C S Manjunath, Tumkur V. Income Tax Officer, Ward- 1, Tumkur

ITA 2640/BANG/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7532 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-01-2021
• Assessment Year: 2016-2017
• Appeal Filed On: 27-12-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C.S.PRAHALLADA
• Keywords: Revised return
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES SMC-A, BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.2640/BANG/2019 : ASST.YEAR 2016-2017 SRI. C.S.MANJUNATH PROPRIETOR : SWATCHA ENTERPRISES NEAR GOVT. WELL, 1 ST CROSS, UPPARAHALLI, TUMKUR 572 102 PAN : AKFPM4892H. V. THE INCOME TAX OFFICER WARD 1 TUMKUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.C.S.PRAHALLADA, CA RESPONDENT BY : SRI.GANESH R.GHALE, STANDING COUNSEL DATE OF HEARING : 22.01.2021 DATE OF PRONOUNCEMENT : 22.01.2021 O R D E R THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST CIT(A)S ORDER DATED 28.10.2019. THE RELEVANT ASSESSMENT YEAR IS 2016-2017. 2. THE SOLITARY ISSUE RAISED IS CONCERNING ESTIMATION OF PROFIT AT 12% OF THE TOTAL TURNOVER. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE IS AN INDIVIDUAL, WHO IS DOING THE BUSINESS AS A LABOUR CONTRACTOR. FOR THE ASSESSMENT YEAR 2016-2017, RETURN OF INCOME WAS FILED ON 07.10.2016 DECLARING TOTAL INCOME OF RS.12,90,760. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE TOTAL TURNOVER OF THE ASSESSEE AS PER 26AS WAS RS.3,00,21,123, WHEREAS THE ASSESSEE HAD DISCLOSED ONLY RS.91,30,229. THE ASSESSEE WAS SHOW CAUSED WHY INCOME SHOULD NOT BE ESTIMATED AT 16% OF THE TOTAL ITA NO.2640/BANG/2019 SRI C.S.MANJUNATH. 2 TURNOVER OF RS.3,00,21,123. VIDE REPLY DATED 21.12.2018, THE ASSESSEE SUBMITTED THAT THE GROSS PROFIT OF RS.91,30,229 IS MENTIONED IN THE RETURN INSTEAD OF GROSS RECEIPTS. IT WAS STATED THAT THE PROFIT DECLARED IS APPLICABLE FOR THE ENTIRE TURNOVER. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, THE A.O. HELD THAT THE ASSESSEE HAS NOT DISCLOSED HIS INCOME FULLY AND DID NOT PROPERLY MAINTAIN THE BOOKS OF ACCOUNT OR FURNISH THE AUDIT REPORT. HENCE, THE A.O. DID NOT TAKE INTO ACCOUNT THE REVISED FINANCIAL STATEMENTS SUBMITTED SINCE ACCORDING TO HIM, THE SAME WAS DRAWN ONLY SUBSEQUENTLY. THE A.O. CONCLUDED THAT THE PROFITS TO BE ESTIMATED IS AT 12% OF THE TOTAL TURNOVER OF RS.3,00,21,123. ACCORDINGLY ARRIVED AT THE ESTIMATED BUSINESS PROFIT OF RS.36,02,534 INSTEAD OF RS.12,90,760 ARRIVED IN THE ORIGINAL RETURN. (REVISED RETURNED INCOME DISCLOSED AT RS.14,52,485). 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. THE RELEVANT FINDING OF THE CIT(A) READS AS FOLLOW:- 6.4 IN VIEW OF ABOVE, IT IS CLEAR THAT THE GROSS RECEIPT OF THE ASSESSEE FOR THE YEAR WAS RS.3,04,34,407/- (THOUGH THE AO FOUND THE AMOUNT AT RS.3,00,21,123/- AS PER 26AS), BUT THE ASSESSEE HAD DECLARED THE GROSS RECEIPT AT RS.91,30,299/- ONLY IN THE RETURN OF INCOME. THUS, THE ASSESSEE HAD DELIBERATELY SUPPRESSED THE AMOUNT OF GROSS RECEIPT TO THE EXTENT OF RS.2,13,04,108/- (RS.3,04,34,407 RS.91,30,299). THOUGH THE ASSESSEE HAD DECLARED A NET PROFIT OF 15.90% IN HIS RETURN OF INCOME, THE AO HAD APPLIED NET PROFIT RATE OF 12% ON THE GROSS RECEIPT WHICH IS CONSIDERED TO BE REASONABLE. ACCORDINGLY, THE NET PROFIT OF THE APPELLANT WILL BE RS.36,52,128/- (12% OF RS.3,04,34,407/-) IN PLACE OF RS.14,52,485/- DECLARED IN THE RETURN OF INCOME THEREBY RESULTING IN ADDITION OF RS.21,99,643/- TO THE RETURNED OF INCOME OF THE ASSESSEE. ITA NO.2640/BANG/2019 SRI C.S.MANJUNATH. 3 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED AR HAS FILED A PAPER BOOK ENCLOSING THEREIN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2013-2014, 2014-2015, 2015-2016 AND 2017-2018. THE LEARNED AR REFERRING TO THE RETURN OF INCOME FILED FOR THE AFORESAID ASSESSMENT YEARS, SUBMITTED THAT THE NET PROFIT DECLARED ARE IN THE RANGE OF 5 TO 6% (I.E. FOR THE PAST AND SUBSEQUENT ASSESSMENT YEARS TO THE CONCERNED ASSESSMENT YEAR). THE LEARNED AR BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SRI KRISHNA SHELTERS PVT. LTD V. DCIT [ITA NO.810/BANG/2017 ORDER DATED 17.01.2018] CONTENDED THAT THE PROFIT DECLARED IN THE EARLIER YEARS CAN BE A VALUABLE GUIDANCE OR BASIS FOR ESTIMATION OF PROFIT OF THE SUBSEQUENT YEAR. THEREFORE, IT WAS PRAYED THAT THE NET PROFIT SHOULD BE REDUCED TO 5% OF THE TOTAL TURNOVER. 6. THE LEARNED STANDING COUNSEL RELIED ON THE ORDERS PASSED BY THE INCOME TAX AUTHORITIES. 7. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IN THE RETURN OF INCOME HAD DISCLOSED THE TURNOVER OF RS.91,30,229. WHEN THE ASSESSING OFFICER CONFRONTED THE ASSESSEE THAT THE TOTAL TURNOVER AS PER 26AS OF RS.3,00,21,123, THE ASSESSEE SUBMITTED IT WAS A MISTAKE. IT WAS STATED THAT GROSS PROFIT WAS DISCLOSED INSTEAD OF GROSS TURNOVER. THE ASSESSEE HAS ALSO FURNISHED REVISED STATEMENTS OF INCOME FOR THE RELEVANT ASSESSMENT YEAR FROM PAGES 26 TO 28 OF THE PAPER BOOK FILED BY THE ASSESSEE. ON PERUSAL OF THE SAME, IT IS CLEAR THAT THE GROSS PROFIT ACCORDING TO THE ASSESSEE IS RS.91,50,988 AND THE TOTAL GROSS RECEIPTS IS RS.3,04,34,406. ITA NO.2640/BANG/2019 SRI C.S.MANJUNATH. 4 AFTER CLAIMING THE GROSS EXPENDITURE, THE NET PROFIT IS ARRIVED AT RS.14,00,580. TO ARRIVE AT THE GROSS PROFIT, THE ASSESSEE HAS REDUCED WAGES PAID FOR THE LABOURERS EMPLOYED IN TWO COMPANIES. FURTHER, THE ASSESSEE HAS ALSO DEDUCTED THE GROSS EXPENDITURE OF ESIC PAYMENT AND PF PAYMENT AMOUNTING TO RS.12,74,813 AND RS.41,74,820, RESPECTIVELY. 7.1 I AM OF THE VIEW THAT THE ESTIMATION OF GROSS PROFIT BY THE INCOME TAX AUTHORITIES AT 12% OF THE TOTAL GROSS RECEIPTS IS ON THE HIGHER SIDE SINCE THE ASSESSEE IS ONLY A LABOUR CONTRACTOR. THE MAJORITY OF WORK UNDERTAKEN BY THE ASSESSEE IS FOR THE COMPANY BY NAME `FITWELL TOOLS AND FORGES PVT. LTD.. FOR LABOUR CONTRACT UNDERTAKEN WITH ABOVE COMPANY, ASSESSEE WAS GIVEN ONLY RS.7 PER MANHOUR, WHICH YIELDS ONLY 1.62% ON GROSS SUPPLIES. THE TOTAL TURNOVER RELATING TO THE ABOVE SAID COMPANY ITSELF IS ALMOST 47% OF THE TOTAL CONTRACT RECEIPTS EXECUTED BY THE ASSESSEE. MOREOVER, THE ASSESSEE HAD FILED RETURNS OF INCOME FOR ASSESSMENT YEARS 2013-2014, 2014-2015, 2015- 2016 AND 2017-2018 (I.E. PAST ASSESSMENT YEARS AND SUBSEQUENT ASSESSMENT YEAR TO THE CONCERNED ASSESSMENT YEAR), WHEREIN THE NET PROFIT DISCLOSED IS AROUND 5.5%. HOWEVER, SINCE THE RETURN OF INCOME FOR THE AFORESAID ASSESSMENT YEARS HAD NOT BEEN TAKEN UP FOR SCRUTINY, THE DECLARATION OF NET PROFIT BY THE ASSESSEE FOR THOSE A.Y.S CANNOT BE TAKEN AS SACROSANCT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT ESTIMATION OF NET PROFIT AT 8% OF THE TOTAL RECEIPT WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, I DIRECT THE A.O. TO SUBSTITUTE THE ESTIMATION OF INCOME BY 8% OF ITA NO.2640/BANG/2019 SRI C.S.MANJUNATH. 5 THE TOTAL GROSS RECEIPTS INSTEAD OF 12% MADE BY HIM ON THE TOTAL GROSS RECEIPTS. IT IS ORDERED ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 22 ND DAY OF JANUARY, 2021 . SD/- ( GEORGE GEORGE K ) JUDICIAL MEMBER BANGALORE; DATED : 22 ND JANUARY, 2021. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-7, BANGALORE. 4. THE PR.CIT-7, BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE