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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
Per Shri S.Balakrishnan, Accountant Member :
This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)]-1, Visakhapatnam in dated 20.11.2019, arising out of the order passed u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961 (in short ‘Act’) for the Assessment Year (A.Y.) 2007-08.
Brief facts of the case are that the assessee, an individual and proprietor of M/s Sarada Enterprises is carrying on the business of P.Sudarsan, Allipuram, Visakhapatnam supplying grocery items to Central Prison and GVMC, sale of vegetables, dry fish etc. The assessee filed his return of income, admitting total income of Rs.1,48,610/- for the A.Y.2007-08 on 31.10.2007. Based on the information received, that the assessee has purchased a property along with his wife Smt.Patnayakuni Satyavathi, during the F.Y.2006-07 for Rs.24 lakhs, which was not reported by the assessee in the return of income, the Ld.AO considered it as income escaping assessment and reopened the assessment u/s 148 of the Act and a notice dated 14.03.2014 was served on 30.03.2014. In response, the assessee provided the information called for by the Ld.AO. The Ld.AO, after verifying the same, estimated the income @5% on the turnover at Rs.2,21,098/- (5% on Rs 44,21,968) as income from other sources and passed assessment order u/s 143(3) r.w.s 147 of the Act on 24.02.2015. Subsequently, the Ld.Pr.Commissioner of Income Tax (PCIT)-1, Visakhapatnam, invoking powers u/s 263 of the Act, considered the order passed by the Ld.AO as erroneous in so far as prejudicial to the interest of the revenue, set aside the assessment order with a direction to the Ld.AO to examine the sources of cash for purchasing and registering the property and hence directed the AO to redo the assessment afresh as per law after providing reasonable opportunity of being heard to the P.Sudarsan, Allipuram, Visakhapatnam assessee. Consequent to the directions of the Ld.PCIT, the Ld.AO issued notice u/s 142(1) of the Act on 21.12.2017 along with final show cause notice, fixing the date of hearing on 27.12.2017. In response to the show cause notice, the assessee’s representative submitted the supporting evidences regarding supplying of grocery items and the sources for cash deposits. Considering the response, the Ld.AO not being convinced with the reply submitted, treated the unexplained cash deposits and cash sales aggregating to Rs.28,48,025/- by adding it to the total income of the assessee.
3. Aggrieved by the order of the Ld.AO, the assessee filed appeal before the CIT(A) and in response to the notices of the Ld.CIT(A), the assessee filed written submissions before the Ld.CIT(A), explaining the source of cash deposits and cash sales. The Ld.CIT(A) granted relief to the extent of Rs.6,50,000/- and treated the balance amount of Rs.21,98,025/- as unexplained source for cash deposits. Further, the Ld.CIT(A) also directed the AO to estimate the profit at 3.5% on the turnover.
4. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us and raised the following grounds : 1. That the learned Commissioner of Income-Tax (Appeals)-1 [for short CIT(a)-1] erred in dismissing the appellant’s contention that initiation of proceedings under section 147 of the Income Tax Act, 1961 (“the Act”) are bad in law and arbitrary.
P.Sudarsan, Allipuram, Visakhapatnam 1.1. It is the case of appellant that the original assessment was completed u/s 143(3) r.w.s. 147 of the Act. Learned Assessing Officer who had reassessed the income originally had verified all the documents resulting to the property and granted relief. On the same facts and circumstances, the assessment was reopened as directed by the Pr.CIT by another Assessing Officer without any new or fresh material de hors the records. Such reopening tantamount to ‘change of opinion’ on same set of facts of the case. Therefore, the change of opinion is bad in law in light of the judgement of Hon’ble High Court of Madras in re. CIT Vs. Pentafour Software Employees’ Welfare Association [2019) 418 ITR 427] followed by the judgement of Hon’ble Supreme Court in re CIT, Delhi vs. Kelvinator of India Ltd. reported in [2010) 320 ITR 561].
2. That the learned CIT(A)-1 not justified in granting partly relief though the appellant had adduced the evidences and explained the source of investment in the property.
That the learned CIT(A)-1 is not justified in directing for estimation of the profit @3.5%.
That the Learned CIT(A)-1 erred in not expressing his opinion on the charge of interest u/s 234B of the Act to the tune of Rs.12,61,749/- having regard to the facts of the case. The appellant denies its liability for payment of interest under section 234B of the Act.
Each one of the above grounds of appeal
is without prejudice to each other.
6. That the appellant craves leave to add / alter any of the grounds of appeal on or before the time of hearing. The Ld.AR argued that the assessee is a kirana dealer and the sales are made by receipt of cash. The Ld.AR further submitted that the assessee is engaged in the sale of vegetables, dry fish and grocery items P.Sudarsan, Allipuram, Visakhapatnam and is regular in filing of his return of income. The Ld.AR further submitted that out of the cash receipts from the sales, the assessee has purchased immovable property during the impugned assessment year. The Ld.AR further submitted that these details are verified by the Ld.AO during the original assessment. The Ld.AR submitted that on being satisfied, the Ld.AO estimated the business profit at 5% which was disputed by the assessee before the Ld CIT(A).
5. Per contra, the Ld.DR relied on the order of the Ld.CIT(A).
We have heard both the parties and perused the orders of the authorities below. It was not disputed by the revenue authorities that the assessee is a kirana merchant engaged in the cash sale of vegetables, dry fish in local markets and to some of the government organisations. It was also not disputed by the revenue that it is a normal trade practice that sales by kirana merchants are mostly by way of cash. Further, the revenue has also not disputed the entire sales that have been deposited in the bank account, which is considered as turnover of the assessee. From the records available before us, the Ld.AO in his original assessment u/s 143(3) r.w.s 147 of the Act has not made any addition for the cash deposits, except estimating the income due to non availability of books. In the absence of any discussion by the LD.AO in the assessment P.Sudarsan, Allipuram, Visakhapatnam order the Ld PCIT has rightly exercised his powers u/s 263 and has directed the AO to verify the cash deposits. We also find that the assessee has produced Shri M.Vijay Kumar Reddy and a statement u/s 132 was recorded from him regarding cash sales made to him. Merely because, the assessee has not produced the confirmation from other debtors, it does not mean that entire sales were not made to these debtors. Further, we are of the considered view that the nature of business of kirana merchants, who is engaged in the sale of vegetables, dry fish and groceries are mostly by way of cash, wherein, the Ld.AO has not disputed the fact of cash deposits in the assessee’s bank account. In the absence of any dispute regarding the cash deposits are arising out of the cash sales by the Ld.AO in the original assessment and in the absence of any contrary findings by the Ld.AO, cash deposits cannot be treated as unexplained. Further Smt. Satyavati, wife of the assessee is also a regular filer of income tax returns who has paid Rs 2,00,000/- to the assessee, as per findings of Ld.CIT(A). In view of the above discussions, considering peculiarity of the trade in which the assessee is engaged, we find that the assessee has source for the cash deposits made for the purpose of investment in residential property for Rs.24 lakhs. Additions cannot be made merely based on assumptions by P.Sudarsan, Allipuram, Visakhapatnam the revenue authorities. We, therefore allow this ground raised
by the assessee.
7. With respect to Ground No.3, we find that on overall consideration of the facts and circumstances, the Ld.CIT(A) has reasonably estimated the profit at 3.5% of the turnover and we are not inclined to intervene in the decision of the Ld.CIT(A) on this ground. Hence, this ground raised by the assessee is dismissed.
8. With respect to Ground No.4, regarding the payment of interest u/s 234B, which is consequential in nature and needs no separate adjudication.
9. Ground No.5 and 6 are general in nature and needs no adjudication.
10. In the result, the appeal of the assessee is partly allowed Order pronounced in the open court on 16th February, 2023.