ITO, Ward-2, Hyderabad V. Sri Papi Reddy Beereddy, Warangal

ITA 982/HYD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91718 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Keywords: Unexplained cash credit; Peak credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.982/HYD/2013 ASSESSMENT YEAR 2009-2010 THE INCOME TAX OFFICER WARD-2, AAYAKAR BHAVAN WARANGAL. VS. MR. PAPI REDDY BEEREDDY WARANGAL PAN AIEPB0235C (APPELLANT) (RESPONDENT) FOR REVENUE : MR. RAJAT MITRA FOR ASSESSEE : MR. S. RAMA RAO DATE OF HEARING : 14.05.2015 DATE OF PRONOUNCEMENT : 03.06.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-VI, HYDERABAD DATED 29. 03.2013. 2. THE ASSESSEE IN THE PRESENT APPEAL IS AN INDIVI DUAL WHO IS ENGAGED IN THE BUSINESS OF TRADING OF LIQUOR ON RETAIL BASIS UNDER THE NAME AND STYLE OF HIS PROPRIETARY C ONCERN M/S. JANATA WINES. THE RETURN OF INCOME FOR THE Y EAR UNDER CONSIDERATION WAS FILED BY HIM ON 29.09.2009 DECLAR ING TOTAL INCOME OF RS.1,36,634. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE THE BOO KS OF ACCOUNTS AS WELL AS SUPPORTING BILLS AND VOUCHERS F OR THE VERIFICATION OF THE A.O. THE A.O. THEREFORE PROPOSE D TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF TRA DING IN WINES BY APPLYING G.P. RATE OF 25% TO THE PURCHASE VALUE OF TOTAL SALES. THE ASSESSEE OBJECTED TO THIS PROPOSAL OF THE A.O. 2 ITA.NO.982/HYD/2013 MR. PAPI REDDY BEEREDDY, WARANGAL. BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE C ASE OF KANAKADURGA WINES RENDERED VIDE ITS ORDER DATED 28. 07.2011 IN ITA.NO.591/HYD/2011 WHEREIN THE NET PROFIT RATE OF 5% WAS APPLIED BY THE TRIBUNAL TO ESTIMATE THE INCOME OF T HE ASSESSEE ENGAGED IN SIMILAR LINE OF BUSINESS. ACCORDING TO T HE A.O., THE SAID DECISION OF THE TRIBUNAL HOWEVER WAS NOT ACCEP TED BY THE DEPARTMENT AND AN APPEAL WAS PREFERRED AGAINST THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT OF ANDHR A PRADESH. HE THEREFORE PROCEEDED TO ESTIMATE THE INCOME OF TH E ASSESSEE FROM THE BUSINESS OF TRADING IN WINES AT RS.6,13,06 1 BY APPLYING G.P. RATE OF 25% ON PURCHASE VALUE OF TOTA L SALES WHICH RESULTED IN SUBSTANTIAL TRADING ADDITION. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, SAVINGS BANK ACCOUNT MAINTAINED WITH ANDHRA BANK AT FATIMANAGAR BRANCH, WARANGAL WAS FURNISHED BY THE A SSESSEE. FROM THE PERUSAL OF THE STATEMENT OF THE SAID BANK ACCOUNT, THE A.O. NOTICED THAT THERE WERE HARDLY ANY PAYMENT S MADE AGAINST THE SUPPLY OF WINES TO APBC LIMITED. HE ALS O FOUND THAT THE SAID BANK ACCOUNT WAS NOT REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE. AS THERE WAS NO EXPLANATION FORTHCOMING FROM THE ASSESSEE REGARDING THE CREDITS APPEARING I N THE SAID ACCOUNT, TOTAL CREDITS FOUND IN THE SAID BANK ACCOU NT AGGREGATING TO RS.31,89,457 WERE TREATED BY THE A.O . AS UNEXPLAINED AND THE SAID AMOUNT WAS ALSO ADDED BY H IM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE ORDER DATED 30.12.2011. 4. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSE SSEE BEFORE THE LD. CIT(A) WHO FOUND THAT THE INCOME OF THE ASS ESSEE FROM THE BUSINESS OF RETAIL TRADING IN WINE ESTIMATED BY THE A.O. BY 3 ITA.NO.982/HYD/2013 MR. PAPI REDDY BEEREDDY, WARANGAL. APPLYING G.P. RATE OF 25% ON THE COST OF PURCHASE W AS ON THE HIGHER SIDE AND RELYING INTER ALIA ON THE DECISION OF THE TRIBUNAL IN THE CASE OF AMARAVATHI WINES, HE DIRECT ED THE A.O. TO ESTIMATE THE INCOME OF THE ASSESSEE BY APPLYING THE NET PROFIT RATE OF 5% TO THE COST OF SALES OF RS.38,48, 185. 5. AS REGARDS THE CREDIT ENTRIES APPEARING IN THE SAVINGS BANK ACCOUNT WITH ANOTHER BANK AT FATHIMANA GAR BRANCH, WARANGAL, THE LD. CIT(A) FOUND THAT THE SAI D BANK ACCOUNT WAS NOT REFLECTED IN THE BALANCE SHEET OF T HE ASSESSEE. HE ALSO AGREED WITH THE A.O. THAT THE CREDITS IN TH E SAID BANK ACCOUNT REPRESENTED UNEXPLAINED CREDITS FOR THE YEA R UNDER CONSIDERATION. HE HOWEVER HELD THAT THE ENTIRE CRED ITS COULD NOT BE CONSIDERED AS INCOME OF THE ASSESSEE AND SIN CE THERE WERE WITHDRAWALS MADE FROM THE SAID ACCOUNT AT REGU LAR INTERVALS, HE DIRECTED THE A.O. TO WORK OUT THE PEA K CREDIT FOR DETERMINING THE QUANTUM OF UNEXPLAINED CREDITS LIAB LE TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUN AL ON THE FOLLOWING GROUNDS : 1. THE ORDER OF THE CIT(A) IS ERRONEOUS ON THE FACTS OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE UNDERSTATEMENT OF SALES DETERMINED ACCORDING TO THE ESTIMATING OF GRO SS SALES BY FOLLOWING THE APBCL MEMORANDUM IN THE ABSENCE OF SALE BILLS ON THE GROSS SALES ADMITTED I N THE RETURN OF INCOME AND THE SAME COULD NOT BE PRODUCED BY THE ASSESSEE DURING THE COURSE OF SCRUTINY ASSESSMENT. 4 ITA.NO.982/HYD/2013 MR. PAPI REDDY BEEREDDY, WARANGAL. 3. THE CIT(A)-VI OUGHT TO HAVE UPHELD THE ADDITION OF RS.31,89,457 MADE BY THE A.O. IN THE ABSENCE OF INFORMATION/EVIDENCE FURNISHED BY THE APPELLANT EXPLAINING THE SOURCES FOR CASH DEPOSITS INTO THE S AID BANK ACCOUNT. 4. THE CIT(A)-VI ERRED IN ADOPTING THE PEAK CREDIT MET HOD IN THE ABSENCE OF ANY EVIDENCE OR INFORMATION FURNISHED BY THE APPELLANT EXPLAINING THE SOURCES F OR CASH DEPOSITS INTO THE SAID BANK ACCOUNT. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. G ROUND NOS. 1 AND 5 RAISED BY THE REVENUE IN THIS APPEAL ARE GE NERAL WHICH DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. AS REGARD S THE ISSUE INVOLVED IN GROUND NO.2 RELATING TO THE ESTIMATION OF INCOME OF THE ASSESSEE FROM THE BUSINESS OF RETAIL TRADING OF WINES, THE LEARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGRE ED THAT THIS ISSUE IS SQUARELY COVERED BY THE VARIOUS DECISIONS OF THE TRIBUNAL WHEREIN A CONSISTENT STAND HAS BEEN TAKEN BY THE TRIBUNAL THAT THE INCOME OF THE ASSESSEE FROM THE B USINESS OF RETAIL TRADING IN WINES CAN REASONABLY HE ESTIMATED BY APPLYING THE NET PROFIT RATE OF 5%. RESPECTFULLY FOLLOW THE SAID DECISION OF THE TRIBUNAL, WE UPHOLD THE IMPUGNED ORDER OF TH E LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO.2 OF THE REVENUES APPEAL. 8. AS REGARDS THE COMMON ISSUE INVOLVED IN GROUND NOS. 3 AND 4 RELATING TO THE ADDITION MADE ON ACCOU NT OF CREDITS APPEARING IN THE BANK ACCOUNT OF THE ASSESS EE WITH ANDHRA BANK, FATIMANAGAR BRANCH, WARANGAL, IT IS OB SERVED 5 ITA.NO.982/HYD/2013 MR. PAPI REDDY BEEREDDY, WARANGAL. THAT THE LD. CIT(A) IN HIS IMPUGNED ORDER HAS AGREE D WITH THE A.O. THAT THE SAID BANK ACCOUNT WAS NOT REFLECTED I N THE BALANCE SHEET OF THE ASSESSEE. HE ALSO AGREED WITH THE VIEW OF THE A.O. THAT THE CREDITS IN THE SAID BANK ACCOUNT REPRESENTED UNEXPLAINED CASH CREDITS FOR THE YEAR UNDER CONSIDE RATION FOR THE PURPOSE OF COMPUTING THE INCOME OF THE ASSESSEE . HE HOWEVER HELD THAT THE ENTIRE CREDITS COULD NOT BE T REATED AS THE INCOME OF THE ASSESSEE AND DIRECTED THE A.O. IN VIE W THE WITHDRAWALS FOUND TO BE MADE BY THE ASSESSEE FROM T HE SAID ACCOUNT ON REGULAR INTERVALS TO WORKOUT THE PEAK CR EDIT AND SUSTAIN THE ADDITION TO THE EXTENT OF SUCH PEAK CRE DIT. AFTER CONSIDERING THE SUBMISSIONS MADE BY BOTH THE SIDES AND PERUSING THE RELEVANT MATERIAL ON RECORD, WE ARE UN ABLE TO FULLY SUBSCRIBE TO THE VIEW OF THE LD. CIT(A) ON THIS ISS UE. IN OUR OPINION, THE PEAK CREDIT THEORY CAN BE APPLIED WHER E THERE ARE WITHDRAWALS AND DEPOSITS IN CASH. BUT WHERE THERE A RE CREDITS IN THE BANK ACCOUNT OF THE ASSESSEE OTHER THAN THE DEPOSITS MADE IN CASH, THE ONUS IS ON THE ASSESSEE TO EXPLAI N THE SAID CREDITS. THE DEPOSITS MADE IN CASH CAN ALWAYS BE EX PLAINED BY THE ASSESSEE WITH THE HELP OF WITHDRAWALS IF ANY, M ADE FROM THE SAID ACCOUNT AND EVEN IF THERE IS NO SUCH EXPLA NATION FORTHCOMING FROM THE ASSESSEE, THE A.O. HIMSELF CAN CONSIDER THE WITHDRAWALS AND DEPOSITS IN CHRONOLOGICAL MANNE R IN ORDER TO WORKOUT THE PEAK CREDIT FOR THE PURPOSE OF MAKIN G ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. IN SO FAR AS O THER CREDITORS IN THE BANK ACCOUNT ARE CONCERNED, THE ONUS IS ON T HE ASSESSEE TO OFFER HIS EXPLANATION IN TERMS OF SECTI ON 68 OF THE ACT AND THE A.O. HAS TO EXAMINE THE SAME IN ACCORDA NCE WITH LAW. WE THEREFORE MODIFY THE DIRECTION GIVEN BY THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE A.O. TO CONSIDER AND D ECIDE THIS ISSUE AFRESH KEEPING IN VIEW OUR DISCUSSION MADE HE REINABOVE. 6 ITA.NO.982/HYD/2013 MR. PAPI REDDY BEEREDDY, WARANGAL. GROUND NOS. 3 AND 4 OF THE REVENUES APPEAL ARE ACC ORDINGLY TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03.06.2 015. SD/- SD/- (SAKTIJIT DEY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 03 RD JUNE, 2015. VBP/- COPY TO 1. THE INCOME TAX OFFICER, WARD-2, AAYAKAR BHAVAN, STATION ROAD, WARANGAL. 2. MR. PAPI REDDY BEEREDDY,H.NO.1-1-1743/2, SIDDARTHANAGTAR, KAZIPET, WARANGAL. 3. COMMISSIONER OF INCOME TAX (APPEALS)-VI, HYDERAB AD. 4. COMMISSIONER OF INCOME TAX-VI, HYDERABAD. 5. D.R. I.T.A.T. B BENCH, HYDERABAD. 6. GUARD FILE