ITO, Ward-2, Proddatur, Proddatur V. Karnati Venkata Subba Reddy, Kadapa, Kadapa

ITA 490/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6325 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A SITARAMA RAO
• Assessee Lawyers: B SHANTI KUMAR
• Keywords: Business income; Income from undisclosed sources
• Section: 143(3); 68; 145

Judgement Text

ITA NO 490 OF 2016 KARNTI VENKATA SUBBA REDDY KADAP A PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER & SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.490/HYD/2016 (ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER WARD 2 PRODDATUR VS. SRI KARNATI VENKATA SUBBA REDDY, YERRAGUNTLA, KADAPA PAN: AQVPK 7851 J (APPELLANT) (RESPONDENT) FOR R E VENUE : SHRI A. SITARAMA RAO, DR FOR ASSESSEE : SHRI B. SHANTI KUMAR DATE OF HEA R ING : 4.8.2016 DATE OF PRONOUNC EMENT : 12 .8.2016 O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2010-11. IN TH IS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUND S: 1. THE CIT (A) FAILED TO APPRECIATE THAT THE HON'BL E SUPREME COURT IN THE CASE OF SRI KALE KHAN MOHAMMAD HANIF VS. CIT (S.C) 50 ITR 1 AND THE HON'BLE A.P HI GH COURT IN THE CASE OF CIT VS. MADURI RAJAIAHGARI KIS TAIAH (A.P) 120 ITR 294 HELD THAT CASH CREDITS CAN BE ASS ESSED EVEN WHEN BUSINESS INCOME IS ESTIMATED. 2. THE CIT (A) FAILED TO APPRECIATE THE FACT THAT T HE AXIS BANK A/C WAS NOT REFLECTED IN THE BALANCE SHEET AND THE ASSESSEE DID NOT ESTABLISH THAT THE DEPOSITS ARE OU T OF EXPLAINED SOURCES. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, WHO IS ENGAGED IN THE BUSINESS OF TRANSPORT CONTRAC TOR, FILED HIS ITA NO 490 OF 2016 KARNTI VENKATA SUBBA REDDY KADAP A PAGE 2 OF 5 RETURN OF INCOME FOR THE A.Y 2010-11 ON 25.6.2011 D ECLARING BUSINESS INCOME OF RS.4,75,650 AND AGRICULTURAL INC OME OF RS.2,14,220. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE ASSESSEE WAS DIRECTED TO FURNISH BOOKS OF ACCOUNTS AND OTHER INFORMATION CALLED FOR. ASSESSEE FURNISHE D THE SAME. SINCE THE AO WAS NOT SATISFIED WITH THE BOOKS OF AC COUNT OF THE ASSESSEE, HE REJECTED THE SAME U/S 145 AND PROPOSED TO ADOPT THE NET PROFIT AT 3% OF THE TURNOVER AS PER FORM 26 AS. THE ASSESSEE EXPRESSED ITS AGREEMENT FOR ADOPTING NET P ROFIT @ 3% OF THE GROSS RECEIPTS. ON THE BASIS OF THE SAID ACCEPT ANCE, THE AO QUANTIFIED THE NET PROFIT AT RS.9,58,879 AND THEREA FTER PROCEEDED TO MAKE AN ADDITION OF RS.32,47,779 U/S 68 OF THE A CT ON THE GROUND THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES OF THE DEPOSITS INTO HIS A/C IN AXIS BANK. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) CONTENDING T HAT WHERE THE ASSESSEES INCOME IS ESTIMATED, NO FURTHER ADDITION CAN BE MADE. IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE UP ON THE DECISION OF THE HON'BLE A.P. HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS, REPORTED IN 232 ITR 776. FURTHER, HE ALSO EXPLAINED THE SOURCES FOR THE DEPOSITS AS THE TRANS FER OF FUNDS FROM THE PARTNERSHIP CONCERN I.E. M/S. SADASIVA TRA NSPORT TO THE ASSESSEE TO MEET THE EXPENDITURE AT HYDERABAD. HE A LSO SUBMITTED THAT SOME OF THE FUNDS HAVE BEEN TRANSFER RED BY WAY OF CHEQUES FROM JAYABHERI PROPERTIES PVT. LTD AS PA RT OF THE TRANSPORT CHARGES. THUS, HE EXPLAINED THAT THE DEPO SITS IN THE ASSESSEES AXIS BANK A/C ARE PART OF THE TRANSACTIO NS OF THE ASSESSEES TRANSPORT BUSINESS FROM WHICH THE AO HAS ESTIMATED THE NET PROFIT. THE CIT (A) ACCEPTED THE CONTENTION S OF THE ITA NO 490 OF 2016 KARNTI VENKATA SUBBA REDDY KADAP A PAGE 3 OF 5 ASSESSEE AND DELETED THE ADDITION MADE BY THE AO. A GGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3. THE LEARNED DR, WHILE RELYING UPON THE ORDER OF THE AO, STATED THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES OF THE DEPOSITS BEFORE THE AO, WHILE THE CIT (A) HAS ACCEP TED THE CONTENTION OF THE ASSESSEE WITHOUT ANY VERIFICATION . THEREFORE, ACCORDING TO THE LEARNED DR, THE ORDER OF THE CIT ( A) IS NOT SUSTAINABLE. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE WAS NOT PROVIDED AN OPPORTUNITY TO EXPLAIN THE SOURCES BEFORE THE AO BU T, THE ASSESSEE HAD EXPLAINED THE SOURCES BEFORE THE CIT ( A), WHO AFTER VERIFICATION OF THE SAME HAS DELETED THE ADDITION. HE FURTHER REFERRED TO THE PROVISIONS OF SECTION 68 TO SUBMIT THAT THE BANK A/C CANNOT BE CONSIDERED AS BOOKS OF ACCOUNT OF THE ASSESSEE AND THEREFORE, ADDITION U/S 68 CANNOT BE MADE. HE A LSO SUBMITTED THAT THE AO HAS TAKEN THE ENTIRE DEPOSITS INTO CONSIDERATION WITHOUT CONSIDERING THE DEPOSITS THRO UGH CHEQUES AND ALSO WITHOUT CONSIDERING WITHDRAWALS FROM THE B ANK A/C. AS REGARDS THE AOS FINDING THAT THE ASSESSEE HAS NOT DISCLOSED THE AXIS BANK A/C IN THE BALANCE SHEET, IT WAS SUBMITTE D THAT IT WAS ONLY AN INADVERTENT MISTAKE AND THERE WAS NO INTENT ION TO NOT DISCLOSE THE SAME. IT IS SUBMITTED THAT THE ASSESSE E HAS ACCEPTED THE ESTIMATION OF INCOME BY THE AO AND FOLLOWING TH E DECISION OF THE HON'BLE A.P HIGH COURT IN THE CASE OF INDWELL C ONSTRUCTIONS VS. CIT (232 ITR 776) (A.P. H.C), WHEN THE INCOME F ROM BUSINESS IS ESTIMATED, NO OTHER ADDITION CAN BE MADE. THE LE ARNED DR, ON THE OTHER HAND, PLACED RELIANCE UPON THE DECISION O F THE HON'BLE SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMAD HAN IF VS. ITA NO 490 OF 2016 KARNTI VENKATA SUBBA REDDY KADAP A PAGE 4 OF 5 CIT (S.C) 50 ITR 1, WHEREIN IT WAS HELD THAT EVEN W HEN THE INCOME OF THE ASSESSEE IS ESTIMATED, THE CASH CREDI T COULD BE ASSESSED TO TAX AS INCOME FROM UNDISCLOSED SOURCES IN ADDITION TO THE BUSINESS INCOME ESTIMATED BY THE AO. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE OR EXPLAIN THE SOURCES OF DEPOSITS INTO HIS ACCOUNT MA INTAINED WITH AXIS BANK BEFORE THE AO. THE ASSESSEE HAS FILED A PAPER BOOK BEFORE US CONTAINING THE STATEMENT OF THE A/C MAINT AINED BY THE ASSESSEE WITH AXIS BANK. IT IS SEEN THEREFROM THAT THERE WERE CASH DEPOSITS AND ALSO WITHDRAWAL OF CASH FROM THE SAID A/C ON A NUMBER OF OCCASSIONS. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHAICHAND H. GANDHI PLACED AT PAGE 14 OF THE PAPER BOOK FILED BY THE ASSESSEE, HAS HELD THAT THE BANK PASS BOOK SUPPLIED BY THE BANK TO THE ASSESSEE SHOULD NO T BE REGARDED AS BOOK OF THE ASSESSEE I.E. BOOK MAINTAIN ED BY THE ASSESSEE OR UNDER HIS INSTRUCTIONS. THEREFORE, IT W AS HELD THAT IT CANNOT BE CHARGED TO INCOME TAX U/S 68 OF THE ACT. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KALE KH AN MOHD.HANIF IS FOR THE A.Y 1945-46 AND 1945-48 AND R ELEVANT TO THE POSITION PRIOR TO 1989 AND THEREFORE, CANNOT BE APPLIED TO THE YEAR BEFORE US. FURTHER, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. INDWELL CONSTRUCTIONS HAS HELD THA T WHERE THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED, THE REVENUE C ANNOT RELY ON THE SAME FOR THE ADDITION OF CASH CREDITS. AO HA S ESTIMATED THE INCOME OF THE ASSESSEE AT 3% OF THE GROSS RECE IPTS. ADMITTEDLY, THE DEPOSITS INTO THE AXIS BANK A/C ARE ALSO FROM THE BUSINESS RECEIPTS OF THE ASSESSEE. HOWVER, THE CIT (A) HAS NOT ITA NO 490 OF 2016 KARNTI VENKATA SUBBA REDDY KADAP A PAGE 5 OF 5 VERIFIED THE GENUINESS OF ASSESSEES CONTENTIONS BU T HAS ACCEPTED THE SAME WITHOUT A MURMUR. THEREFORE, WE DEEM IT FI T AND PROPER TO REMAND THE ISSUE TO THE FILE OF THE AO FOR VERIF ICATION OF ASSESSEES SUBMISSIONS BEFORE THE CIT (A) AND RECON SIDERATION IN ACCORDANCE WITH LAW. 5. IN THE RESULT, REVENUES APPEAL IS TREATED AS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2016. S D/ - S D/ - (S.RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 12 TH AUGUST, 2016. VNODAN/SPS COPY TO: 1. INCOME TAX OFFICER WARD 2, VASANTHAPET PRODDATUR 51 6360 2. SRI KARNATI VENKATA SUBBA REDDY, 7/150, OPP: R.T.P. P. MAIN GATE, KALAMALLA VILLAGE & POST, YERRAGUNTLA, K ADAPA 516310 3. CIT(A) KURNOOL 4. PR. CIT KURNOOL 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER