G. Chakradhar Alias Chakri, Hyderabad V. DCIT, Central Circle-7, Hyderabad

ITA 710/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59199 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V RAGHURAM
• Assessee Lawyers: B V PRASAD REDDY
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO. 708/HYD/2011 A.Y. 2003-04 ITA NO. 709/HYD/2011 A.Y. 2005-06 ITA NO. 710/HYD/2011 A.Y. 2002-03 ITA NO. 711/HYD/2011 A.Y. 2006-07 ITA NO. 712/HYD/2011 A.Y. 2007-08 ITA NO. 713/HYD/2011 A.Y. 2008-09 SHRI G. CHAKRADHAR ALIAS CHAKRI, HYDERABAD PAN: AEFPG5468R VS. DCIT CENTRAL CIRCLE-7 HYDERABAD (APPELLANT) (RESPONDENT) ITA NO. 588/HYD/2011 A.Y. 2004-05 DCIT CENTRAL CIRCLE-7 HYDERABAD VS. SHRI G. CHAKRADHAR ALIAS CHAKRI, HYDERABAD PAN: AEFPG5468R (APPELLANT) (RESPONDENT) C.O. NO. 38/HYD/2011 (ARISING OUT OF ITA NO. 588/HYD/2011) ASSESSMENT YEAR: 2004-05 SHRI G. CHAKRADHAR ALIAS CHAKRI, HYDERABAD PAN: AEFPG5468R VS. DCIT CENTRAL CIRCLE-7, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI A.V. RAGHU RAM ASSESSEE BY: SHRI B.V. PRASAD REDDY DATE OF HEARING: 02.12.2011 DATE OF PRONOUNCEMENT: 25.01.2012 O R D E R O R D E R O R D E R O R D E R PER PER PER PER CHANDRA POOJARI, AM CHANDRA POOJARI, AM CHANDRA POOJARI, AM CHANDRA POOJARI, AM: :: : THE APPEALS IN ITA NOS. 708, 709, 710, 711, 712, 71 3 AND CO. NO. 38/HYD/2011 ARE FILED BY THE ASSESSEE AND T HE APPEAL IN ITA NO. 588/HYD/2011 IS FILED BY THE REVENUE AGAINST TH E DIFFERENT ITA NO. 708/HYD/2011 &ORS SHRI G. CHAKRADHAR ALIAS CHAKRI ========================== 2 ORDERS OF THE CIT(A)-VII, HYDERABAD. THE ISSUES I NVOLVED IN THESE APPEALS ARE COMMON IN NATURE. HENCE ALL THESE APPE ALS AND THE CO ARE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOS ED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON GROUND IN ITA NOS. 710 AND 708/HYD /2011 FOR ASSESSMENT YEAR 2002-03 AND 2003-04 IS THAT THE CIT(A) EARED BY HOLDING THE ORDER OF THE ASSESSING OFFICER WHERE BY A DE NOVO ASSESSMENT WAS MADE U/S. 153A THOUGH NO ASSESSMENT WAS PENDING ON THE DATE OF INITIATION. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PUT ANY SERIOUS AR GUMENTS IN THIS RESPECT. ACCORDINGLY THIS GROUND IS DISMISSED AS N OT PRESSED. MOREOVER, THIS GROUND IS NOT EMANATING FROM THE ORD ER OF THE CIT(A). 3. THE NEXT COMMON GROUND ALL ASSESSEE'S APPEALS AS WE LL AS IN THE CROSS OBJECTION IS WITH REGARD TO ESTIMATION OF THE INCOME OF THE ASSESSEE ON GROSS RECEIPTS, AS BELOW: ASSESSMENT YEAR PROFIT ESTIMATED BY THE ASSESSING OFFICER (%) PROFIT DECLARED BY THE ASSESSEE (%) 2002 - 03 38.36 17.94 2003 - 04 48.58 16.04 2004 - 05 39.46 11.99 2005 - 06 44.56 34.09 2006 - 07 29.41 6.39 2007 - 08 39.77 44.41 2008 - 09 74.95 53.77 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE O F THE SEARCH OR BY THE ASSESSING OFFICER AT ANY STAGE DURING THE COURS E OF ASSESSMENT PROCEEDINGS AND REJECTION OF BOOKS OF ACCOUNT BY AS SESSING OFFICER IS IMPROPER. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE ASSESSING OFFICER THOROUGHLY EXAMINED THE BOOKS OF ACCOUNT OF THE ASSESSEE, BANK STATEMENTS, VOUCHERS FOR EXPENSES PR ODUCED DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT A ND IN THE COURSE ITA NO. 708/HYD/2011 &ORS SHRI G. CHAKRADHAR ALIAS CHAKRI ========================== 3 OF SEARCH NO INCRIMINATING MATERIAL WAS FOUND. AS SUCH SUBSEQUENT ASSESSMENTS U/S. 153A ARE BAD IN LAW. FURTHER THE ASSESSEE HAS BEEN INCURRING EXPENSES TO CARRY ON HIS BUSINESS ON THE FOLLOWING ITEMS: A) RECORDING THEATRE RENT B) OTHER RECORDING EXPENSES LIKE BATTAS, FOOD, LOCAL T RAVEL, ETC. C) REMUNERATION TO VOCALISTS, KEYBOARD PLAYERS, SINGER S, LYRICISTS, ETC. D) PRO REMUNERATION E) BUSINESS PROMOTIONS F) TRAVELLING EXPENSES G) TELEPHONE EXPENSES H) MUSIC SITTING EXPENSES I) INTEREST ON LOANS CAR J) DEPRECIATION K) OFFICE EXPENSES L) OTHER MISCELLANEOUS EXPENDITURE. 5. FURTHER THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE HAS ALREADY OFFERED INCOME ON ACCOUNT OF NON- MAINTENANCE OF ACCOUNTS AS FOLLOWS: F .Y. 2003 - 04 2004 - 05 2005 - 06 2006 - 07 2007 - 08 A.Y. 2004 - 05 2005 - 06 2006 - 07 2007 - 08 2008 - 09 INCOME FROM PROFESSION 8,31,864 28,61,102 3,87,789 10,25,810 75,00,000 6. AGAINST THIS, THE ASSESSING OFFICER COMPUTED THE IN COME AT 50% OF THE GROSS RECEIPTS AND THEREAFTER ALLOWED ON LY INTEREST ON LOAN AND DEPRECIATION OUT OF THE ESTIMATED INCOME A S FOLLOWS: A.Y. TOTAL GROSS RECEIPTS GROSS INCOME ESTIMATED @ 50% OF GROSS RECEIPTS EXP. ALLOWABLE BEING INTEREST ON LOANS EXP. ALLOWABLE BEING DEPRECIATION INCOME FROM PROFESSION 2002 - 03 919000 459500 35824 71065 352611 2003 - 04 5576987 2788494 15387 63372 2709735 2004 - 05 5906658 2953329 302638 319860 2330831 2005 - 06 7950880 3975440 152138 279751 3543551 2006 - 07 2602560 1302780 106735 430498 765547 2007 - 08 4515000 2257500 116886 344787 1795827 2008 - 09 13973224 6986612 66166 372443 6593003 ITA NO. 708/HYD/2011 &ORS SHRI G. CHAKRADHAR ALIAS CHAKRI ========================== 4 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER FURTHER MADE ADDITION TOWARDS UNE XPLAINED INVESTMENT AND UNEXPLAINED CASH CREDIT WHICH SHOULD BE DELETED. 8. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORD ER OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN THIS CASE THE ASSESSEE CATE GORICALLY STATED THAT HE HAS NOT MAINTAINED BOOKS OF ACCOUNT. IN TH E ABSENCE OF BOOKS OF ACCOUNT INCOME OF THE ASSESSEE HAS TO BE E STIMATED. THE ASSESSEE ALSO NOT MAINTAINED THE RELEVANT VOUCHERS FOR INCURRING EXPENDITURE. BEING SO, REASONABLE ESTIMATION OF IN COME HAS TO BE MADE. IN OUR OPINION, CONSIDERING THE NATURE OF BU SINESS OF THE ASSESSEE AND INCOME OFFERED BY THE ASSESSEE IN ALL THESE YEARS, WE FEEL IT PROPER TO TAKE THE AVERAGE RATE OF PROFIT D ECLARED BY THE ASSESSEE AS INCOME FOR THESE ASSESSMENT YEARS, WHIC H IS COMPUTED AS FOLLOWS: A.Y. RATE OF NET PROFIT DECLARED BY THE ASSESSEE (%) 2002 - 03 17.94 2003 - 04 16.04 2004 - 05 11.99 2005 - 06 34.09 2006 - 07 6.39 2007 - 08 14.41 2008 - 09 53.77 10. THE AVERAGE WORKS OUT TO 22.09%. THE ESTIMATION OF INCOME OF THE ASSESSEE IS TO BE DETERMINED AT 22.09% ON TH E GROSS RECEIPTS AS FOLLOWS: A.Y. TOTAL GROSS RECEIPTS 2002 - 03 919000 2003 - 04 5576987 2005 - 06 7950880 2006 - 07 2602560 2007 - 08 4515000 2008 - 09 13973224 ITA NO. 708/HYD/2011 &ORS SHRI G. CHAKRADHAR ALIAS CHAKRI ========================== 5 11. THEREAFTER THE ASSESSEE IS NOT ENTITLED FOR ANY DED UCTION EITHER TOWARDS INTEREST OR DEPRECIATION WHICH IS DE EMED TO HAVE BEEN ALLOWED U/SS. 30 TO 38 OF THE INCOME-TAX ACT, 1961 WHEN WE ESTIMATED THE INCOME OF THE ASSESSEE. HOWEVER, THE INCOME OF THE ASSESSEE WHILE ESTIMATING AT 22.09% IN ANY ASSESSME NT YEAR CANNOT GO BELOW THE INCOME RETURNED BY THE ASSESSEE. IN OTHER WORDS, THE INCOME OF THE ASSESSEE IF COMPUTED WHILE PASSING GI VING EFFECT ORDER TO THIS ORDER OF THE TRIBUNAL, THE INCOME GOES BELO W THE RETURNED INCOME THEN THE ASSESSING OFFICER SHALL CONSIDER TH E RETURNED INCOME, OF THE SAME, MORE SPECIFICALLY, FOR THE ASS ESSMENT YEAR 2005-06 AND 2008-09. HOWEVER, THESE FINDINGS OF ES TIMATED INCOME AT 22.09% MAY NOT BE APPLICABLE FOR THE ASSESSMENT YEAR 2004-05, AS THERE IS ADDITION TOWARDS UNEXPLAINED CREDIT RS. 14.25 LAKHS. IF WE ESTIMATE THE INCOME AT 22.09% ON GROSS RECEIPTS OF RS.59,06,658/- WORKS OUT AT RS.13,04,781/- WHICH IS NOT ENOUGH TO EXPLAIN THESE UNEXPLAINED CREDIT. BEING SO, THE ESTIMATION WOULD FAIL. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ADDIT ION TOWARDS UNEXPLAINED CREDIT AT RS.14.25 LAKHS TO BE SUSTAINE D WHICH IS HIGHER THAN THE ESTIMATION OF INCOME AT 22.09%. 12. FURTHER THE ASSESSEE RAISED GROUND IN ITA NO. 713/H YD/11 WITH REGARD TO ADDITION TOWARDS UNEXPLAINED INVESTM ENT AT RS. 33.5 LAKHS AND UNEXPLAINED CASH CREDIT AT RS. 7.5 LAKHS. THE ASSESSEE MADE ADVANCE CASH PAYMENT FOR PURCHASE OF PROPERTY AT RS. 33.5 LAKHS WHICH IS NOT REFLECTED IN THE BOOKS OF ACCOUN T OF THE ASSESSEE. SIMILARLY, CASH OF RS. 7.5 LAKHS WAS FOUND DURING T HE COURSE OF SEARCH AS UNEXPLAINED INCOME OF THE ASSESSEE IN ASS ESSMENT YEAR 2008-09. THE ASSESSEE WAS NOT ABLE TO EXPLAIN THE INVESTMENT AS WELL AS CASH FOUND. 13. WE HAVE ALREADY HELD IN PARA 11 THAT THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 TO BE CONS IDERED AS ITA NO. 708/HYD/2011 &ORS SHRI G. CHAKRADHAR ALIAS CHAKRI ========================== 6 RETURNED BY THE ASSESSEE AT RS.75,13,470/-, THEREAF TER THE AO AS TO SEE WHETHER ENHANCED ASSESSED INCOME FOR THE ASSESS MENT YEAR 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 AND 200 7-08 IS SUFFICIENT TO MEET THE INVESTMENT OF RS.33.50 AND U NEXPLAINED CASH AT RS.7.5 LAKHS. IN OTHER WORDS, THE AO AS TO GIVE CREDIT TO THE ASSESSED INCOME TOWARDS THESE TWO ELEMENTS FOR THE ASSESSMENT YEAR 2008-09. IF THE ASSESSED INCOME OF THE EARLIE R YEARS IS SUFFICIENT TO MEET THESE TWO UNEXPLAINED INVESTMENT S AND UNEXPLAINED CASH, NO ADDITION IS CALLED FOR. THESE TWO ISSUES ARE SET ASIDE TO THE FILE OF AO FOR FRESH CONSIDERATION. 14. IN THE RESULT, ALL THE ASSESSEE'S APPEALS IN ITA NO S.708, 709, 710, 711, 712, 713/HYD/2011 & CO.38/HYD/2011 AND T HE REVENUE APPEAL IN ITA NO.588/HYD/2011 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2012 SD/ SD/ SD/ SD/- -- - (H.S. SIDHU) (H.S. SIDHU) (H.S. SIDHU) (H.S. SIDHU) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER SD/ SD/ SD/ SD/- -- - (CHANDRA POOJARI) (CHANDRA POOJARI) (CHANDRA POOJARI) (CHANDRA POOJARI) ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED THE 25 TH JANUARY, 2012 COPY FORWARDED TO: 1. SHRI G. CHAKRADHAR ALIAS CHAKRI, FLAT NO. 102, V ISHNU MEADOWS, ROAD NO. 3, BANJARA HILLS, HYDERABAD. 2. DCIT, CENTRAL CIRCLE-7, AAYAKAR BHAVAN, HYDERABA D. 3. CIT(A)-VII, HYDERABAD. 4. CIT (CENTRAL), HYDERABAD. 5. THE DR, B-BENCH, ITAT, HYDERABAD. TPRAO