PETL EXPORTS P.LTD, BANGALORE V. ITO 8(2)(4), MUMBAI

ITA 5143/MUM/2012

• Counselvise Citation: 514319914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JITENDRA SINGH; SATENDRA PANDEY
• Keywords: Rejection of books of accounts; Business income; Competent authority
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 5143/M/2012 ASSESSMENT YEAR: 2008 - 09 M/S. PETL EXPORT P. LTD. 902, PRESTIGE, MERIDIAN BUILDING 1, 9 TH FLOOR, 29 M.G. ROAD, BANGALORE 560 001 PAN: AACCP1453B VS. I.T.O. 8(2)(4) MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : S/ SHRI JITENDRA SINGH & SATENDRA PANDEY REVENUE BY : SHRI SANJEEV JA IN, D.R. DATE OF HEARING : 05.12. 2013 DATE OF PRONOUNCEMENT : 29.01.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 11.05.12 RELEVANT TO ASSESSMENT YEAR 2008 - 09. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 16, MUMBAI ERRED IN PASSING THE ORDER DATED 11TH MAY, 2012 CONFIRMING THE ACTION OF THE LD. A. O. IN REJECTING BOOK OF ACCOUNTS AND DIRECTING HIM TO ESTIMATE INCOME AT RS.2,35,996/ - BEING 5% OF NET PROFIT ON TOTAL SALES AS AGAINST LOSS OF RS. 10,93,667/ - DECLARED BY THE APPELLANT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APPELLANT, THEREFORE, PRAYS THAT THE ADDITION OF RS.2, 35,996/ - IS UNJUSTIFIED AND HENCE, THE SAME MAY BE DELETED. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) ERRED IN NOT DIRECTING THE LD. A.O. TO SET OFF THE LOSSES OF EARLIER YEARS AGAINST THE INCOME, DIRECTED BY HIM TO BE ESTIMATED, FOR THE IMPUGNED ASSESSMENT YEAR. 3. THE LD. CIT(A), FURTHER, ERRED IN NOT ALLOWING CARRY FORWARD OF UNABSORBED LOSS OF RS. 10,93,667/ - INCURRED BY THE APPELLANT FOR THE IMPUGNED ASSESSMENT YEAR WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO. 5143/M/2012 M/S. PETL EXPORT P. LTD. 2 4. THE LD. CIT (A), FURTHER, ERRED IN NOT ALLOWING CARRY FORWARD OF UNABSORBED LOSSES OF EARLIEST ASSESSMENT YEARS INCURRED BY THE APPELLANT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE APPELLANT, CRAVES, LEAVE TO ADD, AMEND, ALTER OR DELETE AN Y OF THE ABOVE GROUNDS OF APPEAL. 2. SINCE ALL THE GROUNDS OF APPEAL ARE INTERCONNECTED, HENCE THE SAME ARE TAKEN TOGETHER FOR ADJUDICATION. THE BRIEF FACTS ARE THAT DURING THE COURSE OF PROCEEDINGS THE ASSESSEE SUBMITTED BEFORE THE A SSESSING O FFICE R (HEREIN FURTHER REFERRED TO AS AO) THAT ITS CASE MAY BE TRANSFERRED TO BANGALORE AS ITS JURISDICTIONAL ASSESSING OFFICE WAS IN BANGALORE AND THAT FURTHER QUERIES MAY BE SENT AT THE BANGALORE OFFICE. THE ASSESSEE FURTHER REQUES TED WITHDRAWAL OF THE NOTICE U/ S.142(1) AND FAILED TO FURNISH THE REQUISITE DETAILS. ACCORDINGLY, THE AO REQUESTED THE C IT - 8, MUMBAI FOR THE NECESSARY ORDERS U/S. 127 OF THE ACT SO AS TO ENABLE THE TRANSFER OF THE CASE RECORDS OF THE ASSESSEE TO THE AO IN BANGALORE . THEREAFTER, VIDE NOTICE U/S. 142(1) DATED 10/11/2010, THE AO INFORMED THE A SSESSEE ABOUT THE INITIATION OF PROCEDURE FOR TRANSFERRING THE CASE WILL TAKE SOME MORE TIME WHICH INVOLVED AN NOC FROM THE AO AT BANGALORE . S INCE THE TIME BARI NG DATE WAS FAST APPROACHING , TO COMP LETE THE PENDING ASSESSMENT PROCEE DINGS , THE AO ASKED THE ASSESSEE TO FILE THE DETAILS AS REQUIRED U/S. 142(1). THE ASSESSEE FAILED TO COMPLY WITH THE NOTIC E. THE AO HELD THAT THE ASSESSEE HAD ADOPTED STAND OF NON - C OOPERATION. THE ASSESSEE HAD FILED THE R ETURN FOR THE YEAR UNDER CONSIDERATION WITH THE REGISTERED ADDRESS FALLING UNDER HIS JURISDICTION AND THUS LEGALLY BOUND TO COMPLY WITH ALL THE STATUTORY PROCEEDINGS INITIATED IN HIS CHARGE TILL THE REQUEST FOR TRANSFER WAS FULFILLED. THE AO FURTHER OBSERV ED THAT THE ASSESSEE'S REQUEST FOR TRANSFER WAS RECEIVED BY HIM ON 23.08.2010 AND THE REQUEST WAS IMMEDIATELY FORWARDED TO THE CIT - 8, MUMBAI WHO HAS BEEN THE COMPETENT AUTHORITY TO PASS THE NECESSARY ORDERS FOR TRANSFERS OF CASES. THE AO FURTHER ITA NO. 5143/M/2012 M/S. PETL EXPORT P. LTD. 3 HELD THAT PENDING SUCH TRANSFER, THE ASSESSEE COULD NOT BE ADAMANT THAT IT WOULD NOT COMPLY WITH THE ASSESSMENT PROCEEDINGS PENDING IN HIS CHARGE. TILL THE CASE WAS TRANSFERRED ALL THE STATUTORY COMPLIANCES WOULD HAVE TO BE MADE. THE AO FURTHER HELD THAT IF BY NON - C OOPERATING IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE MEAN T TO CHALLENGE THE JURISDICTION OF ITO, MUMBAI, THEN BY VIRTUE OF PROVISIONS OF SECTION 124(3)(A) OF THE A CT THE JURISDICTION OF AN AO HAD TO BE CHALLENGED WITHIN ONE MONTH OF THE RECEIPT OF NOTICE U / S. 143(2) OF THE ACT. IN ASSESSEES CASE , NOTICE U / S. 143(2) WAS ISSUED ON 04.08.2009. THUS, THE ASSESSEE SHOULD HAVE FILED THE REQUEST FOR TRANSFER ON OR BEFORE 20.09.2009. BUT THE ASSESSEE CLAIM ED TO HAVE FILED THE FIRST LETTER REQUESTING FOR TRANSFER ON 13.05.2010 WITH DC IT - 8(2), MUMBAI. THE AO THEREFORE PROCEEDED TO MAKE ASSESSMENT UNDER SECTION 144 AS OF THE ACT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. HE POINTED OUT VARIOUS DISCREPANCIES IN THE ACCOUNTS OF THE ASSESSEE AND THEREAFTER ASSESSE D THE TOTAL INCOME OF THE ASSESSEE AT RS.30 LAKHS AND DISALLOWED THE RETURNED LOSS AS WELL AS ANY CARRY FORWARD OF THE RETURNED LOSS. 3. THE LD. CIT(A) THOUGH UPHELD THE ACTION OF THE AO FOR PROCEEDING TO MAKE THE ASSESSMENT UNDER SECTION 144 OF THE ACT ON THE BASIS OF BEST JUDGMENT RU LE TAKING INTO CONSIDERATION THE MATERIAL AVAILABLE ON RECORD. HOWEVER, HE DID NOT AGREE WITH THE ADDITIONS MADE BY THE AO ON THE BASIS OF DISCREPANCIES FOUND IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE. THE LD. CIT(A) A FTER MAKING A DETAILED DISCUSSION RELATING TO ALLEGED DISCREPANCIES WHICH WERE POINTED OUT BY THE AO IN THE ACCOUNTS OF THE ASSESSEE , HELD THAT THE ASSUMPTION OF INCOME BY THE AO ON THE BASIS OF ALLEGED DISCREPANCIES WAS ERRONEOUS AND NOT IN ACCORDANCE WI TH THE LAW. HE THEREAFTER RELYING UPON VARIOUS CASE LAWS OF THE HONBLE SUPREME COURT AS WELL AS HONBLE HIGH COURTS HELD THAT THE AO HAD NEITHER PROVIDED ANY BAS IS FOR MAKING THE ESTIMATION NOR HE PROVIDED ANY METHOD OF ARRIVING AT THE FIGURE OF INCOME S O ESTIMATED BY HIM. HE FURTHER OBSERVED THAT THE ADDITIONS MADE BY THE AO WERE ITA NO. 5143/M/2012 M/S. PETL EXPORT P. LTD. 4 ON CONJECTURES AND SURMISES AND THUS NOT SUSTAINABLE IN THE EYES OF LAW. HE FURTHER HELD THAT AN ESTIMATION WAS REQUIRED TO BE MADE IN ARRIVING AT PROFIT EARNED BY THE ASSESSE E FOR THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) FURTHER NOTED THAT THE TOTAL SALES AFFECTED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION W ERE ONLY AT RS.47,19,901/ - . HE THEREFORE HELD THAT A NET PROFIT OF 5% OF TOTAL SALES WOULD MEET THE ENDS OF JU STICE AND ASSESSED THE INCOME OF THE ASSESSEE ACCORDINGLY AT RS.2,35,996/ - . AGGRIEVED FROM THE ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND ALSO HAVE GONE THROUGH THE RECORDS. 5. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS NOT ADDRESSED ANY ARGUMENT ON THE GROUND RELATING TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS BY THE AO AND ASSESSMENT OF INCOME UNDER SECTION 144 OF THE ACT BY THE AO ON THE GROUND OF FAILURE OF THE ASSE SSEE IN COOPERATING AND PROVIDING NECESSARY DETAILS TO THE AO IN THE ASSESSMENT PROCEEDINGS. HOWEVER, HE HAS CONTESTED THE ESTIMATION OF INCOME @ 5% OF THE NET PROFIT ON THE TOTAL SALES AS AGAINST LOSS OF RS.10,93,667/ - RETURNED BY THE ASSESSEE. FROM T HE FACTS IT IS APPARENT THAT DESPITE SEVERAL NOTICES SERVED BY THE AO , THE ASSESSEE FAILED TO COMPLY THE SAME AND PRO V I D E THE NECESSARY DETAILS TO THE AO. E VEN , AS OBSERVED ABOVE, LD. A.R. ALSO HAS NOT ADDRESSED ANY ARGUMENT ON THE POINT AS TO HOW THE ACT ION OF THE AO IN PROCEEDING FOR ASSESSMENT UNDER SECTION 144 OF THE ACT WAS WRONG. ACCORDINGLY, THE FINDING OF THE LD. CIT(A) UPHOLDING THE ACTION OF THE AO IN ASSESSING THE INCOME OF THE ASSESSEE UNDER SECTION 144 OF THE INCOME TAX ACT IS HEREBY UPHELD. 6. SO FAR THE ESTIMATION OF INCOME BY THE CIT(A) AT THE RATE OF 5% OF THE NET PROFIT ON TOTAL SALES IS CONCERNED, WE FIND THAT SUCH AN ESTIMATION IS QUITE ITA NO. 5143/M/2012 M/S. PETL EXPORT P. LTD. 5 REASONABLE. MOREOVER, THE HONBLE MADRAS HIGH COURT IN THE CASE OF C.PACKIRISAMY VS. ACIT (2009) 315 ITR 293 (MAD) HAS HELD THAT IN CASE OF BEST JUDGMENT ASSESSMENT , ESTIMATION OF NET PROFIT AT 5% OF TOTAL SALES IS IN ACCORDANCE WITH THE ESTABLISHED PRINCIPLES. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) , SO FAR ESTIMATI ON OF THE INCOME OF THE ASSESSEE AT THE RATE OF 5% OF THE NET PROFIT OF TOTAL SALES IS CONCERNED. 7. HOWEVER, WE MAY OBSERVE THAT THE AUTHORITIES BELOW HAVE NOT GIVEN ANY FINDING AS TO WHY THE EARLIER YEAR LOSSES SHOULD NOT BE ALLOWED TO BE SET OFF AGAI NST THE INCOME OF THE RELEVANT ASSESSMENT YEAR AND AFTER SET OFF IF THE NET RESULT IS LOSS WHY NOT THE SAME BE ALLOWED TO BE CARRIED FORWARD AS PER PROVISIONS OF THE INCOME TAX ACT. IF THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS ASSESSED UNDER SECTION 144 OF THE ACT, THAT ITSELF IS NO GROUND TO DISALLOW THE SETOFF OF EARLIER YEAR LOSSES , WHICH THE ASSESSEE OTHERWISE ENTITLED TO CLAIM AS PER LAW. IN VIEW OF THIS , IT IS HELD THAT THE ASSESSEE IS ENTITLED TO SET OFF OF LOSS OF EARLIER YEARS AGAINST THE INCOME DIRECTED BY THE LD. CIT(A) TO BE ESTIMATED FOR THE RELEVANT ASSESSMENT YEAR AND THE ASSESSEE WILL BE FURTHER ENTITLED TO CARRY FORWARD IF THE RESULTING INCOME WILL BE NEGATIVE IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL OF TH E ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01. 201 4 . SD/ - SD/ - ( P.M. JAGTAP ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED : 29.01. 201 4 . * KISHORE ITA NO. 5143/M/2012 M/S. PETL EXPORT P. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.