The ACIT Cent Circle-2 Visakhapatnam, Visakhapatnam V. Sri Moturi Kanakeswara Rao, Eluru

ITA 300/VIZ/2011

• Counselvise Citation: 30025314 RSA 2011
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO. 301/VIZ/2011 ASSESSMENT YEAR : 2001 - 02 ACIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM VS. SRI NUKALA RAMAKRISHNA, MARUTHI NILAYAM, D.NO.78 - 45 - 15, UPPULURIVARI LANE, EASTERNSTREET, ELURU. PAN/GIR NO. : AAQ[M 1119 F ( APPELLANT ) .. ( RESPONDENT ) C.O.NO.2/.VIZ/2012 (ARISING OUT OF I.T.A. NO. 300/VIZ/2011) ASSESSMENT YEAR : 2001 - 02 SRI NUKALA RAMAKRISHNA, MARUTHI NILAYAM, D.NO.78 - 45 - 15, UPPULURIVARI LANE, EASTERN STREET, ELURU VS. ACIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM PAN/GIR NO. : AAQ[M 1119 F ( APPELLANT ) .. ( RESPONDENT ) I.T.A. NO. 300/VIZ/2011 ASSESSMENT YEAR : 2001 - 02 ACIT, CENTRAL CIRCLE - 2, VISAKHAPATNAM VS. SRI MOTURI KANAKESWARA RAO, S/O LAVA RAJU, DOOR NO.1 - 4 - 9/I, GANDHI MAIDANAM, 2 ND LAND WESTERN STREET, ELURU . PAN/GIR NO. : ADIPM 1465 E APPELLANT BY : SHRI B BABU RAO CROSS OBJECTOR BY : Y.SURYA CHANDRA RAO DATE OF HEARING : 10/12/2013 DATE OF PRONOUNCEMENT : 13 /12/2013 O R D E R 2 PER SAKTIJIT DEY, JM THE REVENUE HAS FILED THESE TWO APPEALS FOR ASSESSMENT YEAR 2001 - 02 IN THE CASE OF TWO DIFFERENT ASSESSES AGAINST SEPARATE ORDER S BOTH DATED 19.7.2011 OF LD CIT(A) - VISAKHAPATNAM. 2. THE ASSESSEE - SHRI NUKALU RAMAKRISHNO HAS FILED CROSS OBJECTION IN C.O. NO.2/VIZ/2012 ARISING OUT OF I.T.A NO.301/V/2011 FILED BY THE DEPARTMENT. 3. WE NOW TAKE UP THE APPEAL FILED BY THE DEPARTMENT IN I.T.A. NO.301/V/2011 IN THE CASE OF NUKALA RAMAKRISHNA. 4. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS AN INDIVIDU AL. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE CASE OF THE ASSESSEE AS WELL AS OTHER GROUP CONCERN ON 16.11.2007. ON THE BASIS OF MATERIAL FOUND AS A RESULT OF SEARCH AND SEIZURE OPERATION, IT CAME TO THE NOTICE OF THE AO THAT ASSESSEE WAS INVOLVED IN AQUACULTURE DURING THE FINANCIAL YEAR 2000 - 2001 BY TAKING LEASE OF FISHPON DS TO THE EXTENT OF 70 ACRES FROM VARIOUS PERSONS FOR AN AMOUNT OF RS.11,20,000/ - PER YEAR AS PER THE LEASE AGREEMENT. AT THE SAME TIME, HE ALONGWITH HIS FAMILY MEMBERS HELD ABOUT 128 ACRES OF FISHPONDS. ON VERIFICATION OF THE INCOME TAX RETURN FILED FO R THE IMPUGNED ASSESSMENT YEAR, THE AO NOTICED THAT THE ASSESSEE HAD NOT DISCLOSED ANY INCOME FROM AQUACULTURE. THEREFORE, THE AO HAVING REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, I SSUED NOTICE UNDER SECTION 148 OF THE ACT FOR REOPENING THE ASSESSMENT OF THE ASSESSEE. DURIN G THE ASSESSMENT PROCEEDINGS, WHICH ENSUED IN PURSUANCE TO THE NOTI CE UNDER SECTION 148 OF THE ACT, T HE ASSESSEE APPEARING BEFORE THE AO THOUGH COMPLETED DISOWNE D THE LEASE DEEDS AND TAKING LEASE OF 70 ACRES OF LAND BU T THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND COMPUTED THE INCOME FROM FISHPONDS AT RS.65,30,000/ - AND AFTER DEDUCTING THEREFROM THE INCOME DECLARED OF RS.93,600/ - IN THE ORIGINAL RETU RN ADDED THE BALANCE AMOUNT OF RS.64,36,400/ - TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3 5. THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE WITH REGARD TO ESTIMATION OF NET PR OFIT PER ACRE FOLLOWED THE ORDER OF THE CIT(A) HYDERABAD VIDE ORDER DATED 29.11.2010 IN HIS OWN CASE HELD AS UNDER: THE LD CIT(A) HYDERABAD VIDE ORDER DT.29.11.2010(SUPRA) ADJUDICATED THE MATTER AND HELD THAT THE PROFIT PER ACRE WOULD WORK OUT TO RS.41,8 14/ - FOR THE F.Y. 2007 - 08 AND HE DIRECTED THE AO TO REDUCE THE PROFIT PER ACRE BY 10% EACH YEAR. THUS, HE WORKED OUT A PROFIT OF RS.22,212/ - PER ACRE FOR A.Y. 2001 - 02. ADOPTING THE SAME RATIO, THE PROFIT PER ACRE FOR THE F.Y. 2000 - 2001 I.E. A.Y. 2001 - 02 WOULD COME TO RS.19,999/ - . THUS, FOLLOWING THE STAND TAKEN BY THE LD CIT(A) - 1, HYDERABAD, I DIRECT THE AO TO CALCULATE PER ACRE YIELD AT RS.20,000/ - INSTEAD OF RS.47,000/ - PER ACRE ESTIMATED BY THE AO. THIS ESTIMATION WOULD BE FOR THE FISH TANKS OWNED BY THE APPELLANT. 6. SO FAR AS INCOME FROM LEASED LAND IS CONCERNED, THE CIT(A) DIRECTED THE AO TO ESTIMATE THE PROFIT AS IF THEY ARE OWNED BY THE ASSESSEE AND REDUCED THE ACTUAL LEASED RENTALS PAID FOR THE YEAR FROM THE PROFIT. IN OTHER WORDS, HE DIRECTE D THE AO TO ESTIMATE RS.20,000/ - PER ACRE OF LEASE ON THE LEASED FISH TANKS ON NET ACREAGE AND REDUCED RENTAL THEREFROM AND ARRIVED AT THE NET INCOME. BEING AGGRIEVED OF THE ORDER OF THE CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US. 7. AT THE VERY OUTSE T, LD A.R. SUBMITTED BEFORE US THAT THE ORDER DATED 29.11.2010 OF THE CIT(A) - 1, HYDERABAD FOLLOWING WHICH THE CIT(A) IN THE PRESENT APPEAL HAS DECIDED THE ISSUE , WAS SUBJECT MATTER OF APPEAL BEFORE ITAT, VISAKHAPATAN BENCH AND BY VIRTUE OF THE ORDER PASS ED BY THE VISAKHAPATNAM BENCH, THE ISSUE IN DISPUTE HAS BEEN SETTLED. IN THIS CONNECTION, LD A.R. REFERRED TO THE ORDER DATED 23.9.2011 PASSED IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2002 - 03 TO 2008 - 09. ON PERUSAL OF THE FINDINGS OF THE TRIBUNAL IN ITA NOS.53 TO 58/VIZ/2011 AND OTHER DT.23.9.2011, IT IS TO BE NOTED THAT THE TRIBUNAL HAS UPHELD THE ORDER OF THE CIT(A), WHEREIN, THE CIT(A) HELD AS UNDER: 'THE PROFIT PER ACRE SHOULD BE COMPUTED IN THE FOLLOWING MANNER. PROFIT PER ACRE BASED ON THE SEIZED MATERIAL AND COMPUTED BY THE ASSESSING OFFICER AS PER PARA 4.4 RS.46,460 (THIS PROFIT IS AFTER DEDUCTING COST OF REARING OF 4 RS.85,000/ - PER ACRE OTHER THAN LEASE RENTALS AS PER AO'S OBSERVATION IN PARA 4.4 AND OTHER DIRECT EXPENSES L IKE COST OF PACKING, TRANSPORT ETC). LESS: 10% ESTIMATED EXPENDITURE ON OTHER INDIRECT EXPENSES LIKE INTEREST COST, DISCOUNT, TRANSIT LOSS, DAMAGES ETC. WHICH IS VERY MUCH INCIDENTAL TO THE BUSINESS OF THE APPELLANT. RS. 4,646 PROFIT PER ACRE RS.41,814/ - THIS PROFIT OF RS.41,814/ - IS FOR THE FINANCIAL YEAR 2007 - 08 SINCE THE SALE PATTIES FOUND DURING THE COURSE OF SEARCH BASED ON WHICH THE ASSESSING OFFICER HAS WORKED OUT THE PROFIT PERTAIN TO THE FINANCIAL YEAR 2007 - 08. FOR THE FINANCIAL YEAR 2006 - 07 AND DOWN BELOW UPTO FINANCIAL YEAR 2001 - 02, THE ASSESSING OFFICER IS DIRECTED TO REDUCE PROFIT PER ACRE BY FOR EACH YEAR. FOR EXAMPLE, THE PROFIT PER ACRE FOR 2006 - 07 WILL BE RS.37,633/ - (41814 - 4181), FOR THE FINANCIAL YEAR 2005 - 06 IT WILL BE 33,869(37633 - 3763) AND SO ON. THIS WAY, THE PROFIT FOR THE FINANCIAL YEAR 2001 - 02 PER ACRE WILL COME TO RS.22,221/ - (APPROX). 04.7 ACCORDINGLY THE PROFIT PER ACRE AS ARRIVED AT ABOVE IS IN RESPECT OF THE OWN TANK. AS REGARDS THE LEASED TANKS, THE AO SHOULD DEDUCT THE LEASE RENTAL ON ACTUAL FOR EACH YEAR AS MENTIONED IN THE ASSESSMENT ORDER.' 8. LD D.R. HA S NOT CONTROVERTED THIS FACT. 9. THEREFORE, SINCE THE CIT(A) HAS FOLLOWED THE ORDER DATED 29.11.2010 OF THE CIT (A) (SUPRA) PASSED IN THE CASE OF THE ASSESSEE FOR THE BLOCK PERIOD 2002 - 03 TO 2008 - 09, WHICH IN TURN HAS BEEN CONFIRMED BY THE ITAT (SUPRA), THE SAME PRINCIPLE SHOULD ALSO APPLY TO THE ASSESSMENT YEAR IN DISPUTE. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH, WE DISMISS THE APPEAL FILED BY THE DEPARTMENT. 10. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE CROSS OBJECTION IS THAT THE CIT(A) IN ITS ORDER PASSED FOR THE BLOCK PERI OD WHILE DECIDING THE ISSUE IN DISPUTE HAD DIRECTED PROFIT PER ACR E AT 10% OF EACH YEAR WHEREAS THE ITAT HAS INCREASED TO 15%. IN THIS CONNECTION, LD A.R. SPECIFICALLY INVITED OUR ATTENTION TO PARA 12.4 OF THE ORDER DATED 23.9.2011 BY THE ITAT (SUPRA) . HE SUBMITTED THAT SINCE AT THE TIME WHEN THE CIT(A) DISPOSED OFF THE APPEAL, THE APPEAL BEFORE THE TRIBUNAL WAS NOT DISPOSED OFF , T HEREFORE, HE ALSO DIRECTED TO REDUCE THE PROFIT AT 10%. HOWEVER, IN THE CHANGED SCENARIO EMERGING AFTER T HE ORDER PASSED BY T HE TRIBUNAL(SUPRA) THE 5 REDUCTION OF PROFIT SHOULD BE INCREASED TO 15%. ON PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL, WE FIND THAT THE TRIBUNAL HAS HELD AS UNDER: WITH REGARD TO THE INDIRECT EXPENSES, IT IS A COMMON FACT THAT A FARMER HAVING LARGE SCALE OF OPERATION WOULD HAVE TO INCUR HIGHER INDIRECT EXPENSES SINCE HE IS CONSTRAINED TO MAINTAIN COMPARATIVELY HUGE ESTABLISHMENT. IN THE CASE OF LARGE SCALE OF OPERAT ION, A BUSINESS MAN WOULD NORMALLY TRY TO OPTIMIZE HIS PROFIT BY SELLING HIS GOODS AT COMPARATIVELY LOWER PRICE SINCE HE IS REQUIRED TO DISPOSE OF HIGHER QUANTITY. HENCE, THE LARGE FARMER VIS - A - VIS SMALL FARMER WILL EARN MORE PROFIT IN ABSOLUTE TERMS, BUT THE PROFIT RATIO/PER CAPITA INCOME OF A LARGER FARMER WOULD BE LOWER. WE HAVE ALREADY NOTED THAT THE SELLING RATE OF FISHES WILL NOT BE UNIFORM THROUGH OUT THE YEAR AND IT IS SUBJECT TO FLUCTUATIONS DUE TO VARIOUS REASONS. CONSIDERING ALL THESE ASPECTS, WE ARE OF THE VIEW THAT IT WOULD MEET THE ENDS OF JUSTICE IF THE RATE OF DEDUCTION TOWARDS INDIRECT EXPENSES GIVEN BY LD CIT(A) AT 10% IS INCREASED TO 15%, IN ORDER TO TAKE CARE OF EFFECT OF SELLING RATE VARIATIONS AND ALSO THE EFFECT OF HIGHER INDIRECT EXPE NSES. WE ORDER ACCORDINGLY. ACCORDINGLY THE PROFIT PER ACRE FOR OWN LANDS IN THE FINANCIAL YEAR 2007 - 08 WOULD WORK OUT TO RS.39,491/ - FOR OWN TANKS. 11. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE DIRECT THE AO TO INCREASE THE RATE OF PER ACRE TOWARDS THE EXPENSES FROM 10% TO 15%. 12. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMISSED. 13. IN APPEAL NO.300/VIZ/2011 IN THE CASE OF MOTURI KAMEKESWARA RAO, THE REVENUE HAS RAISED THE SIMILAR GROUNDS AS TAKEN IN I.T.A. NO.301/VIZ/2011 . IN LINE WITH OUR DECISION IN THE CASE OF N.RAMAKRISHNO (SUPRA), WE DISMISS THE APPEAL OF THE DEPARTMENT 14. RESULTANTLY, THE APPEA LS FILED BY THE DEPARTMENT ARE DISMISSED WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/12/20 13 . SD/ - S D/ - (B.RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAPATNAM DATED 13 / 12/2013 PARIDA , SR. PS 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANTS CONERNED 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//