M/s. Sonal Bangla Network, Purba Medinipur V. I.T.O., Ward - 1, Haldia, Purba Medinipur

ITA 360/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48173 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 26-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2010
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: M BANDYOPADHYAY
• Keywords: Business income

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . . . . . . . , , , , ! ! ! ! /AND ' #!' , $% ) [BEFORE HONBLE SHRI G. D. AGRAWAL, V.P. & HONBLE SHRI MAHAVIR SINGH, JM] !& !& !& !& / I.T.A NO. 360/KOL/2010 #'( )* #'( )* #'( )* #'( )*/ // / ASSESSMENT YEAR: 2005-06 M/S. SONAR BANGLA NETWORK VS INCOME-TAX OFFICER, WD-1, HALDIA (PAN-ABEFS 7730 E) ( ,- /APPELLANT ) (./,-/ RESPONDENT ) FOR THE APPELLANT: SHRI M. BANDYOPADHYAY FOR THE RESPONDENT: SHRI P. K. MISHRA $01 / ORDER PER MAHAVIR SINGH, JM ( ' ' ' ' #!' #!' #!' #!' , , , , $% $% $% $% ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDER OF CIT(A)-XXXIII, KOLKATA IN APPEAL NO.102/CIT(A)-XXXIII/WD-1,HAL/07-08 VIDE DAT ED 19.11.2009. ASSESSMENT WAS FRAMED BY ITO, WD-1, HALDIA U/S. 145(3)/144/184 (5) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2005-06 VIDE HIS ORDER DATED 30.11.2007. 2. THE TWO INTER-CONNECTED ISSUES IN THIS APPEAL OF THE ASSESSEE IS AGAINST ESTIMATION OF NET PROFIT ON CABLE NET WORK AT RS.2,84,530/- OUT OF TO TAL TURNOVER OF RS.5,61,450/- AND ALSO ESTIMATED PROFIT ON RECHARGE OF COUPON AT RS.1,19,9 71/- AS AGAINST THE GROSS PROFIT DISCLOSED BY THE ASSESSEE ON RECHARGE OF COUPON AT RS.71,815/- O N THE TOTAL TURNOVER OF RS.39,99,034/-. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING SIX GROUNDS : 1.THE LD.CLT(A)-XXXIII,KOLKATA ERRED IN ESTIMATING NET PROFIT IN CABLE NETWORK BUSINESS AT RS. 2,84,513 AGAINST TURNOVER OF RS.5,6 1,450. 2. THE LD. CIT(A)-XXXIII, KOLKATA ERRED IN ESTIMATI NG NET PROFIT IN CABLE NETWORK BUSINESS AT 50.67% OF TURNOVER WHICH IS UNACHIEVABL E. 3. THE CIT(A)-XXXIII ERRED IN ESTIMATING PROFIT AT RECHARGE COUPON AT RS. 1,19,971 WHICH IS AS HIGH AS 3% OF TURNOVER. 4. THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT G ROSS PROFIT IN RECHARGE COUPON HAS BEEN SHOWN AT RS.71,859. (I.E., SALES RS.39,99,034 LESS PURCHASE RS. 40,31,401 ADD CLOSING STOCK RS. 1,01,226) 2 ITA 360/K/2010 M/S.SONAR BANGLA NET WORK A.Y.05-0 6 5. THE LD. CIT(A) ERRED IN ENHANCING THE NET PROFIT IN THE BUSINESS OF RECHARGE COUPON WHEN GROSS PROFIT ITSELF WAS RS. 71,859. 6. THE LD. CIT (A) ERRED IN ENHANCING THE NET PROFI T OF RECHARGE COUPON BUSINESS TO AN AMOUNT MUCH MORE THAN EVEN THE GROSS PROFIT WITHOUT ALLOWING SPECIFIC OPPORTUNITY TO THE APPELLATE IN THIS MATTER OR WITHOUT ALLOWING PR OPORTIONATE OVERHEADS. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CABLE NET WORK AS WELL AS SALE OF RECHARGE COUPON, SIM CARDS FOR MOBILE PHONES OF CELLULAR COMPANIES IN THE DISTRICT OF MIDNAPORE, WEST BENGAL . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ESTIMATED NET PROFIT IN C ABLE NET WORK AT 5% AND ALSO ESTIMATED COMMISSION FROM CELLULAR COMPANIES ON SALE OF SIM C ARDS OF MOBILE PHONES AS UNDER: 1. NET PROFIT FROM SALE OF HAND SET, MOBILE ACCESS ORIES, PREPAID SIM CARD, SIM REPLACEMENT AND RECHARGE COUPON IS ESTIMATED AT RS. 3,29,465/- I.E. @ 5% OF THE TOTAL TURNOVER OF RS.65,89,304/- 2. RS.57,933/- IS ADDED TO THE TOTAL INCOME ON ACCO UNT OF COMMISSION PAID AGAINST POST PAID SIM SALE, RECEIVED AGAINST MEMBERSHIP FEES, CO MMISSION RECEIVED AGAINST MONTHLY BILL PAYMENT, RECEIVED AGAINST ROAMING CHARGES RECE IVED AGAINST DEPOSIT OF STD AND DISCOUNT RECEIVED AFTER ALLOWING PROPORTIONATE EXPE NSES AMOUNTING TO RS.3.74 (RS.42,595 X RS.58.307/66,47,610). 3. PROFIT FROM CABLE NETWORK IS ESTIMATED OF RS.3,2 6,901/-. ACCORDINGLY, HE ESTIMATED THE PROFIT AT RS.3,29,465 /- ON ACCOUNT OF SALE OF HANDSET, MOBILE ACCESSORIES, PREPAID SIM CARD, SIM REPLACEMENT AND RECHARGE COUPONS AND ALSO ESTIMATED PROFIT FROM CABLE NET WORK AT RS.3,26,901/- APART F ROM COMMISSION ON SIM SALES AT RS.57,933/- AND MADE TOTAL ADDITION OF RS.7,14,299/-. AGGRIEVE D, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND HE PARTLY CONFIRMED THE ACTION OF THE AS SESSING OFFICER BY ESTIMATING THE INCOME AS UNDER: SL. NO. PARTICULARS PERCENTAGE AMOUNT (RS.) 1 2. 3. 4. 5. 6. PROFIT ON RECHARGE COUPON NET PROFIT ON HANDSETS MOBILE ACCESSORIES PREPAID SIM CARD CABLE NETWORK ON A/C OF SUNDRY CREDITS (3% OF RS.3999034) (2.5% OF RS.2202570) - (10% OF RS.383614) - (1000+710+500+15000) TOTAL 119971 55064 85 38361 284513 17210 515204 THE ESTIMATE OF INCOME IS ACCORDINGLY MADE KEEPING IN VIEW THE SUBMISSION OF THE ASSESSEE REGARDING LOWER MARGINS. ASSESSING OFFICER IS DIREC TED TO CONSIDER THIS AS THE INCOME OF THE ASSESSEE INSTEAD OF RS.7,14,299/- DETERMINED BY HIM . THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 3 ITA 360/K/2010 M/S.SONAR BANGLA NET WORK A.Y.05-0 6 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEES TURNOVER ON THE RECHARG E OF COUPONS AT RS.39,99,034/-, ON WHICH THE LOWER AUTHORITIES I.E. FINALLY THE CIT(A) HAS ESTIM ATED THE PROFIT PERCENTAGE AT 3% AS AGAINST THE GROSS PROFIT