Garine Chandramouli, Khammam V. Income Tax Officer, Ward-1, Khammam

ITA 429/Hyd/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9835 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2014-2015
• Appeal Filed On: 28-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYA PRASHANT
• Assessee Lawyers: M CHANDRAMOULISWARA RAO
• Keywords: TDS
• Section: 142(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 429/HYD/2018 ASSESSMENT YEAR: 2014-15 GARINE CHANDRAMOULI, KHAMMAM [PAN: AHPPC6799Q] VS INCOME TAX OFFICER, WARD-1, KHAMMAM (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI M. CHANDRAMOULISWARA RAO, AR FOR REVENUE : SHRI SATYA PRASHANT, DR DATE OF HEARING : 18-02-2019 DATE OF PRONOUNCEMENT : 03-04-2019 O R D E R PER S. RIFAUR RAHMAN, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)7, HYDERABAD, DATED 11-12-2017, FOR THE AY. 2014-15. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN INDIVIDUAL, DERIVING INCOME FROM BUSINESS IN PURCHA SE AND SALE OF LIQUOR AND ELECTRICALS, FILED HIS RETURN OF INCOME FOR THE AY. 2014-15 ON 03-02-2015, ADMITTING TOTAL INCOME OF R S. 10,92,510/-. THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT [ACT]. SUBSEQUENTLY, THE CASE WAS TAKEN UP FOR ITA NO. 429/HYD/2018 :- 2 -: SCRUTINY UNDER CASS AND NOTICES U/S. 142(1) AND 143( 2) OF THE ACT WERE ISSUED TO THE ASSESSEE. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS VIZ. , CASH BOOK, COPY OF BANK STATEMENTS, LEDGERS, RECONCILIATION STATEMENT WITH RESPECT TO THE GROSS COLLECTIONS REFLECTED IN THE RETURN OF INCOME VIS--VIS GROSS COLLECTIONS REFLECTE D IN THE TDS CERTIFICATES ETC., FOR VERIFICATION. ON VERIFICATION OF BOOKS OF ACCOUNT PRODUCED AND VOUCHERS SEPARATELY, IT WAS FOUN D THAT MAJORITY OF THE EXPENDITURE CLAIMED UNDER THE HEADS HA MALI, SALARIES, RENTS, MISC., AND SHOP EXPENDITURE WERE NOT SUPPORTED BY PROPER VOUCHERS. MOST OF THE EXPENDITURE U NDER THESE HEADS WERE SUPPORTED BY SELF-MADE VOUCHERS WHIC H ARE NOT AMENABLE FOR VERIFICATION WITH REFERENCE TO THE EXP ENDITURE BOOKED IN THE PROFIT & LOSS A/C. 2.2. WHEN QUESTIONED ABOUT THE AUTHENTICITY AND GENUINENESS OF THE EXPENSES DEBITED IN THE PROFIT & LO SS A/C, IT WAS EXPLAINED BY THE LD. COUNSEL FOR THE ASSESSEE THAT IN THIS LINE OF BUSINESS MAINTENANCE OF BILLS/VOUCHERS I S VERY DIFFICULT AS THE BUSINESS IS DONE AT PEAK HOURS. IT IS ALSO STATED BY HIM THAT THE ASSESSEE IS UNABLE TO MAINTAIN EACH AND SINGLE VOUCHER FOR EXPENDITURE DEBITED TO THE PROFIT & LOSS A/C, AS THEY WERE SUPPOSED TO BE MAINTAINED BY DAILY LABOURERS . HOWEVER, IT IS CONTENDED THAT ALL THE EXPENDITURE DEBITE D TO THE PROFIT & LOSS A/C WERE ACTUALLY INCURRED AND WERE REA SONABLE WITH REFERENCE TO THE QUANTUM OF BUSINESS DONE. ITA NO. 429/HYD/2018 :- 3 -: 2.3. SINCE THIS IS A TAX AUDIT CASE AND THE ASSESSEE WA S UNABLE TO PRODUCE MOST OF THE VOUCHERS IN PROPER FORMA T AS CALLED FOR DURING THE COURSE OF ASSESSMENT, THE AO O BSERVED THAT THE SAID EXPENDITURE CANNOT BE TREATED AS TRUE AND CORRECT AS THE VOUCHERS MAINTAINED FOR THE ABOVE EXPENDITURE CO ULD NOT BE PRODUCED OR DID NOT CONTAIN ALL THE DETAILS OF EXPENDITURE. FURTHER, THEY ARE NOT AMENABLE FOR VERIFI CATION AND HENCE, THE GENUINENESS AND REASONABLENESS OF EXPENDITURE CLAIMED BY THE ASSESSEE CANNOT BE SATISFACTO RILY ESTABLISHED AND THEREBY THE TRADING RESULTS SHOWN BY THE ASSESSEE CANNOT BE RELIED UPON. 2.4. IN VIEW OF THE DEFICIENCIES NOTICED IN MAINTENANC E OF BOOKS OF ACCOUNT, THE AO REJECTED THE BOOKS OF ACCOUN T MAINTAINED BY THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145(3) AND ESTIMATED THE NET PROFIT @5% OF THE COST OF STOCK PUT FOR SALE FOR THE YEAR UNDER CONSIDERATION, F OLLOWING THE DECISION OF HONBLE HIGH COURT OF HYDERABAD IN THE CASE OF CIT VS. MEKALA BALREDDY IN ITTA NO. 28 & 29/2013, D ATED 30-07-2013. 2.5. AFTER VERIFICATION OF THE RECORDS AND INFORMATION FURNISHED BY THE ASSESSEE, THE AO NOTICED THAT THE ASSES SEE HAD ADMITTED INCOME AT RS. 2,59,056/- TOWARDS ELECTRICA L BUSINESS DURING THE FY 2013-14 RELEVANT FOR AY 2014- 15. HE FURTHER NOTICED THAT IN THE P&L A/C FOR THE YEAR ENDING 31 ST MARCH, 2014, ASSESSEE CLAIMED EXPENDITURE ON VARIOU S HEAD, NAMELY, SALARIES, SHOP RENT TRANSPORT ETC. WHEN ASKED TO ITA NO. 429/HYD/2018 :- 4 -: FURNISH DETAILS FOR THE SAME ALONG WITH SUPPORTING EVID ENCES, THE AR OF THE ASSESSEE FURNISHED THE EVIDENCES IN SUPP ORT OF THE CLAIM. ON EXAMINATION OF THE SAME, THE AO HELD THAT S OME OF THE EXPENSES WERE SUPPORTED BY VOUCHERS WHICH ARE NOT SUSCEPTIBLE FOR VERIFICATION. WHEN, HE PROPOSED TO MAK E A ROUND SUM ADDITION OF RS. 30,000/- TOWARDS DISALLOWA NCE OF EXPENSES CLAIMED, THE AR AGREED FOR THE SAME, HENCE, ADDITION OF RS. 30,000/- WAS MADE. 2.6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO PARTLY ALLOWED THE APPEAL OF ASSESSEE. 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE U S RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE APPELLATE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-7, HYDERABAD IS ERRONEOUS AND BAD BOTH, O N FACTS AND ON IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN N OT DECLARING THE ASSESSMENT ORDER AS VOID AND INVALID AS SAME IS MADE WITHOUT PROPER JURISDICTION. HE OUGHT TO HAVE CONSIDERED THE FACT THAT, THE SCRUTINY IS LIMITED TO THE ASPEC TS AUTHORISED BY CASS AND WHEREAS, THE LD. ASSESSING OFFICER HAS SCRUTINISED THE ISSUES NOT AUTHORISED BY SUCH CASS ORDER AND THEREFORE THE ASSESSMENT ORDER TO THE EXTENT OF UNA UTHORISED ISSUES IS INVALID AND VOID AS THE SAME IS VIOLATIVE OF THE JURISDICTION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN N OT TO DECLARING IN THE ASSESSMENT ORDER AS UNSUSTAINABLE, INVALID AND VOID AS THE SAME IS MADE IN CONTRAVENTION AND V IOLATION OF BINDING CIRCULAR OF CBDT IN INSTRUCTION NO.7/2014 DT.26.09.2014. HE OUGHT TO HAVE CONSIDERED THE FACT THAT, THE ITA NO. 429/HYD/2018 :- 5 -: CBDT HAS DIRECTED THAT THE SCOPE OF ENQUIRY BY THE ASSESSING OFFICER SHOULD BE LIMITED TO VERIFICATION OF THE AS PECTS STATED IN THE LIMITED SCRUTINY ORDER AND THE LD. ASSESSING OF FICER HAS TRAVELLED BEYOND THE SCOPE STATED IN THE CASS WITHO UT THE APPROVAL OF PR. COMMISSIONER OF INCOME TAX IN WRITI NG. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN S USTAINING THE ASSESSMENT ORDER REJECTING THE BOOKS OF ACCOUNT S MAINTAINED BY THE APPELLANT' AND RESORTING TO ESTIM ATION OF INCOME WITHOUT PIN POINTING THE DEFECTS IN THE MAIN TENANCE OF SUCH BOOKS OF ACCOUNTS. HE OUGHT TO HAVE CONSIDERED THE FACT THAT, THE WEAKNESS IN MAINTENANCE OF FEW EXPENDITUR E VOUCHERS WILL NOT MAKE THE BOOKS OF ACCOUNTS LIABLE FOR REJECTION WITHOUT EXPLAINING HOW SUCH BOOKS OF ACCOUNTS COULD NOT BE RELIED UPON FOR THE COMPUTATION OF CORRECT TAXABLE INCOME. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN E STIMATING THE INCOME AT A RATE WHICH IS NOT PRACTICABLE AND A CHIEVABLE IN THE LINE OF BUSINESS OF THE APPELLANT. HE OUGHT TO HAVE CONSIDERED THE FACT THAT, THE PECULIAR NATURE OF TH E BUSINESS OF THE APPELLANT AND ADDITIONAL STATUTORY LEVIES IMPOS ED HAVE TO BE TAKEN IN TO CONSIDERATION IN ARRIVING AT REASONA BLE PROFIT RATE FOR ESTIMATION AND THE LD. COMMISSIONER OF INCOME T AX FURTHER ERRED IN NOT CONSIDERING THAT THE RATE OF PROFIT CA NNOT BE UNIFORM FOR ALL THE ASSESSEES IN THE LINE OF BUSINESS WITH OUT CONSIDERING THE PECULIAR SITUATIONS APPLICABLE TO E ACH ASSESSEE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN A PPROVING THE DISALLOWANCE @30,000/- MADE ON ADHOC BASIS IN A N ARBITRARY MANNER TO THE INCOME DECLARED UNDER THE E LECTRICAL BUSINESS ALLEGING THAT CERTAIN EXPENDITURE IS EVIDE NCED BY SELF MADE VOUCHERS. HE OUGHT TO HAVE CONSIDERED THE FACT THAT THE LD. ASSESSING OFFICER HAD FAILED TO IDENTIFY THE HE ADS OF EXPENDITURE WHICH WERE CONSIDERED BY HIM FOR SUCH L UMP SUM ADHOC DISALLOWANCE AND HOW HE HAS ARRIVED AT SUCH A N AMOUNT FOR DISALLOWANCE. INSPITE OF THE FACT THAT, SUCH VERIFICATION OF ELECTRICITY ACCOUNTS WERE NOT AUTHO RIZED FOR SCRUTINY UNDER CASS. 7. SUCH OTHER GROUND/GROUNDS THAT MAY BE URGED AT T HE TIME OF THE HEARING OF THE APPEAL. ITA NO. 429/HYD/2018 :- 6 -: 4. LD.AR SUBMITTED THAT THE CASE OF ASSESSEE WAS SELEC TED FOR SCRUTINY TO VERIFY THE BANK DEPOSITS WHETHER THE DEP OSITS ARE MORE THAN THE TURNOVER. THE ASSESSING OFFICER HAS VERIFIED THE CASH DEPOSITS AND TURNOVER AND FOUND CORRECT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BEYOND TH E SCOPE OF SCRUTINY WITHOUT ANY APPROVAL FROM PR.CIT. WIDENIN G THE SCOPE OF ASSESSMENT IS AGAINST THE CBDT DIRECTIVES. H E PRAYED THAT ASSESSMENT MAY BE QUASHED. 5. ON THE OTHER HAND, LD. DR SUBMITTED THAT ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT BY ESTIMATING THE REVENUE AS THE ASSESSEE FAILED TO SUBMIT PROPER BILLS AND DOCUMENTS. THE ASSESSING OFFICER HAS NOT VIOLATED ANY PROCEDURE AND HE BROUGHT TO OUR NOTICE THE FINDINGS OF LD.CIT(A) VIS--VIS THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER BEFORE THE CIT(A). 6. CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD. THE ASSESSMENT WAS SELECTED TO VERIFY THE BANK DEPOSI TS AND TURNOVER OF THE ASSESSEE WHETHER THEY MATCH. AS THE ASSE SSEE IS IN THE BUSINESS OF PURCHASE AND SALE OF LIQUOR AN D ELECTRICALS, IT IS A FACT THAT ASSESSEE MAY NOT BE ABLE TO MAINTAIN THE SALE BILLS AS THE SALES ARE MOSTLY ON ACRO SS THE COUNTER. BUT THE PURCHASES ARE FROM THE REGISTERED SOUR CE, MOSTLY FROM GOVERNMENT AGENCIES. IT IS NOT DIFFICULT TO DETERMINE THE ACTUAL SALES. WE NOTICE THAT ASSESSING OFFICER HAS VERIFIED THE EXPENSES ETC., WHICH IS NOT THE MANDATE OF LIMITED SCRUTINY. THE CBDT DIRECTIVES ARE BINDING ON TH E ITA NO. 429/HYD/2018 :- 7 -: ASSESSING OFFICER AND IN CASE, ASSESSING OFFICER FI NDS THAT THE ASSESSMENT HAS TO BE MADE ON EXTENSIVE BASIS DUE TO TH E REASON THAT THERE ARE INCIDENCES OF TAX EVASION FOUND. ASSESSING OFFICER CAN EXTEND THE ASSESSMENT BY TAKING DUE PERMISSION FROM CIT/PR.CIT. IN THIS CASE, THERE IS N O ISSUE OF ANY TAX EVASION AND THE ASSESSING OFFICER SUO MOTTO DID THE EXTENSIVE ASSESSMENT EVEN THOUGH THE MANDATE WAS TO M AKE LIMITED SCRUTINY. 6.1. CONSIDERING THE FACTS OF THE CASE, THE ASSESSEE C OULD NOT SUBMIT THE SALES BILLS DUE TO THE NATURE OF BUSINESS AND ASSESSING OFFICER HAS NOT FOUND ANY DISCREPANCY IN T HE BANK DEPOSITS AND TURNOVER OF THE ASSESSEE. WE ARE COMING ACROSS SO MANY CASES OF WINE BUSINESS, IN WHICH ASSESSEES WERE NOT ABLE TO SUBMIT PROPER VOUCHERS DUE TO THE NATURE OF BU SINESS AND MOSTLY ESTIMATED @3%. THE CASE BEFORE US ALSO FAL LS IN THE SIMILAR CATEGORY AND ASSESSEE WAS NOT ABLE TO MAINTAIN PROPER RECORDS AND SHOWN PROFIT @2%. FOR THE SAKE OF JUDICIA L PRECEDENT, WE ARE INTENDED TO PROCEED WITH THE ESTIMATION BUT THE ISSUE BEFORE US IS NOT ON REJECTION OF BOOKS OR ES TIMATION OF INCOME. BEFORE US, WHETHER LIMITED SCRUTINY MANDATE C AN BE EXTENDED. AS PER THE CBDT DIRECTIVE, ASSESSING OFFIC ER CANNOT DO SO WITHOUT FOLLOWING PROPER PROCEDURE. IN THE GIVEN CASE, ASSESSING OFFICER HAS MADE EXTENSIVE ASSESSMENT WIT HOUT MANDATE. THEREFORE, WE NEED TO RESTRICT OURSELVES TO AD DRESS THIS ISSUE. HOWEVER, WE DIRECT THE ASSESSING OFFICER TO ACCEPT THE BOOKS OF ACCOUNT SINCE HE HAS NOT FOUND ANY DISCRE PANCIES IN VERIFICATION OF DEPOSITS AND TURNOVER AS PER LIMITED MANDATE. ITA NO. 429/HYD/2018 :- 8 -: EVEN IN CASE, ASSESSING OFFICER FOUND DISCREPANCY, HE COULD HAVE INVOKED SECTION 68. THEREFORE, THE GROUND RAISED BY ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD APRIL, 2019 SD/- SD/- (P. MADHAVI DEVI) (S. RIF AUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT M EMBER HYDERABAD, DATED 3 RD APRIL, 2019 TNMM ITA NO. 429/HYD/2018 :- 9 -: COPY TO : 1.GARINE CHANDRAMOULI, KHAMMAM. C/O. M. CHANDRAMOULESWARA RAO, CHARTERED ACCOUNTNAT , FLAT NO. C-3, SKYLARK APARTMENT, BASHEERBAGH, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, KHAMMAM. 3. CIT(APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.