Bhargab Engineering Works, Howrah V. DCIT, Circle-47, Kolkata, Kolkata

ITA 2254/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1676 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2014
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Business income; Diversion of income
• Section: 44AD; 143(3); 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH C) BEFORE SHRI N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 ORDER PER M. BALAGANESH , AM 1. THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXX, KOLKATA-3 VIDE APPEAL NO. 210/CIT(A)-XXX/CIR-47/2013-14 DATED 28.10.2014. ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE VIII, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR A.Y 2011-12 VIDE HIS ORDER DATED 23.09.2013. M/S BHARGAB ENGINEERING WORKS [PAN : AAIFB2118G] -VS- D.C.I.T, CIRCLE - 47, KOLKATA (APPELLANT) (RESPONDENT) FOR THE APPELLANT SHRI MIRAJ D. SHAH, AR FOR THE RESPONDENT SHRI M. K. CHANDA, JCIT, SR. DR DATE OF HEARING 04.05.2017 DATE OF PRONOUNCEMENT 02.06.2017 2 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS 2. THOUGH THE ASSESSEE HAD RAISED SEVERAL GROUNDS, THE CENTRAL ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE AUTHORITIES WERE JUSTIFIED IN ESTIMATING THE NET PROFIT OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF TEA BLENDING MACHINE AND EQUIPMENTS, APART FROM EARNING INCOME BY WAY OF LABOUR CHARGES, CRANE HIRE CHARGES ETC. THERE WAS A SURVEY CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 18.1.2011 AND THE SURVEY TEAM OBSERVED FROM THE MANUFACTURING AND TRADING ACCOUNT FOR THE PERIOD 1.4.2010 TO 18.1.2011 (PRE-SURVEY PERIOD), THE GROSS PROFIT DECLARED THEREIN AS PER THE BOOKS WAS 5.96% OF TURNOVER. THE LD AO LATER OBSERVED FROM THE MANUFACTURING AND TRADING ACCOUNT FOR THE ENTIRE PERIOD ENDING 31.3.2011, THE GROSS PROFIT DECLARED BY THE ASSESSEE WAS AT 19.46%. HE FURTHER OBSERVED THAT THE ASSESSEE HAD SHOWN GROSS PROFIT FOR POST-SURVEY PERIOD ( I.E. FROM 19.1.2011 TO 31.3.2011) AT 105.19%. THE LD AO SHOW-CAUSED THE ASSESSEE FOR LOW GROSS PROFIT RATE DURING PRE-SURVEY PERIOD AND ASSESSEE REPLIED AS FOLLOWS:- WITH DUE RESPECT WE WOULD LIKE TO INFORM YOU REGARDING YOUR QUERY ABOUT THE G.P. RATE IN PRE-SURVEY PERIOD IS 5.96% (EXCLUDING LABOUR CHARGES AND HIRE CHARGES) ON TURNOVER OF 9.13 CRORES AS AGAINST G.P. RATE OF 19.64% FOR THE WHOLE YEAR ON A TURNOVER OF 10.60 CRORES (EXCLUDING LABOUR CHARGES AND HIRE CHARGES). I WOULD LIKE TO FURNISH THAT THE PROFITABILITY OF THE BUSINESS DOES NOT IN THE SAME PROPORTION THROUGHOUT THE YEAR. FURTHER, WE ARE NOT HABITUATED TO PREPARE TRADING A/C ON A PARTICULAR DAY DURING THE FINANCIAL YEAR EXCEPT ON THE CLOSING DATE OF THE YEAR BY THIS PROCESS THEY ARE MIGHT BE SOME POINTS WHICH HAVE BEEN OMITTED OR NOT ACCOUNTED IN THE UNUSUAL TRADING ACCOUNT PREPARED ON THE DATE OF SURVEY. OUR BUSINESS IS MAINLY MANUFACTURING OF MACHINE AND MACHINERY PARTS AFTER CONSUMPTION