ITO, Rourkela V. Biswal Ranjan Pattnaik, Rourkela

ITA 531/CTK/2013

• Counselvise Citation: 53122114 RSA 2013
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 21-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: SIDDHARTHA RAY
• Section: 144; 44AD; 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BE NCH, CUTTACK . . , . . , BEFORE SHRI P.K.BANSAL, AM & SHRI D.T.GARASIA, JM ./ ITA NO.531/CTK/2013 ( / ASSESSMENT YEAR :2009-10) ITO, WARD-3, AYAKAR BHAWAN, 1 ST FLOOR, UDIT NAGAR, ROURKELA VS. SRI BISWA RANJAN PATTANIK, BHRAMANI TARANG, VEDVYAS, ROURKELA ! ./ '# ./ PAN/GIR NO. : AJBPP 1933 H ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) ' ' ( /REVENUE BY : SHRI N.K.NEB *+ ' ( /ASSESSEE BY : SHRI SIDDHARTHA RAY ,- ' + / DATE OF HEARING : 30 TH APRIL, 2014 ./ ' + / DATE OF PRONOUNCEMENT : 02/05/2014 0 / O R D E R PER BENCH : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 20-8-2013 BY TAKING FOLLOWING EFFE CTIVE GROUNDS OF APPEAL :- 1. WHETHER THE LD. APPELLATE AUTHORITY WAS JUSTIFIE D TO ESTIMATE THE TAXABLE PROFIT FROM CONTRACT BUSINESS ONLY AT 1 % OF GROSS CONTRACT RECEIPT IN SITUATION WHERE IT WAS PROVED T HAT THE ASSESSEE HAD CONCEALED PARTICULAR OF GROSS TRANSPO RT RECEIPT BY A WIDE MARGIN OF RS.7.73 CRORES. 2 WHETHER THE LD. APPELLATE AUTHORITY WAS JUSTIFIED TO IGNORE THE WILLFUL ATTEMPT OF THE ASSESSEE IN SUBMISSION OF FA BRICATED DOCUMENTS I.E. TAX AUDIT REPORT IN WHICH THE GROSS TRANSPORT RECEIPT FOR THE F.Y.2008-09 WAS UNDERSTATED BY RS.7 .72 CRORES AND FOR THAT REASON WHETHER THE LD. APPELLAT E AUTHORITY WAS NOT JUSTIFIED TO EXERCISE HIS POWER C OTERMINESS WITH THAT OF ITS TO ESTIMATE THE BUSINESS PROFIT AT MORE THAN THE MINIMAL PERCENTAGE OF 1% OF GROSS CONTRACT RECEIPT . 2 ITA NO.531/CTK/2013 2 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS INDIVIDUAL CARRYING ON BUSINESS OF TRANSPORT BROKER. THE ASSESSEE FILED RETURN ALONG WITH TAX AUDIT REPORT SHOWING THE GROSS RECEIPT AT RS.4, 72,08,209/- AND NET PROFIT OF RS.3,05,530/-. AFTER PROCESSING THE RETUR N U/S.143(1), THE AO NOTED FROM FORM NO.26AS THAT THE TOTAL RECEIPT OF T HE ASSESSEE WAS AT RS.12,45,33,917/- INSTEAD OF RS.4,72,08,209/- AS SH OWN BY THE ASSESSEE. THE AO, THEREFORE, INITIATED THE PROCEEDI NGS U/S.147 BY ISSUING NOTICE U/S.148(2). IN REPLY THERETO THE ASS ESSEE SUBMITTED THAT THE ORIGINAL RETURN FILED BE TAKEN AS RETURN FILED U/S.148. A NUMBER OF OPPORTUNITY WAS GIVEN TO THE ASSESSEE BY ISSUING TH E NOTICE U/S.143(2) AND 142(1) EVEN THOUGH INITIALLY SHRI P.K.PANDA, AP PEARED TO TAKE THE ADJOURNMENT AND AFTER THAT NO COMPLIANCE WAS MADE E VEN THE BOOKS OF ACCOUNTS WERE NOT PRODUCED, THEREFORE, THE AO HAD N O ALTERNATIVE EXCEPT TO COMPLETE THE ASSESSMENT UNDER SECTION 144 BY ESTIMATING THE INCOME AT THE RATE OF 8% FROM THE TOTAL RECEIPT OF RS.12,45,33,917/- AS GIVEN IN FORM NO.26AS. THUS, THE TOTAL INCOME FR OM THE TRANSPORT BUSINESS WAS COMPUTED AT RS.99,62,714/-. THE ASSESS EE WENT IN APPEAL BEFORE THE CIT(A) AND BEFORE THE CIT(A) IT WAS CONTENDED THAT DUE TO CLERICAL MISTAKE IN FIGURE, THE TOTAL RECEIP T WAS SHOWN AT RS.4,42,08,209/- INSTEAD OF RS.12,45,33,917/- AND A DMITTED THAT IT IS A NO-ACCOUNTS CASE AND CAN AT BEST BE CONSIDERED T O BE A CASH SYSTEM OF ACCOUNTS AND THE ASSESSEE DOES NOT MAINTAIN CASH BOOK AND LEDGER. HE ALSO NOTED THAT THE ASSESSEE MAINTAINS ONLY A RE GISTER SHOWING TRUCK WISE AND TRIP WISE DETAILS FOR WHICH HE ACTED AS A BROKER. HE IS A 3 ITA NO.531/CTK/2013 TRANSPORT BROKER AND WORKS FOR THE SPONGE IRON PLA NTS AND OTHER SIMILAR PLANTS OPERATING AROUND ROURKELA FOR WHICH HE GETS CALLS TO ARRANGE TRUCKS FOR TRANSPORTING MATERIALS FROM THE PLANTS TO VARIOUS CUSTOMERS ACROSS THE COUNTRY. THE GOODS ARE TRANSP ORTED ON FREIGHT- TO-PAY BASIS TO THE DESTINATION CUSTOMERS, ON RECEI VING GOODS, THE CUSTOMERS DEPOSIT THE ENTIRE FREIGHT IN THE BANK AC COUNT OF THE ASSESSEE OR DEPOSIT A PART IN THE BANK ACCOUNT AND PAY THE BALANCE TO THE TRUCK DRIVERS. THE ONLY SOURCE IS THE COMMISSIO N WHICH IS DEDUCTED WHILE MAKING THE PAYMENT OF ADVANCE BEFORE LOADING OF THE GOODS. THE CIT(A) AFTER OBSERVING THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08` & 2008-09, COMPLETED UNDER SECTION 143(3) AND AFTER ADDING THE DISALLOWANCE THE NET INCOME COMPLETED BY THE AO WAS LESS THAN 1% OF THE GROSS RECEIPTS OF THE CONCERNED YEARS, TO OK THE VIEW THAT THE PROFIT PERCENTAGE @ 8% UNDER ANY CIRCUMSTANCES CAN BE ACCEPTED AND DIRECTED THE AO TO COMPUTE THE INCOME AT 1% OF THE TURNOVER OF RS.12,45,33,917/-. 3 . WE HEARD RIVAL SUBMISSIONS AND CAREFULLY CONSIDER ED THE SAME ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. LEARNED AR BEFORE US SUBMITTED THE COMPARATIVE CHART OF THE PROFIT A CCEPTED BY THE DEPARTMENT FOR THE ASSESSMENT YEARS 2007-08, 2008-0 9, 2010-11 & 2011-12. THE ASSESSMENT FOR THE ASSESSMENT YEAR 200 7-08 & 2008-09 WERE COMPLETED U/S.143(3) AND IN ALL THESE ASSESSME NT YEARS THE NET PROFIT LESS THAN 1% HAS BEEN ASSESSED. WE NOTED CON TRADICTION IN THE SUBMISSION OF THE LEARNED AR. ON THE ONE SIDE THE S UBMISSION IS MADE 4 ITA NO.531/CTK/2013 THAT THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOU NT, RETURN OF INCOME WAS FILED ALONG WITH COPY OF THE TAX AUDIT REPORT