ACIT, Erode V. Shri N.Sivakumar, Erode

ITA 684/CHNY/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73632 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: EPASS ROAD ERODE
• Keywords: Rejection of books of accounts; Depreciation; Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI (BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ) .. I.T.A. NO. 684/MDS/2012 ASSESSMENT YEAR : 2008-09 ASST. COMMISSIONER OF INCOME TAX ,CIRCLE-I, ERODE PAN : ACPA (APPELLANT) V. SHRI N.SIVAKUMAR, 85,GANDHIJI SECOND STREET, KARUR BYEPASS ROAD, ERODE 638 002. (RESPONDENT) APPELLANT BY : SHRI S.DAS GUPTA, JCIT DR RESPONDENT BY : SHRI S.SRID HAR,ADVOCATE DATE OF HEARING : 18.12.13 DATE OF PRONOUNCEMENT : 17.01.14 O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) DATED 19 .01.2012 IN APPEAL NO.332/10-11 PASSED U/S 14 3(3) READ WITH SE CTION 250 OF THE ACT. ITA NO. 684/MDS/2012 2 2. THE REVENUE HAS RAISED SIX GROUNDS IN ITS APPEA L, HOWEVER, TWO GROUNDS SURVIVE AND THEY ARE BRIEFLY STATED HER EIN BELOW FOR ADJUDICATION. (1) LD. CIT(A) HAD ERRED IN REDUCING THE ESTIMATE OF 25% OF GROSS RECEIPT TO 15% OF GROSS RECEIPT FOR MAKING AD DITION ON ESTIMATE BASIS SINCE THE BOOKS OF ACCOUNTS WERE REJ ECTED AS THE ASSESSEE COULD NOT PRODUCE ANY RECORDS BECAUSE THEY WERE LOST WHILE SHIFTING THE OFFICE. (2) LD. CIT(A) ERRED IN DELETING THE ADDITION M ADE BY THE LD. ASSESSING OFFICER UNDER THE HEAD INCOME FROM OTHER SOURCE FOR `. 6,25,000/- CONSIDERING THE AGRICULTURAL INCOME DECL ARED TO BE VERY HIGH, BY GIVING THE BENEFIT OF TELESCOPI NG. 3. BRIEF FACTS: - THE ASSESSEE IS AN INDIVIDUAL RE SIDENT, ENGAGED IN THE BUSINESS OF CABLE TV NETWORK, BROADCASTING, ADVERTISEMENT AND DISTRIBUTION OF POTABLE WATER AND ALSO HOLDS AGRICU LTURAL LANDS AND DERIVES INCOME FROM AGRICULTURE. THE ASSESSEE FILE D ITS RETURN OF INCOME ON 29.09.2008 FOR THE ASSESSMENT YEAR 2008-0 9 DECLARING A TOTAL INCOME OF `. 69,90,800/- WHICH WAS PROCESSED INITIALLY U/S. ITA NO. 684/MDS/2012 3 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELEC TED FOR SCRUTINY AND THE ASSESSMENT WAS MADE U/S. 143(3) ON 31.12.20 10 WHEREIN LD. ASSESSING OFFICER MADE AN ADDITION BY ESTIMATI NG THE INCOME OF THE ASSESSEE AT 25% OF THE GROSS RECEIPTS AND FURT HER DISALLOWED AGRICULTURAL INCOME OF `. 6,25,000/- BY TREATING THE SAME AS INCOME FROM OTHER SOURCE. DURING THE COURSE OF ASSESSMENT , THE LD. A.R. HAD SUBMITTED BEFORE THE LD. ASSESSING OFFICER THAT THE BOOKS OF ACCOUNTS FOR THE PERIOD JULY,2006 TO 31 ST MAY, 2010 OF THE ASSESSEE WAS LOST ALONG WITH COMPUTER, UPS, BILLS A ND VOUCHERS WHILE SHIFTING THE ASSESSEES ACCOUNT OFFICE ON 02 .06.2010. IN ORDER TO ESTABLISH THE GENUINENESS OF THE ABOVE FACTS, LD . A.R. FURNISHED COPY OF THE COMPLAINT MADE TO THE SUB-INSPECTOR ERO DE NORTH POLICE STATION AND ALSO THE COPY OF THE CERTIFICATE STATIN G THAT THE ABOVE FACTS BY THE CONCERNED SUB INSPECTOR OF POLICE DATED 30.1 1.2010. HOWEVER SINCE THE ASSESSEE COULD NOT PRODUCE ANY RE CORDS, LD. ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE RELYING ON VARIOUS JUDICIAL DECISIONS. THEREAFTER , THE LD. ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE BY TRE ATING 25% OF THE GROSS RECEIPTS FROM THE CABLE TV BUSINESS AS HIS IN COME AMOUNTING ITA NO. 684/MDS/2012 4 TO RS. 1,34,72,383 AND AS A RESULT MADE AN ADDITION OF `. 36,84,445/- BEING DIFFERENCE BETWEEN THE AMOUNT DECLARED AND AS WORKED OUT BY THE LD.A.O SUPRA. IT WAS ALSO OBSERVED BY THE LD. ASSESSING OFFICER THAT THE ASSESSEE HAD DISCLOSED `. 10 LAKHS AS AGRICULTURAL INCOME BY CULTIVATING 15 ACRES OF WET LAND OWNED BY HIM PRODU CING TURMERIC AND SUGAR CANE. HOWEVER, THE ASSESSEE COULD NOT PRODUC E ANY BILLS/VOUCHERS TO SUPPORT HIS CLAIM FOR THE AGRICU LTURAL OPERATIONS. THE LD. ASSESSING OFFICER OPINED THAT THE INCOME DE CLARED BY THE ASSESSEE WAS TOO HIGH AND THEREFORE ESTIMATED THE T OTAL AGRICULTURAL INCOME AT `. 3,75,000/- AND THE REMAINING AMOUNT OF `. 6,25,000 WAS TREATED AS THE INCOME OF THE ASSESSEE UNDER THE HEA D INCOME FROM OTHER SOURCE. 4. ON APPEAL, LD. CIT(A) ALLOWED THE CLAIM OF TH E ASSESSEE BY TELESCOPING THE ADDITION MADE UNDER THE HEAD INCOME FROM OTHER SOURCE FOR `. 6,25,000/- FROM THE ADDITION MADE BY ESTIMATING TH E INCOME FROM CABLE TV BUSINESS AND FURTHER REDUCED THE RATE OF GROSS PROFIT FROM 25% TO 15% FOR MAKING ADDITION ON ESTI MATE BASIS FOR THE INCOME EARNED FROM CABLE TV BUSINESS AND ALSO GAVE THE BENEFIT OF ITA NO. 684/MDS/2012 5 DEPRECIATION FOR `. 26,65,375/- AND THUS SUSTAINED THE ADDITION OF `. 14,12,573/-. THE RELEVANT PARA OF THE ORDER OF THE LD. CIT(A) IS EXTRACTED HEREIN BELOW FOR REFERENCE:- (A) ESTIMATION OF INCOME FROM BUSINESS:- 4.3. I HAVE GONE THROUGH THE SUBMISSIONS MADE B Y THE APPELLANT AND THE ORDER OF THE AO. THE GROSS RECEIPTS FROM CABLE OP ERATIONS ARE RS.5,38,89,316/-. THE APPELLANT ALSO HAD SALE OF MINERAL WATER WHICH WAS RS.30,11,590/-. THE TOTAL GROSS RECEIPTS WERE RS.5,69,00,906/-. THE AO IN HIS ORDER ESTIMATED THE NET PROFIT AT 25% ON THE GROSS RECEIPTS FROM CABLE OF R S.5,38,89,530/-. THE DIFFERENCE IN THE NET PROFIT ALREADY SHOWN WAS ADDE D TO THE INCOME. HOWEVER, AS SEEN FROM THE DETAILS, THE NET PROFIT WAS ESTIMATED AT 25% WHICH COMES TO RS.1,34,72,383/-. THE AO REDUCED THE NET PROFIT AL READY SHOWN AMOUNTING TO RS.97,87,938/- AND ARRIVED AT THE ADDITION OF RS.36 ,84,445/-. 4.4. AS SEEN FROM THESE DETAILS, THE AO ESTIMATE D THE PROFIT AT 25% ON THE GROSS RECEIPTS FROM CABLE OPERATIONS ONLY. HOW EVER, WHILE DECIDING THE QUANTUM OF ADDITION, HE REDUCED THE NET PROFIT, ALR EADY SHOWN (RS.97,87,938/-) WHICH IS THE NET PROFIT FROM CABLE AND SALE OF WATE R BEFORE DEPRECIATION. THE ESTIMATE @ 25% WAS MADE FROM CABLE GROSS RECEIPTS B UT WHILE ARRIVING AT THE DIFFERENCE AMOUNT FOR ADDITION, THE AO HAS REDUCED THIS AMOUNT FROM THE TOTAL NET PROFIT FROM SALE OF WATER AND ALSO FROM CABLE OPERA TIONS. THE AO HAS NOT GIVEN ANY REASON FOR MAKING THIS ESTIMATE. AS SEEN FROM DETAILS, THE NET PROFIT FROM CABLE OPERATIONS WAS RS.76,81,065/- BEFORE DEPRECIA TION. SIMILARLY, THE NET PROFIT FROM SALE OF WATER WAS RS.21,06,873/- BEFORE DEPREC IATION. HOWEVER, TAKING INTO CONSIDERATION THAT THE APPELLANT COULD NOT PRODUCE ANY DETAILS OF THE EXPENDITURE AND ALSO THE BOOKS OF ACCOUNT, THERE IS NO ALTERNAT IVE BUT TO ESTIMATE THE PROFIT ON A REASONABLE BASIS. ITA NO. 684/MDS/2012 6 THE TOTAL NET PROFIT 97,87,938 LESS : DEPRECIATION 26,65,375 NET PROFIT AFTER DEPRECIATION 7 1,22,563 4.5. THE NET PROFIT PERCENTAGE OVER THE TOTAL TURN OVER OF RS.5,69,00,906/- WORKS OUT TO 12.52%. TAKING INTO CONSIDERATION, THE CABLE OPERATIONS AND ALSO THE COMMISSION FROM KING NET WORK WHICH ARE ON A LOWER SIDE, AND THE INCOME DECLARED FOR THE ASSESSMENT YEAR 2007-08, IN MY OPI NION, IT WOULD BE REASONABLE IF PROFIT PERCENTAGE IS ADOPTED AT 15% OF THE TOTAL TURNOVER. THE NET PROFIT AT 15% AMOUNTS TO RS.85,35,135/-(AFTER DEPRECIATION). THE NET PROFIT DECLARED BY THE APPELLANT AFTER DEPRECIATION IS RS.71,22,563/-. HE NCE, THE DIFFERENCE AMOUNT OF RS.14,12,573/- IS TO BE MADE AS ADDITION TO THE INC OME RETURNED OF RS.69,90,800/-. THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. (B) DELETING THE ADDITION MADE UNDER THE HEAD INCOME FROM OTHER SOURCES `. 6,25,000/- 5.2. I HAVE GONE THROUGH THESE DECISIONS AND TAK ING INTO CONSIDERATION THAT THE AO HAS MADE ADDITION OF `. 6,25,000/- AS INCOME FROM OTHER SOURCES (HOLDING THAT THE ASSESSE E HAS INTRODUCED OTHER INCOME), TELESCOPING CAN BE GIVEN TO THE AMOU NT OF `. 6,25,000/- AGAINST THE NET PROFIT ADDITION FOLLOWING THE JUDGE MENTS IN THE ABOVE REFERRED CASES. IN VIEW OF THIS, THE AO IS DIRECTE D TO DELETE THE ADDITION OF `. 6,25,000/- . THESE GROUNDS OF APPEAL ARE PARTLY A LLOWED. ITA NO. 684/MDS/2012 7 5. BEFORE US LD. D.R ARGUED IN SUPPORT OF THE OR DER OF THE LD. ASSESSING OFFICER AND PRAYED THAT THE SAME MAY BE C ONFIRMED WHEREAS LD. A.R. RELIED ON THE ORDER OF THE LD. CI T(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT (A) WAS REASONABLE AND JUDICIOUS FOR GRANTING THE BENEFIT O F DEPRECIATION TO THE ASSESSEE. FURTHER, SINCE THE LD. ASSESSING OFF ICER HAD NOT STATED ANY VALID AND APPROPRIATE REASON FOR ADOPTING 25% O N GROSS RECEIPTS FOR ARRIVING AT THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF CABLE TV, LD. CIT(A) HAD GRACIOUSLY REDUCED THE ESTIMATE TO 15% WHICH WE ARE OF THE OPINION IS QUITE REASONABLE CONSIDERING THE INCOME OF THE ASSESSEE DECLARED AND ACCEPTED BY THE REVENUE DURIN G THE PRECEDING PREVIOUS YEARS. IT IS PERTINENT TO NOTE T HAT THE NET PROFIT DECLARED BY THE ASSESSEE FOR THE EARLIER ASSESSMENT YEARS WERE 17.69% WHICH APPEARS TO HAVE BEEN ACCEPTED BY THE R EVENUE. FROM THE FACTS AND CIRCUMSTANCE OF THE CASE IT IS E VIDENT THAT THE ASSESSEE HAS REASONABLE CAUSE FOR NOT PRODUCING THE BILLS, VOUCHERS ETC., AS THEY WERE LOST WHILE SHIFTING THE OFFICE O NE PLACE TO ANOTHER. ITA NO. 684/MDS/2012 8 MOREOVER, IN VIEW OF THE FACT THAT THE ADDITION IS SUSTAINED FOR AN AMOUNT OF `. 14,12,573/-, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAS TO BE GRANTED THE BENEFIT OF TELESCOPI NG FOR THE ADDITION MADE FOR `. 6,25,000/- UNDER THE HEAD INCOME FROM OTHER SOURCE DISBELIEVING THE AGRICULTURAL INCOME OF `. 10 LAKHS AS DECLARED BY THE ASSESSEE. THEREFORE, FROM THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE O RDER OF THE LD.CIT(A). 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 17 TH JANUARY, 2014 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD ) (A.MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 17 TH JANUARY, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE