ITO, Ward-7(2), Hyderabad V. Sri Ganesh Communications, Hyderabad

ITA 606/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74726 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO. 606/HYD/2013 ASSESSMENT YEAR 2009-2010 INCOME TAX OFFICER, WARD 7(2) HYDERABAD. VS. M/S. GANESH COMMUNICATIONS, HYDERABAD PAN AAOFM 5769L (APPELLANT) (RESPONDENT) FOR REVENUE : MR. JEEVAN LAL LAVIDIYA FOR ASSESSEE : MR. A.V. RAGHURAM DATE OF HEARING : 13.03.2014 DATE OF PRONOUNCEMENT : 26.03.2014 ORDER PER B. RAMAKOTAIAH, A.M. THIS IS A REVENUE APPEAL AGAINST THE ORDER OF THE CIT(A)-VI, HYDERABAD DATED 28.01.2013. THE REVENUE HAS RAISED THE FOLLOWING GROUND WHICH IS MATERIAL FOR D ECIDING THE ISSUE : 2. THE LEARNED CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION, IN THE ABSENCE OF ANY EVIDENCE SUPPORTING THE CONTENTION OF PAYMENTS OF DISCOUNTS TO RETAILERS. U NLESS AND UNTIL THE DISCOUNTS RECEIVED FROM M/S. VODAFONE ARE PASSED ON RETAILERS, THE AMOUNTS HELD BY ASSESSEE A RE TO BE CONSIDERED AS REVENUE RECEIPTS ONLY. 2. BRIEFLY STATED, ASSESSEE, RETAIL DISTRIBUTOR O F ITC PRODUCTS AND ALSO RETAIL DISTRIBUTOR FOR VODAFONE ( MOBILE SERVICE PROVIDER), HAD FILED THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION ADMITTING AN INCOME OF RS.5,78, 829/-. THERE WAS SURVEY CONDUCTED U/S. 133A IN THE CASE. D URING THE 2 ITA.NO.606/HYD/2013 SRI GANESH COMMUNICATIONS, HYDERABAD. PROCEEDINGS IT WAS OBSERVED THAT ASSESSEE STARTED B USINESS OF ITC DEALERSHIP ON 01.08.2008 AND ON THE FIRST DAY O F BUSINESS THERE WERE SALES SHOWN AT RS.57,53,138/- AND CASH R ECEIPTS OF RS.57,53,099/- AGAINST THE SALES. AS ASSESSEE COULD NOT ADDUCE ANY EVIDENCE IN THE SHAPE OF SALES INVOICES, AS THERE WAS SOME PROBLEM IN SOFTWARE, AND ALSO IN THE MANNE R IN WHICH PRESCRIBED, THE A.O. PROCEEDED TO TREAT THE E NTIRE CASH RECEIPTS OF RS.57,53,099/- AS BOGUS AND THESE WERE BROUGHT TO TAX, OBSERVING THE SAME AS UNEXPLAINED INCOME INTRO DUCED IN THE GUISE OF SALES. THIS ADDITION WAS CONTESTED BY ASSESSEE AS GROUND NO.1 BEFORE THE CIT(A). THE OTHER ADDITION MADE WAS IN RESPECT OF DISCOUNT OF RS.23,53,065/-. THE A.O. IN THE ASSESSMENT ORDER OBSERVED THAT ASSESSEE HAD SHOWN G ROSS PROFIT OF 1.97% ON VODAFONE SALES AND ON THE TOTAL TURNOVER OF RS.17,09,73,226/-, VODAFONE HAD ALLOWED A DISCOUNT OF RS.23,53,065/- WHICH WAS NOT REFLECTED IN THE GROSS PROFIT. ON BEING QUESTIONED ABOUT THE DISCOUNTS, ASSESSEE REPL IED TO THE A.O. THAT ALL THE DISCOUNTS WERE GIVEN TO THE CUSTO MERS. AS NO EVIDENCE WAS ADDUCED FOR THE SAME, THE A.O. PROCEED ED TO BRING THE AMOUNT OF RS.23,53,065/- TO TAX. THIS ADD ITION WAS CONTESTED AS GROUND NO.2 BEFORE THE CIT(A. 2.1. ASSESSEE SUBMITTED VARIOUS DETAILS INCLUDING SALES AND COLLECTION FROM THE CUSTOMERS AND THE ADDITIONA L EVIDENCE PRODUCED BY ASSESSEE IN THE FORM OF DETAILS OF SALE INVOICES WERE FORWARDED TO THE A.O. CALLING FOR REMAND REPOR T AFTER VERIFICATION OF THE SAME. THE A.O. SUBMITTED THE RE PORT DATED 31.02.2012 ON THE BASIS OF WHICH, THE CIT(A) DELETE D THE ADDITIONS STATING AS UNDER : 5.4. I HAVE GONE THROUGH THE SUBMISSIONS OF THE AP PELLANT ALONG WITH THE FINDINGS/OBSERVATIONS OF THE A.O. IN ASSESSMENT ORDER AS WELL AS THE REMAND REPORT. AS C OULD 3 ITA.NO.606/HYD/2013 SRI GANESH COMMUNICATIONS, HYDERABAD. BE SEEN FROM THE FACTS OF THE CASE, THE APPELLANT F ROM IS HAVING A DISTRIBUTION AGENCY FOR ITC PRODUCTS, STAR TED DURING THE YEAR. THERE WAS SURVEY IN THIS CASE DURI NG THE YEAR. THE BUSINESS STARTED ON 01.08.2018 AND TH ERE WERE HUGE CASH SALES ON THE INITIAL FEW DAYS OF THE BUSINESS, WHICH WERE SUPPORTED BY THE NEEDED DOCUMENTS SUCH AS SALE BILLS ETC., WHICH COULD NOT BE FURNISHED BEFORE THE A.O. DUE TO THE SOFTWARE PROBL EMS, THAT HAS LED TO THE BELIEF TO THE A.O. THAT SUCH RE CEIPTS CONSTITUTE UNACCOUNTED INCOME OF THE APPELLANT IN T HE FORM OF UNEXPLAINED CREDITS. HOWEVER, THE SAID INFORMATION WAS VERIFIED BY THE A.O. DURING THE REM AND PROCEEDINGS AND THERE ARE NO ADVERSE REMARKS ON THE SUBMISSIONS OF THE APPELLANT. ACCORDINGLY, IT IS HE LD THAT THERE WAS NO GROUND FOR THE A.O. TO PRESUME THAT TH E CASH SALES REPRESENT THE UNEXPLAINED CREDITS, SINCE THE CASH SALES STAND EXPLAINED. ACCORDINGLY, THE ADDITI ON OF RS.57,53,099/- ON ACCOUNT OF BOGUS SALES, STAND DELETED. THIS GROUND OF APPEAL IS TREATED AS ALLOWE D. 2.2. ON THE ISSUE OF ADDITION IN RESPECT OF DISCOU NT OF RS.23,53,065/- THE LD. CIT(A) HELD AS UNDER : 6.4. PERUSED THE SUBMISSIONS OF THE APPELLANT ALON G WITH THE OBSERVATIONS OF THE A.O. IN ASSESSMENT ORDER AS WEL L AS THE REMAND REPORT. AS INDICATED, ASSESSEE FIRM STAR TED THE BUSINESS DURING THE YEAR WITH AGENCIES FROM M/S . ITC LTD., AND M/S. VODAFONE, AND IT WAS OBSERVED BY THE A.O. THAT AN AMOUNT OF RS.23,53,065/- REPRESENTED T HE CREDITS FROM M/S. VODAFONE, ON WHICH NO PROPER EXPLANATION WAS OFFERED AND AS SUCH THE ENTIRE AMOU NT WAS TREATED AS THE UNACCOUNTED INCOME OF THE APPELL ANT. HOWEVER, THE A.O. DID NOT EXAMINE THIS ASPECT CLEAR LY, DURING THE ASSESSMENT PROCEEDINGS, THERE BY RESULTI NG IN REFERRING THE MATTER TO THE A.O. FOR FURTHER EXAMIN ATION, BASED ON THE SUBMISSIONS OF THE APPELLANT. EVEN IN THE REMAND REPORT THE A.O. MENTIONED IT TO BE AN UNCLEA R STATEMENT. HOWEVER, ON EXAMINATION OF THE SAME, IT REVEALS THAT TRANSACTION RELATE TO THE INCENTIVE SC HEME OFFERED BY M/S. VODAFONE TO ITS CUSTOMERS/ SUBSCRI BERS, ROUTED THROUGH ITS AGENT, M/S. GANESH COMMUNICATIO NS, WHICH ARE SUPPORTED BY ACCOUNTING ENTRIES. AS SUCH THERE IS NO MARGIN/PROFIT AVAILABLE TO THE APPELLAN T, AS PER THE SUBMISSIONS/INFORMATION BROUGHT ON THE RECO RD. THE REMAND REPORT OF THE A.O. ALSO DO NOT CONTRACT THE CLAIMS OF THE APPELLANT, THOUGH THE RESERVATIONS 4 ITA.NO.606/HYD/2013 SRI GANESH COMMUNICATIONS, HYDERABAD. EXPRESSED ON THE METHOD OF THE ACCOUNT ADOPTED. UND ER THE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION T HAT THERE IS NO BASIS FOR THE A.O. TO TREAT THE AMOUNTS OF RS.23,53,065/- RECEIVED/CREDITED FROM M/S. VODAFONE , AS THE INCOME OF THE APPELLANT. ACCORDINGLY, THE AD DITION OF RS.23,53,065/- IS NOT SUSTAINABLE. 3. AFTER CONSIDERING THE REMAND REPORT AND ON BEIN G POINTED OUT BY THE A.O. THAT ASSESSEE HAS OFFERED A N AMOUNT OF RS.15 LAKHS ADDITIONAL INCOME DURING THE COURSE OF SURVEY PROCEEDINGS WHICH WAS NOT BROUGHT TO TAX SEPARATELY AS TWO SEPARATE ADDITIONS WERE MADE, LEARNED CIT(A) VIDE P ARA 7.2 CONFIRMED THE AMOUNT OF RS. 15 LAKHS AS ADDITIONAL INCOME AS UNDER : 7.2. THE SUBMISSIONS OF THE APPELLANT THROUGH THE REJOINDER TO THE REMAND REPORT ARE PERUSED ALONG WITH THE OBSERVATIONS OF THE A.O. IN THE REMAND REPORT. AS C OULD BE SEEN FROM THE FACTS OF THE CASE, ASSESSEE HAS OF FERED THE AMOUNT OF RS.15,00,000/- AS ADDITIONAL INCOME, DURING THE COURSE OF THE SURVEY PROCEEDINGS AND TAX ES WERE PAID ON SUCH INCOMES AND OFFERED THE SAME IN COMPUTING THE TAXABLE INCOME FOR THE YEAR. HOWEVER, THE A.O. HAS NOT CONSIDERED THE SAME, IN THE LIGHT OF T HE ADDITION MADE UNDER THE TWO HEADS SEPARATELY, AS INDICATED. AS THE SAID TWO SEPARATE ADDITIONS STAND DELETED, THE ADDITIONAL INCOMES OFFERED BY THE APPE LLANT, ON ACCOUNT OF SURVEY PROCEEDINGS, DO SURVIVE. THE APPELLANT HAS ENDORSED THE SAME, WHILE FURNISHING T HE SUBMISSIONS, IN RESPONSE TO THE REMAND REPORT OF TH E A.O. UNDER THE CIRCUMSTANCES, THE TOTAL TAXABLE INC OME COMPUTED AND OFFERED BY THE APPELLANT, IN FURNISHIN G THE RETURN OF INCOME IS HELD TO BE SUSTAINED. HENCE, TH E GROUND OF APPEAL IS TREATED AS PARTLY ALLOWED. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE REMAND REPORT OF THE A.O. DATED 03.12. 2012, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER O F THE CIT(A) AS HE HAS EXAMINED THE FACTS, GAVE OPPORTUNITY TO T HE A.O. AND DELETED THE ADDITION. SINCE NO PRINCIPLES OF LAW AR E INVOLVED AND BEING FACTUAL MATTER WHICH WAS VERIFIED, THERE IS NO MERIT 5 ITA.NO.606/HYD/2013 SRI GANESH COMMUNICATIONS, HYDERABAD. IN THE REVENUE APPEAL. NOTHING WAS BROUGHT ON RECOR D TO COUNTER THE FINDINGS OF THE LEARNED CIT(A). THEREFO RE, THE GROUND IS DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.03.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 26 TH MARCH, 2014 VBP/- COPY TO : 1. ITO, WARD 7(2), HYDERABAD 2. M/S. GANESH COMMUNICATIONS, 13-6-39/1A/21/3, BA LAJI NAGAR, GUDIMALKAPUR, HYDERABAD 28. 3. CIT(A) - VI, HYDERABAD. 4. CIT-VI, HYDERABAD 5. D.R. ITAT, B BENCH, HYDERABAD.