Sultana Gowlani, Adilabad, Adilabad V. ITO, Ward-1, Adilabad, Adilabad

ITA 649/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2425 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 10-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P V SUBBA RAJU
• Assessee Lawyers: S RAMA RAO
• Keywords: Assessment record
• Section: 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 649/HYD/2017 ASSESSMENT YEAR: 2013-14 SMT. SULTANA GOWLANI, ADILABAD [PAN: ABTPG8112B] VS INCOME TAX OFFICER, WARD-1, ADILABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO, AR FOR REVENUE : SHRI P.V. SUBBA RAJU, DR DATE OF HEARING : 08-11-2017 DATE OF PRONOUNCEMENT : 15-11-2017 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-5, HYDERABAD, DATED 28-12-2016, FOR THE AY. 2013-14. 2. THE GROUNDS RAISED BY ASSESSEE ARE AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REJECTING TH E BOOKS OF ACCOUNT AND IN RESORTING TO ESTIMATION OF INCOME. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ESTIMATING T HE NET INCOME AT 2% OF THE GROSS RECEIPTS. GROUND NO. 4 IS GENERAL IN NATURE. I.T.A. NO. 649/HYD/2017 :- 2 - : 3. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM PROCESSING AND TRADING IN COTTON. FOR THE AY. 2013-14, ASSESSEE SOLD COTTON OF THE VALUE OF RS. 22,14,91,192/- AND THE GROSS PROFIT DERIVED WAS RS. 66,48,208/-. THE NET PROFIT AFTER CLA IMING THE EXPENDITURE WAS RS. 5,58,607/-. PROPER BOOKS OF ACCO UNT STATED TO HAVE BEEN MAINTAINED AND ASSESSEE GOT THE BOOKS OF ACC OUNT AUDITED THROUGH A CHARTERED ACCOUNTANT FOR THE PURPOSE O F SEC.44AB OF THE INCOME TAX ACT [ACT]. THE ADJUSTED INCO ME FOR THE PURPOSE OF INCOME TAX WAS WORKED OUT TO RS. 4,95,070/ - AND THE SAME WAS ADMITTED IN THE RETURN OF INCOME FILED ON 28- 09-2013. 3.1. THE ASSESSING OFFICER (AO) CONVERTED THE CASE TO SCRUTINY AND ISSUED NOTICES U/S. 143(2) AND 142(1) OF THE ACT. THE AO IS OF THE VIEW THAT ASSESSEE DID NOT RESPOND TO THE SAID NOTICES A ND, THEREFORE, THE ASSESSMENT WAS COMPLETED EX-PARTE U/S 1 44 OF THE ACT. WHILE COMPLETING THE ASSESSMENT, THE AO ESTIMATED THE NET PROFIT AT 2%. HE ALSO DISALLOWED DEDUCTION UNDER CHAP TER VIA OF RS. 63,538/- CLAIMED BY ASSESSEE. 4. ASSESSEE CONTENDED THE SAME BEFORE THE CIT(A) SUBMI TTING AS UNDER: THE APPELLANT HUMBLY SUBMITS THAT SHE IS IN THE BU SINESS OF COTTON. THE STOCK DETAILS WERE MAINTAINED AND YIELD STATEME NT WAS ALSO FILED ALONG WITH THE RETURN OF INCOME. THE APPELLANT MAIN TAINED PROPER BOOKS OF ACCOUNT AND PROPER VOUCHERS ARE ALSO AVAILABLE. THE APPELLANT COULD NOT PRESENT ON THE DATES OF HEARING AS SHE WAS BEDRIDDE N AT THE RELEVANT POINT OF TIME AND ALSO UNDERGONE SURGERY FOR HYPERT ENSION AND OTHER CONNECTED PROBLEMS. THE ASSESSING OFFICER DID NOT FIND FAULT WITH THE QUANTITATIVE DETAILS SUBMITTED ALONG WITH THE RETURN OF INCOME. I.T.A. NO. 649/HYD/2017 :- 3 - : THE APPELLANT, HOWEVER, SUBMITS THAT SHE MAINTAINED EVERY DETAIL AND ARRIVED AT THE INCOME AS PER THE BOOKS OF ACCOUNT M AINTAINED. THEREFORE, THE ASSESSING OFFICER SHOULD NOT HAVE RESORTED TO E STIMATION OF INCOME. THE ASSESSEE IS PREPARED TO PRODUCE THE DETAILS BEF ORE THE ASSESSING OFFICER. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT SUBM ITS THAT THE AO IS NOT JUSTIFIED IN ESTIMATING THE NET INCOME AT 2%. I N SO FAR AS TRADING IN COTTON IS CONCERNED, THE RATES WOULD NOT BE CONSIST ENT AND WOULD BE VARYING TOO OFTEN. THE PURCHASES MADE BY ASSESSEE A RE VERIFIABLE AND THE SALES ARE ALSO VERIFIABLE. THE GROSS PROFIT DERIVED BY ASSESSEE IS ABOUT 3%. THEREFORE, THE ASSESSING OFFICER OUGHT NOT TO HAVE REJECTED THE BOOKS OF ACCOUNT AND RESORTED TO ESTIMATION OF INCOME AT 2%. THE ASSESSING OFFICER OUGHT TO HAVE SEEN THAT THE DETAILS OF THE STOCKS W ERE PROPERLY MAINTAINED AND THE SAID DETAILS WERE ALSO FILED ALONG WITH THE RETURN OF INCOME. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N REJECTING THE BOOKS OF ACCOUNT. THE ASSESSEE SUBMITS THAT THE BOOKS OF AC COUNT ARE AVAILABLE AND THE SAME MAY BE EXAMINED EVEN NOW. THEREFORE, T HE APPELLANT SUBMITS THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN RESORTING TO ESTIMATION AND IN MAKING THE ADDITION. IN SO FAR AS THE CLAIM FOR DEDUCTION UNDER CHAPTER VIA IS CONCERNED, THE DETAILS ARE SUBMITTED WHICH MAY KINDLY BE CONSI DERED AND THE ASSESSING OFFICER MAY BE DIRECTED TO ALLOW THE DEDU CTION CLAIMED. 5. LD.CIT(A), HOWEVER REJECTED THE CONTENTIONS IN HIS DETAILED ORDER AS UNDER: 4.6 BEST JUDGEMENT ASSESSMENT : FROM THE DETAILS MENTIONED IN PARA 4.1 TO 4.3, IT IS SEEN THAT THE ASSESSEE DID NOT CO MPLY WITH REQUIREMENTS OF THE STATUTORY NOTICES ISSUED BY THE ASSESSING OFFIC ER DURING THE ASSESSMENT PROCEEDINGS. THE CONDUCT OF THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS IS APPARENT FROM THE RECORD OF EVENTS AS NARRATED IN THE ORDER SHEET. THE AO FIXED THE CASE FOR HEARI NG FROM 22.09.2014 TO 02.02.2016 I.E. ALMOST FOR ONE AND HALF YEARS. THER E IS NO JUSTIFIABLE REASONS FOR THE SAME. THERE WERE REPEATED NON-COMPL IANCES TO SUCH NOTICES, WHICH IS APPARENT FROM ASSESSMENT RECORD. SINCE THE BOOKS OF ACCOUNTS AND THE SUPPORTING DETA ILS, BILLS AND VOUCHERS WERE NEVER PRODUCED BEFORE THE ASSESSING OFFICER, T HE ASSESSING 144 AND COMPLETING THE ASSESSMENT. CLAUSE (B) OF SECTION 144 PROVIDES THAT FAILURE TO COMPLY WITH ALL THE 142(1) WOULD ENTAIL BEST JUDGMENT ASSESSMENT. FOR NON-COMP LIANCE WITH A NOTICE UNDER SECTION 142(1) CALLING FOR FURNISHING INFORMA TION, DOCUMENTS, I.T.A. NO. 649/HYD/2017 :- 4 - : EVIDENCE, BOOKS OF ACCOUNTS ETC., BEST JUDGMENT ASS ESSMENT CAN BE MADE UNDER SECTION 144 [L. HIRALAL VS. CIT (1942) 10 ITR 148 (ALL) AND BANSIDHAR & SONS VS. CIT (1980) 17 CTR (DEL) 216J]. THE WORDINGS IN THE SECTION ARE QUITE CLEAR WHEN TH EY SAY 'FAILS TO COMPLY WITH ALL THE TERMS OF THE NOTICE ISSUED UNDER SUB-S ECTION (1) OF SECTION 142 .... '.HENCE THE PARTIAL COMPLIANCE ALSO ENTAILS A BEST JUDGMENT ASSESSMENT. IN NARINDER KUMAR & ORS. VS. CIT (2014) 369 ITR 004 9 (DELHI) IT WAS HELD THAT WHERE THE ASSESSEE FAILED TO PRODUCE BOOK S OF ACCOUNTS AND DETAILS, AO IS JUSTIFIED IN COMPLETING ASSESSMENT U /S 144. THE FACTS OF THE CASE AND THE CONDUCT OF THE APPELL ANT BEFORE THE AO CLEARLY INDICATE THAT THE A.O. WAS NOT IN A POSITIO N TO DETERMINE WHETHER BOOKS OF ACCOUNTS ARE CORRECT OR COMPLETE. IN THIS SITUATION THE A.O. WAS LEFT WITH NO OPTION BUT TO ASSESS THE ASSESSEE'S IN COME ON THE BASIS OF MATERIAL AVAILABLE WITH HIM. 4.7 AUDITED STATEMENT : IT IS QUITE COMPETENT FOR THE ASSESSING AUTHORITIES TO ASCERTAIN WHAT THE REAL SITUATION IS - WHETHER THE PAYMENTS ALLEGED TO HAVE BEEN MADE WERE IN FACT MADE AND IF THEY WERE MADE WHETHER THEY WERE BONA FIDE PAYMENTS MADE UPON A PR OPER BASIS OR WHETHER THEY REALLY CONSTITUTED A DEVICE FOR THE PU RPOSE OF EVADING THE PAYMENT OF INCOME-TAX OR SUPER TAX. THIS IS SO EVEN WHEN THE ACCOUNTS HAD BEEN AUDITED AND CERTIFIED BY A COMPETENT ACCOU NTANT, FOR IT MAY BE THAT IN COMPUTING THE PROFITS AND GAINS' OF A BUSI NESS, MANY ITEMS SHALL HAVE TO BE DEDUCTED THOUGH THESE MAY NOT BE EXPENDI TURE AT ALL AND EXPENSES PASSED BY AN AUDITOR MAY NOT BE EXPENSES A LLOWABLE UNDER THE IT ACT AND VICE VERSA. UNLESS EXPENDITURE CAN BE BR OUGHT UNDER THE PROVISIONS OF THE ACT, IT CANNOT BE ALLOWED AS A DE DUCTION IN COMPUTING THE PROFITS FROM THE BUSINESS. [LAKSHMI NARAYAN SEN & S ONS LTD., IN RE (1936) 4 ITR 255 (CAL)]. 4.8 ESTIMATION: FROM THE FACTS OF THE CASE AND THE CONDUCT OF THE APPELLANT BEFORE THE AO CLEARLY INDICATE THAT THE A .O. WAS NOT IN A POSITION TO DETERMINE WHETHER BOOKS OF ACCOUNTS ARE CORRECT OR COMPLETE. IN THIS SITUATION THE A.O. WAS LEFT WITH NO OPTION BUT TO E STIMATE THE ASSESSEE'S INCOME ON THE BASIS OF MATERIAL AVAILABLE WITH HIM. THE AO REJECTED BOOKS RESULT AND MADE ADDITIONS ON ESTIMATION. ONCE THE BOOKS OF REJECTED ARE REJECTED THEN PROFIT HAS TO B E ESTIMATED ON THE BASIS OF AVAILABLE MATERIAL. [DABROS INDUSTRIES COMPANY ( P) LTD VS CIT (1977) 108 ITR 424 (CAL), NAVNEET R JHANWAR VS ITO (2004) 1 SOT 541 AND ITO VS KUNDANMAL SURANA (2004) 3 SOT 632 FOLLOWED] I.T.A. NO. 649/HYD/2017 :- 5 - : I HOLD THAT THE ASSESSING OFFICER IS JUSTIFIED IN R EJECTING THE BOOK RESULTS AND FINALIZING THE ASSESSMENT U/S. 144. THE AO ESTI MATED THE PROFIT @2% OF THE TURN-OVER. EVEN THOUGH THE AR ARGUED THAT A S FAR AS TRADING IN COTTON IS CONCERNED, THE RATES WOULD NOT BE CONSIST ENT AND WOULD BE VARYING TOO OFTEN. BUT, THE AR DID NOT SUBMIT ANY COMPARABLE CASES. HENCE I HOLD THAT PROFIT ESTIMATION OF 2% IS REASON ABLE AND NEEDS NO INTERFERENCE. HENCE ALL GROUNDS ARE DISMISSED. 6. ASSESSEE IS AGGRIEVED. BUT THIS APPEAL WAS FILED W ITH A DELAY OF 35 DAYS. THE REASON GIVEN IN AFFIDAVIT WAS THAT AS SESSEE COULD NOT ATTEND TO THE MATTER AS THE AUDITOR HAS BEEN CONTACTING WRONG E-MAIL ADDRESS AND COULD NOT BE REACHED. AFTER THE AO SENT NOTICE FOR COLLECTION OF TAXES, ASSESSEE PURSUED THE MATTER AN D FILED WITH A DELAY. CONSIDERING THE REPORT OF THE AO ON THE ASSESS EE CONTENTIONS AND SUBMISSIONS, I AM SATISFIED THAT ASSESSE E HAS SUFFICIENT CAUSE TO FILE APPEAL BELATEDLY AND THE DELA Y OF 35 DAYS IS HEREBY CONDONED AND APPEAL IS ADMITTED. 7. IT WAS THE CONTENTION OF LD. COUNSEL THAT THE BOOKS OF ACCOUNT ARE MAINTAINED AND THE RETURNS IN EARLIER YEARS ARE ACCEPTED WITHOUT ANY FURTHER VERIFICATION. IT WAS SUBMI TTED THAT THE ASSESSEE HAS EARNED ONLY 0.3% AND 0.5% PROFIT IN EARLIER YEARS AND SO ESTIMATION AT 2% IS ON HIGHER SIDE. IT WAS PLEA DED THAT THE BOOK RESULTS MAY BE ACCEPTED. 8. LD.DR, HOWEVER, POINTED OUT THAT ASSESSEE HAS NOT CO - OPERATED WITH THE AO DURING ASSESSMENT PROCEEDINGS AND BEFORE CIT(A) ALSO ONLY WRITTEN SUBMISSIONS WERE FILED. SO, REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME IS PROPER ON THE FACTS OF THE CASE. I.T.A. NO. 649/HYD/2017 :- 6 - : 9. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. IT IS TRUE THAT IN EARLIER YEARS, THE PROFIT DECLARED BY ASSESSEE ON THE TURNOVER WAS ONLY 0 .3% AND 0.5%. THE RETURN WAS ACCEPTED U/S. 143(1) OF THE ACT. IT IS ALSO A FACT THAT ASSESSEE HAS NOT APPEARED BEFORE AO AND SO HE HAS NO OPTION THAN TO REJECT THE BOOKS OF ACCOUNT. THEREFORE , TO THE EXTENT OF REJECTION OF BOOKS OF ACCOUNT, I AGREE WITH THE FIND INGS OF LD.CIT(A). HOWEVER, THE AO AS WELL AS CIT(A) HAVE N OT GIVEN ANY COMPARABLE CASES FOR ESTIMATION AT 2%. AS ASSESSEE HAS NOT FURNISHED THE BOOKS OF ACCOUNT FOR VERIFICATION AND IN EARLIER YEARS, THE RETURN OF INCOME WAS ACCEPTED U/S. 143(1) AND NOT SCRUTINIZED, I AM OF THE OPINION THAT THE INCOME CAN BE ESTIMATED A T 1% OF THE TURNOVER GIVEN IN THE FACTS OF THE CASE. THEREFORE, THE AO IS DIRECTED TO MODIFY THE ORDER RESTRICTING THE PROFIT ESTI MATION TO 1% OF THE TURNOVER. THE GROUNDS ARE ACCORDINGLY, PARTLY A LLOWED. 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH NOVEMBER, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 15 TH NOVEMBER, 2017 TNMM I.T.A. NO. 649/HYD/2017 :- 7 - : COPY TO : 1. SMT. SULTANA GOWLANI, PROP: DIAMOND COTTON COMPA NY, D.NO. 15-298, DASNAPUR INDUSTRIAL ESTATE, ADILABAD. 2. THE INCOME TAX OFFICER, WARD-1, ADILABAD. 3. CIT (APPEALS)-5, HYDERABAD. 4. PR.CIT-5, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.