Mrs. Sneha Mohanty, Bhubaneswar V. ITO, Ward-2(3), , Bhubaneswar

ITA 104/CTK/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4769 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 04-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G.P.MOHANTY
• Keywords: Rejection of books of accounts; Gift; Principle of natural justice; TDS; Bogus
• Section: 68; 144; 44AD; 80C; 142(1); 201; 143(2); 69A; 192; 44AB; 145(3); 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 104 /CTK/20 1 9 ( / A SSESSMENT Y EAR : 20 1 5 - 201 6 ) MRS SNEHA MOHANTY, PLOT NO.EB/6 9, STAGE - V, JHARPARA HOUSING BOARD COLONY BHUBANESWAR VS ITO, WARD - 2(3), BHUBANESWAR PAN NO. : CGRPM 0535 M ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI G.P.MOHANTY , ADVOCATE /REVENUE BY : SHRI SUBHENDU DUTTA, DR / DATE OF HEARING : 1 4 / 10 /20 20 / DATE OF PRONOUNCEMENT : 16 / 10 /20 20 / O R D E R PER BENCH : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 18.01.2019 , PASSED BY THE C IT (A) - 1 , BHUBANESWAR FOR THE ASSESSMENT YEAR 20 1 5 - 20 1 6 , ON THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT, ASSESSMENT ORDER AS WELL AS APPEAL ORDER IS WRONG, ARBITRARY AND BAD IN LAW BUT NOT BASED ANY SUBSTANTIAL TRUTH FROM FACT AND FIGURES FROM THE RECO RDS. 2. FOR THAT, BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT AS PER THE STATUE WHICH HAS BEEN AUDITED U/S 44AB OF IT ACT AND NO DISCREPANCY HAS BEEN NOTICED IN THE BODY OF ORDER IN SUCH EVENT REJECTION OF BOOKS OF ACCOUNT MADE BY LEARNED ASSESSING OF FICER IS UNJUSTIFIED AND ILLEGAL. 3. FOR THAT, ESTIMATION OF PROFIT MARGIN @8% U/S 44AD OF IT ACT ON SALES TURNOVER, BUT, FURTHER ESTIMATION OF PROFIT MARGIN @25% ON GROSS COMMISSION RECEIPT MADE BY LEARNED ASSESSING OFFICER WITHOUT ANY BASIS WHICH IS U NCALLED FOR AND UNWARRANTED. 4. FOR THAT, NO NEXUS HAS BEEN ATTRIBUTED FOR ESTIMATION OF PROFIT MARGIN IN TWICE IN SINGLE ASSESSMENT YEAR, THUS, LEARNED 1 ST APPELLATE AUTHORITY HAS SWAYED ON THE ALLEGED ADDITIONS AND DISMISS THE GROUNDS OF APPEAL BUT HE HAS FAILED TO TAKEN INTO OWN ITA NO. 104 /CTK/201 9 2 CONSIDERATION AND NON APPLICATION OF HIS MIND IN JUDICIOUSLY BUT ACTED UNILATERALLY TO THE INTEREST OF REVENUE. 5. FOR THAT, NO REASONABLE OPPORTUNITY WAS AFFORDED BY APPELLATE TO PRODUCE THE BOOKS OF ACCOUNTS IN SUCH EVE NT REJECTION OF BOOKS OF ACCOUNTS AS WELL AS MAKING THE BEST JUDGMENT BY LEARNED ASSESSING OFFICER IS QUITE ARBITRARY AND BAD IN LAW. 6. FOR THAT, JUDICIAL PRONOUNCEMENT OF VARIOUS HIGH COURTS AND APEX COURT HAS CLARIFIED THAT NEXUS HAS TO BE DETERMINED PROPERLY, BUT IN THE INSTANT CASE NO NEXUS HAS BEEN ATTRIBUTED FOR ESTIMATION OF PROFIT MARGIN IN TWICE IN SINGLE ASSESSMENT YEAR, THUS, THE APPELLANT HAS FILED THE VARIOUS CASE LAW OF THE OWN BENCH OF THE TRIBUNAL BEFORE THE 1 ST APPELLATE AUTHORITY WHICH HAS NOT BEEN TAKEN INTO OWN CONSIDERATION BUT SHE HAS REFERRED THE CITATION IN THE CASE OF SHREE GANAPATI EMBROIDERY(P) LTD VRS. CIT(2009) WHICH IS NOT APPLICABLE TO THE INSTANT CASE. 7. FOR THAT, SERVICE OF NOTICE U/S 143(2) HAS ISSUED BY ITO, WARD - 2 (2)ON DT.30.07.2016 AND FURTHER NOTICE ISSUED U/S 142(1) BY THE ITO, WARD - 2(3) ON DT.12.08.2016 WHICH IS DISPUTED AND DENIED. 