BADISA HANUMANTHA RAO,GUNTUR vs. THE INCOME TAX OFFICER, WARD-1(1), GUNTUR

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.

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on account of chit contributions made by the assessee.

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.

the CIT(A) and requested for telescopic benefit of chit contributions made

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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.

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.

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.

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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

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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