THE ITO, Vijayawada V. Chitrala Venkata Harinath, Vijayawada

ITA 410/VIZ/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6629 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y SESHA SRINIVAS
• Keywords: Rejection of books of accounts

Judgement Text

ITA NO.410/VIZAG/2015 CHITRALA VENKATA HARINATH, VIJAYAWADA 1 , , 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.410/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) ITO WARD - 1(2), VIJAYAWADA CHITRALA VENKATA HARINATH VIJAYAWADA [ PAN NO. AAZPC9415G ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI Y. SESHA SRINIVAS, DR / RESPONDENT BY : SHRI D.L. NARASIMHA RAO, AR / DATE OF HEARING : 27.09.2017 / DATE OF PRONOUNCEMENT : 06.10.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) {CIT(A)}, VIJAYAWADA VIDE ITA NO.199/CIT(A)/VJA/14-15 DATED 30.9.2015 FOR THE ASSESSMENT YEAR 2011-12. ITA NO.410/VIZAG/2015 CHITRALA VENKATA HARINATH, VIJAYAWADA 2 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE EST IMATION OF GROSS PROFIT BY THE A.O. THE ASSESSEE IS AN INDIVIDUAL C ARRYING ON WHOLESALE TRADE IN EDIBLE OILS, IN THE NAME OF M/S. HARANATHA OIL TRADERS AND M/S. SRI VENKATA KUSUMA HARANADHA OIL TRADES AND FILED T HE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 30.9.2011 ADMITTING TOTAL INCOME OF ` 8,14,717/-. THE ASSESSMENT WAS COMPLETED U/S 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'TH E ACT') ON TOTAL INCOME OF ` 61,95,998/-. DURING THE ASSESSMENT PROCEEDINGS, T HE A.O. MADE THE ADDITION OF ` 49,72,919/- RELATING TO THE GROSS PROFIT. THE A.O . DURING THE ASSESSMENT PROCEEDINGS CALLED FOR PURCHA SE AND SALE VOUCHERS AND MADE RANDOM VERIFICATION OF GROSS PRO FIT ON VARIOUS DATES AND FOUND CERTAIN DIFFERENCES COMPARED TO THE GROSS PROFIT OF THE ASSESSEE AND CALLED FOR EXPLANATION FROM THE ASSESS EE. THE ASSESSEE COULD NOT EXPLAIN THE REASONS FOR DIFFERENCE, HENCE , THE A.O. ENHANCED THE GROSS PROFIT BY 1.5% OF THE TOTAL TURNOVER OF M /S. HARANATHA OIL TRADERS OF ` 33,15,29,967/-, WHICH WORKED OUT TO ` 49,72,919/- AND THE SAME WAS ADDED BACK TO THE INCOME. GROSS PROFIT OF THE ASSESSEE ON DIFFERENT TYPES OF OILS WAS LESS THAN GROSS PROFIT COMPARED BY THE A.O. ON RANDOM BASIS MONTH WISE AND THE ITEMWISE. 3. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) DELETED THE ADD ITIONS OBSERVING ITA NO.410/VIZAG/2015 CHITRALA VENKATA HARINATH, VIJAYAWADA 3 THAT THE ASSESSEE IS REGULARLY ASSESSED TO TAX AN D MAINTAINED THE REGULAR BOOKS OF ACCOUNTS, WHICH WERE AUDITED U/S 4 4AB OF THE ACT. THE GROSS PROFIT OF OILS OF M/S. HARANATHA OIL TRADERS WAS 2.92% AND NET PROFIT WAS 0.25%. THE LD. CIT(A) OBSERVED THAT THE A.O. DID NOT POINT OUT ANY DEFICIENCY IN RESPECT OF BOOKS OF ACCOUNTS OF THE ASSESSEE, AND FURTHER, OBSERVED THAT THE A.O., CAN RESORT TO ESTI MATION OF INCOME ONLY, IF THE BOOKS OF ACCOUNTS ARE NOT RELIABLE. IN THIS CASE, THERE ARE NO PROPER BOOKS OF ACCOUNTS AND THE AO HAS NOT REJECTE D THE BOOKS OF ACCOUNTS. THE LD. CIT(A) FURTHER OBSERVED IN HIS O RDER THAT THE A.O. DID NOT BRING ANY BASIS FOR ESTIMATION OF INCOME. THUS , THE ADDITIONS MADE BY THE A.O. WAS DELETED BY THE LD. CIT(A). AGGRIEV ED BY THE ORDER OF THE A.O., THE REVENUE IS IN APPEAL BEFORE THIS TRIB UNAL. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING EDIB LE OILS AS PROPRIETOR OF M/S. HARANATHA OIL TRADES AND M/S. VENKATA KUSUM A HARANATH OIL TRADERS. FOR THE ASSESSMENT YEAR 2011-12, THE ASSE SSEE HAS MADE THE TURNOVER OF ` 33,15,27,967/- IN RESPECT OF M/S. HARANATHA OIL TR ADERS. DURING THE ASSESSMENT PROCEEDINGS, THE A.O. HAS CAL LED FOR THE PURCHASE AND SALE BILLS OF VARIOUS TYPES OF OILS ON RANDOM B ASIS CHECKED THE GROSS PROFIT. ON RANDOM VERIFICATION THE A.O. FOUND THAT THE GROSS PROFIT ITA NO.410/VIZAG/2015 CHITRALA VENKATA HARINATH, VIJAYAWADA 4 DECLARED BY THE ASSESSEE WAS LESSER THAN THE GROSS PROFIT WORKED BY THE A.O., HENCE, CALLED FOR EXPLANATION FROM THE ASSESS EE. THE ASSESSEE COULD NOT OFFER SATISFACTORY EXPLANATION, HENCE THE A.O. ENHANCED THE GROSS PROFIT BY 1.5% RANDOMLY IN RESPECT OF M/S. HA RANATHA OIL TRADERS AND ACCORDINGLY MADE THE ADDITION OF ` 49,72,919/-. THE LD. CIT(A) DELETED THE ADDITION HOLDING THAT WITHOUT THE REJEC TION OF BOOKS OF ACCOUNTS, THE A.O. CANNOT RESORT FOR ESTIMATION OF PROFIT. THE LD. CIT(A) ALSO OBSERVED THAT THE A.O. DID NOT FIND ANY DEFECT S IN THE BOOKS OF ACCOUNTS AND DID NOT BRING ANY BASIS FOR ESTIMATION OF INCOME. IN THE ASSESSEES CASE, THE A.O. RESORTED FOR ESTIMATION O F INCOME WITHOUT THE REJECTION OF BOOKS OF ACCOUNTS. THE ASSESSEE HAS M AINTAINED THE BOOKS OF ACCOUNTS AND GOT AUDITED U/S 44AB OF THE ACT. T HE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS AND THE A.O. DID NOT FIND ANY DEFECTS IN THE BOOKS OF ACCOUNTS. THE A.O. COMPUTED THE GROSS PROFIT OF DIFFERENT DATES ON VARIOUS TYPES OF OILS DEALT WITH BY THE AS SESSEE WITH THE PURCHASE AND SALE BILLS AND COMPUTED THE GROSS PROF IT ON RANDOM BASIS AND ASKED TO EXPLAIN THE DIFFERENCE, FOR WHICH ASSE SSEE COULD NOT OFFER SATISFACTORY EXPLANATION. IN THE OIL TRADE, THE RA TES CHANGE ON DAY TO DAY BASIS AND THE BUSINESS OF OIL TRADING IS COMPLE TELY VOLATILE. THEREFORE, THE GROSS PROFIT WORKED OUT ON RANDOM BA SIS AT DIFFERENT DATES CANNOT BE APPLIED TO THE BUSINESS OF THE WHOL E YEAR AND THE A.O. ITA NO.410/VIZAG/2015 CHITRALA VENKATA HARINATH, VIJAYAWADA 5 DID NOT GIVE ANY FINDING WITH REGARD TO THE DEFECTS IN THE BOOKS OF ACCOUNTS. FURTHER, THE A.O. HAS ENHANCED THE GROSS PROFIT BY 1.5%, WHICH IS ARBITRARY AND WITHOUT ANY BASIS. FOR RESO RTING TO ESTIMATION OF INCOME, THE A.O. SHOULD BRING SOME BASIS OF COMPARA BLE CASES ON RECORD. THE ASSESSEES PURCHASES AND SALES ARE SUP PORTED BY THE PROPER BILLS AND VOUCHERS AND THE ASSESSEE IS MAINTAINING THE PROPER STOCK RECORDS. THEREFORE, WE DO NOT FIND ANY VALID REASO N FOR ESTIMATION OF INCOME WITHOUT REJECTION OF BOOKS OF ACCOUNTS AND A CCORDINGLY UPHOLD THE ORDER OF LD. CIT(A) AND DISMISS THE APPEAL OF T HE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 6 TH OCT17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 06.10.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1(2), VIJAYAWADA 2. / THE RESPONDENT SRI CHITRALA VENKATA HARINATH, D.NO.1-3/18-32, OPP. BSNL OFFICE, VIDYADHARAPURAM, KUMMARIPALEM CENTRE, VIJAYAWADA-52 0 012. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. 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