2024 (9) TMI 868 - AT - Income Tax

Addition u/s. 69 - unexplained investment - HELD THAT - With regard to agricultural income, before the AO the assessee has furnished the copies of confirmation letters along with Pattadar Passbooks of his family members. It is evident from the AO s order that the assessee has also furnished the certificates issued by the Village Revenue Officer VRO of Devudala Village, Regidi, Amudalavalasa Mandal, Srikakulam District wherein the VRO has certified that an aggregate income per yield will come from the agricultural lands of the assessee s family members. Further, with regard to the loan advanced by the assessee s brother, the assessee has also furnished the return of income to evidence the creditworthiness of Mr. Y. Rajasekhara Rao. Assessee has also produced the copies return of income his family members, confirmation letters from the assessee s family members, Pass Books of the assessee s family members evidencing their agricultural land holdings and the certificates issued by the VRO as well as the copy of the return of income filed by the assessee s brother Mr. Y. Rajasekhara Rao for the AY 2014-15 and 2015-16. On perusal of all these documents as well as the submissions of the assessee, the assessee s family members are having agricultural income and the assessee s brother is also having creditworthiness to advance loan to the assessee. We hereby grant relief to the assessee to the extent of Rs. 5 lakhs towards agricultural income and Rs. 2 lakhs towards the loan availed from the assessee s brother Mr. Y. Rajesekhara Rao as explained out of Rs. 15 lakhs additions made u/s. 69 AO s estimation of 5% of the total value of the stock put to sale as profit in the liquor business of the assessee - HELD THAT - It is an undisputed fact that the assessee was engaged in the liquor business. During the proceedings before the Ld. Revenue Authorities, the assessee has not produced sales bills in support of the sales admitted during the year in the Trading and P L Account and has also not produced any books of account for verification. Under these circumstances, the Ld. AO proposed to reject the book results of the assessee and resorted to estimate the income on liquor business @ 5% on the stock put to use during the year under consideration. On similar set of facts and circumstances, the Division Bench of this Tribunal in the case of Kalla Viswanatha Babu 2022 (7) TMI 549 - ITAT VISAKHAPATNAM has estimated the net profit @ 5% of the purchase price of the stock which was put to sale against 10% estimated by the Ld. CIT(A). We uphold decision of the CIT(A)-NFAC in sustaining the decision of the Ld. AO in estimating the net profit @ 5% of the purchase price of the stock that was put to sale which is net of deductions. Accordingly, this issue raised by the assessee is dismissed.

Summary

Issues:
1. Whether the addition of Rs. 15,00,000 made by the AO u/s. 69 of the Act on account of unexplained investment is justified?
2. Whether the confirmation of the AO's estimation of 5% of the total value of the stock put to sale as profit in the liquor business is justified?

Analysis:

1. The appeal was against the order of the CIT(A)-NFAC regarding the assessment for AY 2016-17. The assessee, engaged in liquor business, had filed his return but failed to provide necessary information during scrutiny. The AO made additions, including Rs. 15,00,000 as unexplained investment. The CIT(A)-NFAC upheld the AO's decision. The Tribunal considered evidence of agricultural income and loan from family members, granting relief of Rs. 5 lakhs for agricultural income and Rs. 2 lakhs for the loan, thus partly allowing the appeal.

2. The second issue involved the estimation of income at 5% of the total stock put to sale by the AO. The AR argued for a lower estimation based on Tribunal precedents. However, the Tribunal upheld the AO's decision, citing lack of evidence provided by the assessee and relying on a previous Division Bench decision. The Tribunal dismissed this issue raised by the assessee, upholding the 5% estimation.

In conclusion, the Tribunal partly allowed the appeal by granting relief on the unexplained investment issue but upheld the estimation of income at 5% of the stock put to sale in the liquor business. The decision was pronounced on 10th September, 2024.