Saraswati Gupta, Howrah V. I.T.O.,Ward-47(1), Kolkata

ITA 358/KOL/2020

• Counselvise Citation: [NaN] 107 COUNSELVISE.COM (IT) 2246 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 10-06-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Capital asset converted into stock in trade
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

1 ITA No.358/Kol/2020 Saraswati Gupta AY: 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA [Before Shri A. T. Varkey, JM & Shri Rajesh Kumar, AM] I.T.A. No. 358/Kol/2020 Assessment Year: 2011-12 Saraswati Gupta (PAN: ADAPG 1993 M) Vs. ITO, Ward-47(1), Kolkata Appellant Respondent Date of Hearing (virtual) 05.01.2022 Date of Pronouncement 02.02.2022 For the Appellant Shri Miraj D Shah, A.R. For the Respondent Smt. Ranu Biswas, Addl. CIT DR ORDER Per Shri A.T.Varkey, JM This is an appeal preferred by the assessee against the order of Ld. CIT(A)-14, Kolkata dated 18.02.2020 for AY 2011-12. 2. The sole grounds of appeal of the assessee is against the action of Ld. CIT(A) in confirming the addition of GP percentage of 8% of Rs. 2,73,54,650/-. 3. Brief facts of the case as noted by the AO is that the assessee had filed return of income declaring Rs. 1,96,350/-. Later the case was reopened u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the basis of information of ADIT(Inv) that the assessee had maintained a bank account in the State Bank of India, Salkia, Howrah wherein the assessee has made huge transaction of money on different dates. The AO noted that an amount of Rs. 2,73,54,650/- was deposited in her bank account on different dates. The AO in the assessment order has noted that the Ld. A.R. of the assessee, pursuant to his requisition had filed profits and loss account, balance sheet, computation of income, sales ledger, copy of bank statement as on 10.12.2018. However, according to AO, the assessee could not conclusively substantiate the genuineness of the transaction reflected in the bank account and could not produce documents/evidence to support her activities. Therefore the AO taking note of the deposit as well as withdrawals of cash, took the peak credit of Rs. 10,70,000/- Thereafter according to AO as Rs. 2,73,54,650/- and thereafter added 8% of the Rs. 21,88,372/- and the same was also added 4. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the peak credit of Rs. 10,70,000/ amounting to Rs. 21,88,372/ with the action of the Ld. CIT(A) 5. We have heard both the parties and perused the records. The aforesaid facts are not repeated for the sake of brevity. We note that the assessee is iron and steel. According to assessee which are regularly deposited in he consideration and regularly according to Ld. A.R. goods as per the requirement of the business. NP which according to Ld AR our attention to the Co-ordinate Bench decision order in ITA No. 290/Kol/2015 in the case of Amit Jaiswal vs. ITO dated 2.8.2017 wherein the Tribunal for same assessment year 2011-12 as in this case has taken note of the NP of a similar busin 6. Therefore according to Ld. A.R., the NP returned by the assessee cannot be held to be low estimating the income of the assessee account submitted by the 2 as unexplained cash credit u/s 68 of the Act ccording to AO for arriving at the NP (Net Profit) he took the gross turn over and thereafter added 8% of the same for computing the and the same was also added. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the peak credit of Rs. 10,70,000/- u/s 68 of the Act. However sustained NP at 8% ing to Rs. 21,88,372/-. Thus giving partial relief to the assessee with the action of the Ld. CIT(A), the assessee is before us. We have heard both the parties and perused the records. The aforesaid facts are not ake of brevity. We note that the assessee is into the business of iron and steel. According to assessee, in this business, sales are made mostly through cash deposited in her bank account. She has been depositing the sale regularly according to Ld. A.R. withdrawing the amount as per the requirement of the business. It is noted that the assessee had shown 0.7% according to Ld AR is the turnover of this kind of business and for ordinate Bench decision order in ITA No. 290/Kol/2015 in the case of Amit Jaiswal vs. ITO dated 2.8.2017 wherein the Tribunal for same assessment year has taken note of the NP of a similar business which is as under: Therefore according to Ld. A.R., the NP returned by the assessee be low. It was pointed out by Ld. A.R. Shri Miraj that the AO erred in estimating the income of the assessee without pointing out any defect in the books of he assessee. According to Ld. A.R., the AO ITA No.358/Kol/2020 Saraswati Gupta AY: 2011-12 as unexplained cash credit u/s 68 of the Act and added the same. the NP (Net Profit) he took the gross turn over computing the net profit at Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased u/s 68 of the Act. However sustained NP at 8% relief to the assessee. Still not satisfied We have heard both the parties and perused the records. The aforesaid facts are not into the business of trading of made mostly through cash She has been depositing the sale withdrawing the amount for purchase of he assessee had shown 0.7% is the turnover of this kind of business and for that he drew ordinate Bench decision order in ITA No. 290/Kol/2015 in the case of Amit Jaiswal vs. ITO dated 2.8.2017 wherein the Tribunal for same assessment year ess which is as under: Therefore according to Ld. A.R., the NP returned by the assessee is reasonable and Shri Miraj that the AO erred in out any defect in the books of O erred in doing so, since 3 ITA No.358/Kol/2020 Saraswati Gupta AY: 2011-12 according to him, the AO without pointing out any defects in the books and without rejecting the same, the AO was not empowered in law to resort to estimation of NP as was done in the instant case. In this respect he drew our attention to the Co-ordinate Bench of this Tribunal in the case of M/s SRK Tea Processing Industries vs. ACIT vs. ACIT in ITA No. 1695/Kol/2009 for AY 2003-04 dated 11.03.2011 wherein it was held as under: “1. For that the Ld. CIT(A) erred in confirming the Addition of the Ld. A.O. in adding back Rs 23,34,000/- being alleged sales of suppressed production of tea by applying the average production rate of preceding 3 years when there was no defects in the audited books of account , day to day production registers and the production was duly accepted by Excise and sales Tax Authorities. 2. For that even otherwise the Ld. CIT(A) erred in confirming the addition of alleged extra production / sales of suppressed tea ignoring the explanation filed by the assessee and Auditor’s Reprot that the books of the assessee were duly audited by him and no defect was pointed out. ” It was held as under:- “4. We have heard the rival contentions and gone through facts and circumstances of the case. We find that the Assessing Officer has not rejected the books of accounts in the present case and even the Ld. CIT(A) has not given any finding in respect to the same. The Ld. CIT(A) simply gone through the issue that the Gross Profit rate, in the present assessment year from earlier years, is lower. Whether, Assessing Officer can estimate Gross Profit rate without rejecting the books of accounts or not, we are of the view that first proviso to section 145(1) or section 145(2) can be invoked only if and where the elements attracting either of those provisions are found to exist. In this regard, the Assessing Officer has to give a clear finding to that effect, along with the material on which such finding is based, has to be made out and given by the AO. No assessment under first proviso to section 145(1) or 145(2) can be made by the Assessing Officer without rejecting the books of accounts. There is no finding in the assessment order in respect to the fact that the assessee’s method of accounting is not a regularly employed method or whether his income, profits or gains cannot be deduced or account are incomplete or incorrect in the present case. In the absence of rejection of books of accounts, we are unable to accept that the Assessing Officer has rightly estimated the gross profit. Accordingly, we are of the view that the lower authorities have erred in applying gross profit rate on the basis of earlier years, without rejecting books of accounts. We allow the claim of the assessee and this issue of assessee’s appeal is allowed. 5. In the result, the appeal of the assessee is allowed.” 7. We note that in the present case the AO without rejecting the books of account submitted by the assessee has estimated NP at 8% which the AO could not have resorted to because in order to estimate the income of the assessee (based on best judgment assessment) as provided for u/s 144 of the Act, the AO has to first of all reject the books of account and then resort to section 145 of the Act and after giving a finding that the assessee has not regularly followed the method of accounting as mentioned u/s 145(1) of 4 ITA No.358/Kol/2020 Saraswati Gupta AY: 2011-12 the Act or that the assessee has not computed the income in accordance with the accounting standard notified u/s 145(2) of the Act or that the AO is not satisfied about the correctness or completeness of the book maintained by the assessee, then only the AO could have resorted to estimation of the income of the assessee u/s 144 of the Act. Since this condition precedent has not been satisfied as is discernible from the AO’s order and since the Ld. CIT(A) has also not rejected the books of accounts, the estimation made in respect of net profit (NP) is not legally tenable and therefore the addition of NP at 8% at Rs. 21,88,372/- is deleted. 8. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 2 nd February, 2022. Sd/- Sd/- (Rajesh Kumar) (Aby. T. Varkey) Accountant Member Judicial Member Dated: 02.02.2022 SB, Sr. PS Copy of the order forwarded to: 1. Assessee – Saraswati Gupta, Radha Kunj, 4D, Dharmatala Road, Salkia, Howrah- 711106. 2. Revenue – ITO, Ward-47(1), Kolkata 3. CIT(A)-14, Kolkata (sent through e-mail). 4. CIT, Kolkata. 5. DR, ITAT, Kolkata, (sent through e-mail).. True Copy By Order Sr. Private Secretary/DDO ITAT, Kolkata Bench, Kolkata