G Vasantha Kumari, Hyd, Hyderabad V. ITO, Ward 1(4), Hyd, Hyderabad

ITA 688/HYD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6031 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: T CHAITANYA KUMAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 688/HYD/2016 ASSESSMENT YEAR: 2006-07 G. VASANTHA KUMARI, SECUNDERABAD [PAN: ACSPG1941L] VS THE INCOME TAX OFFICER, WARD-10(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI T. CHAITANYA KUMAR, AR FOR REVENUE : SHRI K. J. RAO, DR DATE OF HEARING : 21-03-2017 DATE OF PRONOUNCEMENT : 31-03-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-9, HYDERABAD D ATED 27-01-2016, COMPLETED EX-PARTE. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN PASSING AN ORDER WITHOUT GIVING THE ASSESSEE PROPER OPPORTUNIT Y OF HEARING. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN WITHOUT GIVI NG FURTHER OPPORTUNITY. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE SEEN THE FACT THAT THE APPELLANT CASE IN NOT CONSIDERING BUSINESS LOSS. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACTS IN NOT CONSIDERING THE DEFICI T STOCK. I.T.A. NO. 688/HYD/2016 G. VASANTHA KUMARI :- 2 - : 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DISMISSING THE APPEAL WITHOUT CONSIDERING THE MERITS OF THE CA SE AND ERRED IN TREATING THE INTEREST INCOME AS INCOME FROM OTHER SOURCES. 2. BRIEFLY STATED ASSESSEE IS A PROPRIETRIX OF M/S RAG A DESIGNERS WHICH WAS ENGAGED IN RETAIL TRADE OF READYMADE GARMEN TS AND DRESS MATERIALS. FOR THE AY. 2006-07, ASSESSEE FILE D RETURN OF INCOME ON 03-11-2006 DECLARING TOTAL INCOME OF RS. 1 ,71,280/-. A SURVEY OPERATION WAS CONDUCTED IN THE BUSINESS PREMISE S OF ASSESSEE ON 09-01-2006. IN THE SUBSEQUENT SCRUTINY AS SESSMENT COMPLETED, THE ASSESSING OFFICER (AO) DISALLOWED THE LOSSES SHOWN FROM THE BUSINESS OF M/S. VASANTHA TYPEWRITING INSTITU TE AND M/S. VANDANA ENTERPRISES AND ALSO MADE AN ADDITION OF DEFI CIENCY OF STOCK TO AN EXTENT OF RS. 3,41,012/- AND ALSO TREATED T HE INTEREST INCOME AS INCOME FROM OTHER SOURCES. IT WAS THE CON TENTION OF ASSESSEE THAT ASSESSEE STOPPED DOING BUSINESS IN THE RE ADYMADE GARMENTS AND WAS DISPOSING OF THE EXISTING STOCK AT A D ISCOUNT. THERE WERE NO PURCHASES DURING THE YEAR AND SO THE D EFICIT OF STOCK DOES NOT ARISE AS THE SALE PRICE WAS AT A DISCOUNT. AS SESSEE REFERRED TO THE STATEMENT DURING THE SURVEY AND ALSO THE FACT THAT THE YEARS TURNOVER WAS ONLY RS. 4.43 LAKHS. 3. BEFORE THE LD.CIT(A), ASSESSEE PREFERRED THE APPEA L REITERATING THE SUBMISSION, BUT LD.CIT(A) DISMISSED THE APPEAL EX-PARTE STATING THAT NONE APPEARED FOR THE NOTICES ISSUED. FURT HER, LD.CIT(A) ALSO SUPPORTED THE ORDER OF THE AO ON MERITS. 4. IT WAS THE CONTENTION OF THE LD. COUNSEL THAT ASSESSEE HAS NOT RECEIVED NOTICES FROM THE CIT(A) AND SO THERE IS NO OPPORTUNITY TO EXPLAIN THE CONTENTIONS. IT WAS FURTHER SUBMITTED THAT A S CAN BE I.T.A. NO. 688/HYD/2016 G. VASANTHA KUMARI :- 3 - : SEEN FROM THE ASSESSMENT ORDER ITSELF, ASSESSEE WAS W ITHDRAWING FROM THE BUSINESS AND SO THERE WERE NO PURCHASES OF F RESH STOCK DURING THE YEAR AND THE OLD STOCK WAS BEING DISPOSED- OFF AS-IS- WHERE-IS BASIS AT A DISCOUNT. SINCE IT IS THE DEAD STOC K, THE LOSS IN THE BUSINESS SHOULD HAVE BEEN ALLOWED, RATHER THAN MAK ING AN ADDITION OF DEFICIT OF STOCK. WITH REFERENCE TO THE INTE REST INCOME, IT WAS SUBMITTED THAT THE FUNDS RECEIVED FROM THE BUSINESS, INSTEAD OF INVESTING IN THE BUSINESS, HAVE BEEN ADVANCED TO O THERS ON INTEREST AND THERE WAS INTEREST INCOME, OUT OF WHICH AO H IMSELF HAS ALLOWED THE EXPENDITURE OF SBI LOAN A/C. IT WAS S UBMITTED THAT THE INTEREST INCOME WAS BEING OFFERED AS BUSINESS IN COME IN EARLIER YEARS AND SO THERE IS NO NEED TO TREAT IT AS IN COME FROM OTHER SOURCES. 5. LD.DR SUPPORTED THE ORDERS OF THE AO AND CIT(A). 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS. AS SEEN F ROM THE ASSESSMENT ORDER, IT IS A FACT THAT ASSESSEE WAS CLOSING DOWN THE READYMADE SHOP WHICH WAS EVIDENT FROM THE STATEMENTS RE CORDED DURING THE SURVEY. THERE WERE NO MAJOR PURCHASES TI LL THE DATE OF SURVEY, WHICH WAS NOMINAL AMOUNT AT RS. 37,000/-. T HE STOCK ALSO WAS BEING SOLD AT A DISCOUNT, AS MOST OF THE STOCK WAS CONSIDERED DEAD-STOCK. THE QUESTION AND THE ANSWER TO QUESTION NO. 15 WAS ITSELF EXTRACTED BY THE AO IN THE ASSESSMEN T ORDER WHICH SUPPORT ASSESSEES CONTENTIONS THAT THE SALES WER E MADE AT A DISCOUNT PRICE, THEREBY THERE WAS A LOSS IN THE BUSIN ESS. WHETHER THE INCOME FROM INTEREST IS ASSESSED AS INCOME FROM BUSINESS OR FROM OTHER SOURCES DOES NOT MATTER, AS A SSESSEE HAS PREPARED A COMBINED P&L A/C CLAIMING THE LOSSES FROM BUSINESS IN I.T.A. NO. 688/HYD/2016 G. VASANTHA KUMARI :- 4 - : THE COMPUTATION OF INCOME FROM M/S. RAGA DESIGNERS. AS IS EVIDENT FROM THE FACTS, ASSESSEE IS CLOSING DOWN THE B USINESS AND SO ARRIVING DEFICIENCY IN STOCK DOES NOT ARISE AS THE SALE PRICE IS MUCH MORE DISCOUNTED THAN THE NORMAL TAG PRICE. THERE WAS NO EVIDENCE OF SALE OUTSIDE THE BOOKS OF ACCOUNT OR ANY E XCESS CASH FOUND IN THE SURVEY. IN VIEW OF THAT, I AM OF THE OPINI ON THAT THE ADDITION MADE TOWARDS DEFICIENCY IN STOCK DOES NOT ARIS E ON THE FACTS OF THE CASE. IN VIEW OF THAT, AO IS DIRECTED TO A CCEPT THE INCOME DECLARED FROM M/S. RAGA DESIGNERS. SINCE ASSESSEES BUSINESS HAS RESULTED IN LOSS AND MAINTAINED BOOKS OF ACCOUNT, ESTIMATION OF INCOME U/S. 44AF, ON FACTS OF THE CASE D OES NOT ARISE. HOWEVER, ASSESSEE HAS NOT JUSTIFIED HOW THE BUSINESS O F RUNNING THE TYPE INSTITUTE AND VANDANA ENTERPRISES RESULTED IN LOSS. AS SEEN FROM THE P&L A/C OF EARLIER YEAR, ASSESSEE WAS CLAIMING THE SAME AMOUNT OF LOSS. THEREFORE, I AM OF THE OPINION TH AT DISALLOWANCE OF THESE TWO LOSSES BY THE AO IS JUSTIF IED. SUBJECT TO DISALLOWING THE ABOVE TWO LOSSES, AO IS DIRECTED TO R E-WORK OUT THE TOTAL INCOME ACCORDINGLY. ASSESSEES GROUNDS ARE CON SIDERED PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MARCH, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST MARCH, 2017 TNMM I.T.A. NO. 688/HYD/2016 G. VASANTHA KUMARI :- 5 - : COPY TO : 1. G. VASANTHA KUMARI, SECUNDERABAD. C/O. T. CHAITA NYA KUMAR, ADVOCATE, FLAT NO. 102, GOURI APARTMENTS, URDULANE, HIMAYAT NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-10(4), HYDERABAD. 3. COMMISSIONER OF INCOME TAX(APPEALS)-9, HYDERABAD . 4. THE PR. COMMISSIONER OF INCOME TAX-6, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.