Meka Ramesh Kumar, Rajahmundry V. The ITO, Rajahmundry

ITA 85/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6650 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDAM
• Keywords: Unexplained investment; Business income; Salary income
• Section: 69

Judgement Text

ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.85/VIZAG/2017 ( / ASSESSMENT YEAR: 2011-12) MEKA RAMESH KUMAR RAJAHMUNDRY ITO, WARD - 3, RAJAHMUNDRY [PAN NO. AWUPM0955E ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI T. SATYANANDAM, DR / DATE OF HEARING : 20.09.2017 / DATE OF PRONOUNCEMENT : 27.09.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), {CIT(A)}, RAJ AHMUNDRY DATED 1.12.2016 FOR THE ASSESSMENT YEAR 2011-12. 2. GROUND NOS.1.0 & 1.7 ARE GENERAL IN NATURE, WHIC H DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 2 3. GROUND NO.1.1 & 1.2 ARE RELATED TO THE ESTIMATIO N OF INCOME AT 10% OF THE PURCHASE PRICE BY THE LD. CIT(A) AS AGAI NST THE INCOME ADMITTED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS. THE ASSESSEE IS CARRYING ON BUSINESS OF INDIAN MADE FOREIGN LIQUOR (IMFL), HAD FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF 6,88,720 /-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THE A.O., DI D NOT ACCEPT THE INCOME DECLARED BY THE ASSESSEE AND ESTIMATED THE P ROFIT FROM THE BUSINESS AT 20% OF THE STOCK PUT TO SALE AND ACCORD INGLY COMPUTED THE BUSINESS INCOME FROM IMFL AT RS.38,11,715/-. ON AP PEAL, THE CIT(A) HAS SCALED DOWN THE PERCENTAGE OF PROFIT FROM 20% T O 10% AND DIRECTED THE A.O. TO RE-COMPUTE THE INCOME AT 10% OF PURCHAS E PRICE. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEA L IS SQUARELY COVERED IN THE CASE OF SRI VYSYARAJU SATYANARAYANA RAJU, SR IKAKULAM DIST. IN ITA NO.2/VIZAG/2016, WHICH IS REPRODUCED AS UNDER: 3. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL W HERE THE TRIBUNAL HAS SCALED DOWN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016. 4. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE AUTHORITIES BELOW. ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 3 5. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROF IT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPR A) HAS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED TH AT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSI NESS AND DIRECTED THE A.O. TO RE-COMPUTE THE PROFIT OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. TH E A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN S TOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NO T SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOU NTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HONB LE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROF IT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF B USINESS CARRIED ON BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASS ESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRA DE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGE S CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STA TE GOVERNMENT. THE ASSESSEE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELYING UPON THE DE CISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH C OURT HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THEREFORE, WE ARE OF THE VIEW T HAT THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE LIGHT OF THE FACTS OF THE PRESENT C ASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CI RCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONA BLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF P ROFIT AT 16% IS ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 4 HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF P ROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE O RDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE A SSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEG RA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 A ND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREI GN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASS ESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDER ABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE A SSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET O F ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE I NCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BEN CH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYIN G UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESS EE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BEN CH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOT AL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENUE TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. THEREFORE, WE DIRECT THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIO NS. ORDERED ACCORDINGLY. 5. IN VIEW OF THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DIRECT THE A.O. TO RE-COMPUTE THE INCO ME OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 6. GROUND NOS.1.3 TO 1.6 ARE RELATED TO THE ADDITIO N WITH REGARD TO UNEXPLAINED INVESTMENT OF ` 4,16,667/- AND UNSECURED LOANS OF ` 12,50,000/-. DURING THE ASSESSMENT PROCEEDINGS, TH E A.O. FOUND THAT ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 5 ASSESSEE HAS MADE INVESTMENT OF ` 26,66,667/- TO MAKE THE INITIAL PAYMENT OF LICENSE FEE. OUT OF WHICH ` 19.00 LAKHS WAS EXPLAINED TO BE UNSECURED LOANS AND ` 3.00 LAKHS WAS EXPLAINED AS THE INTRODUCTION OF CAPITAL AND FOR THE BALANCE AMOUNT OF ` 4,16,667/-, THE ASSESSEE DID NOT EXPLAIN THE SOURCES. THEREFORE, THE A.O. MADE THE ADDITION OF ` 4,16,667/- AS UNEXPLAINED INVESTMENT. THE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ORDE R OF THE A.O. DURING THE APPEAL HEARING, THE LD. A.R. DID NOT BRI NG ANY EVIDENCE TO SHOW THE SOURCE OF THE PAYMENT OF ` 4,16,667/-. THOUGH THE LD. A.R. ARGUED THAT ONCE THE INCOME IS ESTIMATED NO FURTHER ADDITION REQUIRED TO BE MADE, THE PAYMENT WAS THE INITIAL PAYMENT MADE I N THE BEGINNING OF THE YEAR, HENCE IT CANNOT BE HELD THAT THE ASSESSEE HAS GENERATED INCOME OUT OF BUSINESS IN THE BEGINNING OF THE DAY, THEREFORE, THE ARGUMENT OF THE ASSESSEE IS UNTENABLE, ACCORDINGLY, REJECTED. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCES OF THE INITI AL INVESTMENT, WE HOLD THAT THE A.O. HAS RIGHTLY MADE THE ADDITION, WHICH WAS CONFIRMED BY THE LD. CIT(A). THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) AND THE APPEAL ON THIS GROUND IS DISMISSED. 7. THE NEXT GROUND OF ADDITION WAS ` 12,50,000/- CONFIRMED BY THE LD. CIT(A). DURING THE ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT THE ASSESSEE HAS STATED TO HAVE RECEIVED UNSECURED LOAN S OF RS.19,00,000/- ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 6 FOR PAYMENT OF INITIAL LICENSE FEE OF ` 26,16,667/-. HOWEVER, THE ASSESSEE FAILED TO FURNISH ANY EVIDENCE REGARDING T HE UNSECURED LOANS BEFORE THE A.O. THEREFORE, THE A.O. MADE THE ADDIT ION U/S 69 OF THE ACT SINCE THE AMOUNT WAS PAID FOR LICENSE FEE. AGGRIEVED BY THE ORDER OF THE A.O., THE ASS ESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE ASSESSEE FILED THE CONFIR MATIONS BEFORE THE LD.CIT(A). THE LD.CIT(A) ADMITTED THE ADDITIONAL E VIDENCE AND CALLED FOR THE REMAND REPORT FROM THE A.O. THE A.O. CONDU CTED THE ENQUIRIES AND SUBMITTED THE REMAND REPORT TO THE LD. CIT(A) A CCEPTING THE GENUINENESS OF THE UNSECURED LOANS IN THE FOLLOWING CASES: 8. HOWEVER, THE LD. CIT(A) DID NOT ACCEPT THE REMAN D REPORT AND VERIFIED THE FACTS OF THE EACH CASE WITH RELEVANT A SSESSMENT RECORDS, SWORN DEPOSITIONS, AFFIDAVITS, ETC. AND DELETED THE ADDITION IN RESPECT OF AKULA SHYAM BABU AMOUNTING TO ` 2.00 LAKHS AND AKULA RAMAKRISHNA RAO AMOUNTING TO ` 5,50,000/- TOTALING ` 7,50,000/- AND CONFIRMED THE REMAINING AMOUNT OF ` 12,50,000/-. DURING THE APPEAL HEARING, THE LD. S.NO. NAME OF THE CREDITOR AMOUNT(RS.) 1 AKULA RAMAKRISHNA RAO 5,50,000/- 2 SRI SUNKARA PADMANABHAM 2,00,000/- 3 SRI PITANI VENKATA DURGA PRASAD 2,50,000/- 4 SRI AKULA BHASKARA RAO 2,00,000/- 5 SRI KONDEPUDI SATYANARAYANA 1,00,000/- 6 SRI KANCHUMARTHY DURGA PRQASAD 1,00,000/- 7 SRI AKULA SHYAM BABU 2,00,000/- 8 SRI PASUPULETI RAMESH 1,00,000/- ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 7 A.R. ARGUED THAT SINCE THE ASSESSEE HAD FILED THE C ONFIRMATION LETTERS AND THE A.O. HAS ACCEPTED THE GENUINENESS OF UNSECU RED LOANS, THE SAME SHOULD BE ACCEPTED AS GENUINE. THE LD.AR ARGUE D THAT THE LD. CIT(A) COMMITTED AN ERROR IN IGNORING THE REMAND R EPORT. 9. ON THE OTHER HAND, THE LD. D.R. RELIED ON THE OR DERS OF THE LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE HAS STATED TO HAVE RECEIVED THE UNSECURED LOANS FOR ` 19.00 LAKHS BUT FAILED TO FURNISH ANY EVIDENCE BEFORE THE A.O. DURING THE APPEAL PROCEEDINGS, THE ASSESSEE FILED CONFIRMATION S FROM THE FOLLOWING CREDITORS: 11. THOUGH THE ASSESSING OFFICER ACCEPTED THE GENUI NENESS OF THE CREDITS IN RESPECT OF 8 CREDITORS, THE LD. CIT(A) F OUND THAT THE CREDITS WERE NOT GENUINE AS PER THE DISCUSSION MADE IN THE LD.CIT(A)S ORDER IN S.NO. NAME OF THE CREDITOR AMOUNT(RS.) 1 AKULA SHYAM BABU 2,00,000/- 2 AKULA RAMAKRISHNA RAO 5,50,000/- 3 P.V.D. PRASAD 2,50,000/- 4 KANCHUMARTHY DURGA PRASAD 