Murlidhar Stationery Mart, Mehsana V. The Income tax Officer,Ward-2, Mehsana

ITA 2718/AHD/2011

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0127 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Reasonable cause
• Section: 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2718/AHD/2011 / ASSTT. YEAR: 2008-2009 MURLIDHAR STATIONERY MART G-7, MULKI BHAVAN NR.S.T. STAND MEHSANA 384 001. PAN : AAJFM 3255 A VS ITO, WARD - 2 MEHSANA. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : MS.SONIA KUMAR, SR.DR / DATE OF HEARING : 27/10/2016 / DATE OF PRONOUNCEMENT: 08/11/2016 $%/ O R D E R ASSESSEE IS IN APPEAL AGAINST ORDER OF LD.CIT(A), G ANDHINAGAR DATED 23.8.2011 PASSED FOR THE ASTT.YEAR 2008-2009. 2. IN GROUND NO.1, THE ASSESSEE HAS PLEADED THAT TH E LD.CIT(A) HAS ERRED IN UPHOLDING COMPUTATION OF NET PROFIT AT THE RATE OF 20% OF THE ALLEGED RECEIPT IN INSTEAD OF 5% AS CONTEMPLATED IN SECTION 44AF OF TH E INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WA S ENGAGED IN TRADING IN STATIONERY ARTICLES. IT HAS FILED ITS RETURN OF IN COME ON 3.2.2009 DECLARING TOTAL INCOME AT (-)RS.15,330/-. THE LD.AO HAS SELECTED T HE CASE OF ASSESSEE FOR SCRUTINY ASSESSMENT AND ISSUED VARIOUS NOTICES. TH E ASSESSEE DID NOT COMPLY WITH THE NOTICES. THE LD.AO HAS FOUND A TOTAL RECE IPT OF RS.9,42,039/-. IN THE ITA NO.2718/AHD/2011 2 OPINION OF THE AO, THE ASSESSEE FAILED TO SUBMIT AN Y DETAILS AS TO HOW ITS INCOME COULD BE A LOSS AT RS.15,330/-. ACCORDINGLY , THE LD.AO HAS MADE ADDITION OF RS.9,42,039/- I.E. ALLEGED TOTAL RECEIP T. 4. ON APPEAL, THE LD.CIT(A) HAS RESTRICTED THIS ADD ITION TO RS.1,88,508/- WHICH IS EQUIVALENT TO 20% OF THE TOTAL RECEIPT. I N THE OPINION OF THE LD.CIT(A) ELEMENT OF NET PROFIT INVOLVED IN THE TOT AL RECEIPT CANNOT BE MORE THAN 20%. THE LD.CIT(A) HAS REJECTED THE CONTENTIO NS OF THE ASSESSEE FOR APPLICATION OF SECTION 44AF I.E. ESTIMATION OF PROF IT AT 5% ON THE GROUND THAT THE ASSESSEE COULD NOT PRODUCE DETAILS EXHIBITING T HE NATURE OF BUSINESS AND HOW ITS CASE FALL WITHIN THE AMBIT OF SECTION 44AF OF THE ACT. 5. IN RESPONSE TO THE NOTICE OF HEARING, NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. THE ASSESSEE HAS FILED WRITTEN SU BMISSIONS WHEREIN IT HAS ONLY HIGHLIGHTED FACTS AS TO HOW ORDER OF THE LD.CI T(A) SHOULD BE REVERSED. NO EXPLANATION IS BEING GIVEN. THE FINDING OF THE LD.CIT(A) READS AS UNDER: I HAVE CONSIDERED THE SUBMISSIONS AND FACTS OF THE CASE. AS DISCUSSED IN PARA.6 ABOVE THERE WAS TOTAL NON-COMPLIANCE WITH OUT ANY REASONABLE CAUSE ON THE PART OF THE APPELLANT. ONCE , A NOTICE U/S. 143(2) WAS GIVEN, THE APPELLANT WAS OBLIGED TO SUBM IT EVIDENCES IN SUPPORT OF ITS RETURNED INCOME. NOT ONLY THE APPELL ANT FAILED TO DO SO BUT FAILED TO RESPONSE TO SPECIFIC QUESTIONNAIRE IS SUED U/S. 142(1). THE ASSESSEE SHOULD HAVE SUBMITTED PROOF AND ALLOWED TH E AO TO VERIFY WHETHER OR NOT ITS CLAIM THAT ITS CASE WAS U/S. 44A F. IT HAS TO BE PROVED THAT THE ASSESSEE WAS A RETAIL TRADER ONLY. IN THES E CIRCUMSTANCES, IT IS HELD THAT THE PROVISIONS OF SEC.44AF WOULD NOT BE A PPLICABLE IN THE CASE OF ASSESSEE AS FAR AS THE INCOME TO BE ESTIMAT ED U/S. 144 IS CONCERNED. HOWEVER, I AGREE THAT ENTIRE REVENUE CANNOT BE INCO ME AND A FAIR ESTIMATE HAS TO BE MADE. IN THE TOTALITY OF FA CTS AND CIRCUMSTANCES, WHERE, THE APPELLANT DELIBERATELY AVOIDED THE SCRUT INY OF ITS BUSINESS, THE INCOME IS ESTIMATED ON THE BASIS OF 20% NET PRO FIT SUBJECT TO INTEREST PAYABLE TO THE PARTNERS. THE NET PROFIT @ 20% COMES TO RS.1,88,508/-. THE INTEREST PAID TO PARTNERS IS CLAIMED AT RS.89,2 21/-. THEREFORE, IT IS ITA NO.2718/AHD/2011 3 DIRECTED THAT THE TOTAL INCOME BE TAKEN AT RS.99,28 7/-INSTEAD OF RS.9,42,039/-, ASSESSED BY THE AO. THE GROUND IS DE CIDED AS ABOVE. 6. AFTER GOING THROUGH THE FINDING OF THE LD.CIT(A) , IN THE LIGHT OF THE STATEMENT OF FACTS, I FIND NO REASON TO INTERFERE I N THIS ORDER ON THIS ISSUE. ACCORDINGLY, GROUND NO.1 IS REJECTED. 7. IN THE ALTERNATIVE GROUNDS, THE ASSESSEE HAS CON TENDED THAT FOR THE PURPOSE OF COMPUTING THE PROFIT UNDER SECTION 40(B) , THIS AMOUNT OUGHT TO BE CONSIDERED AND SALARY TO THE PARTNERS BE CONSIDERED AFTER TAKING INTO CONSIDERATION ADDITION CONFIRMED BY THE LD.CIT(A). FOR BUTTRESSING HIS CONTENTIONS THE ASSESSEE MADE A REFERENCE TO THE OR DER OF THE TRIBUNAL IN THE CASE OF SUPER CONSTRUCTION CO. V. ITO RENDERED IN I TA NO.3393/AHD/2008. COPY OF THIS ORDER HAS BEEN PLACED ON RECORD. THE TRIBUNAL WHILE DISCUSSION THIS ISSUE HAS RECORDED THE FOLLOWING FINDING: 5. NOW BEFORE US, THE LEARNED AUTHORISED REPRESENT ATIVE HAS FURNISHED FEW DECISIONS, NAMELY ROYAL SUNRISE (99 T TJ 1305 )[BANG.], CHANDRA ENTERPRISES (97 TTJ 501)[MUM.], S.K. SRIGIR I AND BROTHERS (298 ITR 13)[KAR.] AND THE CBDT CIRCULAR IN SUPPORT OF THE ARGUMENT THAT THE IMPUGNED ADDITION IN THE GROSS PROFIT HAD EMERGED OUT OF THE BUSINESS ACTIVITY OF THE ASSESSEE, THEREFORE, THE C ONSEQUENTIAL CHANGE IN THE WORKING OF THE BOOK PROFIT OUGHT TO HAVE BEEN D ONE BY THE ASSESSING OFFICER FOR THE PURPOSES OF GRANTING OF REMUNERATIO N TO THE PARTNERS IN TERMS OF SECTION 40(B) OF THE I.T.ACT. ON CAREFUL P ERUSAL OF THE DECISIONS CITED A LEGAL PROPOSITION WAS LAID DOWN THAT THE FI NALLY ASSESSED INCOME WAS OUT OF THE BUSINESS ACTIVITY OF THE ASSESSEE, T HEREFORE, THE ADDITIONAL INCOME BEING IN THE NATURE OF ENHANCEMENT IN THE PR OFIT OF THE ASSESSEE SHOULD QUALIFY FOR THE PURPOSES OF THE CALCULATION OF THE BOOK PROFIT IN TERMS OF THE PROVISIONS OF SECTION 40(B) OF THE I.T .ACT. IN VIEW OF THIS, WE HEREBY DIRECT THE ASSESSING OFFICER TO ALLOW REM UNERATION TO PARTNERS U/S.40(B) OF THE I.TACT. ONLY ON THE ELIGI BLE PROFIT AS PRESCRIBED U/S.40(B) OF THE I.TACT. ON THE TERMS AND THE FIGUR ES AS DECIDED HEREINABOVE. THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2718/AHD/2011 4 7. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TR IBUNAL, I ALLOW ALTERNATE CONTENTION OF THE ASSESSEE. THE ADDITION OF RS.1,88,508/- MADE TO THE TOTAL INCOME OF THE ASSESSEE SHALL BE CONSIDERE D FOR THE PURPOSE OF COMPUTING SALARY PAYABLE TO THE PARTNERS. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 8 TH NOVEMBER, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 08/11/2016