Sri K Kalika Prasad, Hyderabad V. Income-Tax Officer, Ward-1, Hyderabad

ITA 44/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6512 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: T CHAITANYA KUMAR
• Section: 143(3); 131; 144

Judgement Text

ITA NO 44 OF 2014 K KALIKA PRASAD KURNOOL PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI P.MADHAVI DEVI, JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.44/HYD/2014 (ASSESSMENT YEAR: 2009-10) SHRI K.KALIKA PRASAD KURNOOL PAN: AADHK 2396 C VS. INCOME TAX OFFICER WARD-1 ADONI (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI T. CHAITANYA KUMAR FOR REVENUE : SHRI B. KURMI NAIDU, DR DATE OF HEARING : 18.05.2016 DATE OF PRONOUNCEMENT : 31 .05.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10. IN T HIS APPEAL, ASSESSEE IS AGGRIEVED BY THE ORDER OF THE C IT (A) IN CONFIRMING THE ADDITIONS MADE BY THE AO OF RS.25,09 ,862 BY TREATING THE AMOUNT AS PAID BY THE ASSESSEE FOR TR ADE CREDITORS OUT OF ITS UNEXPLAINED INCOME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE (H UF) CARRYING ON BUSINESS OF TRADING IN FERTILIZERS, PESTICIDES A ND SEEDS, FILED ITS RETURN OF INCOME FOR THE A.Y 2009-10 ON 30.09.2009 DECLARING TOTAL INCOME OF RS.2,86,124. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSEE WAS DIRECTED TO FURNISH BOOKS OF ACCOUNTS, BANK A/C, VOUCHERS FOR EXPENSES, NAMES AND ADDRESSES OF SUNDRY CREDITORS ETC. HOWEVER, THERE W AS NO ITA NO 44 OF 2014 K KALIKA PRASAD KURNOOL PAGE 2 OF 5 RESPONSE FROM THE ASSESSEE. IN VIEW OF THE SAME, AO COMPLETED THE ASSESSMENT EX-PARTE U/S 144 OF THE I.T. ACT. HE ISSUED SUMMONS U/S 131 OF THE ACT TO THE ASSESSEE ON 19.12 .11 IN RESPONSE TO WHICH THE ASSESSEE APPEARED AND STATED THAT ALL THE BOOKS OF ACCOUNTS AND STOCK WERE LOST DUE TO HEAVY FLOODS AND THAT THE REMAINING STOCK WAS SOLD TO THE RESPECTIVE COMPANIES. IT WAS ALSO SUBMITTED THAT THE BUSINESS WAS CLOSED AND THE ASSESSEE WAS IN SEVERE FINANCIAL CRISIS. AO THEREFO RE, PERUSED THE BALANCE SHEET ENCLOSED TO THE RETURN OF INCOME AND FOUND THAT THE SUNDRY CREDITORS ARE STATED TO BE OF RS.3,57,88 ,762. IN THE ABSENCE OF BOOKS OF ACCOUNTS AND TAKING THE ASSESSE ES REPLY INTO CONSIDERATION, THE AO TOOK THE CLOSING STOCK AT RS. 3,18,42,149 AND TREATED IT AS SETTLED TOWARDS SUNDRY CREDITORS. HE ALSO SETTLED SUNDRY DEBTORS OF RS.14,36,751 AGAINST THE SUNDRY C REDITORS AND THE BALANCE OF RS.25,09,862 WAS TREATED AS PAID FOR TRADE CREDITORS FROM ASSESSEES UNEXPLAINED INCOME. ACCOR DINGLY, A SUM OF RS.25,09,862 WAS BROUGHT TO TAX. AGGRIEVED, ASSESSEE PREFERRED AN APEAL BEFORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT DURING THE RELEVANT PREVIOUS YEAR, THERE WERE HEAVY RAINS AND FLOODS IN THE TOWN OF ADONI OF KURNOOL DISTRICT DURING WHICH THE ENIRE STOCK AS WELL AS THE BOOKS OF ACCOUNTS OF THE ASSES SEE WERE LOST. HE SUBMITTED THAT THE AO HAS ADOPTED THE FIGURES OF SUNDRY CREDITORS, DEBTORS AND THE CLOSING STOCK AS RETURNE D BY THE ASSESSEE, BUT TREATED THE DIFFERENCE BETWEEN THE SU NDRY CREDITORS AND THE CLOSING STOCK AND SUNDRY DEBTORS, AS PAID B Y THE ASSESSEE FROM OUT OF HIS UNEXPLAINED INCOME, WHICH ACCORDING TO ITA NO 44 OF 2014 K KALIKA PRASAD KURNOOL PAGE 3 OF 5 HIM IS NOT JUSTIFIED. HE SUBMITTED THAT THE ASSESSE E HAD MADE SIMILAR SUBMISSIONS BEFORE THE CIT (A) WHO HAS ALSO NOT PROPERLY APPRECIATED THE CONTENTIONS OF THE ASSESSEE AND HAS CONFIRMED THE ADDITIONS. THUS, ACCORDING TO HIM THE ASSESSMEN T ORDER HAS TO BE SET ASIDE AND THE ADDITIONS DELETED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELI ANCE UPON THE DECISION OF THE TRIBUNAL AT AHMEDABAD IN THE CA SE OF EAGLE SYNTHETICS (P) LTD VS. INCOME TAX OFFICER REPORTED IN (2011) 8 ITR (TRIB) 211 (AHD).IN SUPPORT OF HIS CONTENTIONS. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESS EE FAILED TO PRODUCE EVEN THE PARTIES BEFORE THE AO TO CONFIRM T HAT THE SUNDRY CREDITORS HAVE NOT BEEN PAID BY THE ASSESSEE AND THAT IN THE ABSENCE OF ANY MATERIAL IN SUPPORT OF HIS CONTE NTIONS, THE AO IS JUSTIFIED IN MAKING THE ADDITIONS. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE FACT OF THE LOSS OF THE ST OCK AS WELL AS THE BOOKS OF ACCOUNT OF THE ASSESSEE IN HEAVY FLOODS DU RING THE RELEVANT PERIOD ARE NOT DISPUTED BY THE REVENUE AUT HORITIES. THE FIGURES RETURNED BY THE ASSESSEE IN HIS RETURN OF I NCOME HAVE ALSO BEEN ACCEPTED BY THE AO AND THE CIT (A). THE O NLY DISPUTE IS THAT THE AO HAS PRESUMED THAT AFTER REDUCING THE VA LUE OF THE CLOSING STOCK AND THE SUNDRY DEBTORS FROM THE SUNDR Y CREDITORS, BALANCE HAS BEEN PAID BY THE ASSESSEE FROM HIS UNEX PLAINED INCOME. THIS FINDING OF THE AO AND THE CIT (A) IS C LEARLY NOT SUSTAINABLE WHEN THE DEPARTMENT HAS NOT BROUGHT ON RECORD ANY ITA NO 44 OF 2014 K KALIKA PRASAD KURNOOL PAGE 4 OF 5 MATERIAL TO CONTROVERT THE ASSESSEES CLAIM THAT TH E ENTIRE BOOKS AS WELL AS STOCKS HAVE BEEN LOST IN THE RAINS. THER E IS NOT EVEN A WHISPER OF ALLEGATION IN THE ASSESSMENT ORDER OR TH E ORDER OF THE CIT (A), THAT THE ASSESSEE HAS BEEN INDULGING IN EA RNING OF INCOME OUTSIDE THE BOOKS OF ACCOUNTS. THOUGH THE BO OKS OF ACCOUNTS HAS BEEN LOST, THE FIGURES ADOPTED BY THE AO ARE AS REFLECTED BY THE ASSESSEE. THE COORDINATE BENCH OF AHMEDABAD TRIBUNAL HAS DEALT WITH SIMILAR ISSUE IN THE CASE O F AN ASSESSEE IN SURAT IN SIMILAR SITUATION. THE TRIBUNAL HAS HEL D THAT IN THE ABSENCE OF ANY CONTRARY FINDING AND TAKING INTO CON SIDERATION THE PAST CONDUCT OF THE ASSESSEE AND TOTALITY OF ALL TH E FACTS AND CIRCUMSTANCES, THE CONTENTIONS OF THE ASSESSEE COMP ANY THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE LOST HAS TO B E ACCEPTED AND THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJECTI NG THE EXPLANATION OF ASSESSEE COMPANY WITHOUT POINTING OU T ANY DEFECT IN THE EVIDENCES. IN THE SAID THE CASE, THE ASSESSE E COMPANY HAD FURNISHED ALL THE POSSIBLE MATERIAL INCLUDING BANK STATEMENT AND THE COPIES WHICH CONTAINED MONTHLY QUANTITATIVE DET AILS. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED AND THE TRIBUNAL HAS OBSERVED THAT THE AO HAS NOT REPORTED ANY ADVERSE REPORTING BY THE STATUTORY AUDITORS IN THE AUDITED FINANCIAL STATEMENTS. IN THESE CIRCUMSTANCES, THE TRIBUNAL DE LETED THE ADDITIONS MADE BY THE AO THEREIN. IN THE CASE BEFOR E US ALSO, THE AO HAS NOT BEEN ABLE TO POINT OUT ANY DEFECT IN THE INCOME REPORTED BY THE ASSESSEE. THE BOOKS OF ACCOUNTS ARE ADMITTEDLY LOST AND THE ONLY EVIDENCE FOR ESTIMATION OF INCOME IS THE COMPUTATION OF INCOME FILED BY THE ASSESSEE. THE AO HAS NOT REJECTED THE COMPUTATION MADE BY THE ASSESSEE AND H AS NOT ESTIMATED THE INCOME, BUT HAS ACCEPTED THE FIGURES REPORTED BY ITA NO 44 OF 2014 K KALIKA PRASAD KURNOOL PAGE 5 OF 5 THE ASSESSEE. IN THESE CIRCUMSTANCES, PRESUMING THA T THE ASSESSEE HAS PAID BALANCE OF THE SUNDRY CREDITORS O UT OF THE UNEXPLAINED INCOME IS WITHOUT ANY BASIS. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED AND THE ADDITION MADE BY THE AO IS DELETED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2016. S D/ - S D/ - (S.RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 31 ST MAY, 2016. VNODAN/SPS COPY TO: 1. SHRI T. CHAITANYA KUMAR, FLAT NO.409, METRORESIDENC Y, RAJBHAVAN ROAD, SOMAJIGUDA, HYDERABAD 2. INCOME TAX OFFICER WARD 1, ADONI, KURNOOL DISTT. 3. CIT(A) - IV HYDERABAD 4. CIT III HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER