The DCIT, Central Circle, Vijayawada V. Sri NV Seshagiri Rao, Yakalamuru, Krishna Distt.

ITA 92/VIZ/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7087 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D S SUNDER SINGH; TH L PETER
• Keywords: Search and seizure

Judgement Text

ITA NO.92&95/VIZAG/2010 N.V. SESHAGIRI RAO, YAKAMUR U PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.92/VIZAG/2010 ASSESSMENT YEAR: 2006-07 DCIT CENTRAL CIRCLE VIJAYAWADA VS. N.V. SESHAGIRI RAO YAKAMURU (APPELLANT) (RESPONDENT) PAN NO: AAQPN 3114Q ITA NO.95/VIZAG/2010 ASSESSMENT YEAR: 2006-07 DCIT CENTRAL CIRCLE VIJAYAWADA VS. N.V. SAMBASIVA RAO YAKAMURU (APPELLANT) (RESPONDENT) PAN NO: AASPN 5995M APPELLANT BY: SHRI C. SUBRAHMANYAM, CA RESPONDENT BY: SHRI TH.L. PETER, CIT(DR) & SHRI D.S. SUNDER SINGH, SR.DR ORDER PER BENCH: THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINST THE ORDERS PASSED BY LEARNED CIT(A), VIJAYAWADA AND BOT H THE APPEALS RELATE TO THE ASSESSMENT YEAR 2006-07. SINCE THE ISSUE UR GED IN THESE TWO APPEALS IS IDENTICAL IN NATURE, THEY WERE HEARD TOG ETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. THE ADDITION MADE BY THE ASSESSING OFFICER IN THE HANDS OF BOTH THE ASSESSEES TOWARDS THE DIFFERENCE VALUE OF EXCESS ST OCK, HAVING BEEN DELETED BY LEARNED CIT(A) BY GIVING TELESCOPING BEN EFIT, THE REVENUE IS IN APPEAL BEFORE US ASSAILING THE DECISION OF LEARNED CIT(A). ITA NO.92&95/VIZAG/2010 N.V. SESHAGIRI RAO, YAKAMUR U PAGE 2 OF 4 3. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN BRIEF. BOTH THE ASSESSEES ARE BROTHERS AND ARE DOING TIMBER BUSINESS IN THE S AME PREMISES. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THE BUSINE SS PREMISES OF THE ASSESSEES ON 09-09-2005. DURING THE COURSE OF SEAR CH, THE STOCK INVENTORY WAS TAKEN WHICH RESULTED IN AVAILABILITY OF EXCESS STOCK. THE ASSESSING OFFICER DETERMINED THE VALUE OF EXCESS STOCK AT RS. 1,57,76,336/-. IN THE ABSENCE OF STOCK REGISTER, THE ASSESSING OFFICER AP PORTIONED THE VALUE OF EXCESS STOCK BETWEEN THE ASSESSEES IN THE RATIO OF 60:40. THOUGH THE ASSESSEES HAD ALSO OFFERED VALUE OF EXCESS STOCK IN THEIR RESPECTIVE RETURN OF INCOME, HOWEVER, THERE WAS A DIFFERENCE BETWEEN EXCESS STOCK VALUE DETERMINED BY THE ASSESSING OFFICER AND VALUE OFFER ED BY THE ASSESSEES. THE FOLLOWING TABLE HIGHLIGHTS THE SAID DIFFERENCE. NAME OF ASSESSEE AS PER A.O AS PER ASS ESSEE DIFFERENCE SHRI N.V.SESHAGIRI RAO 63,10,534 56,57,236 6,53,298 SHRI N.V.SAMBASIVA RAO 94,65,802 8 2,80,854 11,84,948 --------------- ---------------- ---- ----------- 1,57,76,336 1,39,38,090 18,38,24 6 ======== ======== ======= IN THE PRECEDING ASSESSMENT YEAR, I.E. IN ASSESSMENT YEAR 2005-06, SHRI N.V.SESHAGIRI RAO HAD OFFERED ADDITIONAL INCOME OF RS.73.00 LAKHS CONSISTING OF RS.14,63,160/- TOWARDS CASH SHORTAGE AND RS.58,36,840/- TOWARDS OTHER INCOME. SIMILARLY SHRI N.V.SAMBASIVA RAO HAD OFFERED ADDITIONAL INCOME OF RS.31.50 LAKHS TOWARDS CASH SH ORTAGE IN THE ASSESSMENT YEAR 2005-06. HENCE BOTH THE PARTIES CO NTENDED BEFORE THE ASSESSING OFFICER THAT THE ADDITIONAL INCOME SO OFF ERED IN THE ASSESSMENT YEAR 2005-06 WOULD COVER THE DIFFERENCE COMPUTED BY THE ASSESSING OFFICER. HOWEVER, THE SAID EXPLANATION WAS NOT CON VINCING TO THE ASSESSING OFFICER AND HENCE HE ADDED THE DIFFERENCE CITED ABO VE IN THE RESPECTIVE HANDS OF THE ASSESSEES. BOTH THE ASSESSEES CARRIED THE MATTER IN APPEAL BEFORE LEARNED CIT(A), WHO ALLOWED THE TELESCOPING BENEFIT AND ACCORDINGLY DELETED THE IMPUGNED ADDITIONS. NOW, THE REVENUE I S CHALLENGING THE SAID DECISION OF LEARNED CIT(A). ITA NO.92&95/VIZAG/2010 N.V. SESHAGIRI RAO, YAKAMUR U PAGE 3 OF 4 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. WE NOTICE THAT THE LEARNED CIT(A) HAS ASKED BOTH TH E ASSESSEES TO DEMONSTRATE THE CASH POSITION FROM 1.4.2004 ONWARDS TO THE DATE OF SEARCH, I.E. 9.9.2005 BY TAKING INTO ACCOUNT THE AD DITIONAL INCOME OFFERED TOWARDS CASH SHORTAGE. IN THE CASE OF SHRI N.V.SES HAGIRI RAO, THE CASH BALANCE AS ON THE DATE OF SEARCH WAS ARRIVED AT RS. 11,26,506/-. BESIDES THE SAID ASSESSEE HAD ALSO OFFERED ADDITIONAL INCOM E OF RS.58,36,840/- AS INCOME FROM OTHER SOURCES. HOWEVER, THE STOCK DIFF ERENCE ADDED IN HIS HAND WAS RS.6,53,298/-. SIMILARLY IN THE CASE OF S HRI N.V.SAMBASIVA RAO, THE RECAST CASH BALANCE AS ON THE DATE OF SEARCH WA S ARRIVED AT RS.11,26,506/-, WHERE AS THE STOCK DIFFERENCE ADDED IN HIS HAND WAS RS.11,84,948/-. IT MAY BE NOTED THAT BOTH THE ASSE SSEES ARE CARRYING ON BUSINESS IN THE SAME PREMISES AND THE STOCK DIFFERE NCE WAS ALLOCATED BETWEEN THEM ONLY ON ESTIMATED BASIS ON A CERTAIN R ATIO. HENCE, IN VIEW OF THE ADDITIONAL INCOME OFFERED BY BOTH THE ASSESSEES , THE LEARNED CIT(A) HELD THAT SUFFICIENT FUNDS WERE AVAILABLE WITH THE BOTH ASSESSEES TO COVER THE STOCK DIFFERENCE AND ACCORDINGLY DELETED THE IM PUGNED ADDITIONS. IN SUPPORT OF HIS PROPOSITION, THE LEARNED CIT(A) RELI ED UPON THE FOLLOWING DECISIONS. (A) ANANTHARAM VEERASINGHAIAH AND CO. VS. CIT (123 ITR 457(S.C) (B) K.S.M.GURUSWAMY NADAR & SONS (149 IT R 127 (MAD) (C) CIT VS. VENKATESWARA TIMBER DEBPOT (222 ITR 7 68 (A.P) (D) RAMESHWAR LAL SONI VS. ACIT (91 ITD 301 (JODH )) (E) ARUN KALA VS. ACIT (98 TTJ 1046 (JAI)) 5. THUS WE NOTICE THAT THE LEARNED CIT(A) HAS C ATEGORICALLY HELD THAT THE UNACCOUNTED ADDITIONAL INCOME OFFERED IN EARLIER YE ARS WAS AVAILABLE WITH THE ASSESSEES AS A SOURCE FOR MAKING THE INVESTMENT IN THE UNACCOUNTED STOCK. THOUGH THE REVENUE OBJECTS TO THE DECISION OF LEARNED CIT(A), IT DID NOT CITE ANY CASE LAW CONTRARY TO THE DECISION ARRI VED AT BY LEARNED CIT(A). HENCE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CAS E, WE FIND THE DECISION OF LEARNED CIT(A) TO BE A REASONABLE ONE. ACCORDIN GLY WE UPHOLD HIS ORDER ON THIS ISSUE IN THE CASE OF BOTH THE ASSESSEES. ITA NO.92&95/VIZAG/2010 N.V. SESHAGIRI RAO, YAKAMUR U PAGE 4 OF 4 6. IN THE RESULT, THE APPEALS OF THE REVENUE IN BOTH THE CASES ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 29 TH MARCH, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:29-03-2011 COPY TO 1 DCIT, CENTRAL CIRCLE, VIJAYAWADA 2 SRI N.V. SESHAGIRI RAO, PROP: VENKATA VAMSI KRISH NA TRADERS, YAKLAMURU, KRISHNA DIST. 3 SRI N.V. SAMBASIVA RAO, PROP: SUDHIR TIMBER DEPOT , YAKLAMURU, KRISHNA DIST. 4 5. THE CIT VIJAYAWADA THE CIT(A), VIJAYAWADA 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM