Karuturi Raveendra, Kakinada V. THE ITO, Kakinada

ITA 382/VIZ/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6621 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: Y SESHA SRINIVAS
• Keywords: Unexplained cash credit; Rejection of books of accounts; Unexplained investment; Business income; Depreciation
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 3 8 2 /VIZ/ 201 5 ( / ASSESSMENT YEAR: 20 11 - 12 ) KARUTURI RAVEENDRA C/O J.S.SUNDARAM & CO., D.NO.10 - 4 - 56/3 SESHAGIRIRAO STREET RAMARAO PET KAKINADA INCOME TAX OFFICER WARD - 2 KAKINADA ( / APPELLANT ) ( / RESPONDENT) / APPELLANT BY : SHRI. G.V.N.HARI, AR / RESPONDENT BY : SHRI Y.SESHA SRINIVAS, DR / DATE OF HEARING : 2 6 .0 9 .2017 / DATE OF PRONOUNCEMENT : 06 . 10 .2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 2 , VI SAKHAPATNAM VIDE ITA NO. 0002 / 20 1 4 - 1 5 /ITO, W D - 2/KKD /2015 - 16 DATED 04 . 08 .201 5 FOR THE ASSESSMENT YEAR 2011 - 12. 2 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA 2. ALL THE GROUNDS OF APPEAL IN THIS CASE ARE RELATED TO TWO ISSUES I.E. ESTIMATION OF INCOME BY THE ASSESSING OFFICER (AO) @ 5% OF THE GROSS RECEIPTS AND ADDITION OF CASH DEPOSITS IN THE BANK ACCOUNT AS UNEXPLAINED INCOME. 3. THE ASSESSEE IS A CIVIL CONTRACTOR FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.12,39,870/ - ON 05.10.2011. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME OF RS.93,17,529/ - . DURING THE ASSESSMENT PROCEEDINGS, THE AO MADE THE ADDITION OF CASH DEPOSITS IN SAVINGS BANK ACCOUNT AMOUNTING TO RS.73,36,678/ - . THE ASSESSEE E XPLAINED THAT THE CASH DEPOSITS WERE RELATED TO THE BUSINESS RECEIPTS FOR SUPPLY OF MATERIAL AND LABOUR ON WHICH THE OTHER PARTIES DID NOT DEDUCT THE TDS. HOWEVER, THE ASSESSEE COULD NOT FURNISH ANY EVIDENCES TO SUPPORT HIS STATEMENT. THEREFORE, THE AO T REATED THE CASH DEPOSITS MADE IN THE SAVINGS BANK ACCOUNT AS UNEXPLAINED INVESTMENT AND ACCORDINGLY MADE THE ADDITION OF RS.73,36,678/ - . 3.1. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR, THE ASSES S EE MADE THE TURNOVER OF RS. 3,96,17,024/ - AND DID NOT PRODUCE THE BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS FOR VERIFICATION. THEREFORE, THE 3 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME @5% O F THE TOTAL RECEIPTS WHICH WORKED OUT TO RS.19,80,851/ - CLEAR OF DEPRECIATION. AGGRIEVED BY THE ORDER OF THE AO , THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A). THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. APPEARING FOR THE ASSESSEE, LD. AR ARGUED THAT THE AO HAS ESTIMATED THE INCOME , NET OF EXPENSES AND CLEAR OF DEPRECIATION @5% OF GROSS RECEIPTS, WHICH WA S ON HIGHER SIDE. LD.AR FURTHER SUBMITTED THAT THE ASSESSEE DECLARED THE IN COME OF RS.12,39,870/ - WHICH WA S AROUND 20% BEFORE DEPRECIA TION AND THE SAME FAIRLY REASONABLE COMPARED TO THIS LINE OF BUSINESS . THEREFORE, LD.AR ARGUED THAT THE ESTIMATION OF INCOME WAS ON HIGHER SIDE AND HENCE REQUESTED TO SCALE DOWN THE ESTIMATION. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THOUGH THE ASSESSEE FILED BALANCE SHEET AND FINANCIAL STATEMENTS AND ADMITTED THE INCOME OF RS.12,39,870/ - , THE ASSESSEE DID NOT PRODUCE THE BOOKS OF ACCOUNTS, VOUCHERS AND RELEVANT EVIDENCES FOR THE EXPENSES INCURRED. SIM ILARLY, IN THE ABSENCE OF PRODUCTION OF BILLS AND VOUCHERS AND BOOKS OF ACCOUNTS, IT IS ALSO IMPOSSIBLE TO CONSIDER THE CLAIM 4 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA OF DEPRECIATION. DURING THE YEAR, THE ASSESSEE HAS INTRODUCED THE ASSETS TO THE EXTENT OF RS. 2,72,14,000/ - FOR WHICH THE ASSESSE E NEITHER PRODUCED THE BOOKS OF ACCOUNTS NOR THE RELEVANT EVIDENCES FOR ACQUIRING THE ASSETS. SI MILARLY, WITHOUT PRODUCTION OF BOOKS OF ACCOUNTS AND RELEVANT VOUCHERS, THE CORRECT AMOUNT OF DEPRECIATION CANNOT BE DETERMINED. THE EXPENSES ALSO CANNOT BE W ORKED OUT BY THE AO IN THE ABSENCE OF THE BOOKS OF ACCOUNTS. THE ASSESSEE HAS NEITHER PRODUCED THE BOOKS OF ACCOUNTS NOR THE RELEVANT VOUCHERS. THE ONLY MATERIAL AVAILABLE TO THE AO WAS FO R M 26 AS AND THE RECEIPTS ADMITTED BY THE ASSESSEE IN THE RETURN OF INCOME. IN THE CIRCUMSTANCES THE AO HAS NO OPTION EXCEPT TO COMPUTE THE INCOME ESTIMATING THE NET PROFIT AND THE ESTIMATION OF INCOME @5% IS REASONABLE. THEREFORE, WE HOLD THAT THE AO HAS RIGHTLY ESTIMATED THE INCOME @5% CLEAR OF DEPRECIATIO N OF ALL OTHER EXPENSES WHICH WAS CONFIRMED BY THE LD.CIT(A), THUS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) AND THE SAME IS CONFIRMED. THE ASSESSEES APPEAL ON THIS GROUND IS DISMISSED. 6. THE SECOND ARGUMENT OF THE ASSESSEE WAS WITH REGARD TO ADDITION OF RS.7 3 , 36 ,678/ - RELATING TO THE DEPOSITS MADE IN THE BANK ACCOUNT. THE LD.AR ARGUED THAT ONCE THE INCOME I S ESTIMATED BY THE AO, THE AO CANNOT RESORT FOR SEPARATE ADDITION. LD.AR RELIED ON THE DECISION OF HONBLE HIGH 5 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA COURT OF ANDHRA PRADESH IN THE CASE OF INDWELL CONSTRUCTIONS. LD. AR SUBMITTED THAT THE CASH DEPOSITS RELATED TO BUSINESS RECEIPTS OF MATERIAL AND LABOUR SUPPLY AND THE BANK ACCOUNTS WE RE DECLARED IN THE BALANCE SHEET FILED ALONG WITH RETURN OF INCOME , HENCE NO OTHER A DDTION IS WARRANTED . THE LD.AR FURTHER STATED THAT THE CONTRACT RECEIPTS WERE RS.3,32,64,044/ - AS PER FORM 26AS AND THE BALANCE AMOUNT OF RS.63,52,980/ - WAS ON ACCOUNT OF SUPPLY OF MATERIALS AND LABOUR ON WHICH OTHER PARTIES DID NOT DEDUCT THE TDS. SINCE THE BANK ACCOUNTS WE RE ALREADY DECLARED IN THE BOOKS OF ACCOUNTS AND CASH DEPOSITS RELATED TO THE BUSINESS RECEIPTS OVER AND ABOVE THE CONTRACT RECEIPTS AND THE AO HAD ESTIMATED THE INCOME ON THE ENTIRE RECEIPTS OF RS.3,96,17,204/ - , LD. AR ARGUED THAT NO SEPARATE ADDITION RELATING TO CASH DEPOSITS IS REQUIRED TO BE MADE WHILE COMPUTING THE INCOME AND RELIED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF ANDHRA PRADESH , TS IN THE CASE OF INDWELL CONSTRUCTIONS LTD. VS. CIT. 7. ON THE OTHER HAND, THE LD.DR ARGUED THAT THE ASSESSEE DID NOT SUBMIT THE DETAILS WITH REGARD TO SOURCE OF THE CASH, NAMES OF PERSONS TO WHOM THE GRAVEL AND LABOUR WAS SUPPLIED. THEREFORE, THE LD.DR ARGUED THAT THOUGH 6 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA THE ACCOUNT WAS DECLARED IN THE BALANC E SHEET, THE AO HAS RIGHTLY MADE THE ADDITION AS UNEXPLAINED CASH CREDIT WHICH I S REQUIRED TO BE UPHELD. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE ASSESSEE HAS MADE THE CASH DEPOSITS OF RS.73,36, 678/ - IN THE SAVINGS BANK ACCOUNT MAINTAINED AT ICICI BANK, UCO BANK AND SBI. THE CASH DEPOSITS MADE BY THE ASSESSEE IN THE SAVINGS BANK ACCOUNT WERE TREATED AS UNEXPLAINED CASH DEPOSITS AND MADE THE ADDITION BY THE AO . THE ASSESSEE EXPLAINED THAT THE CO NTRACT RECEIPTS WERE RS.3,32,64,044/ - AND THE ASSESSEE HAS DECLARED THE GROSS RECEIPTS AS RS.3,96,17,204/ - INCLUSIVE OF THE CASH DEPOSITS RELATING TO THE MATERIAL AND LABOUR SUPPLIED TO THE VARIOUS PARTIES WHO DID NOT MAKE THE TDS. THE ASSESSEE HAD ADMITTED THE ENTIRE RECEIPTS IN THE RETURN OF INCOME. LD. AR SUBMITTED THAT THERE W ERE NO UNEXPLAINED CASH DEPOSITS AND THE ENTIRE DEPOSITS WERE EITHER CIRCULATION OF CASH WHICH WAS DEPOSITED AFTER WITHDRAWAL OR RECEIPTS ON ACCOUNT OF SUPPLY OF MATERIAL AND THE LABOUR. REFERRING TO PAGE NO.15 AND 19 OF THE PAPER BOOK , THE LD.AR HAS DEMONSTRATED THAT ALL THE BANK ACCOUNTS WERE DECLARED IN THE BALANCE SHEET . I N PAGE NO.15 OF BALANCE SHEET THE CASH AND BANK BALANCES ADMITTED WERE RS.2,31,605/ - AND IN PAGE NO.19 OF PAPER BOOK BREAK UP OF RS.2,31,605/ - 7 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA WAS FURNISHED . THEREFORE, LD.AR SUBMITTED THAT THE DEPOSITS STOO D EXPLAINED IN THE BOOKS OF ACCOUNTS. FURTHER, LD.AR SUBMITTED THAT THE AO HAS ESTIMATED THE INCOME ON GROSS RECEIPTS AT RS.3,96,17,204/ - WHICH I NCLUDED THE CASH DEPOSITS. WE HAVE OBSERVED THAT THE AO WHILE ESTIMATING THE INCOME CONSIDERED THE TOTAL RECEIPTS OF RS.3,96,17,024/ - INCLUDING THE CASH DEPOSITS. SINCE THE AO HAS ESTIMATED THE INCOME ON THE GROSS RECEIPTS INCLUSIVE OF CASH DEPOSITS, WE ARE OF THE CONSIDERED OPINION THAT NO SEPARATE ADDITION IS REQUIRED TO BE MADE ON ACCOUNT OF THE CASH DEPOSITS. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF INDWELL CONSTRUCTIONS VS CIT . ACCORDINGLY, W E SET ASIDE THE ORDER OF THE LOWER AUTHORITIES AND DELETE THE ADDITION OF RS.73,36,678/ - . APPEAL OF THE ASSESSEE ON THIS GROUND IS ALLOWED. 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. T HE ABOVE ORDER WA S PRONOUNCED IN THE OPEN COURT ON 6 TH OCT 20 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 06 . 10 .2017 L. RAMA, SPS 8 ITA NO. 3 8 2 /VIZ/201 5 K ARUTURI RAVEENDRA , KAKINADA /COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT KARUTURI RAVEENDRA, C/O J.S.SUNDARAM & CO., D.NO.10 - 4 - 56/3, SESHAGIRIRAO STREET, RAMARAO PET, KAKINADA 2 . / THE RESPONDENT INCOME TAX OFFICER , WARD - 2 , KAKINADA 3 . THE COMMISSIONER OF INCOME TAX - 2 , VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM