Tammanagiri Kiran Kumar, Srikakulam V. The ITO, Srikakulam

ITA 479/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8970 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 3 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: 02-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Unexplained investment; Search and seizure; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI D. MANMOHAN, HONBLE VICE-PRESIDENT ITA NO. 479/VIZ/2016 (ASST. YEAR : 2011-12) TAMMANAGIRI KIRAN KUMAR, PROP. KANAKA DURGA WINES, RONANKI APPALASWAMY STREET, GOPINADHAPURAM, TEKKALI, SRIKAKULAM. VS. ITO, WARD-2, SRIKAKULAM. PAN NO. ADIPT 5365 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI - ADVOCATE. DEPARTMENT BY : SHRI M.K. SETHI SR. DR DATE OF HEARING : 05/05/2017. 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 AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF IMFL SUPPLIED BY THE A.P. BEVERAGES CORPORATION. THE BUSINESS WAS CARRIED ON IN THE NAME AND STYLE OF KANAKA DURGA WINES. DURING THE FINANCIAL YEAR 2010-11, THE ASSESSEE PURCHASED IMFL PRODUCTS WORTH 1,76,79,175/- AND DECLARED SALES OF 1,98,78,145/-. AGAINST THE SALES, THE ASSESSEE ADMITTED NET PROFIT OF 6,41,974/- WHICH GIVES THE NET PROFIT MARGIN OF 3.22% ON THE SALES. SINCE ASSESSEE HAS NOT 2 ITA NO. 479/VIZ/2016 (TAMMANAGIRI KIRAN KUMAR) MAINTAINED BOOKS OF ACCOUNT, ASSESSING OFFICER REJECTED THE BOOK RESULTS AND ESTIMATED THE NET PROFIT AT 20% OF THE PURCHASE PRICE. HE OBSERVED THAT AS PER THE MEDIA REPORTS, ACB INVESTIGATED INTO THE LIQUOR TRADE, WHEREIN IT WAS FOUND THAT IN THIS LINE OF BUSINESS, THE TRADERS WERE SELLING THE IMFL PRODUCTS OVER AND ABOVE THE MRP FIXED. 3. ON THE OTHER HAND, CASE OF THE ASSESSEE WAS THAT DUE TO HIKE IN LICENCE FEE, IT IS NOT POSSIBLE TO GET SUCH HIGH RATE OF NET PROFIT. FURTHER IT WAS CONTENDED THAT BASED ON THE MEDIA REPORTS, THE ASSESSING OFFICER SHOULD NOT ESTIMATED THE INCOME, SINCE THERE WAS NO SPECIFIC RAID OR NO SPECIFIC MATERIAL AVAILABLE IN THE ASSESSEES CASE TO SHOW THAT SALES WERE MADE AT A PRICE OVER AND ABOVE THE MRP FIXED BY THE GOVERNMENT. ACCORDINGLY, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), WHO IN TURN ESTIMATED THE INCOME AT 10% OF THE PURCHASE PRICE. FURTHER AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING, BOTH THE PARTIES ADMITTED THAT ON IDENTICAL FACTS AND CIRCUMSTANCES, THE ITAT VISAKHAPATNAM HAS BEEN CONSISTENTLY HOLDING THAT ESTIMATE OF NET PROFIT AT 5% ON PURCHASES, CLEAR OF ALL DEDUCTIONS, WOULD MEET THE ENDS OF JUSTICE. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT, VISAKHAPATNAM (ITA NO. 22/VIZ/2015 & ITA NO. 118/VIZ/2015), I HOLD THAT THE ESTIMATE OF PROFIT AT 5% ON PURCHASES WOULD MEET THE ENDS OF JUSTICE. THE NET PROFIT ESTIMATE WOULD BE CLEAR OF ALL DEDUCTIONS. ACCORDINGLY, GROUND NOS. 1 TO 3 ARE DISPOSED OF. 3 ITA NO. 479/VIZ/2016 (TAMMANAGIRI KIRAN KUMAR) 5 . VIDE GROUND NOS. 4 & 5, THE ASSESSEE CONTENDS THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS TOWARDS UNEXPLAINED UNSECURED LOANS AND UNEXPLAINED INVESTMENT. 6. LEARNED COUNSEL FOR THE ASSESSEE STRONGLY RELIED UPON THE STATEMENT OF FACTS AND GROUND OF APPEAL FILED BEFORE THE LD. CIT(A) AS WELL AS THE GROUNDS URGED BEFORE THE TRIBUNAL. 7. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE LD. CIT(A). 8. I HAVE CAREFULLY CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE RECORD. 9. IT MAY BE NOTICED THAT THE ASSESSING OFFICER MADE AN ADDITION OF 4,95,000/- REFERABLE TO UNSECURED LOANS WHICH WAS NOT EXPLAINED. IN OTHER WORDS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FAILED TO DISCHARGE HIS ONUS OF PROVING THE IDENTITY OR CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE LOAN TRANSACTIONS. 10 . BEFORE THE LD. CIT(A), ASSESSEE FILED ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION LETTERS WHICH, WAS IN TURN, FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS. THEREUPON, THE REPORT OF THE ASSESSING OFFICER WAS ALSO TAKEN ON RECORD, BUT NOTICED THAT WITH REGARD TO FEW CASH CREDITS, THE ASSESSEE WAS ABLE TO SUBSTANTIATE THE CREDITWORTHINESS AND THE BALANCE TO THE TUNE OF 1,18,800/- WAS CONFIRMED. 4 ITA NO. 479/VIZ/2016 (TAMMANAGIRI KIRAN KUMAR) 11. SIMILARLY, THE ASSESSING OFFICER MADE AN ADDITION OF 7,93,575/- TOWARDS UNEXPLAINED INVESTMENT REFERABLE TO INITIAL PURCHASE OF STOCK, FIRST LICENCE FEE, BG DEPOSIT, BG COMMISSION. ALL THIS EXPENDITURE WAS INCURRED BEFORE THE COMMENCEMENT OF THE BUSINESS. SINCE ASSESSEE COULD NOT PROVE THE SOURCE AND COULD NOT FURNISH THE DETAILS, THE ASSESSING OFFICER MADE THE ADDITION OF 7,93,575/-. EVEN BEFORE THE LD. CIT(A), THE ASSESSEE COULD NOT FURNISH ANY DETAILS AND THUS THE SAME WAS CONFIRMED. HOWEVER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. 12 . AT THE TIME OF HEARING, NO MATERIAL WHATSOEVER WAS FURNISHED BEFORE THE TRIBUNAL TO CONTRADICT THE FINDINGS OF THE LD. CIT(A). UNDER THESE CIRCUMSTANCES, I REJECT THE GROUND NOS. 4 & 5 OF THE ASSESSEE. VIDE GROUND NO.6, THE ASSESSEE REQUESTED FOR GRANT OF TELESCOPING BENEFIT, BUT EVEN ON THAT COUNT, NO MATERIAL WAS PLACED. THEREFORE, I REJECT GROUND NO.6 ALSO. 13. GROUND NOS. 1 & 7 BEING GENERAL IN NATURE, I HAVE NOT TAKEN UP FOR CONSIDERATION. 14 . IN THE RESULT, AS PRONOUNCED IN THE OPEN COURT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 05 TH MAY, 2017. VR/- 5 ITA NO. 479/VIZ/2016 (TAMMANAGIRI KIRAN KUMAR) COPY TO: 1. THE ASSESSEE TAMMANAGIRI KIRAN KUMAR, PROP. KANAKA DURGA WINES, RONANKI APPALASWAMY STREET, GOPINADHAPURAM, TEKKALI, SRIKAKULAM. 2. THE REVENUE ITO, WARD-2, SRIKAKULAM. 3. THE CIT-2, VISAKHAPATNAM. 4. THE CIT(A)-2, VISAKHAPATNAM. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER