M/s New Harilal saha & sons, Kolkata V. Income Tax Officer, Ward - 45(2), Kolkata, Kolkata

ITA 2373/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9472 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-11-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ANKIT JALAN
• Keywords: Question of law
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI A.T.VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 2373 / KOL / 2013 ASSESSMENT YEAR:2007-08 M/S NEW HARILAL SAHA & SONS, 16, PAGEYA PATTY STREET, KOLKATA-700 007 [ PAN NO.AACFN 2135 P ] V/S . INCOME TAX OFFICER, WARD-45(2), 3, GOVT. PLACE, KOLKATA-700 001 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ANKIT JALAN, AR /BY RESPONDENT NONE /DATE OF HEARING 27-12-2016 /DATE OF PRONOUNCEMENT 08-02-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKATA D ATED 12.04.2013. ASSESSMENT WAS FRAMED BY ITO WARD-45(2), KOLKATA U/ S 144/143(3)(II) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 02.12.2009 FOR ASSESSMENT YEAR 2007-08. 2. IT IS ALSO NOTICED THAT THE REVENUE HAS MOVED AD JOURNMENT PETITION IN ALMOST 15 CASES AND THIS EN BLOCK ADJOURNMENT IS NOT POSSIBLE AND HENCE, THE POSSIBLE CASE, WE HAVE TAKEN UP FOR HEARING AND DEC IDED THE ISSUE BY REJECTING THE ADJOURNMENT PETITION. IN THIS CASE AL SO WE HAVE REJECTED THE ITA NO.2373/KOL/2013 A .Y. 2007-08 M/S NEW HARILAL SAHA & SONS VS. ITO WD-45(2) KOL. PAGE 2 ADJOURNMENT PETITION AND HEARD THE APPEAL IN PRESEN CE OF SHRI ANKIT JALAN, LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASS ESSEE. 3. AT THE TIME OF HEARING LD. AR FOR THE ASSESSEE H AS STATED THAT HE HAS BEEN INSTRUCTED BY ASSESSEE NOT TO PRESS GROUNDS NO . 1 AND 3. HENCE, THESE ARE DISMISSED AS NOT PRESSED. 4. ONLY ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAI NING THE DISALLOWANCE @ 10% AS MARGIN ON SALE ON AD HOC BASIS. 5. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM AND ENGAGED IN BUSINESS OF CLOTH. THE ASSESSEE IN T HE YEAR UNDER CONSIDERATION FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF 1,47,123/-. SUBSEQUENTLY THE CASE WAS SELECTED UNDER SCRUTINY A ND ACCORDINGLY NOTICES U/S 143(2)/142(1) OF THE ACT WERE ISSUED UPON ASSES SEE. THE ASSESSMENT WAS FRAMED U/S. 144/143(3) OF THE ACT AT A TOTAL IN COME OF 16,88,910/- AFTER MAKING CERTAIN ADDITIONS AND DISALLOWANCES. 6. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HA S SHOWN TOTAL TURNOVER OF 1,68,89,059/- AND NET PROFIT ON SUCH TURNOVER AT 1,47,123/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO ISSUED SEVERAL NOTICES TO THE ASSESSEE IN CONNECTION WITH ASSESSMENT PROCEEDINGS BUT ASSESSEE FAILED TO APPEAR BEFORE HIM. IN THE ABSENCE OF ANY COMPLIANCE FROM THE SIDE OF ASSESSEE, AO FRAMED ASSESSMENT TO THE BEST OF HIS K NOWLEDGE U/S/ 144 OF THE ACT. ACCORDINGLY, HE WORKED OUT THE NET PROFIT @ 10 % OF THE TURNOVER I.E. 16,88,905/- AND ASSESSED TOTAL INCOME OF 15,41,782.00 (16,88,905 1,47,123) AS UNDISCLOSED INCOME. 7. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 2. IT IS SEEN THAT SINCE THE APPELLANT HAS NOT MAD E ANY SUBMISSIONS IN RESPONSE TO THE NOTICE FOR HEARINGS IN ASSESSMENT P ROCEEDINGS AND THE AO HAS CLEARLY MENTIONED IN THE ASSESSMENT ORDER RE GARDING THE ISSUE OF NOTICES U/S/. 