TMI Blog2017 (11) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... also doubtful. None of the creditors are having credit worthiness to make the advances. The ld. CIT(A) also verified the transactions with respect to the DDs purchased and found that there was no evidence to show that the creditors have taken the DDs and the DDs were taken out of the bank withdrawals. The serial No. of DDs and the manner in which DDs were taken to pay the license fee also held to be doubtful and the transactions cannot be held as genuine. During the appeal hearing, 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 and the appeal of the assessee on this ground is dismissed. - I.T.A.No.85/Vizag/2017 - - - Dated:- 27-7-2017 - SHRI V . DURGA RAO, JUDICIAL MEMBER AND SHRI D . S . SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri C . Subrahmanyam, AR For The Respondent : Shri T . Satyanandam, DR ORDER 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eign 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the confirmations before the Ld.CIT(A). The Ld.CIT(A) admitted the additional evidence and called for the remand report from the A.O. The A.O. conducted the enquiries and submitted the remand report to the Ld. CIT(A) accepting the genuineness of the unsecured loans in the following cases: S . No . Name of the creditor Amount ( Rs .) 1 Akula Ramakrishna Rao 5,50,000/- 2 Sri Sunkara Padmanabham 2,00,000/- 3 Sri Pitani Venkata Durga Prasad 2,50,000/- 4 Sri Akula Bhaskara Rao 2,00,000/- 5 Sri Kondepudi Satyanarayana 1,00,000/- 6 Sri Kanchumarthy Durga Prqasad 1,00,000/- 7 Sri Akula Shyam Babu 2,00,000/- 8 Sri Pasupuleti Ramesh 1,00,000/- 8. However, the Ld. CIT(A) did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as under: 7 . 2 Credit in the name of Pithani Venkata Durga Prasad : The assesse had filed before the AO confirmation letter from one Pithani Venkata Durga Prasad,S / o Trimurthulu on 28 . 02 . 2014 confirming advance of Rs . 2,50,000 /- given to the assessee by way of DDs in favour of Excise department . It was also stated that the he was an Income - tax assessee having income from liquor business . Subsequently, the assessee filed an affidavit before the C1T ( A ) from one P . Venkata Durga Prasad confirming the advance of Rs . 2,50,000 /-. The assessee produced this creditor for verification before the AO and the said creditor deposed that he had advanced an amount of Rs . 2,50,000 /- to the assessee and that an amount of Rs . 2,25,000 /- was given by way of DDs and Rs . 25,000 /- was by way of cash . It was also stated that the amount was given from his accumulated savings from 2002 to 2008 out of his liquor business and small contract works . To the query whether the amount advanced to the assessee was reflected in his balance sheet, the creditor replied that he has not maintaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 02 . 03 . 2014 conf irming advance of Rs . 1,00,000 /- given to the assessee by way of DD in favour of Excise department . Subsequently, during the appeal hearing the assessee filed an affidavit from the Kondepudi Satyanarayana before the CIT ( A ) confirming advance of Rs . 1,00,000 /- to the assesee . The assessee produced this creditor for verif ication before the AO, who deposed that he was working as labour mastry in and around Rajahmundry and that an amount of Rs . 90,000 /- was given by way of DDs and ₹ 10,000 / by way of cash out of accumulated balance since his childhood . It is noted that the signature in the confirmation letter was totally different from the signature in the affidavit raising doubt as to the genuineness of the transaction . From the perusal of sworn deposition it is apparent that it is improbable that the alleged creditor advanced the impugned amount of Rs . 1,00,000 /- out of his paltry income as labour maistry and that too without interest . Thus the genuineness and creditworthiness of the transaction remain doubtful . Hence the impugned addition in regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sesse had filed before the AO confirmation letter from one Pasupuleti Ramesh S / o . Basavayya on 19,02 . 2014 confirming advance of Rs . 1,00,000 /- given to the assessee by way of DD . Subsequently, during the appeal hearing the assessee filed an affidavit from this creditor before the CIT ( A ) confirming advance of Rs . 1,00,000 /- given by way of 2 DDs . The assessee produced this creditor for verification before the AO on 08 . 03 . 2016, who deposed that he was engaged as consultant in real estate business from 2012 and before that he was having rice shop . It was stated that he was earning Rs . 10,000 /- per month from rice shop and that out of his accumulated savings from rice shop, the impugned advance was made to the assessee . It was also stated that an amount of Rs . 90,000 /- was given by way of DDs and Rs . 10,000 /- by way of cash . From the deposition, it is evident, that it is improbable that this creditor could advance the alleged amount out of such paltry income and that too without interest . Thus the creditworthiness of the creditor is doubtful . Hence the impugned add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in regard to this creditor is confirmed . 7 . 11 It is 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 . 12. The Ld. CIT(A) examined the transaction of each creditor and given finding that the transactions are not genuine and in some cases the identity of the creditor was also doubtful. None of the creditors are having credit worthiness to make the advances. The ld. CIT(A) also verified the transactions with respect to the DDs purchased and found that there was no evidence to show that the creditors have taken the DDs and the DDs were taken out of the bank withdrawals. The serial No. of DDs and the manner in which DDs were taken to pay the license fee ..... 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