K Ramachandra Reddy, Hyderabad V. Dy.CIT, Central Circle-2, Hyderabad

ITA 791/HYD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5569 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Business income; Search and seizure
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 791/HYD/2013 A.Y. 2006-07 ITA NO. 792/HYD/2013 A.Y. 2007-08 ITA NO. 793/HYD/2013 A.Y. 2008-09 ITA NO. 794/HYD/2013 A.Y. 2009-10 SRI K. RAMACHANDRA REDDY HYDERABAD PAN: AGFPK2421G VS. THE DCIT CENTRAL CIRCLE-2 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI T. CHAITANYA KUMAR RESPONDENT BY: SMT. K. HARITHA DATE OF HEARING: 12 . 12 .2013 DATE OF PRONOUNCEMENT: 09.01.2014 O R D E R PER CHANDRA POOJARI, AM: ALL THE ABOVE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE COMMON ORDER OF THE CIT(A)-I, HYDERABAD DATED 2 8.2.2013 FOR A.YS. 2005-06 TO 2009-10. 2. THE GROUNDS OF APPEAL IN THESE APPEALS ARE COMMON EXCEPT CHANGE IN AMOUNTS. FOR CONVENIENCE SAKE, WE EXTRACT THE GROUNDS IN ITA NO. 791/HYD/2013: 1. THE ORDER OF THE HON'BLE CIT(A) IS ERRONEOUS IN LAW AS WELL AS FACTS. 2. THE HON'BLE CIT(A) OUGHT TO HAVE TAKEN INTO CONSIDERATION THE FACT THAT THE ASSESSEE VOLUNTARIL Y BROUGHT TO THE NOTICE OF THE DEPARTMENT THAT THE SA ID BANK ACCOUNT CONTAIN DEPOSITS OF SALE PROCEEDS. 3. THE HON'BLE CIT(A) OUGHT TO HAVE TAKEN INTO CONSIDERATION THAT THE ASSESSEE DECLARED 15% PROFIT ITA. NOS. 791-794/HYD/2013 SRI K. RAMACHANDRA REDDY ============-========= 2 IN RESPECT OF THE BANK DEPOSITS REPRESENTING SALE PROCEEDS ALONG WITH OTHER SALES AS PER BOOKS AND OUGHT NOT TO HAVE RESORTED FOR ANY ADDITION. 4. THE HON'BLE CIT(A) ERRED IN CONCLUDING THAT THE DEPOSITS DOES NOT REPRESENT SALE PROCEEDS WARRANTIN G ESTIMATION OF PROFIT AT 15%. 5. THE HON'BLE CIT(A) OUGHT TO HAVE OBSERVED THAT IN SPITE OF SEARCH AND SEIZURE OPERATION THE DEPARTMEN T DID NOT IDENTIFY ANY MATERIAL TO ESTABLISH THAT THE DEPOSITS IN THE BANK ACCOUNT REPRESENT OTHER THAN SALE PROCEEDS AND THEREFORE OUGHT NOT TO HAVE RESORTED FOR FURTHER ADDITION. 6. THE HON'BLE CIT(A) OUGHT TO HAVE OBSERVED THAT THE INCOME VOLUNTARILY DECLARED BY THE ASSESSEE INCLUDE THE PROFIT IN RESPECT OF DEPOSITS OF SALE PROCEEDS FINDING PLACE IN THE BANK ACCOUNT AND THEREFORE NO SEPARATE ADDITION WAS CALLED FOR. 7. THE HON'BLE CIT(A) OUGHT TO HAVE OBSERVED THAT THE ASSESSING OFFICER ERRED IN TREATING THE DEPOSITS APPEARING IN THE BANK ACCOUNT AS INCOME AS THE SAME REPRESENT SALE PROCEEDS AND PROFIT IN RESPECT OF THOSE SALES WAS ONLY LIABLE FOR TAX. 8. THE HON'BLE CIT(A) ERRED IN MAKING ADDITION OF RS. 34,97,574/- BEING DEPOSITS IN THE BANK ACCOUNT REPRESENTING SALE PROCEEDS AND THEREFORE THE SAME I S LIABLE TO BE DELETED IN VIEW OF THE FACT THAT THE ASSESSEE ALREADY DECLARED PROFIT IN RESPECT OF SUCH SALE PROCEEDS. 9. ALTERNATIVELY, THE HON'BLE CIT(A) OUGHT TO HAVE OBSERVED THAT THE OVERALL DECLARATION BY THE ASSESS EE FOR ALL THE YEARS DO NOT WARRANT ANY SEPARATE ADDIT ION IN THE LIGHT OF THE FACT THAT AFTER ESTIMATION OF P ROFIT AT 15% ON SALES AS VOLUNTARILY DECLARED BY THE ASSESSE E, THE BALANCE WOULD COVER THE DEPOSITS APPEARING IN T HE BANK ACCOUNT. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS T HE PROPRIETOR OF A CONCERN M/S. ADITI LIFE SCIENCES WH ICH IS IN THE BUSINESS OF SUPPLYING LIFE SAVING DEVICES (STENTS). A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE ASSESSEE'S P REMISES ON 12.8.2009. DURING THE SAID ACTION, VARIOUS INCRIMI NATING MATERIAL/DOCUMENTS WERE FOUND AND SEIZED, LEADING T O ISSUE OF NOTICE U/S. 153A OF INCOME-TAX ACT, 1961. THE PART ICULARS OF ITA. NOS. 791-794/HYD/2013 SRI K. RAMACHANDRA REDDY ============-========= 3 INCOME ADMITTED BY THE ASSESSEE IN THE RETURNS FILE D IN RESPONSE TO THE SAID NOTICE ON 3.6.2010 ARE AS UNDER: A.Y. DATE OF FILING ORIGINAL RETURN INCOME AS PER ORIGINAL RETURN (RS.) AGRIL. INCOME (RS.) INCOME AS PER RETURN U/S. 153A (RS.) AGRIL. INCOME (RS.) 2005-06 29.10.2005 14,52,451 60,000 27,42,451 60,000 2006-07 18.10.2006 18,89,190 - 59,03,190 - 2007-08 29.10.2007 24,19,021 - 51,47,020 - 2008-09 29.09.2008 32,99,550 - 92,70,550 - 2009-10 30.09.2009 1,49,53,880 - 1,49,53,880 - 4. ACCORDING TO THE AO, THE ASSESSEE HAS NOT DISCLOSED TRUE PROFIT AND DISCLOSED PROFIT AT 15% ON SALES IN THE REGULAR ACCOUNTS AND NOT CONSIDERED CERTAIN DEPOSITS IN THE A/C. NO. 446 AT ANDHRA BANK JUBILEE HILLS BRANCH, HYDERABAD. ACCORDINGLY, HE OBSERVED THAT THE DEPOSITS ARE NOT FULLY CONSIDERED FOR DETERMINING THE INCOME OF THE ASSESS EE. HE CONSIDERED THE DIFFERENCE OF THE DEPOSITS SO UN-ADM ITTED AS ADDITIONAL INCOME OF THE ASSESSEE WHICH IS AS FOLLO WS: F.Y. ADDL. INCOME ON THE BASIS OF 15% OF GROSS PROFIT IN M/S. ADITI LIFE SCIENCE (PROPRIETARY CONCERN) ADDL. INCOME ADMITTED IN THE RETURN OF INCOME DIFFERENCE BEING IN RELATION TO DEPOSITS IN ANDHRA BANK A/C. NO. 446 ACTUAL DEPOSIT IN ANDHRA BANK A/C. DIFFERENCE NOT ADMITTED AS ADDITIONAL INCOME 1 2 3 4 (3-2) 5 6 (5-4) 2005-06 21,94,382 40,14,000 18,19,618 53,17,192 34,97,574 2006-07 18,89,194 27,28,000 8,38,806 27,27,779 18,88,973 2007-08 34,98,282 59,71,000 24,72,718 37,91,628 13,18,910 2008-09 NIL NIL 17,66,613 17,66,613 TOTAL 75,81,858 1,27,13,000 51,31,142 1,36,03,212 84,72,070 5. AGAINST THIS, THE ASSESSEE CARRIED AN APPEAL TO THE CIT(A). THE CIT(A) CONFIRMED THE ORDER OF THE AO. AGGRIEVE D, THE ASSESSEE IS IN APPEAL BEFORE US FOR ALL THESE ASSES SMENT YEARS. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE LEARNED AR'S CONTENTION IS THAT TH E AMOUNTS ITA. NOS. 791-794/HYD/2013 SRI K. RAMACHANDRA REDDY ============-========= 4 DEPOSITED INTO THE BANK A/C. NO. 446 AT JUBILEE HIL LS BRANCH OF ANDHRA BANK REPRESENT REGULAR BUSINESS RECEIPTS AND THEY CANNOT BE ISOLATED FROM THE BUSINESS INCOME OF THE ASSESSEE. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ONUS WAS UPON THE ASSESSEE TO EXPLAIN EACH AND EVERY ENTRY I N THE BANK A/C., WITH REGARD TO THE NATURE AND SOURCE OF THE D EPOSITS, WHEREAS IN THIS CASE, THE ASSESSEE HAS FAILED TO FU RNISH THE EXPLANATION AND IN THE ABSENCE OF CREDIBLE INFORMAT ION THERE WAS NO SCOPE TO TREAT THE DEPOSITS AS RELATING TO T HE BUSINESS RECEIPTS OF THE ASSESSEE SO AS TO ESTIMATE THE INCO ME AT 15% OF THE GROSS RECEIPTS. HE SUBMITTED THAT THE BANK ACC OUNT DOES NOT HAVE ANY NEXUS WITH THE BUSINESS OF THE ASSESSE E. 7. BUT THE ADMITTED FACT IS THAT THERE IS NO CLEAR EVI DENCE TO SUGGEST THAT THE ASSESSEE DEPOSITED THE AMOUNTS INT O THE ACCOUNT OF ANDHRA BANK FROM ANY SOURCES OTHER THAN BUSINESS RECEIPTS, THOUGH THERE WAS A SEARCH U/S. 132 OF THE ACT ON 12.8.2009 AT THE PREMISES OF THE ASSESSEE. THE ASS ESSEE'S ONLY PLEA SINCE BEGINNING IS THAT THE DEPOSITS IN THE AN DHRA BANK A/C. REPRESENT SALE PROCEEDS OF THE ASSESSEE. UNLE SS AND UNTIL THE DEPARTMENT LOCATES ANY PARTICULAR SOURCE OF INC OME, IT HAS TO BE TREATED AS BUSINESS RECEIPT OF THE ASSESSEE. THE ENTRIES FOUND IN THE BANK A/C. MAY BE ASSESSED AS BUSINESS PROFIT OR AS INCOME FROM OTHER SOURCES, AS THE CASE MAY BE. THE RE IS NO RULE THAT THE AMOUNT CREDITED TO THE BANK A/C. MUST BE T AKEN AS INCOME FROM OTHER SOURCES. IT ALWAYS DEPENDS UPON THE EVIDENCE AND EXPLANATION FURNISHED BY THE ASSESSEE. 8. IN THE PRESENT CASE, THE DEPARTMENT HAVING CARRIED ON THE SEARCH ACTION IN THE CASE OF THE ASSESSEE AND FOUND NO MATERIAL TO SUGGEST THAT THE IMPUGNED RECEIPTS ARE FROM ANY OTHER SOURCE, THEN IT IS NATURAL TO INFER THAT THE ASSESS EE HAD DEPOSITED BUSINESS RECEIPTS ONLY INTO THE BANK A/C. AND TO ITA. NOS. 791-794/HYD/2013 SRI K. RAMACHANDRA REDDY ============-========= 5 ESTIMATE THE INCOME ON IT AT 15% AS ITS SALE PROCEE DS. BEING SO, IT IS NOT APPROPRIATE TO CONSIDER THE ENTIRE DEPOSI TS IN THE BANK A/C. AS INCOME OF THE ASSESSEE. IN OUR OPINION, IT IS APPROPRIATE TO ESTIMATE THE INCOME AT THE SAME RATE OF NET PROF IT AS APPLIED TO THE UNDISCLOSED TURNOVER OF THE ASSESSEE I.E., A T 15% INSTEAD OF 100% AS CONSIDERED BY THE AO. ACCORDINGLY, WE D IRECT THE AO TO CONSIDER 15% OF THE DEPOSITS IN THE BANK A/C. NO . 446, ANDHRA BANK JUBILEE HILLS BRANCH, HYDERABAD. 9. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH JANUARY, 2014. SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 9 TH JANUARY, 2014 TPRAO COPY FORWARDED TO: 1. SRI K. RAMACHANDRA REDDY, C/O. M/S. B. NARSING RAO & CO., CHARTERED ACCOUNTANTS, PLOT NO. 554, ROAD NO. 92, JUBILEE HILLS, HYDERABAD-500 096. 2. THE DCIT, CENTRAL CIRCLE - 2, HYDERABAD. 3. THE CIT(A) - I , HYDERABAD. 4. THE CIT (CENTRAL) , HYDERABAD 5. THE DR 'A' BENCH, ITAT, HYDERABAD