Lopinti Ramesh, Visakhapatnam V. THE ITO, Srikakulam

ITA 65/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9638 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M NARAYANA RAO
• Keywords: Unexplained cash credit; Unexplained expenditure; Salary income; Source of fund
• Section: 143(3); 142(1); 68

Judgement Text

ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.65/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) L. RAMESH SRIKAKULAM VS. ITO, WARD - 2, SRIKAKULAM [PAN: AFUPL8411M ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI M. NARAYANA RAO, DR / DATE OF HEARING : 06.12.2016 / DATE OF PRONOUNCEMENT : 23.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A)-2, VISAKHAPATNAM DATED 29.12.2014 AND IT PER TAINS TO THE ASSESSMENT YEAR 2011-12. ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING IN IMFL, FILED H IS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 30.9.2011 DECLARING TOTAL INCOME OF ` 5,84,460/-. THE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICES U/S 143(2) & 142(1) OF THE INCOME TAX ACT, 1961 (HE REINAFTER CALLED AS 'THE ACT') WERE ISSUED. IN RESPONSE TO NOTICES, TH E ASSESSEE NEITHER APPEARED NOR FILED ANY DETAILS. THEREFORE, A SHOW CAUSE NOTICE DATED 24.12.2013 WAS SERVED ON THE ASSESSEE. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE HAS FILED WRITTEN REPLY ON 13. 3.2014. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT, DET ERMINING TOTAL INCOME OF ` 94,68,940/- BY MAKING FOLLOWING ADDITIONS. 1. ESTIMATION OF INCOME AT 20% OF STOCK PUT TO SALE ` 44,69,869/-. 2. UNEXPLAINED AMOUNT OF ` 10,25,021/-. 3. UNEXPLAINED CREDIT IN CAPITAL ACCOUNT OF ` 8,14,500/-. 4. UNEXPLAINED UNSECURED LOANS OF ` 31 LAKHS 5. INCOME BROUGHT UNDER INCOME FROM OTHER SOURCES OF ` 59,550/-. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE AS SESSEE HAS FILED WRITTEN SUBMISSIONS AND COPIES OF CONFIRMATION LETT ERS FILED BEFORE THE A.O. TO SUBSTANTIATE LOAN CREDITORS AND CREDITS IN CAPITAL ACCOUNTS. THE ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 3 CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE AS SESSEE, FOR THE DETAILED DISCUSSION IN HIS ORDER DATED 29.12.2014, AND SCALED DOWN ESTIMATION OF NET PROFIT FROM 20% TO 10% OF THE PUR CHASE PRICE, HOWEVER, CONFIRMED ADDITIONS MADE BY THE A.O. TOWAR DS UNEXPLAINED AMOUNT, UNEXPLAINED CREDITORS, UNEXPLAINED CREDIT I N CAPITAL ACCOUNT AND INCOME FROM OTHER SOURCES. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON IS ESTIMATION OF NET PROFIT FROM THE BUSINESS. THE A.O. REJECTED BO OKS OF ACCOUNTS AND ESTIMATED NET PROFIT OF 20% ON TOTAL STOCK PUT TO S ALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEES BOOKS OF ACCOUNTS A RE NOT SUSCEPTIBLE FOR VERIFICATION AND ALSO THE ASSESSEE FAILED TO SUBSTA NTIATE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT WITH NECESSARY EVIDENCES. THE A.O. FURTHER WAS OF THE OPINION THAT THE ASSESSEE COULD NOT PRODUCE STOCK REGISTERS AND ALSO FAILED TO FURNISH QUANTITATIVE D ETAILS RELATING TO SALES AND CLOSING STOCK. THEREFORE, REJECTED BOOKS OF AC COUNTS AND ESTIMATED NET PROFIT OF 20% ON TOTAL STOCK PUT FOR SALE. IT IS THE CONTENTION OF THE ASSESSEE THAT NET PROFIT ESTIMATED BY THE A.O. IS V ERY MUCH ON HIGHER SIDE. THE ASSESSEE FURTHER CONTENDED THAT UNDER SI MILAR FACTS AND CIRCUMSTANCES AND SIMILAR NATURE OF BUSINESS, THE C OORDINATE BENCH OF ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 4 ITAT, VISAKHAPATNAM IN THE CASE OF K. HEMA SUNDAR R AO AND OTHERS IN ITA NO.616/VIZAG/2014 DATED 23.6.2016 HELD THAT EST IMATION OF NET PROFIT AT 5% IS REASONABLE. SINCE, THE FACTS ARE S IMILAR IN THE PRESENT CASE AS THAT OF THE CASE DECIDED BY THE ITAT, IT IS PRAYED THAT SIMILAR ESTIMATION MAY KINDLY BE CONSIDERED. 5. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATER IAL ON RECORD, WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR SET OF FACTS HAS DIRECTED THE A.O. TO ESTIMATE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. THE RELEVANT PORT ION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. TH E A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN S TOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NO T SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOU NTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HONB LE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROF IT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF BUSINE SS CARRIED ON BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRES ENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASS ESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRAD E WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGES C ORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STATE G OVERNMENT. THE ASSESSEE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELYING UPON THE DE CISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 5 RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH COUR T HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THEREFORE, WE ARE OF THE VIEW THA T THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY T HE ASSESSEE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS TH AT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELEVAN T PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF PROFIT AT 16% IS HI GH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF PROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE ORDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE VIEW THA T THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHE R CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREI GN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESS EE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE AS SESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERM INED SHOULD BE BELOW THE INCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BEN CH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYIN G UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESSEE REL IED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BENCH UNDER SIM ILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOTAL PURCHASES N ET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REV ENUE TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE CO ORDINATE BENCH. THEREFORE, WE DIRECT THE A.O. TO ESTIMATE THE NET P ROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. ORDERED ACCORDING LY. ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 6 6. IN THIS VIEW OF THE MATTER AND ALSO RESPECTFULLY FOLLOWING THE RATIO OF COORDINATE BENCH OF THE TRIBUNAL, IN THE CASE OF K. HEMA SUNDAR RAO VS. ITO (SUPRA), WE DIRECT THE A.O. TO ESTIMATE NET PROFIT OF 5% ON TOTAL STOCK PUT FOR SALE NET OF ALL DEDUCTIONS. 7. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ADDITION TOWARDS UNEXPLAINED AMOUNT, UNEXPLAINED CREDITORS, UNEXPLAINED CREDITS IN CAPITAL ACCOUNT AND INCOME FROM OTHER SOURCES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE HAS SHOWN UNSECURED LOANS OF ` 31 LAKHS, OPENING CAPITAL OF ` 8,14,500/- AND INCURRED INITIAL EXPENDITURE AGGREGATING TO ` 49,39,521/- TOWARDS INITIAL LICENSE FEES PAID FOR PROCURING LICENSE, BANK DEPOS ITS AND BANK GUARANTEE COMMISSION. THE A.O. CALLED UPON THE ASS ESSEE TO EXPLAIN THE NATURE AND SOURCE OF CREDITORS AND ALSO SOURCES FOR AMOUNT OF OPENING CAPITAL BROUGHT FORWARD FROM PREVIOUS FINAN CIAL YEARS. THE A.O. ALSO CALLED UPON THE ASSESSEE TO EXPLAIN THE SOURCE S FOR INITIAL EXPENDITURE INCURRED FOR PAYING LICENSE FEES AND BA NK GUARANTEE DEPOSITS. IN RESPONSE TO SHOW CAUSE NOTICE, THE AS SESSEE SUBMITTED THAT OPENING CAPITAL WAS BROUGHT FORWARD FROM EARLI ER YEAR WAS OUT OF HIS PAST SAVINGS FROM HIS PREVIOUS EMPLOYMENT AND O THER INCOME. IN RESPECT OF UNSECURED LOANS, THE ASSESSEE HAS FILED CONFIRMATION LETTER ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 7 FROM THE PARTIES. IN SO FAR AS INITIAL EXPENDITURE TOWARDS LICENSE FEES AND BANK GUARANTEE COMMISSION, THE ASSESSEE EXPLAIN ED THAT SOURCES FOR EXPENDITURE IS MET OUT OF UNSECURED LOANS BORRO WED FROM FRIENDS AND RELATIVES AND ALSO OPENING CAPITAL BROUGHT FORW ARD FROM PREVIOUS FINANCIAL YEAR. 8. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE OBSERVED THAT THE ASSESSEE FAILED TO SUBSTANTIATE U NSECURED LOANS WITH NECESSARY EVIDENCES. THOUGH, THE ASSESSEE FILED CO NFIRMATION LETTERS FROM UNSECURED LOANS, THE CONFIRMATION LETTERS FILE D ARE IN PROTOTYPE FORM WITHOUT ANY DETAILS AS TO HOW LOAN WAS BORROWE D FROM THE CREDITORS. THE ASSESSEE ALSO FAILED TO PROVE THE C REDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THEREFORE, OPINED THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY, GENUINENESS OF THE TR ANSACTIONS AND CREDITWORTHINESS OF THE PARTIES TO PROVE THE UNSECU RED LOANS. IN SO FAR AS OPENING CAPITAL BALANCE IS CONCERNED, THE A.O. O BSERVED THAT THE ASSESSEE FAILED TO FILE ANY EVIDENCE TO PROVE SOURC ES FOR OPENING CAPITAL. THE ASSESSEE ALSO FAILED TO DEMONSTRATE HOW WITH A MEAGER SALARY OF ` 10,000/- PER MONTH COULD SHOW SUCH A HUGE OPENING C APITAL. THEREFORE, OPINED THAT THE ASSESSEE FAILED TO PROVE THE SOURCE S FOR OPENING CAPITAL BROUGHT FORWARD FROM PREVIOUS FINANCIAL YEAR. IN S O FAR AS UNEXPLAINED ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 8 AMOUNT OF ` 10,25,021/-, THE A.O. HELD THAT OUT OF TOTAL EXPEN DITURE AGGREGATING ` 49,39,521/-, SUM OF ` 39,14,500/- HAS BEEN EXPLAINED OUT OF UNSECURED LOANS, STATED TO BE RECEIVED FROM FRIE NDS AND RELATIVES AND OPENING CAPITAL BROUGHT FORWARD FROM PREVIOUS FINAN CIAL YEAR. SINCE, ADDITIONS ARE MADE TOWARDS OPENING CAPITAL AND UNSE CURED LOANS, TELESCOPED SOURCE TO THE EXTENT OF ` 39,14,500/- AND BALANCE AMOUNT WAS TREATED AS UNEXPLAINED EXPENDITURE AND BROUGHT TO TAX. SIMILARLY, THE A.O. TREATED INTEREST INCOME FROM BANK DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOURCES. 9. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS BOR ROWED UNSECURED LOANS TO MEET THE REQUIREMENT TO PAY LICENSE FEE AN D INITIAL EXPENDITURE FROM HIS FRIENDS AND RELATIVES AND FILED NECESSARY CONFIRMATION LETTER FROM THE CREDITORS TO PROVE THE IDENTITY AND GENUIN ENESS OF THE TRANSACTIONS. THE A.R. FURTHER SUBMITTED THAT ALL THE CREDITORS ARE AGRICULTURISTS HAVING SUFFICIENT SOURCE OF INCOME I N THE FORM OF AGRICULTURAL INCOME AND FILED NECESSARY PATTADAR PA SS BOOKS TO PROVE THE LAND HOLDING AND EARNING OF AGRICULTURAL INCOME. T HE A.R. FURTHER SUBMITTED THAT IN SO FAR AS OPENING CAPITAL BALANCE , THE ASSESSEE HAS BROUGHT FORWARD OPENING CAPITAL OF ` 8,14,500/- AND THE SOURCE OF WHICH WAS EXPLAINED TO THE ASSESSING OFFICER BY FILING NE CESSARY EVIDENCES. ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 9 THE ASSESSEE WAS IN EMPLOYMENT FOR OVER 20 YEARS AN D OUT OF HIS SALARY INCOME AND OTHER INCOME, THE ASSESSEE HAS EXPLAINED THE SOURCE, THEREFORE, THE A.O. WAS NOT CORRECT IN MAKING ADDIT IONS TOWARDS OPENING CAPITAL. IN SO FAR AS ADDITIONS TOWARDS UNEXPLAINE D AMOUNT BEING DIFFERENCE BETWEEN INITIAL EXPENDITURE INCURRED TOW ARDS LICENSE FEES AND BANK GUARANTEE DEPOSIT AND COMMISSION AND SOURCES A VAILABLE IN THE FORM OF UNSECURED LOAN AND OPENING CAPITAL, THE A.R . SUBMITTED THAT WHEN BOOKS OF ACCOUNTS ARE REJECTED AND PROFIT IS E STIMATED, THE A.O. WAS ERRED IN MAKING SEPARATE ADDITIONS TOWARDS EXPE NDITURE. WHEN NET PROFIT IS ESTIMATED ON GROSS RECEIPTS, IT WILL TAKE CARE OF EXPENDITURE INCURRED IN CONNECTION WITH THE BUSINESS AND HENCE, MAKING SEPARATE ADDITIONS TOWARDS FEW EXPENDITURES AMOUNTS TO DOUBL E ADDITION. THE A.R. FURTHER SUBMITTED THAT IF YOU TAKE INTO ACCOUN T THE TOTAL ADDITIONS MADE BY THE A.O. TOWARDS UNEXPLAINED EXPENDITURE AN D ESTIMATION OF NET PROFIT, THE PROFIT WOULD GO UP TO 42.1%, WHICH IS VERY MUCH ON HIGHER SIDE WHEN COMPARED TO THE NATURE OF BUSINESS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THOUGH ASSESSEE FILED NECESSARY EVIDENCES BEFORE THE LOWER AUTHORITIES, THE LOWER AUTHORITIES FAILED TO APPRECIATE THE FACTS IN RIGHT PERSPECTIVE, THEREFORE, REQUESTE D TO GIVE ONE MORE OPPORTUNITY TO SUBSTANTIATE THE CLAIM WITH NECESSAR Y EVIDENCES AND ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 10 ACCORDINGLY REQUESTED TO SET ASIDE THE ISSUE TO THE FILE OF THE A.O. FOR FURTHER VERIFICATION. 10. THE LD. D.R. ON THE OTHER HAND STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). THE D.R. FURTHER SUBMITTED THAT THE AS SESSEE FAILED TO FILE NECESSARY EVIDENCES BEFORE THE A.O. TO SUBSTANTIATE THE UNSECURED LOANS AND INITIAL EXPENDITURE INCURRED TOWARDS PAYMENT OF LICENSE FEES AND BANK GUARANTEE DEPOSIT ALONG WITH BANK GUARANTEE CO MMISSION. THE ASSESSEE ALSO FAILED TO FURNISH SUFFICIENT EVIDENCE S BEFORE THE CIT(A). THEREFORE, THE ADDITIONS MADE BY THE A.O. SHOULD BE UPHELD. 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITIONS TOWARDS UNSECURED LOANS, UNEXPL AINED CREDITS IN CAPITAL ACCOUNT AND UNEXPLAINED EXPENDITURE FOR THE REASON THAT THE ASSESSEE FAILED TO SUBSTANTIATE CREDITORS WITH NECE SSARY EVIDENCES. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS INCURRE D HUGE EXPENDITURE TOWARDS LICENSE FEES AND OTHER EXPENDITURE, HOWEVER , FAILED TO SUBSTANTIATE THE SOURCES FOR THE EXPENDITURE. THOU GH ASSESSEE FILED CONFIRMATION LETTERS FROM THE CREDITORS TO PROVE TH E IDENTITY, FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND CREDI TWORTHINESS OF THE PARTIES. THE CONFIRMATION LETTERS FILED BY THE ASS ESSEE ARE PROTOTYPE ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 11 FORM WITHOUT ANY DETAILS AS TO HOW THE LOAN WAS BOR ROWED FROM THE CREDITORS. IN THE ABSENCE OF NECESSARY PROOF, THE A.O. OPINED THAT THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON HIM U/S 68 OF THE ACT TO PROVE THE CREDITORS TO THE SATISFACTION OF THE A.O. IN SO FAR AS OPENING CAPITAL IS CONCERNED, THE A.O. OBSERVED THAT THOUGH ASSESSEE CLAIMS TO HAVE BROUGHT FORWARD OPENING CAPITAL OUT OF SAVINGS , THE ASSESSEE FAILED TO PROVE THE SOURCES FOR SUCH A HUGE OPENING CAPITA L BALANCE WITH NECESSARY EVIDENCES. THE ASSESSEE ALSO FAILED TO P ROVE HOW WITH A MEAGER SALARY OF ` 10,000/- PER MONTH CAN ACCUMULATE SUCH A HUGE OPENING CAPITAL BALANCE. SIMILARLY, THE A.O. OBSER VED THAT THE ASSESSEE FAILED TO PROVE THE SOURCES FOR THE EXPENDITURE INC URRED FOR PAYMENT OF LICENSE FEES AND BANK GUARANTEE DEPOSIT AND COMMISS ION. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAS FURNISHED NE CESSARY DETAILS BEFORE THE A.O. TO PROVE THE UNSECURED LOANS AND CREDITS I N CAPITAL ACCOUNT. THE ASSESSEE FURTHER CONTENDED THAT THE SOURCES FOR THE INITIAL EXPENDITURE WAS OUT OF UNSECURED LOANS BORROWED FRO M FRIENDS AND RELATIVES AND ALSO OUT OF OPENING CAPITAL BROUGHT F ORWARD FROM EARLIER YEARS. THE ASSESSEE FURTHER CONTENDED THAT HE HAD FILED NECESSARY DETAILS TO PROVE THE IDENTITY, GENUINENESS OF TRANS ACTIONS AND CREDITWORTHINESS OF THE PARTIES, THEREFORE, THE A.O . WAS ERRED IN MAKING ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 12 ADDITIONS TOWARDS UNSECURED LOANS, CREDITS IN CAPIT AL ACCOUNTS AND UNEXPLAINED AMOUNT. 12. HAVING HEARD BOTH SIDES, WE DO NOT FIND ANY MER ITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A SSESSEE FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS AND CREDITWOR THINESS OF THE PARTIES. ALTHOUGH, THE ASSESSEE FILED CONFIRMATION LETTERS FROM THE CREDITORS, ALL THE CONFIRMATION LETTERS ARE IN PROT OTYPE FORM WITHOUT ANY DETAILS AS TO HOW THE LOAN WAS ACCEPTED. THOUGH AS SESSEE CLAIMS TO HAVE ACCEPTED THE LOAN FROM AGRICULTURISTS, FAILS T O PROVE THE SOURCES OF THE CREDITORS TO SUBSTANTIATE THE CREDITWORTHINESS OF THE PARTIES. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE ITS INITIAL ONUS CAST UPON HIM BY FURNISHING NECESS ARY IDENTITY, CREDITWORTHINESS OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS. ACCORDINGLY, WE UPHOLD ADDITION MADE BY THE A.O. I N SO FAR AS ADDITIONS TOWARDS OPENING CAPITAL IS CONCERNED, THOUGH ASSESS EE CLAIMS TO HAVE EXPLAINED THE SOURCES FOR OPENING CAPITAL OUT OF HI S PAST SAVINGS, THE ASSESSEE FAILED TO PROVE THE SOURCES WITH NECESSARY EVIDENCES. THE ASSESSEE CLAIMS TO HAVE SAVINGS OUT OF HIS SALARY I NCOME, HOWEVER, ON PERUSAL OF THE SUBMISSIONS OF THE ASSESSEE, THE ASS ESSEE HIMSELF ADMITTED THAT HE WAS WORKING WITH A MEAGER SALARY O F ` 10,000/- PER ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 13 MONTH. THE ASSESSEE FAILED TO DEMONSTRATE HOW WITH A MEAGER SALARY OF ` 10,000/- PER MONTH COULD SHOW SUCH A HUGE OPENING OF CAPITAL OF ` 8,14,500/-. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE FAILED TO PROVE THE SOURCES FOR OPENING CAPITAL BROUGHT FORWA RD FROM PREVIOUS YEARS AND ACCORDINGLY, THE A.O. HAS RIGHTLY MADE AD DITIONS. 13. IN SO FAR AS UNEXPLAINED AMOUNT BEING DIFFEREN CE BETWEEN INITIAL EXPENDITURE INCURRED AND SOURCES IN THE FORM OF UNE XPLAINED CREDITS AND OPENING CAPITAL BALANCE, THE ASSESSEE FAILS TO PROV E THE SOURCES FOR INITIAL EXPENDITURE INCURRED TOWARDS PAYMENT OF LICENSE FEE S AND BANK GUARANTEE DEPOSIT ALONG WITH COMMISSION. ALTHOUGH THE ASSESSEE CLAIMS TO HAVE SOURCES OUT OF OPENING CAPITAL BROUGHT FORW ARD FROM PREVIOUS FINANCIAL YEAR AND UNSECURED LOANS BORROWED FROM FR IENDS AND RELATIVES, WE FIND THAT THE A.O. HAS ALLOWED TELESCOPING BENEF IT TO THE EXTENT OF UNSECURED LOANS AND OPENING CAPITAL CLAIMED BY THE ASSESSEE AND MADE ADDITIONS TOWARDS DIFFERENCE AMOUNT OF ` 10,25,021/- WHICH WAS NOT EXPLAINED WITH ANY SOURCES OF INCOME. THEREFORE, W E ARE OF THE VIEW THAT THE A.O. HAS RIGHTLY MADE ADDITIONS TOWARDS UN EXPLAINED AMOUNT. ACCORDINGLY, WE UPHOLD THE ADDITIONS MADE BY THE A. O. IN SO FAR AS ASSESSEES CLAIM THAT THE A.O. HAS NOT CONSIDERED R ELEVANT MATERIALS AND ACCORDINGLY REQUESTED FOR ONE MORE OPPORTUNITY OF H EARING MAY BE GIVEN ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 14 TO SUBSTANTIATE HIS CLAIM. WE FIND THAT THE ASSESSE E HAD BEEN GIVEN SUFFICIENT OPPORTUNITY TO EXPLAIN THE CASE BEFORE T HE A.O. THOUGH SUFFICIENT OPPORTUNITY HAS BEEN GIVEN, THE ASSESSEE FAILED TO FILE NECESSARY EVIDENCES TO PROVE HIS CASE. EVEN BEFORE CIT(A), THE ASSESSEE FAILED TO FILE NECESSARY EVIDENCES TO JUST IFY THE ADDITIONS MADE BY THE A.O. THEREFORE, WE ARE OF THE VIEW THAT THE RE IS NO MERIT IN THE CLAIM OF THE ASSESSEE FOR ONE MORE OPPORTUNITY OF H EARING AND ACCORDINGLY THE SAME IS REJECTED. 14. IN SO FAR AS ADDITIONS TOWARDS INCOME FROM OTHE R SOURCES BEING INTEREST RECEIVED ON FIXED DEPOSITS, THE ASSESSEE C LAIMS THAT SINCE THE INTEREST RECEIVED IS FROM FIXED DEPOSIT KEPT IN BAN K FOR THE PURPOSE OF OBTAINING BANK GUARANTEE, THE INTEREST RECEIVED ON SUCH DEPOSITS SHOULD BE CONSIDERED AS GROSS RECEIPTS FROM BUSINESS FOR T HE PURPOSE OF ESTIMATION OF NET PROFIT. WE DO NOT FIND ANY MERITS IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT AT ANY STRETCH OF IMAGINATION INTEREST FROM FIXED DEPOSIT WHETHER OR NOT THE SAID DEPOSITS ARE KEPT FOR OBTAINING BANK GUARANTEE CANNOT BE CONSIDERED AS IN COME FROM BUSINESS. THEREFORE, WE ARE OF THE VIEW THAT THE A .O. HAS RIGHTLY TAXED INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES. ACCORDINGLY, THE ADDITION MADE BY THE A.O. IS UPHEL D. ITA NO.65/VIZAG/2015 L. RAMESH, SRIKAKULAM 15 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 RD DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 23.12.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT LOPINTI RAMESH, PROP. SRI BHARAT WINES, ICHAPURAM, RESIDENT OF H.NO.7-41, JAANA STREET, BUDITHI VILLAG E, SRIKAKULAM DIST. 2. / THE RESPONDENT THE ITO, WARD-2, SRIKAKULAM 3. + / THE CIT-2, VISAKHAPATNAM 4. + ( ) / THE CIT (A)-2, VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM