Income Tax Appellate Tribunal - Panji
Katta Srinivasa Rao,, Rajahmundry vs The Ito,, Rajahmundry on 27 September, 2017
ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry
आयकर अपील य अ धकरण, वशाखापटणम पीठ, वशाखापटणम
IN THE INCOME TAX APPELLATE TRIBUNAL,
VISAKHAPATNAM BENCH, VISAKHAPATNAM
ी वी. दग
ु ाराव, या यक सद य एवं
ी ड.एस. सु दर "संह, लेखा सद य के सम%
BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER &
SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.No.84/Vizag/2017
( नधारण वष / Assessment Year: 2011-12)
Katta Srinivasa Rao ITO, Ward-3,
Rajahmundry Rajahmundry
[PAN No.BQTPK5422J]
(अपीलाथ' / Appellant) (()याथ' / Respondent)
अपीलाथ क ओर से / Appellant by : Shri C. Subrahmanyam, AR
याथ क ओर से / Respondent by : Shri T. Satyanandam, DR
सुनवाई क तार ख / Date of hearing : 20.09.2017
घोषणा क तार ख / Date of Pronouncement : 27.09.2017
आदे श / O R D E R
PER D.S. SUNDER SINGH, Accountant Member:
This appeal filed by the assessee is directed against order of the Commissioner of Income Tax (Appeals), {CIT(A)}, Rajahmundry dated 1.12.2016 for the assessment year 2011-12.
2. Ground No1.0 & 1.7 are general in nature, which do not require any specific adjudication.
1ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry
3. Ground No.1.6 is related to furnishing additional evidence filed under rule 46A of the Income Tax Act, 1961 (hereinafter called as 'the Act'). The Ld. A.R. did not make any argument on this ground, therefore, this ground is dismissed.
4. Ground No.1.1 & 1.2 are related to the estimation of income at 10% of the purchase price as against the income admitted by the assessee in his books of accounts. The assessee is carrying on business of Indian made foreign liquor (IMFL), had filed the return of income declaring total income of 7,29,670/-. The case of the assessee was selected for scrutiny and the A.O., did not accept the income declared by the assessee and estimated the profit from the business at 20% of the stock put to sale and accordingly computed the business income from IMFL at Rs.34,64,874/-. On appeal, the CIT(A) has scaled down the percentage of profit from 20% to 10% and directed the A.O. to re-compute the income at 10% of purchase price.
5. On being aggrieved, assessee carried the matter in appeal before the Tribunal. At the time of hearing, the Ld. Counsel for the assessee has submitted that the issue involved in this appeal is squarely covered in the case of Sri Vysyaraju Satyanarayana Raju, Srikakulam Dist. In ITA No.2/Vizag/2016, which is reproduced as under:
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Katta Srinivasa Rao, Rajahmundry
3. On being aggrieved, assessee carried matter in appeal before the Tribunal. At the time of hearing, the Ld. Counsel for the assessee has submitted that the issue involved in this appeal is squarely covered by the decision of the coordinate bench of this Tribunal where the Tribunal has scaled down the estimation of profit from 10% to 5% in the case of Tangudu Jogisetty in ITA No.96/Vizag/2016 by order dated 2.6.2016.
4. On the other hand, the Ld. D.R. strongly supported the order passed by the authorities below.
5. I have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The only issue involved in this appeal is estimation of profit in respect of IMFL business carried by the assessee. In this respect, the coordinate bench of the Tribunal in the case of Tangudu Jogisetty (supra) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. The relevant portion of the order is extracted as under:
8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. estimated net profit of 20% on stock put for sale. The A.O. was of the opinion that the assessee has not maintained proper books of accounts and vouchers in support of purchases and sales. The A.O. further observed that the assessee has failed to maintain stock registers and books of accounts maintained by the assessee are not susceptible for verification, therefore rejected the books of accounts and estimated net profit of 20% by relying upon the decision of Hon'ble A.P. High Court. It is the contention of the assessee that the net profit estimated by the A.O. is quite high when compared to the nature of business carried on by the assessee. It is further submitted that the case law relied upon by the assessee is not applicable to the facts of the present case. The case before the Hon'ble A.P. High Court was that the assessee is into the business of trading in arrack, whereas it is in the business of dealing in IMFL. The assessee further contended that IMFL trade was controlled by the State Government through A.P. State Beverages Corporation Ltd.
and the prices of the products are fixed by the State Government. The assessee being a license holder of State Government cannot sell the products over and above the MRP fixed by the State Government. We find force in the arguments of the assessee for the reason that the A.O. has estimated the net profit by relying upon the decision of A.P. High Court in the case of CIT Vs. R. Narayana Rao in ITA No.3 of 2003 which is rendered under different facts. The A.P. High Court has considered the case of an arrack dealer, whereas, the assessee is into the business of dealing in IMFL. Therefore, we are of the view that the A.O. was not justified in relying upon the judgement, which was rendered under different facts to estimate the net profit. On the other hand, the Ld. A.R. for the assessee, relied upon the decision of ITAT, Visakhapatnam 3 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry bench in the case of T. Appalaswamy Vs. ACIT in ITA No.65 & 66/Vizag/2012. We have gone through the case laws relied upon by the assessee in the light of the facts of the present case and finds that the coordinate bench of this Tribunal, under similar circumstances held that estimation of 5% net profit on purchases is reasonable. The relevant portion of the order is reproduced hereunder:
"3. We have heard the parties, perused the orders of the revenue authorities as well as other materials on record. It is the contention of the Ld. A.R. that the estimation of profit at 16% is high and excessive considering the normal rate of profit in this line of business. Whereas, the Ld. D.R. supported the order of the CIT(A). Having considered the submissions of the assessee, we are of the view that the issue is no more res integra in view of a series of decisions of the ITAT Hyderabad bench in similar cases. The coordinate bench in case of ITA No.127/Hyd/12 and others dated 18.05.2012 as well as a number of other cases have held that profit in case of business in Indian made foreign liquor has to be estimated at 5% of the purchases made by the assessee. Therefore, following the decision of the ITAT Hyderabad bench, we set aside the order of the CIT(A) and direct the assessing officer to estimate the profit from the wine business of the assessee by applying the rate of 5% of the purchases made net of all other deductions. The assessing officer should also bear in mind that in no case the income determined should be below the income returned."
9. Considering the facts and circumstances of this case and also respectfully following the ratios of coordinate bench, we are of the view that the net profit estimated by the A.O. by relying upon the decision of Hon'ble A.P. High Court (supra), which was rendered under different facts is quite high. On the other hand, the assessee relied upon the decision of coordinate bench and the coordinate bench under similar circumstances estimated the net profit of 5% on total purchases net of all deductions. No contrary decision is placed on record by the revenue to take any other view of the matter than the view so taken by the coordinate bench. Therefore, we direct the A.O. to estimate the net profit of 5% on total purchases net of all deductions. Ordered accordingly.
6. In view of the above decision of the coordinate bench of the Tribunal, we direct the A.O. to re-compute the income of the assessee 4 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed.
7. Ground Nos.1.3 to 1.5 are related to the addition with regard to unexplained investment of ` 2,82,767/- and unsecured loans of ` 18,25,000/-. During the assessment proceedings, the A.O. found that assessee has made investment of ` 2,82,767/- to meet the initial payment of license fee of ` 28,92,767/-. The assessee has been requested to explain the source of the investment and the assessee could not furnish any evidence to explain the source of investment. Therefore, the A.O. made the addition of ` 2,82,767/- to the retuned income.
Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A). The Ld. CIT(A) confirmed the addition made by the A.O. The Ld. CIT(A) observed that the assessee has filed the return of income for the first time and made the payment of license fee of ` 28,92,767/- for which the capital introduction was ` 19,60,000/- and the balance amount of ` 2,82,767/-for which the source required to be explained. The A.O. made the addition of ` 19,60,000/- as unexplained capital and ` 2,82,767/- as unexplained investment. Before the CIT(A) also, the assessee could not furnish any evidence with regard to source 5 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry of the investment of ` 2,82,767/-. The sole argument of the assessee was that once the income is estimated by rejecting the books of accounts, no separate addition required to be made. In this case, the assessee has made the investment in the beginning of the year and it has no connection with the business carried on by the assessee. The assessee has not produced any evidence to show that the amount of ` 2,82,767/- was generated out of the business. Before the Tribunal also, the assessee failed to furnish any evidence. Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. The assessee's appeal on this issue in the grounds of appeal is dismissed.
8. The next issue of addition in ground Nos.1.3 to 1.5 is related to the addition confirmed by the Ld. CIT(A) towards unsecured loans. During the assessment proceedings, the assessing officer found that the assessee has made the payment of Rs. 28,92,767/- as license fee. Out of which the unsecured loans claimed to be Rs.19,60,000/- as the source and the same was credited to the capital account. The assessee did not furnish any evidence before the AO for the unsecured loans. He did not submit the details, hence the AO made the addition of Rs.19,60,000/- to the returned income.
6 ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and filed additional evidence in the form of affidavit with regard to unsecured loans. The Ld. CIT(A) called for the remand report from the A.O. and enquired into the genuineness and creditworthiness of the unsecured loans. The A.O. submitted the remand report. The Ld. CIT(A) after considering the remand report examined the each credit and given a finding that the credit transactions were not genuine except in the case of Velligotla Rama Satyanarayana. The addition made in the remaining credits were confirmed by the Ld. CIT(A) totaling to ` 18,25,000/- against which the assessee is in appeal before this Tribunal.
9. Appearing for the assessee, the Ld. A.R. argued that the Ld. CIT(A) has not taken note of the additional evidence filed u/s rule 46A of the Act and the remand report of the A.O. Further, the Ld. A.R. argued that once the income is estimated, no separate addition towards unexplained investments required to be made.
10. Per contra the Ld. D.R. argued that though the A.O. accepted certain credits, but the A.O. has not properly verified the creditworthiness and genuineness of the transaction. The Ld. CIT(A) has examined each credit in detail and given finding that the 7 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry transactions were not genuine. Further, it was also found that the advances were given by way of DDs from the alleged creditors, but there was no evidence to show that the creditors have taken the DDs. It was also observed by the Ld. CIT(A) that there was no evidence to show that the DDs were taken out of withdrawals. Therefore, the Ld. D.R. argued that the Ld. CIT(A) has rightly confirmed the additions and there is no interference is called for.
11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. In this case the impugned credits were ` 19,60,000/-, which was introduced by the assessee in the beginning of the year and hence it cannot be held that the credits were made out of the business income. The Ld. A.R. also argued that the sources were from unsecured loans, therefore, the argument of the assessee is apparently contradictory with regard to the source of explanation. During the assessment year, the assessee claims to have sourced the unsecured loans from the following persons:
S.No. Name of the creditor Amount
1 Geddada Kotayya 1,35,000/-
2 Jogi Peddiraju 1,35,000/-
3 Katta Uma Maheswara Rao 1,35,000/-
4 Kudupudi Jagapathi Rao 1,35,000/-
5 Lankapalli Satyanarayana 1,35,000/-
6 Manya Srinu 1,35,000/-
7 Myam Rambabu 1,35,000/-
8 Mynam Rattaih 1,35,000/-
9 Pitani Nagaraju 1,35,000/-
10 Pitani Saibabu 1,35,000/-
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ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry
11 Pulluri Prasad 1,35,000/-
12 Veligatla Manikyala Rao 1,35,000/-
13 Veligatla Narasimha Swamy 1,35,000/-
14 Veligotla Rama 1,35,000/-
Satyanarayana
15 Mynam Srinu 45,000/-
16 P. Kishore 15,000/-
17 R. Phani Shankar 10,000/-
12. Out of the above loans, the Ld. CIT(A) allowed the credit in respect of Veligotla Rama Satyanarayana amounting to ` 1,35,000/- and the remaining amount of ` 18,25,000/- was confirmed by the Ld. CIT(A). Therefore, the assessee filed the appeal challenging the addition confirmed by the Ld. CIT(A). The Ld. CIT(A) in his order examined each credit in detail and given finding that the credits are not genuine. For ready reference, we extract relevant paragraph of the Ld. CIT(A) order from para 7.1 to 7.19, which reads as under:
7.1 Credit in the name of Geddada Kotayva:
The assesse had filed before the AO confirmation letter from one Geddada Kondayya, S/0. Pullayya on 10.022014 confirming advance of Rs.1,35,000/- to the assessee. Subsequently, an affidavit was filed before the 01(A) confirming the said advance. It is noted that the affidavit was signed by one Geddada Peda Kondayya, 5/0. Pullayya. It is further noted that the signature in the confirmation letter and the signature in the affidavit though in Telugu are totally different raising doubts as to the identity of the creditor and genuineness of the transaction. The assessee also failed to produce the alleged creditor before the AO for examination. Further, the assessee has not furnished any evidence regarding the creditworthiness of this creditor. As per the household card, the annual income was Rs.30,000/- indicating that the alleged creditor lack capacity to advance the impugned amount. Hence the impugned addition in regard to this creditor is upheld.9 ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry 7.2 Credit in the name of Jogi Peddiraju:
The assesse had filed before the AO confirmation letter from one J. Peddiraju, S/o. subbarao on 27.02.2014 confirming advance of Rs.1,35,000/- to the assessee. Subsequently, during the appeal hearing an affidavit from one Jogi Peddiraju was filed confirming the said advance. The assessee failed to produce the creditor for examination. It is noted that the signature in the confirmation letter and the signature in the affidavit were totally different. This is also different from the signature appended in the household card enclosed with the affidavit. Thus the identity of this alleged creditor was not proved. The annual income of the alleged creditor was Rs.20,000/- per annum as per the household card enclosed, indicating that the alleged creditor lacks capacity to advance the impugned amount. It is also noted that an affidavit was filed from Jogi Peddiraju in the case of Nelli Trimurthulu, another liquor dealer confirming advance of Rs.1.35 lakh. It is improbable that this party without any regular source of income could advance such huge amounts, indicating the he was merely a name lender without any source. In the circumstances, it is held that the assessee failed to prove the identity and creditworthiness of this transaction. Hence the impugned addition in regard to this creditor is confirmed.
7.3 Credit in the name of Katta Uma Maheswararao:
The assesse had filed before the AO confirmation letter from one Katta Uma Maheswararao, Sb. Dharmaraju on 25.02.20 14 confirming advance of Rs.1,35,000/- to the assessee. The said confirmation letter was signed in English. Subsequently, during the appeal hearing an affidavit from one Katta Uma Maheswararao was filed confirming the said advance. It is noted that the confirmation letter was signed in English whereas the affidavit was signed in Telugu. The assessee produced one Katta Uma Maheswara Rao. D.No.2-199, Kadali village before the AO for examination on 10.03.2016 and who deposed that he was doing carpentry work and that his annual income was Rs.13,000/per month from carpentry and that his annual income from agricultural activity was Rs.50,000/- per annum, and that out of such income advance was made to the assessee. It is noted that the signature in the affidavit and the signature in the sworn deposition are different. Further, it is also seen that the signature in the household card is different from the signature in the sworn deposition and affidavit raising doubt as to the identity of the alleged creditor and genuineness of the transaction. As per the household card, the annual income was stated to be only Rs.18,000/-. In view of these discrepancies, the identity, genuineness and creditworthiness of this credit transaction are in doubt. Hence the impugned addition in regard to this credit is confirmed.10 ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry 7.4 Credit in the name of Kudupudi Jagapathi Rao:
The assesse had filed before the AO confirmation letter from one K. Jagapathirao, Sb. Narayana Swamy on 01.03.2014 confirming advance of Rs.1,35,000/- to the assessee. The said confirmation letter was signed in English. Subsequently, during the appeal hearing an affidavit from one Kudupudi Jagapathi Rao was filed confirming the said advance to the assessee. The said affidavit was signed in Telugu. The difference in the signature in the confirmation letter and the affidavit clearly show that the persons who have signed these documens are different raising doubts as to the genuineness of the transaction and identity of the creditor. The assessee produced one K. Jagapathi Rao before the AO, who deposed that he was having agricultural land of an extent of 1.5 acres and has taken 6 acres on lease and that the agricultural income per year was Rs. 1 lakh, and that the amount was given out of such income. The signature in the affidavit and sworn deposition are also different. Thus the identity of the alleged creditor, the genuineness of this transaction remain doubtful. Hence the impugned in regard to this credit is upheld.
7.5 Credit in the name of Lankapalli Satyanarayana:
The assesse had filed before the AO confirmation letter from one Lankapalli Satyanarayana, Sb. Narayanamurthy on 09.02.2014 confirming advance of Rs.1,35,000/- to the assessee. The said confirmation letter was signed in English. Subsequently, during the appeal hearing an affidavit from one Lankapalli Satyanarayana was filed confirming the said advance. The assessee produced one Satyanarayana before the AO for examination, who deposed that he was having income from real estate commission of Rs.1,20,000/- to Rs.1,50,000/- every year and that out of such income, the said advance was made. It is noted that the signature in the confirmation letter and the signature in the affidavit are totally different raising doubt as to the genuineness of the transaction and identity of the creditor. As per the household certificate enclosed, the annual income was only Rs.19,000/- and thus the alleged creditor would not have sufficient capacity to make the impugned advance to the assessee. As the identity, genuineness of the credit transaction and creditworthiness of the alleged creditor is in doubt, the impugned addition in regard to this credit is confirmed.
7.6 Credit in the name of Manya Srinu:
The assesse had filed before the AO confirmation letter from one Manya Srinivasarao, 10. Venkataratnam on 11.02.2014 confirming advance of 11 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry Rs.1,35,000/- to the ;sessee. Subsequently, during the appeal hearing the assessee filed an affidavit from e Mainam Srinivasa Rao, S/o. Venkataratnam confirming advance to the assessee of 3.45,000/-. It is noted that the signature in the confirmation letter was in English whereas the signature in the affidavit was in Telugu indicating that the parties who we signed these documents were different. The assessee produced one Mainam Srinivasa Rao before the AO for examination. The sworn deposition was signed in Telugu, but the signature was different from the one in affidavit indicating that the person who signed the affidavit did not sign the sworn deposition. Thus the identity of this alleged creditor and genuineness of transaction is in doubt. It is also noted that in the affidavit, the amount of advance confirmed was Rs.45,000/-, and it was said to be given by way of DD Nos.785283 and 784156, a copy of the DD No.784156 was enclosed, which was found to be for an amount of Rs.45,000/-. Thus, there is discrepancy as to the amount said to be advanced. All these clearly indicate that the credit transaction was only a make believe arrangement. In the circumstances, the impugned addition in regard to this credit is confirmed.
7.7 Credit in the name of Mainam Rambabu:
The assesse had filed before the AO confirmation letter from one Mainam Rambabu, S/o. Satyanarayana on 09.02.2014 confirming advance of Rs.1,35,000/- to the assessee. The assessee did not file any affidavit in respect of this creditor and also did not produce this creditor for examination. Further, no information was filed as to the creditworthiness of this creditor. Thus the identity and creditworthiness of the creditor was not proved. It is also noted that confirmation letters from Mynam Rambabu bearing same address and identity were also filed in the case of other liquor dealers Balusu Prasad and Nelli Trimurthulu confirming advance of Rs.1.35 lakh each. It is improbable that a person without any regular income source could advance huge amounts and that too without interest. These clearly show that this person acted as a mere name lender without any income source, and also raise serious doubts as to the genuineness of the transaction. Hence the impugned addition in regard to this credit is confirmed.
7.8 Credit in the name of Mainam Rattaiah:
The assesse had filed before the P0 confirmation letter from one Mainam Rattaah, Sb. 5ubbarao on 21.02.2014 confirming loan of Rs.1,35,000/- to the assessee. The assessee did not file any affidavit from this creditor nor could produce this creditor for examination. Further, no information was filed as to the creditworthiness of this creditor. Thus the identity and the creditworthiness of the creditor are not proved. Hence the impugned addition in respect of this credit is confirmed. It is pertinent to note that 12 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry confirmation letter was filed from M. Rattaiah, but affidavit was ltd from one Mynam Venkataratnam to prove the alleged credit in the name of M. Rattaiah. It is also noted that affidavits from Mynam Venkataratnam were filed in the case of other liquor dealers namely Balusu Prasad, Nelli Trimurthulu confirming advance of Rs.1.35 lakh each to them. In all these cases M. Rattaiah was shown as creditor in the balance sheet. It is improbable that a person without any regular income could advance such huge amount clearly indicating that he acted merely as name lender without any income source. This also raises serious doubts as to the genuineness of these transactions. As the identity, genuineness and creditworthiness of this credit transaction was not proved, the impugned addition in regard to this credit is confirmed.
7.9 Credit in the name of Pitani Nagaraju:
The assesse had filed before the AU confirmation letter from one Pithani Nagaraju, S/o. Kotaiah on 10.02.2014 confirming advance of Rs.1,35,000f- to the assessee. Subsequently, during the appeal hearing an affidavit was filed from one Pithani Nagara]u confirming advance of said amount to the assessee It is noted that the signature in the confirmation letter and the signature in the affidavit were totally different indicating that the person who signed the confirmation letter and the person who signed the affidavit are different raising doubts as to the identity of creditor and genuineness of transaction. The assessee produced one Pithani Raju for examination before the AO, who had deposed that he was getting income for Rs.1.5 Lakh from agricultural activity in one acre of land owned by him and 2 acres of land taken on lease, and that the impugned advance was made out of such income. No Supporting document was furnished in respect of agricultural income. Even otherwise, it is improbable that the alleged creditor could advance the impugned amount out of such meager income; thus the creditworthiness of this creditor is also in doubt. In the circumstances, it is held that the assessee failed to prove the identity, creditworthiness and genuineness of this transaction. Hence the impugned addition in regard to this creditor is confirmed.
7.10 Credit in the name of Pitani Saibabu:
The assessee had filed before the AD from one P. Saibabu confirming advance of Rs.1,35,000/- to the assessee. The assessee did not file any affidavit, nor could produce the creditor for examination before the AO. Further, no information was furnished as to the income capacity of the creditor to advance impugned amount. Thus the identity of the creditor and the creditworthiness of the creditor was not proved. Hence the impugned addition in regard to this credit is confirmed.13 ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry 7.11 Credit in the name of Pulluri Prasad:
The assesse had filed before the AD confirmation letter from one Pulluri Prasad, S/o Rattaiah on 02.03.2014 confirming advance of Rs.1,35,000/- to the assessee. The said confirmation letter was signed in English. Subsequently, during the appeal hearing an affidavit was filed from one Palluri Prasad confirming the advance of said amount. The said affidavit was signed in Telugu indicating the person who signed the confirmation letter and the person who signed the affidavit are different. The assessee could not produce this creditor before the AO for examination. Thus, the identity of the alleged creditor and the genuineness of the transaction is in doubt. No supporting evidence was filed as to the creditworthiness of the creditor. It is also noted that affidavits of the above alleged creditor Pulluri Prasad were filed in the case of other liquor dealers namely Balusu Prasad, Nelli Trimurthulu confirming advance of Rs.1.35 lakh each to them. It is improbable that a person without any regular income could make such huge advances. These clearly show that he acted merely as name lender without any income This also raises serious doubts as to the genuineness of these transactions. C./T)1us the identity, genuineness and creditworthiness of this credit transaction was not N4roved. Hence the impugned addition in regard to this credit is confirmed.
7.12 Credit in the name of Veligatla Manikyala Rao:
The assesse had filed before the AO confirmation letter from one Veligatla Manikyalarao, Sb. Krishnarao on 08.02.2014 confirming advance of Rs.1,35,000/- to the assessee. Subsequently, during the appeal hearing an affidavit was filed from one Veligatla Manikyala Rao confirming the said advance to the assessee. It is noted that the signature in the confirmation letter and the signature in the affidavit are totally different raising doubt as to the genuineness of the transaction. The assessee produced one V. Manikyala Rao for examination before the AD, who deposed that he has income from agricultural activity, rental income from tractor and also commission income, and that his total income was Rs.2,05,000/- per annum and that out of such income the impugned advance was said to be given to the assessee. The assessee enclosed copy of household card in support of identity of this creditor; the perusal of the same show that annual income was Rs.14,000/- as daily wage earner. This clearly indicate that this alleged creditor lack creditworthiness to advance the impugned amount. It is also noted that affidavit of this creditor was filed in the case of another liquor dealer Nelli Trimurthulu confirming advance of Rs.1.35 14 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry lakh to him. It is improbable that a person without any regular income could make such huge advances. This clearly indicate that he acted merely as name lender without any income source. This also raises serious doubts as to the genuineness of these transactions. In view of the above discrepancies, and as the identity, genuineness and creditworthiness of this credit transaction was not proved, the impugned addition in regard to this credit is confirmed.
7.13 Credit in the name of Vehgot!a Narasimha Swamy:
The assesse had filed before the AO confirmation letter from one Veligotla Narasimha Swamy, S/o. Suranna on 17.02.2014 confirming advance of Rs.1,35,000/- to the assessee. Subsequently, during the appeal hearing an affidavit was filed from one Veligatla Narasimha Swamy confirming advance to the assessee.. However, it is noted that the signature in the confirmation letter and the signature in the affidavit though in Telugu were totally different raising doubt as to the identity of this creditor and genuineness of the transaction. The assessee has produced this creditor for verification before the AO, who had deposed that he was having agricultural income to the tune of R.1,50,000/-and rental income to the tune of Rs.12,000/- per month. He had posed that he owns 3 acres of land and had taken lease of 2 acres of land and out of which earns agricultural income of Rs.1,50,000/- per annum. As the genuineness of the transaction is in doubt, the impugned addition in regard to this creditor is confirmed.
7.14 Credit in the name of Veliqotla Rama Satyanaravana:
The assesse had filed before the AO confirmation letter from one Veligotla Rama Satyanarayana, Sb. Venkata Narasayya on 06.02.2014 confirming advance of Rs.1,35,000/- to the assessee. Subsequently, during the appeal hearing an affidavit was filed from one Veligotla Rama Satyanarayana confirming advance to the assessee. The assessee has produced this creditor for examination before the AO on 10.03.2016, who had deposed that he is a partner in MIs. Gayathri Finance and Sri Laxmi Gayathri Firm and that his income from the firms was around Rs.2 lakh per year and he has agricultural income to the tune of Ra75,000/- per year. It was also stated that he is assessed to tax with ITO, Ward-2, Amalapuram and is regularly filing his returns of income. The AO may verify the return of income of the said party for the subject year, and if the impugned transaction is reflected therein, the impugned addition may be deleted.
7.15 -- Credit in the name of Mynam Srinu:
The assesse had filed before the AO confirmation letter from one Mynam 15 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry Srinu, Sb. Rajarao on 05.12.2013 confirming advance of Rs.1,35,000/- to the assessee, Subsequently, during the appeal hearing an affidavit from one Maryann Srinivas, S/o. Raja Rao confirming advance of Rs.1,35,000/- to the assessee vide three ODs. The signature in the confirmation letter and the signature in the affidavit were totally different raising doubts as to the genuineness of the transaction. The assessee produced this creditor for examination before the AO, who deposed that he was engaged in agricultural activities and that his total income was Rs.1,50,000/- per annum and that he had advanced an amount of Rs.1,35,000/- out of such income. It is noted as per the balance sheet, the amount advanced by this creditor was only Rs.45,000/-, which clearly indicates that the alleged credit transaction is only a make believe arrangement. Hence, the impugned addition in regard to this credit is confirmed.
7.16 Credit in the name of Pullamsetty Krishna Kishore:
The assesse had filed before the AO confirmation letter from one Pullamsetty Krishna Kishore, S/o. Veerabhadrarao on 25.02.2014 confirming advance of Rs.15,000/- by way of cash to the assessee. Subsequently, during the appeal hearing an affidavit was filed from one Pullamsetty Krishna Kishore confirming the advance of Rs.15,000/- to the assessee by way of DD drawn in favour of the District Collector, East Godavari District. The assessee could not produce this creditor for verification before the AO. It is noted that the signature in the affidavit and the signature in the confirmation letter though in English were totally different raising doubt as to the identity of this creditor and genuineness of the transaction. Besides it is also noted that as per the confirmation letter the loan amount was said to be given in cash and whereas in the affidavit the alleged loan amount was said to be given by way of DD. In view of these discrepancies, it is evident that the impugned transaction is not genuine. Hence the impugned addition made by the AO in regard to this credits upheld.
7.17 Credit in the name of Raparthi Phani Kishore:
It is seen that assessee did not file any confirmation letter before the AO in respect of this creditor. An affidavit was filed before the CIT(A) from one Raparthi Phani Kishore confirming advance of Rs.10,000/- by way of DD on 07.06.2010. The assessee produced this creditor before the AO, who deposed that he has income of Rs.2.5 Iakh from contract works and confirmed advance of Rs10,000/- to the assessee out of his income. He 16 ITA No.84/Vizag/2017 Katta Srinivasa Rao, Rajahmundry also deposed that the was assessed to tax and filed a copy of return of income for A.Y.2011-12. It is also noted that affidavit from this creditor was filed in the case of another liquor dealer Meka Murali Krishna confirming advance of Rs.15,000/- to him. The AO may verify whether the Impugned transaction is declared in the return of income of the said creditor. If the same was not declared, the impugned addition would stand confirmed.
7.18 It is pertinent to note that the assessee had filed affidavit from one Mynam Venkataratnam confirming advance of Rs. 1,35,000/- to the assessee but whose name does not figure in the list of creditors stated in the balance sheet. This affidavit purportedly filed to prove credit in the name of M. Rattaiah. It is further noted that affidavit from Mynam Venkataratnam were also filed in the case of other liquor dealers namely Balugu Prasad, Nelli Trimurthulu confirming advance of Rs.1.35 lakh in each case. In all these cases M. Ratiah was shown as creditor in the balance sheet. It is improbable that a person without any regular income could advance such huge amount indicating that he acted merely as name lender. This also goes to prove that the genuineness of most of the above credit transactions are doubtful.
7.19 It is also pertinent to note that it was claimed that these credit transactions were by way of DDs from the alleged creditors. However, there is no evidence to show that the alleged creditors have taken the DDs. It is further noted that there was no evidence to show that the DDS were taken out of cheque withdrawals. The serial numbers of the DDs and the manner in which the cash DDs were taken to pay the licence fee also raises doubts as to the genuineness of these credit transactions which would be additional reason to confirm the above additions.
13. As per the detailed discussion made by the Ld. CIT(A), the credits are not genuine. All the credits were claimed to be transactions by way of DDs from the creditors. However, the assessee has not produced any evidence to show that the DDs were taken by the respective creditors and the Ld. A.R. did not bring any evidence to controvert the finding of the Ld. CIT(A). Therefore, we do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld. In the result, appeal of the assessee on this ground is dismissed.
17ITA No.84/Vizag/2017
Katta Srinivasa Rao, Rajahmundry
14. In the result, the appeal filed by the assessee is partly allowed. The above order was pronounced in the open court on 27th Sept'17.
Sd/- Sd/-
(वी. दग
ु ाराव) ( ड.एस. सु दर "संह)
(V. DURGA RAO) (D.S. SUNDER SINGH)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam:
'दनांक /Dated : 27.09.2017 VG/SPS आदे श क त)ल#प अ*े#षत/Copy of the order forwarded to:-
1. अपीलाथ / The Appellant - Katta Srinivasa Rao, D.No.79-22-8, Vadrevu Nagar, Rajahmundry.
2. याथ / The Respondent - The ITO, Ward-3, Rajahmundry
3. आयकर आय+ ु त / The CIT, Rajahmundry
4. आयकर आय+ ु त (अपील) / The CIT (A), Rajahmundry
5. #वभागीय त न.ध, आय कर अपील य अ.धकरण, #वशाखापटणम / DR, ITAT, Visakhapatnam
6. गाड फ़ाईल / Guard file आदे शानुसार / BY ORDER // True Copy // Sr. Private Secretary ITAT, VISAKHAPATNAM 18