Santosh Enterprises , Sagar TAluk V. Additional Commissioner of Income Tax, Shimoga

ITA 1353/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5571 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 13-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Assessee Lawyers: S KRISHNA SWAMY
• Keywords: Gross profit estimation
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.1353/BANG/2017 (ASST. YEAR 2006-07) SANTOSH ENTERPRISES, ANADAPURAM, SAGAR TALUK. . APPELLANT PAN : AAKFS4558F. VS. THE ADDL. COMMISSIONER OF INCOME-TAX, SHIMOGA. . RESPONDENT APPELLANT BY : SHRI S KRISHNASWAMY, C.A RESPONDENT BY : SMT. PADMAMEENAKSHI, JCIT DATE OF HEARING : 31-1-2018 DATE OF PRONOUNCEMENT : 2-2-2018 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), BANGALORE DATED 22/2/2017 FOR ASSESSMENT FO R ASST. YEAR 2006-07. 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT F OR THIS APPEAL ARE AS UNDER:- ITA NO.1353/B/17 2 2.1 THE ASSESSEE, A FIRM ENGAGED IN THE BUSINESS OF RICE AND PHOVA MANUFACTURING, FILED ITS RETURN OF INCOME FOR ASST . YEAR 2006-07 ON 2/8/2006 DECLARING TOTAL INCOME OF RS.60,04,900/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY . THE ASSESSMENT WAS CONCLUDED U/S 143(3) OF THE ACT VIDE ORDER DATE D 28/11/2008, WHEREIN THE ASSESSEES INCOME WAS COMPUTED AT RS.66 ,39,149/-; WHEREIN, INTER ALIA, THERE WAS (I) ADDITION OF RS.6 ,47,249/- ON ACCOUNT OF THE ASSESSING OFFICER (AO) ESTIMATING THE GROS S PROFITS (GP) AT 7.5% AS AGAINST 6.79% DECLARED BY THE ASSESSEE AND (II) AN ESTIMATED ADDITION OF RS.37,000/- IN RESPECT OF CLOSING STOCK OF BRAN. ON APPEAL; THE ASSESSEES APPEAL WAS DISMISSED BY THE CIT(A), DAVANGERE VIDE THE IMPUGNED ORDER DATED 22/2/2017. 3.0 AGGRIEVED BY THE ORDER OF THE CIT(A), DAVANGERE DATED 22/2/2017 FOR ASST. YEAR 2006-07, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL, WHEREIN IT HAS RAISED THE FOLL OWING GROUNDS:- 1. THE LEARNED ADDITIONAL CIT ERRED IN ASSESSING T O TAX A SUM OF RS 6,47,249/- AS ADDITION TO THE GROSS PROFIT AND THE CIT (A) ERRED IN UPHOLDING THE ADDIT ION 2. THE LEARNED ADDITIONAL CIT AND CIT (A) ERRED IN IGNORING THE PLEA OF THE APPELLANT THAT AN ADDITION CANNOT BE MADE PURELY ON THE BASIS OF ASSUMPTIONS WITHOUT POINTING ANY DEFECT IN THE BOOKS OF ACCOUNT S ITA NO.1353/B/17 3 MAINTAINED WHICH ARE AUDITED AND COVERED BY AN AUDI T REPORT 3. THE LEARNED ADDITIONAL CIT AND CIT (A) OUGHT TO HAVE ACCEPTED THE DECLARED INCOME WHICH IS ON THE BASIS OF REGULARLY MAINTAINED ACCOUNTS AND SUBJECTE D TO AUDIT AND THE NATURE OF BUSINESS EXPLAINED. 4. THE LEARNED ADDITIONAL CIT ERRED IN MAKING AN ADDITION OF RS 37,000/- TO THE CLOSING STOCK OF BRA N PURELY ON AN ESTIMATE BASIS AND THE CIT ERRED IN IGNORING THE GROUND AS TAKEN NOT PRESENTED. 4. GROUNDS NOS. 1 TO 3 GROSS PROFIT ESTIMATION 4.1 IN THESE GROUNDS (SUPRA), THE ASSESSEE ASSAILS THE IMPUGNED ORDER FOR MAKING AN ESTIMATED ADDITION OF RS.6,47,2 49/- ON ACCOUNT OF GROSS PROFIT BEING ESTIMATED AT 7.5% AS AGAINST G.P OF 6.79% DECLARED BY THE ASSESSEE. ACCORDING TO THE LD AR OF THE ASS ESSEE, THE LD CIT(A) ERRED IN BRUSHING ASIDE THE ASSESSEES CONTE NTION THAT THE AFORESAID G.P ADDITION HAD NO FACTUAL BASIS AND WA S MADE PURELY ON ASSUMPTION AND WITHOUT POINTING OUT ANY DEFECT IN T HE AUDITED BOOKS OF ACCOUNT AND AUDIT REPORT MAINTAINED BY THE ASSES SEE OR REJECTING THE SAME. IT WAS PRAYED BY THE LD AR THAT IN VIEW OF THE ABOVE FACTUAL MATRIX OF THE CASE THERE WAS NO BASIS FOR THE GP ES TIMATION BY THE AO AND THEREFORE THE ADDITION OUGHT TO BE DELETED. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANIL KU MAR & CO ITA NO.1353/B/17 4 (2016) 67 TAXMANN.COM 278 (KARNATAKA) WHEREIN IT WA S HELD THAT WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAD NOT B EEN REJECTED AND THE ASSESSMENT HAVING NOT BEEN FRAMED U/S 144 OF TH E ACT, THE ENTIRE ADDITION MADE BY THE AO BASED ON ESTIMATION WAS TO BE DELETED. 4.2 PER CONTRA, THE LD DR FOR REVENUE VEHEMENTLY S UPPORTED THE ORDER OF THE AUTHORITIES BELOW: 4.31 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE UNDISPUTED FACTS OF THE MATTER BEFORE US IS THAT THE ASSESSING OFFICER MADE AN ESTIMATED ADDITI ON OF RS.6,47,249/- TO THE ASSESSEES INCOME BY ESTIMATIN G THE ASSESSEES G.P AT 7.5% AS AGAINT G.P OF 6.79% DECLARED BY THE ASSESSEE; BRUSHING ASIDE THE SUBMISSIONS PUT FORTH BY THE ASSESSEE IN THIS REGARD. WE ALSO OBSERVE THAT THE AO MADE THE AFORESAID ESTIMATED AD DITION ON ACCOUNT OF G.P WITHOUT EITHER DETECTING ANY DEFICIT IN THE ASSESSEES AUDITED BOOKS OF ACCOUNT ON REJECTING THE BOOK RESULTS OF T HE ASSESSEE. IN THIS FACTUAL MATRIX OF THE CASE, WE FIND MERIT IN THE CO NTENTION OF THE ASSESSEE THAT THE AFORESAID ESTIMATION OF G.P AT 7. 5% BY THE AO, AS AGAINST G.P OF 6.79% DECLARED BY ASSESSEE, TO BE BA SELESS AND MADE SOLELY ON SUSPICIONS AND SURMISES AND THEREFORE IN OUR VIEW IS UNSUSTAINABLE IN VIEW OF THE FACTS AND CIRCUMSTANCE S OF THE CASE. IN COMING TO THIS VIEW, WE DRAW SUPPORT FROM THE DECIS ION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR & CO (2016) 67 TAXMANN.COM 278 (KARNATAKA) WHEREIN TH E HONBLE COURT HELD THAT WHERE THE BOOKS OF ACCOUNT OF THE A SSESSEE HAS NOT ITA NO.1353/B/17 5 BEEN REJECTED AND THE ASSESSMENT HAVING NOT BEEN FR AMED U/S 144 OF THE ACT, THE AO AND THE LD CIT(A) WERE IN ERROR IN RESORTING TO AN ESTIMATION OF INCOME AND THUS THE ENTIRE ESTIMATED ADDITION MADE BY THE AO WAS TO BE DELETED. IN OUR CONSIDERED VIEW T HE AFORESAID DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ANIL KUMAR AND CO. (SUPRA) IS SQUARELY APPLICABLE TO THI S FACT SITUATION OF THE CASE ON HAND AND WE THEREFORE DELETE THE ADDITI ON OF RS.6,47,249/- MADE BY THE AO ON ACCOUNT OF ESTIMATION OF THE ASSE SSEES G.P AT 7.5%. CONSEQUENTLY, THE GROUNDS 1 TO 3 RAISED BY T HE ASSESSEE ARE ALLOWED. 5. GROUND NO.4 ADDITION TO CLOSING STOCK OF BRAN 5.1 IN THIS GROUND, THE ASSESSEE CONTENDS THAT THE LD CIT(A) HAD WRONGLY DISMISSED THIS GROUND RAISED BEFORE HIM ON THE ISSUE OF ADDITION OF RS.37,000/- TO THE CLOSING STOCK OF BRA N AS NOT PRESSED. ON A PERUSAL OF THE IMPUGNED ORDER, I.E AT PARA 6 T HEREOF, WE FIND THAT THE LD CIT(A) HAS INDEED DISMISSED THE GROUND AS NO T PRESSED. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE FINDING OF THE LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE LD CI T(A) FOR ADJUDICATION THEREOF, AFTER AFFORDING THE ASSESSEE ADEQUATE OPPO RTUNITY OF BEING HEARD. CONSEQUENTLY, GROUND NO.4 OF ASSESSEES APP EAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST. YEAR 2006-07 IS PARTLY ALLOWED. ITA NO.1353/B/17 6 ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND FEBRUARY, 2018 . SD/- SD/- (LALIET KUMAR) (JA SON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE DATED : 2/2/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVA TE SECRETARY, ITAT, BANGALORE.