ITO Non Corporate Ward 8(1), CHENNAI V. Michael Johnbosco, CHENNAI

ITA 2174/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9804 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 20-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KP GANGI REDDY
• Keywords: Gross profit estimation; Opportunity of being heard; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . . , ! ' , # '$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.2173 & 2174/CHNY/2018 % &% /ASSESSMENT YEAR: 2015-16 INCOME TAX OFFICER, NON-CORPORATE WARD-8(1), CHENNAI. VS. M/S. JOHN & CO., AU-22, PERIYAR VEGETABLE MARKET, KOYAMBEDU, CHENNAI 600 092. [PAN: AADFJ 1832G] MR. MICHAEL JOHNBOSCO, E-106, PERIYAR VEGETABLE MARKET, KOYAMBEDU, CHENNAI. [PAN: AGLPJ 9297M] ( '( /APPELLANT) ( )*'( /RESPONDENT) '( + , / ASSESSEE BY : SHRI KP GANGI REDDY, CA )*'( + , /REVENUE BY : SHRI R. CLEMENT RAMESH KUMAR, ADDL. CIT - + .# /DATE OF HEARING : 10.04.2019 /0& + .# / DATE OF PRONOUNCEMENT : 23.04.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-9, ITA NOS.2173 & 2174/CHNY/2018 (AY: 2015-16) :- 2 -: CHENNAI (HEREINAFTER CALLED AS CIT(A)) DATED 01.0 5.2018 FOR THE ASSESSMENT YEAR (AY) 2015-16. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLV ED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS COMMON ORD ER. 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACT S RELEVANT IN THE CASE OF M/S. JOHN & CO. IN ITA NO.2173/CHNY/2018 AR E STATED HEREIN. 4. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPE AL: 1. THE ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW A ND FACTS OF THE CASE. 2. THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.79,25,159/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLA INED CREDITORS ESPECIALLY WHEN THE IDENTITY AND THE GENUINENESS OF THE CREDITORS HAVE NOT BEEN ESTABLISHED. 3. THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.45,04,094/- MADE BY THE ASSESSING OFFICER BEING 50/O OF THE EX PENSES CLAIMED BY THE ASSESSEE, IGNORING THE FACT THAT THE ASSESSE E HAD FAILED TO FURNISH SUPPORTING DOCUMENTS IN THE FORM OF BILL AN D VOUCHERS. 4. THE LD.CIT(A) HAD DISCUSSED IN DETAIL ABOUT THE ADDITION OF RS.94,014/- MADE BY THE ASSESSING OFFICER TOWARDS T HE DIFFERENCE IN RATE OF COMMISSION INCOME FROM CONSIGNMENT SALES. H OWEVER, THE LD. CIT(A) FAILED TO ADJUDICATE / CONFIRM THE ABOVE ADDITION IN HIS ORDER. 5. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE NAMELY M/S. JOHN & CO. IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF COMMISSION AGENCY D EALING IN ONION AT KOYAMBEDU MARKET, CHENNAI. THE RETURN OF INCOME FOR THE AY 2015-16 ITA NOS.2173 & 2174/CHNY/2018 (AY: 2015-16) :- 3 -: WAS FILED ON 02.09.2015 DISCLOSING TOTAL INCOME OF RS. 3,16,130/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT W AS COMPLETED BY THE ITO, NON-CORPORATE WARD-8(1), CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 30.12.2017 AT TOTAL INCOME OF RS. 1,28, 39,400/-. WHILE DOING SO, THE AO MADE ADDITION OF RS. 94,014/- ON ACCOUNT OF LOWER GROSS PROFIT SHOWN BY THE RESPONDENT-ASSESSEE BY ESTIMATING THE GROSS COMMISSION INCOME @ 5% ON CONSIGNMENT SALES. HE ALSO DISALLOWE D 50% OF THE TOTAL EXPENDITURE CLAIMED OF RS. 90,08,188/- CITING THAT NO SUPPORTING DOCUMENTS WERE PRODUCED FOR VERIFICATION. THE AO A LSO MADE ADDITION OF RS. 79,25,159/- ON ACCOUNT OF UNPROVED SUNDRY CREDI TORS. 6. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEA L WAS PREFERRED BEFORE LD. CIT(A), WHO VIDE IMPUGNED ORDER DELETED THE ADDITIONS. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US IN TH E PRESENT APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. ADMITTEDLY, IN THIS CASE, THE RESPONDENT-A SSESSEE NAMELY M/S. JOHN & CO. IS A COMMISSION AGENT DEALING IN ONION. IN THE CASE OF BUSINESS OF COMMISSION AGENCY, THE BUSINESS TRANSAC TIONS ARE UNDERTAKEN ON PRINCIPAL TO AGENT RELATIONSHIP. FOR THE PURPOSE OF ESTIMATING THE GROSS PROFIT EARNED BY THE RESPONDEN T-ASSESSEE, THE AO HAD ADOPTED GROSS RATE OF 5% BY GIVING THE COMPARAB LE INSTANCE. IT IS NOT THE CASE OF THE ASSESSEE THAT NO ESTIMATION IS REQUIRED TO BE MADE ITA NOS.2173 & 2174/CHNY/2018 (AY: 2015-16) :- 4 -: NOR THE COMPARABLES CITED BY THE AO ARE NOT CORRECT . THE RESPONDENT- ASSESSEE COULD NOT CITE ANY OTHER COMPARABLE INSTAN CE, WHERE THE GROSS PROFIT RATE IS LESS THAN 5% IS EARNED NOR THE ASSES SEE DID PLEAD THE CIRCUMSTANCES UNDER WHICH IT EARNED THE LESSER PROF IT THAN THE OTHER ASSESSEE ENGAGED IN THE SIMILAR LINE OF BUSINESS. THEREFORE, THE LD. CIT(A) WITHOUT REFERRING TO ANY FACTUAL BACKGROUND OF THE ADDITION MERELY GRANTED RELIEF TO THE ASSESSEE. THEREFORE, WE REVE RSE THE FINDINGS OF THE LD. CIT(A) TO THIS EXTENT. HENCE, GROUND OF APPEAL NO.4 FILED BY THE REVENUE IS ALLOWED. 8. AS REGARD TO THE GROUND OF APPEAL NO.2 DEALING W ITH THE ADDITION ON ACCOUNT OF UNPROVED SUNDRY CREDITORS OF RS. 79,25,1 59/-, IT IS CLEAR THAT THE AO HAD BROUGHT OUT THE DISCREPANCY IN THE DETAI LS FURNISHED BY THE RESPONDENT-ASSESSEE ITSELF VIDE PARA 6.3 OF THE ASS ESSMENT ORDER AND THE ASSESSEE COULD NOT EXPLAIN AS TO WHY THERE WAS DISCREPANCY IN THE DETAILS FURNISHED BEFORE THE AO AND THE CONFIRMATIO N LETTER SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE L D. CIT(A) WITHOUT MEETING REASONS GIVEN BY THE AO WHILE MAKING THE AD DITIONS HAD DELETED THE ADDITION. THUS, THE FINDING OF THE LD. CIT(A) IS BASED ON THE IRRELEVANT MATERIAL AND PROCEEDED ON ASSUMPTIONS AND PRESUMPTI ONS WITHOUT REFERRING TO ANY MATERIAL EVIDENCE IN SUPPORT OF HI S CONCLUSIONS AND ALSO IGNORED THE ELEMENTARY PRINCIPLE OF LAW THAT THE EN TRIES IN THE BOOKS OF ITA NOS.2173 & 2174/CHNY/2018 (AY: 2015-16) :- 5 -: ACCOUNT NEEDS TO BE PROVED BY LEADING TO THE NECESS ARY EVIDENCE ON RECORD. FURTHER, THE LD. CIT(A) FAILED TO NOTE THA T IN THE CONSIGNMENT SALES THE QUESTION OF PRESENCE OF SUNDRY CREDITORS FOR SUPPLY OF GOODS DOES NOT ARISE, INASMUCH AS, THE BUSINESS TRANSACTI ONS WERE UNDERTAKEN ON PRINCIPAL TO AGENT RELATIONSHIP. IT IS SETTLED PRINCIPLE OF LAW THAT THE SUNDRY CREDITORS ARE REQUIRED TO BE PROVED BY SATIS FYING THE THREE ELEMENTS NAMELY IDENTITY, GENUINENESS AND CREDITWOR THINESS OF THE SUNDRY CREDITORS, WHICH THE ASSESSEE HAS FAILED TO DISCHARGE AND THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT THI S ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AF TER AFFORDING AN OPPORTUNITY OF BEING HEARD. HENCE, GROUND OF APPEAL NO.2 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 9. SIMILARLY, WITH REGARD TO THE DISALLOWANCE OF 50 % OF THE EXPENDITURE CLAIMED FROM THE GROSS PROFIT EARNED, THE LD. CIT(A ) WITHOUT EXAMINING ANY EVIDENCE HAD MERELY DELETED THE ADDITION REGARD LESS OF THE FACT THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THE EX PENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, THE ORDER OF THE LD. CIT(A) CANNOT BE SUSTAINED. WE ARE OF THE CONSIDERED OPINION THAT THE MATTER BE REMITTED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER AFFORDING DUE OPPORTUNITY OF BEING HEARD TO THE RESPONDENT-ASSESSEE. ITA NOS.2173 & 2174/CHNY/2018 (AY: 2015-16) :- 6 -: 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.2173/CHNY/2018 PARTLY ALLOWED FOR STATISTICAL PU RPOSE. ITA NO.2174/CHNY/2018 : 11. SINCE, THE FACTS IN THE PRESENT APPEAL ARE IDEN TICAL TO THE FACTS IN ITA NO.2173/CHNY/2018, FOR THE REASONS MENTIONED TH EREIN, WE REVERSE THE FINDINGS OF LD. CIT(A) AND REMAND THE MATTER BA CK TO THE FILE OF AO ON THE LINES INDICATED IN THE APPEAL NO.2173/CHNY/2018 SUPRA. HENCE, THE ABOVE CAPTIONED APPEAL FILED BY THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.2174/CHNY/2018 PARTLY ALLOWED STATISTICAL PURPOS E. ORDER PRONOUNCED ON THE 23 RD DAY OF APRIL, 2019 IN CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ! ' ) (INTURI RAMA RAO) # /ACCOUNTANT MEMBER /CHENNAI, 1 /DATED: 23 RD APRIL, 2019. EDN, SR. P.S + ).23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 36 ). /DR 6. 7% 8 /GF