SHRI AMARDEEP SINGH MAKKAR, JALANDHAR V. INCOME TAX OFFICER WARD -4(2), JALANDHAR

ITA 553/ASR/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5340 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 21-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GHANSHAM SHARMA
• Keywords: Unexplained investment; Gift; Business income
• Section: 147; 69; 148; 44AD; 80HH; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.553/Asr/2019 Assessment Year: 2011-12 Sh. Amardeep Singh Makkar New Colony Gopal Nagar Distt. Jalandhar [PAN: AIZPS1271Q] (Appellant) Vs. Income Tax Officer, Ward 4(2), Jalandhar. (Respondent) Appellant by Sh. Ashray Sarna, CA. Respondent by Sh.Ghansham Sharma, Sr. DR. Date of Hearing 14.09.2022 Date of Pronouncement 20.09.2022 ORDER Per Anikesh Banerjee, JM: The instant appeal is directed against the order of Ld. Commissioner of Income Tax (Appeal)-2, Jalandhar, {in brevity CIT(A)} bearing appeal no. 2/10164/18-19/CIT(A)-2/Jal date of order 04.07.2019, order passed u/s. 250(6) of the Income Tax Act, 1961 (in brevity of the Act) for the Assessment year 2011-12. The impugned order was originated from the order of Income Tax Officer, Ward-4(2) Jalandhar (in brevity A.O) order passed u/s.143(3)/147 of the Act date of order 18.12.2018. I.T.A. No.553/Asr/2019 2 2. Tersely we advert the fact of the case. The assesse is importer and trader of the carpet and other goods from Dubai and sale the same in India as retailer. During the assessment year, reopening u/s. 147 was initiated by the ld. AO on the ground that the assesse had given credit/transfer entries amounting to Rs.34,57,563/- and Rs.79,31,509/- to M/s. Kamal Clearing and Forwarding Agency Pvt. Ltd., Mumbai and M/s. Star Trade Shipping and logistics Mumbai respectively. Both the parties has confirmed that they have received the payment from the assesse for having provided Customs clearance services to M/s. Romex International, Jalandhar, proprietor of the concern, Sh. Amardeep Singh Makkar through bank account. During the investigation the ld. AO found that sale and purchase was not matching in the return of the assessee which was filed under the State tax Act. It is observed that the business with both the parties was done but there is no reflection in the return of the income of State Tax Authority, VAT. Assessee had NIL sundry debtors during the financial year. As per investigation of ADIT(Inv) the assessee has not furnished any evidence before the ADIT, so the entire purchase was proposed to be added back u/s. 69 or 69A as per the recorded reasons of the ld AO. During the assessment both the amounts were not added with the total income of the assessee back u/s. 69/69A of the Act as unexplained investment. But on the I.T.A. No.553/Asr/2019 3 other hand the addition was made u/s. 44AD on total turnover of the Rs.4,76,33,724/- @ 8% of net profit which is worked out at Rs.38,10,700/-. Aggrieved assesse had challenged the order of the ld. AO before ld. CIT(A). Both the legal and factual parts of the appeal was challenged before the CIT(A). The CIT(A) upheld the order of the ld. AO. Being aggrieved the assessee filed an appeal before us. 3. The ld. Counsel of the assessee filed two paper books one from page no. 1 to 19 and another page from 1 to 97 which are kept in record. The ld. Counsel first argued the jurisdiction of Assessing Officer related to the addition of net profit u/s. 44AD @8% with the total income of the assesse. The ld. counsel mentioned that assessee had turn over amount of Rs.4,76,33,724/-. In any case, this turnover is not under perview of section 44AD of the Act. So the calculation of net profit @8% on this turnover is contrary to the provisions of the Act. 3.1 The counsel further argued that the ld. AO had calculated the net profit @8% without any basis. The assessee had the G.P and NP rate which is not more than 2% in any of the proceedings and succeeding years. A chart NP and GP ratio was submitted with the paper book which is reproduced as below:- I.T.A. No.553/Asr/2019 4 A.Y. SALE G.P. N.P. @AGE GP %AGE NO 2010-11 16385194 275561 125767 1.68176831 0.76756491 2011-12 47633724 521892 290598 1.09563552 0.61006777 2012-13 27273329 499776 219075 1.83247157 0.80325728 2013-14 12761341 -2152385 --2410202 -16.866448 -18.886746 3.2 The ld. Counsel has first brought our intention in assessment order page no. 2 para no. 4, which is reproduced as below: “4. Now for the F.Y 2010-11 relevant to the A.Y. 2011-12 the same facts are prevalent. I have examined the records of the department and it reveals that return of Income has been filed for the A.Y. 2011-12 on 17.09.2011 declaring taxable income of Rs.2,90,600/- only. The returned income is not commensurate with the magnitude of the transactions entered indto by the assesse and the credit entries are not verifiable as total sundry debtors have been shown ‘0’ in the return. I have further examined the facts of the cases and report of the ADIT(Inv) and find that the assesse has not furnished any evidence, whatsoever, before the ADIT(INV) with regard to credit/transfer entries. Thus, the credit entries of Rs. 79.31.509/- and subsequent transfer of the same amount to M/s Kamal Clearing & Forwarding Agency Pvt. Ltd., Mumbai and M/s Star Trade shipping and logistics, Mumbai through bank account no. 60041618499 is taxable under section 69/69A of the income tax Act, 1961, as unexplained investment/monies. 4. I have examined the relevant records and after verification of the same with reference to the above issues, I have reasons to believe that income of Rs.79,31,509/- as mentioned above has escaped assessment within the meaning of section clause (a) to explanation 2 to 147 of the Income Tax Act, 1961 for the Assessment year 2011-12. I.T.A. No.553/Asr/2019 5 2. Subsequently a notice u/s. 148 of the Income tax Act 1961, with prior approval of the Pr. CIT-2, Jalandhar, was issued to assessee on 30.03.2018 through ITBA. On 17.05.2018 Sh. Ashray Sarena, CA., counsel for the assessee attended the office and filed written submissions stating therein that the return of income already filed on 17.09.2011 for the A.Y. 2011-12 may be treated to have been furnished in response to the notice u/s. 148 dated 30.03.2018. He further demanded a copy of reasons recorded in the case of and the same were provided to him. Later on the assessee filed return of income on 01.01.2018 in response to the notice u/s. 148 dated 30.03.2018 declaring taxable income of Rs.2,90,600/-. There after notices u/s. 142(1)/143(2) were issued to the assesse and in response thereto Sh. Ashray Sarna, CA, counsel for the assesse attended the office and furnished information\documents. 3. As per written submissions furnished by the assesse, the assessee claims to be engaged in business of trading of carpets and cloth. Assessee imports carpets and other goods from Dubai and sells the same in India. The assessee during the course of assessment proceedings furnished a copy of Audited Balance Sheet and P & L account alongwith Audit Report in form 3CD. The assesses has shown total sales of Rs.4,76,33,724/- and purchases of Rs.5,80,81,918/- in the trading account and worked out a net profit of Rs.2,90,598/-. The assesse further in his reply furnished on 15.10.2018 stated that all the sales have been duly recorded in the books of accounts and also stood declared in the VAT returns. The assesse further furnished copies of ledger accounts of two Mumbai based firms namely, M/s. Kamal Clearing & Forwarding Agency Pvt. Ltd., Mumbai and M/s. Star Trade Shipping and logistics, Mumbai, with whom the assessee claimed to have had business transactions. Copies of few bills issued to the assessee by these two above mentioned firms were also furnished by the assessee. 3.1 To verify the claimed of the asessee with regard to sales/purchases made during the year under consideration a letter dated 19.11.2018 was issued to the Asstt. Commissioner of Excise & Taxation Jalandhar and copies of VAT returns filed by the assesse were called for. The reply to the said letter was receied in the office on 21.11.2018 and from the data submitted by the Excise and Taxation Authorities it was seen that the assessee had made purchase of 23,93,487/- only during the year as against declared purchases of Rs.5,80,81,918 I.T.A. No.553/Asr/2019 6 in the Trading account submitted by the assesse. Similarly, from the data furnished by the Excise and Taxation Authorities, it was seen that the assessee had made no sales, i.e. Zero sales, during the year under consideration as against claimed sales of Rs.4,76,33,724/- in the trading account. As such the claims of the assesse made in his reply dated 15.10.2018 were found to be totally incorrect as the figures of sales and purchases reflected in the Trading Account did not match with VAT returns filed by the assesee.....” 3.3 As per the arguments of ld. Counsel, the issue was taken in reopening of assessment related to escapement of income amount to Rs.74,43,269/- u/s. 69/69A of the Act. But the addition was made without considering the recorded reasons & a different issue was considered & added back the amount of Rs. 38,10,700/- on account of 8% net profit on turn over u/s. 44AD. There is no similarity or any relevance in between the recorded reasons and addition made u/s. 143(3)/147 of the Act. 3.4 During the assessment proceedings, the assessee submitted detailed documents related to the clarification of payment to M/s. Kamal Clearing and Forwarding Agency Pvt. Ltd and M/s. Star Trade Shipping and logistic. The documents are enclosed in the APB from page 1 to 83. The reply to the Assessing Officer related to the clarification of payment to the parties in APB 84 to 96. 3.5 The ld. Counsel vehemently argued and relied on the judgement of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd., vs. CIT I.T.A. No.553/Asr/2019 7 in ITA NO.3985/DEL/2017,Sourav Bakshi vs. ITO, ITAT Amritsar Bench, ITA no. 720/ASR/2019 date of order 23.12.2021. He further relied on upon in the case of Preabhakar Damodar Gawanda vs. ITO (2019) 200 TTJ (Pune) 1017. 4. The ld. SR Dr vehemently argued and relied on the order of Revenue Authorities. He relied on the order of ld. AO in para no. 3.1. The relevant part is extracted as below: “Similarly, from the data furnished by the Excise and Taxation Authorities, it was seen that the assessee had made no sales, i.e. Zero sales, during the year under consideration as against claimed sales of Rs.4,76,33,724/- in the trading account. As such the claims of the assesse made in his reply dated 15.10.2018 were found to be totally incorrect as the figures of sales and purchases reflected in the Trading Account did not match with VAT returns filed by the assesee. 5. We heard the rival submissions and relied on the documents available on the record and respectfully considered the generated pronouncement of different authorities. The reopening u/s. 148 was originated on the basis of reasons to believe. The ld. AO recorded the satisfaction for reopening the case related to transactions with the two parties with the assessee. After the detailed investigation ld. AO comes to conclusion that both the transactions with the parties are bogus and liable to be added u/s. 69/69A as unexplained investments. During the assessment proceedings the ld. AO found discrimination in VAT returns of the assessee and the turn over declaring in the income-tax returns. But both the transactions with the parties are not considered during the addition of I.T.A. No.553/Asr/2019 8 income with the total income of the assesse. The ld. AO inconsistently drafted the order. The addition was made u/s. 44AD of the Act. There is no live nexus in between addition and formation of belief during the recorded reasons. We respectfully observed the order of Hon’able High Court of Delhi,in the case of RanbaxyLaboratoriesLtd.v.Commissioner of Income-tax, [2011] 12 taxmann.com 74 (Delhi). The observation of Hon’able Lordship is as follows:- ”20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction under sections 80HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-I as well. 21. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirmative in favour of revenue and the second part of the question against the revenue.” The heading of section 147 is "income escaping assessment" and that of section 148 is "issue of notice where income escaped assessment". Section 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub- section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or re-compute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable I.T.A. No.553/Asr/2019 9 to tax. As per Explanation 3 if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the Legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income. The ld. AO would keep on making roving inquiry and thereby would include different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before the Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account. In the instant case, the Assessing Officer was satisfied with the justifications given by the assessee regarding the items, viz., credit transactions with two parties. But, during the assessment proceedings, he found the justification of addition U/s 44AD of the Act. He, consequently, while not making additions on transactions, which was supposed to added back with the U/s 69/69A of the Act. The escapement of income was ascertained amount to Rs.79,31,509/-. But the addition was made amount to Rs. 38,10,700/-. The ld. AO was not so justified when the reasons for the initiation of those proceedings ceased to survive. I.T.A. No.553/Asr/2019 10 The factual aspect is accordingly decided in favour of assessee. Accordingly, the assessment order is bad in law and liable to be quashed. So, the addition amount of Rs. 38.10.700/- is deleted. 6. In result, the appeal of the assessee bearing ITA no. 553/ASR/2019 is allowed. Order pronounced in the open court on20 .09.2022 Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T (6) The Guard File True Copy By Order