SHRI MEHBOOB HASAN ANSARI, Ashta V. THE ITO - 2(3), Bhopal

ITA 320/IND/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1954 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 13-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: GIRISH AGRAWAL
• Keywords: Business expenditure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO.320/IND/2015 A.Y. : 2008-09. SHRI MEHBOOB HASAN ANSARI, ITO, 2(3), ASHTA VS. BHOPAL APPELLANT RESPONDENT PAN NO. AGFPA4333D A PPELLANT S BY : SHRI GIRISH AGRAWAL, C. A. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A), BHOPAL DATED 12.03.2015 FOR THE ASSESSMENT YEAR 2008-09. DATE OF HEARING : 18.11 .2015 . DATE OF PRONOUNCEMENT : 18 . 1 1 .2015 SHRI MEHBOOB HASAN ANASARI, ASHTA VS. ITO, BHOPAL- I.T.A.NO. 320/IND/2015 A.Y. 2008-09 2 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN AUTHORIZED DISTRIBUTOR OF BHARTI AIRTEL FOR DISTRICT ASHTA. TH E ASSESSEE DERIVES INCOME FROM SALE OF RECHARGE VOUCHERS OF AIRTEL AND OF MOB ILE SETS. THE RETURN WAS FILED ON 30.09.2008 DECLARING INCOME OF RS. 1,30,680/- I.E. @ 0.58% EARNED FROM TURNOVER OF RS.2,23,99,450/-. THE A.O. HAS MADE THE ADDITION AT RS. 2,75,513/- BY TAKING NET PROFIT @ 1.23%. 3. THE AO HAS MADE THE ADDITION OF RS. 1,44,82 9/- IN HIS ORDER BY OBSERVING AS UNDER :- 'THE ASSESSEE IS AN AUTHORIZED DISTRIBUTOR OF BHARA TI AIRTEL FOR DISTRICT ASHTA. DURING THE FINANCIAL YEAR RELEVANT FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS DERIVED INCOME MAINLY FROM SALE OF RECHARGE VOUCHERS OF AIRTEL AND ALSO FROM SALE OF MOBILE SETS. PERUSAL OF PART-B OF TAX AUDIT REPORT REVEALS THAT DURING THE FINANCIAL YEAR 2007-08 RELE VANT FOR ASSESSMENT YEAR 2008-09, THE ASSESSEE HAS SHOWN TOT AL TURNOVER OF RS. 2,23,99,450/- DECLARING NET PROFIT OF RS. 1,30,684/- (O.58 %) AS AGAINST RS. 1,36,10,293/- DECLARING NET PROFIT OF RS. 1,68,618/- (1.23 %) DURING ITS IMMED IATE SHRI MEHBOOB HASAN ANASARI, ASHTA VS. ITO, BHOPAL- I.T.A.NO. 320/IND/2015 A.Y. 2008-09 3 3 PREVIOUS FINANCIAL YEAR. THUS, IF COMPARED, THE BU SINESS OF THE ASSESSEE WAS INCREASED BY 65% WHEREAS THE NET PROFIT HAS BEEN REDUCED PERCENTAGEWISE TO ITS HALF. 4. AS PER LETTER RECEIVED ON 17.09.2010, IT IS STATED BY THE ASSESSEE THAT BHARTI AIRTEL PROVIDES MARGIN OF 4.6 0 %. OUT 0F THIS MARGIN, AS PER POLICY OF THE COMPANY IT HAS TO PASS THREE PERCENT OF MARGIN TO THE FIELD FUNCTIONARIES AND ON LY 1.6 % MARGIN RETAINS WITH HIM OUT OF WHICH ALL BUSINESS EXPENDITURES ARE TO BE INCURRED. THE ASSESSEE WAS REQUIRED TO, PRODUCE BILLS/VOUCHERS AND RELEVANT RECORDS REL ATING TO PASSING OF MARGIN OF THREE PERCENT TO OTHER RETAILE RS. SIMULTANEOUSLY, A LETTER WAS ALSO ADDRESSED TO BHAR TI AIRTEL TO CONFIRM WHETHER IT HAS ANY COMPULSION ON THE DISTRI BUTORS TO PASS THREE PERCENT OF MARGIN TO OTHER RETAILERS. VI DE LETTER DATED 10/12/2010 RECEIVED FROM THE MANAGER (TAXATI ON), INDORE, IT HAS BEEN STATED AS UNDER :- 'OUR BUSINESS MODEL IS THAT DISTRIBUTOR PURCHASES T HE STOCK FROM US. IN THIS TRANSACTION THE DISTRIBUTOR GETS THE GO ODS AT SHRI MEHBOOB HASAN ANASARI, ASHTA VS. ITO, BHOPAL- I.T.A.NO. 320/IND/2015 A.Y. 2008-09 4 4 CERTAIN % BELOW THE MAXIMUM PRICE. FOR F Y . 2007-08 THE AFORESAID % WAS 4. 73%. ' FROM THE ABOVE LETTER IT IS CLEAR THAT BHARTI AIRTE L HAS NOT MADE IT MANDATORY TO PASS THREE PERCENT OF MARGIN TO THE RETAILER/FIELD FUNCTIONARIES. THE ASSESSEE HAS FURN ISHED COMPUTERIZED SHEETS FROM 15/11/2010 TO 23/11/2010 WHICH INDICATES THE DETAILS OF ELECTRONICALLY TRANSFER OF TALK TIME TO VARIOUS RETAILERS FOR FURTHER SALE TO CUSTOMERS. IT HAS INCLUDED THE AMOUNT OF MARGIN WHICH IS WORKED OUT TO 2.5%. NO SUCH RECORD HAS BEEN FURNISHED FOR FINANCIAL YEAR 2007-0 8 RELEVANT FOR ASSESSMENT YEAR 2008-09. THE ASSESSEE HAS FURNI SHED AFFIDAVIT OF TEN PERSONS WHICH STATES THAT DURING F. Y. 2007- 08 THEY HAD RECEIVED 3 PERCENT COMMISSION AS AGAINST 2.5% DURING F. Y. 2010-11. NO CORROBORATIVE EVIDENCES HA VE BEEN FURNISHED BY THE DEPONENTS OF HAVING RECEIVED THREE PERCENT COMMISSION NOR THE ASSESSEE HAS FURNISHED ANY DETAI LS FOR THE YEAR UNDER REFERENCE INDICATING PASSING OF THRE E PERCENT COMMISSION. THUS, THE ASSESSEE'S CLAIM THAT HE HAD PASSED SHRI MEHBOOB HASAN ANASARI, ASHTA VS. ITO, BHOPAL- I.T.A.NO. 320/IND/2015 A.Y. 2008-09 5 5 THREE PERCENT COMMISSION TO RETAILERS AND RETAINED ONLY 1.6 PERCENT IS NOT PROVED. IN VIEW OF ABOVE FACT THE GROSS PROFIT AND NET PROF IT AS DECLARED AND EXPENSES CLAIMED AS CLAIMED BY THE ASS ESSEE IN THE P & L ACCOUNT ARE NOT VERIFIABLE. IN THE CIRCUMSTANCES THE NET PROFIT OF 0.58% DECLARED/OR FINANCIAL YEAR 2007 -08 (RELEVANT FOR A. Y 2008-09) AS AGAINST 1.23% DECLARED FOR IMMEDIATELY PRECEDING FINANCIAL YEAR 2006-07 IS NOT ACCEPTED. IN VIEW OF THE RISING TREND OF TURNOVER FOR FINANCI AL YEAR 2007- 08 (A.Y. 2008-09) THE MARGIN OF PROFIT SHOULD ALSO BE HIGHER IN PERCENTAGE. ACCORDINGLY, NET PROFIT IS TAKEN AT 1.23 % ON THE TURNOVER OF RS. 2,23,99,450/- FOR FINANCIAL YEAR 20 07-08. THEREFORE, AN ADDITION OF RS. 1,44,829/- ( 2,75,513 13,06,864) IS MADE ON ACCOUNT OF LOW DECLARATION O F NET PROFIT. 5. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS CONFIRMED THE SAME. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD . SHRI MEHBOOB HASAN ANASARI, ASHTA VS. ITO, BHOPAL- I.T.A.NO. 320/IND/2015 A.Y. 2008-09 6 6 AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE IS HAVING O.D. ACCOUNT IN THE BANK AND THE ASSESSEE HAS TO MA KE PAYMENT OF INTEREST ON THIS O. D. ACCOUNT. THEREFORE, THERE IS SLIGHT DECREASE IN GROSS PROFIT. THEREFORE, THE APPEAL MAY BE ALLOWED. 7. ON THE OTHER HAND, THE LD. DR OBJECTED TO IT AND H E SUBMITTED THAT THE LD. CIT(A) IS JUSTIFIED. 8. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PART IES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND THAT THE AO HAS MADE THE ADDITION ON THE BASIS THAT THE ASSESSEES NET PROFIT IS IN THE YEAR UNDER CONSIDERATION IS NOT 0.58%, BUT HE H AS COMPARED THE NET PROFIT FROM EARLIER YEARS AND HE HAS TAKEN THE NET PROFIT OF ASSESSMENT YEAR 2007-08 AND HE HAS MADE THE ADDITIO N. I FIND FROM THE CHART THAT THE GROSS PROFIT IN THE YEAR UNDER A PPEAL IS 1.70 %. THE GROSS PROFIT WAS MARGINALLY LOWER IN THE YEAR U NDER APPEAL. THE ASSESSEE WAS NOT ABLE TO PIN POINT THE DECREASE ON THE NET PROFIT. THEREFORE, ONE HAS TO ESTIMATE AND DECIDE THE MATTE R ON ESTIMATE BASIS. THEREFORE, I DELETE THE ADDITION OF RS. 1,00 ,000/- AND CONFIRM THE REST AMOUNT OF RS. 44,829/-. SHRI MEHBOOB HASAN ANASARI, ASHTA VS. ITO, BHOPAL- I.T.A.NO. 320/IND/2015 A.Y. 2008-09 7 7 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 18 TH NOVEMBER, 2015. ( D.T.GARASIA) JUDICIAL MEMBER DATED : 18 TH NOVEMBER, 2015. CPU*