M.Syama Sundara Rao, Srikakulam V. THE ITO, Srikakulam

ITA 30/VIZ/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1125 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Unexplained investment
• Section: 69

Judgement Text

ITA 30/VIZAG/2015 AY 2011-12 SHRI M.SYAMA SUNDARA RAO, SRIKAKULAM 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 30/VIZAG/2015 ASSESSMENT YEAR: 2011-12 SHRI M.SYAM SUNDARA RAO VS. THE ITO, WARD 1 SRIKAKULAM SRIKAKULAM (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G V N HARI, ADV. REVENUE BY: SHRI D. MANOJ KUMAR, SR. DR DATE OF HEARING : 05.03.2015 DATE OF PRONOUNCEMENT : 22.05.2015 ORDER PER J.SUDHAKAR. REDDY : - THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-2, VISAKHAPATNAM DATE D 23.12.2014 FOR THE A.Y. 2011-12. 2. FACTS IN BRIEF . THE ASSESSEE IS AN INDIVIDUAL, CARRIES ON THE BU SINESS IN PURCHASE AND SALE OF INDIAN MADE FOREIGN LIQUOR IN SRIKAKULAM DISTRICT. FOR THE AY 2011-12 HE FILED RETURN OF INCOME DECLARING AN INCO ME OF RS.5,69,484/- THROUGH E- FILING ON 17.9.2011. THE CASE WAS PICKED UP FOR S CRUTINY AND THE AO VIDE HIS ORDER DATED 21.02.2014 DETERMINED TOTAL INCOME AT R S. 39,21,836/-, INTER-ALIA, MAKING THE FOLLOWING ADDITIONS: 1. ESTIMATION OF INCOME OF RS.35,43,234/- @ 20% OF THE STOCK PUT TO SALE; 2. UNEXPLAINED INVESTMENT OF RS. 3,50,000/-; 3. INTEREST ON FDR OF RS. 28,602/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL. 3. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIE F. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS: ITA 30/V/2015 AY: 2011-12 SHRI M.SYAMA SUNDARA RAO, SRIKAKULAM 2 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE T O THE FACTS OF THE CASE; 2. THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT; 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(APPEALS ) IS NOT JUSTIFIED IN ESTIMATING THE NET PROFIT @ 10% OF PURCHASE PRICE A S AGAINST NET PROFIT OF 5% OF COST OF GOODS SOLD AS DETERMINED BY THE HONB LE ITAT, VISAKHAPATNAM AND HYDERABAD BENCHES; 4. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(APPEALS ) IS NOT JUSTIFIED IN ESTIMATING THE NET PROFIT @ 10% OF PURCHASE PRICE A S AGAINST NET PROFIT OF 5% OF COST OF GOODS SOLD; 5. THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ADDITIONS OF RS. 3,50,000 MADE BY THE AO TOWARDS UNEXPLAINED INVEST MENT; 6. THE LD. CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ENTIRE INVESTMENT WAS RECORDED IN THE BOOKS OF ACCOUNT AND HENCE CANNOT BE TERMED AS UNEXPLAINED INVESTMENT. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF A PPEAL HEARING. 4. WE HAVE HEARD SHRI G V N HARI, LD. COUNSEL FOR T HE ASSESSEE AND SHRI D. MANOJ KUMAR, LD. DR ON BEHALF OF THE REVENUE. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: 1. THERE ARE TWO ISSUES THAT ARE AGITATED BEFORE US. THESE ARE : A) ESTIMATION OF NET PROFIT @10% OF THE PURCHASE PRICE , AS AGAINST NET PROFIT OF 5% OF THE COST OF GOODS SOLD; B) ADDITION OF RS. 3,50,000/- U/S 69 OF THE ACT, WHEN THE EXPENDITURE IN QUESTION HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT. 6. AS FAR AS ESTIMATION OF NET PROFIT IS CONCERNED THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF T. APPALASWAMY VS. ACIT (IT A NO. 65 & 66/VIZ/2012) ORDER DATED 3.3.2014 AT PARA 3 HELD AS FOLLOWS: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDER S OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF THE LD. AR 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. DR SUPPORTED THE ORDER OF THE CIT(A). HAVING C ONSIDERED THE SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE VIEW THA T THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT, HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO. 127/HYD./2012 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 FORE IGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESS EE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ESTIMATE T HE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE ITA 30/V/2015 AY: 2011-12 SHRI M.SYAMA SUNDARA RAO, SRIKAKULAM 3 NET OF ALL OTHER DEDUCTIONS. THE AO SHOULD ALSO BE AR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE INCO ME RETURNED. 7. THIS DECISION WAS FOLLOWED IN NUMBER OF CASES IN CLUDING ITA NO. 563/VIZ/2014 IN THE CASE OF U VENKATA NEELADRI RAJU VS. ITO, RAJAHMUNDRY ORDER DATED 26.09.2014. 8. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIREC T THE AO TO ESTIMATE THE PROFIT FROM IMFL BUSINESS BY ADOPTING THE RATE OF 5% ON THE COST OF SALES. 9. GROUND NO.5 AND 6 OF THIS APPEAL RELATE TO UPHOL DING OF AN ADDITION OF RS.3,50,000/- MADE BY THE A.O. 10. SHRI GVN HARI, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION IN QUESTION WAS MADE U/S 69 OF THE ACT AND AS THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS AND HAD RECORDED THE EX PENDITURE IN ITS BOOKS, NO ADDITION CAN BE MADE U/ 69 OF THE ACT. 11. SRI D.MANOJ KUMAR, LD.SR.D.R. OPPOSED THE CONTE NTIONS OF THE ASSESSEE BY SUBMITTING THAT, THE AO HAS RECORDED THAT THE EXP ENDITURE IN QUESTION WAS INCURRED BEFORE THE COMMENCEMENT OF BUSINESS AND T HE SAME WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS AND ALSO THAT THE LD.CIT(A) H AS DEALT WITH THIS ISSUE AND SUBMITTED THAT THE ADDITION TO THE TUNE OF RS.3,50, 000/- BE CONFIRMED. HE RELIED ON THE ORDER OF THE LD. CIT(A). 12. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT T HE LD. CIT(A) HAS AT PARA 5.3 HELD AS FOLLOWS. 5.3. I HAVE CONSIDERED THE SUBMISSIONS. THE CAPITA L INTRODUCED DURING THE SUBJECT YEAR OF RS.4,00,000/- WAS SAID TO BE MADE O UT OF CLOSING CAPITAL AVAILABLE IN HIS BOOKS FOR THE YEAR 2006-07. THE CASH INTROD UCED OF RS.3,50,000/- WAS SAID TO BE OUT OF THE SAID AMOUNT OF RS.4,00,000/-. BUT THERE IS NO INFORMATION OR EXPLANATION AS TO WHAT HAPPENED DURING THE INTERVEN ING 4 YEARS. NO DOCUMENTATION WAS PRODUCED. THEREFORE, I AM OF THE V IEW THAT THE AO IS JUSTIFIED IN HOLDING THAT THE SOURCE FOR THE IMPUGNED CAPITAL INTRODUCED OF RS.3,50,000/- WAS NOT EXPLAINED. THEREFORE, I FIND THAT THE AO IS JUSTIFIED IN MAKING THE IMPUGNED ADDITION OF RS.3,50,000/- AND THE SAME IS CONFIRMED. ITA 30/V/2015 AY: 2011-12 SHRI M.SYAMA SUNDARA RAO, SRIKAKULAM 4 13. THE A.O. HAS CLEARLY RECORDED THAT THE INVESTME NT IN QUESTION HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS AND THAT IT WAS I NCURRED PRIOR TO THE COMMENCEMENT OF LIQUOR BUSINESS. NO EVIDENCE OR AR GUMENTS HAVE BEEN LEAD BEFORE US ON MERITS. 14. WE FIND NO INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY AS THE ASSESSEE HAS NOT RECORDED THE SAID EXPENDITURE IN H IS BOOKS OF ACCOUNTS AND HAS ALSO NOT EXPLAINED THE SOURCES FOR THE INTRODUCTION OF CAPITAL OF BUSINESS. IN THE RESULT, WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THESE TWO GROUNDS OF THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. PRONOUNCED IN THE OPEN COURT ON 22.05.2015 SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:22 ND MAY, 2015 MANGA COPY TO 1 APPELLANT 2 RESPONDENT 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER ASSISTANT REGISTRAR