Smt. Malti Agarwal, Kanpur V. Income Tax Officer-3(2), Kanpur

ITA 150/LKW/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83348 (ITAT-LUCKNOW)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 12-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Business income; Depreciation; Principle of natural justice; Reasonable cause
• Section: 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.150/LKW/2014 ASSESSMENT YEAR:2006 - 07 SMT. MALTI AGARWAL, PROP. M/S NIRMAL JI PRESS, 109/263, R. K. NAGAR, KANPUR. PAN:ABTPA6698L VS. INCOME TAX OFFICER - 3(2), KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY SHRI ALOK MITRA, D.R. DATE OF HEARING 20/08/2014 DATE OF PRONOUNCEMENT 1 7 /09/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, KANPUR DATED 31/01/2014 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN DECIDING THE APPEAL EX - PARTE WITHOUT GIVING ADEQUATE OPPORTUNITY TO THE APPELLANT, WHICH ORDER IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE, BAD IN LAW AND BE QUASHED. 2. BECAUSE THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN ENHANCING THE INCOME BY RS.21 LAKHS, WITHOUT ANY BASIS (IGNORING THE TAX AUDIT REPORT), FOR NO FAULT OF THE ASSESSEE APPELLANT, SUCH ENHANCEMENT BEING CONTRARY TO THE FACTS BE DELETED. 2 3. BECAUSE ON A PROPER APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE, KEEPING IN VIEW OF THE NATURE OF THE BUSINESS, THE DETERMINATION OF INCOME BOTH BY THE AO AT RS.4,94,970/ - AND THEREAFTER ENHANCEMENT OF THE SAME BY CIT(A) TO RS.21 LAKHS IGNORING THE FACT THAT THE APPELLANT WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE (BOTH AGE FACTOR AND SUSPENSION OF BUSINESS), MAKES THE ORDER PERVERSE AND BE QUASHED. 4. BECAUSE THE AO AS WELL AS THE CIT(A) HAVE FAILED TO APPRECIATE THAT THE APPELLANT HAS MAINTAINED PROPER BOOKS OF ACCOUNT, WHICH HAVE BEEN DULY AUDITED AND TAX AUDIT REPORT HAVING BEING FILED THERE WAS NO OCCASION OR REASON TO DISBELIEVE THE SAME, THE ADDITION MADE BE DELETED. 5. BECAUSE THE EXPLANATION FURNISHED BY THE ASSESSEE APPELLANT HAVING NOT FOUND TO BE FALSE OR UNTRUE THE CIT(A) WAS NOT JUSTIFIED IN DISBELIEVING THE SAME AND ENHANCING THE INCOME ARBITRARILY. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING THE PRINTING PRESS UNDER HER PROPRIETORSHIP CONCERN M/S NI RMAL JI PRESS. HE FURTHER SUBMITTED THAT THE INCOME DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT IS REASONABLE. HE ALSO SUBMITTED THAT THE BOOKS OF ACCOUNT ARE AUDITED AND SUBMITTED A COPY OF AUDITED ACCOUNTS. HE FURTHER SUBMITTED THAT AGAINST GROSS RECEIPTS OF RS.43.04 LAC S , THE ASSESSEE HAS SHOWN NET INCOME OF RS.1,44,970/ - WHICH IS MORE THAN 2%. HE SUBMITTED THAT THE BOOK RESULT SHOWN BY THE ASSESSEE SHOULD BE ACCEPTED. 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEA RNED CIT(A). 3 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THIS IS UNDISPUTED FACT THAT BEFORE THE ASSESSING OFFICER , NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE, THE ASSESSING OFFICER WAS COMPELLED TO PASS THE ASSESSMENT ORDER U/S 144 OF THE ACT. IN THIS ASSESSMENT YEAR, THE ASSESSING OFFICER HAS MADE TWO ADDITIONS. THE FIRST ADDITION IS OF RS.2.50 LAC ON TH E BASIS THAT ESTIMATED DISALLOWANCE IS MADE TO COVER POSSIBLE LEAKAGE AND SECOND ADDITION IS OF RS.1 LAC ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWALS. BEFORE CIT(A) ALSO, ALTHOUGH LEARNED A.R. OF THE ASSESSEE APPEARED BUT BOOKS OF ACCOUNT WERE NOT PRODUCED. CONSIDERING ALL THESE FACTS, THE CIT(A) HAS FURTHER ENHANCED THE INCOME OF THE ASSESSEE BY RS.21 LAC S . IN OUR CONSIDERED OPINION, WHERE THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT, IN SUCH A SITUATION, THE INCOME OF THE ASSESSEE HAS TO BE ESTIMAT ED ON REASONABLE BASIS. WE FIND THAT AS PER THE AUDITED INCOME AND EXPENDITURE ACCOUNT, AVAILABLE ON RECORD, IT IS SEEN THAT THE GROSS SALES AND JOB WORK OF THE ASSESSEE WAS RS.43.4 0 LAC S AND AGAINST THIS , THE ASSESSEE CLAIMED EXPENSES ON ACCOUNT OF JOB W ORK RS.33.4 0 LAC S AND IN ADDITION TO THAT , THE ASSESSEE HAS CLAIMED SALARY EXPENSES OF RS.1.86 LAC AND PURCHASE OF PRINTING MATERIAL AT RS.1.58 LAC S . THE TOTAL OF THESE THREE EXPENSES COMES TO RS.39.88 LAC S LEAVING GROSS PROFIT OF RS.3.16 LAC S WHICH IS AR OUND 7.3% OF SALES AND JOB WORK. OTHER EXPENSES CLAIMED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT IS OF RS.2.21 LAC ON ACCOUNT OF CONVEYANCE EXPENSES, TELEPHONE EXPENSES, DEPRECIATION, REPAIR & MAINTENANCE EXPENSES, FREIGHT EXPENSES, AUDIT FEES, MISC. EXPENSES, AND TRAVELLING EXPENSES. IN OUR CONSIDERED OPINION, SUCH ADMINISTRATIVE EXPENSES OF RS.2.21 LAC IS NOT VERY MUCH EXCESSIVE BUT BECAUSE OF THE REASON THAT NO BOOKS OF ACCOUNT AND BILLS AND VOUCHERS ETC. WERE PRODUCED BY THE ASSESSEE BEFORE THE AU THORITIES BELOW, WE ESTIMATE SUCH EXPENSES AT RS.2 LAC S AND THE GROSS PROFIT OF THE ASSESSEE IS 4 ESTIMATED AT 10% OF GROSS RECEIPTS OF RS.43.04 LAC S . IN THIS MANNER , WE WORK OUT THE NET PROFIT OF THE ASSESSEE AT RS.2.30 LAC S AS AGAINST RS.94,988/ - SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT. THIS NET PROFIT IS ESTIMATED BY US BY ADOPTING 10% GROSS PROFIT OF GROSS SALES/RECEIPTS RS. 43.04 LACS WHICH COMES TO RS. 4.30 LAC S AND DEDUCTING THEREFROM OTHER EXPENSES OF RS.2 LAC S RESULTING INTO NET PROFIT OF RS. 2.3 0 LAC S . REGARDING THE ENHANCEMENT MADE BY THE CIT(A) OF RS.21 LAC S , WE FIND THAT NO REASONING IS GIVEN BY CIT(A) FOR ENHANCING THE INCOME BY THIS HUGE AMOUNT OF RS.21 LAC S WHERE THE GROSS RECEIPTS IS ONLY RS.43 LAC S AND THERE IS NO MATERIAL BROUGHT ON RECORD THAT THE GROSS RECEIPTS SHOWN BY THE ASSESSEE IS NOT CORRECT PARTICULARLY WHEN THE ASSESSEE HAS FURNISHED THE AUDIT REPORT U/S 44AB IN WHICH THERE IS NO ADVERSE COMMENT OF THE AUDITOR S AND NO ADVERSE MATERIAL HAS BEEN BROUGHT ON RECORD BY AUTHOR ITIES BELOW . UNDER THESE FACTS , SUCH EXCESSIVE ADDITION BY WAY OF ENHANCEMENT MADE BY CIT(A) IS NOT SUSTAINABLE IN THE ABSENCE OF ANY BASIS OR REASONING FOR DOING SO. WE, THEREFORE, DIRECT THE ASSESSING OFFICER TO ADOPT THE AMOUNT OF RS.2.30 LAC S AS ASSESSEES INCOME FROM BUSINESS AS PER ABOVE DISCUSSION. 6. REGARDING THE SECOND ADDITION OF RS.1 LAC MADE BY THE ASSESSING OFFICER ON ACCOUNT OF HOUSE HOLD WITHDRAWALS, WE FIND THAT IN THE BALANCE SHEET OF THE ASSESSEE SUBMITTED BEFORE US, IN THE CAPITAL , THE ASSESSEE HAS SHOWN OPENING BALANCE OF RS.49,861/ - AND PROFIT OF RS.9 4 ,988/ - TOTALING TO RS. 1 ,44,849/ - SHOWN AS CLOSING BALANCE AND THE ASSESSEE HAS NOT SHOWN ANY WITHDRAWAL FOR HOUSE HOLD EXPENSES. THE HOUSE HOLD EXPENSES HAS BEEN ESTIMATED B Y THE A.O. AT RS.1 LAC WHICH IS REASONABLE AND NOT EXCESSIVE BUT WHEN WE HAVE CONFIRMED ADDITION OF RS.1.35 LAC S BY ESTIMATING THE BUSINESS INCOME AT RS. 2.30 LACS AS AGAINST RS. 94,988/ - SHOWN IN THE PROFIT & LOSS ACCOUNT , THIS ADDITION WILL COVER HOUSE H OLD 5 EXPENSES OF THE ASSESSEE ESTIMATED BY THE A.O. AT RS. I LAC AND NO SEPARATE ADDITION IS CALLED FOR BECAUSE THE EXPENSES AS WELL AS SOURCE BOTH CANNOT BE ADDED. HENCE, IN THE FACTS OF THE PRESENT CASE, WE DELETE THIS ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF HOUSE HOLD EXPENSES BECAUSE THE SAME STANDS COVERED IN THE ADDITION UPHELD BY US OF RS.1.35 LAC ON ACCOUNT OF ADDITION IN THE BUSINESS INCOME OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 /09/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR