SHAKILA BEGUM, SITAPUR V. PR. COMMISSIONER OF INCOME TAX, BAREILLY

ITA 107/LKW/2022

AI Insights

The case involves Shakila Begum, the appellant, who contested the order of the Principal Commissioner of Income Tax, Bareilly, which set aside her original assessment order for the assessment year 2017-18. The PCIT's order was based on perceived discrepancies in the sales figures reported in the Profit & Loss account and the cash sales disclosed, as well as insufficient documentation regarding commission sales for M/s Agarwal Autosales. The Tribunal examined the submissions and evidence presented, including VAT considerations and commission sales documentation, and found that the original assessment had adequately addressed the issues raised.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127419 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 10-05-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Application of stay; Assessment record; TDS; Set aside; FORM 26AS
• Section: 263; 2; 143(3); 142(1); 143(2); 48

Judgement Text

आयकर अपील य अ धकरण, लखनऊ यायपीठ “ए” ,लखनऊ IN THE INCOME TAX APPELLATE TRIBUNAL, LUCKNOW BENCH “A”, LUCKNOW (THROUGH VIRTUAL HEARING) ी आकाश द प जैन, उपा य एवं ी व!म #संह यादव, लेखा सद'य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 107/LKW/ 2022 Assessment Year : 2017-18 Shakila Begum C/o Ravi Ratna Advocate Lohar Bagh, Sitapur The Pr. CIT Bareilly PAN NO: AJEPB0330K Appellant Respondent STAY APPLICATION NO. 03/LKW/2023 (In ITA NO. 107/LKW/ 2022) Assessment Year : 2017-18 Shakila Begum C/o Ravi Ratna Advocate Lohar Bagh, Sitapur The Pr. CIT Bareilly PAN NO: AJEPB0330K Appellant Respondent ! " Assessee by : Shri Ravi Ratna, Advocate # ! " Revenue by : Shri S.H. Usmani, CIT (DR) $ % ! & Date of Hearing : 28/03/2023 '()* ! & Date of Pronouncement : 13/04/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the assessee against the order of the Ld. Pr. CIT, Bareilly dt. 24/03/2022 wherein the assessee has taken the following grounds of appeal: 1. The initiation proceedings, u/s 263 was unwarranted as the Ld. Principal Commissioner of Income Tax did not consider the replies of the assessee filed before the A.O. as all details were filed and were duly considered into by Assessing Officer at the time of assessment. The Ld. Principal Commissioner of 2 Income Tax did not appreciate the difference among total sales, cash sales and sales with VAT. In addition of this, the commission declared by the assessee is duly tallied with the Form 26AS. Therefore, the Assessment Order was neither erroneous nor prejudicial to the revenue. Hence, the entire proceedings u/s 263 being unnecessary may kindly be quashed. And the assessment order u/s 143(3) dated 24.12.2019 may kindly be sustained and restored. 2. The setting aside of assessment order is unjustified, against facts and circumstances of the case and unlawful. Therefore, the order by Ld. Principal Commissioner of Income Tax for denovo reassessment may kindly be quashed. And the order of A.O. may kindly be sustained. And the assessment order u/s 143(3) dated 24.12.2019 may kindly be sustained and restored. 3. That the assessee filed all the required details as per the notice u/s 263 before Ld. Principal Commissioner of Income Tax but Ld. Principal Commissioner of Income Tax did not appreciate the details filed by the assessee and passed order u/s 263 arbitrarily and mechanically which is bad in law. Therefore, the order u/s 263 is unlawful, unjustified, against facts and circumstances of the case, may kindly be quashed. And the assessment order u/s 143(3) dated 24.12.2019 may kindly be sustained and restored.” 2. Briefly the facts of the case are that the assessee filed her return of income declaring total income of Rs. 8,98,310/- which was selected for limited scrutiny through CASS and thereafter the notice under section 143(2) and 142(1) were issued and after calling for necessary information/documentation, the returned income of the assessee was accepted. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT, Bareilly and a show cause dt. 03/03/2022 was issued to the assessee as to why the assessment order should not be set aside being erroneous in so far as prejudicial to the interest of the Revenue as per Explanation 2 to Section 263 of the Act. 2.1 In the show cause, it was stated by the Ld. Pr. CIT that the assessee in her P&L Account has declared sales at Rs. 4,16,61,845/- whereas as per the submissions filed by the assessee, the cash sales were disclosed at Rs. 4,43,20,245/- which shows that the assessee has disclosed total sales in her P&L Account lower than the cash sales and the AO has not made any inquiry in this regard. Another reason which was stated by the Ld. Pr. CIT in the show cause was that the assessee has made sales on commission basis for M/s Agarwal Autosales, Sitapur whose sales proceeds were deposited in the bank account of 3 the assessee and the assessee in her submission before the AO has stated that Rs. 2,41,67,061/- were realized against the sales made on commission basis. It was stated by the ld PCIT that on perusal of assessment records, it is seen that a certificate from M/s Agarwal Autosales, Sitapur is placed on file. However, no details of quantum of sale are mentioned in the said certificate and further no other documents are placed on file substantiating the quantum of sales made by the assessee for M/s Agarwal Autosales, Sitapur. Further no documentation are placed on file regarding customer wise details of sales / services made by the assessee for M/s Agarwal Autosales, Sitapur as well as proprietorship concern of the assessee, M/s Sameer Automobiles, Biswan. 2.2 In response to the show-cause notice, the assessee filed her submissions which were considered by the Ld. Pr. CIT, however, the same were not found acceptable and the assessment order was set aside to be framed denovo as per law keeping in view the observation made in the impugned order after giving reasonable opportunity to the assessee. 3. Against the said findings and the direction of the Ld. Pr. CIT, the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR submitted that the assessee's case was selected for limited scrutiny for issue of "cash deposit during the year. The Ld. A.O. issued a questionnaire u/s 142(1) in which he is confined to the issue of limited scrutiny i.e. the question of cash deposit and raised relevant queries. The assessee filed the detailed reply in response of the above notice, explaining all the queries made by the A.O. While concluding the assessment, the Ld. A.O. mentioned the following - "Subject to the findings in the reply of the assessee, narration of the facts, references of the evidences, analysis and observation, returned income of the assessee is being accepted and accordingly assessment order is being passed u/s 143(3).” 4 4.1. It was submitted that there were two points on which the Ld. Principal Commissioner of Income Tax has ordered the assessment order to be passed denovo. These two points are being reproduced as under- “I. As per P&L A/c for the relevant financial year, sales were declared at Rs.4,16,61,845/-. However, as per the submission of the assessee, cash sales were disclosed at Rs.4,43,20,245/-. In view of above, the assessee has disclosed total sale in her P& L A/c which was less than the cash sale. The AO has not made any enquiry on this issue. 2. In the assessment order, the AO stated that the assessee had also made sales on commission basis for M/s Agarwal Autosales, Sitapur whose sales proceeds were deposited in the bank account of the assessee. In her reply, the assessee has stated that Rs.2,41,67,061/- was realized against sales made on Commission basis. On perusal of assessment record, it is seen that a certificate from Agarwal Autosales, Sitapur is placed on file. No details of quantum of sales are mentioned in this certificate. Also, no other documents are placed on file substantiating the quantum of sale made by the assessee for M/s Agarwal Autosales, Sitapur. There is no document placed on file regarding customer wise details of sales/services made by the assessee for M/s Agarwal Autosales, Sitapur as well as proprietorship concern M/s Sameer Automobiles, Biswan.” 4.2. Regarding the point no. 1 raised by the ld PCIT, it was submitted that it seems that the entire confusion is created by point no. 3.2 (a) of the submission of the assessee before A.O. (please refer page 47 of the paper book) where the assessee, while explaining cash available with her has mentioned total cash sales in F.Y. 2016-17 is Rs. 4,43,20,245.00, here the assessee was trying to explain the cash availability with her. This amount of Rs. 4,43,20,245.00 includes the VAT amount also, which was received along with amount of cash received for sales, and the entire amount (Sales amount + VAT amount) was deposited into the bank. 5 4.3 It was submitted that this gross receipt of Rs. 4,75,15,582.00 is mentioned in the submission of the assessee before AO., compiled at page no. 48 of the paper book (Please see last para of the said page) for which the Ld. A.O. has gone through and thereafter framed the assessment order accordingly. The Ld. PCIT has been confused regarding sales of the assessee with the amount received in cash for sales which also includes VAT amount and the VAT amount can never be the part of the sales. Therefore, there is no discrepancy is sales shown in profit and loss account. 4.4 Regarding point no. 2 raised by the ld PCIT, it was submitted that there is no dispute regarding the amount of the commission received of Rs. 3,29,302/- by the assessee (which was shown in the profit and loss account). This amount was duly verified by the Ld. A.O. from the person, M/s Agarwal Auto Sales, who gave the commission. A certificate from M/s Agarwal Auto Sales regarding this was filed before A.O. is being attached at page 50 of the paper book. This commission amounting of Rs. 3,29,302/- received by the assessee from M/s Agarwal Auto Sales is also verifiable from Form 26AS of the assessee (Form 26AS is attached at page 33 to 39 of the paper book). 4.5 It was submitted that though on receipt of the notice by Principal Commissioner of Income Tax u/s 263, the assessee filed the quantum details in shape of fresh certificate from Agarwal Auto Sales before Ld. PCIT, being attached at page no. 16 of the paper book and details showing name of the customers, address of the customers, and model of the vehicle - the quantum details filed before Ld. PCIT is also being attached at page no. 17 to 20 of the paper book) 4.6 It was submitted that by no stretch of imagination when the commission income is quantified, certain and verified then what is the role of the customer name, address and vehicle model. The assessee sold motorcycles, which is a 6 product which has to be registered with transport department. So unnecessarily asking for name, address, vehicle model is not called for. 4.7 It was further submitted that the following consolidated chart should clear the picture of ledger of Agarwal Auto Sales and its balance (Ledger of Agarwal Auto Sales is compiled at page no 21 to 32 of the paper book) Particulars Amount (in Rs.) Opening Balance as on 01.04.2016 Add : Funds transferred during the year Add : Funds transferred directly by the customers in bank a/c of Agarwal Auto Sales 32,70,171.00 2,14,24,000.00 52,701.00 Total Amount Paid to Agarwal Auto Sales (Duly being tallied with confirmation account of Agarwal Auto Sales, Compiled at Page No. 21 to 32 of paper book) 2,47,46872.00 Less : Amount transferred to Sales Ledger (when commission business was stopped and self sales business started, so that balance amount were transferred to regular account of Agarwal Auto Sales) 5,79,811.00 Transaction Amount of Commission Sales 2,41,67,061.00 4.8 It was submitted that the bank statement of Vijaya Bank, compiled at page no. 57 to 60 (enclosed along with supplementary paper book) is completely tallying with copy of account of Agarwal Auto Sales, compiled at page no. 21 to 32. That this above said bank statement was duly filed before A.O. during assessment proceedings. 4.9 It was submitted that the certificates from M/s Agarwal Auto Sales was filed before A.O. and also before Ld. PCIT, as well as filed before your honour at page no 50 and page no. 16 of paper book . In those certificates, Agarwal Auto Sales has certified that this sales receipts amounting to Rs. 2,41,67,061/- is recorded in the books of account of Agarwal Auto Sales. 4.10 It was further submitted that the case was selected under limited scrutiny on the issue of cash deposits during the year in respect of which the Ld. A.O. before framing the assessment order, asked the required details through notice u/s 142(1) and gone through the reply of the assessee with proper evidences for 7 the reason case was selected for the scrutiny and has recorded his findings as under: “ On perusal of the reply, documentary evidences and Bank account statement it has been found that assessee has deposited Rs. 8,25,000/- during demonetization period which is tallied with cash book. The sales of the assessee is mostly in cash. Hence, cash deposit during the year is justified. Looking into the chart and sales in cash, no adverse has been found.” 4.11 With above facts and submissions, it is submitted that the Assessment Order u/s 143(3) is neither prejudicial to the interest of the revenue nor erroneous and the order u/s 263 may kindly be quashed and assessment order be restored. 5. Per contra, the Ld. CIT DR relied on the order of the Ld. Pr. CIT and our reference was drawn to the findings of the Ld. Pr. CIT which are contained at para 4 of the impugned order and the contents thereof reads as under: “4. I have gone through the submissions of the assessee filed in response to the show cause notice issued u/s 263 of the Act and perused the assessment record. Following observations are made with regard to the assessment order passed by the AO being considered erroneous as pointed out in the show cause notice. (i) With regard to discrepancy in sales declared in P&L Account at Rs. 4,16,61,845/- and cash sales disclosed at Rs. 4,43,20,245/- in the submissions filed by the assessee, during assessment proceedings, it has been submitted by the assessee that AO made enquiry regarding this and assessee had furnished her reply. I have gone through the assessment records and it has been submitted by the assessee as follows: “ the total sales of the assessee during the AY under consideration was Rs. 4,03,70,601/-, value added Tax of sales was Rs. 58,53,738/- and Sale of service during the year was Rs. 12,91,244/- and thus total realization of sales was Rs. 4,75,15,583/-“ Further, total cash sales in FY 2016-17 has been shown at Rs. 4,43,20,245/- in the same submission. It is apparent that the assessee has not reconciled how she has arrived at sales figure shown in P&L Account nor the AO has made any enquiry on this issue. (ii) Further, during the assessment proceedings, it has been submitted by the assessee that he had made sales on commission basis for M/s Agarwal Autosales, Sitapur whose sales proceeds were deposited in the bank account of the assessee and Rs. 2,41,67,061/- was realized against sales made on commission basis. 8 On perusal of assessment record, it is seen that a certificate from Agarwal Autosales, Sitapur is placed on file. No details of quantum of sale are mentioned in the certificate. Also, no other documents were filed during the assessment proceedings, substantiating the quantum of sales made by the assesseee from M/s Agarwal Autosales, Sitapur as well as the proprietorship concern of the assessee. It is apparent that the Assessing Officer during the course of assessment has not examined the above discussed issues neither enquired into the facts of the case.” 6. We have heard the rival contentions and purused the material available on record. Firstly, regarding the disclosure of total sales in the profit/loss account lower than the cash sales, it has been submitted by the ld AR that there is actually no discrepancy and it is the manner of disclosure in the profit/loss account where the sales are reflected net of VAT whereas as the collection from the customers is inclusive of VAT. It has been submitted that total sales inclusive of VAT is Rs 4,75,15,582/- wherein the sales figure is of Rs 4,16,61,845/- and VAT on such sales is Rs 58,53,737/-. In the profit/loss account, the sales have been shown at Rs 4,16,61,845/- and VAT has been shown separately. It has been further explained that the sales figure of Rs 4,75,15,582/- consist of cash sales of Rs 4,43,20,244/- and remaining sales of Rs 31,95,338/- in respect of which amount has been received from the customers through cheque/directly into the bank account. It has been submitted that the necessary reconciliation of cash sales and sales reflected in the profit/loss account was duly submitted before the ld PCIT, however, having taken cognizance of the same, he has failed to appreciate the same. We find that the assessee has provided the necessary explanation regarding the difference in cash sales and sales reflected in the profit/loss account which is on account of manner of reflection of VAT amount collected from the customers. In the profit/loss account, the sales have been shown net of VAT and VAT has been shown separately and therefore, merely on account of separate reflection of sales and VAT and in absence of any other discrepancy, the order so passed by the AO cannot be held as erroneous in so 9 far as prejudicial to the interest of the Revenue and thus, the findings of the ld PCIT in this regard are set-aside. 7. Now, coming to the matter relating to sales on commission basis effected by the assessee for M/s Agarwal Autosales, Sitapur where sales proceeds of Rs. 2,41,67,061/- were deposited in the bank account of the assessee, it has been held by the ld PCIT that a certificate from M/s Agarwal Autosales, Sitapur is placed on file wherein no details of quantum of sale are mentioned and besides that, no other documents were filed during the assessment proceedings, substantiating the quantum of sales made by the assesseee for M/s Agarwal Autosales, Sitapur and the Assessing Officer during the course of assessment has neither enquired into the facts of the case nor examine the same. 8. In this regard, firstly, we find that as per assessee’s own submissions before the AO, the assessee was a sub-dealer of M/s Agarwal Autosales, Sitapur till June 2016 and used to collect the sales proceeds of bikes and deposit the same in her bank account maintained with Vijay Bank and subsequently, the same was transferred to the account of M/s Agarwal Autosales, Sitapur. The collections so made from the customers were thus in cash and how the same has been accounted for in its books of accounts and offered to tax is clearly within the mandate of limited scrutiny for which the matter was selected under CASS to examine the cash deposits during the year. 9. During the course of assessment proceedings, the matter relating to cash deposits was enquired by the AO and in response to the notices issued, the assessee filed her submissions which were examined and thereafter, the assessment order was passed wherein there is a clear mention of the transactions effected by the assessee on behalf of M/s Agarwal Autosales, Sitapur. It is therefore not a case of lack of enquiry on part of the Assessing officer. 10 10. Further, regarding the contents of the certificate issued by M/s Agarwal Autosales, Sitapur so filed by the assessee during the course of assessment proceedings, we find that the same confirm the fact that the assessee acted as a sub-dealer on commission bass for M/s Agarwal Autosales, Sitapur and all the sales were recorded in the books of M/s Agarwal Autosales, Sitapur and commission was paid to the assessee. Further, the assessee has obtained and filed a fresh certificate during the course of revisionary proceedings before the ld PCIT bringing out the fact that during the financial year 2016-17, 490 vehicles were sold by the assessee on behalf of M/s Agarwal Autosales, Sitapur for Rs 2,41,67,061/- which were duly recorded in the books of accounts of M/s Agarwal Autosales, Sitapur and for which commission of Rs 3,29,902/- was paid to the assessee after deducting of TDS. The ld PCIT has not pointed out any defect in the said certificate and even during the course of proceedings before us, the ld CIT DR couldn’t point out any discrepancy in the certificate so filed by the assessee and what further enquiries/verification were required. In view of the aforesaid, where the sales were effected by the assessee on behalf of M/s Agarwal Autosales, Sitapur which were duly recorded in the books of accounts of M/s Agarwal Autosales, Sitapur, and the cash collections so made on behalf of M/s Agarwal Autosales, Sitapur were duly transferred to the account of M/s Agarwal Autosales, Sitapur and for such activities, the commission earned by the assessee has been duly offered in the return of income and which has been accepted by the AO, the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue. 11. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we are of the considered view that the order so passed by the AO cannot be held as erroneous in so far as prejudicial to the interest of the Revenue and accordingly, the order passed by the ld PCIT u/s 263 is set-aside and that of the AO is sustained. 11 12. In view of the above where we have set-aside the order passed by the ld PCIT, the stay petition seeking stay on the set-aside proceedings consequential to order passed u/s 263 has become infructious. 13. In the result, the appeal of the assessee is allowed and the stay petition is dismissed. Order pronounced in the open Court on 13/04/2023. Sd/- Sd/- आकाश द प जैन व!म #संह यादव (AAKASH DEEP JAIN) (VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद'य/ ACCOUNTANT MEMBER AG Date: 13/04/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 6 DR, ITAT, LUCKNOW 6. ग 7 8 % Guard File ( + $ By order, 9 # Assistant Registrar