SREEDHARS CCE, Vijayawada V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, Vijayawada

ITA 149/VIZ/2022

AI Insights

The case involves M/s. Sreedhar CCE, a coaching institute, which appealed against the order of the Commissioner of Income Tax (Appeals)-3, Visakhapatnam. The appeal arose from an assessment order passed under sections 147 and 144 of the Income Tax Act, which included unaccounted receipts found during a survey operation. The Assessing Officer had added a significant amount to the assessee's income for the Assessment Year 2015-16, based on the unaccounted receipts and without allowing deductions for related expenses. The Tribunal's decision to compute the net profit ratio at 18% aligns with a previous ruling in the assessee's favor for a different assessment year under similar circumstances.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128518 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 11-08-2022
• Other Referred Cases: CIT vs. Williamson Financial Services [2007] 165 taxmann 638 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 147; 148; 143(3); 142(1); 133A; 250

Judgement Text

आयकर अपीलȣयअͬधकरण, ͪवशाखापटणम पीठ, ͪवशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM Įी दुåवूǽ आर एल रेɬडी, ÛयाǓयक सदèय एवं Įी एस बालाकृçणन, लेखा सदèय के सम¢ BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.149/Viz/2022 (Ǔनधा[रण वष[ / Assessment Year :2015-16) M/s. Sreedhars CCE, D.No. 29-6-6/1, Vani Nikethan Building, Suryaraopet, Kaleswara Rao Road, Vijayawada, Andhra Pradesh. PAN: ABYFS 5082 K Vs. Asst. Commissioner of Income Tax, Central Circle, Vijayawada. (अपीलाथȸ/ Appellant) (Ĥ×यथȸ/ Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Sri C. Subrahmanyam, CA Ĥ×याथȸ कȧ ओर से / Respondent by : Sri ON Hari Prasada Rao, Sr. AR सुनवाई कȧ तारȣख / Date of Hearing : 14/03/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 29/03/2023 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-3, Visakhapatnam [Ld. CIT(A)] in DIN & Order No. ITBA/APL/S/250/2022- 23/1043695051(1), dated 30/06/2022 arising out of the order 2 passed U/s. 147 r.w.s 144 of the Act, dated 16/12/2019 for the AY 2015-16. 2. Brief facts of the case are that the assessee is a coaching institute and gives coaching for all competition exams in the name style of ‘Sreedhar’s CCE’, filed its return of income for the AY 2015-16 on 30/09/2015 admitting a total income of Rs. 9,19,460/-. A survey operation U/s. 133A of the Act was conducted on 26/02/2019. During the course of survey the survey team noticed fee collection sheets for the period from the Financial Year 2011-12 to 2018-19 in the premises of the assessee firm and they were impounded. The partners of the firm vide their statement recorded on 27/02/2018 and 01/03/2019 confirmed the suppression of receipts. The Assessing Officer having reasons to believe that the assessee has not disclosed fully and truly all material facts commenced proceedings U/s. 147 of the Act and issued notice u/s. 148 of the Act. The assessee re-filed the return of income for the AY 2017-18 electronically on 15/4/2019 admitting a total income of Rs. 1,09,19,460/-. Later, the Assessing Officer issued notices U/s. 143(2) and 142(1) of the Act through ITBA module and called for information from the assessee. The AO also issued a show cause 3 notice on 11/11/2019 calling for objections of the assessee on the same. The assessee has not responded either to the notice or to the show cause notice of the AO. Therefore, the AO completed the assessment U/s. 144 of the Act after determining the gross receipts, including the receipts found during survey, for the AY 2015-16 at Rs. 2,86,25,360/-. The AO deducted the income already offered by the assessee while filing the original return and income accepted by the assessee during the survey proceedings based on the return filed in response to Notice u/s 148, and considered the remaining amount of Rs.78,35,360/- as the income of the assessee for the AY 2015-16 and added the same to the total income of the assessee determining the assessed income at Rs. 7,19,64,960/-. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee’s representative made required submissions with respect to the incomes accepted during the course of survey for the AY 2016-17 and pleaded that the entire gross receipts cannot be taxed. The Ld. CIT(A) considering the submissions and in the absence of any proof provided by the assessee’s representative confirmed the addition made by the AO and dismissed the appeal. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 4 3. The assessee has raised the following grounds of appeal: “1. The order passed U/s. 250 of the Act is contrary to the provisions of the law and fac ts of the case. 2. The Ld. CIT(A) erred in confir ming the additions made by the Assessing Officer in respect of entire unaccounted gross receipts without allowing deduction towards expenses in this regard. 3. The Ld. CIT(A) failed to appreciate that unrecorded receipts and unrecorded expenses are synonymous to each o ther and go together, considering these, the Ld. CIT(A) could not have ignored the expenditure par t while confirming the gross receipts liable for tax. 4. The case laws relied upon by the Ld. CIT(A) are distinguishable wherein the facts of those case are different from the case of the assessee fir m. While on this the Ld. CIT(A) simply brushed aside the case laws relied upon by the assessee’s fir m in a summary manner. 5. For these and o ther reasons that are to be urged at the time of hearing of the case the appellant prays that the impugned disputed addition is to be deleted in the interest of justice.” 4. At the outset, the Ld. AR relying on the order of this Tribunal in the assessee’s own case for the AY 2016-17 in ITA No. 127/Viz/2022 and others, dated 21/07/2022, submitted that under identical circumstances, the Tribunal held that the profit ratio of unaccounted income of the assessee shall be computed @ 18% , which is as accepted by the assessee during the survey 5 proceedings. The Ld. AR therefore prayed that since there is no change in the facts and circumstances of the case, the same decision of the Tribunal may also be applied to the instant case also. On the other hand Ld. DR relied on the orders of the Ld. Revenue Authorities. 5. We have heard both the sides and perused the material available on record and the orders of the Ld. Revenue Authorities. We have also gone through the order of the Tribunal in the assessee’s own case for the AY 2016-17 in ITA No. 127/Viz/2022 (supra), wherein under identical circumstances, the Tribunal held that the profit ratio of unaccounted income of the assessee shall be computed @ 18% , which is as accepted by the assessee during the survey proceedings. For the sake of ready reference, the relevant paragraphs of the Tribunal’s order dated 21/07/2022 (supra) are reproduced herein below: “6. We have he ard the riv al parties and p erused the materi al av ail abl e on record and gone through the orders of the Authorities bel ow. Admitted f acts are that the survey operation conducted on the assessee’s premises on 26/02/2019 wherein certain incrimin ating materi al s was found wi th respect to unaccounted receipts of the firm for the FYs 2011-12 to 2018-19. The amount arrived at by the survey te am for the AYs 2012-13 to 2019-20 amounts to Rs. 29,49,39,973/-. However, it is noticed th at the assessee admitted unrecorded gross receipts of Rs. 32,54,20,132/-. It is al so admitted that no materi al was found by the survey team wi th regard to e xpenses incurred by the assessee for earning the undiscl osed income. We al so find from the s worn state ment of the assessee U/s. 133A of the Act recorde d on 01/03/2019 in respect of Q.No.30, the assessee has 6 denied that the entire expenditure rel ating to receipt is not accounted for in the books of accounts. The Q.No.30 and the repl y given by the assessee are extracte d herein bel ow: “Q.30.Do you agree th at the entire expenditure rel ate d to the receipts of Rs.29,49,39,973/- has al re ady been accounted for in your books of acco unts? If not, please provide the de tail s for the same. Ans. No, the entire expenditure rel ated to these receipts is not accounted for in the books of accounts.” 