Prakash Chandra Ray, Cuttack V. ITO, Wad-2(1), Cuttack, Cuttack

CO 17/CTK/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9540 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 20-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: ASHOK K MOHANTY
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BE NCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL, AM & SHRI D.T.GARASIA, JM ./ ITA NO.19/CTK/2013 ( / ASSESSMENT YEAR :2008-09) ITO, WARD-2(1), CUTTACK VS. PRAKASH CHANDRA RAY, PROP : M/S COMPUSERVE, ARNODAYA MARKET, LINK ROAD, CUTTACK. ! ./ '# ./ PAN/GIR NO. : AEOPR 8931 F ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) AND %&' ./CO NO.17/CTK/2013 (ARISING OUT OF ITA NO.19/CTK/2013) ( / ASSESSMENT YEAR :2008-09) PRAKASH CHANDRA RAY, PROP : M/S COMPUSERVE, ARNODAYA MARKET, LINK ROAD, CUTTACK. VS. ITO, WARD-2(1), CUTTACK ! ./ '# ./ PAN/GIR NO. : AEOPR 8931 F ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ' ( ) /REVENUE BY : SHRI S.C.MOHANTY *+ ( ) /ASSESSEE BY : SHRI ASHOK K.MOHANTY ,- ( + / DATE OF HEARING : 24 TH APRIL, 2014 ./ ( + / DATE OF PRONOUNCEMENT : 01/05/2014 0 / O R D E R PER BENCH : THIS APPEAL AS WELL AS THE CROSS OBJECTION HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A) DATED 31-10-2012. THE REVEN UE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL : 2 ITA NO.19/2013 & CO NO.17/2013 1.IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. FIRST APPELLATE AUTHORITY IS NOT JUSTIFIED IN DIRECTING THE AO TO ADOPT THE GP RATE @4.12% AS DISCLOSED IN FORM NO.3CD AND ESTIMATE PROFIT ON THE TOTAL SALE OF RS.2, 75,31,709/- INCLUDING THE UNDISCLOSED SALE RS.13,09,979/- DET ECTED IMPUGNED ASSESSMENT ORDER. 02.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE THE LD. APPELLATE AUTHORITY IS JUSTIFIED TO HOLD THAT WHERE ASSESSEE FAILED TO ESTABLISH HIS BOOKS RESULTS AS CORRECT AN D RELIABLE - IT IS MANDATORY FOR THE A.O TO DETERMINE THE NET PROFI T ON AN ESTIMATED BASIS AND ALSO A.O. CAN NOT MAKE SPECIFIC ANALYSIS OF VARIOUS CLAIMS OF EXPENSES REFLECTED IN THE P&L ACCOUNT. 03.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD.CIT(A) IS JUSTIFIED TO RELY THE CASE LAWS CITED WHICH ARE NOT SIMILAR AND SQUARELY APPLICABLE TO THE FACTUAL MATRIX OF THE PR ESENT CASE.. WHILE THE ASSESSEE IN THE CROSS OBJECTION HAS TAKEN THE FOLLOWING GROUNDS :- A. FOR THAT THE LEARNED CIT (APPEAL) HAS MISINTERP RETED THE LAW AND MISAPPLIED THE SAME WHILE COMING TO HOLD THAT T HE SALES TURNOVER OF THE RESPONDENT SHOULD BE ENHANCED BY TH E AMOUNT OF VAT COLLECTED BY HIM. SUCH A CONCLUSION B EING ERRONEOUS THE ADDITION OF RS. 10,75,090.00 TO THE T URNOVER SHOULD BE DELETED IN THE PARTICULAR CIRCUMSTANCES O F THE CASE. 2 . GROUND NO.3 IN THE REVENUES APPEAL IS GENERAL IN NATURE, THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 3 . GROUNDS NO.1 & 2 IN REVENUES APPEAL AND ONLY GRO UND IN CROSS OBJECTION IN ASSESSEES APPEAL RELATING TO THE COMM ON ISSUE. THEREFORE, ALL ARE BEING DISPOSED OF BY THIS COMMON FINDINGS. 3.1 FACTS RELATING TO THESE GROUNDS ARE THAT THE AO ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT NOTED THAT THERE WAS A DIFFERENCE OF RS.1,26,253/- FOR THE PURCHASES SHOWN TO THE INCOME TAX DEPARTMENT 3 ITA NO.19/2013 & CO NO.17/2013 AND THE SALES TAX DEPARTMENT. HE ALSO NOTED THAT VA T AMOUNT OF RS.10,65,233/- PAID ON PURCHASES DISCLOSED TO THE S ALES TAX DEPARTMENT HAS NOT BEEN SHOWN TO THE IT DEPARTMENT AND RS.2,34,889/- IN SALES SHOWN TO THE INCOME TAX AND THE SALES TAX DEPARTMENT. FINALLY, IT WAS NOTED BY THE AO THAT TH E ASSESSEE HAS NOT SHOWN THE VAT COLLECTION ON SALES AMOUNTING TO RS.1 0,75,090/-. THEREFORE, THE AO CALLED FOR THE INFORMATION FROM T HE COMMERCIAL TAX DEPARTMENT. THE COMMERCIAL DEPARTMENT CONFIRMED THE PURCHASES OF RS.2,61,18,351/- AS AGAINST RS.2,59,92,098/-, AND R S.2,59,92,098/- HAS BEEN SHOWN TO BE REVENUE. THE SALES WERE CONFIR MED AT RS.2,64,56,619/- AS AGAINST RS.2,62,21,730/- SHOWN TO THE REVENUE. ON THE EXAMINATION OF THE RECONCILIATION SUBMITTED BY THE ASSESSEE WAS NOT CONFIRMED AND, THEREFORE, AN ADDITION OF RS .1,26,253/- FOR PURCHASES AND RS.2,34,889/- FOR THE SALES. FROM THE EXAMINATION OF THE BANK ACCOUNT MAINTAINED IN THE VARIOUS BOOKS, IT WA S NOTICED THAT THE TOTAL DEPOSIT WAS RS.2,81,06,915/- WHILE THE SALES WERE SHOWN AT RS.2,62,21,730/- IN THE PROFIT AND LOSS ACCOUNT. T HUS, THERE WAS AN EXCESS DEPOSIT OF RS.18,85,221/-. THE AO AFTER GOIN G THROUGH REPLY OF THE ASSESSEE AND RECONCILIATION WITH THE BANK NOTED THAT THE TOTAL SALES INCLUDED VAT COMES TO RS.2,72,96,828/-, WHILE THE A CTUAL DEPOSIT MADE BY THE ASSESSEE WAS RS.2,81,06,951/- IN THE BA NK ACCOUNTS. HE BROUGHT THE DIFFERENCE TO TAX AMOUNTING TO RS.8,10, 123/-. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DIRECT ED THE AO TO ADOPT THE GP RATE AT THE RATE OF 4.12% ON SALES OF RS.2,7 5,31,709/- BUT 4 ITA NO.19/2013 & CO NO.17/2013 DELETED THE ADDITION OF RS.3,41,142/- AND THE RS.8, 10,123/-. THE AO HAS ALSO MADE CERTAIN DISALLOWANCE TOWARDS THE EXPE NSES AS THE ASSESSEE FAILED TO PRODUCE THE BILLS/VOUCHERS/INVOI CES, THE CIT(A) FOLLOWING THE DECISION OF THE HONBLE ANDHRA PRADES H HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (1998) 232 ITR 776 TOOK A VIEW THAT WHEN AN ESTIMATE IS MADE IT IS IN SUBSTAN TIVE OF THE INCOME I.E. COMPUTED U/S.29 AND, THEREFORE, ALL THE DEDUCT ION WHICH ARE REFERRED TO U/S.30 TO 43D DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH ASSESSMENT. IN VIEW OF THIS, THE CIT(A) DELETED THE DISALLOWANCE OUT OF THE EXPENSES. 3.2 WE HEARD RIVAL SUBMISSIONS AND CAREFULLY CONSIDERE D THE SAME. SO FAR AS THE CROSS OBJECTION OF THE ASSESSEE IS CO NCERNED, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) BY TAKING THE SUM OF RS.10,75,090/- TO BE PART OF THE TOTAL TURNOVER WHI LE COMPUTING THE TURNOVER OF THE ASSESSEE FOR THE PURPOSE OF ESTIMAT ING THE GROSS PROFIT, THE VAT CALCULATED BY THE ASSESSEE IS A REVENUE REC EIPT AND WILL BECOME PART OF THE TOTAL TURNOVER, SPECIALLY ON THE SE FACTS OF THE CASE, WHERE THE TURNOVER SHOWN BY THE ASSESSEE TO THE SAL ES TAX DEPARTMENT IS MUCH HIGHER THAN THE TURNOVER SHOWN TO THE REVEN UE. THE CIT(A), IN OUR OPINION, WAS FAIR ENOUGH TO WORK OUT THE DIFFER ENCE OF SALE OF RS.13,09,979/-, RS.2,34,889/- BEING THE DIFFERENCE BETWEEN TURNOVER SHOWN TO THE COMMERCIAL DEPARTMENT AND THAT SHOWN T O THE IT DEPARTMENT AND THE SUM OF RS.10,75,090/- RECORDED B Y THE ASSESSEE 5 ITA NO.19/2013 & CO NO.17/2013 BY WAY OF VAT. IF THE SAID SUM OF RS.10,75,090/- AD DED TO SALES SHOWN BY THE ASSESSEE TO THE IT DEPARTMENT AMOUNTING TO R S.2,62,730/-, THE TOTAL TURN OVER IN THE CASE OF THE ASSESSEE WILL CO ME TO RS.2,75,31,709/-. TO THAT EXTENT, WE AGREE WITH THE FINDING OF THE CIT(A). 3.3 COMING TO THE QUESTION OF ESTIMATION OF THE PROFIT , IN OUR OPINION, IT IS A FIT CASE WHERE THE ASSESSEE COULD NOT SHOW THE COMPLETE SALES AND PURCHASES TO THE REVENUE AND UNDER THESE CIRCUM STANCES THE CIT(A) WAS NOT CORRECT IN LAW IN DIRECTING THE SPEC IAL OFFICER TO ADOPT THE GP RATE AS HAS BEEN SHOWN BY THE ASSESSEE IN THE TA X AUDITED REPORT I.E. AT THE RATE OF 4.12% ON THE TURNOVER OF RS.2,7 5,31,709/- AS HAS BEEN WORKED OUT BY HIM. SINCE THERE ARE THE FACTS F OR THE SUPPRESSION OF THE SALES AND PURCHASES IN THE BOOKS OF ASSESSEE , THEREFORE, THE GP RATE AS HAS BEEN SHOWN BY THE ASSESSEE IN FORM NO.3 CD CANNOT BE THE BASIS TO ARRIVE AT THE PROFIT. IN OUR OPINION, IT WILL MEET THE END OF JUSTICE AND FAIRPLAY TO BOTH THE PARTIES, IF THE GR OSS PROFIT OF THE ASSESSEE IS ESTIMATED BY APPLYING RATE OF 5% OF THE SALES OF RS.2,75,31,709/- AS IT WILL TAKE CARE OF EVEN DISAL LOWANCE OF EXPENSES WHICH ASSESSEE FAILED TO PROVE. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ESTIMATE THE GP RAT E IN THE CASE OF THE ASSESSEE BY APPLYING A GP RATE OF 5% ON THE SALES O F RS.2,75,31,709/- . 6 ITA NO.19/2013 & CO NO.17/2013 4. SO FAR AS GROUND NO.2 IN REVENUES APPEAL RELATING TO EXPENSES IS CONCERNED, THE ISSUE, IN OUR OPINION, IS DULY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE ANDHRA PRAD ESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA) , IN WHICH IT WAS CLEARLY LAID DOWN THAT IF THE PROFITS ARE ESTIMATED BY APPLYING THE GP RATE THEN NO FURTHER DISALLOWANCE IN RESPECT OF THE EXPENSES IS TO BE MADE AS WHILE ESTIMATING THE PROFIT ON THE DEDUCTION WHICH ARE RE FERRED TO U/S.30 TO 43D SHALL BE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE ESTIMATING THE PROFIT. THE LEARNED DR EVEN THOUGH BEFORE US RE LIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. DEVI PRASAD VISHWANATH, 72 ITR 194 (SC) . THIS DECISION, IN OUR OPINION, WILL NOT SUPPORT THE REVENUE AS THE DECISION RELATES TO THE ADDITION IN RESPECT OF CASH CREDIT. HENCE, WE DISMISS THIS GROUND OF TH E REVENUE. 5 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTL Y ALLOWED AND CROSS OBJECTION FILED BY THE ASSESSEE IS HEREBY DISMISSED. * 2+3 ' ( 0 4+ ( '+ 56 *+ ( %&' *' ( '+ 56 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/0 5 /2014. 0 ( ./ , 27 83 01/05 /2014 / ( - SD/- SD/- ( . . ) (D.T.GARASIA) ( . . ) (P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; 8 DATED 01/05/2014 % . , . 2 /PKM , . / PS 0 00 0 ( (( ( % %% % + ++ + 9 99 9 : :: : 9 99 9 + ++ + / COPY OF THE ORDER FORWARDED TO : 7 ITA NO.19/2013 & CO NO.17/2013 0, 0, 0, 0, / BY ORDER, ; ;; ; / 5 5 5 5 ' ' ' ' ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. ,< ( ) / THE CIT(A), CUTTACK 4. ,< / CIT ,BHUBANESWAR 5. 9= %+ , , 2,- / DR, ITAT,CUTTACK 6. >- / GUARD FILE. &9+ %+ //TRUE COPY//