Bhagbandas Agarwalla, Angul V. ITO, Angul Ward, Angul

ITA 439/CTK/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4369 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-01-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 22-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: D K SHETHMOHIT SHETH
• Keywords: Rejection of books of accounts
• Section: 68

Judgement Text

1 ITA NO. 439/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 439 /CTK/2016 ASSESSMENT YEAR : 201 2 - 2013 BHAGBAN DAS AGARWALLA, PROP. GEETA AGENCIES, HATISALAPADA, ANGUL VS. ITO, ANGUL WARD, ANGUL. PAN/GIR NO. AAYPA 1361 L (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI D.K.SHETH/MOHIT SHETH, AR REVENUE BY : SHRI D.K.PRADHAN, DR DATE OF HEARING : 3 1 / 01 / 201 8 DATE OF PRONOUNCEMENT : 31 / 0 1/ 201 8 O R D E R PER PAVAN KUMAR GADALE, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 2, BHUBANESWAR DATED 19.8.2016 FOR THE ASSESSMENT YEAR 2011 - 12. 2. ALTHOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS OF APPEAL BUT THE TWO ISSUES ARE ARISING OUT OF THE GROUNDS OF APPEAL I.E. (I) ESTIMATION OF GROSS PROFIT AT 2.25% AND (II) ADDITION OF RS.29,00,000/ - U/S.68 OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF WHOLESALE TRADE AND CONSIGNMENT SALE IN GENERAL COMMODITIES. THE 2 ITA NO. 439/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 RETURN OF INCOME WAS FILED ON 14.02.2003 DECLARING TOTAL INCOME OF RS. 4.84,310/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) AND NOTICE U/S.142(1) WERE ISSUED. IN COMPLIANCE THERETO, THE LD A.R. APPEARED FROM TIME TO TIME AND CASE WAS DISCUSSED. THE ASSESSING OFFICER NOTED THAT EVEN THOUGH STATUTORY NOTICES WERE ISSUED THERE WAS NO SUFFICIENT COMPLIANCE BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER ISSUED SHO W CAUSE NOTICE ASKING THE ASSESSEE WHY THE ASSESSMENT SHOULD NOT BE COMPLETED U/S.144 OF THE ACT. SINCE, THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND OTHER DETAILS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT. THE AS SESSING OFFICER FOUND THAT THE ASSESSEE HAS DISCLOSED GROSS PROFIT @ 1.29% AS AGAINST DISCLOSED IN SIMILAR LINE OF BUSINESS BY OTHER ASSESSEES IN THE SAME LOCALITY, ESTIMATED THE GROSS PROFIT OF THE ASSESSEE @ 2.25% ON THE GROSS TUR OVER AND MADE ADDITION OF RS.16,30,991/ - . 4. IN RESPECT OF SECOND ISSUE, THE ASSESSING OFFICER AFTER ESTIMATING THE INCOME HAD MADE ADDITION OF RS.29,00,000/ - U/S.68 OF THE ACT AS THERE WAS NO PROPER COMPLIANCE IN RESPECT OF UNSECURED LOAN FROM THE PARTIES AND THE ASSESSING OFFICER ALSO DEALT ON THE PROVISIONS AND FINALLY CONCLUDED RELYING ON THE JUDICIAL DECISIONS THAT THE ASSESSEE COULD NOT EXPLAIN THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE PARTIES AND ASSESSED THE INCOME OF THE ASSESSEE AT RS.50,15,300/ - AND PAS SED ORDER U/S.144 OF THE ACT. 3 ITA NO. 439/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 5. ON APPEAL, THE CIT(A) CONCURRED WITH THE FINDINGS OF THE ASSESSING OFFICER. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. 7. BEFORE US, LD A.R. SUBMITTED THAT THE CIT(A) HAS ERR ED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BEST JUDGMENT U/S.144 OF THE ACT IN RESPECT OF ADDITION OF RS.16,30,991/ - BY ESTIMATING THE PROFIT AT 2.25%. LD A.R. ALSO SUBMITTED THAT THE ASSESSEE HAS BEEN OFFERING GROSS PROFIT AT 1.1 4% IN THE ASSESSMENT YEAR 2011 - 12 AND RS.1.49% IN THE ASSESSMENT YEAR 2010 - 2011, WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THE GROSS PROFIT ESTIMATED BY THE ASSESSING OFFICER IN THE CURRENT YEAR IS MORE THA N THE PROFIT SHOWN AND ACCEPTED THAN THE EARLIER YEARS . HENCE, THE ASSESSING OFFICER HAS ERRED IN MAKING THE ADDITION OF RS.16,30,991/ - ,BY ESTIMATING GROSS PROFIT AT 2.25%, WHICH IS NOT THE BENCH MARK IN THIS LINE OF BUSINESS AND PRAYED TO ACCEPT THE PROFIT RATE SHOWN BY THE ASSESSEE. 8. IN RESPECT O F SECOND ISSUE I.E. ADDITION MADE U/S.68 OF THE ACT, LD A.R. SUBMITTED THAT ONCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED THE ADDITION HAS BEEN MADE ON ESTIMATE BASIS, THERE SHOULD NOT BE ANY OTHER ADDITION. FURTHER, THE ASSESSEE HAS PROVIDED THE NAMES AND ADDRESS OF THE PARTIES AND FILED THEIR CONFIRMATIONS AND PRAYED FOR DELETION OF THE ADDITION. 9. CONTRA, LD D.R. VEHEMENTLY OPPOSED THE SUBMISSIONS OF LD A.R. OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSING OFFICER HAS CORRECTLY MADE 4 ITA NO. 439/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 THE ADDITION BASED O N THE INFORMATION FILED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND ALSO THE ADDITION IN RESPECT OF UNSECURED LOAN U/S.68 OF THE ACT HAS TO BE CONFIRMED AS THE ASSESSEE COULD NOT SATISFY THE CONDITIONS LAID DOWN UNDER SECTION 68 OF THE ACT AND PRAYED FOR D ISMISSAL OF APPEAL OF THE ASSESSEE. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. ON THE FIRST DISPUTE ISSUE I.E. ESTIMATION OF GROSS PROFIT AT 2.25%, WE FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED PROFIT AT 2.25% AS AGAINST 1.29% SHOWN BY THE ASSESSEE AND MADE AN ADDITION OF RS.16,30,991/ - . LD A.R . OF THE ASSESSEE SUBMITTED THAT IN THE CASE OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. 2010 - 11, THE INCOME WAS ESTIMATED @ 1.49% O N THE DISCLOSED SALES AND FOR THE A SSESSMENT YEAR 2011 - 12, THE INCOME WAS ESTIMATED AT 1.14% ON THE D ISCLOSED SALES. THEREFORE, HE PRAYED THAT IN THE PRESENT YEAR UNDER APPEAL, THE INCOME SHOULD BE ESTIMATED @ 1.29 % ON THE DISCLOSED SALES. WE OBSERVE THAT THE ASSESSING OFFICER HAS WRONGLY COMPARED THE PERCENTAGE WITH OTHER ASSESSEES ON SIMILAR LINE OF BUSINESS. HOWEVER, CONSIDERING THE TURNOVER OF THE ASSESSEE AS WELL AS THE BUSINESS OF THE ASSESSEE, THE ESTIMATION OF PROFIT @ 2.25% IS LITTLE HIGHER SIDES. WE, THEREFORE, MODIFY THE ORDER AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT @ 2% OF THE GROSS SALES OF THE ASSESSEE AS AGAINST 1.29% DISCLOSED BY THE ASSESSEE. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5 ITA NO. 439/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 11. ON THE SECOND DISPUTED ISSUE, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION U/S.68 OF THE ACT AFTER REJECTING BOOKS OF ACCOUNT OF THE ASSESSEE. . 12. WE FIND THAT HONBLE P&H HIGH COURT IN THE CASE OF CIT VS. DULLARAM LABOUR CONTRACTOR, 42 TAXMAN.COM 349 (P&H) HAS HELD THAT WHERE THE BOOKS OF ACCOUNT ARE REJECTED IN THEIR ENTIRETY, THE ASSESSING OFFICER CANNOT RELY ON ANY ENTRY IN THOSE BOOKS OF ACCOUNT FOR MAKING AN ADDITION TO ASSESSEES TAXABLE INCOME UNDER SECTION 68 OF THE ACT. THEREFORE , NO SEPARATE ADDITION ON A CCOUNT OF SUNDRY CREDITOR CAN BE MADE NOR CAN ANY EXPENDITURE APPEARING IN P&L ACCOUNT BE DISALLOWED . RESPECTFULLY FOLLOWING THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF DULLARAM L A BOUR CONTRACTOR (SUPRA), W E ARE OF THE OPINION THAT WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE REJECTED AND PROFIT HAS BEEN MADE ON ESTIMATION BASIS THERE SHOULD NOT BE ANY SEPARATE ADDITION AND ALLOW THE GROUND OF APPEAL OF THE ASSESSEE. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 31 / 01 /201 8 . SD/ - SD/ - ( N.S SAINI) ( PAVAN KUMAR GADALE) A CCOUNTANT MEMBER JUDICIALMEMBER CUTTACK; DATED 31 / 01 /201 8 B.K.PARIDA, SPS 6 ITA NO. 439/CTK/2016 ASSESSMENT YEAR : 2012 - 2013 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : BHAGBAN DAS AGARWALLA, PROP. GEETA AGENCIES, HATISALAPADA, ANGUL 2. THE RESPONDENT. ITO, ANGUL WARD, ANGUL 3. THE CIT(A) - 2, BHUBANESWAR 4. PR.CIT - 2, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//