Sujata Nayak, Rayagada V. ITO, Rayagada

ITA 151/CTK/2022

AI Insights

This case involves an appeal by Smt. Sujata Nayak against the order of the CIT(A), Berhampur, concerning the assessment year 2010-2011. The appeal was initially delayed significantly, and the assessee sought condonation for this delay, citing miscommunication and errors by her previous auditor. The Tribunal found sufficient cause for the delay and proceeded to address the substantive issues of the appeal. The main issues included the estimation of profit by the Assessing Officer, the addition of capital introduction, and the disallowance of deductions under Chapter VI of the Income Tax Act. The Tribunal's decisions were based on the examination of the assessee's financial records and the application of relevant legal provisions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300334 (ITAT-CUTTACK)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 18-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 11-09-2022
• Other Referred Cases: Perfect Circle India Ltd v. ACIT, Cenzure Industries Ltd v. IRO, P. K. Ramchandran v. State of Kerala, Collector, Land Acquisition v. Mst. Katiji, CIT v. Ram Mohan Kabra
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARCHITA NAYAK
• Keywords: Period of limitation
• Section: 2; 44AD; 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER Smt.Sujata Nayak Shri Lokanath Nayak, OMP Road, Indira Nagar, 6 PO;Dist: Rayagada PAN/GIR No. (Appellant Per Bench This is an appeal filed by the assessee against the order of the ld CIT(A), Berhampur, in Appeal No.0055/13 assessment year 2. Ms Archita Nayak, S.C.Mohanty, ld Sr DR appeared for the revenue. 3. The appeal filed by the assessee is delayed by 2853 days. The assessee has filed a petition for condoning the delay, wherein, the assessee has submitted as follows: IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.151/CTK/2022 Assessment Year : 2010-2011 Sujata Nayak, W/O. Shri Lokanath Nayak, OMP Road, Indira Nagar, 6 th lane, PO;Dist: Rayagada Vs. ITO, Rayagada Ward, Rayagada PAN/GIR No.ADDPN 2024 P (Appellant) .. ( Respondent Assessee by : Ms Archita Nayak, AR Revenue by : Shri S.C.Mohanty, Sr Date of Hearing : 19/01 Date of Pronouncement : 19/01 O R D E R This is an appeal filed by the assessee against the order of the ld , Berhampur, in Appeal No.0055/13-14 dated assessment year 2010-2011. Ms Archita Nayak, ld AR appeared for the assessee and Shri S.C.Mohanty, ld Sr DR appeared for the revenue. The appeal filed by the assessee is delayed by 2853 days. The has filed a petition for condoning the delay, wherein, the assessee has submitted as follows: Page1 | 12 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER 2011 ITO, Rayagada Ward, Respondent) : Ms Archita Nayak, AR S.C.Mohanty, Sr DR 01/2023 /01/2023 This is an appeal filed by the assessee against the order of the ld dated 31.7.2014 for the ld AR appeared for the assessee and Shri The appeal filed by the assessee is delayed by 2853 days. The has filed a petition for condoning the delay, wherein, the assessee ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page2 | 12 “That in the above matter, the order passed by the ld CIT(A), Berhampur u/s.143(3) of the Income Tax Act, 1961 was served on 21.9.2014 and the appeal was filed on 24.10.2014 and sent through by First Flight Courier (Form 36 and courier copy enclosed) That thereafter the appellant has decided to apply for VIVAD SE VISHWAS SCHEME 2020 and filed Form 1 and 2 under VIVAD SE VISWAS SCHEME 2020. Appellant has received Form 3 from the Pr. CIT, Sambalpur and as per the direction of Pr. CIT, Sambalpur, Appellant has deposited the amount and filed Form 4 of VIVAD SE VISWAS scheme 2020 (Form 3 and 4 enclosed),. That the appellant has written an appeal withdrawal letter on 24.3.2022 to the ITAT, Cuttack Bench. That the appellant has received phone calls in the month of May, 2022 from the office of the Pr. CIT, Sambalpur for submission of appeal withdraw confirmation letter. That the appellant has again written an appeal withdrawal letter on 1.6.2022 to the ITAT, Cuttack bench but has not received any confirmation. That due to non-receipt of any confirmation of letter from the ITAT, Cuttack Bench and follow up from the office of the pr. CIT, Sambalpur the appellant has visited the office of ITAT, Cuttack Bench in August, 2022 and came to know that no such appeal is pending against the appellant. That the appellant has decided to file further appeal. Under the facts and in the circumstances of the case, in the interest of justice and equity it is prayed that kindly condone the delay in filing the appeal.” 4. The assessee has also enclosed all the relevant documents to support her petition. 5. Ld Sr DR has filed objection to the condontion of delay, as follows: ‘”The cause offered by appellant: Discovery of the appeal allegedly sent through courier pending. by her CA not to be pending. ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page3 | 12 The issue for the hon'ble bench to decide: Whether 'sufficient' in terms of s. 253 of income Tax Act. one of the considerations for this decision : period of delay [perfect circle India Ltd' v. ACIT (2020) 120 taxmann.com 262 (Bom) following cenzure industries Ltd' v. rro (Notice of Motion No.492 and 493 of 2015 dt.15.1.2016 (Bom). The fact about the delay period in the present case is more than 7 years and 9 months' The issue boils down to judging the sufficiency cause offered in the context of the extent of delay involved. 2. The Pin in the address of ITAT in the copy of the courier receipt is wrong. 3. No proof of payment of appeal fees for the appeal allegedly sent earlier. 4. No appeal no. quoted in copies of letters to ITAT for withdrawal of appeal. 5. The appeal reference no. quoted in Details of pending appeals as per schedules (A,B, C) as applicable as per Form 1 in the copy of the document under Vivad se Viswas Act indicates the appeal was filed in the financial year 2013-14, which not only contradicts the claim of execution of the appeal in a different financial year, i. e., 2014- 15 as per the copy of the alleged earlier appeal but also indicates the impossible fact of the second appeal having been filed before disposal of the first appeal. 6. 'The law of limitation may harshly affect a particular party but it has to be applied with all its rigour when the statute so prescribes and the courts have no power to extend the period of limitation on equitable grounds. P. K. Ramchandran v. State of Kerala, AIR 1998 (SC) 2276. This decision was rendered much after that of the hon'ble apex court in the case of Collector, land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC). 7. 'The provision relating to prescription of limitation in every statute must not be construed so liberally that it would have the effect of taking away the benefit accruing to the other party in a mechanical manner (CIT v. Ram Mohan Kabra (2001) 257 ITR 773] 8. '...liberal construction of the sufficient cause while condoning delay has to be counter balanced by ensuring that the law of limitation which provides for definite consequence on the rights of the parties does not become ineffective.' [Cenzure Ind. (supra)”. ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page4 | 12 6. Basically, the facts remain that the assessee after getting the order of the CIT(A) had intimated her auditors to file the appeal, who had also intimated the assessee that the appeal has been filed. At the time of application under VIVAD SE VISHWAS SCHEME 2020 also, the auditor had not intimated the assessee that the appeal has not been filed. It was on the point when after issuance of Form No.4 i.e., the adjustment of refund against the tax due under VIVAD SE VISWAS SCHEME 2020, and the requirement for proof for withdrawal of the appeal that the assessee came to know that appeal has not been filed. Immediately thereafter, the assessee has taken necessary action to file the appeal through another auditor. The objection of ld Sr DR is that this is not sufficient and that the Pin in address of ITAT in the courier receipt is wrong and there is no proof of payment of appeal fees and the appeal number referred in Form No.3 are erroneous. In fact these objections themselves support the claim of the assessee that her auditor has misled her substantially thereby she even suffered loss in respect of taxes paid under the VIVAD SE VISWASH SCHEME 2020. Thus, on account of the failure on the part of the concerned Authorised Representative, the assessee has suffered substantially loss in the form of delay in filing of the appeal and the monetary loss of the tax paid under VIVAD SE VISHWAS SCHEME 2020. Obviously, no assessee would be interested in filing under VIVAD SE VISWAS SCHEME 2020 and loosing the money if no appeal has been filed. It is also noticed that the ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page5 | 12 assessee has got issued a legal notice on the Authorised Representative in respect of his lapse in not filing the appeal against the order of the ld CIT(A). Thus, we are of the view that the assessee has sufficient cause in respect of the delay in filing of the appeal. The case laws relied upon by ld Sr DR in respect of Perfect Circle India Ltd (supra) shows that in para 12, the Tribunal has given a clear finding that no sufficient cause was shown by the appellant to explain the huge delay. In the present case, the appellant has shown substantial cause that would justify an order of condoning the delay. The second decision relied upon by ld Sr DR in the case of Ram Mohan Kabra (supra), wherein, the Hon’ble High Court has categorically held that the provisions relating to the prescription of limitation in every statute must not be construed so liberally that it would have the effect of taking away the benefit of accruing to the other party in a mechanical manner. In the present case, the delay is supported by documentary evidence, the facts are supported by valid reasons and this being so, we are of the view that the delay is liable to be condoned. Even otherwise, the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Ram Mohan Kabra, 257 ITR 773 (P&H) has categorically held that the authorities therein had exercised their discretion and nothing perverse was found in the impugned order. In the present case, the assessee has given justifiable cause for condonding the delay and non-condonation of the delay would in effect cause substantial hardship to the assessee, who otherwise has a ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page6 | 12 reasonable strong case. In these circumstances, the delay in filing of the appeal stands condoned and the appeal is being disposed off on merits. 7. It was submitted by ld AR that there are three issues in the appeal. The first issue was against the action of the ld CIT(A) in confirming the estimation of the profit at 8% by the Assessing Officer as against 5.88% as disclosed by the assessee. The second issue was against the action of the ld CIT(A) in confirming the addition of Rs.8.7 lakhs being the capital introduction by the assessee during the impugned assessment year. The third issue was against the action of the ld CIT(A) in confirming the disallowance of deduction under Chapter VI of the Act. 8. It was submitted by ld AR that the Assessing Officer had, in the course of assessment proceedings, rejected the assessee’s books of account as the books of account of the assessee had not been produced before him. It was submitted by ld AR that the ld AR of the assessee before the AO, admittedly had used its dilatory tactics in regard to the production of the books of account, which were audited. It was the submission that after the said AR was caught misleading the assessee, ld AR has refused to cooperate with the assessee and has not returned all the documents to the assessee. It was the submission that consequent to the non-availability of the books of account as on date, the assessee is unable to prove its profit and loss account. It was the prayer that the estimate as done by the AO may be reduced insofar the net profit as disclosed by the assessee in earlier ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page7 | 12 assessment years was in the range of 3.08% in the assessment year 2007- 08, 5.46% in the assessment year 2008-09, 6.29% in the assessment year 2009-10 and 5.87% in the assessment year 2010-2011. It was the submission that the net profit may be fixed at 6%. 9. In reply, ld Sr DR submitted that the CIT(A) has taken a view that the percentage as provided in the provisions of section 44AD could be treated as indicative and the percentage at 8% is liable to be upheld. 10. We have considered the rival submissions. When the books of account of the assessee are rejected, the best method of estimation of the income of the assessee would be after considering the net profit as disclosed by the assessee in the earlier assessment years and subsequent assessment years. The maximum net profit disclosed by the assessee during the earlier assessment year i.e. for the assessment year 2009-10 at 6.29%. This being so, we are of the view that the interest of justice would be served if the net profit rate is fixed at 6.5% as against 8% estimated by the AO. 11. In regard to second issue, which was against the action of the ld CIT(A) in confirming the addition representing the capital introduction of Rs.8.7 lakhs, it was submitted by ld AR that before the AO, the assessee had produced cash flow statement for the assessment years 2008-09 and 2009-10. It was the submission that the amount of Rs.8.7 lakhs being the ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page8 | 12 capital introduction was the amount spent by the assessee for the purchase of one J.D.Loader from her husband. It was the submission that the payment was by cash. It was the submission that the assessee had a fixed deposit of Rs.4,80,000/-, which had been used for the purchase of the J.D.Loader and the assessee had also drawing of Rs.8.50 lakhs during the assessment year 2009-10. It was the submission that the Assessing Officer in page 4 of the assessment order has discussed this amount of drawings of Rs.8.50 lakhs and has treated Rs.1 lakh as the amount spent for the purchase of National Saving Certificate and an amount of Rs.1,50,000/- towards household expenses. In respect of balance Rs.6 lakhs, the Assessing Officer did not accept the same as the source as the assessee was unable to show that the said amount had been used for the purchase of the loader. It was the submission that the fund availability with the assessee was the amount of Rs.6 lakhs and the fixed deposit amount of Rs.4.80 lakhs totaling to Rs.10,80 lakhs. It was out of this amount that the loader has been purchased by spending Rs.8.7 lakhs out of the said amount. It was the submission that as the assessee had the source for the purchase of the loader, which was introduced as a capital in the assessee;’s capital account, the addition as made by the AO and confirmed by the ld CIT(A) is liable to be deleted. ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page9 | 12 12. In reply, ld Sr DR has filed written submissions as follows: “ 2. The cash-flow statements for the impugned year as well as the preceding year are actually personal capital accounts. These are unaudited though books of accounts of the assessee have been audited. Although the DR is aware of the prevalent practice of only a section of unscrupulous chartered accountants (not all) of confining audit to accounts of proprietary concern(s) rather than extending it to all those of the proprietor there is no distinction in law in the form of s. 44AB of Income Tax Act between business accounts and personal accounts. Rid of details all that the section provides is that an eligible person... shall... get his accounts... audited...'There is nothing here to limit the scope of the phrase 'his accounts' to his/her business accounts to the exclusion of personal accounts. If personal accounts in respect of an eligible individual have been maintained like the personal capital account in this case that should also come under the purview of audit. 3. Another argument in support of this contention of the statutory requirement of audit of personal (non-business) accounts of an eligible person, maintained is the statutory tax audit report form. It requires the auditor to report that he has examined the balance sheet and the profit and loss account...of (Name), ...([Permanent Account Number or Aadhaar Number) He cannot fill in the space for 'Name' with that of a proprietary concern and then go on to mention, inconsistently, the PAN/Aadhar of the proprietor' though the DR is aware of the illegal practice of a section of chartered accountants to the contrary. As the PAN/Aadhar, the 'Name' should also be not of the proprietary concern but of the proprietor. This requirement of the statutory tax audit report form supports the contention of the scope of audit to cover all accounts maintained in respect of a proprietor and not simply business accounts of proprietary concern(s) 4. So with capital accounts of the proprietor contained in her audited balance sheets the separate, unaudited capital accounts should not be taken cognizance of. 5. No income from Dozer, Roler credited to personal capital a/c as on the end of the preceding year not in ITR for the year concerned. 6. Introduction of capital represented by acquisition of the asset in the form of J D Loader by way of sale deed from husband by ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page10 | 12 payment of cash. Income from this shown in earlier year, no income in impugned year.” 13. It was the submission that the capital accounts for the assessment years 2008-09 and 2009-10 are not the audited personal account of the assessee. It was the submission that as the capital account was not audited accounts, same should not be relied upon and consequently, cash flow prepared out of such un-audited accounts was unreliable. It was the further submission that as per the sale letter issued by the assessee’s husband regarding the sale of the loader, the payment for the loader had taken place as early as in April, 2009. It was the submission that the assessee has shown introduction of the capital amount of Rs.8.7 lakhs in the month of May, 2009. It was thus the submission that the claim of the assessee is an afterthought and the assessee did not have the disclosed funds for the introduction of the capital of Rs.8.7 lakhs. 14. We have considered the rival submissions. A perusal of the assessment order at page 2 shows that the Assessing Officer has brought to tax the interest on the term deposit received of Rs.4,80,000/-. This term deposit has been encashed. There is no dispute regarding this fund flow availability. A perusal of the assessment order at page 4 shows that the Assessing Officer also does not dispute the availability of the cash of Rs.6 lakhs out of the drawing of Rs.8.5 lakhs for the immediately preceding assessment year. Thus, admittedly, the assessee has cash availability at Rs.10.80 lakhs. The assessee admittedly has purchased the J.D.loader as ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page11 | 12 per the sale deed on 10.4.2009. As of the beginning of the year, the assessee did have the funds. The introduction into the books of account of J.D.Loader could be after the transfer of the registration. The addition is in respect of introduction of capital of Rs.8.7 lakhs is in respect of purchase of the J.D.loader. The capital introduced has been used for the purchase of the J.D.Loader. The assessee did have Rs.10.8 lakhs as of the beginning of the year for the purchase and introduction of capital of Rs.8.7 lakhs. This being so, we are of the view that the addition made by the AO towards capital introduction of Rs.8.7 lakhs is unsustainable and consequently, we delete the same. 15. Coming to the issue of the disallowance confirmed by the ld CIT(A) under Chapter VIA of the Act, ld AR has not been able to make any submission to substantiate its claim. Consequently, the addition as made by the AO and confirmed by the ld CIT(A) stands confirmed. 16. In the result, appeal of the assessee stands partly allowed. Order dictated and pronounced in the open court on 19/01/2023. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 19/01/2023 B.K.Parida, SPS (OS) ITA No.151/CTK/2022 Assessment Year : 2010-2011 Page12 | 12 Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Smt.Sujata Nayak, W/O. Shri Lokanath Nayak, OMP Road, Indira Nagar, 6 th lane, PO;Dist: Rayagada 2. The Respondent: ITO, Rayagada Ward, Rayagada 3. The CIT(A)-, Berhampur 4. Pr.CIT-, concerned 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//