Sri K Seetharami Reddy., Guntur v. The ACIT, Circle-1(1)., Guntur

ITA 271/VIZ/2008 | 2004-2005
Pronouncement Date: 19-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 27125314 RSA 2008
Assessee PAN AKAPK5259K
Bench Visakhapatnam
Appeal Number ITA 271/VIZ/2008
Duration Of Justice 2 year(s) 5 day(s)
Appellant Sri K Seetharami Reddy., Guntur
Respondent The ACIT, Circle-1(1)., Guntur
Appeal Type Income Tax Appeal
Pronouncement Date 19-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 19-05-2010
Date Of Final Hearing 30-03-2010
Next Hearing Date 30-03-2010
Assessment Year 2004-2005
Appeal Filed On 14-05-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SRI B.R. BASKARAN ACCOUNTANT MEMBER I.T.A. NO 271/VIZAG/2008 ASSESSMENT YEAR : 2004-05 K SEETHARAMI REDDY GUNTUR VS. ACIT CIRCLE-1(1) GUNTUR (APPELLANT) (RESPONDENT) PAN NO. : AKAPK5259K APPELLANT BY : SHRI GVN HARI. RESPONDENT BY : SHRI GSS GOPINATH O R D E R PER SHRI B.R. BASKARAN ACCOUNTANT MEMBER : THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.2.2008 PASSED BY LD CIT(A) GUNTUR AND IT RELATES TO THE A SSESSMENT YEAR 2004-05. 2. THE ADDITION MADE ON ACCOUNT OF DIFFERENCE I N STOCK HAVING BEEN PARTIALLY ALLOWED BY LD CIT(A) THE ASSESSEE HAS FILED THIS A PPEAL SEEKING FULL RELIEF. 3. THE FACTS RELATING TO THE ISSUE ARE DISCUSSE D IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASING COTTON KAPPAS AND GINNING IT TO OBTAIN COTTON LINT AND COTTON SEED. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 29.1.2004. TH E AVERAGE YIELD OF COTTON LINT AND COTTON SEEDS ON GINNING WAS NOTICED TO BE AT 32 .50% AND 66.50% RESPECTIVELY. THE SURVEY TEAM TOOK PHYSICAL STOCK OF COTTON KAPPAS COTTON LINT AND COTTON SEEDS AND APPLYING THE PERCENTAGES NOTIC ED ABOVE IT WAS NOTICED THAT THERE WAS EXCESS SALE OF COTTON LINT TO THE TU NE OF 329.49 QUINTALS WHICH 2 WAS EQUIVALENT TO 1011.33 QUINTALS OF COTTON. THE SAID COTTON PURCHASE OF 1011.33 QUINTALS WAS TREATED AS THE PURCHASE OUTSID E THE BOOKS OF ACCOUNT AND ACCORDINGLY A SUM OF RS.24 51 675/- BEING THE COST EQUIVALENT OF 1011.33 QUINTALS WAS ADDED TO THE TOTAL INCOME. IN THE AP PEAL PROCEEDINGS LD CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE THAT THERE WERE CERTAIN PURCHASES NOT RECORDED IN THE BOOKS OF ACCOUNT AND ACCORDINGLY GA VE CREDIT FOR 440 QUINTALS AND ACCORDINGLY THE LD CIT(A) ARRIVED AT THE QUANTI TY OF UNACCOUNTED PURCHASE AT 523 QUINTALS AND ACCORDINGLY RESTRICTED THE ADDITIO N TO RS.12 82 396/-. 3.1 DURING THE COURSE OF SURVEY THE QUANTITY R ECONCILIATION WAS DONE IN THE CASE OF COTTON SEEDS ALSO BY TAKING THE YIELD OF C OTTON SEEDS AT 66.55% OF COTTON KAPPAS PROCESSED. IT WAS NOTICED THERE WAS UNACCOU NTED SALE OF COTTON SEEDS TO THE TUNE OF 1017.31 QUINTALS AND ACCORDINGLY A SUM OF RS.9 21 682/- WAS ADDED ON ACCOUNT OF THIS DIFFERENCE. THE SAID ADDITION WA S CONFIRMED BY LD CIT(A). 4. ACCORDING TO LD AR THE BOOKS OF ACCOUNT WER E INCOMPLETE ON THE DATE OF SURVEY AND THE AO HAS PREPARED THE QUANTITY RECONCI LIATION STATEMENT IN THE MIDDLE OF THE YEAR THAT TOO ON THE BASIS OF CERTAI N ASSUMPTIONS. FOR EXAMPLE THE AO HAS ASSUMED AN EVEN LEVEL OF YIELD OF COTTON LINT AND COTTON SEEDS WHILE IN REALITY THE YIELD MAY NOT BE THE EVEN ALWAYS I N VIEW OF SEASONAL EFFECT AND THE DIFFERENCE IN THE QUALITY OF COTTON. IN ANY C ASE AT THE YEAR END THE ASSESSEE HAS PREPARED THE QUANTITY STATEMENT AND TH E SAME WAS SUBMITTED TO THE AO ALONG WITH THE TAX AUDIT REPORT. HE FURTHER SUBMITTED THAT THE ADDITION U/S 69C CAN BE MADE ONLY IF ANY MATERIAL SUGGESTING THE INCURRING OF ANY EXPENDITURE IS FOUND WHERE AS IN THE CASE OF THE A SSESSEE THE AO HAS ONLY PRESUMED THE PURCHASE OF COTTON OUTSIDE THE BOOKS A ND ACCORDINGLY THE ADDITION WAS MADE ON PRESUMPTIONS. IN THE ALTERNATIVE ACCO RDING TO LD AR THE STOCK WAS IN EXCESS IN THE CASE OF COTTON LINT AND THE SA ME WAS IN SHORT IN THE CASE OF COTTON SEED AND HENCE THE AO SHOULD HAVE GIVEN SET OFF OF ONE AGAINST THE OTHER. ON THE CONTRARY LD DR SUBMITTED THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER AND HENCE THE AO WAS CONSTRAINED TO PREPAR E THE QUANTITY RECONCILIATION 3 STATEMENT ON ESTIMATED BASIS. THE VERY FACT THAT T HE LD CIT(A) HAD GIVEN RELIEF ON THE BASIS OF CERTAIN PURCHASE VOUCHERS WHICH WER E NOT RECORDED IN THE BOOKS OF ACCOUNT ONLY SHOW THAT THE ASSESSEE IS PREPARING THE BOOKS ACCORDING TO HIS CONVENIENCE. ACCORDING TO LD DR THERE IS NO SCOPE FOR TELESCOPING OF BOTH THE ADDITIONS. 5. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUS ED THE RECORD. THE UNDISPUTED FACT REMAINS THAT THE ASSESSEE DID NOT M AINTAIN ANY STOCK REGISTER. IN THE ABSENCE OF THE STOCK REGISTER IT IS THE RESPON SIBILITY OF THE ASSESSEE TO OFFER PROPER EXPLANATIONS TO THE STOCK DIFFERENCE NOTICED DURING THE COURSE OF SURVEY. AS NOTICED BY THE LD CIT(A) THE AO HAS TAKEN THE A VERAGE YIELD OF THE COTTON LINT AND COTTON SEEDS ON THE BASIS OF THE PATTERN OF YIE LD DISCLOSED BY THE ASSESSEE. THOUGH THE ASSESSEE CONTENDS THAT THE YIELD WILL AL WAYS NOT BE THE SAME YET THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CONTENTIONS WITH ANY MATERIAL. HENCE WE PROCEED TO DECIDE THE MERIT OF BOTH THE ADDITIONS. 5.1 FIRST WE DEAL WITH THE ADDITION RELATING TO THE COTTON LINTS. WE NOTICE THAT BASED ON THE EXPLANATION OF THE ASSESSEE THAT CERTA IN PURCHASES WERE NOT RECORDED IN THE BOOKS OF ACCOUNT THE LD CIT(A) HAD ALREADY GRANTED PARTIAL RELIEF. WITH REGARD TO THE VALIDITY OF THE ADDITIO N RELATING TO THE UNACCOUNTED PURCHASE OF COTTON KAPPAS WE FIND MERIT IN THE CON TENTION OF THE ASSESSEE THAT SECTION 69C COULD BE INVOKED ONLY ON THE BASIS OF M ATERIALS FOUND SUGGESTING INCURRING OF ANY EXPENDITURE. IT IS A FACT THAT T HERE WAS NO MATERIAL WITH THE AO TO SUGGEST AVAILABILITY OF ANY UNACCOUNTED PURCHASE S. ON THE BASIS OF QUANTITY RECONCILIATION STATEMENT WHAT WAS NOTICED WAS ONLY EXCESS SALE OF COTTON LINTS. THE ASSESSEE HAD ALREADY ACCOUNTED FOR THE SALES AM OUNT PERTAINING TO THE EXCESS SALE. THOUGH THE AO PRESUMES UNACCOUNTED PU RCHASES OF COTTON KAPPAS RELATABLE TO THE EXCESS SALES THE FACT REMAINS THA T THE ASSESSEE HAD ACCOUNTED FOR THE EXCESS SALES FULLY WITHOUT CLAIMING DEDUCTI ON FOR THE CORRESPONDING PURCHASE. IN VIEW OF THE ABOVE IN OUR OPINION NO FURTHER ADDITION IS REQUIRED TO BE MADE ON ACCOUNT OF UNACCOUNTED PURCHASE OF RAW M ATERIALS. ACCORDINGLY WE 4 DIRECT THE AO TO DELETE THE BALANCE ADDITION OF RS. 12 82 396/- PERTAINING TO THE COTTON LINT AND THE ORDER OF LD CIT(A) IS MODIFIED ACCORDINGLY. 6. IN THE CASE OF DIFFERENCE IN COTTON SEEDS T HE QUANTITY RECONCILIATION STATEMENT SUGGESTS THAT THERE WAS UNRECORDED SALE O F COTTON SEEDS. IN THE ABSENCE OF PROPER EXPLANATION IN THIS REGARD THE A DDITION RELATING TO THE COTTON SEED HAS TO BE SUSTAINED. ACCORDINGLY WE UPHOLD T HE ORDER OF LD CIT(A) ON THIS ISSUE. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 19.5.2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM DATE : 19 TH JUNE 2010 A COPY OF THIS ORDER IS FORWARDED TO : 01 V RAO & GOPI CHARTERED ACCOUNTANTS NAGARAMPALE M MAIN ROAD GUNTUR 522 003. 02 THE ACIT CIR.-1(1) GUNTUR 03 THE CIT (A) GUNTUR 04 THE CIT GUNTUR 05 THE DR ITAT VISAKHAPATNAM 06 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT VISAKHAPATNAM BENCH