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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
The captioned appeals are filed by the Revenue against the order of the Ld. CIT (Appeals), Visakhapatnam-3 in DIN & Order No. ITBA/APL/S/250/2023-24/1052589571(1), ITBA/APL/S/250/2023- 24/1052589825(1); ITBA/APL/S/250/2023-24/1052591413(1); ITBA/APL/S/250/2023-24/1052591834(1); ITBA/APL/S/250/2023- 24/1052592275(1), dated 4/5/2023 for the AYs 2015-16 to 2019-20 respectively. Since the Revenue has raised the common issues in all these appeals, they are clubbed, heard together and disposed off in this consolidated order. The assessee has filed cross objections. Considering the similarity of the issues involved, we shall take up (AY: 2015-16) as a lead appeal.
2. This appeal filed by the Revenue against the order of the Ld. CIT(A), Visakhapatnam-3 arising out of the order passed U/s. 153A of the Income Tax Act (the Act) in DIN & Order No ITBA/AST/S/153A/2021-22/1041719889(1), dated 27/03/2022 for the AY 2015-16.
Brief facts of the case are that the assessee is a Private Limited Company deriving income from Aqua Culture filed its return of income on 29/09/2015 declaring total income of Rs. 21,56,660/-. Subsequently, a search and seizure operation U/s. 132 of the Act was conducted on 28/01/2021 in the case of the assessee. Since the impugned assessment year falls under the block of six years a notice U/s. 153A of the Act was issued. In response, the assessee filed its return of income on 29/11/2021 admitting total income of Rs. 1,29,56,660/- by including an additional income of Rs. 1,08,00,000/-. Subsequently, the Ld. AO issued notices U/s. 143(2) and 142(1) of the Act. In response the assessee furnished the information as called for by the Ld. AO from time to time. During the search operations, certain amount of cash was seized from the lockers. Further, the Ld. AO also observed that the seized material contains hand written books which contains the details of date wise receipts and payments pertaining to the entities of Usha Bala Group. The Ld. AO requested Sri VV Balakrishna Rao to explain the nature of transactions. In response, Mr. VV Balakrishna Rao stated that the said hand written books were rough version of daily cash receipts and payments which may contain some duplicate
4 transactions, non-material transactions and some of the transactions are recorded in the regular books of accounts. The Ld. AO rejected the explanation of Sr. VV Balakrishna Rao and concluded that the daily cash receipts and payments are systematically entered and cannot be considered as a rough version. The Ld. AO further also observed that the assessee has indulged in huge transactions in cash mode which is possible only by using hawala mode of transfer of cash. It was also submitted before the Ld. AO that the assessee admitted unaccounted cash of Rs. 30 Crs is also recorded as payments in the hand written books which further indicate that the said hand written books are not rough version as stated by Sri VV Balakrishna Rao. The Ld. AO further observed that Sri VV Balakrishna Rao had declared additional income of Rs. 40 Crs based on the transactions present in the said hand written books. The Ld. AO also reproduced entity wise admission of undisclosed income based on the transactions present in the said hand written books as detailed in the assessment order. The Ld. AO further observed that most of these receipts and payments are related to Aqua Culture entities of Usha Bala Group and are not recorded in the regular books of account. The Ld. AO also further observed that a part of money has been received in cash
5 and partly through banking channels. The Ld. AO further also noticed that even the expenditure incurred in cash for child fish purchase, feed purchase and medicine purchase are also not recorded in the books of account. The Ld. AO also stated that there are three entities dealing with Aqua Culture business of Usha Bala Group viz., Usha Bala Agro Farms (P) Ltd, UBK Hotels & Resorts (P) Ltd and VBK Exim (P) Ltd. The Ld. AO also tabulated the land holdings of the above entities as per the submissions of Sri VV Balakrishna Rao vide answer to Q.No. 18 of the statement recorded on 29/07/2021 as under:
S. Entity Own Leased Total No. (Acres) (Acres) (Acres) 1. Usha Bala Agro Farms 130 110 240 (P) Ltd 2. UBK Hotels & Resorts _ 65 65 (P) Ltd 3. VBK Exim (P) Ltd 52 52 Total 130 227 357 The Ld. AO further observed that since the Aqua Culture activity being operated in 357 Acres, the exact entity of each transaction could not be identified by Sri VV Balakrishna Rao. Therefore, the Ld. AO based on the seized material vide Annexures UPF/RP/EL/41, 74, 81, 82, 90 to 155 observed that there are various types of unaccounted receipts and payments including Aqua culture pertaining to the entities Usha Bala Agro Farms Pvt Ltd (UBAFPL), UBK Hotels & Resorts Pvt Ltd (UBKHRPL) and VBK Exim Pvt Ltd (VBKEPL). The details of the receipts and payments for the FY 2014-15 relevant to the AY 2015-16 are segregated in respect of UBAF & UBKH & VBKE as under:
Transaction Receipts Transaction Type Payments Type Fish Sales 47502079 Payments 4206417 Lease Income 20615744 Feed Purchase 9978839 Receipts 7708022 Land Purchase in ITR 0 Lease Income & 5531790 Labour Payments 7047371 Fish Sales Bogus Payments 792910 Lease Payment 1325929 in ITR Scrap Sales 243375 Payments into Bank 2000000 Child Fish Purchase 0 Land purchase not in 0 ITR Medicine Purchases 2665278 Salary Payment 20000 Transportation 70990 Charges Sand Filling 0 Electricity Bill 62123 Donations 0 Total 82393920 Total 27376947 The Ld AO thus worked out the unaccounted income at Rs. 5,50,16,973/- (ie total receipts – total payments) as above. The Ld AO then bifurcated the unaccounted income to Usha Bala Agro Farms Pvt Ltd (UBAFPL), UBK Hotels & Resorts Pvt Ltd (UBKHRPL) and VBK Exim Pvt Ltd (VBKEPL), in the ratio of their turnover as discussed above, since no separate entity wise
7 transactions were recorded in the said hand written books. The entity wise bifurcation of undisclosed income for the AY 2015-16 is as below:
FY AY UBAFPL UBKHRPL VBKEPL Total 2014-15 2015-16 45592824 3940808 5483342 55016973 Thus, the undisclosed income of M/s. Usha Bala Agro Farms Pvt Ltd consequent to the search is worked out to (from the above table) for the AY 2015-16 as under:
FY Undisclosed income worked out in Rs. 2014-15 45592824 The Ld. AO also noticed that this unaccounted income generated by various entities was used by the assessee as on money component in purchase of properties like land, building and Gold. The Ld. AO therefore issued a show cause notice to the assessee as to why the difference between the unaccounted income worked on the basis of incriminating material seized of Rs. 4,55,92,824/- and Rs. 1,08,00,000/- admitted in the return of income filed U/s. 153A of the Act amounting to Rs. 3,47,92,824/- should not be added to the total income for the year under consideration as undisclosed income as per the seized hand written books. In response to the show cause notice, the assessee referred to the statement recorded on 18/08/2021 and 8 submitted that maintaining regular books of account is not possible in Aqua Culture because it is a non-organized sector.
The assessee further also submitted that the Ld. AO has arrived at the income on estimation on the lands given on own culture and leased rental receipts could not be accepted since the activities of pisci culture is not so profitable. The assessee also further submitted before the Ld. AO that the income on fish culture per acre would be between Rs. 30,000/- to Rs. 35,000/- on own lands and Rs. 20,000/- to Rs. 25,000/- from leased lands. The assessee also submitted that the bund area should be excluded while computing the income from Aqua Culture on acre basis. The Ld. AO observed that the above submissions were not supported by cogent evidences and hence rejected the objections raised by the assessee. The Ld. AO therefore proceeded to add an amount of Rs.3,47,92,824/- to the total income of the assessee as undisclosed income. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A)-3, Visakhapatnam.
4. On appeal, the Ld. CIT(A), considering the submissions of the assessee’s Representative, found that no separate entity wise transactions are recorded in the said hand written books. The Ld CIT also found that the basis for working out of the undisclosed income of the assessee for the year under consideration lacks clarity by the Ld. AO. Further, the Ld. CIT(A), also observed that there is no corroborative evidence on record to consider the contentions of the Ld. AO. The Ld. CIT(A) therefore placed reliance on the Central Board of Direct Taxes [CBDT] Instruction No. 8/2014, dated 27/10/2014 and by relying on the Hon’ble Jurisdictional ITAT decision in the case of DCIT, Circle-2(1), Vijayawada vs. Krishna Fisheries Vijayawada in to 330/Vizag/2015 for AY 2006-07 to 2011-12 and found that the assessee has admitted an income of Rs. 74,458/- (average per acre) which is above the estimate made by jurisdictional Bench in the case of Krishna Fisheries Vijayawada (supra). The Ld. CIT(A) therefore deleted the additions made by the Ld. AO. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us by raising the following grounds of appeal:
“1. The order of the Ld. CIT (A) is erroneous on grounds of facts and law.
On the facts and circumstances of case and in law, the Ld. CIT(A) is not correct in relying upon the Board’s Circular dated 19/10/1993 as the same relates to the Asst. Year 1993-94 for which an amount of Rs. 4000/- per acre water spread area was prescribed which was reasonable during that time. The said Circular also considered genuine difficulties of the fish farmers particularly with reference to the interior areas lacking banking facilities, availability of water, lack of knowledge of accounting, the vagaries of nature etc.,
10 while deciding the above estimation which will not have any relevance when incriminating material was seized evidencing undisclosed income?
