Sri Nerella Chaitanya Ramanjaneya Kishore, Vijayawada V. The ITO, Ward-2(1), Guntur

ITA 503/VIZ/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50264 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: C KAMESWARA RAO
• Keywords: Unexplained cash credit; Rejection of books of accounts; Opportunity of being heard; Principle of natural justice; Additional evidence; Corroborative evidences
• Section: 68; 144

Judgement Text

ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 497 /VIZAG/ 20 09 ASSESSMENT YEAR : 2005 - 06 ITO WARD - 2(1) GUNTUR VS. SRI NERELLA CHAITANYA RAMANJANEYA KISHORE GUNTUR (APPELLANT) (RESPONDENT) PAN NO.AAYPN 5784C ITA NO.503/VIZAG/2009 ASSESSMENT YEAR : 2005 - 06 SRI NERELLA CHAITANYA RAMANJANEYA KISHORE GUNTUR VS. ITO WARD - 2(1) GUNTUR (APPELLANT) (RESPONDEN T) APPELLANT BY: SHRI C. KAMESWARA RAO, CA RESPONDENT BY: SHRI D.S. SUNDER SINGH, DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THESE CROSS APPEALS ARE PREFERRED BY THE REVENUE AS WELL AS THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) PERTAINING TO THE ASSESSMENT YEAR 2005-06. SINCE THESE APPEALS WERE HEARD TOGETHER T HESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. WE HOWEVER, PREFER TO ADJUDICATE THEM ONE AFTER THE OTHER. ITA NO.497 OF 2009: 2. THIS IS AN APPEAL PREFERRED BY THE REVENUE IN WH ICH THE ORDER OF THE CIT(A) IS ASSAILED ON A SOLITARY GROUND THAT CIT(A) HAS ERRED IN ACCEPTING THE PROFITS DECLARED BY THE ASSESSEE INSTEAD OF ACCEPTI NG THE G.P. ESTIMATED BY ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 2 THE ASSESSING OFFICER ON ACCOUNT OF LOW PROFIT DECL ARED IN COMPARISON TO EARLIER YEARS. THE LD. D.R. HAS INVITED OUR ATTENT ION TO THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE H AS NOT PRODUCED THE BOOKS OF ACCOUNTS BEFORE THE ASSESSING OFFICER AND HAVING NOTED THE PROFIT DECLARED BY THE ASSESSEES WAS SUBSTANTIALLY LESS IN COMPARISON TO THE PROFIT DECLARED IN THE EARLIER YEARS HE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE PROFITS. THE CIT(A) DID NOT APPRECIATE THESE F ACTS AND HAS ACCEPTED THE PROFIT DECLARED BY THE ASSESSEE. 3. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HAS SUBMITTED THAT THE ASSESSMENT WAS FRAMED U/S 144 OF THE ACT WITHOU T AFFORDING A PROPER OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE RELEVANT BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNTS WERE PROPERLY MAINTAINED AND WERE ALSO AUDITED U/S 44AB OF THE ACT. THE BOOKS OF ACCOUNTS COULD NOT BE PRO DUCED BEFORE THE A.O. AT THE TIME OF FINALIZATION OF THE ASSESSMENT PROCEEDI NGS FOR THE REASONS THAT HIS FATHER WAS NOT WELL. BEFORE THE CIT(A), THE ASSESS EE HAS FURNISHED ALL EXPLANATIONS FOR THE DOWNFALL IN THE GROSS PROFIT O F THE ASSESSEES AND ALSO PRODUCED THE BOOKS OF ACCOUNTS AND RELEVANT EVIDENC E. THE CIT(A) CALLED THE REMAND REPORT FROM THE ASSESSING OFFICER IN THI S REGARD. IN REMAND PROCEEDINGS, THE ASSESSING OFFICER COULD NOT POINT OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HAVING EXAM INED THE REMAND REPORT, THE CIT(A) HAS ACCEPTED THE BOOK RESULTS DECLARED B Y THE ASSESSEES. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE BOOKS OF ACCOUNTS CANNOT BE REJECTED UNLESS AND UNTIL DEFECT IS POINT ED OUT THEREIN BY THE ASSESSING OFFICER. THE CIT(A) IS ALSO ARMED WITH C O-TERMINUS POWERS OF THAT A.O. TO EXAMINE THE ADDITIONAL EVIDENCE FILED BEFOR E HIM AFTER CONFRONTING IT TO THE ASSESSING OFFICER. IN THE INSTANT CASE, THE COMPLETE BOOKS OF ACCOUNTS ALONG WITH THE SUPPORTING EVIDENCE WERE PRODUCED BE FORE THE CIT(A) AND AFTER CONFRONTING IT TO THE ASSESSING OFFICER, THE CIT(A) EXAMINED IT AND ALLOWED THE RELIEF. THEREFORE, NO INTERFERENCE IS CALLED FOR. ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 3 4. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES WE FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS O F ACCOUNTS ON THE GROUND THAT BOOKS WERE NOT PRODUCED BEFORE HIM AND THE GRO SS PROFIT RATE DECLARED BY THE ASSESSEES WAS LESSER THAN THE RATE DECLARED IN EARLIER YEARS. BEFORE THE CIT(A), THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS AND OTHER SUPPORTING EVIDENCE WHICH WERE DULY EXAMINED BY THE ASSESSING OFFICER IN REMAND PROCEEDINGS. THE ASSESSING OFFICER COULD NO T POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE RE MAND PROCEEDINGS AND CIT(A) AFTER HAVING IT EXAMINED HIMSELF HAS ACCEPTE D THE BOOKS OF ACCOUNTS AND THE GROSS PROFIT DECLARED BY THE ASSESSEES. SI NCE NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNTS OF THE AS SESSEE, WE DO NOT FIND ANY JUSTIFICATION IN REJECTION OF THE BOOKS OF ACCO UNTS. WE THEREFORE FIND NO MERIT IN THE REVENUES CONTENTION. SINCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE PROPERLY AUDITED U/S 44AB OF THE ACT, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY ACCEPTED THE BOOK RESULTS DECLAR ED THEREIN. WE THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND AC CORDINGLY WE CONFIRM HIS ORDER. ITA NO.503 OF 2009: 5. THIS APPEAL IS PREFERRED BY THE ASSESSEE ASSAILI NG THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS WHICH ARE AS UNDER: 1. THE ORDER OF THE CIT(A), GUNTUR IS ERRONEOUS BOTH I N LAW AND ON FACTS OF THE CASE. 2. TAKING COGNIZANCE OF THE FACT THAT THE CREDITORS BY NAME M/S. SRI VENKATA LAKSHMI TRADING COMPANY (AN ASSESSEE AS SESSED TO TAX WITH ITO NARASARAOPET), SRI M. RAMA PRABHAKA R, SMT. MADDALI ANJANI DEVI, SMT. MADDI SUBBA LAKSHMI AND S MT. MURARISETTY ANASUYA ARE IDENTIFIABLE AND FILED CONF IRMATORY LETTERS EXPLAINING THEIR CREDITWORTHINESS, THE LEAR NED CIT(A) OUGHT TO HAVE DELETED THE AGGREGATE ADDITION OF RS. 4,85,000/-. 3. TAKING COGNIZANCE OF THE FACT THAT THE LEARNED ASSE SSING OFFICER DID NOT REQUIRE THE APPELLANT TO PRODUCE THE LOAN C REDITORS, NAMELY SRI M. RAMA PRABHAKAR, SMT. MADDALI ANJANI D EVI, SMT. ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 4 MADDI SUBBA LAKSHMI AND SMT. MURARISETTY ANASUYA, T HE LEARNED CIT(A) OUGHT TO HAVE OBSERVED, THAT THERE W AS NO ADHERENCE TO PRINCIPLES OF NATURAL JUSTICE AND ACCO RDINGLY, HE SHOULD HAVE HELD THAT THE CREDITS APPEARING AGAINST THEIR NAMES ARE GENUINE AND HENCE, ADDITION TO THE ABOVE EXTENT IS NOT WARRANTED. 4. TAKING NOTICE OF THE FACT THAT THE APPELLANT COMPLI ED WITH THE PROVISIONS OF SEC.194A, THE LEARNED CIT(A), OUGHT T O HAVE DELETED THE ADDITION TO THE REMAINING EXTENT OF RS. 1,15,807/- ALSO; 5. TAKING NOTE OF THE FACT THAT THE EXPENDITURE WAS AC TUALLY INCURRED AND RECORDED IN THE REGULAR BOOKS OF ACCOU NT, THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ADDITION O F RS.41,482/-. 6. TAKING NOTE OF THE FACT THAT THE EXPENDITURE WAS AC TUALLY INCURRED AND RECORDED IN THE REGULAR BOOKS OF ACCOU NT, THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ADDITION O F RS.23,978/-. 7. FOR THESE GROUNDS AND ANY OTHER GROUNDS WHICH MAY B E URGED DURING THE COURSE OF HEARING OF THE APPEAL IT IS PR AYED THAT APPEAL MAY BE ENTERTAINED AND ALLOWED. 6. GROUND NO.1 IS GENERAL IN NATURE AND NEED NO COM MENTS. GROUND NOS.2&3 RELATE TO THE ADDITIONS ON ACCOUNT OF UNEXP LAINED CASH CREDIT. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS I NVITED OUR ATTENTION THAT 8 CASH CREDITORS WERE INTRODUCED DURING THE IMPUGNE D ASSESSMENT YEARS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEES. THE TOT AL CREDIT OF RS.24,30,000/- WERE DISALLOWED U/S 68 BY THE ASSESS ING OFFICER. BEFORE THE CIT(A), THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS OF THESE CREDITORS. THE CIT(A) CALLED A REMAND REPORT FROM THE A.O WITH REGARD TO THESE CASH CREDITS AFTER MAKING NECESSARY VERIFICAT IONS. THE DETAILS OF CASH CREDITS ARE AS UNDER: NAME OF THE PARTY AMOUNT OF LOAN BALAJI COTTON CORPORATION 2,00,000 MADDI VENKATA SUBBA RAO & CO. 15,50,000 SRI VENKATA LAKSHMI TRADING CO. 3,00,000 MURARISETTY RAMPRABHAKAR 70,000 ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 5 P. PRAMEELA KUMARI 1,95,000 MADDALA ANJANI DEVI 55,000 MADDALA SUBBALAKSHMI 30,000 M. ANASUYA 30,000 TOTAL 24,30,000 7. DURING THE COURSE OF REMAND PROCEEDINGS, THE ASS ESSEE WAS ASKED VIDE LETTER DATED 1.6.2009 TO PRODUCE THE 4 LOAN CR EDITORS NAMELY M/S. BALAJI COTTON CORPORATION, M/S. SRI VENKATA LAKSHMI TRADING COMPANY, M/S. MADDI VENKATA SUBBA RAO & CO. AND SMT. PRAMEEL A KUMARI. EXCEPT M/S. VENKATA LAKSHMI TRADING COMPANY ASSESSEE HAS P RODUCED ALL THE 3 LOAN CREDITORS AND THEY HAVE ACCEPTED THE ADVANCEME NT OF LOAN TO THE ASSESSEES. THE ASSESSING OFFICER ACCEPTED IT AND T HE RELIEF WAS ALSO GRANTED BY THE CIT(A). THE ASSESSING OFFICER DID N OT ASK THE ASSESSEE TO PRODUCE THE REMAINING LOAN CREDITORS NAMELY N. RAMP RABHAKAR, M. ANJANI DEVI, M. SUBBA LAKSHMI AND M. ANASUYA. THEREFORE, THE ASSESSING OFFICER HAS NO RIGHT TO DISBELIEVE THE CONFIRMATIONS FILED BY THE ASSESSEE FROM THESE LOAN CREDITORS. WITH REGARD TO M/S. VENKATA LAKSHMI TRADING COMPANY, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMI TTED THAT DURING THE IMPUGNED ASSESSMENT YEAR THE ASSESSEE HAS PAID THE INTEREST OF RS.16,900/- ON THIS LOAN AND THE SAID INTEREST WAS ALLOWED BY THE ASSESSING OFFICER. ONCE THE LOAN WAS ALLOWED HE CA NNOT DISBELIEVE THE INTRODUCTION OF LOAN IN THIS YEAR. THEREFORE, THE DISALLOWANCE OF RS.3 LAKHS IN THE NAME OF M. VENKATA LAKSHMI TRADING CO. IS NO T SUSTAINABLE IN THE EYES OF LAW. 8. THE LD. D.R. ON THE OTHER HAND HAS CONTENDED THA T BY MISTAKE, THE ASSESSING OFFICER HAS ALLOWED THE INTEREST PAID ON LOAN INTRODUCED IN THE NAME OF SRI VENKATA LAKSHMI TRADING CO. WHEREAS, TH E SAID CREDITOR WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER DESPITE T HE SPECIFIC DIRECTIONS OF THE A.O. THEREFORE, THE CIT(A) HAS RIGHTLY TREATED THIS LOAN OF RS.3 LAKHS AS UNEXPLAINED CREDIT. WITH REGARD TO THE REMAININ G CREDITORS, THE LD. ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 6 D.R. HAS SUBMITTED SINCE THEY WERE NOT PRODUCED BEF ORE THE A.O. IN REMAND PROCEEDINGS, THE SAME CASH CREDIT CANNOT BE ALLOWED. 9. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE ORDERS OF LOWER AUTHORITIES, WE FIND THAT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO P RODUCE ONLY 4 LOAN CREDITORS. WHEN THE ASSESSEE WAS NOT ASKED TO PRODU CE THE OTHER CREDITORS HOW THE VERACITY OF LOANS INTRODUCED IN T HEIR NAME COULD HAVE BEEN DOUBTED OR QUESTIONED BY THE ASSESSING OFFICER . IF HE HAS SOME DOUBT WITH REGARD TO THE CASH CREDITS INTRODUCED BY THESE PERSONS, HE SHOULD HAVE EXAMINED THEM WITH REGARD TO THE INTROD UCTION OF CREDIT. SINCE THE ASSESSING OFFICER DID NOT ASK THE ASSESSE E TO PRODUCE THESE CREDITORS, HE LOST ALL RIGHT TO TREAT THESE CREDITS AS UNEXPLAINED. WE THEREFORE, FIND NO MERIT IN THE ADDITIONS MADE BY T HE A.O. WITH RESPECT TO THESE LOAN CREDITS INTRODUCED IN THE NAME OF 4 CRED ITORS NAMELY N. RAMPRABHAKAR, M. ANJANI DEVI, M. SUBBA LAKSHMI, M. ANASUYA. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) I N THIS REGARD AND DELETE THE ADDITIONS. 10. SO FAR AS ADDITION OF RS.3 LAKHS IN THE NAME OF VENKATA LAKSHMI TRADING CO. IS CONCERNED, WE FIND THAT UNDISPUTEDLY NONE WAS PRODUCED ON BEHALF OF THIS COMPANY BEFORE THE ASSESSING OFFI CER TO PROVE THE GENUINENESS OF THE LOAN BUT THE ASSESSING OFFICER H AS ACCEPTED THE PAYMENT OF INTEREST ON THIS LOAN AND ALLOWED IT. O NCE THE ASSESSING OFFICER HAS ALLOWED THE INTEREST PAID ON THIS LOAN, THE GENUINENESS OF THE LOANS CANNOT BE QUESTIONED. IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT THE LOAN INTRODUCED IN THE NAME OF VENKAT A LAKSHMI TRADING CO. OF RS.3 LAKHS CANNOT BE TREATED TO BE THE UNEXPLAIN ED CASH CREDIT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) IN TH IS REGARD AND DELETE THE ADDITIONS. ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 7 11. NEXT GROUND RELATE TO THE ADDITION TO THE EXTEN T OF RS.1,15,807/- MADE ON ACCOUNT OF NON-DEDUCTION OF TDS. IN THIS R EGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASS ESSEE HAS FURNISHED THE FORM 15G RECEIVED FROM THE PAYEES BEFORE THE CI T GUNTUR ON 7.4.2005 AND DESPITE OF THIS FACT THE PAYMENTS WERE DISALLOWED. THE DETAILS ARE FURNISHED AT PG.NO.4 OF THE COMPILATION OF THE ASSESSEES. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT ATLEAST THOSE PAYMENT SHOULD BE ALLOWED IN WHICH FORM 15G WAS OBT AINED. THEREFORE, THE MATTER MAY BE SENT BACK TO THE A.O. FOR NECESSA RY ACTION. 12. THE LD. D.R. ON THE OTHER HAND HAS SUBMITTED TH AT FORM 15G SHOULD HAVE BEEN FILED BEFORE THE ASSESSING OFFICER . SINCE IT WAS NOT FILED, THE A.O. HAS RIGHTLY DISALLOWED THE PAYMENT ON NON- DEDUCTION OF TDS. 13. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWE R AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT THE ASSESS EE HAS CLAIMED THAT HE HAS FILED FORM 15G BEFORE THE CIT, GUNTUR ON 7.5.20 05. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE MATTER M AY BE SENT BACK TO THE A.O. TO VERIFY THESE FACTS IN THE INTEREST OF J USTICE. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE M ATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO VERIFY THESE FACTS AND IF HE FINDS THAT THE ASSESSEE HAS OBTAINED THE FORM 15G FROM THE PAYEES WHICH ARE FILED BEFORE THE CIT, GUNTUR, THE CORRESPONDING PAYMENTS SHOULD NOT BE DISALLOWED. ACCORDINGLY, THE MATTER IS RESTORED TO THE FILE OF THE A.O. AFTER SETTING ASIDE THE ORDER OF THE CIT(A) TO RE ADJUDICATE THE ISSUE AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 14. GROUND NO.5 RELATE TO ADDITION OF RS.41,482/- M ADE ON ACCOUNT OF NON-PRODUCTION OF BILLS AND VOUCHERS BEFORE THE ASS ESSING OFFICER. SINCE NOTHING HAS BEEN PLACED EVEN BEFORE US IN THIS REGA RD, WE FIND NO ITA NO 497 & 503 OF 09 N.C.R.KISHORE, GUNTUR. 8 INFIRMITY IN THE ORDER OF THE CIT(A) AS HE HAS ESTI MATED THE DISALLOWANCE ON ACCOUNT OF NON-PRODUCTION OF BILLS AND VOUCHERS. 15. GROUND NO.6 RELATE TO THE ADDITION OF RS.23,978 /- MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE ON NON-PRODUCTION OF BILLS AND VOUCHERS. IN THIS REGARD ALSO NOTHING IS PLACED BEFORE US. W E THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE CONFIRM THE SAME. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28.6.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 28 TH JUNE, 2011 COPY TO 1 N.C.R. KISHORE, C/O S. PULLARAO, ADVOCATE, D.NO.39 - 2 - 24, PITCHAYYA STREET, LABBIPET, VIJAYAWADA-520 010. 2 ITO WARD - 2(1), GUNTUR 3 THE CI T, GUNTUR 4 THE CIT (A) , GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM