ITO, Ward - 26(2), Kolkata, Kolkata V. Shri Prakash Chandra Kejriwal, Kolkata

ITA 661/KOL/2010

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 2942 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 15-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-04-2010
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Assessee Lawyers: S L KOCHAR; AMIT KOCHAR ADVOCA
• Keywords: Business income; Salary income; Reasonable cause
• Section: 143(3); 28

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . , ! /AND ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ !$ !$ !$ / I.T.A NO. 661/KOL/2010 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2004-05 INCOME-TAX OFFICER, WD-26(2), KOLKATA. VS. PRAKASH CHANDRA KEJRIWAL (PAN: AESPK6041F) ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 13.02.2013 DATE OF PRONOUNCEMENT: 15.03.2013 FOR THE APPELLANT: SHRI K. N. JANA, JCIT, SR . DR FOR THE RESPONDENT: S/SHRI S. L. KOCHAR & AMIT KOCHAR, ADVOCATES - / ORDER PER BENCH: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XIV, KOLKATA IN APPEAL NO. 379/CIT(A)-XIV/06-07 DATED 01.02.2010. ASSESSMENT W AS FRAMED BY ITO, WD-26(2), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORDER DATED 29.12.2006. 2. AT THE OUTSET, IT IS TO BE MENTIONED THAT THE RE VENUE HAS FILED REVISED GROUNDS OF APPEAL AND ASSESSEE HAS NOT OBJECTED TO THE SAME. THE REV ISED GROUNDS IS REGARDING ASSESSMENT U/S. 44AF OF THE ACT AND RESTRICTING THE DISALLOWANCE OF PERSONAL EXPENSES AT 50%. THE RELEVANT THREE GROUNDS RAISED BY REVENUE ARE AS UNDER: 1. THAT THE LD. CIT(A) HAS ERRED IN DIRECTING TO ASS ESS THE INCOME OF THE ASSESSEE U/S. 44AF. WHEN THE ASSESSEE HAD NOT OPTED FOR IT. 2. THAT THE LD. CIT(A) ALSO ERRED IN APPRECIATING T HAT THE ASSESSEE HAD CLAIMED TO HAVE PREPARED HIS PROFIT AND LOSS ACCOUNT ON THE BASIS O F BILLS, VOUCHERS & BANK STATEMENT, BUT COULD NOT PRODUCE GENUINE BILLS OF PURCHASE FRO M SHRI C. N. DHAR AND SHRI M. RAKSHIT AND NEITHER DID HIS BANK STATEMENTS CONFIRM THE PAYMENT TO THESE PARTIES. 3. THAT THE LD. CIT(A) ERRED IN DIRECTING TO RESTRI CT THE DISALLOWANCE OF PERSONAL EXPENSES @ 50% WITHOUT ANY REASONABLE CAUSE OR BASIS AND FIL ED TO APPRECIATE THAT THE DISALLOWANCE OF RS.1,05,605/- WAS MERELY 20% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. 2 ITA NO.661/K/2010 PRAKASH CH. KEJRIWAL 2004-05 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2004-05 AND ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT. THE AO, APART FROM SALARY INCOME ASSESSED BUSINESS INCOME BY DISALLOWING NET LOSS AT RS.19,02,296/- AND FINALLY ASSESSED BUSINESS INCOME AT RS.17,58,411/- THEREBY ASSESSED TOTAL INCOME INCLUDING SHORT TERM CAPITAL GAIN, INCOME FROM OTHER SOURCE AT RS.21,84,850/-. AGGRIEVED AGAINST THE ASSESSMENT, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO NOTED THAT THE ASSESSEE IS ASSESSABLE U/S. 44AF APART FROM SALARY AND SHORT TERM CAPITAL GAIN AND D ELETED THE ADDITIONS BY HOLDING AS UNDER IN PARA 8 AND 9 OF HIS ORDER: 8. IN THE SUBMISSION MADE BY THE A/R REPRODUCED IN PARA 5 ABOVE IT HAS BEEN OFFERED THAT THE ASSESSEE IS PREPARED TO GET HIS NCOME FRO M THE BUSINESS OF SALE AND PURCHASES OF PAINTNGS ASSESSED U/S 44AF OF THE IT ACT. I HAV E CONSIDERED THIS PROPOSITION OF THE A/R. IT CAN BE SEEN THAT THE PROVISIONS OF SECTION 44AF STATE THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 28 TO 43C OF I T ACT IN CASE OF AN ASSESSEE ENGAGED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE , THE TAXABLE PROFITS & GAINS OF SUCH BUSINESS SHALL BE THE PROFIT DECLARED BY THE A SSESSEE OR 5% OF THE TOTAL TURNOVER DURNG THE PREVIOUS YEAR WHICHEVER IS HIGHER. THIS PROVISION S APPLICABLE TO CASES WERE THE TOTAL TURNOVER DOES NOT EXCEED RS. 40,00,000/-. AS PER THIS PROVISION THE ASSESSEE IS NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNTS AS PER S ECTION 44AA AND GET BOOKS AUDITED AS PER SECTION 44AB. IN THE CASE OF THE ASSESSEE WE CAN SEE THAT HE PURC HASES OLD PAINTINGS FROM DIFFERENT PARTIES AND SALES TO CERTAIN BUYERS WHO ARE EITHER INDIVIDUALS OR ORGANIZATIONS. THE BUYERS GENERALLY BUY THESE PAINTINGS FOR THEIR OWN USE AND NOT FOR FURTHER SELLING. THEREFORE, THIS BUSINESS OF THE ASSESSEE CAN BE TER MED AS RETAIL TRADE. THE TURNOVER OF THIS BUSINESS SHOWN BY THE ASSESSEE IS RS. 32,87,11 9/- WHICH S LESS THAN RS. 40,00,000/-. IT S SEEN THAT IN RESPECT OF THIS BUSINESS THE ASS ESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS. THE ACCOUNTS OF THE ASSESSEE HAVE ALSO NOT BEEN AUDITED. FOR THIS BUSINESS THE ASSESSEE HAS SHOWN LOSS OF RS.1,4 3,885/-. I FEEL THAT THIS LOSS CANNOT BE ALLOWED TO THE ASSESSEE AS HE HAS NOT MAINTAINED PR OPER BOOKS OF ACCOUNTS AND HAS NOT GOT THEM AUDITED. THE CASE OF THE ASSESSEE APPEARS TO BE COVERED BY SECTION 44AF. THEREFORE, AS PER THIS SECTION THE PROFIT AND GAINS FROM THIS BUSINESS WILL BE RS. 1,64,356/- WHICH IS 5% OF RS.32,87,119/-. IN VIEW OF THE DISCUSSION MADE IN THE EARLIER PARAS 4,5,6 & 7 THE NET INCOME OF THE ASSESSEE FROM THIS BUSINESS WOULD COME TO (-) RS.1, 43,885/- + RS.1,60,000/- + RS. 52,802/- = RS.68,917/-. SINCE THE INCOME DETERMINED U/S 44AF IS HIGHER THAN THIS AMOUNT THEREFORE, THAT INCOME OF RS. 1.64,356/- SHA LL BE THE TAXABLE INCOME OF THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF TRADING IN PAINTINGS. 9. IN RESPECT OF THE DISALLOWANCE OF RS. 1,40,026/ - MADE OUT OF INTEREST EXPENSES RELATED TO DIVIDEND INCOME THE ASSESSEE HAS CLAIMED THAT THE DISALLOWANCE HAD NOT BEEN MADE BY THE A.O. ON LOGICAL GROUNDS. IN THIS REGARD I FIND THAT THE A.O. HAS CALCULATED THE AMOUNT TO BE DISALLOWED IN PROPORTION TO THE INVESTMENT MADE IN SHARES FOR DIV IDEND AND TOTAL INVESTMENTS IN SHARES. I FEEL THAT THIS IS THE MOST LOGICAL BASIS FOR DETERMINING THE PROPORTION OF INTEREST AND OTHER EXPENSES WHICH CAN BE CONSIDERED AS RELAT ED TO DIVIDEND INCOME. THEREFORE, I FEEL THAT THIS DISALLOWANCE HAS BEEN COMPUTED BY TH E A.O. QUITE LOGICALLY. HENCE I CONFIRM THIS DISALLLOWANCE OF RS.1,40,026/-. 3 ITA NO.661/K/2010 PRAKASH CH. KEJRIWAL 2004-05 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS PURSUING ACTIVITY/HOBB Y IN PAINTINGS. HOWEVER, THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT BUT MAINTAINING ALL DETAILS LIKE PURCHASE AND SALES OF PAINTINGS. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THE AO REQUIRED THE DETAILS OF PURCHASES AND SALES OF PAINTINGS , WHICH WAS DISCLO SED AT RS.31,93,599/- OUT OF WHICH PURCHASES MADE FROM ONE SHRI C. M. DHAR WAS AT RS.9 ,82,000/-. THE AO REQUIRED THE ASSESSEE TO GET CONFIRMATIONS FROM SHRI C. M. DHAR FOR THE A BOVE AMOUNT OF RS.50000/-. SHRI C. M. DHAR CONFIRMED THE SALES ABOVE THE ITEMS OF THE VAL UE OF RS.50,000/- AT RS.4,60,000/-, THEREBY THE DIFFERENCE CROPPED UP AT RS.5.22 LACS. THE AO TREATED THE DIFFERENCE AS UNEXPLAINED PURCHASES AND WORKED OUT THE PROFIT ON SALE OF PAIN TINGS AT RS.18,90,211/- AS UNDER: PURCHASES AS PER THE ASSESSEE RS.31,93,599/- LESS: PURCHASES MADE BUT NOT ALLOWED BY THE AO RS.5,22,000 & (AS STATED ABOVE) RS.12,08,949/- RS.17,30,949/- NET PURCHASES: RS.14,62,650/- SALES AS PER THE ASSESSEE RS.32,87,119/- ADD: AD HOC @ 2% RS. 65,742/- RS.33,52,861/- 5. WE FIND THAT THE ASSESSEE IS NOT MAINTAINING ITS ACCOUNTS RATHER KEEPING ONLY LIST OF PURCHASES AND SALES INCLUDING VOUCHERS. IT IS A FA CT THAT ASSESSEES TOTAL TURNOVER IS RS.32,87,119/- , WHICH IS MUCH BELOW THE PRESCRIBED LIMIT AS PRESCRIBED U/S. 44AF OF THE ACT I.E. RS.40 LACS. WE FIND THAT THE CIT(A) HAS WORKE D OUT THE PROFIT @ 5% ON THE ABOVE TURNOVER WITH REFERENCE TO PURCHASE AND SALES AT RS.1,64,356 /-. WE ARE OF THE VIEW THAT THERE IS NO FAULT IN THE ORDER OF CIT(A) IN APPLYING THE PROVISIONS O F SECTION 44AF OF THE ACT. AS FAR AS THE RESTRICTION OF DISALLOWANCE OF PERSONAL EXPENSES AT 50%, THE CIT(A) HAS RESTRICTED THE DISALLOWANCE OF PERSONAL EXPENSES AT 50% WHICH IS Q UITE REASONABLE AND NEED NO INTERFERENCE. ACCORDINGLY, THE APPEAL OF REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2013 . SD/- SD/- . . . . . . . . , ' ' ' ' #!' #!' #!' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . .) )) ) DATED : 15 TH MARCH, 2013 /0 #12 #3 JD.(SR.P.S.) 4 ITA NO.661/K/2010 PRAKASH CH. KEJRIWAL 2004-05 - 4 +##5 65&7- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT ITO, WARD-26(2), KOLKATA. 2 +,)* / RESPONDENT SHRI PRAKASH CHANDRA KEJRIWAL, 19B, B. K. PAUL AVENUE, JORBAGAN, KOLKATA-700 005 . 3 . #- ( )/ THE CIT(A), KOLKATA 4. 5. #- / CIT KOLKATA 5 <#= +# / DR, KOLKATA BENCHES, KOLKATA ,5 +#/ TRUE COPY, ->/ BY ORDER, ' !2 /ASSTT. REGISTRAR .