DECLARED BY ASSESSEE AT RS.71,859/-. THE CONTENTION OF THE ASSESSEE BEFORE US WAS THAT THE TOTAL SALES OF RECHARGE COUPON WAS AT RS.3 9,99,034/- AND OUT OF THIS THE PURCHASES WAS AT RS.40,31,401/- AND ADDING CLOSING STOCK TO THE S AME IT WILL COMES TO RS.41,32,627/-. IN VIEW OF THESE FACTS, THE CIT(A) ESTIMATED THE PROFIT AT 3% AS AGAINST THE DECLARED GROSS PROFIT OF 1%. AS THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCO UNT, THE LOWER AUTHORITIES HAVE RIGHTLY ESTIMATED THE PROFIT, BUT WE ARE OF THE VIEW THAT I N THE NATURE OF THE BUSINESS OF THE ASSESSEE I.E. SALE OF RECHARGE COUPON, THE GROSS PROFIT RATE CANN OT BE AT 3% AS THE LOWER AUTHORITIES HAVE NOT WORKED OUT ON THE BASIS OF PERCENTAGE DISCLOSED BY OTHER ASSESSEES IN THIS LINE OF BUSINESS. EVEN THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD FROM THE COMPANIES OF SIM CARD THAT WHAT IS THE RATE OF COMMISSION OR PROFIT ALLOWED TO THE VENDORS. IN THE ABSENCE OF THIS, AND DUE TO THE VOLUME OF THE BUSINESS OF THE ASSESSEE, WE ARE UNAB LE TO SET ASIDE THIS ISSUE, BECAUSE THIS WILL CREATE UNDUE HARDSHIP TO BOTH THE SIDES, HENCE WE E STIMATE THE PROFIT. ACCORDINGLY, WE ESTIMATE THE PROFIT RATE AT 1% NET OF THE TURNOVER. THE AO IS DIRECTED TO RECOMPUTE THE INCOME ACCORDINGLY. 5. IN RESPECT TO ESTIMATION OF INCOME FROM CABLE NE TWORK THE TOTAL TURNOVER OF THE ASSESSEE IS AT RS.5,61,450/- AND THE CIT(A) ESTIMATED NET PR OFIT AT RS.2,84,530/- WHICH IS ALMOST 50.67% OF THE TURNOVER. NO DOUBT THE ASSESSEE IS UNABLE T O PRODUCE THE BOOKS OF ACCOUNT BUT THE LOWER AUTHORITIES HAVE NOT BROUGHT ANY INSTANCE OR THE PA RALLEL CASE LAW WHERE THE PROFIT MARGIN IS AT THIS RATE OF 50.67%. IN THE ABSENCE OF THIS, WE AR E OF THE VIEW THAT A REASONABLE ESTIMATE OF 20% WILL MEET THE ENDS OF JUSTICE AND WE ESTIMATE A CCORDINGLY. AO IS DIRECTED TO RECOMPUTE THE INCOME ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. 7. ORDER PRONOUNCED IN OPEN COURT ON 27.5.2011 SD/- SD/- . . . . . . . . , , , , ' ' ' ' #!' #!' #!' #!' , $% (G. D. AGRAWAL) (MAHAVIR SINGH) VICE PRESIDENT JUDICIAL MEMBER ( 2 2 2 2) )) ) DATED 27TH DAY OF MAY, 2011 34 #'5 #6 JD.(SR.P.S.) 4 ITA 360/K/2010 M/S.SONAR BANGLA NET WORK A.Y.05-0 6 $01 7 .##8 08)9- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT M/S. SONAR BANGLA NETWORK, VILL+PO CHAITANYAPUR, SUTAHATA, DIST. PURBA MEDINIPUR-72164 5. 2 ./,- / RESPONDENT, ITO, WARD-1, HALDIA 3 . #1' ( )/ THE CIT(A), KOLKATA 4. #1' / CIT, KOLKATA 5 . ?#@ .#' / DR, KOLKATA BENCHES, KOLKATA /8 .#/ TRUE COPY, $01'A/ BY ORDER, ' ! /ASSTT. REGISTRAR .