PUMPKIN PICTURES PRIVATE LTD, MUMBAI V. DY. COMMISSIONER OF INCOME TAX CENTRAL-CIRCLE-2, THANE

ITA 100/MUM/2023

AI Insights

Pumpkin Pictures Pvt. Ltd. appealed against the order of the CIT(A)-11, Pune, which confirmed the income estimated by the Assessing Officer under section 145(3) of the Income Tax Act, 1961. The company, engaged in the business of cinematographic films and advertisements, had not filed its return of income for the assessment year 2011-12. The Assessing Officer reopened the case and estimated the company's income based on substantial receipts reported in the ITD system, rejecting the books of account due to lack of supporting documents. The CIT(A) upheld this estimation, leading to the appeal before the Tribunal. The Tribunal considered the company's recurring losses and the incomplete documentation due to the chartered accountant's oversight, reducing the estimated profit margin from 20% to 6%.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130109 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 29-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 11-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 147; 148; 139; 143(3); 271B; 44AB; 145(3)

Judgement Text

P a g e | 1 ITA No.100/Mum/2023 Pumpkin Pictures Pvt. Ltd. vs. Dy,CIT, CC-2 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.100/Mum/2023 (A.Y. 2011-12) Pumpkin Pictures Private Limited, B/1804, Interface Heights, Behind Infinity Mall, Mindspace, Malad (West), Mumbai – 400064 Vs. Dy. CIT, Central Circle -2 6 th Floor, IT Park, Road No. 16Z, Wagle Estate, Thane (West) स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAFCP0581M Appellant .. Respondent Appellant by : Rajesh Bhosle Respondent by : Krishna Kumar Date of Hearing 30.05.2023 Date of Pronouncement 20.06.2023 आदेश / O R D E R Per Amarjit Singh (AM): This appeal is filed by the assesse against the order passed by the CIT(A)-11, Pune, dated 16.11.2022 for A.Y. 2011-12. The assessee has raised the following grounds before us: “1. The Ld. CIT (Appeal) had erred in confirming the income of Rs.50,09,956/-, 20% of Gross Receipt of Rs. 2,50,49,783/-, estimated by Ld. Assessing Officer by invoking the provisions of section 145(3) of the Income Tax Act, 1961, even though during the year under Appeal the Appellate Company had suffered loss before depreciation of Rs.10,96,563/-. 2. The Ld. CIT (Appeal) erred in not understanding the fact that the Ld. Assessing Officer had invoked the provisions of section 145(3) and rejected the Books of Account and Bills and Vouchers even though the said Books of Accounts were Audited by Statutory Auditor as per the provisions of Companies Act, although the said Auditor failed to file his P a g e | 2 ITA No.100/Mum/2023 Pumpkin Pictures Pvt. Ltd. vs. Dy,CIT, CC-2 Audit Report under section 44AB of the IT Act, 1961 for the reasons best known to him. 3. The Ld. CIT (Appeal) had erred in confirming the estimating the income of Rs.85,000/- being 20% of Rs.4,25,000/- even though the gross amount of Rs.4,25,000/- from G. D. Foods Mfg. (India) Pvt Ltd reflecting in 26AS statement had been included in the gross receipt and the Appellant Company had reconciled the income as per 26AS statement with the gross receipt. credited to Profit & Loss Account. 4. The Ld. CIT (Appeal) had erred in partially dismissing the appeal by confirming the income of Rs.50,94,956/- estimated by Ld. Assessing Officer while passing the Assessment Order under section 143(3) read with section 147 of the IT Act, 1961. The said estimated income of Rs.50,94,956/- has to be deleted. 5. The Appellant Company craves, leave to add, amend or alter the Grounds of this Appeal either at the time of hearing of the Appeal or at any time before that.” 2. Fact in brief is that assessee is a company registered under the provisions of Company Act and engaged in the business of cinematographic films, educational programs advertisement etc. The assesse has not filed its return of income u/s 139 of the Act for the year under consideration. The assessing officer on the basis of information available on the ITD system found that the assessee had obtained the substantial receipt during the year under consideration and has not filed any return of income. Accordingly, the case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued on 30.03.2018. The assessing officer stated that despite providing opportunities the assessee has not submitted the required bills and vouchers in support of its claim of expenditure incurred during the year under consideration. Therefore, the AO has estimated 20%of the gross receipt of Rs.2,50,49,783/- to the amount of Rs.50,09,956/- as net profit of the assessee for the year under consideration and added to the total income of the assessee. 3. The AO also found from the statement of 26AS that assesse has received an amount of Rs.4,25,000/- as receipt from M/s G.D. P a g e | 3 ITA No.100/Mum/2023 Pumpkin Pictures Pvt. Ltd. vs. Dy,CIT, CC-2 Manufacturing India Pvt. Ltd. and same was also added to the total income of the assessee. 4. Aggrieved, the assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. 5. During the course of appellate proceedings before us the ld. Counsel submitted that assessee company has earned gross income of Rs.250,55,263/- against which they had incurred expenses of Rs.261,51,826/-. The assessee explained that the return of income along with the Audit report could not be filed because the chartered accountant of the assesse company Shri Rahul Adlakha had failed to file the same without the knowledge of the assesse. On the other hand, the ld. D.R supported the order of assessing officer. 6. Heard both the sides and perused the material on record. On the basis of the ITD system that the assessee had substantial receipt but did not file return of income, the case of the assesse was reopened and the AO had estimated business income of the assessee at Rs.50,09,956/- being 20% of the gross receipt of Rs.2.50 crores after rejecting the books of accounts of the assessee. The assesse had shown expenses including depreciation to the amount of Rs.2.61 crores which had resulted in net loss of Rs.10,96,563/-. The assesse explained that bills/vouchers sought by the Assessing officer could not be produced on account of failure of its chartered accountant Shri Rahul Adlakha to the file the return of income and the duly audited Audit Report for the reasons best known to the chartered accountant. In support of its contention the assessee also submitted that new C.A. Shri Nilesh Singh has been appointed. We also find that considering the aforesaid circumstances the coordinate bench of the ITAT, Mumbai in the case of assesse has deleted the penalty levied u/s 271B of the Act for not filing P a g e | 4 ITA No.100/Mum/2023 Pumpkin Pictures Pvt. Ltd. vs. Dy,CIT, CC-2 of audit report as per the provision of section 44AB of the Act because of lapse on the part of its Chartered Accountant and also observed that non-filing of return of income was not beneficial to the assessee as it could not carry forward the loss of Rs.11,79,782/- incurred during the year because of non-filing of return of income. 7. We have also perused the audited accounts i.e profit and loss and balance sheet filed in the paper book which demonstrate that the assessee company was formed in the F.Y. 2009-10 and year under consideration was the second year of operation of the company but the assesse company had incurred recurring losses since its formation. 8. Looking to the above facts and circumstances we find it is unreasonable to estimate the net profit of the assesse company @ 20% of gross receipt however after considering the aforesaid facts of recurring losses incurred by the assesse company we consider that it is reasonable to restrict the net profit @ 6% of the gross receipt for want of verification by the AO since the assessee has failed to furnish all the supporting bills/vouchers during the course of assessment. We direct the assessing officer accordingly. Therefore, the grounds of appeal of the assesse are partly allowed. 9. In the result, the appeal of the assesse is partly allowed. Order pronounced in the open court on 20.06.2023 Sd/- Sd/- (Amit Shukla) (Amarjit Singh) Judicial Member Accountant Member Place: Mumbai Date 20.06.2023 Rohit: PS P a g e | 5 ITA No.100/Mum/2023 Pumpkin Pictures Pvt. Ltd. vs. Dy,CIT, CC-2 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीिीय अतिकरण/ ITAT, Bench, Mumbai.