The ITO, Machilipatnam V. Sri Tangavelu Muralikrishna, Machilipatnam

ITA 171/VIZ/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6703 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVINDAKSHAN
• Assessee Lawyers: S GOPALA KRISHNA MURTHY
• Keywords: Business income

Judgement Text

ITA NO.171/VIZAG/2017 SRI TANGAVELU MURALIKRISHNA, MACHILIPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . ' , % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.171/VIZAG/2017 ( / ASSESSMENT YEAR: 2009-10) ITO, WARD - 1, MACHILIPATNAM SRI TANGAVELU MURALIKRISHNA MACHILIPATNAM [PAN NO. AEBPT3768F ] ( ' / APPELLANT) ( ()' / RESPONDENT) / APPELLANT BY : SHRI R.S. ARAVINDAKSHAN, DR / RESPONDENT BY : SHRI S. GOPALA KRISHNA MURTHY, AR / DATE OF HEARING : 12.09.2017 / DATE OF PRONOUNCEMENT : 15.09.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST ORDER OF THE CIT(A), VIJAYAWADA DATED 18.11.2016 FOR THE ASSESSM ENT YEAR 2009-10. 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE EST IMATION OF INCOME ON BUSINESS OF SUBABUL/JAMOIL/SURVEY LOGS. THE A.O . COMPLETED THE ITA NO.171/VIZAG/2017 SRI TANGAVELU MURALIKRISHNA, MACHILIPATNAM 2 ASSESSMENT ESTIMATING THE INCOME AT 10% ON TOTAL TU RNOVER OF ` 5,41,05,960/- IN THE CASE OF SUBABUL LOGS, JAMOIL L OGS, SURVEY LOGS AND 12.5% ON TRANSPORTATION CHARGES OF ` 59,98,451/-. ON APPEAL, THE LD. CIT(A) REDUCED THE ESTIMATION OF INCOME FROM 10% TO 2% ON SUPPLY OF WOODEN LOGS. HENCE, THE APPEAL. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS. FOR THE ASSESSMENT YEAR 2009-10, THE ASSESSEE CARRIED ON THE BUSINESS ACTIVITY OF SUPPLY OF SUBABUL LOGS, SURVEY LOGS AND JAMOIL LOGS TO M/S. ITC LIMITED AND TAMILNADU NEWS PRINT PAPERS LIMITED AND MADE THE TURNOVER OF ` 5,41,05,960/- IN THE CASE OF SUPPLY OF LOGS AND RECEIVED TRANSPORTATION CHARGES OF ` 59,98,451/- IN RESPECT OF TRANSPORTATION CHARGES. THE ASSESSEE NEITHER PRODUCED THE BOOKS OF ACCOUNTS NOR GOT THE BOOKS OF ACCOUNTS AUDITED U/S 44AB OF THE INCOME TAX ACT, 1961 (HEREINAFTER C ALLED AS 'THE ACT') THOUGH THE TURNOVER EXCEEDED THE PRESCRIBED LIMIT O F ` 40 LAKHS. THEREFORE, THE A.O. ESTIMATED THE INCOME @ 10% ON W OODEN LOGS AND 12.5% IN THE CASE OF TRANSPORTATION CHARGES AND ASS ESSED THE TOTAL INCOME AT ` 61,60,402/-. 4. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE WENT ON APPEAL BEFORE THE LD. CIT(A). LD. CIT(A) HAS RESTRICTED T HE ESTIMATION OF ITA NO.171/VIZAG/2017 SRI TANGAVELU MURALIKRISHNA, MACHILIPATNAM 3 INCOME TO 8% IN RESPECT OF TRANSPORTATION CHARGES A ND 2% IN RESPECT OF WOODEN LOGS. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE FILED THE APPEAL BEFORE THE TRIBUNAL. APPEARING FOR THE REVE NUE, THE LD. D.R. ARGUED THAT THE ASSESSEE HAS NEITHER PRODUCED THE B OOKS OF ACCOUNTS NOR GOT THE BOOKS OF ACCOUNTS AUDITED, THEREFORE, T HE A.O. HAS NO OPTION EXCEPT TO ESTIMATE THE INCOME. THE A.O. ESTIMATED THE INCOME REASONABLY @ 10% IN THE ABSENCE OF BOOKS OF ACCOUNT S. LD. CIT(A) RESTRICTED THE ESTIMATION FROM 10% TO 2% WITHOUT AN Y BASIS AND WITHOUT AFFORDING THE OPPORTUNITY TO THE A.O. 6. ON THE OTHER HAND, THE LD. A.R. ARGUED THAT THE ASSESSEE WAS LIC AGENT AND NEW TO THE BUSINESS. THIS WAS THE 2 ND YEAR OF OPERATION DUE TO RECESSION IN THE YEAR 2007, THE RATES HAVE FALLE N STEEPLY AND THE ASSESSEE COULD NOT MAKE THE PROFITS, AND INCURRED T HE LOSSES. THE ASSESSEE DID NOT MAINTAIN THE BOOKS OF ACCOUNTS DUE TO LOSSES AND CLOSED THE BUSINESS WITHIN 1 YEARS. THE LD. A.R. FURTHER STATED THAT IN THIS LINE OF BUSINESS, THE GROSS PROFIT IS 4.02% AND NET PROFIT IS 1.74%, HENCE SUBMITTED THAT THE ORDER OF THE LD. CIT(A) MA Y BE CONFIRMED. ITA NO.171/VIZAG/2017 SRI TANGAVELU MURALIKRISHNA, MACHILIPATNAM 4 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE HAS CARRIED ON THE BUSINESS OF SUPPLY OF W OODEN LOGS TO M/S. ITC LIMITED AND TAMILNADU NEWS PRINT LTD. AND EFFEC TED THE TURNOVER OF ` 5.41 CRORES IN RESPECT OF WOODEN LOGS AND RECEIVED THE TRANSPORTATION CHARGES @ 59.28 LAKHS. THE A.O. ESTIMATED THE INCO ME @ 10% ON SUPPLY OF WOODEN LOGS AND 12.5% ON TRANSPORTATION C HARGES. THE LD. CIT(A) RESTRICTED THE ESTIMATION TO 2% IN THE CASE OF WOODEN LOGS AND 8% IN THE CASE OF TRANSPORTATION CHARGES. WHILE RE STRICTING THE ESTIMATION OF INCOME, THE LD. CIT(A) OBSERVED AS UN DER: 5.2 APPELLANT ADMITTED GROSS PROFIT OF ` 19,30,070/- ON TOTAL SALES OF ` 5,41,05,960/- IN THE BUSINESS OF SUBABUL LOGS GROSS PROFIT RATE WORKED OUT TO 3.57% OF TURNOVER. ASSESSING OFFICER ESTIMATED INCOME @ 10% OF TOTAL TURNOVER IN THIS BUSINESS. ASSESSING OFFICER DID NO T ADDUCE ANY REASON I BASIS FOR AO: INCOME @ 10% OF TURNOVER. HE DID NOT COMPARE THE APPELLANT'S PROFIT WITH OTHER ASSESSEE IN SIMILAR L INE OF BUSINESS. HENCE, IN MY VIEW, THE PROFIT ESTIMATED IS ON THE HIGHER SIDE AND WITHOUT ANY BASIS. 5.2.1. DURING THE COURSE OF APPEAL PROCEEDINGS, APP ELLANT WAS ASKED TO SUBMIT DETAILS OF PROFIT AND LOSS ACCOUNT IN COMPAR ABLE CASES IN SIMILAR LINE OF TRADE. APPELLANT SUBMITTED COPY OF TRADING & PRO FIT & LOSS ACCOUNT OF ANOTHER TRADER IN SIMILAR LINE OF BUSINESS THOUGH F OR THE YEAR ENDING 31.03.2014 WHEREIN G.P. RATE WAS 4.02% AND NET PROF IT WAS 1.74%. 