B Arjun Reddy, Hyderabad V. DCIT, Hyderabad

ITA 992/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61843 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LAXMAN RAO
• Assessee Lawyers: P MURALI MOHAN
• Keywords: Depreciation; Corroborative evidences; Tax effect

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. 992/HYD/2010 ASSESSMENT YEAR : 2006-07 B. ARJUN REDDY, APPELLANT C/O P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. (PAN AEQPB7781P) VS. DY. COMMISSIONER OF INCOME-TAX, RES PONDENT CENTRAL CIRCLE 5, HYDERABAD. ITA NO. 511/HYD/2010 ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME-TAX, A PPELLANT CENTRAL CIRCLE 5, HYDERABAD. VS. B. ARJUN REDDY, RESPONDENT C/O P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82. (PAN AEQPB7781P) ASSESSEE BY : MR. P. MURALI MOHAN REVENUE BY : MR. LAXMAN RAO DATE OF HEARING : 10/04/2012 DATE OF PRONOUNCEMENT : / 04/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THESE ARE THE CROSS APPEALS DIRECTED AGAINST THE O RDER OF CIT(A)-I, HYDERABAD, DATED 10/02/2010 FOR THE ASSE SSMENT YEAR 2006-07 ITA NOS. 992 & 511/HYD/10 B. ARJUN REDDY 2 ITA NO. 511/HYD/2010 APPEAL BY THE REVENUE 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- 1. ON THE CIRCUMSTANCES AND FACTS OF THE CASE, THE CIT(A) OUGHT NOT TO HAVE THE DELETED THE ADDITION MADE BY THE AO . 2. THE CIT(A) DID NOT APPRECIATE THE FACT THAT THE ASSESSEE HAS RECEIVED PART OF THE SALE PROCEEDINGS OF AGRICULTUR AL LAND IN CASH. 3. THE ASSESSEE FAILED TO CORRELATE THE AVAILABILIT Y OF CASH WITH THAT OF SALE TRANSACTION IN THE ABSENCE OF CONFIRMA TION FROM BUYERS OF LAND. 4. FOR THESE AND ANY OTHER GROUNDS THAT MAY BE RAIS ED, THE ORDERS OF THE CIT(A) MAY BE REVERSED AND THOSE OF A O RESTORED. 3. LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE TAX EFFECT IN THE INSTANT CASE IS LESS THAN RS. 3 LAKHS . THEREFORE, IN VIEW OF CBDT INSTRUCTION NO. 3 OF 2011 DATED 9.2.2011 REPORTED I N 332 ITR (STATUTE) 1 AND IN VIEW OF THE DECISION OF HON'BLE BOMBAY HIGH COUR T IN THE CASE OF MADHUKAR K. INAMDAR HUF, 318 ITR 149 (BOM), APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AND, THEREFORE, THE SAME SHOULD BE DISMISSED. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND TH AT, AFTER GIVING APPEAL EFFECT, THE TAX EFFECT INVOLVED IN THIS APP EAL FILED BY THE REVENUE IS LESS THAN RS. 3 LAKHS AND THIS POSITION HAS NOT BEEN DISPUTED EVEN BY THE LEARNED DR. AS PER THE CBDT IN STRUCTION NO. 3 OF 2011 ISSUED ON 09/02/2011, THE MONETARY LIMIT FO R FILING OF AN APPEAL BY THE DEPARTMENT BEFORE THE TRIBUNAL HAS BE EN REVISED TO RS. 3 LAKHS. AS DECIDED BY THE CBDT, APPEALS SHALL NOT BE FILED BY THE DEPARTMENT IN CASES WHERE TAX EFFECT DOES NOT E XCEED RS. 3 LAKHS. IN THE CASE OF CIT VS. MADHUKAR INAMDAR (HUF ) 318 ITR 149, THE HONBLE BOMBAY HIGH COURT HAS HELD THAT CBDT IN STRUCTION FIXING ANY MONETARY LIMIT FOR FILING THE APPEAL WOU LD APPLY EVEN FOR ITA NOS. 992 & 511/HYD/10 B. ARJUN REDDY 3 THE PENDING CASES. KEEPING IN VIEW THE SAID DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT AND THE BOARD INSTRUCTION NO. 3 OF 2011 DATED 09/02/2011, WE HOLD THAT THE PRESENT APPEAL F ILED BY THE DEPARTMENT INVOLVING TAX EFFECT OF LESS THAN RS. 3 LAKHS IS NOT MAINTAINABLE AND THE SAME IS, THEREFORE, DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ITA NO. 992/HYD/2010 APPEAL BY THE ASSESSEE 6. GROUND NOS. 1 & 2 ARE DIRECTED AGAINST THE ACTIO N OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 12,235 /- BEING 10% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE TOWAR DS MAINTENANCE OF VEHICLE AND DISALLOWANCE OF DEPRECIATION OF RS. 57,962/-. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 1, 22,354/- ON MAINTENANCE OF VEHICLES AND DEPRECIATION OF RS. 5,7 9,619/- ON SEVERAL CARS( 8 CARS). THE AO HAD OBSERVED THAT SUC H EXTENSIVE USE OF CAR IN THE BUSINESS OF MONEY LENDING AND RUNNING THE THEATRE LOOKS VERY MUCH OUT OF PLACE AND IT WAS UNLIKELY TH AT THE ASSESSEE HAD USED ALL THE VEHICLES IN THE COURSE OF HIS BUSI NESS ACTIVITY. HE FURTHER OBSERVED THAT THE ELEMENT OF PERSONAL USE O F THE VEHICLES IS NOT IN DOUBT. HE, THEREFORE, DISALLOWED 10% OF THE TOTAL EXPENDITURE CLAIMED ON MAINTENANCE OF VEHICLES, WHICH COMES TO RS. 12,235/- AND ALSO DEPRECIATION OF RS. 57,962/- CLAIMED BY TH E ASSESSEE ON THE VEHICLES WERE DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) FOLLOWING HIS DECIS ION IN ASSESSEES OWN CASE FOR AY 2000-01, 2001-02, 2003-04 AND 2005- 06 IN ITA NOS. 0676 TO 0679/CC-5, HYD/CIT(A)/07-08, DATED 25/ 01/10, CONFIRMED THE DISALLOWANCE MADE BY THE AO. AGGRIEVE D, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NOS. 992 & 511/HYD/10 B. ARJUN REDDY 4 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS OBSERVED THAT THE AO HAD DISALLOWED 10% OF EXPENDITURE AND DEPRECIATI ON OUT OF THE ASSESSEES CLAIM ON VEHICLES ON THE GROUND THAT THE EXTENSIVE USE OF CAR IN THE LINE OF ASSESSEES BUSINESS IS OUT OF PL ACE AND ALSO ON THE ELEMENT OF PERSONAL USE. THE CIT(A) CONFIRMED THE A CTION OF THE AO FOLLOWING HIS DECISION IN EARLIER YEARS IN ASSESSEE S OWN CASE. AFTER CONSIDERING THE FACTS OF THE CASE AND ORDERS OF THE AUTHORITIES BELOW, TO MEET THE ENDS OF JUSTICE, WE RESTRICT THE DISALLOWANCE OF EXPENDITURE AND DEPRECIATION ON THE VEHICLES, TO 5% AS AGAINST 10% MADE BY THE AO. ACCORDINGLY, GROUND NOS. 1 & 2 OF A PPEAL ARE PARTLY ALLOWED. 9. GROUND NOS. 3 & 4 ARE PERTAINING TO THE DISALLOW ANCE OF DEPRECIATION CLAIM BY THE ASSESSEE ON PLANT AND MAC HINERY OF RS. 13,192/-. AT THE TIME OF HEARING BEFORE US, THE LEA RNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN PRESSED THE SAID GROUNDS, THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 10. GROUND NOS. 5 & 6 ARE PERTAINING TO THE CONFIRM ATION OF ADDITION TO THE EXTENT OF RS. 1,74,950/- TOWARDS UN EXPLAINED INCOME. 11. BRIEFLY THE FACTS RELATING TO RISE THIS GROUND ARE THAT DURING THE COURSE OF SEARCH OPERATION IN THE PREMISES OF T HE ASSESSEE, CASH WAS FOUND TO THE TUNE OF RS. 8,74,950/- AND SEIZED. ON BEING ASKED BY THE AO TO EXPLAIN THE SOURCES VIDE Q.NO. 9, THE ASSESSEE STATED THAT OUT OF THE SAID AMOUNT, RS. 6 LAKHS WERE RECEI VED BY SALE OF AGRICULTURAL LAND AT SURVEY NO. 8, RAMAGUNDAM VILLA GE AND THE BALANCE RS. 2,74,950/- WAS FROM THEATRE COLLECTIONS AND PERSONAL SAVINGS. SINCE THE ASSESSEE WAS NOT ABLE TO PRODUCE ANY CORROBORATIVE EVIDENCES OR BOOKS OF ACCOUNT IN SUPP ORT OF THE SAID CLAIM, THE AO TREATED THE SAID CASH FOUND DURING TH E COURSE OF ITA NOS. 992 & 511/HYD/10 B. ARJUN REDDY 5 SEARCH AS UNEXPLAINED INCOME AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL, BEFORE THE CIT(A) THE ASSE SSEE BESIDES REITERATING HIS SUBMISSIONS AS MADE BEFORE THE AO, SUBMITTED THAT OUT OF THE CASH FOUND RS. 6 LAKHS WAS OUT OF THE SA LE PROCEEDS OF SALE OF LAND AT RAMAGUNDAM VILLAGE AND THE SAME HAD ALREADY BEEN MENTIONED IN THE TAXABLE INCOME FOR THE AY 2006-07 WHEREIN THE SHORT TERM CAPITAL GAIN HAS BEEN OFFERED TO TAX AMO UNTING TO RS. 5,04,135/-. AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, THE CIT(A) HELD AS UNDER:- 5.1.OUT OF THE CASH FOUND IN THE PREMISE S OF RS. 8,74,950/-, THE ASSESSEES CONTENTION THAT R S. 6 LAKH IS FROM OUT OF THE SALE CONSIDERATION OF LAND SOLD IS ACCEPTABLE. ACCORDINGLY, RS. 6 LAKHS OUT OF THE CASH FOUND IN T HE PREMISES STANDS EXPLAINED AND THE AO IS DIRECTLY TO DELETE T HE ADDITION TO THAT EXTENT. THIS LEAVES WITH A CASH OF RS. 2,74 ,950/-. THE APPELLANT CONTENDS THAT IT IS FROM OUT OF THEATRE PROCEEDS AND PERSONAL SAVINGS. HOWEVER, NO CORROBORATIVE EVIDENC E TO THAT EFFECT HAS BEEN SUBMITTED EITHER DURING THE ASSESSM ENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. HO WEVER, CONSIDERING THE BUSINESS AS ALSO THE SOCIAL STATUS OF THE APPELLANT, IT IS POSSIBLE THAT SOME CASH MUST HAVE BEEN KEPT FOR THE DAY TO DAY NEEDS. ACCORDINGLY, IN MY VIEW, RS. 1 LAKH CAN BE CONSIDERED AS AVAILABLE FROM OUT OF EARLIER SAVI NGS. THUS RS. 1,74,950/- REMAINS UNEXPLAINED AND ADDITION TO THAT EXTENT IS CONFIRMED. 12. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RE CORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS OBSERVED THAT OUT OF ADDITION RS. 8,74,950/- MADE BY THE AO, THE CIT(A) SUSTAINED THE ADDITION TO THE EXTENT OF RS. 1,74,950/- OBSERVING THAT RS. 6.00 LAKH STANDS EXPLAINED AND RS. 1.00 LAKH CONSIDERED AS CASH AVAILABLE FROM OUT OF EARLIER SAVINGS. AFTER CONSID ERING THE FACTS OF THE CASE, WE RESTRICT THE ADDITION FURTHER TO RS. 1 ,00,000/- TREATING RS. 74,950/- AS EXPLAINED CONSIDERING THE SUBMISSIO N OF THE ASSESSEE THAT THE SAID AMOUNT IS OUT OF THEATRE PRO CEEDS AND PERSONAL SAVINGS. THUS, THIS GROUND OF APPEAL OF TH E ASSESSEE IS PARTLY ALLOWED AND THE ORDER OF THE CIT(A) IN THIS REGARDS IS MODIFIED ACCORDINGLY. ITA NOS. 992 & 511/HYD/10 B. ARJUN REDDY 6 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 14. TO SUM UP, APPEAL OF THE REVENUE IS DISMISSED A ND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20/04/2012 SD/- SD/- (CHANDRA POOJARI) (ASHA VIJ AYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 20 TH APRIL, 2012 KV COPY TO:- 1) B. ARJUN REDDY, C/O P. MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR,SOMAJIGUDA, HYDERABAD 82. 2) DCIT, CENTRAL CIRCLE-5, HYD. 3) THE CIT(A)-I, HYD. 1) THE CIT, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., HYDERABAD. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., HYDERABAD