ITO, Cuttack V. Prakash Chandra Ray, Cuttack

ITA 19/CTK/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6338 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-04-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: ASHOK K MOHANTY
• Keywords: Business income

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL , AM & SHRI D.T.GARASIA , JM ./ ITA NO. 19 / CT K /20 1 3 ( / ASSESSMENT YEAR : 200 8 - 0 9 ) ITO, WARD - 2(1), CUTTACK VS. PRAKASH CHANDRA RAY, PROP : M/S COMPUSERVE, ARNODAYA MARKET, LINK ROAD, CUTTACK. ./ ./ PAN/GIR NO. : A EOPR 8931 F ( / APPELLANT ) .. ( / R ESPONDENT ) AND ./ CO NO. 17 /CTK/201 3 (ARISING OUT OF ITA NO. 19/CTK/2013) ( / ASSESSMENT YEAR :200 8 - 09 ) PRAKASH CHANDRA RAY, PROP : M/S COMPUSERVE, ARNODAYA MARKET, LINK ROAD, CUTTACK. VS. ITO, WARD - 2(1), CUTTACK . / ./ PAN/GIR NO. : A EOPR 8931 F ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI S.C.MOHANTY /ASSESSEE BY : SHRI ASHOK K.MOHANTY / DATE OF HEARING : 2 4 TH APRIL , 201 4 / DATE OF PRONOUNCEMENT : 01/05 /2014 / O R D E R PER BENCH : THIS APPEAL AS WELL AS THE CROSS OBJECTION HAS BEEN FILED AGAINST THE ORDER OF THE CIT(A) DATED 31 - 10 - 2012 . THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL : 2 ITA NO. 19 /201 3 & CO NO. 17/2013 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. FIRST APP ELLATE AUTHORITY IS NOT JUSTIFIED IN DIRECTING THE AO TO ADOPT THE GP RATE @4.12 % AS DISCLOSED IN FORM NO. 3 CD AND ESTIMATE PROFIT ON THE TOTAL SALE OF RS. 2,75,31,709/ - INCLUDING THE UND ISCLOSED SALE RS.13,09,979/ - DETECTED IMPUGNED ASSESSMENT ORDER. 02.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. APPELLATE AUTHORITY IS JUSTIFIED TO HOLD THAT WHERE ASSESSEE FAILED TO ESTABLISH HIS BOOKS RESULTS AS CORRE CT AND RELIABLE - IT IS MANDATORY FOR THE A. O TO DETERMINE THE NET PROFIT ON AN ESTIMATED BASIS AND ALSO A.O. CAN NOT MAK E SPECIFIC ANALYSIS OF VARIOUS CLAIMS OF EXPENSES REFLECTED IN THE P&L ACCOUNT. 03.WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, LD.C IT(A) IS JUSTIFIED TO RELY THE CASE LAWS CITED WHICH ARE NOT SIMILAR AND SQUARELY APPLICABLE TO THE FACTUAL MATRIX OF THE PRESENT CASE. . WHILE THE ASSESSEE IN THE CROSS OBJECTION HAS TAKEN THE FOLLOWING GROUNDS : - A. FOR THAT THE LEARNED CIT (AP PEAL) HAS MISINTERPRETED THE LAW AND MI SAPPLIED THE SAME WHILE COMING TO HOLD THAT THE SALES TURNOVER OF THE RESPONDENT SHOULD BE ENHANCED BY THE AMOUNT OF VA T COLLECTED BY HIM. SUCH A CONCLUSION BEING ERRONEOUS THE ADDITION OF RS. 10,75,090.00 TO THE TURN OVER SHOULD BE DELETED IN THE PARTICULAR CIRCUMSTANCES OF THE CASE. 2 . GROUND NO.3 IN THE REVENUES APPEAL IS GENERAL IN NATURE, THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 3 . GROUNDS NO. 1 & 2 IN REVENUES APPEAL AND ONLY GROUND IN CROSS OBJECTION IN ASSESSEES APPEAL RELATING TO THE COMMON ISSUE. THEREFORE, ALL ARE BEING DISPOSED OF BY THIS COMMON FINDINGS. 