5.2.2. BESIDES FELLING SUBABUL TREES, APPELLANT HAD TO CUT AND DEBARK THE LOGS, STACK AND LOAD THEM IN TRANSPORT VEHICLES. TH IS IS A LABOUR INTENSIVE WORK. FURTHER, DUE TO WEATHER CONDITIONS, MOISTURE CONTENT OF LOGS MAY UNDERGO CHANGE AT THE TIME OF DELIVERY AT FAR OFF P LACES. USUALLY, THIS WILL RESULT IN SHORTAGE OF WEIGHT AT THE TIME OF DELIVER Y AT FACTORY SITE. 5.2.3. TAMIL NADU NEWS PRINT AND PAPERS LTD. (TNPL) IN ITS FIRST PURCHASE ORDER FROM APPELLANT DATED 07.07.2008, QUOTED THE R ATE @ RS.19501- PER M.T. BUT IN ITS SUBSEQUENT PURCHASE ORDER FROM APPE LLANT DATED 19.10.2008, RATE QUOTED WAS RS. 1600/- PER M.T. THU S, THERE IS FALL IN RATE QUOTED BY THE PURCHASER DUE TO MARKET CONDITIONS. U NDER SUCH ITA NO.171/VIZAG/2017 SRI TANGAVELU MURALIKRISHNA, MACHILIPATNAM 5 CIRCUMSTANCES, TO ADOPT 10% OF TOTAL SALES AS INCOM E IS NOT PROPER. APPELLANT CARRIED ON THIS BUSINESS ONLY FOR 2 FINAN CIAL YEARS, I.E. 2008-09 AND 2009-10, I.E. FROM 01 .06.2008 TO 31.03.2010. 5.2.4. IN MY VIEW, 2% OF TOTAL TURNOVER WILL BE JUS T AND FAIR IN LIEU OF 10% ADOPTED BY ASSESSING OFFICER. I, THEREFORE, DIRECT ASSESSING OFFICER TO ESTIMATE THE INCOME AT RS.10,82,1191- (I.E. 2% OF R S.5,41,05,960/-) IN LIEU OF RS.54,10,596/- ADOPTED BY ASSESSING OFFICER . APPELLANT GETS RELIEF OF RS.43,28477/-. 8. THE A.O. ESTIMATED THE INCOME @ 10% ON SUPPLY OF WOODEN LOGS WITHOUT ANY BASIS AND BRINGING THE COMPARABLE CASES ON RECORD. IT IS SEEN FROM THE PURCHASE ORDER DATED 7.7.2008 THAT TH E RATE QUOTED WAS ` 1950/- AND ON 9.10.2008 THE RATE QUOTED WAS ` 1600/- PER M.T., THUS, THERE WAS A FALL IN THE RATE QUOTED BY THE PURCHASE R DUE TO MARKET CONDITIONS. THE ASSESSEE HAS NEITHER MAINTAINED TH E BOOKS OF ACCOUNTS AND NOR GOT THE BOOKS AUDITED, THEREFORE, THIS IS A CLEAR CASE OF ESTIMATION OF INCOME. WE ARE OF THE VIEW THAT NO F RUITFUL PURPOSE WOULD SERVE EVEN IF THE CASE IS REMITTED BACK TO THE FILE OF A.O., IN THE ABSENCE OF BOOKS OF ACCOUNTS. WHILE ESTIMATING THE INCOME, THE ASSESSING OFFICER DID NOT BRING ANY COMPARABLE CASE ON RECORD, WHEREA S, THE LD. CIT(A) CONSIDERED THE COMPARABLE CASES AND DIRECTED THE A. O. TO ESTIMATE THE INCOME @ 2%. THE LD. D.R. DID NOT BRING ANY OTHER COMPARABLE CASES WITH MORE PERCENTAGE OF INCOME THAN ESTIMATED BY TH E LD. CIT(A). THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LD. CIT(A) AND THE SAME IS UPHELD, AND THE APPEAL OF THE REVEN UE IS DISMISSED. ITA NO.171/VIZAG/2017 SRI TANGAVELU MURALIKRISHNA, MACHILIPATNAM 6 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 15 TH SEPT17. SD/- SD/- ( . ) ( . . ' ) (V. DURGA RAO) (D.S. SUNDER SINGH) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 15.09.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1, MACHILIPATNAM 2. / THE RESPONDENT SRI TANGAVELU MURALIKRISHNA, D. NO.15/493, EDEPALLI, MACHILIPATNAM 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM