DCIT, Central Circle, Visakhapatnam V. Sri K Venkata Rao, Rajam

ITSSA 52/VIZ/2004

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9410 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 08-09-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Assessee Lawyers: C V S MURTHY
• Keywords: Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER IT(SS)A NO.52/VIZAG/2004 BLOCK ASSESSMENT PERIOD : 01.04.1990 TO 01.02.2001 DCIT, CENTRAL CIRCLE-2 VISAKHAPATNAM SRI KOTHA VENKATA RAO, RAJAM, SRIKAKULAM (APPELLANT) VS. (RESPONDENT) GIR NO.V-710 APPELLANT BY: SHRI SUBRATA SARKAR, DR RESPONDENT BY: SHRI C.V.S. MURTHY, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) HAS ERRED I N DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER WITH RESPECT TO THE D EFICIT OF CASH TO THE TUNE OF RS.17,89,744/-. THE FACTS BORNE OUT FROM THE RE CORD IN THIS REGARD ARE THAT DURING THE COURSE OF SEARCH IT WAS NOTICED BY THE S EARCH PARTY THAT THERE WAS DEFICIT OF RS.38,89,744/- IN THE ACCOUNTS OF LAKSHM I SRINIVASA MODERN RICE MILL WHICH IS OWNED BY THE ASSESSEES IN PROPRIETARY STATUS. IT WAS EXPLAINED BY THE ASSESSEE AT THAT TIME THAT RS. 21 LAKHS WITH DRAWN FROM THE BANK WAS NOT GIVEN CREDIT. AFTER GIVING A CREDIT TO THE DEF ICIT OF RS.38,89,744/- WITH RS. 21 LAKHS BALANCE DEFICIT CAME TO RS.17,89,744/-. T HOUGH THE ASSESSEE HAS TRIED TO EXPLAIN THE DISCREPANCIES BUT A.O. WAS NOT CONVINCED WITH IT AND HE MADE THE ADDITION OF RS.17,89,744/- IN THE HANDS OF THE ASSESSEES AS A DEFICIT IN CASH. 2. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) AND CONTENDED THAT THIS DEFICIT TOOK PLACE BECAUSE THE LAKSHMI SR INIVASA MODERN RICE MILL MADE PAYMENT TO FARMERS WHICH WERE RECEIVED AT RS.1 7,89,744/- FROM M/S. RATNAM JUTE MILLS PRIVATE LIMITED. IN THIS TRANSAC TION, THE RECEIPT OF RS.17,89,744/- FROM M/S. RATNAM JUTE MILLS PVT. LTD . WAS NOT ENTERED IN THE ACCOUNTS OF M/S. LAKSHMI SRINIVASA MODERN RICE MILL . THEREFORE, THERE WAS A 2 DEFICIT. THIS WAS HOWEVER RECONCILED IN THE CASE O F RATNAM JUTE MILLS PVT. LTD. 3. THE A.O. WHILE PASSING THE BLOCK ASSESSMENT IN T HE CASE OF RATNAM JUTE MILLS PVT. LTD., THE PAYMENTS MADE BY RATNAM J UTE MILLS PVT. LTD. TO M/S. LAKSHMI SRINIVASA MODERN RICE MILLS HAS BEEN ACCEPT ED AND ARRIVED DEFICIT IN RATNAM JUTE MILLS ACCOUNT AT RS.21,34,864/-. IN TH IS ACCOUNT RS.17,09,000/- WAS RECEIVED AS ADVANCE FROM THE FARMERS AND THE S AME HAS SEEN TO HAVE BEEN PAID TO FARMERS OF THE RICE MILLS AND NET HAS RESULTED IN DEFICIT OF RS.21,34,864/-. THERE WAS A NEGATIVE BALANCE OF RS .21,34,864/- IN CASE OF RATNAM JUTE MILLS LTD. WHICH HAS BEEN RESULTED DUE TO THE FOLLOWING REASONS: RECONCILIATION OF CASH BALANCE IN THE BOOKS OF M/S. RATNAM JUTE MILLS PVT. LTD. CASH BALANCE AS ON 4.11.2000 -2534864 ADD: A) 11.10.00 BANK WITHDRAWAL NOT ENTERED IN CASH BOO KS 50000 B) THIRD PARTY DDS DEPOSITED IN BANK ENTERED AS CAS H 350000 DEPOSIT IN BOOKS C) AMOUNTS REALIZED FROM RYOT ADVANCES NOT ENTERED IN CB 1790000 2190000 -344864 LESS: AMOUNT UTILIZED FOR PURCHASE OF PADDY FOR M/S. SLS MODERN RICE MILL -1790000 NEGATIVE CASH BALANCE -2134764 4. IT WAS FURTHER CONTENDED BEFORE THE CIT(A) THAT SINCE THE BOOKS OF ACCOUNTS WERE NOT WRITTEN UPTO DATE, THE BANK WITH DRAWALS, DDS DEPOSIT AND AMOUNTS REALIZED FROM THE FARMERS HAVE NOT BEEN ENT ERED AND FURTHER THE AMOUNTS PAID TO THE FARMERS FOR PURCHASE OF PADDY A LSO NOT ENTERED. THEREFORE, THE CASH DEFICIT OF RS.21,54,364/- HAS B EEN EXPLAINED. IT WAS FURTHER CONTENDED THAT A.O. HAS NO BASIS TO MAKE AD DITION OF RS.17,89,744/- IN THE HANDS OF THE ASSESSEE AS THE CASH DEFICIT HA S ARISEN DUE TO THE PAYMENTS TO THE FARMERS FOR PURCHASE OF PADDY FOR A SSESSEES OWN RICE MILL. MORE OVER IN THE CASE OF RATNAM JUTE MILLS PVT. LTD . THE ASSESSEE HAS ALWAYS DISCLOSED A SUM OF RS.15,60,000/- AS UNDISCLOSED IN COME AND THE ASSESSING OFFICER HAS MADE FURTHER ADDITION OF RS.5,74,864/- AND ASSESSED IT AT RS.21,34,864/- COVERING UP THE CASH DEFICITS IN THE HANDS OF M/S. RATNAM JUTE MILLS PVT. LTD. THE CIT(A) RE-EXAMINED THE ISSUE I N THE LIGHT OF ASSESSEES 3 CONTENTIONS AND HAS CONCLUDED THAT THE CASH DEFICIT POINTED OUT BY THE A.O. AS UNEXPLAINED INCOME IS FORMING PART AND PARTIAL O F CASH DEFICIT OF RS.21,34,864/- AS FROM THE RECONCILIATION STATEMENT OF M/S. RATNAM JUTE MILLS PVT. LTD. IT IS SEEN THAT RS.17,90,000/- WAS ADDED AS AMOUNTS REALIZED FROM THE FARMERS AND THE SAME WERE NOT ENTERED IN THE CA SH BOOK. THE CIT(A) ACCORDINGLY DELETED THE ADDITIONS. THE OBSERVATION S OF THE CIT(A) IN THIS REGARD ARE HOWEVER EXTRACTED AS UNDER FOR THE SAKE OF REFERENCE: THE SUBMISSION MADE BY THE AUTHORISED REPRESENTATI VE HAS BEEN EXAMINED AND NECESSARY DOCUMENTS SUPPORTING TH E ABOVE ARS ARGUMENTS HAS BEEN PERUSED. IT IS SEEN THAT T HE ASSESSING OFFICER, WHILE COMPLETING THE ASSESSMENT OF M/S. RA TNAM JUTE MILLS PVT. LTD. FOR THE BLOCK PERIOD (A.Y. 1991-92 TO 200 0-01 UPTO 01-02- 2001) HAS ASSESSED AS UNDISCLOSED INCOME OF RS.21,3 4,860/-. THIS IS CONSISTING OF RS.15,60,000/- WHICH IS UNDISCLOSE D INCOME ADMITTED BY THE APPELLANT WHILE FILING FORM NO.2B A ND THE ADDITION MADE BY THE ASSESSING OFFICER AT RS.5,74,864/-. IT IS SEEN THAT THE APPELLANT HAS ADMITTED UNDISCLOSED INCOME AT RS.15, 600,000/- WHICH HAS BEEN ARRIVED AT 15% OF THE DEFICIT STOCK FOUND OUT AT THE TIME OF THE SURVEY OPERATION. THEREFORE, THE APPEL LANT HAD ADMITTED RS.15,60,000/- AS UNDISCLOSED INCOME. THE ASSESSING OFFICER HOWEVER, MADE FURTHER ADDITION OF RS.5,74,8 64/- IN VIEW OF THE FACT THAT THERE WAS A CASH DEFICIT ARRIVED IN T HE HANDS OF M/S. RATNAM JUTE MILLS PVT. LTD. AS IT COULD BE SEEN TH AT RS.17,90,000/- HAS BEEN INCLUDED TO WORK OUT THE CASH DEFICIT OF R S.21,34,864/-. THEREFORE, I AM OF THE VIEW THAT THE CASH DEFICIT A S SUCH, POINTED OUT BY THE ASSESSING OFFICER AS UNEXPLAINED INCOME IS FORMING PART AND PARCEL OF CASH DEFICIT OF RS.21,34,864/-. FROM THE RECONCILIATION STATEMENT OF M/S. RATNAM JUTE MILLS (P) LTD., IT IS SEEN THAT RS.17,90,000/- WAS ADDED AS AMOUNTS REALI ZED FROM THE FARMERS SINCE THE SAME WERE NOT ENTERED IN CASH BOO K AND LATER ON THE SAME AMOUNT IS SEEN AS UTILIZED FOR THE PURCHAS E OF PADDY FOR SRI LAKSHMI SRINIVASA MODERN RICE MILL. THIS PARTI CULAR RECEIPT FROM M/S. RATNAM JUTE MILLS (P) LTD. DID NOT ENTER IN TH E ACCOUNTS OF RICE MILLS, HENCE DEFICIT AT RS.17,89,744/-. AS IT IS S EEN FROM THE ABOVE RECONCILIATION RECEIPT OF RS.17,90,000/- AND PAYMEN T OF RS.17,90,000/- IS ACCEPTED IN THE BOOKS OF M/S. RAT NAM JUTE MILLS. THEREFORE, CONSIDERING THE ABOVE FACTS AND CIRCUMS TANCES OF THE CASE, I AM OF THE VIEW THAT TREATING THE SAME A MOUNT OF RS.17,89,744/- AS UNEXPLAINED CASH DEFICIT IN THE H ANDS OF THE APPELLANT IS UNWARRANTED. THEREFORE, THE SAME ADDI TION IS DELETED. RELIEF: RS.17,89,744/- 4 5. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE T HE TRIBUNAL AND HAS PLACED HEAVY RELIANCE UPON THE ORDER OF THE A.O. D URING THE COURSE OF HEARING NO SPECIFIC DEFECT IN THE ORDER OF THE CIT(A) WAS P OINTED OUT. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND BESIDES PLACING HEAVY RELIANCE UPON THE CIT(A)S ORDER HAS CONTENDE D THE DISCREPANCIES POINTED OUT BY THE A.O. AS NOTICED DURING THE COURS E OF SEARCH OPERATIONS WAS PROPERLY EXPLAINED BY THE ASSESSEE BY PLACING RELEV ANT EVIDENCE AND RECONCILIATION STATEMENT DURING THE COURSE OF ASSES SMENT PROCEEDINGS AS SUCH NO ADDITION IS CALLED FOR. 7. HAVING CAREFULLY GONE THROUGH THE ORDER OF CIT( A), WE FIND THAT ASSESSEE HAS SUCCESSFULLY EXPLAINED THE DISCREPANCI ES WITH REGARD TO THE DEFICIT OF CASH AND THE CIT(A) HAS CORRECTLY ADJUDICATED TH E ISSUE IN RIGHT PERSPECTIVE IN THE LIGHT OF MATERIAL PLACED BEFORE HIM. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A), WE CONFIRM HIS ORDER. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 05-03-2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 5 TH MARCH, 2010 COPY TO 1 THE DCIT, CENTRAL CIRCLE-2, 5 TH FLOOR, DIRECT TAXES BUILDING, M.V.P. COLONY, VISAKHAPATNAM 2 SRI KOTHA VENKATA RAO, PROP: M/S. SRI LAKSHMI SRI NIVASA MODERN RICE MILL, CHEEPURUPALLI ROAD, RAJAM, SRIKAKULAM DIST. 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A)-I, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM