Rapol Ravindranath, Hyderabad, Hyderabad V. ACIT, Circle-9(1), Hyderabad, Hyderabad

ITA 59/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2575 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-08-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 09-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L R AMJI RAO
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Depreciation; Search and seizure
• Section: 142(1); 153A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 59 & 60/HYD/2017 ASSESSMENT YEAR: 2004-05 & 2005-06 RAPOL RAVINDRANATH, HYDERABAD. PAN ADWPR 4583N VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 9(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.A. SAI PRASAD REVENUE BY : SHRI L. RAMJI RAO DATE OF HEARING : 07-08-2017 DATE OF PRONOUNCEMENT : 22-09-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME-TA X(A) - 7, HYDERABAD, BOTH, DATED 28-07-2016 FOR AY 2004-05 A ND 2005-06. AS THE FACTS AND GROUNDS ARE MATERIALLY IDENTICAL IN B OTH THE APPEALS, THE SAME WERE CLUBBED AND HEARD TOGETHER AND THEREFORE A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. THE FACTS FROM AY 2004-05 ARE THAT THE ASSESSEE, AN INDIVIDUAL, DERIVES INCOME FROM BUSINESS, PROPERTY AND OTHER SOURCES. THE ASSESSEE FILED HIS RETURN OF INCOME ON 14/10/20 04 U/S 139 ADMITTING LOSS OF RS. 1,77,280/-. IN THIS AY, ASSES SEE HAD CLAIMED LOSS OF RS. 3,69,080/- FROM THE BUSINESS M/S RAVIND RANATH INFO TECH. 2.1 A SEARCH AND SEIZURE OPERATION U/S 132 OF THE A CT WAS CONDUCTED ON 12/09/2009 IN THE RAPOLE GROUP OF CASE S AND IN THE 2 ITA NOS. 59 & 60/H/17 RAPOL RAVINDRANATH, HYD. PLACE OF ASSESSEE. AT THE TIME OF SEARCH, ASSESSEE IS A PROPRIETOR OF M/S CHITRAPURI SERVICE STATION, WHICH IS A RETAIL O UTLET OF IOC, LOCATED AT CHINTALAKUNTA, NHW ROAD, NO. 9, NEAR LB NAGAR, O LD CHECK POST, R.R. DISTRICT. THIS WAS INHERITED BY THE ASSESSEE, WHICH WAS ORIGINALLY STARTED BY HIS FATHER SRI LATE R. CHANDRAKANTH PULL AIAH AND LATER HELD BY HIS MOTHER. FROM AY 2007-08 ONWARDS, ASSESSEE IS THE OWNER OF THIS RETAIL OUTLET. 2.2 CONSEQUENT TO SEARCH AND SEIZURE OPERATION, NOT ICE U/S 153A WAS ISSUED CALLING FOR RETURNS OF INCOME FOR THE AY S 2002-03 TO 2007- 08. IN RESPONSE, ASSESSEE FILED RETURN OF INCOME U/ S 153A ON 25/06/08 DECLARING INCOME FROM HOUSE PROPERTY RS. 1 ,75,775/-, LOSS FROM BUSINESS RS. 3,69,080/- AND INCOME FROM OTHER SOURCES RS. 16,030/- RESULTING IN LOSS OF RS. 1,57,680/-, WHICH INCLUDES ADDITIONAL INCOME OFFERED U/S 132(4) OF RS. 19,600/- UNDER THE HEAD PROPERTY INCOME. ACCORDINGLY, NOTICES WERE ISSUED U/S 142(1) AND 143(2). IN THE ASSESSMENT ORDER PASSED U/S 143(3), AO MADE TWO ADDITIONS, VIZ., ON ACCOUNT OF UNACCOUNTED RENTAL INCOME AND DISALLOWANCE OF BUSINESS LOSS. 3. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A), WHO GAVE RELIEF TO THE AS SESSEE WITH REGARD TO UNACCOUNTED RENTAL INCOME AND CONFIRMED THE DISA LLOWANCE OF BUSINESS LOSS. 4. THE FACTS WITH REGARD TO THE DISALLOWANCE OF BUS INESS LOSS ARE THAT THE ASSESSEE HAS CLAIMED NET LOSS OF RS. 3,69, 079/- FROM THE BUSINESS OF M/S RAVINDRANATH INFO TECH, IN THE RETU RN OF INCOME FILED U/S 153A. THE AO OBSERVED FROM THE RETURN OF INCOME FILED FOR AY 2003-04 TO 2005-06 THAT THE ASSESSEE HAD SHOWN GROS S RECEIPTS FROM THE SAID BUSINESS AT RS. 92,500/-, RS. 97,600/- AND RS. 97,600/-, WHILE, CLAIMED EXPENDITURE OF RS. 4,77,211/-, RS. 4 ,66,680/- AND RS. 4,81,683/- RESPECTIVELY FOR THE ABOVE AYS RESULTING IN NET LOSS IN ALL 3 ITA NOS. 59 & 60/H/17 RAPOL RAVINDRANATH, HYD. THE RESPECTIVE YEARS. HE OBSERVED THAT ASSESSEE HAD CLAIMED EXPENDITURE MORE THAN 400% OF THE GROSS RECEIPTS, W HICH ACCORDING TO HIM, IS TOO HIGH. WHEN ASKED FOR EXPLANATION, ASSES SEE SUBMITTED THAT HE WAS CARRYING ON TRAINING INSTITUTE DURING THE AB OVE AYS AND PURCHASED COMPUTERS AND FILED RELEVANT BILL COPIES TO THIS EFFECT. THE TRANSACTIONS WERE RECORDED IN THE PERSONAL BOOKS, W HICH ARE UNDER SEIZED MATERIAL A/R/RR/8X9. HE SUBMITTED THAT THE BUSINESS COULD NOT RUN ON PROFITABLE LINES AND HAD TO BE DISCONTIN UED LATER AND ALL THE TRANSACTIONS WERE DULY RECORDED IN THE REGULAR RETU RNS FILED MUCH BEFORE THE SEARCH. HE PRAYED THAT LOSS AS PER THE S EIZED BOOKS MAY BE ACCEPTED. 4.1 AO DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESS EE AND MADE THE ADDITION OF ENTIRE EXPENDITURE CLAIMED BY THE A SSESSEE EXCLUDING DEPRECIATION ON ASSETS. I.E. RS. 2,46,522/- IN THE AY 2004-05. 4.2. AGGRIEVED WITH THE ABOVE ORDER, ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY OBSERVING THAT GROUNDS WERE COVERED AGAINST THE ASSESSEE BY THE ORDER OF CIT(A) FOR THE AY 2006-07 AND ALSO OBSERVE D THAT DURING THE APPEAL PROCEEDINGS, THE AR OF THE ASSESSEE DID NOT PRESS GROUNDS AND ACCORDINGLY, GROUND WAS DISMISSED. 4.3 AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSE E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE COMMON IN BOTH THE APPEALS, EXCEPT THE QUANTUM OF DISALLOW ANCE: 1. THE LEARNED COMMISSIONER OF INCOME TAX IS NOT JU STIFIED IN SUSTAINING THE DISALLOWANCE OF EXPENDITURE ESPECIAL LY WHEN THE SAID EXPENDITURE OF RS.2,46,522/- WAS RECORDED IN T HE SEIZED BOOKS. 2. THE FIRST APPELLATE AUTHORITY IS NOT JUSTIFIED I N HOLDING THAT THE AR DID NOT PRESS THE GROUND NO.6, IGNORING THE DETAILED WRITTEN SUBMISSIONS FILED. 4 ITA NOS. 59 & 60/H/17 RAPOL RAVINDRANATH, HYD. 3. THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUS TIFIED IN NOT ADJUDICATING THE GROUND NO.6(B) INSPITE OF THE DETA ILED SUBMISSION MADE IN THIS REGARD. 4. THE LEARNED FIRST APPELLATE AUTHORITY IS NOT JUS TIFIED IS NOT ADJUDICATING THE GROUND NOS RAISED IN THE FIRST APP EAL. 5. THE APPELLANT CRAVES LEAVE TO ADD AMEND OR ALTER ANY OF THE GROUNDS AT THE TIME OF THE HEARING OF THE APPEAL. 