M/s Khumore Manufacturing and Industries ltd., Kolkata V. THE DCIT, CIR-3, KOLKATA, Kolkata

ITA 356/KOL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1621 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATYAJIT MONDAL AD DL
• Assessee Lawyers: ARVIND AGARWAL
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BE NCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO. 356/KOL/201 5 ASSESSMENT YEAR : 2006-0 7 M/S. KHUMOR INVESTMENTS LTD. -VS- D.C.I.T., CIRCL E-3, (FORMERLY M/S. KHUMOR MANUFACTURING & KOLKATA. INDUSTRIES LTD., KOLKATA [PAN : AABCK 1248 A] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI ARVIND AGARWAL, ADVO CATE FOR THE RESPONDENT : SHRI SATYAJIT MONDAL, AD DL. CIT DATE OF HEARING : 30.01.2018. DATE OF PRONOUNCEMENT : 02.02.2018. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 19.01.2015 OF CIT(A)- 1, KOLKATA RELATING TO A.Y.2006-07. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF TRADING IN SHARES AND SECURITIES. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y.2006-07 ON 28.11.2006 DISCLOSING TOTAL INCOME OF RS.24,55,181/-. A NOTIC E U/S 143(2) OF THE INCOME TAX ACT, 1961 (ACT) DATED 21.11.2007 WAS ISSUED BY THE AO FI XING THE DATE OF HEARING ON 26.02.2008. THEREAFTER A NOTICE 13.06.2008 WAS ISSU ED BY THE AO CALLING UPON THE ASESSEE TO FILE THE TAX AUDIT REPORT, PROFIT AND LO SS ACCOUNT, BALANCE SHEET AND COMPUTATION OF TOTAL INCOME. ANOTHER NOTICE DATED 1 8.07.2008 WAS ALSO ISSUED BY THE AO CALLING FOR THE INFORMATION AS WERE MENTIONED IN THE NOTICE DATED 13.06.2008. ANOTHER QUESTIONNAIRE DATED 22.08.2008 WAS ALSO ISS UED BY THE AO CALLING FOR CERTAIN DETAILS. ANOTHER NOTICE DATED 18.09.2008 WAS ALSO ISSUED BY THE AO TO THE ASSESSEE CALLING FOR APPEARANCE OF THE ASSESSEE BEFORE THE A O WITH NECESSARY EVIDENCES. 2 ITA NO.356/KOL/2015 M/S KHUMOR INVESTMENTS LTD. (FORME RLY M/S KHUMOR MANUFACTURING & INDS. LTD. A.YR.2006-07 2 3. ACCORDING TO THE ORDER OF AO THE ASSESSEE FILED COPY OF THE ACCOUNTS IN RESPONSE TO THE NOTICE DATED 18.09.2008 OF THE AO BUT THE AS SESSEE DID NOT RESPOND TO OTHER NOTICES. THE AO THEREFORE PROCEEDED TO FRAME EXPART E ASSESSMENT U/S 144 OF THE ACT VIZ. THE BEST JUDGMENT ASSESSMENT. THE AO DETERMINE D THE TOTAL INCOME OF THE ASSESSEE AND ADDED A SUM OF RS.40,00,000/- WITH THE FOLLOWIN G OBSERVATIONS :- QUITE APPARENTLY THE ASSESSEE IS A HABITUAL DEFAUL TER AND HAVE TRIED IN EVER POSSIBLE WAY TO AVOID SCRUTINY OF ITS ACCOUNTS. ON PURPOSE THE CASE WAS BEING DRAGGED TOWARDS THE FAG END OF THE YEAR. UNDER THE CIRCUMSTANCES, I AM LEFT WITH NO OTHER OPTION BUT TO COMPLETE THE ASSESSMENT EXPA RTE, U/S 144 OF THE ACT. IN ABSENCE OF REQUISITE DETAILS, THE INCOME OF THE ASSESSEE IS ASSESSED AT RS.40,00,000/-. 4. AGGRIEVED BY THE AFORESAID ORDER OF THE AO THE A SSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. THE CONTENTION OF THE ASSESSEE BEFORE CIT(A) WAS THAT (1) WITHOUT ISSUING A SHOW CAUSE NOTICE FOR MAKING BEST JUDGMENT ASSESSME NT AS PER THE SECOND PROVISO TO SECTION 144(1) OF THE ACT, THE AO CANNOT FRAME A BE ST JUDGMENT. (2) WHILE MAKING THE BEST JUDGMENT THE AO HAS TO KEEP IN MIND PRINCIPLES OF JUSTICE , EQUITY AND GOOD CONSCIENCE. HE CANNOT MAKE AN ESTIMATE OF THE TOTAL INCOME IN A DISHONEST, VINDICTIVE OR CAPRICIOUS MANNER. THE ASSESSMENT MADE ON THE BASIS OF BEST JUDGMENT AND THE ESTIMATE MADE BY THE AO SHOULD BE HONEST AND FAIR. IN THIS R EGARD THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF CIT VS LAXMINARAIN BADRIDAS [1937] 5 ITR 170 (PC) AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F BRIJ BHUSHAN LAL PARDUMAN KUMAR VS. CIT [1978] 115 ITR 524 (SC) AND CERTAIN OTHER DECISIONS. (3) THE ASSESSEE BROUGHT TO THE NOTICE OF CIT(A) THAT THE ASSESSMENT MADE BY THE AO WAS A WILD GUESS WHICH IS NOT SUPPORTED BY ANY MATERIAL ON RECORD. T HE ASSESSEE DREW OUR ATTENTION OF THE CIT(A) TO PERCENTAGE OF PROFIT AND GROSS INCOME EARNED BY THE ASSESSEE OVER THE 3 ITA NO.356/KOL/2015 M/S KHUMOR INVESTMENTS LTD. (FORME RLY M/S KHUMOR MANUFACTURING & INDS. LTD. A.YR.2006-07 3 PAST FOUR YEARS AS WELL AS THE TREND OF INCREASE IN THE TOTAL INCOME DECLARED BY THE ASSESSEE IN THE PAST FOUR YEARS . THESE DETAILS WER E AS FOLLOWS : INCOME AND PROFIT FY 2003 FY 2004 FY 2005 FY 2006 GROSS INCOME PROFIT PROFIT AS A % OF GROSS INCOME 3,77,80,120 2,36,274 0.63% 4,01,03,168 7,56,375 1.89% 4,01,26,749 12,04,979 3.00% 3,97,43,778 24,19,089 6.09% RETURNED VS ASSESSED INCOME FY 2003 FY 2004 FY 2005 FY 2006 RETURNED INCOME ASSESSED INCOME ASSESSED U/S ORDER DATED 3,21,974 3,21,974 143(1) 20/11/03 1,67,133 1,67,133 143(1) NOT TRACED 2,10,307 2,21,039 143(3) 05/12/07 24,55,181 40,00,000 144 24/10/08 (4) IT WAS ALSO POINTED OUT THAT WHATEVER DOCUMENTS WERE REQUIRED IN THE VARIOUS NOTICES AND QUESTIONNAIRE ISSUED TO THE ASSESSEE WERE ALREA DY AVAILABLE ON THE RECORDS OF THE AO IN THE FORM OF TAR, BOOKS OF ACCOUNTS AND OTHER DETAILS. 6. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE A O ON THE ABOVE SUBMISSION OF THE ASSESSEE. IN THE REMAND REPORT THE AO APART FRO M POINTING OUT THE FAILURE OF THE ASSESSEE TO PARTICIPATE IN THE ASSESSMENT PROCEEDIN GS FURTHER SUBMITTED THAT THE PAST HISTORY OF THE ASSESSEES CASE WERE NOT RELEVANT. 7. THE CIT(A) AFTER CONSIDERING ALL THE MATERIAL BE FORE HIM ESTIMATED THE TOTAL INCOME OF THE ASSESSEE AT RS.30,00,000/- AS AGAINST RS.40,00,000/- AS ESTIMATED BY THE AO. THE CIT(A) HAS NOT GIVEN ANY REASON FOR HIS ES TIMATION AT RS.30,00,000/-. THE AO HAS ALSO NOT GIVEN ANY BASIS TO THE TOTAL INCOME OF THE ASSESSEE. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE CIT(A):- 4 ITA NO.356/KOL/2015 M/S KHUMOR INVESTMENTS LTD. (FORME RLY M/S KHUMOR MANUFACTURING & INDS. LTD. A.YR.2006-07 4 THE SUBMISSIONS OF THE APPELLANT AND THE REJOINDER TO THE REMAND REPORT HAVE BEEN CONSIDERED. IT IS SEEN THAT THE ISSUE IS REGAR DING ASSESSMENT OF THE APPELLANT'S INCOME AT RS.40 LAKHS BY THE A.O. U/S.144 AGAINST R S.24,55,181/- DISCLOSED BY THE APPELLANT. IN THIS REGARD IT IS SEEN THAT THE A.O. HAS NOT CONSIDERED THE FACT THAT THE APPELLANTS PROFIT HAD INCREASED FROM THE EARLIER YE ARS AND HAD TO SHOWN AT 6.09% AS AGAINST 3 % IN THE IMMEDIATELY PRECEDING YEAR DE SPITE A REDUCTION IN ITS TURNOVER FROM RS 4.01 CRORES TO RS 3.97 CRORES. HOW EVER, IT IS A FACT THAT THE APPELLANT HAD NOT PRODUCED ITS BOOKS OF ACCOUNTS ET C BEFORE THE A.O. FOR VERIFICATION AT THE COURSE OF ASSESSMENT PROCEEDING S WHICH COULD NOT BE EXPLAINED OR JUSTIFIED EVEN IN APPEAL. THEREFORE THE IN ABSEN CE OF ANY VERIFICATION THE DISCLOSED PROFIT CANNOT BE ACCEPTED TO BE CORRECT A ND VERIFIED. THERE ARE OTHER EXPENSES CLAIMED IN THE P &. L A/C INCLUDING PURCHA SE OF SHARES AND THE PROFIT FROM SHARE TRANSACTIONS IS ALSO NOT AUTHENTICATED A ND COULD NOT BE VERIFIED IN THE ORIGINAL ASSESSMENT PROCEEDINGS. ACCORDINGLY CONSID ERING THE SAME AND TAKING A REASONABLE VIEW IN THIS REGARD THE NET PROFIT SHOW N BY THE APPELLANT IS ESTIMATED AT RS..30 LAKHS AS AGAINST RS.24,55,181/ DISCLOSED BY IT, THEREFORE THE ADDITION BY THE A.O IS RESTRICTED TO THIS EXTENT. 8. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESEE REITERATED SUBMISSIONS AS WERE MADE BEFORE CIT(A). THE LD. DR RELIED ON THE O RDER OF THE AO. 9. I HAVE HEARD THE RIVAL SUBMISSIONS. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE THE ESTIMATION OF THE TOTAL INCOME MADE BY THE AO AND CIT(A) IS CONTRARY TO THE PRINCIPLES LAID DOWN IN SEVERAL JUDICIAL PRECEDENTS CITED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE CIT(A). AS ALREADY STATED NEITHER T HE ESTIMATION OF THE TOTAL INCOME BY THE AO OR THE CIT(A) IS BASED ON ANY MATERIAL OR CI RCUMSTANCES OF THE CASE. THE CIRCUMSTANCES POINTED OUT BY THE ASSESSEE BEFORE TH E CIT(A) VIZ. THE TREND OF PERCENTAGE OF PROFITS AND THE INCREASING TREND OF T HE TOTAL INCOME OF THE ASSESSEE GOES TO SHOW THAT THE TOTAL INCOME DECLARED BY THE ASSES SEE OUGHT TO HAVE BEEN ACCEPTED BY THE AO. SINCE THE ESTIMATION OF THE TOTAL INCOME BY THE AO AND THE CIT(A) IS BASED ON NO MATERIAL ON RECORD OR IS NOT BASED ON ANY OTHER CIRCUMSTANCES, THE ADDITIONS SUSTAINED BY CIT(A), IN MY OPINION, SHOULD ALSO BE DELETED. ACCORDINGLY I DIRECT THE 5 ITA NO.356/KOL/2015 M/S KHUMOR INVESTMENTS LTD. (FORME RLY M/S KHUMOR MANUFACTURING & INDS. LTD. A.YR.2006-07 5 AO TO ACCEPT THE TOTAL INCOME AS DECLARED BY THE AS SESSEE AND DELETE THE ADDITION SUSTAINED BY THE CIT(A). 10. IN THE RESULT THE APPEAL BY THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 02.02.2018. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED :02.02.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. M/S KHUMOR INVESTMENTS LTD. (FORMERLY KNOWN AS M /S KHUMOR MANUFACTURING AND INDUSTRIES LTD., 19, ESPLANADE MANSIONS, 14 GOV T. (EAST), KOLKATA-700069. 2. D.C.I.T., CIRCLE-3, KOLKATA. 3. CIT(A)-1, KOLKATA 4. C.I.T-1, KOLKATA . 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECR ETARY HEAD OF OFFICE/ D.D.O., ITAT KOLKATA BENCHES 6 ITA NO.356/KOL/2015 M/S KHUMOR INVESTMENTS LTD. (FORME RLY M/S KHUMOR MANUFACTURING & INDS. LTD. A.YR.2006-07 6