G.V.V.SATYANARAYANA,KADIYAPULANKA vs. THE INCOME TAX OFFICER, WARD-2(3), , RAJAHMUNDRY

PER N.K. CHOUDHRY, JUDICIAL MEMBER This appeal has been preferred by the assessee against the order dated 04/11/2019 impugned herein passed by the ld.CIT(A), Rajamahendravaram u/sec. 250(6) of the Income Tax Act, 1961 (hereinafter referred to as "Act") for the A.Y. 2012-13.

(G.V.V. Satyanarayana) 2. The assessee has raised the following grounds of appeal:- “1. The ld. CIT(A) is not correct in dismissing the appeal preferred by the assessee and should have appreciated the facts of the case in appeal.

2. The ld. CIT(A) is not correct in sustaining the addition of Rs. 9,68,416/- which is the estimated profits in Banana Trade.

3. The ld. CIT(A) should have appreciated the comparable cases submitted by the Assessee to assess the profit from Banana business; and 4. Any other ground that may be urged at the time of hearing of the appeal.”

3. The only issue under challenge in this appeal relates to affirmation of addition of Rs. 9,68,416/- qua estimated profit @8% in banana trade. As per the AO, the cash deposits as confirmed by the buyers of the Assessee were at Rs. 1,21,05,200/- on which the Assessee did not offer any income in his return of income, therefore, treating the said cash deposits as sale proceeds of the Assessee qua banana trading, the income in respect thereof was estimated @8% which worked out to Rs. 9,68,416/- and resulted into addition to the total income of the Assessee.

4. On appeal the ld. CIT(A), affirmed the action of the AO by holding as under:-

5. I have perused the material available on record, written submissions made by the appellant and the (G.V.V. Satyanarayana) assessment order. The appellant challenged the only addition made on account of income estimated on the sale proceeds of banana plantains @8%, which works out at Rs. 9,68,416/-. The appellant stated that the said estimation is on higher side. The appellant has not furnished any books of account in respect of banana plantains business nor has mentioned income particulars from this business while filing the return. During the assessment proceedings only, the appellant has explained about the cash deposits made by him by way of commission from this business. Hence, the AO has treated these cash deposits as sale proceeds of the appellant and the income is estimated @8%. I have perused the material placed on record by the appellant in respect of Viswajanani Fruit Company’s audit reports. However, this case is not squarely applicable to the appellant’s case as there is a difference in the nature of trade.

5. The Assessee being aggrieved preferred this appeal.

6. Having heard the parties and perused the material available on record. The Assessee has claimed that it is dealing with two trades i.e. liquor and banana trading and before the ld. CIT(A) it was submitted that in banana plantation business, the Assessee at the most making a margin of 1.5% to 2% as commission from the sales conducted on behalf of the farmers growing bananas. Further, the Assessee also placed a comparable case i.e. Viswajanani Fruit Company for the A.Y. 2012-13 wherein the gross (G.V.V. Satyanarayana) profit was claimed by the said Assessee at 3.6%, however the ld. CIT(A) did not get impressed upon the submissions of the Assessee and ultimately affirmed the addition under challenge by quoting that the comparable case cited by the Assessee is not squarely applicable to the Assessee’s case as there is difference in the nature of trade.

In our considered view, the Ld. CIT(A) did make any analysis qua comparable case and of the Assessee and passed the order in in cryptic manner and affirmed the estimation @8%. The Ld. CIT(A) further failed to base affirmation of estimation @8% on any material and/or circumstances while ignoring the comparable case. From the perusal of income tax return filed by the Viswajanani Fruit Company for the A.Y. 2012-13 as quoted by the Assessee as a comparable case, it reflects that the profit from banana trading has been estimated @ 3.6% only. Though the Ld. DR supported the orders of the authorities below, however failed to bring on record any material contrary to the comparable case. Though it is not the case of the Assessee that comparable case has attained finality, however there is no material to substantiate that the comparable case is under challenge or otherwise has not attained finality. The Assessee’s case and comparable case also relates to A.Y. 2012-13, hence, considering the comparable case (A.Y. 2012-13) and estimation thereof qua trading of banana, we are inclined to allow the plea of the Assessee and therefore direct the AO to re-compute the estimation @3.6% of the turnover qua banana trading. Consequently, the impugned order is set aside.

(G.V.V. Satyanarayana) 7. In the result, appeal filed by the Assessee stands allowed. Order Pronounced in open Court on this 17th day of Feb., 2021. sd/- sd/- (D.S. SUNDER SINGH) (N.K. CHOUDHRY) Accountant Member Judicial Member Dated: 17th February, 2021. vr/- Copy to:

1. 1. The Assessee - G.V.V. Satyanarayana, D.No. 5-103/1, Kadiyapulanka Tower Street, Kadiyam Mandal, East Godavari District.