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Income Tax Appellate Tribunal, HYDERABAD BENCH ‘B, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, AM: This appeal filed by the assessee is directed against the order of CIT(A) – 7, Hyderabad, dated, 24/10/2017 for AY 2013-14.
Brief facts of the case are, the assessee an individual 2. and the Proprietor of M/s Balaji Wines, filed his return of income for AY 2013-14 on 29.09.2013 admitting total income at Rs. 3,80,680/-. The case was converted to scrutiny under CASS and notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 (in short ‘the Act’) were issued and served on the assessee. The AO completed the assessment u/s 143(3) of the Act on 03/03/2016 by estimating the income of the assessee at 5% of Rs. 17,37,984/- towards stock sold/stock put for sale of Rs. 3,47,59,676, Rs. 55,516/- towards income
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from other sources and Rs. 31,09,500/- towards unexplained cash credits u/s 68 of the Act.
When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the order of AO.
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal: “1) The order of the learned Commissioner of Income- tax (Appeals) is erroneous both on facts and in law. 2) The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the Assessing Officer in rejecting the books of account. 3) The learned Commissioner of Income-tax (Appeals) erred in estimating the income at 5% without properly appreciating the facts stated before him. 4) The learned Commissioner of Income-tax (Appeals) erred in confirming the addition made of Rs.55,516/- separately representing interest from bank deposits when the income is estimated. 5) The learned Commissioner of Income-tax (Appeals) erred in confirming the addition made of Rs.31,09,500/- treating the credits into the bank account as the income of the appellant. 6) Any other ground or grounds that may be urged at the time of hearing.”
Ground Nos. 1 & 6 are general in nature.
As regards ground Nos 2 & 3 estimation of income at 5%, it is a settled issue that the coordinate benches of this Tribunal are consistently taking a view that 3% of the cost of the goods sold is reasonable in this line of business. In the case of Sri Venkateswara Wines in ITA No. 1206/Hyd/2015,
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dated 27/11/2015 for AY 2011-12, the coordinate bench has held as under:
“5. Having regard to the rival contentions and the material on record, we find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income at 5% of the cost of goods sold, while the assessee is seeking the estimation at 3% of the cost of goods sold. We find that in the case of Venkateswara Wines, Nizamabad (supra), the Coordinate Bench of this Tribunal has taken note of the decision of Hon'ble High Court of Telangana and Andhra Pradesh in ITA.No.1198/Hyd/2015 Sai Venkateswara Wines, Secunderabad the case of CIT vs. Kamlekar Shankar Lal (supra) to hold as under : "6. Having regard to the rival contentions and the material on record, we find that the AO has called for books of account of the assessee but the assessee had failed to produce the same. Therefore, AO had estimated the income of the' assessee at 2.5% of the turnover. The CIT wants the same to be estimated at 5% of the total turnover because the Tribunal in the case of an assessee carrying on the same business of sale of IMFL has estimated the income at 5% of the turnover. This, in our view, is not justified as held by the Coordinate Bench of this Tribunal. The uniform net profit cannot be adopted in each and every case of similar business. Estimation of net profit must be on the basis of facts involved in each and every case. Therefore, in our view, there is no error committed by the AU in estimating the profit at 2.5% of the total turnover. Thus grounds of appeal No.2 & 3 are allowed."
Therefore, we direct the AO to adopt 3% of the cost of goods of liquor sold as the income of the assessee. Accordingly, the grounds raised on this issue are allowed.
As regards ground No. 4 regarding addition of Rs. 55,516/- representing interest from bank deposits, the AO made this addition under the head income from other sources.
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7.1 Before us, ld. AR has submitted that interest income earned are out of deposits, which are made only for the purpose of business. Therefore, we remit this issue back to the AO to verify the interest income. If it is earned out of free deposits, the additional income may be sustained.
As regards ground No. 5 regarding addition of Rs. 31,09,500/-, the AO, while verifying the cash book, noticed that the assessee credited an amount of Rs. 61,09,500/- in the cash book of Balaji Wines in the name of assessee. He observed that out of the Rs.61,09,500/-, an amount of Rs. 31,09,500/- is the cash credits appearing in cash book in the name of Sri Bhupalreddy which was credited to his capital account from 04-06-2012 to 04-07-2012 and the balance amount of Rs. 30,00,000/- was introduced on various dates after 04-07-2012, which was duly reflected from earlier drawings made by Sri Bhupal reddy from the cash balances available in the cash book. AO noted that initial amount of Rs.31,09,500/- was introduced by the assessee towards his contribution to meet the expenditure of license fee and bank guarantee fixed deposits which are required to be made to get the license. Thus an amount of Rs. 31,09, 500/- stands to be explained. During the course of hearing on 22.01.2016, the AR submitted that the initial investment in business was made from agriculture income of parents. However, no evidence was produced before the AO.
8.1 Further, the AO observed that during the course of hearing on 25.01,2016, the AR submitted that relatives of assessee, G. Ramreddy, G. Sanjeeva reddy, L.sudhakar reddy, L.Malla Reddy, L. Yadamma, G. Yadamma - all these persons have agriculture income and contributed to the business. Copies of Patta books in their names are furnished.
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No other evidence indicating what is the income derived by them, what is their other means of livelihood, how the amounts have been contributed by them, what is the contribution of each person- these details were not furnished. The copies of the patta book were furnished, according to the AO, the same are mere copies of Patta books in the names of his relatives. Their complete address, sources of income apart from agriculture, what is the extent of income derived by them is not furnished. Thus, the AO opined that mere furnishing of copies of patta books is not discharging the primary onus of proving the genuinety of transaction itself. Based on such copies of patta books, no further enquiry can be taken up. In the absence of genuinity and creditworthiness of the evidences, he held that the same cannot be considered of any evidentiary value. In view of the above observations, the AO held that the assessee has not proved the sources for the investments made to the extent of Rs. 31,09,500/- and accordingly, the same was brought to tax u/s 68 of the IT Act. On appeal, the CIT(A) confirmed the said addition.
Before us, ld. AR of the assessee filed a petition for admission of the following additional evidences, submitting that the same were not filed before the AO and CIT(A), as they were not readily available, hence, the same are submitted before the ITAT for the first time as additional evidence. He submitted that these documents are necessary evidences for deciding the matter, prayed to admit as additional evidence:
S.No. Particulars Page Nos. at paper book 1 Confirmation letter along with returns of 22-32 income, computation of total income and financial statements for the AY 2012-12 and AY 2011-12
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2 Details of amounts received form close 33 relatives 3 Confirmation letter dated 16/04/2016 of 34-48 Smt. Gangidi Yadamma along with agreement of sale cum GPA, Pattadar passbooks 4 Confirmation letter dt. 16/03/2016 of Sri d. 49 Madhusudhan Reddy 5 Confirmation letter dt. 16/04/2016 of Sri T. 50-61 Ramesh Chary along with return of income for the AY 2013-14, computation of total income, Andhra Bank Passbook. 6 Confirmation letter dt. 16/04/2016 of Sri 62-66 Gangidi Ram Reddy along with SBI Passbook and Pattadar Passbook 7 Confirmation letter dt. 16/04/2016 of Sri 67-75 Lachagari Sudhar Reddy along with Andhra Bank Passbook and Pattadar Passbooks 8 Confirmation letter dt. 16/04/2016 of Sri 76-84 Shankar Mudhavath along with IOB statement of account 9 Confirmation letter dt. 16/04/2016 of Sri 85-90 Nirdhula Indra Reddy along with return of income for the AY 2013-14, computation of total income, SAT Challan, PAN Card 10 Affidavit by the assessee 91-92
Ld. DR, on the other hand, relied on the orders of revenue authorities.
Considered the rival submissions and perused the material on record. We noticed that assessee has not submitted any documentary evidence before lower authorities. Now for the first time filed additional evidence before us. Therefore, we admit the additional evidences (supra) submitted by the assessee, as the same are important evidences to decide the issue. Since the additional evidences submitted before the ITAT for the first time, the revenue authorities had no occasion to consider the same. Therefore, we remit the issue back to the file of the AO with a direction to consider and verify the additional evidences submitted by the assessee and decide the issue in accordance with law after
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providing an opportunity of being heard to the assessee in the matter. Thus, this ground is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes. Pronounced in the open court on 3rd May, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, dated 3rd May, 2019. kv Copy forwarded to: 1. Sri Bhupal Reddy Gangidi, Plot No. 46, Bhanu Nagar Colony, Champapet, Hyderabad. 2. ITO, Ward – 9(4), IT Towers, AC Guards, Hyderabad. 3. CIT(A) - 7, Hyderabad 4. Pr. CIT – 7, Hyderabad 5. The DR, ITAT, Hyderabad 6. Guard File