ITO, Ward-2(2), Bhubaneswar V. Smt. Saroj Saraogi, Bhubaneswar

ITA 448/CTK/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7266 (ITAT-CUTTACK)
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 16-11-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P R MOHANTY SURENDRA AGARWAL
• Assessee Lawyers: D K PRADHAN
• Section: 142(1); 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PA V AN KUMAR GADALE, JM ./ ITA NO. 4 48 / CTK /20 1 7 ( [ [ / ASSESSMENT YEAR : 20 1 4 - 20 1 5 ) ITO, WARD - 2(2), BHUBA NESWAR VS. SMT. SAROJ SARAOGI, PROP.: M/S SHIVAM TRADERS, C/O SRI SURENDRA AGARWALA, 3 RD FLOOR, 304, BHAGWAN TOWER, CUTTACK ROAD, LAXMISAGAR, BHUBANESWAR - 751006 ./ ./ PAN/GIR NO. : A PZPS 9464 A ( / APPELLANT ) .. ( / RESPONDENT ) [ /AS SESSEE BY : SHRI D.K.PRADHAN , DR /REVENUE BY : SHRI P.R.MOHANTY /SURENDRA AGARWAL , AR / DATE OF HEARING : 05 / 0 7 /201 8 / DATE OF PRONOUNCEMENT 05 / 07 /201 8 / O R D E R PER SHRI PA V AN KUMAR GADALE, JM : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 1 , BHUBANESWAR , FOR THE ASSESSMENT YEAR 201 4 - 201 5 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF I.T.ACT . 2. THE REVENUE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL : - 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS ON FACTS AND IN LAW. 2. THE LD. CIT(A)' IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.2,44,57,504/ - MADE BY AO IN THE ASSESSMENT BY THE WAY OF ESTIMATING OF PROFIT AT THE RATE OF 9% OF THE G ROSS SALES OF ASSESSEE'S KORAPUT BRANCH AS AGAINST 4.01% DECLARED BY THE ASSESSEE, WHEN THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN PROPERLY THE REASON FOR LOWER PROFIT IN HIS KORAPUT BRANCH WHEN COMPARED TO HIS DHENKANAL BRANCH(8.96%) FOR THE FINANCIAL YEAR 2013 - 14 RELEVANT TO THE A.Y. 2014 - 15. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND PARTICULARLY FOR THE REASON OF FAILURE ON PART OF THE ASSESSEE TO FURNISH FULL PARTICULARS OF THE CUSTOMERS TO WHOM SHE HAS MADE SALES ON WHOLESALE BASIS AND THE FAIL URE TO PRODUCED BILLS AND VOUCHERS ITA NO.448/CTK/2017 2 IN THAT REGARD, AS POINTED OUT BY THE AO IN POINT NO. (X) AT PAGE NO.3 OF THE ASSESSMENT ORDER, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ENTIRE ADDITION OF RS.2,44,57,504/ - MADE IN THE ASSESSMENT IN THIS CASE. 4. THE APPELLANT CRAVES TO ALTER, AMEND OR ADD ANY OTHER GROUND THAT MAY BE CONSIDERED NECESSARY IN COURSE OF THE APPEAL PROCEEDINGS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM WHOLESALE TRADE OF GCI SHEETS, MS ROD, AC SHEET AND CEMENT AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 29.11.2014 FOR THE ASSESSMENT YEAR 201 4 - 201 5 WITH TOTAL INCOME OF RS. 14,22,960/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICE S U/S.143(2) AND 142(1) OF TH E ACT W ERE ISSUED TO THE ASSESSEE. IN COMPLIANCE THE AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND THE CASE WAS DISCUSSED. THE AO COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT AFTER MAKING ADDITION OF RS.2,25,12,376/ - ON ACCOUNT OF ESTIMATING 9% OF TU RNOVER IN RESPECT OF KORAPUT BRANCH AS GROSS PROFIT AND ASSESSED TOTAL INCOME OF RS. 2,58,80,460/ - AND PASSED ORDER DATED 30.12.2016 . 4. ON APPEAL BEFORE THE CIT(A), LD. AR ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO . LD. CIT(A) HAV ING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND FINDINGS OF AO HAS ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGAINST THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. LD. DR SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION AND G RANTED SUBSTANTIAL RELIEF AND FURTHER LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY DETAILS BUT FILED THE EXPLANATIONS BEFORE THE CIT(A) AND ITA NO.448/CTK/2017 3 NO INFORMATION WAS FILED BEFORE LOWER AUTHORITIES , THEREFORE, PRAYED FOR ALLOWING THE APPEAL OF REVENUE. 7. CONTRA, LD. AR SUPPORTED THE ORDER OF THE CIT(A) AND EMPHASIZED THAT THE INFORMATION WAS SUBMITTED WITH THE AO IN THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE ALREADY SUBSTANTIATE D WITH EVIDENCE AND SUBMITTED THAT THE CIT(A) HAS CONSIDERED THE SUBMISSIONS A ND FACTS AS WELL AS GENUINENESS OF THE TRANSACTION S AND DELETED THE ADDITION. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT AS PER THE OBSERVATION OF THE AO THE ASSESSEE HAS SHOWN GROSS PROFIT PERCENTAGE OF M/S SHIVAM TRADERS, DHENKANAL AT 8.96% AND AT KORAPUT BRANCH IT IS 4.01%, THEREFORE, THE AO DID NOT ACCEPT THE LOWER PERCENTAGE OF GROSS PROFIT IN RESPECT OF M/S SHIVAM TRADERS, KORAPUT AS THE ASSESSEES NATURE OF BUSINESS AT KORAPUT IS NOT DIFFERENT FROM ITS BUSINES S AT DHENKANAL AND ACCORDINGLY THE AO ESTIMATED THE PROFIT FROM THE KORAPUT BRANCH OF THE ASSESSEE AT A HIGHER RATE OF 9% AS AGAINST 4.01% DISCLOSED IN THE ACCOUNTS. ON APPEAL, THE CIT(A) OBSERVED THAT THE BOOKS OF ACCOUNT HAVE BEEN PROPERLY MAINTAINED BY THE ASSESSEE WHICH IS CLEAR FROM THE ASSESSMENT ORDER ITSELF WHEREIN THERE IS NOT EVEN A WHISPER AS REGARDS THE DEFECTS IN THE BOOKS OF ACCOUNT. FURTHER THE CIT(A) OBSERVED THAT WITHOUT REJECTING THE BOOK RESULT UNDER THE PROVISIONS OF SECTION 145 OF THE A CT, THE AO CANNOT ESTIMATE THE PROFIT FROM THE BUSINESS. THE OBSERVATIONS OF THE CIT(A) ARE READ AS UNDER : - 5. I HAVE CONSIDERED THE MATTER. THE AO HAS ESTIMATED THE PROFIT FROM THE KORAPUT BRANCH OF THE ASSESSEE AT A HIGHER RATE OF 9% AS AGAINS T 4.01% DISCLOSED IN THE ACCOUNTS. THE REASON FOR THIS IS THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE THAT ITS ITA NO.448/CTK/2017 4 KORAPUT BRANCH IS INVOLVED IN WHOLESALE TRADING WHERE THE RATE OF PROFIT WILL BE LESS. THE AO HAS ALSO REFERRED TO THE AUDIT REPORT WHERE THE NATURE OF BUSINESS OF THE ASSESSEE HAS BEEN MENTIONED AS 'WHOLESALE TRADE'. THE AO IS APPARENTLY NOT SATISFIED WITH THE RATE OF PROFIT IN WHOLESALE TRADING DISCLOSED AT 4.01% AS AGAINST THE RATE OF PROFIT OF 8.96% DISCLOSED FOR ASSESSEE'S DHENKANAL BRANCH WHICH IS INVOLVED IN RETAIL TRADING. THE AO IS OF THE VIEW THAT THE PROFIT RATE IN BOTH THE BRANCHES SHOULD HAVE BEEN DISCLOSED AT THE SAME RATE. THE AO HAS ALSO MENTIONED THAT NO EVIDENCE THE ASSESSEE COULD FURNISH TO SHOW THAT ITS DHENKANAL BRANCH IS IN VOLVED IN RETAIL TRADING WHEREAS THE KORAPUT BRANCH IS INVOLVED IN WHOLESALE TRADING. ON PERUSAL OF THE FACTS ON RECORD, THE SUSPICION OF, THE AO APPEARS TO BE.CLEARLY MISPLACED AND MISGUIDED. THE ASSESSEE HAS BEEN DOING BUSINESS SINCE LONG AND ITS KORAPUT BRANCH IS ALWAYS INVOLVED IN WHOLESALE TRADING DISCLOSING A LESSER MARGIN OF PROFIT. FROM THE RECORDS OF THE EARLIER YEARS, THIS FACT IS CLEARLY EVIDENT. MOREOVER, FROM THE VERY QUANTUM OF TURNOVER, THE CLAIM OF THE ASSESSEE THAT ITS KORAPUT BRANCH IS INV OLVED IN WHOLESALE TRADING IS CRYSTAL CLEAR. THE GROSS SALE OF DHENKANAL BRANCH DURING THE RELEVANT FY IS RS.3,75,58,673/ - WHEREAS THE TOTAL SALE OF KORAPUT BRANCH IS RS,45,13,85,626/ - . IN A RETAIL TRADING OF GROCERY, ACHIEVING A TURNOVER OF MORE THAN RS.4 5 CRORES, THAT TOO IN A BACKWARD DISTRICT LIKE KORAPUT, IS WELL NIGH IMPOSSIBLE. MOREOVER, THE ASSESSEE'S IS A CASE WHERE PROPER BOOKS OF ACCOUNT HAVE BEEN MAINTAINED WHICH HAVE BEEN SUBJECTED TO TAX AUDIT U/S.44AB. THAT BOOKS OF ACCOUNT HAVE BEEN PROPERLY MAINTAINED BY THE ASSESSEE IS CLEAR FROM THE ASSESSMENT ORDER ITSELF WHEREIN THERE IS NOT EVEN A WHISPER AS REGARDS THE DEFECTS IN THE BOOKS OF ACCOUNT. WITHOUT REJECTING THE BOOK RESULT UNDER THE PROVISIONS OF SECTION 145, THE AO CANNOT ESTIMATE THE PROF IT FROM THE BUSINESS AS HAS BEEN DONE IN THIS CASE. DISCLOSURE OF LESS PROFIT FROM A PARTICULAR BRANCH MAY JUSTIFIABLY AROUSE SUSPICION IN THE MINDS OF THE AO BUT SUSPICION HOWEVER STRONG CANNOT TAKE THE PLACE OF EVIDENCE. ON THE BASIS SUSPICION ALONE, TO ESTIMATE THE PROFIT AT 9% AS AGAINST 4.01%DISCLOSED IN THE ACCOUNTS IS HIGHLY UNJUSTIFIED, HIGHHANDED AND ARBITRARY. THE SAME CANNOT AT ALL BE SUSTAINED. THE AO SHOULD HAVE DONE WELL TO REJECT THE BOOKS OF ACCOUNT IF DEFECTS WERE THERE IN THE SAME AND ONLY THEREAFTER COULD HAVE ESTIMATED THE PROFIT AT A REASONABLE RATE. BEFORE MAKING SUCH A HUGE ADDITION OF MORE THAN RS.2 CRORES, THE AO SHOULD HAVE BEEN MORE CAREFUL. THE CARELESSNESS OF THE AO IS ALSO EVIDENT FROM THE FACT THAT AFTER QUANTIFYING THE ADDITION AT RS.2,25,12,376/ - , HE HAS ADDED AN AMOUNT OF RS.2,44,57,504/ - IN THE COMPUTATION OF INCOME. THE ACTION OF THE AO IS NOT SUSTAINABLE IN THE EYE OF LAW SO FAR AS ESTIMATION OF PROFIT OF KORAPUT BRANCH IS CONCERNED. HENCE, THE ADDITION OF RS.2,44, 57,504/ - IS DELETED. 9. WE FIND THAT THOUGH THE LD. DR MADE THE SUBMISSION S BUT COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE CIT(A) AND ALSO COULD NOT BR ING ANY ITA NO.448/CTK/2017 5 NEW MATERIAL FACTS ON RECORD TO SUBSTANTIATE THAT THE CIT(A) HAS ERRED IN ALLOWING THE APPE AL OF THE ASSESSEE. ON PERUSAL OF THE ORDER OF THE CIT(A), WE FOUND THAT THE CIT(A) HAVING CONSIDERED THE BUSINESS OPERATION S AND ACTIVITIES OF THE ASSESSEE THAT THE ASSESSEE IS HAVING TWO BRANCHES AT DHENKANAL AND KORAPUT AND THERE IS A DIFFERENCE IN MARG IN DUE TO DISTURBANCES AT KORAPUT. WE FURTHER FOUND THAT THE CIT(A) HAVING DEALT ON THE ISSUE IN PARA 5 PAGE 6 OF THE ORDER, HAS PASSED A REASONED ORDER ACCEPTING THE PRESENT BUSINESS CIRCUMSTANCES OF THE ASSESSEE AND ALSO LD. CIT(A) HAS DEALT ON THE FINDI NGS OF AO AND SUBMISSIONS OF THE ASSESSEE AND TOOK A RATIONAL VIEW, WHICH ACCORDING TO US, IS ACCEPTABLE. THEREFORE, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF CIT(A) AND WE UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 10 . IN T HE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 05 / 07 / 201 8 . SD/ - ( N.S.SAINI ) SD/ - ( PA V AN KUMAR GADALE ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER CUTTACK ; DATED 05 / 0 7 /201 8 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, CUTTACK 1. / THE APPELLANT - ITO, WARD - 2 (2), BHUBANESWAR 2. / THE RESPONDENT - SMT. SAROJ SARAOGI, PROP.: M/S SHIVAM TRADERS, C/O SRI SURENDRA AGARWALA, 3 RD FLOOR, 304, BHAGWAN TOWER, CUTTACK ROAD, LAXMISAGAR, BHUBANESWAR - 751006 3. ( ) / THE CIT(A), 4. / C IT 5. , , / DR, ITAT, CUTTACK 6. [ / GUARD FILE. //TRUE COPY//