Sri V Naga Sree., Vijayawada V. The ACIT, Circle-2(1)., Vijayawada

ITA 369/VIZ/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2814 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2002-2003
• Appeal Filed On: 11-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B JAYA KUMAR
• Keywords: Business income; Revised return

Judgement Text

PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 369 & 370/VIZAG/2008 ASSESSMENT YEAR: 2002-03 AND 2003-04 V. NAGA SREE, VIJAYAWADA VS. ACIT, CIRCLE-2(1), VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO. ACCPV 5650 R APPELLANT BY: SHRI G.V.N. HARI, CA, RESPONDENT BY: SHRI B. JAYA KUMAR, DR ORDER PER SHRI B R BASKARAN, ACCOUNTANT MEMBER: THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAINST T HE ORDERS OF THE LD CIT (A) VIJAYAWADA AND THEY RELATE TO THE ASSESSMENT YE AR 2002-03 AND 2003-04. SINCE THE ISSUES AGITATED IN THESE APPEALS ARE COMM ON IN NATURE, WE FIND IT CONVENIENT TO DISPOSE OFF BOTH THE APPEALS BY THIS COMMON ORDER. 2. FOLLOWING ISSUES ARE URGED IN THESE APPEALS: A) WHETHER THE ASSESSING OFFICER IS RIGHT IN ESTIMA TING THE INCOME FROM BUSINESS U/S 44 AF OF THE ACT. B) WHETHER THE AO IS JUSTIFIED IN MAKING SEPARATE A DDITIONS FOR CASH CREDITS PAGE 2 OF 4 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. DURING THE COURSE OF ASSESSMENT PROCEEDING FOR THE ASSESSMENT YEAR 2004- 05, THE AO NOTICED THAT THE LIST OF UNSECURED LOANS CONTAINED FOLLOWING LOA NS. A) G. RAMA MANI RS. 2,49,625.00 B) SMT. VIMALA C. SHAH RS. 2,02,307.00 ON MAKING INQUIRY WITH THE CONCERNED CREDITORS, IT CAME TO THE LIGHT THAT LOAN STANDING IN THE NAME OF G. RAMA MANI HAD BEEN REPAI D DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2002-03. SIMILARLY, THE LOAN SHOWN IN THE NAME OF SMT. VIMALA C. SHAH HAD BEEN REPAID DURING THE YEAR RELE VANT TO THE ASSESSMENT YEAR 2003-04. HENCE, THE AO REOPENED THE ASSESSMENT PERT AINING TO THE ASSESSMENT YEAR 2002-03 AND 2003-04. THE ASSESSEE IS A RETAIL TRADER IN OPTICAL. THE ASSESSEE ALSO VOLUNTARILY FILED A RETURN OF INCOME FOR BOTH THE YEARS BY ADMITTING THE CASH CREDITS STATED ABOVE AND BOTH THE RETURNS WERE REGULARIZED BY ISSUING NOTICES U/S 148. THE TURNOVER FOR BOTH THE YEARS WA S LESS THAN RS.40.00 LAKHS. SO, THE AO INVOKED THE PROVISIONS OF SEC.44 AF OF T HE ACT AND ESTIMATED THE PROFIT FROM OPTICAL BUSINESS AT 5% OF THE TURNOVER. THE AO ALSO SUSTAINED THE CASH CREDIT OFFERED BY THE ASSESSEE AND COMPLETED T HE ASSESSMENT. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT (A) CONTENDING THAT SEC.44AF IS NOT APPLICABLE TO HER AND FURTHER THE CASH CREDITS OFFERED UNDER THE HEAD BUSINESS INCOME SHOULD NOT HAVE BEEN SEPARATELY ADD ED. HOWEVER, THE ASSESSEE COULD NOT SUCCEED IN THE APPEAL. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THE LD AR PLACED HIS RELIANCE ON THE DECISION OF ITAT DELHI B ENCH IN THE CASE OF ITO PAGE 3 OF 4 VS.YADHU CONTRACTORS & BUILDERS (P) LTD., (2008) (4 DTR (DEL) (TRIB) 619), WHEREIN IT WAS HELD THAT, WHEN THE ADDITIONS ARE MA DE BY WAY OF APPLYING HIGHER NET PROFIT RATE AND SAID ADDITION WAS MORE THAN SUF FICIENT TO EXPLAIN THE CASH CREDITS, NO SEPARATE ADDITION IS REQUIRED TO BE MAD E U/S 68. 5. IN THE INSTANT CASE, THE ASSESSEE HAD VOLUNTA RILY OFFERED THE IMPUGNED CASH CREDITS IN THE REVISED RETURN FILED BY HER AND THEY WERE OFFERED AS INCOME UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSEE IS A RE TAIL TRADER IN OPTICAL. HIS TURNOVER WAS LESS THAN RS.40.00 LAKHS. HENCE THE PR OVISIONS OF SEC.44AF ARE APPLICABLE TO THE ASSESSEE. ACCORDING TO SEC.44AF( 5), IF AN ASSESSEE CLAIMS THAT HIS PROFIT IS LESS THAN 5% OF THE TURNOVER, THEN HE HAS TO FURNISH AN AUDIT REPORT AS REQUIRED U/S 44AB. IN THE INSTANT CASE, THE ASS ESSEE HAS NOT GOT HIS ACCOUNT AUDITED AND HENCE DID NOT FILE HIS AUDIT REPORT. H ENCE THE AO HAS INVOKED THE PROVISIONS OF SEC.44AF, WHICH IN OUR OPINION ARE CO RRECT. THOUGH THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SANYASI RAO (219 ITR 330) BEFORE LD CIT(A), THE FIRST APPEL LATE AUTHORITY HAS RIGHTLY POINTED OUT THAT THE RATIO OF THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. 6. HOWEVER, IT IS TO BE NOTICED THAT THE CASH C REDIT HAS BEEN OFFERED AS INCOME UNDER THE HEAD INCOME FROM BUSINESS. APART FROM THE BUSINESS INCOME, THE ASSESSEE IS HAVING INCOME FROM HOUSE PROPERTY. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE COULD HAVE EARNED ANY EXCESS RENTAL IN COME. ACCORDINGLY, THE CASH CREDIT HAS TO BE ASSESSED UNDER THE HEAD INCOME FR OM BUSINESS ONLY. HENCE IN OUR OPINION, THE AO SHOULD HAVE COMPARED THE BUSINE SS INCOME INCLUDING THE CASH CREDIT OFFERED BY THE ASSESSEE WITH 5% OF THE TURNOVER AND SHOULD HAVE PAGE 4 OF 4 ADOPTED THE HIGHER OF THE TWO AS PER THE PROVISIONS OF SECTION 44AF OF THE ACT. WE DIRECT THE AO TO COMPUTE THE INCOME ACCORDINGLY. 7. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE A RE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 3.12.2009. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, 3 RD DECEMBER, 2009. COPY TO 1 SMT. V. NAGA SREE, PROP. A.V. OPTICS, D.NO.28-1-7 1, NEAR VIJAYA TALKIES, ELURU ROAD, VIJAYAWADA 2 ACIT, CIRCLE-2 (1) VIJAYAWADA 3 THE CIT VIJAYAWADA 4 THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM