Mohan Vasantha Kumaresan, CHENNAI V. ITO, CHENNAI

ITA 577/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4435 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NETHRAPAL IRS
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Gross profit estimation; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 577/MDS/2017 / ASSESSMENT YEAR : 2012-2013. SHRI. MOHAN VASANTHA KUMARESAN, NO.12, KAMARAJ PARK STREET, ROYAPURAM, CHENNAI 600 013 [PAN AACPK 6777G] VS. THE INCOME TAX OFFICER, NON CORPORATE WARD 5(1) CHENNAI ( !' / APPELLANT) ( # $!' /RESPONDENT) / APPELLANT BY : SHRI. A.S. SRIRAMAN, ADVOCATE /RESPONDENT BY : SHRI. M.S. NETHRAPAL, IRS, JCIT. /DATE OF HEARING : 31-05-2017 !' /DATE OF PRONOUNCEMENT : 31-05-2017 % / O R D E R ASSESSEE IN THIS APPEAL AGAINST AN ORDER DATED 30 .01.2017 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-5, CHEN NAI HAS TAKEN THE FOLLOWING GROUNDS. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 5, CHENNAI DATED 30.01.2017 IN 1,T.A.NO.33/CIT(A)-5/2015-16 FOR THE ABOVE MENTIONE D ITA NO. 577/MDS/2017 :- 2 -: ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN T HE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE GROSS PROFIT ADDITION OF RS.17,09,688/- IN THE COMPUTATION OF TA XABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THE SUSTENANCE OF THE SAID ADDITION ON TECHNICAL GROUND WAS WHOLLY UNJUSTIFIED AND OUGHT TO HAVE APPRECIATED TH AT THE DISTINCTION BETWEEN THE COURT OF RECORD AND QUASI JUDICIAL AUTHORITY WAS NOT CONSIDERED BEFORE APPLYI NG THE TECHNICAL REASON TO SUSTAIN THE SAID ADDITION. 4. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVI NG EXTRACTED THE GROUNDS OF APPEAL IN THE IMPUGNED ORD ER WHICH CLEARLY INDICATED THE CHALLENGE/GROUND RAISED TO QUESTION THE TECHNICAL ISSUE, APPLYING THE TECHNICA L REASON TO SUSTAIN THE SAID ADDITION WAS BAD IN LAW. 5. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD FROM PARA 5.1 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 6. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF RS.36,000/- ON THE CONSIDERATION OF DIVERSION OF BORROWED FUNDS FOR PERSONAL PURPOSES IN THE COMPUTA TION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER RE ASONS AND JUSTIFICATION. 7. THE CIT (APPEALS) WENT WRONG IN RECORDING THE FI NDINGS IN THIS REGARD IN PARA 6.3 & PARA 6.4 OF THE IMPUGNED ORDER WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPU GNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRIN CIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 9. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS/ARGUMENTS AT THE TIME OF HEARING. ITA NO. 577/MDS/2017 :- 3 -: 2. A READING OF THE GROUNDS SHOW THAT ASSESSEE IS AGGR IEVED ON A GROSS PROFIT ADDITION OF A17,09, 688/- AND A DISA LLOWANCE OF INTEREST OF A36,000/- FOR DIVERSION OF BORROWED FUND, WHICH WERE CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADD ITION ON GROSS PROFIT WAS DONE WITHOUT REJECTING THE BOOKS O F ACCOUNTS AND WITHOUT POINTING OUT ANY DEFECTS THEREIN. AS PER T HE LD. AUTHORISED REPRESENTATIVE ACCOUNTS OF THE ASSESSEE WERE SUBJEC T TO TAX AUDIT UNDER SEC. 44AB OF THE INCOME TAX ACT, 1961 (IN SHO RT THE ACT) AND NO DEFECTS WERE POINTED OUT BY THE AUDITOR IN HIS T AX AUDIT REPORTS. ACCORDING TO HIM, THE AUDITED FINANCIAL RESULTS OU GHT NOT HAVE BEEN IGNORED BY THE LOWER AUTHORITIES. AS PER THE LD. A UTHORISED REPRESENTATIVE, JUST BECAUSE THE ASSESSEE AGREED TO OFFER A HIGHER PROFIT, THE ADDITION SHOULD NOT HAVE BEEN MADE. ACC ORDING TO HIM AGREEING TO AN ADDITION BEFORE A QUASI-JUDICIAL AU THORITY LIKE ASSESSING OFFICER WILL NO ESTOPP THE ASSESSEE FROM ASSAILING SUCH ADDITION BEFORE AN APPELLATE AUTHORITY, SINCE PROCEEDINGS BEFORE TH E LD. ASSESSING OFFICER WERE NOT AKIN TO PROCEEDINGS BEFORE A COUR T OF RECORD. RELIANCE WAS PLACED ON THE DECISION OF A CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI. S. VELUMANI VS. ITO (ITA NO.1839/MDS/2013, DATED 28.02.2014 ). ITA NO. 577/MDS/2017 :- 4 -: 4. VIZ-A-VIZ THE SECOND ISSUE, REGARDING DISALLOWANCE OF INTEREST, LD. COUNSEL SUBMITTED THAT ASSESSEE WAS A DEALER IN INVESTMENT AND SECURITIES AND THEREFORE THE SHARES ACQUIRED COULD NOT HAVE BEEN CONSIDERED AS PERSONAL IN NATURE. ACCORDING TO HIM , THE BUSINESS LOAN OF A24,00,000/- WAS USED FOR PURCHASING SHARES AS A PART OF THE BUSINESS OF THE ASSESSEE. 5. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED ASSESSEE COULD NEVER BE AGGRIEVED ON AN ADMITTED AD DITION. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE THE LD. ASSESSING OFFICER HAD NOT SPECIFICALLY NOTED THE DEFECTS IN THE ACCOUNTS OF T HE ASSESSEE CONSIDERING THE ENHANCED GROSS PROFIT ACCEPTED BY T HE ASSESSEE. RELIANCE WAS PLACED BY THE LD. DEPARTMENTAL REPRESE NTATIVE ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE O F RAMANLAL KAMDAR VS. CIT, 108 ITR 0073. 6. I HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONT ENTION. RELEVANT PARA OF THE ASSESSMENT THROUGH WHICH THE A DDITION IN GROSS PROFIT WAS DONE BY THE LD. ASSESSING OFFICER READS AS UNDER:- DURING THE COURSE OF SCRUTINY HEARING, IT IS POINTED OUT TO THE AR REGARDING LOW PROFIT COMPARE TO HUGE TURNOVER AND CALLED FOR DETAILS ON THE SAME. THE ASSESSEE FURNISHED LETTER DATED 1703.2015 CALCULATING THE GP RATE AT 2.4% TAKING INTO ACCOUNT OF PURCHASE AND SALES OF SAMPLE OF A PARTICULAR PERIOD. HOWEVER THE ASSESSEE HAS AGREED TO OFFER A GROSS PROFIT AT @ 2.5% OVER AND ABOVE THE G.P. ALREADY ITA NO. 577/MDS/2017 :- 5 -: ADMITTED(2.12%). THEREFORE THE DIFFERENCE OF GP RAT E 0.38% (2.5- 2.12) WHICH WORKS TO RS.17,09,688/- ON THE TOTAL TURNOVER (SALES AND PROCESSING FEES) OF RS44,99,17,807/- IS ADDED TO THE TOTAL INCOME OF TH E ASSESSEE. LD. AUTHORISED REPRESENTATIVE HAS RELIED ON DECISIO N OF CO-ORDINATE BENCH IN THE CASE OF SHRI. S. VELUMANI (SUPRA) FOR ARGUING THAT AGREEING TO AN ADDITION PER SE WILL NOT BE ENOUGH B UT ASSESSING OFFICER WAS OBLIGED TO SHOW DEFECTS IN THE ACCOUNTS, MORE S O SINCE ASSESSEES BOOKS WERE SUBJECT TO TAX AUDIT. PARA 6 OF THIS O RDER, WHICH HAS BEEN HEAVILY RELIED ON BY THE LD. AUTHORISED REPRESENTAT IVE IS REPRODUCED HEREUNDER:- 6. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH TH E CASE FILE. THE ASSESSEE ARGUES THAT NEITHER HE NOR HIS AUTHORIZED REPRESENTATIVE HAD EVER MADE ANY CONCESSION WITH THE CIT(A) AGREEING WITH THE ADDITI ON TO THE EXTENT OF 50%. A PERUSAL OF THE CIT(A)S ORD ER MAKES IT CLEAR THAT BALANCE 50% OF THE ADDITION HAS BEEN CONFIRMED ONLY ON SUCH AN AGREEMENT BY THE ASSESSEES AUTHORIZED REPRESENTATIVE HOWEVER, NOTHI NG IS FORTHCOMING AS TO WHETHER THE SAME WAS SUBMITTED IN WRITING OR NOT. IN OUR VIEW, SUCH A CONCESSION I N THE ABSENCE OF SPECIFIC AUTHORIZATION EITHER BY THE ASS ESSEE OR AUTHORIZED REPRESENTATIVE, CARRIES NO VALUE. WE QUOTE LATEST CASE LAW OF HON'BLE SUPREME COURT IN C ASE OF URVIBEN CHIRAGBHAI SHETH VS VIJAYBHAI SLP(C) NO.896 OF 2006 HOLDING THAT SUCH A STATEMENT MADE ONLY BEFORE A COURT OF RECORD IS SACROSANCT. SO, THIS ARGUMENT OF THE REVENUE STANDS REJECTED. 7. WHAT CONTASTS THE ABOVE CASE FROM THE FACTS HERE IS THAT ASSESSEE HERE HAS NOT CONTESTED THE CLAIM OF THE LD . ASSESSING OFFICER ITA NO. 577/MDS/2017 :- 6 -: THAT ASSESSEE HAD AGREED TO THE ENHANCED GROSS PROF IT RATE. IN MY OPINION THERE IS MUCH STRENGTH IN THE ARGUMENT OF T HE LD. DEPARTMENTAL REPRESENTATIVE THAT, ASSESSING OFFICE R CONSIDERING THE ADMISSION DID NOT FIND IT NECESSARY TO POINT OUT T HE DEFECTS IN THE ACCOUNTS OF THE ASSESSEE. AS TO THE ARGUMENT OF THE LD. AUTHORISED REPRESENTATIVE, THAT BOOKS OF THE ASSESSEE WERE SUB JECT TO A TAX AUDIT UNDER SECTION 44AA OF THE ACT, IN MY OPINION, IF TH E ASSESSEE WAS SO SURE ABOUT ITS ACCOUNT, IT WOULD HAVE NEVER AGREED TO A GROSS PROFIT ADDITION. ONCE ASSESSEE HAS AGREED TO AN ADDITION, IN MY OPINION, HE CANNOT HAVE ANY GRIEVANCE AGAINST THE ASSESSMENT. HENCE IN MY OPINION THE ADDITION FOR LOW GROSS PROFIT WAS RIGHT LY MADE BY THE LD. ASSESSING OFFICER, AND CONFIRMED BY THE LD. COMMISS IONER OF INCOME TAX (APPEALS). RELATED GROUNDS OF THE ASSESSEE ARE DISMISSED. 8. COMING TO OTHER ISSUE WHICH IS ON DISALLOWANCE OF I NTEREST, ADMITTEDLY ASSESSEE WAS IN THE BUSINESS OF DEALING IN INVESTMENTS AND SECURITIES. ASSESSING OFFICER HAS NOT GIVEN ANY RE ASON WHY THE SHARES ACQUIRED UTILIZING THE BUSINESS LOAN OF A24,00,000 /- WAS CONSIDERED BY HIM AS FOR PERSONAL USE. ASSESSEE BEING A PROPRIET ORSHIP SUCH DIFFERENTIATION IN MY OPINION SHOULD NOT HAVE BEEN WITHOUT SPELLING OUT SPECIFIC REASONS. IN THE CIRCUMSTANCES, I AM OF THE OPINION THAT ITA NO. 577/MDS/2017 :- 7 -: DISALLOWANCE OF INTEREST OF A36,000/- WAS NOT WARRA NTED. SUCH DISALLOWANCE IS DELETED. RELATED GROUNDS OF THE AS SESSEE ARE ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON WEDNESDAY, THE 31 ST DAY OF MAY, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 31ST MAY, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF