Badisa Hanumantha Rao, Guntur V. The income Tax Officer, Ward-1(1), Guntur

ITA 507/VIZ/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4939 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 01-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Rejection of books of accounts; Unexplained investment; Business income
• Section: 56; 143(3); 201; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 50 7 / VIZ/201 8 ( / ASSESSMENT YEAR : 20 1 5 - 1 6 ) BADISA HANUMANTHA RAO MIG NO.1 - 223 NALLAPADU ROAD GUNTUR [PAN :ARHPB4733B] VS. INCOME TAX OFFICER WARD - 1 (1) GUNTUR ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : S HRI G.V.N.HARI, A R / RESPONDENT BY : S MT.SUMAN MALIK , D R / DATE OF HEARING : 0 2 . 0 5 . 201 9 / DATE OF PRONOUNCEMENT : 29 .0 5 . 201 9 / O R D E R P ER D.S. SUNDER SINGH, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] - 1, GUNTUR VIDE APPEAL NO.24/2017 - 18 DATED 26.12.2017 FOR THE ASSESSMENT YEAR (A.Y.) 2015 - 16. 2 I.T.A. NO . 50 7 /VIZ/201 8 BADISA HANUMANTHA RAO, GUNTUR 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ADDITION OF RS.7,42,500/ - ON ACCOUNT OF CHIT CONTRIBUTIONS MADE BY THE ASSESSEE. 3. BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMFL. HE HAS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3,75,960/ - AND THE ASSESSMENT WAS COMPLETED ON TOTAL INCOME OF RS .22,00,836/ - U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) . IN THE ASSESSMENT, THE ASSESSING OFFICER (AO) ESTIMATED THE INCOME @5% ON NET PURCHASES PUT TO SALE AND ALSO MADE THE ADDITION OF RS.7,42,500/ - AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT TOWARDS THE CONTRIBUTION TO CHITS, SINCE THERE WAS NO SOU RCE FOR THE CHIT CONTRIBUTION FROM APRIL TO DECEMBER. THE CONTRIBUTIONS MADE TOWARDS CHITS FROM APRIL TO DECEMBER WAS AGGREGATED TO RS.7,42,500/ - REMAINED UNEXPLAINED. THE CHIT WAS AUCTIONED IN DECEMBER AND THE AND PRIZE MONEY WAS U S ED FOR THE PAYMENT OF REMAINING INSTALMENTS. THEREFORE, THE AO DISALLOWED CHIT CONTRIBUTION MADE FROM APRIL TO DECEMBER AMOUNTING TO RS.7,42,500/ - AND ADDED BACK TO THE INCOME U/S 56 OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND REQUESTED FOR TELESCOPIC BENEFIT OF CHIT CONTRIBUTIONS MADE 3 I.T.A. NO . 50 7 /VIZ/201 8 BADISA HANUMANTHA RAO, GUNTUR FROM APRIL TO DECEMBER OUT OF THE ESTIMATED INCOME. NOT BEING CONVINCED, THE LD.CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE AO. 5. AGAINST THE ORDER OF THE LD.CIT(A), THE ASSESSEE HAS FILED APPEAL BEFORE THIS TRIBUNAL. DURING THE APPEAL HEARING, THE LD.AR ARGUED THAT THE ASSESSEE IS IN THE BUSINESS OF IMFL AND FOR THE A.Y. 2015 - 16, THE ASSESSMENT WAS COMPLETED U/S 143(3) BY ESTIMATION OF INCOME AND THE AO HAS ALSO MADE THE ADDITION RELATING TO THE CHIT CONTRIBUTION FROM APRIL TO DECEMBER 2016. THE ASSESSEE HAS COMMENCED THE BUSINESS FROM JUNE 2014 ONWARDS. SINCE THE INCOME IS ESTIMATED, NO SEPARATE ADDITION REQUIRED TO BE MADE TOWARDS THE APPLI CATION OF INCOME. THEREFORE, REQUESTED TO ALLOW THE CHIT CONTRIBUTION MADE FROM JUNE TO DECEMBER AS DEDUCTION SINCE, THE INCOME ESTIMATED IS MORE THAN THE CHIT CONTRIBUTION MADE BY THE ASSESSEE. 6. ON THE OTHER HAND, THE LD.DR ARGUED THAT THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNTS AND CONTRIBUTIONS WERE MADE OUT OF THE BUSINESS INCOME. THEREFORE, ARGUED THAT NO TELESCOPIC BENEFIT REQUIRED TO BE ALLOWED. HENCE, REQUESTED TO UPHOLD THE ORDER OF THE LD.CIT(A) AND DISMISS THE APPEAL OF THE ASSESSE E. 4 I.T.A. NO . 50 7 /VIZ/201 8 BADISA HANUMANTHA RAO, GUNTUR 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE ASSESSEE HAS STARTED THE BUSINESS OF IMFL FROM JUNE 2014 ONWARDS. ON AN AVERAGE, THE SALES OF THE ASSESSEE WAS MORE THAN RS.20,00,000/ - PER MONT H. THE AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME @5% WHICH WORKS OUT TO RS.1,00,000/ - PER MONTH. THOUGH THE AO HAD ESTIMATED THE INCOME, THERE WAS NO FINDING GIVEN BY THE AO OR CIT(A) THAT THE INCOME ON ESTIMATION WAS INVESTED IN ANY OTH ER MODE S. THERE WAS NO FINDING GIVEN BY THE AO THAT THE RESULTED INCOME OUT OF THE ESTIMATION WAS INVESTED IN UNEXPLAINED INVESTMENT S . THEREFORE, IT IS PRESUMED THAT THE RESULTANT INCOME OUT OF THE ESTIMATION IS AVAILABLE TO THE ASSESSEE FOR INVESTMENTS/ DRAWINGS. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEES REQUEST FOR TELESCOPIC BENEFIT OF CHIT INSTALLMENTS FROM JUNE TO DECEMBER REQUIRED TO BE CONSIDERED FAVOURABLY , AFTER P ROVIDING FOR THE PERSONAL DRAWINGS AND EXPENDITURE. HEN CE, WE CONSIDER TELESCOPIC BENEFIT OF 50% OF THE CHIT CONTRIBUTION FROM JUNE TO DECEMBER CAN BE ALLOWED REASONABLY OUT OF THE ESTIMATED INCOME. FOR A QUERY FROM THE BENCH, THE LD.DR ALSO DID NOT EXPRESS ANY OBJECTION FOR GIVING RELIEF TO THE EXTENT OF 50% OF THE CHIT CONTRIBUTION FROM JUNE TO DECEMBER, ACCORDINGLY, WE DIRECT THE AO TO ALLOW THE TELESCOPIC BENEFIT OUT 5 I.T.A. NO . 50 7 /VIZ/201 8 BADISA HANUMANTHA RAO, GUNTUR OF THE ESTIMATED INCOME TO THE EXTENT OF 50% OF THE CHIT CONTRIBUTION FROM J UNE TO DECEMBER. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY 2019. S D/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 29 .0 5 .2019 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT - BADISA HANUMANTHA RAO, MIG NO.1 - 223, NALLAPADU ROAD, GUNTUR 2 . / THE RESPONDENT - INCOME TAX OFFICER , WARD - 1(1), GUNTUR 3 . / THE PR. COMMISSIONER OF INCOME TAX , GUNTUR 4. ( ) / THE COMMISSIONER OF INCOME - TAX (APPEALS ) - 1, GUNTUR 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM