ITO, Ward-1(2), Bhubaneswar, Bhubaneswar V. Adwaita Charan Hota, Bhubaneswar

ITA 364/CTK/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96869 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VENKATRAMANI
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK ( BEFORE SHRI P. M. JAGTAP , A.M. AND SHRI P. S. CHAUDHURY, J .M . ) ITA NO.364/CTK /2013 : ASSESSMENT YEAR 2009 - 10 ITO, WARD - 1( 2 ) , BHUBANESWAR - VS - ADWAITA CHARAN HOTA, BBSR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. VENKATRAMANI, D.R. RESPONDENT BY : NONE : O R D E R : PER SHRI P.M.JAGTAP , AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), BHUBANESWAR DATED 22.03.2013. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO THIS APPEAL ARE AS FOLLOWS: 2.1 THE ASSESSEE IS AN INDIVIDUAL, WHO IS ENGAGED IN THE BUSINESS OF TRADING IN TRACTORS AND SPARE PARTS UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S. SAMPARK MOTORS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 30.09.2009 DECLARING A TOTAL INCOME OF RS.7,87,760/ - INCLUDING AGRICU LTURAL INCOME OF RS.5,16,000/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED BY THE AO TO PRODUCE THE BOOKS OF ACCOUNTS AS WELL AS OTHER RELEVANT DETAILS REQUIRED F OR THE PURPOSE OF ASSESSMENT. T HE ASSESSEE HOWEVER FAILED TO COMPLY WITH THE REQUIREMENTS OF THE AO INSPITE OF SUFFICIENT OPPORTUNITY AFFORDED IN THIS REGARD. THE AO, THEREFORE, PROCEEDED TO COMPLETE THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON REC ORD BEFORE HIM. IN THE ASSESSMENT SO COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 26.12.2011, THE NET PROFIT OF THE ASSESSEE 2 FROM THE BUSINESS OF DEALING IN TRACTORS AND SPARE PARTS WAS ESTIMATED BY THE AO AT RS.45,94,798/ - BY APPLYING THE NET PROFIT RA TE OF 10% ON THE SALES OF RS.4,5 9 ,4 7 , 98 2 / - . SUNDRY CREDITORS SHOWN BY THE ASSESSEE TO THE EXTENT OF RS.1,15,000/ - WERE ALSO TREATED BY THE AO AS UNEXPLAINED AND THE AMOUNT OF SUCH CR EDITORS WAS ALSO ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE FOR AGRICULTURAL INCOME OF RS.5,16,000/ - WAS ALSO NOT ACCEPTED BY THE AO IN THE ABSENCE OF ANY EVIDENCE PRODUCED BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE THE SAME AND TREATING THE SAME AS INCOME FROM OTHER SOURCES, THE AMOUNT OF RS .5,16,000/ - WAS ALSO BROUGHT TO TAX BY THE AO IN THE HANDS OF THE ASSESSEE . 3. AGAINST THE ORDER PASSED BY THE AO UNDER SECTION 143(3) OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND VARIOUS DETAILS AND DOCUMENTS WERE FILED BY HIM BEFORE THE LD. CIT(A) WHILE CHALLENGING THE VAR IOUS ADDITIONS MADE BY THE AO TO HIS TOTAL INCOME. THE SAID DETAILS AND DOCUMENTS FILED BY THE ASSESSEE FOR THE FIRST TIME BEFORE HIM WERE FORWARDED BY THE LD. CIT(A) TO THE AO FOR THE LATTERS VERIFICA TION. DURING THE REMAND PROCEEDINGS BEFORE THE AO, THE ASSESSEE AGAIN FAILED TO APPEAR AND SUPPORT AND SUBSTANTIATE HIS CASE. THIS NON - COMPLIANCE ON THE PART OF THE ASSESSEE WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) BY THE AO IN THE REMAND REPORT. THE SA ID REMAND REPORT WAS CONFRONTED BY THE LD. CIT(A) TO THE ASSESSEE AND AFTER TAKING INTO CONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A) PROCEEDED TO DISPOSE OF THE APPEAL OF THE ASSESSEE ON MER IT. 3.1 A S REGARDS THE REJECTION OF THE BOOKS OF ACCOUNT OF THE ASSESSEE BY THE AO AND ESTIMATION OF PROFIT OF BUSINESS BY APPLYING THE NET PROFIT RATE OF 10%, THE LD. CIT(A) HELD THAT THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESS EE WAS FULLY JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HE HOWEVER HELD THAT THE NET PROFIT RATE OF 10% APPLIED BY THE AO TO ESTIMATE THE BUSINESS OF 3 PROFIT OF THE ASSESSEE WAS ON THE HIGHER SIDE AND KEEPING IN VIE W THAT THE ASSESSEE HAD DECLARE D NET PROFIT OF ABOUT 1% IN THE IMMEDIATELY PRECEDING FOUR YEARS AND THERE WAS ADDITIONAL INCOME OF RS.2,13,192/ - IN THE FORM OF INCENTIVE DURIN G THE YEAR UNDER CONSIDERATION., H E HELD THAT IT WOULD BE FAIR AND REASONABLE TO ESTIMATE THE BUSINESS PROFIT OF THE ASSESSEE BY APPLYING THE NET PROFIT RATE OF 2% ON SALES. ACCORDINGLY, THE BUSINESS PROFIT OF THE ASSESSEE WAS ESTIMATED BY THE LD. CIT(A) AT RS.9,28,766/ - AS AGAINST THE ESTIMATE OF RS.46,43,830/ - MADE BY THE AO. 3.2 AS REGARDS THE ADDITION OF RS.1,1 5,000/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS, THE LD. CIT(A) FOUND THAT THE SAME WERE TOWARDS PURCHASES, WHICH WERE DEBITED TO THE PROFIT & LOSS A/C. ACCORDING TO HIM, THE BUSINES S PROFIT OF THE ASSESSEE HAVING BEEN ESTIMATED BY APPLYI NG NET PROFIT RATE, NO SEPARATE ADDITION WAS WARRANTED ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS REPRESENTING THE CORRESPONDING PURCHASE. HE, THEREFORE, DELETED THE ADDITION OF RS.1,15,000/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS. 3. 3 AS REGARDS THE CLAIM OF THE ASSESSEE FOR AGRICULTURAL INCOME OF RS.5,16,000/, THE LD. CIT(A) FOUND THE SAME TO BE ACCEPTABLE TO THE EXTENT OF RS.4,15,000/ - FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO.4.3.2 OF HIS ORDER. 4.3.2 SO FAR AS THE AGRI CULTURAL INCOME IS CONCERNED, ADMITTEDLY THE DETAILS WERE NOT FURNISHED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE APPELLANT HAS FILED THE DETAILS OF THE LAND OWNED BY IT AS WELL AS A CERTIFICATE ISSUED BY R.I., KANTAPARA TO THE EFFECT T HAT THE APPELLANT HAD AGRICULTURAL INCOME TO TUNE OF RS.4,85,000/ - , WHICH WAS EXAMINED BY THE AO DURING REMAND. IT IS ALSO SEEN THAT THE HONBLE ITAT VIDE THEIR ORDER DATED 22.12.2011 IN THE CASE OF THE APPELLANT FOR A.Y. 2005 - 06 HAVE ACCEPTED AN AGRICULTU RAL INCOME OF RS.86,500/ - FOR A.Y. 2002 - 03 AND RS.98,500/ - AS AGRICULTURAL INCOME FOR A.Y. 2003 - 04. THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT DOES NOT HAVE ANY AGRICULTURAL INCOME. HOWEVER, AS PER THE CERTIFICATE GIVEN BY THE RI, WHICH WAS ISSUED IN OCTOBER, 2012, THE AGRICULTURAL INCOME OF RS.4,85,000/ - IS IN RESPECT OF RS.17.34 ACRES. OUT OF THIS, IT IS SEEN, AS PER THE DETAILS GIVEN IN THE SAID CERTIFICATE THAT 2.51 ACRES BELONG TO THE WIFE OF THE APPELLANT. 