The DCIT, Circle-1, Kakinada V. Sri RK Katadi, Kakinada

ITA 395/VIZ/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7013 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Keywords: Revenue expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SRI B.R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO. 395/VIZAG/2009 ASSESSMENT YEAR : 2006-07 DCIT, CIRCLE-1, KAKINADA VS. R.K. KATADI, KAKINADA (APPELLANT) (RESPONDENT) PAN NO: AAFFR 1746 R APPELLANT BY : SHRI G.S.S. GOPINATH, DR RESPONDENT BY : SHRI G.V.N. HARI, CA O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER : THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.5.2009 PASSED BY LD CIT(A), RAJAHMUNDRY AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETH ER LD CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.57.52 LAKHS MADE BY THE ASSESSING OFFICER. 3. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND HIRING OF BOATS. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS NOTICED THAT THE ASSESSE E HAS NOT ACCOUNTED FOR THE HIRE BILLS AGGREGATING TO RS.57,52,689/-, THOUG H THEY HAVE BEEN RAISED ON THE CUSTOMERS PRIOR TO THE CLOSING OF THE RELEVA NT ACCOUNTING YEAR. THE ASSESSEE CONTENDED THAT HE IS FOLLOWING CASH SYSTEM OF ACCOUNTING AND ACCORDINGLY SUBMITTED THAT THE SAID AMOUNT HAS BEEN ACCOUNTED FOR IN THE SUBSEQUENT YEAR AS AND WHEN THEY WERE RECEIVED. H OWEVER, IN THE TAX AUDIT REPORT FILED BY THE ASSESSEE, IT WAS MENTIONE D BY THE TAX AUDITOR THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING. HENCE THE AO 2 REJECTED THE EXPLANATION OF THE ASSESSEE AND ADDED THE ENTIRE AMOUNT OF RS.57.52 LAKHS TO THE RETURNED INCOME OF THE ASSESS EE. THE ASSESSEE GOT RELIEF IN THE APPEAL FILED BEFORE LD CIT(A). HENCE THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERU SED THE RECORD. BEFORE THE LD CIT(A), THE ASSESSEE FILED AN AFFIDAVIT OBTA INED FROM THE TAX AUDITOR, WHO HAS AFFIRMED THAT THE METHOD OF ACCOUNTING MENT IONED IN THE TAX AUDIT REPORT IS INCORRECT. THE LD CIT(A) HAS CALLED FOR THE COMMENTS FROM THE AO BUT THE AO HAS FAILED TO SUBMIT ANY REPLY OR OBJECT ION TO THE LD CIT(A). ACCORDINGLY, THE LD CIT(A) PRESUMED THAT THE AO IS NOT HAVING ANY OBJECTION TO THE ADMISSION OF THE AFFIDAVIT AS AN A DDITIONAL EVIDENCE. WE NOTICE THAT THE LD CIT(A), AFTER VERIFICATION OF TH E DOCUMENTARY RECORD, HAS GIVEN A FINDING THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING SINCE THE ASSESSMENT YEAR 2002-03. THE LD CIT(A) H AS ALSO NOTICED THAT THE GROSS RECEIPTS DECLARED BY THE ASSESSEE ARE BOR NE OUT OF THE RUNNING BANK ACCOUNT STATEMENT. 5. WITH REGARD TO THE INCORRECT OBSERVATION OF THE TAX AUDITOR IN THE TAX AUDIT REPORT, THE LD CIT(A) HAS OBSERVED AS UNDER: THE APPELLANTS RELIANCE ON THE AFORESAID CASE LAW S R.VAIDYANATHA MUDALIAR VS. STATE OF MADRAS (104 ITR 444) AND THE INCOME TAX APPELLATE TRIBUNAL VS. JANANMAND AL LTD. (143 ITR 228 (ALL)) APPEAR TO BE QUITE APT, IN AS MUCH AS, IF THE BOOKS OF ACCOUNTS AND SUPPORTING DOCUMEN TS SPEAK FOR THEMSELVES REFERRING TO A PARTICULAR SYST EM OF ACCOUNTING FOLLOWED, NO ESTOPPEL OR WAIVER CAN BE C REATED, IF AN ASSESSEE MISTAKENLY STATES TO HAVE FOLLOWED A DIFFERENT SYSTEM OF ACCOUNTING OR ITS TAX AUDITOR E RRONEOUSLY CERTIFIES ABOUT A SYSTEM OF ACCOUNTING NO EVIDENT F ROM THE BOOKS OF ACCOUNT. 6. IN THE GROUNDS OF APPEAL, THE REVENUE HAS PO INTED OUT THAT THE ASSESSEE HAS SHOWN AN OUTSTANDING AMOUNT OF RS.17,9 45/- AS PAYABLE TO M/S RAJASTAN IRON COMPANY, KAKINADA. WE NOTICE THA T SAID FACT WAS NOT DISCUSSED EITHER BY THE AO OR BY THE LD CIT(A). FU RTHER THE LD AR HAS 3 CLARIFIED THAT THE SAID AMOUNT RELATES TO THE FIXED ASSETS AND NOT CONNECTED WITH THE HIRE CHARGES RECEIPTS, BEING DISPUTED NOW. HENCE, IN OUR OPINION, THE SAID FACT DOES NOT HAVE IMPACT ON THE ISSUE AGI TATED BEFORE US, SINCE THE ABOVE SAID OUTSTANDING AMOUNT RELATES TO THE FI XED ASSETS AND IS NOT CONNECTED WITH THE REVENUE EXPENDITURE/RECEIPTS. 7. WE NOTICE THAT THE LD CIT(A) HAS GIVEN A CA TEGORICAL FINDING, ON THE BASIS OF BOOKS OF ACCOUNT AND OTHER RECORD THAT THE ASSESSEE IS FOLLOWING CASH SYSTEM OF ACCOUNTING FOR RECORDING THE HIRE CH ARGES RECEIPTS. THE SAID FINDING HAS NOT BEEN CONTROVERTED BY THE REVENUE, W ITH ANY DOCUMENTARY EVIDENCE. HENCE WE DO NOT FIND ANY INFIRMITY IN TH E DECISION OF THE LD CIT(A). 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 24-03-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 24 TH MARCH, 2010. A COPY OF THIS ORDER IS FORWARDED TO : 01 THE DCIT, CIRCLE-1, KAKINADA 02 M/S. R.K. KATADI, 16-23-62, PALLAMRAJU NAGAR, RO AD NO.3, NEAR DAIRY FARM CENTRE, KAKINADA 03 THE CIT (A), RAJAHMUNDRY, 04 THE CIT, RAJAHMUNDRY 05 THE DR, ITAT, VISAKHAPAATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT, VISAKHAPATNAM BENCH