Bhawarlal H. Jain, Hyd, Hyderabad V. ITO, Ward-7(4), Hyd, Hyderabad

ITA 318/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6197 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: A.V. RAGU RAM
• Keywords: Notional interest
• 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; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 318/HYD/2016 ASSESSMENT YEAR: 2009-10 SRI BHAWARLAL H. JAIN, HYDERABAD [PAN: AACPJ4726E] VS THE INCOME TAX OFFICER, WARD-7(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGU RAM, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 06-12-2016 DATE OF PRONOUNCEMENT : 31-01-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD D ATED 12-01-2016. ASSESSEE IS AGGRIEVED ON THE TWO ADDITIO NS SUSTAINED BY CIT(A) IN THE ABOVE ORDER. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 2. LEARNED CIT APPEALS ERRED IN SUSTAINING ADDITIO N OF RS. 3,68,023 OUT OF THE TOTAL ADDITION OF 5,41,434 MADE BY THE ASSESSING OFFICER BY ESTIMATING PROFIT ON CASH DEPOSITS MADE IN THE BANK TREATING THE DEPOSITS AS RETAIL SALES OF APPELLANT. I.T.A. NO. 318/HYD/2016 SRI BHAWARLAL H. JAIN :- 2 - : 3. THE LEARNED CIT(APPEALS)-3 ERRED IN SUSTAINING T HE ADDITION OF RS. 48,498 MADE ON THE NOTIONAL BASIS THAT THE INTEREST OUGHT TO HAVE BEEN RECEIVED FROM LOANEES WHEN APPELLANT INFACT HAVE NO T RECEIVED THE SAME. 4. THE APPELLANT THEREFORE PRAYS FOR THE DELETION O F ADDITION RS. 3,68,023 AND RS. 48,498 MADE TO THE RETURNED INCOME OF PASS ANY OTHER ORDER AS THE HON'BLE TRIBUNAL DEEMS FIT AND PROPER . GROUND NOS. 1 & 5 (WRONGLY MENTIONED AS 3) ARE GENER AL IN NATURE. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN GENERAL AND NOVELTY GOODS. HE FILED RETURN OF IN COME ADMITTING TOTAL INCOME OF RS. 1,82,540/- ON 17-12-2009. ASSESS MENT WAS COMPLETED DETERMINING THE TOTAL INCOME OF RS. 9,67,000 /- BY MAKING VARIOUS ADDITIONS. ONE OF THE ADDITIONS SUSTAIN ED BY THE LD.CIT(A) IS WITH REFERENCE TO ADDITION OF RS.48,498/- MADE ON NOTIONAL BASIS THAT INTEREST OUGHT TO HAVE BEEN RECEIVED FROM THE LOANEES. THE OTHER ADDITION SUSTAINED BY THE LD.CIT(A) IS AN AMOUNT OF RS. 3,68,023/- ESTIMATING THE PROFIT AT 24% ON THE CASH DEPOSITS IN THE BANK ACCOUNT TO AN EXTENT OF RS. 15,14,50 0/- TREATING THE SAME AS TURNOVER OF ASSESSEE. ASSESSEE IS CONTESTING THE ABOVE TWO. 3. LD. COUNSEL SUBMITTED THAT ASSESSEE HAS ADVANCED AMO UNTS AT THE FAG END OF THE YEAR AND HAS NOT RECEIVED ANY INTE REST; THEREFORE, BRINGING TO TAX ANY NOTIONAL INTEREST IS NOT CO RRECT. FURTHER, WITH REFERENCE TO ESTIMATION OF INCOME, IT WAS S UBMITTED THAT INCOME CAN BE ESTIMATED AT 5% AS PER THE PROVISIONS OF THE ACT WITHOUT PREJUDICE ABOUT THE CLAIM THAT ENTIRE TURNOVER WA S ACCOUNTED TURNOVER. I.T.A. NO. 318/HYD/2016 SRI BHAWARLAL H. JAIN :- 3 - : 4. LD.DR HOWEVER, SUPPORTED THE ORDERS OF THE LD.CIT(A ). 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE DETAILS ON RECORD. AS SEEN FROM THE SCHEDULE OF LOAN S GIVEN AND RECEIVED BACK, ASSESSEE HAS NOT OFFERED ANY INTEREST O N FIVE LOANS ADVANCED BY ASSESSEE AS UNDER: S. NO NAME DATE OF AMOUNT GIVEN DATE OF AMOUNT RECEIVED BACK AMOUNT (RS) INTEREST (RS) 1. CHETAN KUMAR JWARAJI 26.0 3.2008 16.08.2008 1,25,000 2. DHANARAM MALI 28.03.2008 20.08.2008 1,20,000 3. HEERARAM CHOWDHARY 21.03.2008 01.09.2008 84,450 4. JEEVARAM CHOWDHARY 29.03.2008 30.08.2008 90,000 5. HANUMANARAM CHOWDHARY 30.03.2008 04.09.2008 90,000 5.1. IT WAS THE CONTENTION OF ASSESSEE THAT THE AMOUNTS A RE ADVANCED AT THE YEAR END AND HAS NOT RECEIVED ANY INTER EST. HOWEVER, AS SEEN FROM THE TABLE ABOVE, THE AMOUNTS WERE ADVANCED IN THE EARLIER YEAR AND DURING THE YEAR MOST OF THE AMOUNTS HAVE BEEN RECEIVED. THE REASONS FOR NOT OFF ERING THE INTEREST ARE NOT EXPLAINED. THEREFORE, CONSIDERING AS SESSEES BUSINESS OF MONEY LENDING, IT IS UNEXPLAINED WHY IN TEREST ON THESE AMOUNTS HAVE NOT BEEN RECEIVED. IF ASSESSEE HAS ADV ANCED TO HIS RELATIVES WITHOUT INTEREST OUT OF HIS OWN FUNDS, THEN, THE RE IS NO NEED FOR CHARGE OF INTEREST. HOWEVER, NO SUCH PLEA W AS MADE. THE PLEA THAT MONEYS WERE ADVANCED DURING THE END OF THE YE AR IS ALSO NOT CORRECT AS THE PERIOD UNDER CONSIDERATION IS FROM 0 1-04-2008 I.T.A. NO. 318/HYD/2016 SRI BHAWARLAL H. JAIN :- 4 - : TO 31-03-2009 AND THE AMOUNTS HAVE BEEN RECEIVED DURIN G THE YEAR AFTER FOUR TO FIVE MONTHS FROM THE DATE OF ADVA NCING. IN VIEW OF THAT WE ARE UNABLE TO ACCEPT ASSESSEES CONTENTIONS THA T NO INTEREST COULD BE LEVIED. THERE IS NO INFIRMITY IN T HE ACTION OF THE AO IN BRINGING TO TAX THE INTEREST. HOWEVER, LD.CIT( A) NOTICED THAT THE INTEREST WAS NOT CHARGED FOR THE PERIOD OF ADVANCE BUT FOR THE WHOLE YEAR AND RATE OF INTEREST IS ALSO AT 2%, WHICH I S NOT AT THE RATE AT WHICH ASSESSEE HAS ADVANCED TO OTHERS. THEREF ORE, CIT(A) DIRECTED THE AO TO CHARGE SAME AMOUNT OF INTEREST FROM TH E ABOVE FIVE PARTIES WHICH IS EQUIVALENT TO THE RATE OF INTEREST AS CHARGED BY ASSESSEE FROM OTHER PARTIES FOR THE PERIOD OF ADVANCE. WE DO NOT FIND ANY REASON TO DIFFER FROM THE ABOVE DIRECTIONS O F THE CIT(A). WHILE AFFIRMING THE ABOVE DIRECTION, WE REJECT ASSESSE ES GROUND I.E., GROUND NO.3. 5.2. COMING TO THE ISSUE OF ESTIMATION OF INCOME ON THE TURNOVER BY WAY OF CASH DEPOSITS IN THE BANK ACCOUNT, IT IS NO TICED THAT ASSESSEES TURNOVER SHOWN WAS RS. 4,80,750/- IN THE G ENERAL NOVELTY AND RS. 2,80,599/- IN RHIM JHIM NOVELTIES. THERE IS NO EXPLANATION HOW CASH DEPOSITS WERE MADE TO AN EXTENT OF RS. 15,14,500/-. HOWEVER, ASSESSEE IS AGREEABLE FOR ES TIMATION OF PROFIT AT 5% U/S. 44AF. LD.CIT(A) HOWEVER CONSIDERE D THE AVERAGE RATE OF PROFIT OFFERED BY ASSESSEE AT 24% FROM THE RE CORDED TRANSACTIONS. CONSIDERING THAT ASSESSEE HAS OFFERED MO RE THAN THE REASONABLE INCOME IN THE ACCOUNTED TRANSACTIONS AND THAT PROVISIONS OF SECTION 44AF WILL APPLY, NOTWITHSTANDIN G ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43C, AS ASSESS EE IS INVOLVED IN RETAIL TRADE OF LESS THAN RS. 40 LAKHS, A SUM EQUAL TO 5% OF THE TURNOVER CAN BE BROUGHT TO TAX. ACCORDINGLY, MODIFYING I.T.A. NO. 318/HYD/2016 SRI BHAWARLAL H. JAIN :- 5 - : THE DIRECTIONS OF THE CIT(A), WE DIRECT THE AO TO ESTIMATE THE PROFIT ON THE DEEMED TURNOVER OF RS. 15,14,500/- AT 5% AND RE -COMPUTE THE TOTAL INCOME ACCORDINGLY. THIS GROUND IS ACCORDIN GLY PARTLY ALLOWED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2017 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 31 ST JANUARY, 2017 TNMM COPY TO : 1. SRI BHAWARLAL H. JAIN, HYDERABAD. C/O. R. JASRAJ & CO., ADVOCATES, 15-1-91/4/A/1, 2 ND FLOOR, PAPALAL PLAZA, OLD FEELKHANA, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-7(4), NIZAMABAD. 3. CIT (APPEALS)-3, HYDERABAD. 4. THE PR.CIT-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.