ACIT, CHENNAI V. Shri Chidri Venkata Narasimha Rayal, CHENNAI

ITA 2263/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7904 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-07-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: N DEVANATHAN
• Keywords: Additional evidence; Bad and doubtful debts
• Section: 131

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO. 2263/MDS/2016 / ASSESSMENT YEAR : 2011-12 THE ASSTT. COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE-1(1), CHENNAI-34. V. SHRI CHIDRI VENKATA NARASIMHA RAYAL, NO.3, VIGNESHWARA APARTMENTS, 1 ST FLOOR, NEW NO.9, PERIYAR ROAD, T. NAGAR, CHENNAI 17. [PAN: ABSPN 0788 R] ( /APPELLANT) ( !' /RESPONDENT) # /APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT !' # /RESPONDENT BY : SHRI N. DEVANATHAN, ADVOCATE # /DATE OF HEARING : 12.01.2017 # /DATE OF PRONOUNCEMENT : 31.01.2017 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER : THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, CHENNAI, DA TED 30.03.2016 AND PERTAINS TO THE ASSESSMENT YEAR 2011-12. 2 I.T.A. NO. 2263/MDS/2016 2.0 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) HAS ERRED IN DIRECTING THE ASSES SING OFFICER TO ESTIMATE THE INCOME OF THE ASSESSEE @ 1.5% OF THE G ROSS TURNOVER, AS AGAINST 3.5% ADOPTED BY THE ASSESSING OFFICER WITHO UT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT CO-OPERATED WITH THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOR HAD T HE ASSESSEE PRODUCED ANY EVIDENCE TO THE CONTRARY. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THE FA CT THAT THE ASSESSING OFFICER WAS COMPELLED TO ESTIMATE THE PRO FIT @ 3.5% OF THE TURNOVER, DUE TO NON-FURNISHING OF REQUISITE DETAIL S BY THE ASSESSEE AND IN THE ABSENCE OF ANY CONVINCING EVIDENCE TO PROVE OTHERWISE, THE CIT(A) OUGHT NOT TO HAVE RESTRICTED THE DISALLOWANC E TO A MERE 1.5% OF THE TURNOVER. 4. THE LEARNED CIT(A) ERRED IN RESTRICTING THE DISALLO WANCE TO 1.5% OF THE TURNOVER AND FURTHER BY A SUM OF RS.12 LAKHS IN A SITUATION WHERE THE ASSESSEE WAS SHOW CAUSED TO ASSESS THE INCOME @ 3.5% OF THE TURNOVER BY THE ASSESSING OFFICER AND THE ASSESSEE STILL NOT HAVING PRODUCED ANY EVIDENCE TO PROVE TO THE CONTRARY. 5. THE LEARNED CIT(A) ERRED IN ACCEPTING THE ADDITIONA L EVIDENCES SUBMITTED BY THE ASSESSEE WITHOUT GIVING AN OPPORTU NITY TO THE AO TO 3 I.T.A. NO. 2263/MDS/2016 EXAMINE THE EVIDENCE PRODUCED BY THE ASSESSEE, WHIC H IS A MERE VIOLATION OF RULE 46A OF THE I.T. RULES. 6. 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. 3.0 ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ESTIM ATION OF INCOME BY THE ASSESSING OFFICER. THE ASSESSEE IS ENGAGED IN THE TRADING AND EXPORT OF ONIONS, CHILLIES, MAIZE, GROUND NUTS ETC. , FOR THE ASSESSMENT YEAR 2011-12, THE ASSESSEE FILED RETURN OF INCOME A DMITTING TOTAL INCOME OF 55,24,201/- AND SUBSEQUENTLY REVISED THE RETURN OF INCOME TO 55,28,269/-. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER HAS POSTED THE CASE FOR HEARING ON NUMBER O F OCCASIONS, BUT THE ASSESSEE HAS NOT FURNISHED THE REQUIRED INFORMATION AND THE DETAILS CALLED FOR, FOR COMPLETION OF THE ASSESSMENT. THER EFORE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ESTIMATING THE IN COME @3.5% EXCLUDING OTHER INCOME WHICH WORKED OUT TO 4,80,59,068/- AND THE OTHER INCOME OF THE ASSESSEE CREDITED TO P&L A/C WA S 1,86,23,166/-. THUS, THE TOTAL INCOME WAS ASSESSED TO 5,86,87,035/-. 4.0 AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, T HE ASSESSEE WENT ON APPEAL BEFORE THE CIT(A) AND THE LD.CIT(A) CONFIRMED THE 4 I.T.A. NO. 2263/MDS/2016 ADDITION OF INDIRECT INCOME AMOUNTING TO 1,86,23,166/- WHICH WAS OFFERED AS OTHER INCOME IN THE P&L ACCOUNT AND REDU CED THE ESTIMATION OF INCOME TO 1.5% OF TOTAL INCOME AGAINST THE ESTIM ATION MADE BY THE ASSESSING OFFICER AT 3.5%. FOR THE SAKE OF CONVENIE NCE, WE EXTRACT THE RELEVANT PARAGRAPH OF THE CIT(A) ORDER IN PAGE NO.8 , PARA NO.5.3.1(VI) AS UNDER: NOTWITHSTANDING THE ABOVE, IT SHOULD BE KEPT IN VIE W THAT THERE HAS BEEN AN OVERALL DECLINE IN THE BUSINESS O F THE APPELLANT, WHICH IS REFLECTED IN THE FACT THAT THE APPELLANTS BANKER, UCO BANK, HAS CLASSIFIED THE APPELLANTS ACCOUNT AS NON -PERFORMING ASSET CATEGORY AS PER RBI NORMS, AND THE FURTHER FA CT THAT THE BANK HAS APPOINTED MADRAS ASSET RECOVERY CO. LTD., AS TH E ENFORCEMENT/RECOVERY AGENT FOR ASSESSING THEM IN RE COVERY OF THEIR DUES FROM THE APPELLANT, AS IS REFLECTED IN THE LET TER DT. 2.3.2013 ADDRESSED BY THE BANK TO THE APPELLANT. HENCE, TAKING A REASONABLE VIEW OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE ENDS OF JUSTICE WOULD BE MET, BY FAIRLY ESTIMATING THE NET PROFIT OF THE APP ELLANT AT THE RATE OF 1.5% OF THE TOTAL TURNOVER. FROM THE RETURN OF INCOME, IT IS SEEN THAT THE TO TAL TURNOVER IS RS.84,10,24,770/-. 1.5% OF THE SAME WORKS OUT T O RS.1,26,15,372/-. ADDING BACK THE ENTIRE AMOUNT OF INDIRECT INCOME, AS DONE BY THE ASSESSING OFFICER, I.E., RS. 1,86,23,166/-, THE TOTAL ESTIMATED INCOME OF THE APPELLANT WORKS OUT T O RS.3.12 CRORES 5 I.T.A. NO. 2263/MDS/2016 (APPROX.). THE TOTAL INCOME OF THE APPELLANT IS HE NCE, FURTHER FAIRLY ESTIMATED BY ROUNDING OFF THE SAME, TO RS.3 CRORES. THE ASSESSING OFFICER HAS MADE A TOTAL DISALLOWAN CE OF RS.4,80,59,068/-. BASED ON THE COMPUTATION MADE, B Y ESTIMATING THE NET PROFIT AT THE RATE OF 1.5% OF TOTAL TURNOVE R AND ROUNDING OFF THE SAME TO RS.3 CRORES, THE APPELLANT GETS A RELIE F OF RS.1,80,59,068/-. 5.0 AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE DEPAR TMENT IS IN APPEAL BEFORE US. APPEARING FOR THE REVENUE, SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE ASS ESSEE HAS NOT CO- OPERATED WITH THE DEPARTMENT THROUGHOUT THE ASSESSM ENT PROCEEDINGS AND HAS NOT PRODUCED THE DETAILS, BOOKS OF ACCOUNT, BILLS AND VOUCHERS IN SPITE OF GIVING SUMMONS UNDER SECTION 131 OF THE ACT. THE ASSESSEE HAS NOT FURNISHED THE REQUISITE DETAILS AND EVIDENC E TO SUPPORT THE INCOME RETURNED BY THE ASSESSEE, HENCE THE A.O ISSU ED SHOW CAUSE NOTICE PROPOSING TO ESTIMATE THE INCOME @3.5% FOR W HICH THE ASSESSEE FILED REPLY WITH THE EXPLANATION WHICH IS GENERAL I N NATURE. THE D.R SUBMITTED THAT EVEN FOR SHOW CAUSE NOTICE THE ASSES SEE HAS NOT SUBMITTED THE EXPLANATION DEMONSTRATING THE PROFIT IS BELOW 3.5%. THEREFORE, THE ASSESSING OFFICER HAS NO OPTION EXCE PT TO ESTIMATE THE INCOME WHICH WAS DONE BY THE ASSESSING OFFICER AND COMPLETED THE 6 I.T.A. NO. 2263/MDS/2016 ASSESSMENT ESTIMATING 3.5% OF THE INCOME. IN THE A BSENCE OF ANY EVIDENCE TO SUPPORT THE ACCOUNTS, ACCORDING TO THE LD. DR, THE ASSESSING OFFICER RIGHTLY ESTIMATED THE INCOME WHIC H SHOULD BE CONFIRMED. 6.0 ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THERE WAS A CONTINUOUS REDUCTION IN THE PROFITS OF THE ASSESSEE DUE TO VARIOUS REASONS EXPLAINED BEFORE THE LD.CIT(A). THE AR SU BMITTED THAT THE ASSESSING OFFICER CALLED FOR PARTICULARS WHICH WAS FURNISHED SUCH AS LEDGER ACCOUNTS TOGETHER WITH AUDITED ACCOUNTS, P&L ACCOUNT, INCOME TAX RETURN, TAX AUDITED REPORT AND COMPLETE BANK AC COUNTS. THE OTHER DETAILS COULD NOT BE PRODUCED SINCE THERE WAS A DAM AGE IN GODOWN DURING MONSOON AND COULD NOT BE PRODUCED. HOWEVER, IT WAS EXPLAINED BY THE ASSESSEE TO THE ASSESSING OFFICER THAT EXPOR T COMMODITIES WORLD OVER IS WITH JUST 1% MARGIN AND AS CAN BE SEEN FROM THE EXPORT HOUSE AND CHAMBER OF COMMERCE REVIEWS AND WITH INTERNATIO NAL GLUT DUE TO MARKET RECESSION LEAD TO HUGE BAD DEBTS AND LOSSES ENDING UP WITH SOME KIND OF LOSS. FURTHER, THE AR SUBMITTED THAT THOUGH, THE EXPORT HOUSES ARE REPORTING LOSSES DUE TO FOREIGN EXCHANGE FLUCTUATION, STILL THE ASSESSEE HAD REPORTED THE PROFIT @ 0.38% OF THE TUR NOVER. THE ASSESSING OFFICER HAS TAXED AT THE RATE OF 4% OF TU RNOVER SINCE ALL THE 7 I.T.A. NO. 2263/MDS/2016 COMMODITIES LIKE PETROL, DIESEL ARE TRADED UNDER 2% MARGIN AND AGRO COMMODITIES AT 1% INTERNATIONALLY. THEREFORE, THE LD. AR., VEHEMENTLY OPPOSED THE ORDER OF THE ASSESSING OFFICER ESTIMATI NG THE INCOME AT THE RATE OF 3.5% OF TOTAL INCOME. 7.0 WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIALS ON RECORD. THE ASSESSEE HAS PRODUCED LEDGER ACCOUNTS BUT NOT PRODUCED THE BILLS, VOUCHERS AND VERIFIABLE EVIDENCE TO SUPP ORT THE TRADING AND PROFIT & LOSS ACCOUNT TO ARRIVE AT THE CORRECT INCO ME OF THE ASSESSEE. THOUGH, THE ASSESSING OFFICER HAS CALLED FOR THE DE TAILS, THE ASSESSEE FAILED TO FURNISH THE DETAILS CALLED FOR BY THE ASS ESSING OFFICER WHICH IS EVIDENT FROM PAGE NO.2 PARA NOS.2 & 3 OF THE ASSESS MENT ORDER. THE AO HAS ISSUED SHOW CAUSE NOTICE, BUT THE ASSESSEE D ID NOT PRODUCE ANY EVIDENCE AND DEMONSTRATED THAT HIS PROFIT IS LESS T HAN 3.5%. THEREFORE, THE AO ESTIMATED THE INCOME @3.5% OF TURNOVER. 8.0 THE INCOME CANNOT BE ASSESSED ON THE BASIS OF THE REVIEWS AND SEMINARS ON PRESUMPTIONS AND ASSUMPTIONS. THE INC OME HAS TO BE COMPUTED AS PER THE EVIDENCES PRODUCED BY THE ASSES SEE. THE ASSESSEE REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS AND FURNISH THE EVIDENCE IN SUPPORT OF THE CLAIMS MADE IN THE RETUR N OF INCOME. THOUGH, 8 I.T.A. NO. 2263/MDS/2016 THE ASSESSEE CLAIMED THAT BOOKS OF ACCOUNTS WERE LO ST, NO EVIDENCE WAS PRODUCED BY THE ASSESSEE REGARDING THE LOST BOOKS O F ACCOUNTS AND DEMONSTRATED WITH THE AVAILABLE EVIDENCE THAT THE P ROFIT IS LESS THAN 3.5% INSPITE OF GIVING SHOW CAUSE. IN THE ABSENCE O F EVIDENCE IN SUPPORT OF THE CLAIM, THERE IS NO OPTION FOR THE ASSESSING OFFICER EXCEPT TO ESTIMATE THE INCOME ON THE BASIS OF RELEVANT MATERI AL AVAILABLE WITH THE ASSESSING OFFICER. IN THIS CASE, THE ASSESSING OFFICER HAS ESTIMATED THE INCOME AT THE RATE OF 3.5% OF THE TOTAL TURNOVER APART FROM T HE INDIRECT INCOME. THOUGH THE AO IS JUSTIFIED IN REJECTING THE BOOKS O F ACCOUNTS AND ESTIMATION OF INCOME, THE ESTIMATION SHOULD BE FAIR AND REASONABLE AND NOT ARBITRARY. NO COMPARABLE CASE HAS BEEN BROUGHT ON RECORD TO SUPPORT THE ESTIMATION. THE LD.CIT(A) HAS ESTIMATED THE INCOME AT THE RATE OF 1.5% BUT THIS IS ALSO NOT SUPPORTED BY ANY MATERIAL PLACED ON RECORD AS DISCUSSED ABOVE. THE REVENUE HAS RAISED THE GROUND THAT THE LD. CIT (A) HAS ACCEPTED THE ADDITIONAL EVIDENCES AND NO OPPORTUNIT Y WAS GIVEN TO THE ASSESSING OFFICER TO REBUT THE ADDITIONAL EVIDENCE . THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE CASE SHOULD BE REMI TTED BACK TO THE 9 I.T.A. NO. 2263/MDS/2016 ASSESSING OFFICER TO CONSIDER THE ADDITIONAL EVIDEN CES FURNISHED BEFORE THE LD. CIT(A) AND TO DETERMINE THE TRUE AND CORREC T INCOME AFRESH ON MERITS. BOTH THE PARTIES HAVE AGREED FOR REMITTIN G THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE ENTIR E MATERIAL AND RE- ADJUDICATE THE ASSESSMENT IN ACCORDANCE WITH LAW ON MERITS. 9.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY, 2017 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( . . ) (D.S. SUNDER SINGH) /ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 31 ST JANUARY, 2017. JR. # ! $ % $ /COPY TO: 1. /APPELLANT 2. !' /RESPONDENT 3. &' ( )/CIT(A)-2, CHENNAI 4. &' /CIT 5. ! $ /DR 6. () /GF.