MSL Fish Traders Pvt. Limited, Bhubaneswar V. Pr. CIT, Visakhapatnam

ITA 195/CTK/2022

AI Insights

The case involves MSL Fish Traders Pvt Ltd., which appealed against the orders passed by the Pr. CIT under section 263 of the Income Tax Act for the assessment years 2016-17 and 2019-20. The primary contention was regarding the determination of the gross profit rate applied to the assessee's undisclosed turnover and the inclusion of commission income in the taxable income. For 2016-17, the Tribunal found no error in the Assessing Officer's determination of gross profit at 1.44% and quashed the revisionary order. For 2019-20, the Tribunal noted that the commission income had been included in the assessee's computation and directed a re-examination to ensure it was properly taxed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300309 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-02-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 06-12-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER MSL Fish Traders Pvt Ltd., Room No.14, Fish Market, Unit-4, Bhubaneswar. PAN/GIR No. (Appellant Per Bench ITA No the order of the ld Act dated 29.11.2022 assessment year 2. ITA No the order of the ld Act dated 29.11.2022 assessment year IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA Nos.194 & 195/CTK/20 Assessment Yeas: 2016-17 & 2019 MSL Fish Traders Pvt Ltd., Room No.14, Fish Market, 4, Bhubaneswar. Vs. Pr. CIT (Central) Visakhapatnam PAN/GIR No. (Appellant) .. ( Respondent Assessee by : S/Shri D.Parida, CA/C.Par Revenue by : Shri M.K.Gautam, Date of Hearing : 9/02 Date of Pronouncement : 9/02 O R D E R No.194/CTK/2022 is an appeal filed by the assessee the order of the ld Pr. CIT(Central) Visakhapatnam passed u/s.263 of the 29.11.2022 in Appeal No. Pr. CIT(C)/263/MSL/2022 assessment year 2016-17. No.195/CTK/2022 is an appeal filed by the assessee the order of the ld Pr. CIT(Central) Visakhapatnam passed u/s.263 of the 29.11.2022 in Appeal No. Pr. CIT(C)/263/MSL/2022 assessment year 2019-2020. Page1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER /CTK/2022 17 & 2019-2020 Pr. CIT (Central) Visakhapatnam Respondent) D.Parida, CA/C.Parida, Advt M.K.Gautam, CIT DR 2/2023 2/2023 an appeal filed by the assessee against passed u/s.263 of the /263/MSL/2022-23 for the an appeal filed by the assessee against passed u/s.263 of the /263/MSL/2022-23 for the ITA Nos.194 & 195/CTK/2022 Assessment Yeas: 2016-17 & 2019-2020 Page2 | 6 3. S/Shri D.Parida/C.Parida, ld ARs appeared for the assessee and Shri M.K.Gautam, ld CIT DR appeared for the revenue. 3. In respect of ITA No.194/CTK/2022 for assessment year 2016-17, ld AR submitted that the assessee was subjected to search proceedings on 15.11.2018. it was the submission that the assessment came to be completed u/s.153A of the Act on 20.5.2021. In the assessment, the Assessing Officer had estimated the income of the assessee at 1.44% of the turnover as gross profit. It was the submission that the disclosed turnover was Rs.27.55 crores and the turnover as per the seized materials was Rs.74.21 crores. It was the submission that the difference in the turnover was to an extent of Rs.44.65 crores. It was the submission that the Assessing Officer had determined the percentage of gross profit in respect of the disclosed trading done by the assessee at 1.44% and had applied the same rate to the undisclosed turnover and accepted the disclosure made by the assessee at Rs.67,18,769/-. It was the submission that the order u/s.153A was the subject matter of revision by the Pr. CIT on the ground that the audit report of the assessee showed G.P. at 2.15% as against 1.44%. It was the submission that the Pr. CIT was of the view that the gross profit rate recorded in the audit report was to be considered in respect of the undisclosed turnover. It was the submission that the Assessing Officer having done his own calculation and having arrived at G.P. rate of 1.44% has formed an opinion and under the guise of revision, the ITA Nos.194 & 195/CTK/2022 Assessment Yeas: 2016-17 & 2019-2020 Page3 | 6 Pr. CIT is proposing to impose his view that the G.P. as mentioned in the audit report should be applied to the undisclosed turnover. It was the submission that this was not permissible and the order of the ld Pr. CIT is liable to be quashed. 4. In reply, ld CIT DR submitted that the audit report of the assessee itself showed G.P. rate of 2.15%. Thus, the calculation of the G.P. by the Assessing Officer at 1.44% itself was erroneous. It was the submission that the assessee itself had disclosed suppressed profit of Rs.67.18 lakhs and the Assessing Officer has accepted the same without considering the fact that the G.P. was liable to be considered at 1.25%. It was the submission that the suppression of turnover by the assessee in effect caused substantial higher income of the assessee insofar as the assessee had avoided the payment of statutory liability. It was the submission that the order of the Pr. CIT directing the AO to adopt the G.P. rate of 2.15% is liable to be upheld. 5. We have considered the rival submissions. The assessee is a commission dealer of fish. The products the assessee deals in does not have levy of any statutory liability. The Assessing Officer in the course of assessment has passed a detailed assessment order. The Assessing Officer has considered the various figures taken from the accounts of the assessee to determine the trading G.P. at 1.44%. The methodology adopted by the AO has not been shown to be wrong. Just because, the Assessing Officer ITA Nos.194 & 195/CTK/2022 Assessment Yeas: 2016-17 & 2019-2020 Page4 | 6 has arrived at G.P. of 1.44% does not mean that the G.P. rate as mentioned by the auditors in audit report at 2.15% should be blindly accepted. It is also accepted fact that the audit report is not sacrosanct. It is only indicative of the financial transaction as done by the assessee. A perusal of the order passed u/s.263 shows that the Pr. CIT has not pointed out any error in the determination of gross profit at 1.44% by the Assessing officer. All that the Pr. CIT is attempting to do is that the gross profit as disclosed in audit report is higher and same is liable to be considered as G.P. as against the trading G.P. adopted by the AO. For the purpose of invoking the revisionary powers u/s.263 of the Act, the order passed by the AO must be shown to be erroneous and prejudicial to the interest of the revenue. The error in the order of the Assessing Officer in the computation of G.P. at 1.44% has not been shown. This being so, we are of the view that the order passed u/s.263 of the Act for the assessment year 2016-17 is unsubstantiated and consequently same stands quashed. 6. In the result, appeal of the assessee for A.Y. 2016-17 stands allowed. ITA No.195/CTK/2022: A.Y. 2019-10. 7. It was submitted by ld AR that the assessment order u/s./143(3) came to be passed on 19.5.2021. It was the submission that the Pr. CIT has invoked his powers u/s.263 of the Act directing the AO to verify whether the commission income earned by the assessee has been brought ITA Nos.194 & 195/CTK/2022 Assessment Yeas: 2016-17 & 2019-2020 Page5 | 6 to tax. It was the submission that this commission income has already been included by the assessee in its computation of income and it has also been brought to the attention to the AO in the assessment order. Ld AR drew our attention to the assessment order at page 2 para 4. It was the submission that the issue having already been considered by the AO in the assessment order, the revision u/s.263 is liable to be quashed. 8. In reply, ld CIT DR submitted that a perusal of the assessment order clearly shows that the Assessing Officer has mentioned the amount of Rs.68,69,926/- as commission income. The assessee claims that the amount has been included in the income of the assessee. It was the submission that the assessment order does not speak nor give any findings on the submission of the assessee. It was the submission that the assessment order itself is a non-speaking order and the issue has not been considered by the AO. It was the submission that the order passed u/s.263 is liable to be upheld. 9. We have considered the rival submissions. A perusal of the assessment order most specifically paras 2 & 3 of the assessment order shows that before the AO, the assessee has made submission that the amount of Rs.1,60,96,206/- being the gross profit included the commission of Rs.68,69,926/-. However, when the same is considered with the order of the pr. CIT passed u/s.263, the gross profit as disclosed by the assessee is Rs.96,62,704/-. To this figure of Rs.96,62,704/-, if the commission income ITA Nos.194 & 195/CTK/2022 Assessment Yeas: 2016-17 & 2019-2020 Page6 | 6 of Rs.68,69,926/-, is added then the figures should come at Rs.1.65 crores. However, the seized materials shows the gross profit at 1.65 crores. The assessment order also does not make any discussion of this variation. This being so, we are of the view that the Pr. CIT is well within his powers to invoke the provisions of section 263 of the Act to direct the AO to examine the issue. This being so, the order of the pr.CIT u/s.263 of the Act for the assessment year 2019-20 stands upheld. 10. In the result, appeal for A.Y. 2019-20 stands dismissed. Order dictated and pronounced in the open court on 09/02/2023. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 09/02/2023 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : MSL Fish Traders Pvt Ltd., Room No.14, Fish Market, Unit-4, Bhubaneswar 2. The Respondent: Pr. CIT (Central) Visakhapatnam 3. The CIT(A)-, 4. DR, ITAT, Cuttack 5. Guard file. //True Copy//