ACIT Virudhunagar Circle , Virudhunagar V. N.Narayanasamy, Virudhunagar

ITA 1596/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5588 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 21-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: M KUMARASWAMY ITP
• Keywords: Unexplained investment
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ! ' . #$ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.1595 & 1596/MDS/2017 ( / ASSESSMENT YEARS: 2012-13 & 2013-14) THE ASSISTANT COMMISSIONER OF INCOME TAX, VIRUDHUNAGAR CIRCLE, VIRUDHUNAGAR. VS SHRI N. NARAYANASAMY, PROP. BANU HOTEL, NO.134, MADURAI ROAD, VIRUDHUNAGAR PAN: ACJPN6473B ( /APPELLANT) ( /RESPONDENT) C.O. NOS. 120 & 121/MDS/2017 (IN I.T.A. NOS.1595 & 1596/MDS/2017) SHRI N. NARAYANASAMY, PROP. BANU HOTEL, NO.134, MADURAI ROAD, VIRUDHUNAGAR VS THE ASSISTANT COMMISSIONER OF INCOME TAX, VIRUDHUNAGAR CIRCLE, VIRUDHUNAGAR. PAN: ACJPN6473B ( /APPELLANT) ( /RESPONDENT) /REVENUE BY : SMT. S. VIJAYAPRABHA, JCIT /ASSESSEE BY : SHRI M. KUMARASWAMY, ITP ! /DATE OF HEARING : 15.11.2017 '# ! /DATE OF PRONOUNCEMENT : 28.12.2017 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST T HE ORDERS PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-3, MADURAI DATED 24.03.2017 & 27.03.2017 IN ITA 2 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 NOS.0086/2016-17 & 0087/2016-17 FOR THE ASSESSMENT YEARS 2012-13 & 2013-14 PASSED U/S.250(6) R.W.S. 143(3) & 147 OF THE ACT. THE ASSESSEE HAS ALSO RAISED CROSS OBJECTION S TOWARDS THE RELEVANT ORDERS OF THE LD.CIT(A) SUPRA. 2. THE REVENUE HAS RAISED IDENTICAL GROUNDS IN BOTH ITS APPEALS HOWEVER THE CRUXES OF THE ISSUES ARE THAT:- (I) THE LD.CIT(A) HAS ERRED IN ESTIMATING THE TURNO VER OF THE ASSESSEE AT RS.2 CRORES AND RS.2.2 CRORES FOR THE ASSESSMENT YEAR 2012-13 & 2013-14 RESPECTIVELY WITH OUT ANY BASIS. (II) THE LD.CIT(A) HAS ERRED IN DIRECTING THE LD.AO TO ADOPT NET PROFIT @8% ON TURNOVER. 3. THE ASSESSEE HAS RAISED SEVERAL IDENTICAL GROUND S IN HIS CROSS OBJECTIONS WHICH ARE IN SUPPORT AS WELL AS AG AINST THE ORDERS OF THE LD.CIT(A). 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN HOTEL BUSINESS. A SURVEY U/S .133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF THE A SSESSEE ON 3 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 04.02.2015. TILL THE DATE OF SURVEY THE ASSESSEE H AD NOT FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 AS WELL AS FOR THE ASSESSMENT YEAR 2013-14. DURING THE COURSE OF SURVEY, IT WAS FOUND THAT THE ASSESSEE HAD INVESTED IN CERTAIN IMMOVABLE PROPERTIES, FIXED DEPOSITS, PAID MONEY FOR PURCHASE OF FLAT FOR HIS SON AT CHENNAI DURING THE MONTH OF JANUARY, 2014 AN D SEPTEMBER, 2014. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENDITURE OF RS.44,93,000/- FOR HIS SON S MARRIAGE DURING THE MONTH OF SEPTEMBER, 2014. THERE WERE AL SO CERTAIN CASH DEPOSITS IN CITY UNION BANK. THEREFORE, A NOT ICE WAS SERVED U/S.148 OF THE ACT REQUIRING THE ASSESSEE TO FURNISH HIS RETURN OF INCOME. IN RESPONSE, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012-13 & 2013-14 ON 31.03.2015 ADMITTING HIS TOTAL INCOME AS RS.3,93,76 0/- & RS.5,98,230/- RESPECTIVELY. HOWEVER, THE ASSESSEE D ID NOT FURNISH HIS STATEMENT OF INCOME, BALANCE SHEET AND PROFIT & LOSS ACCOUNT ALONG WITH THE RETURN OF INCOME. THEREAFTE R, THE LD.A.O MADE ADDITIONS IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2012-13 UNDER THE HEAD UNEXPLAINED INVESTMENT TOWARDS IMMOVABLE PROPERTY U/S.69 OF THE ACT, INCOME FROM O THER SOURCES, UNEXPLAINED INVESTMENTS BY WAY OF CASH DEP OSITS IN 4 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 SAVINGS BANK ACCOUNT U/S.69 OF THE ACT AND INCOME F ROM BUSINESS RS.53,12,830/-. SIMILARLY, ADDITIONS WERE MADE FOR THE ASSESSMENT YEAR 2013-14 UNDER THE HEAD UNEXPLAINED INVESTMENT IN IMMOVABLE PROPERTIES U/S.69 OF THE AC T, UNEXPLAINED INVESTMENT BY WAY OF CASH DEPOSITS IN S AVINGS BANK ACCOUNT U/S.69 OF THE ACT AND INCOME FROM BUSINESS OF RS.50,73,996/-. 5. DURING THE COURSE OF SURVEY PROCEEDINGS, IT WAS REVEALED THAT THE ASSESSEE HAD DISCLOSED SALES BEFORE THE CO MMERCIAL TAX OFFICER, VIRUDHNAGAR, AS RS.36,89,465/- FOR THE ASSESSMENT YEAR 2012-13 AND RS.35,23,609/- FOR THE ASSESSMENT YEAR 2013- 14. HOWEVER, FROM THE MATERIALS EXAMINED DURING TH E COURSE OF SURVEY WITH RESPECT TO THE RESTAURANT OWNED BY THE ASSESSEE IN VIRUDHNAGAR, COLLECTORATE, KALLIKUBI & RR NAGAR, IT WAS REVEALED THAT THE ASSESSEE HAD SUPPRESSED THE SALE TO THE EX TENT OF EIGHT TIMES. THEREFORE, MULTIPLYING THE TURNOVER DISCLOSE D BEFORE THE COMMERCIAL TAX OFFICER BY EIGHT, THE TOTAL TURNOVER OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2012-13 & 2013-14 WAS DETERMINED AT RS.2,95,15,720/- & RS.2,81,88,872/- R ESPECTIVELY. THEREAFTER, THE LD.AO ESTIMATED THE NET PROFIT OF T HE ASSESSEE 5 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 @18% OF THE TURNOVER AND WORKED OUT THE SAME AT RS.53,12,830/- & RS.15,73,997/- FOR THE ASSESSMENT YEAR 2012- 13 & 2013-14 RESPECTIVELY. ON APPEAL, THE LD.CIT E STIMATED THE TURNOVER OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 12-13 AT RS.2.00 CRS BASED ON HIS FINDINGS THAT THE TURNOVER PER DAY WORKS OUT TO RS.75,180/- WHICH WAS FURTHER BASED ON THE MATERIALS FOUND DURING THE COURSE OF SURVEY FOR THE ASSESSMENT YEAR 2015-16 WHEREIN THE TURNOVER WAS COMPUTED AT R S.2.60 CRS. THEREAFTER BY ESTIMATING 10% INCREASE IN TURNO VER, THE TURNOVER FOR THE SUBSEQUENT ASSESSMENT YEAR 2013-14 WAS WORKED OUT AT RS.2.20 CRS. SUBSEQUENTLY, THE LD.CIT ESTIMATED THE INCOME OF THE ASSESSEE AT 8% OF THE TURNOVER AS AGAINST 18% WORKED OUT BY THE LD.AO. AGGRIEVED BY THE ORDER OF THE LD.CIT THE REVENUE IS IN APPEAL BEFORE US. 6. THE LD.DR SUBMITTED BEFORE US THAT THE LD.AO HAD FAIRLY ESTIMATED THE INCOME EARNED BY THE ASSESSEE WITH RE SPECT TO HIS RESTAURANT BUSINESS WHICH DID NOT REQUIRE ANY INTER FERENCE BY THE LD.CIT(A). HE FURTHER SUBMITTED THAT THE ASSESS EE HAS GROSSLY ERRED IN NOT MAINTAINING HIS BOOKS OF ACCOU NTS AND THEREFORE THE LD.AO DID NOT HAVE ANY OTHER ALTERNAT IVE BUT TO 6 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 ESTIMATE THE INCOME OF THE ASSESSEE. IT WAS FURTHE R SUBMITTED THAT THE LD.AO HAD ESTIMATED THE TURNOVER OF THE AS SESSEE BASED ON THE MATERIALS AVAILABLE BEFORE HIM DURING THE COURSE OF SURVEY AND THE LD.CIT HAD ERRED IN REDUCING THE TUR NOVER WORKED OUT BY THE LD.AO. THE LD.DR FURTHER VEHEMENTLY ARG UED STATING THAT IN RESTAURANT BUSINESS THE MARGIN IS QUITE HIG H AND THE LD.AO HAD MAGNANIMOUSLY ESTIMATED THE NET PROFIT AT 18% ON THE TURNOVER WHICH WAS UNDULY REDUCED BY THE LD.CIT TO 8%. IT WAS THEREFORE PLEASED THE ORDER OF THE LD.AO MAY BE RESTORED BY SETTING ASIDE THE ORDER OF THE LD.CIT ON THIS ISSUE . THE LD.AR ON THE OTHER HAND SUBMITTED THAT THE ESTIMATION OF TUR NOVER MADE BY THE LD.CIT WAS IMPROPER BECAUSE THE ASSESSEES ACTU AL TURNOVER WAS MUCH LESS COMPARING TO THE TURNOVER WORKED OUT BY THE LD.CIT. HE FURTHER SUBMITTED THAT THE LD.CIT HAD AL SO ERRED IN ESTIMATING THE NET PROFIT AT 8% OF THE TURNOVER BEC AUSE IN THE HIGHLY COMPETITIVE RESTAURANT BUSINESS THE MARGIN I S VERY MUCH LESSER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. 7 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 8. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE HAS NOT MAINTAINED HIS BOOKS OF ACCOUNTS. IN THIS SITUATION, THE REVENUE HAS NO OTHER OPTION BUT TO ESTIMATE THE INC OME OF THE ASSESSEE ON SOME LOGICAL BASIS. CONSIDERING THE FAC TS AND CIRCUMSTANCE OF THE CASE WE ARE OF THE VIEW THAT TH E LD.CIT HAS FAIRLY ESTIMATED THE TURNOVER OF THE ASSESSEE AT RS .75,180/- PER DAY AFTER EXAMINING THE MATERIALS ON RECORD AND TH EREAFTER CAME TO A REASONABLE CONCLUSION THAT THE TURNOVER OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR 2012-13 IS RS.2.00 CRS . FURTHER, WE ARE OF THE VIEW THAT THE LD.CIT(A) HAS FAIRLY WO RKED OUT THE TURNOVER OF THE ASSESSEE FOR THE ASSESSMENT YEAR 20 13-14 AT RS.2.20 CRS BY ESTIMATING AN INCREASE OF 10% FOR TH E SUBSEQUENT ASSESSMENT YEAR. THEREFORE WE DO NOT FIND ANY INFI RMITY IN THE ORDERS OF THE LD.CIT ON THIS ISSUE. HOWEVER, WE ARE OF THE OPINION THAT THE ESTIMATE OF NET PROFIT AT 8% ON TU RNOVER WITH RESPECT TO RESTAURANT BUSINESS IS QUITE LOW. THOUGH , THE FINDINGS OF THE LD.AO THAT IN RESTAURANT BUSINESS A BARE MIN IMUM OF 18% ON TURNOVER WOULD BE THE NET PROFIT CANNOT BE SIMPL Y BRUSHED ASIDE, TAKING A LENIENT VIEW, WE HEREBY HOLD THAT T HE NET PROFIT OF THE ASSESSEE TO BE 10% OF THE TURNOVER WOULD SUFFIC E TO MEET THE END OF JUSTICE. ACCORDINGLY, WE UPHOLD THE DECISIO N OF THE LD.CIT 8 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 WITH RESPECT TO THE DETERMINATION OF THE TURNOVER O F THE ASSESSEE FOR THE ASSESSMENT YEAR 2012-13 & 2013-14 AT RS.2.0 0 & RS.2.20 CRS., RESPECTIVELY AND FURTHER DIRECT THE L D.AO TO COMPUTE THE NET PROFIT OF THE ASSESSEE AT 10% OF TH E TURNOVER FOR BOTH THE RESPECTIVE ASSESSMENT YEARS. THUS, BOTH T HE GROUNDS RAISED BY THE REVENUE ARE DISPOSED OFF. 9. SINCE WE HAVE CONFIRMED THE ORDER OF THE LD.CIT W.R.T. THE DETERMINATION OF TURNOVER FOR BOTH THE ASSESSMENT Y EARS AND FURTHER MODIFIED THE ORDER OF THE LD.CIT W.R.T. THE COMPUTATION OF THE NET PROFIT, THE CROSS-OBJECTION RAISED BY THE A SSESSEE IN HIS CO STANDS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED AND THE CROSS OBJECTION RAISED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON THE 28 TH DECEMBER, 2017 AT CHENNAI. SD/- SD/- ( ! ' . #$ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) $ %& /JUDICIAL MEMBER %& / ACCOUNTANT MEMBER '$ /CHENNAI, (% /DATED 28 TH DECEMBER, 2017 9 ITA NO.1595 & 1596/M DS/2017 & CO NO. 120 & 121/MDS/2017 RSR % *+ ,+ /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. / ( )/CIT(A) 4. / /CIT 5. +01 2 /DR 6. 1 /GF