON RECORD, WE ARE OF THE OPINION THAT THE ISSUE OF PAYMENT OF LICENSE FEE AND SOURCES THEREON REQUIRE FRESH EXAMINATION BY A.O. ADMITTEDLY, ASSESSEE IS IN THE SAME BUSINESS OF RUNNING WINE SHOP. HOWEVER, THE STATEMENTS DID NOT INDICATE THE BUSINESS FROM 1.4.2008 TO JUNE, 2008. THE OPENING STOCK AS ON 31.03.2008 WAS SHOWN AS NIL. THEREFOR E, THE PURCHASES FROM 1.4.2008 TO 30.04.2008 AND CORRESPONDIN G SALES ARE REQUIRED TO BE EXAMINED ON THE BASIS OF BOOKS /BANK STATEMENTS. THIS ALSO ESTABLISHES WHETHER THE CONTENT ION OF ASSESSEE THAT THERE ARE SOURCES FOR PAYMENT OF LICENSE FE E IS VERIFIABLE OR NOT. LIKEWISE, OUTSTANDING LICENSE FEE (RATHER PREPAID FEE) OF EARLIER YEAR, IF ASSESSEE WAS IN BUSINE SS AS CONTENDED, RECONCILIATION WITH PAYMENTS THIS YEAR AND CL AIMS IN NEXT YEAR ALSO REQUIRE VERIFICATION. THEREFORE, WITHOU T GOING INTO THE CONTENTIONS RAISED BEFORE US, WE RESTORE THE ISSUE S TO THE FILE OF A.O. TO EXAMINE THE ASSESSEE PURCHASES FOR THE WHOLE YEAR (FINANCIAL YEAR 2008-09) AND SALES AND REC ONCILE THE LICENSE FEE PAID AND CLAIMED AND DECIDE AFRESH THE SOURCES ON THE BASIS OF BOOKS OF ACCOUNTS, DETAILS FROM BANK ACCOU NTS AND FROM EXCISE DEPARTMENT. SUBJECT TO DETERMINATION OF ITA.NO.278 & 310/HYD.2013 SRI SURESH GOULD MULA, HYDERABAD PURCHASES DURING THE YEAR OR STOCK SOLD, THE ESTIMATION OF 5 % ON PURCHASES OR STOCK SOLD DURING THE YEAR, AS DIRECTED BY CIT(A) STANDS AFFIRMED. A.O. IS FREE TO EXAMINE THE TRA NSACTIONS PERTAINING TO UNEXPLAINED SOURCES, INVESTMENTS IN THE COURSE OF FRESH EXAMINATION. THE GROUNDS ARE ACCORDINGLY TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED A ND ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURP OSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 19 TH FEBRUARY, 2014 VBP/- COPY TO : 1. SRI SURESH GOULD MULA, PROP: DWARAKA WINES, 9-4-1 4/16, TOLICHOWKI, HYDERABAD, 2. THE ITO, WARD 6(4), 7 TH FLOOR, I.T. TOWERS, MASAB TANK, HYDERABAD. 3. CIT(A)-IV, HYDERABAD 4. CIT-(III), HYDERABAD 5. D.R. ITAT, A BENCH, HYDERABAD.