ITO, Ward-9(1), Hyderabad, Hyderabad V. Sri Padamati Laxma Reddy, R.R.Dist

ITA 75/HYD/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6141 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 14-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: K A SAI PRASAD
• Section: 44AD; 28; 144

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 75/HYD/2015 ASSESSMENT YEAR: 2010-11 INCOME-TAX OFFICER, WARD 9(1), HYDERABAD. VS. PADAMATI LAXMA REDDY, HAYATNAGAR, R.R. DISTRICT PAN APTPP 2734 G (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M. SITARAM ASSESSEE BY : SHRI K.A. SAIPRASAD DATE OF HEARING : 06-01-2016 DATE OF PRONOUNCEMENT : 22-01-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A) - VI, HYDERABAD, DATED 20/10/2014, FOR THE AY 201 0-11. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE, AN INDIVIDUAL, CLAIMED TO HAVE BEEN CARRYING ON THE BU SINESS OF SUPPLY OF BUILDING MATERIAL, FILED THE RETURN OF INCOME FOR T HE AY 2010-11 ON 05/09/2011 ADMITTING TOTAL INCOME OF RS. 1,64,400/- AFTER CLAIMING DEDUCTION UNDER CHAPTER VIA. THE CASE WAS SELECTED FOR SCRUTINY. A NOTICE U/S 143(2) WAS ISSUED ON 29/11/2012. ASSESSE ES AR APPEARED AND FURNISHED BANK ACCOUNT STATEMENT. THE AO ASKED THE ASSESSEE TO FURNISH THE SOURCE FOR CASH DEPOSITS MADE IN THE BA NK ACCOUNT, DETAILS OF INVESTMENT MADE IN MOVABLE & IMMOVABLE PROPERTIE S WITH SOURCES, NATURE OF BUSINESS ACTIVITY AND EVIDENCE IN SUPPORT OF DEDUCTION CLAIMED UNDER CHAPTER VIA. THE ASSESSEE FURTHER FUR NISHED RECEIPTS AND PAYMENTS ACCOUNT AND A LETTER STATING THAT THE CASH DEPOSITS IN BANK ACCOUNT REPRESENT THE ADVANCES RECEIVED FROM C USTOMERS AND 2 ITA NO. 75 /HYD/2015 PADAMATI LAXMA REDDY RS. 5 LAKHS TAKEN FROM FAMILY MEMBERS OF HIS LATE B ROTHER. AO ASKED THE ASSESSEE TO FURNISH NAMES AND ADDRESSES OF PERS ONS FROM WHOM HE RECEIVED ADVANCES AND ALSO NAMES AND ADDRESSES O F THE PERSONS TO WHOM HE MADE PAYMENTS FOR SUPPLY OF BUILDING MAT ERIAL AND ALSO ASKED TO FURNISH CONFIRMATIONS FROM THE FAMILY MEMB ERS OF HIS LATE BROTHER TO SUBSTANTIATE HIS CLAIM FOR RS. 5 LAKHS F ROM THEM. ASSESSEE DID NOT FURNISH THE ABOVE SAID DOCUMENTS OR INFORMA TION AS CALLED FOR BY THE AO. THE AO COMPLETED THE ASSESSMENT EX-PARTE U/S 144 AS PER THE INFORMATION AVAILABLE ON RECORD. AS THE ASSESSE E FAILS TO EXPLAIN THE SOURCE OF CASH DEPOSITS OF RS. 46,42,700/-, THE SAME WAS TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE AND ADDED THE SAME TO THE INCOME RETURNED. 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFE RRED APPEAL BEFORE THE CIT(A). 4. THE CIT(A) ACCEPTED THE SUBMISSIONS OF THE ASSES SEE FOR RS. 35.91 LAKHS AS THE ADVANCES RECEIVED FROM CUSTOMERS RELATING TO HIS BUSINESS AND CONFIRMED THE ADDITION OF RS. 8,16,800 AS UNEXPLAINED RECEIPT. THE CIT(A) ADMITTED THE TURNOVER OF THE AS SESSEE AT RS. 46,88,000/- AS CONFIRMED BY THE ASSESSEE. CIT(A) AL SO REJECTED THE CLAIM OF THE ASSESSEE WITH REGARD TO THE ADVANCE RE CEIVED FROM HIS LATE BROTHER TO THE EXTENT OF RS. 5 LAKHS AS THERE WAS NEITHER DETAILED INFORMATION NOR CONFIRMATIONS AVAILABLE ON RECORD. 5. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF A PPEAL: 1. THE ORDER OF C1T(A) -VI, IN CASE OF APPEAL NO. 0650/2013-14, DATED 20- 10-2014 IN RESPECT OF THIS ASSESSEE FOR THE ASSESS MENT YEAR 2010-11 IS ERRONEOUS IN LAW OR FACTS OR BOTH. 2. THE LEARNED COMMISSIONER OF INCOME TAX (A) ERRE D IN HOLDING THAT THE BUSINESS ADVANCES SHOWN TO THE EXTENT OF RS. 35,91 ,500/- IN THE RECEIPTS AND PAYMENTS OF THE ACCOUNT OF THE ASSESSEE, DESER VES TO BE CONSIDERED, AS FOR EXPLAINING THE CASH CREDITS IN VIEW OF THE FACT THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THESE ADVANCES EITHER DURING THE COURSE OF SCRUTINY PROCEEDINGS OR DURING THE COURSE OF AP PELLATE PROCEEDING. THE LD. CIT (A) MERELY RELIED ON THE SUBMISSION OF THE ASSESSEE IN THIS REGARD. IF IT WERE THE CASE THAT THE ADVANCES DESERVED TO BE CONSIDERED FOR 3 ITA NO. 75 /HYD/2015 PADAMATI LAXMA REDDY EXPLAINING THE CASH CREDITS. THE LD. CIT (A) OUGHT TO HAVE DIRECTED THE A.O. TO EXAMINE THE GENUINENESS OF SUCH ADVANCES, WHICH WERE NOT PROVED BY THE ASSESSEE TO THE SATISFACTION OF THE AO. 3 THE OBSERVATION OF THE CIT(A)'S THAT THE PROFIT OF THE BUSINESS AVAILABLE AT RS. 2,34,000/- IS ALSO NOT CORRECT AS THE ASSES SEE HAD INCURRED EXPENDITURE OF RS. 70,000/- OUT OF THE SAID INCOME FOR CLAIMING DEDUCTION UNDER CHAPTER VIA AND LEAVING ONLY THE BALANCE OF RS. 1,64,400/-. FURTHER IT IS SUBMITTED THAT THE PROFIT OR LOSS IS DETERMI NED AT THE END OF YEAR AFTER MAKING NECESSARY/ STATUARY ADJUSTMENT, WHERE THE L AST OF THE CASH DEPOSIT MADE IN THE ACCOUNT OF THE ASSESSEE ON 25.03.3010. RS. 45,000/-. THIS CLEARLY SHOWS THAT THE PROFIT ADMITTED BY THE ASSE SSEE HAS NO RELEVANCE TO THE CASH DEPOSITS. 6. BEFORE US, THE LD. DR SUBMITTED THAT THE ASSESSE E HAS FILED THE RETURN OF INCOME WHEREIN THE BUSINESS IS MENTIONED AS 'CONTRACTOR' (PI. SEE PAGE NO.7 OF PAPER BOOK). SUBSEQUENTLY, DU RING THE ASSESSMENT PROCEEDINGS ON 04-01-2013, THE ASSESSEE FILED 'RECEIPTS AND PAYMENTS' ACCOUNT (PI. SEE PAGE NO.5 OF PAPER B OOK) ALONG WITH A LETTER DATED 20-12-2012, CLAIMING THAT THE ADVANC ES RECEIVED OF RS.35,91,500/- HAVE BEEN RECEIVED AND THE SAME WAS SPENT FOR SUPPLY OF BUILDING MATERIALS AND FOR UNDERTAKING EA RTH WORKS AND FOR MAKING PAYMENTS TO CAR LOAN, LIC PREMIUMS ETC. THE ASSESSING OFFICER IN THE ORDER SHEET NOTINGS DATED 04-01-2013 (PI. SEE PAGE NO.2 OF PAPER BOOK), ASKED THE ASSESSEE TO FURNISH ALL THE ADDRESSES. HOWEVER THERE WAS NO RESPONSE, THOUGH, FURTHER OPPO RTUNITIES WERE GRANTED TO THE ASSESSEE BEFORE COMPLETION OF THE AS SESSMENT U/S. 144. 6.1 HE FURTHER SUBMITTED THAT THE LEARNED CIT(A) BE LIEVED THE VERSION OF THE ASSESSEE THAT HE WAS ENGAGED IN THE BUSINESS OF SUPPLY OF BUILDING MATERIAL, WITHOUT VERIFYING THE FACTS EITHER SUO MOTO BY ANY ENQUIRY OR THROUGH THE ASSESSING OFFICER. TH IS WAS NECESSARY AS THE ASSESSING OFFICER HAS COMPLETED THE ASSESSME NT U/S144. THE AO CATEGORICALLY STATED THAT THE NAMES AND ADDRESSE S OF NONE OF THE PARTIES, I.E., BOTH WHO GAVE ADVANCES AND THOSE WHO RECEIVED PAYMENTS WERE FURNISHED. THESE DETAILS WERE NOT FUR NISHED EVEN DURING APPELLATE PROCEEDINGS BY THE ASSESSEE. HOWEV ER, THE CIT (A) MENTIONED THAT THE APPELLANT WAS CARRYING ON THE BU SINESS OF SUPPLY OF CONSTRUCTION MATERIAL EVEN THOUGH, THERE WAS NO IOTA OF EVIDENCE TO 4 ITA NO. 75 /HYD/2015 PADAMATI LAXMA REDDY THAT EFFECT. THE ADVANCES RECEIVED AND SUPPLY OF MA TERIAL ON COMMISSION BASIS WAS HELD TO BE FACTUALLY CORRECT B Y THE LEARNED CIT(A) (LINE 7 IN PAGE 4 OF THE APPELLATE ORDER), W HICH HAS NOT BEEN PUT TO STRICT PROOF, EITHER BY THE ASSESSING OFFICE R OR BY THE APPELLATE AUTHORITY. 6.2 THE LD. DR CONTENDED THAT IN VIEW OF THE SAID BACKGROUND, ACCEPTANCE OF A PART OF RECEIPT OF RS.5,00,000/- AS UNEXPLAINED, WHEREAS, AT THE SAME TIME, HOLDING THAT ADVANCES OF RS.35,91,000/- HAVE BEEN RECEIVED AND EXPLAINED, EVEN IN THE ABSEN CE OF PROOF OR DETAILS, IS CONTRARY TO FACTS AND IS A CONTRADICTOR Y STAND BY LEARNED C1T(A), WHICH IS NOT COMPREHENSIBLE. 6.3 IT IS SUBMITTED THAT FURTHER THE BOOKS OF ACCOU NTS HAVE NOT BEEN MAINTAINED AND THERE IS NO SALES TAX REGISTRATION A ND ALSO THERE IS NO AUDIT REPORT OF A CHARTERED ACCOUNTANT. UNLESS, THE ASSESSEE HAS DISCLOSED THE TURNOVER TO THE SALES TAX DEPARTMENT AND PAID THE SALES TAX ON SUCH TRADING ACTIVITY, THE CONTENTION OF THE ASSESSEE THAT HE HAS DONE THE BUSINESS CANNOT BE ACCEPTED, AS HE IS DEEMED TO HAVE VIOLATED SALES TAX LAWS APPLICABLE TO HIM. THE REFORE, THE ENTIRE EDIFICE OF 'BUSINESS' IN BUILDING/CONSTRUCTION MATE RIAL IS BASELESS AND A CONCOCTION OF THE ASSESSEE FOR HIS OWN BENEFIT. H ENCE, THE FACTS DO NOT SUPPORT THE VERSION OF THE ASSESSEE. IT IS WELL SETTLED LAW THAT IN A TAXING STATUTE, THE PRINCIPLE OF STRICT INTERPRETAT ION APPLIES. THE TERM 'BUSINESS' HAS TO BE UNDERSTOOD AND INTERPRETED IN THE WAY IT IS USED IN SECTION 28 OF I.T.ACT. THE TERM CANNOT BE NARROW ED DOWN BY ADDING CONJECTURES AND SURMISES BASED UPON THEORETICAL ARG UMENTS OF THE ASSESSEE. 6.4 IT IS SUBMITTED THAT THE OBSERVATION OF LEARNE D CIT(A) THAT THE AO HAS NOT MADE OUT A CASE THAT THE CREDITS IN THE BAN K ACCOUNTS DO NOT REPRESENT THE BUSINESS TURNOVER OR RECEIPTS, IS NOT BASED ON FACTS. IN FACT, THE AO HAS COMPLETED THE ASSESSMENT U/S.144 S INCE THE ASSESSEE HAS NOT FURNISHED ANY DETAILS THAT WERE CA LLED FOR, EVEN 5 ITA NO. 75 /HYD/2015 PADAMATI LAXMA REDDY THOUGH OPPORTUNITIES WERE GIVEN AS PER THE ORDER SH EET NOTINGS (PI. SEE PAGE NOS.1 &2 OF PAPER BOOK). 6.5 FINALLY, THE LD. DR PRAYED THAT THE ORDER OF LE ARNED CIT(A) MAY BE CANCELLED AND THE ORDER OF AO MAY BE RESTORED, U PHOLDING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CASH DEPOSI TS. 7. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE HAS RESPONDED TO THE NOTICES OF AO AND HE SUBMITTED THA T NO ADDITIONAL INFORMATION WAS SUBMITTED BEFORE THE CIT(A). HE FUR THER SUBMITTED THAT RECEIPTS AND PAYMENTS WERE SUBMITTED BEFORE TH E AO WHICH ARE AVAILABLE IN PAPER BOOK. HE SUBMITTED THAT IN RESPO NSE TO NOTICES, THE ASSESSEE HAS FILED RELEVANT INFORMATION TO AO, WHIC H IS AVAILABLE AT PAGE 3 OF PAPER BOOK. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS SUBMITTED THE DETAILS OF ADVANCES RECEIVED FROM CUS TOMERS AGAINST SUPPLY OF BUILDING MATERIAL IN THE RECEIPTS AND PAY MENTS ACCOUNT SUBMITTED BEFORE THE AO TO THE EXTENT OF RS. 35,91, 500/-. LD. AR RELIED ON THE DECISION OF THE COORDINATE BENCH OF T HIS TRIBUNAL IN CASE OF ITO VS. SURESH KUMAR BIYANI IN ITA NO. 227/HYD/2 015, ORDER DATED 18/09/2015, A COPY OF WHICH HAS BEEN PLACED ON REC ORD, WHEREIN THE JUDICIAL MEMBER IS THE AUTHOR OF THE ORDER. 8. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE CO UNSELS AND PERUSING THE MATERIAL FACTS ON RECORD AS WELL AS TH E ORDERS OF REVENUE AUTHORITIES, IT IS OBSERVED THAT THE ASSESSEE HAS S UBMITTED ITS TOTAL TURNOVER FOR AY 2010-11 IS RS. 46,88,000/-, WHICH W AS CONFIRMED BEFORE THE CIT(A) AND ESTIMATED THE GROSS PROFIT AT 5% ON THE TURNOVER. WE FIND THAT THE ELIGIBILITY OF COMPUTAT ION OF INCOME, FOR THE AY 2010-11 ON THE PRESUMPTIVE BASIS U/S 44AD, THE TURNOVER LIMIT WAS RS. 40 LAKHS, WHEREAS, IN THE PRESENT CASE, THE ASSESSEE CROSSED THE LIMIT OF RS. 40 LAKHS, HENCE, THE ASSES SEE IS NOT ELIGIBLE TO COMPUTE HIS INCOME AS PER SECTION 44AD TO CLAIM BENEFIT IN THAT SECTION. MOREOVER, THE RATE APPLICABLE ON THE PRESU MPTIVE BASIS IS 8% WHEREAS THE ASSESSEE HAS DECLARED THE PROFIT AT 5% OF TURNOVER. 6 ITA NO. 75 /HYD/2015 PADAMATI LAXMA REDDY 8.1 ASSESSEE HAS CLAIMED THAT HE HAS TAKEN RS. 5 LA KHS LOAN FROM HIS LATE BROTHERS FAMILY AND HE HAS NOT SUBSTANTIA TED THE ABOVE CLAIM BY WAY OF ANY DOCUMENTARY EVIDENCE AS HE HAS NOT DI SCLOSED EVEN IN THE RECEIPTS AND PAYMENTS ACCOUNT SUBMITTED BEFORE THE AO. SINCE THE ASSESSEE HAS CROSSED THE TURNOVER OF RS. 40 LAK HS, HE IS NOT ELIGIBLE TO CLAIM BENEFIT U/S 44AD AS PER THE PROVI SIONS OF THIS SECTION. AS THE ASSESSEE HAS NOT SUBSTANTIATED THE LOANS AND ADVANCES RECEIVED FROM HIS CUSTOMERS AND HIS LATE BROTHERS FAMILY AND ALSO HE IS NOT ELIGIBLE TO CLAIM THE BENEFIT U/S 44AD, IN O UR CONSIDERED VIEW, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH IN CASE OF SURESH KUMAR BIYANI (SUPRA), WE DIRECT THE AO TO CA LCULATE THE GROSS INCOME OF THE ASSESSEE AT 20% OF THE TOTAL TURNOVER AS ACCEPTED BY THE ASSESSEE BEFORE THE CIT(A). 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY , 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 22 ND JANUARY, 2016 KV COPY TO:- 1) ITO, WARD 9(1), BLOCK NO. 2D, INCOME-TAX TOWERS, AC GUARDS, HYDERABAD 500 004. 2) SRI PADAMATI LAXMA REDDY, 1-114, KUNTLOOR, HAYATNAGAR, R.R. DISTRICT. 3 CIT(A) - VI, HYDERABAD 4) PR. CIT - VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD.