Sri krishna Ghosh, Dakshin Dinajpur V. A.C.I.T CC XX KOL, Kolkata

ITA 1906/KOL/2009

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4781 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-07-2016
• Assessment Year: 1999-2000
• Appeal Filed On: 13-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Gift; Business income; Business expenditure; Search and seizure
• Section: 44AD; 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1906 - 1910 / KOL / 2009 ASSESSMENT YEARS :1999-00 TO 2000- 01 AND 2002-03-2003-04 & 2005-06 SRI KRISHNA GHOSH VILL. BANGAR, P.O. GANGARAMPUR, DIST. DAKSHIN DINAJPUR [ PAN NO. ADLPG 9916 B ] V/S . ACIT, CENTRAL CIRCLE-XX, INCOME TAX OFFICE, PODDAR COURT, RABINDRA SARANI, KOLKATA /APPELLANT .. / RESPONDENT /BY ASSESSEE SHRI SUBASH AGARWAL, ADVOCATE /BY RESPONDENT SHRI G. MALLIKARJUNA, CIT-DR /DATE OF HEARING 19-07-2016 ! /DATE OF PRONOUNCEMENT 03-08-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- FIVE APPEALS FILED BY ASSESSEE ARE DIRECTED AGAINS T THE DIFFERENT ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-CENTRAL-I, KOLKATA AND ASSESSMENTS WERE FRAMED BY ACIT, CENTRAL CIRCLE-XX, KOLKATA U/S 153A/144 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT) VIDE HIS ORDERS DATED 29.12.2006 FOR ASSESSMENT YEARS 1999-0 0, 2000-01,2002-03 2003-04 & 2005-06 RESPECTIVELY. ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 2 SHRI SUBASH AGARWAL, LD AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE AND SHRI G. MALLIKARJUNA, LD DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. ALL THE APPEALS ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . 3. AT THE OUTSET, IT WAS OBSERVED THAT LD AR HAS FI LED ADDITIONAL GROUNDS IN ALL THE APPEALS EXCEPT ITA NO.1910/KOL/2009 WHICH A RE LEGAL IN NATURE. ON THE CONTRARY, LD. DR HAS RAISED NO OBJECTION REGARDING ADMISSION OF ASSESSEES ADDITIONAL GROUNDS IN ALL THE FOUR APPEALS, HENCE T HE ADDITIONAL GROUNDS ARE HEREBY ADMITTED. FIRST WE TAKE UP ITA NO.1906/KOL/2009 AY 99-00. 4. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BY ASSESSEE AS UNDER:- 1. THAT THE LD. CIT(A)ERRED IN LAW WHILE DECIDING THAT IF ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR WAS NOT COMPLETED UNDER SE CTION 143(3), ALL THE ISSUES IRRESPECTIVE OF THE FACT WHETHER THE SAME WA S DISCLOSED IN THE ORIGINAL RETURN OR WHETHER THE SAME WERE THE FINDINGS OF THE SEARCH CAN BE CONSIDERED IN ASSESSMENT UNDER SECTION 153A. 2. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.2,74,664/- AGAINST THE SALE OF GOLD/SILVER JEWELLERIES DECLARED UNDER VDIS, 97 WITHOUT CONSIDERING THE BALANCE SHEET OF THE APPELLANT FOR THE PERIOD BEFORE VDIS, 97 WHERE NO SUCH JEWELLERIES WERE SHOWN. 3. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE ADDI TION OF RS.2,40,000/- MADE BY THE LD. AO CONSIDERING THE GIFTS OF RS.80,000/- EACH RECEIVED BY THE APPELLANT FROM THREE DONORS AS UNEXPLAINED WHICH WE RE DULY DISCLOSED IN THE RETURN OF INCOME OF THE APPELLANT. 4. THAT AS THE ORDER OF THE LD. CIT(A) IS DEVOID OF MERIT, AND BAD IN LAW, THE SAME SHOULD BE QUASHED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 5. THAT THE APPELLANT CRAVES YOUR LD. PERMISSION TO ADD, AMEND AND MODIFY THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 3 ADDITIONAL GROUND OF APPEAL. 2. THE ADDITIONAL GROUND OF APPEAL RAISED NOW IS AS FOLLOWS:- FOR THAT THE ADDITION OF ITEMS OF REGULAR ASSESSMEN T IN THE PROCEEDINGS U/S. 153A WHEN NO INCRIMINATING DOCUMENTS WERE FOUND IN RESPECT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS IS LIA BLE TO BE DELETED. 5. THE ISSUE RAISED BY ASSESSEE IN GROUND NO.1 AND ADDITIONAL GROUND OF APPEAL APPEARS TO BE SIMILAR, THEREFORE, THE SAME A RE CLUBBED TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER. 6. THE ISSUE RAISED IN THESE GROUNDS IS THAT WHETHE R THE ASSESSMENT COMPLETED U/S 143(1) OF THE ACT CAN BE CONSIDERED I N ASSESSMENT PROCEEDINGS U/S 153A OF THE ACT WITHOUT FINDING ANY INCRIMINATING MATERIALS DURING SEARCH. BOTH LD. AR AND LD. DR HAVE ADVANCED THEIR ARGUMENT S ON THIS POINT OF ISSUE AT LENGTH AND SUBMITTED VARIOUS CASE LAWS IN SUPPOR T OF THEIR RESPECTIVE ARGUMENTS. HOWEVER, AT THE END OF HEARING, LD. AR F OR ASSESSEE EXPRESSED HIS WILLINGNESS TO WITHDRAW THE ISSUES RAISED OF AS SESSEES APPEAL. IN REJOINDER, LD. DR OBJECTED ON THE WITHDRAWAL OF THE GROUNDS OF ASSESSEES APPEAL AND SUBMITTED THAT DETAILED ARGUMENTS HAVE A LREADY BEEN ADVANCED ON THIS ISSUE, SO IT IS NOT JUSTIFIED TO WITHDRAW T HE SAME. HOWEVER, WE FIND THAT THE ISSUE INVOLVED IN THIS APPEAL ON MERIT STANDS F OR SMALL AMOUNT AND THEREFORE, WE ARE INCLINED TO DISMISS THE SAME AS N OT PRESSED. 7. THE 2 ND ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD . CIT(A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER BY SU STAINING THE ADDITION OF 2,74,664/- ON ACCOUNT OF SALE OF GOLD/SILVER JEWEL LERY. 8. THE FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRES ENT CASE AN INDIVIDUAL AND HAD DECLARED HIS INCOME FROM BUSINESS AND OTHER SOURCE. A SEARCH ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 4 OPERATION WAS CONDUCTED AT THE RESIDENTIAL AND BUSI NESS PREMISES OF ASSESSEE ON 09.03.2005 U/S.132 OF THE ACT. ACCORDIN GLY, A NOTICE WAS ISSUED UPON ASSESSEE U/S. 153A OF THE ACT. IT WAS OBSERVED THAT ASSESSEE HAS NOT FILED HIS RETURN OF INCOME U/S 139(1) OF THE ACT FO R THE YEAR UNDER CONSIDERATION. HOWEVER, ASSESSEE IN RESPONSE TO THE NOTICE U/S. 153A OF THE ACT FILED HIS RETURNED DECLARING A TOTAL INCOME OF 1,07,760/-. THEREAFTER NOTICE U/S. 143(2) WAS ISSUED AND SERVED UPON ASSESSEE. THE ASSESSEE, DURING THE YEAR, HAS SOLD SILVER UTEN SILS FOR AN AMOUNT OF 2,03,934/- AND GOLD ORNAMENTS FOR 70,734/-. THE ASSESSEE HAS CLAIMED THAT THESE ORNAMENTS WERE PURCHASED PRIOR TO AY 1981-82. ON THE SALE OF ORNAMENTS ASSESSEE HAS CLAIMED LONG TERM CAPITAL LO SS AFTER GIVING THE EFFECT OF INDEXATION. ON QUERY BY AO ABOUT THE DETA ILS OF SUCH PURCHASE OF ORNAMENT, THE ASSESSEE FAILED TO GIVE ANY DOCUMENTA RY SUPPORT IN SUPPORT OF HIS CLAIM EXCEPT A CASH MEMO DEMONSTRATING THE SALE S OF ORNAMENTS TO M/S JUNJUNWALA & CO. OF CHADNI CHOCK, DELHI. IN THE ABS ENCE OF ANY DOCUMENTARY EVIDENCE REGARDING THE POSSESSION OF OLD ORNAMENTS, THE AO HAS MADE THE ADDITION OF 2,74,668/- TO THE TOTAL INCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D CIT(A) WHEREAS ASSESSEE SUBMITTED THAT DETAILS OF SILVER AND GOLD WERE DULY DECLARED UNDER VDIS SCHEME 1997 AND THIS DISCLOSURE OF GOLD WAS DU LY ACCOUNTED FOR IN BALANCE-SHEET AS ON 31.03.1998. HOWEVER, LD CIT(A) REJECTED THE PLEA TAKEN BY ASSESSEE AND UPHELD THE ACTION OF AO BY OBSERVIN G AS UNDER:- 4. THE SUBMISSIONS ARE CAREFULLY CONSIDERED. THE I NFIRMITY IN THE CLAIM OF THE APPELLANT IS THAT THE CERTIFICATE ABOUT THE DISCLOS URE UNDER THE VDIS 97 IS MISSING. IN THE ABSENCE OF THESE CRUCIAL DOCUMENTS THE APPS OWN STATEMENT OF AFFAIR UNDER VDIS 97 AS ON 31.3.97 IS NOT ADEQUA TE EVIDENCE OF THE DECLARATION ABOUT THESE ASSETS UNDER THE VDIS 97. A T THE SAME TIME THE SALE BILL IS GOOD EVIDENCE OF THE SALE OF SILVER UTENSIL S AND GOLD ORNAMENT. IT IS NOT NECESSARY TO HAVE EVIDENCE OF TRAVELING TO DELHI FO R THE PURPOSE OF SUCH SALE. SINCE THE APPELLANT IS UNABLE TO PRODUCE THE VDIS 9 7 CERTIFICATE ISSUED BY THE DEPARTMENT, THE BENEFIT OF INDEXATION AND PRESUMPTI ON ABOUT THE ACQUISITION OF THESE ASSETS IS NOT AVAILABLE TO THE APPELLANT. UND ER THE CIRCUMSTANCES SECOND GROUND OF APPEAL IS DISMISSED. ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 5 BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 10. BEFORE US LD AR HAS FILED PAPER BOOK WHICH IS R UNNING PAGES FROM 1 TO 96 AND DREW OUR ATTENTION ON PAGES 1A TO 3 OF THE P APER BOOK WHERE ITR ALONG WITH FINANCIAL STATEMENTS WERE PLACED REFLECT ING THE AFORESAID TRANSACTIONS. THE LD. AR STATED THAT THE TRANSACTIO NS OF SALE PURCHASE OF OLD ORNAMENTS WERE DULY DISCLOSED IN HIS RETURN OF INCO ME. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BE LOW. 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT ASSESSEE, IN THE INSTANT CASE, FAILED TO PRODUCE DOCUMENTS REGARDING THE PUR CHASE / POSSESSION OF SILVER AND GOLD ORNAMENTS. IN THE ABSENCE OF SUPPOR TING EVIDENCE, IT IS INFERRED THAT ASSESSEE WAS HAVING UNDISCLOSED INCOME WHICH W AS ACCOUNTED IN THE FORM OF SALE PURCHASE OF GOLD AND SILVER. WE FIND T HAT THERE IS NO SUBSTANCE IN THE TRANSACTIONS AS CLAIMED BY ASSESSEE. ACCORDINGL Y, WE FIND NO REASON TO INTERFERE IN THE ORDER OF AUTHORITIES BELOW. WE UPH OLD ACCORDINGLY AND GROUND RAISED BY ASSESSEE IS DISMISSED. 12. NEXT ISSUE RAISED IN THIS APPEAL IS AS REGARDS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY SUSTAINING THE ADDIT ION OF 2.40 LAKH ON ACCOUNT OF UNEXPLAINED INCOME. 13. DURING THE YEAR, ASSESSEE HAS SHOWN TO HAVE REC EIVED GIFT OF RS.2.40 LAKH FROM THE FOLLOWING PERSONS:- SL.NO NAME OF PERSONS AMOUNT ( ) 1 BHUPENDRA NATH SAHA 80,000 2 PARIMAL CH. GHOSH 80,000 3 KAMAKKHYA PADA SAHA 80,000 ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 6 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESS EE FILED TO SUBSTANTIATE THE CLAIM OF GIFT RECEIVED FROM THE AFORESAID PARTI ES. THEREFORE, AO DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF ASSE SSEE. 14. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO UPHELD THE ACTION OF AO BY OBSERVING AS UNDER:- IN MY OPINION THESE GIFTS HAVE TO BE ACCEPTED AS GENUINE. AS FAR AS THE OTHER GIFTS ARE CONCERNED, THE ASSESSING OFFICER HA S NOT BEEN FURNISHED WITH CONFIRMATIONS FROM THE DONORS. THE VERIFICATION ON THE BASIS OF THE CONFIRMATION FROM THE DONORS IS SUBSEQUENT EVENT. T HE ASSESSING OFFICER DID NOT HAVE ANY DOCUMENT FOR THE PURPOSE OF INITIATING VERIFICATION OF THE GIFTS OF RS.80,000/- EACH FROM SHRI BHUPENDRA NATH SHAH, SMT . KAMKHYA PADA SHA AND SRI PARIMAL CHANDRA GHOSH. IN MY OPINION THESE 3 GIFTS ARE JUSTIFIABLY DISBELIEVED. ACCORDINGLY GROUND NO. 3 IS PARTLY ALL OWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 15. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT ASSESSEE FAILED TO FURNISH ANY DOCUMENTS IN SUPPORT OF GIFT RECEIVED FROM THE ABOVE STATED PARTIES. IN THE ABSENCE ANY DOCUMENTARY EVIDENCE, WE FIND NO REASON TO INTERFERE IN THE ORD ER OF LD. CIT(A). WE HOLD ACCORDINGLY AND GROUND RAISED BY ASSESSEE IS DISMIS SED. 16. ISSUE NO. 4 AND 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 17. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. COMING TO ITA NO.1907/KOL/2009 FOR A.Y 00-01 . 18. THE GROUNDS RAISED BY ASSESSEE IN THIS APPEAL A ND ADDITIONAL GROUND ARE REPRODUCED BELOW:- 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE PAR T OF THE ADDITION MADE BY THE LD. AO ESTIMATING THE HIGHER PROFIT ON SURMISES AND CONJECTURES AND IGNORING THE FACT THAT NO EVIDENCE OF HIGHER PROFIT WAS FOUN D DURING SEARCH AND SEIZURE OPERATION. ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 7 2. THAT THE LD. CIT(A) ERRED IN NOT GIVING COGNIZAN CE TO THE INTEREST FACTOR FOR NET LOSS FROM M/S MUKTA BRICKS THOUGH THE CORRESPON DING LOANS AND THEIR UTILIZATION WERE REFLECTED IN THE BALANCE SHEET. 3. THAT THE ACTION OF LD. CIT(A) IN UPHOLDING THE E STIMATION OF PROFIT @ 9% ON A TURNOVER RS.478,350/- INSTEAD OF 12% ESTIMATED BY THE LD. AO IN PLACE OF NET LOSS OF RS.57,403/- DECLARED IN THE RETURN OF I NCOME BY THE APPELLANT IS UNWARRANTED AND BAD IN LAW. 4. THAT AS THE ORDER OF THE LD. CIT(A) IS DEVOID O F MERIT, AND BAD IN LAW, THE SAME SHOULD BE QUASHED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 5. THAT THE APPELLANT CRAVES YOUR LD. PERMISSION TO ADD, AMEND AND MODIFY THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. ADDITIONAL GROUND OF APPEAL . 2. THE ADDITIONAL GROUND OF APPEAL RAISED NOW IS A S FOLLOWS: FOR THAT THE ADDITION OF ITEMS OF REGULAR ASSESSMEN T IN THE PROCEEDINGS U/S. 153A WHEN NO INCRIMINATING DOCUMENTS WERE FOUN D IN RESPECT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS IS LIABLE TO BE DELETED. 19. SINCE THE ISSUE IN GROUND NO. 1 TO 3 IS INTERLI NKED, THESE ARE BEING TAKEN UP TOGETHER FOR ADJUDICATION. THE RELEVANT ISSUE IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO BY ESTIMATING A PROFIT @ 7% ON THE TURNOVER OF 4,78,350/-. ASSESSEE IS ENGAGED IN BUSINESS OF BRICK MAKING AND DURING THE YEAR UNDER CONSIDERATION HAS DECLARED A LOSS OF 1,08,662/- FROM ITS BUSINESS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT GROSS PROFIT (GP) RATIO OF ASSESSEES BUSINESS IS FLUCTUATING VERY ABRUPTLY AS EVIDENT FROM THE FOLLOWING CHART:- A. YR TURNOVER GP(%) NP(%) 99-00 4,42,310 35.76 15.1 00-01 4,78,356 35.21 LOSS 01-02 6,84,500 30.02 LOSS 02-03 7,17,700 22.70 LOSS 03-04 7,44,200 28.68 LOSS 04-05 3,10,398 40.20 8.96 ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 8 ON QUERY BY AO, THE ASSESSEE FAILED TO SUBMIT HIS B OOKS OF ACCOUNT AND OTHER DOCUMENTS IN SUPPORT OF LOSS CLAIMED. THE AO FURTHE R OBSERVED THAT ASSESSEE HAS DECLARED NET PROFIT @ 15.1% IN AY 99-00 AND 8.9 6% IN AY 04-05. THEREFORE THE AO IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE HAS ASSUMED THE PROFIT OF ASSESSEE @ 12% WHICH IS AVERAGE NET P ROFIT RATIO FOR AYS 1999-00 AND 2004-05. ACCORDINGLY, AO DISALLOWED THE LOSS SU FFERED BY ASSESSEE AND WORKED OUT THE NET PROFIT OF 57,403/- AND WHICH WAS ADDED TO THE TOTAL INCOME OF ASSESSEE. 20. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE L OSS IS ARISING DUE TO THE INTEREST EXPENSE FOR RS.1,58,833/- CLAIMED DURING T HE YEAR ON THE LOAN OBTAINED FOR THE PURPOSE OF BUSINESS. HOWEVER, THE LD. CIT(A) HAS REJECTED THE PLEA OF ASSESSEE AND UPHELD THE ACTION OF ASSES SEE AFTER GIVING PARTIAL RELIEF TO ASSESSEE BY OBSERVING AS UNDER:- 3.3 THE SUBMISSIONS ARE CAREFULLY CONSIDERED. THE WRITTEN SUBMISSION DO SNOT STATE THE BASIS FOR THE CLAIM OF INTEREST F AR HIGHER THAN THE PRECEDING ASSESSMENT YEAR. AT THE SAME TIME THE ASS ESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT. THEREFORE, SOME ESTIM ATE OF NET PROFIT WOULD NOT BE OUT OF PLACE. IN MY ORDER FOR ASSESSME NT 2004-05, THE NET PROFIT OF 9% WAS HELD TO BE REASONABLE AND ACCEPTAB LE. IN RELATION TO THE ABSENCE OF PROPER EXPLANATION ABOUT INCREASED INTER EST EXPENDITURE IT IS HELD THAT NET PROFIT RATE OF 7% WOULD BE APPROPRIAT E IN THE PRESENT CASE. THE ASSESSING OFFICER IS DIRECTED TO APPLY THIS RAT E TO THE TURNOVER OF RS.4,78,356/-. THE SECOND GROUND OF APPEAL IS PARTL Y ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 21. BEFORE US LD. AR REITERATED THE SUBMISSION AS P LACED BEFORE LD. CIT(A). THE LD. AR ALTERNATIVELY SUBMITTED THAT INCOME ON T HE TURNOVER CAN BE ESTIMATED AT THE RATE OF 1% / 2% OF THE ASSESSEES TURNOVER. HE SUBMITTED THAT ASSESSEE HAS INCURRED LOSS FROM THE BRICK BUSINESS AND ESTIMATING PROFIT FROM THE SAID BUSINESS WILL BE HARDSHIP TO ASSESSEE. ON THE CONTRARY, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW . ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 9 22. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF THE CASE, WE FIND THAT AS SESSEE HAS INCURRED LOSS FROM HIS BRICK BUSINESS ON ACCOUNT OF INTEREST EXPE NSES ON UNSECURED LOAN FOR AN AMOUNT OF 1,58,833/-. BUT THE LOWER AUTHORITIES HAVE ESTIMATE D THE PROFIT ON PERCENTAGE BASIS ON THE TURN OVER. IN CASE WE RE MOVE THIS AMOUNT OF INTEREST EXPENSES THEN THERE COMES PROFIT TO THE BU SINESS OF ASSESSEE. FROM THE FACTS OF THE CASE, WE FIND THAT NATURE OF BUSIN ESS OF ASSESSEE HAS NOT BEEN DOUBTED BY THE LOWER AUTHORITIES. WE UNDERSTAN D THAT IF ASSESSEE IS CARRYING ON HIS BUSINESS, THERE WILL BE SEVERAL IND IRECT BUSINESS EXPENSES BESIDES THE DIRECT COST. THE LOWER AUTHORITIES HAVE NOT DOUBTED THE AMOUNT OF LOAN WHICH ASSESSEE HAS BORROWED FOR THE PURPOSE OF HIS SMOOTH RUNNING OF BUSINESS. IF WE ANALYSIS THE BALANCE-SHEET OF ASSE SSEE WE FIND THAT LOAN AMOUNT HAS BEEN UTILIZED EXCLUSIVE FOR THE BUSINESS . HOWEVER, AT THE SAME TIME, WE CANNOT IGNORE THE FACT THAT ASSESSEE HAS F AILED TO PRODUCE HIS BOOKS OF ACCOUNT WHICH WAS VERY IMPORTANT ASPECT FOR MAKI NG THE SCRUTINY ASSESSMENT. WE FIND THAT ASSESSEE HAS CLAIMED TOTAL INDIRECT