Saunak Mitra, Kolkata V. ACIT, CIR-25, KOLKATA, Kolkata

ITA 1252/KOL/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4000 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: K M ROY
• Keywords: Rejection of books of accounts
• Section: 143(3); 194C; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D, BENCH KOLKATA BEFORE SHRI S. S. GODARA, JM & DR. A.L. SAINI, AM ITA NO.1252/KOL/2017 (ASSESSMENT YEAR: 2009-10) SAUNAK MITRA 39, MAHANIRBAN ROAD, GROUND FLOOR, KOLKATA 700 029. VS. ACIT, CIRCLE-25, KOLKATA AAYAKAR BHAWAN, 2, GARIAHAT ROAD SOUTH, KOLKATA 700 068. ./ ./PAN/GIR NO. : AHSPM 6241 J ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI K. M. ROY, FCA REVENUE BY : SHRI A. BHATTACHARJEE, ADDL. CIT / DATE OF HEARING : 12/07/2018 /DATE OF PRONOUNCEMENT: 08/10/2018 / O R D E R PER DR. A. L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2009-10, IS DIRECTED AGAINST THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-7, KOLKATA IN APPEAL NO.501/CIT(A)-7/KOL/CIR-25/16-17, DATED 16.05.2017, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. THE LD. CIT(A) HAVING ONCE REJECTED THE BOOKS OF ACCOUNT AND RESORTING TO ESTIMATION OF PROFIT CANNOT AGAIN SUSTAIN THE DISALLOWANCE U/S 40(A)(IA) R.W.S. 194C. 2. THAT THE ESTIMATION OF PROFIT @8% WITHOUT CITING ANY COMPARABLE IS ERRONEOUS AND PERVERSE. 3. THAT APPELLANT RESERVES THE RIGHT TO RAISE ADDITIONAL GROUND. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 30.09.2009 DECLARING A TOTAL INCOME OF SAUNAK MITRA ITA NO.1252/KOL/2017 ASSESSMENT YEAR: 2009-10 2 RS.16,63,243/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT, ON 15.09.2010. SUBSEQUENTLY, THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S 143(2) OF THE ACT AND THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY MAKING FOLLOWING ADDITIONS: I) ADDITION ON ACCOUNT OF DIFFERENCE IN SUNDRY CREDITORS RS.10,17,063/-. II) ADDITION ON ACCOUNT OF VIOLATION OF PROVISION OF SECTION 194C RS.2,59,770/- III) ADDITION ON ACCOUNT DONATION RS.11,400/- IV) ADDITION ON ACCOUNT OF AD PRODUCTION EXPENSES RS.1,58,045/- 4. AGGRIEVED BY THE VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND MADE THE ADDITION BASED ON THE ESTIMATION. THE LD CIT(A) NOTED THAT DURING THE COURSE OF HEARING THE ASSESSEE WAS NOT ABLE TO RECONCILE THE BALANCE OF DEBTORS AND CREDITORS. THEREFORE, SOME DISCREPANCY/MANIPULATION CANNOT BE RULED OUT AND THEREFORE THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED AND PROFIT OF THE ASSESSEE WAS ESTIMATED. THE LD CIT(A) HELD THAT THE NET PROFIT OF THE ASSESSEE MAY BE ESTIMATED AT 8% OF THE OPERATING INCOME OF RS.3,09,71,045/- AND ALLOWED ASSESSEE`S APPEAL PARTLY. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THAT THE LD CIT(A) ERRED IN REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE PROFIT @8% WITHOUT CITING THE COMPARABLE CASES AND PAST HISTORY OF ASSESSEES BUSINESS. THE LD. COUNSEL HAS SUBMITTED BEFORE US A COMPARATIVE CHART OF NET PROFIT WHICH IS GIVEN BELOW FOR READY REFERENCE: PARTICULARS ASSESSMENT YEAR 2009-10 (RS. IN LAKHS) ASSESSMENT YEAR 2008-09 (RS.IN LAKHS) ASSESSMENT 143(3) 143(1) TURNOVER 309.71 344.83 SAUNAK MITRA ITA NO.1252/KOL/2017 ASSESSMENT YEAR: 2009-10 3 N.P. ON TURNOVER 17.50 19.44 N.P % ON TURNOVER 5.65% 5.64% AVERAGE NET PROFIT IS AT 5.65%. THEREFORE, BASED ON THE COMPARATIVE CHART AND PAST HISTORY OF THE ASSESSEES BUSINESS THE LD. COUNSEL FOR THE ASSESSEE PRAYED THE BENCH THAT THE NET PROFIT ESTIMATION MAY BE RESTRICTED TO 6% INSTEAD OF 8%. 7. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE NOTE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS NOT ABLE TO RECONCILE THE BALANCE OF DEBTORS AND CREDITORS. THEREFORE, SOME DISCREPANCY/MANIPULATION CANNOT BE RULED OUT AND THEREFORE THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE REJECTED BY THE LD CIT(A) AND PROFIT OF THE ASSESSEE WAS ESTIMATED AT THE RATE OF 8%. WE NOTE THAT LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED BEFORE US THE PAST HISTORY OF THE ASSESSEES BUSINESS WHERE WE NOTE THAT THE NET PROFIT RATE COMES TO @5.65%. WE UPHELD THE REJECTION OF THE BOOKS OF ACCOUNTS BY THE LD. CIT(A) BUT WE NOTE THAT ESTIMATION OF NET PROFIT MADE BY THE LD. CIT(A) IS TOO HIGH THEREFORE CONSIDERING THE PRINCIPLE OF NATURE JUSTICE AND CONSIDERING THE PAST HISTORY OF THE NET PROFIT OF THE ASSESSEES COMPANY BUSINESS AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE BENCH, WE THINK IT PROPER TO RESTRICT THE NET PROFIT ESTIMATION TO 6%. WE NOTE THAT IT IS NECESSARY TO CONSIDER THE PAST HISTORY AND THE COMPARABLE CASES TO JUDGE THE ESTIMATION. HOWEVER, THE COUNSEL HAS FAILED TO FURNISH BEFORE US THE COMPARABLE CASES BUT AFTER CONSIDERING THE PAST HISTORY OF THE ASSESSEES CASE AND THE FACT THAT TURNOVER IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR OF THE ASSESSEE WAS MORE OR LESS SAME AS COMPARED TO THE ASSESSMENT YEAR UNDER CONSIDERATION THEREFORE, WE DIRECT THE ASSESSING OFFICER TO COMPUTE THE ASSESSEES PROFIT BY APPLYING @ 6%. 8. WE NOTE THAT LD CIT(A) HAD REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND ESTIMATED THE PROFIT OF THE ASSESSEE, THEREFORE, WE ARE OF THE VIEW THAT NO OTHER SEPARATE DISALLOWANCE SHOULD BE MADE FOR NON-PRODUCTION OF BILLS AND VOUCHERS ETC, FOR THE WE RELY ON THE JUDGMENT OF THE HON`BLE ANDHRA HIGH COURT IN THE SAUNAK MITRA ITA NO.1252/KOL/2017 ASSESSMENT YEAR: 2009-10 4 CASE OF INDWELL CONSTRUCTIONS VS. CIT, 232 ITR 776 (AP) WHEREIN IT WAS HELD AS UNDER: 4. THE PATTERN OF ASSESSMENT UNDER THE INCOME-TAX ACT IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43D. SECTION 40 PROVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE. IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE, THE INCOME-TAX OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED UNDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO UNDER SECTION 29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS WILL ALSO MEAN THAT THE EMBARGO PLACED IN SECTION 40 IS ALSO TAKEN INTO ACCOUNT. 5. NO DOUBT THERE IS A BIG DIFFERENCE BETWEEN PROFIT EARNED WITH OWN CAPITAL AND PROFIT EARNED WITH BORROWED CAPITAL AND SUCH A DIFFERENCE COULD HAVE BEEN TAKEN INTO ACCOUNT BY THE INCOME-TAX OFFICER WHILE MAKING AN ESTIMATE. IF THE COMMISSIONER HAD SET ASIDE THE ESTIMATE ON THE GROUND THAT THE VITAL FACT THAT THE BUSINESS WAS CARRIED ON WITH OWN CAPITAL AND NOT WITH BORROWED CAPITAL HAS BEEN IGNORED BY THE INCOME-TAX OFFICER, THERE MAY NOT HAVE BEEN ANY DIFFICULTY IN UPHOLDING THAT ORDER. BUT, WHEN HE PROPOSES TO ADD BACK AN EXACT ITEM IN THE PROFIT AND LOSS ACCOUNT, HE WAS RELYING ON THE REJECTED BOOKS WHICH HE COULD NOT DO AS HELD BY THE BENCH OF THIS COURT IN MADDI SUDARSANAM OIL MILLS CO. V. CIT [1959] 37 ITR 369. THERE IS ALSO A FURTHER DIFFICULTY IF SECTION 40, AS ARGUED BY LEARNED COUNSEL, IS TO BE TAKEN INTO ACCOUNT EVEN AFTER MAKING AN ESTIMATE. WHEN THERE ARE CERTAIN OTHER DEDUCTIONS WHICH ARE TO BE DISALLOWED SUCH AS WEALTH-TAX PAYMENT IN SECTION 40, CAN IT BE SAID THAT AFTER MAKING AN ESTIMATE, THE WEALTH-TAX CHARGED IN THE PROFIT AND LOSS ACCOUNT SHOULD AGAIN BE ADDED BACK TO THE PROFIT. THIS EXAMPLE ILLUSTRATES HOW THE CONTENTION OF THE REVENUE, THAT SECTION 40(B) MAKES A DIFFERENCE IN THE SITUATION, IS UNTENABLE. IN OUR CONSIDERED OPINION, THE ANSWER TO THE QUESTION HAS TO BE IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE. THEREFORE, THE AO IS DIRECTED NOT TO MAKE ANY SEPARATE DISALLOWANCE AND ESTIMATE THE ASSESSEE`S INCOME AT THE RATE OF 6%. WE ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08/10/2018. SD/- (S. S. GODARA) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED:08/10/2018 RS, SR. PS SAUNAK MITRA ITA NO.1252/KOL/2017 ASSESSMENT YEAR: 2009-10 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT- SAUNAK MITRA 2. / THE RESPONDENT.- ACIT, CIRCLE-25, KOLKATA 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. [ / GUARD FILE. //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/D.D.O, I.T.A.T, KOLKATA BENCHES, KOLKATA .