Sri Mohamed Sowkath Pasha , Ramanagara V. Income Tax Officer ward-1 , Ramanagara

ITA 2190/BANG/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9800 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 13-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO. 2 19 0 /BANG/2018 ASSESSMENT YEAR : 201 4 - 1 5 MR. MOHAMED SOWKATH PASHA, M/S. BABU TRADERS, APMC YARD, B.M. ROAD, RAMANAGAR 562 159. PAN: AIRPP 8849D VS. THE INCOME TAX OFFICER, WARD-1, RAMANAGAR. APP ELLANT RESPONDENT APP ELLANT BY : S HRI.MUKESH KUMAR JAIN, CA RESPONDENT BY : SHRI RAJENDRA CHANDEKAR, JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 2 0 .0 8 .2018 DAT E OF PRONOUNCEMENT : 14 .09. 2018 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 15.05.2018 OF THE CIT(APPEALS)-3, BENGALURU RELATIN G TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE THAT WAS PRESSED FOR ADJUDICATION BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THIS APPEAL IS THE ADDI TION OF RS.22,56,750/- MADE TO THE TOTAL INCOME OF THE ASSESSEE BY THE AO AS DIFFERENCE IN SALES WHICH WAS CONFIRMED BY THE CIT(A). ITA NO. 2190/BANG/2018 PAGE 2 OF 5 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS A TRADER I N COCONUT AND CARRIES ON BUSINESS UNDER THE NAME AND STYLE BABU TRADERS. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE RELEVANT AY, THE AO WAS IN POSSESSION OF THE VALUE ADDED TAX (VAT) RETURN FILED BY THE ASSES SEE IN RESPECT OF LOCAL AND INTER STATE SALE IN THE COURSE OF HIS BUSINESS. AS PER THE TRADING ACCOUNT OF THE ASSESSEE THE SALES RECORDED WAS A SU M OF RS.7,00,06,949/- COMPRISING OF RS.6,95,36,914 BEING INTERSTATE SALE AND LOCAL SALE OF RS.4,70,035/-. IT IS BASED ON THIS TRADING ACCOUNT THAT THE INCOME FROM BUSINESS WAS DECLARED IN THE RETURN OF INCOME FILED UNDER THE INCOME TAX ACT, 1961 (ACT). AS PER THE VAT RETURN THE SALES D ISCLOSED WAS RS.7,23,77,077/- COMPRISING OF RS.6,95,36,914/- BEI NG INTER STATE SALE {PURCHASES FROM UNREGISTERED DEALERS (UR)} AND RS.2 7,26,785/- BEING LOCAL SALES. THERE WAS THUS A DIFFERENCE OF RS.22, 56,750/- BETWEEN THE LOCAL SALE BETWEEN THE TRADING ACCOUNT OF THE ASSES SEE AND THE VAT RETURNS. THE ASSESSEE TRIED TO EXPLAIN BEFORE THE AO THAT THE DIFFERENCE IS DUE TO LARGER TURNOVER WRONGLY DECLARED IN THE VAT RETURNS FOR WHICH THE ASSESSEE HAD MADE NECESSARY RECTIFICATION PETITION BEFORE THE VAT AUTHORITIES. THIS PLEA WAS HOWEVER NOT SUBSTANTIAT ED BY THE ASSESSEE. HENCE, THE AO TREATED THE SALE AS INCOME OF THE ASS ESSEE AND BROUGHT THE SUM OF RS.22,56,750/- TO THE TOTAL INCOME OF THE AS SESSEE. 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE AO. THE RELEVANT OBSERVATIONS OF THE CIT(A) IN THI S REGARD WERE AS FOLLOWS:- 4.3 HOWEVER A PERUSAL OF THE VAT RETURN SHOWS THAT THE APPELLANT HAD MADE PURCHASES FROM UNREGISTERED DEAL ER AMOUNTING TO RS.6,95,36,914/-. THE GOODS PURCHASED HAVE DULY BEEN SOLD BY THE APPELLANT DURING THE YEAR UNDER CO NSIDERATION AND AS SUCH THERE IS NO CLOSING STOCK RELATED TO TH ESE PURCHASES AT THE END OF THE YEAR. THE PROFIT ARISING FROM THE SA LE OF THESE GOODS IS BY WAY OF COMMISSION @ 1.5%. THE SALE OF ITA NO. 2190/BANG/2018 PAGE 3 OF 5 RS.6,95,36,914/- IS DULY REFLECTED IN THE P & L ACC OUNT ALONG WITH COMMISSION OF RS.10,59,215/-. SO AS SUCH THERE IS N O SUCH OVER STATEMENT OF INTERSTATE SALES, AS THE APPELLANT HAS TRIED TO ARGUE. AS REGARD LOCAL SALES, THE VAT RETURNS SHOW THE SAM E TO BE RS.27,26,7851- AND THE APPELLANT HAS DULY PAID VAT ON THE SAME @ 5% OR 5.5% AS APPLICABLE. AS AGAINST THIS AP PELLANT HAS REFLECTED LOCAL SALES OF RS.4,70,035 IN HIS BOOKS O F ACCOUNT FOR THE PURPOSE OF COMPUTING HIS PROFITS DURING THE YEA R UNDER CONSIDERATION. CONSIDERING ABOVE, THE ARGUMENTS OF THE APPELLANT ARE FOUND TO BE DEVOID OF ANY MERIT. THE ACTION OF THE AO IN MAKING AN ADDITION OF RS.22,56,750/- IS UPHELD AND THE RELATED GROUNDS OF APPEAL 2 (REVISED 12) OF THE APPELLANT A RE DISMISSED. 