7. We find merit in the argument of the Ld. AR that by no stre tch of imagin ation the profit percentage as assessed by the AO whil e passing the order us/ 143(3) r. w.s 147, cannot be 82.49%. As admi tte d by the assessee in the s wo rn statement u/s 133A of the Act, we are of the considered vie w th at ce rtain expenditure must have been incurred by the assessee in earning such undiscl osed income which was not accounted by the assessee. We al so find from page 126 of the paper book that the assessee h as on an average discl osed 8% to 10% on the reporte d turnover. Further, we al so find from the assessment orde r passed for the AY 2019-20 U/s. 143(3) of the act, the net profit ratio including the reported and unreported incomes wo rked out to 16% as detail ed in page 128 of the paper book. In the absence of evidences for unaccounted expenditure, it cannot be concluded th at the entire gross receipts shoul d be assessed as to tal income. Further, it is noti ced fro m the s worn in statemen t U/s. 133A of the Act th at the assessee has offered Rs 95 l akhs for the current assessment ye ar as income of the assessee wi th reg ard to the unreported income detected during the survey. The survey te am has not disputed the income offered by the assessee and has al so not tre ated the gross undiscl osed receipts as to tal income of the assessee. The Ld. AO in his order has quan tified the total turnover at Rs. 6,65,99,600/- ag ainst which the assessee has offered an amount of Rs. 1,15,71,250/- as tax abl e income. The net profit ratio acco rdingl y wo rks out to 17.37% with respect to accounted and unaccounted income of the assessee for the AY 2016-17. It is imperative th at certain expenses woul d have been incurred in respect unrecorded s al es though not recorded in the books of accounts. During the survey proceedings, whil e ans we ring to Q.No.30, the assessee state d th at “No, the entire expenditure rel ated to these receipts is not accounted for in the books of accounts.” Therefore it is ascertained by the assessee th at there exis ts unexpl ained expenditure rel atabl e to the unaccounted receipts. The computation of profit afte r incl usion of unaccounted s al es in the turnover woul d necessaril y require deduction of unrecorded expenses. The Courts in such cases have taken the vie w th at there is a presumption of expenditure having been incurred in respect of unrecorded s al es. The Hon’bl e 7 Supreme Court in the case of CIT v s. Will iamson Financi al Services [2007] 165 taxmann 638 (SC) has observed as fol l ows: “It is pertinent to be ar in mind th at U/s. 4 the l evy is on total income of the assessee computed in accordance wi th an subject to the provisions of the Income Tax Act. What is charge abl e to tax under the Income Tax Act is not the gross receipt but the income under the Inco me Tax Act. The tax is on income but on gross receipts.” Respectfull y follo wing the judici al precedents and in vie w of the above discussions, we find th at taxing the entire gross receipts, whe re the Ne t Profit ratio is at 82.49%, by AO for the rel evant assessment ye ar is not justif iabl e by any s tre tch of imagin ation. Si mil arl y the pl ea of the Ld.AR to adopt the Net Profit ratio of 16% based on the assessment order p assed for the AY 2019-20 al so coul d not be accepte d because of the fact th at the assessee himsel f has admi tte d a net profit ratio of 17.37% wi th respect to accounted and unaccounted income of the assessee for the AY 2016-17. Therefore, we are of the considered vie w th at the net profit ratio shal l be computed at the rate of 18%, which is as accep ted by the assessee during the survey proceedings. The Assessing Officer is directed accordingl y.” 6. Respectfully following the decision of this Tribunal in the asessee’s own case (supra), we hereby direct the Ld. AO to compute the net profit ratio of unaccounted income of the assessee at the rate of 18% . It is ordered accordingly. 7. In the result, appeal of the assessee is allowed. Pronounced in the open Court on the 29 th March, 2023. Sd/- Sd/- (दुåवूǽ आर.एल रेɬडी) (एस बालाकृçणन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) ÛयाǓयकसदèय/JUDICIAL MEMBER लेखा सदèय/ACCOUNTANT MEMBER Dated :29.03.2023 OKK - SPS 8 आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the order forwarded to:- 1. Ǔनधा[ǐरती/ The Assessee – M/s. Sreedhar CCE, D.No. 29-6-6/1, Vani Nikethan Building, Kaleswara Rao Road, Suryaraopet, Vijayawada, Andhra Pradesh – 520002. 2. राजèव/The Revenue – Asst. Commissioner of Income Tax, Central Circle, Vijayawada Revenue Colony, Siddhartha Public School Road, Mogalrajapuram, Vijayawada, Andhra Pradesh-533401. 3. The Principal Commissioner of Income Tax (Central), Visakhapatnam. 4. आयकर आयुÈत (अपील)/ The Commissioner of Income Tax (Appeals)-3, Visakhapatnam. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, ͪवशाखापटणम/ DR, ITAT, Visakhapatnam 6. गाड[ फ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam