S. Jagadeswara Rao, Srikakulam V. The ITO, Srikakulam

ITA 409/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8951 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 06-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Unexplained investment; Unexplained expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI D. MANMOHAN, HONBLE VICE-PRESIDENT ITA NO. 409/VIZ/2016 (ASST. YEAR : 2011-12) SISTI JAGADESWARA RAO, KAMESWARAPETA, NARASANNAPETA MANDALAM, SRIKAKULAM DISTRICT. VS. ITO, WARD-1, SRIKAKULAM. PAN NO. BGUPS 1135 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FCA DEPARTMENT BY : SHRI M.K. SETHI SR. DR DATE OF HEARING : 01/05/2017. DATE OF PRONOUNCEMENT : 01/05/2017. O R D E R THIS APPEAL IS FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-2, GUNTUR, CAMP AT VISAKHAPATNAM. 2. THE ASSESSEE WAS CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF IMFL (INDIAN MADE FOREIGN LIQUOR) IN SRIKAKULAM DISTRICT, IN HIS INDIVIDUAL CAPACITY. FOR THE YEAR UNDER CONSIDERATION, HE DECLARED TOTAL INCOME OF 3,84,133/- THROUGH E-FILING MODE, WHICH WAS PROCESSED ACCORDINGLY. LATER ON, CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSEE WAS CALLED UPON TO FURNISH THE SOURCE FOR THE CAPITAL INTRODUCED, SOURCE FOR THE PAYMENT OF LICENCE FEE, BANK ACCOUNTS ETC. SINCE, ASSESSEE COULD NOT FURNISH ANY DETAILS, THE BOOKS OF ACCOUNT FILED BY THE ASSESSEE WERE REJECTED AND INCOME WAS ESTIMATED AT 20% OF TURNOVER. 2 ITA NO. 409/VIZ/2016 (S. JAGADESWARA RAO) 3. IN ADDITION THERETO, THE ASSESSING OFFICER HAS MADE AN ADDITION OF 14,56,391/- REFERABLE TO UNEXPLAINED INVESTMENT MADE TOWARDS FIRST INSTALMENT OF LICENCE FEE AND FIRST PURCHASE OF STOCK/BG COMMISSION ETC. 4. ON AN APPEAL FILED BY THE ASSESSEE, LD. CIT(A) REDUCED THE ESTIMATION OF INCOME TO 10%, BUT CONFIRMED THE ADDITION TOWARDS UNEXPLAINED INVESTMENT. 5. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON TWO ISSUES I.E. (1) REASONABLENESS OF ESTIMATION OF INCOME ON PURCHASE AND SALE OF IMFL; AND (2) THE CORRECTNESS OF ADDITION MADE TOWARDS UNEXPLAINED INVESTMENT/UNEXPLAINED EXPENDITURE. 6 . AT THE TIME OF HEARING, LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT GROUND NO. 1.3 REFERABLE TO ADDITION OF 14,56,391/- IS NOT PRESSED. ACCORDINGLY, THE SAID GROUND IS REJECTED. GROUND NOS. 1.0 & 1.4 ARE GENERAL IN NATURE AND THEREFORE, NEED NOT BE CONSIDERED INDEPENDENTLY. 7 . VIDE GROUND NOS. 1.1 & 1.2, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT LD. CIT(A) ERRED IN ESTIMATING THE INCOME AT 10% ON PURCHASE PRICE, WHICH IS MERELY ON HYPOTHETICAL BASIS, WHEREAS IN THIS LINE OF BUSINESS, PROFIT HOVERS AROUND 5% AND, IN SUPPORT THEREOF, LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE PLACED A COPY OF ORDER OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF C. BHAGAVAN VS. ITO IN ITA NO. 123/VIZAG/2015, ORDER DATED 30/12/2016, WHICH IN TURN IS BASED ON COORDINATE BENCH DECISION TO HOLD THAT 5% IS 3 ITA NO. 409/VIZ/2016 (S. JAGADESWARA RAO) THE REASONABLE PROFIT, WHICH CAN BE ACCEPTED IN THIS IMFL BUSINESS FOR THE ASSESSMENT YEAR 2011-12 IN SRIKAKULAM ZONE. 8 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER PASSED BY THE LD. CIT(A). 9 . HAVING REGARD TO RIVAL SUBMISSIONS AND CONSISTENT WITH THE VIEW TAKEN BY THE ITAT IN THE CASE OF C. BHAGAVAN (SUPRA), I HOLD THAT ESTIMATION OF 5%, AS AGAINST 10% ADOPTED BY THE LD. CIT(A), IS REASONABLE. I HOLD ACCORDINGLY. 10 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 01 ST DAY OF MAY, 2017. SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 01 ST MAY, 2017. VR/- COPY TO: 1. THE ASSESSEE SISTI JAGADESWARA RAO, KAMESWARAPETA, NARASANNAPETA MANDALAM, SRIKAKULAM DISTRICT. 2. THE REVENUE - ITO, WARD-1, SRIKAKULAM. 3. THE PCIT-2,VISAKHAPATNAM. 4. THE CIT(A)-2, VISAKHAPATNAM. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER