M/s G Srinivasa Rao, Kolluru., Guntur v. The ITO, Ward-1,, Tenali

1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH: VISAKHAPATNAM BEFORE: SRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SRI B.R. BASKARAN ACCOUNTANT MEMBER O R D E R PER BENCH : THESE APPEALS FILED BY BOTH THE PARTIES RELATE TO THE MEMBERS OF KOLLURU LIQUOR SYNDICATE. SINCE THEY WERE HEARD TOGETHER ALL THE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER. A). ITA NO.293/V/2005 & 304/V/2005 K.SAMBASIVA RA O 2. THE CROSS APPEALS ARE DIRECTED AGAINST THE OR DER DATED 28.3.2005 AND THEY RELATE TO THE ASSESSMENT YEAR 2001-02. 3. THE ASSESSEE IS IN APPEAL ON THE FOLLOWING TW O ISSUES. A. CANCELLATION OF ASSESSMENT OF INCOME FROM LIQU OR BUSINESS IN THE INDIVIDUAL STATUS. B. ADDITION OF CASH CREDIT OF RS.4 59 000/-. 4. THE REVENUE IS ASSAILING THE DECISION OF LD C IT(A) IN DELETING THE SHARE INCOME FROM AOP ASSESSED ON PROTECTIVE BASIS. S. NO CASE NO. A.Y PAN NO APPELLANTS RESPONDENTS 1 ITA NO. 293/V/05 2001-02 AHHPK 9689 B KAMMELA SAMBASIVA RAO KOLLURU ITO WARD-1 TENALI 2 ITA NO. 304/V/05 2001-02 AACHK 7832 G ITO WARD-1 TENALI KAMMELA SAMBASIVA RAO KOLLURU 3 ITA NO. 294/V/05 1999- 2000 AETPG 5144 C GAJULA SRINIVASA RAO KOLLURU ITO WARD-1 TENALI 4 ITA NO. 300/V/05 1999- 2000 AETPG 5144 C ITO WARD-1 TENALI GAJULA SRINIVASA RAO KOLLURU 5 ITA NO. 301/V/05 2000-01 AETPG 5144 C ITO WARD-1 TENALI GAJULA SRIN IVASA RAO KOLLURU 2 5. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A MEMBER OF A SYNDICATE FORMED BY THE LICENSE HOLDERS OF LIQUOR S HOPS OPERATING IN KOLLURU AREA. THE ASSESSEE JOINED THE SYNDICATE ON 1.5.2000. ACC ORDINGLY THE AO ESTIMATED THE INCOME FROM LIQUOR BUSINESS FOR THE MONTH OF AP RIL 2000 AND ALSO ASSESSED THE SHARE INCOME FROM AOP ON PROTECTIVE BASIS. THE AO ALSO ADDED A SUM OF RS.4 59 000/- U/S 68 OF THE ACT. IN THE APPEAL PREF ERRED BY THE ASSESSEE THE LD CIT(A) DELETED THE PROTECTIVE ADDITION OF SHARE INC OME FROM AOP SINCE HE HAD CONFIRMED THE ASSESSMENT IN THE HANDS OF AOP IN THE APPEAL PREFERRED BY THE AOP. LD CIT(A) CONFIRMED OTHER ADDITIONS. AGGRIEV ED BOTH THE PARTIES ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD THE PARTIES. THE APPEAL OF THE A SSESSEE IS FILED IN HUF STATUS. FROM THE ASSESSMENT ORDER WE NOTICE THAT THE ASSES SEE HAD OFFERED INCOME FROM LIQUOR BUSINESS IN HIS HUF STATUS. BEFORE US THE ASSESSEE CLAIMS THAT HE CARRIED ON THE LIQUOR BUSINESS IN HIS INDIVIDUAL ST ATUS WHICH IS CONTRARY TO THE FACTS AVAILABLE IN THE RETURN OF INCOME. THE ASSES SEE HAS NOT FILED ANY OTHER MATERIAL TO CONTRADICT THE FINDINGS OF THE TAX AUTH ORITIES. ACCORDINGLY WE DISMISS THE GROUND OF THE ASSESSEE RELATING TO THE STATUS. 6.1 THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE RELATES TO THE ADDITION MADE U/S 68 OF THE ACT. THE ASSESSEE FURNISHED THE CONF IRMATION LETTERS OBTAINED FROM THE CREDITORS TO THE LD CIT(A). THE LD CIT(A) DIRE CTED THE ASSESSING OFFICER TO VERIFY THE GENUINENESS OF THE CREDITS. AFTER CONS IDERING THE REPORT OF THE AO THE LD CIT(A) CONFIRMED THE ENTIRE ADDITION. WE NOTICE THAT THE ASSESSEE HAD BORROWED A SUM OF RS.4 59 000/- FROM 13 PERSONS. O UT OF THE ABOVE SAID SUM THE ASSESSEE HAD BORROWED A SUM OF RS.2 26 500/- FR OM HIS BROTHER. THE REMAINING AMOUNTS HAVE BEEN BORROWED FROM 12 PERSON S AT AN AMOUNT OF RS.19 500/- EACH. WITH REGARD TO THE LOAN OF RS.19 500/- EACH OBTAINED FROM 12 PERSONS THE AO HAS SPECIFICALLY COMMENTED THAT THE Y ARE NOT GENUINE SINCE ALL THE PERSONS ARE SMALL TIME WORKERS AND FURTHER THEY DID NOT HAVE ANY DOCUMENTARY EVIDENCE NOR DO THEY REMEMBER THE DATES OF ADVANCE. HOWEVER WITH REGARD TO THE LOAN OF RS.2 26 500/- OBTAINED F ROM SHRI KAMMELA VENKATESWARALU THE BROTHER OF THE ASSESSEE THE AO DID NOT MAKE ANY COMMENT ON THE GENUINENESS. THE SAID CREDITOR HAS CLAIMED TO BE OWNER OF 10 ACRES OF 3 AGRICULTURAL LAND AND IS EARNING AGRICULTURAL INCOM E OF RS.1.50 LACS PER YEAR. BEFORE THE AO ALSO THE SAID CREDITOR HAS CONFIRMED THE PAYMENT OF LOAN TO THE ASSESSEE. HENCE WE ARE OF THE VIEW THAT THE ASSES SEE HAD DISCHARGED THE BURDEN OF PROOF PLACED UP ON HIM U/S 68 OF THE ACT WITH REGARD TO THE LOAN OF RS.2 26 500/- OBTAINED FROM SHRI KAMMELA VENKATESWA RALU BUT FAILED TO PROVE THE OTHER LOANS. ACCORDINGLY WE PARTIALLY MODIFY THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION MADE U/S 68 OF THE ACT TO THE EXTENT OF RS.2 26 500/-. THE ORDER OF LD CIT(A) FOR THE REMA INING AMOUNT IS CONFIRMED. 7. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE RELATES TO THE DELETION OF PROTECTIVE ASSESSMENT OF SHARE INCOME FROM AOP. THE ASSESSMENT OF SHARE INCOME FROM THE AOP IS GOVERNED BY SECTION 86 OF TH E ACT. THE ORDER OF THE LD CIT(A) PASSED IN THE HANDS OF KOLLURU LIQUOR SYNDIC ATE AOP HAS BEEN CONFIRMED BY THE TRIBUNAL IN ITS EX-PARTE ORDER DAT ED 30-1-2008. IN VIEW OF THE ABOVE WE SET ASIDE THIS ISSUE TO THE FILE OF AO WI TH A DIRECTION TO DECIDE THE ISSUE OF ASSESSMENT OF SHARE INCOME FROM AOP IN ACC ORDANCE WITH SECTION 86 OF THE ACT. B).GAJULA SRINIVASA RAO 1999-2000 ITA NO.294/V/ 2005 8. THE APPEAL OF THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28.3.2005 PASSED BY LD CIT(A) GUNTUR AND IT RELATES TO THE AS SESSMENT YEAR 1999-2000. 9. THE ASSESSEE IS IN APPEAL BEFORE US ON THE F OLLOWING ISSUES: A. ESTIMATION OF INCOME FROM LIQUOR BUSINESS OWN BU SINESS B. CASH CREDITS ADDED U/S 68. 10. THE FACTS OF THE CASE ARE STATED IN BRIEF. THE ASSESSEE IS A MEMBER OF A SYNDICATE FORMED BY THE LICENSE HOLDERS OF LIQUOR S HOPS OPERATING IN KOLLURU AREA. THE ASSESSEE JOINED THE SYNDICATE ON 1.7.1998. ACC ORDINGLY THE AO ESTIMATED THE INCOME FROM LIQUOR BUSINESS FOR THE PERIOD UP T O 1.7.98 AT RS.1 19 120/- AND ALSO ASSESSED THE SHARE INCOME FROM AOP ON PROTECTI VE BASIS. THE AO ALSO ADDED A SUM OF RS.1 52 500/- U/S 68 OF THE ACT. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LD CIT(A) DELETED THE PROTECTIVE ADDI TION OF SHARE INCOME FROM AOP SINCE HE HAD CONFIRMED THE ASSESSMENT IN THE H ANDS OF AOP IN THE APPEAL 4 PREFERRED BY THE AOP. LD CIT(A) CONFIRMED OTHER AD DITIONS. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE FIRST ISSUE RELATES TO THE ESTIMATION OF INCOME FROM LIQUOR BUSINESS RELATING TO THE PERIOD PRIOR TO JOINING THE SYNDICA TE. AGAINST THE INCOME OF RS.1.00 LAC DECLARED BY THE ASSESSEE THE AO HAS ES TIMATED THE INCOME AT RS.1 19 190/-. AS OBSERVED BY THE LD CIT(A) THE A O HAS ESTIMATED THE INCOME ON A REASONABLE BASIS AND HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE TAX AUTHORITIES. 12. THE NEXT ISSUE RELATES TO THE ADDITION OF R S.1 52 500/- MADE U/S 68 OF THE ACT. THE ASSESSEE HAS TAKEN THIS LOAN FROM NINE PE RSONS IN THE RANGE OF ABOUT RS.17 000/- EACH. HE DID NOT FILE THE CONFIRMATION LETTERS BEFORE THE AO HOWEVER THEY WERE BEFORE THE LD CIT(A). THE FIRST APPELLAT E AUTHORITY DIRECTED THE AO TO VERIFY THE GENUINENESS OF THE LOAN AND SUBMIT A REP ORT. THE AO REPORTED THAT NONE OF THE CREDITORS HAD DOCUMENTARY EVIDENCE TO P ROVE THE LOAN AND FURTHER OBSERVED THAT THEY ARE NOT GENUINE. ACCORDINGLY TH E LD CIT(A) CONFIRMED THE ADDITION. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD CIT(A) WE NOTICE THAT THE MOST OF THE CREDITORS ARE FARM LABOURERS AND THEY C OULD NOT FURNISH THE DATE MONTH OR YEAR OF LENDING THE DETAILS OF RATE OF IN TEREST ETC. BESIDES NO DOCUMENTARY EVIDENCE WAS AVAILABLE WITH BOTH THE PA RTIES TO PROVE THE GENUINENESS OF THE LOAN. ALL THE LOANS HAVE BEEN T AKEN BY WAY OF CASH. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN OF PROOF PLACED UP ON HIM BY SECTION 68 OF T HE ACT. IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT (A) IN CONFIRMING THE ADDITION. ACCORDINGLY WE UPHOLD THE ORDER OF LD CIT(A). GAJULA SRINIVASA RAO IT.A. NO.300/V/2005 & 301/V/20 05 13. THESE TWO APPEALS HAVE BEEN FILED BY THE REVEN UE AND THEY RELATE TO THE ASSESSMENT YEARS 1999-2000 AND 2000-01. 14. IN BOTH THE APPEALS THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE SHARE INCOME FROM AOP ASSESSED ON PROT ECTIVE BASIS. 5 15. AS STATED IN PARA 7 SUPRA THE ASSESSMENT OF SH ARE INCOME FROM THE AOP IS GOVERNED BY SECTION 86 OF THE ACT. THE ORDER OF TH E LD CIT(A) PASSED IN THE HANDS OF KOLLURU LIQUOR SYNDICATE AOP HAS BEEN CO NFIRMED BY THE TRIBUNAL IN ITS EX-PARTE ORDER DATED 30-1-2008. IN VIEW OF THE ABOVE WE SET ASIDE THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO DECIDE THE IS SUE OF ASSESSMENT OF SHARE INCOME FROM AOP IN ACCORDANCE WITH SECTION 86 OF TH E ACT. 16. IN THE RESULT (A) ALL THE THREE APPEALS OF THE R EVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. (B) THE APPEAL FILED BYSHRI K.SAMBASIVA RAO IS PAR TLY ALLOWED. (C) THE APPEAL FILED BY SHRI GAJULA SRINIV ASA RAO IS DISMISSED. PRONOUNCED ACCORDINGLY ON 29 TH APRIL 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE : 29-4-2010. A COPY OF THIS ORDER IS FORWARDED TO : 01 SHRI KAMMELA SAMBASIVA RAO C/O V. RAO & GOPI C AS 1 ST FLOOR AHALYA MANSIONS NAGARAMPALEM GUNTUR 522004 02 THE ITO WARD-1 TENALI 03 SHRI GAJULA SRINIVASA RAO C/O V. RAO & GOPI CAS 1 ST FLOOR AHALYA MANSIONS NAGARAMPALEM GUNTUR 522004 04 THE CIT (A) GUNTUR 05 THE CIT GUNTUR 06 THE DR ITAT VISAKHAPATNAM 07 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY ITAT VISAKHAPATNAM BENCH