N. Murali, CHENNAI V. ACIT, CHENNAI

CO 165/CHNY/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9242 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 23-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R PADMANABHAN
• Assessee Lawyers: S DAS GUPTA IRS
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , !' , # $! % BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ITA NO.1664/MDS//2013 / ASSESSMENT YEAR : 2009-10 AND C.O.NO.165/MDS/2013 (IN ITA NO.1664/MDS/2013) THE ASSISTANT COMMISSIONER OF INCOME-TAX, MEDIA CIRCLE-I, CHENNAI 34. VS. MR. N. MURALI, NO.4, NORTON 3 RD ST., MANDAVELI, CHENNAI 600 028. PAN AGTPM6838R ( '& / APPELLANT) (( '('& /RESPONDENT/CROSS- OBJECTOR) /APPELLANT BY : SHRI S.DAS GUPTA, IRS, JCIT / RESPONDENT BY : SHRI R. PADMANABHAN, FCA /DATE OF HEARING : 23 RD JANUARY, 2014 /DATE OF PRONOUNCEMENT : 23 RD JANUARY, 2014 - ITA 1664 & CO 165/MDS/13 - 2 $) / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THE APPEAL FILED BY THE REVENUE RELATES TO THE ASSESSMENT YEAR 2009-10. THE CROSS OBJECTION RELATING TO THE SAME ASSESSMENT YEAR IS FILED BY THE ASSESSEE. BOTH ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VI AT CHENNAI, DATED 12-4-2013. THEY ARISE OUT OF THE AS SESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. 2. THE ONLY GROUND RAISED BY THE REVENUE IN THE PR ESENT APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEA LS) HAS ERRED IN DIRECTING THE ASSESSING AUTHORITY TO ESTIMATE TH E PROFIT AT 6% OF THE GROSS RECEIPTS EXCLUDING THE SERVICE TAX AS AGA INST THE ESTIMATION AT 10% OF THE GROSS RECEIPTS MADE BY THE ASSESSING OFFICER. 3. THE ASSESSEE IN THE PRESENT CASE IS A PRODUCER OF TV SERIALS AND HAS FILED HIS RETURN OF INCOME. IN THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER FOUND THAT A LION -SHARE OF EXPENDITURE CLAIMED BY THE ASSESSEE AS DEDUCTIONS H AS NOT BEEN - ITA 1664 & CO 165/MDS/13 - 3 SUPPORTED BY ANY VOUCHERS OR EVIDENCES AND SO ALSO MAJORITY OF PAYMENTS WERE MADE IN CASH AND AS SUCH, THE GENUINE NESS OF THE VOLUME OF EXPENDITURE CLAIMED BY THE ASSESSEE COULD NOT BE ACCEPTED. ACCORDINGLY, HE PROCEEDED TO ESTIMATE TH E PROFIT. THE ASSESSEE ALSO AGREED TO COMPLETE THE ASSESSMENT ON AN ESTIMATE BASIS AND HE PLEADED FOR A PROFIT AT THE RATE OF 6% . BUT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AFTER ES TIMATING THE PROFIT AT 10% OF THE GROSS RECEIPTS. 4. IN FIRST APPEAL, THE COMMISSIONER OF INCOME- TAX(APPEALS) UPHELD THE DETERMINATION OF INCOME ON AN ESTIMATE BASIS. HE DIRECTED THE ASSESSING OFFICER TO ESTIMA TE THE PROFIT AT 6% OF THE GROSS RECEIPTS EXCLUDING THE SERVICE TAX. THE REVENUE IS AGGRIEVED ON THIS MODIFICATION GRANTED BY THE CO MMISSIONER OF INCOME-TAX(APPEALS) AND, THEREFORE, THIS SECOND APP EAL BEFORE THE TRIBUNAL. 5. WE HEARD SHRI S. DAS GUPTA, THE LEARNED JOINT COMMISSIONER OF INCOME-TAX, APPEARING FOR THE REVEN UE AND SHRI R. PADMANABHAN, THE LEARNED CHARTERED ACCOUNTANT, A PPEARING FOR THE ASSESSEE. - ITA 1664 & CO 165/MDS/13 - 4 6. IN THE COURSE OF ARGUMENT, THE COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ASSESSEE HAS M AINTAINED BOOKS OF ACCOUNT, WHICH WERE AUDITED AND THEREFORE, THERE IS NO REASON FOR REJECTING THE RESULTS CONCEDED BY THE AS SESSEE ON A WHOLESALE BASIS AND COMPUTING THE INCOME ON AN ARBI TRARILY ESTIMATE BASIS. WE DO NOT FIND MUCH FORCE IN THIS ARGUMENT. EVEN THOUGH THE ASSESSEE MIGHT HAVE MAINTAINED BOOKS OF ACCOUNT AND COMPLIED WITH THE AUDIT PROVISIONS, THAT SEEMS TO B E ONLY A TECHNICAL COMPLIANCE OF LAW. THIS IS MAINLY BECAUS E THE EXPENSES BOOKED BY THE ASSESSEE ARE NOT SUPPORTED BY ANY VOU CHERS OR EVIDENCES AND THE ASSESSING OFFICER HAD NO WAYS AND MEANS TO VERIFY THE VERACITY OF THOSE EXPENSES CLAIMED BY TH E ASSESSEE BY WAY OF DEDUCTIONS. THEREFORE, THE MAINTENANCE OF B OOKS OF ACCOUNT AS CLAIMED BY THE ASSESSEE IS ONLY A RITUAL AND WITHOUT SUBSTANCE. THE ACCOUNTS ARE NOT HELPFUL IN DETERMI NING THE INCOME OF THE ASSESSEE. THEREFORE, WE AGREE WITH THE LOWE R AUTHORITIES IN REJECTING THE ACCOUNTS OF THE ASSESSEE AND PROCEEDI NG TO COMPUTE THE INCOME ON AN ESTIMATE BASIS. 7. NOW, COMING TO THE ESTIMATE, THE COMMISSIONER O F INCOME-TAX(APPEALS) HAS ACCEPTED THE PROFIT RATE AT 6% AS - ITA 1664 & CO 165/MDS/13 - 5 PROPOSED BY THE ASSESSEE, HIMSELF. WHILE DOING SO , THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS OVERLOOKED THE VOLUME OF GROSS RECEIPTS GENERATED BY THE ASSESSEE. IN TH IS LINE OF TELECASTING OF TV SERIALS ETC. PROFIT COMPONENT WIL L BE MORE ON THE INCREMENTAL QUANTUM OF GROSS RECEIPTS. THIS IS BEC AUSE THE INCOME IS GENERATED ON A TOTAL AMOUNT OF EXPENDITURE WITHO UT ANY FURTHER EXPENDITURE FOR EVERY ADDITIONAL COLLECTION EARNED BY THE ASSESSEE ; UNLIKE A TRADER, WHO HAS TO GO FOR PURCHASE AGAINST ANY INCREMENTAL AMOUNT OF SALES MADE BY HIM. THIS NATURE OF THE BU SINESS HAS TO BE TAKEN INTO CONSIDERATION. IF SO, WE FIND THAT T HE RATE OF 6% ADOPTED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IS ON THE LOWER SIDE. 8. TO BE FAIR AND REASONABLE, WE DIRECT THE ASSESS ING OFFICER TO ESTIMATE THE PROFIT AT 8% OF THE GROSS R ECEIPTS EXCLUDING THE SERVICE TAX. THE SERVICE TAX COLLECTION FORMIN G PART OF THE TOTAL RECEIPTS CANNOT BE TREATED AS A SOURCE OF INCOME FO R THE ASSESSEE. THEREFORE, THE COMPONENT OF SERVICE TAX HAS TO BE E XCLUDED FROM THE GROSS RECEIPTS FOR THE PURPOSE OF ESTIMATING TH E PROFIT AT 8%. 9. ACCORDINGLY, THE REVENUE IS PARTLY SUCCESSFUL I N ITS APPEAL. - ITA 1664 & CO 165/MDS/13 - 6 10. NOW COMING TO THE CROSS OBJECTION FILED BY THE ASSESSEE, WE FIND THAT THE MAIN GRIEVANCE IS AGAINS T THE ESTIMATE OF INCOME. THIS ISSUE HAS ALREADY BEEN ANSWERED BY US WHILE DELIBERATING ON THE APPEAL FILED BY THE REVENUE. W E DO NOT FIND ANY MERIT IN THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTION. IT FAILS. 11. IN RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESS EE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON THURSDAY, THE 23 RD OF JANUARY, 2014 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 23 RD JANUARY, 2014. MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.