Nadukuditi Hari Babu, Srikakulam V. THE ITO, Srikakulam

ITA 46/VIZ/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1121 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 27-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Unexplained investment; Corroborative evidences
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS. 46/VIZAG/2015 ASSESSMENT YEAR: 2011-12 SHRI NADUKUDITI HARI BABU VS. THE ITO, WARD 1 SRIKAKULAM SRIKAKULAM (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI G V N HARI, ADV. REVENUE BY: SHRI D. MANOJ KUMAR, SR. DR DATE OF HEARING : 05.03.2015 DATE OF PRONOUNCEMENT : 22.05.2015 ORDER PER J.SUDHAKAR. REDDY : - THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS D IRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2, VISAKHAP ATNAM DATED 23.12.2014 FOR THE A.Y. 2011-12. 2. FACTS IN BRIEF . THE ASSESSEE IS THE PROPRIETOR OF M/S SRI SRINIV ASA WINES AND CARRIES ON THE BUSINESS IN PURCHASE AND SALE OF IND IAN MADE FOREIGN LIQUOR IN SRIKAKULAM DISTRICT. FOR THE AY 2011-12 HE FILED R ETURN OF INCOME DECLARING AN INCOME OF RS.3,75,483/- THROUGH E-FILING ON 17.9.20 11. THE CASE WAS PICKED UP FOR SCRUTINY AND THE AO VIDE HIS ORDER DATED 21.02. 2014 DETERMINED TOTAL INCOME AT RS. 41,94,776/-, INTER-ALIA, MAKING THE FOLLOWIN G ADDITIONS: 1. ESTIMATION OF INCOME OF RS.22,18,470/- @ 20% OF THE STOCK PUT TO SALE; 2. UNEXPLAINED INVESTMENT OF RS. 19,54,134/-; 3. INTEREST ON FDR OF RS. 22,172/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL. 3. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIE F. FURTHER AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GR OUNDS: ITA NO.46/VIZAG/2015 2 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE T O THE FACTS OF THE CASE; 2. THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT; 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(APPEALS ) IS NOT JUSTIFIED IN ESTIMATING THE NET PROFIT @ 10% OF PURCHASE PRICE A S AGAINST NET PROFIT OF 5% OF COST OF GOODS SOLD; 4. THE LD. CIT(APPEALS) IS NOT JUSTIFIED IN UPHOLDING THE ADDITIONS OF RS. 18,00,000/- MADE BY THE AO TOWARDS UNEXPLAINED I NVESTMENT; 5. THE LD. CIT(APPEALS) OUGHT TO HAVE APPRECIATED THAT THE ENTIRE INVESTMENT WAS RECORDED IN THE BOOKS OF ACCOUNT AND HENCE CANNOT BE TERMED AS UNEXPLAINED INVESTMENT. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A) OUGHT TO HAVE GRANTED BENEFIT OF TELESCOPING; 7. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF A PPEAL HEARING. 4. WE HAVE HEARD SHRI G V N HARI, LD. COUNSEL FOR T HE ASSESSEE AND SHRI D. MANOJ KUMAR, LD. DR ON BEHALF OF THE REVENUE. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: 1. THERE ARE THREE ISSUES THAT ARE AGITATED BEFORE U S. THESE ARE : A) ESTIMATION OF INCOME @ 20% OF THE STOCK PUT TO SALE RS.22,18,470/-; B) ADDITION OF UNEXPLAINED INVESTMENT OF RS.19,54,134/ - C) ADDITION OF RS. 22,172/- AS INTEREST ON FDR U/S 69 OF THE ACT, WHEN THE EXPENDITURE IN QUESTION HAS BEEN RECORDED IN TH E BOOKS OF ACCOUNT. 6. AS FAR AS ESTIMATION OF NET PROFIT IS CONCERNED THE INCOME TAX APPELLATE TRIBUNAL IN THE CASE OF T. APPALASWAMY VS. ACIT (IT A NO. 65 & 66/VIZ/2012) ORDER DATED 3.3.2014 AT PARA 3 HELD AS FOLLOWS: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDER S OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF THE LD. AR THAT THE ESTIMATION OF PROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF PROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. DR SUPPORTED THE ORDER OF THE CIT(A). HAVING C ONSIDERED THE SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE VIEW THA T THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT, HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO. 127/HYD./2012 AND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FORE IGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESS EE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ESTIMATE T HE PROFIT FROM THE WINE ITA NO.46/VIZAG/2015 3 BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE AO SHOULD ALSO BE AR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE INCO ME RETURNED. 