142(1) AND 143(2) DATED 1.01.2009 AND 2.08.2008 WHICH HAD BEEN SERVED ON THE APPELLANT ON 2001.2009 AND 2 9.08.2008 AS WELL AS THE SUBSEQUENT NOTICES AND LETTERS ISSUED BY THE AO (REFERRED TO IN PARA 11 ABOVE). THEREFORE SUFFICIENT OPPORTUNITY HA D BEEN GIVEN TO THE ITA NO.2373/KOL/2013 A .Y. 2007-08 M/S NEW HARILAL SAHA & SONS VS. ITO WD-45(2) KOL. PAGE 3 APPELLANT BEFORE COMPLETION OF ASSESSMENT US. 144 B Y THE A.O. FURTHER, NO SUBMISSIONS OR EVIDENCES HAVE BEEN FILED OR EVID ENCES TO ESTABLISH THAT THE ACTION OF THE AO WAS NOT JUSTIFIED. THEREF ORE, THE ACTION OF THE AO IN COMPLETING THE ASSESSMENT US. 144 IS HELD TO BE JUSTIFIED. IT IS THEREFORE SEEN THAT THE SUFFICIENT OPPORTUNITY WAS GIVEN BY THE AO BEFORE PASSING THE ABOVE MENTIONED ORDER U/S. 144 O F THE IT ACT. FURTHER, IN VIEW OF ABSENCE OF ANY ACCOUNTS OR DETA ILS, THE ASSESSMENT MADE BY THE AO ESTIMATING THE NET PROFIT AT 10% OF THE TURNOVER I.E. RS.16,88,905/- IS UPHELD AND THE SAME IS CONFIRMED. AGGRIEVED BY THIS, ASSESSEE HAS COME UP IN APPEAL B EFORE US. 8. BEFORE US LD. AR FILED WRITTEN STATEMENT AND STA TED THAT ALL THE EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT ARE P ERMISSIBLE EXPENSE AS PER IT ACT. SUCH FACT IS NOT DISPUTED BY THE ASSESSING OFFICER BUT HE FAILED TO PIN POINT ANY SPECIFIC ITEM OR DEFECT IN THE BOOKS OF A CCOUNT. IT IS TO BE NOTED THAT ALL THE EXPENSES ARE WHOLLY AND EXCLUSIVELY OF THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. OUR ATTENTION WAS DRAWN TOWARDS THE P ROFIT & LOSS ACCOUNT. HE FURTHER STATED THAT ASSESSEE HAD CLAIMED EXPENSES S UCH AS PURCHASES, SALARY, RENT, BANK CHARGES, INTEREST ON LOAN, TELEPHONE CHA RGES, ELECTRICITY CHARGES ETC. THUS FROM THE PERUSAL OF THE NATURE OF EXPENSE S IT CAN BE CLEARLY CONCLUDED THAT ALL ARE ALLOWABLE EXPENSES AS PER TH E PROVISIONS OF THE INCOME TAX ACT, 1961. IT IS ALSO TO BE NOTED THAT SUCH FAC T IS NOT DISPUTED BY THE AO. MERELY THE AO WAS NOT ABLE TO VERIFY THE EXPENSES C OULD NOT BE THE BASIS FOR FRAMING THE ASSESSMENT ON ASSUMPTIONS AND SURMISES. THERE BEING NO DISPUTE IN FACT THAT EXPENDITURE WAS INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NO PART OF EXPENDITURE CAN BE DISALLOWED TO COVER POSSIBLE LOSS OF REVENUE. 9. HAVING HEARD LD. AR FOR THE ASSESSEE AND ON PERU SAL OF MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT BO TH THE AUTHORITIES BELOW HAS PASSED EX PARTE ORDER IN SPITE OF THE FACT THAT SEVERAL OPPORTUNIT IES WERE PROVIDED TO ASSESSEE WHILE FRAMING ASSESSMENT PROCE EDINGS. IN THE ABSENCE OF ANY COMPLIANCE ON THE PART OF ASSESSEE AO HAD NO OPTION BUT TO FRAME ASSESSMENT ON THE BASIS OF AVAILABLE INFORMATION. A CCORDINGLY, AO HAS ESTIMATED THE NET PROFIT @ 10% OF THE TURNOVER. NOW , ISSUE BEFORE US ARISES ITA NO.2373/KOL/2013 A .Y. 2007-08 M/S NEW HARILAL SAHA & SONS VS. ITO WD-45(2) KOL. PAGE 4 THE ESTIMATION MADE BY AO @ 10% IS JUSTIFIABLE IN T HE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE. IT IS UNDISPUTED FACT TH AT ASSESSEE FAILED TO PRESENT THE PROCEEDINGS BOTH AUTHORITIES BELOW AND THEREFOR E ASSESSEE WAS FRAMED TO THE BEST OF ASSESSING OFFICER'S JUDGMENT U/S. 144 O F THE ACT. HOWEVER, THE BEST JUDGMENT ASSESSMENT ALSO REQUIRES TO DETERMINE THE INCOME OF ASSESSEE IN A SCIENTIFIC MANNER. IN CASE THE AO WISHES TO DI SALLOWANCE THE EXPENSE / DEDUCTION THEN HE HAS TO RECORD THE REASONS FOR DOI NG SO. THE AO CANNOT MAKE ANY DISALLOWANCE WITHOUT ANY BASIS AS DONE IN THE INSTANT CASE BEFORE US. WE FIND THAT AO HAS ESTIMATED THE NET PROFIT ON AD HOC BASIS WITHOUT REJECTING THE BOOKS OF ACCOUNT AND AO HAS NOT BROUG HT ANY DEFECT IN THE FINANCIAL STATEMENT AVAILABLE BEFORE HIM WHILE FRAM ING ASSESSMENT PROCEEDINGS. THE AO HAS ALSO NOT MADE ANY COMPARISO N WITH THE HISTORICAL DATA OF THE ASSESSEE. AS SUCH, WE FIND THAT THE NET PROFIT HAS BEEN ESTIMATED PURELY BASED ON HIS SURMISE AND CONJECTURE ALSO. TH EREFORE, IN OUR CONSIDERED VIEW, THE ADDITION MADE BY AO IS NOT SUSTAINABLE IN THE EYES OF LAW. IN HOLDING SO, WE FIND THAT GUIDANCE AND SUPPORT FROM THE JUDG MENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHAKTI INDUSTRIES REPORTED IN 36 TAXMANN.COM 16 (2013) (GUJ) AND THE RELEVANT EXTRAC T IS REPRODUCED BELOW:- 5. THE TRIBUNAL CONCURRED WITH CIT(A) ON BOTH TIE ISSUES, BY HOLDING THUS- HAVING HEARD THE LD. DR, WE HAVE CAREFULLY GONE TH ROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE AO IN THE ASSESSMENT ORDER ADDED ALL THE THINGS LIKE O PENING STOCK, TOTAL PURCHASES, TOTAL TRADING AND P &L ACCOUNT, EX PENSES, SECURED AND UNSECURED LOANS WITHOUT GIVING ANY ESTI MATION OF GIVING ANY REASON. THE BOOKS OF ACCOUNT OF THE ASSE SSEE ARE AUDITED. WITH THE RETURN OF INCOME, THE ASSESSEE HA D FILED AUDITED P&L ACCOUNT, BALANCE SHEET AND AUDIT REPORT. THE LD . CIT(A) CALLED THE REMAND REPORT FROM THE ASSESSING OFFICER , THIS REMAND REPORT WAS FORWARDED TO THE ASSESSEE FOR IS COMMENT S AND AFTER CONSIDERING THE COMMENTS OF THE ASSESSEE, IN OUR OP INION, THE LD. CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE ADDITIONS TO THE TUNE OF RS.57,04,983/-AND RS.23,30,814/- OUT OF TOTAL ADDITION OF RS.62,20,098/- AND DRS.26,64,814/- MADE BY THE A SSESSING OFFICER IN THE ASSESSMENT ORDER. WE ARE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF THE LEARNED CIT(A). ITA NO.2373/KOL/2013 A .Y. 2007-08 M/S NEW HARILAL SAHA & SONS VS. ITO WD-45(2) KOL. PAGE 5 BOTH THE AUTHORITIES, SINCE HAVE CONCURRENTLY HELD IN FAVOUR OF THE ASSESSEE-RESPONDENT ON THE ISSUES, WHICH IS PREDOMI NANTLY FACTUAL IN NATURE, NO PERVERSITY IS POINTED OUT AS THE REASONI NGS ARE SOUND BASED ON EVIDENCE ADDUCED BEFORE THESE AUTHORITIES, NO QU ESTION OF LAW MUCH LESS SUBSTANTIAL QUESTION OF LAW ARISES. TAX APPEAL IS THEREFORE, DISMISSED. ACCORDINGLY RESPECTFULLY FOLLOWING THE PRECEDENT IN THE CASE OF SHAKTI INDUSTRIES (SUPRA) WE REVERSE THE ORDER OF LD. CIT(A) AND THI S GROUND OF ASSESSEES APPEAL IS ALLOWED. 10. IN THE RESULT, ASSESSEEA APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 08/ 02/2017 SD/- SD/- ( !') ( !') (A.T.VARKEY) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 08 / 02 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S NEW HIRLAL SAHA & SONS, 16, PAGEYA P ATTY ST. KOLKATA-007 2. /RESPONDENT-ITO WARD-45(2), 3,GOVT. PLACE, KOLKATA- 001 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,