4 THEREFORE, THE ENTIRE RS.4,85,000/ - C ANNOT BE CONSIDERED AS AGRICULTURAL INCOME OF THE APPELLANT. HENCE, THE AGRICULTURAL INCOME OF THE APPELLANT IS ESTIMATED BASED ON THE CERTIFICATE FILED BY THE APPELLANT PROPORTIONATELY, WHICH COMES TO RS.4,14,795/ - ROUNDED OFF TO RS.4,15,000/ - . THIS IS AL SO THE AMOUNT OF AGRICULTURAL INCOME DISCLOSED BY THE APPELLANT IN 2007 - 08. THUS, I HOLD THAT THE APPELLANT HAS AGRICULTURAL INCOME OF RS.4,15,000/ - DURING THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY, THE BALANCE AGRICULTURAL INCOME CLAIMED BY THE APPELLANT AMOUNTING TO RS.1,11,000/ - (RS.5,16,000/ - - RS.4,15,000/ - ) IS TO BE HELD AS INCOME FROM OTHER SOURCES. THE LD. CIT(A) THUS ALLOWED A SUBSTANTIAL RELIEF TO THE ASSESSEE BY HIS APPELLATE ORDER DATED 22.03.2013, WHICH IS IMPUGNED BY THE REVENUE IN THE PRES ENT APPEAL ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DIRECTING TO ESTIMATE PROFIT OF THE ASSESSEE AT RS.9,28,766/ - IN PLACE OF RS.46,43,830/ - ESTIMATED BY THE AO. 2. ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.1,15,000/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JU STIFIED IN HOLDING THAT THE ASSESSEE HAD AGRICULTURAL INCOME OF RS.4,15,000/ - WHICH WAS ASSESSED AS INCOME FROM OTHER SOURCES BY THE AO. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE AND NOT ACCEPTING THE FINDINGS OF THE AO IN VIOLATION OF RULE 46A. 4. AT THE TIME OF HEARING BEFORE US, NOBODY HAS APPEARED ON BEHALF OF THE ASSESSEE. THERE WAS A SIMILAR NON - COMPLIANCE ON THE PART OF THE ASSESSEE, W HEN HIS APPEAL WAS EARLI ER FIXED FOR HEARING BEFORE THE TRIBUNAL ON 21.05.2015. THIS APPEAL OF THE REVENUE IS THEREFORE BEING DISPOSED OF EX PARTE QUA THE RESPONDENT ASSESSEE, AFTER TAKING INTO CONSIDERAT ION THE ARGUMENTS OF THE LD. DR AS WELL AS THE MATERIAL AVAILABLE ON RECORD. 5 5. AS REGARDS THE ISSUE INVOLVED IN GROUND NO.1 RELATING TO THE ESTIMATION OF BUSINESS PROFIT OF THE ASSESSEE, WE FIND THAT THERE WAS NO BASIS WHATSOEVER GIVEN BY THE AO TO JUSTIFY THE NET PROFIT RATE OF 10% APPLIED BY HIM TO ESTIMATE THE BUSINESS PROF IT OF THE ASSESSEE. THE LD. DR HAS ALSO NOT BEEN ABLE TO GIVE ANY BASIS TO SUPPORT AND SUBSTANTIATE THE NET PROFIT RATE OF 10% APPLIED BY THE AO. ON THE OTHER HAND, THE NET PROFIT DECLARED BY THE ASSESSEE DURING THE IMMEDIATELY PRECEDING FOUR YEARS, AS FOU ND BY THE LD. CIT(A), WAS ABOUT 1% AND THERE IS NOTHING BROUGHT ON RECORD BEFORE US TO REBUT OR CONTROVERT THIS FINDING OF FACT RECORDED BY THE CIT(A). DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED AN ADDITIONAL INCOME OF RS.2,13,192/ - AS INCENTIVE AND TAKING DUE NOTE OF THE SAME, THE NET PROFIT RATE OF 2% WAS ADOPTED BY THE CIT(A) TO ESTIMATE THE BUSINESS PROFIT OF T HE ASSESSEE. KEEPING IN VIEW THIS SOUND AND CONVINCING BASIS GIVEN BY THE LD. CIT(A), WE ARE OF THE VIEW THE NET P ROFIT RATE OF 2% APPLIED BY HIM TO ESTIMATE THE BUSINESS PROFIT OF THE ASSESSEE IS QUITE FAIR AND REASONABLE AND THERE IS NO JUSTIFIABLE REASON TO INTERFERE WITH THE SAME. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUN D NO.1 OF REVENUES APPEAL. 