M/s. Bhavani Automotives, Warangal V. ITO, Karimnagar

ITA 85/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66305 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 19-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Corroborative evidences; Assessment record
• Section: 143(3); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 85 & 86/HYD/2011 ASSESSMENT YEARS: 2005-06 & 2006-07 BHAVANI AUTOMOBILES, ... APPELLANT KARIMNAGAR 505 001. (PAN AAFFB 6109 A) VS. INCOME TAX OFFICER, WARD-4, RES PONDENT KARIMNAGAR. APPELLANT BY : SHRI C.P. RAMA SWAMY RESPONDENT BY : SMT. AMISHA S. GUPT DATE OF HEARING : 23/07/2012 DATE OF PRONOUNCEMENT : 21/09/20 12 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: BOTH THESE APPEALS PREFERRED BY THE ASSESSEE ARE D IRECTED AGAINST THE RESPECTIVE ORDERS OF THE CIT(A)-III, HY DERABAD FOR THE ASSESSMENT YEARS 2005-06 & 2006-07. SINCE IDENTICAL ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEY WERE HEARD TOG ETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. ITA NO. 85/HYD/2011 FOR AY 2005-06 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FIRM IS A DEALER IN AUTOMOBILES. FOR THE AY 2005-06, IT HAD F ILED ORIGINAL RETURN OF INCOME ON 30/10/2005, SHOWING INCOME AT NIL. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE GRO UP CASES OF THE ASSESSEE FIRM ON 08/09/2005. LATER, THE ASSESSI NG OFFICER HAD REOPENED THE ASSESSMENT U/S 147 OF THE ACT, AND ISS UED NOTICE 2 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES U/S 148 OF THE ACT, ON 30/05/2007. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTED THAT AS PER THE COPY OF ACCOUNT OF TH E ASSESSEE OBTAINED FROM PUNJAB TRACTORS LTD., PUNJAB TRACTORS LTD. CREDITED TOTAL AMOUNT OF RS. 4,10,22,559/- IN THE ACCOUNT OF THE ASSESSEE. HOWEVER, AS PER COPY OF THE ACCOUNT OF THE SAID COM PANY FURNISHED BY THE ASSESSEE, IT HAD SHOWN PAYMENT OF RS. 4,02,15,560/- TO THE PUNJAB TRACTORS LTD. DURING TH E PREVIOUS YEAR RELEVANT TO AY 2005-06. IN RESPONSE TO THE QUE RY RAISED BY THE ASSESSING OFFICER FOR EXPLAINING THE DISCREPANC Y ON THE ABOVE ACCOUNT, THE ASSESSEE FILED A RECONCILIATION STATEM ENT, BUT, COULD NOT EXPLAIN THE SAME WITH SUPPORTING EVIDENCES. THE REFORE, THE ASSESSING OFFICER HELD THAT THE DIFFERENTIAL PAYMEN T TO THE EXTENT OF RS. 8,06,999/- MADE TO THE SAID COMPANY, NOT SHO WN BY THE ASSESSEE IN ITS BOOKS, WERE MADE OUT OF ITS INCOME FROM UNEXPLAINED SOURCES AND, THUS, THE SAME WAS ADDED T O THE INCOME OF THE ASSESSEE. 4. REFERRING TO PAGE NO. 71 OF THE IMPOUNDED DOCUME NT VIDE ANNEXURE NO. 4, WHERE THERE IS MENTION OF AN AMOUNT OF RS. 80,21,292/- SHOWN AS M/S BHAVANI AUTOMOTIVES, KARIM NAGAR : PTL PAYMENTS : 2004-05 YEAR: NOT SHOWING ON PTL STA TEMENT, THE ASSESSING OFFICER NOTED THAT SUCH SHEET SHOWS 2 7 DEMAND DRAFTS OBTAINED ON VARIOUS DATES AGGREGATING TO RS. 80,21,292/-, WHICH WERE NOT RECEIVED BY PUNJAB TRACTORS LTD. ON QUERY RAISED BY HIM, IN THIS REGARD, THE ASSESSEE VIDE LETTER DA TED 19/12/2008 HAD SUBMITTED THAT THOSE DDS WERE DEPOSITED IN THEI R ACCOUNT IN SBI, CHANDIGARH BRANCH AND THUS THE SAME WERE NOT R EFLECTED AS CREDITS IN THE STATEMENT OF THAT COMPANY. THE ASSES SING OFFICER NOTICED THAT SOME OF THE DDS WERE DEPOSITED IN THAT BANK ACCOUNT 3 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES AND NOTED THAT FIVE DDS DRAWN ON DIFFERENT DATES, D ETAILS OF WHICH WERE GIVEN AT PAGE 3 OF ASSESSMENT ORDER, WERE NOT REFLECTED IN THAT BANK ACCOUNT. THE ASSESSING OFFICER FURTHER NO TED THAT THE ASSESSEE FAILED TO EXPLAIN AS TO WHERE SUCH DDS WER E DEPOSITED DURING THE PREVIOUS YEAR AND ALSO COULD NOT EXPLAIN THE PURPOSE OF THOSE DDS. UNDER THESE CIRCUMSTANCES, THE ASSESS ING OFFICER HELD THAT PAYMENT TO THE EXTENT OF RS. 18,06,128/- WERE MADE OUTSIDE THE BOOKS OF ACCOUNT AND THUS, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT O N A TOTAL INCOME OF RS. 26,13,130/- MAKING THE SAID ADDITIONS VIDE ORDER DATED 30/12/2008 PASSED U/S 143(3) R.W.S 147 OF THE ACT. 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 7. BEFORE THE CIT(A), THE ASSESSEE RAISED A GROUND WITH RESPECT TO NON-SUBMISSION OF THE REASONS RECORDED U/S 147 O F THE ACT. THE CIT(A) PLACING RELIANCE ON THE DECISION OF MUM BAI BENCH OF TRIBUNAL IN THE CASE OF DATAMATICS LTD., VS. ACIT [ 2008] 110 ITD 24 AND DELHI BENCH OF ITAT IN THE CASE OF ITO VS. S MT. GURINDAR KAUR [2006] 102 ITD 189, HELD THAT THE ASSESSEE WA S AWARE OF THE REASONS FOR REOPENING THE ASSESSMENT AND DISMIS SED THE GROUND. 8. THE ASSESSEE HAS NOT PREFERRED APPEAL AGAINST TH E DECISION OF CIT(A) HOLDING THAT THE ASSESSING OFFICER WAS CO RRECT IN REOPENING. 9. AS REGARDS THE FIRST ISSUE RELATING TO THE ADDIT ION OF RS. 4 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES 8,06,999/- MADE IN THE ASSESSMENT ON THE BASIS OF T HE DISCREPANCY FOUND IN THE ACCOUNT OF THE ASSESSEE, T HE CIT(A) CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER . THE ASSESSING OFFICER FURNISHED HIS REMAND REPORT AND H AD SUGGESTED THAT THE AMOUNT OF RS. 60,000/- MAY BE SUSTAINED OU T OF THE ADDITION OF RS. 8,06,999/- MADE IN THE ASSESSMENT. THE CIT(A) HELD THAT THE SOURCE OF PAYMENTS AMOUNTING TO RS. 6 0,000/- MADE TO PUNJAB TRACTORS LTD. DURING THE PREVIOUS YEAR RE LEVANT TO THE AY UNDER CONSIDERATION REMAINED UNEXPLAINED AND, TH EREFORE, HE CONFIRMED THE ADDITION TO THE EXTENT OF RS. 60,000/ - AND DELETED THE BALANCE AMOUNT OF RS. 7,46,099/-. 10. AS REGARDS THE ADDITION OF RS. 18,06,128/-, THE ASSESSING OFFICER IN THE REMAND REPORT HELD AS FOLLOWS: THE ASSESSEE HAS STATED THAT THOUGH SEVERAL LETTERS WERE ADDRESSED TO PTL FOR CLARIFICATION ABOUT THE 6 DDS WHICH WERE DRAWN IN ITS FAVOUR NO CLARIFICATION HAS BEEN RECEIVED FROM THE PTL. THOUGH THE ASSESSEE MADE A REQUEST TO ISSUE A NOTICE TO PTL SEEKING CLARIFICATION THE ONUS OF B URDEN TO PROVE VESTS ON THE PART OF THE ASSESSEE TO CLARIFY THE ISSUE RAISED BY THE ASSESSING OFFICER DURING THE COURSE O F THE SCRUTINY PROCEEDINGS. HENCE THE ADDITION OF RS. 18, 06,128/- WHICH WAS NOT REFLECTED IN THE BOOKS OF PTL MAY BE SUSTAINED SINCE THE ASSESSEE FAILED TO EXPLAIN AS T O WHERE THE 6 DDS WERE DEPOSITED/TRANSFERRED. 11. THE CIT(A) HELD THAT THE ASSESSING OFFICER HAS NOT COMMENTED WITH RESPECT TO THOSE DDS, COPIES OF WHIC H HAD BEEN FILED BY THE ASSESSEE DURING THE APPEAL AND WHICH W ERE FORWARDED TO THE ASSESSING OFFICER FOR VERIFICATION AND EXAMI NATION . THEREAFTER THE CIT(A), HELD AS UNDER:- IN THE SAID LETTER WRITTEN TO THE ITO, WARD-4, KARI MNAGAR, AT PAGE 20 OF THE PAPER BOOK, THAT IS REFERENCE TO SIX DDS. HOWEVER, THE APPELLANT HAS FILED COPIES OF THE DDS FOR FIVE AMOUNTS I.E. FOR RS. 3,35,888/-, RS. 2,00,000/-, RS . 3,58,490/-, RS. 3,68,000/- & RS. 2,43,750/-. IT IS CLARIFIED 5 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES HERE, THAT THE PAGE NO. 22 OF THE PAPER BOOK IS THE PHOTOCOPY OF THE ACKNOWLEDGEMENT ISSUED BY THE COUR IER SERVICE AGENT. PAGE 23, IS THE COPY OF LETTER WRITT EN TO PTL RELATING TO DD DATED 03/06/04 FOR RS. 3,35,888/- AN D PAGE 24 IS THE PHOTOCOPY OF THE SAID DD DRAWN IN FAVOUR OF PTL. SIMILARLY, PAGE 25 & 26 OF THE PAPER BOOK RELATE TO THE DD DATED 29/12/2004 FOR RS. 2,00,000/- IN FAVOUR OF PT L, PAGE 27 & 28 RELATE TO THE DD DATED 06/01/2005 IN FAVOUR OF PTL, PAGE 29 TO 32 OF THE PAPER BOOK RELATE TO THE DD AM OUNT OF RS. 3,68,000/-, COMPRISING OF FOUR DDS OF RS. 92,00 0/- EACH IN FAVOUR OF PTL. THE LAST PAGE OF THE PAPER BOOK I .E. 33 RELATES TO THE PHOTOCOPY OF THE DD FOR RS. 2,43,750 /- ISSUED BY ICICI BANK IN FAVOUR OF PUNJAB TRACTORS. SINCE T HE ABOVE FIVE DDS WERE PURCHASED/DRAWN IN FAVOUR OF PTL, IT IS CLEAR THAT THE SAME WERE MEANT FOR PAYMENT TO THAT COMPAN Y. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MEN TIONED THAT THE APPELLANT HAS NOT EXPLAINED AS TO WHERE TH OSE DDS WERE DEPOSITED AND ALSO COULD NOT EXPLAIN THE PURPO SE FOR WHICH SUCH DDS WERE TAKEN. WHEN FROM THOSE VERY DDS , IT SHOWS THAT THE SAME WERE PURCHASED IN FAVOUR PTL, I T IS OBVIOUS THAT THE SAME, PURCHASED BY THE APPELLANT F ROM BANK, MUST HAVE BEEN REMITTED TO THAT COMPANY. THOU GH THE ASSESSING OFFICER STATES THAT SUCH PAYMENTS WERE MA DE OUTSIDE BOOKS, IN ABSENCE OF ANY FINDING GIVEN BY H IM THAT SUCH DDS HAVE NOT BEEN ENTERED/RECORDED IN THE BOOK S, I AM INCLINED TO BELIEVE THAT THE SAME WERE ROUTED THROU GH THE BOOKS OF ACCOUNTS OF THE APPELLANT FOR THE AY 2005- 06. HOWEVER, SINCE THE APPELLANT HAS FAILED TO FURNISH THE COPY OF THE SAID DD NO. 321112 DATED 02/06/04 FOR RS. 3,00,000/- I AM NOT INCLINED TO BELIEVE THAT SUCH D D WAS TAKEN/PURCHASED IN FAVOUR OF PTL. ACCORDINGLY, I AM NOT INCLINED TO BELIEVE THAT THE SAID PAYMENT WAS RECOR DED IN THE BOOKS OF THE APPELLANT FOR THE PREVIOUS YEAR. S INCE THE APPELLANT HAS FAILED TO EXPLAIN THE SOURCE AS WELL AS THE DESTINATION OF SUCH DD DATED 02/06/04 FOR RS. 3,00, 000/-, IN MY VIEW, PAYMENT TO THAT EXTENT CANNOT BE ALLOWED A ND IT HAS TO BE HELD THAT THE SAME WAS MADE OUT OF THE UNEXPLAINED INCOME IN THE HANDS OF THE APPELLANT DU RING THE PREVIOUS YEAR. HENCE, OUT OF THE SAID ADDITION OF R S. 18,06,128/- MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT, ADDITION TO THE EXTENT OF RS. 3,00,000/ - IS CONFIRMED AND THE BALANCE AMOUNT OF RS. 15,06,128/- IS DELETED. 12. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES 13. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI C.P. RAMA SWAMY SUBMITTED STATEMENT OF ACCOUNT FROM 01/0 4/2004 TO 31/03/2005 FROM ANDHRA BANK AND POINTED OUT THAT TH E ENTRY IN THE STATEMENT REGARDING PAYMENT OF RS. 3,00,000/- B Y THE ASSESSEE TOWARDS DD FAVOURING PTL ON 02/06/2004. 14. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE ARE CONVINCED THAT THE ASSESSEE HAS EXPLAINED THE D D FOR THE AMOUNT OF RS. 3.00 LAKHS AND THE PAYMENT OF THE SA ME TO PUNJAB TRACTORS LTD. DATED 02/06/2004 REFLECTED IN THE STA TEMENT OF ACCOUNT ISSUED BY ANDHRA BANK AND, HENCE, THE SAME CANNOT BE TREATED AS UNEXPLAINED INCOME IN THE HANDS OF THE A SSESSEE DURING THE PREVIOUS YEAR. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION OF RS. 3,00,000/ - SUSTAINED BY THE CIT(A). 15. WITH RESPECT TO GROUND NO. 2, REGARDING THE ADD ITION OF RS. 60,000/-, THE LEARNED COUNSEL FOR THE ASSESSEE BEFO RE US HAS NOT PRESSED THIS GROUND, THEREFORE, THE SAME IS DISMISS ED AS NOT PRESSED. 