E.NAVEEN KUMAR GOUD, VIKARABAD,HYDERABAD vs. ITO, WARD-1, VIKARABAD, VIKARABAD

The learned Commissioner of Income-Tax (Appeals) erred in not deciding the appeal on merits.

The learned Commissioner of Income-Tax (Appeals) ought to have considered that the Assessing officer is not justified in estimating income at 5% of the cost of purchase of liquor.

The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing officer in treating the investment of Rs.16,68,SOO/- as unexplained and further erred in treating the same as income of the appellant.

The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing officer in treating the credits in bank account with Indian Bank of Rs.7,ll,048/- as unexplained and further erred in treating the same as income of the appellant.

The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing officer in treating the credits into bank account with ICICI Bank of Rs.3,24,OOO/- as unexplained and further erred in treating the same as income of the appellant”.

Brief facts of the case are that the assessee, an individual, carrying on the business of running a wine shop, filed his return of income for the A.Y 2011-12, declaring income of Rs.5,18,470. During the assessment proceedings u/s 143(3) of the Act, the assessee was asked to furnish the bills/vouchers for sales/purchases and the expenses debited to the P&L A/c along with the books of account maintained. The assessee replied that it is not possible to maintain sale bills/vouchers in this line of activity since all the customers come during 6.00 pm to 10.30 pm in large numbers and will pressurize to deliver the items demanded and do not wait for issuance of sale invoices. Taking the same into consideration, the AO observed that the books of account maintained by the assessee are not reliable and thus, he estimated the assessee’s income at 5% of the goods put to sale and accordingly made the addition of Rs.9,78,792. Further, the AO also observed that the assessee debited an amount of Rs.41,70,000 as license fee and it was explained that the same is paid in installments and the first installment is Rs.18,55,000. The AO observed that the assessee has also paid Rs.3.00 lakhs initially for lifting of stock and the assessee was required to explain the sources for the sum of Rs.21,55,000. The assessee could not furnish any evidence to the tune of Rs.16,68,500. As far as Rs.4,86,500 is concerned, he explained that a sum of Rs.4,86,500 is from agricultural income and has produced the pattadar pass book of his father to this extent. The AO therefore, accepted the source to the tune of Rs.4,86,500 and added a sum of Rs.16,68,500 u/s 69 of the Act as unexplained investment. The AO also found that there were credits in Indian Bank to the tune of Rs.7,11,048 and in ICICI Bank to the tune of Rs.3,24,000 for which the assessee could not offer any explanation. Therefore, he brought it to tax.

Aggrieved, the assessee preferred an appeal before the CIT (A) but failed to either appear before the CIT (A) or produce any evidence. Thus, the CIT (A) confirmed the additions made by the AO and the assessee is in second appeal before us.

The learned Counsel for the assessee submitted that the assessee was prevented by reasonable cause for not appearing before the CIT (A) and prayed for remittance of the appeal to the file of the CIT (A) to explain the sources for investment as well as deposits into the Bank A/cs.

Having regard to the rival contentions and the material on record and also having regard to the order of the CIT (A), we find that the CIT (A) has not discussed the appeal on merits but has dismissed the appeal mainly for non-appearance of the assessee, which she is not permitted under the law to do. Therefore, we deem it fit and proper to remand the issue to the file of the CIT (A) for de novo consideration on merits and the assessee is directed to produce all the relevant material before the CIT (A) and cooperate with the CIT (A) for early disposal of the appeal.

In the result, assessee’s appeal is treated as allowed for statistical purposes. Order pronounced in the Open Court on 28th March, 2018.