5. LD. AR BROUGHT TO OUR NOTICE GROUND NOS. 6 & 7 R AISED BEFORE THE CIT(A) IN WHICH ASSESSEE HAS RAISED AND AGITATE D DISALLOWANCES MADE BY THE AO. HE SUBMITTED THAT WRITTEN SUBMISSIO N WAS FILED BEFORE THE CIT(A) IN WHICH ASSESSEE HAS MADE SUBMIS SIONS WITH REGARD TO ERROR IN COMPUTATION OF INCOME IN AY 2004 -05 AND 2005-06 ALONG WITH OTHER ADDITIONS AND DISALLOWANCES UNDER 153A ALONG WITH RELEVANT CASE LAWS. HE SUBMITTED THAT AO HAS MADE GRAVE ERROR IN MAKING ADDITION IN THE ASSESSMENT ORDER IN WHICH AO HAS MADE DISALLOWANCE OF BUSINESS LOSS TOWARDS UNVOUCHED EXP ENDITURE OF RS. 2,46,522/- INSTEAD OF COMPUTING INCOME FROM BUSINES S AS A SEPARATE HEAD WHICH HE HAS FAILED TO DO. HE FURTHER SUBMITTE D THAT AO CANNOT MAKE ANY DISALLOWANCE WHEN THE DEPARTMENT HAS NOT F OUND ANY INCRIMINATING MATERIAL DURING THE COURSE OF SURVEY. FOR THIS PROPOSITION, HE SUBMITTED THAT THERE ARE CATENA OF CASES IN WHICH IT IS HELD THAT NO ADDITION CAN BE MADE WITHOUT ANY INCRI MINATING MATERIAL FOUND IN THE SEARCH. LD. AR RELIED ON THE FOLLOWING CASES: 1. CIT VS. CONTINENTAL WAREHOUSING CORP., 375 ITR 645 (BOM.) 2. DCIT VS. LINGAM TULSI PRASAD, 49 ITR 218 (HYD. 6. LD. DR, AT THE OUTSET, BESIDES SUPPORTING THE OR DERS OF REVENUE AUTHORITIES, SUBMITTED THAT ASSESSEE HAS NOT PRESSE D THE GROUNDS RAISED BEFORE THE CIT(A). HOWEVER, HE SUBMITTED THA T HE COULD NOT SUBMIT ANY INFORMATION IN THIS REGARD AS HE DID NOT HAVE THE RELEVANT FILE OF CIT(A). 5 ITA NOS. 59 & 60/H/17 RAPOL RAVINDRANATH, HYD. 7. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. AS PER THE RECORD, IT IS NOTICED THAT AS SESSEE HAS INCURRED MORE EXPENDITURE THAN THE ACTUAL GROSS REVENUE FROM THE BUSINESS. ASSESSEE HAS FILED ALL THIS INFORMATION IN THE ORIG INAL RETURN OF INCOME BEFORE THE SEARCH PROCEEDINGS AND THE SAME WAS FOU ND TO BE PROPER AS PER THE RECORDS SUBMITTED BEFORE US AND REVENUE AUTHORITIES. THERE IS NO DISPUTE ABOUT THE INFORMATION FILED AND LOSS CLAIMED BY THE ASSESSEE. THE ONLY DISPUTE BEFORE US IS WHETHER THE AO HAS DISALLOWED PORTION OF THE BUSINESS LOSS WHILE COMPU TING TAXABLE INCOME INSTEAD OF CALCULATING UNDER THE HEAD INCOME FROM BUSINESS. AS PER THE NORMAL PROVISIONS OF THE ACT, FOR DETERM INING TAXABLE INCOME, INCOME SHOULD BE DETERMINED BASED ON 5 HEAD S OF INCOME. ACCORDINGLY, AO SHOULD HAVE CALCULATED INCOME FROM BUSINESS SEPARATELY INSTEAD OF DISALLOWING ADHOC BUSINESS LO SS. IN OUR CONSIDERED OPINION, AO CANNOT DISALLOW PORTION OF B USINESS LOSS WITHOUT SUBSTANTIATING THE REASON FOR DISALLOWING S UCH ADHOC AMOUNT WITH PROPER REASONING AND ALSO WITHOUT ANY INCRIMIN ATING MATERIAL FOUND DURING THE SEARCH PROCEEDINGS. AS BROUGHT TO OUR NOTICE BY LD. AR, IN AY 2006-07, THE CIT(A) HAS GIVEN PARTIAL REL IEF TO THE ASSESSEE, AS UNDER: 4. WITH REGARD TO GROUND NOS.5, IT IS SEEN THAT THE APPELLANT HAS FAILED TO FURNISH EVIDENCE BY WAY OF VOUCHERS E TC. TO SUBSTANTIATE THE CLAIM OF LOSS FROM PROPRIETORY BUS INESS IN THE NAME OF M/S.RAVIRIDERNATH INFOTECH TO THE EXTENT OF RS66,436/- IN VIEW OF THE SAME, THE ASSESSING OFFICER HAS RIGH TLY DECLINED TO ALLOW THE APPELLANT'S CLAIM OF THE SAID BUSINESS LOSS. THEREFORE, THIS GROUND IS REJECTED. 5. WITH REGARD TO GROUND NOS.6 AND 7, IT IS SEEN TH AT THE ASSESSING OFFICER HAD COMPUTED THE INCOMES UNDER VA RIOUS HEADS. THEREFORE, THERE IS NO JUSTIFICATION IN MAKI NG SEPARATE DISALLOWANCE IN RESPECT OF BUSINESS LOSS TOWARDS UN VOUCHED EXPENDITURE, AS THIS AMOUNTS TO DISALLOWING AN EXPE NDITURE WHICH HAS NOT BEEN ALLOWED, RESULTING IN DOUBLE DIS ALLOWANCE. THEREFORE, THE SAID ADDITION OF RS.66,436/- RELATIN G TO BUSINESS LOSS TOWARDS UNVOUCHED EXPENDITURE, IS HEREBY DELET ED AND GROUND NOS.6 AND 7 ARE ALLOWED ACCORDINGLY. 6 ITA NOS. 59 & 60/H/17 RAPOL RAVINDRANATH, HYD. AS PER THE ABOVE PARAS, ASSESSEE HAS NOT FURNISHED ANY EVIDENCE BY WAY OF VOUCHERS TO SUBSTANTIATE THE CLAIM OF LOSS A ND ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS REJECTED. HOWEVER, LD. CI T(A) DELETED THE ADDITION AS THERE IS NO JUSTIFICATION IN MAKING SEP ARATE DISALLOWANCE IN RESPECT OF BUSINESS LOSS TOWARDS UNVOUCHED EXPENDIT URE AS THIS AMOUNTS TO DISALLOWING EXPENDITURE WHICH HAS NOT BE EN ALLOWED, RESULTING IN DOUBLE DISALLOWANCE. ACCORDINGLY, IN T HE CURRENT AY ALSO THE AO HAS MADE SEPARATE DISALLOWANCE IN RESPECT OF BUSINESS LOSS TOWARDS UNVOUCHED EXPENDITURE WHICH ALSO RESULTS IN DOUBLE DISALLOWANCE. IN OUR OPINION, ADDITION OF RS. 2,46, 522/- DESERVES TO BE DELETED. WE ORDER ACCORDINGLY. 8. WITH REGARD TO GROUND NO. 4 RELATING TO NO INCRI MINATING MATERIAL FOUND DURING SEARCH, WE OBSERVE THAT WHEN THERE IS NO INCRIMINATING MATERIAL FOUND DURING SEARCH, THE ADDITION CANNOT B E MADE. THE SAME WAS SUPPORTED BY THE CASE LAWS SUBMITTED BEFORE US. SINCE WE HAVE ALREADY DELETED THE ADDITION MADE BY THE AO, THIS G ROUND BECOMES ACADEMIC IN NATURE. 9. WITH REGARD TO CIT(A)S OBSERVATION THAT ASSESSE E HAS NOT PRESSED THE GROUNDS RAISED BEFORE HIM, THE BENCH AS KED THE DR TO SUBSTANTIATE BY SUBMITTING RELEVANT INFORMATION FRO M CIT(A) RECORDS. SINCE THERE IS NO EVIDENCE BROUGHT ON RECORD TO SUB STANTIATE THAT ASSESSEE HAS IN FACT NOT PRESSED THIS GROUND, GROUN D RAISED BY THE ASSESSEE IS ALLOWED. 10. AS THE FACTS AND GROUNDS ARE MATERIALLY IDENTIC AL IN AY 2005-06 ARE SIMILAR TO THE AY 2004-05, FOLLOWING THE DECISI ON THEREIN, WE ALLOW THE APPEAL IN AY 2005-06. 7 ITA NOS. 59 & 60/H/17 RAPOL RAVINDRANATH, HYD. 11. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERA TION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHMAN ) VICE PRESIDENT AC COUNTANT MEMBER HYDERABAD, DATED: 22 ND SEPTEMBER, 2017. KV COPY TO:- 1) RAPOL RAVINDRANATH, C/O CH. PARTHASRATHY & CO., 1-1-298/2/B/3, 1 ST FOOR, SOWBHAGYA AVENUE, ST. NO. 2, ASHOKNAGAR, HYDERABAD 500 020 2) ACITO, CIRCLE 9(1), IT TOWERS, MASAB TANK, H YDERABAD. 3) CIT(A) - 7, HYDERABAD 4 PR. CIT -7, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE