SRINIVAS BALLA,VISAKHAPATNAM vs. ASSISTANT COMMISSIONER OF INCOME TAX , VISAKHAPATNAM

आयकर अपीलीयअधिकरण, विशाखापटणम SMC पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री दुव्िूरु आर एल रेड्डी, न्याययक सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER आयकर अपील सं./ (निर्धारण वर्ा / Assessment Year : 2017-18) Srinivas Balla, Vs. Asst. Commissioner of Visakhapatnam. Income Tax, Circle-2(1), PAN: AHIPB 8232 A Visakhapatnam. (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधर्थी की ओर से/ Assessee by : Sri C. Subrahmanyam, AR प्रत्यधर्थी की ओर से / Revenue by : Dr. Villuri Aparna, Sr. AR सुिवधई की तधरीख / Date of Hearing : 26/03/2024 घोर्णध की तधरीख/Date of : 19/04/2024 Pronouncement O R D E R PER DUVVURU RL REDDY, Judicial Member :

This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-12, Hyderabad in Appeal No. 10193/2019-20, dated 30/10/2023 arising out of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the Act] for the AY 2017-18. 2 2. At the outset, it is noticed from the appeal record that there is a delay of 11 days in filing the appeal before the Tribunal. Explaining the reasons for belated filing of the appeal, the Ld. AR drawn my attention to the affidavit filed by the assessee along with petition seeking for condonation of delay and read out the contents of the affidavit which is as under:

“1 ………..

3. In the light of the above, I respectfully submit that this delay in filing the appeal belatedly was not a result of any negligence or lack of diligence. I have attached the Doctor’s certificate in support of my petition. 4. …..

4. Briefly stated the facts of the case are that the assessee is an individual deriving income from trading in Indian Made Foreign Liquor [IMFL] filed his return of income for the AY 2017-18 on 17/11/2017 admitting a total loss of Rs. 21,61,484/-. The case was selected for scrutiny under CASS. Accordingly, notice U/s. 143(2) of the Act was issued on 9/8/2018 through ITBA. Subsequently, the case was transferred to the office of ACIT, Circle-2(1) with reference to the order U/s. 127 of the Act vide proceedings of the Ld. Pr. CIT-1, Visakhapatnam. As there is a change in incumbent, a fresh notice U/s. 129 of the Act was issued to the assessee on 11/11/2019 and accordingly notice U/s. 142(1) of the Act was issued to the assessee through ITBA on different dates. During the assessment proceedings, on verification of the assesee’s Trading, P & L Account and the Balance Sheet filed by the assessee, the Ld. AO observed that the assessee has taken cost of sales at 27.75% of the purchases which is very high in this line of business. The Ld. AO also noticed that the assessee has undervalued the closing stock as per the balance sheet. Further, the assessee has debited an amount of Rs. 5,13,419/- towards 4 interest on OD in the P & L Account which is not accepted by the Ld. AO. Further, the Ld. AO also observed that the asessee has claimed indirect expenses at higher values in comparison to his turnover. It is also observed by the Ld. AO that the Trading, P & L Account and Balance Sheet filed along with form 3CD report are not certified by the Chartered Accountant which is mandatory under section 44AB of the Act. In view of the above, the Ld. AO rejected the assessee’s books of account and resorted to estimate the income of the assessee. While estimating the income of the assessee, the Ld. AO relied on various decisions of the Benches of the Tribunal at Hyderabad and Visakhapatnam and came to a conclusion that the assessee’s profit at the rate of 5% of purchases of the net sales or purchases net of all deduction is reasonable and accordingly the net profit from liquior business @ 5% of net sales made at Rs. 2,27,41,803/- was worked to Rs. 11,37,090/- and added the same to the total income of the assessee under the head business income. Further, the Ld. AO also observed that the assessee has deposited cash to the extent of Rs. 11,36,000/- in his Union Bank of India bank accountants during demonetization period. With respect to the cash deposits, after considering the submissions of the assessee and on verification of the assessee’s books of account etc., the Ld. AO treated Rs. 1.50,000/- as 5 explained and the balance of Rs. 9,86,000/- [Rs. 11,36,000 – Rs. 1,50,000] is treated as unexplained money and made addition U/s. 69A of the Act. Accordingly, the Ld. AO determined the assessed income at Rs. 21,23,090/- and passed the order U/s. 143(3) of the Act, dated 20/12/2019. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, none appeared before the Ld. CIT(A) to represent the assessee’s case and therefore the Ld. CIT(A) dismissed the appeal of the assessee and passed ex-parte order. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

“1. That under the facts and circumstances of the case, the orders passed U/s. 143(3) of the Act and upheld by the Ld. CIT(A) is contrary to the provisions of law and facts of the case.

2. Since the present appeal is not resulting out of search U/s. 132 of the Act or survey U/s. 133A of the Act, the Ld. CIT(A) is not the authority empowered to pass the impugned order.

3. The reasons cited by the AL in rejecting the books of accounts, upheld by the Ld. CIT(A) are not valid reasons warranting the rejection of books of accounts, therefore, in the absence of the valid reasons, the rejection of books of account is not correct, consequently the estimation of profit fails.

5. The Ld. CIT(A) is not correct in relying on the same books of accounts while upholding the addition with regards to SBN 6 deposits in the bank account, U/s. 69A of the Act when the same books of accounts were rejected and income from business was estimated.

6. On the other hand, the Ld. DR vehemently opposed to the submissions of the Ld. AR and argued that several opportunities had been provided to the assessee however, on the given dates of hearing, neither the assessee appeared before the Ld. CIT(A) nor made any written submissions before the Ld. CIT (A). It was further submitted that the Ld. CIT (A) had no other option but to pass ex-parte order based on the materials available on record. Hence, it was pleaded that the order passed by the Ld. CIT(A) does not call for any interference.