E. Appala Naidu, Visakhapatnam V. The ITO, Visakhapatnam

ITA 410/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8962 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Unexplained investment; Search and seizure; Deemed to accrue or arise in india
• Section: 131; 68; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI D. MANMOHAN, HONBLE VICE-PRESIDENT ITA NO. 410/VIZ/2016 (ASST. YEAR : 2011-12) ENNAM APPALA NAIDU, D.NO. 3-62, ANNAVARAM, PEDDAVEEDHI, KATAVURATLA MANDAL, NARSIPATNAM, VISAKHAPATNAM DIST. VS. ITO, WARD-5(3), VISAKHAPATNAM. PAN NO. AAOPE 5453 H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI - ADVOCATE. DEPARTMENT BY : SHRI M.K. SETHI SR. DR DATE OF HEARING : 02/05/2017. DATE OF PRONOUNCEMENT : 05/05/2017. O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-2, VISAKHAPATNAM. 2. THE FOLLOWING GROUNDS ARE URGED BEFORE THE TRIBUNAL:- 1 THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, VISAKHAPATNAM IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE TO THE FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN ESTIMATING THE NET PROFIT @ 10% OF PURCHASE PRICE AS AGAINST NET PROFIT OF 5% OF COST OF GOODS SOLD. 4 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS 2,50,000/- MADE BY THE ASSESSING OFFICER TOWARDS UNEXPLAINED CAPITAL. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS 650,000/- MADE BY THE ASSESSING 2 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) OFFICER TOWARDS UNEXPLAINED UNSECURED LOANS. 6 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE GRANTED BENEFIT OF TELESCOPING. 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF APPEAL HEARING. 3. FACTS NECESSARY FOR THE PURPOSE OF DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF INDIAN MADE FOREIGN LIQUOR IN THE NAME AND STYLE OF M/S.NAIDU WINES. FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011-12, THE ASSESSEE DECLARED TURNOVER OF 1,79,47,800/- AND ADMITTED NET PROFIT OF 3,38,936/-, BEING 1.89% OF TOTAL SALES. THE ASSESSING OFFICER WAS OF THE VIEW THAT PROFIT DECLARED BY THE ASSESSEE IS TOO LOW AND, THEREFORE, ASSESSEE WAS CALLED UPON TO FURNISH BOOKS OF ACCOUNT AND COMPLETE DETAILS OF SALES, ALONG WITH RELEVANT BILLS/VOUCHERS, TO SUPPORT HIS STAND THAT THE PROFIT DECLARED BY THE ASSESSEE IS REASONABLE. THE ASSESSEE WAS ALSO CALLED UPON TO FURNISH THE SOURCE OF INVESTMENT AND TO PROVE THE GENUINENESS OF THE CASH CREDITS. 4. A STATEMENT ON OATH WAS RECORDED UNDER SECTION 131 OF THE ACT, WHEREIN, ASSESSEE ADMITTED THAT THE BOOKS OF ACCOUNT WERE NOT MAINTAINED AND HE FURTHER ADMITTED THAT IT IS DIFFICULT TO MAINTAIN SALE BILLS. THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY BOOK RESULTS SHOULD NOT BE REJECTED, SO AS TO ESTIMATE THE PROFIT AT 20% ON STOCK PUT TO SALE. THE ASSESSEE SUBMITTED THAT IT IS DIFFICULT TO MAINTAIN SALE BILLS AND THEREFORE, HE IS AGREEABLE TO PAY TAX BY 3 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) ESTIMATING INCOME AT 5% OF NET SALES, IN LINE WITH THE VIEW TAKEN BY THE ITAT, HYDERABAD BENCH IN THE CASE OF P. NARASIMHA RAO VS. ITO IN ITA NO. 110/H/2012, DATED 18/05/2012. 5. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE. HE OBSERVED THAT THE ONUS IS ON THE ASSESSEE TO PROVE THE EXACT DETAILS OF QUANTITY OF LIQUOR SOLD PRODUCT-WISE & BRAND-WISE WHEREAS, IN THE INSTANT CASE, THE SAME COULD NOT BE PROVED IN ABSENCE OF BILLS / VOUCHERS. THE ASSESSEE HAVING NOT EVEN PRODUCED STOCK REGISTER, THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 145 OF THE ACT AND PROCEEDED TO ESTIMATE THE INCOME. IN THIS REGARD, HE OBSERVED THAT AS PER THE RATE STRUCTURE FIXED BY THE APBCL, THE NORMAL MARGIN OF PROFIT DERIVED BY EACH WINE DEALER VARIES BETWEEN 25% TO 30% AND IN THE CASE OF CIT VS. R. NARAYANA RAO (ARRACK CASE), THE HON'BLE ANDHRA PRADESH HIGH COURT UPHELD THE ESTIMATION OF NET PROFIT AT 16% ON PURCHASE PRICE; THE MARGIN OF PROFIT IN IMFL CASES IS MORE THAN ARRACK CASES AND THEREFORE, HE PROCEEDED TO ESTIMATE THE NET PROFIT FROM SALE OF LIQUOR AT 20% OF STOCK PUT TO SALE. IN OTHER WORDS, HE ESTIMATED INCOME AT 25,75,758/-. 6. FURTHER, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF INTRODUCTION OF CAPITAL OF 2,50,000/-. THE ASSESSEE FILED CONFIRMATION LETTERS FROM 14 PARTIES, WHEREIN THE DATE OF ADVANCING THE LOAN WAS NOT MENTIONED. FURTHER, FULL ADDRESSES OF SO-CALLED CREDITORS HAVE NOT BEEN MENTIONED. HE ALSO OBSERVED THAT THE ASSESSEE HAS STATED THAT THE 4 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) SOURCE FOR INTRODUCTION OF CAPITAL WAS OUT OF LOAN TAKEN FROM FRIENDS AND RELATIVES, WHO ARE STATED TO BE FARMERS, BUT THERE IS NO DOCUMENTARY EVIDENCE IN SUPPORT OF AGRICULTURAL INCOME DERIVED BY THE SO-CALLED CREDITORS AND, THEREFORE, IT IS NOT POSSIBLE TO VERIFY THE VERACITY OF THE SAID PAYMENTS, MORE PARTICULARLY IN THE ABSENCE OF BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THEREFORE, THE SOURCE OF INVESTMENT WAS NOT PROVED / NOT SUBSTANTIATED WITH THE EVIDENCE AND ACCORDINGLY AN ADDITION OF 2,50,000/- WAS SEPARATELY MADE. 7. SIMILARLY, ASSESSEE CLAIMED TO HAVE TAKEN UNSECURED LOANS TO THE TUNE OF 6,50,000/-. THE ASSESSEE FILED CONFIRMATION LETTERS FROM 35 PARTIES. HERE ALSO, THE DATE ON WHICH THE AMOUNTS WERE RECEIVED WAS NOT MENTIONED IN THE CONFIRMATION LETTERS. FOR THE REASONS GIVEN BY THE ASSESSING OFFICER WITH REGARD TO THE REJECTION OF CONTENTION OF THE ASSESSEE, VIS-A-VIS SOURCE OF INTRODUCTION OF CAPITAL, THE ASSESSING OFFICER REJECTED THE GENUINENESS OF UNSECURED LOANS /CASH CREDITORS AND ADDED THE SAME UNDER SECTION 68 OF THE ACT. ACCORDINGLY, ASSESSMENT WAS COMPLETED ON A TOTAL INCOME OF 34,75,758/-. 8 . AGGRIEVED, ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT THE ASSESSING OFFICER ERRED IN TAKING INTO CONSIDERATION THE DECISION OF THE HON'BLE ANDHRA PRADESH HIGH COURT FOR ESTIMATING THE NET PROFIT ON THE GROUND THAT THE NET PROFIT WOULD BE MORE IN IMFL TRADE, AS AGAINST ARRACK BUSINESS. IT WAS FURTHER CONTENDED THAT THE ASSESSEE COULD NOT MAINTAIN SALE BILLS ETC. AND THEREFORE, HE WAS PREPARED TO ADMIT INCOME 5 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) AT 5% ON TURNOVER IN THE LIGHT OF THE DECISION OF ITAT, HYDERABAD BENCH. IT WAS MAINLY CONTENDED THAT THE ITAT, HYDERABAD BENCH AS WELL AS VISAKHAPATNAM BENCH HAVE ACCEPTED THAT THE NET PROFIT IN THIS LINE OF BUSINESS WOULD BE AROUND AT 5% AND THE PROFIT IN ARRACK BUSINESS CANNOT BE TAKEN AS YARDSTICK. 9. WITH REGARD TO ADDITION OF 2,50,000/- AND 6,50,000/-, THE CASE OF THE ASSESSEE IS THAT THE AMOUNT WAS RECEIVED FROM FRIENDS AND RELATIVES AND CONFIRMATION LETTERS WERE FILED WHICH WERE REJECTED WITHOUT PROPER APPRECIATION OF FACTS. 10 . THE LD. CIT(A) OBSERVED THAT THE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM OF RETURNING SUCH LOW PROFIT FROM LIQUOR BUSINESS AND, THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT TO ESTIMATE THE PROFIT. AS REGARDS THE ESTIMATE OF INCOME, THE LD. CIT(A) OBSERVED THAT SERIES OF RAIDS WERE CONDUCTED ON LIQUOR TRADERS BY THE ANTI CORRUPTION BUREAU AT VARIOUS PLACES IN ANDHRA PRADESH, WHICH REVEALED THAT THE LIQUOR TRADERS HAVE MARKED UP PRICE OF THE ALCOHOLIC BEVERAGES BY AS MUCH AS 30-40 PER CENT HIGHER THAN THE MAXIMUM RETAIL PRICE. IT WAS ALSO STATED THAT THE TRADERS NORMALLY VIOLATE THE PROVISIONS OF AP EXCISE ACT AND RULES BY SALE OF LIQUOR OVER AND ABOVE MRP, LOOSE SALE OF LIQUOR, OPENING OF SHOPS BEYOND THE PRESCRIBED TIMINGS, OPERATION OF ILLICIT LIQUOR SHOPS, SALE OF NON-DUTY PAID LIQUOR ETC. ASSESSING OFFICER CONCLUDED THAT HAVING REGARD TO ILLEGALITIES AND VIOLATIONS IN LIQUOR BUSINESS A REASONABLE 6 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) ESTIMATE OF INCOME IS NECESSARY BY TAKING INTO ACCOUNT ALL THESE VIOLATIONS, PARTICULARLY SALE OF LIQUOR OVER AND ABOVE THE MRP PRICE. 11 . VIDE PARAGRAPH 4.2.1, THE LD. CIT(A) OBSERVED THAT APBCL IS A CORPORATE BODY, WHICH REGULATES WHOLESALE LIQUOR DISTRIBUTION IN AP AND IT PROVIDES MARGIN IN THE RANGE AT 25% TO 30% ON ALL PURCHASES TO RETAIL TRADERS AND HENCE, EVEN IF SALES ARE MADE AT THE MRP PRICE, THE PROFIT ON PURCHASES WOULD BE EFFECTIVELY 6.5%, WHICH CLEARLY SHOW THAT THE ESTIMATE OF INCOME AT 3-5% OF PURCHASES IS TOO LOW. IN THIS REGARD, HE HAD TAKEN JUDICIAL NOTICE OF THE FACT THAT THERE WAS A RAMPANT PRACTICE OF SELLING ABOVE MRP AND ALSO SALE OF NON-DUTY LIQUOR, IN WHICH EVENT PROFIT MARGIN WOULD BE HIGHER. CONSIDERING THE ABOVE FACTS, THE LD. CIT(A) WAS OF THE OPINION THAT THE ESTIMATE OF INCOME OF THE ASSESSEE AT 10% OF PURCHASE PRICE WOULD BE REASONABLE IN THE CIRCUMSTANCES OF THE CASE. HE DIRECTED THE ASSESSING OFFICER ACCORDINGLY. 12. WITH REGARD TO THE ADDITION OF UNEXPLAINED INVESTMENT OF 2,50,000/- AND UNSECURED LOANS OF 6,50,000/-, THE CASE OF THE ASSESSEE WAS THAT THE EVIDENCE IN THE FORM OF CONFIRMATION LETTERS FILED BEFORE THE ASSESSING OFFICER WAS SUFFICIENT TO DISCHARGE THE BURDEN PLACED UPON THE ASSESSEE IN PROVING THE SOURCE AND, AT ANY RATE, THE BENEFIT OF TELESCOPING OUGHT TO HAVE BEEN GIVEN SINCE INCOME WAS ESTIMATED IN THE EARLIER YEARS AND THAT ADDITIONAL INCOME IS DEEMED TO BE AVAILABLE FOR THE PURPOSE OF MAKING INVESTMENT IN THIS YEAR. THE LD.CIT(A) REJECTED BOTH THE CONTENTIONS BY OBSERVING AS UNDER:- 7 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) 5.2 I HAVE CONSIDERED THE SUBMISSIONS AND THE DETAILS FILED. FROM THE PERUSAL OF THE CONFIRMATION LETTERS AND THE AFFIDAVITS IT IS NOTED THAT THESE PARTIES HAVE NOT MENTIONED AS TO THE DATE ON WHICH THE IMPUGNED AMOUNTS WERE GIVEN TO THE ASSESSEE. THERE WAS NO EVIDENCE IN SUPPORT OF THEIR CLAIM FOR INCOME FROM AGRICULTURAL ACTIVITY. THE LAND HOLDING DETAILS WERE NOT FURNISHED. THUS, I AM OF THE VIEW THAT THE ASSESSING OFFICER IS JUSTIFIED IN HOLDING THAT THE CREDITWORTHINESS OF THESE PARTIES WAS NOT PROVED. FURTHER, AS THE ASSESSEE FAILED TO PROVE THAT THESE CREDITS RELATIVE TO ITS BUSINESS ACTIVITY, THE CLAIM OF TELESCOPING CANNOT BE CONSIDERED. ACCORDINGLY, THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER IS UPHELD. 13. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PROFIT ON SALE OF IMFL DEPENDS ON VARIOUS FACTORS, SUCH AS, LICENCE FEE, NUMBER OF STAFF, NATURE OF DEMAND FOR EACH PRODUCT, THE AREA IN WHICH THE SHOP IS SITUATED ETC. AND FOR THE SAME YEAR, IN THE CASE OF GUDLA MOTHILAL VS. ITO IN ITA NO. 365/VIZAG/2015 ORDER DATED 22/07/2016, THE TRIBUNAL HELD THAT ESTIMATION OF PROFIT AT 5% ON TOTAL PURCHASES, NET OF ALL DEDUCTIONS, IS APPROPRIATE AND MOST REASONABLE. HE, THEREFORE, SUBMITTED THAT EVEN THE CASE OF THE ASSESSEE, GROUND REALITIES BEING SAME, THE LD. CIT(A) OUGHT TO HAVE ESTIMATED THE NET PROFIT AT 5%. 14. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE LD. CIT(A) TO CONTEND THAT THERE WAS A RAMPANT PRACTICE OF SELLING IMFL ABOVE MRP. SURPRISE VISITS WERE CONDUCTED BY THE INVESTIGATION DEPARTMENT ON SEVERAL SUCH SHOPS, WHEREIN THE AUTHORITIES NOTICED THAT LIQUOR WAS SOLD BY THE RETAIL TRADERS AT 30% - 40% HIGHER THAN MRP AND HENCE, THE PERCENTAGE OF PROFIT 8 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) ADOPTED BY THE LD. CIT(A) CANNOT BE SAID TO BE UNREASONABLE OR EXCESSIVE. 15. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. 16. THE CASE OF THE ASSESSEE IS THAT ANDHRA PRADESH BEVERAGES CORPORATION SUPPLIES IMFL AT A FIXED PRICE AND AUTHORISED RETAILERS TO SELL AT A TAG PRICE WHEREBY THE MARGIN OF PROFIT RANGES FROM 25 TO 30% AND PROFIT VARIES DEPENDING ON THE BRAND SOLD. HOWEVER, NO DETAILS WERE FURNISHED BEFORE ME WITH REGARD TO PURCHASES MADE FROM THE GOVERNMENT BRAND-WISE. THE ASSESSING OFFICER MENTIONED THAT ANTI CORRUPTION BUREAU HAS CONDUCTED RAIDS ON LIQUOR TRADERS TO NOTICE THAT THEY HAVE MARKED UP THE PRICE OF THE ALCOHOLIC BEVERAGES OVER AND ABOVE THE MRP. HOWEVER, IN THE CASE ON HAND, NO SUCH INVESTIGATION WAS CONDUCTED BY THE ASSESSING OFFICER. AT ANY RATE NEITHER THE ASSESSEE FURNISHED NOR ASSESSING OFFICER MADE EFFORT