The ACIT, Circle-3(1)., Visakhapatnam v. Sri Nalluri Bhaskara Rao,, Visakhapatnam

ITA 662/VIZ/2008 | 2003-2004
Pronouncement Date: 06-01-2010 | Result: Dismissed

Appeal Details

RSA Number 66225314 RSA 2008
Assessee PAN ABEPN6202G
Bench Visakhapatnam
Appeal Number ITA 662/VIZ/2008
Duration Of Justice 1 year(s) 25 day(s)
Appellant The ACIT, Circle-3(1)., Visakhapatnam
Respondent Sri Nalluri Bhaskara Rao,, Visakhapatnam
Appeal Type Income Tax Appeal
Pronouncement Date 06-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 06-01-2010
Assessment Year 2003-2004
Appeal Filed On 12-12-2008
Judgment Text
PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.662/VIZAG/2008 ASSESSMENT YEAR: 2003-04 ACIT CIRCLE-3(1) VISAKHAPATNAM VS. NALLURI BHASKARA RAO VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO. ABEPN 6202 G APPELLANT BY: SHRI SUBRATA SARKAR DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B R BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.10.2008 PASSED BY THE LD CIT (A)-I VISAKHAPATNAM AND IT REL ATES TO THE ASSESSMENT YEAR 2003-04. 2. THE GROUNDS RAISED BY THE REVENUE GIVE RISE TO A SINGLE ISSUE VIZ. WHETHER THE LD CIT (A) IS JUSTIFIED IN DELETING THE ADDITIO N OF RS.39 95 040/-. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE PROPRIETOR OF A CONCERN NAMED M/S S.J.TRADERS FILED HIS RETUR N OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ADMITTING AN INCOME OF RS. 18 92 443/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 31.03.2005. CONSEQUENT TO THE SURVEY OPERATION CONDUCTED UPON THE ASSESSEE THE ASSESSME NT WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT. DURING THE COURS E OF SURVEY AN UNSIGNED AND UNAUDITED FINANCIAL STATEMENT TERMED AS CONSOLIDAT ED PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 1.4.2002 TO 31.3.2003 WAS FOUND WHERE IN A NET PROFIT OF RS.61 67 948/- WAS FOUND DISCLOSED. THE UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT CONSISTED OF TRANSACTIONS PERTAINING TO THE PROPRIETARY CONCERN OF THE ASSESSEE M/S. S.J. TRADERS TRANSACTIONS OF M/S SHA KTI ROADWAYS THE PROPRIETARY CONCERN OF A PERSON NAMED SHRI N. NARAYANA RAO AND ALSO SOME OTHER PAGE 2 OF 5 TRANSACTIONS. THE AO NOTICED THAT SHRI N. NARAYANA RAO IS ASSESSED TO INCOME TAX AND HE HAD DISCLOSED A PROFIT OF RS.7 57 100/- IN HIS FINANCIAL STATEMENTS. ACCORDINGLY THE AO DEDUCTED THE SAID PROFIT OF RS.7 57 100/- FROM THE NET PROFIT SHOWN IN THE CONSOLIDATED PROFIT AND LOSS A/C. THE ASSESSEE IN HIS ORIGINAL RETURN OF INCOME HAD ADMITTED AN INCOME OF RS.14 15 809/- AND THE SAME WAS ALSO DEDUCTED BY THE AO. THE BALANCE PROFIT OF RS.39 95 039/- WAS ADDED BY THE AO TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPEAL P REFERRED BY THE ASSESSEE THE LD CIT (A) DELETED THE SAID ADDITION. AGGRIEVED WI TH THE DECISION OF THE LD CIT (A) THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE RECORD. THE UNDISPUTED FACT IS THAT THE MATERIAL ON THE BASIS O F WHICH THE IMPUGNED ADDITION WAS MADE WAS AN UNSIGNED AND UNAUDITED FINANCIAL ST ATEMENT. ACCORDING TO LD AR THE UNSIGNED AND UNAUDITED FINANCIAL STATEMENT IS A DUMP DOCUMENT WITH NO CERTAINTY AND HENCE IT HAS GOT NO EVIDENTIARY VALUE . IN THIS CONNECTION LD AR PLACED HIS RELIANCE ON THE DECISION OF DELHI ITAT I N THE CASE OF BANSAL STRIPS (P) LTD V ACIT REPORTED IN 99 ITD 177. WE FEEL IT PERT INENT TO EXTRACT THE EXPLANATION OF THE ASSESSEE FURNISHED BEFORE THE AO ON THE IMPUGNED CONSOLIDATED PROFIT AND LOSS ACCOUNT. IN THIS CONNECTION I WISH TO STATE THAT I AM A SUPPL IER OF PULPWOOD TO M/S J.K.PAPER MILLS IN THE NAME OF M.S S.J. TRADERS. DURING THE FINANCIAL YEAR 2002-03 I HAVE SUPPLIED CA SUARINA POLES AND DBE POLES TO THE TUNE OF RS.4 10 81 060.40 AND THE SAME HAS BEEN REFLECTED IN MY FINANCIAL STATEMENTS SUBMITTED TO THE INCOME TAX DEPARTMENT. THESE ACCOUNTS HAVE BEEN AUDITED U/ S 44 AB OF INCOME TAX ACT 1961 AND THE ASSESSMENT WAS ALSO COM PLETED BY THE INCOME TAX DEPARTMENT. DURING THE COURSE OF SURV EY A BALANCE SHEET WAS FOUND IN THE COMPUTER WHICH WAS IN FACT PREPARED BY ACCOUNTS STAFF. THE BALANCE SHEET IN TH E COMPUTER INDICATED PROFIT OF RS.61 67 948.95 WHICH HAS NOT B EEN THE ACTUAL PROFIT DERIVED FROM THE SUPPLY OF CASUARINA WOOD TO M/S J.K. PAPER MILLS. I ALSO WISH TO STATE THAT EXCEPT THE SALES FIGURES A ND BALANCE IN ONE BANK THE FIGURES INDICATED IN THE BALANCE SHEE T DOES NOT MATCH WITH THE FIGURES OF OUR FINANCIAL STATEMENTS. I ALSO WISH TO MENTION HERE THAT I HAVE NEVER TRANSACTED BUSINESS O F ANY SORT OTHER THAN THE BUSINESS REFLECTED IN FINANCIAL STAT EMENTS BUT THE FIGURES INDICATED IN THE BALANCE SHEET SHOWS TRANSP ORT RECEIPTS AMOUNTING TO RS.3.77 CRORES WHICH DOES NOT BELONG T O US. IN FACT THE TOTAL TRANSPORTATION FOR THE CASUARINA SUPPLY W AS GIVEN BY M/S J.K.PAPER MILLS TO M/S SHAKTI ROADWAYS WHO ARE ASSE SSED AT RAYAGADA. OUR ACCOUNTANT ERRONEOUSLY CONSIDERED THE PAGE 3 OF 5 TRANSACTIONS OF M/S SHAKTI ROADWAYS IN OUR BALANCE SHEET. THE REASON FOR THE ERROR IS THE ACCOUNTANT BEING THE SA ME FOR THE BOTH THE FIRMS. A COPY OF ASSESSMENT ORDER OF M/S SHAKTI ROADWAYS IS ALSO ENCLOSED FOR YOUR REFERENCE. I MAY ALSO STATE THAT I DID NOT DO ANY BUSINESS WITH NALCO RELIANCE ETC. AS INDICATED IN THE BALANCE SHEET FO UND IN OUR COMPUTER. THE FIGURES INDICATED IN OUR BALANCE SHEE T DOES NOT BELONG TO M/S S.J. TRADERS WHICH IN FACT CAN BE VER IFIED WITH M/S J.K. PAPER MILLS AS WE HAVE DONE BUSINESS OF SUPPLY OF CASUARINA WOOD ONLY TO M/S J.K. PAPER MILLS. HENCE THE PROFIT DECLARED BY US FOR THE FINANCIAL YEAR 2002-03 AMOUNTING TO RS.14 1 5 809.45 IS THE CORRECT PROFIT. 5. THE LD CIT(A) HAS CONSIDERED THE ISSUE IN DE TAIL AND HIS OBSERVATIONS ARE EXTRACTED BELOW: THEREFORE THE BASIC ISSUE THAT NEEDS CONSIDERATIO N IN THE INSTANT CASE IS WHETHER THE ASSESSING OFFICER WAS JUSTIFIED IN ADOPTING THE UNAUDITED STATEMENT OF ACCOUNTS FOUND AND IMPOUNDED DURING THE COURSE OF THE SURVEY. AFTER CAREFULLY EXAMINING THE FACTS AND CIRCUMSTANCES OF THE CASE I AM OF THE CONSIDERED OP INION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN ADOPTING THE SAME FOR THE FOLLOWING REASONS: I) THE IMPOUNDED STATEMENT OF ACCOUNTS WAS A CONSOLIDA TED STATEMENT OF ACCOUNTS OF BOTH M/S S.J TRADERS AS WE LL AS M/S SHAKTI ROADWAYS. WHEREAS THE APPELLANT IS THE PROPRIETOR OF M/S. SJ TRADERS HE HAD NO BUSINESS CONNECTION WITH M/S SHAKTI ROADWAYS. THUS THE NET PROFIT INDICATED IN SUCH STATEMENT OF ACCOUNTS CANNOT BE T REATED AS THE NET PROFIT OF M/S SJ TRADERS. NO ATTEMPT WAS MADE BY THE ASSESSING OFFICER TO BIFURCATE THE RECEIPTS AS WELL AS EXPENDITURE ON ACCOUNT OF BOTH THE BUSINESS ENTITIE S FOR WHICH THE CONSOLIDATED STATEMENT OF ACCOUNTS WAS PREPARED. II) BOTH IN THE IMPOUNDED STATEMENT OF ACCOUNTS AS WELL AS THE AUDITED STATEMENT OF ACCOUNTS FURNISHED BY THE APPE LLANT ALONG WITH THE RETURN OF INCOME THE TOTAL SALES MA DE BY THE APPELLANT HAS BEEN SHOWN AT RS.4 10 18 210/-. THUS THERE IS NO SUPPRESSION OF SALES. III) IN SO FAR AS THE EXPENDITURES ARE CONCERNED THE ASS ESSING OFFICER APART FROM RELYING UPON THE IMPOUNDED STAT EMENT OF ACCOUNTS HAVE BROUGHT NOTHING ON RECORD TO ESTA BLISH THAT THE EXPENDITURES CLAIMED IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE RETURN OF INCOME WERE EITHER F ABRICATED OR INFLATED. IV) THE FACT THAT THE TRANSPORTATION CHARGES RECEIPTS O F RS.3.77CRORES DID NOT PERTAIN TO THE APPELLANT WAS ACCEPTED BY THE ASSESSING OFFICER IN AS MUCH AS THA T HE CONCEDED THAT THE SAID AMOUNT PERTAINED TO M/S SHAK TI ROADWAYS OF WHICH ONE SRI N. NARAYANA RAO WAS THE PROPRIETOR AND WHO WAS ASSESSED TO TAX SEPARATELY. IN FACT PAGE 4 OF 5 HE REDUCED THE PROFIT ATTRIBUTABLE TO SUCH TRANSPOR TATION RECEIPTS FROM THE NET PROFIT DISCLOSED IN THE IMPOU NDED STATEMENT OF ACCOUNTS. THOUGH THE ASSESSING OFFICER REDUCED THE NET PROFIT ARISING OUT OF TRANSPORTATIO N RECEIPTS CREDITED IN THE IMPOUNDED PROFIT & LOSS ACCOUNT HE PRESUMED THE BALANCE AMOUNTS EITHER DEBITED OR CRED ITED TO THE IMPOUNDED PROFIT & LOSS ACCOUNT TO BE THAT OF T HE APPELLANT. SUCH A PRESUMPTION IS NOT SUPPORTED BY A NY EVIDENCE. V) THE IMPOUNDED STATEMENT OF ACCOUNTS INDICATED RECEI PTS FROM THE FOLLOWINGS: A) AIOT MATERIAL REJECTED RS.1 45 700 B) AMC CHARGES RECEIPTS RS.3 50 540 C) NALCO RS. 18 322 D) ONGC RS.6 31 042 E) RELIANCE RS.2 73 663 IN COURSE OF THE ASSESSMENT PROCEEDINGS THE APPELLA NT SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE APPELLANT HAD NO CONNECTION AT ALL WITH THESE RECEIPTS. THE ASSESSING OFFICER WITHOUT MAKING ANY CROSS VERIFICATION SIMPLY REJECTED THE APPELLA NTS CONTENTION. A SIMPLE CROSS VERIFICATION WITH ESTABLISHED BUSINESS ORGANIZATIONS LIKE NALCO ONGC RELIANCE ETC. COULD HAVE INDICAT ED WHETHER THE APPELLANT HAD ANY BUSINESS CONNECTION WITH THEM . BY NOT MAKING SUCH CROSS VERIFICATION THE ASSESSING OFFIC ER HAS FAILED TO ESTABLISH THAT SUCH RECEIPTS WERE ATTRIBUTABLE TO T HE APPELLANT. VI) APART FROM THE CONSOLIDATED STATEMENT OF ACCOUNTS NO OTHER BOOK OF ACCOUNTS OR DOCUMENTS WERE FOUND IN C OURSE OF SURVEY SUPPORTING SUCH STATEMENT OF ACCOUNTS. VII) THE ASSESSING OFFICERS ACTION IN ADOPTING THE NET PROFIT AS SHOWN IN THE IMPOUNDED STATEMENT OF ACCOUNTS AMOUNT S TO REJECTION OF BOOKS OF ACCOUNTS ON THE BASIS OF WHIC H AUDITED STATEMENT OF ACCOUNTS WAS PREPARED AND RETURN OF IN COME WAS FILED. HOWEVER BEFORE REJECTION OF BOOKS OF AC COUNTS I.E. IMPLICITLY INVOKING THE PROVISIONS OF SEC.145 OF THE ACT THE ASSESSING OFFICER HAS NOT MADE OUT ANY CASE FOR REJECTION OF SUCH BOOKS OF ACCOUNTS. ACCOUNTS REGUL ARLY MAINTAINED IN THE COURSE OF BUSINESS HAVE TO BE TAK EN AS CORRECT UNLESS THERE ARE STRONG AND SUFFICIENT REAS ONS TO INDICATE THAT THEY ARE UNRELIABLE. THE ASSESSING OF FICER HAS TO PROVE SATISFACTORILY THAT ACCOUNT BOOKS ARE UNRE LIABLE INCORRECT OR INCOMPLETE BEFORE HE CAN REJECT THE A CCOUNTS. IN THE INSTANT CASE THE ASSESSING OFFICER HAS NOT P ROVED THE SAME BEFORE REJECTING THE BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE IT IS CONCLUDED THAT THE ASSES SING OFFICER IS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDITION OF RS .39 95 040/- WHICH IS HEREBY DELETED. PAGE 5 OF 5 6. AS CAN BE SEEN FROM THE OBSERVATIONS OF THE LD CIT(A) MANY OF THE ENTRIES FOUND IN THE IMPUGNED CONSOLIDATED PROFIT AND LOSS ACCOUNT ARE UNRELATED TO THE TYPE OF ACTIVITIES CARRIED ON BY THE ASSESSEE. THE SURVEY TEAM HAS NOT STUMBLED UPON ANY OF THE BOOKS OF ORIGINAL ENTRY IN SUPPORT OF THE IMPUGNED PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS ALSO OFFERED EXPLANA TION ON THE IMPUGNED STATEMENT AND THE SAID EXPLANATION WAS NOT PROVED W RONG. ON THE OTHER HAND THE AO HIMSELF HAS ACCEPTED THAT THE TURNOVER PERTA INING TO M/S SHAKTHI ROADWAYS DOES NOT BELONG TO THE ASSESSEE. THUS THE AO HAS FAILED TO ESTABLISH THE NEXUS OF THE ASSESSEE WITH THE IMPUGNED PROFIT AND LOSS ACCOUNT AND ALSO ITS VERACITY. HENCE ON A CONSPECTUS OF THE MATTER WE FIND THE ORDER OF LD CIT(A) AS CORRECT IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND ACCORDINGLY UPHOLD THE SAME. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON 06-01-2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM 6 TH JANUARY 2010. COPY TO 1 THE ACIT CIRCLE-3(1) VISAKHAPATNAM 2 SHRI NALLURI BHASKARA RAO D.NO.6-20-10 EAST POI NT COLONY VISAKHAPATNAM 3 THE CIT VISAKHAPATNAM 4 THE CIT(A)-I VIJAYAWADA 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM