Income Tax Appellate Tribunal - Hyderabad
Ch. Hanumantha Rao, Hyderabad, ... vs Ito, Ward 1, Sangareddy, Sanga Reddy on 8 February, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC), HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
I.T.A. No. 690/HYD/2015
Assessment Year: 2009-10
Ch. Hanumantha Rao, The Income Tax Officer,
Sadashivpet, Vs Ward-1,
[PAN: AEPPC6930G] SANGAREDDY
(Appellant) (Respondent)
For Assessee : Shri K.C. Devdas, AR
For Revenue : Shri K.J. Rao, DR
Date of Hearing : 03-02-2017
Date of Pronouncement : 08-02-2017
ORDER
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-2, Hyderabad, dated 20-03-2015.
2. Briefly stated facts of the case are that assessee is a trader in seeds and pesticides having business in the name and style of Shri Rytu Seva Kendra. He has filed return of income for AY. 2009-10 declaring total income of Rs. 1,70,210/- which included income from business at Rs. 2,48,254/- declared under the provisions of Section 44AF, income from house property and other sources. Assessee also declared agricultural income of Rs. 3,38,000/- which was accepted. However, in the course of scrutiny assessment, Assessing Officer (AO) noticed that the total credits in the bank account are to the tune of Rs. 46,01,217/-, whereas total outflow :- 2 -: I.T.A. No. 690/Hyd/2015 Ch. Hanumantha Rao during the year was to the tune of Rs. 73,02,226/-. The difference of Rs. 27,01,009/- was asked to be explained. After assessee's explanation, the AO gave credit for an amount of house rent received of Rs. 1,20,000/- and agricultural income of Rs. 3,38,000/- and the balance amount of Rs. 22,43,009/- was treated as 'unexplained investment' in the hands of assessee. Apart from the above, AO also disallowed interest payment of Rs. 47,605/- on the housing loan and claim of pre-payment of principal of Rs. 47,605/- u/s. 80C of the Act.
3. Before the Ld. CIT(A), assessee explained that he has share derivative transactions in which he has incurred losses and also explained the sources from the creditors Rs. 16,74,000/- and also loan from bank. Ld. CIT(A) remanded the issue to the file of AO for examination. In the remand report, the AO however, has not accepted the revised Balance Sheet, filed with the AO in the course of assessment proceedings and opined that the addition was made correctly. Ld. Joint Commissioner while forwarding the report however, gave credit to the Sundry Creditors and bank loan, but however, asked the confirmation of the amounts as there are differences between earlier Balance Sheet and revised Balance Sheet. Ld. CIT(A) without much discussion on the facts, however, rejected assessee's contentions on all the three issues.
4. Ld. Counsel filed the reconciliation of the amounts as under:
:- 3 -: I.T.A. No. 690/Hyd/2015
Ch. Hanumantha Rao
Working of AO:
Sources Applications
To Deposit in bank 46,01,217 Investment in shares 37,00,000
(Includes 9,00,000
received from Shares (Derivatives)
Investment)
Business expenses 32,98,226
To Difference as per
A.O for which Purchase of property 3,04,000
explanation is given 27,01,009
---------------- ----------------
73,02,226 73,02,226
I. Details of Cash deposits of Rs. 46,01,217 Cash sales Rs. 31,49,000 Credit Sales receipts Rs. 5,51,816 Bank Interest 400 Transferred from shares A/c 9,00,000
-----------------
46,01,216
-----------------
Sources Applications
Rent 1,20,000 Difference to be 27,01,005
Agriculture Income 3,38,000 explained
--------------
4,58,000
Unexplained 22,43,005
Investment --------------- -------------
27,01,005 27,01,005
III. While computing the difference the following sources were not considered by the A.O Sundry Creditors 16,74,100 (Please see page 100 of P.B) Business profit 2,48,254 (Please see page 57 of P.B)
----------------
Total 19,22,354
Difference 3,20,655 (Attributable to business funds)
---------------
Amount added by A.O 22,43,009
---------------
:- 4 -: I.T.A. No. 690/Hyd/2015
Ch. Hanumantha Rao
IV. The Investment in shares (Derivatives) is Rs. 37 Lakhs. While the amount returned on trading in shares is Rs. 9,00,000 both are considered by the A.O. The difference is Rs. 28 lakhs. A sum of Rs. 28,39,793 was claimed as loss in the revised computation of total income. ".
5. It was the submission that AO has not examined the transactions properly and the loss incurred by assessee in the derivatives has not been allowed. If that is allowed, there will be no addition. While admitting that there is a difference of Rs. 3,20,655/- attributable to business funds, the same would be netted-off to the loss computed in the derivative transactions. Ld. Counsel was asked to explain the extent of derivative transactions as there are differences in the accounts furnished at one place, the derivative transactions totalled to Rs. 11,40,66,265/- [Pg.93 of the Paper Book], whereas the details of scrip-wise transactions placed from Page Nos. 178 to 182 indicate total transactions to the tune of Rs. 30,02,19,487/-. Ld.Counsel fairly admitted that the statements indicate loss of Rs. 28,44,698/-, which also is similar to the earlier pages, but admitted that no audit was done and this claim made before the CIT(A) was not adjudicated.
6. Ld.DR, in reply submitted that assessee has filed original Balance sheet and P&L A/c in which the Sundry Creditors and share trading transactions are not reflected and only when the AO started enquiry, assessee filed revised Balance Sheet just before the conclusion of assessment, which the AO has rejected and in the remand report, Assessee has not justified the transactions as concluded by the Ld. CIT(A). It was submitted that the AO has rightly arrived at unexplained investment which was brought to tax.
:- 5 -: I.T.A. No. 690/Hyd/2015
Ch. Hanumantha Rao
7. After considering the rival contentions and perusing the documents on record, I am of the opinion that the entire assessment has to be re-considered/re-examined by the AO. First of all, it took considerable time and effort to understand the action of the AO. While arriving at the total outflow, AO has considered the expenditure to the extent shown in the P&L A/c, net investment made in the Balance Sheet and the outflow in the bank accounts. While considering the receipts, AO has only considered the credits in the bank account. This sort of reconciliation of amounts certainly results in mismatch. As seen from the first page of the assessment order, the case was selected for examining the cash deposits in the bank account as per the CASS. Instead of examining the cash deposits in the bank account or the credits in the books of account, AO undertook the exercise of reconciling receipts and payments, in which all receipts are not considered. It was assessee's contention that there are receipts in the form of Sundry Creditors and also loans and as per the reconciliation, there will be only a difference of Rs. 3,20,655/-. It was the submission that the entire derivative transactions undertaken by assessee has resulted in on loss of Rs. 28,39,793/-. However, this aspect was not examined/ accepted at all by the AO either during the assessment proceedings or during the remand proceedings. He has only taken into account the amount of Rs. 37 Lakhs paid towards share investments whereas the total transactions undertaken by assessee during the year amounted almost to the tune of Rs. 30 Crore. Even though the statement placed on record indicates transactions from 21-03-2008, the AO is directed to consider the transactions from 01-04-2008 to 31-03-2009 pertaining to this year and examine the amounts paid to the :- 6 -: I.T.A. No. 690/Hyd/2015 Ch. Hanumantha Rao broker, amounts invested in derivative transactions, the other business transactions afresh and reconcile with the cash book and the bank account. For this purpose, I hereby set aside the orders of the AO and CIT(A) and restore the entire assessment to the file of the AO to do it as per the facts and law. Assessee should be given due opportunity and his contentions should be considered in detail. Accordingly, the grounds are considered allowed for statistical purposes.
8. In the result, appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 8th February, 2017 Sd/-
(B. RAMAKOTAIAH) ACCOUNTANT MEMBER Hyderabad, Dated 8th February, 2017 TNMM Copy to :
1. Ch. Hanumantha Rao, Sadashivpet, C/o. B. Narsing Rao & Co., Chartered Accountants, Plot No. 554, Road No. 92, Jubilee Hills, Hyderabad.
2. The Income Tax Officer, Ward-1, Sangareddy.
3. Commissioner of Income Tax(Appeals)-2, Hyderabad.
4. The Pr. Commissioner of Income Tax-2, Hyderabad.
5. D.R. ITAT, Hyderabad.
6. Guard File.