DCIT, Circle - 1, Midnapore, Paschim Medinipur V. Kshemendra Kumar Mazumdar, Paschim Medinipur

ITA 485/KOL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54598 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 22-03-2011
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: S M SURANA

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE . .. . , , , , , SHRI N.VIJAYAKUMARAN, JUDICIAL MEMBER. ! ! ! ! /AND . .. .'# '#'# '#. .. . , $% SHRI C.D.RAO, ACCOUNTANT MEMBER &' &' &' &' !( !( !( !( / ITA NO . 485/KOL/2011 )* +,/ ASSESSMENT YEAR : 2005-06 (./ / APPELLANT ) D.C.I.T., CIRCLE-1, MIDNAPORE - - - VERSUS - . (12.// RESPONDENT ) KSHEMENDRA KUMAR MAZUMDAR,MEDINIPUR (PAN: AJVPM 5421 D) 3 ' 3 ' 3 ' 3 ' /C.O. NO.27/KOL2011 !( !( !( !( / A/O ITA NO . 485/KOL/2011 )* +,/ ASSESSMENT YEAR : 2005-06 (./ / APPELLANT ) KSHEMENDRA KUMAR MAZUMDAR,MEDINIPUR (PAN: AJVPM 5421 D) - - - VERSUS - . (12.// RESPONDENT ) D.C.I.T., CIRCLE-1, MIDNAPORE ./ 4 5 $/ FOR THE DEPARTMENT: SHRI S.K.ROY 12./ 4 5 $/ FOR THE ASSESSEE : SHRI S.M.SURANA 6 4 #% /DATE OF HEARING : 13.10.2011. 7+ 4 #% /DATE OF PRONOUNCEMENT : 21.10.2011. $8 / ORDER ( (( ( . .. .'# '#'# '#. .. . ) )) ), , , , $% PER SHRI C.D.RAO, AM THE ABOVE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE AGAINST SEPARATE ORDERS DATED 24.01.2 011 OF THE CIT(A)-XXXVI, KOLKATA PERTAINING TO A.YR. 2005-06. 2 2. BOTH THE REVENUE AS WELL AS ASSESSEE HAVE RAISED THE ONLY ONE ISSUE WHICH RELATES TO ESTIMATION OF INCOME OF ASSESSEE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT WHILE DOI NG THE SCRUTINY ASSESSMENT ASSESSING OFFICER HAS ASSESSED THE INCOME OF ASSESS EE AT RS.1,02,07,435/- AS AGAINST THE RETURNED INCOME OF RS.11,08,740/- BY MAKING SEV ERAL ADDITIONS AS MUCH AS NINE ADDITIONS UNDER VARIOUS HEADS. 3.1. ON APPEAL LD. CIT(A) HAS DELETED ALL THE ADDI TIONS. HOWEVER, HE ESTIMATED THE INCOME OF ASSESSEE AT 6% OF THE GROSS RECEIPTS BY O BSERVING AS UNDER :- 7. HOWEVER, I FIND FROM THE ASSESSMENT ORDER AS WE LL AS FROM THE SUBMISSION OF THE APPELLANT THAT ADMITTEDLY THE BOOKS OF ACCOUNTS WERE NOT COMPLETE AND WERE PARTIAL. THE AO ALSO NOTICED VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNTS DURING THE ASSESSMENT PROCEEDINGS AND THE APPELLANT FAILED TO SUBMIT REPLY TO SOME OF THE QUERIES RAISED BY THE AO. THEREFORE IN MY OPINION, NO RELIA NCE CAN BE PLACED ON SUCH BOOKS OF ACCOUNTS. IT HAS BEEN HELD BY THE HONBLE SUPREM E COURT IN THE CASE OF INVESTMENT LTD REPORTED IN 77 ITR 533 THAT IF THE BOOKS OF ACC OUNTS ARE NOT PROPER AND CORRECT INCOME CANNOT BE ADDUCED FROM THERE, SUCH BOOKS ARE LIABLE TO BE REJECTED. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF BRITISH PAINTS (INDIA) LTD, REPORTED IN 188 ITR 44 AND ALSO IN THE CASE OF UNITED COMMERCIAL BANK REPORTED IN 240 ITR 355. THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF NATIONAL PLASTIC INDUSTRIES, REPORTED IN 309 ITR 191 HAS HEL D THAT IF THE BOOKS OF ACCOUNTS ARE NOT PROPERLY MAINTAINED AND SUFFERED FROM DEFICIENC Y SUCH BOOKS ARE LIABLE TO BE REJECTED. THE AR OF THE APPELLANT HAS BROUGHT TO MY NOTICE THE DECISIONS TAKEN BY THE CIT(A) AND THE HONBLE TRIBUNAL IN THE CASE OF KART ICK CHANDRA DHAR, ANOTHER CONTRACTOR OF THE SAME AREA WHERE ON ALMOST IDENTIC AL ISSUES, THE AO DID NOT ACCEPT THE BOOKS OF ACCOUNTS BUT MADE SPECIFIC ADDITIONS U NDER DIFFERENT HEADS FOR A.Y. 2005-06. THE LD. CIT(A)S FINDING THAT THE BOOKS WE RE NOT PROPERLY MAINTAINED AND HAD VARIOUS DEFECTS, DIRECTED THE AO TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE THE NET PROFIT AT 5% OF THE GROSS RECEIPTS DECLARED BY THE ASSESSEE. THE DEPARTMENT FILED AN APPEAL BEFORE THE ITAT AND THE ITAT, A-BENCH, KO LKATA IN ITA NO.1095/K/2009 DATED 25.6.2010 DISMISSED THE APPEAL OF THE DEPARTM ENT. THE AR HAS ALSO SUBMITTED COPY OF TWO SCRUTINY ASSESSMENT ORDERS OF THE APPEL LANT FOR THE SUBSEQUENT ASSESSMENT YEARS, I.E. A.YS.2006-07 AND 2007-08 AND A COMPARAT IVE STATEMENT SHOWING YEAR-WISE FIGURES OF GROSS RECEIPTS, PERCENTAGE OF NET PROFIT AS OF PROFIT AFTER ADDITION MADE IN THE SCRUTINY ASSESSMENTS, WHICH READS AS FOLLOWS: ASSTT. YEAR GROSS RECEIPT NET PROFIT % OF PROFIT AS PER RETURN ADDITION IN ASSESSMENT % OF PROFIT AFTER ADDITION REMARKS 2005-06 2,23,48,928 10,26,593 4.59% 90,98,669 45.31 % APPEAL PENDING 2006-07 1,37,28,851 6,31,585 4.60% 22,057 4.76% NO APPEAL 2007-08 3,54,97,637 17,74,880 5% 9,98,753 7.81% APP EAL PENDING 3 8. IN VIEW OF THE FOREGOING AS WELL AS VARIOUS OBS ERVATIONS MADE BY THE AO REGARDING THE DEFECTS IN THE BOOKS OF ACCOUNT OF. T HE APPELLANT AND WITHOUT GOING INTO DETAILED DISCUSSION ON EACH HEAD OF ADDITION, I FIN D IT A FIT CASE FOR REJECTING BOOKS OF ACCOUNT AND ESTIMATE THE INCOME AS PER PROVISIONS O F SECTION 145(3) OF THE ACT AND THE AO IS DIRECTED ACCORDINGLY. IT IS SEEN FROM THE ABO VE TABLE THAT INCOME OF THE APPELLANT FOR THE. A.YS. 2006-07 AND 2007-08 HAS BE EN ASSESSED AT NET PROFIT RATE OF 4.76% AND 7.81% RESPECTIVELY AGAINST RETURNED NET P ROFIT RATE AT 4.60% AND 5%. CONSIDERING THIS, I FIND IT FAIR AND PROPER IN DIRE CTING THE AO TO ESTIMATE THE INCOME OF THE APPELLANT 6% OF THE GROSS RECEIPTS OF RS.2,2 3,48,928/-, EQUIVALENT TO RS. 13,40,936/-. THUS, THE NET PROFIT OF THE APPELLANT FROM HIS BUSINESS IS DETERMINED AT RS.13,40,936/- IN PLACE OF RS10,26,593/- DISCLOSED BY THE APPELLANT IN THE RETURN. SINCE INCOME OF THE APPELLANT IS ESTIMATED @ 6% OF THE GROSS RECEIPTS, THE ADDITIONS MADE BY THE AO UNDER SEPARATE HEADS ARE NOT NECESSA RY. 3.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US AND ASSESSEE HAS RAISED CROSS OBJECTION BY REASON THAT LD. CIT(A) SH OULD HAVE APPLIED 5% OF THE GROSS RECEIPTS AS INCOME OF ASSESSEE. 4. AT THE TIME OF HEARING, THE LD. DR APPEARING ON BEHALF OF REVENUE HAS RELIED ON ORDERS OF AO AND REITERATED THE OBSERVATIONS MADE B Y AO AND CONTENDED THAT THE ADDITIONS MADE BY AO TO BE UPHELD SINCE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT WHEREAS LD. CIT(A) HAS ESTIMATED THE INCOME BASED O N THE NET PROFIT RATES. THEREFORE HE REQUESTED TO SET ASIDE THE ORDER OF LD. CIT(A) A ND RESTORE THAT OF AO. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE BY REFERRING TO ITATS ORDERS VIDE ITA NOS. 1095/KOL/2009 AND 11 65/KOL/2009 IN THE CASE OF SRI KARTICK CHANDRA DHAR, MEDINIPUR ORDER DATED 25.06. 2010 AND ITA NO.1445/KOL./2010 ORDER DATED 20.01.2011. WHEREIN I TAT HAS ESTIMATED THE INCOME OF ASSESSEE WHO IS MAKING A SIMILAR NATURE OF BUSIN ESS AS THAT OF ASSESSEE. THEREFORE HE REQUESTED TO RESTRICT THE ESTIMATION TO 5% OF TH E GROSS RECEIPTS. 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THOUGH AO MADE THE ADDITIONS ON SEVERAL GROUNDS THE MAIN REASON FOR MAKING SUCH ADDITIONS A RE BAD MAINTENANCE OF BOOKS OF ACCOUNT. THOUGH HE HAS NOT SPECIFICALLY MENTIONED T HAT THE BOOKS OF ACCOUNT ARE REJECTED IF WE CONSIDER THE OBSERVATIONS MADE BY AO IN THE ASSESSMENT ORDER OR LEADS 4 TO THE DEFECTS IN THE BOOKS OF ACCOUNTS. UNDER THES E CIRCUMSTANCES, LD. CIT(A) IS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND MA KING THE ESTIMATION ON GROSS RECEIPTS. HOWEVER, SINCE ASSESSEE IN HIS CROSS OBJE CTION REQUESTED TO RESTRICT THE ESTIMATION TO 5% BASED ON TRIBUNALS DECISIONS WE H AVE CAREFULLY PERUSED THE TRIBUNALS ORDERS ON WHICH THE LD. AR FOR ASSESSEE IS PLACING RELIANCE. IN THE CASE OF ITA NO.1095/KOL/2009 LD. CIT(A) HIMSELF HAS ESTIMAT ED THE INCOME AT 5% WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL. WHEREAS IN THE CASE OF ITA NO.1445/KOL/2010 THE TRIBUNAL HAS FOLLOWED THE ORDERS OF EARLIER BENCH O F TRIBUNAL. THE LD. COUNSEL APPEARING FOR ASSESSEE COULD NOT ELABORATE THE FACT S UNDER WHICH CIRCUMSTANCES THE TRIBUNAL HAS ADOPTED 5% OF THE TURN OVER. HOWEVER, IN ASSESSEES OWN CASE AT HAND, THE ASSESSEE HIMSELF HAS DECLARED NET PROFIT AT 4.5 9% IN THE IMPUGNED ASSESSMENT YEAR AND 4.6% FOR A.YR. 2006-07 AND 5% FOR ASSTT. YEAR 2 007-08. UNDER THESE CIRCUMSTANCES WE ARE UNABLE TO ACCEPT THE REQUEST O F LD.COUNSEL FOR ASSESSEE TO RESTRICT THE ESTIMATE AT 5% HOWEVER, KEEPING IN VIEW OF THE PECULIAR FACTS OF THE CASE WE CONSIDER IT TO REDUCE THE ESTIMATION AT 5.5% FOR TH E IMPUGNED ASSESSMENT YEAR ONLY. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED AND CROSS OBJECTION OF ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE COURT ON 21.10.2011 SD/- SD/- . .. . , , , , ) ) ) ) N.VIJAYAKUMARAN, JUDICIAL MEMBER . .. .'# '#'# '#. .. . , ,, , $% $% $% $% , C.D.RAO, ACCOUNTANT MEMBER. ( (( (#% #% #% #%) )) ) DATE: 21.10.2011. R.G.(.P.S.) 5 $8 4 1)) 9$+:- COPY OF THE ORDER FORWARDED TO: 1. KSHEMENDRA KUMAR MAJUMDAR, MIRZABAZAR, P.O.MIDNAPOR E, DIST.PASCHIM MEDINIPUR. 2 THE D.C.I.T., CIRCLE-1, MIDNAPORE. 3. THE CIT, 4. THE CIT(A)-XXXVI, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA 2 1)/ TRUE COPY, $8/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES