Patchipulusu Kalpana, Eluru V. Income Tax Officer, Ward-1, Eluru

ITA 402/VIZ/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8445 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 30-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Section: 133A; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO S . 401 & 402 / VIZ /201 8 (ASST. YEAR : 20 13 - 14 & 20 14 - 1 5 ) SMT. PATCHIPULUSU KALPANA, PROP. VARALAKSHMI JEWELLERY MART, D.NO. 7A - 3 - 7/2, PATCHIPULUSUVARI STREET, KOTHA ROAD, ELURU . V S . IT O , WARD - 1, ELURU . PAN NO. AGNPP 1646 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SMT. SUMAN MALIK SR. DR DATE OF HEARING : 02 / 0 7 /201 9 . DATE OF PRONOUNCEMENT : 17 / 0 7 /201 9 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THESE APPEAL S BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - 12 , HYDERABAD , DATED 28 /0 5 /201 8 & 14/06/2018 FOR THE ASSESSMENT YEARS 20 13 - 14 & 20 14 - 1 5 . SINCE FACTS AND ISSUES ARE COMMON, CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. 2 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) ITA NO. 401/VIZ/2018 2. GROUND NOS. 1, 3 & 5 TO 10 ARE NOT PRESSED BY THE ASSESSEES COUNSEL, THEREFORE SAME ARE DISMISSED. THE REMAINING GROUNDS PRESSED ARE ONLY G ROUND NOS. 2 & 4 WHICH ARE AS FOLLOWS : - 2 ) THE LD. CIT(A) SHOULD HAVE ALLOWED THE ADDITION MADE ON ACCOUNT OF THE DIFFERENCES IN BANK BALANCES AS PER BOOKS AND AS PER BANK STATEMENTS. 4 ) THE LD. CIT(A) SHOULD HAVE ALLOWED THE INTEREST CLAIM OF RS. 1,16,086/ - . 3 . FACTS OF THE CASE IN BRIEF ARE THAT ASSESSEE IS AN INDIVIDUAL ENGAGED IN JEWELLERY BUSINESS IN THE NAME AND STYLE OF VARALAKSHMI JEWELLERY MART APART FROM PAWN BROKING . FOR THE YEAR UNDER CONSIDERATION , ASSESSEE FILED HER RETURN OF INCOME DECLARING INCOME OF RS. 2,64,800/ - BESIDES AGRICULTURAL INCOME OF RS. 4,81,000/ - . A SURVEY OPERATION U/SEC. 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 21/03/2014 AND CERTAIN INCRIMINATING MATERIAL WAS FOUND AND IMPOUNDED. CONSEQ U ENT TO THE SURVEY, THE RETURN OF INCOME FILED ON 21/03/2014 WAS SELECTED FOR SC R UT INY MANUALLY BY ISSUING NOTICE U/SEC. 143(2) ON 17/09/2014 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER HAS NOTICED ON VERIFICATION OF THE BALANCE SHEET THAT THE ASSESSEE HAS DISCLOSED BALANCE WITH THE BANKS TO THE TUNE OF RS. 26,614/ - , HOWEVER, AS PER THE STATEMENTS OBTAINED, CREDIT 3 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) BALANCES AVAILABLE IN THE NAME OF THE ASSESSEE ARE OF RS. 71,323/ - THE ASSESSING OFFICER HAS A SKED THE ASSESSEE TO FILE RECONCILIATION , BUT OF NO AVAIL . AS SUCH DIFFERENCE OF (RS. 71,323 RS. 26,614) RS. 44,709/ - IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE . 4 . O N APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. EVEN BEFORE US, NO RECONCILIATION STATEMENT HAS BEEN FILED , THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) . THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 5. THE N EXT GROUND OF APPEAL RELATES TO INTEREST CLAIM OF RS.1,16, 086/ - . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED TH A T DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS R E QUESTED TO STATE WHETHER ASSESSEE HAS FOLLOWED CASH SYSTEM O R MERCANTILE SYSTEM OF ACCOUNT. IN RESPONSE VIDE LETTER DATED 29/02/2016 ASSESSEE CATEGORICALLY STATED TH A T THE METHOD OF ACCOUNTING IS MERCANTILE. THEREFORE, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO EXPLAIN WHY THE INTEREST ACCRUED ON PAWN BROKING BUSINESS WAS NOT DISCLOSED IN THE RETURN OF INCOME ON MERCANTILE BASIS. I N RESPONSE, THE ASSESSEE HAS FILED A REPLY DATED 28/03/2016 AND STATED THAT MY BUSINESS IN PAWN BROKING IS DONE ON CASH BASIS. THE RECEIPT OF INTEREST ON PAWN BROKING CAPITAL IS ACCOUNTED AS AND WHEN RECEIVED . IN MY EARLIER 4 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) LETTER, THE METHOD OF ACCOUNTING WAS STATED AS MERCANTILE BASIS INADVERTENTLY . BY CONSIDERING THE ABOVE EXPLANATION , THE ASSESSING OFFICER HAS NOTED THAT ASSESSEE HAS FOLLOWED CASH BASIS METHOD OF ACCOUNTING . HOWEVER, IN THE PROFIT & LOSS ACCOUNT , SHE HAS CLAIMED INTEREST EXPENDITURE TO THE TUNE OF RS. 1,16,086/ - WHICH WAS OTHERWISE NOT PAID IN CASH BUT CREDITED TO THE ACCOUNT OF THE CREDITOR SRI PATCHIPULUSU VENKATA SIVA KUTUMBARAO ON ACCRUAL BASIS. SINCE THIS EXPENDITURE IS NOT ALLOWABLE IN CASH SYSTEM OF ACCOUNTING, THE SAME IS DISALLOWED AND ADDED TO THE INCOME RETURNED. 6 . ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE INTEREST PAID BY THE ASSESSEE BELONGING TO THE JEWELLERY BUSINESS WHEREIN BOOKS OF ACCOUNT ARE MAINTAINED ON MERCANTILE BASIS AND SUBMITTED THAT THE INTEREST PAID , IS ALLOWABLE . THE LD. CIT(A) BY CONSIDERING THE EXPLANATION OF THE ASSESSEE HAS OBSERVED THAT THE ASSESSEE HAS SUBMITTED BEFORE ASSESSING OFFICER THAT SHE I S FOLLOWING MERCANTILE SYSTEM AND THEREAF TER BY FILING A LETTER STATED THAT SHE IS FOLLOWING CASH SYSTEM AND HAS IN FACT CATEGORICALLY STATED THAT THE METHOD OF ACCOUNTING WAS STATE D AS MERCANTILE INADVERTENTLY , AND AGAIN STATED THAT MERCANTILE SYSTEM OF PAYMENTS . WHEN THE RECEIPTS OF INTEREST ARE ACCOUNTED FOR ON CASH BASIS ON ACTUAL RECEIPT , PAYMENT OF INTEREST WILL ALSO BE 5 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) ALLOWED ON ACTUAL PAYMENT. ACCORDINGLY, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER . 7 . BEFORE US, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS HAVING JEWELLERY BUSINESS ALSO AND INTEREST PAID IS BELONGING TO THE JEWELLERY BUSINESS IN PAWN BROKING BUSINESS . THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER , ONLY SUBMITTED BEFORE TH E LD. CIT(A) AND POINTED OUT THAT THE LD. CIT(A) HAS NOT CONSIDERED THE SAME AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. WE FIND THAT THE SUBMISSIONS OF THE ASSESSEE THAT THE INTEREST PAID BELONGING TO THE JEWELLERY BUSINESS IS ONLY AN AFTERTHOUGHT FOR THE REASON THAT THE ASSESSEE HAS NOT PLACED ANY MATERIAL BEFORE US TO SHOW THAT IT RELATES TO JEWELLERY BUSINESS . WE ARE OF THE OPINION THAT NO INTERFERE IS WARRANTED IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL FILED BY THE ASS ESSEE IS DISMISSED. ITA NO.402/VIZ/2018 8 . THE GROUND NOS. 1, 3 & 5 TO 10 ARE NOT PRESSED BY THE LD.COUNSEL FOR THE ASSESSEE, THEREFORE SAME ARE DISMISSED. THE ONLY GROUNDS PRESSED BY THE ASSESSEES COUNSEL ARE GROUND NO..2 & 4 WHICH ARE AS UNDER: - 6 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) 2) THE LD. CIT(A) SHOULD HAVE ALLOWED THE ADDITION MADE OF RS. 4,64,000/ - BY TREATING THE GOLD ORNAMENTS OF 187 GMS PLEDGED TO UNION BANK OF INDIA, MUNDUR BRANCH AS BELONGING TO THE APPELLANT. 4) THE LD. CIT(A) SHOULD HAVE ALLOWED THE INTEREST CLAIM OF RS. 1, 49,699/ - . 9. GROUND NO. 2 RELATES TO ADDITION OF RS. 4,64,000/ - . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT AS VERIFIED FROM THE BALANCE SHEET, THE ASSESSEE HAS DISCLOSED LIABILITY TOWARDS GOLD LOAN FROM UNION BANK OF INDIA , MUDUNURU BRANCH . IT WAS NOTICED THAT THE ASSESSEE HAS PLEDGED 187 GRMS. OF GOLD AND OBTAINED A LOAN OF RS. 4,64,000/ - . THUS, ORNAMENTS WERE WITH THE BANK W HEN THE SURVEY WAS CONDUCTED. AS VERIFIED FROM THE BALANCE SHEET , THESE GOLD ORNAMENTS ARE NOT REFLECTED ON ASSETS SIDE THOUGH THE GOLD LOAN WAS DISCLOSED. ON BEING ASKED TO EXPLAIN THE SOURCE FOR THE GOLD ORNAMENTS PLEDGED TO BANK, ASSESSEE HAS STATED TH A T THE SAID ORNAMENTS ORIGINALLY BELONG TO HER CUSTOMERS WHO HAVE PLEDGED THE SAME WITH HER IN THE COURSE OF HER PAWN BROKING BUSINESS. VERACITY OF ASSESSEES CONTENTION HAS BEEN EXAMINED. DURING THE COURSE OF SURVEY, INVENTORY OF PAWN BROKING ITEMS WAS TAKEN AND THE ASSESSEE IS UNABLE TO ATTRIBUTE A PARTICULAR ITEM PLEDGED BY HER WITH THE BANK TO THE ITEM PLEDGED WITH HER BY HER CUSTOMERS. SHE IS NOT ABLE TO EXPLAIN THE TOTAL 187 GR A MS OF GOLD , WHICH ITEMS ARE BELONGING TO 7 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) THE CUSTOMERS. AS PER THE LOAN INFORMA TION FURNISHED TO THE BANK THE ASSESSEE HAS CATEGORICALLY CERTIFIED THAT SHE IS THE TRUE OWNER OF THE SAID ORNAMENTS/JEWELLERY THAT IS BEING PLEDGED WITH THE BANK AND NO PRIOR LIEN OR CHARGE HAS BEEN CREATED ON THE SAID GOLD ORNAMENTS/JEWELLERY . THE ASSESSING OFFICER BY CONSIDERING THE ABOVE CERTIFICATE ISSUED TO THE BANK AND BY CONSIDERING THE VALUE MADE BY THE QUALIFIED APPRAISER AT RS. 4,64,000/ - , THE SAME IS TREATED AS THE ASSESSEES UNDISCLOSED INVESTMENT IN GOLD ORNAMENTS AND ADDED TO THE TO TAL INCOME OF THE ASSESSEE . 10 . ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. EVEN BEFORE US, THE AR OF THE ASSESSEE IS NOT ABLE TO PLACE ANY MATERIAL TO SHOW THAT THE GOLD ORNAMENTS TO THE EXTENT OF 187 GRAMS BELONGING TO THE ASSESSEE. WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 11 . G ROUND NO.4 IS RELATED TO INTEREST CLAIM. THE FACTS ARE SIMILAR TO THE FACTS INVOLVED IN ITA NO.401/VIZ/2018, THEREFORE, OUR DECISION IN ITA NO.401/VIZ/2018 SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL ALSO. THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 8 ITA NO S . 401 & 402/VIZ/2018 ( SMT. PATCHIPULUSU KALPANA ) 12 . IN THE RESULT, APPEAL S FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 7 T H DAY OF JU LY , 201 9 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 7 T H JU LY , 201 9 . VR/ - COPY TO: 1. THE ASSESSEE - SMT. PATCHIPULUSU KALPANA, PROP. VARALAKSHMI JEWELLERY MART, D.NO. 7A - 3 - 7/2, PATCHIPULUSUVARI STREET, KOTHA ROAD, ELURU. 2. THE REVENUE ITO, WARD - 1, ELURU. 3. THE PR. CIT , RAJAHMUNDRY. 4. THE CIT(A) - 12, HYDERABAD. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.