7. THIS DECISION WAS FOLLOWED IN NUMBER OF CASES IN CLUDING ITA NO. 563/VIZ/2014 IN THE CASE OF U VENKATA NEELADRI RAJU VS. ITO, RAJAHMUNDRY ORDER DATED 26.09.2014. 8. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DIREC T THE AO TO ESTIMATE THE PROFIT FROM IMFL BUSINESS BY ADOPTING THE RATE OF 5% ON THE COST OF SALES. 9. GROUND NOS. 4, 5 AND 6 ARE ON THE ISSUE OF ADDIT ION MADE BY THE AO OF RS.18,00,000/- AND RS.19,54,134/- TOWARDS UNEXPLAIN ED INVESTMENTS. 10. SHRI GVN HARI, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION IN QUESTION WAS MADE U/S 69 OF THE ACT AND AS THE ASSESSEE HAD MAINTAINED REGULAR BOOKS OF ACCOUNTS AND HAD RECORDED THE EX PENDITURE IN ITS BOOKS, NO ADDITION CAN BE MADE U/ 69 OF THE ACT. 11. SRI D.MANOJ KUMAR, LD.SR.D.R. OPPOSED THE CONTE NTIONS OF THE ASSESSEE BY SUBMITTING THAT, THE AO HAS RECORDED THAT THE EX PENDITURE IN QUESTION WAS INCURRED BEFORE THE COMMENCEMENT OF BUSINESS AND T HAT THE SAME WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. HE REFERRED TO THE ORDER OF THE FIRST APPELLATE AUTHORITY AND RELIED ON THE SAME AND SUBMITTED THAT THE ADDITION HAS TO BE SUSTAINED. 12. AFTER HEARING RIVAL CONTENTIONS WE FIND THAT TH E AO AT PAGE 4 PARA 5 HAS RECORDED THAT THE EXPENDITURE IN QUESTION HAS BEEN INCURRED PRIOR TO COMMENCEMENT OF BUSINESS AND HAS NOT RECORDED IN TH E BOOKS OF ACCOUNTS. THE FIRST APPELLATE AUTHORITY HAD AT PARA 5.2 PAGE 5 HE LD AS FOLLOWS. 5.2 DURING THE APPEAL HEARING, THE AR REPRESENTED T HAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.19,54,134/- TOWA RDS UNEXPLAINED INVESTMENT. IT WAS EXPLAINED THAT THE EXPENDITURE W AS INCURRED FROM LOANS BORROWED FROM G.5URESH AND G.NAGARAJU AGGREGATING T O RS.7,98,OOO/-, LOAN BORROWED FROM M.VIVEKA OF RS.7,75,000/- AND CA PITAL CONTRIBUTION TO ITA NO.46/VIZAG/2015 4 THE TUNE OF RS.18,00,00,000/-. THE ASSESSEE HAS NOT FURNISHED SUPPORTING EVIDENCE FOR CAPITAL CONTRIBUTION IN CASH TO THE TU NE OF RS.18,00,000- ON 7.6.2010. THEREFORE, IT WAS CONTENDED THAT THE ADDI TION SHOULD HAVE BEEN RESTRICTED TO THE AMOUNT OF RS.18,00,000/- ONLY AND THAT THE E ADDITION OF RS.19,54,134/- IS NOT JUSTIFIED. I HAVE EXAMINED TH E SUBMISSIONS MADE WITH REFERENCE TO THE DETAILS FILED AND I FIND MERIT IN THE SAME . THE ASSESSEE VIDE LETTER DATED 20.1.2014 HAS EXPLAINED TO THE AO THAT THE LOAN FROM ABOVE PARTIES WERE UTILIZED FOR PART OF THE INITIAL EXP ENDITURE AND BALANCE MET FROM CAPITAL CONTRIBUTIONS. BUT THE ASSESSEE FAILED TO EXPLAIN SOURCE FOR SUCH CAPITAL CONTRIBUTION TO THE TUNE OF RS.18,00,000/- . ACCORDINGLY THE CREDITS TO THE TUNE OF RS.18,00,000/- IS REQUIRED TO BE ASSES SED U/S.68 OF THE ACT. 13. THE FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ADDITION U/S 68 OF THE ACT. THE ASSESSEE HAS NOT LEAD ANY EVIDENCE OR ARGUMENTS OF FACTS. UNDER THE CIRCUMSTANCES WE FIND NO INFIRMITY IN THE ORDER OF THE FIRST APPELLATE AUTHORITY AND WE UPHOLD THE SAME. HENCE GROUND NOS. 4, 5 AND 6 A RE DISMISSED. 14. GROUND NO.7 IS GENERAL IN NATURE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. PRONOUNCED IN THE OPEN COURT ON 22.05.2015 SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:22 ND MAY, 2015 MANGA COPY TO 1 APPELLANT 2 RESPONDENT 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER ASSISTANT REGISTRAR