1,00,000/- 5 KONDEPUDI SATYANARAYANA 1,00,000/- 6 SUNKARA PADMANABHAM 2,00,000/- 7 CHAMERU VENKATA SUBBA RAO 1,00,000/- 8 PASUPULETI RAMESH 1,00,000/- 9 GULAGONI VENKATA SRIDHAR 2,00,000/- 10 AKULA BHASKARA RAO 2,00,000/- ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 8 EACH CASE. FOR READY REFERENCE, WE EXTRACT THE REL EVANT PARAGRAPHS OF THE LD. CIT(A)S ORDER AS UNDER: 7.2 CREDIT IN THE NAME OF PITHANI VENKATA DURGA PRA SAD: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE PITHANI VENKATA DURGA PRASAD,S/O TRIMURTHULU ON 28. 02.2014 CONFIRMING ADVANCE OF RS.2,50,000/- GIVEN TO THE AS SESSEE BY WAY OF DDS IN FAVOUR OF EXCISE DEPARTMENT. IT WAS ALSO STA TED THAT THE HE WAS AN INCOME-TAX ASSESSEE HAVING INCOME FROM LIQUO R BUSINESS. SUBSEQUENTLY, THE ASSESSEE FILED AN AFFIDAVIT BEFOR E THE C1T(A) FROM ONE P. VENKATA DURGA PRASAD CONFIRMING THE ADVANCE OF RS.2,50,000/-. THE ASSESSEE PRODUCED THIS CREDITOR FOR VERIFICATION BEFORE THE AO AND THE SAID CREDITOR DEPOSED THAT HE HAD ADVANCED AN AMOUNT OF RS.2,50,000/- TO THE ASSESSEE AND THAT AN AMOUNT OF RS.2,25,000/- WAS GIVEN BY WAY OF DDS AND RS.25,000 /- WAS BY WAY OF CASH. IT WAS ALSO STATED THAT THE AMOUNT WAS GIV EN FROM HIS ACCUMULATED SAVINGS FROM 2002 TO 2008 OUT OF HIS LI QUOR BUSINESS AND SMALL CONTRACT WORKS. TO THE QUERY WHETHER THE AMOU NT ADVANCED TO THE ASSESSEE WAS REFLECTED IN HIS BALANCE SHEET, TH E CREDITOR REPLIED THAT HE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AS HIS TURNOVER WAS BELOW THE THRESHOLD LIMIT. A COPY OF THE RETURN FOR THE A.Y.2013-14 AND A.Y.2014-15 WERE ALSO FILED. THE PE RUSAL OF THE COPIES OF RETURNS FILED SHOW THAT THESE RETURNS WER E FILED ONLY ON 26.06.2015, DECLARING INCOME BELOW TAXABLE LIMIT. T HE RETURNS HAVE BEEN FILED AFTER FILING OF CONFIRMATION LETTER. IT IS SEEN THAT THE ALLEGED CREDITOR HAS NO REGULAR SOURCE OF INCOME AN D DOES NOT HAVE CAPACITY TO MAKE THE IMPUGNED ADVANCE. BESIDES, IT IS ALSO NOTED THAT THE SIGNATURE IN THE CONFIRMATION LETTER AND T HE AFFIDAVIT ARE DIFFERENT, RAISING DOUBTS AS TO THE GENUINENESS OF THE TRANSACTION. HENCE, THE IMPUGNED ADDITION IN REGARD TO THIS CREDIT IS C ONFIRMED. 7.3 CREDIT IN THE NAME OF KANCHUMARTHY DURGA PRASAD : THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE KANCHUMARTHY DURGA PRASAD S/O LATE RAMARAO ON 22.02 .2014 CONFIRMING ADVANCE OF RS.1,00,000/- GIVEN TO THE AS SESSEE BY WAY OF DD IN FAVOUR OF EXCISE DEPARTMENT. SUBSEQUENTLY, TH E ASSESSEE FILED AN AFFIDAVIT BEFORE THE C1T(A) FROM THE CREDITOR CO NFIRMING ADVANCE OF RS.1,00,000/- GIVEN TO THE ASSESSEE. THE ASSESSEE P RODUCED THIS CREDITOR FOR VERIFICATION BEFORE THE AO AND THE SAI D CREDITOR DEPOSED THAT HE WAS WORKING AS A SALES OFFICER IN M/S. DECC AN CEMENTS, ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 9 RAJAHMUNDRY FOR THE LAST 6 YEARS AND HIS PRESENT IN COME WAS RS.20,000/- PER MONTH. HE HAD DEPOSED THAT AN AMOUN T OF RS.90,000/- WAS GIVEN BY WAY OF DDS AND RS.10,000/- BY WAY OF CASH. IT IS NOTED THAT THE SIGNATURE IN THE AFFIDAVIT AND THE SIGNATURE IN THE SWORN DEPOSITION ARE DIFFERENT, RAISING DOUBTS AS T O THE GENUINENESS OF THE TRANSACTION. IT IS ALSO NOTED AS PER THE HOUSEH OLD CARD ENCLOSED THE ANNUAL INCOME WAS STATED TO BE RS.26,000/-. IT IS IMPROBABLE THAT WITH SUCH MEAGER THE CREDITOR COULD MAKE HUGE ADVAN CE WITHOUT INTEREST. I FIND THAT THE CREDITWORTHINESS OF THIS CREDITOR AND GENUINENESS OF THE TRANSACTION IS IN DOUBT. HENCE, THE IMPUGNED ADDITION IN REGARD TO THIS CREDIT IS UPHELD. 7.4 CREDIT IN THE NAME OF KONDEPUDI SATYANARAYANA: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE KONDEPUDI SATYANARAYANA S/O. RAJU ON 02.03.2014 CONFIRMING ADVANCE OF RS.1,00,000/- GIVEN TO THE AS SESSEE BY WAY OF DD IN FAVOUR OF EXCISE DEPARTMENT. SUBSEQUEN TLY, DURING THE APPEAL HEARING THE ASSESSEE FILED AN AFF IDAVIT FROM THE KONDEPUDI SATYANARAYANA BEFORE THE CIT(A) CONFI RMING ADVANCE OF RS.1,00,000/- TO THE ASSESEE. THE ASSESS EE PRODUCED THIS CREDITOR FOR VERIFICATION BEFORE THE AO, WHO DEPOSED THAT HE WAS WORKING AS LABOUR MASTRY IN AN D AROUND RAJAHMUNDRY AND THAT AN AMOUNT OF RS.90,000/- WAS G IVEN BY WAY OF DDS AND RS 10,000/ BY WAY OF CASH OUT OF ACC UMULATED BALANCE SINCE HIS CHILDHOOD. IT IS NOTED THAT THE SIGNATURE IN THE CONFIRMATION LETTER WAS TOTALLY DIFFERENT FROM THE SIGNATURE IN THE AFF IDAVIT RAISING DOUBT AS TO THE GENUINENESS OF THE TRANSACTION. FROM THE PERUSAL OF SWORN DEPOSITION IT IS APPARENT THAT IT IS IMPROBABLE THA T THE ALLEGED CREDITOR ADVANCED THE IMPUGNED AMOUNT OF RS.1,00,00 0/- OUT OF HIS PALTRY INCOME AS LABOUR MAISTRY AND THAT TOO WITHOU T INTEREST. THUS THE GENUINENESS AND CREDITWORTHINESS OF THE TRANSAC TION REMAIN DOUBTFUL. HENCE THE IMPUGNED ADDITION IN REGARD TO THIS CREDIT IS CONFIRMED. 7.5 CREDIT IN THE NAME OF SUNKARA PADMANABHAM: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE SUNKARA PADMANABHAM S/O. VENKATESWARARAO ON 03.03.2 014 CONFIRMING ADVANCE OF RS.2,00,000/- GIVEN TO THE AS SESSEE BY WAY OF DDS. SUBSEQUENTLY, DURING THE APPEAL HEARING THE AS SESSEE FILED AN AFFIDAVIT FROM THE SAID CREDITOR BEFORE THE CIT(A) FROM THE SAID CREDITOR CONFIRMING ADVANCE OF RS.2,00,000/- GIVEN TO THE ASSESSEE. THE ASSESSEE PRODUCED THIS CREDITOR FOR VERIFICATIO N BEFORE THE AO ON 08.03.2016. THE SAID CREDITOR DEPOSED THAT HE WAS E NGAGED IN REAL- ESTATE CONSULTANCY AND HAD INCOME BY WAY OF COMMISS ION FROM REAL ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 10 ESTATE CONSULTANCY AND SALARY INCOME FROM BUILDER A ND WAS NOT ASSESSED TO TAX. HE HAD NOT SPECIFIED THE INCOME EA RNED BY HIM EVERY YEAR BUT STATED THAT THE AMOUNT OF RS.2 IAKH WAS GIVEN OUT OF CASH BALANCE AVAILABLE WITH SBH AND THAT RS.1,80,00 0/- WAS GIVEN BY WAY OF DD AND RS.20,000/- WAS GIVEN BY WAY OF CASH. THE ALLEGED CREDITOR HAS NOT SPECIFIED HIS SOURCE OF INCOME TO MAKE THE IMPUGNED ADVANCE AND HIS CREDITWORTHINESS TO MAKE T HE IMPUGNED ADVANCE IS DOUBTFUL. HENCE THE IMPUGNED ADDITION IN REGARD TO THIS CREDIT IS UPHELD. 7.6 CREDIT IN THE NAME OF CHAMERU VENKATA SUBBARAO: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE CHAMERU VENKATA SUBBARAO S/O. VENKATESWARARAO ON 01 .03.2014 CONFIRMING ADVANCE OF RS.1,00,000/- GIVEN TO THE AS SESSEE BY WAY OF DD. SUBSEQUENTLY, DURING THE APPEAL HEARING THE ASS ESSEE FILED AN AFFIDAVIT BEFORE THE CIT(A) FROM ONE CHAMINU VENKAT SUBBA RAO, S/O. VENKATESWARLU CONFIRMING ADVANCE OF RS.1,00,00 0/- TO THE ASSESSEE. THE ASSESSEE COULD NOT PRODUCE THIS CREDI TOR BEFORE THE AO FOR EXAMINATION. IT IS NOTED THAT SIGNATURE IN THE CONFIRMATION LETTER AND THE SIGNATURE IN THE AFFIDAVIT ARE TOTALLY DIFF ERENT RAISING DOUBT AS TO THE IDENTITY OF THIS CREDITOR AND GENUINENESS OF THE TRANSACTION. BESIDES, THE ASSESSEE HAS NOT PROVED THE CREDITWORT HINESS OF THIS CREDITOR. HENCE, THE IMPUGNED ADDITION MADE BY THE AG IN REGARD TO THIS CREDIT IS UPHELD. 7.7 CREDIT IN THE NAME OF PASUPULETI RAMESH: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE PASUPULETI RAMESH S/O. BASAVAYYA ON 19,02.2014 CONF IRMING ADVANCE OF RS.1,00,000/- GIVEN TO THE ASSESSEE BY WAY OF DD . SUBSEQUENTLY, DURING THE APPEAL HEARING THE ASSESSEE FILED AN AFF IDAVIT FROM THIS CREDITOR BEFORE THE CIT(A) CONFIRMING ADVANCE OF RS .1,00,000/- GIVEN BY WAY OF 2 DDS. THE ASSESSEE PRODUCED THIS CREDITO R FOR VERIFICATION BEFORE THE AO ON 08.03.2016, WHO DEPOSED THAT HE WA S ENGAGED AS CONSULTANT IN REAL ESTATE BUSINESS FROM 2012 AND BE FORE THAT HE WAS HAVING RICE SHOP. IT WAS STATED THAT HE WAS EARNING RS.10,000/- PER MONTH FROM RICE SHOP AND THAT OUT OF HIS ACCUMULATE D SAVINGS FROM RICE SHOP, THE IMPUGNED ADVANCE WAS MADE TO THE ASS ESSEE. IT WAS ALSO STATED THAT AN AMOUNT OF RS.90,000/- WAS GIVEN BY WAY OF DDS AND RS.10,000/- BY WAY OF CASH. FROM THE DEPOSITION, IT IS EVIDENT, THAT IT IS IMPROBABLE THAT THIS CREDITOR COULD ADVANCE THE ALL EGED AMOUNT OUT OF SUCH PALTRY INCOME AND THAT TOO WITHOUT INTEREST. T HUS THE CREDITWORTHINESS OF THE CREDITOR IS DOUBTFUL. HENCE THE IMPUGNED ADDITION IN REGARD TO THIS CREDIT IS UPHELD. ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 11 7.8 CREDIT IN THE NAME OF GOLAGONI VENKATA SRIDHAR: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE GULAGONI VENKATA SRIDHAR S/O. PAPARAO ON 12.03.2014 CONFIRMING ADVANCE OF RS.2,00,000/- GIVEN TO THE ASSESSEE BY W AY OF DDS. SUBSEQUENTLY, DURING THE APPEAL HEARING THE ASSESSE E FILED AN AFFIDAVIT FROM G.V. SRIDHAR BEFORE THE CIT(A) CONFIRMING ADVA NCE OF RS.2,00,000/- TO THE ASSESEE. THE ASSESSEE COULD NO T PRODUCE THIS CREDITOR BEFORE THE AO FOR EXAMINATION. IT IS NOTED THAT THE SIGNATURE IN THE CONFIRMATION LETTER AND THE SIGNATURE IN THE AF FIDAVIT ARE TOTALLY DIFFERENT, RAISING DOUBT AS TO IDENTITY OF THE CRED ITOR AND GENUINENESS OF THE TRANSACTION. FURTHER, AS PER THE HOUSEHOLD CARD ENCLOSED, THE ANNUAL INCOME WAS STATED TO BE RS.30,000/-. THUS IT IS APP ARENT THAT THIS CREDITOR DID NOT HAVE CAPACITY TO MAKE SUCH A HUGE ADVANCE OF RS.2 LAKH TO THE ASSESSEE, AND THAT TOO WITHOUT INTEREST . THUS, THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION REMAIN DOUBTFUL. HENCE, THE IMPUGNED ADVANCE IN REGARD TO THIS CREDI T IS CONFIRMED. 7.9 CREDIT IN THE NAME OF AKULA BHASKARARAO: THE ASSESSE HAD FILED BEFORE THE AO CONFIRMATION LE TTER FROM ONE AKULA BHASKARARAO, RAJAHMUNDRY ON 19.02.2014 CONFIRMING A DVANCE OF RS.2,00,000/- GIVEN TO THE ASSESSEE BY WAY OF DDS I N FAVOUR OF EXCISE DEPARTMENT. SUBSEQUENTLY, DURING THE APPEAL HEARING THE ASSESSEE FILED AN AFFIDAVIT FROM THIS PARTY BEFORE THE CIT(A) CONF IRMING ADVANCE OF RS.2,00,000/ TO THE ASSESSEE. THE ASSESSEE PRODUCED THIS CREDITOR BEFORE THE AO FOR EXAMINATION WHO DEPOSED THAT HE W AS HAVING RENTAL INCOME FROM 2 SHOPS AND TWO PORTIONS OF HOUSE AT RS .15,000/- PER MONTH THAT HIS ANNUAL INCOME WAS RS.1,80,000/- AND THAT THE ADVANCE WAS GIVEN OUT OF ACCUMULATED SAVINGS FROM THE RENTA L INCOME. IT IS IMPROBABLE THAT THIS CREDITOR COULD ADVANCE THE IMP UGNED ADVANCE OUT OF HIS PALTRY RENTAL INCOME AND THAT TOO WITHOUT IN TEREST. FURTHER, IT IS NOTED THAT AS PER THE HOUSEHOLD CARD THE ANNUAL INC OME WAS STATED TO BE ONLY RS.30,000/-. THUS, THE CREDITWORTHINESS OF THIS CREDITOR REMAIN DOUBTFUL. HENCE THE IMPUGNED ADDITION IN REGARD TO THIS CREDITOR IS CONFIRMED. 7.11 IT IS PERTINENT TO NOTE THAT IT WAS CLAIMED TH AT THESE CREDIT TRANSACTIONS WERE BY WAY OF DDS FROM THE ALLEGED CR EDITORS. HOWEVER, THERE IS NO EVIDENCE TO SHOW THAT THE ALLE GED CREDITORS HAVE TAKEN THE DDS. IT IS FURTHER NOTED THAT THERE WAS NO EVIDENCE TO SHOW THAT THE DDS WERE TAKEN OUT OF CHEQUE WITHDRAW ALS. THE SERIAL NUMBERS OF THE DDS AND THE MANNER IN WHICH THE CASH DDS WERE TAKEN TO PAY THE LICENCE FEE ALSO RAISES DOUBTS AS TO THE GENUINENESS OF THESE CREDIT TRANSACTIONS WHICH WOULD BE ADDITIO NAL REASON TO ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 12 CONFIRM THE ABOVE ADDITIONS. 12. THE LD. CIT(A) EXAMINED THE TRANSACTION OF EACH CREDITOR AND GIVEN FINDING THAT THE TRANSACTIONS ARE NOT GENUINE AND I N SOME CASES THE IDENTITY OF THE CREDITOR WAS ALSO DOUBTFUL. NONE O F THE CREDITORS ARE HAVING CREDIT WORTHINESS TO MAKE THE ADVANCES. THE LD. CIT(A) ALSO VERIFIED THE TRANSACTIONS WITH RESPECT TO THE DDS P URCHASED AND FOUND THAT THERE WAS NO EVIDENCE TO SHOW THAT THE CREDITO RS HAVE TAKEN THE DDS AND THE DDS WERE TAKEN OUT OF THE BANK WITHDRAW ALS. THE SERIAL NO. OF DDS AND THE MANNER IN WHICH DDS WERE TAKEN T O PAY THE LICENSE FEE ALSO HELD TO BE DOUBTFUL AND THE TRANSACTIONS C ANNOT BE HELD AS GENUINE. DURING THE APPEAL HEARING, THE LD. A.R. D ID NOT BRING ANY EVIDENCE TO CONTROVERT THE FINDING OF THE LD. CIT(A ). THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A) AND THE SAME IS UPHELD AND THE APPEAL OF THE ASSESSEE ON THIS GROUN D IS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 27 TH SEPT17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 27.09.2017 VG/SPS ITA NO.85/VIZAG/2017 MEKA RAMESH KUMAR, RAJAHMUNDRY 13 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT MEKA RAMESH KUMAR, 45-34-9/2A, A VA ROAD, RAJAHMUNDRY 2. / THE RESPONDENT THE ITO, WARD-3, RAJAHMUNDRY 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), RAJAHMUNDRY 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM