Alok Ranjan Dash, Prop: M/s. Dash Communications, Bhubaneswar V. ITO, Ward-5(3), Bhubaneswar

ITA 139/CTK/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4027 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 19-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: BIRAJA KESHARI KANUNGO
• Keywords: Business expenditure; Bonafide belief; Reasonable cause
• Section: 44AD; 139; 273B

Judgement Text

P A G E 1 | 9 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER ITA NO S. 139 & 198 /CTK/201 8 ASSESSMENT YEAR : 2010 - 2011 SRI ALOK RANJAN DASH, PROP. M/S. DASH COMMUNICATIONS, AT.QR. NO.S/95, RAIL VIHAR, PO: CHANDRASEKHARPUR, MAITRI VIHAR, BHUBANESWAR. VS. ITO, WARD 5(3), BHUBANESWAR. PAN/GIR NO. ALAPD 9221 H (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI BIRAJA KESHARI KANUNGO, AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 06 / 02 / 201 9 DATE OF PRONOUNCEMENT : 06 / 0 2 / 201 9 O R D E R BOTH THE APPEAL S FILED BY THE ASSESSEE ARE AGAINST THE SEPARATE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , BHUBANESWAR D ATED 14.2.2017 AND DATED 11.7.2017 FOR THE ASSESSMENT YEAR 2010 - 11. 2. ITA NO.139/CTK/2018, THE GRIEVANCE OF THE ASSESSEE, AS EMANATING FROM THE GROUNDS OF APPEAL, IS THAT THE CIT(A) IS NOT CORRECT AND JUSTIFIED IN UPHOLDING THE COMPUTATION OF THE ASSESSING OFFICER I.E., IN ESTIMATING THE BUSINESS PROFIT OF THE ASSESSEE @ P A G E 2 | 9 30% OF TOTAL AMOUNT OF COMMISSION RECEIVED OF RS.18,14,975/ - AS NET INCOME OF THE ASSESSEE FROM COMMISSION. 3. I HAVE HEARD THE RIVAL SUBMISSION, PERUSED THE ORDERS OF LOWER AUTHORITIES AND CAREFULLY GONE THROUGH THE RELEVANT MATERIALS PLACED ON RECORD OF THE TRIBUNAL. UNDISPUTEDLY, THE ASSESSEE RECEIVED RS.3,87,443/ - AS CONTRACT RECEIPTS AND RS.18,14,975/ - AS COMMISSION ON TOTAL TURNOVER UNDERTAKEN BY HIM. THE MAIN CONTENTION OF LD A.R. OF THE ASSESSEE IS THAT THE ASSESSEE HAS EARNED COMMISSION INCOME @ 4% OF TOTAL TURNOVER AND FURTHER SALES THE SIM CARD AND RECHARGE VOUCHERS T HROUGH VARIOUS RETAILERS AND 3% OF COMMISSION IS FURTHER EXTENDED TO THEM LEAVING ONLY 1% COMMISSION FOR THE ASSESSEE. LD A.R. FURTHER POINTED OUT THAT REMAINING AMOUNT OF 1% COMMISSION IS GROSS COMMISSION INCOME OF THE ASSESSEE OUT OF WHICH BUSINESS/REVENUE EXP ENDITURE OF THE ASSESSEE HAS TO BE ALLOWED. LD A.R. SUBMITTED THAT THE ASSESSING OFFICER WAS NOT RIGHT IN ESTIMATING THE BUSINESS PROFITS OF THE ASSESSEE FROM COMMISSION @ 30% OF TOTAL COMMISSION RECEIPT AS 3% COMMISSION, WHICH IS 75% OF TOTAL RECEIPTS IS FURTHER EXTENDED TO THE RETAILERS AND OUT OF REMAINING 1% COMMISSION, THE ASSESSEE HAS TO INCUR DAY TO DAY BUSINESS EXPENDITURE TO OPERATE BUSINESS ACTIVITIES OF THE ASSESSEE. LD A.R,. SUBMITTED THAT THEREFORE, THE ESTIMATION MADE P A G E 3 | 9 BY THE AO AND UPHELD BY THE CIT(A) IS NOT CORRECT AND JUSTIFIED. HENCE, ESTIMATION OF COMMISSION INCOME SHOULD BE RE DUCED TO 30% OF RS.6,60,725/ - AS ESTIMATED BY THE ASSESSING OFFICER. LD A.R, SUBMITTED THAT THE ASSESSEE IS NOT DISPUTING THE STAND OF THE ASSESSING OFFICER THAT SECTION 44AF IS NOT APPLICABLE TO THE PRESENT CASE. AS THE ASSESSEE HAS EARNED INCOME IN THE NATURE OF COMMISSION FROM BROKERAGE, WHICH DOES NOT FALL WITHIN THE AMBIT OF SAID PROVISO N . FURTHER, LD A.R. VEHEMENTLY POINTED OUT THAT THE LOWER AUTHORITIES C ANNOT IGNORE THE FACT THAT THE ASSESSEE HAS TO INCUR DAY TO DAY EXPENDITURE TO OPERATE ITS BUSINESS OUT OF COMMISSION INCOME. LASTLY, LD A.R,. SUBMITTED THAT THE ASSESSING OFFICER MAY KINDLY BE DIRECTED TO ALLOW THE EXPENDITURE AND RESTRICT THE COMMISSION INCOME ESTIMATION TO 30% OF RS.6,60,725/ - . 4. REPLYING TO ABOVE, LD D.R. STRONGLY SUPPORTED THE ESTIMATION MADE BY THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE ORDER AND SUBMITTED THAT THE ASSESSEE HAS ALREADY BEEN GRANTED CONCESSION OF 70% OF TOT AL COMMISSION RECEIPTS WHICH IS SUFFICIENT TO MEET THE COMMISSION AMOUNT EXTENDED TO THE RETAILERS AS WELL AS EXPENDITURE INCURRED BY THE ASSESSEE FOR DAY TO DAY BUSINESS OPERATION. LD D.R. SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOU NT AND THERE WAS NO DOCUMENTARY P A G E 4 | 9 EVIDENCE SHOWING INCURRING OF EXPENDITURE BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AND FOR THE PURPOSE OF EARNING COMMISSION INCOME. THEREFORE, THE CLAIM OF THE ASSESSEE IS BASELESS AND HENCE CANNOT BE ALLOWED. 5. ON CAR EFULLY CONSIDERATION OF THE MATERIAL FACTS, FIRST OF ALL I MAY POINT OUT THAT THE TOTAL GROSS CONTRACT RECEIPTS OF THE ASSESSEE WAS RS. 3,87,4543/ - ON WHICH THE ASSESSING OFFICER HAS APPLIED SECTION 44AD AND HAS ESTIMATED INCOME @ 8% OF THE CONTRACT RECEIPT S, WHICH CAME TO RS.30,995/ - AND THIS AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE LEAVING BALANCE CONTRACT RECEIPTS OF RS.356,448/ - , WHICH ARE SUFFICIENT TO MEET THE DAY TO DAY BUSINESS EXPENDITURE AND OTHER REQUIREMENTS OF THE ASSESSEE. SO FAR AS ESTI MATION OF 30% OF NET COMMISSION INCOME OUT OF GROSS COMMISSION RECEIPT IS CONCERNED, I AM OF THE CONSIDERED VIEW THAT THE AO AS WELL AS THE CIT(A) HAS TAKEN A VERY BALANCING VIEW WHEREIN, THE ASSESSING OFFICER HAS GIVEN CONCESSION OF 70% OF TOTAL COMMISSIO N RECEIPTS KEEPING IN VIEW THE PART AMOUNT OF COMMISSION WHICH HAS BEEN EXTENDED BY THE ASSESSE E TO THE RETAILERS. THEREFORE, THE ESTIMATION IS BASED ON SOUND PRINCIPLE OF ESTIMATION. AT THIS STAGE, I MAY POINT OUT THAT THE ASSESSEE HAS NOT MAINTAINED AN Y BOOKS OF ACCOUNT AND HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE OR FACTS AND FIGURES SHOWING INCURRING OF P A G E 5 | 9 EXPENDITURE FOR THE BUSINESS PURPOSES WHICH IS NOT COVERED BY THE BALANCE AMOUNT OF RS.3,56,448/ - AND 70% OF TOTAL COMMISSION RECEIPTS WHICH HAS BEE N KEPT OUT BY THE ASSESSING OFFICER FROM THE TAXATION AMBIT. IN MY HUMBLE UNDERSTANDING AND REASONABLE VIEW, THE AUTHORITIES BELOW HAVE TAKEN INTO ACCOUNT ALL POSSIBLE ASPECTS OF LEAKAGE OF INCOME AND EXPENDITURE TO BE INCURRED BY THE ASSESSEE WHILE ESTIM ATING THE NET COMMISSION INCOME AND NET CONTRACT RECEIPTS. THEREFORE, NO FURTHER REDUCTION IN THE ESTIMATION OF BUSINESS PROFITS IS REQUIRED TO BE MADE. I MAY POINT OUT THAT ON BEING ASKED BY THE BENCH, LD A.R. COULD NOT SPECIFY ANY HEAD OF EXPENDITURE W HICH WAS ACTUALLY INCURRED BY THE ASSESSEE AND IS NOT COVERED OUT OF THE AMOUNTS OF CONTRACT RECEIPTS I.E. RS.3,56,448/ - AND 70% OF COMMISSION RECEIPTS, WHICH HAS BEEN KEPT ASIDE OUT OF TAXATION LIMITS BY THE AUTHORITIES BELOW. THEREFORE, I REACHED TO A LOGICAL CONCLUSION THAT ESTIMATION OF NET INCOME IS QUITE CORRECT AND JUSTIFIED AND THE CIT(A) IS ALSO RIGHT IN UPHOLDING THE SAME. NO INTERFERENCE IS CALLED FOR WITH THE ORDERS OF LOWER AUTHORITIES BELOW. HENCE, I UPHOLD THE SAME AND DISMISS THE GROUND OF APPEAL OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. P A G E 6 | 9 7. IN ITA NO.198/CTK/2018 , THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY OF RS.25,000/ - UNDER SECTION 271A OF THE ACT. 8. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. LD A.R. SUBMITTED THAT IN VIEW OF THE ORDER OF THE ITAT CHANDIGARH IN THE CASE OF ACIT VS ANIL LUTHRA (2001) 116 TAXMAN 126(CHD) AND DELHI BENCH OF THE TRIBUNAL IN T HE CASE OF 91 TTJ (DEL)26, IS IT CLEAR THAT NEITHER THE ACT NOR THE RULE PRESCRIBES THE TYPE OF BOOKS OF ACCOUNT TO BE MAINTAINED BY THE ASSESSEE. THEREFORE, PENALTY CANNOT BE LEVIED AGAINST THE ASSESSEE. 9. REPLYING TO ABOVE, LD D.R. SUPPORTING TO THE OR DERS OF LOWER AUTHORITIES, SUBMITTED THAT WHEN THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT, THE AUTHORITIES BELOW HAVE NO ALTERNATIVE OPTION BUT TO IMPOSE PENALTY. THEREFORE, SAME MAY KINDLY BE CONFIRMED. 10. PLACING REJOINDER TO ABOVE, LD A.R. S UBMITTED THAT IT WAS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE AND THE ASSESSEE WAS UNDER B ONAFIDE BELIEF THAT SINCE HE FALLS WITHIN THE AMBIT OF PROVISIONS OF SECTION 44AF OF THE ACT, THEREFORE, DID NOT MAINTAIN ANY BOOKS OF P A G E 7 | 9 ACCOUNT . HENCE, PENALTY IMPOSED BY THE ASSESSING OFFICER MAY KINDLY BE CANCELLED. 11. SECTION 273B READS AS UNDER: '273B. NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF CLAUSE (B) OF SUBSECTION (1) OF SECTION 271, SECTION 271A, SECTION 271B, SECTION 271BB, SECTION 271C, SECTION 271D, SECTION 271E, CLAUSE (C) OR CLAUSE (D) OF SUB SECTION (1) OR SUBSECTION (2) OF SE CTION 272A, SUBSECTION (1) OF SECTION 272AA OR SUBSECTION (1) OF SECTION 272BB OR CLAUSE (B) OF SUBSECTION (1) OR CLAUSE (B) OR CLAUSE (C) OF SUBSECTION (2) OF SECTION 273, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, F OR ANY FAILURE REFERRED TO IN THE SAID PROVISIONS IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE.' THE ABOVE SECTION PROVIDES THAT IF THE ASSESSEE PROVES THAT THERE IS A REASONABLE CAUSE, HE IS NOT SUBJECT TO LEVY OF PENALTY. IN THE PR ESENT CASE, THE CONTENTION OF THE ASSESSEE IS THAT HE WAS UNDER BONAFIDE BELIEF THAT HE IS NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNT. EVEN IF IT IS ASSUMED THAT THE ASSESSEE HAD AN OBLIGATION TO MAINTAIN REGULAR BOOKS OF ACCOUNT, WHICH HE FAILED TO DO, TH E FAILURE IS DEFINITELY DUE TO A REASONABLE CAUSE AND THE CASE IS COVERED UNDER THE PROVISIONS OF SECTION 273B OF THE ACT. 12. IT IS WELL SETTLED PRINCIPLE OF LAW AS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD. VS STATE OF P A G E 8 | 9 ORISSA, 83 ITR 26(SC), THAT PENALTY PROCEEDINGS ARE QUASI - CRIMINAL IN NATURE AND IT MUST BE BROUGHT ON RECORD BY THE ASSESSING OFFIC ER THAT THE ASSESSEE HAS DELIBERATELY ACTED IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTEMPTUOUS OR DISHONEST BUT IN THE REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, NOTHING HAS BEEN MENTIONED. THEREFORE, I AM OF THE CONSIDERED VIE W THAT THE ASSESSEE UNDER BONAFIDE BELIEF, HAD NOT MAINTAINED BOOKS OF ACCOUNT. HENCE, I SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND DELETE THE PENALTY OF RS.25,000/ - U/S.271A OF THE ACT AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. 13. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 06 / 0 2 /201 9 . SD/ - ( CHANDRA MOHAN GARG ) JUDICIALMEMBER CUTTACK; DATED 06 / 0 2 /20 9 B.K.PARIDA, SPS P A G E 9 | 9 COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT : SRI ALOK RANJAN DASH, PROP. M/S. DASH COMMUNICATIONS, AT.QR. NO.S/95, RAIL VIHAR, PO: CHANDRASEKHARPUR, MAITRI VIHAR, BHUBANESWAR 2. THE RESPONDENT. ITO, WARD 5(3), BHUBANESWAR 3. THE CIT(A) - 2, BHUBANESWAR 4. PR.CIT - 2, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//