MD. Rashid, Kolkata V. THE ITO, WD-53(3), KOLKATA, Kolkata

ITA 218/KOL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100237 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2015
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: V N PUROHIT
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: K OLKATA [BEFORE SHRI MAHAVIR SINGH, JM] I.T.A NO.218/KOL/2015 ASSESSMENT YEAR: 2010-11 MD. RASHID VS. INCOME-TAX OFFICER, WD-53(3), KOLKATA (AGIPR7307R) ( APPELLANT ) ( RESPONDENT ) & I.T.A NO.219/KOL/2015 ASSESSMENT YEAR: 2010-11 SMT. YASMINARA VS. INCOME-TAX OFFICER, WD-53(3) , KOLKATA (ABAPY1334N) ( APPELLANT ) ( RESPONDENT ) & I.T.A NO.220/KOL/2015 ASSESSMENT YEAR: 2010-11 MD. SHAHJAHAN VS. INCOME-TAX OFFICER, WD-53(3), KOLKATA (AYFPS9869L) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 11.12.2015 DATE OF PRONOUNCEMENT: 11.12.2015 FOR THE APPELLANT: SHRI V. N. PUROHIT, FCA FOR THE RESPONDENT: MD. GHAYAS UDDIN, JCIT, SR. DR ORDER ALL THESE THREE APPEALS BY ASSESSEE ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A)-7, KOLKATA VIDE APPEAL NOS. 140,137,129/CIT(A)-7/W-26( 3)/14-15 DATED 31.12.2014. ASSESSMENTS WERE FRAMED BY ITO, WARD-55(3), KOLKATA U/S. 145(3)/143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) FOR ASSESSMENT YEAR 2010- 11 VIDE HIS SEPARATE ORDERS DATED 31.12.2012. 2. THE ONLY COMMON ISSUE IN THESE THREE APPEALS OF DIFFERENT ASSESSEES IS AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE ACTION OF AO IN E STIMATING THE NET PROFIT FROM THE BUSINESS OF EMBROIDERY WORK BY APPLYING GROSS PROFI T AT 5% INSTEAD OF DECLARED GROSS PROFIT OF ALL THE THREE APPEALS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND: GROUND FILED IN ITA NO. 218/K/2015 IN THE CASE OF MD. RASHID 2 ITA NO.218-220/K/2015 MD. RASHID, SMT. YASMINARA, MD. SAHAJHAN AY 2010-1 1 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ESTIMATION OF THE NET PROFIT FROM BUSINESS OF E MBROIDERY WORKS AT RS.12,26,215/- @ 5% INSTEAD OF THE DECLARED FIGURE OF RS.4,41,437/- AT THE RATE OF 1.79%, WITHOUT MENTIONING ANY BASIS FOR HIS ESTIMATION. GROUND FILED IN ITA NO. 219/K/2015 IN THE CASE OF SMT. YASMINARA 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ESTIMATION OF THE NET PROFIT FROM BUSINESS OF E MBROIDERY WORKS AT RS.7,53,725/- @ 5% INSTEAD OF THE DECLARED FIGURE OF RS.3,75,355/- AT THE RATE OF 2.49%, WITHOUT MENTIONING ANY BASIS FOR HIS ESTIMATION. GROUND FILED IN ITA NO. 220/K/2015 IN THE CASE OF MD. SHAHJAHAN 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ESTIMATION OF THE NET PROFIT FROM BUSINESS OF E MBROIDERY WORKS AT RS.11,27,690/- @ 5% INSTEAD OF THE DECLARED FIGURE OF RS.4,39,796/- AT THE RATE OF 1.94%, WITHOUT DISCUSSING ANY BASIS FOR HIS ESTIMATION. THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL I N THESE THREE APPEALS OF DIFFERENT ASSESSEE, I WILL TAKE THE FACTS FROM ITA NO. 218/KO L/2015 AND DECIDE THE ISSUE IN THE CASE OF MD. RASHID. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS E NGAGED WITH EMBROIDERY WORK AND THE TOTAL GROSS RECEIPTS FROM THE YEAR UNDER CONSIDERAT ION WAS RS.2,45,24,290/-. THE ASSESSEE CLAIMED LEDGER EXPENSES AT RS.2,34,67,759/ - ON ACCOUNT OF STITCHING CHARGES. THE AO REJECTED THE BOOK RESULTS BY INVOKING THE PR OVISIONS OF SECTION 145(3) OF THE ACT BY OBSERVING AS UNDER: IN THESE CIRCUMSTANCES, I AM NOT SATISFIED WITH C ORRECTNESS AND COMPLETENESS OF ASSESSEE BOOKS OF ACCOUNTS AND THUS HEREBY REJECT THE SAME U /S. 145(3) OF THE INCOME TAX ACT, 1961. THE AO APPLIED GROSS PROFIT RATE @ 5% AND ESTIMATED THE NET PROFIT FROM THE BUSINESS AT RS.12,26,215/- AS AGAINST NET PROFIT DISCLOSED BY T HE ASSESSEE AT RS.4,41,437/- WHICH COMES TO 1.79%. THE CIT(A) ALSO CONFIRMED THE ACTI ON OF AO BY OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE OBSERVATION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND STATEMENT OF FACTS OF THE CASE FILED BY THE A/R OF THE APPELLANT. I FOUND THAT THE APPELLANT FAILED TO GIVE THE DETAIL OF THE PERSON AND THEIR COMMUNICATION ADDRESS TO WHOM STITCHING CHARGES WERE PAID IN CASH AT THE TIME OF ASSESSMENT PROCEEDINGS AS WELL AS APPELLATE PROCEEDINGS. THE A /R OF THE APPELLANT ALSO NOT FILE ANY EVIDENCE WHICH ESTABLISHED THAT THE ESTIMATION MADE BY THE A.O. IS NOT CORRECT. THE A.O. IN ASSESSMENT ORDER GAVE THE FINDINGS THAT STITCHIN G CHARGES ARE NOT FULLY VERIFIABLE AND PAYMENT MADE IN CASH. THE A.O. ESTIMATE THE NET PRO FIT @ 5% OF THE GROSS RECEIPT OF RS.2,45,24,290/- AFTER CONSIDERING THE MATERIAL BEF ORE HIM. 3 ITA NO.218-220/K/2015 MD. RASHID, SMT. YASMINARA, MD. SAHAJHAN AY 2010-1 1 CONSIDERING THE ABOVE OBSERVATION AND FACTS OF THE CASE, I AGREE WITH THE ESTIMATION MADE BY THE A.O. OF NET PROFIT @ 5% OF THE GROSS RE CEIPT OF RS.2,45,24,290/-. HENCE I CONFIRM THE ADDITION MADE BY THE A.O. THIS GROUND I S NOT ALLOWED. AGGRIEVED, ASSESSEE IS IN SECOND APPEAL BEFORE TRIB UNAL. 4. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. I FIND THAT THE ASSESSEE HAS CHALLENGED THE APPLICATION OF GROSS PROFIT RATE BUT NOT THE REJECTION OF BOOKS OF ACCOUNT. THE ASSESSEES T URNOVER IN TERM OF PERCENTAGE INCREASED OVER THE LAST YEARS AND GROSS PROFIT VARI ES FROM 1.84% TO 2%, WHICH WAS ACCEPTED WHILE FRAMING ASSESSMENT U/S/. 143(3) OR 1 43(1), AS THE CASE MAY BE. THE ASSESSEE HAS FILED COMPARATIVE CHART FOR THE FOLLOW ING ASSESSMENT YEARS: SL. NO. ASST. YEAR TOTAL SALE % OF INCREASE IN SALES OVER LAST YEAR NET PROFIT % OF NP ASSESSED U/S. REMARKS 1. 2006-07 8,775,929 - 237,000 1.84% U/S. 143(3) NO INCREASE NET PROFIT PERCENTAGE SOME EXP. DISALLOWED. 2. 2007-08 15,551,250 77.20% 286,536 1.84% U/S. 143(1) -- 3. 2008-09 12,273,540 (-)21.07% 238,923 1.95% -DO- -- 4. 2009-10 14,491,500 18.07% 289.830 2.00% -DO- -- 5. 2010-11 24,524,290 69.23% 441.437 1.79% U/S. 143(3) G. P. ENHANCED 6. 2011-12 23,082,060 (-) 5.86% 403.936 1.75% U/S. 143(1) -- 7. 2012-13 15,346,980 (-) 33.51% 306.940 2.00% -DO- -- THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAS DISCL OSED NET PROFIT @ 1.79% AS AGAINST APPLICATION BY AO AND CONFIRMED BY CIT(A) AT 5%. L D. COUNSEL FOR THE ASSESSEE BEFORE US ONLY PLEADED FOR AN APPLICATION OF REASONABLE RA TE OF NET PROFIT AND ACCORDING TO HIM, 2% OF NET PROFIT WILL MEET THE ENDS OF JUSTICE. ON THE OTHER HAND, LD. SR. DR ALSO AGREED THAT A REASONABLE GROSS PROFIT CAN BE ESTIMATED AND ACCORDING TO HIM, 4% GROSS PROFIT WILL MEET THE ENDS OF JUSTICE. IN VIEW OF THE ABOV E FACTUAL ASPECTS AND SUBMISSION OF BOTH THE SIDES, I FEEL THAT A REASONABLE ESTIMATE O F NET PROFIT WILL MEET THE ENDS OF JUSTICE I.E. 3% AND ACCORDINGLY, I DIRECT THE AO TO COMPUTE THE INCOME AFTER APPLYING NET PROFIT RATE AT 3% AFTER APPLYING GROSS PROFIT. 4 ITA NO.218-220/K/2015 MD. RASHID, SMT. YASMINARA, MD. SAHAJHAN AY 2010-1 1 5. SIMILAR ARE THE FACTS OF OTHER TWO ASSESSEES ALS O. HENCE, AO WILL COMPUTE THE INCOME AFTER APPLYING NET PROFIT RATE AT 3% IN THES E TWO CASES. 6. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE P ARTLY ALLOWED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- (MAHAVIR SINGH) JUDICIAL MEMBER DATED :11TH DECEMBER, 2015 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT MD. RASHID, G-178, DHANKHETI ROAD, GARDEN REACH, KOLKATA-700 024. SMT. YASMINARA, J-30, FATEHPUR VILLAGE ROAD, GARDEN RELACH, KOLKATA- 700 024. MD. SHAHJAHAN, H-118/B, SHYAMLAL LANE, GARDEN REACH , KOLKATA-700 024. 2 RESPONDENT ITO, WD-53(3), KOLKATA. 3. THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .