Shantilata Sahoo, Khurda V. ITO, Khurda

ITA 66/CTK/2012

• Counselvise Citation: 6622114 RSA 2012
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 25-01-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: B K MOHAPATRA
• Section: 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 066/CTK/2012 ( / ASSESSMENT YEAR 2008 - 09) SMT.SHANTILATA SAHOO, PROP. MANMOHAN MEDICAL HALL, AT: DHALAPATHAR, P.O.KALAPATHAR, DIST.KHURDA PAN: AGAPS 4650 B - - - VE RSUS - INCOME - TAX OFFICER, KHURDA WARD, KHURDA. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI B.K.MOHAPATRA, AR / FOR THE RESPONDENT: / SHRI . S.C.MOHANTY, DR / DATE OF HEARING: 08.08.2012 / DATE OF PRONOUNCEMENT: 14.08.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE IS ON A SOLITARY ISSUE THAT THE ESTIMATION OF INCOME @4.5% OF GROSS TURNOVER BEING PHARMACISTS IN A RURAL AREA IS HIGH ON THE BASIS OF FACTS AND CIRCUMSTANCES AS BROUGHT ON RECORD WHEN THE ASSESSEE HAD SHOWN GROSS MARGIN AT 2.41%. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE DERIVES INCOME FROM DEALING I N MEDICINES ON WHOLESALE - CUM - RETAIL BASIS IN A RURAL AREA AT DHALAPATHAR, P.O.KALAPATHAR IN THE DISTRICT OF KHURDA. IT DECLARED INCOME OF 1,87,730 WHICH WAS SCRUTINIZED BY THE ASSESSING OFFICER U/S.143(3) CALLING FOR BOOKS OF ACCOUNT , STOCK REGISTER, CASH BOOK ETC. THE ASSESSING OFFICER CHOSE TO INVOKE THE PROVISIONS OF SECTION 145(3) AND ESTIMATED THE CORRECT INCOME ON THE TURNOVER DECLAR ED BY THE ASSESSEE AT I.T.A.NO. 066/CTK/2012 2 2.1 5 CRORES. HE CHOSE THREE ASSESSES BEING ASSESSED IN HIS WARD WHO HAD RENDERED GROSS MARGIN ON THEIR TURNOVER RANGING BETWEEN 4% TO 5%. HE HELD 4.5% GROSS MARGIN AS REASONABLE IN THE CASE OF THE ASSESSEE AND HE FURTHER DISALLOWED E XPENSES @20% , CLAIMED. . 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE HIM, THE ASSESSEE SUBMITTED THAT ON A GROSS TURNOVER OF RS. 2,15,77.633/ - THE ASSESSEE RETURNED A GP OF RS. 5.19,955/ - WHICH WORKED OUT TO 2.41 % MAINTAI NING THE SIMILAR TREND OF GP IN THE PRECEDING YEARS AS UNDER, A.Y 05 - 06 3.20% A.Y 06 - 07 2.66% A.Y 07 - 08 29 . 6% HE SUBMITTED THAT THE BOOKS OF ACCOUNT ARE DULY AUDITED UNDER THE I NCOME - TAX ACT. THE ASSESSING OFFICER AFTER HAVING EXAMINED THE PURCHASE AND SA LE REGISTER S TO HIS SATISFACTION HAS REJECTED THE TRADING RESULT STATING THAT THE ASSESSEE DID NOT MAINTAIN STOCK REGISTER AND LEDGERS AND CASH BOOK. IT IS AN ADMITTED FACT THAT IT IS EXTREMELY DIFFICULT TO MAINTAIN DAY TO DAY STOCK REGISTER IN A MEDICINE STORE HAVING BOTH WHOLESAL E AND RETAIL SALE BECAUSE OF HUG E NUMBER OF PETTY SALES FROM OUT OF STRIPS AVAILABLE IN 10S 15S AND 30S F ROM ALMOST ALL BRANDS AND KEEPIN G IN MIND THE DATE OF EXPIRY OF THE STOCK, WHICH TAKES PLACE ALMOST EVERY DAY OR WEEK OR M ONTH. IN ABSENCE OF TRAINED MANPOWER IN A RURAL AREA IT IS ALMOST IMPOSSIBLE TO MAINTAIN DAY TO DA Y STOCK REGISTER CORRECTLY AND ACCURATELY. THE STOCK OF THE SHOP IS TAKEN UP IN THE LAST WEEK OF MARCH EVERY YEAR AFTER DISCARDING THE EXPIRED STOCK AN D PH Y SI CALLY VALUING THE AVAILABLE MEDICINES. BECAUSE OF THE ABOVE PREDICAMENTS THE ASSESSEE HAS SO FAR NOT BEEN ABLE TO MAINTAIN DAY TO DAY STOCK REGISTER IN SPITE OF SEVERAL EFFORTS. I.T.A.NO. 066/CTK/2012 3 THE LEARNED CIT(A) NEGATIVED THE CLAIM OF THE ASSESSEE. HOWEVER HE DELETED TH E DISALLOWANCE OF THE 20% EXPENSES ON THE BASIS OF FACTS AND CIRCUMSTANCE AS BROUGHT ON RECORD. 4. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US HAS SUBMITTED THAT ENHANCING THE RATE OF GROSS MARGIN FROM 2.41% TO 4.5% WAS UNJUSTIFIED, UNREASONABLE INSOFAR AS THE FACTS AND CIRCUMSTANCES OF THE CASE CANNOT BE COMPARED WITH THE ASSESSEES WHICH WERE COMPARED BY THE ASSESSING OFFICER IN THE NEAR VICINITY BUT NOT HAVING THE SAME LOCATION ADVANTAGE AS PER THE ASSESSEES SITUATION. THE ASSESSEE HAD BEEN RENDERING INCOME ON THE BASIS OF ACTUAL EARNING INSOFAR AS ALL THE TRADERS DO NOT DEAL IN SIMILAR SITUATION. FOR THIS PROPOSITION HE FILED THE BALANCE SHEET WHEN THE GROSS MARGIN BY THE ASSESSEE HAS BEEN RENDERED AT 2.41% WHICH THE ASSESSING OFFICER HAS ESTIMATED GR OSS MARGIN AT 4.5%. HE FURTHER DISALLOWED EXPENDITURE AFTER SUSTAINING THE GROSS MARGIN AT 4.5% IS A DOUBLE BLOW TO THE ASSESSEES METHOD OF FUNCTIONING AT A PARTICULAR LOCATION. HAVING VERIFIED THE GROSS MARGIN IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO HOLD THE SAME AS NE T MARGIN IN THE HANDS OF THE ASSESSEE. FOR THE IMMEDIATELY PRECEDING AYS THE ASSESSEE HAD SUBMITTED THE VARIOUS RATES OF GROSS MARGIN WHICH ARE IN ACCORDANCE WITH THE BOOKS OF ACCOUNT AND MERELY BECAUSE IT WAS NOT POSSIBLE TO MAINTAI N DETAIL STOCK REGISTER OF THE NUMEROUS MEDICINES THE ASSESSING OFFICER OUGHT TO HAVE INCREASED THE STOCK WHICH WAS NOT THE CASE OF THE ASSESSEE. THE FACT THAT HE ONLY DISALLOWED 20% OF THE EXPENSES CLAIMED AFTER THE GROSS MARGIN CLINCHES THE ISSUE IN FAVO UR OF THE ASSESSEE THAT WAS COMPARABLE TO THE CASES WHICH HE BROUGHT ON RECORD ARE NOT COMPARABLE DUE TO LOCA TIONAL ADVANTAGE, THE ASSESSEE BEING A LADY , HAD TO I.T.A.NO. 066/CTK/2012 4 ULTIMATELY DEPEND ON OUTSIDE HELP AND ULTIMATELY CLOSED SHOP RECENTLY. HE PRAYED THAT A SUITABL E DIRECTION FOR TAXING THE RIGHT INCOME ON ESTIMATION BE MADE BY THE ASSESSING OFFICER . 5. THE LEARNED DR SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. HE POINTED OUT THAT AS PER THE ORDER SHEET THE ASSESSEE WAS NOT MAINTAINING CASH BOOK, STOCK REGISTER, PURCHASE REGISTER, LEDGER AS ADMITTED BY THE ACCOUNTANT THEREFORE CANNOT BE SAID TO BE IMPROPER FOR INVOKING THE PROVISIONS OF SECTION 145(3). THE CHARTERED ACCOUNTANT AUDITING THE ASSESSEES BOOKS OF ACCOUNT ALSO QUALIFIED THEIR REPORT ON THIS ISSUE. THER EFORE, THE ESTIMATION WAS PROPER WHICH HAS BEEN RIGHTLY SUSTAINED BY THE LEARNED CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND FAVOUR IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ESTIMATION OF THE GROSS MARGIN AND THE NET PROFIT CANNOT BE EQUATED FOR A FINDING OF FACT FOR REJECTION OF BOOKS OF BOOKS OF ACCOU NT. THE ASSESSING OFFICER DISALLOWING THE EXPENSES AT A PERCENTAGE CLEARLY INDICATES THAT HE WAS NOT TO COMPUTE INCOME MORE CORRECTLY THAN AS RETURNED BY THE ASSESSEE INSOFAR AS RESORTING TO ESTIMATION OF GROSS MARGIN WAS ON THE BASIS OF ACCEPTED TURNOVER. HE FAULTED IN COMPARING THE CASES FOR GROSS MARGIN COUPLED WITH THE FACT THAT HE DISALLOWED THE EXPENSES BY 20%. THE LEARNED CIT(A) THEREFORE FURTHER COMPLICATED THE ISSUE BY JUSTIFYING THE INVOKING OF PROVISIONS OF SECTION 145 INSOFAR AS THE GROSS MARGIN AS ADOPTED WAS SUSTAINED BY IT BUT AT THE SAME TIME THE EXPENSES DISALLOWED @20% WAS DELETED. IN OTHER WORDS THE RATE OF RETURN ON THE TURNOVER HAS BEEN ACCEPTED I.T.A.NO. 066/CTK/2012 5 INSOFAR AS THE COMPARISON WAS RENDERED USELESS BY THE LEARNED CIT(A). WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL BEFORE US AND WE ARE OF THE BELIEF THAT THE ASSESSEE CANNOT BE ISOLATED TO BE TAXED ON HIGHER INCOME AS OTHERWISE RETURNED BY THE ASSESSEE IN EARLIER YEARS. WE ARE OF THE BELIE F THAT TAXATION @ 3.5% GROSS MARGIN , AS THE DISALLOWAN CE OF EXPENSES STAND ALREADY DE LETED BY THE LEARNED CIT(A) WOULD MEET THE END OF JUSTICE AS INFORMED TO THE LEARNED COUNSEL IN THE COURT . THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE TAXABLE INCOME AFTER ALLOWING ALL THE EXPENSES AS CLAIMED AFTER THE GROSS MARGIN AT 3.5% OF THE TURNOVER DECLARED . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA) , ACCOUNTANT MEMBER. ( ) DATE: 14.08.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SMT.SHANTILATA SAHOO, PROP. MANMOHAN MEDICAL HALL, AT: DHALAPATHAR, P.O.KALAPATHAR, DIST.KHURDA 2 / THE RESPONDENT: INCOME - TAX OFFICER, KHURDA WARD, KHURDA. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BEN CH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 066/CTK/2012 6 APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 10.08.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.08.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S 14.08.2012 . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.08.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..