HEMAKUMAR REDDY POUTTIAKULA ,CHITTOOR vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), TIRUPATI

There is a delay of one day in filing of both the appeals by the assessee for which the assessee has filed condonation application along with affidavit explaining the reasons for such delay. After considering the contents of the condonation applications and after

Both these appeals were earlier dismissed by the Tribunal for want of prosecution. However, the Tribunal subsequently vide order dated 10.06.2022 in M.A.77 to 79/Hyd/2022 recalled its earlier orders. Hence, these are recalled matters.

First we take-up ITA No.1622/Hyd/2019 as the lead case.

Facts of the case, in brief, are that the assessee is an individual and derives income from other sources, liquor business and agricultural income. A search u/s. 132 of the I.T.Act was conducted in the case of Shri Pottiakula Munirathnam Reddy & Others on 15.12.2016 during the course of which the statements were recorded from the assessee. Subsequently, the case of the assessee was transferred to the concerned AO u/s. 127 of the Act. In response to notice u/s. 153A dated 04.09.2018, the assessee requested that the return of income filed on 25.09.2015 may be treated as a return in response to the notice u/s. 153A r.w.s. 153C of the I.T.Act. Thereafter, the AO issued notice u/s. 143(2) and 142(1) in response to which the AR of the assessee appeared from time to time and filed the requisite details.

During the course of assessment proceedings the AO noted that the assessee has shown gross receipt of Rs.1,78,87,500/- from sale of liquor and claimed an expenditure of Rs.1,74,21,500/- and thereby declaring net income of Rs.4,66,000/-, which gives a net profit rate of 2.61%. Since the assessee has not maintained any books of account nor the same were produced for verification either at the time of search

The AO further noted that assessee had shown agricultural income of Rs. 1,05,000/- for the impugned assessment year. However, the assessee has not claimed any agricultural expenses as deduction. He, therefore, asked the assessee to furnish details of crops grown, sold and bills raised in respect of the agriculture produce, the mode of receipt of the sale proceeds of agriculture produce, the parties to whom sold, proof of expenditure incurred, if any, etc. In absence of any satisfactory explanation given by the assessee and observing that assessee could not specify the nature of crops grown or the quantum of agricultural produce, the AO estimated such agricultural income at Rs.52,500/- being 50% of the income claimed to be net agricultural income. The AO accordingly made addition of Rs.52,500/- as income from non- agricultural activities and brought the same to tax. Thus, the AO determined the total income of the assessee at Rs.14,66,210/-.

In appeal, the ld.CIT(A) restricted the profit from liquor business at 5% of the turnover and sustained the addition made by the AO treating the agricultural income as “income from other sources”.

Aggrieved with such order of the Ld.CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds.

The assessee also raised the following additional ground.

However, the ld.counsel for the assessee at the time of hearing did not press the additional ground for which the ld. DR has no objection. Accordingly, the additional ground raised by the assessee is dismissed as not pressed.

So far as the first issue raised by the assessee challenging the estimation of profit @5% of the turnover is concerned, the ld.Counsel for the assessee submitted that such estimation of profit @5% is excessive. She relied on the decision of the Vishakapatnam Bench of the Tribunal in the case of Sri Karla

The ld. DR on the other hand heavily relied on the order of the ld.CIT(A). He submitted that assessee during the course of assessment proceedings as well as appellate proceedings before the ld.CIT(A) has admitted the profit rate at 5% of the turnover. Further, the assessee has not maintained any books of accounts nor produced the same either during the course of search proceedings or post search enquiries or during the course of assessment proceedings. Under these circumstances, the profit was rightly estimated at 5% of the turnover by the ld.CIT(A) and therefore, the assessee should not have any grievance.

We have heard the rival arguments made by both the sides, perused the orders of the AO and the ld.CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is engaged in liquor business and did not maintain any books of accounts nor produced any such books of accounts either during the course of search or post search enquiries or during the course of assessment proceedings for which the AO estimated the profit at 8% of the turnover. We find the assessee before the ld.CIT(A) has requested for restricting the profit @5% of the turnover vide its letter dated 20.11.2018. Under these circumstances, when the ld.CIT(A) estimated the profit @5% of the turnover, the same in our opinion is justified and the assessee now cannot plead to restrict profit at 3% of the turnover. So far as the decision in the case of Karla Srinivasa Rao(supra) is concerned, we find the AO in the instant case estimated the

The second issue raised by the assessee in the ground of appeal relates to the addition of Rs.52,500/- by treating the same as non agricultural income.

After hearing both the sides, we find the assessee has declared agricultural income of Rs.1,05,000/-. Since the assessee could not produce the details such as crops grown, sold and bills raised in respect of the agricultural produce, the mode of receipt of sale proceeds of the agricultural produce, the parties to whom sold and proof of expenditure incurred if any etc, the AO restricted the agricultural income to 50% of the income shown at Rs.1,05,000/- and accordingly, made addition of Rs.52,500/- treating the same as income from other sources. We find the ld.CIT(A) after admitting the additional evidences in the shape of certificate from VRO regarding agricultural income along with other documents and considering the remand report of the AO sustained the addition made by the AO. It is the submission of

We find admittedly the assessee, during the course of assessment proceedings, had not produced the requisite details as called for by the AO. However, before the ld.CIT(A), the assessee had filed the copy of certificate from the VRO regarding agricultural income along with other documents. Although, during the remand proceedings, the assessee did not appear, however, these documents were very much available with the AO and he could have conducted necessary enquiries. However, the AO was waiting for the assessee to appear and did not conduct any independent enquiry. Since, the agricultural income shown by the assessee is very less and since the assessee had filed a certificate from the VRO regarding the agricultural income along with other documents, therefore, considering the totality of the facts of the case including the smallness of the amount and this being an old matter, we direct the AO to restrict such disallowance to 10% of the income shown. In other words, the addition to the tune of Rs.10,500/- is sustained and the balance addition as deleted. The ground raised by the assessee on this issue is accordingly partly allowed.

In the result, the appeal by the assessee is partly allowed.

The grounds raised by the assessee are as under:-

Assessee also raised the additional ground which reads as under:-

The ld.counsel for the assessee did not press the additional ground for which the ld. DR has no objection. Accordingly, the additional ground raised by the assessee is dismissed.

So far as other grounds are concerned, we find these grounds are identical to the grounds raised in ITA No.1622/Hyd/2019. We have already decided the issue and the profit from liquor business at 5% as held by the ld.CIT(A) has been upheld and 10% of the agricultural income has been held to be “income from other

In the result, both the appeals filed by the assessee are partly allowed.