5. BEFORE THE TRIBUNAL, THE SAME CONTENTIONS AS WER E PUT FORTH BEFORE THE LOWER AUTHORITIES WERE REITERATED BY THE LEARNE D COUNSEL FOR THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE SOU GHT TO PLEAD THAT THE BREAK UP OF SALES FIGURE AS GIVEN IN THE TRADING AC COUNT FILED ALONG WITH THE RETURN OF INCOME WAS WRONG AND THE CORRECT LOCAL AN D INTER STATE SALES FIGURE WAS AS FOLLOWS: INTER STATE SALES EXEMPT RS.5,00,22,421 INTERSTATE SALES TAXABLE @ 20% RS.1,40,96,669 H FORM SALES RS. 31,61,074 LOCAL SALES EXEMPT RS. 4,70,035 LOCAL SALES @ 5% RS. 21,48,750 LOCAL SALES @ 5.5% RS. 1,08,000 TOTAL SALES RS.7,00,06,949 6. AN AFFIDAVIT OF THE CHARTERED ACCOUNT WAS FILED ADMITTING WRONG CLASSIFICATION OF SALES IN THE TRADING ACCOUNT AND CLAIMING THE CORRECT CLASSIFICATION OF SALES AS ABOVE. THE AFFIDAVIT WA S SOUGHT TO BE FILED AS ADDITIONAL EVIDENCE BEFORE THE TRIBUNAL. 7. I HAVE CONSIDERED THE REQUEST FOR ADMISSION OF T HE ADDITIONAL EVIDENCE AND I AM OF THE VIEW THAT THE SAME IS NOT ACCEPTABLE. EVEN GOING ITA NO. 2190/BANG/2018 PAGE 4 OF 5 BY THE ADDITIONAL EVIDENCE, THE INTER STATE SALE OF RS.6,95,36,914 AS DECLARED IN THE VAT RETURN WILL STAND REDUCED TO RS .6,41,18,989/-. THERE WILL THUS BE A DIFFERENCE IN THE INTER STATE SALES FIGURE AS PER VAT RETURNS AND AS PER THE TRADING ACCOUNT OF THE ASSESSEE. TH E ADDITIONAL EVIDENCE IS THEREFORE NOT ADMITTED FOR ADJUDICATION AS IT IS CO NTRARY TO THE PLEA OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES. THE ADDITIO NAL EVIDENCE IS THEREFORE NOT ADMITTED FOR ADJUDICATION. 8. ANOTHER ARGUMENT THAT WAS PUT FORTH BY THE LEARN ED COUNSEL FOR THE ASSESSEE WAS THAT TURNOVER FOR THE PURPOSE OF VAT I NCLUDES PURCHASES FROM UR DEALERS AND THEREFORE THE TURNOVER DECLARED FOR VAT PURPOSE WILL NOT HOLD GOOD FOR INCOME TAX PURPOSES. THIS ARGUME NT IS FOUND TO BE DEVOID OF ANY MERIT BECAUSE, THE DIFFERENCE IN TURN OVER BETWEEN THE VAT RETURN AND TRADING ACCOUNT HAS TO BE EXPLAINED BY T HE ASSESSEE AND TO THE EXTENT THE TURNOVER DECLARED IN THE TRADING ACCOUNT IS LESS THAN THAT DECLARED IN VAT RETURN THE ASSESSEE HAD TO RECONCIL E THE SAME. THE ASSESSEE HAS FAILED TO EXPLAIN THE DISCREPANCY SATI SFACTORY AND THEREFORE THE CONCLUSION OF THE REVENUE AUTHORITIES THAT THE TURNOVER DECLARED IN THE TRADING ACCOUNT OF THE ASSESSEE BASED ON WHICH INCO ME FOR THE PURPOSE OF THE ACT WAS COMPUTED AT A LESSER SUM BY RS.22,56,75 0/-. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ENTIRE TURNOVER SHOULD NOT BE TREATED AS INCOME OF THE ASS ESSEE AND ONLY THE PROFIT PERCENTAGE DECLARED BY THE ASSESSEE HAS TO B E ADDED AS INCOME OF THE ASSESSEE. I FIND FORCE IN THE SUBMISSION OF TH E LEARNED COUNSEL FOR THE ASSESSEE AND I AM OF THE VIEW THAT ONLY THE PERCENT AGE OF INCOME DECLARED BY THE ASSESSEE ON IDENTICAL TRANSACTION CAN BE REG ARDED AS INCOME OF THE ASSESSEE AND NOT THE ENTIRE TURNOVER OF RS.22,56,75 0/-. THE AO IS DIRECTED TO SUBSTITUTE THE ADDITION IMPUGNED IN THIS APPEAL BY THE PROFIT PERCENTAGE THAT THE ASSESSEE EARNED ON SIMILAR TURNOVER IN THE RELEVANT PREVIOUS YEAR, AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSE SSEE. ITA NO. 2190/BANG/2018 PAGE 5 OF 5 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF SEPTEMBER, 2018. SD/- ( N.V. VASUDEVAN ) JUDICIAL MEMBER BANGALORE, DATED, THE 14 TH SEPTEMBER, 2018. / D ESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.