CH.Chandra Sekhar, Srikakulam V. THE ITO, Srikakulam

ITA 33/VIZ/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1124 (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 NO.33/VIZAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 33/VIZAG/2015 ASSESSMENT YEAR: 2011-12 SHRI CH. CHANDRA SEKHAR, VS. ITO, PROP. SRI KANAKA DURGA WINES, WARD-1, THONGRAM POST, AMADALAVALASA, SRIKAKULAM. SRIKAKULAM DT. AIAPC9306M (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G V N HARI, ADV. REVENUE BY: SHRI D. MANOJ KUMAR, SR. DR DATE OF HEARING : 04.03.2015 DATE OF PRONOUNCEMENT : 22.05.2015 ORDER PER J.SUDHAKAR. REDDY : - THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-2, VISAKHAPATNAM DATED 2 3.12.2014 FOR THE A.Y. 2011-12. 2. FACTS IN BRIEF. THE ASSESSEE IS A PROPRIETOR OF M/S SRI KANAKA DURGA WINES AND CARRIES ON THE BUSINESS IN IMFL IN THE YEAR 2010 -11. THE ASSESSEE FILED HIS RETURN OF INCOME IN THE STATUS OF AN INDIVIDUAL ON 17.09.2011 DECLARING TOTAL INCOME OF RS. 4,89,684/-. THE CASE WAS PICKED UP F OR SCRUTINY AND THE AO VIDE HIS ORDER DATED 21.02.2014 DETERMINED TOTAL INCOME AT R S. 41,79,568/-, INTER-ALIA, MAKING THE FOLLOWING ADDITIONS: 1. ESTIMATION OF INCOME OF RS. 24,06,360/- @ 20% OF TH E STOCK PUT TO SALE; 2. UNEXPLAINED INVESTMENT OF RS. 17,42,558/-; 3. INTEREST ON FDR OF RS. 30,694/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL. ITA NO.33/VIZAG/2015 2 3. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIE F. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS: 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. 17,42,558/- MADE BY THE AO TOWARDS UNEXPLAINED INVE STMENT; 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. 17,42,558/- U/S 69 OF THE ACT, WHEN THE EXPENDITURE IN QUESTION HAS BEEN RECORDED IN THE BOOKS OF ACCOU NT. 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, ITA NO.33/VIZAG/2015 3 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 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 NOS. 5 AND 6 ARE AGAINST ADDITION OF RS.1 7,42,558/- MADE BY THE AO TOWARDS UNEXPLAINED INVESTMENT. 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 A SSESSEE 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 EXPE NDITURE IN QUESTION WAS INCURRED BEFORE THE COMMENCEMENT OF BUSINESS AND T HAT THE SAME WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. HE REFERRED TO THE ORDER OF THE FIRST APPELLATE AUTHORITY AND RELIED ON THE SAME AND SUBMITTED THAT THE ADDITION HAS TO BE SUSTAINED. 12. AFTER HEARING RIVAL CONTENTIONS WE FIND THAT TH E AO IN PARA 4 OF HIS ORDER HAS CLEARLY RECORDED THAT THE EXPENDITURE IN QUESTI ON WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS AND IT WAS INCURRED PRIOR TO THE COMMENCEMENT OF BUSINESS. THE FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ADD ITION BY HOLDING AS FOLLOWS. 5.3. I HAVE CONSIDERED THE SUBMISSIONS. FROM THE D ETAILS FILED, IT IS SEEN THAT THE ASSESSEE SOUGHT TO EXPLAIN SOURCE WITH REFERENCE TO CAPITAL CONTRIBUTION OF RS.2,55,000/- AND RS.4,00,000/- AND LOAN FROM FAMIL Y MEMBERS TO THE TUNE OF RS.8,00,000/-. HOWEVER, IT IS SEEN THAT NO SUPPORT ING DOCUMENTATION WAS FILED IN THIS REGARD. THUS THE SOURCE FOR THE IMPUGNED EXPE NDITURE REMAINS UNEXPLAINED. ITA NO.33/VIZAG/2015 4 EVEN DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE COULD NOT FURNISH ANY SATISFACTORY EXPLANATION TO CONTROVERT SUCH FINDING S OF THE AO. THE ONLY PLEA RAISED WAS THAT THE ADDITION SHOULD NOT HAVE BEEN MADE U/S 69. SUCH A PLEA WAS ONLY HYPER TECHNICAL AND IS NOT TENABLE AS THERE IS NO R EFERENCE IN THE IMPUGNED ORDER THAT THE IMPUGNED ADDITION WAS MADE U/S 69. THE UN DISPUTABLE FACT REMAINS THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE CREDITS WIT H REFERENCE TO WHICH THE EXPENDITURE TO THE TUNE OF RS.17,42,558/- WAS SOUGH T TO BE EXPLAINED AND THUS THE SOURCE FOR SUCH EXPENDITURE REMAINS UNEXPLAINED. A CCORDINGLY THE IMPUGNED ADDITION OF RS.17,42,558/- IS CONFIRMED. 13. WE FIND NO INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY AS THE ADDITION WAS SUSTAINED DUE TO THE FACT THAT, THE AS SESSEE COULD NOT EXPLAIN THE CREDITS CLAIMED BY HIM WITH REFERENCE TO THE EXPEND ITURE INCURRED. BEFORE US NO SUBMISSION HAS BEEN MADE ON MERITS. IN THE RESULT THESE GROUNDS OF THE ASSESSEE ARE DISMISSED. 14. GROUND NO.7 IS GENERAL IN NATURE. 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 KAVITA, P.S. 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