Ravinder Reddy Mandala, Warangal, Hyderabad V. ITO, Ward-1, Warangal, Warangal

ITA 476/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6072 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 13-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: D SATYANARAYANA
• Keywords: Income from undisclosed sources; Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 476/HYD/2016 ASSESSMENT YEAR: 2009-10 SRI RAVINDER REDDY MANDALA, WARANGAL [PAN: APEPM4340L] VS INCOME TAX OFFICER, WARD-1, WARANGAL (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI D. SATYANARAYANA, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 07-03-2017 DATE OF PRONOUNCEMENT : 10-03-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD D ATED 13-01-2016. THIS APPEAL WAS FILED WITH A DELAY OF THREE DAYS. IT WAS SUBMITTED THAT WHEN THE APPEAL WAS PREPARED ON 31-03 -2016, THE APPEAL FEE COULD NOT BE PAID ON THAT DATE AND NEXT W ORKING DAY I.E., 01-04-2016 HAPPENED TO BE A BANK HOLIDAY AND TH E APPEAL FEE COULD NOT BE REMITTED ON THAT DAY. 02-04-2016 AND 03-04 -2016 BEING PUBLIC HOLIDAYS, THE APPEAL COULD BE FILED ON LY ON 04-04-2016. THUS, THERE WAS A DELAY OF THREE DAYS. CONSIDERING THE PRAYER AND OBJECTIONS OF THE LD.DR, THE THREE DAYS D ELAY IS CONDONED AND APPEAL IS ADMITTED. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAIL TRADE IN LIQUOR. HE FILED RETURN OF INCOME OF RS. 3, 20,180/-. THE I.T.A. NO. 476/HYD/2016 SRI RAVINDER REDDY MANDALA :- 2 - : ASSESSING OFFICER (AO) HAS EXAMINED ASSESSEES TRANS ACTIONS AND FOUND THAT ASSESSEE DID NOT COMPLY WITH THE DIRECTION FO R PRODUCTION OF BOOKS OF ACCOUNT, THEREFORE, INVOKED THE ITAT ORDER IN ANOTHER CASE AND ESTIMATED THE PROFIT AT 25% ON THE PU RCHASES AND INCOME WAS ESTIMATED AT RS. 5,50,715/-. IN ADDITIO N TO THAT, AO ALSO FOUND THAT ASSESSEE IS HAVING AN SB A/C WITH ANDHRA BANK, FATIMA NAGAR BRANCH. ON BEING ENQUIRED, ASSE SSEE ADMITTED THAT THE TRANSACTIONS IN THIS BANK ACCOUNT ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT MAINTAINED FOR THE BU SINESS CONCERN, AS HE WAS OF THE OPINION THAT PERSONAL TRANS ACTIONS NEED NOT BE REFLECTED. SINCE HE HAS FURNISHED THE BANK AC COUNT COPY, AO WAS OF THE OPINION THAT THERE ARE DEPOSITS IN THE BAN K ACCOUNT WHICH REQUIRES EXAMINATION. ASSESSEE SUBMITTED THAT THIS ACCOUNT WAS MAINTAINED TILL THE LICENSE FEE WAS PAID ON 16-06 -2008 AND HAD THIS INFORMATION BEING GIVEN TO THE ACCOUNTANT, HE WOULD HAVE DEBITED THE BANK ACCOUNT RATHER THAN THE CASH ACCOUNT. IT WAS FURTHER SUBMITTED THAT HE HAS WITHDRAWN THE CASH FROM SB A/C ON 13-06-2008 AND PAID LICENSE FEE ON 16-06-2008. AO HOWEVER, NOTICED THAT THERE ARE CREDITS