TO VERIFY THE NATURE OF STOCK PURCHASED, SO AS TO ANALYSE SALES ETC. UNDER THESE CIRCUMSTANCES, IT IS DIFFICULT TO SCIENTIFICALLY FIX A PARTICULAR RATE OF PROFIT IN THIS LINE OF BUSINESS. THEREFORE, I AM LEFT WITH NO OTHER ALTERNATIVE EXCEPT TO FOLLOW THE DIVISION BENCH ORDER OF ITAT, VISAKHAPATNAM IN THE CASE OF GUDLA MOTHILAL (SUPRA) WHEREIN NET PROFIT WAS ESTIMATED AT 5%. IT IS NOT IN DISPUTE THAT THE DECISION OF THE TRIBUNAL PLACED BEFORE ME IS IN RESPECT OF SAME DISTRICT AND FOR THE SAME ASSESSMENT YEAR; THEREFORE, IT HAS TO BE ASSUMED THAT THE CIRCUMSTANCES ARE IDENTICAL IN 9 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) RESPECT OF BOTH THE TRADERS IN THE ABSENCE OF ANY CONTRADICTORY MATERIAL ON THIS ASPECT. I, THEREFORE, FOLLOW THE DECISION OF THE ITAT (SUPRA) AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE NET PROFIT AT 5% OF TOTAL PURCHASES, NET OF ALL EXPENDITURE. 17. VIDE GROUND NOS. 4 & 5 THE ASSESSEE CONTENDS THAT THE ADDITION OF 2,50,000/- AND 6,50,000/- REFERABLE TO UNEXPLAINED CAPITAL AND UNEXPLAINED LOANS WAS NOT BASED ON PROPER EVALUATION OF FACTS. LEARNED COUNSEL FOR THE ASSESSEE ADVERTED MY ATTENTION TO THE ORDER OF THE ASSESSING OFFICER AND RELEVANT MATERIAL PLACED IN THE PAPER BOOK TO SUBMIT THAT CONFIRMATION LETTERS WERE OBTAINED FROM THE PARTIES TO PROVE THAT LOANS WERE PROVIDED BY FRIENDS AND RELATIVES, WHO ARE FARMERS, BUT THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE WITHOUT ASSIGNING APPROPRIATE REASONS. 18. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CONFIRMATION LETTERS ARE VERY GENERAL IN NATURE AND THEY DO NOT SPECIFY THE DATE ON WHICH THE AMOUNT WAS ADVANCED. IT WAS ALSO SUBMITTED THAT NONE OF THE PARTIES WERE HAVING PAN NUMBERS AND FULL ADDRESSES OF THE CREDITORS WERE NOT FURNISHED. 19. IT MAY BE NOTED THAT THE LD. CIT(A) OBSERVED THAT THERE WAS NO MENTION OF DATE, ON WHICH AMOUNTS HAVE BEEN ADVANCED. IN ADDITION THERETO, THE LETTERS WERE IN ROUTINE FORMAT WITHOUT ANY EVIDENCE TO PROVE AVAILABILITY OF AGRICULTURAL INCOME OR OTHER INCOME. 10 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) 20. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. I HAVE ALSO CAREFULLY PERUSED THE AFFIDAVITS OF SOME OF THE PARTIES, WHO CLAIMED TO HAVE ADVANCED PETTY SUMS TO THE ASSESSEE. FOR EXAMPLE, PAGE NO. 52 OF PAPER BOOK SHOWS THAT SMT. PANDURI SATYAVATHI, AGED 39 YEARS, WAS WORKING AS AN AGRICULTURIST SINCE 15 YEARS AND GAVE A HAND LOAN OF 19,000/- TO SHRI E. APPALA NAIDU, WHICH WAS REPAID IN THE YEAR 2012-13. NEITHER THE LAND HOLDING NOR THE INCOME EARNED PER YEAR, THE NUMBER OF FAMILY MEMBERS AND OTHER DETAILS WERE FURNISHED TO EVALUATE THE CORRECTNESS OF THE CREDITORS. A TYPICAL STEREO TYPED LETTER IS NOTICED AT PAGE NO. 58 WHEREIN EVERY INCH OF DETAIL, EXCEPT THE NAME OF THE ALLEGED CREDITOR, IS IDENTICAL. FOR EXAMPLE AT PAGE NO. 52, SMT. PANDURI SATYAVATHI IS W/O CHINABBAI, AGED 39 YEARS, RESIDENT OF CHETTUPALLI VILLAGE, VISAKHAPATNAM AND CLAIMED TO BE AN