Subarnna Kumar Sahu, Raighar V. Principal CIT-1, Bhubaneswar

ITA 410/CTK/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 9294 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 10-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K GAUTAM
• Assessee Lawyers: P R MOHANTY
• Keywords: Business income; Assessment record
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM . / ITA NO. 410 /CTK/20 1 9 ( / A SSESSMENT Y EAR : 20 1 4 - 20 1 5 ) SUBARNA KUMAR SAHU, M/S SUBHAM TRADERS, MAIN ROAD, RAIGHAR, NABARANGPUR VS. PR.CIT, BHUBANESWAR PAN NO. : CLCPS 9799 B ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI P.R.MOHANTY , AR /REVENUE BY : SHRI M.K.GAUTAM , CIT - D R / DATE OF HEARING : 11 / 0 3 /20 2 1 / DATE OF PRONOUNCEMENT : 12 / 0 3 /20 2 1 / O R D E R PER BENCH : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 06.06.2018 , PASSED BY THE CIT (A) - 1 , BHUBANESWAR FOR THE ASSESSMENT YEAR 20 14 - 20 1 5 , ON THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT, THE ORDER OF THE FORUM BELOW IS ARBITRARY, ILLEGAL, UNJUSTIFIED AND ERRONEOUS AND HAS BEEN PASSED ON IMPROPER APPLICATION OF MIND, BEING DEVOID OF MERIT AS SUCH DESERVES TO B E QUASHED IN LIMINE. 2. FOR THAT, THE NOTICE ISSUED AS WELL AS THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, BY THE PRINCIPAL COMMISSIONER OF INCOME TAX - 1, BHUBANESWAR IS WITHOUT JURISDICTION AND ILLEGAL AND DESERVES TO BE QUASHED ON TH E GROUND THAT OF ABSENCE OF THE CONDITIONS PRECEDENT FOR EXERCISE OF THE POWER UNDER SECTION 263 OF THE ACT AND AS SUCH THE SAID ORDER IS ERRONEOUS AND WITHOUT JURISDICTION AND LIABLE TO BE CANCELLED. 3. FOR THAT, THE NOTICE ISSUED AS WELL AS THE ORD ER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, BY THE PRINCIPAL COMMISSIONER OF INCOME TAX - 1, BHUBANESWAR DESERVES TO BE QUASHED ON THE GROUND THAT, SECTION 263 HAS NO APPLICATION IN ABSENCE OF THE ITA NO. 410 /CTK/201 9 2 CUMULATIVE CONDITION NECESSARY FOR INVOCATION OF SECT ION 263 I.E., NEITHER THE ORDER IS ERRONEOUS NOR IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 4. FOR THAT, THE NOTICE ISSUED AS WELL AS THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, BY THE PRINCIPAL COMMISSIONER OF INCOME TAX - 1, BHUBANE SWAR IS WITHOUT JURISDICTION AND ILLEGAL AND DESERVES TO BE QUASHED ON THE GROUND THAT NEITHER IT'S A CASE OF LACK OF ENQUIRY NOR A VIEW NOT SUPPORTED BY THE LAW HAS BEEN ENDORSED BY THE LD. AO WHICH CAN MAKE THIS ORDER EITHER ERRONEOUS OR PREJUDICIAL TO T HE INTEREST OF REVENUE FOR INVOCATION OF SECTION 263 OF THE ACT. 5. FOR THAT, THE NOTICE ISSUED AS WELL AS THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, BY THE PRINCIPAL COMMISSIONER OF INCOME TAX - 1, BHUBANESWAR IS WITHOUT JURISDICTION A ND ILLEGAL AND DESERVES TO BE QUASHED PARTICULARLY WHEN THE ISSUES DISCUSSED IN THE 263 ORDER HAS BEEN TAKEN COGNIZANCE BY THE LD. CIT(A) IN THE REGULAR APPEAL AND THE SUBJECT MATTER OF THE ISSUES ADJUDICATED & DECIDED BY THE LD. CIT(A) AND, THEREFORE, THE LD. CIT DOES NOT ENJOY REVISIONAL JURISDICTION U/S 263 TO INTERFERE ON THESE ISSUES WHICH IS UNDER APPEAL BEFORE THE LD. CIT(A). 6. FOR THAT, THE NOTICE ISSUED AS WELL AS THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, BY THE PRINCIPAL COM MISSIONER OF INCOME TAX - 1, BHUBANESWAR IS WITHOUT JURISDICTION AND ILLEGAL AND DESERVES TO BE QUASHED PARTICULARLY WHEN THE CIT HAD INITIATED REVISION PROCEEDINGS IN ORDER TO CARRY OUT FISHING AND ROVING ENQUIRIES IN MATTERS THAT HAD ALREADY BEEN CONCLUDE D, WHICH WAS NOT PERMISSIBLE UNDER SECTION 263. 7. FOR THAT, THE APPELLANT CRAVES LEAVE TO ADD/ALTER/AMEND FURTHER GROUNDS, IF ANY, AT THE TIME OF HEARING OF APPEAL. 2. IN THIS APPEAL, THE ASSESSEE HAS AGITATED THE ORDER PASSED BY THE PR.CIT DATED 20 .03.2019. THE LD. PR.CIT EXERCISED HIS JURISDICTION AS PER SECTION 263(1) OF THE ACT IN RESPECT OF THE ASSESSMENT ORDER PASSED BY THE AO U/S.144 OF THE ACT, DATED 16.12.2016, IN WHICH THE AO HAD NOTED THAT RS.78,45,000/ - WAS TRANSFERRED TO M/S JAI MAA SA NTOSHI FILLING STATION IN THE FINANCIAL YEAR 2013 - 2014 AND CONSIDERING TO OTHER ADDITION THE AO COMPLETED THE ASSESSMENT AT AN INCOME OF ITA NO. 410 /CTK/201 9 3 RS.1,27,16,672/ - . THE PR.CIT CALLED FOR THE ASSESSMENT RECORD AND OBSERVED THAT THE AO HAS NOT CONSIDERED PROPERLY THE AMOUNT PAID TO M/S JAI MAA SANTOSHI FILLING STATION AMOUNTING TO RS.78,45,000/ - . IN THIS REGARD, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE AND THE ASSESSEE FURNISHED REPLY TO THE SAME. THE PR.CIT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND C ASE LAWS CITED BY HIM PERTAINING TO THE ISSUE OF TRANSFER OF FUNDS OF RS.78,45,000/ - TO M/S JAI MAA SANTOSHI FILLING STATION, RAIGHAR RESTORED THE CASE BACK TO THE AO FOR FRESH ADJUDICATION. 3. FEELING AGGRIEVED FROM THE ORDER OF THE PR.CIT , THE ASSESSEE FILED THIS PRESENT APPEAL BEFORE THE INCOME TAX APPELLATE TRIBUNAL. 4 . LD. AR OF THE ASSESSEE SUBMITTED THAT THE PR.CIT IS NOT JUSTIFIED IN INVOKING REVISONARY POWERS AS EXERCISED U/S.263(1) OF THE ACT AGAINST THE ASSESSMENT ORDER DATED 16.12.2016 PASSED U/S.143(3) OF THE ACT. THE ASSESSEE HAS FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) HAS DECIDED THIS ISSUE VIDE HIS ORDER DATED 06.06.2018 IN IT APPEAL NO.0268/16 - 17 IN WHICH THIS ISSUE HAS ALREADY BEEN CONSIDERED AND DECIDED BY THE CIT(A) AGAINST THE AD DITION MADE BY THE AO AMOUNTING TO RS.1,27, 16,672/ - UNDER THIS HEAD HAS BEEN RESTRICTED TO RS.6,52,365/ - . THE PR.CIT HAS PASSED HIS ORDER ON 20.03.2019 ON THE SAME ISSUE WHICH HAS ALREADY BEEN DECIDED BY THE CIT(A). THEREFORE, ITA NO. 410 /CTK/201 9 4 THE PR.CIT IS NOT JUSTIFIED T O INVOKE THE POWERS U/S.263(1) OF THE ACT. IN SUPPORT OF HIS CONTENTIONS, LD. AR RELIED ON THE FOLLOWING CASE LAWS : - I) PR.CIT VS. OIL INDIA LTD. (2019) 175 DTR (GAU) 185; II) CIT VS. K.SERA SERA PRODUCTIONS LTD. (2015) 374 ITR 503 (BOM); III) CIT VS. NI RMA CHEMICALS WORKS (P) LTD.(2009) 309 ITR 67 (GAU) 5. ON THE OTHER HAND, LD. CITDR SUBMITTED THAT THE PR.CIT HAS RIGHTLY EXERCISED HIS JURISDICTION BECAUSE THE ISSUE WAS NOT PROPERLY CONSIDERED BY THE AO. HE SHOULD HAVE MADE SEPARATE ADDITION UNDER OTHE R HEAD WHICH IS LACK IN THIS CASE. HE HAS NOT MADE ENQUIRY PROPERLY AND THEREFORE, THERE IS A CASE OF INADEQUATE ENQUIRY. ACCORDINGLY, HE SUBMITTED THAT IN THE SIMILAR CIRCUMSTANCES, THE HONBLE DELHI HIGH COURT HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF R EVENUE IN THE CASE OF BSES RAJDHANI POWER LTD. [2017] 88 TAXMANN.COM 25 (DELHI) . 6. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES AND PERUSING THE ENTIRE MATERIAL AVAILABLE ON RECORD, WE OBSERVE THAT IN THE ASSESSMENT ORDER IT HAS BEEN MENTIONED THAT THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE DATED 10.12.2016 IN THIS REGARD AND RELEVANT PARA IS AS UNDER : - 'ON PERUSAL OF THE ALL THE BANK ACCOUNT STATEMENTS MAINTAINED IN YOUR NAME, IT IS SEEN THAT THE TOTAL CREDITS IS RS.5,27,08,809/' WHEREAS THE TOTAL TURNOVER/SATES DISCLOSED BY YOU IN THE RETURN OF INCOME FOR THE A.Y.2014 - 15 IS RS.3,99,92,137/ - , THUS, THERE IS AN APPARENT DISCREPANCY OF RS, 1,27,14,672/ - WITH RESPECT TO THE CREDITS IN BANK WITH THAT OF GROSS SALES IF ALL THE CREDITS ARE TAKEN TO BE THE SALE PROCEEDS OF YOUR BUSINESS. IN THE REGARD NATURE AND SOURCES OF ALL SUCH CREDITS AND CASH BOOK WERE ASKED TO PRODUCE BUT TILL DATE YOU HAVE NOT PRODUCED - THE SAME. ITA NO. 410 /CTK/201 9 5 FURTHER, IT IS NOTED THAT FUNDS TO THE TUNE OF RS.78,45,000/ - HAS BEEN TRANSFERRED ,, T O M/S JAI MAA SANTOSHI FILING STATION,, RAIGHAR IN THE F.Y.2013 - 14. M/S JAI MAA SANTOSHI FHMS STATION,, RAIGHAR HAS CONFIRMED THAT THE ENTIRE FUND HAS BEEN TRANSFERRED TO ITS ACCOUNT TOWARDS PAYMENT OF DIESEI BILLS PURCHASED BY YOU. HOWEVER, YOU HAVE CLAIM ED FUEL EXPENSES OF RS.5,200/ - AND TRANSFORMATION CHARGES OF RS. 1,20,500/ - IN YOUR P & L J ACCOUNT FOR THE YEAR ENDING 31.03.2014. EXPENDING TO THE TUNE OF RS.78,45,000/ - ON DIESEL PURCHASE FOR A BUSINESS OF MAIZE TRADING IS NOT AT ALL ACCEPTABLE. EITHER YOU HAVE A FLEET OF HEAVY GOODS CARRIAGES OR PASSENGER VEHICLES FOR PURCHASING SUCH A HUGE AMOUNT OF DIESEL FROM A PETROL PUMP. IF THE UNDERSIGNED RELY ON THE CONFIRMATION OF THE M/S JAI MAA SANTOSHI FILING STATION, THEN IT SHALL BE HELD THAT YOU HAVE MAD E EXPENDITURE OF RS.78,45,000/ - TOWARDS FUEL BUT NOT RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED FOR THE A.Y.2014 - 15. THIS OUT OF 'BOOKS EXPENDITURE IS MADE OUT OF THE SUPPRESSED SALE PROCEEDS OF RS. 1,27,16,672/ - . IN VIEW OF THE ABOVE, YOU ARE HEREBY SHOW CAUSE TO EXPLAIN WHY SHALL THE ENTIRE AMOUNT OF RS. 1,27,16,672/ - NOT BE ADDED TO THE TOTAL INCOME BEING SUPPRESSION/CONCEALMENT OF SALE PROCEEDS FROM BUSINESS. SIMULTANEOUSLY PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T.ACT, 1961 SHALL BE INITIATED AGAIN ST YOU FOR CONCEALING THE PARTICULARS OF INCOME. ACCORDINGLY, THE AO COMPLETED THE ASSESSMENT BY ADDING THE ENTIRE AMOUNT OF RS.1,27,16,672/ - INCLUDING RS.78,45,000/ - , WHICH IS CLEAR FROM THE SHOW CAUSE NOTICE ISSUED BY THE AO TO THE ASSESSEE. AGAINST TH E ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) HAS CONSIDERED THE ENTIRE ISSUE AS UNDER : - 3.5 I HAVE CONSIDERED THE MATTER AND PERUSED THE REMAND REPORT OF THE AO. THE WRITTEN SUBMISSIONS OF THE ASSESSEE HAVE BEEN DULY CONS IDERED. IN THE COURSE OF REMAND PROCEEDING, THE ASSESSEE HAS FILED BEFORE THE AO A CASH FLOW STATEMENT IN LIEU OF CASH BOOK AND AS PER THIS CASH FLOW STATEMENT THE SOURCES OF ALL THE BANK DEPOSITS ARE APPARENTLY EXPLAINED. HOWEVER, THE AO HAS NOT ACCEPTED THIS CASH FLOW STATEMENT IN HIS REMAND REPORT ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE SUPPORTING BOOKS OF ACCOUNT SUCH AS CASH BOOK, LEDGER ETC. THE AO HAS ALSO NOTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN THE REASON FOR TRANSF ER OF FUNDS OF RS.78,45,000/ - TO M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR. ACCORDING TO THE AO, THE ADDITION OF RS. 1,27,16,672/ - MADE BY THE AO IS JUSTIFIED SINCE THE ASSESSEE HAS NOT EXPLAINED SATISFACTORILY THE SOURCES OF THE IMPUGNE D DEPOSITS. I AM IN AGREEMENT WITH THE AO THAT THE CASH FLOW STATEMENT CANNOT BE ACCEPTED AS CORRECT IN THE ABSENCE OF SUPPORTING BOOKS OF ACCOUNT. SO FAR AS THE TRANSFER OF FUNDS TO M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR IS ITA NO. 410 /CTK/201 9 6 CONCERNED, THE EXPLANAT ION OF THE ASSESSEE IS THAT FUNDS WERE TRANSFERRED FROM TIME TO . TIME TO THE ACCOUNT OF M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR FOR MAKING PAYMENTS TO THE MAIZE FARMERS FROM WHOM THE ASSESSEE USED TO PURCHASE MAIZE. HOWEVER, THE STATEMENT OF M/S. J AI MAA SANTOSHI FILLING STATION, RAIGHAR DOES NOT SUPPORT THE CLAIM OF THE ASSESSEE. M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR STATES THAT IT HAD RECEIVED AN AMOUNT OF RS.78,45,000/ - TOWARDS SALE OF FUEL TO THE ASSESSEE. GOING BY THE NATURE OF THE BUS INESS OF THE ASSESSEE, IT IS HARD TO BELIEVE THAT IT COULD HAVE PURCHASED FUEL WORTH OF RS.78,45,000/ - FROM M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR. THERE WAS NO REQUIREMENT FOR THE ASSESSEE TO PURCHASE SO MUCH FUEL FROM M/S. JAI MAA SANTOSHI FILLIN G STATION, RAIGHAR. ON THE FACTS OF THE CASE, THE STATEMENT OF M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR IS HIGHLY SUSPECT. HOWEVER, THE SOURCES OF THE PAYMENT MADE TO M/S. JAI MAA SANTOSHI FILLING STATION, RAIGHAR HAVE BEEN TREAE6 AS EXPLAINED BY TH E AO HIMSELF BEING OUT OF THE EXCESS BANK DEPOSITS - OF RS.1,27,16,672/ - . TAKING INTO ACCOUNT THE ENTIRE GAMUT OF THE RELEVANT FACTS AND CIRCUMSTANCES OF THE ASSESSEE'S CASE, IT IS'QUITE REASONABLE TO CONSIDER THE EXCESS DEPOSITS AS UNEXPLAINED BUSINESS REC EIPTS OF THE ASSESSEE. THE EXPENDITURE INCURRED ON FUEL ALSO INDICATES THAT THE EXCESS DEPOSITS MIGHT REPRESENT THE BUSINESS RECEIPTS OF THE ASSESSEE. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE AO IN HIS FINAL SHOW CAUSE NOTICE, THE CONTENTS OF WHICH AR E THERE IN THE EXTRACT OF THE ASSESSMENT ORDER REPRODUCED ABOVE, HAS ACCEPTED THAT THE APPARENT DISCREPANCY OF RS.1,27,16,672/ - IS TO BE TAKEN AS SALE PROCEEDS OF ASSESSEE'S BUSINESS. IF THE EXCESS DEPOSITS IN BANKS ARE TAKEN AS SALE PROCEEDS OF THE ASSESS EE NOT DISCLOSED IN THE RETURN, THEN IT WOULD BE QUITE UNREASONABLE AND UNJUSTIFIED TO TAX THE ENTIRE SALE PROCEEDS AS INCOME OF THE ASSESSEE. IN HIS WRITTEN SUBMISSION, THE ASSESSEE HAS REFERRED TO A COUPLE OF CASE LAWS, WHERE, UNDER SIMILAR FACTS AND CIR CUMSTANCES, THE JUDICIAL AUTHORITIES HAVE DIRECTED FOR TAXING ONLY THE PROFIT ELEMENT EMBEDDED IN THE UNDISCLOSED SALE PROCEEDS. IN THE CASE OF RR CARRYING CORPORATION REPORTED IN 126 TTJ (CTK) 240, THE HON'BLE JURISDICTIONAL ITAT HAS HELD THAT IN CASES OF UNDISCLOSED TURNOVER, TO TAX THE ENTIRE TURNOVER AS INCOME OF THE ASSESSEE WOULD BE TOO HIGHHANDED AND UNREASONABLE AND, THEREFORE, ONLY THE PROFIT EMBEDDED IN THE TURNOVER CAN BE TAXED. THE SAME VIEW HAS BEEN TAKEN BY THE HON'BLE MP HIGH COURT IN THE CAS E OF CIT V. BALCHAND AJIT KUMAR (2004) 186 CTR 419. THE HON'BLE GUJARAT HIGH COURT HAS ALSO HELD IN THE CASE OF PRESIDENT INDUSTRY THAT IN CASE OF SUPPRESSION OF RECEIPTS, THE TOTAL RECEIPTS CANNOT BE ADDED TO THE TOTAL INCOME AND ONLY THE PROFIT EMBEDDED IN THE GROSS RECEIPTS SHOULD BE TAXED BY APPLYING THE PROFIT RATE. KEEPING IN VIEW THE ABOVE DECISIONS OF VARIOUS JUDICIAL AUTHORITIES, I AM OF THE VIEW THAT IT WOULD BE PROPER AND REASONABLE TO TAX THE PROFIT EMBEDDED IN THE UNEXPLAINED BUSINESS RECEIPTS OF RS. 1,27,16,672/ - . THE ASSESSEE IS FOUND TO HAVE DISCLOSED A PROFIT RATE OF 5.13% (APPROX.) IN THE RETURN OF INCOME. APPLYING THE SAME PROFIT RATE, THE PROFIT ON THE UNDISCLOSED TURNOVER OF RS.1,27,16,672/ - WOULD COME TO RS.6,52,365/ - (5.13% OF RS.1,27, 16,672). ACCORDINGLY, THE ADDITION OF RS.1,27,16,672/ - IS REDUCED TO RS.6,52,365/ - . ITA NO. 410 /CTK/201 9 7 7. FROM THE ABOVE ORDER OF CIT(A), IT IS CLEAR THAT THE IMPUGNED ISSUE AS HELD BY THE PR.CIT HAS ALREADY BEEN CONSIDERED AND DECIDED BY THE CIT(A). THEREFORE, THE SAME CA NNOT BE EXERCISED BY THE PR.CIT AS HE HAS DONE SO. WE FOUND SUBSTANCE ON THE CONTENTION OF LD. AR OF THE ASSESSEE. THE CASE LAW RELIED ON BY THE LD. CIT - DR IS NOT APPLICABLE IN THE PRESENT CASE AS THE FACTS IN THE SAID CASE ARE ON DIFFERENT FOOTINGS. THUS, WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. CONSEQUENTLY, APPEAL OF THE ASSESSEE IS ALLOWED. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12 / 0 3 / 20 2 1 . S D/ - ( C.M.GARG ) S D/ - (L.P.SAHU) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; DATED 12 / 0 3 /20 2 1 PRAKASH KUMAR MISHRA, SR.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , /ITAT, CUTTACK 1. / THE APPELLA NT - SUBARNA KUMAR SAHU, M/S SUBHAM TRADERS, MAIN ROAD, RAIGHAR, NABARANGPUR 2. / THE RESPONDENT - PR.CIT, BHUBANESWAR 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTT ACK 6. / GUARD FILE. //TRUE COPY//