ITO, Cuttack V. M/s Bharati Chitralaya, Cuttack

ITA 223/CTK/2012

• Counselvise Citation: 22322114 RSA 2012
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 30-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-04-2012
• Court: TRIBUNAL
• Keywords: Assessment record
• Section: 145; 144; 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 223/CTK/2012 C.O.NO.27/CTK/2012 (C.O.FILED BY THE ASSESSEE) / ASSESSMENT YEAR 2008 - 09 INCOME - TAX OFFICER, WARD 2(3),CUTTACK. - - - VERSUS - M/S.BHARATI CHITRALAYA, BAJRAKAB ATI ROAD, DOLAMUNDAI, CUTTACK, PAN: AAGFB 3519 D ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.R.WARDHA/S.K.DEHURI, ARS / FOR THE RESPONDENT: / SHRI MATI PARAMITA TRIPATHY, CIT - DR / DATE OF HEARING: 30.08.2012 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER DT.31.1 .2012 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2008 - 09. THE ASSESSEE HAS FILED CROSS OBJECTION. 2. AT THE OUTSET, THE LEARNED AR OF THE ASSESSEE DID NOT PRESS THE CROSS OBJECTION FILED BY THE ASSESSEE. THEREFORE, THE CROSS OBJECT ION IS DISMISSED AS NOT PRESSED. 3. IN THE APPEAL, THE REVENUE HAS RAISED THE FOLLOWING ISSUES. 01. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. FIRST APPELLATE AUTHORITY IS JUSTIFIED IN DELETING THE DETERMINATION OF PROFIT AS WAS MADE BY TH E AC IN THE IMPUGNED ASSESSMENT ORDER PASSED U/S,144 OF THE I.T.ACT AND DIRECTING TO ESTIMATE THE NET PROFIT @7 . 43% OF GROSS RECEIPTS AND DELETING FURTHER ADDITIONS/DISALLOWANCES OF 1,48,553 (MISC . RECEIPTS) , 15,33,366 (DISALLOWANCE OF EXPENSES), 11,54 ,399 (CREDITORS AS PER BALANCE SHEET), 4,454 (AUDIT FEES). I.T.A.NO. 223/CTK/2012 C.O.NO.27/CTK/2012 (C.O.FILED BY THE ASSESSEE) 2 02. WHETHER THE LD.CIT(A) IS JUSTIFIED TO UPHOLD THE FINDINGS OF THE ASSESSING OFFICER THAT THE ASSESSEE HAD BEEN FACTUALLY FOLLOWING CASH SYSTEM OF ACCOUNTING THOUGH THE TAX AUDIT REPORT HAS STAT ED AS MERCANTILE SYSTEM OF ACCOUNTING AND AT THE SAME TIME TO DIRECT ESTIMATED DEDUCTION OF 92.57% FROM GROSS CASH RECEIPTS AS CASH EXPENDITURE WITHOUT ANY BASIS WHATSOEVER. 03. WHETHER WITHIN THE MEANING OF SECTION 144 OF THE I.T.ACT,1961 WHILE MAKIN G AN ASSESSMENT OF TAXABLE INCOME TO THE BEST OF HIS JUDGMENT THE ASSESSING OFFICER IS LAWFULLY RESTRICTED NOT TO DISALLOW ANY FURTHER DEDUCTIONS WHICH ARE REFERRED TO U/S.29 AS DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE COMPUTING TAXABLE INCOME ON AN ES TIMATE BASIS - WHERE THE DISALLOWANCE MADE IN THE INSTANT CASE IS NOT IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43D - RATHER THE ADDITIONS/DISALLOWANCES MADE RELATE TO THE CREDIT ENTRIES AS PER BALANCE SHEET WHERE THE ASSESSEE HAD FAILE D TO SUBSTANTIATE THE SAME DURING THE ASSESSMENT PROCEEDINGS. 04. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.FIRST APPELLATE AUTHORITY IS JUSTIFIED TO HOLD THAT WHERE ASSESSEE FAILED TO ESTABLISH HIS BOOKS RESULTS AS CORRECT AND RELIABLE - IT IS MANDATORY FOR THE A.O TO DETERMINE THE NET PROFIT ON AN ESTIMATED BASIS AND ALSO A.O. CANNOT MAKE SPECIFIC ANALYSIS OF VARIOUS CLAIMS OF EXPENSES REFLECTED IN THE P&L ACCOUNT. 05. WHETHER THE LD.CIT(A) WAS JUSTIFIED TO BASE HIS FINDINGS RELYING ON THE RATIO OF DECISION OF HONBLE MP HIGH COURT IN THE CASE OF CIT VS. BAICHAND AJIT KUMAR[2003] 263 ITR 610 ALTHOUGH THE FACTS AND CIRCUMSTANCES OF THE CASE ARE PRIMA - FACIE NOT SIMILAR TO THE ASSESSEES CASE. 4. BOTH THE PARTIES WERE HEARD REGARDING T HE ISSUES RAISED IN THE APPEAL FILED BY THE REVENUE AND THEIR LEGAL IMPLICATIONS. 5. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS RELATING TO THE ISSUES AR E THAT THE ASSESSEE FILED ITS RETURN ON 6.10.2008 DECLARING TOTAL INCOME AT 4,31,895 AND CLAIMED REFUND FOR 2,15,155. THIS RETURN WAS TAKEN UP FOR SCRUTINY ASSESSMENT BY ISSUING NECESSARY STATUTORY NOTICES. THE ASSESSEE THROUGH ITS REPRESENTATIVE FURNISHED TAX AUDIT REPORT I.T.A.NO. 223/CTK/2012 C.O.NO.27/CTK/2012 (C.O.FILED BY THE ASSESSEE) 3 IN FORM NO.CB AND FORM NO.CD ALONGWITH THE SUPPORTING AC COUNTS LIKE P & L ACCOUNTS FOR THE YEAR ENDING ON 31.3.2008, BALANCE SHEET AS ON 31.3.2008. ALONG WITH THE DOCUMENTS, THE ASSESSEE HAS MADE SUBMISSIONS ALSO. LATER ON THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT. THE ASSESSEE WA S NOT ABLE TO COMPLY THE NOTICES. HENCE, THE ASSESSING OFFICER TAKING INTO ACCOUNT THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE PASSED THE ASSESSMENT ORDER BY INVOKING THE PROVISIONS OF SECTIONS 144 OF THE I.T.ACT AN DETERMINED THE TAXABLE INCOME IN THE H ANDS OF THE ASSESSEE AT 1,11,29,683. 6. HAVING BEEN AGGRIEVED WITH THIS ASSESSMENT ORDER , THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) AFTER CONSIDERING THE MATERIAL MADE AVAILABLE IN THE ASSESSMENT RECORDS AND THE SUBMISSIONS MADE BY THE LEARNED AR OF THE ASSESSEE HAS COME TO THE CONCLUSION THAT THERE WAS REPEATED NON - COMPLIANCE TO THE NOTICE U/S.142(1 ISSUED BY THE ASSESSING OFFICER AND SERVED ON THE ASSESSEE AND FOUND THAT THE CONCLUSION OF THE ASSESSING OFFICER ON ACCOUNT OF RECEIP TS OF 2,33,86,852 IN THE BANK IS CORRESPONDING TO RECEIPT OF GROSS CONTRIVE VALUE OF 2,38,02,576. BY RELYING ON THE DECISIONS OFO HONBLE MP HIGH COURT IN THE CASE OF CIT V. BALCHAND AJIT KUMAR (263 ITR 610)(MP), WHEREIN DURING THE SEARCH CONDUCTED AT THE BUS INESS AND RESIDENTIAL PREMISES OF THE ASSESSEE WHEN IT WAS FOUND THAT THERE WERE CREDIT SALES WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT AND ON SCRUTINY OF THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER ADDED A SUM OF 8,19,255 TOWARDS T HE SALES PROFIT OF THE ASSESSEE, THE HONBLE COURT HAS HELD THAT THE TOTAL SALE COULD NOT BE REGARDED AS THE PROFIT OF THE ASSESSEE AND THE NET PROFIT RATE HAD TO BE ADOPTED. HE FURTHER FOUND THAT THE ASSESSING OFFICER WHILE MAKING ASSESSMENT U/S.144 HAS RELIED ON THE I.T.A.NO. 223/CTK/2012 C.O.NO.27/CTK/2012 (C.O.FILED BY THE ASSESSEE) 4 COMPARABLE CASES OF M/S.DWARIKA NATH PANDA WHEN THE NET PROFIT HAS BEEN SHOWN AT 7.43%. SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE COMPLETE ACCOUNTS FOR VERIFICATION BY THE ASSESSING OFFICER, THE ASSESSING OFFICER HAS TO ADOPT THE COMPARABL E CASE OF DWARAKA NATH PANDA AND FIXED THE NET PROFIT AT 7.34% ON 2,38,02,576. FURTHER THE LEARNED CIT(A) RELIED ON THE DECISION OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF INDWELL CONSTRUCTIONS V. CIT (232 ITR 776)(AP), WHEREIN HONBLE HIGH COURT HAS HELD THAT THE PATTERN OF ASSESSMENT UNDER THE INCOME TAX ACT IS GIVEN BY SECTION 29 WHICH STATES THAT THE INCOME FROM PROFITS AND GAINS OF BUSINESS SHALL BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN SECTIONS 30 TO 43D. SECTION 40 PR OVIDES FOR CERTAIN DISALLOWANCES IN CERTAIN CASES NOTWITHSTANDING THAT THOSE AMOUNTS ARE ALLOWED GENERALLY UNDER OTHER SECTIONS. THE COMPUTATION UNDER SECTION 29 IS TO BE MADE UNDER SECTION 145 ON THE BASIS OF THE BOOKS REGULARLY MAINTAINED BY THE ASSESSEE . IF THOSE BOOKS ARE NOT CORRECT OR COMPLETE, THE ASSESSING OFFICER MAY REJECT THOSE BOOKS AND ESTIMATE THE INCOME TO THE BEST OF HIS JUDGMENT. WHEN SUCH AN ESTIMATE IS MADE IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTED U/S.29. IN OTHER WORDS, ALL THE DEDUCTIONS WHICH ARE REFERRED TO U/S.29 ARE DEEMED TO HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE. THIS DECISION WAS FOLLOWED BY THE ITAT,HYDERABAD BENCH IN THE CASE OF TEJA CONSTRUCTIONS V. ACJT (2010) 5 TAXMAN.COM 61 (HYD - ITAT) , WHEREIN IT WAS HELD THAT WHERE INCOME OF THE ASSESSEE HAVING BEEN DETERMINED BY RESORTING TO ESTIMATION, THERE IS NO SCOPE FOR ANY FURTHER DISALLOWANCE EITHER IN TERMS OF SECTION 40(A)(IA)/ 40A(3) OF THE ACT OR OTHERWISE. BASING ON THESE TWO DECISIONS, TH E LEARNED CIT(A) HAS DELETED THE ADDITION AND DISALLOWANCES OF 1,48,533 ON ACCOUNT OF MISC.RECEIPTS, 15,53,566 DISALLOWANCE OF EXPENSES, I.T.A.NO. 223/CTK/2012 C.O.NO.27/CTK/2012 (C.O.FILED BY THE ASSESSEE) 5 11,54,399 ON ACCOUNT OF CREDITORS AS PER BALANCE - SHEET AND 4,454 BEING AUDIT FEES PAYABLE BY THE ASSESSEE. BUT AT THE SAME TIME, THE LEARNED CIT(A) HAS UPHELD THE ACTION OF THE A SSESSING OFFICER IN DENYING THE INTEREST AND REMUNERATION PAID TO THE PARTNERS BY PLACING RELIANCE ON SECTION 184(5) OF THE I.T.ACT. 7. ON CAREFUL ANALYSIS OF THE ORDER OF THE LEARNED CIT(A), WE FIND THAT THE CONCLUSION REACHED BY THE LEARNED CIT(A) ARE WE LL REASONED AND SUPPORTED BY RELEVANT PROVISIONS OF THE ACT AND JUDICIAL PRONOUNCEMENTS AND THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) REQUIRING ANY INTERFERENCE. WE THEREFORE, UPHOLD THE SAID ORDER OF THE LEARNED CIT(A) FIN DING THE ISSUES RAISED BY THE DEPARTMENT AS DEVOID OF MERIT. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT AS WELL AS THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. SD/ - SD/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEM BER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: 28.09.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : INCOME - TAX OFFICER, WARD 2(3),CUTTACK. 2 / THE RESPONDENT: M/S.BHARATI CHITRALAYA, BAJRAKABATI ROAD, DOLAMUNDAI, CUTTACK 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 223/CTK/2012 C.O.NO.27/CTK/2012 (C.O.FILED BY THE ASSESSEE) 6 APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER S HEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 24.09.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.09.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..