B UT BEFORE THE CIT(A), THE LEARNED COUNSEL PLEADED WHICH IS APPARENT FROM PAGE 2 PARA 4 OF THE ORDER OF THE CIT(A) THAT IT IS A NO-ACCOUNTS CASE. THE ASSESSEE IS NOT IN A HABIT OF MAINTAINING PROPER BOOKS OF ACCOU NTS LIKE CASH BOOK AND LEDGER. THE ASSESSEE MAINTAINS ONLY A REGISTER SHOWING TRUCK WISE, TRIP WISE DETAILS FOR WHICH HE ACTS AS A BROKER. IF THE ASSESSEE HAS NOT MAINTAINED THE BOOKS OF ACCOUNT, HOW THE TAX AUDIT HAS BEEN CARRIED OUT. IT APPEARS THAT EITHER THERE IS A FALSITY IN T HE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) OR THE ACCOUNTS WERE AUD ITED BY THE CHARTERED ACCOUNTANT JUST WITHOUT LOOKING INTO THE BOOKS OF ACCOUNT. IF THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT, T HE TAX AUDIT U/S.44AB, IN OUR OPINION, CANNOT BE CARRIED OUT. TH E ONUS, IN OUR OPINION, IS ON THE ASSESSEE TO PROVE THAT HE HAS MA INTAINED THE BOOKS OF ACCOUNT AND THE TAX AUDIT HAS BEEN CARRIED OUT O N THE BASIS OF BOOKS OF ACCOUNT. THE AO, IN OUR OPINION, HAS FULL POWER U/S.142(1)(II) TO ASK THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS. IT I S APPARENT FROM THE AUDIT REPORT THAT THE ASSESSEE HAS MAINTAINED THE B OOKS OF ACCOUNT. IF THE BOOKS OF ACCOUNT ARE NOT PRODUCED, THE NATURAL INFLUENCE IS THAT THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNTS AND U NDER THESE CIRCUMSTANCES, THE AO IS BOUND TO MAKE AN ASSESSMEN T U/S.144 TO THE BEST OF HIS JUDGMENT. THE PROVISION OF SECTION 44AD PROVIDES GUIDELINES FOR ESTIMATING THE INCOME AT WHAT RATE I T HAS TO BE ESTIMATED. THIS SECTION EVEN THOUGH MAY NOT BE TECHNICALLY APP LICABLE TO THE 5 ITA NO.531/CTK/2013 ASSESSEE IN VIEW OF SPECIFIC PROVISION OF SECTION 4 0AD(6). THIS SECTION PROVIDES THAT ESTIMATION OF PROFIT @8% AND ALSO STA TES THAT ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTION 30 TO 38 SHALL FOR THE PURPOSE OF SUB-SECTION 1 BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DEDUCTION UNDER THOS E SECTION SHALL BE ALLOWED. SINCE THE LEARNED AR HAS CONFESSED BEFORE THAT THE ASSESSEE IS NOT MAINTAINING THE BOOKS OF ACCOUNT, THEREFORE, IT WILL NOT BE FAIR ON OUR PART TO RESTORE THIS ISSUE TO THE FILE OF THE A O DIRECTING THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT. THE ONLY COURSE OF ACTION WHICH REMAINS BEFORE US WAS TO BE THE FAIR AND REASONABLE PROFIT WHICH THE ASSESSEE WOULD HAVE DERIVED FROM THE SAID BUSINESS. IN THE ASSESSMENT YEAR 2007-08 & 2008-09, WE NOTED THAT TH E FINDING GIVEN BY THE AO THAT THE ASSESSEE HAS MAINTAINED THE REGU LAR BOOKS OF ACCOUNT BUT THERE IS NO SUCH FINDING IN THE IMPUGNE D ASSESSMENT ORDER RATHER THAN THE LEARNED AR ACCEPTED THAT THE ASSESS EE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT EXCEPT THE REGISTE R SHOWING THE TRUCK WISE AND TRIP WISE DETAILS. UNDER THESE CIRCUMSTANC ES, WE ARE OF THE VIEW THAT THE PERCENTAGE OF THE NET PROFIT AS HAS B EEN ACCEPTED BY THE REVENUE IN THE EARLIER ASSESSMENT YEAR CANNOT REGAR DED TO BE THE BEST EVIDENCE IN THE CASE OF THE ASSESSEE. THE RETURN FO R THE ASSESSMENT YEAR 2010-11 AND 2011-12 HAS BEEN ASSESSEE UNDER SE CTION 143(1) AND, THEREFORE, THIS CAN ALSO NOT BE TAKEN THAT THE PROFIT PERCENTAGE HAVE BEEN ACCEPTED BY SCRUTINIZING AND EXAMINING TH E BOOKS OF ACCOUNT BY THE AO. WE NOTED A PECULIAR FACT IN THIS CASE THAT INITIALLY 6 ITA NO.531/CTK/2013 THE ASSESSEE HAS SHOWN THE TURNOVER AT RS.4,42,08,2 09/- IN THE RETURN FILED BY HIM BUT THE AO FOUND OUT THAT THE CORRECT CONTRACT RECEIPT WERE RS.12,45,33,917/-. IN THE ASSESSMENT YEAR 2007-08, 2008-09, 2010-11 AND 2011-12, THE ASSESSEE HAS SHOWN THE GROSS RECEI PT BETWEEN 4.15 CR TO 5.46 CR. THE GROSS RECEIPT WHICH HAS BEEN FOU ND BY THE ASSESSEE SUBSEQUENTLY AT RS.12,45,33,917/- HAS DULY BEEN ACC EPTED BY THE ASSESSEE. IN THE CASE OF COMMISSION BUSINESS, GENE RALLY EXPENSES REMAIN FIX AND THEY DO NOT GET INCREASED WITH THE I NCREASE IN THE RECEIPT, SUCH COMMISSION/BROKERAGE IS RECEIPT AT A PRE-DETERMINED PERCENTAGE, THEREFORE, WE FIND FORCE IN THE SUBMISS ION OF THE LEARNED DR THAT THE NET PROFIT SHOULD BE MORE THAN 1% BUT I N OUR OPINION, IT CANNOT BE @8% AS HAS BEEN ESTIMATED BY THE AO. IN T HE INTEREST OF JUSTICE AND FAIR PLAY TO BOTH THE PARTIES, WE ARE O F THE VIEW THAT IT WILL BE FAIR AND REASONABLE UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE THAT THE NET PROFIT SHOULD BE ESTIMATED AT THE RATE OF 3 %. WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ESTIMATE THE PROFIT @3% ON THE GROSS TURNOVER OF RS.12,45,33,917 /-. 4 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTL Y ALLOWED. * 1+2 ' ' 0 3+ ' '+ 45 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02/0 5/2014. 0 ' ./ , 16 72 02/05 /2014 / ' - SD/- SD/- ( . . ) (D.T.GARASIA) ( . . ) (P.K.BANSAL ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER CUTTACK ; 7 DATED 02/05/2014 7 ITA NO.531/CTK/2013 % . , . 1 /PKM , . / PS 0 0 0 0 ' '' ' %+8 %+8 %+8 %+8 98 + 98 + 98 + 98 + / COPY OF THE ORDER FORWARDED TO : 0, 0, 0, 0, / BY ORDER, : :: : / 4 4 4 4 ' ' ' ' ( ASSTT. REGISTRAR) , / ITAT, CUTTACK 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. ,; ( ) / THE CIT(A), BHUBANESWAR 4. ,; / CIT , BHUBANESWAR 5. 8< %+ , , 1,- / DR, ITAT,CUTTACK 6. =- / GUARD FILE. &8+ %+ //TRUE COPY//