8. FOR THAT, ASSESSMENT ORDER PASSED BY LEARNED ASSESSING OFFICER, WARD - 2(3) IS OUT OF TERRITORIAL JURISDICTION AND VIOLATE THE PRINCIPLE OF NATURAL JUSTICE, HENCE THE ORDER HAS TO BE ANNULLED. 9. FOR THAT, APPELLANT SHALL ADDUCE FURTHER GROUNDS AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, WHO DERIVES INCOME FROM COMMISSION AND INT EREST ON BANK DEPOSITS THROUGH HER PROPRIETORSHIP BUSINESS M/S CHIDANANDA ENTERPRISES. THE ASSESSEE FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2015 - 16 ELECTRONICALLY ON 02.10.2015 DECLARING TOTAL INCOME OF RS.15,35,750/ - . THE CASE OF THE ASSESSEE W AS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. DURING THE COURSE OF HEARING AS ASKED BY THE AO, THE ASSESSEE FURNISHED COPY OF AUDIT REPORT, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE AS ON 31.03.201 5 AND STATEMENT OF BANK ACCOUNT OF THE ASSESSEE FOR THE PERIOD FROM 01.04.2014 TO 31.03.2015. ON VERIFICATION OF THE AUDIT REPORT, THE AO NOTICED THAT THE ASSESSEE ALLEGEDLY HAVE INCURRED MAJOR ITA NO. 104 /CTK/201 9 3 EXPENSES UNDER THE FOLLOWING HEADS APART FROM EXPENDITURE UNDE R THE HEAD SALARY WHICH CONSTITUTES RS.49,20,000/ - : - 1. SALES PROMOTION : RS. 2,84,476/ - 2. FESTIVAL EXPENSES : RS. 8,54,236/ - 3. HOSPITALITY : RS. 88,89,274/ - 4. PURCHASE OF GIFTABLE ITEMS: RS. 4,57,289/ - 5. CONFERENCE : RS. 3,36,236/ - 6. M ISC. EXPENSES : RS. 39,99,387/ - TOTAL : RS.1,48,20,898/ - DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE AO ASKED FOR PRODUCTION OF BOOKS OF ACCOUNTS BUT THE ASSESSEE DID NOT PRODUCE ANY BOOK OF ACCOUNT DURING THE ENTIRE COURSE OF ASSESSMENT PROCEED INGS, THEREFORE, THE AO REJECTED THE BOOKS OF ACCOUNTS INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ESTIMATED THE PROFIT FROM COMMISSION RECEIPTS @25% OF THE DISCLOSED TURNOVER WHICH COMES TO RS.58,96,327/ - AS AGAINST GROSS PROFIT OF RS.16,85,7 49/ - DISCLOSED BY THE ASSESSEE IN HER RETURN OF INCOME. FURTHER THE AO MADE ADDITION OF THE INCOME FROM SALES ESTIMATING 8% OF THE TOTAL TURNOVER ON PRESUMPTIVE BASIS U/S.44AD AT RS.13,894/ - . FURTHER THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN INTEREST INC OME IN THE AUDITED PROFIT AND LOSS ACCOUNT, HOWEVER, THE ASSESSEE COULD NOT FILE ANY EVIDENCE IN SUPPORT OF ANY EXPENDITURE SHOWN TO HAVE BEEN DEDUCTED FROM THE INTEREST INCOME, AND TREATED AS INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCE S OF RS.1,99,190/ - . ITA NO. 104 /CTK/201 9 4 3. BEING AGGRIEVED FROM THE ORDER OF AO, THE ASSESSEE APPEALED BEFORE THE CIT(A) AND THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF AO UPHELD THE ACTION OF AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. FU RTHER AGGRIEVED FROM THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 5. LD. AR BEFORE US FILED HIS WRITTEN SUBMISSIONS WHICH READ AS UNDER : - 1. THAT THE ABOVE MENTIONED ASSESSMENT YEAR THE APPELLANT HAS DISCLOSED THE GROSS TOTAL INCOME RS. 16,85,749/ - AND NET INCOME IS RS. 15,35,750/ - SO ALSO CLAIM THE REFUND IS RS. 20,64,2307 - FOR THE INSTANT ASSESSMENT YEAR. 2. THAT, DURING THE ASSESSMENT YEAR THE APPELLANT HAS DISCLOSED THE SALE RS. 1,73,671/ - AND COMMISSION RECEIPT HAS BEEN CREDITED TO PROFIT LOSS ACCOUNT RS. 2,35,85,309/ - SO ALSO BANK INTEREST HAS BEEN CREDITED TO PROFIT LOSS ACCOUNT RS. 1,99,190/ - BUT NET PROFIT HAS BEEN DISCLOSED RS. 14,86,559/ - AND ALL THE EXPENSES HAS BEEN DEBITED TO PROFIT LOSS ACCOUNT BUT WHICH HAS BEEN AUDITED U/S 44AB OF INCOME TAX ACT BY CHARTED ACCOUNTANT. 3. THAT DURING THE ASSESSMENT YEAR THE APPELLANT HAS MAINTAINED THE BOOKS OF ACCOUNT AS PER THE STATUE AND NO DISCREPANCY HAS BEEN DEPICTED IN THE BODY OF THE ASSESSMENT ORDER BY LEARNED ASSESSING OFFICER, THUS, AT THE TIME OF ASSESSMENT PROCEEDINGS THE APPELLANT HAS FURNISHED THE AUDIT REPORT, 26AS STATEMENT, BANK STATEMENT SO ALSO RELEVANT DOCUMENTS IN SUPPORT OF THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER IN SUCH EVENT BEST JUDGMENT ASSESSMENT MADE BY LEARNED ASSESSING OFFICER SO ALSO PASSED THE ORDER U/S 144 OF IT ACT IS ARBITRARY AND BAD IN LAW. 4. THAT IN THE INSTANT ASSESSMENT YEAR THE APPELLANT HAS DISCLOSED THE NET PROFIT RS. 14,8 6 559 / - WHICH HAS BEE N 8, 5% ON SALE PROCEEDS BUT THE LEARNED ASSESSING OFFICER HAS ASSESSED AND ESTIMATED THE PROFIT MARGIN 8% ON SALE PROCEEDS, FURTHER HE HAS ESTIMATED THE PROFIT MARGIN 25% ON COMMISSI ON RECEIPT BY THE LEARNED ASSESSING OFFICER IS MERE SURMISE, CONJECTURE AND NO N - APPLICATION OF HIS MIND IN JUDICIOUSLY, ITA NO. 104 /CTK/201 9 5 5. THAT, IN THE INSTANT CASE NO NEXUS HAS BEEN ATTRIBUTED FOR ESTIMATION OF PROFIT MARGIN 8% AND 25%, THUS, IT IS CRYSTAL CLEAR FROM THE SECTION U/S 44AD OF IT ACT ,PROFIT MARGIN HAS TO BE ESTIMATED 8% , IN SUC H EVENT PROFIT MARGIN HAS TO BE REDUCED FROM 25% TO 8% AS PER THE SECTION 44AD OF IT ACT YOUR HONOUR. 6. THAT THE BOOKS OF ACCOUNTS OF APPELLANT HAS BEEN AUDITED IN FIRST TIME BUT NO FURTHER AUDIT WAS MADE BY THE APPELLANT PREVIOUSLY FOR WHICH NO TDS W ILL BE ATTRACTED ON ALLEGED EXPENSES AS RAISED BY LEARNED ASSESSING OFFICER. 7. THA T , JUDICIAL PRONOUNCEMENT OF VARIOUS HIGH COURTS AND APEX COURT HAS CLARIFIED THAT PROFIT MARGIN HAS TO BE ESTIMATED REASONABLY, BUT IN THE INSTANT CASE THE SIMILAR TYPE OF CASE PASS THE ORDER BY INCOME TAX APPELLATE TRIBUNA L (ITAT),CUTTACK BENCH, CUTTACK IN THE CASE OF INCOME TAX OFFICER MRS NITYANADA SWAIN, VIDE APPEAL NO 491/CTK/2011 AND PASS THE ORDER ON DT 22.03,2012 THUS PR OFIT MARGIN HAS BEEN ESTIMATED @ 8%, ANOTHER CASE IS INCOME TAX OFFICER VRS SRI RA M KARAN AGARWAL, VIDE APPEAL NO - 272/CTK/2011 AND PASS THE ORDER ON DT 16,09.2011, THUS PROFIT HAS BEEN ESTIMATED 08% AND ANOTHER CASE IS INCOME TAX OFFICER VRS D HURANDHAR PANDA, VIDE APPEAL NO 83/CTK/2013 AND PASS THE O RDER ON DT 28,01.2015 PROFIT HAS BEEN ESTIMATED @ 8% AND UPHELD THE CIT APPEAL ORDER. AND ANOTHER CASE IS ITO VRS ASHOK KUMAR NAYAK ,VIDE ITAT APPEAL NO - 210/CTK/2012 FOR THE ASSESSMENT YEAR 2008 - 19 PROFIT HAS BEEN ESTIMATED (5)8% AGAINST THE BOGUS LIABILIT IES SO ALSO NON PRODUCTION OF BOOKS OF ACCOUNTS. AND ANOTHER CASE IS ITO VRS JUDHISTIR SAMANTRAY PASS THE ORDER BY LTAT,CUTTACK BENCH , CUTTACK ON DT, 11. 09.2008 , THUS, PROFIT HAS BEEN ESTIMATED @8% THE REJECTION OF BOOKS OF ACCOUNTS, FURTHER IN THE CASE OF SOT CONSTRUCTION VRS I TO (2010} 127 TTJ 15 THE HON BIE JURISDICTIONAL TRIBUNAL HAS HE L D THAT THERE IS NO L AW THAT DEEMING PROVISIONS OF SECTION 68 OR SECTION 69A WOULD NOT APPLY IN A CASE WHERE THERE HAS BEEN AN ESTIMATION OF INCOME CONSEQUENT TO THE REJE CTION OF ASSESSED ACCOUNTS. THAT, WHEN INCOME HAS BEEN ESTIMATED @8% THE CONCERNED ASSESSEE IS NOT UNDER ANY OBLIGATION TO EXPLAIN INDIVIDUAL ENTRY OR CASH DEPOSIT OR WITHDRAWAL FROM THE BANK, UNLESS SUCH ENTRY HAS NO NEXUS WITH THE GROSS RECEIP TS IN THE CASE OF 07 VRS SURINDER PAL ANAND (2010} 192 TAXMAN, PUNJAB AND HARYANA HIGH COURT, THAI COPY OF THE CITATION WAS FURNISHED BY THE APPELLANT BEFORE THE ASSESSING OFFICER WHICH HAS NOT BEEN TAKEN INTO OWN CONSIDERATION SO ALSO FAILED TO NON APPLIC ATION OF HIS MIND IN JUDICIOUSLY AND ACTED UNILATERALLY TO INTEREST OF REVENUE, 8. THAT, LOW INCOME COMPARED TO THE LARGE COMMISSION RECEIPTS AS MENTIONED IN THE PAGE OF ASSESSMENT ORDER BY THE LEARNED ASSESSING OFFICER WHICH IS NOT A FACT , AS THE APPE LLANT HAS SHOWN THE GROSS SALE AND GROSS COMMISSION RECEIPTS MET PROFIT, WHICH IS REFLECTED IN THE AUDIT REPORT AND ESTIMATION OF PROFIT MARGIN ON ITA NO. 104 /CTK/201 9 6 GROSS SALE AND GROSS COMMISSION RECEIPT MADE BY LEARNED ASSESSING OFFICER IS UNCALLED FOR AND UNWARRANTED, 9 . THAT NO REASONABLE OPPORTUNITY WAS AFFORDED BY APPELLANT TO PRODUCE THE BOOKS OF ACCOUNTS IN SUPPORT OF THE ASSESSMENT PROCEEDINGS AS MADE BY LEARNED ASSESSING OFFICER IN SUCH EVENT BEST JUDGMENT ASSESSMENT ORDER PASSED BY LEARNED ASSESSING IS UNJUSTI FIED AND ILLEGAL 10. THAT THE APPELLANT WAS FURNISHED THE RELEVANT DOCUMENTS BEFORE THE ASSESSING OFFICER IN SUPPORT OF CLAIM OF THE REBATE U/S 80C OF IT ACT, APART FROM THE ABOVE WRITTEN SUBMISSIONS, LD.AR ALSO SUBMITTED THAT THE AO HAS NOT AFFORDED ANY REASONABLE OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNTS AND REJECTED THE BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT . HE FURTHER STATED THAT THE BOOKS OF ACCOUNTS ARE LAYING WITH THE ASSESSEE WHICH WAS PRODUCED BEFORE THE TAX AUDITORS AND HE HAS MENTIONED IN HIS AUDIT REPORT. T HEREFORE, LD. AR SUBMITTED THAT THE ISSUE MA Y BE RESTORED TO THE FILE OF AO. 6. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT MANY OPPORTUNITIES WERE GIVEN TO THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HE HAD ALSO AN OPPORTUNITY TO PRODUCE THE BOOK S OF ACCOUNTS BEFORE THE CIT(A), HOWEVER, THE ASSESSEE COULD NOT AVAIL THE SAME. 7. AFTER HEARING BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSMENT WAS COMPLETED BY THE AO U/S.144 OF THE ACT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S.145(3) OF THE ACT AND THE CIT(A) HAS CONFIRMED THE SAME. LD. AR ITA NO. 104 /CTK/201 9 7 BEFORE US SUBMITTED THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE HAS BEEN AU DITED U/S.44AB OF THE ACT AND NO DISCREPANCY HAS BEEN NOTICED. IT HAS ALSO BEEN CONTENDED BY THE LD. AR BEFORE US THAT IN THE INSTANT CASE NO NEXUS HAS BEEN ATTRIBUTED FOR ESTIMATION OF PROFIT MARGIN 8% AND 25%, HOWEVER, AS PER THE PROVISIONS OF SECTION 44 AD OF THE ACT, PROFIT MARGIN HAS TO BE ESTIMATED @8%, THEREFORE, LD. AR SUBMITTED THAT THE ESTIMATION DONE BY THE AO AND CONFIRMED BY THE CIT(A) MAY BE REDUCED TO 8%. THE BENCH SPECIFICALLY ASKED THE FOLLOWING QUESTIONS TO THE ASSESSEE : - I) N ATURE OF SUPP LY OF GOODS/SERVICES AND NAME OF PARTIES TO WHOM THE GOODS HAVE BEEN SUPPLIED AG AINST WHICH COMMISSION RECEIVED ? II) THE VALUE OF SUPPLY ON WHICH COMMISSIONS HAVE BEEN RECEIVED ? III) RATE OF COMMISSION RECEIVED FR OM THE SUPPLY OF GOODS/SERVICE ? IV) WAS /WERE THERE ANY AGREEMENT /S MADE FOR RATE OF COMMISSION RE CEIVED ? V) HOW MUCH EXPENDITURE WERE INCURRED TOWARDS EARNING OF COMMISSION AND HOW MANY PERSONS WERE DEPLOYED FOR THIS WORKS AGAINST WHICH COMMISSIONS HAVE BEEN RECEIVED ? VI) REASONS FOR NON - PROD UCTION OF BOOKS OF ACCOUNTS AS STATED IN THE TAX AUDIT REPORT. ALL THE ABOVE QUERIES WERE REMAINED UNANSWERED. CONSIDERING THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE AND LOOKING TO THE FACTS ITA NO. 104 /CTK/201 9 8 AND CIRCUMSTANCES OF THE CASE, WE RESTORE THIS ISSUE TO THE FI LE OF AO AND DIRECT THE AO TO FRAME THE ASSESSMENT DE NOVO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. NEEDLESS TO SAY THE ASSESSEE HAS BE PROVIDED REASONABLE OPPORTUNITY OF HEARING. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE DOCUMENTS TO SUBSTAN TIATE HIS CLAIM BEFORE THE AO AND COOPERATE WITH THE AO FOR EARLY DISPOSAL OF THE CASE. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16 / 10 / 20 20 . S D/ - ( C.M.GA RG ) SD/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 16 / 10 /20 20 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , /ITAT, CUTTACK 1. / THE APPELLANT - MRS SNEHA MOHAN TY, PLOT NO.EB/69, STAGE - V, JHARPARA HOUSING BOARD COLONY BHUBANESWAR 2. / THE RESPONDENT - ITO, WARD - 2(3), BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTT ACK 6. / GUARD FILE. //TRUE COPY//