3. The Ld. CIT(A) has erred in overlooking the fact that determination of the assessee’s income from Aqua business solely on estimation basis will not be applicable since the Board’s Circular as also the decision in the case of M/s. Krishna Fisheries (ITA No. 305 of 330/Vizag/2015) did not have the situation of existence of incriminating material evidencing undisclosed income from aqua business in addition to the facts of non-maintenance of books of account.
The Ld. CIT (A) is not correct in placing reliance on the decision of the jurisdiction ITAT in the case of M/s. Krishna Fisheries as the facts of the said case are different from that of the instant case.
5. Any other ground that may be raised with the permission of Bench.”
Grounds No.1 and 5 are general in nature and therefore they need no adjudication.
Grounds No.2, 3 & 4 are with respect to deletion of addition by the Ld. CIT (A) by relying on the Board Instruction and the decision of the jurisdictional ITAT Bench in the case of Krishna Fisheries Vijayawada (supra). The Ld. DR at the outset submitted that in the case relied on by the Ld. CIT(A) in the case of Krishna Fisheries Vijayawada (supra) there is no incriminating material. However, in the instant case, there is incriminating material which has been relied on by the Ld. AO while making the 11 additions. The Ld. AR therefore pleaded that the order of the Ld.
AO be upheld.
Per contra, the Ld. Authorized Representative referred to the sworn statement of the Managing Director wherein he has clearly mentioned that the rough cash books prepared by the Accountant cannot be relied upon. Further, the Ld. AR submitted that with respect to the receipts and payments prepared by the Ld. AO based on the seized material, there is no authenticity of the income receipts extracted by the Ld. AO. Further, the Ld. AR also argued that the Ld. AO also failed to identify the undisclosed income entity wise and has merely estimated based on the accounted turnover. Further, the Ld. AR also submitted that the assessee has declared Rs. 30 Crs in Income Disclosure Scheme, 2016 [IDS-2016] and Rs. 40 Crs for the group companies during the search and seizure operations. The Ld. AR further submitted that Sri VV Balakrishna Rao in his sworn statement on 18/8/2021 has clearly explained the difficulty in maintaining the regular books of account in this kind of business as it (Aqua Culture) is a non-organized sector. The Ld. AR further submitted that the assessee has admitted an income of Rs. 1,08,00,000/- in addition to the original return of income filed U/s. 139(1) of the Act. The average income admitted per acre is around Rs. 74,458/- which is more than the estimate of income in the case of Krishna Fisheries Vijayawada (supra). The Ld. AR also further submitted the following table:
USHABALA AGRO FARMS PRIVATE LIMITED Calculation of per acre income admitted after deducting bund portion
AY Income as Admitted Total income Total Per acre per section income in acreage income 139(1) 153 returns cultivated 2015-16 21,56,660 1,08,00,000 1,29,56,660 168 77,123 2016-17 16,82,368 1,08,00,000 1,24,82,368 168 74,300 2017-18 15,35,102 1,08,00,000 1,23,35,102 168 73,423 2018-19 15,88,732 1,08,00,000 1,23,88,732 168 73,742 2019-20 15,16,588 1,08,00,000 1,23,16,588 168 73,313
Calculation of per Acre income admitted without deducting bunds portion
AY Income as Admitted Total income Total Per acre per section income in acreage income 139(1) 153 returns cultivated 2015-16 21,56,660 1,08,00,000 1,29,56,660 168 53,986 2016-17 16,82,368 1,08,00,000 1,24,82,368 168 52,010 2017-18 15,35,102 1,08,00,000 1,23,35,102 168 51,396 2018-19 15,88,732 1,08,00,000 1,23,88,732 168 51,620 2019-20 15,16,588 1,08,00,000 1,23,16,588 168 51,319
Calculation of per Acre income as per AO after deducting bunds portion
AY Addition Admitted Total income Total Per acre made as per income in acreage income the AO 153 returns cultivated 2015-16 2,74,72,850 2,74,72,850 168 1,63,529 2016-17 1,59,43,297 1,59,43,297 168 94,901 2017-18 2,40,86,862 2,40,86,862 168 1,43,374 2018-19 2,29,14,122 2,29,14,122 168 1,36,394 2019-20 2,79,06,292 2,79,06,292 168 1,66,109
Calculation of per Acre income as per AO without deducting bunds portion
AY Addition Admitted Total income Total Per acre made as per income in acreage income the AO 153 returns cultivated 2015-16 2,74,72,850 2,74,72,850 240 1,14,470 2016-17 1,59,43,297 1,59,43,297 240 66,430 2017-18 2,40,86,862 2,40,86,862 240 1,00,362 2018-19 2,29,14,122 2,29,14,122 240 95,476 2019-20 2,79,06,292 2,79,06,292 240 1,16,276 The Ld. AR therefore pleaded that since the assessee has declared higher income, the order of the Ld. CIT(A) be upheld.
We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has offered an additional income of Rs. 1,08,00,000/- while filing return of income U/s. 153A of the Act which translates to Rs. 74,458/- per Acre. Based on the land holdings of the assessee with respect to Aqua Culture it is noticed that the assessee has admitted an average income of Rs. 74,458/- as detailed in its submissions.
Further, the Ld. AO has merely relied on the seized material but has not corroborated with the additional evidence while calculating the revenue per acre estimated for the business of Aqua Culture by the assessee and its group companies. It is also noticed that Sri VV Balakrishna Rao in his sworn statement has stated that it is a rough version of daily cash receipts and 14 payments which also contains some duplicate entries. Further, it is also an admitted fact that maintaining books of accounts in this line of business (Aqua Culture) which is a non-organized sector, which is further evident from the fact that the CBDT has issued Instruction No. 8/2014, dated 17/10/2014 that the income with respect to Fish Culture in Andhra Pradesh may be decided by committee comprising of Two Commissioners, Two Representatives of Farmer’s Association to determine the income that may be estimated for that Financial Year. Therefore, in these given circumstances, we also find that the Ld. AO has estimated the income based on the net receipts calculated as per the seized material and by apportioning it on the basis of the accounted turnover of three entities dealing with Aqua Culture business of Usha Bala Group viz., Usha Bala Agro Farms (P) Ltd, UBK Hotels & Resorts (P) Ltd and VBK Exim (P) Ltd. The Ld. AO has rejected the reply to the show cause notice without assigning proper reasons by merely relying on the estimation without any justification. Further, we also find that the Ld. AO has not given any break-up of the income by deducting the bund area and also the income from Fish Culture with respect to the leased lands.
We therefore find that the Ld.CIT (A) while discussing the issue at length in his order has considered the CBDT Instruction No.
15 8/2014 (supra) and also the decision of the jurisdictional Bench of ITAT in the case of Krishna Fisheries Vijayawada (supra) and has concluded that the additional income of Rs. 74,458/- per Acre disclosed by the assessee is reasonable and in accordance guidelines issued by the CBDT and is also above the amount of Rs. 25,000/- to Rs. 35,000/- per Acre fixed by the decision of this Bench in the case of Krishna Fisheries Viajaywada (supra).
We also find from the submissions made by the Ld. AR that if the addition is made as per the Ld. AO, the income per acre on an average works out to Rs. 1,20,000/- which is practically impossible in the opinion of the assessee in this trade. From the facts discussed as above, we are of the considered view that since the assessee has offered an amount of Rs. 74,458/-per Acre (net of Bund area), and which is more than the rate per Acre fixed by the jurisdictional Bench, the Ld. CIT(A) has rightly held and deleted the addition made without any justification / corroborative evidences, by the Ld. AO, and therefore we find no infirmity in the order of the Ld. CIT(A) and thereby dismiss the grounds raised by the Revenue.
In the result, appeal of the Revenue is dismissed. , 205, 206 & 207/Viz/2023 Assessment Years: 2016-17 to 2019-20
These appeals are filed by the Revenue against the orders of the Ld. CIT(A), Visakhapatnam-3 arising out of the orders passed U/s. 153A of the Act.
In all these appeals for the AYs 2016-17 to 2019-20, the Revenue has raised identical grounds to that of the grounds of appeal
for the AY 2015-16. Therefore, our decision given on the issues raised by the Revenue in its appeal for the AY 2015-16 which is adjudicated in the foregoing paragraphs of this order in Revenue in its appeals for the AYs 2016-17 to 2019-
20. Accordingly, grounds raised by the Revenue are dismissed.
In the result, appeals of the Revenue for the AYs 2016-17 to 2019-20 are dismissed.
C.O. Nos. 23, 24, 25, 26 & 27/Viz/2023 (In आयकर अपील सं./ 204, 205, 206 & 207/Viz/2023) (�नधा�रण वष� / Assessment Years: 2015-16 to 2019-20)
All these Cross Objections are raised by the assessee. Out of the 07 Grounds of Cross Objections raised by the assessee for 17 the AYs 2015-16 to 2019-20, Ground No.7 is general in nature and the Grounds No. 1 to 6 are fully supportive in nature to the decision of the Ld. CIT(A). Since the Grounds raised by the Revenue in its appeals for the AY 2015-16 to 2019-20 are dismissed and held in favour of the assessee, the adjudication of these grounds of Cross Objections raised by the assessee becomes infructuous. Thus, all the Cross Objections raised by the assessee are disposed off.
Ex-consequenti, the Revenue’s appeals for the AYs 2015-16 to 2019-20 are dismissed and the Cross Objections raised by the assessee are disposed off as mentioned herein above.
Pronounced in the open Court on 19th October, 2023.