Badagala Srinivasa Rao, Palasa V. The ITO, Srikakulam

ITA 287/VIZ/2016

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9664 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 19-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R.S. ARAVINDHAKASHAN
• Assessee Lawyers: S.V. SATYANARAYANA
• Keywords: Rejection of books of accounts; Additional evidence; Assessment record; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER ITA NO. 287 / VIZ /201 6 (ASST. YEAR : 20 11 - 1 2 ) SRI BADAGALA SRINIVASA RAO, PROP : SRI MANKINAMMA WINES, PURUSHOTTAMPURAM, PALASA, SRIKAKULAM DISTRICT. VS. ITO, WARD - 2, SRIKAKULAM. PAN NO. AINPB 1337 L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S.V. SATYANARAYANA ADV. DEPARTMENT BY : SHRI R.S. ARAVINDHA KASH A N - DR DATE OF HEARING : 14 / 1 2 /201 6 . DATE OF PRONOUNCEMENT : 21 / 12 /201 6 . O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , VISAKHAPATNAM , DATED 0 1 /0 3 /201 6 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMFL LIQUOR , FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 2,52,769/ - . THE CASE OF SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS NOTED TH A T THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT PROPERLY AND THEREFORE, HE ESTIMATED THE PROFIT ON IMFL LIQUOR BUSINESS AT 20 % OF STOCK PUT FOR SALE . ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) HAS SCALED DOWN THE ESTIMATION OF PROFIT AT 8% ON THE PURCHASE PRICE AND DIRECTED THE ASSESSING OFFICER TO RE - COMPUTE THE PROFIT OF THE ASSESSEE. 2 ITA NO. 287/VIZ/2016 3. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL WHERE THE TRIBUNAL HAS SCALED DOWN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED TH E ORDERS PASSED BY THE AUTHORITIES BELOW. 5. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL B USINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPRA) HAS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN T HE LINE OF IMFL BUSINESS AND DIRECTED THE ASSESSING OFFICER TO RE - COMPUTE THE PROFIT OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH TH E ORDERS OF THE AUTHORITIES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. THE A.O. FURTHER OBSE RVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN STOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HO NBLE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASSESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TR ADE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGES CORPORATION LTD. AND THE PRICES OF THE 3 ITA NO. 287/VIZ/2016 PRODUCTS ARE FIXED BY THE STATE GOVERNMENT. THE ASSESSEE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELYING UPON THE DECISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH COURT HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELEVA NT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF PROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF PROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE ORDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SE RIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREIGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE B Y APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE INCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BENCH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYING UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE O THER HAND, THE ASSESSEE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENUE TO T AKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. THEREFORE, WE DIRECT THE A.O. TO 4 ITA NO. 287/VIZ/2016 ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. ORDERED ACCORDINGLY. 6. IN VIEW OF THE ABOVE DECISION OF THE COORD INATE BENCH OF THIS TRIBUNAL, I DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE PROFIT OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 7 . THE THIRD GROUND OF APPEAL RAISED BY THE ASSESSEE IN RESPECT OF UNEXPLAINED AMOUNT OF RS. 9,45,296/ - . 8 . FACTS IN BRIEF ARE THAT IN THE ASSESSMENT ORDER , THE ASSESSING OFFICER HAS NOTED TH A T THE ASSESSEE HAS SHOWN OPENING CAPITAL OF RS.9,45,000/ - . THE ASSESSEE HAS CONTENDED BEFORE THE ASSESSING OFFICER THAT HE HAS BEEN ASSESSED TO TAX IN 2004 - 05 ONWARDS AND INCOME FROM LIC COMMISSION AND SOME AGRICULTURAL INCOME ALSO AND SUBMITTED THAT THE SAME MAY BE CONSIDERED. EXCEPTING THE ABOVE SUBMISSION, THE ASSESSEE WAS UNABLE TO SUBSTANTIATE HIS CASE BY PRODUCING THE DOCUMENTARY EVIDEN CE BEFORE THE ASSESSING OFFICER. T HEREFORE, THE ASSESSING OFFICER HAD ADDED THE ADDITION OF RS.9,45,000/ - IN THE HANDS OF THE ASSESSEE. EVEN BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), HE WAS UNABLE TO SUBSTANTIATE HIS CASE WITH THE DOCUMENTARY EVIDENCE. EVEN BEFORE US, NO EVIDENCE IS PRODUCED EXCEPT STATING THAT HE IS HAVING SOME INCOME. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE AS SESSEE HAS FAILED TO SUBSTANTIATE HIS CASE EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) EVEN BEFORE US BY PRODUCING COGENT MATERIAL. THEREFORE, I FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), WHICH IS HEREBY CONFIRMED. 5 ITA NO. 287/VIZ/2016 9 . THE NEXT G R OUND OF APPEAL RELATING TO UNSECURED LOANS OF RS.12,45,000/ - . 10 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS SHOWN UNSECURED LOANS FOR AN AMOUNT OF RS. 12,45,000/ - . THE ASSESSING OFFICER HAS CALLED TO EXPLAIN THE ASSESSEE TO PRODUCE THE DETAILS OF THE LOAN CREDITORS AND GENUINENESS OF THE SAME . THE ASSESSEE HAS NOT PRODUCED ANY DETAILS BEFORE THE ASSESSING OFFICER, THEREFORE, THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS. 12,45,000/ - IN THE HANDS OF THE ASSESSEE. 11 . ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE HAS FILED THE DETAILS OF THE LOAN CREDITORS AND SUBMITTED TH A T DUE TO CYCLONE, HE WAS NOT ABLE TO FILE THE DETAILS BEFORE THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX (APPEALS) BY CONSIDERING THE EXPLANATION OF THE ASSESSEE ADMITTED THE ADDITIONAL EVIDENCE CALLED REMAND REPORT FROM THE ASSESSING OFFICER. AFTER CONSIDERING THE REMAND REPORT, THE COMMISSIONER OF INCOME TAX (APPEALS) HA S PASSED THE DETAIL ED ORDER WHEREIN THE COMMISSIONER OF INCOME TAX (APPEALS) ONLY ACCEPTED THE AMOUNT BORROWED FROM B . JAGGA RAO TO THE TUNE OF RS. 1 LAKH , REMAINING OF 13 LOAN CREDITORS, HE CONFIRMED THE ADDITION BY PASSING THE DETAILED ORDER BY OBSERVING THAT THERE IS NO CREDITWORTHINESS OF THE LOAN CREDITORS. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: - '6.4 I HAVE CONSIDERED THE DETAILS AND SUBMISSIONS MADE. I HAVE ALSO PERUSED THE ASSESSMENT FOLDERS FORWARDED BY THE AO. IT IS SEEN THAT THE ASSESSEE HAS CLAIMED UNSECURED LOANS FROM THE FOLLOWING 14 PERSONS: SR. NO. NAME OF THE CREDITOR UNSECURED LOAN (RS.) 1 BANDAPU APPALA SWAMY 75,000 2 BALAKA JAGGA RAO 1,00,000 3 DASARI ACCHODU 1,00,000 4 SEEPANA VASUDAVA RAO 1,00,000 5 VALLABHA CHELLAMMA 75,000 6 ITA NO. 287/VIZ/2016 6 EGALA RAMA RAO 75,000 7 MARPU DHARMA RAO 1,50,000 8 SAMALLA SIMHADRI 1,00,000 9 DARASPU KUMAR 1,00,900 10 BUDDA TULASAYYA 1,00,000 11 VALLABHA VYKUNTHA RAO 50,000 12 MADDU KRISHNA MURTHY 1,00,000 13 MUDDADA GOPANNA 75,000 14 EAGALA MOHANA RAO 1,00,000 THE AO HAD EXAMINED 12 OF THE ABOVE CREDITORS EXCEPT MARPU DHARMA RAO AND VALLABHA VYKUNTA RAO. THE AO ON THE BASIS OF THE INQUIRIES MADE CAME TO THE CONCLUSION THAT ALL THESE CREDITORS DID NOT HAVE CREDITWORTHINESS AND HENCE THE IMPUGNED ADDITION MADE BY THE AU WAS STATED TO BE JUSTIFIED. I HAVE CAREFULLY CONSIDERED THE REMAND REPORT, THE DETA ILS AVAILABLE IN THE ASSESSMENT RECORD AND SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE. 6.5 WITH REGARD TO THE CREDITOR B. APPALA SWAMY IT IS SEEN THAT HE DEPOSED THAT HE HAS ANNUAL INCOME FROM AGRICULTURAL LAND AND KEEPING GOATS TO THE TUNE OF RS.40,00 0/ - AND THAT HIS FAMILY EXPENDITURE WAS AROUND RS.40,000/ - . HE HOLDS LAND OF AN EXTENT 0.60 CENTS AND CLAIMED TO HAVE TAKEN LAND ON LEASE OF AN EXTENT OF 2.50 ACRE BUT FAILED TO MENTION THE SURVEY NUMBER OF SUCH LAND. CONSIDERING HIS ECONOMIC STATE OF AFFA IRS, AS DEPOSED BY HIM, I FIND THAT THE AU IS JUSTIFIED IN DISBELIEVING THE CREDITWORTHINESS OF THIS CREDITOR. 6.6 WITH REGARD TO THE CREDITOR B. JAGGA RAO, IT IS SEEN THAT HE HAD DEPOSED THAT HE HAS 7 ACRES OF AGRICULTURAL LAND AND AGRICULTURAL INCOME T O THE TUNE OF RS.1.9 LAKH. HE HAD DEPOSED THAT THE LOAN WAS GIVEN TO THE ASSESSEE IN 5 INSTALLMENTS 5 YEARS BACK. HE HAD DEPOSED THAT THE LOAN WAS GIVEN OUT OF HIS AGRICULTURAL INCOME SAVINGS. THE AU HAS DOUBTED THE CREDITWORTHINESS OF THIS CREDITOR ALSO. HOWEVER, I FIND THAT THE AU HAS NOT DISPUTED THE LAND HOLDING OF THE CREDITOR TO THE TUNE OF 7 ACRES. THEREFORE, IT IS PROBABLE THAT THIS CREDITOR HAD SUFFICIENT SOURCE TO MAKE THE IMPUGNED ADVANCE. 6.7 WITH REGARD TO THE CREDITOR DASARI ACCHODU IT IS SEEN THAT HE HAD DEPOSED THAT HIS ANNUAL INCOME FROM HIS OWN AND LEASED LAND WAS TO THE TUNE OF RS.50,000/ - AND HIS ANNUAL EXPENDITURE IS TO THE TUNE OF RS.36,000/ - . CONSIDERING THIS STATE OF AFFAIRS I FIND THAT THE AO IS JUSTIFIED IN DISBELIEVING THE CRED ITWORTHINESS OF THIS CREDITOR. 6.8 WITH REGARD TO THE CREDITOR SEEPANA VASUDEVA RAO, IT IS NOTED THAT THIS CREDITOR HAS DEPOSED THAT HIS ANNUAL INCOME FROM LAND CULTIVATION AND COWS WAS RS.42,000/ - AND HIS ANNUAL EXPENDITURE WAS TO THE TUNE OF RS.50,000/ - . THUS, I FIND THAT THE AO'S VIEW TH AT THIS CREDITOR LACKS CREDITWORTHINESS IS WELL FOUNDED. 6.9 THE AO HAD EXAMINED THE CREDITOR MR. V. VYKUNTA RAO 7 ITA NO. 287/VIZ/2016 (SL.NO.11) WHO HAD ADVANCED RS.50,000/ - AND HIS MOTHER V. CHELLAMMA (SL.NO.5) HAD ADVANCED RS.75,000/ - . IT WAS DEPOSED THAT THEIR INCOME FR OM AGRICULTURAL ACTIVITIES ARE AROUND RS.48,000/ - AND THE FAMILY EXPENSES WAS ALSO APPROXIMATELY RS.48,000/ - . CONSIDERING THIS STATE OF AFFAIRS I FIND THAT THIS CREDITOR LACKS CREDITWORTHINESS. 6.10 THE AO NOTED THAT THE CREDITOR EGALA RAMA RAO DEPOSED TH AT HE HAD INCOME FROM LIC COMMISSION, AGRICULTURAL INCOME AND DAILY WAGE INCOME EARNED BY HIS WIFE AGGREGATING TO RS.40,000/ - PER ANNUM. HIS WIFE WORKS A DAILY CASUAL LABOURER AND EARNS RS.150/ - PER DAY. IT WAS NOTED THAT HE HAD TAKEN LOAN OF RS.30,000/ - F ROM ANDHRA BANK WHICH WAS OUTSTANDING. ALL THESE CLEARLY SHOW THAT THIS CREDITOR LACKS CREDITWORTHINESS. 6.11 THE AO NOTED THAT THE CREDITOR MARPU DHARMA RAO DIED ON 19.02.2015. HOWEVER, THE ASSESSEE HAS FLIED CONFIRMATION LETTER FROM THIS CREDITOR DATED 13.07.2015. THUS THE GENUINENESS OF THE CLAIM IS IN DOUBT. BESIDES IT IS SEEN THAT THIS CREDITOR OWNS LAND OF 1.20 ACRES ONLY WHICH WOULD HAVE FETCHED ONLY ANNUAL INCOME OF RS.10,000/ - OR SO. THEREFORE, I FIND THAT THE AO HAS RIGHTLY DISBELIEVED THE CREDIT WORTHINESS OF THIS CREDITOR AND ALSO THE GENUINENESS OF THIS TRANSACTION. 6.12 THE CREDITOR SAMALLA SIMHADRI HAS DEPOSED THAT HE HAD AGRICULTURAL INCOME TO THE TUNE OF RS.70,000/ - FROM 3.2 ACRES OF LAND. HOWEVER FROM THE DEPOSITION IT IS SEEN THAT HIS CRE DITOR HAD AVAILED LOAN OF RS.1 LAKH FROM SBI IN THE YEAR 2006 AND WHICH WAS OUTSTANDING TILL DATE. IT WAS ALSO STATED THAT HE INTENDED TO SELL SOME PORTION OF HIS LAND TO CLEAR THE ABOVE LOAN. IN THE ABOVE FACTUAL SCENARIO, IT IS HARD TO BELIEVE THAT THIS CREDITOR WOULD HAVE ADVANCED RS.1 LAKH TO THE ASSESSEE WHEN HE HAS A LOAN BURDEN OF RS.1 LAKH ON HIM WHICH HE COULD NOT DISCHARGE. THEREFORE I FIND THAT THIS CREDITOR LACK CREDITWORTHINESS. 6.13 WITH REGARD TO THE CREDITOR D. KUMARA SWAMY, IT IS SEEN BEF ORE DEPOSED HE IS EARNING AGRICULTURAL INCOME OF RS.15,000/ FROM HIS AGRICULTURAL LAND 1 ACRE 39 CENTS AND THAT HE HAS ALSO WORKED AS DRIVER FOR RS.5,000/ - PER MONTH AND THAT HIS FAMILY EXPENDITURE WAS AROUND RS.30,000/ - PER ANNUM. IT IS CLEAR THAT THIS CR EDITOR HAS ONLY ENGAGED TO MOUTH EXISTENCE AND THE AO HAS RIGHTLY DISBELIEVED THE CREDITWORTHINESS OF THIS CREDITOR. SIMILAR IS THE POSITION WITH REGARD TO THE CREDITORS BUDDA TULASAYYA, MADDU KRISHNA MURTHY, MUDDADA GOPANNA & EGALA MOHANA RAO. THEREFORE, I FIND THAT THE AO HAS RIGHTLY DISBELIEVED THEIR CREDITWORTHINESS OF THE LOAN TRANSACTIONS. 6.14 IN VIEW OF THE ABOVE DISCUSSION, IT CAN BE SEEN THAT ALL THE CREDITORS EXCEPT ONE LACKS CREDITWORTHINESS TO ADVANCE TO THE ASSESSEE. THOUGH THEY HAVE SHOWN O WNERSHIP OF CERTAIN AGRICULTURAL LAND, THEIR DEPOSITION CLEARLY SHOW THEIR HAND TO MOUTH EXISTENCE. 8 ITA NO. 287/VIZ/2016 THE IMPUGNED LOANS HAVE NOT BEEN REPAID EVEN AFTER 5 YEARS. THUS, I FIND THAT THE AO IS JUSTIFIED IN DISBELIEVING THE CREDITWORTHINESS AND GENUINENESS OF TH E LOAN TRANSACTIONS EXCEPT IN THE CASE OF B. JAGGA RAO WHO APPARENTLY HAS CREDITWORTHINESS AND IS ALSO RELATED TO THE ASSESSEE. AS A RESULT, THE IMPUGNED ADDITION MADE TO THE TUNE OF RS.11,45,000/ - IS CONFIRMED. 1 2 . ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE LOAN CREDITORS HAVE ISSUED CONFIRMATION LETTERS, T HEREFORE, THE ADDITION MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) HAS TO BE DELETED . 1 3 . ON THE OTHER HAND , DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS AS WELL AS THE CR EDITWORTHINESS OF THE CREDITORS. THEREFORE, S IMPLY FILING CONFIRMATIONS LETTERS ARE NOT SUFFICIENT, AND HE SUPPORTED THE ORDER PASSED B Y THE COMMISSIONER OF INCOME TAX (APPEALS) . 1 4 . I HAVE CONSIDERED THE SUBMISSION S OF BOTH THE PARTIES, PERUSED THE MATERIAL ON RECORD AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. THE CASE OF THE ASSESSEE IS THAT HE HAS BORROWED MONEY F ROM 14 PERSONS TO THE TUNE OF RS. 12,45,000/ - . INITIALLY , HE WAS NOT ABLE TO FILE ANY DETAILS BEFORE THE ASSESSING OFFICER, HOWEVER, HE FILED SOME DETAILS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) , WHO AFTER CALLING THE REMAND REPORT FROM THE ASSESSING OFFICER, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF RS. 1 LAKH WHICH HE WAS BORROWED FROM B. JAGGA RAO FOR THE REASON THAT THE ASSESSEE IS ABLE TO PRODUCE AN EVIDENCE THAT THE CRED ITOR IS HAVING CREDITWORTHINESS AND REMAINING ALL 13 LO A N CREDITORS, THE ASSESSEE IS NOT ABLE TO PRODUCE ANY EVIDENCE THAT THEY ARE HAVING A CREDITWORTHINESS TO GIVE LOANS TO THE ASSESSEE, EVEN BEFORE US THE ASSESSEE HAS NOT FILED ANY DETAILS AND HE FAILE D TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF 9 ITA NO. 287/VIZ/2016 THE OPINION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE REMAND REPORT AND ALSO DETAILS SUBMITTED BY THE ASSESSEE, HE CONFIRMED THE ADDITION TO THE TUNE OF RS. 11,45,000/ - . H ENCE, I FIND NO REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , WHICH IS HEREBY CONFIRMED AND THE GROU ND OF APPEAL OF THE ASSESSEE IS DISMISSED. 1 5 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 21 ST DAY OF DECEMBER , 201 6 . SD/ - ( V. DURGA RAO ) JUDICIAL MEMBER DATED : 21 ST DECEMBER , 201 6 . VR/ - COPY TO: 1 . THE ASSESSEE. SRI BADAGALA SRINIVASA RAO, PROP : SRI MANKINAMMA WINES, PURUSHOTTAMPURAM, PALASA, SRIKAKULAM DISTRICT. 2 . THE REVENUE. ITO, WARD - 2, SRIKAKULAM. 3 . THE CIT - 2,VISAKHAPATNAM. 4 . THE CIT(A) - 2, VISAKHAPATNAM. 5 . THE D.R . 6 . GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY I.T.A.T., VISAKHAPATNAM .