16. IN THE RESULT, APPEAL OF THE ASSESSEE FOR AY 20 05-06 IS PARTLY ALLOWED. ITA NO. 86/HYD/2011 FOR AY 2006-07. 17. BRIEFLY THE FACTS OF THE CASE ARE THAT FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31/10/2006, SHOWING INCOME AT RS. 43,650/-. A SURV EY U/S 133A OF THE ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 08/09/2005. THE ASSESSING OFFICER DURIN G THE COURSE 7 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES OF ASSESSMENT PROCEEDINGS REQUIRING THE ASSESSEE TO RECONCILE ITS ACCOUNT IN THE BOOKS OF PUNJAB TRACTORS LTD. (IN SH ORT PTL) GIVEN BY THE PTL, WHICH WAS SHOWING A DIFFERENCE OF RS. 21,59,471/-. THOUGH THE ASSESSEE HAD FILED RECONCI LIATION STATEMENT ALONG WITH BILLS OF PAYMENT THE ASSESSEE HAS FAILED TO PRODUCE ANY SUPPORTING EVIDENCE. THE ASSESSING OFFI CER, THEREFORE, MADE THE ADDITION OF RS. 21,59,471/- AS PAYMENT TO PTL OUT OF UNEXPLAINED SOURCES. 18. THE ASSESSING OFFICER FURTHER NOTED THAT SRI T. RAJESHWAR REDDY IS THE MANAGING PARTNER OF THE ASSESSEE FIRM. HE FURTHER NOTICED THAT AS PER THE COPY OF ACCOUNT OF THE SAID T. RAJESHWAR REDDY FILED IN THE CASE OF M/S BHAVANI HIRE PURCHAS E & FINANCE, HE HAD INVESTED IN THAT FIRM AN AMOUNT OF RS. 1,74, 42,611/- DURING THE PREVIOUS YEAR, RELEVANT TO AY 2006-07. O N VERIFICATION OF THE RETURN OF INCOME OF SRI T. RAJESHWAR REDDY, THE ASSESSING OFFICER FURTHER NOTICED THAT HE HAD WITHDRAWN AN AM OUNT OF RS. 1,55,94,101/- FROM THE ASSESSEE FIRM I.E. M/S BHAVA NI AUTOMOTIVES. HE OBSERVED, HOWEVER, SUCH AMOUNT IS N OT REFLECTED IN THE BALANCE SHEET AS ON 31/03/2006 OF THE ASSESS EE FIRM. IN RESPONSE TO QUERY RAISED BY HIM IN THIS REGARD, THE ASSESSEE SUBMITTED THAT SRI REDDY WAS SHOWN AS A DEBTOR FOR THE AMOUNTS DRAWN BY HIM FROM BHAVANI AUTOMOTIVES. STATING THA T AS PER THE DEBTORS LIST, AN AMOUNT OF RS. 95,45,420/- ONLY IS SHOWN AS DEBIT BALANCE AGAINST SRI T. RAJESHWAR REDDY, HE HELD THA T THE DIFFERENCE OF RS. 60,48,681/- (1,55,94,101 94,45, 420) WAS ADDED TO THE INCOME OF THE ASSESSEE TREATING SRI RE DDY AS UNACCOUNTED DEBTOR OF THE ASSESSEE TO THAT EXTENT. 19. THE ASSESSING OFFICER FURTHER NOTED THAT DURING THE SURVEY, IT WAS NOTICED THAT THERE WAS DEFICIT STOCK WORTH R S. 83,29,460/-. 8 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES ON QUERY RAISED BY HIM FOR EXPLAINING THE SAID DEFI CIT, THE ASSESSEE HAD SUBMITTED THAT WHENEVER THERE IS A DEF ECT OR IF ANY MODEL OF THE TRACTOR IS OUTDATED, THEY USED TO RETU RN THE SAME TO PTL AND SUCH RETURNED VEHICLES WERE NOT RECORDED IN THE BOOKS, WHICH RESULTED IN DEFICIT STOCK. THOUGH THE ASSESSE E HAD SUBMITTED DETAILS OF SUCH RETURNED TRACTORS, THE AS SESSING OFFICER DID NOT ACCEPT SUCH CLAIM OF THE ASSESSEE FOR THE R EASON THAT WHENEVER ANY TRACTOR IS RETURNED TO THE COMPANY, TH E SAME IS CREDITED TO THE ACCOUNT OF THE ASSESSEE IMMEDIATELY . HE, THEREFORE, REJECTED THE CONTENTION OF THE ASSESSEE AND HELD THAT SUCH STOCKS HAVE BEEN SOLD BY THE ASSESSEE OUTSIDE THE BOOKS. ESTIMATING THE GROSS PROFIT THEREON AT 4% I.E. AT R S. 4,00,647/- THE ASSESSING OFFICER HELD THAT THE SAME IS ADDED T O THE INCOME OF THE ASSESSEE TOWARDS PROFIT ON UNACCOUNTED SALES . 20. THE AO COMPLETED THE ASSESSMENT VIDE ORDER DATE D 30/12/2008 PASSED U/S 143(3) OF THE ACT, DETERMININ G TOTAL INCOME AT RS.86,52,450/-. 21. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). 22. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CALLED FOR REMAND REPORT FROM THE AO AND THE AO SUB MITTED HIS REPORT WHEREIN IT WAS STATED AS UNDER:- ON THIS ISSUE THE ASSESSEE HAS STATED THAT RS. 4,00 ,000/- WAS DEBITED TO ANDHRA BANK ACCOUNT AND RS. 4,19,86 0/- WAS DEBITED TO SBI ACCOUNT INSTEAD OF DEBITING TO P TL ACCOUNT. NO EVIDENCE HAS BEEN PRODUCED TO THIS EXTE NT. THE ASSESSEE HAS FURTHER STATED THAT AN AMOUNT OF RS. 4 ,000/- WAS RECORDED SHORT AND THE OTHER AMOUNTS OF RS. 84, 915/-, RS. 3,15,515, RS. 2,70,454/-, RS. 3,50,000/- AND RS . 3,15,515/- WERE NOT DEBITED IN ASSESSEES BOOKS BUT 9 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES CREDITED IN THE BOOKS OF PTL. THE AO HAS MADE THE A DDITION TREATING THE DIFFERENCE OF RS. 21,59,471/- AS PAYME NT MADE OUT OF UNEXPLAINED SOURCES. AS THE ASSESSEE HAS STA TED THAT IT HAS NOT TAKEN THE AMOUNTS INTO ACCOUNT, THE ADDI TION MADE MAY BE SUSTAINED TREATING IT AS UNACCOUNTED PAYMENTS. 23. THE ASSESSEE CONFRONTING THE ABOVE REMAND REPOR T OF THE AO, FILED WRITTEN SUBMISSIONS WHEREIN IT WAS SUBMIT TED THAT AN AMOUNT OF RS. 4,00,000/- WAS WRONGLY DEBITED TO AND HRA BANK ACCOUNT INSTEAD OF ACCOUNT OF PTL. IT WAS FURTHER S UBMITTED THAT AN AMOUNT OF RS. 4,19,860/- INSTEAD OF BEING DEBITE D TO PTL, WAS DEBITED TO SBI ACCOUNT CHANDIGARH. STATING THE ASSE SSEE HAD PRODUCED ITS BOOKS OF ACCOUNT AND THE COPY OF THE A CCOUNT OF SBI, CHANDIGARH, BEFORE THE AO, IT WAS SUBMITTED THAT SU CH ENTRIES ARE DUE TO WRONG POSTINGS. REFERRING TO THE OTHER CREDI TS IN THE ASSESSEES ACCOUNT, AS PER THE ACCOUNT COPY OBTAINE D FROM PTL, IT WAS SUBMITTED THAT THEY COULD NOT PASS CORRESPONDIN G ENTRY AS NO ADVICE WAS MADE AVAILABLE BY THAT COMPANY REGARDING THE JOURNAL ENTRIES. IT WAS STATED THAT JOURNAL ENTRIES ARE PAS SED ONLY AFTER GETTING NECESSARY INFORMATION FOR SUCH CREDITS. STA TING THAT SAID CREDITS AS PER THE ACCOUNT OF PTL MAY BE DUE TO RET URNED GOODS OR REVERSAL OF WRONG ENTRIES POSTED BY THAT COMPANY AN D FURTHER STATING THAT NO EXPLANATION WAS FORTHCOMING FROM TH E COMPANY, IT WAS SUBMITTED THAT NO CORRESPONDING JOURNAL ENTRIES WERE POSTED IN THE BOOKS OF THE ASSESSEE. WITH THE ABOVE SUBMIS SIONS, IT WAS CONTENDED THAT SUCH ADDITION MADE BY THE AO TOWARDS SUCH DIFFERENCE IN THE CREDITS MAY BE DELETED. 24. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT OBTAINED FROM THE AO, HELD AS UND ER:- 4.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, THE REMAND REPORT OF THE AO AND THE FACT S OF THE CASE. I HAVE PERUSED THE SAID RECONCILIATION STATEM ENT 10 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES FURNISHED BY THE APPELLANT BEFORE THE AO, AS PER PA GE 1 OF PAPER BOOK FILED DURING THE APPEAL. AS SEEN FROM TH E SAID STATEMENT, REFERRING TO THE CREDIT OF RS. 4,00,000/ - ON 23/09/05 AND OF RS. 4,19,860/- ON 29/12/05 IN THE A CCOUNT OF PTL, THE APPELLANT HAS SUBMITTED THAT THE SAME W ERE DUE TO WRONG POSTINGS/ENTRIES MADE AT THEIR END. IT MAY BE STATED THAT, THE AO IN HIS REMAND REPORT HAS SUBMIT TED THAT THE APPELLANT HAS FAILED TO PRODUCE ANY EVIDENCE IN SUPPORT OF SUCH PLEA. IT HAS BEEN STATED RS.4,00,000/- WAS WRONGLY DEBITED TO ANDHRA BANK ACCOUNT. IN THE COPY OF ACCO UNT OF ANDHRA BANK, AS PER BOOKS OF THE APPELLANT, FURNISH ED BY IT BEFORE THE AO, A SUM OF RS. 4,00,000/- IS CREDITED ON 12/09/2005 SHOWING BY CASH, CHEQUE NO. 0415305. FRO M THIS, IT SHOWS THERE WAS A CHEQUE TRANSACTION FROM THAT BANK VIDE THE SAID CHEQUE NUMBER, WHICH IS POSTED IN THE BOOKS ON 12/09/2005. IN THE PTL ACCOUNT A SUM OF RS. 4,00 ,000/- IS SHOWN AS CREDITED IN THE HANDS OF THE APPELLANT ON 23/09/2005. THIS MEANS, THE APPELLANT HAS PAID RS. 4,00,000/- TO THAT COMPANY ON THAT DATE. WHEN THE APPELLANT SAYS THAT THERE WAS A WRONG POSTING IN IT S BOOKS ON ABOVE ACCOUNT, IT COULD HAVE FURNISHED NECESSARY EVIDENCE EXPLAINING THE ACTUAL FACTS AND ALSO THE S OURCE OF SUCH PAYMENT. SIMILARLY, AS REGARDS THE CONTENTION OF WRONG POSTING IN RESPECT OF THE OTHER AMOUNT OF RS. 4,19, 860/- IS CONCERNED, THE APPELLANT COULD HAVE FURNISHED NECES SARY SUPPORTING EVIDENCE BEFORE THE AO EXPLAINING THE AC TUAL FACTS AND ALSO THE SOURCE OF SUCH PAYMENTS. BY MERE FURNISHING COPIES OF ITS ACCOUNT BOOKS, THE APPELLA NT CANNOT SAY THAT SUCH PAYMENTS MADE BY IT, DURING THE PREVI OUS YEAR, STAND EXPLAINED. FURTHER AS REGARDS THE OTHER ITEMS/AMOUNTS, REFERRED TO IN THE SAID RECONCILIATI ON STATEMENT ARE CONCERNED, THE APPELLANT HAS MERELY SUBMITTED THAT, FOR SUCH CREDITS MADE TO ITS ACCOUN T IN THE BOOKS OF PTL, IT HAS NOT RECEIVED NECESSARY INFORMATION/DETAILS FROM THAT COMPANY. HOWEVER, THE APPELLANT HAS NOT DENIED THAT IT HAS NOT RECEIVED S UCH AMOUNTS/CREDITS DURING THE PREVIOUS YEAR. UNDER THI S CIRCUMSTANCE, IN MY VIEW, THE APPELLANT HAS FAILED TO EXPLAIN SUCH DIFFERENCE OF RS. 21,59,471/- TOWARDS THE CRED ITS MADE IN ITS ACCOUNTS DURING THE PREVIOUS YEAR UNDER CONS IDERATION, IN THE BOOKS OF PTL, WHEN COMPARED TO THE CREDITS S HOWN IN ITS BOOKS. IN FACT, AS THE APPELLANT HAS FAILED TO ACCOUNT FOR IN ITS BOOKS THE SAID EXCESS CREDIT/PAYMENT OF RS. 21,59,471/-, THE AO, IN MY VIEW, HAS BEEN JUSTIFIED IN ADDING THE SAID AMOUNT TO ITS INCOME FOR THE AY 200 6-07. HENCE, SUCH ADDITION IS CONFIRMED. 11 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES 25. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE US. 26. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI C.P. RAMA SWAMY REFERRED TO PAGE 1 & 2OF THE PAPER BOOK WHEREIN THE ASSESSEE HAD FILED RECONCILIATION STATEMENT CONTEND ED THAT RECONCILIATION OF THE ACCOUNTS HAVE TO BE DONE AND REFERRING TO THE CREDIT OF RS. 4,00,000/- ON 23/09/2005 AND OF RS. 4,19,860/- ON 29/12/05 IN THE ACCOUNT OF PTL, THE ASSESSEE HAS SUBMITTED THAT THE SAME WERE DUE TO WRONG POSTINGS/ENTRIES MA DE BY THEM. 27. THE LEARNED DR, SMT. AMISHA GUPT, ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 28. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IT IS OBSERVED THAT SINCE THE ASSESSEE HAS FAILED TO EXPL AIN THE DIFFERENCE OF RS. 21,59,471/- TOWARDS CREDIT MADE I N ITS ACCOUNT DURING THE PREVIOUS YEAR IN THE BOOKS OF PTL WHEN C OMPARED TO THE CREDIT SHOWN IN ITS BOOKS AND HAS FAILED TO ACC OUNT FOR IN ITS BOOKS THE EXCESS CREDIT OF RS. 21,59,471/-, THE ISS UE IS REMITTED BACK TO THE FILE OF THE AO WITH A DIRECTION TO RE-D O THE SAME IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECT ED TO FURNISH NECESSARY SUPPORTING EVIDENCE, SUCH AS RECONCILIATI ON ACCOUNTS AND ACTUAL SOURCE OF SUCH PAYMENTS. THUS, THIS GROU ND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 29. AS REGARDS THE ADDITION OF RS. 4,00,647/- TOWAR DS GROSS PROFIT ON UNACCOUNTED SALES, THE CIT(A) AFTER CONSI DERING THE 12 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES SUBMISSIONS OF THE ASSESSEE, CALLED FOR A REMAND RE PORT FROM THE ASSESSING OFFICER AND THE ASSESSING OFFICER SUBMITT ED HIS REMAND REPORT WHEREIN IT WAS STATED AS UNDER:- THE ASSESSEE HAS STATED THAT THE STOCK DEFICIT HAS OCCURRED ON ACCOUNT OF THE REASON THAT THE RETURNED TRACTOR S WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. IT HAS B EEN STATED THAT DURING THE YEAR 20 TRACTORS WERE RETURN ED TO PTL CHANDIGARH AND IF THE VALUE OF THE SAME IS TAKEN IN TO ACCOUNT THERE WONT BE ANY STOCK DEFICIT. THE ASSES SEE HAS FURNISHED COPIES OF LETTERS WHICH WERE ADDRESSED TO PTL RETURNING THE TRACTORS. HOWEVER, NO CONFIRMATION LE TTERS FROM THE PTL HAVE BEEN OBTAINED AND FILED WITH REGA RD TO RECEIPT OF RETURNED TRACTORS. HENCE THE ADDITION OF RS. 4,00,647/- ESTIMATING THE G.P. @ 4.81% ON THE DEFIC IT STOCK OF RS. 83,29,460/-. 30. AGAINST THE SAID REMAND REPORT OF THE ASSESSING OFFICER, THE LEARNED AR OF THE ASSESSEE FILED WRITTEN SUBMISSIO NS WHEREIN IT WAS STATED THAT THE ASSESSEE HAD FILED THE COPIES O F LETTERS AND OTHER DETAILS PERTAINING TO THE TRACTORS RETURNED B Y THEM TO PTL, IN THE SAID PAPER BOOK AT PAGES 20-32. IT WAS STATE D THAT AT PAGE 22 OF THE PAPER BOOK, THE ASSESSEE HAD FURNISHED TH E MODELS NAME, CHASIS NUMBER, ENGINE NUMBER AND THE AMOUNT/V ALUE OF THE RETURNED TRACTORS. IT WAS STATED THAT WHEN THE ASSESSEE HAD FURNISHED FULL DETAILS OF THE 20 RETURNED TRACTORS AND WHEN SUCH FACT HAS NOT BEEN DISPUTED NOR REJECTED BY THE ASSE SSING OFFICER, SUCH ADDITION MADE TOWARDS PROFIT ARISING FROM DEFI CIT STOCK, TREATING THE SAME AS UNACCOUNTED SALES, IS NOT JUST IFIED. HE REQUESTED THAT HAVING REGARD TO THE EARLIER EXPLANA TION FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS AND IN VIEW OF SUCH DOCUMENTS FILED DURING THE APPEAL, THE SAID AD DITION SHOULD BE DELETED. 31. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNE D AR OF THE ASSESSEE AND CONSIDERING THE REMAND REPORT OF THE A SSESSING 13 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES OFFICER, THE CIT(A) HELD AS UNDER:- 6.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED AR, THE REMAND REPORT OF THE ASSESSING OFFI CER AND THE MATERIAL ON RECORD. AS PER THE SUBMISSIONS OF T HE APPELLANT, SINCE IT HAS RETURNED 20 TRACTORS TO PTL DURING THE PREVIOUS YEAR, NO SUCH ADDITION IS WARRANTED IN ITS CASE. THE ASSESSING OFFICER, HOWEVER, SUBMITTED THAT SINCE TH E APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY CONFIRMA TION FORM THAT COMPANY, CONFIRMING RETURN OF THOSE TRACTORS, THE APPELLANT IS NOT ELIGIBLE FOR ANY RELIEF AGAINST TH E SAID ADDITION MADE IN THE ASSESSMENT. I FIND THAT AT PAG E 22 OF THE PAPER BOOK, THE APPELLANT HAS FURNISHED THE LIS T OF SAID 20 TRACTORS ALONG WITH RESPECTIVE CHASIS NUMBER, EN GINE NUMBER ETC., WHICH WERE STATED TO BE RETURNED TO PT L DURING THE PREVIOUS YEAR. FROM THE ASSESSMENT RECORD, IT I S SEEN THAT THE SAID COMPANY I.E. PTL VIDE THEIR LETTER DA TED 10/01/2006 WRITTEN TO ITO, WARD-1, KARIMNAGAR, HAVE FURNISHED THE INFORMATION WITH REGARD TO SWARAJ TRA CTORS RETURNED BY M/S BHAVANI AUTOMOTIVES, KARIMNAGAR, DU RING THE FY 2004-05 AND 2005-06. A PHOTO COPY OF THE SAI D LETTER IS PLACED ON THE ASSESSMENT RECORD. AFTER COMPARING THE TRACTOR RETURN DETAILS OF M/S BHAVANI AUTOMOTIVES, KARIMNAGAR FOR FY 2005-06, FURNISHED WITH THE SAID LETTER, IT IS SEEN THAT 15 TRACTORS, REFERRED TO IN THE SAID L IST GIVEN BY THE APPELLANT, AT PAGE 22 OF THE PAPER BOOK, ARE AP PEARING THERE. UNDER THE CIRCUMSTANCE, IT CAN BE CONSIDERED THAT OUT OF SUCH LIST, 15 TRACTORS HAVE BEEN RETURNED TO PTL . SINCE THERE IS NO REFERENCE TO THE REMAINING 5 TRACTORS, IT CANNOT BE SAID THAT THOSE 5 TRACTORS HAVE ACTUALLY BEEN RE TURNED TO THAT COMPANY. UNDER THIS CIRCUMSTANCE, THE GROSS PR OFIT ATTRIBUTABLE TO SALE OF SUCH TRACTORS, IN MY VIEW, HAS TO BE ADDED TO THE INCOME OF THE APPELLANT. SINCE, THE AS SESSING OFFICER HAS ESTIMATED SUCH PROFIT ON 20 TRACTORS AT RS. 4,00,647/-, 1/4 TH OF THIS AMOUNT I.E. RS. 1,00,162/- IS THUS LIABLE FOR ADDITION IN THE HANDS OF THE APPELLANT, TOWARDS UNACCOUNTED PROFIT, ARISING FROM SALE OF SUCH TRACT ORS. HENCE, OUT OF THE SAID ADDITION MADE BY THE ASSESSI NG OFFICER, ADDITION TO THE EXTENT OF RS. 1,00,162/- I S CONFIRMED AND THE BALANCE AMOUNT OF RS. 3,00,485/- IS DELETED . 32. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUND AS GROUND NO. 2, WHICH READS AS UN DER:- THE APPELLANT OBJECTS FOR THE ADDITION SUSTAINED TO THE 14 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES EXTENT OF RS. 1,00,162/- 25% OF G.P. OF RS. 4,00,64 7/- AS BAD IN LAW AND ON FACTS. 33. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS FILED RECONCILIATION STATEMENT AND VARIATION IN CLOSING S TOCK OF TRACTORS AS PER TRADING ACCOUNT DRAWN AS ON 08/09/2005 AND P HYSICAL INVENTORY AT PAGES 15 & 16 OF ASSESSEES PAPER BOOK AND AT PAGE 17 OF THE PAPER BOOK, THE ASSESSEE GAVE LIST OF TRA CTORS, WHICH HAVE BEEN RETURNED TO PTL IN AY 2006-07, WHICH SHOW S THAT 20 TRACTORS HAVE BEEN RETURNED BACK WHEREAS THE ASSESS EE HAS GOT CONFIRMATION ONLY FOR 15 TRACTORS. THE LEARNED COU NSEL REQUESTED THAT THE ASSESSING OFFICER SHOULD VERIFY WITH REGAR D TO 5 TRACTORS WHICH HAVE NOT BEEN RETURNED BY THE PTL. IN THIS RE GARD, THE OBSERVATION OF THE CIT(A) THAT SINCE THERE IS NO RE FERENCE TO THE REMAINING 5 TRACTORS, IT CANNOT BE SAID THAT THOSE 5 TRACTORS HAVE ACTUALLY BEEN RETURNED TO THE COMPANY AND, THEREFOR E, GROSS PROFIT ATTRIBUTABLE TO SALE OF SUCH PROFITS HAS TO BE ADDED TO THE INCOME OF THE ASSESSEE. SINCE THE ASSESSING OFFICER ESTIMATED SUCH PROFIT ON 20 TRACTORS AT RS. 4,00,647/-, THE C IT(A) HELD THAT 1/4 TH OF THIS AMOUNT OF RS. 1,00,162/- LIABLE FOR ADDITI ON IN THE HANDS OF THE ASSESSEE TOWARDS UNACCOUNTED PROFIT AR ISING FOR SALE OF SUCH TRACTORS. TAKING INTO CONSIDERATION THE SU BMISSION OF THE ASSESSEE THAT THE ASSESSING OFFICER SHOULD VERIFY W ITH RESPECT TO 5 TRACTORS IN THE LIGHT OF RECONCILIATION DONE BY THE ASSESSEE, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RES TORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMIN E THE ISSUE AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER PROVID ING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. 15 ITA NOS. 85&86/HYD/2011 BHAVANI AUTOMOTIVES 35. TO SUM UP, THE APPEAL FOR AY 2005-06 IS PARTLY ALLOWED AND THE APPEAL FOR AY 2006-07 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21/09/2012. SD/- SD/- ( CHANDRA POOJARI) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED:21 ST SEPTEMBER, 2012. KV COPY TO:- 1) BHAVANI AUTMOTIVES, G.S. MADHAVA RAO & CO., CHARTERED ACCOUNTANTS, H.NO. 11-26-54, SUDHAMA BUILDING, M.G. ROAD, WARANGAL 506 012. 2) ITO, WARD 4, KARIMNAGAR 5050 001. 3) THE CIT (A)-III, HYDERABAD 4) CIT-II, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.