Shree Salsar Industries, Cuttack V. ITO, Cuttack

ITA 440/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77505 (ITAT-CUTTACK)
• Duration Of Justice: 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 20-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SHETH M SHETH
• Section: 144

Judgement Text

1 , CUTTACK IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK ( ) BEFORE . . , , HONBLE SHRI P.K.BANSAL, ACCOUNTANT MEMBER. /AND . . , HONBLE SHRI D.T.GARASIA, JUDICIAL MEMBER ! ! ! ! / I.T.A.NO.440 /CTC/ /2013 ' # / ASSESSMENT YEAR: 2007-08 SHREE SALASAR INDUSTRIES, CUTTACK PA NO.AARFS 2821 E - - - VERSUS- ITO WARD 1(1), CUTTACK ( %& /APPELLANT ) ( '(%& / RESPONDENT ) %& * / FOR THE APPELLANT: / SHRI D.K.SHETH/M. SHETH '(%& * / FOR THE RESPONDENT: / SHRI S.C.MOHANTY + , - / DATE OF HEARING: 22.4.2014 ./# - / DATE OF PRONOUNCEMENT: 22 .4.2014 0 / ORDER PER BENCH: THE APPEAL IS FILED BY THE ASSESSEE AGAINST ORDER DATED 30.8.2013 OF LD CIT(A), CUTTACK FOR THE ASSESSMENT YEAR 2007-08 ON FOLLOWIN G GROUNDS: 1. FOR THAT UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE ASSESSMENT AS MADE U/S.144 OF THE I.T.ACT IS ARBITR ARY, UNJUSTIFIED AND ILLEGAL IN VIEW OF THE FACT THAT THE APPELLANT NEVE R FAILED TO COMPLY ANY STATUTORY NOTICE OF THE DEPARTMENT AND WAS NEVER A DEFAULTER. 2 2. FOR THAT REJECTION OF BOOKS OF ACCOUNT IS UNREAS ONABLE AND UNCALLED FOR IN ABSENCE OF ANY DEFECT FOUND BY THE LD AO. 3. FOR THAT THE INCOME FROM BUSINESS AS DETERMINED AT RS.8,70,016/- BY APPLYING A NET PROFIT RATE OF 1.17% ON THE TURNOVER DISCLOSED IS ARBITRARY, UNREASONABLE AND UNJUSTIFIED. 2. THE ABOVE GROUNDS ARE INTERCONNECTED. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 14.11.2007. THE ASSESSEE FIRM WAS CONTINUED TO CARRY ITS BUSINESS UPTO 29.6.2006. THEREAFTER, IT UNDERWENT A CHANGE W.E.F. 29.6.2006 FROM PARTNERSHIP TO PROPRIETORSHIP. ON RETIREMENT OF SHRI BINOD KUMAR AGARWAL, THE BUSINESS WAS TAKEN OVER BY THE OTHER PARTNER SHRI S ITARAM AGARWAL UNDER HIS SOLE CONTROL AND MANAGEMENT W.E.F 30.6.2006 . DURING TH E COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(2), THE AO NOTICED T HAT IN CASE OF PROPRIETORSHIP, THE EVOLUTIONARY CHANGE CAME TO LIGHT WHEN SRI AGARWAL SUBMITTED ONE AUDIT REPORT PREPARED ON COMPACT BASIS CONSOLIDATING THE FINANCI AL AFFAIRS OF BOTH THE ENTITIES, THE FIRM AS PREDECESSOR AND THE INDIVIDUAL AS SUCCESSOR DURING THE YEAR. THE AO FOUND THAT THE FINANCIAL STATEMENT IN RESPECT OF M/S SHREE SA LASAR INDUSTRIES FOR THE PERIOD FROM 1.4.2006 TO 31.3.2007 HAS BEEN PRODUCED. IN THE AU DIT REPORT, AUDITORS REPORTED THAT THE ORIGINAL PARTNERSHIP FROM 1.4.2006 TO 29.6.2006 UND ERWENT CHANGE IN STATUS AS PROPRIETORSHIP FROM 30.6.2006 TO 31.3.2007. THIS R EVEALS THAT THE AUDITOR HAS CONDUCTED AUDIT FOR ONE SINGLE ASSESSEE IN THE FINANCIAL YEAR . FROM THE FIGURES OF BOTH PARTNERSHIP AND PROPRIETORSHIP FIRM, THE AO WAS OF THE VIEW THA T ASSESSEE HAS FILED TWO RETURNS FOR TWO ASSESSMENT YEARS IN RESPECTIVE PERIOD FOR TWO D IFFERENT ENTITIES IN VIEW OF SECTION 2(31) OF THE ACT. THE AO WAS OF THE VIEW THAT IT I S QUITE IMPRACTICABLE AND IMPROPER TO COMPUTE THE INCOME OF BOTH THE ENTITIES ON THE BASI S OF ONE SINGLE AUDIT REPORT. THE TRANSFER OF CONTROL AND MANAGEMENT IS TERMED AS SUC CESSION IN THE LANGUAGE OF SECTION 170. AS PER SECTION 170(1)(A), THE ASSESSEE SHOULD BE DONE ON THE PREDECESSOR THAT THE FIRM AND SECTION 170(1)(B) ON THE SUCCESSION I. E. INDIVIDUAL. THE AO HAS VERIFIED ALL THE INFORMATION AND WANTED TO VERIFY THE INCOME OF THE ASSESSEE FOR THE PERIOD PERTAINING TO THE PERIOD OF PARTNERSHIP SINCE THE G ROSS TURNOVER WAS OF RS.7,43,60,426/- UNDER THE AUDIT PURVIEW. ASSESSEE WAS ASKED TO PRO DUCE AUDIT REPORT FOR COMPUTING THE PROPER TAXABLE INCOME OF PARTNERSHIP FOR THE FRACTI ON PERIOD OF THE YEAR. THE DETAILS LIKE 3 OPENING BALANCE, CLOSING BALANCE, PURCHASE, SALES, INCOME AND EXPENDITURES UPTO THE DATE OF DISSOLUTION OF THE PARTNERSHIP COULD NOT B E ASCERTAINED, THEREFORE, THE AO HAS NOT CONSIDERED THE AUDIT REPORT AS SUFFICIENT COMPL IANCE AND ESTIMATED THE GROSS TURNOVER OF RS.7,43,60,426/- WITHOUT ALLOWING THE E XPENSES IN ABSENCE OF ANCILLARY REGISTERS AND VOUCHERS. 3. THE MATTER CARRIED TO LD CIT(A), WHO DISMISSED T HE APPEAL OF THE ASSESSEE. 4. AT THE TIME OF HEARING, LD A.R. SUBMITTED BEFORE US THAT ASSESSEE HAS OPERATED BUSINESS FOR THE PERIOD FROM 1.4.2006 TO 31.3.2007, WHEREAS THE AUDIT REPORT WAS PREPARED FOR A SINGLE SET OF ACCOUNTS FOR WHOLE FIN ANCIAL YEAR I.E. 2006-07. THE ASSESSEE HAD SUBMITTED THE AUDIT REPORT FOR PARTNER SHIP WHICH WAS ACCEPTED BY THE DEPARTMENT AND INCOME WAS ASSESSED BUT FOR THE PERI OD FROM 1.4.2006 TO 31.3.2007, THE AO HAS NOT ALLOWED THE PROPORTIONATE EXPENDITUR E FOR ARRIVING THE PROFIT FOR THE PERIOD 1.4.2006 TO 29.6.2006. LD A.R. SUBMITTED TH AT THE AO HAS ACCEPTED THE RETURN FOR REMAINING PERIOD ON THE BASIS OF AUDIT REPORT S UBMITTED FOR THE WHOLE YEAR. LD A.R. SUBMITTED THAT ASSESSEE HAS NO SEPARATE BOOKS OF AC COUNT FOR THE SAID PERIOD. ASSESSEE WILL PRODUCE ONLY THE SAME AUDIT REPORT BU T HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE AO FOR ESTIMATING THE I NCOME FOR THE PERIOD 1.4.2006 TO 29.6.2006. LD A.R. HAS NO OBJECTION TO THE CONTENT ION OF LD A.R. REGARDING RESTORING THE MATTER TO THE FILE OF THE AO. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD OF THE CASE. WE FIND THAT THE AO HAS MADE THE ASSESSMENT UNDER SECTION 1 44 OF THE ACT ON THE GROUND THAT ASSESSEE FAILED TO COMPLY WITH THE STATUTORY NOTICE OF THE DEPARTMENT. ASSESSEE HAS SUBMITTED THE AUDIT REPORT ALONGWITH BOOKS OF ACCOU NT. ASSESSEE HAS COMPLIED WITH THE NOTICES OF THE DEPARTMENT BUT THE ONLY DIFFICULTY O F THE ASSESSEE IS THAT THE ASSESSEE IS NOT HAVING SEPARATE AUDIT REPORT FOR THE BROKEN PER IOD. IN THE SAID PERIOD, ASSESSEE HAD COMBINED THE AUDIT REPORT FOR THE WHOLE YEAR. WE F IND THAT AO HAS NOT ALLOWED ANY EXPENDITURE ON THE GROUND THAT ASSESSEES TURNOVER IS RS.7,43,60,426/-, WHICH COMES UNDER THE AUDIT PURVIEW. WE FIND THAT IT IS NOT NE CESSARY FOR PREPARING THE AUDIT REPORT 4 FOR THE BROKEN PERIOD. WE DIRECT THE ASSESSEE TO P RODUCE ALL THE BOOKS OF ACCOUNT BEFORE THE AO AND AO IS DIRECTED TO VERIFY THE BOOK S OF ACCOUNT OF THE ASSESSEE AND ASSESS THE INCOME FOR THE BROKEN PERIOD WITHOUT OBT AINING ANOTHER AUDIT REPORT. WE FIND THAT THE AO IS AT LIBERTY TO VERIFY THE BOOKS OF AC COUNT AND ASSESS THE INCOME BY ADOPTING PERCENTAGE OF NET PROFIT. 6. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 22.4.14 ) 0 '- 2#-3 - COPY OF THE ORDER FORWARDED TO: 1. %& / THE APPELLANT : SHREE SALASAR IND., B-48, NEW INDUSTRIAL ESTATE, JAGATPUR, CUTTACK-753021. 2 '(%& / THE RESPONDENT:ITO WARD 1(1), CUTTACK 3. 0 / THE CIT, CUTTACK 4. 0 ( )/ THE CIT(A),CUTTACK 5. 4 '- / DR, CUTTACK BENCH 6. GUARD FILE . ( - '- / TRUE COPY, 0 + / BY ORDER, ASST.REGISTRAR, ITAT, CUTTA CK SD/- SD/- ( . . 5 , (P.K.BANSAL), ACCOUNTANT MEMBER ( . . ), (D.T.GARASIA(JUDICIAL MEMBER ( - ) DATE. 22 .4 .2014 (B.K.PARIDA) SENIOR.PRIVATE SECRETARY. 5 1. DATE OF DICTATION 22.4.14. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 22.4.14OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER .............. .. 9. DATE OF DISPATCH OF THE ORDER ..