EXPENSE FOR 2,77,086/- WHICH IS INCLUSIVE OF INTEREST ELEMENT O F 1,58,833/-. SO IT MEANS ONLY INDIRECT EXPENSE OF 1,18,253/- HAS BEEN CLAIMED BY ASSESSEE. IN VIEW OF THE MATER AND AFTER CONSIDERING THE FACTS IN TOTALI TY OF THE CASE AND IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE ARE INCLINED TO LIMIT THE NET PROFIT @ 4% OF ASSESSEES TURNOVER. CONSIDERING THE FACTS AND CIRC UMSTANCES OF ASSESSEE, WE REVERSE THE ORDER OF AUTHORITIES BELOW AND GROUN D RAISED BY ASSESSEE IS ALLOWED PARTLY IN TERMS OF ABOVE FINDING. AO IS DIR ECTED ACCORDINGLY. 23. NEXT ISSUE IN GROUNDS NO. 4 AND 5 ARE GENERAL I N NATURE AND DO NOT REQUIRE ANY SEPARATE ADJUDICATION. 24. ADDITIONAL GROUND WAS NOT PRESSED BY THE ASSESS EE. HENCE THE SAME IS DISMISSED AS NOT PRESSED. 25. IN THE RESULT, ASSESSEES APPEAL ALLOWED PARTLY . ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 10 COMING TO ITA NO.1909-1910/KOL/2009 FOR AYS 03-04 & 05-06 . 26. IN BOTH APPEALS GROUNDS HAVE BEEN RAISED OUT OF WHICH GROUNDS NO.4 & 5 IN [ ITA NO. 1909/KOL/2009 ] AND GROUNDS NO. 3 TO 5 IN [ ITA NO. 1910/KOL/2009 ] GENERAL IN NATURE AND DO NOT REQUIRE SEPARATE ADJ UDICATION. THE OTHER GROUNDS IN ITA NO. 1909/KOL/2009 ARE AS UNDER:- 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE PART OF THE ADDITION MADE BY THE LD. AO ESTIMATING THE HIGHER PROFIT ON SURMISES AND CONJECTURES AND IGNORING THE FACT THAT NO EVIDENCE OF HIGHER PROFIT WAS FOUN D DURING SEARCH AND SEIZURE OPERATION. 2. THAT THE LD. CIT(A) ERRED IN NOT GIVING COGNIZAN CE TO THE INTEREST FACTOR FOR NET LOSS FROM M/S MUKTA BRICKS THOUGH THE CORRESPON DING LOANS AND THEIR UTILIZATION WERE REFLECTED IN THE BALANCE SHEET. 3. THAT THE ACTION OF LD. CIT(A) IN UPHOLDING THE E STIMATION OF PROFIT @ 8% ON A TURNOVER RS.744,200/- INSTEAD OF 12% ESTIMATED BY THE LD. AO IN PLACE OF NET LOSS OF RS.84,368/- DECLARED IN THE RETURN OF I NCOME BY THE APPELLANT IS UNWARRANTED AND BAD IN LAW. FURTHER ASSESSEE RAISED ADDITIONAL GROUND IN ITA NO . 1909/KOL/09:- 2. THE ADDITIONAL GROUND OF APPEAL RAISED NOW IS A S FOLLOWS- FOR THAT THE ADDITION OF ITEMS OF REGULAR ASSESSMEN T IN THE PROCEEDINGS U/S. 153A WHEN NO INCRIMINATING DOCUMENTS WERE FOUN D IN RESPECT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS IS LIABLE TO BE DELETED. ITA NO.1910/KOL/2009 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE PAR T OF THE ADDITION MADE BY THE L. AO ESTIMATING THE HIGHER PROFIT ON SURMIS ES AND CONJECTURES AND IGNORING THE FACT THAT NO EVIDENCE OF HIGHER PR OFIT WAS FOUND DURING SEARCH AND SEIZURE OPERATION. 2. THAT THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.175,909/- OUT OF THE AGGREGATE ADDITION OF RS.40 3,931/- MADE BY THE AO BY ESTIMATING HIGHER PROFIT WITHOUT ANY EVIDENCE AND MATERIAL. 26. SINCE WE HAVE ALREADY DISCUSSED SAME INTER-CONN ECTED ISSUE IN ITA NO.1907/KOL/2009 FOR A.Y. 2000-01 IN PARA 19 TO 22 OF THIS ORDER AND TAKING A CONSISTENT VIEW WE ALLOW BOTH THE APPEAL OF ASSESSE E IN PART AND AO IS DIRECTED ACCORDINGLY. ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 11 27. AT THE TIME OF HEARING LD. AR HAS NOT RAISED A DDITIONAL GROUND IN BOTH THE APPEALS, HENCE, SAME DISMISSED AS NOT PRESSED. 28. IN THE RESULT, BOTH THE APPEAL ALLOWED IN PART. COMING TO ITA NO. 1908/KOL/2009 FOR AY 02.03 . 29. GROUNDS RAISED BY ASSESSEE ARE AS UNDER:- 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE PAR T OF THE ADDITION MADE BY THE LD. AO ESTIMATING THE HIGHER PROFIT ON SURMISES AND CONJECTURES AND IGNORING THE FACT THAT NO EVIDENCE OF HIGHER PROFIT WAS FOUN D DURING SEARCH AND SEIZURE OPERATION. 2. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE APPL ICATION OF THE PROVISIONS OF SECTION 44AD OF THE INCOME TAX ACT, 1961 AS THE GRO SS RECEIPTS FROM CONTRACT BUSINESS EXCEEDED THE LIMIT OF RS.40 LAKHS. 3. THAT THE ACTION OF THE LD. CIT(A) IN SUSTAINING THE ADDITION MADE BY ESTIMATING THE INCOME OF RS.548,698/- @ 8% N GROSS RECEIPTS OF RS.73,08,728/- FROM CONTRACT BUSINESS IN PLACE OF T HE PROFIT OF RS.409,505/- @ 5.6% DECLARED BY THE APPELLANT IN THE RETURN OF INC OME. 4. THAT THE LD. CIT(A) ERRED IN NOT GIVING COGNIZAN CE TO THE INTEREST FACTOR FOR NET LOSS FROM M/S MUKTA BRICKS THOUGH THE CORRESPON DING LOANS AND THEIR UTILIZATION WERE REFLECTED IN THE BALANCE SHEET. 5. THAT THE ACTION OF LD. CIT(A) IN UPHOLDING THE E STIMATION OF PROFIT @ 9% ON A TURNOVER RS.717,700/- INSTEAD OF 12% ESTIMATED BY THE LD. AO IN PLACE OF NET LOSS OF RS.127,647/- DECLARED IN THE RETURN OF INCOME BY THE APPELLANT IS UNWARRANTED AND BAD IN LAW. 6. THAT AS THE ORDER OF THE LD. CIT(A) IS DEVOID OF MERIT, AND BAD IN LAW, THE SAME SHOULD BE QUASHED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 7. THAT THE APPELLANT CRAVES YOUR LD. PERMISSION TO ADD, AMEND AND MODIFY THE ABOVE GROUNDS ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. ADDITIONAL GROUND:- 1. THIS APPLICATION OF THE PETITIONER/APPELLANT MO ST RESPECTFULLY PRAYS FOR ADMISSION OF THE FOLLOWING ADDITIONAL GROUND OF APP EAL WHICH IS PURELY LEGAL IN NATURE. 2. THE ADDITIONAL GROUND OF APPEAL RAISED NOW IS AS FOLLOWS- ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 12 FOR THAT THE ADDITION OF ITEMS OF REGULAR ASSESSMEN T IN THE PROCEEDINGS U/S. 153A WHEN NO INCRIMINATING DOCUMENTS WERE FOUN D IN RESPECT OF THE DISALLOWED AMOUNTS IN THE SEARCH PROCEEDINGS IS LIABLE TO BE DELETED. 3. THIS ADDITIONAL GROUND IS IN ADDITION TO THE SUB STANTIVE GROUNDS RAISE IN THE MEMORANDUM OF APPEAL. 30. FIRST WE TAKE UP INTER-CONNECTED GROUNDS NO. 1 TO 3 IN THIS APPEAL OF ASSESSEE AND THE ISSUE RAISED IS THAT LD. CIT(A) ER RED IN CONFIRMING THE ACTION OF AO BY ESTIMATING INCOME @ 8% ON GROSS RECEIPT OF 73,08,728/-. 31. ASSESSEE, IN HIS ORIGINAL RETURN FILED U/S 139( 1) OF THE ACT HAS DISCLOSED PROFIT @ 5.6% ON THE TURNOVER OF 32,89,042/-. HOWEVER, ASSESSEE IN HIS RETURN FILED U/S. 153A OF THE ACT HAS ENHANCED THE TURNOVER BY 40,19,686/- AND DECLARED TOTAL TURNOVER OF 73,08,728/-. THE ASSESSEE HAS SHOWN HIS TURNOVER FROM CONTRACTUAL BUSINESS AND IN SUPPORT O F IT HAS FURNISHED PAYMENT CERTIFICATES. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, AO OBSERVED THAT THE AUDITED ACCOUNTS OF ASSESSEE DO NOT REPRESENT T HE TRUE & FAIR PICTURE OF THE BUSINESS OF ASSESSEE. THE ASSESSEE FAILED TO PR ODUCE HIS BOOKS OF ACCOUNTS ALONG WITH OTHER DOCUMENTARY EVIDENCE IN S UPPORT OF HIS TURNOVER AND NET PROFIT DECLARED BY HIM. THE AO IN ABSENCE O F DOCUMENTS WORKED OUT THE PROFIT @ 8% TO THE TOTAL TURNOVER AT 73,08,728/- AND WORKED OUT ASSESSEES BUSINESS INCOME AT 5,84,698/-. 32. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ACTION OF AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 33. BEFORE US LD. AR SUBMITTED THAT ACTUAL NET PROF IT DECLARED BY ASSESSEE IS 5.6% AND ACCORDINGLY THE INCOME WAS OFFERED TO T AX. IN THIS CASE, LOWER AUTHORITIES HAVE BEEN GUIDED FROM THE PROVISION OF SEC. 44AD OF THE ACT WHICH ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 13 IS APPLICABLE TO THE ASSESSEE HAVING TURNOVER UP TO RS.40 LAKH. IT SHOWS THAT LEGISLATIVE IS WELL AWARE THAT THE SMALL ASSESSEE H AVING TURNOVER UP TO RS.40 LAKH ARE HAVING HIGHER PROFIT MARGIN IN COMPARISON TO THE ASSESSEE HAVING TURNOVER ABOVE RS.40 LAKH. THEREFORE, LOWER AUTHORI TIES ERRED IN RESORTING TO THE PROVISION OF SEC. 44AD OF THE ACT. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 34. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT IT IS NOT IN DOUBT THAT THE PR OVISION OF SEC. 44AD IS APPLICABLE ONLY TO THOSE ASSESSEES WHO ARE HAVING TURNOVER UP TO RS.40 LAKH. IN THE INSTANT CASE, ASSESSEES TURNOVER IS GREATER THAN RS.40 LAKH. THEREFORE, IN OUR CONSIDERED VIEW, RESORTING TO BE PROVISION O F SEC. 44AD IS NOT PROPER. WE ALSO FIND THAT THE AO HAS MADE THE ESTIMATION @ 8% OF THE TOTAL TURNOVER WITHOUT MAKING ANY COMPARISON WITH THE OTHER CASES WHO ARE ENGAGED IN SAME CATEGORY OF BUSINESS. THEREFORE, WE ARE NOT IN CLINED TO UPHOLD THE ORDER OF AUTHORITIES BELOW. HOWEVER, WE ARE NOT INTERESTE D IN SENDING BACK THE MATTER TO THE AO TO AVOID FURTHER LITIGATION. THERE FORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY WE RESTRICT THE NET PROFIT @ 6% WHICH IN OUR CONSIDERED VIEW IS REASONABLE FROM THE BUSINESS OF ASSESSEE AFTER CONS IDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THIS GROUND OF AS SESSEE IS ALLOWED IN PART. AO IS DIRECTED ACCORDINGLY. 35. NEXT INTER-CONNECTED ISSUE NO. 4 & 5 ARE AS REG ARDS THAT LD. CIT(A) ERRED IN ESTIMATING PROFIT @ 7% ON A TURNOVER RS.71 7,700/- INSTEAD OF 12% ESTIMATED BY AO.IN PLACE OF NET LOSS OF RS.127,647/ -. 36. SINCE WE HAVE ALREADY DISCUSSED SAME INTER-CONN ECTED ISSUE IN ITA NO.1907/KOL/2009 FOR A.Y. 2000-01 IN PARA 19 TO 22 OF THIS ORDER AN D TAKING A ITA NO.1906-1910/KOL/2009 A.YS 99-00-00-01, 02-03,03-04 &05-06 SH. KRISHNA GHOSH VS. ACIT, CC-XX, KOL. PAGE 14 CONSISTENT VIEW WE ALLOW THE APPEAL OF ASSESSEE IN PART AND AO IS DIRECTED ACCORDINGLY. 37. NEXT ISSUE NO. 6 AND 7 ARE GENERAL IN NATURE AN D DO NOT REQUIRE ANY SEPARATE ADJUDICATION. 38. IN THE RESULT, ASSESSEES APPEAL IN ITA NO.1906/KOL /2009 IS DISMISSED AND REMAINING FOUR APPEALS ARE ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT 03 /08/2016 SD/- SD/- (#$) () (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP &'(- 03 / 08 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-SRI KRISHNA GHOSH, VILL. BANGAR,P.O. GANG ARAMPUR, DIST. DAKSHIN DINAJPUR 2. /REVENUE-ACIT, C.C.-XX, PODDAR COURT, RABINDRA SAR ANI, KOLKATA 3.'0'12 3 / CONCERNED CIT KOLKATA 4. 3- / CIT (A) KOLKATA 5.6 78$$12, 12!, / DR, ITAT, KOLKATA 6.8;<=> / GUARD FILE. BY ORDER/ , /TRUE COPY/ /' 12!,