Pranati Mohaptra, Bhubaneswar V. ACIT (OSD), Bhubaneswar

ITA 11/CTK/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0809 (ITAT-CUTTACK)
• Duration Of Justice: 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 05-01-2011
• Court: TRIBUNAL
• Department Lawyers: J KHANRA
• Assessee Lawyers: P C MISHRA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, (SMC) CUTTACK BENCH, CUTTACK () BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. / ITA NO.11/CTK/2011 / ASSESSMENT YEAR 2006 - 07 PRANATI MOHAPATRA, PLOT NO.128, SURYA NAGAR, BHUBANESWAR. - - - VERSUS - ASST. COMMISSIONER OF INCOME - TAX (OSD) RANGE, BHUBANESWAR. ( /APPELLANT ) (/ RESPONDENT ) / FOR THE APPELLANT : / SH RI P.C.MISHRA, AR / FOR THE RESPONDENT: / SHRI J.KHANRA, DR / ORDER (SMC) . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSE AGITATES THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION IN RESPECT OF LOW DRAWINGS AMOUNTING TO 84,000 , ADDITION OF CREDIT NOTES ON PURCHASES AND INCREASE IN THE VALUATION OF CLOSING STOCKS BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 144. 2. THE LEARNED CIT(A) ON SPECIFIC GROUNDS RA ISED BEFORE HIM HAD EXPARTE CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD RETURNED INCOME FROM HOUSE PROPERTY, TRADING OF DOMESTIC APPLIANCE AND ELECTRONIC GOODS AND INCOME FROM OTHER SOURCES WAS HAVING TURNOVER LESS THAN THE PRESCRIBED U/S.44AB CHOSE TO RETURN THE INCOME U/S.44AF BEING 5% OF THE GROSS SALES. THE ASSESSING OFFICER, PASSED THE ASSESSMENT U/S.144 AND ON THE LAST DAY OF THE CALENDAR YEAR HOLDING IT AS TIME BARRED BY SERVI NG NOTICE FOR HEARING ON THE SAME DAY CONSIDERED TAXATION BY INCREASING THE / ITA NO.11/CTK/2011 2 VALUE OF STOCK BY 2529, LOW DRAWINGS 84,000 AND BRINGING TO TAX CREDIT NOTES OF 94,371 WHICH WAS APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(A) ALSO P ASSED AN EX PARTE ORDER WHEN THE COUNSEL ENGAGED BY THE ASSESSEE COULD NOT ATTEND THE VARIOUS DATES DUE TO ENTIRELY HIS PERSONAL REASONS. HOWEVER, THE LEARNED CIT(A) HAS CONFIRMED THE SAME BY ANALYZING THE ISSUES RAISED BY THE ASSESSING OFFICER IN THE IDEN TICAL MANNER. 4. THE LEARNED COUNSEL ARGUED THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT ONCE THE BOOKS OF ACCOUNT WHICH ARE BEING MAINTAINED AND WAS AUDITED U/S.44AB COULD SIMULTANEOUSLY BE ACCEPTABLE ON THE FACT THAT PROVISIONS OF SECTION 44AF ARE APPLICABLE INSOFAR AS HE SOUGHT TO DISALLOW THE CREDIT NOTES AVAILED BY THE ASSESSEE BY HOLDING IT AS INCOME OVER AND ABOVE 5% NET INCOME RETURNED BY THE ASSESSEE ON ACCOUNT OF SUCH TRADING TRANSACTIONS. SIMILARLY HE MINUTELY DETERMINED THE VALUATION O F CLOSING STOCKS WHEN THE EXPENSES ON ACCOUNT OF FREIGHT, LOADING AND UNLOADING WERE SOUGHT TO BE DISALLOWED AMOUNTING TO 2,529. THE ASSESSEE HAD SHOWN 12,000 AS AMOUNT WITHDRAWN FOR PERSONAL USE WHICH HE ENHANCED TO 96,000 BY MAKING ADDITION OF 84,000 ON ACCOUNT OF LOW DRAWINGS FOR PERSONAL USE. HE ALSO CONSIDERED THAT AS THE PROVISIONS OF SECTION 44AF ARE APPLICABLE THE CREDIT NOTES RECEIVED (94,371) WAS ALSO TO BE CONSIDERED FOR TAXATION OVER AND ABOVE THE 5% INCOME AMOUNTING TO 1,63,2389 WHICH AL L ISSUES WERE AGITATED BEFORE THE LEARNED CIT(A). AS MENTIONED EARLIER, THE CHARTERED ACCOUNTANT WHO HANDLED THE CASE OF THE ASSESSEE, DUE TO PURE PERSONAL REASONS DID NOT APPEAR WHICH CONSTRAINED THE LEARNED CIT(A) TO PASS AN EX PARTE ORDER DISMISSING THE ASSESSEES CONTENTIONS. 5. THE LEARNED COUNSEL ARGUED THAT THE ADDITIONS OVER AND ABOVE THE 5% INCOME SHOWN AGAINST THE GROSS SALES COULD NOT LEAD TO TAXING THE CREDIT / ITA NO.11/CTK/2011 3 NOTES ON PURCHASES AGAIN IN VIEW OF THE FACT THAT THE BOOKS OF ACCOUNT, IF AT ALL, WERE TO BE MAINTAINED WOULD HAVE INDICATED THE PURCHASES WHICH HAD BEEN INCORPORATED AGAINST WHICH DISCREPANCY, IF ANY, THE LEARNED ASSESSING OFFICER COULD ONLY FIND WAS OF 2,529. SIMILARLY HE ARGUED THAT THE LOW WITHDRAWAL WHICH HE SOUGHT TO BRING TO TAX WAS LESS THAN 5% OF THE INCOME AND WAS GENERATED BY THE ASSESSEE AS PER THE RETURN FILED THEREFORE WAS SUFFICIENT TO MEET THE ASSESSING OFFICERS ASSUMPTION OF LOW DRAWINGS. HAVING RETURNED THE INCOME FROM HOUSE PROPERTY AND OTHER SOURCES, THE ASSESSING OFFIC ER THEREFORE, COULD NOT BIFURCATE HIS ANALYSIS OF THE VERY ASSUMED BALANCE SHEET WHEN THE ASSESSEE HAD RETURNED TOTAL TAXABLE INCOME AT 1,40,788 WHEN THE ASSESSEE HAD RETURNED 5% OF THE GROSS RECEIPTS AND OVER EXPENSES BEING THE NET PROFIT OF 1,25,890. HE PRAYED THAT SUITABLE DIRECTION MAY KINDLY BE GIVEN TO THE AUTHORITIES BELOW TO ASSESSEE INCOME IN ACCORDANCE WITH THE PROVISIONS OF LAW. 6. THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER WAS CONSTRAINED TO PASS THE ORDER ON THE LAST DAY OF THE TIME BARRING PERIOD AS THE ASSESSEE DID NOT APPEAR ON THE SAID DATE. SIMILARLY NONE APPEARED BEFORE THE LEARNED CIT(A), T HEREFORE, CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSING OFFICER THAT THE ADDITIONS MADE WERE RIGHTLY CONFIRMED BY THE LEARNED CIT(A) ON THE BASIS OF FACTS AND CIRCUMSTANCES NOTED THEREIN. HE FULLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 7. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, I AM INCLINED TO FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE INSOFAR AS THE ASSESSEE INSPITE OF THE SALES BEL OW THE BENCH MARK OF 40 LAKHS CHOSE TO PREPARE THE BOOKS OF ACCOUNT AND GET THEM AUDITED, RETURNED THE INCOME AS / ITA NO.11/CTK/2011 4 ARRIVED AT BY DRAWING THE PROFIT & LOSS ACCOUNT AT A NET PROFIT WHICH OTHERWISE HAS BEEN COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF LAW BY THE ASSESSING OFFICER AT 5% OF THE GROSS TURNOVER. THE OTHER INCOME BEING INCOME FROM HOUSE PROPERTY AND OTHER SOURCES HAVE ALSO BEEN CONSIDERED ALONG WITH THIS INCOME. HAVING DONE SO, THE ASSESSING OFFICER COULD NOT RESORT TO VALUATION OF STOCK OR CONSIDE R THE CREDIT NOTES AVAILABLE TOGETHER WITH LOW DRAWINGS AS THESE THREE ADDITIONS OR DISALLOWANCES ARE BELOW THE PARAMETER OF BRINGING TO TAX OVER AND ABOVE THE 5% OF THE RETAIL SALES UNDER THE PROVISIONS OF SECTION 44AF. IT WAS PURELY ASSUMPTIONS AND PRE SUMPTIONS FOR BRINGING TO TAX SUCH ITEMS AS THE ASSESSEE HAD INCLUDED THE SAME IN THE INCOME ON ACCOUNT OF CREDIT NOTES RECEIVED AMOUNTING TO 94,371 WHEN HE HAD CHOSEN TO SHOW PURCHASE OF 34.38 LAKHS. THERE WILL BE NO WORTHWHILE VERIFICATION TO BE CARRI ED OUT IF THE ISSUES ARE RESTORED TO THE FILE EITHER OF THE ASSESSING OFFICER OR LEARNED CIT(A) INSOFAR AS THE ISSUES RAISED BEFORE ME ONLY PERTAIN TO THE ADDITIONS OF ENHANCING THE DRAWINGS, VALUATION OF STOCK AND THE CREDIT NOTES, WHICH IN ITSELF CLEARLY INDICATE THAT THEY ARE PART AND PARCEL OF THE PROFIT & LOSS ACCOUNT AGAINST WHICH THE ASSESSING OFFICER HAS ALREADY ASSUMED APPLICATION OF SECTION 44AF WHEN HE IS JUSTIFYING TO ACCEPT INCOME AT 5% OF THE SALES REPORTED IN THE PROFIT & LOSS ACCOUNT BY THE ASSESSEE. TO THIS EXTENT, THE ASSESSEES APPEAL IS TO BE PARTLY ALLOWED TO THE EXTENT THAT 5% OF SALES AT 1,63,289 IS TO BE ADJUDICATED VIS - Z - VIS THE SUM OF 1,25,890 RETURNED BY THE ASSESSEE BEING THE NET PROFIT FROM M/S. SUNSHINE ENTERPRISES LTD. THIS I S BECAUSE HAVING JUSTIFY TO VERIFIED THE RETURN U/S.44AF, THE ASSESSING OFFICER WAS NOT TO DISALLOW EXPENSES OR LOW DRAWINGS THAT ARE LESS THAN 5%, WHICH THE LEARNED COUNSEL BEFORE ME HAS AGREED TO THE PROPOSITION THAT OTHER ADDITIONS AND DELETIONS COULD N OT STAND THE TEST OF TIME UNDER LAW. / ITA NO.11/CTK/2011 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 27.01.2011 S D/ - (. . ), , (K.K.GUPTA), ACCOUNTANT MEMBER. () DATE: 27.01.2011 - COPY OF THE ORDER FORWARDED TO: 1. / THE APPELLANT : PRANATI MOHAPATRA, PLOT NO.128, SURYA NAGAR, BHUBANESWAR. 2 / THE RESPONDENT: ASST. COMMISSIONER OF INCOME - TAX (OSD) RANGE, BHUBANESWAR 3. / THE CIT, 4. ()/ THE CIT(A), 5. / D R, CUTTACK BENCH 6. GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.