3.1 FACTS RELATING TO THESE GROUNDS ARE THAT THE AO ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT NOTED THAT THERE WAS A DIFFERENCE OF RS. 1,26,2 53/ - FOR THE PURCHASES SHOWN TO THE INCOME TAX DEPARTMENT 3 ITA NO. 19 /201 3 & CO NO. 17/2013 AND THE SALES TAX DEPARTMENT. HE ALSO NOTED THAT VAT AMOUNT OF RS. 10,65,233/ - PAID ON PURCHASES DISCLOSED TO THE SALES TAX DEPARTMENT HAS NOT BEEN SHOWN TO THE IT DEPARTMENT AND RS. 2,34,889/ - IN SAL ES SHOWN TO THE INCOME T AX AND THE SALES TAX DEPARTMENT. FINALLY, IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS NOT SHOWN THE VAT COLLECTION ON SALES AMOUNTING TO RS. 10,75,090/ - . THEREFORE, THE AO CALLED FOR THE INFORMATION FROM THE COMMERCIAL TAX DEPARTMEN T. THE COMMERCIAL DEPARTMENT CONFIRMED THE PURCHASES OF RS. 2,61,18,351/ - AS AGAINST RS. 2,59,92,098/ - , AND RS. 2,59,92,098/ - HAS BEEN SHOWN TO BE REVENUE. THE SALES WERE CONFIRMED AT RS. 2,64,56,619/ - AS AGAINST RS. 2 , 62 , 21 , 730 / - SHOWN TO THE REVENUE. ON THE E XAMINATION OF THE RECONCILIATION SUBMITTED BY THE ASSESSEE WAS NOT CONFIRMED AND, THEREFORE, AN ADDITION OF RS. 1,26,253/ - FOR PURCHASES AND RS. 2,34,889/ - FOR THE SALES. FROM THE EXAMINATION OF THE BANK ACCOUNT MAINTAINED IN THE VARIOUS BOOKS, IT WAS NOTICE D THAT THE TOTAL DEPOSIT WAS RS. 2,81,06,915/ - WHILE THE SALES WERE SHOWN AT RS. 2,62,21,730/ - IN THE PROFIT AND LOSS ACCOUNT. THUS, THERE WAS AN EXCE SS DEPOSIT OF RS. 18,85,221/ - . THE AO AFTER GOING THROUGH REPLY OF THE ASSESSEE AND RECONCILIATION WITH THE BANK NOTED THAT THE TOTAL SALES INCLUDED VAT COMES TO RS. 2,72,96,828/ - , WHILE THE ACTUAL DEPOSIT MADE BY THE ASSESSEE WAS RS. 2,81,06,951/ - IN THE BANK ACCOUNTS. HE BROUGHT THE DIFFERENCE TO TAX AMOUNTING TO RS. 8,10,123/ - . THE ASSESSEE WENT IN APPEAL BEFOR E THE CIT(A) . THE CIT(A) DIRECTED THE AO TO ADOPT THE GP RATE AT THE RATE OF 4.12% ON SALES OF RS. 2,75,31,709/ - BUT 4 ITA NO. 19 /201 3 & CO NO. 17/2013 DELETED THE ADDITION OF RS. 3,41,142/ - AND THE RS.8,10,123/ - . THE AO HAS ALSO MADE CERTAIN DISALLOWANCE TOWARDS THE EXPENSES AS THE ASSESSEE FAILED TO PRODUCE THE BILLS/VOUCHERS/INVOICES, THE CIT(A) FOLLOWING THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS VS. CIT (1998) 232 ITR 776 TOOK A VIEW THAT WHEN AN ESTIMATE IS MADE IT IS IN SUBSTANTIVE OF THE INCOME I.E. COMPUTED U/S. 29 AND, THEREFORE, ALL THE DEDUCTION WHICH ARE REFERRED TO U/S. 30 TO 43D DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH ASSESSMENT. IN VIEW OF THIS, THE CIT(A) DELETED THE DISALLOWANCE OUT OF THE EXPENSES. 3.2 WE HEARD R IVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. SO FAR AS THE CROSS OBJECTION OF THE ASSESSEE IS CONCERNED, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) BY TAKING THE SUM OF RS. 10,75,090/ - TO BE PART OF THE TOTAL TURNOVER WHILE COMPUTING THE TUR NOVER OF THE ASSESSEE FOR THE PURPOSE OF ESTIMATING THE GROSS PROFIT, THE VAT CALCULATED BY THE ASSESSEE IS A REVENUE RECEIPT AND WILL BECOME PART OF THE TOTAL TURNOVER, SPECIALLY ON THESE FACTS OF THE CASE, WHERE THE TURNOVER SHOWN BY THE ASSESSEE TO THE SALES TAX DEPARTMENT IS MUCH HIGHER THAN THE TURNOVER SHOWN TO THE REVENUE. THE CIT(A) , IN OUR OPINION, WAS FAIR ENOUGH TO WORK OUT THE DIFFERENCE OF SALE OF RS. 13,09,979/ - , RS. 2,34,889/ - BEING THE DIFFERENCE BETWEEN TURNOVER SHOWN TO THE COMMERCIAL DEPART MENT AND THAT SHOWN TO THE IT DEPARTMENT AND THE SUM OF RS. 10,75,090/ - RECORDED BY THE ASSESSEE 5 ITA NO. 19 /201 3 & CO NO. 17/2013 BY WAY OF VAT. IF THE SAID SUM OF RS. 10,75,090/ - ADDED TO SALES SHOWN BY THE ASSESSEE TO THE IT DEPARTMENT AMOUNTING TO RS. 2,62,730/ - , THE TOTAL TURN OVER IN TH E CASE OF THE ASSESSEE WILL COME TO RS. 2,75,31,709/ - . TO THAT EXTENT, WE AGREE WITH THE FINDING OF THE CIT(A) . 3.3 COMING TO THE QUESTION OF ESTIMATION OF THE PROFIT, IN OUR OPINION, IT IS A FIT CASE WHERE THE ASSESSEE COULD NOT SHOW THE COMPLETE SALES A ND PURCHASES TO THE REVENUE AND UNDER THESE CIRCUMSTANCES THE CIT(A) WAS NOT CORRECT IN LAW IN DIRECTING THE SPECIAL OFFICER TO ADOPT THE GP RATE AS HAS BEEN SHOWN BY THE ASSESSEE IN THE TAX AUDITED REPORT I.E. AT THE RATE OF 4.12 % ON THE TURNOVER OF RS. 2, 75,31,709/ - AS HAS BEEN WORKED OUT BY HIM. SINCE THERE ARE THE FACTS FOR THE SUPPRESSION OF THE SALES AND PURCHASES IN THE BOOKS OF ASSESSEE, THEREFORE, THE GP RATE AS HAS BEEN SHOWN BY THE ASSESSEE IN FORM NO. 3CD CANNOT BE THE BASIS TO ARRIVE AT THE PROF IT. IN OUR OPINION, IT WILL MEET T HE END OF JUSTICE AND FAIRPLAY TO BOTH THE PARTIES, IF THE GROSS PROFIT OF THE ASSESSEE IS ESTIMATED BY APPLYING RATE OF 5% OF THE SALES OF RS. 2,75,31,709/ - AS IT WILL TAKE CARE OF EVEN DISALLOWANCE OF EXPENSES WHICH ASSES SEE FAILED TO PROVE. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ESTIMATE THE GP RATE IN THE CASE OF THE ASSESSEE BY APPLYING A GP RATE OF 5% ON THE SALES OF RS. 2,75, 31, 709/ - . 6 ITA NO. 19 /201 3 & CO NO. 17/2013 4. SO FAR AS GROUND NO. 2 IN REVENUES APPEAL RELATIN G TO EXPENSES IS CONCERNED, THE ISSUE, IN OUR OPINION, IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS (SUPRA) , IN WHICH IT WAS CLEARLY LAID DOWN THAT IF THE PROFITS A RE ESTIMATED BY APPLYING THE GP RATE THEN NO FURTHER DISALLOWANCE IN RESPECT OF THE EXPENSES IS TO BE MADE AS WHILE ESTIMATING THE PROFIT ON THE DEDUCTION WHICH ARE REFERRED TO U/S. 30 TO 43D SHALL BE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE ESTIMATING THE PROFIT. THE LEARNED DR EVEN THOUGH BEFORE US RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. DEVI PRASAD VISHWANATH, 72 ITR 194 (SC) . THIS DECISION, IN OUR OPINION, WILL NOT SUPPORT THE REVENUE AS THE DECISION RELATES TO THE ADDITION IN RESPECT OF CASH CREDIT. HENCE, WE DISMISS THIS GROUND OF THE REVENUE. 5 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION FILED BY THE ASSESSEE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/05 / 201 4 . 01/05 /2014 SD/ - SD/ - ( . . ) ( D.T.GARASIA ) ( . . ) ( P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 01/05 /2014 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED T O : 7 ITA NO. 19 /201 3 & CO NO. 17/2013 / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , CUTTACK 4. / CIT , BHUBANESWAR 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. //TRUE COPY//