5.1 AS REGARDS THE ADDITION OF RS.1,15,000/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS, IT IS OBSERVED THAT THE SAID CREDITORS, AS FOUND BY THE LD. CIT(A), WERE TOWARDS PURCHASE OR EXPENSES DEBITED BY THE ASSESS EE TO THE PROFIT & LOSS A/C. SINCE THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED AND HIS INCOME FROM BUSINESS WAS ESTIMATED BY APPLYING THE NET PROFIT RATE, WE FIND OURSELVES IN AGREEMENT WITH THE LD. CIT(A) THAT NO SEPARATE ADDITION WAS WARRANTED ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITOR S, WHICH UNDISPUTEDLY REPRESENTED PURCHASE OR EXPENSES DEBITED BY THE ASSESSEE TO THE PROFIT & LOSS A/C. 6 THE IMPUGNED ORDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSU E IS, THEREFORE, UPHELD DISMISS ING GROUND NO.2 OF THE REVENUES APPEAL. 5.2 IN SUPPORT OF HIS CLAIM FOR AGRICULTURAL INCOME OF RS.5,15,000/ - , NO DOCUMENTARY EVIDENCE WAS FILED BY THE ASSESSEE BEFORE THE AO TO SUPPORT AND SUBSTANTIATE THE SAME. BEFORE THE LD. CIT(A), THE ASSESSEE HOWEVER F ILED THE EVIDENCE SHOWING OWNERSHIP OF LAND AS WELL AS CERTIFICATE ISSUED BY R.I., KANTAPARA TO SHOW THE QUANTUM OF AGRICULTURAL INCOME EARNED BY HIM. ALTHOUGH THIS ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WAS FORWARDED BY THE LD. CIT(A) TO THE AO FOR THE LATTERS VERIFICATION, A PERUSAL OF THE REMAND REPORT SUBMITTED BY THE AO, THE CONTENTS OF WHICH ARE REPRODUCED IN THE IMPUGNED ORDER OF THE LD. CIT(A), SHOWS THAT THE ASSESSEE DID NOT APPEAR BEFORE THE AO DURING THE COURSE OF REMAND PROCEEDINGS IN ORDER TO SUPPORT AND SUBSTANTIATE HIS CLAIM FOR AGRICULTURAL INCOME. THE LD. CIT(A) HOWEVER STILL ACCEPTED THE CLAIM OF THE ASSESSEE FOR AGRICULTURAL INCOME TO THE EXTENT OF RS.4,15,000/ - ON THE BASIS OF ADDITIONAL EVIDENCE FILED BY THE ASSESSEE AFTER OBSERVING THAT THE SAME WAS EXAMINED BY THE AO DURING THE REMAND PROCEEDINGS. AS RIGHTLY CONTENDED BY THE LD. DR, THE OBSERVATION OF THE LD. CIT(A), WHICH FORMS THE BASIS OF THE RELIEF GIVEN BY HIM TO THE ASSESSEE ON THIS ISSUE, IS CONTRADICTORY TO THE REMAND REPORT SUBMITTED BY THE AO IN AS MUCH AS DUE TO NON - COMPLIANCE ON THE PART OF THE ASSESSEE, THERE WAS NO OCCASION FOR THE AO TO EFFECTIVELY EXAMINE AND VERIFY THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) FOR THE FIRST TIME. IN OUR OPINION, THE AO THUS HAS NOT BEEN AFFORDED PROPER AND SUFFICIENT OPPORTUNITY TO VERIFY THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) FOR THE FIRST TIME IN SUPPORT OF HIS AGRICULTURAL INCOME AND THE RE LIEF GIVEN BY THE LD. CIT(A) R ELYING ON TH E SAID EVIDENCE IS CLEARLY IN VIOLATION OF RULE 46A OF THE INCOME - TAX RULES, 1962. IN THAT VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE SAME AFRESH AFTER V ERIFYING THE 7 ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. GROUND NOS. 3 AND 4 OF THE REVENUES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6 . IN THE RESULT , THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPO SES . ORDER PRONOUN CED IN THE COURT ON 30/10/2015 SD/ - SD/ - ( P.S.CHAUDHURY ) ( P.M.JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 30/10/2015 TALUKDAR,SR.PS COPY TO : 1. ADWAITA CHARAN HOTA, PLOT NO.IVR - 32/2, ASHOK NAGAR, BHUBANESWAR - 751 009 2. I.T.O. , WARD - 1( 2 ), BHUBANESWAR 3. CIT(A) - BHUBANESWAR 4. CIT BHUBANESWAR 5. D. R., ITAT, BHUBANESWAR TRUE COPY BY ORDER ASSTT. REGISTRAR I.T.A.T., CUTTACK