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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH
आयकर अपीऱीय अधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री िी. दुगाा राि,न्याययक सदस्य एिं श्री डड.एस. सुन्दर ससंह, ऱेखा सदस्य के समऺ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER& SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER आयकर अऩीऱ सं./I.T.A.No.507/Viz/2018 (ननधधारण वषा/Assessment Year : 2015-16) Badisa Hanumantha Rao Vs. Income Tax Officer MIG No.1-223 Ward-1(1) Nallapadu Road Guntur Guntur [PAN :ARHPB4733B] (अपीऱार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अऩीऱधथी की ओर से/ Appellant by : Shri G.V.N.Hari, AR प्रत्यधथी की ओर से/ Respondent by : Smt.Suman Malik, DR सुनवधई की तधरीख / Date of Hearing : 02.05.2019 घोषणध की तधरीख/Date of Pronouncement : 29 .05.2019 आदेश /O R D E R Per D.S. Sunder Singh, Accountant Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]-1, Guntur vide Appeal No.24/2017-18 dated 26.12.2017 for the Assessment Year (A.Y.) 2015-16.
2 I.T.A. No.507/Viz/2018 Badisa Hanumantha Rao, Guntur
All the grounds of appeal are related to the addition of Rs.7,42,500/-
on account of chit contributions made by the assessee.
Brief facts of the case are that the assessee is engaged in the business
of IMFL. He has filed the return of income declaring total income of
Rs.3,75,960/- and the assessment was completed on total income of
Rs.22,00,836/- u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’). In
the assessment, the Assessing Officer (AO) estimated the income @5% on
net purchases put to sale and also made the addition of Rs.7,42,500/- as
income from other sources u/s 56 of the Act towards the contribution to
chits, since there was no source for the chit contribution from April to
December. The contributions made towards chits from April to December
was aggregated to Rs.7,42,500/- remained unexplained. The chit was
auctioned in December and the and prize money was used for the
payment of remaining instalments. Therefore, the AO disallowed chit
contribution made from April to December amounting to Rs.7,42,500/- and
added back to the income u/s 56 of the Act.
Aggrieved by the order of the AO, the assessee went on appeal before
the CIT(A) and requested for telescopic benefit of chit contributions made
3 I.T.A. No.507/Viz/2018 Badisa Hanumantha Rao, Guntur
from April to December out of the estimated income. Not being convinced,
the Ld.CIT(A) dismissed the appeal of the assessee and confirmed the
addition made by the AO.
Against the order of the Ld.CIT(A), the assessee has filed appeal
before this Tribunal. During the appeal hearing, the Ld.AR argued that the
assessee is in the business of IMFL and for the A.Y. 2015-16, the assessment
was completed u/s 143(3) by estimation of income and the AO has also
made the addition relating to the chit contribution from April to December
2016. The assessee has commenced the business from June 2014 onwards.
Since the income is estimated, no separate addition required to be made
towards the application of income. Therefore, requested to allow the chit
contribution made from June to December as deduction since, the income
estimated is more than the chit contribution made by the assessee.
On the other hand, the Ld.DR argued that the assessee has not
maintained the books of accounts and contributions were made out of the
business income. Therefore, argued that no telescopic benefit required to
be allowed. Hence, requested to uphold the order of the Ld.CIT(A) and
dismiss the appeal of the assessee.
4 I.T.A. No.507/Viz/2018 Badisa Hanumantha Rao, Guntur
We have heard both the parties and perused the material placed on
record. The assessee has started the business of IMFL from June 2014
onwards. On an average, the sales of the assessee was more than
Rs.20,00,000/- per month. The AO rejected the books of accounts and
estimated the income @5% which works out to Rs.1,00,000/- per month.
Though the AO had estimated the income, there was no finding given by the
AO or CIT(A) that the income on estimation was invested in any other
modes. There was no finding given by the AO that the resulted income out
of the estimation was invested in unexplained investments. Therefore, it is
presumed that the resultant income out of the estimation is available to the
assessee for investments/drawings. Therefore, we are of the considered
opinion that the assessee’s request for telescopic benefit of chit
installments from June to December required to be considered favourably,
after providing for the personal drawings and expenditure. Hence, we
consider telescopic benefit of 50% of the chit contribution from June to
December can be allowed reasonably out of the estimated income. For a
query from the bench, the Ld.DR also did not express any objection for
giving relief to the extent of 50% of the chit contribution from June to
December, accordingly, we direct the AO to allow the telescopic benefit out
5 I.T.A. No.507/Viz/2018 Badisa Hanumantha Rao, Guntur
of the estimated income to the extent of 50% of the chit contribution from June to December. Accordingly, the appeal of the assessee is partly allowed. 10. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 29th May 2019.
Sd/- sd/- (िी.दुगाा राि) (डड.एस. सुन्दर ससंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याययक सदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER ववशधखधऩटणम /Visakhapatnam ददनधंक /Dated : 29.05.2019 L.Rama, SPS आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. अऩीऱधथी / The Appellant - Badisa Hanumantha Rao, MIG No.1-223, Nallapadu Road, Guntur 2. प्रत्यधथी / The Respondent - Income Tax Officer, Ward-1(1), Guntur 3. प्रधान आयकर आयुक्त / The Pr.Commissioner of Income Tax, Guntur 4. आयकर आयुक्त(अिीि ) / The Commissioner of Income-Tax (Appeals)-1, Guntur 5. तिभागीय प्रतितनतध, आयकर अिीिीय अतधकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्डफ़ाईि / Guard file आदेशानुसार / BY ORDER // True Copy //
Sr. Private Secretary ITAT, Visakhapatnam