AGRICULTURIST SINCE 15 YEARS AND GAVE A HAND LOAN OF 19,000/-, WHICH WAS REPAID BY THE ASSESSEE IN THE YEAR 2012-13 AND THE AFFIDAVIT WAS GIVEN ON ENQUIRY MADE BY THE IT DEPARTMENT AND ON THE REQUEST OF SRI E. APPALA NAIDU. AT PAGE NO. 58, SMT. KANTREDDI LAKSHMI W/O VARAHALA RAO IS 39 YEARS OLD AND RESIDENT OF SAME VILLAGE WORKING AS AGRICULTURIST SINCE 15 YEARS AND GAVE HAND LOAN OF 19,000/- WHICH WAS REPAID IN THE YEAR 2012-13; EXCEPT THE CLAIM THAT THEY ARE AGRICULTURISTS, NO OTHER DETAILS WERE FURNISHED TO PROVE THE ANNUAL INCOME AND CHANCE OF SAVINGS, IF ANY, AND OTHER DETAILS. PAGE NO.24 OF THE PAPER BOOK, CONTAINS THE AFFIDAVIT OF SHRI NOOTHI VENKATA SATYA 11 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) SEETHA RAMA RAJU, AGED 44 YEARS AND CLAIMED TO BE WORKING AS AN AGRICULTURIST SINCE 44 YEARS, WHO HAD ALSO GIVEN AN IDENTICAL AMOUNT WHICH WAS STATED TO BE REPAID IN THE YEAR 2012-13. IT IS INTRIGUING AS TO HOW THE PERSON WAS WORKING AS AGRICULTURIST FROM THE DATE HE HAS TAKEN BIRTH. SUCH BEING THE CASE, I AM OF THE FIRM OPINION THAT THE ADDITION MADE BY THE ASSESSING OFFICER WAS RIGHTLY CONFIRMED BY THE LD. CIT(A) ON THIS COUNT. 21. HOWEVER, THE ASSESSEE RAISED AN ALTERNATIVE CONTENTION, VIDE GROUND NO.6, WHEREIN IT WAS SUBMITTED THAT IN THE IMMEDIATELY PRECEDING YEARS, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS TOWARDS UNEXPLAINED INCOME AND SUCH INCOME SHOULD BE DEEMED TO BE AVAILABLE WITH THE ASSESSEE AND TO THAT EXTENT, THE BENEFIT OF TELESCOPING SHOULD BE GRANTED. IT WAS CONTENDED THAT EVEN IN THE IMMEDIATE PRECEDING YEAR, THE ASSESSEE DECLARED LESSER RATE OF PROFIT WHEREAS TRIBUNAL ULTIMATELY CONFIRMED THE ESTIMATE AT 5% OF THE SALES. WHEN AN INCOME IS DEEMED TO HAVE BEEN EARNED BY THE ASSESSEE, THE BENEFIT OF AVAILABILITY OF SUCH INCOME SHOULD ALSO BE GIVEN TO THE ASSESSEE AND SUCH AMOUNT SHOULD BE DEEMED TO HAVE BEEN AVAILABLE FOR MAKING INVESTMENTS IN THE SUBSEQUENT YEARS. HAVING REGARD TO CIRCUMSTANCES, I SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER, WHO IS DIRECTED TO VERIFY THE ADDITIONS MADE FOR THE IMMEDIATELY PRECEDING YEAR, TOWARDS DEEMED INCOME, AND SUCH INCOME SHOULD BE TREATED AS AVAILABLE WITH THE ASSESSEE FOR THE PURPOSE OF UTILISING THE SAME 12 ITA NO. 410/VIZ/2016 (ENNAM APPALA NAIDU) TOWARDS INTRODUCTION OF CAPITAL AND IN THE FORM OF INTRODUCTION OF MONEY AS UNSECURED LOANS. SINCE THESE DETAILS WERE NOT AVAILABLE, I SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE SAME AND TO PROVIDE APPROPRIATE RELIEF. 22. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 05 TH DAY OF MAY, 2017. SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 05 TH MAY, 2017. VR/- COPY TO: 1. THE ASSESSEE ENNAM APPALA NAIDU, D.NO. 3-62, ANNAVARAM, PEDDAVEEDHI, KATAVURATLA MANDAL, NARSIPATNAM, VISAKHAPATNAM DISTRICT. 2. THE REVENUE - ITO, WARD-5(3), VISAKHAPATNAM. 3. THE CIT-2, VISAKHAPATNAM. 4. THE CIT(A)-2, VISAKHAPATNAM. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER