GARLAPATI JAGAN MOHANA RAO,MACHILIPATNAM vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), VIJAYAWADA

The assessee has raised the following grounds of appeal in his appeal:

Brief facts of the case are that the assessee is a paddy commission agent and also a commission agent for lorry transport business, and derives income from commission. On 16.03.2014 cash amounting to Rs 48 lakhs was seized from the assessee and since the assessee was unable to explain the 3 source, agreed to admit it as income for the AY 2014-15. Subsequently cash amounting to Rs.31,14,000/- was seized from the assessee by the Police on 30.03.2015 and handed over to the office of the DDIT (Inv.), Unit-11(1), Hyderabad. The cash received from police was remitted in to P.D Account of CIT(Central), Hyderabad on 8.4.2015. Search proceedings were initiated and notice U/s. 153A was issued on 2/8/2016 for the AY 2014-15 and duly served on the assessee. In response to the notice U/s. 153A, the assessee filed his return of income on 21/12/2016 admitting a total income of Rs. 4,11,510/- and agricultural income of Rs.1,50,000/-. Subsequently, statutory notices U/s. 143(2) and 142(1) are issued to the assessee. In response to the said notices, assessee’s representative appeared and filed the details called for by the AO. The assessee explained that the amount was received from Rice millers and payable to farmers, net of commission to assessee. The AO after considering the submissions made an addition towards unproved sundry creditors of Rs. 77,53,580/- and unexplained income / expenditure for Rs. 49,33,570/-. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the CIT(A). Before the CIT(A), the assessee’s representative pleaded that the assessee does not maintain any books of accounts and has disclosed

The Ld. AR vehemently argued that since the income is estimated by the Ld. AO, the addition of trade creditors should not be done based on the books of accounts. The Ld. AR also relied on the following case laws:

Per contra, the Ld. DR placed reliance on the orders of the authorities below.

We have heard the rival submissions and perused the materials available on record and orders of the authorities below. Admitted facts are that the assessee has filed his tax returns on presumptive basis and has admitted that no books of account has been maintained by him. The assessee admitted the same in his sworn statement recorded U/s. 132(4) of the Act in response to question No.10 which is reproduced below:

The Ld. AO also has not disputed that the cash seized were the amounts that have been received from trade creditors (Rice Millers). The Assessing Officer has also accepted the return of income filed U/s. 44AD of the Act. It is also observed from the order of the AO that the AO has not examined the books of accounts. In this scenario placing reliance on the statement of affairs submitted by the assessee with respect to trade creditors is not correct. In the case of CIT vs. Bahubali Neminath Muttin (supra) it has been held that when the income is estimated no addition would be made with respect to trade creditors. The ratio laid down in this judgment is extracted below:

Respectfully following the ratio laid down in the case referred above, we hereby delete the addition of Rs. 29,53,580/- made by the CIT(A).

Since the Ground No.2 is adjudicated, the legal issue raised in Grounds No. 3 to 6 become infructuous. Grounds No.1 and 7 are general in nature and need not be adjudicated.

In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 30th May, 2022. (दुव्िूरु आर.एऱ रेड्डी) (एस बाऱाकृष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER Dated : 30.05.2022 OKK - SPS

Hyderabad. पवभधगीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, पवशधखधऩटणम/ DR, ITAT,

Visakhapatnam गधर्ा फ़धईऱ / Guard file 6. आदेशधनुसधर / BY ORDER