TO THE TUNE OF RS. 18,30, 500/- IN THE BANK ACCOUNT DURING THE YEAR AND SINCE ASSESSEE HAS N OT DISCLOSED HIS BANK ACCOUNT OR EXPLAINED THE SOURCE OF CASH DEP OSITS, THE ENTIRE AMOUNT WAS TREATED AS UNACCOUNTED INCOME AND WAS BROUGHT TO TAX. 3. BEFORE THE LD.CIT(A), ASSESSEE SUBMITTED THAT THE TRIBU NAL IN THE CASE OF KANAKADURGA WINES IN ITA NO. 591/HYD/201 1, DT. 28- 07-2011 HAS ESTIMATED THE PROFIT AT 3% ON STOCKS PUT TO SALE. HOWEVER, LD.CIT(A) FOLLOWING THE CO-ORDINATE BENCH DE CISION IN THE CASE OF M/S. AMARAVATHI WINE SHOP IN ITA NO. 1196/HY D/2011, I.T.A. NO. 476/HYD/2016 SRI RAVINDER REDDY MANDALA :- 3 - : DIRECTED THE AO TO ESTIMATE THE NET PROFIT AT 5% ON COST OF STOCK PUT TO SALE SUBJECT TO ASSESSED INCOME BEING NOT LESS TH AN THE RETURNED INCOME. ASSESSEE IS AGGRIEVED ON THE ABOVE DIRECTION. WITH REFERENCE TO THE DEPOSITS IN THE BANK ACCOUNT, AFTER CONSIDERING ASSESSEES SUBMISSIONS THAT THERE ARE WITH DRAWALS IN THE EARLIER YEAR TO AN EXTENT OF RS. 8 LAKHS (DRAWN ON 22-03-2008) AND THE PAYMENTS TO AP BEVERAGE CORPORATION ARE FULLY RECORDED IN THE BOOKS OF ACCOUNT, THE LD.CIT(A) GAVE A FINDING THA T THE SEQUENCE OF TRANSACTIONS IS THAT DEPOSITS WERE FOLLOWE D BY WITHDRAWALS AND NOT WITHDRAWALS BY THE DEPOSITS. THER EFORE, THE ENTIRE CASH DEPOSITS MADE IN THE BANK ACCOUNT REPRESEN TS THE SUPPRESSED INCOME OF THE APPELLANT. THE ADDITION WAS ACCORDINGLY CONFIRMED. ASSESSEE IS ALSO AGGRIEVED ON THE ABOVE CONFIRMATION OF THE AMOUNT. 4. IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT ASSESSE E IS IN THE COMPETITIVE BUSINESS OF WINE RETAIL SALES AND PROFI T MARGINS ARE NOT HIGH. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS OFFE RED ALMOST 3% ON THE SALES WHICH FACT WAS ALSO ACCEPTED BY THE LD.CIT(A). IT WAS SUBMITTED THAT IN EARLIER YEARS, ASSE SSEE WAS PAYING LICENSE FEE (EXCISE RENTAL) AT AROUND 9.5 TO 9 .9% WHEREAS DURING THE YEAR, ASSESSEE HAS PAID 11% OF EXCISE REN TAL. THEREFORE, IT IS REASONABLE IF THE BOOKS OF ACCOUNT WERE ACCEPTE D OR THE ESTIMATION IS MADE AT 3%, AS REQUESTED BY ASSESSEE BEF ORE THE CIT(A). WITH REFERENCE TO THE CASH DEPOSITS IN THE BANK ACCOUNT, IT WAS SUBMITTED THAT ASSESSEE MADE A REQUEST BEFORE THE CI T(A) THAT ONLY PEAK CASH CREDIT CAN BE MADE AS AN INCOME BUT NO T THE ENTIRE AMOUNT, AS THERE ARE WITHDRAWALS TO JUSTIFY THE DEPO SITS. ASSESSEE HAS FURNISHED THE PEAK WORKING AS UNDER: I.T.A. NO. 476/HYD/2016 SRI RAVINDER REDDY MANDALA :- 4 - : (ALL AMOUNTS ARE IN RUPEES UNLESS OTHERWISE STATED) DATE OP.BALANCE DEPOSIT WITHDRAWAL CL.BALANCE REMARK S 01 - 04 - 2008 -- -- -- 692 0 4 - 04 - 2008 692 2,00,000 -- 2,00,692 09 - 04 - 2008 2,00,692 2,00,000 -- 4,00,692 02 - 05 - 2008 4,00,692 1,00,500 4,00,000 1,01,192 07 - 05 - 2008 1,01,192 -- 20,000 81,192 08 - 05 - 2009 81,192 3,00,000 -- 3,81,192 09 - 05 - 2009 3,81,1 92 2,00,000 -- 5,81,192 PEAK BALANCE 28 - 05 - 2008 5,81,192 -- 1,00,000 4,81,192 13 - 06 - 2008 4,81,192 -- 5,00,000 (18,808) 07 - 07 - 2008 (18,808) 2,00,000 -- 1,81,192 15 - 07 - 2008 1,81,192 2,50,000 -- 4,31,192 24 - 07 - 2008 4,31,192 -- 4,00,000 31,192 29 - 07 - 2008 31,192 -- 50,000 (18,808) 06 - 08 - 2008 (18,808) 3,00,000 -- 2,81,192 13 - 08 - 2008 2,81,192 -- 15,000 2,66,192 27 - 08 - 2008 2,66,192 -- 15,000 2,51,192 02 - 09 - 2008 2,51,192 -- 50,000 2,01,192 11 - 09 - 2008 2,01,192 -- 2,00,000 1,192 19 - 12 - 2008 1,192 60,000 -- 61,192 5. LD.DR, HOWEVER, RELIED ON THE ORDERS OF THE AO AND CIT(A) AND SUBMITTED THAT ASSESSEE HAS MAINTAINED AN UNACCOUNTED BANK ACCOUNT, THE TRANSACTIONS OF WHICH ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT THERE IS ENOUGH EVIDENCE TH AT ASSESSEE HAS EARNED INCOMES OUTSIDE THE BOOKS OF ACC OUNT. IT WAS ALSO FURTHER SUBMITTED THAT SINCE BOOKS OF ACCOUNT WERE N OT SUBMITTED FOR VERIFICATION, CIT(A) ORDER OF ESTIMATION A T 5% BASED ON THE ITAT ORDER IS TO BE APPROVED. WITH REFERENCE TO CASH DEPOSITS, LD.DR RELIED ON THE ORDER OF THE CIT(A). 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DETAILS PLACED ON RECORD. AS FAR AS THE DIRECTION OF THE CIT(A) IN ESTIMATING THE INCOME AT 5% OF THE STOCK PUT TO SALE, THIS IS IN TUNE WITH THE ORDER OF THE ITAT IN THE CASE OF M/S. AMARAVA THI WINE I.T.A. NO. 476/HYD/2016 SRI RAVINDER REDDY MANDALA :- 5 - : SHOP IN ITA NO. 1196/HYD/2011. I HAVE ALSO EXAMIN ED THE EARLIER YEARS STATEMENTS OF ACCOUNTS FURNISHED ON THE CONTENTION THAT ASSESSEE HAS PAID MORE LICENSE FEE DURING THE YEAR, THEREFORE, PROFIT CANNOT BE ESTIMATED AT 5%. AS SEEN FROM THE EARLIER YE ARS STATEMENTS OF ACCOUNT, IT IS TRUE THAT THE EXCISE RENTAL WAS AT 9.68% OF THE SALES FOR THE YEAR ENDING 31-03-2007 AN D AT 9.10% FOR 31-03-2008, WHEREAS FOR THE IMPUGNED ASSESSMENT YEAR, THE EXCISE RENTAL COMES TO 11%. HOWEVER, AS SEEN FROM THE TRADING ACCOUNTS, THE GROSS PROFIT FOR THE YEAR ENDING 31-03-2007 WAS AT 15.60% FOR THE YEAR ENDING 31-03-2008, THE GROSS PROFIT WAS AT 14. 47%. IN THE IMPUGNED YEAR, THE GROSS PROFIT WORKS OUT TO 18%. THI S INDICATES THAT THE FACTOR OF EXCISE RENTAL HAS BEEN COMPENSATED BY THE HIGHER SALE PRICE AS CAN BE SEEN FROM THE TRADING RESULTS. T HUS, ARGUMENT ON PAYMENT OF EXCISE RENTAL AT HIGHER RATE DOES NOT STA ND. AS SEEN FROM THE ORDER OF THE CIT(A), LD.CIT(A) FOLLOWED THE C O-ORDINATE BENCH DECISION AND I AM OF THE VIEW THAT ASSESSEE HAS NOT MADE OUT ANY CASE TO DIFFER FROM THE ESTIMATION OF PROFIT AT 5% ON COST OF STOCK PUT TO SALE, SUBJECT TO INCOME FROM THE BUSINESS IS NOT LESS THAN THE PROFIT EARNED AS PER THE P&L A/C. 7. WITH REFERENCE TO THE CASH DEPOSITS IN THE BANK ACCO UNT, IT WAS THE CONTENTION THAT ASSESSEE HAS WITHDRAWN AN AMOUNT OF RS.8 LAKHS ON 22-03-2008, WHICH WAS AVAILABLE FOR D EPOSIT SUBSEQUENTLY MADE. ASSESSEE ALSO FURNISHED A PEAK W ORKING TO JUSTIFY THE TOTAL ADDITION IS NOT WARRANTED. AS SEEN FROM THE BANK ACCOUNT, THERE ARE DEPOSITS AND WITHDRAWALS WHICH MAY BE PERTAINING TO THE BUSINESS. BUT ASSESSEE CHOSE NOT TO REFLECT THE TRANSACTIONS IN THE BOOKS OF ACCOUNT OR IN THE STATEME NT OF ACCOUNTS, TILL IT WAS POINTED OUT BY THE AO IN THE ASSESSM ENT I.T.A. NO. 476/HYD/2016 SRI RAVINDER REDDY MANDALA :- 6 - : PROCEDURE. FURTHER, IT WAS NOTICED THAT THE BALANCE SHEE T AS ON 31-03-2008 INDICATES THAT ASSESSEES CAPITAL WAS ONLY TO THE EXTENT OF RS. 4,31,041/-. WHAT HAPPENED TO RS. 8 LAKHS WITH DRAWN AS ON 22-03-2008 WAS NOT EXPLAINED. IF IT IS A MONEY DEPOS ITED EARLIER AND WITHDRAWN AND UTILISED IN THE BUSINESS THE SAME WO ULD NOT BE AVAILABLE FOR FURTHER DEPOSITS. SINCE THE SAME WAS NO T SHOWN IN THE BALANCE SHEET AS ON 31-03-2008, THE CREDIT FOR THE A MOUNT OF RS. 8 LAKHS AS AVAILABLE ON 31-03-2008 CANNOT BE ACC EPTED, EVEN THOUGH IT IS A FACT THAT HE WITHDREW THE AMOUNT ON THAT DATE. SINCE ASSESSEE HAS CHOSEN NOT TO SHOW THESE TRANSACTIONS IN THE BOOKS OF ACCOUNT AND HAS NOT FURNISHED ANY EVIDENCE THAT THE WITHDRAWN CASH WAS AVAILABLE ON THAT DAY, IT IS NOT POS SIBLE TO GIVE CREDIT FOR THE AMOUNT. HOWEVER, SINCE THERE ARE DEPOSI TS AND WITHDRAWALS DURING THE YEAR, THE CONTENTION OF PEAK CRE DIT CAN BE ACCEPTED AS THERE ARE NO OTHER INVESTMENTS OR EXPENDI TURES WHICH ARE SUBJECTED TO VERIFICATION BY THE AO. IN VIEW OF THAT, AO IS DIRECTED TO VERIFY THE WORKING PROVIDED BY ASSESSEE A ND MAKE ADDITION ACCORDINGLY, CONSIDERING THE TRANSACTIONS ONL Y FOR THE YEAR UNDER CONSIDERATION. IF THE WORKING PROVIDED IS ACCE PTABLE THEN AO IS DIRECTED TO ACCEPT THE PEAK AT RS. 5,81,192/-. OTHER WISE HE IS DIRECTED TO REWORK THE SAME AFTER GIVING DUE OPPORTUNI TY TO ASSESSEE. WITH THESE OBSERVATIONS, THE GROUNDS ARE CON SIDERED PARTLY ALLOWED. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 10 TH MARCH, 2017 TNMM I.T.A. NO. 476/HYD/2016 SRI RAVINDER REDDY MANDALA :- 7 - : COPY TO : 1. SRI RAVINDER REDDY MANDALA, WARANGAL. C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE , 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, WARANGAL. 3. COMMISSIONER OF INCOME TAX(APPEALS)-3, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.