ITO, Ward-1, Vikarabad, Vikarabad V. M. Rajender, R.R Dist, R.R.Dist

ITA 720/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98529 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: B SHANTHI KUMAR
• Keywords: Unexplained cash credit; Unexplained investment
• Section: 68; 69; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.720/HYD/2015 ASSESSMENT YEAR 2011-2012 THE ITO, WARD - 1, VIKARABAD, R.R. DIST., VS. MR. M. RAJENDER PROP. OM SAI WINES PARGI, RANGA REDDY DIST., PAN AHYPM5662M (APPELLANT) (RESPONDENT) FOR REVENUE : MR. S.K. GUPTA FOR ASSESSEE : MR. B. SHANTHI KUMAR DATE OF HEARING : 01.09.2015 DATE OF PRONOUNCEMENT : 04 .09.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-II, HYDERABAD D ATED 20 TH MARCH, 2015 AND ALTHOUGH, THE GROUNDS RAISED THEREIN CHALLENGE THE ACTION OF THE LD. CIT(A) IN D ELETING THE ADDITION MADE BY THE A.O. UNDER SECTION 68 AND 69 OF THE I.T. ACT, 1961, THE LD. CIT(A) HAVING DELETED O NLY THE ADDITION MADE BY THE A.O. UNDER SECTION 68 BY HIS IMPUGNED ORDER, THE GRIEVANCE OF THE REVENUE IS LIM ITED ONLY TO THE EXTENT OF RELIEF ALLOWED BY THE LD. CIT (A) TO THE ASSESSEE UNDER SECTION 68 AS AGREED EVEN BY THE LEA RNED D.R. THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE 2 ITA.NO.720/HYD/2015 MR. M. RAJENDER, PROP. OM SAI WINES, PARIGI, RANGA REDDY DISTRICT. REVENUE THUS RELATES TO THE DELETION BY THE LD. CIT (A) OF THE ADDITION OF RS.14,82,421 MADE BY THE A.O. UNDER SECTION 68 ON ACCOUNT OF UNEXPLAINED CASH CREDITS. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF RUNNIN G WINE SHOP. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY THE ASSESSEE DECLARING T OTAL INCOME OF RS.2,79,460. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 31.01.2014, T HE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY T HE A.O. AND THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF WINE SHOP WAS ESTIMATED BY HIM AT RS.12,23,555 BY APPLYI NG A NET PROFIT RATE OF 5% TO THE TURNOVER OF RS.2,44,71 ,099. HE ALSO MADE FURTHER ADDITION OF RS.15,09,029 ON AC COUNT OF UNEXPLAINED INVESTMENT AND RS.14,82,421 UNDER SECTION 68 BY TREATING THE RELEVANT CASH CREDITS AS UNEXPLAINED. ON APPEAL, THE LD. CIT(A) CONFIRMED TH E ADDITION OF RS.15,09,029 MADE BY THE A.O. ON ACCOUN T OF UNEXPLAINED INVESTMENT UNDER SECTION 69. HE HOWEVER , DELETED THE ADDITION OF RS.14,82,421 MADE BY THE A. O. ON ACCOUNT OF UNEXPLAINED CASH CREDITS BY RELYING INTER ALIA ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF CIT VS. DULLARAM (ITA.NO.122 OF 1990 DATED 22.10.2013) WHEREIN IT WAS HELD THAT THE A.O. HAVIN G REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ENTRIES IN THE SAID BOOKS OF ACCOUNT COULD NOT BE RELIED UP ON FOR MAKING ADDITION UNDER SECTION 68. AGGRIEVED BY THE ORDER 3 ITA.NO.720/HYD/2015 MR. M. RAJENDER, PROP. OM SAI WINES, PARIGI, RANGA REDDY DISTRICT. OF THE LD. CIT(A) , THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON REC ORD. IT IS OBSERVED THAT THE ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED INTER ALIA BY THE DECIS ION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. DULLARAM (SUPRA), WHEREIN THE SIMILAR ADDITION MADE BY THE A.O. UNDER SECTION 68 AFTER REJECTING THE BO OKS OF ACCOUNT AND DETERMINING THE INCOME OF THE ASSESSEE BY APPLYING A FLAT RATE OF PROFIT IS HELD TO BE NOT SU STAINABLE BY THE HONBLE PUNJAB & HARYANA HIGH COURT FOR THE FOLLOWING REASONS 'AN ASSESSING OFFICER MAY, WHILE CONSIDERING A RETU RN OF INCOME, INSPECT THE ACCOUNT BOOKS AND, IF SATISF IED, THAT ACCOUNT BOOKS DO NOT REFLECT THE TRUE INCOME O F AN ASSESSEE, REJECT THE SAME. ACCOUNT BOOKS ONCE REJECTED, ARE RULED OUT OF CONSIDERATION AND CANNOT BE PRESSED INTO SERVICE WHETHER BY THE ASSESSEE OR THE REVENUE. THUS, WHEN ACCOUNT BOOKS ARE REJECTED, IT WOULD FOLLOW, AS A NECESSARY COROLLARY, THAT ENTRIE S IN THE ACCOUNT BOOKS WHETHER SUSPICIOUS OR NOT CANNOT BE RELIED BY THE REVENUE OR THE ASSESSEE. TO HOLD OTHERWISE, WOULD, IN ESSENCE, RENDER ACCOUNT BOOKS VALID FOR CERTAIN PURPOSES AND INVALID FOR OTHERS, A COURSE IMPERMISSIBLE IN LAW. THE ASSESSING OFFICER REJECTED THE ACCOUNT BOOKS IN THEIR ENTIRETY AND THEREAFTER PROCEEDED' TO ASSESS INCOME BY APPLYING A FLAT RATE OF PROFIT OF 10%. AFTER APPLYING A FLAT R ATE OF PROFIT OF 10%, THE ASSESSING OFFICER ADDED RS.1,98,298 TO THE INCOME OF THE ASSESSEE ON THE BASIS OF CERTAIN 'ENTRIES' DEEMED TO BE SUSPICIOUS. THE COMMISSIONER OF INCOME TAX (APPEALS) AS WELL AS THE TRIBUNAL HAVE RIGHTLY HELD THAT AS BOOKS OF ACCOUNT S 4 ITA.NO.720/HYD/2015 MR. M. RAJENDER, PROP. OM SAI WINES, PARIGI, RANGA REDDY DISTRICT. WERE REJECTED IN THEIR ENTIRETY, THE ASSESSING OFFI CER COULD NOT RELY UPON AY ENTRY IN THE BOOKS OF ACCOUN TS FOR MAKING AN ADDITION OF RS.L,98,298. A BARE READI NG OF SECTION 68 OF THE ACT WOULD REVEAL THAT IT WOULD APPLY TO A SITUATION WHERE ACCOUNT BOOKS HAVE NOT BEEN REJECTED.' 4. IN OUR OPINION, THE RATIO OF THE DECISION OF TH E HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. DULLARAM (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAM E, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETIN G THE ADDITION MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED CASH CREDITS UNDER SECTION 68 OF THE ACT. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.0 9.2015. SD/- SD/- (SAKTIJIT DEY) (P.M. JAGTAP) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 04 TH SEPTEMBER, 2015 VBP/- COPY TO : 1. THE INCOME TAX OFFICER, WARD - 1, 4 - 2 - 1028/2, PATHI SRINATHAM COMPLEX, RAMAIAHGUDA ROAD, VIKARABAD 501 101. 2. MR. M. RAJENDER, PROP. OM SAI WINES, 2 - 36/3, OPP. BUS STAND, PARIGI, RANGA REDDY DISTRICT. 3. CIT(A) - 2, HYDERABAD. 4. PR. CIT - 2, HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE