The Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam V. Malineni Sambasiva Rao, , Visakhapatnam

ITA 56/VIZ/2021

AI Insights

The case revolves around the appeal by the Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam against Malineni Sambasiva Rao, concerning the assessment year 2014-15. The primary issue was the treatment of Rs. 2,39,85,000/- credited to the assessee's bank account as undisclosed turnover. The Assessing Officer initially included this amount in the assessee's income, estimating the profit at 12.5%. However, the CIT(A) later found that this amount represented advances from M/s. Max Infra India Pvt Ltd and not turnover, leading to its deletion from the taxable income. The Tribunal agreed with the CIT(A)'s findings, dismissing the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128569 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-04-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 29-03-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 154; 143(3)

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.56/Viz/2021 (Ǔनधा[रण वष[ / Assessment Year : 2014-15) Deputy Commissioner of Income Tax, Circle-3(1), Visakhapatnam. Vs. Malineni Sambasiva Rao, Visakhapatnam. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸ कȧ ओर से/ Assessee by : Sri GVN Hari, AR Ĥ×याथȸ कȧ ओर से / Revenue by : Sri ON Hari Prasada Rao, Sr. AR सुनवाई कȧ तारȣख / Date of Hearing : 18/04/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 01/06/2023 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal filed by the Revenue is against the order of the Ld. Commissioner of Income Tax (Appeals)-1, Visakhapatnam [Ld. CIT(A)] in appeal No. 10017/2019-20/CIT(A)-1/VSP, dated 16/9/2020 arising out of the order passed U/s. 143(3) r.w.s 263 of the Income Tax Act, 1961 [the Act] for the AY 2014-15. 2 2. Briefly stated the facts of the case are that the assessee is an individual and proprietor of M/s. Unique Engineers at Visakhapatnam is engaged in the business of executing contract works, filed his original return of income for the AY 2014-15 on 02/12/2015 admitting a total income of Rs. 12,98,480/- and claiming a refund of Rs. 15,23,590/-. The case was selected for scrutiny and accordingly the assessment was completed by estimating the income @ 12.5% on the gross receipts thereby assessing the income at Rs. 3,59,91,900/- vide order passed U/s. 143(3) of the Act on 31/12/2016. The Ld. Pr. CIT-1, Visakhapatnam while exercising his powers U/s. 263 of the Act observed that the credits to the tune of Rs.2,39,85,000/- in the assessee’s bank account with Axis Bank A/c. No. 912020021291423 treated as undisclosed turnover of the assessee and accordingly brought to tax by estimating the profit @ 12.5% on the same. The Ld. Pr. CIT accordingly directed the Ld. AO to treat the amount of Rs. 2,39,85,000/- as income of the assessee thereby considering the order of the Ld. AO prima facie prejudicial to the interests of the Revenue. Thereafter, the Ld. AO passed the consequential order U/s. 143(3) r.w.s 263 of the Act in compliance with the directions of the Ld. Pr. CIT and determined the total income at Rs. 5,70,58,490/-. Aggrieved by 3 the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). 3. On appeal, before the Ld. CIT(A), the assessee placed various submissions and argued that the amount of Rs. 2,39,85,000/- represents advances received from M/s. Max Infra India Pvt Ltd., as on 31/3/2014 and does not form part of the turnover for the impugned assessment year. The assessee’s Representative also provided the ledger account of M/s. Max Infra India Pvt Limited along with the advances for the advances taken by the assessee and also provided creditworthiness of the creditors before the Ld. CIT(A). After carefully considering the submissions of the Ld. AR, the Ld. CIT (A) allowed the appeal of the assessee and directed the Ld. AO to delete the addition of Rs. 2.39 Crs. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. 4. The Revenue has raised the following grounds of appeal: “1. The order of the Ld. CIT(A) is erroneous both on facts and in l aw. 2. The Ld. CIT(A) erred in al l owing the ass essee as i t is seen th at an amount of Rs. 2,39,85,000/- was received from M/s. Max Infra In di a Ltd and sho wn as contract receipt of Rs. 2,42,27,272/- under the original P & L Account of M/s. Techno Unique Infratech (P) Ltd and M/s. Unique Engineer JV for the period under considerati on. The revised statements of account furnished during the course of 143(3) 4 proceedings that, in the name of M/s. Unique Engineers (Proprietary concern of assessee), no receipts h ave been sho wn under the P & L Account in the name of M/s. Max Infra ( I) Pvt Ltd and the s aid receipts have been converted into a b al ance sheet item by sho wing the same cre di t bal ance under sundry deb tor group in the asset aside of the assessee’s bal ance sheet. 3. The Ld. CIT(A) erred as the Ld. CIT(A) has not considere d the discussion of the AO for making addition U/s. 68 of the Act in para 5 of the order dated 31/12/2018. 4. The appell ant craves l eave to add or del ete or amend or substitute any ground of appeal before an d /or at the time of hearing of appe al . 5. For these and o ther grounds th at may b e urged at the time of appeal hearing, it is prayed th at the se above addi tions made on rel evant dis al l owances be resto red.” 5. At the outset, the Ld. DR submitted that the assessee has initially not declared the correct turnover while filing the original return of income. Subsequently, based on Form-26AS, the assessee filed a revised return by revising the turnover during the assessment proceedings. The Ld. DR therefore pleaded that the Ld. AO has rightly considered the amount of Rs. 2.39 Crs which was originally included in the turnover and later on revised as advances from M/s. Max Infra (I) Pvt Ltd and therefore the Ld. AO has rightly considered the same as turnover of the assessee and brought to tax. The Ld. DR therefore pleaded that the order of the Ld. AO be upheld. 5 Per contra, the Ld. AR in his submissions accepted the arguments of the Ld. DR to the extent of revision of turnover, and stated that the amount of Rs. 2.39 Crs was received as an advance from M/s. Max Infra (I) Pvt Ltd and it is reflected in the balance sheet as on 31/3/2014 as advance. The Ld. AO also submitted that the confirmation from M/s. Max Infra (I) Pvt Ltd which was also available before the Ld. AO. But the Ld. AO has failed to consider the same. The Ld. AR also submitted that since no work was executed this amount remained as an advance and cannot be treated as a turnover. Further, the Ld. AR also submitted that out of the advance of Rs. 2,39,85,000/-, an amount of 1,72,20,737/- was transferred to the account of Vensor Construction Company on the request of M/s. Max Infra (I) Pvt Ltd. The Ld. AR further submitted that net balance of Rs. 1,07,62,263/- was shown as advance in the balance sheet by the assessee. The Ld. AR therefore pleaded that the order of the Ld. CIT(A) be upheld. 6. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. Admittedly, the assessee has declared a lower turnover while filing the original return of income and has 6 revised the turnover during the assessment proceedings. The revision of turnover was due to the fact that the assessee has entered into a Joint Venture [JV] with M/s. Techno Infratech Projects India Pvt Ltd and a part of the total receipts reflected in the Form-26AS does not pertain to the assessee but to the JV. The Ld. AO in his order U/s. 143(3) has mentioned these facts while framing the assessment U/s. 143(3) of the Act. The Ld. AO on verification of the copy of the bank statement of the assessee found that the assessee has received an amount of Rs. 2,42,27,272/- from M/s. Max Infra (I) Pvt Ltd., as mentioned in para 3.12 of the assessment order. The Ld. AO did not accept the contention of the assessee that Rs 2.39 crs are advances received from M/s. Max Infra (I) Pvt Ltd., could not be considered as turnover of the assessee and thereby the Ld. AO treated the same as total turnover of the assessee for the impugned assessment year. The Ld. AO also failed to take on record the confirmation provided by M/s. Max Infra (I) Pvt Ltd., while disposing off the petition U/s. 154 of the Act stating that the matter has already been ceased by the Ld. Pr. CIT. The Ld. Pr. CIT also did not accept the contention of the assessee and directed the Ld. AO to verify the nature and source of credits aggregating to Rs. 2,39,85,000/- by providing reasonable opportunity to the 7 assessee. The Ld. AO considering the fact that there is no business nexus with M/s. Max Infra (I) Pvt Ltd and the assessee has not furnished any information in this regard, treated the amount as unexplained credit U/s. 68 of the Act in the hands of the assessee and accordingly brought it to tax. From the confirmation provided by Max Infra (I) Ltd, which is before us in paper book page 21, we find the ledger account of Unique Engineers in the books of Max Infra (I) Ltd, we find no sales invoice accounted and hence we are of the considered view that the arguments of the Ld AR that no work was executed deserves merit. The Ld. CIT(A) in para 4.5 of his order has observed as under: “4.5. I h ave carefull y considered the issues and the f acts on record. There is no denial of the fact th at the appell ant h ad brought to the notice of Assessing Officer, the initi al error an d the subsequent correction of accounts. This fact was not denied by the Assessing Officer. Inste ad, the Assessing Officer wan ts the appel l ant to expl ain the n ature and source of payment. The appel l ant had expl ained the amount as adv ance received from M/s. Max Infra ( I) Pvt Ltd and i t refl ected in bal ance sheet as on 31/3/2014 as adv ance. The l edger account of appell ant in the books of Max Infra ( I) Pvt Ltd and vice vers a was fil ed before the Assessing Officer. I have perused the same and found the appel l ant h ad sho wn the receipt of Rs. 2,39,85,000/- and M ax Infra ( I) Ltd sho wn it as p ayment. The appell ant h ad expl ained th at since no work was execute d, an amount of Rs. 1,72,20,737/- was transferred to the account of Vens or Construction Comp any upon the request of creditor. The cl osing bal ance of Rs. 1,07,62,263/- was sho wing in the acco unt of appell ant. On over al l consideration of facts, I am of the considered opinion that the appel l ant had furnished the detail s of credito r, genuineness and credi tworthiness. It is cl ear from records th at the Assessing Officer has not controverted an y of these facts except stating th at the appell ant h ad not furnished any i nformation and business 8 nexus. No enquiry, either wi th the credi tor or with Vensor Construction was conducted. The primary burden cas t upon the appel l ant was pri ma f acie disch arged by the appell ant. Therefore, I find th at there is no ground to tre at the cre dits appe aring in the bank account to the extent of Rs. 2.34 Crs as unexpl ained. I am of the vie w th at the appell ant had expl ained the credits. Accordingl y, the Assessing Officer is directed to del ete the addi tion.” 7. From the above discussion of the Ld. CIT (A), and from the materials available before us, we find that there is no infirmity in the order of the Ld. CIT(A) and we are of the considered view that there is no interference is required in the order of the Ld. CIT(A) and hence the grounds raised by the Revenue are dismissed. 8. In the result, appeal of the Revenue is dismissed. Pronounced in the open Court on the 01 st June, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated : 01.06.2023 OKK - SPS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – Malineni Sambasiva Rao, 15-17-2/4, Kranthi Nagar, Nakkavanipalem, Visakhapatnam, Andhra Pradesh- 530013. 9 2. राजèव/The Revenue – Dy. Commissioner of Income Tax, Circle-3(1), Income Tax Office, Infinity Tower, Shankaramatham Road, Santhipuram, Visakhapatnam, Andhra Pradesh-530016. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax-1, Visakhapatnam. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam