Gudla Sriranganadham, Srikakulam V. THE ITO, Srikakulam

ITA 92/VIZ/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8720 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 02-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BANGARI
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 143(3); 69; 145

Judgement Text

, , 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.92/VIZ/2016 ( / ASSESSMENT YEAR:2011-12 ) SRI GUDLA SRIRANGANADHAM PROP : SRI KRISHNA WINES D.NO.15-24, A.B.ROAD, KOTTURU SRIKAKULAM DISTRICT [PAN : AJHPG3664J] VS. INCOME TAX OFFICER WARD-1 SRIKAKULAM ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI C.SUBRAHMANYAM, AR / RESPONDENT BY : SHRI M.R.BANGARI, DR / DATE OF HEARING : 28.02.2018 / DATE OF PRONOUNCEMENT : 09 .03.2018 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) [CIT(A)]-2, VI SAKHAPATNAM VIDE ITA NO.177/2014-15/ITO/W-1/SKL/2015-16 DATED 01.01. 2016 FOR THE ASSESSMENT YEAR 2011-12. 2 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM 2. GROUND NOS. 1.0 TO 1.3 ARE RELATING TO THE ESTIM ATION OF INCOME @8% OF PURCHASE PRICE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS OF PURCHASE AND SALE OF IMFL (INDIAN MA DE FOREIGN LIQUOR) IN SRIKAKULAM DISTRICT. THE ASSESSEE HAD E- FILED THE RETURN OF INCOME BY DECLARING INCOME OF RS.2,51,910/- ON 29.09.2011 FOR THE ASSESSMENT YEAR 2011-12. THE RETURN FILED BY THE ASSESSEE WAS PROC ESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T'). LATER, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN THE ASSESS MENT ORDER, THE ASSESSING OFFICER (AO) HAS OBSERVED THAT THE ASSESS EE HAS NOT MAINTAINED ANY STOCK REGISTER AND NOT PRODUCED SALE BILLS, NO QUANTITATIVE DETAILS OF SALE EFFECTED AND THEREFORE, ESTIMATED THE NET PROF IT, CLEAR OF ALL EXPENSES @ 20% OF THE STOCK PUT TO SALE BY INVOKING THE PROVIS IONS OF SECTION 145 OF I.T. ACT. ON APPEAL, THE LD. CIT(A) GRANTED THE PARTIAL RELIEF TO THE ASSESSEE BY SCALING DOWN THE PERCENTAGE OF PROFIT FROM 20% TO 8 % AND DIRECTED THE A.O. TO RE-COMPUTE THE INCOME @ 8% OF PURCHASE PRICE. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS 3 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM 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. 5. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE AUTHORITIES BELOW. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COOR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPRA) H AS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% O F PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSINE SS AND DIRECTED THE A.O. TO RE-COMPUTE THE PROFIT OF THE ASSESSEE. THE RELE VANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. 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. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN STOCK 4 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE A SSESSEE ARE NOT SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOU NTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HONBLE A.P. HI GH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A .O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSE E. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICA BLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASSESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRADE WAS CONT ROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGES CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STATE GOVERNMENT. THE AS SESSEE 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 O F THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELYI NG UPON THE DECISION 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 COURT HAS CON SIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THEREFORE, WE ARE OF THE VIEW THAT 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 DECI SION 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 ASSES SEE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENC H OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HER EUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CO NTENTION OF THE LD. A.R. THAT THE ESTIMATION OF PROFIT AT 16% IS HIGH AND EXCESSIVE C ONSIDERING THE NORMAL RATE OF PROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE ORDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE A SSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE B ENCH IN CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WELL A S A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREIGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESS EE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET AS IDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PR OFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURC HASES MADE NET OF ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE INCOME RETURN ED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BENCH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYING UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS I S QUITE HIGH. ON THE OTHER 5 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM HAND, THE ASSESSEE RELIED UPON THE DECISION OF COOR DINATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMA TED THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENUE TO TAKE ANY OTHER VIEW OF THE MATTER TH AN 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 DEDUCTIONS. ORDERED ACC ORDINGLY. 7. IN VIEW OF THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, WE DIRECT THE A.O. TO RE-COMPUTE THE INCOME OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 8. GROUND NOS.1.4 AND 1.5 ARE RELATED TO THE UNEXPL AINED INVESTMENT U/S 69 OF I.T.ACT. DURING THE ASSESSMENT PROCEEDIN GS, THE AO FOUND THAT THE ASSESSEE MADE INVESTMENT OF RS.31,63,321/-, OUT OF WHICH THE ASSESSEE FAILED TO EXPLAIN AND FURNISH ANY EVIDENCE IN RESPE CT OF THE ADVANCES AMOUNTING TO RS.8,50,165/-. THOUGH THE ASSESSEE ST ATED TO HAVE RECEIVED ADVANCES, THE ASSESSEE FAILED TO SUBMIT THE LIST OF PERSONS FROM WHOM THE ADVANCES WERE RECEIVED. THEREFORE, THE AO MADE THE ADDITION OF RS.8,50,165/- AS INCOME FROM UNEXPLAINED SOURCES. 9. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE W ENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) CONFIRMED THE ADDITION SINCE THE ASSESSEE 6 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM FAILED TO FURNISH ANY EVIDENCE BEFORE THE CIT(A) AL SO. DURING THE APPEAL HEARING, THE LD.AR RELIED ON THE GROUNDS OF APPEAL AND THE LD.DR RELIED ON THE ORDERS OF THE LD.CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE LD.CIT(A) HAS CONFIRMED THE ADDITION S INCE THE ASSESSEE FAILED TO ESTABLISH THE SOURCE OF DEPOSIT, IDENTITY AND GE NUINENESS OF THE CREDITOR. FOR THE SAKE OF CLARITY AND CONVENIENCE WE EXTRACT RELEVANT PARAGRAPHS OF THE ORDER FROM PARA NO.5.2 TO 5.3. WHICH READS AS U NDER : 5 .2 DURING THE APPEAL HEARING ALSO, THE ASSESSEE COU LD NOT FURNISH ANY DETAILS TO EXPLAIN THE SOURCE FOR THE IMPUGNED AMOUNT OF R S.8,50,165/- MADE PRIOR TO COMMENCEMENT OF BUSINESS. HENCE, IT IS HELD THAT THE AU IS JUSTIFIED IN MAKING THE IMPUGNED ADDITION OF RS.8,50,165/-. 5.3. THE ASSESSEE HAS RAISED A PLEA IN THE APPEAL P APERS THAT ONCE THE BOOKS OF ACCOUNT ARE REJECTED, THEN THE AU IS NOT JUSTTHED I N MAKING ADDITION TO CASH CREDITS WITH REFERENCE TO THE SAME BOOKS OF ACCOUNT. IN SUP PORT, THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE AP HIGH COURT IN THE CASE O R MADDI SUDARSHANAM OIL MILLS CO. V. CIT(37 ITR 369) AND INDWELL CONSTRUCTI ONS V. CIT(232 ITR 776 AP). IN THIS REGARD, IT IS RELEVANT TO NOTE A SIMILAR ISSUE AS TO WHETHER ADDITION U/S.68 OR 69 COULD BE MADE WHEN THE AO HAS ESTIMATED THE INCO ME WAS DEALT BY THE HONBLE ITAT, HYDERABAD IN THE CASE OR SMT. SHOBA G UPTA(ITA NO.461/HYD/2013, DT.10.07.2013), WHEREIN IT WAS HEL D THAT EVEN IF THE INCOME IS ESTIMATED, THE AO MAY INVOKE THE PROVISIONS OF SEC. 68/69 OF THE ACT THE HON'BE TRIBUNAL FOLLOWED THE DECISION IN THE CASE OR PV.SI TARAMASWAMY NAIDU IN ITA NO.26/HYD/12 VIDE ORDER DT.9.1.2013. THE HON'BLE TR IBUNAL TOOK THE VIEW THAT UNLESS THE ASSESSEE, BY INDEPENDENT AND SATISFACTOR Y EVIDENCE, ESTABLISHES THAT THESE AMOUNTS RELATE OR REFERABLE TO THE UNDISCLOSE D INCOME FROM KNOWN OR DISCLOSED SOURCES, I.E. THE BUSINESS, WHOSE INCOME HAD ALREADY BEEN ESTIMATED, THE ITO IS ENTITLED TO TREAT UNEXPLAINED CASH CREDIT AS INCOME FROM UNDISCLOSED SOURCES. THE HON'BLE TRIBUNAL PLACED RELIANCE ON TH E JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MADURI RAJAIAHGARI KISTAIAH (120 ITR 294) AND OF THE APEX COURT IN THE CASE OF DEVI PRASAD VISWAN ATH PRASAD 72 ITR 194. THE 7 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM HON'BLE TRIBUNAL ALSO REFERRED TO THE OBSERVATION O F SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMED HANIF VS. CIT (50 ITR 1 SC), 'IT CANNOT BE SAID THAT THE TAX AUTHORITIES WERE PRECLUDED FROM TREATING THE AMOUNT S OF THE CREDIT ENTRIES AS INCOME FROM UNDISCLOSED SOURCES SIMPLY BECAUSE THE ENTRIES APPEAR IN THE BOOKS OF A BUSINESS WHOSE INCOME THEY HAD PREVIOUSLY COMP UTED ON A PERCENTAGE BASIS' WHILE RENDERING THE ABOVE DECISION. THEREFORE, THE GROUND RAISED IN THIS REGARD IS REJECTED. THE ADDITION MADE OF RS.8,50,165/- IS CON FIRMED. 10.1. DURING THE APPEAL HEARING BEFORE US ALSO, THE ASSESSEE FAILED TO ESTABLISH THE SOURCE OF CREDIT, IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR. SINCE THE ASSESSEE FAILED TO ESTABLISH ANY OF THE R EQUIREMENTS, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND THE SAME IS UPHELD. APPEAL OF THE ASSESSEE ON THIS GROUND IS D ISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 9 TH MAR 2018. SD/- SD/- ( . ) ( ! . . # ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM $ /DATED : 09.03.2018 L.RAMA, SPS 8 ITA NO.92/VIZ/2016 GUDLA SRIRANGANADHAM, SRIKAKULAM & ' / COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT- SRI GUDLA SRIRANGANADHAM, PROP : SRI KRISHNA WINES, D.NO.15-24, A.B.ROAD, KOTTURU, SRIKAKULAM DI STRICT 2. / THE RESPONDENT INCOME TAX OFFICER, WARD-1, SRIKAKULAM 3. THE COMMISSIONER OF INCOME TAX-2, VISAKHAPATNAM 4. THE COMMISSIONER OF INCOME TAX(APPEALS)-2, VISAKH APATNAM 5. * , * , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM