Tuta Lakshmana Rao, Eluru V. The ITO, Eluru

ITA 393/VIZ/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3821 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C DAS
• Keywords: Unexplained cash credit

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 9 3 /VIZ/ 201 6 ( / ASSESSMENT YEAR: 20 04 - 05 ) TUTA LAKSHMANA RAO PROP :CHAKRI BAR & RESTAURANT CANAL ROAD, ELURU - WEST GODAVARI DISTRICT [PAN : A CBPT2971J ] VS. INCOME TAX OFFICER WARD - 1 ELURU ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI , AR / RESPONDENT BY : SHRI K.C.DAS , DR / DATE OF HEARING : 10 . 04. 201 8 / DATE OF PRONOUNCEMENT : 18 . 0 4 .201 8 / O R D E R PER V.DURGA RAO , JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX ( APPEALS) [CIT(A)], RAJAHMUNDRY VIDE 2 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU ITA NO. 12 / 2010 - 11 / CIT(A) / RJY / W - 1 / ELR/2016 - 17 DATED 03 . 06. 201 6 FOR THE ASSESSMENT YEAR 20 04 - 05 . 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS IN LIQUOR BUSINESS AND THE SAME IS CARRIED OUT THE NAME AND STYLE OF M/S CHAKRI BAR AND RESTAURANT. THE ASSESSING OFFICER (AO) HAS FOUND THAT THE ASSESSEE HAS INVESTED AN AMOUNT OF RS.33,75,000/ - IN THE PURCHASE OF DEMAND DRAFTS FOR PARTICIPATING IN THE AUCTION FOR ISSUE OF EXCISE LICENCE BY GOVT. OF ANDHRA PRADESH. THE AO HAS TAKEN UP THE ASSESSMENT FOR SCRUTINY AND ISSUED NOTICE U/S 175 OF THE I.T.ACT CALLING THE ASSESSEE TO FILE THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS FOUND THAT THE ASSESSEE HAS DEPOSITED HUGE AMOUNTS IN CASH IN TWO BA NK ACCOUNTS HEL D BY HIM WITH UCO BANK, ELURU. THE DETAILS ARE AS UNDER : (A) AMOUNT DEPOSITED IN A/C NO.9812 - RS.46,05,760/ - (B) AMOUNT DEPOSITED IN A/C NO.605 - RS.94,14,630/ - THUS THE TOTAL AMOUNT DEPOSITED IN TWO BANK ACCOUNTS IS ARRIVED AT RS.1,40,20,390/ - . WHEN THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCES FOR CASH DEPOSITS IN THOSE ACCOUNTS, IT IS EXPLAINED THAT HE HAS ANOTHER ACCOUNT IN GODAVARI GRAMEENA BANK , A/C NO.1452 AND THE WITHDRAWALS MADE FROM THAT ACCOUNT ARE USED FOR DEPOSITING IN TO THE ACCOUNTS HELD WITH U CO BANK. THE AO HAS NOT ACCEPTED THE VERSION OF THE ASSESSEE AND GIVEN CREDIT FOR THE 3 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU SALES AMOUNT REPORTED BY THE ASSESSEE AT RS.77,43,204/ - AND TREATED THE BALANCE AMOUNT OF RS.62,77,186/ - AS UNEXPLAINED CASH CREDIT. 3. ON APPEAL, THE CIT(A) HAS MADE A FINDING THAT CREDIT FOR THE DEPOSITS MADE WITHIN 3 DAYS FROM THE DATE OF WITHDRAWALS SHOULD BE GIVEN AND ACCORDINGLY HE HAS DELETED THE AMOUNT OF RS.54,45,920/ - AND SUSTAINED THE ADDITION OF RS.8,31,266/ - . 4. ON APPEAL T HE ITAT HAS CONSIDERED THE ENTIRE ISSUE AND HELD AS UNDER : 8.1. ON A CAREFUL PERUSAL OF THE COPIES OF BANK ACCOUNTS SUBMITTED IN THE PAPER BOOK COMPILED BY THE ASSESSEE, WE NOTICE THAT, ON MAJORITY OF THE OCCASIONS, THE ASSESSEE IS MAKING CASH DEPOSITS CONTINUOUSLY FOR FEW DAYS AND THERE AFTER A DEMAND DRAFT IS TAKEN FOR ALMOST EQUAL TO THE AGGREGATE OF THE AMOUNTS SO DEPOSITED. HENCE, IT APPEARS THAT THE AO WAS CONVINCED THAT THE SALES PROCEEDS COULD HAVE BEEN ROUTED THROUGH THESE TWO BANK ACCO UNTS AND ACCORDINGLY GAVE CREDIT FOR THE SAME. AT THE SAME TIME, IN THE ABSENCE OF ANY MATERIAL TO CONTRADICT THE CONTENTION OF THE ASSESSEE THAT THE WITHDRAWALS MADE FROM THE BANK ACCOUNT MAINTAINED WITH GG BANK WERE ALSO USED FOR MAKING THE DEPOSITS, THE SAID CONTENTIONS CANNOT BE ALTOGETHER RULED OUT. ACCORDINGLY THE LD CLT(A) THOUGHT FIT TO GRANT CREDIT FOR THE AMOUNTS DEPOSITED WITHIN THREE DAYS FROM THE DATE OF WITHDRAWAL HOWEVER, THE LD CIT(A) DID NOT MENTION THE RATIONALE FOR FIX I NG THE TIME LIMIT O F THREE DAYS. IF WE EXTEND THE THEORY OF THE LD CIT(A), I. E, THE TIME LIMIT TO ONE WEEK, THE ASSESSEE WOULD GET FURTHER BENEFIT OF RS.6.09 LAKHS FOR THE FOLLOWING DEPOSITS. HOWEVER, AS STATED EARLIER, THERE IS NO SCIENTIFIC BASIS FOR FIXING THE DATE SPANS. WHEN THERE IS REGULAR INFLOW AND OUTFLOW OF CASH/CHEQUES, IT IS 31.07.04 25,000 02.08.04 85,000 01.10.04 2,50,000 01.10.04 77,000 04.02.05 48,000 07.02.05 1,24,000 4 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU NOT LOGICAL TO MAKE ADDITION ONLY IN RESPECT OF DEPOSITS WITHOUT GIVING CREDIT TO THE WITHDRAWALS MADE EARLIER, PARTICULARLY IN THE ABSENCE OF ANY OTHER MATERIAL TO SUGGEST THAT THE EARLIER WITHDRAWALS HAVE BEEN SPENT AWAY. IN THE METHODOLOGY ADOPTED BY T HE LD. CIT(A), AS STATED EARLIER,, IF EXPAND THE TIME SPAN FURTHER, NO ADDITION COULD BE WARRANTED. AS STATED EARLIER, THERE IS NO SCIENTIFIC BASIS FOR DETERMINING THE TIME SPAN. HOWEVER, ON A CAREFUL PERUSAL OF PATTERN OF THE TRANSACTIONS, THE POSSIBILITY OF ASSESSEE ENGAGING IN ANY OTHER BUSINESS ACTIVITIES CANNOT BE RULED OUT. AS STATED EARLIER THE ASSESSES IS MAKING DEPOSITS CONTINUOUSLY FOR FEW DAYS AND THEREAFTER HE, WITHDRAWS THE ENTIRE AMOUNT EITHER BY WAY OF CASH OR BY DEMAND DRAFT/ CHEQUE. HENCE, INSTEAD OF GIVING OUTRIGHT CREDIT FOR THE WITHDRAWALS, IN OUR OPINION, IT WOULD MEET THE ENDS OF JUSTICE, IF WE ESTIMATE THE INCOME OUT OF THE SAID TRANSACTIONS TREATING THE SAME AS BUSINESS TRANSACTIONS. THE AO HIMSELF HAS GIVEN CREDIT OF THE SATES TURN O VER OUT OF THE TOTAL DEPOSITS ] BY ASSUMING THAT THE PART OF DEPOSITS REPRESENTS THE SALES TURNOVER. BY EXTENDING THE ASSUMPTION OF THE AO, THE REMAINING DEPOSIT AMOUNT OF RS.62,77,186/ - IS ALSO TREATED AS THE SALES TURNOVER OUTSIDE THE BOOKS OF ACCOUNT. AC CORDINGLY WE ESTIMATE A PROFIT OF 8% ON THE SAID DEPOSITS AND THE SAME WORKS PUT TO RS.5,02,175/ - . ACCORDINGLY, THE AO IS DIRECTED TO MAKE A ROUND SUM ADDITION OF RS.5.00 LAKHS AND IN OUR OPINION IT WOULD MEET THE ENDS OF JUSTICE AND WE ORDER ACCORDINGLY. SUBSEQUENTLY, THE AO HAS ISSUED A SHOW CAUSE NOTICE AND ASKED THE ASSESSEE TO EXPLAIN WHY PENALTY U/S 271 (1)( C ) SHOULD NOT BE LEVIED. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO, THE ASSESSEE HAS SUBMITTED THAT ULTIMATELY, THE ITAT DIRECTED T HE AO TO ESTIMATE THE INCOME OF THE ASSESSEE AND ACCORDINGLY, THE AO HAS MADE THE ADDITION OF RS.5,00,000/ - ON THE BASIS OF ESTIMATION, THEREFORE, NO PENALTY CAN BE LEVIED WHEN THE AO HAS ESTIMATED THE INCOME. THE AO AFTER CONSIDERING THE EXPLANATION OF T HE ASSESSEE HAS OBSERVED THAT THE ESTIMATION OF INCOME MADE BY THE ITAT HAS NO RELEVANCE TO THE INCOME ASSESSED BY THE AO AND IS OF THE OPINION THAT THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME BY 5 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU FURNISHING INACCURATE PARTICULARS OF HIS TURNOVER, HENC E, PENALTY U/S 271 (1)( C ) IS LEVIED. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE AO. 5. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LD.COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AO HAS ESTIMATED THE INCOME OF T HE ASSESSEE BASED ON THE DIRECTIONS GIVEN BY THE ITAT, THEREFORE, PENALTY CANNOT BE LEVIED WHEN INCOME IS ESTIMATED. 6. ON THE OTHER HAND, LD.DR RELIED ON THE ORDERS PASSED BY THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL O N RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS DEPOSITED AN AMOUNT OF RS.46,05,760/ - AND ALSO RS.94,14,630/ - IN THE UCO BANK, ELURU. THE ASSESSEE IS ALSO MAINTAINING ANOTHER BANK ACCOUNT WITH GODAVARI GRAMEENA BANK AT ELU RU. WHEN THE AO HAS ASKED THE ASSESSEE WHAT IS THE SOURCE OF DEPOSITS IN UCO BANK, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THE WITHDRAWALS MADE FROM GODAVARI GRAMEENA BANK WERE DEPOSITED IN THE UCO BANK. THE AO HAS FOUND THAT THERE IS MISMATC H IN THE WITHDRAWALS AND DEPOSITS, THEREFORE, THE AO HAS ACCEPTED ONLY CREDIT FOR THE SALES AMOUNT REPORTED BY THE ASSESSEE AT RS.77,43,204/ - AND TREATED THE BALANCE AMOUNT OF RS.62,77,186 AS 6 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU UNEXPLAINED CASH CREDIT. ON APPEAL, THE LD.CIT(A) HELD THAT CRE DIT FOR THE DEPOSITS MADE WITHIN THREE DAYS FROM THE DATE OF WITHDRAWALS SHOULD BE GIVEN. ACCORDINGLY, HE HAS DELETED THE ADDITION OF RS.54,45,920/ - AND SUSTAINED THE AMOUNT OF RS.8,31,266/ - . ON APPEAL, THE ITAT IN ITA NO.476/VIZ/2006 HAS FOUND THAT THER E IS NO SCIENTIFIC BASIS FOR FIXING THE 3 DAYS LIMIT FROM THE DATE OF DEPOSIT TO DATE OF WITHDRAWAL. THE ITAT OBSERVED AND EXTENDED THE THEORY OF LD.CIT(A) FOR THE TIME LIMIT TO ONE WEEK AND GRANTED FURTHER RELIEF TO THE ASSESSEE. HOWEVER, THE ITAT HAS OBSERVED THAT THERE IS NO SCIENTIFIC BASIS FOR THE DEBT SPANS WHEN THERE IS REGULAR INFLOW AND OUTFLOW OF THE CHEQUES. IT IS NOT LOGICAL TO MAKE ADDITION ONLY IN RESPECT OF DEPOSITS WITHOUT GIVING CREDIT TO THE WITHDRAWALS MADE EARLI ER. PARTICULARLY IN THE ABSENCE OF ANY OTHER MATERIAL SUGGESTS THAT THE EARLIER WITHDRAWALS HAVE BEEN SPENT AWAY . IN THE METHODOLOGY ADOPTED BY THE LD.CIT(A) AS STATED EARLIER, IF EX PA ND TO TIME SPAN FURTHER, NO ADDITION COULD BE WARRANTED. HOWEVER, ON PERUSAL OF PATTERN OF THE TRANSACTIONS, THE POSSIBILITY OF THE ASSESSEE ENGAGING IN ANY OTHER BUSINESS ACTIVITIES CANNOT BE RULED OUT. THE AO HIMSELF HAS GIVEN CREDIT OF SALES TURNOVER OUT OF THE TOTAL DEPOSITS BY ASSUMING THAT THE PART OF THE DEPOSITS RE PRESENTS THE SALES TURNOVER. BY EXPLAINING THIS ASSUMPTION OF THE AO, THE REMAINING DEPOSITS OF RS.62,77,182/ - WAS ALSO TREATED AS THE SALES TURNOVER OUTSIDE THE BOOKS 7 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU OF ACCOUNTS. ACCORDINGLY WE ESTIMATE THE PROFIT OF 8% OF THE SAID DEPOSITS AND THE SAM E WORK S OUT TO RS.5,02,175/ - . ACCORDINGLY DIRECTED THE AO TO MAKE AN ADDITION OF RS.5,00,000/ - . IN OUR OPINION IT WOULD ME E T THE ENDS OF THE JUSTICE AND WE ORDER ACCORDINGLY. WE FIND THAT IN THIS CASE, THE AO HAS GIVEN A CREDIT TO THE EXTENT OF RS.77,43 ,204/ - RELATING TO THE SALES AMOUNT. ON APPEAL, THE LD.CIT(A) ADOPTED THE METHODOLOGY OF AMOUNTS DEPOSITED WITHIN 3 DAYS AND WITHDRAWALS AND ACCORDINGLY DELETED THE FURTHER ADDITION TO THE EXTENT OF RS.54,45,920/ - . ON APPEAL, THE ITAT FURTHER GRANTED REL IEF ON THE BASIS OF ESTIMATION AND DIRECTED THE AO TO MAKE ADDITION OF RS.5,00,000/ - . AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE ORDERS PASSED BY THE AUTHORITIES BELOW INCLUDING ITAT, WE ARE OF THE OPINION THAT ULTIMATEL Y THE ADDITION SUSTAINED IN THIS CASE ONLY ON THE BASIS OF ESTIMATION. THEREFORE, THE AO IS NOT ABLE TO ESTABLISH IN THIS CASE THE ASSESSEE CONCEALED INCOME BY FURNISHING INACCURATE PARTICULARS. IN OUR OPINION IT IS NOT A FIT CASE TO IMPOSE PENALTY U/S 2 71 (1)( C ) OF THE ACT. ACCORDINGLY, THE PENALTY IS DELETED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 8 ITA NO . 3 9 3 /VIZ/201 6 SRI TUTA LAKSHMANA RAO, ELURU THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 TH APR , 20 1 8 . SD/ - SD/ - ( . . ) ( . ) ( D.S. SUNDER SINGH ) (V. DURGA RAO) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /VISAKHAPATNAM /DATED : 18 .0 4 .2018 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT - TUTA LAKSHMANA RAO , PROP :CHAKRI BAR & RESTAURANT , CANAL ROAD, ELURU - 534001 , WEST GODAVARI DISTRICT 2 . / THE RESPONDENT - INCOME TAX OFFICER , WARD - 1, ELURU 3 . THE COMMISSIONER OF INCOME TAX , RAJAHMUNDRY 4. THE COMMISSIONER OF INCOME - TAX(APPEALS), RAJAHMUNDRY 5 . , , / DR, ITAT, VISAKHAPATNAM 6. / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM