The ITO, Ward-1(2), Guntur V. M/s Sri Vamsi Krishna Genl. Traders, Guntur

ITA 28/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56792 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y SURYACHANDRA RAOCA
• Assessee Lawyers: R K SINGH
• Keywords: Revised return
• Section: 133A; 131

Judgement Text

ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.14/VIZAG/2011 ASSESSMENT YEAR: 2007-08 M/S. SRI VAMSI KRISHNA GENERAL TRADERS, GUNTUR VS. ITO WARD-1(2) GUNTUR (APPELLANT) PAN NO: ABAFS 6669 J (RESPONDENT) ITA NO.28/VIZAG/2011 ASSESSMENT YEAR: 2007-08 ITO WARD-1(2) GUNTUR VS. VAMSI KRISHNA GENERAL TRADERS, GUNTUR (RESPONDENT) (APPELLANT) PAN NO: ABAFS 6669 J APPELLANT BY: SHRI Y. SURYACHANDRA RAO,CA RESPONDENT BY: SHRI R.K. SINGH, DR DATE OF HEARING : 12/07/2011 DATE OF PRONOUNCEMENT: 10-08-2011 ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 27.9.2010 PASSED BY LEARNED CIT(A), GUNTUR AND THEY RELATE TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS AND ADDITIONAL GROUNDS IN ITS APPEAL 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ASSESSED THE STATUS OF THE FIRM CORRE CTLY AND ASSESSMENT COMPLETED IN THE NAME OF M/S SRI VAMSI K RISHNA GENERAL TRADERS AS A PARTNERSHIP FIRM MAY KINDLY BE ANNULLED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE ACCEPTED THE TOTAL ENTRIES IN THE SEIZED RE CORDS. ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 2 OF 12 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION OF ` 11,17,738/- BY WAY OF DIFFERENCE IN COMMISSION @ 2% ON ESTIMATION BASI S TOTALLY INSTEAD OF RESTRICTING THE ADDITION TO ` 1,11,780/-. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION OF ` .7,53,000/- BY WAY OF SOURCE FOR ADVANCES TO FARMERS SINCE EVERY ADVANCE TO FARMERS IS REPRESENTED BY CREDIT IN THE DAY BOOK OF THE SEIZED RECORDS. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION OF ` 7,17,000/- BY ESTIMATION @ 50% OF THE PRONOTES FOUND AT THE TIME OF SURVEY. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ADDITION OF ` 35,000/- TOWARDS UN- ACCOUNTED SHOP EXPENSES AND ` 20,600/- ON ACCOUNT OF YARD EXPENSES FOR WANT OF SOURCE. 7. THE LEARNED CIT (APPEALS) OUGHT TO HAVE DISCUSSE D THE GROUND NO.7 FOR DISALLOWANCE OF INTEREST OF ` 2,89,893/- WHICH WAS DEBITED TO P&L ACCOUNT AND ALLOWED THE SA ME BASED ON THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT CONSISTENTLY. 8. THE LEARNED CIT (APPEALS) WAS SILENT ON THE GROU ND RAISED BY THE APPELLANT FOR DISALLOWANCE OF INTEREST OF ` 2,89,893/- BY THE ASSESSING OFFICER WITHOUT ANY BASIS AND ON W RONG OBSERVATIONS WHICH IS NOT CORRECT AND SHOULD HAVE B EEN ENTERTAINED 3. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN THE APPEAL FILED BY IT. 1. THE LEARNED CIT (A) ERRED BOTH ON FACTS AND IN L AW BY GRANTING RELIEF TO THE ASSESSEE IN THE GIVEN FACTS AND CIRCUMSTANCES. 2. THE LEARNED CIT (A) ERRED IN GRANTING RELIEF RS.10,05,958/- WITHOUT ANY ARITHMETICAL BASIS. 3. THE LEARNED CIT (A) ERRED IN ACCEPTING THE ASSES SEES ARGUMENT OF BUSINESS EXPEDIENCY FOR SHOWING LESSER INCOME WITHOUT ANY EVIDENCE. 4. THE LEARNED CIT (A) OUGHT TO HAVE CONFIRMED THE FIXATION OF COMMISSION AT 2% WHICH IS IN ACCORDANCE WITH THE RULES ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 3 OF 12 FRAMED BY A STATUTORY BODY. WHILE HE APPRECIATED TH E CASE MADE OUT BY THE ASSESSING OFFICER FOR REVENUE. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A FIRM CONSISTING OF TWO PARTNERS AND IT FILED ITS RE TURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 17.12.2007 ADMITTING A TOTAL INCOME OF ` 4,46,870/-. A SURVEY OPERATION UNDER SECTION 133A OF THE ACT WA S CONDUCTED UPON THE ASSESSEE ON 24.7.2007. PURSUANT THERETO, THE ASSES SING OFFICER TOOK UP THE RETURN OF INCOME CITED ABOVE FOR SCRUTINY AND D ETERMINED THE TOTAL INCOME AT ` 33,80,100/- BY MAKING VARIOUS ADDITIONS. THE APPEA L FILED BY THE ASSESSEE BEFORE LEARNED CIT(A) WAS ALLOWED PART LY. HENCE BOTH THE PARTIES ARE IN APPEAL BEFORE US CONTESTING THE DECI SION OF LEARNED CIT(A) ON THE POINTS DECIDED AGAINST EACH OF THEM. 5. WE SHALL FIRST TAKE UP THE APPEAL OF THE ASS ESSEE. IN THE FIRST GROUND, THE ASSESSEE IS QUESTIONING THE STATUS UNDER WHIC H IT IS ASSESSED. THE ASSESSEE HAD TAKEN AN IDENTICAL GROUND IN ITS APPEA L FILED BEFORE THE TRIBUNAL IN ITA NO.475/VIZAG/2010 RELATING TO THE A SSESSMENT YEAR 2005-06 AND THE TRIBUNAL, VIDE ITS ORDER DATED 03-06-2011 R EJECTED THE SAME WITH THE FOLLOWING OBSERVATIONS: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE OR DER OF THE AUTHORITIES BELOW AND WE FIND THAT DURING THE C OURSE OF SURVEY PROCEEDINGS CONDUCTED UNDER SECTION 133A AT THE ASSESSEES PREMISES, THE REVENUE AUTHORITIES HAS IM POUNDED VARIOUS DOCUMENTS. THEREAFTER, THE ASSESSEE HAS FIL ED THE RETURN OF INCOME IN THE STATUS OF HE REGISTERED FIR M. AFTER MAKING A DETAILED ENQUIRY, THE ASSESSMENT WAS FRAME D IN THE HANDS OF THE ASSESSEE FIRM. NOWHERE THE ASSESSE E HAS RAISED ANY PLEA DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THAT THE ASSESSMENT SHOULD BE MADE IN THE HANDS OF THE A.O.P. FIRST TIME THE PLEA WAS RAISED BEFORE THE CI T (A). DURING THE COURSE OF HEARING OF THIS APPEAL, A SPEC IFIC QUERY WAS RAISED FROM THE ASSESSEE TO PLACE THE RELEVANT PROVISIONS OF THE ACT UNDER WHICH ASSESSEE IS AUTHO RISED TO FILE A REVISED RETURN BEFORE THE FIRST APPELLATE AU THORITIES WITH REGARD TO THE CHANGE OF ITS STATUS. BUT THE ASSESSE E FAILED TO ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 4 OF 12 POINT OUT ANY PROVISIONS OF THE ACT OR ANY CASE LAW ON THE SUBJECT. WE HOWEVER, HAVE CAREFULLY EXAMINED THE RE LEVANT PROVISIONS OF THE ACT AND WE DO NOT FIND ANYTHING I N THE INCOME-TAX ACT WHICH EMPOWERS THE ASSESSEE OR GIVES A LIBERTY TO THE ASSESSEE TO FILE A REVISED RETURN OR TO RAISE A REVISED CLAIM WITH REGARD TO THE STATUS BEFORE THE FIRST APPELLATE AUTHORITY. THEREFORE, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEES. WE HOWEVER, HAVE CAREFULLY EXAMIN ED THE ORDER OF THE CIT (A) IN THIS REGARD AND WE FIND THA T HE HAS MINUTELY EXAMINED THIS ISSUE AND SINCE WE FIND NO I NFIRMITY THEREIN, WE CONFIRM HIS ORDER. CONSISTENT WITH THE VIEW TAKEN EARLIER, WE ALSO REJ ECT THE SAID GROUND URGED IN THIS APPEAL ALSO. 6. THE GROUND NO.2 IS GENERAL IN NATURE AND REQ UIRES NO ADJUDICATION. THE ASSESSEE DID NOT PRESS GROUND NO.3 AND HENCE TH E SAME IS DISMISSED AS WITHDRAWN. THE GROUNDS NUMBERED AS 7 AND 8 ABOVE IN THE ASSESSEES APPEAL RELATE TO THE DISALLOWANCE OF INTEREST OF ` 2,89,893/-. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE RAISED THIS ISSUE B EFORE LEARNED CIT(A), BUT THE FIRST APPELLATE AUTHORITY HAS FAILED TO DISPOSE OF THE SAME INADVERTENTLY. WE HAVE EXAMINED THE GROUNDS RAISED BEFORE LEARNED CIT(A) AND NOTICE THAT THE THOUGH ASSESSEE HAS RAISED THIS ISSUE OF D ISALLOWANCE OF INTEREST OF ` 2,89,893/- IN GROUND NUMBERED AS 7, YET THE LEAR NED CIT(A) DID NOT DISPOSE OF THE SAME. ACCORDINGLY WE SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED CIT(A) WITH A DIRECTION TO DISPOSE THE SAID GROUND AFTER AFFORDING NECESSARY OPPORTUNITY TO THE ASSESSEE. 7. THE GROUND NO.4 RELATED TO THE ADDITION OF ` 7,53,000/- PERTAINING TO THE BANK LOAN CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE. THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF. DURING T HE COURSE OF SURVEY OPERATION, IT WAS NOTICED THAT THE ASSESSEE FIRM HA D GIVEN ADVANCES TO THE FARMERS TUNE OF ` 2,79,91,025/- SPREADING IN 4 YEARS, I.E. DURING THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2005-06 TO 2008-09 . THE ASSESSEE WAS QUESTIONED IN THIS REGARD AND THE MANAGING PARTNER SHRI P. SHANKAR RAO EXPLAINED THAT THE ACTUAL AMOUNT INVESTED IN MAKING SUCH ADVANCES WAS ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 5 OF 12 ONLY ` 1,45,00,000/- AND DUE TO ROTATION OF FUNDS, THE AGG REGATE AMOUNT HAS RESULTED IN AN AMOUNT OF ` 2,79,91,025/- OVER A PERIOD OF FOUR YEARS. THE ASSESSEE EXPLAINED THE DETAILS OF SOURCES FOR ` 1,45,00,000/- AS UNDER: LOAN TAKEN FROM V. SAMPURNA - ` 72,01,116/- LOAN TAKEN FROM FARMERS - ` 29,75,000/- LOAN TAKEN FROM BANKS - ` 30,00,000/- AMOUNT RECEIVED FROM SISTER CONCERN M/S AGASTHESWARA SWAMY COMPANY - ` 15,00,000/- HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDING S RELATING TO THE ASSESSMENT YEAR 2005-06, THE ACTUAL AMOUNT OF LOANS CITED ABOVE WAS ARRIVED AT AS UNDER: 1.LOANS TAKEN FROM SMT.V. SAMPURNA - ` 72,01,116/- AND HER RELATIVES 2.DEBTORS TRANSFERRED FROM M/S AGASTESWAR- ` 16,73,500/- SWAMY & COMPANY WHILE ITS DISSOLUTION TO THE SHARE OF SRI P. SANKAR RAO 3. FARMERS CREDITORS - ` 29,75,000/- 4. BANK LOAN OBTAINED FROM ANDHRA - ` 27,80,500/- BANK AGAINST STOCKS OF COLD STORAGE BOND BELONGING TO FARMERS. ------------------- TOTAL ` 1,46,30,116/- ========== IN THAT YEAR THE ASSESSING OFFICER ACCEPTED THE GENU INENESS OF LOAN OBTAINED FROM ANDHRA BANK WITH THE FOLLOWING OBSERV ATIONS: WITH REGARD TO THE ANDHRA BANK LOAN OBTAINED FOR RS.27,80,500/- THE ASSESSEE EXPLAINED THAT THE STOC K OF THE FARMERS KEPT IN COLD STORAGE AND THE BONDS RECEIVED FROM COLD STORAGE WERE PLEDGED WITH BANK AND THE LOAN IS DISBURSED TO RESPECTIVE FARMER. THE ASSESSEE PRODUC ED LIST OF SUCH FARMERS ALONG WITH CONFIRMATION LETTERS ALO NG WITH BANK STATEMENTS FOR THE PERIOD FROM 10-03-2005 TO 2 6-03- 2007. SINCE THE LOAN TAKEN FROM BANK AND THE LOANEE S ARE THE REGULAR CUSTOMERS OF THE ASSESSEE, THE CONTENTI ON OF THE ASSESSEE IS ACCEPTABLE. HENCE NO DISALLOWANCE IS CA LLED FOR ON THIS COUNT. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE A SSESSING OFFICER PLACED RELIANCE ON THE STATEMENT TAKEN FROM ONE OF THE PAR TNERS ON 21.6.2007 WITH REGARD TO THE BANK LOANS AND HAS PROCEEDED TO MAKE THE IMPUGNED ADDITION ON THE PRESUMPTION THAT THE ASSESSEE HAS FAILED TO OFFER THE SAME IN ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 6 OF 12 ACCORDANCE WITH THE VOLUNTARY DISCLOSURE GIVEN BY T HE ASSESSEE. WE EXTRACT BELOW THE RELEVANT QUESTION AND ANSWER, WHICH WERE RELIED UPON BY THE ASSESSING OFFICER FOR MAKING THE IMPUGNED AD DITION: QUESTION NO;8: OF THE STATEMENT OF SRI P. SIVA KRI SHNA RECORDED UNDER SECTION 131 ON 21.06.2007. Q. LEGALLY THE BANK LOANS OBTAINED BY YOUR FATHER A ND YOURSELF AMOUNTED TO RS.7,64,000/- ONLY. AS SUCH, E XPLAIN AS TO WHY THE BALANCE AMOUNT OF RS.22,36,000/- SHOULD NOT BE TREATED AS YOUR OWN INCOME ANS. WE HAVE NO PROPER UNDERSTANDING OF INCOME TAX ACT. DUE TO THIS REASON WE HAVE DONE LIKE THIS. THERE IS NOTHING MORE THAN THIS. WE HAVE OBTAINED BANK LOANS OF ` 12,43,000/- FOR ASSESSMENT YEAR 2006-07 ` 7,53,000/- FOR THE ASSESSMENT YEAR 2007-08 ON ` 2,40,000/- FOR THE ASSESSMENT YEAR 2008-09. IF IT IS REQUIRED TO PAY TH E TAXES ON THE LOANS AS PER THE STATUTE OF THE INCOME TAX, WE SHALL DISCLOSE THE ABOVE SUMS AS OUR INCOME IN THE RESPEC TIVE ASSESSMENT YEARS AND PAY THE TAXES. ACCORDINGLY THE CONTENTION OF THE LEARNED A.R ARE T HAT THE ASSESSING OFFICER, HAVING ACCEPTED THE GENUINENESS OF BANK LO ANS IN THE ASSESSMENT YEAR 2005-06 ITSELF, THERE IS NO NECESSITY TO MAKE THE IMPUGNED ADDITION PURELY BASED UPON THE STATEMENT OBTAINED DURING THE COURSE OF SURVEY. HE FURTHER SUBMITTED THAT THE PARTNER OF THE FIRM NEVE R SURRENDERED THESE AMOUNT AS THE INCOME OF THE FIRM. HE ALSO SUBMITTE D THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION IN RESPECT OF THE BANK LOAN IN THE ASSESSMENT YEAR 2006-07 ALSO. THE ASSESSEE HAS PL ACED COPIES OF THE ASSESSMENT ORDERS RELATING TO THE ASSESSMENT YEARS 2005-06 AND 2006-07 PLACED IN THE PAPER BOOK FILED BY IT. 7.1 WE HAVE GONE THROUGH THE ASSESSMENT ORDERS OF EARLIER YEARS. AS SUBMITTED BY LEARNED AUTHORISED REPRESENTATIVE, THE RE WAS NO ADDITION MADE IN THE ASSESSMENT YEAR 2006-07 ON ACCOUNT OF B ANK LOAN, SINCE THE GENUINENESS OF BANK LOAN WAS EXAMINED AND ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 29.12.2008 PA SSED FOR THE ASSESSMENT YEAR 2005-06. ON THIS BACK GROUND, WE D O NOT FIND ANY REASON ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 7 OF 12 FOR MAKING THE IMPUGNED ADDITION OF ` 7,53,000/- DURING THE YEAR UNDER CONSIDERATION ALSO AS THE SAME FORM PART OF THE BAN K LOAN EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS RELATING TO THE ASSESSMENT YEAR 2005-06. WE NOTICE THAT THE LEA RNED CIT (A) WAS UNDER THE IMPRESSION THAT THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION ON THIS ISSUE EVEN THOUGH THE SAME WAS DISCUSSED IN THE ASSESSMENT ORDER. WE FIND THE SAID OBSERVATIONS OF THE LEARNED CIT (A ) TO BE WRONG. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LEARNED C IT (A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ABOVE SA ID ADDITION. 8. THE GROUND NO.5 RELATES TO THE ADDITION OF ` 7,17,000/- PERTAINING TO THE 50% OF THE AMOUNT OF PRONOTES FOUND DURING THE COURSE OF SURVEY. THE FACTS RELATING TO THE SAME ARE STATED IN BRIEF. DUR ING THE COURSE OF SURVEY OPERATION, MANY BLANK PRONOTES WERE FOUND IN POSSES SION OF THE ASSESSEE. THOUGH THE SAID PRONOTES WERE FOUND SIGNED, YET THE AMOUNT AND OTHER DETAILS WERE LEFT BLANK. HOWEVER, ON THE BACKSIDE O F THE CERTAIN PRONOTES, AMOUNT AND DATE WERE FOUND WRITTEN. THE ASSESSING O FFICER COLLATED THOSE FIGURES AND ARRIVED AT AN AMOUNT OF ` 14,34,000/-. THE ASSESSEE EXPLAINED THAT IT DID NOT LEND MONEY ON THESE PRONOTES, BUT T HEY WERE OBTAINED FROM THE FARMERS AS SECURITY ONLY. THE ASSESSING OFFICE R DID NOT ACCEPT THE SAID EXPLANATION AND ACCORDINGLY ADDED THE ABOVE SAID SU M OF ` 14.34 LAKHS BY DIVIDING THE SAME EQUALLY IN TWO ASSESSMENT YEARS V IZ., THE INSTANT ASSESSMENT YEAR AND THE ASSESSMENT YEAR 2008-09. TH E LEARNED CIT (A) ALSO CONFIRMED THE SAID ADDITION. 8.1 IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRE SENTATIVE THAT THE ASSESSEE USED PAY ADVANCE TO THE FARMERS AND THESE PRONOTES WERE TAKEN FROM THEM AS A MEASURE OF SECURITY ONLY. HE FURTHER SUBMITTED THAT THE FACT OF PAYMENT ADVANCE TO THE FARMERS DURING THE YEARS RELEVANT TO THE ASSESSMENT YEARS 2005-06 TO 2008-09 FOR AN AGGREGAT E AMOUNT OF ` 2,79,91,025/- WAS ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2005-06. THE SAID FACTS WERE AVAILABLE FROM TH E REGISTERS FOUND AND ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 8 OF 12 IMPOUNDED DURING THE COURSE OF SURVEY. IT WAS ALSO S UBMITTED TO THE THEN ASSESSING OFFICER THAT THE ACTUAL AMOUNT UTILIZED F OR MAKING THE ADVANCES CITED ABOVE WAS AT ` 1.45 CRORES AND THE ASSESSING OFFICER HAS ALSO EXAMINED THE GENUINENESS OF THE SAID SOURCES. ACCO RDINGLY THE LEARNED A.R SUBMITTED THAT THERE IS NO REASON TO REJECT THE EXP LANATIONS OF THE ASSESSEE AND HENCE THERE IS NO NECESSITY FOR MAKING ANY FURT HER ADDITION ON THE BASIS OF BLANK PRONOTES FOUND DURING THE COURSE OF SURVEY . 8.2 HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIV E SUBMITTED THAT THE SAID PRONOTES WERE NOT ACCOUNTED IN THE BOOKS O F ACCOUNT AND HENCE THE LEARNED CIT (A) HAS CONFIRMED THE SAID ADDITION . 8.3 WE HAVE CONSIDERED THE RIVAL CONTENTIONS ON THI S ISSUE. DURING THE COURSE OF HEARING, THE LEARNED AUTHORISED REPRESENT ATIVE FURNISHED COPIES OF CERTAIN PRONOTES FOR OUR PERUSAL. AS OBSERVED BY THE ASSESSING OFFICER, ALL THE PRONOTES ARE BLANK THOUGH THEY HAVE BEEN SIGNED BY THE SOME PERSONS. ONLY ON SOME OF THE PRONOTES, CERTAIN AMOUNT IS NOT ED ON THEIR BACKSIDE. THE SUBMISSION OF THE ASSESSEE IS THAT THESE PRONOT ES HAVE BEEN OBTAINED ONLY AS A SECURITY FROM THE FARMERS TO WHOM ADVANCE S WERE PAID. THE FACT OF PAYMENT OF ADVANCE TO FARMERS HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2005-06 WHEREIN THE DETAILS OF AMOUNT PAID TO FARMERS IN VARIOUS YEARS HAVE BEEN COLLATED FROM THE IMPOUNDED MATERIAL AS UNDER: FINANCIAL YEAR ASSESSMENT YEAR AMOUNT IN `. 2004-05 2005-06 97,42,126 2005-06 2006-07 73,41,607 2006-07 2007-08 99,14,610 2007-08 2008-09 9,92,682 2,79,91,025 =========== ON A COMBINED CONSIDERATION OF ABOVE SAID FACTS, WE FIND THE EXPLANATION OF THE ASSESSEE THAT THE IMPUGNED PRONOTES WERE OBTAIN ED FROM THE FARMERS AS A SECURITY TO BE A REASONABLE ONE. ACCORDINGLY W E SET ASIDE THE ORDER OF ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 9 OF 12 THE LEARNED CIT (A) AND DIRECT THE ASSESSING OFFICE R TO DELETE THE ABOVE SAID ADDITION OF ` 7,17,000/-. 9. THE GROUND NO.6 RELATES TO THE ADDITION OF RS.35 ,000/- AND ` 20,600/- PERTAINING TO SHOP EXPENSES AND YARD EXPENSES RESPE CTIVELY. THE ASSESSING OFFICER MADE THE ABOVE SAID ADDITION ON THE BASIS O F STATEMENTS TAKEN FROM ONE OF THE PARTNERS. FOR THE SAKE OF CONVENIENCE, W E EXTRACT BELOW THE RELEVANT QUESTION AND ANSWERS: Q.11. FROM THE IMPOUNDED BOOKS AND DOCUMENTS FROM YOUR OFFICE, IT IS OBSERVED THAT YOU HAVE GIVEN IN WRITING THE FOLLOWING EXPENSES AS PER ANNEXURE-A (BOOK NO.14 TO 17). YARD EXPENSES FOR THE ASSESSMENT YEAR 2007-08: ` 22,600/- AND FOR THE ASSESSMENT YEAR 2008-09 ` 10,400/-. SHOP EXPENSES FOR THE ASSESSMENT YEAR 2007-08 ` 38,000/- AND FOR THE ASSESSMENT YEAR 2008-09 ` 18,000/-. WHETHER THESE EXPENSES ARE SHOWN IN YOUR BOOKS OF ACCOUNT?. IF NOT, WHY THE SAID AMOUNTS WILL BE TREAT ED AS YOUR INCOME IN THE RESPECTIVE YEARS. REPLY: WE HAVE SPENT ` 60,600/- TOWARDS YARD EXPENSES AND SHOP EXPENSES DURING THE ASSESSMENT YEAR 2007-0 8. WE HAVE SHOWN IN OUR REGULAR BOOKS ` 40,000/- ONLY. THE BALANCE AMOUNT OF ` 20,600/- WILL BE SHOWN AS INCOME FOR THE ASSESSMENT YEAR 2007-08 AND IF ANY TAX LIABILIT Y COMES OUT OF IT, IT WILL BE PAID IN DUE COURSE. AND WE HAVE SPENT ` 28,400/- TOWARDS YARD EXPENSES AND SHOP EXPENSES DURING THE ASSESSMENT YEAR 2008-09, B UT WE HAVE SHOWN IN OUR REGULAR BOOKS ` 20,000/- ONLY. THE BALANCE AMOUNT OF ` 8,400/- WILL BE SHOWN AS INCOME FOR THE ASSESSMENT YEAR 2008-09 AND IF ANY TAX LIABILITY CO MES OUT OF IT, IT WILL BE PAID IN DUE COURSE. THOUGH THE ASSESSEE HAD ADMITTED ONLY ` 20,600/-, THE ASSESSING OFFICER ADDED A SUM OF ` 55,600/-. 9.1 THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE PREPARED AN INCOME AND EXPENDITURE ACCOUNT AT THE T IME OF FILING RETURN OF INCOME AND ARRIVED AT AN INCOME OF ` 7,25,617/-. IN THE SAID INCOME & ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 10 OF 12 EXPENDITURE ACCOUNT THE ASSESSEE HAD CLAIMED SHOP E XPENSES TO THE TUNE OF ` 2,18,996/- AND YARD EXPENSES TO THE TUNE OF ` 1,83,369/-, WHICH INCLUDED THE AMOUNT OFFERED BY THE ASSESSEE. HE FURTHER SUBM ITTED THAT THE ASSESSEE HAS OFFERED ONLY ` 20,600/- IN THE STATEMENT AND HENCE THERE IS NO BAS IS FOR MAKING FURTHER ADDITION OF ` 35,000/-. ACCORDINGLY IT WAS SUBMITTED THAT THERE IS NO NECESSITY TO MAKE THE IMPUGNED ADDITION S AGAIN. 9.2 WE ALSO HEARD LEARNED DEPARTMENTAL REPRESEN TATIVE ON THIS ISSUE. THE ASSESSEE HAS PLACED A COPY OF THE INCOME AND EX PENDITURE ACCOUNT AT PAGE 32 OF THE PAPER BOOK FILED BY IT. IN THE SAID STATEMENT, THE ASSESSEE HAS DEBITED A SUM OF ` 2,18,996/- TOWARDS SHOP EXPENSES AND ` 1,83,369/- TOWARDS YARD EXPENSES. IN THE STATEMENT TAKEN FROM THE PARTNER, THE AMOUNT SPENT TOWARDS YARD EXPENSES AND SHOP EXPENSE S WERE CLAIMED TO BE ` 60,600/- AND IT WAS FURTHER STATED THAT ONLY A SUM OF ` 40,000/- WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. ACCORDINGLY THE PARTNER OFFERED A SUM OF ` 20,600/- FOR TAXATION. IN OUR VIEW, THE AMOUNT OF ` 20,600/- OFFERED BY THE ASSESSEE CANNOT BE DELETED SIMPLY FO R THE REASON THAT THE ASSESSEE HAS INCLUDED IT IN THE STATEMENT PREPARED BY IT POST SURVEY OPERATIONS. HOWEVER, WE FIND THAT THERE IS NO BAS IS OR MATERIAL WITH THE ASSESSING OFFICER FOR MAKING THE ADDITION OF ` 35,000/-. ACCORDINGLY WE RESTRICT THE ADDITION ON THIS ISSUE TO THE EXTENT O F ` 20,600/-. THE ORDER OF LEARNED CIT(A) IS MODIFIED ACCORDINGLY. 10. NOW WE SHALL TAKE UP THE APPEAL OF THE RE VENUE. ALL THE GROUNDS ARE DIRECTED AGAINST A SINGLE ISSUE, VIZ., THE RELI EF GRANTED BY LEARNED CIT(A) IN RESPECT OF COMMISSION INCOME ESTIMATED BY THE ASSESSING OFFICER. THE FACTS RELATING TO THE SAME ARE SET OUT IN BRIEF . THE ASSESSEE REPORTED A TOTAL TURNOVER OF ` 13.69,53,329/-, ON WHICH THE COMMISSION WAS REPORTE D AT ` 16,21,329/-. THE RATE OF COMMISSION WORKED OUT TO 1.18% OF THE TURNOVER. THE ASSESSING OFFICER NOTICED THAT THE C OMMISSION MERCHANTS ARE ENTITLED TO A COMMISSION OF 2% AS PER THE RULES FRA MED BY AGRICULTURAL MARKETING COMMITTEES. ACCORDINGLY, THE ASSESSING O FFICER ESTIMATED THE ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 11 OF 12 GROSS COMMISSION INCOME AT ` 27,39,066/- AND ADDED THE DIFFERENCE AMOUNT OF ` 11,17,738/- TO THE TOTAL INCOME. BEFORE LEARNED CI T(A), THE ASSESSEE CONTENDED THAT IT IS THE USUAL TRADE PRACTICE TO RE DUCE THE RATE OF COMMISSION DUE TO BUSINESS EXPEDIENCY AND COMPETITI ON. THE LEARNED CIT(A) WAS CONVINCED WITH THE EXPLANATIONS OF THE A SSESSEE AND ACCORDINGLY RESTRICTED THE ADDITION TO ` 1,11,780/- AS AGAINST ` 11,17,738/- ADDED BY THE ASSESSING OFFICER. HENCE THE REVENUE IS IN APPEAL BEFORE US. 10.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE SU BMITTED THAT THE ASSESSEE DID NOT PRODUCE ANY MATERIAL IN SUPPORT OF ITS CONTENTION THAT IT IS THE USUAL TRADE PRACTICE TO REDUCE THE COMMISSION R ATE DUE TO THE BUSINESS EXPEDIENCY. 10.2 ON THE CONTRARY, THE LEARNED AUTHORISED RE PRESENTATIVE SUBMITTED THAT THE RATE OF 2% FRAMED BY THE AGRICULTURAL MARK ET COMMITTEE IS THE FLOOR RATE AND THERE IS NO BAR AGAINST REDUCING THE RATE OF COMMISSION. HE FURTHER SUBMITTED THAT THE COMPETITIVE ENVIRONMENT COMPELS THE ASSESSEE TO REDUCE THE RATE OF COMMISSION. 10.3 WE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE AND PERUSED THE RECORD. THE AMOUNT OF GROSS COMMISSION DISCLOSED B Y THE ASSESSEE HAS BEEN WORKED OUT AS UNDER:- ON A TURN OVER OF ` 4,33,58,656/- @ 2% - ` 8,67,172.00 ON A TURN OVER OF ` 9,35,94,673/- @ 1% - ` 9,35,946.00 -------------------- ` 18,03,118.00 (-) COMMISSION RELATING TO SISTER CONCERN M/S VIJAYA SHANTHI CHILLIES ` 1,81,789.00 ---------------------- GROSS COMMISSION ` 16,21,329.00 =========== THE TURNOVER OF ` 9.35 CRORES ON WHICH THE COMMISSION WAS DECLARED AT 1% WAS CLAIMED TO HAVE BEEN PASSED TO OTHERS. IN A CO MPETITIVE BUSINESS ENVIRONMENT, IT IS QUIET POSSIBLE THAT THE BUSINESS EXPEDIENCY WOULD WARRANT A REDUCTION OF COMMISSION RATE IN ORDER TO PROCURE MORE VOLUME OF ITA NOS 14 & 28 OF 2011 SRI VAMSI KRISHNA GENERAL T RADERS GUNTUR PAGE 12 OF 12 BUSINESS. HENCE THE SAID CLAIM OF THE ASSESSEE COU LD NOT BE BRUSHED ASIDE ALTOGETHER. AT THE SAME TIME, THE ASSESSEE HAS AL SO FAILED TO BRING ON RECORD ANY EVIDENCE IN SUPPORT OF ITS CONTENTIONS. HENCE, IN ORDER TO RESOLVE THESE KIND OF SITUATION, IT IS IMPERATIVE T O INDULGE IN MAKING ESTIMATE. HENCE, ON A CONSPECTUS OF THE MATTER, IN OUR OPINION, THE ENDS OF JUSTICE WOULD BE MET IF THE ADDITION ON ACCOUNT OF COMMISSION IS RESTRICTED TO ` 2,00,000/-. WE ORDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED AND THE APPEAL OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 10-08-2011 COPY TO 1 M/S SRI VAMSI KRISHNA GENERAL TRADERS, C/O Y. SUR YA CHANDRA RAO, CHARTERED ACCOUNTANT 49-27-4/1 2 ND FLOOR, MADHURANAGAR, VISAKHAPATNAM 530016 2 THE ITO WARD-1(2) GUNTUR 3 4. THE CIT GUNTUR THE CIT(A),GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM