Dillip Kumar Naik, Keonjhar V. ACIT, Bhubaneswar

CO 28/CTK/2015

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9928 (ITAT-CUTTACK)
• Duration Of Justice: 7 year(s) 3 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-10-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 15-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Document seized; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER ACIT, Circle Bhavan, Rajaswa Vihar, Bhubaneswar (Appellant Mr Dillip Kumar Naik, At/PO: Boneikala, Joda, Dist: Keonjhar PAN/GIR No. Cross objector Per Bench These orders of the ld CIT(A) Nos.0291/12-13 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER IT(ss)A Nos.4 to 8/CTK/20 Assessment Years : 2005-06 to 200 ACIT, Circle-1(2), Aayakar Bhavan, Rajaswa Vihar, Bhubaneswar Vs. Mr Dillip Kumar Naik, At/PO: Boneikala, Joda, Dist: Keonjhar PAN/GIR No.ABCPN 4195 N (Appellant) .. ( Respondent C.O. Nos.25 to 29/CTK/2015 (in IT(ss)A Nos.4 to 8/CTK/20 Assessment Years : 2005-06 to 200 Mr Dillip Kumar Naik, At/PO: Boneikala, Joda, Dist: Vs. ACIT, Circle Bhavan, Rajaswa Vihar, Bhubaneswar No. ABCPN 4195 N Cross objector .. ( Appellant) Assessee by : Shri P.C.Sethi, AR Revenue by : Shri M.K.Gautam, Date of Hearing : 21 /10 Date of Pronouncement : 21/10 O R D E R These are the appeals filed by the revenue of the ld CIT(A)-1, Bhubaneswar all dated 14.11.2014 13, 0292/12-13, 0293/12-13, 0294/12-13 & 0295/12 Page1 | 11 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER /CTK/2015 to 2009-10 Mr Dillip Kumar Naik, At/PO: Boneikala, Joda, Dist: ABCPN 4195 N Respondent) 2015 /CTK/2015) to 2009-10 ACIT, Circle-1(2), Aayakar Bhavan, Rajaswa Vihar, Bhubaneswar Appellant) , AR M.K.Gautam, CIT DR 10/2022 10/2022 against the separate 14.11.2014 in Appeal 13 & 0295/12-13 for IT(ss)A Nos.4 to 8/CTK/2015 C.O. Nos.25 to 29/CTK/2015 Assessment Years : 2005-06 to 2009-10 Page3 | 11 what was actually required on M/s. Serajuddin & Co. and the assessee was returning 50 to 60% of the said higher billed amount to M/s. Serajuddin & Co., in cash, the Assessing Officer completed the assessment by adopting the turnover of the assessee as adopted on M/s. Serajuddin & Co., and granting the assessee a reduction of 30% towards expenses. The balance 70% of the turnover was treated as the income of the assessee and out of the said 70%, 50% to 60% of the total receipts was protectively assessed in the hands of the assessee and substantially in the hands of M/s. Serajuddin & Co. The balance was treated as substantive income of the assessee. It was the submission that the ld CIT(A) in para 5.2 of his order estimated the income of the assessee at 10% of the total receipts of the assessee from M/s. Serajuddin & Co. It was the submission that the assessee having not co-operated in the assessment proceedings, the estimation done by the AO was liable to be upheld and that of the ld CIT(A) reversed. 4. Ld CIT DR has also filed written submission as follows: “The assessee is engaged in the business of iron ore raising contractor for M/s. Serajuddin & Co. He was also working as a salaried employee for M/s. Bansapani Iron Ltd. A search & seizure operation u/s.132 of the Income Tax Act was carried out on 27.09.2008 at the premises of the assessee. Notice u/s.l53A (a) dated 11.03.2010 was sent through RPAD and same was duly served on 11.05.2010. However the assessee did not file any return of income in response to said notice. Vide letter dated 24.06.2010, the assessee asked for copies of seized documents. The A.O. vide letters dated 02.07.2010 and 19.07.2010 asked him to take the extracts of seized documents. But the assessee sought more time to take the copies of seized documents. Finally the extraction work was started from 06.08.2010 and it IT(ss)A Nos.4 to 8/CTK/2015 C.O. Nos.25 to 29/CTK/2015 Assessment Years : 2005-06 to 2009-10 Page5 | 11 income for AY 2008-09 but not a single voucher was found at the time of search. The statement of Shri Dillip Kumar Nayak was recorded on oath wherein he claimed that vouchers had been sent to his Auditors. But Shri Naresh Agrawal, CA. was also covered under survey operation and he admitted on oath that he did not have books of account/vouchers belonging to Shri Dillip Kumar Nayak. He also stated that he was not maintaining any computerized account on behalf of his client. Thus neither any books of account nor any vouchers for various expenses were found at the time of search at the premises of Shri Dillip Kumar Nayak. iv.) During the course of search, the statement of Shri Dillip Kumar Nayak recorded on oath has been reproduced by the A.O in para-3.4 on pages-5 to 7 of the assessment order. It is obvious that major expenses were incurred on labour and wages. It was baffling to note that as against alleged expenses of Rs.1.27 crores, not a single voucher was found at the premises of the assessee or his Chartered Accountant namely Shri Naresh Kumar Agarwal. The number of labourers employed by the assessee in the mines was about 100 as per documents submitted to the labour department. The payment of labour was made at the rates prescribed by the Labour Department. Even assuming that it was slightly higher than that applicable for skilled labour (Rs.90/- per person) and estimatingi the same for 300 days, the total expenses under the head "labour payment" could not have exceeded Rs.27 lakhs. On the other hand, the assessee had claimed labour payment of Rs.1.27 crores in AY 2008-09. v.) In para-4.2 on page-7 of the assessment order, the A.O. has discussed the seized documents belonging to Shri Dillip Kumar Nayak. The seized documents DKN-1 are very crucial documents which give rates for raising of iron ores from the mines of M/s. Serajuddin & Co. and cash returned to said mine owner. On the reverse side of page-32, the rate of raising work has been shown at Rs.45/- per MT but same has been inflated by Rs.65/- per MT. Hence the billing has been done at Rs.110/- per MT. Page 30-of DKN-1 is in the handwriting of Shri Dillip Kumar Nayak, hence its genuineness can't be doubted. It refers to billing rate, actual rate and amount returned to the assessee firm in cash. Page-30 reveals that rates for raising work are effective from 01.04.2006. The bills have been raised for ROM, lumps and fines at Rs.80/-, Rs.650/- and Rs.205/- per MT respectively, whereas the cash returned was to the extent of Rs.40/-, Rs.380/- and Rs.105 per MT respectively and the actual rates were Rs.40/-, Rs.270/- and Rs.100/- per MT respectively. Another seized document (page-6 of DKN-16) shows the amount returned to M/s. Serajuddin & Co. firm in the months of January and February, 2008. Shri Dillip Kumar Nayak has carried out raising work in respect of 730.32 MT of lumps, 18.95 MT of lumps and 6462.63 MT of fines. The billing rate is Rs.650/- per MT for lumps and Rs.205/- per MT for fines in January, 2008. The actual rate was Rs.380/- per MT for lumps and Rs.105/- for fines. On the right side of IT(ss)A Nos.4 to 8/CTK/2015 C.O. Nos.25 to 29/CTK/2015 Assessment Years : 2005-06 to 2009-10 Page7 | 11 receipt of excess monies in cash from the contractors. Such cash received from the contractors was also allocated among partners and they had shared the gains. Thus the order of the A.O. should be restored and that of the CIT(A) be reversed.” 5. Ld CIT DR submitted that a diary being BKN-16 had been found in the course of search on the assessee, which showed the computation of cash back payments to Serajuddin & Co for the months of January, February, March and September of 2008. It was the submission that this clearly showed that money had been paid back to Serajuddin & Co. 6. In reply, ld AR submitted that in the course of search on Serajuddin & Co., no cash had been found nor was any investment or any undisclosed assets found. It was the submission that though admittedly, shows cause notice had been issued by the AO, the statement relied upon by the AO for the purpose of assessment had not been provided to the assessee and consequently, such statement could not be relied upon. It was the submission that the assessee has not paid back any portion of the total receipts to M/s. Serajuddin & Co. It was the further submission that if it is presumed that 50% of the total receipts of the assessee has been returned to M/s. Serajuddin & Co., then the estimation of 10% by the ld CIT(A) should be only on 50% turnover of the assessee from M/s. Serajuddin & Co. It was the further submission that even assuming that the income of the assessee is to be estimated at 10% of the turnover of the assessee then on the allegation of the AO, 50% has been returned to M/s. Serajuddin & Co., IT(ss)A Nos.4 to 8/CTK/2015 C.O. Nos.25 to 29/CTK/2015 Assessment Years : 2005-06 to 2009-10 Page9 | 11 no evidence found of the amounts being paid to Serajuddin & Co. Even otherwise, the details in the diary only show the details for 4 months. It is also an admitted fact that no books of accounts and vouchers have been maintained by the assessee, which is evident from the fact that the search did not bring out any books of account. However, in the assessment order, the AO refers to profit and loss account in his order. How this profit and loss account has been prepared is not ascertainable. Thus, clearly, the AO had no details with him except the turnover of the assessee, which has also been extracted from the books of account of M/s. Serajuddin & Co. This being so, a perusal of the order of the ld CIT(A) clearly shows that he has taken into consideration all the issues to come to the conclusion in paras 5.1 & 5.2 of his order that the estimation of income of the assessee is the best method to determine the income of the assessee. We find no reason to interfere with these findings of the ld CIT(A) in respect of estimation of income insofar as neither the assessee nor the revenue has been able to dislodge the findings of the ld CIT(A). 8. Coming to the issue of percentage of the net profit as determined by the ld CIT(A) at 10%. A perusal of the order of the ld CIT(A) clearly shows that the highest percentage disclosed by the assessee is 6%. This being so, we are of the view that the interest of justice would be served if the estimation of the percentage of net profit is taken at 8% as against 10% directed by the ld CIT(A) and we do so. The findings of ld CIT(A) in regard IT(ss)A Nos.4 to 8/CTK/2015 C.O. Nos.25 to 29/CTK/2015 Assessment Years : 2005-06 to 2009-10 Page11 | 11 that he is not pressing the legal grounds taken in Ground Nos.1 to 5 of cross objections. Consequently, Ground Nos.1 to 5 of cross objections stand dismissed as not pressed. Ld AR submitted that Ground Nos.6 to 8 are against the estimation as done by the ld CIT(A) at 10%. As we have reduced the estimation of the net profit of the assessee from 10% to 8%, Ground Nos.6 to 8 on merits stands partly allowed. 12. In the result, appeals filed by the revenue stand dismissed and the cross objections filed by the assessee stand partly allowed. Order dictated and pronounced in the open court on 21/10/2022. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 21/10/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Assessee : S.M.Enterprises, At/Po: Balda, Joda, Dist: Keonjhar 2. The Revenue: ACIT, Circle-1(2), Aayakar Bhavan, Rajaswa Vihar, Bhubaneswar 3. The CIT(A)-1, Bhubaneswar 4. Pr.CIT-1, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//