OF RAW MATERIALS. SINCE THE PRODUCE IS OF VARIOUS SIZES AND VOLUMINOUS ONE, THE EXACT YIELD CANNOT BE ASCERTAINED IN THE NATURE OF 3 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS OUR BUSINESS. REGARDING THE PERCENTAGE OF G.P. IN MANUFACTURING CONCERN OF OUR WORKS LIKE US THE RATE IS NORMALLY 15% TO 20%. IN VIEW OF THE ABOVE YOU ARE REQUESTED TO ACCEPT THE TRADING RESULT AS SHOWN BY US. YOUR KIND COOPERATION IN THIS REGARD SHALL BE HIGHLY APPRECIATED AND OBLIGE. 3.1. THE LD AO OBSERVED THAT THE G.P. SHOWN IN THE PRE-SURVEY PERIOD AT 5.96% IS UNREASONABLY LOW, CONSIDERING THE G.P. RATE SHOWN IN THE POST-SURVEY PERIOD AT 105.19%. THE LD AO FURTHER OBSERVED THAT THE ASSESSEE HAS A MANUFACTURING OF ENGINEERING GOODS OF VARIOUS SIZES AND VARIOUS NATURES FOR WHICH THE EXACT PERCENTAGE OF YIELD HAD NOT BEEN FURNISHED. BASED ON THESE OBSERVATIONS, HE CONCLUDED THAT THE ASSESSEES ACCOUNTS FOR PRE-SURVEY AS WELL AS POST-SURVEY PERIODS ARE NOT SATISFACTORILY FOUND AS CORRECT AND COMPLETE. ACCORDINGLY HE ESTIMATED THE GROSS PROFIT FOR THE PRE-SURVEY PERIOD (I.E 1.4.2010 TO 18.1.2011) AT 15% OF TURNOVER OF PRE-SURVEY PERIOD AND MADE AN ADDITION OF RS 82,42,786/- THEREON. 4. THE LD CITA OBSERVED THAT THERE IS NO BASIS FOR THE ACTION OF THE LD AO FOR ESTIMATING THE G.P FOR PRE-SURVEY PERIOD AT 15% OF TURNOVER AND OBSERVED THAT THE ASSESSMENT IS BASED ON SURVEY REPORT AND IS ON THE BACKGROUND OF COMMITMENT GIVEN BY THE ASSESSEE TO PAY RS 25.5 LACS OF TAX ON CORRESPONDING INCOME OF RS 85 LACS THAT THE ASSESSEE AGREED THAT IT EARNED IN THE RELEVANT PREVIOUS YEAR. THE LD CITA OBSERVED AS UNDER:- 5.1. THE SURVEY OFFICIALS AND THE APPELLANT SEEM TO HAVE RUSHED TO THE CONCLUSION THAT THE ESTIMATED INCOME FOR THE RELEVANT YEAR COULD BE ABOUT RS 85 LACS AND SO THE APPELLANT HAS APPARENTLY AGREED TO 4 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS PAY THE TAX OF RS 25.5 LACS ON THE SAID ESTIMATED INCOME OF RS 85 LACS. IN THE COURSE OF ASSESSMENT, IT APPEARS THAT THE ACCOUNTS HAVE BEEN DRESSED UP BECAUSE THERE ARE TOO MANY CONTRADICTIONS IN THE ACCOUNTING RESULTS. THE PROFIT IN THE POST-SURVEY PERIOD IS ABNORMALLY HIGH EVEN IF ONE IGNORES THE WORKING OF THE GROSS PROFIT BY THE A.O. ON PAGE-2 OF ASSESSMENT ORDER. WORKING DIRECTLY FROM THE SUBMISSION OF THE APPELLANT VIDE LETTER DATED 04.09.2014 INDICATES THAT AS PER THE APPELLANTS WORKING ALSO, THE GROSS PROFIT IN THE POST SURVEY PERIOD OF RS 1,38,19,490/- ON SALES OF ABOUT RS 1,45,88,318/- PLUS LABOUR CHARGES AND CRANE HIRE CHARGES OF RS 57,03,444/- IS ABOUT 68% OF SALES AND OTHER RECEIPTS. THERE ARE OTHER PROBLEMS IN THE FINAL ACCOUNT OF THE POST SURVEY PERIOD. FOR EXAMPLE, THE CLOSING STOCK IS SHOWN AS RS 6,00,23,472/- WHEREAS THE CLOSING STOCK ON 18.01.2011 IS RS 4,30,36,993/- AS PER THE BOOK VALUE OF THE STOCK. NOW, IN THIS PERIOD OF ABOUT 2 MONTHS 10 DAYS, THE CLOSING STOCK IN THE SAID WORKING IN SHOWN TO HAVE INCREASED BY ABOUT RS 1,69,86,479/- AND THE SALES IN THE SAID PERIOD IS SHOWN AS RS 1,45,88,318/-. TAKEN TOGETHER THE INCREASE OF CLOSING STOCK AND THE SALES IS ABOUT RS 3,15,74,797/- AND DURING THIS PERIOD PURCHASE IS ONLY ABOUT RS 1,74,45,288/- EXCLUDING OTHER EXPENSES. NOW, ON A PURCHASE OF RS 1,74,45,288/- THERE IS INCREASE OF CLOSING STOCK OF THE CORRESPONDING PERIOD OF RS 1,69,86,479/- AND SALES OF RS 1,45,88,318/- WHICH IN VIEW OF THE FIGURES OF THE PRE-SURVEY PERIOD LOOKS ABSURD BECAUSE IF SURVEY OFFICIALS ARRIVED AT THE SURVEY SPOT UNANNOUNCED THEN THE FINDING BY THE SURVEY OFFICIALS FOR THE PRE-SURVEY PERIOD IS MORE AUTHENTIC OR MORE ACCORDING TO THE FACTS THAN THE FINAL ACCOUNT FIGURE OF THE POST SURVEY PERIOD WHICH CAN BE SUBJECTED TO MANIPULATION TO SUIT THE PURPOSE OF THE APPELLANT. IN MY VIEW, THUS, THE BOOK RESULTS ARE NOT RELIABLE. THE A.O.S DEPENDENCE ON THE POST-SURVEY PERIOD TO EXTRAPOLATE A HIGHER RATE OF 15% IN PLACE OF 5.96% IS ARBITRARY. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHAT WAS REQUIRED BY THE A.O. WAS TO REJECT THE BOOKS ALTOGETHER AND COME UP WITH AN ESTIMATION SCHEME FOR THE BUSINESS INCOME. 5.2. THE ASSESSEE CLAIMS THAT THE WORKING BY THE A.O. OF THE G.P. OF THE PRE- SURVEY PERIOD IS NOT CORRECT IN VIEW OF WORKING OF THE APPELLANT. THE GROSS PROFIT FOR THE PRE-SURVEY PERIOD IN TERMS OF THE SUBMISSION DATED 04.09.2014 IS 17.52% WHICH HAS BEEN ARRIVED AT BY SUBSTITUTING THE CLOSING STOCK VALUE BY RS 4,30,36,993/-. THIS CALCULATION BY THE APPELLANT IS MORE REASONABLE BECAUSE EVEN IF THE PHYSICAL INVENTORY IS TAKEN AS CORRECTLY VALUED BY THE SURVEY OFFICIALS AT RS 3,57,99,493/-, THE DIFFERENCE OF ABOUT RS 72 LACS FROM THE BOOK STOCK AS ON THE SURVEY DATE MAY BE TAKEN UNACCOUNTED AND 5 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS UNRECORDED SALES. SO ANY WORKING OF THE GROSS PROFIT MUST INCLUDE RS 72 LACS WORTH OF SALES OF THE STOCK TO ARRIAVE AT A CORRECT OR REASONABLE FIGURE OF GROSS PROFIT. IF THIS AMOUNT OF RS 72 LACS IS INCLUDED WHICH IS EQUIVALENT TO PUTTING IN PLACE OF RS 3,57,99,493/-, RS 4.30 CRS, THEN THE FIGURE OF GROSS PROFIT SHOULD APPROACH THAT SHOWN BY THE SUBMISSION AND PERCENTAGE COMES TO 17.52% BUT THIS REQUIRES ONE MODIFICATION RS 72 LACS ABOUT SHORTAGE OF STOCK IS VALUED ONLY AT THE COST WHEREAS THE SALES MAY BE ASSUMED TO BE INCLUDING SOME PROFIT AND EXTRAPOLATING THE GROSS PROFIT OF THE EARLIER YEARS OR EVEN OF CURRENT YEAR, AFTER CONSIDERING THE ADJUSTMENT THAT SHOULD ARISE BECAUSE OF UNRECORDED SALES OF RS 72 LACS THEN THE PROFIT OF THE PRE-SURVEY PERIOD WILL INCREASE BY RS 72 LACS MULTIPLIED BY G.P. I.E ABOUT RS 11 LACS. SO THE PRE-SURVEY PERIOD WILL SHOW THE PROFIT OF RS 1.67 CR. + 11 LACS WHICH COMES TO A FIGURE OF RS 1.78 CRORES AND THAT TRANSLATES TO G.P. OF ABOUT 17% +1.2% THAT IS ABOUT 18.2% FOR THE PRE-SURVEY PERIOD. THIS G.P. MAY BE TAKEN AS THE G.P. WHICH REASONABLY CAN BE SAID TO HAVE BEEN DEDUCED FROM THE FIGURES. THUS, THERE ARE SO MANY CONTRADICTIONS IN THE BOOK RESULTS IN THE PRE-SURVEY PERIOD AND THE POST SURVEY PERIOD AND THEREFORE THE APPELLANTS INCOME RESULTS OF THE FINAL ACCOUNT CANNOT BE ACCEPTED. 5.3. THE A.OS ADDITION AS ABOVE IS ALSO ARBITRARY AND ABSURD CALCULATION AND THUS THE ESTIMATION AND THE ADDITION THEREFORE IS ARBITRARY AND CANNOT BE UPHELD. BUT THERE HAS TO BE AN ESTIMATION OF INCOME THAT MAY HAVE BEEN EARNED BY THE APPELLANT FOR THE ASSESSMENT. ONCE THE BOOK RESULTS ARE REJECTED, THEN THERE HAS TO BE SOME ESTIMATION WHICH MAY BE ADOPTED FOR THE PURPOSE OF DETERMINING THE ASSESSED INCOME. BEFORE I SUGGEST AN ESTIMATE, WE HAVE TO GO BACK TO THE SURVEY AND THE COMMITMENT OF THE APPELLANT TO THE SURVEY PARTY. IT IS ON RECORD AND RECORDED IN THE DEPOSITION U/S 131 ON 20.01.2011 THAT THERE WAS SOME AGREEMENT ON ESTIMATION OF INCOME BETWEEN THE SURVEY OFFICIALS AND THE APPELLANT. THEY BOTH SEEM TO HAVE AGREED ON ESTIMATED FIGURE OF INCOME OF RS 82 LACS AND THE TAX LIABILITY ARISING THEREFROM OF RS 25.5 LACS. THUS, RS 82 LACS OF INCOME COMES TO (ON RS 11.4 CRORES) ABOUT 7.5% OF N.P. THE APPELLANT HAS ONLY OFFERED IN THE RETURN INCOME OF RS 24 LACS WHEREAS IT HAD AGREED TO PAY THE TAX LIABILITY OF ABOUT RS 25.5 LACS. HAVING REGARD TO THE NON-FIDELITY OF ACCOUNTS RESULTS AND OTHER FINDINGS OF THE SURVEY OFFICIALS AND THE ASSESSING OFFICERS, I TAKE THE ESTIMATED INCOME OF THE APPELLANT FOR THE PURPOSE OF THIS APPEAL ORDER AT RS 82 LACS. THIS SHOWS THE DIFFERENCE OF RS 58 LACS (82-24) ON THE RETURNED INCOME. IT HAS BEEN POINTED OUT BY THE APPELLANT THAT IN THE CURRENT YEAR PARTNERS REMUNERATION WAS PAID MUCH HIGHER THAN THE LAST 6 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS YEAR. AGAINST RS 29.31 LACS OF REMUNERATION IN THE PREVIOUS YEAR TO PARTNERS, THIS YEAR THE APPELLANT HAS DEBITED IN THE P/L ACCOUNT RS 38.40 LACS REMUNERATION TO PARTNERS OF THE FIRM. THUS, THERE IS AN EXCESS REMUNERATION CLAIMED IN THE P/L ACCOUNT OF ABOUT RS 9.09 LACS AGAINST THE REMUNERATION TO THE PARTNERS. THIS IN EFFECT IS ONLY DIVERSION OF INCOME FROM THE FIRMS HAND TO THE PARTNERS HAND. IT APPEARS THAT THE FIRM HAS NOT BEEN PROPERLY ADVISED IN THE MATTER OTHERWISE THE REMUNERATION TO PARTNERS WOULD HAVE BEEN NOT INCREASED IF THE APPELLANT WAS TO HONOUR THE COMMITMENT MADE TO SURVEY OFFICIALS. SOME OF THE ABSURD RESULTS IN THE POST SURVEY APPARENTLY IS BECAUSE OF SOME CONCERN TO SHOW MORE PROFIT IN THE CURRENT YEAR THAN ARISING OUT OF THE BOOK FIGURES AND THEREFORE I FIND IT REASONABLE TO ALLOW THE ADJUSTMENT OF EXCESS RS 9 LACS PAID TO THE PARTNERS AS REMUNERATION TO PARTNERS HAS ALREADY BEEN SUBJECTED TO TAX. IT IS IN THE INTEREST OF JUSTICE TO HOLD THAT FOR THE PURPOSE OF ASSESSMENT OF TAX OF THE FIRM, THE TOTAL INCOME SHOULD BE TAKEN AT RS 82 LACS 9 LACS = 73 LACS. THUS, BALANCE ADDITION OF RS 82L +RS 24L RS 73 L = RS 33 LACS IS DELETED . 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. FOR THAT WHEN THE ADDITION MADE BY THE ASSESSING OFFICER DID FIND FAVOUR AT THE APPELLATE STAGE, THE TRADING RESULTS OF THE APPELLANT FIRM SHOULD HAVE BEEN ACCEPTED AT THE APPELLATE FORUM. 2. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - XXX, KOLKATA WRONGLY PLACED MUCH WEIGHTAGE AND RELIANCE UPON THE STATEMENT RECORDED AT THE TIME OF SURVEY, BY THE SURVEY TEAM AND WRONGLY UPHELD ADDITION TO THE TUNE OF RS. 49 LACS MERELY ON THE BASIS OF ALLEGED STATEMENT RECORDED ON EXPECTED TOTAL INCOME PUT IN THE MOUTH OF THE PARTNER WHILE RECORDING THE STATEMENT IN COURSE OF SURVEY WITHOUT BRINGING ANY CORROBORATIVE MATERIAL ON RECORD. 3. FOR THAT WHEN THE APPELLATE AUTHORITY BRUSHED ASIDE THE FINDINGS OF THE ASSESSING AUTHORITY, IT WAS NOT OPEN TO HIM TO SUSTAIN ADDITION ON A TOTALLY DIFFERENT GROUND MERELY RELYING ON ALLEGED CONFESSION OF TOTAL EARNINGS OF THE FIRM OR DISCLOSURE MADE ON SURVEY SPOT. 7 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS 4. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) SIMPLY HARPED UPON THE REPLY OF THE ASSESSEE VIDE WHICH THE ALLEGED DISCLOSURE WAS MADE AND THE MOMENT THE STATEMENT OF ASSESSEE IS EXCLUDED FROM RECORD THEN NOTHING IS LEFT THE APPELLATE AUTHORITY TO SUPPORT HIS CONCLUSION. 5. FOR THAT THE LAW HAS BEEN SETTLED BY APEX COURT THAT SECTION L33A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH: SO STATEMENT RECORDED UNDER SECTION L33A HAS NO EVIDENTIARY, VALUE AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BE MADE BASIS OF ADDITION. 6. FOR THAT WHEN SHORTAGE OF STOCK IS FOUND IN SURVEY, IT IS APPROPRIATE TO APPLY G. P. RATIO ON THE SHORTAGE PORTION TO DETERMINE INCOME, IF THERE IS ANY POSITIVE EVIDENCE THAT SUCH SHORTAGE IS ATTRIBUTABLE TO SALES NOT RECORDED IN BOOKS OF ACCOUNTS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD AR WAS TRYING TO HARP ON THE POINT THAT THE ENTIRE ADDITION HAS BEEN FINALLY DETERMINED BY THE LD CITA BASED ON THE STATEMENT GIVEN BY THE ASSESSEE AT THE TIME OF SURVEY WHICH HAS GOT NO EVIDENTIARY VALUE AND FOR WHICH HE PLACED RELIANCE ON VARIOUS CASE LAWS. IN RESPONSE TO THIS, THE LD DR ARGUED THAT THE LD CITA HAD RIGHTLY ESTIMATED THE PROFITS IN THE INSTANT CASE TAKING INTO ACCOUNT ALL THE FACTORS GOVERNING THE CONDUCT OF THE ASSESSEE AND THE SURVEY ACTION CARRIED OUT BY THE DEPARTMENT AND FINDINGS THEREON. WE FIND THAT THE LD CITA HAVING GIVEN A CATEGORICAL FINDING THAT THE LD AO, HAVING FOUND LOT OF DEFECTS IN THE BOOKS OF ACCOUNTS ON SEVERAL COUNTS ; HAVING STATED THAT THE CALCULATION OF PROFITS MADE BY THE LD AO IS ABSURD AND ARBITRARY ; HAVING REJECTED THE BOOK RESULTS OF THE ASSESSEE FOR VARIOUS REASONS, OUGHT TO HAVE RESORTED TO ESTIMATION OF NET PROFIT ON PRESUMPTIVE BASIS THOUGH STRICTLY THE PERCENTAGE OF PROFITS PRESCRIBED THEREON U/S 44AD / 44AF OF THE ACT CANNOT BE MADE APPLICABLE TO THE FACTS OF THE INSTANT CASE IN VIEW OF HIGHER TURNOVER. HOWEVER, IT IS ALREADY WELL SETTLED THAT THE PERCENTAGE OF PROFITS PRESCRIBED IN THE SAID SECTIONS WOULD BE AN INDICATOR FOR ESTIMATION OF REASONABLE PROFITS OF THE ASSESSEE IN THE EVENT OF 8 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS BOOK RESULTS NOT RELIABLE. THE PAST HISTORY OF THE ASSESSEE ALSO WOULD BE A GOOD INDICATOR OF PERFORMANCE OF THE ASSESSEE, BUT IN THE INSTANT CASE, THE DETAILS OF THE SAME ARE NOT AVAILABLE ON RECORD. BUT DURING THE YEAR UNDER APPEAL, THE ASSESSMENT WAS FRAMED BASED ON THE SURVEY CONDUCTED BY THE DEPARTMENT AND DISCLOSURE GIVEN BY THE ASSESSEE AT THE TIME OF SURVEY THAT ITS INCOME FOR THE YEAR UNDER APPEAL COULD BE ESTIMATED AT RS 85 LACS AND TAX THEREON TO THE TUNE OF RS 25.5 LACS WOULD BE PAID IN DUE COURSE. BUT THE ASSESSEE HAD NOT COMPLIED WITH THE DISCLOSURE GIVEN AT THE TIME OF SURVEY WHILE FILING THE RETURNS. IT IS WELL SETTLED THAT NO ADDITION COULD BE MADE MERELY BASED ON THE STATEMENT GIVEN DURING SURVEY WITHOUT BRINGING ANY CORROBORATIVE EVIDENCE ON RECORD. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS S KHADER KHAN SONS REPORTED IN (2012) 210 TAXMAN 248 (SC) WHEREIN IT WAS HELD THAT THE STATEMENT RECORDED U/S 133A OF THE ACT HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BE MADE THE BASIS OF ADDITION. WE ARE NOT IN AGREEMENT WITH THE ARGUMENTS OF THE LD AR THAT THE BOOKS OF ACCOUNTS WERE NEVER REJECTED BY THE DEPARTMENT IN THE YEAR UNDER APPEAL. WE FIND THAT BOTH THE LD AO AS WELL AS LD CITA HAD BROUGHT ON RECORD SEVERAL DEFECTS IN THE BOOKS AND DETAILS PRODUCED BY THE ASSESSEE AND HAD RESORTED TO IGNORE THE BOOK RESULTS AND RESORTED TO ESTIMATE OF PROFITS IN DIFFERENT WAYS. IN THE INSTANT CASE, THE ONLY WAY FOR DETERMINING THE TOTAL INCOME OF THE ASSESSEE IS BY RESORTING TO ESTIMATION OF NET PROFITS. IN THESE PECULIAR FACTS AND CIRCUMSTANCES, WE HOLD THAT THE NET PROFITS SHOULD BE ESTIMATED AS A PERCENTAGE OF TOTAL TURNOVER TAKING INTO ACCOUNT ALL THE DEFECTS IN THE BOOKS DURING PRE-SURVEY AND POST SURVEY PERIOD. WE FEEL THAT THE ESTIMATION OF NET PROFITS (BEFORE PARTNERS REMUNERATION) AT 8% OF TOTAL TURNOVER WOULD MEET THE ENDS OF JUSTICE IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. THE LD AO IS DIRECTED THE ALLOW DEDUCTION OF PARTNERS REMUNERATION OF RS 31.40 9 I.T.A. NO.2254/KOL/2014 ASSESSMENT YEAR 2011-12 M/S BHARGAB ENGINEERING WORKS LACS FROM THE NET PROFIT SO DETERMINED ABOVE AT 8% ON TOTAL TURNOVER OF RS 1058.91 LACS . ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [N. V. VASUDEVAN] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02.06.2017 {RS SPS} COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/ASSESSEE M/S BHARGAB ENGINEERING WORKS, P-292, BENARAS ROAD, P.O. NETAJIGARH, BELGACHIA, HOWRAH 711108. 2. REVENUE/RESPONDENT- D.C.I.T, CIRCLE- 47, KOLKATA 3. CIT(A)- KOLKATA 4. CIT , KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE, DDO, KOLKATA BENCHES, KOLKATA.